9911796707
TMI Blog2004 (8) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... or a writ of prohibition, restraining the first respondent from proceeding further for recovery of tax pursuant to the impugned order dated December 14, 1999 passed for the assessment year 1996-97 under section 18-AA(2)(ii) read with section 9(2) of the Central Sales Tax Act, 1956 along with the accompanying demand notice dated December 16, 1999 vide annexure C. 2. The brief facts of the case are as follows: It is not in dispute that, the petitioner is a public limited company and a registered dealer under the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the KST Act") and the Central Sales Tax Act, 1956 (hereinafter referred to as "the CST Act"). The petitioner had filed its annual returns in prescribed form No. 4 which discloses their total and taxable turnover respectively, for the assessment year 1996-97. The first respondent herein issued a call notice as envisaged under section 27(1) read with section 18(2) of the KST Act, calling upon the petitioner to produce the books of accounts in order to verify the correctness of their returns. The petitioner produced its books of accounts, sales bills and other connected documents. After thorough evaluation of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or their products as end-products or by-products was reduced to 1 per cent as per Notification dated 22nd August, 1983. After nearly twenty-one days from the date of issue of the proposition notice, the petitioner filed reply and paid up the amount of CST and the excess collection aggregating to Rs. 15,16,122 by cheques and it is their case that, they have not retained any amounts or utilised them for any other purpose. The assessing authority held that, the collection of CST in excess of the prescribed rate of tax constituted contravention of section 18 of the KST Act read with section 9(2) of the CST Act and regularised the payment of Rs. 15,16,122 made by the petitioner earlier. Further the assessing authority has invoked clause (ii) of sub-section (2) of section 18-AA of the KST Act, and passed the order under the above provisions levying interest of Rs. 13,92,589 and issued demand notice in form 6 dated December 16, 1999 demanding payment of interest. Assailing the correctness of the order passed by the first respondent vide annexure C and levy of interest as per demand notice in form 6, and also challenging the provisions of sub-clause (ii) of sub-section (2) of section 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amendments to section 9 of the CST Act were introduced by section 119 of the amendment Act. Section 119 of the amendment Act has not been given any retrospective effect. Only sections 2 to 77 according to Chapter I Preliminary (2), were given retrospective effect from April 1, 2000. Further, he submitted that, the expressions used for amendments to section 9 in the Finance Act, 2000, are also that "shall be substituted", "shall be inserted" and not "shall always be deemed to have been substituted/inserted" to give the amendments any retrospective effect. Therefore, he specifically submitted that, as per the expression used for amendments introduced to section 9 of the CST Act by the Finance Act, 2000 (Central Act No. 10 of 2000) all the amendments are only with prospective effect and not retrospective. To substantiate his submission, he placed reliance on the following judicial pronouncements for an amendment with retrospective effect and submitted that it is not enough that only a validation clause is inserted but the first and foremost requirement is that, the provision of the Act which is amended is given retrospective effect. (i) Gill and Company (P.) Limited v. Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment is liable to be struck down as unconstitutional and violative of article 19(1)(g) of the Constitution of India. 8.. The learned Senior Counsel appearing for the petitioner placed reliance on the judgment of the honourable Supreme Court of India in the case of Bakhtawar Trust v. M.D. Narayan reported in AIR 2003 SC 2236, in which, the relevant portion of the judgment rendered in the case of Hindustan Gum Chemicals Ltd. v. State of Haryana (1985) 4 SCC 124 is extracted, reads as follows: "It is now well-settled that it is permissible for a competent Legislature to overcome the effect of a decision of a court setting aside the imposition of a tax by passing a suitable legislation amending the relevant provisions of the statute concerned with retrospective effect, thus taking away the basis on which the decision of the court had been rendered and by enacting an appropriate provision validating the levy and collection of tax made before the decision in question was rendered." Therefore, he submitted that, it is open for the legislation to change the very basis of the provision retrospectively and to validate the levy and collection of tax. However, he submitted that this f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the petitioner in the case of India Carbon Limited [1997] 106 STC 460 (SC), is not at all applicable to the facts of the case on hand. He submitted that, in the absence of any substantive provision for collection of interest, the Parliament has enacted amendment to section 9(2) of the CST Act by Act No. 10 of 2000 as section 9(2-A) of the CST Act with retrospective effect. This retrospective effect was given to the said Act with regard to collection of interest, which is just, reasonable and justifiable for the reason that, no dealer/person can unjustly enrich himself and be deemed to have the right to retain and enjoy the taxes collected in contravention of the relevant taxing provisions at the cost of the State without paying any interest on the taxes so retained and withheld by the dealers as to whether for the past or for the current year. Therefore, there is no unreasonableness in demanding the interest on the amount withheld or retained unjustly by the petitioner without any authority of law for any period. 10.. Further, he vehemently submitted that, the dealer concerned obviously gets enriched at the cost of the consumer and in the name of the State. To cover this infl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand notice dated December 16, 1999 issued are sustainable in law? (iii) Whether it is permissible for the petitioner to question the impugned retrospective amendment made in 1992 to section 18-AA of the KST Act at this belated stage when he was very much aware of the said retrospective amendment made in 1992 to the said Act? Re: Question (i): On the arguments of the learned counsel appearing for the parties, the question that arise for consideration is as to whether the Karnataka Legislature by the impugned amended provision has purported to nullify the judicial pronouncements per se and therefore, whether such an Act is ultra vires the competency of the State Legislature? Here, it would be pertinent to advert to the relevant provisions of the Karnataka Sales Tax Act which read as follows: Provisions of section 18-AA inserted by Karnataka Act No. 4 of 1992 with effect from April 1, 1992 are extracted below. "18-AA: Payment and disbursement of amounts wrongly collected by dealer as tax. (1) Where any amount is collected by way of tax or purporting to be by way of tax from any person by any dealer in contravention of section 18, whether knowingly or not, such dealer shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est is payable on delayed remittance of amounts unauthorisedly collected by way of KST and in the instant case, it is not in dispute that the petitioner has collected sales tax from the customers at the rate of four per cent thus contravening the provision of section 18(1) of the KST Act read with section 9(2) of the CST Act. Further, it is not in dispute that, the amendment brought by Parliament to section 9 of the CST Act introduced by Central Act No. 10 of 2000 was retrospective in nature from May 12, 2000. The said amendment has been brought by Parliament in the absence of any clause for payment of interest on delayed payment of interest giving retrospective effect from December 5, 2000 and taking into consideration the law laid down by the Supreme Court of India in India Carbon Limited case [1997] 106 STC 460 and that will come into force after receiving the assent of the President of India. The apex Court has held in the case of India Carbon Limited [1997] 106 STC 460, that, collection of interest was not provided by any substantive provision under the Central Sales Tax Act. In the absence of such substantive provision, the provision under local Act entitles the State to reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.. In the case of Kanthi Enterprises [2002] 128 STC 182, the honourable Supreme Court has held that, the retrospective provision by the Legislature is permissible and that a registered dealer cannot collect any tax more than what he would be liable to pay. The relevant portion reads as hereunder: "It is settled position that, the legislature can impose tax retrospectively though it cannot be arbitrary and unreasonable. At the first sight, it appears that, the explanation which was inserted on March 5, 1996 retrospectively with effect from April 1, 1998, casts burden of payment of tax for about eight years on the appellants. But, on a closer scrutiny, it becomes clear that, till August 18, 1995, (the date of pronouncement of High Court judgment), they could have and in fact collected the tax. The explanation was inserted on March 5, 1996 so, in effect, the retrospectivity which really affects them, is only for about six months. Even if they have not passed on burden of tax to the customers during that period, the effect cannot be said to be so unreasonable, arbitrary and harsh as to invalidate the explanation. Such occasional hiccups are not unusual incidents of business. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture possesses the competence which it claims over the subjectmatter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the validating law or for a valid imposition of the tax." "Para. 18. In State of Mysore v. Fakrusab Babusab Karanondi [1977] 2 SCR 544 at 546, it was held: It is now settled law that when a legal fiction is enacted by the Legislature, the court should not allow its imagination to boggle but must carry the legal fiction to its logical extent and give full effect in it .........." "Para. 20. In the case of Vijay Mills Company Ltd. v. State of Gujarat reported in (1993) 1 SCC 345 at 357, it was held: '18. From the above, it is clear that there are different modes of validating the provisions of the Act retrospectively, depending upon the intention of the Legislature in that behalf. Where the Legislature intends that the provisions of the Act themselves should be deemed to have been in existence from a particular date in the past and thus to validate the actions taken in the past as if the provisions concerned were in existence from the earlier date, the Legislature makes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that by no stretch the courts can interfere with a legislative malice in passing a statute. Interference is restrictive in nature and that too on the constitutionality aspect and not beyond the same'." "Para. 32. In the case of T. Venkata Reddy v. State of Andhra Pradesh (1985) 3 SCC 198 and Gurudevdatta VksSs Maryadit v. State of Maharashtra (2001) 4 SCC 534, it has been laid down that '..............the intention of the Legislature in enacting a particular statute is immaterial in terms of the question relating to its validity. The intention of the Legislature in passing of a particular statute is beyond the pale of judicial review. In the present matter, the supposedly nebulous intention of the Legislature to defeat the judicial process is, therefore, outside the bounds of our consideration'." In the case of Bakhtawar Trust AIR 2003 SC 2236 at paragraph 31, it is observed thus: "31. It was then urged on behalf of the respondents that a perusal of the Statement of Objects and Reasons for the Validation Act shows that the intention of the Legislature was rather to render the decision of the High Court infructuous than to correct any infirmity in the legal position. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the commodities as stated supra. Accordingly, a proposition notice was issued and the petitioner has given reply to the said notice stating that the tax of the above mentioned items under section 8(5) of the CST Act has been reduced to 1 per cent as per Notification No. FD 122 CSL 82(ii) Bangalore, dated 22nd August 1993 and has been cancelled with effect from April 1, 1997, "C" forms were not required. Considering the said stand taken by the petitioner in its reply, the first respondent has issued the revised form 31-A intending to propose tax for the said items at the rate of twelve per cent on item Nos. 1 to 7 and 9 as the rate of sales tax payable by the petitioner was two per cent. Whereas the petitioner had collected sales tax from its customers at the rate of four per cent thus contravening the provisions of section 18(1) of the KST Act read with section 9(2) of the CST Act as rightly pointed out by the learned Government Advocate appearing for respondents in her statement of objections. By virtue of such collection, the petitioner has illegally and unjustly enriched itself and retention of such excess tax collected by the petitioner without paying it over to the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... honourable Supreme Court of India in the case of Rup Diamonds v. Union of India reported in AIR 1989 SC 674, the relief sought for by the petitioner is liable to be rejected on the ground of delay and laches also. Paragraphs 8 and 9 of the said judgment read thus: "Para 8. ..............there is one more ground which basically sets the present case apart. Petitioners are re agitating claims which they had not pursued for several years. Petitioners were not vigilant but were content to be dormant and chose to sit on the fence till somebody else's case came to be decided. Their case cannot be considered on the anology of one where a law had been declared unconstitutional and void by a court, so as to enable persons to recover monies paid under the compulsion of a law later so declared void. There is also an unexplained, inordinate delay in preferring this writ petition which is brought after almost an year after the first rejection. From the orders in P. Ripal Kumar and Co's case (1988) 37 ELT 517 (Bom) and H. Patel Co's case (W.P. No. 1465 of 1984 Bombay High Court) it is seen that in the former case the application for revalidation and endorsement was made on March 12, 1984 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided under the law and relevant Rules. Under law, the petitioner has got an alternative, efficacious and effective remedy by way of filing an appeal before the appellate authority. The petitioner, without exhausting the alternative, effective and efficacious remedy available to it under the provisions of the Act, has approached this Court. Hence, in view of the well-settled law laid down in host of judgments by the honourable Supreme Court as well as this Court, the petitioner cannot seek for any relief on this ground also. 20.. In the instant case, there is no dispute that the petitioner has collected the tax at the rate of four per cent contrary to the permissible limit and enjoyed the said amount from the assessment year 1996-97 till 2000 without remittance of the same to the Government. Hence, such persons are not entitled to take any benefits accrued in view of the subsequent law laid down by the apex Court. 21.. Having regard to the facts and circumstances of the case, as stated above, and having regard to the factual legal aspect of the matter, as stated supra, I do not find any good grounds to entertain the instant writ petition. Accordingly, the writ petition filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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