One per cent sales tax deduction applies to finished goods sold outside the State, not to input cost attribution.

Section 18B(2) of the Bombay Sales Tax Act, 1953 and rule 11(1A) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954 were construed as granting the prescribed one per cent deduction by reference to the sale price of finished goods sold outside the State. The wording was read as linked to the dealer's sales of manufactured goods, not to a notional or proportionate sale of raw materials, packing materials or containers used in manufacture. The alternative interpretation was rejected because it was inconsistent with the rule's language and scheme. The deduction therefore applied to the finished product's sale price.

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Issues: Whether, under section 18B(2) of the Bombay Sales Tax Act, 1953 and rule 11(1A) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954, the prescribed deduction of one per cent was to be computed on the sale price of the finished goods sold outside the State, or only on the value attributable to raw materials, packing materials and containers used in manufacture.

Analysis: The deduction was held to operate with reference to the finished product sold by the manufacturing dealer, not to a deemed or proportionate sale of the raw materials or packing materials consumed in its manufacture. The language of the rule, read as a whole, linked the relief to the sales tax payable on the dealer's sales of manufactured goods, and the references to the sale of the goods, their transportation outside the State, and the proviso concerning goods used as raw materials or packing materials all supported that construction. The alternative theory of notional sales of inputs was rejected as inconsistent with the wording of the rule and unnecessary for its operation. The same meaning was applied to section 18B(2), which used substantially similar language.

Conclusion: The one per cent deduction had to be calculated on the sale price of the finished goods manufactured or processed and sold outside the State, and not on only that part of the price attributable to locally purchased inputs.

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