M/S PROSPER JEWEL ARCADE LLP V. THE DEPUTY COMMISSIONER

WA/3052/2018

AI Insights

The case involves M/s Prosper Jewel Arcade LLP, which appealed against the order of the learned Single Judge that dismissed their writ petition challenging the reassessment order under the KVAT Act, 2003. The reassessment was based on the appellant's alleged incorrect claim of Input Tax Credit on purchases from unregistered dealers for the year 2012-13. The appellant argued that the reassessment was unconstitutional post the 101st Amendment to the Constitution, which altered the legislative framework for taxation on goods and services, and the subsequent enactment of the KGST Act, 2017. The High Court of Karnataka, after examining the constitutional amendments and the relevant statutory provisions, upheld the validity of the reassessment order and the provisions of the KGST Act, 2017, dismissing the writ appeal.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 726762 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 25-03-2021
• Assessment Year: misc
• Other Referred Cases: Chottabhai vs. Union of India, Somaiya Organics (India) Ltd. vs. State of Uttar Pradesh, District Mining Officer vs. Tata Iron and Steel Co., Kohlapur Canesugar Works Ltd. vs. Union of India, General Finance Co. vs. Assistant Commissioner of Income Tax, Punjab, State of Punjab vs. Mohar Singh, Gian Singh vs. State of Punjab, R.S.Rekhchand vs. State of Maharashtra, Indian Aluminium co. vs. State of Kerala, Karnataka Bank vs. State of Andhra Pradesh
• Laws Referred To: Karnataka Value Added Tax Act, 2003, Karnataka Goods and Service Tax Act, 2017, Constitution (101st Amendment) Act, 2016
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: VIKRAM HUILGOL
• Assessee Lawyers: P B KRISHNAN
• Keywords: Constitutional Validity; Goods and Service Tax; KGST Act; KVAT Act; Tax reassessment
• Section: 19; 39(1); 174(1)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF MARCH, 2021 PRESENT THE HON'BLE MR. JUSTICE SATISH CHANDRA SHARMA AND THE HON'BLE MR. JUSTICE V.SRISHANANDA WRIT APPEAL NO.3052/2018 (T-RES) BETWEEN M/S PROSPER JEWEL ARCADE LLP NO.444, 20TH MAIN WEST OF CHORD ROAD, RAJAJI NAGAR, FIRST BLOCK, BANGALORE-560 010 REPRESENTED HEREIN BY ITS DESIGNATED PARTNER, SRI.K.P.VEERAN KUTTY ..APPELLANT (By SRI : P.B.KRISHNAN, ADVOCATE FOR V VINAY GIRI, ADVOCATE) AND 1 . THE DEPUTY COMMISSIONER COMMERCIAL TAXES (AUDIT RECOVERY) 2.8, DVO-2, A BLOCK, NEAR PASSPORT OFFICE, KORAMANGALA, BANGALORE-560 047. 2 . THE ASSISTANT COMMISSIONER LVO 140, DVO-2, NEAR NATIONAL GAMES VILLAGE, KORAMANGALA, BANGALORE-560 047. 3 . THE COMMISSIONER 2 STATE GOODS AND SERVICE TAX DEPARTMENT (COMMERCIAL TAXES DEPARTMENT) 1ST MAIN ROAD, GANDHINAGAR, BANGALORE-560 009. 4 . THE STATE OF KARNATAKA REPRESENTED HEREIN BY THE PRINCIPAL SECRETARY FINANCE DEPARTMENT GOVERNMENT OF KARNATAKA VIDHANA SOUDHA, BANGALORE-560 001. 5 . CENTRAL BOARD OF EXCISE & CUSTOMS DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI, DELHI-110001. ...RESPONDENTS (By SRI : VIKRAM HUILGOL, AGA FOR R1-R4 CGC FOR R5) THIS APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO ALLOW THIS WRIT APPEAL AND SET ASIDE THE IMPUGNED ORDER DATED 25.10.2018 PASSED BY THE LEARNED SINGLE JUDGE IN WRIT PETITION NO.20642/2018. THIS APPEAL HAVING BEEN HEARD AND RESERVED ON 19.2.2021, COMING ON FOR ‘PRONOUNCEMENT OF JUDGMENT’ THIS DAY, SATISH CHANDRA SHARMA J., DELIVERED THE FOLLOWING: JUDGMENT The present writ appeal has been filed by the appellant being aggrieved by the order dated 25.10.2018 passed by the learned Single Judge in WP.No.20642/2018 between M/s Prosper Jewel Arcade LLP and the Deputy Commissioner of Commercial Taxes (Audit and Recovery) and Others, by which the learned 3 Single Judge has disposed of the writ petition with a liberty to avail the alternative remedy available under the law. 2. The facts of the case reveal that the appellant is a dealer in jewellery bearing TIN No.29620659465 registered under the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as KVAT Act). On the basis of the intelligence report submitted by the Assistant Commissioner, Commercial Taxes, Enforcement- 8, after conducting Audit visit, the Deputy Commissioner of Commercial Taxes passed an order dated 31.3.2018 under Section 39(1) of KVAT Act, levying tax, penalty and interest amounting to Rs.4,42,72,061/- for the year 2012-13. 3. The appellant contended before the learned Single Judge that 101st Amendment Act (Constitutional amendment) was notified on 16.9.2016. As per Section 17 of the Constitution Amendment Act, Entry 54 List II of Seventh Schedule to the Constitution was amended, by which “Taxes on sale or purchase of goods other than Newspaper subject to the provisions of Entry 92 A List I” was substituted with the entry “Taxes on sale of petroleum, crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course 4 of interstate trade or commerce or sale in the course of international trade or commerce of such goods.” It was further contended before the learned Single Judge that Section 19 of the Constitution Amendment starts with non obstante clause which provides that any provision of any law relating to tax on goods or service or on both in force in any State immediately before the commencement of the Constitution Amendment Act which is inconsistent with the provisions of the Constitution as amended, shall continue to be in force until amended or repealed or until expiration of one year, whichever is earlier. 4. It was further contended that before the learned Single Judge that the Constitution Amendment Act was notified on 16.9.2016 and one year expired on 15.9.2017. The Karnataka Goods and Service Tax Act, 2017 was introduced w.e.f., 1.7.2017. Therefore, KVAT Act can be enforced only till 15.9.2017 or 1.7.2017, whichever is earlier. It was further contended that as per Section 2 of the Constitution Amendment Act, Article 246A was introduced which authorizes the legislation of law relating to Goods and Service Tax. Sourcing the above powers, Karnataka Goods and Service Tax Act, 2017 was introduced w.e.f., 1.7.2017. Section 174 of Karnataka Goods and Service Tax Act, 2017 provides Repeal and Savings clause and Section 174(1) clauses 5 (d) and (e) protect the tax, penalty, fine, etc., due under the old Act, for which no time limit has been prescribed under Section 174, whereas as per Section 19 of the Constitution Amendment Act, there is a time limit of one year or until the old taxation law is amended or repealed. Section 19 of the Constitution Amendment Act prevails over Section 174 of the Karnataka Goods and Service Tax Act, 2017 and therefore, clauses (d) and (e) of Section 174(1) which protect the penalty, tax, fine, etc., in KVAT Act, without any time limit, is ultra vires to the Constitution of India. It was further contended that in the light of aforesaid, the assessment order passed on 31.3.2018 is against provisions of the Constitution as it is passed beyond the period prescribed in Section 19 of the Constitution Amendment Act, which is unconstitutional. 5. The petitioner before the learned Single Judge further contended that that Entry 54 List II as it existed prior to coming into force of the modified Entry read with Article 246A had not been saved. It was further contended that in light of the aforesaid Old Entry has been extended just for a year, the Entry no longer exists in the Constitution. It was further contended that it is a well settled proposition of law that the power to legislate should be traceable to a Constitution Entry and when such an 6 entry does not exist, the legislation arising out of the Entry will not have the force of law and cannot be enforced. It was further contended that when the Entry 54 List II in its earlier form no longer exists in the Constitution, nor has the old Entry been saved, the provisions relating to the KVAT Act stands dead and unenforceable. It was also stated that it has no life or existence. Neither the repeal and saving clause of Karnataka Goods and Service Tax Act, 2017 nor any provisions of the State Goods and Service Tax Act, 2017 can validate actions when the corresponding Constitutional Entry is no longer in existence in the Constitution. 6. Before the learned Single Judge the appellant has prayed for the following reliefs; “i) To call for records leading to passing of the Order bearing No.DCCT: (Audit) – 2.8/VAT-16/7046839 (2012- 13)/2017-18) dated 31.3.2018 passed by the 1st Respondent (Annexure-C) under Section 39(1) of the Karnataka Value Added Tax Act, 2003; ii) To issue Writ of Certiorari quashing the Order bearing No.DCCT: (Audit) – 2.8/VAT-16/7046839 (2012- 13)/2017-18) dated 31.3.2018 passed by the 1st Respondent (Annexure-C) under Section 39(1) of the Karnataka Value Added Tax Act, 2003 as rectified by order endorsement dated 25.4.2018 (Annexure-F) as it is passed beyond the period stipulated under section 19 of the Constitution One Hundred and First Amendment Act in the absence of source of power under Entry 54. iii) To declare that clauses (d) and (e) of section 174(1) of the Karnataka Goods and Service Tax Act, 2017 are inconsistent and contradictory with the provisions of section 7 19 of the Constitution One Hundred and First Amendment Act 2016 and hence they are ultravires to the Constitution of India. iv) To declare that the powers under erstwhile Entry 54 do not exist post 15.9.2017 and therefore the provisions of the Karnataka Value Added Tax Act cannot be enforced after 15.9.2017 so long as the old Entry 54 has not been saved. v) To declare that when the provisions of Constitution are inconsistent with the provisions of a statute, the provisions of Constitution will prevail over the provisions of statute and so provisions of section 174 of the Karnataka Goods and Service Tax Act 2017 to the extent to which they are in conflict with the provisions of Constitution, are bad in law. vi) To declare that as section 19 of the Constitution Amendment Act is having supremacy over the rest of sections of Constitution Amendment Act, the provisions passed under Section 174 of Karnataka Goods & Service Tax Act 2017 invoking Article 246A of the Constitution of India is subservient to section 19 of the Constitution Amendment Act and so any provision in section 174 which are contradictory to section 19 is unconstitutional.” 7. The learned Single Judge after hearing the parties at length has dismissed the writ petition rejecting the challenge to the Constitutional validity. The learned Single Judge has not accepted the contentions raised by the petitioner/appellant and has arrived at a conclusion that the against the reassessment order dated 31.3.2018 there is a remedy of appeal under Section 62 of the KVAT Act and the writ petition was dismissed to avail the alternative remedy. 8 8. The order passed by the learned Single Judge in paragraphs 6 to 15 reads as under: “6. What he endeavored to submit before the Court was that the imposition of tax by its levy, assessment and collection, all have to be supported by the nowexisting law and since the impugned Order has been passed by the Assessing Authority on 31/03/2018 after the said KGST Act, 2017 has come into existence with effect from 01/07/2017, the questions raised about the validity of Section 174 of the KGST Act, 2017 are relevant and the said questions deserve to be gone into by this Court. 7. This Court is not impressed by the said argument on behalf of the petitioner at all. The taxable event under the Value Added Tax law is individual transaction of sale or purchase by the Dealer and the law applicable on the date of taxable event is the relevant law for imposition of tax. Merely because the re-assessment Order is passed under KVAT Act, 2003 after the KGST Act, 2017 under GST regime came into effect from 01/07/2017, it does not mean that the said Order passed on 31/03/2018 under the KVAT Act, 2003 is non-est or void in the eye of law. 8. Section 174 of the KGST Act, 2017 clearly saves all the rights, obligations or liabilities acquired, accrued or incurred under the repealed Acts enumerated under Section 173 of the said Act which includes KVAT 2003. The ground of attack on Section 174 of the KGST Act, 2017 does not affect the validity of KVAT Act, 2003 and the Orders passed under that enactment. 9. Therefore, the larger constitutional questions raised in the present writ petition and as sought to be canvassed by the learned Senior Counsel for the petitioner like the substitution of Entry 54 in List II, effect of Article 246-A inserted by the 101stConstitutional Amendment Act of 2016, the sunset Clause as the learned Senior Counsel chose to name it, namely Clause 19 of the said 101st Constitutional Amendment Act etc, are all the questions which can be raised and considered only in an appropriate case to which these amended Constitutional and statutory legal provisions under the GST law regime are applicable for a tax period which falls after 01/07/2017. The Entry 54 of List II and KVAT Act, 2003 for the tax period in question, viz. 2012-13 was very much in existence for the 9 said period and these provisions are not under challenge. Merely passing of the re-assessment order after 01/07/2017 does not get adversely affected on the basis of the said arguments sought to be canvassed by the learned counsel for the petitioner. 10. The learned Advocate General, Mr. Udaya Holla fairly and rightly submitted that these questions are merely academic and the amendment of law with effect from 01/07/2017 is not applicable in the present case and the question of validity of these provisions, particularly Section 174 of the KGST Act, 2017 has been raised merely to maintain the present writ petition directly before the High Court under Article 226 of the Constitution of India, even though the impugned Order is appealable under Section 62 of the KVAT Act, 2003. Even though the demand of tax has been raised under a valid enactment of KVAT 2003 on the ground that the Assessee wrongly claimed the Input Tax Credit on the purchases made from the Unregistered Dealers (URD), which in law it was not entitled to, and therefore, the tax to that extent under the KVAT Act, 2003 and not KGST Act, 2017 was clearly evaded by the Assessee and therefore the re- assessment order was passed. 11. The learned Advocate General urged that the present assessment period is not all governed by the KGST 2017 under GST regime enforced by the State with effect from 01/07/2017 pursuant to 101stConstitutional Amendment. He submitted that not only Article 246-A empowers the State now to make laws both for imposition of tax in respect of Goods and Services, but also Clause 19 of the 101stConstitutional Amendment clearly saves all the provisions under different enactments immediately before the commencement of the said Constitutional 101st Amendment with effect from 16/09/2016. 12. He also submitted that there is no repugnancy of the provisions of the KVAT Act, 2003with Entry 54 and therefore, the subsequent Amendment of law does not at all affect the Re-assessment order under challenge in the present case. 13. Having considered the rival submissions, this Court is of the clear and considered opinion that all these questions sought to be raised are only academic and do not really arise in the present case and the amended law and GST regime with effect from 01/07/2017 is not at all 10 applicable to the facts of the present case for the year 2012-13. These questions are therefore left open to be considered in appropriate case. 14. Since the re-assessment order under challenge Annexure C dated 31/03/2018 for the period 2012-13 is clearly appealable before the higher Appellate Authority under Section 62 of the KVAT Act, 2003, the present writ petition is dismissed with a liberty to the petitioner Assessee Company to avail the remedy by way of an appeal if it so chooses and if any such an appeal is filed within four weeks from today, the objection of limitation shall not come in the way of the Assessee petitioner subject to the other conditions for maintaining such appeal being fulfilled by the Assessee petitioner. 15. Accordingly, the present writ petition is dismissed with no order as to costs.” 9. Learned counsel appearing for the appellant has vehemently argued before this Court that the learned Single Judge has erred in law and in facts in holding that there is an alternative remedy available in the matter. His contention is that the basic question that arises for decision is whether Section 174 of the Karnataka Goods and Services Act, 2017, relating to savings of the erstwhile KVAT Act, 2003, is within the competence of the State legislature. 10. Learned Counsel has further contended that the authority to tax sale of goods and enact a law like the Karnataka VAT Act, 2003 flows from Article 246 read with Entry 54, List II of the Seventh Schedule of the Constitution of India. On account of 11 the Constitution (101st Amendment) Act, 2016 (which commenced operation from 16.9.2016) Entry 54 was substituted. On and from that day, the State legislature had authority only to tax sale of six specified goods. The board power of the State to tax sale of goods that existed till 16.9.2016 in respect of all other goods stood obliterated permanently. The State also got the authority to make a law on Goods and Service tax under Article 246A of the Constitution by virtue of Section 2 of the Constitution (101st Amendment) Act, 2016. 11. The transitory scheme devised by the Constitution (101st Amendment) Act, 2016, through Section 19 thereof, is to allow the provisions of the Karnataka VAT Act, 2003 and other similar laws made by States to continue to be in force till they are amended or repealed or for one year, whichever is earlier. Section 19 is therefore a sunset clause, a temporary provision that has no existence or relevance after 16.9.2017. Section 19 does not save or allow the omitted Entry 54, List II of the Seventh Schedule of the Constitution of India to continue to operate. The loss of authority of the State, on account of the substitution of Entry 54 with effect from 16.9.2016, is not remedied by Section 19. Also, Section 19 does not contemplate any savings but only a 12 repeal of the provisions of the existing laws like the Karnataka VAT Act, 2003. 12. Learned Counsel has further contended that in exercise of the power conferred by Section 19 of the Constitution (101st Amendment) Act, 2016 and Article 246A of the Constitution, the Karnataka legislature enacted the Karnataka Goods and Service Tax Act, 2017. In exercise of the power of repeal conferred by Section 19 of the Constitution (101st Amendment) Act, 2016, section 173 was enacted to repeal inter alia the Karnataka VAT Act, 2003. However, section 174 was enacted to save the Karnataka VAT Act, 2003 in the matter of past transactions so that the process of assessment and collection could be concluded under the repealed enactment. 13. Learned Counsel has vehemently argued that Section 174 has no constitution legs to stand on as it cannot be supported either under Section 19 of the Constitution (101st Amendment) Act, 2016 or Article 246A of the Constitution or the substituted Entry 54, List II of the Seventh Schedule of the Constitution. The transitory provision, Section 19 does not enable or contemplate a further transitory scheme by the state legislature to negate the full effect of that provision. 13 14. He has further contended that the manner in which Section 19 operates is that all provisions of the Karnataka VAT Act, 2003 and other similar laws made by the States cannot survive the one year outer limit prescribed in that provision. If an amendment is affected to Karnataka VAT Act, 2003 within one year, the said amended provision along with the Karnataka VAT Act, 2003 would operate till the expiry of one year. If a partial repeal of the Karnataka VAT Act, 2003 is affected by the legislature within one year that would take effect. The unrepealed provision will continue to operate. But, a full repeal will take place on the expiry of one year and the unrepealed provisions will also stand repealed. In other words, irrespective of the exercise of the power of amendment or repeal under Section 19 by the State within one year, no vestige of the Karnataka VAT Act, 2003 can survive the one year guillotine. 15. Learned Counsel has further contended that the savings attempted through Section 174 is to allow the Karnataka VAT Act, 2003 to continue to operate for the purposes specified in that provision notwithstanding the repeal affected through Section 173. Hence, a repeal of the Karnataka VAT Act, 2003 in the matter of levy, assessment and collection qua future transactions 14 of sale is effected leaving the old law to operate in the matter of past transactions. This is clearly a partial repeal of the Karnataka VAT Act, 2003. Such a course of savings even if assumed to be valid law making is of no avail since on the expiry of one year ie on 16.9.2017 a repeal is affected in full by virtue of the last part of Section 19. Hence, even assuming Section 174 has been validly enacted and the Karnataka VAT Act, 2003 operates in respect of past transactions for the purposes of assessment and collection, it cannot in any event survive the repeal at the expiry of one year as mandated by Section 19. 16. Learned Counsel has further contended that the rigour of Article 265 of the Constitution insists that there must be an authority to levy and collect tax. The authority to make law has to be a continuing one and has to exist throughout the process of imposing tax (a legislative exercise), assessment (a quasi judicial exercise) and collection (an administrative exercise). Reliance is placed on the following decisions:- a) Chottabhai vs. Union of India, reported in 1962 SCR Supl (2), P 1006; b) Somaiya Organics (India) Ltd., and Ors., vs. State of Uttar Pradesh and Ors., reported in AIR 2001 SC 1723; 15 c) District Mining Officer and Ors., vs. Tata Iron and Steel Co. and Ors., reported in AIR 2001 SC 3134. 17. Learned Counsel has further contended that the saving of a law at the time of repeal and re-enactment is a conscious decision of the legislature. If the savings is not enacted then the provisions of the repealed law do not survive for any purpose. It is for this very reason that section 174 has been enacted while repealing the Karnataka VAT Act, 2003. The authority to enact such a provision has to be traced to some article and entry in the constitution. In the absence of an authority to make law, section 174 is not within the competence of the State Legislature. 18. Learned counsel has further contended that Section 6 of the General Clauses Act 1897 does not apply to an amendment of the Constitution as Article 367(1) permits General Clauses Act 1897 to be used only for interpretation of the Constitution and not for other purposes. Moreover, Section 19 of the Constitution (101st Amendment) Act, 2016 is a transitory, temporary law that does not operate beyond one year of its commencement. Also Entry 54, List II of the Seventh Schedule of the Constitution of India is substituted. An omission and substitution is not repeal. Hence, Section 6 of the General Clauses Act 1897 does not apply 16 or save either the original Entry 54, List II of the Seventh Schedule of the Constitution of India or the provisions of the Karnataka VAT Act, 2003. Reliance has been placed upon the following judgments delivered by the Hon’ble Supreme Court; a) Royala Corporation (P) Ltd & Ors., vs. Director of Enforcement, New Delhi, reported in (1969) 2 SCC 412. b) Kohlapur Canesugar Works Ltd., vs. Union of India, reported in (2000) 2 SCC 536. c) General Finance Co. & Ors., vs. Assistant Commissioner of Income Tax, Punjab, reported in AIR 2002 SC 3126. d) State of Punjab vs. Mohar Singh, reported in AIR 1955 SC 84. e) Gian Singh vs. State of Punjab, reported in 1999(9) SCC 312. 19. On the other side, learned counsel for the State of Karnataka has argued that the appellant’s case, in short, is that the reassessment order passed under the provisions of the Karnataka Value Added Tax Act, 2003 (“KVAT Act”) is without authority of law and, therefore, violation of Article 265 of the Constitution. In support, the appellant contends that the State is denuded of its power to reassess a dealer’s tax liability under the provisions of the KVAT Act after amendment to Entry 54 of the State List vide the Constitution (101st Amendment) Act, 2016 (“the Amendment Act”), which was notified to be brought into 17 force with effect from 16.09.2016, and the subsequent repeal of the KVAT Act with effect from 1.7.2017, vide Section 173 of the Karnataka Goods and Services Tax Act, 2017 (“KGST Act”). 20. Learned Counsel for the State has contended that the appellant’s contention in this regard is, however, wholly untenable in view of the insertion of a savings clause, namely Section 174 of the KGST Act in order to ensure that the repeal of the KVAT Act shall not affect liabilities accrued or tax payable under the KVAT Act. Therefore, in view of the savings clause under Section 174, the appellant’s contention that the State cannot reassess a liability incurred prior to repeal of the KVAT Act is totally baseless. 21. Learned Counsel for the State has further argued that the appellant has contended that Section 174 is unconstitutional as the said provision suffers from lack of legislative competence in view of the amendment to Entry 54 of the State Lit with effect from 16.9.2016. In regard to the aforesaid contention, he has stated that as a result of the amendment to Entry 54, the State lost its powers under Article 246(3) read with the said Entry to legislate on taxes on sale of purchase of goods except insofar as certain specified goods are concerned. It is, however, critical to note that, simultaneously, vide the same Constitution Amendment 18 Act, the States were conferred with power under Article 246A to make laws with respect to goods and services tax. Pertinently, the terms “goods and services tax” has been defined under Article 366(12-A) of the Constitution to mean “any tax on supply of goods, or services or both (....).” 22. Learned counsel has further contended that on a combined reading of Article 246A and Articles 366(12-A), it can clearly be discerned that the States, along with Parliament, have been conferred with a simultaneous power to make laws with respect to any tax on the supply of goods. The crucial difference between the power conferred under the erstwhile Entry 54 and Article 246A is that the power under Entry 54 was restricted only to taxes on sale or purchase of goods, whereas now under Article 246A, the States have the power to make laws with respect to taxes on supplies of goods. He has further submitted that the term “supply of goods” is of much wider amplitude than the term “sale of goods.” It is axiomatic that the term “supply of goods” includes “sale of goods” and, therefore, the power to legislate with respect to tax on the supply of goods would include the power to legislate with respect to tax on the sale of goods. He has further contended that in short, the legislative power to make laws with respect to sale of goods continues to vest in the State 19 Government and the only difference is that previously, the power vested exclusively with the State, vide Article 246(3) read with Entry 54 of List II, whereas now, the power is conferred simultaneously on the Centre and the States under Article 246A. 23. He has further submitted that the power to enact Section 174 of the KGST Act can be traced to Article 246A, which, when read with Article 366(12-A), confers power on the States to make laws with respect to any tax on supply of goods. Accordingly, Section 174 is a validly enacted piece of legislation and cannot be said to be without legislative competence. Therefore, the contention of the appellant that Section 174 is a “still born” provision and unconstitutional is without merit. 24. He has further submitted that the Hon’ble Supreme Court has held in a catena of judgments that there is always a presumption in favour of constitutionality of a provision of law, and that a law should not be declared unconstitutional unless the case is so clear as to be free from doubt (Karnataka Bank Vs. State of Andhra Pradesh, reported (2008) 2 SCC 254) ). He has further contended that it is also a well settled position of law that words appearing in any of the entries of the VII Schedule to the Constitution must not be read in a narrow or restrictive sense, 20 and that they must be understood to have effect in their widest amplitude (R.S.Rekhchand vs. State of Maharashtra, reported (1997) 6 SCC 12). He has further contended that the ratio of the above judgments is equally applicable to the interpretation of Article 246A since the said Article is the fountain of power for the Centre and the States to make laws with respect to taxes on goods and services. He has further submitted that this Court ought to construe Article 246A in a manner that is beneficial to the widest amplitude of the powers conferred under it. His further contention is that in light of the aforesaid judgments, it can be seen that the power to enact Section 174 can be traced to Article 246A. 25. Learned counsel has further stated that as per the contention of the appellant that the power to enact Section 174 can be traced to Section 19 of the 101st Constitution Amendment Act is erroneous. Section 19 was enacted with the specific purpose of providing for the levy of various indirect taxes during the period between the commencement of the Amendment Act (16.9.2016) and the introduction of GST, which at the stage of notification of the 101st Constitution Amendment Act, was uncertain. In other words, since the exact date for introduction of GST was not certain as on 16.9.2016, Section 19 ensured the 21 KVAT Act (as well as Central Excise Act, Service Tax, and all state VAT enactments) would continue to be valid and that the Centre and the States’ revenues would not be affected during the interregnum. Therefore, section 19 does not confer any power on the State to enact Section 174 of the KGST Act, which as submitted earlier, can be traced to the power conferred under Article 246A. 26. Learned Counsel has further submitted that it is beyond any doubt that during the tax periods in question in this appeal (2012-13), Article 246(3), read with Entry 54 of the State List, empowered the State to legislate with regard to levy of tax on sale or purchase of goods. The periods in question in the instant appeal are prior to the coming into force of the 101st Constitution Amendment Act. Therefore, the taxable events, that is, the sale or purchase of goods, occurred prior to the repeal of the KVAT Act, during which time the State had full power to levy, assess, and collect tax. He has further submitted that the levy, assessment, and collection of tax had occurred prior to the repeal of the KVAT Act. The same is in view of the fact that under the scheme of the Act, tax is levied under Section 3 at the time of sale of goods (which occurred during the tax periods in question), assessed at the time of filing of returns (as per Section 38 of the 22 KVAT Act, which deems every return filed to be assessed), and collected once again at the time of filing of returns (since tax as declared in the returns is payable along with the returns). Therefore, the levy, assessment, and collection of tax were in accordance and with the authority of law. He has further submitted that the amendment to Entry 54 does not affect the rights of the State to merely recomputed/reassess the tax payable on taxable events, namely sale of goods that had occurred when Entry 54 existed prior to its amendment. Therefore, the appellant is wholly incorrect in contending that, by virtue of the Amendment to Entry-54, the State has lost its power to reassess tax liability that was incurred during the time the KVAT Act was in force. 27. Learned Counsel has further contended that if the contentions of the appellant were to be accepted, the Centre and the States would be unable to assess/reassess/adjudicate/collect any taxes under the Central Excise Act, the Finance Act, 1994 (service tax), and the VAT and Entry Tax Acts of each of the States for the tax periods prior to the coming into force of GST, which would result in substantial losses to the State exchequer. Such an absurd eventuality could never have been contemplated by the Parliament and State legislatures. Therefore, on this 23 ground, too, the contentions of the appellant are liable to be rejected. 28. Heard the learned counsel for the parties at length and perused the records. 29. The undisputed facts of the present case reveal that the appellant is a dealer in jewellery. On the basis of the intelligence report by the Assistant Commissioner of Commercial Taxes, notice dated 3.2.2015, under Section 39(1) of the KVAT Act was issued. The petitioner/appellant did submit a reply to the notice and an order has been passed by the assessing authority on 31.3.2018 under the Karnataka Goods and Service Tax Act, 2017, which came into existence w.e.f., 1.7.2017. The appellant’s main contention is that the order passed by the competent authority is bad in law and he has challenged the constitutional validity and clauses (d) and (e) of Section 174(1) of the Karnataka Goods and Service Tax Act, 2017. He has also prayed for quashment of the order dated 31.3.2018. 30. The Constitution (101st Amendment) Act, 2016 is a land mark amendment made in the constitution to pave way to enable the parliament and the State Legislature to enact unified indirect taxation law on goods and service tax. The amendment 24 inserted Articles i.e., 246A, 269A and 279A. Articles 248, 249, 250, 268, 269, 270, 271, 286, 366, 368 were amended and Article 268A was omitted. The 101st Amendment Act, 2016 introduced a new Article after Article 246 i.e., Article 246A and the same reads as under: “246A special provisions with regard to Goods and Service Tax – (1) Notwithstanding anything contained in Article 246 and 254, Parliament, and subject to clause (2) the Legislature of every State have power to make laws with respect to Goods and Service Tax imposed by Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and service tax where the supply of goods or of service or both takes place in the course of interstate trade or commerce...................................” 31. As per the Amendment Act, 2016, 7th Schedule to the Constitution was also amended. List II (State List) was also amended. By the Amendment, Entry 52 (Entry Tax) Entry 55 (Tax on advertisement) were omitted. Entry 54 (tax on sale or purchase of goods) and Entry 62 (luxury tax) were amended. The amendment also amended Entry 54 “Taxes on the sale or purchase of goods other than Newspapers, subject to the provisions of Entry 92 A of List I”, was substituted by the following Entry:- “54. Taxes on the sale of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of 25 interstate trade or commerce or sale in the course of international trade or commerce of such goods.” 32. Thus it makes clear that the State legislation is denuded from its powers to make law on taxes on sale or purchase of goods other than petroleum products and liquor for human consumption as per the amended Entry 54. 33. The Central Government as per SO 2986 E dated 16.9.2016 issued orders notifying the 16th day of September 2016 as the date on which the provisions of Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 15, 16, 17, 18, 19 and 20 of the Constitution 101st Amendment Act have come in to force. Sections 19 of the Constitution 101st Amendment Act, 2016, is the Transitional provision, which reads as under: “19. Notwithstanding anything contained in this Act, any provisions of any law relating to tax on goods or services or on both in force in any State immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act, 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.” 34. It has been vehemently argued before this Court that the provisions of Karnataka Value Added Tax Act, 2003, can be enforced till 15.9.2017 and the Karnataka Goods and Service Act, 2017, has come into force on 1.7.2017 and therefore, the 26 provisions of KVAT Act cannot have any force of law after 15.9.2017 or 1.7.2017, whichever is earlier keeping in view the Transitional provisions of the Constitution as amended by Constitution 101st Amendment Act, 2016. 35. Section 174 of the Karnataka Goods and Service Tax Act, 2017, reads as under: 174. Saving. (1) The repeal of the Acts specified in section 173 shall not- (a) revive anything not in force or existing at the time of such repeal; or (b) affect the previous operation of the repealed Acts and orders or anything duly done or suffered there under; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the repealed Acts or orders under such repealed Acts: Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or (d) affect any tax, surcharge, penalty, fine, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the repealed Acts; or (e) 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, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, 27 surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so repealed; or (f) affect any proceedings including that relating to an appeal, revision, review or reference, instituted before, on or after the appointed day under the said repealed Acts and such proceedings shall be continued under the said repealed Acts as if this Act had not come into force and the said Acts had not been repealed. (2) Not withstanding anything contained in section 173, for the purpose of giving effect to subsection (1), the State Government may, by notification, in the Official Gazette make such provisions appears to it necessary or expedient,- (a) for making omissions from, additions to and adaptations and modifications of the rules, notifications and orders issued under the repealed Acts; (b) for specifying the authority, officer or person who shall be competent to exercise such functions, exercisable under any of the repealed Acts or any rules, notifications or orders issued there under as may be mentioned in the said notification. (3) Notwithstanding anything contained in section 173, nothing contained in any of the repealed Acts limiting the time within which any action may be taken or any order, assessment or reassessment may be made shall apply to an assessment or re-assessment made on the assessee or any person,- (i) in consequence of, or to give effect to, any finding, direction or order made under any provision of the relevant repealed Acts or any judgment, or order made by the Supreme Court, High Court or any other court whether before or after the commencement of this Act; (ii) to rectify any error on account of the assessment of such assessee or person under this Act, instead of under the relevant enactment, provided such assessment or reassessment under the repealed Acts is made within the time specified in such repealed Acts. (4) The repeal of the Acts referred to in section 173 shall not be held to prejudice or affect the general 28 application of section 6 of the Karnataka General Clauses Act, 1899 (Karnataka Act III of 1899) with regard to the effect of repeal.” 36. The Hon’ble Supreme Court in a land mark judgment delivered in the case of R.S.Rekhchand Mohota Spinning & Weaving Mills Ltd., vs. State of Maharashtra, reported in (1997) 6 SCC 12, in paragraphs 8 to 11 has held as under: “8. A conjoint reading of the provisions of the Code and the respective Entries would indicate that land revenue including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenue lie under the broad-head 'land revenue'. It is well-settled legal position that the land has been widely interpreted. In Navinchandra Mafatlal vs. The CIT, [(1965) 1 SCR 829 at 836] a Constitution Bench had observed that the question before this Court related to the correct interpretation of a word appearing in a Constitution Act which, as has been said , must not be construed in a narrow and pedantic sense. The interpretation of the statute would apply to the interpretation of the entries subject to reservation that their application is of necessity conditioned by the subject-matter of the enactment itself. It should be remembered that the problem before us is to construe a word appearing in Entry 54 which is a head of legislative power. It cannot be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended to it. It is, therefore, clear that in construing an entry in a list conferring legislative powers, the widest possible construction , according to their ordinary meaning, must be put upon the words used therein. Reference to legislative practice may be admissible for cutting down the meaning of a word in order to reconcile two conflicting provisions in two legislative lists. The cardinal rule of interpretation, however, is that words should be given their ordinary, natural and grammatical meaning subject to the rider that in construing words in a constitutional enactment, conferring legislative power 29 under Article 246, the most liberal construction should be put upon the words in the entries in the respective lists in the Seventh Schedule so that the same may have effect in their widest amplitude. The same principle was reiterated in Kunnathat Thathuunni Moopil Nair vs. State of Kerala & Anr. [(1961) 3 SCR 77 at 106] by Sarkar, J. though in a dissenting tone but on this principle there is no dissent by majority and it cannot be dissented. It was said thus: \"It is well known that entries in the legislative lists have to be read as wisely as possible. It is not necessary to cut down the plain meaning of the word \"land\" in Entry 49 to give full effect to the word \"forest\" in Entry 19. In my view, the two entries, namely, Entry 49 and Entry 18 deal with entirely different matters. Therefore, under Entry 49 taxation on land on which a forest stands is permissible and legal.” 9. In the case of Synthetics and Chemicals Ltd., vs. State of U.P. [(1990) 1 SCC 109], a Bench of seven Judges of this Court considered the effect of interpretation of the Constitution and legislative entries in para 67 which reads as under: \" 67. It is well to remember that the meaning of the expressions used in the Constitution must be found from the language used. We should interpret the words of the Constitution on the same principle of interpretation compel one to take into account the nature and scope of the Act which requires interpretation. A Constitution is the mechanism under which laws are to be made and not merely an Act which declares what the law is to be. It is also well settled that a Constitution must not be construed in any narrow or pedantic sense and that construction must not be construed in any narrow or pedantic sense and that construction which is most beneficial to the widest possible amplitude of its power, must be adopted. An exclusionary clause in any of the entries should be strictly and, therefore, narrowly construed. No entry should, however, be so read as not (sic) to rob it of entire content. A broad and liberal spirit should, therefore, inspire those whose duty it is to interpret the Constitution, and the courts are not free to stretch or to prevent the language of an enactment 30 in the interest of any legal or constitutional theory. Constitutional adjudication is not strengthened by such an attempt but it must seek to declare the law but it must not try to give meaning on the theory of what the law should be but it must so look upon a organic thing and must adapt itself to the changing situations and pattern in which it has to be interpreted. It has also to be borne in mind that where division of powers and jurisdiction in a federal Constitution is the scheme, it is desirable to read the Constitution in harmonious way. It is also necessary that in deciding whether any particular enactment is within the purview of one legislature or the other, it is the pith and substance of the legislation in question that has to be looked into. It is well settled that the various entries in the three lists of the Indian Constitution are not powers but fields of legislation. The power to legislate is given by Article 246 and other articles of the Constitution. The three lists of the Seventh Schedule to the Constitution are legislative heads of fields of legislation. These demarcate the area over which the appropriate legislature can operate. It is well settled that widest amplitude should be given to the language of the entries in three Lists but some of these entries in different lists or in the same list may override and sometimes may appear to be in direct conflict with each other, then and then only comes the duty of the court to find the true intent and purpose and to examine the particular legislation in question. Each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. In interpreting an entry it would not be reasonable to import any limitation by comparing or contrasting that entry with any other in the same list. It has to be interpreted as the Constitution must be interpreted as an organic document in the light of the experience gathered. In the constitutional scheme of division of powers under the legislative lists, there are separate entries pertaining to taxation and other laws. The aforesaid principles are fairly well settled by various decisions of this Court and other courts. Some of these decisions have been referred to in the decision of this Court in India Cement Ltd. v. State of Tamil Nadu, (1990) 1 SCC 12. 31 10. In a recent judgment, this Court, by a Bench of two Judges, to which K. Ramaswamy and G.P. Pattanaik,JJ. were members, in Indian Aluminium co. vs. State of Kerala [(1996) 7 SCC 637], considered the same question in para 12 and 20 which read as under: \" 12. The primary question, therefore, is: Whether the impugned Act enacted by the State Legislature is one under Entry 53 of the State List, viz., ‘Taxes on the consumption or sale of electricity’. Indisputably, the title of the Act as well as the charging Section 3 employ the words ‘duty on supply of electricity’. Under Article 246(3) of the Constitution, every State legislature has explicit power to make law for that State with respect to the matters enumerated in List II (State List) to the Seventh Schedule to the Constitution. The State’s power to impose tax is derived from the Constitution. The entries in the three lists of the Seventh Schedule are not power of legislation but merely fields of legislation. The power is derived under Article 246 and other related articles of the Constitution. The legislative fields are of enabling character designed to define and delimit the respective areas of legislative competitive areas of legislative competence of the respective legislature. There is neither implied restriction imposed on the legislature nor is any duty prescribed to exercise that legislative power in a particular manner. But the legislation must be subject to the limitations prescribed under the Constitution. 20.When the vires of an enactment is challenged, it is very difficult to ascertain the limits of the legislative power. Therefore, the controversy must be resolved as far as possible, in favour of the legislative body putting the most liberal construction upon the relevant legislative entry so that it may have the widest amplitude. The court is required to look at the substance of the registration. It is an equally settled law that in order to determine whether a tax statute is within the competence of the legislature, it is necessary to determine the nature of the tax and whether the legislature had power to enact such a law. The primary guidance for this purpose is to be gathered from the charging section. It is the 32 substance of the impost and not the form that determines the nature of tax.\" 11. Thus, it is settled principle of interpretation that legislative entries are required to be interpreted broadly and widely so as to give powers to the legislature to enact law with respect to matters enumerated in the legislative entries. Substantive power of the legislature to enact law is under Article 246 of the Constitution and legislative Entries in the respective Lists 1 to 3 of the Seventh Scheduled are of enabling character, designed to define and delimit the respective areas of legislative competence of the respective legislatures, the substantive power in Article 246 and all other related articles. “ 37. In the aforesaid judgment, the Hon’ble Supreme Court has held that it is a settled principle of interpretation that legislative entries are required to be interpreted broadly and widely so as to give powers to legislature to enact the laws with respect to the matters enumerated in the legislative entries. Therefore, in the light of the aforesaid judgment, by no stretch of imagination it can be held that clauses (d) and (e) of Section 174(1) of the Karnataka Goods and Service Tax Act, 2017 is ultra vires. 38. In the case of Karnataka Bank Ltd., vs. State of Andhra Pradesh and Others, reported in (2008) 2 SCC 254, the Apex Court in paragraph 19 has held as under: “19. The rules that guide the constitutional courts in discharging their solemn duty to declare laws passed by a legislature unconstitutional are well known. There is always a presumption in favour of constitutionality, and a law will not be declared unconstitutional unless the case 33 is so clear as to be free from doubt; to doubt the constitutionality of a law is to resolve it in favour of its validity. Where the validity of a statute is questioned and there are two interpretations, one of which would make the law valid and the other void, the former must be preferred and the validity of law upheld. In pronouncing on the constitutional validity of a statute, the Court is not concerned with the wisdom or un-wisdom, the justice or injustice of the law. If that which is passed into law is within the scope of the power conferred on a Legislature and violates no restrictions on that power, the law must be upheld whatever a Court may think of it. [See – State of Bombay vs. F.N.Balsara, AIR 1951 SC 318].” 39. In the aforesaid judgment, it has been held that where a validity of a statute is questioned and there are two interpretations, one of which would make law valid and the other void, the former must be preferred and validity of law upheld. 40. A similar and unsuccessive challenge was made in respect of constitutional validity in the case of Sheen Golden Jewels (I) P.Ltd., vs. State Tax Officer (IB), SGST Department, Thiruvananthapuram, reported in 2019(23) G.S.T.L 4 (Ker). The High Court of Kerala has dismissed the writ petition with a liberty to prefer appeal before the appellate authority within a period of 30 days. 41. The appellant’s basic contention is that the State is denuded of its power to re-assess a dealer’s tax liability under the provisions of the KVAT Act after amendment to Entry 54 of the State List vide the Constitution (101st Amendment) Act, 2016, 34 (‘the Amendment Act’), which was notified to be brought into force w.e.f., 16.9.2016 and the subsequent repeal of the KVAT Act w.e.f., 1.7.2017, vide Section 173 of the KGST Act. The appellant’s contention is totally untenable in view of the insertion of saving clause, namely Section 174 of the KGST Act in order to ensure that the repeal of the KVAT Act shall not affect liabilities accrued or tax payable under the KVAT Act. Therefore, in view of the savings clause under Section 174, the appellant’s contention that the State cannot reassess the liability incurred prior to repeal of the KVAT Act is totally baseless. 42. In respect of challenge to the constitutional validity and the assertion that the State’s legislative power have been taken away, it is pertinent to note that the power to enact Section 174 of the KGST Act can be traced to Article 246A, which, when read with Article 366(12-A), confers power on the States to make laws with respect to any tax on supply of goods. Accordingly, Section 174 is a validly enacted piece of legislation and cannot be said to be without legislative competence. Hence, the contention of the appellant that Section 174 is a still born provision and unconstitutional is devoid of merits and substance. 43. Learned Single Judge was therefore justified in holding that the reassessment order dated 31.3.2018 for the 35 period 2012-13 is clearly appealable before the appellate authority under Section 62 of the KVAT Act, 2003. 44. Resultantly, the present writ appeal is dismissed with a liberty to the assessee – company to avail the alternative remedy, if it so chooses and in case, the appeal is preferred within a period of four weeks from today, the issue of limitation will not come in the way of the assessee and the matter shall be decided on merits. No order as to costs. Sd/- JUDGE Sd/- JUDGE nd/- "