Deduction for oil manufacture is capped by actual purchase turnover, not notional valuation under the assessment rule.

Rule 18(2) of the Turnover and Assessment Rules allows a registered oil manufacturer a deduction to prevent double taxation on groundnut or kernel used in producing oil. The proviso to rule 18(2) was read as setting an upper limit by reference to the actual purchase turnover attributable to the groundnut or kernel included in net turnover. A notional valuation worked out under the rule cannot itself fix the ceiling, because it is not the relevant turnover for this purpose. The broader claim based on notional value was rejected.

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Issues: Whether, under rule 18(2) of the Turnover and Assessment Rules, the deduction available to a registered manufacturer of oil is confined by the proviso to the actual purchase value of the groundnut or kernel used in manufacture, and not by a notional valuation worked out under the rule.

Analysis: The deduction scheme under rule 5(1)(k) read with rule 18 was intended to relieve the manufacturer from double taxation, namely tax on the purchase of groundnut or kernel and again on the sale of oil manufactured from it. Rule 18(2) grants a deduction based on the statutory formula, while rule 18(4) provides the method of valuation. The proviso to rule 18(2), which limits the deduction to the turnover attributable to the groundnut or kernel used in the manufacture of oil and included in the net turnover, was construed as fixing an upper limit by reference to the actual purchase turnover. A notional value derived from the formula cannot itself be the ceiling, because such notional turnover is not included in the net turnover in the relevant sense.

Conclusion: The deduction is restricted by the proviso to the actual turnover attributable to the groundnut or kernel purchased and used in manufacture, and the petitioner's broader claim based on notional valuation was rejected.

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