TaxTMI 
TaxTMI 
2024 (7) TMI 1448
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....00A of the Constitution of India; in the alternative the prayer has been made to issue a Declaration that the retrospective effect from 01.07.2017 of Section 7 (1) (aa) as unconstitutional and violative of Articles 14, 19 (1) (g) Articles 265 and 300A of the Constitution of India. 3. The petitioner's case is that the petitioner is an association under the provisions of the Travancore - Cochin Literary Scientific & Charitable Societies Registration Act, 1955. Only qualified modern medical practitioners with a valid registration in the State of Kerala under the Travancore Cochin Medical Practitioners Act, 1953 (predecessor Act of the Kerala State Medical Practitioners Act, 2021) are eligible to become members of the petitioner association. 4. Members are admitted to the petitioner association on payment of one-time admission fee. There are no shareholders. No dividends are declared, and there is no distribution of profits. Membership is not transferable. Membership can be terminated under certain specified circumstances. It is submitted that in the event of dissolution of the petitioner association, the property of the association is not allowed to be distributed among the memb....
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....cation (Nammude Arogyam) are registered separately, with a separate income tax PAN and separate GST registration. For carrying out the aforesaid activities, GST is duly remitted. 9. The petitioner had earlier constructed and sold flats to its member doctors; for that activity, the petitioner had obtained a service tax/ GST registration and duly remitted service tax / GST. It is stated that the object of the Social Security Scheme is to provide financial assistance to the families of the medical practitioners in the event of his or her death, or in the event of the member suffering permanent disability that renders the member unfit to practice the profession for life, the object is also encompass undertaking various charitable/philanthropic activities such as providing medical aid to the needy and poor, family welfare programs independently / jointly with the Government, organising blood donation camps, eye camps, promoting medical education, etc. 10. Any doctor who is a member of the petitioner may become a member of these Social Security Schemes upon payment of an admission fee which is graded depending upon the age of the doctor. The member is then required to pay an annual....
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....red to be paid by a member of the scheme, the petitioner pays such damages up to a maximum of Rs 10 lakhs for a single case and Rs 20 lakhs for multiple cases in one year. A member may also opt for enhanced protection under this scheme upon payment of a membership fee of Rs. 10,000/- p.a. The maximum compensation then payable to such a member of the scheme would be an additional amount of Rs 1 crore. 15. The petitioner's other Scheme is the Hospital Protection Scheme, to protect hospitals, clinics, and dispensaries (run by member-doctors/where member-doctors work) from litigation and from harassment by the media for any act of alleged negligence or carelessness or deficiency in service on the part of the doctors/staff. Membership fee ranges from Rs 5,000/- to Rs. 75,000/- per year depending upon the bed strength of the member institution. The maximum compensation paid by the scheme is Rs 10.00 lakhs for a single case and Rs 20.00 lakhs for multiple cases in a year. The petitioner would also engage advocates to act on behalf of member institutions and pay the related legal fees to such advocates. 16. The Kerala Health Scheme run by the petitioner association is to provide fina....
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....heme from time to time. The payments to deserving patients are made from the corpus of this fund / Scheme. 20. Mr. Aravind P. Datar the learned Senior Advocate for the petitioner submits that the petitioner association is like a member's club. Only qualified modern medical doctors are eligible to become members of the petitioner association. The property of the association is held for and on behalf of the members. There are also regional branches of the petitioner in various towns in Kerala, which are separate bodies. The petitioner association runs schemes as a self-help group. These schemes are run with an aim to help one another / their family members to tide over difficulties such as disabilities, death, legal action, etc. The members, pool in their money by way of admission and annual subscription, which is distributed to individual members / their families upon the happening of the events (death, disability, etc). The petitioner association has guest houses, and it lets out rooms to its traveling members / their guests. Many charitable activities, such as HIV awareness, End-TB campaigns, etc., have been carried out by the association. The activities of the Petitioner Socie....
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....defined in broader terms to include a tax on the supply of goods by an unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. However, the Supreme Court in State of West Bengal v. Calcutta Club [2019 (29) GSTL 545 (SC)] emphatically held that the principle of mutuality continued even after the 46th Amendment. Learned counsel for the petitioner has placed reliance on the judgment of Ranchi Club v. Chief Commr of Central Excise & Services Tax [ 2012 SCC OnLine 306], wherein it was held that the sale and services would require the existence of two parties. However, with respect to the clubs, and services provided by the club to its members, there is no service that would affect the service tax as it would not be a service by one to another as there would be no existence of foundational facts between two legal entities in such a transaction. 25. The Parliament brought in the 101st Amendment by inserting Article 246A, empowering the Parliament and the State legislatures to levy goods and services tax under Article 246A. Article 366 was also amended, and 366 (12A) was inserted by the 101st Constitution Amendment, w....
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....hat the effect of the judgments may be nullified by the legislative act removing the basis of the judgment. However, where a judgment recognizes a position of law - especially a well-entrenched position in a fairly long time and the said position determines the scope of the power conferred on a legislature by constitutional provision, then any amendments to that position of law can be made only by a constitutional amendment and not amending statute by legislature. 30. Alternatively, it has been submitted that the provision under Section 7 (1) (aa) and the explanation thereto cannot be given retrospective operation. 31. In view of the settled position of law in a series of judgments, including in Calcutta Club (supra), GST on clubs and associations prior to the insertion of Section 7 (1) (aa) and explanation thereto was not applicable. The insertion of Section 7 (1) (aa) by the Finance Act 2021 has created a new levy and therefore, the new provision inserted for determining input tax credit cannot be a retrospective operation. 32. The petitioner was not collecting any GST in view of the settled position of law from its members on transactions done. By way of amendment in th....
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....ubmits that the amendment in Section 7 by Finance Act 2021, particularly the insertion of Section 7 (1) (aa) in the GST Act 2017 also falls foul of Government constituted committee report pursuant to the Vodafone saga. The Standing Committee on Finance presented its report on the current economic situation and policy options to Parliament on 30.8.2012. The Committee inter alia found that the investment climate in the country had suffered a serious setback, and investors' confidence had been hit mainly because of the concerns over the impact of retrospective tax laws and new General Anti Avoidance Rules (GAAR). The Government then constituted an Expert Committee headed by Dr. Parthasarathi Shome on GAAR on 13.07.2012. After examining the matter in some detail, the committee submitted its report and conclusions of the report of the committee are summarised as below:- "The Committee concluded that retrospective application of tax law should occur in exceptional or rarest of rare cases, and with particular objectives: first, to correct apparent mistakes/anomalies in the statute; second, to apply to matters that are genuinely clarificatory in nature, i.e. to remove technica....
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....titioner association renders services to third parties, such as waste collection, equipment production, or advertisements in the petitioner's magazine, these activities are registered, and GST is paid. The petitioner association has paid GST of Rs.16 crores over the last year on these activities/services rendered to third parties. 40. The submissions/contentions made on behalf of the petitioners have been refuted by, Mr. A.R.L Sundaresan, the learned Senior counsel and the learned Additional Solicitor General of India. He has submitted that a combined reading of Articles 246 (A) and 366 (12A) would provide that the goods and services tax means any tax on the supply of goods and services or both. As such, the parliament and the State legislature have concurrent powers to make laws with respect to goods and services tax viz tax on supply of goods and services or both. The power conferred by the Constitution on the parliament and the State legislature is to make laws to levy tax on the supply of goods and services. There is no reference to the term 'person' either under Article 246A or 366 (12A). When there is no reference to the term 'person' in the Constitution for the levy of go....
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....been held that the legislature enjoys a greater latitude for classification, and it is open to the Legislature to identify areas of evasion of tax and brings in provision to plug the loopholes even by deeming fiction or artificial definitions. 44. The learned ASG has submitted that the vires of taxation law can be tested on the following grounds; "1) There is always a presumption in favor of the Constitutionality of a law made by the Parliament or the State Legislature. 2) No enactment can be struck down by saying that it is arbitrary or unreasonable or irrational but some Constitutional infirmity has to be found. 3) The Court is not concerned with the wisdom, justice, or injustice of the law as Parliament and the State Legislature are supposed to be alive to the needs of the people whom they represent and they are the best judge of the Community by whose suffrage they came into existence. 4) Hardship is not relevant in pronouncing the Constitutional validity of a fiscal statute or economic law, and 5) In the field of taxation, the legislature enjoys a greater latitude for classification." 45. It is further submitted that the judgm....
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....nal. 49. In respect of the challenge to the retrospective amendment in Section 7 (1) (aa), it has been submitted that the Legislature has the power to make laws prospectively and retrospectively. Clarificatory amendments are always retrospective in operation. The amendment introducing Section 7 (1) (aa) and the explanation are only clarificatory. The liability was always there even under Section 7 (1) (a) of the Act. 50. It has been further submitted that the judgment in Jayam & Co (supra) is not applicable in the facts of the present case as no vested right of the petitioner association is being taken away by the retrospective amendment in the present case. The only liability which has always been on the petitioner is sought to be enforced by way of the amendment. 51. The doubt which arose in view of the judgment of the Supreme Court in the case of Calcutta Club(supra), with regard to the correct position of levy of tax on transactions between club/association and its members, and therefore, the amendment had been made by the parliament to remove any such doubt and the basis of the judgment in Calcutta Club (supra) was corrected, and therefore, it was made with retrospect....
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....ion and artificially deeming a club/association and its members to be two separate persons. 57. Second contention is that Article 246 (A) empowers the Parliament and the State Legislature to enact laws to tax on supply of goods or services or both. The supply of goods and services means supply by one person to another and unless the Constitution provides for taxing the supply of goods or services where the principle of mutuality involves such as sale/services to its members by amending the legislation on the subject, the principle of mutuality could not have been done away with. The submission is that the amendment is ultra-virus the provision of the Constitution. Such a levy could have been only by amendment in the Constitution and not otherwise. 58. The relevant provisions of the Constitution and GST Act (the KGST Act) are extracted hereunder:- Article 246(A):- (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. Parliament has exclusive power to make laws with respect to go....
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.... the activities of club/association could not be brought within the ambit of GST Act. 60. In support of the submission, he has placed reliance on the judgment of Gannon Dunkerly (supra) and Calcutta Club (supra). 61. The judgment in the case of Gannon Dunkerly (supra) involved the question of the construction of entry 48 in list 2 of Schedule 7 to the Government of India Act, 1935, which provided "Tax on the sale of goods." The court was dealing with a levy of tax on the sale of goods over the materials which was used in construction and building under a contract. 62. The Supreme Court held that the legislature had the power to levy tax only on the "sale of goods." The sale of goods has not been defined in the Constitution, the court opined that the definition of the sale of goods under the Sale of Goods Act ought to be adopted and if so, the event of sale of goods would take place only if there is a transfer of title in movable property for consideration under a contract. 63. It was also held that when goods or materials are used in the construction of a building under a building contract, and the constructed building is transferred, there can be a definite identity of....
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....erred by s. 100 to make laws with respect to the matters enumerated in the Lists, to impose a tax on construction contracts and that before such a law could be enacted it would have been necessary to have had recourse to the residual powers of the Governor General under s. 104 of the Act. And it must be conceded that a construction which leads to such a. result must, if that is possible, be avoided. Vide Manikkasundara v. R. S. Nayudu (1). It is also a fact that acting on the view that Entry 48 authorises it, the States have enacted laws imposing a tax on the supply of materials in works contracts, and have been realising it, and their validity has been affirmed by several High Courts. All these laws were in the statute book when the Constitution came into force, and it is to be regretted that there is nothing in it which offers a solution to the present question. We have, no doubt, Art. 248 and Entry 97 in List I conferring residual power of legislation on Parliament, but clearly it could not have been intended that the Centre should have the power to tax with respect to works constructed in the States. In view of the fact that the State Legislatures had given to the expression " ....
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....c liquor for human consumption. Thus, a combined reading of Article 246A and Article 366 (12A) provides that goods and services tax means any tax on the supply of goods and services or both. The parliament and State Legislature would have the power to make laws with respect to goods and services tax viz, Tax on supply of goods and services or both. 66. Article 246A or Article 366 (12A) does not have any reference to the term Person. The tax is on activities, i.e., the supply of goods and services or both. Therefore, I am of the view that the Parliament as well as the State Legislature, in the exercise of their power under Article 246A r/w Article 366 (12A), would be empowered to Legislate for imposing tax on the supply of goods and services, irrespective of the person / individual involved. 67. The Constitution does not put any restriction or limitation from defining a person(s) for the purpose of levy of GST. This supply of goods and services may be by club / association to its member and therefore, the principal of the mutuality will not come in a way of the Parliament or the State legislature to enact law for tax on supply of goods and services. 68. The Supreme Court in....
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.... same nature, as those of Parliament itself. The established of courts of Justice, when a question arises whether the prescribed limits have been exceeded, must of necessity determine that question; and the only way in which they can properly do so, is by looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by which, negatively, they are restricted. If what has been done is legislation, within the general scope of the affirmative words which give the power, and if it violates no express condition or restriction by which that power is limited (in which category would, of course, be included any Act of the Imperial Parliament at variance with it) it is not for any Court of Justice to inquire further, or to enlarge constructively those conditions and restrictions. In Kesavananda v. Kerala this Court reaffirmed the correctness of the principle laid down in Burah (supra) 22. In Bharat Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon, this court held that the provisions of Art.276 of the Constitution which precludes State Legislature from making a law enabling a local authority to impose a tax on profession etc. in....
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....ror. The High Court in that case had taken the view that the mortgagee had failed affirmatively to prove its bona fides and the said conclusion was based upon the consideration that the General Clauses Act defined good faith as nothing is said to be done or believed in good faith which is done or believed without due care and attention. It is in that context this Court while analyzing the scope of provisions of the General Clauses Act observed that the General Clauses Act is enacted in order to shorten language used in parliamentary legislation and to avoid repetition of the same words in the course of the same piece of legislation. Such an Act is not meant to give a hide bound meaning to terms and phrases generally occurring in legislation. That is the reason why definition section contains words like unless there is anything repugnant in the subject or context. Words and phrases have either a very narrow significance or a very wide significance according as the context and subject of the legislation requires the one or the other meaning to be attached to those words or phrases. The Court recognized that the legislature is entitled in its wisdom to give a special definition of the....
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....the applicability of the Act and makes such an application subject to the context as otherwise may require. The trinity of Arts.20, 21, 22 broadly guarantee the personal liberties against the State to individual person. They are not guaranteed to all those who are included in the definition of person under S.3 (42) of the General Clauses Act. Person under S.3 (42) of the General Clauses Act shall include any company or association or body of individuals whether incorporated or not. Does it mean that the High Court is entitled to issue a writ or order or direction under Art.226 of the Constitution against every person under S.3 (42) of the General Clauses Act? It is well settled that the remedy available under Art.226 is a public law remedy and a writ and does not lie against a person not discharging public law duties. It is thus clear that the definition of person under S.3 (42) of the General Clauses Act is not applicable automatically to interpret the provisions of the Constitution unless the context so requires and makes that definition applicable. 37. S.3 of the General Clauses Act, 1897 itself says that unless there is anything repugnant in the subject or context the ....
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....ntinues to be company within the meaning of S.3 of the Companies Act, 1956 which defines the company, existing company, private company and public company for the purposes of the Companies Act. Its status as one entity continues to be the same. It is only for the purposes of the present Act viz. Andhra Pradesh Tax on Professions, Trades, Callings and Employments Act, 1987 even its branches are treated as a person enabling the authorities to levy and collect profession tax. 45. For the aforesaid reasons, we hold the definition of the word person in the impugned Explanation and also Explanation No. I to the First Schedule of the Act is not intended to tax a person at a rate higher than Rs. 2500/- per annum, per person, but to treat even a branch of a firm, company, corporation or other corporate body, any society, club or association as a separate person, and therefore, a separate assessee within the meaning of S.2(b) of the Act and the Andhra Pradesh State Legislature has undoubtedly the competency to adopt such a devise of taxation. The Andhra Pradesh State Legislature did not violate the mandate of Art. 276 (2) of the Constitution." 71. In the case of State of Madya Pr....
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....nd Co. observed in paragraphs 43 and 44 [at pg. 739) of the Report as under: ''' Now, coming to the decision in Ananthi Ammal, we are of the opinion that it does not lay down a different proposition. It was an appeal from the decision of the Madras High Court striking down the Tamil Nadu Acquisition of Land for Harijan Welfare Schemes Act, 1978 as violative of Art.14, Art.19 and Art.300A of the Constitution. On a review of the provisions of the Act, this Court found that it provided a procedure which was substantially unfair to the owners of the land as compared to the procedure prescribed by the Land Acquisition Act, 1894, insofar as S.11 of the Act provided for payment of compensation in instalments if it exceeded rupees two thousand. After noticing the several features of the Act including the one mentioned above, this Court observed: (SCC p. 526, para 7) '7. When a statute is impugned under Art.14 what the Court has to decide is whether the statute is so arbitrary or unreasonable that it must be struck down. At best, a statute upon a similar subject which derives its authority from another source can be referred to, if its provisions have been ....
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....Collector under S.47A unconstitutional. The Court said in P. Laxmi Devi (Smt.), 2008 KHC 6136 : 2008 (4) SCC 720 : 2008 (3) SCALE 45 : 2008 (2) KLT SN 13 : AIR 2008 SC 1640 as follows: '19. It is well settled that stamp duty is a tax, and hardship is not relevant in construing taxing statutes which are to be construed strictly. As often said, there is no equity in a tax vide CIT v. V.MR.P. Firm Muar. If the words used in a taxing statute are clear, one cannot try to find out the intention and the object of the statute. Hence the High Court fell in error in trying to go by the supposed object and intendment of the Stamp Act, and by seeking to find out the hardship which will be caused to a party by the impugned amendment of 1998. 30. Had the High Court kept in view the above well-known and important principles in law, it would not have declared Clause (d), Art.45 of Schedule 1A as violative of Art.14 of the Constitution being arbitrary, unreasonable and irrational while holding that the provision may pass test of classification. By creating two categories, namely, an agent who is a blood relation, i.e. father, mother, wife or husband, son or daughter, brother o....
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....ntract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by installments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made;" 73. From the perusal of Article 366(29A), it would be evident that a levy of service tax on the supply of goods by an unincorporated Association or body of persons to a member for....