PEPSICO INDIA HOLDINGS LTD.versusCOMMISSIONER OF TRADE TAX, LUCKNOW, U.P.

•                      [2011] 4 S.C.R. 723


                PEPSICO INDIA HOLDINGS LTD.                       A
                                V.                      '
       COMMISSIONER OF TRADE TAX, LUCKNOW, U.P.
              (Civil Appeal No. 2926 of 2011)
                          APRIL 5, 2011
                                                                  B
              [DR. MUKUNDAKAM SHARMA AND
                     ANIL R. DAVE, JJ.]

        UP. Trade Tax Act, 1948:
                                                                  c
      s.8(1) and its Explanation, s.8(18) - Interest on delayed
 payment of tax - Whether payable as per s.8(1) or as per
 s.8(18) - Held: If tax is admittedly payable and is not paid,
 the same becomes payable along with interest as mentioned
 in s.8(1) - Once it is. confirmed by the Court that the tax is 0
 payable under the Act, it would be covered within the definition
 of the term "the tax admittedly payable" as defined in the
 explanation to s.8(1) and, in case, the tax had not been paid
 then the same becomes payable along with interest as
 mentioned in s.8(1) - Provisions of sub-section (18) of s.8 E
 would come into operation only if the ·case is not covered
·under sub-section (1) of s.8 - In the instant case, assessee
 disputed its liability to pay tax on the glass bottles and crates
 used for beverages sold by it - However, it had itself
 mentioned in its accounts the turnover in respect of rent
 charged by distributors of glass bottles and crates - The said F
 issue was decided in the case of Asiatic Gases Ltd. wherein
 it was held that tax was payable on rentals charged in respect
 of containers for goods that cannot be sold without containers
 - Thus, interest is payable in terms of sub-section (1) of s.8
 and not in terms of sub-section (18) of s.8.                      G
         s.8(1) - Interest on delayed payment of tax - Whether
    payable from the {late whfin the tax became due and payable
    or from the date of the assessment order - Held: Where a
                               n3                                 H
    724     SUPREME COURT REPORTS                  [2011] 4 S.C.R.
                                                                        •
A dealer fails to pay tax at the correct rate because he claimed
    not to know the revision in the rate, the dealer remains liable
    to pay interest at a penal rate uls. 8 (1) from the date when the
    tax became due and payable - In such a case, the dealer
    cannot claim that he is liable only from the date of the
s   assessment order fixing the correct rate of tax.

       s. 3-F - Rent charged in respect of glass bottles and
  crates us~d for beverages sold by assessee - Liability to pay
  sales tax on - Held: Glass bottles and crates constitute an
  integral part of the beverages and they together with the
C contents therein are a "composite personality" and constitute
  "goods" liable to sales tax - Sales tax.

      Words and phrases: Expression "the tax admittedly
  payable" - Meaning of, in the context of s.8(1) of the U.P.
D Trade Tax Act.

       The appellant was engaged in the manufacturing and
  selling of the beverages and owned bottling plants in the
  State of Uttar Pradesh. The dispute pertained to the trade
E tax payable on its turnover of ? 8.54 crores in respect of
  rentals by distributors of glass bottles and crates for the
  assessment year 1999-2000. The appellant disputed the
  tax liability on such turnover as well as the interest, as
  according to them no tax was payable on the rental of
  glass bottles and crates as the same did not amount to
F a transfer of right to use the goods for value or
  consideration under section 3-F of the U.P. Trade Tax Act.
  However, the said submission was negated by the first
  and second appellate authority as well as, on revision, by
  the High Court.
G
         The issue as to whether there was transfer of rights
    of users by the assessee when he realized rental charges
    for glass bottles and crates was dropped by the assessee
    as, in the intervening period, the issue was finally settled
H
•   PEPSICO INDIA HOLDINGS LTD. v. COMMNR. OF TRADE 725
                     TAX, LUCKNOW
    by judgment of Supreme Court in *Asiatic Gases Ltd.            A
    wherein it was held that the containers constituted an
    integral part of t.he commodities in question and the
    container together. with the contents therein was a
    ''composite personality" and constituted "goods" eligible
    to sales tax. The only issue which was under                   B
    consideration in the instant appeal .was whether the
    appellant was liable to pay .interest on the delayed
    payment of tax under Section 8(1) of the U.P. Trade Tax
    Ac! i.e. @ 2% per mensem from the date the tax was due
    or under Section 8(1 B) i.e. 1.5% per mensem from the          c
    date of the assessment order and demand notice.

        Dismissing the appeal, the Court

         HELD: 1. The explanation to the sub-section (1) to
    section 8 of the U.P. Trade Tax Act clearly defined the        D
    term "the· tax admittedly payable" and illustrates the
    situations in which the tax would be deemed to be
    admittedly payable, which are: (i) The tax which is
    payable under this Act on the turnover of sales, as the
    case may be, the turnover of purchase, or both, as             E
    disclosed in the accounts maintained by the dealer; (ii)
    The tax admitted by the dealers in any return or
    proceeding under this act, whichever is greater; (iii) If no
    accounts were maintained, then according to the estimate
    of the dealer and includes the amount payable under            F
    section 3-B or sub-section (6) of section 4-B.
    Undisputedly in the instant case, the appellant had
    themselves mentioned in their accounts the turnover in
    respect of rentals by distributors of glass bottles and
    crates. However, the appellant had disputed that the said      G
    turnover was liable to tax under the Act. The issue was
    finally settled by judgment of Supreme Court in *Asiatic
    Gases Ltd. Once it is confirmed that the tax is payable
    under the Act, the same becomes payable from the date
                                                                   H
    726     SUPREME COURT REPORTS                [2011] 4 S.C.R.
                                                                    •
A when it was due and not from the date when the judicial
  verdict was pronounced (unless and until, in a case, the
  court specifies a particular date from which it shall be
  payable). Thus, once it has been confirmed by the Court
  that the tax is payable under the Act, it would be covered
B within the definition of the term "the tax admittedly
  payable" as defined in the explanation to section 8(1) and,
  in case, the tax had not been paid then the same
  becomes payable along with interest as mentior:ied in
  section 8 (1) of the Act. Provisions of sub-section (1 B) of
c section 8 of the act will come into operation only if the
  case is not covered under sub-section (1) of section 8 of
  the Act. The opening word.s of the said sub-section (1 B)
  states "if the tax, other than the tax referred to in sub-
  section 1, assessed by the assessing authority is not
  paid". As in the present case the tax becomes admittedly
0
  payable once it has been held that the tax is payable
  under the Act, the interest would be payable in terms of
  sub-section (1) of section 8 of the Act and not in terms
  of sub-section (1 B) of Section 8 of the Act. [Paras 11, 12,
E 14,15,16) [730-G-H; 731-A-D; F-H; 732-A-B, DJ
      2. Where a dealer fails to pay tax at the correct rate
  because he claimed not to know the revision in the rate,
  the dealer remains liable to pay interest at a higher rate,
  penal rate under section 8 (1) from the date when the tax
F became due and payable. In such a case, the dealer
  cannot claim that he is liable only from the date of the
  assessment order fixing the correct rate of tax. Similarly,
  in case where the dealer has taken a chance and it has
  been held that the tax is payable under Act, the same
G becomes payable from the date when it was due. [Para
  17] [732-E-G]
        *State of Orissa and another v. Asiatic Gases Ltd. (2007)
    5 SCC 766; Aggarwal Bros. v. State of Haryana (1999) 9 SCC
H
•   PEPSICO INDIA HOLDINGS LTD. v. COMMNR. OF TRADE 727
                     TAX, LUCKNOW
    182; Commissioner of Sales Tax v. Qureshi Crucible Centre            A
    1993 Supp (3) SCC 495 - relied on.

                          Case Law Reference:
        (2007) 5 sec 766             relied on            Para 4
                                                                         B
        (1999) 9 sec 182             relied on            Para 4
        1993 Supp (3) sec 495 relied on                   Para 17

        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    2926 of 2011.              ·          ·                              c
         From the Judgment & Order dated dated 10.12.2007 of
    the High Court of Allahabad, Lucknow Bench, Lucknow in Trade
    Tax Revision No. 181 of 2007.

        Shyam Divan, Ananya Kumar, Anku( Saigal, Gaurav                  D
    Singh, Bina Gupta for the Appellant.

        Krishna Venugopal, Gunnam Venkateswara Rao, Manoj
    Dwivedi for the Respondents.

        ~he Judgment of the Court was delivered by                       E

        DR. 'MUKUNDAKAM SHARMA, J. 1. Leave granted.

         2. The present appeal arises out of the judgment dated
    10.12.2007 passed by the learned Single Judge of the High
                                                                         F
    Court of Allahabad (Lucknow Bench) whereby the learned
    Single Judge has dismissed the tax revision filed by the
    Appellant under section 11 of the U. P. Trade Tax Act
    (hereinafter referred to as "the Act") impugning the judgment
    dated 14.8.2007 passed by the Trade Tax Tribunal, Lucknow            G
    rejecting the second appeal of the appellant/assessee.

         3. Various issues were raised before the Tribunal as well
    as the High Court with respect to the liability of the appellant/
    assessee to pay tax which, in nutshell, are as follows: -
                                                                         H


                                                                    .f
    728          SUPREME COURT REPORTS               [2011] 4 S.C.R.

A         (i)      That there is no transfer of rights of users by the
                   assessee when he realized rental charges for glass
                   bottles and crates.
          (ii)     The forums did not consider the terms of the
                   agreemenUcontract between the assessee and his
B                  selling agents/consumers.
          (iii)    The interest charge on the tax could not have been
                   charged under Section 8(1) as the case falls under
                   Section 8(1 B).
C       4. However, in the present appeal the issues Nos. (i) and
  (ii) were dropped by the appellant as, in the intervening period,
  the above said two issues were finally settled by the judgment
  of this court in the case of State of Orissa and another v.
  Asiatic Gases Ltd. (2007) 5 SCC 766. In the said case this
D court held that the previous decision of this Court in Aggarwal
  Bros. v. State of Haryana (1999) 9 SCC 182, is fully applicable
  to rentals charged in respect of the containers for goods that
  cannot be sold without containers. This court held that the
  containers constitute an integral part of the commodities in
E question and the container together with the contents therein
  is a "composite personality" and constitutes "goods" eligible to
  sales tax.
       5. Accordingly, the only issue which requires consideration
  in the present appeal is whether the appellant is liable to pay
F interest on the tax due under Section 8 (1) of the Act i.e. @ 2
  % per mensem from the date the tax was due or under Section
  8 (1 B) i.e. @ 1.5 % per men sum from the date of the
  assessment order and demand notice.
       6. The High Court and the other forums below, for the
G reasons mentioned therein, have held that the appellant is liable
  to pay interest on the delayed payment of tax under section 8
  (1) of the Act (i.e. @ 2 % per mensem from the date of filing of
  returns). Whereas, it is the appellants case that the interest is
  payable as per section 8 (1 B) of the Act (i.e. @ 1.5 % per
H mensum from the expiration of the date mentioned in the
•    PEPSICO INDIA HOLDINGS LTD. v. COMMNR. OF TRADE 729
        TAX, LUCKNOW [DR. MUKUNDAKAM SHARMA, J.]

    assessment order which in the present case is March 15,                   A
    2002).
          7. As a short question is involved we need not mention the
    facts of the case in great detail. In brief the facts leading to the
    filing of the present appeal are that the appellant is engaged
    in the manufacturing and selling of the beverages and is having           B
    bottling plants in the state of Uttar Pradesh. The dispute pertains
    to the trade tax payable on its turnover of Rupees 8.54 crores
    in respect of rentals by distributors of glass bottles and crates
    for assessment year 1999-2000. The appellant disputed the
    liability to pay tax on such· turnover as well as the interest, as        C
    according to them no tax is payable on the rental of glass
    bottles and crates as the same did not amount to a transfer of
    right to use the goods for value or consideration under section
    3-F of the Act. However, the said submission was negated by
    the first and second appellate authority as well as, on revision,         D
    by the High Court. As mentioned hereinabove, the challenge
    to the liability to pay tax was dropped by the appellant in the
    light of the judgment passed by this Hon'ble court in Asiatic
    Gases Ltd. case (supra).
             8. We heard the learned counsel appearing for both the           E
      parties and perused the record. It was submitted by the learned
      senior counsel appearing for the Appellant that as it was the
      bonafide belief of the appellanVassessee that they were not
      liable to pay tax on the turnover realized as rental from the
      bottles and crates, therefore, the tax should be charged only           F
      from the date of the assessment order and not from the date
      of filing of the returns. It was further submitted that section 8 (1)
      of the Act only becomes applicable when the assessee had
      admitted its tax liability in its accounts or its return and as the
      appellanVassessee had disputed the liability to pay tax and             G
      raised a bonafide dispute they would not be liable to pay
      interest under Section 8 (1) of the Act. Resultantly, interest, if
      any, can only be charged under Section 8 (1 B) which covers
    · the cases which does not fall within the ambit of Section 8 (1)
      of the Act.                                                             H
    730          SUPREME COURT REPORTS               [2011] 4 S.C.R.


A      9. All the abovesaid contentions were negated by the
  counsel appearing for the respondent and it was submitted that
  after disclosing the turnover in its accounts a dealer cannot run
  away from his liability to pay tax by raising false and frivolous
  dispute. In case, if he does so then he will be liable to pay penal
8 rate of interest under section 8 (1) of the Act.

         10. Section 8 (1) of the act, prior to its amendment in 2002,
    is reproduced below:

          "8. Payment and recovery of tax:
c
          (1) The tax admittedly payable shall be deposited within
          the time prescribed or by the thirty-first day of August,
          1975, whichever is later failing which simple interest at the
          rate of 2 per cent per mensem shall become due and be
D         payable on the unpaid amount with effect from the day
          immediately following the last date prescribed or till the
          date of payment of such amount, whichever is later and
          nothing contained in section 7 shall prevent or have the
          effect of postponing. ihe liability to pay such interest.
E         Explanation: - For the purposes of this sub-section, the tax
          admittedly payable means the tax which is payable under
          this Act on the turnover of sales or, as the case may be,
          the turnover or purchases, or of both, as disclosed in the
          accounts maintained by the dealer, or admitted by him in
F         any return or proceeding under this Act, whichever is
          granted, or, if no accounts were maintained then according
          to the estimate of the dealer and includes the amount
          payable under Section 38 or sub-section (6) of section
          48."
G
         11. The explanation to the said subsection clearly defines
    the term "the tax admittedly payable" and illustrates the situation
    in which the tax would be deemed to be admittedly payable,
    the same are as follows: -
H          (i)     The tax which is payable under this Act on the
•    PEPSICO INDIA HOLDINGS LTD. v. COMMNR. OF TRADE 731
        TAX LUCKNOW [DR. MUKUNDAKAM SHARMA, J.]

                   turnover of sales, as the case may be, the turnover       A
                   of purchase, or both, as disclosed in the accounts
                   maintained by the dealer.

           (ii)    The tax admitted by the dealers in any return or
                   proceeding under this act, whichever is greater.
                                                                             B
           (iii)   If no accounts were maintained, then according to
                   the estimate of the dealer and includes the amount
                   payable under section 3-B or subsection (6) of
                   section 4-B.
                                                                             c
           12. It is not in dispute in the present case that the appellant
     has themselves mentioned in their accounts the turnover in
     respect of rentals by distributors of glass· bottles and crates.
     However, the appellant has disputed that the said turnover is
     liable to tax under the Act.                                            o
           13. The question that emerged for adjudication before
    • forum and Court below was that whether the tax is payable
      under the Act on the turnover from rentals of glass bottles and
      crates. The Court has answered the question in affirmative and
      confirmed that on such turnovers the tax will be payable under         E
      the Act.

           14. The appellant had taken the chance to get a judicial
     verdict on the said issue. Once it has been confirmed that the
     tax is payable under the Act, the same becomes payable from             F
     the date when it was due and not from the date when the judicial
     verdict was pronounced (unless and until, in a case, the court
     specifies a particular date from which it shall be payable).
     Thus, once it has been confirmed by the Court that the tax is
     payable under the Act it would be covered within the definition         G
     of the term "the tax admittedly payable" as defined in the
     explanation to section 8 (1) and, in case, the tax had not been
     paid then the same becomes payable along with interest as
     mentioned in section 8 (1) of the Act.

          15. Provisions of subsection (1 B) of section 8 of the act         H
    732       SUPREME COURT REPORTS                   (2011] 4 S.C.R.


A   will come into operation only if the case is not covered under
    subsection (1) of section 8 of the Act. The opening words of
    the said subsection (1 B) states "if the tax, other than the tax
    referred to in subsection 1, assessed by the assessing authority
    is not paid". The said subsection is reproduced herein below
B   for reference: -

          "Section 8(1 B) - If the tax, other than the tax referred to in
          sub-section (1), assessed by any Assessing Authority is
          not paid within the period specified in the notice of
          assessment and demand referred to in sub-section (1-A),
c         simple interest at the rate of one and half per cent per
          mensem on the unpaid amount calculated from the date
          of expiration of the period specified in such notice shall
          become due and be payable."

D        16. As in the present case the tax becomes admittedly
    payable once it has been held that the tax is payable under the
    Act, the interest would be payable in terms of subsection (1)
    of section 8 of the Act and not in terms of subsection (1 B) of
    Section 8 of the Act.
E      17. This court in the case of Commissioner of Sales Tax
  v. Qureshi Crucible Centre, 1993 Supp (3) SCC 495 has held
  that where a dealer fails to pay tax at the correct rate because
  he claimed not to know the revision in the rate, the dealer
  remains liable to pay interest at a higher rate, penal rate under
F section 8 (1) from the date when the tax became due and
  payable. In such a case, the dealer cannot claim that he is liable
  only from the date of the assessment order fixing the correct
  rate of tax. Similarly, in case where the dealer has taken a
  chance and it has been held that the tax is payable under Act,
G the same becomes payable from the date when it was due.

        18. Accordingly, the present appeal dis"1issed but without
    any orders as to costs.

H D.G.                                             Appeal dismissed.