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 the calculation of the composition amount under the 'Composition Scheme for Gem and Stones, 2006'. The Court reasoned that the composition amount, as envisaged under the scheme and Section 5 of the RVAT Act, is levied in lieu of tax liability and retains its characteristic as tax. Including export sales in the gross turnover for composition purposes would be tantamount to permitting the State to collect tax on exports, which is constitutionally impermissible under Article 286 of the Constitution of India. 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. Key distinctions included the fact that Naveen Jewellers pertained to a prior tax regime (RST Act) without input tax credit, whereas the RVAT Act is based on multi-point taxation. Additionally, Section 5 of the RVAT Act, which provides for payment of tax in a lump sum, was not considered in Naveen Jewellers. The Court also emphasized 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.

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 contended that export sales should be included in the gross turnover, leading to underpayment of the composition amount. Proceedings were initiated, and an assessment order dated March 2, 2021, demanded ₹32,53,180 from M/s Gem India Exports. The appellate authority dismissed the assessee's appeal. However, the Tax Board allowed the assessee's appeal, quashing the previous orders. The revenue filed revision petitions against these decisions.

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’? Petitioner (Revenue) argued that the term 'annual gross turnover' must 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 rightly distinguished the Naveen Jewellers judgment. They contended that the Naveen Jewellers case was under a previous tax regime (Rajasthan Sales Tax Act, 1994) and dealt with a different issue. The assessee highlighted that the RVAT Act is based on multi-point taxation with input tax credit, unlike the single-point tax regime of the RST Act. Furthermore, they argued that including export sales in the gross turnover for composition purposes would be constitutionally impermissible under Article 286 of the Constitution, as states cannot levy tax on exports. They also pointed out that the Composition Scheme 2006 explicitly mentions 'sales...within the State'.