1. These two revisions under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") are directed against the orders of Tribunal dated 15.09.1097 both relating to the assessment years 1985-86 and 1986-87 under the U.P. Trade Tax Act respectively.
2. A common question of law is involved in the present revisions for consideration of this Court as to whether the price of the bottles charged from customers is liable to tax. in a case where on a return of bottle, some of price of bottle was liable to be refunded.
3. The brief facts of the case are that the Dealer/Opposite Party (hereinafter referred to as "the Dealer") was engaged in the business of Country liquor and Indian made foreign liquor. In the assessment order, it is mentioned that in the assessment year 1986-87 as per the letter dated 29.3.1986 of the Commissioner of Excise, U.P., dealer was permitted to charge the price towards bottle in the case of 750 ML bottle at Rs. 2.30, 500 ML bottle at Rs. 2.20 and 250 ML bottle at Rs. 2.10 from the retail vendor and in case of return of bottle, a sum of Rs. 1.45 was returnable in the case of 750 ML bottle, at Rs. 1.35 in the case of 500 ML bottle, in the case of 250 ML bottle at Rs. 1.25. For the assessment year 1985-86, though any order passed by the Excise Commissioner has not been referred but it is stated that the same position was there in this assessment year also. Before the Assessing Authority it was claimed by the dealer that the price of bottle was nominal and the dealer was not intended to selhbottles, inasmuch as, the consumed bottle have been returned. Claim of dealer was that the bottle was given on bailment and not as a result of sale. The Assessing Authority did not accepted the plea of the dealer and held that the bottles were sold alongwith the liquor, for which, prices were also charged, therefore, prices charged were held liable to tax. Plea of the bailment had not been accepted. Matter went in appeal before the Deputy Commissioner (Appeals). First Appellate Authority allowed the claim and held that the bottles were returnable and were given on bailment and not as a result of sale, therefore, the amount taken towards bottle were held not liable to tax. Commissioner of Trade Tax filed appeals before the Tribunal. Tribunal up held the order of the First Appellate Authority.
4. The Tribunal up held the order of the First Appellate Authority relying upon the decision of this Court in the case of Dyer Meakin Breweries v. Commissioner of Sales Tax, U.P. reported in STC 1972 (29) page 69 and the decision of Apex Court in the case of United Breweries Ltd. v. State of Andhra Pradesh and State of Tamil Nadu v. Mc Dowell & Company Limited 1997 (105) STC page 172.
5. Heard learned Standing Counsel. No one appears on behalf of the dealer.
6. Learned Standing Counsel submitted that the First Appellate Authority and the Tribunal have erred in holding that the amount charged towards bottle was liable to tax because, the amount has been received towards the bailment and not as a sale consideration is erroneous. He submitted that in the present case, Excise Commissioner had permitted the supplier to charge price of bottle and on the return of bottle to refund certain amount. He submitted that in the present case, the amount charged was not towards the security but as a sale consideration of bottle. He submitted that on the return of bottle, the entire price charged towards bottle was not returnable and only part of the amount was returnable. He submitted that the decision of Apex Court in the case of United Breweries Ltd. v. State of Andhra Pradesh (supra) is not applicable in the present case, inasmuch as the fact of the case was different. He further submitted that the decision of Apex Court in the case of United Breweries Ltd. v. State of Andhra Pradesh has been considered by the Apex Court in the case of Kalyani Breweries Ltd. v. State of West Bengal and Ors. reported in 107 STC page 190, in which. ! amount charged towards security which were refundable, held liable to tax. He further submitted that the Assessing Authority in the present case also found that the dealer had not maintained any stock register to show the date of return of bottle, thus return of bottle was not established.
7. I have considered the submissions of learned Standing Counsel and perused the order of the Tribunal and the Authorities below.
8. In my opinion, the First Appellate Authority as well as the Tribunal misdirected themselves in treating the present case that of bailment. In the present case, amount charged by the dealer from the customer was towards the price of bottle and not towards the security subject to refundable oh the return of bottle when price was charged from the customer, it was towards the sale consideration. It has only been provided that in case if the bottle would be refunded, some part of the-amount would be refunded, therefore, in the present case, bottle was sold against the sale consideration, therefore, there was no question of providing bottle on bailment to the retail Vendor. As per the definition of "Turnover" under Section 2(h), price of bottle is liable to be included in the turnover of liqubr within leaning of "any sum charged for any thing done by the dealer in respect of the at the time or before the delivery" and liable to tax accordingly."
9. In the case of United Breweries Ltd. v. State of Andhra Pradesh (supra) under the terms and conditions, bottle was returnable, security was ;ed with the view to get the bottle returned and in case of non return of the bttle as per terms and conditions, security was liable to be forfeited. Assessing Authority levied tax on the amount of security treating it as a part of the turnover in case where bottles were not returned and security were forfeited. Matter went to the Apex Court. The Apex Court held that there was no intention to sell the bottle and the security amount which was liable to be forfeited on the failure of of non-return of the bottle was in the nature of liquidated damages recoverable by the supplier under Section 74 of the Contract Act. The Apex Court held that there was no sale of bottle and. therefore, the amount of security charged was not the sale price and was not liable to tax. Some of the relevant parts of the Apex Court decision are as followed:-
Para-19. We are unable to uphold this contention. Whether the bottles and the crates were sold alongwith the beer or not will depend upo the intention of the; parties. We have set out the terms and conditions under' which the beer was sold and it does not appear from these terms and conditions that UB intended to sell ' crates and bottles to the customers. On the contrary, it was very anxious to get back these crates and bottles in order to use them again for further supplies. The fact that UB advised their customers to charge similar deposits from their consumers and get back the bottles from them goes to show that an out and out sale of bottles had not taken place. By taking the deposits UB merely ensured the return of the bottles and the crates. A deposit of forty paise per bottle was taken to ensure retirn of the bottles. In our view, the deposit amount which was liable to be forfeited on failure of the returns of bottle was in the nature of liquidated damages recoverable by the supplier under Section 74 of the Contract Act. An overall view has to be taken of the dealings and transactions between the manufacturer of the beer, its customers and the consumers. The intention of UB does not appear to have been to sell the beer bottles. Nor was there any intention of the retailers to sell the bottles to the consumers. On the contrary, by the terms and conditions of the agreement UB was trying to ensure that the bottles in which the beer was supplied to the consumers through their customers were brought back to it so that they could be used again for fresh supply of beer as a cheap rate.
Para-32. In the present case also the customers clearly know the price they will have to pay for the beer. They are required to pay an additional amount by way of deposit for taking away the bottle which is refunded if the bottle is returned. If the bottle is not returned, the deposit is retained as liquidated damages for the loss of the bottle. There is a clear intention not to sell the bottle. Hence, we are of the view that the deposit cannot be considered as price of the bottles.
Para-33. We are of the view that the High Court was in error in holding that the crates and the bottles were sold alongwith the beer. In the facts of this case, the deposits could not be treated as the price of the bottles and the crates.
10. In the case of Kalyani Breweries Ltd. v. State of West Bengal (supra) amount of security which was charged at the time of sale of the liquor to ensure the return of the bottles were forfeited on account of non return of the bottles and they have been taxed. The Apex Court considered the decision of three Judges Bench in the case of United Breweries Ltd. v. State of Andhra Pradesh (supra) and on the fact of that the case distinguished the decision and held that forfeited amount charged towards security was liable to tax. Apex Court, distinguished the decision of United Breweries Ltd. v. State of Andhra Pradesh (supra) and held forfeited amount liable to tax on the following reasons:-
Now, there is nothing on record which indicates that the terms under which the deposits would be repaid were communicated to the assessee's customers. There is no suggestions that there was an oral communication of such terms to the customers or that there was any trade usage in this behalf. It is difficult to visualize a bailment the terms whereof are not made known to the bailee. The forfeiture of amount in the assessee's "Deposit on Bottles" account does not appear to bear out the assessee's case that the empties were returnable at any time. This must also be taken into account that the customers were required to deposit for the beer bottle a rate which was exactly equal to the cost of the bottles; this would suggest the sale thereof more strongly than the intention to get them back upon bailment. It seems to us upon these facts and circumstances that there was really a sale of the bottles to the customers, the assessee buying back the empties from some customers. It is, therefore, that the assessee could show a refund of Rs. 11,62,974/- out of the total amount of deposits, namely Ks.30,57,143/-. Had there been a bailment, which necessarily presupposes that the bailee was aware of the terms thereof, a larger refund would have been shown.
The judgment in the case of United Breweries Ltd. proceeded upon the very clear terms of the bailment that were made known by crculars to the customers. The judgment found that the intention of the brewer was to get the empties back, as evidenced by the fact that the rate of the deposit was less.than the cost of the beer bottles.
11. In my view on the facts and circumstances of the present case, the decision if Apex Court in the case of United Breweries Ltd. v. State of Andhra Pradesh (supra) does not apply.
12. For the reasons stated above, in my opinion, amount of bottle charges was the part of the turnover and is liable to tax.
13. In the result, both the revisions are allowed. Orders of Tribunal in Appeal No. 273 of 1991 for the assessment year 1985-86 and in Appeal No. 85 of l'991 for the assessment year 1986-87 are set aside. The aforesaid appeals filed by the Commissioner of Trade Tax are allowed.