2019 (8) TMI 342 - HC - GST

Recovery of VAT after repealing of VAT Act post GST - Summons for recording of statement - challenge is essentially on the basis that by reason of the Constitution (One Hundred and First Amendment) Act, 2016 read with the Maharashtra State Goods and Services Tax Act, 2017, the State of Maharashtra could not have continued the application and effect of the provisions of the VAT Act, and in particular, Section 64 thereof, beyond one year after the appointed day or taken steps thereunder - vires of Section 78 of the Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017. HELD THAT - There is no inconsistency between the provisions of Section 78 of the State GST Savings Act and the Constitution as amended. The Constitution Amendment Act provides for concurrent power of the State legislature to make laws with respect to goods and services tax, i.e. any tax on supply of goods, or services or both. The State GST Act has been enacted by the State legislature under this power. Just as it could enact any law relating to tax on supply of goods, or services or both, it could amend or repeal or save any such law. The VAT Act is one such law, which it had the power to amend or repeal or save. Section 78 of the State GST Savings Act saves the provisions of the VAT Act so far as they relate to any payment or recovery of tax under the VAT Act and any purpose connected or incidental thereto relating to any period prior to the commencement of the State GST Act. There is no inconsistency or repugnancy here with the Constitution as amended. The constitution, as amended, empowers the State legislature to make laws with respect to tax on supply of goods or services. It is under this very power that the State can enact, amend or repeal any law providing for tax on supply of goods. The tax on supply of goods occasioned by sale of goods can be provided for or done away with under this very constitutional power. No such law made or repealed or saved by the State legislature can be said to be inconsistent with Article 246A of the Constitution brought in by the Amendment Act. What it observes is that any sub ordinate legislation, in order to survive the repeal of its parent statute, must be referred to in the Saving Act by express words and not by implication. It cannot possibly be suggested that the sub ordinate legislation under the VAT Act, such as rules, regulations, notifications, etc. issued thereunder, has not been expressly saved by Section 78 of the State GST Savings Act. The wordings of the Section leave no manner of doubt that all these are expressly referred to and saved. The saving provision is both explicit and expansive. It saves all rules, regulations, orders, notifications, form, certificate and notices, appointments and delegation of powers issued under the VAT Act. There is, thus, no substance in the contention. The challenge, in the premises, to the vires of Section 78 has no merit - So far as the other grievance of the Petitioner, namely, non-consideration of its application in Form 701 (made on 2 May 2018) is concerned, learned Counsel for the Respondents states that it has already been heard and shall be disposed of within three weeks. Petition disposed off.

Summary

Issues Involved:
1. Constitutionality of Section 78 of the Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017.
2. Legitimacy of actions taken under the Maharashtra Value Added Tax Act, 2002 post-GST implementation.
3. Consideration of the Petitioner's application in Form 701.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 78 of the Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017:
The Petitioner challenged the vires of Section 78, arguing that it was ultra vires the Constitution Amendment Act. The Petitioner contended that the State of Maharashtra could not continue the application and effect of the VAT Act provisions, particularly Section 64, beyond one year after the appointed day due to the Constitution (One Hundred and First Amendment) Act, 2016. The Court analyzed Article 246A, which grants concurrent power to Parliament and State legislatures to make laws concerning GST. The Court concluded that there is no inconsistency between Section 78 and the amended Constitution. The State legislature has the power to enact, amend, repeal, or save laws related to the tax on the supply of goods or services. Section 78 saves the VAT Act's provisions for purposes connected to any period before the State GST Act's commencement, thus not being inconsistent or repugnant to the amended Constitution.

2. Legitimacy of actions taken under the Maharashtra Value Added Tax Act, 2002 post-GST implementation:
The Petitioner argued that actions taken under the VAT Act, including the search of premises and issuance of summons under Section 14, were illegal post-GST implementation. The Court held that by virtue of Section 78 of the State GST Savings Act read with Section 19 of the Constitution Amendment Act, the VAT Act's provisions continue to have effect for various purposes, including assessment, reassessment, and recovery of tax for periods before the State GST Act's appointed day. The Court found that Sections 64 and 14 of the VAT Act, related to the collection or recovery of tax, are saved and applicable, thus validating the actions taken against the Petitioner.

3. Consideration of the Petitioner's application in Form 701:
The Petitioner expressed grievance over the non-consideration of its application in Form 701. The Respondents' Counsel stated that the application had been heard and would be disposed of within three weeks. The Court accepted this statement and directed the Respondents to act accordingly.

Conclusion:
The Court disposed of the petition by rejecting the challenge to the constitutionality of Section 78 of the Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017. The Court upheld the legitimacy of actions taken under the VAT Act post-GST implementation and accepted the Respondents' assurance regarding the Petitioner's application in Form 701. No order as to costs was made.