1973 (4) TMI 122 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of sales tax on oil cakes.
2. Levy of sales tax on Indian made foreign liquor.
3. Retrospective effect of the Punjab General Sales Tax (Amendment and Validation) Act, 1972.
4. Constitutionality of the Amendment and Validation Act under Article 19(1)(f) & (g) and Article 14 of the Constitution.
5. Legislative competence and abdication of functions by the State Legislature.

Detailed Analysis:

1. Levy of Sales Tax on Oil Cakes:
The petitioners, dealing in oil cakes, challenged the levy of sales tax on oil cakes following the deletion of Entry No. 43 (Oil Cakes) from Schedule 'B' of the Punjab General Sales Tax Act, 1948, by Act No. 7 of 1958. The dealers argued that oil cakes should be tax-exempt as they are used as fertilizers or fodder, falling under Entries No. 44 and 54 of Schedule 'B'. However, the State Government contended that oil cakes were not covered under these entries and were subject to sales tax. The matter was previously adjudicated in M/s. Punjab Copra Crushing Oil Mills, where it was held that oil cakes were exempt from sales tax. Following this, the State Government issued notifications excluding oil cakes from tax-free goods and enacted the Punjab General Sales Tax (Amendment and Validation) Act, 1972, giving retrospective effect to these changes.

2. Levy of Sales Tax on Indian Made Foreign Liquor:
The petitioners dealing in Indian made foreign liquor challenged the levy of sales tax following amendments to Schedules 'A' and 'B' of the Act. Initially, Indian made foreign liquor was exempt from sales tax, but subsequent notifications and amendments included it as taxable. The State Government's attempt to correct a clerical mistake in the notifications was quashed by the court in M/s. Krishan Lal Bajaj & Co., leading to the issuance of fresh notifications and the enactment of the Amendment and Validation Act to retrospectively validate the levy of sales tax on Indian made foreign liquor.

3. Retrospective Effect of the Amendment and Validation Act:
The court upheld the retrospective effect of the Amendment and Validation Act, stating that a Legislature competent to enact laws prospectively also has the power to enact them retrospectively. The court cited the Supreme Court's decision in Hira Lal Rattan Lal v. Sales Tax Officer, affirming that retrospective taxation is within legislative competence and does not inherently violate constitutional provisions.

4. Constitutionality under Article 19(1)(f) & (g) and Article 14:
The petitioners argued that the Amendment and Validation Act violated their rights under Article 19(1)(f) & (g) by interfering with their right to acquire, hold, and dispose of property and to carry on business. The court rejected this argument, noting that the petitioners had been collecting sales tax from customers and were not entitled to refunds based on the court's previous judgment. The court also dismissed the claim of violation of Article 14, stating that the Legislature has the authority to grant tax exemptions selectively, and the petitioners failed to provide specific allegations of discrimination.

5. Legislative Competence and Abdication of Functions:
The petitioners contended that the State Legislature had abdicated its functions by giving retrospective effect to notifications issued by the State Government. The court found no merit in this argument, stating that the Legislature's reference to notifications in the Act does not constitute abdication of legislative functions. The court cited the Supreme Court's decision in Jaora Sugar Mills (P) Ltd. v. State of Madhya Pradesh, affirming that legislative intent can be clarified through retrospective amendments without abdicating legislative functions.

Conclusion:
The court dismissed all writ petitions, upholding the validity of the Punjab General Sales Tax (Amendment and Validation) Act, 1972. The court found no violation of constitutional provisions and affirmed the legislative competence to enact retrospective taxation laws. The decision was supported by relevant Supreme Court precedents, emphasizing the Legislature's authority to clarify and validate its legislative intent retrospectively.