STATE OF HARYANA versus M/S LIBERTY ENTERPRISES

Citation: [2009] 4 S.C.R. 621 · Decided: 17-03-2009 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Dismissed

Judgment (excerpt)

µ 
' 
[2009] 4 S.C.R. 621 
STATE OF HARYANA 
v 
M/S LIBERTY ENTERPRISES 
Civil Appeal No 1618 of 2009 
MARCH 17, 2009 
(S.H. KAPADIA AND H. L. DATTU, JJ) 
Haryana Sales Tax Rules, 1975: 
rr 28-A, 28-A(2)(n), 28-A(4) Explanatio_n 1- "Export sales" 
A 
B 
- Whether includible in "notional sales tax liability" - Assessee c 
was granted Sales Tax Exemption Certificate w.e.f 13:3.1995 
to 14.3.2002 - From 1.1.1997 assessee switched over to 
deferment tax payment scheme - Revisionar authority 
assessed 'Export Sales' <;luring the period of exemption l.e. 
from 1.4.1996 to 31.12.1996 for purpose of r28-A - Since 0 
exemption quantum exhausted, excess~amount ordered to be 
recovered - HELD: During the period in question export sales 
were not included in definition of 'notional sales tax liability' as 
provided in r28-A{2)(n) - High Court rightly upheld order of 
Tribunal setting aside order of revisional authority - Haryana E 
General Sales Tax Act, 1973 - s. ~3cB: 
The assessee-respondent in CA No. 161-8/Qe,'a'.: 
manufacturer of shoes in the State of Haryarta, .v,vas 
-
, 
granted Sales Tax Exemption Certificate for-~n amou·nt of 
Rs.533 lakhs w.e.f. 15,3:19_~5 to 14.3.2002 in terms of s.13-
F 
B of Haryana, Gehera1' Sales Tax Act, 1973 rlw r.28-A of 
Haryana General Sales~Ta·x Rules, 1975. The assessee 
availed the exemption benfit till 31.12.1996 and from 
1.1.1.997 switched over to the deferment tax payment . · 
scheme. The assessing authority allowed the assessee ·ts· 
the deduction of Export Sales for the assessment year 
1996-97 as per the deciaration forms. But the Revisional 
Authority, on revision assessed the Export Sales during . 
the period of exemption (1.4.1996 to 31.12.1996) at 4% for 
621 
H 
622 
SUPREi'vlE COURT REPORTS 
[2009] 4 S.C.R 
A the purpose of r. 28-A of the 1975 Rules. Since the 
exempted quantum exhausted, the excess amount was 
ordered to be recovered. The Tribunal set aside the order 
of the Revisional Authority. The High Court having upheld 
the order of the Tribunal, the State Government filed the 
B appeals. 
c 
The question for consideration before the Court was: 
whether Export Sales were includible in "notional tax 
liability" of a unit as defined in Rule 28A(2)(n) of the 1975 
Rules. 
Dismissing the appeal, the Court 
HELD: 1.1 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 
0 
between the "basis" for computation of the quantum of 
-t' 
' benefit and the "limit" or ceiling to be placed on that 
quantum. There is no dispute that but for exemption 
claimed, the assessee was a dealer, who was subject to 
incidence of sales tax under the Haryana General Sales 
E Tax Act, 1973. 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 the Rules 
was payment of tax by a class of dealers who had been 
issued eligibility/exemption certificates.[para 1 O] [632-A-C] 
F 
1.2 Under the provisions of Haryana General Sales 
Tax Rules, 1975 benefit of exemption from payment of tax 
was available for a specified period and upto the specified 
quantum. Rule 28A provides for calculation of the quantum 
of exemption upto the limit of tax exemption and, therefore, 
G it provides for deduction of the "notional sales tax liability" 
from the total exemption limit available to a dealer during 
the period of exemption. A perusal of transactions, 
included in the "notional sales tax liability", shows that 
r.28A(2)(n) of the 1975 Rules, included sales which were 
H otherwise exigible to sales tax, namely, local sales and 
STATE OF HARYANA V. 
623 
M/S LIBERTY ENTERPRISES 
~ 
inter-State sales and, secondly, the Rule also included A 
branch transfers or consignment sales outside the State 
and sales made on consignment basis or branch transfers 
within the State by treating them as deemed sales, which 
two transactions were otherwise not exigible to sales tax 
for any other unit not availing the exemption. It is B 
important, however, to note that the "notional sales tax 
~ 
liability" did not include even by a deeming fiction the 
~ 
Export Sale(s). Export sale(s) was not included in notional 
sales tax liability by a deeming fiction or otherwise. [para 
10, 12] [632-C, H; 633-A-D] 
c 
1.3 The assessee was eligible to avail deductions 
from its 'gross turnover' for transactions relating to inter-
State branch 

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