Deduction for raw material from exempted units upheld under Punjab sales tax rules; exemption did not bar assessment.

Rule 29(xii) of the Punjab General Sales Tax Rules, 1949 was construed to allow deduction of the purchase value of raw material bought from exempted units because the expression "goods which have been subjected to tax" under section 5(1A) was not limited to goods that had actually borne tax payment. The statutory scheme distinguished levy, assessment, and the point of taxation, and the exemption available to the eligible unit was treated as an exemption from payability, not from assessment. On that construction, the assessee was entitled to the deduction and the department's narrower reading was rejected.

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Issues: Whether, for the purpose of deduction under rule 29(xii) of the Punjab General Sales Tax Rules, 1949, the purchase value of raw material bought from exempted units is covered by the expression goods which have been subjected to tax under section 5(1A) of the Punjab General Sales Tax Act, 1948.

Analysis: The statutory scheme distinguished between levy, assessment and the point of taxation. Section 5(1A) of the Punjab General Sales Tax Act, 1948 fixed the first stage of sale for levy of tax on specified goods, while the notification issued under that provision and the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 showed that the exemption granted to the eligible unit was only qua payability and not an exemption from assessment. Rule 29(xii) allowed deduction of the purchase value of goods which had been subjected to tax under section 5(1A), and the expression was held not to be confined to goods that had actually borne tax in the sense of tax payment. The scheme of the Punjab legislation was distinguished from the Rajasthan Sales Tax Act considered in earlier precedent.

Conclusion: The assessee was entitled to deduction of the purchase value of raw material purchased from exempted units under rule 29(xii), and the department's restrictive construction was rejected.

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