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2015 (11) TMI 260 - HC - VAT and Sales TaxDisallowance of set-off on purchases of goods for scientific research and development - purchases of cement used in the foundation of plant and machinery - Rule 41D of the B.S.T Rules - Held that:- what Rule 41D provides for is a drawback, set-off of a tax paid by a manufacturer in respect of purchases made on or after the notified day. The language is that in assessing the amount of tax payable in respect of any period by a Registered dealer who manufactures goods for sale or export, the claimant/dealer can claim set-off and the Commissioner shall allow in respect of purchases made by such claimant dealer on or after the notified day, of any goods specified in entry 6 of Schedule 'B' and in Schedule 'C' and used by him within the State. The rule does not stop here. It goes on further to say that the set-off is admissible if the purchased goods are used by the claimant dealer within the State in the manufacture of goods [not being kerosene] for sale, which manufactured goods are in fact been sold by him or exported or in the packing of the goods so manufactured. The set-off is subject to reduction specified in sub-Rule (3). First Appellate Authority was concerned with a set-off on purchases of scientific equipments and other materials which are used for research and development purposes. - set-off can be claimed and granted provided the manufacturer sells the goods manufactured by using the goods purchased and during the assessment year or period in question. It is in that period and if at all the conditions under this sub-rule are satisfied that this set-off is admissible. Once it is found that the goods brought in are not used in the manufacture of goods for sale and which goods have in fact been sold by the dealer or exported by him or in the packing of the goods so manufactured, then, there was no scope for any such set-off. In the case of set-off under Rule 41D of purchase of cement the Tribunal as also the First Appellate Authority found that the cement may have been brought in and purchased for the purposes of strengthening the foundation of the manufacturing plant and the manufacturing plant may have been used in the manufacture of goods sold, still, the cement brought in was not used for such purpose. The cement was not used during the course of the manufacture of goods but substantial portion of this cement was used for construction of staff quarters etc. That had nothing to do with the manufacturing activity. The cement brought in having no direct connection with the manufacturing activity that the Tribunal and the First Appellate Authority concluded that no set-off is admissible in terms of the rule and as it stands. - Decided against assessee.
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