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TMI Blog2009 (11) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... that in so far as the rate of tax in respect of declared goods in excess of the rate as provided under section 15 of the Central Sales Tax Act will be unconstitutional, we hold that the ninth proviso added to section 6(1)(f) being clarificatory in nature and in that context it will be effective from the date on which section 6(1)(f) was brought into force and thus save the provision from being ultra vires of the Constitution and consequently we declare the rate of tax applicable to declared goods shall always be at the same rate as provided under the CST Act and that prescription of uniform rate of tax in the transfer of goods and execution of works contract where transfer is not in the form of goods but in some other form at the rate of 12.5 per cent and when the transfer is in the form of goods at the rate prescribed for the respective Schedules, is legal and valid. - W.A No. 566 of 2007 - - - Dated:- 23-11-2009 - RAMAN P.R. AND RAMACHANDRA MENON P.R. , J. The judgment of the court was delivered by P.R. RAMAN J. The challenge made in this batch of writ petitions/writ appeal is against the amendment brought about to section 6(1)(f) of the Kerala Value Added Tax Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the Special Committee and after discussion, some recommendations were made and finally, the Act was passed incorporating the provision under challenge with retrospective effect. So however, he justified the amendment with retrospective effect, to which we will refer to later. Since the basis on which the writ petition was disposed of having arisen out of a mistaken fact, necessarily we will have to consider the contentions raised in the said writ petition on its merits. The main prayer in the writ petition is to declare section 6(1)(f) of the KVAT Act as unconstitutional in so far as it imposes levy of tax at 12.5 per cent in the execution of works contract and transfer is not in the form of goods though goods are not separately assessable and for further consequential reliefs. In W.P. (C) No. 30027 of 2007 there is a further prayer to declare that section 6(1)(f) as amended by Act 22 of 2006 is ultra vires and unconstitutional in so far as it permits levy of tax on transfer of value of declared goods involved in the execution of works contracts at a rate more than four per cent. Similar prayer is made in W.P. (C) No. 28436 of 2009 and W.P. (C) No. 4125 of 2008. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods involved in the execution of works contract, where the transfer is not in the form of goods but in some other form, where the goods incorporated in the work are separately ascertainable, at the rates applicable to the goods and (iii) where the goods incorporated in the work are not separately ascertainable, at the rate of 12.5 per cent at all points of sale. The Legislature, by a subsequent amendment, added one more proviso after the eighth proviso which provides that the tax payable under clause (f), in respect of transfer of declared goods not in the form of goods but in some other form, shall be at the rates prescribed under the respective Schedules. This proviso was added by Act 21 of 2008 with effect from April 1, 2008, whereby the contention that even in the case of declared goods, prescription of a uniform rate at 12.5 per cent over the rate as prescribed under the Central Sales Tax Act as illegal was remedied. But this proviso was not given any retrospective effect. Therefore, for the period prior to the insertion of the aforesaid proviso, the contention as advanced still remains to be considered. The appellant in W.A. No. 566 of 2007 is the petitioner in W. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect. The petitioner in W.P. (C) No. 11391 of 2008 is a contractor in electrification works and is a dealer registered under the KVAT Act. He filed returns and paid tax under section 6(1)(f) at the rates applicable to the goods used in the execution of works contract, separately ascertainable at the rate of four per cent and 12.5 per cent, respectively and by virtue of the amendment, the tax is imposed at a uniform rate at 12.5 per cent. It is also contended that there is no proposal either in the original or revised Finance Bill for amending section 6(1)(f) as is now done. A substantive provision which enhances the liability, therefore, according to him, cannot be given retrospective effect. He has produced exhibit P1, a copy of the works order issued to him by one of the awarder, M/s. Pioneer Infrastructures Company (P) Ltd., and it is contended that the rate is inclusive of the tax so that once the contract is executed, if retrospectivity is given by increasing rate of tax, it will cause undue hardship to him. However, on a perusal of exhibit P1, at the outset we may state that one of the conditions under clause 5 is to the effect that the rates are inclusive of all taxes e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, which is generally applicable to all sales including the transfer, supply or delivery of goods which are deemed to be sales under clause (29A) of article 366 of the Constitution. If any declared goods which are referred to in section 14 of the Central Sales Tax Act, 1956 are involved in such transfer, supply or delivery, which is referred to in clause (29A) of article 366, the sales tax law of a State which provides for levy of sales tax thereon will have to comply with the restrictions mentioned in section 15 of the Central Sales Tax Act, 1956. Clause (b) is an additional provision which empowers Parliament to impose any additional restrictions or conditions in regard to the levy of sales tax on transactions which will be deemed to be sales under sub-clause (b) or sub-clause (c) or subclause (d) of clause (29A) of article 366 of the Constitution. . . Though the State had urged a contention that since sub-clause (b) of clause (3) of article 286 of the Constitution refers only to the transactions referred to in sub-clauses (b), (c) and (d) of clause (29A) of article 366, the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han [1993] 88 STC 204 (SC) the same question as to whether it is permissible for the State Legislature to levy tax on deemed sales falling within the ambit of article 366(29A)(b) by prescribing a uniform rate of tax for all goods involved in the execution of a works contract, even though different rate of tax are prescribed for sale of goods, arose for consideration. On behalf of the contractors, it was urged that it will not be permissible to impose two different rates of tax in respect of the sale of the same article, one rate when the article is sold separately and a different rate when there is deemed sale in connection with the execution of a works contract. The State, however, sought to justify the levy of a uniform rate of tax to the goods involved in the execution of a works contract though the rate of tax may be different as may be applicable to those goods when sold separately. The apex court observed that in the field of taxation, going by the various decisions, the Legislature is permitted to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es enumerated thereunder. The imposition, abolition, remission, alteration or regulation of any tax is one such matter. Therefore, as per article 207(1) read with article 199, there admits no doubt that, any Bill or amendment making provision for imposition of tax shall not be introduced except on the recommendation of the Governor. But as rightly pointed out by the Special Government Pleader, article 255 is a curative provision and the absence of any recommendation made by the Governor by itself will not invalidate any Act of Parliament or the State Legislature, or any provisions contained in such Act shall be invalid if subsequently assent to the Act was given where the recommendation required was either by Governor or the President. In this case, the Amendment Act has been assented to by the Governor. A Constitution Bench of the honourable Supreme Court in Jawaharmal v. State of Rajasthan AIR 1966 SC 764 held thus: The next question to consider is whether an Act which suffers from the infirmity that it does not comply with the requirements of article 255, can be validated by subsequent legislation. There are two answers to this question. Article 255 provides, inter alia, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no Act of parliament or of the Legislature of a State and no provision in any such Act shall be invalid by reason only that some recommendation or previous sanction required by the Constitution was not given if assent to that Act was given by the President. Now, in this case it is common ground that the President did accord his sanction to the impugned Act. Therefore, the requirement of the proviso is satisfied. In the light of the discussion as above and in the light of the aforesaid decisions of the apex court and the clear provisions contained under article 255 of the Constitution of India and when the Governor has assented to the enactment in terms of article 200 of the Constitution, we find no merit in the contention that merely because prior recommendation or assent was not obtained, there is any infirmity in the Act. The next question to be considered is as to whether there is any merit in the contention that a taxing statute cannot be given retrospective effect. The contention raised on behalf of the petitioners is that sales tax is an indirect tax realisable from the consumer and the idea being that the seller can pass it on to his purchaser and collect it from them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us is that the legislative power conferred on the appropriate Legislatures to enact law in respect of topics covered by the several entries in the three Lists can be exercised both prospectively and retrospectively. Where the Legislature 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. . . Another Constitution Bench of the apex court in Jawaharmal v. State of Rajasthan AIR 1966 SC 764 has held thus: It is well recognised that the power to legislate includes the power to legislate prospectively as well as retrospectively, and in that behalf tax legislation is no different from any other legislation. If the Legislature decides to levy a tax, it may levy such tax either prospectively or even retrospectively. When retrospective legislation is passed imposing a tax, it may, in conceivable cases, become necessary to consider whether such retrospective taxat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A competent Legislature can always validate a law which has been declared by courts to be invalid, provided the infirmities and vitiating factors noticed in the declaratory judgment are removed or cured. Such a validating law can also be made retrospective. If in the light of such validating and curative exercise made by the Legislature granting legislative competence the earlier judgment becomes irrelevant and unenforceable, that cannot be called an impermissible legislative overruling of the judicial decision. All that the Legislature does is to usher in a valid law with retrospective effect in the light of which earlier judgment becomes irrelevant. . . Such legislative expedience of validation of laws is of particular significance and utility and is quite often applied in taxing statutes. It is necessary that the Legislature should be able to cure defects in statutes. No individual can acquire a vested right from a defect in a statute and seek a windfall from the Legislature's mistakes. Validity of legislations retroactively curing defects in taxing statutes is wellrecognised and courts, except under extraordinary circumstances, would be reluctant to override the legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their purchasers. In D.G. Gouse and Co. (Agents) Pvt. Ltd. v. State of Kerala AIR 1980 SC 271 a Constitution Bench of the apex court, held as follows: 13. We may as well put aside the other argument that the Act is unconstitutional as it was passed on April 2, 1975 but has imposed a tax on buildings with retrospective effect from April 1, 1973. 14.. Craies on Statute Law, Seventh Edition, has stated the meaning of 'retrospective' at page 387 as follows: 'A statute is to be deemed to be retrospective, which takes away or impairs any vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect of transactions or considerations already past. But a statute is not properly called a retrospective statute because a part of the requisites for its action is drawn from a time antecedent to its passing . It has however not been shown how it could be said that the Act has taken away or impaired any vested right of the assessees before us which they had acquired under any existing law, or what that vested right was. It may be that there was no liability to building tax until the promulgation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that it imposes any hardship and that any unreasonable restriction to carry on the trade is imposed. On the part of the State, it is contended that though the proposed amendment was not in the form of a Bill presented earlier, it is however maintained that when the matter was referred to the subject committee, the subject committee after deliberation submitted certain recommendations and it was accordingly, that the amendment was brought out. As already pointed out earlier, the assent of the Governor having been obtained, there is no infirmity affecting the validity of the enactment in the light of article 255 of the Constitution of India. So also, the period of three months from July 1, 2006 to October 24, 2006 is not a period to be reckoned with, to say that the retrospectivity has caused much undue hardship or unreasonable restriction. Whenever a legislation is assailed on the ground of imposing unreasonable restriction, it is for the person who assails it as discriminatory to establish that it is not based on a valid classification and the burden is heavier in the field of taxing statute. In this case, going by the averments made in the writ petition and the exhibits produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t we have considered this aspect only in the background of the plea raised as against retrospectivity. Even though in W. A. No. 566 of 2007 arising from the judgment in W.P. (C) No. 4568 of 2007, it is contended that the amount of tax liable to be paid after the amendment is five times of the tax paid earlier for the quarter April 1, 2006 to June 31, 2006 under the pre-amendment Value Added Tax Act, as we have already stated, the quantum of tax that is imposed by giving retrospective effect, no doubt, may cause an additional burden on the taxpayer. But as already held, there is no equity in taxation and the amount of tax that has to be paid in no way can be said to be an expropriation of property. Further, this is in the realm of a works contract. As already held by the apex court in one of the decisions referred to earlier, it is open to the taxpayer either to bear it himself rather than passing it to the ultimate consumer or it may be a case where still after the amendment it could be revised, provided such claim is raised within the period of limitation and subject to the contract. Unless it is shown that within a period of three years any such claim is raised for such r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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