TMI Blog2007 (4) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... R.F. Nariman and Harish Chander, Senior Advocates, Sanjay Kunur, N.N. Keshwani, S.G. Shivram, N.D.B. Raju, Ms. Bharathi Raju, Good Will Indeevar, Kavin Gulati, Ms. Ruby Singh Ahuja, Debmalya Banerjeee, Manu Agarawala, Ms. Manik Karanjawala, M. Yogesh Kanna, V.N. Raghupathy, T.V. Ratnam, Atul K. Atur, Sanjay R. Hegde, Subramonium Prasad, Anant Bhushan Kanade, R.K. Gupta and Ariban Guneshwar Sharma, Advocates for the appearing parties. -------------------------------------------------- The judgment of the court was delivered by Dr. ARIJIT PASAYAT, J. Leave granted in special leave petitions. Challenge in these appeals is to the legality of the judgment rendered by a division Bench of the Karnataka High Court holding that the circular dated October 23, 1999 (Circular No. 31/1999-2000) is valid and Circular No. 5/1996-97 dated April 12, 1996 was inoperative. Background facts in a nutshell are as follows: Appellants are dealers registered under the Karnataka Sales Tax Act, 1957 (in short, "the Act"). Their business activities, inter alia, include business of leasing machinery, equipment and motor vehicles. Section 5-C of the Act deals with levy of tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not entitled to any relief. This view was taken primarily on the ground that even an incorrect circular binds the Revenue. The division Bench held the incorrect circular does not bind the Revenue and that the law declared by this court has a binding effect. Learned counsel for the appellants submitted that both the orders of the learned single Judge and the judgment of the division Bench do not take into effect the proviso which is in essence a legislative declaration of a clarificatory nature. The proviso in terms recognises the correctness of the circular dated April 12, 1996. In any event, there could not have been any reopening of the assessment because of a mere change in opinion of the Commissioner. When two opinions were expressed in the two circulars it is nothing but a change in the opinion and it is impermissible for the Revenue to reopen the complete assessment on the basis of the subsequent circular. The fact that the proviso was by way of a clarification is clear from the fact that at the first instance only 12 days after section 5-C was amended, the circular was issued. In essence, the principle of contemporaneous expression applies to the facts of the case. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within a period of eight years from the expiry of the year to which the tax relates, proceed to assess or reassess to the best of its judgment the tax payable by the dealer in respect of such turnover after issuing a notice to the dealer and after making such inquiry as it may consider necessary. (1-A) In making an assessment under sub-section (1) the assessing authority may, if it is satisfied that the escape from assessment is due to wilful non-disclosure of assessable turnover by the dealer, direct the dealer to pay, in addition to the tax assessed under sub- section (1), a penalty not exceeding (an amount equivalent to the tax due) the tax so assessed: Provided that no penalty under this sub-section shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause against such imposition. (2) In computing the period of limitation for assessment for the escaped turnover under this section, the time during which an assessment has been deferred on account of any stay order granted by any court or other authority in any case, or by reason of the fact that an appeal or other proceeding is pending before the Appellate Tribunal or the High Court or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the parties. The Finance Minister's speech shows that the proviso was intended to provide additional benefit or relief. The proviso appears to have been introduced as a clarificatory measure. There is no mention as to the date after which benefit can be granted in respect of the goods which have suffered tax. Therefore, the assessment period concerned as sought to be introduced by the Revenue has no foundation. The proviso clearly states that once the goods have suffered the tax they would not be subject to tax again. As observed by this court in Zile Singh v. State of Haryana [2004] 8 SCC 1 for the purpose of determining that the proviso is clarificatory or not, the date when it is introduced is relevant. Paras 11 to 21 of the judgment are relevant and they read as follows: "11. According to the appellant, the disqualification imposed by section 13-A(1)(c) of the First Amendment remained in operation only for a period of one year and would have in ordinary course ceased to operate on the expiry of the period of one year from April 5, 1994. The citizens were justified in arranging their affairs including the enlargement of their families keeping in view the provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69). 15.. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the Legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the Legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the Legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former State of the law; and (iv) what it was the Legislature contemplated (p. 388). The rule against ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. Every legislation whether prospective or retrospective has to be subjected to the question of legislative competence. The retrospectivity is liable to be decided on a few touchstones such as: (i) the words used must expressly provide or clearly imply retrospective operation; (ii) the retrospectivity must be reasonable and not excessive or harsh, otherwise it runs the risk of being struck down as unconstitutional; (iii) where the legislation is introduced to overcome a judicial decision, the power cannot be used to subvert the decision without removing the statutory basis of the decision. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. A validating clause coupled with a substantive statutory change is only one of the methods to leave actions unsustainable under the unamended statute, undisturbed. Consequently, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity is otherwise apparent'. 19.. The Constitution Bench in Shyam Sunder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble interpretation should apply. 'A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole'." (SCC pp. 479-80, para 13) The budget speech speaks of the goods "already been subjected to tax under the Act" and does not even by implication state that in order to be entitled to the benefit the goods ought to have been taxed after a particular date. It is purely on the event of goods having suffered tax once or in other words the taxable event having taken place once. The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As was stated in Mullins v. Treasurer of Survey [1880] 5 QBD 170 (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha AIR 1961 SC 1596 and Calcutta Tramways Co. Ltd. v. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t into the enacting part something which is not there, but where the enacting part is susceptible to several possible meanings, it may be controlled by the proviso (See Jennings v. Kelly [1940] A.C. 206). The above position was highlighted in Ali M. K. v. State of Kerala [2003] 11 SCC 632 and Union of India v. Sanjay Kumar Jain [2004] 6 SCC 708. The stand of the Revenue does not appear to be very consistent. Though in the counter-affidavit before the High Court it was stated that the circular is not binding on the authorities, it is conceded by learned counsel for the State Government that it is, in fact, binding on the department officials. The circulars read as follows: "COMMISSIONER OF COMMERCIAL TAXES CIRCULAR No. 5/96-97 dated April 12, 1996 Sub: Salient features of the amendments effective from April 1, 1996 Reg. Ref: 1. Govt. Notification No. DPAL 15 LGN 96, Dated March 21, 1996 published in Karnataka Gazette, Extraordinary, Part IV, section 2B, dated March 21, 1996. 2.. Govt. Notifications No. FD35 CSL 96 (1 to 25) dated March 30, 1996. 3.. Govt. Notifications No. FD 85 CET 96 (1 to 3) dated March 30, 1996. 4.. Govt. Notifications No. FD 4 CRC 96 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm rate of 4%." "No. RFD. CR.53/97-98 Office of the Commissioner of Commercial Taxes in Karnataka, Bangalore-560 009 Dated 23-10-1999 COMMISSIONER OF COMMERCIAL TAXES CIRCULAR No. 31/99-2000 Sub: KST Act, 1957 Amendment of section 5-C by Karnataka Taxation Laws (Amendment Act 1996) Certain instruction Reg. Ref: Commissioner of Commercial Taxes Circular No. 5 of 1996-97 dated April 1996. In Commissioner of Commercial Taxes Circular No. 5 of 1996-97, dated April 12, 1996, while explaining the salient features of the amendments effected to the provisions of Karnataka Sales Tax Act, 1957 by Karnataka Taxation Laws (Second Amendment) Act, 1996 at paras 16 and 17, the position of law relating to section 5-C of the Karnataka Sales Tax Act, 1957 as amended by the said Amendment Act was stated to be as follows: "16. Section 5-C in force prior to this amendment prescribed 'total turnover' as the basis for levy of tax. The honourable High Court of Karnataka in the judgment rendered in the case of Shetty Leasing (India) Ltd. v. Union of India [1996] 100 STC 533, had struck down section 5-C as beyond the competence of State Legislature. The amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o indicate that the goods which are subject to tax on their transfer of the right to use (lease) cannot be subject to tax under section 5-C when right to use such goods are again transferred after the expiry of the specified period for which it was hired earlier. Therefore, the levy under the said provision is multi-point in nature. The very goods when leased out more than once, such transaction attract levy every time they are leased out. (iii) As section 5-C starts with a non obstante clause, namely, 'notwithstanding anything contained in sub-section (1) or sub-section (3) of section 5', the goods, in respect of which right to use goods is transferred, even though have been subjected to tax under the said sub-sections of section 5, they shall be liable to tax under section 5-C. In other words, the goods which have suffered tax under section 5 are not excluded from the purview of section 5-C when right to use of such goods is transferred. In view of the above, the following revised instructions are issued: (i) Section 5-C was substituted retrospectively with effect from April 1, 1986 by amending Karnataka Taxation Laws (Second Amendment) Act, 1996. The newly substituted se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the subordinate officers had no option but to comply with the directions given. The notices issued under section 12-A of the Act initiating the assessment proceedings clearly show that they were on the basis of the instructions issued. As observed by this court in Commissioner of Trade Tax, U. P. v. Kajaria Ceramics Ltd. [2005] 11 SCC 149 See [2005] 141 STC 406 (SC). there are various circulars, some are binding and some are not binding. Though strong reliance was placed by learned counsel for the Revenue on Additional Commissioner (Legal) v. Jyoti Traders [1999] 2 SCC 77 See [1999] 112 STC 277 (SC)., a close reading of the decision shows that it does not support the stand of the Revenue and on the contrary supports the stand of the appellants. Particular reference may be made to paragraphs 22 and 25 (paras 15 and 18 in STC) which read as follows: "22. In Ahmedabad Manufacturing Calico Printing Co. Ltd. v. S.G. Mehta, Income-tax Officer AIR 1963 SC 1436 See [1963] 48 ITR 154 (SC). in its assessment to income-tax for the year 1952-53, the appellant, a company, had been granted under the provisions of the Finance Act, 1952, a rebate on a portion of its profits of the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive rights was not to have such operation. This court, per majority (3: 2), held that sub-section (10) of section 35 was intended to have a retrospective operation and was applicable to the present case. Sarkar, J. who was in majority, in his concurring judgment, observed as under: "There is no dispute that by sub-section (10) the Legislature intended to penalise a case where subsequent to its enactment, the amount on which rebate had been granted was utilised in declaration of dividends. Now, is there any reason to think that the Legislature did not want to impose the penalty also on those who had earlier utilised the amount in declaration of dividends? There was no special merit in these latter cases. And I also think that they formed the majority of the cases. The grant of rebate having been stopped after March 31, 1956, there was no occasion to provide for cases of such grant thereafter. All these circumstances lead me to the view that the intention of the Legislature was to penalise the cases of utilisation of amounts on which rebate had been granted in payment of dividends which had happened before the sub-section came into force. The remedy which the sub-section provided w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment after the expiration of 4 years from the end of that particular assessment year. It is immaterial if a period for assessment or reassessment under sub- section (2) of section 21 before the addition of the said proviso had expired. Here, it is the completion of assessment or reassessment under section 21 which is to be done before the expiration of 8 years of that particular assessment year. Read as it is, these provisions would mean that the assessment for the year 1985-86 could be reopened up to March 31, 1994. Authorisation by the Commissioner of Sales Tax and completion of assessment or reassessment under sub-section (1) of section 21 have to be completed within 8 years of the particular assessment year. Notice to the assessee follows the authorisation by the Commissioner of Sales Tax and its service on the assessee is not a condition precedent to reopen the assessment. It is not disputed that a fiscal statute can have retrospective operation. If we accept the interpretation given by the respondents, the proviso added to sub-section (2) of section 21 of the Act becomes redundant. Commencement of Act can be different than the operation of the Act though sometimes both ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
