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TMI BlogRevival of an elapsed demand by subsequent amendment - whether retrospectiveX X X X Extracts X X X X X X X X Extracts X X X X ..... Revival of an elapsed demand by subsequent amendment - whether retrospective - By: - Pragya Singh - Service Tax - Dated:- 26-4-2019 - Rakesh Chitkara - Introduction: Any law (or amendment) need to have a nexus with the basic structure of the constitution. It is a rule of law that a person can be subject only to established and known law and cannot be made liable for a past act based on a future law. Legal Maxim nova constitutio futuris formam imponere debet non praeteritis , i.e. a new law ought to regulate what is to follow, not the past , contain a principle of presumption of prospectivety of a statute. Further Article 20 (1) of Constitution of India provides protection against Ex post facto laws . An Ex post facto law is a law that retrospectively affects the legal consequences of an act done or a liability/right vested before the enactment of such law. Example: Punishment for an offence is increased in 2018 and if made applicable to acts done before 2018; it is an Ex post facto law . As per Article 20(1) of the Constitution , no person shall be convicted of any offence except for violation of the law in force at the time of the commission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the act charged as an offence. The time period for issue of Show Cause Notice for normal cases (i.e. not involving fraud, collusion, wilful-misstatement, etc) was extended to two years from one year by Finance Act 2016 . This article analyses whether such change will affect the demands that have elapsed earlier, i.e. whether increased period of limitation provide powers to officers to issue show cause notice for demands which have already elapsed before the change in the law. Period of Limitation for issue of Show Cause Notice: The period of limitation for issue of Show Cause Notice for normal cases (i.e. not involving fraud, collusion, wilful-misstatement, etc) under the various indirect tax laws (as amended by the Finance Act, 2016 ) is as provided under: Particulars Section Time Period Service Tax Section 73 of the Finance Act, 1994 18 months (Increased to 30 months w.e.f 14.05.2016 by Finance Act, 2016) Central Excise Section 11A of the Central Excise Act, 1944 One year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Increased to two years) (Increased to 30 months w.e.f 14.05.2016 by Finance Act, 2016)) Customs Section 28 of the Customs Act, 1962 However, in cases involving fraud, collusion, wilful mis-statement, suppression of facts, contravention of provisions with intention to evade payment of duty/ taxes, time limit continued to be 5 years. Questions under consideration: The amendment by the Finance Act has brought a number of questions: Whether the amendment made by Finance Act, 2016 is retrospective or prospective? Whether an elapsed demand can be resurrected by a subsequent amendment? Whether such a resurrection violates Principle of Fairness? Whether law prevalent during the period of alleged violation is applicable or the date of issuance of SCN when milepost has been shifted adversely affecting the vested rights of the assessee? General Presumption in a Statue: Any enactment is generally prospective in nature and has no effect on what is already done unless it is specifically provided that it means otherwise. It shall generally deal with future conting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encies, and does not annul or affect existing rights and liabilities or vested rights, or obligations already acquired under some provision of law. On the other hand, when it is expressly provided that it should be deemed to have come into effect from a past date, it is retrospective in nature. Retrospective laws create liabilities or annul a benefit on activities or transactions which already took before the enactment of such retrospective law. It is a settled law that in absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned. Nor the legislature authorise the assessing authorities to commence proceedings which before the new Act came into force had by the expiry of the period provided, become barred. It is, thus, a settled law that the demand which was time barred before the amending act with larger period of limitation (two years / 30 months in the present case) cannot be revived at a later stage. Justice G.P. Singh in Principles of Statutory Interpretation (14th Edition, in Chapter 6) while dealing with operation of fiscal statute elaborate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the principles of statutory interpretation in the following words: Fiscal legislation imposing liability is generally governed by the normal presumption that it is not retrospective and it is a cardinal principle of the tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. The above rule applies to the charging section and other substantive provisions such as a provision imposing penalty and does not apply to machinery or procedural provisions of a taxing Act which are generally retrospective and apply even to pending proceedings. But a procedural provision, as far as possible, will not be so construed as to affect finality of tax assessment or to open up liability which had become barred. Increase in limitation period by Finance Act, 2016 : By virtue of Section 120 , Section 143 , Section 152 of the Finance Act, 2016 w.e.f. 14.05.2016, the normal period for raising demand was increased from one year to two years in case of Excise and Customs and from eighteen months to thirty months in case of Service Tax. These sections did not make this provision effectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e retrospectively. Unlike year 2000, when such period was enhanced from 6 months to one year, this time; there is no Board Circular/Instruction on the subject matter and no guidance note of any kind from the higher authorities. The sections do not contain any Explanation clarifying the applicability of the new two years / 30 months normal period of limitation nor is there presumably any saving clause which forbids applying the two years/30 months normal period to past evasion. Thus, Even if the adjudicating authority or the appellate authorities come to a conclusion that there was no suppression etc., yet the possible offshoot would be that they confirm the demand for the normal period of limitation and which in the new set up would be the two year / 30 months period . Application of retrospectivity / Prospectivity in present case: It is a settle law that before applying a statute retrospectively, the Court has to be satisfied that the statute is in fact retrospective. The presumption against retrospective operation is strong in cases in which the statute, if operated retrospectively, would prejudicially affect vested rights or the illegality of the past tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions, on impair contracts, or impose new duty or attach new disability in respect of past transactions or consideration already passed. In determining whether a provision is applicable prospectively or retrospectively, attention would be required to be paid to the language of the amending statute, the legislature s intent, the memorandum to the relevant Finance Act, and the hardship the amendment would cause to the taxpayer. Assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either is either expressly or by necessary implication retrospective. A provision which in terms is retrospective and has the effect of opening up liability which had become barred by lapse of time, will be subject to the rule of strict construction. In the absence of a clear implication such a legislation will not be given a greater retrospectivity than is expressly mentioned; nor will it be construed to authorize the Income tax Authorities to commence proceedings which, before the new Act came into force, had by the expiry of the period then provided become barred. But unambiguous language must be given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to, even if it results in reopening of assessments which had become final after expiry of the period earlier provided for reopening them. There is no fixed formula for the expression of legislative intent to give retrospectivity to a taxation enactment...... Relevant Case Laws: CIT Vs. Vatika Township Private Limited: The honourable Supreme Court provided clarity on Prospective versus Retrospective operation of tax amendments in CIT v. Vatika Township Private Limited [ 2014 (9) TMI 576 - SUPREME COURT ] . It elaborated on general principles of retrospectivity in Para 30, relying on a host of Indian and foreign judgments: Legislation differed as to its meaning and implications according to the intent of the lawmaker. Legislation may physically consist of words printed on paper. However, it was conceptually more than an ordinary text. It was not like a series of statements found in a work of fiction/ non-fiction, or in any Court judgement. A technique was required to draft a piece of legislation and to interpret it. One of the established rules of interpretation was that unless explicitly stated, a piece of legislation is presumed no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be intended to have a retrospective operation { Govinddas v. Income Tax Officer [ 1975 (12) TMI 144 - SUPREME COURT ]} The idea behind such a rule was that a current law should govern current activities. The principle of lex prospicit non respicit , which means that The Law looks forward and not backward , was upheld. Retrospective legislation was contrary to the general principle that legislation introduced for the first time need not change the character of past transactions carried out upon the faith of the then existing law. { Phillips v. Eyre [1870] LR 6 QB 1} The obvious basis of the principle against retrospectivity was the principle of fairness , which must be the basis of every legal rule L Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Company Limited [1994] 1 AC 486. Legislations which modified accrued rights or imposed disabilities were to be treated as prospective in nature unless they were accounting for an obvious omission, or explaining a former legislation. The doctrine of fairness was a relevant factor when construing a statute that conferred a benefit without inflicting a corresponding detrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Accordingly, it had to be given a retrospective operation Government of India Ors v. Indian Tobacco Association 2005 (8) TMI 113 - SUPREME COURT OF INDIA and Vijay v. State of Maharashtra Ors 2006 (7) TMI 648 - SUPREME COURT . CIT Vs. M/s. Talbros Pvt Ltd COMMISSIONER OF INCOME TAX XIII VERSUS NARESH KUMAR, M/S TALBROS (P) LTD [ 2013 (9) TMI 275 - DELHI HIGH COURT ] , the Delhi High Court held that: 15 Various rules of interpretation have developed in order to determine whether or not, an amendment is retrospective or prospective. Fiscal statutes imposing liabilities are governed by normal presumption that they are not retrospective The aforesaid dictum is based upon the principle that a new provision creating a liability or an obligation, affecting or taking away vested rights or attaching new disability is presumed to be prospective. 17. Remedial statutes are normally not retrospective, on the ground that they may affect vested rights [ See Bharat Singh versus Management of New Delhi Tuberculosis Centre, 1986 (4) TMI 345 - SUPREME COURT OF INDIA and Workmen of Messrs Firestone Tyre Rubber Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of India (P) Ltd. Versus Management, 1973 (3) TMI 134 - SUPREME COURT ]. CIT MUMBAI Vs. M/s Essar Teleholdings Ltd: The Supreme Court Of India in CIT MUMBAI Vs. M/s Essar Teleholdings Ltd [ 2018 (2) TMI 115 - SUPREME COURT OF INDIA ] observed that: The legislature has plenary power of legislation within the fields assigned to them, it may legislate prospectively as well as retrospectively. It is a settled principle of statutory construction that every statute is prima facie prospective unless it is expressly or by necessary implications made to have retrospective operations. A three Judge Bench of this court in 1975 (12) TMI 144 - SUPREME COURT , Govind Das and others Versus the Income Tax officer and another , noticing the settled rules of interpretation laid down following in paragraph 11: Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. Mc Donald's India Pvt Ltd. Vs CST In re Mc Donald's India Pvt Ltd. Vs CST, DELHI-I [ 2016 (12) TMI 1469 - CESTAT NEW DELHI ], the Double Bench of Delhi CESTAT, held: 9. The basic principle for ascertaining the retrospectivity of a legislation is the principle of 'fairness'. Thus, legislations which modified accrued rights or which impose obligations or impose new dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies or attach a new disability, have to be treated as prospective, unless the legislative intent is clear to give the enactment a retrospective effect. CESTAT, Bangalore in Tata Tea Ltd. Vs. CCE, Cochin [ 2003 (9) TMI 601 - CESTAT, BANGALORE ]: In this case , the normal period for issue of show cause notice was only six months. This period came to be enhanced to one year only w.e.f. 12-5-2000. Held that: 3. During the period to which the duty demand relates, the normal period under Section 11A was only six months. Since the amendment made with effect from 12-5-2000 was not retrospective in character, the period stipulated with effect from that day, had no application to the appellants case. Eris Life Sciences Private Limited v. DC IT : Gujarat High Court, in the case of Eris Life Sciences Private Limited v. DC IT CA 4650/2016 with CA 4712/2016 [ 2016 (6) TMI 1352 - GUJARAT HIGH COURT ] held that, The admitted facts emerging from the record are that as per sub-section (3) of section 201 which stood prior to 1-10-2014, the initiation of action for failing to deduct tax at source is barred by limitation. The amended sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (3) of section 201 with effect from 1-10-2014 enlarges the period of limitation to seven years which, as held by this Court in the case of Tata Teleservices v. Union of India 2016 (2) TMI 414 - GUJARAT HIGH COURT cannot be applied retrospectively. Amendment in Section increasing the time limit would not apply to the matters which attained queitus before the amendment. Section 11A amending period of normal demand from one year to two years cannot be applied to matters to which one year limit already expired even if the amended period of two years is within time. The new law of limitation providing a longer period cannot revive a dead remedy. Nor can it suddenly extinguish vested right of action by providing for a shorter period of limitation. Union of India Vs Uttam Steel Ltd [ 2015 (5) TMI 214 - SUPREME COURT ] The facts of the case, in brief, were that as per the law prevailing at the relevant time, the Respondent had to file claims for rebate within six months from the date of shipment i.e. on or before 20-11-1999 and 10-12-1999 respectively. However, claims for rebate on both counts were filed only on 2 8-12-1999 beyond the period of six mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs under Section 11B of the Central Excise Act, 1944 as it stood at the relevant time. Section 11B was amended on 12-5-2000 where the period of six months was substituted by a period of one year . Since the rebate application was filed within the period of one year from the date of the two shipments, the Respondent contended that they were within time. In this factual backdrop their Lordships of Hon ble Supreme Court, inter-alia, observed that,-1 There is no doubt whatsoever that a period of limitation being procedural or adjectival law would ordinarily be retrospective in nature. This, however, is with one proviso super added which is that the claim made under the amended provision should not itself have been a dead claim in the sense that it was time barred before an Amending Act with a larger period of limitation comes into force . The Supreme Court quoted the following decision with approval in support of their above conclusions. 10. Thus, in S.S.Gadgil v. Lai and Company, 1964 (4) TMI 19 - SUPREME COURT , this Court stated:- 13. As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of a non-resident party under the Income Tax Act before it was amended, ended on March 31, 1956. It is true that under the amending Act by Section 18 of the Finance Act, 1956, authority was conferred upon the Income Tax Officer to assess a person as an agent of a foreign party under Section 43 within two years from the end of the year of assessment. But authority of the Income Tax Officer under the Act before it was amended by the Finance Act of 1956 having already come to an end, the amending provision will not assist him to commence a proceeding even though at the date when he issued the notice it is within the period provided by that amending Act. This will be so, notwithstanding the fact that there has been no determinable point of time between the expiry of the time provided under the old Act and the commencement of the amending Act. The legislature has given to Section 18 of the Finance Act, 1956, only a limited retrospective operation i.e. up to April 1, 1956, only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity than is expressly mentioned, nor to authorise the Income Tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided, become barred. Conclusion: Legislations which modified accrued rights or imposed disabilities are to be treated as prospective in nature unless they were accounting for an obvious omission, or explaining a former legislation. The doctrine of fairness was a relevant factor when construing a statute that conferred a benefit without inflicting a corresponding detriment. Accordingly, in the instant case, the increased limitation period shall not affect the liabilities that elapsed before the amendment was made effective. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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