Why the constitution bench declined adjudication
Indian courts do not decide questions for academic interest. A Constitution Bench is convened to settle a live conflict. When statutes are repealed or replaced, the need for an answer can fade. That was the view taken here, with the Bench recording replacement or amendment of the impugned provisions and then the arrival of GST.
GST changed the field directly. With effect from July 1, 2017, the Constitution was amended to allow concurrent taxation of goods and services by the Union and the States. Entry 54 of the State List, which had given States power over sale or purchase of goods other than newspapers, was sharply curtailed. Article 246A and Article 279A set up a new framework with the GST Council, and Central and State GST laws replaced a cluster of earlier levies on sale of goods and services.
In the Bench's view, that change removed the practical anchor for the reference. A ruling on repealed sales tax provisions would not guide current assessments under GST law. It would at best restate the law for a closed period, and the court said it would not use the time of seven judges for that exercise when a binding precedent already covered the point.
Kodar ruling remains binding law
S. Kodar v. State of Kerala was decided by a Constitution Bench in 1974. The court upheld the power of States to impose an additional sales tax or surcharge calculated as a percentage of sales tax. It treated the added amount as part of the tax on sale or purchase of goods, holding that the measure — a percentage of the basic tax — did not turn it into a separate tax outside State power. That holding has been cited for decades in sales tax disputes.
By reaffirming Kodar, the present Bench kept continuity intact. It laid down no new test. It neither widened nor narrowed State power, saying only that the earlier statement of law continues to hold for the period when it applied. For lawyers handling legacy files, that means assessments, appeals, revisions and rectifications for pre-GST years can be decided by reference to Kodar without waiting for a fresh pronouncement.
Confusion sometimes arises because readers meet foreign tax terms during online research. Searches such as what is sales use tax & e911 surcharge come from the United States system, where local telecom and emergency-service charges sit alongside sales and use taxes. A related American filing reference described as st-1 sales and use tax and e911 surcharge return also belongs to that separate framework. Those levies are not the same as the additional sales tax or surcharge examined in Kodar and in the present reference, which concerned State power over sale or purchase of goods under the Indian Constitution before GST.
GST replaced old levy structure
The change to GST was not a rate revision. It replaced a fragmented base with a dual levy on supply. Dealers who once filed monthly sales tax returns and faced separate assessments for surcharge moved to a common return system. Input tax credit, place-of-supply rules and a harmonised rate structure took over, with transitional provisions allowing carry-forward of credit and continuation of pending proceedings under the old laws.
That is why many pre-GST references lost force. Courts have repeatedly closed or adjusted old sales tax matters after noting repeal and saving clauses. The saving clauses preserve actions taken and proceedings started under repealed Acts. They do not keep repealed charging sections alive for fresh levies, and once GST statutes govern the transaction the validity of a repealed surcharge provision has limited use beyond pending disputes for the relevant years.
The Bench followed that practical course. It did not examine each amended State provision in detail. It did not compare rates or periods across States. It took note of the broad fact of replacement and amendment, coupled with the start of GST, and on that basis held the reference academic.
Legacy assessments gain final certainty
For tax departments and dealers, the immediate effect is on pending pre-GST files. Audits get reopened. Remands come back from appellate authorities. Demands linked to additional sales tax or surcharge for years before GST remain in the system. With Kodar reaffirmed and the larger reference closed, assessing officers and tribunals can apply the settled position to each assessment year without adjourning cases to await the seven-judge decision.
A pending reference often prompts requests for stays or adjournments in High Courts and tribunals, with parties citing pendency to delay final hearing. That tactic now ends. Courts dealing with old demands can move to valuation, turnover, exemption and rate disputes on their merits. Where the only objection was to competence to levy the surcharge, Kodar will answer it.
The order does not validate every demand raised under every State provision. A demand must still rest on a valid assessment for the correct period, with proper notice and computation. Mistakes in applying the percentage, errors in taxable turnover, or failure to grant set-off where due can still be challenged. The order settles competence and leaves factual and procedural defences open in individual cases.
Dealers with pending appeals for pre-GST years will now need to review their pleadings. If the challenge rested solely on lack of State power to impose additional sales tax or surcharge as a percentage of sales tax, that ground will face Kodar. Time will be better spent on turnover reconciliation, documentary proof, limitation, and correct application of the rate in force for that year, while departments will have to trace each demand to the provision as it stood at the relevant time.
The Supreme Court file will now be closed, and applications linked to the reference will not survive on their own. Legacy disputes return to the authorities and courts where they were stayed, to be decided under the law as it stood before GST and in line with Kodar.
