Set-off claim under sales tax rules can be raised later when existing record supports substantive entitlement.

The HC held that the Tribunal should have allowed the assessee to raise, in reference proceedings, a plea for set-off under rule 42 of the Gujarat Sales Tax Rules, 1970. Because the reassessment findings already showed a linkage between the purchased goods and the local and inter-State sales, the claim could be examined on the existing record without fresh evidence. The absence of an earlier express plea did not defeat the substantive entitlement, especially where the point could have been raised in the alternative during reassessment. The question was answered in favour of the assessee and against the department.

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Issues: Whether the Tribunal was right in law in refusing to allow the assessee to raise, for the first time in reference proceedings, the plea of set-off under rule 42 of the Gujarat Sales Tax Rules, 1970, in respect of tax paid on raw and processing materials and consumable stores used in the manufacture of paper sold locally or in inter-State trade and commerce.

Analysis: The assessee's reassessment proceedings had already produced findings that only a part of the goods purchased without payment of tax under form No. 19 was used in respect of consignment sales outside the State, while the balance of the goods purchased on payment of tax could be correlated to the goods sold locally or in inter-State trade and commerce. On those findings, the claim for set-off under rule 42 could have been entertained on the basis of the material already on record. The absence of an earlier express plea did not destroy the substantive entitlement, because the matter could have been urged in the alternative in the reassessment proceedings and no fresh facts or further evidence were necessary.

Conclusion: The Tribunal was not justified in refusing to permit the assessee to raise the plea of set-off under rule 42, and the question referred was answered in the negative, in favour of the assessee and against the department.

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