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2015 (7) TMI 463 - BOMBAY HIGH COURT

2015 (7) TMI 463 - BOMBAY HIGH COURT - [2015] 83 VST 360 (Bom) - Set off claimed under Rule 41-D of the Bombay Sales Tax Rules, 1959 - The dealer is carrying on business of export of goods - tax paid on the consumables which were treated as components, parts and accessories of machinery - Whether the Tribunal was justified in confirming the reduction of set off by the Deputy Commissioner of Sales Tax by 1.5% by calculating the exports at 96.1% in place of 97.6% calculated by the Sales Tax Office .....

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se that the turnover of sales of the manufactured goods and intended for export and in fact exported consisted principally of sale of waste or scrap goods.

The words “consists principally of sales of waste or scrap goods” are completely ignored by both the Revisional Authority and the Tribunal. The dealer in this case has not been found to have principally dealt with waste or scrap goods. The exported goods were manufactured with the purchases of goods styled as raw materials that ha .....

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icer found that the dealer has not treated them as purchases of capital goods. - there is no discussion at all in both the orders as to why goods or assets were indeed not treated as capital assets by the dealer. The authorities ought to have indicated with clarity and precision as to what is meant by capital goods and which capital goods and of what description have been acquired.

We are of the opinion that the authorities have completely misread and misinterpreted the Rules and the .....

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r answer and opinion of this Court. They read as under : (1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in confirming the disallowance of set off claimed under Rule 41-D of the Bombay Sales Tax Rules, 1959, by the Deputy Commissioner of Sales Tax, by ₹ 1,22,267/- in respect of the tax paid on the consumables which were treated as components, parts and accessories of machinery by the Deputy Commissioner of Sales Tax ? (2) Whether the Tribunal was j .....

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to 31st December, 2003 with monetary ceiling of ₹ 1,32,48,400/-. The assessee is an export oriented unit certified by the Government of India. The Sales Tax Officer assessed the assessee for the period 1st April, 1999 to 31st March, 2000, and allowed full set off under Rule 41-D(3)(c)(ii) of the Bombay Sales Tax Rules, 1959, as the unit was an export oriented unit. The assessment resulted in refund in the sum of ₹ 15,67,499/-. The assessment under the Central Sales Tax Act, 1956, res .....

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re, he came to the conclusion that there was an excess set-off. He, therefore, revised that order by withdrawing the set-off in the sum of ₹ 34,501/- and consequential interest under section 36(3)(b) of the Bombay Act in the sum of ₹ 52,776/- also came to be computed. 4. It was also held by him that instead of deducting the set-off under Rule 41-D(3)(b) of the Bombay Rules, on the purchases of component parts and accessories at 4%, the set off was deducted at 3%. He, therefore, withd .....

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les was confirmed but the interest under section 36(3)(b) was deleted. That is how a Reference Application was filed but which came to be rejected by the Tribunal on 25th April, 2003. Thereafter, the assessee approached this Court and this Court directed that the Tribunal should refer the above two questions of law for opinion and answer by this Court. 5. It is in this background that the Reference was placed before us. 6. Mr. Surte appearing on behalf of the applicant submitted that the authori .....

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a very convincing answer given by the assessee inasmuch as the exports sales were substantial. What has been disposed of in the local market is scrap. That resulted from the manufacturing process itself. If any scrap or waste results and which is not a final product nor is the assessee dealing in scrap and waste materials then the language of the Rule ought to be borne in mind by the Tribunal. The Revisional Authority and the Tribunal, therefore, were in complete error in denying the relief. 7. .....

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ent case and insofar as the other aspect is concerned, viz. the second question, Rule 41-D(3)(b) covers parts, components and accessories of capital assets for retention. In the present case, the dealer has not disclosed or has not treated the goods as capital assets, but has treated them as consumables. That cannot change the nature of the same and even on the second question, this Court must confirm the concurrent findings and give its answer and opinion accordingly. 8. With the assistance of .....

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t dealer ) the Commissioner shall, in respect of purchases made by the 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; (i) in the manufacture of goods not being kerosene, for sale, which manufactured goods have in fact been sold by him or exported by him, or (ii) in the packing of goods so manufactured, grant him subject to the reduction specified in sub-rule (3), a draw-back, set-off, or as the cas .....

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the refund, shall not be granted on purchase of goods including capital assets effected prior to the 1st April 1998 and also in respect of capital assets on which depreciation has been earlier claimed by any other person or dealer and which have been purchased by the claimant dealer on or after the 1st April 1998. Provided also that, the claimant dealer shall not be entitled to claim any drawback, set-off or refund in respect of purchases of molasses and rectified spirit used by him in the manuf .....

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goods purchased against declaration in Form A1 in accordance with the entry 148 of Group A of Schedule appended to the notification issued under section 41 of the Bombay Sales Tax Act, 1959 (2) For the purpose of this rule the expression export shall include, - (i) a sale in the course of inter-State trade and commerce or in the course of export of the goods out of the territory of India, where such sale occasions the movement of the goods from the State, (ii) despatches made by the claimant dea .....

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him or will be used by him in the manufacture of goods which will in fact be sold by him and that he, his manager or, as the case may be, his agent is registered under the Central Sales Tax Act, 1956 (LXXIV of 1956) in respect of that place of business. (3) The aggregate of the sums referred to in subrule (1) shall be in respect of purchases made on or after the 1st April 1999 reduced by, - (a) 6 per cent of the purchase price representing the sums in respect of the goods which are despatched in .....

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e 30th September 1995, then as regards the first turnover of rupees twelve lakh in respect of the said purchase price if the turnover of all sales or, as the case may be, all purchases does not exceed rupees twelve lakh in the immediately preceding year; or (ii) if the claimant dealer is a 100 per cent Export Oriented Unit certified by the government of India, then in respect of the purchase price representing the sums corresponding to the sales covered by subsection (1) of section 5 of the Cent .....

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f surcharge i.e. 10% of the sales Tax applicable to the sales of the goods. T = Rate of Turnover Tax applicable to the sale of goods. RT = Rate of resale tax applicable to the resale of goods. Provided that, if the quantum of draw-back, set-off or as the case may be, refund, calculated in accordance with rule 44D read with this rule has been increased or reduced in accordance with the Second or Third proviso to rule 44D, then, the purchase price determined in accordance with the Table shall be i .....

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ioner that surcharge, turnover tax or as the case may be, resale tax is not included in the said purchase price, then the Commissioner may for the purpose of calculation as per formula given in the Table, exclude the component of surcharge, turnover tax or as the case may be, resale tax. (4) Nothing contained in sub-rule (1), (2) and (3) shall apply in respect of any purchases made by the claimant dealer where on an earlier transaction of purchases of these goods for use in the manufacture of go .....

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(by whatever name called); or (b) during the period on or after the 4th January 1972 upto the 2nd February 1983 by any manufacturing dealer other than any restaurant or eating house (by whatever name called), and the same sales are claimed as exempt under the provisions of sub-section (2) of section 6 of the Constitution (Forth-sixth Amendment) Act, 1982. 9. A bare perusal of this Rule would indicate that it deals with drawback, set-off etc. of tax paid by manufacturer in respect of purchases m .....

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pecified in Entry 6 of Schedule B and in Schedule C and used by him within the State in the manufacture of goods for sale which manufactured goods have in fact been sold by him or exported by him or in the packing of goods so manufactured, grant him, subject to reduction specified in sub-rule (3), a draw-back, set-off or as the case may be, a refund of aggregate of the sum determined in accordance with the provisions of Rule 44-D. 10. The fourth proviso to this sub-rule clarifies as to how the s .....

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and utilised them for manufacturing the finished product / the goods which came to be exported by him. That is how he approached the authorities. The refund was worked out by the Sales Tax Officer and when he arrived at the same, he considered the submission of the dealer regarding determination of percentage of export sales. He has specifically held that in the process of manufacture, scrap is generated which is sold locally and if the ratio of such sale is ignored then the determination of pe .....

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ffected during the period. Therefore, set-off under Rule 41-D was worked out by him. Then, he also arrived at the figure and for the purposes of Rule 41-D (3)(c). There, purchases of raw materials were referred to and he specifically termed them as hardware, packaging material, bearing etc. and full set-off was allowed by him. It is the Revisional Authority which reduced it in terms referred by us hereinabove. 12. The said reasoning of the Revisional Authority has been upheld by the Tribunal. Th .....

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y exported, then, the set-off has to be worked out inasmuch as export ought to be of finished goods. The percentage cannot be worked out on the basis of the material used in the manufacture of goods for export. That is how the Revisional Authority's conclusion came to be upheld. Then, the Tribunal concluded that the machinery parts and accessories do not get consumed in end product and, therefore, they cannot be called as consumables. Therefore, the parts and accessories of machinery have to .....

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k. There is no dispute in this case that the dealer purchased the goods and of the nature specified in the above Entry. There is no dispute that he is manufacturing goods for export. There is no dispute that the purchases were made by the dealer. Therefore, the reduction that is specified in sub-clause (3) is in relation to first 6% of the purchase price representing the sums in respect of the goods which are despatched in a manner referred to in clause (3) of sub-rule (2). In the present case, .....

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he State and thereafter he has to produce the requisite certificates. We are concerned in the present case with the proviso below clause (2) of sub-rule (1) of Rule 41-D where the Legislature has clarified that where the turnover of sale of such manufactured goods consists principally of sales of waste or scrap goods, then the claimant-dealer shall not be entitled to any drawback, set-off or as the case may be, a refund under this Rule. It is not the conclusion drawn by both authorities in the p .....

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en made by the dealer. In such circumstances, we do not see how the dealer was ineligible or not qualified for the refund under the Rule. A finding of fact, therefore, should have been rendered and in terms of this proviso. 14. Equally, on the second aspect, the disentitlement comes in the case of a dealer in respect of purchase of goods which are used by him in the manufacture of goods treated as capital assets by him or parts and components of such capital assets. The Sales Tax Officer found t .....

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r life is very limited for about 3 to 6 months. These were never treated by the dealer as capital assets. It is such a stand which came to be accepted by the Sales Tax Officer / Assessing Authority that the Revisional Authority interfered with. It found that retention of 4% of tax is required to be made in respect of goods which are treated as capital assets. It held that merely because the dealer has not treated the goods as capital assets but has treated them as consumables cannot change the n .....

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