Andhra HC (Pre-Telangana)
Central Wines And Ors. vs Govt. Of A.P. And Ors. on 7 February, 1992
Equivalent citations: 1992(2)ALT289
JUDGMENT P. Venkatarama Reddy, J.
1. The constitutional validity of Explanations (a) and (b) to the Sixth Schedule of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as 'the APGST Act') introduced by Section 15 of A.P. Act 25 of 1988 with effect from 8-7-1983 is under challenge in this batch of writ petitions filed by the dealers in liquor. A.P. Act 25/88 came into force from 6th September, 1988. In some of the writ petitions, the orders passed by the Joint Commissioner of Commercial Taxes (Legal) revising the order of the Appellate Dy. Commissioner relating to assessment year 1983-84 as a sequel to A.P. Act 25/88 have also been assailed.
2. The undisputed facts are that the petitioners held at the relevant point of time two licences under the A.P. Excise Act read with A.P. Foreign Liquor and Indian Liquor Rules, 1970- one was wholesale licence known as FL 15 licence and the other was retail licence known as FL 24 licence. The wholesale licence-holder was authorised to import liquor and beer from outside the State on which the licensee pays the prescribed countervailing duty. The holder of licence in Form FL 15 is permitted to sell liquor in quantities of not less than 9 litres in sealed or capsuled bottles at any time and in any single transaction to licensees holding the licences in Form FL 24 (retail licence), FL 17 (Bar licence) etc. He is not permitted to carry on retail sale or allow consumption of liquor in the licensed premises (Vide Rule 23 of the Foreign Liquor and Indian Liquor Rules, 1970). The retail licence holder in Form FL 24 is permitted to sell liquor obtained only from the wholesale licensees.
3. Prior to 8-7-1983, beer and liquor were exigible to tax under Items 25 and 26 of the A.P. General Sales Tax Act at the point of first sale in the State. By A.P. Ordinance 19/83, items 25 and 26 were removed from the first schedule. By the said Ordinance, the taxation of liquor and country liquor (which includes beer as per the definition) was dealt with by the newly introduced provision viz., Section 5(2)(d) read with Sixth Schedule to the Act. Section 5(2)(d) lays down that in the case of the goods mentioned in the Sixth Schedule, tax under the APGST Act shall be levied at the rates and at the points specified as applicable thereto in the Sixth Schedule. Sub-section (2) of Section 5 was in force upto 29-3-1989 on which date the said sub-section was merged into Sub-section (1) which is the charging provision for all the goods mentioned in the Schedule. The Sixth Schedule as introduced by A.P. Ordinance 19/88 together with the Explanations thereto is extracted hereunder:
Sixth Schedule Goods in respect of which tax is leviable under Section 5(2)(d):
Description of Point of levy Rate of tax
the goods
(1) (2) (3)
1. Country Liquor (a) At every point sale other 10 paise in the rupee.
than at the point of last
sale in the State.
(b) At the point of last sale 5 paise in the rupee.
in the State.
2. All Liquors (a) At every point of sale 25 paise in the rupee.
other than country other than at the point of
liquors. last sale in ther State.
(b) At the point of last 5 paise in the rupee.
sale in the State.
Provided that at any point of sale other than the first point of sale and the last point of sale, the turnover of the goods liable to tax shall be arrived at by deducting the turnover of such goods on which tax has been levied at the immediately preceding point of sale.
"Explanation-I:- In this schedule 'country liquor' means 'liquor' manufactured in India, other than liquor manufactured and compounded in India and coloured and flavoured to resemble Gin, Brandy, Whisky, Vodka, Wine or Rum imported from outside the territory of India.
Explanation-II:-The point of last sale mentioned in this Schedule shall be the sale by a dealer holding a licence other than wholesale licence under Rule 23 of the Andhra Pradesh (Foreign Liquor) Rules, 1970. In the case of a dealer holding a wholesale-cum-retail licence, it shall be his sale to individual consumer as specified in the said rule."
The Ordinance was replaced by A.P. Act 11 of 1984 which came into force from 8-7-1983. Sub-section (1) of Section 40 confers power on the State Government to alter, add to or cancel any of the Schedules by means of a notification. In exercise of the said power, the State Government issued G.O.Ms.No. 376, Revenue (CT) Dept., dated 25-4-1987 amending, inter alia, the Sixth Schedule to the APGST Act with effect from 1 st May 1987. The amendments are to the following effect:
In the Sixth Schedule to the APGST Act, for items 1 and 2, the following item and entries relating to rates are substituted:
All liquors other (a) At every point 25 paise in
than toddy and of sale other than the rupee.
arrack. at the point of
last sale in the State.
(b) At the point of 5 paise in
last sale in the State. the rupee.
Explanation-I was omitted.
As a result of omission of Explanation-I, Explanation-II became the only 'Explanation' to the Schedule. In the Explanation, the second sentence, namely, 'in the case of a dealer holding a wholsale-cum-retail licence, it shall be his sale to individual consumer as specified in the said rule' was omitted. The gist of the amendment brought about by G.O.Ms.376 was to place all liquors including beer in one entry which attracts tax at 5% or 25% depending upon whether it is a last point sale or a sale at other points. The rate of beer which was hitherto levied at 10% was stepped up to 25%. Toddy and arrack were excluded from the Sixth Schedule. In the explanation, the term 'last point sale' underwent slight change by deletion of the second sentence. This deletion was necessitated by reason of the discontinuance of wholesale-cum-retail licence by the rules framed under the A.P. Excise Act with effect from 1-10-1983. This change is not material for the purpose of this case because the petitioners did not at any time hold wholesale-cum-retail licence.
4. The next development in the legislative history which is to be mentioned is G.O.Ms.No. 100 dated 5-2-1988. This G.O. was again issued by the Government in exercise of the powers conferred by Sub-section (1) of Section 40 of the APGST Act. The reason for issuing this G.O. invoking once again the power under Section 40(1) of the APGST Act is to provide for continuity of levy and collection of tax on the commodities concerned, in terms of the amendments brought about by G.O.Ms.376 Revenue (CT) Dept. dated 25-4-1987 and certain other G.Os. amending the Schedules. It appears, a Bill APGST (4th Amendment) Bill, 1987 (L.A. Bill 46/87) incorporating the amendments made by G.O.Ms.376, etc., was introduced in the Legislative Assembly on 10th August 1987 but it was not passed by the Legislature and hence it did not become the Act. As a result of this situation, the earlier notification issued under Section 4o(1) (G.O.Ms.376) and the bill introduced on 10-8-1987 ceased to have effect by virtue of Sub-section (2) of Section 40 and the proviso's thereto. Hence G.O.Ms.No. 100 was issued to maintain continuity in levy. The said GO. did not bring about any material change vis-a-vis the Sixth Schedule to APGST Act. The Schedule as amended by G.O.Ms.No. 376 therefore held the field even after the issuance of G.O.Ms.No. 100 dated 5-2-1988.
5. The last development which deserves our attention is the APGST (4th Amendment) Act (A.P. Act 25/88). Sections 15 and 16 are the relevant provisions in so far as the Sixth Schedule is concerned. Section 15 of the said Amendment Act recast the Explanation to Sixth Schedule in the following terms:
"Explanation; For the purpose of this Schedule,-
(a) 'point of first sale' shall mean sale of liquor effected by a dealer who manufactures in the State or imports liquor from outside the State or to any other dealer or person;
(b) 'point of last sale' shall mean sale of liquor to a person by a dealer who purchased liquor from another dealer in the State."
Section 15 was given retrospective effect with effect from 8th July 1983 by a deeming provision. Section 16 substituted the following schedule:
Sixth Schedule Goods in respect of which tax is leviable under Section 5(2)(d):
Description of goods Point of levy Rate of tax
(1) (2) (3)
All liquors other than (a) At every point of 25 paise in
toddy and arrack sale other than at the rupee.
the point of last
sale in the State.
(b) At the point of last 5 paise in
sale in the State. the rupee."
The proviso providing for deduction of turnover continued to remain. The explanation was couched in the same terms as in Section 15. Section 16 was brought into force with retrospective effect from 1st May 1987 i.e., the date on which G.O.Ms.376 came into force. In a nutshell, the effect of Section 15 of the Amendment Act (Act 25/88) is that right from 8-7-1983 the concept of first sale and last sale shall be understood in accordance with Clauses (a) and (b) to the Explanation. The same Explanation stands on the statute book even today. By virtue of Section 16 of the Amendment Act, the rate of tax on beer was increased from 10% to 25% at the point of sale other than last sale with effect from 1-5-1987. By giving retrospective effect to Section 16, the Legislature did no more than according statutory approval to the rate of tax notified by G.O.Ms.No. 376 and continued by G.O.Ms.No. 100 dated 5-2-1988.
6. Though a number of contentions have been raised in the affidavits filed in support of the writ petitions, the two main points urged before us by the learned Counsel for the petitioners, Mr. A.T.M. Rangaramanujam are (1) The retrospective effect given by Section 15 of A.P. Act 25/88 to the Explanation to Sixth Schedule is unconstitutional; and (2) The impugned amendment brought about by A.P. Act 25/88 discriminates between liquor imported from other States and the liquor locally marketed and hence violative of Articles 301, 303 and 304 of the Constitution. A few other contentions have also been urged in passing to which we shall refer after dealing with the main contentions noted above.
7. The main attack of the petitioners is against the retroactivity of the impugned provision viz., Section 15 of A.P. Act 25/88. It is contended that the retroactive application of law affecting the transactions that took place nearly five years back is irrational and unreasonable and it causes serious prejudice and hardship to the petitioners. It is therefore submitted that the impugned provision is an infraction of the fundamental rights guaranteed to the petitioners. In order to appreciate this contention, we would like to reiterate certain well-known and well-settled principles governing the retrospective legislation and the parameters within which such legislation could be tested:
(1) A long line of authorities of the Supreme Court recognised the power of the Legislature to enact laws including tax laws both prospectively and retrospectively. The power to legislate retrospectively embraces within its scope the power to validate a law which had been declared invalid by Courts provided the infirmities or vitiating factors are removed or cured. (Vide Union of India v. Madan Gopal, AIR 1954 SC 541; J.K. Jute Mills Co. Ltd., v. State of U.P., ; Rai Ramakrishna v. State of Bihar, ; Krishnamurthi Co., v. State of Madras, and Ujagar Prints v. Union of India, AIR 1989 SC 517. The following passage in 73 Harvard Law Review 692 at 705 cited with approval by a Constitution Bench of the Supreme Court in Asst. Commr. of Urban Land Tax v. The Buckingham & Carnatic Co. Ltd., forcefully brings out the need and justification for retrospective taxation:
"It is necessary that the legislature should be able to cure inadvertent defects in statutes or their administration by making what has been aptly called 'small repairs'. Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since had the legislature's or administrator's action had the effect it was intended to and could have had, no such right would have arisen. Thus the interest in the retroactive curing of such a defect in the administration of Government outweighs the individual's interest in benefiting from the defect....
The Court has been extremely reluctant to override the legislative judgment as to the necessity for retrospective taxation, not only because of the paramount governmental interest in obtaining adequate revenues, but also because taxes are not in the nature of a penalty or a contractual obligation but rather a means of apportioning the cost of Government among those who benefit from it."
(2) The inability of the dealer to realise the sales-tax during the period covered by retrospective operation of law is not a factor which affects the competence of the Legislature to enact a law imposing sales-tax retrospectively (Vide J.K. Jute Mills case (2 supra) and Krishnamurthi Co., case (4 supra).
(3) In applying the test of reasonableness to a taxing statute, it is no doubt a relevant consideration that the tax is being enforced with retrospective effect but that is not conclusive in itself. In considering the question whether excessive retrospective operation prescribed by a taxing statute amounts to contravention of the citizen's fundamental rights, the Court has to take into account all the relevant and surrounding facts and circumstances in relation to the taxation. (Vide Epari Chinna Krishna Moorthy v. State of Orissa, ); Jawaharmal v. State of Rajasthan, ; and Asst. Commissioner of Urban Land Tax v. Buckinham & Carnatic Co. Ltd., (6 supra).
In testing whether a retrospective imposition of a tax operates so harshly as to violate fundamental rights under Articles 19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validation of taxing statute struck down by the Courts for certain defects; the period of such retroactivity; and the degree and extent of any unforeseen or unforseeable financial burden imposed for the past period etc., (Per Venkatachalaiah, J., in Ujagar Prints v. Union of India (5 supra).
(4) Where the retrospective legislation has been undertaken for the reason that the Legislature or the delegated authority failed to bring out its intention clearly in the Principal Act, such legislation is not normally open to attack either on the ground of legislative competence or on the ground of violation of Article 19(1)(g). (Vide Hiralal Ratan Lal v. State of U.P. and Epari China Krishna Moorthi v. State of Orissa (7 supra)).
(5) The test of the length of time covered by retrospective operation cannot by itself be a decisive test (Vide Rai Ramakrishna Case (3 supra) and Shiv Dutt Rai Fateh Chand v. Union of India, .
8. Most often retrospective operation will be given to statutes to overcome a defect or lacuna pointed out by the Courts and to validate the past actions notwithstanding the judgment of a Court to the contrary. Retrospective legislation is also resorted to plug a loophole in an enactment that might have come to light in the course of implementation of the Act so as to bring the law in line with the intention of law-making body. Here also, the law is curative in its purport and effect. Levy of new tax or fresh impost not covered by earlier law is also resorted to in exceptional cases by introducing a retroactive legislation. The present is a case which more appropriately falls within the second category.
9. As we have already noticed, apart from the question of legislative competence, a retrospective law relating to taxation could be generally tested on the anvil of Part III of the Constitution, that is to say, the fundamental rights guaranteed by Articles 14 and 19(1)(g) of the Constitution. As far as Article 19(1)(g) is concerned, it is wholly out of place in the present case, because the petitioners have no fundamental right to carry on trade in liquor - (Vide the Constitution Bench Judgment of the Supreme Court in Har Shankar v. Dy. E & T Commissioner, ). Even if a taxation measure has the effect of driving a dealer in liquor out of business, the affected dealer cannot invoke Article 19(1)(g). When that be the case, is it open to him to assail the law from the standpoint of reasonableness of the provision - a concept that is ingrained in Article 14 according to the more recent decisions of the Supreme Court, viz., Maneka Gandhi v. Union of India, etc? This raises a moot point on which we do not propose to express any opinion in this case as we feel it unnecessary to do so We assume that Article 14 can be called in aid by the petitioners and direct their attack on the retrospective operation of the amending provision on the ground of unreasonableness (or arbitrariness?). Even so, we do not think that the retrospective amendment in question can be characterised as unreasonable or irrational. At this stage, we may recall what the Supreme Court has said about the application of Article 14 to the taxation laws in general. In Khandige Sham Bhat v. Agrl. I.T. Officer, AIR 1963 SC 591 , Subba Rao, J., (as he then was) speaking for the Constitution Bench observed that-
"....in the application of equality clause enshrined in Article 14, the Courts in view of the inherent complexity of fiscal adjustment of diverse elements permit a larger discretion to the Legislature in the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways....
it is true taxation law cannot claim immunity from the equality clause of the Constitution. The taxation statute shall not also be arbitrary and oppressive, but at the same time the Court cannot for obvious reasons, meticulously scrutinize the impact of its burden on different persons or interests. Where there is more than one method of assessing tax and the Legislature selects one out of them, the Court will not be justified to strike down that law on the ground that the Legislature should have adopted another method which, in the opinion of the Court is more reasonable, unless it is convinced that the method adopted is capricious, fanciful, arbitrary or clearly unjust."
The Supreme Court, speaking through Gajendragadkar, J., expounded the law on this aspect almost in the same tone in Rai Ramakrishna's case (3 supra - Vide para 12 of the Judgment).
10. Before we proceed to address ourselves to the specific issue of validity of A.P. Act 25/88, we deem it appropriate to refer to the judgment of the Supreme Court in Epari Chinna Krishna Murthy v. State of Orissa (7 supra) which is the most relevant decision in the context of the present case. In that case, the Government of Orissa issued a notification dated 1-7-1947 exempting gold ornaments from sales tax, when the manufacturer selling them charges separately for the value of gold and the cost of manufacture. The petitioner before the Supreme Court was a manufacturer of gold ornaments who supplied gold to artisans and got the ornaments prepared by them under his supervision and selling them in his shop showing the value of gold and the cost of manufacture separately. The petitioner claimed exemption of sales tax under the said notification. The Sales Tax authorities disallowed the claim. The Orissa High Court upheld the plea of the assessee holding that the expression 'manufacturer' meant the first owner of the finished product for whom it was made either by his paid employee or even by independent artisans on receipt of raw materials and labour charges from him. After the judgment of the Orissa High Court, the Orissa Legislature passed the Orissa Sales Tax Validation Act (Act 7/61) on 1st August 1961. Section 2 of the said Act provided that not with standing contained in any judgment, decree or order of any Court, the word 'manufacturer' occurring against item 33 in the Schedule to the notification issued on July 28, 1947 as amended by another notification dated 1st July 1949, shall mean and shall always be deemed to have been a person who by his own labour works up materials into suitable forms and a person who owns or runs a manufactory for the purpose of business with respect to the articles manufactured therein. The validity of this retrospective provisions was challenged before the Supreme Court. Gajendragadkar, J., (as he then was) speaking for the Constitution Bench pointed out that the intention of the Government in issuing the notification was not to give the benefit of the exemption to traders or shop-keepers and who did not personally work for making gold ornaments or who did not own a manufactory employing artisans for that purpose. The retrospective law was passed to give effect to this intention. Dealing with the contention that it was not open to the Legislature to take away the exemption granted by the State Government retrospectively, the Supreme Court held:
"We are not impressed by this argument. What the legislature has purported to do by Section 2 of the impugned Act is to make the intention of the notification clear. Section 2 in substance declares that the intention of the delegate in issuing the notification granting exemption was to confine the benefit of the said exemption only to persons who actually produce gold ornaments or employ artisans for that purpose. We do not see how any question of legislative incompetence can come in the present discussion. And, if the State Government was given the power either to grant or withdraw the exemption, that cannot possibly affect the legislature's competence to make any provision in that behalf either prospectively or retrospectively."
Dealing with the contention whether the retrospective operation of the impugned section imposes an unreasonable restriction on the petitioners' fundamental right to carry on business, the Supreme Court observed:
"It is true that in considering the question as to whether the legislative power to pass an Act retrospectively has been reasonably exercised or not, it is relevant to enquire how the retrospective operation operates. But it would be difficult to accept the argument that because retrospective operation may operate harshly in some cases, therefore, the legislation itself is invalid. Besides, in the present case, the retrospective operation does not spread over a very long period either. Incidentally, it is not clear from the record that the petitioners did not recover sales tax from their customers when they sold the gold ornaments to them. The counter-affidavit filed by the respondent-State alleges that even where sales-tax has not been charged separately, the price charged included sales tax because it was the usual practice of every registered dealer doing similar business to collect sales tax either by showing it as such separately and thereby claiming deduction of the sales tax from the gros turnover to arrive at the taxable turnover shown separately or by including it in the price and thereby collecting it as a part of the price charged....."
11. Bearing the above principles in mind, now let us examine the facts of the present case and the genesis of the retrospective provisions impugned in this batch of writ petitions viz., Explanations (a) and (b) to the Sixth Schedule of the APGST Act. As already noticed, the writ petitioners are both wholesale and retail licensees. They import liquor from other States. Under the Excise law, a wholesaler cannot sell liquor directly to the consumer. If a dealer holding a licence other than a wholesale licence effected a sale, he was considered to be the last seller under the Exemption in force during the period 8-7-1983 to 6-9-1988 i.e., the date of commencement of Act 25/88. Taking advantage of the deficiency in the language employed in the Explanation, wholesale licensees like the petitioners importing liquor from other States invented a device to pass themselves off as last sellers. They began transferring the stocks by book entries to their retail shops and selling the liquor from those retail shops. This has become possible by reason of the fact that the petitioners possessed both wholesale and retail licences. By adopting this methodology, a wholesaler claimed to be the last seller and paid tax at 5%. In the normal course the wholesaler should have paid 25% tax when he sold the imported liquor to other dealers, bars, clubs, etc., in huge quantities. The purchasers from the wholesale licensees, in their turn, would have sold the liquor to consumers by paying 5% tax on the differential sale value. Now the wholesale licensees, by virtue of transfer of stocks to their retail shops, were paying a mere 5% tax on the whole. An unintended advantage was thus derived by the wholesale licensees who were also having retail licences. This led to an anamolous situation affecting the public revenues. It could not have been the intention of the Legislature or the State Government that a wholesaler selling imported liquor through his retail shop should be treated as last seller and subjected to tax as so low a rate as 5%. The anamoly resulting from this situation becomes transparent when we notice the fact that without there being any anterior sale, straightaway, a wholesaler is able to make a last sale'. The so-called last sale is in substance a first sale, but by a device of tax avoidance made possible by deficient language in the Explanation and by the factum of holding dual licences, the first sale is dubbed as last sale. It is to overcome this situation and to place the law beyond any ambiguity, the impugned legislation has been enacted with retrospective effect. In fact, even without an amendment to the Explanation it would have been possible to take the stand that in effect and in substance the sale was by a dealer holding wholesale licence and hence his sale is not last sale within the meaning of the then existing Explanation. It may be that the wholsealer was also having a retail licence by reason of which he was able to sell liquor directly to the consumer. But the fact remains that he did not shed his character as a dealer possessing wholesale licence. Perhaps it was also possible to take the stand that when there was no first or intermediate sale, there was no question of last sale. But as the language of the Explanation was susceptible to two interpretations- one in favour of the assessee and the other in favour of the revenue, the situation would have led to long-drawn litigation and the consequent uncertainty in the incidence of levy. In fact, the Department in order to foil the attempts of the petitioners in giving the colour of last sales to their transactions and to subject them to tax at 25% took the stand that the transfer of stock from wholesale to retail shop itself amounted to a sale. But this stand taken by some of the assessing authorities did not, perhaps rightly, receive the seal of approval of the appellate authorities including the Sales Tax Appellate Tribunal. Thus the law was in a state of flux. The State could not sit back and afford to lose valuable revenue from the liquor trade. It is in this state of affairs that the present legislation was enacted. Explanations (a) and (b) as it now stands and brought into force with retrospective effect from 8-7-1983 are crystal clear and it is not the case of the petitioners that according to the said Explanation they can still be regarded as last sellers liable to pay tax only at 5%. We are unable to understand how such a legislation could be labelled as unreasonable by reason of its retrospectivity. Far from being unreasonable, it gives effect to the obvious intention of the legislature by thwarting dubious tax avoidance measures. We are inclined to think that the Explanation as amended by A.P. Act 25/88 has only made 'small repairs' so as to dispel the doubts and to fully effectuate the legislative intent underlying the Entry in the Sixth Schedule from its inception. It has not made any radical departure from the pre-existing scheme of levy. The competence of the legislature to make such retrospective provision cannot be doubted.
12. It is argued that the retrospectivity extending upto a period of five years operates harshly on the petitioners and introduces an element of unreasonableness in the impugned law. We do not see any merit in this argument for more than one reason. As already noticed, the Supreme Court held that the test of the length of time covered by retrospective operation of law is not a decisive test. In Krishna Murthy's case (7 supra) a retrospective provision taking away the benefit of exemption of sales tax was upheld though the retrospective operation covered a period of twelve years. In Shiv Dutt Rai Fatesh Chand case (9 supra) the amendment to Section 9 of the Central Sales Tax Act in the year 1976 and giving retrospective effect thereto right from its inception -that is from 1957. so as to enable the levy of penalties in accordance with the provisions of local sales tax laws was upheld by the Supreme Court. In Rai Ramakrishna case (3 supra), the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 which was brought into force with retrospective effect from 1st April 1950 was uphled by the Supreme Court. The five-year period of retrospectivity given to the impugned provision is not such as to expose the impugned provision to the charge of oppressiveness or unreasonableness. In considering the impact of the impugned retrospective provision, it is necessary to bear in mind that the then Explanation to the Sixth Schedule defining the first point sale and last point sale was not free from doubt. The petitioners could not have taken it for granted that the sales of liquor stock transferred from wholesale shop to retail shop attracted levy only as a last point sale. The interpretation which could be put against the assessee has already been indicated above. The Department was also not prepared to accept the claim of the petitioners that they should be subjected to tax at 5% treating their sales as last sales. As noticed earlier, the intention of the State from the beginning had been to treat the wholesalers like the petitioners as first sellers. In this situation, no reasonable and prudent dealer would have proceeded on the assumption that their tax liability was limited to 5% only and to arrange their business affairs on that assumption. If for any reason they had done so, they would have taken a calculated risk. In all probability, the petitioners would have collected tax at the higher rate of 25% either directly or indirectly. It is significant to note that there is no averment in any of the writ petitions that the petitioners suffered prejudice on account of realisation of tax at the lesser rate of 5% acting upon their own interpretation of the legal provisions. The reasonable presumption is that as prudent dealers, the petitioners could not have taken the risk and that they would have collected the tax at the higher rate being prepared for the worst. These are all relevant considerations which should weigh with us while applying the yard-stick of reasonableness to the retroactive provision in question. These were also the considerations which were taken into account by the Constitution Bench in Krishna Murthy's case cited supra. Viewed in this background, we are not in a position to say that the retrospective operation of law for a period of five years had an oppressive effect on the petitioners' business or that the petitioners suffered irretrievable hardship on that account. We therefore hold that the retrospectivity given to the Explanation to the Sixth Schedule by A.P. Act 25/88 is perfectly within the legislative competence and does not violate Article 14 of the Constitution on the ground of unreasonableness or otherwise.
13. The learned Counsel for the petitioners referred to the judgment of a Division Bench of the Bombay High Court reported in C.I.T. v. Mico Products Pvt. Ltd, . In that case, the amendment to Income Tax Act made in the year 1980 with retrospective effect from 1-4-1962 depriving the assessee of the benefit of depreciation in any year was held to violate Article 19(1)(g) of the Constitution. The retrospective amendment was also held to be violative of Article 14 on the ground that it discriminated the assessments completed prior to the amendment and the pending assessments. The impugned provision of the APGST Act is not open to attack on any of the grounds on which the Bombay High Court rendered its decision. The Bombay High Court quoted with approval the following passage in the dissenting judgment of A.N. Sen, J., in the case of Lohia Machines Ltd., v. Union of India, :
"In my opinion, the possibility of very grave prejudice to the assessee by the withdrawal of the relief with retrospective effect, in the absence of any justifiable ground and any serious prejudice to the interest of the Revenue, establishes unreasonableness and arbitrariness of the retrospective amendment."
Even if we apply the test enunciated above, we have no hesitation in holding that there is no taboo attaching to the impugned provision. The tell-tale factors in the present case amply justify the enactment of retrospective legislation and we have already adverted to those aspects in detail. The fact that the impugned legislation was not for the purpose of curing a defect pointed out by a Court of law does not make any difference. The Legislature need not wait to make necessary repairs to the legislation till the High Court or Supreme Court lays down the legal position.
The learned Counsel for the petitioners while contending that there is no reason or justification for increasing the rate of tax on beer from 10% to 25% by including the same in the item 'liquor1 with retrospective effect from 1st May, 1987, has relied upon the following observations of the Supreme Court in D. Cawasji & Co. v. State of Mysore, :
"It may be open to the Legislature to impose the levy at the higher rate with prospective operation but levy of taxation at higher rate which realty amounts to imposition of tax with retrospective operation has to be justified on proper and cogent grounds."
We do not see any force in this contention. The retrospectivity was only for the purpose of ensuring continutly of levy which was already in force. As already noticed, increase in the rate of tax on beer was brought about initially by G.O.Ms.376 dated 25-4-1987and the same was maintained in G.O.Ms.No. 100 dated 5-2-1988. Both these G.Os. were issued by the State Government in exercise of the power to amend the Schedules. G.O.Ms.No. 376 came into force from 1-5-1987 but it ceased to have effect by reason of the Bill introduced to give effect to G.O.Ms.376 not having been enacted within the stipulated time. Thus it is really not a case of imposing a higher rate of tax for the first time. We therefore see no relevance in the aforementioned observations of the Supreme Court.
14. The second contention advanced by the learned Counsel for the petitioners is devoid of any substance. Relying upon Weston Electronics v. State of Gujarat, AIR 1988 SC 2038 the learned Counsel submits that the Explanation to Sixth Schedule introduced by A.P. Act 25/88 discriminates between liquor imported from other States and liquor of local origin thereby violating Articles 301 and 304(A)oftheConstitution. The petitioners contend that the sale of liquor imported from outside the State is chosen for special treatment for the purpose of imposing higher tax liability. There is an obvious fallacy in this contention. Under Clause (a) of the Explonation, sale of liquor effected by a manufacturing dealer in the State or sale imported liquor are both treated alike. No higher rate of tax is sought to be imposed on the imported liquor alone. Far from discriminating between the imported liquor and local liquor, Clause (a) of the Explanation seeks to bring about uniformity in the incidence of taxation on both kinds of liquor. If the impugned legislation had not been enacted, perhaps the dealers importing liquor would have stood on a better footing than others dealing in locally manufacturing liquor. That situation is now obviated. We are unable to see how Weston Electronics case (16 supra) is of any assistance to the petitioners.
15. It was also contended by the learned Counsel for the petitioners that the impugned Sections 15 and 16 of A.P. Act 25/88 is ultra vires Clause (29-A) of Article 366 of the Constitution which defines the expression 'tax on the sale or purchase of goods'. By the introduction of the said clause by the 46th Constitutional Amendment, the Parliament expanded the concept of sale or purchase for the purpose of levy of tax thereon. Apart from merely indicating this argument, the learned Counsel has not elaborated as to how the concept of sale either in its traditional sense or in its enlarged sense has been violated in the instant case by defining as to what is first sale and what is last sale. There cannot be an iota of doubt that what is taxed under the Sixth Schedule read with the Explanation is only sale of liquor and nothing else.
16. Lastly it was faintly urged by the learned Counsel that there is no guidance in the Act to identify what is liquor and what is beer. The expression 'all liquors' occurring in Sixth Schedule obviously includes 'beer'. Only toddy and arrack have been specifically excluded from the Sixth Schedule. We do not see any difficulty of identification whatsoever.
17. In the result, all the writ petitions fail and are hereby dismissed with costs. Advocate's fee Rs. 250/- in each.