Supreme Court

The State of Gujarat vs. Ambuja Cement Ltd. (Neutral Citation: 2024 INSC 572)

MANU/SC/0822/2024

02.08.2024

Sales Tax/VAT

Definition of purchase price under Gujarat Value Added Tax Act, 2003 would not include value added tax

In present matter, the Respondent dealer calculated the taxable turnover of its purchases within the State of Gujarat by excluding the amount representing Value Added Tax and value of purchases of which no credit was claimed. This was asserted to have been done under the provisions of Section 11(3)(b) of the Gujarat Value Added Tax Act, 2003 (GVAT Act). Accordingly, the taxable turnover was calculated and proportionately reduced by four per cent on the quantity of goods involved in the manufacturing of goods dispatched by way of branch transfer.

The Deputy Commissioner during the process of audit assessment determined the taxable turnover of purchases within the State by including the tax amount i.e., Value Added Tax Amount and Value of Purchases on which no tax credit was claimed by the Respondent dealer nor proposed to be granted in the assessment. The Respondent being aggrieved preferred an appeal before the Joint Commissioner which was dismissed leading to the filing of a second appeal before the Gujarat Value Added Tax Tribunal wherein the same was partly allowed by holding that the tax and value purchases on which no tax was claimed nor was granted in the assessment could not be included in the aggregate of taxable turnover of purchases within the State for the purpose of reduction of tax credit. The State of Gujarat carried an appeal before the High Court challenging the order passed by the Tribunal which has been dismissed affirming the order of the Tribunal.

The Courts are bound to give effect to the said meaning irrespective of the consequences so far as the taxation statutes are concerned. Article 265 of the Constitution of India, 1950 prohibits the State from extracting tax from the citizens without the authority of law. The tax statutes have to be interpreted strictly which means that the legislature mandates taxing certain persons in certain circumstances which cannot be expanded or interpreted to include those who were not intended or comprehended.

The purchase price would be the determinative factor for calculating the turnover of purchases, the purchase price would be restrictive within the domain of Section 2(18). The cogent reading of sub-Section (18) of Section 2 which defines ‘purchase price’, sub- Section 32 of Section 2 which defines ‘turnover of purchases’, and Section 11 of the GVAT Act which deals with entitlement to the tax credit, would lead to only one conclusion, that the purchase price would not include purchases on which no value added tax was claimed nor granted and the component of value added tax stood already paid on purchases. Accordingly, the taxable turnover of purchases would have to be calculated after deducting both the components.

Therefore, the calculation of taxable turnover of the purchases and reduction value of purchases on which no tax credit was claimed nor granted, and component of value added tax already paid on purchases, was rightly excluded from the total turnover of the Respondent dealer while computing his tax liability under Section 11(3)(b) of the GVAT Act. The order passed by the Tribunal as has been upheld vide the impugned judgment of the High Court being in accordance with law calls for no interference. Appeals dismissed.

Tags : Taxable turnover Liability Assessment

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