Export sales excluded from notional tax liability where exemption schemes apply and no express deeming fiction exists.

Export sales cannot be included in gross turnover for computing notional tax liability under rule 28-A(4)(a) when determining exemption under section 13-B, because the State has no competence to tax export transactions protected by Article 286 and section 12. The scheme under sections 13-B and 25-A and rule 28-A applies only to tax otherwise payable under the Act, and the deeming fiction in rule 28-A(2)(n) extends only to specified transactions such as branch transfers and consignment sales. In the absence of an express deeming provision for exports, treating them as notional taxable items would defeat the incentive scheme.

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Issues: Whether export sales form part of gross turnover for the purpose of computing notional tax liability under rule 28-A(4)(a) of the Haryana General Sales Tax Rules, 1975, while determining exemption benefit under section 13-B of the Haryana General Sales Tax Act, 1973.

Analysis: The scheme under sections 13-B and 25-A of the Haryana General Sales Tax Act, 1973 and rule 28-A of the Haryana General Sales Tax Rules, 1975 grants exemption or deferment in respect of tax otherwise payable under the Act. A transaction on which the State has no competence to levy tax, such as export sales covered by Article 286 of the Constitution of India and section 12 of the Act, cannot be brought into the computation of notional tax liability merely for adjusting the exemption limit. The definition of notional sales tax liability in rule 28-A(2)(n) contains a deeming fiction only for specified transactions like branch transfers and consignment sales, and no similar deeming provision exists for export sales. The interpretation suggested by the Revenue would convert a non-taxable export transaction into a notional taxable item and would defeat the object of the incentive scheme.

Conclusion: Export sales do not form part of gross turnover for calculating notional tax liability under rule 28-A(4)(a) of the Rules, and the question is answered against the Revenue and in favour of the assessee-dealer.

Ratio Decidendi: Transactions on which the State has no taxing competence cannot be included in gross turnover or notional tax liability for the purpose of computing exemption benefits under an incentive scheme, unless the statute expressly creates a valid deeming fiction.

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