2015 (3) TMI 1163 - HC - VAT and Sales Tax

Interpretation of Notification - Whether can be applied retrospectively or not - Petitioner hotelier was granted eligibility of certificate for exemption for a period of 10 years w.e.f. 5.11.1996 to 4.11.2006 but curtailed upto 31.3.2006 instead of 4.11.2006 by issuing notification dated 31.3.2006 and 15.9.2006, making retrospective amendment which is without authority of law - Held that - it is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. The Hon ble Supreme Court held that a subordinate legislation can be given a retrospective effect, if any power is contained in this behalf in the main act. Rule making power is a species of delegated legislation. A delegatee therefor can make rules only within the four-corners thereof. No statute can be construed to have a retrospective operation unless such a construction appears very clearly in terms of the Act by a delegated legislation the right accrued to the petitioner cannot be taken away. Thus, the Supreme Court held that the amendments carried out could not take away the rights of the petitioner with the retrospective effect. Here, the exemption, which was granted already earlier notification was available to the petitioner up to 4.11.2006, but vide notification dated 15.9.2006 to 31.9.2006, it was restricted up to 31.3.2006, meaning thereby, for a period of near about six months, petitioner has been liable for payment of tax for which there was no power with the State Government to withdraw such exemption with retrospective effect. The aforesaid exemption could not have been withdrawn by the State Government vide notification dated 15.9.2006 with retrospective effect. Therefore, Notification dated 31.3.2006 and 15.9.2006, insofar as it relates to the petitioner only, restricting the exemption of notification till 31.3.2006 is not sustainable under the law and the petitioner who was extended the benefit of exemption from payment of tax till 15.9.2006 shall be entitled to get the aforesaid exemption. - Decided in favour of petitioner

Summary

Issues Involved:
1. Retrospective enforcement of notifications.
2. Validity of curtailing tax exemption.
3. Violation of Articles 14 and 19(1)(g) of the Constitution.
4. Authority of delegated legislation to make retrospective amendments.
5. Petitioner's entitlement to tax exemption.

Detailed Analysis:

1. Retrospective Enforcement of Notifications:
The petitioner challenged the retrospective enforcement of Notification No. 31 dated 3rd March 2006 and Notification No. 69 dated 15th September 2006, which curtailed the previously granted tax exemption period from 5th November 1996 to 4th November 2006, reducing it to 1st April 2006. The petitioner argued that this retrospective amendment was without authority and void.

2. Validity of Curtailing Tax Exemption:
The petitioner, a public limited company engaged in the hotel business, was initially granted a tax exemption for ten years under the Luxury Tax Act and the Commercial Tax Act as part of the 1995 Tourism Policy to promote tourism. The subsequent notifications attempted to limit this exemption period, which the petitioner contended was improper. The court noted that the petitioner had been availing of the exemption as per the eligibility certificate and that the VAT Act, 2002, introduced new concepts like input tax rebate, which were incorporated into the exemption scheme.

3. Violation of Articles 14 and 19(1)(g) of the Constitution:
The petitioner argued that the retrospective amendment violated Articles 14 and 19(1)(g) of the Constitution, which guarantee equality before the law and the right to practice any profession or carry on any occupation, trade, or business, respectively. The court examined the provisions of the notifications and found that the dealers who continued to avail of the exemption were allowed to adjust the balance of input tax rebate against other tax liabilities, ensuring no adverse consequences.

4. Authority of Delegated Legislation to Make Retrospective Amendments:
The court referred to the Supreme Court's rulings that a subordinate legislation could only have retrospective effect if explicitly provided for in the main act. The court emphasized that a vested right could not be taken away by delegated legislation. The notifications in question attempted to retrospectively curtail the exemption period, which the court found to be beyond the delegated authority of the state government.

5. Petitioner's Entitlement to Tax Exemption:
The court concluded that the petitioner was entitled to the tax exemption for the unexpired period of the eligibility certificate, which extended up to 4th November 2006. The assessment order allowed the petitioner an input rebate for tax paid on purchases up to 4th November 2006, and the petitioner was entitled to retain the tax collected in excess of the input tax rebate.

Conclusion:
The court held that the notifications dated 31st March 2006 and 15th September 2006, insofar as they retrospectively curtailed the petitioner's tax exemption period to 31st March 2006, were not sustainable under the law and were quashed. The petitioner was entitled to the tax exemption until 4th November 2006, as originally granted. The writ petition was allowed with no orders as to costs.