TMI Blog2019 (2) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... wers both the Union and the State, for the first time, to have simultaneous -not concurrent- powers to legislate on certain items. Indeed concurrency yields to the Doctrine of repugnancy, but simultaneous legislative power does not. That is, both the Legislatures, say one from the Union and other from the State, co-exist-operate in the same sphere subject to other constitutional safeguards. The petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed. - W.P. (C) 11335/2018, W.P. (C) 15523/2018, W.P.(C) 15851/2018, W.P.(C) 15879/2018, W.P.(C) 15898/2018, W.P.(C) 18326/2018, W.P.(C) 25768/2018, W.P.(C) 40543/2018, W.P.(C) 40545/2018, W.P.(C) 40561/2018, W.P.(C) 40646/2018 - - - Dated:- 11-1-2019 - MR. DAMA SESEADRI NAIDU J. PETITIONER: BY ADVS. SRI. VENKITARAMAN, SMT. SHOBA ANNAMA EAPEN, SMT. T. ARCHANA. SRI. K.P. ABDUL AZEEZ RESPONDENT: BY ADVS. SRI. K.K. RAVINDRANAN, ADDL. ADVOCATE GENERAL GOVERNMENT PLEADER SRI. K.K. RAVINDRANATH ADDL. ADVOCATE GENERAL OTHER PRESENT : ADDL. AG K.K. RAVINDRANATH, SPI G.P. SRI. C.E. UNNIKRISHNAN, GP DR. THUSHARA JAMES., ADDL. SOLICITOR GENERAL SRI. K.M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with constituting Empowered Committees, to usher in further tax reforms. Besides that, then the Sales Tax, in its original form, was invariably a single tax levy, imposed at the first stage of the sale. The subsequent resale and its value addition were not captured to tax. This and other shortcomings made the Sales Tax give way to the Value Added Tax; the sale at every stage till the point of consumption got taxed, and the taxes paid in the previous stages were subsumed as Input Tax Credit. The Scope: 6. Earlier, as we have noted, the taxing powers of the Union and the States had been well-demarcated. Recently, With the 101 st Constitutional Amendment, the Goods and Services Tax regime has been ushered in. The Constitutional Amendment Act (the CA Act ) has led to a federal fiscal experiment by engendering a host of enactments: the Central Goods and Services Tax Act, 2017; the Integrated Goods and Services Tax Act, 2017; the Union Territory Goods and Services Tax Act, 2017; the Goods and Services Tax (Compensation to States) Act, 2017; The X State Goods and Services Act, 2017 (State specific). 7. For the first time, in the taxation sphere, both the Union and the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years 2009-2010, 2010-2011 and 2011-2012. The grounds of the notices are not germane here, though the petitioner s objections to the notices are. Succinctly stated, the petitioner is accused of not maintaining the true and correct accounts, and that has led to evasion of tax. So the Intelligence Officer proposed penalty under Sec 67(1)(b) and (d) of the KVAT Act. The petitioner replied to the notices for AYs 2010-2011 and 2011-12 and produced material in defence. Yet the Intelligence Officer confirmed the proposal for imposing a penalty. Aggrieved, the petitioner challenged the penalty orders before this Court in W. P.(C) No.12648 of 2016. This Court admitted the Writ Petition and stayed the recovery of the penalty. 12. On parallel lines, the Assessing Authority sought the Deputy Commissioner s prior approval for cancelling the compounding permission granted to the petitioner, as mandated under the proviso to Section After securing the permission under Section 8(f)(iv) of the KVAT Act, pending W.P. No.12648 of 2016, now the Assessment Officer, the 3rd Respondent, has issued a notice for a best-judgment assessment under Section 25, read with Section 42(3), of the KVAT Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities-constitutionally invalid. WP (C) No.40646 of 2018: 18. The petitioner, a registered dealer under the KVAT Act, is a Government Electrical Contractor. He filed all returns and remitted tax under the KVAT Act for the AYs 2012-13, 2013-14, 2014-15, 2015- 16 and 2016-17. The Assessing Officer accepted all the returns filed and the tax paid, with no demur. so, the assessments for the years are deemed to have been completed under Section 21 of the KVAT Act. 19. But, recently, on 23.112018, the Assessing Officer served on the petitioner the pre-assessment notices under Section 25(1) of the KVAT Act 2003, proposing to assess an alleged escapement of turnover for all the above years. So the petitioner challenges those notices on the premise that the Assessing Officer has no jurisdiction to invoke the KVAT Act, for it stood repealed With the 101 st Constitutional Amendment ( the CA Act ). WP No. (C) No. 40561 of 2018: 20. petitioner, an assessee, claims to have been filing proper returns periodically, besides paying tax. But on 05.122018 he received a notice for AY 2012-13 under Section 25(1) of the KVAT Act 2003. The petitioner, in this writ petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty s sake, I will set out their arguments compendiously and, to the extent possible, concisely, too. so the arguments are party-specific, not counsel-specific. The Summary of the Petitioners Submissions: About the 101st Constitution Amendment Act: On and from 16.9.2016, Article 246 yielded legislative ground to the newly engrafted Article 246A. Thus, Article 246 stood amended and modified in its operation. Consequently, a few items in both List I and List II suffered significant schematic changes. Article 246A, an enabling legislative provision, contains no concomitant schedule or iteration. Entry 54 of List II stands substituted by 16.09.2016; the Constitutional Amendment does not save it. So the pre-amended Entry 54 of List II has ceased to exist. Instead, what reigns is the substituted Entry 54. Section 19 of the Amendment Act is the transitional provision, besides being the saving provision. Nothing from the pre-existing legislative regime saves itself from or transits across what is set out in Section 19-a sunset clause. First, Entry 54 abrogated, from 16.09.2016 the States have been denuded of the power of taxation. Second, the interim or trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wered by Section 18 of the Amendment Act, on the recommendation of the GST Council, though. This enactment is, however, does not derive its legitimacy from any legislative entry or field of legislation enumerated in the Central List. Similarly, Section 19 of the Amendment Act empowers the State Legislature to amend or repeal provisions of any existing law which are inconstant with the Constitution as amended by the amending Act. The non-obstante Clause in Section 19 mandates that such legislation can be made notwithstanding anything contained in the Amendment Act. So the Entry 54, as it originally stood before the Amendment Act, remains available for the State, under Article 246 of the Constitution. In the alternative, without Entry 54 as it originally stood, the newly introduced Article 246-A as per Section 2 of the Amending Act read with Section 19 of the amending Act, by itself gives power to the state legislature to enact the impugned provisions in the State GST Act. A transitional provision in a Constitution Amendment Act has a higher status and better legal impact than a transitional provision in ordinary legislation. So Section 19 of the CA Act, read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers lying with the Union, though. The division of powers is zealously guarded in no other sphere than fiscal. Taxation as the backbone of a welfare nation, which India is; the legislative fields are as distinct, yet interconnected, as the spinal segments do. 27. That said, 101st Constitutional Amendment is the epoch-making federal feat unparalleled in constitutional democracies-almost. It is, I may say, a constitutional coup de grace delivered against the fiscal confusion compounded by conflicting taxation regimes. This amendment, perhaps, marks the crest of cooperative federalism. It has created even a constitutional institution-GST Council. 28. As constitutional democracies have gained experience, Utopian vision of justice has given way to utilitarian view. Material comfort or upliftment has become the hallmark of good governance. So economic analysis of law substitutes the notion of simple justice with that of economic efficiency and wealth maximisation. True, nations like France successfully embraced GST regimes in the 1950s. Even federal polities like Canada replaced MST (Manufacturer s Sales Tax) with GST (Goods and Services Tax) in the 1980s. India joined the fiscal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods. The States do not have the powers to levy a tax on the supply of services while the Centre does not have the power to levy a tax on the sale. Thus, it suggested for a constitutional amendment that would contain a mechanism for a harmonious structure of GST that would not affect the federal fabric. 35. Then, with the deliberations between the Centre and States, aided by the Empowered Committee, the constitutional amendment process to usher in GST began. It resulted in the Constitution (One Hundred and Fifteenth Amendment) Bill, 2011 After that one got lapsed, came the 2014 Amendment Bill (as passed by Parliament). Passed on 8 September 2016, this Bill became the Constitution (One Hundred and First Amendment) Act, 2016 . 36. The GST Council, constituted in September 2016, is a constitutional institution comprising as its members the Finance Ministers of the Union and the SMteS3 including Union Territories with Legislatures. It has the authority to recommend to the Union and the States on various facets of GST, including Model GST laws, principles to determine the place of supply, levy of the tax, design of GST, dispute settlement, special provisions for a special cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fall under each slab has been worked out. Besides these rates, a cess would be imposed on demerit goods to raise resources for compensating States as States may lose revenue owing to implementing GST. (ix) GST will apply to all goods and services except Alcohol for human consumption. (x) GST on five specified petroleum products (Crude, Petrol, Diesel, ATF Natural Gas) be applicable from a date to be recommended by the GSTC. (xi) Tobacco and tobacco products would be subject to GST. Besides, the Centre will have the power to levy Central Excise duty on these products. (xii) A common threshold exemption would apply to both CGST and SGST. Taxpayers with an annual turnover not exceeding ₹ 20 lakh (Rs.10 Lakh for special category States) would be exempted from GST. For small taxpayers with an aggregate turnover in a financial year up to 50 lakhs, a composition scheme is available. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover in a State during the year without the benefit of Input Tax Credit. This scheme will be optional. (xiii) The list of exempted goods and services would be kept to a minimum, and it would be harmo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods and Services Tax Network (GSTN). It will provide front end services and will also develop back end IT modules for States who chose the same. Constitutional Amendment Acc An Overview: 43. As we shall see, the CA Act inserts, repeals, and amends certain parts of the Constitution. Inserted are the Articles 246A, 269A, and 279A; repealed is the Article 268A; amended are Articles 248, 249, 250, 268, 269, 270, 271, 286, 366, and 279A. Besides that the Sixth and the Seventh Schedules, too, have been amended. 44. Article 246A, inserted through Section 2 of the Amendment Act, is a marvel of the federal fiscal mechanism. By this Article, the State Legislatures now have the power to make laws regarding GST tax imposed by the Union or by that State and to implement them in intra-state trade. The Centre, of course, continues to have exclusive power to make GST laws regarding inter-state trade. Both the Union and States in India now have simultaneous powers to make law on the goods and services. 45. Article 269A, inserted through Section 9 of the Act, deals with levy and collection of goods and services tax in the course of inter-State trade or commerce. That is, in case of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n turbine fuel, tobacco and tobacco products have been removed from the ambit of GST and have been subjected to Union jurisdiction. Newspapers advertisements, and Service Tax have been brought under GST (entries 84, 92, 92C). Similarly, in the State List, petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel, and alcoholic liquor for the human consumption have been included, unless the sale is in the course of inter-State or International trade and commerce. Entry tax and Advertisement taxes have been removed. Taxes on entertainment are only to be included to the extent of that imposed by local bodies. (entries 52, 54, 55, 62) [5] 49. To be explicit, in Article 366 of the Constitution, after clause (12), clause (12A) Was inserted: goods and services tax means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. After clause (26), clauses (26A) and (26B) were inserted: Services means anything other than goods; Staten with reference to Articles 246A, 268, 269, 269A and Article 279A includes a Union territory with Legislature. 50. Section 18 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded It gives power to the Parliament to enact any law applicable to states on the matters mentioned even in states list. GST, no mentioned in States list, now explicitly mentioned. 250 Power of Parliament to legislate regarding any matter in the State List if a Proclamation of Emergency is in operation Amended It has a similar impact as does the amended Article 249 268 Duties levied by the Union but collected and appropriated by the States Amended Additional Duties of Excise (Medicinal and toilet preparations) Stand subsumed into GST. 268A Service tax levied by Union and Collected and appropriated by the Union and the States: Omitted Service tax has been subsumed into GST. So Entry No. 92C of List-I too stands omitted. 269 Taxes levied and collected by the Union but assigned to the States Amended The arrangement under Article 269 is subjected to Article 269A, a new provision. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of Tribal Areas in the States of Assam, Meghalaya, Tripura, and Mizoram 8. Powers to assess and collect land revenue and to impose taxes. Amended It concerns powers to assess and collect land revenue and to impose taxes in the Tribal Areas of a few States. Seventh Schedule List I : Barring those excluded, the Union could levy excise duty on all other goods, including tobacco, manufactured or produced in India. The excluded ones are these: (a) alcoholic liquors for human consumption; (b) opium, Indian hemp, and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance in sub-paragraph (b). Amended Now excise duty is levied only on the enumerated items: (a) petroleum crude; (b) high-speed diesel; (c) motor spirit (commonly known as petrol); (d) natural gas; (e) aviation turbine fuel; and f) tobacco and tobacco products Entry 92 Taxes on the sale or purchase of newspapers and on advertisements published. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rala Enactment 55. Kerala Goods and Services Tax Act, 2017 (Act 20 of 2017) received the Governor s assent on the 16th day of September 2017. It provides for, as the preamble suggests, levy and collection of tax on intra-State supply of goods or services, or both by the State of Kerala. As it is in pari materia with the Central Goods and Services Tax Act, it needs no much elaboration, but for one provision: Section 174, the customary repeal and saving provision. 174. Repeal and saving.-( 1) Save as otherwise provided in this Act, on and from the date of commencement of this Act,- (i) the Kerala Value Added Tax Act, 2003 (30 of 2004) except in respect of goods included in entry 54 of the State List of the Seventh schedule to the Constitution including the Goods to which the Kerala General Sales Tax Act, 1963 (15 of 1963) is applicable as per the provisions of the Kerala Value Added Tax Act, 2003 (30 of 2004); (ii) the Kerala Tax on Entry of Goods into Local Areas Act, 1994 (15 of 1994); (iii) the Kerala Tax on Luxuries Act, 1976 (32 of 1976); and (iv) the Kerala Tax on Paper Lotteries Act, 2005 (20 of 2005) (hereinafter referred to as the repealed Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 4 of the Interpretation and General Clauses Act, 1125 (Act VII of 1125) with regard to the effect of repeal. (4) The Kerala Goods and Services Tax Ordinance, 2017 (11 of 2017) is hereby repealed. (5) Notwithstanding the repeal of the Kerala Goods and Services Tax Ordinance, 2017 (11 of 2017) anything done or any action taken under the said Ordinance, shall be deemed to have been done or taken under this Act. (italics supplied) Constitutional Invalidity: 56. This Court is called upon to examine the constitutional validity of Section 174 of the KSGST Act. Its invalidity is set up in the face of Section 19 of the CA Act. The petitioners argue, among other things, the State has no legislative power to override Section 19 of the CA Act. 57. A statute may be unconstitutional if it is enacted in the absence of legislative competence, in violation of Fundamental Rights guaranteed to the citizens of India, or in contravention of other constitutional constraints. For the Constitution is the fundamental or basic law to which all the laws must conform. It is superior even to the will of the legislature. Dr. C. D. Jha in his illuminating Judicial Review of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mere umpire, as some assume, but an active catalyst in the Constitutional scheme . Then, referring to Bihar Distillery Ltd., the Court invokes Lord Denning s observations in Seaford Court Estates Ltd Vs. Asher[1949 (2) KB 481]: the job of a Judge in construing a statute must proceed on the constructive task of finding the intention of Parliament and this must be done (a) not only from the language of the Statute but also (b) upon consideration of the social conditions which gave rise to it, (c) and also of the mischief to remedy which the statute was passed; and if necessary, (d) the Judge must supplement the written word to give force and life to the intention of the legislature. Constitution was prospective in its operation: 61. In Keshavan Madhava Menon v. The State of Bombay[1951 CriLJ 680] = 1951 (1) TMI 32 - SUPREME COURT the Supreme Court was concerned with the legality of the prosecution of the appellant for contravention of the Indian Press (Emergency Powers) Act, 1931. The offence had been committed before the Constitution came into force, and prosecution launched earlier was pending after January 26, 1950. The enactment which created the offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law upheld . 65. Even otherwise, the question of repugnancy would arise only when both the laws are enacted on the same entry, as is held in Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector.[(2007) 5 SCC 447] = 2007 (5) TMI 591 - SUPREME COURT Federal Features: Article 246A - A Unique Federal Feat: 66. The first illustration to this effect is Article 246-A which makes a special provision for GST. By way of Article 246-A, the Constitution Amendment Act creates (a) a new legislative field conferring, (b) outside the three Lists of the Seventh Schedule, (c) concurrent powers on both Parliament and the State Legislatures to enact on the same subject matter at the same time. Thus, there is a fundamental change to the scheme of legislative relations between the Union and the States by the CA Act: Article 246-A. [9] 67. To exemplify, Article 246-A does change the legislative distribution of powers; however, it does not upset the delicate balance between the Union and the States. Instead, it carries out the function of cross-empowerment. On the one hand, it enables the Union, according to Tarun Jain, to legislate and collect taxes on cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, immensely important is the Bimolangshu Roy s observation that the authority to make law flows from various sources: (1) express text of the Constitution; (2) by implication from the scheme of the Constitution; and (3) as an incident of sovereignty. Bimolangshu Roy, in fact, invokes the doctrine of inherent powers. Thus, it felicitously observes: 21. The authority to make law flows not only from an express grant of power by the Constitution to a legislative body but also by implications flowing from the context of the Constitution is well settled by the various decisions of the Supreme Court of America in the context of American Constitution. A principle which is too well settled in all the jurisdictions where a written Constitution exists. The US Supreme Court also recognised that the Congress would have the authority to legislate with reference to certain matters because such authority is inherent in the nature of the sovereignty. The doctrine of inherent powers was propounded by Justice Sutherland in the context of the role of the American Government in handling foreign affairs and the limitations thereon. In substance, the power to make the legislation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it based on any other entry within the legislative competence of the legislature. It is unnecessary for the State, notes the Supreme Court in Ujagar Prints v. Union of India[AIR 1989 SC 516] = 1988 (11) TMI 106 - SUPREME COURT OF INDIA , to show that the legislature, in enacting the law, consciously applied its mind to the source of its own competence. Competence to legislate flows from Articles 245, 246 and the other Articles falling in Part XI of the Constitution. In defending the validity of a law questioned on the ground of legislative incompetence, the state can always show that the law was supported under any other entry within the competence of the legislature. Indeed, in supporting legislation, sustenance could be drawn from many entries. The legislation could be composite legislation drawing upon several entries such as rag-bag legislation, particularly familiar in taxation. 75. In State of AP v. National Thermal Power Corpn. Ltd., [AIR 2002 SC 1895] = 2002 (4) TMI 694 - SUPREME COURT OF INDIA the Supreme Court has observed that the power of the State Legislature to enact a law to levy tax by reference to List II of the Seventh Schedule has two lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, and the duration of the provisions, are matters of constructions. And Lord Abinger C.B., in a concurrent judgment, said: It is by no means a consequence of an Act of Parliament expiring that rights acquired under it should likewise expire. 80. If an Act contains a proviso that it is to continue in force only for a certain specified time, it is, according to Craies [10], a temporary Act. According to the same learned author, Temporary Acts have these peculiarities: Commencement: If an Act is in the first instance temporary and is continued from time to time by subsequent Acts, it is considered as a statute passed in the session when it was first passed, and not as a statute passed in the session in which the Act which continues its operation was passed. Expiration : As a general rule, and unless it contains some special provision to the contrary, after a temporary Act has expired, no proceedings can be taken upon it, and it ceases to have any further effect. 81. Another celebrated commentary- G. P. Singh s Principles of Statutory Interpretation [11] -notes that a statute is either perpetual or temporary. It is perpetual when no time is fixed for it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if a clause prescribes that a statute should expire from a certain date, then it is reasonable to assume that it is not valid unless re-enacted. But in practice, there are exceptions in each instance. To begin with, the expiration, or sunset , of an act has the same consequences as if it were repealed. Yet, as Broom remarks, there is a difference between statutes which expire and statutes which are repealed. Although the latter become as if they had never existed (except so far as they relate to transactions already completed under them), yet with respect to the former, the extent of the restrictions imposed, and the duration of the provisions, are matters of construction [14] . 87. Indeed, there are many sunset clauses, such as the entire sunset clause compared to the sectional ; the conditional compared to the unconditional ; the direct compared to the indirect . Confining our discussion to the issue on hand, we may note that a sunset clause is direct when it prescribes the termination of the whole or part of the act which is embodied, indirect where it refers to a different act. Here, I reckon, if we accept the petitioners contention, then Section 19 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments that are recorded as temporary. These constitutions are often categorised as transitional and are commonly created because of a major national crisis: for example, (after the War of American Independence), the Constitution of South Carolina and the Constitution of New Hampshire. In the more modern era, the preamble of the Constitution of the Republic of South Africa in 1993, described it as the Interim Constitution . It has a two-year sunset clause. (b) Sunset Clauses and Constitutional Design: 92. A.E. Kouroutakis, in the chapter named as above, quotes a very interesting stance Jefferson has taken. The third American President, regarded as the US progenitor of sunset laws, in the pre-constitutional days, was concerned with the perpetuity of the constitution. He suggested to Madison about sunsetting on any statute after nineteen years. According to him, no society can make a perpetual constitution or even a perpetual law. The earth belongs always to the living generation. [ ] Every constitution, then, and every law, naturally expires at the end of 19 years. If it be enforced longer, it is an act of force and not of right. [17] (c) Pragmatic Injustice and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if some future event occurs (which may be a real-world event or an event such as making an order-designed to commence the legislation); (4) with retrospective effect from a past time; or (5) not at a particular point in time, but in relation to things done or events occurring during a period specified upon the legislation being passed or made, with it being possible to specify either a single period for all purposes or different period for different purposes. 97. Transitional provisions, the learned author continues to observe, may be relatively unimportant, in that by definition they affect relatively few cases, but they are extremely complicated; and they can be important to the cases affected [20] . Thornton in his Legislative Drafting [21] acknowledges the difficulty in describing what constitutes a transitional provision. According to him, the function of a savings provision in the legislation is to preserve or save a law, a right, a privilege, or an obligation otherwise repealed or ceased to have an effect. 98. The function of a transitional provision, Thornton [22] adds, is to make special provisions for applying legislation to the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e answer to such a question, G. P. Singh observes, again depends upon constructing the Act as a whole. The Legislature very often enacts in the temporary Act a saving provision similar in effect to section 6 of the general Clause Act, 1897. [24] 103. The question before the Supreme Court in Tata Iron and Steel Co. was whether because of the Validation Act the State could retain only the cess and taxes already collected before the date of validation or whether they also could collect the cess and taxes due till that date of validation. Tata Iron and Steel has held that the Validation Act did not enable the State to collect the cess and taxes not collected till the date of validation. One of the reasons it assigned was that the Validation Act contained no saving clause and section 6 of the General Clauses Act, too, would not affect a temporary statute. So there could be no recovery and collection of cess and taxes which may have become due but had not been collected till the date of validation. 104. That said, Tata Iron and Steel has gone on to observe that a temporary statute on its expiry is not dead for all purposes, even in the absence of a saving provision like section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l repeal obliterates statutes, except as to transactions past and closed. When an Act of Parliament is repealed, said Lord Tenterden in Surtees v. Ellison, it must be considered (except as to transactions past and closed) as if it had never existed. That is the general rule. Tindal C.J. stated the exception more widely. He said, The effect of repealing a statute is to obliterate it as completely from the records of the Parliament as if it had never been passed; and it must be considered as a law that never existed except for the purpose of those actions which were commenced, prosecuted and concluded whilst it was an existing law . 109. To decide whether any particular transaction is affected by the repeal of an Act, it is necessary to ascertain whether the transaction in question was completed when the Act was repealed. Thus, if an Act gives a right to do anything, the thing to be done, if only commenced but not completed before the Act is repealed, must upon the repeal of the Act be left in status quo. So, under some statute, if a right becomes vested upon the completion of some certain transaction but not before, no right whatever will have been acquired if the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... superfluities, and reject clearly inconsistent enactments . Application of the General Clauses Act: 115. Resounding is the judicial assertion: it is emphatically the duty of the Judicial Department to say what the law is. Those who apply the rule to particular cases must, of necessity, expound and interpret the rule. If two laws conflict with each other, the Court must decide on the operation of each. That is the assertion of Chief Justice Marshall in Marbury v. Madison. Again he famously declared in McCulloch v. Maryland , We must never forget that it is a constitution we are expounding. 116. To begin with, generally, the predominant approach of the Indian Judiciary, according to M.P. Jain [25] , was positivist; that is, to interpret the Constitution literally and to apply to it more or less the same restrictive canons of interpretation as are usually applied to interpreting ordinary statutes. To some extent, the Constitution itself incorporates the principle of statutory construction. Article 367 provides that the General Clauses Act, 1897, shall apply for interpreting the Constitution as it applies for interpreting legislative enactments. The courts have held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless a different intention appears, the repeal shall not - (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the repealing Act had not been passed. 121. Indeed, we can refer to the precedents on Section 6 of the General Clauses Act to appreciate how the repeal of an enactment affects the pending cases or proceedings under that repealed enactment. In Ambalal Sarabhai Enterprises Ltd. v. Amrit Lal Co., [(2001) 8 SCC 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egime. On 16.09.2017 came the Kerala State Goods and Services Tax Act, 2017 ( KSGST Act ). It has replaced the KSGST Ordinance. On the same day, however, the saving period prescribed under Section 19 of the CA Act, too, ended. 125. But, as a way out, the KSGST Act has its own Saving Clause: Section 174. So we must examine the relative, sometimes overlapping, concepts of transition and saving, besides those of repeal, sunset, amendment, omission, and substitution. 126. A bill may contain provisions that limit, modify, or destroy individual rights and privileges. Then, on the Bill s enforcement as an Act, the Legislature may desire to consider a saving clause, to protect those who have acted as per the law till then existing. The means for providing this protection is the saving clause. Black s Law Dictionary defines Saving Clause in a statute as an exception of a special thing out of the general things mentioned in that statute; it is ordinarily a restriction in a repealing act, which is intended to save rights, pending proceedings, penalties, and so on, from annihilation that would result from an unrestricted repeal. In other words, a saving clause is generally used in a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Here I must observe that Section 19 is not a saving clause; any saving clause starts to operate from the day the previous Act is dead. Here, the CA Act has allowed various enactments-those that contradict it-to coexist. Here, the repeal did not take place on 16.09.2016, when the CA Act came into force, but on 16.09.2017, when the one-year period ended. Saving Clause, in fact, if available, was needed from then on, not before. Indeed, Section 19 of the CA Act saves nothing beyond 16.09.2017. 132. Legislative power, to begin with, inheres in and vests with Parliament. If it is unitary, the division or demarcation of those powers does not arise; but in a federal polity, the Constitution usually demarcates the legislative boundaries. Thus, as to the division of legislative powers, Article 246, and now Article 246A too, of our Constitution holds the key. Inherent Legislative Power: 133. Article 246 of the Constitution deals with the distribution of legislative powers. Under Clause (1) of that Article, Parliament has the exclusive power to make laws on any of the matters enumerated in List I (Union List) in the Seventh Schedule. Under Clause (2) both Parliament and the State Legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d affected by the CA Act. It has brought them in harmony with the Goods and Services Tax regime. On the other hand, Section 174 repealed and saved certain statutes. Let us see which have been amended and which repealed: Amended U/S.173 Repealed through S.174 1. Kerala Value Added Tax Act, 2003 2.Kerala Finance Act, 2011 3. Kerala Finance Act, 2013 4. Kerala General Sales Tax Act, 1963 5. Kerala Surcharge on Taxes Act, 1957 6. Kerala Panchayat Raj Act, 1994 7. Kerala Municipality Act, 1994 1. Kerala Value Added Tax Act, 2003 2. Kerala Tax on Entry of Goods into Local Areas Act, 1994 3. Kerala Tax on Luxuries Act, 1976 4. Kerala Tax on Paper Lotteries Act 139. We can see the KVAT Act, the focal enactment for our discussion, finds a place in the table on both sides: amendment and repeal. The same enactment could not have been amended and repealed simultaneously; if so, it proves the idiom have the cake and eat it too. We can either keep the cake or eat it; so is the case with an enactment: it can either be amended or repealed. For the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, the repeal has not affected any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Acts or repealed Acts or orders under such repealed or amended Acts. Nor has it affected any tax, surcharge, penalty, fine, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Acts or repealed Acts . 144. In other words, the repeal has not affected any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication, and any other legal proceedings or recovery arrears or remedy in respect of any such tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there are three stages in the imposition of a tax: (1) there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. (2) Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. And (3) lastly comes the methods of recovery, if the person taxed does not voluntarily pay. 151. Govind Saran Ganga Saran v. Commissioner of Sales Tax and Ors,[AIR 1985 SC 1041] = 1985 (4) TMI 65 - SUPREME COURT approves of this view. Moreover, the Constitutional Bench endorses it in Mathuram Agarwal v. State of MP[(1999) 8 SCC 667] = 1999 (10) TMI 125 - SUPREME COURT OF INDIA . Section 17 of the CA Act has substituted Entry 54 with effect from16.09.2016, and Section 19, the petitioners argue, extended its transitional life by one year. That extended period ended on 15.09.2017. It is, therefore, mandatory for levy, assessment, and collection, the petitioners assert, to have been completed before 15.09.2017, for any VAT issues under the pre-GST regime lost th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erable steps, that is to say, one of repeal and another of a fresh enactment even if it implies two steps. Indeed, the natural meaning of the word substitution is to indicate that the process cannot be split up into two pieces like this. If the process described as substitution fails, it is totally ineffective to leave intact what was sought to be displaced. That seems to be the ordinary and natural meaning of the words shall be substituted. 155. On facts, the Court has held that there is no intention to repeal without a substitution was deducible. In other words, there could be no repeal if substitution failed. The two were part and parcel of a single indivisible process and not bits of a disjointed operation. 156. The Court also observes that repeal is not a matter of mere form but one of substance, depending upon the intention of the Legislature. If the intention, indicated expressly or by necessary implication in the subsequent statute, were to abrogate or wipe off the former enactment, wholly or in part, then it would be a case of total or pro tanto repeal. On the other hand, if the intention were merely to modify the former enactment by engrafting an exception or gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which earlier drew their legitimacy from the unamended Entry 54? (b) Repeal and Omission: 160. Clause 17 of the Constitution (One Hundred and First Amendment) Act has omitted, the petitioners maintain, Entries 92, 92C of List I and Entries 52, 55of List II and substituted Entry 84 of List I and Entries 54 and 62 of List II. 161. In Rayala Corporation (P) Ltd. and Ors., v. Director of Enforcement, New Delhi[(1969) 2 SCC 412] = 1969 (7) TMI 109 - SUPREME COURT OF INDIA , the Supreme Court has held that Section 6 only applies to repeals and not to omissions. Granted, Rayala Corporation, a Constitution Bench decision, has not elaborated on how repeal and omission differ, but it has, nevertheless, laid down the law that repeal differs from omission and Section 6 of the General Clauses Act would apply only for repeal and not omissions . Kolhapur Cane Sugar Works Ltd. v. Union of India[(2000) 2 SCC 536] = 2000 (2) TMI 823 - SUPREME COURT OF INDIA , another Constitution Bench decision, has followed Rayala Corporation. This decision, too, has elaborated on neither the semantic significance nor the supposedly distinct legal impact of these two expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Fibre Boards (P) Ltd. v. CIT[(2015) 10 SCC 333] = 2015 (8) TMI 482 - SUPREME COURT , in the statutory backdrop of Section 6-A of the General Clauses Act, Shree Bhagwati Steel Rolling Mills affirms that repeal would include repeal by way of an express omission. Indeed, it declares, after elaborate reasoning, that the observations in Rayala Corporation on repeal and omission are obiter. 166. The precedential force of an avalanche of authorities cited at the Bar remains undisputed. That said, I must add, on facts, that the petitioners contention that the State has lost legislative power to enact a saving clause-Section 174-in the KSGST Act does not stand the judicial gaze. That power preserved, the concept of repeal, the scope of Section 19 of the CA Act, and the relevance of Section 6 of the General Clauses Act or Section 4 of the Kerala Interpretation and General Clauses Act pale into insignificance. And any discussion, as we have already undertaken, turns out to be an academic exercise. Limitation: 167. The petitioner in one writ petition has argued that on the date when the first ever Show Cause Notice, dated 15.03.2018, under Section 8 (f) (iv), read wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) and 174 (3) are by themselves self-contradicting; (d) Section 24 of the General Clauses Act is the saving of subordinate legislation and applies when there are repeal and re-enactment. The present is not a case of repeal and re- enactment. So Section 24 is not attracted. In other words, machinery provisions are not saved. Then, there can be no tax without machinery provisions. Fallacy: 172. Indeed, on most counts, the petitioners assertions can be accepted. Done so, does that mean the adjudication results or stands resolved in their favour? 173. Section 6 of the General Clauses Act does not apply to sunset clauses or temporary statutes. Agreed. Repeal and Omission are different. They are not. Shree Bhagwati Steel Rolling Mills dispels this myth. Yet, even if we accept it to be so, still that does not alter the outcome in any way. 174. First, we must acknowledge one thing: none of the provisions repealed through the CA Act is central legislation. Each one is state legislation. And the General Clauses Act does not apply to the State Legislation. But, perhaps, Section 4 of the Kerala Interpretation and General Clauses Act could be roped in, if ever we need an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy, what has been added is the simultaneity-novel as it may sound. 181. To encapsulate, I may observe that all the petitioners have advanced one common argument: the State has been denuded of its legislative power to enact Section 174 of the Kerala State Goods and Services Act, 2017. The obvious prop for this assertion comes from the 101st Constitutional Amendment-that is, the attenuated or modified Entry 54 of the List II, the State List. 182. All the petitioners contend that the KSGST Act came into being because of the Constitutional Amendment. And that very Constitutional Amendment has put paid to many other enactments-for example, the Kerala Value Added Tax Act, 2003. So with the Entry 54 of List II unavailable for the State to incorporate Section 174 of the KSGST Act, the whole saving mechanism vis- -vis transactions before 16.09.2017 crumbles. 183. I am afraid it is a fallacy on the petitioners part to contend that the State lacks the legislative power to enact Section 174 of the KSGST Act. Article 246A is the special provision (if it can be called a provision) on the Goods and Services Tax. It empowers, as rightly contended by the learned Senior Counsel Shri Venkat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on nor reiteration. Result: 188. I find no merit in the writ petitions; accordingly, I dismiss all the writ petitions. 189. Yet I clarify: In all these writ petitions various issues arise-constitutionality is only one of them. Even a single issue has many shades of a challenge. I have touched none save the constitutional question. And I answered that in the negative. All other issues-including limitation-remain untouched. After all, the limitation is a mixed question of fact and law. I reckon, in that context, that the petitioners have efficacious alternative remedies under the relevant statutes. 190. Granted, the petitioners have bona fide pursued these writ petitions; so, now, in a few cases, the petitioners may face the question of limitation. To adjust equities, I observe that if any petitioner approaches a statutory authority on an issue arising out of a writ petition which now stands disposed of in this batch, the authority will exclude for limitation the period it has spent before this Court. 191. If any petitioner files in thirty days after its receiving a copy of the judgment, a statutory appeal or takes out any other legally sustainable proceedings agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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