1997 (8) TMI 484 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Retrospective Levy of Tax
2. Reasonableness and Constitutionality of Retrospective Taxation
3. Discrimination and Fundamental Rights under Article 19(1)(g)
4. Availability of Gazette Notification

Issue-wise Detailed Analysis:

1. Retrospective Levy of Tax:
The petitioners, registered dealers under the Andhra Pradesh General Sales Tax Act, 1957, challenged the retrospective increase in tax rates on drugs, medicines, pesticides, and insecticides from August 1, 1996, under section 21 of A.P. Act No. 27 of 1996. The court noted that retrospective legislation is a constitutional function of the Legislature, and the authority to legislate includes the power to legislate both retrospectively and prospectively unless there is a constitutional bar against retrospective legislation. The court cited previous judgments, including Rai Ramkrishna v. State of Bihar and Sundararamier & Co. v. State of Andhra Pradesh, to affirm that the Legislature has the competence to impose taxes retrospectively.

2. Reasonableness and Constitutionality of Retrospective Taxation:
The petitioners argued that retrospective taxation is unreasonable and affects their fundamental rights under Article 19(1)(g) of the Constitution. The court rejected this argument, stating that the power of taxation is an essential attribute of sovereignty and that the reasonableness of a tax cannot be questioned as long as it retains its character as a tax and is not confiscatory or extortionate. The court referred to several cases, including Chhotabhai Jethabhai Patel and Co. v. Union of India and Malwa Bus Service Pvt. Ltd. v. State of Punjab, to support its position that retrospective taxation is not per se unreasonable or unconstitutional.

3. Discrimination and Fundamental Rights under Article 19(1)(g):
The petitioners contended that the retrospective levy was discriminatory and violated their fundamental rights under Article 19(1)(g) because it deprived them of the benefit of collecting the tax from customers. The court dismissed this argument, stating that the economic wisdom of a tax is within the exclusive province of the Legislature. The court emphasized that taxation is not merely a process of raising revenue but also a tool in social engineering, and it is within the Legislature's prerogative to classify taxpayers and determine the scope and application of the tax. The court cited cases such as S. Kodar v. State of Kerala and J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh to affirm that the Legislature has the competence to impose taxes retrospectively and that such taxes do not violate Article 19(1)(g).

4. Availability of Gazette Notification:
The petitioners argued that the Amendment Act, although gazetted on October 17, 1996, was not made available until October 31, 1996, and therefore, the levy from October 17, 1996, to October 31, 1996, was not collectible. The court rejected this argument, stating that since the law was retrospective from August 1, 1996, the availability of the gazette notification was irrelevant. The court emphasized that the retrospective character of the levy rendered the argument about the availability of the gazette notification moot.

Conclusion:
The court concluded that the retrospective increase in the rate of tax was neither arbitrary nor unreasonable. The petitioners failed to demonstrate how the marginal rise of one percent was unreasonable or how the provision operated drastically unreasonably. The court held that the retrospective levy was within the legislative competence and did not violate any constitutional provisions. Consequently, the writ petitions were dismissed with costs.