Manufacture and resale set-off limits clarified for tanning of hides and skins; debatable legal error barred rectification.

Converting raw hides and skins into dressed hides and skins was held not to be manufacture for set-off purposes because the goods remained covered by the Schedule B description of hides and skins in any raw or dressed state, so the manufacturing-based claim failed. Tanning materials used in that process were also not treated as resold within the statutory sense, as they were consumed in processing rather than sold in the same form, so relief under the resale set-off rules was unavailable. However, rectification was held unwarranted because the alleged error depended on a debatable legal question and was not a mistake apparent from the record.

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Issues: (i) Whether converting raw hides and skins into dressed hides and skins amounted to manufacture for claiming set-off under rule 41-A of the Bombay Sales Tax Rules, 1959; (ii) Whether tanning materials used in that process could be treated as resold so as to attract set-off under rules 42 and 43 of the Bombay Sales Tax Rules, 1959; (iii) Whether rectification under section 62 of the Bombay Sales Tax Act, 1959 was justified for withdrawal of the set-off earlier granted.

Issue (i): Whether converting raw hides and skins into dressed hides and skins amounted to manufacture for claiming set-off under rule 41-A of the Bombay Sales Tax Rules, 1959.

Analysis: The definition of manufacture in section 2(17) of the Bombay Sales Tax Act, 1959 is wide, but rule 3(xviii) excludes processes applied to goods already described in Schedule B. Hides and skins are covered by entry 4 in Part II of Schedule B as hides and skins whether in a raw or dressed state. The process of tanning and dressing did not take the goods out of that description, so the statutory exception applied.

Conclusion: The process was not manufacture for the purpose of rule 41-A, and the claim for set-off failed.

Issue (ii): Whether tanning materials used in that process could be treated as resold so as to attract set-off under rules 42 and 43 of the Bombay Sales Tax Rules, 1959.

Analysis: Rules 42 and 43 apply only where the goods purchased are resold, and resale under section 2(26) of the Bombay Sales Tax Act, 1959 contemplates sale in the same form or without a process amounting to manufacture. The tanning materials were consumed in the manufacturing process and were not resold in the statutory sense.

Conclusion: The tanning materials could not be treated as resold, and no relief was available under rules 42 and 43.

Issue (iii): Whether rectification under section 62 of the Bombay Sales Tax Act, 1959 was justified for withdrawal of the set-off earlier granted.

Analysis: Rectification under section 62 is confined to mistakes apparent from the record, meaning obvious or glaring mistakes and not issues requiring detailed legal inquiry. The question whether the assessee was a manufacturer and entitled to set-off was a long-debated and arguable question of law, and therefore any error in the original allowance was not apparent from the record.

Conclusion: Rectification under section 62 was not justified, and withdrawal of the set-off could not be sustained.

Final Conclusion: The references were answered partly against the assessee on the substantive set-off issues, but in its favour on the rectification question, with no order as to costs.

Ratio Decidendi: Where a statutory exclusion removes a process from the scope of manufacture, the dealer cannot claim manufacture-based set-off, and a debatable question of law on that point is not a mistake apparent from the record for rectification.

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