TMI Blog1996 (2) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is clear that levy and collection of additional duty is not discontinued as contended by Shri Venugopal. As held above, the Act is a complete code in itself and operates retrospectively. Therefore, both the Acts operate harmoniously and do not collide in their operation since 1984 Act is the principal Act and the Act is in addition to, but not in substitution of the principal Act. Therefore, 1984 Act does not get eclipsed with the passing of the Act. Under these circumstances, we hold that the Act is valid. The direction with regard to the refund of duty for the period which the Act did not seek to cover, has already been given by the High Court and no appeal has rightly been filed by the State. Therefore, to that extent that order has become final. We need not dwell upon it. Appeal dismissed. - CIVIL APPEAL NOS. 2771-2822 OF 1996 - - - Dated:- 2-2-1996 - RAMASWAMY, K. AND G.B. PATTANAIK, JJ. JUDGMENT Ramaswamy. J. Leave granted in all the special leave petitions. This batch of appeals by special leave arises from common judgment dated November 22, 1994 of the Kerala High Court made in O.P. No.5957 of 1987 and batch. By Section 36 of Finance Act 1978, the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge is in substance a compulsory exaction intended to enrich the coffers of the State and in effect partakes the character of a tax on electricity. The Government, acting as a delegate under the Kerala Essential Articles Control Act, 1986 [Act 16 of 1986], is not competent to impose any tax. A writ of mandamus was issued directing refund of excise duty collected from those writ petitioners before the High Court. The Kerala State Electricity Supply [Kerala State Electricity Board add Licensees Area] Surcharge Order, 1984 was declared ultra vires the power of the State Government. The said judgment was confirmed by this Court dismissing the Special Leave Petitions in limine. At this stage, it may be necessary to mention that the Essential Articles [Control] Act, 1963 was amended and Act 13 of 1988 was enacted. It is also relevant to note that exercising the power under Entry 53 of List II of the Seventh Schedule, the Kerala State legislature had enacted Kerala Electricity Duty Act, 1963 and Rules were made to levy electricity duty at varying rates. Orders were passed by this Court on April 13, 1989 dismissing the SLP [C] Nos.4256-66 of 1989. The Governor of Kerala, exercising power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the imposition is not a tax but a duty on supply of electricity. This deduction could be drawn from the language employed in the Act itself. Otherwise, nothing prevented the legislature to use such a language as impost on sale and consumption of electricity. The express language employed shows that they intended to levy duty on supply of electricity. The Act was not intended to be one made under Entry 53 but one under Entry 27. He sought support from previous judgments of this Court upholding the power of the legislature under Entries 21 and 26 imposing duty on supply of electric energy in 1968 Order from the State of Kerala and under similar provisions in other States. Shri R.F. Nariman, learned counsel for some other appellants contended that the legislature is devoid of power to enact Section 11 of the Act validating the levy with retrospective effect which is blatant encroachment upon judicial power of the Courts. Judicial review being basic structure of the Constitution, Section 11 is ultra vires the Constitution. Even assuming that it could enact a law after Chakolas' case [supra], it could do so only prospectively but it could not nullify the writ of mandamus issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case, had been removed making it a tax, the base of invalidity pointed out by the Court had been removed by enacting the Act and having removed the vice the Act has given retrospective effect to it. It is not a direct encroachment on the power of judicial review but is one of legislative arrangement exercising its sovereign power to amend the law and validate all past transactions. Therefore, Section 11 is not ultra vires the Constitution. The legislature did not put any express embargo on the power of judicial review nor a declaration to that effect finds place in any of the provisions of the Act. Though it is open to the judiciary to declare the law; the effect thereof could suitably be removed. Resultantly, there is no invalidity in the impost as electricity duty. The Electricity Duty Act and the Act operate in the same field. The former as principal Act; the Act is in the nature of an enactment imposing tax on duty. Both operate harmoniously in the respective fields without colliding in their operation. Shri G. Vishwanatha Iyer for the Board contended that the KSEB had been receiving substantial financial assistance from the Government and the impost and the collection of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t upon the words so that the same may have effect in their widest amplitude. It was accordingly held that the "capital gain" is an income under that Act. In Banarasi Das etc. v. The Wealth Tax Officer, Spl. Circle, Meerut [AIR 1965 SC 1387 at 1389], another Constitution Bench, interpreting the word 'individuals' as used in Entry 86 of List I and the Wealth Tax Act, while dealing with the question whether Hindu family would include an individual, this Court reiterated that the words used in the Entries of the Seventh Schedule must receive their widest interpretation. It was further held that it would be unreasonable to approach the task of interpretation in a narrow or restrictive manner. In Baldeo Singh v. Commissioner of Income-tax Delhi Ajmer [AIR 1966 SC 736 at 742] interpreting the provisions of Income-tax Act, 1922 this Court had held that payment of dividend is a form of income. The Act was made to prevent avoidance of super-tax. Therefore, the entries in that Act and the words used thereunder must be construed liberally to prevent avoidance of the tax. In M/s. Burmah Construction Co. v. The State of Orissa Ors. [AIR 1962 SC 1320], after this Court had decided in St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e put up. In view of the legal position referred to hereinbefore, it must be held that the words 'sale or consumption' used in Entry 53 of the State List and the Act made in exercise of the power under Article 246 [3] of the Constitution, would receive wide interpretation so as to sustain the constitutionality of the Act unless it is affirmatively established that the Act is unconstitutional. When the vires of an enactment is challenged, it is very difficult to ascertain the limits of the legislative power. Therefore, the controversy must be resolved as far as possible, in favour of the legislative body putting the most liberal construction upon the relevant legislative entry so that it may have the widest amplitude. The Court is required to look at the substance of the legislation. It is equally settled law that in order to determine whether a tax statute is within the competence of the legislature, it is necessary to determine the nature of the tax and whether the legislature had power to enact such a law. The primary guidance for this purpose is to be gathered from the charging section. It is the substance of the impost and not the form that determines the nature of the tax. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a restaurant or in the execution of a works contract and power to impose tax leviable thereon would be under Entry 54 of the State List. It was held that it was not liable to tax since there was no transfer of property in goods. The Parliament amended the Constitution and enacted clause [29- A] of Article 366 so as to bring it in conformity with Entry 33 of List III of the Seventh Schedule, introducing a legal fiction of tax on sale or purchase of goods including the transfer of property in goods, whether as goods or in some other form, involved in execution of the works contract or otherwise than in pursuance of the contract of property in goods for cash, deferred payment or other valuable consideration. It is common knowledge that for HT and EHT industries a sub-station at the place of manufacture or establishment or at its convenient place is set up and electricity is supplied to the sub-station and a minimum guarantee of payment is ensured therefor under the contract. But the question is whether the word 'supply' used in Section 3 of the Act would be construed to mean 'consumption' or 'sale' of electricity. From the sub-station, electricity is connected to the industrial u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he passing of the Act occupying the same field as the Act? In Bisra Stone Lime Company Ltd. Anr. etc. v. Orissa State Electricity Board Anr. [(1976) 2 SCR 307] it was held that surcharge on electricity is an additional tax. "The word 'surcharge' is not defined in the Act, but etymologically, inter alia, surcharge stands for an additional or extra charge or payment. Surcharge is thus a super-added charge, a charge over and above the usual or current dues". The term 'surcharge' in substance is an addition to the stipulated rate of tariff. The nomenclature, therefore, does not alter the position. In CIT v. K. Krinivasan [(1972) 4 SCC 526], The question arose whether the term "income-tax" as defined in Section 2 of the Finance Acts 1964 would include surcharge and additional charge, wherever provided. This Court had held that the word surcharge includes additional tax. The whole proceeds of any such charge were to form part of the revenue of the State. In C.V. Rajagopalachariar v. State of Madras [AIR 1960 Mad 543], in the context of the Madras Land Revenue Surcharge Act , 1954 and the Madras Land Revenue (Additional Surcharge) Act, 1955, interpretation of the word 'surcharge' ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Act in pith and substance is a tax on sale or consumption of electrical energy. Therefore, the Act falls in Entry 53 and does not fall in Entry 27 of the State List of the Seventh Schedule to the Constitution. The State legislature, therefore, validly enacted the Act under Article 246 [3] of the Constitution. The next question is: whether the validation provision contained in Section 11 is constitutional? Section ll of the Act reads thus: "11. Validation. [1] Notwithstanding anything to the contrary contained in any judgment, decree or order of any court, the levy and collection of surcharge by the Board or other licensees on or after the 1st day of October, 1984 and before the 1st day of August, 1988 under the Kerala State Electricity Supply [Kerala State Electricity Board and Licensees, Areas Surcharge Order, 1984, shall be deemed to be, and deemed always to have been validly levied and collected as if the said Order was a notified order under Section 3 of this Ordinance; and accordingly- (a) all acts, proceedings, or things done by the Board or other licensees in connection with such levy, collection and remittance of surcharge shall, for all purposes be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en made, entered into or transacted under the Act. While making the Validation Act, as seen, Section 6 provides for recoveries and Section 7 provides for penalties. Section 8 prescribes offences by companies and Section 9 gives rule making power to effectuate the purpose or the Act by making rules enumerated thereunder to give effect to the provisions of the Act. Section 10 provides protection of actions taken by the officers in good faith. Section 4 deals with books of accounts to be maintained by the licensees and Section 5 authorises officers for inspection of the books of accounts maintained by the licensees. It would thus be clear that the Act is a complete and self-contained code in itself. The question, therefore, is whether Section 11 is an anti-judicial power interfering with or encroaching into judicial review entrusted to the Courts, a basic feature of the Constitution and whether it directly overrules the judgment of the High Court? In view of specific stand and vehement contention that the legislature can, under no circumstance, nullify mandamus or direction issued by a court, we have to survey the decided cases in which relevant principles were laid by this Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possess the power to impuse the tax, for, if it does not. the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the decision could not have been given in the altered circumstances. Ordinarily, a court holds a tax to be invalidly imposed because, the power to tax is wanting or the statute or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by reenacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the reenacted law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Orissa Sales Tax Act. When the constitutionality thereof was challenged on refusal to grant refund of the tax paid under the invalid law, contending that Section 14A deprived the assessee of the common law right to claim refund of the amount paid as tax under the invalid law, this Court had held that the legislature was competent to exercise the power in respect of the subsidiary or ancillary matters of granting refund of tax inappropriately or illegally collected. Therefore, Section 14A validating the illegal collection and refusal of the refund was upheld as valid. It was also held that it was not in violation of Article 19 [1] (f) of the Constitution. In M/S Misrilal Jain v. State of Orissa Anr. [(1977) 3 SCC 212], a larger Bench of seven Judges was required to construe the provisions of Orissa Taxation [on Goods Carried by Roads or Inland Waterways] Act, 8 of 1968. By a judgment dated August 10, 1967 this Court had declared the Orissa Taxation [on Goods Carried by Roads or Inland Waterways] Act, 1962 as invalid since it did not cure the defect from which the Orissa Taxation [on Goods Carried by Roads or Inland Waterways] Act, 7 of 1959 had suffered. It was further held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly to the consumers by the manufacturers. Section 3-A(1) was amended with retrospective effect by U.P. Sales Tax (Amendment and Validation) Act, 1970. The validity thereof was questioned. The High Court had held that Section 3 A(1), as amended was unconstitutional as it delegated essential legislative functions to the State Government. Allowing the appeal and upholding the validity, this Court had held that "this Court has pointed out in several cases the distinction between encroachment on the judicial power and nullification of the effect of a judicial decision by changing the law retrospectively. The former is outside the competence of the legislature but the latter is within its permissible limits." The legislature had not purported either directly or by necessary implication to overrule the decision of the Allahabad High Court. On the other hand it had accepted the decision as correct but had removed the basis of the decision by retrospectively changing the law. In The Govt. of A.P. Anr. v. Hindustan Machine Tools Ltd. [AIR 1975 SC 2037], the respondent had constructed its factory and other buildings within the limits of Gram Panchayat 'K' without its permission. Gram Panch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion between legislative act and judicial act is well-known. The adjudication of the rights of the parties is a judicial function. The legislature has to lay down the law prescribing the norms or conduct which will govern the parties and transactions to require the Court to give effect to that law. Validating legislation which removes the norms of invalidity of action or providing remedy is not an encroachment on judicial power. Statutory rule made under the proviso to Article 309 was upheld. The legislature cannot by a bare declaration, without anything more, directly overrule, reverse or override a judicial decision at any time in exercise of the plenary power confer on the legislature by Arts.245 and 246 of the Constitution. It can render a judicial decision ineffective by enacting a valid law on a topic within its legislative field, fundamentally altering or changing with retrospective, curative or fulfilling effect, the conditions on which such a decision is based. In Hari Singh Ors. v. The Military Estate Officer and Anr. [(1973) 1 SCR 515], prior to 1958 two alternative modes of eviction under Public Premises Act were available. When the eviction was sought of an unauthoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck of extracted coal lying at the commencement of the appointed date had to be taken into account to determine the profit and loss during the period of management of the mines by the Central Government taken over under Section 3 of the Coking Coal Hines [Nationalisation] Act, 1972. Thereafter, Coal hines Nationalisation Laws [Amendment] Act, 1986 was enacted. In Section 10, sub-section (2) of the principal Act, amount payable as compensation was to be deemed to include and demmed always to have included the amount required to be paid to the owner in respect of coal in stock on the date immediately before the appointed date. It was contended that the deeming provision was encroachment on the judicial power and was, therefore, unconstitutional. Repelling the contention in Bhuvaneswar Singh Ors. v. Union of India [(1994) 6 SCC 77], a three-Judge,Bench of this Court had held that when the validating legislation removed cause of the validity it could not be considered, to be an encroachment on judicial power. Any action in exercise of the power under the enactment which has been declared to be invalid by that Court cannot be made valid by validating Act by merely saying so unless the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw shall be otherwise than as declared by the Court. In The Municipal Corporation of the City of Ahmedabad Anr. v. the New Shrock Spg. Wvg. Co. Ltd. etc. etc. [(1970) 2 SCC 280], in a previous proceeding like the respondent therein, this Court in New Manek Chowk Spinning Weaving Mills Co. Ltd. Ors. v. Municipal Corporation of the City of Ahmedabad Ors. [(1967) 2 SCR 678] struck down the rules framed under the Bombay Provincial Municipality and Corporation Act, 1948 permitting the Corporation to value the land and building on flat rate method. Writ of mandamus issued directing the municipality to treat the relevant entries as assessment books for the relevant years, was held to be invalid and cancelled. Section 152-A was amended by Gujarat Amendment Act, 1968. When it was challenged, this Court had pointed out that the Corporation was not entitled to withhold the amounts illegally collected and writ of mandamus was issued directing the refund. Again, sub-section [3] of Section 152-A was introduced validating the collections by Gujarat Amendment and Validation Ordinance, 1969 authorizing the Corporation and its officers to refuse to refund the amount of tax illegally collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Parliament, under no circumstance, has power to amend the law removing the vice pointed out by the Court. Equally, the observation of Chief Justice Beg is to be understood in the context that as long as the effect of mandamus issued by the Court is not legally and constitutionally made ineffective, the State is bound to obey the directions. Thus understood, it is unexceptionable. But it does not mean that the learned Chief Justice intended to lay down the law that mandamus issued by court cannot at all be made ineffective by a valid law made b the legislature, removing the defect pointed out by the Court. Subsequently, notice was issued on March 3, 1978 by the LIC to the workmen under Section 19 [2] of the Industrial Disputes Act declaring its intention to terminate the settlement on the expiry of the period of two months from that date. Another notice was issued under Section 9A of that Act intending to effect a change from June 1, 1978 in the conditions of service of the workmen. The Central Government on May 26, 1978 issued a notification under Section 49 of the LIC Act substituting a new Regulation for the existing Regulation. Simultaneously, an Amendment on the similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x and excise duty which is not a part of the selling price. Mandamus for refund was issued. Appeal filed in this Court was withdrawn and the Sales Tax [Amendment] Act was enacted enhancing sales tax from original 6% per cent to 45 per cent with retrospective effect. Section 3 validated he previous assessments. This Court struck down the Amendment so far as it related to retrospectivity pointing out that the lacuna pointed out by the Court was not cured and the judgment could not be nullified by legislative amendment. In State of Haryana Ors. v. Karnal Co-op.Farmers' Society Ltd Ors. [(1993) 2 SCC 363 Punjab Village common Lands [Regulation] Act, 1961, the pre-existing law was invalidated under 1961 Act. Shamilat deh land was not defined to achieve certain objects which did not find place in the repealed Acts and 1961 [Amendment] Act declared that the definition shall be deemed to have applied to all lands which are shamilat deh as defined in 1961 Act with a non obstante clause. The validity thereof was challenged. This Court held that the Amendment Act was unconstitutional abrogating the civil court's orders in respect of the lands covered by the definition of shamilat deh. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on delineated delicate balance in the exercise of the sovereign power by the Legislature, Executive and Judiciary, [3] In a democracy governed by rule of law, the Legislature exercises the power under Articles 245 and 246 and other companion Articles read with the entries in the respective Lists in the Seventh Schedule to make the law which includes power to amend the law. [4] Courts in their concern and endeavor to preserve judicial power equally must be guarded to maintain the delicate balance devised by the Constitution between the three sovereign functionaries. In order that rule of law permeates to fulfil constitutional objectives of establishing an egalitarian social order, the respective sovereign functionaries need free-play in their joints so that the march of social progress and order remain unimpeded. The smooth balance built with delicacy must always maintained; [5] In its anxiety to safeguard judicial power, it is unnecessary to be overjealous and conjure up incursion into the judicial preserve invalidating the valid law competently made; [6] The Court, therefore, need to carefully scan the law to find out: (a) whether the vice pointed out by the Court and inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as valid under the Act and also fastened liability on the consumers. In other words, the effect of Section 11 is that the illegal collection made under invalid law is to be retained and the same shall now stand validated under the Act. Thus considered, we hold that Section 11 is not an incursion on judicial power of the Court and is 8 valid piece of legislation as part of the Act. As already seen, the specific case of the State and the Board is that the State has been expending its public money for the effective functioning for the KSEB and the duty under the Act is flowing into the public exchequer and, therefore, it is not a duty for the benefit of KSEB coming under Essential Articles Act. Equally, it is not either a threat to the power of judicial review or form of restraint to exercise the power of judicial review over legislative action. It is true that under the Electricity Act which admittedly has been enacted under Entry 53 of the State List, the rate of duty, as amended, is 10 per cent. As stated above, under the duty is an additional impost in the nature of compulsory exaction for the benefit of public exchequer. When we look into the provisions of the Act it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
