M/S. CO-OPERATIVE COMPANY LTD. versus COMMISSIONER OF TRADE TAX, U.P.

Citation: [2007] 5 S.C.R. 476 · Decided: 24-04-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Case Allowed

Judgment (excerpt)

A 
MIS. CO-OPERATIVE COMPANY LTD. 
~ --
v. 
COMMISSIONER OF TRADE TAX, U.P. 
APRIL 24, 2007 
B 
[S.8. SINHA AND MARKANDEY KA TJU, JJ.] 
• 
UP. Trade Tax Act, 1948: 
• 
c 
s.2(i)-Bottles of country liquor-Levy of sale tax on-High Court 
opining that bottling charges are part of turnover and are liable to tax-
Challenge against-Held: No finding by High court that there was implied 
transfer condition of sale in regard to sale of bottles nor as to whether the 
charges recovered by assessee from its customer represent bottling charges 
or price of bottles-Matter needs reconsideration and is remitted back to 
D High Court. 
Appellant- assessee had been carrying on the business of manufacture 
' -
and sale of India Made Foreign Liquor (IMFL) and country liquor. In respect 
of the assessment year 1989-90, the books of accounts maintained by it were 
rejected by the Assessing Authority, on the premise that tax would be payable 
E in respect of bottles being containers of the country liquor. 
Appellate authority and Tribunal held that no sales tax could be imposed 
on the bottling charges for country made liquor. The High Court opined that 
bottling charges are part of turnover and are liable to tax. 
F 
In appeal to this Court, appellant- assessee contended that sales tax is 
.... 
.. 
not payable as they are not dealer in bottles; that there being no other 
alternative, bottles are used as a cheap and convenient mode of transport and 
sale of country m~de liquor; that the amounts of Rs.2.60, Rs.2.39 and Rs. 
.
l.57 represent only the charges for P.P. caps, sales and filling charges, which 
•
G 
are collected under the head of bottling charge and thus the same is a payment 
for the job work undertaken for packing the country made liquor; that neither 
there is any sale of bottles nor any price charge; that there is no express or 
~ 
implied agreement to sell bottles; that the purchasers were purchasing only 
country made liquor and the appellant had only been selling the same and 
that tax on bottling charges is sought to be recovered only from tax free country 
H 
476 
CO-OPERATJVr 
)!\it..'. LTD.v. COMMNR.OFTRADETAX,U.P. 
477 
liquor, and in the course of sale of IMFL, the sale of bottle has not been held A 
to be a separate sale and, thus, double standards adopted by the department is 
not justified. 
Respondent contended that as sale of bottles finds place in Entry 20 in 
the Schedule appended to the Act, despite the fact that no sales tax is payable 
on country liquor, the assessee would be liable therefor having regard to the B 
definition of 'turnover' as contained in s. 2(i) of the Act. 
Allowing the appeal and remitting the matter to High Court, the Court 
HELD: 1. Appellant is a dealer of country liquor. It also carries on 
business in IMFL. Curiously, whereas in respect of IMFL, no sales tax has C 
been levied on bottles, such a levy is sought to be made on bottles for sale of 
country liquor. Business in country liquor is res extra commercium. It is 
governed by the provisions of the U.P. Excise Act. Each stage of manufacture, 
bottling, distribution and sale of country liquor is governed not only by the 
provisions of the U.P. Excise Act and the rules framed thereunder, but also D 
the terms and conditions of licence. [Para 8) (481-F, GJ 
2.1. There is no finding by the High Court that there was an implied 
condition of sale in regard to sale of bottles. The High Court did not deal with 
the question as to whether the charges levied by appellant from its customers, 
which admittedly stand apgroved by the Excise Authority, represent bottling E 
charges or sale of bottles. (Para 14) (484-E, FI 
2.2. A contract of sale of goods must be construed having regard to the 
terms and conditions thereof. A person purchasing a property must know as 
to what he has bargained for. The parties might not have bargained for the 
,; 'r 
containers but only for the contents. In the absence of any stipulation made F 
in the contract of sale for the purpose of levy of sales tax or otherwise, the 
Revenue Authorities must arrive at a finding as to whether there had been 
any implied condition of transfer, burden of proof wherefor would be on the 
Revenue. Consideration of a part of goods may be held to be a condition 
precedent for constituting a sale, but each case must be judged on its own G 
facts. [Paras 15 and 16) (484-F, G; 485-A) 
2.3. The High Court failed to take into consideration the fact that the 
question as to whether t

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