The Supreme Court ruled that the value-added tax ( VAT ) is not included in the definition of ‘purchase price’ under the Gujarat Value Added Tax Act, 2003 (GVAT), giving relief to Ambuja Cement. The Court concluded that VAT should not be added to the purchase price for tax calculation, as it is not listed among the categories of tax/duties in Section 2(18) of the Gujarat Value Added Tax Act.
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The bench, consisting of Justice Abhay S. Oka and Justice Augustine George Masih, stated, “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 provided in this section apart from other charges. The scope has been limited to the two Acts mentioned in the Section itself. It can be safely said that the intention of the legislature was to exclude VAT from the ambit of purchase price as it is not mentioned among the categories of tax/duties enumerated thereunder.”
The court elaborated that the definition of ‘purchase price’ under Section 2(18) of GVAT includes duties and levies specified in the Central Excise Tariff Act, 1985, and the Customs Act, 1962, along with other charges, but excludes any other tax.
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“The cogent reading of sub-Section (18) of Section 2 defining ‘purchase price’, sub-Section 32 of Section 2 defining ‘turnover of purchases’, and Section 11 of the GVAT Act dealing with entitlement to the tax credit, leads to the conclusion that the purchase price would not include purchases on which no VAT was claimed nor granted, and the component of VAT already paid on purchases,” the judgement authored by Justice Masih stated.
The court further clarified that the calculation of taxable turnover of the purchases and reduction value of purchases on which no tax credit was claimed nor granted, and the component of VAT 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 Gujarat VAT Act.”
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The ruling emphasises the importance of strict interpretation of tax statutes. “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, only one meaning can be inferred. Tax statutes have to be interpreted strictly, meaning 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 court asserted.
The legal representation in this case included Ms. Archana Pathak Dave, Senior Advocate, and Ms. Deepanwita Priyanka, Advocate on Record ( AOR ), along with Mr. S. Ganesh, Senior Advocate, Mr. Hrishikesh Baruah, AOR, Mr. Rudraksh Kaushal, Advocate, and Mr. Anurag Mishra, Advocate, representing the petitioner. The respondents were represented by Mr. Purvish Jitendra Malkan, AOR, Mr. Alok Kumar, Advocate, Mr. Kush Goel, Advocate, Mr. Ryan Singh, Advocate, Mr. Suraj Pandey, Advocate, Mr. Santosh Krishnan, AOR, Mr. Uchit Sheth, Advocate, Ms. Sonam Anand, Advocate, Ms. Deepshikha Sansanwal, Advocate, Ms. Archana Pathak Dave, Senior Advocate, and Ms. Deepanwita Priyanka, AOR.
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The Supreme Court dismissed the appeal filed by the State against the impugned order, thereby restoring the order passed by the tribunal.
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