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TMI Blog2016 (9) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... has to fail. When a concession is given by a statute, the Legislature has power to make the provision stating the form and manner in which such concession is to be allowed. Sub-section (20) seeks to achieve that. - Decided against the assessee. Validity of amendment with retrospective effect - Held that:- The entire gamut of retrospective operation of fiscal statues was revisited by this Court in a Constitution Bench judgment in Commissioner of Income Tax (Central) I, New Delhi v. Vatika Township Private Limited [ 2014 (9) TMI 576 - SUPREME COURT] The amendment in-question fails to meet these tests as pronounced in the above decision. - Such a provision, therefore, cannot have retrospective effect, more so, when vested right had accrued in favour of these dealers in respect of purchases and sales made between January 01, 2007 to August 19, 2010. Thus, while upholding the vires of sub-section (20) of Section 19, we set aside and strike down Amendment Act 22 of 2010 whereby this amendment was given retrospective effect from January 01, 2007. - Decided partly in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... (20) of Section 19 of the VAT Act, vide amendment brought by Amendment Act 22 of 2013 were challenged. This provision though came into force on August 19, 2010, by the aforesaid Amendment Act, was given retrospective effect from January 01, 2007 by Tamil Nadu Value Added Tax (Special Provision) Act, 2010 (hereinafter referred to as 'Act, 2010'). The retrospectivity of the provision was also questioned by the dealers. The dealers had argued that this provision is confiscatory in nature as well as unreasonable and arbitrary and is, therefore, violative of Article 14 and 19(1)(g) of the Constitution and repugnant to the general scheme of the charging provisions of Section 3(2) and 3(3) of the VAT Act. On both the counts, the dealers' challenge has been repelled by the High Court vide impugned judgment July 17, 2013. 4. We have heard learned counsel for the parties at length. Before us, Mr. Bagaria, learned senior counsel appearing for the dealers in some of these appeals had also argued that even if the aforesaid provision was valid, it was not properly interpreted by the High Court. We have considered this additional submission as well. We may record, at the outset, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscount scheme by issuing credit note. 10 Net purchase price after discount 90 SALE DETAILS S. No. Description Amount (Rs.) 1 Sale Price 95 2. VAT actually on the sale price @ 10% 9.50 7. From the aforesaid, it is clear that the dealer had paid to the vendor VAT of ₹ 10/-. However, at the time of re-sale VAT actually allowed was ₹ 9.50. That is the effect of sub-section (20) of Section 19, which reads as under: "S. 19(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." 8. First submission of the dealer was that the price could not have been taken as per the tax invoice but net price at which it was ultimately purchased after discount should have been taken. In the given illustration, it was ₹ 90/-. On this basis, argument raised on interpretation was that since the goods were purchased at ₹ 90/- and sold at ₹ 95/-, sub-section (20) of Section 19 had no application at all. Detail submissions were made with reference to the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er) grown within the State by himself or on any land in which he has an interest whether as owner, unsufructuary mortgage, tenant or otherwise, shall be excluded from his turnover. Explanation I: "Agricultural or horticultural produce" shall not include such produce as has been subjected to any physical, chemical or other process for being made fit for consumption, save mere cleaning, grading, sorting or dying; Explanation II: Subject to such conditions and restrictions, if any, as may be prescribed in this behalf- (i) the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time or before the delivery thereof; (ii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; Explanation III: Any amount, realized by a dealer by way of sale of his business as a whole, shall not be included in the turnover; Explanation IV: Any amount, charged by a dealer by way of tax separately without including the same in the price of the goods sold, shall not be included in the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial production and over a period of three years in the manner as may be prescribed. After the expiry of three years, the unavailed input tax credit shall lapse to Government. (c) Input tax credit shall be allowed for the tax paid under section 12 of the Act, subject to clauses (a) and (b) of this sub-section. (4) Input tax credit shall be allowed on tax paid or payable in the State on the purchase of goods, in excess of three percent of tax relating to such purchases subject to such conditions as may be prescribed- (i) for transfer to a place outside the State otherwise than by way of sale; or (ii) for use in manufacture of other goods and transfer to a place outside the State, otherwise than by way of sale: PROVIDED that if a dealer has already availed input tax credit there shall be reversal of credit against such transfer. (5) (a) No input tax credit shall be allowed in respect of sale of goods exempted under section 15 (b) No input tax credit shall be allowed on tax paid or payable in other States or Union Territories on goods brought into this State from outside the State. (c) No input tax credit shall be allowed on the purchase of goods sold as such or used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed only on the basis of duplicate or carbon copy of such tax invoice obtained from the selling dealer subject to such conditions as may be prescribed. (11) In case any registered dealer fails to claim input tax credit in respect of any transaction of taxable purchase in any month, he shall make the claim before the end of the financial year or before ninety days from the date of purchase, whichever is later. (12) Where a dealer has availed credit on inputs and when the finished goods become exempt, credit availed on inputs used therein, shall be reversed. (13) Where a registered dealer without entering into a transaction of sale, issues an invoice, bill or cash memorandum to another registered dealer, with the intention to defraud the Government revenue, the assessing authority shall, after making such enquiry as it thinks fit and giving a reasonable opportunity of being heard, deny the benefit of input tax credit to such registered dealer who has claimed input tax credit based on such invoice, bill or cash memorandum from such date. (14) Where the business of a registered dealer is transferred on account of change in ownership or on account of sale, merger, amalgamat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x of those goods shall be reversed." 11. From sub-section (10) onwards, provisions are made to follow the procedure and fulfill the requisite conditions for availing ITC. For the purposes of this particular issue, sub-section (10) is the material provision. This provision, which is couched in negative terms, categorically stipulates that such ITC would be admissible to the registered dealer and he would not be entitled to claim this credit 'until the dealer receives an original tax invoice duly filled, signed and issued by a registered dealer from where the goods are purchased.. '. Further, such original tax invoice should evidence the amount of input tax. So much so, even if the original tax invoice is lost, the obligation cast on the registered dealer is to obtain duplicate or carbon copy of such tax invoice from the selling dealer and only then input tax is allowed. From the aforesaid scheme of Section 19 following significant aspects emerge:- (a) ITC is a form of concession provided by the Legislature. It is not admissible to all kinds of sales and certain specified sales are specifically excluded. (b) Concession of ITC is available on certain conditions mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice, i.e., ₹ 36,780/- in the tax invoice, an amount of Input Tax Credit, i.e., Input Tax Credit of ₹ 4m597.50 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., ₹ 33,777.78 (taking into account discount price, there is a profit margin for the dealer) and thereby the output tax payable to the Government is reduced, leaving excess Input Tax Credit at the hands of the dealer. The said excess credit in the hands of the dealer might be adjusted to their other liabilities or might claim refund of the said excess Input Tax Credit. Taking excess Input Tax Credit and later in the guise of credit note giving discount and reducing the price of the goods which reduces the Output tax payable to the Government dwindles State revenue. 65. Learned Advocate General contended that seller and buyer coalition is issuing purchase invoice at an escalated price thereby taking benefit of excess Input Tax Credit and later in the guise of credit notes giving discount, reduced the price of the same goods and thereby reducing the output tax payable to the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a clear infraction of a constitutional provision is established. The burden is on the person, who attacks the constitutional validity of a statute, to establish clear transgression of constitutional principle. Observing that the law relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc., in R.K. Garg vs. Union of India [(1981) 4 SCC 675, this Court held as under: 14. With this, let us advert to the issue on retrospectivity. No doubt, when it comes to fiscal legislation, the Legislature has power to make the provision retrospectively. In R.C. Tobacco Pvt. Ltd. V. Union of India (2005) 7 SCC 725 , this Court stated broad legal principles while testing a retrospective statute, in the following manner: "(i) A law cannot be held to be unreasonable merely because it operates retrospectively; (ii) The unreasonability must lie in some other additional factors; (iii) The retrospective operation of a fiscal statute would have to be found to be unduly oppressive and confiscatory before it can be held to be unreasonable as to violate constitutional norms; (iv) Where taxing statute is plainly disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma facie unreasonable restriction and was, therefore, unconstitutional. More so, when the original provision was subsequently reintroduced deleting the amendments and there was no material to justify the special treatment given for the said eight years. The respondent State could not meet the said contention. The assessee company further contended that since the CST Act had not been extended to Dadra and Nagar Haveli, where the assessee's branch office was located, the requirement under Rule 41-D for registration of the assessee under the CST Act in that place was impossible of performance and should, therefore, be ignored. 16. Though the latter contention was rejected, the first contention noted above, touching upon the retrospectivity of the amendment, was accepted and while allowing the appeal the matter was dealt with in the following manner: "15. It is no doubt true that the legislature has the powers to make laws retrospectively including tax laws. Levies can be imposed or withdrawn but if a particular levy is sought to be imposed only for a particular period and not prior or subsequently it is open to debate whether the statute passes the test of reasonableness at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears and not either before or subsequently and, therefore, we are of the view that the impugned provision, namely, Section 26 deserves to be quashed by striking down the words "not being waste goods or scrap goods or by-products" occurring in the said Section 26 of Maharashtra Act 9 of 1989 and the authorities concerned shall rework assessments as if that law had not been passed and give appropriate benefits according to law to the parties concerned." 17. The entire gamut of retrospective operation of fiscal statues was revisited by this Court in a Constitution Bench judgment in Commissioner of Income Tax (Central) - I, New Delhi v. Vatika Township Private Limited [2015] 1 SCC 1 in the following manner: "33. A Constitution Bench of this Court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas [AIR 1968 SC 1336 : (1968) 3 SCR 623] , while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows: (AIR p. 1339, para 8) "8. The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as primarily gone by the fact that there was no unforseen or unforeseeable financial burden imposed for the past period. That is not correct. Moreover, as can be seen, sub-section (20) of Section 19 is altogether new provision introduced for determining the input tax in specified situation, i.e., where goods are sold at a lesser price than the purchase price of goods. The manner of calculation of the ITC was entirely different before this amendment. In the example, which has been given by us in the earlier part of the judgment, 'dealer' was entitled to ITC of ₹ 10/- on re-sale, which was paid by the dealer as VAT while purchasing the goods from the vendors. However, in view of Section 19(20) inserted by way of amendment, he would now be entitled to ITC of ₹ 9.50. This is clearly a provision which is made for the first time to the detriment of the dealers. Such a provision, therefore, cannot have retrospective effect, more so, when vested right had accrued in favour of these dealers in respect of purchases and sales made between January 01, 2007 to August 19, 2010. Thus, while upholding the vires of sub-section (20) of Section 19, we set aside and strike down Ame ..... X X X X Extracts X X X X X X X X Extracts X X X X
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