TaxTMI 
TaxTMI 
2020 (4) TMI 499
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....of Petrochemicals, has prayed for the following reliefs; "(A) This Hon'ble Court may be pleased to issue a writ striking down and declaring Section 84A of the VAT Act as being ultra-vires and beyond the legislative competence of the State of Gujarat under Entry 54 of List II of the Seventh Schedule to the Constitution of India; (B) Without prejudice to the above and in the alternative this Hon'ble Court may be pleased to issue a writ striking down and declaring Section 84A of the VAT Act as being manifestly arbitrary, confiscatory and hence violating Article 14 of the Constitution of India; (C) ) Without prejudice to the above and in the alternative this Hon'ble Court may be pleased to issue a writ striking down and declaring Section 84A of the VAT Act in so far as it is introduced with retrospective effect from 1.4.2006 as being manifestly arbitrary, confiscatory and hence violating Article 14 of the Constitution of India; (D) This Hon'ble Court may be pleased to issue writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order quashing and setting aside impugned notices dated 1.9.2018 (annexed at Annexure B and C). (E) This Hon'ble Court ma....
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....AT Act is not applicable to consignment of branch transfer transactions. 3.4 This Court, vide its judgment dated 18.1.2013 reported in 2013 SCC Online Guj. 8788 dismissed the appeal of the State Government filed against the aforesaid order of the VAT Tribunal, while holding inter alia, that the reduction of Input Tax Credit under Section 11(3)(b) would, in no case, exceed 4% on the ground that the limitation of availing of the tax credit as provided under Section 11(3)((b) could be applied only once irrespective of the fact as to whether particular commodity purchased falls in more than one sub-clauses of Section 11(3)(b) of the VAT Act. 3.5 On 30.03.2013, an Assessment Order came to be passed by the Deputy Commissioner of Commercial Tax, Ahmedabad for the F.Y. 2008-09 in the case of the petitioner Company, deciding the assessment proceedings for the said period as under in respect of the two different issues; (I) As per the aforesaid judgment dated 18.01.2013 of this Court, rendered in the case of the petitioner Company with respect to the reduction of Input Tax Credit on natural gas used as raw material, the competent authority reduced the ITC of the Petitioner Company at the....
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....es or both. 3.11 Apropos the aforesaid Constitution (101st Amendment) Act, 2016, the Gujarat Value Added Tax Act, 2003 came to be substantially amended by way of substitution and deletion of many provisions thereof by virtue of the Gujarat Value Added Tax (Amendment) Act, 2017, which came into force w.e.f. 01.07.2017. 3.12 Meanwhile, the Supreme Court passed an order dated 22.09.2017 in an appeal filed by the State, setting aside the aforesaid judgment dated 18.01.2013 of this Court by holding, inter alia, that the Input Tax Credit is required to be reduced twice. i.e, to the extent of total 8%, under sub clauses (ii) and (iii) of Section 11(3)(b) of the VAT Act, in such a way that the reduction should not exceed the amount of the Input Tax credit claimed. The said judgment of the Supreme Court was reported in (2017) 16 SCC 28. 3.13. In view of the aforesaid judgment of the Supreme Court, the Additional Commissioner of Commercial Tax issued a revision notice dated 03/06.11.2017 in Form 503 under Sections 75 of the Act to revise the Assessment Order for F.Y. 2008-09 made vide order dated 30.03.2013 (Sr. No.5 above), for reducing the Input Tax Credit to the extent of 8% under the ....
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....ting the aforesaid period of three years, referred to under Section 75 of the Act. 3.18 In such circumstances, referred to above, the writ applicant seeks to challenge the constitutional validity of Section 84A of the GVAT Act as well as the revision notice dated 01.09.2018. Submissions on behalf of the writ applicant; 4. Mr. S.N.Soparkar, the learned senior counsel appearing with Mr. Uchit N. Sheth, the learned counsel appearing for the writ applicant vehemently submitted that Section 84A of the GVAT Act is without legislative competence and, therefore, is unconstitutional. Mr. Soparkar would submit that the constitution (101st Amendment) Act, 2016 introduced the Goods & Services Tax regime in India. It sought to replace all the indirect taxes, levied on the goods and services by the Union of India as well as the State Governments. It came to be a comprehensive indirect tax levy on manufacture,, sale or consumption of goods and services. The Act of 2016 inserted Articles 246A, 269A and 279A to the Constitution of India. It amended the provisions of Article 286 of the Constitution. It deleted Entry No.92 and 92C of List-I of the Seventh Schedule and inserted Entry 84 of List-I a....
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....0). 6. Mr. Soparkar drew the attention of this Court to Section 19 of the Constitution Amendment Act. Drawing the attention of this Court to Section 19 of the Constitution Amendment Act, he submitted that it was provided in the Constitution Amendment Act that any legal provision inconsistent with the provisions of the unamended constitution shall continued to be in force until amended or repealed by a competent legislature or until expiration of one year from the commencement of the Constitution Amendment Act. In other words, even an existing statutory provision would automatically cease to exist latest by one year from the date of the commencement of the Constitution Amendment Act. In such circumstances, the State legislature definitely lacks the competence to make a new enactment such as Section 84A pertaining to the erstwhile entries of the State List. 7. Mr. Soparkar would submit that Section 84A of the VAT Act is not saved under Article 246A of the Constitution. He would submit that Article 246A of the Constitution was inserted by the 101st Constitution Amendment Act with the prime object of subsuming multiple indirect taxes and to confirm concurrent power upon the Parliamen....
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....of the Supreme Court in the case of State of Punjab vs. Shereyas Industries Ltd., (2006) 91 VST 23 (SC). 11. In the aforesaid context, Mr. Soparkar submitted that any legislation which is found to be manifestly arbitrary can be struck down as violative of Article 14 of the Constitution. In this regard, strong reliance has been placed on the decision of the Supreme Court in the case of Shayara Bano vs. Union of India, (2017) 9 SCC 1. 12. Mr. Soparkar would submit that the retrospective insertion of Section 84A with effect from 01.04.2006 makes the provision exhaustively arbitrary and unreasonable. He would submit that the Legislature may have the power to legislate prospectively as well as retrospectively, but any retrospective legislation would be prone to the scrutiny on the anvil of the test of reasonableness. In this regard, reliance is placed on the decisions of the Supreme Court in the case of Rai Ramkrishna vs. State of Bihar, AIR 1963 SC 1667 and Epari Chinna Krishna Moorthy vs. State of Orissa, AIR 1964 SC 1581. Mr. Soparkar also invited the attention of this Court to the decision of the Supreme Court in the case of R.C. Tobacco (P) Ltd. vs. Union of India, 2005 7 SCC 725....
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....e cotton yarn. Mr. Y succeeds before the Appellate Authority and the rate of tax is held to be 5%. The Department prefers appeal before the Tribunal and the same is pending. In the year 2025, the matter in the case of Mr. Y reaches the Supreme Court and holds that the applicable rate of tax on cotton yarn is 15%. In such circumstances, the impugned amendment will enable the authorities to revise in the year 2025 the assessment order passed in the case of Mr. X of Surat in the year 2010. This, according to Mr. Soparkar, is violative of Article 14 of the Constitution as it could be termed as manifestly arbitrary. 17. Mr. Soparkar also submitted that the impugned amendment is violative of Article 19(1)(g) of the Constitution of India as it adversely effects the fundamental right of free trade business. 18. Mr. Soparkar also submitted that Section 84A of the VAT Act is not a validating Act by any stretch of imagination. There was no levy which was held to be illegal by any Court which needs validation. The revision notices had been issued beyond the statutory period of limitation and those were quashed on such ground. Therefore, according to Mr. Soparkar, there is nothing to be valid....
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.... decision of this Court in the case of Malaviya Bros. & Co. vs. Sales Tax Officer, 1973 GSTB 206 22. In such circumstances, referred to above, Mr. Soparkar, the learned senior counsel appearing for the writ applicant prays that there being merit in all his submissions, referred to above, the provision of Section 84A of the VAT Act deserves to be declared as ultra vires. Submissions on behalf of the State Government; 23. Mr. Kamal Trivedi, the learned Advocate General appearing for the State vehemently submitted that the State Legislature is empowered to enact taxation laws relating to the intra-state supply with respect to only six items and not with any other items. Prior to the enactment of Constitution (101" Amendment) Act, 2016, in terms of Article 246 of the Constitution of India, the Union and the State Governments were empowered to make laws relating to the matters covered under List I (Union List), List ll (State List) and List Ill (concurrent List). In other words, there used to be a clear demarcation of legislative powers between the Union and the States by confining themselves within the field entrusted upon them. 24. In terms of the erstwhile Entry 54 of List II, th....
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....uld submit that by virtue of the said Constitution Amendment Act of 2016, two major changes have been brought in picture: (a) Tax would be now imposed on 'supply of goods', which was earlier used to be only on 'sale/purchase of goods'; (b) The demarcation of powers between the Union and the legislatures of every State has disappeared and that the Union and the legislatures of every State, both are empowered to make laws with reference to the supply of goods: 31. It is further argued that by virtue of Article 246A of the Constitution of India, the power to make laws with respect to 'intra-state' sale or purchase of goods still exists with the State legislature, even after the enactment of the said 101st Constitution Amendment Act of 2016. In the aforesaid context, Mr. Trivedi seeks to rely on a recent pronouncement of the Kerala High Court in the case of Golden Jewels (India) Pvt. Ltd. vs. State Tax Officer, 2019 SCC Online Ker. 973. 32. It is pointed out that the judgment rendered by the learned Single Judge has been affirmed in appeal by the Division Bench of the Kerala High Court vide judgment dated 6th March, 2019. 33. Mr. Trivedi submitted that it is a settled principle ....
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...., 2003 came to be substantially amended and more particularly Section 2(13) dealing with the definition of the term 'goods' with reference to the amended Entry 54 of List II and the addition of sub-section (2A) in Section 100 relating to Repeal and Savings with further insertion of Section 84A on 03.04.2018. However, the said newly inserted Section 84A is not inconsistent with the provision of Section 19 of the Constitution Amendment Act, 2016, nor has the said Section 19 of the Constitution Amendment Act, 2016 denuded State's power to enforce Gujarat VAT Act in its amended form. 39. Mr. Trivedi would submit, relying on the decision of the Supreme Court in the case of J.K. Jute Mills Company Ltd. vs. State of Uttar Pradesh, AIR 1961 SC 1354 that the power of the legislature to enact a law with reference to a topic entrusted to it is unqualified and, therefore, in exercise of such power, it is competent for the legislature to enact a law which is either prospective or retrospective. Mr. Trivedi, without prejudice to his aforesaid submission, would submit that there are many ways and means of enacting and amending the Act for the purpose of inserting an amendment in the existing....
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....cation made retrospective. In other words, there is no bar under the Constitution that a statute of limitation impacting a substantive right, cannot be made retrospective in nature. Thus, even if Section 84A of the VAT Act is considered to be not a Validating Act, but simply a statutory provision relating to limitation, then in that case also, the same is rightly brought in picture with retrospective effect. 44. Mr. Trivedi also seeks to rely upon the following three decisions to fortify his submission that a law cannot be held to be unreasonable merely because it operates retrospectively. (I) In the case of R.C. Tobacco Pvt. Ltd. vs. Union of India & Anr., reported in (2005) 7 SCC 725; (II) In the case of Raj Ramkrishna vs. State of Bihar, reported in AIR 1963 SC 1667; (III) In the case of Epari Chinna Krishna Moorthy vs. State of Orissa, reported in AIR 1964 SC 1581; 45. On the issue of reopening of the closed assessments, the submissions of Mr. Trivedi are as under; "1. It has been contended on behalf of the Petitioners that by virtue of Section 84A of the Gujarat VAT Act, it is not legally permissible to the department to reopen the assessments which have already atta....
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....ake away the vested rights of the Petitioners. As per the Petitioners, once the assessment for a particular year attains finality, the same creates a vested right in favour of the Petitioners and alteration of such vested rights and that too, on the ground that judgment in favour of the revenue has been pronounced by a Court in some other case. is manifestly arbitrary and illegal. 2. In this regard. it is submitted that the provision under challenge is neither manifestly arbitrary nor illegal, as alleged or otherwise. In fact, even it is considered that finality of an assessment, for a particular year. creates a vested right in favour of the Petitioners. then in that event also. in terms of Section 35/75 of the VAT Act. it is always open for the competent authority to reopen/revise the assessment orders, within the prescribed time limit, which have attained finality. 3. In the present case, the provision under challenge merely enables the authority to exclude the period spent before the competent forum for deciding the issue. The said provision under challenge is only enacted with a view to safeguard the revenue, which the authority would lose, with efflux of time, without any ....
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....nd disproportionate. 9 In fact, one needs to consider as to which particular provision came to be held as as 'manifestly arbitrary" in the above referred four judgments by the Supreme Court and then, to equate Section 84A of the VAT Act with those provisions. On mere comparison of this type will reveal that by no stretch of imagination, Section 84A of the VAT Act can be considered to be manifestly arbitrary, much less arbitrary." 47. On the issue of the retrospective operation of the provision under challenge being unreasonable and violative of Article 19(1)(g) of the Constitution, the submissions of Mr. Trivedi are as under; "1. It is contended on behalf of the Petitioners that the retrospective operation provided to the provision under challenge is unreasonable, on the ground that the same fails the test of reasonableness, as laid down by the Apex Court in the case of R. C. Tobacco Vs. Union of India reported in (2005) 7 sec 725. 2. In this regard. it is submitted that applying the said tests to the retrospectivity of the provision under challenge, the same would clear the test of the reasonableness and that the same is not unreasonable, as alleged or otherwise. 3. As fa....
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....nt order cannot be revised for the second time, the submissions of Mr. Trivedi are as under; "1. It is alternatively contended on behalf of the Petitioners that when the revision powers conferred under Section 75 is exercised once, then in that event, such powers get exhausted and the said assessment order cannot be revised once again. In other words. as per Petitioners, the assessment orders which are already revised once, cannot be taken in revision again by the revisional authority. In this regard, it is submitted that the said contention is not tenable in the eye of law. 2. On a plain reading of the provisions of Section 75 of the VAT Act, it would be discernible that the said Section does not debar/restrict the revisional powers to be exercised more than once, on different issues. If, the said contention raised by the Petitioners to the effect that once an assessment order is revised on one issue. then the revisional authority cannot revise the said assessment orders for another issue also, is accepted, then in that eventuality, the same would frustrate the intention of the legislature and would defeat the very purpose of the legislature to provide revisional powers to the....
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....exercised the power of revision once over again as the same having been exhausted in the first Instance. Whereas in the second case referred to above, the Revisional Authority was seeking to revise in respect of the same subject matter, which was already settled either in revision or appeal. As against this, as aforesaid, in the present case, the notice in question is altogether on different issue and admittedly, not on the same subject/issue, which was revised earlier." 49. As regards the amendment in the repealed enactment, the submissions of Mr. Trivedi are as under; "1. It has been contended by the Petitioners that the provisions of the VAT Act stand repealed qua all goods, except 6 items which are enumerated in Entry 54 of List II of the 7th Schedule of the Constitution of India. 2. In this regard, it is categorically stated that the provisions of the VAT Act, more particularly, Section 75 of the VAT Act still exists and that the same are not repeated. 3. However, even assuming without admitting that the provisions of VAT Act stand repealed all goods but 6 items, then in that also, it is submitted that the State Legislature still possesses the power and it is also permi....
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....he Constitution of India and the Gujarat Vat Act. 53. Section 84A of the Act reads thus; "84A.Exclusion of period in some cases (1) Notwithstanding anything contained in this Act, an issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the Appellate Authority or the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the Appellate Authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in section 34 or section 35. (2) Notwithstanding anything contained in this Act, if any decision or order under section 73 or section 75 involves an issue on which the Revision Authority or Appellate Authority or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings an....
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....a tax on the turnover of sale of Motor spirit commonly known as Petrol, High Speed Diesel, Aviation Turbine Fuel, Petroleum Crude, Natural Gas and Alcoholic Liquor for human consumption specified in Schedule III at the rate set out against each of them: Provided that the Government may levy, from importer or manufacturer or oil marketing companies, a tax at full rate on the retail price in such manner as may be notified by the Government."; 57. In section 100, after sub-section (2), the following subsection shall be added, namely:- "(2A) The amendment of the Gujarat Value Added Tax (Amendment) Act, 2017 (Guj. 26 of 2017) shall not(a) revive anything not in force or existing at the time of such amendment or repeal; or (b) affect the previous operation of this Act prior to the coming into force of the Gujarat Value Added Tax (Amendment) Act, 2017 and orders or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under this Act prior to the coming into force of the Gujarat Value Added Tax (Amendment) Act, 2017 (Guj. 26 of 2017) or orders made thereunder: Provided that any tax exemption granted ....
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....le also came to be amended vide the 101st Constitution Amendment Act, 2016 and the amended Entry 54 reads as under:- "54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commodity known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods." 60. Article 366 (12A) of the Constitution reads as under; "366(12A) 'goods and services tax means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption." 61. Sections 142(6) and 142(7) of the GST Act reads as under; "142(6) (a) every proceeding of appeal, review or reference relating to a claim for input tax credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash in accordance with the provisions of existing law, and the amount rejected, if any, shall not be admissible as input ta....
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.... if the orders passed by the authorities under the said Act are allowed to stand which are contrary to the judgment/s of the said appellate authorities, they will be prejudicial to the Government Revenue unless they are taken in revision under the said Act. Section 84 of the Act that provides for exclusion of period of limitation in certain cases, does not provide the exclusion of time spent between the judgment of Appellate Court and the Higher Court when the earlier judgment is prejudicial to the interest of revenue. It is therefore, considered necessary and expedient in the interest of safeguarding the revenue to insert section 84A so as to provide the contingency for exclusion of the period spent between the earlier judgment and later judgment of any Appellate Authority, Tribunal, High Court, or as the case may be, Supreme Court involving issue prejudicial to the interest of revenue. This bill seeks to amend the said Act of 2003 to achieve the aforesaid objects." 63. Section 174 of the GGST Act, which provides for the "repeal and savings" reads thus; "174. Repeal and Savings; (1) The repeal of the Acts specified in section shall not: (a) revive anything not in force ....
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....re, sale or consumption of goods and services. The Act of 2016 inserted Article 246A, 269A and 279A to the Constitution of India. It amended the provisions of Article 286 of the Constitution. It deleted Entry 92 and 92C of List I of the Seventh Schedule and inserted Entry 84 of List I and Entry 54 of the List II of the Seventh Schedule. In tune with the constitutional amendments incorporated, Central Goods and Services Tax Act, 2017, Integrated Goods and Services Tax Act, 2017 and the respective State Goods and Services Tax Act, 2017 were enacted. 65. Article 246A of the Constitution of India makes special provision with respect to Goods and Services Tax. It empowers the Parliament and the Legislature of every State subject to Article 246A(2) and notwithstanding anything contained in Articles 246 and 254, to make laws with respect to Goods and Services Tax imposed by the Union or the State. Article 246A(2) recognises the exclusive power of the Parliament to make laws with respect to Goods and Services Tax where the supply of goods, or of services, or both takes place in course of inter-state trade or commerce. Article 269A deals with levy and collection of Goods and Services Tax i....
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....t a saving clause in favour of pending suits all suits must stop where the repeal firnds them. If final relief has not been granted before the repeal went into effect, it cannot be after, if a case is appealed, and pending the appeal the law is changed, the appellate court must dispose of the case under the law in force when its decision was rendered. The effect of the repeal is to obliterate the statute repealed as completely as if it had never been passed, and it must be considered as a law which never existed, except for the purposes of those actions or suits which were commenced, prosecuted and concluded while it was an existing law. Pending judicial proceedings based upon a statute cannot proceed after its repeal. This rule holds true until the proceedings have reached a final judgement in the court of last resort, for that court, when it comes to announce its decision, conforms it to the law then existing and may therefore reverse a judgement which was correct when pronounced in the subordinate tribunal from which whence the appeal was taken, if it appears that pending the appeal a statute which was necessary to support the judgement of the lower court has been withdrawn by a....
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.... section reads as under: "6. Effect of repeal - Where this Act, or any Central Act or Regulation made after the commencement of this 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 proceedings or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed." 67.3 The aforesaid provision will apply to repeal of any enactment by a Ce....
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....to replace the one withdrawn. However, when an entire Act or section is abrogated and no new section is added to replace it, Legislatures label the Act accomplishing this result a repeal. Thus as used by the Legislatures, amendment and repeal may differ in kind addition as opposed to withdrawal or only in degree-abrogation of part of a section as opposed to abrogation of a whole section or Act; or more commonly, in both kind and degree-addition of a provision to a section to replace a provision being abrogated as opposed by abrogation of a whole section of an Act. This arbitrary distinction has been followed by the Courts, and they have developed separate rules of construction for each. However, they have recognized that frequently an Act purporting to be an amendment has the same qualitative effect as a repeal - the abrogation of an existing statutory provision- and have therefore applied the term 'implied repeal' and the rules of construction applicable to repeals to such amendments. Amendment is, in fact, a wider term and it includes abrogation or deletion of a provision in an existing statute. If the amendment of an existing law is small, the Act professes to amend; if it is ....
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....ulation. However, Constitution is not an enactment. The Constitution is supreme and is, in fact, the foundation of all the enactment. This has been observed by the Law Commission in its 60th Report on the General Clauses Act, 1897 in the context of Section 8 (construction of references of repealed enactment). The relevant extract of the report is as under: "1.30. Effect of section 8 on Article 367.- Will section 8 of the General Clauses Act, which provides that when an enactment is repealed and re-enacted, references to the old enactment will be construed as references to that, re-enacted one, make any difference? We do not think so. It should be noted that the words "unless the context otherwise requires" (in Article 367) mean that the General Clauses Act, section 8, is to be excluded. Even by its terms, section 8 of the General Clauses Act will not apply to the Constitution, because expression "enactment" (which occurs in section 8) would not take in the Constitution, which is not an "enactment". The Constitution is supreme and is, in fact, the foundation of all enactments." 69.5 Thus, Section 6 of the General Clauses Act, 1897 will not apply to the Constitution (contrary view....
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....ple, laws passed under the previous Government Acts would have ceased to operate on the commencement of this Constitution, by reason of Art. 395, post. The object of the prevent clause is to sanction the continuance of the existing laws until they are repealed or amended by a competent authority under the new constitution." 70.4 The Supreme Court in the case of South India Corporation v. Secretary, Board of Revenue, 1964 AIR 207, in the context of Article 372 observed as under: "The object of this article is to maintain the continuity of the pre-existing laws after the Constitution came into force till they were repealed, altered or amended by a competent authority. Without the aid of such an article there would be utter confusion in the field of law. The assumption underlying the article is that the State laws may or may not be within the legislative competence of the appropriate authority under the Constitution. The article would become ineffective and purposeless if it was held that pre- Constitution laws should be such as could be made by the appropriate authority under the Constitution. The words "subject to the other provisions of the Constitution" should, therefore, be ....
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....tion on different lines. The relevant extract of the judgement is as under: "Section 143 (2) which is a saving clause and obviously, designed, to prevent a dislocation of the finances of Local Governments and of local authorities by reason of the coming into force of the provisions of the Government of India Act distributing heads of taxation on lines different from those which prevailed before that date, cannot be construed as one conferring a plenary power to legislate on those topics till such time as the Central Legislature intervened." 71.4 The aforesaid provision is needed, apart from the general savings in Article 372, as Article 372 is subject to the other provisions of the Constitution. If Article 277 was not enacted, a doubt may arise whether the laws enacted by the Government of State prior to the constitution would become inconsistent with Article 246 due to the heads of taxation being shifted to the Union List. 71.5 Thus, to put the matter beyond any doubt, Article 277 saves the laws relating to taxes, duties, cesses or fees even though they are inconsistent with the provisions of the Constitution until provision to the contrary is made by the Parliament. 72. Unco....
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....icle 372 of the Constitution. An existing law continues to be valid even though the legislative power with respect to the subject matter of the existing law might be in a different list under the Constitution from the list under which it would have fallen under the Government of India Act, 1935. But after the Constitution came into force an existing law could be amended or repealed only by the legislature which would be competent to enact that law if it were to be newly enacted." 73.3 Further, the power to repeal is also co-extensive with the power to enact. Thus, only the legislature which has the power to enact a law, can repeal such a law. This was held by the Supreme Court in the case of Rama krishna Ramanath v. The Janpad Sabha, Gondia, 1962 AIR 1073 as under: "There is no doubt that the general principle is that the power of a legislative body to repeal a law is co-extensive with its power to enact each a law, as would be seen from the following passage in the judgment by Lord Watson in Attorney General for Ontario v. Attorney General for the Dominion: "Neither the Parliament of Canada nor the provincial legislatures have authority to repeal statutes which they could not....
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....th Gupta v. Province of Bihar, AIR 1949 FC 175 wherein Mukherjee J. held as under: "It is certainly competent to the Legislature in exercise of its plenary powers to revive or re-enact a legislation which has already expired by lapse of time. The Legislature is also competent to legislate with retrospective effect; but neither of these things seems to have been done in the present case. The Legislature proceeds on the footing that the old Act was alive at the date. Then the new Act was passed, and the new Act merely purports to amend one of the provisions of the old Act. There could be no amendment of an enactment which a not in existence and from the fact that the Legislature purports to amend an Act, it could not held as a matter of construction that the intention of the Legislature was to renew a dead Act or make a new enactment on the same terms as the old with retrospective effect." 74.4 However, in the case of State of Rajasthan v. Mangilal Pindwal, AIR 1996 SC 2181, the Supreme Court held that retrospective amendments can be made to the repealed statutes in respect of the transactions past and closed. The judgement has been summarised in Justice GP Singh's Principles of S....
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....ure. It is a part of the constitution amendment Act and has to be read as an addendum to the Constitution. 75.3 Section 19 provides that the laws relating to the goods and services tax which are inconsistent with the amended Constitution shall continue until amended or repealed by a competent legislature. It is a debatable issue as to who is the competent legislature for the purpose of Section 19: the State Legislature or Parliament? 75.4 It is argued on behalf of the State that the law relates to tax on sales, which may be covered within the ambit of Article 24CA. It has been argued that the State Legislature will be a competent legislature for the purpose of Section 19. 75.5 Further, Section 19 can be said to be an independent and limited legislative power to repeal the earlier enactments. Such power will also include all ancillary powers necessary to exercise the main powers. Further, as this is an independent power, by necessary implication it may exclude the applicability of other articles such as Article 286, Article 279A, etc. Thus, the saving clause can also be enacted in exercise of such power to save the initiation, continuation and conclusion of assessments. 76. Whic....
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....tution Amendment Act." 76.8 Article 246(3) of the Constitution provides that the State Legislature has the exclusive power to make laws for such state or any part thereof in respect of any matters enumerated in the List II of the Seventh Schedule. 76.9 The Entry 54 of the List II reads as: 'Taxes on the sale or purchase of goods other than newspaper subject to the provisions of entry 92A of List I.' Entry 92A of List I read as: 'Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter -State trade or commerce'. 76.10 Thus, the State Legislature could make laws for taxes on sale or purchase of goods other than those taking place in the course of inter - state trade or commerce. Article 269(3) of the Constitution provided that the Parliament may by law formulate principles for determining when a sale or purchase takes place in the course of inter-state trade or commerce. Section 3 of the Central Sales Tax Act, 1956 was enacted in pursuance of this power. 76.11 The other restrictions were placed by Article 286 of the Constitution (as it stood post Constitution Sixth Amendment Act and before its amendment by Consti....
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....ulate principles for determining when a supply of goods or of services or both in any of the ways mentioned in clause (1)." 76.15 Here, two things are important. First is that the Constitution nowhere provides that the Legislatures of the States can make law for imposing goods and services tax on the intra-State supply of goods or services or both. Secondly, the Constitution does not give powers to the Parliament for formulating principles for the purpose of determining which supplies shall be an intra-State supply of goods or services or both. The powers of Legislatures of States can be derived from Article 246A (1) read with Article 246A (2) and Article 286. There is no other provision in the Constitution which either confer the GST Law making the powers or curtails such law making powers of the Legislatures of the States. However, unless Clause (1) of Article 246A takes effect in relation to the petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel, the Parliament and the Legislatures of the States, both, cannot make the law providing levy of goods and services tax (GST) on supply of these goods. 76.16 Thus, a law of....
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....e principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce." 76.23 The Parliament has accordingly enacted, the Integrated Goods and Service Tax Act, 2017, Sections 7 and 8 respectively of which provides the principles for determining when a supply takes place in the course of inter - state trade or commerce. 76.24 Further Article 286 also places some restriction on imposition of tax on the supply of goods or services or both. The Article provides that no law of a state shall authorize the imposition of tax on supply of goods and services or both where such supply takes place outside the state or in the course of the import into or export out of the territory of India. The relevant extract reads as under: "286. Restriction as to imposition of tax on the sale or purchase of goods:- (1) No law of a State shall impose, or authorize the imposition of, a tax on the supply of goods or of services or both, where such supply takes place (a) outside the State; or (b) in the course of the import of the goods or services or both into, or export of the goods or services or both out o....
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....ords, the State Legislature can make amendments to the earlier VAT Acts, Entry Tax Acts only if such aspects can be traced to Article 246A of the Constitution. 77.5 Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016 can also not be a source of power to amend the State VAT laws. First, the power to amend under Section 19 is only for a period of one year from the commencement of the amendment act. 77.6 Secondly, the words used in Section 19 are that the laws inconsistent with the new provisions of Constitution 'shall continue to be in force'. The Supreme Court in the case of Ram Krishna Ramanath v. The Janpad Sabha, Gondia AIR 1962 SC 1073 held that the Provincial Legislature which was competent to enact laws prior to the Government of India Act, 1935 has a limited legislative power by virtue of Section 143(2) of the Government of India Act, 1935 (which is analogous to Article 277 of the Constitution). This was because the words used was 'may be continued until provision to the contrary is made by the Federal Legislature'. The Supreme Court construed the words 'may' in the phrase to mean 'may continue to be levied if so desire by the Provincial Legislature'.....
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....Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services 14 tax shall replace a number of indirect taxes being levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax. 2. The proposed Bill, which seeks further to amend the Constitution, inter alia, provides for- (a) subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services; (b) subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Cen....
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....erce Explanation.-The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council.". 269A. Levy and Collection of goods and services tax in course of inter-State trade or commerce.(1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. Explanation.-For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. (2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India. (3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund ....
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....States for two years or such other period recommended by Council (1) An additional tax on supply of goods, not exceeding one per cent. in the course of inter-State trade or commerce shall, notwithstanding anything contained in clause (1) of article 269A, be levied and collected by the Government of India for a period of two years or such other period as the Goods and Services Tax Council may recommend, and such tax shall be assigned to the States in the manner provided in clause (2). (2) The net proceeds of additional tax on supply of goods in any financial year, except the proceeds attributable to the Union territories, shall not form part of the Consolidated Fund of India and be deemed to have been assigned to the States from where the supply originates. (3) The Government of India may, where it considers necessary in the public interest, exempt such goods from the levy of tax under clause (1). (4) Parliament may, by law, formulate the principles for determining the place of origin from where supply of goods take place in the course of inter-State trade or commerce." 27. Clause 19 contain compensation to States for loss of revenue on account of introduction of goods and s....
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....ose read as under: "55. The expression used in Article 246A is "power to make laws with respect to goods and service tax". The power to make law, thus, is not general power related to a general entry rather it specifically relates to goods and services tax. When express power is there to make law regarding goods and services tax, we fail to comprehend that how such power shall not include power to levy cess on goods and services tax. True, that Constitution (One Hundred and First Amendment) Act, 2016 was passed to subsume various taxes, surcharges and cesses into one tax but the constitutional provision does not indicate that henceforth no surcharge or cess shall be levied." 80. The issue can also be looked into from a different angle. Article 246(A) of the Constitution of India has been inserted in the Constitution of India to provide for integrated power to the Union of India and the States to make a common law to levy tax on the "Goods and Services". Article 246A is not akin to the "concurrent list" enumerated in List III in Schedule VII of the Constitution of India which empowers, either the Union or State, to make laws with respect to levy of tax on either the goods or serv....
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....ed in the Bill introduced in Loksabha on 18th December, 2014 clearly stated that the Constitution is proposed to be amended to introduce the goods and services tax for conferring concurrent taxing powers on the Union as well as the States including the Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. It further provided that it seeks to amend the Constitution to subsume the State Value Added Tax/Sales Tax. 86. It is an established principle of interpretation of statues to look into the mischief which was intended to be remedied by enactment of the statute. 87. It has been held by the Supreme Court in the case of U.P.Bhoodan Yagna Samiti, U.P. Vs. Braj Kishore and Ors. reported in AIR 1988 SC 2239 that one has to look to the intention of the Legislature, one has to look to the circumstances under which the law was enacted, the Preamble of the law, the mischief which was intended to be remedied by the enactment of the statute. 88. The Entry 54 in List II in Schedule VII of the Constitution of India was amended to extinguish the power of states to levy taxes on sale or purchase of goods exc....
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....the goods and services tax would also be irrelevant if the State legislatures are independently empowered to enact sales tax/value added tax legislations by taking recourse to Article 246A of the Constitution of India. 91. In fact if the State legislature has the power to enact the value added tax laws under Article 246A of the Constitution of India as argued on behalf of the State, then Entry 54 of List II of the Seventh Schedule to the Constitution which was retained to the extent of six products which are outside the GST regime will be rendered redundant. The very fact that Entry 54 of List II of the Seventh Schedule was retained in so far as the six products are concerned indicates that the sales tax/value added tax enactment is not permissible under Article 246A of the Constitution of India. The vociferous argument of the State that Article 246A of the Constitution can support the enactment of provision under the Vat Act falls flat in the face of the existence of Entry 54 of List II of the Seventh Schedule to the Constitution of India which survived the 101st Constitution Amendment Act. 92. We may clarify that in Mohit Mineral Pvt. Ltd. (supra), the challenge was to the impo....
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....ntry 54 of List II of the Seventh Schedule to the Constitution of India which was specifically retained by the 101st Constitution Amendment Act will be rendered redundant 93. In the aforesaid context, we may look into a very recent pronouncement of the Kerala High Court in the case of M/s. Opac Engineering Pvt. Ltd. vs. The State Tax Officer (Works Contract) & Ors., rendered in WP (C) No.32439 of 2019, decided on 6th Day of December, 2019/ 15th Agrahayana, 1941. In the case before the Kerala High Court, the legality and validity of the notices and assessment orders issued to the petitioners in connection with the assessment under the Kerala Value Added Tax Act (for short "the KVAT Act") for the A.Y. 2010-11 and 2011-12 was made a subject matter of challenge. The main plank of challenge to the impugned notices and orders was on the ground that the authorities concerned had no jurisdiction since the amendments introduced to Section 25(1) of the KVAT Act through the Kerala Finance Acts of 2017 and 2018 notified through Gazette Notifications dated 19.06.2017 and 31.03.2018 respectively did not contemplate a retrospective operation of the amended provisions. A learned Single Judge of t....
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.... Act. The Court found that the State legislature retained its legislative power to enact the savings clause under Section 174 of the State GST Act and that the only difference in the nature of that power was that, while prior to the introduction of GST through the CAA the State Legislatures enjoyed exclusivity in the mater of legislation on the subject of taxes on sale or purchase of goods, after the CAA, they had simultaneous legislative power, with the Parliament, to legislate in respect of taxes on supply (which included sale) of goods or services or both. The challenge to the notices and orders issued/passed by the revenue authorities was rejected on the finding that the actions of the revenue authorities, in issuing such notices and passing such orders, were saved by the provisions of Section 174 of the State GST Act, the validity of which was also upheld. 18. I am given to understand that an intra-court appealagainst the aforesaid judgment of the learned Single Judge is pending consideration before a Division Bench of this Court. At any rate, the said judgment, which dealt with actions taken by the revenue authorities before the amendments brought in to the KVAT Act through....
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....ify the inclusion of a savings clause in the new legislation enacted in respect of the new levy of tax, to save accrued rights, privileges, immunities etc. under the erstwhile enactment, the deletion of Entry 54 of List II automatically denuded the State Legislatures of the power to further legislate on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. The power to amend a statute being a facet of the legislative power itself, the State legislature could not have exercised a power to amend the KVAT Act, save to the extent permitted, when it did not retain any residual right to further legislate on the subject of taxes on sale or purchase of goods. 20. There is yet another aspect of the matter. It is trite that when a Court judges the Constitutionality of a legislative enactment it should try to sustain the validity of the enactment to the extent possible and it should strike down the law only when it is impossible to sustain it State of Bihar v. Bihar Distilery - [JT (1996) 10 SC 854]. At the same time, the Court must proceed to determine the intention of the Parliament, not only from the language used in the statute ....
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.... assessments in respect of which the period of limitation for re-opening under Section 25 of the KVAT Act was to expire by 31.03.2017 can be re-opened up to 31.03.2018 by virtue of the amendment to the third proviso to Section 25 (1) vide Kerala Finance Act, 2017. (ii) the assessments in respect of which the period of limitation for re-opening under Section 25 of the KVAT Act was to expire by 31.03.2018 cannot be re-opened up to 31.03.2019 or thereafter, by relying on the amendments introduced through the Kerala Finance Act, 2018 since the State Legislature did not have the power to amend the KVAT Act after the CAA 2016, and the repeal of the KVAT Act pursuant thereto, on 22.06.2017. (iii) The legality of the orders/notices impugned in these writ petitions shall stand determined by the declarations in (i) and (ii) above." 95. The line of reasoning adopted by the Kerala High Court in the aforesaid decision fortifies our view that the State Legislature could not have amended the State VAT Act by enacting Section 84A which is sought to be protected by virtue of Article 246A of t he Constitution. 96. The dictum as laid by the Kerala High Court may be summarized as under: "Amend....
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....97. Mr. Kamal Trivedi, the learned Advocate General placed strong reliance on the decision of the Kerala High Court in the case of Sheen Golden Jewels (India) Pvt. Ltd vs. State Tax Officer, 2019 SCC Online Ker. 973. Strong reliance has been placed on the following observations; "133.Article 246 of the Constitution deals with the distribution of legislative powers. Under Clause (1) of that Article, Parliament has the exclusive power to make laws on any of the matters enumerated in List I (Union List) in the Seventh Schedule. Under Clause (2) both Parliament and the State Legislature have concurrent powers to make laws on any matter enumerated in List III (the Concurrent List) of the Seventh Schedule. But the State Legislature's power to legislate over the matters in the Concurrent List is subject to Parliament's power under the Union List. Then, of course, subject to Parliament's powers under List I and List III, the State Legislature has the exclusive power to make laws on any matter enumerated in List II (State List). Besides, under Article 245(4) of the Constitution, Parliament has the power on any matter for any part of the territory of India not included in a State. 134. T....
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....nts, the procedural mechanism has disappeared. It has not. The prospectivity of the amendment undisputed, what remains to be examined is the State's power to save what had happened before the CA Act came into force or, more precisely, until one year after that Act came into force. Indeed, the CA Act allowed the State Acts in the same legislative field to coexist for one year: the window period. 180. The petitioners argue that the CA Act has disrupted the federal demarcations; the State's legislative fields under Entry 54 of the Second Schedule have been truncated. Thus, the State has no longer the power to legislate on the files that have been taken away from it. Have the State's legislative power on the items once available for it under the Entry 52 taken away? We will see. 181 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. 182. To encapsulate, I may observe that all the petitioners have advanced one ....
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....he legislative power but are merely topics or fields of legislation and that the competence to legislate flows from the Articles in Part-XI of the Constitution of India. It is sought to be argued by the learned Advocate General that the amendments in such entries like the amendment in Entry 54 of List II in the present case would not make any difference to the legislative competence of the State Legislature to make any laws, which otherwise flows from the substantive provisions under the Constitution. To fortify such submission, reliance has been placed on a decision of the Supreme Court in the case of Hoechst Pharmaceuticals Ltd. vs. State of Bihar, (1983) 4 SCC 45. It has been argued by Mr. Trivedi that by enacting Section 84A in the VAT Act, the State Legislature has not proposed to levy any fresh tax, but merely allowed the department to enlarge the period of limitation under the provisions of Section 75 of the VAT Act, if permissible, so as to collect the legitimate tax already levied but could not be collected in view of the pendency of litigation before the Supreme Court. 99. We are afraid we are not in a position to agree with the stance of the State. In Sheen Golden Jewel....
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.... either of them. Secondly, an attempt should be made to see whether the two entries cannot be reconciled so as to avoid a conflict of jurisdiction. It should be considered whether a fair reconciliation can be achieved by giving to the language of the Union Legislative List a meaning which, if less wide than it might in another context bear, is yet one that can properly be given to it and equally giving to the language of the State Legislative List a meaning which it can properly bear. The nonobstante clause in Article 246(1) must operate only if such reconciliation should prove impossible. Thirdly, no question of conflict between the two Lists will arise if the impugned legislation, by the application of the doctrine of 'pith and substance' appears to fall exclusively under one List, and the encroachment upon another list is only incidental." 101. From the aforesaid decision, which is sought to be relied upon by the State, the principle that flow are these: [1] First, the words "notwithstanding anything contained" in clauses (1) and (2) of Article 246 and the words "subject to" used in clauses (2) and (3) of Article 246 show the supremacy of Parliament namely when there ....
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....mpetence. If it has legislated upon a topic not within its competence, than the legislation is clearly ' ultra vires ' and no further question arises. 105. The aforenoted Division Bench decision of the Bombay High Court was looked into by a Seven Judge Bench of the Supreme Court reported in AIR 1957 SC 699. S.R. Das, J., speaking for the Bench, observed thus: "The principal question canvassed before us relates to the validity or otherwise of the impugned Act. The Court of Appeal has rightly pointed out that when the validity of an Act is called in question, the first thing for the Court to do is to examine whether the Act is a law with respect to a topic assigned to the particular Legislature which enacted it. If it is, then the court is next to consider whether, in the case of an Act passed by the Legislature of a Province (now a State) its operation extends beyond the boundaries of the Province or the State; for under the provisions conferring legislative powers on it such Legislature can only make a law for its territories or any part thereof and its laws cannot, in the absence of a territorial nexus, have any extra-territorial operation. If the impunged law satisfies....
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.... effect and substance, reaches beyond it. If, in fact, it has power to make the law, its motives in making the law are irrelevant." 108. There need not be any debate on the statement of law that the entries in the lists are themselves not power of legislation, but fields of legislation. It is trite that India being a Union of State both the Parliament and the State Legislature can frame laws having regard to their respective legislative competence enumerated in the three Lists contained in the Seventh Schedule of the Constitution of India. The Parliament has exclusive power to make laws with respect of any of the matters enumerated in List I in the Seventh Schedule. Similarly, State Legislatures have exclusive power to make laws in respect of any of the matters enumerated in List II. Parliament and State Legislatures both have legislative power to make laws with respect to any matter enumerated in List III, the Concurrent List. The various entries in the three Lists are fields of legislation. They are designed to define and delimit the respective areas of legislative competence of the Union and State Legislatures. 109. We once again reiterate the tests prescribed by the Supreme C....
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....e General also tried to defend Section 84A of the VAT Act on the ground that the tax dues which were morally due to the State are sought to be recovered. In other words, the argument is that the State had no other option but to enact Section 84A in the VAT Act. It is sought to be argued that the State was remediless in a situation where there was judgment of this High Court operating in favour of the dealer at the time of assessment which was subsequently reversed by the Supreme Court. Such stance of the State is not tenable in law in view of two decisions of the Supreme Court. In the case of Asst. Commissioner, Commercial Tax vs. LIS (Registered), (2018) 15 SCC 283. it has been observed in Para-12 as under; "12. Time and again, it has been emphasized that a taxing statute cannot be made applicable to a citizen by unnatural or unreasonable extensions thereof. A recent view of this Court in this regard is available in 'Shabina Abraham vs. Collector of Central Excise and Customs'1 wherein a judgment of the Bombay High Court which is of considerable vintage i.e. 'Commissioner of Income Tax, Bombay v. Ellis 1 2015 (322) E.L.T. 372(S.C.) 8 C.Reid2, has been referred to and....
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....This Court has, in a plethora of judgments, referred to the aforesaid principles. Suffice it to quote from one of such judgments of this Court in Commissioner of Sales Tax, Uttar Pradesh v. Modi Surgar Mills, 1961 (2) SCR 189 at 198 :- "In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The Court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency." 113. In the case of Nestle India Ltd vs. Deputy Commissioner of Commercial Tax, (2016) 89 VST 56 (Guj.). It has been observed by M.R. Shah (as His Lordship then was) in Para 8.13 as under; "8.13 Now, so far as the decisions, upon which the learned AGP has relied, which are referred to herein above in support of his submission that principle of res judicata is not applicable to Tax Laws, as every year is a separate unit is concerned, there cannot be any dispute that generally, the principle of res judicat....
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....ermitted to take a contrary view than the view taken by the higher forum, more particularly, when in the subsequent years, there are no change circumstances and the decision of the higher forum (in the present case, learned Tribunal), has been acted upon and implemented for the years." 114. It is well known that motive or intention for making an Act or issuing an ordinance is not justifiable before a court of law. Whenever the expressions colourable exercise of power or fraud on Constitution are used in connection with any enactment, it only means that the particular legislature had no legislative competence although it purports to have exercised that power. Reference in this connection may be made to the cases of K.C.Gajapati Narayan Deo v. State of Orissa (AIR 1953 SC 375), Bhairabendra Narayan Bhup v. State of Assam (AIR 1956 SC 503), Gullapalli Nageswara Rao v. Andhra Pradesh State Road Transport Corpn. (AIR 1959 SC 308) and R.S. Joshi etc v. Ajit Mills Ltd. (AIR 1977 SC 2279). In the case of K.C.Gajapati Narayan Deo (AIR 1953 SC 375), it was observed (at p. 379): "It may be made clear at the outset that the doctrine of colourable legislation does not involve any question of....
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....n the four corners of the taxing statute with its fold so as to make him liable to payment of tax. In this regard paragraphs 31, 32 and 33 of the opinion rendered in Shabina Abraham (supra) would commend to us for recapitulation and, therefore, are extracted below : 32. The impugned judgment in the present case has referred to Ellis C. Reid's case but has not extracted the real ratio contained therein. It then goes on to say that this is a case of short-levy which has been noticed during the lifetime of the deceased and then goes on to state that equally therefore, legal representatives of a manufacturer who had paid excess duty would not by the self-same reasoning be able to claim such excess amount paid by the deceased. Neither of these reasons are reasons which refer to any provision of law. Apart from this, the High Court went into morality and said that the moral principle of unlawful enrichment would also apply and since the law will not permit this, the Act needs to be interpreted accordingly. We wholly disapprove of the approach of the High Court. It flies in the case of first 2 AIR 1931 Bombay 333 principle when it comes to taxing statutes. It is therefore, necessa....
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....ccept the submission that for all practical purposes, the VAT Amendment Act, 2018 is a validating Act. According to Mr. Trivedi, it seeks to overcome an obstacle in terms of the limitation of three years provided under Section 75 of the VAT Act. According to Mr. Trivedi, the said obstacles stood confirmed by this Court vide its judgment and order dated 16th March, 2018 rendered in the Special Civil Application No.22283 of 2018 while quashing and setting aside the revision notice dated 03/06.11.2017 issued by the State Authorities to revise the assessment order for the F.Y.2008-09 as time barred under Section 75 . According to Mr. Trivedi, the said revision notice was issued on the basis of the judgment delivered by the Supreme Court dated 22nd September, 2017 reported in (2017) 16 SCC 28 whereby the judgment of this High Court dated 18th January, 2013, referred to above, was quashed and set aside. According to Mr. Trivedi, the validation exercise may be undertaken by a Competent Legislature by adopting any of the following methods. (a) By removing the obstacle of illegality or invalidity, retrospectively, or, (b) By providing for jurisdiction retrospectively, where jurisdiction....
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....chine Tools Ltd (supra), the Andhra Pradesh High Court quashed and set aside the notice seeking to recover property tax on the "factory" of the Company while relying upon Section 2(15) of the Andhra Pradesh Gram Panchayats Act, 1964, defining the term "house", on the ground that the said definition does not include "factory" and hence no tax could be recovered, since the demand in that behalf was illegal. When the appeal of the State against the judgment of the High Court was pending before the Apex Court, State Legislature retrospectively amended the said Section 2(15) of the said Act so as to eliminate the impediment on which the High Court rested its judgment. 119. However, ultimately, while upholding the demand of tax retrospectively, it was observed as under: "We see no substance in the respondent's contention that by re-defining the term 'house' with retrospective effect and by validating the levies imposed under the unamended Act as if notwithstanding anything contained in any judgment, decree or order of any court, that Act as amended was in force on the date when the tax was levied, the Legislature has encroached upon a judicial function. The power of the Legislature to....
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....e there are pending proceedings in some other cases which result into a judgment in favour of the Revenue. 122. The question that falls for our consideration is whether Section 84A of the VAT Act is a validating Act?. 123. The Supreme Court, in the case of Amrendra Kumar Mohapatra vs. State of Orissa, (2014) 4 SCC 583 has very succinctly explained the concept of validating Act. We quote the relevant observations; "22. Black's Law Dictionary (9th Edition, Page No.1545) defines a Validation Act as "a law that is amended either to remove errors or to add provisions to conform to constitutional requirements". To the same effect is the view expressed by this Court in Hari Singh & Others v. The Military Estate Officer and Anr. (1972) 2 SCC 239, where this Court said" 21.The meaning of a Validating Act is to remove the causes for ineffectiveness or invalidating of actions or proceedings, which are validated by a legislative measure". In ITW Signode India Ltd. v. Collector of Central Excise (2004) 3 SCC 48, this Court described Validation Act to be an Act that "44. removes actual or possible void ness, disability or other defect by confirming the validity of anything which is....
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....hile adjudication of rights is essentially a judicial function, the power to validate an invalid law or to legalise an illegal action is within the exclusive province of the legislature. Exercise of that power by the legislature is not, therefore, an encroachment on the judicial power of the Court. But, when the validity of any such Validation Act is called in question, the Court would have to carefully examine the law and determine whether (i) the vice of invalidity that rendered the act, rule, proceedings or action invalid has been cured by the validating legislation (ii) whether the legislature was competent to validate the act, action, proceedings or rule declared invalid in the previous judgments and (iii) whether such validation is consistent with the rights guaranteed by Part III of the Constitution. It is only when the answer to all these three questions is in the affirmative that the Validation Act can be held to be effective and the consequences flowing from the adverse pronouncement of the Court held to have been neutralised. Decisions of this Court in Shri Prithvi Cotton Mills Ltd. and Anr. V. Broach Borough Municipality and Ors. (1969) 2 SCC 283, Hari Singh v. Military....
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....stantive enactment therein makes no mention of any validation. It only provides that no law of a State imposing tax on sales shall be deemed to be invalid merely because such sales are in the course of inter-State trade or commerce. The effect of this provision is merely to liberate the State laws from the fetter placed on them by Art. 286(2) and to enable such laws to operate on their own terms." (emphasis supplied) 29. We may also refer to Maxwell on Interpretation of Statutes (12th Edn., page 6), where on the basis of authorities on the subject, short title of the Act has been held to be irrelevant for the purpose of interpretation of statutes. Lord Moulton in Vacher and Sons Ltd. v. London Society of Compositors [1913] AC 107 described the short title of an Act as follows: "A title given to the act is solely for the purpose of facility of reference. If I may use the phrase, it is a statutory nickname to obviate the necessity of always referring to the Act under its full and descriptive title....Its object is identification and not description." (emphasis supplied)" 124. The law relating to validating statutes in general is to be found in a catena of judgments. We can do no....
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....has the power over the subject- matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions. The validity of a Validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the Courts had found in the existing law and makes adequate provisions in the validating law for a valid imposition of the tax." (Emphasis by me) 125. In the case of D. Cawasji and Co. Vs. State of Mysore 1984 (supp). SCC 490, the issue related to constitutionality of Mysore Sales Tax Amendment Act, 1969 which provided for levy of higher rate of tax with retrospective effect to nullify the judgment and order of the High Court for refund of excess amount of tax illegally collected. On the basis of Articles 14 and 19, the Act was held to be unconstitutional being unreasonable and arbitrary. The Court further held that the Act in question could not be considered to be a validating Act because in words of the Court - "A validating Act seeks to validate earlier Acts declared illegal and unconstitu....
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....s if at all material times when such tax was imposed, assessed or collected, the principal Act as amended by section 2, 3 and 4 except sub-clause (a) of clause (1) thereof and section 7 of this Act and section 9 had been in force and accordingly - (a) no suit or other proceeding shall be maintained or continued in any court for the refund of any tax paid in respect of designated omnibus under the principal Act, (b) no court shall enforce a decree or other directing the refund of any tax paid in respect of designated omnibus under the principal Act, (c) ) any tax imposed or assessed in respect of designated omnibus under the principal Act during the period beginning from the 1st day of April, 1991 and ending on the 16th day of August, 2001 but not collected before 17th day of August, 2001 may be recovered (after assessment of tax where necessary) in the matter provided in the principal Act. (2) For the removal of doubts, it is hereby declared that nothing in sub-section (1) shall be construed as preventing any person- (a) from questioning in accordance with the provisions of the principal Act and rules made thereunder the assessment of tax on designated omnibus for any per....
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....has been waived or any deferment of payment of tax granted by any order of the State Government before the commencement of this Act shall be and shall be deemed always to have been validly waived or granted in accordance with law as if the provisions of sections 18 and 19 of the principal Act as amended by this Act had been in force at all material time when such interest was waived or the deferment of payment was granted." 133. On a bare perusal of the above referred amendment Acts, it is evident that the amending Act specifically provides for validation of various aspects (namely assessment, reassessment, collection etc.) notwithstanding any judgement, decree or order of any court, Tribunal or authority to the contrary. 134. We shall once again look into Section 84A of the Gujarat Value Added Tax (Amended Act) 2017. The same reads thus:- "84A(1) Notwithstanding anything contained in this Act, an issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of t....
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.... impugned unsuccessfully before the High Court as also the Supreme Court. The Supreme Court laid down the following tests for judging the validity of the Validating Act: (i) whether the Legislature enacting the Validating Act has competence over the subject-matter, (ii) whether by validation, the Legislature has removed the defect which the Court had found in the previous law; (iii) whether the validating law is inconsistent (sic consistent) with the provisions of Part III of the Constitution. If these tests are satisfied, the Act can with retrospective effect validate the past transactions which were declared to be unconstitutional. The Legislature cannot assume power of adjudicating a case by virtue of its enactment of the law without leaving it to the judiciary to decide it with reference to the law in force. The Legislature also is incompetent to overrule the decision of a Court without properly removing the base on which the judgment is founded. The Supreme Court on a review of judicial opinion, proceeded to lay down the following principles among others so as to maintain the delicate balance in the exercise of the sovereign powers by the Legislature, Executive and Judi....
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....ed and create a situation which if it had existed earlier, the Court would not have made the pronouncement. 139. Thus, we find it difficult to take the view that the VAT Amendment Act, 2018 is a validating Act. 140. We, once again, go back to the issue with regard to the competence of the State Legislature to enact Section 84A of the Act. 141. In Bhikaji Narain Dhakras v. State of M.P. (AIR 1955 SC 781), while considering the validity of the pre-Constitution Act the Supreme Court observed: "All laws, existing or future, which are inconsistent with the provisions of Part III of the Constitution are by the express provisions of Article 13 rendered void to the extent of such inconsistency. Such laws were not dead for all purposes. They existed for the purpose of pre-Constitution rights and liabilities and they remained operative even after the Constitution as against non-citizens." In Sundaramier and Co. v. State of Andhra Pradesh (AIR 1958 SC 468) the main point for determination was the validity of the Sales Tax Validation Act 1956, a Madras Act. Venkataram Aiyar, J. reviewed the authorities and thereafter concluded:- "Thus a legislation on a topic not within the competence of ....
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....jarat Value Added Tax (Amendment) Act, 2018 is invalid on the ground that the same is beyond the legislative competence of the State Legislature. IS SECTION 84A OF THE GUJARAT VAT (AMENDMENT) ACT, 2017 MANIFESTLY ARBITRARY AND UNREASONABLE? 144. The aforesaid takes us now to consider the question whether Section 84A of the VAT Act is manifestly arbitrary and is liable to be struck down being violative of Article 14 of the Constitution of India. 145. Mr. Soparkar, the learned senior counsel appearing for the writ applicant submitted that Section 84A of the VAT Act is manifestly arbitrary and violative of Articles 14 and 19(1) (g) respectively of the Constitution of India. He would submit that when the assessment for a particular year attains finality, the same creates a vested right in favour of the dealer. The dealer would arrange his affairs of business considering the fact that his liability has crystallized for the periods where the assessments have attained finality. Alteration of such position without any definite time limit only on the ground that the judgment in favour of the Revenue has been pronounced by a Court in another case, with which, the concerned dealer has noth....
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....o assessment/re-assessment/revision for an indefinite period which is excessive and disproportionate. In fact, the retrospective operation of the provision w.e.f 1st April, 2006 allows reopening of assessments of years in respect of which a dealer was not required to preserve the books of accounts and, therefore, the retrospective operation is all the more onerous and manifestly arbitrary. 149. In the last, Mr. Soparkar submitted that the retrospective operation of Section 84A of the VAT Act makes the same all the more oppressive. 150. Mr. Trivedi, in response to the aforesaid submissions, submitted that Section 84A of the VAT Act, cannot be termed as arbitrary in any manner. According to him, there is a clear context in bringing Section 84A of the VAT Act with retrospective operation inasmuch as the sole intention behind enacting the same is to safeguard the interest of the Revenue by seeking to recover which is legitimately due. According to Mr. Trivedi, the words "manifestly arbitrary" means something done by the Legislature capriciously, rationally and or without adequate determining principle, or something done which is excessive and disproportionate. According to Mr. Trived....
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....the argument that because the retrospective operation may operate harshly in same cases therefore the legislation itself is in valid." 154. The issue whether law can be declared unconstitutional on the ground of arbitrariness has received the attention of the Supreme Court in a Constitution Bench Judgment in the case of Shayara Bano v. Union of India & Ors. 24. R.F. Nariman and U.U.Lalit, JJ. (State of M.P. v. Rakesh Kohli, (2012) 6 SCC 312; Ashoka Kumar Thakur v. Union of India, (2008) 6 SCC 1 22 (1996) 3 SCC 709 23 (2016) 2 SCC 445 24 (2017) 9 SCC 1) discredited the ratio of the aforesaid judgments wherein the Court had held that a law cannot be declared unconstitutional on the ground that it is arbitrary. The Judges pointed out the larger Bench judgment in the case of Dr. K.R, Lakshmanan v. State of T.N. & Anr., and Maneka Gaandhi v. Union of India & Anr. where manifest arbitrariness is recognised as the third ground on which the legislative Act can be invalidated. The following discussion in this behalf is worthy of note: "87. The thread of reasonableness runs through the entire fundamental rights chapter. What is manifestly arbitrary is obviously unreasonable and being cont....
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....e being flawed. The judgments, following McDowell (State of A.P. v. McDowell and Co., (1996) 3 SCC 709) are, therefore, no longer good law." 155. The historical development of the doctrine of arbitrariness has been noticed by the Hon'ble Judges in Shayara Bano in detail. It would be suffice to reproduce paragraphs 67 to 69 of the said judgment as the discussion in these paras provide a sufficient guide as to how a doctrine of arbitrariness is to be applied while adjudging the constitutional validity of a legislation. "67. We now come to the development of the doctrine of arbitrariness and its application to State action as a distinct doctrine on which Sate action may be struck down as being violative of the rule of law contained in Article 14. In a significant passage, Bhagwati, J., in E.P. Royappa v. State of T.N. stated: (SCC p. 38, para 85) 85. The last two grounds of challenge may be taken up together for consideration. Though we have formulated the third ground of challenge as a distinct and separate ground, it is really in substance and effect merely an aspect of the second ground based on violation of Articles 14 and 16. Article 16 embodies the fundamental guarantee....
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....exercise of power and that is hit by Articles 14 and 16. Mala fide exercise of power and arbitrariness are different lethal radiations emanating from the same vice: in fact the letter comprehends the former. Both are inhibited by Articles 14 and 16. 68. This was further flashed out in Maneka Gandhi v. Union of India, where after stating that various fundamental rights must be read together and must overlap and fertilise each other, Bhagwati, J., further amplified this doctrine as follows: (SCC pp. 283-84, para 7) The nature and requirement of the procedure under Article 21 7. Now, the question immediately arises as to what is the requirement of Article 14: what is the content and reach of the great equalising principle enunciated in this article? There can be no doubt that it is a founding faith of the Constitution. It is indeed the pillar on which rests securely the foundation of our democratic republic. And, therefore, it must not be subjected to a narrow, pedantic or lexicographic approach. No attempt should be made truncate its all-embracing scope and meaning, for to do so would to violate its activist magnitude. Equality is a dynamic concept with many aspects and dimension....
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....ction and ensures fairness and equality of treatment. It is thus too late in the day to contend that an executive action shown to be arbitrary is not either judicially reviewable or within the reach of Article 14. The same view was reiterated in Babita Prasad v. State of Bihar, SCC at p. 285, para 3." 156. The aforenoted doctrine is, thus, treated as a facet of both Articles 14 and 21 of the Constitution. 157. In case of The State of Jammu & Kashmir vs. Triloki Nath Khosa and ors reported in AIR 1974 SC 1 the Constitution Bench of the Supreme Court upheld the legislation classifying the Assistant Engineers into Degree-holders and Diploma holders respectively for the purpose of promotion. It was observed that classification on the basis of educational qualifications made with a view to achieving the administrative efficiency cannot be said to rest on any fortuitous circumstances and one has always to bear in mind the facts and circumstances in order to judge the validity of a classification. It was observed that there is a presumption of constitutionality of a statute. The burden is on one who canvasses that certain statute is unconstitutional to set out facts necessary to sustain....
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....rved that a statute can also be struck down if it is manifestly arbitrary. It was observed as under: "101. It will be noticed that a Constitution Bench of this Court in Indian Express Newspapers v. Union of India, (1985) SCC 641, stated that it was settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. This being the case, there is no rational distinction between the two types of legislation when it comes to this ground of challenge under Article 14. The test of manifest arbitrariness, therefore, as laid down in the aforesaid judgments would apply to invalidate legislation as well as subordinate legislation under Article 14. Manifest arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary. We are, therefore, of the view that arbitrariness in the sense of manifest arbitrariness as pointed out by us above would apply to negate legislation as well under Article 14." 160. It is well settled that as long as....
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....abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry" that exact wisdom and nice adoption of remedy are not always possible and that "judgment is largely a prophecy based on meagre and un-interpreted experience". Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There, may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Reig Refining Company 94 Lawyers Edition 381 be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provision....
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....pectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre[3], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule as was observed in the decision reported in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd[4]. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal po....
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....hose subject to them as could find no justification in the minds of the reasonable men, the Court might well say parliament never intended to give authority to make such rules and that they are unreasonable and ultra vires ." 24. In Municipal Corporation of Delhi v. Birla Cotton Spinning and Weaving Mills, Delhi, AIR 1968 SC 1232, a Constitution Bench of the Apex Court had occasion to examine the issue. The Court approved the aforesaid principle enunciated in the case of Kruse v. Johnson (supra). 25. Chief Justice Wanchoo approving the principle said :- 26. In such case of the act of such a body in exercise of the power conferred on it by law is unreasonable, the Court can held that such exercise is void for unreasonableness">. This principle was laid down as far back as 1898 in Kruse v. Johnson, (1898) 2 QB 91, in connection with a bye law made by a county council. The Court held that a bye law could be struck down on the ground of unreasonableness. Hidayatullah, J. agreed and said:-- "Now the rule regarding reasonableness of bye laws was laid down in (1898) 2 QB 91. The rule has been universally accepted and applied in India and elsewhere." Sikri, J. Concurred : "I ....
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....laim refund without reopening such assessment/order on the ground of a decision in another person's case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well-established principles of law. It also leads to grace public mischief. Section 72 of the Contract Act, or for that matter Section 17(1)(c) of the Limitation Act, 1963, has no application to such a claim for refund." 168. The entire gamut of retrospective operation of fiscal statues was revisited by the Supreme Court in a Constitution Bench judgment in Commissioner of Income Tax (Central) - I, New Delhi v. Vatika Township Private Limited [2015 1 SCC 1] in the following manner: "33. A Constitution Bench of this Court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas [AIR 1968 SC 1336 : (1968) 3 SCR 623], while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows: (AIR p. 1339, para 8) "8. ... The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to ....