The Honorable Supreme Court in the case of State of Gujarat vs M/s. Ambuja Cement Ltd. held that the Value Added Tax (VAT) paid on purchases should not be considered for computing taxable turnover of purchases as per Section 11(3)(b) of the Gujarat Value Added Tax Act, 2003 (GVAT Act).
In this case, the respondent dealer calculated the taxable turnover of its purchases within the Gujarat State by excluding the amount representing VAT and value of purchases of which no credit was claimed. This was asserted to have been done under Section 11(3)(b) of GVAT Act. Accordingly, the taxable turnover was calculated and proportionately reduced by four per cent on the quantity of goods involved in the manufacturing of goods dispatched by way of branch transfer. 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., VAT amount and value of purchases on which neither tax credit was claimed by the respondent nor proposed to be granted in the assessment.
Based on the aforesaid assessment, the aggrieved respondent approached the Joint Commissioner but its appeal was dismissed. Hence, second appeal was filed before the Tribunal and it partly allowed the same by holding that the tax and value purchases on which no tax was claimed and granted in the assessment could not be included in the aggregate of taxable turnover of purchases within the State for the purpose of reduction of tax credit.
Based on the aforesaid assessment, the aggrieved respondent approached the Joint Commissioner but its appeal was dismissed. Hence, second appeal was filed before the Tribunal and it partly allowed the same by holding that the tax and value purchases on which no tax was claimed and granted in the assessment could not be included in the aggregate of taxable turnover of purchases within the State for the purpose of reduction of tax credit.
The Court added that the intention of the legislature was to 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.
“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”, it said.
Accordingly, the Supreme Court dismissed the appeals and refused to interfere in the judgment of the High Court.
Reference: VERDICTUM
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