M/S Gem INDIA Exports vs. Assistant Commissioner, Anti Evasion

Held

The Court held that the Tax Board was justified in excluding export sales from the gross turnover for calculating the composition amount under the 'Composition Scheme for Gem and Stones, 2006'. The Court reasoned that the Composition Scheme 2006, notified under Section 5 of the RVAT Act, is intended to discharge tax liability. Article 265 of the Constitution prohibits the imposition of taxes except by law, and Article 286 restricts states from imposing tax on exports. Therefore, including export sales in the 'gross turnover' for composition would amount to the State collecting tax on exports, which is constitutionally impermissible. The Court distinguished the revenue's relied-upon judgment in M/s Naveen Jewellers vs. Commercial Taxes Officer, finding it distinguishable on facts and law. The Naveen Jewellers case pertained to the prior RST Act, did not consider Section 5 of the RVAT Act, and dealt with a different factual matrix. The Court emphasized that the term 'gross turnover' in the Composition Scheme 2006 must be read in conjunction with 'within the State'. Consequently, the question of law was answered in favour of the assessee.

Facts

The revenue authorities surveyed the premises of M/s Gem India Exports and M/s Gem India Investments in May 2016. It was found that the assessees had opted for the 'Composition Scheme for Gem and Stones, 2006' under the Rajasthan Value Added Tax Act, 2003. The revenue contended that the assessees failed to include export sales in their 'gross turnover' for calculating the composition amount, leading to underpayment. Proceedings were initiated, and an assessment order dated March 2, 2021, demanded ₹32,53,180 from M/s Gem India Exports. The Appellate Authority upheld this order. However, the Tax Board allowed the assessees' appeals, quashing the revenue's orders. The revenue filed these revisions before the High Court challenging the Tax Board's decision.

Key Issues

1. Whether the Tax Board was justified in law in holding that the export amount is to be excluded from gross turnover for the calculation of the Composition Amount under the ‘Composition Scheme for Gem and Stones, 2006’ (RVAT Act, Section 5)? Petitioner (Revenue) argued that once an assessee opts for the Composition Scheme 2006, they must abide by its terms. They contended that 'annual gross turnover' includes export sales, affecting the composition amount. The revenue relied on a co-ordinate bench judgment in M/s Naveen Jewellers vs. Commercial Taxes Officer, which held that composition amount is a fee/fine and gross turnover includes export sales. They also cited Supreme Court judgments on the binding nature of co-ordinate bench decisions. Respondent (Assessee) argued that the Tax Board correctly distinguished the Naveen Jewellers judgment. They submitted that the Naveen Jewellers case dealt with a prior tax regime (RST Act) and a different issue (refund of composition amount for a 100% exporter). The assessee highlighted that the RVAT Act introduced input tax credit, unlike the RST Act. They further argued that the Composition Scheme 2006, derived from Section 5 of the RVAT Act and read with Article 265 of the Constitution, levies tax on sales 'within the State', making export sales excludable from the 'gross turnover' for composition purposes.