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IN THE HIGH COURT OF JHARKHAND AT RANCHI
H. C. MISHRA, DEEPAK ROSHAN, JJ.
M/s. Ramkrishna Forgings Limited and Ors - Petitioner
Versus
The State of Jharkhand through the Secretary, Finance Department, Project Building, HEC, Dhurwa, Ranchi and Ors - Respondent
(In W.P.(T) Nos.2740 of 2017, 3089 of 2017, 424 of 2016, 425 of 2016, 435 of 2017, 7337 of 2016, 7455 of 2016, 134 of 2016, 267 of 2016, 2935 of 2017, 3643 of 2017, 6739 of 2016, 3659 of 2017, 428 of 2016, 5948 of 2017) (In W.P. (T) Nos. 1965 of 2016, 2641 of 2017, 2642 of 2017, 2660 of 2017, 2661 of 2017, 2739 of 2017, 2740 of 2017, 3086 of 2017, 3087 of 2017, 3323 of 2017, 3391 of 2017, 3948 of 2016, 4203 of 2017, 424 of 2016, 425 of 2016, 4264 of 2016, 4265 of 2016, 4268 of 2016, 4269 of 2016, 429 of 2016, 4294 of 2017, 4312 of 2017, 4820 of 2016, 6537 of 2016, 1101 of 2016, 5119 of 19) (In W.P.(T) Nos. 3310 of 2017, 4150 of 2017, 7465 of 2016, 7467 of 2016, 7469 of 2016, 7486 of 2016, 755 of 2016, 757 of 2016, 834 of 2016, 861 of 2016, 948 of 2017) (In W.P.(T) Nos. 1227 of 2016, 1228 of 2016, 1243 of 2016, 1318 of 2016, 2130 of 2017, 2134 of 2017, 2136 of 2017, 2977 of 2017, 2980 of 2017, 3008 of 2017, 3084 of 2017, 3093 of 2017, 3307 of 2017, 3310 of 2017, 3576 of 2017, 3755 of 2017, 4013 of 18, 4020 of 18, 4149 of 2017, 4150 of 2017, 435 of 2017, 436 of 2017, 455 of 2017, 4684 of 2017, 471 of 2017, 577 of 2016, 6165 of 2016, 755 of 2016, 757 of 2016, 834 of 2016, 861 of 2016, 948 of 2017)
Decided On : 29-01-2020
The Jharkhand High Court, in a batch of writ petitions, examined the validity of amendments made to the Jharkhand Value Added Tax Act, 2005 (JVAT Act) and the Jharkhand Value Added Tax Rules, 2006 (JVAT Rules). The amendments in question related to the eligibility of input tax credit (ITC) and the retrospective effect given to certain provisions.
Fact of the Case:
Several dealers registered under the JVAT Act filed writ petitions challenging the amendments on various grounds, including the retrospective effect given to the amendments and the competence of the State Government to make retrospective amendments to the Rules.
Finding of the Court:
The High Court held that the retrospective effect given to the substituted proviso inserted in clause (ii) and (iii) of sub-section 4 of Section 18 of the JVAT Act, vide Amendment Act contained in Notification dated 8.2.2016, was ultra vires and violative of Articles 14 and 19(1)(g) of the Constitution of India. The Court reasoned that the substituted proviso, for the first time, provided for the forfeiture of ITC by restricting the availability of ITC on purchases of goods sold in the course of inter-State trade and commerce under Section 8(1) of the Central Sales Tax Act, 1956, and that this had the effect of curtailing the vested rights of the dealers.
Issues: ['Whether the retrospective effect given to the substituted proviso inserted in clause (ii) and (iii) of sub-section 4 of Section 18 of the JVAT Act, vide Amendment Act contained in Notification dated 8.2.2016, was ultra vires and violative of Articles 14 and 19(1)(g) of the Constitution of India.', 'Whether the amendment carried out in sub-section 8 of Section 18 of the JVAT Act, wherein a new clause (xviii) was inserted after existing clause (xvii) of the aforesaid section, was ultra vires and violative of Articles 14 and 19(1)(g) of the Constitution of India.', 'Whether the insertion of Rule 26(11A) under the JVAT Rules, vide notification dated 17.2.2017 with retrospective effect i.e. from 01.04.2015, was ultra vires to the provision of Section 94 of the JVAT Act, being beyond the powers of the delegate i.e. the State of Jharkhand.', 'If the answer to issue No. (IV) is in affirmative, whether in absence of machinery provision for giving effect to the amendments made in section 18(4)(ii) and 18(4)(iii) of the JVAT Act, upto 16.2.2017, the said provisions are unworkable and cannot be acted upon.']
Ratio Decidendi: The High Court held that the retrospective effect given to the substituted proviso was ultra vires and violative of Articles 14 and 19(1)(g) of the Constitution of India because it had the effect of curtailing the vested rights of the dealers. The Court also held that the amendment carried out in sub-section 8 of Section 18 of the JVAT Act, wherein a new clause (xviii) was inserted after existing clause (xvii) of the aforesaid section, was not ultra vires and violative of Articles 14 and 19(1)(g) of the Constitution of India, as it was based on reasonable classification and intelligible differentia. Further, the Court held that the insertion of Rule 26(11A) under the JVAT Rules, vide notification dated 17.2.2017 with retrospective effect i.e. from 01.04.2015, was ultra vires to the provision of Section 94 of the JVAT Act, being beyond the powers of the delegate i.e. the State of Jharkhand. The Court reasoned that the State Government did not have the power to frame rules with retrospective effect. Consequently, the Court held that in the absence of machinery provision for giving effect to the amendments made in section 18(4)(ii) and 18(4)(iii) of the JVAT Act, upto 16.2.2017, the said provisions were unworkable and could not be acted upon.
Final Decision: The High Court allowed the writ petitions in part, to the extent indicated in the judgment. The Court quashed and set aside the retrospective effect given to the substituted proviso inserted in clause (ii) and (iii) of sub-section 4 of Section 18 of the JVAT Act, vide Amendment Act contained in Notification dated 8.2.2016. The Court also quashed and set aside the insertion of Rule 26(11A) under the JVAT Rules, vide notification dated 17.2.2017 with retrospective effect i.e. from 01.04.2015. Further, the Court declared that for the period 23.09.2015 to 16.2.2017, the proviso inserted to clause (ii) and Clause (iii) of sub-section 4 of Section 18 of the JVAT Act could not be given effect to in the absence of any machinery provision and no forfeiture of ITC shall be given effect to during the said period.
JUDGMENT :
DEEPAK ROSHAN, J.
1. All the aforesaid writ petitions involve a common question of law, as such, they were heard together and are being disposed of by this common judgment.
2. These batch of writ petitions have been filed by the dealers registered under the provision of the Jharkhand Value Added Tax Act,2005 [hereinafter referred to as “JVAT Act” in short], primarily challenging the amendments brought in Section-18 of the JVAT Act, 2005 which lays down eligibility towards claim of Input Tax Credit [ hereinafter referred to as “ITC” in short]. Further challenge has been made in the writ applications to the amendment made in the Jharkhand Value Added Tax Rules, 2006 [hereinafter referred to as “JVAT Rules”] wherein amendment has been carried in Rule-26 of the said JVAT Rules,2006 with retrospective effect for giving effect to the amendment carried out under Section-18 of the JVAT Act, 2005 aforesaid.
3. The writ petitioners before this Hon’ble Court are either traders or manufacturers of goods. Since in the batch of the present writ applications the only issue for adjudication is the validity of the amendment carried out under the JVAT Act, and/or JVAT Rules, individual facts of the writ applications are not discussed as the same are not in dispute. However, for proper appreciation of the issues involved in the instant writ applications, it would be appropriate to notice the various amendments carried out under the provision of Section-18 of the JVAT Act, including the amendment carried out under Rule-26 of the JVAT Rules, which are as under:-
Vide notification dated 23.09.2015 an Amendment was carried out in Clause-(ii) of sub-section-4 of Section-18 of the JVAT Act, 2005 and, Clause-(iii) of sub-section-4 of Section-18 of the JVAT Act, 2005, as under:-
Amendment in Section-18-
(b) In clause (ii) of sub-section (4), after the existing provision ‘Sale in course of inter-State trade and commerce falling under sub-section (1) of Section 8 of the Central Sales Tax Act, 1956 ( 74 of 1956)’, a proviso shall be added in the following manner:-
Provided that the Input Tax Credit on purchases when sold in course of inter State trade or commerce shall be allowed only to the extent of the Central Sales Tax payable under the Central Sales Tax Act, 1956 ( 74 of 1956).
(d) In clause (iii) of sub-section-4, a proviso shall be added in the following manner:-
Provided that the Input Tax Credit on purchases when sold in course of inter State trade or commerce shall be allowed only to the extent of the Central Sales Tax payable under the Central Sales Tax Act, 1956 ( 74 of 1956).
The aforesaid amendments were initially given retrospective effect with effect from 01.04.2015.
(ii) Amendment No.2
In Section-18 of the JVAT Act, a new clause was inserted vide same gazette notification dated 23.09.2015 which reads as under:-f) In the existing sub-section (8), after the clause (xvii), a new clause (xviii) , shall be added in the following manner:-
(xviii) ‘In respect of goods consumed or burnt up in course of manufacturing process and are not transferred into or existent in the finished product whether as goods or in any other form’
The said amendment was also initially given retrospective effect with effect from 01.04.2015.
(iii) Amendment No. 3
Vide notification dated 08.02.2016, Proviso insertedin (ii)Clause-and (iii) of sub-section(4) of Section-18 which was inserted vide notification dated 23.09.2015 was substituted in the following manner:-
Amendment in sub-section(4) of Section-18 The existing proviso in clause-(ii) of sub-Section(4) of Section-18 shall be substituted in the following manner:-
“Provided that the input tax credit on such purchases when sold in course of interstate trade and commerce shall be allowed only to the extent of Central Sales Tax payable on such sales made under sub-section (1) of Section 8 of The Central S
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