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Bengal Paper Mill Co. Ltd. and anr. Vs. Commercial Tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberC.R. No. 5177(W) of 1968
Judge
Reported in[1976]38STC163(Cal)
AppellantBengal Paper Mill Co. Ltd. and anr.
RespondentCommercial Tax Officer and ors.
Appellant AdvocateR.N. Bajoria, ;Bhaskar Gupta, ;P.L. Khaitan, ;C.S. Hirawat and ;Dilip K. Dhar, Advs.
Respondent AdvocateSamarendra Nath Dutta, Adv.
DispositionPetition allowed
Cases ReferredSeldon v. Seldon
Excerpt:
- s.k. mukhekjea, j.1. this application has come up before us for decision, on a reference made by p.k. banerjee, j., under rule 1(1) of chapter ii of the appellate side rules.2. the reference involves the question of validity of the retrospective operation of the definition of 'business' in clause (la) of section 2 of the bengal finance (sales tax) act, 1941, a definition introduced by means of an amendment by sub-section (1) of section 4 of the west bengal taxation laws (amendment) act, 1969, and similar enactments.3. the petitioners, bengal paper mill company limited, carry on business of manufacturing paper. they are registered dealers under the bengal finance (sales tax) act, 1941.4. the petitioners' case is that for the manufacture of paper they purchase chemicals and stores. those.....
Judgment:

S.K. Mukhekjea, J.

1. This application has come up before us for decision, on a reference made by P.K. Banerjee, J., under Rule 1(1) of Chapter II of the Appellate Side Rules.

2. The reference involves the question of validity of the retrospective operation of the definition of 'business' in Clause (la) of Section 2 of the Bengal Finance (Sales Tax) Act, 1941, a definition introduced by means of an amendment by Sub-section (1) of Section 4 of the West Bengal Taxation Laws (Amendment) Act, 1969, and similar enactments.

3. The petitioners, Bengal Paper Mill Company Limited, carry on business of manufacturing paper. They are registered dealers under the Bengal Finance (Sales Tax) Act, 1941.

4. The petitioners' case is that for the manufacture of paper they purchase chemicals and stores. Those chemicals and stores are usually received by the petitioners packed in drums and bags. After use, the drums, bags or other containers in which the said stores and chemicals are received become useless and are sold or disposed of by the petitioners from time to time. On occasions, they also sell or dispose of scrap or other miscellaneous old and discarded stores. Sale of old and discarded materials does not form any part of the business activities of the petitioners. They do not deal in or purchase any of the said materials for the purpose of selling them with any intention of making profit or gain thereby. The petitioners do not carry on any business of dealing in or selling such materials. The said materials are not by-products or subsidiary products of or arising in the course of manufacture of paper.

5. The petitioners maintain a canteen for supplying meals to the workers employed in their factory. The canteen is run in the interest of labour welfare and not for profit. The petitioners do not carry on any business in respect of supply of meals. The canteen is required to be run under the provisions of the Factories Act.

6. The Commercial Tax Officer, respondent No. 1, sought to assess the petitioners to tax in respect of sales of old and discarded materials and also of sales made by the said canteen in the year ending on 31st December, 1964. The petitioners contended that the said sales are not taxable as the petitioners do not carry on any business in the said materials or in running the said canteen. They claimed that the said materials were neither acquired nor disposed of for making profit.

7. It is stated in the petition that for the year ending on 31st December, 1964, the petitioners sold discarded materials of the total value of Rs. 97,607.17. They also received a sum of Rs. 54,388.57 as proceeds of sale made by the said canteen for the said period. The petitioners did not include the said sales in their returns filed for the said period before respondent No. 1 as the said sales were not taxable under the provisions of the Sales Tax Act. The assessment for the year ending on 31st December, 1964, was taken up on December 4 and 7, 1967, and the case was finally heard by respondent No. 1 on 30th April, 1968. Respondent No. 1 indicated to the petitioners, his intention of taxing the sales of the said materials as also the sales made by the canteen. Thereafter, the petitioners by a letter dated 30th April, 1968, made representations to the effect that those sales were not taxable under the provisions of the said Act.

8. The petitioners claimed that at the material time, that is to say, during the year ending on 31st December, 1964, no tax could be levied on the petitioners under the provisions of the Bengal Finance (Sales Tax) Act, 1941, in respect of the said sales as the petitioners did not carry on any business by sale of the said commodities. It was contended by the petitioners that in order that a person might be said to be carrying on business of selling goods as contemplated under the said Act, there had to be acquisition by such person of such goods with the object of making profit. Unless the profit-motive was present in the transactions and such transactions were carried on regularly or systematically it could not be said that a business was carried on by a person in respect of such transactions. The petitioners claimed that they could not be treated as dealers under the said Act in respect of the said sales. It was pointed out that the Supreme Court had clearly laid down in the decisions in State of Gujarat v. Raipur . [1967] 19 S.T.C. 1 (S.C.). and held that the proceeds of sale of the said materials could not form any part of the petitioners' turnover under the said Act as the petitioners were not dealers in the contemplation of the said Act in respect of sale of the said materials. As regards sales made by the canteen, the Assistant Commissioner found against the petitioners and upheld the order of the Commercial Tax Officer.

9. We may now refer to the relevant legislation on the subject. On 9th November, 1967, the West Bengal Taxation Laws (Amendment) Ordinance, 1967, was promulgated by the Governor of West Bengal whereby several provisions of the Bengal Finance (Sales Tax) Act were amended.

10. Section 4 of the said Ordinance provides as follows:

Amendment of Ben. Act VI of 1941. -- In the Bengal Finance (Sales Tax) Act, 1941....

(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with the motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern ; and

(ii) any transaction in connection with, or ancillary or incidental to, such trade, commerce, manufacture, adventure or concern.

11. Thereafter, another Ordinance was promulgated by the Governor on 9th January, 1968, known as the West Bengal Taxation Laws (Amendment) Second Ordinance, 1968. By Section 8 of the said Ordinance, the earlier Ordinance was repealed and by Section 4, Section 4 of the earlier Ordinance was re-enacted. On 26th March, 1968, the President of India was pleased to enact the West Bengal Taxation Laws (Amendment) Act, 1968. By the said amending Act, the Second Ordinance was repealed. By Section 4 of the said amending Act, Section 4 of the Second Ordinance was re-enacted. By the West Bengal Taxation Laws (Amendment) Act, 1969 (Act 25 of 1969), the earlier Act was repealed and by Section 4 of the said Act, Section 4 of the earlier Act was re-enacted.

12. The petitioners do not challenge the provisions of Section 4 of the said Act or of the earlier Ordinances or Act, by which a definition of business has been inserted in the Bengal Finance (Sales Tax) Act. In other words, they do not seek to impugn the validity of the definition of 'business' introduced into the Sales Tax Act. They merely challenge the validity of the provision in Sub-section (1) of Section 4 of the West Bengal Taxation Laws (Amendment) Act, 1969, and of all other legislative enactments which provided that Clause (la) of Section 2 of the Bengal Finance (Sales Tax) Act, 1941, by which the word 'business' has been defined, shall be and shall always be deemed to have been inserted. It is the validity of the retrospective operation of the definition sought to be given by Section 4 of the West Bengal Taxation Laws (Amendment) Act, 1969, and the earlier enactments which has come up for consideration in this reference. The petitioners have sought to impugn the provision in the amending Act giving retrospective operation to Section 2(1a) of the Sales Tax Act on the ground that the provision offends against Article 14, Article 19(l)(f)and (g) and Article 20 of the Constitution.

13. It is submitted that the provision offends against Article 14 because, assessees whose assessments are pending have been subjected to discrimination as against those whose assessments have been completed. In so far as the amending Act has made no provision for reopening assessments already completed, the provision giving retrospective operation to Section 2(la) has exposed only those whose assessments are pending in respect of past years to taxation, leaving untouched those whose assessments have been completed. The provision therefore contravenes the principle of equality before the law which is enshrined in Article 14 of the Constitution. It is further contended that the provision by which retrospective operation has been given to Section 2(1a) of the Sales Tax Act also offends against Article 20 of the Constitution because it exposes assessees to penalties for non-registration in respect of those commodities which are sought to be taxed retrospectively by the insertion of the definition of 'business' in the Sales Tax Act. The argument in support of contravention of Article 20 may be briefly indicated. Sub-section (1) of Section 7A of the Sales Tax Act provides that no dealer shall, while being liable to pay tax under Section 4A of the said Act, carry on business as a dealer unless he has been registered and possesses a registration certificate. Section 22(l)(a) of the Act provides that whoever carries on business as a dealer in contravention of Sub-section (1) of Section 7 shall be punishable with simple imprisonment which may extend to six months or with fine or with both and when the offence is a continuing one, with a daily fine not exceeding fifty rupees during the period of the continuance of the offence. On the basis of these provisions of the Act, it was argued that if a dealer has become liable to pay tax retrospectively on sales of commodities which were not taxable before, he will also become liable to be registered and required to possess a registration certificate with retrospective effect in respect of his dealership in sales of commodities which were not taxable but have become liable to tax under the amended provisions of the Act. If that be the legal position, the learned counsel argued, the dealer not having registered himself in the past when he was dealing in those commodities, has exposed himself to the penalties imposed by Section 22 of the Sales Tax Act. That will have the effect of convicting a person of an offence for violation of a law which was not in force at the time of the commission of the act charged as an offence, a course prohibited by Article 20(1) of the Constitution.

14. It was then contended that by giving retrospective operation to the definition of 'business', the amending Act imposes unreasonable restriction on the petitioner's right to acquire, hold and dispose of property and to carry on trade or business guaranteed by Article 19(1)(f) and (g) of the Constitution. The provision in the amending Act, by which such retrospective operation has been given, is therefore not protected by Clause (6) of Article 19. Mr. Bajoria, the learned counsel appearing on behalf of the petitioners, pointed out that by the definition of business introduced by the amending Act, a fresh imposition has been sought to be levied, which affects transactions closed and concluded years ago although assessment proceedings might be pending in respect of those transactions in the original, appellate or even a post-appellate stage. The amending Act does not seek to validate impositions made in the past or any act done in relation thereto, but professes to impose a fresh tax for the first time. This is borne out by the objects and reasons in support of the West Bengal Taxation Laws (Amendment) Act, 1968 -- where the reasons for the amendment were stated to be the need for additional resources for financing the development schemes of West Bengal and also to meet the vast increase of commitments in the non-plan budget of the State,

15. It was then contended that it is unreasonable to give retrospective operation to the definition clause in Section 2 of the Bengal Finance (Sales Tax)

16. Act in view of the dealer not being able to pass on the liability sought to be created by the amending Act to his buyer. Retrospective operation of the clause has been given, it was submitted, in respect of a period well over a quarter of a century, which is unreasonably long. An argument was also addressed on Section 64A of the Sale of Goods Act, which provides that in contracts of sale, unless a different intention appears from the terms of the contract, in the event of any tax on the sale or purchase of goods being imposed in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of the tax where tax was not chargeable at the time of the making of the contract, the seller shall be entitled to be paid and to sue for and recover such tax. In so far as recovery of sales tax by the seller from the buyer is concerned, it was only on the 22nd September, 1963, that the right to recover such tax was conferred on the seller by Section 64A. It should be borne in mind that Section 64A, which was introduced in 1963, has not been given retrospective operation. In the result, the dealer has, in any event, no legal right to recover the fresh impost from his buyer on transactions prior to September, 1963. Moreover, it will be difficult, if not impossible, for him to recover the tax at all, after all these years.

17. It can be hardly disputed that under the Constitution, legislatures have powers to legislate both prospectively and retrospectively except in specific cases, as for example, cases contemplated in Article 20. No restriction has been imposed by the Constitution on the powers of the legislatures to enact laws with retrospective operation. In Raghubar Dayal v. Union of India A.I.R. 1962 S.C. 263, it was expressly recognised that the Constitution while making provision against ex post facto laws in Article 20(1) and against titles in Article 18(1) studiously refrained from introducing any bar against retrospective legislation. At page 274 of the Reports Ayyangar, J., speaking for the court said:

It cannot be therefore predicated off-hand and as a matter of law that every restriction which operates with retrospective effect and affects rights obtained under the pre-existing law, is unconstitutional as obnoxious to the freedom guaranteed by Sub-clause (f) or (g) of Clause (1) of Article 19.

18. In Rai Ramkrishna v. State of Bihar A.I.R. 1963 S.C, 1667 at 1673, Gajendragadkar, J., observed:

The other point on which there is no dispute before us is that the legislative power conferred on the appropriate legislatures to enact law in respect of topics covered by the several entries in the three lists can be exercised both prospectively and retrospectively. Where the legislatures can make a valid law, it may 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. Similarly, there is no doubt that the legislative power in question includes the subsidiary or the auxiliary power to validate laws, which have been found to be invalid. If a law passed by a legislature is struck down by the courts as being invalid for one infirmity or another, it would be competent to the appropriate legislature to cure the said infirmity and pass a validating law so as to make the provisions of the said earlier law effective from the date when it was passed. This position is treated as firmly established since the decision of the Federal Court in the case of United Provinces v. Mst. Atiqa Begum A.I.R. 1941 F.C. 16.

19. It is, therefore, clear that so long as the legislature is competent to legislate, it can legislate retrospectively. In this case, no question has been raised as to the competence of the legislatures to legislate on the subject-matter of the West Bengal Taxation Laws (Amendment) Act, 1969.

20. One of the grounds on which retrospective operation of Section 4 of the impugned Act has been challenged is that it imposes unreasonable restrictions on the rights guaranteed by Article 19(l)(f) and (g) of the Constitution. In the case of Rai Ramkrishna v. State of Bihar A.I.R. 1963 S.C. 1667., to which reference has already been made, it was said :

Though the legislature can pass a law and make its provisions retrospective, it would be relevant to consider the effect of the said retroactive operation of the law both in respect of the legislative competence of the legislature and the reasonableness of the restrictions imposed by it. In other words, it may be open to a party affected by the provisions of the Act to contend that the retrospective operation of the Act so completely alters the character of the tax imposed by it as to take it outside the limits of the entry which gives the legislature competence to enact the law ; or, it may be open to it to contend in the alternative that the restrictions imposed by the Act are so unreasonable that they should be struck down on the ground that they contravene his fundamental rights guaranteed under Article 19(l)(f) and (g). This position cannot be, and has not been, disputed by Mr. Sastri, who appears for the respondent, vide State of West Bengal v. Subodh Gopal Base A.I.R. 1954 S.C. 92 at 104 and Express Newspapers (Private) Ltd. v. Union of India A.I.R. 1958 S.C. 578 at 621.

21. In the same case it was recognised by the Supreme Court that taxing statutes are not beyond the pale of the constitutional limitations prescribed by articles 19 and 14 and that the test of reasonableness prescribed by Article 304(b) is justiciable. In this connection Gajendragadkar, J., observed :

It is, of course, true that the power of taxing the people and their property is an essential attribute of the Government and Government may legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed, so long as they happen to be within the legislative competence of the legislature, can be taxed by the legislature according to the exigencies of its needs, because there can be no doubt that the State is entitled to raise revenue by taxation. The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the legislature, and in dealing with the contention raised by a citizen that the taxing statute contravenes Article 19, courts would naturally be circumspect and cautious. Where for instance it appears that the taxing statute is plainly discriminatory, or provides no procedural machinery for assessment and levy of the tax, or that it is confiscatory, courts would be justified in striking down the impugned statute as unconstitutional.

22. In order to test the validity of the objection that the retrospective operation of the impugned section offends against Article 19(l)(f) and (g) of the Constitution, it has to be ascertained whether the restrictions imposed by the retrospective operation are reasonable or not. The tests of reasonableness have been prescribed by the Supreme Court on more than one occasion.

23. In Chlntamanrao v. State of Madhya Pradesh A.I.R. 1951 S.C. 118 at 119., Mahajan, J., said:

The phrase 'reasonable restriction' connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests of the public. The word 'reasonable' implies intelligent care and deliberation, that is the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(l)(g) and the social control permitted by Clause (6) of Article 19, it must be held to be wanting in that quality.

24. This statement of the law was relied upon by the Supreme Court in the later case of Express Newspapers (Private) Ltd. v. Union of India A.I.R. 1958 S.C. 578 at 621. Another pronouncement on the test of reasonableness occurs in State of Madras v. V.G. Row A.I.R. 1952 S.C. 196 at 199-200. There Patanjali Sastri, C.J., laid down that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned and no abstract standard or general pattern of reasonableness can be laid down as applicable to all cases. The learned Chief Justice said:

The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict.

25. The test of reasonableness as prescribed by Patanjali Sastri, C.J., has been applied in subsequent decisions and notably in the case of Raghubar Dayal v. Union of India A.I.R. 1962 S.C. 263. In the latter case, it was said that the 'reasonableness' of the provisions of a statute are not to be judged by a priori standards unrelated to the facts and circumstances of a situation, which occasioned the legislation.

26. The Bengal Finance (Sales Tax) Act was enacted in 1941. Section 4 of the West Bengal Taxation Laws (Amendment) Act, 1968, and the Act which replaced it, by giving retrospective operation to the definition of 'business' has sought to impose fresh taxes on transactions of certain types and in certain articles of merchandise with effect from the date of commencement of the statute. The question arises whether the retrospective operation of Section 4 over such a long period of time bringing within its scope, transactions of the remote past is reasonable or not. In the case of State of West Bengal v. Subodh Copal A.I.R. 1954 S.C. 92, S.R. Das, J., expressed the view that the fact of a statute being given retrospective operation may be properly taken into consideration in determining the reasonableness of the restriction imposed in the interest of the general public. Reference was made to this observation in Express Newspapers (Private) Ltd. v. Union of India A.I.R, 1958 S.C. 578 at 621 without a demur. In the present case, the section has not only been given retrospective operation but it has been given retrospective operation over an unreasonably long period -- one is almost tempted to say, an unconscionably long period of time. That itself is a factor, which, in our opinion, should be taken into consideration in judging the reasonableness of the provision by which the section has been made retrospective in its operation. In Krishnamurthi v. State of Madras [1973] 31 S.T.C. 190 (S.C.), where the court upheld the validity of an Act by which an amendment introduced in the Madras General Sales Tax Act was given retrospective operation, Khanna, J., speaking for the court, pointed out that the period from 1st April, 1964, to 13th September, 1965, during which the sales tax authorities charged tax on sale of furnace oil at the rate of two per cent was very short and did not give rise to some kind of vested right in favour of the appellants. It is, therefore, clear that one of the considerations which weighed with the court in upholding the validity of the retrospective operation of the Act was the comparatively short period over which the Act was intended to operate. The court made it clear that though the legislature can pass the law and make its provisions retrospective it would be relevant to consider the reasonableness of the restrictions imposed by it. Moreover, it has to be borne in mind that the definition of 'business' given by Section 4 has the effect of imposing fresh tax for the first time on transactions which were outside the ambit of the Sales Tax Act. The retrospective operation of the section, in effect, imposes fresh tax retrospectively over transactions which transpired over a long period of time dating back to 1941. It has been recognised in a large number of cases that the retrospective operation of a validating Act is quite the usual thing and will not, therefore, be lightly struck down. Instances will be found in the case of Krishnamurthi v. State of Madras [1973] 31 S.T.C. 190 (S.C.), to which reference has already been made and Jaora Sugar Mills v. State of Madhya Pradesh A.I.R. 1966 S.C. 416 at 421. A distinction ought to be made, in our opinion, between a validating Act, where Acts in respect of which the legislature is competent to legislate are validated by subsequent legislation to cure the defects of formal legislation under which those acts have been done, on the one hand, and a statute by which fresh impositions are levied on citizens retrospectively, on the other. There is, moreover, some substance in the contention that it will be difficult, if not impossible, for dealers to recover the sales tax which they have become liable to pay under the impugned section. In J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 S.T.C. 429 (S.C.) and in Krishnamurthi's case [1973] 31 S.T.C. 190 (S.C.), the court expressed the view that the fact that a dealer is not in a position to pass on the sales tax to others does not affect the competence of the legislature to enact a law imposing sales tax retrospectively because that is a matter of legislative policy. The pronouncement of the court has to be read in the context of the objection on the ground of lack of competence of the legislature, and not in the context of unreasonableness of a fresh impost, which is to be paid by a dealer but cannot be recovered from the buyer. In the judgment in Krishnamurthi's case [1973] 31 S.T.C. 190 (S.C.), a long passage was cited from the judgment in J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 S.T.C. 429 (S.C.), it reads:

It is no doubt true that a sales tax is, according to accepted notions, intended to be passed on to the buyer, and provisions authorising and regulating the collection of sales tax by the seller from the purchaser are a usual feature of sales tax legislation. But it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer, nor is 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 a sales tax, or validating the imposition of sales tax, when the seller is not in a position to pass it on to the consumer, is a matter of policy and does not affect the competence of the legislature.

27. The case of J.K. Jute Mills Co. Ltd. [1961] 12 S.T.C. 429 (S.C.) was decided in 1961. Section 64A of the Sale of Goods Act was amended on the 22nd September, 1963, to enable the seller to recover from the buyer any fresh tax, which might be imposed on the seller after the contract of sale is concluded. It must, therefore, be recognised that a right has been conferred on the seller to recover sales tax from the buyer if the seller is subsequently required to pay such sales tax. To give retrospective operation to Section 4 with effect from 1941 militates, in our opinion, against the policy of the law, which inspired the insertion of Section 64A into the Sale of Goods Act. Section 64A has not been given retrospective operation. It will not, therefore, be possible for the seller to recover from the buyer the tax now sought to be imposed by the amending Act in respect of the periods prior to September, 1963. As for the subsequent period he may be entitled in law to recover sales tax but the long lapse of time will, in our opinion, render it impossible for him to recover anything from his buyers. The difficulty of recovery of sales tax from the buyers is a factor which should legitimately be taken into consideration on the question of reasonableness of the impugned provision in the facts and circumstances of the present case.

28. Mr. Bajoria relied on a decision of the Supreme Court of the United States in Blodgett v. Holder 275 U.S. 142, where the Revenue Act, 1924, which sought to impose a tax on gifts retrospectively was struck down as arbitrary and invalid under the due process clause of the Fifth Amendment. In our opinion, the decision is not relevant for our present purpose having regard to the difference in this respect between the Indian Constitution and the Constitution of the United States to which attention was drawn by the Supreme Court in the case reported in Raghubar Dayal v. Union of India A.I.R. 1962 S.C. 263.

29. It will not be out of place to mention that several State Legislatures have latterly introduced amendments in their Sales Tax Acts by inserting a definition of 'business' similar to the definition given in Section 4 of the West Bengal Taxation Laws (Amendment) Act. In no other case, however, the definition clause has been given a retrospective operation. Neither the Madras General Sales Tax (Second Amendment) Act, 1964, nor the relevant Andhra Pradesh Act provides that the definition given of the word 'business' shall be and shall always be deemed to have been inserted in the Act. The impugned provision giving retrospective operation to a section which has the effect of imposing fresh taxation over a period of a quarter of a century retrospectively, shines in splendid isolation. In judging the reasonableness of the retrospective operation of the impugned section, we have also taken into consideration the fact that the rate of sales tax has steadily increased over the years and the retrospective imposition of fresh taxes without any limitation in time, which cannot be recovered by a dealer from his buyers will make an appreciable impact on his finances. A nominal or inconsequential impost may be ignored. In some cases, the taxes sought to be imposed retrospectively may not be of much consequences but, in other cases, they may have a disastrous effect, as for example, where a trader has sold his plant or machinery in the course of closing down his business. This is a factor which, in our opinion, the court ought not to ignore.

30. For all these reasons, we are of the view that the retrospective operation, which Section 4 of the relative Ordinances and Acts seeks to give to the amended Sub-section (la) of Section 2 of the Bengal Finance (Sales Tax) Act, 1941, imposes restrictions on fundamental rights guaranteed by Article 19(l)(f) and (g) in a measure, which must be held to be unreasonable and, therefore, the provision in Sub-section (1) of Section 4 of the West Bengal Taxation Laws (Amendment) Act by which retrospective operation has been given to the definition of 'business' must be struck down. We are of the opinion that the manner in which retrospective operation has been given to Clause (la) cannot be upheld as being violative of Article 19(l)(f) and (g) of the Constitution.

31. In Shew Bhagwan Goenka v. Commercial Tax Officer [1973] 32 S.T.C. 368, Debiprosad Pal, J., held that the retrospective operation of the amendment in question imposed an unreasonable restriction upon a person's fundamental rights guaranteed under Article 19(l)(f) and (g), which is not protected by Article 19(5) and (6). We are in agreement with the conclusion reached by the learned Judge, on this aspect of the matter, for the reasons we have given.

32. Mr. S.N. Dutta, the learned Advocate appearing for the revenue, pointed out that the Sales Tax Act provides for limitation for the purpose of assessment, appeal, revision and review. He referred to Section 11(2a) and Section 20 and Rule 80(5) and Rule 80(6) in support of his argument. He submitted that it is not always possible to reopen an assessment even though Clause (la) has been given retrospective operation by the West Bengal Taxation Laws (Amendment) Act. He submitted that the assessment must be completed within four years. After completion of the assessment, a further period of four years is available to the revenue for reopening the assessment. It has to be borne in mind that in appeal and in applications for revision or review, the period may be extended and, in fact, is extended in a large number of cases. Furthermore, when cases go higher up to the High Court or to the Supreme Court, the assessment may be reopened a long time after the return was originally filed. Even eight years is long enough. In many cases the time may be considerably longer in view of subsequent proceedings before tribunals and courts. Moreover, it has to be remembered that the section itself has not restricted the retrospective operation of Clause (la) in any manner. It is of the widest amplitude and relates back to 1941 when the Bengal Finance (Sales Tax) Act was first brought on the Statute Book.

33. The retrospective operation of the Act was challenged by the petitioner on the ground that it offends against Article 14 of the Constitution. Under the Presidential Order dated the 27th June, 1975, the right of a person to move any court for the enforcement of rights conferred by the said article in any proceedings pending in any court remains suspended for the time being and, therefore, no question arises of striking down the impugned statute under the said article. However, to hold that Article 14 is not applicable or that a statute does not offend against Article 14 is not to enforce the rights guaranteed by that article and we are, therefore, free to express our opinion that in so far as Section 4 of the relevant Act seeks to give retrospective operation to Clause (la) of the Bengal Finance (Sales Tax) Act, 1941, it is not hit by Article 14. It does not offend against Article 14 because it does not seek to make any hostile discrimination between persons or classes of persons. That it affects only those cases where assessments have not been finally closed and not others is a fortuitous circumstance. It is, therefore, not possible to hold that the relevant provision offends against Article 14.

34. As regards Article 20, we are unable to agree with Pal, J., that the relevant provision is violative of Article 20. In our opinion, the argument that by reason of the retrospective operation of Clause (la) of Section 2 of the Act a legal liability is imposed on the dealers to have themselves registered retrospectively in respect of their dealing in the articles which have been brought under the ambit of the Sales Tax Act by the amendment, is untenable. Section 7 provides that no dealer shall, while being liable to pay tax under Section 4 of the Act, carry on business as a dealer unless he has been registered and possesses a registration certificate. In the years prior to the enactment of the impugned provisions, dealers were not liable to pay the tax imposed by the amendment. They have become liable to pay the tax in respect of past transactions but they were not liable to pay the tax at the time when those transactions took place. There was, therefore, in our opinion, no obligation on their part to have themselves registered during those years in respect of sale of commodities which have become taxable under the amending Act. The deeming provision in the section, that is to say, Section 4(1) of the Taxation Laws (Amendment) Act cannot be extended to the provision made for registration of dealers. A deeming provision is a legal fiction which ought not to be extended beyond its legitimate limits, that is to say, beyond the scope of the purpose for which the fiction was resorted to by the legislature. In this connection, reference may be made to the interesting case of Seldon v. Seldon 50 T.L.R. 469, decided by the House of Lords. We are of the opinion that the amending Act by giving retrospective operation to Clause (la) of Section 2 of the Act does not offend against Article 20 of the Constitution.

35. In the view we have taken, the rule is made absolute. There will be no order for costs. The operation of this order is stayed for a period of eight weeks.

Sudhamay Basu, J.

36. I agree


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