2010 (7) TMI 885 - HC - VAT and Sales Tax

Whether on true and correct interpretation of rule 42-I of the Bombay Sales Tax Rules 1959 the Tribunal is justified in refusing to grant set-off on purchase tax levied under the Bombay Sales Tax Act 1959 in respect of purchases of gold which was used in the manufacture of mangalsutra when the mangalsutra is covered by Schedule entry A30 appended to the Bombay Sales Tax Act 1959 for the assessment period April 1 1990 to March 31 1991 though subsequently referred in rule 42-I with notification dated May 1 1992? Held that - The words for any period will bring within itself the period prior to the date of insertion of entry relevant to mangalsutra. The entry relating to mangalsutra was no doubt inserted with effect from May 1 1992 but manufacture thereof and use of gold therein could be prior to the amendment. In order to cover such cases of manufacture the words for any period appear to have been used in the subject rule and were retained even after amendment. Therefore in our considered view the gold used in manufacture of mangalsutra prior to the date of amendment will also be entitled for set-off. In the above view of the matter the question referred is answered in the negative i.e. in favour of the assessee and against the Revenue.

Summary

Issues:
Interpretation of rule 42-I of the Bombay Sales Tax Rules, 1959 regarding the grant of set-off on purchase tax for gold used in the manufacture of mangalsutra exempted under the Bombay Sales Tax Act, 1959 for the assessment period April 1, 1990 to March 31, 1991.

Analysis:
The case involved a dispute over the grant of set-off on purchase tax for gold used in manufacturing mangalsutra, which was exempted under the Bombay Sales Tax Act. The applicant-assessee contended that the set-off should be allowed as the mangalsutra was exempted both before and after the amendment of rule 42-I. On the other hand, the respondent argued that the set-off was wrongly granted as the gold was purchased before the amendment, making it ineligible for set-off. The Tribunal reduced the set-off, leading to the applicant's appeal.

Upon examination, the Court focused on the interpretation of rule 42-I of the BST Rules, effective from September 1, 1990. The rule allowed set-off for goods purchased after a certain date if used in manufacturing taxable goods for sale. The original Schedule A exempted mangalsutra from tax, and an amendment in May 1992 included mangalsutra in the rule, keeping the words "for any period" intact.

The Court analyzed the legislative intent behind the amendment and the notification dated May 1, 1992. While the amendment did not explicitly state retrospective effect, the retention of "for any period" in the rule indicated a broader scope. Referring to legal precedents, the Court concluded that the words "for any period" encompassed the period before the amendment, allowing set-off for gold used in manufacturing mangalsutra even pre-amendment.

In light of the above interpretation, the Court ruled in favor of the assessee, holding that the gold used in manufacturing mangalsutra before the amendment was entitled to set-off. The decision favored the applicant and went against the Revenue's contention.