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TMI Blog1998 (3) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was in force from October 3, 1989 to October 2, 1992. By virtue of the scheme, an incentive of five years sales tax holiday subject to a ceiling of Rs. 35 lakhs on sales tax during the entire holiday period was introduced. This concession was allowed to SSI units to be set up on or after October 3, 1989 and going into commercial production before March 31, 1995. The said G.O. was also provided for another incentive by way of investment subsidy for small, medium and large scale industries. The annexure to the said G.O. provided the list of industries which are not eligible for the incentives/ concession under the G.O. 3.. The petitioners established SSI units in various backward areas under the said scheme. The petitioners were granted permanent eligibility certificate by the Department of Industries and Commerce. However, the authorities interpreted the G.O. by restricting the quantum of sales tax holiday to a maximum limit of capital investment or Rs. 35 lakhs whichever is less. 4.. Therefore, the petitioners along with several others filed Writ Petition No. 16570 of 1991 and batch under article 226 of the Constitution of India seeking a direction to the authorities to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified order issued under article 166(2) of the Constitution and published in the same manner and subject to the same conditions and restrictions as provided in that article. That we understand to be the basic requirement of section 21 of the Interpretation in General Clauses Act. Such an alteration not having been effected by a notified order issued under article 166(2) of the Constitution of India, respondents are not entitled to rely upon the alteration or reduction in the eligibility of the petitioners for exemption to any amount lesser than that which was promised in clause 3 of G.O. No. 498 dated October 16, 1989. .......................... 13. In this view, we hold that the petitioners are entitled to sales tax holiday for a period of five years subject to a ceiling of Rs. 35,00,000 on sales tax during the entire holiday period. We further hold that restriction or reduction of such eligibility to the sum of 100 per cent of the capital investment under clause 6B(ii) of the Manual of Instructions or the eligibility fixed by the District Committee or the orders of assessment are illegal and unenforceable. There will be a consequential direction that the respondents shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thirty-five lakh whichever is less, the Act was also given retrospective effect, namely, it was brought into force with effect from October 16, 1989. Pursuant to Act No. 14 of 1995, the second respondent issued notices proposing to levy and collect tax in terms of the said Act and requested the petitioners to file their objections if any against the proposed assessment, under the Andhra Pradesh General Sales Tax Act. 8.. Challenging the above legislation, namely, Act No. 14 of 1995, the petitioners have approached this Court under article 226 of the Constitution of India seeking an appropriate writ declaring the legislation of the State Government known as The Andhra Pradesh Small-scale Industries (Restriction on Sales Tax Holiday) Act, 1995 , as unconstitutional, arbitrary, unjust and violative of articles 14 and 300-A of the Constitution of India and further declaring that the impugned legislation has effect of overruling the decision of this Court in Writ Petition No. 16570 of 1991 and batch dated August 13, 1993. (P.P.P. Industries v. Commissioner of Industries [1994] 92 STC 110). The facts in the other writ petitions are more or less similar to the facts narrated above. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y limitation imposed by the Constitution, in the exercise of such power, it will be competent for the Legislature to enact a law which is either prospective or retrospective and, therefore, the impugned Act is within the competence of the State Legislature. Merely because the petitioners have not collected and recovered from the consumers the sales tax during the period in which G.O. Ms. No. 498 dated October 16, 1989 was in force, it does not affect the competence of the State Legislature to enact the impugned legislation as it is not an essential characteristic of a sales tax that the seller must have the right to pass on it to the consumer, nor is the power of the Legislature to impose tax on sales conditional on its making a provision for sellers to collect the tax from the purchaser. It is a matter of policy whether a law should be enacted imposing sales tax or validating imposition of sales tax and the fact that the seller was not in a position to pass it on to the consumer does not in any way affect the competence of the Legislature. There is no evidence that the impugned legislation is confiscatory. The fact that the petitioners were disabled from passing on the inciden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of SSI units including oil mills crushing non-edible oil seeds set up on or after October 3, 1989 and go into commercial production before March 31, 1995. In other words, under this provision, the sales tax holiday will be applicable if two conditions are satisfied(i) it is limited to 100 per cent fixed capital investment or Rs. 35 lakhs whichever is less and (ii) the production should commence before March 31, 1995. 14.. At this stage, it is necessary to refer to the judgment of a Division Bench of this Court in Writ Petition No. 16570 of 1991 and batch dated August 13, 1993 in P.P.P. Industries v. Commissioner of Industries [1994] 92 STC 110; [1993] 17 APSTJ 91, as the impugned legislation is an aftermath of this judgment. In this case, under G.O. Ms. No. 498 dated October 16, 1989 small-scale industries are exempted from payment of sales tax for a period of five years from the date of commercial production and the entitlement to sales tax holiday is up to a sum not exceeding Rs. 35 lakhs during the period of five years. That concession was sought to be amended by a memo called Manual of Guidelines by introducing a restriction restricting the sales tax holiday to a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -(i) that they should commence production before March 31, 1995 and (ii) that the tax holiday is restricted to 100 per cent of the capital investment or Rs. 35 lakhs whichever is less. With the result, the assessees are entitled to a tax holiday up to 100 per cent of the fixed capital investment or Rs. 35 lakhs, whichever is less. We have already pointed out, in the earlier paragraphs, that in P.P.P. Industries case [1994] 92 STC 110 (AP); [1993] 17 APSTJ 91, it was held that the petitioners therein would be entitled for sales tax holiday up to Rs. 35 lakhs provided they commence production before March 31, 1995. 16.. The argument of the learned counsel for the petitioners is that the judgment in P.P.P. Industries case [1994] 92 STC 110 (AP); [1993] 17 APSTJ 91, has attained finality and, therefore, section 2 of the impugned legislation in effect overrules the said decision. The Legislature is incompetent to do so. It is true that it was held in S.R. Bhagwat [1995] 6 SCC 16 that: Once respondent-State had suffered the mandamus to give consequential financial benefits to the allottees like the petitioners on the basis of the deemed promotions such binding direction about paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 498 dated October 16, 1989 by means of an ordinary memo. Since it was not done in accordance with law, this Court declared that the amendment by a memo to G.O. Ms. No. 498 as invalid. Therefore, the above observations are not applicable to the facts of the present case. 20.. The next contention of the learned counsel for the petitioners is that by giving retrospective effect the legislation is imposing hardship on the petitioners as they are made to pay the tax though they have not collected the same as they have passed on the concession to the consumers. Therefore, it is unreasonable and arbitrary. It is true that in Ujagar Prints case [1989] 74 STC 401 (SC); [1989] 179 ITR 317 (SC), it was held that in testing whether a retrospective imposition of a tax operates so harshly as to violate the fundamental right under article 19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validating of taxing statutes struck down by courts for certain defects, the period of such retroactivity and the defects and extent of any unforeseen or unforseeable financial burden for the past period, etc. It is also tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Judges have not declared that a taxing provision would become arbitrary and unreasonable on the grounds of retrospectivity if the assessees failed to pass on the tax to the consumer. At this stage, it is necessary to refer to the observations made in S. Kodar case [1974] 34 STC 73 (SC): that as the tax was not shown to be confiscatory, it could not be said that the provisions of the Act imposed any unreasonable restrictions upon the appellants right to carry on trade. Because the appellants were disabled from passing on the incidence of the tax to the purchasers, it could not be said that the provisions imposed an unreasonable restriction upon the fundamental rights of the appellants under article 19(1)(g) or 19(1)(f). 22.. To the same effect, it was also held in Hoechst Pharmaceuticals Ltd. case [1984] 55 STC 1 (SC) thus: that, on the facts, there was no material placed on record to show that the surcharge levied under sub-section (1) of section 5 of the Act imposed a disproportionate burden on the appellants or that it was confiscatory in nature; that merely because a dealer falling within the class defined under subsection (1) of section 5 of the Act was prevente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Validation) Act, 1958 (U.P. 15 of 1958) is not ultra vires the powers of the Legislature under entry 54, for the reason that it operates retrospectively. 25.. Further, we may also refer to the judgment in Vij Resins Pvt. Ltd. case AIR 1989 SC 1629 relied on by the learned counsel for the petitioners wherein it was held thus: It is true that there is no estoppel against the Legislature and the vires of the Act cannot be tested by invoking the plea but so far as the State Government is concerned the rule of estoppel does apply and the precedents of this Court are clear. 26.. In other words, there is no estoppel against the Legislature in making the impugned enactment though it may give rise to a fact situation of estoppel as on the promise made by the authorities by issuing G.O. Ms. No. 498 dated October 16, 1989 whereby the assessees were allowed to avail sales tax holiday resulting in passing on the concession to the consumers and now by virtue of the Act 14 of 1995 they are liable to pay the tax. However, the next sentence makes it clear that there cannot be any estoppel against State Legislature and, therefore, the enactment is valid. Reliance placed on by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of tax from 6 per cent to 45 per cent, with retrospective effect from April 1, 1966, to avoid the liability of refunding the excess amounts collected and had further purported to nullify the judgment and order passed by the High Court which had become conclusive and become binding on the parties. Under those circumstances, it was held that the object of enacting amendment Act is to nullify the effect of the judgment and enable the State Government to retain the amount wrongfully and illegally collected as sales tax and this object was sought to be achieved by the amendment Act, which did not even purport to remedy or remove the defect or lacuna, but, merely raised the rate of sales tax from 6 per cent to 45 per cent and further proceeded to nullify the judgment and order of the High Court. Under those circumstances, it was held that the enhancement of the rate of tax was clearly arbitrary and unreasonable. It was further held that the Act imposing higher levy with retrospective effect and sought to nullify the judgment and order of the High Court was invalid and unconstitutional. 28.. From the facts referred to above in the judgment of D. Cawasji Co. case [1985] 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested right from a defect in a statute and seek a windfall from the Legislature s mistakes. 30.. By giving retrospective effect, the Amendment Act could not be said to have imposed unreasonable restriction on the petitioners fundamental rights under articles 14 and 19(1)(g). It is no doubt true that in Empire Industries Ltd. s case [1987] 64 STC 42 (SC); [1986] 162 ITR 846 (SC) it was observed that the petitioners had already paid the excise duty demanded of them from time to time and had also collected the duty from the customers. These observations cannot be understood that in the event of not collecting the tax from the customers the retrospective legislation becomes unreasonable and arbitrary and violative of articles 19(1)(g) and 14 of the Constitution of India in view of the observations in S. Kodar [1974] 34 STC 73 (SC) and Hoechst Pharmaceuticals Ltd. [1984] 55 STC 1 (SC), as it is not the essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer and the power of the Legislature to impose a tax on sales is not conditional on its making a provision for seller to collect the tax from the purchasers; because the sellers were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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