TaxTMI 
TaxTMI 
2021 (12) TMI 523
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....he Kerala Value Added Tax Act, 2003 (for short 'KVAT Act, 2003') and consider the consequential challenge to proviso to Section 8(a) as illegal, ultra virus and unconstitutional. The question of construction paving way for the alleged challenge to proviso to Section 8(a) of KVAT Act 2003 appears to be simple, but the simple question posed by the appellants reminds this Court of the following quote from the Interpretation of Statutes - 5th Edition by Vepa P. Sarathi. The net result is that the legislative object and intent must somehow be gathered by the court. But sometimes, there is obvious ambiguity in the meaning of a statute either because of the poverty of the language of the draftsman or want of imagination in not providing for conceivable situations, or due to an inept use of language. "Lack of legislative simplicity or clarity leads to interpretative complexity and confusion." "I am the parliamentary draftsman I compose the Country's laws, And of half the country's litigation I am undoubtedly the Cause." A Cynic describes the Draftsman as assigning the above lines to himself and expects the legal profession to be grateful to such Draft....
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....t 30 of 2004.-In the Kerala Value Added Tax Act, 2003 30 of 2004). .... .... (4) in section 8.- (i) in clause (a)- (a) for sub-clause (ii), the following sub-clause shall be substituted. namely:- "(ii) any works contractor not falling under clause (i) above may, at his option, instead of paying tax in accordance with the provisions of the said section, shall pay tax at three per cent of the contract amount after deducting the purchase value of goods excluding freight and gross profit element consigned into the State on stock transfer or purchased from outside the State and for the purchase value of goods so deducted shall pay tax at the scheduled rate applicable to such goods." 2.3 To sum up the above, substitution by way of an amendment is briefly stated hereunder: The State Legislature through Finance Act, 2008 introduced an amendment to clause (a) of Section 8 resulting in the substitution of sub-clauses (i) and (ii), and the proviso was introduced. Through Finance Act, 2009 the State Legislature, by way of substitution, amended Section 8(a)(ii) alone and the proviso remained intact. Thereby, Section 8 as stand....
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....thority and Local Authorities in comparison to private contractors; (d) issue a writ of mandamus or any other writ, order or direction, to the 1st respondent to instruct the awarder to deduct tax only at 3% while making payments to the petitioner; and (e) to issue such other orders or directions as this Hon'ble Court may deem fit in the facts and circumstances of the case. 3.1 The petitioner challenges proviso to section 8(a)(ii) of Act 2003 on the ground that the proviso, as it stands upon amendment to sub-clause (ii) to Section 8(a) of the KVAT Act through Finance Act 2009, is discriminatory and unconstitutional, for the reason that, by giving effect to the amendment, the works executed by the appellant awarded by the State Government, Kerala Water Authority (KWA) or local authorities pay tax higher than the tax payable by the other works contractors under sub-clause (ii). The proposed recovery of compounded tax is contrary to the stipulated rate of compounded tax at 3% in sub-clause (ii). 3.2 The petitioner contends that the Kerala Finance Act, 2009 stipulated the rate of tax payable under clause (ii) at 3% on works contracts awarded to private contra....
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.... 3.4 The compounded rate of tax at 4% is attracted if (i) the dealer is registered under the CST Act; (ii) the dealer effected import of goods which are not exempted goods under the Act 2003; (iii) the dealer undertook the contract work awarded by the Government Departments, local authorities or KWA. With the attraction of the above three ingredients, a dealer is liable to pay tax at 4% on the works contract amount. The proviso satisfies where, what and how the incidence has arisen. Therefore, the sum and the substance of the respondents' reply is that even with the substitution made by Finance Act, 2009 to clause (ii) of Section 8(a) proviso is relevant, it is not arbitrary and unconstitutional. It is argued that the constitution of proviso does not decide the legislative competence, but decides the extent of applicability of proviso. On the other hand, the Legislature, in its wisdom and purpose of operating compounding rate of tax, continued to retain proviso to Section 8(a)(i) and (ii) of the Act. 3.5 The batch of cases has been disposed of by the learned Single Judge through the common judgment dated 20.12.2014. 4. We have heard learned Senior counsel Mr Raju Joseph, Ad....
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.... 5.2 The argument proceeds on the ground that, by interpreting proviso to clause (ii) of Section 8(a) of Act 2003 in accordance with the well-established principles of law, the legal effect could be that the proviso is controlling the enacted provision and the benefit given to contractors executing works contract of the Government is, firstly, not continued, and secondly, these contractors are made to pay 1% more tax on the works contract being executed by them. 6. Special Government Pleader Mr. Mohammed Rafiq argues that the competence of the State Legislature to legislate on matters dealing with value-added tax is not in dispute. In other words, the appellants admit that the legislature is competent to legislate and also make necessary amendments etc as are deemed necessary from time to time. According to him, Section 6 deals with levy of tax on sale or purchase of goods. Section 8 provides for compounding rate of tax in respect of contractors executing works contracts of Government, KWA or local authorities. The State Legislature through Finance Act, 2008 has provided for payment of tax by the contractors executing works contract in the following method: (i) any wor....
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.... In the cases covered by substitution, the effect is understood by replacing the old clause/subclause/proviso with the new clause/subclause/proviso, as the case may be. According to him, the challenge raised by the appellants is without understanding the area of operation of sub-clause (ii) of Section 8(a). Section 8(a) deals with contractors not being a dealer registered under CST Act 1956 and as an importer, instead of paying tax in accordance with the provisions of the said section, is allowed to pay tax at 3% of the whole contract amount. Clause (a)(i) is not applicable. Clause (a)(ii) deals with the contractors who do not fall under clause (i) of Section 8(a). At his option, instead of paying tax in accordance with the provisions of said sections, pay tax at 8% of the whole contract amount. Therefore, the rate of tax payable by the persons covered by subclause (ii) is 8%. When it comes to contractors who are executing works contracts for and on behalf of the Government of Kerala, KWA, local authority, 4% of the whole contract amount is the tax payable. The Finance Act, 2009 has substituted sub-clause (ii). According to sub-clause (ii), as it stands, tax is payable at 3% of the....
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.... judgment of the Supreme Court in VKC Footsteps India Pvt. Ltd would be sufficient to appreciate the law on constitution of a proviso in different circumstances. "79. Provisos in a statute have multi-faceted personalities. As interpretational principles governing statutes have evolved, certain basic ideas have been recognized, while heeding to the text and context. Justice GP Singh, in his seminal text, Principles of Statutory Interpretation formulates the governing principles of interpretation which have been adopted by courts while construing a statutory proviso. The first rule of interpretation is that: "The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As stated by LUSH, J.: "When one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. In the words of LORD MACMILLAN: "The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enac....
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....constructions of the words to be found in the enactment, and show when there is doubt about its scope, when it may reasonably admit of doubt as to having this scope or that, which is the proper view to take of it." (iv) An effort should be made while construing a statute to give meaning both to the main enactment and its proviso bearing in mind that sometimes a proviso is inserted as a matter of abundant caution: "The general rule in construing an enactment containing a proviso is to construe them together without making either of them redundant or otiose. Even if the enacting part is clear effort is to be made to give some meaning to the proviso and to justify its necessity. But a clause or a section worded as a proviso, may not be a true proviso and may have been placed by way of abundant caution." (v) While ordinarily, it would be unusual to interpret the proviso as an independent enacting clause, as distinct from its main enactment, this is true only of a real proviso and the draftsperson of the statute may have intended for the proviso to be, in substance, a fresh enactment: "To read a proviso as providing something by way of an addendum or ....
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....e the position. The substituted subclause (ii) deals with a higher rate of tax payable by the contractors executing works contracts other than government, local body, KWA etc. The interpretation of proviso, in the case on hand, firstly, could be either excepting the situation covered by subclause (ii), and secondly, can also act independently and would deal with the compounding rate of tax payable by the contractors executing works of government, local bodies and KWA. In the case on hand, the proviso continues to operate as an excerpted circumstance to the enacting sub-clause (ii) and no ground to apply in any other way is neither possible nor permissible. 8.4 We are of the view that the legal argument now introduced by the appellants prima facie is on account of the misunderstanding of the flow of payment of rate of tax by various individuals covered by Section 8(a)(i)(ii) and proviso of Act, 2003. As already explained, subclause (i) deals with one type of contractor, namely dealers registered under the CST Act.. Subclause (ii), as it stands now, deals with contractors executing works contracts but not falling under clause (i). 8.5 Proviso was dealing with the contractors ex....