1989 (7) TMI 318 - AT - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the price of bottles in which beer is sold and in respect of which a security deposit is kept by the applicant forms part of the sale proceeds where the bottles are not returned, and the security money is forfeited.
2. Whether any tax is leviable on the export pass fee realized from customers outside the State of West Bengal.

Issue-wise Detailed Analysis:

Issue 1: Price of Bottles and Security Deposit

The applicant, a beer manufacturer, argued that the security deposit for bottles, refundable upon their return, should not be considered part of the sale price and thus not subject to sales tax. The respondents contended that the security deposit was essentially an additional price for the bottles, especially since there was no obligation or time-limit for their return, making it part of the sale transaction.

The Tribunal referred to the Supreme Court's decision in *Punjab Distilling Industries Limited v. Commissioner of Income-tax*, where it was held that additional amounts described as security deposits, but without an obligation for return, were part of the sale consideration. The Tribunal found that the applicant's security deposits for bottles were similarly part of the sale price since there was no contractual obligation for the return of bottles, and the deposits were forfeited if bottles were not returned.

The Tribunal concluded that the forfeited security deposits were part of the sale price and thus subject to sales tax. The unrefunded portion of the security deposit constituted the price of the bottles sold and was liable to levy of sales tax.

Issue 2: Export Pass Fee

The applicant argued that the export pass fee, paid in advance and recoverable from buyers outside West Bengal, should not be included in the sale price. The appellate authority had included this fee in the sale price, but the Tribunal noted the Calcutta High Court's decision in Civil Rule No. 2257-W of 1974, which quashed the levy of the fee as illegal.

The Tribunal referred to the Supreme Court's decision in *Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax*, which distinguished between taxes that could be passed on to the purchaser (not part of sale price) and those that could not (part of sale price). Since there was no statutory provision authorizing the applicant to pass on the export pass fee, the Tribunal found that the fee should not be included in the sale price.

The Tribunal concluded that the department failed to prove the liability of the export pass fee, and thus, the amount of Rs. 17,472 paid as export pass fee should be deducted from the taxable turnover.

Conclusion:

The Tribunal allowed the application in part, ruling that the export pass fee paid by the applicant was deductible from the turnover, but the security deposits for bottles, to the extent they were forfeited, were part of the sale price and subject to sales tax. There was no order as to costs.