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TMI Blog2018 (9) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... d oil manufactured and sold by the petitioners is taxable commodity specified in Entry No.31 of Part-II, Schedule II of the VAT Act, taxable at the rate specified in Schedule II. During the course of manufacture / extraction of the cotton oil from the cotton seeds, "Oil Cake" is a by-product generated as a result of such process. Manufacture or extraction of cotton oil is not possible without generation of "Oil Cake" as a byproduct. "Oil Cake" is a commodity declared tax free under Section 16 by specifying in Entry No.3 of Schedule I of the VAT Act (as it stood prior to 01.04.2015). 3. For the purpose of manufacture of oil, the petitioners are required to purchase cotton seeds from registered dealers within the State of Madhya Pradesh as also from the dealers outside the State of Madhya Pradesh, after payment of tax at the rate applicable. Such purchases of raw material from the registered dealer within the State of Madhya Pradesh, after payment of tax i.e. Input Tax for consumption or use of manufacture of oil, entitle the petitioners to Rebate of Input Tax (ITR) from the tax payable on sale of oil by such manufactures. Such Input Tax Rebate (ITR) is available to the petitioners, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Schedule I as well as Schedule II goods, Input Tax Rebate should be computed after apportioning the Input Tax in proportion to the value of Schedule I and Schedule II goods so manufactured." 6. The above amendment then became an Act vide Madhya Pradesh Value Added Tax (Second Amendment) Act, 2014 with the modification that the explanation inserted in the Act by Ordinance has been given a retrospective effect from 01.04.2006. The effect of the above amendment is that the petitioners are deprived of the benefit of ITR in respect of Input Tax paid by them for purchase of raw material used or consumed by them for / in the manufacture of Schedule II goods, viz. 'oil' from oil seeds, which was available to the petitioners in terms of Section 14 (1) (a) (2) of the Act, as interpreted this Court in the above judgments. The said retrospective amendment introduced with retrospective effect was being challenged on the ground that the amendment with retrospective effect has an effect of taking away benefit of full ITR from the date of its insertion and reduced it on proportionate basis in proportion to the value of the generation of Schedule I goods, which indirectly amounts to reba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Madhya Pradesh or in the course of inter-state trade or commerce or in the course of export out of the territory of India; or (5) Consumption or use for/in the manufacture or processing or packaging of goods declared tax free under Section 16, for sale in the course of export out of the territory of India; or (5-a) Consumption or use for/in the manufacture or processing or packaging, other than mentioned in sub-clause (5) above, and in connection with sale of goods declared tax free under Section 16; or (5-b) Consumption or use as plant, machinery, equipment and parts thereof for/in generation, transmission or distribution of electrical energy; or] (6) No input tax rebate under sub-section (1) shall be claimed or be allowed to a registered dealer, (i) in respect of any goods specified in Schedule II purchased by him from another such dealer for sale but given away by him by way of free sample or gift or given to or received by him by way of replacement; (ii) in respect of goods specified in Schedule II for use or consumption for manufacture or processing or mining of goods but the goods manufactured or processed or mined are given away by him by way of free sample or gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2016 passed in Writ Petition No.8118/2015 read, as under: - "28. The 2014 amendment was obviously introduced for the purpose of rectifying the obvious error in Section 14. The object which cannot be introduced by Explanation since an Explanation cannot be read as changing or as interfering with the incidence of the levy. It is not for us, particularly when legislative clarity is required since the statutory provision imposes a tax, to untangle the legislative confusion. 29. It appears that the only object of enacting the amended provision is to nullify the effect of the judgment which became conclusive and binding on the parties to enable the State Government to grant the benefit of ITR without deduction of proporti0nate basis to the extent of tax free commodity "oil cake". 30. In the circumstances, Explanation to Section 14 of the M.P. VAT Act, as introduced by Amendment Act of 2014 and amended in 2015, would apply prospectively. However, the legislature has power to validate the judicial invalid levy retrospectively by bringing Validation Act. 31. For these reasons, we are of the view that the Explanation to amendment of Section 14 would apply prospectively. The writ pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulties, it is proposed to enact a Validation Act to make the explanation inserted by the Madhya Pradesh VAT (Second Amendment) Act, 2014 (No.3 of 2015) effective retrospectively from 1st April, 2006 to 6th January, 2015, that is, the date prior to the date of publication of the Madhya Pradesh VAT (Second Amendment) Act, 2014 (No.3 of 2015)." 16. Clause 1 to Clause 3 of the Madhya Pradesh VAT Amendment (Validation) Bill, 2017 reads, as under: - "1. (1) This Act may be called the Madhya Pradesh VAT Amendment (Validation) Act, 2017. (2) It shall be deemed to have come into force from 1st April, 2006 to 6th January,2015, that is, the date prior to the date of publication of the Madhya Pradesh VAT (Second Amendment) Act, 2014 (No.20 of 2015) in the official gazette. 2. The Amendment, that is, insertion of explanation after second proviso to clause (a) of sub-section (1) of Section 14 of the Madhya Pradesh VAT Act, 2002 (No.20 of 2002) (herein after referred to as the principal Act), made by the Madhya Pradesh VAT (Second Amendment) Act, 2014 (No.3 of 2015) (hereinafter referred to as the amending Act) shall be deemed to have come into force from 1st April, 2006 to 6th January, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned Validation Act has been passed by only saying that the Explanation will apply from 01.04.2006 to 06.01.2015 and is contrary to the ratio laid down by this Court in the case of M/s. Jindal Agro Oils Balwada & others v. The State of Madhya Pradesh & another (supra). 19. He lastly submitted that the Validation Act amounts to overriding the judgment of this Court in the case of M/s. Jindal Agro Oils Balwada & others v. The State of Madhya Pradesh & another (supra) and submitted that the law on the subject is well settled by the Apex Court in the recent judgment of Cheviti Venkanha Yadav v. State of Telangana & others reported in (2017) 1 Supreme Court Cases 283; and prayed that the same be declared as ultra vires. 20. Per contra, Shri Vivek Patwa, learned Government Advocate for the respondent / State of Madhya Pradesh has submitted that the Validation Act is as per legal provisions of law. The action of the State Government in bringing the Validation Act is just, legal and proper in the eyes of law. Such an exercise of power to amend a statute is not an incursion on the judicial power of the Court, but is a statutory exercise of the constituent power to suitably amend the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Exchequer can be secured adequately, because by inserting an explanation in statute, the main provision of the VAT Act has not been defeated but simply the explanation has been inserted to clarify the position retrospectively, so that no tax evasion can be made by any tax payer. 24. It is pertinent to mention here that the Division Bench of this Court has decided the controversy on the strength of Supreme Court judgment while interpreting Section 14 (a) framed under the provisions of Bombay Sales Tax Act, 1959, whereas in the State of Madhya Pradesh there was no explanation regarding Input Tax Rebate on the entire raw material, even if the by-product is tax free has been mentioned in Schedule-I, therefore, it has become necessary for the State Government to clarify the position by bringing the Validation Act vide impugned notification retrospectively and the same has been done, in accordance with law. 25. Since there was a need of explaining the VAT Act regarding the Input Tax Rebate on the entire raw material, whereas by-products are both taxable and nontaxable, therefore, using the powers conferred under the Constitution, the amending notification has been issued providing e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. The legislature does it many a way. One of the methods it may adopt is to give its own meaning and interpretation of the law under which tax was collected and by legislative fiat makes the new meaning binding upon courts. On such legislation being brought, it neutralizes the effect of the earlier decision as a consequence of which it becomes ineffective. The test of validity of a validating law depends upon whether the Legislature possesses the competence which it claims over the subject-matter 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 for a valid imposition of the tax. 27. In Bhubaneshwar Singh and another v. Union of India and others [(1994) 6 SCC 77] in view of Section 3 of the Coking Coal Mines (Emergency Provisions) Act, 1971 which has promulgated in the year 1971 the custodian being appointed by the Central Government took over the management of Coking Coal Mines and the said mines remained under the manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 was the validating provision. 28. The writ petition was filed questioning the validity of the said ordinance primarily on the ground that it purported to nullify the judgment rendered in the case of Central Coal Fields Ltd. v. Bhubaneswar Singh and others [(1984) 4 SCC 429]. The Court referred to the provisions and opined that:- "13....if sub-section (2) as introduced by the Coal Mines Nationalisation Laws (Amendment) Act, 1986 in Section 10 had existed since the very inception, there was no occasion for the High Court or this Court to issue a direction for taking into account the price which was payable for the stock of coke lying on the date before the appointed day. The authority to introduce sub-section (2) in Section 10 of the aforesaid Act with retrospective effect cannot be questioned. Once the amendment has been introduced retrospectively, courts have to act on the basis that such provision was there since the beginning. The role of the deeming provision need not be emphasized in view of series of judgments of this Court. Hence reading sub-section (2) of Section 10 along with Section 19, it has to be held that respondents are not required to take into account the stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not directly overrule or reverse a judicial dictum. The legislature cannot, by way of an enactment, declare a decision of the court as erroneous or a nullity, but can amend the statute or the provision so as to make it applicable to the past. The legislature has the power to rectify, through an amendment, a defect in law noticed in the enactment and even highlighted in the decision of the court. This plenary power to bring the statute in conformity with the legislative intent and correct the flaw pointed out by the court, can have a curative and neutralizing effect. When such a correction is made, the purpose behind the same is not to overrule the decision of the court or encroach upon the judicial turf, but simply enact a fresh law with retrospective effect to alter the foundation and meaning of the legislation and to remove the base on which the judgment is founded. This does not amount to statutory overruling by the legislature. In this manner, the earlier decision of the court becomes non-existent and unenforceable for interpretation of the new legislation. No doubt, the new legislation can be tested and challenged on its own merits and on the question whether the legislatu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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