Direct Taxes

Questions & Answers

Q.1 What is the distinction between repeal of the Act simpliciter and repeal with fresh legislation? Will there be different situation where the fresh legislation contains a saving clause or such a clause does not form part of the fresh legislation?

Ans. The term ‘Repeal’ connotes as if one statute is abrogated or obliterated by another statute, as if one statute was never passed, never existed. The Hon’ble Supreme Court of India in the case of State of Orissa vs. M A Tulloch & Co. reported as AIR 1964 SC 1284 referred in para 20 of this judgment as under :

“ …………………………………….. the effect in law of a repeal, if it is not subject to a saving as is found in S. 6 of the General Clauses Act is also not a matter of controversy. Tindal, C.J., stated this in Kay vs. Goodwin, (1830) 6 Bing 576 at p. 582:

“I take the effect of repealing a statute to be to obliterate it as completely from the records of the Parliament as it if had never been passed; and it must be considered as a law that never existed except for the purpose of those actions which were commenced, prosecuted and concluded whilst it was an existing law.”

It was the same idea that was expressed by Lord Tenterden in Surtees vs. Ellison, (1829) 9 B and C 750 at p. 752:

“It has long been established that, when an Act of Parliament is repealed, it must be considered (except as to transactions past and closed) as if it had never existed.”

It is a recognized principle in law that any rules, regulations or instructions issued under the repealed Act shall be continued to be in force unless they are clearly inconsistent with the amended Act or instructions or the new rules framed.

In view of the definition of the term repeal it can be said that in the case of simple repeal there is no scope for any contrary opinion. But when there is a repeal of an enactment followed by fresh legislation on the same subject, it necessarily needs to examine the provisions of new Act in order to ascertain whether the same indicate a different intention or not. In such a situation it will have to be seen that whether the new Act expressly keeps alive old rights and liabilities under the Repealed Act or there is an intention to destroy the same. It is thus difficult to say in general terms that the provisions of General Clauses Acts of various States are ruled out whenever there is a repeal of enactment followed by a fresh legislation. Supreme Court in the case of Punjab vs. Mohar Singh (1955) 1 SCR 893 observed that whenever there is repeal of enactment the consequences laid down in Sec. 6 of the General Clause Act will follow unless, if the section itself says, a different intention appears, (these words have also been used in State General Clauses Act). In such an event one has to look to the provisions of new Act only for the purpose of determining whether the new Act indicates different intentions. The object of the repeal and re-enactment is to obliterate the repealed Act.

A saving provision or clause merely preserves what exists. A different situation arises where fresh legislation contains a saving clause. A saving provision, whether it is sustentative or procedural in scope, being the byproduct of legislative wisdom, acts on its own uninfluenced by other considerations such as hardships, inconvenience and equity. In its operational field it may work hardship, its results may be at once startling an inconvenient.

In case, if there is no saving clause in fresh legislation, the old/repealed legislation will continue to operate to the extent of the clauses mentioned in the repealing Act; i.e., like anything done and action taken and acts done and any rights, title, entitlement, or obligation already acquired, accrued to incurred thereunder etc. would continue as provided in the repealing Act.

Q.2 What is the effect of repeal of local sales tax laws by the State VAT Acts on

1. Pending proceedings under the local sales tax law.

2. Notifications granting full/partial exemptions not specifically rescinded on the date of repeal.

3. Proceedings that were already commenced under the old law but were completed after its repeal.

4. Who would be jurisdictional remedial authority if the new and the repealed law provide for different ones, when the adverse order was passed after repeal.

Ans. It is a vast question and to answer it provisions of Repeal and Savings in VAT Laws of different States have to be examined. On a perusal of the provisions of Repeals and Savings in different VAT Laws and simultaneously of General Clauses Acts of the States, it will be seen that the Repeal does not –

1. affect the previous operation of any enactment so repealed or anything duly done or suffered there under; or

2. affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

3. affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

4. affect any investigation, legal proceeding or remedy, in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid.

and any such investigation, legal proceedings or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed, as if the repealing Act had not been passed.

A perusal of the aforesaid provision shows that pending proceedings under the local sales tax law would continue and the Courts would not lose their jurisdiction, notifications granting full/partial exemptions not specifically rescinded on the date of repeal shall remain in force and proceedings that were already commenced under the old law but were completed after its repeal shall not be effected by the repeal of the Act.

The Answer to Part iv of Question 2 is that when new and repealed law provide for different jurisdictional remedial authority and the adverse order is passed after repeal, it is the jurisdictional remedial authority under the new Act (Repealing Act) before whom an aggrieved party is to approach to seek remedy. It is a settled rule of law that one cannot have any vested right in seeking remedy from one particular jurisdictional remedial authority and only such authority is competent to exercise jurisdiction who exist on the day when the remedy is sought by an aggrieved party. The principles that the new procedure prescribed by the law governs all pending cases has been laid down by the Supreme Court of India in the case of State of Madras vs. Lateef Hamid & Company (1971) 28 STC 690 SC, in which the Court held that “……………… So long as the new procedure laid down in the 1959 Act did not interfere with any of his vested rights the dealer had no right to claim that his case must be dealt with under the provisions of the repealed Act. His right of appeal under the 1959 Act did not take away in any manner any of his vested rights under the 1939 Act. The Appellate Assistant Commissioner therefore could have enhanced the assessment for the year 1958-59.”

Q.3 Whether an order passed under the local sales tax law (old Act) can be revised or reviewed by the appropriate authority under the old Act after its repeal by VAT Acts and in case the prescribed period for such an action differ in both the Acts, which period of limitation will apply for initiation as well as completion of such departmental actions?

Ans. On a perusal of different State VAT Acts, it will be seen that the repeal of the said Acts has not by and large effected the previous operation of the Repealed Acts and right, title, entitlement obligation or liability already acquired, accrued or incurred thereunder have been saved. In view of such provisions in different State Acts, the appropriate authority under the old Act, unless otherwise provided under the Repealing Act, would continue to exercise powers to revise or review any order under the Repealed Act. However, so far as the prescribed period for such action is concerned, in case any period of limitation for such an action has been prescribed under the Repealing Act, such period of limitation will apply to the proceedings irrespective of the fact whether the repealing Act has extended or shortened the period of limitation and in case the repealing Act does not prescribe any limitation, the limitation prescribed under the repealed Act for such action would continue.

Q.4 For agitating questions of law arising out of the decisions of the Tribunal, under the old law pronounced after its repeal, whether Reference Application before the Tribunal (under the old Act) or the direct appeal to High Court (as per new Act) would be appropriate?

Ans. For agitating Question of law arising out of the decision of the Tribunal under the Repealed Act and pronounced after its repeal, in my opinion it will be governed by the provisions laid down in Repealing Act as held by the Supreme Court as in the case of State of Madras vs. Lateef Hamid & Company (1971) 28 STC 690 SC. However, it will be of essence to say here that both in case of a reference under the Repealed Act and an appeal to the High Court under the Repealing Act; it is the question of law which can only be raised in availing either of the two remedies before the High Court.

Q.5 When the decision of the Tribunal involve an order under section 6A of the Central Sales tax Act as well as the dispute about the nature of the transaction and the transaction in the course of import/export, whether appeal will be filed to the Central Appellate Authority for all the points or whether from one common order two appeals are required to be filed, one to the Central Appellate Authority against order under section 6A and another to High Court on the other points? The High Court being the higher constitutional court, will it entertain such a dichotomy of the same order of the Tribunal or whether the Tribunal is required to pass two separate orders in such an appeal?