UNITED BREWERIES LTD. versus STATE OF ANDHRA PRADESH

Citation: [1997] 2 S.C.R. 690 · Decided: 04-03-1997 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
UNITED BREWERIES LTD. 
v. 
STATE OF ANDHRA PRADESH 
MARCH 4, 1997 
[AM. AHMADI, CJI, S.C. SEN AND SUJATA V. MANOHAR, JJ.] 
Sale of Goods Act 193(}--Sections 11, 19, 20 & 24-Taxable Turn-
over-Sale of Beer-deposit collected for bottle~Reimbursed on retum-Com-
C mercial Tax Officer took into account value of bottles and crates for imposing 
sales tax--Upheld by both Tribunal and High Court-Held, no intention to 
sell bottles and crates-Deposits cannot be considered as price for bot-
tle~Retained as liquidated damage~En-or committed by High Court in 
holding that crates and bottles sold along with beer. 
D 
The appellant company has been carrying on the business of 
E 
F 
G 
manufacture and sale of beer. A dispute arose between the appellant and 
sales tax authority regarding crates and bottles in which beer was supplied. 
The Commercial Tax Officer held that the taxable turnover had to be 
computed not only by taking into account the sale price but also the value 
of bottles. On appeal the Tribunal upheld the views of Commercial Tax 
Officer. On further appeal, the High Court held that bottles and crates 
were sold along with beer and had to be included in the price of beer. Hence 
this appeal by the assessee. 
The contention of the appellant was that when beer is sold, bottles 
and crates are not sold to the customers. The deposits collected from 
customers is not sale proceeds and it refundable on return of bottles and 
crates. It was further contended that the assessee had issued circular to 
its contended that the assessee had issued circular to its customers making 
it clear that bottles and crates were not being sold. 
The contention of the respondent on the other hand was that when 
beer was sold in bottles and despatched in crates to the customers by 
appellant-assessee an out and out sale of the bottles and crates took place. 
The customers had an option to return the bottles. There is no contractual 
obligation to return the bottles to the appellant company within any 
H specified period of time. 
690 
-
-
I 
UNITED BREWERIES LTD. v. STATE 
691 
Allowing the appeals, this Court 
HELD.: 1. An out and out sale of the bottles did not take place when 
beer was supplied in bottles by appellant assessee to its customers against 
A 
the deposits which had to be refunded when the bottles were returned. The 
High Court was in error in holding that when beer was sold in bottles, not 
only beer but also the bottles were sold and the price of beer along with B 
the deposits became exigible to sales tax. (699-G-H] 
2. The Principle of Section 24 of the Sale of Goods Act or any analogous 
principle is not applicable. Neither the beer nor the bottles nor the crates ware 
sent to the customers by appellant-assessee, for approval or "on sale or return" C 
basis or any other similar terms. Section 24 of the sale of goods Act is subject 
to the provisions of Section 19 which provides that the property in specific or 
ascertained goods is passed to the buyer only at such time as the parties to the 
contract intent it to be passed. The facts of this case reveal that appellant 
assessee did not intent to sell the bottles or the crates to the customers. On the 
contrary the customers were advised to sell the beer in bottles to the consumers D 
and collect a deposit so that the bottles can be brought back from consumers. 
No time limit was fixed for return of bottles in this case. But even if such limit 
was fixed, it was well settled that time is not the essence of contract unless the 
parties specifically make it so. Section 11 of the Sale of Goods Act gives 
statutory recognition to this Principle. [ 699-C-F] 
E 
3. Whether the bottles and the crates were sold along with the beer or 
not will depend upon the intention of the parties. It does not appear from the 
terms and conditions that appellant-assessee intended to sell crates and 
bottles to the customers. On the contrary it was very anxious to get back these 
crates and bottles in order to use them again for further supplies. By taking F 
the deposits appellant-assessee nearly ensured the return of bottles and the 
crates. The deposit amount which was liable to be forfeited on failure to return 
bottles was in the nature of liquidated damages recoverable by the supplier 
under Section 74 of the Contract Act. The intention of the appellant-assessee 
has not been to sell the bottles. Nor was there any intention of the retailers G 
to sell the bottles to the consumer. [70

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