2024 (8) TMI 198 - SC - VAT and Sales Tax

Interpretation of purchase price under Section 2(18) of the Gujarat Value Added Tax Act, 2003 (GVAT Act) - Exclusion of value added tax paid on purchases for computing taxable turnover of purchases under section 11(3)(b) of Gujarat Value Added Tax Act, 2003? - purchases on which value added tax is neither claimed nor granted are required to be excluded for computing taxable turnover of purchases under section 11(3)(b) of the Act or not - HELD THAT - 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. In the light of the definition as provided for under Section 2(18) of the GVAT Act, it becomes obvious that the definition is enumerative and exhaustive. The use of the word means denote the intention of the legislature to restrict the scope of the purchase price to the categories enumerated in the definition itself. 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 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. Thus, 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 and therefore, the appeals deserve dismissal - appeal dismissed.

Issues Involved:
1. Interpretation of "purchase price" under Section 2(18) of the Gujarat Value Added Tax Act, 2003 (GVAT Act).
2. Calculation of "taxable turnover of purchases" under Section 11(3)(b) of the GVAT Act.
3. Inclusion of Value Added Tax (VAT) and unclaimed tax credit in the taxable turnover of purchases.

Detailed Analysis:

1. Interpretation of "purchase price" under Section 2(18) of the GVAT Act:
The primary issue revolves around the interpretation of "purchase price" as defined in Section 2(18) of the GVAT Act. The definition includes the amount of valuable consideration paid or payable for any purchase, including duties levied under the Central Excise Tariff Act, 1985, and the Customs Act, 1962, but does not explicitly mention VAT.

The court emphasized that the definition is both exclusive and exhaustive, indicating that the legislative intent was to limit the scope of "purchase price" to the categories explicitly enumerated. The court cited precedents, such as Commissioner of Wealth Tax, Gujarat-III, Ahmedabad v. Ellis Bridge Gymkhana and P. Kasilingam and Others v. P.S.G. College of Technology and Others, to support the principle that tax statutes must be interpreted strictly, and no tax can be imposed by implication.

2. Calculation of "taxable turnover of purchases" under Section 11(3)(b) of the GVAT Act:
The appellant argued that the taxable turnover of purchases should include VAT and the value of purchases on which no tax credit was claimed. However, the respondent contended that the statutory provisions did not intend to include VAT within the "purchase price" for calculating taxable turnover.

The court analyzed the relevant statutory provisions, including Section 2(32), which defines "turnover of purchases" as the aggregate of the amounts of purchase price paid or payable, and Section 11(3)(b), which provides for the reduction of tax credit by four percent on the turnover of purchases of taxable goods consigned or dispatched for branch transfer or used as raw materials in manufacturing.

The court concluded that the taxable turnover of purchases should be calculated by excluding the VAT component and the value of purchases on which no tax credit was claimed, as the legislative intent was clear in not including these components within the "purchase price."

3. Inclusion of VAT and unclaimed tax credit in the taxable turnover of purchases:
The appellant's plea was that the lower courts erred in holding that VAT and the value of purchases on which no tax credit was claimed should not be included in the taxable turnover of purchases. The respondent argued that the correct interpretation of the statutory provisions excluded these components from the taxable turnover.

The court affirmed the interpretation of the lower courts, stating that the legislative intent was to exclude VAT from the "purchase price" and, consequently, from the taxable turnover of purchases. The court held that the calculation of taxable turnover should exclude both VAT and the value of purchases on which no tax credit was claimed.

Conclusion:
The Supreme Court upheld the judgment of the High Court and the Tribunal, affirming that the "purchase price" under Section 2(18) of the GVAT Act does not include VAT and the value of purchases on which no tax credit was claimed. Consequently, these components should be excluded from the taxable turnover of purchases under Section 11(3)(b) of the GVAT Act. The appeals were dismissed, and the transfer cases were allowed in light of this judgment.

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