TaxTMI 
TaxTMI 
2021 (4) TMI 961
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....e case reveal that the appellant is a dealer in jewellery bearing TIN No.29620659465 registered under the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as KVAT Act). On the basis of the intelligence report submitted by the Assistant Commissioner, Commercial Taxes, Enforcement 8, after conducting Audit visit, the Deputy Commissioner of Commercial Taxes passed an order dated 31.3.2018 under Section 39(1) of KVAT Act, levying tax, penalty and interest amounting to Rs. 4,42,72,061/- for the year 2012-13. 3. The appellant contended before the learned Single Judge that 101st Amendment Act (Constitutional amendment) was notified on 16.9.2016. As per Section 17 of the Constitution Amendment Act, Entry 54 List II of Seventh Schedule to the Constitution was amended, by which "Taxes on sale or purchase of goods other than Newspaper subject to the provisions of Entry 92 A List I" was substituted with the entry "Taxes on sale of petroleum, crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of interstate trade or commerce or sale in the course of int....
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.... has been extended just for a year, the Entry no longer exists in the Constitution. It was further contended that it is a well settled proposition of law that the power to legislate should be traceable to a Constitution Entry and when such an entry does not exist, the legislation arising out of the Entry will not have the force of law and cannot be enforced. It was further contended that when the Entry 54 List II in its earlier form no longer exists in the Constitution, nor has the old Entry been saved, the provisions relating to the KVAT Act stands dead and unenforceable. It was also stated that it has no life or existence. Neither the repeal and saving clause of Karnataka Goods and Service Tax Act, 2017 nor any provisions of the State Goods and Service Tax Act, 2017 can validate actions when the corresponding Constitutional Entry is no longer in existence in the Constitution. 6. Before the learned Single Judge the appellant has prayed for the following reliefs; "i) To call for records leading to passing of the Order bearing No.DCCT: (Audit) - 2.8/VAT-16/7046839 (201213)/2017-18) dated 31.3.2018 passed by the 1st Respondent (Annexure-C) under Section 39(1) of the Karnataka Valu....
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....ed to submit before the Court was that the imposition of tax by its levy, assessment and collection, all have to be supported by the nowexisting law and since the impugned Order has been passed by the Assessing Authority on 31/03/2018 after the said KGST Act, 2017 has come into existence with effect from 01/07/2017, the questions raised about the validity of Section 174 of the KGST Act, 2017 are relevant and the said questions deserve to be gone into by this Court. 7. This Court is not impressed by the said argument on behalf of the petitioner at all. The taxable event under the Value Added Tax law is individual transaction of sale or purchase by the Dealer and the law applicable on the date of taxable event is the relevant law for imposition of tax. Merely because the re-assessment Order is passed under KVAT Act, 2003 after the KGST Act, 2017 under GST regime came into effect from 01/07/2017, it does not mean that the said Order passed on 31/03/2018 under the KVAT Act, 2003 is non-est or void in the eye of law. 8. Section 174 of the KGST Act, 2017 clearly saves all the rights, obligations or liabilities acquired, accrued or incurred under the repealed Acts enumerated under Sec....
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....itutional Amendment. He submitted that not only Article 246-A empowers the State now to make laws both for imposition of tax in respect of Goods and Services, but also Clause 19 of the 101stConstitutional Amendment clearly saves all the provisions under different enactments immediately before the commencement of the said Constitutional 101st Amendment with effect from 16/09/2016. 12. He also submitted that there is no repugnancy of the provisions of the KVAT Act, 2003with Entry 54 and therefore, the subsequent Amendment of law does not at all affect the Re-assessment order under challenge in the present case. 13. Having considered the rival submissions, this Court is of the clear and considered opinion that all these questions sought to be raised are only academic and do not really arise in the present case and the amended law and GST regime with effect from 01/07/2017 is not at all applicable to the facts of the present case for the year 2012-13. These questions are therefore left open to be considered in appropriate case. 14. Since the re-assessment order under challenge Annexure C dated 31/03/2018 for the period 2012-13 is clearly appealable before the higher Appellate Aut....
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....tution of Entry 54 with effect from 16.9.2016, is not remedied by Section 19. Also, Section 19 does not contemplate any savings but only a repeal of the provisions of the existing laws like the Karnataka VAT Act, 2003. 12. Learned Counsel has further contended that in exercise of the power conferred by Section 19 of the Constitution (101st Amendment) Act, 2016 and Article 246A of the Constitution, the Karnataka legislature enacted the Karnataka Goods and Service Tax Act, 2017. In exercise of the power of repeal conferred by Section 19 of the Constitution (101st Amendment) Act, 2016, section 173 was enacted to repeal inter alia the Karnataka VAT Act, 2003. However, section 174 was enacted to save the Karnataka VAT Act, 2003 in the matter of past transactions so that the process of assessment and collection could be concluded under the repealed enactment. 13. Learned Counsel has vehemently argued that Section 174 has no constitution legs to stand on as it cannot be supported either under Section 19 of the Constitution (101st Amendment) Act, 2016 or Article 246A of the Constitution or the substituted Entry 54, List II of the Seventh Schedule of the Constitution. The transitory provi....
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....collection (an administrative exercise). Reliance is placed on the following decisions:- a) Chottabhai vs. Union of India, reported in 1962 SCR Supl (2), P 1006; b) Somaiya Organics (India) Ltd., and Ors., vs. State of Uttar Pradesh and Ors., reported in AIR 2001 SC 1723; c) District Mining Officer and Ors., vs. Tata Iron and Steel Co. and Ors., reported in AIR 2001 SC 3134. 17. Learned Counsel has further contended that the saving of a law at the time of repeal and re-enactment is a conscious decision of the legislature. If the savings is not enacted then the provisions of the repealed law do not survive for any purpose. It is for this very reason that section 174 has been enacted while repealing the Karnataka VAT Act, 2003. The authority to enact such a provision has to be traced to some article and entry in the constitution. In the absence of an authority to make law, section 174 is not within the competence of the State Legislature. 18. Learned counsel has further contended that Section 6 of the General Clauses Act 1897 does not apply to an amendment of the Constitution as Article 367(1) permits General Clauses Act 1897 to be used only for interpretation of the Constitu....
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....aseless. 21. Learned Counsel for the State has further argued that the appellant has contended that Section 174 is unconstitutional as the said provision suffers from lack of legislative competence in view of the amendment to Entry 54 of the State Lit with effect from 16.9.2016. In regard to the aforesaid contention, he has stated that as a result of the amendment to Entry 54, the State lost its powers under Article 246(3) read with the said Entry to legislate on taxes on sale of purchase of goods except insofar as certain specified goods are concerned. It is, however, critical to note that, simultaneously, vide the same Constitution Amendment Act, the States were conferred with power under Article 246A to make laws with respect to goods and services tax. Pertinently, the terms "goods and services tax" has been defined under Article 366(12-A) of the Constitution to mean "any tax on supply of goods, or services or both (....)." 22. Learned counsel has further contended that on a combined reading of Article 246A and Articles 366(12-A), it can clearly be discerned that the States, along with Parliament, have been conferred with a simultaneous power to make laws with respect to any t....
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.... the said Article is the fountain of power for the Centre and the States to make laws with respect to taxes on goods and services. He has further submitted that this Court ought to construe Article 246A in a manner that is beneficial to the widest amplitude of the powers conferred under it. His further contention is that in light of the aforesaid judgments, it can be seen that the power to enact Section 174 can be traced to Article 246A. 25. Learned counsel has further stated that as per the contention of the appellant that the power to enact Section 174 can be traced to Section 19 of the 101st Constitution Amendment Act is erroneous. Section 19 was enacted with the specific purpose of providing for the levy of various indirect taxes during the period between the commencement of the Amendment Act (16.9.2016) and the introduction of GST, which at the stage of notification of the 101st Constitution Amendment Act, was uncertain. In other words, since the exact date for introduction of GST was not certain as on 16.9.2016, Section 19 ensured the KVAT Act (as well as Central Excise Act, Service Tax, and all state VAT enactments) would continue to be valid and that the Centre and the Sta....
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....e exchequer. Such an absurd eventuality could never have been contemplated by the Parliament and State legislatures. Therefore, on this ground, too, the contentions of the appellant are liable to be rejected. 28. Heard the learned counsel for the parties at length and perused the records. 29. The undisputed facts of the present case reveal that the appellant is a dealer in jewellery. On the basis of the intelligence report by the Assistant Commissioner of Commercial Taxes, notice dated 3.2.2015, under Section 39(1) of the KVAT Act was issued. The petitioner/appellant did submit a reply to the notice and an order has been passed by the assessing authority on 31.3.2018 under the Karnataka Goods and Service Tax Act, 2017, which came into existence w.e.f., 1.7.2017. The appellant's main contention is that the order passed by the competent authority is bad in law and he has challenged the constitutional validity and clauses (d) and (e) of Section 174(1) of the Karnataka Goods and Service Tax Act, 2017. He has also prayed for quashment of the order dated 31.3.2018. 30. The Constitution (101st Amendment) Act, 2016 is a land mark amendment made in the constitution to pave way to enable ....
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....this Act, any provisions of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act, shall continue to be in force until amended or repealed by a competent legislature or other competent authority or until expiration of one year from such commencement whichever is earlier." 34. It has been vehemently argued before this Court that the provisions of Karnataka Value Added Tax Act, 2003, can be enforced till 15.9.2017 and the Karnataka Goods and Service Act, 2017, has come into force on 1.7.2017 and therefore, the provisions of KVAT Act cannot have any force of law after 15.9.2017 or 1.7.2017, whichever is earlier keeping in view the Transitional provisions of the Constitution as amended by Constitution 101st Amendment Act, 2016. 35. Section 174 of the Karnataka Goods and Service Tax Act, 2017, reads as under: 174. Saving. (1) The repeal of the Acts specified in section 173 shall not- (a) revive anything not in force or existing at the time of such repeal; or (b) affect the previous operation of the repealed Acts and orders ....
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....epealed Acts limiting the time within which any action may be taken or any order, assessment or reassessment may be made shall apply to an assessment or re-assessment made on the assessee or any person,- (i) in consequence of, or to give effect to, any finding, direction or order made under any provision of the relevant repealed Acts or any judgment, or order made by the Supreme Court, High Court or any other court whether before or after the commencement of this Act; (ii) to rectify any error on account of the assessment of such assessee or person under this Act, instead of under the relevant enactment, provided such assessment or reassessment under the repealed Acts is made within the time specified in such repealed Acts. (4) The repeal of the Acts referred to in section 173 shall not be held to prejudice or affect the general application of section 6 of the Karnataka General Clauses Act, 1899 (Karnataka Act III of 1899) with regard to the effect of repeal." 36. The Hon'ble Supreme Court in a land mark judgment delivered in the case of R.S.Rekhchand Mohota Spinning & Weaving Mills Ltd., vs. State of Maharashtra, reported in (1997) 6 SCC 12, in paragraphs 8 to 11 has held a....
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....s possible. It is not necessary to cut down the plain meaning of the word "land" in Entry 49 to give full effect to the word "forest" in Entry 19. In my view, the two entries, namely, Entry 49 and Entry 18 deal with entirely different matters. Therefore, under Entry 49 taxation on land on which a forest stands is permissible and legal." 9. In the case of Synthetics and Chemicals Ltd., vs. State of U.P. [(1990) 1 SCC 109], a Bench of seven Judges of this Court considered the effect of interpretation of the Constitution and legislative entries in para 67 which reads as under: " 67. It is well to remember that the meaning of the expressions used in the Constitution must be found from the language used. We should interpret the words of the Constitution on the same principle of interpretation compel one to take into account the nature and scope of the Act which requires interpretation. A Constitution is the mechanism under which laws are to be made and not merely an Act which declares what the law is to be. It is also well settled that a Constitution must not be construed in any narrow or pedantic sense and that construction must not be construed in any narrow or pedantic sense and ....
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....ment in the light of the experience gathered. In the constitutional scheme of division of powers under the legislative lists, there are separate entries pertaining to taxation and other laws. The aforesaid principles are fairly well settled by various decisions of this Court and other courts. Some of these decisions have been referred to in the decision of this Court in India Cement Ltd. v. State of Tamil Nadu, (1990) 1 SCC 12. 10. In a recent judgment, this Court, by a Bench of two Judges, to which K. Ramaswamy and G.P. Pattanaik,JJ. were members, in Indian Aluminium co. vs. State of Kerala [(1996) 7 SCC 637], considered the same question in para 12 and 20 which read as under: "12. The primary question, therefore, is: Whether the impugned Act enacted by the State Legislature is one under Entry 53 of the State List, viz., 'Taxes on the consumption or sale of electricity'. Indisputably, the title of the Act as well as the charging Section 3 employ the words 'duty on supply of electricity'. Under Article 246(3) of the Constitution, every State legislature has explicit power to make law for that State with respect to the matters enumerated in List II (State List) to the Seventh Sc....
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.... laws with respect to the matters enumerated in the legislative entries. Therefore, in the light of the aforesaid judgment, by no stretch of imagination it can be held that clauses (d) and (e) of Section 174(1) of the Karnataka Goods and Service Tax Act, 2017 is ultra vires. 38. In the case of Karnataka Bank Ltd., vs. State of Andhra Pradesh and Others, reported in (2008) 2 SCC 254, the Apex Court in paragraph 19 has held as under: "19. The rules that guide the constitutional courts in discharging their solemn duty to declare laws passed by a legislature unconstitutional are well known. There is always a presumption in favour of constitutionality, and a law will not be declared unconstitutional unless the case is so clear as to be free from doubt; to doubt the constitutionality of a law is to resolve it in favour of its validity. Where the validity of a statute is questioned and there are two interpretations, one of which would make the law valid and the other void, the former must be preferred and the validity of law upheld. In pronouncing on the constitutional validity of a statute, the Court is not concerned with the wisdom or un-wisdom, the justice or injustice of the law. I....