Purchase tax set-off on cotton seeds used in oil manufacture cannot be denied merely because a tax-free by-product also emerges.

Purchase tax set-off on cotton seeds used to manufacture oil depends on whether the tax-paid goods are employed in producing taxable goods for sale. The emergence of a tax-free by-product, such as khal, does not by itself justify apportionment or denial of full rebate. The article notes that inconsistent tribunal approaches were found unsustainable in light of the Supreme Court's principle, and the matter required fresh reconsideration under that standard. The refusal of relief was therefore not supportable on the existing order.

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Issues: Whether the assessee was entitled to full rebate or set-off of purchase tax on cotton seeds used in manufacturing oil merely because a tax-free by-product, khal, also emerged in the process.

Analysis: The Tribunal had taken inconsistent views in similar matters, and the Court found the impugned refusal of full rebate to be discriminatory and unsupported in light of the governing principle stated by the Supreme Court that the decisive condition for set-off is that the tax-paid goods are used in the manufacture of taxable goods for sale, while concurrent use in producing another item does not by itself justify apportionment. On that basis, the Court held that the matter could not be finally sustained on the existing order and required reconsideration by the Tribunal in accordance with the Supreme Court's exposition.

Conclusion: The assessee was entitled to have the claim reconsidered afresh, and the order denying relief was not sustainable.

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