TMI Blog2016 (9) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... ers are deprived of the benefit of ITR in respect of Input Tax paid by them for purchase of raw material used or consumed by them for / in the manufacture of Schedule II goods, viz. 'oil' from oil seeds, which was available to the petitioners in terms of Section 14 (1) (a) (2) of the Act - whether retrospective amendment introduced with retrospective effect is justified and holds good? It is well settled that by inserting an Explanation in statute, the main provision of the Act cannot be defeated or enlarged. Ordinarily, the purpose of Explanation is to clarify that it is already enacted and not to introduce something new. The 2014 amendment was obviously introduced for the purpose of rectifying the obvious error in Section 14. The object which cannot be introduced by Explanation since an Explanation cannot be read as changing or as interfering with the incidence of the levy. It is not done, particularly when legislative clarity is required since the statutory provision imposes a tax, to untangle the legislative confusion. Explanation to Section 14 of the M.P. VAT Act, as introduced by Amendment Act of 2014 and amended in 2015, would apply prospectively. However, the legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (ITR) in respect of purchases of raw material oil seeds made by them, after payment of tax to the selling dealers. The respondent No.2 rejected the claims of ITR on the basis of the circular issued by the Commissioner of Commercial Tax on the ground that manufacture of oil results in generation of a tax free commodity, viz. Oil Cake , the benefit of ITR is available on proportionate basis i.e. no ITR will be available to the extent of generation of tax free commodity Oil Cake . The matter travelled up to this High Court. The Division Benches of Madhya Pradesh High Court, Bench at Gwalior and Principal Seat at Jabalpur in the case of Ruchi Soya Industries v. State of MP reported in ( 2014) 24 STJ 235 and M/s. Shri Ram Agro Industries v. Commissioner of Commercial Tax reported in ( 2014) 24 STJ 498 and Indore Bench of Madhya Pradesh High Court in the case of M/s. Jindal Agro Oil v. Commissioner of Commercial Tax reported in ( 2014) 24 STJ 685 held that benefit of ITR is available on the entire amount of tax paid on raw material without any deduction on proportionate basis to the extent of generation of tax free commodity Oil Cake and the principle of apport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 with retrospective effect. 7. It is contended that explanation inserted by the above amendment for proportionate computation of ITR in proportion to the value of Schedule I and Schedule II goods can neither be said to be a clarificatory or declaratory amendment clarifying or declaring or explaining the provisions which were already there in the statute, but amendment is in effect and substance a new provision introduced by legislature for withdrawing the benefit of ITR on proportionate basis, which is already available to the petitioners under Sub Clause (2) of Section 14 (1) (a) of the Act. In other words, the said provision has the effect of levy of tax on generation of Oil Cake , which is otherwise, tax free commodity, as specified in Schedule I. The petitioners are praying for declaration of the explanation inserted by Section 14 of the MP VAT (Second Amendment) Act, 2014 with retrospective effect from 01.04.2006 as arbitrary, unreasonable and unconstitutional as being violative of Articles 14 and 19 (i)(g) of the Constitution and prayed for striking down the retrospective part of the said explanation. 8. Section 14 of the Amendment Act, 2014 provides for ITR on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax, Bombay v. Poddar Cement Private Limited reported in (1997) 5 SCC 482 and submitted that the amendment introduced by explanation with retrospective effect from 01.04.2006 is clarificatory in nature and prayed for dismissal of the writ petition. 12. We have heard the arguments of the learned counsel for the parties at length. 13. Section 3 of the Madhya Pradesh Value Added Tax (Second Amendment) Act, 2014 provides, as under: - 3. Amendment of Section 14 In Section 14 of the Principal Act, - (i) in sub-section (1), in clause (a), after the second proviso, the following explanation shall be inserted, namely: Explanation : where a manufacturing process results in the manufacture of Schedule I as well as Schedule II goods, Input Tax Rebate should be computed after apportioning the Input Tax in proportion to the value of Schedule I and Schedule II goods so manufactured. (ii) for sub-section (3), the following subsection shall be substituted, namely: (3) The input tax rebate by a registered dealer under this section shall be adjusted in such manner as may be prescribed towards the tax, interest and penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective effect from April 1996, to avoid the liability of excess amount. The Karnataka High Court in its earlier judgment ( D. Cawasji Co. V/s. State of Mysore Ors. reported as 1969 (1) Mysore L.J. 461 ) had held that sales tax could not be collected on excise duty and cess imposed on arrack and the high court had issued writs directing the State Government to forebear from collected sales tax and to refund the petitioner therein any amount that might have been collected from them, by way of sales tax on items excise duty, health cess and education cess on arrack or special liquor. The State preferred an appeal to the Supreme Court which was subsequently withdrawn. The State to nullify the judgment and order passed by the High Court directing to refund of the excess amount illegally collected had amended and raised the rate of the tax from 6 % to 45% with, retrospective effect from 1.4.1996 to avoid the liability of refunding the excess amount collected. The validity of the said amendment was challenged by filing writ petition. The matter went upto the Supreme Court. The Hon'ble Supreme Court has held that the only object of enacting the amendment act to nullify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose specified in Part III of the said Schedule within the State of Madhya Pradesh from another such dealer after payment to him input tax for,- (1) .......................... (2) consumption or use for/in the manufacture or processing or mining of goods specified in Schedule II for sale within the State of Madhya Pradesh or in the course of inter-state trade or commerce or in the course of export out of the territory of India; or (5) Consumption or use for/in the manufacture or processing or packaging of goods declared tax free under Section 16, for sale in the course of export out of the territory of India; or (5-a) Consumption or use for/in the manufacture or processing or packaging, other than mentioned in sub-clause (5) above, and in connection with sale of goods declared tax free under Section 16; or (5-b) Consumption or use as plant, machinery, equipment and parts thereof for/in generation, transmission or distribution of electrical energy; or] (6) No input tax rebate under sub-section (1) shall be claimed or be allowed to a registered dealer,- (i) in respect of any goods specified in Schedule II purchased by him from another such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romulgation of the 2003 Act, been held to be invalid by any Court. The legislature can also change the character of the tax or duty from impermissible to permissible but the tax or levy should be within its legislative competence. However, these principles would not apply to the 2003 Amendment since it is in the form of an Explanation to Section 3(2). The object of an Explanation to a statutory provision has been culled out from the earlier judicial decisions and succinctly restated in S. Sundaram Pillai V/s. V.R. Pattabiraman [(1985) 1 SCC 591 at 613]. 53 Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is - a) to explain the meaning and intendment of the Act itself, b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act . has taken a great deal of trouble to raise a very difficult question, when he might with the greatest ease by using appropriate and well- known terms have avoided any question whatever. 27. We are, therefore, of the opinion that the cess chargeable at all material times under Section 3(2) is only on the production of electrical energy units as far as producers of electricity for captive consumption are concerned and the Explanation does not serve to change the character of the tax from an impermissible to a permissible levy. 22. In this particular case also the provisions regarding incidence of tax has not been amended. 23. That as already held in the case of Ruch Soya (supra), the benefit of ITR is available on the entire amount of tax paid on raw material without any reduction on proporti0nate basis to the extent of generation of tax free commodity oil cake and the plea of apportionment cannot hold good. 24 . This decision is based on the provision incidence of tax laid down in M.P. Vat Act. The aforesaid provision has not been amended to lay a claim for input tax rebate computed after apportioning the input tax in proportionate to the value of Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wellsettled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' or 'shall be deemed never to have included' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which ITA No.2191/Ahd/2008 was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the Constitution came into force, the amending Act also will be part of the existing law. 27. The object of Explanation to statutory provision has been culled out from the earlier judicial decision and succinctly restated in S. Sundaram Pillai Ors. V/s. V.R. Pattabiraman Ors. , reported as 1985 (1) SCC 591 Para 53 is relevant which reads as under :- (a) to explain the meaning and intendment of the Act itself, (b) where there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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