Full Judgment Text
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PETITIONER:
COMORIN MATCH INDUSTRIES (PVT.) LTD.
Vs.
RESPONDENT:
STATE OF TAMIL NADU
DATE OF JUDGMENT: 16/04/1996
BENCH:
SEN, S.C. (J)
BENCH:
SEN, S.C. (J)
SINGH N.P. (J)
CITATION:
1996 AIR 1916 1996 SCC (4) 281
JT 1996 (5) 167 1996 SCALE (3)538
ACT:
HEADNOTE:
JUDGMENT:
(With Civil Appeal No. 2207 of 1982)
J U D G M E N T
SEN, J.
The appellant is a manufacturer of safety matches.
During the period relevant For the assessment years
1957-58 to 1965-66, the appellant sold matches in the
course of inter-State trade and commerce for which sales tax
was charged under the Central Sales Tax Act. The assessment
orders were challenged by the petitioner by filing writ
petition before the High Court. The ground taken was that
Central Sales Tax was levied on turnover which included
excise duty. No Central Sales Tax could be levied on excise
duty. The provisions of subsections (2), (2A) and (5) of
Section 8 of the Central Sales Tax Act were ultra vires the
Constitution of India. Claims for refund of the tax
collected by the Sales Tax Authority were also made. Several
other similar writ petitions were heard by the High Court
along with the appellant’s case. The High Court by the
judgment dated 30th January, 1968 allowed the writ petitions
in the case of Larsen and Toubro v. Joint Commercial Tax
Officer, (1967) 20 STC 150. Following that decision, the
High Court allowed the writ petitions filed by the appellant
and the other writ petitioners. The Sales Tax Authority did
not prefer any appeal in the case of the appellant, but went
up in appeal in another case (The State of Madras v. N.K.
Nataraja Mudaliar, AIR 1969 SC 147) in which this Court held
that the provisions of sub-sections (2), (2A) and (5) of
Section 8 of the Central Sales Tax Act were valid. Is,
however, held that tax on excise duty was illegal and
affirmed the decision of the High Court on this point.
The case of the appellant is that even after the
judgment of the Madras High Court. the Commercial Tax
Officer did not refund the amount of tax illegally collected
even though specific direction had been given by the High
Court to that effect.
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The position after the decision of this Court in the
case of The State of Madras v. N.K. Nataraja Mudaliar,
(supra) was that levy of sales tax could not be said to be
invalid because provisions of sub-sections (2), (2A) and (5)
of Section 8 of the Central Sales Tax Act were ultra vires
the Constitution of India. In disposing of the appeal, Shah,
J. (as His Lordship then was) directed:
"The appeal will be allowed and the
order passed by the High Court
declaring the provisions of
Sections 8(2), 8(2A) and 8(5) ultra
vires must be set aside.
The petition out of which this
appeal arises was one of 8 group of
petitions filed before the High
Court. Against orders passed in
favour of the other assessees the
State has not preferred appeals.
The amount involved in the claim is
small The State apparently has
approached this Court with a view
to obtain a final determination of
the important question which was
raised in the petitions filed
before the High Court. We therefore
direct that there will be no order
as to costs in this Court and in
the High Court."
The other reason for which the assessments were set
aside was inclusion of excise duty in the computation of
’turnover’. There was a controversy as to how the turnover
under the Central Sales Tax Act should be computed. Under
the Madras General Sales Tax Act, 1959 and the rules, as it
stood at the material time, provisions had been made for
deduction of excise duty in the computation of chargeable
turnover. Madras High Court held that the quantum of
turnover for the purpose of levy of Central Sales Tax had to
be made in the same manner by excluding the excise duty paid
on the goods sold. In the case of State of Madras v. N.K
Nataraja Mudaliar, (supra), this Court held:-
"If under the Madras General Sales
Tax Act in computing the turnover
the excise duty is not liable to be
included and by virtue of section
9(1) of the Central Sales Tax Act
has to be levied in the same manner
as the Madras General Sales Tax
Act, the excise duty will not be
liable to be included in the
turnover . . . We are of the view
that in the matter of determining
the taxable turnover the same rules
will apply by virtue of Section
9(1) of the Central Sales Tax Act,
whether the tax is to be levied
under the Central Sales Tax Act or
the General Sales Tax Act."
The Central Sales Tax Amendment Act, 1969 brought about
a number of changes in the Central Sales Tax Act, 1956. The
definition of ’turnover’ in Section 2(j) was modified and
the wording of Section 9 was radically altered. The new
provisions were deemed always to have been substituted. This
amendment was effected with a view to put an end to the
controversy whether ’turnover’ should be computed in
accordance with the provisions of the State Sales Tax law or
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not. This amendment was necessary to get over the view
expressed by this Court in N.K. Nataraja Mudaliar’s case
that the Central Sales Tax had to be levied in the same
manner as provided in the Madras General Sales Tax Act When
the Central Sales Tax Act was examined by the Madras High
Court in the case of Larsen and Toubro and this Court in the
case of N.K. NataraJa Mudaliar, ’turnover’ had been defined
by the Central Sales Tax Act in Section 2(j) to mean "the
aggregate of sale prices received and receivable by him in
respect of sales of any goods in the course of inter-State
trade or commerce made during Any prescribed period and
determined in the prescribed manner". By Section 2 of the
Central Sales Tax Amendment Act, 1979 (28 of 1969), the
words ’and determined in a prescribed manner’ were
substituted by the words ’and determined in accordance with
the provisions of this Act and he rules made thereunder’.
This amendment was given effect with retrospective effect
from the date on which the Central Sales Tax Act ame into
force. In other words, the very basis of the law on which
the judgment in N.K. Nataraja Mudaliar’s was pronounced was
removed from the statute book .
The scope of the validating provision of the Amending
Act of 1969 must be viewed in the background of these facts
The amending Act, after amending the aforesaid provisions of
the Central Sales Tax Act and various other provisions, went
on to validate all assessments, reassessments, levy or
collection of any tax made ’notwithstanding anything
contained in the judgment, decision, decree or order of any
court or other authority to the contrary’. The result of the
various provisions of the Amending Act and in particular the
validating provision was to change the law with
retrospective effect and to impart validity to all
assessments made under the Central Sales Tax Act which had
been struck down by the judgment in the case of Larsen and
Toubro and all other orders passed pursuant to that
judgment.
Mr. Vaidyanathan has strenuously contended that the
legislature cannot nullify any judgment of the court. In the
instant case, the assessment made under the Central Sales
Tax Act had been quashed by the Madras High Court. This was
one of a large number of writ petitions which were heard by
the Madras High Court. Although in the case of N.K. Nataraja
Mudaliar (supra), an appeal was preferred to the Supreme
Court and the judgment was reversed, in the case of the
appellant the judgment was not questioned and was allowed to
stand. Therefore, it is in full force and has to be
respected as valid and binding. This judgment could be
reversed by the Supreme Court, but could not be nullified by
legislature by an Act. In support of this contention he has
relied on a judgment of this Court in the case of Madan
Mohan Pathak v. Union of India & Ors., (1978) 3 SCR 334,
In that case, a dispute between workers’ union and
the Life Insurance Corporation was settled by an
agreement for payment of cash bonus at the rate of 15%
of gross wages. The settlement was valid for four years
from 1st April, 1973 to 31st March, 1977. There was
some dispute about the implication of this settlement
and on 21st May, 1976 on a writ petition, the Calcutta
High Court passed an order recognizing the right of the
employees to payment of bonus for the year 1975-76 which
had become payable along with the salary in April, 1976. The
Calcutta High Court ordered that it must be paid to the
employees. On 29th May, 1976 the Life Insurance Corporation
(Modification of Settlement) Act, 1976 was passed by the
Parliament denying the employees the right which had been
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conferred by the settlement, approved by the Central
Government, acted upon by actual payment of bonus to the
employees and finally recognized as a right protected by
Articles 19(1)(f) and 31(1) of the Constitution by a
decision of the Calcutta High Court on 21st May, 1976.
It was noted in the judgment of Beg, C.J., that the
Statement of Objects and Reasons of the Act disclosed that
the purpose of the Act was to undo the settlement which had
been arrived at between the Corporation and Class-III and
Class-IV employees on January 24 and January 26, 1974. Beg,
C.J., was of the view that it would, in any event, be unfair
to adopt legislative procedure to undo such a settlement
which had become the basis of a decision of a High Court.
Even if legislation can remove-the basis of a decision it
has to do it by an alteration of general rights of a class
but not by simply excluding two specific settlements between
the Corporation and its employees from the purview of the
section 18 of the Industrial Disputes Act, 1947, which had
been held to be valid and enforceable by a High Court. Such
Selective exclusion could also offend Article 14."
Strong reliance was placed by Mr. Vaidyansthan on the
following observation of Beg, C.J. :-
"I find myself in complete
agreement with my learned brother
Bhagwati that to give effect to the
judgment of the Calcutta High court
is not the same thing as enforcing
a right under Article 19 of the
constitution becomes liked up with
the enforceability of the Judgment.
Nevertheless, the tow could be
viewed as separable sets of rights.
If the right conferred by the
judgment independently is sought to
be set aside, section 3 of the Act,
would in, my opinion, be invalid
for trenching upon the judicial
power."
Mr. Vaidyanathan has argued that whatever may be the
effect of the validation provision of Central Sales Tax
Amendment Act of 1969, it could not nullify the judgment
pronounced by the Madras High Court whereby the assessment
order had been quashed.
Before examining this argument of Mr. Vaidyanathan, the
majority judgment in Madan Mohan Pathak’s case (supra) will
have to be read and properly understood. The Life Insurance
Corporation (Modification of Settlement) Act, 19?6 was an
Act to alter the settlement which had been arrived at
between the Corporation and its class-III and Class-IV
employees on 24th January, 1974 under the Industrial
Disputes Act, 1947 and which was in force upto 31st March,
1976. The Act did not purport to change the law which formed
the basis of the judgment of the Calcutta High Court in any
manner. The Act did not contain any clause that it would be
enforced notwithstanding anything contained in any judgment
to the contrary. The majority judgment. which was delivered
by Justice Bhagwati, J. (as His Lordship then was),
highlighted this-aspect. Bhagwati,J. observed:-
"It is significant to note that
there was no reference to the
judgment of the Calcutta High Court
in the Statement of Objects and
Reasons, nor any non-obstante
clause referring to a judgment of a
court in section 3 of the impugned
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Act The attention of Parliament
does not appear to have beer drawn
to the fact that the Calcutta High
Court had already issued a writ of
mandamus commanding the Life
Insurance Corporation to pay the
amount of bonus for the year 1st
April, 1975 to 31st March, 1976. It
appears that unfortunately the
judgment of the Calcutta High Court
remained almost unnoticed and the
impugned Act was passed in
ignorance of that judgment. Section
3 of the impugned Act provided that
the provisions of the Settlement in
so far as they relate to payment of
annual cash bonus to Class III and
Class IV employees shall not have
any force or effect and shall not
be deemed to have had any force or
effect from 1st April, 1975. But
the writ of mandamus issued by the
Calcutta High Court directing the
Life Insurance Corporation to pay
the amount of bonus for the year
1st April, 1975 to 31st March, 1976
remained untouched by the impugned
Act. So far as the right of Class
III and Class IV employees to
annual cash bonus for the year 1st
April, 1975 to 31st March, 1976 was
concerned, it became crystalized in
the judgment and thereafter they
became entitled to enforce the writ
of mandamus granted by the judgment
and not any right to annual cash
bonus under the settlement. This
right under the judgment was not
sought to be taken away by the
impugned Act. The judgment
continued to subsist and the Life
Insurance Corporation was bound to
pay annual cash bonus to Class III
and Class IV employees for the year
1st April, 1975 to 31st March, 1976
in obedience to the writ of
mandamus."
After referring to the decision of this Court in Shri
Prithvi Cotton Mills Ltd. v. Broach Borough Municipality,
(1970) 1 SCR 388, Bhagwati, J. pointed out that in that case
validity of Gujarat Imposition of Taxes by Municipalities
(Validation) Act, 1963, altered the very basis of the law on
which this Court’s judgment in Patel Gordhandas Hargovindas
v. Municipal Commissioner, Ahmedabad, (1964) 2 SCR 608, was
pronounced. Not only substantive provisions of the Act were
altered but Section 3 of the Validation Act provided that
notwithstanding anything contained in any judgment, decree
or order of a court or tribunal or any other authority, no
tax assessed or purported to have been assessed by the
municipality on the basis of capital value of a building or
land and imposed, collected or recovered by the municipality
at any timebefore the commencement of the Validation Act
shall be deemed to have invalidly assessed or imposed or
collected or recovered and the imposition or collection of
the tax so assessed shall be valid and shall be deemed to
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have always been valid and shall not be called in question
merely on the ground that the assessment of the tax on the
basis of capital value of the building or land was not
authorized by law and accordingly any tax so assessed before
the commencement of the Validation Act and leviable for a
period prior to such commencement but not collected or
recovered before such commencement may be collected or
recovered in accordance with the relevant municipal law.
After referring to the provisions of the Act, Bhagwati,
J. observed:
"It is difficult to see how this
decision given in the context of a
validating statute can be of any
help to the Life Insurance
Corporation. Here, the judgment
given by the Calcutta High Court,
which is relied upon by the
petitioners, is not a mere
declaratory judgment holding an
impost or tax to be invalid, so
that a validation statute can
remove the defect pointed out by
the judgment amending the law with
retrospective effect and validate
such impost or tax."
Krishna Iyer and Desai, JJ. agreed with the judgment of
Justice Bhagwati, Chandrachud, Fazal Ali and Shinghal, JJ.
observed:-
"We agree with the conclusion of
brother Bhagwati but prefer to rest
our decision on the ground that the
impugned Act violates the
provisions of Article 31(2) and is,
therefore, void. We consider it
unnecessary to express any opinion
on the effect of the judgment of
the Calcutta High Court in W.P. 371
of 1976."
Therefore, the majority view appears to be that if a
judgment is pronounced by a court and the effect of that
judgment is sought to be taken away by legislature by
passing an Act without altering the statute on the basis of
which the judgment was pronounced, then such legislation
will not nullify the effect or force of the judgment
pronounced by a court in any manner. The statute being what
it was, the judicial interpretation of the statute could not
be held to be erroneous by legislative imprimatur, but if
the statute itself was amended retrospectively so that the
very basis of the judgment disappeared, then it could not be
said the judgment was still in force and will have to be
given effect to even though the legislature had specifically
laid down that the amended law will operate notwithstanding
any judgment or decision or decree by the court to the
contrary. In fact, that is how the judgment of Shri Prithvi
Cotton Mills Ltd. understood and explained .
In the instant case, after this Court’s decision in
N.K. Nataraja Mudaliar’s case the legislature has defined
’turnover’ in a new manner and has also amended certain
other provisions of the Act which formed very basis of the
Madras Judgments in the case of Larsen Toubro and this
Court’s judgment in the case of N.K. Nataraja Mudaliar.
Therefore, we are unable to uphold the contention of Mr,
Vaidyanathan that the Judgment of the Madras High Court in
the assessee’s own case must be held to be in full force in
spite of the Amendment Act of 1969.
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The legislature ordinarily cannot reverse a decision of
8 court of law given in exercise of judicial power. A
settlement between the management and the employees under
the Industrial Disputes Act cannot be declared by the
legislature invalid and not enforceable even after a High
Court had declared the settlement as valid and binding
between the parties. This is what was sought to be done in
Madan Mohan Pathak’s case (supra) and this Court held that
it was not permissible But if a High Court quashes several
assessment orders interpreting a taxing statute in a certain
certain manner and that interpretation is by a subsequent
judgment of the Supreme Court and the statute itself is
amended as e result of which the law on the basis of which
the High Court’s judgment was given is drastically altered,
in such a situation,’ it is permissible for the legislature,
by a Validation Acts to declare the assessments as valid and
binding notwithstanding the judgment of the High Court to
the contrary. The principle to be applied in cases like this
was stated by Hidayatullah, C.J., in the case of Shri
Prithvi Cotton Mills Ltd. v. Broach Borough Municipality,
(1970) 1 SCR 388:-
"When a legislature sets out to
validate a tax declared by a court
to be illegally collected under an
ineffective or invalid law, the
cause for ineffectiveness or
invalidity must be removed before
validation can be said to take
place effectively. The most
important condition 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.’
In Shri Prithvi Cotton Mill’s case (supra), the
assessment years involved were 1961-62, 1962-63 and 1963-64.
Broach Borough Municipality imposed a purported rate on
lands and buildings at a certain percentage of the capital
value. The assessment lists were published and tax was
imposed on the basis of capital value of the property. A
number of writ petitions were filed for quashing the
assessments. During the pendency of the writ petition, a
Validation Act was passed which was also challenged by
amending the writ petition.
The Validation Act was passed because of the decision
of this Court in the case of Patel Gordhandas Hargovindas v.
The Municipal Commissioner, Ahmedabad, AIR 1963 SC 1742 =
(1964) 2 SCR 608. In that case this Court struck down the
municipal tax levied as a percentage of the capital value of
the property. The assessments were declared ultra vires. The
Validation Act of 1963 redefined ’rate’ and converted the
municipal tax as a ’rate’ on lands and buildings. In the
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case of Shri Prithvi Cotton Mills (supra), Hidayatullah,
C.J., pointed out that the legislature by legislative
enactment retrospectively imposed the tax by giving to the
expression ’rate’ a new meaning and "while doing so it put
out of action the effect of the decisions of the courts to
the contrary." This principle laid down in Shri Prithvi
Cotton Mills, case has not been overruled or doubted by the
majority view in the case of Madan Mohan Pathak (supra).
In the instant case also. the High Court’s judgment in
Larsen and Toubro’s case (supra), in so far as it declared
certain provisions of the Sales Tax Act ultra vires, was
reversed in the case of N.K. Nataraja mudaliar (supra).
The includibility of the excise duty element in the
turnover was validated by the statutory amendments with
retrospective effect. Therefore, the very basis on which the
assessments sere quashed in the case of Larsen and Toubro
disappeared. The legal basis of the decisions following the
Larsen and Toubro’s case including that case also had
disappeared by judicial pronouncements and legislative
enactment. The validating provision of the 1969 Act, to
borrow the language of Hidayatullah, C.J., has put out of
action the effect of the decision of the High Court in this
case. The field is now occupied by the judgment of this
Court in N.K. Natraja Mudaliar’s case (supra) and the
provisions of the Central Sales Tax Act as amended by the
Act of 1969.
We shall now examine some of the other cases which were
cited on the question of the scope of various Validation
Acts passed by the legislature from time to time. The case
of A.V. Nachane v. Union of India (1982) 2 SCR 246, was a
sequel to the decision in the case of Madan Mohan Pathak,
where this Court had directed the Union of India and Life
Insurance Corporation to forbear from implementing the
provisions of the Validation Act of 1976 and to pay annual
cash bonus for the years in question to Class III and Class
IV employees in accordance with the settlements. On March
31, 1978 the Corporation issued a notice under Section 19(2)
of the Industrial Disputes Act declaring its intention to
terminate the settlement on the expiry of two months from
the date of the notice. Another notice was issued to effect
a change in the conditions of service applicable to the
workmen. The validity of the aforesaid two notices and the
consequential notification issued to nullify any further
claim to annual cash bonus was challenged by a writ petition
in the Allahabad High Court. The writ petition was allowed.
On appeal this Court pointed out that the settlements of
1974 could only be superseded by a fresh settlement. It was
held that in view of the decision in Madan Mohan Pathak case
(supra). the amended rules, in so far as they sought to
abrogate the terms of 1974 settlement relating to bonus,
could only operate prospectively. This judgment does not
advance the case of the appellant. It merely reiterates the
principles laid down in the case of (supra).
In the case of Janpada Sabha, Chhindwar v. The Central
Provinces Syndicate Ltd., (1970) 3 SCR 745, the question was
raised as to the validity of enhancement of cess on
extraction of coal. The rate of cess originally was at 3
pies per ton This was later enhanced to 4 pies per ton, in
1946 to 7 pies and in 1947 to 9 pies. The enhanced levies
were challenged in this Court. It was held that the
increased levies were not valid because previous sanction of
the local Government had not been obtained. The State
Legislature thereafter passed Act in 1964 by which a Board
(Janapada Sabha) was constituted and cess was defined to
mean a cess imposed by the Board or its successor body.
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Section 3(1) of the Act contained a validating provision
that notwithstanding any judgment of any court, cesses
imposed, aisessed or collected by the Board shall be deemed
to be, and to have always been, validly imposed, assessed or
collected. When the case came to this Court, the inadequacy
of the Amending Act was pointed out in the following words:
"But the Act in terms is limited in
its application to the Independent
Mining Local Board, Chhindwara, and
its successor body the Janapada
Sabha, Chhindwara constituted under
Act 38 of 1948, and only in respect
of the three notifications
specified in the Schedule.
Obviously the Act limited to one
local Board in its application and
to certain specific notifications
cannot operate to repeal the clause
insofar as it applied to other
Boards.
The nature of the amendment
made in Act 4 of 1920 has not been
indicated. Nor is there anything
which enacts that the notifications
issued without the sanction of the
State Government must be deemed to
have been issued validly under s.
51(2) without the sanction of the
Local Government "
This case does not lay down that after a judgment has
been pronounced on the basis of an Act, the provisions of
that Act cannot be amended so as to cure the defect pointed
out in the judgment retrospectively. The effect of the
Amending Act of 1969 is not to over rule a judgment passed
by a court of law, which the legislature cannot do What the
legislature can do is to change the law on the basis of
which the judgment was pronounced retrospectively and
thereby nullify the effect of the judgment. When the
legislature enacts that notwithstanding any judgment or
order the new law will operate retrospectively and the
assessments shall be deemed to be validly made on the basis
of the amended law, the legislature is not declaring the
judgment to be void but rendering things or acts deemed to
have been done under amended statute valid notwithstanding
any judgment or order on the basis of the unamended law to
the contrary. The validity to the assessment orders which
had been struck down by the Court, is imparted by the
Amending Act by changing the law retrospectively.
In the case of P.S. Mohal v. Union of India (1984) 3
SCR 847, certain seniority rule of Government of India came
up for consideration. In the case of A.K. Subraman v. Union
of India (1975) 2 SCR 979, a direction had been given by
this Court to the government of India to amend and recise
the seniority list in a certain manner. The government
instead of complying with this direction framed Rules 2(ii)
and 2(vi) by which a totally different rule of seniority was
framed. This was contrary to the direction given in A.K.
Subraman’s case. This Court pointed out that A.K. Subraman’s
case was "not a mere declaratory judgment holding an impost
or tax to be invalid, so that a validation statute can
remove the defect pointed out by that judgment and validate
such impost or tax, But it is a decision giving effect to
the right of the Executive Engineers promoted form the grade
of Assistant Engineers to have their inter se seniority with
Executive Engineers promoted form the grade of Assistant
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Executive Engineers determined on the basis of rule of
length of continuous officiation by issue of a writ
directing the Government of India to amend and revise the
seniority list in accordance with such rule of seniority."
Far from supporting the contention of the appellant,
this decision completely goes against the argument advanced
by the appellant. This Court clearly laid down that if an
impost or tax is declared to be invalid, a validation
statute can remove the defect pointed out by the judgment
and validate such impost or tax. This is precisely what has
happened in the instant case. The provisions of the Act
which were declared ultra vires in the case of Larsen and
Toubro have been held to be valid by this Court in the case
of N.K. Nataraja Mudaliar (supra) Includibility of excise
duty in ’turnover’ was also specifically provided
retrospectively by the amendments to the various provisions
of the Central Sales Tax Act by the Amendment Act of 1969
In the case of Bhubaneshwar Singh v. Union of India,
(1994) 6 SCC 77, a Bench of three judges to which on of us
(N.P. Singh,J) was party, held :
"The Validating Acts are enacted to
validate the action taken under the
particular enactments by removing
the defect in the statute
retrospectively because of which
the statute or the pert of it had
been declared ultra vires. The
exercise of rendering ineffective
the judgments or orders of
competent courts by changing the
very basis by legislation is a
well-known device of validating
legislation. Such validating
legislation which removes the cause
of the invalidity cannot be
considered to be an encroachment on
judicial power. At the same time,
any action in exercise of the power
under any enactment which has been
declared to be invalid by a court
cannot be made valid by a
Validating Act by merely saying so
unless the defect which has been
pointed out by the court is removed
with retrospective effect. The
validating legislation must remove
the cause of invalidity. Till such
defect or the lack of authority
pointed out by the court under a
statute is removed by the
subsequent enactment with
retrospective effect, the binding
nature of the judgment of the court
cannot be Ignored."
In that case Bhubaneshwar Singh, the petitioner, was
the owner of a coking coal mine which had been taken over by
the Central Government. He filed on application under
Article 226 of the Constitution alleging that the Custodian
had debited the expenses for raising coal to his account but
had not given him credit for the price of the coal raised
which was lying in stock on the date when the coal mine
vested in the Central Government, The High Court allowed the
writ petition holding that the petitioner was the owner of
the coal mine and was entitled to credit for the stock of
coal lying unsold as on 30.4 1972. A direction was given to
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recast the account and make certain payments to the
petitioner. The Special Leave Petition against that judgment
was dismissed by this Court by a reasoned order. Whereafter,
by the Amendment Act of 1976, Coking Coal Mines
(Nationalization) Act, 1972 was amended with retrospective
effect. The question before this Court was whether by
introduction of sub-section (2) to Section 10 of the
Amending Act with retrospective effect, the respondents were
absolved of their liability and were exonerated from the
responsibility of complying with the direction given by the
High Court in the earlier writ petition filed on behalf of
the writ petitioner. It was held that the amendments which
had been introduced retrospectively had taken away the
substratum of the claim made on behalf of the petitioner.
This Court held since the Validation Act had cured the
lacunae or defect pointed out by the High Court in its
earlier decision by introduction of sub-section (2) of
Section 10 with retrospective effect, it shall be deemed
that compensation had been paid even for the stock of unsold
coke lying on the date prior to the appointed day.
In the case of S.R. Bhagwat v. State of Mysore, (1995)
6 SCC 16, a Bench of three Judges held that a judgment which
had attained finality and was binding upon the State could
not be overruled by any legislative measure. In that case by
an interpretation of the relevant service law the High Court
had given certain benefits to the writ petitioners by
issuing a writ in the nature of mandamus. That order of the
High Court was sought to be nullified by enactment of a new
statute. The Court held that this was impermissible because
the High Court had not struck down any legislation which
could be re-enacted after removing the defect
retrospectively. In other words, it was recognized by this
Court that in a case where provisions of a statute were
declared inadequate or ultra vires, it was open to
legislature to remove the defect retrospectively so as to
cure the defect and make the statute valid.
What has happened in this case is that a large number
of writ petitions were dismissed by the High Court on the
basis of its decision in the case of Larsen and Toubro as
result of these decisions. a large number of assessment
orders under the Central Sales Tax Act were set aside. It
was held in the case of Larsen and Toubro certain provisions
of the Act were ultra vires and in any event excise duty
could not be included in the assessee’s turnover for the
purpose of levy of Central Sales Tax. The main basis of the
High Court’s judgments disappeared when the Supreme Court
held that the impugned provisions of the Central Sales Tax
Act which had been declared ultra vires by the Madras High
Court were validly enacted. The other defect which relates
to the includibility of excise duty in the ’turnover’ of an
assessee was cured retrospectively by amending the
provisions of the Central Sales Tax Act. The new provisions
introduced by the Amending Act were deemed to have come into
effect retrospectively Section 9 of the Amending Act
declared all assessments made upto 9th January, 1969 valid
and binding. There is nothing in the long line of decisions
cited by Mr. Vaidyanathan to suggest that the legislature
could not take such a step until and unless the judgments
were specifically reversed by this Court. This argument is
not tenable having regard to the principles of law laid down
in the case of Shri Prithvi Cotton Mills (supra), which
have been reiterated in the subsequent judgments of this
Court. This is not a case of passing a legislation trying to
nullify the interpretation of 19# given in the judgment of a
court of law. This is a case of changing the law itself on
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the basis of which the judgment was pronounced holding that
the assessment orders were erroneous in law.
The next contention of Mr. Vaidyanathan is that, even
after the Act of 1969 was passed, the High Court passed an
order in the contempt application, directing the State to
pay the disputed amount to the appellant and that order was
carried out. The respondents could have but did not take
shelter behind the Amendment Act of 1969 The special leave
petition filed against that order was dismissed by this
Court. Therefore, this is a case of res judicata and the
respondent could not nor raise this point at this stage by a
fresh proceeding.
The appellant has not been able to cite any decision to
show that a direction given in a contempt petition can
operate as res judicata in a suit. In the contempt petition
the only issue was whether the court’s order in the writ
petition was carried out or not. If the order of the writ
court was not carried out, the contempt court was bound to
pass suitable orders to ensure obedience to the order of the
court. The question of correctness or validity of the
judgment passed on the writ petition could not be raised in
a contempt proceeding. No question of res judicata arises in
such a case.
Be that as it may, the petitioner was successful in
getting an order of payment on the contempt petition. We are
unable to uphold the contention that merely because an order
was passed in the contempt proceeding to make payment, the
respondent is estopped from claiming the amount of tax
raised by an assessment order validated by the Act of 1969.
If this argument is accepted, strange result will follow.
The assessment order will remain valid. That notice of
demand raised pursuant to the assessment order will remain
intact and in force, but it will not be open to the
Department to realise the amount of tax merely because of
the order passed in the contempt proceeding. The writ
court’s order had to be carried out, which is why the refund
order was passed in the contempt proceeding. This direction
to refund the amount of tax already collected was given only
because the assessment orders had been set aside by the writ
court. But, when the assessment orders were validated by
passing the Amendment Act of 1969 with retrospective effect,
the tax demand became valid and enforceable. The tax demand
is a debt owed by an assessee which can be realised by the
State in accordance with law. Merely because the amount of
tax which had been realised earlier was directed to be
refunded by court’s order on the finding that the assessment
order was invalid, will not preclude the State from
realizing the tax due subsequently when the assessment order
was validated by the Amending Act of 1969. The order passed
in the contempt proceeding will not have the effect of
writing off the debt which is statutorily owed by the
assessee to the State. The State has filed a suit for
recovery of this debt. Unless it can be shown that the debt
does not exist or is not illegally due, the court cannot
intervene and prevent the State from realizing its dues by a
suit. All that the Department has done in this case is to
bring a suit to recover the Amount of tax due and payable to
it as a result of what must now be treated as a valid
assessment order.
It is needless to speculate as to what would have been
the position, had the Amending Act been produced before the
court in the contempt case. But, in our view, in the
contempt proceeding the court was only endeavoring to ensure
that the order of refund passed by the writ court was
carried out. In the contempt jurisdiction the court was not
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really concerned with the merit of the case.
It is also to be noted that the vires of the Amendment
Act of 1969 has not been questioned by the appellant by
filing any substantive application. The effect of the
Amending Act is to impart validity to those assessment
orders which had been struck down by the High Court. If the
assessment orders are now held to be valid, the tax demands
raised in the assessment orders are still enforceable. What
the State of Tamil Nadu is seeking to do is to enforce these
demands. Merely because taxes which had been realized
earlier had been refunded under an order passed on a
contempt petition, the respondent is not debarred from
realizing the demands which are now deemed to be valid and
subsisting.
Therefore, in our view, the appeal has no merit. The
Department is entitled to recover the amount refunded to the
appellant pursuant to the direction given in the contempt
proceeding. The appeal is dismissed. Each party will bear
its own costs.
CIVIL APPEAL NO. 2207 OF 1982
In vies of our judgment in Civil Appeal No.2206 of
1982, the above appeal is also dismissed. There will be
no order as to costs.