Consumable stores in manufacture: dry-ice used to preserve ice-cream in transit qualified for set-off under sales tax rules.

Dry-ice purchased by an ice-cream manufacturer and used to preserve the product during transit was treated as a consumable store used in manufacture for set-off purposes under rule 42 of the Gujarat Sales Tax Rules, 1970. Applying the test of commercial expediency, the Court held that an activity integral to keeping the finished product marketable can form part of manufacture. Because ice-cream had to be maintained at a specified temperature to preserve its character and saleability, dry-ice used for that purpose was not merely a business but an item necessarily used in the manufacturing and marketing process. Set-off was therefore rightly allowed.

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Issues: Whether dry-ice purchased by an ice-cream manufacturer and used for preserving the product during transportation from the manufacturing centre to the selling centre qualified as consumable stores used in manufacture so as to justify set-off under rule 42 of the Gujarat Sales Tax Rules, 1970.

Analysis: Rule 42 permits set-off only where the purchased goods are used as raw materials, processing materials or consumable stores in the manufacture of taxable goods. Applying the settled test of commercial expediency and the principle that an activity integral to making the finished product marketable may form part of manufacture, the Court held that ice-cream must be preserved at a specified temperature to retain its character during transit. Dry-ice used for that purpose was therefore not a mere facility for business convenience, but an item necessarily used to keep the manufactured goods in saleable condition.

Conclusion: Dry-ice was a consumable store used in the manufacture and marketing of ice-cream, and the set-off under rule 42 was rightly allowed.

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