Supreme Court Adjudicates Appeals Arising From Amendments In Value Added Tax Acts In Three Different States
A Supreme Court Bench of Justice S Ravindra Bhat and Justice Aravind Kumar has adjudicated appeals arising from the amendments to the VAT Acts in three different States.
Senior Advocate Arvind Datar appeared for the State of Telangana, while ASG Balbir Singh appeared for the State of Maharashtra. Senior Counsel Kapil Sibal, Senior Counsel S Ganesh, Senior Counsel Nankani, Senior Counsel Soparkar, and Counsel Sujit Ghosh appeared for the assessee respondents.
In this case, three sets of appeals arise from amendments to Value Added Tax (VAT) Acts in different Indian states. In the Telangana batch, the state amended its VAT Act through an ordinance, which extended the period for reassessments and was later enacted into law. However, the Telangana High Court invalidated this amendment, contending that it exceeded the state's scope to amend its VAT Act and that it could not be confirmed after a certain date.
The Maharashtra batch concerns the Maharashtra VAT Amendment Act, initially enacted in 2017, which was read down by a court decision. An amendment sought to reverse this judgment and grant it retrospective effect. Appeals were filed by the aggrieved parties after their writ petitions were dismissed.
The Gujarat batch pertains to the introduction of Section 84A in the Gujarat Value Added Tax Act in 2018. This amendment, with retrospective effect, allowed for the exclusion of time spent in litigation and reopening of finalized assessments. The Gujarat High Court invalidated this amendment, citing a lack of legislative competence and manifest arbitrariness. These cases collectively raise issues regarding the legality and constitutionality of state-level VAT amendments in India.
On hearing the parties, the Apex Court drew the following conclusions:
(i) Section 19 of the Constitution (101st Amendment) Act, 2016 and Article 246A enacted in exercise of constituent power, formed part of the transitional arrangement for the limited duration of its operation, and had the effect of continuing the operation of inconsistent laws for the period(s) specified by it and, by virtue of its operation, allowed state legislatures and Parliament to amend or repeal such existing laws.
(ii) Since other provisions of the said Amendment Act, had the effect of deleting heads of legislation, from List I and List II (of the Seventh Schedule to the Constitution of India), both Section 19 and Article 246A reflected the constituent expression that existing laws would continue and could be amended. The source or fields of legislation, to the extent they were deleted from the two lists, for a brief while, were contained in Section 19. As a result, there were no limitations on the power to amend.
(iii) The above finding is in view of the vacuum created by the coming into force of the 101st Amendment, which resulted in deletion of the heads of legislation in the two lists aforesaid.
(iv) The amendments in question, made to the Telangana VAT Act, and the Gujarat VAT Act, after 01.07.2017 were correctly held void, for want of legislative competence, by the two High Courts (Telangana and Gujarat High Court). The judgment of the Bombay High Court is, for the above reasons, held to be in error; it is set aside; the amendment to the Maharashtra Act, to the extent it required pre-deposit is held void.
In light of the same, the appeals filed by the States of Telangana and Gujarat were dismissed, and the appeals of the assessees against the judgment of the Bombay High Court succeeded and were allowed.
Cause Title: The State of Telangana & Ors. vs M/s Tirumala Constructions