Input tax rebate on exempt by-products turns on sale of exempt goods, not on whether they are principal products.

Section 17 of the Karnataka Value Added Tax Act, read with Rule 131, requires apportionment of input tax where a registered dealer makes both taxable and exempt sales. The provision is triggered by the sale of exempt goods, and it does not depend on whether the exempt item is a by-product or a principal product. De-oiled sunflower cake remained a saleable exempt good sold by the assessee, so it fell within the statutory scheme for partial rebate. Applying the literal language of the taxing provision, the Court held that only partial input tax rebate was available and that the High Court's view was incorrect.

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Issues: Whether Section 17 of the Karnataka Value Added Tax Act, 2003 read with Rule 131 of the Karnataka Value Added Tax Rules, 2005 applies to the sale of exempt de-oiled sunflower cake arising as a by-product in the process of extracting sunflower oil, thereby limiting the assessee to partial input tax rebate.

Analysis: Section 17 applies when a registered dealer makes sales of both taxable goods and goods exempt under Section 5, and the provision is triggered by the sale of exempt goods, not by the character of the item as a by-product or manufactured product. Rule 131, especially sub-rule (3), provides the method for apportionment where input tax relates to both taxable and exempt sales. The fact that de-oiled cake emerged during extraction did not take it outside the statutory scheme, since it was a saleable good actually sold by the assessee and exempt from VAT. In a taxing statute, the plain language of the provision must govern, and the literal construction of Section 17 did not produce any absurdity.

Conclusion: Section 17 and Rule 131 applied, and the assessee was entitled only to partial input tax rebate. The view taken by the High Court was incorrect.

Ratio Decidendi: Where a dealer sells both taxable goods and exempt goods, partial rebate of input tax must be determined under Section 17 and the prescribed apportionment rule on the basis of sale of goods, irrespective of whether the exempt goods are by-products or principal products.

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