Strict construction of sales tax exemption proviso: "such manufacture" covers manufacture for sale within the State of Bombay.

The expression "such manufacture" in proviso (a) to rule 5(1)(vii) of the Bombay Sales Tax Rules, 1952 was read in the context of the main clause, which required goods to be used in manufacture and the resulting goods to be sold in the State of Bombay. On that construction, breach of either declared condition attracted the proviso, and the word "sale" took its statutory meaning under the Bombay Sales Tax Act. The proviso therefore applied where purchased goods were not used in manufacture for sale within the State of Bombay, with the result that the assessee's construction was rejected and the Revenue's position accepted.

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Issues: Whether the words "such manufacture" in proviso (a) to rule 5(1)(vii) of the Bombay Sales Tax Rules, 1952 mean manufacture for sale within the State of Bombay.

Analysis: The main clause of rule 5(1)(vii) required the purchasing dealer to certify not only that the goods were intended for use in the manufacture of specified goods, but also that the manufactured goods would be sold in the State of Bombay. On that construction, the expression "such manufacture" in proviso (a) referred back to the entire manufacture contemplated by the main clause. Since the rule operated as an exception in a taxing scheme, its language had to be read strictly, but the text of the rule showed that breach of either of the two declared conditions would attract the proviso. The context therefore did not confine the proviso only to non-use in manufacture, and the word "sale" in the rule was to bear the meaning assigned by section 2(14) of the Bombay Sales Tax Act, 1953.

Conclusion: The words "such manufacture" mean manufacture for sale, that is, sale within the State of Bombay. The answer was therefore against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered by holding that the proviso applied where the purchased goods were not used in manufacture for sale within the State of Bombay, and the taxable turnover could accordingly include the purchase price in the circumstances covered by the rule.

Ratio Decidendi: Where a taxing rule ties exemption to a declared intention of manufacture and sale, the proviso is attracted on breach of any essential component of that declaration, and the expression "such manufacture" takes its meaning from the whole statutory context.

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