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PETITIONER: M/S. KALYANI BREWERIES LTD.

       Vs.

RESPONDENT: STATE OF WEST BENGAL& ORS.

DATE OF JUDGMENT:       15/09/1997

BENCH: S.P. BHARUCHA, M. JAGANNADHA RAO

ACT:

HEADNOTE:

JUDGMENT:                THE 15TH DAY OF SEPTEMBER,1997 Present:               Hon’ble 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.                       J U D G M E N T      The following Judgement of the Court was delivered:                       J U D G M E N T 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

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        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

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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

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    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

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    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.