2001 (12) TMI 860 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of sub-clause (2)(d) of the validation clause 120 of the Finance Act, 2000.
2. Alleged violation of Articles 14 and 19(1)(g) of the Constitution of India.
3. Alleged violation of Section 9(2B) of the Central Sales Tax Act, 1956.
4. Legality of the notice for demand of interest.
5. Retrospective application of the Finance Act, 2000.
6. Limitation period for rectification under Section 37 of the Rajasthan Sales Tax Act.

Detailed Analysis:

1. Validity of Sub-clause (2)(d) of the Validation Clause 120:
The petitioners challenged the provisions of sub-clause (2)(d) of the validation clause 120 of the Finance Act, 2000, arguing that it should be declared violative of Articles 14 and 19(1)(g) of the Constitution of India and Section 9(2B) of the Central Sales Tax Act, 1956. The Court found that the legislative history and amendments made to the Central Sales Tax Act were valid and did not suffer from any unconstitutionality. The provisions were initially missing the word "interest," which was later included through amendments to address the Supreme Court's concerns.

2. Alleged Violation of Articles 14 and 19(1)(g) of the Constitution:
The petitioners argued that the validation clause, particularly sub-clause (2) of clause 120, which had been given retrospective effect, violated Articles 14 and 19(1)(g) of the Constitution. The Court rejected this argument, stating that the retrospective effect was necessary to cure the defect identified by the Supreme Court, and the legislative competence to enact such provisions was not in question.

3. Alleged Violation of Section 9(2B) of the Central Sales Tax Act:
The petitioners contended that Section 9(2B) of the Central Sales Tax Act, inserted by clause 119 of the Finance Act, 2000, was prospective in nature, and the validation clause could not authorize the levy of interest retrospectively. The Court held that the amendment had been given retrospective effect, and the provisions for levying interest were validly incorporated into the Central Sales Tax Act.

4. Legality of the Notice for Demand of Interest:
The petitioners challenged the legality of the notice for demand of interest, arguing that it was illegal, without jurisdiction, and against the principles of natural justice. The Court found that the validation clause in the Finance Act, 2000, provided for the retrospective imposition of interest, and therefore, the notices for demand of interest were valid.

5. Retrospective Application of the Finance Act, 2000:
The petitioners argued that the validation clause could not cure the defect retrospectively, as the substantive provision for levying interest was prospective. The Court rejected this argument, stating that the validation clause had been given retrospective effect, and the provisions for levying interest were validly incorporated into the Central Sales Tax Act.

6. Limitation Period for Rectification under Section 37 of the Rajasthan Sales Tax Act:
The petitioners contended that the demand for interest could not be made by way of rectification beyond the limitation period provided under Section 37 of the Rajasthan Sales Tax Act. The Court held that the provisions for rectification had to be followed, but amendments in law, particularly those with retrospective effect, could not be ignored. The Court also noted that any pending rectification applications should be decided in accordance with the relevant provisions.

Conclusion:
The Court dismissed all the writ petitions, stating that the challenge to the validity of the provisions in the Finance Act, 2000, had no basis. The legislative history and amendments made to the Central Sales Tax Act were valid and did not suffer from any unconstitutionality. The retrospective application of the validation clause was necessary to cure the defect identified by the Supreme Court, and the provisions for levying interest were validly incorporated into the Central Sales Tax Act. The Court also addressed the issue of limitation for rectification, stating that amendments with retrospective effect had to be considered. The notices for demand of interest were found to be valid, and no further interest could be charged on interest.

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