TaxTMI 
TaxTMI 
2022 (12) TMI 1137
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....P. MOHD RAFIQ., SR. GP. VK. SHASUDHEEN., 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 th....
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....Ministers has designed the road map for implementing 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 om....
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....entioned in sub-section (1) or section 173 shall not,- (a) revive anything not in force or existing at the time of such 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, int....
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.... provisions, and the sunset clause, and rejected the writ prayers. Hence the Writ Appeals. 11. We have heard the learned Counsel, P B Krishnan, A Kumar, K P Abdul Azeez, and Bobby John. The 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 servi....
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....of Entry 54 of List II of the Seventh Schedule. The contemporaneous power to tax by the State Legislature relates to Article 246-A of the Constitution. The result is that the State Legislature does not have the ability to legislate 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) ....
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....to assess to tax the returns already filed, and no vested or accrued right to reopen the assessment or reassess the tax liability is available. In the preface to our deliberation, we have referred to Learned Hand on interpretation. The catena 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 Con....
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....SCC 496] 141. In General Electric Co. v. Renusagar Power Co (1987) 4 SCC 137, it was held: "As often enough pointed out by us, words and expressions used in a judgment are not to be construed in the same manner as statutes or as words and expressions defined in statutes. We do not have 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 avoide....
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..... Under Article of the Constitution, no tax shall be levied or collected except by authority of law. It is thus explicit that not only the levy, but also the collection of a tax must be under the authority of some law. The authority of law refers to a valid law which in turn would mean that the tax proposed to be levied must be within the legislative 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 a....
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....f the repeal of Statutes this rule [i.e., the Central Rule stated above] stands modified by Section 6 of the General Clauses Act". The Supreme Court has considered that the Central Legislature passed the "Repealing and Amending Act, 1947 (Act 2 of 1948)". Among other Acts and Ordinances repealed was Ordinance 12 of 1946. The Supreme Court recorded that when 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 fo....
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....included in the taxable turnover of a dealer or not became no more res Integra with the judgment in Hyderabad Asbestos Cement Products Limited v. State of Andhra Pradesh (1969) 24 STC 487. While answering this controversy, the dissenting judgment of Hon'ble Mr Justice Bhagwati, as he then was, held that the tax payable is ascertained when the Assessing Authority makes the 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 singu....
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....on/liability arising before 16.09.2016 or not? 30. Before one arrives at 08.09.2016, when the CAA 2016 was enacted, resulting in Constitutional Amendments, a few milestones in the journey of bringing into existence tax on the supply of goods and services from the Value Added Tax regime are noted: 30.1 The Empowered Committee of State Finance Ministers, through their report dated 30.04.2008, had submitted 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 purch....
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....ods or services or both, and, in effect, legislative competence to both the Centre and States is conferred by the constitutional amendments. Thereby, several indirect taxes are subsumed into GST, resulting in CGST and SGST on the supply of goods and services. The narrative is necessitated for dealers' arguments assume that in the bargain of concurrent power to levy tax on the supply of goods and services, the State 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 ....
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....f import or export. Originally, States could not levy and collect tax on specific Interstate transactions. With omitting Clause (3), now even inter-state transactions of that nature would attract GST. 366 Definitions Inserted Three definitions have been added to the Constitution: (12A) Goods and Services Tax; (26A) Services; and (26B) State. 368 Power of Parliament to amend the Constitution and procedure therefore Amended As regards provisions and laws regarding GST Council, Parliament has been 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 narcot....
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....e Parliament and the State Legislature. 35.1 On 16.09.2016, the CAA 2016 Gazette and consequential amendments in the Constitution have become effective. On 22.06.2017, the State of Kerala promulgated Kerala State Goods and Services Act, Ordinance No.11/2017. KSGST Act, by repealing the Ordinance, was notified on 16.09.2017 [Act 20 of 2017]. The steps envisaged by Section 19 are taken within one year from 16.09.2016. The argument on legislative competence rests on the alleged overshooting of the legislative measure taken in Section 174(2) of the KSGST Act beyond one year. The consideration of the core issue turns upon the interpretation 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....
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....ples of strict construction of taxation Statutes: "A taxing statute is to be strictly construed. The well-established rule in the familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and Lord Simonds, means: "The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words.' In a classic passage Lord Cairns stated the principle thus: 'If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within 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 A....
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....e or other competent authority to repeal or amend the laws inconsistent with amended constitutional provisions and mandate must be understood in the background of the distribution of fiscal powers or entries existing at that point in time between the Centre and the State. The words 'to repeal' or 'to amend' used in Section 19 of CAA 2016 mean and presuppose that the State has the power, the State can repeal the laws inconsistent with amended Articles. If laws inconsistent with the GST regime are amended or repealed by an act of Parliament, there is nothing for the State Legislature to do. The CAA 2016, speaking through Section 19, called upon States to come on board the GST regime by repealing and enacting new 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 su....
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....n of constitutional provision/constitutional amendment act, repeal, amend, substitution, transitional provision or a sunset clause. There is no debate on the principles per se, but their applicability to the case on hand is the crux. In our view, most of the judgments cited are not on point. 37.1 In the judgment under appeal, the learned Single Judge, in great detail, has considered the concepts of 'repeal', 'amend' and also 'substitute', 'transitional provision', and the 'sunset clause'. [See paragraphs nos.92 to 99 in judgment in W.P.(C) No.11335/2018] 37.2 In Ashok Tanwar v. State of Himachal Pradesh (2005) 2 SCC 104 the Supreme Court held that the constitution is intended to serve the needs of the day when it was enacted 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 i....
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....ve, amending or repealing enactments, it commonly also includes transitional provisions which regulates the coming into operation of those enactments and modify their effect during the period of transition. Where an Act fails to include such provisions expressly, the court is required to draw such inferences as to the intended transitional arrangements as, in the light of interpretative criteria, it considers Parliament to have intended. As stated by Thornton, The function of a transitional provision is to make special provision for the application of legislation to the circumstances which exist at the time when the legislation comes into force 'and that' what appears to be the plain meaning of a substantive enactment is often modified by transitional provisions 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....
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....India." 69.2 Thus, the General Clause Act applies only to the interpretation of Constitution. The General Clauses Act defines various terms in section 3. These definitions will apply for the interpretation when these words are employed in the Constitution. Apart from the definition, Section 16 (power to appoint to include power to suspend or dismiss), Section 21 (Power to issue to include power to add to, amend, vary or rescind Notification, Orders, Rules or Bye-laws), etc. which are general rules of construction and which are otherwise in accord with the common law may also apply for the interpretation of the Constitution. 69.3 Therefore, perhaps, the other matters such as the savings in the case of repeal (Section 6), revival of repeal enactments (Section 7), construction of references to the repealed enactments (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 p....
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....repeal and saving are also examined in the Reliance Industries Ltd, and the following paras are excerpted. xxx xxx xxx 74. Possibility of amendment of a repealed Act, after its repeal when it is not in operation. 74.1 The Madras High Court in the case of Kalyanam Veerabhadrayya v. King, AIR 1960 Mad 243 held that a repealed Act which is non-existent cannot be amended unless the competent legislature revives or re-enact the repealed Act and then make amendments to it. 74.2 The facts in the case before the Madras High Court were these: The Maintenance of Public Order Act, 1947 was enacted for a period of one year. However, the Act provided that the Provincial Government is empowered to extend the operation of the Act beyond the period of one year. This power was held to be bad as it amounts to delegation of legislative function. The Madras Maintenance of Public Order Removal 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 rev....
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....sed, it can be retrospectively amended to affect such transactions even after its repeal. Thus, when Rule B made under Article 309 of the Constitution substitutes Rule A, which in effect means that A is repealed and B is enacted in its place, A can be amended retrospectively for the period during which it was in operation to validate transactions past and closed. In the case from which the above principle is deduced, a rule permitted compulsory retirement of a Government servant by paying period the retired in payment of an three months salary. This rule was later repealed by substituting another rule in its place. During the was in operation, a Government amount was as salary but which was found on calculation later to be little short of three months salary making the retirement invalid. The rule was after its repeal amended for the period it was in operation to retire a Government servant forthwith without paying him three months salary 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 ....
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....016 is an act of Parliament and must be on the language of Section 19 of CAA 2016. Considering the purpose and object of the new regime, it is challenging to roll out the GST regime with the break of day and the sun's rising. Section 19, in a concise form, authorized the States to repeal or amend the laws contrary to the amended provisions of the Constitution within one year, and the outer limit for such exercise is one year from 16.09.2019. As rightly pointed out by Mr. Mohammed Rafiq, no State, after the constitutional amendments came into operation, could take the risk of firstly, making its legislature for tax on the sale of goods and services and alternatively not making sufficient saving provision for exigencies covered by the State Act, i.e., the KVAT Act, while repealing the laws inconsistent in terms of Section 19 of CAA 2016. 38.1 The marginal notes of Section 19 describe Section 19 as a transitional provision. Section 19 reads thus: "19. Notwithstanding anything in this Act, any 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 o....
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..... In other words, instead of providing any saving mechanism through Section 19 of CAA 2016 or any other Section, the States are empowered to amend or to repeal, which authority would mean and include the power to provide for savings as well. The repeal of an Act is again by the Legislature competent to do so. Once the competence to repeal by the State Legislature is concurred by the Dealers, the competence to legislate a saving clause is a shadow to the primary power. A similar challenge was raised in the Karnataka High Court in M/s. Prosper Jewel Arcade LLP v. The Deputy Commissioner Judgment dated 25.03.2021 in WA No.3052/2018 and the Division Bench held that the State Legislature is competent under Section 19 to repeal and also provide for saving as in Section 174(2). 39. We have kept in our perspective the principle on which the constitutional amendments are to be interpreted, the purpose of the proposed amendment, and the transitory provisions provided for migration from the VAT regime to the GST 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, le....
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....ts". 144. In other words, the repeal has not affected "any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication, and any other legal proceedings or recovery 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 and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed." 145. Collaterally it follows that all the judicial and quasi-judicial proceedings arising from the above contingencies, too, stand saved." 40. The learned Single Judge pithily has explained the power of the State Legislature before 16.09.2016 and post 16.09.2017. We, for these reasons, hold that the argument under Article 265, read with Section 19 of the CAA 2016, is untenable, as the Legislature, by operation of Section ....
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....(i) Section 19 of CAA 2016 confers the power to repeal the earlier enactments dealing with indirect taxes. (ii) As a corollary to such power, all ancillary powers, such as the saving clause, necessary to exercise the main power are included. (iii) The Gujarat and Karnataka High Courts have held that the power to repeal includes the power to save the repealing provisions. (iv) The power to repeal or amend inhere or ingrained with the power to enact saving clause as well. (v) Any other construction on Section 19 of CAA 2016 would negate the presumption against ineffectiveness presumed in favour of competence would follow inevitably from circumstances that (a) interpretation always depends on context; (b) the context always includes evident purpose; (c) evident purpose always includes effectiveness. (vi) The learned Single Judge has examined the question on authoritative principles and rendered legal and correct findings on the competence of the State Legislature. We are in full accord with the conclusions recorded in the impugned judgment. The point is answered against the Dealers and in favour of the State. ....
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....he suo motu revisional power of the Deputy Commissioner and the Commissioner. The conspectus of indirect taxes under the KVAT Act is that the dealer is obligated to pay the Government the tax payable on the returns for the exigible event of sale or purchase. The exigency in a given case, i.e., non-filing of correct returns or non-payment of correct VAT by a Dealer, is taken care of by reassessment, best judgment, suo motu revision, etc. In other words, a return filed accompanied by all statements, records and tax payable on the return is deemed to have been assessed under Section 21 of the Act. The converse of the example is that where the Dealer does not properly reflect the taxable turnover, the Department, on verification under Section 23 of the KVAT Act or under Section 25 of the KVAT Act, gets jurisdiction to reassess the return and determine the tax liability of a dealer. The extended mechanism to protect the revenue of the State is covered by Sections 56 and 58 of the KVAT Act. 44. We appreciate and note that under the Scheme of the KVAT Act, several obligations arise for performance by the Dealer, and jurisdictional rights are conferred on the Officials of the Department....
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.... limitation prescribed in respective Sections. (7) Till the period of limitation prescribed under Section 25, illustratively stated, is over, the Dealer is said to have been not discharged from the legal obligation, ripening into a right or vested right. 45.1 Assuming a right in favour of the Dealers, contrary to the scheme of KVAT, would be illegal. To narrate his case, he juxtaposed the view taken by this Court in Commercial Tax Officer v. Najeem 2018 (3) KLT 877, which considered the stage at which a right is said to have been accrued in favour of the Dealer on account of completion of the period of limitation. Conversely, it is argued that even before the expiry of any of the timelines under the KVAT Act, the dealers claim a right etc., because the KVAT Act is repealed. According to him, the argument is a contradiction in terms. 45.2 Lastly, it is argued that the State Legislature is competent to make transitory arrangements within the time granted by Section 19 and the State Legislature in exercising its power enacted saving clause. The implementation of GST does not efface the legal obligations of the Dealers subject to other limitations under the KVAT Act. The....
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....ct. The consequence of such a conclusion is that clauses in Section 174(2) are within the competence of the State Legislature. To escape the saving clause's effect, the arguments noted above are canvassed. In our view, the argument proceeds on the assumption that with the repeal of the KVAT Act, an absolute right in favour of Dealers erasing and effacing every legal obligation under the KVAT Act has been attracted. The purpose of savings is intended to have certainty on initiation, enquiry, etc., even after the repeal is given effect. 48. Statutory obligation means an obligation arising under a Statute. Legal obligation means an obligation that derives from the operation of law. These obligations are discharged by duly complying with the requirement thereof, or the obligation stands discharged with the efflux of limitation. The third way now canvassed is that since notices are issued after 01.07.2017, the State cannot proceed to recover the amount. Our view is that the rolling over to the GST regime does not automatically liquidate the obligations fastened on the Dealers and rights and functions conferred on the machinery to enforce the obligation or liability said to have b....