Assistant Commissioner vs. M/S Gem INDIA Investments

Held

The Court held that the Tax Board was justified in excluding export sales from the gross turnover for calculating the composition amount. The Court reasoned that the Composition Scheme 2006, notified under Section 5 of the RVAT Act, is in lieu of tax liability. Including export sales in the gross turnover for calculating the composition amount would amount to the State collecting tax on exports, which is constitutionally impermissible under Article 286 of the Constitution of India. The Court distinguished the Naveen Jewellers judgment, stating it was passed under a prior tax regime (RST Act) and did not consider Section 5 of the RVAT Act. The Court also noted that the term 'gross turnover' in the Composition Scheme 2006 must be read in conjunction with 'within the State'. Therefore, the question of law was answered in favour of the assessee. The revenue's revision petitions were dismissed, and the assessee's revision petitions were disposed of.

Facts

The revenue initiated proceedings against M/s Gem India Exports and M/s Gem India Investments after a survey on 31.05.2016 revealed that the assessees, who had opted for the 'Composition Scheme for Gem and Stones, 2006' under the Rajasthan Value Added Tax Act, 2003 (RVAT Act), failed to include export sales in their 'gross turnover' for calculating the composition amount. The revenue contended this led to underpayment of the composition amount. An assessment order dated 02.03.2021 demanded ₹32,53,180/- from M/s Gem India Exports. The Appellate Authority dismissed the assessee's appeal on 28.03.2022. However, the Tax Board allowed the assessee's appeal, quashing the previous orders. The revenue filed revision petitions 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 calculation of Composition Amount under the ‘Composition Scheme for Gem and Stones, 2006’? Petitioner (Revenue) argued that the term ‘annual gross turnover’ should include export sales, as the composition amount is determined on this basis. The revenue relied on a co-ordinate bench judgment in M/s Naveen Jewellers vs. Commercial Taxes Officer, which held that composition amount is in the nature of 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 contended that the Naveen Jewellers case was under a previous tax regime (RST Act) and involved different facts, specifically regarding refund of composition amount by a 100% exporter. The assessee highlighted that the RVAT Act is based on multi-point taxation with input tax credit, unlike the single-point RST Act. Furthermore, they argued that levying tax on exports is constitutionally impermissible under Article 286 of the Constitution of India, and the Composition Scheme 2006, stemming from Section 5 of the RVAT Act, is in lieu of tax liability.