2022 (7) TMI 649 - AT - VAT and Sales Tax

State Legislature's Retrospective Tax Amendments Ruled Unconstitutional

The Tribunal held that the State Legislature lacked legislative competency to retrospectively amend the Entry Tax Act after the deletion of Entry 52, ... Levy of Entry tax - goods which were imported from outside of state of West Bengal - Vires of West Bengal Tax On Entry of Goods into Local Area Act. 2012 - violative of Article 301 & 304(a) of the Constitution or not - HELD THAT:- The indubitable and undeniable position is that by virtue of the 101st Constitution Amendment Entry 52 of List II (State List) of the Seventh Schedule was omitted / deleted. It would be somehow beneficial to see Entry 52 before it was omitted by the said amendment - It is, therefore, apparent that the source or fountain of the legislative power of the State Legislature (in our case West Bengal) came to be dried up and, therefore, it could very well be said that the State Legislature did not have the legislative competence to introduce amendment in the Entry Tax Act of 2012 on 06/03/2017 by the West Bengal Finance Act, 2017 but the grey area is, Section 19 of the Constitution 101st Amendment Act. On perusal particularly when the judgment of the ld. Single Bench striking down the Entry Tax Act of 2012 now pends for appeal it can very well be said that whether the original Act indeed satisfy the constitutional tests within ambit of Article 304(a) of the Constitution will be taken care of the Appellate forum i.e., the Division Bench of the Hon’ble Calcutta High Court and it is only incumbent upon us to decide whether the Amending Act of 2017 i.e., Finance Act of 2017 whereby the Entry Tax Act was validated and given retrospective effect is hit by the lack of legislative competence. It must be held that the transitional provision contained in Section 19 of the 101st Amendment Act cannot come in aid to save the amendment of the Entry Tax Act introduced by way of Finance Act, 2017. The State Legislature cannot be said to have legislative competence to bring in the impugned amendment and validation of the Act - Even assuming for a moment that the West Bengal Entry Tax Act was not struck down by any judgment of the High Court can it be said that the amendment introduced retrospectively and validation of the Act by way of introducing Finance Act of 2017 is within the legislative competence of the State Government? Having regard to the deletion of Entry 52 of the State List and bearing in mind the provision contained in Section 265 of the Constitution we are impelled to hold that the State Legislature did not have the legislative competence to bring in such amendment insofar as it relates to the West Bengal Tax on Entry of Goods into Local Areas Act, 2012. Thus, Section 5 & Section 6 of the West Bengal Finance Act, 2017 are ultra-vires and unconstitutional - the applications filed by the petitioners are allowed on contest but without any order as to costs. Issues Involved:1. Legislative Competency2. Validity of Retrospective Amendment3. Compliance with Constitutional Provisions4. Impact of Pending Appeals5. Discrimination and Violation of Fundamental RightsIssue-wise Analysis:1. Legislative Competency:The primary issue was whether the State Legislature had the legislative competency to amend the Entry Tax Act (2012) after the deletion of Entry 52 from List II of the Seventh Schedule of the Constitution by the 101st Constitutional Amendment Act (2016). The Tribunal held that the deletion of Entry 52 resulted in the State losing its plenary power to legislate on entry tax matters. The Tribunal concluded that the State Legislature could not amend the Entry Tax Act with retrospective effect, as it had lost its legislative competency with the omission of Entry 52.2. Validity of Retrospective Amendment:The Tribunal examined whether the retrospective imposition of entry tax by Sections 5 and 6 of the West Bengal Finance Act, 2017, was permissible. It was argued that the State Legislature had attempted to revive the Entry Tax Act, which had been declared unconstitutional by the Single Bench of the Calcutta High Court on 24.06.2013. The Tribunal concluded that the retrospective amendment was unconstitutional, as the State Legislature had lost its power to amend the Entry Tax Act after the deletion of Entry 52.3. Compliance with Constitutional Provisions:The Tribunal analyzed whether the amendments complied with Articles 14, 19(1)(g), 301, and 304(a) of the Constitution. The petitioners argued that the amendments created new classes of assessees retrospectively, which was discriminatory and violated the equality clause of the Constitution. The Tribunal held that the amendments were manifestly arbitrary and created hostile discrimination, thus violating Article 14. Additionally, it was noted that the amendments failed to achieve the ostensible purpose of removing defects pointed out by the Single Bench.4. Impact of Pending Appeals:The Tribunal considered the impact of the pending appeals against the Single Bench's judgment that declared the Entry Tax Act unconstitutional. It was argued that the Division Bench's interim order allowing assessment proceedings to continue did not imply a stay of the Single Bench's judgment. The Tribunal held that the State Legislature should not have amended the Entry Tax Act during the pendency of the appeal, as the Act was still considered void and unconstitutional.5. Discrimination and Violation of Fundamental Rights:The petitioners contended that the amendments imposed entry tax on new classes of assessees retrospectively, which was unreasonable, unjust, and unconstitutional. The Tribunal agreed with the petitioners, stating that the amendments created new liabilities and discriminated against certain assessees. It was also noted that the amendments violated Article 19(1)(g) by imposing unreasonable restrictions on the right to carry on trade and business.Decision:The Tribunal declared Sections 5 and 6 of the West Bengal Finance Act, 2017, ultra vires and unconstitutional. The judgment emphasized that the State Legislature lacked the legislative competency to amend the Entry Tax Act after the deletion of Entry 52 and that the retrospective amendments were discriminatory and violated fundamental rights. The judgment applied to all pending applications challenging the West Bengal Finance Act, 2017, but did not cover applications challenging the original Entry Tax Act, 2012.