1989 (7) TMI 323 - HC - VAT and Sales Tax

Issues Involved:
1. Legislative competence of the Orissa Sales Tax (Amendment and Validation) Act, 1979.
2. Violation of constitutional provisions (Articles 13(2), 14, 19(1)(g), 265, 300, 300-A, and 304(b)).
3. Principles of equitable and promissory estoppel.
4. Retrospective effect and validation of actions.
5. Definition and scope of "dealer" under the amending Act.
6. Discrimination against the Central Government, State Government, and their employees.
7. Validity of Explanation II in Section 2 of the amending Act.

Detailed Analysis:

1. Legislative Competence:
The petitioners contended that the amending Act was beyond the legislative competence of the Orissa Legislature as it sought to modify the concept of "sale of goods" as defined by the Indian Sale of Goods Act, 1930. The court, however, found no substance in this argument, noting that the power to legislate on sales tax is rooted in Entry 54 of List II of the Seventh Schedule to the Constitution, and the amending Act did not exceed this competence.

2. Violation of Constitutional Provisions:
The petitioners argued that the amending Act violated multiple constitutional provisions, including Articles 13(2), 14, 19(1)(g), 265, 300, 300-A, and 304(b). The court observed that the petitioners did not provide specific allegations or factual basis to support these claims. The court emphasized that a challenge to the constitutional validity of a statute requires clear and explicit statements, which were lacking in this case.

3. Principles of Equitable and Promissory Estoppel:
The petitioners claimed that the State's action in enacting the amending Act, while an appeal was pending in the Supreme Court, violated the principles of equitable and promissory estoppel. The court dismissed this argument, noting that the State's legislative power includes the ability to amend laws retrospectively to rectify defects identified by judicial decisions.

4. Retrospective Effect and Validation of Actions:
The amending Act was given retrospective effect from July 19, 1979, and validated actions taken under the principal Act. The court cited Supreme Court rulings, including Bengal Immunity Co. Ltd. v. State of Bihar and Khyerbari Tea Co. Ltd. v. State of Assam, to affirm that retrospective legislation and validation Acts are permissible and do not inherently violate constitutional provisions.

5. Definition and Scope of "Dealer":
The amending Act expanded the definition of "dealer" to include the Central Government, State Government, and their employees acting in official capacity. The petitioners argued that this expansion was discriminatory and contrary to the main provision requiring the carrying on of business. The court found that the expanded definition was intended to address judicial decisions that excluded these entities from the definition of "dealer."

6. Discrimination Against Government Entities:
The petitioners alleged that the amending Act discriminated against the Central and State Governments and their employees by subjecting them to sales tax. The court rejected this claim, noting that the legislature has the authority to determine the scope of tax laws and that the inclusion of government entities was a valid legislative decision.

7. Validity of Explanation II in Section 2:
The petitioners focused their challenge on Explanation II in Section 2, arguing that it conflicted with the main provision and was not permissible in a taxation statute. The court disagreed, stating that the Explanation was intended to clarify and remove ambiguities in the definition of "dealer." The court cited Supreme Court decisions, including Bihta Co-operative Development and Cane Marketing Union Ltd. v. Bank of Bihar and S. Sundaram Pillai v. V.R. Pattabiraman, to support the view that explanations can serve to clarify legislative intent and are permissible.

Conclusion:
The court dismissed the writ petition, finding no merit in the petitioners' arguments. The court upheld the validity of the Orissa Sales Tax (Amendment and Validation) Act, 1979, including its retrospective effect and expanded definition of "dealer." The court emphasized the legislative competence and constitutional validity of the amending Act, as well as the proper use of explanations to clarify statutory provisions.

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