2004 (12) TMI 652 - HC - VAT and Sales Tax

Court affirms set-off for ice-cream manufacturer purchasing essential dry-ice under sales tax rules

Commissioner of Sales Tax Versus Vadilal Dairy Frozen Food Industries

Commissioner of Sales Tax Versus Vadilal Dairy Frozen Food Industries - [2006] 146 STC 9 (Guj) Issues:Interpretation of rule 42 of the Gujarat Sales Tax Rules, 1970 regarding set-off on purchase of dry-ice for manufacturing ice-cream.Analysis:The Gujarat Sales Tax Tribunal referred a question of law under section 69 of the Gujarat Sales Tax Act, 1969 to determine the justification of allowing set-off under rule 42 of the Gujarat Sales Tax Rules, 1970 on the purchase of dry-ice by the opponent, who is a manufacturer of ice-cream. The Tribunal upheld the contention of the assessee, based on the decision in a similar case, that the activity of manufacture includes everything done up to making the manufactured product available for sale. The Tribunal considered dry-ice as a consumable store necessary for preserving ice-cream during transportation, applying the principles of commercial expediency.Rule 42 of the Rules specifies conditions for granting set-off to a manufacturer, including the use of goods as raw materials, processing materials, or consumable stores in the manufacture of taxable goods. The Court referred to a previous case involving the purchase of twine for packing manufactured goods, where it was held that items integral to the manufacturing process, even if not raw materials, could be considered consumable stores if essential for the commercial viability of the manufacturing activity.Applying the principles established in previous cases, the Court found that dry-ice, used by the assessee for preserving ice-cream during transportation, qualifies as a consumable store under rule 42. The Court concluded that the Tribunal was justified in allowing the set-off on the purchase of dry-ice, as it met the criteria of being essential for maintaining the characteristics of the manufactured product and ensuring commercial viability. Consequently, the Court answered the question in the affirmative, affirming the Tribunal's decision to grant the set-off.In conclusion, the judgment clarifies the interpretation of rule 42 in the context of claiming set-off on the purchase of consumable stores for manufacturing taxable goods. It emphasizes the importance of commercial expediency in determining the eligibility for set-off and upholds the Tribunal's decision to allow the set-off on the purchase of dry-ice for preserving ice-cream during transportation.