TaxTMI 
TaxTMI 
2022 (7) TMI 420
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....rtikeya, Mr. P. Karthik Ramana, Mr. B. Srinivas, Mr. Tej Prakash Toshniwal, Mr. Pasam Mohith and Mr. Venkatram Reddy Mantur Counsel for Respondents : Mr. B.S.Prasad, learned Advocate General with Mr. K. Raji Reddy COMMON JUDGMENT & ORDER: (Per Hon'ble the Chief Justice Ujjal Bhuyan) Issue raised in all the writ petitions being identical, those were heard together and are being disposed of by this common judgment and order. 2. We have heard Mr. S.Ravi, learned senior counsel, Mr. S. Dwarakanath, learned senior counsel, Mr. S.R.R. Viswanath, Mr. V. Bhaskar Reddy, Mr. Shaik Jeelani Basha, Mr. Karan Talwar, Mr. G. Narendra Chetty, Mr. A.V.A. Siva Kartikeya, Mr. P. Karthik Ramana, Mr. B. Srinivas, Mr. Tej Prakash Toshniwal, Mr. Pasam Mohith and Mr. Venkatram Reddy Mantur, learned counsel for the petitioners; and Mr. B.S. Prasad, learned Advocate General for the State of Telangana along with Mr. K. Raji Reddy, learned senior standing counsel for Commercial Taxes. 3. Challenge made in this batch of writ petitions is to the constitutionality of Telangana Value Added Tax (Second Amendment) Act, 2017. 4. It is the contention of the petitioners that Telangana Value Added Tax (Second Am....
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....terest or penalty leviable. 8.2. Sub-Section (3) deals with a situation where the authority prescribed is not satisfied with the return filed by the VAT dealer or TOT dealer or the return appears to be incorrect or incomplete, in which event, he shall make the assessment to the best of his judgment within four years of due date of the return or within four years of the date of filing of the return, whichever is later. 8.3. Power to conduct scrutiny of accounts is provided in Sub-Section (4) and making of assessment in the event of willful evasion of tax is dealt with in Sub-Section (5). In Sub-Section (6) the prescribed authority has been empowered to make reassessment when the assessment was made under Sub-Sections (1) to (5) and such assessment understates the correct tax liability of the dealer, within a period of four years from the date of such assessment. As per Sub-Section (7), where any assessment has been deferred by the Commissioner under Sub-Section (5) of Section 32 or as the case may be, by the Appellate Tribunal under the proviso to Sub-Section (4) of Section 33 on account of any stay granted by the Appellate Tribunal or by the High Court or by the Supreme Court, or....
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....edings to revise, modify or set aside such order or proceeding and may pass such order in reference thereto as he thinks fit. 10.1. As per Sub-Section (2), such power may also be exercised by the Additional Commissioner, Joint Commissioner, Deputy Commissioner and Assistant Commissioner in the case of orders passed or proceedings recorded by the authorities, officers or persons subordinate to them. However, as per the proviso, such power shall not be exercised by the revisional authority in respect of an issue or question which was decided on appeal by the Appellate Tribunal under Section 33. 10.2. Sub-Section (3) says that in relation to an order of assessment passed under the VAT Act, the powers conferred by Sub-Sections (1) and (2) shall be exercisable only within a period of four years from the date on which the order was served on the dealer. However, as per Sub-Section (4), no such order enhancing any assessment shall be passed without giving an opportunity to the dealer to show cause against the proposed enhancement. 10.3. Under Sub-Section (5) the revisional authority may defer any such proceedings if an appeal or other proceeding is pending before the Appellate Tribunal....
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....vant provisions of the Constitution (101st Amendment) Act, 2016. As per Section 2 of the aforesaid Constitution Amendment Act, after Article 246 of the Constitution of India a new Article 246-A came to be inserted. Article 246-A reads 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. Explanation.---The provisions of this article, in respect of goods and services tax referred to in clause (5) of the article 279A, take effect from the date recommended by the Goods and Services Tax Council." 12.1. As per Section 7, Article 268-A of the Constitution has been omitted. 12.2. After Article 269, Article 269-A has been inserted. Article 269-A is as under: "269A. Levy and collection of goods and services tax in course of int....
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....) The Goods and Services Tax Council shall consist of the following members, namely:- (a) the Union Finance Minister.......Chairperson; (b) the Union Minister of State in charge of Revenue or Finance...... Member; (c) The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government .....Members. (3) The Members of the Goods and Services Tax Council referred to in sub-clause (c) of the clause (2) shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such period as they may decide. (4) The Goods and Services Tax Council shall make recommendations to the Union and the State on--- (a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax; (b) the goods and services that may be subjected to, or exempted from the goods and services tax; (c) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-state trade or commerce under article 269-A and the principles that govern the place of supply; (d) the threshold limit of t....
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....tes on the other side; or (c) between two or more States, arising out of the recommendations of the Council or implementation thereof." 12.5. Section 14 says that after Clause (12) of Article 366 a new clause being Clause (12-A) shall be inserted. Likewise after Clause 26, Clauses (26-A) and (26-B) shall be inserted. 12.6. A crucial amendment made was in the VII Schedule to the Constitution. As per Section 17 (a) in List I (Union List) for Entry 84, the following entry shall be substituted: "84. Duties of excise on the following goods manufactured or produced in India, namely:--- (a) Petroleum crude; (b) High speed diesel; (c) Motor spirit (commonly known as petrol); (d) Natural gas; (e) Aviation turbine fuel; and (f) Tobacco and tobacco products."; 12.7. Entries 92 and 92 C have been omitted. 12.8. Likewise, as per Section 17 (b), in List II (State List) Entry 52 has been omitted and for the existing Entry 54 the following entry has been substituted: "54. 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, but not including sale in the ....
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....on 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 and incidental thereto. As per Section 1 (3), the CGST Act shall come into force on such date as the Central Government may by notification in the official gazette appoint. Several dates were notified by the Central Government as the date for coming into force of various sections of the CGST Act, such as, Sections 1 to 5, 10, 22 to 30, 139, 146 and 164 came into force on 22.06.2017; some sections came into force on 01.07.2017 whereas Section 52 came into force on 01.10.2018. Likewise, Parliament enacted the Integrated Goods and Services Tax Act, 2017 (IGST Act) 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. Like the CGST Act, Central Government notified various dates as the date for coming into force of relevant provisions of the IGST Act, such as, 22.06.2017 and 01.07.2017. Further, two more Acts were enacted by the Parliament post the Constitution (101st Amendment) Act, 2016. 16. Legislature of the State of Telangana....
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....al, revision, review or reference which shall be continued under the amended Acts or repealed Acts. It was also mentioned that it was considered necessary to strengthen certain provisions of the VAT Act to overcome any limitations to help effective revenue realization besides preventing leakages. Accordingly, it was decided to amend the relevant provisions of the VAT Act by undertaking legislation. Since it was decided to give effect to the above decision immediately and since the Legislature was not in session, and as the Governor of Telangana was satisfied that circumstances exist which rendered it necessary for him to take immediate action; therefore, in exercise of the powers conferred by Clause (1) of Article 213 of the Constitution of India, the Governor promulgated Telangana Ordinance No.2 of 2017 called the Telangana Value Added Tax (Amendment) Ordinance, 2017, which came into force with immediate effect i.e., 17.06.2017. By the said amendment, certain provisions of the VAT Act, such as, in Section 20 (4), Section 21 (3), (4), (6), (7) and (8), Section 32 (3), (6) and (7) and in Section 57, the words 'four years' or 'four years or six years' or 'three years' stood substitut....
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....r Clause (a) on or before the prescribed date in the manner prescribed shall be liable to pay penalty as may be prescribed." (ii) In sub-section (3), for the words "four years" occurring at two places, the words "six years" shall be substituted. (iii) in sub-sections (4) and (6), for the words 'four years' the words 'six years' shall be substituted. (iv) in sub-sections (7) and (8), for the words 'four years or six years, as the case may be, the words 'six years' shall be substituted. 4 In the principal Act, in section 31, in sub-section (1),- (i) the first proviso shall be omitted; (ii) after omitting the first proviso, in the existing proviso, for the words "provided further that" the words "provided that' shall be substituted. 5 In the principal Act, in section 32, in sub-section (3), (60 and (7), for the words 'four years' the words 'six years' shall be substituted. 6 In the principal Act, in Section 57, in sub-section (5) and the proviso thereunder, for the words 'three years', the words 'six years' shall be substituted. 7 The Telangana Value Added Tax (Amendment) Ordinance, 2017 is hereby repealed. 21. Following the Second Amendment Act, as extracted above,....
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....er passed or proceeding recorded by any authority under the provisions of the VAT Act, other than the order passed or proceeding recorded by any authority under the provisions of the VAT Act, other than the order passed or proceeding recorded by an Additional Commissioner or Joint Commissioner or Deputy Commissioner, may within 30 days from the date on which the order or proceeding was served on him, appeal to such authority in the manner prescribed. Provided that an appeal so preferred shall not be admitted by the appellate authority concerned unless the dealer produces proof of payment of tax, penalty, interest or any other amount admitted to be due, or of such installments as have been granted, and the proof of payment of twelve and half percent of the difference of the tax, penalty, interest or any other amount, assessed by the authority prescribed and the tax, penalty, interest or any other amount admitted by the appellant, for the relevant tax period, in respect of which the appeal is preferred. Section 32 (3): In relation to an order of assessment passed under the Act, the powers conferred by sub-sections (1) and (2) shall be exercisable only within a period of six years....
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....d at Rs.60,35,000.00 which was neither reported by the petitioner in the returns nor subjected to assessment. Therefore, the assessment order dated 31.03.2015 was found to be prejudicial to the interest of revenue. Accordingly a view was taken that revision under Section 32 (2) of the VAT Act was warranted. 24. Petitioner filed explanation on 17.12.2019. It was followed by subsequent letters seeking certain information on the allegation made. 25. It is contended that without considering the explanation of the petitioner and without providing an opportunity of personal hearing, Deputy Commissioner, Commercial Tax passed the order dated 14.09.2020 confirming the revision proposed in the show cause notice. 26. It is this order which is impugned in W.P.No.7054 of 2021. 27. Amongst the various grounds urged by the petitioner, it is contended that the assessment order is dated 31.03.2015. Therefore, the revisional order ought to have been passed within four years i.e., on or before 30.03.2019, in terms of Section 32 (2) of the VAT Act. However, the revisional order was passed on 14.09.2020 which is beyond four years but within six years. In so far the Second Amendment Act is concerne....
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....ial year 2011-12 petitioner filed returns under the VAT Act. After availing the input tax credit to which it was entitled, it paid the taxes due at the prescribed rate. 32. Commercial Tax Officer conducted audit and on completion thereof passed the assessment order dated 24.03.2014. 33. Deputy Commissioner, Commercial Tax issued pre revision show cause notice dated 09.11.2017 proposing to revise the assessment made by the Commercial Tax Officer and to levy additional tax of Rs.1,03,26,998.00 on the grounds mentioned therein. 34. Petitioner filed detailed reply dated 06.03.2018 to the pre revision show cause notice. However, the Deputy Commissioner did not consider such reply of the petitioner and passed the revisional order on 05.03.2020 levying additional tax of Rs.1,03,26,998.00 by imposing tax at a higher rate. Following the revisional order, the assessing authority passed the consequential order dated 07.03.2020 giving effect to the revisional order. 35. Aggrieved, present Writ Petition has been filed. 36. It is contended that under Sub-section (3) of Section 32 of the VAT Act, limitation prescribed for passing revisional order was four years from the date of service of th....
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....Act while repealing the VAT Act except for the goods listed in Entry 54 of List II of the VII Schedule. Ordinance No.2 of 2017 was promulgated by the Governor of Telangana under Article 213 of the Constitution of India on 17.06.2017 whereby limitation was extended from four years to six years. 01.07.2017 is the date on and from which TGST Act became enforceable. Section 174 of the TGST Act repealed the VAT Act in respect of all goods except those mentioned in the substituted Entry 54 of the State List. On 29.11.2017 the Second Amendment Act received the assent of the Governor whereafter it was published in the Telangana Gazette on 02.12.2017 giving retrospective effect from 17.06.2017. 40. Mr. S.Ravi, learned senior counsel, submits that prior to the Constitution Amendment Act coming into force, States had legislative competence to levy Value Added Tax (VAT) on sales of all goods except newspapers in the course of intra-State trade pursuant to Article 246 of the Constitution read with Entry 54 of List II of the VII Schedule. Constitution Amendment Act has amended the Constitution of India to redistribute the legislative powers to give effect to the new GST regime based on cooperat....
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....reflected in pre-amended Entry 54 of List II prior to 16.09.2016 for legislative competence on the ground that the Second Amendment Act is retrospective and intended to deal with VAT demands prior to the coming into force of GST. Thus, Section 6 of the General Clauses Act, 1897 cannot be pressed into service to save the pre-amended Entry 54 of List II. 43. While on legislative competence, Mr. Ravi submits that after the Constitution Amendment Act, Entry 54 of List II is confined to only five petroleum products and alcohol for human consumption. States have lost legislative competence after 16.09.2016 to make laws imposing VAT on other goods i.e., goods generally. To support his above submission, learned senior counsel has placed reliance on the following decisions: Reliance Industries Limited Vs. State of Gujarat (2 supra), Hindalco Industries Limited Vs. State of Kerala 2020 74 GSTR 116 (Ker), and Jain Distillery Private Limited Vs. State of U.P. 2021 (10) TMI 583 (All). 44. According to him, there is no provision in the Constitution Amendment Act which postpones or dilutes the effect of amendment in Entry 54 List II of VII Schedule. On and from 16.09.2016, the State Legis....
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....enable the competent legislatures to amend / repeal their laws to bring them in consonance with post amended provision. Therefore, Section 19 of the Constitution Amendment Act does not eclipse the amendment to Entry 54 of List II or confer legislative competence upon the State for making amendments to the VAT Act qua goods other than alcohol for human consumption and the five petroleum products. Therefore, what Section 19 provides is that the State can continue to levy tax under the VAT Act for the window period of one year or till the VAT Act is amended or repealed whichever is earlier. This transitional provision does not enable the States to make amendments to the VAT Act in contravention of the amended Entry 54 of List II. He submits that Section 19 of the Constitution Amendment Act cannot be understood as a source of legislative power, nor as a saving provision in respect of legal competence to amend the VAT Act. To buttress this point he has pressed into service the division bench decision of the Gujarat High Court in Reliance Industries Limited (2 supra). According to him, even the single bench of Kerala High Court in Sheen Golden Jewels (India) Pvt. Limited Vs. State Tax Of....
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....nce qua the goods not mentioned in amended Entry 54, such operation could not have continued beyond 08.12.2017 as per Article 213 of the Constitution. Clarifying the position, he submits that the Ordinance was not challenged because the Ordinance was repealed by the Second Amendment Act and is no longer in existence. Besides, the Second Amendment Act was brought into force with effect from 17.06.2017 which was the date of the Ordinance. Thus, even for the period when the Ordinance was in existence it was the Second Amendment Act which occupied the legislative field and not the Ordinance. Therefore, any reliance placed on the Ordinance would be misplaced and the fact that the Ordinance was not challenged would have no legal bearing. 51. Finally Mr. Ravi refers to Section 174 of the TGST Act. Section 174 of the TGST Act provides for repeal and savings. It clearly says that on and from the date of commencement of the TGST Act, the VAT Act stood repealed except in respect of goods included in Entry 54 of List II of the VII Schedule. To that extent, Section 174 of the TGST Act vindicates the stand of the petitioners. Mr. Ravi submits that Section 174 of the TGST Act was brought into fo....
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....16.09.2016. On and from 16.09.2016 only concurrent jurisdiction could be exercised simultaneously by the Central Government as well as by the State Government insofar GST is concerned; that apart, exercise of power under Article 246 A can only be carried out on the recommendation of the GST Council. 55. Adverting to Section 19 of the Constitution Amendment Act, he submits that it is a transitional provision and a transitional provision cannot be used for unintended or oblique purpose. 56. Referring to Article 213 (3), Article 246 (3) read with Entry 54 of List II and placing reliance on State of Bombay Vs. R.M.D. Charmarbaugwala AIR 1957 SC 699 and Krishna Kumar Singh Vs. State of Bihar (2017) 3 SCC 1, he submits that both the Ordinance as well as the Second Amendment Act in their application to goods other than the five petroleum products and liquor for human consumption are void for want of power. While highlighting the difference between amendment to the Constitution and amendment to other laws, he submits that post the Constitution Amendment Act coming into effect from 16.09.2016, legislative power which flows from Entry 54 of List II ceased to have effect from 16.09.2016 in ....
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....shall not effect the previous operation of any enactment so repealed or anything done thereunder. According to him, reliance placed by the petitioners on the decision of the Kerala High Court in Hindalco Industries Limited (3 supra) and on the Gujarat High Court decision in Reliance Industries Limited (2 supra) would be of no assistance to the petitioners as in those cases there was no Ordinance or legislative enactment pertaining to the State VAT Acts prior to introduction of GST. 59. Elaborating further Mr. B.S.Prasad submits that the Ordinance was promulgamated by the Governor of Telangana on 17.06.2017 whereby the time limit for assessments and revisions was extended from four years to six years before annulment of VAT Act. The Ordinance became an Act i.e. the Second Amendment Act on 02.12.2017. Prior to that, the Ordinance was approved by the legislative assembly of the State of Telangana within six months from the date of the Ordinance. Referring to Article 213 (2) of the Constitution of India, he submits that an Ordinance promulgated by the Governor would have the same force and effect as an Act of the legislature unless such an Ordinance is not placed before the legislativ....
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....ovisions for enlarging time limitation on assessments etc., are only procedural aspects of levy and assessment of tax. These are not substantive provisions. Assessing Officers are competent to adjudicate on limitation since it is a mixed question of fact and law. 64. Referring to Hindalco Industries Limited (3 supra), he submits that decision of the Kerala High Court, as expressed in the said case, is distinguishable. In the said decision, Kerala High Court did not deal with the effect of Section 19 of the Constitution Amendment Act and the savings provision under the State GST Act. As a matter of fact, State of Kerala had enacted the impugned law after the permissible window period of one year allowed under Section 19 of the Constitution Amendment Act. Likewise, Mr.Prasad submits that decision of the Gujarat High Court in Reliance Industries Limited (2 supra) would also have no persuasive value for this Court. 65. Mr. Prasad, learned Advocate General, relied on a decision of the Supreme Court in Tirumalai Chemicals Limited Vs. Union of India (2011) 6 SCC 739 to contend that while right of appeal may be a substantive right, the procedure for filing the appeal including the period....
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....lvency and Bankruptcy Code (Amendment) Act, 2020 was challenged. He submits that when a legislation is challenged, more particularly, a constitutional amendment on the ground of being manifestly arbitrary, it would be incumbent upon the petitioners to show or demonstrate that something was done by the legislature capriciously, irrationally and / or without adequate determining principle. He submits that wide latitude is allowed to the legislature in enacting a law. The freedom to experiment must be conceded to the legislature, particularly in economic laws. If problems emerge in the working of laws and which require legislative intervention, the Court cannot be oblivious of the power of the legislature to respond by stepping in with necessary amendments. Since the law, in this case, the Second Amendment Act has been enacted to augment the revenue of the State, the constitutional Court will lean heavily in favour of such a law. The law under scrutiny is an economic measure. In economic matters, wider latitude is given to the law makers, which is based on sound principle. Mr. Prasad asserts that even a vested right can be the subject matter of retrospective law. No doubt, such a law ....
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....are manifestly arbitrary or that those cannot be given retrospective effect. Therefore, the argument advanced by the learned Advocate General based on the principles of manifest arbitrariness or retrospectivity are not at all germane to adjudicate on the issues raised by the petitioners. 73. Besides reiterating reliance on Reliance Industries Limited (2 supra) and Hindalco Industries Limited (3 supra), Mr.Ravi has also pressed into service a decision of the Allahabad High Court in Jain Distillery Private Limited (4 supra). 74. Insofar extension of time limit in tax matters is concerned, Mr.Ravi submits that time limits are a fetter on the jurisdiction of the departmental authorities. Enlargement of time under the Second Amendment Act in extending the limitation period amounts to conferring jurisdiction on departmental authorities that did not exist earlier. Therefore, such an amendment is not merely for securing old liabilities but impacts the rights of assessees, thus being a fresh legislation which is devoid of legislative competence. 75. Insofar reliance placed by learned Advocate General in Tirumalai Chemicals Limited (11 supra) it is submitted that the said decision is of n....
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....not transgress the constitutional limits. In the instant case, the challenge to the Second Amendment Act is purely on the ground of legislative competence; rather lack of legislative competence. Petitioners are not questioning the legislative wisdom in extending the limitation for making assessments, reassessments, revisions etc., from four years to six years, but have questioned the Second Amendment Act on the ground that the State did not have the legislative competence to enact the same. 77. Insofar Sheen Golden Jewels (India) Pvt. Limited (7 supra) is concerned, learned senior counsel submits that a division bench of the Gujarat High Court in Reliance Industries Limited (2 supra) has distinguished the said decision. In Sheen Golden Jewels (India) Pvt. Limited (7 supra) petitioners had challenged validity of Section 174 of the Kerala Goods and Services Tax Act, 2017 which is pari materia to Section 174 of the TGST Act, on the anvil of Section 19 of the Constitution Amendment Act. According to Mr.Ravi, petitioners herein are not questioning validity of Section 174 of the TGST Act. Rather, according to the petitioners, Section 174 of the TGST Act only supports what is being conte....
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....nance or to make the Second Amendment Act after 16.09.2016 and also after 27.05.2017. 81. Referring to Section 19 of the Constitution Amendment Act, Mr. Viswanath submits that the window provided by Section 19 was completely exhausted on 27.05.2017 when the TGST Act was enacted and Section 174 thereof partially repealed the VAT Act. There is no merit in the argument of the learned Advocate General that Section 19 of the Constitution Amendment Act could be invoked even after 27.05.2017 and that the Ordinance and the Second Amendment Act owe their genesis to Section 19. He further submits that neither the Ordinance nor the Second Amendment Act can be traced to Article 246A of the Constitution. 82. Insofar decision of the Kerala High Court in Sheen Golden Jewels (India) Pvt. Limited (7 supra) is concerned, he submits that in the said case the challenge was made to Section 174 of the Kerala Goods and Services Tax Act, 2017 which is pari materia to Section 174 of the TGST Act. Petitioners herein are not challenging validity of Section 174 of the TGST Act. He, therefore, submits that there is no merit in the arguments advanced by the learned Advocate General. 83. Submissions made by l....
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.... but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods". 88. Thus, on and from 16.09.2016, the competence of the State Legislature got truncated; it had competence to enact law only on the fields mentioned in Entry 54 as substituted i.e., regarding taxes on sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption. However, there is a further restriction in as much as the taxes should not be on sale of such goods in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods. 89. The Second Amendment Act, as already noticed, enhances the limitation period from four years to six years with respect to assessment, reassessment, revision etc. It covers all general goods and is not confined to the five petroleum products and alcoholic liquor for human consumption as mentioned in the substituted Entry 54 of List II. Therefore, State Legislature of Telangana did not have the competence post 16.09.2016 to legislate the Second Amendment Act which could be traceabl....
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....ution of India defines various expressions which finds place in the Constitution. Clause (12) defines "goods" to include all materials, commodities and articles. Clause (12A) which was inserted by the Constitution Amendment Act with effect from 16.09.2016 defines "goods and services tax" (GST) to mean any tax on supply of goods or services or both except taxes on the supply of alcoholic liquor for human consumption. Clause (26A), also inserted by the Constitution Amendment Act with effect from 16.09.2016, defines "services" to mean anything other than goods. 94. Article 246 A of the Constitution of India came up for analysis before the Supreme Court in VKC Footsteps India Private Limited (5 supra), Supreme Court has held as follows: "34. Article 246A has brought about several changes in the constitutional scheme: (i) Firstly, Article 246A defines the source of power as well as the field of legislation (with respect to goods and services tax) obviating the need to travel to the Seventh Schedule; (ii) Secondly, the provisions of Article 246A are available both to Parliament and the State Legislatures, save and except for the exclusive power of Parliament to enact on inter-Stat....
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....r given by article 246A of the Constitution of India independent of each other unlike the power given by the "Concurrent List" enumerated in List III in Schedule VII of the Constitution of India". 97. In Baiju A.A. (10 supra) the challenge before a single bench of the Kerala High Court was to the legality of the notices and assessment orders issued in connection with the assessments under the Kerala Value Added Tax Act, 2003 for the assessment years 2010-2011 and 2011-2012. The challenge was made on the ground that the concerned authorities did not have the jurisdiction to issue the notices and assessment orders since the amendments introduced to Section 25 (1) of the Kerala Value Added Tax Act, 2003 through the Kerala Finance Acts of 2017 and 2018 notified on 19.06.2017 and 31.03.2018 respectively did not contemplate a retrospective operation of the amended provisions. Section 25 of the Kerala Value Added Tax Act, 2003 deals with assessment of escaped turnover. In case of escaped turnover for any reason the assessing authority could determine to the best of his judgment the turnover which had escaped assessment to tax at any time within five years from the last date of the year t....
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....e position changed when there was a fundamental shift in the nature of the tax levy and a fresh conferment of legislative power to legislate in respect of the new levy. After the CAA 2016, the State Legislatures stood denuded of their power to legislate in respect of taxes on sale or purchase of goods, that was covered under Entry 54 of List II of the VIIth Schedule to the Constitution, and they were instead conferred with legislative powers, to be exercised simultaneously with the Parliament, in respect of taxes on supply of goods or services or both. While the new legislative power could justify the inclusion of a savings clause in the new legislation enacted in respect of the new levy of tax, to save accrued rights, privileges, immunities etc. under the erstwhile enactment, the deletion of Entry 54 of List II automatically denuded the State Legislatures of the power to further legislate on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. The power to amend a statute being a facet of the legislative power itself, the State Legislature could not have exercised a power to amend the KVAT Act, save to the extent permitte....
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....e new legislative power could justify the inclusion of a savings clause in the new legislation enacted in respect of the new levy of tax, to save accrued rights, privileges, immunities, etc., under the erstwhile enactment, the deletion of Entry 54 of List II automatically denuded the State Legislatures of the power to further legislate on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. The power to amend a statute being a facet of the legislative power itself, the State Legislature could not have exercised a power to amend the KVAT Act, save to the extent permitted, when it did not retain any residual right to further legislate on the subject of taxes on sale or purchase of goods". 101. A division bench of the Allahabad High Court in M/s. Pankaj Advertising Vs. State of U.P (2020) 73 GSTR 235 (All) was examining challenge to the legislative competence to the imposition, collection and realization of advertisement tax under the U.P. Municipalities Act, 1916 on the ground that when there is no provision to impose such tax there can be no power to frame any by-laws in that regard. The power to levy advertisement tax was....
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....oted that the express intent of the constitutional change made vide the Constitution Amendment Act was to tax alcohol under the GST regime except alcoholic liquor for human consumption. Thus, alcoholic liquor not for human consumption or industrial alcohol or non potable alcohol would be subject to GST laws only. According to the Allahabad High Court this intent has been expressed through Section 174 (1) (i) of the U.P. Goods and Services Tax Act, 2017. Section 174 (1) (i) of the U.P.Goods and Services Tax Act, 2017 reads as follows: "174. (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act: (i) The Uttar Pradesh Value Added Tax Act, 2008, except in respect of goods included in Entry 54 of the State List of the Seventh Schedule to the Constitution, * * * are hereby repealed." 102.1 It was in that context Allahabad High Court held as follows: "61. Since the State Legislature did not attempt to save the UPVAT Act- to tax alcoholic liquor not for human consumption, two direct consequences arise. First, a consequence arises of recognition of the change in the Constitutional scheme, noted above. Second, yet more directly, t....
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....s Act, an issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the appellate authority or the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the appellate authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in section 34 or section 35. (2) Notwithstanding anything contained in this Act, if any decision or order under section 73 or section 75 involves an issue on which the Revision Authority or appellate authority or the High Court has been 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 Appellate Tribunal or the High Court is pending, the period spent between the date of the dec....
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....tution 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. [2018] 58 GSTR 1 (SC) : [2019] 2 SCC 599. 92. 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 five years. Thus the entire scheme of the Constitution Amendment Act recognizes imposition of only "goods and services tax" under article 246A of the Constitution of India. The phrase the "goods and services tax" is defined under article 366 (29A) to mean any tax on supply of goods or service or both except taxes on the supply of alcoholic liquor for human consumption. Such "supply" cannot be fragmented into different components by the State Legislature and assume power to impose independent tax on the sale of goods without reference to the Goods and Services Ta....
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....is 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. 107. Section 19 starts with a non-obstante clause. It says that notwithstanding anything in the Constitution Amendment Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before commencement of the Constitution Amendment Act, which is inconsistent with the provisions of the Constitution as amended by the Constitution Amendment 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. 108. Thus, the purpose of this provision is to provide for a window or transition by suspending invalidity of inconsistent legislations existing immediately before commencement of the Constitution Amendment Act for a period of one year or till such legislations are amended or repealed, whichever is earlier. The objective appears to be for a transition to the GST regime brought into force by the Constitution Amendme....
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....any provision of any law relating to Municipalities in force in a State immediately before the commencement of the Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistent with the provisions of this Part, shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until the expiration of one year from such commencement, whichever is earlier: Provided that all the Municipalities existing immediately before such commencement shall continue till the expiration of their duration, unless sooner dissolved by a resolution passed to that effect by the Legislative Assembly of that State or, in the case of a State having a Legislative Council, by each house of the Legislature of that State. 111. As per this Article, notwithstanding anything in Part IXA of the Constitution, any provision of law relating to municipalities in force in a State immediately before commencement of the Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistent with Part IXA, 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 co....
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....iance Industries Limited (2 supra) wherein it has been held as follows: 79.5. Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016 can also not be a source of power to amend the State VAT laws. First, the power to amend under Section 19 is only for a period of one year from the commencement of the Amendment Act. 115. Even in Sheen Golden Jewels (India) Pvt. Limited (7 supra) relied upon by the State, learned single judge of the Kerala High Court held as follows: 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 goods and services in force in any State before 16.09.2016 (the commencement of the CA Act) shall continue to be in force "until amended or repealed by a competent Legislature or other competent authority". So the States were, first, required to amend the inconsistent laws to bring them in harmony with the CA Act. Otherwise, the States must repeal them. And they were given one year for achieving this. If the States do neither, those inconsistent acts stand repealed. 142. Here, the States acted; they amended a few inconsistent Acts. They also re....
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.... clearly inconsistent with the Constitution Amendment Act. 118. We have already noted that the Constitution Amendment Act, more particularly Sections 1 to 11 and 13 to 20, came into force on and from 16.09.2016. Thereafter Parliament enacted the CGST Act and other related enactments, most provisions of such enactments having come into force on and from 01.07.2017. State of Telangana also enacted the TGST Act. While majority of the sections came into force on 22.06.2017, Section 174 of the TGST Act which provides for repeal and saving came into force on and from 01.07.2017. Section 174 of the TGST Act reads as under: "174. Repeal And Saving:- (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, (i) The Telangana Value Added Tax Act, 2005 (Act 5 of 2005); except in respect of goods included in the Entry 54 of the State List of the Seventh Schedule to the Constitution, (ii) The Telangana Entertainments Tax Act, 1939 (Act X of 1939); (iii) The Telangana Tax on Entry of Motor Vehicles into Local Areas Act, 1996 (Act 26 of 1996); (iv) The Telangana Tax on Entry of Goods into Local Areas Act, 2001 (Act 39 of 2001); (v) The Telangana Ta....
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....rce and the said Acts had not been amended or repealed. (3) The mention of the particular matters referred to in section 173 and sub-section (1) shall not be held to prejudice or affect the general application of section 8, 8A, 9 and 19 of the Telangana General Clauses Act, 1891 (Act 1 of 1891) with regard to the effect of repeal". 119. Thus, as per Section 174 (1) (i) the VAT Act stood repealed with effect from 01.07.2017 except in respect of goods included in Entry 54 of the State List in the Seventh Schedule. When we refer to Entry 54 of the State List i.e., List II it means the entry as it stood on 01.07.2017. We have already noticed that post the Constitution Amendment Act, Entry 54 of List II has been substituted whereafter the field of legislation under the said entry is confined only to taxes on the sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption; further clarifying that this would not include sale of such goods in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods. Therefore, in terms of Section 174 (1) (i) of t....
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....e to legislate on GST after 16.09.2016 and certainly after 01.07.2017. 123. Repeal of an enactment would mean that such an enactment is erased from the statute book; it would no longer be in existence. This aspect was gone into by the Gujarat High Court in Reliance Industries Limited (2 supra). It has been held as follows: "68. Effect of repeal at common law-Repeal obliterates the statute as if it has never been enacted: 68.1 Under the common law, a statute after its repeal is completely obliterated as if it has never been enacted, except as to the transactions past and closed. 68.2 Crates on Statue Law, 7th Edition, at pages 411-412 states the principle as under: "When an Act of Parliament is repealed, said Lord Tenterden in Surtees v. Ellison 1829 9 (B&C) 750, 752; 7 L.J.K.B. 335, it must be considered (except as to transactions past and closed) as if it had never existed. That is the general rule'. Tindal C. J. states the exception more widely. He says (in Kay v. Goodwin MANU/INOT/0001/1830 : 1830 6 ving 576 ; 8 LJ CP 212); The effect of repealing a statute is to obliterate it as completely from the records of the Parliament as if it had never been passed; and it must b....
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....e 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." 68.6 The apex court in Mohan Raj v. Dimbeswari Saikia, MANU/SC/8641/2006 : AIR 2007 SC 232, has quoted the above passage with approval in paragraph 23 which is quoted below: "23. It is now well settled that such Repealing Act shall be construed to have not taken away the accrued right of a person. In G.P.Singh's Principles of Statutory Interpretation, (10th Edn.) 2006 at page 631, it is stated: "Under the common law rule the consequences of repeal of a statute are very drastic. Except as to transactions past and closed, a statute after its repeal is as completely obliterated as if it had never been enacted. The effect is to destroy all inchoate rights and all causes of action that may have risen under the repealed statute. Therefore, leaving aside the cases where proceedings were commenced, prosecuted and brought to a finality before the repeal, no pr....
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.... shall not affect continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 128. Article 367 of the Constitution of India speaks about the interpretation of the Constitution of India. Clause (I) of Article 367 is relevant. It says that unless the context otherwise requires, the General Clauses Act, 1897, subject to any adaptations and modifications that may be made therein under Article 372, shall apply for the interpretation of the Constitution as it applies for the interpretation of an Act of the Legislature. 129. Gujarat High Court in Reliance Industries Limited (2 supra) examined this aspect as well and held that General Clauses Act, 1897 applies only for interpretation of the Constitution but in respect of other matters, such as, savings in the case of repeal etc which are unrelated to interpretation may not apply by virtue of Article 367. Section 6 of the General Clauses Act, 1897 or Sections 8/8A of the Telangana General Clauses Act, 1891 would apply only to repeal of an enactment. A Constitution Amendment Act is not or cannot be termed as an enactment. Therefore, beyond what is stated in Clause (I) of Article 367 of t....
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....ission in its 60th Report on the General Clauses Act 1897 in the context of section 8 (construction of references of repealed enactment). The relevant extract of the report is as under: "1.30. Effect of section 8 on article 367.-Will section 8 of the General Clauses Act, which provides that when an enactment is repealed and re-enacted, references to the old enactment will be construed as references to that, re-enacted one, make any difference? We do not think so. It should be noted that the words 'unless the context otherwise requires' (in article 367) mean that the General Clauses Act, section 8, is to be excluded. Even by its terms, section 8 of the General Clauses Act will not apply to the Constitution, because expression 'enactment' (which occurs in section 8) would not take in the Constitution, which is not an 'enactment'. The Constitution is supreme and is, in fact, the foundation of all enactments." 71.5 Thus, section 6 of the General Clauses Act 1897 will not apply to the Constitution (contrary view taken by the Allahabad High Court in the case of Farzand v. Mohan Singh, MANU/UP/0018/1968 : AIR 1968 All 67 (73). However, no reasoning has been giv....
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....g into force of the Constitution Amendment Act on 16.09.2016, it was so promulgated within the window period of one year as provided by Section 19 of the Constitution Amendment Act. At this stage we may mention that following the Constitution Amendment Act, State of Telangana enacted the TGST Act with effect from 01.07.2017. 134. Before we deal with the Telangana Ordinance No.2 of 2017, we may note that power of the Governor to promulgate ordinance is traceable to Article 213 of the Constitution of India. Article 213 provides as follows: "213. Power of Governor to promulgate Ordinances during recess of Legislature.-(1) If at any time, except when the Legislative Assembly of a State is in session, or where there is a Legislative Council in a State, except when both Houses of the Legislature are in session, the Governor is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such Ordinances as the circumstances appear to him to require: Provided that the Governor shall not, without instructions from the President, promulgate any such Ordinance if- (a) a Bill containing the same provisions would under this Constitution....
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.... which call for immediate action, he may promulgate such Ordinance. Clause (2) clarifies that an Ordinance so promulgated under Article 213 of the Constitution shall have the same force and effect as an Act of the Legislature of the State assented to by the Governor. However, every such Ordinance shall be laid before the Legislature and shall cease to operate at the expiration of six weeks from the reassembly of the Legislature. Clause (3) says that if an Ordinance makes any provision which would not be valid if enacted as an Act of the Legislature assented to by the Governor, it shall be void. 136. As noticed above, the Ordinance was promulgated by the Governor on 17.06.2017. As per preamble to the Ordinance, it is stated that Government of India had enacted the CGST Act and Government of Telangana had enacted the TGST Act. But both the Acts had not been brought into force. Referring to the provisions of the VAT Act, it is stated that it empowers the State Government to levy tax on alcoholic liquor for human consumption and on petroleum products. According to the Constitution Amendment Act, levy of tax on those petroleum products and alcoholic liquor for human consumption is with....
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....he Second Amendment Act had derived competence from the Ordinance since it was a continuation of the law and had come into force from the date of promulgamation of the Ordinance. Such a line of reasoning, in our considered view, has no legal substance. Therefore, it is immaterial that the Ordinance was not challenged in Court. 138. That apart, the ostensible objective of the Ordinance as could be discerned from the preamble is to save any investigation, assessment, recovery of dues, legal proceedings etc., pending on the date of coming into force of the Constitution Amendment Act which is perfectly understandable and valid. But that does not mean that limitation across the board could be extended by way of amendment to initiate fresh proceedings, such as, fresh revision proceedings, which otherwise had become time barred. 139. With effect from 16.09.2016 the Constitution was amended by virtue of the Constitution Amendment Act. While Article 246A was inserted immediately after Article 246, the earlier Entry 54 of List II was substituted by the new Entry 54, in the process denuding the States from making any law except on the sale of petroleum crude, high speed diesel, motor spirit....
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.... in enacting the Constitution Amendment Act. This is because it would give us a clear idea as to why the Constitution Amendment Act was brought about and why the Second Amendment Act cannot be sustained being completely inconsistent with the scheme of the Constitution Amendment Act and being denuded of its legislative competence. In Baiju A.A. (10 supra), Kerala High Court held as follows: 20. There is yet another aspect of the matter. It is trite that when a Court judges the constitutionality of a legislative enactment it should try to sustain the validity of the enactment to the extent possible and it should strike down the law only when it is impossible to sustain it, State of Bihar v. Bihar Distillery - [MANU/SC/0354/1997 : JT (1996) 10 SC 854]. At the same time, the Court must proceed to determine the intention of the Parliament, not only from the language used in the statute but also from surrounding circumstances and an understanding of the mischief that was sought to be remedied by the statute. When one applies the said test to the events that took place after the CAA, 2016, it cannot but be noticed that the very purpose of the CAA was to bring about a change in the syste....