Madras High Court
Tvl.Shanmugamari Timbers vs The Commercial Tax Officer on 20 December, 2018
Author: G.R.Swaminathan
Bench: G.R.Swaminathan
1
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 20.12.2018
CORAM :
THE HONOURABLE MR.JUSTICE G.R.SWAMINATHAN
WP(MD) No.3744 of 2015
and
MP(MD)No.1 of 2015
Tvl.Shanmugamari Timbers,
Rep.by its Proprietor M.Selvendran ... Petitioner
Vs.
The Commercial Tax Officer,
Chokkikulam Assessment Circle,
Madurai – 20. ... Respondent
Prayer : This writ petition is filed under Article 226 of the
Constitution of India, to issue a Writ of Certiorari, to call for the
records on the file of the respondent in TIN No.
33235002837/10-11 dated 08.01.2015 and quash the same as
illegal, invalid and contrary to the provisions of the Tamil Nadu
Value Added Tax Act, 2006.
For Petitioner : Mr.A.Chandrasekaran
For Respondent : Mr.Aayiram K.Selvakumar
Additional Government Pleader
http://www.judis.nic.in
2
ORDER
The petitioner is a dealer in Timber. He had registered himself under the TNVAT Act, 2006. He is an assessee registered with the respondent. Section 3 of the Act is the charging section. As per Section 3(1)(a) of the Act, taxes on sales of goods are levied on dealers whose total turn over in a year is not less than Rs.5,00,000/-. As per Section 3(2) of the Act, the tax shall be payable by a dealer on every sale made by him within the State as per rates specified in the First Schedule. But then, Section 3(4) of the Act provides for a composition scheme. As per the said provision, the dealer whose annual taxable turn over is less than Rs.50.00 lakhs instead of paying tax as per Section 3(2) can opt for paying a flat tax at such rate not exceeding one percent as may be notified by the Government. The Government has issued G.O.Ms.No.2, CT & R Department dated 01.01.2007 notifying that a dealer who has opted to pay under this provision shall have to pay tax @ ½ %. But then, such a dealer is subjected to certain conditions. (a) He cannot collect any tax from his purchasers.
(b) He cannot avail any ITC on the goods purchased by him and http://www.judis.nic.in 3 also the dealer who puchased goods from such dealer shall not be entitled to ITC (c) he cannot make any inter-state purchase.
2.If these conditions are breached by the dealer, the consequence will be that the composition given to him to pay at ½ % on the turn over would stand withdrawn and he will have to pay under Section 3(2) of the Act. This provision found place in the Act even from the beginning in order to benefit the small dealers whose annual turn over did not exceed Rs.50.00 lakhs. But then, the law makers did not foresee the possibility of the annual turn over of the dealers crossing Rs.50.00 lakhs even before the close of the assessment year. The question that arose was how to deal with such cases. Therefore, Section 3(4) of the Act was recast and Section 3(4)(b) was introduced vide Tamilnadu Act No. 49 of 2008 with effect from 18.06.2008. Section 3(4)b) read as under :
Section 3(4)(b) : If the turnover relating to taxable goods of a dealer paying tax under clause
(a), in a year, reaches rupees fifty lakhs at any time during that year, he shall inform the assessing authority in writing within seven days from the date http://www.judis.nic.in 4 on which such turnover has so reached. Such dealer is liable to pay tax under sub-section (2) on all his sales of rupees fifty lakhs and above and he is entitled to the input tax credit on the purchases made from the date, and on the stock available with him, the purchases of which has been made within ninety days before the date, on which such turnover has reached rupees fifty lakhs.
Provided that such dealer whose turnover relating to taxable goods has reached rupees fifty lakhs during the previous year shall not be entitled to exercise such option for subsequent years.”
3.But, the said provision was interpreted by the officials as if on crossing of the ceiling of Rs.50.00 lakhs, the dealer will have to pay tax under section 3(2) of the Act on his entire sales turn over. This had a ruinous impact on the small dealers. Therefore, the provision was substituted vide Tamilnadu Act 27 of 2011 with effect from 01.04.2012. The relevant provision in the amending Act read as under :
“In Section 3 of the Tamil Nadu Value Added Tax Act, 2006, in sub-section (4), in clause (b) for the expression “Such dealer is liable to pay tax under sub-section (2) on all his sales of rupees fifty lakhs http://www.judis.nic.in 5 and above” the expression “Such dealer may pay a tax for each year on his turnover relating to taxable goods upto rupees fifty lakhs at such rate not exceeding one percent, as may be notified by the Government and is liable to pay tax under sub- section (2) on all his sales of taxable goods above rupees fifty lakhs” shall be substituted.”
4.The petitioner had opted to pay tax under the composition scheme. His turn over however crossed Rs.50.00 lakhs in the month of March 2011. In fact, the total sales turn over for the assessment year 2010-2011 for the petitioner was Rs.63,50,354/-. The petitioner was issued with a notice dated 19.09.2014 calling upon him to pay tax at the rate of 12.5% as per Section 3(2) of the Act. The petitioner failed to respond. As a result, the impugned order dated 08.01.2015 came to be passed levying a tax of Rs. 7,62,035/-. Questioning the same, this writ petition has been filed.
5.Heard the learned counsel appearing for the petitioner as well as the learned Additional Government Pleader for the respondent.
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6.The learned Additional Government Pleader appearing for the respondent contended that this writ petition is not maintainable since the writ petitioner has not exhausted the remedy of appeal available under the Act. He also pointed that the case on hand will have to be judged in the light of the pre- amendment position and that the writ petitioner cannot call in aid Tamil Nadu Act 27 of 2011. This is because admittedly the said amendment came into effect only on 01.04.2012. The case on hand pertains to the assessment year 2010-11. He drew the attention of this Court to G.O Ms.No.135, CT & RE (B1) dated 31.10.2011. According to which 01.04.2012 has been appointed as the date on which the Tamil Nadu Act 27 of 2011 shall come into force. He therefore called upon this Court to sustain the order impugned in this writ petition.
7.The learned counsel appearing for the petitioner on the other hand contended that this Court must give retrospective application to Tamil Nadu Act 27 of 2011. He highlighted the fact that this amendment is a substitutive amendment. The effect of a substitutive amendment is that the substituted provision should be http://www.judis.nic.in 7 deemed to have been present in the statute from the very beginning. He placed reliance on the decision of the Madras High Court reported in (2013) 64 VST 385 (Mad) (Sakthi Masala (P) Ltd vs. Assistant Commissioner (CT), Madurai). He pointed out that if retrospective application is not given, it would lead to disastrous consequence for the dealers like the petitioner. This is because acting under the impression that they need to pay only ½ % as composition tax, they had not collected tax from their purchasers. If they were to taxed at a higher rate on the entire turn over, it will have a catastrophic consequence on their businesses. This is all the more so because they had not availed any ITC.
8.It is true that as per the Tamil Nadu Act 27 of 2011, the dealer who is under the composition scheme should inform the assessing authority in writing within 7 days from the date on which the ceiling limit is crossed. But then, this requirement cannot be made applicable to the petitioner herein because the case on hand pertains to the assessment year 2010-11. http://www.judis.nic.in 8
9.The issue that arises for consideration can be formulated as follows :
“Whether Tamil Nadu Act 27 of 2011 has to be retrospectively applied ?
The initial objection raised by the learned Additional Government Pleader can be disposed of first. The writ petitioner can obviously not be non suited on the ground of availability of alternative remedy of appeal. This is because a serious question of law has been canvassed for consideration. It is true that as per G.O Ms.No.135, CT & RE (B1) dated 31.10.2011, 01.04.2012 has been notified as the appointed date on which the Act is to come into force. But then, as held by the Hon'ble Supreme Court in the decision reported in 2008 (11) SCALE 497 (Commissioner of Income Tax-1, Ahmedabad Vs. Gold Coim Health Foods Pvt Ltd), the date from which the amendment is made operative does not conclusively decide the question. The court has to examine the scheme of the statute prior to the amendment and subsequent to the amendment to determine whether the amendment is clarificatory or substantive.
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10.Therefore, the fact that 01.04.2012 has been notified as the date on which the Act is to come into force cannot be put against the petitioner. The general principles concerning retrospectivity have been authoritatively laid down by the Five Judges Bench by the Hon'ble Supreme Court in the decision reported in 2015( 1 SCC 1 (Commissioner of Income Tax (Central) – I, New Delhi vs. Vatika Township Private Limited). It was held therein as under :
General Principles concerning retrospectivity
27.A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of ‘Interpretation of Statutes’. Vis-à-
vis ordinary prose, a legislation differs in its provenance, layout and features as also in the http://www.judis.nic.in 10 implication as to its meaning that arise by presumptions as to the intent of the maker thereof.
28.Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow’s backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
29.The obvious basis of the principle against retrospectivity is the principle of 'fairness’, which must http://www.judis.nic.in 11 be the basis of every legal rule as was observed in L’Office Cherifien des Phosphates v. Yamashita- Shinnihon Steamship Co.Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later.
30.We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors. v. http://www.judis.nic.in 12 Indian Tobacco Association, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in Vijay v. State of Maharashtra & Ors. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are (sic not) confronted with any such situation here.
31.In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct http://www.judis.nic.in 13 implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by outweighing factors.
32.Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labelled as “declaratory statutes”. The circumstances under which provisions can be termed as “declaratory statutes” is explained by Justice G.P. Singh in the following manner:
“Declaratory statutes The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court : “For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is http://www.judis.nic.in 14 declaratory for these words may, at times, be used to introduced new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law.” The above summing up is factually based on the judgments of this Court as well as English decisions.
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33.A Constitution Bench of this Court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas & Anr while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows:
“8.....The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from Section 115 of the Code of Civil Procedure, and the legislature has by the amending Act not attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act.”
11.The said Constitution Bench judgment was followed in (2015) 16 SCC 731 (Sebi v. Alliance Finstock Ltd). The doctrine of fairness was applied in the said decision and it was held that if a benefit can be conferred without a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then retrospectivity should be given.
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12.Applying the aforesaid standard, there cannot be any difficulty in coming to the conclusion that Tamil Nadu Act 27 of 2011 must be given retrospective application. As rightly pointed out by the learned counsel appearing for the petitioner, this is evident from the statement of objections and reasons annexed to the amendment Act. The legislature was aware that a literal construction of the unamended Section 3(4)(b) of the Act resulted in levy of tax under Section 3(2) of the Act on the entire turn over of the dealer. The dealer was faced with such a levy even though he had not collected any tax on the turnover upto Rs.50.00 lakhs. In order to rectify the situation the amendment Act was introduced.
13.The intent and object of the legislature is clearly evident by the use of the expression “substituted”. Therefore, it will have to be necessarily construed as retrospective. In fact, that is the object which the legislature intend to subserve. Therefore, I hold that the Tamil Nadu Act 27 of 2011 being a substitutive amendment will cover the case of the writ petitioner also. http://www.judis.nic.in 17
14.Though the issue has not directly arisen for consideration, submissions were made as to whether the requirement that the dealer who is under the composition scheme should inform the assessing authority within seven days after crossing the ceiling limit is directory or mandatory. The Hon'ble Supreme Court in the decision reported in (1980) 1 SCC 403, (Sharif-Ud-Din vs. Abdul Gani Lone) has laid down the principles for construing a particular statutory requirement as directory or mandatory. The relevant portion of the aforesaid decision reads as under :
“The difference between a mandatory rule and a directory rule is that while the former must be strictly observed, in the case of the latter substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. Certain broad propositions which can be deduced from several decisions of courts regarding the rules of construction that should be followed in determining whether a provision of law is directory or mandatory may be summarised thus: The fact that the statute uses the word “shall” while laying down a duty is not conclusive on the question whether it is a mandatory or directory provision. In order to find out the true http://www.judis.nic.in 18 character of the legislation, the court has to ascertain the object which the provision of law in question has to subserve and its design and the context in which it is enacted. If the object of a law is to be defeated by non-compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act done in disregard of that provision causes serious prejudice to those for whose benefit it is enacted and at the same time who have no control over the performance of the duty, such provision should be treated as a directory one. Where, however, a provision of law prescribes that a certain act has to be done in a particular manner by a person in order to acquire a right and it is coupled with another provision which confers an immunity on another when such act is not done in that manner, the former has to be regarded as a mandatory one. A procedural rule ordinarily should not be construed as mandatory if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage unless by according such permission to rectify the error later on, another rule would be contravened. Whenever a statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to http://www.judis.nic.in 19 comply with the said requirement leads to a specific consequence, it would be difficult to hold that the requirement is not mandatory and the specified consequence should not follow.”
15.Applying the aforesaid principles, this Court notes that the consequences of non adherence have not been stipulated in the statutory scheme itself. That apart, the rule in question is rather procedural in character. The omission on the part of the assessee to inform the assessing authority within the stipulated time can always be made good later. Therefore, this Court has to necessarily hold that the requirement that the dealer who is under the composition scheme should inform the assessing authority within seven days from the date on which the turnover has crossed the limit is only directory.
16.In this view of the matter, the order impugned in this writ petition is set aside. This writ petition is allowed. The matter is remitted to the file of the respondent to pass orders afresh in accordance with law after affording an opportunity of personal hearing to the petitioner. The learned counsel for the petitioner http://www.judis.nic.in 20 states that the petitioner will file his objections to the notice issued by the respondent within a period of four weeks from the date of receipt of a copy of this order.
17.This writ petition stands allowed. No costs. Consequently, connected miscellaneous petition is closed.
20.12.2018 Skm To
1.The Commissioner of Commercial Taxes, O/o.the Principal and Special Commissioner of Commercial Taxes, Ezhilagam, Chepauk, Chennai – 600 005.
2.The Commercial Tax Officer, Palayamkottai Assessment Circle, Thirunelveli – 627 002.
http://www.judis.nic.in 21 G.R.SWAMINATHAN, J.
Skm WP(MD) No.3744 of 2015 and MP(MD)No.1 of 2015 20.12.2018 http://www.judis.nic.in