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TMI Blog1989 (7) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... ing beer in bottles and is registered as a dealer under the Bengal Finance (Sales Tax) Act, 1941, and also under the Central Sales Tax Act, 1956. The applicant sells beers in bottles raising separate invoices-one for the beer simpliciter and another for the deposit of the price of bottles with a stipulation for return of such containers or bottles to the applicant within a period of four months from the date of supply. In the event of purchasers failing to return the empty bottles, the deposit with the petitioner stands forfeited. If and when such empty bottles are returned, the corresponding value thereof kept as security is forthwith refunded. There was never any agreement or contract or any transaction of sale or purchase of such container/bottles which the customers were obliged to hold in possession for a limited time as a mere bailee without any right or title or interest therein. The deposits for empty bottles kept by the applicant do not represent sale proceeds of any goods and such deposits do not consitute part of sale price or turnover within the meaning of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the BFST Act), or the Central Sales Tax Act, 1956. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning of section 3 of the Transfer of Property Act, is unfounded. There was no regularity of return of the goods, namely, the bottles, within a certain period of time as is commonly stipulated in a contract of bailment which is absent in the transactions entered into by and between the applicant and the purchasers. In the event of bottles being returned, the amount received as sale price of bottles, results in the reduction of the overall sale price of the goods and a rebate is allowed on such sales. The amount said to have been kept as deposit has a nexus to the purchase price of the goods and whenever the price escalates, a corresponding rise in the amount of deposit is also made. Therefore, while the total amount kept as deposit may not represent sale proceeds in respect of the bottles, the amount forfeited by the applicant definitely represents proceeds of sale price and is exigible to tax. Whenever a customer returns the containers, the refund of the security deposit by the applicant amounts to a discharge of its obligation to pay back the price of the bottles in terms commonly known in trade practice as "buy back system". It is conceded, however, -that if the amount is refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration passing from the buyer to the seller for sale of goods, however, found that the applicant-company was entitled to a deduction of that amount (Rs. 4,368) which he had actually refunded to the outstation purchasers. The decision in the case of Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax reported in [1980] 46 STC 477 (SC), lays down the law on the subject in unequivocal terms. The decision lays down that where a dealer is authorised by law to pass on any tax payable by him on a transaction of sale to the purchaser, such tax does not form part of the consideration for the purposes of levy of tax on sales or purchases but where there is no statutory provision authorising the dealer to pass on the tax to the purchaser, such tax does form part of the consideration when he includes it in the price and realises the sum from the purchaser. The essential factor which distinguishes the former class of cases from the latter class is the existence of a statutory provision authorising a dealer to recover the tax payable on the transaction of sale from the purchaser. In the instant case before us there was no evidence to indicate as to what the statutory provision is regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity for the bottles is refundable as and when the bottles are returned and as such, the security deposit is not a consideration for sale of beer in bottles and not, therefore, exigible to tax. The case of the respondent, on the other hand, is that the dealer was actually charging a price for the bottles though under the guise of a security deposit. Their contention is that it is not a case of bailment-there being no time-limit for return of the bottles and there being no obligation on the part of the purchasers to return the bottles. The learned Advocate appearing for the applicant, argued that the security deposit could not form part of the sale price and that, at most, it could be an actionable claim within the meaning of section 3 of the Transfer of Property Act. Actionable claim means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant which the civil courts recognise as affording grounds for relief whether such debt or beneficial interest be existent, accruing, conditional or cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the appellant. The sales tax authorities did not accept the explanation. The High Court also was not satisfied with the explanation and inferred that the amount reflected profits of the business out of sales not entered in the account books. On appeal to the Supreme Court, it was held that in order to impose liability upon the appellant for payment of sales tax by treating the sum of Rs. 10,000 as profits arising out of undisclosed sales, two things have to be established: (i) the amount was the income of the appellant, and not of the partner or his wife; (ii) the amount represented profits from income realised as a result of transactions liable to sales tax and not from other sources. It was further held that the failure on the part of the partner or his wife to furnish satisfactory or reasonable explanation could not have the effect of discharging the onus of proving both the ingredients by the respondent. It was necessary to produce more materials in order to connect the amount with the income of the appellant as a result of sales. The decision in the case of Dyer Meakin Breweries v. Commissioner of Sales Tax [1972] 29 STC 69 (All.) and McDowell's case reported in [1980] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal sums left after refund was assessable to tax. Their Lordships particularly noted that no time-limit was fixed for the return of the bottles and there was no obligation to return the bottles. 10.. This case, therefore, lays down the principle that an amount kept in the name of security, becomes a part of the commercial transaction of sale to the extent it remains in the hands of the seller after refunds, if any. The case is sought to be distinguished on the plea that it was a case under the Income-tax Act and considerations for the purposes of income-tax and sales tax are different. Assuming that it is so, it may be stated that the decision at least lays down the principle that the security deposits under such circumstances, form part of the commercial transaction of sale. 11.. In the instant case before us, only one invoice, annexure B, has been produced. The invoice is in two parts-one for the price of the liquor and the other on account of deposits on bottles. There is nothing to indicate in the invoices as to any time-limit within which the bottles are to be returned. In view of the decision in Punjab Distilling Industries Ltd. v. Commissioner of Income-tax [1959] 35 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to a dealer as consideration for the sale of any goods. The question is what is the consideration passing from the purchaser to the dealer for the sale of the goods? It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax or freight. The only relevant question to be considered is as to what is the amount payable by the purchaser to the dealer as consideration for the sale. This judgment, however, came to be reviewed later by the Supreme Court ([1980] 45 STC 194), but that was entirely on a different point. The contention of the applicant that the transaction was in the nature of a bailment, does not appeal to us. Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. In the instant case, there is nothing to indicate that there was any contract for return of the bottles. The invoice does not show any direction on the purchaser to deliver them to the seller. The bailee's duty to deal with the goods according to the bailer's orders i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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