The Karnataka High Court has held that merely because a reassessment order is passed under the Value Added Tax law after coming into force of the GST regime, it would not make that reassessment order void in the eyes of law.
“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 (Karnataka VAT) Act, 2003 after the KGST Act, 2017 under GST regime came into effect from July 1, 2017, it does not mean that the said Order passed on March 31, 2018 under the KVAT Act, 2003 is non-est or void in the eye of law,” said Justice Vineet Kothari.
The court said so while dismissing the petition moved by M/s. Prosper Jewel Arcade, a dealer in jewellery, assailing the re-assessment order passed by the Deputy Commissioner of Commercial Taxes, (Audit)- 2.8, DVO-02, Bangalore, under Section 39(1) of the Karnataka Value Added Tax Act, 2003 read with the other relevant provisions of the said Act for the year 2012-13 raising a demand of Rs.4,42,72,061, including tax, interest and penalty against the petitioner assessee.
The petitioner also challenged the constitutional validity of Section 174(1) (d) and (e) of the Karnataka Goods and Services Tax Act, 2017 which has been enforced only later on with effect from July 1, 2017, and is not at all applicable to the assessment period 2012-13 in question.
The court noted that, “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of the KGST Act, 2017 clearly saves all the rights, obligations or liabilities acquired, accrued or incurred under the repealed Acts enumerated under Section 173 of the said Act which includes KVAT 2003.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”.
The petitioner had argued that when the new GST regime subsumed the various indirect tax levies like the excise duty, Value Added Tax (VAT), entry tax, etc., earlier imposed by the Union of India as well as states and was enforced in India with effect from July 1, 2017 consequent to the 101st Amendment to the Constitution of India, there were 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.
The court was, however, not impressed with the argument and stated that merely because the order has been passed after July 2017, it does not get adversely affected.
The court also noted that the petitioner could not give any satisfactory response to a pointed question from the court as to how the constitutional amendment of law and the change of indirect taxes regime by introduction of GST regime with effect from July 1, 2017 is applicable or relevant to the tax period involved in the present case, viz. 2012-13 under the impugned order passed under the provisions of the then existing KVAT Act, 2003.