Andhra HC (Pre-Telangana)
Kamala Ginning And Oil Mill, Adilabad ... vs State Of A.P. And Anr. on 24 March, 1998
Equivalent citations: 1998(3)ALD361, 1998(3)ALT712
Author: T.N.C. Rangarajan
Bench: T.N.C. Rangarajan
ORDER
S.V. Maruthl, J
1. These batch of writ petitions are disposed of by a common judgment as the issue involved is common to all these writ petitions.
2. The facts in brief are as follows:
For the sake of convenience the facts mentioned in Writ Petition No.4528 of 1996 are referred to in this judgment. The petitioners are Small Scale Industrial Units (hereinafter referred to as 'SSI Units') producing cotton seed oil having their units in Adilabad District. The Government of Andhra Pradesh issued G.O.Ms.No.498 Industries and Commerce (IA) Department dated 16-10-89 introducing a liberalised incentive scheme based on the recommendations made by an Expert Committee headed by Dr. Ram K. Vepa, I.A.S. (Retd.). The objective of the scheme is to achieve all round development of the State. This scheme covers the whole State except the Municipal Corporation areas of Hyderabad, Vijayawada and Visakhapatnam and was in force from 3-10-1989 to 2-10-1992. By virtue of the scheme, an incentive of five years sales tax holiday subject to a ceiling of Rs.35 lakhs on sales tax during the entire holiday period was introduced. This concession was allowed to SSI Units to be set up on or after 3-10-1989 and going into commercial production before 31-3-1995. The said G.O. was also provided for anotiier incentive by way of investment subsidy for small, medium and large scale industries. The annexurc to the said G.O. provided the list of industries which are not eligible for the incentives/concession under the G.O.
3. The petitioners established SSI Units in various backward areas under the said scheme. The petitioners were granted permanent eligibility certificate by the Department of Industries and Commerce. However, the authorities interpreted the G.O. by restricting the quantum of sales tax holiday to a maximum limit of capital investment or Rs.35 lakhs whichever is less.
4. Therefore, the petitioners along with several others filed Writ Petition No. 16570 of 1991 and batch under Article 226 of the Constitution of India seeking a direction to the authorities to extend sales tax holiday upto a sum of Rs.35 lakhs. In the said writ petitions, the petitioners also sought a consequential direction declaring the action of the authorities concerned in restricting the amount pertaining to such incentives/concessions to a sum equivalent to the capital investment of each of the industrial unit as illegal, arbitrary and without jurisdiction. The said writ petitions came up for hearing before a Division Bench of this Court consisting of Mr. Justice V. Sivaraman Nair, as he then, was, and Ms. Justice S. V. Maruthi (one of us). The learned Judges considered the extent of tax holiday or the sum in which the said concession/incentive was to be worked out. The Bench also considered the effect of a manual of guidelines issued by the Department of Industries and Commerce (LA.) in Memo No.2125/IA/89-I dated 15-09-1990, i.e., 11 months after the said G.O. was issued for the purpose of implementation of the G.O. The said guidelines provided instructions, prescribed proformas, time limit, etc. for claiming the concession. On a consideration of the guidelines and other arguments advanced at the time of hearing, it was held that the guidelines issued by the State did not empower it to restrict or forge fetters into the amplitude of the concession provided under clause 3 of the G,O.Ms.No.498 dated 16-10-1989 and further held that the petitioners are entitled to the sales tax holiday for a sum of Rs.35 lakhs. It was observed thus :
"11. We find considerable force in the submission urged by petitioners that clause 3 of G.O.498 contained an unambiguous and unequivocal representation that small scale industrialists who commence industrial activities on and after 3-10-1989 and commence commercial production before 31-3-1995 would be entitled to tax holiday in a sum not exceeding Rs.35,00,000/- during the period of five years. That concession was extended by a notified order issued in the manner indicated in Article 166(2) of the Constitution of India. We understand clause 6-B(ii) of the Guidelines to effect an alteration in that provision by limiting the extent of eligibility to a sum lesser than Rs.35,00,000/-. Such an alteration in a notified order issued under Article 166(2) of the Constitution could have been effected only by another notified order issued under Article 166(2) of the Constitution and published in the same manner and subject to the same conditions and restrictions as provided in that Article. That we understand to be the basic requirement of Section 21 of the Interpretation in General Clauses Act. Such an alteration not having been effected by a notified order issued under Article 166(2) of the Constitution of India, respondents are not entitled to rely upon the alteration or reduction in the eligibility of the petitioners for exemption to any amount lesser than that which was promised in clause 3 of G.O.498 dated 16-10-1989.
13. In this view, we hold that the petitioners are entitled to "sales tax holiday" for a period of five years subject to a ceiling of Rs.35,00,000/- on sales tax during the entire holiday period. We further hold that restriction or reduction of such eligibility to the sum of Rs.100% of the capital investment under clause 6-B(ii) of the Manual of instructions or the eligibility fixed by the District Committee or the orders of assessment are illegal and unenforceable. There will be a consequential direction that the respondents shall give full effect to the eligibility of the petitioners, in terms of clause 3 of the G.O.498 to the extent mentioned above for the period provided not exceeding five years and that the respondents shall not demand or collect Sales Tax from the petitioners except after granting the benefits of tax holiday in the amount and within the period as mentioned above."
5. The said judgment has become final. The petitioners along with others obtained the tax concession/holiday in terms of G.O.Ms.No.498 dated 16-10-1989 as upheld by this Court. The petitioners, in view of the tax holiday, passed on the concession to their customers and did not collect any sales tax during the relevant period.
6. By G.O.Ms.No.146 Industries and Commerce (IFR) Department dated 25-4-1991 the State Government included cotton seed oil units in the ineligible list of industries for the grant of incentives under G.O.Ms.No.498 dated 16-10-1989. While giving effect the provisions of G.O.Ms.No.l46 dated 25-4-1991, the respondents rejected the applications for grant of incentives of various cotton seed oil Units in the State. Questioning the rejection orders, a number of writ petitions were filed in mis Court namely Writ Petition No.2031 of 1994 and batch. While the said writ petitions and batch were pending, the State Government has passed Act 14 of 1995 and once again made the cotton seed oil units including the Oil Mills crushing non-edible oil seeds eligible for the incentives in terms of G.O.Ms.No.498 dated 16-10-1989. In view of the Act 14 of 1995, the writ petition No.2031 of 1994 and batch was disposed of by an Order dated 5-4-1995 holding that the petitioners are entitled for the benefits of G.O.Ms.No.498 as G.O.Ms.No.146 stood repealed in view of the Act 14 of 1995. This Court also directed the respondents to pass appropriate orders in the light of the provisions of Act 14 of 1995. It was further observed that the petitioners are at liberty to approach this Court challenging the provisions of Act 14 of 1995.
7. Act 14 of 1995 limited the maximum fixed capital investment or thirty five lakhs which which ever is less for the purpose of sales tax holiday in respect of SSI Units covered byG.O.Ms.No.498 dated 16-10-1989. While restricting the tax holiday to the maximum fixed capital investment or thirty five lakhs which ever in less, the Act was also given retrospective effect, namely, it was brought into force with effect from 16-10-1989. Pursuant to Act 14 of 1995, the second respondent issued notices proposing to levy and collect tax in terms of the said Act and requested the petitioners to file their objections if any against the proposed assessment, under the Andhra Pradesh General Sales Tax Act.
8. Challenging the above legislation, namely, Act 14 of 1995, the petitioners have approached this Court under Article 226 of the Constitution of India seeking an appropriate writ declaring the legislation of the State Government known as "The Andhra Pradesh Small Scale Industries (restriction on Sales Tax Holiday) Act, 1995, as unconstitutional, arbitrary, unjust and violative of Articles 14 and 300-A of the Constitution of India and further declaring that the impugned legislation has effect of overruling the decision of this Court in Writ Petition No.16570 of 1991 and batch dated 13-8-1993.
9. The facts in the other writ petitions are more or less similar to the facts narrated above.
10. The main argument of the learned Counsel for the petitioners is that the impugned legislation defeats and overrules the judgment of this Court in Writ Petition No.16570 of 1991 and batch, that there is no defect on the part of the G.O.Ms.No.498 dated 16-10-1989 so as to enable the legislature to remove the basis of the judgment which is the only permissible method for bringing out a validating legislation and that, therefore, this is a clear case of encroachment into the judicial authority. The impugned legislation has the effect of overruling the Mandamus issued by this Court' 'not to demand or collect sales tax from the petitioners except after granting benefits of tax holiday". The petitioners, relying on the concession extended to them under G.O.Ms.No.498 dated 16-10-1989, have not collected sales tax from their customers and passed on the concession to them and by virtue of the impugned legislation they are subjected-to suffer undue hardship and loss on account of retrospective effect given to it. The effect of retrospective legislation is unreasonable, arbitrary, illegal, unjust, confisfactory and expropriatary.
11. The learned Counsel for the petitioners, in support of their respective contentions, relied on the following decisions :
(1) State of Haryana and others v. Karnal Co-op. Farmer's Society Limited and others, .
(2) Empire Industries Ltd. and another v. Union of India and others, .
(3) Ujagar Prints v. Union of India and others, ( 1989 ) 3 SCC 531.
(4) S.R Bhagwat and others v. State of Mysore, .
(5) Coramandal Fertilizers Limited v. Commercial Tax Officer, Panjagutta, 1991 Vol.13 APSTJ 242 (6) Entertainment Tax Officer-1 and another v. Ambae Picture Palace, 1995 Vol.96 STC 338.
(7) Assistant Commissioner of Commercial Taxes (Asst.) Dharwar and others v. Dharmendra Trading Co., .
(8) Vij Resins Pvt. Ltd. and another v. State of Jammu and Kashmir and others., .
(9) D. Cawasji and Co. v. State of Mysore andothers, .
12. On the other hand, the learned Special Government Pleader for Taxes contended that the power of the legislature to enact a law with reference to a topic entrusted to it being unqualified subject only to any limitation imposed by the Constitution, in the exercise of such power, it will be competent for the legislature to enact a law which is either prospective or retrospective and, therefore, the impugned Act is within the competence of the State Legislature. Merely because the petitioners have not collected and recovered from the consumers the sales tax during the period in which G.O.Ms.No.498 dated 16-10-1989 was in force, it does not effect the competence of the State Legislature to enact the impugned legislation as it is not an essential characteristic of a sales tax that the seller must have the right to pass on it to the consumer nor is the power of legislature to impose tax on sales conditional on its making a provision for sellers to collect the tax from the purchaser. It is a matter of policy whether a law should be enacted imposing sales tax or validating imposition of sales tax and the fact that the seller was not in a position to pass it on to the consumer does not in any way effect the competence of the legislature. There is no evidence that the impugned legislation is confiscatory. The feet that the petitioners were disabled from passing on the incidence of the tax to the purchaser, it could not be said that the provisions imposed an unreasonable restriction upon the fundamental rights of the petitioners. Further, the petitioners have not shown the impugned legislation as confiscatory and, therefore, it could not be said that the Act imposed an unreasonable restrictions upon the petitioners. The learned Special Government Pleader for Taxes, in support of his respective contentions, relied on the following cases :
(10) J.K. Jute Mills Co., Ltd., v. State of Uttar Pradesh and another, .
(11) Indian Aluminium Co., v.. State of Kerala and others, .
(12) Hoechst Pharmaceuticals Ltd. and another v. State of Bihar and others, 1984 Vol.55 STC 1.
(13) S. Kodar v. State of Kerala, 1974 Vol.34 STC 73.
13. To consider the respective arguments of the learned Counsel for the petitioners as well as the learned Special Government Pleader for Taxes, it is necessary to refer to the Act 14 of 1995. The objective of the said Act is to limit the maximum fixed capital investment for the purpose of sales tax holiday in respect of certain SSI Units in the State of Andhra Pradesh. The relevant section of the impugned Act reads as under:
"2. Notwithstanding anything contained in G.O.Ms.No.498, Industries and Commerce (IA) Department, dated the 16th October, 1989 or, in any judgment, decree or order of any Court, Tribunal or other authority or any order to the contrary, the Government may declare a Sales Tax Holiday limited to 100% of the fixed capital investment or rupees thirty five lakhs, whchever is less for a period of five years in respect of the small scale industries including the oil mills crushing non-edible oil seeds, set up on or after 3rd October, 1989 and go into commercial production before 31st March, 1995 in the State of Andhra Pradesh except the industries indicated in the Annexure to the said Government Order and the industries located in the Municipal Corporation limits of Hyderabad, Visakhapatnam and Vijayawada."
14. From a reading of Section 2 of the impugned Act, it is clear that notwithstanding anything contained in G.O.Ms.No.498 dated 16-10-1989 or in any judgment, decree or order of any Court to the contrary, the sales tax holiday is limited to 100% of the fixed capital investment or Rs.35 lakhs which ever is less for a period of five years in respect of SSI Units including Oil Mills crushing non-edible oil seeds set up on or after 3-10-1989 and go into commercial production before 31-3-1995. hi other words, under this provision, the sales tax holiday will be applicable if two conditions are satisfied - (i) it is limited to 100% fixed capital investment or Rs.35 lakhs which ever is less and (ii) the production should commence before31-3-1995.
15. At this stage, it is necessary to refer to the judgment of a Division Bench of this Court in Writ Petition No.16570 of 1991 and batch dated 13-8-1993 in P.P.P. Industries and others v. The Commissioner of Industries and others, 1993 Vol.17 APSTJ 91 as the impugned legislation is an aftermath of this judgment, hi this case, under G.O.Ms.No.498 dated 16-10-1989 small scale industries are exempted from payment of sales tax for a period of five years from the date of commercial production and the entitlement to sales tax holiday is upto a sum not exceeding Rs.35 lakhs during the period of five years. That concession was sought to be amended by a Memo called Manual of Guidelines by introducing a restriction restricting the sales tax holiday to a sum of 100% of the capital investment, thus, reducing the eligibility to a sum lesser than Rs.35 lakhs which was originally mentioned in the Government Order. When the action of the authorities imposing a condition restricting the eligibility for tax holiday to a sum of 100% of the capital investment is challenged, this Court held that the restriction or reduction of such eligibility to the sum of 100% of the capital investment under the Manual of Instructions is illegal and unenforceable. The reason being that such an alteration could be effected only by another notified order issued under Article 166(2) of the Constitution of India and published in the same manner and subject to the same conditions and restrictions as provided in that Article as that being the basic requirement of Section 21 of the Interpretation of General Clauses Act. In other words, since it is not in compliance with the Article 166(2) of the Constitution of India, the authorities were debarred from altering the eligibility of the petitioners for exemption to any amount lesser than that which was promised in clause 3 of G.O.Ms.No.498 dated 16-10-1989. In other words, this Court held that it is competent for the Government to alter the conditions subject to the petitioners therein are entitled for tax holiday by an order issued under Article 166(2) of the Constitution of India and not by means of a Memo or Guidelines and that the Government Order can be amended only by another Government Order and not by a Memo. Since the alteration is made by a Memo which the authorities are incompetent to do, this Court held that the Memo is illegal.
16. By means of the impugned Act, the authorities have incorporated the contents of the Memo in it. In other words, the defect pointed out by this Court in P.P.P. Industries (supra) has been rectified. The authorities as well could have issued another Government Order amending the G.O.Ms.No.498 dated 16-10-1989. However, instead of issuing another Government order in exercise of the powers conferred on it under Article 166(2) of the Constitution of India, the State Government enacted a legislation in exercise of the legislative power with retrospective effect. The effect of the legislation is that the assessees would be entitled to tax holiday provided two conditions are satisfied - (1) that they should commence production before 31-3-1995 and (ii) that the tax holiday is restricted to 100% of the capital investment or Rs,35 lakhs which ever is less. With the result, the assessees are entitled to a tax holiday upto 100% of the fixed capital investment or Rs.35 lakhs, whichever is less. We have already pointed out, in the earlier paragraphs, that in P.P.P. Industries case (supra) it was held that the petitioners therein would be entitled for sales tax holiday upto Rs.35 lakhs provided they commence production before 31-3-1995.
17. The argument of the learned Counsel for the petitioners is that the judgment in P.P.P. Industries case (supra) has attained finality and, therefore, Section 2 of the impugned legislation in effect over-rules the said decision. The legislature is incompetent to do so. It is true that it was held in S.G. Bhagwat (supra) that:
"Once respondent-State had suffered the Mandamus to give consequential financial benefits to the allottees like the petitioners on the basis of the deemed promotions such binding direction about payment of consequential monetary benefits cannot be nullified by the impugned provisions of Section 4. Therefore, the underlined portions of sub-sections (2), (3) and (8) of Section 4 will have to be read down in the light of orders of the Court which have become final against the respondent-State and insofar as these provisions are inconsistent with these final orders containing such inconsistency must be treated to be inoperative and ineffective."
However, in our view, this judgment has no application to the facts of the present case for the reason that in the earlier judgment in which a writ of Mandamus was issued directing the payment of consequential benefits to the deemed promotees, the Court was not removing any lacuna or defect and under those circumstances it was held as above. That is what was pointed out by the learned Judges in the following observations:
"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. This would be clearly impermissible legislative exercise."
18. Similarly, in State of Haryana (supra) it was observed that:
"A legislature while has the legislative power to render ineffective the earlier judicial decisions, by removing or altering or neutralising the legal basis in the unamended law on which such decisions were founded, even retrospectively, it docs not have the power to render ineffective the earlier judicial decisions as invalid or not binding for such power if exercised would not be a legislative power but a judicial power which cannot be encroached upon by a legislature under our Constitution."
19. There cannot be any dispute about the propositions referred to above. But, the question is whether the principle is applicable to the facts of the present case. In our view, as pointed out in the earlier paragraphs, there is a defect in amending G.O.Ms.No.498 dated 16-10-1989 by means of an ordinary memo. Since it was not done in accordance with law, this Court declared that the amendment by a memo to G.O.Ms.No.498 as invalid. Therefore, the above observations are not applicable to the facts of the present case.
20. The next contention of the learned Counsel for the petitions is that by giving retrospective effect the legislation is imposing hardship on the petitioners as they are made to pay the tax though they have not collected the same as they have passed on the concession to the consumers. Therefore, it is unreasonable and arbitrary. It is true that in Ujagar Prints case (supra) it was held that in testing whether a retrospective imposition of a tax operates so harshly as to violate the fundamental right under Article 19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of, validating of taxing statutes struck down by Courts for certain defects, the period of such retroactivity and the defects and extent of any unforeseen or unforeseable financial burden for the past period etc. It is also true that in Empire Industries Ltd (supra) it was observed that if the amendment is harsh, it results in arbitrariness or discrimination. However, in the very same cases, namely Vjagar Prints (supra) and Empire Industries Ltd. (supra), it was observed thus :
In Ujagar Prints case:
"A competent Legislature can always validate a law which has been declared by Courts to be invalid, provided the infirmities and vitiating gactors noticed in the declaratory judgment are removed or cured. Such a validating law can also be made retrospective. If, in the light of such validating and curative exercise made by the Legislature granting legislative competence, the earlier judgment becomes irrelevant and unforceable, that cannot be called an impermissible legislative overruling of the judicial decision. All that the Legislature does is to usher in a valid law with retrospective effect in the light of which the earlier judgment becomes irrelevant.
Such legislative expedient of validation of laws is of particular significance and utility and is quite often applied in taxing statutes. It is necessary that the Legislature should be able to cure defects in statutes. No individual can acquire a vested right from a defect in a statute and seek a windfall from the Legislature's mistakes. Validity of legislation retroactively curing defects in taxing statutes is well-recognised and Courts, except under extraordinary circumstances, would be reluctant to override the legislative judgment as to the need for, and the wisdom of, the retrospective legislation."
In Empire Industries Ltd. case:
"That by giving retrospective effect, the Amendment Act of 1980 could not be said to have imposed unreasonable restrictions on the petitioners' fundamental rights under Articles 14 and 19(1)(g). The petitioners had already paid the excise duty demanded of them from time to time and had also collected the duty from the customers. By the amendments, the legislative was only making "small repairs" and this was permissible mode of legislation. The amendment did not act harshly nor was there arbitrariness or discrimination."
21. While making the above observations, the learned Judges have not declared that a taxing provisions would become arbitrary and unreasonable on the grounds of retrospectivity if the assessees failed to pass on the tax to the consumer. At this stage, it is necessary to refer to the observations made in S. Kodar (supra) thus :
"That as the tax was not shown to be confiscatory, it could not be said that the provisions of the Act imposed any unreasonable restrictions upon the appellants' right to carry on trade. Because the appellants were disabled from passing on the incidence of the tax to the purchasers, it could not be said that the provisions imposed an unreasonable restriction upon the fundamental rights of the appellants under Article 19(1)(g) or 19(1)(f)."
22. To the same effect, it was also held in Hoechst Pharmaceuticals Ltd. case (supra) thus:
"that, on the facts, there was no material placed on record to show that the surcharge levied under sub-section(1) of Sections of the Act imposed a disproportionate burden on the appellants or that it was confiscatory in nature;
that merely because a dealer falling within the class defined under sub-section (1) of Section 5 of the Act was prevented from collecting the surcharge recovered from him, did not affect the competence of the State Legislature to make a provision like sub-section (3) of Section 5 of the Act nor did it become a tax on his income;
that it was 'not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer; nor was the power of the legislature to impose a tax on sales conditional on its making a provision for sellers to collect the tax from the purchasers whether a law should be enacted, imposing sales tax or validating the imposition of sales tax, when the seller was not in a position to pass it on to the consumer, was a matter of policy and did not affect the competence of the Legislature."
23. From the above it is clear that it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer and that the power of Legislature to impose tax on sales does not depend on the condition that the sellers have to collect the tax from the purchasers and it is a matter of policy for enactment of such law imposing sales tax or validating the imposition of sales tax, and, it does not effect the legislative power if the seller was not in a position to pass it on to the consumer. The fact that the assessee was prevented from collecting the sales tax recovered from him, does not effect the competence of the slate legislature to make a provision imposing sales tax or validating the imposition of sales tax by removing the defect.
24. Further, it was held in J.K. Jute Mills Co. Ltd. case (supra) thus :
"where the transactions is one of sale of goods as known to law the power of the State to impose a tax thereon is plenary and unrestricted subject only to any limitation which the Constitution might impose and in the exercise of that power, it will be competent to the legislature to impose a lax on sales which had taken place prior to the enactment of the legislation.
As the power of legislature to enact a law with reference to a topic entrusted to it being thus unqualified, subject only to any limitation imposed by the Constitution, in the exercise of such a power, it will be competent for the legislature to enact a law, which is either prospective or retrospective. Such a law, therefore, being within the competence of the legislature, the U.P. Sales Tax (Validation) Act, 1958 (U.P. 15 of 1958) is not ultra vires the powers of the legislature under Entry 54, for the reason that it operates retrospectively."
25. Further, we may also refer to the judgment in Vij Resins Pvt. Ltd. case (supra) relied on by the learned Counsel for the petitioners wherein it was held thus :
"It is true that there is no estoppel against the legislature and the vires of the Act cannot be tested by invoking the plea but so far as the State is concerned the rule of estoppel does apply and the precedents of this Court are clear."
In other words, there is no estoppel against the Legislature in making the impugned enactment though it may give rise to a fact situation of estoppel as on the promise made by the authorities by issuing G.O.Ms.No.498 dated 16-10-1989 whereby the assessees were allowed to avail sales tax holiday resulting in passing on the concession to the consumers and now by virtue of the Act 14 of 1995 they are liable to pay the tax. However, the next sentence makes it clear that there cannot be any estoppel against State Legislature and, therefore, the enactment is valid.
26. Reliance placed on by the learned Counsel for the petitioners on Entertainment Tax Officer-I (supra) is not of much assistance. This is a case where till September 6, 1984, entertainment tax was being levied on the gross collection capacity per show at certain percentage. On a change of Government, the new Government by an Ordinance promulgated with effect from September 7, 1984, restored the tax to its original base of actual payment received for admission to entertainment. There was again a change of Government and the old Government which had gone out of power came back to power, and a new Ordinance was issued on October 25, 1984, with retrospective effect from September?, 1984, reintroducing the payment of entertainment tax on the basis of gross collection capacity of the show. In this context, we may refer to the observations of the Supreme Court in the said case which are as follows:
"Where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law, but it can also provide for the retrospective operation of the said provisions.''
27. Much reliance has also been placed by the learned Counsel for the petitioners on D. Cawasji and Co. case (supra). However, the facts of the said case are distinguishable and the principle laid down therein is not applicable to the facts of the present case. We may also refer to the principle laid down by the Supreme Court in the said case which is as follows:
"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 amendment providing for eligibility 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 cess 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."
Under those circumstances, it was held that the object of enacting Amendment Act is to nullify the effect of the judgment and enable the State Government to retain the amount wrongfully and illegally collected as sales tax and this object was sought to be achieved by the Amendment Act, which did not even purport to remedy or remove the defect or lacuna, but, merely raised the rate of sales tax from 6 1/2 per cent to 45 per cent and further proceeded to nullify the judgment and order of the High Court, Under those circumstances, it was held that the enhancement of the rate of tax was clearly arbitrary and unreasonable. It was further held "that the Act imposing higher levy with retrospective effect and sought to nullify the judgment and order of the High Court was invalid and unconstitutional.
28. From the facts referred to above in the judgment of D. Cawasji and Co. case (supra), it is clear that instead of curing the defect, the amendment Act imposed higher rate of tax to retain the tax wrongfully and illegally collected. Under those circumstances, it was held that the Amendment Act was invalid and unconstitutional. But, in the present case, the question of imposing higher rate of tax did not arise. The only question which arises in the present cascj in our view, is whether it is competent for the legislature to remove the defect pointed out in the earlier judgment, as referred to in the earlier paragraphs by retrospective legislation.
29. Therefore, the contention of the learned Counsel for the petitioners that the imposition of tax with retrospective effect is arbitrary and unreasonable and cannot be sustained. The reliance placed on by the Counsel on the observations made by the Supreme Court in Lohia Machines Ltd. and another v. Union of India and others, which are to the following effect:
' 'To establish arbitrariness or unreasonableness, it does not become necessary to prove that the undertaking of the assesses will be completely crippled and will have to be closed down in consequence of the withdrawal of the relief with retrospective effect. The possibility of very grave prejudice to the assessee by the withdrawal of the relief with retrospective effect, in the absence of any justifiable ground and any serious prejudice to the interests of the Revenue, establishes unreasonableness and arbitrariness of the retrospective amendment."
cannot come to his rescue as they represent minority view.
30. It follows from the above that the legislature has the legislative power to render ineffective the earlier judicial decisions, by removing or altering or neutralising the legal basis in the unamended law on which such decisions are founded, retrospectively, if in the light of such validating and curative exercise made by the legislature granting legislative competence, the earlier judgment becomes irrelevant and unenforceable. That cannot be called as impermissible legislation overruling of judicial decision. Validity of legislation retroactively curing defects in taxing statutes is well recognised and Courts, except under extraordinary circumstances, would be reluctant to override the legislative judgment as to the need for, and the wisdom of, the retrospective legislation. No individual can acquire a vested right from a defect in a statute and seek a windfall from the legislature's mistakes.
31. By giving retrospective effect, the Amendment Act could not be said to have imposed unreasonable restriction on the petitioners' fundamental rights under Articles 14 and 19(l)(g). It is no doubt true that in Empire Industries Ltd. (supra) it was observed that the petitioners had already paid the excise duty demanded of them from time to time and had also collected the duty from the customers. These observations cannot be understood that in the event of not collecting the tax from the customers the retrospective legislation becomes unreasonable and arbitrary and violative of Articles 19(1)(g) and 14 of the Constitution of India in view of the observations in S. Kodar (supra) and Hoechst Pharmaceuticals Ltd. (supra); as it is not the essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer and the power of the legislature to impose a tax on sales is not conditional on its making a provision for seller to collect the tax from ihc purchasers; because the sellers were disabled from passing on the incidence of the tax to purchasers, it could not be said that the provision imposed an unreasonable restriction upon the fundamental rights of the sellers under Article 19(1)(g).
32. Let us examine the facts of the present case in the light of the above principles.
33. Under G.O.Ms.No.498 dated 16-10-1989 a concession namely a tax holiday was conferred on those persons who set up industries in backward area. According to the said Government Order, the petitioners arc not liable to pay any tax on sales upto Rs.35 lakhs provided they commence the production before 31-3-1995. However, this was sought to be amended by a memo by limiting the concession to the 100% capital investment or Rs.35 lakhs whichever is less. With the result, those whose investment is less than Rs.35 lakhs alone are entitled for tax holiday. The said memo was struck down as illegal and without authority of law. During pendency of this writ petition, challenging the memo, the petitioners had stay with the result they passed on the concession to the consumers and could not collect the tax. By means of retroactive legislation which is impugned now, the Government proposes to collect the tax which the petitioners could not collect from the consumers. The competency of the Legislature to impose sales tax does not depend upon the petitioners right to collect the same from the customers as it is not a characteristic of the sales tax that the petitioner must have the right to pass it to the customer, because the petitioner was disabled from passing on the incidence of the tax to the purchaser, it could not be said that the Act imposed an unreasonable restriction upon the fundamental rights of the petitioners under Article 19(1)(g) of the Constitution of India. Consequently, the retrospectivity given to the Act does not become unreasonable or arbitrary.
34. The next argument of the learned Counsel for the petitioners is that the Act is confiscatory and, therefore, unreasonable and violative of Article 19(1)(g) of the Constitution of India. No material is placed before us as to how it is confiscatory. Mere fact that the petitioners have not collected the tax from the customers does not make the tax confiscatory as it is not an essential characteristic of the sales tax that the petitioners must have the right to pass it on to the customer.
35. It follows from the above that the Act does not suffer from any infirmity', and we therefore hold that it is valid and constitutional. The petitioners fail and the writ petitions are dismissed, but, in the circumstances without costs.