TMI Blog2011 (3) TMI 1537X X X X Extracts X X X X X X X X Extracts X X X X ..... extinguished by law. Appeal allowed. - Writ Appeal No. 381 of 2010 - - - Dated:- 17-3-2011 - ANSARI I.A. AND GOSWAMI A.K. JJ. N. Dutta, Senior Advocate, G.K. Joshi and R.K. Joshi for the appellant D. Saikia, Standing Counsel, Finance Department, for the respondents JUDGMENT Can a subordinate legislation be retrospective in operation, when the parent legislation, whereunder such a legislation stands made, is prospective in nature? When a person is statutorily entitled to be exempted from payment of sales tax, or is statutorily entitled to pay tax at a reduced rate, can such benefit of exemption, or payment of tax at a reduced rate, be denied to him on equitable consideration, because of the fact that the person had already availed of exemption from payment of sales tax, or had availed of the benefit of payment of sales tax at a reduced rate during the period, when he was not so entitled to avail of such benefit? In short, whether, on equitable considerations, a person can be denied the benefit of exemption from payment of sales tax, or the benefit of payment of sales tax at a reduced rate, which the Legislature has, otherwise, vested in him? In the answers t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pipes, at any place, outside the territory of the State of Assam, for being carried to, and used in, the State of Assam, because such transactions amounted to inter-State sale ; whereas a local manufacturer, in Assam, was required to pay tax at 13.2 per cent, because the sale of PVC pipes by a local manufacturer, within the State of Assam, even if such sale was made to the Government of India, Government of Assam and or to any undertaking, corporation, enterprise of the Government of India or of the Government of Assam for the purpose of use by the Government undertakings, corporations or enterprises aforementioned amounted to intra-State sale and nor inter-State sale. In other words, while the manufacturers of PVC pipes, situated outside Assam, were required to pay barely 4.4 per cent of tax on the sale or supply of PVC pipes to the State Government or its undertakings, in Assam, the local manufacturers of PVC pipes were required to pay sales tax at 13.2 per cent on the sale or supply of PVC pipes manufactured or supplied by them. Since the intra-State sale of PVC pipes carried higher rate of tax, the State Government decided to reduce the rate of tax, in respect of local manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from January 3, 2003 and not on any date prior thereto. Thus, the answer to the controversy, which the present appeal has raised, lies in the correct interpretation of the expression, date of its issue , which appears in the second proviso to section 9(3) of the AGST Act, 1993. The appellant herein is a small-scale private limited company, registered under the Companies Act, 1956, and engaged in the manufacture, sale and supply of PVC pipes and plastic tanks, having its principal place of business at Bonda, Narangi, Guwahati, Assam. The company, apart from being registered as a dealer under the Central Sales Tax Act, 1956, was also registered as a dealer under the AGST Act, 1993, and, later on, it came to be registered as a dealer under the Value Added Tax Act, 2003 (in short, the VAT Act, 2003 ). Notwithstanding the fact that a notification, under the second proviso to section 9(3), cannot exceed a period of three years from the date of its issue and the notification, dated January 3, 2003, aforementioned had claimed to have come into force on May 1, 2001, the appellant herein claimed and was given by the assessing authority the benefit of the notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2004-05. As regards the contention of respondent No. 4 in its letter, dated November 6, 2008, aforementioned, that the notification, in question, was effective from May 1, 2001, and, therefore, on completion of three years, elapsed, by efflux of time, on April 30, 2004, the appellant contended that the notification, in question, was a piece of subordinate legislation and since a subordinate legislation cannot go against the parent legislation, the notification, in question, must be treated to have remained valid for three years from the date of its issue , i.e., January 3, 2003. On receipt of the appellant's reply to the show-cause notice, dated November 6, 2008, aforementioned, respondent No. 4 herein sought for, vide its letter, dated December 5, 2008, a clarification from respondent No. 3, namely, Commissioner of Taxes, Assam, as to whether the notification, in question, should be treated to have remained in force till April 30, 2004 or shall the notification be treated to have lapsed by counting the validity of the notification with effect from May 1, 2001. Reacting to the clarification, which the respondent No. 4 had so sought for by his letter, dated December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observing to the effect, inter alia, that though the date of notification was January 3, 2003, the same having been brought into force with effect from May 1, 2001, the notification had remained in force from May 1, 2001 to April 30, 2004 and, hence, the notification, having elapsed, on April 30, 2004, by efflux of time, the concessional rate, which the appellant had enjoyed during the assessment year 2004-05, was illegal. In order to strengthen his conclusion that the appellant was not entitled to claim concessional rate of tax, respondent No. 3 further pointed out, in its order, dated September 24, 2009, aforementioned, that the appellant had already enjoyed concessional rate of tax during the period from August, 2001, to January, 2003, and that by its act of having enjoyed the benefit of concessional rate between August 2001 and January 2003, the appellant had shown its clear understanding that the notification was retrospective in nature and, hence, the appellant, after having enjoyed the benefit, with retrospective effect, cannot make contrary claim and derive benefit of the notification by contending that the notification was effective from the date of its issue, i.e., Januar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hereinabove) that the expression, date of its issue , appearing in the second proviso to section 9(3), has to be understood within the ceiling of three years, which is allowable for obtaining exemption from payment of tax or the benefit of payment of tax at a reduced rate. Because of the conclusions so reached, the writ petition was dismissed on September 16, 2010 (Kamakhya Plastics (P) Ltd. v. State of Assam). The appellant is, therefore, before us. We have heard Mr. N. Dutta, learned senior counsel, appearing on behalf of the appellant, and Mr. D. Saikia, learned counsel, appearing on behalf of the respondents. Appearing on behalf of the appellant, Mr. N. Dutta, learned senior counsel, submits that a bare reading of section 9 of the AGST Act, 1993, clearly shows that the benefit of reduced rate of tax can be granted by the State Government by issuing appropriate notification, in this regard, but, under the second proviso to section 9(3), the validity of such a notification is three years from the date of its issue. Thus, the notification, as envisaged by the second proviso is, according to Mr. Dutta, prospective in nature. When the parent legislation, i.e., AGST Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant was left with no alternative, but to approach this court, The learned single judge, however, contends Mr. Dutta, fell in serious error in ignoring the fact that the parent legislation being prospective in nature, the notification, which is a piece of subordinate legislation, could not have been given retrospective effect and ought to have, therefore, been treated to be prospective effect. Moreover, as there was no outer-limit fixed in respect of the validity of the notification, the notification, according to Mr. Dutta, ought to be treated to have remained valid till January 2, 2006. Mr. Dutta further points out that respondent No. 4 is a statutory authority and, while deciding the question as to whether the assessment, which had already been made, needed to be reopened and reassessed, the authority functioned as a quasi-judicial body and such an authority cannot be made to act at the dictates of its superior authority nor can its decision be controlled and/or guided by any superior authority, for, such a conduct of being guided and controlled by superior authority would amount to abdication of authority by the authority, which has to exercise quasi-judicial power in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissal of the writ petition and has thereby denied to the appellant the right, which the statute had, otherwise, given to the appellant. The dismissal of the writ petition is, therefore, contends Mr. Dutta, illegal and this appeal may, therefore, be allowed. Resisting the appeal, Mr. D. Saikia, learned counsel, submits that the notification did not mention the total period and/or the outer-limit of its validity and, hence, the appellant cannot contend that the notification must be treated to have come into force for a period of three years. This apart, points out Mr. Saikia, the notification was made effective on May 1, 2001 and the appellant, acting upon the said notification, had already enjoyed the benefit of concessional rate of tax with effect from May 1, 2001. In such circumstances, having already availed of the concessional rate of tax for a period of three years by virtue of the notification, in question, the appellant could not have turned back and contended that the notification must be treated to have remained in force for three years with effect from January 3, 2003, for, such continuation of validity, if permitted, would make the notification valid for five year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterates that since the appellant had already enjoyed concessional rate of tax with effect from May 1, 2001, the writ petition has been correctly rejected, because, the benefit, which the appellant had enjoyed, has become, by efflux of time, non-recoverable and the appellant, therefore, cannot be allowed to receive benefit once again. Repelling the submissions made, on behalf of the respondents, Mr. Dutta, learned senior counsel, points out, once again, that neither the statutory authorities concerned nor the learned single judge of this court determined as to when a notification, issued under section 9(3), comes into effect. Instead of determining the statutory position, the statutory authorities as well as the learned single judge were prevailed upon by the fact that the notification mentions that it had come into force on May 1, 2001 and the notification should, therefore, be construed to have remained in force for three years with effect from May 1, 2001. Continuing his submissions, Mr. Dutta points out that what the appellant wanted before the statutory authorities, as well as before the learned single judge, was determination of the question as to what the statutory da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the whole or any part of their turnover:- Provided that any exemption pr reduction may extend to the whole of the State or to any specified area or areas therein and be subject to such restrictions and conditions as may be specified in the notification:- Provided further that validity of any notification issued under this sub-section shall not exceed a period of three years from the date of its issue. (4) The State Government may, from time to time, by notification in the Official Gazette, frame one or more schemes for the grant of relief to any class of industries within the State or within any specified part of the State on or after such date as may be specified in such scheme and producing such goods as may be specified therein by way of full or partial exemption of any tax payable under this Act on the raw materials or other input purchased by them within the State or on the manufactured goods sold by them within the State or in the course of inter-State trade or commerce for such period or periods as may be specified or by way of deferment of the tax payable by them under this Act for such period as may be specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature may have the power to make a legislation retrospectively unless denied by the Constitution in any given case, a subordinate legislation cannot be retrospective unless the parent legislation authorizes the authority concerned to make the legislation with retrospective effect. The prospectivity of a legislation being normal and retrospective legislation being an exception, a clear indication must be discernible from the legislation that a given piece of legislation is retrospective in effect, particularly, when the legislation concerns fiscal matters. Dealing with almost similar fiscal statute, as the one at hand, and referring to section 7 of the Orissa Sales Tax Act, 1947 (which was the subject-matter of discussion in Mangalam Timber Products Ltd. v. State of Orissa reported in [2008] 18 VST 1 (Orissa)), it was pointed out by a Division Bench that when section 7 is prospective, it is obvious that the notification, issued in exercise of power under section 7, cannot become retrospective. The court, therefore, in Mangalam Timber Products Ltd. [2008] 18 VST 1 (Orissa), read the notification, in question, as operative from the date of the notification and not from any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [2008] 18 VST 1 (Orissa) that when statutory provisions are prospective in nature, subordinate legislation cannot be retrospective unless a contrary indication is discernible from the legislation itself. In fact the principle of law that an authority, which has the power to make subordinate legislation cannot make it with retrospective effect unless it is so authorized by the Legislature, which has conferred that power on the authority concerned, has been summed up succinctly in Income-tax Officer v. M. C. Ponnoose reported in [1970] 75 ITR 174 (SC) ; [1969] 2 SCC 351, wherein the court observed (page 177 in 75 ITR):- Now it is open to a sovereign Legislature to enact laws which have retrospective operation. Even when Parliament enacts retrospective laws such laws are in the words of Willes, J. in Phillips v. Eyre [1870] 40 Law J. Rep. (N. S.) Q.B. 28 at page 37 ; L. R. 6 Q.B 1, 23:- ' . . .no doubt, prima facie of questionable policy, and contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive effect, particularly, when the power to make subordinate legislation, conferred on the State Government, by section 9(3), is prospective in nature. Consequently, notwithstanding the fact that the notification, in question, was issued on January 3, 2003, making it effective from May 1, 2001, the fact of the matter remains that the parent legislation, i.e., the AGST Act, 1993, being prospective in nature, no retrospective effect could have been given to the said notification by the State Government as a delegatee under the AGST Act, 1993 ; more so, when the validity of the notification is to be counted with effect from the date of its issue and not from any date prior thereto. As regards the submissions made on behalf of the State that an exemption notification has to be construed strictly, there can be really no dispute. However, reliance placed by Mr. Saikia; in support of such a proposition, on the case of Hari Chand Shri Gopal [2011] 6 GSTR 369 (SC) ; [2011] 1 SCC 236, is not incorrect inasmuch as the decision in Hari Chand Shri Gopal [2011] 6 GSTR 369 (SC) ; [2001] 1 SCC 236, has no application to the facts of the present case. When construed strictly, there remains no es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent No. 4 to reopen the assessment and make assessment anew as has been done. The conduct of respondent No. 4 clearly shows that though, as a statutory authority, it (respondent No. 4) was, exercising quasi-judicial jurisdiction in the present case, it abdicated his authority to decide as to whether the notification, in the light of the clear language employed by section 9(3), ought or not, to be read prospectively with effect from January 3, 2003, and not retrospectively, i.e., May 1, 2001. Sadly enough, respondent No. 4 did not apply his own mind to the facts of the given case and, thus, abdicating his authority and the duty to decide himself, look to his superior authority and merely carried into execution the views of his superior authority as had been expressed in the said clarification . This, in itself, was sufficient to warrant interference, with the impugned order of assessment, in the revision. Coupled with the above, the clarification, which respondent No. 3 had issued, was, it is clear, wholly contrary to law inasmuch as no subordinate legislation can run counter to the parent legislation and when the parent legislation, in the present case, was prospective in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hirked his responsibility to determine what the law had warranted him to determine. Yet another reason, which respondent No. 3 has assigned for his noninterference with the order of reassessment, is that the appellant had already availed of concessional rate of tax for a period of three years. Respondent No. 3, therefore, took the view that since the appellant had already enjoyed the benefit of concessional rate in terms of the notification, the notification has to be construed retrospectively so far as, at least, the case of the appellant was concerned. This was a completely incorrect approach by respondent No. 3 inasmuch as no tax can be imposed on a person unless permitted by law. So guarantees article 366. In the name of equity, therefore, the right not to pay tax cannot be denied to an assessee by the State. This is the basis of each fiscal legislation. No tax can be made payable by a person unless the law requires him to do so. When the law does not require him to pay tax, tax cannot be realized. Even if, therefore, the appellant had, in the present case, incorrectly or illegally, enriched himself by taking the benefit of concessional rate of tax relying on the notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 9(3), comes into force. Without answering this legal question, the writ petition could not have been decided. The learned single judge appears to have been influenced by the fact that the Government had intended to give continuity to its earlier notification of exemption and, that is why, the notification had been brought into force with effect from May 1, 2001. Based on this interpretation, which we find, with great respect, impossible to agree to, denied to the appellant his right to receive the benefit of notification in accordance with what the parent legislation contemplated, In fact, the learned single judge too fell into serious error of law in allowing equity to prevail over the law, in the case, while interpreting the fiscal statute inasmuch as the learned single judge pointed out that the petitioner, i.e., the appellant herein, having availed of the benefit of reduced rate of tax, cannot claim prospective enforcement of the notification. Reminds the Supreme Court, in Polestar Electronic (P) Ltd. v. Additional Commissioner, Sales Tax, Delhi reported in [1978] 41 STC 409 (SC) ; [1978] 1 SCC 636, that in construing a taxing statute, one must have regard to the strict le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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