M\/s. Sheen Golden Jewels (India) Pvt. Ltd. Versus The State Tax Officer (IB) -1, and Others
GST
2019 (2) TMI 300 – KERALA HIGH COURT – [2019] 62 G S.T.R. 207 (Ker), 2019 (23) G. S. T. L. 4 (Ker.)
KERALA HIGH COURT – HC
Dated:- 11-1-2019
W. P. (C) 11335\/2018, W. P. (C) 15523\/2018, W. P. (C) 15851\/2018, W. P. (C) 15879\/2018, W. P. (C) 15898\/2018, W. P. (C) 18326\/2018, W. P. (C) 25768\/2018, W. P. (C) 40543\/2018, W. P. (C) 40545\/2018, W. P. (C) 40561\/2018, W. P. (C) 40646\/2018
GST
MR. DAMA SESEADRI NAIDU J.
\nPETITIONER: BY ADVS. SRI. VENKITARAMAN, SMT. SHOBA ANNAMA EAPEN, SMT. T. ARCHANA. SRI. K.P. ABDUL AZEEZ
\nRESPONDENT: BY ADVS. SRI. K.K. RAVINDRANAN, ADDL. ADVOCATE GENERAL GOVERNMENT PLEADER
\nSRI. K.K. RAVINDRANATH ADDL. ADVOCATE GENERAL
\nOTHER PRESENT : ADDL. AG K.K. RAVINDRANATH, SPI G.P. SRI. C.E. UNNIKRISHNAN, GP DR. THUSHARA JAMES., ADDL. SOLICITOR GENERAL SRI. K.M. NATRAJ., CGC., JAISHANKAR V. NAIR., SR. SC. SRI. SREELAL N. WARRIER
\nJUDGMENT
\nIntroduction<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n anywhere; as the constitution prevents federal fiscal turf wars. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ed in. The Constitutional Amendment Act (the “CA Act”) has led to a federal fiscal experiment by engendering a host of enactments: the Central Goods and Services Tax Act, 2017; the Integrated Goods and Services Tax Act, 2017; the Union Territory Goods and Services Tax Act, 2017; the Goods and Services Tax (Compensation to States) Act, 2017; The “X” State Goods and Services Act, 2017 (State specific). = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n lative competence to enact section 174 and save the past taxation events-comprising levy, and recovery-when Entry 54, List Il, which is the field of legislation empowering the State, stood omitted permanently with effect from 16.09.2017? Of course, this core question engenders a few collateral questions. We will answer them all. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n under Section 25, read with Section 42(3), of the KVAT Act. The notice concerns the AYs 2010-2011 and 2011-2012 and proposes to cancel the compounding under Section 8(1)(iv). To be explicit, the notice proposes to revise the compounded tax for 2010-11 and 2011-2012, based on the alleged escapement of tax for the previous year. The petitioner did reply to the notice. The notice, as the petitioner contends, is a composite one; it proposes to cancel the compounding, besides undertaking a best judgment assessment-simultaneously. The composite notice, the petitioner asserts, is a fait accompli. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n to impose penalties of over seven crores and eight crores for the years 2010-11 and 2011-12 respectively. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n er's final assessments for 2012-13 and 2013-14, under Section 25 (1) of the KVAT Act by making huge additions. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n I will set out their arguments compendiously and, to the extent possible, concisely, too. so the arguments are party-specific, not counsel-specific. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n y, as the constitutional command of repeal is explicit. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 19 mandates that such legislation can be made notwithstanding anything contained in the Amendment Act. So the Entry 54, as it originally stood before the Amendment Act, remains available for the State, under Article 246 of the Constitution. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ributing to the later legislation the same intent which Section 6 presumes where the word 'repeal' is expressly used. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ice with that of economic efficiency and wealth maximisation. True, nations like France successfully embraced GST regimes in the 1950s. Even federal polities like Canada replaced MST (Manufacturer's Sales Tax) with GST (Goods and Services Tax) in the 1980s. India joined the fiscal reform bandwagon a little late. Tentative it was to begin with, but determined it is in this new federal fiscal path. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n rnment of India took the first step towards the transition to GST when it announced certain policy changes in the 2009-10 budget. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 1) The Central Goods and Services Tax Act, 2017: it levies a tax on intra-State supplies of goods and services in all supplies within a State = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ified on the recommendation of the GST Council. To begin with, the GST Council has decided that GST would be levied at four rates viz. 5%, 12%, 18% and 28%. The schedule or list of items that would fall under each slab has been worked out. Besides these rates, a cess would be imposed on “demerit” goods to raise resources for compensating States as States may lose revenue owing to implementing GST. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n \n(xvi) Accounts would be settled periodically between the Centre and the States to ensure that the credit of SGST used for payment of IGST is transferred by the Exporting State to the Centre. Similarly, IGST used for payment of SGST would be transferred by the Centre to the Importing State. Further, the SGST portion of IGST collected on B2C supplies would also be transferred by the Centre to the destination State. The transfer of funds would be carried out based on information contained in the returns filed by the taxpayers. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 269A, and 279A; repealed is the Article 268A; amended are Articles 248, 249, 250, 268, 269, 270, 271, 286, 366, and 279A. Besides that the Sixth and the Seventh Schedules, too, have been amended. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n egarding GST, in the national interest. So has Article 250 been amended; Parliament will have powers to make laws on GST during the emergency period. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n nstitution, after clause (12), clause (12A) Was inserted: “goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. After clause (26), clauses (26A) and (26B) were inserted: “Services” means anything other than goods; “Staten with reference to Articles 246A, 268, 269, 269A and Article 279A includes a Union territory with Legislature. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n brought drastic changes in the federal taxing powers of the State; it has introduced a couple of Articles, amended a few, and done away with a few more. At a glance we can appreciate the changes: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n under GST. So in Article 270, a reference to Article 268A has been omitted, and a new reference to Article 269A for levy of GST for Inter-state transactions has been introduced. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s, but including medicinal and toilet preparations containing alcohol or any substance in sub-paragraph (b). = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n espective State Goods and Services Tax Acts. These laws, among Other things, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n revious operation of the amended Acts or repealed Acts and orders or anything duly done or suffered thereunder; or = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n tion 4 of the Interpretation and General Clauses Act, 1125 (Act VII of 1125) with regard to the effect of repeal. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n tions which put fetters on the power of the Legislature?[8] = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n also of the mischief to remedy which the statute was passed; and if necessary, (d) the Judge must supplement the written word to give 'force and life' to the intention of the legislature. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n y necessary implications made to have retrospective operation. There is no reason why this rule of interpretation should not be applied for interpreting our Constitution, and a constitutional amendment, too. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n t the delicate balance between the Union and the States. Instead, it carries out the function of cross-empowerment. On the one hand, it enables the Union, according to Tarun Jain, to legislate and collect taxes on certain subjects which hitherto remained within the exclusive fold of the States-such as the taxes on sale and purchase of goods, luxury taxes, advertisement taxes, and so on. While doing this, however, the Union has not lost the legislative rights it possessed by then-such as taxes on manufacturing, taxes on services, and so on, except that these taxes are subsumed in a larger legislative field (that is, GST) and would be levied under that caption. Further still, Article 246-A expands the legislative landscape of the States to bring within their fold the Westminster model of Governance which is the core principle governing the functioning of the Executive wing of the Union and of the States. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n arily presumes, notes Bimolangshu Roy, the constitutionality of the statute, by putting the most liberal construction upon the relevant legislative entry so that it may have the widest amplitude. And for this, the substance of the legislation will have to be looked into. But it also cautions against the court's interpretative bending- over-backward attitude to extend the meaning of the words beyond their reasonable connotation, anxious to preserve the power of the legislature. The Court is no legislative or executive guardian angel; it is a constitutional sentinel. Period. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n U.P.,[ (1990) 1 SCC 109] = 1989 (10) TMI 214 – SUPREME COURT OF INDIA the Supreme Court has held that the power to legislate does not flow from a single Article of the Constitution. To articulate this assertion and to elaborate on it, Bimolangshu Roy observes that besides the declaration in Article 246, there are various other Articles in the Constitution which confer authority on the Parliament or on a State legislature to legislate, under various circumstances. Illustratively, Article 3 authorises the Parliament to make a law either creating a new State or extinguishing an existing State. Such power is exclusively conferred on the Parliament. As further instances of legislative repositories, Bimolangshu Roy enumerates Articles 2, 3, 11, 15(5), 22(7), 32(3), 33, 34, 59(3), 70, 71(3), 98(2) and 326. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ulated. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n the earlier one, the one repealed cannot be treated as a temporary statute merely because it has a transitional provision with a time-frame. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s to continue in force only for a certain specified time, it is, according to Craies[10], a temporary Act. According to the same learned author, Temporary Acts have these peculiarities: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n w accords with Craies'. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n the 'entire' sunset clause compared to the 'sectional'; the 'conditional' compared to the 'unconditional'; the 'direct' compared to the 'indirect'. Confining our discussion to the issue on hand, we may note that a sunset clause is direct when it prescribes the termination of the whole or part of the act which is embodied, indirect where it refers to a different act. Here, I reckon, if we accept the petitioners' contention, then Section 19 of the CA Act amounts to an indirect sunset clause-at best. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ime.[16] = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n atic Injustice and Sunset Clauses: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n oes not necessarily have effect as law immediately after being passed or made. It may take effect under these circumstances: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n aving. At the end of the day, the drafter's pen will identify the nature of the provisions, and there is a great benefit in doing so clearly and accurately. Lumping transitional and savings provisions in a single section is never a good idea. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n the Act as a whole. The Legislature very often enacts in the temporary Act a saving provision similar in effect to section 6 of the general Clause Act, 1897.[24] = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n inconsistent laws can be amended to render them compatible or altogether repealed. I am afraid the answer is a “No”. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n er existed except for the purpose of those actions which were commenced, prosecuted and concluded whilst it was an existing law”. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n d, accrued, or incurred.'' But the rule of law has been well entrenched on this point; so such a clause is apparently unnecessary, and only inserted ex abundanti cautela. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ion itself incorporates the principle of statutory construction. Article 367 provides that the General Clauses Act, 1897, shall apply for interpreting the Constitution as it applies for interpreting legislative enactments. The courts have held that not only the 'general definitions' in the General Clauses Act, but also the “general rules of construction” in the Act, apply to the Constitution. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n undred and First Amendment) Act, 2016 could have adopted the language, they contend, similar to Section 174 KSGST Act, 2017, and Section 6 of the General Clauses Act. But it has deliberately and consciously not done so because it has not intended the KVAT Act to operate beyond 16.09.2017. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n prima facie affect the pending proceedings which may be continued as if the repealed enactment were still in force. In other words, such repeal does not affect the pending cases which would be decided as if the enactment were not repealed. In fact, when a lis commences, all rights and obligations of the parties get crystallised on that date. The mandate of Section 6 of the General Clauses Act is simply to leave unaffected the pending proceedings which commenced under the unrepealed provisions unless a contrary intention is expressed. Clause (c) of Section 6 refers to the words “any right, privilege, obligation … acquired or accrued”; accordingly, the repealing statute would not affect those rights, privileges, obligations. Ambalal Sarabhai Enterprises, however, hastens to clarify that mere existence of a right not being “acquired” or “accrued” on the date of the repeal would not get the protection of Section 6 of the General Clauses Act. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n he KVAT Act. And the saving was for one year: 16.09.2017. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ady. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n e repeal did not take place on 16.09.2016, when the CA Act came into force, but on 16.09.2017, when the one-year period ended. Saving Clause, in fact, if available, was needed from then on, not before. Indeed, Section 19 of the CA Act saves nothing beyond 16.09.2017. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n comes the assertion from the petitioners that Entry 54 abrogated (it is not, though), the States have been denuded of the power of taxation from 16.9.2016 on the items that stand deleted. For them, the interim or temporary continuation is only up to 16.09.2017, as per Section19 of the CA Act. They also argue that if the State wants to sustain “taxes under Entry 54, then there is no necessity to abrogate the erstwhile Entry 54 on 16.09.2016. Read otherwise, Section 19 would be rendered otiose, meaningless, and would have no significant purpose at all.” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n erala Tax on Paper Lotteries Act = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n actments, the procedural mechanism has disappeared. It has not. The prospectivity of the amendment undisputed, what remains to be examined is the State's power to save what had happened before the CA Act came into force or, more precisely, until one year after that Act came into force. Indeed, the CA Act allowed the State Acts in the same legislative field to coexist for one year: the window period. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n been so amended or repealed.” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n x imposition will encompass all the three elements: levy, assessment, and collection. A mere Legislation to tax cannot result in fructifying a tax imposition. In other words, for a tax to be imposed, it requires a taxable event to trigger the levy and a taxable person to discharge it. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n orities collect the vend fee levied when the act was in force? The Supreme Court has held that the vend fee levied but not collected previously cannot be collected then. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n o steps. Indeed, the natural meaning of the word substitution is to indicate that the process cannot be split up into two pieces like this. If the process described as substitution fails, it is totally ineffective to leave intact what was sought to be displaced. That seems to be the ordinary and natural meaning of the words shall be substituted. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s[(2003 )5 SCC 461] = 2003 (5) TMI 4 – SUPREME COURT, the Tribunal nullified the assessment orders on the ground of jurisdiction. On facts, it was found that the authorities could not frame a fresh assessment. Then the question was whether the respondents could have the refund of income tax paid by them by way of advance tax and self- assessment tax. The Court, first, has held that liability to pay income-tax does not depend on the assessment being made. As soon as the Finance Act prescribes the rate or rates for any assessment year, the liability to pay the tax arises. It has, then, observed that in the face of a nullified assessment if the assessing authority cannot make a fresh assessment in accordance with the law, it amounts to deemed acceptance of the assessee's return of income. In such a case, the assessing authority is denuded of its authority to verify the correctness and completeness of the return. Even if the tax paid is found to be less than that payable, no further demand<\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 6 only applies to repeals and not to omissions. Granted, Rayala Corporation, a Constitution Bench decision, has not elaborated on how “repeal” and “omission” differ, but it has, nevertheless, laid down the law that “repeal” differs from “omission” and Section 6 of the General Clauses Act would apply only for “repeal” and not “omissions”. Kolhapur Cane Sugar Works Ltd. v. Union of India[(2000) 2 SCC 536] = 2000 (2) TMI 823 – SUPREME COURT OF INDIA, another Constitution Bench decision, has followed Rayala Corporation. This decision, too, has elaborated on neither the semantic significance nor the supposedly distinct legal impact of these two expressions. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n udge Bench though, has elaborated on not only on “deletion” and “omission” but also on “repeal”. It has cited Halsbury's Laws of England the Legal Thesaurus (Deluxe Edition) by William C. Burton to unearth semantic distinctions, if any, of those expressions. Then, Shree Bhagwati Steel Rolling Mills has held that on a conjoint reading of the three expressions “delete”, “omit”, and “repeal”, it becomes clear that “delete” and “omit” are used interchangeably, so that when the expression “repeal” refers to “delete”, it would necessarily take within its ken an omission as well. It finds no substance in the argument that a “repeal” amounts to an obliteration from the very beginning, whereas an “omission” is only in futuro. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ertaken, turns out to be an academic exercise. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n pply because repealing enactment itself specifically provides for transition and savings. Only in the absence of the repeal or saving, is the General Clauses is attracted; here the General Clauses Act does not apply; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n y a Constitutional Amendment. This proposition, too, needs no contradiction. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ionally permitted to be shared with the Union Government. What is gone is the State's exclusivity. To the legislative fields of exclusivity and concurrency, what has been added is the simultaneity-novel as it may sound. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n e declaration in Article 246, there are various other Articles in the Constitution which confer authority on the Parliament or on a State legislature to legislate, under various circumstances. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n has many shades of a challenge. I have touched none save the constitutional question. And I answered that in the negative. All other issues-including limitation-remain untouched. After all, the limitation is a mixed question of fact and law. I reckon, in that context, that the petitioners have efficacious alternative remedies under the relevant statutes. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n p:\/\/racolblegal.com\/examining-the-effect-of-the-constitution-one-hundred-and-first-amendment-act-2016-on-federalism. Accessed on 10th Januuy 2019. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" M\/s. Sheen Golden Jewels (India) Pvt. Ltd. Versus The State Tax Officer (IB) -1, and OthersGST2019 (2) TMI 300 – KERALA HIGH COURT – [2019] 62 G S.T.R. 207 (Ker), 2019 (23) G. S. T. L. 4 (Ker.)KERALA HIGH COURT – HCDated:- 11-1-2019W. P. (C) 11335\/2018, W. P. (C) 15523\/2018, W. P. (C) 15851\/2018, W. … Continue reading “M\/s. Sheen Golden Jewels (India) Pvt. Ltd. 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\n3. To be explicit, constitutionally, fiscal powers between the Centre and the States stand demarcated. The legislative scheme admits of almost no overlap between the respective domains. The Centre has the powers to levy a tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics, and so on); the States, on the other hand, have the powers to levy a tax on the sale of goods. With inter-state sales, the Centre has the powers to levy a tax (the Central Sales Tax). But the tax is collected and retained entirely by the originating States. As for services, it is the Centre alone that is empowered to levy Service Tax.
\n4. Since the States had the legislative competence to impose a sales tax, under Entry 54, List Il, indiscriminate tax rates were applied by the respective States resulting in tax wars, tax holidays, deferrals, incentives, and concessions. Each State started to offer attracti<\/p>\n
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\n7. For the first time, in the taxation sphere, both the Union and the States have come to enjoy simultaneous powers, thus putting paid to the repugnancy doctrine, at least, in particular areas of taxation. With the insertion, amendment, and deletion of a few constitutional provisions-particularly with the insertion of Article 246A of the Constitution and deletion of Entry 52 of List II in Seventh Schedule- there has been a realignment of legislative powers of the Union and the States. Now, Entry 54 stands modified. In its attenuated form, it denudes, according to the petitioners, from 16.<\/p>\n
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\nFace:
\nW.P.(C) No. 15879 of 2018:
\n10. The petitioner, a Private Limited Company, is a dealer under the Kerala Value Added Tax Act and Central Sales Tax Act. It has opted to pay the tax at the compounded rates under Section 8 of the KVAT Act. so for the assessment years (AY) and 2011-2012 and thereafter, too, the petitioner filed returns in terms of the compounding scheme-in Form 10DA.
\n11. But the Intelligence Officer (IB)-II, Thiruvananthapuram, issued to the petitioner notices under Sec 67 in the KVAT Act for the assessment years 2009-2010, 2010-2011 and 2011-2012. The grounds of the notices are not germane here, though the petitioner's objections to the <\/p>\n
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\n13. So the petitioner has filed this writ petition questioning the notices under Section 25, read with Section 42(3) and Section of the KVAT Act.
\nWP (C) No. 11335 of 2018:
\n14. The Petitioner, a jeweler, is a dealer under the Kerala Value Added Tax Act. The State Tax Officer, the second respondent, inspected the petitioner's business premises in November 2012, seized some records, and, later, iss<\/p>\n
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\n16. Eventually, in February 2018, the first respondent passed an order under Section 67 (1) of the KVAT Act for AY 2010-11. He imposed a penalty of In March 2018, through another order, for the next assessment year, he imposed a penalty of Rs. 8,12,56,734\/-.
\n17. The petitioner challenges these orders as ultra vires of the authorities-constitutionally invalid.
\nWP (C) No.40646 of 2018:
\n18. The petitioner, a registered dealer under the KVAT Act, is a Government Electrical Contractor. He filed all returns and remitted tax under the KVAT Act for the AYs 2012-13, 2013-14, 2014-15, 2015- 16 and 2016-17. The Assessing Officer accepted all the returns filed and the tax paid, with no demur. so, the assessments for the years are deemed to have been completed under Section 21 of the KVAT Act.
\n19. But, recently, on 23.112018, the Assessing Officer served on the petitioner the pre-assessm<\/p>\n
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\n22. The main reason for the Assessing Officer to resort to the best judgment assessment is that after his verifying the petitioner's sales and purchases through the KVATIS module, he found certain unaccounted transactions. The additional reason is that the Intelligence wing of the Department has imposed a penalty upon the Petitioner under Section 47 (6) of the KVAT Act for the offence of attempted evasion of tax while his transporting goods. So the petitioner has assailed the Assessment Orders as unconstitutional and without jurisdiction.
\nSubmissions:
\nPetitioner's:
\n23. In the past one year, a rash of writ petitions has been filed. Those writ petitions may count up to a few thousands. But only a handful of advocates-about half a dozen-argued; the rest adopted those arguments. Shri Abhishek Manu Singhvi, the learned Senior Counsel, instructed by Shri A. Kumar, the counsel o<\/p>\n
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\nThe Summary of the Petitioners' Submissions:
\nAbout the 101st Constitution Amendment Act:
\n * On and from 16.9.2016, Article 246 yielded legislative ground to the newly engrafted Article 246A. Thus, Article 246 stood amended and modified in its operation. Consequently, a few items in both List I and List II suffered significant schematic changes. Article 246A, an enabling legislative provision, contains no concomitant schedule or iteration.
\n * Entry 54 of List II stands substituted by 16.09.2016; the Constitutional Amendment does not save it. So the pre-amended Entry 54 of List II has ceased to exist. Instead, what reigns is the substituted Entry 54.
\n * Section 19 of the Amendment Act is the transitional provision, besides being the saving provision. Nothing from the pre-existing legislative regime saves itself from or transits across<\/p>\n
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\n * Neither KSGST nor CGST provides for repeal or re-enactment.
\n * So, primarily, the General Clauses Act cannot resurrect or rescue the repealed enactments, even if its Sections 6 and Section 24 are invoked.
\n * The State stands protected for the Centre undertakes to reimburse its losses.
\n * The clear and unequivocal legislative intent of Section 19 of the Amendment Act is to stop the operation KVAT, 2003, from 16.09.2017.
\n * A Statutory saving-provision, such as Section 174 of KSGST, emanating from the State's legislative power, cannot nullify the constitutional mandate of Section 19 of the Amendment Act, emanating from the Parliament's constituent power.
\nSection 174 – Absence of Legislative Power:
\n * Article 367 does not apply because repealing enactment itself provides explicitly for transition and saving. In other words, only in the absence of the repeal or saving is the General Clauses Act attracted.
\n * Section 24 of <\/p>\n
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\n * In the alternative, without Entry 54 as it originally stood, the newly introduced Article 246-A as per Section 2 of the Amending Act read with Section 19 of the amending Act, by itself gives power to the state legislature to enact the impugned provisions in the State GST Act.
\n * A transitional provision in a Constitution Amendment Act has a higher status and better legal impact than a transitional provision in ordinary legislation. So Section 19 of the CA Act, read with Article 246-A, without any doubt, empowers the State Legislature to enact Section 174(b) and (c) of the KSGST Act, 2017.
\n * The Legislature does not derive its power to legislate from the Entries in the three lists of the 7th Schedule; therefore, the substitution of an entry in<\/p>\n
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\n * Where an intention to effect repeal is attributed to a legislature, then the same would attract the incidence of the saving found in Section 6 of the General Clauses Act.
\n * The power to make a law regarding a tax comprehends, within its power, how to levy that tax and determine the persons who are liable to pay such tax, the rate at which such tax is to be paid, and the event which will attract the liability regarding such tax.
\n * The liability to pay the tax was not dependent upon assessment or demand but was an obligation to pay the tax either annually, quarterly or monthly as the case may be.
\nDISCUSSION:
\nGST – Introduction:
\n26. In a federal constitutional set up, coordination rather than subordination as the guiding spirit, the States and the Union as the constituents have demarcated spheres of legislation and governance. With Clearly delineated legislati<\/p>\n
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\n29. To put the concept in perspective, GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the later stage of value addition. This process makes GST a tax on value addition at each stage. The consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
\n30. In other words, the focus was shifted from taxable event to destination-based taxation. It avoids the evil of cascading taxation or tax on tax trouble. So<\/p>\n
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\n33. The next major landmark was the “First Discussion Paper on Goods and Services Tax in India” released by the Empowered Committee in November 2009. This was the first official document publicly delineating the contours of the proposed reform and nuances of the GST Model[1]
\n34. The First Discussion Paper, in fact, explained the rationale for a constitutional amendment to introduce GST. It noted that while the Centre is empowered to tax services and goods up to the production stage, the States have the power to tax sale of goods. The States do not have the powers to levy a tax on the supply of services while the Centre does not have the power to levy a tax on the sale. Thus, it suggested for a constitutional amendment that would contain a mechanism for a harmonious structure of GST that would not affect the federal fabric.
\n35. Then, with the deliberations<\/p>\n
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\n(2) the Integrated Goods and Goods and Services Tax Act, 2017: it levies a tax on inter-State supplies of goods and services;
\n(3) the Union Territory Goods and Services Tax Act, 2017: it levies a tax on intra-State supplies of goods and service.
\n38. Tarun Jain's Goods and Services Tax, already copiously quoted, observes that in constitutional terms, GST is unique because of these aspects of its design:
\n1. It provides for the concurrent exercise of taxing powers by the Centre and the States on the same subject-a unique and unprecedented measure.
\n2. Both the Centre and the States are to act in tandem based on the GST Council's recommendations.
\nSalient features of GST:
\n39. The salient features of GST are these[3]:
\n(i) GST applies on 'supply\/ of goods or services as against the present concept on the manufacture of goods, or on the sale<\/p>\n
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\n(ix) GST will apply to all goods and services except Alcohol for human consumption.
\n(x) GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural Gas) be applicable from a date to be recommended by the GSTC.
\n(xi) Tobacco and tobacco products would be subject to GST. Besides, the Centre will have the power to levy Central Excise duty on these products.
\n(xii) A common threshold exemption would apply to both CGST and SGST. Taxpayers with an annual turnover not exceeding Rs. 20 lakh (Rs.10 Lakh for special category States) would be exempted from GST. For small taxpaye<\/p>\n
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\n(xvii) The laws, regulations, and procedures for levy and collection of CGST and SGST would be harmonized to the extent possible.
\n40. GST replaces these taxes currently levied and collected by the Centre:
\n(a) Central Excise Duty,
\n(b) Duties of Excise (Medicinal and Toilet Preparations),
\n(c) Additional Duties of Excise (Goods of Special Importance),
\n(d) Additional Duties of Excise (Textiles and Textile Products),
\n(e) Additional Duties of Customs (commonly<\/p>\n
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\n44. Article 246A, inserted through Section 2 of the Amendment Act, is a marvel of the federal fiscal mechanism. By this Article, the State Legislatures now have the power to make laws regarding GST tax imposed by the Union or by that State and to implement them in intra-state trade. The Centre, of course, continues to have exclusive power to make GST laws regarding inter-state trade. Both the Union and States in India now have simultaneous powers to make law on the goods and services.
\n45. Article 269A, inserted through Section 9 of the Act, deals with levy and collection of goods and services tax in the course of inter-State trade or commerce. That is, in case of inter-state trade, the amount collected by the Centre is to be apportioned between the Centre and the States as per the GST Counci<\/p>\n
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\n47. At a different plane are the other amendments. Article 268 has been amended so that excise duty on medicinal and toilet preparation are omitted from the State List and are subsumed in GST. And Article 269 would empower the Parliament to make GST related laws for inter-state trade or commerce. Article 270 now provides for collection and distribution of tax to be done according to Article 246A. Then, under Article 271, GST has been exempted from being part of the Consolidated Fund of India. The amended Article 286 includes the supply of goods and services under its ambit, rather than just sale or purchase of goods; Article 366 now includes the definitions of Goods and Service Tax, Services and State. And finally, Article 279A has also been brought under the ambit of Article 368.”[4]
\n48. As with the Schedules, the Sixth Schedule has be<\/p>\n
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\n50. Section 18 of the Amendment Act provides for compensation to States for loss of revenue because of the introduction of goods and services tax. Parliament shall, by law, on the recommendation of the GST Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for five years.
\n51. The overarching provision for our discussion is Section 19 of the Amendment Act.
\nSection 19 – Transitional provisions:
\nNotwithstanding anything in this Act, any provision of any law relating to tax on go<\/p>\n
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\nBefore Amendment
\nAfter Amendment
\nImpact
\n246A
\nNot existing
\nIntroduced
\nSpecial provision on goods and services tax conferring simultaneous legislative powers on both the Union and the States.
\n248
\nResiduary power
\nAmended
\nThe Union's residuary legislative power is subjected to Article 246A.
\n249
\nPower of Parliament to legislate regarding a matter in the State List in the national interest
\nAmended
\nIt gives power to the Parliament to enact any law applicable to states on the matters mentioned even in states list. GST, no mentioned in States list, now explicitly mentioned.
\n250
\nPower of Parliament to legislate regarding any matter in the State List if a Proclamation of Emergency is in operation
\nAmended
\nIt has a similar impact as does the amended Article 249
\n268
\nDuties levied b<\/p>\n
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\n271
\nSurcharge on certain duties and taxes for purposes of the Union
\nAmended
\nParliament's powers to levy an additional surcharge on Union taxes under Article 271 now stands amended: Parliament can levy no additional surcharge on GST.
\n279A
\nNot existing
\nInserted
\nProvision for creating the GST Council, a constitutional body.
\n286
\nRestrictions on the imposition of tax on the sale or purchase of goods
\nAmended
\nFirst, the word “sales” is replaced with “supply” and the word “goods” is replaced with “goods or services or both”.
\nStates cannot legislate on the supply of goods or services if such supply is outside their state or is in the course of import or export.
\nOriginally, States could not levy and collect tax on specific Inter-state transactions. With omitting Clause (3), now even inter-state transact<\/p>\n
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\nAmended
\nNow excise duty is levied only on the enumerated items:
\n(a) petroleum crude;
\n(b) high-speed diesel;
\n(c) motor spirit (commonly known as petrol);
\n(d) natural gas;
\n(e) aviation turbine fuel; and
\nf) tobacco and tobacco products”
\nEntry 92
\nTaxes on the sale or purchase of newspapers and on advertisements published.
\nOmitted
\nNow, taxes on the sale or purchase of newspapers and on advertisements published therein have been subsumed into GST.
\nEntry 92C
\nTaxes on services
\nOmitted
\nService tax has also been subsumed into GST.
\nList II Entry 52
\nTaxes on the entry of goods into a local area for consumption, use or sale therein.
\nOmitted
\nPurchase tax, too, has been subsumed into GST.
\nEntry 54
\nTaxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. (Entry 92A of List I concern inter-State trade or commerce.)
\nAme<\/p>\n
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\n(i) Carry out the transition to GST;
\n(ii) provide for the levy of GST on intrastate within the State; and also
\n(iii) modify\/repeal the earlier State enactments which have to be modified\/repealed because of transition to GST. Notable is the repeal of the VAT\/Entry Tax\/Luxury Tax, and so on, which earlier provided for levy of these taxes within the States.[6]
\nKerala Enactment
\n55. Kerala Goods and Services Tax Act, 2017 (Act 20 of 2017) received the Governor's assent on the 16th day of September 2017. It provides for, as the preamble suggests, levy and collection of tax on intra-State supply of goods or services, or both by the State of Kerala. As it is in pari materia with the Central Goods and Services Tax Act, it needs no much elaboration, but for one provision: Section 174, the customary 'repeal and saving' provision.
\n174. Repeal and saving.-(1) Save as otherwise provided in this Act, on and from the<\/p>\n
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\n (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:
\n 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
\n (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
\n (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,<\/p>\n
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\n(4) The Kerala Goods and Services Tax Ordinance, 2017 (11 of 2017) is hereby repealed.
\n(5) Notwithstanding the repeal of the Kerala Goods and Services Tax Ordinance, 2017 (11 of 2017) anything done or any action taken under the said Ordinance, shall be deemed to have been done or taken under this Act.
\n(italics supplied)
\n Constitutional Invalidity:
\n56. This Court is called upon to examine the constitutional validity of Section 174 of the KSGST Act. Its invalidity is set up in the face of Section 19 of the CA Act. The petitioners argue, among other things, the State has no legislative power to override Section 19 of the CA Act.
\n57. A statute may be unconstitutional if it is enacted in the absence of legislative competence, in violation of Fundamental Rights guaranteed to the citizens of India, or in contravention of other constitutional constraints. For the Consti<\/p>\n
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\n58. In State of Bihar v. Bihar Distillery Ltd, JT 1996 (10) SC 854 = 1996 (12) TMI 383 – SUPREME COURT the Supreme Court has laid down certain principles on how to judge the constitutionality of an enactment: the Court should
\n(a) try to sustain the validity of the impugned law to the extent possible;
\n(b) should not approach the enactment with a view to picking holes or to ferreting out defects of drafting or for the language employed;
\n(c) should consider that the Act made by the legislature represents the will of the people and that cannot be lightly interfered with;
\n(d) can strike down the Act only when the unconstitutionality is plainly and a plain case of legislative competence. Let us see how Section 174 of the KSGST Act fares vis-a-vis the Amendment Act in general and Section 19 of it in particular. As it is a matter of vires and legislative competence, we must trace the source of power.
\nHow to judge the constit<\/p>\n
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\nConstitution was prospective in its operation:
\n61. In Keshavan Madhava Menon v. The State of Bombay[1951 CriLJ 680] = 1951 (1) TMI 32 – SUPREME COURT the Supreme Court was concerned with the legality of the prosecution of the appellant for contravention of the Indian Press (Emergency Powers) Act, 1931. The offence had been committed before the Constitution came into force, and prosecution launched earlier was pending after January 26, 1950. The enactment which created the offence was held to be void under Art.19 (1) (a) read with Art. 13, as contradicting one of the Fundamental Rights guaranteed by Part III of the Constitution. Then, the question was whether the prosecution could be continued after the enactment became void. The majority held that the Constitution was prospective in its operat<\/p>\n
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\nPresumption in favour of constitutionality:
\n64. To reiterate the well-known judicial assertion, I may refer to the Supreme Court's observations in Karnataka Bank Ltd v. State of A.P[(2008) 2 SCC 254] = 2008 (1) TMI 605 – SUPREME COURT OF INDIA. The rules that guide the Constitutional Courts in discharging their solemn duty to declare laws passed by a legislature unconstitutional are well-known. There is always a presumption in favour of constitutionality, and a law will not be declared unconstitutional unless the case is so clear as to be free from doubt; 'to doubt the constitutionality of a law is to resolve it in favour of its validity. Where the validity of a statute is questioned, and there are two interpretations one of which would make the law valid and the other void, the <\/p>\n
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\nEntries in the Lists:
\n68. The power to legislate is engrafted under Article 246 of<\/p>\n
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\n70. For our purpose, immensely important is the Bimolangshu Roy's observation that the authority to make law flows from various sources:
\n (1) express text of the Constitution;
\n (2) by implication from the scheme of the Constitution; and
\n (3) as an incident of sovereignty. Bimolangshu Roy, in fact, invokes the doctrine of inherent powers. Thus, it felicitously observes:
\n21. The authority to make law flows not onl<\/p>\n
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\n72. Indeed the State legislatures are assigned only specified fields of legislation, the Residuary legislative powers lying with the Parliament. But taxing entries are distinct from the ge<\/p>\n
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\n74. If legislation purporting to be under a particular legislative entry is assailed for lack of legislative-competence, the State can seek to support it based on any other entry within the legislative competence of the legislature. It is unnecessary for the State, notes the Supreme Court in Ujagar Prints v. Union of India[AIR 1989 SC 516] = 1988 (11) TMI 106 – SUPREME COURT OF INDIA, to show that the legislature, in enacting the law, consciously applied its mind to the source of its own competence. Competence to legislate flows from Articles 245, 246 and the other Articles falling in Part XI of the Constitution. In defending the validity of a law questioned on the ground of legislative incompetence, the state can always show that the law was supported under any other entry within the competence of the legislature. Indeed, in supporting legislation, sustenance could be drawn from many entries. The legislation could be composite legislation drawing upon several entries such as <\/p>\n
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\n77. Often the legislature itself enacts a saving provision in the temporary Act, on the lines of Section 6 of the General Clauses Act, 1897. The usual presumption is that if such a saving provision is not present, then the proceedings began under the repealed Act ipso facto terminate as soon as the statute expires. Indeed, the expiry does not make the statute dead for all purposes even in the absence of a saving clause. The nature of the right or obligation emanating from the temporary Act may determine whether that right or obligation is enduring. So held the Supreme Court in State of Orissa v Bhupinder Kumar[AIR 1962 S.C. 945] = AIR 1962 S.C. 945.
\n78. A temporary statute can be repealed before its specified period. That said, I may add that merely because the statutory purpose is temporal, the very statute cannot be regarded as temporary unles<\/p>\n
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\nCommencement: If an Act is in the first instance temporary and is continued from time to time by subsequent Acts, it is considered as a statute passed in the session when it was first passed, and not as a statute passed in the session in which the Act which continues its operation was passed.
\nExpiration: As a general rule, and unless it contains some special provision to the contrary, after a temporary Act has expired, no proceedings can be taken upon it, and it ceases to have any further effect.
\n81. Another celebrated commentary-G. P. Singh's Principles of Statutory Interpretation[11]-notes that a statute is 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 express or implied. A perpetual statute <\/p>\n
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\n84. I must acknowledge that the petitioners' counsel have laid much emphasis on the sunset clause and nuanced their arguments to drive home their contention that Section 19 is a sunset clause and, so, the General Clauses Act does not apply. So the concept of sunset clause, I reckon, needs more elaboration.
\nSunset Clauses:
\n85. Sunset clauses are statutory provisions providing that a particular law will expire automatically on a particular date unless it is re-authorised by the legislature. The use of a sunset clause, observes A.E. Kouroutakis in The Constitutional Value of Sunset Clauses: An historical and normative analysis[12], was expected to create an incentive for the periodic and comprehensive executive and legislative evaluation of agencies. Sunset clauses- as temporary laws-have the potential, from the perspective of separation of powers, to enhance the role of the legislature and support its monitoring task over the administration[13].
\n86. Sunset cla<\/p>\n
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\n88. In this context, A.E. Kouroutakis observes that while a plethora of direct sunset clauses is recorded in the statute books, indirect sunset clauses are mainly recorded in constitutional documents. Therefore, the common utility of indirect sunset clauses is recorded in constitutional orders with codified constitutions and a hierarchy of norms. Sunset clauses do not obliterate legislation as if it never existed. That said, the legal effect of automatic expiration due to a sunset clause, em<\/p>\n
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\n(a) Interim Constitutions:
\n90. In the constitutional context, affirmative action policies aim to regulate and correct a given deficiency; as soon as the deficiency is eliminated, such policies have no reason to stay in force. Thus a sunset clause is desirable to make them expire. Jackson, as quoted in The Constitutional Value of Sunset Clauses, discussing constitution making, explores the idea of 'transitional constitution making' by adding a sunset clause and points out that they may shed new light on the advantages and disadvantages of constitutional 'sunset' clauses- that is, “requirement of reconsideration in plenary form after a set period of years, far enough into the future to allow time for developing some authoritative institutions of politics and governance”.
\n91. There are several constitutional documents that are recorded as temporary. These constitutions are often categorised as transitional and are commonly created because of a major national crisis: for exampl<\/p>\n
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\n93. Finally, we may consider the sunset clauses in the context of pragmatic injustice. Pragmatic injustice, according to Roscoe Pound[18], exists when the reality is far from the ideal, which is prescribed in the law books. Currently, although equality is the default rule and it is emphatically recognised in constitutional and international documents, the law in action is far from the ideal. So the nations take recourse to affirmative action policies to regulate and correct a given deficiency. Once the deficiency is eliminated, the policies, introduced out of turn, have no reason to stay in force. Thus, a sunset clause is desirable to make them expire.
\n94. Indeed, sunset clauses have been frequently used in India in fiscal and tax laws. Tax holidays and exchange control regulations are the best examples. The Constitution itself provides for a 10-year sunset for reservations to Parliament and legislative assembly seats (Article 334).
\n95. Section 6 o<\/p>\n
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\n(1) immediately upon being passed or made;
\n(2) at a point in the future that is specified upon the legislation being passed or made, or that can be determined under criteria specified upon the legislation being passed or made;
\n(3) only if some future event occurs (which may be a real-world event or an event such as making an order-designed to commence the legislation);
\n(4) with retrospective effect from a past time; or
\n(5) “not at a particular point in time, but in relation to things done or events occurring during a period specified upon the legislation being passed or made, with it being possible to specify either a single period for all purposes or different period for different purposes.”
\n97. Transitional provisions, the learned author continues to observe, may be relatively unimportant, in that by definition they affect relatively few cases, but they<\/p>\n
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\n99. The learned author finally notes that the necessity for savings and transitional provisions is a consequence of a change in the law, whether the change is caused by new statute law or by the repeal, repeal and substitution, or modification, of existing statute law. Consideration of whether special savings or transitional provisions are necessary is an important part of every drafting exercise.
\nSaving Clause:
\n100. A saving clause is used to preserve what already exists; it cannot create new rights or obligations. Such a provision has no application to transactions complete at the time the savings provision comes into force. A savings provision is frequently included in legislation to establish beyond doubt that the provisions of that legisla<\/p>\n
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\n103. The question before the Supreme Court in Tata Iron and Steel Co. was whether because of the Validation Act the State could retain only the cess and taxes already collected before the date of validation or whether they also could collect the cess and taxes due till that date of validation. Tata Iron and Steel has held that the Validation Act did not enable the State to collect the cess and taxes not collected till the date of validation. One of the reasons it assigned was that the Validation Act contained no saving clause and section 6 of the General Clauses Act, too, would not affect a temporary statute. So there could be no recovery and collection of cess and taxes which may have become due but had not been collected till the date of validation.
\n104. That said, Tata Iron and Steel has gone on to observe that a temporar<\/p>\n
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\n106. We will also examine a converse situation. Sometimes, a repealing statute, the latter one, can be a temporary one. Again, Section 6(a) of the General Clauses Act does not apply on the expiry of the “temporary” repealing statute; so held the Supreme Court in Om Prakash v. State of U.P[AIR 1957 SC 458] = 1957 (1) TMI 43 – SUPREME COURT. Then, can we call the Constitutional Amendment Act a temporary one? I am afraid this question, too, gets the same answer: No. Section 19 of the Amendment Act, at best, is a transitional provision.
\n107. Here the petitioners have argued that the enactments-Central or State-inconsistent with the Amendment Act have rendered themselves temporary statutes and perished on the temporal altar of one year. If this logic is accepted, every succeeding act renders the previous act a temporary one, obliterates its impact beyond a specified date, <\/p>\n
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\n109. To decide whether any particular transaction is affected by the repeal of an Act, it is necessary to ascertain whether the transaction in question was completed when the Act was repealed. Thus, if an Act gives a right to do anything, the thing to be done, if only commenced but not completed before the Act is repealed, must upon the repeal of the Act be left in status quo. So, under some statute, if a right becomes vested upon the completion of some certain transaction but not before, no right whatever will have been acquired if the statute in question is repealed before the transaction is completed.
\n110. Repeal of statute results in nullification of the subordinate legislation the repealed statute has engendered. That is, when a statute is repealed, any by-law or statutory instrument made under that statue ceases to be operative unless there is a savi<\/p>\n
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\n114. Succinctly stated, repeal is not a matter of mere form but one of substance, depending upon the legislative intent. If the intention indicated expressly or by necessary implication in the subsequent statute was to abrogate or wipe off the former enactment, wholly or in part, then it would be a case of total or pro tanto repeal. If the intention was merely to modify the former enactment by engrafting an exception or granting an exemption, or by super-adding conditions, or by restricting, intercepting or suspending its operation, such modification would not amount to repeal. After referring to many standard commentaries on statutory interpretation, the Supreme Court in Udai Singh Dagar v. Union of India,[(2007) 10 SCC 306] = 2007 (5) TMI 627 – SUPREME COURT OF INDIA re-emphasises that the principal object of a rep<\/p>\n
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\n117. The General Clauses Act can be amended by Parliament. Article 367 thus means that interpretation of many words and phrases used in the Constitution can be modified by Parliamentary legislation without amending the Constitution. From its initial days of literal, restrictive interpretation, the Constitutional Courts have shifted towards liberal, purposive interpretation. The liberal approach is designed to give a creative and purposive interpretation to the Constitution “with insight into social values, and with the suppleness of adaptation to changing needs.”
\n118. Since the General Clause Ac<\/p>\n
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\n120. Section 6 of the General Clauses Act and Section 4 of the Kerala Interpretation and General Clauses Act are analogous. Here, as we consider the State enactments, Section 4 of the State Act may have to be considered. And it reads:
\n4. Effect of repeal. – Where any Act repeals any enactment hitherto made or hereafter to be made, then unless a different intention appears, the repeal shall not –
\n (a) revive anything not in force or existing at the time at which the repeal takes effect; or
\n (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or
\n (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any <\/p>\n
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\n122. The principle encapsulated, the effect o<\/p>\n
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\n124. On 22.06.2017, the State of Kerala issued the Kerala State Goods and Services Tax Ordinance; it has heralded the new State GST regime. On 16.09.2017 came the Kerala State Goods and Services Tax Act, 2017 (“KSGST Act”). It has replaced the KSGST Ordinance. On the same day, however, the saving period prescribed under Section 19 of the CA Act, too, ended.
\n125. But, as a way out, the KSGST Act has its own Saving Clause: Section 174. So we must examine the relative, sometimes overlapping, concepts of transition and saving, besides those of repeal, sunset, amendment, omission, and substitution.
\n126. A bill may contain provisions that limit, modify, or destroy individual rights and privileges. Then, on the Bill's enforcement as an Act, the Legislature may desire to consider a saving clause, to protect those who have acted as per the law till then existing. The means for providing this protection is the saving clause. Black's La<\/p>\n
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\n128. The saving clause, according to Crawford[28], is used to exempt something from immediate interference or destruction. It is generally used in repealing statues to prevent them from affecting rights accrued, penalties incurred, duties imposed, or proceedings started under the statute sought to be repealed. Its position or verbal form is unimportant. But if it conflicts with the body of the statute of which it is a part, it is ineffective, or void. And whether the saving clause should receive a strict or liberal construction, is a matter upon which there seems to be some conflict of opinion. Perhaps the best rule would make, Crawford continues, the nature of constructing the saving clause depend upon the nature of the statute involved for example whether it was remedial, penal, or procedural.
\n129. If the saving clause is a general one, that is, applicable to all repealing acts, it is merely declaratory of a rule of construction, notes Crawford. But whether they are general or<\/p>\n
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\n132. Legislative power, to begin with, inheres in and vests with Parliament. If it is unitary, the division or demarcation of those powers does not arise; but in a federal polity, the Constitution usually demarcates the legislative boundaries. Thus, as to the division of legislative powers, Article 246, and now Article 246A too, of our Constitution holds the key. Inherent Legislative Power:
\n133. Article 246 of the Constitution deals with the distribution of legislative powers. Under Clause (1) of that Article, Parliament has the exclusive power to make laws on any of the matters enumerated in List I (Union List) in the Seventh Schedule. Under Clause (2) both Parliament and the State Legislature have concurrent powers to <\/p>\n
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\n136. Unfortunately, the whole argument is sought to be erected on a slippery slope. There is no denudation of legislative power, no obliteration of Entry 54 of List II. An entry's abrogation, as it were, would not ipso facto lead to the legislative denudation. I will elaborate on that, later.
\n137. Then follows from the petitioners the collateral attack: Section 173 is “merely a manifestation of the repeal of the laws under the Entries a<\/p>\n
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\n139. We can see the KVAT Act, the focal enactment for our discussion, finds a place in the table on both sides: amendment and repeal. The same enactment could not have been amended and repealed simultaneously; if so, it proves the idiom “have the cake and eat it too.” We can either keep the cake or eat it; so is the case with an enactment: it can either be amended or repealed. For the amendment and repeal are mutually exclusive. Yet, paradoxical as it may sound, the distinction between amendment and repeal, notes Vepa P. Sarathi in his Interpretation of Statutes[29] is one of degree.
\n140. In fact, the KVAT Act stands repealed “except in respect of goods included in entry 54 of the State List of the Seventh Schedule to the Constitution, including the Goods to which the Kerala General Sales Tax Act, 1963” applies as per the KVAT Act.
\n141. Now, let us examine both Section 19 of the CA Act and Section 174 of the KSGST Act. Section 19 mandates that any in<\/p>\n
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\n143. So I must hold that Section 19 of the CA Act is- transitional as it may have been-a repealing clause simpliciter, not a saving clause. Nothing more. That job of saving is done by Section 174 of the KSGST Act. Well and truly. So the repeal has not, as Section 174 elaborates, affected “the previous operation of the amended Acts or repealed Acts and orders or anything duly done or suffered thereunder.” In other words, the repeal has not affected “any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Acts or repealed Acts or orders under such repea<\/p>\n
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\n145. Collaterally it follows that all the judicial and quasi- judicial proceedings arising from the above contingencies, too, stand saved.
\n146. Of course, in most cases, the question is, as the petitioners put it, whether Section 174 (2) (a) “revives” the KVAT Act, 2003 for the authorities to issue notices under that Act beyond 16.09.2017. The petitioners contend that revival presupposes the pre-existence of something valid. For them, the KVAT Act had ceased to operate completely on 16.09.2017. Legally it died that day, they assert. To support this contention, they have relied on Ambalal Sarabhai Enterprises.
\n147. Ambalal Sarabhai Enterprises examined, pending a tenancy dispute before a rent-control court, through amendment, its jurisdiction is taken away because of the changed threshold limit of the rent. Then, among other things, the Court had to answer these questions:
\n(a) can a ground of eviction, say illegal subletting, be claimed by a landlord a<\/p>\n
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\n150. Lord Dunedin pointed out in Whitney v. Inland Revenue Commissioners[[1926] A.C. 37] that there are three stages in the imposition of a tax:
\n(1) there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable.
\n(2) Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. And
\n(3) lastly comes the methods of recovery, if the person taxed does not voluntarily pay.
\n151. Govind Saran Ganga Saran v. Commissioner of Sales Tax and Ors,[AIR 1985 SC 1041] = 1985 (4) TMI 65 – SUPREME COURT approve<\/p>\n
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\n153. In Manattitillah Krishnan Thangal v. State of Kerala,[AIR 1971 Ker 65 (FB)] = 1970 (4) TMI 166 – KERALA HIGH COURT this Court has held that the content of a valid law under Article 265 is that it should provide for the levy, assessment, and collection of tax. The words “levied or collected” in Article 265 are of comprehensive to include all the three stages in imposing a tax. The word 'levied” in Article 265 of the Constitution is therefore used to include the first two stages: the levy or the declaration of the liability and the assessment or the determination of the amount of the tax. The Full Bench relies on the dictum in Raja Jagannath Baksh Singh v Sate of U.P.[AIR 1962 SC 1563] = 1962 (4) TMI 5 – SUPREME COURT.
\n“If a taxing statute makes no specific provision about the machinery to recover tax and the <\/p>\n
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\n155. On facts, the Court has held that there is no intention to repeal without a substitution was deducible. In other words, there could be no repeal if substitution failed. The two were part and parcel of a single indivisible process and not bits of a disjointed operation.
\n156. The Court also observes that repeal is not a matter of mere form but one of substance, depending upon the intention of the Legislature. If the intention, indicated expressly or by necessary implication in the subsequent statute, were to abrogate or wipe off the former enactment, wholly or in part, then it would be a case of total or pro tanto repeal.<\/p>\n
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\n162. But Kolhapur Cane Sugar Works stresses that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute-book as completely as if it had never been passed. To this rule, an exception is engrafted by Section 6(1) of the General Clauses Act. If a provision of a statute is uncon<\/p>\n
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\n165. If the expression “delete” would amount, Shree Bhagwati Steel Rolling Mills further holds, to a “repeal”, it is clear that a conjoint reading of Halsbury's Laws of England and the Legal Thesaurus leads to the same result: an “omission”, a form of repeal, is t<\/p>\n
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\nLimitation:
\n167. The petitioner in one writ petition has argued that on the date when the first ever Show Cause Notice, dated 15.03.2018, under Section 8 (f) (iv), read with Section 25, of KVAT Act was issued, KSGST, 2017 had been in operation for almost six months. And the KVAT, 2003 stood expired.
\n168. The impugned Notices have been issued for the alleged assessment of the escaped turnover. All the notices, the petitioners have maintained, pertain to the AYs 2010-2011 and 2011-2012, but were issued in March 2018 and beyond. The time for an assessment under Section 25 is five years for the relevant assessment years; so the notices are barred by time. Section 42(3) of the KVAT Act, according to them, does not save the limitation under Section 25 of the Act. They have also contended that composite notices are illegal and impermissible.
\n169. To sustain their plea, the petitioners, among other things, have argued that on the assessees' fi<\/p>\n
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\n(b) Article 367 does not apply to constitutional amendments; the General Clauses Act is only for understanding and for interpreting words not defined and specifically available in the Constitution including Article 366 (12);
\n(c) Specific repeal and saving under KSGST and also the application of the General Clauses Act as per S.174
\n(3) is self-contradicting. In any view, S.174 (2) and 174 (3) are by themselves self-contradicting;
\n(d) Section 24 of the General Clauses Act is the saving of subordinate legislation and applies when there are repeal and re-enactment. The present is not a case of repeal and re- enactment. So Section 24 is not attracted. In other words, machinery provisions are not saved. Then, there can be no tax without machinery provisions.
\nFallacy:
\n172. <\/p>\n
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\n178. What does Section 19 of the CA Act do? It repeals or omits, for instance, a congeries of state statutes. And, indeed, the whole Amendment Act is prospective. So these repealed state acts failed to survive beyond the date mentioned in Section 19. They perished. First, prospectively, no State Legislature could trifle with the constitutional mandate under the Amendment Act. But, prospective as the Amendment Act is, could the State have saved the causes and the consequences flowing from the past enactments-enactments once legitimate and living.
\n176. We have found that the General Clauses Act is unavailable; and that is unavailable on more than on ground:
\n(a) Omission;
\n(b) repeal by a Constitutional Act;
\n(c) the alternative theory of sunset clause, if it were;
\n(d) the inapplicability of the General Clauses Act to the State enactments.
\n177. We have noted that the States could do nothing to affect the <\/p>\n
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\n181. To encapsulate, I may observe that all the petitioners have advanced one common argument: the State has been denuded of its legislative power to enact Section 174 of the Kerala State Goods and Services Act, 2017. The obvious prop for this assertion comes from the 101st Constitutional Amendment-that is, the attenuated or modified Entry 54 of the List II, the State List.
\n182. All the petitioners contend that the KSGST Act came into being because of the Constitutional Amendment. And that very Constitutional Amendment has put paid to many other enactments-for example, the Kerala Value Added Tax Act, 2003. So with the Entry 54 of List II unavailable for the State to incorporate Section 174 of the KSGST Act, the whole saving mechanism vis-à-vis transactions befo<\/p>\n
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\n185. Indeed the State legislatures are assigned only specified fields of legislation, the residuary legislative powers lying with the Parliament. But taxing entries are distinct from the general entries. So comes a federal constitutional experiment in the fiscal field: the 101st Constitutional Amendment.
\n186. Article 246 generally stipulates the competence of the Parliament and the state legislatures on the various fields of legislation. But Articles 249, 250 and 252 contain provisions which enable the Parliament to legislate on any matter enumerated in List II in the exigencies specified in those Articles. The Scheme of Entries, such as 52 and 54 and the corresponding Entries in the List-II, Bimolangshu Roy underlines, is nothing but another instance of special arrangement akin to the one made<\/p>\n
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\n190. Granted, the petitioners have bona fide pursued these writ petitions; so, now, in a few cases, the petitioners may face the question of limitation. To adjust equities, I observe that if any petitioner approaches a statutory authority on an issue arising out of a writ petition which now stands disposed of in this batch, the authority will exclude for limitation the period it has spent before this Court.
\n191. If any petitioner files in thirty days after its receiving a copy of the judgment, a statutory appeal or takes out any other legally sustainable proceedings against the orders under challenge, the statutory authority will en<\/p>\n
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\n5. Id.
\n6. Tarun Jain's Goods and Services Tax, Constitutional Law & Policy, ST, EBC. Ed-2018. p.70 (e-book)
\n7. Lexis-Nexis, 2009 Ed., p.311
\n8. Id. Pp.312, 313
\n9. Tarun Jain's Goods and Services Tax, Constitutional Law & Policy, ST, EBC, Ed.2018, pg.89-90 (e-book)
\n10. Craies On Legislation, Sweet & Maxwell, 2010, p.407
\n11. Lexis-Nexis, 14th Ed., Pp.717, 718
\n12. Taylor and Francis, 2016. Kindle edition., p.4, location 559
\n13. Id. p.6, location 624
\n14. Id. p.7, location 646-653
\n15. Id. p.16, location 881
\n16. Id. pp. 155-157, location 5578-5637
\n17. Id. pp.163-164, location 5767-5792
\n18. Law in books and law in action (1910) 44 American Law Review 12, as quoted by A. E. Kouroutakis, Page 161, location 5723
\n19. Sweet & Maxwell, South Asian Ed. 2010, p.399
\n20. Id., 417
\n21. Prof. Dr. Helen Xanthaki, Bloomsbury Professional, 5th <\/p>\n
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