TMI Blog2022 (5) TMI 1553X X X X Extracts X X X X X X X X Extracts X X X X ..... or commerce - Prior to 101st Amendment to the Constitution of India, Entry 52 of List II - State List of the Seventh Schedule of the Constitution of India provided for taxes on entry of goods into a local area for consumption, use or sale therein . Entry 54 of List II provided for taxes on sale or purchase of goods other than newspaper, subject to the provisions of Entry 92-A of List I. Entry 55 of List II provided for taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television . Entry 62 of List II provided for taxes on luxuries including taxes on entertainment, amusements, betting and gambling . Overall reading of 101st Amendment to the Constitution of India leaves no manner of doubt that Article 246-A and other relevant provisions were enacted by the Constitution (101st Amendment) Act, 2016 so as to bring the taxes on purchase and sale of goods, duties on excise and entertainment tax etc. under one umbrella by empowering the Parliament and the State Legislatures to enact laws with respect to taxes on supply of goods or services or both - Statement of Object and Reasons to the 101st Amendment to the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made above on legislative competence and presumption of constitutional validity, we hold that Section 7 of the CGST Act/UPGST Act does not suffer from lack of legislative competence. In other words, Section 7 of the CGST Act/UPGST Act is wholly valid - there are no merit in challenge to the constitutional validity of Section 7 of the CGST Act/UPGST Act. Therefore, the challenge to the constitutional validity of Section 7 of the CGST Act/UPGST Act is hereby rejected. Principles of Natural Justice - HELD THAT:- The copies of all relied upon documents have been given by the Assessing Authority to the petitioner and he has also been allowed to inspect the records. Opportunity of hearing is also reflected from the notices including the notice dated 05.01.2022 in which the date, place and time for appearance has been informed to the petitioner by the Deputy Commissioner, Commercial Tax, Division-17, Ghaziabad - there are no substance in challenge to the impugned assessment order on the ground of alleged breach of principles of natural justice or provisions of Section 75(4) of the CGST Act/UPGST Act. The writ petition is dismissed, leaving it open for the petitioner to challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods and Services Tax Act, 2017 (hereinafter referred to as 'the UPGST Act'), lacks legislative competence. (ii) The word 'supply' does not mean sale. Therefore, sale could not fall within the meaning of the word 'supply'. Reliance is placed upon judgment of Hon'ble Supreme Court in the case of Southern Petrochemical Industries Co. Ltd. vs. Electricity Inspector ETIO, (2007) 5 SCC 447 (Para-50) and Karnataka Power Transmission Corporation vs. Ashok Iron Works (P) Ltd. (2009) 3 SCC 240 (Para-28). (iii) The words 'tax on the sale or purchase on goods' has been defined in Article 366(29A) and Entry 54, List-II of the VIIth Schedule of the Constitution of India provides for tax on sale of only petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel and alcoholic liquor for human consumption. Therefore, by implication, no law can be legislated which may levy tax on sale of goods inasmuch as amended Entry 54 has narrowed down the field of legislation limited to petroleum crude etc. as aforementioned. (iv) Opportunity of hearing as provided under Section 75(4) of the CGST/UPGST Act has not been afforded to the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncurrent taxing powers on the Union as well as the States including on Union Territory with Legislature to make laws for levying goods and services tax on every transaction of supply of goods or services or both. The goods and services tax shall replace a number of indirect taxes being levied by the Union and the State Governments and is intended to remove cascading effect of taxes and provide for a common national market for goods and services. The proposed Central and State goods and services tax will be levied on all transactions involving supply of goods and services, except those which are kept out of the purview of the goods and services tax. 2. The proposed Bill, which seeks further to amend the Constitution, inter alia, provides for- (a) subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services; (b) subsuming of State Value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... votes cast in that meeting. Illustration In terms of clause (9) of the proposed Article 279-A, the weighted votes of the members present and voting in favour of a proposal in the Goods and Services Tax Council shall be determined as under.- WT = WC + WS Where WT = WC + WS = WST/SP x SF Wherein WT=Total weighted votes of all members in favour of a proposal. WC=Weighted vote of the Union = 1/3 i.e., 33.33% if the Union is in favour of the proposal and be taken as 0 if, Union is not in favour of a proposal. WS= Weighted votes of the States in favour of a proposal. SP= Number of States present and voting. WST= Weighted votes of all States present and voting i.e. 2/3, i.e., 66.67% SF = Number of States voting in favour of a proposal. (j) Clause 20 of the proposed Bill makes transitional provisions to take care of any inconsistency which may arise with respect to any law relating to tax on goods or services or on both in force in any State on the commencement of the provisions of the Constitution as amended by this Act within a period of one year. 3. The Bill seeks to achieve the above objects. 1. Short title and commencemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words consignment of goods , the words, figures and letter except as provided in Article 269-A shall be inserted. 9. Insertion of new Article 269-A.- After article 269 of the Constitution, the following article shall be inserted, namely:- '269-A. Levy and collection of goods and services tax in course of inter State trade or commence - (1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. Explanation.-For the purposes of this clause, supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce. (2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India. (3) Where an amount collected as tax levied under clause (1) has been used for payment of the tax levied by a State under article 246-A, such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices Tax Council referred to in sub-clause (c) of clause (2) shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such period as they may decide. (4) The Goods and Services Tax Council shall make recommendations to the Union and the States on- (a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax; (b) the goods and services that may be subjected to, or exempted from the goods and services tax; (c) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-State trade or commerce under article 269-A and the principles that govern the place of supply; (d) the threshold limit of turnover below which goods and services may be exempted from goods and services tax; (e) the rates including floor rates with bands of goods and services tax; (f) any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster; (g) special provision with respect to the States of Arunachal Pradesh, Assam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place , the words the supply of goods or of services or both, where such supply takes place shall be substituted; (B) in sub-clause (b), for the word goods , at both the places where it occurs, the words goods or services or both shall be substituted; (ii) in clause (2), for the words sale or purchase of goods takes place , the words supply of goods or of services or both shall be substituted; (iii) clause (3) shall be omitted. 14. Amendment of Article 366.- In article 366 of the Constitution,- (i) after clause (12), the following clause shall be inserted, namely:- '(12-A) 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:- '(26-A) Services means anything other than goods; (26-B) State with reference to articles 246-A, 268, 269, 269-A and article 279-A includes a Union territory with Legislature;'. 15. Amendment of Article 368.- In Article 368 of the Constitution, in clause (2), in the proviso, in clause (a), for the words and fig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the provisions of the Constitution as amended by this Act shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier. 20. Power of President to remove difficulties.- (1) If any difficulty arises in giving effect to the provisions of the Constitution as amended by this Act (including any difficulty in relation to the transition from the provisions of the Constitution as they stood immediately before the date of assent of the President to this Act to the provisions of the Constitution as amended by this Act), the President may, by order, make such provisions, including any adaptation or modification of any provision of the Constitution as amended by this Act or law, as appear to the President to be necessary or expedient for the purpose of removing the difficulty: Provided that no such order shall be made after the expiry of three years from the date of such assent. (2) Every order made under sub-section (1) shall, as soon as may be after it is made, be laid before each House of Parliament. (ii) Article 366(12A) of the Constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Central Government or the State Governments on the supply of goods or services going to be converged in goods and services tax which is proposed to be a dual levy where the Central Government will levy and collect tax in the form of central goods and services tax and the State Government will levy and collect tax in the form of State goods and services tax on intra-State supply of goods or services or both. 4. In view of the above, it has become necessary to have a Central legislation, namely, the Central Goods and Services Tax Bill, 2017. The proposed legislation will confer power upon the Central Government for levying goods and services tax on the supply of goods or services or both which takes place within a State. The proposed legislation will simplify and harmonise the indirect tax regime in the country. It is expected to reduce cost of production and inflation in the economy, thereby making the Indian trade and industry more competitive, domestically as well as internationally. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of goods and services tax that would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the UPGST Act, is part of Chapter-III providing for Levy of Collection of Tax. Section 7 of the CGST Act provides for scope of supply as under:- (1) For the purposes of this Act, the expression supply includes-- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.--For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another; (b) import of services for a consideration whether or not in the course or furtherance of business; [and] (c) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than goods. Thus, Parliament, and, subject to clause (2) of Article 246-A, the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State and the Parliament has been conferred exclusive powers to legislate with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. 10. Prior to 101st Amendment to the Constitution of India, Entry 52 of List II - State List of the Seventh Schedule of the Constitution of India provided for taxes on entry of goods into a local area for consumption, use or sale therein . Entry 54 of List II provided for taxes on sale or purchase of goods other than newspaper, subject to the provisions of Entry 92-A of List I. Entry 55 of List II provided for taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television . Entry 62 of List II provided for taxes on luxuries including taxes on entertainment, amusements, betting and gambling . That apart, Entry 84 of List I - Union List to the 7th Schedule of the Constitution provided for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions, taxes on services and taxes on sale or purchase of newspapers and on advertisements published therein and duties on excise except on those items as provided under amended Entry 84 were omitted and in place a comprehensive power of legislation has been conferred under Article 246-A of the Constitution of India empowering the Parliament and State Legislatures to enact law to levy tax on goods or services or both; with a provision of compensation to States for loss of revenue on account of implementation of the Goods and Services Tax Act, for a period of five years. 13. The Statement of Objects and Reasons to the aforesaid 101st Amendment of the Constitution of India as aforequoted, clearly recorded that the 101st Amendment has been brought subsuming various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services and of State Value Added Tax/Sales Tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tecedent state of affairs, the surrounding circumstances in relation to the statute, and the evil which the statute sought to remedy. Reference in this regard may be had to judgments of Hon'ble Supreme Court in State of West Bengal vs. Union of India, [AIR 1963 SC 1241], M/s. Sanghvi Jeevraj Ghewar Chand and others Vs. Secretary, Madras Chillies, Grains and Kirana Merchants Workers Union and another, [AIR 1969 SC 530 (para-2)], Dantuluri Ram Raju And Ors vs State Of Andhra Pradesh And Anr, [AIR 1972 SC 828 (para-4)], Narain Khamman Vs. Parduman Kumar Jain, [AIR 1985 SC 4 : 1985 1 SCC 1 (para-12)], State of H.P. Vs. Kailash Chand Mahajan, [AIR 1992 SC 1277 (para 77) : 1992 Suppl. (2) SCC 351 (para-82)], Devadoss vs Veera Makali Amman Koil Athalur, [AIR 1998 SC 750 : (1998) 9 SCC 286 (paras 20 21)], State (NCT of Delhi) Vs. Union of India, [(2018) 8 SCC 501 (Para 604.1)], Union of India and another Vs. Mohit Mineral Private Ltd., [(2019) 2 SCC 599 (Paras 50 and 51)], Council Of Architecture vs Mr. Mukesh Goyal, [(2020) 16 SCC 446 (para 43)], M. Ravindran vs. The Intelligence Officer, Directorate of Revenue Intelligence, [ (2021) 2 SCC 485 (paras 17.10)], Ghanshyam Mishra and so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statement of Objects and Reasons and the Preamble are taken to be correct and they justify the enactment of law for the purpose sought to be achieved. (Emphasis supplied by us) 17. The 101st Amendment to the Constitution of India and the CGST Act, 2017 including its Statement of Objects and Reasons have been well considered by Hon'ble Supreme Court in Union of India and another Vs. Mohit Mineral Private Ltd., (2019) 2 SCC 599 (Paras 51 and 56) and it has been held that the words with respect to used in Article 246-A of the Constitution of India are words of expansion. It has been further held that the power to make the laws under Article 246-A is not general power related to general entry rather it specifically relates to goods and services tax and the Constitution 101st Amendment Act, 2017 was passed to subsume various taxes, surcharges and cesses into one tax. Thus, the 'scope of supply' as provided in Section 7 of the CGST Act which includes sale also, is well within the legislative power of the Parliament conferred under Article 246-A of the Constitution of India. 18. In the case of Union of India vs. VKC Footsteps (India)(P.) Ltd., (2022) 2 SCC 603 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislatures under Article 246-A is termed as a 'simultaneous power' to differentiate it from the constitutional design on exercise of concurrent power under Article 246, the latter being subject to the repugnancy clause under Article 254. The constitutional role and functions of the GST Council must be understood in the context of the simultaneous legislative power conferred on Parliament and the State legislatures. It is from that perspective that the role of the GST Council becomes relevant. (v) One of the important features of Indian federalism is 'fiscal federalism'. A reading of the Statement of Objects and Reasons of the 2014 Amendment Bill, the Parliamentary reports and speeches indicate that Articles 246-A and 279A were introduced with the objective of enhancing cooperative federalism and harmony between the States and the Centre. However, the Centre has a one-third vote share in the GST Council. This coupled with the absence of the repugnancy provision in Article 246-A indicates that recommendations of the GST Council cannot be binding. Such an interpretation would be contrary to the objective of introducing the GST regime and would also dislodge the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force of Ordinance 6 of 1969 bad been made by taking into account the rent restriction provisions of the Bombay Rent Act. Paragraph 2B and some other paragraphs of petition No. 233 of 1970 before the High Court, to which our attention was invited by Mr. Tarkunde, also do not contain that averment. No material on this factual aspect was in the circumstances produced either on behalf of the petitioners or the Corporation. The High Court, as already observed, decided the matter merely on the basis of a presumption. It is, in our opinion, extremely hazardous to decide the question of the constitutional validity of a provision on the basis of the supposed existence of certain facts by raising a presumption. The facts about the supposed existence of which presumption was raised by the High Court were of such a nature that a definite averment could have been made in respect of them and concrete material could have been produced in support of their existence or non-existence. Presumptions are resorted to when the matter does not admit of direct proof or when there is some practical difficulty to produce evidence to prove a particular fact. When, however, the fact to be established is of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (para 18), Hon'ble Supreme Court observed that an Act made by legislature represents the will of people and cannot be lightly interfered with. In Zameer Ahmad Latifur Rehman Sheikh Vs. State of Maharashtra and ors., J.T. 2010 (4) SC 256 (para 34), Hon'ble Supreme Court observed that every legally possible effort should be made to uphold the validity. In Greater Bombay Co-operative Bank Ltd. Vs. United Yarn Tex (P) Ltd. and others, (2007) 6 SCC 236 (paras 82 to 85), Hon'ble Supreme Court observed as under: 82. The constitutional validity of an Act can be challenged only on two grounds, viz. (i) lack of legislative competence; and (ii) violation of any of the Fundamental Rights guaranteed in Part III of the Constitution or of any other constitutional provision. In State of A. P. Ors. v. McDowell Co. Ors. [ (1996) 3 SCC 709], this Court has opined that except the above two grounds, there is no third ground on the basis of which the law made by the competent legislature can be invalidated and that the ground of invalidation must necessarily fall within the four corners of the afore-mentioned two grounds. 83. Power to enact a law is derived by the State Assem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. It is also well- settled that the courts will be justified in giving a liberal interpretation in order to avoid constitutional invalidity. A provision conferring very wide and expansive powers on authority can be construed in conformity with legislative intent of exercise of power within constitutional limitations. Where a Statute is silent or is inarticulate, the Court would attempt to transmutate the inarticulate and adopt a construction which would lean towards constitutionality albeit without departing from the material of which the law is woven. These principles have given rise to rule of reading down the provisions if it becomes necessary to uphold the validity of the law. 85. In State of Bihar Ors. v. Bihar Distillery Ltd. Ors. [(1997) 2 SCC 453], this Court indicated the approach which the Court should adopt while examining the validity/constitutionality of a legislation. It would be useful to remind ourselves of the principles laid down, which read: (SCC p. 466, para 17): The approach of the court, while examining the challenge to the constitutionality of an enactment, is to start with the presumption of constitutionality. The court should try to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, Court may take into consideration matters of common knowledge, reports, preamble, history of the times, object of the legislation and all the other facts which are relevant. It must always be presumed that the legislature understands and correctly appreciates the need of its own people and that discrimination, if any, is based on adequate grounds and considerations. The courts will be justified in giving a liberal interpretation in order to avoid constitutional invalidity. Where a Statute is silent or is inarticulate, the Court would attempt to transmutate the inarticulate and adopt a construction which would lean towards constitutionality albeit without departing from the material of which the law is woven. These principles give rise to rule of reading down the provisions if it becomes necessary to uphold the validity of the law. While examining the challenge to the constitutionality of an enactment, the court is to start with the presumption of constitutionality and try to sustain its validity to the extent possible. The court cannot approach the enactment with a view to pick holes or to search for defects of drafting, much less inexactitude of language employed. An act ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, Taxes on lottery, betting and gambling; and State cesses and surcharges in so far as they relate to supply of goods or services. Thus, overall reading of 101st Amendment to the Constitution of India leaves no manner of doubt that Article 246-A and other relevant provisions were enacted by the Constitution (101st Amendment) Act, 2016 so as to bring the taxes on purchase and sale of goods, duties on excise and entertainment tax etc. under one umbrella by empowering the Parliament and the State Legislature to enact laws with respect to taxes on supply of goods and services. (vi) The 101st Amendment to the Constitution of India and the CGST Act, 2017 including its Statement of Objects and Reasons have been well considered by Hon'ble Supreme Court in Union of India and another Vs. Mohit Mineral Private Ltd., (2019) 2 SCC 599 (Paras 51 and 56) and it has been held that the words with respect to used in Article 246-A of the Constitution of India are words of expansion. It has been further held that the power to make the laws under Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso. Thus, the Parliament does not lack legislative competence to enact Section 7 of the CGST Act levying tax on supply of goods or services or both. Likewise, in view of Article 246-A of the Constitution of India, State Legislature does not lack legislative competence to enact Section 7 of the UPGST Act. (ix) The philosophy of GST is a consumption and destination-based tax. (x) The provisions of Section 7 of the CGST Act/UPGST Act is not ultra vires to the Constitution of India. 26. The judgments relied by the learned counsel for the petitioners have no relevance on the facts of the present case and the constitutional and statutory provisions in question. Therefore, those judgments are of no help to the petitioners. Natural Justice:- 27. So far as the challenge to the impugned assessment order is concerned, we find that the copies of all relied upon documents have been given by the Assessing Authority to the petitioner and he has also been allowed to inspect the records. Opportunity of hearing is also reflected from the notices including the notice dated 05.01.2022 in which the date, place and time for appearance has been informed to the petitioner by the Deputy C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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