Mira Industries vs Sales Tax Officer (1) Div. 15
2025 Latest Caselaw 8074 Guj

Gujarat High Court

Mira Industries vs Sales Tax Officer (1) Div. 15 on 19 November, 2025

Author: A.S. Supehia

Bench: A.S. Supehia

                                                                                                            NEUTRAL CITATION




                            C/TAXAP/241/2009                                ORDER DATED: 19/11/2025

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                                   IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                                 R/TAX APPEAL NO. 241 of 2009

                                                            With
                                                 R/TAX APPEAL NO. 242 of 2009
                                                            With
                                                 R/TAX APPEAL NO. 243 of 2009
                                                            With
                                                 R/TAX APPEAL NO. 244 of 2009
                                                            With
                                                 R/TAX APPEAL NO. 245 of 2009
                                                            With
                                                 R/TAX APPEAL NO. 246 of 2009
                                                            With
                                                 R/TAX APPEAL NO. 247 of 2009
                      ==========================================================
                                                      MIRA INDUSTRIES
                                                            Versus
                                                 SALES TAX OFFICER (1) DIV. 15
                      ==========================================================
                      Appearance:
                      MR. UCHIT SHETH, ADVOCATE FOR MRS SWATI SOPARKAR(870) for the
                      Appellant(s) No. 1
                      MS. SHRUNJAL SHAH, AGP for the Opponent(s) No. 1
                      ==========================================================
                          CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
                                and
                                HONOURABLE MR. JUSTICE PRANAV TRIVEDI

                                              Date : 19/11/2025
                                               ORAL ORDER

(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1 At the outset, learned advocates appearing for the respective parties, have submitted that the issue is squarely covered by the decision dated 01.09.2016 passed by this Court in Tax Appeal No. 727 of 2015 with Tax Appeal No. 731 of 2015, the judgement against which the Special Leave to Appeal (Civil) No. 7716-7717 of 2017 has been dismissed by the Supreme Court vide order dated 17.04.2017.

2 The present tax appeals were disposed of by the Co- ordinate Bench vide order dated 18.07.2016, however, the Co-

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ordinate Bench had no occasion to examine the order dated 01.09.2016 passed in Tax Appeal No. 727 of 2015 against which the Special Leave Petition was filed.

3 It appears that the department filed Civil Appeal No. 697-703 of 2020 against the judgement and order dated 18.07.2016 which was allowed by the order dated 24.01.2020 as under:

"Leave granted.

We find that the High Court while allowing the assessees appeal has not considered the judgments relied upon by the Tribunal.

We are also informed by counsel for the parties that the judgment relied upon by the Tribunal, have been the subject matter of further orders passed by the Tribunal and the High Court, which have also not been considered.

We consider the same as sufficient to hold that the impugned order is not sustainable in its present form and that the matter is required to be remanded for fresh adjudication on merits in accordance with law.

The impugned order is set aside and the appeals stand disposed."

4 Thus, on remand the matters are listed today before us.

5 With consent of the learned advocates appearing for the respective parties, the matters are today disposed of in terms of the judgement dated 01.09.2016 passed in Tax Appeal No. 727 of 2015 as identical issue is raised.

6 It appears that the Supreme Court was also aware about the subsequent development and hence the matter was remanded for fresh adjudication. Substantial question of law as framed in Tax Appeal No. 727 of 2015 would remain the same, the same is as under:

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"1. These appeals are filed by the Government. While admitting the appeals, following substantial question of law was raised:

"Whether on the facts and in the circumstances of the case, the Gujarat Value Added Tax Tribunal was justified in holding that the dealer was entitled to set off under rule 42 of the Gujarat 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?"

7 The Co-ordinate Bench in the order dated 01.09.2016 has answered the question of law as under:

"6. In terms of Rule 42 of the Rules, a manufacturer, subject to conditions contained in Rule 47, would be granted drawback, set off or as the case may be refund, of the whole or any part of the tax in respect of purchase of goods 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 any goods described in the said entries. If therefore the goods purchased by a manufacturer dealer were prohibited goods, ordinarily condition No.2 would not be satisfied. However, if such goods fall in any of the entries 26, 39 and 43 and are used by the manufacturer in the manufacture of any of the goods described in the said entries by virtue of the proviso, condition No 2 itself would not apply In other words, in respect of the purchase of goods falling in entries 26, 39 and 43 which are used by the assessee for manufacture of goods described under the said entries, though the goods happened to be prohibited goods, condition No.2 itself would be rendered inapplicable Subtle distinction therefore would be in such a case, it would not be a case of fulfillment of condition No.2 but, its non-applicability altogether.

7 With this background, we may refer to the 4th condition which requires that the goods so manufactured have been sold by the assessee in the State or in course of inter-State trade etc. It can be easily appreciated that Condition Nos.2 and 4 apply independently For example, in case of goods falling in prohibited category not covered by the proviso, condition No.2 would not be satisfied and the benefit of set off would not be available irrespective of the fact

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whether condition No.4 is satisfied or not. Conversely, if the goods purchased are taxable goods not falling within the prohibited category, condition No.2 would stand satisfied and condition No.4 would 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 or refund as the case may be at prescribed rate on the tax paid on such purchases.

8. That being the position, the concern of the department that the raw material used for manufacturing of electric motors were not directly sold by the assessee but, were sold after manufacturing pump sets, would not be valid. Had we been called upon to interpret the second condition alone, perhaps, we would concur the suggestion of the learned AGP that this condition would require manufacture and sale of the same product since the concession is entry specific. However, no such restriction can be read in condition No.4. If find that the moment as per the proviso to the second condition, the assessee used the raw material which was otherwise prohibited but fell within the entry 26 for manufacture of a product, namely, electric motor which also fell within entry 26, applicability of condition No.2 stood ousted, it was thereafter only required to be seen whether condition No.4 was satisfied, which in our opinion, was done.

9. Therefore, the present tax appeals are dismissed."

8 Accordingly, the present tax appeals are allowed in terms of the order dated 01.09.2016 and the substantial question of law is answered in favour of the appellant accordingly.

(A. S. SUPEHIA, J)

(PRANAV TRIVEDI,J) BIMAL /10