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CA Gaurav Gupta


The recent enactment of all sections of Constitutional (101st Amendment) Act, 2016 has triggered a lot of debate all across. Many experts have opined that among other, Section 19 post its enactment has taken away the power of Center to levy and Collect Excise Duty. However, this debate is also to be seen in the following perspective. To appreciate the argument, we need to see Section 19 of the Amendment Act which 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with the provisions of the Constitution as amended by this Act shall continue to be in-force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier. “

The explanation offered to interpret the above Section to say that Center can no longer Levy Excise stands on the understanding when we read the phrase “any provision of any law relating to tax on goods or services or on both in force in any State” as “any provision of any law relating to tax on goods or services or on both in force enacted by any State”.

Thus, this stands on the explanation that a law which is enacted by a state legislature can only be in force in the state. Thus, the experts view this as giving protection to state laws like VAT etc but not Excise which is not enforced in states. In other words, Laws enacted by parliament is in force in India and not states per se. Thus, whether “in the state” can be equated with “enacted by any state” is the whole debate.

In my opinion, it is to be appreciated that the extent section of any Central taxation law usually provides for its application to the ‘whole of India’. for eg. Excise Act, 1944 provides as under:

“(1) This Act may be called the Central Excise Act, 1944.

(2) It extends to the whole of India”

Similarly, Service Tax (Finance Act, 1994) provides as under:

“64. (1) This Chapter extends to the whole of India except the State of Jammu and Kashmir.”

Now to appreciate what is India we need to refer to our Constitution which provides as follows:

“1. Name and territory of the Union.—(1) India, that is Bharat, shall be a Union of States.

(2) The States and the territories thereof shall be as specified in the First Schedule.

(3) The territory of India shall comprise— (a) the territories of the States; (b) the Union territories specified in the First Schedule; and (c) such other territories as may be acquired.”

Thus, India per se does not have any existence of its own. Its existence depends upon the States of which it is a union. Thus, any thing enforced in India is enforced in its states.

Thus, when Section 19 provides for a saving clause for all laws applicable in all states, to my mind, it provides a protection to all laws enacted by Center as well as such laws are in force in States only. Trust we get suitable explanation from officials in time to save all taxpayers from this interpretation which taken either ways can be of great damage.


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July 2024