TMI Blog2005 (3) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... distribution of domestic cooking gas (L.P.G.). It is alleged that the distribution of the domestic cooking gas in cylinder was made to its customers situated at Delhi in accordance with the provisions of Gas Cylinder Rules, 1981 framed in exercise of powers conferred by Sections 5 and 7 of the Explosive Act, 1884. While supplying the L.P.G. in cylinder, applicant has taken cash security in a sum of ₹ 550 for cylinder and ₹ 150 for regulator, total ₹ 700 as per terms and conditions specified on the reverse of the security voucher issued to the customers. During the year under consideration, applicant received a sum of ₹ 9,55,850 by way of cash security. The said amount was transferred to profit and loss account, as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of such security was specifically mentioned in the security vouchers provided to the customers. Thus, there was a proper communication of such conditions to the customers. He submitted that the costs of the cylinder inclusive of excise duty was ₹ 803.71 p, which was inadvertently told at ₹ 650 before the authorities below for which the application under Section 22 of the Act for the rectification of mistake was filed before the Appellate Authority which was rejected. He submitted that the amount of security was less than the cost of cylinder and not in the nature of sale consideration, therefore, it would not be liable to tax. On these facts, he submitted that the case of the applicant is squarely covered by the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was returnable and in case of non-return, amount of security would be forfeited. A sum of ₹ 550 was charged towards security while the costs of the cylinder was ₹ 650 though it was claimed as ₹ 803.7 1 which has not been accepted. Question for consideration is whether in the event of non-return of cylinder whether there was any sale and whether forefeited amount which was charged initially towards security amounts to sale consideration and liable to tax. 8. Section 2 (g) of the Central Sales Tax Act defines sale and Sections 2 (h) arid 2 (j) of the Act defines sale price and turnover respectively. All the three sections are referred as follows: 2 (g). said with its grammatical variations and cognate expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it as a part of the turnover. Matter went to the Apex Court. The Apex Court held that there was no intention to sell the bottle and the security amount which was liable to be forfeited on the failure of non-return of the bottle was in the nature of liquidated damages recoverable by the supplier under Section 74 of the Contract Act. The Apex Court held that there was no sale of bottle and, therefore, the amount of security charged was not the sale price and was not liable to tax. Some of the relevant parts of the Apex Court decision are as follows: 19. We are unable to uphold this contention. Whether the bottles and the crates were sold along with the beer or not will depend upon the intention of the parties. We have set out the terms an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay for the beer. They are required to pay an additional amount by way of deposit for taking away the bottle which is refunded if the bottle is returned. If the bottle is not returned, the deposit is retained as liquidated damages for the loss of the bottle. There is a clear intention not to sell the bottle. Hence, we are of the view that the deposit cannot be considered as price of the bottles. 33. We are of the view that the High Court was in error in holding that the crates and the bottles were sold along with the beer. In the facts of this case, the deposits could not be treated as the price of the bottles and the crates. 10. In the case of Kalyani Breweries Ltd. v. State of West Bengal and others reported in 107 S.T.C. 190 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances that there was really a sale of the bottles to, the customers, the assessee buying back the empties from some customers. It is, therefore, that the assessee could show a refund of ₹ 11,62,974 out of the total amount of deposits, namely, ₹ 30,57,143. Had there been a bailment, which necessarily pre-supposes that the bailee was aware of the terms thereof, a larger refund would have been shown. The judgment in the case of United Breweries Ltd., 1997 U.P.T.C. 1274 (SC) : (1997) 105S.T.C. 177 (SC): (1997)3 S.C.C. 530 proceeded upon the very clear terms of the bailment that were made Known by circulars to the customers. The judgment found that the intention of the brewer was to get the empties back, as evidenced by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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