BRIEF ANALYSIS OF JUDGEMENT OF HON'BLE GUJARAT HIGH COURT IN CASE OF RELIANCE INDUSTRIES LTD VS STATE OF GUJARAT

[Rachit Agarwal]

Objective of Filing Writ

The writ applicant seeks to challenge the constitutional validity of Section 84A of the GVAT Act as well as the revision notice dated 01.09.2018

Factual Summary

By an order dated 16.03.2018, this Court, while allowing the Special Civil Application No.22283 of 2018 [RELIANCE INDUSTRIES LTD. VERSUS STATE OF GUJARAT - 2018 (5) TMI 1395 - GUJARAT HIGH COURT] filed by the petitioner, quashed and set aside the aforesaid revision notice issued by the department under Section 75 of the VAT Act on the ground that the said revision notice cannot be sustained being beyond the period of limitation provided under Section 75 of the VAT Act.

By virtue of the VAT Amendment Act, 2018, Section 84A came to be added in the VAT Act to be operative retrospectively w.e.f 01.04.2006, inter alia, providing for the exclusion of the period spent between the date of the decision of the appellate tribunal and that of the High Court as well as the Supreme Court in computing the period of limitation, referred to in Section 75 of the VAT Act. In the present case, the period commencing from the date of the decision of this Court dated 18.01.2013 rendered against the revenue upto the date of the decision of the Supreme Court i.e., 22.09.2017 being in favour of the revenue, is sought to be excluded by virtue of the above referred retrospective amendment to enable the department to issue a notice for revision for revising the assessment made for the year 2008-09 and thereby removing the basis of the later judgment dated 16.03.2018 of this Court (Sr. No.10 above).

In view of the above, on 01.09.2018, fresh notice for revision came to be issued by the Addl. Commissioner of Commercial Tax to the Petitioner on the basis of the above referred newly added Section 84A

Hon'ble Court Pronouncement

Para 74-  STATE OF RAJASTHAN VERSUS MANGILAL PINDWAL-1996 (7) TMI 560 - SUPREME COURT, the Supreme Court held that retrospective amendments can be made to the repealed statutes in respect of the transactions past and closed. The above referred cases, however, are not concerned with the competence of the legislature to enact retrospective laws, but only with the issue as to whether the amendments can be made to the repealed  laws.

Para 75- Repeal is effected by the State GST Acts. Such Acts provide for savings of the pending proceedings. Thus, assessments can be initiated, continued and concluded in pursuance of such saving clause contained in the respective GST laws

Para 76- Both the State legislature and the Parliament have simultaneous power to make laws relating to goods and services tax under Article 246A

Para 84- The objective of the One Hundred and first amendment to the Constitution of India vide the Constitution (One Hundred And Firsts Amendment) Act, 2016 was to bring into force a uniform law for levy of tax on “Goods and Services” and not separate laws with respect to either Goods and Services

Para 92- The Supreme Court in the case of UNION OF INDIA & ANR. VERSUS MOHIT MINERAL PVT. LTD. AND VICE-VERSA [2018 (10) TMI 200 - SUPREME COURT], the challenge was to the imposition of the compensation cess under the Goods & Services Tax (Compensation to States) Act, 2017 on the ground of lack legislative competence. Mr. Soparkar invited our attention to few distinguishing features of the said case with the facts of the present case. In our opinion, the distinguishing features are quite relevant.

Para 95- State Legislature could not have amended the State VAT Act by enacting Section 84A which is sought to be protected by virtue of Article 246A of the Constitution. Relied on Kerala High Court in the case of M/s. Opac Engineering Pvt. Ltd. vs. The State Tax Officer (Works Contract) & Ors [2019 (12) TMI 1292 - KERALA HIGH COURT]

Para 109- Tests to ascertain the legislative competence of the State Legislature to enact a provision of law.- First, the Court should examine whether the Act is a law with respect to a topic assigned to the particular legislature which enacted it. Thereafter, the Court should consider whether in the case of an Act passed by the legislature of a State, its operation extends beyond the boundaries of the State. If these two tests are satisfied, then the Court should in the lists consider or rather ascertain if there is anything in any other part of the Constitution which places any fetter on the legislative powers of such legislature. The mandate of the Supreme Court is very clear that the impugned law should pass of the above referred three tests.- Relied on of Gullapalli Nageswara Rao and others vs. A.P. State Road Transport Corporation reported in 1958 (11) TMI 28 - SUPREME COURT, the case of State of Gujarat vs. Ramanlal Sankalchand and Co. reported in 1963 (11) TMI 73 - GUJARAT HIGH COURT, 

Para 110- The contention of Respondent that Article 54  in Lists II of the Seventh Schedule to the Constitution as amended should be ignored could not be upheld. The tax demand on the writ applicants proposed be made by disallowance of the input tax credit is on the sales made by the writ applicants which are  indisputably of goods  not covered under Entry  54 of List II of the Seventh Schedule   to the Constitution of India.

Para 114- EQUITY, MORALITY AND FAIRNESS- Responded tried to defend Section 84A of the VAT Act on the ground that the tax dues which were morally due to the State are sought to be recovered. State was remediless in a situation where there was judgment of this High Court operating in favour of the dealer at the time of assessment which was subsequently reversed by the Supreme Court. Such stance of the State is not tenable in law. It is well known that motive or intention for making an Act or issuing an ordinance is not justifiable before a court of law. Relied on- Supreme Court. In the case of Asst. Commissioner, Commercial Tax vs. LIS (Registered), 2017 (12) TMI 1285 - SUPREME COURT, Nestle India Ltd vs. Deputy Commissioner of Commercial  Tax, 2015 (7) TMI 387 - GUJARAT HIGH COURT

Para 129- Retrospective amendment may be passed with or without validation. Reference may be made to following Acts passed by The Gujarat State Legislature which are retrospective amendments with validation- Section 8 of the Bombay Motor Vehicle Tax (Gujarat Amendment and Validation) Act, 2002 , Section 5 of the Gujarat Sales Tax (Amendment and Validation) Act, 2002 (Gujarat Act, No. 15 of 2002), Section 4 of the Gujarat Purchase Tax on Sugarcane Act, 1989.

Para 133- Amending Act specifically provides for validation of various aspects (namely assessment, re- assessment, collection etc.) notwithstanding any judgement, decree or order of any court, Tribunal or authority to the contrary.

Para 143- Section 84A of the Gujarat Value Added Tax (Amendment) Act, 2018 is invalid on the ground that the same is beyond the legislative competence of the State Legislature.

Para 160- Legislation has the necessary competence to frame a law and the law so framed is not violative of the fundamental rights enshrined in the constitution or any of the constitutional provision, the Court would not strike down the statute merely on the perception that the same is harsh or unjust. Relied on Supreme Court in case of R.K.Garg vs. Union of India and ors [1981 (11) TMI 57 - SUPREME COURT]

Para 161- The parliament has wide powers to frame the laws including taxing statutes with retrospective effect. However, the Courts have recognized certain inherent limitations in framing retrospective tax legislations. Relied on In Tata Motors Ltd vs. State of Maharashtra and ors reported 2004 (5) TMI 292 - SUPREME COURT

Para 165- If unlimited time period is available to the Revenue for assessment/re- assessment/revision in any case based on a decision rendered in the case of any other dealer the same would lead to an irreparable situation and, in such circumstances, it renders Section 84A manifestly arbitrary and unreasonable. Relied on Kruse vs. Johnson (1895-90) All ER 105, Mafatlal Industries Ltd. vs. Union of India, (1996 (12) TMI 50 - SUPREME COURT, Supreme Court in a Constitution Bench judgment in Commissioner of Income Tax (Central) - I, New Delhi v. Vatika Township Private Limited [2014 (9) TMI 576 - SUPREME COURT] , Supreme Court, in the case of Jayam and Co vs. Assistant Commissioner and another reported in [2016 (9) TMI 408 - SUPREME COURT]

Hon'ble Court Final Conclusions-

1. Section 84A of the Gujarat VAT Act is ultra vires and beyond the legislative competence of the State Legislature.

2. Section 84A of the Gujarat VAT Act is manifestly arbitrary, unreasonable and therefore, violative of the Articles 14 and 19(1)(g) of the Constitution of India.

3. Section 84A of the Gujarat VAT Act is not a validating Act.