Supreme Court of India
THE STATE OF GUJARATversusM/S AMBUJA CEMENT LTD.
- Citation
- 2024 INSC 572
- Decided
- 2 August 2024
- Bench
- ABHAY S OKA
Holding
The purchase price defined in Section 2(18) of the Gujarat Value Added Tax Act, 2003 is exhaustive and does not include VAT or unclaimed tax credit, so such amounts must be excluded from the taxable turnover of purchases.
Summary
The State of Gujarat appealed against the Gujarat Value Added Tax Tribunal and the High Court, which had allowed M/s Ambuja Cement Ltd. to exclude Value Added Tax (VAT) and the value of purchases on which no tax credit was claimed from its taxable turnover of purchases under Section 11(3)(b) of the Gujarat Value Added Tax Act, 2003. The central issue was whether the definition of "purchase price" in Section 2(18) of the Act includes VAT and unclaimed tax credit, thereby requiring their inclusion in the turnover of purchases. The Supreme Court examined the statutory language, emphasizing that the definition is enumerative and uses the word "means", indicating an exhaustive scope limited to duties under the Central Excise Tariff Act and the Customs Act. Relying on principles of strict construction of tax statutes and precedents such as Commissioner of Wealth Tax v. Ellis Bridge Gymkhana, the Court held that VAT is expressly excluded from the purchase price. Consequently, the taxable turnover of purchases must be calculated after deducting both VAT and unclaimed tax credit, validating the Tribunal's and High Court's orders. The appeals were dismissed, and the transfer cases were allowed.
Issues considered
- Whether VAT paid on purchases must be excluded when computing "taxable turnover of purchases" under Section 11(3)(b) of the Gujarat Value Added Tax Act, 2003.
- Whether purchases on which VAT is neither claimed nor granted must be excluded for computing "taxable turnover of purchases" under the same provision.
Legislation cited
- Central Excise Tariff Act, 1985
- Constitution of India
- Customs Act, 1962
- Gujarat Value Added Tax Act, 2003s. 11(3)(b), s. 2(18), s. 2(32)
Subjects
Purchase PriceValue added taxVATGujarat Value Added TaxGVATValue of purchasesTaxable turnover of purchasesAggregate of taxable turnover of purchasesEntitlement to tax creditUnclaimed tax creditValue Added Tax excluded from the ambit of purchase priceTaxation statutesStrict interpretationBranch transferTaxable turnover reduced
Judgment
[2024] 8 S.C.R. 34 : 2024 INSC 572
The State of Gujarat
v.
M/s Ambuja Cement Ltd.
(Civil Appeal No. 7874 of 2024)
02 August 2024
[Abhay S. Oka and Augustine George Masih,* JJ.]
Issue for Consideration
Definition of Purchase Price under sub-Section (18) of Section
2 of the Gujarat Value Added Tax Act, 2003. High Court whether
justified in upholding the order passed by the Gujarat Value Added
Tax Tribunal wherein it held that the tax and value purchases on
which no tax was claimed nor was granted in the assessment could
not be included in the aggregate of taxable turnover of purchases
within the State of Gujarat for the purpose of reduction of tax credit.
Headnotes†
Gujarat Value Added Tax Act, 2003 – ss.2(18), (32), 11(3 (b) –
Purchase Price – Turnover of purchases – Tax liability
u/s.11(3 (b) – Entitlement to tax credit – Respondent-dealer
excluded the amount representing Value Added Tax and
value of purchases of which no credit was claimed, while
calculating the taxable turnover of its purchases within the
State of Gujarat and reduced the taxable turnover by four per
cent on the quantity of goods involved in the manufacturing
of goods dispatched by way of branch transfer – Correctness:
Held: 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 u/s. 11(3 (b) –
Cogent reading of s.2(18), s.2(32) and s.11 lead to only one
conclusion that purchase price would not include purchases
on which no value added tax was claimed nor granted and the
component of value added tax stood already paid on purchases –
Thus, the taxable turnover of purchases would have to be calculated
after deducting both the components – Definition of Purchase
Price u/s.2(18) is enumerative and exhaustive – The use of the
word “means” denote the intention of the legislature to restrict the
* Author
[2024] 8 S.C.R. 35
The State of Gujarat v. M/s Ambuja Cement Ltd.
scope of the “purchase price” to the categories enumerated in
the definition itself – Therefore, the purchase price 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 (Central Excise Tariff Act, 1985 and the Customs Act,
1962) 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 – Thus, 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 – Order passed by the Tribunal and upheld by the High
Court not interfered with. [Paras 18, 17, 15, 19]
Interpretation of Statutes – Taxation statutes – Strict
interpretation – Duty of the Court:
Held: The Courts ought to read the statute as it is and if the words
therein are clear and unambiguous then only one meaning can
be inferred – 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 prohibits the
State from extracting tax from the citizens without the authority of
law – The tax statutes have to be interpreted strictly – 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. [Para 12]
Case Law Cited
Commissioner of Wealth Tax, Gujarat-III, Ahmedabad v. Ellis
Bridge Gymkhana [1997] Supp. 4 SCR 626 : 1998 (1) SCC 384;
P. Kasilingam and Others v. P.S.G. College of Technology and
Others [1995] 2 SCR 1061 : (1995) Supp 2 SCC 348 – relied on.
List of Acts
Gujarat Value Added Tax Act, 2003; Central Excise Tariff Act, 1985;
Customs Act, 1962; Constitution of India.
36 [2024] 8 S.C.R.
Digital Supreme Court Reports
List of Keywords
Purchase Price; Value added tax; VAT; Gujarat Value Added
Tax; GVAT; Value of purchases; Taxable turnover of purchases;
Aggregate of taxable turnover of purchases; Entitlement to tax
credit; Unclaimed tax credit; Value Added Tax excluded from the
ambit of purchase price; Taxation statutes; Strict interpretation;
Branch transfer; Taxable turnover reduced.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7874 of 2024
From the Judgment and Order dated 28.04.2016 of the High Court
of Gujarat at Ahmedabad in TA No. 353 of 2016
With
Civil Appeal Nos. 7875, 7877 and 7876 of 2024, T.C.(C) Nos. 12-13,
14, 15 and 9-11 of 2019
Appearances for Parties
Ms. Archana Pathak Dave, S Ganesh, Sr. Advs., Ms. Deepanwita
Priyanka, Hrishikesh Baruah, Rudraksh Kaushal, Anurag Mishra,
Purvish Jitendra Malkan, Alok Kumar, Kush Goel, Ryan Singh, Suraj
Pandey, Santosh Krishnan, Uchit Sheth, Ms. Sonam Anand, Ms.
Deepshikha Sansanwal, Advs. for the appearing parties.
Judgment / Order of the Supreme Court
Judgment
Augustine George Masih, J.
1. The Appellant herein is the State of Gujarat which has challenged
the judgment passed by 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
[2024] 8 S.C.R. 37
The State of Gujarat v. M/s Ambuja Cement Ltd.
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’).
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 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 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
38 [2024] 8 S.C.R.
Digital Supreme Court Reports
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 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, 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 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
[2024] 8 S.C.R. 39
The State of Gujarat v. M/s Ambuja Cement Ltd.
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 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 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 goods, being food or any other article
for human consumption or any drink
40 [2024] 8 S.C.R.
Digital Supreme Court Reports
(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 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 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: -
1 [1997] Supp. 4 SCR 626 : 1998 (1) SCC 384.
[2024] 8 S.C.R. 41
The State of Gujarat v. M/s Ambuja Cement Ltd.
“5. The rule of construction of a charging section is that
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 Others 2 this Court while interpreting the use of
expressions in the statute observed as follows:
“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
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
2 [1995] 2 SCR 1061 : 1995 Supp (2) SCC 348.
42 [2024] 8 S.C.R.
Digital Supreme Court Reports
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.”
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 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.”
16. The above provision makes it amply clear that the purchase price
would be the determinative factor for calculating the turnover of
[2024] 8 S.C.R. 43
The State of Gujarat v. M/s Ambuja Cement Ltd.
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];
[***************]
(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,
(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.]
44 [2024] 8 S.C.R.
Digital Supreme Court Reports
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 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 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.
Result of the case: Appeals dismissed, Transfer Cases allowed.
†
Headnotes prepared by: Divya Pandey
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Purchase Price"Sign in to search