1. These are petitions under Article 226 of the Constitution by different assessees, but as they raise a common question as to the alleged invalidity of the Madras General Sales Tax (Third Amendment) Act, 1967 on the ground of its unreasonable retrospective operation, they have been heard together. Three of the assessees are each a public limited liability company registered under the provisions of the Companies Act and are leading dealers in mineral oils, including furnace oil, lubricating oils and greases. The other assessee is a partnership firm and a dealer in similar oils which it purchases from one or the other of the leading dealers and sells in retail. The first sales of lubricating oils and greases, under Entry 47 in the first Schedule to the Madras General Sales Tax Act, 1959, were charged to a single point tax at six per cent. With effect from April 1, 1964, Madras Act VII of 1964 substituted it by a fresh entry, lubricating oils, all kinds of mineral oils (not otherwise provided for in the Act) quenching oils and greases. Till September 13, 1965, it is stated, the trade proceeded on the assumption that the substitution made no difference to sales of furnace oil and they were, as before, liable to multipoint tax at two per cent. The dealers paid and collected tax on that basis and the Revenue accepted it. One of the dealers having sought for it, the Board of Revenue by its resolution dated August 28, 1965 expressed its view that Entry 47 as amended included furnace oil and transformer oil. The leading dealers thereafter started from Sept. 14, 1965 charging tax at 6 per cent on the first sales of the oils and were assessed accordingly. One of them, however, disputed the Board's view in Burmah Shell Co., Ltd. v. State of Madras (1968) 21 STC 227 (Mad) with the result that this Court held on August 2, 1967. that Entry 47, as amended in 1964, did not include furnace oil. This led to the enactment of the Madras General Sales Tax (Third Amendment) Act, 1967, which received the assent of the Governor on December 29, 1967, and came into operation on January 5, 1968, the date of its publication in the Fort St. George Gazette Extraordinary. The Amending Act has recast Entry 47, as lubricating oils (not otherwise provided for in the Act), quenching oils and greases and inserted a new Entry 47-A, alt kinds of mineral oils (other than those falling under the Entry 47 and not otherwise provided for in the Act) including furnace oil. Section 2 gives retrospective effect to the amendment but adopts the rates of tax as they existed from April 1, 1964 to November 30, 1965 and December 1, 1965 to June 17, 1967. Section 4 validates all taxes levied or collected or purported to have been levied or collected under the principal Act in the sale of the goods specified in Entry 47-A for the period April 1, 1964 to January 5, 1968.
2. It is contended that the retrospective imposition of a single point tax on furnace oil and other non-lubricating oils and the validation of levies prior to January 5, 1968, involving refusal or refund are ultra vires and void as they violate Articles 14 and 19 of the Constitution. The retrospective operation fend the validation, according to the assessees, violated equality under the law and also constituted an unreasonable restriction. In our opinion, the attack cannot be sustained. It is entirely based on the absence of a scheme of licensing and provisions requiring maintenance of books of accounts and records related to first or other siles of furnace oil prior to January 5, 1968 and the hardship and difficulty In discharging the burden o proof envisaged by Section 10 of the Madras General Sales Tax Act. In Guruviah Naidu and Brothers v. State of Madras, (1957) 8 STC 690 AIR 1958 Mad 158 this Court acknowledged that a system of licensing was essential to keep track of the dealings in goods subjected to single point taxation as they passed from dealer to dealer within the State and observed that, if there was no system of licensing by reason of which there could be such a tracing of the dealings, there would be the possibility of an escapement from tax or of imposition of multi-point tax because of the inability of the trader to prove that his dealing was not one which attracted the lax or that the tax had been paid at earlier stages. This reasoning led to the conclusion that 'a licensing system therefore was an inevitable adjunct to any system of single point taxation.' So, it is urged that the retrospective provision in the amending Act has placed the dealers in an unenviable position in which the assessees find themselves unable to discharge the burden cast on them in establishing that their sales are not first sales during the period prior to January 5, 1968. They were not expected to maintain and preserve records necessary to show that the tax had been paid at an earlier point, in the successive sales and, therefore, it would be an unreasonable restriction to require them, they say, to prove that their transactions were not liable to tax. Further, such retrospective operation deprived the dealers of the opportunity to collect tax or pass on the tax burden to other dealers or consumers. The advance knowledge of tax incidence is a primary element of reasonableness in indirect taxation and this element is entirely lacking because the dealers could not have visualised prior to the Board's resolution aforesaid that there would be a liability for a higher rate of single point tax in respect of first, sales of furnace oil. The petitioners add that these are not cases where there had been in fact tax levy in operation but subsequently some infirmity in the law led to a judgment of invalidity and then the Legislature resorted to a retrospective validation of the previous factual position by removing the infirmity. But (1968) 21 STC 227 showed that sales of furnace oil were not within the purview of Entry 47 at all as amended in 1964. The retrospective effect of the amending Act, according to the petitioners, also offends the guarantee of equality since among others equally situated as for instance subsequent dealers, some of them may be taxed at single point rate, though erroneously, while others may altogether escape and likewise some first sellers may escape while others are charged.
Now, it is well settled that the power of the Legislature in a taxation entry a plenary and it includes the power to legislate prospectively and retrospectively: Jaora Sugar Mills v. State of Madhya Pradesh, : 1SCR523 . No question of legislative competency of an enactment can arise merely on the ground of its retrospective effect in taxation. J. K. Jute Mills Co., Ltd. v. State of Uttar Pradesh, : 2SCR1 held that it would be competent to a Legislature to impose a tax on sales which had taken place prior to the enactment of the legislation. So too, it is now beyond dispute that fiscal statutes are Subject to the test of Part III of the Constitution. But Chhottabhai v. Union of India, : AIR1962SC1006 , pointed out that mere retrospectivity in the imposition of a tax could not per se render the law Unconstitutional on the ground of its infringing the right to hold property under Article 19(1)(f) or on the ground that it was unreasonable because it deprived a citizen of his right to pass on the tax to others. Rai Ramkrishna v. State of Bihar, : 50ITR171(SC) recognised that a taxing statute could be struck down as being unreasonable and so violative of Article 19(1). So too, if the taxing statute is plainly discriminatory or provides no procedural machinery for assessment and levy of tax or it is confiscatory. it will be held to be unconstitutional as exceeding the limits prescribed by Articles 19 and 14. C. Krishnamoorthy v. State of Orissa, : 7SCR185 refused to strike down Orissa Sales Tax Validation Act (7 of 1961) and observed:
'It is true that in considering the question as to whether legislative power to pass an Act retrospectively has been reasonably exercised or not, it is relevant to enquire how the retrospective operation operates. But because the retrospective operation may operate harshly in some cases, it cannot be said that the legislation itself is invalid. Besides, in the present cases, the retrospective operation does not spread over a long period either. In any event, in the circumstances of this case it would not be possible to hold that by making the provision of Section 2 of the Impugned Act retrospective the legislature has imposed a restriction on the petitioners' fundamental right under Article 19(1)(g) which is not reasonable and is not in the interest of the general public'.
We may take it, therefore, that the Court has the power and indeed it is its duty to strike down a fiscal legislation to be unconstitutional on the ground that its re-trospecive operation is unreasonable and offends the guarantee under Article 19(1). But it is neither possible nor wise to generalise what may constitute or be considered as unreasonable, as, in the nature of things, it is closely related to a variety of circumstances and the context. In the light of the principles of the cases referred to by us, we are unable to accept the extreme proposition that any retrospective taxation is by itself unreasonable. The inhibition of ex post facto laws does not apply to imposition of taxes by retrospective legislation. But if the retrospectivity is in its effect confiscatory or operates as a cloak of an oblique legislative purpose removed from ostensible tax considerations, or so totally oppressive as might destroy the very source oj taxation, it may be regarded as unreasonable. Mr, Thiruvenkatachari, who appeared for the petitioners, suggested that to satisfy the test of reasonableness for prospective tax laws, their incidence on burden should not be so high as to maka the holding of property or carrying on business unremunerative according to the accepted current standard of yield or profit, even after allowing for progressive taxation. But he himself adds that one should make a pragmatic approach to the problem having regard to the particular system of taxation. In the particular circumstances of the petitions before us, we are not, however, called upon to express our view on this suggestion.
3. But learned Counsel presses upon us that in the present case, in view of the practical difficulties and inequalities produced by the impugned retrospective legislation which was referred to earlier, we should hold it to be unreasonable and arbitrary. We do not think that these inequalities and practical difficulties, assuming they exist which may be but peripheral and procedural result, would be sufficient by themselves to render the retrospective effect unreasonable and to enable us to strike down the legislation as unconstitutional on that ground. A system of licensing and legislation is not a sine qua non or a necessary condition to the validity of a single point scheme of taxation, prospective or retrospective. As a matter of fact, there are provisions In the Madras General Sales Tax Act, 1959 which require every dealer to get himself registered and to maintain correct and proper accounts of dealings. If the petitioners have complied with these provisions as they should have, they would be able to show that their sales are subsequent sales of furnace oil not liable to charge.
4. Learned Government Pleader defends the amending Act by pointing out that it is not a new retrospective levy but the legislation is curative in character. Even if it created such a new liability which in a sense is not the case, we do not think that it is confiscatory in character or so oppressive or burdensome as to hold that it is unreasonable or unconstitutional. Jawaharmal v. State of Rajas-than, : 1SCR890 upheld the validity of extra rates retrospectively Imposed by legislation.
5. In our opinion the attack on the validity of the amending Act fails. The petitions are dismissed. No costs.