# CASE DETAILS THE STATE OF TELANGANA & ORS v. M/S TIRUMALA CONSTRUCTIONS

- **Citation:** 2023 INSC 942
- **Court:** Supreme Court of India
- **Decided:** 2023-10-20
- **Case number:** Civil Appeal No. 1628 of 2023
- **Bench:** S. Ravindra Bhat, Aravind Kumar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-the-state-of-telangana-ors-v-m-s-tirumala-constructions-36820
- **Pages:** 72

## Headnote

Issue for consideration: The Constitution (101st Amendment) Act,
2016, introduces a fundamental re-ordering of the constitutional premise of
taxation by the Union and State Governments in India. It is the framework to
enable the introduction of the Goods and Services Tax (GST). These batch
of appeals arise from judgments delivered by the Telangana, Gujarat and
Bombay High Court. The concerned States (Telangana and Gujarat) have
appealed aggrieved by the judgments. The assessee petitioners are appellants,
and are aggrieved by the judgments of Bombay High Court.
Constitution of India - Constitution (101st Amendment) Act,
2016 - Eff ect of:
Held: The coming into force of the GST regime, and the passage of
the amendment demonstrates a rare unanimity, a resolve across the political
spectrum, to ensure that there is a single indirect taxation regime - The
eff ect of the Amendment is to subsume all state and union taxes, on goods
and services - Both the Union and the States will ostensibly have the power
to tax the supply of goods and services - The 101st Amendment Act takes
away neither the Union's nor the States' taxing power but instead gives
them the power to impose taxes on supply of goods and supply of services
respectively - Through Article 246-A the Amendment creates: (a) a new
legislative fi eld, conferring; (b) legislative authority outside the three Lists
of the Seventh Schedule; (c) concurrent powers to both Parliament and the
State Legislatures to enact legislations on the same subject-matter and at
the same time. [Para 8]
142
SUPREME COURT REPORTS
[2023] 15 S.C.R.
Constitution of India - Constitution (101st Amendment) Act, 2016
- s.19 - Interpretation of:
Held: S.19 seeks to achieve three aims - The fi rst is to preserve
the existing status quo with regard to the state and central indirect tax
regime, for a period of one year from the date of commencement of the
Amendment or till a new law is enacted whichever is earlier - The second
is authorizing the competent legislatures i.e. the State Legislatures and
Parliament to amend existing laws which were in force in states and other
parts of the country (both Central and State laws) - The third was the
repeal of such laws - S.19 was meant to be transitional - In its absence,
the several hundreds of state enactments and central laws which were in
force, would have been jeopardized - Other than s.19 there is no saving
provision which is part of the Amendment - So, s.19 of the Constitution
(101st Amendment) Act, 2016 and Article 246A enacted in exercise of
constituent power, formed part of the transitional arrangement for the
limited duration of its operation, and had the eff ect of continuing the
operation of inconsistent laws for the period(s) specifi ed by it and, by
virtue of its operation, allowed state legislatures and Parliament to amend
or repeal such existing laws. [Paras 73, 116]
Constitution of India - Ordinary law and Constitutional law:
Held: An ordinary law such as an Act of Parliament, is a product of a
legislative exercise - The source of that power is traced to the Constitution
in some specifi c provisions or through fi elds of legislation enumerated
in one or the other lists - Constitutional law on the other hand is that it
arises out of the Constitution and creates diff erent organs of the State,
defi nes their power and imposes limitations on the functioning of the
Executive and legislative wings through the fundamental rights and other
limitations - An ordinary law can be made or changed by the same body,
the legislating body in exercising legislative power - Since constitutional
amendments relates to the fundamental law of the land which is a source
of authority for other laws, it can be achieved only through fulfi lling the
special procedure. [Para 77]
Constitution of India - Constitution (101st Amendment) Act,
2016 - s.19 - Whether the power of amendment or repeal is subject to
limitations u/s. 19:
143
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONS

## Text

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[2023] 15 S.C.R. 141 : 2023 INSC 942
141
CASE DETAILS
THE STATE OF TELANGANA & ORS.
v.
M/S TIRUMALA CONSTRUCTIONS
(Civil Appeal No(s). 1628 of 2023)
OCTOBER 20, 2023
[S. RAVINDRA BHAT AND ARAVIND KUMAR, JJ.]
HEADNOTES
Issue for consideration: The Constitution (101st Amendment) Act,
2016, introduces a fundamental re-ordering of the constitutional premise of
taxation by the Union and State Governments in India. It is the framework to
enable the introduction of the Goods and Services Tax (GST). These batch
of appeals arise from judgments delivered by the Telangana, Gujarat and
Bombay High Court. The concerned States (Telangana and Gujarat) have
appealed aggrieved by the judgments. The assessee petitioners are appellants,
and are aggrieved by the judgments of Bombay High Court.
Constitution of India - Constitution (101st Amendment) Act,
2016 - Eff ect of:
Held: The coming into force of the GST regime, and the passage of
the amendment demonstrates a rare unanimity, a resolve across the political
spectrum, to ensure that there is a single indirect taxation regime - The
eff ect of the Amendment is to subsume all state and union taxes, on goods
and services - Both the Union and the States will ostensibly have the power
to tax the supply of goods and services - The 101st Amendment Act takes
away neither the Union's nor the States' taxing power but instead gives
them the power to impose taxes on supply of goods and supply of services
respectively - Through Article 246-A the Amendment creates: (a) a new
legislative fi eld, conferring; (b) legislative authority outside the three Lists
of the Seventh Schedule; (c) concurrent powers to both Parliament and the
State Legislatures to enact legislations on the same subject-matter and at
the same time. [Para 8]
142
SUPREME COURT REPORTS
[2023] 15 S.C.R.
Constitution of India - Constitution (101st Amendment) Act, 2016
- s.19 - Interpretation of:
Held: S.19 seeks to achieve three aims - The fi rst is to preserve
the existing status quo with regard to the state and central indirect tax
regime, for a period of one year from the date of commencement of the
Amendment or till a new law is enacted whichever is earlier - The second
is authorizing the competent legislatures i.e. the State Legislatures and
Parliament to amend existing laws which were in force in states and other
parts of the country (both Central and State laws) - The third was the
repeal of such laws - S.19 was meant to be transitional - In its absence,
the several hundreds of state enactments and central laws which were in
force, would have been jeopardized - Other than s.19 there is no saving
provision which is part of the Amendment - So, s.19 of the Constitution
(101st Amendment) Act, 2016 and Article 246A enacted in exercise of
constituent power, formed part of the transitional arrangement for the
limited duration of its operation, and had the eff ect of continuing the
operation of inconsistent laws for the period(s) specifi ed by it and, by
virtue of its operation, allowed state legislatures and Parliament to amend
or repeal such existing laws. [Paras 73, 116]
Constitution of India - Ordinary law and Constitutional law:
Held: An ordinary law such as an Act of Parliament, is a product of a
legislative exercise - The source of that power is traced to the Constitution
in some specifi c provisions or through fi elds of legislation enumerated
in one or the other lists - Constitutional law on the other hand is that it
arises out of the Constitution and creates diff erent organs of the State,
defi nes their power and imposes limitations on the functioning of the
Executive and legislative wings through the fundamental rights and other
limitations - An ordinary law can be made or changed by the same body,
the legislating body in exercising legislative power - Since constitutional
amendments relates to the fundamental law of the land which is a source
of authority for other laws, it can be achieved only through fulfi lling the
special procedure. [Para 77]
Constitution of India - Constitution (101st Amendment) Act,
2016 - s.19 - Whether the power of amendment or repeal is subject to
limitations u/s. 19:
143
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONSTRUCTIONS
Held: There were no limitations u/s. 19 (read together with Art.
246A), of the Amendment - That provision constituted the expression
of the sovereign legislative power, available to both Parliament and state
legislatures, to make necessary changes through amendment to the existing
laws - As held in Rama Krishna Ramanath case the transitional power
(in that case, Section 143 (3)) "the provision by its implication confers
a limited legislative power to desire or not to desire the continuance of
the levy" - This limited legislative power was not constricted or limited,
in the manner alleged by the states; it is circumscribed by the time limit,
indicated (i.e. one year, or till the new GST law was enacted) - It could,
therefore, enact provisions other than those bringing the existing provisions
in conformity with the amended Constitution - Since other provisions of the
said Amendment Act, had the eff ect of deleting heads of legislation, from
List I and List II (of the Seventh Schedule to the Constitution of India), both
s.19 and Art.246A refl ected the constituent expression that existing laws
would continue and could be amended - The source or fi elds of legislation,
to the extent they were deleted from the two lists, for a brief while, were
contained in s.19 - As a result, there were no limitations on the power to
amend. [Paras 97 and 116]
Constitution of India - Constitution (101st Amendment) Act, 2016
- Validity of Telangana Act tested from the touch stone of its originating
as an ordinance:
Held: The Telangana ordinance was promulgated on 17.6.2016 -
The Telangana State GST Act was enacted and received the assent of the
Governor on 25.05.2017; it was brought into force on 01.07.2017 - The
state GST Act contained a savings and repeal law, which sought to save acts
done, privileges and rights accrued under the repealed enactment, i.e. the
State VAT Act - It was sought to be argued that once the State Legislature
approved the ordinance and enacted the amendment, in conformity with it,
the provisions of the Ordinance became part of the act - The question of
legislative competence would not arise, because the mere confi rmation of an
ordinance is within the competence of the State legislature - Since the law
was introduced through a diff erent procedure, i.e. ordinance, the eff ect of
that law, empowering the VAT offi cials to reopen or complete assessments,
was no diff erent - The state of Telangana had argued to the contrary, and
144
SUPREME COURT REPORTS
[2023] 15 S.C.R.
explained that when the ordinance was issued, there was no doubt about the
state possessing legislative competence - As of that date (17.06.2017) the
power to amend existing laws, was permissible u/s. 19 of the Amendment
- However, that argument is not tenable, because the ordinance's validity
and eff ect might not have been suspect on the date of its promulgation; yet,
the issue is that on the date when it was in fact, approved and given shape
as an amendment, the State legislature had ceased to possess the power - By
that time, the State GST and the Central GST Acts had come into force (on
01.07.2017) - Therefore, Section 19 ceased to be eff ective - The original
entry (Entry 54 of the State List) ceased to exist - In the circumstances,
the state legislature had no legislative competence to enact the amendment,
which approved the ordinance, which consequently was rendered void.
[Paras 102, 105]
Constitution of India - Constitution (101st Amendment) Act,
2016 - Gujarat Act:
Held: In the Gujarat batch of cases, s.84A was introduced in the Gujarat
Value Added Tax Act, 2003 by the Gujarat Value Added Tax (Amendment)
Act, 2018, gazetted on 06.04.2018 but with retrospective eff ect from
1.4.2006 - It inter-alia provided that if for a particular issue in "some
other proceedings" a lower forum, gave a decision which is prejudicial to
the interest of the revenue and an appeal against such decision is pending
before the higher forum then the period spent in such litigation will be
excluded while computing period of limitation for revision - By giving
such provision retrospective eff ect the State legislature thus sought to enable
reopening of assessments which had already attained fi nality - The Gujarat
High Court struck down the amendment on the ground of lack of legislative
competence, on the part of the legislature, after 01.07.2017, and also that it
was manifestly arbitrary - In the instant case, the retrospective eff ect, given
to the amendment, which was brought into force, with eff ect from 2006,
cannot in any way save it, after the coming into force of the GST laws,
on 01.07.2017 - Nor can there can be any argument that the amendment
made in February, 2018, is traceable to Article 246A - The amendments
in question, made to the Gujarat VAT Act after 01.07.2017 were correctly
held void, for want of legislative competence, by the High Court of Gujarat.
[Paras 16,113,116]
145
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONSTRUCTIONS
Constitution of India - Constitution (101st Amendment) Act, 2016
- Maharashtra Act:
Held: As far as the Maharashtra appeals are concerned, the assessees'
grievance is that the retrospective amendments, made to the Maharashtra
VAT Act, were void - There is no quarrel with the proposition that a
legislative body is competent to enact a curative legislation with retrospective
eff ect - Yet, the same vice that attaches itself to the Gujarat amendment, i.e.
lack of competence on the date the amendment was enacted i.e. in this case,
09.07.2019, the Maharashtra legislature ceased to have any authority over
the subject matter, because the original entry 54 had undergone a substantial
change, and the power to change the VAT Act, ceased, on 01.07.2017, when
the GST regime came into eff ect - Therefore, for the same reasons, as in the
other cases, the amendments to the Maharashtra VAT Act cannot survive.
[Paras 15, 115]
LIST OF CITATIONS AND OTHER REFERENCES
Ramkrishna Ramanath v. Janpad Sabha [1962] Suppl. (3) SCR 70;
Kesavananda Bharati v State of Kerala [1973] Supp 1 SCR 1; Krishna
Kumar Singh v. State of Bihar [2017] 5 SCR 160 - followed.
Synthetics and Chemicals Ltd. and Ors. v. State of U.P. & Ors [1989]
Supp (1) SCR 623; Vipulbhai M Chaudhary v Gujarat Milk Mktg Federation
Ltd. [2015] (3) SCR 997; Bondu Ramaswamy v. Bangalore Development
Authority [2010] 6 SCR 29; Bimolangshu Roy (Dead) through L.Rs. v. State
of Assam & Ors [2017] 13 SCR 301; A. Hajee Abdul Shakoor & Co v. State
of Madras [1964] 8 SCR 217; Jaya Thakur v Union of India & Ors 2023
SCC OnLine SC 813; Kerala State Electricity Board v. Indian Aluminium
Co. Ltd [1976] 1 SCR 552; Union of India v Mohit Mineral Pvt. Ltd [2018]
13 SCR 139 - relied on.
T.N. Kalyana Mandapam Assn. v. Union of India [2004] Supp 1
SCR 169; Godfrey Phillips India Ltd. v. State of U.P. [2005] 1 SCR 732;
A.K. Roy v. UOI [1982] 2 SCR 272; R.K. Garg v. Union of India [1982]
1 SCR 947; Fuerst Day Lawson Ltd v Jindal Exports Ltd [2001] 3 SCR
479; UOI & Anr. v. Mohit Minerals Private Limited [2022] 9 SCR 300;
Anant Mills Company Limited v. State of Maharashtra [1975] 3 SCR 220;
146
SUPREME COURT REPORTS
[2023] 15 S.C.R.
Vijay Prakash D. Mehta v. Collector of Customs (Preventive), Bombay
[1988] Supp (2) SCR 434; State of Haryana v. Maruti Udyog Limited &
Ors. [2000] Supp 3 SCR 185; Thirumali Chemicals Limited v. Union of
India [2011] 4 SCR 739; Neena Aneja & Anr. v. Jai Prakash Associated
Limited [2021] 15 SCR 96; M/s West Ramnad Electric Distribution Co.
Ltd. v. State of Madras [1963] 2 SCR 747; State of Rajasthan v. Mangilal
Pindwal [1996] Supp (3) SCR 98; Mafatlal Industries Ltd. v. Union of India
[1996] Suppl. (10) SCR 585; State of Gujarat v. Reliance Industries Ltd
[2017] 13 SCR 25; Sundergarh Zilla Adivasi Advocates Association and
Ors. v State of Odisha and Ors [2013] 6 SCR 420; Union of India v. VKC
Footsteps India (P)Ltd [2021] 15 SCR 169; R. Abdul Quader v. Sales Tax
Offi cer [1964] 6 SCR 867; State of Madhya Pradesh v. M.V. Narasimhan
[1976] 1 SCR 6; R.K. Garg Etc. Etc v. Union Of India & Ors. [1982] 1
SCR 947; State of Gujarat v. Reliance Industries Ltd [2017] 16 SCC 28;
Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1970] 1
SCR 388; Government of Andhra Pradesh v. Hindustan Machine Tools
Ltd [1975] Supp (1) SCR 394; Ujagar Prints v. Union of India [1988]
Supp 3 SCR 770; Anshul Impex Private Ltd. v. State of Maharashtra
STA No. 2/2018; United Projects v State of Maharashtra (Writ Petition
(ST.) No. 11589 of 2021, and Writ Petition No. 13754 of 2018; State of
Gujarat v. Welspun Gujarat Stahl Rohren Ltd. [2014] 71 VST 550 (Guj);
Reliance Industries Ltd. v. State of Gujarat [2018] 58 GSTR 366 (Guj);
Sree Rayalaseema Alkalies and Allied Chemicals Limited v. State of Andhra
Pradesh and Ors. 2007 SCC OnLine AP 1158 - referred to.
Constitutional Law of India 4th Edition Volume 3 page 3119; P.
Ramanatha Aiyar's Advance Law Lexicon Volume I at Page 271 - referred
to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1628 of 2023.
From the Judgment and Order dated 03.08.2022 of the High Court for
the State of Telangana at Hyderabad in WP No.5010 of 2021.
147
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONSTRUCTIONS
With
C.A. Nos. 2502-2513, 2644-2686, 2732, 2733, 1654, 1683, 1662, 1663,
1629, 1658, 1630, 1653, 1655, 1657, 1672, 1676, 1656, 1661, 1664, 1660,
1682, 1665, 1666, 1667, 1668, 1669, 1659, 2690, 1670, 1673, 1671, 1674,
1675, 1677, 2687, 2688, 2689 of 2023 SLP(C) Nos. 7776, 13543-13545,
13529-13530, 13523-13526, 13547-13559, 13562-13574, 13561, 1353913540, 13527-13528, 13560, 13534-13537 of 2023, C.A. Nos. 2433, 2436,
2437-2443, 2730, 2731, 1645, 1649, 1643, 1636, 1652, 1679, 1637, 1632,
1651, 1633, 1648, 1634, 1647, 1644, 1638, 1678, 1631, 1681, 1641, 1640,
1680, 1639, 1646, 1635, 1642 and 1650 of 2023.
Appearances:
Vikram Nankani, Arvind P. Datar, Sr. Advs., B.S. Prasad A.G./Sr.
Adv., Ms. Kavita Jha, Arnab Roy, Prithwiraj Choudhuri, Ms. Archana
Pathak Dave, Kumar Prashant, Ms. Deepanwita Priyanka, Ms. Manju Jetley,
Varun Mishra, Ankur Jain, Prablin Singh Abrol, Sanchit Jain, Aniruddha
Singh, Rajavat, Ajay Sharma, Awadhesh Kumar, Manju Jetley, Digant
Mishra, Somanadri Goud Katam, Rahul Unnikrishnan, Sirajuddin, Advs.
for the Appellants.
Balbir Singh, A.S.G., S. Dwarakanath, Saurabh Soparkar, Kapil Sibbal,
S. Ganesh, Jay Savla, Dama Seshadari Naidu, Sr. Advs., Sameer Jain, Ms.
Anu Sura, Soayib Qureshi, K. K. Mani, Ms. T. Archana, Rajeev Gupta, Vinay
Rajput, K. R. Sasiprabhu, Uchit Sheth, Santosh Krishnan, Vishnu Sharma
A S, Prakhar Agarwal, Robin Ratnakar David, R Jawaharlal, Siddharth
Bawa, Anuj Garg, Mohit Sharma, Mayank Kshirsagar, Sridhar Potaraju,
Ms. Aditi Anil Dani, Rajat Srivastava, Aayush, Ms. Simran Gupta, Ashutosh
Jha, Dr. M. V. K. Moorthy, M. V. J. K. Kumar, M. Kumar, Hitendra Nath
Rath, Mohan Raj A, Hariharan, Ms. Charulata Chaudhary, Ravinder Kumar
Yadav, D. Srinivas, A.V.S. Raju, R. Ravi, Sadam Satyanarayana Raja Yadav,
Srinivas Rao Ambaji, Somanatha Padhan, Sujit Ghosh, Mridul Gupta, Shubh
Dixit, Ms. Mannat Waraich, Aniruddha Joshi, Shrirang B. Varma, Siddharth
Dharmadhikari, Naman Tandon, Samarvir Singh, Prasanjeet Mohpatra,
Aditya Rathore, Aaditya Aniruddha Pande, Bharat Bagla, Sourav Singh,
Aditya Krishna, Ranjeet Singh, Mrs. Bela Maheshwari, V Seshagiri, Bikram
Bhattacharya, R. Krishnan, Rupesh Kumar, Ms. Pankhuri Shrivastava, Ms.
Neelam Sharma, Rajeev Sharma, Kumar Visalaksh, Udit Jain, Arihant Tater,
148
SUPREME COURT REPORTS
[2023] 15 S.C.R.
Abhishek Vikas, Ms. Tatini Basu, Ms. Nitipriya Kar, Kumar Shashank,
Byrapaneni Suyodhan, Krishan Kumar, Mrs. Neetu Sharma, Nitin Pal,
Shivam Pandey, Yelamanchili Shiva Santosh Kumar, Rudrajit Ghosh,
Tushar Arora, Tarun Gupta, Ishaan George, Ms. Shiwani Tushir, M/s. Shree
Chakra Chambers, Venkatram Reddy Mantur, G.N. Reddy, Ravi Shankar,
Vedrumudi Vishnoo C. Kashyap, Uchit Seth, Malak Manish Bhatt, Jasdeep
Singh Dhillon, Prabhat Kumar Chaurasia, Yugantar Singh Chauhan, Ms.
Pinky Behera, Rizwan Ahmad, Shakeel Ahmed, Amir Kaleem, Paras Nath
Singh, Jatin Anand Diwedi, Soumik Ghosal, Ramesh Allanki, Ms. Aruna
Gupta, Syed Ahmad Naqvi, B Krishna Reddy, K. Aroah, K. K. Tyagi, Iftekhar
Ahmad, Ms. Garima Tyagi, Sarvam Ritam Khare, Vikash Chandra Shukla, V.
C. Shukla, Sidharth Relan, Naga Deepak, Aishvary Vikram, Ajay Awasthi,
Anantha Narayana M. G., Siddhartha Relan, Prakash Gautam, Puspraj Singh
Parihar, Pushpraj Singh Parihar, Akshya Kumar Panda, Prabhsimar Singh,
Amritesh Raj, Nitesh Ranjan, Tarun Gulia, Manish Dutt Sharma, Piyush
Singh, Anshuman Sinha, Vijay Kumar Pandey, Vinay Prakash, Ajay Vikram
Singh, Mrs. Pragya Sharma, Udayan Sinha, Karan Talwar, Krishna Sumanth,
Siddhant Buxy, Sumanth Nookala, Advs. for the Respondents.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
S. RAVINDRA BHAT, J.
Table of Contents
I.
Background and relevant provisions ......................................2
II.
Facts .........................................................................................9
III. Arguments of the appellant-states .........................................11
IV. Arguments of the respondent-assessees ................................20
V. Analysis and reasoning .........................................................33
A. Interpretation of Section 19 ..................................................35
B. Whether the power of amendment or repeal is subject
to limitations under Section 19 .............................................40
149
C. Validity of Telangana Act tested from the touch stone of
its originating as an ordinance .............................................50
D. Gujarat and Maharashtra Acts .............................................57
VI. Conclusions ............................................................................63
1. This batch of appeals arise from judgments delivered by the
Telangana, Gujarat and Bombay High Court. The concerned states
(Telangana and Gujarat) have appealed aggrieved by the judgments. The
assessee petitioners are appellants, and are aggrieved by the judgments of
Bombay High Court.
I. Background and relevant provisions
2. The Constitution (101st Amendment) Act, 2016, (hereafter referred
to as "the Amendment") introduces a fundamental re-ordering of the
constitutional premise of taxation by the Union and State Governments
in India. It is the framework to enable the introduction of the Goods and
Services Tax (GST). It confers new powers upon the Union Parliament
and State Legislative Assemblies, and also creates institutions that have a
signifi cant bearing on the federal character of the Constitution.
3. The pre-Amendment constitutional scheme had a vision of taxation
of goods and services supplied within India. Excise and customs duty and
excise on manufacture were within the scope of the legislative powers of
the Union Parliament1, under the Seventh Schedule. No separate entry
for Service Tax existed in the Constitution at the time it was enacted. In
T.N.Kalyana Mandapam Assn. v. Union of India2, this court held that
service tax as a subject matter was within the "residuary power" of the
Union; nevertheless, Entry 92C was introduced into the Union List by the
Constitution (88th Amendment) Act, 2004 clarifying that the Union had
exclusive authority to impose a service tax. Taxation of sale and movement
of goods was within the exclusive purview of the States,by Entries 52 and
54 of the State List (List II of the VIIth Schedule to the Constitution). The
delineation of Union and State taxation powers through the Union and State
Lists of the Seventh Schedule was precise and clear, leaving little room for
1
Entries 83 and 84, List I, Seventh Schedule of the Constitution of India.
2
2004 Supp (1) SCR 169; (2004) 5 SCC 632
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONSTRUCTIONS [S. RAVINDRA BHAT, J.]
150
SUPREME COURT REPORTS
[2023] 15 S.C.R.
any overlap in the kind of taxes that the Union could impose and those that
a State could levy. The "Concurrent List" (or List III of the VIIth Schedule)
contained no taxing entries, signifying that the constitutional scheme for
taxation was to apportion two distinct, exclusive spheres of taxation for the
Union and the States.
4. The initial move to introduce GST was through the Fiscal
Responsibility and Budget Management Report and the first official
announcement for a transition to GST, was made by the Government of
India in 2006-07 by the Budget Speech of the then Finance Minister; this
was reiterated in the Budget Speech of 2008-09 and followed up in 2009-10
when certain policy changes were announced in the Budget for that year.
The "First Discussion Paper on Goods and Services Tax in India" released
by the Empowered Committee in November 2009 was the fi rst offi cial
document publicly delineating the contours of the proposed reform and
nuances of the GST Model.
5. The First Discussion Paper, in fact, explained the rationale for a
constitutional amendment to introduce GST. It noted that while the Centre is
empowered to tax services and goods up to the production stage, the States
have the power to tax the sale of goods. The States do not have the power
to levy a tax on the supply of services while the Centre does not have the
power to levy a tax on the sale. It suggested for a constitutional amendment
that would contain a mechanism for a harmonious structure of GST that
would not aff ect the federal fabric.
6. Then, with the deliberations between the Centre and States, aided by
the Empowered Committee, the constitutional amendment process to usher
in GST began. It resulted in the "Constitution (One Hundred and Fifteenth
Amendment) Bill, 2011" After that failed attempt, the 2014 Amendment
Bill was adopted and passed on 8 September 2016. The Bill became "the
Constitution (One Hundred and First Amendment) Act, 2016".
7. The GST Council was constituted in September 2016. It is a
constitutional institution comprising as its members the Finance Ministers
of the Union and the States including Union Territories with members of
the legislatures. It has the authority
151
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONSTRUCTIONS [S. RAVINDRA BHAT, J.]
"to recommend to the Union and the States on various facets of GST,
including Model GST laws, principles to determine the place of supply,
levy of the tax, design of GST, dispute settlement, special provisions
for a special category of States, and so forth".
GST Council's recommendations led Parliament to enacted legislation.3
8. The coming into force of the GST regime, and the passage of the
amendment demonstrates a rare unanimity, a resolve across the political
spectrum, to ensure that there is a single indirect taxation regime. The
eff ect of the Amendment is to subsume all state and union taxes, on goods
and services. Both the Union and the States will ostensibly have the power
to tax the supply of goods and services. The 101st Amendment Act takes
away neither the Union's nor the States' taxing power but instead gives
them the power to impose taxes on supply of goods and supply of services
respectively.Through Article 246-A the Amendment creates:
a.
a new legislative fi eld, conferring
b.
legislative authority outside the three Lists of the Seventh
Schedule;
c.
concurrent powers to both Parliament and the State Legislatures
to enact legislations on the same subject-matter and at the same
time.
9. There consequently is a fundamental change to the scheme of
legislative relations between the Union and the States by departing from
the underlying theory of exclusivity of legislative fi elds between Parliament
and the State legislatures,in terms of the distribution of legislative powers
carried out by Chapter I of Part XI of the Constitution4.
10. To exemplify this:whilst Article 246-A changes the legislative
distribution of powers, however, it does not upset the balance between
3
The Central Goods and Services Tax Act, 2017: it levies a tax on intra-State
supplies of goods and services in all supplies within a State; the Integrated
Goods and Goods and Services Tax Act, 2017: it levies a tax on inter-State
supplies of goods and services; and (3) the Union Territory Goods and Services
Tax Act, 2017: it levies a tax on intra-State supplies of goods and service.
4
Godfrey Phillips India Ltd. v. State of U.P. (2005) 1 SCR732,
152
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[2023] 15 S.C.R.
the Union and the States. Instead, it carries out the function of crossempowerment. On the one hand, it enables the Union to legislative and
collect taxes on certain subjects which were hitherto within the exclusive
fold of the States (such as the taxes on sale and purchase of goods, luxury
taxes, advertisement taxes, etc.), while retaining the legislative rights it
hitherto possessed (such as taxes on manufacture, taxes on services, etc.)
except that these taxes are subsumed in a larger legislative fi eld - i.e., GST
- and would be levied thereunder. On the other hand, Article 246-A also
expands the legislative reach of the States to bring within their fold the
subjects which were hitherto beyond their competence-such as tax on the
supply of services, etc. As in the case of the Union, the States also continue
to enact and impose taxes on the legislative fi elds they hitherto possessed
(such as taxes on sale and purchase, taxes on betting and gambling, and
taxes on advertisements), albeit as a partof GST which subsumes these
legislative fi elds.
11. Article 279-A provides for the Goods and Services Tax Council
(hereafter "GST Council"). This provision also changes the underlying
constitutional philosophy to a certain extent. Sub-clause (1) of Article 279A creates a new constitutional institution; (2) confers upon it the power
to make recommendations to the Union and the States; (3) provides that
certain functions of other constitutional institutions shall be carried out on
the basis of the recommendations of the GST Council5; (4) has overarching
jurisdiction and carries extensive functions in relation to the design and
structure of the goods and services tax; (5) has substantial role in resolution
of disputes amongst the executive governments relating to GST, etc.6 In fact,
the GST Council is empowered to even recommend on the model legislations
and rates of tax on supply of goods and services.
12. The relevant parts of the Amending Act, read as follows:
In terms of Section 2 of the aforesaid Constitution Amendment Act,
after Article 246, a new Article 246-A came to be inserted which reads as
under:
5
For illustration, see Art. 246-A Explanation, Art. 269-A(1), Constitution of India.
6
Article 279-A, infra, for a detailed discussion.
153
"246A. Special Provision with respect to goods and services tax---
(1) Notwithstanding anything contained in articles 246 and 254,
Parliament, and, subject to clause (2), the Legislature of every State,
have power to make laws with respect to goods and services tax
imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to goods
and services tax where the supply of goods, or of services, or both takes
place in the course of inter-State trade or commerce.
Explanation.---The provisions of this article, in respect of goods and
services tax referred to in clause (5) of the article 279A, take eff ect
from the date recommended by the Goods and Services Tax Council."
By Section 7, Article 268-A was omitted. After Article 269, Article
269-A has been inserted, which reads as under:
"269A. Levy and collection of goods and services tax in course of
inter-state trade or commerce---
(1) Goods and Services tax on supplies in the course of inter-State
trade or commerce shall be levied and collected by the Government
of India and such tax shall be apportioned between the Union and the
States in the manner as may be provided by Parliament by law on the
recommendations of the Goods and Services Tax Council.
Explanation---For the purposes of this clause, supply of goods, or
of services, or both in the course of import into the territory of India
shall be deemed to be supply of goods, or of services, or both in the
course of inter-State trade or commerce.
(2) The amount apportioned to a State under clause (1) shall not form
part of the Consolidated Fund of India.
(3) Where an amount collected as tax levied under clause (1) has been
used for payment of the tax levied by a State under article 246A, such
amount shall not form part of the Consolidated Fund of India.
(4) Where an amount collected as tax levied by a State under article
246A has been used for payment of the tax levied under clause (1),
such amount shall not form part of the Consolidated Fund of the State.
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONSTRUCTIONS [S. RAVINDRA BHAT, J.]
154
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[2023] 15 S.C.R.
(5) Parliament may, by law, formulate the principles for determining
the place of supply, and when a supply of goods, or of services, or both
takes place in the course of inter-State trade or commerce."
Section 12 of the Amendment inserted Article 279-A, which reads as
follows:
"279A. Goods and Services Tax Council ---
(1) The President shall, within sixty days from the date of commencement
of the Constitution (One Hundred and First Amendment) Act, 2016,
by order, constitute a Council to be called the Goods and Services
Tax Council.
(2) The Goods and Services Tax Council shall consist of the following
members, namely:-
(a) the Union Finance Minister.......Chairperson;
(b) the Union Minister of State in charge of Revenue or Finance......
Member;
(c) The Minister in charge of Finance or Taxation or any other Minister
nominated by each State Government .....Members.
(3) The Members of the Goods and Services Tax Council referred to
in sub-clause (c) of the clause (2) shall, as soon as may be, choose
one amongst themselves to be the Vice-Chairperson of the Council for
such period as they may decide.
(4) The Goods and Services Tax Council shall make recommendations
to the Union and the State on---
(a) the taxes, cesses and surcharges levied by the Union, the States and
the local bodies which may be subsumed in the goods and services tax;
(b) the goods and services that may be subjected to, or exempted from
the goods and services tax;
(c) model Goods and Services Tax Laws, principles of levy,
apportionment of Goods and Services Tax levied on supplies in the
course of inter-state trade or commerce under article 269-A and the
principles that govern the place of supply;
155
(d) the threshold limit of turnover below which goods and services
may be exempted from goods and services tax;
(e) the rates including fl oor rates with bands of goods and services tax;
(f) any special rate or rates for a specifi ed period, to raise additional
resources during any natural calamity or disaster;
(g) special provision with respect to the States of Arunachal Pradesh,
Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
(h) any other matter relating to the goods and services tax, as the
Council may decide.
(5) The Goods and Services Tax Council shall recommend the date on
which the goods and services tax be levied on petroleum crude, high
speed diesel, motor spirit (commonly known as petrol), natural gas
and aviation turbine fuel.
(6) While discharging the functions conferred by this article, the Goods
and Services Tax Council shall be guided by the need for a harmonized
structure of goods and services tax and for the development of a
harmonised national market for goods and services.
(7) One-half of the total number of Members of the Goods and Services
Tax Council shall constitute the quorum at its meetings.
(8) The Goods and Services Tax Council shall determine the procedure
in the performance of its functions.
(9) Every decision of the Goods and Services Tax Council shall be
taken at a meeting, by a majority of not less than three-fourths of the
weighted votes of the members present and voting, in accordance with
the following principles, namely:---
(a) the vote of the Central Government shall be a weightage of onethird of the total votes cast, and
(b) the votes of all the State Governments taken together shall have a
weightage of two-thirds of the total votes cast, in that meeting.
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONSTRUCTIONS [S. RAVINDRA BHAT, J.]
156
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[2023] 15 S.C.R.
(10) No act or proceedings of the Goods and Services Tax Council
shall be invalid merely by reason of---
(a) any vacancy in, or any defect in, the constitution of the Council; or
(b) any defect in the appointment of a person as a Member of the
Council; or
(c) any procedural irregularity of the Council not aff ecting the merits
of the case.
(11) The Goods and Services Tax Council shall establish a mechanism
to adjudicate any dispute---
(a) between the Government of India and one or more States; or
(b) between the Government of India and any State or States on one
side and one or more other States on the other side; or
(c) between two or more States,

arising out of the recommendations of the Council or implementation
thereof."
13. Section 14 (of the Amendment)had the eff ect of introducing
Article 366 (12A), (26-A) and (26-B). A crucial amendment was in the
VIIth Schedule to the Constitution. In List I (Union List) for Entry 84, the
following entry was substituted:
"84. Duties of excise on the following goods manufactured or produced
in India, namely:---
(a) Petroleum crude;
(b) High speed diesel;
(c) Motor spirit (commonly known as petrol);
(d) Natural gas;
(e) Aviation turbine fuel; and
(f) Tobacco and tobacco products.";
Entries 92 and 92 C (Union List)were omitted. Similarly, Entry 52 was
omitted and Entry 54 was substituted. The new Entry 54, reads as follows:
157
"54. Taxes on the sale of petroleum crude, high speed diesel, motor
spirit (commonly known as petrol), natural gas, aviation turbine fuel
and alcoholic liquor for human consumption, but not including sale
in the course of inter-State trade or commerce or sale in the course
of international trade or commerce of such goods."
Section 19 read as follows:
"19. Notwithstanding anything in this Act, any provision of any law
relating to tax on goods or services or on both in force in any State
immediately before the commencement of this Act, which is inconsistent
with the provisions of the Constitution as amended by this Act shall
continue to be in force until amended or repealed by a competent
Legislature or other competent authority or until expiration of one
year from such commencement, whichever is earlier."
Section 20 read as follows:
"20. (1) If any diffi culty arises in giving eff ect to the provisions of the
Constitution as amended by this Act (including any diffi culty in relation
to the transition from the provisions of the Constitution as they stood
immediately before the date of assent of the President to this Act to the
provisions of the Constitution as amended by this Act), the President
may, by order, make such provisions, including any adaptation or
modifi cation of any provision of the Constitution as amended by this
Act or law, as appear to the President to be necessary or expedient
for the purpose of removing the diffi culty:
Provided that no such order shall be made after the expiry of three
years from the date of such assent.
(2) Every order made under sub-section (1) shall, as soon as may be
after it is made, be laid before each House of Parliament."
II. Facts
14. There are three batches of appeals, arising from separate special
leave petitions fi led in this case. One batch relates to the State of Telangana.
The facts in relation to that State are that the local VAT Act was amended -
after the Amendment was introduced. The VAT amendment was through an
Ordinance, and was brought into force on 17.06.2017, i.e. 13 days before
THE STATE OF TELANGANA & ORS. v. M/S TIRUMALA
CONSTRUCTIONS [S. RAVINDRA BHAT, J.]
158
SUPREME COURT REPORTS
[2023] 15 S.C.R.
the time granted by the 101st Amendment Act, i.e. one year. The Amendment
came into force on 16.09.2016. The ordinance sought to extend the period
of limitation, and permitted to re-open assessments. This ordinance,
continued till the State Legislature enacted it. The Governor then assented
to the law, and it came into force on 02.12.2017. Feeling aggrieved many
traders and VAT payers approached the Telangana High Court, challenging
the amendments to the local VAT Act. By the impugned judgment, the
High Court accepted the challenge and struck it down, on various counts,
including that the State had limited scope to amend its VAT Act, which in
terms of Section 19 of the Amendment could have done it only to bring it
in conformity with the amended Constitution. Other reasons included that
the ordinance, could not have been confi rmed, as the state was denuded of
legislative competence after 01.07.2017.
15. In the batch of appeals arising from the judgment of the Bombay
High Court, the parties were aggrieved by the fact that the Maharashtra VAT
Amendment Act, which was initially made on 15.04.2017, was read down
by a Division Bench judgment, of the Bombay High Court. That position
was sought to be reversed, through an amendment which was brought into
force, on 15.04.2017 and later in an eff ort to reverse the eff ect of a judgment,
given retrospective eff ect. The writ petitions fi led by such aggrieved parties,
were dismissed. Consequently, they are in appeal.
16. In the Gujarat batch of cases, Section 84A was introduced in
the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the
Gujarat VAT Act") by the Gujarat Value Added Tax (Amendment) Act,
2018, gazetted on 06.04.2018 but with retrospective eff ect from 1.4.2006. It
inter-alia provided that if for a particular issue in "some other proceedings"
a lower forum, gave a decision which is prejudicial to the interest of the
revenue and an appeal against such decision is pending before the higher
forum then the period spent in such litigation will be excluded while
computing period of limitation for revision. By giving such provision
retrospective eff ect the State legislature thus sought to enable reopening
of assessments which had already attained fi nality. The Gujarat High
Court struck down the amendment on the ground of lack of legislative
competence, on the part of the legislature, after 01.07.2017, and also that
it was manifestly arbitrary.
159
III. Arguments of the appellant-states
17. It was argued on behalf of the State of Telangana, by Mr. Arvind
Datar, Senior Advocate, Mr. Balbir Singh, learned Additional Solicitor
General (ASG), on behalf of Maharashtra, that the Constitutional Amendment
was introduced on 16.09.2016. It was highlighted that by its provisions
various entries in the State and Union list were amended drastically to limit
the powers of the two legislatures. The object of the amendment was to reorganize the powers of indirect taxation that the original Constitution makers
had envisioned. Indirect taxes: more specifi cally, sales tax, service tax,
central excise and value added tax were the subject matter of this amendment.
The original intent of the Constitution and powers in relation to levy of
customs duty were retained as it were. For the fi rst time, the amendments
denuded the States and Parliament of exclusive fi elds of legislation and
introduced the concept of shared or pooled sovereign powers in relation
to value added tax, central excise and service tax. These were brought into
one compendious term "goods and services tax", ensuring that all aspects in
this fi eld of taxation were covered.