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TMI Blog1996 (4) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... t orders are still enforceable. What the State of Tamil Nadu is seeking to do is to enforce these demands. Merely because taxes which had been realised earlier had been refunded under an order passed on a contempt petition, the respondent is not debarred from realising the demands which are now deemed to be valid and subsisting. - Civil Appeal No. 2206, 2207 of 1982, - - - Dated:- 16-4-1996 - SINGH N.P. AND SUHAS CHANDRA SEN JJ. A. Mariarputham and Mrs. Aruna Mathur, Advocates, for the respondent. C.S. Vaidyanathan, Senior Advocate (S.R. Setia, Shivram, Mrs. Mohana and Ms. Jayshree, Advocates, with him), for the appellant. -------------------------------------------------- The judgment of the Court was delivered by SUHAS C. SEN, J. The appellant is a manufacturer of safety matches. During the period relevant for the assessment years 1957-58 to 1965-66, the appellant sold matches in the course of inter-State trade and commerce for which sales tax was charged under the Central Sales Tax Act. The assessment orders were challenged by the petitioner by filing writ petition before the High Court. The ground taken was that Central sales tax was levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re direct that there will be no order as to costs in this Court and in the High Court." The other reason for which the assessments were set aside was inclusion of excise duty in the computation of "turnover". There was a controversy as to how the turnover under the Central Sales Tax Act should be computed. Under the Madras General Sales Tax Act, 1959 and the Rules, as it stood at the material time, provisions had been made for deduction of excise duty in the computation of chargeable turnover. Madras High Court held that the quantum of turnover for the purpose of levy of Central sales tax had to be made in the same manner by excluding the excise duty paid on the goods sold. In the case of State of Madras v. N.K. Nataraja Mudaliar [1968] 22 STC 376; AIR 1969 SC 147, this Court held: "......If under the Madras General Sales Tax Act in computing the turnover the excise duty is not liable to be included and by virtue of section 9(1) of the Central Sales Tax Act tax has to be levied in the same manner as the Madras General Sales Tax Act, the excise duty will not be liable to be included in the turnover............ We are of the view that in the matter of determining the taxable turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity to the contrary". The result of the various provisions of the amending Act and in particular the validating provision was to change the law with retrospective effect and to impart validity to all assessments made under the Central Sales Tax Act which had been struck down by the judgment in the case of Larsen and Toubro [1967] 20 STC 150 (Mad.) and all other orders passed pursuant to that judgment. Mr. Vaidyanathan has strenuously contended that the Legislature cannot nullify any judgment of the court. In the instant case, the assessment made under the Central Sales Tax Act had been quashed by the Madras High Court. This was one of a large number of writ petitions which were heard by the Madras High Court. Although in the case of N.K. Nataraja Mudaliar [1968] 22 STC 376 (SC); AIR 1969 SC 147, an appeal was preferred to the Supreme Court and the judgment was reversed, in the case of the appellant the judgment was not questioned and was allowed to stand. Therefore, it is in full force and has to be respected as valid and binding. This judgment could be reversed by the Supreme Court, but could not be nullified by Legislature by an Act. In support of this contention he has relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the Constitution becomes linked up with the enforceability of the judgment. Nevertheless, the two could be viewed as separable sets of rights. If the right conferred b the judgment independently is sought to be set aside, section 3 of the Act, would, in my opinion, be invalid for trenching upon the judicial power." Mr. Vaidyaathan has argued that whatever may be the effect of the validation provision of the Central Sales Tax (Amendment) Act of 1969, it could not nullify the judgment pronounced by the Madras High Court whereby the assessment order had been quashed. Before examining this argument of Mr. Vaidyanathan, the majority judgment in Madan Mohan Pathak's case [1978] 3 SR 334; AIR 1978 SC 803 will have to be read and properly understood. The Life Insurance Corporation (Modification of Settlement) Act, 1976, was an Act to alter the settlement which had been arrived at between the Corporation and its Class III and Class IV employees on January 24, 1974 under the Industrial Disputes Act, 1947 and which was in force up to March 31, 1976. The Act did not purport to change the law which formed the basis of the judgment of the Calcutta High Court in any manner. The Act did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Patel Gordhandas Hargovindas v. Municipal Commissioner, Ahmedabad [1964] 2 SC 608; AIR 1963 SC 1742, was pronounced. Not only substantive provisions of the Act were altered but section 3 of the Validation Act provided that notwithstanding anything contained in any judgment, decree or order of a court or Tribunal or any other authority, no tax assessed or purported to have been assessed by the municipality on the basis of capital value of a building or land and imposed, collected or recovered by the municipality at any time before the commencement of the Validation Act shall be deemed t have invalidly assessed or imposed or collected or recovered and the imposition or collection of the tax s assessed shall be valid and shall be deemed to have always been valid and shall not be called in question merely on the ground that the assessment of the tax on the basis of capital value of the building r land was not authorised by law and accordingly any tax so assessed before the commencement of the Validation Act and leviable for a period prior to such commencement but not collected or recovered before such commencement may be collected or recovered in accordance with the relevant municipal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ja Mudaliar [1968] 22 STC 376; AIR 1969 SC 147. Therefore, we are unable to uphold the contention of Mr. Vaidyanathan that the judgment of the Madras High Court in the assessee's own case must be held to be in full force in spite of the Amendment Act of 1969. The Legislature ordinarily cannot reverse a decision of a court of law given in exercise of judicial power. A settlement between the management and the employees under the Industrial Disputes Act cannot be declared by the Legislature invalid and not enforceable even after a High Court had declared the settlement as valid and binding between the parties. This is what was sought to be done in Madan Mohan Pathak's case [1978] 3 SCR 334; AIR 1978 SC 803 and this Court held that it was not permissible. But if a High Court quashes several assessment orders by interpreting a taxing statute in a certain manner and that interpretation is nullified by a subsequent judgment of the Supreme Court and the statute itself is amended as a result of which the law on the basis of which the High Court's judgment was given is drastically altered, in such a situation, it is permissible for the Legislature, by a Validation Act, to declare the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew meaning and "while doing so it put out of action the effect of the decisions of the courts to the contrary." This principle laid down in Shri Prithvi Cotton Mills' case [1970] 1 SCR 388; [1971] 79 ITR 136 (SC) has not been overruled or doubted by the majority view in the case of Madan Mohan Pathak [1978] 3 SCR 334; AIR 1978 SC 803. In the instant case also, the High Court's judgment in Larsen and Toubro's case [1967] 20 STC 150 (Mad.), in so far as it declared certain provisions of the Sales Tax Act ultra vires, was reversed in the case of N.K. Nataraja Mudaliar [1968] 22 STC 376 (SC); AIR 1969 SC 147. The includibility of the excise duty element in the turnover was validated by the statutory amendments with retrospective effect. Therefore, the very basis on which the assessments were quashed in the case of Larsen and Toubro [1967] 20 STC 150 (Mad.) disappeared. The legal basis of the decisions following the Larsen and Toubro's case [1967] 20 STC 150 (Mad.) including this case also had disappeared by judicial pronouncements and legislative enactment. The validating provision of the 1969 Act, to borrow the language of Hidayatullah, C.J., has put out of action the effect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government had not been obtained. The State Legislature thereafter passed Act in 1964 by which a Board (Janapada Sabha) was constituted and cess was defined to mean a cess imposed by the Board or its successor body. Section 3(1) of the Act contained a validating provision that notwithstanding any judgment of any court, cesses imposed, assessed or collected by the Board shall be deemed to be, and to have always been, validly imposed, assessed or collected. When the case came to this Court, the inadequacy of the amending Act was pointed out in the following words: "But the Act in terms is limited in its application to the Independent Mining Local Board, Chhindwara, and its successor body the Janapada Sabha, Chhindwara constituted under Act 38 of 1948, and only in respect of the three notifications specified in the Schedule. Obviously the Act limited to one local Board in its application and to certain specific notifications cannot operate to repeal the clause in so far as it applied to other Boards. The nature of the amendment made in Act 4 of 1920 has not been indicated. Nor is there anything which enacts that the notifications issued without the sanction of the State Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in accordance with such rule of seniority". Far from supporting the contention of the appellant, this decision completely goes against the argument advanced by the appellant. This Court clearly laid down that if an impost or tax is declared to be invalid, a validation statute can remove the defect pointed out by the judgment and validate such impost or tax. This is precisely what has happened in the instant case. The provisions of the Act which were declared ultra vires in the case of Larsen and Toubro [1967] 20 STC 150 (Mad.) have been held to be valid by this Court in the case of N.K. Nataraja Mudaliar [1968] 22 STC 376 (SC); AIR 1969 SC 147. Includibility of excise duty in "turnover" was also specifically provided retrospectively by the amendments to the various provisions of the Central Sales Tax Act by the Amendment Act of 1969. In the case of Bhubaneshwar Singh v. Union of India (1994) 6 SCC 77, a Bench of three Judges to which one of us (N.P. Singh, J.) was a party, held: "The validating Acts are enacted to validate the action taken under the particular enactments by removing the defect in the statute retrospectively because of which the statute or the part of it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or defect pointed out by the High Court in its earlier decision by introduction 6of sub-section (2) of section 10 with retrospective effect, it shall be deemed that compensation had been paid even for the stock of unsold coke lying on the date prior to the appointed day. In the case of S.R. Bhagwat v. State of Mysore (1995) 6 SCC 16, a Bench of three Judges held that a judgment which had attained finality and was binding upon the State could not be overruled by any legislative measure. In that case by an interpretation of the relevant service law the High Court had given certain benefits to the writ petitioners by issuing a writ in the nature of mandamus. That order of the High Court was sought to be nullified by enactment of a new statute. The court held that this was impermissible because the High Court had not struck down any legislation which could be re-enacted after removing the defect retrospectively. In other words, it was recognised by this Court that in a case where provisions of a statute were declared inadequate or ultra vires, it was open to Legislature to remove the defect retrospectively so as to cure the defect and make the statute valid. What has happened i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. The appellant has not been able to cite any decision to show that a direction given in a contempt petition can operate as res judicata in a suit. In the contempt petition the only issue was whether the court's order in the writ petition was carried out or not. If the order of the writ court was not carried out, the contempt court was bound to pass suitable orders to ensure obedience to the order of the court. The question of correctness or validity of the judgment passed on the writ petition could not be raised in a contempt proceeding. No question of res judicata arises in such a case. Be that as it may, the petitioner was successful in getting an order of payment on the contempt petition. We are unable to uphold the contention that merely because an order was passed in the contempt proceeding to make payment, the respondent is estopped from claiming the amount of tax raised by an assesment order validated by the Act of 1969. If this argument is accepted, strange result will follow. The assessment order will remain valid. That notice of demand raised pursuant to the assessment order will remain intact and in force, but it will not be open to the department to realise the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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