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2022 (12) TMI 1137 - HC - VAT and Sales TaxJurisdiction - Constitutional validity of Section 174(2) of the KSGST Act - Demand / Recovery of VAT after implementation of GST - Scope of saving clause under the GST Act - validity of notices and orders of assessment/penalty - competence of the State Legislature - Revenue, in purported exercise of saving power granted by Section 174(2) of the KSGST Act read with Section 25(1), Section 42(3), or Section 67 of the KVAT Act 2003, issued notices proposing to reopen the assessments of the Dealers, as the case may be for best judgment, penalty etc. - HELD THAT:- The State Legislature is competent to enact Section 174(2) of the KSGST Act. The consequence of such a conclusion is that clauses in Section 174(2) are within the competence of the State Legislature. To escape the saving clause's effect, the arguments noted above are canvassed. The argument proceeds on the assumption that with the repeal of the KVAT Act, an absolute right in favour of Dealers erasing and effacing every legal obligation under the KVAT Act has been attracted. The purpose of savings is intended to have certainty on initiation, enquiry, etc., even after the repeal is given effect. Statutory obligation means an obligation arising under a Statute. Legal obligation means an obligation that derives from the operation of law. These obligations are discharged by duly complying with the requirement thereof, or the obligation stands discharged with the efflux of limitation. The third way now canvassed is that since notices are issued after 01.07.2017, the State cannot proceed to recover the amount - The absence of initiation of any proceeding before 16.09.2017 is not a criterion at all in the scheme of the KVAT Act. With the applicable saving clause, what is required in law is that when steps for reassessment etc., are taken up, those steps conform to the limitation covered by the applicable Section under the KVAT Act. The notices now impugned are well within the period under Section 25 or within the reasonable period under Sections 56, 58 and 67; such proceedings are covered by the saving clause of Section 174(2) of the KSGST Act. The converse of the above deliberation is that the State Legislature, however, has the power to repeal and provide for a saving clause; still, on the interpretation now suggested to various clauses, again, the provisions of the KVAT Act could be rendered ineffective. The effect of the saving clause cannot be defeated on any of the grounds now raised by the Dealers. The Dealers must complete the legal obligations, or the timelines expire to assume rights either accrued or vested. It is not the case of Dealers that beyond the period of limitation, the impugned notices are issued or orders made. The migration to GST is not an amnesty given to defaulting dealers from paying the tax due under the KVAT Act - the Revenue/State has not disentitled itself from enforcing its right to recover the defaulted tax or tax dues under the KVAT Act arising before 01/07/2017. The impugned notices are saved by clauses (i) to (iv) of Section 174(2) of the KSGST Act and are within the competence of the Department - Constitutionality of Section 174(2) of the KSGST Act and legality of notices/ orders as the case may be impugned in the respective Writ Appeals are answered against the dealers, hence necessarily, the Writ Appeals must fail and accordingly are dismissed.
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