2011 (3) TMI 1537 - HC - VAT and Sales Tax

Can a subordinate legislation be retrospective in operation, when the parent legislation, whereunder such a legislation stands made, is prospective in nature? Held that - The notification, dated January 3, 2003, which mentions to have come into force on May 1, 2001, must be treated, and ought to have been treated, to have come into force on the date of its issue, i.e., with effect from January 3, 2003 and cannot be, and could not have been, treated to have come into force retrospectively with effect from May 1, 2001. With this fundamental issue of law being clear, it necessarily follows, as a logical conclusion, that the appellant had rightly enjoyed the benefit of the notification for the assessment year 2004-05 and the benefit, if any, which he had received, or had availed of, during the period, when the notification was not in force, (and cannot, now, be legally construed to have been in force), the remedy of the State lies in recovering the same in accordance with law provided the State s right, if any, in this regard, does not, otherwise, stand extinguished by law. Appeal allowed.

Summary

Issues Involved:
1. Retrospective operation of subordinate legislation.
2. Denial of statutory tax benefits on equitable considerations.
3. Validity of reopening tax assessment based on superior authority's clarification.
4. Interpretation of the term "date of its issue" in the context of the Assam General Sales Tax Act, 1993.

Detailed Analysis:

1. Retrospective Operation of Subordinate Legislation:
The primary issue was whether a subordinate legislation could be retrospective when the parent legislation is prospective. The court noted that the Assam General Sales Tax Act, 1993 (AGST Act) is prospective, and thus, any subordinate legislation under it, such as the notification in question, must also be prospective. The notification issued on January 3, 2003, was intended to be effective from May 1, 2001, which the court found contrary to the parent legislation. The court cited the principle that subordinate legislation cannot be retrospective unless expressly authorized by the parent legislation. Therefore, the notification should be treated as effective from its date of issuance, i.e., January 3, 2003.

2. Denial of Statutory Tax Benefits on Equitable Considerations:
The court addressed whether a person could be denied statutory tax benefits on equitable grounds if they had previously availed such benefits when not entitled. The court held that tax benefits provided by law cannot be denied based on equity. The statutory right to tax benefits must be honored irrespective of past conduct. The court emphasized that tax laws must be interpreted strictly according to their language and not based on equitable considerations.

3. Validity of Reopening Tax Assessment Based on Superior Authority's Clarification:
The court examined the legality of reopening tax assessments based on clarifications from superior authorities without independent application of mind by the assessing authority. It was found that the Superintendent of Taxes had reopened the assessment based on a clarification from the Commissioner of Taxes without independently verifying whether the clarification applied to the facts of the case. The court ruled this as an abdication of quasi-judicial authority, emphasizing that the assessing authority must exercise its discretion independently.

4. Interpretation of the Term "Date of its Issue":
The court interpreted the term "date of its issue" in the second proviso to Section 9(3) of the AGST Act. It concluded that the validity period of a notification starts from the date of its issuance, not from any retrospective date mentioned in the notification. The court held that the notification issued on January 3, 2003, should be valid for three years from that date, i.e., until January 2, 2006, and not retrospectively from May 1, 2001.

Conclusion:
The court allowed the appeal, setting aside the impugned judgment and order of the single judge, as well as the rectified order of assessment and the revisional order. The court reaffirmed that subordinate legislation under the AGST Act must be prospective and that tax benefits cannot be denied based on equitable considerations. The reopening of tax assessments must be based on independent application of mind by the assessing authority, and the term "date of its issue" must be interpreted as the date the notification is issued.