STATE OF GUJARAT Vs. WOOD POLYMER LTD

JUDGEMENT

(1.) WHAT is the scope and width of rule 42-A of the Gujarat Sales Tax Rules, 1970 (hereinafter referred to as "the Gujarat Rules"), in the context of the set-off claimed by a new industry of sales tax paid on the purchases of raw materials used in the manufacture of goods sold outside the State is a moot point arising in this reference. Shortly stated, the facts leading to this reference are as under :

(2.) THE assessee-company which is the opponent herein established a factory for manufacturing decorative laminated sheets and industrial laminates in the State of Gujarat. It is common ground that it is a new industry within the meaning of rule 42-A of the Gujarat Rules, and a certificate under item No. 53 of the Government notification issued under section 49 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the Gujarat Act"), was issued in that behalf with effect from 1st February, 1971. THE assessee-company has got its selling depots at various places outside the State of Gujarat, namely, Calcutta, Bombay, Delhi, Coimbatore, Bangalore, Hyderabad and Madras. It is also an admitted position that the assessee-company sold its products partly in the State and partly in the course of inter-State trade and commerce as well as through its selling depots outside the State. THE assessee-company was required to purchase raw materials for its use in the manufacture of its products. THEse raw materials were purchased partly on the strength of declaration in Z form and partly on payment of tax from the Gujrat State during the assessment period commencing from 1st April, 1971, to 31st March, 1972. THE aggregate value of the products manufactured by the assessee-company in the said assessment period was to the tune of Rs. 34,08,847. 00. It is also not in dispute that out of the aforesaid goods, the goods of the value of Rs. 28,70,274. 00 were sold outside the State through its sales depots at the aforesaid places while goods worth Rs. 5,38,273. 00 were sold either in the State or in the course of inter-State trade and commerce. It should be also noted that out of the raw materials purchased on the strength of Z form the materials of the value of Rs. 51,409. 00 were used in the manufacture of decorative laminated sheets sold on consignment basis in the aforesaid assessment period. In the course of the assessment, the assessee-company, therefore, claimed a set-off of the tax paid on the purchases of the raw materials to the tune of Rs. 12,722. 88 under rule 42-A of the Gujarat Rules.

(3.) THE assessee-company contended before the Tribunal that it is not necessary under rule 42-A of the Gujarat Rules that the manufactured goods should have been sold locally or in the course of inter-State trade or commerce or export to qualify itself for claiming set-off of the tax paid on the raw materials used in the manufacture of the goods for sale. In other words, the contention of the assessee-company was that having regard to rule 42-A in the context of the scheme of the set-off in the Act the term "sale" should not have been construed as defined in the Gujarat Act but it should be interpreted to mean as sale in its generic sense. THE Tribunal traced the legislative history for the insertion of rule 42-A in the Gujarat Rules, and having regard to the entire context of the scheme of set-off agreed with the assessee-company that it satisfied all the conditions prescribed in rule 42-A to qualify itself for set-off and it did not commit any breach of the conditions of the declaration in Z form, namely, that it purchased the raw materials for the use in the manufacture of the goods for sale which should not be restricted to sale inside the State or in the course of inter-State trade or commerce or export since otherwise the legislative intent of granting concessional incentives to the new industries would be defeated. THE Tribunal, therefore, held that the assessee-company was entitled to set-off of the amount of tax paid on the raw materials purchased for the use in the manufacture of its products and was also not liable to pay any purchase tax since there was not breach of any conditions with the result that there was no difference in the tax assessed and the tax paid which would expose it to the liability of penalty. THE Tribunal therefore allowed the set-off and set aside the order of purchase tax and penalty.