While Interpreting the definition of the ‘Purchase Price’ under the Gujarat Value Added Tax Act of 2003 (“GVAT”), the Supreme Court on Friday (August 2) observed that the value-added tax would not be included in the definition of the purchase price.

The Court held that no value-added tax would be added to the purchase price to calculate tax as the same is not mentioned in the categories of tax/duties enumerated under Section 2(18) of the GVAT.

“The purchase price, therefore, would be the amount of valuable consideration paid or payable for any purchase which would include amount of duties, levied or leviable under the two acts as has been provided for in this Section apart from the other charges as expounded therein. The scope has been limited to the two Acts mentioned in the Section itself. The same could not be expanded and therefore it can be safely said that the intention of the legislature was to exclude Value Added Tax from the ambit of purchase price as the same is not found mentioned in the categories of tax/duties enumerated thereunder.”, the bench comprising Justice Abhay S Oka and Justice Augustine George Masih said.

In essence, the court said that the definition of the ‘Purchase Price’ as defined under Section 2(18) of GVAT would only include duties and levies that are levied in the form of two Acts i.e., Central Excise Tariff Act, 1985 and the Customs Act, 1962 and other charges enumerated therein but no other tax.

“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 as has been detailed aforesaid.”, the Judgment authored by Justice Masih said.

“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 court added.

Tax Statutes Needs To Be Strictly Interpreted To Not Include Those Who Were Not Intended Or Comprehended To Be Taxed

“The first and foremost duty of the Court is to read the statute as it is and if the words therein are clear and unambiguous then only one meaning can be inferred. 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 assessee is not to be taxed without clear words and, for that purpose, the same must be according to the natural construction of the words which have been used in that statute. These words have to be read as it is and thus cannot be added or substituted which may give a meaning other than what is expressed in the provision.”, the court said.

Based on the aforesaid observation, the Appeal preferred by the State against the impugned order was dismissed, and the order passed by the tribunal was restored. (‘Purchase Price’ Gujarat Value Added Tax Act the Supreme Court)

Appearance:

For Petitioner(s) Ms. Archana Pathak Dave, Sr. Adv. Ms. Deepanwita Priyanka, AOR Mr. S Ganesh, Sr. Adv. Mr. Hrishikesh Baruah, AOR Mr. Rudraksh Kaushal, Adv. Mr. Anurag Mishra, Adv.

For Respondent(s) Mr. Purvish Jitendra Malkan, AOR Mr. Alok Kumar, Adv. Mr. Kush Goel, Adv. Mr. Ryan Singh, Adv. Mr. Suraj Pandey, Adv. Mr. Santosh Krishnan, AOR Mr. Uchit Sheth, Adv. Ms. Sonam Anand, Adv. Ms. Deepshikha Sansanwal, Adv. Ms. Archana Pathak Dave, Sr. Adv. Ms. Deepanwita Priyanka, AOR

Case Title: THE STATE OF GUJARAT Vs. M/S. AMBUJA CEMENT LTD, CIVIL APPEAL NO. 7874 OF 2024

Citation : 2024 LiveLaw (SC) 544

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