Andhra HC (Pre-Telangana)
State Of Andhra Pradesh vs Phipson & Co. on 5 November, 1994
Equivalent citations: 1995(1)ALT444, [1995]97STC622(AP)
Author: Syed Shah Mohammed Quadri
Bench: S.S. Mohammed Quadri
JUDGMENT Syed Shah Mohammed Quadri, J.
1. The question - whether the turnover of the "bottles" (container) and the "beer" (content) have to be taxed separately, the former at the rate applicable to the container and the latter at the rate applicable to the content - is being agitated and re-agitated in several cases. This case also involves consideration of the same question.
2. The principle with regard to assessment of sales tax on the container/packing material is laid down by the Supreme Court in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379. The Supreme Court observed :
"It is commonly accepted that a transaction of sale may consist of a sale of the product and a separate sale of the container housing the product with respective sale considerations for the product and the container separately; or it may consist of a sale of the product and a sale of the container but both sales being conceived of as integrated components of a single sale transaction; or, what may yet be a third case, it may consist of a sale of the product with the transfer of the container without any sale consideration therefor. The question in every case will be a question of fact as to what are the nature and ingredients of the sale. It is not right in law to pick on one ingredient only to the exclusion of the others and deduce from it the character of the transaction. For example, the circumstance that the price of the product and the price of the container are shown separately may be evidence that two separate transactions are envisaged, but that circumstance alone cannot be conclusive of the true character of the transaction. It is not unknown that traders may, for the advantage of their trade, show what is essentially a single sale transaction of product and container, or a transaction of a sale of the product only with no consideration for the transfer of the container, as divisible into two separate transactions, one of sale of the product and the other a sale of the container, with a distinct price shown against each ........."
3. The Supreme Court laid down the following factors which have to be, taken into consideration to determine whether a transaction for sale of packing material is an independent transaction from the sale of the content.
"1. The packing material is a commodity having its own identity and is separately classified in the Schedule;
2. There is no change, chemical or physical, in the packing either at the time of packing or at the time of using the content;
3. The packing is capable of being refused after the contents have been consumed;
4. The packing is used for convenience of transport and the quantity of the goods as such is not dependent on packing;
5. The mere fact that the consideration for the packing is merged with the consideration for the product would not make the sale of packing an integrated part of the sale of the product."
4. We may incidentally mention that in that case it was also held that section 6-C of the Andhra Pradesh General Sales Tax Act, 1957 (for short "the Act") was declaratory of the position which was obtaining even before its insertion of section 6-C in the Act.
5. The effect of the decision of the Supreme Court in the abovesaid case is that where there is an independent agreement between the seller and the purchaser for the sale of the bottles, the turnover has to be taxed at the rate applicable to "bottles" prescribed under the Act, but, where there is no independent agreement with regard to sale of the bottle, the transaction will have to be treated as one and the turnover relating to the bottles will have to be charged at the rate applicable to the content.
6. Following the judgment of the Supreme Court in Raj Sheel's case [1989] 74 STC 379, a Division Bench of this Court in Rayalaseema Enterprises v. State of Andhra Pradesh [1990] 78 STC 121 held as under :
"The Tribunal has to consider whether there was a separate agreement - express or implied for the sale of bottles and the packing material used while selling the liquor. If it is found that there was no separate agreement for the sale of bottles/packing material, the turnover relating to bottles/packing material will also be charged at the rate applicable to the contents. In such a case the turnover would be 'one', i.e., one relating to liquor. If, however, it is found that there is a separate agreement for the sale of bottles/packing material, the orders passed by the lower authorities will be valid."
7. Now turning to the facts of the present case, the assessee sold beer along with bottles. Its contention was that the bottles were given to the purchaser by taking deposit for the price of the bottles and therefore, there was no sale of the bottles. The assessing authority, having examined the record, noted that both, invoices and the debit notes, had been raised on the same day and that the amounts charged in the invoices and the debit notes pertain to a single sale and form turnover. It also added that though the assessee called the price of the empty bottles "deposit", it was not treated as such in accounts and that the accounts did not disclose that the amounts were deposited in individual khatas. It further added that there was no condition or any sale agreement that the bottles should be returned within a stipulated time and that there was clearly a transfer of property in the bottles for money consideration along with the liquor or beer sold. For that reason, it concluded that the amount charged for the bottles forms part of the turnover and that the assessee had given the name "deposit" to avoid sales tax.
8. On appeal, the appellate authority, having perused the accounts, sales bills and the debit notes, confirmed the finding of the assessing authority that there was no refundable deposit for the bottles and that there was outright sale of the bottles, and came to the conclusion that the seller intended to sell packed bottles of beer and the price recovered was for such filled-in-bottles of beer. On further appeal, the Sales Tax Appellate Tribunal came to the conclusion that entry 19 of Schedule I could not be applied and that the only entry which was attracted was entry 123 of Schedule I and the rate applicable would be 6 per cent. It noted that the deposit amounts were separately mentioned in the bills by the assessee and therefore, they have to be treated as representing the value of empty bottles and taxed under entry 123.
9. The only ground on which the Tribunal held that the bottles should be taxed separately is that separate amount is collected for the contents (beer) and the container (bottles). In view of the observations of the Supreme Court in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379, referred to above, mere mentioning of the deposit for bottles as a separate item in the bill would not lead to the conclusion that bottles were separately sold, in the present case. It was neither stated nor proved by the assessee that the sale of bottles was separate from the content thereof and therefore the bottle could be taxed at the rate applicable to the content (beer). It is only when the assessee proves the existence of an agreement to the effect that the bottles were sold separately from the contents thereof, the bottles will have to be taxed as an independent item. No such attempt having been made, the case cannot be sent back to either the Tribunal or the assessing authority, as prayed by the learned counsel for the respondent, as it may amount to giving an opportunity to the assessee to make out a new case. Having regard to the provisions of section 6-C of the Act, which is held to be declaratory of the position which was obtaining even before its insertion in the Act, the bottles will have to be taxed at the rate of the "contents".
10. In Circar Enterprises v. Commissioner of Commercial Taxes [1995] 97 STC 40 a Division Bench of this Court, on similar facts, held that the price was a single price for the bottled beer and the amount of turnover relating to the bottles claimed as exemption related only to debit notes issued subsequently and that was only an artificial bifurcation of the price which the assessee had paid to the manufacturer while purchasing the goods and the price received while reselling to the retail dealers which is a single amount for the sale of the goods as bottled beer.
11. For the above reasons, we set aside the order of the Tribunal and allow the tax revision case, but without costs.
12. Petition allowed.