In a significant ruling, the Supreme Court of India has upheld the Gujarat High Court’s decision, affirming that Value Added Tax (VAT) and the value of purchases on which no tax credit was claimed or granted should be excluded from the taxable turnover of purchases under the Gujarat Value Added Tax Act, 2003 (GVAT Act). The judgment was delivered by Justice Abhay S. Oka and Justice Augustine George Masih in the case State of Gujarat vs. M/s Ambuja Cement Ltd. (Civil Appeal No. 7874 of 2024).
Background of the Case
The case originated from an audit assessment by the Deputy Commissioner, who included the VAT amount and the value of purchases on which no tax credit was claimed in the taxable turnover of M/s Ambuja Cement Ltd. The company challenged this assessment before the Gujarat Value Added Tax Tribunal, which ruled in favor of the company. The Tribunal’s decision was subsequently upheld by the Gujarat High Court, leading the State of Gujarat to appeal to the Supreme Court.
Legal Issues Involved
The primary legal issue revolved around the interpretation of the term “purchase price” under Section 2(18) of the GVAT Act and whether VAT and unclaimed tax credits should be included in the taxable turnover of purchases for the purpose of tax credit reduction under Section 11(3)(b) of the GVAT Act. The two substantial questions of law framed were:
1. Whether VAT paid on purchases should be excluded for computing “taxable turnover of purchases” under Section 11(3)(b) of the GVAT Act.
2. Whether purchases on which VAT is neither claimed nor granted should be excluded for computing “taxable turnover of purchases” under Section 11(3)(b) of the GVAT Act.
Court’s Decision
The Supreme Court, after considering the submissions from both parties, ruled that the definition of “purchase price” under Section 2(18) of the GVAT Act is exhaustive and does not include VAT. The Court observed that the legislative intent was clear in excluding VAT from the definition of purchase price, as it was not mentioned among the taxes and duties enumerated in the section.
Key Observations:
– “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”.
– “The purchase price, therefore, would be the amount of valuable consideration paid or payable for any purchase which would include the 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”.
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Parties and Legal Representation
– Appellant: State of Gujarat
– Respondent: M/s Ambuja Cement Ltd.
– Bench: Justice Abhay S. Oka and Justice Augustine George Masih
– Lawyers: Senior advocates representing the State of Gujarat and learned counsel for M/s Ambuja Cement Ltd.
