TMI Blog2019 (12) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... d already expired? - whether the amendment to the third proviso to Section 25 (1) of the KVAT Act, through the Kerala Finance Act, 2017, would enable the revenue to re-open assessments in cases where, by 31.03.2017, the five year period for re-opening assessments under the un-amended provisions of Section 25 (1) of the KVAT Act had already expired? - HELD THAT:- In the instant cases, it can be seen that the purpose of the amendment to the third proviso to Section 25 (1) of the KVAT Act was only to extend the time for re-opening those assessments where the period of limitation for re-opening under the unamended provisions was to expire by 31.03.2017. The object of the amendment was to permit a re-opening of such cases till 31.03.2018. The amendment has to be viewed in the backdrop of the introduction of the new regime of GST in the State with effect from 22.06.2017, on which date the KVAT Act was repealed by the State legislature - the circumstances under which the amendment was carried out clearly bring out the intention of the legislature to permit a re-opening of past assessments under the KVAT Act up to 31.03.2018 and it is this intention that must be read into the third proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Kerala Finance Act, 2017, the legislative measures should have sufficed to justify a reopening of past assessments up to 31.03.2019, notwithstanding that the amendment itself was effective only from 01.04.2018. However, the intervention of the CAA 2016, and the consequent repeal of the KVAT Act with effect from 22.06.2017, has a bearing on the legality of the 2018 amendment - The power to amend a statute being a facet of the legislative power itself, the State legislature could not have exercised a power to amend the KVAT Act, save to the extent permitted, when it did not retain any residual right to further legislate on the subject of taxes on sale or purchase of goods. At the time of repeal of the KVAT Act, and simultaneous enactment of the State GST Act with a savings clause therein, the savings clause operated only to save rights, privileges, immunities, action taken etc under the erstwhile enactment as it stood at the time of its repeal, which included the amendments brought in through the Kerala Finance Act, 2017. There could not have been any further legislative exercise by the State legislature in relation to the repealed KVAT Act - The amendments to Section 25 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with effect from 01.04.2017 read as follows: 25. Assessment of escaped turnover:- (1) Where for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to tax in any year or return period or has been under-assessed or has been assessed at a rate lower than the rate at which it is assessable or any deduction has been wrongly made therefrom, or where any input tax or special rebate credit has been wrongly availed of, the assessing authority may, at any time within five years from the last date of the year to which the return relates, proceed to determine, to the best of its judgment,the turnover which has escaped assessment to tax or has been underassessed or has been assessed at a rate lower than the rate at which it is assessable or the deduction in respect of which has been wrongly made or input tax or special rebate credit that has been wrongly availed of and assess the tax payable on such turn over or disallow the input tax or special rebate credit wrongly availed of, after issuing a notice on the dealer and after making such enquiry as it may consider necessary: Provided that before making an assessment under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of GST. Amendments were carried out in Articles 248, 249, 250, 268, 268A, 269, 270, 271, 286, 366 and 368. The sixth and seventh Schedules to the Constitution were also suitably amended. Through the introduction of a new Article 246A, both the Parliament and the State Legislatures were given the powers to make laws with respect to Goods and Services tax imposed by the Union or by the State. The exclusive power to make laws regarding GST, where the supply of goods or services or both took place in the course of inter-state trade or commerce, was retained with the Parliament. Sections 14, 17(b) and 19 of the CAA are relevant for the purposes of these writ petitions and are therefore extracted hereunder. 14. In Article 366 of the Constitution,- (i) after clause (12), the following clause shall be inserted, namely:- (12A) 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; ; (ii) after clause (26), the following clauses shall be inserted, namely:- (26A) Services means anything other than goods; (26B) State wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year period of limitation for re-opening assessments could be relied upon to issue pre-assessment notices in cases where, by 31.03.2017, the five year period for reopening assessments under the unamended provisions of Section 25 (1) of the KVAT Act had already expired? (b) If issue (a) is answered in the negative, whether the amendment to the third proviso to Section 25 (1) of the KVAT Act, through the Kerala Finance Act, 2017, would enable the revenue to re-open assessments in cases where, by 31.03.2017, the five year period for re-opening assessments under the un-amended provisions of Section 25 (1) of the KVAT Act had already expired? (c) Whether, after the CAA, 2016, and the repeal of the KVAT Act pursuant thereto, on 22.06.2017, the State legislature retained any residual power of legislation so as to amend the provisions of Section 25 (1) of the KVAT Act through the Kerala Finance Act, 2018? (d) Whether the amendment to the provisions of Section 25 (1) of the KVAT Act, through the Kerala Finance Act, 2018, and the pre-assessment notices and assessment orders issued consequent thereto, could be justified by relying on the savings clause under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support the said contention. 9. Per Contra, it is the submission of Sri. C.E Unnikrishnan, learned Special Government Pleader, that the amendment brought in with effect from 01.04.2017, conferred on the assessing authorities the power to re-open assessments for assessment years up to six years prior to 01.04.2017. He relies upon the judgment of a Constitution Bench of the Supreme Court in S.C. Prashar and another v. Vasantsen Dwarkadas and others - [AIR 1963 SC 1356] to fortify his submission. He also places reliance on the decisions of this Court in Binu Gopinath v. State of Kerala - [2018 (2) KLT 991] and Paul Varghese v. State of Kerala [(2005) 13 KTR 29 (Ker)] to suggest that the amendments brought about through the Kerala Finance Act, 2017 are retrospective in their operation. As regards the amendment effected to the third proviso to Section 25 (1) of the KVAT Act with effect from 01.04.2017, it is his contention that the amendment brought in significant changes to the wording of the proviso in that, while earlier the phraseology used mandated that assessments already re-opened had to be completed within a particular period, the amendment had the effect of empower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position is slightly different. A Division Bench of this Court in Commercial Tax Officer, Anchal and Others v. S. Najeem and Another [2018 (4) KHC 666 (DB)], while rejecting the argument of the Government pleader who sought to justify a re-opening of assessments based on the amended provisions of Section 25 (1) of the KVAT Act, with effect from 01.04.2017, observed as follows at paras 14 and 32; 14. The learned Special Government Pleader (Taxes) lastly argued that there was an amendment by substitution to Section 25(1) by which the period for proceeding to determine was made 6 years. When a substitution is made as distinguished from addition, deletion or insertion then, the substituted provision would relate back to the date of the enactment unless otherwise specified. Strong reliance was placed on AIR 2014 Karnataka 120 (Full Bench) [Hassan Cooperative Milk Producers Societies Union Limited v. State W.A.No.230 of 2017 - 18 - connected cases of Karnataka] to urge the position. At least the notices issued within the six year period has to be sustained argues the Special G.P. In Hassan Co-operative Union the Full bench considered the issue of a substitution made, chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the decision in Binu Gopinath - [2018 (3) KHC 482] to observe as follows with respect to the amended provisions of the 3rd proviso to Section 25 (1) of the KVAT Act; 33. Binu Gopinath v. State of Kerala [2018 (3) KHC 482] was also relied on by the learned Special Government Pleader. The W.A.No.230 of 2017 - 44 - connected cases provision which was considered therein was distinct from that considered here. Finance Act, 2017, as we noticed, substituted the provision under sub-section (1) of Section 25 and provided six years from the last date of the assessment year, as the period of limitation for proceeding to determine the tax payable. The assessment which came up for consideration before the learned Single Judge was of the year 2011-12. As per the earlier provision and the limitation provided of five years, the period stood expired on 31.03.2017, after which the amendment by substitution was brought into the statute book. We have already held that substitution as such would not have any retrospective effect. The learned Single Judge had also not declared the assessment to be retrospective merely for reason of a substitution having been made. There was a proviso in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or clear implication, the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned . Hence all the decisions of the Supreme Court are to the effect that it is the legislative intention that must be given full effect. Hence in view of the authoritative pronouncements of the Supreme Court discussed above, the contention of the petitioner that the assessment is barred by limitation has no substance. It is accordingly rejected. 15. In the instant cases, it can be seen that the purpose of the amendment to the third proviso to Section 25 (1) of the KVAT Act was only to extend the time for re-opening those assessments where the period of limitation for re-opening under the unamended provisions was to expire by 31.03.2017. The object of the amendment was to permit a re-opening of such cases till 31.03.2018. The amendment has to be viewed in the backdrop of the introduction of the new regime of GST in the State with effect from 22.06.2017, on which date the KVAT Act was repealed by the State legislature. In my view, the circumstances under which the amendment was carried out clearly bring out the intention of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislature in the said proviso and accord to it the same meaning as the main provision. Going by the tests enumerated in Sundaram Pillai (Supra), the third proviso to Section 25 (1), as amended with effect from 01.04.2017, has to be seen as qualifying the ambit of the main enactment with the object of explaining the real intendment of the statutory exercise. I therefore find that issue (a) has to be answered in the negative and in favour of the assessees, and issue (b) in the affirmative, in favour of the revenue and against the assessees. Re: Issues (c) and (d): Although detailed arguments have been advanced before me on both these issues, I find that I need confine myself only to a consideration of issue (c) in these cases. This is because issue (d) had come up for consideration before a learned single judge in a batch of cases where the validity of Section 174 of the State GST Act had been called in question. Rejecting the contentions of the assessees in those cases, the court in Sheen Golden Jewels (India) Pvt. Ltd. v. State Tax Officer Ors. [2019 (27) KTR 119 (Ker)] found that the mere repeal of the KVAT Act with effect from 22.06.2017 did not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening of past assessments up to 31.03.2019, notwithstanding that the amendment itself was effective only from 01.04.2018. However, the intervention of the CAA 2016, and the consequent repeal of the KVAT Act with effect from 22.06.2017, has a bearing on the legality of the 2018 amendment. A distinction does exist between the saving of rights, privileges, immunities and liabilities under a repealed enactment, through a savings clause inserted in the new enactment traceable to the same legislative power, and an amendment brought in to a repealed enactment after the legislative power itself is taken away. While the legislative power justifying both actions, prior to the CAA 2016, could have been traced to Article 246 of our Constitution, read with the relevant entry in the VIIth Schedule thereto, the position changed when there was a fundamental shift in the nature of the tax levy and a fresh conferment of legislative power to legislate in respect of the new levy. After the CAA 2016, the State Legislatures stood denuded of their power to legislate in respect of taxes on sale or purchase of goods, that was covered under Entry 54 of List II of the VIIth Schedule to the Constitution, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, with a savings clause of limited operation, it effectively acknowledged the absence of any power to legislate thereafter on the subject of tax on sale or purchase of goods, except in respect of the limited commodities for which the said power was retained under the Constitution. In respect of all other commodities, the legislative power of the State was only in respect of taxes on the supply of goods or services or both, a power that had to be exercised simultaneously with the Parliament and not unilaterally or exclusively. Thus, at the time of repeal of the KVAT Act, and simultaneous enactment of the State GST Act with a savings clause therein, the savings clause operated only to save rights, privileges, immunities, action taken etc under the erstwhile enactment as it stood at the time of its repeal, which included the amendments brought in through the Kerala Finance Act, 2017. There could not have been any further legislative exercise by the State legislature in relation to the repealed KVAT Act. 21. I therefore find that issue (c) has to be answered in the negative and in favour of the writ petitioners. The amendments to Section 25 of the KVAT Act, through the Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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