One-stage levy for declared goods and valid notification timing shaped the fate of Punjab sales tax assessments.

Declared goods under the Punjab General Sales Tax Act could be taxed only at one stage, and the statutory scheme was held invalid because it did not fix a clear and certain point of levy; a refund mechanism could not cure the absence of a lawful initial levy, so the challenged assessments failed. A later notification could not sustain assessments for an earlier period after the amended definition of purchase had displaced the earlier notification, so those assessments also could not stand. The majority allowed the appeals and set aside the assessments. Sikri J., with Ramaswami J. agreeing, dissented on the one-stage levy issue.

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Issues: (i) Whether the second proviso to section 5(1) and clause (vi) of section 5(2)(a) of the Punjab General Sales Tax Act, 1948 were valid in the light of section 15 of the Central Sales Tax Act, 1956 and Article 286(3) of the Constitution of India; (ii) Whether the notification dated 26 September 1961 could sustain assessments for the earlier period under the amended definition of purchase.

Issue (i): Whether the second proviso to section 5(1) and clause (vi) of section 5(2)(a) of the Punjab General Sales Tax Act, 1948 were valid in the light of section 15 of the Central Sales Tax Act, 1956 and Article 286(3) of the Constitution of India.

Analysis: The majority held that declared goods could be taxed only at one stage and that the State Act, read with the machinery for returns, payment and refund, did not provide a clear and certain single point of levy. It was held that a dealer could be made to deposit tax even though liability might later be found not to exist, and that a refund provision could not cure the want of a lawful initial levy where the statute did not prescribe a definite stage. The Court therefore found the impugned provisions inconsistent with the mandatory restriction against taxation at more than one stage.

Conclusion: The challenge succeeded and the provisions, as applied to the assessments, could not be sustained.

Issue (ii): Whether the notification dated 26 September 1961 could sustain assessments for the earlier period under the amended definition of purchase.

Analysis: The majority held that the earlier notification issued in 1958 could not continue to operate after the 1960 amendment to the definition of purchase, because the amended definition and the earlier notification were inconsistent. In the absence of a fresh notification until 26 September 1961, the assessments for the relevant earlier years could not be upheld on that basis.

Conclusion: The assessments for the earlier period could not be sustained on the strength of the earlier notification.

Final Conclusion: The appeals were allowed and the assessments under challenge were set aside in the manner indicated, with costs awarded in one appeal only.

Ratio Decidendi: Where a taxing statute governing declared goods does not prescribe a definite single stage of levy and no lawful levy can be sustained for the relevant period, a later refund mechanism cannot validate an otherwise unauthorised collection.

Dissenting Opinion: Sikri J., with Ramaswami J. agreeing, held that the Punjab Act in substance complied with the one-stage requirement because the first taxable purchase could be identified from the statutory scheme and that the second proviso served to protect the Act from challenge.

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