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TMI Blog2001 (4) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... l, J.]. - Civil Appeal No. 4093 of 1991 and C.A. No. 2853 of 2001 (Arising out of SLP (C) 20018 of 1991). - Leave granted in SLP (C) No. 20018 of 1991. These appeals are sequel to a judgment of this court in Synthetics and Chemicals Ltd. and others v. State of U. P. and Others - (1990) 1 SCC 109 wherein it was held that in respect of industrial alcohol the States were not authorised to impose the impost they had purported to do. By that judgment delivered on 25th October, 1989 the Court overruled its earlier decision in State of U.P. and Others v. Synthetics and Chemicals Ltd. and Others - (1980) 2 SCC 441 wherein the validity of such an impost had been upheld. By the second Synthetics case it was declared that the impugned provisions were illegal prospectively. 2.The question which arises for consideration in these appeals is whether the vend fee which had been levied by the appropriate State enactments, but not collected whether by reasons of the orders of the Court or otherwise, can be collected now when the said provisions by the said judgment dated 25th October, 1989 have been held to be invalid prospectively. 3.For the sake of convenience, we shall briefly refer to the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the second Synthetics case had been differently construed by Benches of this Court. In view of this apparent conflict these appeals were referred to a larger Bench. It is in pursuance thereto that these appeals have been heard. 8.It was contended by Shri K.K. Venugopal, learned senior counsel for the appellants, that in respect of industrial alcohol the State Legislature had no legislative competence to levy excise duty or any tax in that nature. Drawing our attention to Entries 8 and 51 of List II, he submitted that the State can impose excise duty only on potable liquor. Corresponding to that is Entry 84 in List I which enables the Parliament to levy excise duty except in regard to those items referred to in Entry 51 of List II. Furthermore under Entry 52 of List I the I.D.R. Act had been promulgated by the Parliament and in the First Schedule Item No. 26 related to fermentation industries. In respect of the industries referred to in the First Schedule to the I.D.R. Act it is only the Parliament which has jurisdiction to levy taxes in respect thereto. As such levy of vend fee on industrial alcohol by the States was not valid. 9.It is also submitted that Article 162 provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he second Synthetics case were understood as entitling the appellants to retain the vend fee despite prospective overruling because those who have paid the vend fee for the same period would stand in a disadvantageous position when compared to those who did not pay the vend fee in view of the interim orders although in both the cases liability to tax arises at the time of issuance of the alcohol. Such an interpretation, it was contended, would be arbitrary and violative of Article 14 of the Constitution. 12.The doctrine of prospective overruling was simply based on equity and full effect must be given thereto and the State should be permitted to recover the unpaid levy in respect of the period prior to 25th October, 1989. Shri Dwivedi further submitted that in any case payments which have been made under the interim orders of the High Court could be retained by the State and this clearly flows from the directions of this Court in paragraph 89 of the judgment in second Synthetics case. The learned counsel, of course, contended that even in respect of amounts secured by bank guarantee the State would be entitled to collect the same. 13.In the present case the State of Uttar Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Tamil Nadu), certain orders were passed by this Court on November 1, 1978, September 1, 1986, October 1, 1986 and October 10, 1986. It is stated that the present demand of the Central Excise Department from March 1, 1986 on alcohol manufactured by the company in their captive distillery is over Rs. 4 crores. This Court by its order dated October 1, 1986 as confirmed on October 16, 1986 had permitted the State Government to collect the levy on alcohol manufactured in company's captive distillery subject to adjustment of equities and restrained the central excise authorities from collecting any excise duty on such alcohol. It is, therefore, necessary to declare that in future no further realisation will be made in respect of this by the State Government from the petitioners. So far as the past realisations made are concerned, we direct that this application for that part of the direction, should, in accordance with our decision herein, be placed before a Division Bench for disposal upon notice both to the State Government and the Central Government." 15.It is contended on behalf of the appellants that the declaration in paragraph 82 of the said judgment that the impugned provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submitted by Shri Nariman that there is no jurisprudential basis for applying the doctrine of prospective overruling in India. He submitted that this doctrine was first invoked in I.C. Golak Nath & Ors. v. State of Punjab & Anrs. - [1967] 2 SCR 762 where Chief Justice K. Subba Rao for himself and five other judges invoked an American doctrine to that effect. Shri Nariman contended that the other six judges did not subscribe to this and in fact three of the judges through the judgment of Justice Wanchoo expressly came to the conclusion that the doctrine of prospective overruling was against the provisions of Article 13(2) of the Constitution. In our opinion it is not necessary nor appropriate for us to go into this question. We are only concerned with the interpretation and effect of the second judgment in Synthetics case and not with regard to the correctness of the same. 19.It was contended by Shri Nariman that the vend fee which was deposited in Court consequent on the interim order passed in respect thereto clearly stipulated that the same should be kept in a separate account. He, therefore, submitted that this cannot be regarded as a payment the refund of which the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the answer is in the negative. For the purposes of securing the revenue in the event of the revenue succeeding in proceedings before a court, the court, as a condition of staying the demand for the disputed tax or duty, imposes a condition that the assessee shall provide a bank guarantee for the full amount of such tax or duty or part thereof. The bank guarantee is required to be given either in favour of the principal administrative officer of the court or in favour of the revenue authority concerned. In the event that the revenue fails in the proceedings before the court the question of payment of the tax or duty, the amount of which is covered by the bank guarantee, does not arise and, ordinarily, the court, at the conclusion of its order, directs that the bank guarantee shall stand discharged. Where the revenue succeeds the amount of the tax or duty becomes payable by the assesses to the revenue and it is open to the revenue to invoke the bank guarantee and demand payment thereon. The bank guarantee is security for the revenue, that in the event the revenue succeeds its dues will be recoverable, being backed by the guarantee of a bank. In the event, however unlikely, of the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulded in accordance with the justice of the cause or matter before it." The parameters have not been adhered to in practice. 23.The word 'prospective overruling' implies an earlier judicial decision on the same issue which was otherwise final. That is how it was understood in Golaknath. However, this Court has used the power even when deciding on an issue for the first time. Thus in India Cement Ltd. and Others v. State of Tamil Nadu and Others - (1990) 1 SCC 12 when this Court held that the cess sought to be levied under Section 115 of the Madras Panchayats Act, 1958 as amended by Madras Act 18 of 1964, was unconstitutional, not only did it restrain the State of Tamil Nadu from enforcing the same any further, it also directed that the State would not be liable for any refund of cess already paid or collected. 24.This direction was considered in Orissa Cement Ltd. v. State of Orissa and Others - 1991 Supp (1) SCC 430 at page 498 where it was held that: "....... The declaration regarding the invalidity of a provision and the determination of the relief that should be granted in consequent thereof are two different things and, in the latter sphere, the Court has, and must be held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t unduly affecting the rights of the people who acted upon the law operated prior to the date of the judgment overruling the previous law." Ultimately, it is a question of this Court's discretion and is, for this reason, relatable directly to the words of the Court granting the relief. 28.Reading the two paragraphs 89 and 90 together it does appear that this Court regarded the declaration of the provisions being illegal prospectively as only meaning that if the States had already collected the tax they would not be liable to pay back the same. It is the States which were protected as a result of the declaration for otherwise on the conclusion that the impugned Acts lacked legislative competence the result would have been that any tax collected would have become refundable as no State could retain the same because levy would be without the authority of law and contrary to Article 265 of the Constitution. At the same time, it was clearly stipulated that the States were restrained from enforcing the levy any further. The words used in Article 265 are 'levy' and 'collect'. In taxing statute the words 'levy' and 'collect' are not synonymous terms, (refer to Assistant Collector of Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards vend fee for the period from 9-4-1975 to 11-7-1978." 30.To the same effect is another order dated 12th March, 1990 again by a Bench presided over by Chief Justice Mukherji in Writ Petition No. 8435 of 1981 - Yawar Ali v. The State of U.P. &. Ors. By these two orders the State of U.P. was directed not to recover the amounts outstanding despite recovery notices having been issued on a date prior to 25th October, 1989. These two orders are important inasmuch as the author of the judgment in second Synthetics case understood his own decision of prospective overruling to imply that if a levy in respect of the period earlier than 25th October, 1989 has not been recovered by the excise authorities then notwithstanding a recovery order having been issued the State was not entitled to recover the amount. It can be said that in 1990 Chief Justice Mukherji, along with two companion judges interpreted his earlier decision in a manner which clearly showed that paragraph 89 of the judgment in the second Synthetics case could not entitle the State to physically receive any amount in respect of the levy for the period prior to 25th October, 1989 even though it could be said that the levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners in the High Court has, as an appellant before this Court, obtained stay of the payment of market fee, then for the period during which such stay has operated and consequently market fee was not paid on the transactions covered by such stay orders, there will remain no occasion for the Market Committee concerned to recover such market fee from the sugar mill concerned after the date of this judgment even for such past transactions. In other words, market fees paid in the past shall not be refunded. Similarly market fees not collected in the past also shall not be collected hereafter. The impugned judgments of the High Court in this group of sugar matters will stand set aside as aforesaid. The writ petition directly filed before this Court also will be required to be allowed in the aforesaid terms." The aforesaid observations make clear what was implicit in paragraph 89 of the second Synthetics case, namely, that where payment has not actually been made to the Market Committee for a period prior to the announcement of the judgment, by reason of the assessee having obtained a stay, the Market Committee was not entitled to recover the market fee, payment of which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .P. Excise Act on industrial alcohol because that would be outside the ambit of Entry 51 of List II of the Seventh Schedule. Vend fee being regarded as excise duty on industrial alcohol which is not valid as not falling under Entry 51 of List II cannot be regarded as excise revenue and, therefore, at least after 25th October, 1989 it would be unrecoverable being outside the purview of the Section 39 of the U.P. Excise Act, 1910. This would clearly be the position as a result of the Court having declared relevant provisions of the U.P. Act as being ultra vires insofar as it enables the imposition of excise duty on industrial alcohol. 33.Furthermore in, view of the enunciation of the law by this Court in Oswal Agro Mills Ltd. case (supra), a bank guarantee which is furnished cannot be regarded as payment of excise levy which the Government is entitled to retain. The furnishing of a bank guarantee is ordered normally in order to ensure collection of dues. Where, however, the State, as in the present case, has been held not to be entitled to collect or realise vend fee after 25th October, 1989 it cannot be allowed to invoke the bank guarantee and realise the amount of vend fee. What c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been used in taxation statutes in general and the UP. Excise Act, 1910 in particular. However, the interim orders passed by the High Court show that deposits were made of vend fee and the purchase tax. Although these 'deposits' were to be kept in a separate account, nevertheless in the circumstances of this case, it would be mere sophistry to hold that the monies so deposited were not 'realisations' for the purposes of the U.P. Excise Act. Therefore, what was deposited by the appellants with the State would remain with it notwithstanding, the interim orders which required the State to keep it in a separate account but, at the same time, what has not been collected by the State cannot be realised by it, even in those cases where a bank guarantee had been furnished. 37.Lastly, while relying on Mafatlal Industries Ltd. and Others v. Union of India and Others - 1997 (89) E.L.T. 247 (S.C.) = (1997) 5 SCC 536 Shri Dwivedi submitted that the appellants had realised the amount of vend fee payable by taking that figure into account while determining their sale price and, therefore, the State is entitled to recover the same as it would otherwise result in unjust enrichment to the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to add my views on an aspect of the 'prospective overruling' which was sought to be effected by the decision of the Constitution Bench of this Court in Synthetics and Chemicals Ltd. and Others v. State of U.P. and Others - 1990 (1) SCC 109. 43.One of the arguments of the appellant as noted by my learned brother was that the Court in the Synthetic's case by resorting to prospective over-ruling had in a fact sought to uphold a law up to the period of the judgment which law had held to have been passed without competence. It is submitted that the finding that the States were not competent to levy tax on industrial alcohol meant that the State Acts were non est and that the Court could not by giving prospective effect to its judgment breathe life into a dead statute up to the date of the judgment. It was also contended by the appellant that even under Article 142, the Court could not whittle down or act in derogation of any constitutional provision. By declaring that the statute was valid up to the date of the judgment, according to the appellant, the specific constitutional provisions, namely, Article 246 and Article 245 were infringed. Reliance has been placed on the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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