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TMI Blog2008 (3) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under rule 29(xii) of the Punjab General Sales Tax Rules, 1949 (for short, "the 1949 Rules"). The respondent-assessee, Perfect Synthetics, is a partnership firm engaged in the business of purchase, sale and manufacturing of yarn. In this civil appeal we are concerned with assessment year 2001-02. The assessee is registered under the Punjab General Sales Tax Act, 1948 (for short, "the 1948 Act"). The assessee claims that after purchasing raw material from exempted units within the State it has used the same in the manufacture of yarn, majority of yarn being sold in the course of intra- State sales and tax on finished goods being paid. Some of the units from whom the assessee purchased raw material stood exempted from payment of tax under the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 (for short, "the 1991 Rules"). It is the grievance of the assessee that in calculating its taxable turnover, in terms of rule 29(xii) of the 1949 Rules, deduction is not being allowed by the department on the ground that the goods purchased by the assessee are liable to tax at the first stage of sale and since no tax on purchase of raw material from exempted units has been pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which remains after deducting therefrom the dealer's turnover during the relevant period on such other sales or purchases as may be prescribed. We quote hereinbelow section 5(2)(a)(vii) which reads as follows: "5. Rate of tax.-(1) . . . (2) In this Act, the expression, 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom,- (a) his turnover during that period on- (i) to (vi) . . . (vii) such other sales or purchases as may be prescribed;" We quote hereinbelow rule 29(xii) of the 1949 Rules which reads as under: "Rule 29. In calculating his taxable turnover a registered dealer may deduct from his gross turnover,- (i)-(xi) . . . (xii) The purchase value of goods which have already been subjected to tax under section 5(1-A) or section 5(3) as the case may be used or consumed by him in manufacture in Punjab of goods other than goods declared tax-free under section 6 for sale,- (i) in Punjab; (ii) in the course of inter-State trade or commerce; (iii) In the course of export out of territory of India: Provided that the dealer produces copies of cash memos or bills prescribed under rule 55A at the time of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the Constitution Bench of this court in the case of Gannon Dunkerley & Co. v. State of Rajasthan [1993] 1 SCC 364 See [1993] 88 STC 204 (SC) .in which rule 29(2) of the Rajasthan Sales Tax Rules came to be interpreted. We find no merit in the said argument of the Department. In this connection, we have to construe the scheme of the 1948 Act. As stated above, section 4 is the charging section whereas section 5(1A) indicates the point at which the levy takes place. The said "1948 Act" refers to single point levy of tax on the first sale. The notification dated July 25, 1990 specifically incorporates the provisions of rule 9 of the 1991 Rules which requires the unit holding exemption certificate to file the return under the Act and for the assessment of an eligible unit in respect of which exemption certificate has been granted. The said notification read in entirety thus indicates the exemption given to the eligible unit under the Act is only qua the payability. The said exemption to the eligible unit is not in the matter of assessment. The reason is obvious. The exemption is granted to the unit for 10 years or till the exemption entitlement gets exhausted, whichever is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we may refer to the judgment of the Constitution Bench of this court in the case of Gannon Dunkerley & Co. v. State of Rajasthan [1993] 1 SCC 364 See [1993] 88 STC 204 (SC). In that case it was held that the goods, on which no tax was leviable under section 5(1) of the Rajasthan Sales Tax Act, 1954, were not subjected to any tax and, therefore, there was no question of such goods having suffered tax at the rates prescribed under section 5 of the said Act. We quote hereinbelow paras 68(2) and 69(2) of the said judgment which read as under: "68(2). The constitutional validity of a statute has to be determined on the basis of its provisions and on the ambit of its operation as reasonably construed and if, so judged, it does not pass the test of constitutionality it cannot be pronounced valid merely because it is administered in a manner which might not conflict with the constitutional requirements. [See: Collector of Customs v. Nathella Sampathu Chetty [1962] 3 SCR 786 at pages 825 and 826] The Rules framed under the Rajasthan Sales Tax Act would not, therefore, be of any assistance in resolving the question regarding the validity of section 5(3). We have, however, examined the rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods 'on which no tax is leviable under this Act' and clause (ii) refers to sale of goods 'which have already been subjected to tax under this Act'. These clauses show that the Legislature has made a distinction between a sale of goods on which no tax is leviable and a sale of goods which has already been subjected to tax under the Act. Clause (i) of sub-rule (2) of rule 29 is a provision similar to that contained in clause (ii) of section 2(s). It is, therefore, not possible to construe clause (i) of sub-rule (2) of rule 29 to mean that sales on which no tax is leviable under sub-section (1) of section 5 are to be excluded from the turnover for the purpose of computing tax on such turnover in relation to a works contract." It is important to note that under rule 29(2) of the Rajasthan Sales Tax Rules, 1955, provision was made for deduction from the turnover in the case of a works contract. Sub-rule (2) contained two clauses. Clause (i) referred to the proviso to section 5(3) which, inter alia, provided for deduction of the value of the goods transferred in execution of works contract which had suffered tax at the rates prescribed by section or which stood exempted from tax under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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