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TMI Blog1994 (1) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... in non-mechanised sector the duty was ₹ 4.50p. By Notification No. 99 of 1980, a further distinction was made among the units in non-mechanised sector. Factories recommended by the Khadi and Village Industries Commission for exemption under this notification as a bona fide cottage unit or which was a member of a cooperative society was held entitled to pay duty at the rate of ₹ 1.60p per gross. There were, however, two other conditions which these factories had to satisfy, viz., (i) their matches are sold through KVIC or a cooperative society and (ii) their matches are cleared under the labels prescribed by the KVIC and approved by the appropriate officer of the Excise Department. (Vide Provisos 1 to 3 appended to the said Notification No. 99 of 1980). It would be appropriate to read the notification, insofar as it is relevant: In exercise of the powers conferred by subrule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts matches, in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power, falling under Item No. 38 of the First Schedule to the Central Excises and Salt Act, 1944 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to eligible units; (2) that KVIC had no authority in law to impose conditions which were not provided by the notifications issued by the Central Government under Rule 8 of the Central Excise Rules; (3) that while the KVIC was insisting upon a ceiling on the production of matches for new applicants, it was not observing the said condition in the case of those units who had already obtained certificates from it. This brought about a discrimination between similarly placed units. 4. The mandamus issued by the High Court is in the following terms: There will be a writ of mandamus directing the respondents to give the benefit of Notification No. 99 of 1980 without reference to the first and the second provisos to the notification. However, it is made clear that this order will be applicable only to those petitioners who have filed the writ petitions. This order also is subject to the further conditions that the Government is at liberty to reject the concession in cases where the respondents to these writ petitions come to the conclusion on materials that such and such a petitioner is not a bona fide unit, in the sense, that it was either non-existent or fictitious unit, or tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals, it would be appropriate if we read Notification No. 22 of 1982 as well as Section 52 here: NOTIFICATION 22/1982 GOVERNMENT OF INDIA (MINISTRY OF FINANCE - DEPARTMENT OF REVENUE) Notification No. 22 of 1982 Central Excise Dr. 23-2-1982 G.S.R. 77(E) In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the notifications of the Government of India in the Ministry of Finance (Department of Revenue) No. 2 of 1982-Central Excise and 3/82-Central Excise, dated the 1st January, 1982, the Central Government hereby exempts matches falling under Item No. 38 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power, in respect of the first clearances for home consumption from a factory not exceeding 120 million matches cleared during a financial year, from so much of the duty of excise leviable thereon as is in excess of ₹ 1.60 per gross boxes of 50 matches, subject to the condition that clearances from the said factory during such financial year does not exceed 150 million ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected on or after the 19th day of June, 1980 and before the 23rd day of February, 1982 on matches, shall be deemed to be, and shall be deemed to have always been, as validly levied, assessed or collected as if the provisions of this section had been in force at all material times; (b) no suit or other proceeding shall be maintained or continued in any court for the refund of, and no enforcement shall be made by any court of any decree or order directing the refund of, any such duties of excise which have been collected and which would have been validly collected if the provisions of this section had been in force at all material times; (c) refund shall be made of all such duties of excise which have been collected but which would not have been so collected if the provisions of this section had been in force at all material times; (d) recovery shall be made of all such duties of excise which have not been collected or, as the case may be, which have been refunded but which would have been collected or, as the case may be, would not have been refunded, if the provisions of this section had been in force at all material times. Explanation.- For the removal of doubts, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India2 and A. V. Nachane v. Union of India3. According to the learned counsel the dicta of the said judgments squarely applies herein. 10. It is a matter of frequent occurrence, more particularly in the field of taxation, that where a court strikes down a provision of law which has got serious financial implications to the public exchequer, the legislature steps in to repair the situation. The legislature does this by removing or altering the basis of, or the defect in the law on which the judgment is based, with retrospective effect. It also provides a validation clause in such cases. The result of such removal or alteration is that the judgment based on unamended provision becomes inoperative. That this is permissible for the legislature to do is no longer in doubt or dispute. A series of decisions of this Court commencing from Rai Ramkrishna v. State of Bihar4 to Cauvery Water Disputes Tribunal5 have affirmed this principle. Shri Vaidyanathan, however, says that in Madan Mohan Pathak2 a departure was made by this Court from the above principle. According to the learned counsel, the ratio of the said judgment is that where the Court issues a mandamus and it becomes final, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for ever. They concede that the notification could be and was validly superseded with effect from 1-1-1982 or 23-2-1982, as the case may be. If this could be done, we fail to see why it could not be done with retrospective effect and that too by Parliament. In principle, there is no difference; what could be done prospectively could also be done retrospectively. No question of legislative competence can arise in such a case. The only contention that can possibly arise is one of violation of the provisions of Part III of the Constitution which we would be dealing with at a later stage. To repeat the said mandamus did not and could not prevent the Central Government (authority empowered to grant exemption) from withdrawing the said notification. The power of the Central Government to withdraw a notification issued by it was in no way curtailed or affected by the judgment of the Madras High Court in Devi Match Factory1. Once Notification No. 99 of 1980 was withdrawn and superseded with effect from 1-1-1982 by Notification No. 2 of 1982, the judgment of the High Court became inoperative with effect from that date. The argument to the contrary has no basis either in principle or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to have been inserted in the Act. As observed by Lord Asquith of Bishopstone in East End Dwellings Co. Ltd. v. Finsbury Borough Council7 : If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of those in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. Thus, there can be no doubt that the effect of the retrospective operation of the Amendment Act is that the proviso inserted by the said section in Section 18-A(5) of the Act would, for all legal purposes, have to be deemed to have been included in the Act as from April 1, 1952. 12. It is perhaps necessary to stress that this retrospective operation was provided in this case not by the Central Government in exercise of its power under Rule 8 but by Parlia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the Life Insurance Corporation (Modification of Settlement) Act, 1976 which were allowed. Three opinions were rendered by the learned Judges. Bhagwati, Krishna Iyer and Desai, JJ. rendered one opinion, Chandrachud, Fazal Ali and Singhal, JJ., a separate short opinion and Beg, C.J. another opinion. We may notice the ratio of each of these three opinions. Bhagwati, J. held that the impugned Act did not refer to and did not purport to supersede or nullify the settlement between the Corporation and its employees. In the words of Bhagwati, J., unfortunately the judgment of the Calcutta High Court remained almost unnoticed and the impugned Act was passed in ignorance of that judgment This right under the judgment was not sought to be taken away by the impugned Act. The judgment continued to subsist and the Life Insurance Corporation was bound to pay annual cash bonus...... The learned Judge remarked that the Corporation committed a grave error in withdrawing the Letters Patent Appeal in view of the impugned enactment. Had they persisted with the appeal and brought the aforesaid Act to the notice of the Court, the Letters Patent Appeal would certainly have been allowed. But as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or altered to remove/rectify the defect. 15. Now of the seven learned Judges, only Beg, C.J. put forward as one of the grounds for allowing the writ petition, the theory that the mandamus issued by the learned Single Judge of the Calcutta High Court having become final could not be nullified by Parliament. No other learned Judge adopted that reasoning. As pointed out hereinabove, three learned Judges for whom Bhagwati, J. spoke, held that the settlement remained untouched by the impugned Act and, therefore, settlement continued to be in force, and that if the Act is taken as nullifying the settlement, the Act is bad being violative of Article 31(2). Three other learned Judges, Chandrachud, Fazal Ali, JJ. agreed with Bhagwati, J. only to the extent that the Act was violative of Article 31(2). The question now is how far does the first ground aforesaid in the judgment of Beg, C.J. helps the appellants herein. In my opinion, it does not. Both the situations are qualitatively different. In our case, the mandamus was to apply Notification No. 99 of 1980 to the appellants without reference to the offending provisos and as we have pointed out hereinabove, that did not disable the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to lay down the correct law and are inconsistent with the earlier decisions of this Court, the argument was dealt with in the following words: (SCC p. 221) The Attorney General referred to a number of earlier decisions of this Court wanting us to infer that the observations quoted above from the judgment in Madan Mohan Pathak case2 did not state the correct law in view of the said decisions. But these observations expressed the majority view of a Bench of seven Judges bearing directly on the point that arises for decision in the instant case and are binding on us. We therefore hold that Rule 3 operating retrospectively cannot nullify the effect of the writ issued in D.J. Bahadur case9 which directed the Life Insurance Corporation to give effect to the terms of the 1974 settlements relating to bonus until superseded by a fresh settlement, an industrial award or relevant legislation. The Life Insurance Corporation (Amendment) Act, 1981 and the Life Insurance Corporation of India Class III and Class IV Employees (Bonus and Dearness Allowance) Rules, 1981 are relevant legislation. However in view of the decision in Madan Mohan Pathak case2, these rules, insofar as they seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the retrospective amendment of law, it was held, the decree which was validly passed and had become final, has been rendered inexecutable and that the said objection can be raised in the execution proceedings. The same position is affirmed by A.K. Sarkar, J., in his opinion in Kavalappara Kottarathil Kochuni v. State of Madras11. Though the opinion of Sarkar, J. is a dissenting one, there is no dissent on the above point. [The majority held that in view of its opinion on another question, it is not necessary for it to express any opinion on this aspect (see page 904)]. 19. At this stage, it would be appropriate to deal with the decision of this Court in D. Cawasji Co., Mysore v. State of Mysore12 on which too reliance was placed by Shri Vaidyanathan, learned counsel for the appellants. Sales tax on liquor was levied at 6 1/2%. The Government was collecting it on the entire sale price of barrack. However, in a batch of writ petitions filed by the licensees, the Karnataka High Court held that the levy of sales tax on excise duty and cesses component of the sale price was incompetent. In other words, it was held that sales tax can be levied only on the price proper but not up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a provision was to come into operation, they would have collected more tax from their purchasers/consumers. He stated that the appellants collected and passed on the burden of excise duty only at the rate of ₹ 1.60p per gross. Counsel further submitted that even the certified cottage units are adversely affected by the impugned legislation inasmuch as with the removal of ceiling by Notification No. 99 of 1980 they produced and cleared matches in excess of 150 million matches but collected and passed on duty only at the rate of ₹ 1.60p per gross. Now they too are being called upon to pay at the higher rate. In my opinion, there is no substance in these contentions. So far as the non-certified units (writ petitioners in Devi Match Factory1) are concerned, they could not say till 9-12- 1981 (the day their writ petitions were allowed) that they are entitled to pay only the lesser duty of ₹ 1.60p. As the matters then stood, they were liable to pay the higher duty applicable to non-mechanised units. I cannot, therefore, accept their plea that they collected duty at the lesser rate. If, indeed, they have done so, they have to thank themselves for the present situatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in detail, there is no need to recapitulate except saying that against the judgment of the Madras High Court given in Devi Match Factory case1 this Court had been approached only relating to Raja Match Works and the petition was numbered as SLP(C) No. 11173 of 1981; leave was granted on 1-2-1982 but stay was refused. Subsequently, on 25-7-1983 Civil Appeal No. 303 of 1982 (arising out of the aforesaid SLP) was dismissed as infructuous. This shows that the judgment in Devi Match Factory1 became final for all purposes insofar as remedy available to the Union of India as a litigant is concerned. The all important question is that whether in exercise of legislative power the judgment could have been set at naught? 24. Brother Reddy has held, and with respect rightly, that it is permissible to the legislature to repair a situation by removing or altering the basis of the judgment which strikes down a provision of law. Such a piece of legislation has a validation clause, the result of which is that the judgment based on the unmended provision becomes inoperative. This proposition of law has rightly been said as no longer in doubt or dispute . According to me, it cannot be equally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich had become conclusive and binding on the parties for enabling the State Government to retain the amount wrongfully and illegally collected, it was held that same was not permissible and the impugned Act was therefore held to be invalid. 26. 1 would next refer to Cauvery Water Disputes Tribunal case5 which too has been noted by my learned brother. The Constitution Bench of this Court in that case dealt with this aspect of the matter in paragraphs 74 to 76. In paragraph 74 the decision in Madan Mohan Pathak v. Union of India2 was referred and in paragraph 75 the decision in P. Sambamurthy v. State of A.P. 16 in which even a constitutional provision, which had conferred power of judicial review on State Government, was held to be violative of the basic structure doctrine by stating that rule of law would be meaningless if State Government could set at naught a judgment rendered against it by a duly constituted adjudicatory body. It was then observed in paragraph 76 : (SCC p. 142) The principle which emerges from these authorities is that the legislature can change the basis on which a decision is given by the Court and thus change the law in general, which will affect a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the view of Beg, J. did not state the correct law, by observing that the same had been accepted by the majority. It is because of this that in Nachane3 the retrospective given to the concerned rule was held to have nullified the effect of the writ issued in D.J. Bahadur case9 for which reason the same was held to be invalid. 30. Let it now be seen what had really been done in the cases at hand. Brother Reddy has stated, and with respect rightly, that retrospective operation was given to Notification No. 22 of 1982 by Section 52 of the Finance Act, 1982 evidently to enable the State to retain the duty collected by it from the non-certified units and to frustrate claims of refund from them . So the whole object was to take the wind out of sail which had been blown by the mandamus directed to be issued in Devi Match Factory casel. The same was the object of retrospectively given to the rule which had come to be held invalid in Nachane case3. 31. May it be stated that what has been observed above finds support from what was opined by the Finance Minister in his speech dated 28-2-1982 while moving the Finance Bill in question wherein reference was made about the necessity of ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rers who come under Explanation 11 being illegal. Therefore, this is a fortiori case where the concession extended to the manufacturers coming under Explanation 11 should be extended to the petitioners also. Therefore these writ appeals and the writ petitions have to be allowed. (emphasis supplied) 34. The aforesaid shows that though the Court had applied its mind to the question of discrimination, it did not set aside the provision being discriminatory. What had rather prevailed with the Court in directing to issue mandamus was the inability of the petitioners to obtain certificates from Khadi and Village Industries Commission, which denial was not held as justified for reasons noted by my learned brother. Notification No. 22 of 1982 made no effort at all to take care of the infirmity pointed out by the High Court; instead, it laid down altogether different criteria for claiming levy of excise duty at ₹ 1.60. It was thus not a case of removal of the defect or taking care of infirmity pointed out by the Court. 35. 1 would not, therefore, regard the notification as a piece of validating enactment, as it did not remove the defect or lacuna pointed out by the High Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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