A recent Supreme Court ruling prevents Britannia Biscuits Co from recycling its tin containers. Ending what may have been an interesting environment-friendly scheme, the court ruled that the the recycling was a tax evasion measure. The renowned biscuit company had, some months ago, offered to -take back used tin containers from consumers. The scheme -- started in Bombay -- involved Britannia charging an additional deposit money over the marked price. This would be refunded to the consumers if they returned the old containers within 3 months.

However, the Maharashtra government appealed to the Bombay High Court that the company collected sales tax only on the sale price of the biscuits but not on the deposit received on the tins. The government's plea was that since a certain number of consumers never returned the tins, some of the deposits remained with the company at the end of the financial year.

The HC had ruled in favour of the company, but the Supreme Court upheld the government's contention that the company was indeed violating existing tax laws. In the last assessment year, of total tin deposits of Rs 12,97,229 received by the company, Rs 11,29,202 was refunded to customers.

Following its own accounting practices, the company wrote off 50 per cent of the deposit, putting the rest in the tin stock account. However, under the Bombay Sales Tax Act, the assessing authority included that balance in the company's taxable turnover.

This interpretation of the tax laws has forced the company to shelve its recycling programme. Observes legal commentator Krishan Mahajan, "The Supreme Court verdict shows how a decision on tax laws can defeat the constitutional aim of protecting the environment."