Skip to content


Gill and Company (P.) Limited Vs. Commercial Tax Officer, Ii Circle, Gadag and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 6300 to 6304 of 1969
Judge
Reported in(1973)1MysLJ45; [1973]31STC336(Kar)
ActsCentral Sales Tax Act, 1956 - Sections 6, 6(1A) and 9
AppellantGill and Company (P.) Limited
RespondentCommercial Tax Officer, Ii Circle, Gadag and ors.
Appellant AdvocateK. Srinivasan, Adv.
Respondent AdvocateP.G. Gowri, Adv. and ;Adv.-General
Excerpt:
- industrial disputes act, 1947. [c.a. no. 14/1947]. section 36: [mrs. manjula chellur & a.n. venugopala gowda, jj] appearance through legal practitioner - held, sub-section (2) of section 36 enables the engaging of the service of the officer of the company or the officers of the association or of a federation, to which the management is a member, not withstanding that the officer or office bearer is incidentally being a legal practitioner. sub-section (4) of section 36 cannot prevent such authorised person incidentally being a legal practitioner from appearing for the industrial concern. on facts, held, the respondent has produced material to show that the person who is authorised to represent it in the industrial tribunal, is the office bearer of icea and icea is an association of..........assessment years 1959-60 to 1963-64, the company's turnover in respect of sale of cotton in inter-state sales were assessed to tax under the central sales tax act, 1956, hereinafter called the act. the company paid quite a large sum, a little over 3 1/2 lakhs, as tax but the fortune appears to have smiled on it. some dealers in mysore state were then contending that if no sales tax would be liable under the mysore sales tax act, if the sales in the course of inter-state sales or commerce are deemed to have taken place inside the state, then no tax is chargeable under the act. in a sales tax revision petition preferred by one yaddalam lakshminarasimhiah setty, this court upheld the contention : see yaddalam lakshminarasimhiah setty and sons v. the state of mysore ([1962] 13 s.t.c. 583)......
Judgment:
ORDER

Jagannatha Shetty, J.

1. In these writ petitions, the following three questions of law have been referred to us for decision, in view of the conflict in two Bench decisions of this Court, namely, Harakchand Rugchand v. State of Mysore ([1969] 23 S.T.C. 197) and A. Misrimal Jain and Co. and Others v. State of Mysore ([1971] 28 S.T.C. 137) :

'(1) Does section 9 of the Central Sales Tax (Amendment) Act, 1969, operate to set aside the order of this court in Writ Petitions Nos. 550 to 554 of 1967 quashing the assessment orders and directing refund of the tax collected and to revive the original assessment orders by this court

(2) Does section 9 of the Central Sales Tax (Amendment) Act, 1969, operate to automatically revive the original assessment orders that had been set aside on appeal or revision following the decision in Yaddalam's case : [1965]2SCR129 and

(3) Is there any machinery provision in the Mysore Sales Tax Act, 1957, read with section 9 of the Central Sales Tax Act, 1956, for effecting recovery of the amount of tax refunded on the basis of Yaddalam's case : [1965]2SCR129 , without making rectification or revision of final assessment orders ?'

2. In Harakchand's case ([1969] 23 S.T.C. 197), the facts are these :

In respect of the assessment year 1957-58, the Commercial Tax Officer made an order of assessment by which the turnover of the petitioner therein relating to the sale of cloth held by him on 14th December, 1957, was included in the assessment. In Writ Petition No. 1235 of 1962, this court held that section 5 of the Mysore Sales Tax Act, 1957, did not charge that part of the turnover with sales tax and set aside that part of the assessment. On the strength of the order of this court, the petitioner applied for a refund which was accordingly granted to him. Subsequently, the Mysore Sales Tax (Amendment) Act (9 of 1964) amended section 5(5A) retrospectively and validated all assessments notwithstanding any judgment, decree or order of any court. Thereupon, the Commercial Tax Officer called upon the petitioner to pay back the amount refunded to him. The petitioner challenged the demand on two grounds : (1) the refund made by the Commercial Tax Officer also stood validated under section 34 of the amending Act and it was impossible for the Commercial Tax Officer to demand the payment of what was refunded; (2) the demand could be made only after there was a rectification, under rule 38 of the Mysore Sales Tax Rules, 1957, of the order of assessment which the Commercial Tax Officer had previously made.

Rejecting those contentions, it was held therein that on the validation of the assessments, the Commercial Tax Officer had the power to call upon the petitioner therein to repay the amount which had been refunded to him and that the liability to pay back that amount was a consequence which plainly flowed from the retrospective validation.

In Misrimal Jain's case ([1971] 28 S.T.C. 137), no specific contention was urged before the Bench to the effect that on the enactment of section 34 of the Mysore Sales Tax (Amendment) Act, 1963 (Mysore Act No. 9 of 1964), the original assessment orders levying tax on the stock of cloth were revived automatically and that it was not necessary to make a rectification of the assessment order before demanding the payment of tax. The contention urged there was that the object of section 34 was to maintain the status quo and not to disturb the orders of assessment and refunds made pursuant to the decision of this court.

In that case, this court sustained the orders of rectification made by the commercial tax authorities holding that the authorities could not have demanded the tax refunded without such rectification. The said decision has been followed in a number of cases arising out of the validation of assessments made by section 9 of the Central Sales Tax (Amendment) Act, 1969. The decision in Harakchand's case ([1969] 23 S.T.C. 197) was not brought to the notice of the Division Bench which decided the Misrimal Jain's case ([1971] 28 S.T.C. 137).

3. Before we go to the questions of law, let us see the facts leading to the petitions before us.

The common petitioner is a private limited company carrying on the business of selling cotton. This is the second time that the company has approached this court for relief under article 226 of the Constitution. For the assessment years 1959-60 to 1963-64, the company's turnover in respect of sale of cotton in inter-State sales were assessed to tax under the Central Sales Tax Act, 1956, hereinafter called the Act. The company paid quite a large sum, a little over 3 1/2 lakhs, as tax but the fortune appears to have smiled on it. Some dealers in Mysore State were then contending that if no sales tax would be liable under the Mysore Sales Tax Act, if the sales in the course of inter-State sales or commerce are deemed to have taken place inside the State, then no tax is chargeable under the Act. In a sales tax revision petition preferred by one Yaddalam Lakshminarasimhiah Setty, this court upheld the contention : see Yaddalam Lakshminarasimhiah Setty and Sons v. The State of Mysore ([1962] 13 S.T.C. 583). The appeal preferred by the State of Mysore against the decision of this court was dismissed by the Supreme Court but on a different ground : see The State of Mysore v. Yaddalam Lakshminarasimhiah Setty and Sons : [1965]2SCR129 .

After this decision which is popularly called the Yaddalam's case : [1965]2SCR129 , the petitioner preferred Writ Petitions Nos. 550 to 554 of 1967, challenging the validity of the orders of assessment pursuant to which it had already paid the tax. Following the decision in Yaddalam's case : [1965]2SCR129 , this court allowed the writ petitions on 28th March, 1967, quashing the assessment orders. Pursuant to the orders of this court, the assessing authority refunded to the petitioner the entire tax paid before.

But, fortune did not favour the petitioner much longer. The Parliament intervened to amend the Act by the Central Sales Tax (Amendment) Act, 1969 (Central Act No. 28 of 1969, which we will call as the amending Act). Earlier to the amending Act there was an Ordinance to the same effect promulgated by the President of India on 9th June, 1969. The object of the amending Act was obviously to render the decision of the Supreme Court in Yaddalam's case : [1965]2SCR129 ineffective and to validate the assessments of the type that were set aside by this court in Writ Petitions Nos. 550 to 554 of 1967.

On the passing of the amending Act, the assessing authority issued five notices to the petitioner-company on 15th October, 1969. The notices state as follows :

'In view of the direction issued by the Honourable High Court of Mysore in Writ Petition No. 550 of 1967 dated 28th March, 1967, the amount of tax paid by you, Rs. 31,006.71 (Rupees thirtyone thousand and six and paise seventy-one only) under the Central Sales Tax Act, 1956, for the period from 1st April, 1959, to 31st March, 1960, was refunded to you on 3rd July, 1967.

But section 9 of the Central Sales Tax (Amendment) Act, 1969, validates the order of assessment previously made. You are, therefore, called upon to pay back the amount of Rs. 31,006.71 (Rupees thirtyone thousand and six and paise seventy-one only) forthwith failing which the amount will be recovered as provided under the provisions of the Act.'

The petitioner-company immediately challenged the notices in the writ petitions out of which the questions of law have arisen.

4. Mr. Srinivasan, the learned counsel for the petitioner, urged that the assessment orders which were quashed by this court in the previous batch of writ petitions have become non est in law and could not be revived by the passing of the amending Act. He further urged that, in any event, section 9 of the amending Act does not automatically revive the original assessment orders that had been set aside on appeal or revision following the decision in Yaddalam's case : [1965]2SCR129 . Mr. Byra Reddy, the learned Advocate-General contended to the contrary.

5. Let us now come to the relevant provisions of the amending Act. Sub-section (1-A) of section 6 of the Act, which was inserted retrospectively, provides :

'6. Liability to tax on inter-State sales. - (1) ...... (1-A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State ......'

Section 9 provides :-

'9. Validation of assessments, etc. - (1) Notwithstanding anything contained in any judgment, decree or order of any court or other authority to the contrary, any assessment, reassessment, levy or collection of any tax made or purporting to have been made, any action or thing taken or done in relation to such assessment, reassessment, levy or collection under the provisions of the principal Act before the 9th day of June, 1969, shall be deemed to be as valid and effective as if such assessment, reassessment, levy or collection or action or thing had been made, taken or done under the principal Act as amended by this Act and accordingly -

(a) all acts, proceedings or things done or taken by the Government or by any officer of the Government or by any other authority in connection with the assessment, reassessment, levy or collection of such tax shall, for all purposes, be deemed to be, and to have always been, done or taken in accordance with law;

(b) no suit or other proceedings shall be maintained or continued in any court or before any authority for the refund of any such tax; and

(c) no court shall enforce any decree or order directing the refund of any such tax.

(2) For the removal of doubts, it is hereby declared that nothing in sub-section (1) shall be construed as preventing any person -

(a) from questioning in accordance with the provisions of the principal Act, as amended by this Act, any assessment, reassessment, levy or collection of tax referred to in sub-section (1), or

(b) from claiming refund of any tax paid by him in excess of the amount due from him by way of tax under the principal Act as amended by this Act.'

6. Before we examine the scope and effect of section 9 of the amending Act, it would be convenient to remember the power of Legislature to enact validating statutes.

The principles of law as stated by Hidayatullah, C.J., in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality and Others : [1971]79ITR136(SC) , and adopted by Hegde, J., in The Municipal Corporation of the City of Ahmedabad and Another v. The New Shrock Spg. and Wvg. Co. Ltd. : [1971]1SCR288 , are as follows :

'When a Legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the Legislature must possess the power to impose the tax, for if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the Legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances. Ordinarily, a court holds a tax to be invalidly imposed because the power to tax is wanting or the statutes or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law.'

7. Often we find the Legislature passing an amending and validating Act, and it comes for scrutiny before the courts. Reference may be made to the decision of the Supreme Court in Sadasib Prakash Brahmchari, Trustee of Mahiparakash Muth v. The State of Orissa : [1956]1SCR43 . Therein, certain schemes framed in pursuance of sections 38 and 39 of the Orissa Hindu Religious Endowments Act (No. 4 of 1939) were held invalid by the decision of the Supreme Court on the basis of the then existing law. Thereafter, the Orissa Legislature brought an amendment introducing section 79-A into the relevant Act purporting to revive the schemes which were pronounced to be invalid, by removing the defects noticed in the judgment of the Supreme Court. In dealing with a question similar to the one before us, this is what Jagannadhadas, J., speaking for the court, observed (at page 439) :

'Section 79-A in terms purports to revive the invalid scheme notwithstanding any judgment, decree or order of any court which means that though a court may have pronounced the scheme as void still that is deemed to be alive. It has been suggested that this is directly flouting the decision of this court and that the Legislature has no power to declare as valid and constitutional what was decided by this court as invalid and unconstitutional.

But it is to be observed that the Legislature does not purport to do anything of the kind. What it does is not to deem the schemes previously settled as having been validly settled on those very dates, under the then existing law. This of course is beyond legislative competence since the Legislature has not the power to override unconstitutionality as such. But what the Legislature has purported to do is to take up those very schemes and deem them to have been settled 'under the provisions of the present Act' and thereby to lay them open to any attack available under the present law.

Such a provision is not uncommon in legislative practice, and is enacted in order to avoid the public inconvenience of having to re-do what has previously been done.'

8. With this background in view, we now proceed to deal with the rival contentions by looking more closely at the relevant provisions of the amending Act. The controversy appears to us to be simple. Mr. Srinivasan did not contend that the amending Act was beyond the scope of the Parliament. He also did not say that the amending Act was a mere declaration invalidating the judgment in Yaddalam's case : [1965]2SCR129 , or the decision of this court in the previous batch of writ petitions preferred by the petitioner, as he could not, in view of the retrospective operation of the amendment to section 6 of the Act. By inserting sub-section (1-A) to section 6, the Parliament removed the defect which the courts had found in the then existing law, and supplied power to assess the transactions of the nature which the petitioner did during the relevant period of assessment. By the said provisions, it is now made clear that even if no tax was leviable under the general sales tax law of any State, in respect of any intra-State transactions of sale, tax will be leviable on the sale of any goods effected by a dealer in the course of inter-State trade or commerce.

Next comes section 9, validating all assessments made before 9th June, 1969. It opens with a non obstante clause overriding anything contained in any judgment, decree or order of any court or other authority.

What this section in effect says is that the assessment, reassessment, levy or collection of any tax made or purporting to have been made, any action taken or anything done in relation to such assessment, reassessment, levy or collection under the provisions of the Act, shall be deemed to be valid and effective as if they were made under the provisions of the Act which stood amended by the amending Act. Certain consequences follow from these savings which are to be found in clauses (a) to (c). Clause (a), again a deeming clause directs that all acts, proceedings or things done or taken by the Government or by any officer, in connection with the assessment, reassessment, levy or collection of such tax shall, for all purposes, be deemed to be, and to have always been, done or taken in accordance with law. Clause (b) bars any suit or other proceedings for refund of tax so paid, and clause (c) says that no court shall enforce any decree or order directing the refund of any tax so paid. Sub-section (2) lays such assessment, collection of tax or claim for refund open to any attack available under the Act as amended by the provisions of the amending Act.

9. It is indisputable that the introduction of sub-section (1-A) of section 6 of the main Act has been given retrospective effect as if it has been in the original Act at the initial enactment itself. Such introduction of the said sub-section, therefore, in the words of the Supreme Court, has so fundamentally altered the conditions on which the decision in Yaddalam's case : [1965]2SCR129 was rendered that the said decision could not have been given in the altered circumstances. That means that the amendment has rendered the decision ineffective by removing the very basis of the decision. By the express language of section 9 of the amending Act, assessments made must be deemed to be as valid and effective as if the same had been made under the principal Act as amended, that is to say, as if they had been made in the light of or pursuant to sub-section (1-A) of section 6 of the main Act and this deeming has to be made notwithstanding any judgment, decree or order of any court or other authority to the contrary. The expression, 'authority' undoubtedly means any authority functioning under the Sales Tax Act itself. If, therefore, the order of any appellate or revisional authority functioning under the Sales Tax Act has, following the decision in Yaddalam's case : [1965]2SCR129 , set aside any assessments then the order or decision of such authority also is rendered ineffective for the same reason.

10. The said result is brought about by the amending Act, not by a mere declaration that the decision in Yaddalam's case : [1965]2SCR129 or any judgment, decree or order of any court or authority shall not be binding without effecting any change in the state of law on the basis of which the decision in Yaddalam's case : [1965]2SCR129 was rendered, but by changing or altering the law and thus conferring validity upon assessments already made and any further action or proceedings taken in connection with it or pursuant thereto.

11. Hence, it is no longer possible to cite the decision in Yaddalam's case : [1965]2SCR129 as declaring a rule of law invalidating the assessments. The assessments are now valid and effective as if made pursuant to sub-section (1-A) of section 6 of the main Act. The said section 9 of the amending Act expressly states further that all acts, proceedings or things done or taken by the Government or by any officer of the Government or by any authority in connection with the assessment shall be deemed to be and to have always been done or taken in accordance with law; it also prevents or prohibits the taking of any proceedings for refund of any tax collected or the enforcement of any decree or order directing refund of any such tax.

12. The result is that the assessment having been validated retrospectively, further ation thereon already taken is also validated; among other things a demand notice issued pursuant to an order of assessment is also validated. If the tax has already been collected, no refund thereof can be claimed. As the assessment is valid and enforceable, the retention of money already refunded also necessarily becomes unlawful. If the retention of tax refunded is unlawful and the demand originally made is effective, then it inevitably follows that the valid and enforceable demand attracts the entire machinery for recovery provided in the Sales Tax Act. In this view, the notices received by the petitioner in these cases which he impugns in the writ petitions must be regarded as mere reminders or communications to him, that under the law as amended, the original demand has become enforceable and that he can no longer retain the money refunded to him.

13. It only remains to be stated that the decision in Yaddalam's case : [1965]2SCR129 and the amendments of the Act intended to nullify its effect deal only with liability of a transaction of sale of a particular description to tax and do not involve any variation in the rate of tax. No question of rectification or correction or recalculation of the amount of tax arises.

14. As the view we have taken proceeds on the declaration of law made by the Supreme Court in the cases already cited, we do not feel called upon to discuss the three decisions of the Madras High Court cited by Mr. Srinivasan, viz., (1) M. M. Muthukaruppan Chettiar v. Deputy Commercial Tax Officer, Tiruchi Town III, Tiruchirapalli ([1960] 11 S.T.C. 220), (2) T. V. Sundaram Iyengar and Sons Private Limited v. The Deputy Commercial Tax Officer, Madurai Town I, and Another ([1960] 11 S.T.C. 443) and (3) Ceylon Thowfeck Hotel v. The State of Madras ([1961] 12 S.T.C. 238), nor can we accept an argument which seeks to give effect to those decisions in such a way as to involve a departure from the principles as declared by the Supreme Court.

15. Our answers, therefore, to the questions referred to us are :

(1) Section 9 of the Central Sales Tax (Amendment) Act, 1969, operates to render ineffective the order of this court in W.P. Nos. 550 to 554 of 1967 and to render effective and valid the original assessment orders as if they have been made under or pursuant to sub-section (1-A) of section 6 of the Central Sales Tax Act, 1956.

(2) The said section 9 likewise renders ineffective any order made by an appellate or revisional authority under the Sales Tax Act following the decision in Yaddalam's case : [1965]2SCR129 and renders valid and effective the original assessment orders set aside by such authority for the said reason as if the same had been made under or pursuant to sub-section (1-A) of section 6 of the Central Sales Tax Act.

(3) As the demand made pursuant to original assessment orders so rendered are also rendered valid and effective, recovery of tax pursuant to such demand does not stand in need of any machinery other than or in addition to the machinery provisions already contained in the Mysore Sales Tax Act, 1957, read with the Central Sales Tax Act.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //