2009 (5) TMI 882 - HC - VAT and Sales Tax

Whether sales to registered dealers are includable in notional tax liability of a unit as defined in rule 28A(2)(n) of the Haryana General Sales Tax Rules, 1975? Held that - Sales made to registered dealers were not includible in the matter of calculation of notional tax liability during the period in question. Petition succeeds. The order dated December 19, 2001 (P9) and order dated May 26, 2005 (P11) passed by the Tribunal are set aside and direction is issued to the respondents to deduct the sales made to the registered dealers while working out taxable turnover. Accordingly the same would also not be included in notional tax liability

Summary

Issues:
Interpretation of rule 28A(2)(n) of the Haryana General Sales Tax Rules, 1975 regarding inclusion of sales to registered dealers in notional tax liability.

Detailed Analysis:

1. Facts:
The petitioner, a partnership firm engaged in cotton ginning, was exempted from tax under the Haryana General Sales Tax Act. The assessments for previous years did not include sales to registered dealers in notional tax liability due to form ST XV obtained from purchasers. However, a revisional authority disallowed this deduction, leading to additional tax demand.

2. Contentions:
The petitioner argued that sales to registered dealers should not be included in notional tax liability based on a Supreme Court judgment in a similar case involving export sales. The Department contended that sales to dealers are not exempt from tax and relied on rule 28A(4) proviso (1).

3. Judgment:
The High Court held that the case was covered by the Supreme Court judgment concerning notional tax liability calculation. It was determined that sales to registered dealers should not be included in notional tax liability as per rule 28A(2)(n) and section 27 of the Act. The Court rejected the Department's argument and set aside the Tribunal's orders, directing exclusion of sales to registered dealers from taxable turnover and notional tax liability calculation.

In conclusion, the High Court's judgment clarified the interpretation of rule 28A(2)(n) regarding the inclusion of sales to registered dealers in notional tax liability, aligning with a previous Supreme Court decision. The ruling favored the petitioner, emphasizing the exclusion of such sales from tax calculations and directing the respondents to adjust taxable turnover accordingly.