Sales-tax liability crystallises on assessment and demand, while later reassessment does not shift the original year of liability.

Sales-tax liability is deductible only when it crystallises on assessment and demand, not merely when the underlying sales were made. Demand notices issued in the relevant previous year for earlier assessment periods were therefore treated as allowable deductions. A customer remission granted on 1 April 1976 was also accepted as a deductible item, with no basis shown to disturb the appellate finding. The fact that an assessment for 1970-71 was later reopened and reassessed did not change the year in which the liability originally arose. The appellate order was sustained on all disputed items, and both the departmental appeal and the assessee's cross-objection were rejected.

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Issues: (i) Whether sales-tax demands raised and notices served during the previous year relevant to the assessment year 1977-78, though relating to earlier assessment years, were allowable as deductions; (ii) whether the remission allowed by the assessee to its customers on 1 April 1976 was rightly allowed as a deduction; and (iii) whether the liability relating to the assessment year 1970-71 arose in that year notwithstanding the later reassessment.

Issue (i): Whether sales-tax demands raised and notices served during the previous year relevant to the assessment year 1977-78, though relating to earlier assessment years, were allowable as deductions.

Analysis: The demands did not arise at the time of sale but only when the sales-tax authorities completed the assessments after rejecting the assessee's books and served demand notices during the relevant previous year. The liability thus crystallised only upon assessment and demand in the previous year relevant to the assessment year 1977-78.

Conclusion: The deduction was allowable and the Revenue's objection failed.

Issue (ii): Whether the remission allowed by the assessee to its customers on 1 April 1976 was rightly allowed as a deduction.

Analysis: The record disclosed no reason to disturb the appellate finding allowing the remission as a deductible item.

Conclusion: The allowance was upheld in favour of the assessee.

Issue (iii): Whether the liability relating to the assessment year 1970-71 arose in that year notwithstanding the later reassessment.

Analysis: The original assessment had been completed on 25 March 1973, and the later setting aside and reassessment did not alter the time when the liability had arisen.

Conclusion: The appellate finding was affirmed and the assessee's claim failed.

Final Conclusion: The appellate order was sustained on all disputed items, and both the departmental appeal and the assessee's cross-objection were rejected.

Ratio Decidendi: A sales-tax liability becomes deductible only when it crystallises on assessment and demand, while the mere fact of later reassessment does not change the point at which a liability originally arose.

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