1997 (9) TMI 490 - SC - VAT and Sales Tax

Whether or not the assessee had sold the beer bottles to its customers so as to become liable to pay sales tax on the price or deposit realised therefor? Held that - Appeal dismissed. The forfeiture of amounts in the assessee s Deposit on Bottles account does not appear to bear out 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 larger refund would have been shown.

Summary

Issues:
1. Whether the amount forfeited by the assessee should be considered as part of sales realizations and taxed.
2. Whether the transaction regarding beer bottles was a sale or bailment.
3. Whether the intention of the assessee was to sell the beer bottles.

Analysis:
1. The case involved the assessment year 1974-75 where the appellant brewed and sold beer in beer bottles, issuing invoices for the beer and a separate one for "the deposit on bottles." The Commercial Tax Officer treated the forfeited deposit amount as part of sales realizations and taxed it. The Assistant Commissioner and West Bengal Commercial Taxes Tribunal upheld this decision, leading to the appeal to the West Bengal Taxation Tribunal.

2. The Tribunals found that the transaction was not a bailment but a sale based on the fact that there was no time-limit for returning the empty bottles. The appellant argued that the transaction was a bailment, citing legal references and judgments emphasizing the need to determine whether the transaction was a sale. The appellant's accounting procedure and the nature of the deposit were also scrutinized.

3. The judgment referred to the United Breweries Ltd. case, where a similar scenario was analyzed, and the intention of the brewer was found to be ensuring the return of the bottles. The judgment highlighted the importance of clear terms and communication regarding the return of containers. The absence of communicated terms for deposit repayment to customers and the equal rate of deposit to bottle cost indicated a sale rather than a bailment. The judgment concluded that the forfeited amount was rightly subject to sales tax due to the sale nature of the transaction.

4. The decision was based on the lack of communicated terms for deposit repayment, the absence of evidence supporting a bailment, and the equal rate of deposit to bottle cost, indicating a sale. The judgment emphasized the need to ascertain the true nature of the transaction based on all facts and circumstances. The appeal was dismissed, affirming the liability for sales tax on the forfeited amount.

5. In conclusion, the judgment upheld the decision to consider the forfeited amount as part of sales realizations and subject to sales tax, based on the analysis of the transaction's nature as a sale rather than a bailment. The legal references and factual circumstances led to the dismissal of the appeal without costs.