United Breweries Ltd. Vs State of Andhra Pradesh

A. Raghuvir, J.@mdashM/s. United Breweries Limited is a manufacturer of beer at Bangalore. The company commenced supplying beer in two brands at Hyderabad from October 18, 1971. The name of the two brands are : "U.B. Export Lager", "Sun Lager". For the business they have done in the State of Andhra Pradesh (covering sale of beer), they were assessed under the Andhra Pradesh General Sales Tax Act (6 of 1957). Before the taxing authorities the company asserted to have sold U.B. Export Lager at Rs. 43.18 and Sun Lager at Rs. 43.75 per dozen of bottles and crates. The company asserted when beer was sold, bottles and crates were not sold to their customers. Ownership in the bottles and crates remained with them. Further the agents kept security of Rs. 4.80 per dozen bottles and Rs. 5 for crates. These deposits were returned to customers when bottles and crates were returned. This methodology of vending, the company represented, to be their scheme of sales and offered two circulars of the company to explain the scheme.

2. The two circulars recite for the two brands of beer are to be booked and cheques are to be issued in the name of Phipson & Co. Ltd., Himayatnagar. Cheques for U.B. Export Lager, however, are to be issued in favour of United Breweries Ltd. The circulars further recite vendees to return bottles and crates and customers are assured of better supply, if the scheme is adhered by the customers; otherwise the company expressed difficulty in supplying the liquor.

3. The scheme was explained to the taxing authorities. The Commercial Tax Officer verified the scheme and held the customers did not return bottles and crates. There was no truth in the scheme, as it was never implemented. On appeal, the Commercial Tax Officer recorded the ledgers of the company were not produced for verification. Further bottles and crates were higher in value than the amounts deposited as security. For the two reasons the scheme was not true. Aggrieved the company-assessee approached and the Sales Tax Appellate Tribunal verified the records. The Tribunal held there was no bailment of bottles and crates and no contractual obligation on the part of the customer to return bottles and crates. The scheme therefore, was not accepted (as) true. Hence the three revision cases for the respective years.

4. Before this Court the scheme is sought to be supported. The same contentions argued before the taxing authorities are reiterated. It is argued on behalf of the Revenue, bottles and crates could be returned, does not mean the customer was not the owner of bottles and crates, which were vended to the customers. Therefore, there is no truth in the scheme propounded by the company.

5. We are in agreement with the conclusions reached by the three tax authorities having considered numerous aspects of the scheme. We hold ownership in bottles and crates did not remain with the company when beer was vended. The customer purchased bottles and crates with the contents of receptacles. When bottles and crates are returned (to the extent shown by the company) in law there was a resale of bottles and crates in favour of the company. We have no hesitation to reject the contentions raised by the company.

6. The company, however, cited large number of cases. Among the cases, in Punjab Distilling Industries Ltd. Vs. The Commissioner of Income Tax, Simla, a like contention is found considered "buy-take" scheme. The issue raised there was whether the price of liquor included the cost of bottles. This aspect was juxtaposed with the security deposit (made as in the instant case) and it was considered whether deposit made was part of consideration. The Supreme Court held that there could be no security given for the return of bottles unless there was a right to their return and if there was no such right, there would be nothing to secure. It was further held there was no time-limit for the return of the bottles and this aspect strikes at the bottom of the contention. These two tests and answers on these aspects were held decisive.

7. In another case of the Supreme Court in Hindusthan Sugar Mills Vs. State of Rajasthan and Others, observation was made that it is immaterial to enquire as to how the amount of consideration was made up, whether it included excise duty, sales tax and also the freight. These aspects were dealt in considering what was the consideration paid by the vendee. Two English cases were cited by the company. In Beecham Fords Ltd. v. North Supplies [1959] 2 All ER 336 glucose drink was sold. The facts in the case showed the receptacles were not sold. In another case in William Leitch and Company Limited v. Leydon [1931] AC 90 a passage at page 104 was read before us for appreciating the nature of transaction. In the former English case we agree with the observation made that at times the contentions raised with reference to receptacles raised difficult questions.

8. The three authorities under the Act 6 of 1957 have concurrently found bottles and crates were sold when beer was sold to vendees. We have borne in mind the principles laid in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) Vs. McDowell and Co. Limited, , The State of Tamil Nadu Vs. McDowell and Company Ltd., ; Arlem Breweries Ltd. Vs. The Assistant Commissioner of Sales Tax, Panaji, and The Britannia Biscuit Co. Ltd. Vs. The State of Maharashtra, in arriving at the conclusion. We find the bottles and crates when they are returned to the company indicated in our conclusion a different sale by the customer to the company.

9. In that view there are no merits in the three tax revision cases. The three tax revision cases are dismissed. No costs.

10. Petitions dismissed.