The main legal point established in the judgment is that 'empty bottle deposits' should be considered part of the turnover for tax assessment, based on the principles established in the referenced cases and the Supreme Court's ruling in Punjab Distilling Industries' case.

RAJASEKHARA MURTHY, J.

( 1 ) PETITIONER in this case is a wholesale dealer in liquor. Petitioner purchases bottled beer from its manufacturers at Bangalore and other places for purposes of distribution to retailers. At the time of sale to the retailers a deposit known as 'empty bottle deposit' at 70 p. per bottle is taken by the petitioner. This deposit, according to the petitioner is only meant for repaying the said sums to the retailers on the return of the bottles. For the assessment year 1976-77 a sum of Rs. 5,17,713-75 p. representing such deposits was Claimed as a deduction from the total turnover. The Assistant Commissioner of Commercial Taxes (Assessment -1) Bangalore, allowed the said claim and consequently, deducted it from the total turnover.

( 2 ) THE Deputy Commissioner of Commercial Taxes, Bangalore, in exercise of power conferred under Section 21 (2) of the Karnataka Sales Tax Act, issued a notice, as per Annexure-B, to the petitioner to show cause why the exemption allowed by the Assessing Officer in respect of the deposits in question, should riot be withdrawn and the deposits treated as part of the total turnover of the assessee. In reply to this notice, the petitioner filed objections in detail and contended that the deposit should not be treated as part of its turnover since there was no sale of empty bottles by the petitioner, He also relied upon a Division Bench decision of the Kerala high Court in Macdowell and Co. , Ltd. 's case, 46 STC 79 and another decision of Madras High court, 46 STC 85 in which the petitioners were sister concerns of the petitioner herein.

( 3 ) THE Deputy Commissioner, thereafter fixed the case for hearing on 11-2-1980 and called upon the petitioner to produce the relevant documents, etc. , in support of the petitioner's contention. The petitioner has challenged the show cause notice in this Writ Petition.

( 4 ) SRI Hanumantha Rao, learned Counsel for the petitioner has, at the outset, challenged the very jurisdiction of the Deputy Commissioner, to issue notice under Section 21 (2) of the Act proposing to. revise the assessment. According to him, the matter does not require any investigation since the claim was scrutinised by the Assessing Officer and on being satisfied, the exemption claimed was allowed. The learned Counsel has reiterated the very same contentions which he urged before the Deputy Commissioner in his reply and in addition has relied upon a decision of this Court by Sri K. S. Puttaswamy, J. in Mysore Breweries Ltd.-v.- Deputy commissioner of Commercial Taxes, Bangalore, W. P. No. 18690 and 23105 of 1980 D. D. 8-3-1983.

( 5 ) THE following decisions are also relied upon on behalf of the petitioner in support of its contention :

1) United Excise v. Commr. of Sales Tax, 28 STC 16 (M. P.) 2) 46 STC 79 (Kerala) 3) 46 STC 85 (Madras), and 4) Arlem Breweries v. Asst. Commr. of S. T. , 53 STC 172 (Bombay ).

( 6 ) IN the Madhya Pradesh High Court decision the question that arose was different and related to sale of packing materials and it has no bearing on the present case.

( 7 ) IN the Kerala and Madras decisions Macdowell and Co. , Ltd. sister concerns of the petitioner were the respondents. They had made a similar claim before the Assessing Officers in respect of similar deposits which they had received from their retailers. The question before the High courts was : whether the 'bottle deposits' was an integral part of the sale and its turnover was assessable to tax. No doubt, the High Courts held that the deposits in respect of bottles which was separately invoiced and separately treated in the accounts, cannot be treated as an integral part of the sale price, and while arriving at this conclusion they also distinguished the Supreme court decision in Punjab Distilling Industries' case, 35 ITR 519. But both the Courts accepted the finding of the Tribunal and its conclusions recorded after an elaborate examination of the nature of transaction between the parties.

Click Here to Read the rest of this document