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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 ..... uty. No Central sales tax could be levied on excise duty. The provisions of sub-sections (2), (2-A) and (5) of section 8 of the Central Sales Tax Act were ultra vires the Constitution of India. Claims for refund of the tax collected by the sales tax authority were also made. Several other similar writ petitions were heard by the High Court along with the appellant's case. The High Court by its judgment dated January 30, 1968, allowed the writ petitions in the case of Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 STC 150. Following that decision, the High Court allowed the writ petitions filed by the appellant and the other writ petitioners. The sales tax authority did not prefer any appeal in the case of the appellant, but went up in appeal in another case State of Madras v. N.K. Nataraja Mudaliar [1968] 22 STC 376; AIR 1969 SC 147 in which this Court held that the provisions of sub-sections (2), (2-A) and (5) of section 8 of the Central Sales Tax Act were valid. It, however, held that tax on excise duty was illegal and affirmed the decision of the High Court on this point. The case of the appellant is that even after the judgment of the Madras High Court, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 9(1) of the Central Sales Tax Act, whether the tax is to be levied under the Central Sales Tax Act or the General Sales Tax Act." The Central Sales Tax (Amendment) Act, 1969, brought about a number of changes in the Central Sales Tax Act, 1956. The definition of "turnover" in section 2(j) was modified and the wording of section 9 was radically altered. The new provisions were deemed always to have been substituted. This amendment was effected with a view to put an end to the controversy whether "turnover" should be computed in accordance with the provisions of the State sales tax law or not. This amendment was necessary to get over the view expressed by this Court in N.K. Nataraja Mudaliar's case [1968] 22 STC 376; AIR 1969 SC 147 that the Central sales tax had to be levied in the same manner as provided in the Madras General Sales Tax Act. When the Central Sales Tax Act was examined by the Madras High Court in the case of Larsen and Toubro [1967] 20 STC 150 and this Court in the case of N.K. Nataraja Mudaliar [1968] 22 STC 376; AIR 1969 SC 147 "turnover" had been defined by the Central Sales Tax Act in section 2(j) to mean "the aggregate of sale prices received and rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madan Mohan Pathak v. Union of India [1978] 3 SCR 334; AIR 1978 SC 803. In that case, a dispute between workers' union and the Life Insurance Corporation was settled by an agreement for payment of cash bonus at the rate of 15 per cent of gross wages. The settlement was valid for four years from April 1, 1973 to March 31, 1977. There was some dispute about the implication of this settlement and on May 21, 1976 on a writ petition, the Calcutta High Court passed an order recognising the right of the employees to payment of bonus for the year 1975-76 which had become payable along with the salary in April, 1976. The Calcutta High Court ordered that it must be paid to the employees. On May 29, 1976, the Life Insurance Corporation (Modification of Settlement) Act, 1976 was passed by the Parliament denying the employees the right which had been conferred by the settlement, approved by the Central Government, acted upon by actual payment of bonus to the employees and finally recognised as a right protected by articles 19(1)(f) and 31(1) of the Constitution by a decision of the Calcutta High Court on May 21, 1976. It was noted in the judgment of Beg, C.J., that the Statement of Objects a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twithstanding anything contained in any judgment to the contrary. The majority judgment, which was delivered by Justice Bhagwati, J. (as His Lordship then was), highlighted this aspect. Bhagwati, J., observed: "It is significant to note that there was no reference to the judgment of the Calcutta High Court in the Statement of Objects and Reasons, nor any non obstante clause referring to a judgment of a court in section 3 f the impugned Act. The attention of Parliament does not appear to have been drawn to the fact that the Calcutta High Court had already issued a writ of mandamus commanding the Life Insurance Corporation to pay the amount of bonus for the year 1st April, 1975 to 31st March, 1976. It appears that unfortunatly the judgment of the Calcutta High Court remained almost unnoticed and the impugned Act was passed in ignorance of that judgment. Section 3 of the impugned Act provided that the provisions of the settlement in so far as they relate to payment of annual cash bonus to Class III and Class IV employees shall not have any force or effect and shall not be deemed to have had any force or effect from 1st April, 1975. But he writ of mandamus issued by the Calcutta High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agwati, J., observed: "......It is difficult to see how this decision given in the context of a validating statute can be of any help to the Life Insurance Corporation. Here, the judgment given by the Calcutta High Court, which is relied upon by he petitioners, is not a mere declaratory judgment holding an impost or tax to be invalid, so that a validation statute can remove the defect pointed out by the judgment amending the law with retrospective effect and validate such impost or tax." Krishna Iyer and Desai, J., agreed with the judgment of Justice Bhagwati, Chandrachud, Fazal Ali and Shinghal, JJ., observed: "We agree with the conclusion of brother Bhagwati but prefer to rest our decision on the ground that the impugned Act violates the provisions of article 31(2) and is, therefore, void. We consider it unnecessary to express any opinion on the effect of the judgment of the Calcutta High Court in W.P. No. 371 of 1976." Therefore, the majority view appears to be that if a judgment is pronounced by a court and the effect of that judgment is sought to be taken away by Legislature by passing an Act without altering the statute on the basis of which the judgment was pronounced, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the High Court to the contrary. The principle to be applied in cases like this was stated by Hidayatullah, C.J., in the case of Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1970] 1 SCR 388; [1971] 79 ITR 136 (SC): "When a Legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition is that the Legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the court shall not bind, for that is tantamount to reversing the decision in exercise of judicial power which the Legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances." In Shri Prithvi Cotton Mill's case [1970] 1 SCR 388; [1971] 79 ITR 136 (SC), the assessment years involved w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occupied by the judgment of this Court in N.K. Nataraja Mudaliar's case [1968] 22 STC 376; AIR 1969 SC 147 and the provisions of the Central Sales Tax Act as amended by the Act of 1969. We shall now examine some of the other cases which were cited on the question of the scope of various Validation Acts passed by the Legislature from time to time. The case of A.V. Nachane v. Union of India [1982] 2 SCR 246; AIR 1982 SC 1126 was a sequel to the decision in the case of Madan Mohan Pathak [1978] 3 SCR 334; AIR 1978 SC 803, where this Court had directed the Union of India and Life Insurance Corporation to forbear from implementing the provisions of the Validation Act of 1976 and to pay annual cash bonus for the years in question to Class III and Class IV employees in accordance with the settlements. On March 31, 1978, the Corporation issued a notice under section 19(2) of the Industrial Disputes Act declaring its intention to terminate the settlement on the expiry of two months from the date of the notice. Another notice was issued to effect a change in the conditions of service applicable to the workmen. The validity of the aforesaid two notices and the consequential notification iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without the sanction of the local Government." This case does not lay down that after a judgment has been pronounced on the basis of an Act, the provisions of that Act cannot be amended so as to cure the defect pointed out in the judgment retrospectively. The effect of the amending Act of 1969 is not to overrule a judgment passed by a court of law, which the Legislature cannot do. What the Legislature can do is to change the law on the basis of which the judgment was pronounced retrospectively and thereby nullify the effect of the judgment. When the Legislature enacts that notwithstanding any judgment or order the new law will operate retrospectively and the assessments shall be deemed to be validly made on the basis of the amended law, the Legislature is not declaring the judgment to be void but rendering things or acts deemed to have been done under amended statute valid notwithstanding any judgment or order on the basis of the unamended law to the contrary. The validity to the assessment orders which had been struck down by the court, is imparted by the amending Act by changing the law retrospectively. In the case of P.S. Mahal v. Union of India [1984] 3 SCR 847, certain seni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments or orders of competent courts by changing the very basis by legislation is a well-known device of validating legislation. Such validating legislation which removes the cause of the invalidity cannot be considered to be an encroachment on judicial power. At the same time, any action in exercise of the power under any enactment which has been declared to be invalid by a court cannot be made valid by a validating Act by merely saying so unless the defect which has been pointed out by the court is removed with retrospective effect. The validating legislation must remove the cause of invalidity. Till such defect or the lack of authority pointed out by the court under a statute is removed by the subsequent enactment with retrospective effect, the binding nature of the judgment of the court cannot be ignored." In that case Bhubaneshwar Singh, the petitioner, was the owner of a coking coal mine which had been taken over by the Central Government. He filed an application under article 226 of the Constitution alleging that the custodian had debited the expenses for raising coal to his account but had not given him credit for the price of the coal raised which was lying in stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court on the basis of its decision in the case of Larsen and Toubro [1967] 20 STC 150 (Mad.). As a result of these decisions, a large number of assessment orders under the Central Sales Tax Act were set aside. It was held in the case of Larsen and Toubro [1967] 20 STC 150 (Mad.) certain provisions of the Act were ultra vires and in any event excise duty could not be included in the assessee's turnover for the purpose of levy of Central sales tax. The main basis of the High Court's judgments disappeared when the Supreme Court held that the impugned provisions of the Central Sales Tax Act which had been declared ultra vires by the Madras High Court were validly enacted. The other defect which relates to the includibility of excise duty in the "turnover" of an assessee was cured retrospectively by amending the provisions of the Central Sales Tax Act. The new provisions introduced by the amending Act were deemed to have come into effect retrospectively. Section 9 of the amending Act declared all assessments made up to January 9, 1969 valid and binding. There is nothing in the long line of decisions cited by Mr. Vaidyanathan to suggest that the Legislture could not take such a step ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ court's order had to be carried out, which is why the refund order was passed in the contempt proceeding. This direction to refund the amount of tax already collected was given only because the assessment orders had been set aside by the writ court. But, when the assessment orders were validated by passing the Amendment Act of 1969 with retrospective effect, the tax demand became valid and enforceable. The tax demand is a debt owed by an assessee which can be realised by the State in accordance with law. Merely because the amount of tax which had been realised earlier was directed to be refunded by court's order on the finding that the assessment order was invalid, will not preclude the State from realising the tax due subsequently when the assessment order was validated by the amending Act of 1969. The order passed in the contempt proceeding will not have the effect of writing off the debt which is statutorily owed by the assessee to the State. The State has filed a suit for recovery of this debt. Unless it can be shown that the debt does not exist or is not legally due, the court cannot intervene and prevent the State from realising its dues by a suit. All that the departm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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