TMI Blog1992 (7) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the State which is attributable to the locally purchased raw material on which the appellants were claiming set-off? Held that:- Appeal dismissed. Failure to 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 abridgement 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 in which raw material was purchased within and outside the State. - Civil Appeal No. 800-803 of 1977, 3843-3850 of 1988, S.L.P. (Civil) No. 1377 of 1977, - - - Dated:- 30-7-1992 - RANGANATHAN S. AND JEEVAN REDDY B.P. JJ. D.N. Misra, Ravinder Narain and Bharat Sangal, Advocates, for the appellants. A.S. Bhasme, Sudhir Kulshrestre, T.V.S.N. Chari and M.N. Shroff, Advo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 unregistered 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 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 July 15, 1962. From this date onwards, it is rule 41A that operates. In respect of their assessment for the period January 1, 1960, to December 31, 1960, the appellant (manufacturing dealer) claimed set-off under rule 41 whereas for the period January 1, 1962, to Decemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be reduced by 1 per cent of the sale price of the goods so despatched: Provided further that if the dealer shows to the satisfaction of the Commissioner that not more than 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." "41A. 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)].- (1) In assessing the amount of tax payable in respect of any period by a registered dealer who manufactures taxable goods for sale or export (hereinafter 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 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. This is the result flowing from a combined reading of clause (e) of rule 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vanced before us by the respondents. Even viewed from the angle of ordinary legal notions, it is obvious that what is in fact are despatched by the manufacturing dealer are the finished goods. The raw materials 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of 1977: 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing with V. Ramaswami and S.C. Agrawal, 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 materials 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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