Deduction of sales to registered dealers from notional tax liability was upheld under the Haryana sales tax framework.

Sales made to registered dealers were excluded from notional tax liability under rule 28A of the Haryana General Sales Tax Rules, 1975 because section 27(1)(a) of the Haryana General Sales Tax Act, 1973 permits deduction of such sales from gross turnover. The Court read rule 28A(2)(n) as defining notional sales tax liability by reference to tax payable on finished products under the local sales tax law, and held that the proviso to rule 28A(4) could not override the parent Act or the substantive rule. Accordingly, sales to registered dealers had to be deducted while computing taxable turnover.

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Issues: Whether sales made to registered dealers were includible in the computation of notional tax liability under rule 28A of the Haryana General Sales Tax Rules, 1975.

Analysis: Rule 28A(2)(n) defines notional sales tax liability with reference to the tax payable on sales of finished products under the local sales tax law, and section 27(1)(a) of the Haryana General Sales Tax Act, 1973 permits deduction of sales made to registered dealers from gross turnover. The Court applied the interpretation already accepted by the Supreme Court on the computation of notional liability under rule 28A and held that the proviso to rule 28A(4) could not be read to deny the deduction otherwise available under the Act and the Rules.

Conclusion: Sales made to registered dealers were not includible in the computation of notional tax liability and had to be deducted while working out taxable turnover.

Ratio Decidendi: Where the governing statute permits deduction of sales to registered dealers from gross turnover, such sales cannot be included in notional tax liability merely by reference to a proviso in the rules that is inconsistent with the parent Act and the substantive rule defining the liability.

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