Set-off reduction under sales tax rules applies to the full sale price of finished goods despatched outside the State.

Rule 41 and rule 41A of the Bombay Sales Tax Rules, 1959 were construed to require reduction of set-off by 1 per cent with reference to the sale price of the finished goods despatched to a dealer's branch or agent outside the State and actually resold there. The explanation and proviso were read as applying to the manufactured goods themselves, not to the value of locally purchased raw materials or packing materials used in manufacture. On this construction, the computation was to be made on the full sale price of the goods so despatched, unless the rule expressly provided another allocation.

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Issues: Whether, under rule 41 and rule 41A of the Bombay Sales Tax Rules, 1959, the reduction of set-off by 1 per cent was to be computed on the entire sale price of the finished goods despatched to branches or agents outside the State, or only on the portion attributable to locally purchased raw materials and packing materials.

Analysis: The explanation to rule 41 widened the meaning of "sale" to include sales of manufactured goods despatched to a dealer's own place of business or to an agent outside the State and actually resold there. The first proviso dealt with despatch of the manufactured goods themselves, and clause (iii) expressly required reduction of set-off by 1 per cent of the sale price of the goods so despatched. On a plain reading, the words used referred to the finished goods despatched and sold, not to the raw materials consumed in manufacture or to a proportionate allocation of their value. The same construction applied to rule 41A, as its explanation and proviso were materially similar for the purpose in issue.

Conclusion: The reduction had to be computed on 1 per cent of the sale price of the finished goods despatched, not merely on the value attributable to locally purchased raw materials or packing materials. The answer was against the assessee and in favour of the Revenue.

Ratio Decidendi: Where a taxing rule provides for reduction of set-off by a percentage of the sale price of goods so despatched, the computation must be made with reference to the finished goods actually despatched and sold, unless the rule itself expressly directs a different allocation.

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