Surcharge on exempted turnover and penalty for non-response were sustained under the Punjab General Sales Tax framework.

Surcharge under section 5(1C) of the Punjab General Sales Tax Act was treated as payable on taxable turnover and, absent any express exclusion in the exemption scheme, was held to form part of the annual tax burden adjustable against exemption entitlement; the surcharge point was decided against the assessee. For sales claimed to be of three wheelers, the benefit of the second proviso to section 5(1C) was denied because the assessee failed to prove that the disputed sales fell within that category. Penalty under section 23 was also sustained because the assessee had been given an opportunity to explain and did not respond, so the absence of a separate notice did not vitiate the order.

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Issues: (i) Whether surcharge under section 5(1C) of the Punjab General Sales Tax Act, 1948 could be included while computing the exemption entitlement of an exempted industrial unit and whether such surcharge was to be calculated on the taxable turnover; (ii) Whether surcharge was leviable on the sales of three wheelers in view of the second proviso to section 5(1C) of the Punjab General Sales Tax Act, 1948; (iii) Whether penalty under section 23 of the Punjab General Sales Tax Act, 1948 was sustainable in the facts of the case.

Issue (i): Whether surcharge under section 5(1C) of the Punjab General Sales Tax Act, 1948 could be included while computing the exemption entitlement of an exempted industrial unit and whether such surcharge was to be calculated on the taxable turnover.

Analysis: Section 5(1C) levies surcharge on the taxable turnover and section 5(2) defines taxable turnover by allowing the deductions permitted by the Act and the rules. Rule 4A of the 1991 Rules grants exemption from sales tax, but it does not create any separate immunity from surcharge. Section 30AA, which had earlier provided for liability to pay surcharge notwithstanding exemption, had been omitted, and in the absence of any provision in the Act or the Rules excluding surcharge from the exemption computation, the yearly tax and surcharge payable on taxable turnover form part of the exemption entitlement.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether surcharge was leviable on the sales of three wheelers in view of the second proviso to section 5(1C) of the Punjab General Sales Tax Act, 1948.

Analysis: The second proviso to section 5(1C) excludes surcharge on three wheelers, but the Tribunal found that the assessee had failed to produce material showing that the disputed sales were in fact of three wheelers. On the record, the finding that the assessee had not established entitlement to the proviso could not be shown to be perverse or erroneous.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Issue (iii): Whether penalty under section 23 of the Punjab General Sales Tax Act, 1948 was sustainable in the facts of the case.

Analysis: Section 23 empowers imposition of penalty for contravention or failure to comply with the Act or the Rules after affording a reasonable opportunity of being heard. The record showed that the assessee was asked to explain why penalty should not be imposed and gave no response. In those circumstances, the absence of a separate notice did not vitiate the penalty order.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The substantial questions of law were answered against the assessee, and the appeal failed.

Ratio Decidendi: Where the taxing statute grants exemption from sales tax but does not expressly exclude surcharge, surcharge payable on taxable turnover remains part of the annual tax burden and is adjustable against the exemption entitlement; penalty is sustainable where a reasonable opportunity to explain has been afforded.

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