Deferment rules and notional sales tax: branch transfers outside Punjab cannot be taxed by delegated legislation.

Rule 2(xxi)(ii) of the Punjab General Sales Tax (Deferment & Exemption) Rules, 1991 is explained as a computation provision for deferment, not a charging rule. Branch transfers outside Punjab are not exigible to sales tax under the parent Act, and subordinate legislation cannot create a fresh tax liability by deeming fiction or presumption. The references to "notional" sales tax, "shall be deemed", and the proviso operate only to calculate the quantum of deferred tax for determining the deferment limit. The ratio is that tax liability must arise from the statute itself, and delegated rules cannot fasten tax on otherwise exempt branch transfers.

---

---

Issues: Whether Rule 2(xxi)(ii) of the Punjab General Sales Tax (Deferment & Exemption) Rules, 1991, by including branch transfers and consignment sales in the computation of notional sales tax liability, fastens a tax liability on branch transfers outside the State of Punjab or merely provides a methodology for calculating notional tax for the purpose of determining the deferment limit.

Analysis: Section 10-A of the Punjab General Sales Tax Act, 1948 empowers deferment of tax due subject to prescribed conditions, but it does not authorise the creation of a new charging event by subordinate legislation. The Court held that branch transfers outside the State are not exigible to sales tax under the parent Act, and that a rule cannot, either directly or by presumption, impose a fresh tax liability where the statute itself does not do so. The expression "notional" in Rule 2(xxi), together with the words "shall be deemed" and the presumption in the proviso, was understood only as a device for computing the quantum of deferred tax achieved, not as a charging provision. The explanation and proviso were therefore read as calculation mechanisms linked to deferment and not as provisions creating tax liability on otherwise exempt branch transfers.

Conclusion: Rule 2(xxi)(ii) does not impose tax on branch transfers outside the State of Punjab; it only prescribes the method for computing notional sales tax liability for deferment purposes. The challenge succeeded and the impugned orders were set aside.

Ratio Decidendi: Exigibility to tax must flow from the parent statute, and delegated legislation governing deferment cannot, by deeming fiction or presumption, create a new charging liability on transactions exempt under the Act.

---