Declared goods and single-stage sales tax: cotton purchase turnover remained deductible despite retention of cotton seeds.

The Supreme Court of India held that the entire purchase turnover of cotton was deductible under section 5(2)(a)(vi) of the Punjab General Sales Tax Act where the assessee sold the ginned cotton to registered dealers and was not the last purchaser liable to tax. Cotton, as declared goods, remained subject to single-stage levy under section 15(a) of the Central Sales Tax Act, 1956, and the retention of cotton seeds as a by-product did not mean that any part of the cotton itself was retained. The assessing authority could not include the value of cotton seeds while computing the admissible deduction on the cotton purchase turnover.

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Issues: Whether the entire turnover of cotton, after ginning and sale of the ginned cotton to registered dealers, was entitled to deduction under section 5(2)(a)(vi) of the Punjab General Sales Tax Act, notwithstanding that cotton seeds remained with the assessee.

Analysis: The statutory scheme permitted deduction of the purchase turnover where the assessee was not the last purchaser liable to tax. Cotton was treated as declared goods, and the levy was to operate at one stage only under section 15(a) of the Central Sales Tax Act, 1956. The assessee sold the entire ginned cotton to registered dealers, and nothing of the cotton itself remained with it after processing. The retention of cotton seeds, being a by-product separated in the course of ginning, did not mean that any part of the cotton was retained. The assessing authority could not include the value of cotton seeds while computing the deduction admissible on the purchase turnover of cotton.

Conclusion: The entire purchase price of cotton was deductible, and the assessment to the extent it denied that deduction was unsustainable.

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