GODREJ & BOYCE MFG.CO.PVT.LTD. vs COMMISSIONER OF SALES TAX

The Supreme Court examined the validity of Rule 41 and Rule 41A of the Bombay Sales Tax Rules, 1959, which allow manufacturing dealers to claim set-off on taxes paid for raw materials. The Court held that the deduction of one percent from the sale price of goods sold outside Maharashtra effectively imposes a sales tax on purchases made outside the state, which is unconstitutional. The Court ruled that the set-off should be calculated based on the proportion of raw materials purchased within and outside the state, thereby affirming the need for fair allocation in tax assessments under Section 61(2) of the Bombay Sales Tax Act, 1959.