# Oriental Bank of Commerce v. State of U.P. and others

- **Citation:** (2008) 1 ILRA 316
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2008-02-13
- **Case number:** Civil Misc. Writ Petition No. 840 of 2005
- **Bench:** Sushil Harkauli, Sudhir Agarwal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/oriental-bank-of-commerce-v-state-of-u-p-and-others-41078
- **Pages:** 15

## Headnote

Constitution of India Art. 226-Alternative
Remedy-U.P.
Trade
Tax
Act-1948Whether transaction of renting lockersamount to sale or transfer of Rights?-
pure
question
of
law-No
disputed
question
of
facts
involved-if
this
question decided in favour of petitioner
impugned demand of Trade Tax-would
be
wholly
without
jurisdiction-heldalternative remedy 'No bar'-writ petition
can be directly decided on merit.

Held: Para 8

We propose to deal first with the
preliminary
objection
raised
by
the
respondents that the petitioners have a
statutory alternative remedy of appeal
and, therefore, the writ petitions are
liable to be dismissed on the ground of
availability of alternative remedy. From
the pleadings of the parties, it is evident
that the pure and simple question of law
involved in these cases is whether
renting
out
a
Locker
amounts
to
"transfer of right to use goods" and is
taxable under the Act. If it is not taxable
under the Act, the entire proceedings are
wholly without jurisdiction. One of the
exceptions to the principle of exhaustion
of alternative remedy is where the order
impugned is wholly without jurisdiction.
Since, there are no disputed questions of
fact involved in this case and pure legal
question
has
been
raised
which
if
decided in favour of the petitioners, the
entire proceedings and the impugned
orders
would
be
wholly
without
jurisdiction, we are of the view that the
1 All] Oriental Bank of Commerce V. State of U.P. and others
317
matter deserves to be considered on
merits and it is not a case where the
petitioners should be non suited on the
ground of alternative remedy.

(B) U.P. Trade Tax Act, 1948-Section 2
(m)-Work Contract-letting out locker by
the
Bank
and
the
rent
paid
by
customers-not at all taxable-No transfer
of Rights but a licence use-requirement
of sale to attract tax liability not
completed-No liability-pay the Trade
Tax.

Held: Para 25 & 29

Applying the aforesaid dictum also in the
nature of the transaction involved in the
present case, we are clearly of the view
that the rent paid by the customers to
Bank for hiring a Locker amounts to the
charges paid for an indivisible contract
and, therefore, is not at all taxable under
the Act.

Applying the aforesaid to the facts
involved and as discussed above, in
letting
out
Bank
Lockers
to
the
customers, we are clearly of the view,
that there is no transfer of right to use
Lockers but only a licence to use and
does not answer the requirement of
"sale" to attract tax liability under the
Act. There is no "sale" element involved
in the matter and in effect, it is only a
service
rendered
by
the
Bank
by
providing the facility to the customers to
keep his valuables in a safe and secured
place at the Bank and Locker is only a
place specified for such purpose.
Case law discussed:
2003 NTN (Vol. 22) 175, 1988 (70) STSC 215
(A.P.), 2000 NTN (Vol. 16) 425, 1987 (67) STC
199, 2004 UPTC 133, AIR 1958 SC 560, (1972)
1 SCC 472, 2006 (3) SCC 1, JT 2008 (1) SC
496, (1986) 1 SCC 414, 2005 (1) SCC 308,
2002 (3) SCC 314,

## Text

_Characters 0–39,991 of 49,919. This is a partial read: ask again with offset=39991 for what follows._

316 INDIAN LAW REPORTS ALLAHABAD SERIES [2008
be severely lacking in application of mind
to
these
laws.
A
Sub
Divisional
Magistrate is not trained to understand or
appreciate niceties of election laws. Very
often the cases are coming to the court
where election tribunals manned by
executive officers are not in a position to
understand or appreciate the evidence and
laws. It gives rise to law of uncertainty
and provides an opportunity to the
defeated candidate to engage the winning
candidate in a battle for several years. The
lack
of
appreciation
of
law
and
inconsistent decisions rendered by the
Prescribed Authorities under the UP
Panchayat Raj Act, leave the electorate
divided and leads to acrimony. The
legislature should consider to entrust
these powers to persons trained in law
who properly understand the election
laws. The persons with training in law
preferably a judicial officer will be better
equipped to discharge these functions.

26. The writ petition is dismissed.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 13.02.2008

BEFORE
THE HON'BLE SUSHIL HARKAULI, J.
THE HON'BLE SUDHIR AGARWAL, J.

Civil Misc. Writ Petition No. 840 of 2005
Connected with

Writ Petitions Nos. 875 of 2005, 1080 of
2005, 1283 of 2005, 1414 of 2005, 1511
of 2005, 1565 of 2005, 1596 of 2005,
1597 of 2005, 1617 of 2005, 543 of 2006,
597 of 2006, 845 of 2006, 1009 of 2006,
1010 of 2006, 1059 of 2006, 1060 of
2006, 1061 of 2006, 1062 of 2006, 1063
of 2006, 1064 of 2006, 1124 of 2006,
1125 of 2006, 1301 of 2006, 1325 of
2006, 1381 of 2006
Oriental Bank of Commerce ...Petitioner
Versus
State of U.P. and others ...Respondents

Counsel for the Petitioner:
Sri Bharatji Agarwal
Sri Tarun Verma
Sri Ashok Bhatnagar

Counsel for the Respondents:
S.C.

Constitution of India Art. 226-Alternative
Remedy-U.P.
Trade
Tax
Act-1948Whether transaction of renting lockersamount to sale or transfer of Rights?-
pure
question
of
law-No
disputed
question
of
facts
involved-if
this
question decided in favour of petitioner
impugned demand of Trade Tax-would
be
wholly
without
jurisdiction-heldalternative remedy 'No bar'-writ petition
can be directly decided on merit.

Held: Para 8

We propose to deal first with the
preliminary
objection
raised
by
the
respondents that the petitioners have a
statutory alternative remedy of appeal
and, therefore, the writ petitions are
liable to be dismissed on the ground of
availability of alternative remedy. From
the pleadings of the parties, it is evident
that the pure and simple question of law
involved in these cases is whether
renting
out
a
Locker
amounts
to
"transfer of right to use goods" and is
taxable under the Act. If it is not taxable
under the Act, the entire proceedings are
wholly without jurisdiction. One of the
exceptions to the principle of exhaustion
of alternative remedy is where the order
impugned is wholly without jurisdiction.
Since, there are no disputed questions of
fact involved in this case and pure legal
question
has
been
raised
which
if
decided in favour of the petitioners, the
entire proceedings and the impugned
orders
would
be
wholly
without
jurisdiction, we are of the view that the
1 All] Oriental Bank of Commerce V. State of U.P. and others
317
matter deserves to be considered on
merits and it is not a case where the
petitioners should be non suited on the
ground of alternative remedy.

(B) U.P. Trade Tax Act, 1948-Section 2
(m)-Work Contract-letting out locker by
the
Bank
and
the
rent
paid
by
customers-not at all taxable-No transfer
of Rights but a licence use-requirement
of sale to attract tax liability not
completed-No liability-pay the Trade
Tax.

Held: Para 25 & 29

Applying the aforesaid dictum also in the
nature of the transaction involved in the
present case, we are clearly of the view
that the rent paid by the customers to
Bank for hiring a Locker amounts to the
charges paid for an indivisible contract
and, therefore, is not at all taxable under
the Act.

Applying the aforesaid to the facts
involved and as discussed above, in
letting
out
Bank
Lockers
to
the
customers, we are clearly of the view,
that there is no transfer of right to use
Lockers but only a licence to use and
does not answer the requirement of
"sale" to attract tax liability under the
Act. There is no "sale" element involved
in the matter and in effect, it is only a
service
rendered
by
the
Bank
by
providing the facility to the customers to
keep his valuables in a safe and secured
place at the Bank and Locker is only a
place specified for such purpose.
Case law discussed:
2003 NTN (Vol. 22) 175, 1988 (70) STSC 215
(A.P.), 2000 NTN (Vol. 16) 425, 1987 (67) STC
199, 2004 UPTC 133, AIR 1958 SC 560, (1972)
1 SCC 472, 2006 (3) SCC 1, JT 2008 (1) SC
496, (1986) 1 SCC 414, 2005 (1) SCC 308,
2002 (3) SCC 314,

(Delivered by Hon'ble Sudhir Agarwal, J.)

1. In all these writ petitions, the
common question involved is whether the
petitioners-Banks are liable to pay trade
tax under U.P. Trade Tax Act, 1948
(hereinafter referred to as the 'Act') for
renting Lockers to their customers. The
incidental question is whether Lockers are
"goods" and right to use Locker can be
said to be "transfer of right to use any
goods" attracting liability of tax under the
Act.

2. In some of these cases,
assessment orders have been passed, and
in some cases, notices for assessment
have been issued. Since, the principle
question involved in all these writ
petitions
is
common,
therefore,
as
requested and agreed by learned counsel
for parties, all these writ petitions have
been heard together at this stage under the
Rules of the Court and are being decided
finally by this common judgment.

3. The writ petition no. 840 of 2005,
for the purpose of referring to the
documents and pleadings is taken as the
leading case.

4. The petitioner, M/s Oriental Bank
of
Commerce
after
execution
of
agreements with its customers, provide
facility of using Lockers installed in the
Bank on rent to the said customers. It is
not disputed that Lockers are installed
inside the strong room of the bank,
permanently attached to the earth and
inseverable by the customers. It is said
that the relationship of the Bank and the
customers is that of landlord and tenant
and not that of bailor and bailee. The
Lockers can be operated with two keys,
one key remains in possession of the
customer and another in the possession of
the bank and can be operated when both
the keys are simultaneously inserted in the
key hole of the Locker. Entry in strong
318 INDIAN LAW REPORTS ALLAHABAD SERIES [2008
room for operating Locker is restricted as
per the rules of the Bank. A letter was
issued on 11.2.2005 by respondent no. 2
requiring the petitioner to furnish details
of the operation of Lockers and rental
accrued during the assessment years
1998-99 to 2004-05. The Assistant
Commissioner,
Trade
Tax,
Meerut,
however, issued a notice dated 21.2.2005
to the petitioner for assessment year 200203 to show cause as to why trade tax be
not charged on rental accrued to the Bank
on the Lockers allotted to different
persons as it amounts to "sale" under the
extended definition of "sale" being
"transfer of right to use the goods".
Similar notices were issued on 17.3.2005
under Section 21(2) for the assessment
year 1998-99. The petitioner submitted
reply dated 19.3.2005 stating that neither
the petitioner is a "dealer" nor the Lockers
can be said to be "goods" nor facility of
use of Locker can be said to be "transfer
of right to use goods" and, therefore, the
petitioner is not liable to pay any trade
tax. Details of operation of Locker etc.
were also mentioned therein. However,
respondent no. 2 passed an assessment
order dated 22.3.2005 for the assessment
year 2002-03 holding that the petitioner is
liable to pay tax as the right to use Locker
by customer on rent amounts to "transfer
of right to use goods" and, therefore, is
taxable under Section 3-F of the Act.
Similar assessment orders or notice
proposing assessment have been issued in
other cases. Aggrieved, the petitioners
have filed these writ petitions challenging
the proceedings.

5. All the petitioners are banks
providing facility of use of Locker to their
customers on rent and basic facts are
common.

6. The respondents have filed
counter affidavit raising a preliminary
objection that against the assessment
order, the petitioners have an alternative
remedy of filing Appeal under Section 9
of the Act and, thereafter, Second Appeal
Under Section 10(2), therefore, the writ
petitions are liable to be dismissed on the
ground of alternative remedy. On merits,
it is said that the Bank is a 'dealer' in view
of the decision of Apex Court in State of
U.P. & another Vs. Union of India &
another 2003 NTN (Vol. 22) 175, renting
out Lockers to their customers is taxable
under Section 3-F of the Act and,
therefore, the assessments made or
proposed against the petitioners are
absolutely valid and in accordance with
law. Reliance is also placed on the
following authorities :

1.
State Bank of India Vs. State of
Andhra Pradesh 1988 (70) STSC
215 (A.P.)
2.
20th Century Finance Corporation
Ltd. & another Vs. State of
Maharashtra 2000 NTN (Vol. 16)
425
3.
Bank of India Vs. Commercial Tax
Officer Central Section Calcutta
1987 (67) STC 199.
4.
Sanda Tent House Association Vs.
State of U.P. & others 2004 UPTC
133

7. A supplementary counter affidavit
has also been filed wherein it is said that
the petitioners-Banks are engaged in
business of transfer of right to use bank
Lockers and other commercial activities
and, thus, they are "dealer" within the
meaning of Section 2(c)(vii) of the Act,
the transaction of renting out Lockers
amounts to "sale" within in the meaning
of Section 2(h)(iv) and activities of the
1 All] Oriental Bank of Commerce V. State of U.P. and others
319
petitioner
is
"business"
within
the
meaning of Section 2(aa) of the Act. It is
also said that the Bank Lockers are
"goods" within the meaning of Section
2(d) of the Act. Reference is also made to
the
Article
366
(29-A)(d)
of
the
Constitution of India, which defines "tax
on sale or purchases of goods" and it is
said that the present dispute is covered by
the said definition. It is also averred that
Bank Lockers are made of iron and are
really in the nature of shelf in a big
cabinet, each shelf having its own door.
However, for security and secrecy during
the course of operation of the Bank
Lockers by the customers, the Bank keep
the cabinet in a strong room and entry and
exit thereto is also restricted, but that
would not detract from the fact that it is a
movable property purchased by the Bank
for the purpose of carrying out business of
letting it on hire to its customers, hence, it
is taxable under the Act.

8. We propose to deal first with the
preliminary objection raised by the
respondents that the petitioners have a
statutory alternative remedy of appeal
and, therefore, the writ petitions are liable
to be dismissed on the ground of
availability of alternative remedy. From
the pleadings of the parties, it is evident
that the pure and simple question of law
involved in these cases is whether renting
out a Locker amounts to "transfer of right
to use goods" and is taxable under the
Act. If it is not taxable under the Act, the
entire proceedings are wholly without
jurisdiction. One of the exceptions to the
principle of exhaustion of alternative
remedy is where the order impugned is
wholly without jurisdiction. Since, there
are no disputed questions of fact involved
in this case and pure legal question has
been raised which if decided in favour of
the petitioners, the entire proceedings and
the impugned orders would be wholly
without jurisdiction, we are of the view
that the matter deserves to be considered
on merits and it is not a case where the
petitioners should be non suited on the
ground of alternative remedy.

9. Now we proceed to consider the
matter on merits.

10. The term "goods" and "tax on
the sale or purchase of goods" are defined
under Article 366 (12) & (29-A) of the
Constitution. The relevant provisions
thereof are reproduced as under:

"366. Definitions.-....................
(12) "goods" includes all materials,
commodities, and articles;
.........................................
(29-A) "tax on the sale or purchase of
goods" includes-
(a).......
(b).......
(c).......
(d) a tax on the transfer of the right to use
any goods for any purpose (whether or
not for a specified period) for cash,
deferred payment or other valuable
consideration;
(e).......
(f).......
and such transfer, delivery or supply of
any goods shall be deemed to be a sale of
those goods by the person making the
transfer, delivery or supply and a
purchase of those goods by the person to
whom such transfer, delivery or supply is
made."

Section 2 (aa) of the Act defines
"business" and the relevant part, which
been pressed in service in the present
case, reads as under:
320 INDIAN LAW REPORTS ALLAHABAD SERIES [2008
"2. Definitions.-...................
(aa) 'business', in relations to business of
buying or selling goods, includes-
(i) ...................
(ii) the execution of any works contract or
the transfer of the right to use any goods
for any purpose (whether or not for a
specified period);..."

Similarly, the term "dealer" is
defined under Section 2(c) of the Act and
according to the respondents, the present
transaction is covered by provisions of
Section 2 (C) (vii) (viii), which are
reproduced as under :

"2. (c) "Dealer" means any person
who carries on in Uttar Pradesh (whether
regularly or otherwise) the business of
buying, selling, supplying or distributing
goods directly or indirectly, for cash or
deferred payment or for commission,
remuneration
or
other
valuable
consideration and includes-
......................
(vii) every person who carries on the
business of transfer of property in
goods (whether as goods or in some
other form) involved in the execution
of a works contract;
(viii) every person who carries on
business of transfer of the right to
use any goods for any purpose
(whether or not for a specified
period) for cash, deferred payment
or other valuable consideration;"

The "goods" are defined under
Section 2(d) of the Act which reads as
under :

"2. (d) 'Goods' means every kind or
class of movable property and includes all
materials,
commodities
and
articles
involved in the execution of a works
contract, and growing crops, grass, threes
and things attached to, or fastened to
anything permanently attached to the
earth which, under the contract of sale,
are agreed to be severed but does not
include actionable claims, stocks, shares,
securities or postal stationery sold by the
Postal Department;"
Since, the respondents have also
placed reliance on the definition of
"works contract" as contained in Section
2(m),
therefore,
the
same
is
also
reproduced as under:
"2. (m) 'Works contract' includes
any agreement for carrying out, for cash,
deferred payment or other valuable
consideration, the building construction,
manufacture,
processing,
fabrication,
erection,
installation,
fitting
out,
improvement, modification, repair or
commissioning
of
any
movable
or
immovable property;"

The charging provision attracting tax
liability in the present case is Section 3-F
and relevant part thereof reads as under:

"3-F. Tax on the right to use any
goods or goods involved in the execution
of works contract.-(1) Notwithstanding
anything contained in Section 3-A or
Section 3-AAA or Section 3-D but subject
to the provisions of Sections 14 and 15 of
the Central Sales Tax Act, 1956, every
dealer shall, for each assessment year,
pay a tax on the net turnover of-

(a) transfer of the right to use any goods
for any purpose (whether or not for a
specified period) for cash, deferred
payment
or
other
valuable
consideration; or
(b) transfer
of
property
in
goods
(whether as goods or in some other
1 All] Oriental Bank of Commerce V. State of U.P. and others
321
form) involved in the execution of a
works contract.
at such rate not exceeding twenty percent
as the State Government may, by
notification, declare and different rates
may be declared for different goods or
different classes of dealers."

11. Thus, from a combined reading
of all the aforesaid provisions, the very
first indicia to attract the Act is that there
has to be "goods" in existence with which
a person is carrying on the "business" of
buying, selling, supplying or distributing
directly or indirectly, for cash or deferred
payment or for commission, remuneration
etc. Therefore, the first question would be
whether Lockers of the Bank can be said
to satisfy the definition of "goods" under
the Act. The reply of the respondents is
that Locker is nothing but a vault fixed in
a big cabinet, which is movable item
when it is purchased by the Bank, though
it is affixed for the purpose of security
and safety, but that would not detract
from the fact that it is a movable property
which the contention of the petitioners is
otherwise.

12. We have to examine the
correctness of the rival submissions to
find out whether a Locker can be said to
be "goods" i.e. a "movable property" in
the light of the provisions in the
Constitution, Act and the admitted facts
borne out from the pleadings.

13. It would be appropriate, first to
consider as to what is taxable under the
Act. Entry 54 List II Schedule-VII of the
Constitution
confers
legislative
competence upon the State legislature to
make law on taxes on the sale or purchase
of "goods" other than newspapers, subject
to the provisions of entry 92-A of List I.
Prior
to
46th
Amendment
of
the
Constitution, whereby Clause 29-A was
inserted in Article 366, the law as laid
down by the Apex Court in State of
Madras Vs. M/s. Gannon Dunkerley
and Co. (Madras) Ltd. AIR 1958 SC
560 was holding field as to the meaning
of the words sale of "goods". Interpreting
Entry 54 in the light of Entry 48 of List II,
Schedule VII to the Government of India
Act, 1935, the Apex Court held that the
old and known concept of sale of goods
would apply to the entry in the legislative
list which must have three essential
components to constitute a transaction of
sale of goods, namely, (i) an agreement to
transfer title, (ii) consideration, and (iii)
actual transfer of title in the goods. It was
held that in the absence of any one of
these elements, there would be no sale.
Considering whether a contract under
which a contractor agreed to set up a
building would be a contract for sale, the
Court held otherwise and said that in law
there cannot be an agreement relating to
one kind of property and a sale as regards
another. The parties could have provided
for two independent agreements, one
relating to the labour and work involved
in the execution of the work and erection
of the building and the second relating to
the sale of the material used in the
building in which case the latter would be
an agreement to sell and the supply of
materials thereunder. However, where
there is a composite contract, it was not
classifiable as a sale. The Court held that
the words "sale of goods" have to be
interpreted in their legal sense. That sense
can only be what it had in law relating to
"sale of goods". Consequently, the word
"sale" was construed and given the same
meaning which it had in the Sale of
Goods Act, 1930. This view was followed
with respect to "meals" served at hotels in
322 INDIAN LAW REPORTS ALLAHABAD SERIES [2008
State of Punjab Vs. M/s. Associated
Hotels of India Ltd., (1972) 1 SCC 472.

14. Considering, that the aforesaid
position had resulted in evasion of tax in
various ways, the matter was considered
by the Law Commission, who submitted
its report in 1974 and, thereafter, Article
366 was amended inserting Clause 29-A,
i.e., the definition of "tax on the sale or
purchase of goods". The effect of the said
amendment is that certain transactions,
which were not sale or purchase of goods
earlier are now included therein. By legal
fiction, the composite contracts like work
contracts, hire purchase contracts and
catering contracts are deemed to be "sale
or purchase of goods" and subjected to
sale
tax
under
the
relevant
State
legislation under Entry 54 List II
Schedule VII. This development has been
noticed by the Apex Court in Bharat
Sanchar Nigam Ltd. & another Vs.
Union of India & others 2006 (3) SCC
1, but the Apex Court observed that
though to some extent the principle
enunciated in Gannon Dunkerley stood
modified by 46th Amendment yet it has
survived in two respects. In para 43 of the
judgment the Court has said that with
respect to definition of "sale", for the
purpose of Constitution in general and for
the purpose of Entry 54 of List II in
particular, except to the extent that the
clause in Article 366 (29-A) operate
otherwise, the position continue to be the
same. Even in separate categories of
"deemed sale", the composite elements of
a sale such as intention of the parties,
goods, delivery, etc. would continue to be
defined
according
to
known
legal
connotations.
It
is
said
that
46th
Amendment has not given a licence to
assume that a transaction is a sale and
then to look around for what could be the
"goods". Words "goods" has not been
altered by the 46th Amendment and that
ingredient of a sale continues to have the
same definition. The second aspect, in
which Gannon Dunkerley (supra) has
survived is with reference to the dominant
nature test to be applied to a composite
transaction not covered by Article 366
(29-A). Transactions which are mutant
sales are limited to the clauses of Article
366 (29-A). All other transactions would
have to qualify as "sales" within the
meaning of Sales of Good Act, 1930 for
the purpose of levy of sales tax. The
Court has further explained some of the
composite transactions, which would not
be covered by clause 29-A of Article 366
and in para-44 of the judgment in Bharat
Sanchar Nigam Ltd. (supra), the Apex
Court said:

"Of all the different kinds of
composite transactions the drafters of the
46th Amendment chose three specific
situations, a works contract, a hirepurchase contract and a catering contract
to bring within the fiction of a deemed
sale. Of these three, the first and third
involve a kind of service and sale at the
same time. Apart from these two cases
where splitting of the service and supply
has been Constitutionally permitted in
clauses (b) and (g) of Clause (29A) of Art.
366, there is no other service which has
been permitted to be so split. For example
the clauses of Art.366(29A) do not cover
hospital services. Therefore, if during the
treatment of a patient in a hospital, he or
she is given a pill, can the sales tax
authorities tax the transaction as a sale?
Doctors, lawyers and other professionals
render service in the course of which can
it be said that there is a sale of goods
when a doctor writes out and hands over
a prescription or a lawyer drafts a
1 All] Oriental Bank of Commerce V. State of U.P. and others
323
document and delivers it to his/her client?
Strictly speaking with the payment of fees,
consideration does pass from the patient
or client to the doctor or lawyer for the
documents in both cases."

15. Recently, in respect to an
Advertising Agency, the applicability of
Karnataka Value Added Tax Act, 2003 in
view of the fact that it was already subject
to payment of service tax under Finance
Tax Act, 1994 came up for consideration
in Imagic Creative Pvt. Ltd. Vs.
Commissioner of Commercial Taxes &
others JT 2008 (1) SC 496. Relying on
Tata Consultancy (supra) and Bharat
Sanchar Nigam Ltd. (supra), the Apex
Court held that where it is the question of
changeability of a service contract, the
Court must have in mind a distinction
between an indivisible contract and a
composite contract. If in a contract, an
element to provide service is contained,
the purport and object for which the
Constitution had to be amended and
clause 29A had to be inserted in Article
366, must be kept in mind. It further held
that a legal fiction is created by the said
provision and such a legal fiction should
be applied only to the extent for which it
was enacted. Though it must be given its
full effect, but the same would not mean
that it should be applied beyond a point
which was not contemplated by the
legislature or which would lead to an
anomaly or absurdity.

16. Since the above law has been
enunciated
after
considering
the
amendment in the Constitution as well as
in the Act, and the effect thereof, hence,
we have to apply the same to the facts and
circumstances of the present case to find
out the answer to the question which has
been raised in this bunch of writ petitions.
The first indicia for attracting liability of
tax under the Act is that there must be a
"goods" in respect whereto a transaction
of sale or purchase has taken place. The
"goods" as observed earlier has been
defined in the Constitution under Article
366 (1), which is a inclusive definition
providing that it includes all materials,
commodities and articles. Under Section
2(7) of the Sale of Goods Act, 1930, the
word "goods" has been defined as under:

"2. (7) "goods" means every kind of
movable property other than actionable
claims and money; and includes stock and
shares, growing crops, grass, and things
attached to or forming part of the land
which are agreed to be severed before
sale or under the contract of sale:"

17. Similar definition of "goods" has
been incorporated under the Act vide
Section
2(d),
though
with
minor
variations. An incorporal right has been
held
to
be
goods
in
Anraj
Vs.
Government of Tamil Nadu (1986) 1
SCC 414. It was held that a goods may be
a tangible or intangible property in Tata
Consultancy Services Vs. State of
Andhra Pradesn 2005 (1) SCC 308,
where considering validity of sales tax on
computer software, the Apex Court in
para 81 of the judgment held that the
"goods" may be tangible or intangible
property provided it has the attributes
thereof having regard to (a) its utility; (b)
capable of being bought and sold; and (c)
capable of being transmitted, transferred,
delivered, stored and possessed. The
aforesaid view has been followed by the
Apex Court for the purpose of judging
what are "goods" for attracting tax
liability under the Act in Bharat Sanchar
Nigam Ltd. (supra). Therefore, in order
to constitute "goods" attracting tax
324 INDIAN LAW REPORTS ALLAHABAD SERIES [2008
liability under the Act, it is no doubt true
that only a movable property would
constitute goods and not an immovable
property. The learned counsel for the
petitioners have contended that the
Lockers attached in a Safe Deposit Vault
of the Bank embedded with earth is an
immovable property and not a kind of
movable property attracting liability of
tax under the Act. The term "movable
property" has not been defined in the Act.
The General Clauses Act, 1987, however,
defined
"immovable
property"
and
"movable property" vide Section 3 (26)
and 3(36), which read as under:

"3. definitions.-..............
.....................................
(26)"immovable
property"
shall
include land, benefits to arise out of land,
and things attached to the earth, or
permanently
fastened
to
anything
attached to the earth;
(36) "movable property" shall mean
property of every description, except
immovable property;"
The term "immovable property" is
also defined under Section 3 of the
Transfer of Property Act, 1882, which
reads as under:

"immoveable property" does not
include standing timber, growing crops or
grass:"

18. The definition of "goods" under
the Act referring to every kind of movable
property and including growing crops,
grass and things attached to or forming
part of the land, which are agreed to be
severed before sale or under the contract
of sale takes away some items which
would otherwise be immovable property
under the General Clauses Act, 1897
inasmuch certain items which are attached
to the earth or permanently fastened to
anything permanently attached to the
earth, but if are agreed to be severed
before sale or under the Contract of sale
are treated to be a kind of "movable
property" constituting "goods" under the
Act, though under the General Clauses
Act, it may not be. To that extent, the
definition of "goods" under the Act is
wider but in all other respects, there is not
much difference inasmuch if any other
thing, if permanently attached to earth or
fastened to anything attached to earth,
which is not agreed to be severed before
sale or under the contract of sale, that
would continue to be an immovable
property and, therefore, outside the
purview of the term "goods" under the
Act. It is not the case of the respondents
that the Bank Locker, which is hired by a
customer is intended to be severed from
earth for user or at the time of user or at
any other point of time. On the contrary,
the Locker continue to be a part and
parcel of a thing attached and embedded
with earth and, therefore, in the absence
of any material otherwise to show that it
has to be severed before sale or under the
contract of sale, it cannot be said that it is
a movable property included within the
definition of "goods" under the Act. We
are, therefore, inclined to hold that in the
absence of any otherwise material or
pleading or record, the Locker, which is
part of Safe Deposit Vault embedded to
earth in the strong room of the Bank is an
immovable property inasmuch it is to be
used by the customers in the fixed
condition and not by severing it from
earth or the things attached to earth. This
fact that at the time of purchase of Safe
Deposit Vault of which the Lockers were
a part, it was a movable property and
brought from one place to another would
make no difference inasmuch it is not the
1 All] Oriental Bank of Commerce V. State of U.P. and others
325
Safe Deposit Vault purchased by the Bank
from its manufacturer, which is hired by
the customer, but it is a Locker forming
part of a Safe Deposit Vault, which is
embedded with earth in the strong room
of the Bank, which is hired by the
customer for keeping his valuables therein
in safe custody. This reason itself is
sufficient to keep the Locker of the Bank
outside the purview of the Act and non
taxable. The view we have taken herein
that the Lockers of the Bank are not a
kind of movable property, which may
constitute "goods" under the Act finds
support from the meaning assigned to the
"goods" in Tata Consultancy Services
(supra) and Bharat Sanchar Nigam Ltd.
(supra).

19. The issue can also be examined
from another angle. The transfer of right
to use any goods for any purpose must be
for cash, deferred payment or other
valuable consideration. Can it be said that
the rent charged by the Bank for entering
into an agreement with the customers
assigning right to use Locker of the Bank
amounts to such consideration. This
would require us to examine as to what is
the principle object of the customer in
hiring the Locker of the Bank. In other
words, we have to examine what actually
is the contract between the Bank and its
customers with respect to user of Bank
Lockers and the kind of transaction
involved therein. In para 22 of the writ
petition, it is averred that the Bank is not
selling Lockers to its customers for rent.
Locker is a part of big vault attached and
embedded to earth. The whole extent of
the vault is embedded to the strong room
which has been specifically designed to
ensure proper security and safety to the
valuables of its customers. In order to
provide security, the Bank has to
construct strong room with prescribed
specifications necessary for attaining
highest security and safety and it is
attached to earth. The specifications
necessary for security are as per the
norms and standards of global standard
security.
The
Bank
further
installs
security alarm surveillance device and
ensure constant electric supply for the
working of security alarm surveillance
device. A regular security guard is
employed for round the clock for
guarding of Lockers. The customers have
limited right to access during specific
hours and specific days. The Locker is
operable with the use of a key which is in
possession of the customer and a master
key possessed by the Bank without which,
the Locker cannot be opened and operated
by the customer. The Bank has every right
to stop operation of the Lockers in certain
cases. The agreement is said to be a leasedeed wherein the customer is in the
capacity of lessee and the Bank in the
capacity of lessor. A copy of the draft
agreement is on record as Annexure 7 to
the writ petition. It is admitted by all the
parties concerned that the agreements
executed by all the Banks for renting out
Lockers are in similar terms. It provides
that the Bank reserves right of having the
working of the Safe Deposit Vault and of
making changes therein without any
previous notice or information and the
Lockers can be operated by the customer
or his authorized agent during such
working times as are prescribed by the
Regulations or the Bank. Clause 5 of the
lease deed reserves rights to the Bank of
closing Safe Deposit Vault under extraordinary circumstances such as civil
commotion, riots and other similar
circumstances for such time as may be
necessary. Clause 20 provides as to what
326 INDIAN LAW REPORTS ALLAHABAD SERIES [2008
shall not be kept in the Locker and reads
as under:

"20. The lessee shall not assign or
subject the locker or any part thereof, or
use or permit it to be used for deposit of
any liquid of any thing of explosive
dangerous of offensive nature or which
may become a nuisance to the Bank or
any of its tenants or customers or for any
other purpose than for deposit of
valuables or other property and shall on
demand permit the bank to inspect the
contents of the safe for the purpose of
ascertaining it the condition is being
complied with."

20. Clause 22 provides that in case
of receipt of an order from a competent
Court, the bank shall have right to refuse
access to the customer to the Locker.
Clause
23
clearly
reads
that
the
relationship of the Bank and the lessee
shall be that of a landlord and a tenant and
not that of bailor and bailee. The Bank
has no responsibility of liability of any
kind whatsoever in respect of the contents
of the Locker and shall not be responsible
for any loss or damage etc.

21. The facts as above are not
disputed in the counter affidavit. From the
pleadings of the parties as well as
arguments advanced on both the sides,
three things are evident. Firstly, that
Lockers are part of a Safe Deposit Vault
embedded to earth. Secondly, that the
public go to Bank for hiring Lockers not
because they lack a Locker at their
residence, but because of the safety and
security, which is maintained by the Bank
and which is not available at the
individual residence. Judicial cognizance
can be taken of the fact that normally steel
almirah is fitted with a Safe Deposit
Locker of high thickness and couched
safety. The class of customers, who go to
Bank for depositing their valuables in
Lockers must have the capacity to possess
such almirahs in their house and even
otherwise can afford to purchase a steel
almirah fitted with such Safe Deposit
Locker, but instead of making this
arrangement at their residence, people
prefer to go to a Bank to hire a Locker
thereat in order to keep their valuables in
such Lockers. One would not like to keep
his valuables at a place which is not in his
control or possession instead of keeping it
in his house under constant watch unless
the reasons for such are so compelling.
The foremost compelling reason which
can easily be conceived in this case is
safety and security available to the Bank
Lockers. The Safe Deposit Lockers of
Banks are located in impregnable strong
rooms and a stranger cannot get access
into these strong rooms of the Bank. The
high security alarms installed by the Bank
provides a feeling of safety to the
customers who prefer to have a Locker in
the Bank for keeping his valuable therein
instead of a Locker at his residence. Even
several Government Departments hire
Bank
Lockers
to
keep
their
valuables/important documents due to
high degree of safety available therein.
Therefore, the rental paid by such person
to the Bank cannot be said to be mere
rental charges for hiring the Locker but it
includes comprehensively the cost of
maintaining high safety standards and
arrangements at the Bank. In other words,
it can be said that a person pay rent for the
locker not only for right to use the Locker
but also of a host of other services closely
associated with maintenance of Lockers
by the Bank. In fact the use of Lockers is
predominant by other services available at
the Bank. In other words, the Bank collect
1 All] Oriental Bank of Commerce V. State of U.P. and others
327
higher
charges
which
represents
a
consolidated charge levied by the Bank
for variety of services and facilities, of
which, use of Locker forms a small part.
The various services and items are
inseparable due to the nature of such
services and purpose involved in the
transaction. The third aspect of the matter
is that the customer is not given exclusive
control of the Locker inasmuch the Bank
retains control over the Locker all through
and a double locking system ensures that
the locker cannot be opened by a
customer except with the aid and
assistance of the Bank. The agreement
clearly provides that the relationship is
clearly of lessor and lessee though in fact,
it is slightly a bid complex in nature
inasmuch the Locker can be used by the
customer for keeping his valuables but he
can not operate the same according to his
free will as and when he likes and is
bound to follow the regulations and
conditions imposed by the Bank in this
regard. Neither the strong room nor the
steel cabinet in which the Lockers are
fitted is rent out to any particular person.
Even the Locker cannot be opened by the
customer on his own unless it is first
unlocked by the Bank with master key
kept by it. The arrangement, therefore,
made by the customer with the Bank with
respect to Locker cannot be equated with
that of hiring of an Almirah or drawer of
an Almirah, and, rental for the Locker
cannot be said to be consideration for
only use of storage space in the cabinet.
The dominant aspect involved in the
transaction is the security and safety of
valuable which is kept by the customers
in the Locker of the Bank instead of
keeping it at their residence. These
services are admittedly not taxable under
the Act. The services rendered by the
Bank and the charges levied therefor from
its customer would not amount to
valuable consideration in order to cover
transaction in question within the purview
of Section 2(c) of the Act read with
Article 266 (29-A) of the Constitution.

22. There is another aspect of the
matter. As we have already discussed,
rental charges includes various other
aspects which are in the nature of service
rendered by the Bank to its customers.
The State is not entitled to entrench upon
the Union List and 'tax services' by
including the cost of such service in the
value of the goods. Even if we assume
that
the
transaction
answers
the
description of "goods", it is not disputed
that Banks are in List I and it is the
Parliament, which is competent to make
law with respect to banking services.
Where the charges are inseparable, the
value of goods involved in the execution
of whole transaction cannot be assessed to
sale tax for the reason that the charges
pertaining to services rendered by the
Bank are not the taxable under the Act.