JUDGMENT Rajes Kumar, J.
1. Present revision under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 9th February, 2004 relating to the assessment year, 1999-2000 under the Central Sales Tax Act.
2. Brief facts of the case are that the applicant is a Public Limited Company, incorporated under the Indian Companies Act, 1956 having its head office at B-7, Sector-20, Noida, Ghaziabad. Company was engaged in the business of bottling and 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 Section 5 and 7 of the Explosive Act, 1884. While supplying the LPG in cylinder, applicant has taken cash security in a sum of Rs. 550/- for cylinder and Rs. 150/- for regulator, total Rs. 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 Rs. 9,35,850/- by way of cash security. The said amount was transferred to profit and loss account, as the business was closed and the gas cylinder had not been returned by the customers. This transfer of the cash amount was considered by the assessing authority as sale of the cylinder and the aforesaid amount was brought to tax. Appeal filed by the dealer was rejected. Applicant filed second appeal before the Tribunal which was also rejected by the impugned order.
3. Question for consideration whether the security which was charged from the customers towards cylinder which was on returnable basis but on failure to return were forfeited, amounts to sale and the amount of security which was forfeited amounts to sale consideration liable to tax.
4. Heard learned counsel for the parties.
5. Learned counsel for the applicant submitted that the applicant was engaged in the business of distribution of LPG and was not engaged in the business of sale of cylinders. He submitted that the cylinder was used for the filling of the LPG gas which was returnable and the security amount was charged to ensure the return of such cylinders. Applicant never intended to sell the cylinders and only in a situation when the cylinders could not be returned, the amounts were forfeited. He submitted that the amount which was forfeited was in the nature of compensation or damages and not as a sale consideration. He further submitted that the terms and conditions stipulated the supply of LPG in cylinders and return of the cylinders and in case of failure to return the gas cylinders, forfeiture 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 Rs. 803.71 p, which was inadvertently told at Rs. 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 the Apex Court in the case of United Breweries Ltd v. State of Andhra Pradesh (1997) 105 STC, 177 (SC). He submitted that the aforesaid decision has been followed subsequently in the case of Deputy Commissioner of Commercial Taxes v. Mysore Breweries Ltd and Ors. reported in 109 STC 345. He submitted that the decision of the Apex Court in the case of United Breweries Limited v. State of Andhra Pradesh reported in 1997 UPTC 1274 is not applicable to the facts of the case. He further submitted that the decision in the case of United Breweries Limited v. State of Andhra Pradesh and in the case of Deputy Commissioner of Commercial Taxes v. Mysore Breweries Ltd and Ors. are decision of three Judges Bench, while the decision in the case of Kalyani Breweries Ltd. v. State of West Bengal and Ors. reported in 107 STC 190 is of the two Judges Bench. Learned Standing Counsel submitted that the amount of security charged was almost equal to the costs of the cylinders. He submitted that the amount which was forfeited during the year under consideration on account of non return of cylinder was only taxed which was towards the price of the cylinder and, therefore, it has been rightly assessed to tax.
6. I have perused the order of the Tribunal and the authorities below.
7. So far as the fact is concerned, there is no dispute, namely, that the gas cylinder was returnable. In the security voucher it was specifically mentioned that the cylinder was returnable and in case of non return, amount of security would be forfeited. A sum of Rs. 550/- was charged towards security while the costs of the cylinder was Rs. 650/- though it was claimed as 803.71 p 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 forfeited 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) and 2(j) of the Act defines "sale price" and "turnover" respectively. All the three sections are referred as follows:
"2(g) "sale" with its grammatical variations and cognate expressions means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods;
2 (h) "sale price" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged;
2 (j) "turnover" used in relation to any dealer liable to tax under this Act means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period and determined in accordance with the provisions of this Act and the rules made thereunder."
9. In the case of United Breweries Limited v. State of Andhra Pradesh under the terms and conditions, bottle was returnable, security was charged with the view to get the bottle returned and in case of non-return of the bottle as per terms and conditions, security was liable to be forfeited. Assessing authority levied tax on the amount of security treating 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 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 dget back the bottles from them goes to show that an out and out sale of 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 returns 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 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.
"32. 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.
"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 Ors. reported in 107 STC 190 amount of security which was charged at the time of sale of the liquor to ensure the return of the bottles were forfeited on account of non-return of the bottles and they have been taxed. The Apex Court considered the decision of the three Judges Bench in the case of United Breweries Limited v. State of Andhra Pradesh (supra) and on the fact of that case distinguished the decision and held that forfeited amount charged towards security was liable to tax. Apex Court distinguished the decision of United Breweries Limited v. State of Andhra Pradesh (supra) and held forfeited amount liable to tax for the following reasons:
"Now, there is nothing on record which indicates that the terms under which the deposits would be repaid were communicated to the assessee's customers. There is no suggestions that there was an oral communication of such terms to the customers or that there was any trade usage in this behalf. It is difficult to visualize a bailment the terms whereof are not made known to the bailee. The forfeiture of amounts in the assessee's "Deposit on Bottles" account does not appear to bear out the assessee's case that the empties were returnable at any time. This must also be taken into account that the customers were required to deposit for the beer bottles a rate which was exactly equal to the cost of the bottles; this would suggest the sale thereof more strongly than the intention to get them back upon bailment. It seems to us upon these facts and 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 Rs. 11,62,974/- out of the total amount of deposits, namely, Rs. 30,57,143/-. Had there been a bailment, which necessarily presupposes 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) 105 STC 177 (SC); (1997) 3 SCC 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 the fact that the rate of the deposit was less than the cost of the beer bottles."
11. Having heard learned counsel for the parties and giving deep consideration to the facts of the case and the two decisions of the aforesaid Apex Court, in my opinion the decision in the case of Kalyani Breweries Ltd. v. State of West Bengal (supra) is not applicable to the present case, while the decision in the case of United Breweries Limited v. State of Andhra Pradesh (supra) is applicable.
12. In the present case, in the security voucher, it was specifically mentioned that that cylinder would be returned and in case of non-return, amount of security would be forfeited. This amounts to clear communication of the terms to the customer. Security was realised to ensure the return of the cylinder. Normally, in this nature of business, namely, in the supply of LPG gas, customer is never intended to buy cylinder. Therefore, in respect of amount charged towards security applicant was bailee and the transaction was only in the nature of bailment. Amount of security which was forfeited on account of non return of cylinder in view of the decision of United Breweries Limited v. State of Andhra Pradesh (supra) was in the nature of damages and not in the nature of sale price. At no stage, either of the party intended to enter into a contract for selling and buying of cylinder. The intent was to supply LPG gas in cylinder. It is seen that in normal course, cylinders are always returned. Therefore, the view of the Tribunal upholding the levy of tax on the forfeited amount is erroneous.
13. In the result, revision is allowed. Order of the Tribunal is set aside.