2022 (7) TMI 608 - HC - VAT and Sales Tax

Amendment to repealed VAT Act post GST era - Legislative competence of State of Maharashtra to enact the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2017 and the Maharashtra Tax Laws (Amendment and Validation) Act, 2019 to amend the provisions of the Maharashtra Value Added Tax Act, 2002 - incorporation of mandatory pre-deposit for filing appeals against the assessment orders pertaining to all the goods after 16th September 2016 that is post 101 Constitutional Amendment Act, 2016 - right of the assessee to file an appeal without statutory deposit in respect of orders passed for the assessment years prior to 15th April 2017, were taken away by Explanation to Section 26 of the MVAT Act introduced with effect from 15th April 2017 by the Maharashtra Tax Laws (Amendment and Validation) Act, 2019 - whether right of filing appeal accrues on the date of order of assessment and requirement of mandatory predeposit introduced by way of amendment does not apply to the orders passed in the assessment years prior to 15th April 2017, is correct or not. HELD THAT - There is no substance in the submission made by Mr.Nankani, learned senior counsel for the petitioner that the State Government had no power to legislate including the power to amend the legislation or that such power to legislate of power has been taken away in view of the introduction of Article 246A in the Constitution of India. The argument of the learned senior counsel that post constitutional amendment, the provision of MVAT Act, 2002 virtually has the effect of repealing the MVAT Act, 2002 in so far as all other goods, except the 6 mentioned in Entry-54 of List-II of Schedule-VII of the Constitution are concerned, has no merit - Article 367 of the Constitution of India provides that 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. Since by carrying out amendment to the provisions of the MVAT Act and that also within a period of one year from the date of introduction of Article 246A of the Constitution of India, the impugned amendment was within the legislative competence of the State Government and has neither overreached nor overruled the effect of the judgment by the Nagpur Bench of this Court in case of M/S. ANSHUL IMPEX PRIVATE LTD., VERSUS STATE OF MAHARASHTRA, THROUGH THE ADDITIONAL CHIEF SECRETARY FINANCE 2018 (12) TMI 1279 - BOMBAY HIGH COURT . There is no merit in the challenge to the constitutional validity thereof. There is no violation of any doctrine of separation of powers as sought to be canvassed by the learned senior counsel for the petitioners. The petitioners have also not disputed the proposition of the law that the State Government has power to legislate for the purpose of removing or curing any defect - there is no encroachment on the part of the State Government upon the power of the judiciary by carrying out the amendment in the provision of MVAT in any manner whatsoever. There is no merit in the submission of the learned senior counsel for the petitioners that in the amending Act though the explanation starts with the words for removal of doubts , the same does not invariably mean that the explanation is clarificatory. It is neither an absolute right nor an ingredient of natural justice, the principles of which must be followed in all judicial and quasi-judicial litigations. It is always be circumscribed with the conditions of grant. At the given time, it is open for the legislature in its wisdom to enact a law that no appeal shall lie or it may lie on fulfillment of pre-condition, if any, against the order passed by the Authority in question. After considering various provisions providing for such condition of deposit as condition precedent for entertaining of the appeal, the Hon ble Supreme Court held that in no circumstance the said provision can be said to be onerous as prayed for or in violation of Articles 14 or 19(1) (g) of the Constitution of India. A perusal of the impugned explanation added by the State Government by Ordinance of 2017 w.e.f. 15th April, 2017 irrespective of the date of the commencement of the original proceedings indicates that the same is clarificatory in nature and takes away the effect of the judgment of the Nagpur Bench of this Court in case of M/s. Anshul Impex Private Ltd. - There is no substance in the submission made by the learned senior counsel for the petitioner that the impugned amendment directly or indirectly overrules or overreaches the judgment in case of M/s. Anshul Impex Private Ltd. The Legislature has power to remove the defects retrospectively and prospectively by Legislative action so as to cure the defect or inconsistency in the law declared by the Court so as to remove such inconsistency from the statute for effective enforcement of law - when a law is enacted with retrospective effect, it is not considered as an encroachment upon judicial power when the legislature does not directly overrule or reverse a judicial dictum. The legislature cannot, by way of an enactment, declare a decision of the Court as erroneous or a nullity, but can amend the statute or the provision so as to make it applicable to the past. The legislature has the power to rectify, through an amendment, a defect in law noticed in the enactment and even highlighted in the decision of the court. This plenary power to bring the statute in conformity with the legislative intent and correct the flaw pointed out by the Court can have a curative and neutralizing effect. There is no substance in the submission of the learned senior counsel for the petitioners that the impugned explanation violates Article 14 of the Constitution of India, or discriminates between two assessees in the same assessment year, or causes delay in passing assessment orders attributable to the Government or otherwise. The impugned amendment would apply only for those orders which are passed only after 15th April, 2017 and not to the prior orders being passed by exercising the legislative power of the State Government. The argument of the petitioner that the amendment violates Article 14 of the Constitution of India on the ground that two sets of assessees are discriminated against insofar as the pre-condition of deposit for entertaining the appeal is concerned has no merit - the impugned amendment also does not take away vested right of the assessee to file an appeal as sought to be canvassed by the learned senior counsel for the petitioner. Under unamended section 26(6) of the MVAT Act, there was no condition prescribed that the Appellate Authority or the Tribunal as the case may be was bound to admit the appeal and to grant stay without imposing any condition for deposit of the part or whole of the disputed amount by the appellant. In our view, the right of appeal which was already provided under section 26 of the MVAT Act has been protected and is not taken away by virtue of sections 6A, 6B and 6C inserted in the said section 26(6) or by inserting explanation to section 26(6C) of the MVAT Act but is only made conditional. The principles laid down by the Division Bench of this Court in case of HARESH NAGINDAS VORA, SACHIN LAXMICHAND SHAH VERSUS UNION OF INDIA, PRINCIPAL COMMISSIONER OF CUSTOMS (GENERAL) 2017 (6) TMI 964 - BOMBAY HIGH COURT apply to the facts of this case. In the facts of this case, the petitioner has not made out the case of legislative incompetence on the part of the State Government to make the amendment to the provisions of the MVAT including the explanation inserted to section 26(6B). The State of Maharashtra has legislative competence to enact the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2017 and the Maharashtra Tax Laws (Amendment and Validation) Act, 2019 to amend the provisions of the Maharashtra Value Added Tax Act, 2002 to incorporate a condition/modifying the earlier condition for entertaining an appeal for a mandatory pre-deposit for filing appeals against the assessment orders pertaining to all the goods after 16th September 2016 that is post 101 Constitutional Amendment Act, 2016 - the explanation to section 26 of the MVAT Act introduced by the Maharashtra Tax Laws (Amendment and Validation) Act, 2019 does not take away the right of the assessee to file an appeal without statutory deposit in respect of the orders passed for the assessment year prior to 15th April, 2017. The said explanation also does not nullify the decision of the Division of this Court of Nagpur Bench in case of M/s. Anshul Impex Private Ltd. Thus, it is declared that the explanation inserted in 2019 amendment w.e.f. 15th April, 2017 would apply to those orders which are passed after 15th April, 2017and not to the prior orders. All earlier orders are governed by the original provisions of Section 26(6) and not by the amendment. Both the provisions i.e. old Section 26(6) and the amendment introduced by Sub Section 6A, 6B and 6C to Section 26 and the explanation thereto will apply and co-exist. Application disposed off.

Summary

Issues Involved:
1. Legislative competence of the State of Maharashtra to enact the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2017 and the Maharashtra Tax Laws (Amendment and Validation) Act, 2019.
2. Impact of the explanation to Section 26 of the MVAT Act introduced by the Maharashtra Tax Laws (Amendment and Validation) Act, 2019 on the right of the assessee to file an appeal without statutory deposit for orders passed before 15th April 2017.
3. Validity of the decision in Anshul Impex Pvt. Ltd. Vs. State of Maharashtra regarding the right of filing appeal and mandatory pre-deposit requirements.

Issue-wise Detailed Analysis:

1. Legislative Competence of the State of Maharashtra:
The court affirmed the legislative competence of the State of Maharashtra to enact the Maharashtra Tax Laws (Levy, Amendment and Validation) Act, 2017, and the Maharashtra Tax Laws (Amendment and Validation) Act, 2019. It was held that the State has the power to legislate on matters of Goods and Services Tax (GST) under Article 246A of the Constitution, which allows both the Union and the States to have simultaneous powers to legislate on GST-related matters. The court noted that the power to legislate includes the power to amend existing laws, and this power was not taken away by the introduction of Article 246A. The court also referenced the judgment in Union of India & Anr. vs. M/s. Mohit Minerals Pvt. Ltd., which supported the concurrent legislative powers of the Union and the States under Article 246A.

2. Impact of the Explanation to Section 26 of the MVAT Act:
The court held that the explanation to Section 26 of the MVAT Act, introduced by the Maharashtra Tax Laws (Amendment and Validation) Act, 2019, does not take away the right of the assessee to file an appeal without statutory deposit for orders passed before 15th April 2017. The explanation was deemed to be clarificatory and intended to remove doubts raised by the Nagpur Bench in the case of Anshul Impex Pvt. Ltd. The court clarified that the explanation applies to orders passed after 15th April 2017, and not to prior orders. The court emphasized that the explanation was inserted to clarify the legislative intent and does not nullify the decision of the Nagpur Bench.

3. Validity of the Decision in Anshul Impex Pvt. Ltd. Vs. State of Maharashtra:
The court declared that the decision of the Nagpur Bench in Anshul Impex Pvt. Ltd. Vs. State of Maharashtra, which held that the right of filing an appeal accrues on the date of the order of assessment and that the requirement of mandatory pre-deposit introduced by way of amendment does not apply to orders passed before 15th April 2017, is not a correct proposition. The court stated that the right of appeal can be made conditional by the Legislature with express indication. The court overruled the decision of the Nagpur Bench, stating that the right of appeal is a statutory right and can be subject to conditions imposed by the Legislature.

Conclusion:
The court upheld the legislative competence of the State of Maharashtra to enact the amendments to the MVAT Act, affirmed that the explanation to Section 26 does not nullify the right to appeal for orders passed before 15th April 2017, and overruled the decision in Anshul Impex Pvt. Ltd., affirming that the right of appeal can be made conditional by legislative amendments. The court directed that the explanation inserted by the 2019 amendment applies to orders passed after 15th April 2017, and not to prior orders.