1986 (1) TMI 360 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of Section 6 of the Constitution (Forty-sixth Amendment) Act, 1982.
2. Validity of Sections 6 and 38 of the Andhra Pradesh General Sales Tax (Amendment) Act (No. 18 of 1985) concerning Articles 19(1)(g), 21, 141, 265, and 300-A of the Constitution.
3. Authority to levy and collect sales tax for the period prior to 10th April, 1985.
4. Retrospective application of tax laws.

Detailed Analysis:

1. Constitutionality of Section 6 of the Constitution (Forty-sixth Amendment) Act, 1982:
The petitioners sought a declaration that Section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, was unconstitutional. The court examined the amendment, which included the supply of food or drinks as taxable transactions under "tax on the sale or purchase of goods." The court referred to previous judgments, including the Supreme Court's decision in Northern India Caterers v. Lt. Governor of Delhi, which held that the supply of food in hotels and restaurants was not a sale. The amendment aimed to nullify this effect by deeming such supplies as sales. The court upheld the constitutionality of Section 6, stating it was within the amending power of Parliament under Article 368 and did not affect the basic structure of the Constitution.

2. Validity of Sections 6 and 38 of the Andhra Pradesh General Sales Tax (Amendment) Act (No. 18 of 1985):
The petitioners contended that Sections 6 and 38 of the Andhra Pradesh General Sales Tax (Amendment) Act, 1985, were ultra vires Articles 19(1)(g) and 21 and violative of Articles 141, 265, and 300-A. The court noted that the amendment act retrospectively validated the levy and collection of sales tax on the supply of food and drinks in hotels, restaurants, and eating houses. The court held that the retrospective imposition of tax was not unreasonable or arbitrary and did not violate the petitioners' fundamental rights. The court emphasized that the legislature is competent to enact laws with retrospective effect to cure defects pointed out by judicial decisions.

3. Authority to Levy and Collect Sales Tax for the Period Prior to 10th April, 1985:
The court examined whether the State Government could recover tax for the period before 2nd February, 1983, and noted that the Andhra Pradesh General Sales Tax Act contained provisions for levying tax on food and drinks served in hotels and restaurants. The court held that the Constitution (Forty-sixth Amendment) Act, 1982, validated these transactions as deemed sales, allowing the State Government to levy and collect tax retrospectively. The court also upheld the validity of Section 5D of the Andhra Pradesh General Sales Tax (Amendment) Act, 1985, which conferred power on the assessing authority to assess or reassess tax for the specified period.

4. Retrospective Application of Tax Laws:
The petitioners argued that retrospective imposition of tax from 2nd February, 1983, to 10th April, 1985, was illegal and violated their fundamental rights. The court referred to several Supreme Court judgments, emphasizing that retrospective taxation is not inherently unreasonable or unconstitutional. The court held that the retrospective effect given to the provisions of the amending act was reasonable and necessary to cure defects in the law and validate past transactions. The court dismissed the petitioners' contention that the retrospective imposition of tax was arbitrary or violative of Articles 14, 19(1)(g), 21, and 300-A of the Constitution.

Conclusion:
The court dismissed the writ petitions, upholding the constitutionality of Section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, and the validity of Sections 6 and 38 of the Andhra Pradesh General Sales Tax (Amendment) Act, 1985. The court ruled that the retrospective imposition of tax was neither unreasonable nor arbitrary and did not violate the petitioners' fundamental rights. The court declined the request for leave to appeal to the Supreme Court, finding no substantial question of law of general importance.