2024 (10) TMI 1458 - HC - VAT / Sales Tax

Maintainability of the petitions in view of availability of the alternative remedy of filing statutory appeal under Section 73 of the Gujarat Value Added Tax Act, 2003 - whether the liability of payment of Value Added Tax would include service tax component collected by the petitioner from customers or not? - HELD THAT - The petitioner is required to calculate the taxable turnover of its sales under the provisions of Section 14 of the Act by excluding the amount of turnover of sales not subjected to tax under the Act and turnover of goods declared exempt and in case of turnover of sales in case of the works contract, charges towards labours, service and other like charges and subject to such conditions as may be prescribed. Accordingly, VAT is payable upon the taxable turnover and as per the provision of Section 3 read with Section 14 of the Act, it provides for option for payment of lump sum tax in lieu of tax on turnover of sales. On perusal of the interpretation made by the respondent authority, whether the service tax component collected by the petitioner could be said to be sale price or not is answered by this Court in the case of Ambuja Cement Ltd. 2016 (4) TMI 1399 - GUJARAT HIGH COURT while deciding the issue as to whether the total taxable turnover of purchases liable for purchase tax would include Value Added Tax component or not. It is pertinent to note that definition of taxable turnover of purchase is mirror image of definition of taxable turnover of sales under Section 2(33). When the word includes is used in the definition of Section 2(24) of the Act, it is clear that legislature does not intend to restrict the definition, it makes the definition enumerative and not exhaustive as held by this Court and therefore, in ordinary meaning, it has to be extended to bring within the term certain matters which in its ordinary meaning it may or may not comprise. Inclusion of the words duties levied or leviable under the Central Excise Tariff At, 1985 or Customs Act, 1962 and any sum charged for anything done by the dealer in respect of the goods before the delivery thereof would indicate that the legislator intend to include only those duties/taxes within the purview of the expression sale price . Therefore, the intention of the legislature to exclude the service tax component from the ambit of sale price is clear, as otherwise, the same would also have found place in the categories enumerated thereunder. The impugned orders passed by the respondent authority setting aside the permission granted under Section 14D of the Act for payment of composition tax only on the ground that petitioners have not paid the VAT on the service tax component which ought to have been included in the sale price is squarely covered in favour of the petitioners and on the same analogy for excluding Value Added Tax from purchase price in case of Ambuja Cement Ltd., the petitioners are not liable to include the service tax component as part of the sales price so as to pay VAT thereon. All these petitions succeed and are accordingly allowed.

Summary

Issues Involved:
1. Maintainability of petitions due to alternative remedy under Section 73 of the Gujarat Value Added Tax Act, 2003.
2. Inclusion of service tax component in the sale price for VAT calculation under the Gujarat Value Added Tax Act, 2003.
3. Legality of the cancellation of permission to pay lump sum composition tax under Section 14D of the Act.

Detailed Analysis:

1. Maintainability of Petitions:
The respondent raised a preliminary issue regarding the maintainability of the petitions, arguing that the petitioners had an alternative remedy available through a statutory appeal under Section 73 of the Gujarat Value Added Tax Act, 2003. However, the court entertained the petitions, referencing a previous decision in the case of Ambuja Cement Ltd., which dealt with a similar issue, thus justifying the court's jurisdiction to hear the matter despite the availability of an alternative remedy.

2. Inclusion of Service Tax in Sale Price for VAT Calculation:
The core issue was whether the service tax component collected by the petitioners should be included in the sale price for the purpose of calculating VAT. The petitioners argued that, according to Section 2(24) of the Act, the sale price should not include the service tax component. They relied on the decision in Ambuja Cement Ltd., where it was held that statutory taxes collected by dealers do not form part of the taxable turnover. The court agreed with this argument, noting that the legislative intent was to exclude service tax from the sale price, as evidenced by the definition of "sale price" under Section 2(24), which did not explicitly include service tax.

3. Legality of Cancellation of Permission under Section 14D:
The petitioners challenged the cancellation of the permission to pay lump sum composition tax under Section 14D, which was revoked on the grounds that VAT was not paid on the service tax component. The court found that the cancellation was unjustified, as the service tax component should not have been included in the sale price for VAT calculation. The court reiterated that the legislative framework did not support the inclusion of service tax in the taxable turnover of sales, aligning with the reasoning in Ambuja Cement Ltd. Consequently, the impugned orders and show-cause notices were quashed.

Conclusion:
The court ruled in favor of the petitioners, concluding that the service tax component should not be included in the sale price for VAT purposes. The cancellation of the permission to pay lump sum composition tax was deemed unjustified, and the impugned orders were set aside. The petitions were allowed, with the rule made absolute to the specified extent, and no order as to costs was made.