1964 (3) TMI 66 - SC - VAT and Sales Tax

Whether the assessee who had elected the previous year are liable to pay tax in the assessment year 1948-49 according to the rates prevailing during the year? Held that - Appeal allowed. Application of the relevant law to a problem raised by the reference before the High Court is not normally excluded merely because at the date when the Tribunal decided the question the relevant law was not or could not be brought to its notice. There is nothing so peculiar in the nature of a reference under the Indian Income-tax Act or the Sales Tax Acts that in deciding it the High Court is restricted to the application of the law which has been superseded by legislation since the date when the reference was made by the Tax Tribunal and is obliged to refuse to apply the law which by legislative direction has to be applied to a particular transaction which is the subject-matter of the reference.

Issues Involved:
1. Applicability of sales tax rates for the assessment year 1948-49.
2. Impact of U.P. Act III of 1963 on the assessment.
3. Jurisdiction of the High Court in light of subsequent legislative amendments.

Detailed Analysis:

1. Applicability of Sales Tax Rates for the Assessment Year 1948-49:
The respondent, a manufacturer of cotton yarn, was assessed under the U.P. Sales Tax Act, 1948. Initially, sales tax was levied at a uniform rate of three pies per rupee. However, a notification issued under section 3-A of the Act changed the rate to six pies per rupee from June 9, 1948. The Sales Tax Officer applied the rate of three pies for the first 69 days and six pies for the remainder of the year. This decision was modified on appeal but later reinstated by the Judge (Revisions) Sales Tax, U.P. The High Court, following its earlier judgment, ruled that all sales for the previous year should be taxed at the flat rate of three pies per rupee.

2. Impact of U.P. Act III of 1963 on the Assessment:
The Supreme Court noted that the Legislature of Uttar Pradesh enacted validating legislation by Act III of 1963. Section 7 of the Amending Act added section 31 to the Principal Act, which retroactively applied altered tax rates to the turnover of the previous year. The amendment mandated that the turnover of the previous year must be broken up, and the new rates of tax applied proportionately for the same number of days they were in force during the assessment year. This retroactive amendment aimed to supersede the previous rule declared by the Court and apply the new rates as if they were in force during the previous year.

3. Jurisdiction of the High Court in Light of Subsequent Legislative Amendments:
The respondent's counsel argued that the Court should answer the question based on the law as it stood when the reference was made, not considering subsequent amendments. However, the Supreme Court rejected this contention, stating that the law enacted by the Legislature, even if retroactive, must be applied. The Court emphasized that the High Court's jurisdiction includes applying the law as amended with retroactive effect. The Court cited previous judgments to support this view, asserting that the High Court must give effect to legislative intent and apply the amended law to the question referred, provided it does not necessitate investigation of fresh facts.

The Supreme Court concluded that the High Court must apply the amended law, which was in force retroactively, to the question posed by the Judge (Revisions) Sales Tax. The appeal was allowed, and the question was answered in the affirmative, applying the amended law as per U.P. Act III of 1963.

Conclusion:
The Supreme Court allowed the appeal, holding that the amended law by U.P. Act III of 1963, which retroactively altered the tax rates, must be applied to the assessment year 1948-49. The High Court and this Court must consider the legislative amendments with retroactive operation when answering the questions referred to them. The parties were directed to bear their own costs.

← Previous Next →