STATE OF MAHARASHTRA versus M/S. THE BRITANNIA BISCUITS CO. LTD.

Citation: [1994] SUPP. 5 S.C.R. 719 · Decided: 23-11-1994 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

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Judgment (excerpt)

STATE OF MAHARASHTRA 
A 
v. 
MIS. THE BRITANNIA BISCUITS CO. LTD. 
NOVEMBER23, 1994 
[B.P. JEEV AN REDDY AND S.B. MAJMUDAR, JJ.] 
B 
SALES TAX 
Bombay Sales Tax Act, 1959: 
Section 2 clause (28) Sale Determination of-Dependent upon precise C 
terms of transaction between purchaser and seller-Manner of 
maintenance of accounts irrelevant-No obligation to return the tins-
Whether constitutes sale. 
Contract Act, 1872: 
Section 148-Bailment-No obligation to return goods entrusted-
Held does not constitute bailment. 
Sale of Goods Act, 1930: 
D 
Section 24-Delivery of goods to the buyer-Approval or acceptance E 
not signifi~d-Goods also not returned within time prescribed-Held 
property in the goods passes to buyer. 
The respondent-assesses 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 F 
respondent were sold in tins. While selling the biscuits in the tins, it 
collected the price of Biscuits alone and for the tins in which Biscuits 
were sold, it took a refundable deposit with the stipulation that if the 
tin was returned within three months in good condition, the deposit will 
be returned. These deposits were credited to 'Deposit Account 
returnable Tins'. The tins so supplied to purchasers were shown as the G 
stock of the respondent-assesses in its accounts 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 on the deposit received in respect of the 
tins. Indeed in respect of city of Bombay and its suburbs, a separate 
price list was issued by the respondent. Th.e price list carried an H 
719 
A 
B 
c 
D 
E 
F 
G 
H 
720 
SUPREME COURT REPORTS 
(1994) SUPP. 5 S.C.R 
endorsement; "A deposit of Rs. 5.50 for LB tins and Rs.3.50 for LS tins · 
will be charged at the time of supply, which will be refunded on return 
of tins in good condition within 3 months from date of supply." In the 
invoices issued by the respondent, there was a separate column showing 
the number of tins supplied to the purchaser and the amount of deposit 
received from him in that behalf. At the top of the invoice the following 
endorsement occurred; "Dealers are informed that the company's 
liability to refund the value of returnable tins extends only upto 3 
months from the date of the invoice". It has however been found by the 
High Court that notwithstanding the endorsement on the price list as 
well as on the invoice, the respondent was in fact receiving the tins 
returned even after the expiry of three months and refunding the 
deposit amount. 
For the assessment year 1967-68, the respondent received a total 
deposit amount of Rs. 12,97,229.05 paise. Out of the said amount Rs. 
11,29, 202.00 paise was refunded to the customers ~n receiving back the 
tins. At the end of the accounting year, a balance of Rs. 1.68.027.05 
paise was left outstanding. As per the accounting practice followed by 
the respondent in this behalf, the assessee wrote off 50 per cent of this 
amount viz., Rs. 84,013 reducing the corresponding tin stock account to 
that extent. The said amount was treated as a trading receipt and was 
transferred to P and L account. This amount represented the value of 
the tins which the respondent thought were not likely to be re~urned. 
The balance amount of Rs. 84,013- was shown as the value of the 
closing stock of tins (and was shown. as the opening balance in the next 
year's account). 
In the assessment proceedings relating to the said assessment year, 
the Assessing Authority included the sum of Rs. 84,013 (the amount 
written off by the respondent in the tin stock account and transferred 
to its P and L account) in its taxable turnover. He treated the said 
amount ·as the sale price of tins not returned. The said inclusion was 
questioned by the respondent in appeai before the 
~sistant 
Commissioner of Sales Tax. The appeal was dismissed. The 
respondent's second appeal to the Tribunal was also 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 percent of 
the closing balance of the tin deposits left on 31.3.68 written off from 
STA TE v. THE

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