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TMI Blog2015 (1) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... s - The basic conditions were, set off under Rule 41D require the dealer to be a registered dealer having purchased goods covered by Schedule C, using the goods to manufacture taxable goods contemplated in Section 2(33) of the Bombay Sales Tax Act for sale or export - The goods manufactured should in fact have been sold or exported and goods purchased should have been used in the manufactured goods - since taxable goods include goods exempt from tax and the assessee has not claimed exemption from sales tax u/s 41, there is no reason to apply standard condition No.3 of Annexure-1 to notified entry A 23 – the Applicant’s rightly contended that they did not have claimed exemption from Sales Tax u/s 41, the condition No.3 cannot be imposed upon them – thus, the disallowance of set off is unsustainable – thus, the Tribunal was not justified in holding that the Applicant was not entitled to set off in respect of the export sales of the goods for the relevant period – Decided in favour of Applicant-Assessee. - Sales Tax Reference No. 12 of 2006, Sales Tax Reference No. 13 of 2006 - - - Dated:- 14-10-2014 - S. C. Dharmadhikari And A. K. Menon,JJ. For the Applicant : Mr. P. V. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed export sales of manufactured goods. The Deputy Commissioner reduced the set off allowed. The Deputy Commissioner relied on some audit note and reduction in set off under Rule 41D was increased from 9% to 51.3% for the financial year 1995- 96. In case of financial year 1996-97 i.e. in Reference No.13 of 2006, it entailed increase in reduction from 5.52% to 51.25%. 5. Being aggrieved by the said order, the Applicant preferred a second appeal before the Tribunal in respect of the order. The Applicant contended before the Tribunal that the Deputy Commissioner (Appeals) has incorrectly decided the percentage while granting set off and that he erred in considering part of export sales as exempted for reducing the set-off along with exempted local sales. 6. Mr.Surte, learned counsel appearing on behalf of the Applicant referred to the definition of taxable goods under section 2(33) of the Bombay Act as meaning goods other than those on the sale or purchase of which no tax is payable under Section 5 . He then relied upon item 28 of schedule C-II upto 30th September, 1995 which set out the percentage of tax applicable on fountain pens, ball pens, etc. during the period in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from payment of tax on such goods to the extent such purchase tax has been paid. (3) If the Commissioner has reason to believe that any person is liable to pay tax under sub-section (2), the Commissioner shall, after giving him a reasonable opportunity of being heard, assess the amount of tax so due. 8. Mr.Surte also drew our attention to the Notification under section 41 which reveals that under entry A23 of C-II, sales or purchases of fountain pens not exceeding thirty rupees per piece and ball pens not exceeding twenty-five rupees made on or after 1st October, 1995 were exempted from whole of the tax. Mr.Surte took us through the provisions of rule 41D which reads as under:- Rule 41D. Drawback, setoff etc. of tax paid by a manufacturer in respect of purchases made on or after the notified day- (1) In assessing the amount of tax payable in respect of any period by a Registered dealer who manufactures [goods] for sale or export (hereinafter in this rule referred to as the claimant dealer ) the Commissioner shall, in respect of purchases made by the claimant dealer on or after the notified day, of any goods specified [in entry 6 of Schedule B and in Schedule C and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew to selling the goods to the said person and the said goods have actually been sold to him within the period of one year from the date of despatch; and (iii) Despatches made by the claimant dealer to his own place of business or to his agent outside the State where the claimant dealer produces certificate in Form 31C issued by his manager, or as the case may be, his agent declaring inter alia that the goods will in fact be sold by him or will be used by him in the manufacture of goods which will in fact be sold by him and that he, his manager or, as the case may, his agent is registered under the Central Sales Act, 1956 (LXXIV of 1956) in respect of that place of business. (3) ---------------------------- 9. Mr.Surte relied upon the judgment of the Supreme Court in the matter of Commissioner of Sales Tax, U.P. V/s. Indra Industries reported in (2001) 122 Sales Tax Cases, 100, wherein the Court was considering the binding nature of a circular issued by the sales tax authorities. The Court held that even if the Court holds it as not binding, including, upon the assessee, the interpretation that is placed by the taxing authority on the circular is binding on that taxing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of rule 42-I and the expression sale used therein so as to include sales in the course of export. The Tribunal also held that disallowance of set off was not by way of tax free goods as contemplated in the Notification entry A-23 but by way of standard condition No.3 in Annexure-1. It held that there was no mention that disallowance of setoff is by way of free sales and disallowance of set-off under Rule 41D on the goods was upheld. 13. Entry A-23 reads as follows:- Entry A-23 1 2 3 4 5 Sales or purchases made on whole of Standard 1.10.1995 or after the 1st October, 1995, tax. Condition No.3 to by a Registered dealer of- in Annexure-1 30.4.1997 (I) fountain pens and ball point pens sold at a price not exceeding thirty rupees per piece and components, parts and accessories of any of them covered by entry 71 in Part-II of Schedule C. (ii) ball point pens refills covered by entry 71 in Part II of Schedule C, sold at a price not exceeding rupees five per piece and components, parts and accessories of such refills. ANNEXURE-I Standard conditions (1) ................... (2) ................... (3) The claimant dealer shall not be entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le or tax free. Taxable goods are either chargeable with tax or exempt from tax. The product sold by the assessee are in the exempted goods category. Section 2(33) determines whether goods are taxable or tax free and not Section 41. The Applicant has sold pens locally in the course of inter State trade and also in the course of exports. It is not possible to accept the views of the Tribunal. The basic conditions were, set off under Rule 41D require the dealer to be a registered dealer having purchased goods covered by Schedule C, using the goods to manufacture taxable goods contemplated in Section 2(33) of the Bombay Sales Tax Act for sale or export. The goods manufactured should in fact have been sold or exported and goods purchased should have been used in the manufactured goods. Since taxable goods include goods exempt from tax and the Assessee has not claimed exemption from sales tax under section 41, there is no reason to apply standard condition No.3 of Annexure-1 to notified entry A 23. We agree with the Applicant s contention that not having claimed exemption from Sales Tax under Section 41, the condition No.3 cannot be imposed upon them. Accordingly, we find that the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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