Madras High Court
Star Club vs The Principal Secretary To Government on 17 December, 2019
Author: Subramonium Prasad
Bench: A.P.Sahi, Subramonium Prasad
W.P(MD)Nos.19910 of 2013, etc., batch
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 17.12.2019
CORAM:
THE HONOURABLE MR.JUSTICE A.P.SAHI, CHIEF JUSTICE
AND
THE HONOURABLE MR.JUSTICE SUBRAMONIUM PRASAD
W.P.(MD)Nos.19910 to 19912, 20282, 20283, 20566, 20567,
20749, 20844 of 2013, 729, 812, 813, 1215, 1681, 2188, 2203,
2994, 3538, 5811, 7540 and 10353 of 2014
and
Connected Miscellaneous Petitions
W.P.(MD)No.19910 of 2013:
Star Club,
Rep. by its Secretary,
Sakthivel,
S/o. G.Mardhappan,
2/1590. Gopal Nagar,
Vembakottai Road,
Sithurajapuram,
Virudhunagar District. : Petitioner
Vs.
1.The Principal Secretary to Government,
Commercial Taxes and Registration Department,
Government of Tamil Nadu,
Fort St. George,
Chennai.
http://www.judis.nic.in
1/17
W.P(MD)Nos.19910 of 2013, etc., batch
2.The Managing Director,
Tamil Nadu State Marketing Corporation,
CMDA Tower 4th Floor,
Gandhi Irwin Bridge Road,
Egmore, Chennai.
3.The District Manager,
Tamil Nadu State Marketing Corporation,
Virudhunagar District. : Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of
India, praying for a Writ of Declaration declaring that G.O.Ms.No.139
dated 08.11.2013 issued by the first respondent is inapplicable to holder
of FL2 license.
For Petitioner : Mr.K.Gokul
For Respondent No.1 : Mrs.S.Srimathy
Special Government Pleader
For Respondents 2&3 : Mr.H.Arumugam
*****
COMMON ORDER
********************** [Order of the Court was made by The Hon'ble Chief Justice] The entire batch of writ petitions questions the legality and http://www.judis.nic.in 2/17 W.P(MD)Nos.19910 of 2013, etc., batch validity of a liability sought to be imposed by the State Government under G.O.Ms.No.139, Commercial Taxes and Registration (B1), dated 08.11.2013, which has been filed on record, whereby the Tamil Nadu Value Added Tax Act, 2006 [for brevity 'the 2006 Act'], insofar as it relates to the sale of alcoholic liquors as provided for in the Second Schedule to the Principal Act, notifies the percentage of tax applicable which stands imposed @ 14.5% at the third point of sale in the State. The pointed and focused issue which has been raised in these batch of writ petitions and calls for determination is as to whether by virtue of such imposition, the petitioners can be saddled with the liability of tax for the period from 01.04.2013 to 07.11.2013 with retrospective effect.
2. The contention of the petitioners is that in the absence of any provision for levy of such tax on alcoholic drinks in existence for the said period, the same could not have been notified by way of a deferred payment so as to realise the tax on the sales between the said period with retrospective effect.
3. The submission is that goods already sold to customers without there being any tax leviable between the said period could not be a matter of deferred tax realisation. In the case of indirect tax, the liability has to pass on to the customers, to be realised by the petitioners.
The respondent State could not have brought out a legislation into effect http://www.judis.nic.in 3/17 W.P(MD)Nos.19910 of 2013, etc., batch without there being a specific indication of retrospective application authorising the levy of such stated and alleged deferred payment.
4. Learned Counsel for the petitioners taking the aid of Section 30 of the 2006 Act, contended that for the purpose of exemption or reduction, the State can either prospectively or retrospectively legislate on the subject. But insofar as levy is concerned, the same has to be announced for the financial year to be levied on an annual basis for realising a tax component which is in relation to an indirect tax and for realisation of such tax, there is no such provision under the 2006 Act, so as to impose any such liability retrospectively. In essence, the argument is that past transactions that were not subject to any levy of tax, cannot be a matter of imposition in relation to an indirect tax with retrospective effect.
5. Learned Special Government Pleader for the respondent State has however urged that this is not an imposition of a fresh tax and as a matter of fact, this was levied in the previous financial year and not only this, the imposition by a deferred method through a notification is in relation to the financial year in question. The liability thereof cannot be denied by the petitioners as such liability is only an execution of the power of the State to levy a tax under the statute. The contention is that the goods are leviable to such tax as per the Second Schedule and http://www.judis.nic.in 4/17 W.P(MD)Nos.19910 of 2013, etc., batch therefore, the argument of the petitioners amounts to seeking a blanket exemption which is impermissible. The challenge raised by the petitioners, therefore, does not stand the test of scrutiny of law and consequently, the liability cannot be denied by the petitioners. Hence, the petitions deserve to be dismissed.
6. The decision in the case of Commissioner of Income Tax-I, New Delhi Vs. Vatika Township Private Limited reported in (2015) 1 SCC 1, has been placed before the Court, where the issue of levy of surcharge for block assessment in a matter arising out of Income Tax Act was under consideration. We may, at the outset, clarify that the said decision related to a direct tax where also, the issue raised was as to whether the levy imposed was clarificatory in nature or was a fresh imposition of tax. The Apex Court upon assessing the contentions indicated the question that arose to the answer in paragraph No.18 of the said judgment and then, while answering the issue raised, the Court proceeded to lay down the guiding principles concerning retrospectivity being applied in taxing statutes. Paragraphs 29 to 36 of the said decision are extracted herein under for ready reference:
“29. Notwithstanding the aforesaid position clarified with us, we are of the opinion that dehors this discussion, in any case on the application of general principles concerning retrospectivity, the proviso to Section 113 of the Act cannot be treated http://www.judis.nic.in 5/17 W.P(MD)Nos.19910 of 2013, etc., batch as clarificatory in nature, thereby having retrospective effect. To make it clear, we need to understand the general principles concerning retrospectivity.
General Principles concerning retrospectivity
30. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consist 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, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof.
31. 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 http://www.judis.nic.in 6/17 W.P(MD)Nos.19910 of 2013, etc., batch 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 bed rock 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[3], 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.
32. The obvious basis of the principle against retrospectivity is the principle of 'fairness’, which must be the basis of every legal rule as was observed in the decision reported in LOffice 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 http://www.judis.nic.in 7/17 W.P(MD)Nos.19910 of 2013, etc., batch 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.
33. 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. 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 the case of 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 confronted with any such situation here.
http://www.judis.nic.in 8/17 W.P(MD)Nos.19910 of 2013, etc., batch
34. 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 implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors.
35. 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 labeled as “declaratory statutes”. The circumstances under which a provision 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 http://www.judis.nic.in 9/17 W.P(MD)Nos.19910 of 2013, etc., batch 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 declaratory for these words may, at times, be used to introduce 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 http://www.judis.nic.in 10/17 W.P(MD)Nos.19910 of 2013, etc., batch 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.
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:
“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 S.115, Code of Civil Procedure, and the legislature has by the amending Act 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.” http://www.judis.nic.in 11/17 W.P(MD)Nos.19910 of 2013, etc., batch
36. It would also be pertinent to mention that assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective. (See. Controller of Estate Duty Gujarat-I v. M.A. Merchant]. We would also like to reproduce hereunder the following observations made by this Court in the case of Govinddas v. Income-tax Officer, while holding Section 171(6) of the Income Tax Act to be prospective and inapplicable for any assessment year prior to 1st April, 1962, the date on which the Income Tax Act came into force:
“11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie http://www.judis.nic.in 12/17 W.P(MD)Nos.19910 of 2013, etc., batch prospectively and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.”
7. A perusal of the ratio of the said decision, which was in relation to an imposition of a direct tax being applied retrospectively, would reveal that 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.
8. In our considered opinion, in the instant case, the principle will apply more squarely as this is a case of indirect tax where the burden of collecting tax on the petitioners lay from the customers who have already purchased the goods and have disposed of any tax liability with the completion of the transaction of sale without there being any indication in the statute for imposition of any future deferred tax. The result, therefore, is that the petitioners cannot now realise tax in respect of goods already sold to the customers for which there was no statutory liability nor was there any existence of a specific charging section for http://www.judis.nic.in 13/17 W.P(MD)Nos.19910 of 2013, etc., batch realisation of such tax retrospective that is, of course, confined only to the period from 01.04.2013 to 07.11.2013.
9. As already indicated above, the grievance of the petitioners stands narrowed down only to this period of the transactions in relation to the aforesaid financial year and therefore, even though it was neither a benefit nor an exemption, yet inflicting an imposition later on clearly amounts to retrospectively realising a tax on the sale of the goods which under the impugned Government Order was not leviable to tax for the aforesaid period. Thus, the burden or the liability on the petitioners for the said period as created by the notices issued to the petitioners by the respondent Tax Department are unsustainable in law. The same, in our opinion, amounts to an unreasonable and an unfair imposition of liability which does not find support from the statutory provisions, as a taxing statute in our opinion has to be construed strictly for imposing any liability.
10. It is trite that a fiscal legislation imposing tax is generally governed by the normal presumption that it is not retrospective and it is a cardinal principle of tax law that the law to be applied is that which is force for the assessment year in question until otherwise provided expressly or by necessary implication. The rule applies to the charging sections and other substantive provisions. A provision which has the http://www.judis.nic.in 14/17 W.P(MD)Nos.19910 of 2013, etc., batch effect of opening up liability will be subject to the rule of strict construction. A legislation cannot be given a greater retrospectivity than is expressly mentioned in the statute nor can such a provision be construed to initiate recovery of liability or commence proceedings in relation thereto in the absence of any charging provision. The impugned realisation sought to be made from the petitioners through the notices of demand would ultimately turn out to be unduly oppressive and confiscatory in nature, inasmuch as by virtue of the impugned liability created under the provisions under challenge, tax would be realised in respect of transactions that have already attained finality and stand foreclosed as the goods have already been supplied by the petitioners to their customers who are no longer available for meeting any such liability that has been created subsequently by virtue of the impugned Government Order.
11. We also find that the period of liability in respect of all the petitioners extending from 01.04.2013 to 07.11.2013 had been protected by an interim measure through the orders of this Court.
12. Accordingly, the Writ Petitions are allowed and the imposition of liability through the demand notices issued under the impugned Government Order in respect of the period from 01.04.2013 to 07.11.2013 at the third point of sale is struck down. However, there shall http://www.judis.nic.in 15/17 W.P(MD)Nos.19910 of 2013, etc., batch be no order as to costs. Consequently, connected miscellaneous petitions are closed.
[A.P.S.,CJ.,] [S.P.,J.]
17.12.2019
Index : Yes/No
MR/RSB
To
1.The Principal Secretary to Government, Commercial Taxes and Registration Department, Government of Tamil Nadu, Fort St. George, Chennai.
2.The Managing Director, Tamil Nadu State Marketing Corporation, CMDA Tower 4th Floor, Gandhi Irwin Bridge Road, Egmore, Chennai.
3.The District Manager, Tamil Nadu State Marketing Corporation, Virudhunagar District.
http://www.judis.nic.in 16/17 W.P(MD)Nos.19910 of 2013, etc., batch THE HON'BLE CHIEF JUSTICE AND SUBRAMONIUM PRASAD, J.
MR/RSB COMMON ORDER MADE IN W.P.(MD)Nos.19910 to 19912, 20282, 20283, 20566, 20567, 20749, 20844 of 2013, 729, 812, 813, 1215, 1681, 2188, 2203, 2994, 3538, 5811, 7540 and 10353 of 2014 and Connected Miscellaneous Petitions 17.12.2019 http://www.judis.nic.in 17/17