1975 (7) TMI 137 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the retrospective operation of the definition of "business" in section 2(1a) of the Bengal Finance (Sales Tax) Act, 1941.
2. Whether the retrospective operation violates Article 14 of the Constitution.
3. Whether the retrospective operation violates Article 19(1)(f) and (g) of the Constitution.
4. Whether the retrospective operation violates Article 20 of the Constitution.

Detailed Analysis:

1. Validity of the Retrospective Operation of the Definition of "Business":
The petitioners challenged the retrospective operation of the definition of "business" introduced by the West Bengal Taxation Laws (Amendment) Act, 1969, which amended the Bengal Finance (Sales Tax) Act, 1941. The petitioners argued that the retrospective application of this definition, which included transactions not carried out with a profit motive, was invalid. They contended that the sales of discarded materials and canteen sales did not constitute "business" under the original Act and should not be retrospectively taxed.

2. Violation of Article 14:
The petitioners argued that the retrospective provision discriminates against assessees whose assessments are pending, as opposed to those whose assessments have been completed. They claimed this differential treatment violated the principle of equality before the law enshrined in Article 14 of the Constitution. The court, however, held that the retrospective operation does not offend Article 14 as it does not make any hostile discrimination between persons or classes of persons. The fact that it affects only pending assessments is a fortuitous circumstance and does not constitute a violation of Article 14.

3. Violation of Article 19(1)(f) and (g):
The petitioners contended that the retrospective operation imposes unreasonable restrictions on their fundamental rights to acquire, hold, and dispose of property and to carry on trade or business, guaranteed by Article 19(1)(f) and (g) of the Constitution. They argued that the retrospective imposition of tax over a long period (dating back to 1941) is unreasonable and that it is difficult, if not impossible, to recover the tax from buyers after such a long time. The court agreed, noting that the retrospective operation over an unreasonably long period imposes fresh taxes on transactions that were not originally taxable. This was deemed an unreasonable restriction on the petitioners' fundamental rights, and thus, the provision was struck down as violative of Article 19(1)(f) and (g).

4. Violation of Article 20:
The petitioners also argued that the retrospective provision violates Article 20 of the Constitution, which prohibits ex post facto laws. They claimed that the retrospective imposition of tax would expose them to penalties for non-registration in respect of transactions that were not taxable at the time they were conducted. The court, however, disagreed, stating that there was no obligation on the part of the dealers to have themselves registered during the years when those transactions took place, as they were not liable to pay tax at that time. The deeming provision in the amendment could not be extended to the registration requirement, and thus, the retrospective operation does not offend Article 20.

Conclusion:
The court concluded that the retrospective operation of the definition of "business" in section 2(1a) of the Bengal Finance (Sales Tax) Act, 1941, as introduced by the West Bengal Taxation Laws (Amendment) Act, 1969, imposes unreasonable restrictions on the fundamental rights guaranteed by Article 19(1)(f) and (g) of the Constitution. Therefore, the provision giving retrospective operation to the definition of "business" was struck down. The court also held that the retrospective operation does not violate Article 14 or Article 20 of the Constitution. The rule was made absolute, and the operation of the order was stayed for eight weeks.

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