Blue Dart Express Ltd. vs the State of Maharashtra

Facts of the Case-

Blue Dart Express Limited (hereinafter referred to as “Blue Dart”) is a courier company engaged in the business of providing courier services in the state of Maharashtra. The company had filed a writ petition before the Bombay High Court challenging the validity of certain provisions of the MVAT Act, 2002. The petitioner claimed that the provisions were unconstitutional and violative of Article 19(1)(g) of the Constitution of India.

The dispute in the case relates to the interpretation of the provisions of the MVAT Act, 2002, specifically section 52(1)(a)(i) and section 61. Section 52(1)(a)(i) provides for the levy of VAT on the sale of goods, while section 61 provides for the registration of dealers under the Act.

The petitioner contended that the provisions of the MVAT Act, 2002 were discriminatory and arbitrary, and that they violated the fundamental right to carry on business guaranteed under Article 19(1)(g) of the Constitution. Blue Dart argued that it was not liable to pay VAT on the courier services provided by it, as they did not involve the sale of goods.

On the other hand, the state of Maharashtra argued that courier services provided by Blue Dart did involve the sale of goods, and hence, were liable to VAT under the MVAT Act, 2002.

Issues Raised-

1. Whether Blue Dart’s courier services, which included handling, packing, and delivery, were exempted from sales tax under the Bombay Sales Tax Act, 1959, as they fell under the category of ‘goods in transit’?

Contentions of the Petitioner-

The petitioner in the case of Blue Dart Express Limited vs. The State of Maharashtra, 2011 contended that certain provisions of the Maharashtra Value Added Tax Act, 2002 (MVAT Act) were unconstitutional and violative of Article 19(1)(g) of the Constitution of India.

The petitioner, Blue Dart Express Limited, argued that it was not liable to pay VAT on the courier services provided by it, as they did not involve the sale of goods. The petitioner claimed that courier services were not covered under the definition of ‘goods’ under the Sale of Goods Act, 1930 and hence, were not liable to VAT under the MVAT Act, 2002.

The petitioner also contended that the provisions of the MVAT Act, 2002 were discriminatory and arbitrary, as they imposed an additional burden on the petitioner, which was not borne by other similarly placed service providers. The petitioner argued that this violated its fundamental right to carry on business guaranteed under Article 19(1)(g) of the Constitution of India.

Overall, the petitioner’s main contentions were that the courier services provided by it did not involve the sale of goods and hence, were not liable to VAT under the MVAT Act, 2002. Additionally, the petitioner claimed that the provisions of the MVAT Act, 2002 were unconstitutional and violated its fundamental right to carry on business.

Contentions of the Respondent-

In the case of Blue Dart Express Limited vs. The State of Maharashtra, 2011, the respondent, the State of Maharashtra, contended that the courier services provided by Blue Dart did involve the sale of goods and hence, were liable to VAT under the Maharashtra Value Added Tax Act, 2002 (MVAT Act).

The respondent argued that the delivery of documents and parcels by Blue Dart constituted a service in the nature of transportation of goods, and hence, was covered under the definition of ‘sale of goods’ under the MVAT Act, 2002. The respondent contended that the petitioner was liable to pay VAT on the courier services provided by it.

The respondent also argued that the provisions of the MVAT Act, 2002 were not discriminatory and arbitrary, as they applied equally to all dealers engaged in the sale of goods within the state of Maharashtra. The respondent claimed that the levy of VAT was a reasonable restriction on the fundamental right to carry on business, as it was imposed for a public purpose and was proportionate to the object sought to be achieved.

Overall, the respondent’s main contentions were that the courier services provided by Blue Dart involved the sale of goods and were liable to VAT under the MVAT Act, 2002. Additionally, the respondent claimed that the provisions of the MVAT Act, 2002 were not discriminatory and arbitrary and did not violate the petitioner’s fundamental right to carry on business.

Ratio Decidendi-
The ratio decidendi of the case of Blue Dart Express Limited vs. The State of Maharashtra, 2011 is that courier services, even though they involve the transportation of goods, do not constitute a sale of goods and are therefore not liable to VAT under the Maharashtra Value Added Tax Act, 2002 (MVAT Act).

The Bombay High Court held that courier services are essentially services and do not involve the transfer of ownership of goods. The court observed that the dominant intention behind the provision of courier services is the performance of a service, which may or may not involve the delivery of goods. The court also noted that the Sale of Goods Act, 1930, which defines the term ‘goods’, does not include services.

Furthermore, the court held that the provisions of the MVAT Act, 2002, which sought to impose VAT on courier services, were unconstitutional and violated the petitioner’s fundamental right to carry on business guaranteed under Article 19(1)(g) of the Constitution of India. The court found that the imposition of VAT on courier services was discriminatory and arbitrary, as it imposed an additional burden on the petitioner, which was not borne by other similarly placed service providers.

Therefore, the court held that courier services did not constitute a sale of goods and were not liable to VAT under the MVAT Act, 2002. This decision has been an important precedent for the classification of courier services for the purposes of taxation, and has been cited in several subsequent cases.

Judgment-

The Bombay High Court held that the courier services provided by Blue Dart did not involve the sale of goods and hence, were not liable to VAT under the MVAT Act, 2002. The court relied on the definition of ‘goods’ under the Sale of Goods Act, 1930 and held that courier services did not qualify as goods under the Act. The court also held that the petitioner was not liable to register under the MVAT Act, 2002, as it did not involve the sale of goods.

The court also examined the provisions of the MVAT Act, 2002 and held that they were not violative of Article 19(1)(g) of the Constitution of India. The court observed that the levy of VAT was a reasonable restriction on the fundamental right to carry on business, as it was imposed for a public purpose and was proportional to the object sought to be achieved.

The court also noted that the provisions of the MVAT Act, 2002 were in line with the principles of taxation and were based on the destination principle, which ensures that the tax burden falls on the ultimate consumer and not on the intermediary dealers.

Conclusion-

The judgment in Blue Dart Express Limited v. State of Maharashtra is significant as it clarified the position of law on the levy of sales tax on courier services provided by courier companies. The judgment also reaffirmed the principle that taxes cannot be levied on the movement of goods from one place to another as it would amount to double taxation.

The judgment also highlights the importance of correctly interpreting the provisions of tax laws to determine the tax liability of taxpayers. In this case, the Court’s interpretation of the term ‘goods in transit’ under the Bombay Sales Tax Act, 1959,

written by Bhoomi Aggarwal intern under legal vidhiya