2023 (6) TMI 234 - HC - VAT and Sales Tax

Interpretation of statute - term gross turnover as contained in the Composition Scheme 2006 - Composition Scheme for Gem and Stones, 2006 - exclusion of export amount from gross turnover for calculation of Composition Amount - N/N. F.12(63)FD/Tax/2005-37 dated 06.05.2006. HELD THAT - From the conjoint reading of notification dated 06.05.2006 and Section 5 of RVAT Act, it is abundantly clear that the composition amount as envisaged under the Composition Scheme 2006 is levied so that assessee can discharge his/her tax liability by paying a lump sum amount / composition amount. The Composition Scheme 2006 was introduced with a beneficial purpose with the objective to streamline/simplify the tax paying process and to reduce the otherwise rigorous and complex compliance with respect to tax return. Thus, composition amount paid by the assessee, essentially to discharge his/her tax liability, retains its characteristic of tax even though the same is called composition amount . As per Article 265 (Taxes not to be imposed save by authority of law) of Constitution of India, no tax can be levied or collected except by authority of law. Further, as per Article 286 (Restrictions as to imposition of tax on the sale or purchase of goods) of Constitution of India, no State law can impose tax on supply of goods or services outside the State or in the course of import or export of goods or services outside the territory of India. In these circumstances, the contention of the Revenue that gross turnover would include export sale as well cannot be accepted as that would tantamount to permitting State to collect tax on exports, which is constitutionally impermissible. This Court is of the view that the assessee was rightly excluding the export sales form the gross turnover and was accordingly paying composition amount on gross turnover of local sales. Therefore, the question of law framed hereinabove is answered in favour of the assessee and against the revenue. Revision dismissed.

Summary

Issues Involved:
The judgment involves the interpretation of the term "gross turnover" in the Composition Scheme 2006 under the Rajasthan Value Added Tax Act, 2003, specifically regarding whether export sales should be included in the gross turnover for calculating the composition amount.

Facts and Arguments by Revenue:
The assessee underpaid the composition amount by excluding export sales from the gross turnover, leading to tax evasion proceedings. The Revenue argued that the Composition Scheme 2006 mandates payment based on the entire turnover, including export sales, and cited a previous court decision supporting this position.

Counterarguments by Assessee:
The Assessee contended that the Composition Scheme 2006 is optional and export sales should not be included in the gross turnover for calculating the composition amount. They highlighted differences in tax regimes, emphasizing that the Composition Scheme under the RVAT Act differs from the previous tax regime, making the previous court decision non-binding.

Court Analysis and Decision:
The court examined the relevant legal provisions and the purpose of the Composition Scheme 2006. It noted that the scheme aims to simplify tax payment and cannot impose tax on exports. The court distinguished the previous court decision, stating that it was based on a different tax regime and did not consider the specific provisions of the RVAT Act. Ultimately, the court ruled in favor of the assessee, holding that export sales should not be included in the gross turnover for calculating the composition amount.

Conclusion:
The court dismissed the Revenue's Sales Tax Revisions/References and disposed of the Assessee's cases accordingly, affirming that export sales should not be part of the gross turnover for determining the composition amount under the Composition Scheme 2006.