2015 (10) TMI 213 - HC - VAT and Sales Tax

Disallowane of set off under rule 41D - Manufactured goods were used in works contract in other States, and were not sold in those States as contemplated by section 2(28) of the Bombay Sales Tax Act, 1959 - Drawback, set-off, etc., of tax paid by a manufacturer in respect of purchases made on or after the notified day. - Held that - Certificate is issued by his manager or as the case may be, his agent who declared, interalia, that the goods will be in fact sold by him or will be used by him in the manufacture of goods which will be in fact sold by him and that there is a registration in their favour under the Bombay Sales Tax Act, 1959 in respect of that place of business. Undisputedly, such certificate was produced. Once such a certificate was produced and export is defined inclusively to mean a dispatch as above, then, any larger controversy or wider question should not have been gone into and decided by the Tribunal at all. The reference to the circular was wholly unnecessary because the claimant/dealer can despatch the goods to his own place of business or his agent outside the State. He would be able to obtain the reliefs in terms of sub rule (1), provided certificate in form 31C is produced. - Admittedly, that certificate was produced and it contains the relevant particulars. Tribunal had before it the material that the branches of the claimant dealer were registered under the local Act as well as the Central Sales Tax Act, qua those States. The definition of sale in those States includes a works contract as defined in the law in force in those States. In such circumstances, the Tribunal was right in the conclusion it reached. We are of the opinion that the questions have been rightly decided. In the circumstances, the reference at the instance of the Revenue ought not to have been made to this court but having been made and we are called upon to decide, that we conclude that the Tribunal correctly read rule 41D and granted relief thereunder. The reference is, therefore, answered against the Revenue and in favour of the assessee.

Summary

Issues:
1. Interpretation of rule 41D(2)(iii) of the Bombay Sales Tax Rules, 1959 regarding set-off for manufactured goods used in works contract in other states.
2. Justification of allowing set-off under rule 41D when goods are not sold in those states as per the Bombay Sales Tax Act, 1959.

Issue 1:
The primary issue in this judgment revolves around the interpretation of rule 41D(2)(iii) of the Bombay Sales Tax Rules, 1959 concerning the entitlement to set-off for manufactured goods used in works contracts in other states. The Tribunal was tasked with determining whether the set-off was justified under the rule when the goods were not sold in those states as required by the Bombay Sales Tax Act, 1959. The dealer contended that the branches in Andhra Pradesh and Uttar Pradesh, where the goods were used in works contracts, were registered under local and Central Sales Tax Acts, and the definition of "sale" in those states included works contracts. The Tribunal, after considering the rule's language, the definition of "export," and a relevant circular, held that the set-off was permissible despite the works contract usage.

Issue 2:
The second issue delves into the justification for allowing the set-off under rule 41D despite the goods not being sold in the states where they were used in works contracts. The Revenue argued that the set-off should not have been granted as the goods were utilized in works contracts contrary to the certificate produced by the dealer. However, the Tribunal, supported by the dealer's advocate, maintained that the certificate's contents, which met the requirements of rule 41D, were conclusive for granting the set-off. The High Court concurred with the Tribunal's decision, emphasizing that the certificate's declaration that goods would be sold or used in manufacturing goods to be sold sufficed for entitlement to the set-off, regardless of the actual usage in works contracts.

In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue. The judgment highlighted the importance of adhering to the statutory provisions and the contents of the certificate in determining eligibility for set-off under rule 41D. The Court clarified that any broader controversies regarding works contract Acts in other states should be addressed in appropriate proceedings, emphasizing the decisive nature of the certificate's declarations for obtaining the set-off relief.