Supreme Court Upholds Constitutional Validity Of 2013 Amendment To Section 29 Of Punjab VAT Act

The Supreme Court has upheld the Constitutional validity of the 2013 amendment to Section 29 of the Punjab Value Added Tax Act, 2005 (PVAT Act).

The Court was hearing a batch of Civil Appeals preferred against the Judgment of the Punjab and Haryana High Court.

The two-Judge Bench comprising Justice B.V. Nagarathna and Justice Satish Chandra Sharma held, “… we hence do not find any reason to interfere with the impugned orders of the High Court. In the circumstance, the Civil Appeals stand dismissed. We reiterate the liberty reserved by the High Courts in Amrit Banaspati.”

The common question of law arising in the Appeals before the Bench was whether the amendment to Section 29 of the PVAT Act by the Punjab Value Added Tax Act, 2013 is constitutionally valid or not.

Senior Advocates Sujit Ghosh and Arvind Datar represented the Appellants while ASG Archana Pathak Dave and Senior Advocate (AAG) Shadan Farasat represented the Respondents.

Brief Facts

All the impugned Orders in the Civil Appeals followed result in Amrit Banaspati Company Ltd. v. State of Punjab & Others (Civil Writ Petition No.21811 of 2014), which was disposed of by a separate Order and Judgment in 2015 by the Punjab and Haryana High Court. An Appeal against the said Judgment before the Supreme Court by the assessee was dismissed as withdrawn in 2016. The amendments to Section 29 of PVAT Act were challenged by the Appellants before the High Court on the grounds that i) they were prospective; and if not, then ii) they reverse/over-rule several Judgments of the High Court; iii) Explanation (2) is contrary to principles of natural justice; iv) they violate Articles 14 and 19 of the Constitution; v) they extend the period of reassessment even where the original period for assessment has expired; and vi) the proviso to the amended Section 29(4) is contrary to the main Section.

The High Court had observed that the amendment cannot by any stretch of imagination be held to be so unreasonable or excessive as to warrant it being declared invalid. On a survey of cases, it highlighted that the principle was that the proceedings which have attained finality under the existing law due to a bar of limitation cannot be held to be open for revival unless the amended provision is clearly given a retrospective operation so as to allow unsettling of proceedings, which had already been concluded and attained finality. It was further observed that the purpose and effect of the entire amendment was to obviate the consequences of the proviso to the unamended section. Resultantly, the High Court dismissed the Writ Petitions filed by the Appellants.

Reasoning

The Supreme Court in view of the above facts, observed, “To the question whether by an amendment the Legislature could extend the period for assessment even though the original period for assessment had expired, the High Court relied on the judgment of this Court in Additional Commissioner (Legal) & Another v. Jyoti Traders & Another, (1999) 2 SCC 77, to answer in the affirmative. In that case, the impugned provision before amendment provided for a limitation of four years and the amended provision increased the same to eight years.”

The Court noted that the assessment year in that case was 1985-86 and the amendment came into force in 1991 and hence, the four-year period originally prescribed would have expired prior to the date of the amendment; despite the same, the Apex Court held that the amendment was applicable to the assessees.

“… liberty is reserved to the appellant/assessee(s) to avail the appellate remedy if so advised within a period of three months from today. If such an appellate remedy is availed by the appellants herein, the State as well as the Appellate Authorities shall not raise the issue of limitation. It is needless to observe that the appeals so filed shall be disposed of in accordance with law”, it further ordered.

Court’s Directions

The Court, therefore, issued the following directions –

(a) Insofar as the State of Punjab as well as the Union Territory of Chandigarh are concerned, the Judgment of the Court in State of Punjab v. Nokia India Pvt. Ltd. (2014) is in favour of the Revenue and bearing in mind the quantum of taxes that have to be paid by the appellant assessee(s), it does not intend to consider the correctness, or otherwise of the said Judgment as sought to be persuaded by Senior Counsel Datar appearing for the Appellants.

(b) The Appellants shall pay the outstanding tax dues and the said payment shall be restricted only to the principal amount of tax dues and shall not include interest and penalty insofar as these cases are concerned.

(c) Since the Judgment in Nokia case is now being restricted to the Act applicable in State of Punjab and the Act applicable in the Union of Territory of Chandigarh, the said Judgment may not be a binding precedent insofar as other States’ enactments are concerned.

(d) In case any aggrieved party before the High Court intends to avail the appellate remedy (alternate remedy), the issue of limitation shall not be raised by the appellate authority or by the respondent-State subject to the further Orders to be passed by the said High Court.

(e) The Court restricted the ramification and implication of Nokia Judgment to the relevant assessment years in the State of Punjab and Union Territory of Chandigarh only.

(f) The Court reserved the liberty to any aggrieved party to contend that the Judgment in Nokia case is not applicable and is distinguishable in any other State.

(g) The Registry of the Court shall intimate this Order to the Registry of the Andhra Pradesh High Court and also to take steps for smooth transfer of these cases so as to be restored on the file of the Andhra Pradesh High Court as expeditiously as possible.

Accordingly, the Apex Court disposed of the Appeals and requested the High Court to expedite the hearing and disposal of the cases.

Cause Title- M/s. Naresh Kumar Gupta v. State of Punjab & Another (Neutral Citation: 2025 INSC 719)

Appearance:

Appellants: Senior Advocates Sujit Ghosh, Arvind Datar, AORs Manju Jetley, Sushil Balwada, Santosh Kumar, Mannat Waraich, Advocates Sanchar Anand, Aman Kumar Thakur, Abhishek Bhardwaj, Aman Bhardwaj, Sandeep Goyal, Aakriti Gupta, Nitin Bansal, Akriti Goel, Puneet Agarwal, Mansi Khurana, Chetan Shukla, Ashray Behura, Ananya Goswami, and Arya Mittal.

Respondents: ASG Archana Pathak Dave, Senior Advocate (AAG) Shadan Farasat, DAG Talha Abdul Rehman, AORs Ajay Pal, Shreekant Neelappa Terdal, Sahil Bhalaik, Nupur Kumar, Jagjit Singh Chhabra, Advocates Varun Chugh, Krishna Kant Dubey, Bhuvan Kapoor, Tushar Giri, Siddharth Anil Khanna, Ritik Arora, Shivam Mishra, Gouttam Polanki (also listed as Gowtham Polanki), Sewa Singh, and Aman Naqvi.

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