Set-off under Rule 42H was unavailable for export-related sales outside the State sales tax net.

Rule 42H of the Bombay Sales Tax Rules, 1959 did not allow set-off for sales covered by Form N-14B, because that mechanism applied only to transactions within the Bombay Sales Tax Act, 1959 levy. Sales treated as in the course of export under Section 5(3) of the Central Sales Tax Act, read with Rule 21A and Form N-14B, were outside the State sales tax net and therefore not eligible for drawback or set-off. A harmonious reading with Section 75 of the Bombay Sales Tax Act confirmed that export sales and other excluded transactions could not be brought within Rule 42H merely because the earlier explanation to the rule was absent for the relevant period.

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Issues: Whether set-off under Rule 42H of the Bombay Sales Tax Rules, 1959 was admissible where the goods sold were covered by Form N-14B, i.e. a declaration relating to sales deemed to be in the course of export.

Analysis: Rule 42H granted drawback or set-off only in respect of sales that remained within the ambit of the Bombay Sales Tax Act, 1959. Sales falling outside the State sales tax net, including sales covered by the export-related mechanism under Section 5(3) of the Central Sales Tax Act, 1956 read with Rule 21A and Form N-14B, were not intended to be brought within Rule 42H. The provisions had to be read harmoniously with Section 75 of the Bombay Sales Tax Act, 1959, which excluded from tax any sale or purchase taking place in the course of export, inter-State trade, or outside the State. The absence of the earlier explanation in Rule 42H for the relevant period did not alter this construction, because the rule was never meant to extend set-off to transactions already outside the State tax regime.

Conclusion: Set-off under Rule 42H was not admissible for sales covered by Form N-14B. The question was answered against the assessee and in favour of the Revenue.

Final Conclusion: The reference was disposed of by upholding the Tribunal's view that Rule 42H could not be invoked for sales excluded from the Bombay Sales Tax levy by reason of their export character.

Ratio Decidendi: A set-off provision confined to sales within the State sales tax levy cannot be extended, on a harmonious reading of the statutory scheme, to sales that are already excluded from tax as export sales or otherwise outside the taxing net.

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