Holding

Export sales are not includible in the definition of "notional sales tax liability" under Rule 28A(2)(n) of the 1975 Rules.

Summary

M/s Liberty Enterprises, a shoe manufacturer in Haryana, was granted a sales‑tax exemption certificate (Rs 533 lakhs) under Section 138 of the Haryana General Sales Tax Act, 1973 and Rule 28A of the 1975 Rules, effective 15 Mar 1995‑14 Mar 2002. The exemption was used until 31 Dec 1996, after which the firm switched to a deferment scheme. The Revisional Authority treated export sales made between 1 Apr 1996 and 31 Dec 1996 as part of the "notional sales tax liability" under Rule 28A, concluded that the liability exceeded the exemption limit and ordered recovery. The Haryana Tax Tribunal set aside that order, the High Court upheld the Tribunal, and the State appealed. The Supreme Court examined whether export sales fall within the definition of "notional sales tax liability" in Rule 28A(2)(n). It held that the rule includes local sales, inter‑state sales, and deemed sales such as branch transfers, but expressly excludes export sales; the later Rule 28B(2)(m) that includes exports is not applicable. Consequently, export sales cannot be counted towards the notional liability, and the State’s claim for recovery fails.

Issues considered

Whether export sales are includible in the "notional sales tax liability" of a unit as defined in Rule 28A(2)(n) of the Haryana General Sales Tax Rules, 1975 for the purpose of calculating the limit of tax exemption/deferment.

Legislation cited

Haryana General Sales Tax Act, 1973s. 12, s. 13, s. 138, s. 27, s. 2(e), s. 2(g), s. 2(p), s. 6
Haryana General Sales Tax Rules, 1975s. Explanation 1 to Rule 28A(4), s. Rule 28A(2)(n), s. Rule 28A(4)(a), s. Rule 28B(2)(m)

Subjects

sales tax exemptionnotional sales tax liabilityexport salesRule 28Adeferment schemegross turnovertax recoveryHaryana

Judgment

[2009] 4 S.C.R. 621

STATE OF HARYANA A
v
M/S LIBERTY ENTERPRISES
Civil Appeal No 1618 of 2009
MARCH 17, 2009
B
(S.H. KAPADIA AND H. L. DATTU, JJ)
Haryana Sales Tax Rules, 1975:
µ
rr 28-A, 28-A(2)(n), 28-A(4) Explanatio_n 1- "Export sales"
'
- Whether includible in "notional sales tax liability" - Assessee c
was granted Sales Tax Exemption Certificate w.e.f 13:3.1995
to 14.3.2002 - From 1.1.1997 assessee switched over to
deferment tax payment scheme - Revisionar authority
assessed 'Export Sales' <;luring the period of exemption l.e.
from 1.4.1996 to 31.12.1996 for purpose of r28-A - Since
0
exemption quantum exhausted, excess~amount ordered to be
recovered - HELD: During the period in question export sales
were not included in definition of 'notional sales tax liability' as
provided in r28-A{2)(n) - High Court rightly upheld order of
Tribunal setting aside order of revisional authority - Haryana E
General Sales Tax Act, 1973 - s. ~3cB:
The assessee-respondent in CA No. 161-8/Qe,'a'.:
manufacturer of shoes in the State of Haryarta, .v,vas - ,
granted Sales Tax Exemption Certificate for-~n amou·nt of
Rs.533 lakhs w.e.f. 15,3:19_~5 to 14.3.2002 in terms of s.13- F
B of Haryana, Gehera1' Sales Tax Act, 1973 rlw r.28-A of
Haryana General Sales~Ta·x Rules, 1975. The assessee
availed the exemption benfit till 31.12.1996 and from
1.1.1.997 switched over to the deferment tax payment .·
scheme. The assessing authority allowed the assessee ·ts·
the deduction of Export Sales for the assessment year
1996-97 as per the deciaration forms. But the Revisional
Authority, on revision assessed the Export Sales during .
the period of exemption (1.4.1996 to 31.12.1996) at 4% for
621 H
622 SUPREi'vlE COURT REPORTS [2009] 4 S.C.R

A the purpose of r. 28-A of the 1975 Rules. Since the
exempted quantum exhausted, the excess amount was
ordered to be recovered. The Tribunal set aside the order
of the Revisional Authority. The High Court having upheld
the order of the Tribunal, the State Government filed the
B appeals.
The question for consideration before the Court was:
whether Export Sales were includible in "notional tax
liability" of a unit as defined in Rule 28A(2)(n) of the 1975
Rules.
c
Dismissing the appeal, the Court
HELD: 1.1 There is a vital difference between the
scheme of deduction and a scheme for exemption. Even
within the scheme of exemption there is a basic difference
0 between the "basis" for computation of the quantum of -t'
' benefit and the "limit" or ceiling to be placed on that
quantum. There is no dispute that but for exemption
claimed, the assessee was a dealer, who was subject to
incidence of sales tax under the Haryana General Sales
E Tax Act, 1973. Its transactions were liable to be dealt with
in accordance with the provisions of the Act relating to
taxability. What was exempted under the Act and the Rules
was payment of tax by a class of dealers who had been
issued eligibility/exemption certificates.[para 1O] [632-A-C]
F 1.2 Under the provisions of Haryana General Sales
Tax Rules, 1975 benefit of exemption from payment of tax
was available for a specified period and upto the specified
quantum. Rule 28A provides for calculation of the quantum
of exemption upto the limit of tax exemption and, therefore,
G it provides for deduction of the "notional sales tax liability"
from the total exemption limit available to a dealer during
the period of exemption. A perusal of transactions,
included in the "notional sales tax liability", shows that
r.28A(2)(n) of the 1975 Rules, included sales which were
H otherwise exigible to sales tax, namely, local sales and
STATE OF HARYANA V. 623
M/S LIBERTY ENTERPRISES

~ inter-State sales and, secondly, the Rule also included A
branch transfers or consignment sales outside the State
and sales made on consignment basis or branch transfers
within the State by treating them as deemed sales, which
two transactions were otherwise not exigible to sales tax
for any other unit not availing the exemption. It is B
important, however, to note that the "notional sales tax
~
liability" did not include even by a deeming fiction the
~
Export Sale(s). Export sale(s) was not included in notional
sales tax liability by a deeming fiction or otherwise. [para
10, 12] [632-C, H; 633-A-D] c
1.3 The assessee was eligible to avail deductions
from its 'gross turnover' for transactions relating to inter-
State branch transfers or consignment sales outside the
State and sales made on consignment basis or branch
......... ,... transfers within the State. These deductions stood D
disallowed to a unit allowing exemption for calculating
the "notional sales tax liability" as defined in Rule 28A(2)(n),
as a condition for grant of exemption. [para 12] [633-C-D]
1.5 A scheme for Exemption has to be interpreted in
the strict sense. A scheme for Deduction provides for E
conditions to be specified for grant of exemption. Export
Sales were never sought to be included in the "notional
sales tax liability" as defined in r.28A(2)(n). The assessee
was not entitled to avail tax incentives beyond the period
of exemption. The assessee was not entitled to avail F
exemption of tax also beyond the maximum limit of tax
determined and certified in his eligibility/exemption
certificate. Therefore, the scheme contemplated tax-limit
and time-limit. The notional tax liability was deductible
from the total exemption limit available to a dealer during G
the period of exemption. To the extent the notional tax
liability exceeded the total exemption limit, the Department
was entitled to order the recovery of the difference. In the
instant case, the Department has sought to recover the
difference on the ground that the notional tax liability H
624 SUPREME COURT REPORTS [2009] 4 S.C.R.

A exceeded the exempted quantum during the period of --.
exemption. [para 12] [633-E-H]
1.6 The instant case relates to the "limit" to be placed
on tax exemption/deferment, and for calculating that limit/
ceiling one has to take into account the notional sales tax
B liability of the unit. Therefore, one has to read the proviso
in r. 28A(4) with Explanation 1 which states that "for the
purposes of arriving at the limit of tax exemption/ ..
deferment, the notional sales tax liability of the unit shall
be taken into consideration". It is because of the said
C Explanation that notional sales tax liability has been
defined in r. 28A(2)(n). Therefore, one has to go strictly by
the definition of the words "notional sales tax liability" in
r. 28A(2)(n) of the 1975 Rules.[para 14] [634-E-F]
1. 7 It may be noted that a bare reading of the definition
0
of "notional sales tax liability" under r. 28B(2)(m)
incorporated on 16.9.1998, makes it clear that the
definition included within its scope "sales made in exports
outside India" by deeming it to be a sale in the course of
inter-State trade or commerce. Such deeming fiction did
E not exist in r. 28A(2) (n). Rule 28B(2)(m) is not applicable
to the facts of the .instant case.[para 15] [635-B-C]
1.8 In view of the legal position, during the period in
question, Export Sales were not included in the definition
F of "notional sales tax liability" as defined in r.28A(2)(n) of
the 1975 Rules. [para 18] [635-F]
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1618
of 2009
G From the Judgement and Order dated 26.05.2006 of the
Hon'ble High Court of Punjab &Haryana at Chandigarh, in CWP
No. 2558 of 2005.
WITH
Civil Appeal No. 1619 of 2009
H
·'

STATE OF HARYANA V. 625
MIS LIBERTY ENTERPRISES

Civil Appeal No. 1620 of 2009 A
Civil Appeal No. 1621 .of 2009
Manjit Singh, AAG, Annop G. Choudhary, Harikesh Singh,
T.V. George, for the Appellants.
Mcnish Panda, M.P. Devanath, Mohan Pandey, for the 8
Respondents.
The Judgement of the Court was delivered by

S. H. KAPADIA, J.
1. Delay condoned.
c
2. Leave granted.
Facts in the Lead Matter:
3. For the sake of convenience we state the facts occurring D
in Civil Appeal No. of 2009-Arising out of S.L.P(C) No.23970
of 2007 - State of Haryana vs. Mis. Liberty Enterprises.
4. M/s. Liberty Enterprises (assessee) is engaged in the
manufacture of shoes in the State of Haryana. They availed E
exemption from payment of sales fax under Section :1 ~R of
Haryana General Sales Tax Act, 1973 read with R.ule 28A of
Haryana General Sales Tax Rules, 1975 respectively.Assessee
was granted Exemption Certificate No.116 for an amount of
Rs.533 lakhs with effecUrom 15.3.95 to 14.3.2002 in terms of
Rule 28A of the said 1975 Rules. The assessee availed benefit F
of exemption till 31.12.96 and from 1, 1.97 the assessee
switched over to the def~~ment tax paym~nt scheme. Till
31.12.96 the exemption granted to the assessee was for an
··amount of Rs.53.94 lakhs. On exercising option of deferment,
·an entitlement Certificate No.07 for an amount of Rs.479.06 G
lakhs effective for the period 1.1.97 to 14.3,2002 was issued to
the assessee in place of earlier Exemption Certificate.
5. The assessment of the assessee for the year 1996-97 .
was finalized vide order dated 12.3.01; from the total gross . H
626 SUPREME COURT REPORTS [2009] 4 S.C.R.

A turnover the Assessing Authority allowed the deduction of Export
Sales against the Declaration Forms. However, the assessment
...
was revised by the Revisional Authority, Kamal, which assessed
the Export Sales made during the period of exemption (1.4.96
to 31.12.96) at 4% for the purpose of Rule 28A of the 1975
a Rules. Since the exempted quantum of the assessee fixed at
Rs.53.94 lakhs stood exhausted, the excess amount was
ordered to be recovered by the Revisional Authority. Against
the said order of the Revisional Authority, the assessee ..
appealed before the Haryana Tax Tribunal. Vide Order dated
c 13.1.04 the Tribunal set aside the order of the Revisional
Authority which was challenged by the State of Haryana
(Department) by way of civil writ petition before the High Court
of Punjab & Haryana at Chandigarh. By the impugned Order
dated 26.5.06, the High Court dismissed the said writ petition
0
in terms of its earlier judgment rendered in the case of Mis.
Kagaz Print-N-Pack (India) Pvt. Ltd. v. State of Haryana-
(G S. T.R.No.10 of 2004).
-
ISSUE
6. The short question which arises for determination in this
E civil appeal is : whether Export Sales are includible in "notional
tax liability" of a unit as defined in Rule 28A(2)(n) of the 1975
Rules.
CONTENTIONS
F 7. Mr. Anoop G. Choudhary, learned senior counsel
appearing on behalf of the State, submitted that in terms of the
proviso to Rule 28A(4)(a) of the 1975 Rules, the benefit of
exemption on payment of tax was available to a unit on its 'gross
turnover' which was defined to mean the total receipt on account
G of sales made by a dealer, which included even the Export Sales.
In this connection, reliance was placed on the proviso to Rule
28A(4)(a) which inter alia states that the benefit of exemption
shall extend to tax on 'gross turnover', which according to
learned counsel would cover total sales receipts (including
H Export Sales).
STATE OF HARYANA V 627
MIS LIBERTY ENTERPRISES [S. H. KAPADIA, J.]

8. On the other hand, Mr. Monish Panda, learned counsel A
appearing on behalf of the assessee, submitted that exemption
from payment of sales tax stood provided for under Section 138
of the said 1973 Act. It provided for exemption from payment of
sales tax to eligible units subject to the conditions mentioned
in the Rules. The conditions for availing the exemption were B
provided for under Rule 28A of the 1975 Rules. The exemption
-4
was available from the date of commercial production. The
benefit of exemption, according to learned advocate, was
+ available for a specified period and upto the specified quantum.
According to learned advocate, for the purpose of calculating
the quantum of exemption, the "notional sales tax liability" was c
to be taken into consideration. The expression "notional sales
tax liability" stood defined in Rule 28A(2)(n) of the 1973 Rules.
According to learned advocate, on a bare reading of 28A(2)(n),
it is clear that all the incidences of sales transaction that are to
--~ be computed for arriving at the notional. sales tax liability stood D
'
incorporated in the said sub-rule. According to learned
advocate, on a bare reading of the above sub-rule, it is clear
that sale made in the course of export outside India ("Export
Sale", for short) was not included in "notional sales tax liability"
as defined in Rule 28A(2)(n). According to learned advocate, E
such exclusion of Export Sale from the meaning of "notional saies
tax liability" under Rule 28A(2)(n) leads to the clear conclusion
that Rule 28A never intended to deem "Export Sale" within
"notional sales tax liability" and, therefore, learned advocate
urged that in the context of 'notional tax liability', turnover of export F
goods could not have been included in the 'gross turnover'.
Relevant Provisions of Law:
9. To decide the controversy we need to quote relevant
provisions of the 1973 Act and 1975 Rules which read as under:
·...(
G
"1973 ACT:
Section 2. Definitions: - In this Act, unless there is
anything repugnant in the subject or context.-
(e) - "export" means the taking out of goods from the H
628 SUPREME COURT REPORTS [2009] 4 S.C.R

A State to any place outside it otherwise than by way of sale
in the course of inter-State trade or commerce or in the
course of export out of the territory of India
(gg) - "gross turnover" means the aggregate of the
amounts of sales and purchases and parts of sales and
B purchases made by any dealer whether as principal, agent
or in any other capacity during the given period less any
sum allowed as cash discount according to ordinary trade
practice, but including any sum charged for anything done
by the dealer in respect of the goods at the time of, or
c before, delivery thereof;
(p) - "taxable turnover" means that part of a dealer's
gross turnover which remains after allowing deductions
under Section 27 of the Act.
D Section 6 - Incidence of Taxation:-
(1) Subject to the provisions of Section 15 and 27 of this
Act, every dealer whose gross turnover during the year
immediately preceding the 27th day of May, 1971
exceeded the taxable quantum, shall from the 27th day of
E May, 1971 and every other dealer shall, on the expiry of
thirty days after the date on which his gross turnover first
exceeds the taxable quantum, be liable to pay tax under
this Act on the sale or purchase of goods by him in the
State at the stage hereinafter provided.-·
F
(a) to (c:) xxx xxx xxx
(i) & (ii) xxx xxx xxx
Provided ... xxx xxx xxx
G Provided further that in the case of a dealer, -
(a) who imports any goods for sale or for use in
manufacturing or processing any goods for sale, the
liability to pay tax shall commence from the date on which
he imports such goods;
H
STATE OF HARYANA V. 629
MIS LIBERTY ENTERPRISES [S. H. KAPADIA, J.]

, ... (b) who manufactures or processes any goods for sale, A
the liability to pay tax shall commence, from the date on
which his gross turnover, during any year, first exceeds the
taxable quantum;
(c) who exports any goods purchased within the State,
the liability to pay tax shall commence from the date on B
which he purchases such goods;
._,.
~

Section 12 - No tax payable in case of inter-State
trade, etc.- Notwithstanding anything contained in this Act, c
a tax on the sale or purchase of goods shall not be imposed
under this Act;
(i) where such sale or purchase takes place outside the
State;
-"'-<( D
(ii) where such sale or purchase takes place in the course
of import of the goods into, or export of the goods out of,
the territory of India; or
(iii) where such sale or purchase takes place in the course
of inter-State trade or commerce. E

Section 138.- Power to exempt certain class of
--' industries.-
The State Government may, if satisfied that it is necessary
or expedient so to do in the interest of industrial_ F
development of the State, exempt such class of industries
from the payment of tax, for such period and subject to
such conditions as may be prescribed.

•.A Section 27 - Taxable turnover.-
G
(1) In this Act, the expression, "taxable turnover" means
that part of a dealer's gross turnover during any period
which remains after deducting therefrom his turnover during
that period -
H
630 SUPREME COURT REPORTS [2009] 4 S.C.R.

A (a) on account of -
(i) to (iii) xxx xxx xxx
(iv) Sale and purchase of goods falling under Section 12:

B
"1975 RULES :
Rule 28A. Class of industries, period and other ..
conditions for exemption/deferment from payment
of tax (Sections 138 and 25A) - (1) The industries
c covered under this rule shall not be entitled to any deferment
or exemption from payment of tax under any other
provisions of these rules.

(2) For the purposes of this Chapter, unless the context
D otherwise requires -
(n) "notional sales tax liability" means-

(i) amount of tax payable on the sales of finished products
of the eligible industrial unit under the Local Sales Tax
E Law but for an exemption computed at the maximum rates
specified under the Local Sales Tax Law as applicable
from time to time; and

Explanation:- The sales made on consignment basis
F within the State of Haryana or branch transfer within the
State of Haryana shall also be deemed to be sales made
within the State and liable to tax;
(ii) amount of tax payable under the Central Sales Tax
Act, 1956, on the sales of finished products of the eligible
G industrial unit made in the course of inter-State trade or
commerce computed at the rate of tax applicable to such
sales as if these were made against certificate in form C
on the basis that the sales are eligible to tax under the
said Act.
H
STATE OF HARYANA V. 631
M/S LIBERTY ENTERPRISES [S. H. KAPADIA, J.]

_.,.. Explanation:- The branch transfers or consignment sales A
outside the State of Haryana shall be deemed to be the
sale in the course of inter-State trade or commerce.

Note : The expression and terms, if any appearing in this
rule not defined above shall unless the context otherwise
requires carry the same meaning as assigned to them 8
under the Act and rules made thereunder.
-
.
-t
Rule 28A

(3) Option - An eligible industrial unit may opt either to
avail benefit of tax exemption or deferment. Option once c
exercised shall be final except that it can be changed
once from exemption to deferment for the remaining period
and balanced quantum of benefit.

Rule 28A
~--<\"' D
(4)(a) Subject to other provisions of this rule, the benefit
ll of tax exemption or deferment shall be given to an eligibl~
industrial unit holding exemption or entitlement certificate,
as the case may be to the extent, for the period, from year
to year in various zones from the date of commercial E
production or from the date of issue of entitlement
exemption/exemption certificate as may be opted as
under:-

F
Provided that in the case of exemption the benefit shall
extend to tax on gross turnover and in the case of
deferment, it shall extend to tax on the taxable turnover of
goods manufactured by the unit.
'--'!" G

Explanation:- 1. For the purpose of arriving at the limit
of tax exemption/deferment, the notional sales tax liability
of the unit shall be taken into consideration."
(emphasis supplied by us) H
..
I

632 SUPREME COURT REPORTS [2009] 4 S.C.R.

A FINDINGS:
10. At the outset, we may state that there is a vital difference
between the scheme of Deduction and a scheme for Exemption.
Even within the scheme of exemption there is a basic difference
between the "Basis" for computation of the quantum of benefit
8 and the "Limit" or ceiling to be placed on that quantum. There is
no dispute that but for exemption claimed, the assessee was a
dealer, who was subject to incidence of sales tax under the 1973 •
Act. Its transactions were liable to be dealt with in accordance
with the provisions of the Act relating to taxability. What was
C exempted under the Act and the Rules was payment of tax by a
class of dealers who had been issued eligibility/exemption
certificates. This is not in dispute. Under the provisions of 1975
Rules benefit of exemption from payment of tax was available
for a specified period and upto the specified quantum. Rule
D 28A provides for calculation of the quantum of exemption upto
the limit of tax exemption and, therefore, it provides for
deduction of the "notional sales tax liability" from the total
exemption limit available to a dealer during the period of
...
exemption.
E 11. Rule 28A(2)(n) included in its purview the following
transactions:

(a) amount of tax payable under the local sales tax law;

(b) sales made on consignment basis within the State
F or the branch transfers within the State;

(c) amount of tax payable under the Central Sales Tax
Act, 1956 on the sales made in the course of inter-
state trade or commerce; and
G (d) branch transfers or consignment sales outside the
State.

12. A perusal of the above transactions, included in the
"notional sales tax liability", shows that the said Rule 28A(2)(n)
H of the 1975 Rules included sales which were otherwise exigible
STATE OF HARYANA V 633
MIS LIBERTY ENTERPRISES [S. H. KAPADIA, J.]

to sales tax, namely, local sales and inter-State sales and A
secondly the Rule also included branch transfers or consignment
sales outside the State and sales made on consignment basis
or branch transfers within the State by treating them as deemed
sales, which two transactions were otherwise not exigible to
sales tax for any other unit not availing the exemption. In other B
words, a unit availing exemption from payment of sales tax under
Rule 28A had been disallowed certain deductions which were
otherwise available to an assessee if it would have been a case
-1-
of normal assessment. The assessee was eligible to avail
deductions from its 'gross turnover' for transactions relating to
inter-State branch transfers or consignment sales outside the
c
--t
I State and sales made on consignment basis or branch transfers
within the State. These deductions stood disallowed to a unit
allowing exemption for calculating the "notional sales tax liability"
as defined in Rule 28A(2)(n), as a condition for grant of
--~
D
exemption. It is important, however, to note that the "notional
sales tax liability" apart from the above referred to transactions
did not include even by a deeming fiction the Export Sale(s).
Export Sale(s) was not included in 'notional tax liability' by a
deeming fiction or otherwise. A scheme for Exemption has to
be interpreted in the strict sense. A scheme for Deduction E
provides for conditions to be specified for grant of exemption.
Export Sales were never sought to be included in the "notional
sales tax liability" as defined in Rule 28A(2)(n). The assessee
was not entitled .to avail tax incentives beyond the period of
exemption. The assessee was not entitled to avail exemption F
of tax also beyond the maximum limit of tax determined and
certified in his eligibility/exemption certificate. Therefore, the
scheme contemplated tax-limit and time-limit. The notional tax
liability was deductible from the total exemption limit available
. ........ to a dealer during the period of exemption. To the extent the G
notional tax liability exceeded the total exemption limit, the
Department was entitled to order the recovery of the difference.
In the present case, the Department has sought to recover the
difference on the ground that the notional tax liability exceeded
the exempted quantum during the period of exemption. H
634 SUPREME COURT REPORTS [2009] 4 S.C.R.

A 13. Rule 28A deals with computation of the quantum of tax
incentive available to a dealer in whose favour eligibility
certificate is issued. In order to regulate the exemption scheme
the concept of "notional sales tax liability" stood incorporated
.vide Rule 28A(2)(n) of the 1975 Rules.
8 14. The Department has placed heavy reliance on the
proviso in Rule 28A(4)(a), which has been quoted above. The
said proviso states that in case of exemption, the benefit shall
extend to tax on gross turnover and in case of deferment it shall
extend to tax on the taxable turnover of the goods manufactured •
c by the unit. We have quoted the definition of the word "gross
turnover" which is defined to mean the aggregate of the amount
of sales and purchases made by any dealer. The Department
placed heavy reliance on this definition of the words "gross
turnover" to saY, that it would include Export Sales, particularly,
D when Rule 28A contains a proviso to the effect that in case of
exemption, the benefit shall extend to tax on "gross turnover". .,._ -
There is no dispute on this proposition. However, in this case
we are concerned with the "limit" to be placed on tax exemption/
deferment and for calculating that limiUceiling one has to take
E into account the notional sales tax liability of the unit. Therefore,
one has to read the proviso in Rule 28A(4) with Explanation 1
which states that "for the purposes of arriving at the limit of tax
exemption/deferment, the notional sales tax liability of the unit
shall be taken into consideration". It is because of the said
F Explanation that notional sales tax liability has been defined in
Rule 28A(2)(n). Therefore, one has to go strictly by the definition
of the words "notional sales tax liability" in the said Rule
28A(2)( n) of the 1975 Rules.
15. There is one more aspect which needs to be
G considered. For the purpose of granting exemption from
payment of sales tax under Section 138 of the 1973 Act, the
Legislature incorporated Rule 288 on 16.9.98 providing
conditions for availing exemption from payment of sales tax to
-
eligible units. Under the provisions of Rule 288 of the 1975
H Rules, benefit of exemption was available for a specified period
STATE OF HARYANA V. 635
MIS LIBERTY ENTERPRISES [S. H. KAPADIA, J)

--..· and upto the specified quantum. However, Rule 288 provided A
that for the purposes of calculating the quantum of exemption ·
availed by the unit upto the limit of tax exemption allowed, the
notional sales tax liability shall be taken into consideration.
Accordingly, notional sales tax liability stood defined ev€1n in
Rule 28B(2)(m). On a bare reading of the definition of "notional B

-
sales tax liability" under Rule 28B(2)(m) it is clear that the
definition included within its scope "sales made in exports
outside India" by deeming it to be a sale in the course pf inter-
state trade or commerce. Such deeming fiction did not exist in
Rule 28A(2)(n). Rule28B(2)(m) is not applicable to the facts of C
the present case. However, in order to explain the position, we
have discussed, byway of analogy, Rule 28B(2)(m) of the 1975
Rules.

16. For the aforestated reasons, we hold that Export Sales
- 1 were not includible in the matter of calculation of "notional tax D
liability" during the period in question.
17. Before concluding learned counsel for the State also
raised the question of constitutionality by stating that the Export
Sales in any event were not taxable by the State Government in
view QfArticle 286 of Jhe. Constitution read with Section 12 of E
the 1973 Acf We keep this qu~tion of law open. ~-
18. Suffice it to state that Export Sales were not included
in the definition of"notional sales tax liability" as defined in Rule
28A(2)(n) of the 1975 Rules. On this point alone the assessee · F
socceeds.

19. For the aforestated reasons, the civil appealS'filed by
the Department are accordingly dismissed with no order as to
costs.

-~

..... R.P. Appeal dismissed;