The order of the Karnataka High Court permitting the tax department to pass VAT Re-Assessment Order after the GST rollout will now consider by the division bench on appeal.
The petitioners, Propel Jewel has filed an appeal against the Single Bench order holding that the re-assessment order passed under the Karnataka Value Added Tax (KVAT) Act after the rollout of the Goods and Services Tax Act cannot be held as invalid.
Before the High Court, the petitioners challenged a re-assessment order passed under the Karnataka Value Added Tax Act by contending that post 101st Amendment to the Constitution of India, there are certain lacunas in not saving Entry 54 of List II in its original form prior to the 101st Constitutional Amendment which received the Assent of the President on 08/09/2016 and was notified to be effective from 16/09/2016 and therefore the impugned re-assessment Order passed by the Assessing Authority does not legally stand the test of an Order passed under due authority of law.
It was also contended that the imposition of the tax by its levy, assessment and collection, all have to be supported by the now existing 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.
Rejecting the contentions, Justice Vineet Kothari observed that the taxable event under the Value Added Tax law is the individual transaction of sale or purchase by the Dealer and the law applicable on the date of the taxable event is the relevant law for the imposition of the tax.
On appeal, the petitioners pointed out that when 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 Karnataka Value Added Tax Act, 2003 stands dead and unenforceable on the introduction of Karnataka Goods Service Tax Act and that Karnataka Value Added Tax Act has no life or existence. The repeal and saving clause of the Karnataka Goods and Service Tax Act 2017 cannot validate actions when the corresponding Constitutional Entry is no longer in existence in the Constitution in the light of Article 265 of the Constitution.
It was further submitted that the amount taxed becomes due only after passing and issuance of assessment order and demand notice, especially when it is admitted that the assessment order has been passed and demand notice has been issued only on 31-03-2018 and therefore the finding of the learned Single Judge that the demand becomes due when sale or purchase has taken place, is against law and the provisions of Article 265 of the Constitution.
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