Magma Fincorp LTD. Through Its Authorised Representative vs. State Of Maharashtra Through Its Addl. Chief Secretary And Anr.

Held

The Court held that Section 78 of the Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017, was not ultra vires the Constitution Amendment Act. The Court reasoned that the Constitution Amendment Act empowered the State legislature to make laws with respect to GST, and this power included the ability to amend, repeal, or save existing laws. Section 78 was found to be a valid legislative act by the competent legislature, enacted within the stipulated time frame. The Court found no inconsistency between Section 78 and the amended Constitution, as it merely saved the provisions of the VAT Act concerning the payment or recovery of tax for periods prior to the commencement of the State GST Act. Regarding the Petitioner's contention about subordinate legislation, the Court held that Section 78 explicitly and expansively saved all rules, regulations, notifications, etc., issued under the VAT Act, referencing the Supreme Court judgment in Air India vs. Union of India to confirm that the saving provision was explicit and not by implication. The Court also noted that the Respondents stated that the Petitioner's application in Form 701 had been heard and would be disposed of within three weeks, accepting this statement. The Petitioner's challenge to the constitutionality of Section 78 was rejected.

Facts

The Petitioner, Magma Fincorp Limited, a Non-Banking Finance Company, filed a writ petition challenging the investigation initiated by the Assistant Commissioner of Sales Tax under Section 64 of the Maharashtra Value Added Tax Act, 2002. This included the search and sealing of its premises on April 4, 2018, and the issuance of a summons to its Managing Director under Section 14 of the VAT Act. The Petitioner argued that the introduction of the Goods and Services Tax (GST) regime, through the Constitution (One Hundred and First Amendment) Act, 2016, and the Maharashtra State Goods and Services Tax Act, 2017, rendered the continued application of the VAT Act, particularly Section 64, beyond one year from the appointed day, illegal. The Petitioner contended that Section 78 of the Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017, which purportedly continued the operation of VAT Act provisions, was ultra vires the Constitution Amendment Act.

Key Issues

1. Whether Section 78 of the Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017, is ultra vires the Constitution (One Hundred and First Amendment) Act, 2016, by allowing the continued operation of provisions of the Maharashtra Value Added Tax Act, 2002, beyond one year from the appointed day? Petitioner's Arguments: The Petitioner argued that the Constitution Amendment Act, by introducing Article 246A and subsuming existing indirect taxes, effectively repealed the VAT Act. They contended that Section 19 of the Constitution Amendment Act stipulated that any inconsistent provisions of existing laws would cease to operate after one year from the commencement of the Amendment Act. Therefore, Section 78 of the State GST Savings Act, which sought to continue the operation of the VAT Act beyond this period, was inconsistent with the Constitution Amendment Act and thus ultra vires. They also argued that subordinate legislation under the VAT Act was not specifically saved by Section 78. Revenue's Arguments: The Revenue contended that the Constitution Amendment Act empowered the State legislature to make laws concerning GST. They argued that Section 78 of the State GST Savings Act was a valid legislative exercise to save provisions of the VAT Act relating to the payment or recovery of tax for periods prior to the commencement of the State GST Act. They asserted that there was no inconsistency between Section 78 and the amended Constitution, as the State legislature had the power to save or repeal existing laws. They also argued that Section 78 expressly saved all subordinate legislation under the VAT Act.