Deduction for goods already subjected to tax cannot be denied merely because the first-stage seller deferred payment under the statutory scheme.

Deduction under rule 29(xi) or rule 29(xii) of the Punjab General Sales Tax Rules, 1949 was held available where goods had already been subjected to tax under the statutory scheme, even if the first-stage seller had not physically remitted tax. The court read the expression "subjected to tax" in its plain sense and refused to add an extra condition of actual payment. It relied on the first-stage levy structure and the exemption or deferment mechanism, under which returns, taxable turnover and certificates operate as the statutory substitute for proof of payment. The reassessment orders and show cause notices based on the contrary view were quashed.

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Issues: Whether a dealer purchasing goods from an exempted or deferred-payment unit is entitled to deduction under rule 29(xi) or rule 29(xii) of the Punjab General Sales Tax Rules, 1949, when the first-stage seller has not actually paid tax but the goods have been subjected to tax under the statutory scheme.

Analysis: The statutory scheme distinguishes between levy, assessment and payment. Under section 5(1-A) of the Punjab General Sales Tax Act, 1948 and the notification issued thereunder, the relevant goods are taxable at the first stage of sale. Rule 29(xi) and rule 29(xii) allow deduction where the goods have already been 'subjected to tax'. The expression was read in its plain and natural sense, and no additional requirement of actual payment could be imported into the rules. Rule 9 of the 1991 Rules shows that an eligible exempted unit continues to file returns, shows the taxable turnover and attaches the exemption or deferment certificate in lieu of proof of payment, so the tax is treated as having been accounted for within the statutory mechanism. The scheme therefore supports deduction where the goods are liable to tax at the first stage, even if the payment is deferred or deemed to have been made under the exemption arrangement.

Conclusion: The petitioners were entitled to deduction under rule 29(xi) or rule 29(xii), and actual payment of tax by the first-stage seller was not a condition precedent. The impugned reassessment orders and show cause notices to the extent they proceeded on the contrary view were quashed, in favour of the assessees.

Ratio Decidendi: Where the statute allows deduction for goods already subjected to tax, a court cannot add a requirement of actual payment if the statutory exemption or deferment scheme deems the tax to have been duly accounted for at the first stage.

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