1. The facts which have given rise to this Reference under section 34(1) of the Bombay Sales Tax Act, 1953 so far as relevant to this Reference, are that the Respondents are registered as dealers under the said Act. During the course of their business the Respondents purchased wooden logs from unregistered dealers and cut them into planks of varying thickness and dimensions according to the specific requirements of their customers. In respect of the sales made by them to their customers they paid sales tax to the Government during the assessment periods April 1, 1957 to March 31 and April 1, 1958 to March 31, 1959.
2. While these assessment proceedings were pending, the Sales Tax Officer, B Ward, Unit 1, Bombay, who was seized of these proceedings, raised a contention that the Respondents, in converting wooden logs into planks, were manufacturing planks and were not reselling the goods bought by them from unregistered dealers to other dealers, and were, therefore, liable to pay purchase tax on their purchases of logs in addition to paying sales tax on the sales of planks made by them. By this two assessment orders, both dated April 27, 1963, the Sales Tax Officer rejected the Respondent's contention that they wee not a manufacturer, and held that they were liable to pay purchase tax. As appears from the said orders, while the point was being discussed the Respondents claimed in the alternative to set off the purchase tax payable by them against the sales tax which they were liable to pay, this claim of the Respondents was based upon Rule 11 (4) of the Bombay Sales Tax (Exemptions, Set-Off and Composition) Rules, 1964, made in exercise of the powers conferred upon the State Government by section 18B (1) of the said Act. Under that Rule no drawback, set-off or refund is to be granted to a dealer in respect of any amount of tax recovered from him or payable by him on any purchase of goods unless such dealer has maintained a register in the prescribed form in which the particulars of each such purchase and the amount recovered from the dealer by way of tax have been entered in chronological order within ten days from the date of each such purchase and has further furnished the Collector of Sales Tax with a statement in Form (12) annexed to his return for the relevant period within the time prescribed for such return. As according to the Respondents they were not a manufacturer and therefore not liable to pay purchase tax, the Respondents had not filed alongwith their returns for the relevant periods a statement in Form (12). However, when the question whether they were a manufacturer or not arose before the Sales Tax Officer, they claimed before him orally, as appears from the records, that they were entitled to set off the amount of purchase tax which might be assessed against the amount of sales tax payable by them. They further contended that Form (12) was not applicable as the Bombay Sales Tax (Exemptions, Set-Off and Composition) Rules, 1954 were subject to section 42 of the Bombay Sales Tax Act, 1959, which according to them did not prescribe the filing of any statement. This contention of theirs was negatived by the Sales Tax Officer, and no set-off was allowed to them. The appeals filed by the Respondents against the said two assessment orders were dismissed by Assistant Commissioner of Sales Tax by his orders dated January 11, 1964. The revision applications against the said appellate orders filed by the Respondents met with the same fate at the hand of the Deputy Commissioner of Sales Tax who by his orders dated January 28, 1965 dismissed the said applications. Against the Deputy Commissioner of Sales Tax the Respondents went in further revision to the Sales Tax Tribunal upheld the contention of the Respondents and held that notwithstanding the fact the Respondents had not filed statements in Form (12), they were entitled to get a set-off in respect of the purchase tax assessed against them. The ground upon which the Tribunal proceeded was that the Respondents had not acted mala fide and that since it was only by the order of the Sales Tax Officer that they were held to be a manufacturer, the question of claiming a set-off prior to such decision did not arise and, therefore, in the circumstances of the case it was not possible for them to file a statement in form (12).
3. Feeling aggrieved by this judgment of the Tribunal, the Commissioner of Sales Tax filed two applications for Reference, and by its order dated January 23, 1967 the Tribunal consolidated the two Reference and referred the following question to us :
'Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the respondent was entitled for the set-off of purchase tax on he purchases of wooden logs purchased from the unregistered dealers during the periods under assessment despite non-compliance of the mandatory provisions of rule 11(4) of the Bombay Sales Tax (Exemptions, Set-Off and Composition) Rules, 1954 ?'
The above question as framed by the Tribunal is, in our opinion, a contradiction in terms. If the provisions of the said Rule 11(4) were mandatory, non-compliance with the provisions thereof would be fatal to an assessee's claim for set-off. What in substance the Tribunal has held is that the said provisions are not mandatory but directory and that in a given case, even though they have not been complied with, a set-off should be allowed by the assessing authority to the dealer. In view of these findings of the Tribunal, we accordingly reframe the question as follows :
'Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the Respondents were entitled to set-off the purchased tax on the purchase of wooden logs purchased by them from unregistered dealers during the assessment periods April 1, 1957 to March 31, 1958 and April 1, 1958 to March 31, 1959, notwithstanding the fact that they had not filed the statements in Form (12), as required by Rule 11 (4) of the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954 ?'
4. Before we proceed to deal with the correctness of the order of the Tribunal we may mention that in Miscellaneous Petition No. 212 of 1969 - Messrs National Electrical Industries Limited vs. H. B. Munshi and others - filed on the Original Side of this Court decided on November 1, 1974, Mr. Justice Lentin held that Rule 11(4) (a) of the Bombay Sales Tax (Exemption, set-off and Composition) Rules, 1954, to the extent that it laid down a time-limit within a set-off should be claimed by a dealer entitled to a set-off was outside the scope of the rule-making authority of the State Government and was ultra vires the mandatory provisions of section 18B (2) of the Bombay Sales Tax Act,1953. Relying upon this judgment, Mr. Mehta on behalf of the Respondents contended that Rule 11(4) (a) had been declared ultra vires by this High Court. We are unable to accept Mr. Mehta 's submission. The judgment makes it clear that all hat has been struck down from the Rule has been the limit of time within which the set-off could be claimed, and not the other provisions of the said Rule. The judgment further proceeds to state as follows :
'But does this mean, that a dealer entitled to a set-off can claim it at any time he likes at his sweet will and pleasure The answer must be in the negative. He must do so within a reasonable time. What is 'reasonable time' would depend on the facts and circumstances of each case.'
We are informed by Mr. Sanghavi that this judgment is under appeal. We are, however, not concerned today with the question of constitutionality of the said Rule nor with the fact whether any portion of the said Rule has been rightly declared to be ultra vires. Sitting in reference we accept the said judgment for the purposes of this Reference as correct and as laying down the law. We, however, fail to see how this judgment in any way helps the Respondents. What the judgment lays down is that the times limit provided under Rule 11 (4) (a) does not apply since the introduction of such a time-limit is ultra vires the relevant rule-making powers of State Government and that a set-off must be claimed within a reasonable time. So far as the facts and circumstances of the present case are concerned, we are unable to appreciate the approach adopted by the Tribunal. The Tribunal has proceeded upon the footing that until the order of assessment was made by the Sales Tax Officer, the Respondents did not know, and could not possibly know, that the Sales Tax Officer was going to hold that the Respondents were a manufacturer and assess them on that basis. The record shows that that is not correct. In fact, the point whether the Respondents were a manufacturer or not was argued before the Sales Tax Officer. The Respondents, therefore, made a claim for set-off before the Sales Tax Officer. The Respondents, therefore, made a claim for set-off before the Sales Tax Officer. They, however contended that Form (12) was not applicable as the Bombay Sales Tax (Exemptions, Set-off and Composition) Rules, 1954 were subject to section 42 of the Bombay Sales Tax Act, 1959. They had not at any time filed a statement in Form (12) before the Sales Tax Officer. It is true that filing such a statement per se would have prejudiced their contention that they were not a manufacturer, but there was nothing to preclude them from filing it without prejudice to their said contention that they were not a manufacturer. This too they failed to do. Had they filed or applied to file a statement in Form (12) without prejudice to their contention that they were not a manufacturer, and had the Sales Tax Officer then rejected the said statements or refused to take them on the file, we could have held that the Tribunal was justified in coming to the conclusion it did, but as aforesaid the Respondents made no attempt to file such statements. They did not even file or apply to file such statements when they went in appeal to the Assistant Commissioner of Sales Tax or in revision to the Commissioner of Sales Tax. Even there they rested content with their contention that they were not bound to file the statements. The facts and circumstances are clearly against the Respondents.They had an opportunity at each stage to file these statements or at least apply that they be taken on file without prejudice to their main content in that they were not a manufacturer. They have not chosen to do so, and no equity arises in their favour as held by the Tribunal.
5. In the circumstances, we find the Tribunal was wrong in the view it took, and accordingly we answer the question which has been reframed by us in the affirmative.
6. The Respondents will pay to the Applicant the costs of the Reference fixed at Rs. 150.