Notional sales tax liability under exemption schemes must be computed at the rate actually applicable to the transaction, not the maximum rate.

For computing notional sales tax liability under rule 28A of the Haryana General Sales Tax Rules, 1975, sales made to Government Departments against form D certificates must be valued at the rate actually applicable to the transaction under the Act. The ceiling mechanism in the exemption scheme is designed to measure the real tax burden that would otherwise arise, not to assume the maximum possible rate regardless of the nature of the sale. The reasoning follows the earlier approved approach on exemption-related computation and supports assessment on the legally applicable rate rather than the highest statutory rate.

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Issues: Whether, for computing notional sales tax liability under rule 28A of the Haryana General Sales Tax Rules, 1975, sales made to Government Departments against form D certificates are to be valued at the maximum rate of sales tax or at the rate actually applicable to such transactions under the Act.

Analysis: Notional sales tax liability under the exemption scheme is to be worked out by applying the rate of tax that is actually applicable to the relevant transaction under the Act. The ceiling mechanism under rule 28A is intended to quantify the real tax burden that would otherwise arise on the sale, and not to assume the maximum possible rate irrespective of the nature of the transaction. The earlier view on similar exemption-related computation had already been approved by the Supreme Court, and the same reasoning governed the present reference.

Conclusion: The applicable rate for computing notional sales tax liability is the rate actually applicable on the sale to Government Departments against form D, not the maximum rate. The question is answered in favour of the assessee and against the State.

Ratio Decidendi: For computing notional sales tax liability under an exemption scheme, tax must be calculated at the rate legally applicable to the transaction, not at the highest conceivable rate under the statute.

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