STATE OF MAHARASHTRAversusM/S. THE BRITANNIA BISCUITS CO. LTD.

                    STATE OF MAHARASHTRA                              A
                              v.
             MIS. THE BRITANNIA BISCUITS CO. LTD.

                          NOVEMBER23, 1994

         [B.P. JEEVAN REDDY AND S.B. MAJMUDAR, JJ.]                   B

   SALES TAX

   Bombay Sales Tax Act, 1959:

    Section 2 clause (28) Sale Determination of-Dependent upon precise C
terms of transaction between purchaser and seller-Manner of
maintenance of accounts irrelevant-No obligation to return the tins-
Whether constitutes sale.

    Contract Act, 1872:
                                                                      D
    Section 148-Bailment-No obligation to return goods entrusted-
Held does not constitute bailment.

   Sale of Goods Act, 1930:

    Section 24-Delivery of goods to the buyer-Approval or acceptance E
not signifi~d-Goods also not returned within time prescribed-Held
property in the goods passes to buyer.

     The respondent-assesses is a manufacturer of biscuits. It is a
registered dealer both under the Bombay Sales Tax Act, 1959 and the
Central Sales Tax Act, 1956. The biscuits manufactured by the F
respondent were sold in tins. While selling the biscuits in the tins, it
collected the price of Biscuits alone and for the tins in which Biscuits
were sold, it took a refundable deposit with the stipulation that if the
tin was returned within three months in good condition, the deposit will
be returned. These deposits were credited to 'Deposit Account
returnable Tins'. The tins so supplied to purchasers were shown as the G
stock of the respondent-assesses in its accounts books, but debited in
the customer's account. When the tins were returned, a reversal entry
was made in both the accounts. Sales tax was charged only on the sale
price of the biscuits but not on the deposit received in respect of the
tins. Indeed in respect of city of Bombay and its suburbs, a separate
price list was issued by the respondent. Th.e price list carried an H
                                 719
    720                   SUPREME COURT REPORTS          (1994) SUPP. 5 S.C.R

A   endorsement; "A deposit of Rs. 5.50 for LB tins and Rs.3.50 for LS tins ·
    will be charged at the time of supply, which will be refunded on return
    of tins in good condition within 3 months from date of supply." In the
    invoices issued by the respondent, there was a separate column showing
    the number of tins supplied to the purchaser and the amount of deposit
    received from him in that behalf. At the top of the invoice the following
B   endorsement occurred; "Dealers are informed that the company's
    liability to refund the value of returnable tins extends only upto 3
    months from the date of the invoice". It has however been found by the
    High Court that notwithstanding the endorsement on the price list as
    well as on the invoice, the respondent was in fact receiving the tins
    returned even after the expiry of three months and refunding the
c   deposit amount.

         For the assessment year 1967-68, the respondent received a total
    deposit amount of Rs. 12,97,229.05 paise. Out of the said amount Rs.
    11,29, 202.00 paise was refunded to the customers ~n receiving back the
    tins. At the end of the accounting year, a balance of Rs. 1.68.027.05
D   paise was left outstanding. As per the accounting practice followed by
    the respondent in this behalf, the assessee wrote off 50 per cent of this
    amount viz., Rs. 84,013 reducing the corresponding tin stock account to
    that extent. The said amount was treated as a trading receipt and was
    transferred to P and L account. This amount represented the value of
    the tins which the respondent thought were not likely to be re~urned.
E   The balance amount of Rs. 84,013- was shown as the value of the
    closing stock of tins (and was shown. as the opening balance in the next
    year's account).

         In the assessment proceedings relating to the said assessment year,
    the Assessing Authority included the sum of Rs. 84,013 (the amount
F   written off by the respondent in the tin stock account and transferred
    to its P and L account) in its taxable turnover. He treated the said
    amount ·as the sale price of tins not returned. The said inclusion was
    questioned by the respondent in appeai before the ~sistant
    Commissioner of Sales Tax. The appeal was dismissed. The
G   respondent's second appeal to the Tribunal was also dismissed.

         At the instance of the respondent, the Tribunal referred the
    following question for the opinion of the High Court; "whether on the
    facts and circumstances of the case, the Tribunal was justified in law in
    holding that the book entry of Rs. 84, 013 representing 50 percent of
H   the closing balance of the tin deposits left on 31.3.68 written off from
                  STATE v. THE BRITANNIA BISCUITS                    721

the account stock of tins on the probable non-return of the tins by the A
customers constitutes "sale price ?"

    The High Court held that the arrangement between the respondent
and the purchasers was one of bailment insofar as tins were concerned
and not a transaction of sale. It held that according to the said
arrangement "there is an obligation on the assessee (respondent) to B
accept the tins returned and a corresponding obligation on the
customer to return the tins". Aggrieved by the High Court's judgment
the appellant preferred the present appeal.

    On behalf of the appellant State it was contended that there was no
obligation upon the purchaser to return the tins within three months; C
and that in fact there was a sale of the tins alongwith the biscuits and
when the tins were returned &nd the deposit amount refunded by the
respondent, it was a case of a purchase of tins by the respondent.

    On behalf of the respondent assessee it was contended that the
transaction between it and the purchaser was one of bailment and there D
was no sale of tins; that the tins supplied continued to be its property ;
that the amount written off did not represent the sale price of tins but
was a compensation of damage for breach of the obligation on the
purchaser to return the tins, that for constituting the "sale price" there
must be a specific sale of goods to a specific buyer; and that in the
absence of such identification the "sale price" cannot be ascertained.     E
    Allowing the appeal, this Court

     HELD : 1. The true nature of t.he transaction has to be decided in
this case on the following material; the endorsements on the price lists
as well as the invoices issued by the respondent ; the fact that in respect F
of sales to dealers in the city of Bombay and its suburbs, invoices
showed sale of biscuits only and not of tins, that sales tax was charged
only on the sale price of biscuits and that a refundable deposit was
collected for the tins supplied. The manner in which entries were made
by the respondent in its account books including in tin stock deposit
account are also said to be relevant facts ; there is also the finding that G
the respondent used to refund the deposit even in cases where the tins
were returned after the expiry of three months. (727 G, H)

    2. Whether there has been a sale of tins at the end of the accounting
year or along with the biscuits themselves has to be determined on the
precise terms of the transaction between the respondent and its H
    722                     SUPREME COURT REPORTS           [1994] SUPP. 5 S.C.R

A   customers and that on this aspect the manner in which the respondent
    maintained its accounts or made entries therein not very much
    relevant. (730 B, C)

        Mis.. Ar/em Breweries Ltd. v. The Assistant Commissioner ofSales Tax,
     Panaji, (53) s.:r.c. 172, referred to.
B
         3. Neither the endorsement on the price list nor the endorsement on
     the invoice can be said to create an obligation on the purchaser to
     return the tins. All that the endorsement on the price list says is that the
     deposit will be refunded on the return of the tins in good condition
     within three months. Similarly the endorsement on the invoice stated
c    that the respondent's liability to return the value of returnable tins
     extended only upto three months. Of course, in practice the respondent
     was not adhering to the said time limit. But it cannot be said that either ·
     the aforesaid endorsement or the said practice of the respondent
     created an obligation upon the customer to return the tins. It was left to
     his choice. If he thought, it would be more advantageous to him to
D    return the tins and get back the deposit amount, he could do so. On the
     other hand, if he found it more advantageous to retain the tins and
     forego the deposits, it was equally open to him not to return the tins.
     The fact remains that when the tin was not returned, the said deposit
     was treated as a trading receipt by making necessary entries in its
     books treating 20% of the deposit amount as profit. In all these
E    circumstances the transaction/ arrangement/ understanding between
     the parties did not ere.ate an obligation upon the purchaser/ customer
     to return the tins. (730 D, E, 731 B)

          4. Once it is held that there was no obligation to return the tins, the
.F . theory of bailment falls to the. ground. It would then not be a case
     where some property of the respondent was entrusted to the
     purchasers/ customers with stipulation that they should be returned or
     otherwise disposed of according to the directions of the respondent,
     within the meaning of Section 148 of the Contract Act, which defines
     the expression "bailment". (731 D, E)
G
         S. The transaction in question is neither a bailment nor a pledge: It
     was a composite transaction. It was to start with, an entrustment which
     could result in a sale of tins in case of non-return of the tins. While
     entrusting the tins, the respondent took care to stipalate and receive the
     value of the tins and a little more to be precise 20%. If the tin was
H    returned, well and good the transaction r~mained one of entrustment.
                  STATE v. THE BRITANNIA BISCUITS                   723

But if not returned within 3 months, it became a sale as per the terms A
of the transaction. The fact that the respondent was receiving back the
tins even after the expiry of three months and returning the deposits
was more by way of grace probably a business decision rather than a
matter of right or an obligation. (731 G, H, 732 A)

     6. According to the principle of Section 24 of Sale of Goods Act, B
1930 the position of the purchaser, until he return the goods within the
prescribed period, is that of a bailee and on the expiry of the said
period, he becomes a purchaser. Where, however, the persons to whom
the goods are delivered is under an obligation to return the goods, there
is no question of sale ever coming into being and the person to whom
the goods are delivered remains a bailee. The transaction herein is in its C
nature nearer to the situation contemplated by and to tl~e principle of
Section 24 inasmuch as the t§ns were delivered to the buyer with the
stipulation that if he returns the tins in which the biscuits were sold in
good condition within three months, he will get back the deposit kept
by him in that behalf. It meant that after the expiry of the said period,
he had no right to claim the refund on return of goods. The transaction D
then became a sale. (733 C, D)
    Halsbury's Laws of England lVth Edn. Vol.41 Paras 727 and 728,
referred to.
     7.1 Each customer/ purchaser had an account with the respondent
are when a particular number of tins were supplied to a customer, an E
entry was made to that effect in that customer's account in the account
books of the respondent besided making an entry in the other relevant
account books of the respondent When the customer returned the tins,
a reverse entry was made in the customer's account as well as in the
relevant account books of the assessee. Thus there could be no difficulty F
in identifying the customer who failed to return the tins.
                                                        (733 H, 734 A, B)

    7.2. As there was· no obligation to return the tins by the purchaser/
customer to the respondent, the deposit amount appropriated by it
cannot be anything but sale price - No other label could be suggested
for it In this case there was a composite transaction ; in case of non G
return of the tins within three months it became a sale of the
unreturned tins. (734 D, C, D, G)

    Raj Shee/ and Others. v. State ofA.P. and Anr., [1989) 3 SCR 305 and
Hyderabad Deccan Cigerette Factory v. The State of Andhra Pradesh, (17)
S.T.C. 624, held inapplicable.                                           H
    724                      SUPREME COURT REPORTS            [1994] SUPP. 5 S.C.R

A          CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4734/84 Etc.
    Etc.

        Appeal by Special Leave from the Judgment and Order dt. the 2nd
    March, 1983 of·the High Court of Judicature at Bombay in Sales Tax
    Reference No.68of1979.
B
           K. Madhava Reddy and A. S. Bhasme for the Appellant.

         Joseph Vellapally, A. K. Verma and Puneet Tyagi for JBD and Co. for
    the Respondents.

           The Judgment of the Court was delivered by
c
         B.P. JEEVAN REDDY, J. A common question arises in the appeal
    and the Special leave petition. Leave granted in the Special leave petitions.

         The assessee is common in all the appeals, for the sake of convenience
    we shall refer to the facts in the Civil Appeal 4734 of 1984 which pertains
D   to the assessment year 1967-68 (l.4.1967 to 31.3.1968). The matter arises'
    under the Bombay Sales Tax Act, 1959.

         The assessee is a manufacturer of biscuits, it is a registered dealer both
    under the Bombay Sales Tax Act, 1959 and the Central Sales Tax Act,
    1956. The biscuits manufacture by the respondent are sold in tins. In
E   respect of the biscuits sold outside the city the respondent includes the cost
    of tins in which the biscuits are sold but insofar as the city of Bombay and
    its suburbs are concerned, with which sales alone we are concerned herein
    the respondent followed a different practice. While selling the biscuits in
    tins, it collected the price of biscuits alone and so far ~s the tins in which
    biscuits were sold, it took a refundable d<::posit with the stipulation that if
F   the tin is returned within three months in good condition, the deposit shall
    he returned. These deposits .vere credited to "Deposit account returnable
    Tins." The Tins so supplied to purchasers were shown as the stock or.the
    respondent- assessee in its account book; but debited in the customer's
    account, but debited in the customer's account. When the tins were
    returned, a reversal entry was made in both the accounts, Sales Tax was
G
    charged only on the sale price of the biscuits but not on the deposit received
    in respect of the tins. Indeed in respect of city of Bombay and its suburbs a
    separate price list was issued by the respondent. The price list carried an
    endorsement. The deposit of Rs. 5.50 for LB tins and Rs. 3.50. for LS tins
    will be charged at the time of supply, which will be refunded on return of
H   tins in good condition within 3 months from date of supply". In the invoice
      STATE v. THE BRITANNIA BISCUITS [B.P. JEE''.<\N REDDY, J.)           725

issued by the respondent, there was separate column sbwing the number of          A
tins supplied to the purchase and the amount of deposit received from him
in ·that behalf. At the top of the invoice the following endorsement
occurred; "Dealers are informed that Company's liability to refund the
value of returnable tins extends only up to three months from the date of the
invoice". It has however been found by the High Court that notwithstanding
the endorsement on the price list as well as on the invoice, the respondent       B
was in fact receiving the tins retUl::1ed even after the expiry of three months
and refunding the deposit amount.

     For the assessment year 1967-68, the respondent received a total
deposit amount of Rs.12,97,299.05 paise. Out of the said amount,
Rs.11,29,202.00 paise was refunded to the customers on receiving back the C
tins. At the end of the accounting year, a balance of Rs. 1,68,027 .05 paise
was left outstanding. As per the accounting practice followed by the
respondent in this behalf, the assessee wrote off 50 per cent of this amount-
viz, Rs 84.013 reducing the corresponding tins stock account to that extent.
The said. amount was treated as a trading receipt and was transferred to
P&L account. This amount represented the value of the tins which the D
respondent thought were not likely to be returned. The bafonce amount of
Rs 84, 013 was shown as the value of the closing stock of tins (and was
shown as the opening balance in the next year's account).

     In the assessment proceedings relating to the said assessment year, the
Assessing Authority included the sum of Rs 84, 013 (the amount written off        E
by the respondent in the tin stock account and transferred to its P and L
account) in its taxable tum over. He treated the said amount as the sale
price ~f tins not returned. The said inclusion was questioned by the
respondent in appeal ~efore the Assistant Commissioner of Sales Tax. The
appeal was dismissed. The respondent carried the matter in Second Appeal
to the tribunal. The Bench which intiaily heard the appeal referred the           F
following question to a larger Bench :

                ''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 assessess and not returned by the       G
                customers dur'ing the period of assessment in question".

     The Special Bench of the Tribunal answered the question in favour of
the Revenue and against the Respondent following which the respondent's
appeal was dismissed. At the instance of the respondent; the Tribunal
referred the following question for the opinion of the High Court: "whether       H
    726                     SUPREME COURT REPORTS            [1994] SUPP. S S.C.R

A   on the facts and circumstances of the case, the Tribunal was justified in law
    in holding that the book eritry of Rs. 84,013 representing 50 per cent of the
    closing balance of the tin deposits left on 31.3.68 written off from the
    account stock of tins on the probable non return of the tins by the customer
    constitutes "sale price"?

B        The High Court was of the opinion that the arrangement between the
    respondent and the purchasers (from the city of Bombay and its suburbs)
    was one of bailment insofar as tins were concerned and not a transaction of
    sale. It held that according to the said arrangement "there is an obligation
    on the assessees (respondent) to accept the tins returned and a
    corresponding obligation on the customer to return the tins". Accordingly it
c   held that "the amount of deposit in the hands of the assessee company at the
    end of the Assessment year which is written off the assessees on a national
    basis cannot be treated as price of tins sold and is no exigible to Sales Tax".
    The High Court did observe that the manner in which accounts are
    maintained by the assessee or entries are made in their account books is not
    conclusive of the matter and that the true nature of the transaction has to be
D   determined on the basis of the precise arrangement between the parties. It
    referred to various decisions of the High Court cited by both the sides and
    distinguished them holding that the d1:cision in each of those cases turned
    upon the precise terms of arrangement /agreement between the parties. Iri
    particular it distinguished the decision of the very Court (Goa Bench) in
    Mis Ar/em Breweries Ltd. v. The Assistant Commissioner of Sales Tax.
E
    Panaji reported in (53) S.T.C 172 on the ground that in that case "the terms
    of the sale.did not contain any obligation on the purchaser to return bottles
    nor was there any time prescribed for such return. The payment of deposit
    for bottle in advance was term of the sale. The petitioner had also no
    ~ontrol over the return of the bottles . which would be sold by the
F   wholesellers to retailers and by the retailers to consumers." Inasmuch as the
    Bench found in the present case that the purchaser was under an. obligation
    to return the tins within three m~nths, it held the situation was different
    from the once considered in Ar/em Breweries.

          Mr. K. Madhava Reddy, learned counsel for the appellant State
G submitted that the High Court was not right in holding that in this case,
    there was an obligation upon the purchaser to return the tins within three
    months. From the endorsements on the price list and invoice, no much
    obligation can be inferred. The return of the tins lay within the discretion
    and pleasure of the purchaser. Even the time limit of three months was not
    observed in practice, inasmuch as the tins returned even after 'the exprry of
H   three months were taken back and deposit amount refunded. Learned
       STATE v. THE BRITANNIA BISCUITS [B.P. JEEVAN REDDY, J.]             727

counsel submitted that in fact there was a sale of the tins alongwith the         A
biscuits and when the tins were returned and the deposit amount refunded
by the respondent. It was a case of a purchase of tins by the respondent. In
short, the learned counsel commended the approach and reasoning of the
Tribunal for our acceptance. On the other hand Shri Joseph Vellapally,
learned counsel for the respondent assessee submitted that the transaction
between the appellant and the purchaser was one of bailment and nor of            B
sale. There was no sale of tins, the tins supplied to the purchasers continued
to be the property of the assessee and ~ey were shown as the stock of the
assessee in their account books. At the end of the accounting year, half the
amount of deposit representing the unreturned tins was written off did not
represent the sale price of tins inasmuch as there was no sale of tins. At the
most it can be treated as a compensation of damages for breach of the             C
obligation lying on the purchaser to return the tins. Whatever may be the
nature of the said amount appropriated, it certainly was not the sale price of
tins. If so no Sales Tax can be levied upon the said amount. Learned
counsel also pointed out that the approach and reasoning adopted by the
Assessing Authority and the First Appellant Authority is different from the
approach and reasoning adopted by the Tribunal. According to the former,          D
the sale of tins took place when the assessee made the entries at the end of
the accounting year debiting the sum of Rs 84, 013/ from "deposit account
returnable tins." According to the said authorities the said writing off and
transferring of the said amount to the P and L account as a trading receipt
constituted the sale of tins which the assessee concluded would not be            E
returned. They did not proceed on the basis that there was a sale of tins in
the first intance followed by a buy back of the same by the respondent
when the tins were returned. However, when the matter reached the
Tribunal, it adopted a different approach. According to the Tribunal, it was
a case of sale of tins in the first instance and when the tins were returned by
the purchaser it was a case of purchase of tins by the respondent. The            F
difference between the two figures , to the extent written off by the
appellant was treated as a trading receipt and as part of the respondent's
turnover of sales.

     The true nature of the transaction has to be decided in this case on the
following material : the endorsements on the price lists as well as the G
invoices issued by the respondent ; the city of Bombay and its suburbs,
Invoice showed sale of biscuits only and not of tins: that sale tax was
charged only on the sale price of biscuits and that a refundable deposit was
collected for the tins supplied. The manner in which entries were made by
the respondent in its account books including the tin stock deposit account
are also said to be relevant facts ; there is also the finding that the appellant H
    728                     SUPREME COURT REPORTS            [1994] SUPP. 5 S.C.R

A   used to refund the deposit even in cases where the tins were returned after
    the expiry of three months. Yet another relevant fact as that in respect of .
    half of sales, tins were also sold alongwith the biscuits and that only in case
    of sales in Bombay and its suburbs that this different practice was being
    followed. It is on the above material that we have to determine the question
    at issue. But before we do that, it would be appropriate to refer to a few
B   relevant provisions in the Bombay Sales Tax Act. The expression "sale" is
    defined in clause (28) of Section 2 in the following words.

                    "(28) "sale" means a sale of goods made within the State
                    for cash or deferred payment or other valuable
                    consideration, and includes any supply by a society or club
c                   or an association to its members on payment of a price of
                    fees or sub-scription, but does not include a mortgage,
                    hypothecation, charge or pledge; and the words "sell",
                    "buy" arid "purchase" "with all their grammatical
                    variations, and cognate expressions, shall be construed
                    accordingly;"
D
                    (The remaining point of the definition is omitted as
                    unnecessary.)

        The expression "sale price" is defined in clause (29) in the following
    words;
E
                    "(29) "sale price means the amount of valuable
                    consideration paid or payable to a dealer for any sale made
                    including any sum charged for anything done by the dealer
                    in respect of goods at the time of or before delivery thereof,
                    other than [the cost of insurance for transits or of
F
                    installation.] when such cost is seperately charged;

                    Explanation for the purposes of this clause, the amount of
                    duties levied or leviable on goods under the Central Excise
                    and Salt Act, 1944 or the Customs Act, 1962 or the Bombay
G                   Prohibition Act, 1949 shall be deemed to be part of the sale
                    price of such goods, whether such duties are paid or payable
                    by or on behalf of the seller or the purchaser or any other
                   ·person."

         The expression "turnover of sales" is defined in clause (36) which 'runs
H   thus;
      STATE v. THE BRITANNIA BISCUITS [B.P. JEEVAN REDDY, J.]              729

                "(36) "Turnover of sales" means one aggregate of the              A
                amount of sales price received and receivable by a dealer in
                respect of any sale of goods made during a given period
                after deducting the amount of sale price, if any refunded by
                the dealer to a purchaser, in respect of any goods purchased
                and returned by the purchaser wi.thin the prescribed period
                and includes;                                                     B
         (i)    the amounts received or receivable during the given period
                in respect of goods delivered on or after the commencement
                of the Bombay Sales Tax (Amendment and validating
                Provisions Act, 1985 on hire purchase or any system of
                payment by instalments; and                                C
         (ii)   where the registration certificate is cancelled, the amount, in
                receipt of sale made before the date on which the
                cancellation become effective received or receivable after
                such date; and"
                                                                                  D
    Section G is the main changing section. According to sub-section (1)
thereof the liability to pay tax under the Act is on the turnover of sales and
turnover of purchases of a dealer.

     We agree with Mr. Vellapally, learned counsel, for the respondent that
there is a difference in the approach adopted by the Assessing and the First E
appellate authorities and the approach adopted by the Tribunal. While the
former held that the sale of tins took place when the respondent made the
entries in its account books at the end of the accounting year writing off
half the balance amoun~ outstanding in the tin stock account, the Tribunal
has understood the transaction between the parties as involving a sale of
tins alongwith the biscuits and held that when the tins were returned and the F
deposit refunded by the respondent, it was a case of purchase of tins by the
respondent. But what is of interest to note is that the question which was
referred by the Tribunal for the opinion of the High Court seems to reflect
the approach adopted by the assessing and the first appellate authorities
rather than the approach adopted by the Tribunal. In fact, if the approach G
and reasoning of the Tribunal is accepted, the question referred by the
Tribunal for the opinion of the High Court cannot be said to arise from the
order of the Tribunal within the meaning of Section 31 of the Bombay Act
and need not be answered. The proper course··-:-vhich is indeed the course,
adopted by the High Court is to take the question as stated and to answer it,
keeping aside the interpretation placed by the Tribunal upon the transaction. H
      730                     SUPREME COlJ1lT REPORTS           (1994] SUPP. S S.C.R

A In other words, we have to and we do proceed to answer the question
      accepting the approach and reasoning adopted by the as~essing authority
      and the first appellate authority. A reading of the Judge of the High Court
      establishes beyond doubt that it has proceeded on this basis alone. Indeed, it
      may not have been open to the Tribunal to make out a new case not put
      forward either by the Assessee or by the Assessing Authorities. We shall,
B     therefore, take the basis adopted by the assessing and the first appellate
      authoritie.s for det~rmining the question arisen herein.

           We also agree with the High Court that the question whether there has
      been a .sale of tins at ·the end of the accounting year or along with the
      biscuits themselves has to be determined on the precise terms of the
c     transaction between the respondent and its customers and that on this aspect
      the manner in which the respondent maintained its accounts or made entries
      therein is not very much relevant.

          The first question to be answered in this case is whether there was an
     obligation upon the purchaser to return the tins or was it a case where the
 D return or non return of the tins lay within the discreti<>n and pleasure of the
   . purchaser on the price list nor the endorsement on the invoice can be said to
     create an obligation to return. All that the endorsement on the price list says
     is that the deposit will be refunded on the return of the tins in good
     condition within three months. Similarly the endorsement on the invoice
     stated that the company's liability to return the value (note the word
     'value') of returnable tins extends only upto three months. Of course a
     finding has been recorded. that in practice the respondent was not adhering
     to the said time limit. But it cannot be said that either the aforesaid
     endorsements or the said practice of the respondent created an obligation
     upon the customer to return the tins. It was left to his choice. If he thought,
 F it would be more advantageous to him to. return the tins and get back the
     deposit amount, he could do so. On the other hand, if he found it more
     advantageous to retain the tins and forego the dei)osits, it was equally open
     to him not to return the tins. (It is probably in view of this situation that the
     Tr.tbunal understood and interpreted the transaction as involving a sale of
     tins alongwith the biscuits themselves, and a case of purchase of tins by the
·G respondent when it received back the tins and refunded .the deposit.)
           It must be remembered that sales of the' respondent were spread all
      over the country and the normal practice was'to sell the tin alongwith the
      biscuits contained therein and that it was also the most convenient and
      cheap method of selling the biscuits by the respondent. The sales within the
 H    City of Bombay and its suburbs represented only a small portion of its total
      STATE v. THE BRITANNIA BISCUITS [B.P. JEEVAN REDDY, J.]              731

volume of sales. It is only in the case of this small portion of its sales that   A
the respondent followed a differed practice aforesaid. Another circumstance
to be kept in mind. In this behalf is that the deposit amount stipulated,
received and kept by the respondent was always a little higher (by 20 as we
shall indicate later) than the value of the tin. May be, this was done to
induce the customer to return the tin, or may be the respondent was careful
enough to provide the consequences of non- return, including the                  B
possibility of the transaction being treated as a sale and taxed as such. The
fact remain that when the tin was not returned, the said deposit was treated
as a trading receipt by making necessary· entries in its books treating 20 %
of the deposit amount as profit. In all these circumstances, we are unable to
agree with the High Court that the transaction/ arrangement/understanding
between ·the parties created an obligation upon the purchaser/ customer to        C
return the tins. Mr. Joseph Vellapally, submitted that inasmuch as all the
tins supplied to the purchasers were treated as the stock of the respondent in
its account books, it must be presumed that the purchasers were in custody
of the respondent's property which they were obliged in law to return.
Acceptance of this contention, in our opinion, amount to attaching undue
importance to the entries in the account books of the respondent and to           D
ignoring the true nature of the transaction.

    It may also be noticed theory of bailment put forward by the
respondent is in the opinion, not very accurate. Once it is held that there
was no obligation to return the tins, the theory of bailment falls to the
ground. It would then not be a case where some property of the respondent         E
was entrusted to the purchasers/customers with stipulation that they should
be returned .or otherwise disposed of according to the directions of the
respondents, within the meaning of Section 148 of the Contract Act, which
defines the expression "bailment". The definition reads;

                "a bailment is the delivery of goods by one person to             F
                another for some purposes, upon a contract that they shall,
                when the purpose is accomplished, be returned or otherwise
                disposed of according to the directions of the person
                delivering them. The person delivering the goods is called
                the 'bailor.' ·Tue person to whom they are delivered is
                called the bailee."                                               G
     In our opinion, the transaction in question is neither a bailment nor a
pledge. It was a composite transaction. It was to start with an entrustment
which could result in a sale of tins in case of non return of the tins. While
entrusting the tins, the respondent took care to stipulate and receive the
value of the tins and a little more to the precise 20 %. If the tin was           H
    732                     SUPREME COURT REPORTS             (1994] SUPP. 5 S.C.R

A   returned, well and good the transaction remained one of entrustment. But if
    not returned within 3 months, it became a sale as per the terms of the
    trans&ction. The fact that the respondent was receiving back the tins even
    after the expiry of three months and returning the deposit was more by way
    of grace probably a business decision rather than a matter of right or an
    obligation.
B
        We must at this stage, refer to Section 24 df the Sale of Goods Act,
    1980. It reads:

             "24.   Goods sent on approval or "on sale or return". When goods
                    are delivered to the buyer on approval or "on sale or return"
                    or other similar terms, the property therein passes to the
c                   buyer .................. ·

             (a)    When he signifies his approval or acceptance to the seller or
                    does any other act adopting the transaction:

             (b)    if he does not signify his approval or acceptance to the
D                   seller but retains the goods without giving notice of
                    rejection, then, if a time has been fixed for the return of the
                    goods, on the expiration of such time, and if no time has
                    been fixed, on the expiration of a reasonable time."

         Section 24 has to be read along with sub section (3) of Section 19
E   which says that "unless a different intention appears, the rules contained in
    Section 20 to 24 are rules for ascertaining the intention of the parties as to
    the time at which the property in the goods is to pass to the buyer. Section
    24 appears to be practically in the same terms as Section 18 of the English
    Sale of Goods Act 1979 which itself is but a repetition of the common law
    rule to that effect. The law in this behalf is stated in Halsbury Laws of
F   English IVth Edn, vol.41 Para 727 in the following words:

                    "727. when property passes. Unless a different intention
                    appears, when goods are delivered to the buyer on approval,
                    or on sale or return, or other similar terms, the property in
                    the goods passes to the buyer when he signifies his approval
                    of acceptance to the seller or does any other act adopting
G                   the transaction; and if he does not signify his approval or
                    acceptance to the seller but retains the goods without giving
                    notice of rejection then, if a time has been fixed for the
                    return of the goods, on the expiration of that time and, If no
                    time has been fixed, on die expiration of a reasonable time.
                    What is a reasonable time is a question of fact."
H
           STATE v. THE BRITANNIA BISCUITS [B.P. JEEVAN REDDY, J.]           733

                    In para 728, it is stated:                                     A

                    "728. Similar tenns. A delivery of goods is not made on
                    tenns similar to a delivery on approval or on sale or return
                    unless the effect of the transaction is that the bailee has the
                    option of becoming the owner of the goods and on terms
                    substantially the same as those already mentioned ....... "     B
          The principle of Section 24 inter alia is that where the goods .are
     delivered to the buyer on tenns similar to the delivery of goods on approval
     or "on sale or return", the property in the goods therein passes to the buyer,
     if he does not signify his approval or acceptance and also does not return
     the goods with in the time prescribed therefore. According to the said C
     principle, the position of the purchaser, until he returns the goods within the
     prescribed period, is that of a bailee and on the expiry of the said period, he
     becomes a purchaser. Where, however, the person to whom the goods are
     delivered is under an obligation to return the goods, there is no question of
     sale ever coming into being and the person to whom the goods are
     delivered remains a bailee. The transaction herein is in its nature nearer to D
     the situation contemplated by a."ld to the principle of Section 24 inasmuch
     as the tins were delivered to the buyer with the stipulation that if he returns
     the tins in which the biscuits were sold in good condition within three
     months, he will get back the deposit kept by him in that behalf. 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. As stated above, the E
     customer was under no obligation to return, as explained hereinbefore; he ·
     had a right to return the tins in good condition within three months.
     Correspondingly, the respondent assessee was under an obligation· to refund
     the deposit amount if the tins were returned within three months in good
     condition; after the expiry of three months. The respondent was under no
     such obligation though it may be that for his own business or other reasons, F
     he may yet accept the return of the tins and refund the deposit.

,.
                                       "
          Mr. Vellapally, Learned counsel for the Respondent submitted that for
     constituting the "sale price" as defined by the Act, there must be a specific
     sale of goods to a specific buyer and that on the approach adopted by the
     Assessing authority and the first appellate authority (whereunder, sale of G
     tins is held to have taken place at the end of the accounting year, when the
     Respondent made the entries i.n his books, no such specificity is
     identifiable. In the absence of such identification of the sale and the
     purchaser, the learned counsel submitted, the "sale price" cannot be
     ascertained. The said contel)tion is unacceptable in the facts of this case. H
     734                     SUPREME couR:r REPORTS           [1994] SUPP. 5 S.C.R

 A   From the facts set out in the judgment of the High Court. It appears that
     each customer/purchaser (evidently all of them were whol~sellers) had an
     account with the respondent and when a particular number of tins were
     supplied to a customer, an entry was made to that effect in that customer's
     account in the account books of the respondent besides making an entry in
     the other relevant account books of the respondent. It is further recorded in
 B   the judgment that when the customer returned the tins, a reverse entry was
     made in the customer's account as well as in the relevant account books of
     the assessee. If so there could be no difficulty in identifying the customer
     who failed to return the tins. The submission of Mr. Vellapally is thus
     without a factual foundation.

 c        To test the validity of the contention urged by Mr Vellapally, we put
     him a straight question. viz., if the deposit amount appropriated by the
     respondent to its P and L account, treating it as a trading receipt, is not a
     sale price, then what is its nature ? The answer of the learned counsel was
     that it is compensation or damages for breach of obligation, to return the
     tins by the purchaser/customer. But once we hold that there was no such
 D   obligation, then the said trading receipt cannot be anything but sale price.
     No other label could be suggested for it.

          Mr. Vellapally relied upon the decision of this Court in Raj Shee/ and
     Others, Etc. Etc. v. State ofA.. P. and Anr. Etc. Etc., [1989] 3 SCR, 305. In
     support of his propositions. The said decision lays down, following the
 E   earlier decision of this Court in Hyderabad Deccan Cigarette Factory v.
     The State of Andhra Pradesh, (17) S.T.C.624 that the question whether
     there was a sale of container alongwith the contents is not a question of law
     but one of fact and that said question has to be dt'-cided in each case having
     regard to the facts of that particular case. But while detennining this
     question the Court should not be led away by the inanner in which the
.F   assessee has made entries in its own accounts books but must look to the
     substµice of the transaction and decide what in· truth and in reality it
     amounts to. This is the approach and opinion both of the High Court as well
     as the Special Bench of the Tribunal. As held by us hereinbefore, this was a
     composite transaction ; ir. case of non return of the tins within three months
     it became a sale of the unreturned tins.
 G
            We may mention in this connection that the decision of the Bombay
     . High Court (Goa Bench) in Ar/em Breweries referred to and distinguished
       in the judgment under appeal has been noticed by this Court in Raj Sheet.
       In our opinion, just as in Arlem Breweries. In this case too, payment of_ an
 H     amount for the bottles in advance (called deposit) was a tenn of the sale.
         STATE v. THE BRITANNIA BISCUITS [B.P. JEEVAN REDDY, J.)         735

     We do not think it necessary to refer to various decisions of the High A
Court referred to in the judgment under appeal or to other decisions brought
to our notice for the reason that each of those cases turned upon the terms
and the language of the arrangement/transaction between the parties. We
reiterate that the question arising herein is not a pure question of law; it is a
mixed question oflaw and fact.
                                                                               B
     For the above reasons the appeals are allowed and the judgment of the
High Court is set aside. The question referred to the High Court is answered
in the affirmative i.e. in favour of the revenue and against the assessee.
There shall be no orders as to costs.

v.s.s.                                                     Appeals allowed.