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TMI Blog1997 (7) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the Kerala General Sales Tax Act, 1963, held that since cashew shells used by the assessee as fuel, did not go into the end-product and were not used as raw material in the manufacture of other goods. Purchase of such goods used only as fuel did not fall within section 5A(1)(a) of the Kerala General Sales Tax Act and did not therefore attract the tax payable thereunder. Relying upon the said pronouncement, applications were made by the petitioner purporting to be under section 25A of the Karnataka Sales Tax Act, seeking rectification of the orders of assessment for five assessment years commencing 1979-80 to 1983-84. These applications were by an endorsement dated 11th October, 1988, rejected by the A.C.T.O. on the ground that Karnataka Taxation Laws (Amendment) Act, 1988 (Karnataka Act No. 8 of 1989) had retrospectively amended section 6 of the Act, in the light whereof there was no question of either rectifying the orders in question or directing any refund of the tax already paid. Aggrieved, the petitioner has filed the present writ petition assailing the constitutional validity of the amendment, inter alia, on the ground that the same was beyond the legislative competenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Amendment of Karnataka Act 25 of 1957.-In the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957),- (1) in section 5, in sub-section (1A), in the second proviso,- (i) for the figures and words 31st day of May, 1988 the figures and words 31st day of July, 1988 shall be and shall be deemed always to have been substituted; (ii) the words at the rate of forty-five per cent shall be and shall be deemed always to have been omitted. (2) in section 6,- (a) in clause (i), after the words sale or otherwise , the words and the punctuation mark or consumes otherwise, shall be inserted; (b) at the end, the following explanation shall be deemed to have been inserted with effect from the first day of April, 1970, namely: Explanation.-For the purpose of this section consumes such goods in the manufacture shall include goods consumed for ancillary purposes in or for such manufacture . 6.. It is apparent from the above that with the addition of the words or consumes otherwise in clause (i) of section 6 and the addition of the explanation at the end of the provision even such of the goods as were not consumed, in the manufacture of other goods, but were consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 1 (SC); AIR 1991 SC 1806. Keeping in view the language employed in the explanation added by the amending provision, as also the background in which the addition, Legislature intended by the said provision to extend the meaning of the expression consume such goods in the manufacture of other goods , even to such goods as did not actually result in production of other goods for sale or otherwise but were all the same used for a purpose ancillary to any such manufacture. For instance firewood purchased by the petitioner even though consumed as fuel for manufacture of other goods does not itself go into such manufacture. It only serves an ancillary purpose, namely, the purpose of consumption as fuel which may be essential for manufacture of other goods for sale but which does not in itself go into such manufacture. The extended meaning given to the words consume such goods in the manufacture of other goods by the explanation does not however, change the nature of the levy under section 6 of the Act. The levy continues to be one on purchases of goods, in the circumstances in which no tax under section 5 is leviable on the price thereof. The crucial expression in the charging secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion the relevant facts and circumstances, in which a retrospective legislation was considered necessary. Where retrospective legislation in the form of validating Acts, are resorted to by the Legislature in fiscal enactment the courts have upheld such measures as small repairs that become necessary and are frequently resorted to. Reference can in this regard be made to: (1) Assistant Commissioner of Urban Land Tax, Madras v. Buckingham and Carnatic Co. Ltd. [1970] 75 ITR 603 (SC); (2) Utkal Contractors and Joinery Pvt. Ltd. v. State of Orissa AIR 1987 SC 1454; (3) Hira Lal Rattan Lal v. Sales Tax Officer, Section III, Kanpur [1973] 31 STC 178 (SC); AIR 1973 SC 1034 and (4) Epari Chinna Krishna Moorthy v. State of Orissa [1964] 15 STC 461 (SC); AIR 1964 SC 1581. 9.. In the instant case, the necessity to amend the provisions of section 6 arose on account of the decision handed down by the Supreme Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Thomas Stephen Co. Ltd. [1988] 69 STC 320, where while interpreting an analogous provision in the Kerala Act, the court declared that goods like cashew shells used as fuel in the kiln could not be dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent to 45 per cent with retrospective effect is in the facts and circumstances of the case clearly arbitrary and unreasonable. The defect or lacuna is not even sought to be remedied and the only justification for the steep rise in the rate of duty by the amended provision is to nullify the effect of the binding judgment. The vice of illegal collection in the absence of the removal of the illegality which led to the invalidation of the earlier assessments on the basis of illegal levy, continues to taint the earlier levy. In our opinion, this is not a proper ground for imposing the levy at the higher rate with retrospective effect. It may be open to the Legislature to impose the levy at the higher rate with prospective operation but levy of taxation at higher rate which really amounts to imposition of tax with retrospective operation has to be justified on proper and cogent grounds. The last four lines of passage extracted above, heavy reliance whereupon was placed by Mr. Gandhi, have therefore to be understood in the context in which the same appear in the decision. So also, reliance placed upon the judgment of the Calcutta High Court in Bengal Paper Mill Co. Ltd. v. Commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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