TaxTMI 
TaxTMI 
2025 (11) TMI 1088
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....d by the Maharashtra Sales Tax Tribunal ("Tribunal" for short). The common question referred reads thus:- "Whether on the facts and in the circumstances of the case, and on the correct interpretation of Rule 41-D of Bombay Sales Tax Rules, 1959, the full set-off is available under Rule 41D main provision or the set off is available after reducing 6 per cent of purchase price under sub-rule 3(a) of Rule 41D on purchases of furnace oil used in manufacture of goods partly sold locally and partly transferred to branches outside the state?" 3. This Court is confronted with the above two Sales Tax References ("STR" for short) for adjudication/determination. STR No. 9 of 2011 arises from the proceedings preferred by the Assessee ("Borosil" for short) against the judgment and order dated 30 April 2002 ("Impugned Order" for short) passed by the Tribunal. The Tribunal, vide the said Impugned Order, has allowed set off to Borosil by reducing 6% of purchase price from the taxes paid on purchase of furnace oil, which is used in the manufacture of taxable goods transferred to the branches of Borosil, under Rule 41D of the Bombay Sales Tax Rules, 1959 ("Sales Tax Rules" for short). ....
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....at the furnace oil is "goods which are dispatched" as it appears in Rule 41D(3)(a) of the Sales Tax Rules. 8. In the above context, Mr Patkar would urge that if the furnace oil was supposed to be brought into operation in Rule 41D(3)(a) of the Sales Tax Rules, the legislature would have used the expression "purchases which are used in the manufacture of goods dispatched". However, the legislature has consciously chosen to use different language in the set of rules, which cannot be overlooked, much less ignored. 9. Mr Patkar, in support of his submission, would rely on the decision of the Supreme Court in The State of Madras v. Swasthik Tobacco Factory 1966 17 STC 316 SC, where the Supreme Court had the occasion to deal with the question whether excise duty paid in respect of "goods sold" as per Rule 5(1)(i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939 included excise duty paid not only in respect of finished product or also excise duty paid in respect of raw material used in the manufacture of the finished product. The Court held that "goods sold" in Rule 5(1)(i) can only mean the finished product and not the raw material which are different goo....
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....t is not possible to apportion between permissible and non-permissible sales. Mr. Patkar has relied on the decision of M/s. International Chemicals Co. Vs. State of Maharashtra Second Appeal No. 1466 of 1980 decided on 7 August 1981 to buttress that furnace oil cannot be apportioned between permissible and non-permissible sales. Thus, the decision of the Larger Bench of the Tribunal in M/s. Pudumjee Pulp (Supra) is flawed as it failed to consider the aforesaid two decisions of this Court. 13. Mr. Patkar would submit that when Rule 41D of the Sales Tax Rules came into force, the Tribunal followed the previous judgments starting from M/s. International Chemical Co. (Supra) and held that furnace oil cannot be apportioned at all and therefore full set-off ought to be allowed. In fact the Revenue accepted the principle of non-apportionability and thus it is not open for them to take a contrary stand. This is also because the decision in M/s. Mahalaxmi Steel Industries vs State of Maharashtra Second Appeal 1297 of 1991 decided on 23 April 1993 has not been assailed by the Revenue. 14. Mr. Patkar would submit that the Tribunal in Larger Bench decision in M/s. Pudumjee Pulp (Supra) d....
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...., M/s. Godrej Food Ltd. Vs. State of Maharashtra STR No. 1 of 1997 decided on 14 January 1998, Union of India vs. Satish Panalal Shah 2002 1 SCC 605, Collector of Central Excise & Customs vs. P.M.P. Components Ltd. 2005 12 SCC 242 and M/s. Wipro Limited, Amalner vs. The State of Maharashtra SA No. 727 of 1989 decided on 21 December 1996 to hold that once the Revenue accepts a view in one case by not challenging it, it cannot discriminate against other Assessees, by taking a different view. Thus, Mr. Patkar would submit that Borosil is being singled out and discriminated against. 18. Mr. Patkar would urge that there was no justification in the Impugned Order of the Tribunal dated 30 April 2002 to apply the pro-rata formula of apportionment. The Tribunal in the given case, erred in directing reduction of set-off to the extent of 6% of purchase price of furnace oil with respect to branch transfer. Mr. Patkar further relies on the decision of K. Damodarasamy Naidu & Bros Vs. State of Tamil Nadu & Anr. 2000 (1) SCC 521 to submit that the State was injuncted from taxing until an appropriate formula was legislatively enacted, like in the present case also where an evolution of formula ....
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....y to the meaning and purport thereof, which cannot be legally accepted. This is in as much as the given case deals with a situation of purchase of furnace oil to be used in the manufacture of final product and not purchase of plant and machinery, in any manner and whatsoever. 22. Ms. Chavan then submits that furnace oil is consumable in the manufacture of the final product. Thus, it falls under Entry-(C-II-41A) whereas machinery and parts, components and accessories of plant and machinery fall under Entry-(C-II-44A), whereas boiler falls under Entry-(C-II-73(a)). In light of such distinct and clear classification for these items, Ms. Chavan would contend that the submission of Mr. Patkar that furnace oil is synonymous to plant and machinery would be in the teeth of such clear classification as provided under the extant statutory framework. 23. Ms. Chavan would submit that the assessment order dated 20 February 1996 for the period 01 April 1992 to 31 March 1993 was passed after examining the Borosil's manufacturing activity. This comprised of sales within the State and branch transfers outside the State. The Assessing Officer duly recorded that 61% of the total turnover repres....
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....r dated 30 April 2002 has correctly interpreted Rule 41D of the Sales Tax Rules. The Tribunal has applied its mind to the meaning and purport of Sub Rule 3(a) of Rule 41D of the Sales Tax Rules which was the subject matter of interpretation and consideration before the Tribunal, then. Accordingly, the Tribunal went by the clear and unambiguous language of the Sub Rule 3(a) of Rule 41D of the Sales Tax Rules which expressly stipulated that with effect from 1 July 1982 the aggregate of such amount shall be reduced by 6% of such purchase price. 27. Ms. Chavan submits that the Tribunal in the Impugned Order dated 30 April 2002 has rightly observed that, at the highest, boiler can be said to be machinery but not furnace oil, which can be classified as consumable, as it is consumed in producing the heat by way of burning in the boiler. Accordingly, for the purpose of granting set-off, the purchase of furnace oil as provided under Rule 41D(3)(a) of the Sales Tax Rules can be bifurcated into two parts one used for the product sold and the other for product transferred to the branches of the Assessee. Thus, it is Sub-Rule 3(a) of Rule 41D of the Sales Tax Rules which is clearly applicabl....
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....rule: Provided further that where such manufacture results in the production of taxable goods as well as goods other than taxable goods, then such drawback, set-off, or as the case may be, the refund, in so far as it pertains to purchases of Goods other than plant and machinery, shall be apportioned as between taxable goods and goods other than taxable goods on the basis of the sale prices of such manufactured goods and shall be allowed only to the extent that it pertains to the taxable goods manufactured. (2) For the purpose of this rule the expression "export" shall include - (i) a sale in the course of inter-State trade and commerce or in the course of export of the goods out of the territory of India, where such sale occasions the movement of the goods from the State. (ii) despatches made by the claimant dealer to a person outside the territory of India, with a view to selling the goods to the said person and the said goods have actually been sold to him within the period of one year from the date of despatch, and (iii) despatches made by the claimant dealer to his own place of business or to his agent outside the State where the cla....
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....1D of the Sales Tax Rules in its proper perspective. In this context, the said Rule makes it clear that it contemplates bifurcation for set-off in the proportion of taxable goods and tax free goods, in the event the manufacturing process results into taxable goods, as in the present case. However, the said extant Rule 41D does not provide for bifurcation in the case of plant and machinery, its parts and components as is clear from the plain language of the second proviso, as noted above. Therefore, there is no ambiguity in the said provision neither does it leave any room for interpretation in light of the expressly clear language impregnated therein. 34. The submission of Ms. Chavan that furnace oil, and plant and machinery i.e. Boiler in the given case along with its components and accessories fall within different classification entries does not appear to be disputed. Thus, these are distinct and different and cannot be intermingled or mixed with one another. Such position is further fortified by the decision of the Tribunal in the case of M/s. New Era Fabrics Pvt. Ltd. Vs. The State of Maharashtra Second Appeal No. 930 of 1993 dated 19 July 1997 and M/s. Polyolefins Industri....
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....he case of Hanuman Vitamins Pvt. Ltd. (Supra). It cannot be overlooked that in the case of Borosil, we are concerned with furnace oil and its use as a consumable in the manufacture of finished products, which is different from the fact situation from Hanuman Vitamins Pvt. Ltd. (Supra). 38. The decision in the case of M/s. New Era Fabrics Pvt. Ltd. (Supra) and M/s. Polyolefins Industries Ltd. (Supra) dealt exactly with furnace oil and its use in plant and machinery which is therefore rightly followed by the Larger Bench decision of the Tribunal in M/s. Pudumjee Pulp (Supra). Thus, reliance on the decision of the Tribunal in Hanuman Vitamins Pvt. Ltd. (Supra) does not support the case of Borosil, in the given facts. 39. We are inclined to accept the reasoning of the Larger Bench decision of the Tribunal in M/s. Pudumjee Pulp (Supra) in the above context. This is because it cannot be disputed that plant and machinery do not get consumed in the process of manufacturing the finished product in the given case. The purchase price of such machinery, i.e. boiler, as in the given case that remains a fixed asset, will, therefore, have no nexus with the goods dispatched. 40. Moreover,....
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....ue of impossibility would need to be gone into, at this stage. This is to be also viewed in light of the Larger Bench decision of the Tribunal in M/s. Pudumjee Pulp (Supra). 43. To answer the above, we would advert to the submission of Ms. Chavan who has pointed out that the Assessment Order dated 20 February 1996 clearly records that, in any event, apportionment has been done in the case of Borosil. The relevant portion of the findings in this regard from the said order, reads thus :- "19. For working out set-off the ratio of branch transfer to net sales out of manufacturing activity is taken. The same is at 61% of net sales out of mfg. And 39% out of branch sales. In respect of fuel, same is a consumable and is not governed by the words stated under the rule 41D in respect of machinery, machinery components parts, accessories thereof from 1.7.81 and 1.4.88 respectively. Hence for working set off on fuel, apportionment is done. The set-off 41D is allowed at Rs. 36,11,373/. 20. Taxes payable after adjustment of set-off comes to Rs. 1,42,62,672/-. The taxes Paid with returns is Rs. 1,49,86,710/-. The payments are late, interest u/s 36(3) is levied At Rs. 13,068/....
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....he said decisions would reveal that those decisions of the Tribunal were in the peculiar facts in those cases which cannot be plucked mechanically and juxtaposed to the given factual matrix. Mr. Patkar would submit that the Revenue by not challenging the decision in M/s. Mahalaxmi Steel Industries (Supra) has accepted the said decision. In this regard, he would rely on the decision of Satish Panalal Shah (Supra) and Collector of Central Excise & Customs (Supra). However, it is settled law that merely by not assailing a decision in a particular case which was in the context of a factual position in the given factual complexion of that case, cannot be stretched to the extent of discrimination by the Revenue against Assessees in all other cases. This cannot be accepted nor can be countenanced. In any event, such aspects are duly dealt with in the Larger Bench decision of the Tribunal in M/s. Pudumjee Pulp (Supra) from which, in our view a departure is not called for, as also indicated above. 47. Mr. Patkar contends that the crucial decisions of a Coordinate Bench of this Court in Berar Oil Industries (Supra) and Amar Dye Chem Ltd. (Supra) were not placed for consideration before th....
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....e Larger Bench which has observed that just like raw material and packing material furnace oil, also has a nexus with the goods manufactured. This is in as much as furnace oil is undoubtedly used/consumed in the machinery but cannot be equated with the machinery itself. The manufactured goods are despatched to branches and therefore the furnace oil used in such goods have nexus to the goods despatched to the branches of Borosil. The quantum of raw material, packaging material and furnace oil to be used would depend upon the quantity of goods to be manufactured. For such reasons, it is not improbable, much less impossible to take a view that the furnace oil would not have a nexus with the goods despatched. 51. In the above context, considering the fact that the furnace oil is indeed used as a consumable in the manufacture of finished products, it cannot be ruled out that the same would constitute a part of the goods which are dispatched to the branches of Borosil. Thus, Mr Patkar's submission and interpretation in the context of Sub-Rule 3(a) of Rule 41D of Sales Tax Rules that furnace oil cannot be "goods which are dispatched" does not persuade us. In this context, the said Sub ....
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....ogical code, whereas every lawyer must acknowledge that the law is not always logical, at all. Such dictum was approved and followed by the Supreme Court by in several cases including Sarv Shramik Sangh vs. State of Maharashtra (2008) 1 SCC 494 and Bihar School Examination Board vs. Suresh Prasad Sinha (2009) 8 SCC 483. 54. In regard to the above, the logical corollary would be to apply the provisions of Rule 41D(3)(a) of the Sales Tax Rules as it stands, without reading it down, on the purchase of furnace oil in proportion to the finished goods despatched to the branches of Borosil. We do not find it legal or proper to go behind the factual findings in the given proceedings, more so, in the absence of any perversity, much less illegality. In fact, both the Tribunal in the Impugned Order dated 30 April 2002 and the Larger bench of the Tribunal in M/s. Pudumjee Pulp (Supra) have correctly interpreted the Rule and Sub- Rule strictly following the principles of strict interpretation. Considering the expression "goods which are despatched" as it appears in Sub Rule 3(a) of Rule 41D of the Sales Tax Rules, we have already expressed our view above. Therefore, any other interpretati....
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....70 and thereafter, it was observed as follows :- "In other words, under the first principle a casus omissus cannot be supplied by the Court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute." 58. In this context, it would be apposite to refer to another decision of the Supreme Court in the case of Reserve Bank of India vs. Peerless General Finance and Investment Co. Limited (1987) 1 SCC 424, wherein it was observed thus :- "Interpretation must depend on the tax and the context they are the bases of interpretation one may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. ..........
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....ssistance to him, in the given factual complexion. 63. Mr. Patkar has been at pains to submit that a position holding the field for 22 years with regard to non-segregability and impossibility of apportionment ought not to be disturbed. He would submit that the Larger Bench of the Tribunal in M/s. Pudumjee Pulp (Supra) had absolutely no material, much less, no evidence on such pure findings of fact i.e., cost of production of furnace oil etc. Despite that, the Larger Bench of the Tribunal refused to grant full set-off to the Assessee, by its judgment. In this context, we may reiterate that the question of reference to be decided by this Court revolves specifically around the interpretation of Sub Rule 3(a) of the Rule 41D of the Sales Tax Rules. 64. We do not find that for all these years such issue had come up for consideration, much less adjudication before a judicial forum. The Larger Bench of the Tribunal in M/s. Pudumjee Pulp (Supra) has categorically observed that the issue of interpretation of Rule 41D(3)(a) of Sales Tax Rules, was never raised earlier. It further recorded that as pointed out by the learned counsel from both sides, the dispute was centralized on the app....