2023 (3) TMI 1005 - HC - VAT and Sales Tax

Retrospective withdrawal of exemption - Constitutional Validity of Notification No.II (1)/CTR/75 (b-2)/2007, dated 19.12.2007 (G.O.Ms.No.198) - vires of Sections 30 and 88 of the Tamil Nadu Value Added Tax Act, 2006 and Articles 14, 19 (1) (g), 265, 301 and 304 (a) of the Constitution of India - exemption to Waste Paper, Paper Boards and used/old bottles - refund - principles of unjust enrichment. Whether the impugned notification(s) which imports the condition that the exemption to Waste Paper, Paper Boards and used/old bottles shall be subject to the concession that the said goods are sold on inter-state trade and tax has been paid under the Central Sales Tax Act, 1956, retrospectively is within or beyond the scope of the powers conferred on the Government in terms of Section 17 of the TNGST Act, 1959 (or) Section 30 read with Section 88 (4) of the TNVAT Act? - HELD THAT - The question is no longer res integra . Power may be conferred to make subordinate/ delegated legislation in the shape of rules, bye-laws, notifications etc., which have retrospective operation. - Such a power may be either conferred in express words or may be inferred by necessary implication. In the absence, however, of an express or necessarily implied power to that effect, subordinate/ delegated legislation, be it a rule, a bye-law or a notification, cannot have retrospective operation. It has been consistently held by this Court in the context of Section 17 of TNGST Act which is pari materia with Section 30 of the TNVAT Act, that while the Government is conferred with the power to grant exemption prospectively or retrospectively, the power to withdraw, annul, modify or vary a notifcation traceable to sub-Section (3) to Section 17 of the TNGST Act, cannot be exercised retrospectively. Reliance can be placed in the case of HONEST CORPORATION VERSUS STATE OF TAMIL NADU 1997 (12) TMI 622 - MADRAS HIGH COURT and G. PACKIRISAMY CO. VERSUS STATE OF TAMIL NADU (AND OTHER CASES) 1994 (5) TMI 244 - MADRAS HIGH COURT - On a reading of the above judgments it is beyond the pale of any doubt that the power of the State Government be it under Sub-section (3) to Section 17 or 30 of the TNGST Act or TNVAT Act respectively cannot modify, annul or vary a notification retrospectively. Thus the impugned notification insofar as it imports conditions which curtails or whittles the exemption for waste paper, paper board and old or used bottles is in excess of the power conferred under Sub-section (3) to Section 17 or 30 of the TNGST Act or TNVAT Act respectively. The impugned notification travels beyond the scope of power conferred under sub-Section (3) to Section 17 (or) Section 30 of the TNGST Act and the TNVAT Act respectively and thus the impugned notification viz., Notification No.II (1)/CTR/75 (b-2)/2007, dated 19.12.2007 (G.O.Ms.No.198) is ultra vires to Sections 17 of the TNGST Act, 1959 (or) Sections 30 and 88 of the TNVAT Act, 2006, insofar as it imports conditions with retrospective effect which has the effect of curtailing/ whittling down the scope of exemption granted vide notification in G.O.Ms.No.176 dated 28.12.2006. Whether any refund consequent to a declaration that the impugned notifications are ultra vires would be subject to the doctrine of ''Unjust Enrichment''? - HELD THAT - It was submitted that it was not a case of claim of refund, but a case where the assessment orders were made granting refund and the prayer is to direct the 1st Respondent herein to forbear from giving effect to or rely upon Notification No.II(1)/CTR/75/(81)/07 G.O.Ms.No.198, Commercial Taxes and Registration (B2) dated 19.12.2007, to revise or review completed proceedings granting exemption in respect of the purchases of old/ used empty bottles during the period from 1st June, 2000 to 5th September, 2006. It is submitted by the learned counsel that Doctrine of Unjust Enrichment is applicable only against a claim for refund and not to reopen closed assessment thereby resulting in recovery of any sums/amounts collected by way of or purporting to be by way of tax. We are not inclined to accede to the above prayer for we do not intend rather cannot pass orders pre-empting a quasi-judicial authority from exercising its power. It is made clear that the above declaration on the validity of the impugned notification would not preclude the authorities to recover the sums if any collected by way or purporting to be by way of taxes if law enables/permits to do so. Needless to state that any such exercise shall be in accordance with law. Petition disposed off.

Summary

Issues Involved:
1. Validity of Notification No.II (1)/CTR/75 (b-2)/2007, dated 19.12.2007 (G.O.Ms.No.198)
2. Retrospective imposition of conditions under Section 17 of the TNGST Act and Section 30 of the TNVAT Act.
3. Applicability of the Doctrine of Unjust Enrichment.

Issue-Wise
Detailed Analysis:

1. Validity of Notification No.II (1)/CTR/75 (b-2)/2007, dated 19.12.2007 (G.O.Ms.No.198)
The petitioners challenged the validity of Notification No.II (1)/CTR/75 (b-2)/2007, dated 19.12.2007, arguing that it is ultra vires Sections 30 and 88 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act), and unconstitutional as it violates Articles 14, 19(1)(g), 265, 301, and 304(a) of the Constitution of India. The notification imposed conditions retrospectively, thereby curtailing exemptions granted under the earlier notification G.O.Ms.No.176 dated 28.12.2006.

2. Retrospective Imposition of Conditions
The court examined whether the State Government has the power to impose conditions retrospectively under Section 17 of the TNGST Act and Section 30 of the TNVAT Act. It was established that while the State Government can grant exemptions prospectively or retrospectively, it cannot modify or vary these exemptions retrospectively. This principle was supported by previous judgments, including Honest Corporation v. State of Tamil Nadu and State of Tamil Nadu v. Kannapiran Steel Re-rolling Mills, which held that the power to cancel or vary a notification cannot be exercised retrospectively.

The court noted that the impugned notification dated 19.12.2007, which imposed conditions retrospectively, was beyond the powers conferred under Section 17 of the TNGST Act and Section 30 of the TNVAT Act. The court rejected the State's argument that the retrospective condition was intended to rectify an inadvertent error in the original notification, emphasizing that the power to modify a notification retrospectively is not conferred by the legislature.

3. Applicability of the Doctrine of Unjust Enrichment
The court addressed whether any refund consequent to the declaration that the impugned notifications are ultra vires would be subject to the Doctrine of Unjust Enrichment. It was submitted that the principle of "Unjust Enrichment" would apply only against a claim for refund and not to reopen closed assessments. The court clarified that the declaration of invalidity of the impugned notification does not preclude authorities from recovering sums collected by way of taxes if the law permits.

Conclusion:
1. The impugned notification in G.O.Ms.No.198 dated 19.12.2007 is declared invalid as it exceeds the power conferred on the State Government under Section 17 of the TNGST Act and Sections 30 and 88 of the TNVAT Act.
2. Orders of assessment invoking G.O.Ms.No.198 are set aside, with a direction to re-do the assessment in conformity with the declaration of invalidity of the impugned notification.
3. Petitioners must submit their objections within four weeks if writ petitions are filed against notices, and the assessing officer shall pass orders in conformity with this judgment.

The court disposed of the writ petitions with these directions and closed the connected Miscellaneous Petitions.