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TMI Blog2019 (12) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... GMENT In these writ petitions, the issue that arises for consideration is the legality of the notices and assessment orders issued to the petitioners in connection with the assessment under the Kerala Value Added Tax Act [hereinafter referred to as the 'KVAT Act'] for the assessment years 2010-11 and 2011-12. The notices and orders are impugned, inter alia, on the ground that the authorities concerned did not have the jurisdiction to issue them since the amendments introduced to Section 25 (1) of the KVAT Act, through the Kerala Finance Acts of 2017 and 2018, notified through gazette notifications dated 19.06.2017 and 31.03.2018 respectively, did not contemplate a retrospective operation of the amended provisions. 2. Before framing the issues that arise for adjudication in these writ petitions, it would be apposite to refer to the legislative exercises that were undertaken in respect of Section 25 (1) of the KVAT Act during the period between 2016 and 2018. Section 25 (1) as it stood immediately prior to its amendment with effect from 01.04.2017 read as follows: "25. Assessment of escaped turnover:- (1) Where for any reason the whole or any part of the turnover of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding to determine any assessment including those subjected to extension under section 25B which expires on 31st March, 2017, shall be extended up to 31st March, 2019." 5. It is relevant to note, at this juncture, that on 8th September, 2016, the Constitution (One Hundred and First Amendment) Act, 2016 (hereinafter referred to as 'CAA' for brevity) received the assent of the President and the erstwhile regime of levy of taxes on Sale or Purchase of goods, gave way to a new regime for levy of taxes on the supply of Goods and Services. Through the amendment, taxing powers were conferred on the Union as well as the States and the Union Territories with legislatures, to make laws for levying Goods and Services Tax (GST) on every transaction of supply of goods or services or both. In the future, Central and State GST was to be levied on all transactions involving supply of goods and services, except those that were kept out of the purview of GST. Amendments were carried out in Articles 248, 249, 250, 268, 268A, 269, 270, 271, 286, 366 and 368. The sixth and seventh Schedules to the Constitution were also suitably amended. Through the introduction of a new Article 246A, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier." 6. On going through the pleadings in the writ petitions and on considering the arguments advanced before me by counsel on either side, I find that the issues that arise for consideration in these writ petitions are as follows: (a) Whether under the provisions of Section 25 (1) of the KVAT Act, as amended by the Kerala Finance Act, 2017, and before the repeal of the KVAT Act on 22.06.2017, the six year period of limitation for re-opening assessments could be relied upon to issue pre-assessment notices in cases where, by 31.03.2017, the five year period for reopening assessments under the unamended provisions of Section 25 (1) of the KVAT Act had already expired? (b) If issue (a) is answered in the negative, whether the amendment to the third proviso to Section 25 (1) of the KVAT Act, through the Kerala Finance Act, 2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessments for the assessment years up to six years prior to 01.04.2017, the third proviso cannot have the effect of empowering the authorities to re-open assessments beyond six years prior to 01.04.2017. This is because a proviso cannot expand the ambit of the main provision and must necessarily be subservient to it. Reliance is placed on the decisions in Gajraj Singh etc. v. The State Transport Appellate Tribunal and Others etc. - [AIR 1997 SC 412], M/s. Gurcharan Singh Baldev Singh v. Yashwant Singh and Others - [AIR 1992 SC 180], Isha Valiamohamad and another v. Haji Gulam Mohamad & Haji Dada Trust - [AIR 1974 SC 2061] and J.K. Synthetics Limited v. Commercial Taxes Officer - [(1994) 4 SCC 276] to support the said contention. 9. Per Contra, it is the submission of Sri. C.E Unnikrishnan, learned Special Government Pleader, that the amendment brought in with effect from 01.04.2017, conferred on the assessing authorities the power to re-open assessments for assessment years up to six years prior to 01.04.2017. He relies upon the judgment of a Constitution Bench of the Supreme Court in S.C. Prashar and another v. Vasantsen Dwarkadas and others - [AIR 1963 SC 1356] to fortify his s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a retrospective amendment in the instant cases? As already noticed, the amendment in question was expressly made effective only from 01.04.2017. The period for re-opening assessments under Section 25 (1) of the Act was enlarged from five years to six years only with effect from 01.04.2017. The provisions of Section 25 (1), save the third proviso thereto, have therefore to be construed as having only a prospective operation. 12. As regards the third proviso to Section 25 (1), which too was amended with effect from the same date, to state that "the period for proceeding to determine any assessment which expires on 31.03.2017 shall be extended up to 31.03.2018, the position is slightly different. A Division Bench of this Court in Commercial Tax Officer, Anchal and Others v. S. Najeem and Another - [2018 (4) KHC 666 (DB)], while rejecting the argument of the Government pleader who sought to justify a re-opening of assessments based on the amended provisions of Section 25 (1) of the KVAT Act, with effect from 01.04.2017, observed as follows at paras 14 and 32; "14. The learned Special Government Pleader (Taxes) lastly argued that there was an amendment by substitution to Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation clause so as to get over the judgment of the writ Court. Rai Ramakrishna, Meerut Development Authority, M/s Arooran Sugars Limited, and Indian Aluminium Co. are cases in which the legislature despite the judgment of a constitutional court; brought in amendments removing the defect pointed out in the judgments, and also provided a validation clause by which the action taken under the defective provision stood validated under the retrospective amendment made. This exercise is totally absent in the amendment made to section 25 (1), substituting the period of limitation from five to six years." 13. Thereafter, however, the court referred to the decision in Binu Gopinath - [2018 (3) KHC 482] to observe as follows with respect to the amended provisions of the 3rd proviso to Section 25 (1) of the KVAT Act; "33. Binu Gopinath v. State of Kerala [2018 (3) KHC 482] was also relied on by the learned Special Government Pleader. The W.A.No.230 of 2017 & - 44 - connected cases provision which was considered therein was distinct from that considered here. Finance Act, 2017, as we noticed, substituted the provision under sub-section (1) of Section 25 and provided six years from the last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the period of limitation for completion of assessment/re assessment after the expiry of the period for completion of the assessment, the Supreme Court has held that the intention of the legislature should be given its full effect. The second proviso as already noted, clearly expresses the intention of the legislature in giving retrospective operation in respect of the assessment year 1994-95. Here it must be noted that even in the decision of the Supreme Court in Gadgil's case relied on by the assessee it was observed that "the 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 retrospectivity than is expressly mentioned". Hence all the decisions of the Supreme Court are to the effect that it is the legislative intention that must be given full effect. Hence in view of the authoritative pronouncements of the Supreme Court discussed above, the contention of the petitioner that the assessment is barred by limitation has no substance. It is accordingly rejected." 15. In the instant cases, it can be seen that the purpose of the amendment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant cases, as already noticed above, while the main part of Section 25 (1) clearly indicates that the extended period of six years for re-opening assessments is to operate prospectively with effect from 01.04.2017, the third proviso seeks to carve out those assessments, where the period of re-opening would have expired by 31.03.2017, for a differential treatment, by stating that in such cases, the re-opening could be carried out before 31.03.2018. To treat the said proviso as having only prospective effect would render meaningless the words used by the legislature in the said proviso and accord to it the same meaning as the main provision. Going by the tests enumerated in Sundaram Pillai (Supra), the third proviso to Section 25 (1), as amended with effect from 01.04.2017, has to be seen as qualifying the ambit of the main enactment with the object of explaining the real intendment of the statutory exercise. I therefore find that issue (a) has to be answered in the negative and in favour of the assessees, and issue (b) in the affirmative, in favour of the revenue and against the assessees. Re: Issues (c) and (d): Although detailed arguments have been advanced before me on both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and in particular the third proviso thereto, authorised the re-opening of past assessments till 31.03.2018. The amendment effected through the Kerala Finance Act, 2018, with effect from 01.04.2018, enlarged the period for re-opening past assessments from 31.03.2018 to 31.03.2019. Under ordinary circumstances, and based on my findings above as regards the effect of the amendments brought into the third proviso to Section 25 (1) by the Kerala Finance Act, 2017, the legislative measures should have sufficed to justify a reopening of past assessments up to 31.03.2019, notwithstanding that the amendment itself was effective only from 01.04.2018. However, the intervention of the CAA 2016, and the consequent repeal of the KVAT Act with effect from 22.06.2017, has a bearing on the legality of the 2018 amendment. A distinction does exist between the saving of rights, privileges, immunities and liabilities under a repealed enactment, through a savings clause inserted in the new enactment traceable to the same legislative power, and an amendment brought in to a repealed enactment after the legislative power itself is taken away. While the legislative power justifying both actions, prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g value added taxes, that were levied and collected by the Centre and the States. Section 19 of the CAA 2016, which is the sunset clause in the said enactment, envisaged the continuation of the erstwhile system of taxation for a period of one year from the date of enactment of the CAA or till such time as the State legislatures amended or repealed their respective VAT legislations, whichever was earlier. When the State legislature repealed the KVAT Act, while simultaneously bringing into force the new State GST Act, with a savings clause of limited operation, it effectively acknowledged the absence of any power to legislate thereafter on the subject of tax on sale or purchase of goods, except in respect of the limited commodities for which the said power was retained under the Constitution. In respect of all other commodities, the legislative power of the State was only in respect of taxes on the supply of goods or services or both, a power that had to be exercised simultaneously with the Parliament and not unilaterally or exclusively. Thus, at the time of repeal of the KVAT Act, and simultaneous enactment of the State GST Act with a savings clause therein, the savings clause opera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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