Notified inter-State sales rate controls levy; additional State tax and consequential interest cannot be imposed on covered turnover.

A valid notification under section 8(5) of the Central Sales Tax Act, 1956 that prescribes a lower rate or exemption for specified inter-State sales governs the tax payable on that turnover, so no additional tax can be imposed under the Punjab General Sales Tax Act, 1948 on the same sales. The article also states that interest cannot survive where the underlying additional tax demand itself is not legally leviable. The stated ratio is that the notified CST rate or exemption displaces any inconsistent State levy on the covered inter-State turnover, and consequential interest on an invalid demand fails with it.

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Issues: (i) Whether additional tax could be levied under the Punjab General Sales Tax Act, 1948 on inter-State sales where the State Government had issued a notification under section 8(5) of the Central Sales Tax Act, 1956 prescribing a lower rate of tax. (ii) Whether interest was leviable on the additional demand raised on that account.

Issue (i): Whether additional tax could be levied under the Punjab General Sales Tax Act, 1948 on inter-State sales where the State Government had issued a notification under section 8(5) of the Central Sales Tax Act, 1956 prescribing a lower rate of tax.

Analysis: Section 8(5) empowers the State Government, by notification and in public interest, to direct that tax on specified inter-State sales shall not be payable or shall be calculated at a lower rate. Where such a notification exists for the relevant goods, the tax structure fixed under the notification governs the inter-State sales, and no additional tax can be imposed under the State sales tax law on the same turnover. The issue stood covered by the earlier law declared by the Supreme Court.

Conclusion: The levy of additional tax was impermissible and the issue is answered in favour of the assessee.

Issue (ii): Whether interest was leviable on the additional demand raised on that account.

Analysis: Interest could survive only if the underlying additional tax demand was validly raised. Once the additional tax itself was held not leviable on the notified inter-State sales, the consequential demand of interest on that amount could not stand independently.

Conclusion: The levy of interest on the additional demand was also unsustainable and this issue is answered in favour of the assessee.

Final Conclusion: The reference was answered against the Revenue, the Tribunal's view was set aside, and both the additional tax demand and the consequential interest demand were quashed.

Ratio Decidendi: When a State issues a valid notification under section 8(5) of the Central Sales Tax Act, 1956 prescribing a lower rate or exemption for specified inter-State sales, additional tax under the State sales tax law cannot be levied on that turnover, and any consequential interest demand also fails.

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