1980 (4) TMI 282 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the amendment to the U.P. Sales Tax Act, 1948, violated Article 14 of the Constitution.
2. Whether the retrospective operation of the amending Act was an unreasonable restriction on the freedom of trade under Article 19 of the Constitution.
3. Whether Article 301 of the Constitution was transgressed.
4. Whether the amending Act validated assessments under the Central Sales Tax Act.
5. Whether the amending Act nullified the effect of the High Court's previous decisions.

Issue-wise Detailed Analysis:

1. Violation of Article 14 of the Constitution:
The petitioners argued that the amendment violated the guarantee of equality under Article 14 of the Constitution by classifying condensed milk differently from milk, which was exempt from sales tax. The Court held that the classification was neither arbitrary nor discriminatory. The legislature has wide latitude in taxation matters, and the selection of condensed milk for taxation was not arbitrary as it is a different commercial commodity from milk, meant for different uses.

2. Retrospective Operation and Article 19:
The petitioners contended that the retrospective application of the amending Act imposed an unreasonable restriction on the freedom of trade guaranteed by Article 19. The Court found no unreasonableness in the legislative action, noting that the taxability of condensed milk was known since 1948, and the legislature's intervention in 1974 was to clarify the taxability. The Court cited the Supreme Court's decision in Hira Lal Rattan Lal v. Sales Tax Officer, which upheld the legislative competence in imposing retrospective taxes.

3. Transgression of Article 301:
The argument that the retrospective levy of sales tax violated Article 301 of the Constitution was dismissed. The Court clarified that the amendment dealt with intra-State trade and not inter-State trade or commerce, thus not transgressing Article 301.

4. Validation of Assessments under the Central Sales Tax Act:
The petitioners claimed that the amending Act did not validate assessments under the Central Sales Tax Act. The Court rejected this argument, stating that the Full Bench decision in Indodan Milk Products' case had already established that if condensed milk was taxable under the U.P. Sales Tax Act, it would also be taxable under the Central Sales Tax Act. The amended U.P. Sales Tax Act's provisions would apply to assessments under the Central Act as well.

5. Effect on High Court's Previous Decisions:
The petitioners argued that the amending Act did not nullify the High Court's previous decisions, particularly the Full Bench decision and subsequent writ petition judgments. The Court held that the legislation had effectively nullified the basis of these decisions by retrospectively amending the law. However, the Court distinguished the mandamus issued in Writ Petition No. 2443 of 1972, stating that such a mandamus could not be countermanded by retrospective legislation. The respondents were directed to comply with the mandamus, as it had become final and binding between the parties.

Conclusion:
The U.P. Sales Tax (Amendment) Act (17 of 1974) was held valid and intra vires. The respondents were directed to obey the mandamus issued by the Court in Writ Petition No. 2443 of 1972 for the assessment year 1967-68. Other reliefs claimed in the writ petitions were refused, and the respondents were entitled to costs.

Ordered accordingly.