TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Section 26(6A)-(6C) struck down; no 10% pre-deposit required, appeal to proceed on merits; interim relief extended six weeks</h1> <h3>Haresh J. Dharmani Versus State of Maharashtra And Ors.</h3> The HC noted that the SC reversed a Full Bench decision upholding amendments to Section 26(6A)-(6C), and the impugned provisions have been struck down. ... Constitutional validity of the amendment to Section 26(6A), (6B) and (6C) of the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2017 - amendment of Section 26 of Mah. IX of 2005 by inserting a Proviso, The Maharashtra Tax Laws (Amendment and Validation) Ordinance, 2019 [Ordinance No. VI of 2019] now replaced by The Maharashtra Tax Laws (Amendment and Validation) Act, 2019 - seeking quashing of notices dated 19 September 2019 requiring the Petitioner to pay a 10% deposit in terms of the amended Section 26(6A), (6B) and (6C) - HELD THAT:- The Full Bench of this Court, in the case of United Projects Vs. State of Maharashtra [2022 (7) TMI 608 - BOMBAY HIGH COURT], had in fact upheld the constitutional validity of the impugned provisions. However, in the case of Tirumala Constructions [2023 (10) TMI 1208 - SUPREME COURT] and connected matters, this decision of the Full Bench was reversed by the Hon’ble Supreme Court. The decisions of the Telangana and Gujarat High Courts striking down the impugned provisions were upheld. The Petitioner has already instituted an Appeal before the First Appellate Authority. With the striking down of the impugned provisions, there is no longer any requirement that the Petitioner pre-deposit 10% of the demanded tax amount. The Appeal, therefore, will now have to be decided on its own merits and in accordance with law without insisting upon this 10% pre-deposit. It is directed that the interim relief granted in this Petition will operate for a period of six weeks from today - petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether retrospective amendments inserting pre-deposit requirements into the State VAT legislation (Section 26(6A), (6B), (6C) and proviso to Section 26) are constitutionally valid. 2. Whether the State Legislature had legislative competence to amend the VAT statute with retrospective effect after the commencement of the GST regime (i.e., whether competence over the subject-matter survived beyond the GST commencement date). 3. Whether notices requiring a 10% pre-deposit issued pursuant to the impugned amendments are sustainable after those amendments are struck down. 4. Whether interim relief staying pre-deposit obligations should continue pending disposal before the First Appellate Authority, and the appropriate interim regime once the impugned provisions are struck down. ISSUE-WISE DETAILED ANALYSIS - 1. Constitutional validity of the retrospective pre-deposit amendments Legal framework: The impugned statutory insertions mandated a mandatory pre-deposit of 10% of the disputed tax in proceedings under the VAT law; the amendments were framed as retrospective/curative, purportedly to remove doubts about applicability to pre-2017 proceedings. Precedent Treatment: A State Full Bench earlier upheld the amendments as within legislative competence and as valid curative/explanatory legislation. Subsequently, the apex court examined parallel challenges from other States and reversed the Full Bench, upholding High Courts that struck down similar amendments for want of competence. Interpretation and reasoning: The Court accepts that legislatures may enact curative or clarificatory legislation with retrospective effect in appropriate cases. However, retrospective enactment cannot confer competence that the legislature lacked on the date of enactment. Here, the core legislative competence over the VAT subject-matter had been substantially altered by the introduction of the GST regime; consequently, on and after the GST commencement date, the State Legislature lacked authority to enact amendments affecting the now-altered field. The purported clarification inserting applicability to pre-2017 lis sought to alter the law with retrospective effect but was enacted at a time when the State no longer possessed competence to do so. Ratio vs. Obiter: Ratio - The impugned retrospective/curative amendments are void for want of legislative competence where the State's power over the subject-matter had ceased or materially changed on the GST commencement date. Obiter - General propositions that legislatures can enact curative legislation are acknowledged but subordinated to the competence limitation. Conclusions: The amendments imposing the 10% pre-deposit requirement are unconstitutional and void to the extent enacted after the State lost competence; the Full Bench holding upholding those amendments is set aside to that extent. ISSUE-WISE DETAILED ANALYSIS - 2. Legislative competence post-GST commencement Legal framework: Legislative competence is determined by the constitutional division of subjects and the state's residual powers. The GST commencement effected a substantial redistribution of indirect tax subject-matter, thereby altering the State's competence over VAT-related enactments. Precedent Treatment: High Courts in other jurisdictions held similar post-GST amendments void for want of competence; the Full Bench's contrary view was reversed by the apex court aligning with the competence-based invalidation. Interpretation and reasoning: The Court reasons that where the original subject-entry has been substantially changed by subsequent constitutional or legislative developments (e.g., GST), the State cannot, post-change, validly alter statutes within the now-transferred or materially redefined domain. The impugned amendments, enacted after GST commenced, sought to reach back and alter liabilities and procedural requirements for disputes that had arisen prior to the change, but legislative competence to do so did not survive the GST-driven reallocation. Ratio vs. Obiter: Ratio - Loss of competence post-GST prevents the State from enacting amendments to VAT laws that affect the altered subject-matter; such amendments are ultra vires if they purport to revive or modify rights/obligations beyond the competence retained. Conclusions: The Maharashtra amendments enacted after the GST commencement date lack legislative competence and therefore cannot stand. ISSUE-WISE DETAILED ANALYSIS - 3. Validity of notices requiring 10% pre-deposit Legal framework: Notices that seek statutory compliance flow from the enabling provision; if the enabling provision is void, notices issued thereunder are also unsustainable. Precedent Treatment: Where statutory amendments have been declared void, consequential notices and actions taken solely under those provisions are routinely quashed. Interpretation and reasoning: Since the pre-deposit requirement was founded exclusively on the now-invalid amendments, notices issued under that provision cannot survive. The Court quashes such notices as they are predicated on void statutory provisions. Ratio vs. Obiter: Ratio - Notices based solely on statutory provisions subsequently declared void must be set aside; they confer no enforceable obligation. Conclusions: Notices issued demanding a 10% pre-deposit pursuant to the impugned amendments are quashed and set aside. ISSUE-WISE DETAILED ANALYSIS - 4. Interim relief and appellate proceedings after striking down the impugned provisions Legal framework: Appellate authorities retain statutory power to direct deposit of disputed amounts under the pre-amended provisions; interim reliefs are discretionary and can be tailored pending appellate adjudication. Precedent Treatment: Standard practice permits limited continuance of interim relief to avoid immediate prejudice while enabling the appellate forum to decide interim applications on merits. Interpretation and reasoning: With the impugned provisions struck down, the pre-amendment legal regime governs; that regime contemplates discretionary directions for deposit by the First Appellate Authority. The Court therefore grants a limited continuance of the interim relief (six weeks) to permit the petitioner to approach the appellate authority for interim directions. The appellate authority is directed to decide any such application on merits, uninfluenced by this limited continuance. Ratio vs. Obiter: Ratio - Where impugned provisions imposing pre-deposit are struck down, appellate authorities should adjudicate interim deposit applications under the pre-amendment law; courts may grant limited interim relief to bridge to the appellate decision. Obiter - Observations regarding counsel's tactical concessions or unpressed prayers are ancillary. Conclusions: The unconditional interim relief is continued for a limited period (six weeks); there is liberty to seek interim relief before the First Appellate Authority, which must decide on merits in accordance with law; appeals will proceed without any requirement of the 10% pre-deposit imposed by the invalidated provisions. ADDITIONAL POINTS AND FURTHER DIRECTIONS 1. All contentions on the merits of the underlying tax appeal are left open for determination by the First Appellate Authority in accordance with law. 2. Remaining reliefs not pressed are left to be agitated before the Appellate Authority; no costs order is made in the disposition of the rule.
TaxTMI 
TaxTMI 
