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TMI Blog2013 (8) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation given would not be in consonance with the scheme of the VAT Act -Therefore, the correct manner in which sub-section (20) of Section 19 had to be read is that where any registered dealer had sold goods at a price lesser than the price of the goods purchased by him as reflected in the original tax invoice as defined under Section 2 (36) of the Act, then the amount of input tax credit over and above the output tax of those goods has to be reversed. Constitutional Validity of fiscal legislation - When there was a challenge to the constitutional validity of the provisions of a Statute, Court exercising power of judicial review must be conscious of the limitation of judicial intervention, particularly, in matters relating to the legitimacy of the economic or fiscal legislation - While enacting fiscal legislation, the Legislature was entitled to a great deal of latitude. Validity of Retrospective Amendment - Whether amendment to Section 19(20) of Tamil Nadu Value Added Tax Act by giving retrospective effect from 01.01.2007 was unreasonable and harsh and whether retrospective operation of the provision was liable to be struck down - There was no discrimination in the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. T. Pramod kumar, Chopda, Mr. S. Ramanathan, Mr. Prabhakaran, Mr. AL. Somayagi, Mr. V. Haribabu,AGP (Taxes), Mr. Cibi Vishnu, AGP(Taxes), Mr. Manohara Sundaram, Govt. Advocate (Taxes), Mr. Kanmani Annamalai, Govt.Advocate (Taxes) Mr. J.Adithya Reddy, Govt.Advocate (Taxes) and Mr. A. R. Jayaprathap, Govt.Advocate (Taxes) ORDER R. Banumathi, J. And T. S. Sivagnanam, J. These batch of writ petitions could be broadly classified into two categories. In the first set of writ petitions, prayer has been made for issuance of a writ of declaration to declare Sub-section (20) of Section 19 as enacted by Tamil Nadu Value Added Tax (Second Amendment) Act, 2010, (22 of 2010), which came into force on 19.08.2010 and later retrospectively brought into force from 01.01.2007, by Tamil Nadu Value Added Tax (Special Provision) Act, 2010 (Act 42 of 2010) as being confiscatory, unreasonable, arbitrary and violative of Articles 14 and 19 (1)(a) of the Constitution of India and repugnant to the general scheme of the charging provision of Section 3 (2) and 3 (3) of TN VAT Act, 2006, and beyond legislative competence of the State Legislature under Entry 54 of the State list and void and unenf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in to account the price after discount when the goods were resold, resultantly, there was a resale at a lesser price, the tax paid by the petitioners to the vendor to certain extent became credit in the hands of the petitioners. The State cannot appropriate the excess credit Input Tax lying in the account of the assessee. Petitioners had conducted their business all along on the basis of VAT scheme operating under Section 19 of the Act with a benefit of Input Tax Credit paid to the vendor which in turn was remitted to the Treasury and that tax cannot be recovered or reversed with retrospective effect and the petitioners challenge the vires of Sub-section (20) of Section 19. 5. While so, the enforcement officers of the respondent department visited the place of the business of the petitioner and took details of the discount received from the vendors and statements of the petitioner was recorded. Thereafter, a notice was served under Section 27 of the Act proposing to treat as escaped turnover the discounts received from the vendors by treating the discount as subsidy, constituting re-selling price of the petitioner. The petitioner submitted their reply stating that the ITC taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted price. Reliance was placed on the decision of the Hon'ble Supreme Court in State of Rajasthan vs. Rajasthan Chemists Association, [147 STC 542 (SC)]. Therefore, it is submitted that sale price or turnover adopted for levy cannot ignore price mutually agreed. Reference was placed upon the decision in State of Madras vs. Ganon Dunkerly Co [ 9 STC 353 (SC)]. It is further submitted that to say invoice price is the consideration or price for sale is untenable and it ignores the constitutional limitation and statutory provisions. By referring to the definition of 'turnover' as defined under Section 2(41) read with explanation II(ii), it is submitted that the contracted price should be calculated after removing the discounts granted between the vendor and the petitioners. It is further submitted that trade discount of every kind, including post sale discount granted by credit note reduces the price and the abated price should be taken into consideration. In support of such contention, reliance has been placed on the decision in The State of Madras vs. Jeewanlal (1929) Ltd. [(1973) 32 STC 649 (Madras)]; Bharat Steel Tubes Ltd., vs. State of Tamil Nadu [(1994) 94 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the same is repugnant to Articles 14 19(1)(g) of the Constitution being arbitrary and confiscatory. That it imposes a new burden retrospectively, which none of the petitioners have provided for in conducting their affairs. It is further submitted that retrospective validating laws imposing liability by a taxing enactment are upheld, if they do not impose a fresh tax or a new liability. These validation laws are in the nature of an amending and validating Act to cure a defect in a legal provision, which Court invalidates and such legislation though retrospective, is not a new levy. In support of such contention, reference was made to Rai Ramkrishna vs. State of Bihar [AIR 1963 SC 1667]; Krishnamurthy Co Vs. State of Madras [(1973) 31 STC 190 (SC)]; Lohia Machines Limited vs. Union of India [(1985) 152 ITR 308(SC)]; R.C.Tobacco (P) Ltd., and Anr., vs. Union of India [(2005) 7 SCC 725];. It is further submitted that whenever retrospective legislation imposed a fresh tax or new liability or created unforeseen demands, the same has been held to be unconstitutional. Reliance was placed on Bengal Paper Mill Co. Ltd., vs. Commercial Tax Officer [(1976) 38 STC 163 (Calcutt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler who may avail the input tax credit or may not avail such concession and the legislature is free to impose conditions for grant of such concession. Therefore, it is contended that Section 19 does not in any manner touch the charging Section 3(2) and the tax component shall be as indicated in the tax invoice and any arrangement between the seller and purchaser by way of credit notes issued after the issuance of a tax invoice cannot bind the revenue and the revenue is not concerned with such credit notes as the taxable event took place on the date, when the invoice was issued. Elaborate reference was made to the proceedings of the Commissioner of Commercial Taxes addressed to the Government for making amendments to the TN VAT Act by introducing sub-section 20 in Section 19. The learned Advocate General by referring to the sample tax invoice filed by the petitioner submitted that there is huge loss of revenue to the Government and the dealers who were paying substantial sums of money under the sales tax regime have not been paying any tax under the VAT scheme. Further, it is submitted that no arguments have been advanced as regards the legislative competence of the State in the lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment by inserting Section 19(20) to Tamil Nadu Value Added Tax reversing the amount of the input tax credit over and above the output tax of those credit is not within the legislative competence of the State Legislature under Entry 54 of the State List and utravires the Constitution and the Statute? (2)Whether amendment to Section 19(20) of Tamil Nadu Value Added Tax Act by giving retrospective effect from 01.01.2007 is unreasonable and harsh and whether retrospective operation of the provision is liable to be struck down. 19. INTRODUCTION - SALES TAX REGIME TO VALUE ADDED TAX (VAT): Value Added Tax is modern and progressive tax system now adopted in over 130 countries around the world. In India, this was initially tried out on Central Excise and after its success, extended to Service tax levy. Since at both levels Value Added Tax (VAT) has been successfully integrated in the tax system, the same has now been extended to state sales tax levies. Tax on sale within the State is a State subject. Over the period, many distortions had come in the regime of sales tax due to heterogeneity prevailed in the structure of sales tax. In the Sales Tax regime, there were problems of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more transparent. That will improve tax compliance and also augment revenue growth. Thus, to repeat, with the introduction of VAT, benefits will be as follows: a set-off will be given for input tax as well as tax paid on previous purchasesother taxes, such as turnover tax, surcharge, additional surcharge, et., will be abolished.overall tax burden will be rationalised. prices will be self-assessment by dealers transparency will increase there will be higher revenue growth 21. In order to examine the controversy raised in these writ petitions and to test the validity of the impugned provision, a birds eye view of the design of the VAT Act, its concept, coverage, the compulsory requirement to be complied with and other relevant details has to be looked into. The essence of VAT is in providing set off for the Tax paid earlier and this is given effect through the concept of input tax credit/rebate. VAT is based on value addition to goods and related VAT liability of the dealer is calculated by deducting input tax credit from tax collected on sales during the payment period. The input tax credit was available on both manufacturer and the trader for purchase of inputs/supplies mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en abolished. As a result, over all tax burden will be rationalised and prices in general will also fall. 24. Point No.1: Challenging the vires of Section 19(20):- Tamil Nadu Value Added Tax Act, 2006 (in short, T.N. VAT Act No.32 of 2006) was enacted introducing VAT in the State of Tamil Nadu with effect from 1.1.2007. Section 2 of TN VAT Act defines as many as 44 terms. Section 2(15) defines dealer to mean any person who carries on the business of buying, selling, supplying or distributing goods directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration and includes those authorities and persons as enumerated in clause (i) to clause (ix) of Section 2(15). Section 2(21) defines goods to mean all kinds of movable property other than newspapers, actionable claims, stocks and shares and securities and includes all materials, commodities and articles including the goods etc. Section 2(24) defines input tax as the tax paid or payable under this Act by a registered dealer to another registered dealer on the purchase of goods including capital goods in the course of his business . Section 2(28) defines output t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (2) by a registered dealer shall be reduced, in the manner prescribed, to the extent of tax paid on his purchase of goods specified in Part - B or Part - C of the First Schedule, inside the State, to the registered dealer, who sold the goods to him. .............. 27. The essence of VAT is in providing set off for the tax paid earlier and this is given effect through the concept of Input Tax Credit. Input Tax Credit is given only to ameliorate the cascading effect of tax burden. By virtue of the Section 3(3), the tax payable by the registered dealer shall be reduced in the manner prescribed, to the extent of tax paid on his purchase of the goods specified in Part B or Part C, inside the State to the registered dealer, who sold the goods to him. Input Tax Credit is creature of Statute. Case of respondents is that petitioners have no absolute right to claim Input Tax Credit, but only a concession and when Input Tax Credit is only a concession, it is open to the Government to impose conditions for availing Input Tax Credit. 28. Petitioners in these cases are purchasing dealers of various products/goods, subject to different rate of tax as per Schedule for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it availed by any registered dealer shall be only provisional and the assessing authority is empowered to revoke the same if it appears to the assessing authority to be incorrect, incomplete or otherwise not in order. (17) If the input tax credit determined by the assessing authority for a year exceeds tax liability for that year, the excess may be adjusted against any outstanding tax due from the dealer. (18) The excess input tax credit, if any, after adjustment under sub-section (17), shall be carried forward to the next year or refunded, in the manner, as may be prescribed. (19) Where any registered dealer has availed input tax credit and has goods remaining unsold at the time of stoppage or closure of business, the amount of tax availed shall be reversed on the date of stoppage or closure of such business and recovered. (20) Notwithstanding anything contained in this section, where any registered dealer has sold goods at a price lesser than the price of the goods purchased by him, the amount of the input tax credit over and above the output tax of those goods shall be reversed. 30. Sub-section (1) of Section 19 of TN VAT Act, 2006 provides for availment of Input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were in the form of credit notes. On receipt of the credit notes, the purchasing dealer calculated the purchase price of the goods taking into account discount given by credit note and fixed the same as his purchase price. By value addition, the purchasing dealer sold the goods to the consumer and VAT was calculated on the sale price fixed by the purchasing dealer by reckoning the discount offered under the credit note. If the purchase price of the goods is taken as per the tax invoice undoubtedly the selling price was lower. 34. The petitioners had taken only Input Tax Credit of actual tax paid to the vendor on the VAT invoice and the Input Tax Credit had not been altered even by the vendor. The petitioners would thus take umbrage under the credit note issued by the selling dealer and state that on account of discount there is abatement of the original sale price and their sale price is higher than the price so abated and section 19 (20) as inserted in the Amending Act is not attracted. 35. Petitioners rely upon Rule 10(6)(b)(ii)(C) of TN VAT Rules. As per the said rule wherever any credit notes are to be issued for discount or sales incentives by any dealer to another dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale price and how output tax is collected at a lesser rate based on the discounted price and value added addition. This could be better explained by the following illustration by taking the case of the petitioner in W.P.No.25952 of 2010. We may usefully refer to the sample Chart furnished in W.P.No.25952 of 2010 as under:- PURCHASE DATA: Sl.No. Name of the supplier Description Model No. Purchase Bill No. and dateQuantity received Billing Price. Per unit (VAT Invoice) Discount Per unit Nett cost after discount 1 L.G.Electronics India Pvt. Ltd., LCD TV 32LG80FR SINCHECE/40842 dt. 01.01.2009 10 units Basic : 36780.00 VAT : 4597.50 41377.50 6477.75 NIL 30302.25 4597.50 34899.75 RE-SALE DATA:- Sl. No. Sale Bill No. Date Sale Price by Jayam Co., Per unit Profit per unit Excess Input Tax Credit 1. 10124 dt. 20.3.2009 Basic : 33777.78 VAT : 4222.22 38000.00 33777.78 (-) 30302.25 3475.53 375.28 Petitioners claim that in the above sample transaction, the writ petitioner (W.P.No.25952 of 2010) claims to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Pistons Limited v. State of Tamil Nadu]; (1980) 45 STC 32 [The Deputy Commissioner of Sales v. Advani Oerlikon Pvt. Ltd.]; (1980) 46 STC 420 [State of Tamil Nadu v. Ultramarine and Pigments Ltd.]; (1973) 32 STC 649 [State of Madras v. Jeewanlal]; 94 STC 292 (Mad) [Bharat Steel Tubes Ltd. v. State of Tami Nadu]; 124 STC 586 (SC) [Neyveli Lignite Corporation Ltd. v. CTO] and 126 STC 547 (SC) [TISCO General Office Recreation Club v. State of Bihar]. 41. All the above decisions referred to by the learned Senior Counsel pertains to discount under Sales Tax and Central Excise Act which would have no relevance to the present case where we are considering vires of Section 19(20) of TN VAT Act. As pointed out earlier, there is a vast distinction on sale of goods under VAT regime and under Sales Tax regime. 42. We should now see as to whether the discount offered by the manufacturer to the petitioner which is post the tax invoice could have any effect on the particulars mentioned in the tax invoice or could make a dent either in the purchase price or the tax component. The learned counsels for the petitioners would contend that the discount abates the sale price. 43. In the prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ress and the Taxpayer Identification Number of the seller; (d) The name, address of the Taxpayer Identification Number of the buyer; (e) The description of the goods; (f) The quantity or volume of the goods; (g) The value of the goods; (h) The rate and amount of tax charged; and (i) The total value of the goods. Rule 10 makes it clear that the tax invoice is the invoice for the sale and cannot comprehend any subsequent Credit Note or Debit Note arising out of post-sale matters. 48. Sub-section (13) of Section 19 empowers assessing authority to deny the benefit of input tax credit in cases where the registered dealer without entering into a transaction of sale issues a tax invoice to another registered dealer. Sub-section (16) of Section 19 states that the input tax credit availed by a registered dealer is only provisional and the assessing authority is empowered to revoke the same if it appears to be incorrect, incomplete or otherwise not in order. Only after the assessing authority has determined the input tax credit for a year and if the credit exceeds the tax liability for that year, the excess may be adjusted in accordance with sub-section (17) of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of sale i.e. the date of tax invoice. Sale price given in the tax invoice should be the basis for arriving at the quantum of tax and therefore, the price in the invoice must be taken as sale price. Any subsequent discount should not disturb the sale price or tax component indicated thereon. 51. Giving discount and reducing price is an internal arrangement between the selling dealer and buying dealer and for the said internal arrangement, credit note may be issued. State is not concerned about the discount or internal arrangement between the seller and the buyer. For the purpose of revenue, the tax component should be the same as indicated in the tax invoice, until the goods is sold to the ultimate consumer. The Value Added Tax shown in the tax invoice which is available to the petitioner as Input Tax Credit should not be altered, when he sells the goods. 52. The tax invoice is a document to be issued by the registered dealer who sells the taxable goods to another registered dealer and the entire design of VAT with Input Tax Credit is crucially based on documentation of invoice. Therefore, the petitioner who is the purchasing dealer can never be allowed to amend the tax inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid, since there is reduction of the original sale price, the person who can seek for return of the said amount shall only be the selling dealer and not the petitioners/purchasers. Therefore, it is clear that it is the selling dealer who has fixed the sale price based on which VAT has been calculated and remitted by the selling dealer. Any discount on the price allowed in respect of any sale shall be by the selling dealer as a consequence any reduction in the VAT remitted by the selling dealer shall accrue to the selling dealer alone. This conclusion is fortified by Section 19(20) of the Act where any registered dealer has sold goods at a price lesser than the price of the goods purchased by him the amount of Input Tax Credit over and above, the output tax of those goods shall be reversed and by a conjoint reading of Clause (ii) of Explanation II in Section 2(41) and Section 19(20), it is only the selling dealer in the lead case, L.G. Electronics Limited can seek for refund or reversal of the said amount. We would add a caveat here to state that this claim is not an absolute right, but subject to assessment proceedings. The petitioners do not dispute this legal position, but woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Division Bench of the Bombay High Court held that a set-off constitutes a concession granted by the legislature and in the absence of set-off, the selling dealer would be liable to pay tax on the sale consideration and there is no independent right to a set-off apart from Section 48. 58. In the case of MOHAMMED HAJI V. STATE OF KERALA [2012 (3) KLT SN 17], the Kerala High Court held as under:- 7. ..... The set off so provided is in the nature of a concession. It is a benefit conferred on the assessee quite in harmony with the scheme of multi point levy of tax but confined to the value addition at each stage . 59. Input tax credit , which is in the nature of the concession or indulgence, could be availed only in the manner prescribed under Section 19. The law is well settled that the person, who claims exemption or concessional rate, must obey and fulfil the mandatory requirements exactly. Unless there is strict compliance with the provisions of the statute, the registered dealer is not entitled to claim input tax credit. When Section 19(10) stipulates that the registered dealer shall not claim Input tax credit until the dealer receives original tax invoice and Input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, a incentive discount, such discount quantifies for deduction from payment of tax only when, it is separately mentioned in the original tax invoice and this is vivid from the statutory provision, which we have been discussed above. 63. Having arrived at such a finding, the decisions relied on by the learned counsel for the petitioner pertaining to the tax discount as to how they have to be construed under the Sales Tax Act and the Central Excise Act would have no impact on the facts of the present case and does not render any support to the petitioners' case. 64. Let us now point out the background/reasons for inserting Section 19(20) by Amendment Act 22 of 2010, by referring to the Chart, the sample instance is detailed in the Chart in paragraph (34). Let us recapitulate the entries in the Chart. Based on the sale price i.e., ₹ 36,780/- in the tax invoice, an amount of ₹ 4,597.50 was paid as VAT and the same was taken as Input Tax Credit i.e. Input Tax Credit of ₹ 4,597.50 was available to the petitioner when he re-sells goods. Based on the Credit Note, the same goods are re-sold within the State at a lesser price than what was purchased i.e. ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he excess Input Tax Credit earned by the petitioners is being adjusted against the outstanding tax due or carried forward to next year or refunded. If this trend is allowed to continue, the concept of VAT that meant for payment of tax on every value addition gets defeated. 68. In order to protect the revenue and with a view to curb the clandestine transactions resulting in evasion of tax, in respect of second and subsequent sales, Section 19(20) was introduced, where any dealer has sold goods at a price lesser than the price of the goods purchased by him, the amount of Input Tax Credit over and above the output tax of those goods, shall be reversed. 69. Constitutional Validity of fiscal legislation:- When there is a challenge to the constitutional validity of the provisions of a Statute, Court exercising power of judicial review must be conscious of the limitation of judicial intervention, particularly, in matters relating to the legitimacy of the economic or fiscal legislation. While enacting fiscal legislation, the Legislature is entitled to a great deal of latitude. The Court would interfere only where a clear infraction of a constitutional provision is established. The bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues. 70. When vires of a Statute is challenged, Courts must make every effort to uphold the constitutional validity of a statute. In GOVERNMENT OF ANDHRA PRADESH VS. P.LAKSHMI DEVI, (2008) 4 SCC 720, the Hon'ble Supreme Court has observed as under: The Court must, therefore, make every effort to uphold the constitutional validity of a statute, even if that requires giving the statutory provision a strained meaning, or narrower or wider meaning, than what appears on the face of it. It is only when all efforts to do so fail should the court decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst see whether there is an indication in the VAT Act as what should be the price at which the goods have been sold. When we examine the meaning of tax invoice as defined under Sub-section (36) of Section 2, it has been defined to mean an invoice issued by a registered dealer who sells taxable goods to another registered dealer showing the tax charged separately and containing details as may be prescribed. The prescription is under Rule 10(2) (a) to (i). As pointed out earlier, in terms of clause (g) of Rule 10 (2) the registered dealer is required to disclose the value of the goods. As per clause (h) the rate and amount of tax charged and as per clause (i) the total value of the goods. The rate and amount of tax charged shall necessarily be on the value of the goods. Discounts or deduction provided by the selling dealer as a part of normal business practice or as an incentive should find place in the invoice. 75. Bearing in mind these provisions, if we look into the impugned sub-section (20) of Section 19 the only plausible meaning to the word 'price' used therein shall be the price /value as reflected in the tax invoice. Any other interpretation given would not be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sold. Explanation The tax credit claimed on a particular purchase shall not exceed the amount of tax payable on its sale. 79. Likewise, the Uttar Pradesh Value Added Tax Act, 2008 have been amended by adding a new clause (f) to sub-section (1) of Section 13 of U.P. VAT Act providing that the amount of input tax credit shall be claimed and be allowed to the extent of tax payable on the sale value of goods or manufactured goods. Section 13, sub-section (1), clause (f) of U.P. VAT Act reads as under:- Section 13(1)(f) Notwithstanding anything to the contrary contained in this sub-section where goods purchased are resold or goods manufactured or processed by using or utilizing such purchased goods are sold, at the price which is lower than: (i) purchase price where purchased goods are resold; and (ii) cost price of manufactured goods where purchased goods are used in manufacture of such goods, the amount of input tax credit shall be claimed and be allowed to the extent of tax payable on the sale value of goods or manufactured goods: 80. Sub-section (5) of Section 48 of Maharashtra VAT Act provides that in no case shall the amount of set-off exceed the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e constitutional provisions. 83. Point No.2:- Challenge to retrospective operation of sub-section (20) of Section 19:- Coming to the next aspect of retrospectivity , the challenge is on the ground that the Hon'ble Supreme Court has upheld retrospective legislation only in cases of validation laws, where the law as initially passed was held to be inoperative by the Court. The competence of the Parliament and the State Legislature to repeal, amend or suspend an exemption notification is unquestionable. In a line of decisions, the Hon'ble Supreme court consistently held that a law cannot be held to be unreasonable merely because it operates retrospectively . As far as fiscal legislation is concerned, the limitation is implicit in Article 265 of the Constitution, which provides that no tax shall be levied or collected except by authority of law. In Chhotabhai Jethabhai Patel and Co. v. Union of India, (AIR 1962 SC 1006), the Hon'ble supreme Court has held as under : If by reason of Article 265 every tax has to be imposed by law it would appear to follow that it could only be imposed by a law which is valid by conformity to the criteria laid down in the relevant articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the VAT Act. 86. Like other enactments, taxing statute has also to satisfy the test of reasonableness . Taxing statutes are not beyond the limitation imposed by Articles 14 and 19 of the Constitution of India or the test of reasonableness prescribed by Article 304(b). The taxing statute may arise in which retrospective operation of a taxing or other statute may introduce an element of unreasonableness and the same may be open to challenge as unconstitutional. But the test of length of time covered by the retrospective operation cannot by itself necessary be a decisive test. 87. Considering the constitutional validity of retrospective operation of law, referring to various Supreme Court judgments, in SHAMANUR KALLAPPA AND SONS VS. STATE OF KARNATAKA AND ANOTHER, ((2004) 136 STC 132 (Karnataka)), Justice H.L.Dattu, (as His Lordship then was) held as under: 24. Now, it is well-settled that the legislative power to impose tax also includes within itself, the power to tax retrospectively. The power to legislate retrospectively embraces within its scope, the power to validate actions taken and laws which had been declared invalid by the courts, provided the infirmities or vit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unication dated 24.11.2009, emanating from the Commissioner of Commercial Tax to the Principal Secretary to Government Commercial Taxes and Registration, it is seen that the department observed a sudden fall in the tax collection after the advent of the VAT regime. On a closure scrutiny, it was observed that non-realization of tax under TNVAT Act, is due to various discount received by the dealers after the issue of sale invoices, which were in the form of credit notes. These discounts resulted in accumulation of input tax credit claimed by virtue of purchase invoices raised without these discount components. Statistics have been furnished to show that a registered dealer for the assessment year 2005-06 under the erstwhile TNGST Act reported a turnover of ₹ 28.42 crores and paid tax of ₹ 28,42,905/- whereas after the advent of the VAT regime for the year 2007-08, the same dealer reported a taxable turnover of ₹ 31.53 crores, but did not pay any VAT. In the said communication reference has been made to similar provisions such as Section 19 (20) which have been inserted in the Kerala VAT Act, West Bengal VAT Act, Orissa VAT Act and the learned Advocate General also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly Constitutional validity of the impugned enactment is upheld. 95. The other bunch of writ petitions challenging the assessment order/show cause notices are not maintainable as they are pre-mature. The writ petitions challenging the constitutionality of the impugned amendment having failed the writ petitions challenging assessment orders/show cause notices have no legs to stand and therefore, they should necessarily fail. However, it is open to the petitioners to avail the statutory remedy available to them under the Act. 96. In cases where final orders of assessment have been challenged, the assessees shall be entitled to prefer statutory appeal against such order and if such appeals are presented, within a period of 60 days from the date of receipt of a copy of this order, the same shall be entertained by the appellate authority subject to the assessee full-filing other mandatory statutory conditions except rejecting those appeals on the ground of limitation. In cases where the petitioners have challenged show cause notices, they are at liberty to submit their explanation. If such explanation is submitted within a period of 30 days from the date of receipt of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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