AI Drafter 
TaxTMI 
TaxTMI 
2021 (4) TMI 961
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....lable under the law. 2. The facts of the 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 tr....
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....ntended that in light of the aforesaid Old Entry 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 Responde....
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.... passed by the learned Single Judge in paragraphs 6 to 15 reads as under: "6. What he endeavored 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 ....
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....ment period is not all governed by the KGST 2017 under GST regime enforced by the State with effect from 01/07/2017 pursuant to 101stConstitutional 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. ....
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....llow the omitted Entry 54, List II of the Seventh Schedule of the Constitution of India to continue to operate. The loss of authority of the State, on account of the substitution 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 Con....
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....ax. The authority to make law has to be a continuing one and has to exist throughout the process of imposing tax (a legislative exercise), assessment (a quasi judicial exercise) and 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 co....
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....ot affect liabilities accrued or tax payable under the KVAT Act. Therefore, in view of the savings clause under Section 174, the appellant's contention that the State cannot reassess a liability incurred prior to repeal of the KVAT Act is totally baseless. 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. L....
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....must be understood to have effect in their widest amplitude (R.S.Rekhchand vs. State of Maharashtra, reported (1997) 6 SCC 12). He has further contended that the ratio of the above judgments is equally applicable to the interpretation of Article 246A since 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. I....
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....ess/adjudicate/collect any taxes under the Central Excise Act, the Finance Act, 1994 (service tax), and the VAT and Entry Tax Acts of each of the States for the tax periods prior to the coming into force of GST, which would result in substantial losses to the State 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 claus....
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....ections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15, 16, 17, 18, 19 and 20 of the Constitution 101st Amendment Act have come in to force. Sections 19 of the Constitution 101st Amendment Act, 2016, is the Transitional provision, which reads as under: "19. Notwithstanding anything contained in 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. ....
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....ders issued under the repealed Acts; (b) for specifying the authority, officer or person who shall be competent to exercise such functions, exercisable under any of the repealed Acts or any rules, notifications or orders issued there under as may be mentioned in the said notification. (3) Notwithstanding anything contained in section 173, nothing contained in any of the repealed 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 secti....
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....nth Schedule so that the same may have effect in their widest amplitude. The same principle was reiterated in Kunnathat Thathuunni Moopil Nair vs. State of Kerala & Anr. [(1961) 3 SCR 77 at 106] by Sarkar, J. though in a dissenting tone but on this principle there is no dissent by majority and it cannot be dissented. It was said thus: "It is well known that entries in the legislative lists have to be read as wisely as 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 Constit....
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....intent and purpose and to examine the particular legislation in question. Each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. In interpreting an entry it would not be reasonable to import any limitation by comparing or contrasting that entry with any other in the same list. It has to be interpreted as the Constitution must be interpreted as an organic document 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 th....
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....of the Seventh Scheduled are of enabling character, designed to define and delimit the respective areas of legislative competence of the respective legislatures, the substantive power in Article 246 and all other related articles." 37. In the aforesaid judgment, the Hon'ble Supreme Court has held that it is a settled principle of interpretation that legislative entries are required to be interpreted broadly and widely so as to give powers to legislature to enact the 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 ....