Section 84A of Gujarat VAT Act is declared as ultra vires the Constitution of India

Reliance Industries Ltd. & ors. Vs State of Gujarat (Gujarat High Court)

Conclusion: Section 84A of the Gujarat VAT Act is declared as ultra vires and beyond the legislative competence of the State Legislature under Entry 54 of List II of the Seventh Schedule to the Constitution of India and is also declared to be violative of Article 14 of the Constitution of India on the ground of being manifestly arbitrary, unreasonable and oppressive.

Held: Supreme Court passed an order dated 22.09.2017 in an appeal filed by the State this Court by holding that the Input Tax Credit was required to be reduced twice. i.e, to the extent of total 8%, under sub clauses (ii) and (iii) of Section 11(3)(b) of the VAT Act , in such a way that the reduction should not exceed the amount of the Input Tax credit claimed. In view of the aforesaid judgement of the Supreme Court, Additional Commissioner of Commercial Tax issued a revision notice dated 03/06.11.2017 in Form 503 under Sections 75 to revise the Assessment Order for F.Y. 2008-09 made vide order dated 30.03.2013 for reducing the Input Tax Credit to the extent of 8% under the provisions of Section 11(3)(b)(ii) and 11(3)(b)(iii) of the VAT Act. By an order dated 16.03.2018, this Court quashed and set aside the aforesaid revision notice issued by the department under Section 75  on the ground that the said revision notice could not be sustained being beyond the period of limitation provided under Section 75 of the VAT Act.By virtue of the VAT Amendment Act, 2018, Section 84A came to be added in the VAT Act to be operative retrospectively w.e.f 01.04.2006, inter alia, providing for the exclusion of the period spent between the date of the decision of the appellate tribunal and that of the High Court as well as the Supreme Court in computing the period of limitation, referred to in Section 75 of the VAT Act. In the present case, the period commencing from the date of the decision of this Court dated 18.01.2013 rendered against the revenue upto the date of the decision of the Supreme Court i.e., 22.09.2017 being in favour of the revenue, was sought to be excluded by virtue of the above referred retrospective amendment to enable the department to issue a notice for revision for revising the assessment made for the year 2008-09 and thereby removing the basis of the later judgment dated 16.03.2018 of this Court. Assessee challenged to the constitutional validity on the ground that Section 84A of the GVAT Act was ultra vires and beyond the legislative competence of the State under Entry 54 of List II of the Seventh Schedule to the Constitution of India and also on the ground that Section 84A of the GVAT Act was violative of Article 14 of the Constitution of India. It was held that if the unlimited time period was available to the Revenue for assessment/reassessment/revision in any case based on a decision rendered in the case of any other dealer the same would lead to an irreparable situation section 84A of the Gujarat VAT Act was declared as ultra vires and beyond the legislative competence of the State Legislature under Entry 54 of List II of the Seventh Schedule to the Constitution of India and was also declared to be violative of Article 14 of the Constitution of India on the ground of being manifestly arbitrary, unreasonable and oppressive.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

1. Since the issues raised in all the captioned writ applications are the same, those were heard analogously and are being disposed of by this common judgment and order.

2. For the sake of convenience, the Special Civil Application No.14206 of 2018 is treated as the lead matter.

3. By this writ application under Article 226 of the Constitution of India, the writ applicant, a Public Limited Company, engaged in the manufacture and sale of Petrochemicals, has prayed for the following reliefs;

“(A) This Hon’ble Court may be pleased to issue a writ striking down and declaring Section 84A of the VAT Act as being ultra-vires and beyond the legislative competence of the State of Gujarat under Entry 54 of List II of the Seventh Schedule to the Constitution of India;

(B) Without prejudice to the above and in the alternative this Hon’ble Court may be pleased to issue a writ striking down and declaring Section 84A of the VAT Act as being manifestly arbitrary, confiscatory and hence violating Article 14 of the Constitution of India;

(C) Without prejudice to the above and in the alternative this Hon’ble Court may be pleased to issue a writ striking down and declaring Section 84A of the VAT Act in so far as it is introduced with retrospective effect from 1.4.2006 as being manifestly arbitrary, confiscatory and hence violating Article 14 of the Constitution of India;

(D) This Hon’ble Court may be pleased to issue writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order quashing and setting aside impugned notices dated 1.9.2018 (annexed at Annexure B and C).

(E) This Hon’ble Court may be pleased to hold that the impugned notices issued by the learned Respondent No. 3 are wholly without jurisdiction, bad and illegal;.

(F) Pending notice, admission and final hearing of this petition, this Hon’ble Court be pleased to restrain the learned Respondents from proceeding further pursuant to impugned notices annexed at Annexure B and C;

(G) Ex parte ad interim relief in terms of prayer F may kindly be granted’”

2. Thus, the subject matter of challenge in all the writ applications is the constitutional validity of Section 84A of the Gujarat Value Added Tax Act, 2003 (for short “the GVAT Act”). The challenge to the constitutional validity is substantially on the ground that Section 84A of the GVAT Act is ultra vires and beyond the legislative competence of the State under Entry 54 of List II of the Seventh Schedule to the Constitution of India. The challenge to the validity is also on the ground that Section 84A of the GVAT Act is arbitrary, unreasonable and, therefore, is violative of Article 14 of the Constitution of India.

3. The facts, giving rise to this litigation, may be summarized as under;

3.1 The Deputy Commissioner of Commercial Tax, Corporate-I, Ahmedabad passed an assessment order dated 23.12.2009 for the Financial Year 2006-07 against the writ applicant company by reversing the Input Tax Credit to the extent of 8% i.e. 4% under each of the provisions of Sections 11(3)(b)(ii) and 11(3)(b)(iii) of the GVAT Act.

3.2 The Joint Commissioner (Appeals), Baroda, being the First Appellate Authority, vide order dated 30.12.2010 dismissed the First Appeal filed by the Petitioner Company under Section 73 of the VAT Act, confirming the aforesaid order dated 23.12.2009.

3.3 On 26.04.2012, the Gujarat Vat Tribunal passed an order allowing the Second Appeal of the Petitioner Company, by quashing and setting aside both the above referred orders of the Sales Tax Authorities by holding, inter alia, that the First Appellate Authority had erred in confirming the Assessment Order for branch transfer and consignment adjustments wherein admissible Input Tax Credit was reduced twice, while applying both clauses (ii) as well as (iii) of Section 11(3)(b) of the VAT Act, resulting into reduction of the Input Tax Credit to the extent of 8% for purchases of furnace oil, natural gas and light diesel oil, as sub-clause (iii) of Section 11(3)(b) of the VAT Act is not applicable to consignment of branch transfer transactions.

3.4 This Court, vide its judgment dated 18.1.2013 reported in 2013 SCC Online Guj. 8788 dismissed the appeal of the State Government filed against the aforesaid order of the VAT Tribunal, while holding inter alia, that the reduction of Input Tax Credit under Section 11(3)(b) would, in no case, exceed 4% on the ground that the limitation of availing of the tax credit as provided under Section 11(3)((b) could be applied only once irrespective of the fact as to whether particular commodity purchased falls in more than one sub-clauses of Section 11(3)(b) of the VAT Act.

3.5 On 30.03.2013, an Assessment Order came to be passed by the Deputy Commissioner of Commercial Tax, Ahmedabad for the F.Y. 2008-09 in the case of the petitioner Company, deciding the assessment proceedings for the said period as under in respect of the two different issues;

(i) As per the aforesaid judgment dated 18.01.2013 of this Court, rendered in the case of the petitioner Company with respect to the reduction of Input Tax Credit on natural gas used as raw material, the competent authority reduced the ITC of the Petitioner Company at the rate of 4%, instead of 8%, under the provisions of Section 11(3)(b) of the Act.

(ii) As per the decision dated 30.04.2010 of the Gujarat VAT Tribunal, rendered in the case of Welspun Gujarat Stahi Rohren Ltd., while considering the availment of sales tax incentive limit, under the provisions of Section 49(2) of the Gujarat Sales Tax Act, 1969 the tax paid by the assessee on purchases of goods used in manufacture of taxable goods exported outside the country was not to be included. In other words, according to the Tribunal, the said incentive limit cannot be curtailed by the said tax paid by the assessee.

3.6 In an appeal filed by the State against the aforesaid decision dated 30.04.2010 rendered by the Tribunal in the case of Welspun Gujarat Stahi Rohren Ltd., this Court vide its judgment dated 04.04.2014, nullified the findings and observations of the Tribunal and, inter alia, held that while considering the availment of sales tax incentive limit, the tax paid on the purchase of goods used in the manufacture of taxable goods exported outside the country is required to be considered.

3.7 in view of the aforesaid judgment dated 04.04.2014 of this Court rendered in the case of Welspun Gujarat (supra), the Additional Commissioner of Commercial Tax issued a revision dated 10.03.2018 under Section 75 of the VAT Act to the petitioners to show cause as to why the assessment order dated 30.03.2013, referred to above, at Sr. No.5 should not be revised so as to give effect to the aforesaid judgment of this Court in the case of Welspun Gujarat (supra) and thereby, reducing the sales tax incentive limit after considering the tax paid on purchases of the goods used in manufacture of taxable goods, exported outside the country.

3.8 The provisions of the Constitution (One Hundred and First Amendment) Act, 2016, came to be enacted, which came into force w.e.f. 01.07.2017.

3.9 On 20.09.2016, the Additional Commissioner of Commercial Tax passed an order and reduced the sales tax incentive, in case of the Petitioner Company, while considering the tax paid on the purchase of taxable goods used in the manufacture of taxable goods, exported outside the country.

3.10 On 01.07.2017, the legislations, i.e, the Gujarat Goods and Services Tax Act, 2017 and the Central Goods & Services Tax Act, 2017 came into force to levy tax on all the intra-state suppliers of goods or services or both.

3.11 Apropos the aforesaid Constitution (101st Amendment) Act, 2016, the Gujarat Value Added Tax Act, 2003 came to be substantially amended by way of substitution and deletion of many provisions thereof by virtue of the Gujarat Value Added Tax (Amendment) Act, 2017, which came into force w.e.f. 01.07.2017.

3.12 Meanwhile, the Supreme Court passed an order dated 22.09.2017 in an appeal filed by the State, setting aside the aforesaid judgment dated 18.01.2013 of this Court by holding, inter alia, that the Input Tax Credit is required to be reduced twice. i.e, to the extent of total 8%, under sub clauses (ii) and (iii) of Section 11(3)(b) of the VAT Act , in such a way that the reduction should not exceed the amount of the Input Tax credit claimed. The said judgment of the Supreme Court was reported in (2017) 16 SCC 28.

3.13. In view of the aforesaid judgment of the Supreme Court, the Additional Commissioner of Commercial Tax issued a revision notice dated 03/06.11.2017 in Form 503 under Sections 75 of the Act to revise the Assessment Order for F.Y. 2008-09 made vide order dated 30.03.2013 (Sr. No.5 above), for reducing the Input Tax Credit to the extent of 8% under the provisions of Section 11(3)(b)(ii) and 11(3)(b)(iii) of the VAT Act in light of the judgment dated 22.09.2017 of the Supreme Court.

3.14 By an order dated 16.03.2018, this Court, while allowing the Special Civil Application No.22283 of 2018 filed by the petitioner, quashed and set aside the aforesaid revision notice issued by the department under Section 75 of the VAT Act on the ground that the said revision notice cannot be sustained being beyond the period of limitation provided under Section 75 of the VAT Act.

3.15 By virtue of the VAT Amendment Act, 2018, Section 84A came to be added in the VAT Act to be operative retrospectively w.e.f 01.04.2006, inter alia, providing for the exclusion of the period spent between the date of the decision of the appellate tribunal and that of the High Court as well as the Supreme Court in computing the period of limitation, referred to in Section 75 of the VAT Act. In the present case, the period commencing from the date of the decision of this Court dated 18.01.2013 rendered against the revenue upto the date of the decision of the Supreme Court i.e., 22.09.2017 being in favour of the revenue, is sought to be excluded by virtue of the above referred retrospective amendment to enable the department to issue a notice for revision for revising the assessment made for the year 2008-09 and thereby removing the basis of the later judgment dated 16.03.2018 of this Court (Sr. No.10 above).

3.16 in view of the above, on 01.09.2018, fresh notice for revision came to be issued by the Addl. Commissioner of Commercial Tax to the Petitioner on the basis of the above referred newly added Section 84A, for revising the assessment for the F.Y.2008-09 made vide order dated 30.03.2013 (at Sr. No.5 above) for reducing the Input Tax Credit to the extent of 8% under the provisions of Section 11(3)(b)(ii) and 11(3)(b)(iii) of the VAT Act in light of the judgment dated 22.09.2017 of the Supreme Court.

3.17 In the present case, the original period of limitation as provided under Section 75 of the VAT Act for issuing notice is of 3 years from the date of the assessment order i.e. 30.03.2013 which had lapsed on 30.03.2016. However, by virtue of the newly enacted Section 84A, the period spent from the date of the decision of the High Court is 18.01.2013 upto the date of the decision of the Supreme Court i.e. 22.09.2017 is to be excluded in computing the aforesaid period of three years, referred to under Section 75 of the Act.

3.18 In such circumstances, referred to above, the writ applicant seeks to challenge the constitutional validity of Section 84A of the GVAT Act as well as the revision notice dated 01.09.2018.

Submissions on behalf of the writ applicant;

4. Mr. S.N.Soparkar, the learned senior counsel appearing with Mr. Uchit N. Sheth, the learned counsel appearing for the writ applicant vehemently submitted that Section 84A of the GVAT Act is without legislative competence and, therefore, is unconstitutional. Mr. Soparkar would submit that the constitution (101st Amendment) Act , 2016 introduced the Goods & Services Tax regime in India. It sought to replace all the indirect taxes, levied on the goods and services by the Union of India as well as the State Governments. It came to be a comprehensive indirect tax levy on manufacture,, sale or consumption of goods and services. The Act of 2016 inserted Articles 246A, 269A and 279A to the Constitution of India. It amended the provisions of Article 286 of the Constitution. It deleted Entry No.92 and 92C of List-I of the Seventh Schedule and inserted Entry 84 of List-I and Entry 54 of List-II of the Seventh Schedule. In tune with the constitutional amendments incorporated, the Central Goods & Services Tax Act, 2017, Integrated Goods and Services Tax Act, 2017 and the respective State Goods and Services Tax Act, 2017 were enacted. Mr. Soparkar further submitted that Article 246A of the Constitution of India makes the provision with respect to goods and services tax. It empowers the Parliament and the legislature of every State, subject to Article 246A(2) and notwithstanding anything contained in Articles 246 and 254, to make laws with respect to Goods and Services Tax imposed by the Union or the State. According to Mr. Soparkar, while the State Legislatures have been empowered to impose goods and service tax by the newly inserted Article 246A of the Constitution, the scope of Entry 54 has been drastically curtailed to six specific products. It is submitted that the State Legislature does not have the competence to enact any law under Entry 54 except the law concerning only the six specific products. It is vehemently submitted that despite such limited legislative competence, the State Legislature proceeded to enact Section 84A whereby the assessment related to the tax liability of all goods which were earlier covered under Entry 54 are now sought to be reopened. In other words, according to Mr. Soparkar, liability is sought to be imposed and enforced in respect of all goods though the competence of the Legislature is limited to the six products. In such circumstances, according to Mr. Soparkar, Section 84A of the Vat Act is beyond the legislative competence of the State Legislature.

5. According to Mr. Soparkar, the competence of the Legislature could be adjudged at the time of the enactment of the provision. If at the time of passing the law if the Legislature has the necessary competence, then such law can even be passed with retrospective effect covering the period when the Legislature did not have the competence. However, if at the time of the amendment, the Legislature does not have the competence, then the law cannot be enacted on the ground that the same is concerning the period when the Legislature had the necessary competence. In support of this submission, Mr. Soparkar seeks to rely on the decision of the Supreme Court in the case of A. Hajee Abdul Shukoor & Co. vs. State of Madras, (1964) 15 STC 719 (SC) (page 730).

6. Mr. Soparkar drew the attention of this Court to Section 19 of the Constitution Amendment Act. Drawing the attention of this Court to Section 19 of the Constitution Amendment Act, he submitted that it was provided in the Constitution Amendment Act that any legal provision inconsistent with the provisions of the unamended constitution shall continued to be in force until amended or repealed by a competent legislature or until expiration of one year from the commencement of the Constitution Amendment Act. In other words, even an existing statutory provision would automatically cease to exist latest by one year from the date of the commencement of the Constitution Amendment Act. In such circumstances, the State legislature definitely lacks the competence to make a new enactment such as Section 84A pertaining to the erstwhile entries of the State List.

7. Mr. Soparkar would submit that Section 84A of the VAT Act is not saved under Article 246A of the Constitution. He would submit that Article 246A of the Constitution was inserted by the 101st Constitution Amendment Act with the prime object of subsuming multiple indirect taxes and to confirm concurrent power upon the Parliament and State Legislature to impose “Goods & Services Tax’ in accordance with the recommendations of the Goods & Services Tax Council constituted under Article 279A of the Constitution.

8. Mr. Soparkar would submit that if the State Legislature could be said to have the power to enact the Value Added Tax Laws under Article 246A of the Constitution, then the Entry 54 of List II of the Seventh Schedule to the Constitution which was retained to the extent of six products kept outside the GST regime, will be rendered redundant. The argument of the learned senior counsel is that the fact that Entry 54 of List II of the Seventh Schedule stands retained so far as the six products are concerned, indicates that the sales tax/value added tax enactment is not permissible under Article 246A of the Constitution. The learned senior counsel would submit that the stance of the State that Article 246A of the Constitution supports the enactment of the provision under the VAT Act flies in the face of the existence of Entry 54 of List II of the Seventh Schedule to the Constitution which survived the 101st Constitution Amendment Act.

9. Mr. Soparkar submitted that the case of the State that the impugned proceedings are one relating to the recovery towards one of the six products covered under Entry 54 of List II of the Seventh Schedule is contrary to the materials on record. It is submitted that the goods manufactured by the writ applicant are in the nature of petrochemicals and are not covered by Entry 54 of List II of the Seventh Schedule to the Constitution. It is submitted that if the revision initiated by the impugned notice is concluded by disallowance of the Input Tax Credit, then the same would result in the recovery of tax on such petrochemicals.

10. Mr. Soparkar submitted that Section 84A of the VAT Act is manifestly arbitrary and violative of Articles 14 and 19(1)(g) of the Constitution of India. He would submit that when the assessment for a particular year attains finality, the same creates a vested right in favour of the dealer. The dealer would, accordingly, arrange his affairs. The alteration of such position without any definite time limit only on the ground that a judgment has been pronounced in favour of the Revenue in another case is manifestly arbitrary and illegal. In support of such submission, the learned senior counsel seeks to rely on the decision of the Supreme Court in the case of State of Punjab vs. Shereyas Industries Ltd., (2006) 91 VST 23 (SC).

11. In the aforesaid context, Mr. Soparkar submitted that any legislation which is found to be manifestly arbitrary can be struck down as violative of Article 14 of the Constitution. In this regard, strong reliance has been placed on the decision of the Supreme Court in the case of Shayara Bano vs. Union of India, (2017) 9 SCC 1.

12. Mr. Soparkar would submit that the retrospective insertion of Section 84A with effect from 01.04.2006 makes the provision exhaustively arbitrary and unreasonable. He would submit that the Legislature may have the power to legislate prospectively as well as retrospectively, but any retrospective legislation would be prone to the scrutiny on the anvil of the test of reasonableness. In this regard, reliance is placed on the decisions of the Supreme Court in the case of Rai Ramkrishna vs. State of Bihar, AIR 1963 SC 1667 and Epari Chinna Krishna Moorthy vs. State of Orissa, AIR 1964 SC 1581. Mr. Soparkar also invited the attention of this Court to the decision of the Supreme Court in the case of R.C. Tobacco (P) Ltd. vs. Union of India, 2005 7 SCC 725.

13. In the aforesaid context, Mr. Soparkar seeks to rely upon the following decisions;

(i) in the case of Jayam & Co. vs. Assistant Commissioner, (2016) 96 VST 1 (SC);

(ii) In the case of Filco Trade Centre Pvt. Ltd. vs. Union of India, (2008) 57 GSTR 204 (Guj.);

(iii) In the case of Avani Exports vs. Commissioner of Income Tax, (2012) 348 ITR 391 (Guj.); (Para 24)

14. Mr. Soparkar further submitted that the test of unforeseen and unforeseeable burden should be applied keeping in mind the impugned retrospective amendment. He pointed out that the revision proceedings were permitted to be initiated only within three years from the date of passing of the order. Such position was prevailing even under the Gujarat Sales Tax Act, 1969. Section 67 of the Sales Tax Act empowered the Commissioner to initiate the revision proceedings within the stipulated time limit and it was consistently held that the revision proceedings initiated beyond the stipulated period of limitation was time barred.

15. Mr. Soparkar further submitted that the provisions of limitation in the taxing statute are enacted with a specific objective of giving certainty and finality to the legal proceedings and to avoid exposure to the risk of litigation for an indefinite period of time. Any changes in such limitation period should be ordinarily prospective. He would submit that the retrospective operation given to the impugned amendment without any valid reason could be termed as manifestly arbitrary and violative of Article 14 of the Constitution of India. In this context, reliance is placed on the decision of the Supreme Court in the case of K.M. Sharma vs. Income Tax Officer, 2002 (4) SCC 339 and the judgment of this Court in the case of Tata Teleservices vs. Union of India, (2016) 385 ITR 497 (Guj.).

16. Mr. Soparkar vehemently submitted that the impugned amendment leads to an absurd situation with unforeseeable consequences. In such circumstances, the same is manifestly arbitrary. Mr. Soparkar gave an example in this regard. By way of an illustration, he pointed out that a case in which Mr. X of Surat selling cotton yarn was assessed to tax for the year 2006-07 at the rate of 5% in March, 2010. Such assessment was not challenged by either side and the same attained finality. For the same period, issue was raised in the case of Mr. Y of Rajkot, demanding tax at the rate of 15% on the cotton yarn. Mr. Y succeeds before the Appellate Authority and the rate of tax is held to be 5%. The Department prefers appeal before the Tribunal and the same is pending. In the year 2025, the matter in the case of Mr. Y reaches the Supreme Court and holds that the applicable rate of tax on cotton yarn is 15%. In such circumstances, the impugned amendment will enable the authorities to revise in the year 2025 the assessment order passed in the case of Mr. X of Surat in the year 2010. This, according to Mr. Soparkar, is violative of Article 14 of the Constitution as it could be termed as manifestly arbitrary.

17. Mr. Soparkar also submitted that the impugned amendment is violative of Article 19(1)(g) of the Constitution of India as it adversely effects the fundamental right of free trade business.

18. Mr. Soparkar also submitted that Section 84A of the VAT Act is not a validating Act by any stretch of imagination. There was no levy which was held to be illegal by any Court which needs validation. The revision notices had been issued beyond the statutory period of limitation and those were quashed on such ground. Therefore, according to Mr. Soparkar, there is nothing to be validated by Section 84A of the Act. It could be said that a fresh liability is sought to be created by retrospectively extending the period of limitation.

19. For the purpose of understanding the true meaning of the term “validation Act” reliance is placed on the decision of the Supreme Court in the case of Amarendra Kumar Mohapatra vs. State of Orissa, (2014) 4 SCC 583. it was also argued that Section 64 of the VAT Act fortifies all the above referred submissions, more particularly, that the impugned provision is excessive and disproportionate. Mr. Soparkar also submitted that the impugned Section 84A of the VAT Act cannot be defended on the ground that the tax dues which were morally due to the State are sought to be recovered. It is submitted that the reasons of morality and fairness can have no application to bring a person within the four corners of the taxing statute so as to make him liable to payment of tax. In this regard, reliance is placed on the decision of the Supreme Court in the case of Assistant Commissioner, Commercial Taxes vs. LIS (Registered),
(2018) 15 SCC 283.

20. It is submitted that the stance of the State that as it was remedy less, it had to insert Section 84A of the Act , is absolutely not tenable in law. It is submitted that the respondents could have issued notice for revision under Section 75 of the VAT Act within the stipulated period of limitation to keep the matter alive. It is submitted that if the time period for passing order in revision was to expire and the issue was still pending before the Supreme Court, then the respondents could have passed an order in favour of the dealer and, thereafter, carried the matter before the Tribunal/High Court by filing the revision application/appeal. In this regard, reliance is placed on the decision of this Court in the case of Nestle India Ltd. vs. Deputy Commissioner of Commercial Tax, (2016) 89 VST 56.

21. In the last, the learned senior counsel submitted that the Commissioner is empowered to revise an assessment order passed by his delegatee under Section 75 of the VAT Act. Once such power of revision in respect of an assessment order is exercised, then the power gets exhausted and the same assessment order cannot be revised again. In this regard, reliance is placed on the decision of the Supreme Court in the case of OCL India Ltd. vs. State of Orissa, (2003) 130 STC 35 (SC) and the decision of this Court in the case of Malaviya Bros. & Co. vs. Sales Tax Officer, 1973 GSTB 206

22. In such circumstances, referred to above, Mr. Soparkar, the learned senior counsel appearing for the writ applicant prays that there being merit in all his submissions, referred to above, the provision of Section 84A of the VAT Act deserves to be declared as ultra vires.

Submissions on behalf of the State Government;

23. Mr. Kamal Trivedi, the learned Advocate General appearing for the State vehemently submitted that the State Legislature is empowered to enact taxation laws relating to the intra-state supply with respect to only six items and not with any other items. Prior to the enactment of Constitution (101“ Amendment) Act, 2016, in terms of Article 246 of the Constitution of India, the Union and the State Governments were empowered to make laws relating to the matters covered under List I (Union List), List ll (State List) and List III (concurrent List). In other words, there used to be a clear demarcation of legislative powers between the Union and the States by confining themselves within the field entrusted upon them.

24. In terms of the erstwhile Entry 54 of List II, the State legislature was empowered to levy taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. In other words, in respect of all intra-state sale / purchase of goods other than newspaper, the State legislature was empowered to levy taxes on the said transactions.

25. However, while making a paradigm shift in the indirect tax regime to empower the Centre and the State, both to levy taxes simultaneously, the Constitution came to be amended vide the 101st Constitution Amendment Act, 2016. Pertinently, vide the said Constitutional Amendment, new Article 246A came to be inserted in the Constitution of India, which confers right upon both, the Union and the legislature of every State to make laws with respect to goods and services for imposition of tax. by the Union or by such State.

26. Mr. Trivedi pointed out that the said erstwhile Entry 54 of List ll of the 7th Schedule also came to be amended vide the 101st Constitution Amendment Act, 2016.

27. Mr. Trivedi would submit that It was never the intention of the Parliament to take away the power of the State legislature to enact laws with respect to intra-state sale or purchase of goods. However, the intention as discernible from the language of the above Article 246A, clearly appears to confer simultaneous powers on the Union and the State legislatures to make laws for levying tax simultaneously on every transaction of supply of goods or services or both. In the aforesaid context, Mr. Trivedi seeks to rely upon the decision of the Supreme Court in the case of Union of India vs. Mohit Mineral Pvt. Ltd., reported in (2019) 2 SCC 599.

28. Mr. Trivedi would submit that the term “goods and services tax’, used in the afore-quoted Article 246A of the Constitution of India, is defined under Article 366(12A) of the Constitution, which means “any tax” on “supply of goods” which necessarily occurs on the sale of goods.

29. According to Mr. Trivedi, by virtue of Article 246A read with Article 366(12A) of the Constitution of India, the Union and the State legislatures,. both have power to make laws with respect to any tax on supply of goods. or services or both except taxes on the supply of the alcoholic liquor for human consumption. At this stage. it Is worthwhile to note that, undisputedly, the term “supply includes ‘sales/purchases.

30. Mr. Trivedi would submit that by virtue of the said Constitution Amendment Act of 2016, two major changes have been brought in picture:

(a) Tax would be now imposed on ‘supply of goods’, which was earlier used to be only on ‘sale/purchase of goods’;

(b) The demarcation of powers between the Union and the legislatures of every State has disappeared and that the Union and the legislatures of every State, both are empowered to make laws with reference to the supply of goods:

31. It is further argued that by virtue of Article 246A of the Constitution of India, the power to make laws with respect to ‘intra-state’ sale or purchase of goods still exists with the State legislature, even after the enactment of the said 101st Constitution Amendment Act of 2016. In the aforesaid context, Mr. Trivedi seeks to rely on a recent pronouncement of the Kerala High Court in the case of Golden Jewels (India) Pvt. Ltd. vs. State Tax Officer, 2019 SCC Online Ker. 973.

32. It is pointed out that the judgment rendered by the learned Single Judge has been affirmed in appeal by the Division Bench of the Kerala High Court vide judgment dated 6th March, 2019.

33. Mr. Trivedi submitted that it is a settled principle of law that the Entries to the legislative lists are not the sources of the legislative power, but are merely topics or fields of legislation and that the competence to legislate flows from Articles in Part XI of the Constitution of India. Hence, amendment: in such Entries, like amendment in Entry 54 of List II in the present case would not make any difference to the legislative competence of the State legislature to make any laws, which otherwise flows from the substantive provisions under the Constitution.

34. It is submitted that by enacting Section 84A in the VAT Act, the State Legislature has not proposed to levy any fresh tax, but merely allowed the department to enlarge the period of limitation under the provisions of Section 75 of the VAT Act, if permissible, so as to collect the legitimate tax already levied, but was not collected in view of pendency of litigation before the Apex Court.

35. It is submitted that though the Constitutional (101″ Amendment) Act, 2016, was passed to subsume various taxes, like excise, service tax, VAT, etc., but, the same does not indicate that henceforth, the State Legislature would not have any power to make laws with respect to VAT, for the past transactions under the provisions of Section 75 of the VAT Act, more particularly, in view of Article 246A read with Article 366(12A) of the 101st Constitutional Amendment Act, 2016, read with Section 142(6) and 142(7) of the CGST Act.

36. According to Mr. Trivedi, 101st Constitutional Amendment Act of 2016, inter alia. inserting Article 246A. starting with nonobstante clause, came into effect on 01.07.2017 conferring power on the State Legislature to enact law with reference to any tax on supply of goods. Whereas, Section 84A came to be enacted by the State Legislature on 03.04.2018, to be operated upon retrospectively with effect from 01.04.2006, which is the date on which the VAT Act had come into force.

37. According to Mr. Trivedi, the State Legislature was very much competent to legislate when it enacted Section 84A of the VAT Act. According to Mr. Trivedi, the decision relied upon on behalf of the writ applicant of the Supreme Court in the case of A. Hajee Abdul Shakoor (supra0 is of no avail.

38. Mr. Trivedi gave us a fair idea as regards the effect of Section 19 of the Constitutional Amendment Act, 2016. It is submitted that w.e.f. 01.07.2017, the Gujarat VAT Act, 2003 came to be substantially amended and more particularly Section 2(13) dealing with the definition of the term ‘goods’ with reference to the amended Entry 54 of List II and the addition of sub-section (2A) in Section 100 relating to Repeal and Savings with further insertion of Section 84A on 03.04.2018. However, the said newly inserted Section 84A is
not inconsistent with the provision of Section 19 of the Constitution Amendment Act, 2016, nor has the said Section 19 of the Constitution Amendment Act, 2016 denuded State’s power to enforce Gujarat VAT Act in its amended form.

39. Mr. Trivedi would submit, relying on the decision of the Supreme Court in the case of J.K. Jute Mills Company Ltd. vs. State of Uttar Pradesh, AIR 1961 SC 1354 that the power of the legislature to enact a law with reference to a topic entrusted to it is unqualified and, therefore, in exercise of such power, it is competent for the legislature to enact a law which is either prospective or retrospective. Mr. Trivedi, without prejudice to his aforesaid submission, would submit that there are many ways and means of enacting and amending the Act for the purpose of inserting an amendment in the existing legislation with retrospective effect. Such amending Acts have the effects of validating, curing or declaring etc. with retrospective effect for the purpose of overcoming a legal obstacle or curing existing legal defects, or validating the tax declared illegal or declaring a particular position of law.

40. According to Mr. Trivedi, for all practical purposes, the VAT Amendment Act of 2018 is a validating Act, inasmuch as it has sought to overcome the obstacle in terms of limitation of 3 years provided under Section 75 of the VAT Act, which obstacle stood confirmed by this Court vide its judgment dated 16.03.2018 in SCA No.22283 of 2018, while quashing and setting aside the revision notice dated 03/06.11.2017 issued by the State Authorities to revise the assessment order for Financial Year 2008-09, as time barred under Section 75 and hence, illegal. This revision notice was issued on the basis of the judgment dated 22.09.2017 of the Supreme Court reported in (2017) 16 SCC 28, whereby the judgment dated 18.01.2013 of this Court, reported in 2013 SCC Online Guj. 8788, was set aside necessitating the recovery of lost revenue.

41. Mr. Trivedi seeks to rely on the decision of the Supreme Court in the case of Shri Prithvi Cotton Mills Ltd. vs. Broach Boroush Municipality, 1969 Part II SCC 283.

42. Mr. Trivedi would submit that there is no merit in the contention canvassed on behalf of the writ applicant that it is mandatory that there has to be an invalid levy of tax declared by any Competent Court which can be validated by a Validating Act. There can be a Validating Act conferring jurisdiction which may be absent or validating the illegal demand of tax on the basis of wrong interpretation of the provisions as held by the Court by amending the said provision retrospectively. In support of such submission, Mr. Trivedi seeks to rely on the following three decisions;

(I) In the case of Government of Andhra Pradesh vs. Hindustan Machine Tools Ltd., (1975) 2 SCC 274;

(II) In the case of M/s. Ujagar Prints vs. Union of India, (1989) 3 SCC 488;

(III) In the case of Asst. Commissioner of Agricultural Income Tax, (2015) 11 SC 462;

43. Mr. Trivedi would submit that the statutes of limitation are retrospective in nature, when they deal with procedural law and they are prospective, when they deal with the substantive rights, unless the same are expressly or by implication made retrospective. In other words, there is no bar under the Constitution that a statute of limitation impacting a substantive right, cannot be made retrospective in nature. Thus, even if Section 84A of the VAT Act is considered to be not a Validating Act, but simply a statutory provision relating to limitation, then in that case also, the same is rightly brought in picture with retrospective effect.

44. Mr. Trivedi also seeks to rely upon the following three decisions to fortify his submission that a law cannot be held to be unreasonable merely because it operates retrospectively.

(I) In the case of R.C. Tobacco Pvt. Ltd. vs. Union of India & Anr., reported in (2005) 7 SCC 725;

(II) In the case of Raj Ramkrishna vs. State of Bihar, reported in AIR 1963 SC 1667;

(III) In the case of Epari Chinna Krishna Moorthy vs. State of Orissa, reported in AIR 1964 SC 1581;

45. On the issue of reopening of the closed assessments, the submissions of Mr. Trivedi are as under;

“1. It has been contended on behalf of the Petitioners that by virtue of Section 84A of the Gujarat VAT Act, it is not legally permissible to the department to reopen the assessments which have already attained finality before such amendment is brought into force.

2. In this regard, it is submitted that it is settled principle of law that it is the language of the provision which matters and when the meaning of the said provision is amply clear, it has to be given full effect. In other words, when the provision of law is explicit, it has to operate fully and there could not be any limit to its operation.

3. It is not disputed that a fiscal statute can be given retrospective operation. Thus, if the contention raised by the Petitioners is accepted, the clear intention of the legislature become redundant. The provisions of Section 84A of the VAT Act now inserted with retrospective effect from 01.04.2006, do not put any embargo on the department in reopening the assessment, if period, as prescribed earlier, had expired before the said section came into operation.

4. Earlier the re-assessment under the provisions of Section 75 of the VAT Act could have been completed within five years, of that particular assessment year and now, by virtue of the said Section 84A of the VAT Act, the same may extend up to the period spent in litigation before the High Court or the Supreme Court, as the case may be. A bare reading of the said Section 84A shows that the operation of the said section, encompasses back and relates to previous assessment years, whether or not they have become final by reason of the expiry of the period prescribed under the Act.

5. In addition to the above, it is submitted that as such, under the provisions of the VAT Act. there is no bar to reopen the assessments, which have attained finality. The provisions of Section 75 of the VAT Act specifically empower the appropriate authority to reopen the assessments, which have attained finality. Thus. the provisions of Section 84A of the VAT Act do not provide for anything which was not there previously but, the same only explain/clarify as to in what manner, the said prescribed period is to be calculated.”

46. As regards the retrospective Introduction of Section 84A of the VAT Act being manifestly arbitrary and violative of Article 14 of the Constitution of India, the submissions of Mr. Trivedi are as under;

“1. It has been contended on behalf of the Petitioners that the provision under challenge is manifestly arbitrary on the ground that the same seeks to reopen the assessments and in other words, take away the vested rights of the Petitioners. As per the Petitioners, once the assessment for a particular year attains finality, the same creates a vested right in favour of the Petitioners and alteration of such vested rights and that too, on the ground that judgment in favour of the revenue has been pronounced by a Court in some other case. is manifestly arbitrary and illegal.

2. In this regard. it is submitted that the provision under challenge is neither manifestly arbitrary nor illegal, as alleged or otherwise. In fact, even it is considered that finality of an assessment, for a particular year. creates a vested right in favour of the Petitioners. then in that event also. in terms of Section 35/75 of the VAT Act. it is always open for the competent authority to reopen/revise the assessment orders, within the prescribed time limit, which have attained finality.

3. In the present case, the provision under challenge merely enables the authority to exclude the period spent before the competent forum for deciding the issue. The said provision under challenge is only enacted with a view to safeguard the revenue, which the authority would lose, with efflux of time, without any fault on the part of the department but only due to the pendency of cases before the Higher forum. In this behalf, reliance is placed on the above judgment of the Apex Court in the case of
Commercial Tax Officer Vs. Biswanath Jhunjhunwalla, reported in (11) (1996) 5 SCC 626.

4. Thus. in other words, though the interpretation provided by the Supreme Court would be applied retrospectively. due to the prescribed time limit of 3 years provided for reopening of assessments in the VAT Act. the department was not able to reopen the past assessments prior to the period of 3 years, resulting in lose the revenue, which the State was otherwise entitled for.

5. In addition to above, even otherwise. in taxation matters, the law laid down by the Courts with respect to the interpretation of any provision, apply to all the cases and that, it is not open for any assessee to contend that reopening of its case, on the ground of a judgment delivered in favour of the revenue by a Court in some other case. is manifestly arbitrary and illegal.

6. As such, at the most, the provision under challenge merely extends the time limit prescribed under Section 35/75 of the VAT Act, which ultimately enables the department to issue show cause notice as to why the assessment order of a particular year  should not be reopened and at that stage, the concerned assessee can show cause as to how and in what manner, the judgment delivered in some other case is not applicable to the facts of the said assessee. Hence, the same does not envisage imposition of tax/penalty directly but, the same would only be levied/imposed only after hearing the concerned assessee. Thus, there arises no question of arbitrariness.

7. Petitioners have relied upon the following four authorities for contending that Section 84A of the VAT Act is “manifestly arbitrary” and hence hit by contravention of Article 14 of the Constitution of India. It is undoubtedly true that the legislation can now be struck down as unconstitutional on the ground that the same being manifestly arbitrary. However, that does not mean that Section 84A of the VAT Act is manifestly arbitrary.

8 As observed by the Apex Court in the aforesaid case of Shayara Bano (supra), “manifestly arbitrariness” means something done by legislature capriciously, irrationally and/or without adequate determining principle, or something done which is excessive and disproportionate.

9. In fact, one needs to consider as to which particular provision came to be held as as ‘manifestly arbitrary” in the above referred four judgments by the Supreme Court and then, to equate Section 84A of the VAT Act with those provisions. On mere comparison of this type will reveal that by no stretch of imagination, Section 84A of the VAT Act can be considered to be manifestly arbitrary, much less arbitrary.”

47. On the issue of the retrospective operation of the provision under challenge being unreasonable and violative of Article 19(1)(g) of the Constitution, the submissions of Mr. Trivedi are as under;

“1. It is contended on behalf of the Petitioners that the retrospective operation provided to the provision under challenge is unreasonable, on the ground that the same fails the test of reasonableness, as laid down by the Apex Court in the case of R. C. Tobacco Vs. Union of India reported in (2005) 7 sec 725.

2. In this regard. it is submitted that applying the said tests to the retrospectivity of the provision under challenge, the same would clear the test of the reasonableness and that the same is not unreasonable, as alleged or otherwise.

3. As far as the test with regard to the context in which the retrospectivity is contemplated is concerned, it is submitted that the provision under challenge has been given retrospective effect only with a view to safeguard the revenue’s interest which was lost because of the pendency of issue before the appropriate forum. In other words, even if an issue is decided in favour of the department but due to the delay occurred in deciding the same issue, the department would lose the opportunity to apply the said favorable decision to the cases which have been already decided on the basis of wrong/incorrect proposition of law.

4. As far as the period of such retrospectivity is concerned, it is submitted that as such it has been held by the Supreme Court that the test of length of time covered by the retrospective operation cannot, by itself, be treated as a decisive test. Even otherwise. considering the facts of the present case, there arises no question of any unforeseen or unforeseeable financial burden imposed for the past period. inasmuch as. the provision under challenge simply enables the department to exclude the period spent in litigation before the Courts and that the same do not envisage to levy/ impose any tax/penalty upon an assesses retrospectively, which was not there at the time of assessment. In other words, the question of unforeseen financial burden would only come in picture in cases where the provision imposes taxes/increases the rate of taxes retrospectively, which an assesses would not have foreseen while undertaking his/her business.

5. In addition to the above. It is pertinent to note that the power of the department to revise/reopen the assessment under the provisions of Section 35/75 of the VAT is not under challenge and hence, in any case, without there being the provision under challenge, the department can revise/reopen the assessment orders within the prescribed time limit. Thus, in the present case. there arises no question of any unforeseen or unforeseeable financial burden imposed by applying the provision under challenge retrospectively.

6. Therefore. the retrospective operation of the provision under challenge is not unreasonable and hence, the said provision under challenge is not required to be struck down.”

48. On the argument canvassed by the learned senior counsel appearing on behalf of the writ applicant that the assessment order cannot be revised for the second time, the submissions of Mr. Trivedi are as under;

“1. It is alternatively contended on behalf of the Petitioners that when the revision powers conferred under Section 75 is exercised once, then in that event, such powers get exhausted and the said assessment order cannot be revised once again. In other words. as per Petitioners, the assessment orders which are already revised once, cannot be taken in revision again by the revisional authority. In this regard, it is submitted that the said contention is not tenable in the eye of law.

2. On a plain reading of the provisions of Section 75 of the VAT Act, it would be discernible that the said Section does not debar/restrict the revisional powers to be exercised more than once, on different issues. If, the said contention raised by the Petitioners to the effect that once an assessment order is revised on one issue. then the revisional authority cannot revise the said assessment orders for another issue also, is accepted, then in that eventuality, the same would frustrate the intention of the legislature and would defeat the very purpose of the legislature to provide revisional powers to the competent authority, more particularly, in a situation where the law with respect to different issues get settled at different points of time.

Thus, with respect to different issues, the assessment orders can be revised more than once, if the same is within the prescribed period of limitation.

3. In addition to the above. it is submitted that it is settled principle of law that the Doctrine of Merger is applicable only to the extent to which the issue or issues got settled/decided/ forms part of revision, expressly or by necessary implication. Thus, the issues/controversies which are not forming the subject matter of revision, the doctrine of merger would not be applicable and that the colour of the assessment order to the extent of those unchallenged issues would not get altered.

4. Pemnently, in the present case, the second revision notice dated 01.09.2018 issued to the Petitioners, is based on altogether different issue and not related or identical to the issue which was revised earlier vide Order dated 10.03 2016. In other words, the controversy sought to be raised in the present notice in question is admittedly based on an issue. which was never taken in appeal or revision by any of the parties. In view thereof, except for the issue which was revised vide order dated 10.O3.2016, the revisional authority would not be debarred/ restricted from exercising its revisional powers upon all other issues. Even under the Civil law, action in regard to a property challenged in the subsequent suit based upon different cause of action, is not barred on the ground of the earlier suit having been filed for the same property but in respect of another cause of action. Thus, consideration of 0rder 2 Rule 2 of CPC or waiver. estoppel, or constructive res-judicata do not apply to such an eventuality, which exists in the present case.

5. As far as the judgments viz. (14A) OCL India Ltd. Vs. State of Orissa, reported in (2003) 130 STC 35, and (14B) Malavia Bros. & Co. Vs. Sales Tax Officer, reported in 1973 GSTB 206, relied upon by the Petitioners are concerned, the same would also not be applicable to the facts of the present case. In the first case referred to above, it was held that once the Assistant Commissioner, as a delegatee of the Commissioner, had revised the order of the Sales Tax Officer, then in that case, the Commissioner, as a delegator, could not have exercised the power of revision once over again as the same having been exhausted in the first Instance. Whereas in the second case referred to above, the Revisional Authority was seeking to revise in respect of the same subject matter, which was already settled either in revision or appeal. As against this, as aforesaid, in the present case, the notice in question is altogether on different issue and admittedly, not on the same subject/issue, which was revised earlier.”

49. As regards the amendment in the repealed enactment, the submissions of Mr. Trivedi are as under;

“1. It has been contended by the Petitioners that the provisions of the VAT Act stand repealed qua all goods, except 6 items which are enumerated in Entry 54 of List II of the 7th Schedule of the Constitution of India.

2. In this regard, it is categorically stated that the provisions of the VAT Act, more particularly, Section 75 of the VAT Act still exists and that the same are not repeated.

3. However, even assuming without admitting that the provisions of VAT Act stand repealed all goods but 6 items, then in that also, it is submitted that the State Legislature still possesses the power and it is also permissible under the law to amend the provisions, which are repealed or not in existence. Therefore, it is incorrect to contend that the State Legislature seeks to amend the
provisions of VAT Act, which are not in existence, and hence invalid. “

50 In such circumstances, referred to above, Mr. Trivedi, the learned counsel appearing for the State prays that there being no merit in this writ application, the same be rejected.

ANALYSIS

51. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the following questions fall for our consideration;

(i) Whether Section 84A of the GVAT Act is ultra vires and beyond the legislative competence of the State under Entry 54 of List II of the seventh schedule to the Constitution of India?

(ii) Whether by virtue of Article 246A read with Article 366(12A) of the Constitution of India, the Union and the State Legislatures, both have the power to make laws with respect to any tax on supply of goods or services or both, except taxes on the supply of the alcoholic liquor for the human consumption? In other words, whether by virtue of Article 246A of the Constitution of India, the power to make laws with respect to “intra-state’ sale or purchase of goods still exists with the State Legislature even after the enactment of the 101^St Amendment Act of 2016.

(iii) Whether Section 84A of the GVAT Act is manifestly arbitrary and violative of the Articles 14 and 19(1)(g) of the Constitution of India?

(vi) Whether the retrospective insertion of Section 84A with effect from 01.04.2006 makes the provision exceedingly arbitrary and unreasonable?

(v) Whether Section 84A of the GVAT Act is a validating Act?

(vi) Whether by virtue of Section 84A of the GVAT Act, it is permissible to the Department to reopen the assessments which have already attained finality before such amendment came into force?.

(vii) Whether the provisions of the Gujarat Vat Act stand repealed qua all the goods except the six items enumerated in the Entry 54 of List li of the seventh schedule of the Constitution of India?. In other words, whether the provisions of the VAT Act more particularly, Section 75 of the Act still operates and the  other provisions cannot be said to be repealed?

52. Before adverting to the rival submissions canvassed on either side, we must look into few relevant provisions of the Constitution of India and the Gujarat Vat Act.

53. Section 84A of the Act reads thus;

“84A. Exclusion of period in some cases

(1) Notwithstanding anything contained in this Act, an issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the Appellate Authority or the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the Appellate Authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in section 34 or section

(2) Notwithstanding anything contained in this Act, if any decision or order under section 73 or section 75 involves an issue on which the Revision Authority or Appellate Authority or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the High Court or the Supreme Court against such decision of the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the Appellate Tribunal and the date of the decision of the High Court or the date of the decision of the High Court and the date of the decision of the Supreme Court shall be excluded in computing the period of limitation referred to in section 73 or section 75. “

54. We shall now look into few relevant provisions of the Gujarat Value Added Tax (Amendment) Act, 2017.

55. In the principal Act, in section 2,-

(1) clauses (1), (1 A) and (2) shall be deleted;

(2) in clause (4), in sub-clause (ii), for the words “plant, machinery, raw materials, processing materials, packing materials, empties, consumable stores, waste products, or such other goods, or waste or scrap of any of them”, the words “raw materials, processing materials, consumable stores, waste products or such other goods” shall be substituted;

(3) clauses (5) and (9) shall be deleted; Ai

(4) in clause (10), Exceptions (i) to (iii) shall be deleted;

(5) clause (11) shall be deleted;

(6) for clause (13), the following clause shall be substituted, namely:-

“(13) “goods” means goods as covered under entry 54 of List II of the Seventh Schedule to the Constitution of India;”;

(7) in clause (19), the words “material used in the packing of the goods” shall be deleted;

(8) In clause (27), for the words, figures and letters “on sales or purchase of goods and includes lump sum tax leviable or payable under Section 14, 14A, 14B, 14C or 14D”, the words “on sales of goods” shall be substituted;

(9) for clause (29), the following clause shall be substituted, namely:-

“(29) “taxable goods” means goods liable to section 7 excluding the goods on which no tax under section 5;”;

(10) in clause (30), –

(i) the words “or purchases” shall be deleted;

(ii) in sub-clause (b), the words, brackets and figures “under sub-section (1) of section 5 or” shall be deleted;

(11) in clause (34), in sub-clause (a) the words “or purchases”, occurring at two places, shall be deleted;

(12) clause (37) shall be deleted.

56. In the principal Act, in section 7, –

(1) for sub-section (1), the following sub-section shall be substituted, namely:-

“(1) Subject to the provisions of this Act, there shall be levied a tax on the turnover of sale of Motor spirit commonly known as Petrol, High Speed Diesel, Aviation Turbine Fuel, Petroleum Crude, Natural Gas and Alcoholic Liquor for human consumption specified in Schedule III at the rate set out against each of them:

Provided that the Government may levy, from importer or manufacturer or oil marketing companies, a tax at full rate on the retail price in such manner as may be notified by the Government.”;

57. In section 100, after sub-section (2), the following sub‑ section shall be added, namely:-

“(2A) The amendment of the Gujarat Value Added Tax (Amendment) Act, 2017 (Guj. 26 of 2017) shall not‑

(a) revive anything not in force or existing at the time of such amendment or repeal; or

(b) affect the previous operation of this Act prior to the coming into force of the Gujarat Value Added Tax (Amendment) Act, 2017 and orders or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under this Act prior to the coming into force of the Gujarat Value Added Tax (Amendment) Act, 2017 (Guj. 26 of 2017) or orders made thereunder:

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 coming into force of the Gujarat Value Added Tax (Amendment) Act, 2017 (Guj. 26 of 2017); or

(d) affect any tax, surcharge, penalty, fine, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of this Act prior to the coming into force of the Gujarat Value Added Tax, (Amendment) Act, 2017 (Guj. 26 of 2017); or

(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed; or

(f) affect any proceedings including that relating to an appeal, revision, review or reference, instituted under this Act prior to the coming into force of the Gujarat Value Added Tax (Amendment) Act, 2017 (Guj. 26 of 2017) and such proceedings shall be continued under the said amending Act”.

58. The newly enacted Article 246A of the Constitution of India reads as under;

“Article 246A. Special provision with respect to goods and services tax:

(1) Notwithstanding anything contained in articles 246 and 254, Parliament and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. –

(2) Parliament has exclusive power to make laws with respect to goods and service tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.

Explanation:-The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of Article 279A, take effect from the date recommended by the Goods and Services Tax Council.”

59. The said erstwhile Entry 54 of List II of the seventh schedule also came to be amended vide the 101^st Constitution Amendment Act, 2016 and the amended Entry 54 reads as under:-

“54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commodity known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or comme4rce of such goods.”

60. Article 366 (12A) of the Constitution reads as under;

“366(12A) ‘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.”

61. Sections 142(6) and 142(7) of the GST Act reads as under;

“142(6) (a) every proceeding of appeal, review or reference relating to a claim for input tax credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law, and any amount of credit found to be admissible to the claimant shall be refunded to him in cash in accordance with the provisions of existing law, and the amount rejected, if any, shall not be admissible as input tax credit under this Act:

Provided that no refund shall be allowed of any amount of input tax credit where the balance of the said amount as on the appointed day has been carried forward under this Act;

(b) every proceeding of appeal, review or reference relating to recovery of input tax credit initiated whether before, on or after the appointed day under the existing law shall be disposed of in accordance with the provisions of existing law and if any amount of credit becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.

(7) (a) every proceeding of appeal, review or reference relating to any output tax liability initiated whether before, on or after the appointed day under the existing law, shall be disposed of in accordance with the provisions of the existing law, and if any amount becomes recoverable as a result of such appeal, review or reference, the same shall, unless recovered under the existing law, be recovered as an arrear of duty or tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act.

(b) every proceeding of appeal, review or reference relating to any output tax liability initiated whether before, on or after the appointed day under the existing law, shall be disposed of in accordance with the provisions of the existing law, and any amount found to be admissible to the claimant shall be refunded to him in cash in accordance with the provisions of existing law and the amount rejected, if any, shall not be admissible as input tax credit under this Act.”

62. At this stage, it would not be out of place to incorporate the statement of objects and reasons for the enactment of Section 84A of the Gujarat Vat Act.

“STATEMENT OF OBJECTS AND REASONS

After implementation of the Gujarat Value Added Tax Act, 2003 in the State, Amendments have been made from time to time for better administration and tax compliance.

It is noticed that in some cases under the said Act, orders are passed by the authorities under Gujarat Value Added Tax Act,2003, but the appellate authorities including the High Court or the Supreme Court have decided the matters before them involving similar issues, due to which if the orders passed by the authorities under the said Act are allowed to stand which are contrary to the judgment/s of the said appellate authorities, they will be prejudicial to the Government Revenue unless they are taken in revision under the said Act. Section 84 of the Act that provides for exclusion of period of limitation in certain cases, does not provide the exclusion of time spent between the judgment of Appellate Court and the Higher Court when the earlier judgment is prejudicial to the interest of revenue. ;

It is therefore, considered necessary and expedient in the interest of safeguarding the revenue to insert section 84A so as to provide the contingency for exclusion of the period spent between the earlier judgment and later judgment of any Appellate Authority, Tribunal, High Court, or as the case may be, Supreme Court involving issue prejudicial to the interest of revenue.

This bill seeks to amend the said Act of 2003 to achieve the aforesaid objects.”

63. Section 174 of the GGST Act, which provides for the “repeal and savings” reads thus;

“174. Repeal and Savings;

(1) The repeal of the Acts specified in section shall not:-

(a) revive anything not in force or existing at the time of such amendment or repeal; or

(b) affect the previous operation of the amended Acts or repealed Acts and orders or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed Acts:

Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or

(d) affect any tax, surcharge, fine, penalty, 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 repealed Acts; or

(e) affect any – investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such tax, surcharge, penalty, fine, interest, right, privilege, obligation, – liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so repealed ; or

(f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said repealed Acts as if this Act had not come into force and the said Acts had not been repealed. (2) The mention of the particular matters referred to in Section 173 shall not be held to prejudice or affect the general application of section 7 or section 7A or section 25 of the Gujarat General Clauses Born. 1 of 1904 with regard to the effect of repeal.”

64. The Constitution (One hundred and first Amendment) Act, 2016 introduced the Goods and Services Tax regime in India. It sought to replace all indirect taxes levied on goods and services by the Union as well as the State Governments. It came to be a comprehensive indirect tax levy on manufacture, sale or consumption of goods and services. The Act of 2016 inserted Article 246A, 269A and 279A to the Constitution of It amended the provisions of Article 286 of the Constitution. It deleted Entry 92 and 92C of List I of the Seventh Schedule and inserted Entry 84 of List I and Entry 54 of the List II of the Seventh Schedule. In tune with the constitutional amendments incorporated, Central Goods and Services Tax Act, 2017, Integrated Goods and Services Tax Act, 2017 and the respective State Goods and Services Tax Act, 2017 were enacted.

65. Article 246A of the Constitution of India makes special provision with respect to Goods and Services Tax. It empowers the Parliament and the Legislature of every State subject to Article 246A(2) and notwithstanding anything contained in Articles 246 and 254, to make laws with respect to Goods and Services Tax imposed by the Union or the State. Article 246A(2) recognises the exclusive power of the Parliament to make laws with respect to Goods and Services Tax where the supply of goods, or of services, or both takes place in course of inter-state trade or commerce. Article 269A deals with levy and collection of Goods and Services Tax in course of inter-state trade or commerce. Essentially, Article 269A recognises the Government of India to collect Goods and Services Tax on supplies in the course of inter-state trade or commerce. It allows the apportionment of the tax levied and collected between the Union and the States as may be provided by Parliament by law. It recognises the authority of the Parliament by law to formulate the principles for determining the place of supply and when a supply of goods or of services or both takes place in the course of inter-state trade or commerce. Article  279A deals with Goods and Services Tax Council. It envisages the Constitution of a Goods and Services Tax Council. It enumerates the powers and functions of such Council, the decision making process therein and the establishment of a mechanism to adjudicate any disputes.

66. Effect of repeal at Common Law – Repeal obliterates the statute as if it has never been enacted

66.1 Under the common law, a statute after its repeal is completely obliterated as if it has never been enacted, except as to the transactions past and closed.

66.2 Craies on Statute Law, 7^th Edition at pages 411-412 states the principle as under:

“When an Act of Parliament is repealed, “said Lord Tenterden in Surtees V. Ellison,” it must be considered (except as to transactions past and closed) as if it had never existed. That is the general rule. Tindal C.J. stated title exception more widely. He said: “The effect of repealing a statute is to be obliterate it as completely from the records of the Parliament as if it had never been passed and it must be considered as a law that never existed except for the purpose of those action which were commenced, prosecuted and concluded whilst it was an existing law.”

66.3 Bennion on Statutory Interpretation, 6^th Edition at Pg 276 explains the effect of repeal as under –

“Effect of repeal

At common law the repeal of an Act makes it as if it had never been, except as to matters past and closed. ….

Thus anything done after the repeal in purported exercise of a repealed provision is a nullity.”

66.4 A seven judge bench of the Supreme Court in the case of Keshavan Madhava Menon v. State of Bombay, 1951 AIR 128 referred to a passage from the Crawford’s book on Statutory Construction which reads as under:

“it is well settled that if a statute giving a special remedy is repealed without a saving clause in favour of pending suits all suits must stop where the repeal firnds them. If final relief has not been granted before the repeal went into effect, it cannot be after, if a case is appealed, and pending the appeal the law is changed, the appellate court must dispose of the case under the law in force when its decision was rendered. The effect of the  repeal is to obliterate the statute repealed as  completely as if it had never been passed, and it must be considered as a law which never existed,  except for the purposes of those actions or suits  which were commenced, prosecuted and concluded while it was an existing law. Pending judicial proceedings based upon a statute cannot proceed after its repeal. This rule holds true until the proceedings have reached a final judgement in the court of last resort, for that court, when it comes to announce its decision, conforms it to the law then existing and may therefore reverse a judgement which was correct when pronounced in the subordinate tribunal from which whence the appeal was taken, if it appears that pending the appeal a statute which was necessary to support the judgement of the lower court has been withdrawn by an absolute repeal.” (P. 601).

….emphasis supplied

66.5 Justice G.P. Singh in his Principles of Statutory Interpretation, 12th Edition 2010, while examining the consequences of repeal has stated as following at page 695.

“Under the common law rule the consequences of repeal of a statute are very drastic. Except as to transactions past and closed, a statute after its repeal is as completely obliterated as if it had never been enacted. The effect is to destroy all inchoate rights and all causes of action that may have arisen under the repealed statute. Therefore, leaving aside the cases where proceedings were commenced, prosecuted and brought to a finality before the repeal, no proceeding under the repealed statute can be commenced or continued after the repeal.”

66.6 The Apex Court in Mohan Raj Vs. Dimbeswari Saikia & Anr, AIR 2007, SC 232, has quoted the above passage with approval in paragraph 23 which is quoted below:

“23. It is now well settled that such Repealing Act shall be construed to have not taken away the accrued right of a person. In G.P. Singh’s Principles of Statutory Interpretation (10th Edn.) 2006 at Page 631, it is stated:

“Under the common law rule the consequences of repeal of a statute are very drastic. Except as to transactions past and closed, a statute after its repeal is as completely obliterated as if it had never been enacted. The effect is to destroy all inchoate rights and all causes of action that may have arisen under the repealed statute. Therefore, leaving aside the cases where proceedings were commenced, prosecuted and brought to a finality before the repeal, no proceeding under the repealed statute can be commenced or continued after the repeal.”

66.7 The aforesaid principle is reiterated in the Constitution Bench decision of the Supreme Court in the case of Kolhapur Canesugar Works Ltd v. Union of India – 2000 (119) ELT 257 (SC).

66.8 Thus, at common law, a statute become non-existent on its repeal, unless saved by some saving provision.

67. Section 6 of the General Clauses Act – abrogates

67.1 To prevent the drastic effect of obliteration of statute on its repeal and to save the rights acquired or liabilities incurred, the savings clauses are provided in the repealing statutes.

67.2 Apart from that, Section 6 of the General Clauses Act, 1897 provides a general savings. The section reads as under:

“6. Effect of repeal –

Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not:

(a) Revive anything not in force or existing at the time at which the repeal takes effect; or

(b) Affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) Affect any right privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) Affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) Affect any investigation, legal proceedings or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid,

and any investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.”

67.3 The aforesaid provision will apply to repeal of any enactment by a Central Act, unless a different intention appears from the repealing Act. The section inter alia provides that repeal shall not affect the previous operation of any enactment so repealed, anything duly done or suffered; or affect any rights, privileges, obligations or liabilities acquired, accrued or incurred under the repealed enactment; or affect penalty, forfeiture or punishment incurred or investigation, legal proceedings in respect of right, privilege, obligation, liability, penalty, forfeiture or punishment.

68. The term ‘repeal’ is used when the entire act is abrogated. The term ‘amendment’ is used when a portion of an Act is repealed and re-enacted. There is  no real distinction between them. Repeal thus includes  partial repeal.

68.1 The use of any particular form of words is not necessary to bring about a repeal. All that is necessary is that the words should indicate the intention to abrogate the Act or provision in question. The word ‘repeal’ is usually used when the entire Act is sought to be abrogated. However, when the object is to repeal only a portion of an Act, the term ‘omission’ is used. Further, where the object is to repeal a part and re-enact another provision in its place, the term ‘amendment’ is used.

68.2 The above principle has been explained by the Supreme Court in the case of Bhagat Ram Sharma v. Union of India, AIR 1988 SC 740 as under:

“It is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of repeal of the existing provision. Such a law may also provide for the introduction of a new provision. There is no real distinction between ‘repeal’ and an ‘amendment’. – In Sutherland’s Statutory Construction, 3^rd edn., vol. 1 at p. 477, the learned author makes the following statement of law:

“The distinction between repeal and amendment as these terms are used by the Courts is arbitrary. Naturally the use of these terms by the Court is based largely on how the Legislatures have developed and applied these terms in labelling their enactments. When a section is being added to an Act or a provision added to a section, the Legislatures commonly entitle the Act as an amendment… When a provision is withdrawn from a section, the Legislatures call the Act an amendment, particularly when a provision is added to replace the one withdrawn. However, when an entire Act or section is abrogated and no new section is added to replace it, Legislatures label the Act accomplishing this result a repeal. Thus as used by the Legislatures, amendment and repeal may differ in kind addition as opposed to withdrawal or only in degree-abrogation of part of a section as opposed to abrogation of a whole section or Act; or more commonly, in both kind and degree-addition of a provision to a section to replace a provision being abrogated as opposed by abrogation of a whole section of an Act. This arbitrary distinction has been followed by the Courts, and they have developed separate rules of construction for each. However, they have recognized that frequently an Act purporting to be an amendment has the same qualitative effect as a repeal – the abrogation of an existing statutory provision- and have therefore applied the term ‘implied repeal’ and the rules of construction applicable to repeals to such amendments. Amendment is, in fact, a wider term and it includes abrogation or deletion of a provision in an existing statute. If the amendment of an existing law is small, the Act professes to amend; if it is extensive, it repeals a law and re-enacts it.”

68.3 Further, in the case of Fibre Boards (P) Ltd v. CIT Bangalore, 2015 (8) TMI 482 – SC, the Supreme Court held that there is no distinction between ‘repeal’ and ‘omission’. Similar dictum is laid in the case of Shree Bhagwati Steel Rolling Mills v. Commir. Of Central Excise, 2015 (326) ELT 2019 (SC).

68.4 Accordingly, Section 6 of the General Clauses Act, 1897 will also apply to the omission, amendment, substitution, etc. which repeals a part of an Act or partially repeals an Act.

69. Applicability of the General Clauses Act. 1897 for the interpretation of the Constitution _I V

69.1 Article 367(1) of the Constitution states that the General Clauses Act, 1897 (subject to the adaptations and modification made under Article 372) shall apply for the interpretation of the Constitution. The relevant extract is as under:

“367.(1) Unless the context otherwise requires, the General Clauses Act, 1897, shall, subject to any adaptations and modifications that may be made therein under Article 372, apply for the interpretation of this Constitution as it applies for the interpretation of an Act of the Legislature of the Dominion of India.”

69.2 Thus, the General Clause Act applies only for the interpretation of constitution. The General Clauses Act defines various terms in section 3. These definitions will apply for the interpretation when these words are employed in the Constitution. Apart from the definition, Section 16 (power to appoint to include power to suspend or dismiss), Section 21 (Power to issue to include power to add to, amend, vary or rescind Notification, Orders, Rules or Bye-laws), etc. which are general rules of construction and which are otherwise in accord with the common law may also apply for the interpretation of the Constitution.

69.3 Therefore, perhaps, the other matters such as the savings in the case of repeal (Section 6), revival of repeal enactments (Section 7), construction of references to the repealed enactments (Section 8), continuation of order issued under the repealed enactment and re-enacted (Section 24), etc. which are not related to interpretation may not apply by virtue of Article 367.

69.4 Further, Section 6 applies only to repeal of an enactment. Enactment is defined under Section 3(19) of the General Clauses Act to include regulation or any provision contained in any Act or regulation. However, Constitution is not an enactment. The Constitution is supreme and is, in fact, the foundation of all the enactment. This has been observed by the Law Commission in its 60^th Report on the General Clauses Act, 1897 in the context of Section 8 (construction of references of repealed enactment). The relevant extract of the report is as under:

“1.30.Effect of section 8 on Article 367.- Will section 8 of the General Clauses Act, which provides that when an enactment is repealed and re-enacted, references to the old enactment will be construed as references to that, re-enacted one, make any difference? We do not think so. It should be noted that the words “unless the context otherwise requires” (in Article 367) mean that the General Clauses Act, section 8, is to be excluded. Even by its terms, section 8 of the General Clauses  Act will not apply to the Constitution, because  expression “enactment” (which occurs in section  8) would not take in the Constitution, which is not an “enactment”. The Constitution is supreme and is, in fact, the foundation of all enactments.”

69.5 Thus, Section 6 of the General Clauses Act, 1897 will not apply to the Constitution (contrary view taken by the Allahabad High Court in the case of Farzand v. Mohand, AIR 1968 All 67(73). However, no reasoning has been given to apply Section 6 of the General Clauses Act, 1897 to the Constitution.)

69.6 The above principle about the non-applicability of the General Clauses Act, 1897 is relevant and applicable even to the Constitutional Amendment Acts as they are made by the Parliament in exercise of its constituent powers under Article 368 and not in exercise of normal legislative powers under Article 245 of the Constitution.

69.7 The question as to whether Section 6 applies to the Constitution is relevant to determine whether after the repeal of the Entry in the legislative list, the laws made in pursuance of such legislative powers can be saved. That provision has presently been made under Section 19 of the Constitution (One hundred and First) Amendment Act, 2016. Thus, contextually also Section 6 will not apply to the present case.

70. Need for Article 372 in the Constitution – Saving of laws in force

70.1 Article 395 of the Constitution inter alia repeals the Government of India Act, 1935. The repeal of the Government of India Act, 1935 may have the effect that all the previous Acts passed under it may cease to operate.

70.2 Accordingly, Article 372 of the Constitution provides for continuance of the existing laws in force on repeal of the Government of India Act, 1935. The relevant extract of the said Article is as under:

“372. Continuance in force of existing laws and their adaptation

(1) Notwithstanding the repeal by this Constitution of the enactments referred to in Article 395 but subject to the other provisions of this Constitution, all the laws in force in the territory of India immediately before the commencement of this Constitution, all the laws in force in the territory of India immediately before the commencement of this Constitution shall continue in force therein until altered or repealed or amended by a competent Legislature or other competent authority.”

70.3 The objective behind the enactment of Article 372 was explained by Durga Das Basu in his Commentary on the Constitution of India (First Edition) at page 726-727 as under:

“The general rule is that with the repeal of a statute, all bye-laws made thereunder cease to be valid, unless there is a saving clause in the new statute, preserving the old bye-laws. On this principle, laws passed under the previous Government Acts would have ceased to operate on the commencement of this Constitution, by reason of Art. 395, post.

The object of the prevent clause is to sanction the continuance of the existing laws until they are repealed or amended by a competent authority under the new constitution.”

70.4 The Supreme Court in the case of South India Corporation v. Secretary, Board of Revenue, 1964 AIR 207, in the context of Article 372 observed as under:

“The object of this article is to maintain the continuity of the pre-existing laws after the Constitution came into force till they were repealed, altered or amended by a competent authority. Without the aid of such an article there would be utter confusion in the field of law. The assumption underlying the article is that the State laws may or may not be within the legislative competence of the appropriate authority under the Constitution. The article would become ineffective and purposeless if it was held that pre- Constitution laws should be such as could be made by the appropriate authority under the Constitution. The words “subject to the other provisions of the Constitution” should, therefore, be given a reasonable interpretation, an interpretation which would carry out the intention of the makers of the Constitution and also which is in accord with the constitutional practice in such matters. The article posits the continuation of the pre-existing laws made by a competent authority notwithstanding the repeal of certain acts under Art. 395; and the expression “other” in the article can only apply to provisions other than those dealing with legislative competence.”

70.5 Thus, in the absence of Article 372 in the Constitution, perhaps the laws enacted under the Government of India Act, 1935 would have ceased to operate. Article 372 saves the operation of such laws.

71. Need for Article 277 in the Constitution – Saving of laws which become inconsistent with the changes in the matters enumerated in the Legislative lists in Schedule VII.

71.1 Apart from the repeal of the Government of India Act, 1935, the Constitution also made some changes in the subject matters allocated to the legislature for enacting laws. Thus, some of the matters within the legislative competence of the Government of State were shifted to the Union List in the Seventh Schedule of the Constitution.

71.2 Accordingly, to save taxes, duties, cesses or fees which prior to the commencement of the Constitution were lawfully being levied by the Government of State and the subject matter to which they relate has been now mentioned in the Union List, Article 227 was enacted. The relevant extract of the said article is as under:

“277. Savings

Any taxes, duties, cesses or fees which, immediately before the comencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district or other local area may, notwithstanding that those taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law.”

71.3 The analogous provision to Article 277 in the Government of India Act, 1935 was Section 143(2). The Supreme Court in the case of Ram Krishna Ramanath v. The Janpad Sabha, Gondia, 1962 AIR 1073 held that Section 143(2) is a saving clause designed to prevent dislocation of finances of local government by the reason of distribution of heads of taxation on different lines. The relevant extract of the judgement is as under:

“Section 143 (2) which is a saving clause and obviously, designed, to prevent a dislocation of the finances of Local Governments and of local authorities by reason of the coming into force of the provisions of the Government of India Act distributing heads of taxation on lines different from those which prevailed before that date, cannot be construed as one conferring a plenary power to legislate on those topics till such time as the Central Legislature intervened.”

71.4 The aforesaid provision is needed, apart from the general savings in Article 372, as Article 372 is subject to the other provisions of the Constitution. If Article 277 was not enacted, a doubt may arise whether the laws enacted by the Government of State prior to the constitution would become inconsistent with Article 246 due to the heads of taxation being shifted to the Union List.

71.5 Thus, to put the matter beyond any doubt, Article 277 saves the laws relating to taxes, duties, cesses or fees even though they are inconsistent with the provisions of the Constitution until provision to the contrary is made by the Parliament.

72. Unconnected ancillary matter – Whether Section 19 of the Constitution (One Hundred and First) Amendment Act. 2016 applies to laws relating to service tax, excise  duty, etc. levied by the Parliament.

72.1 Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016 reads as under:

“19. Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State  immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.

….emphasis supplied

72.2 A doubt has been raised as to whether Section 19 will apply to the Central levies such as the service tax, excise duty, etc. as only the provisions of law in force in any state.

72.3 On a plain reading of the section, it will become clear that the doubt is entirely unfounded. ‘Law…. In force in any State’ will include even a law made by the Parliament as it is in force in the state. The words used are not ‘law enacted by state legislature’.

72.4 Thus even the Central levies such as the service tax, etc. will be covered by Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016.

73. Legislature competent to repeal, alter or amend –The legislature which has present competence to enact the law sought to be repealed, can repeal such law. It is irrelevant that the law was enacted by another  legislature when it had the competence.

73.1 The Supreme Court in the case of A. Hajee Abdul Shukoor & Co. v. State of Madras – AIR 1964 SC 1729 held that the competence to make a law for a past period depends on the present legislative power. The relevant extract of the judgement is as under:

“The State Legislature is free to enact laws which would have retrospective operation. Its competence to make a law for a certain past period, depends on its present legislative power and not on what it possessed at the period of time when its enactment is to have operation.”

73.2 In the case of Kerala State Electricity Board v. Indian Aluminum Co. Ltd. AIR 1976 SC 1031, the Supreme Court held as under:

“Both the 1910 Act as well as the 1948 Act are existing law as contemplated under Article 372 of the Constitution. An existing law continues to be valid even though the legislative power with respect to the subject matter of the existing law might be in a different list under the Constitution from the list under which it would have fallen under the Government of India Act, 1935. But after the Constitution came into force an existing law could be amended or repealed only by the legislature which would be competent to enact that law if it were to be newly enacted.” —

73.3 Further, the power to repeal is also co-extensive with the power to enact. Thus, only the legislature which has the power to enact a law, can repeal such a law. This was held by the Supreme Court in the case of Rama krishna Ramanath v. The Janpad Sabha, Gondia, 1962 AIR 1073 as under:

“There is no doubt that the general principle is that the power of a legislative body to repeal a law is co-extensive with its power to enact each a law, as would be seen from the following passage in the judgment by Lord Watson in Attorney General for Ontario v. Attorney General for the Dominion:

“Neither the Parliament of Canada nor the provincial legislatures have authority to repeal statutes which they could not directly enact.”

73.4 Thus, the power to repeal or alter an enactment is co­extensive with the power to enact. The power has to be seen at the time when the repealing legislation is being enacted. The legislation may be prospective or retrospective. It can also be made retrospective for the period for which the legislature did not have the competence. However, the legislature should have the competence at the time when such a repealing law is being enacted.

74. Possibility of amendment of a repealed Act, after its repeal when it is not in operation.

74.1 The Madras High Court in the case of Kalyanam Veerabhadrayya v. King, AIR 1960 Mad 243 held that a repealed Act which is non-existent cannot be amended unless the competent legislature revives or re-enact the repealed Act and then make amendments to it. K         I

74.2 The facts in the case before the Madras High Court were these: The Maintenance of Public Order Act, 1947 was enacted for a period of one year. However, the Act provided that the Provincial Government is empowered to extend the operation of the Act beyond the period of one year. This power was held to be bad as it amounts to delegation of legislative function. The Madras Maintenance of Public Order Removal of Doubts Ordinance, 1949 was passed to declare that the Maintenance of Public Order Act, 1947 remains in force and shall continue to be in force. In these facts the court held that the amendments can be made only to an existing Act. However, the legislature is competent to revive or re-enact the repealed legislation and make amendments to it. In the facts of that case, the court held that the legislature had not done so. The relevant extract of the judgement is as under:

“An amending Act is not an independent Act but an Act passed with a view to effect an improvement or to more effectively carry out the purpose for which the original law was passed. To remove doubts by a declaratory Act, there should be in existence an Act, the doubts in which have to be removed. It the Act had already ceased to be in force, a declaratory Act would have no operation. An amending Act also presumes the existence of an original Act. If the original Act, which was a temporary Act, terminated after the lapse of time, the amending Act would be inoperative.”

74.3 For the aforesaid proposition, the court relied on the decision of Federal Court in the case of Jatindra Nath Gupta v. Province of Bihar, AIR 1949 FC 175 wherein Mukherjee J. held as under:

lt is certainly competent to the Legislature in exercise of its plenary powers to revive or re-enact a legislation which has already expired by lapse of time. The Legislature is also competent to legislate with retrospective effect; but neither of these things seems to have been done in the present case. The Legislature proceeds on the footing that the old Act was alive at the date. Then the new Act was passed, and the new Act merely purports to amend one of the provisions of the old Act. There could be no amendment of an enactment which a not in existence and from the fact that the Legislature purports to amend an Act, it could not held as a matter of construction that the intention of the Legislature was to renew a dead Act or make a new enactment on the same terms as the old with retrospective effect.”

74.4 However, in the case of State of Rajasthan v. Mangilal Pindwal, AIR 1996 SC 2181, the Supreme Court held that retrospective amendments can be made to the repealed statutes in respect of the transactions past and closed. The judgement has been summarised in justice GP Singh’s Principles of Statutory Interpretation, 14^th Edition at page 757-758 as under:

“Since repeal of a law takes effect from the date of repeal and the law repealed remains in operation for the period before its repeal without assistance of nay saving clause for transaction past and closed, it can be retrospectively amended to affect such transactions even after its repeal. Thus, when Rule B made under Article 309 of the Constitution substitutes Rule A, which in effect means that A is repealed and B is enacted in its place, A can be amended retrospectively for the period during which it was in operation to validate transactions past and closed. In the case from which the above principle is deduced, a rule permitted compulsory retirement of a Government servant by paying three months salary. This rule was later repealed by substituting another rule in its place. During the period the earlier rule was in operation, a Government service was retired in payment of an amount as salary but which was found on calculation later to be little short of three months salary making the retirement invalid. The rule was after its repeal amended for the period it was in operation to retire a Government servant forthwith without paying him three months salary but entitling him to claim three months salary after retirement. This amendment was held to be valid and effective to validate the retirement of the Government servant concerned. “

74.5 The above referred cases, however, are not concerned with the competence of the legislature to enact retrospective laws, but only with the issue as to whether the amendments can be made to the repealed laws.

75. Repeal of the State VAT Act is not effected by the Constitution (One Hundred and First) Amendment Act, 2016. Repeal is effected by the State GST Acts. Such  Acts provide for savings of the pending proceedings.  Thus, assessments can be initiated, continued and  concluded in pursuance of such saving clause contained in the respective GST laws.

75.1 In respect of the pending assessments, they can be initiated, continued and concluded. This is because while repealing the VAT Acts by the State GST Act, specific savings have been provided in this regard. Of     If

75.2 This provision can perhaps be traced to Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016. Section 19 is not some section enacted under an Act of Parliament or State Legislature. It is a part of the constitution amendment Act and has to be read as an addendum to the Constitution.

75.3 Section 19 provides that the laws relating to the goods and services tax which are inconsistent with the amended Constitution shall continue until amended or repealed by a competent legislature. It is a debatable issue as to who is the competent legislature for the purpose of Section 19: the State Legislature or Parliament?

75.4 It is argued on behalf of the State that the law relates to tax on sales, which may be covered within the ambit of Article 24CA. It has been argued that the State Legislature will be a competent legislature for the purpose of Section 19.

75.5 Further, Section 19 can be said to be an independent and limited legislative power to repeal the earlier enactments. Such power will also include all ancillary powers necessary to exercise the main powers. Further, as this is an independent power, by necessary implication it may exclude the applicability of other articles such as Article 286, Article 279A, etc. Thus, the saving clause can also be enacted in exercise of such power to save the initiation, continuation and conclusion of assessments.

76. Which is the legislature competent to amend the laws relating to the Sales Tax after the Constitution (One Hundred and First) Amendment Act, 2016? State  Legislature or Parliament?

76.1 Article 245 of the Constitution provides that the Parliament may make laws for the whole or any part of the territory of India and the Legislature of a State can make laws for the whole or any part of the State.

76.2 Article 245 is the fountain source of the power. In other words, both the Parliament and State legislature are supreme and none is the delegate of another.

76.3 Article 246 read with the Seventh Schedule only demarcates the fields of the legislation. However, within their competence, each legislature has plenary powers. Further, while enacting laws which are within their competence, the Parliament or State Legislature can also make laws for the matter which are ancillary to the main matters.

76.4 Thus, to determine the validity of a law, the provisions of the Constitution have to be seen to determine whether the legislature enacting the law has necessary competence to enact such law.

76.5 The Constitution (One Hundred and First) Amendment Act, 2016 inter alia substituted Entry 54 of List II of the Seventh Schedule of the Constitution to confine it to the “Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption’.

76.6 The substitution of Entry 54 amounts to repeal of the old entry and subsequent enactment of the new entry. In absence of any saving clause, the old entry will become non existent as if it had never been in the Constitution, except for the transactions past and closed. However, Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016 saves the laws which are inconsistent with the amended constitution until amended or repealed by competent legislature or expiration of one year of the commencement of Constitution (One Hundred and First) Amendment Act, 2016, whichever is earlier.

76.7 The legislature competent to amend or repeal is the legislative which has the power to enact such law after the amendment of the Constitution.

“RELEVANCE OF ARTICLE 246A:

Restriction placed on State legislature in respect of laws relating to sales tax by Article 286 and other provisions of the Constitution prior to the 101^St Constitution Amendment Act.”

76.8 Article 246(3) of the Constitution provides that the State Legislature has the exclusive power to make laws for such state or any part thereof in respect of any matters enumerated in the List II of the Seventh Schedule.

76.9 The Entry 54 of the List II reads as: ‘Taxes on the sale or purchase of goods other than newspaper subject to the provisions of entry 92A of List I.’ Entry 92A of List I read as: ‘Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter -State trade or commerce’. I                               r

76.10 Thus, the State Legislature could make laws for taxes on sale or purchase of goods other than those taking place in the course of inter – state trade or commerce. Article 269(3) of the Constitution provided that the Parliament may by law formulate principles for determining when a sale or purchase takes place in the course of inter-state trade or commerce. Section 3 of the Central Sales Tax Act, 1956 was enacted in pursuance of this power.

76.11 The other restrictions were placed by Article 286 of the Constitution (as it stood post Constitution Sixth Amendment Act and before its amendment by Constitution One Hundred and First Amendment Act).

76.12 Prior to the One Hundred and First Amendment of the Constitution, Article 286 of the Constitution had stood as follows:;

“286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place

(a) outside the State; or ,…_

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).

(3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,—

(a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or

(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366,

be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify.”

76.13 In Article 286 of the Constitution, vide the Constitution (One Hundred and First Amendment) Act, 2016, the following amendments were made, namely:-

“13. In article 286 of the Constitution,—

(I) In clause (1),—

(A) for the words “the sale or purchase of goods where such sale or purchase takes place”, the words “the supply of goods or of services or both, where such supply takes place” shall be substituted;

(B) in sub-clause (b), for the word “goods”, at both the places where it occurs, the words “goods or services or both” shall be substituted;

(ii) in clause (2), for the words “sale or purchase of goods takes place”, the words “supply of goods or of services or both” shall be substituted;

(iii) clause (3) shall be omitted.”

76.14  After the amendments made by the said Constitution Amendment Act, the Article 286 stands as follows:

“286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the supply of goods or of services or both, where such supply takes place—

(a) outside the State; or

(b) in the course of the import of the goods or services or both into, or export of the goods or services or both out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a supply of goods or of services or both in any of the ways mentioned in clause (1).”

76.15 Here, two things are important. First is that the Constitution nowhere provides that the Legislatures of the States can make law for imposing goods and services tax on the intra-State supply of goods or services or both. Secondly, the Constitution does not give powers to the Parliament for formulating principles for the purpose of determining which supplies shall be an intra-State supply of goods or services or both. The powers of Legislatures of States can be derived from Article 246A (1) read with Article 246A (2) and Article 286. There is no other provision in the Constitution which either confer the GST Law making the powers or curtails such law making powers of the Legislatures of the States. However, unless Clause (1) of Article 246A takes effect in relation to the petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel, the Parliament and the Legislatures of the States, both, cannot make the law providing levy of goods and services tax (GST) on supply of these goods.                                 .¹11.

76.16 Thus, a law of a state cannot impose tax on sale or purchase of goods which takes place (a) outside the state or (b) in the course of the import into or export out of India. Clause (2) provides that the Parliament may formulate the principles for determining when a sale or purchase takes place in the ways mentioned in clause (1).

76.17 Section 4 of the Central Sales Tax Act, 1956 has been enacted in exercise of the powers under Article 286(1)(a) read with clause (2). Section 5 of the Central Sales Tax Act, 1956 has been enacted in exercise of the powers under Article 286(1)(b) read with clause (2). —’

76.18 Thus, any state law imposing tax on sale or purchase of goods has to comply with the provisions of Article 269(3), Article 286(1)(a) and Article 286(1)(b).

Restriction on the State legislature in respect of the laws  relating to goods and services tax after the 101st Constitution Amendment Act.

76.19 The Constitution (One Hundred and First) Amendment Act, 2016 made various changes in the Constitution with regard to the power to make laws relating to the goods and services tax.

76.20 Article 246A has been inserted which provides for power to make laws relating to goods or services tax simultaneously to the Parliament and the State Legislature. The relevant extract of the said Article is as under:

“246A. Special provision with respect to goods and services tax

(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.

(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce”.

76.21 Thus, Thus, both the State Legislature and the Parliament has the power to make laws with respect to the goods and services tax. However, the Parliament has the exclusive power to make laws with respect to the goods and services tax where the supply takes place in the course of inter-state trade or commerce.

76.22 Article 296(5) of the Constitution provides that the Parliament may by law formulate the principles for determining when a supply takes place in the course of inter-state trade or commerce. The said Article reads as under:

“(5)Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.”

76.23 The Parliament has accordingly enacted, the Integrated Goods and Service Tax Act, 2017, Sections 7 and 8 respectively of which provides the principles for determining when a supply takes place in the course of inter – state trade or commerce.

76.24 Further Article 286 also places some restriction on imposition of tax on the supply of goods or services or both. The Article provides that no law of a state shall authorize the imposition of tax on supply of goods and services or both where such supply takes place outside the state or in the course of the import into or export out of the territory of India. The relevant extract reads as under:

“286. Restriction as to imposition of tax on the sale or purchase of goods:-                  –

(1) No law of a State shall impose, or authorize the imposition of, a tax on the supply of goods or of services or both, where such supply takes place‑

(a) outside the State; or

(b) in the course of the import of the goods or services or both into, or export of the goods or services or both out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a supply of goods or of services or both in any of the ways mentioned in clause (1).”

76.25 Further, Article 279A provides for the constitution of a Goods and Services Tax Council which shall make recommendations on all matters relating to the goods and services tax.

76.26 It may not be out of place to note that the residuary power of the Parliament under Article 248 of the Constitution to make laws with respect to any matter not enumerated in the Concurrent List or State List has also been subject to Article 246A.

76.27 Thus, both the State legislature and the Parliament have simultaneous power to make laws relating to goods and services tax under Article 246A. t

77. Amendment of State VAT Acts now made after the 101^St Amendment Act for the period when the VAT Acts were in force, can perhaps be made only by the  Legislature which has the present competence over the  subject matter and it should be in accordance with the  present provisions of the Constitution!

77.1 As seen above the competence to make a law even for a past period depends on the present legislative power. After the amendment of the Constitution, both the Parliament and State Legislature have the competence to enact laws relating to the goods and services tax.

77.2 However, the exercise of the power is circumscribed by other provisions of the Constitution such as Article 246A(2) read with Article 269A(5) which relates to supply in the course of inter-state trade or commerce, Article 286 which relates to restriction on imposition of tax by law made by a state on supply taking place outside the state, in the course of import into or export out of territory of India and Article 279A which related to recommendations of the GST Council. Thus, the powers can be exercised only after complying with such provisions of the Constitution.

77.3 We have our own doubts whether an amendment to the VAT Act (which was originally enacted complying with the erstwhile Article 286 and Article 269(3) can now also comply with the new Article 246A(2), Article 269A(5) and Article 286 respectively.

77.4 Further, to what extent the aspects of taxation such as the sale, entry into local area, manufacture, etc. will be covered within the ambit of laws relating to the goods or service tax is also not amply clear. In other words, the State Legislature can make amendments to the earlier VAT Acts, Entry Tax Acts only if such aspects can be traced to Article 246A of the Constitution.

77.5 Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016 can also not be a source of power to amend the State VAT laws. First, the power to amend under Section 19 is only for a period of one year from the commencement of the amendment act.

77.6 Secondly, the words used in Section 19 are that the laws inconsistent with the new provisions of Constitution ‘shall continue to be in force’. The Supreme Court in the case of Ram Krishna Ramanath v. The Janpad Sabha, Gondia AIR 1962 SC 1073 held that the Provincial Legislature which was competent to enact laws prior to the Government of India Act, 1935 has a limited legislative power by virtue of Section 143(2) of the Government of India Act, 1935 (which is analogous to Article 277 of the Constitution). This was because the words used was ‘may be continued until provision to the contrary is made by the Federal Legislature’. The Supreme Court construed the words ‘may’ in the phrase to mean ‘may continue to be levied if so desire by the Provincial Legislature’. Accordingly, the Supreme Court found a limited legislative power in the Provincial Legislature to repeal the Act or to reduce the rate of tax but not to increase the burden by enhancing the rate of tax.

77.7 However, the above case may not apply to the present case as the words used in Section 19 of the Constitution (one Hundred and First) Amendment Act, 2016 are that the laws shall continue to be in force.

77.8 It is settled principle that the legislative power of the State legislature is plenary. They are not delegate of the Parliament. However, this principle is relevant only when the threshold question on the competence to legislate with respect to subject matter is in favour of the State Legislature.

78. The Supreme Court in the case of Union of India & Anr. vs. Mohit Mineral Private Limited, (2019) 2 5CC 599, had the occasion to consider the challenge to the validity of the Goods and Services Tax (Compensation to States) Act, 2017 enacted by the Parliament as well as the Goods and Services Tax Compensation Rules, 2017. While considering such challenge, the Supreme Court considered Article 246A quite in details. We quote the relevant paras;

“21. First, we need to notice relevant constitutional provisions and the Parliamentary enactments relevant for the issues raised in these cases.

22. Part XII of the Constitution deals with Finance. Article 265 provides that no tax shall be levied or collected except by authority of law. Article 366 contains definitions. Article 366(26A) defines “services” as “services means anything other than goods”. Whereas Article 366 (29A) contains an inclusive definition of “tax on the sale or purchase of goods”. A Bill was introduced in the Lok Sabha namely, the Constitution (One Hundred and TwentySecond Amendment) Bill, 2014 on 19.12.2014 proposing constitutional amendments to introduce the goods and services tax for conferring concurrent taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. Statement of Objects and Reasons of the Bill are as follows:”

STATEMENT OF OBJECTS AND REASONS

The Constitution is proposed to be amended to introduce the goods and services tax for conferring concurrent taxing powers on the Union as well as the States including Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services 14 tax shall replace a number of indirect taxes being levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax.

2. The proposed Bill, which seeks further to amend the Constitution, inter alia, provides for

(a) subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services;

(b) subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax,

Luxury tax, Taxes on lottery, betting and gambling; and State cesses and surcharges in so far as they relate to supply of goods and services;

(c) dispensing with the concept of ‘declared goods of special importance’ under the Constitution;

(d) levy of Integrated Goods and Services Tax on inter-State transactions of goods and services; 1

(e) levy of an additional tax on supply of goods, not exceeding one per cent. in the course of inter-State trade or commerce to be collected by the Government of India for a period of two years, and assigned to the States from where the supply originates;

(f) conferring concurrent power upon Parliament and the State Legislatures to make laws governing goods and services tax;

(g) coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council.

(h) compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years;”

23. The Constitution (One Hundred and First Amendment) Act, 2016 dated 08.09.2016 was passed to amend the Constitution of India. By Constitution (One Hundred and First Amendment) Act, 2016, new Articles 246A, 269A and 279A were inserted. Amendments were also made in Articles 248, 249, 250, 268, 269, 270, 271, 286, 366 and 368. Article 268A was omitted. Amendments were also made in Seventh Schedule of the Constitution in List I and List II.

Article 246A and 269A as inserted by Constitution (One Hundred and First Amendment) Act, 2016 is as follows:”

246A. Special provision with respect to goods and services tax. (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.     •

(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce

Explanation.—The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council.”.

269A. Levy and Collection of goods and services tax in course of inter-State trade or commerce.(1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Explanation.—For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.

(2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India.

(3) Where an amount collected as tax levied under clause

(1) has been used for payment of the tax levied by a State under article 246A, such amount shall not form part of the Consolidated Fund of India.

(4) Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax levied under clause (1), such amount shall not form part of the Consolidated Fund of the State.

(5) Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.”.

24. Article 270 of the constitution as amended by the above Amendment Act is as follows:”

270.Taxes levied and distributed between the Union and the States. (1) All taxes and duties referred to in the Union List, except the duties and taxes referred to in Articles 268, 269 and 269A, respectively, surcharge on taxes and duties referred to in Article 271 and any cess levied for specific purposes under any law made by Parliament shall be levied and collected by the Government of India and shall be distributed between the Union and the States in the manner provided in clause (2).”

25. Section 18 and Section 19 of the Constitution (One Hundred and First Amendment) Act, 2016 is also relevant, which are to the following effect:”

18. Compensation to States for loss of revenue on account of introduction of goods and services Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years.

19. Transitional provisions- Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.

26. At this stage, it is also relevant to notice that in the Constitution (One Hundred and Twenty Second Amendment) Bill, 2014, Clause 18 contain a provision for arrangement for assignment of additional tax on supply of goods to States for two years or such other period recommended by Council, which was to the following effect:”

18. Arrangement for assignment of additional tax on supply of goods to States for two years or such other period recommended by Council (1) An additional tax on supply of goods, not exceeding one per cent. in the course of inter-State trade or commerce shall, notwithstanding anything contained in clause (1) of article 269A, be levied and collected by the Government of India for a period of two years or such other period as the Goods and Services Tax Council may recommend, and such tax shall be assigned to the States in the manner provided in clause (2).

(2) The net proceeds of additional tax on supply of goods in any financial year, except the proceeds attributable to the Union territories, shall not form part of the Consolidated Fund of India and be deemed to have been assigned to the States from where the supply originates.

(3) The Government of India may, where it considers necessary in the public interest, exempt such goods from the levy of tax under clause (1).

(4) Parliament may, by law, formulate the principles for determining the place of origin from where supply of goods take place in the course of inter-State trade or commerce.”

27. Clause 19 contain compensation to States for loss of revenue on account of introduction of goods and services tax. Clause 19 of the Bill is as follows:”

19. Compensation to States for loss of revenue on account of introduction of goods and services tax-Parliament may, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for such period which may extend to five years.”

28. It is, however, to be noticed that Constitution (One Hundred and Twenty Second Amendment) Bill, 2014 was passed but Clause 18 of the Bill was not incorporated and Clause 19 found place as Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016. After the aforesaid Constitution Amendment, Parliament enacted Central Goods and Services Tax Act, 2017 (Act No.12 of 2017 dated 12.04.2017) to make a provision for levy and collection of tax on intra State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto. On the same day, another enactment namely ‘The Integrated Goods and Services Tax Act, 2017’ (Act No. 13 of 2017 dated 12.04.2017) was enacted to make a provision for levy and collection of tax on inter-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto. Another enactment namely ‘The Union Territory Goods and Services Tax Act, 2017’ (Act No. 14 of 2017) was passed on the same day to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Union territories and for matters connected therewith or incidental thereto. The Fourth Parliamentary enactment, which is subject matter of challenge in the present case was also enacted on the same day, i.e. 12.04.2017, namely ‘The Goods and Services Tax (Compensation to States) Act, 2017’ (Act NO. 15 of 2017) to provide for compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax in pursuance of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016. As the Preamble indicate (Compensation to States) Act, 2017 was enacted in pursuance of the provisions of the Constitution (One Hundred and First Amendment) Act, 2016.

79 The observations made by the Supreme Court as contained in para 55 are important. Those read as under:

“55. The expression used in Article 246A is “power to make laws with respect to goods and service tax”. The power to make law, thus, is not general power related to a general entry rather it specifically relates to goods and services tax. When express power is there to make law regarding goods and services tax, we fail to comprehend that how such power shall not include power to levy cess on goods and services tax. True, that Constitution (One Hundred and First Amendment) Act, 2016 was passed to subsume various taxes, surcharges and cesses into one tax but the constitutional provision does not indicate that henceforth no surcharge or cess shall be levied.”

80. The issue can also be looked into from a different angle. Article 246(A) of the Constitution of India has been inserted in the Constitution of India to provide for integrated power to the Union of India and the States to make a common law to levy tax on the “Goods and Services”. Article 246A is not akin to the “concurrent list” enumerated in List III in Schedule VII of the Constitution of India which empowers, either the Union or State, to make laws with respect to levy of tax on either the goods or services. The Parliament in its wisdom did not incorporate power to make laws with respect to the “Goods and Services Tax” in the “Concurrent list” enumerated in List III in Schedule VII of the Constitution of India but inserted a new Article 246A in the Constitution of India to confer an integrated power, to both the Union and the State, which is to be exercised simultaneously by both, to make a common law to levy tax on the “Goods and Services”. The purpose of this constitutional amendment was perhaps to have a uniform “Goods and Services Tax” law throughout the country.

81. It prima facie appears that the power conferred by Article 246A of the Constitution of India is to be exercised by both, the Union and the States concurrently to ensure uniform “Goods and Services Tax” law all over the country. The Union of India or States cannot separately exercise power given by Article 246A of the Constitution of India independent of each other unlike the power given by the “Concurrent list” enumerated in the List III in the Schedule VII of the Constitution of India.

82. Further, Article 245A in the Constitution of India empowers to make a integrated tax law with respect to levy of tax on either “Goods” or “Services”.

83. Once again, we may look into the observations made by the Supreme Court in Mohit Mineral Pvt. Ltd (supra) as contained in para-55. The same reads thus;

“55. The expression used in Article 246A is “power to make laws with respect to goods and service tax”. The power to make law, thus, is not general power related to a general entry rather it specifically relates to goods and services tax. When express power is there to make law regarding goods and services tax, we fail to comprehend that how such power shall not include power to levy cess on goods and services tax. True, that Constitution (One Hundred and First Amendment) Act, 2016 was passed to subsume various taxes, surcharges and cesses into one tax but the constitutional provision does not indicate that henceforth no surcharge or cess shall be levied.”

84. The objective of the One Hundred and first amendment to the Constitution of India vide the Constitution (One Hundred And Firsts Amendment) Act, 2016 was to bring into force a uniform law for levy of tax on “Goods and Services” and not separate laws with respect to either Goods and Services.

85. The statement of objects and reasons as provided in the Bill introduced in Loksabha on 18^th December, 2014 clearly stated that the Constitution is proposed to be amended to introduce the goods and services tax for conferring concurrent taxing powers on the Union as well as the States including the Union territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. It further provided that it seeks to amend the Constitution to subsume the State Value Added Tax/Sales Tax.

86. It is an established principle of interpretation of statues to look into the mischief which was intended to be remedied by

87. It has been held by the Supreme Court in the case of P.Bhoodan Yagna Samiti, U.P. Vs. Braj Kishore and Ors. reported in AIR 1988 SC 2239 that one has to look to the intention of the Legislature, one has to look to the circumstances under which the law was enacted, the Preamble of the law, the mischief which was intended to be remedied by the enactment of the statute.

88. The Entry 54 in List II in Schedule VII of the Constitution of India was amended to extinguish the power of states to levy taxes on sale or purchase of goods except taxes on the sale of petroleum products and alcoholic liquor for human Therefore, the power to amend any law with respect to levy of tax on the sale or purchase of goods such as “Gujarat VAT Act” could be said to have been abolished with the aforesaid amendment in the Entry 54 in List II in Schedule VII of the Constitution of India.

89. Having given our earnest consideration to all the relevant aspects of the matter, we have reached to the conclusion that Article 246A of the Constitution of India does not save Section 84A of the VAT Act from being declared invalid or ultra vires. As noted above, Article 246A of the Constitution was inserted by the 101^St Constitution Amendment Act with the sole or rather the precise object of subsuming multiple indirect taxes and to confer concurrent power to the Parliament and State Legislature to impose “Goods & Services Tax” in accordance with the recommendations of the Goods & Services Tax Council statute under Article 279A of the Constitution of India. The very object of such large scale reform was to replace number of indirect taxes being levied by the Union and the State Governments and to remove the cascading effect of taxes and provide for a common national market for goods and This is apparent from the statement of objects and reasons referred to by the Supreme Court in Mohit Mineral Pvt. Ltd. (supra)

90. Further Section 18 to the Constitution Amendment Act provides for compensation to the States for the loss of revenue arising on account of the implementation of the goods and services tax for a period of 5 years. Thus the entire scheme of the Constitution Amendment Act recognizes imposition of only “goods and services tax” under Article 246A of the Constitution of India. The phrase the “goods and services tax” is defined under Article 366(29A) to mean any tax on supply of goods or service or both except taxes on the supply of alcoholic liquor for human consumption. Such “supply” cannot be fragmented into different components by the State legislature and assume power to impose independent tax on the sale of goods without reference to the Goods and Services Tax Council. Such interpretation would be contrary to the entire scheme as well as the object and purpose of the Constitution Amendment Act. In fact the provision providing for compensation to the States for the loss of revenue due to the goods and services tax would also be irrelevant if the State legislatures are independently empowered to enact sales tax/value added tax legislations by taking recourse   to Article  246A of the Constitution of India.

91. In fact if the State legislature has the power to enact the value added tax laws under Article 246A of the Constitution of India as argued on behalf of the State, then Entry 54 of List II of the Seventh Schedule to the Constitution which was retained to the extent of six products which are outside the GST regime will be rendered redundant. The very fact that Entry 54 of List II of the Seventh Schedule was retained in so far as the six products are concerned indicates that the sales tax/value added tax enactment is not permissible under Article 246A of the Constitution of India. The vociferous argument of the State that Article 246A of the Constitution can support the enactment of provision under the Vat Act falls flat in the face of the existence of Entry 54 of List II of the Seventh Schedule to the Constitution of India which survived the 101^St Constitution Amendment Act.

92. We may clarify that in Mohit Mineral Pvt. Ltd. (supra), the challenge was to the imposition of the compensation cess under the Goods & Services Tax (Compensation to States) Act, 2017 on the ground of lack legislative competence. The Union defended such levy by relying upon Article 246A of the Constitution. Cess was imposed on the Goods & Services Tax itself and its validity was upheld by the Supreme Court. Mr. Soparkar invited our attention to few distinguishing features of the said case with the facts of the present case. In our opinion, the distinguishing features are quite relevant.