What did the Supreme Court decide in this case?

The Court held that, unless a statute clearly allows it, a firm that has dissolved cannot be assessed to sales tax. Fiscal laws must be read strictly and, if there is doubt, in favour of the taxpayer.

Is a firm a separate assessable entity for sales tax?

Only if the statute expressly treats the firm as an assessable unit. In this case, the Court found no clear provision to assess a dissolved firm.

Did Section 16 of the East Punjab Act allow post-dissolution assessment?

No. Section 16 was read as an administrative notice requirement, not a power to assess a firm after dissolution.

What principle of interpretation did the Court apply?

Fiscal statutes are construed as written; gaps are not to be filled by courts. If ambiguity remains, it leans in favour of the taxpayer.

How is this case useful for exams?

It is a classic on strict construction of tax laws and on whether assessment can continue after a firm loses its legal character.

Law Easy

31 October, 2025

251

State of Punjab v. Jullundur Vegetables Syndicate (AIR 1966 SC 1295) — Sales Tax & Dissolved Firms | The Law Easy

State of Punjab v. Jullundur Vegetables Syndicate

Supreme Court of India 1966 AIR 1966 SC 1295 Sales Tax • Partnership ~7 min read

Easy English explainer on whether a dissolved firm can be assessed to sales tax and how courts read fiscal statutes.

Author: Gulzar Hashmi India Published: 31 Oct 2025 Slug: state-of-punjab-v-jullundur-vegetables-syndicate

```

CASE_TITLE PRIMARY_KEYWORDS SECONDARY_KEYWORDS PUBLISH_DATE: 31-10-2025 AUTHOR_NAME: Gulzar Hashmi LOCATION: India

https://thelaweasy.com/state-of-punjab-v-jullundur-vegetables-syndicate/

Quick Summary

Core idea: A firm that has already dissolved cannot be assessed to sales tax unless the law clearly allows it. Courts do not “fix” gaps in tax laws. If a doubt remains, it favours the taxpayer.

This case also clarifies that a “firm” is not automatically treated as a separate assessable unit after dissolution. Section 16 of the East Punjab General Sales Tax Act gives only an administrative notice duty. It is not a hidden power to tax a firm that no longer exists.

Issues

Is a firm a separate assessable entity or only a convenient label for all partners?
Can a firm be assessed to sales tax after its dissolution?

Rules

Strict construction of tax law: Courts read fiscal statutes exactly as written. They do not fill gaps. If doubt remains, the reading should help the taxpayer.
Section 16 (East Punjab Act): Only a notice requirement on discontinuance/change; not a power to assess a dissolved firm.
Rule 40 (Rules, 1949): No machinery to assess a dissolved firm.
Partnership Act: Does not change assessment rules under the sales tax law.

Facts (Timeline)

Optional

04 Oct 1952: Jullundur Vegetables Syndicate begins business at Jullundur.

11 Jul 1953: The firm dissolves.

18 Jul 1953: Dissolution intimated to department under Section 16 (EPGST Act, 1948).

30 May 1953: (Earlier) Assessment for Oct 1952–Mar 1953 by STO; later quashed on 11 Apr 1955 for lack of jurisdiction.

03 Sep 1955: Fresh assessment passed by STO on the firm’s turnover.

On appeal: Turnover/tax reduced by Deputy Excise & Taxation Commissioner.

On revision: Financial Commissioner upholds assessment, rejects “no post-dissolution assessment” plea.

Punjab High Court (FB): Rules for the firm—no machinery to assess a dissolved firm.

Supreme Court: State appeals. Final ruling favours the firm.

Timeline illustration of milestones in the Jullundur Vegetables Syndicate case

Arguments

Appellant: State of Punjab

A firm is an assessable unit; assessment can continue despite dissolution.
Section 16 notice and the scheme of the Act allow the department to complete assessment.
Public revenue would suffer if dissolved firms escape assessment.

Respondent: Jullundur Vegetables Syndicate

No express provision to assess a firm after it ceases to exist.
Section 16 is only administrative; it is not an assessment power.
Fiscal statutes must be read strictly; any doubt helps the taxpayer.

Judgment (Held)

Held: In the absence of an express provision, a dissolved firm cannot be assessed. The Court saw no valid difference between proceedings started before or after dissolution—either way, once the firm loses its legal character, assessment cannot be pressed against it unless the law clearly says so.

Section 16: Only informs the authority; it does not permit post-dissolution assessment.
Rule 40: No machinery to assess a dissolved firm.
Partnership Act: Irrelevant for sales tax assessment machinery.

Judgment concept image representing the Supreme Court decision

Ratio Decidendi

The tax statute did not clearly authorise assessment of a firm after it dissolved. Courts must apply the statute as it is. Without an explicit charging/ machinery provision for such a case, assessment cannot proceed. Ambiguity in tax laws benefits the taxpayer.

Why It Matters

Exam value: Clear statement on strict interpretation of fiscal laws.
Practice value: Departments must rely on express provisions; cannot “create” powers.
Partnership angle: A firm’s post-dissolution status affects assessment strategy.

Key Takeaways

Strict reading Doubt → taxpayer No post-dissolution assessment without express law

Sec. 16 is notice only Rule 40 lacks machinery Partnership Act not determinative here

Mnemonic + 3-Step Hook

Mnemonic: D.I.E.T. — Dissolved firm, In no express law, Exact reading, Taxpayer wins doubt.

Spot: Is the firm dissolved?
Search: Is there an express provision to assess it?
Settle: If doubt remains, rule for the taxpayer.

IRAC Outline

Issue: Can a dissolved firm be assessed? Is a firm a separate assessable entity without express words?

Rule: Strict construction of tax statutes; ambiguity favours taxpayer; Section 16 is merely administrative; Rule 40 lacks machinery.

Application: The Act/Rules do not expressly allow assessment of a dissolved firm; notice duty does not create taxing power.

Conclusion: No assessment on a dissolved firm without a clear statutory mandate.

Glossary

Assessable Entity: A person/unit recognised by law for tax assessment.
Dissolution: Formal end of a partnership firm.
Strict Construction: Reading a statute as written, without adding words.

Student FAQs

No. It only says: without an express provision, you cannot assess the dissolved firm. Other actions depend on specific statutory powers.

The Court made no difference—before or after dissolution, the key is whether the law expressly allows assessment of a non-existing firm.

Because it is a notice rule. It helps administration, but it does not create a power to assess after the firm ends.

It depends on the statute. If the law says the firm is an assessable unit, then it is. Here, no such clear rule covered the dissolved firm situation.

```

Comment

Nothing for now