The State Of Gujarat vs M/S Ambuja Cement Ltd

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7874 OF 2024

THE STATE OF GUJARAT …APPELLANT

Vs.

M/S. AMBUJA CEMENT LTD … RESPONDENT

WITH

CIVIL APPEAL NO. 7875 OF 2024 CIVIL APPEAL NO. 7877 OF 2024 CIVIL APPEAL NO. 7876 OF 2024

WITH

T.C.(C) NOs. 12-13 OF 2019, T.C.(C) NO. 14 OF 2019, T.C.(C) NO. 15 OF 2019 & T.C.(C) NOs. 9- 11 OF 2019

J U D G M E N T

AUGUSTINE GEORGE MASIH, J.

1. The Appellant herein is the State of Gujarat Signature Not Verified Digitally signed by KAVITA PAHUJA which has challenged the judgment passed by Date: 2024.08.02 18:22:20 IST Reason:

Civil Appeal No.7874 of 2024, ETC. Page 1 of 23

the High Court of Gujarat dated 28.04.2016 in

an appeal preferred by it which was dismissed

affirming the order dated 08.06.2015 of the

Gujarat Value Added Tax Tribunal Ahmedabad

(hereinafter referred to as ‘the Tribunal’),

allowing the appeal of Respondent M/s Ambuja

Cement, Ltd.

2. The plea taken by the Appellant while

challenging the judgments of the High Court

and the Tribunal is that the Courts below have

erred in holding that Value Added Tax and value

of purchases on which no tax credit was claimed

nor granted in the assessment, cannot be

included in the aggregate of taxable turnover of

purchases within the State for the purpose of

reduction of tax credit under Section 11(3)(b) of

the Gujarat Value Added Tax Act, 2003

(hereinafter referred to as ‘the GVAT Act’).

Civil Appeal No.7874 of 2024, ETC. Page 2 of 23

3. Two substantial questions of law being framed

by the High Court were as follows: -

[1] Whether the Hon'ble Tribunal has erred in law and in facts in holding that value added tax paid on purchases is required to be excluded for computing "taxable turnover of purchases" under section 11(3)(b) of the Act?

[2] Whether the Hon'ble Tribunal has erred in law and in facts by holding that 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?

4. The learned senior advocate appearing for the

Appellant has asserted that the Respondent

dealer essentially calculated the taxable

turnover of its purchases under the GVAT Act by

excluding the Value Added Tax and value of

Civil Appeal No.7874 of 2024, ETC. Page 3 of 23 purchases on which no tax credit was

claimed and reduced the taxable turnover of

purchases by four per cent on the quantity of

goods involved in the manufacture of goods

dispatched by way of branch transfer as has

been provided in Section 11(3)(b) of the GVAT

Act. It is asserted that the Courts below have

failed to appreciate that the assessing officer

had rightly included the amount of Value Added

Tax and unclaimed tax credit in the turnover of

purchases as defined in Section 2(32) of the

GVAT Act.

5. It was further submitted that the legislative

intent has been wrongly interpreted to say that

it did not intend to include Value Added Tax

within the definition of the purchase price as

defined under Section 2(18) of the Gujarat Value

Added Tax. Section 2(18) which defines the

Civil Appeal No.7874 of 2024, ETC. Page 4 of 23 purchase price is not exhaustive and the Value

Added Tax should be included in the purchase

price for the purpose of calculation of taxable

turnover of purchases. Based on these

submissions, it is asserted by the learned senior

advocate for the Appellant that the judgments

passed by the High Court as well as the Tribunal

cannot be sustained and deserve to be set aside

by restoring the orders passed by the

assessment authorities being in accordance

with the law.

6. On the other hand, learned counsel for the

Respondent has asserted that the judgment as

passed by the Tribunal which has been

approved by the High Court has laid down the

correct interpretation of the statutory

provisions. Supporting the said judgment, the

learned counsel submitted that the purchase

Civil Appeal No.7874 of 2024, ETC. Page 5 of 23 price as defined aforesaid does not include the

Value Added Tax component, and whatever

duties and levies are required to be included in

the meaning of purchase price are specifically

provided for in the form of two Acts i.e., Central

Excise Tariff Act, 1985 and the Customs Act,

1962. Apart from these two taxes which have

been specifically referred to and provided for in

Section 2(18) of the GVAT Act, no other tax is to

be included. Had the legislature intended to

include the VAT component in the purchase

price, the same could have been expressly

provided for in the statute.

7. It is further contended by the learned counsel

that the scope of Section (11)(3)(b) of the GVAT

Act while computing the taxable turnover of

purchases cannot be expanded beyond the

provision as provided for under the GVAT Act,

Civil Appeal No.7874 of 2024, ETC. Page 6 of 23 supporting the said judgment, therefore, it was

prayed for the dismissal of the present appeals.

8. We have considered the submissions made by

the learned counsel for the parties and have

gone through the provisions, as well as the

pleadings.

9. In brief, the facts of the case are that the

Respondent dealer as mentioned calculated the

taxable turnover of its purchases within the

State of Gujarat by excluding the amount

representing Value Added Tax and value of

purchases of which no credit was claimed. This

was asserted to have been done under the

provisions of Section 11(3)(b) of the GVAT Act.

Accordingly, the taxable turnover was calculated

and proportionately reduced by four per cent on

the quantity of goods involved in the

Civil Appeal No.7874 of 2024, ETC. Page 7 of 23 manufacturing of goods dispatched by way of

branch transfer.

10. The Deputy Commissioner during the process

of audit assessment determined the taxable

turnover of purchases within the State by

including the tax amount i.e., Value Added Tax

Amount and Value of Purchases on which no tax

credit was claimed by the Respondent dealer nor

proposed to be granted in the assessment. On

the basis of this assessment, the Respondent

being aggrieved preferred an appeal before the

Joint Commissioner which was dismissed

leading to the filing of a second appeal before the

Gujarat Value Added Tax Tribunal at

Ahmedabad wherein the same was partly

allowed by holding that the tax and value

purchases on which no tax was claimed nor was

granted in the assessment could not be included

Civil Appeal No.7874 of 2024, ETC. Page 8 of 23 in the aggregate of taxable turnover of

purchases within the State for the purpose of

reduction of tax credit. The State of Gujarat

carried an appeal before the High Court

challenging the order passed by the Tribunal

which has been dismissed affirming the order of

the Tribunal.

11. The issue involved in the present matters

revolves around the definition of Purchase Price

as provided for under sub-Section (18) of Section

2 of the GVAT Act, which reads as follows: -

2. In this Act, unless the context otherwise requires, -

[* * * * *]

18. “purchase price” means the amount of valuable consideration

paid or payable by a person for any purchase made including the amount of

Civil Appeal No.7874 of 2024, ETC. Page 9 of 23 duties levied or leviable under the Central Excise Tariff Act, 1983 or the Customs Act, 1962 and any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged and includes, -

(a) in relation to –

(i) the transfer, otherwise than in pursuance of a contract of property in any goods,

(ii) the supply of goods by any unincorporated association or body of persons to a member thereof,

(iii) the supply by way of or as part of any service or in any other manner whatsoever, of

Civil Appeal No.7874 of 2024, ETC. Page 10 of 23 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 by 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

Civil Appeal No.7874 of 2024, ETC. Page 11 of 23 installments, the amount of valuable consideration payable by a person for such delivery.

12. On going through the above definition as has

been provided for, it would indicate that the

same is not only exclusive but exhaustive as

well, it can rather be said to be enumerative.

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

Civil Appeal No.7874 of 2024, ETC. Page 12 of 23 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.

13. In the case of Commissioner of Wealth Tax,

Gujarat-III, Ahmedabad v. Ellis Bridge

Gymkhana1 this Court held as follows: -

“5. The rule of construction of a charging section is that

1 1998 (1) SCC 384.

Civil Appeal No.7874 of 2024, ETC. Page 13 of 23 before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all.

6. *** what has been specifically left out by the legislature cannot be brought back within the ambit of the charging section by implication or by ascribing an extended meaning to the word “individual” so as to include whatever has been left out.”

14. In the case of P. Kasilingam and Others v.

P.S.G. College of Technology and Others2

this Court while interpreting the use of

expressions in the statute observed as follows: 2

1995 Supp (2) SCC 348.

Civil Appeal No.7874 of 2024, ETC. Page 14 of 23 “19…. The use of the word ‘means’ indicates that “definition is a hard-and- fast definition, and no other meaning can be assigned to the expression than is put down in definition”. (See : Gough v. Gough [(1891) 2 QB 665 : 60 LJ QB 726] ; Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court [(1990) 3 SCC 682, 717 : 1991 SCC (L&S) 71] .) The word ‘includes’ when used, enlarges the meaning of the expression defined so as to comprehend not only such things as they signify according to their natural import but also those things which the clause declares that they shall include. The words “means and includes”, on the other hand, indicate “an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions”. (See : Dilworth v. Commissioner

Civil Appeal No.7874 of 2024, ETC. Page 15 of 23 of Stamps [1899 AC 99, 105-106 : (1895-9) All ER Rep Ext 1576] (Lord Watson); Mahalakshmi Oil Mills v. State of A.P. [(1989) 1 SCC 164, 169 : 1989 SCC (Tax) 56] The use of the words “means and includes” in Rule 2(b) would, therefore, suggest that the definition of ‘college’ is intended to be exhaustive and not extensive and would cover only the educational institutions falling in the categories specified in Rule 2(b) and other educational institutions are not comprehended. Insofar as engineering colleges are concerned, their exclusion may be for the reason that the opening and running of the private engineering colleges are controlled through the Board of Technical Education and Training and the Director of Technical Education in accordance with the directions issued by the AICTE from time to time.” Civil Appeal No.7874 of 2024, ETC. Page 16 of 23

15. In the light of the above reproduced 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 same could

not be expanded and therefore it can be safely

said that the intention of the legislature was to

Civil Appeal No.7874 of 2024, ETC. Page 17 of 23 exclude Value Added Tax from the ambit of

purchase price as the same is not found

mentioned in the categories of tax/duties

enumerated thereunder. Sub-Section (32) of

Section 2 of the GVAT Act defines turnover of

purchases which reads as follows: -

“2. In this Act, unless the context otherwise requires, -

[* * * * * *]

32. “turnover of purchases” means 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 a given period after deducting the amount of purchase price, if any, refunded to the dealer by the seller in respect of any goods purchased from the seller and returned to him within the prescribed period.”

Civil Appeal No.7874 of 2024, ETC. Page 18 of 23

16. The above provision makes it amply clear that

the purchase price would be the determinative

factor for calculating the turnover of purchases,

as stated above, the purchase price would be

restrictive within the domain of Section 2(18).

Section 11 of the Gujarat Value Added Tax Act

deals with the tax credit. The relevant portion

thereof reads as follows:

11.(1)(a) A registered dealer who has purchased the taxable goods (hereinafter referred to as the “purchasing dealer”) shall be entitled to claim tax credit equal to the amount of,-

(i) tax collected from the purchasing dealer by a registered dealer from whom he has purchased such goods or the tax payable by the purchasing dealer to a registered dealer who has sold such goods to him during the tax period, or];

[***************]

Civil Appeal No.7874 of 2024, ETC. Page 19 of 23

(b)The tax credit to be so claimed under this sub-

section shall be subject to the provisions of sub-

sections (2) to (12); and the tax credit shall be calculated in such manner as may be prescribed.

[***************]

11.(3)(b) Notwithstanding anything contained in this section, the amount of tax credit in respect of a dealer shall be reduced by the amount of tax calculated at the rate of four per cent. on the turnover of purchases-

(i) of taxable goods consigned or dispatched for branch transfer or to his agent outside the State, or

(ii) of goods taxable 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,

Civil Appeal No.7874 of 2024, ETC. Page 20 of 23

(iii) of fuel used for the manufacture of goods.:]

[Provided that where the rate of tax of the taxable goods consigned or dispatched by a dealer for branch transfer or to his agent outside the State is less than four per cent., then the amount of tax credit in respect of such dealer shall be reduced by the amount of tax calculated at the rate of tax set out in the Schedule on such goods on the 34[taxable turnover of purchases with in the State.]

17. 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

Civil Appeal No.7874 of 2024, ETC. Page 21 of 23 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.

18. Therefore, 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.

19. The order passed by the Tribunal as has been

upheld vide the impugned judgment of the

High Court being in accordance with law calls

Civil Appeal No.7874 of 2024, ETC. Page 22 of 23 for no interference and therefore, the appeals

deserve dismissal.

20. The appeals, accordingly, stand dismissed.

21. As regards the Transfer Cases which were

directed to be heard along with the present

Appeals, are allowed in the light of the above

Judgment passed in the Appeals.

....………………………………. J.

(ABHAY S. OKA)

……………………………………J. (AUGUSTINE GEORGE MASIH)

NEW DELHI.

AUGUST 02, 2024.

Civil Appeal No.7874 of 2024, ETC. Page 23 of 23