Set-off on machinery used for manufacturing taxable goods extends to job-work use unless the rule expressly requires sale by the purchaser.

Rule 41-A of the Bombay Sales Tax Rules, 1959 was construed to allow full set-off on machinery used in Maharashtra to manufacture taxable goods for sale, even where part of the machinery's use was for job-work manufacturing for others. The court applied an earlier interpretation of materially similar language and held that the benefit was not limited to goods sold by the purchasing dealer himself at the relevant time. The later amendment requiring sale by the dealer was treated as a change in the rule, not a statement of the prior position. On that basis, the assessees were entitled to the full set-off claimed.

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Issues: Whether a dealer purchasing machinery and using it partly in manufacturing taxable goods for sale by itself and partly for doing job-work on behalf of others was entitled under rule 41-A of the Bombay Sales Tax Rules, 1959 to full set-off of the tax paid on such purchases.

Analysis: Rule 41-A, as it stood at the material time, allowed set-off where the purchased goods were used within the State in the manufacture of taxable goods for sale. The machinery in question fell within the relevant residuary entry in Schedule E and was used in Maharashtra for manufacturing taxable goods. The only dispute was whether the manufactured goods had to be sold by the purchasing dealer himself. The same expression had already been construed in a prior decision dealing with a provision in pari materia, and the earlier construction was applied here. On that construction, the benefit was available both where the dealer manufactured goods for sale by himself and where the machinery was used in manufacturing goods for sale by others on job-work basis. The later amendment requiring sale by the dealer himself was noted as a change in the rule and not as affecting the position at the relevant time.

Conclusion: The respondents were entitled to the full set-off claimed by them, and the question was answered in the affirmative, in favour of the assessees and against the department.

Ratio Decidendi: Where the relevant statutory language permits set-off for machinery used in the manufacture of taxable goods for sale, the benefit is available even if the machinery is partly used for manufacturing goods on job-work for others, unless the rule in force expressly requires sale by the purchasing dealer himself.

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