Double taxation on forest contract goods barred where sales tax was already paid, and related penalty could not stand.

Chironji purchased under a forest department contract and already subjected to sales tax could not again be included in the contractor's taxable turnover. The court treated the goods in the assessee's hands as tax-paid goods because the department had already charged tax on the same produce, and there was no material showing that the chironji fell outside the contract. On that basis, the turnover inclusion was unjustified. Since the penalty rested on the disputed tax demand, the penalty order also could not stand in its existing form and had to be reconsidered with the corrected turnover.

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Issues: Whether chironji purchased under a forest department contract and already subjected to sales tax could again be included in the assessee's taxable turnover, and whether the penalty assessed on that basis could stand.

Analysis: The decisive fact was that the assessee had purchased the forest produce under contract from the forest department and the department had already charged sales tax on the same produce. In the absence of material showing that the chironji was not the forest produce covered by the contract, the goods in the assessee's hands had the character of tax-paid goods. Such turnover could not, therefore, be again brought to tax in the assessee's assessment. Since the penalty was founded on the disputed tax demand, the penalty also had to be reconsidered on the basis of the corrected taxable turnover.

Conclusion: The inclusion of the chironji turnover in the assessee's taxable turnover was unjustified, and the penalty order could not survive as framed.

Ratio Decidendi: Goods purchased under a forest contract on which sales tax has already been paid by the forest department cannot be taxed again in the hands of the contractor as part of his taxable turnover, and any penalty based on such wrongful inclusion must be reassessed.

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