Purchase price for sales tax deduction must be actual price, not grossed up by purchase tax liability.

For deduction under the second proviso to rule 42 of the Gujarat Sales Tax Rules, 1970, the term "purchase price" means the actual valuable consideration paid or payable for the goods and cannot be inflated by adding a purchaser's purchase tax liability. Rule 42 uses the same purchase price both to compute the aggregate drawback, set-off or refund and to calculate the 2% deduction, so the expression must bear the same statutory meaning in both places. In the absence of express language permitting a notional gross-up, the deduction is to be worked out on the actual purchase price. The reference was answered in favour of the assessee and against the Revenue.

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Issues: Whether, for deduction under clause (i) of the second proviso to rule 42 of the Gujarat Sales Tax Rules, 1970, the purchase price should be taken as the actual price paid by the purchaser or whether it may be grossed up by adding the purchase tax element.

Analysis: Rule 42 grants drawback, set-off or refund on the tax relatable to purchases used in manufacture, and the proviso requires deduction of 2% of the purchase price of the goods considered for such benefit. The expression "purchase price" is not defined in the rule, and under section 2(22) of the Act it means the valuable consideration paid or payable for the purchase, including sums charged by the seller in respect of the goods, but not a notional enhancement by adding a purchaser's later tax liability. The same purchase price used for computing the aggregate benefit under clauses (A) and (B) must also govern the 2% deduction under the proviso. There is no basis in the rule to adopt a grossed-up notional figure for the deduction.

Conclusion: The purchase price cannot be grossed up by adding purchase tax for the purpose of the 2% deduction under the proviso to rule 42; the reference was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Where a taxing rule uses "purchase price" for both computation of benefit and deduction therefrom, the term must bear the same actual, statutorily defined meaning and cannot be artificially increased by a notional tax component unless the statute expressly so provides.

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