BRITANNIA BISCUIT CO LTD Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) The applicants are registered dealers under the Bombay Sales Tax Act, 1959, as well as under the Central Sales Tax Act, 1956. The applicants carry on the business of manufacture and sale of biscuits both within the State of Maharashtra as also outside. The applicants charge a lump sum price for the sale of biscuits outside the City of Bombay and suburbs, which includes the cost of tins in which the biscuits are supplied. In the City of Bombay and its suburbs, however, the applicants sell biscuits in returnable containers. The applicants take a refundable deposit in respect of the tins in which the biscuits are supplied. On the return of the tins the deposit is refunded to the purchaser. These tins are shown in the books of account of the applicants as part of their stock along with their stock of tins actually lying with the applicants. The deposits are credited to "Deposit Account Returnable Tins" account and a corresponding debit is made to the customer's account. A reversal entry is passed in both the accounts when the tins are returned and the deposits are refunded. At the end of the accounting period, out of the balance left to the credit of the deposit account, 50 per cent of the amount is written off on a national basis and is transferred to the credit of "Tin Stock Control Account", thereby showing that the value of the closing stock is depleted to that extent. The balance 50 per cent of the outstanding deposits are considered as a part of the value of the closing stock of tins. This amount is shown in the balance sheet as an asset and the corresponding deposit amount is shown as a liability. These entries at the end of the accounting year are made on a notional basis of probable non-return of tins. The assessees, however, accept tins which are returned at any time and refund the deposit, although their invoice contains a statement that the Company's liability to refund the deposit exists only up to 3 months from the date of the invoice.

(2.) No sales tax has been collected or paid by the assessees on the deposits for tins.

(3.) For the assessment year 1st April, 1967, to 31st March, 1968, the assessees received total deposits amounting to Rs. 12,97,229.05. Out of these deposits, deposits to the tune of Rs. 11,29,202 were refunded to the customers. At the end of the accounting year a balance of Rs. 1,68,027 was left outstanding. As per their accounting practice the assessees wrote off 50 per cent of this amount viz., Rs. 84,013, and reduced the corresponding tin stock account. The Sales Tax Officer subjected the said amount of Rs. 84,013 so written off to sales tax, treating the same as the sale price of tins. The order of the Sales Tax Officer was upheld in appeal by the Assistant Commissioner of Sales Tax. Thereafter the assessees preferred a second appeal bearing No. 1553 of 1972 before the Tribunal. The Tribunal referred the issue to a larger Bench, and the question which was referred to a larger Bench was : "Whether, on the facts and in the circumstances of the case, the amount of Rs. 84,013 represents the 'sale price' of tins supplied by the appellant-assessee and not returned by the customers during the period of assessment in question." The Special Bench of the Tribunal held that the amount of Rs. 84,013 represented the sales price of tins supplied by the assessees to their customers. Following the judgment of the Special Bench, the ordinary Bench of the Tribunal passed orders accordingly. In respect of the orders passed by the Tribunal, at the instance of the assessees the following question has been referred to us for determination :