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TMI Blog2022 (7) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... the three lists of the VII Schedule are not sources of legislative power. These are legislative heads demarcating the field of legislation; of course, being the field of legislation, the entries should be given the widest possible amplitude - On and from 16.09.2016, the competence of the State Legislature got truncated; it had competence to enact law only on the fields mentioned in Entry 54 as substituted i.e., regarding taxes on sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption. However, there is a further restriction in as much as the taxes should not be on sale of such goods in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods. The Second Amendment Act, as already noticed, enhances the limitation period from four years to six years with respect to assessment, reassessment, revision etc. It covers all general goods and is not confined to the five petroleum products and alcoholic liquor for human consumption as mentioned in the substituted Entry 54 of List II. Therefore, State Legislature of Telangana did not have the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. It has been held that the power to amend a statute being a facet of the legislative power itself, the State Legislature could not have exercised a power to amend the Kerala Value Added Tax Act, 2003 except to the extent permissible when it did not retain any residual right to further legislate on the subject of taxes on sale or purchase of goods. Kerala High Court in HINDALCO INDUSTRIES LIMITED AND ORS. VERSUS STATE OF KERALA AND ORS. [ 2019 (12) TMI 1604 - KERALA HIGH COURT] following the same line of reasoning adopted by the previous bench in BAIJU A.A. (10 supra) it has been held that after the Constitution Amendment Act, State Legislatures stood denuded of their power to legislate in respect of taxes on sale or purchase of goods that was covered under Entry 54 of List II of the VII Schedule; they have instead been conferred with legislative powers to be exercised simultaneously with the Parliament in respect of taxes on supply of goods or services or both. Consequence of amendment of Entry 54 of List II is denuding the State Legislature of the power to levy t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals any enactment by which the text of any previous enactment was amended by express omission, insertion or substitution of any matter then unless a different intention appears, the repeal shall not affect continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal - Article 367 of the Constitution of India speaks about the interpretation of the Constitution of India. Clause (I) of Article 367 is relevant. It says that unless the context otherwise requires, the General Clauses Act, 1897, subject to any adaptations and modifications that may be made therein under Article 372, shall apply for the interpretation of the Constitution as it applies for the interpretation of an Act of the Legislature. The Constitution Amendment Act came into force on and from 16.09.2016. Section 19 of the Constitution Amendment Act provided for a window period to the States to remove any inconsistent enactments by way of amendment or repeal or until expiration of one year from such commencement whichever was earlier. Telangana Ordinance No.2 of 2017 was promulgated by the Governor of Telangana on 17.06.2017 to further amend the VAT Act. Though the Ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 23386, 24282, 25561, 27294, 27533, 28797, 29743, 32129, 32373, 32653, 32697 and 34054 OF 2021 Counsel for the Petitioners : Mr. S. Ravi, learned Senior Counsel, Mr. S. Dwarakanath, learned Senior Counsel, Mr. S.R.R. Viswanath, Mr. V. Bhaskar Reddy, Mr. Shaik Jeelani Basha, Mr. Karan Talwar, Mr. G. Narendra Chetty, Mr. A.V.A. Siva Kartikeya, Mr. P. Karthik Ramana, Mr. B. Srinivas, Mr. Tej Prakash Toshniwal, Mr. Pasam Mohith and Mr. Venkatram Reddy Mantur Counsel for Respondents : Mr. B.S.Prasad, learned Advocate General with Mr. K. Raji Reddy COMMON JUDGMENT & ORDER: (Per Hon'ble the Chief Justice Ujjal Bhuyan) Issue raised in all the writ petitions being identical, those were heard together and are being disposed of by this common judgment and order. 2. We have heard Mr. S.Ravi, learned senior counsel, Mr. S. Dwarakanath, learned senior counsel, Mr. S.R.R. Viswanath, Mr. V. Bhaskar Reddy, Mr. Shaik Jeelani Basha, Mr. Karan Talwar, Mr. G. Narendra Chetty, Mr. A.V.A. Siva Kartikeya, Mr. P. Karthik Ramana, Mr. B. Srinivas, Mr. Tej Prakash Toshniwal, Mr. Pasam Mohith and Mr. Venkatram Reddy Mantur, learned counsel for the petitioners; and Mr. B.S. Prasad, learned Advocate Gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed shall assess the dealer for the said period for such default in the manner prescribed. 8.1. As per Sub-Section (2), if a VAT dealer or TOT dealer submits a return along with evidence for full payment of tax, subsequent to the prescribed time the assessment made under Sub-Section (1) shall be withdrawn without prejudice to any interest or penalty leviable. 8.2. Sub-Section (3) deals with a situation where the authority prescribed is not satisfied with the return filed by the VAT dealer or TOT dealer or the return appears to be incorrect or incomplete, in which event, he shall make the assessment to the best of his judgment within four years of due date of the return or within four years of the date of filing of the return, whichever is later. 8.3. Power to conduct scrutiny of accounts is provided in Sub-Section (4) and making of assessment in the event of willful evasion of tax is dealt with in Sub-Section (5). In Sub-Section (6) the prescribed authority has been empowered to make reassessment when the assessment was made under Sub-Sections (1) to (5) and such assessment understates the correct tax liability of the dealer, within a period of four years from the date of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any order passed or proceeding recorded by any authority, officer or person subordinate to him under the provisions of the VAT Act and if such order or proceeding recorded is prejudicial to the interest of revenue, may make such enquiry or cause such enquiry to be made and subject to the provisions of the VAT Act, may initiate proceedings to revise, modify or set aside such order or proceeding and may pass such order in reference thereto as he thinks fit. 10.1. As per Sub-Section (2), such power may also be exercised by the Additional Commissioner, Joint Commissioner, Deputy Commissioner and Assistant Commissioner in the case of orders passed or proceedings recorded by the authorities, officers or persons subordinate to them. However, as per the proviso, such power shall not be exercised by the revisional authority in respect of an issue or question which was decided on appeal by the Appellate Tribunal under Section 33. 10.2. Sub-Section (3) says that in relation to an order of assessment passed under the VAT Act, the powers conferred by Sub-Sections (1) and (2) shall be exercisable only within a period of four years from the date on which the order was served on the dealer. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of three years, the period during which any stay order was in force or any appeal or other proceeding in respect thereof was pending, shall be excluded. 12. The Goods and Services Tax (GST) regime came to be introduced in the country by way of the Constitution (101st Amendment) Act, 2016. In this context we may advert to the relevant provisions of the Constitution (101st Amendment) Act, 2016. As per Section 2 of the aforesaid Constitution Amendment Act, after Article 246 of the Constitution of India a new Article 246-A came to be inserted. Article 246-A reads as under: "246A. Special Provision with respect to goods and services tax--- (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation.---The provisions of this article, in respect of goods and services tax referred to in clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a new Article 279-A shall be inserted. Article 279-A reads as under: "279A. Goods and Services Tax Council --- (1) The President shall, within sixty days from the date of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council. (2) The Goods and Services Tax Council shall consist of the following members, namely:- (a) the Union Finance Minister…….Chairperson; (b) the Union Minister of State in charge of Revenue or Finance…… Member; (c) The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government …..Members. (3) The Members of the Goods and Services Tax Council referred to in sub-clause (c) of the clause (2) shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such period as they may decide. (4) The Goods and Services Tax Council shall make recommendations to the Union and the State on--- (a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax; (b) the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l; or (c) any procedural irregularity of the Council not affecting the merits of the case. (11) The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute--- (a) between the Government of India and one or more States; or (b) between the Government of India and any State or States on one side and one or more other States on the other side; or (c) between two or more States, arising out of the recommendations of the Council or implementation thereof." 12.5. Section 14 says that after Clause (12) of Article 366 a new clause being Clause (12-A) shall be inserted. Likewise after Clause 26, Clauses (26-A) and (26-B) shall be inserted. 12.6. A crucial amendment made was in the VII Schedule to the Constitution. As per Section 17 (a) in List I (Union List) for Entry 84, the following entry shall be substituted: "84. Duties of excise on the following goods manufactured or produced in India, namely:--- (a) Petroleum crude; (b) High speed diesel; (c) Motor spirit (commonly known as petrol); (d) Natural gas; (e) Aviation turbine fuel; and (f) Tobacco and tobacco products."; 12.7. Entries 92 and 92 C have been omitted. 12.8. Likewise, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment) Act, 2016, appointed the 16th day of September, 2016 as the date on which provisions of Sections 1 to 11 and 13 to 20 of the said Amendment Act would come into force. 15. Following the Constitution (101st Amendment) Act, 2016, Parliament enacted the Central Goods and Services Tax Act, 2017 (briefly, 'the CGST Act', hereinafter) to make provision for levy and collection of tax on intra-State supply of goods or services or both by the Central Government and for matters connected therewith and incidental thereto. As per Section 1 (3), the CGST Act shall come into force on such date as the Central Government may by notification in the official gazette appoint. Several dates were notified by the Central Government as the date for coming into force of various sections of the CGST Act, such as, Sections 1 to 5, 10, 22 to 30, 139, 146 and 164 came into force on 22.06.2017; some sections came into force on 01.07.2017 whereas Section 52 came into force on 01.10.2018. Likewise, Parliament enacted the Integrated Goods and Services Tax Act, 2017 (IGST Act) for levy and collection of tax on inter-State supply of goods or services or both by the Central Government and for matters conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , inquiry, verification including scrutiny and audit assessment proceedings etc, which may be instituted, continued or enforced, whereafter tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if those Acts had not been so amended or repealed. That apart, such repeal would not affect any proceedings, such as, appeal, revision, review or reference which shall be continued under the amended Acts or repealed Acts. It was also mentioned that it was considered necessary to strengthen certain provisions of the VAT Act to overcome any limitations to help effective revenue realization besides preventing leakages. Accordingly, it was decided to amend the relevant provisions of the VAT Act by undertaking legislation. Since it was decided to give effect to the above decision immediately and since the Legislature was not in session, and as the Governor of Telangana was satisfied that circumstances exist which rendered it necessary for him to take immediate action; therefore, in exercise of the powers conferred by Clause (1) of Article 213 of the Constitution of India, the Governor promulgated Telangana Ordinance No.2 of 2017 called the Telangana Value A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department. Provided that the VAT dealer, whose turnover is less than Rs.50 lakhs per annum, may opt to submit the statements as may be prescribed, by self certification, or certified by the Sales Tax Practitioner, enrolled with the Commercial Taxes Department. (b) Any VAT dealer, who fails to furnish the certificates along with other statements under Clause (a) on or before the prescribed date in the manner prescribed shall be liable to pay penalty as may be prescribed." (ii) In sub-section (3), for the words "four years" occurring at two places, the words "six years" shall be substituted. (iii) in sub-sections (4) and (6), for the words 'four years' the words 'six years' shall be substituted. (iv) in sub-sections (7) and (8), for the words 'four years or six years, as the case may be, the words 'six years' shall be substituted. 4 In the principal Act, in section 31, in sub-section (1),- (i) the first proviso shall be omitted; (ii) after omitting the first proviso, in the existing proviso, for the words "provided further that" the words "provided that' shall be substituted. 5 In the principal Act, in section 32, in sub-section (3), (60 and (7), for the words 'fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside by any Court or as the case may be the Appellate Tribunal, the period between the date of such assessment and the date on which it has been set aside shall be excluded in computing the period of six years as the case may be, for making any fresh assessment. Section 31 (1): Any VAT dealer or TOT dealer or any other dealer objecting to any order passed or proceeding recorded by any authority under the provisions of the VAT Act, other than the order passed or proceeding recorded by any authority under the provisions of the VAT Act, other than the order passed or proceeding recorded by an Additional Commissioner or Joint Commissioner or Deputy Commissioner, may within 30 days from the date on which the order or proceeding was served on him, appeal to such authority in the manner prescribed. Provided that an appeal so preferred shall not be admitted by the appellate authority concerned unless the dealer produces proof of payment of tax, penalty, interest or any other amount admitted to be due, or of such installments as have been granted, and the proof of payment of twelve and half percent of the difference of the tax, penalty, interest or any other amount, assessed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Deputy Commissioner, Commercial Tax in exercise of powers under Section 32 (2) of the VAT Act suo-motu proposed to revise the original audit assessment proceedings. In this connection, show cause notice was issued on 30.11.2019 stating that on scrutiny of assessment records it was found that petitioner had imported 71 metric tons of Basmathi Rice valued at Rs.60,35,000.00 which was neither reported by the petitioner in the returns nor subjected to assessment. Therefore, the assessment order dated 31.03.2015 was found to be prejudicial to the interest of revenue. Accordingly a view was taken that revision under Section 32 (2) of the VAT Act was warranted. 24. Petitioner filed explanation on 17.12.2019. It was followed by subsequent letters seeking certain information on the allegation made. 25. It is contended that without considering the explanation of the petitioner and without providing an opportunity of personal hearing, Deputy Commissioner, Commercial Tax passed the order dated 14.09.2020 confirming the revision proposed in the show cause notice. 26. It is this order which is impugned in W.P.No.7054 of 2021. 27. Amongst the various grounds urged by the petitioner, it is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered as a dealer under the then Andhra Pradesh General Sales Tax Act, 1957 and thereafter under the Andhra Pradesh Value Added Tax Act, 2005. After bifurcation of the State, petitioner continued as a registered VAT dealer under the VAT Act. For the period from 01.04.2010 to 31. 10.2011, covering the entire financial year 2010-2011 and partly the financial year 2011-12 petitioner filed returns under the VAT Act. After availing the input tax credit to which it was entitled, it paid the taxes due at the prescribed rate. 32. Commercial Tax Officer conducted audit and on completion thereof passed the assessment order dated 24.03.2014. 33. Deputy Commissioner, Commercial Tax issued pre revision show cause notice dated 09.11.2017 proposing to revise the assessment made by the Commercial Tax Officer and to levy additional tax of Rs.1,03,26,998.00 on the grounds mentioned therein. 34. Petitioner filed detailed reply dated 06.03.2018 to the pre revision show cause notice. However, the Deputy Commissioner did not consider such reply of the petitioner and passed the revisional order on 05.03.2020 levying additional tax of Rs.1,03,26,998.00 by imposing tax at a higher rate. Following the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment) Act, 2016 (referred to hereinafter as 'the Constitution Amendment Act') received the assent of the President and was published in the official gazette. 16.09.2016 was the appointed date when various provisions of the Constitution Amendment Act came into force. He then referred to 27.05.2017 when the Telangana State Legislature enacted the TGST Act while repealing the VAT Act except for the goods listed in Entry 54 of List II of the VII Schedule. Ordinance No.2 of 2017 was promulgated by the Governor of Telangana under Article 213 of the Constitution of India on 17.06.2017 whereby limitation was extended from four years to six years. 01.07.2017 is the date on and from which TGST Act became enforceable. Section 174 of the TGST Act repealed the VAT Act in respect of all goods except those mentioned in the substituted Entry 54 of the State List. On 29.11.2017 the Second Amendment Act received the assent of the Governor whereafter it was published in the Telangana Gazette on 02.12.2017 giving retrospective effect from 17.06.2017. 40. Mr. S.Ravi, learned senior counsel, submits that prior to the Constitution Amendment Act coming into force, States had legislative competence to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the Constitution of India since Constitution of India is not an enactment. In this connection, learned senior counsel has placed reliance on a division bench decision of the Gujarat High Court in Reliance Industries Limited Vs. State of Gujarat 2020 82 GSTR 32 (Guj.). Therefore, the State cannot rely upon the erstwhile legislative scheme reflected in pre-amended Entry 54 of List II prior to 16.09.2016 for legislative competence on the ground that the Second Amendment Act is retrospective and intended to deal with VAT demands prior to the coming into force of GST. Thus, Section 6 of the General Clauses Act, 1897 cannot be pressed into service to save the pre-amended Entry 54 of List II. 43. While on legislative competence, Mr. Ravi submits that after the Constitution Amendment Act, Entry 54 of List II is confined to only five petroleum products and alcohol for human consumption. States have lost legislative competence after 16.09.2016 to make laws imposing VAT on other goods i.e., goods generally. To support his above submission, learned senior counsel has placed reliance on the following decisions: Reliance Industries Limited Vs. State of Gujarat (2 supra), Hin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes such invalidity for a period of one year to enable the competent legislatures to remove the inconsistency by amending or repealing such law to bring them in consonance with the post amended provisions. Object of such transitional provision is to provide for a transition by suspending invalidity of inconsistent legislation for a period of one year to enable the competent legislatures to amend / repeal their laws to bring them in consonance with post amended provision. Therefore, Section 19 of the Constitution Amendment Act does not eclipse the amendment to Entry 54 of List II or confer legislative competence upon the State for making amendments to the VAT Act qua goods other than alcohol for human consumption and the five petroleum products. Therefore, what Section 19 provides is that the State can continue to levy tax under the VAT Act for the window period of one year or till the VAT Act is amended or repealed whichever is earlier. This transitional provision does not enable the States to make amendments to the VAT Act in contravention of the amended Entry 54 of List II. He submits that Section 19 of the Constitution Amendment Act cannot be understood as a source of legislativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ordinance would be ultra vires for the very same reason for which the Second Amendment Act is ultra vires. He further submits that life of the Ordinance was only six weeks from date of convening of the State Legislature. This period, he submits, was till 08.12.2017. Even assuming that the State Legislature was competent to enact and apply the Ordinance qua the goods not mentioned in amended Entry 54, such operation could not have continued beyond 08.12.2017 as per Article 213 of the Constitution. Clarifying the position, he submits that the Ordinance was not challenged because the Ordinance was repealed by the Second Amendment Act and is no longer in existence. Besides, the Second Amendment Act was brought into force with effect from 17.06.2017 which was the date of the Ordinance. Thus, even for the period when the Ordinance was in existence it was the Second Amendment Act which occupied the legislative field and not the Ordinance. Therefore, any reliance placed on the Ordinance would be misplaced and the fact that the Ordinance was not challenged would have no legal bearing. 51. Finally Mr. Ravi refers to Section 174 of the TGST Act. Section 174 of the TGST Act provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after submits that the Ordinance was promulgated on 17.06.2017 whereas the Second Amendment Act was made on 02.12.2017 giving retrospective effect from 17.06.2017. He submits that the Second Amendment Act is unconstitutional as the State Legislature had lost its competence to make such amendments after the Constitution Amendment Act came into force from 16.09.2016. On and from 16.09.2016 only concurrent jurisdiction could be exercised simultaneously by the Central Government as well as by the State Government insofar GST is concerned; that apart, exercise of power under Article 246 A can only be carried out on the recommendation of the GST Council. 55. Adverting to Section 19 of the Constitution Amendment Act, he submits that it is a transitional provision and a transitional provision cannot be used for unintended or oblique purpose. 56. Referring to Article 213 (3), Article 246 (3) read with Entry 54 of List II and placing reliance on State of Bombay Vs. R.M.D. Charmarbaugwala AIR 1957 SC 699 and Krishna Kumar Singh Vs. State of Bihar (2017) 3 SCC 1, he submits that both the Ordinance as well as the Second Amendment Act in their application to goods other than the five petroleum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to 01.07.2017. Insofar the VAT Act is concerned, the same was amended by the Second Amendment Act prior to the effective date of repeal by way of an Ordinance dated 17.06.2017. Article 13 (3) of the Constitution of India states that law includes Ordinance as well. Section 6 (b) of the General Clauses Act, 1897 also makes it clear that repeal of an Act shall not effect the previous operation of any enactment so repealed or anything done thereunder. According to him, reliance placed by the petitioners on the decision of the Kerala High Court in Hindalco Industries Limited (3 supra) and on the Gujarat High Court decision in Reliance Industries Limited (2 supra) would be of no assistance to the petitioners as in those cases there was no Ordinance or legislative enactment pertaining to the State VAT Acts prior to introduction of GST. 59. Elaborating further Mr. B.S.Prasad submits that the Ordinance was promulgamated by the Governor of Telangana on 17.06.2017 whereby the time limit for assessments and revisions was extended from four years to six years before annulment of VAT Act. The Ordinance became an Act i.e. the Second Amendment Act on 02.12.2017. Prior to that, the Ordinance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested rights of the assessees i.e. even where assessments become barred by time under the pre-amended provision. State can enlarge the limitation even for such time barred assessments and take away vested rights. Looked at from this perspective, the Second Amendment Act cannot be said to be arbitrary, not to speak of being manifestly arbitrary. 63. Provisions for enlarging time limitation on assessments etc., are only procedural aspects of levy and assessment of tax. These are not substantive provisions. Assessing Officers are competent to adjudicate on limitation since it is a mixed question of fact and law. 64. Referring to Hindalco Industries Limited (3 supra), he submits that decision of the Kerala High Court, as expressed in the said case, is distinguishable. In the said decision, Kerala High Court did not deal with the effect of Section 19 of the Constitution Amendment Act and the savings provision under the State GST Act. As a matter of fact, State of Kerala had enacted the impugned law after the permissible window period of one year allowed under Section 19 of the Constitution Amendment Act. Likewise, Mr.Prasad submits that decision of the Gujarat High Court in Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar there being nothing in the Act so as to make the Ordinance ineffective. The Act being a continuation of the Ordinance, would be deemed to have been effective from 25.01.1996 when the first Ordinance came into force. 67. Mr. Prasad has also placed heavy reliance on Manish Kumar Vs. Union of India (2021) 5 SCC 1 wherein Sections 3, 4 and 10 of the Insolvency and Bankruptcy Code (Amendment) Act, 2020 was challenged. He submits that when a legislation is challenged, more particularly, a constitutional amendment on the ground of being manifestly arbitrary, it would be incumbent upon the petitioners to show or demonstrate that something was done by the legislature capriciously, irrationally and / or without adequate determining principle. He submits that wide latitude is allowed to the legislature in enacting a law. The freedom to experiment must be conceded to the legislature, particularly in economic laws. If problems emerge in the working of laws and which require legislative intervention, the Court cannot be oblivious of the power of the legislature to respond by stepping in with necessary amendments. Since the law, in this case, the Second Amendment Act has been enacted to augme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded Entry 54 but not goods in general. It is the contention of the petitioners that other than the goods mentioned in amended Entry 54, the State does not possess legislative competence. This crucial aspect was not countered by the State. 72. Mr. Ravi submits that it is not the argument of the petitioners that the Ordinance or the Second Amendment Act are manifestly arbitrary or that those cannot be given retrospective effect. Therefore, the argument advanced by the learned Advocate General based on the principles of manifest arbitrariness or retrospectivity are not at all germane to adjudicate on the issues raised by the petitioners. 73. Besides reiterating reliance on Reliance Industries Limited (2 supra) and Hindalco Industries Limited (3 supra), Mr.Ravi has also pressed into service a decision of the Allahabad High Court in Jain Distillery Private Limited (4 supra). 74. Insofar extension of time limit in tax matters is concerned, Mr.Ravi submits that time limits are a fetter on the jurisdiction of the departmental authorities. Enlargement of time under the Second Amendment Act in extending the limitation period amounts to conferring jurisdiction on departmental authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners that the Second Amendment Act should be struck down on the ground of being manifestly arbitrary. That apart, while there can be no dispute to the proposition that a wider latitude should be allowed to the legislature while legislating economic laws, it is also equally clear that while making such law, the Legislature or the Parliament cannot transgress the constitutional limits. In the instant case, the challenge to the Second Amendment Act is purely on the ground of legislative competence; rather lack of legislative competence. Petitioners are not questioning the legislative wisdom in extending the limitation for making assessments, reassessments, revisions etc., from four years to six years, but have questioned the Second Amendment Act on the ground that the State did not have the legislative competence to enact the same. 77. Insofar Sheen Golden Jewels (India) Pvt. Limited (7 supra) is concerned, learned senior counsel submits that a division bench of the Gujarat High Court in Reliance Industries Limited (2 supra) has distinguished the said decision. In Sheen Golden Jewels (India) Pvt. Limited (7 supra) petitioners had challenged validity of Section 174 of the K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce as well as the Second Amendment Act were made subsequent to the enactment of the TGST Act. Therefore, learned Advocate General is not right in saying that the Ordinance was promulgated prior to coming into force of the TGST Act. Thus, he would submit that neither the Governor nor the State Legislature had legislative competence to promulgate the Ordinance or to make the Second Amendment Act after 16.09.2016 and also after 27.05.2017. 81. Referring to Section 19 of the Constitution Amendment Act, Mr. Viswanath submits that the window provided by Section 19 was completely exhausted on 27.05.2017 when the TGST Act was enacted and Section 174 thereof partially repealed the VAT Act. There is no merit in the argument of the learned Advocate General that Section 19 of the Constitution Amendment Act could be invoked even after 27.05.2017 and that the Ordinance and the Second Amendment Act owe their genesis to Section 19. He further submits that neither the Ordinance nor the Second Amendment Act can be traced to Article 246A of the Constitution. 82. Insofar decision of the Kerala High Court in Sheen Golden Jewels (India) Pvt. Limited (7 supra) is concerned, he submits that in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then existed, that the VAT Act was enacted. 87. After the Constitution Amendment Act came into force with effect from 16.09.2016, Entry 54 of List II now reads as follows: "54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods". 88. Thus, on and from 16.09.2016, the competence of the State Legislature got truncated; it had competence to enact law only on the fields mentioned in Entry 54 as substituted i.e., regarding taxes on sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption. However, there is a further restriction in as much as the taxes should not be on sale of such goods in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods. 89. The Second Amendment Act, as already noticed, enhances the limitation period from four years to six years with respect to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST imposed by the Union or by such State except in the case of GST where the supply of goods or of services or both takes place in the course of inter-State trade or commerce in which case Parliament has the exclusive competence. Of course, such enactment will take effect from the date of recommendation by the GST Council. 93. Article 366 of the Constitution of India defines various expressions which finds place in the Constitution. Clause (12) defines "goods" to include all materials, commodities and articles. Clause (12A) which was inserted by the Constitution Amendment Act with effect from 16.09.2016 defines "goods and services tax" (GST) to mean any tax on supply of goods or services or both except taxes on the supply of alcoholic liquor for human consumption. Clause (26A), also inserted by the Constitution Amendment Act with effect from 16.09.2016, defines "services" to mean anything other than goods. 94. Article 246 A of the Constitution of India came up for analysis before the Supreme Court in VKC Footsteps India Private Limited (5 supra), Supreme Court has held as follows: "34. Article 246A has brought about several changes in the constitutional scheme: (i) Firstly, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a uniform "goods and services tax" law throughout the country. 83. It prima facie appears that the power conferred by article 246A of the Constitution of India is to be exercised by both the Union and the States concurrently to ensure uniform "goods and services tax" law all over the country. The Union of India or States cannot separately exercise power given by article 246A of the Constitution of India independent of each other unlike the power given by the "Concurrent List" enumerated in List III in Schedule VII of the Constitution of India". 97. In Baiju A.A. (10 supra) the challenge before a single bench of the Kerala High Court was to the legality of the notices and assessment orders issued in connection with the assessments under the Kerala Value Added Tax Act, 2003 for the assessment years 2010-2011 and 2011-2012. The challenge was made on the ground that the concerned authorities did not have the jurisdiction to issue the notices and assessment orders since the amendments introduced to Section 25 (1) of the Kerala Value Added Tax Act, 2003 through the Kerala Finance Acts of 2017 and 2018 notified on 19.06.2017 and 31.03.2018 respectively did not contemplate a retrospecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the CAA 2016, could have been traced to Article 246 of our Constitution, read with the relevant entry in the VIIth Schedule thereto, the position changed when there was a fundamental shift in the nature of the tax levy and a fresh conferment of legislative power to legislate in respect of the new levy. After the CAA 2016, the State Legislatures stood denuded of their power to legislate in respect of taxes on sale or purchase of goods, that was covered under Entry 54 of List II of the VIIth Schedule to the Constitution, and they were instead conferred with legislative powers, to be exercised simultaneously with the Parliament, in respect of taxes on supply of goods or services or both. While the new legislative power could justify the inclusion of a savings clause in the new legislation enacted in respect of the new levy of tax, to save accrued rights, privileges, immunities etc. under the erstwhile enactment, the deletion of Entry 54 of List II automatically denude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .After the CAA 2016, the State Legislatures stood denuded of their power to legislate in respect of taxes on sale or purchase of goods, that was covered under Entry 54 of List II of the Seventh Schedule to the Constitution, and they were instead conferred with legislative powers, to be exercised simultaneously with the Parliament, in respect of taxes on supply of goods or services or both. While the new legislative power could justify the inclusion of a savings clause in the new legislation enacted in respect of the new levy of tax, to save accrued rights, privileges, immunities, etc., under the erstwhile enactment, the deletion of Entry 54 of List II automatically denuded the State Legislatures of the power to further legislate on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. The power to amend a statute being a facet of the legislative power itself, the State Legislature could not have exercised a power to amend the KVAT Act, save to the extent permitted, when it did not retain any residual right to further legislate on the subject of taxes on sale or purchase of goods". 101. A division bench of the Allahabad Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also been followed by a later division bench of the Allahabad High Court in Jain Distillery Private Limited (4 supra). In this case, the Allahabad High Court examined the position as to the competence of the Parliament and State Legislatures to enact laws to impose duties on excise and to levy tax on sale of alcoholic liquor not for human consumption post the Constitution Amendment Act. It was noted that the express intent of the constitutional change made vide the Constitution Amendment Act was to tax alcohol under the GST regime except alcoholic liquor for human consumption. Thus, alcoholic liquor not for human consumption or industrial alcohol or non potable alcohol would be subject to GST laws only. According to the Allahabad High Court this intent has been expressed through Section 174 (1) (i) of the U.P. Goods and Services Tax Act, 2017. Section 174 (1) (i) of the U.P.Goods and Services Tax Act, 2017 reads as follows: "174. (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act: (i) The Uttar Pradesh Value Added Tax Act, 2008, except in respect of goods included in Entry 54 of the State List of the Seventh Schedule to the Constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the petitioners had made it very clear that their challenge to the Second Amendment Act is not on the ground of arbitrariness or manifest arbitrariness; it is on the ground of lack of legislative competence. Section 84 A of the Gujarat Value Added Tax Act, 2003 is extracted as under: "84A. Exclusion of period in some cases.-(1) Notwithstanding anything contained in this Act, an issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal or the High Court or the Supreme Court against such decision of the appellate authority or the Appellate Tribunal or the High Court is pending, the period spent between the date of the decision of the appellate authority and that of the Appellate Tribunal or the date of decision of the Appellate Tribunal and that of the High Court or the date of the decision of the High Court and that of the Supreme Court shall be excluded in computing the period referred to in section 34 or section 35. (2) Notwithstanding anything contained in this Act, if any decision or order under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article 246A of the Constitution was inserted by the 101st Constitution Amendment Act with the sole or rather the precise object of subsuming multiple indirect taxes and to confer concurrent power to the Parliament and State Legislature to impose "goods and services tax" in accordance with the recommendations of the Goods and Services Tax Council statute under article 279A of the Constitution of India. The very object of such large scale reform was to replace number of indirect taxes being levied by the Union and the State Governments and to remove the cascading effect of taxes and provide for a common national market for goods and services. This is apparent from the statement of objects and reasons referred to by the Supreme Court in Mohit Mineral Pvt. Ltd. [2018] 58 GSTR 1 (SC) : [2019] 2 SCC 599. 92. Further section 18 to the Constitution Amendment Act provides for compensation to the States for the loss of revenue arising on account of the implementation of the goods and services tax for a period of five years. Thus the entire scheme of the Constitution Amendment Act recognizes imposition of only "goods and services tax" under article 246A of the Constitution of India. The ph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islation by the Parliament. 106. Let us now deal with Section 19 of the Constitution Amendment Act, which reads as under: 19. Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services 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. 107. Section 19 starts with a non-obstante clause. It says that notwithstanding anything in the Constitution Amendment Act, any provision of any law relating to tax on goods or services or on both in force in any State immediately before commencement of the Constitution Amendment Act, which is inconsistent with the provisions of the Constitution as amended by the Constitution Amendment 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. 108. Thus, the purpose of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions municipalities and municipal administration were brought under the umbrella of the Constitution. Article 243 ZF provides for continuance of existing laws and municipalities. This provision is pari materia to Section 19 of the Constitution Amendment Act. Article 243 ZF reads as under: 243 ZF.Continuance of existing laws and Municipalities:- Notwithstanding anything in this Part, any provision of any law relating to Municipalities in force in a State immediately before the commencement of the Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistent with the provisions of this Part, shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until the expiration of one year from such commencement, whichever is earlier: Provided that all the Municipalities existing immediately before such commencement shall continue till the expiration of their duration, unless sooner dissolved by a resolution passed to that effect by the Legislative Assembly of that State or, in the case of a State having a Legislative Council, by each house of the Legislature of that State. 111. As per this Article, notwithstanding anyt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Part IXA of the Constitution. 114. On the above analysis we have no hesitation in holding that Section 19 of the Constitution Amendment Act cannot be understood or cannot be construed as a source of legislative power. It is also not a saving provision in respect of suspending legislative competence to amend the VAT Act. This aspect was gone into by the Gujarat High Court in Reliance Industries Limited (2 supra) wherein it has been held as follows: 79.5. Section 19 of the Constitution (One Hundred and First) Amendment Act, 2016 can also not be a source of power to amend the State VAT laws. First, the power to amend under Section 19 is only for a period of one year from the commencement of the Amendment Act. 115. Even in Sheen Golden Jewels (India) Pvt. Limited (7 supra) relied upon by the State, learned single judge of the Kerala High Court held as follows: 141. Now, let us examine both Section 19 of the CA Act and Section 174 of the KSGST Act. Section 19 mandates that any inconsistent law relating to tax on goods and services in force in any State before 16.09.2016 (the commencement of the CA Act) shall continue to be in force "until amended or repealed by a competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to repeal such inconsistent laws. For this a window period of one year was given. If the States did neither, those inconsistent laws would then automatically stand repealed. 117. Therefore, from the above analysis we can safely conclude that Section 19 of the Constitution Amendment Act is not a source of power to enable the State Legislature to enact the Second Amendment Act, which is clearly inconsistent with the Constitution Amendment Act. 118. We have already noted that the Constitution Amendment Act, more particularly Sections 1 to 11 and 13 to 20, came into force on and from 16.09.2016. Thereafter Parliament enacted the CGST Act and other related enactments, most provisions of such enactments having come into force on and from 01.07.2017. State of Telangana also enacted the TGST Act. While majority of the sections came into force on 22.06.2017, Section 174 of the TGST Act which provides for repeal and saving came into force on and from 01.07.2017. Section 174 of the TGST Act reads as under: "174. Repeal And Saving:- (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, (i) The Telangana Value Added Tax Act, 2005 (Act 5 of 2005); e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be levied or imposed as if these Acts had not been so amended or repealed; (f) affect any proceedings including that relating to an appeal, revision, review or reference, instituted before, on or after the appointed day under the said amended Acts or repealed Acts and such proceedings shall be continued under the said amended Acts or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed. (3) The mention of the particular matters referred to in section 173 and sub-section (1) shall not be held to prejudice or affect the general application of section 8, 8A, 9 and 19 of the Telangana General Clauses Act, 1891 (Act 1 of 1891) with regard to the effect of repeal". 119. Thus, as per Section 174 (1) (i) the VAT Act stood repealed with effect from 01.07.2017 except in respect of goods included in Entry 54 of the State List in the Seventh Schedule. When we refer to Entry 54 of the State List i.e., List II it means the entry as it stood on 01.07.2017. We have already noticed that post the Constitution Amendment Act, Entry 54 of List II has been substituted whereafter the field of legislation under the said entry is confined only to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Section 174 of the TGST Act has repealed amongst other enactments the VAT Act with effect from 01.07.2017 except in respect of goods covered by the substituted Entry 54 of List II. Thus Section 174 of the TGST Act is in consonance with Section 19 of the Constitution Amendment Act. The above position only supports the case of the petitioners that the State was denuded of its competence to legislate on GST after 16.09.2016 and certainly after 01.07.2017. 123. Repeal of an enactment would mean that such an enactment is erased from the statute book; it would no longer be in existence. This aspect was gone into by the Gujarat High Court in Reliance Industries Limited (2 supra). It has been held as follows: "68. Effect of repeal at common law-Repeal obliterates the statute as if it has never been enacted: 68.1 Under the common law, a statute after its repeal is completely obliterated as if it has never been enacted, except as to the transactions past and closed. 68.2 Crates on Statue Law, 7th Edition, at pages 411-412 states the principle as under: "When an Act of Parliament is repealed, said Lord Tenterden in Surtees v. Ellison 1829 9 (B&C) 750, 752; 7 L.J.K.B. 335, it must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68.5 Justice G.P.Singh in his Principles of Statutory Interpretation, 12th Edition, 2010, while examining the consequences of repeal has stated as follows (at page 695): "Under the common law rule the consequences of repeal of a statute are very drastic. Except as to transactions past and closed, a statute after its repeal is as completely obliterated as if it had never been enacted. The effect is to destroy all inchoate rights and all causes of action that may have arisen under the repealed statute. Therefore, leaving aside the cases where proceedings were commenced, prosecuted and brought to a finality before the repeal no proceeding under the repealed statute can be commenced or continued after the repeal." 68.6 The apex court in Mohan Raj v. Dimbeswari Saikia, MANU/SC/8641/2006 : AIR 2007 SC 232, has quoted the above passage with approval in paragraph 23 which is quoted below: "23. It is now well settled that such Repealing Act shall be construed to have not taken away the accrued right of a person. In G.P.Singh's Principles of Statutory Interpretation, (10th Edn.) 2006 at page 631, it is stated: "Under the common law rule the consequences of repeal of a statute are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 126. Section 8 of the Telangana General Clauses Act, 1891 is similar to Section 6 of the General Clauses Act, 1897. 127. Section 8 A of the Telangana General Clauses Act, 1891 says that where any act repeals any enactment by which the text of any previous enactment was amended by express omission, insertion or substitution of any matter then unless a different intention appears, the repeal shall not affect continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 128. Article 367 of the Constitution of India speaks about the interpretation of the Constitution of India. Clause (I) of Article 367 is relevant. It says that unless the context otherwise requires, the General Clauses Act, 1897, subject to any adaptations and modifications that may be made therein under Article 372, shall apply for the interpretation of the Constitution as it applies for the interpretation of an Act of the Legislature. 129. Gujarat High Court in Reliance Industries Limited (2 supra) examined this aspect as well and held that General Clauses Act, 1897 applies only for interpretation of the Constitution but in respect of other matters, such as, savi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n may not apply by virtue of article 367. 71.4 Further, section 6 applies only to repeal of an enactment. Enactment is defined under section 3(19) of the General Clauses Act to include regulation or any provision contained in any Act or regulation. However, Constitution is not an enactment. The Constitution is supreme and is, in fact, the foundation of all the enactment. This has been observed by the Law Commission in its 60th Report on the General Clauses Act 1897 in the context of section 8 (construction of references of repealed enactment). The relevant extract of the report is as under: "1.30. Effect of section 8 on article 367.-Will section 8 of the General Clauses Act, which provides that when an enactment is repealed and re-enacted, references to the old enactment will be construed as references to that, re-enacted one, make any difference? We do not think so. It should be noted that the words 'unless the context otherwise requires' (in article 367) mean that the General Clauses Act, section 8, is to be excluded. Even by its terms, section 8 of the General Clauses Act will not apply to the Constitution, because expression 'enactment' (which occurs in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd from 16.09.2016. Section 19 of the Constitution Amendment Act provided for a window period to the States to remove any inconsistent enactments by way of amendment or repeal or until expiration of one year from such commencement whichever was earlier. Telangana Ordinance No.2 of 2017 was promulgated by the Governor of Telangana on 17.06.2017 to further amend the VAT Act. Though the Ordinance was promulgated after coming into force of the Constitution Amendment Act on 16.09.2016, it was so promulgated within the window period of one year as provided by Section 19 of the Constitution Amendment Act. At this stage we may mention that following the Constitution Amendment Act, State of Telangana enacted the TGST Act with effect from 01.07.2017. 134. Before we deal with the Telangana Ordinance No.2 of 2017, we may note that power of the Governor to promulgate ordinance is traceable to Article 213 of the Constitution of India. Article 213 provides as follows: "213. Power of Governor to promulgate Ordinances during recess of Legislature.-(1) If at any time, except when the Legislative Assembly of a State is in session, or where there is a Legislative Council in a State, except when bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuance of instructions from the President shall be deemed to be an Act of the Legislature of the State which has been reserved for the consideration of the President and assented to by him." 135. While clause (1) provides that if the Governor is satisfied when the Legislative Assembly of a State is not in session or where there is a Legislative Council in a State, the same is not in session, that circumstances exist which call for immediate action, he may promulgate such Ordinance. Clause (2) clarifies that an Ordinance so promulgated under Article 213 of the Constitution shall have the same force and effect as an Act of the Legislature of the State assented to by the Governor. However, every such Ordinance shall be laid before the Legislature and shall cease to operate at the expiration of six weeks from the reassembly of the Legislature. Clause (3) says that if an Ordinance makes any provision which would not be valid if enacted as an Act of the Legislature assented to by the Governor, it shall be void. 136. As noticed above, the Ordinance was promulgated by the Governor on 17.06.2017. As per preamble to the Ordinance, it is stated that Government of India had enacted the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed in the Telangana Gazette on 02.12.2017, was deemed to have come into force with effect from 17.06.2017 i.e. the date when the Ordinance was promulgated. This is because legislative competence cannot flow from an earlier legislation, be it an ordinance or an enactment. Legislative competence must be traceable to the Constitution. Therefore, no reliance can be placed on the Ordinance in support of the contention that the Second Amendment Act had derived competence from the Ordinance since it was a continuation of the law and had come into force from the date of promulgamation of the Ordinance. Such a line of reasoning, in our considered view, has no legal substance. Therefore, it is immaterial that the Ordinance was not challenged in Court. 138. That apart, the ostensible objective of the Ordinance as could be discerned from the preamble is to save any investigation, assessment, recovery of dues, legal proceedings etc., pending on the date of coming into force of the Constitution Amendment Act which is perfectly understandable and valid. But that does not mean that limitation across the board could be extended by way of amendment to initiate fresh proceedings, such as, fresh rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depend on its present legislative power and not on what it possessed at the period of time when the enactment would be in operation. 142. Insofar the decisions relied upon by the learned Advocate General are concerned, we have already discussed why those would not be applicable to the facts and grounds of challenge made in this bunch of writ petitions. 143. Finally we may also look into the intention of the Parliament in enacting the Constitution Amendment Act. This is because it would give us a clear idea as to why the Constitution Amendment Act was brought about and why the Second Amendment Act cannot be sustained being completely inconsistent with the scheme of the Constitution Amendment Act and being denuded of its legislative competence. In Baiju A.A. (10 supra), Kerala High Court held as follows: 20. There is yet another aspect of the matter. It is trite that when a Court judges the constitutionality of a legislative enactment it should try to sustain the validity of the enactment to the extent possible and it should strike down the law only when it is impossible to sustain it, State of Bihar v. Bihar Distillery - [MANU/SC/0354/1997 : JT (1996) 10 SC 854]. At the same ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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