Balakeshwara and Company, Bidar vs The Additional Commissioner of Commercial Taxes, Davanagere Zone, Davanagere

T.N. Vallinayagam, J.-The order of the Additional Commissioner of Commercial Taxes, passed under Section 22-A of the Karnataka Sales Tax Act, 1957, in respect of the assessment year 1990-91 has been challenged in this appeal. The Assessing Authority has allowed the reduction of bottle deposits received by the appellant. According to the Revising Authority, there was a sale of bottle and tax was to be levied on such collection of deposits. It was found that there was no possibility of returning the bottles and therefore, the alleged deposits cannot be allowed exemption. It was observed:

"Bottle deposit: The deposit collected was by way of safeguard against the contingency of the bottle being not returned. This is not a sale price as there was no sale of bottle when the liquor was sold, deposit collected returnable on the return of empty bottles. This would amount to bailment. Reliance is made in the cases of (1) State of Tamil Nadu v McDowell and Company Limited, (1980)46 STC 85 (Mad.); (2) Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v McDowell and Company Limited, (1980)46 STC 79 (Ker.); (3) Dyer Meakin Breweries v Commissioner of Sales Tax, Uttar Pradesh, (1972)29 STC 69 (All.) and also the report from Supreme Court that deposit collected on Bottles - Whether includible? 19-11-1990 Their Lordships M.N. Venkatachaliah and R.M. Sahai, JJ., granted special leave to the State against the judgment and order dated 7-8-1987 of the Madras High Court in T.C. Nos. 992 and 993 of 1987 whereby the High Court following the case of State of Tamil Nadu, supra, dismissed the State''s revision application holding that deposits collected by the dealer on bottles were not to be included in his turnover. (Against the case of State of Tamil Nadu, supra, special leave has already been granted. (Ed.): Deputy Commissioner of Commercial Taxes v A. Usman Ali, SLP (Civil) Nos. 13345 and 13346 of 1990).

It was further observed:

"Before considering the law enumerated by the Courts as cited by the dealer in this connection it is essential to have a look at the law relating to the ''bailments'' and the essential requirements of the contract. The word ''bailment'' is derived from the French word ''bailer'', which means ''to deliver'' -is understood as a contract resulting from delivery.

Section 148 of the Indian Contract Act, 1872 defines bailment as "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. The person delivering them is called ''bailer'' and the person to whom they are delivered is called as the ''bailee''.

From the above definition it can be noted that an agreement in order to be a contract of ''bailment'' shall have the following ingredients.-

There must be a delivery

of goods

by the owner called the ''bailor''

To another person called the ''bailee''

for a specific purpose

return of the goods in specie.

It is this re-delivery in specie that distinguishes a contract of sale from a contract of bailment.

In a well-settled law pronounced by Privy Council in the case of South Australian Insurance Company v Randall, 1866(3) PC 101, it is held that "the goods which form the subject-matter of bailment should be returned by the bailee after the purpose or after the period of bailment, where the contract is not to deliver back the goods, but to pay their value, it is not a contract of bailment".

Reference was made to the decision given in the cases of Deputy Commissioner of Commercial Taxes, Bangalore v Mysore Breweries Limited, 1990(34) Kar. L.J. 164 (HC), Shah Wallace and Company Limited v State of Karnataka, 1993(37) Kar. L.J. 478 (HC), and the Supreme Court decision given in the case of Hyderabad Deccan Cigarette Factory v State of Andhra Pradesh, (1966)17 STC 624 (SC); Raj Sheel and Others v State of Andhra Pradesh, AIR 1989 SC 1696; Hindustan Sugar Mills v State of Rajasthan, AIR 1978 SC 1496. The value was determined by the Revising Authority himself.

The limited argument which has been raised by the learned Counsel for the assessee is that, the entire turnover should not have been taken into consideration for levy of tax as that was only one bill and that, the books of accounts of the assessee have not been rejected, as such, it was proper for the Additional Commissioner to direct the Assessing Authority to verify the figures from the books and then levy the tax.

Arguments of the learned Counsel for both the parties heard.

A finding of fact has been given that, the bottles have been ultimately sold to the consumer and it was impossible for returning of such empty bottles. In the circumstances, the order of the Revising Authority considering it to be a sale is perfectly justified. The Assessing Authority was not justified in giving deduction. However, for the purpose of levy of tax, since the books have not been rejected and figures are available in the books of account, it was proper for the Revising Authority to either call for furnishing the figure before him or direct the Assessing Authority to verify such figures from the assessee and then, to levy tax. From the record, it is not clear that the assessee was asked to furnish the figure by the Revising Authority nor the said figures were ever verified from the books of accounts. In the circumstances, we consider it proper that the Assessing Authority may verify the figure from the books of accounts and levy the tax accordingly.

Sales tax appeal is partly allowed.