Retrospective tax amendment cannot withdraw accrued set-off benefit where the rule's plain wording covers by-products and scrap.

Rule 41-C was construed on its plain language to allow drawback, set-off or refund where Schedule B goods purchased on payment of tax were used in manufacturing goods within the same Schedule B entry, even if the process also yielded Schedule E goods or scrap as a by-product. Iron and steel scrap was treated as a distinct taxable commodity, so relief could be claimed to the extent iron and steel inputs were proved to have gone into the scrap. The Court further held that the 1990 retrospective amendment could not validly withdraw an accrued and vested tax benefit without a demonstrated overriding public interest or equity, and therefore struck it down as unreasonable, invalid and unconstitutional.

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Issues: Whether section 19 of the Maharashtra Sales, Professions, Luxuries and Sugarcane Tax Laws (Amendment, Levy and Validation) Act, 1990 retrospectively amending rule 41-C of the Bombay Sales Tax Rules, 1959 was constitutionally valid and could deny the benefit of drawback, set-off or refund in respect of tax paid on Schedule B goods used in the manufacture of iron and steel scrap as a by-product or remnant.

Analysis: Rule 41-C, as originally inserted, was held to apply where Schedule B goods purchased on payment of tax were used in the manufacture of goods specified in the same Schedule B entry. The Court read the rule on its plain language and held that it did not restrict the benefit to cases where Schedule B goods were used exclusively in the manufacture of Schedule B goods. It was sufficient if Schedule B goods were used in the manufacture of Schedule B goods, even when the manufacturing process simultaneously produced Schedule E goods and scrap or by-products. The Court further held that iron and steel scrap, when manufactured from iron and steel, remained a distinct taxable commodity within Schedule B, and therefore the manufacturer could claim relief under rule 41-C to the extent of the quantity of iron and steel proved to have gone into the scrap.

Analysis: The Court rejected the contention that the 1990 amendment was merely clarificatory. It held that the amendment sought to take away an accrued and vested entitlement under the unamended rule without any demonstrated overriding public interest or equity. The retrospective amendment was also not justified merely because of earlier Tribunal decisions, since the proper course would have been to challenge those decisions rather than extinguish vested rights by retrospective legislation. The Court distinguished the authorities relied upon by the Revenue and treated the earlier retrospective amendment as impermissible in the absence of a valid basis for withdrawal of the benefit.

Conclusion: Section 19 of the 1990 Act was held to be unreasonable, invalid and unconstitutional, and the petitioners were entitled to establish the quantity of iron and steel used in the manufacture of iron and steel scrap and claim the corresponding benefit under rule 41-C.

Ratio Decidendi: A retrospective amendment cannot validly withdraw an accrued tax benefit under a rule that, on its plain meaning, applies to goods manufactured as main products, remnants or by-products, unless the State establishes a clarificatory basis supported by overriding public interest or equity.

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