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TMI Blog1999 (9) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that at any point of sale other than first point of sale and the last point of sale, the taxable turnover shall be arrived at by deducting the turnover of such goods on which tax has been levied under this sub-section at the immediately preceding point of sale." 2.. In the case of Sri Vinayaka Agency v. State of Karnataka [1996] 102 STC 404 (Kar) clarification issued by the Commissioner of Commercial Taxes on the interpretation of first proviso to section 5(1-A) of the Act came for consideration before this Court and it was interpreted that the amount collected by way of sales tax by the registered dealer and paid over to the State Government could be included by the registered dealer in the sale price of the goods sold and the amount was liable to be given deduction while arriving at the taxable turnover of the dealer. The expression "turnover" used in the first proviso to section 5(1-A) was interpreted to include the amount of sales tax collected by selling dealer. This interpretation was given on August 18, 1995. By Act No. 1 of 1996 the following explanation was added beside the validation of the assessments already made: "Explanation.-For the purpose of this proviso 't ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the competence of the State Legislature to enact the law with retrospective effect was examined and objection raised were found of no substance and accordingly the writ petitions were dismissed. 4.. Before us the competence of the State Legislature to make changes in the charging section is not challenged but it is submitted that the explanation has the effect of levying the tax on the tax element which is part of turnover and it is not a case of omission or filling up any lacuna pointed out by this Court but it is a fresh levy. It is further submitted that the amendment is unreasonable and in any case, the Legislature should have given the relief to those dealers who have not collected the tax from the date of the decision of this Court dated August 18, 1995 (Sri Vinayaka Agency v. State of Karnataka [1996] 102 STC 404) till the legislative change was made by Act No. 1 of 1996. 5.. Learned counsel for the appellant have relied on the decision given in the case of Bengal Paper Mill Co. Ltd. v. Commercial Tax Officer, Calcutta [1976] 38 STC 163 (Cal) and Shew Bhagwan Goenka v. Commercial Tax Officer [1973] 32 STC 368 (Cal), where the amendment to definition of "business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is to remove the defect in phraseology or lacuna of the nature pointed out by the court and also to validate the proceedings including realisation of tax which have taken place in pursuance of the earlier enactment which have been found by the court to be vitiated by an infirmity. Such an amending and validating Act in the very nature of thing has a retrospective operation. For "small repairs", 73 Harvard Law Review 692 at page 705 was referred and it was observed: "It is necessary that the Legislature should be able to cure inadvertent defects in statutes or their administration by making what has been aptly called 'small repairs'. Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since had the legislature's or administrator's action had the effect it was intended to and could have had, no such right would have arisen. Thus, the interest in the retroactive curing of such a defect in the administration of Government outweighs the individual's interest in benefiting from the defect.......The court has been extremely reluctant to override the legislative judgment as to the necessity for retrospective taxation, not only bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C); AIR 1963 SC 1667, a contention was raised that the date when a particular Act was declared ultra vires on December 12, 1960 and subsequently an Ordinance is brought to validate the actions on August 1, 1961. It was observed by the apex Court that it must be realised that in such a situation there would be some time lag between the date when the particular Act is struck down as unconstitutional and the date on which a retrospective validating Act is passed. About the period to be covered, by the validating Act, it was observed that: "We do not think that such a mechanical test can be applied in determining the validity of the retrospective operation of the Act. It is conceivable that cases may arise in which the retrospective operation of a taxing or other 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, necessarily be a decisive test. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined with reference to the power of the Legislature. The consequence and effects of the legislation are not the same thing as the legislative subject-matter. It is the true nature and character of the legislation and not its ultimate economic result that matters. 14.. In Venkateshwara Theatre v. State of Andhra Pradesh [1995] 96 STC 130 (SC) change in measure of tax from percentage of actual payments for admission to percentage of gross collection capacity does not alter nature of tax and levy of tax was held within the competence of State Legislature. It was observed that the tax has two distinct elements, viz., subject of the tax and the measure of the tax. The subject of the tax is the person, thing or activity on which the tax is imposed, and the measure of the tax is the standard by which the amount of tax is measured. The competence of the Legislature to enact a law imposing a tax under a particular head of the legislative List has to be examined in the context of the subject of the tax. If the subject of the tax falls within the ambit of the legislative power conferred by the head of the legislative entry, it would be within the competence of the Legislature to impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t were not able to collect the tax which they were entitled to realise under section 18 of the KST Act. Reliance is placed on the judgment given in the case of Maneka Gandhi v. Union of India AIR 1978 SC 597, Tata Cellular v. Union of India AIR 1996 SC 11. It is submitted that the principles enunciated in the case of Meeruth Development Authority v. Satbir Singh AIR 1997 SC 1467 and Indian Aluminium Co. v. State of Kerala (1996) 2 JT SC 85, have not been followed. The collection of the tax being an integral part with the scheme of the KST Act, it cannot be divorced from by inserting section 5(1-A) with retrospective effect. The provisions of article 14 of the Constitution are also violated as the rights of the appellant have been infringed by the disproportionate imposition of tax and ignoring the prevailing conditions at the time and judicial verdict was given. Reliance is placed on the judgment given in the case of Love v. Norman Wright (Builders) Ltd. [1944] 1 All ER 618, where it was observed: "Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an oun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed: 'judicial review' is a great weapon in the hands of the Judges; but the Judges must observe the constitutional limits set by our parliamentary system upon the exercise of this beneficient power." After considering the various judgments it was observed that as under: "113. The principles deducible from the above are: (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fairplay in the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermeates to fulfil constitutional objectives of establishing an egalitarian social order, the respective sovereign functionaries need free-play in their joints so that the march of social progress and order remain unimpeded. The smooth balance built with delicacy must always be maintained. (5) In its anxiety to safeguard judicial power, it is unnecessary to be overzealous and conjure up incursion into the judicial preserve invalidating the valid law competently made; (6) The court, therefore, need to carefully scan the law to find out: (a) whether the vice pointed out by the court and invalidity suffered by previous law is cured complying with the legal and constitutional requirements; (b) whether the Legislature has competence to validate the law; (c) whether such validation is consistent with the rights guaranteed in Part III of the Constitution. (7) The court does not have the power to validate an invalid law or to legalise impost of tax illegally made and collected or to remove the norm of invalidation or provide a remedy. These are not judicial functions but the exclusive province of the Legislature. Therefore, they are not the encroachment on judicial power. (8) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judiciary to decide it with reference to the law in force. 24.. In Meeruth Development Authority v. Satbir Singh AIR 1997 SC 1467, validity of the Act during the pendency of the appeal before the Supreme Court was held not invalid. 25.. This Court in the case of Amaravathi Wines v. Deputy Commissioner of Commercial Taxes ILR 1997 Kar 875 examined the effect of explanation added to the provisions to nullify the court's interpretation and held that retrospectivity could be given. It has not merely added the explanation but by specific proviso retrospectivity has been given and therefore even the scope of the explanation is not to be examined. 26.. The purpose of framing this legislation, i.e., 5(1-A) was to levy the tax on every sale and to give a set-off of the tax paid on previous sale. This Court has taken the interpretation that the set-off of the tax paid also on the previous sale is permissible. By the amendment it is sought to be made clear that set-off to the extent of tax paid will not be permissible. It cannot be disputed that the Legislature has plenary powers to define the turnover or the taxable turnover or even the computation thereof. The constitutional prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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