THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE SANJAY KUMAR TAX REVISION CASE NOS.40, 48, 54, 57, 67, 69 & 102 OF 2000 AND WRIT PETITION NOS.21627 & 22022 OF 2000 DATED 10TH NOVEMBER, 2011 BETWEEN The State of Andhra Pradesh Represented by the State Representative before Sales Tax Appellate Tribunal, D.No.5-4-400 to 404, Nampally, Hyderabad, A.P. …Petitioner And M/s.Premier Enterprises, H.No.5-4-187/6, Modi Complex, M.G.Road, Secunderabad and another. …Respondents THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE SANJAY KUMAR TAX REVISION CASE NOS.40, 48, 54, 57, 67, 69 & 102 OF 2000 AND WRIT PETITION NOS.21627 & 22022 OF 2000 COMMON ORDER: (Per SK,J) In this batch of T.Rev.Cs., yet again the Revenue raises the tried and tested issue of exigibility of beer bottle deposit amounts to taxation under the Andhra Pradesh General Sales Tax Act, 1957 (for brevity, ‘the Act’). The two writ petitions filed by the dealers seek implementation of the order under revision and consequential refund. Grounded on similar facts and revolving around the same issue, the revision cases and the writ petitions are amenable to disposal by way of this common order. T.Rev.C.Nos.40 and 48 of 2000 pertain to M/s.Premier Enterprises and relate to the assessment years 1988-89 and 1990-91 respectively. T.Rev.C.Nos.102, 57, 67, 69 and 54 of 2000 pertain to M/s.Sunny Enterprises and relate to the assessment years 1988-89, 1989-90, 1990-91, 1992-93 and 1993-94 respectively. M/s.Premier Enterprises and M/s.Sunny Enterprises are distributors of beer for United Breweries Ltd. The dispute presently is as to their liability to pay tax under the Act on the bottle deposit amounts collected upon sale of bottled beer. In the first instance, when they were assessed to tax treating the turnover of bottle deposits as sale consideration and applying the rate of tax applicable to beer, they filed appeals before the Sales Tax Appellate Tribunal, Hyderabad (for brevity, ‘the Tribunal’) contending that bottles should be charged at the rate separately specified in the Schedule and not at the rate applicable to beer. By order dated 29.11.1996, reported in SUNNY ENTERPRISES, HYDERABAD v. STATE OF A.P[1], the Tribunal dismissed their appeals. Aggrieved thereby, they filed T.R.C.No.29 of 1997 and batch before this Court. Taking note of the later Judgments of the Supreme Court in UNITED BREWERIES LTD. v. STATE OF A.P.[2] and KALYANI BREWERIES LTD. v. STATE OF W.B.[3], this Court, being of the opinion that the matter required fresh consideration by the Tribunal in the light thereof, remanded the cases by order dated 08.12.1998. Having considered the matter afresh, the Tribunal by its common order dated 27.09.1999 allowed the appeals of the dealers holding that there was no sale of the beer bottles whereby the bottle deposit amounts could be subjected to taxation under the Act. Aggrieved thereby, the Revenue filed the present T.Rev.Cs. Seeking implementation of the common order of the Tribunal and consequential refund of the amounts due to them, the dealers filed the two writ petitions – W.P.No.21627 of 2000 was filed by M/s.Premier Enterprises for refund of the amounts due under the Tribunal’s order in respect of the assessment years 1988-89 and 1990-91 while M/s.Sunny Enterprises filed W.P.No.22022 of 2000 seeking refund in respect of the assessment years 1988-89, 1989-90, 1990-91, 1992-93 and 1994-95. Heard Sri A.V.Krishna Kaundinya and Sri P.Balaji Varma, learned special counsel for Commercial Taxes appearing for the Revenue and Sri M.V.J.K.Kumar, learned counsel for the dealers. Admittedly, the Tribunal re-considered the issue keeping in mind the Judgments of the Supreme Court in UNITED BREWERIES LTD.2 and KALYANI BREWERIES LTD.3. Pertinent to note, the dismissal of the dealers’ appeals by the earlier order dated 29.11.1996 in SUNNY ENTERPRISES, HYDERABAD1 was on the basis of the Judgment of this Court in UNITED BREWERIES LTD. v. STATE OF A.P.[4]. This was the Judgment reversed by the Supreme Court in UNITED BREWERIES LTD.2. Therefore, the very foundation of the earlier dismissal order stood nullified and the matter necessarily had to be decided afresh. However, in view of the Supreme Court Judgments, the issue was no longer limited to the rate at which the bottle deposit amounts were to be charged to tax in as much as the very exigibility of such amounts to taxation was now open to question. The Tribunal rightly recognized this aspect and considered the matter accordingly. It was the case of the dealers that as per the scheme of United Breweries Ltd., the distributors while selling bottled beer to the wholesalers collected refundable deposit amounts for the beer bottles which was repaid upon return of the bottles and as such there was no sale of the bottles at all. Per contra, it was the case of the Revenue that there was a deemed sale of the bottles in the light of Section 6-C of the Act and such deposit amounts would therefore be liable to taxation at the same rate at which the contents – the beer, was taxable. Earlier, the Supreme Court in PUNJAB DISTILLING INDUSTRIES LTD. v. THE COMMISSIONER OF INCOME TAX, SIMLA[5] was dealing with a buy-back scheme evolved by the Government during the war time whereby a distiller of country liquor could charge a wholesaler the price for the bottle in which liquor was supplied along with a security deposit, which he was bound to repay to the wholesaler on his returning the bottle. The Court held that such a security deposit was only a trading receipt assessable to tax as the amounts were paid as an integral part of the commercial transaction of sale of liquor in bottles and represented an extra price charged for the bottles. It was further held that such amount did not constitute a security deposit as there was nothing to secure, there being no right to return of the bottles. This Judgment was however distinguished in UNITED BREWERIES LTD.2 by a three Judge Bench of the Supreme Court. It was pointed out therein in the context of PUNJAB DISTILLING INDUSTRIES LTD.5 that under the buy-back scheme, the bottle was also sold as the price of the bottle fixed by the Government was paid to the distiller by the wholesaler. The Court therefore observed that there could be no doubt that under this buy-back scheme bottles were sold in the first instance and bought back later on. In such a scenario, any additional deposit was held to be an additional consideration for the sale of bottles. The Supreme Court therefore opined that PUNJAB DISTILLING INDUSTRIES LTD.5 could not be treated as an authority for the proposition that whenever liquor is supplied in a bottle to a consumer, it should be treated as being sold along with the liquor. In UNITED BREWERIES LTD.2, an issue similar to that raised before us was under consideration. The case of United Breweries Ltd. was that when beer was sold, the bottles and crates containing it were not sold to the customers. Supplies were made to the selling agents who deposited security for the bottles and the crates and such security deposit was repaid to them when the bottles and crates were returned. Relying upon PUNJAB DISTILLING INDUSTRIES LTD.5, this Court i n UNITED BREWERIES LTD.4 rejected this stand and held that United Breweries Ltd. did not have the right to return of the bottles and crates. The matter went before the Supreme Court in UNITED BREWERIES LTD.2. The Supreme Court did not accept the contention of the Revenue that when beer was sold in bottles, the sale of the bottle had also taken place as the property therein passed to the customer. The Revenue’s stand that the customer had an option either to retain the bottle or return it, whereupon a resale of the bottle took place, was not favoured. The Court pointed out that the basic question would be as to what was the intention of the parties – whether United Breweries intended to make an out and out sale of bottles along with the beer and whether the customers purchased not only the beer but also the bottles. The answer, per the Supreme Court, had to be found from the conduct of the parties to the agreement and the manner in which the business was carried out. On facts, the Court found that United Breweries Ltd. was very anxious not to lose the bottles in which the beer was supplied and the whole intention was to get back the bottles from the consumers through the dealers. The observations of the Court in this regard are apposite: “18. ……… 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 and conditions under which the beer was sold and it does not appear from these terms and conditions that UB 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. The fact that UB advised their customers to charge similar deposits from their consumers and get back the bottles from them goes to show that an out and out sale of the bottles had not taken place. By taking the deposits UB merely ensured the return of the bottles and the crates. A deposit of forty paise per bottle was taken to ensure return of the bottles. In our view, the deposit amount which was liable to be forfeited on failure of the return of bottles was in the nature of liquidated damages recoverable by the supplier under Section 74 of the Contract Act. An overall view has to be taken of the dealings and transactions between the manufacturer of the beer, its customers and the consumers. The intention of UB does not appear to have been to sell the beer bottles. Nor was there any intention of the retailers to sell the bottles to the consumers. On the contrary, by the terms and conditions of the agreement UB was trying to ensure that the bottles in which the beer was supplied to the consumers through their customers were brought back to it so that they could be used again for fresh supply of beer at a cheap rate. ……… 30. In the present case also the customers clearly know the price they will have 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.” I n KALYANI BREWERIES LTD.3, the Supreme Court was dealing with a case where the brewery, while selling its beer, collected a deposit equivalent to the cost of the bottle. When the empty bottles were returned this deposit was repaid. The brewery sought relief on the ground that there was no sale of the bottle whereby the bottle deposit amounts could be assessed to tax. Reliance was placed on UNITED BREWERIES LTD.2. However, on facts, the Supreme Court found that there was nothing to indicate that the terms under which the deposit was to be repaid were ever communicated to the customers. In that view of the matter, the Court held that it was difficult to visualize a bailment when the terms thereof were not made known to the bailee. The fact that the customers were required to deposit the bottle cost was taken to indicate that there was a sale of the bottle rather than a bailment. In these circumstances, the Supreme Court held that there was sale of bottles to the customers and that the brewery bought back the empties thereafter. UNITED BREWERIES LTD.2 was therefore held to be inapplicable on facts as in that case, the clear terms of the bailment were made known by circulars to the customers and the intention of the brewery was to get the empties back, as was evidenced by the fact that the rate of the deposit was far less than the cost of the beer bottle. It was in the light of these two Judgments that this Court remanded the matter for verification afresh on factual aspects to ascertain as to which would be applicable. Thereupon, the Tribunal examined the various circulars and letters issued by United Breweries Ltd. to its distributors in the context of collection of bottle deposits and return of empty bottles. The Tribunal found that, as in the case before the Supreme Court, the material placed on record clearly showed that United Breweries Ltd. was very anxious to secure the return of the empty bottles in which the beer was supplied. The same scheme which was discussed by the Supreme Court in UNITED BREWERIES LTD.2 was found to have been resorted to in the transactions of United Breweries Ltd. in the State of Andhra Pradesh. The Tribunal therefore found that the distinguishing factors in KALYANI BREWERIES LTD.3 had no application to the cases on hand. It accordingly held that there was no sale of the bottles by the distributors making them liable to pay tax on the refundable bottle deposit amounts collected by them. The learned special counsel for Commercial Taxes would however contend that the Tribunal failed to consider the impact of Section 6-C of the Act. They would further contend that in the light of the later Judgment of this Court in SRI SATYA WINERY & DISTRILLERY PVT. LTD., NAGOLE v. STATE OF A.P.[6], the matter requires reconsideration. Section 6-C was inserted in the Act by Andhra Pradesh Amendment Act No.11 of 1984 with effect from 08.07.1983. It was amended and substituted by Act No.22 of 1995 with effect from 01.04.1995. The Section as it stood originally and after its amendment is extracted hereunder: Before Amendment: “6-C. Levy of tax on packing material: Notwithstanding anything in Sections 5 and 6-A, where goods packed in any materials are sold or purchased, the materials in which the goods are so packed shall be deemed to have been sold or purchased along with the goods and the tax shall be leviable on such sale or purchase of the materials at the rate of tax, if any, as applicable to the sale, or, as the case may be, purchase of goods themselves.” After amendment: “6-C. Levy of tax on packing material: Notwithstanding anything contained in Section 5, Section 5-F, Section 6 and Section 6-A, the rate of tax on packing material sold with the goods shall be the same as that of the goods packed or filled, whether or not there is separate sale or agreement for sale for the packing material and the goods packed or filled.” The constitutional validity of the original Section 6-C of the Act was called in question before this Court. By Judgment dated 28.02.1986, reported in RAJ SHEEL v. STATE OF A.P.[7], this Court upheld the validity of the provision and observed that even where money was paid to the distributor as a security deposit refundable on the return of the bottle, the sale of the bottle could not be treated as an independent transaction different and distinct from the transaction of sale of the beer. The matter was then carried in appeal to the Supreme Court. By its Judgment reported in RAJ SHEEL v. STATE OF A.P[8], the Supreme Court, while concurring with this Court on the validity of the provision, took a different view as to the implicit deemed sale of the bottle. The Supreme Court observed that a sale transaction may consist of a sale of the product and separate sale of the container; or it may consist of a sale of the product and sale of the container but both sales being conceived of as integrated components of a single sale transaction; or it may consist of a sale of the product with the transfer of the container without any sale consideration therefor. The Court held that the question in each case would be a question of fact as to what was the nature and the ingredients of the sale transaction and that in every case, the assessing authority would be obliged to ascertain the true nature and character of the transaction upon a consideration of all the facts and circumstances pertaining to such transaction. The Court further observed that the issue as to whether the packing material had been sold or merely transferred without consideration would depend on the contract between the parties. Dealing with the ‘deemed sale’ envisaged under Section 6-C of the Act, it was held that the Section merely clarified and explained that the components which entered into determining the price of the goods cannot be treated separately from the goods themselves and that no account was taken of the packing material when the transaction took place, and that if such account must be taken then the same rate must be applied to the packing material as was applicable to the goods themselves. In PREMIER BREWERIES v. STATE OF KERALA[9], a three Judge Bench of the Supreme Court explained RAJ SHEEL7 and held that the deeming clause in Section 6-C of the Act was given a restricted meaning therein whereby it could at best be regarded as a provision by way of clarification of an existing legal situation. By giving a restricted meaning to the deeming clause, RAJ SHEEL7 was held to have ruled out the possibility of taxing packing material or containers in cases where only the goods were sold but packing material or containers were not actually sold. Pertinent to note, UNITED BREWERIES LTD.2 though it did not specifically advert to the provisions of Section 6-C of the Act which had been introduced and substituted in the statute book by that date, did however refer to RAJ SHEEL7. It therefore cannot be said that UNITED BREWERIES LTD.2 was rendered in ignorance of Section 6- C of the Act. In SRI SATYA WINERY6, the issue before this Court was not at all similar. The case of the assessees therein was that they had separately sold the packing materials, viz., the bottles and cartons and therefore the same could not be assessed to tax at the same rate at which the contents, the liquor, was taxed. The question was therefore as to the rate of tax to be applied under the provisions of the Act. Non- exigibility of the bottles or bottle deposits to taxation under the Act on the ground that there was no sale of the bottles, as in the cases before us, was not in issue. However, as SRI SATYA WINERY6 was decided upon a detailed analysis of the case law on the subject, it requires consideration. Referring to UNITED BREWERIES LTD.2 it was observed therein that the Supreme Court had not considered Section 6-C of the Act though the same was on the statute by the date of the Judgment. However, as pointed out supra, though the provision as such was not adverted to, RAJ SHEEL7 was referred to at length clearly indicating that the Supreme Court was conscious of Section 6- C of the Act while rendering judgment. Reference was also made to RAASI CEMENT LTD. v. CTO[10], which upheld the constitutional validity of the amended Section 6-C of the Act, wherein it was pointed out that notwithstanding the phraseology of the provision, the assessing authority had to determine in each case the ingredients of the contract of sale or agreement for sale relating to the container and also the intention of the parties in accordance with the Judgment of the Supreme Court in RAJ SHEEL7. Upon the aforestated analysis of the case law on the subject, this Court correctly deduced that the issue had to be considered on facts – as to the existence of an agreement, express or implied, for the sale of the packing material, viz., bottles and cartons. This Court found that the dealers in that case were unable to show that there were agreements for separate sale of the bottles and cartons differentiated from the sale of the contents packed therein and accordingly upheld the action of the Revenue in taxing the turnover relating to bottles at the rate applicable to liquor. On a conspectus of the above factual and legal position, we are unable to accede to the contentions advanced by the Revenue. After the authoritative pronouncements of the Supreme Court, irrespective of the intention and actions of the parties, the Revenue cannot claim liberty to treat a transaction as a sale by deeming it to be so under Section 6-C of the Act. The ingredients of a sale must necessarily be forthcoming therefrom. The restricted meaning given to the provision, be it as it originally stood or in its amended form, in RAJ SHEEL7 and explained in PREMIER BREWERIES8 and thereafter adverted to by this Court in RAASI CEMENT LTD.9 puts it beyond the pale of doubt that the assessing authority must examine the facts of each case for ascertaining the intention of the parties; and to determine the nature of the transaction. We are therefore disinclined to accept the argument of the learned special counsel for Commercial Taxes that notwithstanding the material placed on record by the dealers before the Tribunal, the transaction ought to have been treated as a deemed sale under Section 6-C of the Act. Applying the legal parameters laid down in the decisions aforestated, the Tribunal rightly came to the finding that there was no intention on the part of United Breweries Ltd. to sell the bottles and that the endeavor through out was to secure the return of the bottles for further use. This finding of fact is not shown to be perverse or opposed to the material on record. We accordingly find no question of law arising in the T.Rev.Cs. in so far as these factual aspects are concerned. SRI SATYA WINERY6, turned on facts wholly dissimilar to those in the cases on hand and is of no avail to the Revenue. The T.Rev.Cs. are accordingly dismissed. The Writ Petitions are disposed of giving liberty to the dealers to make applications for refund of the tax paid/collected, if not already made. On such applications being made or if they are pending, they shall be considered and disposed of in the light of this order and in accordance with law by the competent authority within a period of six weeks from the date of receipt of a copy of this order. In the circumstances of the case, there shall be no order as to costs. ______________ V.V.S.RAO, J. ____________________ SANJAY KUMAR, J. 10TH NOVEMBER, 2011. VGSR [1] (1997) 24 APSTJ 131 [2] (1997) 105 STC 177 = (1997) 24 APSTJ 175 [3] (1997) 107 STC 190 [4] (1988) 68 STC 214 [5] (1959) 35 ITR 519 = 1959 Supp (1) SCR 683 [6] (2005) 41 APSTJ 111 [7] (1987) 64 STC 399 [8] (1989) 3 SCC 262 = (1989) 74 STC 379 [9] (1998) 108 STC 598 [10] (1997) 24 APSTJ 100 (APHC)