Strict construction of exemption rules excludes export sales from notional tax liability when computing the exemption ceiling.

Export sales were not includible in the notional sales tax liability used to compute the exemption ceiling under rule 28A of the Haryana General Sales Tax Rules, 1975. The scheme under section 13B fixed exemption subject to a ceiling and time limit, and rule 28A(2)(n) confined notional liability to local sales, inter-State sales, and specified deemed sales such as branch transfers and consignment sales. A general reference to gross turnover could not expand that defined base, and the exemption provision had to be construed strictly. The assessee therefore succeeded, and the departmental appeals failed on the computation issue.

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Issues: Whether export sales are includible in the notional sales tax liability for computing the ceiling of exemption under rule 28A of the Haryana General Sales Tax Rules, 1975.

Analysis: The exemption scheme under section 13B of the Haryana General Sales Tax Act, 1973 operated subject to a limit of tax exemption and a time limit. For computing that ceiling, rule 28A(4)(a) required the notional sales tax liability of the unit to be taken into account, and rule 28A(2)(n) specifically defined that liability by referring to local sales, inter-State sales, and certain deemed sales such as branch transfers and consignment sales. Export sales were not included in that definition by express words or by deeming fiction. The proviso referring to gross turnover could not enlarge the specific definition used for arriving at the exemption limit. Since exemption provisions are to be construed strictly, the computation had to remain confined to the transactions expressly covered by the rule.

Conclusion: Export sales were not includible in the notional tax liability under rule 28A(2)(n), and the assessee succeeded on this issue.

Final Conclusion: The departmental appeals failed because the export turnover could not be added for computing the exemption ceiling under the relevant rule.

Ratio Decidendi: Where an exemption scheme fixes a ceiling by reference to a defined notional tax liability, only those transactions expressly covered by that definition can be included, and the definition cannot be expanded by invoking a general reference to gross turnover.

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