COMMISSIONER OF SALES TAX Vs. CADBURY FRY INDIA PVT LTD

JUDGEMENT

(1.) Two question shave been referred to us for our determination in this reference under section 61(2) of the Bombay Sales Tax Act, 1958 (hereinafter referred to as "the said Act"), made at the instance of the Commissioner of Sales Tax These two question are :- 1. 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 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 out-side the State which is attributable to the locally purchased raw material on which the appellants were claiming set-off ?

(2.) 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 Explanation to Rule 41 and clause (y) of the proviso to the Explanation to Rule 41A 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 his branches, but only on the 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 ? 2. The brief facts necessary to be set out in order to know how this Reference came to be made are that the respondents are registered as a dealer under the said Act. The respondents manufacture various products such as chocolates, drinking chocolate, cocoa and other similar products. For the purpose of manufacturing these goods the respondents purchased within the State raw materials as also packing materials and containers for marketing the finished goods. These raw materials, packing materials and containers were purchased by the respondents not only from registered dealer but also from unregistered dealers. In respect of the goods so sold by the registered dealers to the respondents, such registered dealers collected from the respondents the amounts which they would have to pay to the Government by way of tax on the sales of these goods to the respondents. In respect of such goods purchased by the respondents from unregistered dealers, the respondents became liable to pay purchase tax to the Government. Section 74 of the Bombay Sales Tax Act, 1959, confers powers upon the State Government to make rules for carrying out the purposes of the said Act and amongst other matters specifically set out are "any of the matters specified in section 42". In pursuance of this rule-making power the State Government made Rule 41 of the Bombay Sales Tax Rules, 1959 (hereinafter referred to as "the said Rules)" providing for grant of drawback, set-off or refund of tax paid by a manufacturer. By Government Notification in the Finance Department No. STR. 1062/A-1142-XIII dated the 13th October 1962, the State Government inserted Rule 41A in the said Rules providing for grant of drawback, set-off or refund of tax paid by a manufacturer in respect of purchases made on or after the 15th July 1962. By the same Notification Rule 41 was amended so as to provide that the said Rule should apply in respect of purchases made by a manufacturing dealer only upon 15th July, 1962.

(3.) In respect of their assessment for the period from January 1, 1960 to December 31, 1960 the respondents claimed a set-off under the said Rule 41 in respect of tax collected and payable by them, and in respect of their assessment for the period from January 1, 1962 to December 31, 1962 the respondents claimed a set-off under Rule 41A in respect of taxes collected by their vendors and purchase tax payable by them under the said Act in respect of purchase made by them on or after July 15, 1962. Both Rules 41 and 41A provide for a deduction of certain percentage to be made in cases where goods manufactured by a registered dealer are despatched by him to his branches and agents outside the State but within India and sold at such places. According to the respondents, the percentage which was to be so deducted was one percent, 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 finish 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 she finished goods. According to the Department, one per cent. of the sale price that was to be deducted from the amount allowed to the respondents by way of set-off was one per cent. of the sale price of the finished goods so despatched outside the State but within India and sold there.