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TMI Blog1972 (12) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to appreciate the contentions urged, it is necessary to set out briefly the relevant facts leading to the enactment of the impugned Act by the State Legislature. Sales tax is collected on the sale of "country liquor other than toddy" by virtue of the power conferred on the State to make such collection under section 5(3)(a), proviso, read with section 19 of the Act. The levy of sales tax on "country liquor other than toddy" is made by section 5(3)(a) of the Act on the first or the earliest of successive dealers in the State who is liable to tax at the rate specified under column 3 corresponding to serial No. 39 of the Second Schedule. By virtue of the first proviso to section 5(3)(a) of the Act, the State Government is deemed to be the first dealer in the State in respect of sale of any of the goods mentioned in serial Nos. 38, 39 and 40 of the Second Schedule and is entitled to collect tax under section 19. The State Government has the monopoly of first sale of arrack (which is "country liquor other than toddy"). Manufacture of arrack by distillation is done in the State under State control and the entire quantity manufactured by distillers in the State is sold to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent dated 12th July, 1968. The common question for decision before this court was, whether excise duty, health cess and education cess, levied on arrack and collected from the licensees did not form part of the "taxable turnover" of the State Government selling arrack to the licensees. This court held that excise duty and the cesses were not paid by the sellers-the State Government-but by the purchasers-the licensees -and therefore, did not become part of the price at which the goods were sold to the licensees and in that view, the State Government cannot collect sales tax on excise duty and the cesses which are in the nature of surcharges on excise duty: vide D. Cawasji Co. v. State of Mysore (1969) 1 Mys. L.J. 461 at 483. The State preferred an appeal to the Supreme Court against the judgment of this court; but it was subsequently withdrawn. During the pendency of the appeal, the privileges of vending liquor for the excise year 1968-69 were sold without any variation in the price of arrack fixed by the Government during the previous years at 55 paise a litre. During the year 1968-69, the State Government collected sales tax computing the same at six and a half per cent. of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... country liquor other than toddy" shall be deemed to have been 45 per cent. at all times from 1st April, 1966. At the hearing, the learned counsel for the petitioners urged the following grounds: I. That the impugned Act is a colourable piece of legislation. II. That as the impugned Act does not remove the basis of the decision of this court in D. Cawasji Co. v. State of Mysore(1969) 1 Mys. L.J. 461., and its effect is to overrule the said decision without changing the law retrospectively, it is beyond the legislative competence of the State under the Constitution. III. That the impugned Act makes a discrimination between purchasers of arrack from the State made before 1st July, 1969, and thereafter, and the said classification is arbitrary and is violative of article 14 of the Constitution. IV. That the retrospective operation of the enhanced rate of tax of "forty-five per cent." with effect from 1st April, 1966, imposes on the petitioners additional burdens amounting to about Rs. 96.83 lakhs while the total profits earned by them is Rs. 55.13 lakhs, with the consequence that they are put to a loss of about Rs. 40.69 lakhs. The impugned Act is thus oppressive and confis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Rayappa Gounder's case(3) and the earlier cases referred to therein is that while the Legislatures under our Constitution have within the prescribed limits power to make laws prospectively as well as retrospectively, there is no power to ask any instrumentality of the State to disobey or disregard the decisions given by courts, without removing the basis of the decisions and thus rendering the same ineffective. In other words, if an assessment to tax is declared invalid by court and that decision, has become final, the Legislature cannot say that such a decision shall be ineffective by merely passing a Validation Act, but the Legislature is competent to remove the basis of the decision rendered by a competent court by retrospective legislation and thus render the decision ineffective. The argument of Sri Kohla for the petitioners was that this court has held that the State Government had no right to collect sales tax on the amount of excise duty and the cesses, that no law had been made to remove the basis of the said decision by enacting a retrospective legislation empowering the levy of sales tax on excise duty and the cesses and what the impugned Act has done merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the taxable turnover ever since 1st April, 1966. If the rate of tax was 45 per cent. on the sale price of arrack, which was 55 paise a litre, then the amount the State was authorised to collect comes to about 25 paise. Thus it will be seen that by the enactment of section 2 of the impugned Act the very basis of the complaint made by the petitioners before this court in the earlier writ petitions as also the basis of the decision of this court in Cawasji's case(1969) 1 Mys. L.J. 461. that the State is collecting amounts by way of tax in excess of what was authorised under the Act has been removed. Thus the decision of this court has been rendered ineffective. III. Re: Article 14.-It was contended that the two different rates for the period before and after 1st July, 1969, is discriminatory and, therefore, it offends article 14 of the Constitution. This argument has to be stated only to be rejected. It is not the case of the petitioners that there is any discrimination made between the licensees inter se during the period from 1st April, 1966, to 1st July, 1969. No class of licensees has been selected for discriminatory treatment and all are treated alike. It is common knowledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96,83,031 as stated in annexure A to reply affidavit. This is entirely wrong. The liability arising upon the petitioner as a result of the amended Act is as shown in the annexed statement. It is very little more than the liability which arose under the original demand made on the petitioner. The petitioner has worked out the liability as Rs. 96,83,031 by calculating the 45 per cent. on the aggregate of price and excise duty and cesses. This is not correct. The sales tax of 45 per cent. has to be calculated only on the price part of it excluding the duty and cesses in view of the earlier judgment of this Honourable Court. When so done the liability will be much less as shown in column No. 6 of annexure A." (Underlining is ours). The grievance of the petitioners rests entirely on a misconception that the enhanced levy under the impugned Act has to be calculated on the price of arrack plus excise duty and the cesses. The decision of this court in D, Cawasji's case(1969) 1 Mys. L.J. 461., that excise duty with the cesses thereon do not form part of the sale price of arrack and, therefore, cannot be included in the taxable turnover of the State Government when they sell arrack to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive operation of the law can be scrutinised by the court. It is conceivable that cases may arise in which the retrospective operation of a taxing statute may introduce such an element of unreasonableness that the restrictions imposed by it may be open to serious challenge as unconstitutional; but the test of the length of time covered by the retrospective operation cannot by itself be a decisive test. If the validity of a taxing statute is challenged in court and ultimately the highest court in the land holds that the statute is unconstitutional, the Legislature may amend the Act so as to bring it in conformity with the Constitution with retrospective effect and validate the assessments made under the statute declared as unconstitutional. Occasion may arise for amendment of a taxing statute for curing the defective provisions of a taxing statute which come to light in legal proceedings. A curative Act is generally given retrospective operation. When dealing with curative statutes, the courts have consistently held that the legislative purpose is by itself sufficient to justify the concomitant retroactivity." During the period from 1st April, 1966, until the date when the State wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 608., the Supreme Court rejected the contention that section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act of 1961 offended article 301 of the Constitution. In that case, the Supreme Court at page 608 stated: "A non-discriminatory tax on goods does not offend article 301 unless it directly impedes the free movement or transport of the goods...... Normally, a tax on sale of goods does not directly impede the free movement or transport of goods......It does not impede the free movement or transport of goods and is not violative of article 301." Sales tax on arrack is a non-discriminatory tax. It is not shown as to how it directly impedes the free movement or transport of arrack. We have to judge the result of the impost having due regard to the nature of the trade. It may be that in certain circumstances a high rate of tax on sale of goods like essential goods of common consumption may have the effect of impeding the free movement of goods and as such, such an impost may violate the constitutional limitations under article 301. It would all depend on the nature of the trade and the nature of the goods involved in the trade. In the instant case, as st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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