Judgment Update | Amendment to State VAT laws unconstitutional after GST
This is in furtherance of our earlier update NITYA’s Insight | Issue 85 | Judgment Update | Amendment to State VAT laws after repeal of VAT Act is unconstitutional.
In another case of Reliance Industries Limited v. State of Gujarat, 2020-VIL-182-GUJ, the Gujarat High Court has struck down Section 84A of the Gujarat Value Added Tax Act, 2003 (‘GVAT Act’) inserted on April 6, 2018, being unconstitutional.
Brief facts and issue
The issue involved in this case pertained to determination of validity of amendment made to the GVAT Act post introduction of Goods and Services Tax.
In the present case, the Supreme Court decided an issue in favor of the Department in Petitioner’s case for earlier assessment year. Post such decision, the department issued revision notice dated November 6, 2017 to the Petitioner under Section 75 of the GVAT Act for such assessment year.
Notably, under Section 75 of the GVAT Act, limitation period prescribed for issuing the said revision notice was three years from the date of Assessment Order, which lapsed in this case. Accordingly, the Petitioner challenged the revision notice before the High Court. The Court quashed the notice being issued beyond the limitation period.
Thereafter, Section 84A was inserted in the GVAT Act which in effect amended the time period prescribed under Section 75 of the GVAT Act. This amendment was made retrospectively applicable from April 1, 2006. Thus, Section 84A sought to extend the original limitation prescribed under Section 75 for issuing revision notice.
Upon adjudication, the High Court held that Section 84A of the GVAT Act is unconstitutional being beyond the competence of State legislature. For arriving at this conclusion, the Court gave following reasoning:
- After repeal of a statute, it is completely obliterated as if it has never been enacted except for the transactions saved under the relevant saving clause.
- To ensure uniform law all over the country, Article 246A of the Constitution of India (‘CoI’) provides for simultaneous, concurrent and integrated power to the Parliament and the State Legislature to make laws qua The Union or States cannot separately exercise power independent of each other unlike the power given under the ‘Concurrent list’. Therefore, the power to amend any law with respect to levy of tax on the sale or purchase of goods such as GVAT Act was abolished vide 101st Constitutional Amendment Act. Further, the power to amend GVAT Act under Section 19 of the 101st Constitutional Amendment Act is available only for a period of year from the date of commencement of said 101st Constitutional Amendment Act. Notably, insertion of Section 84A in the GVAT Act was made after expiry of such one year period.
- The State GST Acts have repealed their respective VAT Acts and save only pending proceedings. The proceedings already lapsed, have not been saved. Further, it is trite in law that competence to make law for a past period depends on the present legislative power i.e. day on which its exercised.
The Gujarat High Court has correctly struck down Section 84A of the GVAT Act for want of legislative competence. The Court reiterated limited power of State Governments to amend State VAT laws post introduction of GST.
This decision passed by the Gujarat High Court fortifies our views provided in the earlier update concerning the judgment passed