Gauhati High Court
M/S Kamakhya Plastics (P) Ltd vs The State Of Assam & 4 Ors on 17 March, 2011
Bench: Ia Ansari, Ak Goswami
THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM: NAGALAND: MEGHLALAYA: MANIPUR: TRIPURA:
MIZORAM AND ARUNACHAL PRADESH)
Writ Appeal No. 381 of 2010
M/s. Kamakhya Plastics (P) Ltd.,
A Private Limited Company registered under the Companies
Act, 1956, having its principal place of business at Bonda,
Narangi, Assam.
..........Appellant
Versus
1. The State of Assam,
Represented by the Commissioner & Secretary to the Govt. of
Assam, Department of Finance and Taxation,
Dispur, Guwahati.
2. The Commissioner & Secretary to the Govt. of Assam,
Department of Public Health Engineering,
Govt. of Assam.
3. The Commissioner of Taxes,
Assam, Kar Bhawan, GS Road,
Guwahati - 781006, Assam.
4. The Superintendent of Taxes,
Unit A. Kar Bhawan, Dispur,
Guwahati - 781 006.
5. The Certificate Officer (Taxation),
Kamrup, Kar Bhawan, GS Road,
Guwahati - 781 006.
.... Respondents
BEFORE THE HON'BLE MR. JUSTICE IA ANSARI THE HON'BLE MR. JUSTICE AK GOSWAMI For the appellant :: Mr. N DUTTA , SR. ADVOCATE Mr. G.k. Joshi, Advocate Mr. R.K. Joshi, Advocate For the respondents :: Mr. D. Saikia, Standing counsel, Finance Department Date of hearing :: 18.02.2011 Date of judgment :: 17.03.2011 2 JUDGMENT & ORDER (Ansari, J.) Can a subordinate legislation be retrospective in operation, when the parent legislation, whereunder such a legislation stands made, is prospective in nature? When a person is statutorily entitled to be exempted from payment of sales tax, or is statutorily entitled to pay tax at a reduced rate, can such benefit of exemption, or payment of tax at a reduced rate, be denied to him on equitable consideration, because of the fact that the person had already availed exemption from payment of sales tax, or had availed of the benefit of payment of sales tax at a reduced rate during the period, when he was not so entitled to avail such benefit? In short, whether, on equitable considerations, a person can be denied the benefit of exemption from payment of sales tax, or the benefit of payment of sales tax at a reduced rate, which the legislature has, otherwise, vested in him?
2. In the answers to the questions, posed above, rest the decision in this appeal. However, an incidental question, which we have to answer, in this appeal, has also arisen, and the question is: when a statutory authority, while determining the question of reopening of assessment of taxable liability, acts on the basis of the clarification, which such an authority obtains from his superior authority, on the issue raised in the proceedings of reopening of assessment, and opens the assessment and makes assessment on the basis of the clarifications received from his 3 superior authority, whether such an action is sustainable in law, particularly, when, there is no independent application of mind by the authority, who re-opens the assessment as to whether the clarification, as given by his superior authority, are attracted to the facts of the case or not?
3. The questions, indicated above, have arisen in the context of Section 9 of the Assam General Sales Tax Act, 1993 (in short, 'the AGST Act, 1993'), which, in some specified cases, provides for granting of exemption from payment of tax in respect of sale of goods and empowers the State Government to issue notification granting exemption from payment of sales tax, or payment of sales tax at a reduced rate inasmuch as the root of the controversy lies in the notification, dated 03.01.2003, published in the Assam Gazette (Extraordinary) on 22.01.2003, whereby the rates of payment of tax, on the sale/supply of certain classes of goods including water supply and sanitary fittings, pipes used for the purpose, specified in the notification, were reduced if the goods were sold by a dealer, registered under the AGST Act, 1993, to the Government of India, Government of Assam and to any undertaking, corporation or enterprises of the Government of India or of the Government of Assam, for the purpose of their own use provided that a certificate, in writing, as prescribed by Form 'C', was issued, in this regard, in favour of the dealer ?
4. Before attempting to answer the questions, raised above, the legal history behind the notification, dated 03.01.2003, aforementioned needs to be traced. In this regard, it is pertinent 4 to note that though the sale of PVC pipes were taxable @ 13.2% under the AGST Act, 1993, the State Government could not have realized more than 4.4% of tax on the turnover from a dealer, who sold PVC pipes, at any place, outside the territory of the State of Assam, for being carried to, and used in, the State of Assam, because such transactions amounted to inter-State sale; whereas a local manufacturer, in Assam, was required to pay tax @ 13.2%, because the sale of PVC pipes by a local manufacturer, within the State of Assam, even if such sale was made to the Government of India, Government of Assam and or to any undertaking, corporation, enterprise of the Government of India or of the Government of Assam for the purpose of use by the Government undertakings, corporations or enterprises aforementioned amounted to intra-State sale and nor inter-State sale.
5. In other words, while the manufacturers of PVC pipes, situated outside Assam, were required to pay barely 4.4% of tax on the sale or supply of PVC pipes to the State Government or its undertakings, in Assam, the local manufacturers of PVC pipes were required to pay sales tax @ 13.2% on the sale or supply of PVC pipes manufactured or supplied by them. Since the intra- State sale of PVC pipes carried higher rate of tax, the State Government decided to reduce the rate of tax, in respect of local manufacturers, to 4.4%. The benefit of such reduced rate of tax could not have been given to the local manufacturers except by way of issuing requisite notification under Section 9 of the AGST Act, 1993, which empowers the State Government, as indicated above, to grant exemption from payment of tax, or to pay tax at a 5 reduced rate. A notification was accordingly issued, on 28.04.1998, under Section 9(3) of the AGST Act, 1993, making the notification effective for a period of three years.
6. It is noteworthy, now, that according to Section 9(3) of the AGST Act, 1993, the validity of a notification, issued under Sub- Section(3) of Section 9 of the AGST Act, 1993, shall not exceed a period of three years from the date of its issue. Ordinarily, therefore, a notification, issued under Section 9 of the AGST Act, 1993, would remain, unless earlier withdrawn, valid and effective for a period of three years from the date of its issue. Seen in this light, the notification, dated 28.04.98, (which was initially issued), could not have remained effective beyond the period of three years from the date of its issue, i.e., 28.04.98. Naturally, therefore, the notification, dated 28.04.98, aforementioned, lapsed on 27.04.2001 inasmuch as no notification was issued by the State Government in exercise of its power under Section 9(3) extending the period of effectiveness or validity of the notification aforementioned beyond 27.04.2001.
7. In order to enable, therefore, a local manufacturer/dealer to receive the benefit of exemption, which the notification, dated 28.04.98, had envisaged, the State Government, in exercise of its powers under Section 9(3), issued a notification, on 03.01.2003, making exemption, in the form of reduced rate of tax, as indicated hereinbefore, available to the local manufacturers/dealers. However, though the notification was issued on 03.01.2003, the notification declared that it shall come into force with effect from 6 01.05.2001. The notification, dated 03.01.2003, was, thus, retrospective in nature.
8. The question, therefore, is: whether the notification, dated 03.01.2003, could have been given retrospective effect from 01.05.2001 or whether a notification, such as, the one at hand (i.e., the notification, dated 03.01.2003) cannot but be read to have had come into force prospectively with effect from 03.01.2003 and not on any date prior thereto.
9. Thus, the answer to the controversy, which the present appeal has raised, lies in the correct interpretation of the expression, ‗date of its issue', which appears in the second proviso to Section 9(3) of the AGST Act, 1993.
10. The appellant herein is a small scale private limited company, registered under the Companies Act, 1956, and engaged in the manufacture, sale and supply of PVC pipes and plastic tanks, having its principal place of business at Bonda, Narangi, Guwahati, Assam. The company, apart from being registered as a dealer under the Central Sales Tax Act, 1956, was also registered as a 'dealer' under the AGST Act, 1993, and, later on, it came to be registered as a 'dealer' under the Value Added Tax Act, 2003 (in short, 'the VAT Act, 2003).
11. Notwithstanding the fact that a notification, under the 2 nd proviso to Section 9(3), cannot exceed a period of three years from the date of its issue and the notification, dated 03.01.2003, aforementioned had claimed to have come into force on 01.05.2001, the appellant herein claimed and was given by the 7 assessing authority the benefit of the notification, in question, for the assessment year 2004-05, inasmuch as the appellant was allowed to pay tax at the reduced rate of interest, even for the assessment year 2004-2005, against supply of PVC pipes, manufactured by it, to various Government Departments in Assam. To be precise, for the assessment year 2004-05, the Superintendent of Taxes completed assessment, on 14.02.2006, by allowing payment of tax by the appellant at a concessional rate of 4%.
12. However, the problem for the appellant started, when a notice was issued, on 06.11.2008, to the appellant by respondent no 4 herein, namely, Superintendent of Taxes, contending therein, inter alia, that the appellant had been wrongly allowed payment of tax at the concessional rate of 4%, on its turnover, for the assessment year 2004-05, against supply of PVC pipes to various Government departments of the State Government on the strength of the notification, dated 03.01.2003, aforementioned inasmuch as the notification, being effective from 01.05.2001, could not have continued to remain in force beyond a period of three years and the notification had, thus, stood elapsed on 30.04.2004. The appellant was, therefore, directed to show cause as to why the appellant should not be made to pay the balance amount of tax @ 8.8% [13.2% - 4.4%] and also the interest accrued thereon.
13. Responding to the notice of show cause, dated 06.11.2008, the appellant furnished its reply, on 20.11.2008, to respondent No. 4, namely, Superintendent of Taxes, contending therein, inter 8 alia, that the notification, in question, having been issued on 03.01.2003, the appellant could have availed exemption for a period of three years with effect from 03.01.2003 inasmuch as a notification, issued under Section 9(3), remains in force for a period of three years with effect from the date of its issuance. As the notification was issued on 03.01.2003, the notification remained, according to the appellant, in force till 02.01.2006. The appellant contended that since the assessment, in question, was in respect of the assessment year 2004-05 and the notification was effective, during the assessment year 2004-2005, the appellant had rightly claimed and was legally allowed to avail the benefit of concesssional rate of tax, while making payment of tax for the year 2004-2005.
14. As regards the contention of the respondent No. 4 in its letter, dated 06.11.2008, aforementioned, that the notification, in question, was effective from 01.05.2001, and, therefore, on completion of three years, elapsed, by efflux of time, on 30.04.2004, the appellant contended that the notification, in question, was a piece of subordinate legislation and since a subordinate legislation cannot go against the parent legislation, the notification, in question, must be treated to have remained valid for three years from the 'date of its issue', i.e., 03.01.2003.
15. On receipt of the appellant's reply to the show cause notice, dated 06.11.2008, aforementioned, respondent No. 4 herein sought for, vide its letter, dated 05.12.2008, a clarification from respondent No. 3, namely, Commissioner of Taxes, Assam, as to 9 whether the notification, in question, should be treated to have remained in force till 30.04.2004 or shall the notification be treated to have lapsed by counting the validity of the notification with effect from 01.05.2001.
16. Reacting to the clarification, which the respondent No. 4 had so sought for by his letter, dated 05.12.2004, respondent No. 3, namely, Commissioner of Taxes, Assam, issued a clarification, on 19.02.2009, conveying to the respondent No. 4 to the effect that though the notification, in question, had been issued on 03.01.03, yet since the notification was brought into force with effect from 01.05.2001, the notification ought to be treated to have remained in force from 01.05.2001 to 30.04.2004. The clarification, so issued by respondent No.3, on 19.02.2009, being relevant to the present appeal, is reproduced below:
―Sub - Clarification Ref - Your letter No.6356 dated 05.12.2008. With reference to your letter seeking clarification in respect of Govt. Notification issued vide FTX-189/93/pt/268, dt 03.01.2003, giving effect from 01.05.2001, it is stated that the notification was issued under Section 9(3) of the Assam General Sales Tax Act, 1993, since repealed. As per proviso to Section 9(3) (ii) the validity of notification issued under said section shall not exceed a period of 3 years from the date of its issue. However, since the notification was brought into force from 01.05.2001, therefore, the notification was in force w.e.f. 01.05.2001 to 30.04.2004.
(Sd/- Sanjay Lohiya) Commissioner of Taxes, Assam Dispur, Guwahati.‖ 10
17. Following the clarification, dated 19.02.2009, so issued by respondent No. 3 and acting upon the same, respondent No. 4 passed an order, on 06.03.2009, to the effect that the appellant had been wrongly allowed to pay tax at the concessional rate of 4.4% for the assessment year 2004-2005 inasmuch the notification, in question, had remained in force with effect from 01.05.2001 to 30.04.2004 and could not have, therefore, entitled the appellant to claim benefit of reduced rate of tax. With the reason, so assigned, respondent No. 4 reopened the assessment of the taxable liability of the appellant, made assessment afresh, and directed the appellant to pay the balance amount of tax @ 8.8%, with interest, which had accrued thereon.
18. Aggrieved by the reopening of the assessment and the reassessment of its taxable liability, the appellant filed a revision before the respondent No. 3, namely, Commissioner of Taxes, Assam. By order, dated 24.09.2009, the respondent No. 3 dismissed the revision by observing to the effect, inter alia, that though the date of notification was 03.01.2003, the same having been brought into force with effect from 01.05.2001, the notification had remained in force from 01.05.2001 to 30.04.2004 and, hence, the notification, having elapsed, on 30.04.2004, by efflux of time, the concessional rate, which the appellant had enjoyed during the assessment year 2004-2005, was illegal. In order to strengthen his conclusion that the appellant was not entitled to claim concesssional rate of tax, the respondent No. 3 further pointed out, in its order, dated 24.09.2009, aforementioned, that the appellant had already enjoyed 11 concessional rate of tax during the period from August, 2001, to January, 2003, and that by its act of having enjoyed the benefit of concessional rate between August 2001 and January 2003, the appellant had shown its clear understanding that the notification was retrospective in nature and, hence, the appellant, after having enjoyed the benefit, with retrospective effect, cannot make contrary claim and derive benefit of the notification by contending that the notification was effective from the date of its issue, i.e., 03.01.2003, and shall be treated to have remained valid till 02.01.2006. The revision, filed by the appellant, was accordingly dismissed on the premises aforementioned.
19. It is, thus, clear that the appellant was denied the benefit of the notification aforementioned on two grounds, namely, that the notification having mentioned that it had come into force on 01.05.2001, the notification could not have been treated to have remained in force beyond 30.04.2004, and, secondly, equity estopped the appellant from claiming the benefit of the notification, because the appellant had already availed the benefit for a maximum period of three years covering thereby the period, when (according to the appellant itself), the notification could not have been, in law, effective.
20. Aggrieved by the dismissal of the revision, the appellant filed a writ petition under Article 226 of the Constitution of India, which gave rise to WP(C) No. 4859/2009, seeking issuance of appropriate writ(s) setting aside and quashing not only the reopening of the assessment, but also the revisional order. In the 12 writ petition, a learned Single Judge of this Court took the view that in the facts and circumstances of the case, the expression, ‗date of its issue', appearing in the 2nd proviso to Section 9(3), has to be understood within the ceiling of three years, which is allowable for seeking the benefit of reduced rate of tax. The learned Single Judge also took the view that as the appellant had already availed consessional rate of tax for the period from 01.05.2001 to 30.04.2004 by drawing strength from the said notification, the appellant cannot, having enjoyed the benefit of the notification, turn back and claim further right to continue to receive the benefit of concessional rate of tax.
21. In effect, the learned Single Judge too took the view that the appellant was estopped from claiming the benefit of the notification, because of equitable consideration inasmuch as it had already availed the benefit, for the maximum period of three years, by drawing strength from the said notification and the appellant could not have, having enjoyed such benefit, turn back and claim further exemption for the assessment year 2004-2005. In order to buttress this conclusion, the learned Single Judge took the view (as already indicated hereinabove) that the expression, ‗date of its issue', appearing in the 2nd proviso to Section 9(3), has to be understood within the ceiling of three years, which is allowable for obtaining exemption from payment of tax or the benefit of payment of tax at a reduced rate. Because of the conclusions so reached, the writ petition was dismissed on 06.09.2010. The appellant is, therefore, before us.
13
22. We have heard Mr. N. Dutta, learned Senior counsel, appearing on behalf of the appellant, and Mr. D. Saikia, learned counsel, appearing on behalf of the respondents.
23. Appearing on behalf of the appellant, Mr. N. Dutta, learned Senior counsel, submits that a bare reading of Section 9 of the AGST Act, 1993, clearly shows that the benefit of reduced rate of tax can be granted by the State Government by issuing appropriate notification, in this regard, but, under the 2nd proviso to Section 9(3), the validity of such a notification is three years from the date of its issue. Thus, the notification, as envisaged by the 2nd proviso is, according to Mr. Dutta, prospective in nature. When the parent legislation, i.e., AGST Act, 1993, makes the exemption prospective in nature, the subordinate legislation, i.e., the notification, in question, could not have been made retrospective and cannot be read in law as retrospective. So contends Mr. Dutta. In support of this submission, Mr. Dutta places reliance on Bakul Cashew Co. and Others vs. Sales Tax Officer, Quilon and another, reported in (1986) 2 SCC 365.
24. Elaborating his submission, as noted above, Mr. Dutta points out that the 2nd proviso to Section 9(3) makes it clear that the validity of the notification, which is issued under Section 9(3), shall not remain valid for more than three years from the 'date of its issue'. Since the proviso uses the expression, ‗from the date of its issue', Mr. Dutta contends that the date of issue of the notification, in the present case, being 03.01.2003, the notification ought to have been held to have remained valid for a 14 period of three years commencing from 01.03.2003 and, in such circumstances, the notification could not have been treated, contrary to the parent legislation, to have come into force on a date prior to the date of its issuance, i.e., 03.01.2003; whereas, the respondents have been insisting that though the notification had been issued on 03.01.2003, it was given effect to, or had been brought into force, on 01.05.2001, and, therefore, the notification could not have remained in force beyond 30.04.2004. Such a construction of the notification by the respondents is, according to Mr. Dutta, wholly untenable in law.
25. Referring to the decision, in Mangalam Timber Products Ltd. v. State of Orissa, reported in (2008) 18 VST 1 (Orissa), Mr. Dutta submits that in similar circumstances, Orissa High Court has decided that the notification could not be retrospective, when the legislation is prospective in nature and the notification must, therefore, be read to be effective from the date of notification and not from any date prior thereto.
26. Mr. Dutta points out that since the statutory authorities, namely, respondent No. 4 and also respondent No. 3 failed to hold that the notification, having been issued on 03.01.2003, must be taken to have been remained in force for a period of three years, i.e., till 02.01.2006, and, hence, the assessment year 2004-2005 was well within the validity period of the notification, in question, the appellant was left with no alternative, but to approach this Court. The learned Single Judge, however, contends Mr. Dutta, fell in serious error in ignoring the fact that the parent legislation 15 being prospective in nature, the notification, which is a piece of subordinate legislation, could not have been given retrospective effect and ought to have, therefore, been treated to be prospective effect. Moreover, as there was no outer limit fixed in respect of the validity of the notification, the notification, according to Mr. Dutta, ought to be treated to have remained valid till 02.01.2006.
27. Mr. Dutta further points out that the respondent No. 4 is a statutory authority and, while deciding the question as to whether the assessment, which had already been made, needed to be reopened and reassessed, the authority functioned as a quasi- judicial body and such an authority cannot be made to act at the dictates of its superior authority nor can its decision be controlled and/or guided by any superior authority, for, such a conduct of being guided and controlled by superior authority would amount to abdication of authority by the authority, which has to exercise quasi-judicial power in determining the question as to whether it shall or shall not reopen the assessment.
28. In the present case, submits Mr. Dutta, in order to reach a decision as to whether the assessment, already made, needed to be reopened or not, respondent No. 4 looked to his superior, namely, the respondent No. 3 for guidance as to whether the notification, in question, should be treated to have come into force on 03.01.2003, which was the date of issuance of the notification, or should it be read retrospectively with effect from the date on which the notification stated to have come into force. Responding to the clarification, which the respondent No.4 had so sought for, 16 respondent No.3, points out Mr. Dutta, gave his 'clarification' and it is this 'clarification', which the respondent No. 4 treated as his guidance and reopened the assessment. There was, thus, contends Mr. Dutta, no independent application of mind by the respondent No. 4, which was nothing but complete abdication of authority by respondent No. 4. The impugned order, therefore, submits Mr. Dutta, reopening the assessment and making the assessment afresh was wholly illegal.
29. Mr. Dutta submits that aggrieved by the wrong construction of the notification and the conduct of the respondents, when the appellant approached this Court by way of writ petition, the learned Single Judge too misconstrued the notification inasmuch as the learned Single Judge was of the view that a notification, issued under Section 9(3), cannot exceed a period of three years and, since the notification mentioned that it had come into force on 01.05.2001, it ought to be treated to have elapsed on 30.04.2004. The language of the 2nd proviso to Section 9(3), submits Mr. Dutta, clearly indicates as to what the legislative intent was inasmuch as the second proviso to Section 9(3) clearly conveys the legislative intent, the legislative intent being that a notification, issued under Section 9(3), has to be effective from the date of its issuance and not on any date prior thereto, which the learned Single Judge failed to take note of. Thus, the subordinate legislation, according to Mr. Dutta, having gone contrary to the parent legislation, the learned Single Judge ought to have set aside the order of reassessment and also the revisionl order. 17
30. It is, contends Mr. Dutta, the error in correctly construing the notification that has led to the dismissal of the writ petition and has thereby denied to the appellant the right, which the statute had, otherwise, given to the appellant. The dismissal of the writ petition is, therefore, contends Mr. Dutta, illegal and this appeal may, therefore, be allowed.
31. Resisting the appeal, Mr. D. Saikia, learned counsel, submits that the notification did not mention the total period and/or the outer limit of its validity and, hence, the appellant cannot contend that the notification must be treated to have come into force for a period of three years. This apart, points out Mr. Saikia, the notification was made effective on 01.05.2001 and the appellant, acting upon the said notification, had already enjoyed the benefit of concessional rate of tax with effect from 01.05.2001. In such circumstances, having already availed the concessional rate of tax for a period of three years by virtue of the notification, in question, the appellant could not have turned back and contended that the notification must be treated to have remained in force for three years with effect from 03.01.2003, for, such continuation of validity, if permitted, would make the notification valid for five years.
32. Moreover, according to Mr. Saikia, as the appellant had already availed the benefit of concessional rate of tax for a period of three years on the strength of the notification, the appellant, could not have claimed and cannot, now, once again, claim the benefit of concessional rate of tax under the same notification by 18 asking the authorities concerned, or the High Court, to treat the notification as prospective in nature. In effect, Mr. Saikia points out, in this regard, that the provisions of exemption from payment of tax, or payment of tax at a concessional rate, has to be construed strictly and, on the basis of this principle, the appellant must be denied, and has been rightly denied, its claim to receive benefit for longer than three years. For the purpose of sustaining his contention, that a notification, granting exemption, has to be construed strictly, Mr. Saikia has referred to, and relied upon, the decision in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal and Others, reported in (2001) 1 SCC 236.
33. Mr. Saikia further points out that, in the writ petition, there was no challenge to the validity of the notification and, without challenging the notification, the appellant cannot claim that the notification must be read to have come into force on the date of its issuance, i.e., 03.01.2003, and not on 01.05.2001, as had been mentioned in the notification. In the absence of any such challenge being posed to the notification, the appellant, according to Mr. Saikia, is not entitled to receive benefit of the notification by construing the notification in the manner as has been contended by the appellant. In support of his submission, that in the absence of any challenge, posed to the legality of the said notification, the appellant cannot seek any relief, Mr. Saikia relies on the decisions, in K. Vasudevan v. Mohan N. Mali and Others, reported in (2002) 10 SCC 117, Andhra Pradesh Public Service Commission v. Baloji Badhavath and Others, reported in (2009) 5 SCC 1, Secretary to the Govt. and another v. M. Senthil 19 Kumar, reported in (2005) 3 SCC 451, Nagar Palika Nigam v. Krishi Upaj Mandi Samiti and others, reported in (2008) 12 SCC 364, Central Government of India and Others v. Krishnajo Parvetesh Kulkarni, reported in (2006) 4 SCC 275, and Jitendra Kalita and Others v. State of Assam and Others, reported in 2006 (2) GLT 654 (FB).
34. Mr. Saikia, learned counsel, reiterates that since the appellant had already enjoyed concessional rate of tax with effect from 01.05.2001, the writ petition has been correctly rejected, because, the benefit, which the appellant had enjoyed, has become, by efflux of time, non-recoverable and the appellant, therefore, cannot be allowed to receive benefit once again.
35. Repelling the submissions made, on behalf of the respondents, Mr. Dutta, learned Senior counsel, points out, once again, that neither the statutory authorities concerned nor the learned Single Judge of this Court determined as to when a notification, issued under Section 9(3), comes into effect. Instead of determining the statutory position, the statutory authorities as well as the learned Single Judge were prevailed upon by the fact that the notification mentions that it had come into force on 01.05.2001 and the notification should, therefore, be construed to have remained in force for three years with effect from 01.05.2001.
36. Continuing his submissions, Mr. Dutta points out that what the appellant wanted before the statutory authorities, as well as before the learned Single Judge, was determination of the 20 question as to what the statutory date of coming into force of a notification, issued under Section 9, is; but, without deciding this crucial question, the statutory authorities rejected the claim of the appellant and the learned Single Judge fell into error in not interfering with the same. As the appellant was seeking benefit under the notification, there was, according to Mr. Dutta, no question of challenging the notification. Mr. Dutta reiterates that what the appellant had been asking the statutory authorities and the High Court was to give a legal and correct interpretation of the notification in respect of the validity period of a notification irrespective of the fact as to whether the appellant had or had not legally or justifiably enjoyed the benefit as regards the rate of tax payable by the appellant. The correct interpretation of statutory provisions cannot, submits Mr. Dutta, depend on the fact as to whether the appellant has already availed the benefit of concessional rate of tax in the past or not. The decision, therefore, reached by the statutory authorities and non- interference therewith by the learned Single Judge, in the writ petition, are, therefore, according to Mr. Dutta, contrary to law and may, therefore, be interfered with in this appeal.
37. As already indicated above, the answer to the questions, which have arisen for determination, depend on the basic question as to whether a notification, issued under Section 9(3), can be given retrospective effect, it is imperative that the provisions of Section 9 be taken note of. Section 9 is, therefore, reproduced below:
21
"9.(1) - Subject to the conditions and exceptions, if any, set out in Schedule I, the sales of goods specified herein shall be exempted from the tax under this Act.
(2) The State Government may by notification in the Official Gazette, and to, amend or otherwise modify, the said Schedule and thereupon, the said Schedule shall be deemed to have been amended accordingly.
(3) The State Government may by notification in the Official Gazette make an exemption or reduction in rate in respect of any tax or interest payable under this Act on the sale or purchase of any class of goods specified therein - (i) at all or any specified point or points of sale in a series of sales by successive dealers; or (ii) by any specified class of persons in regard to the whole or any part of their turnover:
Provided that any exemption or reduction may extend to the whole of the State or to any specified area or areas therein and be subjected to such restrictions and conditions as may be specified in the notification:
Provided further that validity of any notification issued under this sub-section shall not exceed a period of three years from the date of its issue.
(4) The State Government may from time to time, by notification in the Official Gazette, frame one or more schemes for the grant of relief to any class of industries within the State or within any specified part of the State on or after such date as may be specified in such scheme and producing such goods as may be specified therein by way of full or partial exemption of any tax payable under this Act on the raw materials or other input purchased by them within the State or on the manufactured goods sold by them within the State or in the course of inter-State trade or commerce for such period or periods as may be specified or by way of deferment of the tax payable by them under this Act for such period as may be specified and subject to such other restrictions and conditions as may be provided in such scheme or schemes.22
Provided that the State Government may withdraw any such exemption granted under any scheme at any time as it may think fit and proper.‖
38. A microscopic reading of the provisions of Section 9, as a whole, and, in particular, the proviso to Section 9(3) clearly shows that the validity of a notification, issued under Section 9, shall not exceed beyond a period of three years from the date of its issue.
39. The expression, date of its issue, would, without doubt, mean the date on which the notification is issued and it is from the date of issuance of the notification that the validity period of the notification would start running. The notification, as contemplated by the second proviso to Section 9(3), has to be, therefore, prospective in effect.
40. There can be no doubt, and it could not be disputed, on behalf of the respondents, that a notification, issued under Section 9, would, ordinarily, remain, in the light of the language appearing in the second proviso to Section 9(3) for a period of three years from the date of its issue unless withdrawn earlier or indicated otherwise by the notification. Hence, the commencement of validity of such a notification has to be, ordinarily, from the date of issuance of the notification and not from any date prior thereto.
41. It is trite that an authority, which has the power to make a subordinate legislation, cannot make the subordinate legislation with retrospective effect unless it is so authorized by the legislature, while conferring on the authority concerned, the power to make the subordinate legislation. In the absence of any power 23 given to a subordinate authority to make a subordinate legislation with retrospective effect, a subordinate legislation has to be treated, and must be allowed to operate prospectively and not retrospectively; more so, when the parent legislation is prospective in nature. To put it a little differently, if the parent legislation is prospective, the subordinate legislation, in the absence, therefore, of any indication in the legislation itself to the contrary, cannot be made with retrospective effect. Laws are normally prospective. Legislature is, however, competent to make unless, otherwise, contrary to the Constitution, a legislation having retrospective effect. Though the legislature may have the power to make a legislation retrospectively unless denied by the Constitution in any given case, a subordinate legislation cannot be retrospective unless the parent legislation authorizes the authority concerned to make the legislation with retrospective effect. The prospectivity of a legislation being normal and retrospective legislation being an exception, a clear indication must be discernible from the legislation that a given piece of legislation is retrospective in effect, particularly, when the legislation concerns fiscal matters.
42. Dealing with almost similar fiscal statute, as the one at hand, and referring to Section 7 of the Orissa Sales Tax Act, 1947 (which was the subject-matter of discussion in Mangalam Timber Products Ltd. Vs. State of Orissa, reported in (2008) 18 VST 1 (Orissa), it was pointed out by a Division Bench that when Section 7 is prospective, it is obvious that the notification, issued in exercise of power under Section 7, cannot become retrospective. The Court, therefore, in Mangalam Timber Products Ltd. (supra), 24 read the notification, in question, as operative from the date of the notification and not from any date prior thereto making it clear that any attempt to read the notification, with effect from the date on which the notification had not stood issued, would not be sustainable in law. The concern of the revenue, (same as the case at hand), was that it would require the revenue to make adjustment of benefits, which the assessee might have, in the meanwhile, received. The Court, in Mangalam Timber Products Ltd. (supra), pointed out, in this regard, that if the effect of reading of the notification prospectively would require making of some adjustments to be made with regard to the benefits, which the petitioner might have derived as a result of the notification, it is not for the Court to make the calculation. The Court, however, made it clear, in Mangalam Timber Products Ltd. (supra), that if adjustment is required to be made, the same should be made at the level of the revenue authority keeping in view the fact that the notification is prospective in nature. Speaking for the Court, in Mangalam Timber Products Ltd. (supra), A.K. Ganguly, J., (as his Lordship, then, was) observed:
―It is clear on a plain reading that the said section 7 that it is prospective in operation.
It is rather settled that laws are normally made prospectively but it can be made retrospectively also. If a law is to be made retrospectively, the Legislature must give clear indication to that effect in the law itself. In the absence of such clear indication, law is to operate prospectively. (See Keshavan Madhava Menon Vs. State of Bombay, AIR 1951 SC 128). This is particularly so in the field of statues dealing with fiscal matter involving 25 revenue, as section 7. (See Collector of Central Excise, Ahmedabad Vs. Ashoka Mills Ltd, AIR 1990 SC 33 at page
39).
Since section 7 of the Act is prospective, it is obvious that the notification issued in exercise of power under section 7 of the Act cannot become retrospective. Both the notifications at annexures 1 and 3 suffer from the aforesaid vice, i.e., they purport to operate retrospectively even though issued in exercise of power under section 7 of the Act, which is prospective.‖ (Emphasis is added)
43. We fully agree with the position of law as stated in Mangalam Timber Products Ltd. (supra) that when statutory provisions are prospective in nature, subordinate legislation cannot be retrospective unless a contrary indication is discernible from the legislation itself.
44. In fact the principle of law that an authority, which has the power to make subordinate legislation cannot make it with retrospective effect unless it is so authorized by the legislature, which has conferred that power on the authority concerned, has been summed up succinctly in ITO vs. M.C. Ponnoose, reported in (1969) 2 SCC 351, wherein the Court observed:
―Now it is open to a sovereign legislature to enact laws which have retrospective operation. Even when Parliament enacts retrospective laws such laws are -- in the words of Willes, J. in Phillips v. Eyre ―no doubt prima facie of questionable policy, and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law‖. The courts will not, therefore, ascribe 26 retrospectively to new laws affecting rights unless by express words or necessary implication it appears that such was the intention of the legislature. Parliament can delegate its legislative power within the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or by-law which can operate with retrospective effect; (see Subba Rao, J., in Dr Indramani Pyarelal Gupta v. W.R. Nathu) -- the majority not having expressed any different opinion on the point; Modi Food Products Ltd. v. CST; India Sugars and Refineries Ltd. v. State of Mysore and S. Shiv Dev Singh v. State of Punjab.‖ (Emphasis is added)
45. Mr. Dutta is, therefore, not incorrect, when he refers to the case of Bakul Cashew Co. and others Vs. Sales Tax Officer, Quilon and another, reported in (1986) 2 SCC 365, wherein the Court, having referred to the position of law as indicated in M.C. Ponnoose (supra), observed and held as under:
―8..............The power of exemption in the instant case was exercised through a retrospective notification which was a piece of subordinate legislation. It has been held by this Court that an authority which has the power to make subordinate legislation cannot make it with retrospective effect unless it is so authorised by the legislature which has conferred that power on it.‖ (Emphasis is added) 27
46. In the backdrop of the law as discussed above, there can be no escape from the conclusion that the notification, in question, having been issued on 03.01.2003, must be given retrospective effect, particularly, when the power to make subordinate legislation, conferred on the State Government, by Section 9(3), is prospective in nature. Consequently, notwithstanding the fact that the notification, in question, was issued on 03.01.2003, making it effective from 01.05.2001, the fact of the matter remains that the parent legislation i.e. the AGST Act, 1993, being prospective in nature, no retrospective effect could have been given to the said notification by the State Government as a delegatee under the AGST Act, 1993; more so, when the validity of the notification is to be counted with effect from the date of its issue and not from any date prior thereto.
47. As regards the submissions made on behalf of the State that an exemption notification has to be construed strictly, there can be really no dispute. However, reliance placed by Mr. Saikia, in support of such a proposition, on the case of Hari Chand Shri Gopal and others (supra), is not incorrect inasmuch as the decision in Hari Chand Shri Gopal and others (supra), has no application to the facts of the present case. When construed strictly, there remains no escape from the conclusion that the validity of a notification, issued under Section 9(3), commences from the 'date of its issue' and can remain in force, at the most, for a period of three years from the 'date of its issue'. 28
48. We, now, come to Mr. Saikia's argument that the appellant, as a writ petitioner, had not impugned the notification and the appellant may, therefore, be held debarred from receiving the benefit from the notification inasmuch as the notification, in question, (in the absence of any challenge as to its validity) has to be considered as it is or not at all. There is a noticeable fallacy in this argument. In the case at hand, the assessment of tax, payable for the assessment year 2004-2005, had already been done. However, on the completion of the assessment, it was pointed out by the respondent No.4, while seeking to reopen the assessment, that a notification, issued under Section 9(3), cannot, in the light of the second proviso thereto, remain in force for a period longer than three years. This apart, since the notification had mentioned that it (notification) shall be treated to have come into force on 01.05.2001, the notification, according to respondent No.4, ought to be held to have enured, by efflux of time, on 30.4.2004. Consequently, respondent No.4 took the view that the assessee was not entitled to the exemption, which he had availed in respect of the assessment year 2004-2005. The notice of show cause was accordingly issued by the respondent No.4 to the appellant and, on receiving the notice, the appellant contended, in no uncertain words, that under the second proviso to Section 9(3), the notification remains, and ought to be treated to have remained, in the present case, valid for a period of three years from 'the date of its issue', i.e., 03.01.2003.
49. Confronted with the bold stand, so taken by the appellant, respondent No.4 looked towards respondent No.3 for a 29 clarification and sought for accordingly a clarification, in this regard, from the respondent No.3, who, in turn, clarified that the notification, having been brought with effect from 01.05.2001, must be treated to have come into effect from 01.05.2001 and could not have remained, and must not be treated to have remained, beyond 30.04.2004. It is basically this clarification issued by the respondent No.3, which became the foundation for the decision of the respondent No.4 to reopen the assessment and make assessment anew as has been done. The conduct of the respondent No.4 clearly shows that though, as a statutory authority, it (respondent No.4) was exercising quasi judicial jurisdiction in the present case, it abdicated his authority to decide as to whether the notification, in the light of the clear language employed by Section 9(3), ought or not, to be read prospectively with effect from 03.01.2003, and not retrospectively, i.e., 01.05.2001. Sadly enough, respondent No.4 did not apply his own mind to the facts of the given case and, thus, abdicating his authority and the duty to decide himself, look to his superior authority and merely carried into execution the views of his superior authority as had been expressed in the said 'clarification'. This, in itself, was sufficient to warrant interference, with the impugned order of assessment, in the revision.
50. Coupled with the above, the clarification, which the respondent No.3 had issued, was, it is clear, wholly contrary to law inasmuch as no subordinate legislation can run counter to the parent legislation and when the parent legislation, in the present case, was prospective in nature, the subordinate legislation, i.e., 30 the notification, dated 03.01.2003, could not have been given retrospective effect. If this fundamental aspect of law had been borne in mind by the respondent No.3, there could not have been any controversy as to the date on which the notification shall be treated to have come into force. The notification, such as the one at hand, must be read subservient to the parent legislation and when the parent legislation states that the notification, issued under Section 9(3), shall be valid from the date of its issue, respondent No.3 ought to have clarified -- if he was required to clarify at all -- that the notification has to be read in tune with the parent legislation and when the parent legislation makes the notification, issued under Section 9(3), prospective in nature, the notification has to be given prospective effect.
51. In fact, respondent No.4, who has reopened the assessment and made the impugned re-assessment, did not even decide as to what the expression, 'date of its issue', in Section 9(3), means. What he decided was as to what is the date on which the notification came into force; whereas the plain language of the law required him to really determine the date of issuance of the notification and start counting the period of validity with effect from the date of issuance of the notification. Respondent No.4 abdicated his authority to decide this basic issue raised and without deciding the issue, so raised, had reopened the assessment by holding that the notification, in question, having come into force on 03.01.2003, must be read to have come into force on 01.05.2001.
31
52. Turning to the order passed in the revision, it needs to be noted that even the respondent No.3, when confronted with the impugned order of re-assessment, did not answer the question raised by the appellant, namely, as to whether the parent legislation being prospective in effect, a notification, issued under Section 9(3), could have been given retrospective effect. Though raised before the respondent No.3, respondent No.3 too did not answer the question as to when a notification, issued under Section 9(3), comes into force. Without answering this question of law, respondent No.3 merely observed to the effect that since the notification had mentioned that it was retrospective, it had to be given retrospective effect. Respondent No.3, thus, shirked his responsibility to determine what the law had warranted him to determine.
53. Yet another reason, which respondent No.3 has assigned for his non-interference with the order of re-assessment, is that the appellant had already availed concessional rate of tax for a period of three years. Respondent No.3, therefore, took the view that since the appellant had already enjoyed the benefit of concessional rate in terms of the notification, the notification has to be construed retrospectively so far as, at least, the case of the appellant was concerned. This was a completely incorrect approach by the respondent No.3 inasmuch as no tax can be imposed on a person unless permitted by law. So guarantees Article 366. In the name of equity, therefore, the right not to pay tax cannot be denied to an assessee by the State. This is the basis of each fiscal legislation. No tax can be made payable by a person 32 unless the law requires him to do so. When the law does not require him to pay tax, tax cannot be realized. Even if, therefore, the appellant had, in the present case, incorrectly or illegally, enriched himself by taking the benefit of concessional rate of tax relying on the notification aforementioned, this could not have denied, in the name of equity, the appellant's right to ask the respondents to decide, as a matter of law, as to when the notification shall be taken to have come into effect. An interpretation of a legislation has to be neutral. A decision, in a given case, may take its colour from the facts of the given case; but, while deciding the question of law, the fact cannot colourise the decision. When interpretated with neutrality, the notification, under the second proviso to Section 9(3), has to be treated to have come into effect on the date of its issue and not with effect from any date prior thereto. This primary position, as regards the notification, appears to have escaped the attention of the learned Single Judge. The learned Single Judge has, therefore, observed, at para 19, while dealing with the notification, as under.
―19. The notification dated 1.3.2003 is conspicuous by its language to be effective from 1.5.2001. The period of exemption/reduction is limited by the Act to be for a period of three years. In the comprehension of this Court though section 9(3) does not as such in express words permit the State Government to issue a notification with a back date, the words ‗date of issue' is in uncertain terms intended to be the starting point of the period of three years to avail the exemption or reduction in the rate of tax. By issuing this notification as is apparent in the contextual facts, the State Government desired a continuity in the exemption/reduction on and from 1.5.2001 and not 1.3.2002. The date of issue i.e. 33 1.3.2003, if construed to be the starting point of the grant of the exemption/reduction, it will not only be obviously against the apparent objective conveyed thereby but also lead to unwarranted anomalies and complications vis-à-vis the past transactions closed and finalized during 1.5.2001 to 28.02.2003. Admittedly the petitioner and others participating in such transactions have availed the benefit of such exemption/reduction in tax rate and thus if the notification as has been done is construed to have been effective from 1.5.2001, the same would not in any manner prejudicially affect any of its vested rights.‖
54. The learned Single Judge, it can be clearly seen, did not decide the question as to when a notification, issued under Section 9(3), comes into force. Without answering this legal question, the writ petition could not have been decided. The learned Single Judge appears to have been influenced by the fact that the Government had intended to give continuity to its earlier notification of exemption and, that is why, the notification had been brought into force with effect from 01.05.2001. Based on this interpretation, which we find, with great respect, impossible to agree to, denied to the appellant his right to receive the benefit of notification in accordance with what the parent legislation contemplated. In fact, the learned Single Judge too fell into serious error of law in allowing equity to prevail over the law, in the case, while interpreting the fiscal statute inasmuch as the learned Single Judge pointed out that the petitioner i.e. the appellant herein, having availed the benefit of reduced rate of tax, cannot claim prospective enforcement of the notification. Reminds the Supreme Court, in Polestar Electronic (P) Ltd. Vs. Addl. 34 Commissioner, Sales Tax, Delhi, reported in (1978) 1 SCC 636, that in construing a taxing statute, one must have regard to the strict letter of the law and not merely to the spirit of the statute or substance of the law. There is no equity about a tax nor can there be any presumption as to the tax inasmuch as one must look fairly at the language used in the statute and the Act. In fact, in Polestar Electronic (P) Ltd. (supra), the Supreme Court has further pointed out that it is a firmly established rule that the words of a taxing Act must never be stretched against a tax-payer. If the legislature has failed to clarify its meaning by use of appropriate language, the benefit must go to the tax-payer and if there is any doubt as to the interpretation, it must be resolved in favour of the subject.
55. Because of what have been discussed and pointed out above, it becomes clear that the notification, dated 03.01.2003, which mentions to have come into force on 01.05.2001, must be treated, and ought to have been treated, to have come into force on the date of its issue, i.e., with effect from 03.01.2003 and cannot be, and could not have been, treated to have come into force retrospectively with effect from 01.05.2001. With this fundamental issue of law being clear, it necessarily follows, as a logical conclusion, that the appellant had rightly enjoyed the benefit of the notification for the assessment year 2004-2005 and the benefit, if any, which he had received, or had availed of, during the period, when the notification was not in force, (and cannot, now, be legally construed to have been in force), the remedy of the State lies in recovering the same in accordance with 35 law provided the State's right, if any, in this regard, does not, otherwise, stand extinguished by law.
56. Because of what have been pointed out and discussed above, this appeal stands allowed. The impugned judgment and order, dated 06.09.2010, passed by the learned Single Judge, shall stand set aside and quashed. The impugned notification, dated 01.03.2003, the rectified order of assessment, dated 06.03.2009, passed by the respondent No.4 as well as the revisional order, dated 24.09.2009, passed by the respondent No.3, issue shall also stand set aside and quashed.
57. With the above observations and directions, this appeal shall stand disposed of.
58. No costs.
JUDGE JUDGE dutt