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TMI Blog1997 (7) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... ........ (ii) paid or levied or leviable in respect of any earlier sale or purchase of goods under this Act or any earlier law, be granted to the purchasing dealer; Rule 41D in so far as is relevant for our present purpose reads as follows: 41D. Drawback, set-off, etc., of tax paid by a manufacturer in respect of purchases made on or after the notified day.-(1) In assessing the amount of tax payable in respect of any period by a registered dealer who manufactures taxable goods for sale or export (hereinafter in this rule referred to as claimant dealer ) the Commissioner shall, in respect of purchases made by claimant dealer on or after the notified day, of any goods specified in Part II of Schedule C and used by him within the State: (i).......................... (ii)........................ (2) For the purpose of this rule the expression export shall include- (i) and (ii).......................... (iii) Despatches made by the claimant dealer to his own place of business or to his agent outside the State where the claimant dealer produces certificate in form 31C issued by his manager, or as the case may be, his agent declaring, inter alia, that the goods will in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aggregate of the sums determined in accordance with the provisions of rule 44D. The assessee has challenged non-deduction of the amount of set-off under rule 41E for the purpose of computation of additional tax under section 15-A(1) of the Act. Section 15-A reads as follows: Here italicised. Section 15-A(1) of the BST Act: Levy of additional tax in the case of dealers whose turnover exceeds Rs. 10,00,000 a year.-(1) With effect from the 1st day of April, 1975, for the purpose of raising the resources for implementing the Employment Guarantee Scheme (under the Maharashtra Employment Guarantee Act, 1977), where the turnover of either of all sales or of all purchases by any dealer liable to pay tax under section 3 has exceeded ten lakhs of rupees in any year, the tax payable by him shall be increased by the levy of an additional tax at the rate of 6 per cent of the tax payable by him for that year under the other provisions of this Act. Such additional tax shall be paid by the dealer in addition to the tax levied and payable by him under the other provisions of this Act: The main points which are raised in the petition may be summarised as follows: (a) The validity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sub-rule (3)(a) of rule 41D which provides for a reduction from the aggregate of the sum of drawback, setoff or refund allowable to the dealer at the rate of 6 per cent from July 1, 1982, instead of at 5 per cent of the purchase price, although valid, can come into force only from the date of publication of Government notification dated August 10, 1983, and cannot have retrospective effect from July 1, 1982. It was held that section 42 of the Bombay Sales Tax Act, 1959, which enables the State Government to provide by rules for drawback, set-off or refund, etc., nor section 74 either specifically or by implication confers power to make rules with retrospective effect. In view of the said decision of the Division Bench [Tata Engineering and Locomotive Company Ltd. v. State of Maharashtra [1992] 86 STC 180 (Bom)], point (a) is answered in favour of the assessee. 3.. Re. point (b): In his assessment order the assessing authority did not allow set-off under clause (iii) of sub-rule (2) of rule 41D on the purchase of goods which were transferred to the assessee s branch at Silvassa on the ground that the said branch was not registered under the Central Sales Tax Act, 1956 ( the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rospectively. Exemption from tax was, however, granted under the second proviso to that section if tax had already been levied on the purchase of cashewnut out of which the kernel was produced, but the assessee had to produce declarations in form No. 25 in support of the claim for exemption. The question was whether during the period from 21st June, 1962 to 31st March, 1963, the assessee s purchase turnover of cashew kernel was, even in the absence of declarations in form No. 25, exempt from tax. It was held by the Kerala High Court that for the purpose of claiming exemption it was not reasonable to expect the assessee to produce the declaration in form No. 25 for an anterior period when there was no tax on the purchase of cashew kernel. Therefore, notwithstanding the retrospective operation of the Act, the assessee was not obliged to produce the declaration for the purpose of claiming exemption from tax under the second proviso to section 3(1). 5.. In the second judgment relied upon by Shri Jetley [Commissioner of Sales Tax v. Hindustan Silk Mills [1972] 29 STC 99 (Bom)], the Sales Tax Officer called upon the assessee to produce the declarations in the prescribed form or their d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef granted by the statute before the present amendment and lawfully enjoyed by the assessee during all these years and thereby imposing on the assessee an unjust, unmerited and accumulated huge financial liability, cannot be considered to be reasonable. Shri Jetley argues that the direct result of the amending Act will be that the assessee will be liable to suffer unforeseen and irrecoverable huge tax burden after a considerable lapse of time. Shri Jetley argues that by seeking to amend rule 41E retrospectively by a period of almost 8 years, the petitioners are precluded from passing on the extra tax burden to their customers. Shri Jetley argues that the withdrawal of relief lawfully granted and properly enjoyed by the assessees after this long lapse of time cannot be said to be in public interest and must be held to be unreasonable, arbitrary and violative of articles 14 and 19 of the Constitution. On the other hand, Shri Zambre submits that it was never the intention of the Legislature to grant the benefit of set-off to the scrap generated in the course of manufacture or to any by-product. However, in view of the judgment of this Court in Commissioner of Sales Tax v. Burmah Shell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lists can be exercised both prospectively and retrospectively. Where the Legislatures can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law but it can also provide for the retrospective operation of the said provisions. Similarly, there is no doubt that the legislative power in question includes the subsidiary or the auxiliary power to validate laws which have been found to be invalid. If a law passed by a Legislature is struck down by the courts as being invalid for one infirmity or another, it would be competent to the appropriate Legislature to cure the said infirmity and pass a validating law so as to make the provisions of the said earlier law effective from the date when it was passed. This position is treated as firmly established since the decision of the Federal Court in the case of United Provinces v. Mst. Atiqa Begum 1940 FCR 110; AIR 1941 FC 16. 10.. One of the contentions raised by Shri Jetley is that the assessee is almost precluded from passing the extra tax burden to their customers. In J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 STC 429; AIR 1961 SC 1534, the Supreme Court obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strictions upon the appellants right to carry on trade. It is, no doubt, true that every tax imposes some restriction upon the right to carry on a business; but it would not follow that the imposition of the tax in question is an unreasonable restriction upon the appellants fundamental right to carry on trade. Generally speaking, the amount or rate of tax is a matter exclusively within the legislative judgment and as long as a tax retains its avowed character and does not confiscate property to the State under the guise of a tax, its reasonableness is outside the judicial ken. But it was contended that as the dealer is prohibited from passing on the incidence of tax to the purchaser, the additional tax, unlike sales tax, is a tax on income of the dealer which he must pay whether he makes any profit or not and is, therefore, an unreasonable restriction on his fundamental rights under article 19(1)(g). The legal incidence of a tax on sale of goods under the Tamil Nadu General Sales Tax Act, 1959, falls squarely on the dealer. It may be that he can add the tax to the price of the goods sold and thus pass it on to the purchaser. But it is not necessary that the dealer should be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test . The Supreme Court further observed that we may have a statute whose retrospective operation covers a comparatively short period and yet it is possible that the nature of the restriction imposed by it may be of such a character as to introduce a serious infirmity in the retrospective operation. On the other hand, we may get cases where the period covered by the retrospective operation of the statute, though long, will not introduce any such infirmity . The Supreme Court further observed as follows: Take the case of a Validating Act. If a statute passed by the Legislature is challenged in proceedings before a court and the challenge is ultimately sustained and the statute is struck down, it is not unlikely that the judicial proceedings may occupy a fairly long period and the Legislature may well decide to await the final decision in the said proceedings before it uses its legislative power to cure the alleged infirmity in earlier Act. In such a case, if after the final judicial verdict is pronounced in the matter the Legislature passes a Validating Act, it may well co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on declared unconstitutional. When Parliament passes an amendment validating any provision which might have been declared invalid for some defect or lacuna, Parliament seeks to enforce its intention which was already there by removing the defect or lacuna.............. However, the withdrawal or modification with retrospective effect of the relief properly granted by the statute to an assessee which the assessee has lawfully enjoyed or is entitled to enjoy as his vested statutory right, depriving the assessee of the vested statutory right has the effect of imposing a levy with retrospective effect for the years for which there was no such levy and cannot, unless there be strong and exceptional circumstances justifying such withdrawal or modification, be held to be reasonable or in public interest. 17.. Shri Jetley also brought to our notice the decision of the Supreme Court in D. Cawasji Co. v.State of Mysore [1985] 58 STC 1; [1984] 150 ITR 648. In that case the Supreme Court observed that in the case before it, the State instead of remedying the defect or removing the lacuna has by the impugned amendment sought to raise the rate of tax from six-and-half per cent to 45 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, the ratio of this case may not be attracted inasmuch as the Legislature in the facts of the case before us, clearly seeks to remove the defect and lacuna after the judgment in Taparia s case. 18.. Shri Jetley next relied upon the judgment of the division Bench of the Calcutta High Court in Bengal Paper Mills Co. Ltd. v. Commercial Tax Officer, Calcutta [1976] 38 STC 163. The question which arose before the division Bench of the Calcutta High Court was whether the provisions of section 4 of the West Bengal Taxation Laws (Amendment) Acts of 1968 and 1969 giving retrospective operation to the definition of business was valid. The division Bench concluded that the amendment had sought to impose fresh taxes on transactions of certain types and on certain articles of merchandise with effect from the date of commencement of the statute, an unreasonably long period of time. In respect of periods prior to the insertion of section 64A in the Sale of Goods Act, 1930, it would not be possible for the dealers to recover from the buyers the tax sought to be imposed by the amending Act. As for the subsequent periods, the dealer might be entitled in law to recover sales tax but the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which fall under entry No. 6 of Schedule B to the Act. While the assessee produces predominantly motor vehicle chassis and spares thereof, scrap is also produced in the course of such manufacture, as a by-product and the scrap which is so produced is in fact sold by the assessee in the course of business. It was claimed before the assessing officer that the scrap which was so produced and sold also falls under the same entry No. 6 of Schedule B and, therefore, the assessee is entitled to avail of set-off under rule 41E read with rule 42 of the Rules. The assessee has relied upon the decision of the Tribunal in the case of Taparia Tolls Ltd. v. State of Maharashtra. The contention of the assessee was accepted by the assessing authority. However, the assessing authority calculated the set-off on the basis of the sales tax paid on the sale price instead of purchase price, as claimed by the assessee. The assessing officer has fixed the quantum of set-off allowable to the assessee at Rs. 5,81,000 as against the amount of Rs. 38,64,996 claimed by the assessee. The assessee has mainly challenged the method of calculation adopted by the assessing officer. It is contended that set-off h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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