TMI Blog1975 (7) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... icals 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. 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. 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e must be a course of dealings either actually continued or contemplated to be continued with a profit-making motive and there must be some real or systematic or organised course of activity or conduct with the said purpose of making profit. It had been further held by those decisions that where a company carries on a business of manufacturing and selling, and in course of such business disposes of miscellaneous old and discarded items, such as machinery, iron scrap, cans, boxes, cotton rope, rags and other miscellaneous articles, the company cannot be said to be carrying on business of selling such goods. Moreover, the fact that sales of such items were frequent and their volume was large does not raise any presumption that when the goods were acquired there was an intention to carry on any business in the said discarded materials. Respondent No. 1 had, therefore, no jurisdiction or power to assess to tax any of the said sales of discarded materials or sales made by the said canteen. Respondent No. 1 rejected the petitioners' contentions and assessed them to tax under the provisions of the Bengal Finance (Sales Tax) Act, 1941, in respect of those sales. The petitioners preferred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 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 (1a) 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(1)(f) and (g) and article 20 of the Constitution. It is submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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. 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 profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision 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." In Rai Ramkrishna v. State of Bihar [1963] 50 I.T.R. 171 at 179 (S.C.); 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. 12 at 139; A.I.R. 1958 S.C. 578 at 621." 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 be circumspect and cautious. Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i, C.J., has been applied in subsequent decisions and notably in the case of Raghubar Dayal v. Union of India[1962] 3 S.C.R. 547; 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. 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 Gopal[1954] S.C.R. 587; 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 reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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(3), 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 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Blodgett v. Holder275 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 IndiaA.I.R. 1962 S.C. 263. 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 ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is not always possible to reopen an assessment even though clause (1a) 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 (1a) 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. The retrospective operation of the Act was challenged by the petitioner on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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