2000 (11) TMI 1198 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of the Gujarat Sales Tax (Validation) Ordinance, 1997 and the Gujarat Sales Tax (Validation) Act, 1997.
2. Retrospective amendment of sub-entry (i) of entry 10 of Schedule I to exclude "milk powder" from the exemption.
3. Impact of retrospective legislation on completed and closed sale transactions.
4. Legislative power to enact retrospective tax laws.
5. Fundamental rights under Article 19(1)(g) of the Constitution of India.

Detailed Analysis:

1. Constitutional Validity of the Gujarat Sales Tax (Validation) Ordinance, 1997 and the Gujarat Sales Tax (Validation) Act, 1997:
The petitioners, dealers in milk powder and condensed milk, challenged the constitutional validity of the Gujarat Sales Tax (Validation) Ordinance, 1997, and the subsequent Gujarat Sales Tax (Validation) Act, 1997. They argued that the legislation was an attempt to upset the judicial verdict in Chunilal Mayachand v. State of Gujarat [1992] 86 STC 105 and interfered with judicial power. The court, however, found no constitutional infirmity in the impugned Ordinance and Act, declaring them valid pieces of legislation.

2. Retrospective Amendment of Sub-entry (i) of Entry 10 of Schedule I to Exclude "Milk Powder" from the Exemption:
The State Legislature amended sub-entry (i) of entry 10 of Schedule I retrospectively to exclude "milk powder" from the exemption. The court noted that the legislative device to validate laws retrospectively is well-recognized and approved by courts. The retrospective amendment was intended to validate the assessment, collection, or recovery of tax on milk powder, which was previously interpreted by the High Court to be included under the exemption for "milk, whole or separated or reconstituted."

3. Impact of Retrospective Legislation on Completed and Closed Sale Transactions:
The court emphasized that the retrospective legislation should not affect completed and closed sale transactions where no tax was assessed or collected on milk powder. The general rule is that no statute shall have retrospective operation unless its language plainly requires it. The court concluded that the impugned legislation has limited retrospective operation, affecting only cases where milk powder was assessed and subjected to tax. It does not authorize reopening assessments where milk powder was treated as exempt from tax.

4. Legislative Power to Enact Retrospective Tax Laws:
The court upheld the power of the State Legislature to enact retrospective tax laws, derived from Articles 245, 246, and 248 of the Constitution. It was noted that the power to legislate retrospectively is unquestionable, provided no fundamental rights are infringed. The court cited several precedents supporting the Legislature's competence to render ineffective judicial decisions by changing the legislative basis upon which the judgment was founded.

5. Fundamental Rights under Article 19(1)(g) of the Constitution of India:
The petitioners contended that the retrospective imposition of tax on milk powder encroached on their fundamental right to carry on their trade under Article 19(1)(g). They argued that it was unreasonable and placed them in a situation where they could not pass on the tax burden to purchasers. The court, however, found that the retrospective legislation was a genuine attempt to clear legislative intent and safeguard revenue, and did not constitute an unreasonable restriction on the petitioners' fundamental rights.

Conclusion:
The court concluded that the impugned legislation was constitutionally valid and had limited retrospective operation. It affected only cases where milk powder was assessed and subjected to tax, and did not authorize reopening assessments where milk powder was treated as exempt. The petitions were partly allowed, restraining tax authorities from reopening assessments or subjecting the turnover of milk powder to tax in cases where it was not previously assessed. The relief for refund claimed by the petitioners was rejected. Each party was directed to bear their own costs.

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