1981 (2) TMI 216 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of rule 41-A of the Bombay Sales Tax Rules, 1959 regarding set-off of taxes paid on purchases of machinery.
2. Whether machinery used partly for manufacturing taxable goods for sale and partly for job-work on behalf of others qualifies for full set-off.

Analysis:
The judgment pertains to the interpretation of rule 41-A of the Bombay Sales Tax Rules, 1959 concerning the set-off of taxes paid on the purchase of machinery. The respondents, manufacturers of nuts and bolts, claimed set-off for the tax collected by vendors on the machinery purchased during specific periods. Initially, the Assistant Commissioner of Sales Tax allowed the set-off, but the Deputy Commissioner revised the order, granting set-off only for a portion of the claimed amount. The dispute was whether the machinery, partly used for manufacturing taxable goods for sale and partly for job-work on behalf of others, qualified for full set-off.

The Tribunal, in response to the reference made by the Commissioner of Sales Tax, considered the issue. The rule in question allowed a dealer to claim set-off if the purchased goods were used in the manufacture of taxable goods for sale. The goods in question fell under a specific entry in the Act and were used for manufacturing taxable goods within Maharashtra. The key contention was whether the goods had to be manufactured for sale by the purchasing dealer or could be manufactured on behalf of others for sale by them.

The judgment referenced a previous decision by a Division Bench of the High Court in a similar matter, which concluded that the relief claimed under the rule was available to a dealer using purchased goods for manufacturing goods for sale by themselves or on behalf of others. This interpretation was crucial in determining that the respondents were entitled to the full amount of set-off claimed, as upheld by the Tribunal. Additionally, an amendment to the rule clarified that the goods manufactured had to be sold by the purchasing dealer to qualify for set-off.

In conclusion, the Court answered the question in favor of the respondents, affirming their entitlement to the full set-off amount. The department was directed to pay the costs of the references to the respondents. The judgment clarified the application of rule 41-A in cases where machinery was used both for manufacturing taxable goods for sale and for job-work on behalf of others, ensuring a fair and consistent interpretation of the tax rules.