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No LBT / Octroi can be levied on the value of vouchers. Sodexo Co. Judgement

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In a recent Land mark judgement, the apex court has held after reversing the ratio laid down by the Bombay High Court that Sodexo vouchers are not goods and hence no LBT / Octroi can be levied on the value of such vouchers.

Let’s look at the critical aspects of this judgement:-

Business model followed by Sodexo 

The appellant has been granted a Certificate of Authorisation by the RBI to operate a payment system for the issuance of Sodexo Meal Vouchers in the form of 'Paper Based Vouchers' under the aforesaid provision. The business operation that is carried out by the appellant, has the following essential features:

(i) the payment system operated by the appellant involves issuance of vouchers having a face value (meal and gift vouchers) to the customers;

(ii) customers grant said vouchers to their employees (beneficiaries);

(iii) the employees use the vouchers to obtain/pay for food, meal or goods;

(iv) vouchers can only be used in an affiliated network of restaurants and shops (affiliates/redeemers);

(v) the affiliated restaurant/shop having delivered the food/meal/ good,  receives the voucher and turns it to the appellant who issued it for reimbursement of the face value (redemption); and

(vi) when the vouchers are redeemed, the appellant reimburses to the affiliate/redeemer the face value of the voucher and retains a service fee in order to compensate for the attractiveness of the system which has benefited to the affiliate's business. The appellant pays service tax on such service fee charged


Issue that has to be answered in the present case, namely, whether these Sodexo Meal Vouchers are goods within the meaning of the Maharashtra Municipal Corporation Act under which the Municipal Corporation is entitled to levy and collect Octroi or LBT.

The appellant had resisted the imposition of LBT primarily on the ground that it was providing services to the establishments with whom it had entered into contracts and, therefore, such agreements were for service and not for sale of any goods.

Position taken by the Honourable Bombay High Court :-

The said vouchers have its utility and the same are capable of being paid or sold and same are capable of being delivered, stored and possessed. Thus, the test laid down by this Court in Tata Consultancy Services v. State of Andhra Pradesh has been satisfied.

Position taken by the Honourable Supreme Court :-

Sodexo Meal Vouchers cannot be treated as 'goods' for the purpose of levy of Octroi or LBT. There are at least three fundamental and principal reasons for coming to this conclusion:-

(I) Exact Nature of Meal Vouchers: - This arrangement is made to help the customers by simply facilitating the provision for making available food items, etc. of a particular amount, represented by vouchers, through some affiliates. It is these affiliates who are getting the money for those goods and not the appellant, who only gets service charges for the services rendered, both to the customers as well as the affiliates. These vouchers are printed for a particular customer, which are used by the said customer for distribution to its employees and these vouchers are not transferrable at all.

(II) Transaction Regulated By RBI Guidelines: - An insight into the Policy Guidelines dated March 28, 2014 issued by the RBI to regulate such transactions would also clinchingly bears out that the real nature of the transaction is to provide service and by no stretch of imagination these vouchers can be termed as 'goods'. As per this, the amount thus collected has to be kept in the escrow account and the persons, like the appellant herein, are under obligation to use this amount only for making payments to the participating merchant establishments and other permitted payments.

The apex court has relied on the ratios laid down in Bharat Sanchar Nigam Ltd. & Anr. v. Union of India & Ors. And Idea Mobile Communication Limited. v. Commissioner of Central Excise and Customs, Cochin.  

What is to be seen is the 'flexibility in its utilisation and its transferability?

We may mention here that the appropriate test would be as to whether such vouchers can be traded and sold separately. answer is in the negative. Therefore, this test of ascertaining the same to be 'goods' is not satisfied.

(III) Real Character Of The Transaction Is The Facility By The Customers As Employers To Their Employees: The value of such free food and non-alcoholic beverage provided by an employer to an employee is treated as expenditure incurred by the employer and amenity in the hands of the employee. It is this perquisite given by the customer to its employees by adopting the methodology of vouchers and for its proper implementation, services of the appellant are utilised.


Thus the apex court has held that the judgment of the High Court has not discussed and decided the issue correctly and warrants interference. The court has thus allowed these appeals and set aside the judgment of the High Court by holding that Sodexo Meal Vouchers are not 'goods' within the meaning of Section 2(25) of the Act and, therefore, not liable for either Octroi or LBT. The judgement will be critical in ascertaining the fate of several similar instruments.

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