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Issue for consideration: The Constitution (101st Amendment) Act, 2016, introduces a fundamental re-ordering of the constitutional premise of taxation by the Union and State Governments in India. It is the framework to enable the introduction of the Goods and Services Tax (GST). These batch of appeals arise from judgments delivered by the Telangana, Gujarat and Bombay High Court. The concerned States (Telangana and Gujarat) have appealed aggrieved by the judgments. The assessee petitioners are appellants, and are aggrieved by the judgments of Bombay High Court. Constitution of India – Constitution (101st Amendment) Act, 2016 – Effect of:Held: The coming into force of the GST regime, and the passage of the amendment demonstrates a rare unanimity, a resolve across the political spectrum, to ensure that there is a single indirect taxation regime – The effect of the Amendment is to subsume all state and union taxes, on goods and services – Both the Union and the States will ostensibly have the power to tax the supply of goods and services – The 101st Amendment Act takes away neither the Union’s nor the States’ taxing power but instead gives them the power to impose taxes on supply of goods and supply of services respectively – Through Article 246-A the Amendment creates: (a) a new legislative field, conferring; (b) legislative authority outside the three Lists of the Seventh Schedule; (c) concurrent powers to both Parliament and the State Legislatures to enact legislations on the same subject-matter and at the same time. [Para 8] Constitution of India – Constitution (101st Amendment) Act, 2016 – s.19 – Interpretation of:Held: S.19 seeks to achieve three aims – The first is to preserve the existing status quo with regard to the state and central indirect tax regime, for a period of one year from the date of commencement of the Amendment or till a new law is enacted whichever is earlier – The second is authorizing the competent legislatures i.e. the State Legislatures and Parliament to amend existing laws which were in force in states and other parts of the country (both Central and State laws) – The third was the repeal of such laws – S.19 was meant to be transitional – In its absence, the several hundreds of state enactments and central laws which were in force, would have been jeopardized – Other than s.19 there is no saving provision which is part of the Amendment – So, s.19 of the Constitution (101st Amendment) Act, 2016 and Article 246A enacted in exercise of constituent power, formed part of the transitional arrangement for the limited duration of its operation, and had the effect of continuing the operation of inconsistent laws for the period(s) specified by it and, by virtue of its operation, allowed state legislatures and Parliament to amend or repeal such existing laws. [Paras 73, 116]Constitution of India – Ordinary law and Constitutional law: Held: An ordinary law such as an Act of Parliament, is a product of a legislative exercise – The source of that power is traced to the Constitution in some specific provisions or through fields of legislation enumerated in one or the other lists – Constitutional law on the other hand is that it arises out of the Constitution and creates different organs of the State, defines their power and imposes limitations on the functioning of the Executive and legislative wings through the fundamental rights and other limitations – An ordinary law can be made or changed by the same body, the legislating body in exercising legislative power – Since constitutional amendments relates to the fundamental law of the land which is a source of authority for other laws, it can be achieved only through fulfilling the special procedure. [Para 77]Constitution of India – Constitution (101st Amendment) Act, 2016 – s.19 – Whether the power of amendment or repeal is subject to limitations u/s. 19: Held: There were no limitations u/s. 19 (read together with Art. 246A), of the Amendment – That provision constituted the expression of the sovereign legislative power, available to both Parliament and state legislatures, to make necessary changes through amendment to the existing laws – As held in Rama Krishna Ramanath case the transitional power (in that case, Section 143 (3)) “the provision by its implication confers a limited legislative power to desire or not to desire the continuance of the levy” – This limited legislative power was not constricted or limited, in the manner alleged by the states; it is circumscribed by the time limit, indicated (i.e. one year, or till the new GST law was enacted) – It could, therefore, enact provisions other than those bringing the existing provisions in conformity with the amended Constitution – Since other provisions of the said Amendment Act, had the effect of deleting heads of legislation, from List I and List II (of the Seventh Schedule to the Constitution of India), both s.19 and Art.246A reflected the constituent expression that existing laws would continue and could be amended – The source or fields of legislation, to the extent they were deleted from the two lists, for a brief while, were contained in s.19 – As a result, there were no limitations on the power to amend. [Paras 97 and 116]Constitution of India – Constitution (101st Amendment) Act, 2016 – Validity of Telangana Act tested from the touch stone of its originating as an ordinance: Held: The Telangana ordinance was promulgated on 17.6.2016 – The Telangana State GST Act was enacted and received the assent of the Governor on 25.05.2017; it was brought into force on 01.07.2017 – The state GST Act contained a savings and repeal law, which sought to save acts done, privileges and rights accrued under the repealed enactment, i.e. the State VAT Act – It was sought to be argued that once the State Legislature approved the ordinance and enacted the amendment, in conformity with it, the provisions of the Ordinance became part of the act – The question of legislative competence would not arise, because the mere confirmation of an ordinance is within the competence of the State legislature – Since the law was introduced through a different procedure, i.e. ordinance, the effect of that law, empowering the VAT officials to reopen or complete assessments, was no different – The state of Telangana had argued to the contrary, and explained that when the ordinance was issued, there was no doubt about the state possessing legislative competence – As of that date (17.06.2017) the power to amend existing laws, was permissible u/s. 19 of theAmendment – However, that argument is not tenable, because the ordinance’s validity and effect might not have been suspect on the date of its promulgation; yet, the issue is that on the date when it was in fact, approved and given shape as an amendment, the State legislature had ceased to possess the power – By that time, the State GST and the Central GST Acts had come into force (on 01.07.2017) – Therefore, Section 19 ceased to be effective – The original entry (Entry 54 of the State List) ceased to exist – In the circumstances, the state legislature had no legislative competence to enact the amendment, which approved the ordinance, which consequently was rendered void. [Paras 102, 105] Constitution of India – Constitution (101st Amendment) Act, 2016 – Gujarat Act:Held: In the Gujarat batch of cases, s.84A was introduced in the Gujarat Value Added Tax Act, 2003 by the Gujarat Value Added Tax (Amendment) Act, 2018, gazetted on 06.04.2018 but with retrospective effect from 1.4.2006 – It inter-alia provided that if for a particular issue in “some other proceedings” a lower forum, gave a decision which is prejudicial to the interest of the revenue and an appeal against such decision is pending before the higher forum then the period spent in such litigation will be excluded while computing period of limitation for revision – By giving such provision retrospective effect the State legislature thus sought to enable reopening of assessments which had already attained finality – The Gujarat High Court struck down the amendment on the ground of lack of legislative competence, on the part of the legislature, after 01.07.2017, and also that it was manifestly arbitrary – In the instant case, the retrospective effect, given to the amendment, which was brought into force, with effect from 2006, cannot in any way save it, after the coming into force of the GST laws, on 01.07.2017 – Nor can there can be any argument that the amendment made in February, 2018, is traceable to Article 246A – The amendments in question, made to the Gujarat VAT Act after 01.07.2017 were correctly held void, for want of legislative competence, by the High Court of Gujarat. [Paras 16,113,116]Constitution of India – Constitution (101st Amendment) Act, 2016 – Maharashtra Act:Held: As far as the Maharashtra appeals are concerned, the assessees’ grievance is that the retrospective amendments, made to the Maharashtra VAT Act, were void – There is no quarrel with the proposition that a legislative body is competent to enact a curative legislation with retrospective effect – Yet, the same vice that attaches itself to the Gujarat amendment, i.e. lack of competence on the date the amendment was enacted i.e. in this case, 09.07.2019, the Maharashtra legislature ceased to have any authority over the subject matter, because the original entry 54 had undergone a substantial change, and the power to change the VAT Act, ceased, on 01.07.2017, when the GST regime came into effect – Therefore, for the same reasons, as in the other cases, the amendments to the Maharashtra VAT Act cannot survive. [Paras 15, 115] |
