{"id":120478,"date":"1992-07-30T00:00:00","date_gmt":"1992-07-29T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/godrej-boyce-mfg-co-pvt-ltd-vs-commissioner-of-sales-tax-and-ors-on-30-july-1992"},"modified":"2017-01-15T06:08:29","modified_gmt":"2017-01-15T00:38:29","slug":"godrej-boyce-mfg-co-pvt-ltd-vs-commissioner-of-sales-tax-and-ors-on-30-july-1992","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/godrej-boyce-mfg-co-pvt-ltd-vs-commissioner-of-sales-tax-and-ors-on-30-july-1992","title":{"rendered":"Godrej & Boyce Mfg. Co. Pvt. Ltd. … vs Commissioner Of Sales Tax And Ors. … on 30 July, 1992"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Godrej & Boyce Mfg. Co. Pvt. Ltd. … vs Commissioner Of Sales Tax And Ors. … on 30 July, 1992<\/div>\n
Equivalent citations: 1992 AIR 2078, \t\t 1992 SCR (3) 683<\/div>\n
Author: B Jeevan Reddy<\/div>\n
Bench: Jeevan Reddy, B.P. (J)<\/div>\n
           PETITIONER:\nGODREJ & BOYCE MFG. CO. PVT. LTD. AND ORS. ETC. ETC.\n\n\tVs.\n\nRESPONDENT:\nCOMMISSIONER OF SALES TAX AND ORS. ETC. ETC.\n\nDATE OF JUDGMENT30\/07\/1992\n\nBENCH:\nJEEVAN REDDY, B.P. (J)\nBENCH:\nJEEVAN REDDY, B.P. (J)\nRANGNATHAN, S.\n\nCITATION:\n 1992 AIR 2078\t\t  1992 SCR  (3) 683\n 1992 SCC  (3) 624\t  JT 1992 (4)\t317\n 1992 SCALE  (2)107\n\n\nACT:\n     Bombay  Sales Tax Rules, 1959-Rules 41,  41-A-Set\toff-\nClaim by assessee-Legislative intention of.\n     Bombay Sales Tax Rules, 1959-Rule 41(iii)\tExplanation,\nProviso\t and  Rule  41-A(y)-Set\t off  under-One\t per   cent-\nCalculation of.\n     Bombay  Sales  Tax Act,  1959-Section  61(2)-Reference-\nWhether constitutionality of a rule can be questioned-Rules,\n41, 41A of the Bombay Sales Tax Rules, 1959-Validity of.\n\n\n\nHEADNOTE:\n     The  facts in all the appeals - (C.A.No. 803\/1977\tC.A.\nNos.800-01  of\t1977; 3843-47\/1983;  and  3849-50\/1988\twere\nidentical and common question arose.\nC.A.No.803 of 1977\n     The appellant was a registered dealer under the  Bombay\nSales  Tax  Act, 1959 and it engaged in the  manufacture  of\nproducts,  like chocolate, drinking chocolate,\tcocoa,\tetc.\nDuring\tthe  assessment\t years it  purchased  raw  material,\npacking\t material  and containers both within the  State  as\nwell  as outside.  In respect of the raw  material,  packing\nmaterial   etc.\t purchased  from  registered   dealers\t the\nappellant  paid purchase tax to them.  On the  raw  material\netc.   purchased from un-registered dealers,  the  appellant\npaid the purchase tax directly to the Government.  The goods\nmanufactured  by  the apllellant were liable to\t sales\ttax,\nwhen sold within the State.\n     Rule  41  and Rule 41A of the Bombay Sales\t Tax  Rules,\n1959 enable the manufacturing dealer to claim set-off of the\ntax paid by him on the purchase of raw materials from out of\nthe  tax  payable by him on the sale of\t goods\tmanufactured\nfrom  out  of  the said raw  material.\t The  rules  further\nprovide that in respect of manufactured goods despatched  by\nthe manufacturing dealer to his own place of business or  to\nhis agent outside the State\n\t\t\t\t\t\t       684\nand  actually  sold there, the amount of  set-off  shall  be\nreduced\t by one per cent of the sale price of the  goods  so\ndespatached.   Applying said rule the assessing\t authorities\nmade  a deduction of one per cent of the sale price  of\t the\ngoods despatched and sold outside the State of Maharasthra.\n     The petitioners' case was that the raw material, out of\nwhich  he  manufactured the goods, was\tpurchased  not\tonly\nwithin\tthe State of Maharashtra but also outside the  State\nof  Maharashtra.   Similarly the goods manufactured  by\t him\nwere sold not only within the State of Maharashtra but\talso\noutside\t of the State of Maharashtra.  In such a  situation,\nmaking a deduction of one per cent of the sale price of\t the\nmanufactured goods despatched and sold outside the State  of\nMaharashtra  amounts  in  effect to levy  of  sales  tax  on\npurchase  of  raw  material effected outside  the  State  of\nMaharashtra.   He  also contended that it also\tamounts\t the\nlevy  of  sales\t tax  on goods sold  outside  the  State  of\nMaharashtra.   He  pleaded for allocation of sale  price  in\nproportion  in which raw material was purchased\t within\t and\noutside the State.\n     Under  section  61(2) of the Bombay Sales Tax  Act\t the\nfollowing two questions were referred to the High Court:\n     (1)  Whether on the facts and in the  circumstances  of\nthe  case, the Tribunal was correct in law in  holding\tthat\nfor  the purpose of reducing set-off under clause  (iii)  of\nthe  Proviso to Explanation to Rule 41 of the  Bombay  Sales\nTax  Rules, 1959, one per cent, should be calculated not  on\nthe  entire  sale  price  of the  goods\t despatched  by\t the\nappellants  to their branches, but only on that part of\t the\nsale  price  of the goods sold outside the  State  which  is\nattributable  to  the locally  purchased   raw\tmaterial  on\nwhich the appellants were claiming set off?\n     (ii)  Whether on the facts and in the circumstances  of\nthe  case, the Tribunal was correct in law in  holding\tthat\nfor  the purpose of reducing set-off under clause  (iii)  of\nthe Proviso to Explanation to Rule 41 and clause (y) of\t the\nproviso\t to the Explanation to Rule 41A of the Bombay  Sales\nTax Rules, 1959, one per cent shall be calculated not on the\nentire sale price of the goods despatched by the  appellants\nto  his branches, but only on the part of the sale price  of\nthe  goods sold outside, the State which is attributable  to\nthe  locally purchased raw material on which the  appellants\nwere claiming set off?\n\t\t\t\t\t\t  685\n     The  High\tCourt  answered the  reference\tagainst\t the\nassessee-appellant.   The appellant-assessee challenged\t the\njudgment  of  the High Court in this Court  by\tfilling\t the\nappeal by special leave.\n     The appellants reiterated the contentions urged  before\nthe  High Court.  They submitted that the deduction  of\t one\nper  cent,  in effect, amounts to taxing  the  raw  material\npurchased  outside  the\t State\tor to  taxing  the  sale  of\nfinished goods effected outside the State Maharashtra.\nSLP (C) No. 1377\/77\n     The  assessment period was April 1, 1957 to  March\t 31,\n1958.\tDuring\tthis period the Rule in force was  Rule\t 11,\nwhich too provided for a benefit accompanied by a  deduction\nas  was provided by Rule 41.  The petitioner contended\tthat\nthe  position under Rule 11(1A) was not different  from\t the\none  obtaining\tunder  Rule 41; that in case  the  rule\t was\ninterpreted  in the manner done by the High Court, it  would\nexpose it to the vice of unconstitutionality; that the\tsaid\ndeduction  in  effect  amounted to levy\t of  sales   tax  on\npurchases made outside the State of Maharashtra and had\t the\neffect\tof  impinging upon the charging\t provisions  of\t the\nAct.\n     Dismissing the appeals of the  assessee, this Court,\n     HELD  :  1.01.   The   intention  of  the\trule  making\nauthority  is  to provide a relief to the  dealers  so\tthat\nultimately  the\t benefit should percolate  to  the  consumer\npublic.\t  A manufacturing dealer pays purchase tax  when  he\npurchases  raw material and he is again obliged to  pay\t the\nsales tax when he sells the goods manufactured by him out of\nthe said raw material.\tTax on both the transactions has the\ninevitable  effect of increasing the price to the  consumers\nbesides\t adversely  affecting  the trade.  It  is  for\tthis\nreason\tthat  the Rules 41 and 41A of the Bombay  Sales\t Tax\nRules,\t1959, enable the manufacturing dealer to claim\tset-\noff of the tax paid by him on the purchase of raw  materials\nfrom  out  of the tax payable by him on the  sale  of  goods\nmanufactured from out of the said raw material. [691G-692A]\n     1.02.  The\t purport of Rules 41 and 41A is\t inter\talia\nthis:  in  respect of manufactured goods despatched  by\t the\nmanufacturing dealer to his own place of business or to\t his\nagent outside the State and actually sold there, the  amount\nof  set-off  shall be reduced by one per cent  of  the\tsale\nprice of the goods so despatched. [692B]\n\t\t\t\t\t\t       686\n     2.01.   The appellant (manufacturing dealer)  purchases\nhis  raw material both within the State of  Maharashtra\t and\noutside the State.  In so far as the purchases made  outside\nthe  State of Maharashtra are concerned, the tax thereon  in\npaid to other States.  The State of Maharashtra gets the tax\nonly  in respect of purchases made by the  appellant  within\nthe State.  So far as the sales tax leviable on the sale  of\nthe  goods manufactured by the appellant is  concerned,\t the\nState  of Maharashtra can levy and collect such tax only  in\nrespect\t of sales effected within the State of\tMaharashtra.\nIt cannot levy or collect tax in respect of goods which\t are\ndespatched  by\tthe  appellant to his  branches\t and  agents\noutside the State of Maharashtra and sold there. [692D-E]\n     2.02.   In\t law  (apart  from Rules  41  and  41A)\t the\nappellant  has\tno  legal  right to  claim  set-off  of\t the\npurchase  tax paid by him on his purchases within the  State\nfrom out of the sales tax payable by him on the sale of\t the\ngoods manufactured by him.  It is only by virtue of the said\nRules,\twhich,\tare  conceived mainly  in  the\tinterest  of\npublic,\t that he is entitled to such set-off.  It is  really\na  concession and an indulgence.  More\tparticularly,  where\nthe  manufactured  goods are not sold within  the  State  of\nMaharashtra  but  are despatched to out-State  branches\t and\nagents\tand sold there, no sales tax can be or is levied  by\nthe  State  of Maharashtra.  The State of  Maharashtra\tgets\nnothing in respect of such sales.  The rule-making authority\ncould well have denied the benefit to such out-State sale as\nwell,  subject however to deduction of one per cent  of\t the\nsale  price  of such goods sent out of the  State  and\tsold\nthere. [693G-694A]\n     2.03. No valid grievance can be made in respect of such\ndeduction when the very extension of the benefit of  set-off\nis  itself a boon or a concession.  It was open to the\trule\nmaking\tauthority  to  provide for a  small  abridgement  or\ncurtailment while extending a concession. [694B]\n     3.\t There is no unconstitutionality in the rule,  apart\nfrom the fact that question of constitutionality may not  be\nopen  in a reference made under section 61(2) of the  Bombay\nSales  Tax Act.\t The said Rules do not provide for  levy  of\nany  tax as such.  Their operation is limited to  what\tthey\nsay. [695H]\n     C.S.T.  Bombay  v. Bharat Petroleum  Corporation  Ltd.,<\/a>\n[1992] 1 SCR 807, distinguished.\n\t\t\t\t\t\t       687\n\n\n\nJUDGMENT:\n<\/pre>\n
     CIVIL  APPELLATE JURISDICTION : Civil Appeal Nos.\t800-
\n801 of 1977.\n<\/p>\n
     From  the\tJudgment and Order dated  24.2.1976  of\t the
\nBombay High Court in Sales Tax Nos. 59 and 60 of 1972.\n<\/p>\n
\t\t    WITH
\n     CA Nos. 803\/77, 3843-47\/88 and 3849-50\/88
\n     D.N. Misra for the Appellants.\n<\/p>\n
     A.S. Bhasme and Bharat Sangal for the Respondents.
\n     The Judgment of the Court was delivered by
\n     B.P.  JEEVAN REDDY, J. Common questions arise  in\tthis
\ngroups\tof civil appeals, for which reason they\t were  heard
\ntogether and are being disposed of under a common  judgment.
\nThe judgments under appeal were rendered on references\tmade
\nunder section 61(2) of the Bombay Sales Tax Act, 1959.\t The
\nHigh  Court has answered the questions referred against\t the
\nappellants-dealers  and\t in favour of the  Revenue.   Hence,
\nthese  appeals by them.\t Since the facts in all the  appeals
\nare idenctical, it is sufficient if we refer to the facts in
\nCivil  Appeal  No. 803 (N.T.) of 1977 (Cadbury\tFry  (India)
\nPrivate Limited v. Commissioner of Sales Tax and Anr.).\n<\/p>\n
     In Civil Appeal No.803\/77, the following two  questions
\nwere  referred\tfor  the opinion of  the  High\tCourt  under
\nSection 61(2) of the Act:\n<\/p>\n
     (i)  Whether on the facts and in the  circumstances  of
\nthe  case, the Tribunal was correct in law in  holding\tthat
\nfor  the purpose of reducing set-off under clause  (iii)  of
\nthe  Proviso to Explanation to Rule 41 of the  Bombay  Sales
\nTax  Rules, 1959, one per cent, should be calculated not  on
\nthe  entire  sale  price  of the  goods\t despatched  by\t the
\nappellants  to their branches, but only on that part of\t the
\nsale  price  of the goods sold outside the  State  which  is
\nattributable to the locally purchased raw material on  which
\nthe appellants were claiming set off.\n<\/p>\n
     (ii)  Whether on the facts and in the circumstances  of
\nthe  case, the Tribunal was correct in law in  holding\tthat
\nfor  the purpose of reducing set-off under clause  (iii)  of
\nthe Proviso to Explanation to Rule 41 and clause (y) of\t the
\nproviso the Explanation to Rule 41A of the Bombay Sales\t Tax
\nRules,\t1959, one per cent should be calculated not  on\t the
\nentire
\n\t\t\t\t\t\t       688<\/span>
\nsale price of the goods despatched by the appellants to\t his
\nbranches,  but\tonly on the part of the sale  price  of\t the
\ngoods  sold outside, the State which is attributable to\t the
\nlocally purchased raw material on which the appellants\twere
\nclaiming set-off.”\n<\/p>\n
     The  appellant, a registered dealer under the  Act,  is
\nengaged\t in  the  manufacture of various  products  such  as
\nchocolate,  drinking  chocolate,  cocoa\t etc,\tDuring\t the
\nassessment   years  concerned  herein,\tit   purchased\t raw
\nmaterial,  packing material and containers both\t within\t the
\nState of Maharashtra as well as outside.  In respect of\t the
\nraw   material,\t  packing  material  etc.   purchased\tfrom
\nregistered dealers the appellant paid purchase tax to  them.
\nIn  so far as such raw material etc. was purchased from\t un-
\nregistered dealers, the appellant was liable to and did\t pay
\nthe  purchase  tax directly to the  Government.\t  The  goods
\nmanufactured  by the appellant are liable to sales tax\twhen
\nsold within the State.\n<\/p>\n
     In\t exercise  of  the Rule-making\tpower  conferred  by
\nSection\t 74  of\t the  Act,  Rules  have\t been  made  by\t the
\nGovernment  of Bombay.\tWe are concerned in this  case\twith
\nonly  two rules namely 41 and 41A.  The purport of both\t the
\nRules, in so far as it is relevant for the purposes of these
\nappeals\t   is\tconcerned,   is\t  practically\t the\tsame
\nnotwithstanding\t a good amount of phraseological  difference
\nbetween them.  Rule 41 applies in respect of purchases\tmade
\nby  a `manufacturing dealer’ like the appellant up  to\t15th
\nJuly,  1962.   From this date onwards, it is rule  41A\tthat
\noperates.   In\trespect of their assessment for\t the  period
\nJanuary\t Ist,  1960  to\t December  31,\t1960  the  appellant
\n(manufacturing dealer) claimed set-off under rule 41 whereas
\nfor  the period January Ist, 1962 to December 31st, 1962  be
\nclaimed it under rule 41A.\n<\/p>\n
     Rule 41 and 41A provide for set-off of the purchase tax
\npaid  by  the  manufacturing dealer  on\t the  raw  material,
\npacking\t material etc. as against the sales tax\t payable  on
\nthe  sale  of  the goods manufactured by him.  It  would  be
\nappropriate  at this stage to read both these rules,  in  so
\nfar as they are relevant for our purpose:\n<\/p>\n
\t 41.  “Drawback,  set-off,  etc. of tax\t paid  by  a
\n\t manufacturer\t(In  respect  of  purchases  up\t  to
\n\t 15.6.62).   In assessing the amount of tax  payable
\n\t in  respect of any period by a\t Registered  Dealer,
\n\t who\tmanufactures   taxable\t goods\t for\tsale
\n\t (hereinafter  in  this\t rule  referred\t to  as\t the
\n\t “Manufacturing\t dealer”)  the\tCommissioner   shall
\n\t grant him a drawback, set off or as the case may
\n\t\t\t\t\t\t       689<\/span>
\n\t be,  a\t refund of the aggregate  of  the  following
\n\t same, that is to say:\n<\/p>\n
\t (b)……….\n<\/p>\n
\t (c)………..\n<\/p>\n
\t (d)………..\n<\/p>\n
\t (e)  a sum recovered from the manufacturing  dealer
\n\t by another Registered dealer by way of sales tax or
\n\t general  sales tax or both, as the case may be,  on
\n\t the purchase by him, of goods from such  Registered
\n\t dealer, being goods specified in Schedule C to\t the
\n\t Act other than in entries 1 to 11 (both  inclusive)
\n\t and  15  therein and in schedule D  other  than  in
\n\t entries  1  to 4 (both inclusive)  therein  and  in
\n\t Schedule  E other than in entries 1 and 2  therein,
\n\t when\tthe  purchasing\t dealer\t did  not   hold   a
\n\t Recognition  or when the dealer held a\t Recognition
\n\t but affected the purchase otherwise than against  a
\n\t certificate  under section 12 of the Act;  provided
\n\t that such goods are used by him in the\t manufacture
\n\t of  taxable  goods  for sale or  in  the  packingof
\n\t taxable goods manufactured by him for sale……
\n\t Explanation: For the purposes of this rule the word
\n\t “sale”\t with all its grammatical variations,  shall
\n\t include the sale of manufactured goods\t (despatched
\n\t by  the dealer in his own place of business  or  to
\n\t his  agent  outside the State\tand  (actually\tsold
\n\t there).\n<\/p>\n
\t  Provided that where such despatch has been made to
\n\t his  place of business or to his agent outside\t the
\n\t State but within India (i) such despatch shall have
\n\t taken\tplace  within nine  months of  the  date  of
\n\t purchase of the goods so used;\n<\/p>\n
\t (ii)  the  dealer, of his manager or agent  as\t the
\n\t case may be, is registered under the Central Sales,
\n\t 1956, in respect of place of business of which\t the
\n\t goods are so despatched; and\n<\/p>\n
\t (iii) the amount of drawback, set-off or refund  as
\n\t the case may be, shall be reduced by 1 per cent  of
\n\t the sale price of the goods so despatched.\n<\/p>\n
\t\t\t\t\t\t       690<\/span><\/p>\n
\t Provided  further that if the dealer shows  to\t the
\n\t satisfaction of the Commissioner that not more then
\n\t 1 per cent of the total value of the finished goods
\n\t so  despatched was comprised of goods in respect of
\n\t which\tthe drawback, set off or refund is  claimed,
\n\t the Commissioner shall not so reduce the amount  of
\n\t drawback, set-off or refund.”\n<\/p>\n
\t “41-A (1) Drawback, set-off, etc. of tax paid by  a
\n\t manufacturer  in respect of purchases made  [during
\n\t the   period  from  15th  July\t 1962  to  the\t day
\n\t immediately  preceding the notified day (both\tdays
\n\t inclusive) – In assessing the amount of tax payable
\n\t in  respect of any period by the Registered  dealer
\n\t [who manufactures taxable goods for sale or export]
\n\t (hereinafster\tin  this  rule referred\t to  as\t the
\n\t “Manufacturing dealer”), the Commissioner shall, in
\n\t respect  of  the  purchases  made  by\tsuch  dealer
\n\t [during  the period from 15th July 1962 to the\t day
\n\t immediately  preceding the notified day (both\tdays
\n\t inclusive)]  of  any goods  specified\tin  Schedule
\n\t B,C,D or E and used by him within the State in\t the
\n\t manufacture of taxable goods [which have, in  fact,
\n\t been sold by him (and not given away as samples  or
\n\t otherwise  or\twhich have been exported by  him  or
\n\t used\tby   him  in  the  packing   of\t  goods\t  so
\n\t manufactured]\tgrant him a draw-back,\tset-off,  as
\n\t the  case may be, a refund of the aggregate of\t the
\n\t following sums, that it to say:\n<\/p>\n
\t (a)  a sum recovered from the Manufacturing  dealer
\n\t by other Registered dealers by way of sales tax, or
\n\t general sales or, as  the case may be, both, on the
\n\t purchase by him from such Registered dealers,\twhen
\n\t the Manufacturing dealer did not hold a Recognition
\n\t or  when  he held a Recognition  but  effected\t the
\n\t purchase otherwise than against a certificate under
\n\t sections 11 of the Act.\n<\/p>\n
\t  Explanation:- For the purposes of this rule,\t[the
\n\t expression `export’ shall include -]\n<\/p>\n
\t (i)  a sale in the course of inter-State  trade  or
\n\t commerce,  or\tin the course of the export  of\t the
\n\t goods\tout  of the territory of India,\t where\tsuch
\n\t sale  occasions the movement of the goods from\t the
\n\t State of Maharashtra, and
\n\t\t\t\t\t\t       691<\/span>
\n\t  [(i-a) despatches made by the manufacturing dealer
\n\t to a person outside the territory of India, with  a
\n\t view  to selling the goods to the said\t person\t and
\n\t the  said  goods  have actually been  sold  to\t him
\n\t within\t a  period of three years from the  date  of
\n\t despatch, and]\n<\/p>\n
\t  (ii)\tdespatches made by the Manufacturing  dealer
\n\t to  his  own  place of business  or  to  his  agent
\n\t outside  the  State and [which have, in  fact\tbeen
\n\t sold  (and not given away as samples or  otherwise)
\n\t or  used in the manufacture of goods which have  in
\n\t fact  been sold (and not given away as\t samples  or
\n\t otherwise.)]
\n\t  Provided  that, where such despatch has been\tmade
\n\t to  his  own  place of business or  to\t his  agent,
\n\t outside the State but within India……..
\n\t  (Y)  the  amount of draw-back, set-off or  as\t the
\n\t case  may  be\trefunds shall be reduced  by  a\t sum
\n\t calculated   in  accordance  with   the   following
\n\t formula, namely:-\n<\/p>\n
\t\t\t D multiplied by R\n<\/p>\n
\t\t\t —————–\n<\/p>\n
\t\t\t\t 100<\/span><\/p>\n
\t `D’  means [the sale price of the goods  despatched
\n\t which\thave in fact, been sold (and not given\taway
\n\t as samples or otherwise  or the value of the  goods
\n\t despatched  for  use in the  manufacture  of  goods
\n\t which have, in fact, been sold (and not given\taway
\n\t as samples or otherwise) and `R’ means the rate  of
\n\t tax in force on the sale at the time of despatch of
\n\t goods,\t in  the  course of  inter-state  trade\t  or
\n\t commerce,  of the same goods under section 8(1)  or
\n\t as  the case may be, section 8(2A), of the  Central
\n\t Sales Tax Act, 1956;]…..”\n<\/p>\n
     A\treading of the Rules manifests the intention of\t the
\nrule  making  authority.  It is to provide a relief  to\t the
\ndealers so that ultimately the benefit should  percolate  to
\nthe  consumer  public.\t A  manufacturing  dealer  like\t the
\nappellant  pays purchase tax when he purchases raw  material
\nand  he is again obliged to pay the sales tax when he  sells
\nthe goods manufactured by him out of the said raw  material.
\nTax  on both the transactions has the inevitable  effect  of
\nincreasing the price to the consumers besides
\n\t\t\t\t\t\t       692<\/span>
\nadversely  affecting the trade.\t It is for this reason\tthat
\nthe aforesaid Rules enable the manufacturing dealer to claim
\nset-off\t of  the  tax paid by him on  the  purchase  of\t raw
\nmaterials from out of the tax payable by him on the sale  of
\ngoods  manufactured from out of the said raw material.\t The
\nRule  further  provides\t – and it is that  aspect  which  is
\nrelevant  in  these appeals – that in  respect\tmanufactured
\ngoods  despatched  by the manufacturing dealer\tto  his\t own
\nplace  of  business or to his agent outside  the  State\t and
\nactually sold there, the amount of set-off shall be  reduced
\nby  one\t per  cent  of\tthe  sale  price  of  the  goods  so
\ndespatched.   This  is the result flowing  from\t a  combined
\nreading\t of clause (e) of Rule 41 read with the\t Explanation
\nand  the Proviso appended to the Explanation.  Same  is\t the
\nposition flowing from the relevant portions of Rule 41A.\n<\/p>\n
     The  contention of the appellant – which  found  favour
\nwith  the  Sales  Tax Tribunal – runs  thus;  the  appellant
\npurchases the raw material required by him partly within the
\nState\tof  Maharashtra\t and  partly  from   other   States.
\nSimilarly,  only a portion of the goods manufactured by\t him
\nis  sold within the State of Maharashtra.  Bulk of  them  is
\nsold  outside  the State of Maharashtra, though\t within\t the
\nCountry.  Rule 41 provides for setting off the purchase\t tax
\npaid  by the appellant on the raw material purchased by\t him
\nwithin the State of Bombay.  No set-off is given in  respect
\nof the tax paid by the appellant on the purchases of the raw
\nmaterial  made\tby  him outside\t the  State  of\t Maharashtra
\nevidently for the reason that such tax is paid to such other
\nStates.\t In such a situation providing for deduction of\t one
\nper  cent  of  the sale price of  the  goods  despatched  to
\noutside-State  branches\t from out of the set-off  amount  is
\nunjust\tand impermissible.  The manufactured goods came\t out
\nof  the\t raw  material purchased  both\twithin\tand  outside
\nMaharashtra   and  not\texclusively  out  of  raw   material
\npurchased within the State of Maharasthra.  At any rate, the
\nRules  properly interpreted would mean that “the  percentage
\nwhich was to so deducted was one per cent of the sale  price
\nof the raw materials which had gone into the manufacture  of
\nthe  finished  goods  (and of the  containers  and  packing-
\nmaterials  used\t in marketing the finished goods)  and\tsuch
\nsale  price  was  to  be  arrived  at  by  a   proportionate
\nallocation  of\tthe  percentage\t which\tsuch  raw  materials
\n(packing materials and containers) bore to the sale price of
\nthe   finished\tgoods”.\t  (This\t is  how   the\t appellants’
\ncontention  is set out in the judgment of the  High  Court.)
\nApplying  such a deduction to the entire sale price  of\t the
\nmanufactured  goods sent to out-State branches,\t in  effect,
\namounts to levy of tax on the raw material purchased outside
\nthe State or in any event amounts to levy of tax on sales of
\nfinished goods effected
\n\t\t\t\t\t\t       693<\/span>
\noutside the State of Maharashtra which is clearly beyond the
\ncompetence of the State Legislature.\n<\/p>\n
     The  High Court did not agree with the  appellant.\t  It
\nwas  of\t the  opinion  that  “on  a  plain  reading  of\t the
\nExplanation  and  the  first  proviso  thereto,\t it  is\t not
\npossible to accept the contention advanced before us by\t the
\nrespondents.   Even viewed from the angle of ordinary  legal
\nnotions, it is obvious that what in fact are despatached  by
\nthe  manufacturing dealer are the finished goods.   The\t raw
\nmaterial which have gone into manufacture of the said  goods
\nare not despatched, some of them can no more be in existence
\nhaving\tbeen  consumed\tin the process\tof  manufacture\t and
\nothers have completely altered in their composition,  nature
\nand  form  and are no more raw\tmaterials  preserving  their
\nindividuality  in  the form which they bore when  they\twere
\npurchased.   Similarly in the case of packing materials\t and
\ncontainers…….. .\n<\/p>\n
     Sri  Bobde appearing for the appellants reiterated\t the
\ncontentions urged before the High Court.  He submitted\tthat
\nthe deduction of one per cent, in effect, amounts to  taxing
\nthe  raw material purchased outside the State or  to  taxing
\nthe  sale  of finished goods effected outside the  State  of
\nMaharashtra.  We cannot agree.\tIndeed, the whole issue\t can
\nbe  put\t in  simpler terms.   The  appellant  (manufacturing
\ndealer) purchases his raw material both within the State  of
\nMaharashtra  and  outside  the\tState.\tIn  so\tfar  as\t the
\npurchases   made  outside  the\tState  of  Maharashtra\t are
\nconcerned,  the\t tax thereon is paid to other  States.\t The
\nState  of  Maharastra  gets  the  tax  only  in\t respect  of
\npurchases made by the appellant within the State.  So far as
\nthe sales tax leviable on the sale of the goods manufactured
\nby the appellant is concerned, the State of Maharashtra\t can
\nlevy  and collect such tax only in respect of  sales  effect
\nwithin the State of Maharashtra.  It cannot levy or  collect
\ntax  in\t respect  of  goods  which  are\t despatched  by\t the
\nappellant  to his branches and agents outside the  State  of
\nMaharashtra and sold there.  In law (apart from Rules 41 and
\n41A)  the appellant has no legal right to claim\t set-off  of
\nthe  purchase  tax paid by him on his purchases\t within\t the
\nState  from out of the sales tax payable by him on the\tsale
\nof  the goods manufactured by him.  It is only by virtue  of
\nthe  said   Rules – which, as stated  above,  are  conceived
\nmainly\tin the interest of public – that he is\tentitled  to
\nsuch set-off.  It is really a concession and an\t indulgence.
\nMore particularly, where the manufactured goods are not sold
\nwithin\tthe State of Maharashtra but are despatched to\tout-
\nState  branches and agents and sold there, no sales tax\t can
\nbe or is levied by the State of Maharashtra.\n<\/p>\n
\t\t\t\t\t\t       694<\/span><\/p>\n
The  State  of Maharashtra gets nothing in respect  of\tsuch
\nsales effected outside the State.  In respect of such sales,
\nthe rule-making authority could well have denied the benefit
\nof  set-off.  But it chose to be generous and has   extended
\nthe  said benefit to such out-State sales as well,  subject,
\nhowever\t to deduction of one per cent of the sale  price  of
\nsuch goods sent out of the State and sold there.  We fail to
\nunderstand  how a valid grievance can be made in respect  of
\nsuch  deduction\t when the very extension of the\t benefit  of
\nset-off\t is itself a boon or a concession.  It was  open  to
\nthe rule making authority to provide for a small  abridgment
\nor  curtailment while extending a concession.\tViewed\tfrom
\nthis  angle, the argument that providing for such  deduction
\namounts\t to levy of tax either on purchases of raw  material
\neffected outside the State or on sale of manufactured  goods
\neffected  outside  the State of Maharashtra  appears  to  be
\nbeside\tthe point and is unacceptable.\tSo is  the  argument
\nabout  apportioning  the sale-price with  reference  to\t the
\nproportion  is which raw material was purchased\t within\t and
\noutside the State.\n<\/p>\n
     It\t is  not necessary for us to  discuss  the  position
\nobtaining under Rule 41A separately inasmuch as it is agreed
\nby the learned counsel for the appellant Sri Bobde that\t the
\nposition  obtaining under both the rules, in so far  as\t the
\naspect\tin  controversy is concerned, is  substantially\t the
\nsame, notwithstanding the phraseological difference  between
\nboth the rules.\n<\/p>\n
S.L.P. (C) No.1377\/77:\n<\/p>\n
     Leave Granted
\n     The period concerned in this appeal (by Hindustan Lever
\nLimited)  is  April 1, 1957 to March 31, 1958.\tDuring\tthis
\nperiod\tthe Rule in force was Rule, 11, which  too  provided
\nfor  a\tsimilar\t benefit accompanied by a  deduction  as  is
\nprovided by Rule 41.  Sub-rule(1A), which alone is  relevant
\nfor our purpose, reads as follows:\n<\/p>\n
\t “Grant of drawback, set-off or refund of sales\t tax
\n\t or  general  sales tax or purchase tax\t in  certain
\n\t cases.\n<\/p>\n
\t (1A)  In assessing the amount of sales tax  payable
\n\t by   a\t registered  dealer  who   manufactures\t  or
\n\t processes  or\tprocesses  any\tgoods  for  sale  in
\n\t respect  of any period, the collector\tshall  grant
\n\t him  a drawback, set-off or refund as the case\t may
\n\t be, of an amount
\n\t\t\t\t\t\t       695<\/span>
\n\t equal to the aggregate of the sums\n<\/p>\n
\t (i)  recovered from the dealer by other  registered
\n\t dealers by way of sales tax or general sales tax;\n<\/p>\n
\t (ii) calculated in the manner specified in sub rule
\n\t (1) of rule 11_A; and\n<\/p>\n
\t (iii)\tpayable as purchase tax under clause (a)  of
\n\t section  10  of the purchase of such goods  by\t the
\n\t dealer;\n<\/p>\n
\t after deducting therefrom one per cent, and in\t the
\n\t case of goods falling under entry 23 or 24 Schedule
\n\t B  to\tthe Act, one quarter per cent  of  the\tsale
\n\t price of any goods manufactured or processed  where
\n\t the  sale of the goods takes place at any place  in
\n\t India outside the State of Bombay, the goods having
\n\t been transported to such place on or after the\t Ist
\n\t day of July; 1957;\n<\/p>\n
\t Provided –\n<\/p>\n
\t (a)  such  goods have been used  as  raw  materials
\n\t processing materials, fuel, lubricants,  containers
\n\t or   packing  materials  in  the   manufacture\t  or
\n\t processing of any goods specified in entries 19  to
\n\t 80  (both inclusive) of Schedule B to the  Act\t for
\n\t sale;\n<\/p>\n
\t (b) and the goods so manufactured or processed\t are
\n\t not the goods on the sale of which no sales tax  is
\n\t payable under rule 5 or clause (i) of rule 7.”
\n     It is not suggested by Dr. Pal, the learned counsel for
\nthe petitioner that the position under Rule 11(1A) is in any
\nmanner\tdifferent  from\t the one obtaining  under  Rule\t 41.
\nBesides reiterating the submissions made by the counsel\t for
\nthe  appellant\tinthe aforesaid group of  appeals,  Dr.\t Pal
\nsubmitted that in case the rule is interpreted in the manner
\ndone  by  the High Court, it will expose it to the  vice  of
\nunconstitutionality.   According  to Dr. Pal too,  the\tsaid
\ndeduction  in  effect  amounts\tto  levy  of  sales  tax  on
\npurchases made outside the State of Maharashtra and has\t the
\neffect of impinging upon the charging provisions of the Act.
\nWe are however, unable to see any unconstitutionality in the
\nrule  apart  from the fact that such a question may  not  be
\nopen in a reference made under section\t61(2) of the
\n\t\t\t\t\t\t       696<\/span>
\nAct.  To  put  the matter beyond  any  doubt,  Mr.  Dholakia
\nappearing for the State of Maharashtra stated before us that
\nthe  State  would never demand or recover any  tax,  on\t the
\nbasis of or by virtue of any of the said Rules, which is not
\notherwise due.\tIndeed, none of these Rules provide for levy
\nof any tax as such.  Their operation is operation is limited
\nto what they say.\n<\/p>\n
     The  counsel for the appellant relied upon\t the  recent
\ndecision of this court in Civil Appeal No.1031 of 1979\tetc.
\ndecided on February 18, 1992 by a Bench comprising one of us
\nRanganathan,  J. sitting with V.Ramaswami  and\tS.C.Agarwal,
\nJJ.  The said decision also deals with rule 41 but the point
\narising therein was wholly different than the one  concerned
\nherein.\t  We may refer to the facts in Civil Appeal  No.1031
\nof   1979  wherein  the\t respondent  was  Bharat   Petroleum
\nCorporation  Limited.\tIts main activity was  refining\t the
\ncrude\toil   which  belonged  to  another   company.\t The
\nrespondent-dealer  agreed to refine the crude oil  belonging
\nto  such other company and to deliver the  kerosene  derived
\nout of it to it.  That other company alone effected the sale
\nof such kerosene, and not the respondent-dealer.   Sulphuric
\nacid was one of the raw material required by the respondent-
\ndealer,\t on purchase of which it paid tax.  The\t process  of
\nrefining yielded acid sludge which was regularly sold by the
\nrespondent  dealer  to its own purchasers.   The  respondent
\ndealer\tsought\tto set-off the purchase tax paid  by  it  on
\npurchase of sulphuric acid from out of the sales tax payable
\nby  it on the sale of acid sludge.  This was denied  by\t the
\nRevenue.   It is this Controversy which came to this  court.
\nOn  a  literal reading of rule 41 and having regard  to\t the
\nfact   that  acid  sludge  was\tregularly  yielded  by\t the
\nmanufacturing  process undertaken by  the  respondent-dealer
\nwhich was sold by it in its regular course of business, this
\ncourt  held that the respondent-dealer was entitled to\tsuch
\nset-off.   We  are  unable  to\tsee  any  bearing  the\tsaid
\nprinciple  has\tupon  the  issue  in  controversy  in  these
\nappeals.\n<\/p>\n
     For  the above reasons, the Civil Appeals fail and\t are
\ndismissed with costs.\n<\/p>\n
V.P.R.\t\t\t\t\t   Appeals dismissed.\n\t\t\t\t\t\t    697<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Godrej & Boyce Mfg. Co. Pvt. Ltd. … vs Commissioner Of Sales Tax And Ors. … on 30 July, 1992 Equivalent citations: 1992 AIR 2078, 1992 SCR (3) 683 Author: B Jeevan Reddy Bench: Jeevan Reddy, B.P. (J) PETITIONER: GODREJ & BOYCE MFG. CO. PVT. LTD. AND ORS. ETC. ETC. Vs. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-120478","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nGodrej & Boyce Mfg. Co. Pvt. Ltd. ... vs Commissioner Of Sales Tax And Ors. ... on 30 July, 1992 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/godrej-boyce-mfg-co-pvt-ltd-vs-commissioner-of-sales-tax-and-ors-on-30-july-1992\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Godrej & Boyce Mfg. Co. Pvt. 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