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2023 (10) TMI 1208 - SC - GSTConstitutional validity of section 84A of the Gujarat VAT Act - Section 19 of the Constitution (101st Amendment) Act, 2016 and Article 246A enacted in exercise of constituent power - vires of Article 14 and 19(1) (g) of the Constitution of India - power of amendment or repeal, subject to limitations under Section 19 or not Interpretation of Section 19 - HELD THAT - In the opinion of this Court, the mere circumstance that Section 19 does not get added to the Constitution, would not make any difference. If one looks closely at Articles 243 ZF which this Court interpreted in BONDU RAMASWAMY VERSUS BANGALORE DEVELOPMENT AUTHORITY AND ORS. 2010 (5) TMI 867 - SUPREME COURT and Article 243 ZT which was interpreted in VIPULBHAI M. CHAUDHARY VERSUS GUJARAT COOPERATIVE MILK MARKETING FEDERATION LTD. AND ORS. 2015 (3) TMI 1430 - SUPREME COURT the effects of those provisions are the same as Section 19. Although those provisions continued to be part of the Constitution, they have no meaning and were merely historical. The reason is that they were operative, for a limited duration like Section 19. However, the fact remains that those provisions as well as Section 19 were enacted in exercise of the constituent power. Section 19 is not, in this court s opinion comparable to a mere Parliamentary enactment. There cannot be any gain in saying that Section 19 is not a mere legislative device. It was adopted as part of the 101st Constitutional Amendment Act. Undoubtedly, it was not inserted into the Constitution. Whatever reasons impelled Parliament to keep it outside the body of the Constitution, the fact remains that it was introduced as part of the same Amendment Act which entirely revamped the Constitution. It cannot be in dispute that Section 20 existed for a period of two years and enabled the President to issue orders for the removal of difficulties experienced in the course of implementing the amendments to the Constitution. If indeed those parts of the amendments were not enacted in the exercise of constituent power but mere legislative power, there would be no legitimacy of the power conferred upon the President under Section 20. On an overall interpretation of the provisions of the Amendment, it is held that Sections 19 and 20 constitute incidental and transitory provisions which have limited life, so to speak. Whether they became part of the Constitution or not is really academic. What really matters is the effect of those provisions. Whether the power of amendment or repeal is subject to limitations under Section 19? - HELD THAT - The effect of the 97th amendment to the Constitution which came into force on 12.01.2012 was to introduce provisions, to strengthen the functioning of the cooperative societies in a democratic, autonomous and economically sound manner. Various new provisions granted constitutional status to cooperative societies and inserted Part IX-B in the Constitution which specified several conditions for state laws relating to cooperative societies. Article 243 ZT which is worded similarly to Section 19 of the present case sought to continue in force existing laws, for a limited duration until amended or repealed or until the expiration of one year from the commencement of the amendment act. Once it is conceded that Section 19 was enacted as part of the constituent power and has the same force as the rest of the constitutional amendment and is not a mere Parliamentary enactment, one has to consider the consequence of this sequitur to such a finding - The 101st amendment as noted earlier uniquely transformed the indirect taxation regime and revamped the constitutional compact itself in one sense. Gone were the traditional delineations of distribution of legislative power including taxation fields which traced their origins to Articles 245 and 246 and also the rules for handling repugnancy which Article 254 had enacted. Instead, what was brought in was an entirely new concept of sourcing common or concurrent power of both the state legislatures and the Union through the newly added provision Article 246A. There were no limitations under Section 19 (read together with Article 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 1962 (2) TMI 76 - SUPREME COURT 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. Validity of Telangana Act tested from the touch stone of its originating as an ordinance - HELD THAT - In the present case, 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 - 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 provisions of the ordinance, as approved by the later state act, which amended the local VAT Act s, are valid. Gujarat and Maharashtra Acts - HELD THAT - 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 cam.e into effect. Therefore, for the same reasons, as in the other cases, the amendments to the Maharashtra VAT Act cannot survive. The appeals (and any other special leave petitions) filed by the States of Telangana and Gujarat are hereby dismissed.
Issues Involved:
1. Interpretation of Section 19. 2. Whether the power of amendment or repeal is subject to limitations under Section 19. 3. Validity of Telangana Act tested from the touchstone of its originating as an ordinance. 4. Validity of Gujarat and Maharashtra Acts. Summary: I. Interpretation of Section 19 Section 19 of the Constitution (101st Amendment) Act, 2016, was enacted as part of the constituent power and has the same force as the rest of the constitutional amendment. It was not a mere legislative device but a transitional provision to preserve the existing state and central indirect tax regime for a period of one year from the date of commencement of the Amendment or until a new law is enacted, whichever is earlier. This provision allowed competent legislatures to amend or repeal existing laws during this transitional period. The Court held that the absence of Section 19 would have jeopardized several state enactments and central laws, leading to catastrophic consequences. II. Whether the power of amendment or repeal is subject to limitations under Section 19 Section 19 conferred a limited legislative power to amend or repeal existing laws, but this power was not constricted to merely bringing existing enactments in line with the new provisions of the Constitution. The Court held that Section 19 and Article 246A should be understood as both the power enabling the existing state of affairs to continue and also enabling both the center and the states to make necessary changes in the existing laws through amendment or repeal. The authority to legislate is expressed through Section 19, read with Article 246A, and there were no limitations on the power to amend. III. Validity of Telangana Act tested from the touchstone of its originating as an ordinance The Telangana ordinance was promulgated on 17.06.2016, and the Telangana State GST Act was enacted and brought into force on 01.07.2017. The Court held that the validity of the amendment by the state legislature, which conformed to the ordinance on 02.12.2017, went to its root of jurisdiction, rendering it void and unenforceable. The Court also held that acts done in pursuance of the ordinance cannot lapse, but the invalidity of the amendment rendered any action taken under the ordinance void. IV. Validity of Gujarat and Maharashtra Acts The Gujarat VAT Act was amended to add Section 84A, which was given retrospective effect. The Court held that the retrospective effect given to the amendment could not save it after the coming into force of the GST laws on 01.07.2017. The Maharashtra VAT Act was also amended to require a mandatory pre-deposit of 10% of the disputed tax liability. The Court held that the Maharashtra legislature ceased to have any authority over the subject matter after 01.07.2017, when the GST regime came into effect, rendering the amendments void. VI. Conclusions 1. Section 19 and Article 246A formed part of the transitional arrangement and allowed state legislatures and Parliament to amend or repeal existing laws. 2. There were no limitations on the power to amend under Section 19. 3. The amendments to the Telangana VAT Act and the Gujarat VAT Act after 01.07.2017 were correctly held void for want of legislative competence. 4. The judgment of the Bombay High Court was in error, and the amendment to the Maharashtra Act requiring pre-deposit was held void. The appeals filed by the States of Telangana and Gujarat were dismissed, and the appeals of the assessees against the judgment of the Bombay High Court were allowed. There was no order on costs.
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