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 Turnover-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 bottle~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

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.

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

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. [700-C-E]

4. 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 bottles which is refunded if the bottle is returned. If the bottle is not returned, the deposit is retained as liquidated damages for H

A the loss of the bottle. There is a clear intention not to sell the bottle. Hence deposits cannot be considered as price of the bottles. The High Court was in error in holding that the crates and the bottles were sold along with the beer. (705-CD]

State of Maharashtra, Bombay & Ors. v. Britannia Biscuits Company B Ltd. & Ors., [1995) Supp. 2 SCC 72; Punjab Distilling Industries limited v.

Commissioner of Income~Tax, Simla, [1959) Supp. 1 SCR 683 and Commissioner of Income Tax Madurai v. T.V. Sundaram Iyengar & Sons Ltd.,

(1996) 6 Scale 757, held in applicable.

C Raj Steel and Others v. State of A71dhra Pradesh and Others, [1989) 3 sec 262, referred to.

Beecham Foods Ltd. v. North Supplies (Edmonton) Ltd., ( 1959) 2 All England Reports 336 and Jay's-The Jewellers Ltd. v. Commissioners of Inland Revenue, 29 Tax Cases 274, referred to • ...

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8479- 8482 of 1994.

From the Judgment and Order dated 4.4.94/17.2.87 of the Andhra Pradesh High Court in T.R. Case No. 8/93, 7, 9 and 11 of 1985.

WITH

Civil Appeal Nos. 892-94 of 1991.

From the Judgment and Order dated 17.8.90 of the Karnataka High Court in W.A. Nos. 275-76 of 1984 with STRP No. 50 of 1984.

H.N. Salve, Sunil Gupta and Ms: K. Verma for JBD & Co. for the Appellant.in C.A. Nos. 8479-82/94.

M. Veerappa for the Appellant in C.A. Nos. 892-94/91.

G 'K. Ram Kumar, Balasubramaniam and Mrs. Asha Nair 'for the Respondent in C.A. Nos. 8479-82/94.

B. Sen, Praveen Kumar and George Wundgaonkar for the Respondent in C.A. Nos. 892-94/91. ·

H The Judgment of the Court was delivered by

- SEN, J. This case along with a number or other cases was heard by A S.P. Bharucha and Faizan Uddin, JJ. Who passed the following order:

"During the course of the arguments, the judgment of a bench of two learned Judges 'in State of Maharashtra, Bombay & Ors. v.

Brittannia Biscuits Company Ltd. & Ors., (1995] Supp. 2 SCC 72,

ha, s been cited. Our attention has also been drawn to the judgment. B of a bench of three learned Judges in Punjab Distilling Industries Limited v. Commissioner of Income-Tax, Simla, (1959] Supp. 1 SCR

683. Having regard to these judgments, we think that these appeals require the consideration of a larger bench. The larger bench may also take note of the judgment dated 11th September, 1996 in C.A. C Nos. 11864-67 of 1996. Commissioner of Income Tax, Madurai v.

T. V. Sundaram Iyengar & Sons Ltd."

The Unitt; d Breweries (hereinafter referred to as 'VB') supplies at Hyderabad two brands of beer - (1) U.B. Export Lager and (2) Sun Lager.

The dispute between UB and Another Pradesh Sales Tax Authority was as D regard the crates and bottles in which the beer was supplied. The case of UB was that when beer was sold bottles and crates were not sold to the customers. The sale price of UB Export Lager was Rs. 43.18 and Sun Lager Rs. 43.75 per dozen. The supplied were made to selling agents who deposited security of Rs., 4,80 of the bottles and Rs. 5.00 for the crates.

These deposit were returned to the selling agents when the bottles and the E crates were returned. This was the method of carrying on of the trade by they assessee and two circulars were issued by the assessee to explain the scheme to their customers. It was stated in the two circulars as to how paymen(s for two brands of the beer were to be made. Additionally, it was stated that the "Vendees to return bottles and crates and customers are F assured of better supply, if the scheme is adhered by the customers; otherwise the company expressed difficulty in supplying the liquor".

The scheme was explained to the trucing authorities. The Comr.1ercial Tax Officer verified the scheme and held that the customers did not always return the bottles and crates. The sale of beer included sale of the crates G and the bottles.

The Commercial Tax Officer was also of the view that the bottles and crates were higher in value than the amounts deposited as security.

For these two reasons, it was held that the scheme was not genuine.

Therefore, the taxable turnover had to be computed not only by taking into H

. SUPREMECOURTREPORTS

[1997]1 S.C.R.

A account the sale price but also the value of the bottles.

The case ultimately went up to the Tribunal. The Tribunal was of the view that there was no bailment of the bottles and the crates and there was no contractual obligation on the part of the customers to return the bottles and the crates. The scheme, therefore, was not acceptable as genuine.

Thereafter, the case was taken up by UB to the High Court. Before the High Court the contention of the Revenue was that the mere fact that bottles and crates in which beer was sold could be returned did not mean that the customers had not purchased the bottles and the crates and had not become C owners thereof. The bottles and crates were also vended to the customers along with the beer. The High Court held that the ownership in the bottles and crates did not remain with the UB when beer was sold. The customers purchased the bottles and the crates with the contents of receptacles. When bottles ad crates were returned to the extent shown by the assessee, in law, there was a resale of bottles and crates to the assessee. The High Court D referred to the decision of this Court in the case of Punjab Distilling Industries Ltd. v. Commissioner of Income Tax (A), (1959) 35 STC 519, and pointed out that UB did not have any right to the return of the bottles and crates nor was there any timelimit set for return of the bottles and crates.

Therefore, it was a clear case where bottles and crates were sold along with beer and had to be included in the sale price.

The assessee has come up in appeal against this decision.

The case of the appellant is that the Company carries on business of manufacture and sale of beer. It sells beer to retailers and wholesale dealers throughout India. When the beer is sold the bottles and crates are not sold to the customers. The assessee follows the trade practice to sell the beer in bottles which are ultimately to be returned to the assessee after the beer is consumed.

To ensure such return a deposit is collected from the customers. This deposit cannot be treated as sale proceeds in any way. It has been emphasised that the assessee had issued circulars to its customers making it clear that empty G bottles and crates were not being sold. The bottles were to be returned so that the process of bottling beer could continue smoothly and steady supply could be maintained. The system followed by the assessee was that upon the return of the empty bottles, fresh supplies would be made to the dealer. The assessee had submitted figures to show that a substantial part of the bottles was returned by the consumers. The attention of the Sales Tax Authority was also drawn to H the circulars issued by the assessee to its customers to the following effect :-

UNITED BREWERIES LTD. v. STATE [SEN, J.]

"UNITED BREWERIES LIMITED, HYDERABAD,

Dear Sir,

24, Grant Road,

P.B. 5104 Bangalore-1.

We are glad to inform you that our brewery at Hyderabad commenced operating on October 18, 1971 and we are not in a position to render the same service to you as we render to our valued customers in Bangalore viz., delivery of our beer at your door fresh from the Brewery every day.

The brands can offer and their prices are as follows :

U.B. EXPORT LAGER

Rate per dozen Rs. 33.88 D

Refundable deposit on bottles Rs. 4.80

Refundable deposit on crates Rs. 5.00

TOT AL per dozen Rs. 43.68 E

SUN LAGER

Rate per dozen Rs. 38.95

Refundable deposit on bottles Rs. 4.80 F Refundable deposit on crates Rs. 5.00

TOT AL per dozen Rs. 48.75

Rebate for orders at a time of 40 dozen and more of.Sun Lager only is Rs. 1.24 per dozen making the net price Rs. 47.50 per dozen. G

Orders should be booked at the office of Phipson & Co. Ltd., _at 3-6-14/7, Himayathnagar, Hyderabad-29.

Full payment should be made at the above rates at the time of booking of orders. Cheques for OB Export Lager should be made H

in favour of United Breweries Limited and cheques for Sun Lager should be made in favour of Phipson & Co. Ltd.

Delivery will be made on the following working day after booking of the order. Empty bottles and crates with customers will be taken back by our truck, the driver of which will issue a receipt, against which our Brewery will issue a Credit Note on production of which credit will be allowed for the deposit at the time-of booking of the next order. Please take back empty bottles from your customers and pay them 40 paise per bottle. This will reduce the cost of the beer and encourage them to buy larger quantities from you.

As open delivery will be given, there will be no question of leakages. Further, as already stated above, the beer will be delivered to you fresh every day. Not only will this simplify your business but you will build up a very good turnover ia beer just like very every one of our customers in Bangalore. This arrangement will be particularly of great advantage to you during the hot weather when there is a large demand for beer. We hope you will easily visualize the tremendous benefit to you of our having started our Brewery in Hyderabad and extend you kind patronage to your mutual benefit."

Four things emerge from this circular set out herein -

(1) The refundable deposits were being collected on the bottles and the crates.

(2) The appellant advised its customers to collect forty paise per bottle from the consumers as deposit.

(3) The customers were advised to collect the empty bottles from the consumers and return them to the appellant.

( 4) The empty bottles and crates were to be taken back by the trucks of the appellant, the drivers of which were authorised to issue a receipt for the empties against which the appellant would issue credit notes. At the time of the booking of the next consignment, the customers would get advantage of the credit notes.

UNITED BREWERIES LTD. v. STA TE [SEN, J.] 697

This arrangement suggests a continuous process by which the appel- A !ant will sell beer to its customers in bottles and crates and collect the sale price of beer and also deposits for the crates and the bottles. The customers, in their turn, will sell beer to the consumers and apart from the price of beer, will recover forty paise per bottle as deposit to ensure return of the bottles. The bottles will ultimately be taken back by the appellant B for which the trucks will be sent and the credit notes will be given to the customers for return of the empties. This scheme of recycling the bottles and crates will keep down the costs and ultimately will have the effect of reducing the price of beer and encouraging the customers to buy beer in larger quantities.

The contention of Mr. Ganguli appearing for the respondent is that when beer was sold in bottles and despatched in crates to the customers c

by UB, an out and out sale of the bottles and the crates took place. The property in the bottles and the crates passed to the customers. The customers had an option to retain the bottles and use them as they liked. There D was no contractual obligation to return the bottles to UB within any specified period of time. When the bottles were ultimately returned by the customers to UB, a resale of the bottles took place.

We are unable to uphold this contention having regard to the nature of the transaction. The basic questions are : What was the intention of the E parties? When the bottles and crates were supplied by UB, did UB intend to make an out and out sale of the bottles and the crates along with beer and did the customers purchase not only beer but also the bottles and the crates from UB? The intention has to be found out from the conduct of the parties to the agreement and the manner in which the business was F being carried out.

Section 19 of the Sale of Goods Act lays down that where there is a contract for sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. For the purpose of ascertaining the intention of the G parties, regard shall be had to the terms of the contract, conduct of the parties and the circumstances of the case. Sections 20 to 24 contain rules for ascertaining the intention of the parties as to the time at which the property in the goods is passed to the buyer. But these rules will apply only if a different intention does not appear from the contract itself.

A From the memorandum issued by UB, it appears that UB was very anxious not to lose the bottles and crates in which the beer was supplied. 40 paise was charged as deposit and the customers were also advised to do likewise when they sold the beer to the consumers. The whole intention was to get back the bottles from the consumers through the customers. The B scheme was that UB would regularly send trucks with beer to the customers to supply beer and get back the empties. These empties will be filled up again for further supplies. This recycling of bottles will keep down the costs and this process will have the effect of keeping down the price of the beer which in turn will increase the sales. This does not appeal to be a case where UB was selling beer in bottles and washing off its hands thereafter.

C It wanted to use the empty bottles. It was anxious to get back the bottles and that is why it not only charged 40 paise per bottle from customers but even advised them to do likewise, and collect 40 paise as deposit per bottle of beer from consumers to ensure that the bottles ultimately are returned to UB.

D Mr. Ganguli invited our attention to Sections 23 and 24 of Sale of Goods Act. According to him, this Court in the case of State of Maharashtra, Bombay and others v. Britannia Biscuits Co. Ltd. and Others, [1995] Supp. 2 SCC 72, in a similar transaction had held that supply of biscuits by the manufacturer to its customers in returnable tins amounted E to sale of goods. To come to this conclusion, a Bench of two Judges of this Court took the view that the principle underlying Section 24 was that where the goods were delivered to the buyer on terms similar to the delivery of goods on approval or "on sale or return" basis, the property in the goods therein passed to the buyer, if he did not signify his approval or acceptance F and also did not return the goods within the time prescribed therefore. The position of the purchaser, until he returned the goods within the prescribed period, was that of a bailee and on the expiry of the said period, he becomes a_purchaser. Where, however, the person to whom the goods were delivered was under an obligation to return the goods, there was no question of sale every coming into being and the person to whom the goods G were delivered remained a bailee. It was held in the facts of that case that the transaction therein was of the nature nearer to the situation contemplated by Section 24 inasmuch as the tins were delivered to the buyer with the stipulation that if he returned the tins in good condition within three months, he would get back the deposit made by him in that behalf.

H It meant that after the expiry of the said period, he had no right to claim

the refund on return of goods. The transaction then became a sale. The A Court highlighted two features of the transaction. One was that the customer was under no obligation to return the tins in which the biscuits had been supplied. He had a right to return the tins in good condition within three months. The supplier was under an obligation to refund the deposit amount only if the tins were returned within three months in good condi- B ti on.

It is not clear how the Court came to the conclusion in the facts of that case that the tins were sent to the buyers on sale or 'on sale or return' basis or any analogous condition. We are of the view that the principle of Section 24 or any analogous principle cannot be applied to a case like this. C Neither the beer nor the bottles nor the crates were sent to the customers by UB for approval or 'on sale or return' basis or any other similar term.

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 intend D it to be passed. The facts of this case reveal that UB did not intend to sell the bottles or the crates to the customers. There was no intention of an out and out sale to the customers. On the contrary, the customers wee advised to sell the beer in bottles to the consumers and collect a deposit of 40 paise per bottle so that the bottles can be brought back from the consumers and returned to UB. The entire iea was to use the bottles over and over, again E so that the business costs of UB could be kept at the minimum and the price of the beer could be kept at a low level so that consumption of beer would increase. It does not appear that any time limit was fixed for return of bottles in this case. But, even if such limit was fixed, it is well settled that time is not of the essence of the contract unless the parties specifically F make it so. Section 11 of the Sale of Goods Act gives statutory recognition to this principle. This aspect of the matter was also overlooked in Britannia Biscuits Co. 's case.

Having regard to the facts of this case, we are of the view that an out and out sale of the bottles did not take place when beer was supplied in G bottles by UB to its customers against the deposits which had to be refunded when the bottles were returned. Having regard to the scheme and the nature of the transactions, we are of the view that 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 the deposits H

A became exigible to sales tax.

Mr. Ganguli argued that the very fact that UB had a right to forfeit the deposits on the failure of the customer to return the bottles indicates that the bottles were sold. The deposits were nothing but price of the goods B which was returnable when the bottle; were resold.

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 and conditions under which the beer was sold and it does not appear from these terms and C 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 D 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 bottle 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 transac- E tions 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 io 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 F 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.

i Strong reliance was place by Mr. Ganguli on the decision of this Court in the case of Punjab Distilling Industries Ltd. v. The Commissioner of Income Tax, Simla, [1959) Supp. 1 SCR 683. That case was decided G under the Income Tax Act, 1922. There the appellant-distiller of country liquor carried on the business of selling liquor to licensed wholesalers. Due to shortage of bottles during the. war-time, a buy-back scheme was evolved by the Government whereunder the distiller could charge a wholesaler a price for the bottles in which liquor was supplied at a rate fixed by the H Government, which he was bound to repay to the wholesaler on his

returning the bottles. In add, ition to this, the distiller took a further sum A from the wholesalers described as security deposit for the return of the bottles. Like the price of the bottles, these moneys were also repaid as and when the bottles were returned with the difference that the entire sum was refunded only when 90 per cent of the bottles covered by it had been returned. The distiller was assessed to income tax on the balance of the B amounts of these additional sums left after the refunds were made. This Court held that the sums paid to the appellant and described as "security deposit" were trading receipts and, therefore, were assessable to tax~ These amounts were paid as an integral part of the commercial transaction of the sale of liquor in bottles and represented an extra price charged for the bottles. They were not security deposits as there was nothing to secure, C there being no right to the return of the bottles.

The principle laid down in that case has to be understood having regard to the special facts of that case. The buy-back scheme was devised by the Government due to scarcity of bottles. Under this scheme, a distiller D on a sale of liquor became entitled to charge the wholesaler a price for the bottles in which the liquor was supplied at rates fixed by the Government.

Therefore, not only a sale of liquor took place but under "buy-back" scheme, the bottles were also sold. The price at which the bottles were to be sold were fixed by the Government. The supplier was bound to repay the wholesaler the price as and when the bottles were returned. Therefore, E there could not be any doubt that under the "buy-back" scheme the bottles were being sold in the first instance and bought back later on. This was a scheme devised by the Government. The parties had no option to do business in any other way. Since the bottles had to be sold in the first instance and bought back thereafter, any additional deposit could not be F anything but an additional consideration for sale of the bottles.

This case cannot be treated as an authority for the proposition that whenever liquor is supplied in bottles to a consumer, the container is also sgld along with liquor.

Commissioner of Income Tax, Madurai v. Mis T. V. Sundaram Iyengar & Sons Ltd., (1996) 6 Scale 757, is a case under Income Tax Act. The ! question in that case was whether unclaimed sundry credit balances lying with the assessee could be treated as trading receipt. The amounts were

left lying with the assessee and the claims of the customers had become H

A barred by limitation. The assessee transferred the unclaimed balances to the profit and loss account. It was held that the moneys had been received by the assessee in course of trading transaction. Although originally the amounts received were not of income nature, by lapse of time the claim of the depositors became time barred and the amount by operation of law

B acquired totally different character. This principle was enunciated in the case ofJay's-The Jewellers Ltd. v. Commissioners of Inland Revenue, 29 Tax Cases 274. This was a case under the Income Tax Act. We fail to see how this principle has any relevance to the case now before us. In that case, the dictum of Lord Greene in the case of Morley (H.M. Inspector of Taxes) v.

Messr, Tattersall, (1939) 7 ITR 316 (CA), that the taxability of receipts was C fixed with reference to its character at the moment it was received, was explained and confined to the peculiar facts of that case.

The principle laid down in the case of Jay's-The Jewellers Ltd. (supra) was that the money owed to the clients in course of usual business transactions remaining with the assessee-company and transferred by it from the D suspense account to profit and loss account after it had become, by operation of law, the assessee's money, arose out of ordinary trading transactions and had to be taxed as income of the company.

It however, cannot be said that the moneys lying with the company E for a long time as security deposit from its customers would automatically become sale proceeds in the hands of the company by efflux of time. The customers may lose all claims to the deposit amount by operation of law.

The company may take the unclaimed deposits to its profit and loss account by treating them as trading receipts. That, however, will not convert the deposits which were not received initially as price into sale F proceeds of the tins in which the biscuits were supplied or the bottles in which the beer was sold.

We were referred to a large number of decisions of various High Courts. It is not necessary to refer to these decisions in this case. The cases G were decided on the basis of the facts found by the Tribunal and the provisions of the local sales tax laws.

In the case of Raj Steel and others v. State of Andhra Pradesh and others, [1989] 3 SCC 262, this Court had to deal with two types of cases -

(1) beer sold.in bottles packed in cartons and (2) cement sold in gunnies.

H It was held that the issue as to whether the packing material had been sold,

depended on the contract between the parties. 'fhe fact that the packing A was of insignificant value in relation to the value of the contents might imply that there was no intention to sell the packing, but where any packing material was of significant value it might imply an intention to sell the packing material. It was concluded that in every case the assessing authority had to ascertain the true nature and character of the transaction upon a B consideration of all the facts and circumstances pertaining to the transaction. The case was, therefore, remitted to the High Court to find out the facts on fuller investigation.

We were also referred to an English decision in the case of Beecham Foods Ltd. v. Norlh Supplies (Edmonton) Ltd., (1959) 2 All England C Reports 336, where the plaintiffs were the manufacturers and suppliers of a glucose drink sold under the trade mark 'Lucozade'. Every bottle of 'Lucozade' was supplied subject to a condition as to the price at which it might be resold, the condition being the observance of the fixed retail price as published in the current price list issued by the plaintiffs' distributors. D In the retail price list for 1957, the price was shown as "2s. 6d. plus 3d." for a twenty-six ounce unit, and under the heading "Bottle and container charges", it was stated that ·Lueozade' bottles were "charged at 3s. per dozen, refundable". The defendants, who carried on business as grocers, sold 'Lucozade' at 2s. 7d per bottle Moulded in the glass of the bottle was . the word 'Lucozade', and there was a label on the bottle with "2s. 6d." in E large type, followed by.the words "plus 3d. deposit returnable on bottle with stopper", in smaller type. The plaintiffs, who were the manufacturers, brought an action for an injunction to restrain the defendants from selling 'Lucozade' at a price less than the fixed retail price. i.e., 2s. 6d. plus 3d. It was held that the bottles in which 'Lucozade' was supplied were not sold f to customers, but merely hired to them, as the property in the bottles was not intended to pass to customers. The correct retail price of the drink in a twenty-six ounce bottle of 'Lucozade' was 2s. 6d., and not 2s. 9d., the extra 3d. being for the hire of the bottle, and on each occasion when Lhc defendants received 2s. 7d. for a bottle of 'Lucozade', the customer paid the correct retail price of 2s. 6d. for the drink and ld., instead of 3d., for G the hire of the bottle.

It was further held that th~ action was under Section 25(1) of the Restrictive Trade Practices Act, 1956, which applied only to sales and riot to hiring agreements; and therefore the defendants were not in breach of H

A -the statute in not charging the stipulated rate for the hire of the bottles and ther.efore, the action of the defendants must fail.

The facts of this case come very close to the facts of the case before us. The Court took note of the fact that initially it was stated specifically on the label "plus 3d. deposit returnable on bottle with stopper". The label, B however, did not say by whom the 3d. would be returned when the bottle with stopper was returned to the retailer. The Court held that this merely implied that the customer would get 3d. back, if he took back the bottle to the same shop which supplied him the '_Lucozade'. Vaisey, J., after referring to the scheme of the transaction concluded. "It further seems that the C property in the bottle was never intended to pass to the customer".

The Court observed:-

. "In the present case each of the two ladies who effected a trapor test purchase from the defendants paid, on each occasion, 2s 7d., and, in my judgment, may fairly be said to have paid the full and correct price of 2s. 6d. for the liquid but only ld. for or towards the hire of the bottle. In my judgment, however, the bottle, in each of these transactions, was never sold at all, but was merely lent or hired as a convenient receptade for carrying the liquid home. The same result follows if 2s. 9d. is paid by a customer. In either case I interpret the transaction as a payment of 2s. 6d. in full as the price of the liquid and 3d. or. ld. for the hire of the bottle. The matter may be looked at in a variety of ways. For example, a customer may go into a shop, ask for a bottle of 'Lucozade', fill up his own flask from the contents and hand back the bottle with its stopper across the counter to the shop man. What has he to pay? Surely 2s. 6d. The suggestion that he must pay 2s. 9d. and a minute or two later ask for 3d. back is reducing a very ordinary transaction to an absurdity. The moral is that, if people want to fix prices for retail sales, they must, in my view, do so in plain, simple and sensible and, above all, accurate language. Here the price , of. 'Lucozade' is 2s. 6d., whether the bottle to carry it home is hired or not."

After referring to the clause in the price-list that the deposit will be refunded whe~ the bottles are returned, Vaisey, J., observed that the H charge over and above the price of 'Lucozade' was in the nature of a

deposit. It was held :- A

"I think that the distributors' view is perfectly right, and that the goods which are sold in the present case are the contents of the bottles and not the bottles themselves. Indeed, it is this fact, and this fact only, which justifies the prominence given to the figures 2s. 6d. on the labels." B

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 C 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.

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 D case, the deposits could not be treated as the price of the bottles and the crates.

We, therefore, set aside the judgments under appeal dated 17.2.1987 and 4.4.1994. The appeals are allowed. There will be no order as to costs. E

CA. Nos. 892-94 of 1991.

SEN, J, Following the decision in Civil Appeal Nos. 8479-8482 of 1994 (United Breweries Limited v. State of Andhra Pradesh), these appeals ~~ F

Mr. B. Sen, appearing on behalf of the respondents has drawn our attention to clause (ff) of sub-rule ( 4) of Rule 6 of the Karnataka Sales Tax Rules, 1957, which specifically provides :-

"6( 4). In determining the taxable turnover, the amount specified in clauses (a) to (n) shall, subject to the conditions specified therein, be deducted from the total turnover as determined under clauses

(a) to (e) of sub-rule (1)-

(a) ....

(l) ....

(ft). all amounts falling under the head charges for packing; that is to say, the cost of packing materials and cost of Labour for packing in respect of goods not liable to tax at the hands of the assessee, whether or not such amounts are specified and charged for by the dealer separately;"

Mr. B. Sen has contended that this is an additional ground why appeals should be dismissed in this case.

The appeals are dismissed. No order as to costs.

S.V.K.I.

Appeal Nos. 8479-82/94 allowed.

Appeal Nos. 892-94/91 dismissed.

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