Set-off under sales tax rules must be limited to consignment goods; it cannot reduce relief on locally sold goods.

Rule 42 of the Gujarat Sales Tax Rules, 1970 was construed to confine the 3% deduction in the proviso to set-off attributable to goods used in manufacturing consignment-sold goods transported and sold outside Gujarat but within India. The phrase "the aggregate of the amounts" was read in context to refer only to tax-linked relief connected with that category of goods, not to set-off arising from goods used in manufacturing goods sold locally. This construction preserves the object of the set-off scheme, avoids extending the proviso beyond its intended field, and prevents reduction of otherwise admissible relief on locally sold goods.

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Issues: Whether, on the true construction of the proviso to rule 42 of the Gujarat Sales Tax Rules, 1970, the deduction of 3 per cent of the sale price of goods transported and sold outside the State but within India could be made only from the set-off relatable to the tax paid on purchases of goods used in manufacturing those consignment goods, or whether the shortfall could also be adjusted against set-off relatable to goods used in manufacturing goods sold locally.

Analysis: Rule 42 grants a manufacturer drawback, set-off or refund of tax paid on purchases of goods used in manufacture, subject to the general conditions and the further conditions in the rule. The proviso applies where the manufactured goods are sold outside the State but within India after being transported by the assessee to its own place of business or that of its agent, and then requires deduction of 3 per cent of the sale price from the aggregate of the amounts calculated under clauses (A) and (B). Reading the rule as a whole, and applying literal construction in its context, the phrase "the aggregate of the amounts" refers only to the tax-linked relief attributable to goods used in manufacturing the consignment-sold goods. A contrary reading would permit the proviso to operate beyond its legitimate field, reduce relief otherwise available for locally sold goods, and defeat the object of single point levy and avoidance of undue tax burden. The construction adopted also accords with the beneficent nature of the set-off provision and the scheme of the Act.

Conclusion: The deduction under the proviso to rule 42 is confined to the set-off relatable to goods used in the manufacture of goods sold on consignment basis outside the State but within India, and any excess cannot be carried over to reduce set-off on goods sold locally; the answer is in favour of the assessee.

Ratio Decidendi: A proviso requiring deduction from the aggregate of relief calculated under a set-off rule must, when read in the statutory context, be confined to the relief attributable to the very category of goods that triggers the proviso, and cannot be extended to diminish unrelated set-off otherwise admissible.

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