Locker hire charges not taxable where exemption remained in force and no transfer of right to use goods was shown

Exemption on banks' locker hire charges continued until the rescinding notification took effect, so tax could not be levied for any earlier period covered by the notices. The court also held that safe deposit locker charges were not taxable as consideration for transfer of the right to use goods: lockers embedded in a strong room were not movable goods, the bank's charge was composite and inseparable, and no delivery or possession of the locker was shown. The writ petitions succeeded and the impugned notices were quashed, with no sales tax liability on locker hire charges on the facts considered.

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Issues: (i) whether the notices proposing levy of sales tax on locker hire charges could operate before rescission of the exemption notification issued under section 9(1) of the Act; (ii) whether the hire charges for safe deposit lockers attracted tax under section 5-E of the Act as consideration for transfer of the right to use goods.

Issue (i): whether the notices proposing levy of sales tax on locker hire charges could operate before rescission of the exemption notification issued under section 9(1) of the Act.

Analysis: The exemption notification issued under section 9(1) granting relief to banks remained in force until it was rescinded. The constitutional amendment and the State amendments did not by themselves authorise collection of tax during the subsistence of that exemption. Since the rescinding notification took effect only from the later date, the authorities could not fasten liability for the earlier period covered by the notices.

Conclusion: The proposed levy could not operate before the rescission and the petitioners were not liable for tax prior to that date.

Issue (ii): whether the hire charges for safe deposit lockers attracted tax under section 5-E of the Act as consideration for transfer of the right to use goods.

Analysis: Tax under section 5-E was attracted only where there was a transfer of the right to use goods. Safe deposit lockers, if embedded in the strong room, were not movable property and therefore did not answer the description of goods. Even otherwise, the amount charged by banks was a composite and inseparable charge for multiple facilities, including security, strong room arrangements, watch and ward, and access control, so that no distinct amount could be identified as consideration solely for the right to use the locker. The arrangement also lacked the essential element of delivery or possession of the goods to the hirer, which distinguished the transaction from cases where goods are actually delivered for use.

Conclusion: The locker hire charges were not exigible to tax under section 5-E on the facts of the case.

Final Conclusion: The writ petitions succeeded, the impugned notices were quashed, and the banks were held not liable to sales tax on safe deposit locker hire charges in the circumstances considered.

Ratio Decidendi: A tax on the transfer of the right to use goods is attracted only where the transaction involves goods capable of being so transferred with possession or delivery, and a composite inseparable charge for allied banking services cannot be split to tax only an alleged use component.

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