2006 (7) TMI 614 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to deduction under rule 29(xii) of the Punjab General Sales Tax Rules, 1949 for purchases from exempted units.
2. Interpretation of "subjected to tax" under section 5(1A) of the Punjab General Sales Tax Act, 1948.
3. Validity of reassessment and revision orders issued by the tax authorities.

Issue-wise Detailed Analysis:

1. Entitlement to Deduction under Rule 29(xii):
The primary issue is whether dealers can deduct the purchase value of goods from exempted units under rule 29(xii) of the 1949 Rules. The court held that the petitioners are entitled to such deductions. The rule does not require "actual payment of tax" but only that the goods have been "subjected to tax." The court emphasized that the legislative intent is clear and does not necessitate the interpolation of additional words such as "actual payment."

2. Interpretation of "Subjected to Tax":
The court clarified that the phrase "subjected to tax" is synonymous with "assessed to tax." It does not imply that tax must be actually paid. The court referred to the Supreme Court's interpretation in various cases, emphasizing that statutory provisions should be construed according to their plain and natural meaning. The court rejected the state's argument that "actual payment of tax" is a sine qua non for claiming deductions.

3. Validity of Reassessment and Revision Orders:
The court found the reassessment and revision orders invalid. These orders were based on an incorrect interpretation of the requirement for "actual payment of tax." The court quashed the impugned show cause notices and reassessment orders, directing the authorities to pass necessary orders in line with the court's interpretation.

Conclusion:
The court concluded that the petitioners are entitled to deductions under rule 29(xii) for purchases from exempted units. The phrase "subjected to tax" does not necessitate actual payment of tax. The reassessment and revision orders issued by the tax authorities were set aside. The writ petitions were disposed of with no order as to costs.