TaxTMI 
TaxTMI 
2016 (9) TMI 610
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....at Sales Tax Rules, 1970 on purchase of prohibited goods as defined in clause 21(2) of the Gujarat Sales Tax Act, 1969 namely, spare parts and accessories of electric motors used in the manufacture of water pumps? 2. Brief facts are as under : 2.1 For the assessment period 1980-81, the Assessing Officer framed assessment in case of the respondent - company in which he disallowed the set-off under Rule 42 of the Gujarat Sales Tax Rules,1970 (for short 'the Rules') on purchase of spares of electrical motors used in manufacturing pumping set and sold as pumping set in which the electric motors were fitted. The assessee had made purchases of such spares which fell under entry-26 of Schedule-IIA to the Gujarat Sales Tax Act,1969 (for short....
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....d for the respondent. 4. In view of the facts on record, we may test the contention of learned AGP on the basis of statutory provisions. Section 2(21) of the Act defines term 'prohibited goods'. At the relevant time, Section 2(21) provided that prohibited goods means goods described in entries 26, 39, and 43 of Part-A of Schedule-II or in entries 1 to 4 in Part-B of Schedule-II and such other goods as the State Government may by notification in official gazette specify. This definition of prohibited goods would therefore, include entry-26 of Schedule IIA which contain the following entry 'electric motor and spare parts and accessories thereof'. 5. Rule 42 of the Rules pertains to drawback, set off or refund of tax for the goods purcha....
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....oods used by him in manufacture. So far as fulfillment of conditions Nos.1 and 3 contained in the said rule is concerned, there is no dispute. Our focus would be therefore, to ascertain whether the assessee fulfilled conditions Nos.2 and 4. As noted, condition No.2 was that the goods purchased should not be prohibited goods. In other words, if the goods purchased fell within the definition of prohibited goods as defined under Section 2(21) of the Act, condition No.2 would be breached. However, the proviso as it stood at the relevant time provided that such condition shall not apply in respect of purchasing of any of the goods as described in entries-26, 39 and 43 in Schedule-IIA, where such goods are used by the assessee in manufacture of a....
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....ld have to be tested independently by examining whether the goods so manufactured have been sold in the State of Gujarat or in the course of inter-State trade etc. The 4th condition has therefore a direct relation to the main body of the rule which provides that in assessing the tax payable by a manufacturer, the Commissioner shall subject to conditions grant him drawback, set off or refund of the whole or any part of the tax in respect of purchase of goods used by him in manufacture. The moment therefore the raw material is used for manufacture by an assessee and subject to other conditions being fulfilled, has been sold in the State of Gujarat or in the course of inter-State trade etc., Rule 42 would enable him to claim drawback, set off ....