Section 84A Of Gujarat VAT Act Unconstitutional: Gujarat HC Allows Reliance Industries' Plea [Read Judgment]

The Gujarat High Court has struck down Section 84A of the Gujarat Value Added Tax Act holding it as unconstitutional.

The Court held that the provision is ultra vires and beyond the legislative competence of the State Legislature. The bench comprising of Justices JB Pardiwala and AC Rao also held that it is manifestly arbitrary, unreasonable and therefore, violative of the Articles 14 and 19(1)(g) of the Constitution of India.

Section 84A, introduced vide VAT Amendment Act, 2018, provided for the exclusion of the period spent between the date of the decision of the appellate tribunal and that of the High Court as well as the Supreme Court in computing the period of limitation, referred to in Section 75 of the VAT Act.

The Reliance Industries and some others had challenged the validity of the provision.

The bench said that if unlimited time period is available to the Revenue for assessment/re- assessment/revision in any case based on a decision rendered in the case of any other dealer the same would lead to an irreparable situation. The court also disagreed with the contention that the VAT Amendment Act, 2018 is a validating Act.

The Court concluded as follows :

(i) Section 84A of the Gujarat VAT Act is ultra vires and beyond the legislative competence of the State Legislature.

(ii) Section 84A of the Gujarat VAT Act is manifestly arbitrary, unreasonable and therefore, violative of the Articles 14 and 19(1)(g) of the Constitution of India.

(iii) Section 84A of the Gujarat VAT Act is not a validating Act.

The judgment heavily relied on the principle in the SC decision Mafatlal Industries Ltd. vs. Union of India, (1998) 111 STC 467 (SC) that "one of the important principles of law, based upon public policy, is the sanctity attaching to the finality of any proceeding, be it a suit or any other proceeding".

"We are of the view that if unlimited time period is available to the Revenue for assessment/reassessment/revision in any case based on a decision rendered in the case of any other dealer the same would lead to an irreparable situation and, in such circumstances, it renders Section 84A manifestly arbitrary and unreasonable", the bench noted. 

Accordingly, the impugned notices in each of the writ applications issued under Section 75 of the Gujarat VAT Act were quashed and set aside. 

Case name: Reliance Industries Ltd. vs State Of Gujarat
Case no.:SCA NO. 14206 of 2018
Coram: Justices JB Pardiwala and AC Rao
Counsel: Sr. Adv SN Soparkar, Adv Uchit N Sheth, Advocate General Kamal Trivedi

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