TaxTMI 
TaxTMI 
2022 (12) TMI 1137
X X X X Extracts X X X X
X X X X Extracts X X X X
....EN., GP M.M. JASMIN JUDGMENT S.V. Bhatti, J. The writ petitioners are the appellants. The Writ Appeals are directed against the common judgment dated 11.01.2019 in W.P.(C) Nos.11335/2018 and batch. A few of the Writ Appeals are independently disposed of following the common judgment dated 11.01.2019. We refer to the appellants as 'Dealer' and respondents as 'Revenue' for consistency in referring to the parties. 2. This Court, in this common judgment, would be considering the challenge to Section 174(2) of the Kerala State Goods and Services Tax Act, 2017 (short 'KSGST Act'). In the analysis of these jurisprudential and constitutional issues, we will advert to a few Sections in the Constitution (101st Amendment) Act, 2016 (for short 'CAA 2016'); Kerala Value Added Tax Act, 2003 (for short 'KVAT Act'); The General Clauses Act, 1977 (for short 'GC Act'); the Constitution of India (for short 'Constitution'); and the Kerala Interpretation of Statutes and General Clauses Act, 1897 (for short 'KGC Act'). With effect from 01.07.2017, by Article 246A of the Constitution, the levy of tax on the supply of goods or services or both are made by the Centre and States depending on the exigibl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng GST. Finally, on 19.12.2014, CAA Bill 2014 was introduced in the Lok Sabha. On 06.05.2015, the CAA Bill was passed by the Lok Sabha. The Rajya Sabha referred the Bill to the Select Committee and had the advantage of the Select Committee's report dated 22.07.2015. Finally, on 03.08.2016, the Bill was passed by Rajya Sabha with the amendment suggested by the Select Committee, and on 08.08.2016, the amended Bill was passed by the Lok Sabha, later the States ratified the amendment, resulting in the assent of the President of India on 08.09.2016. On 08.09.2016, CAA 2016 was notified in the Gazette of India. 5. The constitutional amendments carried out through the CAA 2016 have conferred sufficient power and legislative competence to both the Parliament and the States to levy tax on the supply of goods or services or both. The summary of amendments made to the Constitution is as follows: "(i) Articles inserted: 246A, 269A, 279A, 366 (12A), 366 (26A). (ii) Articles amended: 248, 249, 250, 268, 269, 270, 271, 286, 368, Schedule VI, Schedule VII, List I, Entry 84; List II. Entries 54 and 62. (iii) Articles omitted: 268A, Schedule VII, List I, Entries 92 & 92C; Schedule VII List II....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch amendment or repeal; or (b) affect the previous operation of the amended Acts or repealed Acts and orders or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Acts or repealed Acts or orders under such repealed or amended Acts: Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or (d) affect any tax, surcharge, penalty, fine, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Acts or repealed Acts; or (e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....other learned counsel appearing for the appellants have adopted the arguments without burdening the Court with repetitive submissions. We have also heard the learned Special Government Pleaders (Taxes), Mohammed Rafiq, Senior Government Pleader V K Shamsudheen and Government Pleader M M Jasmine for the State. 12. The learned Counsel advanced detailed and exhaustive arguments touching upon the concepts or issues considered in the impugned judgment. A host of citations is relied upon and commended for our consideration in interpreting the Entries in List II of the Seventh Schedule, Section 19 of the CAA 2016 etc. Before we cut out the task in the batch of appeals, we reckon the view of Justice Learned Hand on interpretation "that the theory of legal interpretation is discussed interminably and often so obscurely leaves even the most intelligent readers, or especially the most intelligent readers, befuddled". [See Learned Hand proceedings in commemoration of 50 years of federal judicial service]. So, the question then posed is why would we add to the number? We do not intend to engage in interminable discussion. 13. Far from proposing yet another novel approach, we remind ourselves ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate the saving clause in Section 174(2) of the KSGST Act, as the saving clause deals with tax on the purchase or sale of goods. Article 246-A is a simultaneous power to legislate on the supply of goods and services but not on the sale and purchase of goods exercised simultaneously by the Parliament and the State Legislature. Therefore, Article 246-A is unavailable to the State Legislature to justify legislation of Section 174(2) of the KSGST Act. 15.3 Section 19, a transitional provision in CAA 2016, has two facets, namely that the laws inconsistent with the provisions of the Constitution as amended by CAA 2016 shall continue to be in force (a) until amended (b) or repealed by a competent legislature or other competent authority, secondly 'until the expiration of one year from such commencement, namely 16.09.2016. Being so, the scheme of repeal and savings taper beyond any of the limitations prescribed by Section 19 of CAA 2016. Therefore, Section 174(2) of the KSGST is unconstitutional. 15.4 The State Legislature does not have the competence to make laws on savings. Article 246-A confers legislative competence and not a field by referring to which the State Legislature could hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of citations is filed in the compilations, but a few citations are relied on. 17. The learned counsel for the Dealers in support of the two contentions, namely that the State Legislature firstly lacks the competence to enact Section 174(2) of the KGST Act and secondly, that the saving clause in Section 174(2) either under Section 6 of Interpretation and General Clauses Act (Kerala) cannot survive to live beyond 16.09.2017 have placed reliance on a few citations. 18. Before embarking upon the applicability of the cited judgments and the ratio laid down to the question on hand, we refer to what constitutes a binding precedent, ratio decidendi, and obiter dicta of the judgments. The provisions for interpretation in the batch of appeals arise under CAA 2016, the Articles of Constitution, and provisions of the KSGST Act. In more than one sense, the Articles/provisions of law we examine are unique to the standard scheme of things under the Constitution before 08.09.2016, i.e., the day on which both Houses of Parliament passed CAA 2016. 19. In Islamic Academy of Education v. State of Karnataka (2003) 6 SCC 697, the Supreme Court, in paragraph 2 of the judgment, held that: "The ratio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave any doubt that when the words "adjudication of the merits of the controversy in the suit" were used by this Court in State of U.P. v. Janki Saran Kailash Chandra (1973) 2 SCC 96, the words were not used to take in every adjudication which brought to an end the proceeding before the court in whatever manner but were meant to cover only such adjudication as touched upon the real dispute between the parties which gave rise to the action. Objections to adjudication of the disputes between the parties, on whatever ground are in truth not aids to the progress of the suit but hurdles to such progress. Adjudication of such objections cannot be termed as adjudication of the merits of the controversy in the suit. As we said earlier, a broad view has to be taken of the principles involved and narrow and technical interpretation which tends to defeat the object of the legislation must be avoided." 142. In Rajeshwar Prasad Mishra v. The State of West Bengal reported in AIR 1965 SC 1887, it was held: "Article 141 empowers the Supreme Court to declare the law and enact it. Hence the observation of the Supreme Court should not be read as statutory enactments. It is also well known that rat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... competence of the legislature, imposing the tax and the law must be validly enacted, I must not also contravene the specific provisions of the Constitution and the tax in question must be be authorised by such valid law. The expression "levy and collection" are used in Article 265 in a comprehensive sense and are intended to include the entire process of taxation commencing from taxing statute to the taking away of the money from the citizen. What the Article enjoins is that every stage in this entire process must be authorised by the law. This being the position, in the case in hand, several tax legislations enumerated in the Schedule to the Validation Act having been declared ultra vires, on the ground that the State Legislature had not the legislative competence to make the legislation, there existed no authority of law for making any levy or collection of tax and cesses on minerals. The Parliamentary intervention by enacting the Validation Act and giving it retrospective effect and making the law existed till 04.04.91." 21. The ratio decidendi laid down in Tata Iron and Steel Co. cannot be applied to the circumstances in which the competence of the State Legislature to incorp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the Defence of India Act itself could be said to be repealed by Act 2 of 1948 and had not expired by efflux of time, this saving clause undoubtedly permitting prosecution for offences was also dead. The foremost question for consideration is the scope and, purpose, effect of Section 19 of CAA 2016 during and post the currency of its validity. Hence, we consider that the said judgment, from the mere narration of the circumstances therein, is distinguishable and not applicable to the propositions for which it relied on. 24. A Division Bench of Gujarat High Court in Ravi Electronics v. Assistant Commercial Tax Commissioner (2), Enforcement (2013) 63 VST 414 (Guj) was considering a challenge to the notices issued by the Sales Tax Department of the State of Gujarat for reopening previously closed assessments. To wit, the dealer for the Financial Year 2003-04 filed the returns under Gujarat Sales Tax Act, 1969. On 05.03.2012, notice impugned in the reported judgment was issued to reopen the assessment between April 1, 2003, and March 31, 2004. The Division Bench considered the scheme of provisions such as the power of reassessment, reopening, penalty, suo motu revision etc., under the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessment under Section 10 or when the assessee himself quantifies it through the process of self-assessment under sub-section (2) of Section 7. The dissenting judgment, it is argued, has been accepted by the Supreme Court in subsequent judgment. So, the argument proceeds that the tax-determined point is crucial for taking any step by the Department post 16.09.2017. 26. We have perused the judgments commended to us during the hearing. As an illustration, we have taken out three of the strongly relied-on judgments and explained how the judgments are distinguishable and cannot be applied in all fours to the controversy on hand. We refrain from explaining further how the other judgments relied on by the counsel appearing for the Dealers are distinguishable, and the inapplicability of those precedents to the singular controversy in hand would be sufficiently clear when we take up the core questions for consideration in the following paragraphs: Section 19 of CAA 2016 27. A Statute can be said to be either perpetual or temporary. It is perpetual when no time is fixed for its duration, and such a Statute remains in force until its repeal, which may be expressed or implied. But a St....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the final version of the model and roadmap for the GST. The burden of multiple taxations under the Central Excise Act and the General Sales Tax Act etc. was felt, resulting in the introduction of VAT. Before the introduction of VAT, any commodity produced, inputs into the commodity were taxed and then after the commodity got produced with input tax load, output was taxed again. The Nation needed to lessen the burden on multiple taxations with a cascading effect. With the introduction of VAT in place of Central Excise Duty, a set-off is given, and a deduction is made from the overall tax burden for input tax. VAT was introduced in place of the General Sales Tax levy. A set-off is given from the tax burden, not only for input tax paid but also for the tax paid on previous purchases. Though the VAT regime is stated to have provided success vis-àvis indirect taxes on manufacturers, sellers, agriculturists, and consumers, it has been felt at the federal level of our confederacy that the Value Added Tax in operation still had a few shortcomings. 31. By choice, we refrain from narrating the shortcomings noted in the VAT regime for migration to One Nation One Tax or GST. But the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Legislatures have been denuded of power under the KVAT, post 01.07.2017 even for the alleged legal obligation arising before the introduction of GST. This we will consider in detail a little later in our judgment. 35. The conspectus of pre and post-amendments to the Constitution has been very well tabulated in the judgment under appeal. For continuity, we prefer to excerpt the very same tabular statement, which reads thus: Before Amendment After Amendment Impact 246A Not existing Introduced Special provision on goods and services tax conferring simultaneous legislative powers on both the Union and the States. 248 Residuary power Amended The Union's residuary legislative power is subjected to Article 246A. 249 Power of Parliament to legislate regarding a matter in the State List in the national interest Amended It gives power to the Parliament to enact any law applicable to states on the matters mentioned even in states list. GST, not mentioned in States list, is now explicitly mentioned. 250 Power of Parliament to legislate regarding any matter in the State List if a Proclamation of Emergency is in operation Amended It has a similar impact as does the amend....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... vested with the power to amend the Constitution. Sixth Schedule. Provisions on the Administration of Tribal Areas in the States of Assam, Meghalaya, Tripura, and Mizoram 8. Powers to assess and collect land revenue and to impose taxes. Amended It concerns powers to assess and collect land revenue and to impose taxes in the Tribal Areas of a few States. Seventh Schedule List I: Entry 84 Barring those excluded, the Union could levy excise duty on all other goods, including tobacco, manufactured or produced in India. The excluded ones are these: (a) alcoholic liquors for human consumption; (b) opium, Indian hemp, and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance in subparagraph (b). Amended Now excise duty is levied only on the enumerated items: (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." Entry 92 Taxes on the sale or purchase of newspapers and on advertisements published. Omitted Now, taxes on the sale or purchase of newspa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tation of Section 19 of CAA 2016. 35.2 The sheet anchor of the arguments for the Dealers is that lack of competence to legislate Sec 174 (2) of KSGST Act. (i) On 22.07.2015, the report of the Empowered Committee of State Ministers was taken forward, leading to the passing of the CAA Bill 2014 by the Parliament and on 03.08.2016 by the Rajya Sabha and the amendments made by the Rajya Sabha were accepted by the Parliament On 06.09.2016. (ii) On 16.09.2016, notification of CAA 2016 was issued. The result of enactment and notification is that Article 246-A was inserted after Article 246. (iii) The other amendments are tabulated in paragraph ... and for the present purpose, the amendments to Article 268-A, Article 269-A and Article 366(12) are noted along with amendment of the Seventh Schedule List I and List II. Entry 84 of List I is substituted. (iv) Entry 52 of List II was omitted, and Entry 54 was substituted by the amending entry. (v) By operation of Section 19 of CAA 2016 and with effect from 16.09.2016, the law relating to tax on goods or services or both in any State as of 15.09.2016, which is inconsistent with the amended provisions of the Constitution shall remain i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thin the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute.' Viscount Simon quoted with approval a passage from Rowlatt, J. expressing the principle in the following words: 'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.'" (at p. 635)" 35.6 The concluding comment of the counsel for the Dealers is that in tax Statutes, the Court does not keep within its perspective hardship in the implementation of taxing Statutes or equities. Reply of Centre and the State 36. The Centre and the States, on a consensus view on the necessity of indirect tax reforms, designed the GST regime. The object of CAA 2016 is to confer simultaneous power on the Centre and the States to levy ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....GST laws. As the State Legislature is given the Constitutional obligation to discharge, the words 'to repeal' and 'to amend' are used in Section 19 of CAA 2016. 36.3 The argument that repeal must be restricted to mean repeal alone and not to savings ignores the competence to repeal and the effect of repeal in interpreting the KGC Act. The State Legislature, when made the KSGST Act, is authorised by Article 246-A of the Constitution to legislate on intra-State tax on the supply of goods or services or both and in the same law, by recourse to Section 19, the competence of State Legislature is inbuilt in repeal mechanism so that the saving provision could be enacted simultaneously. 36.4 The indirect taxes regime in operation up to 16.09.2017 in the State has conferred the right on dealers to collect indirect taxes on the exigible event happening; the procedure for reassessment and penalty suo motu proceedings are provided in the KVAT Act to avoid evasion of indirect taxes collected by the Dealers. The amendments shall not be understood as completely effacing the obligations fastened on the dealers for the transactions made till 01.07.2017. 36.5 The Dealers' argument on lack of powe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cted and meet the needs of the changing conditions in new circumstances. Constitution has no fixed meaning, and its interpretation must be based on the experience of the people in the course of working on the Constitution. However, the same thing cannot be said about interpreting the words and expressions in a Statute. 37.3 Kept in perspective that the liberal judicial interpretation of the written constitution arises from the feeling that the function of interpreting a written constitution is very crucial to the governmental process in the Country and, therefore, the approach of the Court to the task of interpretation of Constitution has to be entirely different from that of interpreting a Statute. In interpreting a Statute, it is needless to state affects one way or the other and a limited number of persons and actions are taken within the fold of such interpretation. Per contra, interpreting the Constitution and its schedules will affect the policymaking of the constitutional process initiated by the Parliament in the Country. The Constitution is the fabric for good governance in the Country and, among other things, in clear terms, provides for structure, scheme, power, and fun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....located elsewhere in the Act. [K S Pariporrnan v. State of Kerala, (1994) 5 SCC 593]" (emphasis supplied) A temporary Statute, in the absence of a saving provision like Section 6 of the General Clauses Act, may not be construed as dead for all purposes. The effect of expiry is essentially one of the construction of the Act. 37.7 The Dealers rely on Article 367 of the Constitution and argue that the General Clauses Act or KGC Act do not apply to interpret the Constitution. Therefore, the effect of repeal is not traceable to Section 6 of the General Clauses Act. Consequently, for both reasons, viz., Section 19 does not enable making a saving clause, and General Clauses Act is not applicable. Therefore, the saving clause fails. The challenge on these lines is no more maiden for the following reasons. 37.8 A Division Bench of Gujarat High Court (Justice J B Pardiwala, as he then was, and Justice A C Rao) considered a challenge to the Legislative competence of the Gujarat Legislature to amend the Gujarat Value Added Tax Act, 2003. Through Gujarat Act No.10/2018, the State Legislature amended the Gujarat Value Added Tax, incorporating Section 84A, purporting to exclude the period of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s (Section 8), continuation of order issued under the repealed enactment and re-enacted (Section 24), etc. which are not related to interpretation may not apply by virtue of Article 367. 69.4 Further, Section 6 applies only to repeal of an enactment. Enactment is defined under Section 3(19) of the General Clauses Act to include regulation or any provision contained in any Act or regulation. However, Constitution is not an enactment. The Constitution is supreme and is, in fact, the foundation of all the enactment. This has been observed by the Law Commission 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emoval of Doubts Ordinance, 1949 was passed to declare that the Maintenance of Public Order Act, 1947 remains in force and shall continue to be in force. In these facts the court held that the amendments can be made only to an existing Act. However, the legislature is competent to revive or re-enact the repealed legislation and make amendments to it. In the facts of that case, the court held that the legislature had not done so. The relevant extract of the judgement is as under: "An amending Act is not an independent Act but an Act passed with a view to effect an improvement or to more effectively carry out the purpose for which the original law was passed. To remove doubts by a declaratory Act, there should be in existence an Act, the doubts in which have to be removed. It the Act had already ceased to be in force, a declaratory Act would have no operation. An amending Act also presumes the existence of an original Act. If the original Act, which was a temporary Act, terminated after the lapse of time, the amending Act would be inoperative." 74.3 For the aforesaid proposition, the court relied on the decision of Federal Court in the case of Jatindra Nath Gupta v. Province of B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry but entitling him to claim three months salary after retirement. This amendment was held to be valid and effective to validate the retirement of the Government servant concerned." 74.5 The above referred cases, however, are not concerned with the competence of the legislature to enact retrospective laws, but only with the issue as to whether the amendments can be made to the repealed laws. 75. Repeal of the State VAT Act is not effected by the Constitution (One Hundred and First) Amendment Act, 2016. Repeal is effected by the State GST Acts. Such Acts provide for savings of the pending proceedings. Thus, assessments can be initiated, continued and concluded in pursuance of such saving clause contained in the respective GST laws. 75.1 In respect of the pending assessments, they can be initiated, continued and concluded. This is because while repealing the VAT Acts by the State GST Act, specific savings have been provided in this regard. 75.2 This provision can perhaps be traced to Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016. Section 19 is not some section enacted under an Act of Parliament or State Legislature. It is a part of the constituti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is 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." The Section permits State laws inconsistent with the amended provision to be in force only for one year. With the completion of one year, the power to levy tax on the supply of goods or services or both is traceable to Article 246A of the Constitution. The other implication of Section 19 on a plain interpretation is that the Section calls upon the State legislatures to amend or repeal laws inconsistent with the amended Articles through CAA 2016. To amend or repeal inconsistent laws provided by the Parliament presupposes that such amendment or repeal again, as has been held by the Gujarat High Court in the Reliance Industries Ltd, is in the competence enjoined on the State legislature by Section 19. The limitation is that the legislative measure taken by the State legisl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....regime. In the impugned judgment, the learned Single Judge considers the power of the saving and transitory provisions in the paragraphs excerpted hereunder: "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 repealed a few more. As with the KVAT Act, the repeal, if it were, has not resulted in its abrogation or annihilation. So the operation of the so-called sunset clause (as provided in Section 19) has not denuded the State's power to enforce the KVAT Act in its amended form. The Act remained, with its remit reduced, though. Thus goes o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons, hold that the argument under Article 265, read with Section 19 of the CAA 2016, is untenable, as the Legislature, by operation of Section 19 of CAA 2016, is competent to amend or repeal which inhere in the State Legislature to enact a saving clause as well. It is contextual to bear in perspective the fact that in the issue in Reliance Industries Ltd case, viz., amendment was made post-GST regime and also amended to revive, concluded issues on the levy and demand of VAT. We are of the considered view that the Parliament, through CAA 2016, called upon the State Legislature to repeal or amend laws inconsistent with amended provisions through CAA 2016. The Parliament desired the State to exercise its legislative power during the window period provided by Section 19 of CAA 2016 to enact laws on the levy of tax on the supply of goods and services in their respective States. 41. The argument of the learned counsel for the Dealers sounds attractively audible; the acceptance of the said argument, in the light of the decisions referred to above and the view taken in Reliance Industries Ltd, is not tenable. Hence, we reject the argument and hold that the State Legislature is competent t....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The point is answered against the Dealers and in favour of the State. Point (ii): Whether Section 174(2) of the KSGST Act confers a right or a vested right or accrued right to proceed to reopen assessments for enforcing the legal obligation/liability arising before 16.09.2016 or not? 42. The Dealers challenge notices of reopening, orders etc., issued after the commencement of the GST regime under the KVAT Act purporting to exercise power retained through one or the other saving clause of Section 174(2) of the KSGST Act on the ground that the notices/orders impugned in the writ petitions are per se illegal, without jurisdiction and contrary to a binding precedent on the concept of a right, vested right, accrued right, legal obligation etc. 43. Before addressing the contentions on either side on the point under consideration, we would consider a few of the provisions under the KVAT Act to appreciate the rights, obligations etc, under the said Act. 43.1 Section 2(lviii) defines 'tax' meaning a tax payable under the KVAT Act. Section 6 is the charging section, which mandates that every dealer subject to the conditions stipulated in Section 6 shall be liable to pay tax on the sal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tional rights are conferred on the Officials of the Department to prevent revenue loss under the KVAT Act. 44.1 The arguments for the Dealers summed up as follows: The impugned notices are contrary to Sections 174 (2)(a)(b) and (c) of the KSGST Act since: (a) Section 174(2)(a) revives KVAT Act 2003 only to continue the proceedings and revival of pre-supposes the pre-existence of reviving a valid Act. On 16.09.2017 KVAT Act is not in force. Therefore, what is a dead letter cannot be revived? (b) Section 174(2)(b) cannot be used to invoke a fresh cause of action under the repealed KVAT Act. (c) Section 174(2)(c) saves any right etc acquired or incurred under the amended Acts, but since no liability is acquired or accrued for no action against the Dealers for the subject Assessment Years was taken during the currency of the KVAT Act. (d) Section 174(2) (d), (e) and (f) are not attracted for the very grounds available to the Dealer under section 174(2)(a), (b) and (c). The Department has failed to initiate action for any of the purposes under the KVAT Act when the Act is repealed. Therefore, the issuance of notices independently is illegal. 45. Per contra, Mr Mohammed Rafiq....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trary to the scheme and structure of the KVT Act. Explained by way of illustration, it is stated that even in respect of the return period 2016-17, also in spite of one or other contingencies referred to in Section 25 noticed, still the Department could be precluded from initiating action against such Dealer. Such interpretation affects the competence and power enjoyed by the State Legislature during the currency of the KVAT Act and is protected by the transitory provision. The liability to pay VAT is attracted with the occasioning of a taxable event and could be discharged in the mode and manner stated in the KVAT Act. 46. In Najeem's case, a Division Bench of this Court, in paragraph 32, on the concept of substitution by amendment, its legal effect has noticed thus: "32. Having gone through the gamut of decisions placed before us, both by the State and the respondent-assessees, from which we have copiously referred, we find the State's contention to be supported only by the judgment of the Full Bench of the Karnataka High Court, which we have dissented from. We have demonstrated from the various decisions of the Hon'ble Supreme Court placed before us by both the partie....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of initiation of any proceeding before 16.09.2017 is not a criterion at all in the scheme of the KVAT Act. With the applicable saving clause, what is required in law is that when steps for reassessment etc., are taken up, those steps conform to the limitation covered by the applicable Section under the KVAT Act. 49. The notices now impugned are well within the period under Section 25 or within the reasonable period under Sections 56, 58 and 67; such proceedings are covered by the saving clause of Section 174(2) of the KSGST Act. The converse of the above deliberation is that the State Legislature, however, has the power to repeal and provide for a saving clause; still, on the interpretation now suggested to various clauses, again, the provisions of the KVAT Act could be rendered ineffective. The effect of the saving clause cannot be defeated on any of the grounds now raised by the Dealers. The Dealers must complete the legal obligations, or the timelines expire to assume rights either accrued or vested. It is not the case of Dealers that beyond the period of limitation, the impugned notices are issued or orders made. The migration to GST is not an amnesty given to defaulting deal....