2006 (7) TMI 642 - AT - VAT and Sales Tax

Issues Involved:
1. Whether the amendment in section 2(17) of the Act by omitting the words "and includes blending of tea" had the effect of taking away the vested right of the petitioner-company to claim exemption under section 39 on and from the date of such amendment.
2. Whether blending of tea amounts to manufacture and as such, in spite of the omission made by the 2001 Act, the petitioner-company is entitled to claim the exemption under section 39 of the Act.
3. Whether the amendment is violative of articles 14 and 19 of the Constitution if it deprives the benefit of exemption of the petitioner-company with effect from August 1, 2001.

Detailed Analysis:

Issue 1: Effect of Amendment on Vested Right
The primary argument from the petitioner was that the eligibility certificate issued to them for tax exemption constituted a "vested right," which could not be taken away by an amendment before the expiry of the specified period. The petitioner relied on various judgments, including those from the Calcutta High Court and the Supreme Court, to support the claim that once a right is vested, it cannot be withdrawn by subsequent amendments. However, the respondents argued that the legislature has the authority to enact laws with retrospective effect and that the concept of vested rights does not apply against legislative supremacy. The Tribunal noted that the amendment was prospective and that the small-scale tea blending industries were allowed to enjoy the exemption up to the date of the amendment. The Tribunal concluded that the amendment did not have a retrospective effect and that the petitioners did not possess an inviolable vested right that could not be interfered with by legislative enactments. The Tribunal emphasized that statutory rights are subject to legislative changes and that the legislature can make retrospective laws to confer, extend, take away, or curtail any statutory right.

Issue 2: Blending of Tea as Manufacture
The petitioner did not advance any argument on this issue, as the Calcutta High Court had consistently held that blending of tea is not manufacturing. The petitioner sought to keep the issue alive for potential arguments before higher courts. The Tribunal noted that blending of tea was regarded as manufacturing under the 1994 Act due to the inclusive definition in section 2(17). However, after the amendment, blending of tea ceased to be considered a manufacturing process, and thus, the exemption was no longer available.

Issue 3: Constitutionality of the Amendment
The petitioner did not argue the constitutionality of the amendment before the Tribunal, reserving the right to question the vires of the amendment in higher courts if necessary. The Tribunal did not consider the constitutionality of the amendment, focusing instead on whether the petitioners had a vested right that could not be interfered with by legislative enactments. The Tribunal concluded that the amendment was not violative of articles 14 and 19 of the Constitution as the legislature acted within its authority to amend the definition of "manufacture" and that such legislative actions are presumed to be in public interest.

Conclusion:
The applications were disposed of with the Tribunal holding that the petitioners did not have an inviolable vested right to continue enjoying tax exemption after the legislative amendment. The Tribunal emphasized that statutory rights are subject to legislative changes and that the amendment of section 2(17) of the 1994 Act, which excluded tea blending from the definition of "manufacture," was valid and effective from the date of the amendment. The Tribunal did not consider the constitutionality of the amendment, as it was not argued before them. No order as to costs was made.

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