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TMI Blog2022 (8) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... the operation of the Finance Act 11 of 2017? - HELD THAT:- The long and short of the conclusion is the substituted words six years , being operational in the Statute Book with effect from 01.04.2017, the Assessment Year 2010-11 is excluded from the reassessment enquiry by 31.03.2017. The fundamental rule in any interpretation is that if the legislative expression is unambiguous; the Courts employ the golden rule of interpretation and give the meaning applicable to the words employed by the State Legislature. It is clear to one's mind and interpretation that the amendment to Section 25(1) of KVAT Act substituting the words five years to six years is prospective. Competence of the State Legislature to amend the Kerala Value Added Tax Act through Finance Act 5/2018 - HELD THAT:- Since the legislative competence is traceable to Article 246A, which speaks about goods supply of goods or services, the argument canvassed is that under Article 246A, the State Legislature has broader power than what it had before 16.09.2016. The repeal of the KVAT Act shall not be understood as taking away the original power of the State Legislature to make amendments to the repealed Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 020, 742/2020, 785/2020, 877/2020, 892/2020, 912/2020, 986/2020, 1019/2020, 1528/2020, 1558/2020, 3/2021, 7/2021, 8/2021, 10/2021, 48/2021, 51/2021, 52/2021, 75/2021, 94/2021, 98/2021, 99/2021, 117/2021, 142/2021, 143/2021, 245/2021, 284/2021, 1056/2021 State Of Kerala, The State Tax Officer, (Works Contract), Assistant Commissioner, Now Designated As Assistant Commissioner Of State Tax, Special Circle II, State Goods And Services Tax Department Sales Tax, Deputy Commissioner, Special Circle-1, State Goods And Service Tax Department, Ernakulam, The Commercial Tax Officer (Works Contract) Department of Commercial Taxes, Ernakulam The Deputy Commissioner (Appeals) Department Of Commercial Taxes, Perumanoor, The Secretary To Government, Taxes Department, Government Secretariat, Thiruvananthapuram, Versus M/s. Chakolas Habitat Bay Side, M/s. Interdec, P.S. Kannan, Proprietor, M/s. Sachindra Plymer Industries, Krishna Metals, Basil Engineering Contractors, S.B. Tech Constructions, Patharam Service Co-Operative Bank Ltd. Jinesh A.M, M/s. Anthikkat Agencies, Sudhakaran Nair And Co Pvt Ltd, M/s. V.C. Constructions, T.O. Ittoop and Associates, K.N. Vijayan, S/o. Narayanan, Proprietor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to Section 25(1) of the KVAT Act through Finance Act 5/2018 is without legislative competence. Hence, the notices issued under Section 25(1) of the KVAT Act are illegal and without authority. The common judgment disposes of the writ petitions. The operative portion reads thus: (i) the assessments in respect of which the period of limitation for re-opening under Section 25 of the KVAT Act was to expire by 31.03.2017 can be re-opened up to 31.03.2018 by virtue of the amendment to the third proviso to Section 25 (1) vide Kerala Finance Act, 2017. (ii) the assessments in respect of which the period of limitation for re-opening under Section 25 of the KVAT Act was to expire by 31.03.2018 cannot be re-opened up to 31.03.2019 or thereafter, by relying on the amendments introduced through the Kerala Finance Act, 2018 since the State Legislature did not have the power to amend the KVAT Act after the CAA 2016, and the repeal of the KVAT Act pursuant thereto, on 22.06.2017. (iii) The legality of the orders/notices impugned in these writ petitions shall stand determined by the declarations in (i) and (ii) above. The judgment impugned accepted the prayer made on the retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are relied on by the learned counsel for the appellants. The Indian Income-tax Act, 11 of 1922, has recognised from the beginning that, for various reasons, the income of an assessee during a particular year may escape assessment altogether or that an assessment made of it may not bring the whole of the assessable income under tax or may not charge the proper amount of tax on it and it has therefore contained in S.34 a provision for making assessments beyond the normal time or re-opening assessments. The section has been amended from time to time and immediately before the amending Act of 1948. *** *** *** 14 As already stated, amendments of the Income-tax Act were made by Ss.2 to 12 of Act 48 of 1948. That Act itself came into force on 8-9-1948 but, by S.1(2), it prescribed the dates on which certain of its provisions and certain amendments made to the Income-tax Act were to come into force. Section 1(2) is in the following terms: Sections 3 to 12 shall be deemed to have come into force on 30-3-1948 and the amendment made in the Income-tax Act, 1922 (11 of 1922) by 5.2 shall be deemed to be operative so as to apply in relation to all assessments subsequent to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed income and not included a provision as to the period up to which computed from the end of the assessment year concerned, the right could be exercised, a question might conceivably arise as to whether it was intended to be retrospective in operation, but in view of its clear terms, the section gives rise to no such question. The plain effect of the substitution of the new S.34 with effect from 30-3-1948 is that from that date the Income-tax Act is to be read as including the new section as a part thereof and if it is to be so read, the further effect of the express language of the section is that so far as cases coming within cl. (a) of sub-S.(1) are concerned, all assessment years ending within eight years from 30-3-1948 and from subsequent dates, are within its purview and it will apply to them, provided the notice contemplated is given within such eight years. *** *** *** 23. In the view I have taken of S.34, no question of retrospective operation, as a question of interpretation, arises in the present case. The term 'retrospective operation', as has been observed, is ambiguous, because it is applied both to the fact that a particular enactment opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued on April 30, 1954 long before which date the assessment had become final and in respect of which reassessment proceedings had become time-barred. The short answer to the argument based on S. 31 is that the notice in the present case was not issued in accordance with sub-section (1) of S. 34, and the first part of S. 31 requires that the notice must be so issued before the second part thereof can give any protection to it. *** *** *** Per Hidayatullah, J. 93. The Amending Act of 1948 was passed on September 8, 1948, and came into force from March 30, 1948. In some cases it has been held that its retrospectivity cannot be carried further than March 30, 1948. That is true in one sense but not in the sense how its provisions were to work in relation to the assessees. *** *** *** That liability to the State is independent of any consideration of time and, in the absence of any provision restricting action by a time limit, it can be enforced at any time. What the law does is to prevent harassment of assessees to the end of time by prescribing a limit of time for its own officers to take action. This limit of time is binding upon the (officers, but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure, shall have a retrospective operation unless such a construction appears very clearly in the terms of the Act or arises by necessary and distinct implication. Put differently, a statute is not to be construed to have a greater retrospective operation than its language renders necessary and it is submitted that the general rule 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 effect is not to be given to them unless by express words or necessary implication, it appears that this was the Intention of the legislature and it is a corollary of this general presumption against retrospection that, even when a statute is intended to be to some extent retrospective, it is not to be construed as having a greater retrospective effect than its language renders necessary . (Halsbury's Laws of England, Vol. 36, Third Edn., p. 423 and p. 426). *** *** *** The principle is simply this. A statute which is not declaratory of a pre-existing law nor a matter relating to procedure but affects vested rights cannot be given a greater retrospective effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terfere with the impugned judgments on the basis of the amendment made subsequent to the judgment. Though the legislature had the competence to extend the period of limitation with retrospective effect, the same was not done. We cannot but observe that even if such an exercise was carried out, necessarily there should have been a validation 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 S.25 (1), substituting the period of limitation from five to six years. is not in line with the well-established principles of interpretation of a provision on retrospective operation of vested right or accrued right, whether the limitation in the present scenario is procedural or substantive, and commends to the court to tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh sometimes, h both may be the same. The proviso now added to sub-section (2) of Section 21 of the Act does not put any embargo on the Commissioner of Sales Tax not to reopen the assessment if the period, as prescribed earlier, had expired before the proviso came into operation. One has to see the language of the provision. If it is clear, it has to be given its full effect. To reassure oneself, one may go into the intention of the legislature in enacting such provision. The date of commencement of the proviso to Section 21(2) of the Act does not control its retrospective operation. Earlier the assessment/reassessment could have been completed within four years of that particular assessment year and now by the amendment adding the proviso to Section 21(2) of the Act it is eight years. The only safeguard being that it is after the satisfaction of the Commissioner of Sales Tax. The proviso is operative from 19-2-1991 and a bare reading of the proviso shows that the operation of this proviso relates and encompasses back to the previous eight assessment years. We need not refer to the provisions of the Income Tax Act to interpret the proviso to Section 21(2) the language, is which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power is considered and decided in the negative by relying on a principle laid down in the background of the power of a functionary under the Punjab General Sales Tax Act. In conclusion, it is argued, once the distinguishing features of the Shreyans Industries Ltd case in fact and law are appreciated, the conclusion on the vested and accrued right is erroneous. 7. Adverting to the challenge to the Amendment made through Finance Act 5/2018 to the third proviso of Section 25(1) of the KVAT Act, he relies on the judgment of a learned Single Judge in Sheen Golden Jewels (India) Pvt. Ltd. v. State Tax Officer 2019 (1) KLT OnLine 3302 wherein the saving provision, section 174 of Kerala State Goods and Services Tax Act 2017, has been upheld. It is argued that the Constitution 101st Amendment has not taken away the power of the State Legislature to amend the KVAT Act. The entries on the subject are more comprehensive, and the conclusion, viz. absence of legislative power to amend the KVAT Act, is erroneous. Therefore, the amendment through Finance Act 5/2018 to the third proviso is valid and within the competence of the State Legislature. 8. Advocates A Kumar, Alan Dev for Aji V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be different dates for commencement of the Act and the operation of the Act. In the amendment carried out by Finance Act 11/2017, the commencement and operation of the Act could be the same, but two different dates are incorporated. [See Jyothi Traders case: Commencement of the Act can be different than the operation of the Act though sometimes both may be the same] It is for the Legislature to determine, and the Legislature has determined the commencement and operation as 01.04.2017 for the amendment made to Section 25(1) of KVAT Act by the Finance Act 11/2017. (vi) The Calcutta Discount Co. Ltd case (supra) is appreciated in the background facts and dates noted in the judgment. The judgment is distinguishable, and the amending act in the said reported judgment provided the date of coming into operation of the amended provision as 30.03.1948. (vii) The amendment to Section 25(1) substituting five years to six years is substantive. The limitation is usually a procedural law, and retrospective operation is through strict construction, and the expression of the legislature must be unambiguous. (viii) The dealers/petitioners cannot be subjected to reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Gujarat 2020 (4) TMI 499 (viii) M/s. Sri Sri Engineering Works and others v. The Deputy Commissioner (CT), Begumpet Division, Hyderabad and others 2022 (7) TMI 420 The Counsel pray for dismissing the appeals. 9. We have noted the rival submissions made at the Bar, perused the record and the citations relied on by both sides. We would, before proceeding with our discussion, refer to the prefatory paragraph, which is apt to the case on hand in the Calcutta Discount Co. Ltd case, which reads as follows: 1. This appeal involves a short and simple point, but it was sought to be presented as if it involved an Intricate question of interpretation of statutes and also a profound question of constitutional law. In my opinion, whatever the true answer to the question may be, there is no room for either intricacy or profoundity. The counsel on both sides made arguments from more than one perspective, in support of their respective cases, to some extent, expanding the area of consideration by this Court. But, we are convinced that the learned Single Judge has framed correct points for deliberation and answered as noted above. We prefer to consider in the batch of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her steps that remain to be taken under the repealed statute were the steps necessary for acquiring a right or incurring liability or whether these steps were required merely for enforcing a right or liability that had come into existence. Unless there are words in the Statutes sufficient to show the intention of the legislature to affect existing rights, the legislation is deemed to be prospective only. As a logical corollary from the general rule that retrospective operation is not taken to be intended, unless that intention is manifested by expressed words or necessary implication, there is a subordinate rule to the effect that a Statute or a section in it is not to be construed to have a larger retrospective operation than its language renders such interpretation necessary. [See Gardner Co. v. Cone (1928) All ER Rep 458; S.S. Gadgil v. Lal Co. AIR 1965 SC 171, pg.177; K.S. Paripoornan v. State of Kerala (1992) 1 SCC 684] (viii) Lastly, close attention must be paid to the language of the statutory provision for determining the scope of the retrospectivity intended by Parliament. [See Union of India v. Raghubir Singh 1989 (2) SCC 754; Sangam Spinners v. Regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in Act 11/2017 should not be read in isolation of the words saved as otherwise provided in this Act. Because of the plain language employed in Section 1 of Finance Act 11/2017, it would be clear that the Legislature, in its wisdom, employed the commencement and operation of substituted words with effect from 01.04.2017. The meaning now given by the appellants from the sequence of events noted in the preceding paragraphs and the very will expressed by the State Legislature through categorical words does not admit a meaning or construction canvassed by the appellants. In this context, the words save as provided by this Act means save as otherwise expressly stipulated by the Act. We gather further strength for our view that the amendment to Section 25(1) of the Act is effective from 01.04.2017 from the definite date used, i.e., 03.03.2017 by the State Legislature in the third proviso introduced through Section 6(3) of the Finance Act 11/2017. Therefore, from the very words used by the State Legislature, the State Legislature is conscious of the commencement date and operation date and employed them as intended. 15. The learned Single Judge, while answering point (a), has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econsideration by the Full Bench, we are convinced that the additional grounds now canvassed by keeping in perspective Najeem s case do not change the conclusion arrived at in Najeem s case in our consideration for the reasons we have recorded in the judgment. 17. The next point for consideration arises on the competence of the State Legislature to amend the Kerala Value Added Tax Act through Finance Act 5/2018. Constitution (101 st Amendment) Act 2016 (for consistency CAA ) is in force from 16.09.2016. CAA made a few important changes by way of insertion, repeals, and amendments to a few clauses of the Constitution, including the Sixth and the Seventh Schedules to the Constitution of India. With effect from 22.06.2017, the State of Kerala repealed the KVAT Act and, in its place, legislated Kerala Goods and Services Tax Act. Section 174 of the KGST Act deals with the repeal and savings. The Kerala GST Act has been in force from 23.06.2017 in the State of Kerala. On 31.03.2018, the Finance Act 5/2018 was passed by the Legislative Assembly and received the assent of the Governor of Kerala on the 31 st day of March 2018. Section 10 of Finance Act 5/2018 deals with amendments pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT Act, for all purposes, is repealed, and Section 174 of the KVAT Act cannot be understood in any way as continuing to remain with the State Legislature to make amendments to a repealed Act for all times to come. Once it is an accepted position in the constitutional scheme of things that the Legislature had the competence to enact the KVAT Act upon the amendment of the corresponding Articles and items in the schedule, the State Legislature is without power to legislate or amend or otherwise. The State Legislature, in the scheme of constitutional jurisdiction and separation of powers, cannot be said to derive its legislative power from a saving clause. The State Legislature must have competence on the day on which the Legislature is making the law. It is argued that on 31.03.2018 by referring to Entry in Value Added Tax, the State Legislature does not have competence. 21. The respondents rely on the Constitutional Bench judgment in Hajee Abdul Shakoor and Company v. State of Madras AIR 1964 SC 1729 for the proposition that the State Legislature had lost the power to make amendments to the VAT Act after substitution made to Entry 54 by the CAA, which reads thus: This pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endments effected to Section 25 (1) of the KVAT Act, through the Kerala Finance Act 2017, were before the repeal of the KVAT Act with effect from 22.06.2017. The provision as it stood then, 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 are opening 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bring about a change in the system of indirect taxation in our country through the introduction of a Goods and Service Tax, and the phasing out of the multitude of indirect tax levies, including 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 Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since the power to amend is a legislative power, the State Legislature lacked the legislative competence to amend Section 25 of the KVAT Act after the repeal of KVAT Act on June 22, 2017. Therefore, the assessments for the FY 2011-12 could not have been re-opened after March 31, 2017 (till March 31, 2018) as provided by the Kerala Financial Act, 2018. The existence of legislative competence is fundamental to the exercise of legislative functions and necessarily includes the power to amend. Prior to the repeal of the KVAT Act and the sunset date under the CAA, the Legislature was competent to amend the KVAT Act. Post repeal of the KVAT the savings clause under the KGST Act cannot be relied upon to make any amendments in the erstwhile VAT laws. The savings clause only saves the executive actions such as the power to issue notices and pass orders under the erstwhile laws but not the power to legislate in respect of the same. Therefore, no amendments whether prospective or retrospective can be made after the concerned erstwhile low has been amended or repealed or if one year has lapsed from the enactment of the CAA. 23. A Division Bench of High Court of Telangana refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special power introduced by Article 246A allows Parliament and the State legislatures to 'simultaneously' make laws. Subsequently, while explaining the 'simultaneous' nature of power held by Parliament and State legislature, it was observed that the power under Article 246A can be exercised simultaneously by the State legislature and Parliament and none hold any 'unilateral or exclusive' legislative power. 25. The learned counsel appearing for respondents argue in a straight and simple way that the new grounds now canvassed to trace competence to amend KVAT Act through Finance Act 5/2018 are considered in detail by the Gujarat and Telangana High Courts. The view has been approved and adopted as one of the reasons for setting aside the legislation impugned before the respective Courts. The Supreme Court in M/s. Mohit Minerals Pvt.Ltd case has referred to the very conclusion now under challenge before this court in the intra-Court appeal. Therefore, any other view on legislative competence to amend the KVAT Act after CAA 10.09.2016 and GST Act 22.06.2017 is impermissible and would be contrary to two persuasive judgments of Gujarat and Telangana High Courts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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