2012 (1) TMI 137 - HC - VAT and Sales Tax

Notification giving retrospective effect to the applicability of the provisions of the Haryana General Sales Tax Act, 1973 from May 17, 1988 challenged whereas the notification had been issued on March 26, 1991 - Held that - The petitioner has been burdened with liability only on the basis of the aforesaid amendment by virtue of notification annexure P1 while passing the assessment order to which it was not liable earlier. Under the circumstances, the plea of the State that the amendment is clarificatory cannot be accepted. Further, the State in the written statement nowhere has furnished any justification for amending entry 2 and inserting entry 2A and Explanation 1 in the Schedule D of the Act with effect from May 17, 1988 by notification dated March 26, 1991. In the absence of any reasons enumerated for retrospectivity of the notification, its validity to that extent cannot be upheld. Accordingly, the writ petition is allowed to the extent that the impugned notification shall not operate retrospectively. As a sequel, the liability, if any, of the petitioner shall be determined afresh by the assessing officer in accordance with law.

Summary

Issues:
1. Legality and validity of a notification giving retrospective effect to the applicability of the provisions of the Haryana General Sales Tax Act.
2. Power of the State Government to issue notifications amending Schedule D retrospectively from a specific date.

Analysis:

Issue 1: Legality and Validity of the Notification
The petitioner, a registered dealer under the Haryana General Sales Tax Act, challenged the legality and validity of a notification issued by the State Government retrospectively amending Schedule D of the Act. The petitioner argued that the retrospective effect of the notification, which made them liable to pay tax on wheat purchases, was beyond the State's power. The petitioner contended that prior to the amendment, they were only liable to pay tax on flour and by-products, not on wheat purchases. The State argued that the notification was not retrospective but merely clarified the legislative intent. The court examined previous judgments and held that retrospective legislation must be reasonable and justified, which was not the case here. The court found that the petitioner was burdened with new liabilities due to the retrospective amendment, without any valid justification provided by the State. Consequently, the court allowed the writ petition, ruling that the impugned notification should not operate retrospectively.

Issue 2: Power of the State Government to Issue Retrospective Notifications
The key issue in this petition was whether the State Government had the authority to issue notifications amending Schedule D of the Haryana General Sales Tax Act retrospectively from a specific date. The court analyzed the relevant entries in Schedule D before and after the retrospective amendment. The court noted that the retrospective amendment imposed new tax liabilities on the petitioner without sufficient justification from the State. Relying on legal principles, the court emphasized that retrospective legislation must be reasonable and not arbitrary. The court found that the State failed to provide valid reasons for the retrospective nature of the notification, leading to the conclusion that the amendment was not justifiable. Consequently, the court allowed the writ petition, directing a reassessment of the petitioner's liabilities in accordance with the law, without retrospective application of the impugned notification.

This detailed analysis of the judgment from the Punjab and Haryana High Court highlights the legal intricacies involved in challenging the retrospective effect of tax-related notifications and the court's scrutiny of the State's power to issue such amendments.