TaxTMI 
TaxTMI 
2019 (2) TMI 300
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....he rhetoric of freedom, fraternity, comity, and human rights apart, the nations are guided by naked economic compulsions. The latter part of the last century dedicated itself to dismantling walls around the nations; this century has begun, it seems, determined to raise a few. At the national level, this clamour for economic hegemony is felt acutely, at least, institutionally. 2. Granted, federalism is the pinnacle of a democracy's political maturity; sharing the power signifies its wisdom. But there, too, fiscal discipline demands a watertight division. Our Constitution has, as a case in point, kept the fiscal legislative powers in water-tight divisions-either in List I or in List II. None in List III. In a federal polity, good legislative fences make good political neighbours. A vigilant policeman always guards a thief's virtue, anywhere; as the constitution prevents federal fiscal turf wars. 3. To be explicit, constitutionally, fiscal powers between the Centre and the States stand demarcated. The legislative scheme admits of almost no overlap between the respective domains. The Centre has the powers to levy a tax on the manufacture of goods (except alcoholic liquor for huma....
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.... Constitution and deletion of Entry 52 of List II in Seventh Schedule- there has been a realignment of legislative powers of the Union and the States. Now, Entry 54 stands modified. In its attenuated form, it denudes, according to the petitioners, from 16.09.2016, the State's legislative power to tax on those items now removed from that Entry. They insist that Section 19 of the CA Act allows "interim or temporary continuation" of all the Acts made earlier under the unamended Entry 54 only up to 16.09.2017. As a Case in point, the petitioners assert that the Kerala Value Added Tax Act has become a dead letter from 16.09.2017. 8. Section 174 of the Kerala Goods and Services Act, 2017, is a saving provision brought about by the State Legislature to save the transactions under the State's various pre-GST enactments, including the KVAT Act. About that provision, the petitioners, first, maintain that Section 19 of the CA Act has repealed all the State laws inconsistent with the GST Laws. And they also, second, insist that the States have been denuded of the legislative power to enact Section 174 because of the amendment to Entry 54 of List II. 9. So the question, the Core Question,....
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....e petitioner did reply to the notice. The notice, as the petitioner contends, is a composite one; it proposes to cancel the compounding, besides undertaking a best judgment assessment-simultaneously. The composite notice, the petitioner asserts, is a fait accompli. 13. So the petitioner has filed this writ petition questioning the notices under Section 25, read with Section 42(3) and Section of the KVAT Act. WP (C) No. 11335 of 2018: 14. The Petitioner, a jeweler, is a dealer under the Kerala Value Added Tax Act. The State Tax Officer, the second respondent, inspected the petitioner's business premises in November 2012, seized some records, and, later, issued a notice. He directed the petitioner to produce books of accounts. The petitioner, instead, asked for the return of the seized records. But they were not returned. So the petitioner filed WP (C) No.25376 of 2012. The Court stayed further proceedings. 15. When the stay was in force, in March 2013, the second respondent issued a penalty Notice under section 67 (1) of the KVAT Act, proposing to impose penalties of Rs. 88,22,948/- and Rs. 40,99,06,936/- for the years 2010-11 and 2011-12 respectively. Reminded of the Co....
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....urns on time and paid the taxes due. But, later, the Assessing Officer reopened the petitioner's final assessments for 2012-13 and 2013-14, under Section 25 (1) of the KVAT Act by making huge additions. 22. The main reason for the Assessing Officer to resort to the best judgment assessment is that after his verifying the petitioner's sales and purchases through the KVATIS module, he found certain unaccounted transactions. The additional reason is that the Intelligence wing of the Department has imposed a penalty upon the Petitioner under Section 47 (6) of the KVAT Act for the offence of attempted evasion of tax while his transporting goods. So the petitioner has assailed the Assessment Orders as unconstitutional and without jurisdiction. Submissions: Petitioner's: 23. In the past one year, a rash of writ petitions has been filed. Those writ petitions may count up to a few thousands. But only a handful of advocates-about half a dozen-argued; the rest adopted those arguments. Shri Abhishek Manu Singhvi, the learned Senior Counsel, instructed by Shri A. Kumar, the counsel on record, led the arguments. He was admirably complemented by Shri Venkataraman, another learned Seni....
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...., and insignificant. • Section 19 of the Amendment Act itself provides for the repeal, for the savings, and for the consequences, too. so there remains no more power or authority to have a further repeal and saving, as provided-erroneously though-in Section 174 of the SGST Act. Pithily put, Section 174 of the SGST Act cannot travel beyond Section 19 of the Amendment Act. • A law under Article 246A cannot be the source of power to save legislation under List II of Entry 54 at all. Article 367 & General Clauses Act: • Article 367, too, does not apply, as the constitutional command of repeal is explicit. • Neither KSGST nor CGST provides for repeal or re-enactment. • So, primarily, the General Clauses Act cannot resurrect or rescue the repealed enactments, even if its Sections 6 and Section 24 are invoked. • The State stands protected for the Centre undertakes to reimburse its losses. • The clear and unequivocal legislative intent of Section 19 of the Amendment Act is to stop the operation KVAT, 2003, from 16.09.2017. • A Statutory saving-provision, such as Section 174 of KSGST, ....
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....e Legislature does not derive its power to legislate from the Entries in the three lists of the 7th Schedule; therefore, the substitution of an entry in any List of the 7th Schedule does not affect the State's lawmaking power. • The Amendment Act is only prospective, and the constitutional amendment does not in any way deal with the past transactions or any rights and liabilities accrued. • The provisions contained in Sections 173 and 174 of the State Act are not inconsistent with the provisions contained in the Amendment Act. On the General Clauses Act and Application: • Every latter enactment which supersedes an earlier one or puts an end to a previous state of the law is presumed to intend the continuance of rights accrued and liabilities incurred under the superseded enactment. • This interpretative presumption could be negated only if there were sufficient indications express or implied in the later enactment designed to obliterate the earlier state of the law. • If the legislative intent to supersede the earlier law is the basis upon Which the doctrine of implied repeal is founded, there could be no incongrui....
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....determined it is in this new federal fiscal path. 29. To put the concept in perspective, GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the later stage of value addition. This process makes GST a tax on value addition at each stage. The consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. 30. In other words, the focus was shifted from taxable event to destination-based taxation. It avoids the evil of cascading taxation or tax on tax trouble. So goes the motto: One Nation-One Market-One Tax. 31. A nascent enactment in a nebulous field of taxation will have many teething troubles. GST is no exception. In its path to perfection, GST has much dust to settle-legislatively and judicially. These are the days of confusion and cacophony: many views, many interpretations, and many jurisprudential mumblings. GST: The Origins: 32. Before its advent as a revolutionary indirect tax regime, Goods and Services Tax (GST) had been on the parliamentary anvil for more than a decade. Its nee....
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....he GST Council, Parliament has enacted these pieces of legislation: (1) The Central Goods and Services Tax Act, 2017: it levies a tax on intra-State supplies of goods and services in all supplies within a State (2) the Integrated Goods and Goods and Services Tax Act, 2017: it levies a tax on inter-State supplies of goods and services; (3) the Union Territory Goods and Services Tax Act, 2017: it levies a tax on intra-State supplies of goods and service. 38. Tarun Jain's Goods and Services Tax, already copiously quoted, observes that in constitutional terms, GST is unique because of these aspects of its design: 1. It provides for the concurrent exercise of taxing powers by the Centre and the States on the same subject-a unique and unprecedented measure. 2. Both the Centre and the States are to act in tandem based on the GST Council's recommendations. Salient features of GST: 39. The salient features of GST are these^[3]: (i) GST applies on 'supply/ of goods or services as against the present concept on the manufacture of goods, or on the sale of goods, or on the provision of services. (ii) GST is based on the principle of destination-based consumption ta....
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....r services that are exported would not suffer input taxes or taxes on finished products. (xv) The credit of CGST paid on inputs may be used only for paying CGST on the output, and the credit of SGST paid on inputs may be used only for paying SGST. Input Tax Credit (ITC) of CGST cannot be used for payment of SGST and vice versa. In other words, the two streams of Input Tax Credit (ITC) cannot be cross-utilised, except in specified circumstances of inter-state supplies for payment of IGST. (xvi) Accounts would be settled periodically between the Centre and the States to ensure that the credit of SGST used for payment of IGST is transferred by the Exporting State to the Centre. Similarly, IGST used for payment of SGST would be transferred by the Centre to the Importing State. Further, the SGST portion of IGST collected on B2C supplies would also be transferred by the Centre to the destination State. The transfer of funds would be carried out based on information contained in the returns filed by the taxpayers. (xvii) The laws, regulations, and procedures for levy and collection of CGST and SGST would be harmonized to the extent possible. 40. GST replaces these taxes curren....
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...., it assigns State's share to the State concerned; on the other hand, if the State collects the tax, it assigns the Centre's share to the Centre. Those proceeds will not form a part of the Consolidated Fund of India, so it avoids having an Appropriation Bill passed every time a deposit is made. 46. And Article 279A provides for the constitution of a GST Council, besides prescribing its powers and positions. Earlier, Article 268A dealt with the service tax levied by Union and collected and appropriated by the Union and States. Now, this Article stands repealed. As to the amended constitutional provisions, Article 248 confers residuary legislative powers on Parliament. Now this provision is subject to Article 246A of the Constitution. Article 249, amended through Section 4 of the Act, now stands changed so that if Rajya Sabha approves the resolution with 2/3^rd majority, Parliament will have powers to make necessary laws regarding GST, in the national interest. So has Article 250 been amended; Parliament will have powers to make laws on GST during the emergency period. 47. At a different plane are the other amendments. Article 268 has been amended so that excise duty on medicin....
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....e for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for five years. 51. The overarching provision for our discussion is Section 19 of the Amendment Act. Section 19 - Transitional provisions: Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier. 52. Until the Constitution Suffered its 101^st Amendment-that is, The Constitution (One Hundred & First Amendment) Act, 2016- the Union and the State Governments have been collecting, as is relevant here, the indirect taxes under dearly demarcated legislative fields as shown in the Seventh Schedule. Then, there were 97 Entries in List-I, 66 in List-II, and 47 in List-III, not all those dealings with the Legislature's taxing power though. In List I, principal among the....
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....en introduced. 271 Surcharge on certain duties and taxes for purposes of the Union Amended Parliament's powers to levy an additional surcharge on Union taxes under Article 271 now stands amended: Parliament can levy no additional surcharge on GST. 279A Not existing Inserted Provision for creating the GST Council, a constitutional body. 286 Restrictions on the imposition of tax on the sale or purchase of goods Amended First, the word "sales" is replaced with "supply" and the word "goods" is replaced with "goods or services or both". States cannot legislate on the supply of goods or services if such supply is outside their state or is in the course of import or export. Originally, States could not levy and collect tax on specific Inter-state transactions. With omitting Clause (3), now even inter-state transactions of that nature would attract GST. 366. Definition Inserted The definitions have been added to the Constitution: (12A) Goods and Services Tax; (26A) Services; and (26B) State. 368 Power of Parliament to amend the Constitution and procedure therefore Amended As regards provisions and laws regarding GST Coun....
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....ntertainments, amusements, betting, and gambling. Amended (a) Taxes on Luxury betting, and gambling have been subsumed into GST. (b) Right to levy Tax on entertainments and amusements has been restricted to Panchayats, municipalities, Regional Councils, and District Councils. The State Enactments: 54. In the above background, the States have enacted the respective State Goods and Services Tax Acts. These laws, among Other things, (i) Carry out the transition to GST; (ii) provide for the levy of GST on intrastate within the State; and also (iii) modify/repeal the earlier State enactments which have to be modified/repealed because of transition to GST. Notable is the repeal of the VAT/Entry Tax/Luxury Tax, and so on, which earlier provided for levy of these taxes within the States.^[6] Kerala Enactment 55. Kerala Goods and Services Tax Act, 2017 (Act 20 of 2017) received the Governor's assent on the 16th day of September 2017. It provides for, as the preamble suggests, levy and collection of tax on intra-State supply of goods or services, or both by the State of Kerala. As it is in pari materia with the Central Goods and Services Tax Act, it needs no muc....
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....tiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed; (f) affect any proceedings including that relating to an appeal, revision, review or reference, instituted before, on or after the appointed day under the said amended Acts or repealed Acts and such proceedings shall be continued under the said amended Acts or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed. (3) The mention of the particular matters referred to in section 173 and sub-sections (1) and (2) shall not be held to prejudice or affect the general application of section 4 of the Interpretation and General Clauses Act, 1125 (Act VII of 1125) with regard to the effect of repeal. (4) The Kerala Goods and Services Tax Ordinance, 2017 (11 of 2017) is hereby repealed. (5) Notwithstanding the repeal of the Kerala Goods and Services Tax Ordinance, 2017 (11 of 2017) anything done or any action taken ....
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....ty is plainly and a plain case of legislative competence. Let us see how Section 174 of the KSGST Act fares vis-a-vis the Amendment Act in general and Section 19 of it in particular. As it is a matter of vires and legislative competence, we must trace the source of power. How to judge the constitutionality of an enactment? 60. When faced with a challenge to interpret laws, Courts have to discharge a duty. The Judge cannot act, holds the Supreme Court in Bhanumati v. State of UP [AIR 2010 SC 3796] = 2010 (5) TMI 783 - SUPREME COURT OF INDIA, like a phonographic recorder, but he must act as an interpreter of the social context articulated in the legal text. The Judge must be, in the words of Justice Krishna Iyer, "animated by a goal-oriented approach" because the judiciary is not a "mere umpire, as some assume, but an active catalyst in the Constitutional scheme". Then, referring to Bihar Distillery Ltd., the Court invokes Lord Denning's observations in Seaford Court Estates Ltd Vs. Asher[1949 (2) KB 481]: the job of a Judge in construing a statute must proceed on the constructive task of finding the intention of Parliament and this must be done (a) not only from the language o....
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....judicial assertion, I may refer to the Supreme Court's observations in Karnataka Bank Ltd v. State of A.P[(2008) 2 SCC 254] = 2008 (1) TMI 605 - SUPREME COURT OF INDIA. The rules that guide the Constitutional Courts in discharging their solemn duty to declare laws passed by a legislature unconstitutional are well-known. There is always a presumption in favour of constitutionality, and a law will not be declared unconstitutional unless the case is so clear as to be free from doubt; 'to doubt the constitutionality of a law is to resolve it in favour of its validity. Where the validity of a statute is questioned, and there are two interpretations one of which would make the law valid and the other void, the former must be preferred and the validity of law upheld". 65. Even otherwise, the question of repugnancy would arise only when both the laws are enacted on the same entry, as is held in Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector.[(2007) 5 SCC 447] = 2007 (5) TMI 591 - SUPREME COURT Federal Features: Article 246A - A Unique Federal Feat: 66. The first illustration to this effect is Article 246-A which makes a special provision for GST. By way of ....
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....h has no rational connection with the subject-matter of an entry. 69. When the vires of enactment are challenged, the court primarily presumes, notes Bimolangshu Roy, the constitutionality of the statute, by putting the most liberal construction upon the relevant legislative entry so that it may have the widest amplitude. And for this, the substance of the legislation will have to be looked into. But it also cautions against the court's interpretative bending- over-backward attitude to extend the meaning of the words beyond their reasonable connotation, anxious to preserve the power of the legislature. The Court is no legislative or executive guardian angel; it is a constitutional sentinel. Period. 70. For our purpose, immensely important is the Bimolangshu Roy's observation that the authority to make law flows from various sources: (1) express text of the Constitution; (2) by implication from the scheme of the Constitution; and (3) as an incident of sovereignty. Bimolangshu Roy, in fact, invokes the doctrine of inherent powers. Thus, it felicitously observes: 21. The authority to make law flows not only from an express grant of power by the Cons....
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.... II in the exigencies specified in those Articles. The Scheme of Entries, such as 52 and 54 and the corresponding Entries in the List-II, Bimolangshu Roy underlines, is nothing but another instance of special arrangement akin to the one made in Articles 249, 250 and 252. To conclude, Bimolangshu Roy reminds us that a great deal of schematic examination of the entire Constitution is essential for us to interpret the scope of each Entry in the three Lists of the Seventh Schedule. And no rule with a universal application on interpreting all entries in the 7th Schedule can be postulated. 74. If legislation purporting to be under a particular legislative entry is assailed for lack of legislative-competence, the State can seek to support it based on any other entry within the legislative competence of the legislature. It is unnecessary for the State, notes the Supreme Court in Ujagar Prints v. Union of India[AIR 1989 SC 516] = 1988 (11) TMI 106 - SUPREME COURT OF INDIA, to show that the legislature, in enacting the law, consciously applied its mind to the source of its own competence. Competence to legislate flows from Articles 245, 246 and the other Articles falling in Part XI of the....
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.... legislature has specified a fixed period for its duration. Indeed, unless it contains some special provision to the contrary; after a temporary Act has expired, no proceedings can be taken upon it, and it ceases to have any further effect. 79. The difference between the effect of the expiration of a temporary Act and the repeal of a perpetual Act is pointed out by Parke B. in Steavenson v. Oliver:[ (1841) 151 E. R. 1024] "There is a difference between temporary statutes and statutes which are repealed; the latter (except so far as they relate to transactions already completed under them) become as if they had never existed; but with respect to the former, the extent of the restrictions imposed, and the duration of the provisions, are matters of constructions.'' And Lord Abinger C.B., in a concurrent judgment, said: "It is by no means a consequence of an Act of Parliament expiring that rights acquired under it should likewise expire.'' 80. If an Act contains a proviso that it is to continue in force only for a certain specified time, it is, according to Craies^[10], a temporary Act. According to the same learned author, Temporary Acts have these peculiarities: Commencem....
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....he Constitutional Value of Sunset Clauses: An historical and normative analysis^[12], was expected to create an incentive for the periodic and comprehensive executive and legislative evaluation of agencies. Sunset clauses- as temporary laws-have the potential, from the perspective of separation of powers, to enhance the role of the legislature and support its monitoring task over the administration^[13]. 86. Sunset clauses have, A.E. Kouroutakis further observes, two major legal effects. First, unless re-authorised by the legislature, it brings about the expiration of a law on a prescribed date. Expiration, as brought about by a sunset clause, differs from repeal. Second, if a clause prescribes that a statute should expire from a certain date, then it is reasonable to assume that it is not valid unless re-enacted. But in practice, there are exceptions in each instance. To begin with, the expiration, or 'sunset', of an act has the same consequences as if it were repealed. Yet, as Broom remarks, there is a difference between statutes which expire and statutes which are repealed. Although 'the latter become as if they had never existed (except so far as they relate to transactions ....
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....e deficiency is eliminated, such policies have no reason to stay in force. Thus a sunset clause is desirable to make them expire. Jackson, as quoted in The Constitutional Value of Sunset Clauses, discussing constitution making, explores the idea of 'transitional constitution making' by adding a sunset clause and points out that they may shed new light on the advantages and disadvantages of constitutional 'sunset' clauses- that is, "requirement of reconsideration in plenary form after a set period of years, far enough into the future to allow time for developing some authoritative institutions of politics and governance". 91. There are several constitutional documents that are recorded as temporary. These constitutions are often categorised as transitional and are commonly created because of a major national crisis: for example, (after the War of American Independence), the Constitution of South Carolina and the Constitution of New Hampshire. In the more modern era, the preamble of the Constitution of the Republic of South Africa in 1993, described it as the 'Interim Constitution'. It has a two-year sunset clause. (b) Sunset Clauses and Constitutional Design: 92. A.E. Kouro....
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....t straddle the transaction. Sometimes the old law is continued for transitional cases, and sometimes the new law is applied; in either event, modifications may be necessary. In other words, as Craies observes in his treatise On Legislation,^[19] legislation does not necessarily have effect as law immediately after being passed or made. It may take effect under these circumstances: (1) immediately upon being passed or made; (2) at a point in the future that is specified upon the legislation being passed or made, or that can be determined under criteria specified upon the legislation being passed or made; (3) only if some future event occurs (which may be a real-world event or an event such as making an order-designed to commence the legislation); (4) with retrospective effect from a past time; or (5) "not at a particular point in time, but in relation to things done or events occurring during a period specified upon the legislation being passed or made, with it being possible to specify either a single period for all purposes or different period for different purposes." 97. Transitional provisions, the learned author continues to observe, may be relatively unimport....
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....de, or any other thing done or having effect as if done, under any enactment repealed by this section, could have been made or done under a corresponding provision of this Act, it shall, if effective immediately before the coming into force of this Act, have effect subsequently as if it had been made or done under that corresponding provisions. Saving Clause & Legal Proceedings Under an Expired Statute: 102. A question often arises, as it does here, about the legal proceedings about matters connected with a temporary Act: whether they can be continued or initiated after the Act has expired. The answer to such a question, G. P. Singh observes, again depends upon constructing the Act as a whole. The Legislature very often enacts in the temporary Act a saving provision similar in effect to section 6 of the general Clause Act, 1897.^[24] 103. The question before the Supreme Court in Tata Iron and Steel Co. was whether because of the Validation Act the State could retain only the cess and taxes already collected before the date of validation or whether they also could collect the cess and taxes due till that date of validation. Tata Iron and Steel has held that the Validation A....
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....eding act renders the previous act a temporary one, obliterates its impact beyond a specified date, and avoids Section 6 of the General Clauses Act from applying itself. One enactment will not, rather cannot, make another enactment a temporary one; the same enactment can, for various reasons, render itself a temporary one. So a later enactment, inconsistent with the previous one, repeals that previous one either expressly or impliedly. Now, it is time we examined what repeal is and how it affects these cases before us. Repeal of Statutes: 108. We must acknowledge that a total repeal obliterates statutes, "except as to transactions past and closed." "When an Act of Parliament is repealed," said Lord Tenterden in Surtees v. Ellison, "it must be considered (except as to transactions past and closed) as if it had never existed. That is the general rule.'' Tindal C.J. stated the exception more widely. He said, "The effect of repealing a statute is to obliterate it as completely from the records of the Parliament as if it had never been passed; and it must be considered as a law that never existed except for the purpose of those actions which were commenced, prosecuted and conclude....
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....l or pro tanto repeal. If the intention was merely to modify the former enactment by engrafting an exception or granting an exemption, or by super-adding conditions, or by restricting, intercepting or suspending its operation, such modification would not amount to repeal. After referring to many standard commentaries on statutory interpretation, the Supreme Court in Udai Singh Dagar v. Union of India,[(2007) 10 SCC 306] = 2007 (5) TMI 627 - SUPREME COURT OF INDIA re-emphasises that the principal object of a repealing and amending Act is to 'excise dead matter, prune off superfluities, and reject clearly inconsistent enactments'. Application of the General Clauses Act: 115. Resounding is the judicial assertion: it is emphatically the duty of the Judicial Department to say what the law is. Those who apply the rule to particular cases must, of necessity, expound and interpret the rule. If two laws conflict with each other, the Court must decide on the operation of each. That is the assertion of Chief Justice Marshall in Marbury v. Madison. Again he famously declared in McCulloch v. Maryland, "We must never forget that it is a constitution we are expounding." 116. To begin wit....
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.... they contend, similar to Section 174 KSGST Act, 2017, and Section 6 of the General Clauses Act. But it has deliberately and consciously not done so because it has not intended the KVAT Act to operate beyond 16.09.2017. 120. Section 6 of the General Clauses Act and Section 4 of the Kerala Interpretation and General Clauses Act are analogous. Here, as we consider the State enactments, Section 4 of the State Act may have to be considered. And it reads: 4. Effect of repeal. - Where any Act repeals any enactment hitherto made or hereafter to be made, then unless a different intention appears, the repeal shall not - (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect o....
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....es concern the Kerala Value Added Tax Act (KVAT); so we will examine the chronology of statutory events in the backdrop of that Act. With effect from 01.04. 2005 came KVAT Act into force. Then, on 08.09.2016 the CA Act was enacted. But it came into effect only from 16.09.2016. Section 19 of the CA Act saved a host of statutes holding field by then; those enactments include the KVAT Act. And the saving was for one year: 16.09.2017. 124. On 22.06.2017, the State of Kerala issued the Kerala State Goods and Services Tax Ordinance; it has heralded the new State GST regime. On 16.09.2017 came the Kerala State Goods and Services Tax Act, 2017 ("KSGST Act"). It has replaced the KSGST Ordinance. On the same day, however, the saving period prescribed under Section 19 of the CA Act, too, ended. 125. But, as a way out, the KSGST Act has its own Saving Clause: Section 174. So we must examine the relative, sometimes overlapping, concepts of transition and saving, besides those of repeal, sunset, amendment, omission, and substitution. 126. A bill may contain provisions that limit, modify, or destroy individual rights and privileges. Then, on the Bill's enforcement as an Act, the Legislat....
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.... provision whose repeal is clearly intended by the legislature by the later act. To hold otherwise would abridge or limit the legislative power of the various late legislatures, by the enactment of irrepealable legislation. 130. A saving, to me, is a device that preserves accrued, acquired rights and incurred liabilities under a statute that no longer exists. If the new statute that repeals an old one contains no saving clause, General Clauses Act steps in; Section 6 plays the role of a protector of the rights and liabilities under the repealed act. 131. Here I must observe that Section 19 is not a saving clause; any saving clause starts to operate from the day the previous Act is dead. Here, the CA Act has allowed various enactments-those that contradict it-to coexist. Here, the repeal did not take place on 16.09.2016, when the CA Act came into force, but on 16.09.2017, when the one-year period ended. Saving Clause, in fact, if available, was needed from then on, not before. Indeed, Section 19 of the CA Act saves nothing beyond 16.09.2017. 132. Legislative power, to begin with, inheres in and vests with Parliament. If it is unitary, the division or demarcation of those po....
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.... legislative denudation. I will elaborate on that, later. 137. Then follows from the petitioners the collateral attack: Section 173 is "merely a manifestation of the repeal of the laws under the Entries already occurred. It only excises and prunes out the dead matter." This assertion, too, must fail. The GST (Compensation to States) Act, recompenses the States; so, they argue, "no difficulty needs to be perceived by the State" on the financial front. 138. If we examine Section 173 of the KSGST Act, the State has amended a few taxing statutes that now stand affected by the CA Act. It has brought them in harmony with the Goods and Services Tax regime. On the other hand, Section 174 repealed and saved certain statutes. Let us see which have been amended and which repealed: Amended U/S.173 Repealed through S.174 1. Kerala Value Added Tax Act, 2003 2.Kerala Finance Act, 2011 3. Kerala Finance Act, 2013 4. Kerala General Sales Tax Act, 1963 5. Kerala Surcharge on Taxes Act, 1957 6. Kerala Panchayat Raj Act, 1994 7. Kerala Municipality Act, 1994 1. Kerala Value Added Tax Act, 2003 2. Kerala Tax on Entry of Goods into Local Areas Act, 1994 3. Keral....
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....ld to coexist for one year: the window period. 143. So I must hold that Section 19 of the CA Act is- transitional as it may have been-a repealing clause simpliciter, not a saving clause. Nothing more. That job of saving is done by Section 174 of the KSGST Act. Well and truly. So the repeal has not, as Section 174 elaborates, affected "the previous operation of the amended Acts or repealed Acts and orders or anything duly done or suffered thereunder." In other words, the repeal has not affected "any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Acts or repealed Acts or orders under such repealed or amended Acts." Nor has it affected "any tax, surcharge, penalty, fine, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Acts or repealed Acts". 144. In other words, the repeal has not affected "any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication, and any other legal proceedings or recovery arrears or remedy in respect of any such tax, surcharge, penalty,....
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.... and Collection: 149. Time and again, Courts have held that tax imposition will encompass all the three elements: levy, assessment, and collection. A mere Legislation to tax cannot result in fructifying a tax imposition. In other words, for a tax to be imposed, it requires a taxable event to trigger the levy and a taxable person to discharge it. 150. Lord Dunedin pointed out in Whitney v. Inland Revenue Commissioners[[1926] A.C. 37] that there are three stages in the imposition of a tax: (1) there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. (2) Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. And (3) lastly comes the methods of recovery, if the person taxed does not voluntarily pay. 151. Govind Saran Ganga Saran v. Commissioner of Sales Tax and Ors,[AIR 1985 SC 1041] = 1985 (4) TMI 65 - SUPREME COURT approves of this view. Moreover, the Constitutional Bench endorses it in Mathuram Agarwal v. State of MP[(1999) 8 SCC 667] = 1999 (10)....
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....ould partake of the character of a purely administrative affair can, in a proper sense, be challenged as contravening Article 19(1) (f)." 154. In Supreme-Court-Advocates-on-Record Association v. Union of India[(2016) 5 SCC 1] = 2015 (10) TMI 2687 - SUPREME COURT, a Constitution Bench of the Supreme Court has held that the word substitution necessarily or always connotes two severable steps, that is to say, one of repeal and another of a fresh enactment even if it implies two steps. Indeed, the natural meaning of the word substitution is to indicate that the process cannot be split up into two pieces like this. If the process described as substitution fails, it is totally ineffective to leave intact what was sought to be displaced. That seems to be the ordinary and natural meaning of the words shall be substituted. 155. On facts, the Court has held that there is no intention to repeal without a substitution was deducible. In other words, there could be no repeal if substitution failed. The two were part and parcel of a single indivisible process and not bits of a disjointed operation. 156. The Court also observes that repeal is not a matter of mere form bu....
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....tax to be imposed, it requires a taxable event triggering the levy and a taxable person to discharge it. So the petitioners contend that the levy, assessment, and collection must have been completed before 15.09.2017 under any tax regime which has been "subsumed" by the GST regime. Then, the question is, have GST laws under the CA Act subsumed all the State tax enactments, which earlier drew their legitimacy from the unamended Entry 54? (b) Repeal and Omission: 160. Clause 17 of the Constitution (One Hundred and First Amendment) Act has omitted, the petitioners maintain, Entries 92, 92C of List I and Entries 52, 55of List II and substituted Entry 84 of List I and Entries 54 and 62 of List II. 161. In Rayala Corporation (P) Ltd. and Ors., v. Director of Enforcement, New Delhi[(1969) 2 SCC 412] = 1969 (7) TMI 109 - SUPREME COURT OF INDIA, the Supreme Court has held that Section 6 only applies to repeals and not to omissions. Granted, Rayala Corporation, a Constitution Bench decision, has not elaborated on how "repeal" and "omission" differ, but it has, nevertheless, laid down the law that "repeal" differs from "omission" and Section 6 of the General Clauses Act would apply o....
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.... an "omission" is only in futuro. 165. If the expression "delete" would amount, Shree Bhagwati Steel Rolling Mills further holds, to a "repeal", it is clear that a conjoint reading of Halsbury's Laws of England and the Legal Thesaurus leads to the same result: an "omission", a form of repeal, is tantamount to a "deletion". Interpreting Fibre Boards (P) Ltd. v. CIT[(2015) 10 SCC 333] = 2015 (8) TMI 482 - SUPREME COURT, in the statutory backdrop of Section 6-A of the General Clauses Act, Shree Bhagwati Steel Rolling Mills affirms that repeal would include repeal by way of an express omission. Indeed, it declares, after elaborate reasoning, that the observations in Rayala Corporation on "repeal" and "omission" are obiter. 166. The precedential force of an avalanche of authorities cited at the Bar remains undisputed. That said, I must add, on facts, that the petitioners' contention that the State has lost legislative power to enact a saving clause-Section 174-in the KSGST Act does not stand the judicial gaze. That power preserved, the concept of repeal, the scope of Section 19 of the CA Act, and the relevance of Section 6 of the General Clauses Act or Section 4 of the Kerala ....
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....; the General Clauses Act is only for understanding and for interpreting words not defined and specifically available in the Constitution including Article 366 (12); (c) Specific repeal and saving under KSGST and also the application of the General Clauses Act as per S.174 (3) is self-contradicting. In any view, S.174 (2) and 174 (3) are by themselves self-contradicting; (d) Section 24 of the General Clauses Act is the saving of subordinate legislation and applies when there are repeal and re-enactment. The present is not a case of repeal and re- enactment. So Section 24 is not attracted. In other words, machinery provisions are not saved. Then, there can be no tax without machinery provisions. Fallacy: 172. Indeed, on most counts, the petitioners' assertions can be accepted. Done so, does that mean the adjudication results or stands resolved in their favour? 173. Section 6 of the General Clauses Act does not apply to sunset clauses or temporary statutes. Agreed. Repeal and Omission are different. They are not. Shree Bhagwati Steel Rolling Mills dispels this myth. Yet, even if we accept it to be so, still that does not alter the outcome in any way. 174. First, ....
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....der the Entry 52 taken away? We will see. 180. First, the State's legislative powers have not been taken away; they have been, on the contrary, constitutionally permitted to be shared with the Union Government. What is gone is the State's exclusivity. To the legislative fields of exclusivity and concurrency, what has been added is the simultaneity-novel as it may sound. 181. To encapsulate, I may observe that all the petitioners have advanced one common argument: the State has been denuded of its legislative power to enact Section 174 of the Kerala State Goods and Services Act, 2017. The obvious prop for this assertion comes from the 101st Constitutional Amendment-that is, the attenuated or modified Entry 54 of the List II, the State List. 182. All the petitioners contend that the KSGST Act came into being because of the Constitutional Amendment. And that very Constitutional Amendment has put paid to many other enactments-for example, the Kerala Value Added Tax Act, 2003. So with the Entry 54 of List II unavailable for the State to incorporate Section 174 of the KSGST Act, the whole saving mechanism vis-à-vis transactions before 16.09.2017 crumbles. 183. I am afr....
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....174 into Kerala State Goods and Services Act, 2017. I have already rejected as inapplicable the petitioners' other propositions: the survival of the sunset clause, the impact of a temporary statute, and inapplicability of Section 6 of the General Clause Act vis-à-vis a repealed enactment. They need neither repetition nor reiteration. Result: 188. I find no merit in the writ petitions; accordingly, I dismiss all the writ petitions. 189. Yet I clarify: In all these writ petitions various issues arise-constitutionality is only one of them. Even a single issue has many shades of a challenge. I have touched none save the constitutional question. And I answered that in the negative. All other issues-including limitation-remain untouched. After all, the limitation is a mixed question of fact and law. I reckon, in that context, that the petitioners have efficacious alternative remedies under the relevant statutes. 190. Granted, the petitioners have bona fide pursued these writ petitions; so, now, in a few cases, the petitioners may face the question of limitation. To adjust equities, I observe that if any petitioner approaches a statutory authority on an issue arising ou....