 of Jharkhand VAT Act is ultra vires as the state legislature lacks legislative competence to enact such a law that too with retrospective effect.){kind=link}
Jharkhand High Court has held that Section 9(5) of Jharkhand VAT Act is ultra vires Article 246 of the Constitution as the state legislature lacks legislative competence to enact such a law that too with retrospective effect. The petitioner who is a Company registered, under the provisions of ‘JVAT Act‘ and is liable to pay VAT on its turnover. Earlier, the petitioner was not liable to pay any VAT on the trade discounts / incentives, but pursuant to bringing in Section 9(5) in JVAT Act, the petitioner has become liable to pay the tax on the trade discounts and incentives.
Acting upon the plea, the Division bench of Justice H.C. Mishra & Justice Deepak Roshan observed that by bringing Section 9(5) in the JVAT Act into the statute book, the dealers have been put to a disadvantageous position which was not within the legislative competence of the State Legislature. It was further observed that this is a clear case where the State Legislature was not having the legislative competence to give the expression “sale of goods” an extended meaning and to enlarge its legislative field to cover those transactions for taxing, which did not properly conform to the elements of sale of goods within the Sales of goods Act, or under Article 366(29-A) of the Constitution of India, and were not satisfying the four conditions of sale.
The petitioner in the writ petition has challenged the vires of the above said provisions stated that under Entry 54 of List-II of Seventh Schedule of the Constitution, the state legislature is not empowered to make any addition in the list of taxable sales or purchase as given under Article 366(29A). It was also submitted that by no stretch of imagination, in absence of the deeming fiction it can be said that the trade discounts / incentives, given by and received by the petitioner could be treated as sales.
Allowing the writ petition, the High Court held that the State has sought to make such transactions taxable, which are in addition to the transactions described under Article 366(29A) and such transactions were never being subjected to tax under the principle Act. The Court dismissed the state’s submission that in the present case only apprehending danger is challenged, and judicial review is not available at the stage prior to making a decision, on the ground of quia timet action. Placing reliance on Tashi Delek Gaming Solutions Ltd. & Anr. Vs. State of Karnataka, (2006) 1 SCC 442, the court held that a quia timet application would be maintainable and the provision of S.9(5) was struck down from the statute books.
-India Legal Bureau