1974 (12) TMI 56 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of the term 'recovered' in rule 41-A(a) of the Bombay Sales Tax Rules, 1959.

The judgment by the Bombay High Court addressed three references under section 61(1) of the Bombay Sales Tax Act, 1959, concerning a common question of law. The references stemmed from the applicant's business of manufacturing edible oil and his purchase of groundnuts without the necessary declarations. The vendors charged tax at 1% instead of the required 2%, leading to a subsequent debit note for the additional tax. The applicant sought a set-off under rule 41-A(a) of the Bombay Sales Tax Rules, arguing that the tax was 'recovered' from him by the vendors. The lower authorities rejected this claim, prompting appeals up to the Sales Tax Tribunal. The central issue was the interpretation of the term 'recovered' in the rule.

The Court analyzed the relevant rule 41-A(a) which allowed for a set-off of tax amounts 'recovered' from a manufacturing dealer by other registered dealers. The applicant contended that the debit note constituted recovery, entitling him to the set-off. However, the Court disagreed, holding that 'recovered' implied actual payment in cash or adjustment against existing liabilities. The Court rejected the argument equating 'recovered' with 'charged separately or payable', emphasizing the necessity for actual payment to qualify as recovery. The judgment clarified that mere debit entries in account books did not constitute recovery under the rule.

Regarding costs, the Court noted the applicant's desire to withdraw the references, but the respondent's counsel urged for a decision on the merits. Ultimately, the Court decided that each party should bear their own costs due to the circumstances. The Court concluded by answering the reference question, affirming that 'recovered' in rule 41-A(a) meant actual payment and not just entries in account books.