Court Rules Deposit for Bottles Constitutes Sale Consideration Subject to Tax

Commissioner, Trade Tax, UP., Lucknow Versus The Co-operative Co. Ltd.

Commissioner, Trade Tax, UP., Lucknow Versus The Co-operative Co. Ltd. - [2007] 5 VST 78 (All) Issues:
Whether the price of bottles charged from customers is liable to tax when a part of the price is refundable upon return of the bottle.

Analysis:
The case involved two revisions under section 11 of the U.P. Trade Tax Act, 1948, challenging the orders of the Tribunal for the assessment years 1985-86 and 1986-87. The primary issue was whether the amount charged towards bottles by the dealer was liable to tax, considering that a portion of the amount was refundable upon the return of the bottle. The dealer contended that the bottles were given on bailment and not as a result of sale, while the assessing authority held that the bottles were sold along with the liquor, making the prices charged taxable. The first appellate authority and the Tribunal ruled in favor of the dealer, stating that the bottles were returnable and given on bailment, hence not liable to tax.

The High Court analyzed the submissions and held that the first appellate authority and the Tribunal erred in treating the case as bailment. It emphasized that the amount charged for the bottles was part of the sale consideration, not security subject to refund. Referring to relevant legal precedents, including the case of United Breweries Ltd. v. State of Andhra Pradesh, the Court concluded that the intention was to sell the bottles, and the amount charged was part of the turnover liable to tax under the U.P. Trade Tax Act.

Further, the Court distinguished the case of Kalyani Breweries Ltd. v. State of West Bengal, where the forfeited security amount charged for the return of bottles was held taxable. It highlighted that in the present case, the terms of repayment of deposits were not communicated to customers, indicating a sale rather than bailment. The Court emphasized that the decision in United Breweries Ltd. v. State of Andhra Pradesh was not applicable due to the specific circumstances of the case.

Consequently, the High Court allowed both revisions, setting aside the Tribunal's orders and ruling in favor of the Commissioner of Trade Tax. The Court held that the amount charged for bottles constituted part of the turnover and was liable to tax under the U.P. Trade Tax Act.