Tax set-off requires actual recovery, not mere book entries or unpaid debit notes under the sales tax rule.

In construing rule 41-A(a) of the Bombay Sales Tax Rules, 1959, the Bombay HC read the word "recovered" to require actual receipt of the tax amount, either by cash payment or by a real adjustment against an existing liability. The court distinguished "recovered" from "recoverable" and relied on the rule's use of both "paid" and "payable" to show that different expressions were intended to carry different meanings. Mere debit notes or book entries in the vendor's accounts, without payment or effective adjustment, do not satisfy the recovery requirement for set-off.

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Issues: Whether the word "recovered" in rule 41-A(a) of the Bombay Sales Tax Rules, 1959 means only amounts actually received by cash payment or adjustment against an existing liability, or whether mere debit entries in the vendor's account books amount to recovery.

Analysis: The rule grants set-off only where a sum is recovered from the manufacturing dealer by another registered dealer by way of sales tax or general sales tax. On a plain construction, recovery requires actual payment or a real adjustment against an existing liability. The word "recovered" cannot be treated as equivalent to "recoverable". The use of both "paid" and "payable" in the rule indicates that the rule-making authority intended different meanings for those expressions. Mere debit notes or book entries, without cash payment or adjustment, do not satisfy the requirement of recovery.

Conclusion: The word "recovered" means actually recovered, namely, actually paid in cash or by adjustment against an existing liability. Mere debit entries in the vendor's books do not constitute recovery. The question is answered against the assessee and in favour of the Revenue.

Final Conclusion: The references were answered by holding that set-off was unavailable on the facts shown, and the parties were directed to bear their own costs.

Ratio Decidendi: For purposes of a tax set-off provision, "recovered" denotes actual receipt or effective adjustment of the tax amount and not a mere debit or booking entry that remains unpaid.

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