TMI Blog1984 (9) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... cate, for the respondents. SEN, J.: The question of the constitutional validity of the Mysore Sales Tax (Amendment) Act, 1969 (Mysore Act of 1969) (hereinafter referred to as the Act ), falls for determination in these two appeals preferred by the appellant with certificate granted by the High Court under art. 133(1) of the Constitution. The question arises under the following circumstances : The appellants are excise contractors who had secured excise privilege of retail sale of toddy, arrack or special liquor. The State Government has the monopoly of the first sale of arrack which is country liquor other than toddy. The manufacture of arrack by distillation is done in the State under the State Control and the entire quantity manufactured by distillation in the State is sold to the State Government which in its turn supplies it to bonded depots in Taluks. Under the Mysore Excise Act, arrack is liable to excise duty at the rates prescribed by the Government. The State does not collect excise duty from the distillers. From the distillery, arrack is transferred to bonded depots and excise duty together with cesses thereon is collected from the contractors who are give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hereby issue writs directing the State Government to forbear from collecting from the petitioners any amount representing sales tax on the following, viz., excise duty, health cess and education cess imposed on arrack or special liquor, and to refund to the petitioners any amount that might have been collected from them, by way of sales tax on items of excise duty, health cess and education cess on arrack or special liquor. The Division Bench, in the course of the judgment in Cawasji Co. vs. State of Mysore [1969] 1 Mys LJ 461, observed at p. 483: It is difficult to see how excise duty paid, not by the seller but by the purchaser, to the State Government, can become a part of the price at which the goods are sold by that seller to that purchaser. If that is the true position, we think the State Government cannot, under s. 19 of the Sales Tax Act, collect sales tax on excise duty which is not a part of its selling price. Against the judgment of the High Court, the State preferred an appeal to the Supreme Court, but the appeal was subsequently withdrawn. It appears that during the pendency of the appeal, the privileges of vending liquor in the excise year 1968-69 were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have always been validly levied or collected in accordance with law, as if this Act had been in force at all material times such tax was levied or collected and accordingly- (a) all acts, proceedings or things done or taken by any authority or officer or person in connection with the levy or collection of such tax, shall, for all purposes, be deemed to be and to have always been done or taken in accordance with law ; (b) no suit or proceeding shall be entertained, maintained or continued in any Court for the refund of any tax so paid ; and (c) no Court shall enforce any decree or directing the refund of any tax so paid. 4. The Mysore Sales Tax (Amendment) Ordinance, 1969 (Mysore Ordinance No. 3 of 1969) is hereby repealed. The Statement of Object and Reasons for the passing of the amendment may appropriately be set out at this stage. The Statement of Object and Reasons runs as follows: Clause (j) of sub-rule (4) of r. 6 of the Mysore Sales Tax Rules, 1957, provided for the exclusion of excise duty paid by a dealer from the computation of his taxable turnover. By Government Notification No. GSR 882, dt. 16th March, 1966, this clause was deleted from the rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause sales tax could not be levied on excise duty by virtue of the judgment of the High Court. The learned counsel points out that the appeal which was filed by the State Government against the judgment of the High Court had been withdrawn by the State and, as such, the judgment of the High Court has become final and conclusive and on the basis of the judgment, a large amount has become refundable by the State to the appellants. It is the submission of the learned counsel that the amendment has been brought about only for the purpose of circumventing the judgment of the High Court with the object of avoiding the liability to refund the amount wrongfully and illegally collected as sales tax from the appellant by raising the amount of tax from 6-1/2 per cent to 45 per cent. the learned counsel contends that the increase in the rate of sales tax form 6-1/2 per cent to 45 with retrospective effect is clearly arbitrary and unreasonable. It is the contention of the learned counsel that if any particular provision of a statute is for some lacuna or defect in the statute declared unconstitutional or invalid, it is open to the Legislature to pass a Validating Act with retrospective effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64. Sec. 3(1) provides that notwithstanding a judgment of any Court, cesses imposed, assessed or collected by the Board in pursuance of the notifications and notices specified in the Schedule shall, for all purposes, be deemed to be, and to have always been, validly imposed, assessed or collected as if the enactment under which they were issued stood amended at all material times so as to empower the Board to issued the said notifications . In the Schedule were specified the three notifications enhancing the rate of cess. On the question, whether the enhanced levy was validated by the 1964 Act, a five judges Bench of this Court held that it did not give legal effect to the imposition of cess at the enhanced rate. That Court observed at p. 751 of [1970] 3 SCR and at p. 61 of AIR 1971 : The nature of the amendment made in Act 4 of 1920 has not been indicated. Nor is there anything which enacts that the notifications issued without the sanction of the State Government must be deemed to have been issued validly under s. 51(2) without the sanction of the Local Government. On the words used in the Act, it is plain that the Legislature attempted to overrule or set aside the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be deemed always to have been lawful, for the Municipal Corporation of the City of Ahmedabad to withhold refund of the amount already collected or recovered in respect of any of the property taxes to which sub-s. (1) applies till assessment or reassessment of such property taxes is made and the amount of tax to be levied and collected is determined under sub-s. (1) : Provided that the Corporation shall pay simple interest at the rate of six per cent. per annum on the amount of excess liable to be refunded under sub-s. (2), form the date of decree or order of the Court referred to in sub-s. (1) to the date on which excess is refunded. This Court held that under s. 152A of the Act, before the Corporation could detain any amount collected as property tax, there must be an assessment according to law ; but, in the present case, there were no assessment orders in accordance with the provisions of the 1949 Act and the rules, as amended by the Amending Act, and, therefore, the appellate-Corporation was not entitled to retain the amounts illegally collected. This Court has further held that sub-s. (3) of s. 152A, which commands the Corporation to refuse to refund the amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and then by fiction making the tax already collected to stand under the re-enacted law. This Court at pp. 296 and 297 relied on the earlier decision of this Court in the case of Janapada Sabha, Chhindwara vs. Central Provinces Syndicate Ltd., AIR 1971 SC 57 ; [1970] 3 SCR 745. This Court finally observed at page 297 : We are clearly of the opinion that sub-s. (3) of s. 152A introduced by the Ordinance is repugnant to our Constitution. That apart, the said provision authorises the Corporation to retain the amounts illegally collected and treat them as loans, that is an authority to collect forced loans. Such conferment of power is impermissible under our Constitution. The learned counsel appearing on behalf of the State has submitted that this very contention that the State has sought to enhance the rate of tax without seeking to remove or rectify the lacuna which was there in the earlier Act and for which the earlier provision has been struck down by the High Court, was raised in the writ petition filed in the High Court by the appellant. It is the submission of the learned counsel that this contention has been rejected by the High Court for reasons indicated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt issued writs directing the State Government to forbear from collecting from the appellant any amount representing the sales tax on the following, namely, excise duty, health cess and education cess, imposed on arrack or special liquor and to refund to the appellant what might have been collected from them by way of sales tax on items of excise, health cess and education cess on arrack or special liquor. The High Court had passed the aforesaid order issuing appropriate writ in view of the High Court's finding that sales tax is not payable on excise duty, health cess and education cess. In view of the aforesaid judgment and order passed by the High Court, amounts collected by the State by way of sales tax on items of excise, health cess and education cess on arrack or special liquor from the appellant became refundable to the appellant. The impugned amendment has been passed, as the Statement of Objects and Reasons which we have earlier set out clearly indicates, override the judgment of the High Court and to enable the State to hold on to the amount collected as sales tax on excise duty, health cess and education cess, if any, on arrack or special liquor. It has to be not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me conclusive and is binding on the parties. It may or may not have been competent for the State Legislature to validly remove the lacuna and remedy the defect in the earlier levy by seeking to impose sales tax though any amendment on excise duty, education cess and health cess ; but, in any event, the State Government has not purported to do so through the Amending Act. As a result of the judgment of the High Court declaring such levy illegal, the State became obliged to refund the excess amount wrongfully and illegally collected by virtue of the specific direction to that effect in the earlier judgment. It appears that the only object of enacting the amended provision is to nullify the effect of the judgment which became conclusive and binding on the parties to enable the State Government to retain the amount wrongfully and illegally collected as sales tax and this object has been sought to be achieved by the impugned amendment which does not even purport or seek to remedy or remove the defect and lacuna but merely raises the rate of duty from 6 1/2 per cent to 45 per cent and further proceeds to nullify the judgment and order of the High Court. our opinion, the enhancement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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