2002 (12) TMI 578 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Retrospective effect of tax rate increase.
2. Lack of awareness and publication of the Ordinances.
3. Validity of demands under the Ordinances.
4. Constitutionality of re-promulgated Ordinances.
5. Validity of retrospective amendment.

Detailed Analysis:

1. Retrospective Effect of Tax Rate Increase:
The primary contention raised by the petitioners was against clause (c) of section 3 of the Kerala General Sales Tax (Amendment) Act, 2002, which increased the tax rate on paper from 4% to 8% with retrospective effect from December 31, 2001. The petitioners argued that this retrospective levy was confiscatory as they were unaware of the amendment and had not collected tax at the higher rate. The court upheld the validity of section 2(1) of the Amendment Act, stating that the Amendment Act merely retained the tax increase introduced by Ordinance No. 37 of 2001 prospectively from January 1, 2002.

2. Lack of Awareness and Publication of the Ordinances:
The petitioners claimed that both they and the assessing officers were unaware of the Ordinances due to a lack of publication, thereby making the tax demand unsustainable. The court dismissed this claim, noting that the petitioners themselves produced Exhibit P1, a gazette publication of the Ordinance dated December 31, 2001. The court emphasized that the gazette publication constituted proper publication, and ignorance of the departmental officers did not offer a defense against the tax demand.

3. Validity of Demands Under the Ordinances:
The court examined whether the demands under Ordinance No. 37 of 2001 and Ordinance No. 4 of 2002 were sustainable. It concluded that the Ordinances had the force of law until the expiration of six weeks from the reassembly of the Legislature, as per Article 213(2)(a) of the Constitution. Since Ordinance No. 4 of 2002 was issued before the expiry of Ordinance No. 37 of 2001 and given retrospective effect from December 31, 2001, the tax rate increase was validly in force from January 1, 2002.

4. Constitutionality of Re-promulgated Ordinances:
The petitioners argued that re-promulgation of Ordinance No. 4 of 2002 without replacing it with an Act of the Legislature was unconstitutional. The court referred to the Supreme Court's decision in D.C. Wadhwa v. State of Bihar, which held that re-promulgation without legislative replacement is unconstitutional. However, the court distinguished this case, noting that Ordinance No. 4 of 2002 was a stop-gap arrangement to cover the lapse of Ordinance No. 37 of 2001 and was replaced by the Amendment Act with retrospective effect, thus upholding its constitutionality.

5. Validity of Retrospective Amendment:
The court addressed the petitioners' reliance on various Supreme Court decisions regarding the validity of retrospective amendments. It noted that the retrospective amendment in this case was not arbitrary or unreasonable, as it merely retained the prospective tax increase introduced by Ordinance No. 37 of 2001. The court cited the Supreme Court's decision in Premier Enterprises v. Commercial Tax Officer, which upheld the competence of the Legislature to make retrospective tax levies, provided they are not oppressive or unreasonable. The court concluded that the retrospective amendment was valid and did not invalidate the tax demand.

Conclusion:
The court dismissed the petitions, stating that the petitioners' inability to collect the higher tax rate was due to their ignorance of the law, which did not invalidate the tax demand. The court granted the petitioners six weeks to file revised returns and pay the difference in tax, failing which the department could take penal action as per the Act and Rules.