1964 (3) TMI 55 - SC - VAT and Sales Tax

Whether legislative power to pass an Act retrospectively has been reasonably exercised or not? Held that - Appeal dismissed. In any event, we do not think that in the circumstances of this case it would be possible to hold that by making the provision of section 2 of the Orissa Sales Tax Validation Act, 1961 retrospective the Legislature has imposed a restriction on the petitioners fundamental right under Article 19(1)(g) which is not reasonable and is not in the interest of the general public.

Summary

Issues Involved:
1. Validity of the Orissa Sales Tax Validation Act, 1961.
2. Retrospective withdrawal of tax exemption.
3. Alleged discrimination under Article 14.
4. Alleged unreasonable restriction under Article 19(1)(g).

Detailed Analysis:

1. Validity of the Orissa Sales Tax Validation Act, 1961:
The primary issue in the group of writ petitions was the validity of the Orissa Sales Tax Validation Act, 1961 (Act No. 7 of 1961). The petitioners challenged the Act, particularly Section 2, which aimed to clarify the definition of "manufacturer" in the context of tax exemption for gold ornaments. The petitioners argued that the legislative intention was to include all first owners of finished gold products within the exemption. However, the Act specified that "manufacturer" referred to those who personally work on the materials or run a manufactory for producing gold ornaments. The Court upheld the Act, stating that the legislative intention was clear and that the Act validly clarified the scope of the exemption.

2. Retrospective Withdrawal of Tax Exemption:
The petitioners contended that the Legislature could not withdraw the tax exemption retrospectively, as it was initially granted by the State Government under Section 6 of the Orissa Sales Tax Act, 1947. The Court rejected this argument, stating that if the State Government, as a delegate of the Legislature, could withdraw the exemption, the Legislature itself certainly had the competence to do so, whether prospectively or retrospectively. The Court emphasized that the retrospective operation of Section 2 was intended to clarify the original legislative intent and did not constitute an invalid exercise of legislative power.

3. Alleged Discrimination Under Article 14:
The petitioners argued that the Act was discriminatory and violated the equality before the law guaranteed by Article 14 of the Constitution. They claimed that traders like themselves, who did not directly produce gold ornaments but acted as commission agents, were unjustly excluded from the exemption. The Court found this argument unconvincing, noting that the petitioners did not belong to the same class as those who personally produced gold ornaments or ran manufactories. The classification made by the Legislature was deemed rational and connected to the objective of benefiting actual producers of gold ornaments and those employing artisans continuously.

4. Alleged Unreasonable Restriction Under Article 19(1)(g):
The petitioners also argued that the retrospective operation of the Act imposed an unreasonable restriction on their fundamental right to practice any profession or carry on any occupation, trade, or business under Article 19(1)(g). The Court acknowledged that while the retrospective operation of a law could be relevant in assessing its reasonableness, it did not automatically render the legislation invalid. The Court noted that the retrospective period was not excessively long and that the petitioners might have already collected sales tax from their customers. Consequently, the Court concluded that the retrospective application of the Act did not impose an unreasonable restriction on the petitioners' fundamental rights.

Conclusion:
The Supreme Court dismissed the petitions, upholding the validity of the Orissa Sales Tax Validation Act, 1961, and its retrospective application. The Court found no merit in the arguments regarding legislative incompetence, discrimination under Article 14, or unreasonable restriction under Article 19(1)(g). The petitions were dismissed with costs, and one set of hearing fees was awarded.