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1994 Supreme(SC) 1173
SUPREME COURT OF INDIA
B.P.Jeevan Reddy : S.B.Majmudar
State Of Maharashtra
Versus
Britannia Biscuit Company Limited
Case No. : 4734 of 1984
Date of Decision : 11/23/94
Advocates Appeared: Bhasme A.S. : Bhasnic A.S. : Reddy K.Madhava : Tyagi P.D. : Varma A.K. : Vellapally Joseph : Verma A.K.
A.K.VERMA, A.S.BHASME, JOSEPH VELLAPALLY, K.Madhava Reddy, P.D.TYAGI
Headnote:
Bombay Sales Tax Act, 1959 - English Sale of Goods Act, 1979 - Section 18- Sake of convenience - Arrangement between the respondent and the purchasers – Jurisdiction - Price list carried an endorsement tins will be charged at the time of supply, which will be refunded on return of tins in good condition within 3 months from date of supply - In invoices issued by the respondent, there was a separate column showing the number of tins supplied to the purchaser and the amount of deposit received from him in that behalf. At the top of the invoice the following endorsement occurred are informed that liability to refund the value of returnable tins extends only up to three months from the date of the invoice - It has however been found by the High court that notwithstanding endorsement on the price list as well as on the invoice, the respondent was in fact receiving the tins returned even after the expiry of three months and refunding the deposit amount – Held, To test the validity of contention urged by court put to him a straight question, viz., if deposit amount appropriated by the respondent to its P & L account, treating it as a trading receipt, is not a sale price, then what is its nature - Answer of learned counsel was that it is compensation or damages for breach of obligation to return the tins by the purchaser/customer. But once we hold that there was no such obligation, then the said trading receipt cannot be anything but sale price. No other label could be suggested for it - Relied upon the decision of this court in Raj Steel v. State of A.P. in support of his propositions. The said decision lays down, following the earlier decision of this court in Hyderabad Deccan Cigarette Factory v. State of A.P. that the question whether there was a sale of container along with the contents is not a question of law but one of fact and that the said question has to be decided in each case having regard to the facts of that particular case. But while determining this question the court should not be led away by the manner in which has made entries in its own account books but must look to the substance of the transaction and decide what in truth and in reality it amounts to - This is the approach and opinion both of the High court as well as the Special bench of the tribunal - As held by us hereinbefore, this was a composite transaction; in case of non-return of the tins within three months it became a sale of the unreturned tins – Court may mention in this connection that decision of the Bombay High court Breweries referred to and distinguished in judgment under appeal has been noticed by this court in Raj Steel - In our opinion just as Breweries in this case too payment of an amount for bottles in advance – Appeal allowed
Judgment
B.P. JEEVAN REDDY, J.
(1) A common question arises in the appeal and the special leave petitions. Leave granted in the special leave petitions.
(2) THE assessee is common in all the appeals. For the sake of convenience we shall refer to the facts in the Civil No. 4734 of 1984 which pertains to the assessment year 1967-68 (1/4/1967 to 31/3/1968. The matter arises under the Bombay Sales Tax Act, 1959.
(3) THE assessee is a manufacturer of biscuits. It is a registered dealer both under the Bombay Sales Tax Act, 1959 and the central Sales Tax Act, 1956. The biscuits manufactured by the respondent are sold in tins. In respect of the biscuits sold outside the city of Bombay and its suburbs, the price charged by the respondent includes the cost of tins in which the biscuits are sold but insofar as the city of Bombay and its suburbs are concerned with which sales alone we are concerned herein the respondent followed a different practice. While selling the biscuits in tins, it collected the price of biscuits alone and so far as the tins in which biscuits were sold, it took a refundable deposit with the stipulation that if the tin is returned within three months in good condition, the deposit shall be returned. These deposits were credited to "Deposit account: returnable tins". The tins so supplied to purchasers were shown as the stock of the respondent-assessee in its account books, but debited in the customers account. When the tins were returned, a reversal entry was made in both the accounts. Sales tax was charged only on the sale price of the biscuits but not on the deposit received in respect of the tins. Indeed in respect of the city of Bombay and its suburbs, a separate price list was issued by the respondent. The price list carried an endorsement: "(A) Deposit of Rs. 5.50 for LB tins and Rs. 3.50 for LS tins will be charged at the time of supply, which will be refunded on return of tins in good condition within 3 months from date of supply." In the invoices issued by the respondent, there was a separate column showing the number of tins supplied to the purchaser and the amount of deposit received from him in that behalf. At the top of the invoice the following endorsement occurred: "[D]ealers are informed that the Companys liability to refund the value of returnable tins extends only up to three months from the date of the invoice." It has however been found by the High court that notwithstanding the endorsement on the price list as well as on the invoice, the respondent was in fact receiving the tins returned even after the expiry of three months and refunding the deposit amount.
(4) FOR the assessment year 1967-68, the respondent received a total deposit amount of Rs. 12,97,229.05 paise. Out of the said amount, Rs. 11,29,202.00 was refunded to the customers on receiving back the tins. At the end of the accounting year, a balance of Rs. 1,68,027.05 paise was left outstanding. As per the accounting practice followed by the respondent in this behalf, the assessee wrote off 50 per cent of this amount, viz., Rs. 84,013.00 reducing the corresponding tin-stock account to that extent. The said amount was treated as a trading receipt and was transferred to P & L account. This amount represented the value of the tins which the respondent thought were not likely to be returned. The balance amount of Rs. 84,013.00 was shown as the value of the closing stock of tins (and was shown as the opening balance in the next years account).
(5) IN the assessment proceedings relating to the said assessment year, the Assessing Authority included the sum of Rs. 84,013.00 (the amount written off by the respondent in the tin-stock account and transferred to its P & L account) in its taxable turnover. He treated the said amount as the sale price of tins not returned. The said inclusion was questioned by the respondent in appeal before the Assistant Commissioner of Sales Tax. The appeal was dismiss
