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TMI Blog1992 (12) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... each of which was calculated at the rate of 50 per cent of the amount of the land revenue. 2. On 21st July, 1976, the State Government published draft rules amending 1972 Rules. The principal amendment related to the rate of the assessment of the non-agricultural land whereby the erstwhile rate of 2 paise was raised to 15 paise per square metre. The amendment also classified the assessable lands on the basis of their locations, viz., whether they were in villages, towns and cities, and on the basis of the population of the area and the non-agricultural user to which the land was being put. The State Government invited objections to the draft rules before 30th July, 1976. Since no objections were received, the State Government made the draft rules final and published them on 31st July, 1976 bringing them into force w.e.f. 1st August, 1976. Several writ petitions challenging the said rules were filed in the High Court. One of the contentions in the petitions was that sufficient time was not given to raise objections to the draft rules. During the tendency of the writ petitions, the State Government on 28th June, 1977 withdrew the notification dated 31st July, 1976 issuing the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 14 of the Constitution. We will take up for consideration the first four points simultaneously since they are interconnected. The High Court answered issues Nos. 3 to 6 against, and issue No. 7 in favour of the appellants and struck down Rule 81(2) of Amendment Rules of 1977. It is against the said decision that the present appeals are filed. 5. The following contentions are raised before us by Shri Nariman on behalf of the appellants : 1. 1977 Rules promulgated on 24th January, 1978 and brought into force retrospectively from 1st September, 1976 are ultra vires and void to the extent that they retrospectively impose a higher rate of land revenue on land used for industrial purpose. Section 214 of the Code did not give the State Government power to frame rules with retrospective effect. The Bombay Land Revenue [Gujarat Amendment and Validation] Ordinance [which later became an Act] amending Section 214 of the Code though gave the State Government a power to make rules with retrospective effect, Section 214 itself was not substituted with retrospective effect but only came into force on 24th February, 1981. Hence, the validation of the Section is ineffective in so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein. (2). In particular, and without prejudice to the generality of the foregoing power, such Rules may be made- ... (b) regulating the assessment of land to the land revenue and the alterations and recovery of land revenue.... ... (3) The power to make Rules under this section shall be subject to the condition of previous publication. The section was amended by the Ordinance dated 10th December,. 1980 by inserting Clauses (3) and (5), among others, which read as follows- 3. Amendment of Section 214 of Bom. V of 1879. In the principal Act, in Section 214, in Sub-section (1) for the words 'make rules' the words 'make, whether prospectively or retrospectively, rules' shall be substituted. 5. Validation of certain rules - Any rule made retrospectively under Section 214 of the principal Act, before the commencement of this Ordinance shall be and shall be deemed always to have been validly made in accordance with law, as if the principal Act had been in force as amended by this Ordinance at all material times when such rule was made and any such rules or anything done or action or proceeding taken or purported to have been done or taken under suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of the petitioners is that these provisions are insufficient to validate the defects which were noticed in the earlier judgment of this Court inasmuch as the relevant provisions of the Act and the Rules have not been retrospectively amended. We see no force in this argument for the provisions as they stand certainly validate the defects pointed out in the earlier judgment of this Court. It is true that the relevant sections and the Rules have not been retrospectively amended by the Ordinance, but this in our opinion was unnecessary. Retrospective amendment may be necessary when it is desired to change the law; but it seems that so far as Section 11 is concerned the legislature did not intend that the control of the State Government over levy of fees should be done away with for the future also. Therefore, all that was necessary in that respect was to validate the past actions and this is specifically provided for by Sub-section (2) and (3) of Section 29-B. As for the establishment of market committees an amendment has been made in Section 5-AA of the Act deleting the provision by which a market could be established only if so required by the State Government. This amendment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en to have become invalid because, inter alia, of the making of more than one declaration under Section 6 of the Land Acquisition Act, notwithstanding any judgment decree or order to the contrary. Parliament was competent to validate such actions and transactions, its power in that behalf being only circumscribed by appropriate entries in the Lists of the Seventh Schedule and the fundamental rights set forth in Part III of the Constitution. Section 4 of the Amending Act being within the legislative competence of Parliament, the provisions thereof are binding on all courts of law notwithstanding judgments, orders or decrees to the contrary rendered or made in the past. 13. In Shri Prithvi Cotton Mills Ltd. and Anr. v. Broach Borough Municipality and Ors. a somewhat similar situation, as obtaining in the present case, arose. Broach Borough Municipality constituted under the provisions of the Bombay Municipal Boroughs Act, 1925 purporting to act under Section 73 of the said Act and the Rules made thereunder, imposed rate on land and buildings belonging to Prithvi Cotton Mills at a certain percentage of the capital value in the assessment years 1961-62 to 1963-64. Section 73 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e features of the validating statutes in general are instructive. They read as under: 4. Before we examine Section 3 to find out whether it is effective in its purpose or not we may say a few words about validating statutes in general. When a legislature sets out to validate a tax declared by a Court to be legally collected under ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances. Ordinarily, a Court holds a tax to be invalidly imposed because the power to tax is wanting or the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and buildings on the basis of capital value. The Court also referred to its earlier decision in Patel Gordhandas Hargovandas's case [supra] that the Municipality under the Boroughs Act had no power to fix a rate on the basis of capital value since the word rate had acquired a special meaning in the legislative practice. The Court thereafter observed as under: 6. ...Faced with this situation the legislature exercised its undoubted powers of redefining 'rate' so as to equate it to a tax on capital value and convert the tax purported to be collected as a 'rate' into a tax on lands and buildings. The legislature in the Validation Act, therefore, provided for the following matters. First, it stated that no tax or rate by whichever name called and laid on the capital value of lands and buildings must be deemed to be invalidly assessed, imposed, collected or recovered simply on the ground that a rate is based on the annual letting value. Next it provided that the tax must be deemed to be validly assessed, imposed, collected or recovered and the imposition must be deemed to be always so authorised. The legislature by this enactment retrospectively imposed the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leaving one procedure only available and thus remove the vice of discrimination found in Northern India Caterers case (supra). 15. 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 said intention clear by the specific language of the validating Act. It is open for the legislature to change the very basis of the provisions retrospectively and to validate the actions on the changed basis. This is exactly what has been done in the present case as is apparent from the provisions of Clauses (3) and (5) of the Amending Ordinance corresponding to Sections 2 and 4 of the Amending Act No. 2 of 1981. We have already referred to the effect of Sections 2 and 4 of the Amending Act. The effect of the two provisions, therefore, is not only to validate with retrospective e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), the assessee was a spinning mill. It opened a fair price shop to provide an amenity to its workmen so that commodities could be made available to them at fair prices. For the assessment year 1960-61, the assessing authority under the Madras General Sales Tax Act, 1959 included in the assessee's turnover the sale value of groceries sold in the fair price shop. The Tribunal held in favour of the assessee and the High Court on reference found that the assessee was not carrying on business within the meaning of the provisions of the Act in the fair price shop and confirmed the orders. In appeal to this Court, the State contended that the Amending Act of 1964 substituted a new definition of business in the Act which read with Section 9 of the Act, had retrospective effect. While dismissing the appeal, this Court held that validation of tax which has been declared to be illegal may be done only if the ground of illegality or invalidity are capable of being removed and are in fact removed. The legislature can give its own meaning and interpretation of law under which the tax was collected and by legislative flat make a new meaning binding upon the courts. But in that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Validating Act cannot validate rules made or acts done prior to the date it was enacted, if accepted, will strike at the very root of the concept of retrospective validation. Law is an instrument which is forged to regulate the affairs of the society. Society can mould it to meet the needs felt from time to time. Society cannot be a slave of the instrument. The device of validating a statute is forged precisely to adopt the law to meet the exigencies of the situations. The validation, therefore, may be done in the manner required by the needs of the tune. All that is required is that the agency which validates the statute must have the power to do it. The manner and method of doing it is to be left to the authority. If the intentions are clear, the validation has to be interpreted according to the intentions. The courts have in fact upheld such validation regarding it to be an important weapon in the armoury of legislative devices. It is to emphasise this aspect that we have endeavoured to summarise the law on validation as above, at the cost of lengthening the judgment. We, therefore, find no substance in Shri Nariman's contention that since the Amending Act came i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the merit with regard to the first opportunity, the second opportunity was admittedly fair. After considering the objections, the rate of assessment was in fact reduced. As has been stated earlier, even this rate of assessment was fixed after a long lapse of time during which incomes, prices of products, levels of profits, rentals of lands, inflation and the cost of maintenance and providing services had gone up enormously. It is, therefore, not possible to accept the contention that either the enhancement in assessment was made without following the principles of natural justice or that it was arbitrary or unreasonable. This part of the contention must, therefore, fail. 21. Reliance placed on certain observations in the decisions of this Court in Madan Mohan Pathak v. Union of India and Ors. etc. and Lohia Machines Ltd. and Anr. v. Union of India and Ors. in support of the contention that the present assessment is arbitrary, unreasonable and irrational is in the facts and circumstances of the case misplaced. In Madan Mohan Pathak's case (supra), the learned Chief Justice concurring with the majority, was commenting upon the legislation made by the Parliament which had the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rule declared invalid in the section itself is to withdraw with retrospective effect the relief which had been earlier granted by the parliament in so far as the relief extends to borrowed capital employed in the undertaking and thereby to impose on the assessee a burden of tax which was not there for all these years. As a matter of policy it may be open to the Parliament to withdraw the relief granted to borrowed capital by an amendment with prospective effect consequent on any such amendment. To withdraw with retrospective effect the benefit of relief unequivocally granted by the section to an assessee who qualified for such relief and was lawfully entitled to enjoy the benefit of such relief and has in fact in many cases enjoyed the benefit for all these years, prior to the present amendment with retrospective effect, cannot, in my opinion, be said to be on any just and valid grounds and cannot be considered to be reasonable. If any fiscal statute grants relief to any assessee and the assessee enjoys the benefit of that relief, as the assessee is legally entitled under the statute, the withdrawal of the relief validly and unequivocally granted and enjoyed by any assessee must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As has been explained in Bomanji Ardeshir Wadia and Ors. v. Secretary of State [1929 PC 34] the basis of assessment of non-agricultural land is the return or the income from the user of such land to the land owner. Where the non-agricultural land is not actually put to any use, assessment can also be made on the basis of the potential income from such land. Section 48 of the Land Revenue Code purports to impose land revenue on the basis of return to the land owner. This is clear from the provisions of the said section which reads as follows: 48. (1) The land revenue leviable on any land under the provisions of this Act shall be assessed, or shall be deemed to have been assessed, as the case may be, with reference to the use of the land- (a) for the purpose of agriculture, (b) for the purpose of building, and (c) for a purpose other than agriculture or building; [2] Where land assessed for use for any purpose is used for any other purpose, the assessment fixed under the provisions of this Act upon such land shall, notwithstanding that the term for which such assessment may have been fixed has not expired be liable to be altered and fixed at different rate by such au ..... 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