AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 499
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....ted Company, engaged in the manufacture and sale 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 noti....
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....purchases of furnace oil, natural gas and light diesel oil, as sub-clause (iii) of Section 11(3)(b) of the VAT 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 T....
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....Act, 2017 and the Central Goods & Services Tax Act, 2017 came into force to levy tax on all the intra-state suppliers of goods or services 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 Assessm....
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....the date of the decision of the High Court is 18.01.2013 upto the date of the decision of the Supreme Court i.e. 22.09.2017 is to be excluded in computing 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 a....
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..... Soparkar seeks to rely on the decision of the Supreme Court in the case of A. Hajee Abdul Shukoor & Co. vs. State of Madras, (1964) 15 STC 719 (SC) (page 730). 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 ....
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....d in favour of the Revenue in another case is manifestly arbitrary and illegal. In support of such submission, the learned senior counsel seeks to rely on the decision 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....
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....rch, 2010. Such assessment was not challenged by either side and the same attained finality. For the same period, issue was raised in the case of Mr. Y of Rajkot, demanding tax at the rate of 15% on the 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 whi....
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....ed and the same assessment order cannot be revised again. In this regard, reliance is placed on the decision of the Supreme Court in the case of OCL India Ltd. vs. State of Orissa, (2003) 130 STC 35 (SC) and the 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 othe....
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.... goods. or services or both except taxes on the supply of the alcoholic liquor for human consumption. At this stage. it Is worthwhile to note that, undisputedly, the term "supply includes 'sales/purchases. 30. Mr. Trivedi would 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. ....
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.... of the Supreme Court in the case of A. Hajee Abdul Shakoor (supra) is of no avail. 38. Mr. Trivedi gave us a fair idea as regards the effect of Section 19 of the Constitutional Amendment Act, 2016. It is submitted that w.e.f. 01.07.2017, the Gujarat VAT Act, 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 legislat....
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....sioner of Agricultural Income Tax, (2015) 11 SC 462; 43. Mr. Trivedi would submit that the statutes of limitation are retrospective in nature, when they deal with procedural law and they are prospective, when they deal with the substantive rights, unless the same are expressly or by implication 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 15....
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....Section 84A of the VAT Act being manifestly arbitrary and violative of Article 14 of the Constitution of India, the submissions of Mr. Trivedi are as under; "1. It has been contended on behalf of the Petitioners that the provision under challenge is manifestly arbitrary on the ground that the same seeks to reopen the assessments and in other words, take 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 pre....
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....ional on the ground that the same being manifestly arbitrary. However, that does not mean that Section 84A of the VAT Act is manifestly arbitrary. 8 As observed by the Apex Court in the aforesaid case of Shayara Bano (supra), "manifestly arbitrariness" means something done by legislature capriciously, irrationally and/or without adequate determining principle, or something done which is excessive and 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 unreason....
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....sent case. there arises no question of any unforeseen or unforeseeable financial burden imposed by applying the provision under challenge retrospectively. 6. Therefore. the retrospective operation of the provision under challenge is not unreasonable and hence, the said provision under challenge is not required to be struck down." 48. On the argument canvassed by the learned senior counsel appearing on behalf of the writ applicant that the assessment 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/restri....
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....dia Ltd. Vs. State of Orissa, reported in (2003) 130 STC 35, and (14B) Malavia Bros. & Co. Vs. Sales Tax Officer, reported in 1973 GSTB 206, relied upon by the Petitioners are concerned, the same would also not be applicable to the facts of the present case. In the first case referred to above, it was held that once the Assistant Commissioner, as a delegatee of the Commissioner, had revised the order of the Sales Tax Officer, then in that case, the Commissioner, as a delegator, could not have 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, exc....
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....ents which have already attained finality before such amendment came into force?. (vii) Whether the provisions of the Gujarat Vat Act stand repealed qua all the goods except the six items enumerated in the Entry 54 of List Ii of the seventh schedule of the Constitution of India?. In other words, whether the provisions of the VAT Act more particularly, Section 75 of the Act still operates and the other provisions cannot be said to be repealed?. 52. Before adverting to the rival submissions canvassed on either side, we must look into few relevant provisions of the 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 t....
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...., namely:- "(29) "taxable goods" means goods liable to tax under section 7 excluding the goods on which no tax is payable under section 5;"; (10) in clause (30), - (i) the words "or purchases" shall be deleted; (ii) in sub-clause (b), the words, brackets and figures "under sub-section (1) of section 5 or" shall be deleted; (11) in clause (34), in sub-clause (a) the words "or purchases", occurring at two places, shall be deleted; (12) clause (37) shall be deleted. 56. In the principal Act, in section 7, - (1) for sub-section (1), the following sub-section shall be substituted, namely:- "(1) Subject to the provisions of this Act, there shall be levied 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 sec....
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....; "Article 246A. Special provision with respect to goods and services tax: (1) Notwithstanding anything contained in articles 246 and 254, Parliament and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and service tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. 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." 59. The said erstwhile Entry 54 of List II of the seventh schedule 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 sa....
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....and any amount 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 tax credit under this Act." 62. At this stage, it would not be out of place to incorporate the statement of objects and reasons for the enactment of Section 84A of the Gujarat Vat Act. "STATEMENT OF OBJECTS AND REASONS After implementation of the Gujarat Value Added Tax Act, 2003 in the State, Amendments have been made from time to time for better administration and tax compliance. It is noticed that in some cases under the said Act, orders are passed by the authorities under Gujarat Value Added Tax Act,2003, but the appellate authorities including the High Court or the Supreme Court have decided the matters before them involving similar issues, due to which 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....
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....t may be levied or imposed as if these Acts had not been so repealed ; or (f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said repealed Acts as if this Act had not come into force and the said Acts had not been repealed. (2) The mention of the particular matters referred to in Section 173 shall not be held to prejudice or affect the general application of section 7 or section 7A or section 25 of the Gujarat General Clauses Bom. 1 of 1904 with regard to the effect of repeal." 64. The Constitution (One hundred and first Amendment) Act, 2016 introduced the Goods and Services Tax regime in India. It sought to replace all indirect taxes levied on goods and services by the Union 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 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....
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..... stated title exception more widely. He said: "The effect of repealing a statute is to be obliterate it as completely from the records of the Parliament as if it had never been passed and it must be considered as a law that never existed except for the purpose of those action which were commenced, prosecuted and concluded whilst it was an existing law." 66.3 Bennion on Statutory Interpretation, 6th Edition at Pg 276 explains the effect of repeal as under - "Effect of repeal At common law the repeal of an Act makes it as if it had never been, except as to matters past and closed. .... Thus anything done after the repeal in purported exercise of a repealed provision is a nullity." 66.4 A seven judge bench of the Supreme Court in the case of Keshavan Madhava Menon v. State of Bombay, 1951 AIR 128 referred to a passage from the Crawford's book on Statutory Construction which reads as under: "it is well settled that if a statute giving a special remedy is repealed without 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, ....
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....ly obliterated as if it had never been enacted. The effect is to destroy all inchoate rights and all causes of action that may have arisen under the repealed statute. Therefore, leaving aside the cases where proceedings were commenced, prosecuted and brought to a finality before the repeal, no proceeding under the repealed statute can be commenced or continued after the repeal." 66.7 The aforesaid principle is reiterated in the Constitution Bench decision of the Supreme Court in the case of Kolhapur Canesugar Works Ltd v. Union of India - 2000 (119) ELT 257 (SC). 66.8 Thus, at common law, a statute become non-existent on its repeal, unless saved by some saving provision. 67. Section 6 of the General Clauses Act - abrogates the Common Law effect of repeal 67.1 To prevent the drastic effect of obliteration of statute on its repeal and to save the rights acquired or liabilities incurred, the savings clauses are provided in the repealing statutes. 67.2 Apart from that, Section 6 of the General Clauses Act, 1897 provides a general savings. The section reads as under: "6. Effect of repeal - Where this Act, or any Central Act or Regulation made after the c....
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....iple has been explained by the Supreme Court in the case of Bhagat Ram Sharma v. Union of India, AIR 1988 SC 740 as under: "It is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of repeal of the existing provision. Such a law may also provide for the introduction of a new provision. There is no real distinction between 'repeal' and an 'amendment'. In Sutherland's Statutory Construction, 3rd edn., vol. 1 at p. 477, the learned author makes the following statement of law: "The distinction between repeal and amendment as these terms are used by the Courts is arbitrary. Naturally the use of these terms by the Court is based largely on how the Legislatures have developed and applied these terms in labelling their enactments. When a section is being added to an Act or a provision added to a section, the Legislatures commonly entitle the Act as an amendment... When a provision is withdrawn from a section, the Legislatures call the Act an amendment, particularly when a provision is added to replace the one withdrawn. However, when an entire....
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.... applies only for the interpretation of constitution. The General Clauses Act defines various terms in section 3. These definitions will apply for the interpretation when these words are employed in the Constitution. Apart from the definition, Section 16 (power to appoint to include power to suspend or dismiss), Section 21 (Power to issue to include power to add to, amend, vary or rescind Notification, Orders, Rules or Bye-laws), etc. which are general rules of construction and which are otherwise in accord with the common law may also apply for the interpretation of the Constitution. 69.3 Therefore, perhaps, the other matters such as the savings in the case of repeal (Section 6), revival of repeal enactments (Section 7), construction of references to the repealed enactments (Section 8), continuation of order issued under the repealed enactment and re-enacted (Section 24), etc. which are not related to interpretation may not apply by virtue of Article 367. 69.4 Further, Section 6 applies only to repeal of an enactment. Enactment is defined under Section 3(19) of the General Clauses Act to include regulation or any provision contained in any Act or regulation. However, Constit....
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....Acts passed under it may cease to operate. 70.2 Accordingly, Article 372 of the Constitution provides for continuance of the existing laws in force on repeal of the Government of India Act, 1935. The relevant extract of the said Article is as under: "372. Continuance in force of existing laws and their adaptation (1) Notwithstanding the repeal by this Constitution of the enactments referred to in Article 395 but subject to the other provisions of this Constitution, all the laws in force in the territory of India immediately before the commencement of this Constitution, all the laws in force in the territory of India immediately before the commencement of this Constitution shall continue in force therein until altered or repealed or amended by a competent Legislature or other competent authority." 70.3 The objective behind the enactment of Article 372 was explained by Durga Das Basu in his Commentary on the Constitution of India (First Edition) at page 726-727 as under: "The general rule is that with the repeal of a statute, all bye-laws made thereunder cease to be valid, unless there is a saving clause in the new statute, preserving the old bye-laws....
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....th Schedule of the Constitution. 71.2 Accordingly, to save taxes, duties, cesses or fees which prior to the commencement of the Constitution were lawfully being levied by the Government of State and the subject matter to which they relate has been now mentioned in the Union List, Article 227 was enacted. The relevant extract of the said article is as under: "277. Savings Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district or other local area may, notwithstanding that those taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law." 71.3 The analogous provision to Article 277 in the Government of India Act, 1935 was Section 143(2). The Supreme Court in the case of Ram Krishna Ramanath v. The Janpad Sabha, Gondia, 1962 AIR 1073 held that Section 143(2) is a saving clause designed to prevent dislocation of finances of local g....
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....aw made by the Parliament as it is in force in the state. The words used are not 'law enacted by state legislature'. 72.4 Thus even the Central levies such as the service tax, etc. will be covered by Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016. 73. Legislature competent to repeal, alter or amend - The legislature which has present competence to enact the law sought to be repealed, can repeal such law. It is irrelevant that the law was enacted by another legislature when it had the competence. 73.1 The Supreme Court in the case of A. Hajee Abdul Shukoor & Co. v. State of Madras - AIR 1964 SC 1729 held that the competence to make a law for a past period depends on the present legislative power. The relevant extract of the judgement is as under: "The State Legislature is free to enact laws which would have retrospective operation. Its competence to make a law for a certain past period, depends on its present legislative power and not on what it possessed at the period of time when its enactment is to have operation." 73.2 In the case of Kerala State Electricity Board v. Indian Aluminum Co. Ltd. AIR 1976 SC 1031, the Supreme Court hel....
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....t beyond the period of one year. This power was held to be bad as it amounts to delegation of legislative function. The Madras Maintenance of Public Order Removal of Doubts Ordinance, 1949 was passed to declare that the Maintenance of Public Order Act, 1947 remains in force and shall continue to be in force. In these facts the court held that the amendments can be made only to an existing Act. However, the legislature is competent to revive or re-enact the repealed legislation and make amendments to it. In the facts of that case, the court held that the legislature had not done so. The relevant extract of the judgement is as under: "An amending Act is not an independent Act but an Act passed with a view to effect an improvement or to more effectively carry out the purpose for which the original law was passed. To remove doubts by a declaratory Act, there should be in existence an Act, the doubts in which have to be removed. It the Act had already ceased to be in force, a declaratory Act would have no operation. An amending Act also presumes the existence of an original Act. If the original Act, which was a temporary Act, terminated after the lapse of time, the amending Act....
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....onths salary making the retirement invalid. The rule was after its repeal amended for the period it was in operation to retire a Government servant forthwith without paying him three months salary but entitling him to claim three months salary after retirement. This amendment was held to be valid and effective to validate the retirement of the Government servant concerned." 74.5 The above referred cases, however, are not concerned with the competence of the legislature to enact retrospective laws, but only with the issue as to whether the amendments can be made to the repealed laws. 75. Repeal of the State VAT Act is not effected by the Constitution (One Hundred and First) Amendment Act, 2016. Repeal is effected by the State GST Acts. Such Acts provide for savings of the pending proceedings. Thus, assessments can be initiated, continued and concluded in pursuance of such saving clause contained in the respective GST laws. 75.1 In respect of the pending assessments, they can be initiated, continued and concluded. This is because while repealing the VAT Acts by the State GST Act, specific savings have been provided in this regard. 75.2 This provision can perhaps be traced....
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.... legislature enacting the law has necessary competence to enact such law. 76.5 The Constitution (One Hundred and First) Amendment Act, 2016 inter alia substituted Entry 54 of List II of the Seventh Schedule of the Constitution to confine it to the "Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption'. 76.6 The substitution of Entry 54 amounts to repeal of the old entry and subsequent enactment of the new entry. In absence of any saving clause, the old entry will become non existent as if it had never been in the Constitution, except for the transactions past and closed. However, Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016 saves the laws which are inconsistent with the amended constitution until amended or repealed by competent legislature or expiration of one year of the commencement of Constitution (One Hundred and First) Amendment Act, 2016, whichever is earlier. 76.7 The legislature competent to amend or repeal is the legislative which has the power to enact such law after the amendment of the Constitution. "....
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....ause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." 76.13 In Article 286 of the Constitution, vide the Constitution (One Hundred and First Amendment) Act, 2016, the following amendments were made, namely:- "13. In article 286 of the Constitution,- (I) In clause (1),- (A) for the words "the sale or purchase of goods where such sale or purchase takes place", the words "the supply of goods or of services or both, where such supply takes place" shall be substituted; (B) in sub-clause (b), for the word "goods", at both the places where it occurs, the words "goods or services or both" shall be substituted; (ii) in clause (2), for the words "sale or purchase of goods takes place", the words "supply of goods or of services or both" shall be substituted; (iii) clause (3) shall be omitted." 76.14 After the amendments made by the said Constitution Amendment Act, the Article 286 stands as follows: "286. (1) No law of a State shall impose, or aut....
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....es tax after the 101 st Constitution Amendment Act. 76.19 The Constitution (One Hundred and First) Amendment Act, 2016 made various changes in the Constitution with regard to the power to make laws relating to the goods and services tax. 76.20 Article 246A has been inserted which provides for power to make laws relating to goods or services tax simultaneously to the Parliament and the State Legislature. The relevant extract of the said Article is as under: "246A. Special provision with respect to goods and services tax (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce". 76.21 Thus, both the State Legislature and the Parliament has the power to make laws with respect to the goods and services tax. However, the Parliament has the exclusive power to make laws with respect....
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....e 246A. 77. Amendment of State VAT Acts now made after the 101 st Amendment Act for the period when the VAT Acts were in force, can perhaps be made only by the Legislature which has the present competence over the subject matter and it should be in accordance with the present provisions of the Constitution! 77.1 As seen above the competence to make a law even for a past period depends on the present legislative power. After the amendment of the Constitution, both the Parliament and State Legislature have the competence to enact laws relating to the goods and services tax. 77.2 However, the exercise of the power is circumscribed by other provisions of the Constitution such as Article 246A(2) read with Article 269A(5) which relates to supply in the course of inter-state trade or commerce, Article 286 which relates to restriction on imposition of tax by law made by a state on supply taking place outside the state, in the course of import into or export out of territory of India and Article 279A which related to recommendations of the GST Council. Thus, the powers can be exercised only after complying with such provisions of the Constitution. 77.3 We have our own doubts whe....
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.... the case of Union of India & Anr. vs. Mohit Mineral Private Limited, (2019) 2 SCC 599, had the occasion to consider the challenge to the validity of the Goods and Services Tax (Compensation to States) Act, 2017 enacted by the Parliament as well as the Goods and Services Tax Compensation Rules, 2017. While considering such challenge, the Supreme Court considered Article 246A quite in details. We quote the relevant paras; "21. First, we need to notice relevant constitutional provisions and the Parliamentary enactments relevant for the issues raised in these cases. 22. Part XII of the Constitution deals with Finance. Article 265 provides that no tax shall be levied or collected except by authority of law. Article 366 contains definitions. Article 366(26A) defines "services" as "services means anything other than goods". Whereas Article 366 (29A) contains an inclusive definition of "tax on the sale or purchase of goods". A Bill was introduced in the Lok Sabha namely, the Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014 on 19.12.2014 proposing constitutional amendments to introduce the goods and services tax for conferring concurrent taxing powers on ....
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....m where the supply originates; (f) conferring concurrent power upon Parliament and the State Legislatures to make laws governing goods and services tax; (g) coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council. (h) compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years;" 23. The Constitution (One Hundred and First Amendment) Act, 2016 dated 08.09.2016 was passed to amend the Constitution of India. By Constitution (One Hundred and First Amendment) Act, 2016, new Articles 246A, 269A and 279A were inserted. Amendments were also made in Articles 248, 249, 250, 268, 269, 270, 271, 286, 366 and 368. Article 268A was omitted. Amendments were also made in Seventh Schedule of the Constitution in List I and List II. Article 246A and 269A as inserted by Consti....
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....n the Union and the States.(1) All taxes and duties referred to in the Union List, except the duties and taxes referred to in Articles 268, 269 and 269A, respectively, surcharge on taxes and duties referred to in Article 271 and any cess levied for specific purposes under any law made by Parliament shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2)." 25. Section 18 and Section 19 of the Constitution (One Hundred and First Amendment) Act, 2016 is also relevant, which are to the following effect:" 18. Compensation to States for loss of revenue on account of introduction of goods and services tax.Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years. 19. Transitional provisions- Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsiste....
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....nd Twenty Second Amendment) Bill, 2014 was passed but Clause 18 of the Bill was not incorporated and Clause 19 found place as Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016. After the aforesaid Constitution Amendment, Parliament enacted Central Goods and Services Tax Act, 2017 (Act No.12 of 2017 dated 12.04.2017) to make a provision for levy and collection of tax on intra State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto. On the same day, another enactment namely 'The Integrated Goods and Services Tax Act, 2017' (Act No. 13 of 2017 dated 12.04.2017) was enacted to make a provision for levy and collection of tax on inter-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto. Another enactment namely 'The Union Territory Goods and Services Tax Act, 2017' (Act No. 14 of 2017) was passed on the same day to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Union territories and for matters connected therewith or incidental thereto. The Fourth ....
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....stitutional amendment was perhaps to have a uniform "Goods and Services Tax" law throughout the country. 81. It prima facie appears that the power conferred by Article 246A of the Constitution of India is to be exercised by both, the Union and the States concurrently to ensure uniform "Goods and Services Tax" law all over the country. The Union of India or States cannot separately exercise power given by Article 246A of the Constitution of India independent of each other unlike the power given by the "Concurrent list" enumerated in the List III in the Schedule VII of the Constitution of India. 82. Further, Article 245A in the Constitution of India empowers to make a integrated tax law with respect to levy of tax on either "Goods" or "Services". 83. Once again, we may look into the observations made by the Supreme Court in Mohit Mineral Pvt. Ltd (supra) as contained in para-55. The same reads thus; "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 m....
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.... reached to the conclusion that Article 246A of the Constitution of India does not save Section 84A of the VAT Act from being declared invalid or ultra vires. As noted above, Article 246A of the Constitution was inserted by the 101st Constitution Amendment Act with the sole or rather the precise object of subsuming multiple indirect taxes and to confer concurrent power to the Parliament and State Legislature to impose "Goods & Services Tax" in accordance with the recommendations of the Goods & Services Tax Council statute under Article 279A of the Constitution of India. The very object of such large scale reform was to replace number of indirect taxes being levied by the Union and the State Governments and to remove the cascading effect of taxes and provide for a common national market for goods and services. This is apparent from the statement of objects and reasons referred to by the Supreme Court in Mohit Mineral Pvt. Ltd. (supra) 90. Further Section 18 to the Constitution Amendment Act provides for compensation to the States for the loss of revenue arising on account of the implementation of the goods and services tax for a period of 5 years. Thus the entire scheme of the Co....
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....se. In our opinion, the distinguishing features are quite relevant. Sr.No. Observation and conclusions of Supreme Court How not applicable to the present case (1) The Supreme Court observed in para 40 of the judgement that the expression "cess" means a tax levied for some special purpose, which may be levied as an increment to an existing tax. The cess was with respect to goods and services tax. It was concluded in para 56 that power to levy goods and services tax included power to levy cess on goods and services tax In the present case the Vat enactment has absolutely nothing to do with the goods and services tax. It cannot be compared to a cess or surcharge imposed on the goods and services tax (2) It was observed in para 41 of the judgement that the residuary power of legislation is with the Parliament and in the absence of any contention that the subject matter of the legislation was within the competence of the State legislature it could not be said that there was lack of legislative competence in Parliament. In the present case the challenge is to the competence of the State legislature. The State legislature does not have any residuary power and it....
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....2017, the five year period for re-opening assessments under the unamended provisions of Section 25(1) of the KVAT Act had already expired? (b) If issue (a) is answered in the negative, whether the amendment to the third provision to Section 25(1) of the KVAT Act, through the Kerala Finance Act, 2017, would enable the revenue to re-open assessments in cases where, by 31.03.2017, the five year period for re-opening assessments under the un-amended provisions of Section 25(1) of the KVAT Act had already expired? (c) Whether after the CAA, 2016, and the repeal of the KVAT Act pursuant thereto, on 22.06.2017, the State Legislature retained any residual power of legislation so as to amend the provisions of Section 25(1)of the KVAT Act through the Kerala Finance Act, 2017? (d) Whether the amendment to the provisions of Section 25 (1) OF THE KVAT Act, through the Kerala Finance Act, 2018, and the pre-assessment notices and assessment orders issued consequential thereto, could be justified by relying on the savings clause under Section 174 of the SGST Act?" 94. The discussion with respect to the issues Nos. c and d respectively assumes importance and significan....
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....he KVAT Act, through the Kerala Finance Act 2017, were before the repeal of the KVAT Act with effect from 22.06.2017. The provision as it stood then, and in particular the third proviso thereto, authorised the re-opening of past assessments till 31.03.2018. The amendment effected through the Kerala Finance Act, 2018, with effect from 01.04.2018, enlarged the period for re-opening past assessments from 31.03.2018 to 31.03.2019. Under ordinary circumstances, and based on my findings above as regards the effect of the amendments brought into the third proviso to Section 25 (1) by the Kerala Finance Act, 2017, the legislative measures should have sufficed to justify a re- opening of past assessments up to 31.03.2019, notwithstanding that the amendment itself was effective only from 01.04.2018. However, the intervention of the CAA 2016, and the consequent repeal of the KVAT Act with effect from 22.06.2017, has a bearing on the legality of the 2018 amendment. A distinction does exist between the saving of rights, privileges, immunities and liabilities under a repealed enactment, through a savings clause inserted in the new enactment traceable to the same legislative power, and an amendme....
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....troduction of a Goods and Service Tax, and the phasing out of the multitude of indirect tax levies, including value added taxes, that were levied and collected by the Centre and the States. Section 19 of the CAA 2016, which is the sunset clause in the said enactment, envisaged the continuation of the erstwhile system of taxation for a period of one year from the date of enactment of the CAA or till such time as the State legislatures amended or repealed their respective VAT legislations, whichever was earlier. When the State legislature repealed the KVAT Act, while simultaneously bringing into force the new State GST Act, with a savings clause of limited operation, it effectively acknowledged the absence of any power to legislate thereafter on the subject of tax on sale or purchase of goods, except in respect of the limited commodities for which the said power was retained under the Constitution. In respect of all other commodities, the legislative power of the State was only in respect of taxes on the supply of goods or services or both, a power that had to be exercised simultaneously with the Parliament and not unilaterally or exclusively. Thus, at the time of repeal of the KVAT ....
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....r to the amendment. The amendment to the third proviso of Section 25(1) is retrospective in nature. If the same is read to be prospective, the purpose of this amendment will not be met. The Court held that the assessment whose limitation period expired on March 31, 2017 (i.e. Financial Year 2011-12), could have been undertaken till March 31,2018. Amendments made after the introduction of GST The Constitution (One Hundred and First) Amendment Act, 2016 ('CAA') which came into force on September 16, 2016, stripped the State Legislatures of their power to legislate in respect of sale or purchase of goods covered under Entry 54 of List II of the Schedule VII of the Constitution of India. The sunset clause under Section 19 of the CAA allowed continuation of the erstwhile State VAT laws till September 16, 2017 or until such statutes were repealed or amended, whichever was earlier. The KVAT Act was repealed with effect from June 22, 2017. Since the power to amend is a legislative power, the State Legislature lacked the legislative competence to amend Section 25 of the KVAT Act after the repeal of KVAT Act on June 22, 2017. Therefore, the assessments for the FY 2....
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....d of division, it fosters amalgamation. Article 246A has no schedules. 135. And the scheme of the CA Act further examined, Entry 54 of List II stands substituted. So comes the assertion from the petitioners that Entry 54 abrogated (it is not, though), the States have been denuded of the power of taxation from 16.9.2016 on the items that stand deleted. For them, the interim or temporary continuation is only up to 16.09.2017, as per Section19 of the CA Act. They also argue that if the State wants to sustain "taxes under Entry 54, then there is no necessity to abrogate the erstwhile Entry 54 on 16.09.2016. Read otherwise, Section 19 would be rendered otiose, meaningless, and would have no significant purpose at all. 136. Unfortunately, the whole argument is sought to be erected on a slippery slope. There is no denudation of legislative power, no obliteration of Entry 54 of List II. An entry's abrogation, as it were, would not ipso facto lead to the legislative denudation. I will elaborate on that, later. 141. Now, let us examine both Section 19 of the CA Act and Section 174 of the KSGST Act. Section 19 mandates that any inconsistent law relating to tax on go....
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....tutional Amendment-that is, the attenuated or modified Entry 54 of the List II, the State List. 183. All the petitioners contend that the KSGST Act came into being because of the Constitutional Amendment. And that very Constitutional Amendment has put paid to many other enactments-for example, the Kerala Value Added Tax Act, 2003. So with the Entry 54 of List II unavailable for the State to incorporate Section 174 of the KSGST Act, the whole saving mechanism vis-à-vis transactions before 16.09.2017 crumbles. 184. I am afraid it is a fallacy on the petitioners' part to contend that the State lacks the legislative power to enact Section 174 of the KSGST Act. Article 246A is the special provision (if it can be called a provision) on the Goods and Services Tax. It empowers, as rightly contended by the learned Senior Counsel Shri Venkataraman, both the Union and the State, for the first time, to have simultaneous-not concurrent- powers to legislate on certain items. Indeed, concurrency yields to the doctrine of repugnancy, but simultaneous legislative power does not. That is, both the legislatures, say one from the Union and the other from the State, co-existope....
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....he pre-GST enactments on the ground that the same was beyond the legislative competence of the State Legislatures after the 101st Constitutional Amendment Act. In such context, it was held that the State Legislature had the competence to enact a savings clause in respect of the past transactions. The High Court rejected the contention that even the existing liabilities under the pre-GST enactments would stand obliterated by Section 19 of the 101st Constitutional Amendment Act. In the case on hand, the issue is altogether different and of wide import. In the case on hand, the issue is whether the State Legislature can create fresh liabilities by enactment of Section 84A of the VAT Act after the 101st Constitutional Amendment Act. The dictum as laid down in Hoechst Pharmaceuticals Ltd. (supra) would also not help the State. In the said case, the Supreme Court observed that various entries in the three lists in the seventh schedule of the Constitution are not "powers" of legislation but "fields" of legislation and that the power to legislate is given by Article 246 and other Articles of the Constitution. In the case on hand, the State seeks to uphold the validity of Section 84A of the....
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....III and in case of overlapping between Lists II and III, the former shall prevail. [2] Secondly, however, before the Court decides the supremacy of Parliament, there should be an effort by the Court to reconcile the conflict between the entries in the Union and the State Lists. The non-obstante clause in Article 246(1) and (2) operates only when such reconciliation between the two entries is not possible. [3] Thirdly, where the competence of State Legislature is challenged, the Court should not proceed with the supremacy of Parliament by employing expressions 'notwithstanding' and 'subject to' and the Court should consider the scope of the entries under which the legislation has been enacted. [4] Fourthly, there would be no conflict between the two lists if on the application of doctrine of pith and substance, the legislation falls exclusively in one List and the tresspass is only incidental and [5] Fifthly the general entry in one list of the Seventh Schedule of the Constitution is not to be interpreted as to obliterate the subject-matter of a specific entry in other list. 102. While laying down the aforesaid principles of law....
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....e Constitution which places any fetter an the legislative powers of such Legislature. The impugned law has to pass all these, three tests." 106. A Division Bench of this High Court in the case of State of Gujarat vs. Ramanlal Sankalchand and Co. reported in AIR 1965 Guj 60, speaking through Justice P.N. Bhagwati (as His Lordship then was) observed thus: "In every case, therefore, where a provision in an enactment is challenged as beyond the legislative competence of the Legislature, the first question that must be considered is whether the provision falls within the express words of the entry conferring power on the Legislature which enacted the legislation. If it falls directly within the subject of legislation, cadit questio." 107. In the case of Gullapalli Nageswara Rao and others vs. A.P. State Road Transport Corporation reported in AIR 1959 SC 308, a Bench of five Judges, speaking through S.R. Das, C.J.I., observed as under: "As was said by Duff J., in AttorneyGeneral for Ontario v. Reciprocal Insure (1924 A. C.328 at p. 337), 'Where the law making authority is of a limited or qualifled character it may be necessary to examine with some strictness t....
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....f testing the competence of enactment passed by the legislature of a State. First, the Court should examine whether the Act is a law with respect to a topic assigned to the particular legislature which enacted it. Thereafter, the Court should consider whether in the case of an Act passed by the legislature of a State, its operation extends beyond the boundaries of the State. If these two tests are satisfied, then the Court should in the lists consider or rather ascertain if there is anything in any other part of the Constitution which places any fetter on the legislative powers of such legislature. The mandate of the Supreme Court is very clear that the impugned law should pass of the above referred three tests. 110. Thus, in view of the aforesaid discussion, we find it difficult to uphold the contention of Mr. Trivedi that Article 54 in Lists II of the Seventh Schedule to the Constitution as amended should be ignored as the State Legislature has been conferred with the power to enact a provision like Section 84A of the Gujarat VAT Act by virtue of Article 246A of the Constitution. 111. Mr. Soparkar brought to our notice that the argument canvassed on behalf of the State that....
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.... of morality and fairness can have no application to bring a citizen who is not within 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 : 31. 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 ....
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.... res judicata would not be applicable to Tax Laws as every year is a separate unit. However, it is required to be noted that the same would not be applicable in a case where the issue with respect to classification and/or Entry is interpreted by higher forum and the same had attained finality, inasmuch as the same is not challenged and the decision of the higher forum has been followed consistently for number of years, unless there are change circumstances in the subsequent assessment years. Unless there are change circumstances, in the subsequent years, in case of interpretation of Entry i.e. whether a particular goods fall in a particular Entry or not and consequently, on the said goods, there is exemption leviable or not, the subordinate authority even on the ground of judicial discipline is bound to follow the decision of the higher court/forum. If the State and/or authority is of the opinion that the earlier decision, which is against the revenue, is not correct decision and for whatever reason, earlier, the same was not challenged before the higher forum and the same came to be implemented erroneously and/or mechanically and the authority is of the opinion that there is likel....
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....volve any question of 'bona fides' or 'mala fides' on the part of the legislature. The whole doctrine resolves itself into the question of competency of a particular legislature to enact a particular law. If the legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all..... if the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of funadamental rights, questions do arise as to whether the legislature in a particular case has or has not, in respect to the subjectmatter of the statute or in the method of enacting it, transgressed the limits of its constitutional powers. Such transgression may be patent, manifest or direct, but it may also be disguised, covert and indirect and it is to this latter class of cases that the expression 'colourable legislation' has been applied in certain judicial pronouncements." 115. In the aforesaid con....
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.... statutes. It is therefore, necessary to reiterate the law as it stands. In Partington v. A.G., (1869) LR 4 HL 100 at 122, Lord Cairns stated : "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute." 33. In Cape Brandy Syndicate v. IRC, (1921) 1 KB 64 at 71, Rowlatt J. laid down : "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 34. This Court has, in a plethora of judgments, referred to the....
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....retrospectively, or, (b) By providing for jurisdiction retrospectively, where jurisdiction had not been properly invested before, or, (c) By re-enacting retrospectively, a valid and legal taxing provision and then by fiction, making the tax already collected to stand under the re-enacted law, or (d) By giving its own meaning and interpretation of the law under which tax was collected and by legislation fiat, making the new meaning binding upon the Courts. 116. In the aforesaid context, Mr. Trivedi seeks to rely on a decision of the Supreme Court in the case of Shri Prithvi Cotton Mills Ltd vs. Broach Borough Municipality, 1969 (2) SCC 283, more particularly, the observations made in Para-4, which reads thus; "4. ....Ordinarily, a court holds a tax to be invalidly imposed because the power to tax is wanting or the statute or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisd....
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.... in force on the date when the tax was levied, the Legislature has encroached upon a judicial function. The power of the Legislature to pass a law postulates the power the pass it prospectively as well as retrospectively, the one no less than the other. Within the scope of its legislative competence and subject to other constitutional limitation, the power of the Legislature to enact laws is plenary. In United Provinces v. Atiqa Begum, Gwyer, C.J. while repelling the argument that Indian Legislatures had no power to alter the existing laws retrospectively observed that within the limits of their powers the Indian Legislatures were as supreme and sovereign as the British Parliament itself and that the powers were not subject to the "strange and unusual prohibition against retrospective legislation". The power to validate a law retrospectively is, subject to the limitations aforesaid, an ancillary power to legislate on the particular subject". 120. Mr. Trivedi submitted that in the case on hand also, a show-cause notice dated 3rd November, 2017 for revision came to be quashed and set aside by this High Court on the ground that the same was time barred in accordance with t....
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....) 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 or may be invalid". 23. The pre-requisite of a piece of legislation that purports to validate any act, rule, action or proceedings were considered by this Court in Shri Prithvi Cotton Mills Ltd. and Ann v. Broach Borough Municipality and Ors. (1969) 2 SCC 283. Two essentials were identified by this Court for any such legislation to be valid. These are: (a) The legislature enacting the Validation Act should be competent to enact the law and; (b) the cause for ineffectiveness or invalidity of the Act or the proceedings needs to be removed. 24. The Court went on to enumerate certain ways in which the objective referred to in (b) above could be achieved by the legislation and observed : "4......... Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to st....
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....ces 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 Estate Officer (1972) 2 SCC 239, Madan Mohan Pathak v. Union of India (1978) 2 SCC 50, Indian Aluminium Co. etc. v. State of Kerala and Ors. (1996) 7 SCC 637, Meerut Development Authority etc. v. Satbir Singh and Ors. etc. (1996) 11 SCC 462, and ITW Signode India Ltd. v. Collector of Central Excise (2004) 3 SCC 48 fall in that category. 26. Even in the realm of service law, validation enactments have subsequent to the pronouncement of competent Courts come about validating the existing legislation. Decisions of this Court in I.N. Saksena v. State of Madhya Pradesh (1976) 4 SCC 750, Virender Singh Hooda and Ors. v. State of Haryana and Anr. (2004) 12 SCC 588 and State of Bihar and Ors. v. Bihar Pensioners Samaj (2006) 5 SCC 65 deal with that category of cases. 27. In the case at hand, the State of Orissa had not suffered any adverse judicial pronouncement to necessitate a Validation Act, as has been the position in the generality of t....
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.... 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 better than to quote paragraph 4 from the judgment of the Supreme Court in the case of Shri P.C. Mills Vs. Broach Municipality, AIR 1970 SC 192 rendered by a Constitution Bench of five Judges : "4. Before we examine Section 3 to find out whether it is effective in its purpose or not we may say a few words about validating statutes in general. When a legislature sets out to validate a tax declared by a Court to be illegally collected under ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount ....
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....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 unconstitutional by courts by removing the defect or lacunae which led to invalidation of the law. With the removal of the defect or lacunae resulting in the validation of any Act held invalid by a competent court, the Act may become valid, if the validating Act is lawfully enacted. ........ The retrospective operation of a validating Act properly passed curing the defects and lacunae which might have led to invalidity of any act done may be upheld, if considered reasonable and legitimate." 126. The legislative power conferred on the appropriate Legislatures to enact laws in respect of topics covered by the several entries in the three lists can be exercised both prospectively and retrospectively. 127. Where the Legislature can make a valid law, (i) it may provide only for the prospective operation of the material provisions of the said law (ii) it can provide for the retrospective operation of th....
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....y) 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 period, or (b) from claiming refund of any tax paid by him on designated omnibuses in excess of the amount due from him under the principal Act and the rules made thereunder." 131. Section 5 of the Gujarat Sales Tax (Amendment and Validation) Act, 2002 (Gujarat Act, No. 15 of 2002) reads as under: "5. Validation of levy and collection of tax on specified works contract:- (1) Notwithstanding anything contained in any judgement, decree or order of any court, tribunal or authority, the tax deducted, levied, assessed, reassessed or collected or purported to have been deducted, levied, assessed, reassessed or collected under the principal Act on specified sales in pursuance of a specified works contract under section 57B shall be and shall be deemed always to have been validly deducted, levied, assessed, reassesse....
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....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 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 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 and an appeal to the High Court or the Supreme Court against such decision of the Appe....
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....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 Judiciary :- "(i) in order that rule of law permeates to fulfil constitutional objectives of establishing an egalitarian social order, the respective sovereign functionaries need free play in their joints so that the march of social progress and order remains unimpeded; (ii) in its anxiety to safeguard judicial power, it is unnecessary to be overzealous and conjure up incursion into the judicial preserve invalidating the valid law competently made; (iii) the Court, therefore, needs to carefully scan the law to find out; (a) whether the vice pointed out by the Court and invalidity suffered by previous law is cured complying with the legal and constitutional requirement....
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....icle 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 the Legislature and a legislation within its competence but violative of Constitutional limitations have both the same reckoning in a Court of Law; they are both of them unenforceable. But does it follow from this that both the laws are of the same quality and character and stand on the same footing for all purposes.... If a law is on a field not within the domain of the Legislature, it is absolutely null and void, and a subsequent cession of that field to the Legislature will not have the effect of breathing life into what was of stillborn piece of legislation and a fresh legislation on the subject would be requisite. But if....
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....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 nothing to do, could be termed as manifestly arbitrary and unreasonable. Mr. Soparkar would submit that the legislation which is found to be manifestly arbitrary is liable to be struck down is now a well settled position of law in view of the decision of the Supreme Court in the case of Shayara Bano vs. Union of India, (2017) 9 SCC 1, It is argued that the test of manifest arbitrariness would apply to invalid legislation as well as to subordinate legislation under Article 14 of the Constitution. 146. Mr. Soparkar submitted that the impugned amendment leads to an absurd and unforeseen consequences. To illustrate, Mr. ....
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....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. Trivedi, the dictum as laid in Shayara Bano (supra) is completely misplaced. 151. Mr. Trivedi pointed out that in the case of R.C. Tobacco Pvt. Ltd. Vs. Union of India, reported in (2005) 7 SCC 725: AIR 2005 SC 4203, while holding the retrospective amendment by way of Section 154 of the Finance Act, 2003, it was observed as under; "16. ..... A law cannot be held to be unreasonable merely because it operates retrospectively." 32. ...... How the manufacturer will adjust its liability with its customers does not concern the respondents......" 33. .....It may be that the r....
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....4 (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 contrary to the rule of law, would violate Article 14. Further, there is an apparent contradiction in the three Judge Bench decision in McDowell (State of A.P. v. McDowell and Co., (1996) 3 SCC 709) when it is said that a constitutional challenge can succeed on the ground that a law is disproportionate, excessive or unreasonable, yet such challenge would fail on the very ground of the law being unreasonable, unnecessary or unwarranted. The arbitrariness doctrine when applied to legislation obviously would not involve the latter chall....
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....gislation. "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 that there shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State. Though enacted as a distinct and independent fundamental right because of its great importance as a principle ensuring equality of opportunity in public employment which is so vital to the building up of the new classless egalitarian society envisaged in the Constitution, Article 16 is only an instance of the application of the concept of equality enshrined i....
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....(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 dimensions and it cannot be imprisoned within traditional and doctrinaire limits. We must reiterate here what was pointed out by the majority in E.P.Royappa v. State of T.N., namely that: (SCC p. 38, para 85) 85. From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic, while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is im....
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....shmir 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 the plea of discrimination and to adduce cogent and convincing evidence to prove those facts. In order to establish that the protection of the equal opportunity clause has been denied to them, it is not enough for the petitioners to say that they have been treated differently from others, not even enough that a differential treatment has been accorded to them in comparison with other similarly circumstanced. Discrimination is the essence of clas....
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....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 the legislation has the necessary competence to frame a law and the law so framed is not violative of the fundamental rights enshrined in the constitution or any of the constitutional provision, the Court would not strike down the statute merely on the perception that the same is harsh or unjust. Particularly, in taxing statutes the Courts have recognized much greater latitude in the legislation in framing suitable laws. Reference i....
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....od 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 provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of a....
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....ions 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 position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different....
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.... 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 agree with the learned Chief Justice and Hidayatullah, J. that in suitable cases taxation in pursuance of delegated powers by a Municipal Corporation can be struck down as unreasonable by Courts. If Parliament chooses to delegate wide powers it runs the risk of the bye laws or the rules framed under the delegated power....
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....ion 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 entertain a petition for exercising revisional jurisdiction was before the amendment derived from Section 115 of the Code of Civil Procedure, and the legislature has by the amending Act not attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obviou....