2001 (7) TMI 1277 - SC - Indian Laws

Summary

Issues Involved:

1. Validity of the Cess and Other Taxes on Minerals (Validation) Act, 1992.
2. Authority to levy and collect taxes post-4th April 1991.
3. Interpretation of the Validation Act in light of Article 265 of the Constitution.
4. Impact of the Validation Act on refunds and collections.

Summary:

1. Validity of the Validation Act:
The Supreme Court upheld the constitutional validity of the Cess and Other Taxes on Minerals (Validation) Act, 1992. The Act was enacted to validate the imposition and collection of cesses and taxes on minerals under certain state laws, which had been struck down by courts due to lack of legislative competence.

2. Authority to Levy and Collect Taxes Post-4th April 1991:
The primary issue was whether the Validation Act authorized the recovery of taxes or cess after 4.4.1991. The Court held that the Validation Act did not authorize the recovery of any tax or cess after 4.4.1991, even if the liability was incurred under the validated laws before 4.4.1991. Consequently, demands raised by the states for such dues were quashed, and the states were restrained from taking any steps to realize such demands.

3. Interpretation of the Validation Act in Light of Article 265 of the Constitution:
Article 265 mandates that no tax shall be levied or collected except by the authority of law. The Court concluded that the Validation Act was intended to validate the collections already made under the invalid laws and not to authorize fresh levies or collections post-4.4.1991. The absence of a saving clause similar to Section 6 of the General Clauses Act indicated that the Parliament did not intend to permit the states to levy or collect taxes after the specified date.

4. Impact of the Validation Act on Refunds and Collections:
The Court emphasized that the Validation Act's purpose was to prevent the states from refunding the taxes already collected under the invalid laws, which would have had serious financial implications for the states. The Act did not sanction the recovery of any tax after 4.4.1991. The judgment in Kannadasan's case, which held otherwise, was found to be incorrect.

Conclusion:
The Supreme Court upheld the Patna High Court's judgment, which had quashed the demands made by the state for taxes post-4.4.1991 and restrained the state from realizing such demands. The Court also allowed appeals against similar judgments from the Karnataka and Andhra Pradesh High Courts that had followed Kannadasan's case. The review petitions in Kannadasan's case were to be disposed of after issuing notice to the State of Tamil Nadu. The pending writ petitions in the Madhya Pradesh High Court were directed to be disposed of in light of the Supreme Court's judgment in the Bihar case.