Allowed

M/s.Sls Engineers v. Assistant Commissioner (St) and 3 others

Telangana HC19 Jun 2023WP/7893/2023

Case brief

AI extract

What is this about?

The High Court allowed a writ petition challenging a revision order under the Telangana VAT Act. Striking down the Second Amendment Act, 2017 as unconstitutional for lacking legislative competence post-GST, the Court quashed the revision order and set aside the notices issued thereunder.

What did the court decide?

The impugned revision order dated 19.04.2022 passed under Section 32(3) of the VAT Act was set aside and quashed.

M/s.Sls Engineers Vs Assistant… — Constitutional and Fundamental Rights | Telangana HC (2023)

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[³³¹¹ ]

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction)

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MONDAY, THE NINETEENTH DAY OF JUNE TWO THOUSAND AND TWENTY THREE

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PRESENT

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THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE N.TUKARAMJT

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WRIT PETITION NO: 7893 OF 2023

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Between:

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!(l 9!9^{Elgineers, H.No.+1-18,Snehapuri Cotony, Nacharam, Hyderabad-} 500. 076, Rangjr Reddy District, Telangana, reprbsented by its-Managing Partner, Smt T.Rupa.

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...PETITIONER

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Assistant Commissioner (ST), Nu#Brn 1 Circte, formerly known as Commercial Tax Officer, Nacharam Circle, Hyderabad.

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Deputy Commercial Tax Officer - ll, Nacharam Circle, Hyderabad.

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!.^{pgguty-C_oqmissioner (CT), Saroornagar Division,niOeraOaO.}

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State of Telalgana, Represented by ita^principal Seiretary, Revenue (CT) Department, Telangana Secretariat, Hyderabad.

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...RESPONDENTS

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Petition under Article 226 of the constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ or order or direction particularly one in the nature of writ of Mandamus setting aside the revision order passed by the third respondent in R.R.No.23l2021-22, vide D.C.No.263, dated 19.04.2022tor the tax period March, 2014, to March, 2016, as illegal, arbitrary, vitiated against the principles of natural justice, unsustainable in law, barred by limitation, and without jurisdiction.

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lA NO: 1 OF 2023

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to pending disposal of the Writ Petition, grant stay of all further proceedings arising in pursuance of the revision order passed by the third respondent in R.R.No.23l2021-22, vide D.C.No.263, dated 19.04.2022 tot the tax period March, 2014, lo March, 2016.

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Counsel for the Petitioner: SRI S.SURI BABU

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Counsel for the Respondents: SRI K.BHASKAR REODY, AGP FOR

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COMMERCIAL TAXES

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The Court made the following: ORDER

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THE HON'BLE THE CHIEF JUSTICE UJJAL BHI,IYAN

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AND

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THE HON'BLE SRI JUSTICE N.TI,'KARAMJI

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W.P.No.7893 of 2023

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ORDER.' eeriLe Itot ble ie cht([ JLtsn..]^t,tlt1l Bhr4an)

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Hearrl Mr S.Suribabu, learned counsel for the^petitioner and Mr.K.Bhaskar Reddy, Iearnecl Assistant Government^{Pleader for} Commercial Taxes appearing on behalfofthe^respondents.

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By filing this pctition under^{Article 226 ofthe} Constitution ol'India,^{petitionerhas assailed legality and validity of} the revisional older dated^{19.O4.2022passed by respondentNo.3} under Section 32(21 of the^{Tclangana Value Added Tax Act, 2005} (briefly 'the VAT Act' hereinaltcr).

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Petitioner is a registcred dealer^{under the VATAct and is} engaged in the business ol'^{purchase and sale of valves and} electrical goods etc. For thc^period April,^{2016 to June,2077,} assessment ordcr was passe<l by respondent^{No.2 on 31.08.2016.}

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On lhe ground thrlt assessing authority had^allowed excess input tax credit antl^{t I'rat} there^{was short lery of tax,} revisional procee'dings wcre^initiated by^{respondentNo.3 and in} this connect.ion, a revision sl'row cause notice dated 06.09.2021

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was issued to the petitioner. It was thereafter that^{the impugned} order dated 19.04.2022 came^{to be passedby respondentNo.3'}

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Learned counsel for the^{petitioner submits that limitation} for revision is four years from the date^{of the assessment order. In} this case, the impugned revisional order came^{to be passed beyond} the iimitation of four years. He submits that^{respondent No.3 had} relied upon the amendment to Section 32(21 of the^{VAT Act made} by Telangana Value Added Tax (Second Amendment) Act, 2Ol7 whereby the period of limitation of four years was extended to six years.

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However, this amendment has been stuck down by this Court as unconstitutional in M/s. Sri Sri Engineering Works v. Deputy Qgrnrnissiollgr (CTfl. Therefore, the impugned order is unsustainable and is liable to be set aside.

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I*arr,.ed counsel for the respondents agrees that the impugned order was passed beyond four years but within six years.

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If that be the position, we are of the view that this could I have been done only by relying upon the amended provision.

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| 2022 SCC Online TS 1367

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In M/s. Sri Sri Engineering Works (supra), this Court has

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held as follou,s

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"As rtoticecl aboue, the Ordinance was promttlgatud bg tlrc Got,entor on 17.06.2017. As per preamble to the Orditruntce, it is stated that Gouenunerrt of lndia hctd enacted the CGST Act and Gouentnent of Telanganct had enacted^{the TGSTAct.} But both the Acts hod not been brought^into force' Refernng b the prouisiotts of the VAT Act,^{it is stated} that it empotuers the Slete^{Couentment to leug tax on} alcoholic liquor for hrttran consumption^andon petroleum products. According to the^Constitution Amendment Act, Leuy of tax on^{those petroleum} produt:ts attd alcoholic tkluor for human^consumptioh is tuitlin tlrc competenct' of the^{State Legislature. It} further^{stated thatrepeolof the VATAct except in} respect of tlrc goods inc'luded in^{Entry54 of List II of} the VII Schedule by the^{TGST Act, tuhich uas} Aet^to be brougltt into forcc, tuould not^{affect anA} inuestigation, inquiry, w'ification^{(includingscruting} and audit), assessme,rt^{proceedings,adjudication} and ang cther legal^proceedings or^{recouery of} arrears or remedg in respect of any such^tax; surcharge, penaltA, fittt;, interest, right,^piuilege, obligation, iiabilitg, forf^iture or^{punishmentand ony} such inuestigation- etc., may be instituted,^continued or enforced and any srtr-'lt tax, surcharge^{etc, may be} leuied or irrLposed as if those Acts had not been so amended o. repealed. Such repeal lLould not also affect any proceedings including those relating to appeal, reuision, reuietu or reJerence instituted. before,

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{:.",-]

on or after the appointed dag under the said amended Acts or repealed Acts and such proccedings shall be continued under th.e amended Acts or repealed Acts. Therefore, it utas considered necessory to strength,en certain proui.sions of the VAT Act to ouercome ang limitatiors to trclp effectiue reuenue realization. Ttrcrefore, it utas decided to amend certain prouisions of the VAT Act bg undertaking a legislation. Since it was decided to giue effect to such deci-sion immediatelg and as tle Legislature of Telangana u)as not in session, therefore, tfle Gouentor, in exercise of pouers conferred bg Clause (1) of Article 213 of tlrc Constitution promulgated the Ordinance uhich basicallg extended the limitation from four Aears to^sr..rc Aears in respect of assessmenrs, reassessments, reuision etc.

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It is not necessary for us to go into the aspect as to whether the Ordinonce uas laid before the Assemblg or not and as to tohether it ltad ceased. to operate after six seeks from reassembly of the Legislature. It may also not be necessary for us to labour on the aspect tLnt the Second Amendment Act though pubtished, in the Telangana Gazette on 02.12.2017, was deemed to haue come into force uith effect from 17.O6.2017 i.e. the date when the Ordinance u)as promulgated. Thjs is because Iegislatiue competence cannot flow from an earlier legislation, be it an ordinance or an enactment. Legislatiue competence must be .traceable to the Constitution. Therefore, no reliance can be placed. on the Ordinance in support of the contention that the

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Second Amendment A<t lnd deiued. competence from the^()rdirtance since it uas a continuation of the lau.t and harl come into force from the date of prom.ulgomatiort of tl te Ordinance. Such a line of reasoninq, in our considered uietu, has no legal subsfrzncr:. Therefore, it is immoteial that the Ordinana, LUas not chollerryed in Court.

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That apat1, the' ostensible objectiue of the Ordin.ance, as could be discerned from the preamble is to saue any inuestigntlon, assessment, recouery of dues, leqal proceedings etc., pending on the date of coming int o force of the Constitution Amendment Act uthich is perfectly unde.rstandable and ualid. But that does not mean that lintitatiort across the board could be extended by uag o.f amendment to initiate fresh proceedirqs, srzch a.s, J'resh reuision proceedings, u.thich otlertuise had becorne time banred.

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With effect front 16.09.2016 the Constitution u)as cLntended by uolue of the Constitution Amentlm<:r t Act. While Afticle 246A was inserted immediately after Afticle 246, the earlier Entry 54 of List II tlas substitutecl br1 the neu Dntry 54, in the process denuding the Stntes from moking ony law except on the sale oJ' petroleum crude, high speed diesel, mol.or spirit (petrol), natural gas, auiation turbine fu el and alcoholic liquor for human consuntptiort. Thus tlrc States did not haue the competence to make latu to leuA VAT or such tax on ang gootls other than the aboue goods. Sectton 19 of the Constitution Amendnent Act, which can be

construed to be a sunset clause, prouided for a usindow of one year to remoue tte lous inconsistent with the Constitution Amendment Act either bg utay of amendment or bg utay of repeal. The uindotu peiod was giuen to remoue the inansistencies; not to prolong the inconsktencies. But uhat th.e State of TelarLgana did by promulgating the Ordinance uas not to remoue the inconsistencies in tLte VAT Act. As mentioned aboue, the Ordinance, in fact, introduced certain prouisions ertending limitation to enable initiation of fresh proceedings, such as, reuistonal proceedings which are completelg inconsistent uith the scheme of the Constitution Amendment Act. On this ground itself, the Ordinance can be said to haue no legal consequence.

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Howeuer, bg the Second Amendment Act, more particularlg, bg Section 7 thereof, the Ordinance was repealed. As alreadg stated aboue, the Second Amendment Act cannot deiue legislative competence from^{th.e Ordinance.} It must deiue tegislatiue mmpetence from the Constitution. Unfortunatelg, after substitution of Entry 54 of List II, State utas denud.ed of such competence traceable to Article 246. As a standalone legislation, it cannot deiue legitimacg traceable to Article 246A of the Constitution as tuell. 1'h.erefore, the Second Amendment Act made ort 02.12.2017 though giuen retrospectiue effect from 17.06.2017 cannot be sustained as the same is deuoid of legislatiue competence.

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lVeerlless to sa!j, trtall back in 1964, Supreme Coutl in A.Hajee Abdui Shukoor (1 supra) uos cateqoical in holding thot u.,hile the State Legislature is free to enact lauts tultich could haue retrospectiue operation, its competence to make a law for a certain past period ttoulcl, hou,cuer, depend on its present Iegislatiue pouer and nol on what it^{possessedat the} peiod of time uthen tlrc enactment tuould beⁱⁿ operation.

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InsoJ ar the decisions relied upon^{by the learned} Aduocate^(]eneral are^{concertted,tue haue already} discussed^,uhA those urould^{not be applicableto the} facts^{and grounds of challenge made in this bunch of} utrit petitiorts.

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Finalty u)e tnaA also look^{into the intentionof} the Parlicrment in^{criacting theConstitution} Amendment Act. This is^{because it uould giue us a} clear irlea as to uhy the^{Constihttion Amendment Act} uas brouqlft about and^{tuhu the Second Amendment} Act carLn.ot lrc sustained^{beitg completely inconsistent} with the scheme of the^{Constitution Amendment Act} and beirtg denuded of^{rts legislatiue competence' In} Baiju A.A. (1O supra),^{KeralaHigh Courl held os} follou.ts:

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There is yet anotlrcr^{aspectof the matter' It} is trite that ruhen a^{Court judgesthe} constitutionalitg of cr legislatiue^{enactment it} should try lo susfcirz the ualiditg of^the enactment to the extent possible and it^should strike dctutn the laLu ctnly tuhen it is impossible to sustann it, State of Bihar u. Bihar Distillery - IMANU/sC/0ss4/^{19t)7 : JT (1996) 10 SC 854].}

At the same time,^{the Court must proceed to} determine the intention^{of the Parliament,not} onlg from the language^{used in the statute but} also from surrounding^{ciranmstances and an} understanding of^{the mischief that uas sought} to be remedied bg the statute'^{Wten one} applies the said test to the^{euentsthattook} place after the CAA, 2016, it cannot but^be noticed that the uery^{purpose of the CAA wasto} bring about a change in^{the sgstem of indirect} taxation in our country through^{the introduction} of a Goods and Seruice Tax, and^{the phasing} out of the multitude of indirect tox^leuies, including ualue added taxes, that u.tere^leuied and collected bg the Centre and the^States. Section 19 of the CAA 2016, uthich is^th.e sunset clause in the said enactment, enuisaged the continuation of the erstuhile sgstem of taxation for^{a period of one gear} from^{the date of} enactment of the CAA or tiII such time as tLrc State Legislatures amended or repealed their respectiue VAT legislations, uhicheuer utas earlier. Wlen tLe State Legisloture repealed the KVAT Act, uhile simultaneouslg bringing into force^{tLrc neu StoteGST Act, tuith o sauings} clause of limited operation, it effectiuely acknouledged the absence of ang pouer to Iegislate thereafier on the subject of tax on sale or purctnse of goods, except in respect of the limited commodities for which the said pouer u.tas retained under the Constitution. In respect of all oth,er commodities, tte legislatiue pouer of tLrc State uas onlg in respect of taxes on the supplg of goods or seruices or botlq a pou)er that had to be exercised simultaneouslg utith , the Parliament and not uniloterallg or exclusiuelg. TLus, at the time of repeal of the KVAT Act, and simultaneous enoctment of the State GST Act with a sauings clause therein, tte sauings clause operated onlg to saue rights, piuileges, immunities, action taken etc under tLe erstwhile enactment as it stood at the time of its repeal, uhich included the amendments brought in through the Keralg Finance Act, 2O17. There could not haue been ang further legtslatiue exercise bg the State legislature in relation to the repealed KVAT Act.

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W<, are in respect.fitl agreement uith the uieu.,s expresserl bg the KercLla High Court in Baiju A.A (jO supra). Irrtention of Porlktment in usheing in the GST regirne through tlrc Ctntstitution Amendment Act ond enacttnerit of the CGST Act and simultaneous enactment of uanious Slafe GSI Acts by the State Legis;Iatures is to auoid multiplicity of taxes bg subsuming those indirecL taxes in a single tax called GST. It is in this context ute haue analAzed Section 19 of the Constitution Amendment Act. Vieuted thus the amendments brought in bg the Second Amendment Act, cLs cli.scrzssed aboue, are uhollg inconsistent with the scheme of the Cottstitution Amendment Act read tDith the CGST Act and the TGST Act.

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Thu.s, upon thorough consideration of all aspects o-f the matter. we haue no hesitation in holdirLg that the Second Amendment Act is unconstitutional beirtg deuoid of legislatiue competence. It is accordinglg declared as such. Consequerttly, the notices issued and orders passed under Section 32 (3) of the VAT Act tuhich haue been impugned in the present batch of ulit petitions are hereby set aside and qtLashed."

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Following the aforesaid decision, we have no other alternative but to set aside the impugned revisional order dated 25.10.2022 passed by rcspondent No.3.

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1 l. Writ Pel ition is aci:ordingly allowed

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r.. --s

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As a sequel, miscellaneous^{petitions,pending} if any,^stand

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closed. However, there shall be no order^{as to costs.}

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SD/. C. PRAVEEN KUMAR

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