Machinery for sales tax set-off includes integral plant components that function as part of a complete processing system.

The expression "machinery" in rule 42-A of the Gujarat Sales Tax Rules, 1970 is not limited to a single complete machine; it also covers component units or parts that, in their functional setting, form an integral and necessary part of a complete processing plant. Applying that test, the tanks, condenser and related units purchased for the chemical plant were treated as essential machinery for the manufacturing process rather than unrelated spare parts. The articles therefore qualified for set-off, and the question was answered against the Revenue and in favour of the assessee.

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Issues: Whether the disputed articles purchased for a chemical plant, being component units of a processing system, were "machinery" within rule 42-A of the Gujarat Sales Tax Rules, 1970 so as to qualify for set-off.

Analysis: Rule 42-A grants drawback, set-off or refund to a certified manufacturer establishing a new industry in respect of tax paid on purchases of raw materials, processing materials, machinery or packing materials used in manufacture. The expression "machinery" is not confined to a single complete machine in isolation. On the ordinary meaning of the term and the decided cases, machinery may include a completed machine, a number of completed machines, or parts or members of a machine which, when assembled, form a complete machine. The test is whether the articles, viewed in their functional setting, form an integral and necessary part of a complete processing unit and operate towards a definite manufacturing result. The disputed tanks, condenser and related units were found to be essential components of the plant and not mere unrelated spare parts.

Conclusion: The disputed articles were machinery within rule 42-A and the assessee was entitled to set-off. The question was answered against the Revenue and in favour of the assessee.

Final Conclusion: The reference was answered by holding that component units forming an integral part of a new industrial processing plant can constitute machinery for the purpose of sales tax set-off.

Ratio Decidendi: For the purpose of a tax concession on machinery, the term "machinery" includes component parts or units that, in combination and in their functional setting, form an integral part of a complete machine or processing plant.

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