TMI Blog2009 (3) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... or the appellants. -------------------------------------------------- The judgment of the court was delivered by S.H. KAPADIA J. Delay condoned. Leave granted. Facts in the lead matter: For the sake of convenience we state the facts occurring in Civil Appeal No. 1618 of 2009 arising out of S.L.P. (C) No. 23970 of 2007 (State of Haryana v. Liberty Enterprises). Liberty Enterprises (assessee) is engaged in the manufacture of shoes in the State of Haryana. They availed of exemption from payment of sales tax under section 13B of the Haryana General Sales Tax Act, 1973 read with rule 28A of the Haryana General Sales Tax Rules, 1975, respectively. The assessee was granted Exemption Certificate No. 116 for an amount of Rs. 533 lakhs with effect from March 15, 1995 to March 14, 2002 in terms of rule 28A of the said 1975 Rules. The assessee availed of the benefit of exemption till December 31, 1996 and from January 1, 1997 the assessee switched over to the deferment tax payment scheme. Till December 31, 1996 the exemption granted to the assessee was for an amount of Rs. 53.94 lakhs. On exercising the option of deferment, an entitlement certificate No. 07 for an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tood provided for under section 13B 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 of the exemption were provided for under rule 28A of the 1975 Rules. The exemption was available from the date of commercial production. The benefit of exemption, according to learned advocate, was available for a specified period and up to the specified quantum. According to the learned advocate, for the purpose of calculating the quantum of exemption, the "notional sales tax liability" was to be taken into consideration. The expression "notional sales tax liability" stood defined in rule 28A(2)(n) of the 1973 Rules. According to the 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 incorporated in the said sub-rule. According to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commence, from the date on which his gross turn- over, 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 which he purchases such goods; ... Section 12. No tax payable in case of inter-State trade, etc. Notwithstanding anything contained in this Act, 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; (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. ... Section 13B. 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 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. ... Section 27. Taxable turnover. (1) In this Act, the expression, 'taxable turnover' means that part of a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar to year in various zones from the date of commercial production or from the date of issue of entitlement exemption/exemption certificate as may be opted as under: ... 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: ... 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) Findings: 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 and the "limit" or ceiling to be placed on that quantum. There is no dispute that but for the 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 exempted under the Act and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability" by a deeming fiction or otherwise. A scheme for exemption has to be interpreted in the strict sense. A scheme for deduction 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 of tax incentives beyond the period of exemption. The assessee was not entitled to avail of 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 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 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. Rule 28A deals with computation of the quantum of tax incentive available to a dealer in whose favour eligibility ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28B(3)(m). On a bare reading of the definition of "notional sales tax liability" under rule 28B(3)(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 of inter-State trade or commerce. Such deeming fiction did not exist in rule 28A(2)(n). Rule 28B(3)(m) is not applicable to the facts of the present case. However, in order to explain the position, we have discussed, by way of analogy, rule 28B(3)(m) of the 1975 Rules. For the aforestated reasons, we hold that export sales were not includible in the matter of calculation of "notional tax liability" during the period in question. 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 of article 286 of the Constitution read with section 12 of the 1973 Act. We keep this question of law open. Page No: 9 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 succeeds. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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