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2020 (3) TMI 828 - HC - VAT and Sales TaxValuation - disallowance of deduction of target based discount - Vires of Section 9 (5) of the Jharkhand Value Added Tax Act, 2005 - amendment made in the year 2011 in the section - validity of retrospective effect given to this provision with effect from 1.4.2010 - Jharkhand VAT Act - HELD THAT:- The submission of learned counsel for the State that in the matters of economic concerns, the Court should not generally interfere, as the laws relating to economic activities should be viewed with greater latitude than laws touching civil rights, and the State must be left with wide latitude in devising ways and means of fiscal or regulatory measures, does not apply in the present case, as in this case, the constitutionality of Section 9(5) of the JVAT Act and the legislative competence of State Legislature in bringing sub-Section (5) in Section 9 of the JVAT Act, is challenged, on the ground that the same is beyond the legislative competence of the State, as in garb of Entry-54 List-II of Seventh Schedule of the Constitution of India, any transaction could not be added in Article 366(29A) of the Constitution of India, treating the same to be sale by a deeming fiction, even though, it is not a sale, within the meaning of Sale of Goods Act, or does not fall within the Article 366(29A) of the Constitution of India. The law is well settled in this regard right from Gannon Dunkerley’s case [ 1958 (4) TMI 42 - SUPREME COURT ], in the year 1959, to Bharat Sanchar Nigam’s case [ 2006 (3) TMI 1 - SUPREME COURT ], and Rajasthan Chemists Association’s case [ 2006 (7) TMI 17 - SUPREME COURT ], in the year 2006, wherein the Hon’ble Apex Court has dealt with the several earlier decisions and has come to the conclusion that in order to levy tax on sale, the transactions must fall within any of the clauses of Article 366 (29A) of the Constitution of India, or within the meaning of the Sales of Goods Act, for the purpose of levy of sales tax. In absence thereof, the Provincial Legislature cannot, in the purported exercise of its power to levy tax on sales or purchases of goods, tax even such transactions, which are not sales or purchases, by merely enacting that they shall be deemed to be sales or purchases by the dealers. In the present case, we find that the State Government has exceeded its legislative competence and has in that effort, treated the trade discounts / incentives as taxable transactions, treating them to be sale by a deeming fiction by bringing sub-Section (5) in Section 9 of the JVAT Act, and has thus sought to make such transactions taxable, which are in addition to the transactions described under Article 366(29A) of the Constitution of India, which the State Government could not do, and admittedly, prior to bringing of Section 9(5) of the JVAT Act, into the Statute Book, such transactions were never being subjected to tax under the JVAT Act. Thus, by bringing Section 9(5) in the JVAT Act into the Statute Book, the dealers have been put to a disadvantageous position, which was not there, prior to the amendment made in the year 2011, and this putting the dealers into a disadvantageous position was not within the legislative competence of the State Legislature - Though it is well settled that this Court should not interfere into the fiscal legislations, and the laws, relating to economic activities should be viewed with greater latitude than the laws touching civil rights, and even if there are possibilities of abuse, that cannot in itself be a ground for invalidating the legislation, but since the State action is not within the competence of the State Legislature, this Court has no option, but to strike down the action of the State Legislature, which was beyond its legislative competence. There are no difficulty in holding that Section 9(5) of the JVAT Act, brought into force by amendment in the JVAT Act in the year 2011, is beyond the legislative competence of the State Legislature, and the same is ultra vires Article 246(1) of the Constitution of India, and cannot be sustained in the eyes of law - Accordingly, sub-Section (5) of Section 9 of the JVAT Act, as it stood with effect from 1.4.2010 to 30.06.2017 in the Statute Book, is hereby, held to be ultra vires, and accordingly, it has to be treated as if never existing in the Statute Book. Petition allowed.
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