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TMI Blog1983 (3) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... and a corresponding debit is made to the customer's account. A reversal entry is passed in both the accounts when the tins are returned and the deposits are refunded. At the end of the accounting period, out of the balance left to the credit of the deposit account, 50 per cent of the amount is written off on a notional basis and is transferred to the credit of "Tin Stock Control Account", thereby showing that the value of the closing stock is depleted to that extent. The balance 50 per cent of the outstanding deposits are considered as a part of the value of the closing stock of tins. This amount is shown in the balance sheet as an asset and the corresponding deposit amount is shown as a liability. These entries at the end of the accounting year are made on a notional basis of probable non-return of tins. The assessees, however, accept tins which are returned at any time and refund the deposit, although their invoice contains a statement that the Company's liability to refund the deposit exists only up to 3 months from the date of the invoice. 2.. No sales tax has been collected or paid by the assessees on the deposits for tins. 3.. For the assessment year 1st April, 1967, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seller to the buyer. Sales tax can be imposed only when there is a completed sale involving transfer of title in the goods sold from the seller to the buyer. In this connection a reference may be made to the decision of the Supreme Court in the case of Sales Tax Officer, Pilibhit v. Budh Prakash Jai Prakash reported in [1954] 5 STC 193 (SC). Reference may also be made to the case of State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. reported in [1958] 9 STC 353 (SC). We have, therefore, to examine whether in the present case the bargain between the assessees and their customers constitutes a sale of tins or whether the transaction amounts to a bailment or a loan of tins. Jowitt's Dictionary of English Law, 2nd Ed., at page 1110 defines "loan" as follows: "LOAN: (Sax. hloon), anything lent or given to another on condition of return or repayment. See MONEYLENDER. A gratuitous loan is a class of bailment called commodatum in the civil law, and denominated by Sir William Jones as a loan for use (pret a usage), to distinguish it from mutuum, a loan for consumption. The borrower has the right to use the thing during the time and for the purpose agreed upon by the parties. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries. For this purpose we must examine the documents, facts and circumstances which constitute the bargain between the parties. 5.. The assessees have a separate price list for Bombay City and suburbs. At the foot of the price list it has been mentioned as follows: "A deposit of Rs. 5.50 for LB tins and Rs. 3.50 for LS tins will be charged at the time of supply, which will be refunded on return of tins in good condition within 3 months from date of supply." In their invoices there is a separate column showing the number of tins and the deposit taken in respect of these tins. In the main body of the invoice, quantity and value of the biscuits sold is set out and sales tax is charged on this price. No sales tax is charged on tin deposit which is shown separately. At the top of the invoice it has been stated as follows: "Dealers are informed that the company's liability to refund the value of returnable tins extends only up to three months from the date of the invoice." Since in the invoice itself the amount taken from the customers against the tins is shown as tin deposit and since the price list of the assessees also describes the amount taken as a deposit for the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts at the end of the assessment year is not a matter of bargain between the assessees and their customers. From the bargain between the parties in the present case, there appears to be a bailment of tins to the customers rather than an outright sale. 6.. There have been a number of cases where problems have arisen under the relevant sales tax law in respect of deposits taken by a seller for containers in which the goods were sold. The decision in each case necessarily turns on the nature of the transaction between the parties. In the case of Punjab Distilling Industries Ltd. v. Commissioner of Income-tax, Simla reported in [1959] 35 ITR 519 (SC) the Supreme Court was required to consider the case of an assessee that carried on business as a distiller of country liquor. After the war started difficulty was felt in finding bottles in which the liquor was to be sold; and to relieve the scarcity the Government devised a scheme whereby the distiller was entitled to charge the wholesaler a price for the bottles in which the liquor was supplied, at rates fixed by the Government. When the bottles were returned, the seller was bound to repay the price. This was known as "buy-back sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contract was to the effect that the rate for yarn agreed between the parties was a consolidated rate including the cost of cones, stiffeners and other packing materials. It was also agreed between the parties that the assessees would be given credit for the cost of cones, stiffeners, etc., at rates as agreed between the parties as and when returned. Therefore, in the case before the Kerala High Court, the assessees were required to pay a consolidated price for yarn which included the cost of cones. The bargain for giving credit for the cost of returned cones was also on the basis of the rates agreed upon as and when the cones were returned. In these circumstances, the Kerala High Court came to the conclusion that there was a sale of cones along with the yarn wound round cones. It held that under the terms of the contract the property in the cones passed to the assessees and it repassed to the mills when the cones were returned. 8.. In the case of Arlem Breweries Ltd. v. Assistant Commissioner of Sales Tax, Panaji [1983] 53 STC 172 being Special Civil References Nos. 4, 5, 6, 7, 8 and 9/B of 1979, by its judgment dated 2nd February, 1983, a Division Bench of this High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the period of retention of containers beyond 60 days. No time-limit was fixed for the return of containers but the purchasers were bound to return them after they become empty. The sale of containers was not in the way of trade of the assessees. They did not receive the cost of containers as price; the cost was taken as a deposit; no sales tax was charged on the cost. The deposit was the probable cost of the container and there was no profit-making. The court therefore held that this was a case of bailment of containers rather than a sale. It, therefore, held that the deposit remaining in the hands of the assessees could not be subjected to sales tax. 10.. In the case of Deputy Commissioner of Sales Tax (Law) v. McDowell Co. Ltd. reported in [1980] 46 STC 79, the Kerala High Court considered the case of an assessee that manufactured foreign liquor. At the time of sale, the assessee charged a price for the sale of liquor and charged separately an amount of deposit on bottles. The deposit was refunded on return of bottles. It was held that the amount representing the deposits for bottles was separately invoiced and differently treated in the accounts and that on the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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