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TMI Blog1994 (11) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... ght or an obligation.But once we hold that there was no such obligation, then the said trading receipt cannot be anything but sale price. - Civil Appeal No. 4734 of 1994, & 8356-8359 of 1994 - - - Dated:- 23-11-1994 - JEEVAN REDDY B.P. AND MAJMUDAR S.B. JJ. Joseph Vellapally, Senior Advocate (Mrs. A.K. Verma and Puneet Tyagi of J.B. Dadachanji Co., Advocates, with him), for the respondent. K. Madhava Reddy, Senior Advocate (A.S. Bhasme, Advocate, with him), for the appellant. -------------------------------------------------- The judgment of the Court was delivered by B.P. JEEVAN REDDY, J. -A common question arises in the appeals and the special leave petitions. Leave granted in the special leave petitions. The assessee is common in all the appeals. For the sake of convenience we shall refer to the facts in Civil Appeal No. 4734 of 1994 which pertains to the assessment year 1967-68 (April 1, 1967 to March 31, 1968). The matter arises under the Bombay Sales Tax Act, 1959. The assessee is a manufacturer of biscuits. It is a registered dealer both under the Bombay Sales Tax Act, 1959 and the Central Sales Tax Act, 1956. The biscuits manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half, the assessee wrote off 50 per cent of this amount, viz., Rs. 84,013 reducing the corresponding tin-stock account to that extent. The said amount was treated as a trading receipt and was transferred to P and L account. This amount represented the value of the tins which the respondent thought were not likely to be returned. The balance amount of Rs. 84,013 was shown as the value of the closing stock of tins (and was shown as the opening balance in the next year's account). In the assessment proceedings relating to the said assessment year, the assessing authority included the sum of Rs. 84,013 (the amount written off by the respondent in the tin-stock account and transferred to its P and L account) in its taxable turnover. He treated the said amount as the sale price of tins not returned. The said inclusion was questioned by the respondent in appeal before the Assistant Commissioner of Sales Tax. The appeal was dismissed. The respondent carried the matter in second appeal to the Tribunal. The Bench which initially heard the appeal referred the following question to a larger Bench: "Whether, on the facts and in the circumstances of the case, the amount of Rs. 84,013 represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also no control over the return of the bottles which would be sold by the wholesalers to retailers and by the retailers to consumers". Inasmuch as the Bench found in the present case that the purchaser was under an obligation to return the tins within three months, it held the situation was different from the one considered in Arlem Breweries [1983] 53 STC 172 (Bom). Mr. K. Madhava Reddy, learned counsel for the appellant-State, submitted that the High Court was not right in holding that in this case, there was an obligation upon the purchaser to return the tins within three months. From the endorsements on the price list and invoice, no such obligation can be inferred. The return of the tins lay within the discretion and pleasure of the purchaser. Even the time-limit of three months was not observed in practice, inasmuch as the tins returned even after the expiry of three months were taken back and deposit amount refunded. Learned counsel submitted that in fact there was a sale of the tins along with the biscuits and when the tins were returned and the deposit amount refunded by the respondent, it was a case of a purchase of tins by the respondent. In short, the learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in respect of sales to dealers in the City of Bombay and its suburbs, invoices showed sale of biscuits only and not of tins, that sales tax was charged only on the sale price of biscuits and that a refundable deposit was collected for the tins supplied. The manner in which entries were made by the respondent in its account books including the tin-stock deposit account are also said to be relevant facts; there is also the finding that the appellant used to refund the deposit even in cases where the tins were returned after the expiry of three months. Yet another relevant fact is that in respect of the bulk of sales, tins were also sold along with the biscuits and that only in case of sales in Bombay, and its suburbs that this different practice was being followed. It is on the above material that we have to determine the question at issue. But before we do that, it would be appropriate to refer to a few relevant provisions in the Bombay Sales Tax Act. The expression "sale" is defined in clause (28) of section 2 in the following words: "(28) 'sale' means a sale of goods made within the State for cash or deferred payment or other valuable consideration, and includes any supply b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and the first appellate authorities and the approach adopted by the Tribunal. While the former held that the sale of tins took place when the respondent made the entries in its account books at the end of the accounting year writing off half the balance amount outstanding in the tin-stock account, the Tribunal has understood the transaction between the parties as involving a sale of tins along with the biscuits and held that when the tins were returned and the deposit refunded by the respondent, it was a case of purchase of tins by the respondent. But what is of interest to note is that the question which was referred by the Tribunal for the opinion of the High Court seems to reflect the approach adopted by the assessing and the first appellate authorities rather than the approach adopted by the Tribunal. In fact, if the approach and reasoning of the Tribunal is accepted, the question referred by the Tribunal for the opinion of the High Court cannot be said to arise from the order of the Tribunal within the meaning of section 61 of the Bombay Act and need not be answered. The proper course-which is indeed the course, adopted by the High Court-is to take the question as stated an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal understood and interpreted the transaction as involving a sale of tins along with the biscuits themselves, and a case of purchase of tins by the respondent when it received back the tins and refunded the deposit.) It must be remembered that sales of the respondent were spread all over the country and the normal practice was to sell the tin along with the biscuits contained therein and that it was also the most convenient and cheap method of selling the biscuits by the respondent. The sales within the City of Bombay and its suburbs represented only a small portion of its total volume of sales. It is only in the case of this small portion of its sales that the respondent followed a different practice aforesaid. Another circumstance to be kept in mind in this behalf is that the deposit amount stipulated, received and kept by the respondent was always a little higher (by 20 per cent as we shall indicate later) than the value of the tin. May be, this was done to induce the customer to return the tin, or may be the respondent was careful enough to provide for the consequences of non-return, including the possibility of the transaction being treated as a sale and taxed as such. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack the tins even after the expiry of three months and returning the deposits was more by way of grace-probably a business decision-rather than a matter of right or an obligation. We must at this stage refer to section 24 of the Sale of Goods Act, 1930. It reads: "24. Goods sent on approval or 'on sale or return'.- When goods are delivered to the buyer on approval or 'on sale or return' or other similar terms, the property therein passes to the buyer- (a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time." Section 24 has to be read along with sub-section (3) of section 19 which says that "unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Section 24 appears to be practically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the expiry of the said period, he had no right to claim the refund on return of goods. The transaction then became a sale. As stated above, the customer was under no obligation to return, as explained hereinbefore; he had a right to return the tins in good condition within three months. Correspondingly, the respondent-assessee was under an obligation to refund the deposit amount if the tins were returned within three months in good condition; after the expiry of three months, the respondent was under no such obligation though it may be that for his own business or other reasons, he may yet accept the return of the tins and refund the deposit. Mr. Vellapally, learned counsel for the respondent, submitted that for constituting the "sale price" as defined by the Act, there must be a specific sale of goods to a specific buyer and that on the approach adopted by the assessing authority and the first appellate authority (whereunder, sale of tins is held to have taken place at the end of the accounting year, when the respondent made the entries in his books) no such specificity is identifiable. In the absence of such identification of the sale and the purchaser, the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a composite transaction; in case of non-return of the tins within three months it became a sale of the unreturned tins. We may mention in this connection that the decision of the Bombay High Court (Goa Bench) in Alrem Breweries [1983] 53 STC 172 referred to and distinguished in the judgment under appeal has been noticed by this Court in Raj Sheel [1989] 74 STC 379; [1989] 3 SCR 305. In our opinion, just as in Arlem Breweries [1983] 53 STC 172 (Bom) in this case too, payment of an amount for the bottles in advance (called deposit) was a term of the sale. We do not think it necessary to refer to various decisions of the High Court referred to in the judgment under appeal or to other decisions brought to our notice for the reason that each of those cases turned upon the terms and the language of the arrangement/transaction between the parties. We reiterate that the question arising herein is not a pure question of law; it is a mixed question of law and fact. For the above reasons the appeals are allowed and the judgment of the High Court is set aside. The question referred to the High Court is answered in the affirmative, i.e., in favour of the Revenue and against the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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