1992 (2) TMI 341 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the bottle deposits collected by the appellant could be construed as part of the turnover liable to be assessed under the Andhra Pradesh General Sales Tax Act.
2. Whether the rate applicable to the bottles and packing material was the rate applicable to beer.

Detailed Analysis:

Issue 1: Bottle Deposits as Part of Turnover

The primary contention of the assessee was that the sale involved only the beverages, and the bottles were handed over to the customer as a bailee, meaning there was no sale of bottles. The amounts accepted from customers as deposits to secure the return of bottles should not form part of the turnover. The Revenue, however, argued that the description of part of the turnover as bottle deposit is immaterial, and the sale price, by any name, constitutes turnover. The assessing authority included the bottle deposits as part of the turnover and taxed it accordingly. The Deputy Commissioner (Appeals) and the Sales Tax Appellate Tribunal affirmed this view, citing the lack of evidence from the assessee to prove that there was a bailment of bottles rather than a sale.

The court referred to various precedents, including Punjab Distilling Industries Ltd. v. Commissioner of Income-tax [1959] 35 ITR 519 (SC) and Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379 (SC), which held that without an obligation to return the bottles, the amounts collected as deposits were indeed part of the sale price. The court emphasized that the assessee failed to produce relevant agreements or documents to substantiate the claim of bailment. Consequently, the court held that the bottle deposits collected by the assessee were part of the turnover and thus liable to tax.

Issue 2: Rate of Tax on Bottles and Packing Materials

The second issue was whether the rate applicable to the bottles and packing materials should be the same as that applicable to beer. The assessing authority had taxed the turnover related to bottles and packing materials at the higher rate applicable to beer. The Deputy Commissioner (Appeals) and the Sales Tax Appellate Tribunal initially affirmed this, but later, in light of the Supreme Court decision in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379 (SC), the Tribunal remitted the matter to the assessing authority for reconsideration.

The court agreed with the Tribunal's direction to reconsider the rate of tax on bottle deposits and packing charges, applying the guidelines from the Raj Sheel case. The court instructed that the rate of tax should be determined with reference to Section 6-C of the Andhra Pradesh General Sales Tax Act and the relevant guidelines. The court also noted that the same direction should apply for the assessment year 1981-82 and for the entire period of the assessment year 1983-84, ensuring consistency in the applicable tax rate.

Conclusion

The court dismissed T.R.C. Nos. 247 and 262 of 1990, thereby upholding the Tribunal's decision that the bottle deposits were part of the turnover and should be taxed accordingly. T.R.C. No. 105 of 1988 was allowed, restoring the order of the Appellate Deputy Commissioner (ST) dated February 27, 1985. T.R.C. No. 316 of 1990 was also allowed, directing the revisional authority to reconsider the rate of tax on bottle deposits and packing materials, ensuring it aligns with the rate applicable to general goods, not the higher rate applicable to beer. No order as to costs was made, and an advocate's fee of Rs. 250 was awarded in each case.