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TMI Blog1994 (6) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... er the proviso excludes the turnover relating to sale or purchase of goods specified in the Fourth Schedule to the Act. Wheat is one of the items listed in the Fourth Schedule to the Act and therefore the turnover relating to wheat is exempted from turnover tax. 3.. The Revenue considered "wheat products" as different from "wheat" and therefore the exemption which was available in respect of wheat listed in the Fourth Schedule was not extended to wheat products. Consequently the turnover relating to wheat products like soji, maida and atta were subjected to turnover tax under section 6B, as they did not fall under any of the exempted items. 4.. The question whether "wheat products" like soji, atta and maida were the same as "wheat" came up for consideration before a Division Bench of this Court in New Swastik Flour Mill v. State of Karnataka [1992] 84 STC 49. This Court on March 7, 1991, held that wheat, one of the declared goods, is a staple food article which was capable of being consumed only in the form of broken wheat of flour or rava; and therefore these products could not be treated as different from wheat; and consequently atta, maida and soji which were produced out of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities either under section 12(2) or 12(3) or 12A or 25A exempting the turnover relating to wheat products. The revisional authorities have held that the assessing authorities had passed the orders under revision exempting wheat products from turnover tax, on the basis of the decision of this Court in New Swastik [1992] 84 STC 49, that the Supreme Court has in [1993] 91 STC 408 (Rajasthan Roller Flour Mills Association v. State of Rajasthan) reversed the decision in New Swastik [1992] 84 STC 49 (Kar) holding that wheat and wheat products have to be considered as different commodities and therefore the turnovers relating to wheat products are liable for turnover tax under section 6B. Consequently the gross and taxable turnovers were determined by subjecting the turnover relating to wheat products also to turnover tax. These orders in revision are challenged in most of these writ petitions. (A few of the writ petitions challenge the orders made in appeal affirming the levy of turnover tax on the turnover relating to wheat products and a few of the petitions relate to orders of assessment passed by assessing authorities or orders passed under section 22-A applying turnover tax to turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question that arose for consideration was whether the decision in Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305 (SC); AIR 1988 SC 567 could be applied to past transactions. The Andhra Pradesh High Court noted that wherever orders issued by State Governments under sales tax enactments favouring sales of indigenous products at reduced rates of tax were found to be illegal and unconstitutional, the Supreme Court had been consistent in directing that past transactions which took place on the strength of the impugned orders were not to be reopened. But in Indian Cement's case [1988] 69 STC 305; AIR 1988 SC 567, the Supreme Court while quashing the orders of the Andhra Pradesh Government granting a reduction in the rate of sales tax on cement manufactured in the State, did not clarify that past transactions will not be affected. It was contended before the Andhra Pradesh High Court that the persons affected by quashing of the notifications by the Supreme Court (dealers in cement) could not be held liable to pay the arrears of difference in tax for the period during which the concessional rate of sales tax granted by the State Government was in force, even though th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t unless such restriction is specified by the decision itself, the decision will necessarily be retrospective. 10(1). Salmond on Jurisprudence (Twelfth Edition) puts it thus (at page 148): "As we have seen, the theory of case law is that a Judge does not make law; he merely declares it, and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regard matters that are res judicata, or accounts that have been settled in the meantime." The above is in consonance with the Blackstonian view that courts do not make or pronounce a new law but only expound and declare the true position of the existing law. This view did not contemplate prospective overruling or giving only prospective operation to decisions. A modification to this view was suggested by Benjamin N. Cardozo in his celebrated lecture relating in "Adherence to precedent" in the following words. (See "The Nature of the Judicial Process" at pages 146-148) "I say, therefore, that in the vast majority of cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Co. [1932] 287 US 358 in the following words: "A State in defining the limits of adherence to precedent may make a choice for itself between the principle of forward operation and that of relation backward. It may say that decisions of its highest court, though later overruled, are law none the less for intermediate transactions.... but never has doubt been expressed that it may so treat them if it pleases, whenever injustice or hardship will thereby be averted.... On the other hand, it may hold to the ancient dogma that the law declared by its courts had a Platonic or ideal existence before the act of declaration, in which event the discredited declaration will be viewed as if it had never been, and the reconsidered declaration as law from the beginning..... The choice for any State may be determined by the juristic philosophy of the Judges of her courts, their conceptions of law, its origin and nature." The principle of prospective overruling was recognised and applied in India in Golak Nath v. State of Punjab AIR 1967 SC 1643. In the recent decision in Managing Director, ECIL v. B. Karunakaran [1993] 4 SCC 727 the Supreme Court referring to the decision in Golak Nath AIR 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction to declare law binding on all the courts in India; (3) the scope of the retroactive operation of the law declared by the Supreme Court superseding its earlier decisions is left to its discretion to be moulded in accordance with the justice of the cause or matter before it.' ....................... Accepting the lead given in the above decision, this Court has since extended the doctrine to the interpretation of ordinary statutes as well." The Supreme Court, thereafter noticed that in the interests of public or administrative realities, in suitable cases, the court had on several occasions, given only prospective operation to its decisions. 10(3). A. Narayana Pai, J. (as he then was), speaking for a Division Bench of this Court in M.V. Govindaraju Chetty v. Commercial Tax Officer [1968] 22 STC 46; [1967] 2 Mys LJ 385 held: "To say that a decision of the Supreme Court to the effect that a particular levy was wrong or not in accordance with law means that the levy was at no time good, is nothing more than to state in clear terms the real effect of a decision of the court. The decision gets rid of the order as it was originally made which gave rise to the appeal to the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in force even on the day when the order sought to be rectified was passed. We are further of the view that the Appellate Tribunal was in error in holding that the subsequent decision of the High Court has no retrospective operation as in the case of subsequent legislation or the decision of the Supreme Court. A subsequent binding decision of the Supreme Court or of the High Court has retrospective operation and overruling is always retrospective." 10(5). In Mysore Cements Limited v. Deputy Commissioner of Commercial Taxes (W.P. Nos. 16881 to 16895 of 1993 decided on November 15, 1993) [1994] 93 STC 464; 166 CTR 284 (Kar) while dissenting with a contrary view expressed by the Calcutta High Court in Jiyajeerao Cotton Mills Ltd. v. Income-tax Officer [1981] 130 ITR 710 and by the Madras High Court in State of Tamil Nadu v. M.G. Meenambal and Co. [1984] 56 STC 82, I had observed: "The Calcutta and Madras High Courts have proceeded on the basis that an order ex facie legal and correct, when made, cannot become erroneous by reason of any subsequent declaration of law by the Supreme Court or the respective High Court. They further assume that a 'mistake apparent on the record' should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them to an "invention" and a "discovery" respectively. An invention creates or brings into existence, something which was not in existence earlier; but a discovery does not create something, but brings to light something, which was already in existence. Similarly when a Legislature enacts a statute, it creates rights or obligations and therefore, its operation can be prospective or retrospective, depending on the provisions of the statute. But when the Supreme Court gives a decision declaring the law, it does not create rights/obligations, but merely identifies and declares the pre-existing rights/ obligations and declares the true position of law. Consequently, the terms "prospective" and "retrospective" strictly do not apply to decisions of the Supreme Court, as all decisions are "retrospective". It is thus a cardinal principle of construction that every statute is presumed to be prospective unless it is expressly or by necessary implication made retrospective in operation; and every decision of the Supreme Court declaring the law is retrospective, unless it is expressly or by necessary implication restricted to prospective operation. The above principles would apply not only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applying to future transactions only. It is pointed out that the Andhra Pradesh High Court in Coromandel [1992] 85 STC 212 has read such a restriction in regard to the decision of the Supreme Court in Indian Cement [1988] 69 STC 305; AIR 1988 SC 567, on the ground that in several similar matters while quashing notifications affecting freedom of trade, the Supreme Court had consistently ruled that such decisions will not affect the past transactions. But the principles relating to prospective overruling/operation enunciated by the Supreme Court in Golak Nath AIR 1967 SC 1643 and ECIL [1993] 4 SCC 727 show that the discretion to restrict the operation of a decision prospectively vests only in the court rendering the decision. It is therefore doubtful whether a High Court can hold that a decision of the apex Court will operate only prospectively, as held by the Andhra Pradesh High Court, in the absence of an indication to that effect in the decision of the apex Court itself. Even assuming such a course is possible, it is easily demonstrable that in the cases on hand, on facts, such a course is not warranted as none of the circumstances which persuaded the Supreme Court to apply pros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question whether the decision in Rajasthan Roller Flour Mills [1993] 91 STC 408 (SC) is only prospective in its application, the answer is that there is no justification for such restricted application. 13.. The learned counsel for the petitioners next contended that the Commissioner having issued a circular dated August 25, 1992 (referred to in para 5 above) and the said circular not having so far been withdrawn or rescinded even after the decision in Rajasthan Roller Flour Mills [1993] 91 STC 408 (SC), the authorities are bound to apply and follow the directions contained in the said circular. This contention is without merit. The circular merely brings to the notice of the assessing and other authorities the decision of this Court in New Swastik Flour Mill case [1992] 84 STC 49 and gave effect to the decision in New Swastik [1992] 84 STC 49 (Kar), as the Supreme Court had refused to stay the operation of New Swastik [1992] 84 STC 49 (Kar). When the decision in New Swastik [1992] 84 STC 49 (Kar) was reversed by the Supreme Court, the circular dated August 25, 1992, ceased to have any effect. It is not necessary that whenever the Supreme Court declares the law, the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments to the petitioners to pay the amount, if proper applications are made by the petitioners seeking grant of instalments. It is also made clear that if petitioners have other grievances or grounds of challenge in regard to the impugned orders (other than turnover tax relating to wheat products) they are at liberty to have recourse to appeal or other remedies available to them in law, in regard to such matters, other than turnover tax relating to wheat products. The above order was dictated on April 22, 1994. But just before the completion, the learned counsel for some of the petitioners submitted that he wanted to verify whether any other point remains to be urged in any of the cases and sought time to file a memo confirming that all cases were covered by the aforesaid common question of law. However, as such a memo was not filed, these matters were listed again on June 14, 1994. The counsel confirmed that all the cases raised the said common question of law. Accordingly this order is being pronounced today. After pronouncement of the aforesaid order, the learned counsel for the petitioners orally pray for stay of recovery for a period of four weeks to enable them to make nece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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