Furnace Oil Not On Par With 'Plant And Machinery', Unrelated To Goods Dispatched For Complete Sales Tax Set-Off: Bombay High Court

The Bombay High Court on Wednesday held that manufacturers cannot claim full sales tax set-off on furnace oil used in producing goods that are partly sold within Maharashtra and partly transferred to branches outside the state, ruling that a 6% reduction must apply under Rule 41D(3)(a) of the Bombay Sales Tax Rules, 1959. Assessee sought to put forth that Furnace oil is a consumable used in manufacturing but not part of the finished goods dispatched, and therefore, it cannot be apportioned between local sales and branch transfers. The Division Bench comprising of Justice M.S. Sonak and Justice Advait M. Sethna, on applicability of Rule 41D of the Sales Tax Act to furnace oil, endorses the view of Larger Bench of the Tribunal in case of Pudumjee Pulp to state that “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.” Further, the High Court harped on how Rule 41D(3)(a) ought to be interpreted 'contextually' as it appears in the said statutory provision and rejects the submission of assessee that principle applied to 'plant and machinery' is to be applied. Holds thus, furnace oil is not 'plant or machinery' and falls under consumables while citing 'express exclusion' in second proviso to Rule 41D of the Sales Tax Rules The High Court, distinguishing the applicability of the Supreme Court decision in the case of Swasthik Tobacco on facts emphasizes on Rule of Strict Interpretation, language and intent of Rule 41D. Opines thus, “in so far as interpretation of the Rule 41D of the Sales Tax Rules and Sub-Rule 3(a) thereof are concerned….. in interpreting the Rule 5(1)(i) of General Sales Tax Rules, 1939 has interpreted the expression 'in respect of' as 'on' in that case. However, as far as the present Sub-Rule 3(a) of Rule 41D is concerned, it has to be interpreted only in the context of the language and intent of such Sub-Rule.” The High Court reiterated that the price of the furnace oil would have a nexus with the goods dispatched citing the principle that “long-standing precedents ought not to be disturbed”. Further, observes that “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” Thus, upholds Tribunal's view that has allowed set off to Borosil by reducing 6% of purchase price from the taxes paid on purchase of furnace oil, used in manufacturing goods that are partly sold within Maharashtra and partly transferred to the branches of Borosil, outside the state. Case No. : Sales Tax Reference NO. 09 OF 2011 Date of Decision: 12.11.2025 Appearance: Advocates Ishaan V. Patkar, Vinit V. Raje, Roshni Naik appeared on behalf of the assessee, whereas Revenue was represented by Additional Government Pleader Jyoti Chavan. Click Here To Read/download The Order

Furnace Oil Not On Par With 'Plant And Machinery', Unrelated To Goods Dispatched For Complete Sales Tax Set-Off: Bombay High Court

Parul Bose

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