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PETITIONER: GODREJ & BOYCE MFG. CO. PVT. LTD. AND ORS. ETC. ETC.

       Vs.

RESPONDENT: COMMISSIONER OF SALES TAX AND ORS. ETC. ETC.

DATE OF JUDGMENT30/07/1992

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) RANGNATHAN, S.

CITATION:  1992 AIR 2078            1992 SCR  (3) 683  1992 SCC  (3) 624        JT 1992 (4)   317  1992 SCALE  (2)107

ACT:      Bombay  Sales Tax Rules, 1959-Rules 41,  41-A-Set  off- Claim by assessee-Legislative intention of.      Bombay Sales Tax Rules, 1959-Rule 41(iii)  Explanation, Proviso  and  Rule  41-A(y)-Set  off  under-One  per   cent- Calculation of.      Bombay  Sales  Tax Act,  1959-Section  61(2)-Reference- Whether constitutionality of a rule can be questioned-Rules, 41, 41A of the Bombay Sales Tax Rules, 1959-Validity of.

HEADNOTE:      The  facts in all the appeals - (C.A.No. 803/1977  C.A. Nos.800-01  of  1977; 3843-47/1983;  and  3849-50/1988  were identical and common question arose. C.A.No.803 of 1977      The appellant was a registered dealer under the  Bombay Sales  Tax  Act, 1959 and it engaged in the  manufacture  of products,  like chocolate, drinking chocolate,  cocoa,  etc. During  the  assessment  years it  purchased  raw  material, packing  material  and containers both within the  State  as well  as outside.  In respect of the raw  material,  packing material   etc.  purchased  from  registered   dealers   the appellant  paid purchase tax to them.  On the  raw  material etc.   purchased from un-registered dealers,  the  appellant paid the purchase tax directly to the Government.  The goods manufactured  by  the apllellant were liable to  sales  tax, when sold within the State.      Rule  41  and Rule 41A of the Bombay Sales  Tax  Rules, 1959 enable the manufacturing dealer to claim set-off of the tax paid by him on the purchase of raw materials from out of the  tax  payable by him on the sale of  goods  manufactured from  out  of  the said raw  material.   The  rules  further provide that in respect of manufactured goods despatched  by the manufacturing dealer to his own place of business or  to his agent outside the State                                                        684 and  actually  sold there, the amount of  set-off  shall  be reduced  by one per cent of the sale price of the  goods  so despatached.   Applying said rule the assessing  authorities made  a deduction of one per cent of the sale price  of  the goods despatched and sold outside the State of Maharasthra.

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    The petitioners’ case was that the raw material, out of which  he  manufactured the goods, was  purchased  not  only within  the State of Maharashtra but also outside the  State of  Maharashtra.   Similarly the goods manufactured  by  him were sold not only within the State of Maharashtra but  also outside  of the State of Maharashtra.  In such a  situation, making a deduction of one per cent of the sale price of  the manufactured goods despatched and sold outside the State  of Maharashtra  amounts  in  effect to levy  of  sales  tax  on purchase  of  raw  material effected outside  the  State  of Maharashtra.   He  also contended that it also  amounts  the levy  of  sales  tax  on goods sold  outside  the  State  of Maharashtra.   He  pleaded for allocation of sale  price  in proportion  in which raw material was purchased  within  and outside the State.      Under  section  61(2) of the Bombay Sales Tax  Act  the following two questions were referred to the High Court:      (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 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 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 shall 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?                                                   685      The  High  Court  answered the  reference  against  the assessee-appellant.   The appellant-assessee challenged  the judgment  of  the High Court in this Court  by  filling  the appeal by special leave.      The appellants reiterated the contentions urged  before the  High Court.  They submitted that the deduction  of  one per  cent,  in effect, amounts to taxing  the  raw  material purchased  outside  the  State  or to  taxing  the  sale  of finished goods effected outside the State Maharashtra. SLP (C) No. 1377/77      The  assessment period was April 1, 1957 to  March  31, 1958.   During  this period the Rule in force was  Rule  11, which too provided for a benefit accompanied by a  deduction as  was provided by Rule 41.  The petitioner contended  that the  position under Rule 11(1A) was not different  from  the one  obtaining  under  Rule 41; that in case  the  rule  was interpreted  in the manner done by the High Court, it  would expose it to the vice of unconstitutionality; that the  said deduction  in  effect  amounted to levy  of  sales   tax  on purchases made outside the State of Maharashtra and had  the effect  of  impinging upon the charging  provisions  of  the Act.      Dismissing the appeals of the  assessee, this Court,      HELD  :  1.01.   The   intention  of  the  rule  making authority  is  to provide a relief to the  dealers  so  that ultimately  the  benefit should percolate  to  the  consumer

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public.   A manufacturing dealer pays purchase tax  when  he purchases  raw material and he is again obliged to  pay  the sales tax when he sells the goods manufactured by him out of the said raw material.  Tax on both the transactions has the inevitable  effect of increasing the price to the  consumers besides  adversely  affecting  the trade.  It  is  for  this reason  that  the Rules 41 and 41A of the Bombay  Sales  Tax Rules,  1959, enable the manufacturing dealer to claim  set- off of the tax paid by him on the purchase of raw  materials from  out  of the tax payable by him on the  sale  of  goods manufactured from out of the said raw material. [691G-692A]      1.02.  The  purport of Rules 41 and 41A is  inter  alia this:  in  respect of manufactured goods despatched  by  the manufacturing dealer to his own place of business or to  his agent outside the State and actually sold there, the  amount of  set-off  shall be reduced by one per cent  of  the  sale price of the goods so despatched. [692B]                                                        686      2.01.   The appellant (manufacturing dealer)  purchases his  raw material both within the State of  Maharashtra  and outside the State.  In so far as the purchases made  outside the  State of Maharashtra are concerned, the tax thereon  in paid to other States.  The State of Maharashtra gets the tax only  in respect of purchases made by the  appellant  within the State.  So far as the sales tax leviable on the sale  of the  goods manufactured by the appellant is  concerned,  the State  of Maharashtra can levy and collect such tax only  in respect  of sales effected within the State of  Maharashtra. It cannot levy or collect tax in respect of goods which  are despatched  by  the  appellant to his  branches  and  agents outside the State of Maharashtra and sold there. [692D-E]      2.02.   In  law  (apart  from Rules  41  and  41A)  the appellant  has  no  legal  right to  claim  set-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,  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.  The rule-making authority could well have denied the benefit to such out-State sale 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. [693G-694A]      2.03. No 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 a  small  abridgement  or curtailment while extending a concession. [694B]      3.  There is no unconstitutionality in the rule,  apart from the fact that question of constitutionality may not  be open  in a reference made under section 61(2) of the  Bombay Sales  Tax Act.  The said Rules do not provide for  levy  of any  tax as such.  Their operation is limited to  what  they say. [695H]      C.S.T.  Bombay  v. Bharat Petroleum  Corporation  Ltd., [1992] 1 SCR 807, distinguished.                                                        687

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JUDGMENT:      CIVIL  APPELLATE JURISDICTION : Civil Appeal Nos.  800- 801 of 1977.      From  the  Judgment and Order dated  24.2.1976  of  the Bombay High Court in Sales Tax Nos. 59 and 60 of 1972.                     WITH      CA Nos. 803/77, 3843-47/88 and 3849-50/88      D.N. Misra for the Appellants.      A.S. Bhasme and Bharat Sangal for the Respondents.      The Judgment of the Court was delivered by      B.P.  JEEVAN REDDY, J. Common questions arise  in  this groups  of civil appeals, for which reason they  were  heard together and are being disposed of under a common  judgment. The judgments under appeal were rendered on references  made under section 61(2) of the Bombay Sales Tax Act, 1959.   The High  Court has answered the questions referred against  the appellants-dealers  and  in favour of the  Revenue.   Hence, these  appeals by them.  Since the facts in all the  appeals are idenctical, it is sufficient if we refer to the facts in Civil  Appeal  No. 803 (N.T.) of 1977 (Cadbury  Fry  (India) Private Limited v. Commissioner of Sales Tax and Anr.).      In Civil Appeal No.803/77, 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 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 Explanation to Rule 41 and clause (y) of  the proviso the Explanation to Rule 41A of the Bombay Sales  Tax Rules,  1959, one per cent should be calculated not  on  the entire                                                        688 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."      The  appellant, a registered dealer under the  Act,  is engaged  in  the  manufacture of various  products  such  as chocolate,  drinking  chocolate,  cocoa  etc,   During   the assessment   years  concerned  herein,  it   purchased   raw material,  packing material and containers both  within  the State of Maharashtra as well as outside.  In respect of  the raw   material,   packing  material  etc.   purchased   from registered dealers the appellant paid purchase tax to  them. In  so far as such raw material etc. was purchased from  un- registered dealers, the appellant was liable to and did  pay the  purchase  tax directly to the  Government.   The  goods manufactured  by the appellant are liable to sales tax  when sold within the State.      In  exercise  of  the Rule-making  power  conferred  by Section  74  of  the  Act,  Rules  have  been  made  by  the Government  of Bombay.  We are concerned in this  case  with only  two rules namely 41 and 41A.  The purport of both  the Rules, in so far as it is relevant for the purposes of these

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appeals    is   concerned,   is   practically    the    same notwithstanding  a good amount of phraseological  difference between them.  Rule 41 applies in respect of purchases  made by  a ‘manufacturing dealer’ like the appellant up  to  15th July,  1962.   From this date onwards, it is rule  41A  that operates.   In  respect of their assessment for  the  period January  Ist,  1960  to  December  31,  1960  the  appellant (manufacturing dealer) claimed set-off under rule 41 whereas for  the period January Ist, 1962 to December 31st, 1962  be claimed it under rule 41A.      Rule 41 and 41A provide for set-off of the purchase tax paid  by  the  manufacturing dealer  on  the  raw  material, packing  material etc. as against the sales tax  payable  on the  sale  of  the goods manufactured by him.  It  would  be appropriate  at this stage to read both these rules,  in  so far as they are relevant for our purpose:          41.  "Drawback,  set-off,  etc. of tax  paid  by  a          manufacturer   (In  respect  of  purchases  up   to          15.6.62).   In assessing the amount of tax  payable          in  respect of any period by a  Registered  Dealer,          who    manufactures   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                                                        689          be,  a  refund of the aggregate  of  the  following          same, that is to say:          (b)..........          (c)...........          (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 affected 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  packingof          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          by  the dealer in his own place of business  or  to          his  agent  outside the State  and  (actually  sold          there).           Provided that where such despatch has been made to          his  place of business or to his agent outside  the          State but within India (i) such despatch shall have          taken  place  within nine  months of  the  date  of          purchase of the goods so used;          (ii)  the  dealer, of his manager or agent  as  the          case may be, is registered under the Central Sales,          1956, in respect of place of business of which  the          goods are so despatched; and          (iii) the amount of drawback, set-off or refund  as          the case may be, shall be reduced by 1 per cent  of          the sale price of the goods so despatched.                                                        690

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        Provided  further that if the dealer shows  to  the          satisfaction of the Commissioner that not more then          1 per cent of the total value of the finished goods          so  despatched was comprised of goods in respect of          which  the drawback, set off or refund is  claimed,          the Commissioner shall not so reduce the amount  of          drawback, set-off or refund."          "41-A (1) Drawback, set-off, etc. of tax paid by  a          manufacturer  in respect of purchases made  [during          the   period  from  15th  July  1962  to  the   day          immediately  preceding the notified day (both  days          inclusive) - In assessing the amount of tax payable          in  respect of any period by the Registered  dealer          [who manufactures taxable goods for sale or export]          (hereinafster  in  this  rule referred  to  as  the          "Manufacturing dealer"), the Commissioner shall, in          respect  of  the  purchases  made  by  such  dealer          [during  the period from 15th July 1962 to the  day          immediately  preceding the notified day (both  days          inclusive)]  of  any goods  specified  in  Schedule          B,C,D or E and used by him within the State in  the          manufacture of taxable goods [which have, in  fact,          been sold by him (and not given away as samples  or          otherwise  or  which have been exported by  him  or          used   by   him  in  the  packing   of   goods   so          manufactured]  grant him a draw-back,  set-off,  as          the  case may be, a refund of the aggregate of  the          following sums, that it to say:          (a)  a sum recovered from the Manufacturing  dealer          by other Registered dealers by way of sales tax, or          general sales or, as  the case may be, both, on the          purchase by him from such Registered dealers,  when          the Manufacturing dealer did not hold a Recognition          or  when  he held a Recognition  but  effected  the          purchase otherwise than against a certificate under          sections 11 of the 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, and                                                        691           [(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          otherwise.)]           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 draw-back, 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

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                        -----------------                                  100          ‘D’  means [the sale price of the goods  despatched          which  have in fact, been sold (and not given  away          as samples or otherwise  or the value of the  goods          despatched  for  use in the  manufacture  of  goods          which have, in fact, been sold (and not given  away          as samples or otherwise) and ‘R’ means the rate  of          tax in force on the sale at the time of despatch of          goods,  in  the  course of  inter-state  trade   or          commerce,  of the same goods under section 8(1)  or          as  the case may be, section 8(2A), of the  Central          Sales Tax Act, 1956;]....."      A  reading of the Rules manifests the intention of  the rule  making  authority.  It is to provide a relief  to  the dealers so that ultimately the benefit should  percolate  to the  consumer  public.   A  manufacturing  dealer  like  the appellant  pays purchase tax when he purchases raw  material and  he is again obliged to pay the sales tax when he  sells the goods manufactured by him out of the said raw  material. Tax  on both the transactions has the inevitable  effect  of increasing the price to the consumers besides                                                        692 adversely  affecting the trade.  It is for this reason  that the aforesaid Rules enable the manufacturing dealer to claim set-off  of  the  tax paid by him on  the  purchase  of  raw materials from out of the tax payable by him on the sale  of goods  manufactured from out of the said raw material.   The Rule  further  provides  - and it is that  aspect  which  is relevant  in  these appeals - that in  respect  manufactured goods  despatched  by the manufacturing dealer  to  his  own place  of  business or to his agent outside  the  State  and actually sold there, the amount of set-off shall be  reduced by  one  per  cent  of  the  sale  price  of  the  goods  so despatched.   This  is the result flowing  from  a  combined reading  of clause (e) of Rule 41 read with the  Explanation and  the Proviso appended to the Explanation.  Same  is  the position flowing from the relevant portions of Rule 41A.      The  contention of the appellant - which  found  favour with  the  Sales  Tax Tribunal - runs  thus;  the  appellant purchases the raw material required by him partly within the State   of  Maharashtra  and  partly  from   other   States. Similarly,  only a portion of the goods manufactured by  him is  sold within the State of Maharashtra.  Bulk of  them  is sold  outside  the State of Maharashtra, though  within  the Country.  Rule 41 provides for setting off the purchase  tax paid  by the appellant on the raw material 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 Maharasthra.  At any rate, the Rules  properly interpreted would mean that "the  percentage which was to 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

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(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 of the  High  Court.) Applying  such a deduction to the entire sale price  of  the manufactured  goods sent to out-State branches,  in  effect, amounts to levy of tax on the raw material purchased outside the State or in any event amounts to levy of tax on sales of finished goods effected                                                        693 outside the State of Maharashtra which is clearly beyond the competence of the State Legislature.      The  High Court did not agree with the  appellant.   It was  of  the  opinion  that  "on  a  plain  reading  of  the Explanation  and  the  first  proviso  thereto,  it  is  not possible to accept the contention advanced before us by  the respondents.   Even viewed from the angle of ordinary  legal notions, it is obvious that what in fact are despatached  by the  manufacturing dealer are the finished goods.   The  raw material which have gone into manufacture of the said  goods are not despatched, some of them can no more be in existence having  been  consumed  in the process  of  manufacture  and others have completely altered in their composition,  nature and  form  and are no more raw  materials  preserving  their individuality  in  the form which they bore when  they  were purchased.   Similarly in the case of packing materials  and containers........ .      Sri  Bobde appearing for the appellants reiterated  the contentions urged before the High Court.  He submitted  that the deduction of one per cent, in effect, amounts to  taxing the  raw material purchased outside the State or  to  taxing the  sale  of finished goods effected outside the  State  of Maharashtra.  We cannot agree.  Indeed, the whole issue  can be  put  in  simpler terms.   The  appellant  (manufacturing dealer) purchases his raw material both within the State  of Maharashtra  and  outside  the  State.  In  so  far  as  the purchases   made  outside  the  State  of  Maharashtra   are concerned,  the  tax thereon is paid to other  States.   The State  of  Maharastra  gets  the  tax  only  in  respect  of purchases made by the appellant within the State.  So far as the sales tax leviable on the sale of the goods manufactured by the appellant is concerned, the State of Maharashtra  can levy  and collect such tax only in respect of  sales  effect within the State of Maharashtra.  It cannot levy or  collect tax  in  respect  of  goods  which  are  despatched  by  the appellant  to his branches and agents outside the  State  of Maharashtra and sold there.  In law (apart from Rules 41 and 41A)  the appellant has no legal right to claim  set-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.                                                        694 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

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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 a small  abridgment or  curtailment while extending a concession.   Viewed  from this  angle, the argument that providing for such  deduction amounts  to levy of tax either on purchases of raw  material effected outside the State or on sale of manufactured  goods effected  outside  the State of Maharashtra  appears  to  be beside  the point and is unacceptable.  So is  the  argument about  apportioning  the sale-price with  reference  to  the proportion  is which raw material was purchased  within  and outside the State.      It  is  not necessary for us to  discuss  the  position obtaining under Rule 41A separately inasmuch as it is agreed by the learned counsel for the appellant Sri Bobde that  the position  obtaining under both the rules, in so far  as  the aspect  in  controversy is concerned, is  substantially  the same, notwithstanding the phraseological difference  between both the rules. S.L.P. (C) No.1377/77:      Leave Granted      The period concerned in this appeal (by Hindustan Lever Limited)  is  April 1, 1957 to March 31, 1958.  During  this period  the Rule in force was Rule, 11, which  too  provided for  a  similar  benefit accompanied by a  deduction  as  is provided by Rule 41.  Sub-rule(1A), which alone is  relevant for our purpose, reads as follows:          "Grant of drawback, set-off or refund of sales  tax          or  general  sales tax or purchase tax  in  certain          cases.          (1A)  In assessing the amount of sales tax  payable          by   a  registered  dealer  who   manufactures   or          processes  or  processes  any  goods  for  sale  in          respect  of any period, the collector  shall  grant          him  a drawback, set-off or refund as the case  may          be, of an amount                                                        695          equal to the aggregate of the sums          (i)  recovered from the dealer by other  registered          dealers by way of sales tax or general sales tax;          (ii) calculated in the manner specified in sub rule          (1) of rule 11_A; and          (iii)  payable as purchase tax under clause (a)  of          section  10  of the purchase of such goods  by  the          dealer;          after deducting therefrom one per cent, and in  the          case of goods falling under entry 23 or 24 Schedule          B  to  the Act, one quarter per cent  of  the  sale          price of any goods manufactured or processed  where          the  sale of the goods takes place at any place  in          India outside the State of Bombay, the goods having          been transported to such place on or after the  Ist          day of July; 1957;          Provided -          (a)  such  goods have been used  as  raw  materials          processing materials, fuel, lubricants,  containers          or   packing  materials  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

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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  inthe 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                                                        696 Act.  To  put  the matter beyond  any  doubt,  Mr.  Dholakia appearing for the State of Maharashtra stated before us that the  State  would never demand or recover any  tax,  on  the basis of or by virtue of any of the said Rules, which is not otherwise due.  Indeed, none of these Rules provide for levy of any tax as such.  Their operation is operation is limited to what they say.      The  counsel for the appellant relied upon  the  recent decision of this court in Civil Appeal No.1031 of 1979  etc. decided on February 18, 1992 by a Bench comprising one of us Ranganathan,  J. sitting with V.Ramaswami  and  S.C.Agarwal, JJ.  The said decision also deals with rule 41 but the point arising therein was wholly different than the one  concerned herein.   We may refer to the facts in Civil Appeal  No.1031 of   1979  wherein  the  respondent  was  Bharat   Petroleum Corporation  Limited.   Its main activity was  refining  the crude   oil   which  belonged  to  another   company.    The respondent-dealer  agreed to refine the crude oil  belonging to  such other company and to deliver the  kerosene  derived out of it to it.  That other company alone effected the sale of such kerosene, and not the respondent-dealer.   Sulphuric acid was one of the raw material required by the respondent- dealer,  on purchase of which it paid tax.  The  process  of refining yielded acid sludge which was regularly sold by the respondent  dealer  to its own purchasers.   The  respondent dealer  sought  to set-off the purchase tax paid  by  it  on purchase of sulphuric acid from out of the sales tax payable by  it on the sale of acid sludge.  This was denied  by  the Revenue.   It is this Controversy which came to this  court. On  a  literal reading of rule 41 and having regard  to  the fact   that  acid  sludge  was  regularly  yielded  by   the manufacturing  process undertaken by  the  respondent-dealer which was sold by it in its regular course of business, this court  held that the respondent-dealer was entitled to  such set-off.   We  are  unable  to  see  any  bearing  the  said principle  has  upon  the  issue  in  controversy  in  these appeals.      For  the above reasons, the Civil Appeals fail and  are dismissed with costs. V.P.R.                                     Appeals dismissed.                                                     697