1977 (1) TMI 129 - SC - VAT and Sales Tax

Whether the enhanced rate under notifications dated 8th June, 1948, and 30th June, 1948, issued under section 3-A of the U.P. Sales Tax Act, 1948, are applicable to the sales of goods mentioned in paragraph 2 above which took place before 8th June, 1948, and 30th June, 1948? Whether sub-section (ii) of section 3-A of the U.P. Sales Tax Act, 1948, empowers Provincial Government to fix the rate of sales tax in respect of an assessment year or in respect of certain specified sales only? Held that - Appeal is allowed and the impugned judgment of the High Court dated February 11, 1970, is set aside. When section 31 of the Act is clearly valid and is retroactive, and the legislature has shown the intention of restoring the assessments and orders made under the provisions of sub-section (1) of section 7 (as it stood prior to its amendment by section 7 of U.P. Act 19 of 1956) as good and valid assessments in law, as if they had been duly made, that was enough to set the controversy at rest and there is nothing wrong with the view which has been taken by the Additional Judge (Revisions) in his order dated December 28, 1968.

Issues Involved:
1. Applicability of enhanced sales tax rates to sales made before the notification dates.
2. Authority of the Provincial Government under section 3-A of the U.P. Sales Tax Act, 1948.
3. Binding nature of the High Court's judgment post-amendment of the Act.
4. Validity and retroactive application of section 31 of the U.P. Sales Tax Act, 1948.
5. Implementation and machinery for giving effect to section 31.

Issue-wise Detailed Analysis:

1. Applicability of Enhanced Sales Tax Rates:
The dealer contended that sales tax on its entire turnover for the previous years should be assessed at the old rate of 3 pies per rupee, as the enhancement to 6 pies per rupee was made after the previous years had expired. The Sales Tax Officer assessed the tax at the enhanced rates, but the appellate authority upheld the dealer's contention. The High Court, in its judgment dated July 24, 1961, answered that the sales tax should be charged at the rates applicable on the first day of the relevant assessment year, supporting the dealer's stance.

2. Authority of the Provincial Government under Section 3-A:
The High Court was asked to determine whether the Provincial Government had the authority under section 3-A of the U.P. Sales Tax Act, 1948, to fix the rate of sales tax for an assessment year or only for certain specified sales. The High Court declined to answer this question directly but ruled in favor of the dealer's interpretation that any changes in the tax rate during the assessment year could not be applied retroactively to the previous year's turnover.

3. Binding Nature of the High Court's Judgment Post-Amendment:
The High Court ruled that its judgment from July 24, 1961, remained binding on the parties and the revising authority, even after the amendment of the Act by the insertion of section 31. The High Court stated that the revising authority was not free to take a different view, including the ground of any subsequent amendment in the law.

4. Validity and Retroactive Application of Section 31:
Section 31 was inserted by the amending Act, stating that dealers opting to be assessed on the turnover of the previous year would be liable to pay tax at the altered rates as if those rates were in force during the previous year. The Supreme Court had previously upheld the validity and retroactive application of section 31 in Commissioner of Sales Tax, U.P. v. Bijli Cotton Mills, Hathras, establishing that assessments made at enhanced rates were valid and binding, despite any prior judgments to the contrary.

5. Implementation and Machinery for Giving Effect to Section 31:
The argument that section 31 could not be implemented due to the lack of machinery was dismissed. The Supreme Court held that the amendment was clear in its intent to restore the assessments and orders made under the provisions of section 7 as valid, and no additional machinery was required for its implementation.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment dated February 11, 1970. The Court ruled that the amendment made by section 31 was valid and retroactive, rendering the High Court's earlier judgment unenforceable. The revising authority's order dated December 28, 1968, which recognized the restoration of the assessments at the enhanced rates, was upheld. The parties were directed to bear their own costs.

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