TMI Blog1983 (7) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... f export of the goods out of the territory of India or in the course of import of the goods into the territory of India". Section 2(1)(u-2) defines "total turnover" as follows: "The aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India." Section 2(1)(v) defines "turnover" in the following terms: "The aggregate amount for which goods are bought or sold, or supplied or distributed by a dealer, either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration." Section 5 in Chapter III provides for levy of tax on sale or purchase of goods. Section 5(1) provides for levy of tax at four per cent (five per cent from 1st April, 1982), on the turnover specified in sub-sections (i) and (ii). It may be multi-point levy. Section 5(2) provides for a concessional rate of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total turnover in a year exceeds rupees one lakh shall, in addition to the tax payable, if any, under other provisions of this Act, pay a tax at the rate of one-half per cent of his total turnover: Provided that no tax under this sub-section shall be payable on any part of such turnover which relates to,- (i) sale or purchase of goods specified in the Fifth Schedule; (ii) sale or purchase of goods specified in the Fourth Schedule; (iii) sale or purchase of goods in the course of inter-State trade or commerce; (iv) sale or purchase of goods in the course of export outside the territory of India or sale or purchase in the course of import into the territory of India and (v) all amounts collected by way of tax under the provisions of this Act or the Central Sales Tax Act, 1956." 5.. The validity of the above section was called into question in this Court on a variety of grounds by the petitioners herein and also by other dealers in W.P. Nos. 11889 of 1981 and connected writ petitions (B.P. Automobiles v. State of Karnataka [1984] 55 STC 93). This Court while upholding the validity of the section inter alia observed: "That the expression 'total turnover' occurring i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt under section 5(3)(a) and (b), be refunded to the petitioners concerned. 6.. The State perhaps thought that the decision of this Court in B.P. Automobiles' case [1984] 55 STC 93 was not close to the legislative intent. So, Karnataka Act No. 13 of 1982 was enacted with the substitution of new section 6B giving retrospective effect from 29th March, 1981. It is apparently a Validating Act enacted for the purpose of validating the turnover tax assessed and collected under section 6B of Karnataka Act No. 7 of 1981. That becomes clear by section 3 of Karnataka Act No. 13 of 1982 which has validated the assessments, reassessments, levy or collection of any tax made, notwithstanding anything contained in any judgment, decree or order of any Court. 7.. There cannot be any dispute regarding the power of the Legislature to put an end to the finality of a judicial decision by passing a Validating Act. A Validating Act may also be given retrospective effect neutralising the conditions on which the decision of the Court was based. The Legislature by so doing does not exercise a judicial function. The validity of a Validating Act, however, could be challenged if it does not satisfy th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort into the territory of India; (v) all amounts collected by way of (v) all amounts collected by way of tax under the provisions of this Act tax under the provisions of this Act or or the Central Sales Tax Act, 1956 the Central Sales Tax Act, 1956 (Central Act No. 74 of 1956). (Central Act 74 of 1956); (vi) all amounts falling under the head 'freight', when specified and charged for by the dealer separately without including such amounts in the price of the goods sold; and (vii) all amounts falling under the head charges for packing materials and cost of labour', when specified and charged for by the dealer separately without including such amounts in the price of the goods sold: Provided further that save as otherwise provided in this sub-section, no other deduction shall be made from (2) The provisions of this Act and the the total turnover of a dealer for the Rules made thereunder including those purposes of this section. relating to refund or exemption from tax (2) The provisions of this Act and shall, so far as may be, apply in the Rules made thereunder shall, so relation to the levy, assessment and far as may be, apply in relation to the collection of the tax payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and collection of tax at the prescribed rate. He also did not dispute that it is a validating enactment. He, however, urged that the Legislature has no competence to override the mandamus issued by this Court in the exercise of its constitutional power under article 226 of the Constitution in B.P. Automobiles' case [1984] 55 STC 93. This Court had issued a writ in the nature of mandamus restraining the State and its authorities from levying the turnover tax which were exempted under section 5(3)(a) and 5(3)(b) of the Act. This Court also issued a direction to refund to the petitioners the tax recovered from them. According to the counsel, such a mandamus issued by this Court cannot be rendered ineffective by the Legislature. In support of the contention, he relied upon triology of cases of the Supreme Court: (1) Madan Mohan Pathak v. Union of India AIR 1978 SC 803, (2) A.V. Nachane v. Union of India AIR 1982 SC 1126 and (3) Maru Ram Bhiwana Ram v. Union of India AIR 1980 SC 2147. 11.. In Narasimha Kamath Co. v. Entry Tax Officer, Mandya (W.A. Nos. 662 to 668 of 1982 disposed of on 12th April, 1982), a Bench of this Court has rejected a similar contention urged by Mr. Srinivasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agawati, J., who delivered the majority judgment observed at page 816, para 25: "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 Act. The attention of Parliament does not appear to have been 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 rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is pertinent to observe that the Legislature in order to render the judgment of this Court in B.P. Automobiles' case [1984] 55 STC 93 ineffective also enacted section 3 in Karnataka Act No. 13 of 1982. Section 3 provides that notwithstanding anything contained in any judgment, decree or order of any Court or other authority to the contrary, any assessment, reassessment, levy or collection of any tax made or purporting to have been made including payments, recoveries or refunds in relation to such assessments, etc., shall be deemed to be valid and effective and no Court shall enforce any decree or order directing the refund of any such tax. In view of this express validation of the tax levied and collected coupled with the change in the relevant law, we fail to see how the counsel for the petitioners could still contend that the Legislature has no power to render the judgment of this Court ineffective. It was next contended by Sri Srinivasan that the impugned section 6B(1) is beyond the competence of the State Legislature inasmuch as the inter-State sales and export sales were also taken into consideration for determining the liability of a dealer. In this context, the counsel pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to contend that the transactions covered under article 286 are also sought to be taxed. The term "total turnover" used in section 6B(1), as rightly held by this Court in B.P. Automobiles' case [1984] 55 STC 93 was intended only to identify the class of traders for the purpose of levy and not for the purpose of taxing itself. 15.. The Supreme Court in the recent decision in Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1 (SC) (Civil Appeals Nos. 2567 and connected appeals of 1982 disposed of on 6th May, 1983) has explained the decision in Fernandez's case [1957] 8 STC 561 (SC) as follows: "The decision in Fernandez's case [1957] 8 STC 561 (SC) is therefore clearly an authority for the proposition that the State Legislature notwithstanding article 286 of the Constitution while making a law under entry 54 of List II of the Seventh Schedule can, for the Purposes of the registration of a dealer and submission of returns of sales tax, include the transactions covered by article 286 of the Constitution. That is to say, sub-section (1) of section 5 of the Act which provides for the classification of dealers whose gross turnover during a year exceeds Rs. 5 lakhs for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 5(1) of the Bihar Finance Act, 1981 which was considered by the Supreme Court in the abovesaid case. Therein the dealers having gross turnover exceeding Rs. 5 lakhs have been grouped together for the purpose of the surcharge, whereas here, the dealers having total turnover of one lakh and above are selected for the turnover tax at the prescribed rate. In substance, there is absolutely no difference in both the said sections. Therefore, the contention relating to the vice of discrimination also must fail and is rejected. 17.. There is yet another contention urged for the petitioners relating to the validity of section 18(3) of the Act. The argument proceeded on the assumption that that section is an unreasonable restriction on the freedom of trade guaranteed to the petitioners under article 19(1)(g) of the Constitution. There is hardly any substance even in this contention. Section 2(10) of Karnataka Act No. 13 of 1982 inserting section 18(3) is only prospective in operation. It came into force with effect from 1st April, 1982. It prohibits the dealers from collecting from their customers any amount by way of turnover tax payable by the dealers under section 6B(1). However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State was not liable to pay any tax under the principal Act, but in view of section 613, the company is now liable to pay tax on the turnover and such a tax is illegal and contrary to the scheme of single point levy envisaged under section 5(3)(a). Sri B.P. Gandhi, appearing for the petitioners in W.P. Nos. 19187 to 19200 of 1982, who are dealers liable to pay tax as first sellers submitted that the turnover of such dealers again cannot be brought to tax, since the power to tax such turnover has been exhausted under section 5 of the Act. His further contention was that the turnover of the dealers in respect of transactions of goods specified in the Fourth Schedule and the Fifth Schedule are still exempted from the turnover tax under section 6B, while the turnover of dealers under the Second and Third Schedules are subjected to second levy and therefore section 6B is discriminatory. 19.. There are, in our opinion, at least three reasons to reject these contentions. Firstly, the Act does not provide exclusively for a single point levy. There is no such scheme under the Act. Secondly, even assuming that the Act provides only for a single point levy, it cannot bind the Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X
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