M/S.Titan Intech Limited vs. The Assistant Commissioner (CT) Ltu

The Court made the following: ORDER

THE HON'BLE THE CHIEF JUSTICE UJJAL BHTIYAN AND THE HONOURABLE MRS JUSTICE SUREPALLI NANDA WRIT PETITION No.24455 of 2022 ORDER: per ttw Hon'bte the Chief Justice ujjat Bhugan) Heard Mr. Shaik Jeelani Basha, learned counsel for the petitioner and Mr. K. Raji Reddy, learned Senior Standing Counsel, Commercial Tax for the respondents.

A HIGIH COURT DATED:0610712022 ORIDER W.['.No.24455 of 2022 .. r) I B SEP 2LfI? ALLOWING THE WRIT PETITION WITHOUT COSTS ))_ I I q

3 THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SMT. JUSTICE P.MADHAVI DE\rI WRIT PETITION Nos.7893. 9550. L6527.16853. 16896. 16903 0F 2020, 494,712A.7054.9622. L0046. tl4t4. 11996, L2778, 15215, L5a22,15841, 15853, L5942. 17095. L7LO2, L73L4,17988. 18258. 20079,207LO. 2078A.2L542, 2265L, 22940,23336. 23386,242a2. 25561, 2729+, 27533, 28797, 29743, 32L29,32373, 32653 32697 and 34054 OF 2O2L COMMON JUDGMENT & ORDER: (Per Hon'ble the Chief Justice Ujjal Bhuyan) Issue raised in all the writ petitions being identical, those were heard together and are being disposed of by this common judgment and order.

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l0 Supreme Court involving a question of law having a direct bearing on the order or proceeding in question- 1O.

t2 246-A carneto be inserted' Article 246-A reads as under: "246A' Speciot Prouision uith respect to goods and seruices tax-- (1) Notr'uitlstanding anything coryt3inld in articles 246 and 254, Parliamen', ""i"i"'iit"iii iti""t (2)' the -Lesislature of euery Slate, hnue po-"'to"iiil liuts tt'tith respect to goods and serurces ,i'-iiio,.i ag the union or bg such stote' (2) Portiament has exclusiue pooer to moke lanus tuith respect to good's and'";;i"t;';; *heie the supplu of goods' or of seruices, o' both tuk;: ;i;;;;; 't* course of inter-state trade or after Article 246 of the Constitution of India a new Article Act, com.merce. Tar Council." t2.1. been omitted

l.l by each Stote GouenTment ..-..Members (3) The Members of the Goods and Seruices Tax Councit refened to irt sub-clause ( c ) of the clause (2) shall, as soon os may be, choose one amongst themselues to be the Vice-Cha.irperson of the Council for such period as theg mag decide. (4) The Goods and Seruices Tax Council shall make reaommendations to the Union and the State on-' (a) tLe toxes, cesses and surchnrges leuied bg the Union' the States and the local bodies which mag be subsumed in the goods and seruices tax; (b) the goods and seruices that maA be subjected to, or exempted from the goods and seruices tax; ( c ) modet Goods and Seruices Tax Laus, pinciples of teuy, apportionment of Goods and Seruices Tax leuied on supplies in the course of inter-state trade or commerce under article 269-A and the principles that gouem the place of supplg; (d) the threshold limit of turnouer belou which goods and seruices mog be exempted from goods and sentices tax; (e) the rates including floor rates uith bands of goods and seruices tax: (J) ang special rate or rotes for o specifred penod, to rqise additionat resources duing any natural calamitA or disaster; (g) speciat prouision tuith respect to the States of Antnachal Pradesh" Assam, Jammu and Kashmir, Manipur, Meghalaga, Mizoram, Nagaland, Sikkim, Tipura, Himachal Pradesh and Llttarakhand; and (h) ang otler matter relating to tlae goods ond seruices tax, as the Council mag decide. (5) The Goods and Seruices Tax Couttcil shall reammend th-e date on u-thich the goods and seruices tax be leuied on petroleum crude, high speed diesel, motor spiit (commonlg knou.tn o-s petrol), natural gas and auiation turbine fuel. (6) White discharging the functions confened bg this arlicle, the Goods and Seruices Tox Council shall be Wided bg the need for a hnrmonized structure of goods and- seruices tax and for the deuelopn'Lent of a harmonised national market for goods and seruices. (7) One-half of the total number of Members of the Goods and Seruices Tax Council shall constitute the Elorum at its meetings.

l5 (8) The Goods and Seruices Tax Council shall determine the procedure in the performance of its functions. (9) Euery decision of the Goods and Serutces Tax Council shall be taken at a meeting, by a majoitg of not less than three fourths of the ueighted uotes of the members present and uoting, in accordance with the follou-ting pinciples, namely:-- (a) the uote of the Centrol Couemment shall be a weightage of one-third of the total uotes cast, ond (b) the uotes of all the State Gouemments taken together shall haue a uteightage of tuLo-thirds of the total uotes cost, in that meeting. (1O) No act or proceedings of tlle Goods and Seruices Tox Council sfutll be inualid merelg bg reason of-- (a) ang uaconcg in, or ang dekct in, the constitution of the Council; or (b) ang defect in the appointment of a person as a Member of the Council; or (c) ang procedural ineguloitg of the Council not affecting the meits of the case. (11) The Goods and Seruices Tox Council shall estoblish a mechanism to adjudicate ang dispute-' (a) bedteen the Gouernment of India and one or more States; or (b) betueen the Gouernment of India and ang State or States on one side and one dr more other States on the other side; or ( c ) betuteen two or more States, arising out of the recommendations of the Council or impleme ntation there of. "

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t7 competent authority or until expiration of one year from such commencement u,hichever is earlier.

l9 and collection of tax on inter-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto. Like the CGST Act, Central Government notified various dates as the date for coming into force of relevant provisions of the IGST Act, such as, 22.06.2O17 and Ol.O7 .2017 . Further, two more Acts were enacted by the Parliament post the Constitution (1O1st Amendment) Act, 20 16. 16. Legislature of the State of Telangana enacted the Telangana Goods and Services Tax Act, 2017 ("|GST Act' hereinafter) to make provision for lely and collection of tax on intra-State supply of goods or services or both by the State of Telangana. TGST Act received the assent of the Governor on 25-05.2017 and was first published in the Telangana Gazette on 27.O5.2O 17. Various provisions of the TGST Act came into force on various dates. While Sections 1 and 2 (definition clause) came into force on 22.06.2017, Section 174 which provides for repeal and saving came into force on Ol.O7 .2017. 17. As noticed above, Section 174 provides for repea-l and saving' As per Sub-section (1), save as otherwise provided in the TGST Act, on and from the date of commencement of the TGST Act, the VAT Act amongst other Acts except in respect of goods included in 20 Entry 54 of the State List of the VII Schedule to the Constitution were repealed. Sub-section (2) clarilies that such repeal would not revive anything not in force or existing at the time of such repeal or affect the previous operation of the repealed Act etc.

21 and audit assessment proceedings etc, which may be instituted, continued or enforced, whereafter tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if those Acts had not been so amended or repealed. That apart, such repeal would not affect any proceedings, such as, appeal, revision, review or reference which shall be continued under the amended Acts or repealed Acts. It was also mentioned that it was considered necessary to strengthen certain provisions of the VAT Act to overcome any limitations to help effective revenue realization besides preventing leakages. Accordingly, it was decided to amend the relevant provisions of the VAT Act by undertaking legislation. Since it was decided to give effect to the above decision immediately and since the Legislature was not in session, and as the Governor of Telangana was satisfied that circumstances exist which rendered it necessary for him to take immediate action; therefore, in exercise of the powers conferred by Clause (1) of Article 213 of the Constitution of India, the Governor promulgated Telangana Ordinance No.2 of 2017 called the Telangana Value Added Tax (Amendment) Ordinance, 2017, which came into force with immediate effect i.e., 17.06.2017. By the said amendment, certain provisions of the VAT Act, such as, in Section 2O (4), Section 21 (3), (4), (6), (7) and (8), Section 32 (31,

11 (6) and (7) and in Section 57, the words 'four years'or four years or six years' or 'three years' stood substituted by the words 'six yeals'.

24 (iv) in sub-sections(7) alrd (8), for the words four years or six years, as the case may be, the words 'six years' shall be substituted. In the principal Act, in section 31, in sub-section ( 1),- (i) the first proviso shall be omitted; (ii) alter omitting the first proviso, in the existing proviso, for the words "provided further that" the words "provided that' shall be substituted. In the principal Act, in section 32, in sub-section (3), (60 and (7), for the words 'four years' the words 'six years' shall be substituted. In the principal Act, in Section 57, in sub-section (5) and the proviso thereunder, for the words 'three years', the words 'six years' shall be substituted. The Telangana Value Added Tax (Amendment) Ordinance, 2017 is hereby repealed. 21 . Following the Second Amendment Act, as extracted above, relevaxt provisions of the VAT Act would now read as under: Section 2O (4): Every dealer shall be deemed to have been assessed to tax based on the return frled by him, if no assessment is made within a pcriod of six years from the date of filing of the return. Section 21 (3): Where the authority prescribed is not satisfied with a return {iled by the VAT dealer or TOT dealer or the return appears to be incorrect or incomplete, he shall assess to the best of his judgment within six years of due date of the return or within six years of the date of filing of the return whichever is later. Section 21 (4): The authority prescribed may, based on .rny information available or on any other basis, conduct a detailed scrutiny of the accounts of aly VAT dealer or TOT dealer and where €rny assessment as a result of such scrutiny becomes necessary, such assessment sha-I1 be made within a period of six years from the end of the period for which the assessment is to be made. Seclion 21 (6): The authority prescribed may reassess, where an assessment was already made under sub-sections (1) to (5) a-nd such assessment understates the correct tax liability of the dea-ler, within a period of six years from t-l-re date of such assessment. 4 5 () 7

)i Section 2l (7): Where any assessment has been deferred by the Commissioner under sub-section (5) of Section 32 or as the case may be, the Appellate Tribunal under the proviso to sub-section (4) of Section 33 on account of any stay order granted by the Appellate Tribunal or as the case may be, the High Court or the Supreme Court respectively, or whereas appeal or other proceedings is pending before the Appellate Tribunal or the High Court or Supreme Court involving a question of law having a direct bearing on the assessment in question, the period during which the stay order was in force or such appeal or proceedings was pending shall be exciuded in computing the period of six years as the case may be for the purpose of making the assessment. Section 21 (8): Where an assessment made has been set aside by arly Court or as the case may be the Appellate Tribunal, the period between the date of such assessment ald the date on which it has been set aside shall be excluded in computing the period of six years as the case may be, for making any fresh assessment. Section 31 (1): Any VAT dealer or TOT dealer or any other dealer objecting to any order passed or proceeding recorded by any authority under the provisions of the VAT Act, other than tlte order passed or proceeding recorded by any authority under the provisions of the VAT Act, other than the order passed or proceeding recorded by al Additional Commissioner or Joint Commissioner or Deputy Commissioner, may within 30 days from the date on which the order or proceeding was served on him, appea-l to such authority in the manner prescribed. Provided that an appeal so preferred shall not be admitted by the appellate authority concerned unless the dealer produces proof of payment of tax, penalty, interest or any other amount admitted to be due, or of such insta-llments as have been granted, and the proof of payment of twelve and half percent of the di{Ierence of the tax, penalty, interest or any other amount, assessed by the authority prescribed and the tax, penalty, interest or any other amount admitted by the appellant, for the relevant tax period, in respect of which the appeal is preferred. Section 32 (3): In relation to an order of assessment passed under the Act, the powers conferred by sub-sections (1) and (2) sha1l be exercisable only within a period of six years from the date on which the order was served on the dealer. Section 32 (6): Where an order passed under this Section has been set-aside by any court or other competent authority under the Act for any reason, the period between the date of such order and the date on which it has been so set-aside shall be excluded in computing the period of six years specifred in sub-section (3), for the purpose of making a fresh revision, if any, under this Section.

z6 Section 32 (7): Whcre any proceeding under this Section has been deferred on account of any stay order gralted by the Appellate Tribunal or the High Court or Supreme Court in any case, or by reason of the fact that an appeal or other proceeding is pending before the Appeliate Tribunal or the High Court of the Supreme Court in'r,oh"ing a question of law having a direct bearing on the order or proceeding in question, the period during which tJ e stay order was in force or such appeal or proceeding was pending sha.ll be excluded in computing the period of six years specified in sub- section (3), Ior the purposes of exercising the power under this Section. Section 57 (5): No order for the forfeiture under this section, shall be made after the expiration of six years from the date of collection of the amount referred to in sub-section (4).

replaced by the Second Amendment Act which is in force Therefore, contcntion of the petitioner that the amendment was carried out during GST regime lacking legal sanctity has been denied. The impugned notice and revisional order were passed within the limitation period of six years. Therefore, those are 1egal and valid.

30 31.10.2011, covering the entire financial year 2O|O-2O11 and partly the financial year 2011-12 petitioner filed returns under the VA'I' Act. After availing the input tax credit to which it was entjtled, it paid the ta-xes due at the prescribed rate.

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32 the revisional order dated 05.03.2020 as being barred by limitation and thereafter to quash the same as well as the consequential order dated 07 .O3.2O2O.

3l reflected in pre-amended Entry 54 of List II prior to 16.09.2O16 for legislative competence on the ground that the Second Amendment Act is retrospective and intended to deal with VAT demands prior 2 2O2O 82 GSTR 32 (Guj.)

36 to the coming into force of GST. Thus, Section 6 of the General Clauses Act, 1897 cannot be pressed into service to save the pre- amended Entq' 54 of List II

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.10 54 had not yet been amended, even then also the Second Amendment Act having been passed on 02.I2.2O17 was beyond the one year period in terms of Section 19 of the Constitution Amendment Act and therefore invalid.

1t of the one year window period. On the day of enacting the Second Amendment Act, the State Legislature had lost its competence for making law in respect of other goods barring the goods mentioned in the amended Entry s4 of List II. State Legisrature must have the competence both on the date of enactment i.e. O2.I2.2O1Z and, also on the day when it was brought into lorce retrospectively i.e. 17.06.2017. 50' Referring to Article 213 (3) of the constitution of India he submits that the Ordinance would be ultra uiresfor the very same reason for which the Seconcl Amendment Act is ultra uires. He further submits that life of the Ordinance was only six weeks from date of convening of the State Legislature. This period, he submits, was till OB.l2.2OlZ. Even assuming that the State Legislature was competent to enact and apply the Ordinance qua the goods not mentioned in amendecl Entry 54, such operation could not have continued beyond OB.\2.2O1Z as per Article 2I3 of the Constitution. Clarifying the position, he submits that the Ordinance was not challenged because the Ordinance was repealed by the Second Amendment Act and is no longer in existence. Besides, the Second Amendment Act was brought into force with effect from lZ .06.20\Z which was the date of the 12 ordinance. Thus, even for the period when the Ordinance was 1n existence it was the Second Amendment Act which occupied the legislative field and not the Ordinance' Therefore' any reliance placed on the Ordinance would be misplaced and the fact that the Ordinance was not challenged would have no lega1 bearing'

d3 Amendment Act can only be in respect of the VAT Act as existing on 02.12.2017, even if given retrospective effect from 17.06.2017. 52. Summing up his arguments, Mr. Ravi submits that both the Ordinance as well as the Second Amendment Act are unconstitutional being devoid of legislative competence. He submits that division bench of the Gujarat High Court in Reliance Industries Limited (2 supra| and a later single bench decision of the Kerala High Court in Hindalco Industries Limited (3 supra) have struck down VAT legislations enacted post i6.O9.2016. He submits that he would adopt the detailed reasonings given by the bench in those tr,l,o cases.

44 senior counsel, submits that the State Legislature passed the Telangana Goods and Services Tax Bill, 2Ol7 on 16.04.2017. It received the assent of the Governor on 25.O5.2OI7 whereafter the Telangana Goods and Services Tax Act, 2Ol7 (already referred to as the TGST Act') was published in the Telangana Extraordinary Gazette on 27.O5.2O17. He thereafter submits that the Ordinance was promulgated on 17.06.2017 whereas the Second Amendment Act was made on 02.12.2017 giving retrospective effect from 17.06.2017. He submits that the Second Amendment Act is unconstitutional as the State Legislature had lost its competence to make such amendments after the Constitution Amendment Act came into force from 16.09.2016. On and from 16.09.2016 only concurrent juri iction could be exercised simultaneously by the Central Government as well as by the State Government insofar GST is concerned; that apart, exercise of power under Article 246 A can only be carried out on the recommendation of the GST Council.

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17 make laws for saving the repealed Acts under Section 19 of the Constitution Amendment Act. Accordingly, Section 174 was included in the TGST Act as a measure to save the repealed Acts, including the VAT Act. He submits that Section 174 saves operation of the VAT Act in respect of transactions made prior to Ol.O7 .2O 17 . Insofar the VAT Act is concerned, the sarne was amended by the Second Amendment Act prior to the effective date of repeal by way of an Ordinance dated 17.06.2017. Articie 13 (3) of the Constitution of India states that law includes Ordinance as well. Section 6 (b) of the General Clauses Act, 1897 also makes it clear that repeal of an Act shall not effect the previous operation of any enactment so repealed or anything done thereunder. According to him, reliance placed by the petitioners on the decision of the Kerala High Court in Hindalco Industries Limited (3 supra) and on the Gujarat High Court decision in Reliance lndustries Limited (2 supra) would be of no assistance to the petitioners as in those cases there was no Ordinance or legislative enactment pertaining to the State VAT Acts prior to introduction of GST. 59 trlaborating further Mr. B.S.Prasad submits that the Ordinance was promulgamated by the Governor of Telangala on .t8 17.06.2017 r.r.hereby the time limit for assessments and revisions wasi extended from four years to six years before annulment of VAT Act. The Ordinance became an Act i.e. the Second Amendment Act on 02.12.2017. Prior to that, the Ordinance was approved by the legisiative assembly of the State of Telangana within six months from the date of the Ordinance. Referring to Article 213 (2) of the Constitution of India, he submits that an Ordinance promulgated by the Governor would have the same force and effect as an Act of the legislature unless such an Ordinance is not placed before the legislative assembly or rejected by the legislative assembly when placed before it within the sti.pulated time. Insofar the present case 1s concerned, the Ordinance was placed before the legislative assembly arrd the assembly approved the same. Therefore, in the light of the above constitutional provision, the limitation to make an assessment or reassessment or revision is six years and not four years. According to him, the Ordinance issued and the subsequent legislative Act fc,r prolonging the limitation made such extension of limitation va1id. Therefore, the proceedings initiated under the VAT Act in r,sspect of the petitioners are valid, being within limitation. Insofar d ecision of the Kerala High Court in Baiju AA ( 10 supral 1S concerned, the sarne would not be applicable to the facts of the 19 present case inasmuch as amendment to the Kerala VAT Act nas made long after annulment of the Kerala VAT Act. Insofar the present case is concerned, the Ordinance was promulgated prior to O 1.07.2017 r,r,hen the VAT Act',\,as stiil in force 60 Mr. Prasad, learned Advocate General, asserts that Telangana State was competent to promulgate the Ordinance on 17.06.2017 and thereafter to pass the Second Amendment Act on O2.I2.2O17 in respect of goods not covered by amended Entry 54 of List II. Power a]rld competence of the State in this regard is traceable to Article 246 of the Constitution read with Section 19 of the Constitution Amendment Act; the savings provision in Section 174 of the TGST Act; Article 246A of the Constitution; and Sections 8 and 8A of the Telangana General Clauses Act, 1891. 61 Mr. Prasad submits that State is only securing and protecting the revenue due to it by enlarging the duration by which the dealers can be assessed etc., but not imposing any new tax or levy. Legislation being a sovereign function of the State, thus, the Second Amendment Act cannot be questioned as being without competence. 62 State has the power to enforce the Second Amendment Act with retrospective effect. State has the power to even take away

5() vested rights of Lhe assessees i.e. even where assessments become barred by time under the pre-amended provision. State can enlztrge the limitation even for such time barred assessments and takr: away vested rights. Looked at from this perspective, the Second Amendment Act cannot be said to be arbitrary, not to speak of being malifestly arbitrary. 63 Provisions for enlarging time limitation on assessments etc., are only procedural aspects of lery and assessment of tax. These aJ€: not substantive provisions. Assessing Officers are competent to adjudicate on limitation since it is a mixed question of fact and lanv. 64 Referring to Hindalco Industries Limited (3 supra), he submits that decision of the Kerala High Court, as expressed in the said case, is distinguishable. In the said decision, Kerala High Court did not deal with the effect of Section 19 of the Constitution Amendment Act and the savings provision under the State GST Act. As a matter of fact, State of Kerala had enacted the impugned lau, after the permissible window period of one year allowed under Section 19 of the Constitution Amendment Act. Likeu'ise, Mr.Prasad submits that decision of the Guj arat High

5l aggrieved person cannot ciaim any vested right in procedure; that he should be governed by the old provision relating to the period of limitation. Procedural law is retrospective, meaning thereby, that it may apply even to acts or transactions under the repealed Act. Time and again it has been held and clarified by the Supreme Court that every litigant has a vested right in substantive law but no such right exists in procedural law. According to Mr. Prasad, law of limitation is generally regarded as procedural and its object is not to create any right but to prescribe periods within which legal proceedings be instituted for enforcement of rights which exists under the substantive law. Statutes of limitation are retrospective insofar those apply to all legal proceedings brought after their operation for enforcing cause of action accrued earlier, rr (2o11) 6 scc 739

52 but they are prospective in the sense that they neither have the effect of reviving the right of action nor do they have the effect of extinguishing a right of action subsisting on that day. 66 Learned Advocate General has also placed reliance on a Su1:reme Court decision in Fuerst Day Lawson Limited Vs. Jindal Exports Limitedl2 in support of the proposition that when there is an Ordinance '*,hich is followed by an Act on the same subject matter, the Act will come into force in continuation of the Ordinance. In that case, a gazette notification was issued on 22.08.7996 which appointed 22"a day of August, 1996 as the date on which the Act in question vvould come into force. The said gazette notification was issued in exercise of the powers conferred b1' Section 1 (3) of the Arbitration and Conciliation Act, 1996. In the facts of that case, it was held that while the Act came into force on 22.08.1996, for all practical and legal purposes, it would b,: deemed to have been effective from 25.01 .7996, when the Ordinance '*'as promulgated, particularly, when the provisions of the Ordinance and the Act are similar there being nothing in the Act so as to make the Ordinance ineffective. The Act being a continuation of the Ordinalce, would be deemed to have been ru 1zoo1) 6 scc 356

5-1 more particularly, a constitutiona-l amendment on the ground of being manifestly arbitrary, it would be incumbent upon the petitioners to show or demonstrate that something was done by the legislature capriciously, irrationally and / or without adequate determining principle. He submits that wide latitude is allowed to the legislature in enacting a law. The freedom to experiment must be conceded to the legislature, particularly in economic laws. If problems emerge in the working of laws and which require legislative intervention, the Court cannot be oblivious of the power of the legislature to respond by stepping in with necessary amendments. Since the law, in this case, the Second Amendment Act has been enacted to augment the revenue of the State, the constitutional Court will lean heavily in favour of such a law. The law under scrutiny is an economic measure. In economic matters, t3 l2o2tl 5 scc 1 force.

l: ii. Effect of repeal of VAT Act for all other goods except the goods mentioned in the amended Entry 54 of List II as per Section 174 ofthe TGST Act, iii. Competence of the State as on O2.12.2017 to pass the Second Amendment Act, given the requirements of the present legislative competence as on that date; iv. Requirement of simultaneous lery by Parliament and State kgislature for legislative competence under Article 246A, v. Objective and effect of Section 19 of the Constitution Amendment Act, vi. State did not :rt all make any endeavour to show any distinguishing feature in the judgment rendered by the Gujarat High Court in Reliance Industries Limited (2 supra) and why the same should not be applied to the present case. 71 Mr. Ravi contends that it is not the stand of the petitioners that the State has no competence whatsoever to promulgate the Ordinance or to enact the Second Amendment Act. State does have the power and competence in respect of the goods specifically mentioned in the amended Entry 54 but not goods in general. It is the contention of the petitioners that other than the goods mentioned in amended Entry 54, the State does not possess legislative competence. This crucial aspect was not countered by the State. 72 Mr. Ravi submits that it is not the argument of the petitioners that the Ordinance or the Second Amendment Act are manifestly arbitrary or that those cannot be given retrospective effect. Therefore, the argument advanced by the learned Advocate

56 Genera-l based on the principles of manifest arbitrariness or ret rospectivitl, are not at all germane to adjudicate on the issues raised by the petitioners. 73 Besides reiterating reliance on Reliance Industries Limited (2 supra) ald Hindalco Industries Limited (3 supra), Mr.Ravi has also pressed into service a decision of the Allahabad High Court in Jain Distillery Private Limited (4 supraf . 74 Insofar extension of time limit in tax matters is concerned, Mr.Ravi submits that time limits are a fetter on the juri iction of the departmental authorities. Enlargement of time under the Second Amendment Act in extending the limitation period amounts to conferring juri iction on departmental authorities that did not exist earlier. Therefore, such an amendment is not mr:relv for securing old liabilities but impacts the rights of assessees, thus being a fresh legislation which is devoid of legislative competence 75 Insofar reliance placed by learned Advocate General in Tirumalai Chemicals Limited (11 supra) it is submitted that the sard decision is of no application to the present batch of cases. He submits that the question for determination in that case was whether the limitation to file appeal against order for violation of 57 provisions of Foreign Exchange Reguiation Act, 1973 (FERA) would be governed by the appellate mechanism under the Foreign Exchange Regulation Act, 7973 or under the Foreign Exchange Management Act, 1999. The above decision has no relevance insofar the present batch of writ petitions is concerned where the challenge is primarily to the competence of the State Legislature to enact the Second Amendment Act after the Constitution Amendment Act. 76 Regarding Fuerst Day Lawson (12 supraf relied upon by the learned Advocate General, Mr. Ravi submits that in the present batch of cases petitioners are primarily concerned with the validity of the Second Amendment Act and not the Ordinance. trven if it is assumed that the State had the competence to promulgate the Ordinance in June, 2Ol7 before onset of GST with effect from Ol.O7.2Ol7, by the time the Second Amendment Act was passed, the State had lost its competence for legislating on goods in general, except for petroleum products and liquor for human consumption as mentioned in the amended Entry 54 ol List II. However, he submits that though the Ordinance has not been specifically challenged, nonetheless, it is clear that on and from 16.09.2016 when the Constitution Amendment Act came into 58 force, the Ordinance could not have been promulgated. Thus, both the Ordinance and the Second Amendment Act cannot be sustained aJter 16.09.2016. Again in this judgment question of legislative competence of the State to promulgate an Ordinance followed by an Act on the same subject matter was not in issue. He submits that an Ordinance as well as arr Act are two pieces of legislation. Legislative competence of each has to be separately determined in the light of the Constitution and the point of time when those u,ere enacted. Insofar Manish Kumar (13 supra) is concerned, he submits that it is not the case of the petitioners that the Second Amendment Act should be struck down on the ground of being manifestly arbitrary. That apart, while there can be no dispute to the proposition that a wider latitude should be allowed to the legislature while legislating economic laws, it is also equally clear that while making such law, the Legislature or the Parliament cannot transgress the constitutional limits. In the instant case, the cha-llenge to the Second Amendment Act is purely on the ground of legislative competence; rather lack of legislative competence. Petitioners are not questioning the legislative wi om in extending the limitation for making assessments, reassessments, revisions etc., from four years to six years, but have questioned the Second Amendment Act on the 59 ground that the State did not have the legislative competence to enact the same. 77 Insofar Sheen Golden Jewels (India) Pvt. Limited (7 supra) IS concerned, learned senior counsel submits that a division bench of the Gujarat High Court in Reliance Industries Limited (2 supra) has distinguished the said decision. In Sheen Golden Jewels (Indiaf Pvt. Limited (7 supra) petitioners had challenged validity of Section 17 4 of the Kerala Goods and Services Tax Act, 2017 which is pai materia to Section 774 of the TGST Act, on the anvil of Section 19 of the Constitution Amendment Act. According to Mr.Ravi, petitioners herein are not questioning validity of Section 174 of the TGST Act. Rather, according to the petitioners, Section 174 of the TGST Act only supports what is being contended by the petitioners. 7A The article, 'Transitional Prouisions in Commercial Legislation: An Analysis' follows the same logic given by the Kerala High Court 17,1 of the State GST Act was brought in. Mr' Ravi submits that according to the aforesaid article, Section 19 of the constitution Amendment Act has elements of both transitional as well as savings clause. However, he contends that Section 19 of the Constitution Amendment Act only suspends invalidity of the inconsistent legislation for a period of one year or till the inconsistent legislations are amended or repealed' He asserts that Section 19 is neither a source of power nor a savings provision' It is only a transitional Provision. 79 Mr.S.R.R.Viswanath, learned counsel for some of the petitioners also rnade submissions replying to the arguments advanced by the learned Advocate General. While admitting that learned Advocate General was only partly correct in submitting that time limitations are procedural and not substantive, he, however, submits that in tax jurisprudence time limitations prescribed for making assessments, reassessments, revisions etc are juri ictional in nature and are thus fetters on the taxing authorities. In this connection, he has placed reliance on a decision of the Supreme Court in S.S.Gadgil Vs. [TOrs' Referring to Tirumalai Chemicals Limited (11 supra) relied upon by the ls 53 ITR 231

6l learned Advocate General, he submits that in the said case Supreme Court was dealing with the limitation prescribed lor filing appeals, which is of entirely different nature. BO Mr. Viswanath submits that two dates are extremely crucial. Firstly, 16.09.2016 when the Constitution Amendment Act came into force. Secondly, 27.O5.2O17 when the TGST Act was enacted. The Ordinance as weil as the Second Amendment Act were made subsequent to the enactment of the TGST Act. Therefore, learned Advocate General is not right in saying that the Ordinance was promulgated prior to coming into force of the TGST Act. Thus, he would submit that neither the Governor nor the State Legislature had legislative competence to promulgate the Ordinance or to make the Second Amendment Act after 16.09.2016 and also after 27.05.2017. 81 Referring to Section 19 of the Constitution Amendment Act, Mr. Viswanath submits that the window provided by Section 19 was completely exhauste d on 27.O5.2O17 when the TGST Act was enacted and Section 174 ttrcreof partially repealed the VAT Act. There is no merit in the argument of the learned Advocate General that Section 19 of the Constitution Amendment Act could be invoked even after 27 .O5.2O L7 and that the Ordinance and the 62 Se,:ond Amendment Act owe their genesis to Section 19. He further submits that neither the Ordinance nor the Second Arrrendment Act can be traced to Article 246A of the Constitution. 82 Insofar decision of the Kerala High Court in Sheen Golden Jewels {Indiaf Pvt. Limited (7 supra} is concerned, he submits that in the said case the challenge was made to Section 174 of ttrc Kerala Goods ald Services Tax Act, 2O17 which is pai materia to Section 17 4 of the TGST Act. Petitioners herein are not challenging validity of Section 174 of tlrc TGST Act. He, therefore, submits that there is no merit in the arguments advanced by the learned Advocate General. 83 Submissions made by iearned counsel for the parties have re<:eived the dr-re consideration of the Court. 84 We shall iirst deal with the issue relating to legislative competence. Heading of Article 246 of the Constitution of India is subject matter of laws made by Parliament and by the Legislatures of States. Clause (I) says that notwithstanding anything 1n cleiuses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I (Union Lit;t) of the VII Schedule to the Constitution of India. As per Cl,ause (2), notwithstanding anything in Clause (3), Parliament

(r3 and subject to Clause (l), the Legislature of any State aiso have power to make laws lvith respect to any of the matters enumerated in List III (Concurrent List) in the VII Schedule. In terms of Clause (3), subject to Clauses (1) and (2) the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II (State List) in the VII Schedule. Clause (4) clarifies that Parliament has porver to make laws with respect to any matter for any part of the territory of India not included in any State notwithstanding that such matter is a matter enumerated in the State List. 85 Thus, the power to make laws either by the Parliament or by the State Legislatures is traceable to Article 246 of the Constitution of India. The Lists in the VII Schedule defines and limit the respective competence of the Union and the States. The various entries in the three lists of the VII Schedule are not sources of legislative power. These are legislative heads demarcating the field of legislation; of course, being the field of legisiation, the entries should be given the widest possible amplitude. 86 Prior to the Constitution Amendment Act i.e., prior to 16.09.2016, Entry 54 of List II was as follows:

64 "54: Taxes on the sale or purchose of goods other thon neuspaperq subject to the prouisions of entry 92 A of List l'. 86.I It was on the strength of Entry 54 of List II as it then existed, that the VAT Act was enacted. a7 After the Constitution Amendment Act came into force with effect from 16.O9.2016, trntry 54 of List II now reads as foliows:

"

67 defines "goods" to include all materials, commodities and articles. Clause (12A) which was inserted by the Constitution Amendment Act with effect from 16.09.2016 defines "goods and services tax" (GST) to mean any tax on supply of goods or services or both except taxes on the supply of alcoholic liquor for human consumption. Clause (26A), also inserted by the Constitution Amendment Act with effect from L6.09.2016, defines "services" to mean anything other than goods. 94 Article 246 A of the Constitution of India came up for analysis before the Supreme Court in VKC Footsteps India Private Limited (5 supraf , Supreme Court has held as follows:

"

"

0q 97 In Baiju A.A. (10 supraf the challenge before a single bench of the Kerala High Court was to the legality of the notices and assessment orders issued in connection with the assessments under the Kerala Value Added Tax Act, 2003 for the assessment years 2010-2011 and 2OIl 2012. The challenge was made on the ground that the concerned authorities did not have the juri iction to issue the notices and assessment orders since the amendments introduced to Section 25 (1 ) of the Kerala Value Added Tax Act, 2003 through the Kerala Finance Acts of 2077 and 2018 noti{ied on 19.O6.2017 and 31.03.2018 respectively did not contemplate a retrospective operation of the amended provisions. Section 25 of the Kerala Value Added Tax Act, 2003 deals with assessment of escaped turnover. In case of escaped turnover for any reason the assessing authority could determine to the best of his judgment the turnover which had escaped assessment to tax at any time within five years from the last date of the year to which the return relates. As per the last proviso the period for completion of assessment was extended up to 3 1 .03.20 1 6. By the Kerala Finance Act of 2O77 , the period of limitation under Section 25 (1) for proceeding to determine escaped turnover was enhanced from live years to six years and in the last proviso the extension was made up to 31.03.2018. Thereafter, by the Kerala Finance

7ll Act, 20 18, in the last proviso, the extension was made up to 31.03.2019. 98 One of the questions framed by the Kerala High Court was whether after the Constitution Amendment Act and repeal of the Kerala Value Added Tax Act on 22.06.2017, the State Legislature rel-ained aly residual power of legislation so as to amend the provisions of Section 25 (1) through the Kerala Finance Act, 2O18' After due consideration Kerala High Court held as follows:

7t legislate on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. The power to amend a statute being a facet of the legislative power itself, the State l,egislature could not have exercised a power to amend the IO/AT 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. 99 According to the Kerala High Court, after the Constitution Amendment Act, the State Legislatures stood denuded of their power to legislate in respect of taxes on sale or purchase of goods covered under Entry 54 of List II of the VII Schedule; rather they were conferred with legislative powers to be exercised simultaneously with the Parliament in respect of taxes on supply of goods or services or both. While the new legislative power could justify the inclusion of a savings clause in the new legislation enacted in respect of the new levy of tax to save accrued rights etc., under the erstwhile enactment, the truncation of Entry 54 of List II automatically denuded the State Legislatures of the power to further legislate on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. It has been held that 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 Kerala Value Added Tax Act, 2OO3 except to the extent permissible when it did not retain any residual right to further legislate on the subject of taxes on sale or purchase of goods.

72 100 An identical issue came up before another single bench of the Kerala High Court in HINDALCO INDUSTRIES LIMITED (3 supra). Follou,ing the same line of reasoning adopted by the pr,rvious benr:h in BAIJU A.A. (1O supral it has been held that after the Constitution Amendment Act, 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 VII Schedule; they have instead been conferred with legislative powers to be exercised simultaneously with the Parliament in respect of taxes on supply of goods or services or both. It has been heid as follows: ....-.......,..........Afi.er the CAA 2016, the State Legislatures stood. denuded of their power to legislate in respect of taxes on sale or purchnse of goods, that uas couered under Entry 54 of List II oJ' the Seuenth Schedule to tlle Constitution, and theg u.tere instead conferred uith legislatiue pouers, to be exercised simultaneouslg with the Parliament, in respect of taxes on supplg of goods or seruices or botlt. While the neut legislatiue pouer could justifu the inclusion of a sauings clause in the neu-t legislation enacted in respect of the neu teug of tax, to saue accrued ights, priuileges, irnmunities, etc., under the erstu.thile enactment, the deletion oJ' Entry 54 of List II automaticallg denuded the State Legislatures of the pouter to further legislate on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. The pouer to amend a statute being a facet oJ' the legi-slatiue power itself, the State Legblature could not haue exercised o potuer to amend the KVAT Act, saue to the extent petmitted, tuhen it did not retain ang residual ight to further legislate on the subject of toxes on sale or purchase of goods".

73 101 A division bench of the Allahabad High Court in M/s. such tax there can be no power to frame any by-laws in that regard. The power to levy advertisement tax was traceable to Entry 55 of List II. Allahabad High Court noted that the Constitution Amendment Act came into effect from 16.09.20 16 U.P. Goods and Services Tax Act, 2O17 carn-e into operation with effect from 01.O7.2017. The by-laws by which the municipalities intended to levy and collect taxes on advertisement were framed on 12.O1.2017 but published on 19.08.2017 1.e., after O1.O7 .2O17 when the U.P.Goods and Services Tax Act, 2Ol7 came into effect. Allahabad High Court also noted that by virtue of the Constitution Amendment Act, Entry 55 of List II u,as omitted. It u,as in that context that Allahabad High Court held that after omission of Entry 55 of List II of the VII Schedule to the Constitution of India by the Constitution Amendment Act with effect from 16.O9.2016, even the State Legislature did not have the legislative competence to lely or collect taxes on advertisement which was earlier 'o (2ozo)'tt csrR 235 (Att)

71 available under Entry 55. Further, the bench noted that the power to tax earlier vested with the municipalities under Section 128 (21 (VII) of the U.P. Municipalities Act, 1916. Having been omitted by virtue of Section 173 of the U.P.Goods and Services Tax Act, 2017, tlne municipalities did not have the statutory competence to levy, impose or collect advertisement tax. Further clarifying the position Allahabad High Court held that the State Legislature was invested with the power to make laws in respect of taxes on advertisement vide Entry 55 of List II to the VII Schedule but the said entry was deleted by the Constitution Amendment Act with effect from 16.09.2016. The Constitution Anrendment Act vide Section 17 amended the VII Schedule and omitted Entry 55 of List II, thus deleting the power of the State to make laws in respect of taxes on advertisement. Therefore, when the State was denuded of the power to make laws in respect of taxes on advertisement, obviously the municipalities were also divested of the power to impose any tax on advertisement' 1O2 This line of reasoning has also been followed by a later division bench of the Allahabad High Court in Jain Distillery Private Limited 14 supral. In this case, the Allahabad High Court examined the position as to the competence of the 75 Parliament and State Legislatures to enact laws to impose duties on excise and to ler.y tax on sale of alcoholic liquor not for human consumption post the Constitution Amendment Act. It was noted that the express intent of the constitutional change made vide the Constitution Amendment Act was to tax alcohol under the GST regime except aicoholic liquor for human consumption. Thus, alcoholic liquor not for human consumption or industrial alcohol or non potable alcohol would be subject to GST laws only. According to the Allahabad High Court this intent has been expressed through Section 174 (l) (i) of the U.P.Goods and Services Tax Act, 2017. Section 174 (ll (i) of the U.P.Goods and Services Tax Act, 20 17 reads as follows: " 174. (1) Saue os otheru.ise prouided in this Act, on and from the date of commencement of this Act: (r) The Uttar Pradesh Vatue Added Tax Ac\ 2008, except in respect of goods included in Entry 54 of the State List of the Seuenth Schedule to the Constitution, are hereby repeoled." lo2.l It was in that context Allahabad High Court held as follows:

"

76 consunlplion". Hence, in anA case, o-fter the enactnerLt of the UPGST Act, 2O17 and in absence of any amendment to Section 174 (l) (t) of tllat Act, there neither suruiues nor exbts ang delegated pouter uith the State Gouernment, to issue the impugned. Notif.catktrt, to impose UPVAT on ENA.

7ti Va,lue Added Tax Act, 2003 by virtue of the Gujarat Value Added Tax (Amendment) Act, 2OlB enacted on 03.O4.20 18 giving retrospective operation from 01.O4.2O06. Seclion 84 A provided for exclusion of the period spent between the date of the decision of the Appellate Tribunai and that of the High Court as well as the Supreme Court in computing the period of limitation referred to in Section 75 of the said Act. Therefore, one of the questions which fell for consideration was whether Section 84 A of the Gujarat Va.iue Added Tax Act, 2003 was ultra uires and beyond the leplislative competence of the State under Entry 54 of the List II of the VII Schedule. After due analysis Gujarat High Court held as follows:

"

79 was to replace number of indirect taxes being leuied bg the (Jnion and the State Gouernments and to remoue the cascading effect of taxes and prou[de for o common national market for goods and seruices. Tltis is apparent from the statement of objects ond reasons refened to bg the Supreme Court in Mohit Mineral Put. Ltd. l2o18l 58 GS?R I fSCi : [2019] 2 SCC 599. 92. Further section 18 to the Constitutton Amend.ment Act prouides for compensation to the States for the loss of reuenue arising on account of the implementation of the goods and seruices tax for a peiod of fue years- Thus the entire scheme of the Constitution Amendment Act recognizes imposition of only "goods and serutces tax" under article 246A of the Constitution of India. The phrase the "goods and seruices tax" is defined under anlicle 366 (29A) to mean ang tox on supplg of goods or seruice or both except taxes on the supplg of alcoholtc liquor for human consumplion. Such "supply" cannot be fragmented into different components bA the State Legislature and ossume pouer to impose independent tax on the sole of goods tuithout reference to the Goods and Seruices Tox Council. Such interpretotion tuould be contrary to the entire scheme as well as the object and purpose of the Constitution Amendment Act. In fact the prouision prouiding for compensation to the States for the loss of reuenue due to the goods and seruices tax would also be irreleuant if the State Legislatures are independentlg empotuered to enact sales tax/ ualue added tax legtslations bg taking recourse to article 246A of the Constitution of India.

tt0 106 Let us now deal with Section 19 of the Constitution Amendment Act, which reads as under:

81 competent authority or until expiration of one year from such commencement, whichever is earlier. 108 Thus, the purpose of this provision is to provide for a window or transition by suspending invalidity of inconsistent legislations existing immediately before commencement of the Constitution Amendment Act for a period of one year or till such legislations are amended or repealed, whichever is earlier. The objective appears to be for a tralsition to the GST regime brought into force by the Constitution Amendment Act. All that Section 19 does is to provide a period so as to eliminate or remove all laws inconsistent with the GST regime within arl outer limit of one year period. Section 19 does not and cannot be construed to eclipse the amendments carried out in Entry 54 of List II to the VII Schedule or confer legislative competence upon the State Legislatures for making amendments to the VAT Act in respect of goods other than the five petroleum products and alcohol for human consumption covered by the amended (substituted) Entry 54 of List II. 109 As already discussed above, consequence of amendment of Entry 54 of List II is denuding the State Legislature of the pou.er to lev-\' tax on sale of goods other than those as 82 provided in amended Entry 54; invalidation of State legislations existing as on 16.09.2016 levying tax on sale of goods other than those finding place in amended Entry 54. Section 19 does not save or postpones deprivation or denuding of legislative competence of State Legislature for lelying tax on sale of goods other than those mentioned in amended (substituted) Entry 54 of List II. Section 19 only allows operation and levy of tax under the VAT Act which is inconsistent with the GST regime for a period of one yea-r or until the VAT Act is repealed or amended, whichever is earlier. This would mean that the State could continue to levy ta-x under the VAT Act for the window period of one year or till the VAT Act was amended or repealed to align it with the GST regime, whichever was earlier. This transitional provision does not enable the State Legislature to make amendments to the VAT Act in contravention of the amended Entry 54 of List II. 11O At this stage, we may refer to Article 2432F of ttre Constitution. Part IXA dealing with municipalities vvas inserted in the Constitution by the Constitution (Seventy-fourth Amendment) Act, 1992 with effect from 01.06.1993. Articles 243 P to Article 243 ZG comprises of Part IXA, all dealing with municipalities. By the aforesaid provisions municipalities and municipal

administration \\''ere brought under the umbrella ol the Constitution. Article 243 ZF provides for continuance of existing laws and municipalities. This provision is pari mateia to Section 19 of the Constitution Amendment Act. Article 243 ZF reads as under: 243 ZF. Continuance of existing lanus and Municipalities:- Notutithstanding angthing in this Part, any prouision of any lau relating to Municipalities in force in a State immediately before the commencemerlt of the Constitution (Seuenty-fourth Amendment) Act, 1992, u.thich is inconsistent utith the prouisions of this Part, shall continue to be in force until amended or repeoled bg a competent Legislature or other competent authoity or until the expiration of one year from such commencement, u.,hicheuer is earlier: Prouided that all the Municipalities existing immediatelg before such commencement shall continue till the expiration of their duration, unless sooner dissolued by a resolution passed to that effect bg the Legislatiue Assemblg of that State or, in the case of a State hauing a Legislatiue Council, bg each house of the Legislature of that State. I 1 1 As per this Article, notwithstanding anything in Part IXA of the Constitution, any provision of law relating to municipalities in force in a State immediately before commencement of the Constitution (Seventy-fourth Amendment) Act, 1992, which is inconsistent with Part IXA, 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. 83

85 113 As has been held by the Supreme Court, Article 243 ZF suspends such invalidity or postpones the invalidity for a period of one year to enable the competent l,egislature to remove the inconsistency by amending or repealing such law relating to municipalities to bring it in consonance with the provisions of Part IXA of the Constitution lI4 On the above analysis we have no hesitation in holding that Section 1 9 of the Constitution Amendment Act cannot be understood or cannot be construed as a source of legislative power. It is also not a saving provision in respect of suspending legislative competence to amend the VAT Act. This aspect was gone into by the Gujarat High Court in Reliance Industries Limited (2 supral wherein it has been held as follows:

86 lau,s to bring them in harmony ivith the CA Act- Otherwise, the States must repeal them. And thcy were given one year for achieving this. If the States do ncither, those inconsistent acts stand repealed.

87 ll7 Therefore, lrom the above analysis we can safely conclude that Section 19 of the Constitution Amendment Act is not a source of power to enable the State Legislature to enact the Second Amendment Act, which is clearly inconsistent u,ith the 118 We have already noted that the Constitution Amendment Act, more particularly Sections 1 to I 1 and 13 to 20, came into force on and from 16.09.2016. Thereafter Parliament enacted the CGST Act and other related enactments, most provisions of such enactments having come into force on and from O1 .O7.2017. State of Telanga11a also enacted the TGST Act While majority of the sections came into force on 22.06.2017, Section 174 of the TGST Act which provides for repeal and saving came into force on and from 01.O7 .2017 . Section 174 of the TGST Act reads as under: "174. Repeal And Sauing:- (1) Saue as othentise prouided in this Act, on and from the date of commencement of this Ac| The Telangana Value Added Tax Act, 20O5 (Act 5 of 2OO5); except in respect of goods included in the Entry 54 of the State List of the Seuenth Schedule to the Constitution, (iil The Telangana Entertainments Tax Act, 1939 (Act X of 1939); (iiil The Telongana Tax on Entry of Motor Vehicles into Local Areas Act, 1996 (Act 26 of 1996); (t) Constitution Amendment Act.

8li (iu) The Telangana Tox on Entry of Goods into Local Areos Act, 2OO1 (Act 39 of 2001); (u) The Telangana Tax on Luxuries Act, 1987 (Act 24 of 1987); (ut) The Telangana Horse Racing and Betting Tax Regulations, 1358F (Regulation XLIX of 1358F); (uir) The Telongona Rural Deuelopment Cess Act, 1996 (Act 11 of 1996); (hereafter rekrred to as the repealed Acts) are herebu repealed. (2) The repeal of the said Acts and the amendment of the Acts specified in section 173 (hereafter refeted to as "such amendment" or "amended Act", as the case mag be) to the extent rnentioned in sub-sectiott (1) or section 173 shall not- (a) reuiue angthing not in force or existing at the time of such amendment or repeal; or (b) affect the preuious operation of the amended Acts or repealed Acts and orders or angthing dulg done or suffered thereunder; or (c) affect anlt right, piuilege, obligation, or liability acquired, accrued or ina nred under the amended Acts or repealed Acts or orders under such repealed or omended Acts: Prouided that anA tax exemption granted as an incentiue against inuestment through a notification shall not continue as priuilege if the said notificotion is rescinded on or after the oppointed day; or (d) affect anA tax, surcharge, penalty, fine, interest as are due or maA become due or any forfeiture or punishment inanrred or inflicted in respect of ang offence or uiolation committed against the prouisions of the amended Acts or repealed Acts; or (e) affect ang inuestigation, inquiry, uerification (including scruting and audit), assessment p roceedings, adjudication and ang other legal proceedirlgs or recouery of anrears or remedy in respect of ang such tax, surchorge, penaltg, fine, interest, ight, priuilege, obligation, liabilitg, forfeiture or punishment, as aforesaid, and ang such inuestigation, inquiry, ueification (includirtg scrutiny and audit) assessment proceedings, adjudication and other legal proceedirlgs or recouery of anears or remedg may be instituted, continued or enforced, and any 8q such taa, surcharge, penalta, fine, interest, forfeiture or punishment may be leuied or imposed as if these Acts had not been so amended or repealed; (fl affect any proceedings including that relating to an appea| reuision, reuietu or reference, instituted before, on or after the appointed day under the said amended Acts or repealed Acts and such proceedings shall be continued under the said amended Acts or repealed Acts as if this Act had not come into force and the said Acts hod not been amended or repealed. (3) The mention of the partianlar matters refered to in section 173 and sub-sectiort (1) shall not be held to prejudice or affect the general application of section 8, 8A, 9 and 19 of the Telangana General Clauses Act, 1891 (Act 1 of 1891) utith regard to the effect of repeal". 119 Thus, as per Section 174 (ll (i) the VAT Act stood repealed with effect from O1.O7.2O17 except in respect of goods included in Entry 54 of the State List in the Seventh Schedule. When we refer to Entry 54 of the State List i.e., List II it means the entry as it stood on Ol.O7.2Ol7. We have already noticed that post the Constitution Amendment Act, Entry 54 of List II has been substituted whereafter the field of legislation under the said entry is confined only to taxes on the sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption; further clarifying that this would not include sale of such goods in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods. Therefore, in terms of Section 174 (11 (i) of the TGST Act, the VAT Act stood

90 rel)ealed \vith effect from ot.o7 .2017 except 1n rcspect of the goods covered by the amended (established) trntry 54 of List II r20 As a matter of fact, we may observe that the very pr{rsence of Section 174 (11 (i) in the TGST Act buttresses the stand taken by the petitioners r21 In Sheen Golden Jewels (Indiaf Pvt. Limited (7 supral the question before the single bench of the Kerala High Court was whether the State had the legislative competence to enact Section 174 of the Kera,la Goods and Services Tax Act, 2Ol7 and save the past taxation events r,r,hen Entry 54 List II stood omitted permanently with effect from 16.09.2016. We may mention that Section 174 of the Kerala Goods and Services Tax Act, 2Ol7 is pari mateia to Section 174 of the TGST Act. The Court was called upon to examine constitutional validity of Section 174 ol the Kerala Goods and Services Tax Act, 2017 on thr: anvil of Scction 19 of the Constitution Amendment Act. It was contended that State had no legislative power to over ride Section 19. Kera-la High Court took the view that while Section 19 is a tretnsitional provision; the job of saving is done by Section 174. Thouglr Section 774 h.as repealed the Kerala Value Added Tax Act,

9t 2O03, the repeal has not affected the previous operation of the repealed act. In other words, the repeal has not affected any right, privilege, obligation or liability acquired, accrued or incurred under the repealed act. In the above back drop, single bench of the Kerala High Court rejected the contention that the State lacked the competence to engraft Section 174 into the Kerala Goods and Services Tax Act, 2Ol7 and accordingly upheld constitutional validity of Section 174. 122 We see no conflict or contradiction between Section 19 of the Constitution Amendment Act and Section 174 of the TGST Act. While Section 19 has deferred invalidity of inconsistent legislations till such time those are amended or repealed or for a period of one year whichever is earlier, Section L74 of the TGST Act has repealed amongst other enactments the VAT Act with effect from Ol.O7.2Ol7 except in respect of goods covered by the substituted Entry 54 of List IL Thus Section 174 of the TGST Act is in consonance with Section 19 of the Constitution Amendment Act. The above position only supports the case of the petitioners that the State was denuded of its competence to legislate on GST alter 16.O9.2016 and certainly alter Ol.O7.2Ol7. 92 t23 Repeal of an enactment would mean that such art enactment is erased from the statute book; it would no longer be in existence. This aspect was gone into by the Gujarat High Court in Reliance Industries Limited (2 supraf . It has been held as follows: " 68.Effect of repeal at common lant-Repeal obliterates the stdtute as if it has neuer been enacted: 68 . 1 Under the common lou , a statute after its repeal is completelg obliterated as if it has neuer been enacted, except os to the transactions past and closed.

() -1 MANU/SC/002O/1951 : AIR 1951 SC 128 referred to a pdssage from the Crauford's book on Statutory Cotlsttuction uhich reads as under: "It is well-settled thot if a statute giuing a special remedg is repealed utithout a sauing clause in fauour of pending suits all suils musl stop where the repeol ftnds them. If final relief has not been granted before the repeal tuent into effect, it cannot be after, if a case is appealed, and pending the appeal the lau is changed, the appellote court must dispose of the case under the laut in force uhen its decision uas rendered. The effect of the repeal b to obliterate the statute repealed as completelA as if it had neuer existed, except for the purposes of those actions or suils which were commenced, proseanted and concluded Luhile it was an existing lau. Pending judicial proceedings based upon a statute cannot proceed after its repeal. This ntle holds true until the proceedings haue reached a Jinal judgment in the court of last resort, for that court, uhen it comes to onnounce its decision, conforms it to the la u.t then existing, and may therefore, reuerse a judgment which u.tas correct uLhen pronounced in the subordinate tribunal from uhich tthence the appeal utas taken, if it appears that pending tl'Le appeal a stah)te uthich utas necessary to support the judgment of the lotuer court has been utithdrawn bg an absolute repeal-" @.601) (emphasis supplied)

9{ "

95 any other enactment, then the repeal shall not effect anything done or any olfence committed or any fine or penalty incurred or any proceeding taken before commencement of the repealing Act; or reviving anything not in force or existing at the time when the repeal takes effect; or affect the previous operation of any enactment so repealed or anything duly done or suflered under any enactment so repealed; or affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or affect any fine, penalty, forfeiture etc, incurred in respect of any offence committed under any enactment so repealed; or affect any investigation, legal proceeding or remedy ln respect of any such right, privilege, obligation, Iiability, fine, penaity, forieiture or punishment and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such fine, penalty, forfeiture or punishment may be imposed as il the repealing Act had not been passed. 126 Section 8 of the Telangana General Clauses Act, 1891 is similar to Section 6 of the General Clauses Act, 1897 . t27 Section B A of the Telangana General Clauses Act, 1891 says that where any act repeals any enactment by which the 96 text of any previous enactment was arnended by express omission, insertion or substitution of any matter then unless a different intention appears, the repeal shall not affect continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 128 Article 367 of the Constitution of India speaks about the interpretation of the Constitution of India. Clause (I) of Article 367 is relevant. It says that unless the context otherwise requires, the General Clauses Act, 1897, subject to any adaptations and modifications that may be made therein under Article 372, shall apply for the interpretation of the Constitution as it applies for the interpretation of an Act of the Legislature. 129 Gujarat High Court in Reliance Industries Limited (2 supra| examined this aspect as well and held that General Clauses Act, 1897 applies only for interpretation of the Constitution but in respect of other matters, such as, savings in the case of repeal etc which are unrelated to interpretation may not apply by virtue of Article 367. Section 6 of the General Clauses Act, 1897 or Sections B/BA of the Telangana General Clauses Act, 1891 would apply only to repeal of an enactment. A Constitution Amendment Act is not or cannot be termed as art

97 enactment. Therefore, beyond what is stated in Clause (l) of Article 367 of the Constitution, provisions of the General Clauses Act, either the Central Act or the State Act, would not appiy to the Constitution, including the Constitution Amendment Act since a Constitution Amendment Act is made by the Parliament in exercise of its sovereign powers under Article 368 of the Constitution. It has been held as follows:

99 the repealed act in respect of those goods by virtue of the Second Amendment Act r.r,ould not arise 131 Though there is no challenge to the Ordinance, nonetheless we may also examine the same since it is the contention of the State that the Ordinance was promulgated during the window period and the subsequent Second Amendment Act is given effect to from the date of promulgamation of the Ordinance, thereby making it a valid piece of legislation 132 It was strongly argued by learned Advocate General that when the Ordinance was promulgated, State of Telangana had the legislative competence to so promulgate the Ordinance and the Second Amendment Act which was made subsequently was nothing but a continuation of the law as promulgated by way of Ordinance since it was given effect to from the date of promulgamation of the Ordinance. 133 To appreciate the above contention, we may note that the Constitution Amendment Act came into force on and from 16.09.2016. Section 19 of the Constitution Amendment Act provided for a window period to the States to remove any inconsistent enactments by way of amendment or repeal or until expiration of one year from such commencement whichever ',r'as lr)0 earlier. Telar-rgana Ordinance No.2 of 2017 was promulgated by the Governor of Telangan a on 17.06.2O17 to further amend the VAT Act. Though the Ordinance was promulgated after coming int-o force of the Constitution Amendment Act on 16.09.2016, it wzrs so prom ulgated within the window period of one year as prcvided bv Section 19 of the Constitution Amendment Act. At this stage we may mention that following the Constitution Amendment Act, State of Telangana enacted the TGST Act with effect from Ol .O7.2OI7. 134 Belore we deal with the Telangana Ordinance No.2 of 2017, w,e ma), note that power of the Governor to promulgate ordinance is traceable to Article 213 of the Constitution of India. Article 213 provides as follows: o273. Pouer ol Goternor to promulgate Ordiaances during recess ol Legislature.- -(1) If at ang time, except u.)hen the Legi.slative Assembtg of a State is in sessiorr, or where there is a lagislattue Courtcil in a State, except uhen both Houses of tle Legislature are in session, the Gouenor is satisfied that cir.umstances eist uthich render it necessary for him to take intmediate actio4 he mag promulgate such Ordinqnces as the circufitstonces appear to him to reElire: Prouided tltat the Gouernor shall not, tDithout instructions from the President, promulgctte ang such Ordinance if-- (a) o Bilt containing the same prouisions would under this Constitution have requtred the preuious sanction of the President for tlTe introduction thereof itlto the legtslqture; or (b) le Luould hsue deemed. it l.ecessa'ry to reserue a BilL containing the sanre prouisions for the consideration of the President; or (c) ort Act of the l,egistature of the State containing tle same provi.sions taould under this Constitution haue been inualid unless, hautng been reseru<,tl for the consideration of the President, it had receiued the qssent of the President. (2) An Orditnnce prontulgzted under this article shatl haue the sante force and effect as am Act of the legislature of the State ossented to bg the Gouernor, but euery suclt Ordiruutce

t0t (a) shall be Laid before the Legislatiue Assemblg of the State, or uhere there is a l.egislatiue Council in the Stote, before both tle Houses, and slrr:ll ceese to operate at the exptration of six weeks from the reassenlblg of the Legislature, or if before the expiration oJ that peiod a resolutiotT disapprouing it is passed bg the Legislative Assemblg and agreed to bA the Legislcttiue Council, if anLt, upon the passing of the resolutton or, as the case may be, on th,e resolution being agreed to bA the Counctl; and (b) mag be uithdraun at ang time bA the Couentor. Explanation.-Where tlrc Houses of the Legistature of a State having a Legislatiue Council are summoned to reqssemble o4 different dates, the period of six Lueeks shall be reckoned from the later of those dates for ttte purposes o./ fhis clcuse. (3) If and so far as an Ordinance under this arttcle makes ang provision which u.tould not be ualid if enacted tn an Act of the l,egislature of the State assented to bA the Gouemor, it shall be uoid: Prouided that, for the purposes of the prouisions of tltis Constitution relattng to tle effect of an Act of the Legistature of a State uhich is repugnonl to an Act of Parliqment or an eisting lau uith respect to a motter enumerated in the Concurrent List, on Ordinance promulgated under this article in pursuance of instntctions from the President sh<tll be deemed to be an Act of the Legislature of the Stote which hrrs been reserued for the consideration of th.e President and assented to bg him. " 135 While clause (1) provides that if the Governor is satisfied when the Legislative Assembly of a State is not in session or where there is a Legislative Council in a State, the same is not in session, that circumstances exist which call for immediate action, he may promulgate such Ordinance. Clause (2) clarifies that an Ordinance so promulgated under Article 2 13 of the Constitution shail have the same force and effect as arr Act of the Legislature of the State assented to by the Governor. However, every such Ordinance shall be laid before the Legislature and shall cease to operate at the expiration of six weeks from the reassembly of the Legislature. Clause (3) says that if an Ordinance makes any provision which would not be valid if I02 enacted as an Act of the Legislature assented to by the Governor, it shall be void. 135 As noticed above, the Ordinance was promulgated by the Governor on 17.06.2017. As per preamble to the Ordinance, it is stated that Government of India had enacted the CGST Act arrd Government of Telangana had enacted the TGST Act. But both the Acts had not been brought into force. Referring to the provisions of the VAT Act, it is stated that it empowers the State Government to let y tax on alcoholic liquor for human consumption and on petroleum products. According to the Constitution Amendment Act, lely of tax on those petroleum products and alcoholic liquor for human consumption is within the competence of the State Legislature. It further stated that repeal of the VAT Act except in respect of the goods included in Entry 54 of List II of the VII Schedule by the TGST Act, which was yet to be brought into force, would not affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such tax; surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment and any such investigation etc.,

103 may be instituted, continued or enforced and any such tax, surcharge etc, may be levied or imposed as if those Acts had not been so amended or repealed. Such repeal would not also affect any proceedings including those relating to appeal, revision, review or reference instituted before, on or after the appointed day under the said amended Acts or repealed Acts and such proceedings sha1l be continued under the amended Acts or repealed Acts. Therefore, it was considered necessary to strengthen certain provisions of the VAT Act to overcome any limitations to help effective revenue realization. Therefore, it was decided to amend certain provisions of the VAT Act by undertaking a legislation. Since it was decided to give eflect to such decision immediately and as the Legislature of Telangana was not in session, therefore, the Governor, in exercise of pou,ers conferred by Clause (1) of Article 213 of the Constitution promulgated the Ordinance which basically extended the limitation from four years to six years in respect of assessments, reassessments, revision etc. r37 It is not necessary for us to go into the aspect as to whether the Ordinance was laid before the Assembly or not and as to whether it had ceased to operate after six seeks from l0.l reassembly of the Legislature. It may also not be necessary for us to labour on the aspect that the Second Amendment Act though published in the Telangana Gazette on 02.12.2017, was deemed to have come into force with effect from 17.06.2017 i.e' the date when the Ordinance was promulgated. This is because legislative competence cannot flow from an ea-rlier legislation, be it an ordinance or an enactment. Legislative competence must be traceable to the Constitution. Therefore, no reliance can be placed on the Ordinance in support of the contention that the Second Amendment Act had derived competence from the Ordinance since it was a continuation of the law and had come into force from the date of promulgamation of the Ordinance. Such a line of reasoning, in our considered view, has no legal substance. Therefore, it is immaterial that the Ordinance was not challenged in Court. 138 That apart, the ostensible objective of the Ordinance as could be discerned from the preamble is to save any investigation, assessment, recovery of dues, lega,l proceedings etc., pending on the date of coming into force of the Constitution Amendment Act which is perfectly understandable and valid. But that does not mean that limitation across the board could be I05 extended by way of amendment to initiate fresh proceedings, such as, fresh revision proceedings, which otherwise had become time barred 139 With effect from 16.09.2016 t}ee Constitution was amended by virtue of the Constitution Amendment Act. While Article 246A was inserted immediately after Article 246, the earlier Entry 54 of List II was substituted by the new Entry 54, in the process denuding the States from making any law except on the sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption. Thus the States did not have the competence to make law to levy VAT or such tax on any goods other than the above goods. Section 19 of the Constitution Amendment Act, which can be construed to be a sunset clause, provided for a window of one year to remove the laws inconsistent with the Constitution Amendment Act either by way of amendment or by way of repeal. The window period was given to remove the inconsistencies; not to prolong the inconsistencies. But what the State of Telangana did by promulgating the Ordinance was not to remove the inconsistencies in the VAT Act. As mentioned above, the Ordinance, in fact, introduced certain

I06 provisions extending limitation to enable initiation of fresh proceedings, such as, revisional proceedings which are completely in<:onsistent with the scheme of the Constitution Amendment Act. On this ground itself, the Ordinance can be said to have no legal consequence. l4O However, by the Second Amendment Act, more particularly, bv Section 7 thereof, the Ordinance was repealed. As already stated above, the Second Amendment Act cannot derive legislative competence from the Ordinance. It must derive legislative competence from the Constitution. Unfortunately, after substitution of Entry 54 of List II, State was denuded of such competence traceable to Article 246. As a stand alone legislation, it cannot derive legitimacy traceable to Article 246A of the Constitution as well. Therefore, the Second Amendment Act made on 02.12.2017 though given retrospective effect from 17.06.2017 cannot be sustained as the same is devoid of legislative co mpetence. l4l Needless to say, way back in 1964, Supreme Court in A.Hajee Abdul Shukoor (1 supraf was categorical in holding that while the State Legislature is free to enact laws which could have retrospective operation, its competence to make a law for a certain

I07 past period would, holl,ever, depend on its present legislative povver and not on what it possessed at the period ol time when the enactment wouid be in operation. 142 Insofar the decisions relied upon by the learned Advocate General are concerned, we have already discussed r,l,hy those would not be applicable to the facts and grounds of challenge made in this bunch of writ petitions. t43 Finally \^re may also look into the intention of the Parliament in enacting the Constitution Amendment Act. This is because it would give us a clear idea as to why the Constitution Amendment Act was brought about and why the Second Amendment Act cannot be sustained being completely inconsistent r.vith the scheme of the Constitution Amendment Act and being denuded of its legislative competence. In Baiju A.A. {1O supraf , Kerala High Court held as follows:

Iott country through the introduction of a Goods and Service Tax, and the phasing out of the multitude of indirect tax levies, including value addecl ta(es, that were lcvied and collected by the Centre and the States. Section 19 of the CAA 2016, which is the sunset clause in the said enactment, envisaged tJ-e continuation of the erstwhile system of taxation for a period of one year from the date of enactment of the CAA or till such time as the State Legislatures amended or repealed their respective VAT legislations, whichever was earlier. When the State Legislature repealed the KVAT Act, while simultaleously bringing into force the new State GST Act, with a savings clause of limited operation, it eflectively acknowledged the absence of any power to legislate therea-fter 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, tJ-e 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 sirnultaneously 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, irnmunities, action taken etc under the erstwhile enactment as it stood at the time oI 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. t4+ We are in respectful agreement with the vlews expressed by the Kerala High Court in Baiju A.A ( 10 supral. Intention of Parliament in ushering in the GST regime through the Constitution Amendment Act and enactment of the CGST Act and simultaneous enactment of various State GST Acts by the State Legislatures is to avoid multiplicity of taxes by subsuming those inclirect taxes in a single tax called GST. It is in this context we have analyzed Section 19 of the Constitution Amendment Act. Viewed thus the arnendments brought in by the Second Amendment Act, as discussed above, are wholly inconsistent with 109 the scheme of the Constitution Amendment Act read with the CGST Act and the TGST Act. 145 Thus, upon thorough consideration of all aspects of the matter, we have no hesitation in holding that the Second Amendment Act is unconstitutional being devoid of legislative competence. It is accordingly declared as such. Consequently, the notices issued and orders passed under Section 32 (3) of the VAT Act which have been impugned in the present batch of writ petitions are hereby set aside and quashed. 146 All the \vrit petitions are accordingly allowed. However, there shall be no order as to costs. t47 Miscellaleous petitions, if any, pending in all the writ petitions, shall stand closed. UJJAL BHUYAN, CJ SMT. JUSTICE P.MADHAVI DEVI Date:05- 07-2022. KasnNrks/Pln Note: LR copy be marked (By order) pln