Assistant Commissioner vs. M/S Gem INDIA Exports

Held

The Court held that the Tax Board was justified in excluding export sales from the gross turnover for the calculation of the composition amount. The Court reasoned that the Composition Scheme 2006, notified under Section 5 of the RVAT Act, provides for payment of a composition amount in lieu of tax liability. Article 286 of the Constitution of India prohibits states from imposing tax on the sale or purchase of goods in the course of import or export outside the territory of India. Therefore, including export sales in the gross turnover for calculating the composition amount would be constitutionally impermissible. The Court distinguished the Naveen Jewellers judgment, noting it was under a previous tax regime (RST Act) and did not consider Section 5 of the RVAT Act, which allows for payment of tax in lump sum. The Court emphasized that the term ‘gross turnover’ in the scheme must be read in conjunction with ‘within the State’. 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 and found that they had opted for the 'Composition Scheme for Gem and Stones, 2006' under the Rajasthan Value Added Tax Act, 2003. The assessees had excluded export sales from their gross turnover when calculating the composition amount. The revenue initiated proceedings for evasion of tax, contending that export sales should be included in the gross turnover. An assessment order was passed on March 2, 2021, demanding ₹32,53,180/-. The appeal against this order was dismissed by the Appellate Authority. However, the Tax Board allowed the assessees' appeal, quashing the previous orders. The revenue has filed revision petitions against the Tax Board's order.

Key Issues

1. Whether the Tax Board was justified in law in holding that export amount is to be excluded from gross turnover for calculation of Composition Amount under the ‘Composition Scheme for Gem and Stones, 2006’ (RVAT Act)? Petitioner (Revenue) argued that once an assessee opts for the Composition Scheme 2006, they must abide by its terms. The term ‘annual gross turnover’ should include 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 rightly distinguished Naveen Jewellers, as that case dealt with a refund of composition amount under a previous tax regime (Rajasthan Sales Tax Act, 1994) and did not hold that composition amount includes export sales. The assessee highlighted the change in law with the RVAT Act, which is based on multi-point taxation with input tax credit, unlike the single-point tax regime of the RST Act. They also pointed to Article 286 of the Constitution, prohibiting state tax on exports, and argued that the term ‘gross turnover’ in the scheme must be read with ‘within the State’.