Breweries Ltd. Vs. State of West Bengal& Ors  INSC 731 (15 September
BHARUCHA, M. JAGANNADHA RAO
15TH DAY OF SEPTEMBER,1997 Present:
Mr. Justice S.p.Bharucha Hon'ble Mr. Justice M.Jagannadha Rao Sunil Gupta, Mrs.A.K.Verma,
Advs. for M/S.JBD& Co., Advs. for the appellant B.Sen, Sr.Adv., Dilip Sinha,
and J.R.Das.,Adv. with`him for the Respondents.
following Judgement of the Court was delivered:
BHARUCHA Under challenge in this appeal by special leave is a judgement and
order of the West bengal Taxation Tribunal.
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:
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.
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
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.
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".
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...".
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.
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.
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.
The appellant advised its customers to collect forty paise per bottle from the
customers as deposit.
The customers were advised to collect the empty bottles from the consumers ands
return them to the appellant.
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
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.
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;
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".
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.
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.
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.
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.
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
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.
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.
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
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.
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.
in the case of United Breweries Ltd.
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.
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.
appeal fails and is dismissed. No order as to costs.