State of Maharashtra v. Britannia Biscuit Co. Ltd.

State of Maharashtra v. Britannia Biscuit Co. Ltd.

1995 Supp (2) SCC 72


The respondents manufactured and sold biscuits in tins. In respect to the biscuits sold in Bombay and its suburbs, the assessee (respondents) charged only for the price of the biscuits. With regards to the tins, the respondents took a refundable deposit (which was 20% more than the actual cost of the tin), with the stipulation that if the tins were returned within a period of three months and in a good condition, the refundable amount would be returned. The assessee however, did not adhere to this, in practice, and accepted tins even after three months. As per its accounting practice the assessee wrote off 50% of the outstanding unrefunded deposit for the assessment year 1967-68 and treated 20% of the deposit amount as profit. The Assessing auth. treated this amount as sale price of unreturned tins and included the same in the taxable turnover of the assessee.

ISSUE: Whether there was an obligation upon the purchaser to return the tins or was it a case where the return or non-return of the tins lay within the discretion of the purchaser?


Lower Courts:  favoured Tax Authority.

The assessee’s appeal was dismissed by the First Appellate Authority and the Tribunal.

High Court (favoured Assessee)

  1. The HC held that the manner in which accounts are maintained or entries are made in the account is not conclusive of the matter and the true nature of the transaction has to be determined on the basis of the precise arrangement between the parties.
  2. The arrangement between assessee and purchaser was one of bailment and not of sale because of an obligation on the assessee to accept the tins returned and a corresponding obligation on the customer to return the tins.




  1. No such obligation (as observed by HC) can be inferred from the endorsement on the price list and invoice of the assessee.
  2. The return of the tin lay within the discretion of the purchaser as even the time-limit was not strictly observed in practice and hence the arrangement was one of sale and not bailment.


  1. The tins supplied to the purchasers continued to be the property of the respondents and they were shown as the stock of the respondents in their account books. Therefore, it was a case of bailment and not sale.
  2. The amount written off can be treated at the most as compensation or damages for breach of the obligation lying on the purchaser to return the tins.
  3. There is a difference of approach adopted by Assessing and the First Appellate Auth. 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 accounts at the end of the accounting year writing off half the outstanding balance amount, the tribunal understood it as sale of tins along with the biscuits and held that when the tins were returned and the deposit were refunded by the respondent, it was the case of purchase of tins by the respondent.
  4. For constituting the “sale price” as defined by SOGA, there must be a specific sale of goods to a specific buyer and that on the approach adopted by the assessing Auth. and the First Appellate Auth. no such specificity is identifiable and on such ground sale-price can’t be ascertained.


  1. (w.r.t. 1st observation of the HC) SC concurred to this point and said that court should not be led away by the manner in which the assessee has made entries in its own account but must look to the substance of the transaction and decide what in truth it amounts to.
  2. (w.r.t 1st issue and 2nd observation of the HC) Neither the endorsement on the price list nor the endorsement on the invoice can be said to create an obligation to return. Also, the time limit was not strictly adhered to.
  3. (w.r.t 1st & 2nd contention of the respondent) Once it is held that there was no obligation to return the tins the theory of bailment falls to the ground and the said trading receipt can’t be anything but sale price.
  4.  (w.r.t the 3rd contention of the respondent) Question which was referred by the tribunal for the opinion of the HC reflect the approach adopted by the Assessing and the First Appellate Auth. rather than the approach adopted by the tribunal.
  5. (w.r.t 4th contention of the respondent) It is unacceptable in the light of the facts that each customer had an account with the respondent and when a particular no. of tins were supplied to a customer, an entry was made to the effect in that customer’s account in the account books of the respondents besides making an entry in the other relevant account books of the respondent.

The transaction relates to s, 24 of the Sale of Goods Act as per which the position of the purchaser, until he returns the good within the prescribed period, is that of a bailee and on the expiry of the said period he becomes a purchaser.

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