VAT Assessment post-GST: Karnataka HC stays Single Bench Order [Read Order]

In an appeal filed before the division bench against the order of the Karnataka High Court permitting the tax department to pass VAT Re-Assessment Order after the GST rollout, the division bench has now granted an interim relief to the petitioners by granting stay on demand and the Single bench judgment.

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.

When the subject appeal came up before the Court, Mr. Venkataraman, Advocate appeared for the petitioners. The Court passed an order admitting the appeal.

Thereafter, the Court took up the applications for stay, for hearing.  Upon hearing the counsels, the Court passed an order staying the operation of the Single Judge’s order. Further, it passed an order staying the operation of the demand notice subject to payment of Rs. 1,80,00,000/-, which is to be made after deducting the amount already remitted to the department.

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.