2018 (7) TMI 147 - HC - VAT and Sales Tax

Levy of Turnover tax - sale of Bread - Composition Scheme - Whether the Gujarat Value Added Tax Tribunal was justified in holding that lump sum tax is payable under the Gujarat Value Added Tax Act, 2003 on the turnover of sales of bread ? - Held that - Ordinarily a dealer engaged in the manufacturing activity would not be entitled to composition of tax provided under sub-section 1 of Section 14, unless the manufacturing activity in question has been specified for exclusion from such treatment by the Government by an order in writing. As per sub-section 3 of Section 14, a dealer who is permitted to pay lump sum tax is not entitled to certain benefits, such as to claim tax credit in respect of tax payable by him on his purchases or charge any tax on his sales invoice in respect of the sales on which lump sum tax is payable. In case of the dealers, who want to pay lump sum tax in lieu of normal tax, the rate of tax prescribed was one-half per cent. This one-half per cent was to be computed as per notification dated 31st March 2006 on the total turnover of the dealer, which was quickly corrected to taxable turnover by a later notification dated 29th April 2006. The Government, by virtue of the said notification dated 31st March 2006, do not intended to compute the lump sum tax of a manufacturer of bakery items on the basis of his total turnover. The very purpose of the composition scheme would be in jeopardy if the payable tax by a dealer is substituted by percentage of his taxable and non-taxable turnover. Turnover tax not leviable - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether lump sum tax is payable on the turnover of sales of "bread" under the Gujarat Value Added Tax Act, 2003?
2. Whether the Assistant Commissioner of Commercial Tax had jurisdiction to undertake provisional assessment under Section 32 of the Act?
3. Whether the Assistant Commissioner was justified in confirming dues under the Act based on provisional assessment without passing audit assessment or re-assessment order?

Analysis:

Issue 1:
The judgment addressed the interpretation of statutory provisions related to the payment of lump sum tax under the Gujarat Value Added Tax Act, 2003. The court examined definitions of terms like "taxable turnover," "total turnover," and "turnover of sales" to determine the correct basis for calculating lump sum tax. It highlighted the distinction between taxable and non-taxable turnover and emphasized the legislative intent behind the composition scheme. The court analyzed a government notification specifying the rate of lump sum tax for manufacturing activities, particularly bakery items, and the subsequent correction in terminology from "total turnover" to "taxable turnover." By applying a purposive interpretation, the court concluded that the lump sum tax for bakery manufacturers should be based on taxable turnover, not total turnover, to align with the scheme's objectives. Citing relevant legal principles, the court reversed the Tribunal's decision, favoring the appellant and providing a detailed explanation for the ruling.

Issue 2:
While the judgment extensively discussed the first issue and provided a detailed analysis, it noted that due to the resolution of the primary question in favor of the appellant, the advocate representing the appellant chose not to pursue the second and third questions raised in the case. Consequently, the court did not delve into a detailed analysis of the jurisdiction of the Assistant Commissioner for provisional assessment or the justification for confirming dues without audit assessment or re-assessment orders. The decision on the first issue led to the disposal of the tax appeals without further examination of the remaining issues.

Conclusion:
The judgment delivered by the Gujarat High Court, through a comprehensive analysis of statutory provisions and legal principles, clarified the correct basis for calculating lump sum tax under the Gujarat Value Added Tax Act, 2003. By emphasizing the importance of aligning tax calculations with legislative intent and scheme objectives, the court provided a clear ruling in favor of the appellant, setting a precedent for similar cases. The decision's impact on the remaining issues raised in the case was significant, leading to the disposal of tax appeals based on the resolution of the primary issue.