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TMI Blog1992 (7) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in all the appeals are identical, it is sufficient if we refer to the facts in Civil Appeal No. 803 of 1977 [Cadbury Fry (India) P. Ltd. v. Commissioner of Sales Tax See High Court decision in [1977] 40 STC 111-Ed.]. In Civil Appeal No. 803 of 1977, the following two questions were referred for the opinion of the High Court under section 61(2) of the Act: (i) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that for the purpose of reducing set- off under clause (iii) of the proviso to the explanation to rule 41 of the Bombay Sales Tax Rules, 1959, one per cent, should be calculated not on the entire sale price of the goods despatched by the appellants to their branches, but only on that part of the sale price of the goods sold outside the State which is attributable to the locally purchased raw material on which the appellants were claiming set-off. (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that for the purpose of reducing set- off under clause (iii) of the proviso to the explanation to rule 41 and clause (y) of the proviso to the explanation to rule 41-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taxable goods for sale (hereinafter in this rule referred to as the 'manufacturing dealer), the Commissioner shall grant him a drawback, set-off or as the case may be, a refund of the aggregate of the following sums, that is to say:....... (b) to (d)..... (e) a sum recovered from the manufacturing dealer by another registered dealer by way of sales tax or general sales tax or both, as the case may be, on the purchase by him, of goods from such registered dealer, being goods specified in Schedule C to the Act other than in entries 1 to 11 (both inclusive) and 15 therein and in Schedule D other than in entries 1 to 4 (both inclusive) therein and in Schedule E other than in entries 1 and 2 therein, when the purchasing dealer did not hold a recognition or when the dealer held a recognition but effected the purchase otherwise than against a certificate under section 12 of the Act, provided that such goods are used by him in the manufacture of taxable goods for sale or in the packing of taxable goods manufactured by him for sale.... Explanation.-For the purposes of this rule the word 'sale' with all its grammatical variations, shall include the sale of manufactured goods despatched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. ............. Explanation.-For the purposes of this rule, the expression 'export' shall include- (i) a sale in the course of inter-State trade or commerce, or in the course of the export of the goods out of the territory of India, where such sale occasions the movement of the goods from the State of Maharashtra, (i-a) despatches made by the manufacturing dealer to a person outside the territory of India, with a view to selling the goods to the said person and the said goods have actually been sold to him within a period of three years from the date of despatch, and (ii) despatches made by the manufacturing dealer to his own place of business or to his agent outside the State and [which have, in fact been sold (and not given away as samples or otherwise) or used in the manufacture of goods which have in fact been sold (and not given away as samples or other- wise:) Provided that, where such despatch has been made to his own place of business or to his agent, outside the State but within India,- (y) the amount of drawback, set-off, or as the case may be, refunds shall be reduced by a sum calculated in accordance with the following formula, namely- D multiplied by R --- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial purchased by him within the State of Bombay. No set-off is given in respect of the tax paid by the appellant on the purchases of the raw material made by him outside the State of Maharashtra evidently for the reason that such tax is paid to such other States. In such a situation providing for deduction of one per cent of the sale price of the goods despatched to outside State branches from out of the set-off amount is unjust and impermissible. The manufactured goods came out of the raw material purchased both within and outside Maharashtra and not exclusively out of raw material purchased within the State of Maharashtra. At any rate, the rules properly interpreted would mean that "the percentage which was to be so deducted was one per cent of the sale price of the raw materials which had gone into the manufacture of the finished goods (and of the containers and packing materials used in marketing the finished goods) and such sale price was to be arrived at by a proportionate allocation of the percentage which such raw materials (packing materials and containers) bore to the sale price of the finished goods". (This is how the appellants' contention is set out in the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -off of the purchase tax paid by him on his purchases within the State from out of the sales tax payable by him on the sale of the goods manufactured by him. It is only by virtue of the said rules-which, as stated above, are conceived mainly in the interest of public-that he is entitled to such set-off. It is really a concession and an indulgence. More particularly, where the manufactured goods are not sold within the State of Maharashtra but are despatched to out-State branches and agents and sold there, no sales tax can be or is levied by the State of Maharashtra. The State of Maharashtra gets nothing in respect of such sales effected outside the State. In respect of such sales, the rule-making authority could well have denied the benefit of set-off. But it chose to be generous and has extended the said benefit to such out-State sales as well, subject, however to deduction of one per cent of the sale price of such goods sent out of the State and sold there. We fail to understand how a valid grievance can be made in respect of such deduction when the very extension of the benefit of set-off is itself a boon or a concession. It was open to the rule-making authority to provide for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terials in the manufacture or processing of any goods specified in entries 19 to 80 (both inclusive) of Schedule B to the Act for sale; (b) and the goods so manufactured or processed are not the goods on the sale of which no sales tax is payable under rule 5 or clause (i) of rule 7." It is not suggested by Dr. Pal, the learned counsel for the petitioner that the position under rule 11(1A) is in any manner different from the one obtaining under rule 41. Besides reiterating the submissions made by the counsel for the appellant in the aforesaid group of appeals, Dr. Pal submitted that in case the rule is interpreted in the manner done by the High Court, it will expose it to the vice of unconstitutionality. According to Dr. Pal too, the said deduction in effect amounts to levy of sales tax on purchases made outside the State of Maharashtra and has the effect of impinging upon the charging provisions of the Act. We are, however, unable to see any unconstitutionality in the rule apart from the fact that such a question may not be open in a reference made under section 61(2) of the Act. To put the matter beyond any doubt, Mr. Dholakia appearing for the State of Maharashtra stated befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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