TMI Blog2001 (4) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 in particular. However, the interim orders passed by the High Court show that deposits were made of vend fee and the purchase tax. Although these 'deposits' were to be kept in a separate account, nevertheless in the circumstances of this case, it would be mere sophistry to hold that the monies so deposited were not 'realisations' for the purposes of the U.P. Excise Act. Therefore, what was deposited by the appellants with the State would remain with it notwithstanding, the interim orders which required the State to keep it in a separate account but, at the same time, what has not been collected by the State cannot be realised by it, even in those cases where a bank guarantee had been furnished. - Civil Appeal No.4093 of 1991 - - - Dated:- 17-4-2001 - B.N. Kirpal, Syed Shah Mohammed Quadri, M.B. Shah, Ruma Pal and K.G. Balakrishnan, JJ. Senior Advocates: F.S. Nariman, R.F. Nariman, K.K. Venugopal, Rakesh Dwivedi and Dinesh Dwivedi, for the parties. other Advocates: D.M. Popat, Amit Dhingra, Zulfikar Kumar Shafi, P.H. Parekh, Shahid Rizvi, G.K. Kumar, K.C. Dua, Y.P. Mahajan, Arvind Minocha, Tarun Dua, E.C. Agrawala, Mahesh Agarwal, Rishi Agarwal, Sumeeet Lall, Ashwini Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the writ petitions interim orders were passed by the High Court whereby the petitioners before it were required to give a bank guarantee and/or pay to the State the amounts directed by the Court which, in an earlier order, the High Court had directed that it should be kept by the State in a separate account. 5.As noticed hereinabove, vide decision of a Division Bench of this Court in first Synthetics Chemicals case rendered on 19th December, 1979 the validity of the impost was upheld. Subsequently, on the matter being referred to a Bench of Seven Judges, by the second Synthetics case decision in 1989, the validity of the provisions of the said Acts permitting levy of excise duty in the form of vend fee was struck down prospectively. 6.The High Court by the impugned judgment dated 29th August, 1990 in Somaiya's case interpreted the direction in the second Synthetics case relating to prospective declaration to mean that for the period prior to 25th October, 1989 the amount payable in respect thereto could be recovered. It held that once the levy for the period prior to 25th October, 1989 was saved further steps consequent upon such levy were equally saved and recovery in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awful enactment which authorised the levy and collection of tax. Tax cannot be levied and collected by virtue of a decision of a Court in the absence of any statutory provision. It was further submitted that in series of decisions of this Court, one of the examples being that of M. P. V. Sundararamier Co. v. The State of Andhra Pradesh Another - 1958 SCR 1422 it had been held that the law which is declared ultra vires due to lack of legislative competence would be void ab initio and the same could not be made operative. The effect of the second judgment in Synthetics case was that after 25th October, 1989 no levy or collection could take place. In respect of the period prior to 25th October, 1989 even if tax had been levied and/or demand raised the contention of the learned counsel was that the same could not be collected. 11.On behalf of the respondents it was contended by Shri Rakesh Dwivedi that declaration of the provisions as being illegal prospectively meant that prior to 25th October, 1989 all the provisions were valid. He submitted that this meant that the said provisions were capable of being enforced for the period prior to the said date. He contended that liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Andhra Pradesh, Tamil Nadu and Bombay were "unconstitutional insofar as these purported to levy a tax or charge impost upon industrial alcohol, namely alcohol used and usable for industrial purposes". 14.Having come to the conclusion that the levy was unconstitutional the Court, as far as the relief was concerned, observed as follows : We must, however, observe, that these imposts and levies"89. have been imposed by virtue of the decision of this Court in Synthetics Chemicals Ltd. case. The States as well as the petitioners and manufacturers have adjusted their rights and their position on that basis except in the case of State of Tamil Nadu. In that view of the matter, it would be necessary to state that these provisions are declared to be illegal prospectively. In other words, the respondent States are restrained from enforcing the said levy any further but the respondents will not be liable for any refund and the tax already collected and paid will not be refunded. We prospectively declare these imposts to be illegal and invalid, but do not affect any realisations already made. The writ petitions and the appeals are disposed of accordingly. The review petitions, accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s already paid but, at the same time, the State Government is not entitled to collect the taxes in respect of the period prior to 25th October, 1989, i.e. the date on which the judgment was delivered. It was, however, submitted that in those cases where money was deposited with the State on the condition that the same will be kept in a separate account, and would be subject to the outcome of the writ petition, the appellants would be entitled to refund thereof. 17.Shri R. F. Nariman, learned senior counsel for the appellants referred to Supreme Court Bar Association v. Union of India and Another - (1998) 4 SCC 409 (at page 430) and contended that under Article 142 of the Constitution this Court cannot pass any order which is contrary to any constitutional or statutory provision. The effect of the decision in Synthetics case being that the impugned Acts were without legislative competence and those laws must be regarded as nonest as if they did not exist. The validity of the said laws which had earlier been upheld in the first Synthetics case got wiped out with a review petition against the first Synthetics case being allowed and the declaration of law in the Synthetics case. He c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antamount to payment of tax. He invited our attention to the decision of this Court in the case of Oswal Agro Mills Ltd. and Another v. Asstt. Collector of Central Excise, Division Ludhiana and Others - 1994 (70) E.L.T. 48 (SC) = (1994) 2 SCC 546. In that case, pursuant to an interim order passed by this Court staying the recovery of excise duty a bank guarantee had been furnished. The assessee's appeal was allowed and it claimed the refund of the bank guarantee which had already been encashed by the excise authorities. The Revenue contended that the bank guarantee should be deemed to have been an equivalent to money deposited in Court and as such Section 11B of the Excise Act stood attracted and the appellants having failed to establish before the authorities concerned that they had not passed on the incidence thereof to the customers, the authorities were entitled to encash the bank guarantee and retain the amount thereof. Allowing the appeal and holding that the provisions of Section 11B were not applicable in the case of furnishing of the bank guarantee, this Court observed as follows: Section 11B applies when an assessee claims refund of excise"9. duty. A claim for refund is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n recognition of the fact that between the coming into force of the Constitution on 26th January, 1950 and the date of the judgment, Parliament had in fact exercised the power of amendment in a way which, according to the decision in Golaknath was void. If retrospectivity were to be given to the decision, "it would introduce chaos and unsettled conditions in our country". On the other hand it also recognised that such possibility of chaos might be preferable to the alternative of a totalitarian rule. The Court, therefore, sought to evolve 'some reasonable principle to meet this extraordinary situation'. The reasonable principle which was evolved was the doctrine of prospective overruling. 22.Although the doctrine of 'prospective overruling', was drawn from American jurisprudence, it has/had, of necessity, to develop indigenous characteristics. The parameters of the power as far as this country is concerned were sought to be laid down in Golaknath itself when it was said: "As this Court for the first time has been called upon to apply the doctrine evolved in a different country under different circumstances, we would like to move warily in the beginning. We would lay down the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion would have prospective application so that no punishment already imposed would be open to challenge on this count. [See also Managing Director, ECIL, Hyderabad and Others v. B. Karunakar and Others - (1993) 4 SCC 727]. 26.In the ultimate analysis, prospective overruling, despite the terminology, is only a recognition of the principle that the court moulds the reliefs claimed to meet the justice of the case - justice not in its logical but in its equitable sense. As far as this country is concerned, the power has been expressly conferred by Article 142 of the Constitution which allows this Court "to pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it". In exercise of this power, this Court has often denied the relief claimed despite holding in the claimants favour in order to do 'complete justice'. 27.Given this constitutional discretion, it was perhaps unnecessary to resort to any principle, of prospective overruling a view which was expressed in Narayanibai v. State of Maharashtra Others - (1969) 3 SCC 468 at page 470 and in Ashok Kumar Gupta and Another v. State of U.P. and Others - (1997) 5 SCC 201. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st March, 1986 the demand of the Central Excise Department on the alcohol manufactured was over Rs. 4 crores. The Court referred to its orders dated 1st October, 1986 and 16th October, 1986 whereby the State Government was permitted to collect the levy on alcohol manufactured in the company's distilleries. With respect to the said amount of Rs. 4 crores, it was observed that "it is, therefore, necessary to declare that in future no further realisation will be made in respect of this by the State Government from the petitioners". The implication clearly was that if out of Rs. 4 crores the State Government had collected some levy the balance outstanding cannot be collected after 25th October, 1989. 29.After the decision in second Synthetics case Writ Petition Nos. 7452 of 1981 and 3571 of 1982 - Sachid Hussain Anr. v. The State of U.P. Ors. - came up for hearing. A Bench of Three Judges presided over by Chief Justice Mukherji, who had delivered the judgment in second Synthetics case vide order dated 26th February, 1990 disposing of the said writ petitions observed as follows : "In view of the judgment of this Court in Synthetics and Chemicals Limited and Others v. State of Ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... har Market Act on the other could not operate harmoniously and, therefore, the Sugarcane Act and the Sugarcane Order prevailed over the Market Act. It was then contended that the appellants therein should be allowed to get refund of the market fee which they had paid under the Marker Act subject to their showing that they had not passed on the burden on the principle of unjust enrichment. Dealing with the above contentions, it was observed as follows: .......Under these circumstances, keeping in view the"112. peculiar facts and circumstances of these cases, we deem it fit to direct in exercise our powers under Article 142 of the Constitution of India that the present decision will have only a prospective effect. Meaning thereby that after the pronouncement of this judgment all future transactions of purchase of sugarcane by the sugar factories concerned in the market areas as well as the sale of manufactured sugar and molasses produced by therefrom by utilising this purchased sugarcane by these factories will not be subjected to the levy of market fee under Section 27 of the Market Act by the Market Committees concerned. All past transactions up to the date of this judgment which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e realised by the Government. 32.It is, of course, true that in respect of the same period i.e. prior to 25th October, 1989 persons who had obtained stay orders or had otherwise not paid the levy would be better off than those who have deposited the sums with the Government and are not entitled to receive any refund. This situation, however, is unavoidable for the simple reason that Article 265 does not permit collection of tax without the authority of law. Even though levy prior to 25th October, 1989 may be valid but when in fact no collection was made pursuant to the said levy, then post judgment in the second Synthetics case collection is not permissible. After 25th October, 1989 there was no valid law in existence which permitted the collection of tax. Shri Venugopal is right in contending that after 25th October, 1989 the provisions of Section 39 of the U.P. Excise Act, 1910 which provides for recovery of excise revenue would be inapplicable. The said section, inter alia, states that all excise revenue may be recovered from the person primarily liable to pay the same, as arrears of land revenue or in the manner provided for the recovery of public demands by any law for the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... augwalla v. The Union of India - (1957) SCR 930 at 940, M.P.V. Sundararamier Co. v. The State of Andhra Pradesh Another (supra) at 1468 and Mahendra Lal Jaini v. The State of Uttar Pradesh and Others - (1963) Supp. 1 SCR 912 at 937-941.] 35.Nevertheless a law enacted without legislative competence remains on the statute book till a Court of competent jurisdiction adjudicates thereon and declares it to be void. When the Court declares it to be void it is only then that it can be said that it is nonest for all purposes. In Synthetics and Chemicals case the invalidity of the provisions was a declaration under Article 141 of the Constitution. It was for doing complete justice that the Court in exercise of its jurisdiction under Article 142 moulded the relief in such a way as to give effect to its declaration prospectively. It is not possible to accept that such an order of prospective overruling is contrary to law. An invalid law has not been held to be valid. All that has happened is that the declaration of invalidity of the legislation was directed to take effect from a future date. 36.The principle of prospective overruling is too well enshrined in our jurisprudence for it t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..". The contention of the respondents in the teeth of the aforesaid direction cannot, therefore, be accepted. This is apart from the fact that there is no factual basis on which this Court can conclude that the appellants have in fact realised the amount of vend fee and allowing them to retain it will result in their getting enriched unjustly. 39.For the aforesaid reasons, C.A. No. 4093 of 1991 is allowed. Civil Appeal No. 2853 of 2001 is dismissed. It is declared that the vend fee realised by the States is not to be refunded to the appellants and, at the same time, the State cannot collect any vend fee for the period prior to 25th October, 1989 or thereafter notwithstanding that notices of demand may have been issued or recovery proceeding initiated. Parties to bear their own costs. C.A. Nos. 324 of 1981, 455, 2795, 1604 of 1980, 624, 625, 125, 2049 of 1981, C.A. Nos. 1122, 181 of 1981, SLP (C) Nos. 4181, 4297- 4298 of 1980, C.A. Nos. 215, 341 of 1981, T.C. Nos. 37- 39 of 1989, C.A. Nos. 2777 of 1981 and 1607 of 1980 40.In these appeals apart from the points decided by the judgment in Somaiya's case (Civil Appeal No. 4093 of 1991), one of the issues which arises pertains to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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