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TMI Blog2024 (10) TMI 1458X X X X Extracts X X X X X X X X Extracts X X X X ..... common judgment and order. 1.2 Rule in Special Civil Application Nos.16620 of 2022, 17011 of 2022, 19080 of 2022, 16446 of 2023 and 16515 of 2023, returnable forthwith. Learned Assistant Government Pleader Mr.Chintan Dave waives service of notice of Rule on behalf of the respondents in these petitions. 2. For the sake of convenience, Special Civil Application No.705 of 2021 is treated as a lead matter. 3. The respondent raised a preliminary issue with regard to 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. 3.1 The coordinate Bench of this Court vide order dated 12th January, 2021, considering the decision rendered in Tax Appeal No.349 of 2016 in case of Ambuja Cement Ltd. dealing with the similar issue applicable to the facts of the present case, has entertained this petition by issuing notice. 4. Brief facts of the case of Special Civil Application No.705 of 2021 are as under. (i) The petitioner is a company incorporated under the provisions of the Companies Act, 1956 having franchisee of Pizza Hut at Vadodara. (ii) The petitioner was initially carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commercial Tax Officer-4, Vadodara to show cause as to why permission granted on 09th July, 2014 to the petitioner company to pay lump sum composition tax under Section 14D of the Act should not be revoked on the ground that the petitioner, while making payment of VAT did not take into consideration the service tax component and did not add the same in the invoice while determining the VAT to be paid by the petitioner company. (xiii) The petitioner company replied on 10th December, 2019 and 23rd January, 2020 in response to the show-cause notice contending that as per the provision of Section 2(24) of the Act, sale price would not include service tax component. However, the respondent No.2, by order dated 03rd June, 2020, set aside the permission granted to the petitioner company under Section 14D of the Act to pay consolidated lump sum amount of composition tax on the ground that VAT has not been paid on the service tax component collected by the petitioner. (xiv) It appears that the petitioner thereafter received notice dated 29th November, 2019 for issue based assessment under Section 34(8A) of the Act for the years 2014-15 and 2015- 16 for the period from 01st April, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are defined under Section 65B(22) of the said Act as activity carried out by a person for another person for consideration and declared as such under Section 66E of the said Act which means that service to be covered under the purview of declared services, it must satisfy two conditions simultaneously - (i) it must be an activity carried out by one person for another person in lieu of consideration, and (ii) it must be specified (declared) under Section 66E of the Finance Act, 1994. It was further submitted that provision of Section 2(33) of the Act defines turnover sales and Section 2(24) of the Act defines sale price, therefore question which arise for consideration is what is includible in sales turnover. 5.2 Reliance was placed on the decision of this Court in case of Ambuja Cement Ltd. (supra), wherein the issue regarding computing taxable turnover of purchases under Section 11(3)(b) of the Act was considered vis-a-vis taxable turnover of sales. It was submitted that the definition of taxable turnover of purchases is a mirror image of the definition of taxable turnover of sales and therefore, the ratio of judgment of this Court in the said case of Ambuja Cement Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid VAT on lump sum rate on the amount charged by the petitioner on the invoice value without including component of "service tax". It was, therefore, submitted that though the petitioner has collected service tax on the services rendered by the petitioner, however petitioner has conveniently chosen to avoid the payment of VAT at the lump sum rate on the service tax component. 6.2 Learned Assistant Government Pleader referred to and relied upon the definition of "sale price" under Section 2(24) to submit that definition is required to be considered in its true perspective and strict sense as it is not in dispute that the services rendered by the petitioner would be covered in sale price and therefore, once it is to be included in the sale price, the VAT is to be paid accordingly on the considerations received for services rendered and once lump sum tax benefit is claimed by the petitioner, it was the liability of the petitioner to ensure that the tax component paid on 'sale price' covers the service tax component recovered by the petitioner. 6.3 Learned Assistant Government Pleader Mr.Dave thereafter referred to Section 2(30) of the Act which deals with "taxable turnover" and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to such violation if found during the course of investigation, inquiry, verification etc. instituted pursuant to the enforcement of the Amendment Act and it cannot be said that such action of the respondent authority is without legal backing and such contentions raised by the petitioner are, therefore, not tenable. 6.7 Reliance was placed on Section 14 of the Act read with corresponding Rule 26 of the Rules to submit that permission which has been cancelled from the date when it was in contravention of the provisions of the Act and therefore, when indisputedly at no point of time the tax under the VAT Act has been paid on the service tax component, the respondent authorities have rightly cancelled the permission right from the day one when it was granted. It was, therefore, submitted that no interference may be made in the impugned order dated 11th November, 2020 as well as notice dated 01st December, 2020 issued by respondent No.3. 7. Learned advocate Mr.Anand Nainawati appearing for other petitioners adopted the submissions made by learned senior advocate Mr.S.N. Soparkar in the facts of the case which were pleaded. 7.1 In case of other petitions, the petitioner was hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in the cases of Joint Commercial Tax Officer, Division-III, Madras vs. Spencer & Co. & Ors., 36 STC 188 (SC) & Anand Swarup Mahesh Kumar vs. Commissioner of Sales Tax, 46 STC 477 (SC), wherein Hon'ble Supreme Court observed that where a dealer is authorized by law to pass on any tax payable by him on a transaction of sale to the purchaser, such tax does not form part of the consideration for the purposes of levy of tax on sales and purchase." 8. Having heard learned advocates for the respective parties, the short question which arises for consideration of this Court is as to whether the liability of payment of Value Added Tax would include 'service tax' component collected by the petitioner from customers or not. 9. In order to answer this question, it would be germane to refer to the relevant provisions of the VAT Act, which are as under:- 2(23) "sale" means a sale of goods made within the State for cash or deferred payment or other valuable consideration and includes,- ... ... ... (h) supply of goods being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "total turnover" means aggregate of the following transactions effected by a dealer, (a) turnover of sales of goods within the State whether such sales of goods are taxable or exempt under this Act; (b) turnover of sales of goods in the course of inter-State trade or commerce; (c) turnover of sales of goods in the course of export of goods out of the territory of India; (d) turnover of sales by a dealer on his own account and also on behalf of his principal; 3. Incidence of tax. (1) Subject to the provisions of this Act, every dealer,- (i) whose total turnover during the year immediately preceding the appointed day exceeded rupees five lakhs and whose taxable turnover exceeded rupees ten thousand in a year (the aforesaid amounts of total turnover and taxable turnover are hereinafter referred to as "thresholds of turnover"), or (ii) who was registered under the earlier law or under the Central Act as on the appointed day, or (iii) whose total turnover and taxable turnover in any year first exceed the thresholds of turnover, or (iv) who is registered or liable to be registered as a dealer under this Act or under the Central Act at any time after the appointed day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State Government by notification in the Official Gazette : Provided that the Commissioner shall not grant permission to pay lump sum tax to a dealer who is engaged in the activity of manufacture of such goods as the State Government may, by notification in the Official Gazette, specify. (2) The provisions of sub-sections (3) and (4) of section 14 shall apply mutatis mutandis to a dealer who is permitted under sub-section (1) to pay lump sum tax by way of compositions. (3) The permission granted under subsection (1) shall remain valid so long as the provisions of this section and rules made in this behalf are complied with; and in case of breach of any of the provisions of this section or the rules, the dealer shall be liable to pay tax under sections 7 and 9 for such tax period as may be prescribed. Rule 18 Calculation of tax.- (1) The net amount of tax payable under section 13 by a registered dealer, other than the dealer who has been granted permission to pay lump sum tax under section 14, shall be determined in Form 201. (2) If the amount calculated as per subrule (1) has a negative value - (a) the same shall be adjusted against tax liability, if any, under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified period, (iii) the supply of goods by any unincorporated association or body of persons to a member thereof, (iv) the supply by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), the amount of cash, deferred payment or other valuable consideration paid or payable therefor; (b) in relation to the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, such amount as is arrived at by deducting from the amount of valuable consideration paid or payable to a person for the execution of such works contract, the amount representing labour charges for such execution; (c) in relation to the delivery of goods on hire-purchase or any system of payment by installments, the amount of valuable consideration payable to a person for such delivery. 10.2 However, 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. (supra) while decidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsigned or dispatched for branch transfer or to his agent outside the State, or (ii) of taxable goods which are used as raw materials in the manufacture, or in the packing of goods which are dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State, (iii) of fuels used for the manufacture of goods. Thus, the amount of tax credit in respect of a dealer is required to be reduced by the amount of tax calculated at the rate of four per cent on taxable turnover of purchases within the State. The controversy involved in the present case is as regards the taxable turnover of the purchases made by the petitioner. It would, therefore, be germane to refer to the definition of "taxable turnover" as defined under section 2(30) of the GVAT Act which provides that "taxable turnover" means the turnover of all sales or purchases of a dealer during the prescribed period in any year after deducting therefrom, the matters enumerated thereunder. Sub-section (32) of section 2 defines "taxable turnover of purchases" to mean the aggregate of the amounts of purchase price paid or payable by a dealer in respect of any purchase of goods made by him during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchaser is a tax on the purchaser and not on the seller. Under section 21-A, the tax payable is on the price of the liquor and that tax is to be paid by the purchaser, the seller is required to collect the tax from the purchaser which he has to pay over to the Government. Section 21-A makes the seller a collector of tax for the Government and the amount collected by him as tax under this section cannot, therefore, be part of the turnover. It was submitted on behalf of the dealer that in the present case also, the value added tax paid by the purchasing dealer is collected on behalf of the Government and, therefore, has rightly been held by the Tribunal to be not part of the turnover of the respondent dealer. In Anand Swarup Mahesh Kumar v. The Commissioner of Sales Tax (supra), the Supreme Court placed reliance upon its earlier decision in the case of M/s Spencer & Co. (supra) and held that there was no substantial difference between section 21-A of the Madras Prohibition Act, 1937 and section 17(iii)(b)(1) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964. Whereas the levy under section 21-A of the Madras Prohibition Act, 1937 was sales tax payable to the State Government, und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act, 1985 or the Customs Act, 1962" is an inherent indicator of the legislative intent to include only those duties/taxes within the purview of the expression "purchase price". Therefore, the intention of the legislature to exclude value added tax from the ambit of purchase price is clear, as otherwise, the same would also have found place in the categories enumerated thereunder. The Tribunal in the impugned order, on a conjoint reading of the definition of "purchase price" in sub-section (18) of section 2, turnover of purchases in sub-section (32) of section 2 of the Act and section 11 of the Act, was of the view that the tax collected under the Value Added Tax Act is not includible in the turnover of purchases, though it covers other duties as leviable under different Acts. In the opinion of this court, the view adopted by the Tribunal is in consonance with the construction of section 2(18) as discussed hereinabove. Since the interpretation of "purchase price" as defined under section 2(18) of the Act is the foundation for in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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