Recycling of empty beer bottles liable to commercial tax: SC

NEW DELHI: Beer and liquor manufacturers procuring empty bottles from scrap dealers to refill and sell the intoxicants are in for a few hiccups as the Supreme Court ruled that brewers and distillers are liable to pay purchase tax on procurement of empty bottles.
The manufacturers, including Mohan Breweries and Distilleries Ltd, had challenged the decision of the Tamil Nadu Commercial Tax Officer to impose purchase tax on empty beer and Indian Made Foreign Liquor bottles from unregistered dealers on the ground that these bottles were not part of the manufacturing process. What the law mandated was that purchase tax was leviable on any item "consumed", "used", or "otherwise" in the manufacture of beer or IMFL.
The brewers and distillers argued that the bottles were recycled after use by consumers and were refilled with beer and IMFL. A bench of Justices A M Khanwilkar and Dinesh Maheshwari had to look up dictionaries as much as law to examine threadbare the meaning of the words 'use', 'consume' and 'or otherwise' to arrive at a conclusion that empty bottles procured from dealers for reuse in bottling beer and IMFL were liable for purchase tax.
Given the staggering number of bottles used annually by the liquor industry, the revenues of the state governments would see an increment by this ruling. Writing the 102-page judgment for the bench, Justice Maheshwari agreed with the manufacturers that bottles are neither consumed nor used in the brewing of beer or distilling of IMFL.
But, the provision covering "or otherwise" remained an insurmountable legal hurdle for the breweries and distilleries to escape purchase tax on procurement of empty bottles for rebottling of beer and IMFL. The bench said, "Obviously, these words 'or otherwise' are intended to convey that not only the activities envisaged by "consumed' or 'used', but even other activities covered thereunder. It cannot be said that bottles in question have not been 'used otherwise'."
As per the tax assessees, the cost of bottles was Rs 35.69 per case (12 bottles) against manufacturing cost of beer of Rs 109.93 per case, that is 32%. In the case of IMFL, the cost of bottles was 28% of the manufacturing cost of liquor.
The bench said, "The fact that bottles in question have indeed been used by the assessee in its overall activity of manufacture and sale of liquor is clear from the fact that the manufacture of liquor by the process of brewing or distillation did not conclude the activities of the assessee."
"Undoubtedly, for the sale of such manufactured liquor to Tamil Nadu State Marketing Corporation, the assessee is required to put the same into the bottles and the sale by the assessee could have taken place only after such bottling of liquor. The assessee has, undisputedly, undertaken the process of bottling by the use of goods in question, that is, the empty bottles purchased from unregistered dealers," it said and hence, held them liable to pay purchase tax on procurement of empty bottles.