The following Judgement of the Court was delivered: S.P. BHARUCHA
Under challenge in this appeal by special leave is a judgement and order of the West bengal Taxation Tribunal.
The Assessment Year with which we are concerned is the Assessment Year 1974-75. The Assessee, the appellant, brewed and sold beer in beer bottles. For the beer it gave to its purchasers one invoice and another for "the deposit on bottles" there is another item, of "truck charge". It was the case of the assessee that the rate per bottle of the deposit was adjusted so as to cover the cost of the bottles that were purchased by it. Upto 1st March 1974, the rate was Rs. 4.80 per dozen bottles but, due to the increase in their cost, the rate was raised to Rs.9/- per dozen bottles with effect from 2nd March, 1974. The amounts received as such deposit were credit to an account entitled "Deposit on Bottles" in the assessee’s ledger. When the empty bottles were returned by customers, refunds were made at the same rate. There was no time limit for the return and bottles taken from the assessee in one year might be returned was adopted: Deposited for three months were kept in the aforementioned account as a liability and the balance in that account as a liability and the balance in that account was transferred to an account called the "Bottle Deposit Forfeited Account". The amount of bottle deposit receipts, returns and forfeiture were shown by the assessee thus: "1.4.74- By Balance Rs.6,84,152.00
Add Deposit Rs.30,57,143.00
less Refund Rs.37,41,295.00
less amount forfeited Rs16,55,355.00
Balance on 31.3.75 Rs.9,22,966.00
The commercial Tax Officers treated the amount of Rs.16,55,355/-, being the forfeited deposit amount aforestated, as a part of the assessee’s sales realisations and taxed it. The Assistant commissioner confirmed the order, as did the West Bengal Commercial Taxes Tribunal. The matter was carried to the West Bengal Taxation Tribunal, whose order is under appeal. Both Tribunals placed emphasis upon the fact that it had been admitted by the assessee that there was no time limit for the return of the empty bottles. They found that the transaction in respect of the beer bottles was not one of a bailment as contended by the assessee but one of sale.
Learned counsel for the appellant relied upon Benjamin’s sale of Goods (Third Edition) where it is stated, "It is a question of construction whether sacks, barrels, bottles and similar containers in which goods are sold are themselves the subject of a sale or are merely bailed to the buyer, remaining at all times the property of the seller or the original manufacturer. It is not decisive of the issue that a charge is made for the non-return of the container, nor will the payment of such charge necessarily transfer the ownership of the container to the person who pays it". learned counsel also referred to the Curzon’s Dictionary of Law (Fourth Edition) which defines a deposit to mean "a sum of money paid on terms under which it will be repaid...". Great emphasis was laid be learned counsel on the judgement of this court in United Breweries Ltd. vs. State of A.P.,1997 (3) S.C.C.530, & Raj Steel and others vs. State of A.P. and others, 1989 (3) S.C.C.262. In learned counsel’s submission, what had to be seen was whether the transaction in respect of the beer bottles was a sale. The intention of the assessee transaction was not to sell the beer bottles. The fact that the relevant invoice spoke of a deposit and the fact that so substantial a sum as Rs.11 lakhs had been refunded from out of the Bottles Deposit Account to customers who returned the empties showed that there was only a bailment of the beer bottles to the customers.
The United Breweries Ltd. case, decided by a Bench of three learned Judges, involved a brewer making and selling beer in bottles, In respect of the beer bottles the brewer had issued circulars to its buyers. Four things were found by this court to emerge therefrom, namely-
"(1) The refundable deposits were
being collected on the bottles and
the creates.
(2) The appellant advised its
customers to collect forty paise
per bottle from the customers as
deposit.
(3) The customers were advised to
collect the empty bottles from the
consumers ands return them to the
appellant.
(4) The empty bottles and creates
were to be taken back by the trucks
of the appellant, the drivers of
which were authorised to issue a
receipt for the empties against
which the appellant would issue
credit notes. At the time of the
booking of the next consignment,
the customers would get advantage
of the credit notes.
This arrangement suggested to this Court "a continuous process by which the appellant will sell beer to its customers in bottles and crates and collect the sale price of beer and also deposits for the crates and the bottles. The customers, in their turn, will sell beer to the customers and apart from the price of the beer, will recover forty paise per bottle as deposit to ensure return of the bottles. The bottles will ultimately be taken back by the appellant for which the trucks will be sent and the credit notes will be given to the customers for return of the empties. This scheme of recycling the bottles and crates will keep down the costs and ultimately will have the effect of reducing the price of beer and encouraging the customers to buy beer in large quantities". It was also found, as a matter of fact, that the rate at which the customer was required to make the deposit for the beer bottles was less than the cost of the beer bottles. Upon this basis this court came to the conclusion that the intention of the brewer did not appear to have been to sell the beer bottles; on the contrary, the brewer was trying to ensure that the bottles in which the beer was supplied to customers through its customers were brought back to it so that they could be used again. It was in this context that it was said, "It does not appear that any time-limit was fixed for return of bottles in this case. But, even if such limit was fixed, it is well settled that time is not of the essence of the contract unless the parties specifically make it so".
In Raj Steel and Others vs. State of A.P. and others , 1989 (3) S.S.C. 262, this court was again concerned with brewers who sold beer in bottles and the question was whether the bottles were exigible to sales tax. Learned counsel for the assessee relied upon the following observations therein.
"7. It is commonly accepted that a
transaction of sale may consist of
a sale of the product and a
separate sale of the container
housing the product with respective
sale considerations for the product
and the container separately; or it
may consists of a sale of the
product and a sale of the container
but both sales being conceived of
as integrated components of a
single sale transaction; or, what
may yet be a third case, it may
consists of a sale of the product
with the transfer of the container
without any sale consideration
therefor. The question in every
case will be a question of fact as
to what are the nature and
ingredients of the sale. It is not
right in law to pick on one
ingredients of the sale. It is not
right in law to pick on one
ingredient only to the exclusion of
the others and deduce from it the
character of the transaction. For
example, the circumstance that the
price of the product and the price
of the container are shown
separately may be evidence that two
separate transactions are
envisaged, but that circumstances
alone cannot be conclusive of the
true character of the transaction.
It is not unknown that traders may,
for the advantage of their trade,
show what is essentially a single
sale transaction of product and
container, or a transaction of a
sale of the product only with no
consideration for the transfer of
the container, as divisible into
two separate transactions, one of
sale of the product, and the other
a sale of the container, with a
distinct price shown against each.
Similarly where a deposit is made
by the purchaser with the dealer,
the deposit may be pursuant to
transaction where there is no sale
of the container and its return is
contemplated, and in the event of
its not being returned the security
is liable to forfeiture.
Alternatively, it may be a case
where the container is sold and the
deposit represents the
consideration for the sale, and in
the event of the container being
returned to the dealer the deposit
is returned by way of consideration
for the resale. In every case, the
assessing authority is obliged to
ascertain the true nature and
character of the transaction upon a
consideration of all the facts and
circumstances pertaining to the
transaction. That the problem
almost always requires factual
investigation into the nature and
ingredients of the transaction has
been repeatedly emphasised by this
court. In Hyderabad Deccan
Cigarette Factory vs. State on
Andhra Pradesh, (1966) 17 S.T.C.624
(SC) this court said:
It is not possible to state as a
proposition of law that whenever
particular goods were sold in a
container the parties did not
intend to sell and buy the
container also. Many cases may be
visualized where the container is
comparatively of high value and
sometimes even higher than that
contained in it. Scent or whisky
may be sold in costly containers.
Even cigarettes may be sold in
silver or gold caskets. It may be
that in such cases the agreement to
pay an extra price for the
container may be more readily
implied. In the present case, if
we may say so with respect, all the
authorities, including the High
Court, dealt with the question as a
question of law without considering
the relevant factors which would
considering the relevant factors
which would sustain or negative any
such agreement."
This court added that the question whether the packing material had been sold or merely transferred without consideration was dependent upon the contract between the parties. It found ‘hat there was a lack of adequate and clear factual material and, therefore, remanded the matter to the assessing authority for fuller investigation.
There can be no doubt that the facts and circumstances must be ascertained to determine whether or not the assesses had sold the beer bottles to its customers so as to become liable to pay sales tax on the price or deposit realised therefor.
The two factors that may be said to militate agaist the sale of the beer bottles are, first, the invoices that speak of the "deposit on bottles" and, secondly, the refund of Rs.11,62,974.00 out of the aggregate amount of the deposits, namely, Rs.30,57,143.00.
Now, there is nothing on record which indicates that the terms under which the deposits would be repaid were communicated to the assessee’s customers. There is no suggestion that there was an oral communication of such terms to the customers or that there was any trade usage in this behalf. it is difficult to visualise a bailment the terms whereof are not made known to the bailee. The forfeiture of amounts in the assessee’s "Deposit on Bottles" account does not appear to bear out of the assessee’s case that the empties were returnable at any time. This must also be taken into account that the customers were required to deposit for the beer bottles a rate which was exactly equal to the cost of the bottles; this would suggest the sale thereof more strongly than the intention to get them back upon bailment. It seems to us upon these facts and circumstances that there was really a sale of the bottles to the customers, the assessee buying back the empties from some customers. It is, therefore, that the assessee could show a refund of Rs.11,62,974/- out of the total amount of deposits, namely, Rs.30,57,143/-. Had there been a bailment which necessarily pre-supposes that the bailee was aware of the terms thereof, a large refund would have been shown.
The Judgement in the case of United Breweries Ltd. proceeded upon the very clear terms of the bailment that were made known by circulars to the customers. The judgement found that the intention of the brewer was to get the empties back, as evidenced by the fact that the rate of the deposit’ was less that the cost of the beer bottles.
For the reasons aforestated, we are of the view that the amount of Rs.16,55,355, being the amount shown as forfeited as aforementioned, was rightly made liable to sales tax.
The appeal fails and is dismissed. No order as to costs.