1963 (2) TMI 2 - SC - VAT and Sales Tax

Validity of the retrospective operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 questioned Held that - Part XIII contains provisions which constitute a self-contained code and we need not really travel outside the said provisions in determining the validity of the tax imposed by the Act. Since we have come to the conclusion that the challenge to the validity of the retrospective operation of the Act cannot be sustained, we do not think it necessary to pursue this matter any further. Appeal fails.

Issues Involved:
1. Validity of the Retrospective Operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961.
2. Legislative Competence of the Bihar Legislature for Retrospective Taxation.
3. Reasonableness of Restrictions Imposed by the Retrospective Operation under Articles 19(1)(f) and (g) and Article 304(b) of the Constitution.

Detailed Analysis:

1. Validity of the Retrospective Operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961:
The appellants challenged the retrospective operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 (the Act), arguing that it imposed unreasonable restrictions. The High Court had upheld the Act's validity in both prospective and retrospective operations. The Supreme Court noted that the appellants had confined their challenge to the retrospective operation and not the prospective operation.

The background of the dispute involved the Bihar Finance Act, 1950, which was struck down by the Supreme Court in 1960. Subsequently, the Bihar Legislature passed an Ordinance and later the Act in 1961, which validated the provisions of the earlier Act retrospectively. The Supreme Court found that the retrospective operation of the Act did not alter the character of the tax and was within the legislative competence of the Bihar Legislature.

2. Legislative Competence of the Bihar Legislature for Retrospective Taxation:
The appellants argued that the retrospective operation of the Act altered the character of the tax, making it outside the legislative competence of the Bihar Legislature. The Supreme Court rejected this argument, stating that the legislative power conferred by the Seventh Schedule includes the power to enact laws both prospectively and retrospectively. The Court emphasized that the nature of the tax remained the same for both prospective and retrospective operations, and the difficulty in recovering the tax from past passengers did not change its character.

The Court also referred to previous decisions, such as Tata Iron and Steel Co. Ltd. v. State of Bihar and J. K. Jute Mills Co. Ltd. v. State of Uttar Pradesh, where similar arguments regarding the retrospective operation of taxing statutes were rejected.

3. Reasonableness of Restrictions Imposed by the Retrospective Operation under Articles 19(1)(f) and (g) and Article 304(b) of the Constitution:
The appellants contended that the retrospective operation of the Act imposed unreasonable restrictions on their rights under Articles 19(1)(f) and (g) and Article 304(b). They argued that the long period covered by the retrospective operation made it unreasonable. The Supreme Court disagreed, stating that the length of time covered by the retrospective operation is not a decisive test for determining reasonableness. The Court noted that the legislative process, including the period during which judicial proceedings were pending, justified the retrospective operation.

The Court also addressed the argument regarding the period covered by injunction orders and the time between the Supreme Court's decision in 1960 and the issuance of the Ordinance in 1961. The Court found that the retrospective operation was reasonable and in the public interest, considering the background and circumstances of the case.

Conclusion:
The Supreme Court dismissed the appeals, upholding the validity of the retrospective operation of the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961. The Court found that the retrospective operation did not alter the character of the tax, was within the legislative competence of the Bihar Legislature, and imposed reasonable restrictions under Articles 19(1)(f) and (g) and Article 304(b) of the Constitution. The appeals were dismissed with costs.

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