Punjab-Haryana High Court
United Riceland Pvt. Ltd. And Anr. vs State Of Haryana And Ors. on 17 December, 2004
Equivalent citations: [2005]140STC42(P&H)
Author: M.M. Aggarwal
Bench: M.M. Aggarwal
JUDGMENT G.S. Singhvi, J.
1. These petitions involve adjudication of the petitioners' challenge to the Haryana General Sales Tax (Amendment) Act, 2003 (Haryana Act No. 4 of 2003, [2003] 132 STC Statutes 50) and the Haryana Value Added Tax (Amendment) Act, 2004 (Haryana Act No. 4 of 2004, [2004] 136 STC Statutes 125). An ancillary question which would require determination by the Court is whether the petitioners are entitled to refund of the tax collected under the Haryana General Sales Tax Act, 1973 (hereinafter referred to as the Haryana Sales Tax Act) on the paddy purchased up to March 31, 1991.
2. For the sake of convenience, we have taken the facts from C.W.P. No. 18485 of 2003.
3. Petitioner No. 1 is a private limited company engaged in the business of export of rice outside India. It purchases paddy from within the State of Haryana and after dehusking the same, exports rice to foreign countries. Petitioner No. 2 is a shareholder of petitioner No. 1. For the assessment year 1982-83 and onwards, the respondents levied purchase tax on the paddy purchased by petitioner No. 1. Similar imposition was made on other dealers engaged in the business of manufacture of rice out of paddy and export thereof. They challenged the levy of tax by filing petitions under Article 226 of the Constitution of India. They also challenged the vires of Section 15-A which was inserted by the Haryana General Sales Tax (Amendment) Act, 1993 (Haryana Act No. 9 of 1993). A Full Bench of this Court upheld the constitutionality of Section 15-A and the levy of purchase tax on the paddy used for manufacturing rice which was exported out of the country--United Riceland Limited, Samana Baha, District Karnal v. State of Haryana [1997] 104 STC 362 (P&H); (1996) 3 PLR 227. The operative part of the judgment of the Full Bench which also contains the final conclusions recorded by it reads as under :
"(i) That the provisions of Haryana Act No. 4 of 1991 are legal, valid and constitutional ;
(ii) the provisions of Section 15-A of the Act are substituted by Act No. 9 of 1993 is intra vires of the provisions of the Constitution rightly imposing the liability upon the petitioners to pay the purchase tax retrospectively ;
(iii) Section 9 of the Act was validly omitted and this Section had not granted any exemption to the petitioners from payment of the tax demanded ;
(iv) the petitioners are liable to pay the purchase tax on the paddy used by them for husking paddy which was ultimately exported out of the country ;
(v) annexure P.1 the notice under Section 40 of the Act is legal, valid and according to law .; and
(vi) the impugned notice of assessment and demand under Sections 28, 29, 31 and 33 of the Act in so far as it directs the payments of the purchase tax is legal, valid and according to law. However, the petitioners are held not liable to pay the amount of interest as specified in the said notice of assessment and demand. The Assessing Authority shall afresh determine the liability of the petitioners to pay the interest in terms of Sub-section 5 of Section 25 of the Act but the interest shall be imposed only from the date of notice of assessment and demand notwithstanding any interim stay granted by any Court in the State of Haryana."
4. In the course of judgment, the Full Bench referred to a large number of judicial precedents including the judgments of the Supreme Court in Goodyear India Limited v. State of Haryana [1990] 76 STC 71, Murli Manohar and Co. v. State of Haryana [1980] 80 STC 79 and Hotel Balaji v. State of Andhra Pradesh [1993] 88 STC 98 (SC) ; AIR 1993 SC 1048, but distinguished the last two mentioned judgments by making the following observations :
"As earlier noted in the aforesaid judgments of the Supreme Court in Hotel Balaji's case [1993] 88 STC 98 and Murli Manohar's case [1991] 80 STC 79, the Supreme Court made reference to the provisions of the Act while interpreting the law to other States. Such observations or contentions made or noted in the judgment of the Supreme Court while interpreting the provisions of the law pertaining to other States may not be deemed finally decided as admittedly the Haryana Act was not called upon to be adjudicated. The judgment proceeding on concessions whether implicit or implied and admittedly not on analysis or examination of the relevant provisions cannot be held to be declaring the law within the meaning of Article 141 of the Constitution. The obiter dictum cannot be treated as precedent particularly when such obiter dictum is not found to be specifically connected with an issue before the Supreme Court. It is, however, acknowledged that obiter dictum of the Supreme Court though not a precedence yet being observations of the apex Court is worthy of respect and considerable weightage. In the light of what has been noted and discussed hereinabove, the law laid down in the aforesaid two judgments cannot be held to be a decision with respect to the matter in controversy before this Court."
5. The petitioners and others challenged the judgment of the Full Bench by filing petitions for special leave to appeal in the Supreme Court. By an interim Order dated April 8, 1996, the Supreme Court directed petitioner No. 1 to deposit 50 per cent of the tax due for the period prior to September 15, 1990 and also furnish bank guarantee for 25 per cent of the remaining tax. In compliance of that direction, petitioner No. 1 deposited a sum of Rs. 1,65,41,420 and furnished bank guarantee of Rs. 82,25,660. The appeal filed by the petitioner and other dealers of Haryana were heard by the Supreme Court along with similar appeals and the writ petitions filed by the dealers of Punjab. All the cases were disposed of by the Supreme Court by a common judgment reported as a Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107 ; (2003) 1 SCC 561. While dealing with the Haryana matters, their Lordships of the Supreme Court took notice of the plea of the appellants that their claim for exemption from levy of purchase tax on the paddy was covered by the ratio of the judgments in Murli Manohar and Co's case [1991] 80 STC 79, Hotel Balaji's case [1993] 88 STC 98 ; AIR 1993 SC 1048 and K.B. Handicrafts Emporium v. State of Haryana [1993] 90 STC 477 ; (1993) Supp. 4 SCC 536 and held the High Court was not justified in not following the ratio of the judgment in Murli Manohar and Company's case [1991] 80 STC 79 (SC) and that the assessees were not liable to pay tax on the paddy purchased in any assessment year ending before April 1, 1991. Paragraphs 25, 27 and 28 of the judgment of the Supreme Court, which have direct bearing on the decision of these writ petitions read as under :
"25. In these cases, in the light of the above discussion, we conclude that specific charging provision of Section 9(1)(b) will be attracted as the assessee purchased paddy (which is not one of the goods specified in Schedule B). Procured rice (manufactured goods) from the said paddy and exported rice outside the territory of India, on which no purchase tax was payable under the general charging provision of Section 6 which is, inter alia, subject to the provisions of Section 9. We have already held above that the assessees will not be liable to pay tax on the purchase of such paddy in view of the provision of Clause (b) of Sub-section (1) of Section 9 in the assessment years in question, or for that matter, any assessment year ending before April 1, 1991. To the same effect is the view expressed by this Court in the cases of Murli Manohar [1991] 80 STC 79 (SC); (1991) 1 SCC 377, Hotel Balaji [1993] 88 STC 98 (SC) ; (1993) Supp 4 SCC 536 and K.B. Handicrafts Emporium [1993] 90 STC 477 (SC); (1993) Supp 4 SCC 589. The High Court was, therefore, clearly in error in not following the ratio of these judgments on untenable grounds.
...................................
27. We have already referred to Sections 6 and 9 of the Haryana Act. To recapitulate, Section 6, which is a general charging Section, provides that every dealer shall be liable to pay tax under the Act on the sale or purchase of, inter alia, declared goods by him in the State at the stage specified under Section 17, It says that at the stage of sale or purchase of the declared goods, the tax shall be levied and paid as specified against such goods in Schedule D. It also provides that where the goods have not been subjected to tax at any of the stages of sale or purchase specified in Schedule D, the tax shall be levied and paid by a dealer liable to pay tax under the Act at the stage of the last purchase of such goods by him, after providing deductions admissible under Section 27. It is not possible to read that the Section by itself creates an independent charge on the declared goods. It merely indicates the stage at which the tax shall be leviable and payable. Indeed, Clause (a) of Sub-section (1) of Section 6 itself mentions that in respect of the declared goods tax shall be levied at the stage specified in Section 17. It is, therefore, futile to contend that under Section 17 levy of tax on declared goods is not dependent on the use and disposal of such goods whether as such or in the manufactured form. It has already been pointed out above that when paddy, declared goods, is manufactured into rice which is exported outside India, as postulated in Clause (b) of Sub-section (1) of Section 9 of the Haryana Act, the liability for payment of purchase tax on such paddy would be nil. The Legislature enacted a specific provision [Section 9(l)(b)] with regard to levy and payment of purchase tax on paddy when rice is procured therefrom and exported outside India. We find it difficult to sustain the argument that in view of Section 17 of the Haryana Act, levy of purchase tax on paddy would be valid notwithstanding the fact that the same is exempted under Section 9(l)(b). Though in Murli Manohar case [1991] 80 STC 79; (1991) 1 SCC 377, the raw material was not one of the declared goods, it makes no difference so far as the ratio of that decision is concerned.
28. For the purpose of Section 6 read with Section 15 of the Haryana Act, a dealer is liable to pay tax on the taxable turnover of his sales and purchases. The expression 'taxable turnover' is defined in Clause (p) of Section 2 to mean that part of a dealer's gross turnover which remains after allowing deductions under Section 27 of the Haryana Act. Explanation (2) to the said Clause provides that the proceeds of sale of any goods on the purchase of which tax is leviable under the Act or the purchase value of any goods on the sale of which tax is leviable under the Act shall not be included in the turnover. Inasmuch as the sale of paddy is taxable under the Act, the purchase value of such paddy cannot be included in the turnover; it is evident that no purchase tax can be imposed under Section 6 of the Haryana Act, This explains the reasons as to why Section 9 specifically provides that the charge thereunder shall be levied in the circumstances in which no tax is payable under any other provisions of the Act. In other words, it is only because no tax can be levied and collected on the purchase of paddy either under Section 6 or under any other provisions of the Haryana Act, that Section 9 imposes the tax, except in the circumstances provided in Clause (b) of Sub-section (1) of Section 9. This is the view taken by a Bench of three learned Judges of this Court in Murli Manohar case [1991] 80 STC (SC); (1991) 1 SCC 377 where the liability under Section 9 was directly in question. This view was reiterated by two more Benches of this Court in Hotel Balaji case [1993] 88 STC 98; (1993) Supp 4 SCC 536 and K.B. Handicrafts Emporium [1993] 90 STC 477 (SC); (1993) Supp, 4 SCC 589. The Full Bench of the High Court, in our view, was not right in declining to act upon the ratio of the judgments in the aforementioned cases. In the result, we hold that the amendment to the definition of turnover in Clause (p) of Section 2 and of Section 6 does not affect the position when Section 9 is part of the statute."
6. Their lordships of the Supreme Court then considered the provisions of the Punjab General Sales Tax Act, 1948 (for short, "the Punjab Act") and upheld the levy of purchase tax on paddy under Section 4-B of that Act. In paragraph 39, the Supreme Court noticed the similarity in the provisions of the Punjab Act and the Haryana Act but held that similarity alone would not determine the liability of a dealer to pay purchase tax on the paddy. In paragraph 50, the Supreme Court reiterated that no purchase tax was payable on paddy under Section 6 of the Sales Tax Act. For the sake of reference, paragraphs 39 and 50 of the judgment in Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107 CSC); (2003) SCC 561 are also reproduced below (paragraphs 39 and 52 in STC) :
"39. Though Section 4-B of the Punjab Act is not in iisdem terminis with Section 9(l)(b) of the Haryana Act, however, they are in pari materia. It is not the similarity of the said provisions alone that would determine the liability of a dealer to pay purchase tax on paddy under the said Acts. It is the ambit of charging Sections in those Acts, which will be determinative. Section 6 of the Haryana Act, as pointed out above, did not charge purchase tax on paddy before October 14, 1990 and in the circumstances mentioned in Section 9(l)(b) imposed purchase tax but provided for its exemption in specified situations.
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52. It is true that Section 15-A does not permit refund of purchase tax paid on paddy, cotton and oil seeds by an assessee though such a relief is available in regard to other goods. In the light of the above discussion, the challenge to Section 15-A on the ground of violation of Section 15(c) of the CST Act or Article 286(l)(b) of the Constitution cannot be sustained because the only relief that is granted by Section 15(c) is reduction of tax leviable on the sale of rice procured from out of paddy, where tax has been levied on sale or purchase of such paddy inside the State. This relief is incorporated by the Haryana Act in Clause (iii) of the proviso to Sub-section (1) of Section 16. Even Clause (b) of sub-Article (1) of Article 286 does not provide for exemption of tax on the purchase of paddy. There is no other provision either in Article 286 or in the CST Act which bars a State from levying tax on the sale or purchase of paddy which is not exported out of the territory of India. Section 15-A proceeds on the premise that purchase tax is payable, inter alia, on paddy. From the above discussion, it is clear that before the omission of Section 9 from the Haryana Act, no purchase tax was payable on paddy under Section 6 of the Act. Therefore, during the aforesaid period, the assessee cannot complain of the denial of the benefit of adjustment and refund of purchase tax on the basis of Section 15-A of the Haryana Act, The position would, however, be different after April 1, 1991, when Section 9 was omitted from the Act."
7. Paragraph 62 of the judgment, which contains the conclusions recorded by the Supreme Court, is as follows (para 64 in STC):
"(1) In the specified circumstances in which charge of purchase tax on the raw material is imposed, Clause (b) of Sub-section (1) of Section 9 of the Haryana Act and the exemptions provided therein would apply ; the law declared by this Court in Murli Manohar & Co. [1991] 80 STC 79; (1991) 1 SCC 377, Hotel Balaji [1993] 88 STC 98 ; (1993 Supp 4 SCC 536) and K.B. Handicrafts [1993] 90 STC 477 (SC); (1993) Supp 4 SCC 589 holds the field;
(2) while Section 9 remained on the statute till April 1, 1991, retrospective amendments of Sections 2(p), 6, 15 and 15-A of the Haryana Act would make no difference in regard to levy of purchase tax on paddy ;
(3) adjustment of purchase tax paid on paddy (raw material) is permissible under Section 15-A of the Haryana Act during the relevant period ;
(4) by virtue of Section 15-A of the Haryana Act, denial of refund of purchase tax, if any, paid by a dealer is not illegal much less unconstitutional ; and (5) mere similarity between Section 9(l)(b) of the Haryana Act and Section 4-B of the Punjab Act would not relieve a dealer of the liability to pay purchase tax on paddy as the scope of charging Sections under the 'said Acts are different'."
8. After the judgment in Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107 (SC); (2003) 1 SCC 561, petitioner No. 1 applied for refund of tax levied and collected on the purchase of paddy made during the period relating to assessment years 1982-83 to 1992-93. The Excise and Taxation Officer-cum-Assessing Authority, Karnal (respondent No. 3) substantially accepted the claim of petitioner No. 1 and released the bank guarantee furnished by it. He also passed Order dated March 13, 2003 (annexure P.4) for refund of Rs. 1,58,35,015. However, the amount was not released to petitioner No. 1 apparently because the State Government had decided to amend the Sales Tax Act which was actually amended vide Haryana Act No. 4 of 2003 vide Notification No. Leg. 5/2003 dated March 27, 2003. Simultaneously, the Haryana Value Added Tax Act, 2003 (hereinafter referred to as "the VAT Act") was amended by Haryana Act No. 4 of 2004. That amendment was published vide Notification No. Leg. 6/2004 dated March 5, 2004. After the amendment of the two Acts, respondent No. 3 filed the application made on behalf of petitioner No. 1 for refund of the amount. Simultaneously, he issued notice dated November 13, 2003 for deposit of Rs. 160.51 lacks with a threat that in case it fails to deposit the amount, recovery will be effected under the Land Revenue Act, 1887.
9. The petitioners have challenged the amendments brought about in the Haryana General Sales Tax Act and the VAT Act by Haryana Act No. 4 of 2003 and Haryana Act No. 4 of 2004 respectively on the following grounds :
(i) The impugned amendments cannot be treated as validating Acts because in Satnam Overseas. (Export) v. State of Haryana [2003] 130 STC 107 (SC; (2003) 1 SCC 561, the Supreme Court did not declare any provision of the Haryana Sales Tax Act to be ultra vires to the provisions of the Constitution.
(ii) The State Legislature cannot nullify the judgment of the Supreme Court which held that retrospective amendment of Sections 2(p), 6, 15 and 15-A of the Haryana Sales Tax Act will not make any difference in regard to levy of purchase tax on paddy till April 1, 1991 when Section 9 remained on the statute book.
(iii) The impugned amendments amount to usurpation of the judicial powers with the Legislature which is impermissible.
(iv) The amendment in Section 6 by Haryana Act No. 4 of 2003 is inconsequential because as per the judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana [2003] 130, STC 107 ; (2003) 1 SCC 561, that Section did not authorise the State to levy tax on the paddy purchased by the millers and in the absence of retrospective amendment of Section 9, the levy of purchase tax on paddy cannot be validated.
(v) The impugned Acts are unreasonable, arbitrary and violative of Article 14 of the Constitution of India because they seek to give excessive retrospectively to the provisions of Section 6 of the Haryana Sales Tax Act.
(vi) The impugned Acts seek to take away the accrued and vested right of the petitioners and, therefore, the same are liable to be struck down being violative of Article 14 of the Constitution.
10. In C.W.P. No. 18485 of 2003, it has also been pleaded that the impugned amendments cannot be given effect to in the petitioners' case because Order dated March 13, 2003 passed by respondent No. 3 has not been set aside or nullified by a superior adjudicating authority.
11. In almost identical written statements filed by the respondents in all the cases, it has been pleaded that the retrospective amendment of Section 6 along with a validating Clause was necessitated because Section 9 of the Haryana Sales Tax Act had been declared unconstitutional by the Supreme Court in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71 and by the recent judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana [20031 130 STC 107; (2003) 1 SCC 561, which partially reversed the judgment of the Full Bench of this Court in United Riceland Limited v. State of Haryana [1997] 104 STC 362 (P&H) [FB], the levy of purchase tax on the paddy up to March 31, 1991 has been invalidated on the basis of Section 9(l)(b) of the Haryana Sales Tax Act. It has been further averred that if the judgment of the Supreme Court in the case of Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107; (2003) 1 SCC 561 is given effect to, the State Government will have to refund 50 per cent of the past arrears and forego the remaining 50 percent resulting in huge loss to public exchequer running into several crores and, therefore, the Legislature thought it proper to amend Section 6 and bring it at par with Section 4-B of the Punjab Act. According to the respondents, the Legislature has inherent power to enact a law or amend the existing law with retrospective effect and the impugned legislations enacted for validating the levy of purchase tax on the paddy do not suffer from any constitutional infirmity.
12. The petitioners have filed replication in C.W.P. No. 18485 of 2003 reiterating their stand on the constitutionality of the impugned amendments.
13. Shri A.K. Ganguly, Senior Advocate who led the arguments on behalf of the petitioners made the following submissions :
(i) The impugned Acts cannot be treated as validating statutes because the Supreme Court did not declare any provision of the Haryana Sales Tax Act as unconstitutional and the Legislature does not have the power to enact such law.
(ii) The legislative power of the State cannot be used to nullify or override the judgment of the court without removing the basis of the judgment.
(iii) The only object of the impugned amendments is to frustrate the right of the petitioners to receive refund of the tax illegally collected on the purchase of paddy. Thus, it is an attempt to wriggle out of the binding effect of the decision of the Supreme Court by resorting the legislative powers which is impermissible.
(iv) The State cannot validate the levy of purchase tax on paddy with retrospective effect because Section 9(l)(b) under which the dealers were entitled to exemption up to March 31, 1991 has not been obliterated from the statute book with retrospective effect.
(v) Section 6 is a general charging Section, whereas Section 9 is a special provision for levy of purchase tax on paddy and in case of the conflict, the latter would prevail.
(vi) The impugned amendments are violative of Article 14 of the Constitution, inasmuch as, they seek to validate levy of purchase tax under Section 9 and not any other tax which can be charged under Section 6.
14. In support of his arguments, Shri Ganguly relied on the judgments of the Supreme Court in D. Cawasji and Co. v. State of Mysore [1985] 58 STC 1, S.R. Bhagwat v. State of Mysore (1995) 6 SCC 16, Sachidananda Misra v. State of Orissa (2004) 8 SCC 599, Municipal Corporation of the City of Ahmedabad v. New Shrock Spg. and Wvg, Co. Ltd. (1970) 2 SCC 280, Gobind Sugar Mills Ltd. v. State of Bihar [1999] 115 STC 358; (1999) 7 SCC 76, Sultana Begum v. Prem Chand Jain (1997) 1 SCC 373, State of Gujarat v. Raman Lal (1983) 2 SCC 33, Union of India v. Toshar Ranjan Mohanti (1994) 5 SCC 450, Eicher Motors Ltd. v. Union of India (1999) 2 SCC 361, Government of Andhra Pradesh v. G.V.K. Girls High School (2000) 8 SCC 370, State of Orissa v. Manglam Timber Products (2004) 1 SCC 139 and Ex. Capt. K.C. Arora v. State of Haryana (1984) 3 SCC 281.
15. Shri Avneesh Jhingan, learned counsel appearing for the petitioners in C.W.P. No. 725 of 2004 adopted the arguments of Shri A.K. Ganguly and argued that the petitioners cannot be deprived of their right to get refund of the tax illegally collected by the State. He relied on the judgments of the Supreme Court in Shri Prithvi Cotton Mills Ltd, v. Broach Borough Municipality [1971] 79 ITR 136 and National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India (2003) 5 SCC 23.
16. Shri K.S. Dhillon, learned counsel appearing for some of the petitioners in C.W.P. No. 20381 of 2003 also adopted the arguments of Shri Ganguly.
17. Shri A.K, Chopra, learned Senior Advocate appearing for the respondents heavily relied on the observations made by the Supreme Court in relation to Section 4-B of the Punjab Act and argued that the impugned amendments cannot be declared unconstitutional because the main object thereof is to bring the provisions of the Haryana Sales Tax Act at par with the Punjab Act. Shri Chopra emphasised that the State Legislature has the power to enact and also to amend the existing law with retrospective effect and argued that by virtue of the amendment of Section 6 making it subject to the provisions of Sections 15 and 27 only, the same has been brought in conformity with Section 4-b of the Punjab Act. He then argued that the validating Clause contained in the amending Acts is intended to relieve the State of the burden to refund a sum of Rs. 7 crores which had become payable to the petitioners and other dealers in view of the judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107 (SC); (2003) 1 SCC 561 and the Legislature is competent to enact such law. Shri Chopra further argued that Section 6 of the Haryana General Sales Tax Act, which is the charging Section, was not properly analysed before the Supreme Court along with the definition "turnover" contained in Section 2(p) and if the impugned amendments are read in that light, no fault can be found with the legislative steps taken by the State to protect the public revenue. In support of his arguments, Shri Chopra relied on the judgments of the Supreme Court in Polaki Motors v. State of Orissa, [1993] 88 STC 259, Krishnamurthy and Co. v. State of Madras [1973] 31 STC 190, Hira Lal Rattan Lal v. Sales Tax Officer, Section III Kanpur [1973] 31 STC 178, Devi Dass Gopal Krishan Pvt Ltd. v. State of Punjab [1994] 95 STC 170, Birla Cotton Spinning and Weaving Mills Ltd, v. State of Haryana [1979] 43 STC 158, Bharat Engineering Company v. Assessing Authority, Karnal [1980] 45 STC 363 ; and Goodyear India Ltd. v. State of Haryana [2001] 123 STC 577.
18. We have given serious thought to the respective arguments. Sections 6 and 9(l)(b) of the Haryana General Sales Tax Act, which were considered by the Supreme Court in the case of Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107, read as under :
Section 6. Incidence of taxation.--(1) Subject to other provisions of this Act, every dealer whose gross turnover during the year immediately preceding the 27th day of May 1971, exceeded the taxable quantum, shall from the 27th day of May, 1971 and every other dealer shall, on the expiry of thirty days after the date on which his gross turnover first exceeds the taxable quantum, be liable to pay tax under this Act on the sale or purchase of goods by him in the State at the stage hereinafter provided--
(a) on declared goods at the stage specified under Section 17 :
(b) and (c).....................
Provided that this Sub-section shall not apply to a dealer who deals exclusively in goods specified in Schedule B or who executes a sub-contract with a contractor who is liable to pay tax in respect of the works contract of which the sub-contract is a part :
Provided further that in the case of a dealer,--
(a)..................
(b) who manufactures or processes any goods for sale, the liability to pay tax shall commence, from the date on which his gross turnover, during any year, first exceeds the taxable quantum ;
(c)..................
(d) who deals in declared goods, the liability to pay tax shall commence from the date on which his gross turnover of such goods exceeds the taxable quantum ;
(e) to (h).........:..
(3)-(5)................
Section 9(1)(b) 9(1) Where a dealer liable to pay tax under this Act,--
(a)...................
(b) purchase goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or dispatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export outside the territory of India within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act, 1956 ; or
(c).......................
in the circumstances in which no tax is payable under any other provision of this Act, there shall be levied, subject to the provisions of Section 17, a tax on the purchase of such goods at such rate as may be notified under Section 15."
19. Amended Section 6 (as amended by Haryana Act No. 4 of 2003) and Clause 3 of the Amending Act, the vires of which is under challenge, read as under :
Amended Section 6:
"Section 6 : Incidence of taxation--(1) Subject to the provisions of Sections 15 and 27 of this Act, every dealer whose gross turnover during the year immediately preceding the 27th day of May, 1971 exceeded the taxable quantum, shall from the 27th day of May, 1971 and every other dealer shall, on the expiry of thirty days after the date on which his gross turnover first exceeds the taxable quantum, be liable to pay tax under this on the sale or purchase of goods by him in the State at the stage hereinafter provides,--
Clause 3
3. Notwithstanding anything to the contrary contained in any judgment, decree or Order of any court or other authority, any levy, assessment, reassessment or collection of any amount by way of tax made or purporting to have been made in respect of purchase of paddy effected on or after 1st April, 1981 and used in the manufacture of rice sold in the course of export of goods out of the territory of India within the meaning of Sub-section (1) of Section 5 of the Central Sales Tax Act, 1956 (74 of 1956) and any action taken or thing done in relation to such levy, assessment, reassessment of collection shall be deemed to be as valid and effective as if such levy assessment reassessment of collection had been made or action taken or things done under the principal Act, and accordingly,--
(a) all acts, proceedings or things done or action taken by the State Government or by any officer of the State Government or by any authority, in connection with the levy, assessment, reassessment or collection of such tax shall, for all purposes be deemed to be and to have always been, done or taken in accordance with law.
(b) no suit or other proceedings shall be maintained or continued in any Court or before any authority for the refund of any such tax so collected; and
(c) no Court or authority shall enforce any decree or Order directing the refund of any such tax so collected."
20. Clause (f) of Haryana Act No. 4 of 2004 vide which the VAT Act was amended, also seeks to validate the tax levied on the purchase of paddy effected between April 1, 1981 and March 31, 2003. The same reads as under :
"(f) the tax levied under Section 6 read with Section 17 of the Act of 1973 on the last purchase of paddy effected between April 1, 1981 and March 31, 2003 (both days inclusive), by a dealer liable to tax under the said Act, shall be valid notwithstanding anything to the contrary contained in any judgment, decree or Order of any court or other authority, any levy, assessment, reassessment or collection of any amount by way of tax made or purporting to have been made in respect of purchase of paddy effected in the said period and used in the manufacture of rice sold in the course of export of goods out of the territory of India within the meaning of Section 5 of the Central Act and any action taken or thing done or purporting to have been taken or done in relation to such levy, assessment, re-assessment or collection, shall be deemed to be as valid and effective as if such levy, assessment, reassessment or collection, had been made or action taken or thing done under the said Act, and accordingly--
(i) all acts, proceedings or things done or action taken by the State Government or by any officer of the State Government or by any authority, in connection with the levy, assessment, reassessment or collection of such tax shall, for all purposes be deemed to be, and to have always been, done or taken in accordance with law ;
(ii) no suit or other proceedings shall be maintained or continued in any court or before any authority for the refund of any such tax so collected ; and
(iii) no court or authority shall enforce any decree or Order directing the refund of any such tax so collected."
21. Section 4-B of the Punjab Act, on which much emphasis has been placed by Shri A.K. Chopra, reads thus :
"4-B. Levy of purchase tax on certain goods.--Where a dealer who is liable to pay tax under this Act purchases any goods other than those specified in Schedule B, from any source and
(i) uses them within the State in the manufacture of goods specified in Schedule B, or
(ii) uses them within the State in the manufacture of any goods other than those specified in Schedule B, and sends the goods so manufactured outside the State in any manner other than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, or
(iii) uses such goods for a purpose other than that of resale within the State or sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, or
(iv) sends them outside the State other than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India, and no tax is payable on the purchase of such goods under any other provisions of this Act, there shall be levied a tax on the purchase of such goods at such rate not exceeding the rate specified under Sub-section (1) of Section 5 as the State Government may direct."
22. At this stage, we may notice some judicial precedents which have bearing on the decision of the constitutional validity of the impugned amendments. In Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1971] 79 ITR 136, a Constitution Bench of the Supreme Court considered the validity of the Gujarat Imposition of Taxes by Municipalities (Validation) Act, 1963, which was enacted during the pendency of the writ petitions filed by the owners of the properties questioning the assessment lists prepared by Broach Borough Municipality. Their Lordships of the Supreme Court upheld the validity of the amended law and laid down the following propositions :
"When a Legislature sets out to validate a tax, declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the Legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the court shall not bind, for that is tantamount to reversing the decision in exercise of judicial power which the Legislature does not possess or exercise. A Court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances..,.
Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law. Sometimes the Legislature gives its own meaning and interpretation of the law under which the tax was collected and by legislative fiat makes the new meaning binding upon courts....
The validity of a validating law, therefore, depends upon whether the Legislature possesses the competence which it claims over the Subject-matter and whether in making the validation it removes the defect which the Courts had found in the existing law and makes adequate provisions in the validating law for a valid imposition of the tax." (underlining* is ours).
23. In D. Cawasji & Co. v. State of Mysore [1985] 58 STC 1, the Supreme Court considered the constitutional validity of the Mysore Sales Tax (Amendment) Act, 1969. The facts of that case were that with effect from April 1, 1966, the State Government started collecting sales tax on the sale price of arrack and on excise duty and cesses. The appellant filed a writ petition challenging the validity of collection of sales tax on excise duty and cesses. The High Court upheld the appellant's contention and quashed the levy of sales tax on excise duty and cesses. The appeal filed by the State Government in the Supreme Court was withdrawn. Thus, the judgment of the High Court became final. Thereafter, the State Government promulgated an Ordinance to validate the levy of sales tax on excise duty and cesses. The Ordinance was replaced by the Mysore Sales Tax (Amendment) Act, 1969 with retrospective effect from April 1, 1966, The Act also contained the following validating Clause :
"Notwithstanding anything contained in any judgment, decree or Order of any Court or other authority, the sales tax on country liquor other than toddy levied or collected or purported to have been levied or collected shall, for all purposes, be deemed to be and to have always been validly levied or collected in accordance with law." The Section also validated all proceedings for the levy or collection of such tax and also provided that "no suit or proceeding shall be entertained, maintained or continued in any Court for the refund of any tax so paid" and "no Court shall enforce any decree or Order directing the refund of any tax so paid".
24. The Mysore, High Court dismissed the writ petitions filed by the appellants questioning the validity of the Amending Act. On appeal, the Supreme Court held :
"That in its earlier judgment, the High Court had held that sales tax could not be collected on excise duty and cesses imposed on arrack and the High Court had issued writs directing the State Government to forbear from collecting such sales tax and to refund to the appellant the amounts which might have been collected from it by way of sales tax on items of excise, health, cess and education cess. That judgment became final on the Government withdrawing its appeal therefrom to the Supreme Court. The Amendment Act did not proceed to cure the defect or lacuna by bringing in an unamendment providing for exigibility of sales tax on excise duty, health, cess and education cess. Instead of remedying the defect or removing the lacuna the Amendment Act had merely sought to raise the rate of tax from 61/2 per cent to 45 per cent, with retrospective effect from April 1, 1966, to avoid the liability of refunding the excess amounts collected and had further purported to nullify the judgment and Order passed by the High Court which had become conclusive and become binding on the parties. Thus, the only object of enacting the Amendment Act was to nullify the effect of the judgment of the High Court and to enable the State Government to retain the amount wrongfully and illegally collected as sales tax. The enhancement of the rate of tax was, therefore, clearly arbitrary and unreasonable. To the extent that the Act imposed the higher levy with retrospective effect and it sought to nullify the judgment and Order of the High Court the Act was invalid and unconstitutional." (Emphasis* supplied).
25. In the Municipal Corporation of the City of Ahmedabad v, New Shrock Spinning and Wvg. Co. Ltd. (1970) 2 SCC 280, the Supreme Court considered the constitutional validity of Section 152-A of the Bombay Principal Municipal Corporation (Gujarat Amendment and Validating Provisions) Ordinance, 1969 vide which the Municipal Corporation was authorised to refuse to refund the amount of tax illegally collected despite the Orders of the Court. While striking down the impugned provision, the Supreme Court relied on the earlier judgments and held :
" .......That provision attempts to make an indirect inroad into the judicial powers of the State. The Legislature under our Constitution have within the prescribed limits powers to make laws prospectively as well as retrospectively. By exercise of those powers, the Legislature can remove the basis of a decision rendered by a competent Court thereby rendering the decision ineffective. But no Legislature in this country has power to ask the instrumentability of the State to disobey or disregard the decisions given by Courts."
26. In G.C. Kanungo v. State of Orissa (1995) 5 SCC 96, the Supreme Court considered the constitutionality of the Arbitration (Orissa Second Amendment) Act, 1991 which had the effect of nullifying of awards already made by the Special Tribunal. While upholding the plea of the petitioner that the State Legislature was not competent to enact law to nullify the award which had become final, the Supreme Court held :
"When awards are made in disputes between the parties by the arbitrators of their choice or arbitrators who may be appointed by the Court on their behalf, as provided for under the Principal Act, such awards, can never be regarded as those made by the arbitrators in exercise of the judicial power of the State conferred upon them. However, if reasoned awards are made by Special Arbitration Tribunals constituted under a legislative enactment in exercise of the power conferred upon them under such enactment in the mater of adjudicating upon disputes between the parties according to accepted norms of judicial procedure, can such awards be regarded as those rendered by the arbitration tribunals in exercise of the judicial power of the State conferred upon them under the legislative enactment................
When under the 1984 Amendments Act, the Special Arbitration Tribunals had been constituted by the State Government and were conferred by that enactment, the power of adjudicating upon the disputes between parties referred to them, conforming to the normal judicial procedure and by making reasoned awards, it must be held that the awards so made by the Special Arbitration Tribunals are those made in exercise of State's judicial power conferred upon them under the 1984 Amendment Act for deciding the disputes between the parties by having recourse to normal judicial process.
The impugned 1991 Amendment Act seeks to nullify the awards made by the Special Arbitration Tribunals constituted under the 1984 Amendment Act, in exercise of the power conferred upon them by that Act itself. When, the awards made under the 1984 Amendment Act by the Special Arbitration Tribunals in exercise of the State's judicial power conferred upon them which cannot be regarded as those merged in Rules of Court or judgments and decrees of Courts, are sought to be nullified by the 1991 Amendment Act, it is clear that legislative power of the State Legislature is used by enacting the impugned 1991 Amendment Act to nullify or abrogate the awards of the Special Arbitration Tribunals by abrogating to itself, a judicial power. Therefore, the State Legislature by enacting the 1991 Amendment Act has encroached upon the judicial power entrusted to judicial authority resulting in infringement of a basic feature of the Constitution--the Rule of Law."
27. In S.R. Bhagwat v. State of Mysore (1995) 6 SCC 16, the Supreme Court considered the validity of the Karnataka State Civil Services (Regulation of Promotion, Pay and Pension) Act, 1973, by which the State Government sought to nullify the binding judicial pronouncements. While striking down Section 11 of the Act, the Supreme Court observed :
"It is now well-settled by a catena of decisions of this Court that a binding judicial pronouncement between the parties cannot be made ineffective with the aid of any legislative power by enacting a provision which in substance overrules such judgment and is not in the realm of a legislative enactment which displaces the basis or foundation of the judgment and uniformly applies to a class of persons concerned with the entire subject sought to be covered by such an enactment having retrospective effect.
In the present case, the High Court had not struck down any legislation which was sought to be re-enacted after removing any defect retrospectively by the impugned provisions. This is a case where on interpretation of existing law, the High Court had given certain benefits to the petitioners. That Order of mandamus was sought to be nullified by the enactment of the impugned provisions in a new statute. This would be clearly impermissible legislative exercise.
A mere look at Sub-section (2) of Section 11 shows that the respondent-State of Karnataka, which was a party to the decision of the division Bench of the High Court against it had tried to get out of the binding effect of the decision by resorting to its legislative power. The judgments, decrees and Orders of any Court or the competent authority which had become final against the State were sought to be done away with by enacting the impugned provisions of Sub-section (2) of Section 11. Such an attempt cannot be said to be a permissible legislative exercise. Section 11(2), therefore must be held to be an attempt on the part of the State Legislature to legislatively overrule binding decisions of competent Courts against the State."
28. The proposition of law which can be culled out from the afore-mentioned judgments is that the Legislature has the power to enact, for the first time or to amend, the existing law with retrospective effect. However, this power is subject to the following conditions:
(i) The Legislature is competent to enact law on the particular subject.
(ii) The words used in the legislation must expressly provide or clearly imply retrospective operation.
(iii) The retrospectively of the law must be reasonable, otherwise it runs the risk of being struck down as unconstitutional.
(iv) The legislative power cannot be used to subvert or overcome a judicial decision without removing the statutory basis of the decision.
29. In the light of the above, we shall now consider whether the sole purpose of the impugned amendment is to nullify the judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107; (1993) Supp 4 SCC 536 and, therefore, the same are ultra vires to the legislative power of the State. A bare reading of the two amending Acts shows that by amending Section 6 of the Haryana Sales Tax Act, the State Legislature has made the provisions of that Section subject to Sections 15 and 27, whereas unamended Section 6 was subject to other provisions of the Act, Section 9(l)(b) of the Haryana Sales Tax Act, which was deleted w.e.f. April 1, 1991, has not been erased from the statute book with retrospective effect. Notwithstanding this, by virtue of Clause 3 of Haryana Act No. 4 of 2003 and Clause (f) of Haryana Act No. 4 of 2004, attempt has been made to validate and legalise the levy of tax on purchase of paddy on or after April 1, 1981. The use of the expression "notwithstanding anything to the contrary contained in judgment, decree or Order of any Court..." in the validation Clause contained in Haryana Act No. 4 of 2003 leaves no manner of doubt that the sole purpose of that Clause is to nullify the effect of the judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107; (1993) Supp 4 SCC 536 vide which the levy of purchase tax on the paddy up to March 31, 1991 was declared illegal. What the Legislature has done is to simply override the judgment of the Supreme Court without amending the scheme of the Haryana Sales Tax Act and deleting Section 9(l)(b) under which the petitioners and other dealers engaged in the manufacture of rice were entitled to exemption from levy of tax on the purchase of paddy. Therefore, by applying the ratio of the judgments of the Supreme Court in Prithvi Cotton Mills Ltd. v. Broach Borough Municipality [1971] 79 ITR 136, D. Cawasji and Co. v. State of Mysore [1985] 58 STC 1 and Municipal Corporation of the City of Ahmedabad v. New Shrock Spg. and Wvg. Co. Ltd. (1970) 2 SCC 280, we hold that the validation Clause contained in Haryana Act No. 4 of 2003 and Clause (f) of Haryana Act No. 4 of 2004 are ultra vires to the powers of the State Legislature.
30. Before parting with this aspect of the case, we may refer to some of the judgments on which reliance was placed by Shri A.K. Chopra. In Polaki Motors v. State of Orissa [1993] 88 STC 259, the Supreme Court considered the validity of the Orissa Additional Sales Tax Act, 1975, as amended in 1983. While upholding the impugned legislation, their Lordships of the Supreme Court observed as under:
"Both the Sales Tax Act of 1947 and the Additional Sales Tax Act of 1975 (as amended in 1983) deal with the topic of levy of sales tax on sales or purchases which is within the legislative competence of the State Legislature. Both the levies come under the same topic of taxes on the sale or purchase of goods under entry 54 of List II of Schedule VII to the Constitution. Instead of levying the tax one enactment the State has chosen to levy the same under two different enactments. By choosing some transactions of sale of goods alone for levy of sales tax in the first instance the Legislature does not exhaust its legislative power in the field of tax on sale of goods. The law does not require the entire gamut under the topic of tax on sales to be covered in the first or one enactment itself on peril of losing its legislative competence on that topic or field. The Legislature may choose certain goods alone or certain dealers or class of dealers alone for purposes of levy. Later certain other goods or dealers or class of dealers may be included in the taxation net or some already in the net omitted. Rates of tax, points of taxation and single point and multi-point scheme are all subject to legislative changes, additions and modifications. If the State Legislature at the time of enactment of the principal Act, viz., the Act of 1947, had provided in the charging Section that certain transactions are liable to single point levy and certain other transactions are liable for multi-point levy and yet other transactions are exempted and if some dealers or class of dealers or the purchases or a class of purchasers are exempt and others not exempt no exception to such levy could have been taken. It will not make any different if the same thing is done under two different enactments or more than one enactment. It is not correct to state that because the Principal Act contemplated a single point levy it is not open to the State Legislature to adopt a multi-point levy at a different stage or take certain specific transactions or gross turnover for multi-point taxation. It is also not necessary that the dealer should be enabled to pass on the incidence of the tax on sale to the purchaser in Order that it might be a tax on sales of goods. There being no legal or constitutional bar for a combination of single point levy and a multi-point levy and levying of additional tax, there is no infirmity or constitutional inhibition, which would invalidate the Orissa Additional Sales Tax (Amendment and Validation) Act of 1983.
The Validating Act of 1983 was enacted to remedy the defects pointed out by the Supreme Court in the Ashok Service Centre case [1983] 53 STC 1. The object of the Act was not only to amend the law from a past date but also to protect and validate actions already taken. By enacting retrospectively a valid and legal taxing provision the law creates a fiction that the assessments made and the tax collected are under the new re-enacted law. Once the amended provision is given retrospective operation, the fiction operates and it was not necessary to specifically provide that all assessments made or actions taken or notifications issued under the Act before amendment shall be deemed to be made, taken or issued under the new provision though the Legislatures often resort to such practice. The effect of retrospectively amending the provisions would, for all legal purposes, be that amended provisions shall be deemed to have been included in the original Act from April 1, 1979, and all consequences and incidences which if this amended provision had been there since April 1, 1979 has to be carried to its logical conclusion."
31. In Hira Lal Rattan Lal v. Sales Tax Officer, Section III, Kanpur [1973] 31 STC 178, the Supreme Court considered the constitutionality of the U.P. Sales Tax (Amendment and Validation) Act, 1970 which was enacted in the backdrop of the Allahabad High Court judgment in Tilok Chand Prasan Kumar v. Sales Tax Officer, Hathras [1970] 25 STC 118, which had struck down the levy of tax on the foodgrains under Section 3-D of the U.P. Sales Tax Act. The High Court dismissed the writ petitions filed for challenging the 1970 Act. While affirming the judgment of the High Court, the Supreme Court held as under :
"(i) that a fresh levy of tax could be imposed retrospectively ;
(ii) that the Legislature was competent to separate processed or split foodgrains from unsplit or unprocessed foodgrains and treat them as two separate and independent goods ;
(iii) that by enacting the amending Act, the Legislature had not usurped legislative power but had only made its legislative intent clear ;
(iv) that Explanation II to Section 3-D(l) did not violate Article 14 of the Constitution of India ;
(v) that the retrospective levy was not violative of Article 19(l)(f) or (g); the amendment was necessitated because of the Legislature's failure to bring out clearly in the principal Act its intention to separate processed or split foodgrains from unprocessed or unsplit foodgrains and the retrospective amendment became necessary as otherwise the State would have had to refund large sums of money;
(vi) that the fact that the retrospective levy did not afford an opportunity to the dealers to pass on the tax to the consumers had no relevance in considering the legislative competence of the levy ;
(vii) that Explanation II clearly brought to tax with retrospective effect split or processed foodgrains as well ;
(viii) that no fresh notification was necessary to tax split or processed foodgrains ; because of Explanation II, the expression 'foodgrains' in the notification already issued had to be read as containing two different items, processed or split foodgrains and unprocessed or unsplit foodgrains ;
(ix) that Section 3-D had not made an excessive delegation of legislative function to the executive."
32. In Krishnamurthy and Co. v. State of Madras [1973] 31 STC 190, the Supreme Court approved the judgment of the Madras High Court, which had upheld the amendment made in the Madras General Sales Tax Act in 1967 and held that the amending Act was intended to cure an infirmity as revealed by the judgment of the High Court and to validate the past levy and collection of tax in respect of all kinds of non-lubricating mineral oils, including furnace oils, w.e.f. April 1, 1964.
33. Similar views were expressed in Devi Dass Gopal Krishan Put. Ltd. v. State of Punjab [1994] 95 STC 170 (SC), State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons [1965] 16 STC 231 (SC), Birla Cotton Spinning and Weaving Mills Ltd. v. State of Haryana [1979] 43 STC 158 (P&H) and Bharat Engineering Company v. Assessing Authority, Karnal [1980] 45 STC 363 (P&H).
34. In our opinion, none of the judgments, on which reliance has been placed by Shri. A.K. Chopra, supports the proposition sought to be advanced on behalf of the State that the Legislature can nullify the effect of the judgment of the Supreme Court in Satnam Overseas (Export) v. State of Haryana [2003] 130 STC 107 ; (2003) Supp 4 SCC 536 despite the fact that Section 9(l)(b) under which the dealers enjoyed exemption from levy of purchase tax remained on the statute book.
35. In view of our conclusion on the first point. We do not consider it necessary to deal with other points raised by the parties.
36. In the result, the writ petitions are allowed. The Haryana General Sales Tax (Amendment) Act, 2003 (Haryana Act No. 4 of 2003) is declared ultra vires to the Legislative power of the State. The corresponding amendment made in the Haryana Value Added Tax (Amendment) Act, 2004 vide notification dated March 5, 2004 is also declared ultra vires to the legislative power of the State to the extent of levy of purchase tax for the period ending up to March 31, 1991. The demand notices issued by the respondents in furtherance of the aforesaid amending Acts are quashed. However, it is made clear that this Order will not preclude the State from taking appropriate legal measures in the matter of refund of purchase tax levied and collected from the petitioners for the period before April 1, 1991.