2004 (5) TMI 292 - SC - VAT and Sales Tax

DRAWBACK, SET-OFF OR REFUND - RETROSPECTIVE AMENDMENT SCOPE OF WITHDRAWAL OF BENEFIT OF SET-OFF FOR A LIMITED PERIOD

Summary

Issues Involved:
1. Constitutional validity of the retrospective amendment of Rule 41E.
2. Scope of set-off under Rule 41D before the transfer of stock to a regional sales office in Silvassa, Dadra and Nagar Haveli.

Issue-Wise Detailed Analysis:

1. Constitutional Validity of the Retrospective Amendment of Rule 41E:
The assessees, engaged in the manufacture of motor vehicle chassis and spare parts, claimed set-off under Rules 41D and 41E of the Bombay Sales Tax Act, 1959. These rules allowed for a drawback, set-off, or refund of tax paid on purchases used in manufacturing taxable goods for sale or export. Rule 41E was amended retrospectively by Section 26 of the Maharashtra Tax Laws (Levy, Amendment and Repeal) Act, 1989, denying the benefit of set-off for goods manufactured out of waste, scrap goods, or by-products for the period between July 1, 1981, and March 31, 1988. The High Court upheld the validity of this amendment.

The Supreme Court examined whether this retrospective amendment was constitutional. The appellant argued that the retrospective withdrawal of relief granted by a valid statutory provision was unreasonable and irrational. They cited the case of Rai Ramkrishna v. State of Bihar (1964) 1 SCC 897, which acknowledged that retrospective operation of a statute might introduce unreasonableness and thus be unconstitutional. The Court noted that the State failed to provide a rational basis for limiting the retrospective withdrawal to a specific period. The Court concluded that the retrospective withdrawal of the benefit of Rule 41E for a particular period lacked justification and was arbitrary. Consequently, the Court struck down the words "not being waste goods or scrap goods or by-products" from Section 26 of the Maharashtra Act 9 of 1989, directing authorities to rework assessments as if the law had not been passed.

2. Scope of Set-off under Rule 41D Before Transfer of Stock to Regional Sales Office at Silvassa:
The appellant also contended that the requirement under Rule 41D to register under the Central Sales Tax Act at the place to which goods are "exported" was impossible to fulfill since the Central Sales Tax Act was not extended to Silvassa, Dadra, and Nagar Haveli, where the appellant's branch office was located. The Court held that since the benefit claimed was under taxation law, all conditions, including registration under the Central Sales Tax Act, must be complied with. The Court rejected the appellant's contention that the condition should be ignored due to its impossibility of performance, emphasizing that the appellant could carry on business in a place where the Central Sales Tax Act was applicable.

Conclusion:
The appeal was allowed in part. The Court quashed the words "not being waste goods or scrap goods or by-products" from Section 26 of the Maharashtra Act 9 of 1989, directing reassessment to provide appropriate benefits according to law. The contention regarding the impossibility of registration under the Central Sales Tax Act for Silvassa was rejected. The judgment in Civil Appeal No. 1153 of 1998 was applied to Civil Appeal No. 3014 of 2004 and Special Leave Petition (C) No. 5260 of 1999, allowing these appeals in terms of the judgment delivered.