Full Judgment Text
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PETITIONER:
GODREJ & BOYCE MFG. CO. PVT. LTD. AND ORS. ETC. ETC.
Vs.
RESPONDENT:
COMMISSIONER OF SALES TAX AND ORS. ETC. ETC.
DATE OF JUDGMENT30/07/1992
BENCH:
JEEVAN REDDY, B.P. (J)
BENCH:
JEEVAN REDDY, B.P. (J)
RANGNATHAN, S.
CITATION:
1992 AIR 2078 1992 SCR (3) 683
1992 SCC (3) 624 JT 1992 (4) 317
1992 SCALE (2)107
ACT:
Bombay Sales Tax Rules, 1959-Rules 41, 41-A-Set off-
Claim by assessee-Legislative intention of.
Bombay Sales Tax Rules, 1959-Rule 41(iii) Explanation,
Proviso and Rule 41-A(y)-Set off under-One per cent-
Calculation of.
Bombay Sales Tax Act, 1959-Section 61(2)-Reference-
Whether constitutionality of a rule can be questioned-Rules,
41, 41A of the Bombay Sales Tax Rules, 1959-Validity of.
HEADNOTE:
The facts in all the appeals - (C.A.No. 803/1977 C.A.
Nos.800-01 of 1977; 3843-47/1983; and 3849-50/1988 were
identical and common question arose.
C.A.No.803 of 1977
The appellant was a registered dealer under the Bombay
Sales Tax Act, 1959 and it engaged in the manufacture of
products, like chocolate, drinking chocolate, cocoa, etc.
During the assessment years it purchased raw material,
packing material and containers both within the State as
well as outside. In respect of the raw material, packing
material etc. purchased from registered dealers the
appellant paid purchase tax to them. On the raw material
etc. purchased from un-registered dealers, the appellant
paid the purchase tax directly to the Government. The goods
manufactured by the apllellant were liable to sales tax,
when sold within the State.
Rule 41 and Rule 41A of the Bombay Sales Tax Rules,
1959 enable the manufacturing dealer to claim set-off of the
tax paid by him on the purchase of raw materials from out of
the tax payable by him on the sale of goods manufactured
from out of the said raw material. The rules further
provide that in respect of manufactured goods despatched by
the manufacturing dealer to his own place of business or to
his agent outside the State
684
and actually sold there, the amount of set-off shall be
reduced by one per cent of the sale price of the goods so
despatached. Applying said rule the assessing authorities
made a deduction of one per cent of the sale price of the
goods despatched and sold outside the State of Maharasthra.
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The petitioners’ case was that the raw material, out of
which he manufactured the goods, was purchased not only
within the State of Maharashtra but also outside the State
of Maharashtra. Similarly the goods manufactured by him
were sold not only within the State of Maharashtra but also
outside of the State of Maharashtra. In such a situation,
making a deduction of one per cent of the sale price of the
manufactured goods despatched and sold outside the State of
Maharashtra amounts in effect to levy of sales tax on
purchase of raw material effected outside the State of
Maharashtra. He also contended that it also amounts the
levy of sales tax on goods sold outside the State of
Maharashtra. He pleaded for allocation of sale price in
proportion in which raw material was purchased within and
outside the State.
Under section 61(2) of the Bombay Sales Tax Act the
following two questions were referred to the High Court:
(1) Whether on the facts and in the circumstances of
the case, the Tribunal was correct in law in holding that
for the purpose of reducing set-off under clause (iii) of
the Proviso to Explanation to Rule 41 of the Bombay Sales
Tax Rules, 1959, one per cent, should be calculated not on
the entire sale price of the goods despatched by the
appellants to their branches, but only on that part of the
sale price of the goods sold outside the State which is
attributable to the locally purchased raw material on
which the appellants were claiming set off?
(ii) Whether on the facts and in the circumstances of
the case, the Tribunal was correct in law in holding that
for the purpose of reducing set-off under clause (iii) of
the Proviso to Explanation to Rule 41 and clause (y) of the
proviso to the Explanation to Rule 41A of the Bombay Sales
Tax Rules, 1959, one per cent shall be calculated not on the
entire sale price of the goods despatched by the appellants
to his branches, but only on the part of the sale price of
the goods sold outside, the State which is attributable to
the locally purchased raw material on which the appellants
were claiming set off?
685
The High Court answered the reference against the
assessee-appellant. The appellant-assessee challenged the
judgment of the High Court in this Court by filling the
appeal by special leave.
The appellants reiterated the contentions urged before
the High Court. They submitted that the deduction of one
per cent, in effect, amounts to taxing the raw material
purchased outside the State or to taxing the sale of
finished goods effected outside the State Maharashtra.
SLP (C) No. 1377/77
The assessment period was April 1, 1957 to March 31,
1958. During this period the Rule in force was Rule 11,
which too provided for a benefit accompanied by a deduction
as was provided by Rule 41. The petitioner contended that
the position under Rule 11(1A) was not different from the
one obtaining under Rule 41; that in case the rule was
interpreted in the manner done by the High Court, it would
expose it to the vice of unconstitutionality; that the said
deduction in effect amounted to levy of sales tax on
purchases made outside the State of Maharashtra and had the
effect of impinging upon the charging provisions of the
Act.
Dismissing the appeals of the assessee, this Court,
HELD : 1.01. The intention of the rule making
authority is to provide a relief to the dealers so that
ultimately the benefit should percolate to the consumer
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public. A manufacturing dealer pays purchase tax when he
purchases raw material and he is again obliged to pay the
sales tax when he sells the goods manufactured by him out of
the said raw material. Tax on both the transactions has the
inevitable effect of increasing the price to the consumers
besides adversely affecting the trade. It is for this
reason that the Rules 41 and 41A of the Bombay Sales Tax
Rules, 1959, enable the manufacturing dealer to claim set-
off of the tax paid by him on the purchase of raw materials
from out of the tax payable by him on the sale of goods
manufactured from out of the said raw material. [691G-692A]
1.02. The purport of Rules 41 and 41A is inter alia
this: in respect of manufactured goods despatched by the
manufacturing dealer to his own place of business or to his
agent outside the State and actually sold there, the amount
of set-off shall be reduced by one per cent of the sale
price of the goods so despatched. [692B]
686
2.01. The appellant (manufacturing dealer) purchases
his raw material both within the State of Maharashtra and
outside the State. In so far as the purchases made outside
the State of Maharashtra are concerned, the tax thereon in
paid to other States. The State of Maharashtra gets the tax
only in respect of purchases made by the appellant within
the State. So far as the sales tax leviable on the sale of
the goods manufactured by the appellant is concerned, the
State of Maharashtra can levy and collect such tax only in
respect of sales effected within the State of Maharashtra.
It cannot levy or collect tax in respect of goods which are
despatched by the appellant to his branches and agents
outside the State of Maharashtra and sold there. [692D-E]
2.02. In law (apart from Rules 41 and 41A) the
appellant has no legal right to claim set-off of the
purchase tax paid by him on his purchases within the State
from out of the sales tax payable by him on the sale of the
goods manufactured by him. It is only by virtue of the said
Rules, which, are conceived mainly in the interest of
public, that he is entitled to such set-off. It is really
a concession and an indulgence. More particularly, where
the manufactured goods are not sold within the State of
Maharashtra but are despatched to out-State branches and
agents and sold there, no sales tax can be or is levied by
the State of Maharashtra. The State of Maharashtra gets
nothing in respect of such sales. The rule-making authority
could well have denied the benefit to such out-State sale as
well, subject however to deduction of one per cent of the
sale price of such goods sent out of the State and sold
there. [693G-694A]
2.03. No valid grievance can be made in respect of such
deduction when the very extension of the benefit of set-off
is itself a boon or a concession. It was open to the rule
making authority to provide for a small abridgement or
curtailment while extending a concession. [694B]
3. There is no unconstitutionality in the rule, apart
from the fact that question of constitutionality may not be
open in a reference made under section 61(2) of the Bombay
Sales Tax Act. The said Rules do not provide for levy of
any tax as such. Their operation is limited to what they
say. [695H]
C.S.T. Bombay v. Bharat Petroleum Corporation Ltd.,
[1992] 1 SCR 807, distinguished.
687
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JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 800-
801 of 1977.
From the Judgment and Order dated 24.2.1976 of the
Bombay High Court in Sales Tax Nos. 59 and 60 of 1972.
WITH
CA Nos. 803/77, 3843-47/88 and 3849-50/88
D.N. Misra for the Appellants.
A.S. Bhasme and Bharat Sangal for the Respondents.
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J. Common questions arise in this
groups of civil appeals, for which reason they were heard
together and are being disposed of under a common judgment.
The judgments under appeal were rendered on references made
under section 61(2) of the Bombay Sales Tax Act, 1959. The
High Court has answered the questions referred against the
appellants-dealers and in favour of the Revenue. Hence,
these appeals by them. Since the facts in all the appeals
are idenctical, it is sufficient if we refer to the facts in
Civil Appeal No. 803 (N.T.) of 1977 (Cadbury Fry (India)
Private Limited v. Commissioner of Sales Tax and Anr.).
In Civil Appeal No.803/77, the following two questions
were referred for the opinion of the High Court under
Section 61(2) of the Act:
(i) Whether on the facts and in the circumstances of
the case, the Tribunal was correct in law in holding that
for the purpose of reducing set-off under clause (iii) of
the Proviso to Explanation to Rule 41 of the Bombay Sales
Tax Rules, 1959, one per cent, should be calculated not on
the entire sale price of the goods despatched by the
appellants to their branches, but only on that part of the
sale price of the goods sold outside the State which is
attributable to the locally purchased raw material on which
the appellants were claiming set off.
(ii) Whether on the facts and in the circumstances of
the case, the Tribunal was correct in law in holding that
for the purpose of reducing set-off under clause (iii) of
the Proviso to Explanation to Rule 41 and clause (y) of the
proviso the Explanation to Rule 41A of the Bombay Sales Tax
Rules, 1959, one per cent should be calculated not on the
entire
688
sale price of the goods despatched by the appellants to his
branches, but only on the part of the sale price of the
goods sold outside, the State which is attributable to the
locally purchased raw material on which the appellants were
claiming set-off."
The appellant, a registered dealer under the Act, is
engaged in the manufacture of various products such as
chocolate, drinking chocolate, cocoa etc, During the
assessment years concerned herein, it purchased raw
material, packing material and containers both within the
State of Maharashtra as well as outside. In respect of the
raw material, packing material etc. purchased from
registered dealers the appellant paid purchase tax to them.
In so far as such raw material etc. was purchased from un-
registered dealers, the appellant was liable to and did pay
the purchase tax directly to the Government. The goods
manufactured by the appellant are liable to sales tax when
sold within the State.
In exercise of the Rule-making power conferred by
Section 74 of the Act, Rules have been made by the
Government of Bombay. We are concerned in this case with
only two rules namely 41 and 41A. The purport of both the
Rules, in so far as it is relevant for the purposes of these
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appeals is concerned, is practically the same
notwithstanding a good amount of phraseological difference
between them. Rule 41 applies in respect of purchases made
by a ‘manufacturing dealer’ like the appellant up to 15th
July, 1962. From this date onwards, it is rule 41A that
operates. In respect of their assessment for the period
January Ist, 1960 to December 31, 1960 the appellant
(manufacturing dealer) claimed set-off under rule 41 whereas
for the period January Ist, 1962 to December 31st, 1962 be
claimed it under rule 41A.
Rule 41 and 41A provide for set-off of the purchase tax
paid by the manufacturing dealer on the raw material,
packing material etc. as against the sales tax payable on
the sale of the goods manufactured by him. It would be
appropriate at this stage to read both these rules, in so
far as they are relevant for our purpose:
41. "Drawback, set-off, etc. of tax paid by a
manufacturer (In respect of purchases up to
15.6.62). In assessing the amount of tax payable
in respect of any period by a Registered Dealer,
who manufactures taxable goods for sale
(hereinafter in this rule referred to as the
"Manufacturing dealer") the Commissioner shall
grant him a drawback, set off or as the case may
689
be, a refund of the aggregate of the following
same, that is to say:
(b)..........
(c)...........
(d)...........
(e) a sum recovered from the manufacturing dealer
by another Registered dealer by way of sales tax or
general sales tax or both, as the case may be, on
the purchase by him, of goods from such Registered
dealer, being goods specified in Schedule C to the
Act other than in entries 1 to 11 (both inclusive)
and 15 therein and in schedule D other than in
entries 1 to 4 (both inclusive) therein and in
Schedule E other than in entries 1 and 2 therein,
when the purchasing dealer did not hold a
Recognition or when the dealer held a Recognition
but affected the purchase otherwise than against a
certificate under section 12 of the Act; provided
that such goods are used by him in the manufacture
of taxable goods for sale or in the packingof
taxable goods manufactured by him for sale......
Explanation: For the purposes of this rule the word
"sale" with all its grammatical variations, shall
include the sale of manufactured goods (despatched
by the dealer in his own place of business or to
his agent outside the State and (actually sold
there).
Provided that where such despatch has been made to
his place of business or to his agent outside the
State but within India (i) such despatch shall have
taken place within nine months of the date of
purchase of the goods so used;
(ii) the dealer, of his manager or agent as the
case may be, is registered under the Central Sales,
1956, in respect of place of business of which the
goods are so despatched; and
(iii) the amount of drawback, set-off or refund as
the case may be, shall be reduced by 1 per cent of
the sale price of the goods so despatched.
690
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Provided further that if the dealer shows to the
satisfaction of the Commissioner that not more then
1 per cent of the total value of the finished goods
so despatched was comprised of goods in respect of
which the drawback, set off or refund is claimed,
the Commissioner shall not so reduce the amount of
drawback, set-off or refund."
"41-A (1) Drawback, set-off, etc. of tax paid by a
manufacturer in respect of purchases made [during
the period from 15th July 1962 to the day
immediately preceding the notified day (both days
inclusive) - In assessing the amount of tax payable
in respect of any period by the Registered dealer
[who manufactures taxable goods for sale or export]
(hereinafster in this rule referred to as the
"Manufacturing dealer"), the Commissioner shall, in
respect of the purchases made by such dealer
[during the period from 15th July 1962 to the day
immediately preceding the notified day (both days
inclusive)] of any goods specified in Schedule
B,C,D or E and used by him within the State in the
manufacture of taxable goods [which have, in fact,
been sold by him (and not given away as samples or
otherwise or which have been exported by him or
used by him in the packing of goods so
manufactured] grant him a draw-back, set-off, as
the case may be, a refund of the aggregate of the
following sums, that it to say:
(a) a sum recovered from the Manufacturing dealer
by other Registered dealers by way of sales tax, or
general sales or, as the case may be, both, on the
purchase by him from such Registered dealers, when
the Manufacturing dealer did not hold a Recognition
or when he held a Recognition but effected the
purchase otherwise than against a certificate under
sections 11 of the Act.
Explanation:- For the purposes of this rule, [the
expression ‘export’ shall include -]
(i) a sale in the course of inter-State trade or
commerce, or in the course of the export of the
goods out of the territory of India, where such
sale occasions the movement of the goods from the
State of Maharashtra, and
691
[(i-a) despatches made by the manufacturing dealer
to a person outside the territory of India, with a
view to selling the goods to the said person and
the said goods have actually been sold to him
within a period of three years from the date of
despatch, and]
(ii) despatches made by the Manufacturing dealer
to his own place of business or to his agent
outside the State and [which have, in fact been
sold (and not given away as samples or otherwise)
or used in the manufacture of goods which have in
fact been sold (and not given away as samples or
otherwise.)]
Provided that, where such despatch has been made
to his own place of business or to his agent,
outside the State but within India........
(Y) the amount of draw-back, set-off or as the
case may be refunds shall be reduced by a sum
calculated in accordance with the following
formula, namely:-
D multiplied by R
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-----------------
100
‘D’ means [the sale price of the goods despatched
which have in fact, been sold (and not given away
as samples or otherwise or the value of the goods
despatched for use in the manufacture of goods
which have, in fact, been sold (and not given away
as samples or otherwise) and ‘R’ means the rate of
tax in force on the sale at the time of despatch of
goods, in the course of inter-state trade or
commerce, of the same goods under section 8(1) or
as the case may be, section 8(2A), of the Central
Sales Tax Act, 1956;]....."
A reading of the Rules manifests the intention of the
rule making authority. It is to provide a relief to the
dealers so that ultimately the benefit should percolate to
the consumer public. A manufacturing dealer like the
appellant pays purchase tax when he purchases raw material
and he is again obliged to pay the sales tax when he sells
the goods manufactured by him out of the said raw material.
Tax on both the transactions has the inevitable effect of
increasing the price to the consumers besides
692
adversely affecting the trade. It is for this reason that
the aforesaid Rules enable the manufacturing dealer to claim
set-off of the tax paid by him on the purchase of raw
materials from out of the tax payable by him on the sale of
goods manufactured from out of the said raw material. The
Rule further provides - and it is that aspect which is
relevant in these appeals - that in respect manufactured
goods despatched by the manufacturing dealer to his own
place of business or to his agent outside the State and
actually sold there, the amount of set-off shall be reduced
by one per cent of the sale price of the goods so
despatched. This is the result flowing from a combined
reading of clause (e) of Rule 41 read with the Explanation
and the Proviso appended to the Explanation. Same is the
position flowing from the relevant portions of Rule 41A.
The contention of the appellant - which found favour
with the Sales Tax Tribunal - runs thus; the appellant
purchases the raw material required by him partly within the
State of Maharashtra and partly from other States.
Similarly, only a portion of the goods manufactured by him
is sold within the State of Maharashtra. Bulk of them is
sold outside the State of Maharashtra, though within the
Country. Rule 41 provides for setting off the purchase tax
paid by the appellant on the raw material purchased by him
within the State of Bombay. No set-off is given in respect
of the tax paid by the appellant on the purchases of the raw
material made by him outside the State of Maharashtra
evidently for the reason that such tax is paid to such other
States. In such a situation providing for deduction of one
per cent of the sale price of the goods despatched to
outside-State branches from out of the set-off amount is
unjust and impermissible. The manufactured goods came out
of the raw material purchased both within and outside
Maharashtra and not exclusively out of raw material
purchased within the State of Maharasthra. At any rate, the
Rules properly interpreted would mean that "the percentage
which was to so deducted was one per cent of the sale price
of the raw materials which had gone into the manufacture of
the finished goods (and of the containers and packing-
materials used in marketing the finished goods) and such
sale price was to be arrived at by a proportionate
allocation of the percentage which such raw materials
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(packing materials and containers) bore to the sale price of
the finished goods". (This is how the appellants’
contention is set out in the judgment of the High Court.)
Applying such a deduction to the entire sale price of the
manufactured goods sent to out-State branches, in effect,
amounts to levy of tax on the raw material purchased outside
the State or in any event amounts to levy of tax on sales of
finished goods effected
693
outside the State of Maharashtra which is clearly beyond the
competence of the State Legislature.
The High Court did not agree with the appellant. It
was of the opinion that "on a plain reading of the
Explanation and the first proviso thereto, it is not
possible to accept the contention advanced before us by the
respondents. Even viewed from the angle of ordinary legal
notions, it is obvious that what in fact are despatached by
the manufacturing dealer are the finished goods. The raw
material which have gone into manufacture of the said goods
are not despatched, some of them can no more be in existence
having been consumed in the process of manufacture and
others have completely altered in their composition, nature
and form and are no more raw materials preserving their
individuality in the form which they bore when they were
purchased. Similarly in the case of packing materials and
containers........ .
Sri Bobde appearing for the appellants reiterated the
contentions urged before the High Court. He submitted that
the deduction of one per cent, in effect, amounts to taxing
the raw material purchased outside the State or to taxing
the sale of finished goods effected outside the State of
Maharashtra. We cannot agree. Indeed, the whole issue can
be put in simpler terms. The appellant (manufacturing
dealer) purchases his raw material both within the State of
Maharashtra and outside the State. In so far as the
purchases made outside the State of Maharashtra are
concerned, the tax thereon is paid to other States. The
State of Maharastra gets the tax only in respect of
purchases made by the appellant within the State. So far as
the sales tax leviable on the sale of the goods manufactured
by the appellant is concerned, the State of Maharashtra can
levy and collect such tax only in respect of sales effect
within the State of Maharashtra. It cannot levy or collect
tax in respect of goods which are despatched by the
appellant to his branches and agents outside the State of
Maharashtra and sold there. In law (apart from Rules 41 and
41A) the appellant has no legal right to claim set-off of
the purchase tax paid by him on his purchases within the
State from out of the sales tax payable by him on the sale
of the goods manufactured by him. It is only by virtue of
the said Rules - which, as stated above, are conceived
mainly in the interest of public - that he is entitled to
such set-off. It is really a concession and an indulgence.
More particularly, where the manufactured goods are not sold
within the State of Maharashtra but are despatched to out-
State branches and agents and sold there, no sales tax can
be or is levied by the State of Maharashtra.
694
The State of Maharashtra gets nothing in respect of such
sales effected outside the State. In respect of such sales,
the rule-making authority could well have denied the benefit
of set-off. But it chose to be generous and has extended
the said benefit to such out-State sales as well, subject,
however to deduction of one per cent of the sale price of
such goods sent out of the State and sold there. We fail to
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understand how a valid grievance can be made in respect of
such deduction when the very extension of the benefit of
set-off is itself a boon or a concession. It was open to
the rule making authority to provide for a small abridgment
or curtailment while extending a concession. Viewed from
this angle, the argument that providing for such deduction
amounts to levy of tax either on purchases of raw material
effected outside the State or on sale of manufactured goods
effected outside the State of Maharashtra appears to be
beside the point and is unacceptable. So is the argument
about apportioning the sale-price with reference to the
proportion is which raw material was purchased within and
outside the State.
It is not necessary for us to discuss the position
obtaining under Rule 41A separately inasmuch as it is agreed
by the learned counsel for the appellant Sri Bobde that the
position obtaining under both the rules, in so far as the
aspect in controversy is concerned, is substantially the
same, notwithstanding the phraseological difference between
both the rules.
S.L.P. (C) No.1377/77:
Leave Granted
The period concerned in this appeal (by Hindustan Lever
Limited) is April 1, 1957 to March 31, 1958. During this
period the Rule in force was Rule, 11, which too provided
for a similar benefit accompanied by a deduction as is
provided by Rule 41. Sub-rule(1A), which alone is relevant
for our purpose, reads as follows:
"Grant of drawback, set-off or refund of sales tax
or general sales tax or purchase tax in certain
cases.
(1A) In assessing the amount of sales tax payable
by a registered dealer who manufactures or
processes or processes any goods for sale in
respect of any period, the collector shall grant
him a drawback, set-off or refund as the case may
be, of an amount
695
equal to the aggregate of the sums
(i) recovered from the dealer by other registered
dealers by way of sales tax or general sales tax;
(ii) calculated in the manner specified in sub rule
(1) of rule 11_A; and
(iii) payable as purchase tax under clause (a) of
section 10 of the purchase of such goods by the
dealer;
after deducting therefrom one per cent, and in the
case of goods falling under entry 23 or 24 Schedule
B to the Act, one quarter per cent of the sale
price of any goods manufactured or processed where
the sale of the goods takes place at any place in
India outside the State of Bombay, the goods having
been transported to such place on or after the Ist
day of July; 1957;
Provided -
(a) such goods have been used as raw materials
processing materials, fuel, lubricants, containers
or packing materials in the manufacture or
processing of any goods specified in entries 19 to
80 (both inclusive) of Schedule B to the Act for
sale;
(b) and the goods so manufactured or processed are
not the goods on the sale of which no sales tax is
payable under rule 5 or clause (i) of rule 7."
It is not suggested by Dr. Pal, the learned counsel for
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the petitioner that the position under Rule 11(1A) is in any
manner different from the one obtaining under Rule 41.
Besides reiterating the submissions made by the counsel for
the appellant inthe aforesaid group of appeals, Dr. Pal
submitted that in case the rule is interpreted in the manner
done by the High Court, it will expose it to the vice of
unconstitutionality. According to Dr. Pal too, the said
deduction in effect amounts to levy of sales tax on
purchases made outside the State of Maharashtra and has the
effect of impinging upon the charging provisions of the Act.
We are however, unable to see any unconstitutionality in the
rule apart from the fact that such a question may not be
open in a reference made under section 61(2) of the
696
Act. To put the matter beyond any doubt, Mr. Dholakia
appearing for the State of Maharashtra stated before us that
the State would never demand or recover any tax, on the
basis of or by virtue of any of the said Rules, which is not
otherwise due. Indeed, none of these Rules provide for levy
of any tax as such. Their operation is operation is limited
to what they say.
The counsel for the appellant relied upon the recent
decision of this court in Civil Appeal No.1031 of 1979 etc.
decided on February 18, 1992 by a Bench comprising one of us
Ranganathan, J. sitting with V.Ramaswami and S.C.Agarwal,
JJ. The said decision also deals with rule 41 but the point
arising therein was wholly different than the one concerned
herein. We may refer to the facts in Civil Appeal No.1031
of 1979 wherein the respondent was Bharat Petroleum
Corporation Limited. Its main activity was refining the
crude oil which belonged to another company. The
respondent-dealer agreed to refine the crude oil belonging
to such other company and to deliver the kerosene derived
out of it to it. That other company alone effected the sale
of such kerosene, and not the respondent-dealer. Sulphuric
acid was one of the raw material required by the respondent-
dealer, on purchase of which it paid tax. The process of
refining yielded acid sludge which was regularly sold by the
respondent dealer to its own purchasers. The respondent
dealer sought to set-off the purchase tax paid by it on
purchase of sulphuric acid from out of the sales tax payable
by it on the sale of acid sludge. This was denied by the
Revenue. It is this Controversy which came to this court.
On a literal reading of rule 41 and having regard to the
fact that acid sludge was regularly yielded by the
manufacturing process undertaken by the respondent-dealer
which was sold by it in its regular course of business, this
court held that the respondent-dealer was entitled to such
set-off. We are unable to see any bearing the said
principle has upon the issue in controversy in these
appeals.
For the above reasons, the Civil Appeals fail and are
dismissed with costs.
V.P.R. Appeals dismissed.
697