TaxTMI 
TaxTMI 
1994 (11) TMI 335
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....es 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 by the respondent are sold in tins. In respect of the biscuits sold outside the City of Bombay and its suburbs, the price charged by the respondent includes the cost of tins in which the biscuits are sold but in so far as the City of Bombay and its suburbs are concerned-with which sales alone we are concerned herein-the respondent followed a different practice. While selling the biscuits in tins, it collected the price of biscuits alone and so far as the tins in which biscuits were sold, it took a refundable deposit with the stipulation that if the tin is returned within three months in good condition, the deposit shall be returned. These deposits were credited to "Deposit account returnable tins". The tins so supplied to purchasers were shown as the stock of the respondent- assessee in its account books, but debited in the customer's account. When the tins were returned, a reversal entry was made in both the accounts. Sales tax was charged only on the sale price of the biscuits but not....
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....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 represents the 'sale price' of tins supplied by the appellant-assessees and not returned by the customers during the period of assessment in question." The Special Bench of the Tribunal answered the question in favour of the Revenue and against the respondent following which the respondent's appeal was dismissed. At the instance of the respondent, the Tribunal referred the following question for the opinion of the High Court: "Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the book entry of Rs. 84,013 representing 50 per cent of the closing balance of the tin deposits left on March 31, 1968 written off from the account stock of tins on the probable non-return of the tins by the customers constitutes 'sale price'." The High Court was of the opinion that the arrangement between the respondent and the purchasers (from the City of Bombay and its suburbs) was one of bailment in so far as tins were concerned and not a transaction of sale....
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....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 counsel commended the approach and reasoning of the Tribunal for our acceptance. On the other hand Shri Joseph Vellapally, learned counsel for the respondent-assessee, submitted that the transaction between the appellant and the purchaser was one of bailment and not of sale. There was no sale of tins. The tins supplied to the purchasers continued to be the property of the assessee and they were shown as the stock of the assessee in their account books. At the end of the accounting year, half the amount of deposit representing the unreturned tins was written off and transferred to P and L account. The amount written off did not represent the sale price of tins inasmuch as there was no sale of tins. At the most it can be treated as a compensation or damages for breach of the obligation lying on the purchaser to return the tins. Whatever may be the nature of the said amount appropriated, it certainly was not the sale price of tins. If so, no sales tax can be levied upon the said amo....
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....s 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 by a society or club or an association to its members on payment of a price or of fees or subscription, but does not include a mortgage, hypothecation, charge or pledge; and the words 'sell', 'buy' and 'purchase', with all their grammatical variations and cognate expressions, shall be construed accordingly." (The remaining portion of the definition is omitted as unnecessary.) The expression "sale price" is defined in clause (29) in the following words: "(29) 'sale price' means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged; Explanation.-For the purposes of this clause, the amount of duties levied or leviable on goods under the Central Excises and Salt Act, 1944 or the Customs Act, 1962 or the Bombay Prohibit....
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....se 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 and to answer it, keeping aside the interpretation placed by the Tribunal upon the transaction. In other words, we have to and we do proceed to answer the question accepting the approach and reasoning adopted by the assessing authority and the first appellate authority. A reading of the judgment of the High Court establishes beyond doubt that it has proceeded on this basis alone. Indeed, it may not have been open to the Tribunal to make out a new case not put forward either by the assessee or by the assessing authorities. We shall, therefore, take the basis adopted by the assessing and the first appellate authorities for determining the question arisen herein. We also agree with the High Court that the question whether there has been a sale of tins at the end of the accounting year or along with the biscuits themselves has to be determined on the precise terms of the transaction between the respondent and its customers and that on this aspect the manner in which the....
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....e 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 fact remains that when the tin was not returned, the said deposit was treated as a trading receipt by making necessary entries in its books treating 20 per cent of the deposit amount as profit. In all these circumstances, we are unable to agree with the High Court that the transaction/ arrangement/understanding between the parties created an obligation upon the purchaser/customer to return the tins. Mr. Joseph Vellapally submitted that inasmuch as all the tins supplied to the purchasers were treated as the stock of the respondent in its account books, it must be presumed that the purchasers were in custody of the respondent's property which they were obliged in law to return. Acceptance of this contention, in our opinion, amounts to attaching undue importance to the entries in the account books of the respondent and to ignoring the true nature of the transaction. It may also be noticed that theory of bailment put forward by the respondent is in our opinion....
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....rent 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 in the same terms as section 18 of the English Sale of Goods Act, 1979, which itself is but a repetition of the common law rule to that effect. The law in this behalf is stated in Halsbury's Laws of England, IV Edition, Volume 41, paragraph 727, in the following words: "727. When property passes.-Unless a different intention appears, when goods are delivered to the buyer on approval, or on sale or return, or other similar terms, the property in the goods passes to the buyer when he signifies his approval or acceptance to the seller or does any other act adopting the transaction; and 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 that time and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact. " In paragraph 728, it is stated: "72....
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....d 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 submitted, the "sale price" cannot be ascertained. The said contention is unacceptable in the facts of this case. From the facts set out in the judgment of the High Court, it appears that each customer/purchaser (evidently all of them were wholesalers) had an account with the respondent and when a particular number of tins were supplied to a customer, an entry was made to that effect in that customer's account in the account books of the respondent besides making an entry in the other relevant account books of the respondent. It is further recorded in the judgment that when the customer returned the tins, a reverse entry was made in the customer's account as well as in the relevant account books of the assessee. If so there could be no difficulty in identifying the customer who failed to return the tins. The submission of Mr. Vellapally is thus without a factual foundation. To test the validity of the contention urged by Mr. Vellapally, we....