2007 (12) TMI 428 - HC - VAT and Sales Tax

Constitutional validity of section 25 of the Maharashtra Tax Laws (Levy, Amendment and Repeal) Act, 1989 challenged in so far as it pertains to amending entry 9 and entry 61 in Part II of Schedule C to the Bombay Sales Tax Act, 1959 with retrospective effect from July 1, 1981. Held that - The Legislature by the impugned legislation brought out clearly that lamination sheets including lamination sheets which are used for surface lamination of table tops, furniture, panels, partitions or for like purposes shall always be deemed to be covered under entry C-II-61 and what was covered under entry C-II-61 shall always be deemed to be excluded from entry C-II-9. Thus, by retrospective amendment what was implicit is made explicit and such a clarificatory amendment cannot be said to be arbitrary or discriminatory. The argument of the petitioners that the very fact that the Legislature chose to amend the entry C-II-9 with retrospective effect from July 1, 1981 shows that up to the date of amendment, the goods in question were taxable at six per cent under entry C-II-9 is also without any merit, because, by the retrospective amendment, none of the items set out in entry C-II-9 has been deleted. What is done by the retrospective amendment is to clarify that the items covered under entry C-II-61 were never covered under entry C-II-9. In other words, by retrospectively amending entry CII-9 it is clarified that the goods covered under entry C-II-61 were always intended to be excluded from entry C-II-9. Thus it is difficult to accept the arguments advanced on behalf of the petitioners regarding the constitutional validity of retrospective amendment to entries C-II-9 and C-II-61. W.P.fails.

Issues Involved:
1. Constitutional validity of Section 25 of the Maharashtra Tax Laws (Levy, Amendment, and Repeal) Act, 1989.
2. Classification of "paper-based decorative laminates" under the Bombay Sales Tax Act, 1959.
3. Retrospective amendment of tax entries and its implications.
4. Allegations of arbitrariness, discrimination, and unreasonableness of the retrospective amendment.
5. Impact of the retrospective amendment on refund claims.

Detailed Analysis:

1. Constitutional Validity of Section 25 of the Amending Act:
The petitioners challenged the constitutional validity of Section 25 of the Maharashtra Tax Laws (Levy, Amendment, and Repeal) Act, 1989, which amended entry 9 and entry 61 in Part II of Schedule C to the Bombay Sales Tax Act, 1959, with retrospective effect from July 1, 1981. The court upheld the retrospective amendment, stating that it was clarificatory in nature and did not impose a new impost. The amendment merely reiterated the tax liability at 12% for laminated sheets, which had been consistently taxed at that rate since July 1, 1981.

2. Classification of "Paper-Based Decorative Laminates":
The petitioners argued that "paper-based decorative laminates" should be classified under entry C-II-9 as "coated board" at a tax rate of 6%, rather than under entry C-II-61 as "plastic laminates" at 12%. The court noted that since inception, the goods in question were assessed under entry C-II-61 and taxed at 12%. The court emphasized that the goods in question were commercially known as laminated sheets and not as paper board/coated board.

3. Retrospective Amendment of Tax Entries:
The petitioners contended that the retrospective amendment imposed a new tax liability, which is unconstitutional. The court rejected this argument, stating that the retrospective amendment did not create a new tax liability but clarified the existing tax liability. The court held that the retrospective amendment was valid as it merely clarified the original intention of the Legislature and did not affect concluded assessments.

4. Allegations of Arbitrariness, Discrimination, and Unreasonableness:
The petitioners argued that the retrospective amendment was arbitrary, discriminatory, and unreasonable, as it imposed a higher tax rate on their goods compared to similar goods classified under entry C-II-9. The court found no merit in this contention, stating that the goods in question were always intended to be classified under entry C-II-61 and taxed at 12%. The court held that the retrospective amendment was not arbitrary or discriminatory, as it uniformly taxed all laminated sheets at 12%.

5. Impact of the Retrospective Amendment on Refund Claims:
The petitioners sought a refund of the excess tax paid due to the alleged erroneous classification of their goods. The court noted that the petitioners had refunded the excess tax to their customers in anticipation of getting a refund from the State Government. However, the court held that the retrospective amendment, being clarificatory in nature, did not entitle the petitioners to a refund. The court stated that the petitioners' refund claims were based on an erroneous interpretation of the tax entries, which was clarified by the retrospective amendment.

Conclusion:
The court upheld the constitutional validity of the retrospective amendment to entries C-II-9 and C-II-61, stating that it was clarificatory in nature and did not impose a new tax liability. The court rejected the petitioners' arguments of arbitrariness, discrimination, and unreasonableness, and held that the retrospective amendment uniformly taxed all laminated sheets at 12%. Consequently, the court dismissed the writ petition and discharged the rule with no order as to costs.

← Previous Next →