1991 (10) TMI 287 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the amount of money claimed by the assessee as security was part of the sale price.
2. The effect of this determination on the liability of the assessee to tax.

Detailed Analysis:

1. Whether the amount of money claimed by the assessee as security was part of the sale price:
The core issue was whether the money received by the dealer as a "security deposit" for the beer bottles was actually part of the sale price. The dealer, M/s. Punjab Breweries Limited, claimed that these amounts were security deposits for the return of bottles, suggesting a bailment rather than a sale. However, the Tribunal and the High Court found that the dealer did not provide sufficient evidence to support this claim.

The Tribunal observed that under the Punjab Excise Act, 1914, the dealer could only sell bottled beer to L1 licensees, who in turn could only sell beer in sealed bottles. The Tribunal noted that there was no obligation on the L1 licensees to return the bottles, and in practice, no bottles were returned. The High Court agreed with the Tribunal's finding that the transactions were sales, not bailment, as the bottles were not returned and there was no contractual obligation for their return.

The High Court referenced several judgments, including *Arlem Breweries Ltd. v. Assistant Commissioner of Sales Tax* [1983] 53 STC 172 (Bom), which held that the absence of an obligation to return the bottles and the lack of a time frame for their return indicated a sale. The Court also noted the Supreme Court's approval of this view in *Raj Sheel v. State of Andhra Pradesh* [1989] 74 STC 379 (SC), which emphasized that whether there is an agreement to sell packing material is a question of fact.

2. The effect of this determination on the liability of the assessee to tax:
Given the determination that the transactions were sales and not bailment, the dealer was liable to pay sales tax on the amount received as security deposits. The High Court concluded that the method of billing adopted by the dealer, showing the transfer of bottles against a security deposit, was a device to evade tax on the bottles. The Court emphasized that under the statutory provisions, the dealer could only sell bottled beer, and the L1 licensee could only sell beer in sealed bottles, with no obligation to return the bottles.

The High Court rejected the dealer's argument that the term "security deposit" implied an obligation to return the bottles, noting the lack of any evidence to support this claim and the absence of a time frame for the return of the bottles. The Court highlighted that fresh security deposits were taken for each consignment, and no bottles were returned.

The High Court agreed with the Tribunal and the Bombay High Court's view in *Arlem Breweries' case* [1983] 53 STC 172, which was indirectly approved by the Supreme Court in *Raj Sheel's case* [1989] 74 STC 379. Accordingly, the High Court answered the reference in the affirmative, holding that the amount claimed as security was part of the sale price and that the dealer was liable to pay sales tax on it.

Conclusion:
The High Court concluded that the amount of money claimed by the dealer as security was indeed part of the sale price, and thus, the dealer was liable to pay sales tax on it. The reference was answered in the affirmative, in favor of the Revenue and against the dealer.