Aluminium Co. Vs. State of Kerala & Crs  INSC 172 (2 February 1996)
K.Ramaswamy, K.G.B. Pattanaik (J) Ramaswamy. J.
1996 AIR 1431 JT 1996 (2) 85 1996 SCALE (1)780
APPEAL NOS. 2771-2822 OF 1996 [Arising out SLP [C] Nos. 10334/95, 10335/95, 10697-98/95, 11267/95, 11268-70/95, 111318/95,
11319/95, 11321/95, 11322/95, 11340/95, 11655/95, 17898/95, 18047/64/95,
18471/95, 3512/96 [CC 3235/95], 3514/96 [CC 4093/95], 8077/95, 8297/95,
8305/95, 8446-48/95, 8488/95, 8490/95, 8826/95, 8846/95, 8878/95, 9055/95,
9077/95, 9079/95, 9083/95 & 9205/95]
granted in all the special leave petitions.
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.
Section 36 of Finance Act 1978, the Central Excise and Salt Act, 1944 [for
short, the Excise Act] was amended to impose central excise duty on electricity
under Item II-E in the Ist Schedule to the Excise Act and fixed 2 paise per
kilo watt of electricity unit. Consequently, the Kerala State Electricity Board
[KSEB] was liable to pay excise duty on electricity generated and produced by
it. To recoup that loss, the Government of Kerala, exercising its power under
Section 3 of the Kerala Essential Articles Control [Temporary Powers] Act,
1961, issued an order. By clause  of the said order, surcharge at the rate
of 2.5 paise per unit of electrical energy was levied on all Supplies of
electrical energy made by the KSEB either directly or through licensees of
Extra High Tension [EHT] and High Tension [HT] consumers. Thereunder, the
licensees were allowed to retain 1% of the anount collected as collection
charges. On October 1,
1984, the Government
of India had withdrawn the levy of excise duty on electricity. The Government
of Kerala in supersession of its Order dated April 6, 1979 had notified the State Electricity Supply [Kerala State
Electricity Board and licensees Area] Surcharge Order, 1984 effective from October 1, 1984. Under clause  of the said Order
all supplies of electrical energy made by KSEB either directly or through
licensees, were liable to surcharge at the rate fixed at 2.5 paise per unit. In
the explanatory note it was stated that though excise duty was discontinued,
the State Government desired to continue the levy of surcharge. The EHT and HT
consumers had filed writ petitions challenging the validity of the 1984 Order.
Pending writ petitions, on August 1, 1988,
the State Government discontinued the levy of surcharge with effect from that
date by issuing an Ordinance called the Kerala Electricity Duty [Amendment]
Ordinance, 1988 which later on became an enactment. The rate of electricity
duty was 30% of the price of energy. Later, it was revised to 10 paise per unit
for HT consumers and 6.5 paise per unit for EHT consumers. After a
representation was made through the Association of the HT and EHT consumers,
the Government of Kerala decided to discontinue the surcharge on the
electricity duty of 10 paise per unit. On September 27, 1988, a Division Bench
of the High Court in Chakolas Spinning & Weaving Mills Ltd. v. K.S.E. Board
(1988  KLT 680] held that the levy of surcharge 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.
State Electricity Supply [Kerala State Electricity Board add Licensees Area]
Surcharge Order, 1984 was declared ultra vires the power of the State
said judgment was confirmed by this Court dismissing the Special Leave
Petitions in limine.
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 under
Article 213 of the Constitution issued Ordinance called the Kerala Electricity
Surcharge [Levy and Collection] Ordinance, 1989 which later on became
enactment, viz., Act 22 of 1989 [for short, "the Act"]. Under the
Act, the appellants are liable to pay 2.5 paise per unit of electrical energy
supplied. The appellants challenged the same by filing the writ petitions. The
High Court upheld the validity of the Act and the Order. Thus these appeals by
K.K. Venugopal, learned senior counsel for the first appellant contended that
the Act levies tax on supply of electrical energy. It is not a tax either on sale
or consumption of electrical energy. Entries 26 and 27 of List II [State List]
of the Seventh Schedule to the Constitution empower the State legislature,
subject to Entry 33 of List ITI [Concurrent List] to enact law empowering levy
of surcharge on supply and distribution of goods and trade and commerce
therein. Entry 53 of the State list empowers the State legislature to enact the
law on sale or consumption of electricity. Having made the law under Entry 26
or 27, using the appropriate language for levy and collection of excise duty on
supply of electricity, the Act cannot be construed to be one made under Entry
53 of the State List. He further contended that the word 'supply' has its own
'sale' and 'consumption' of electricity bear different connotations. The State
legislature having enacted the Electricity Duty Act, 1963, imposes duty on
electricity @ 30% and reduced it to 10% by later amendment and discontinued the
levy of excise duty from August 1, 1988, and the so-called duty not having been
passed on to the public exchequer, the Act was made only as a colourable device
to avoid refund of excise duty to the tune of Rs.15 crores wrongly collected
from the consumers. The Act admittedly is not an amendment to the Excise Act.
The excise duty is levied on supply of electricity. If excise duty is construed
to be a tax under Entry 53, the Electricity Duty Act, 1963 being earlier to the
Act and both occupying the same field, as a special component of the tax on
electricity, the later Act prevails over the earlier.
the State legislature did not intend to have the earlier enactment, viz.,
Electricity Duty Act, superseded by the Act which imposes levy of only 2.5 paise
per unit of electrical energy. Therefore, 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.
nothing prevented the legislature to use such a language as impost on sale and
consumption of electricity.
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
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 issued by the High Court. The law is
anti-judgment validation directly overruling the judgment which was upheld by
Section 11 is unconstitutional. He contended that after Pathak's case [infra],
the legislature has no power to amend the law.
K.V. Vishwanathan, learned counsel for some other appellants contended that the
effect of Section 11 would be that any judgment to be rendered by the Court in
future would be nullified and in effect would tantamount to legislative
declaration prohibiting judicial review, a basic feature of the Constitution.
In other words, the legislature adjudicates upon the disputes and gives a
legislative declaration of the law which is impermissible under the scheme of
the distribution of the sovereign powers between the legislature, the executive
and the judiciary.
T.L. Vishwanatha Iyer, learned senior counsel for the State contended that the
language employed and the title of the Act are not conclusive. Legislature
derives power from Entry 53 to make the Act. It is law on sale or consumption
of electricity. In Chakolas case [supra] the Division Bench of the High Court
declared that impost is compulsory exaction for the benefits to the State and
had declared that the executive was not competent to issue the predecessor
Order under the Essential Articles [Control] Act. Section 3 thereof had not
given express power to the Government to levy and collect excise duty.
Consequently, the levy was declared ultra vires. The legislature acted thereon
and enacted the Act. Though the words" sale or consumption" of
electricity have not expressly been used in the Act and repeated as excise duty
on supply of electricity duty, being in the nature of a tax impost and being a
compulsory exaction for benefits to the State, it is a tax.
legislature, therefore, enacted law under Entry 53 of List II of the 7th
is no hiatus between supply and consumption of electricity. As soon as the
electrical energy passes off from the meter of the consumer, electricity is
the moment of consumption it becomes sale. It is, therefore, in substance a tax
on consumption and sale of electricity. He further contended that the
legislature having competence to enact the law, equally has power to enact
prospectively and retrospectively. The foundation that it is a duty levied
under the Order, as held in Chakolas 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
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
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.
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 tax went to the credit of the public exchequer except 1% in
the form of collection charges which goes to the account of KSEB. Instead of
granting refund to the appellants the State retrospectively enacted the law.
The validation Act merely intended to retain the collection already made not
only from the appellants but also from every other consumer.
validation was made to avoid cumbersome process of refund and recollection.
There is no embargo on the exercise of the power of judicial review either by
this Court or the High Court.
primary question, therefore, is: whether the impugned Act enacted by the State
legislature is one under Entry 53 of the State List, viz., "Taxes on the
consumption or sale of electricity". Indisputably, the title of the Act as
well as the charging Section 3 employ the words 'duty on supply of electricity.
Under Article 246  of the Constitution, every State legislature has explicit
power to make law for that State with respect to the matters enumerated in List
II [State List of the Seventh Schedule to the Constitution. The State's power
to impose tax is derived from the Constitution. The Entries in the three Lists
of the Seventh Schedule are not power of legislation but merely fields of
legislation. The power is derived under Article 246 and other related Articles
of the Constitution. The legislative fields are of enabling character designed
to define and delimit the respective areas of legislative competence of the
respective legislatures. There is neither implied restriction imposed on the
legislature nor is any duty prescribed to exercise that legislative power in a
particular manner. But the legislation must be subject to the limitations
prescribed under the Constitution.
Mafatlal v. The Commissioner of Income- Tax, Bombay [(1955) 1 SCR 829 at
836-37], the controversy was whether the expression "capital gain"
used in the Income-tax Act, inserted by Section 12B of Income-tax Act, 1922 and
Government of India Act, 1935, includes "income" under Entry 54 of
list I [Union List]. A Constitution Bench of this Court had held that the
cardinal rule of interpretation is that the words should be read in their
ordinary, natural and grammatical meaning subject to this rider that in
construing the words in a constitutional enactment conferring legislative
power, the most liberal construction should be put 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.
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.
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.
M/s. Burmah Construction Co. v. The State of Orissa & Ors. [AIR 1962 SC 1320],
after this Court had decided in State of Orissa v. Oriental Paper Mills Ltd. [AIR 1962 SC 1320], after this Court had
decided in State of Orissa v. Oriental Paper Mills Ltd. [AIR 1961 SC 1438], the
Orissa Sales Tax Act, 1947 was amended and Section 14 restricting grant of
refund of tax inappropriately and illegally collected, was challenged. This
Court had held that "if the power to legislate in respect of tax
comprehends the power to legislate "in respect of refund of tax improperly
or illegally collected", imposition of restrictions on the exercise of the
right to claim refund will not be beyond the competence of the Legislature.
Granting refund of tax improperly or illegally collected and the restriction on
the exercise of that right are both ancillary or subsidiary matters relating to
the primary head of tax on sale of goods". The provisions of Section 14 of
the Act were, therefore, not held ultra vires the State Legislature.
Madurai District Central Co-operative Bank Ltd. v. The Third Income Tax
Officer, Madurai [AIR 1975 SC 2016], when the
annuity scheme was enacted in the Finance Act, competence of the Parliament in
that regard was questioned.
Court had held that Income-tax Act is a permanent statute. Finance Act passed
every year prescribes the rates at which the tax is to be charged under the
annuity is only one of the benefits for deduction of the income-tax in
calculation of the income chargeable to tax.
so interpreting, this Court had given wide interpretation and upheld the power
of the Parliament under Article 246 [11 read with Entry 82 of List I.
Hoechst Pharmaceuticals Ltd. & Anr. etc. v. State of Bihar & Ors.
[(1983) 3 SCR 130] relied on by Shri Venugopal, the question arose whether levy
of surcharge on sales-tax and prohibition from passing on the liability thereof
to purchasers was void in terms of the opening words of Article 246  of the
Constitution for being in conflict with the Drugs [Price Control] Order made
under Section 3 of the Essential Commodities Act. In interpreting the
respective legislative fields of the Parliament and the State legislature
(Concurrent List), with a view to subserve the power of the respective
legislatures to enact law, restrictive interpretation was adopted by a
three-Judge Bench of this Court. It, therefore, cannot be understood that in
respect of taxing statute, restictive interpretation would be put up.
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  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.
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.
District Board, Dehra Dun v. Damodar Dutt [ILR (1944) All. 611], the Allahabad
High Court, while considering the constitutionality of Professions Tax
Limitation Act, 1941 and Section 2 thereof, had held that the name given to a
tax did not matter. What had to be considered was the pith and substance of it.
The High Court had held that in pith and substance the impugned rax was one
which attracted the provisions of Section 2 of that Act.
ratio was upheld by this Court in Pandit Ram Narain v. State of U.P. & Ors.
[1956 SCR 664 at 673] and it was held that the title of the Act and the words
used therein were not conclusive but the pith and substance of the statute
needed to be looked into.
doctrine of pith and substance, though applied in determining the true
character of the statutes under List III [Concurrent List] of the respective
legislative topics of the State legislature and the Parliament, it was extended
for consideration of the true character of the legislation even under the same
legislative list. In all cases, therefore, the name given by the legislature in
the impugned enactment is not conclusive on the question of its competence to
make it. It is the pith and substance of the legislation which decides the
matter which needs to be decided with reference to the provisions of the
M. Patel v. Union of India & Ors. [AIR 1960 SC
4251, another Constitution Bench had held that in every case where the
legislative competence of the legislature in regard to a particular enactment
was challenged with reference to the entries in the various lists, it was
necessary to examine the pith and substance of the Act and if the matter came
substantially within an item in the Central List, it could not be deemed to
come within an entry in the Provincial list.
question, therefore, is: whether in pith and substance the Act is one imposing
tax on the sale or consumption of electrical energy supplied to the consumer?
It is true that in Northern India Caterers (India Ltd. v. Lt. Governor of Delhi [(1979) 1 SCR 557] and M/s. Gannon Dunkerley
& Co. & Ors. v. State of Rajasthan & Ors. [(1993) 1 SCC 364] this
Court had held that the expression tax on the sale or purchase of goods"
in Entry 54 of the State List included a tax on the transfer of property in
goods, whether as goods or in some other form] involved in supplying food 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
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 units through the meter put up in the factory. Continuity of supply and
consumption starts from the moment the electrical energy passes through the
meters and sale simultaneously takes place as soon as meter reading is
recorded. All the three steps or phases take place without any hiatus. It is
true that from the place of generating electricity, the electricity is supplied
to the sub-station installed at the units of the consumers through electrical
high-tension transformers and from there electricity is supplied to the meter.
But the moment electricity is supplied through the meter, consumption and sale
simultaneously take place. It is true that in the definitions given in the New Encyclopaedia
Britanica, Vol.4, p.842 cited before us, distinction between supply and
consumption is stated but adopting a pragmatic and realistic approach, we are
of the considered view that as soon as the electrical energy is supplied to the
consumers and is transmitted through the meter, consumption takes place
simultaneously With the supply. There is no hiatus in its operation.
Simultaneously sale also takes place. Charge will be quantified at a later date
as per the recorded meter reading or escaped metering, as the case may be. The
word `supply' used in the charging Section 3 should, therefore, receive liberal
interpretation to include sale or consumption of electricity as envisaged in
Entry 53 of the State List.
true that when water supplied by the municipality to the consumers through
their water mains, flows from the mains through the water meter and into the
pipes fitted into the house and from there water is supplied from tap fitted to
the pipes. Thus there is hiatus between supply and consumption. When water is
actually used there would be consumption though water supplied gets recorded
when water passes through the meter from the water mains. But the analogy
thereof to the supply, consumption and sale of electric energy is inappropriate
as it cannot be separately stored after the supply but before consumption or
sale thereof. However, water can, incidentally be stored or remain in pipe for
use and after tap is opened it is consumed. Even if it percolates it may be a
loss to the consumer. This operation thereof is inapt. Its analogy to
electricity is, therefore, inapt and inappropriate.
question then is: whether The Electricity Duty Act gets eclipsed with the
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
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' came up for consideration.
The ratio of the said case is that 'surcharge' includes an excess or additional
burden or amount of money charged in excess of the land revenue and, therefore,
it was held to be an additional land revenue. That ratio was approved by this
Court in Sarojini Tea Co. (P) Ltd. v. Collector of Dibrugarh [(1992) 2 SCC
156]. Considering, in extenso, this Court had held in paragraph 16 that
"the expression 'surcharge' in the context of taxation means an additional
imposition which results in enhancement of the tax and the nature of the
additional imposition is the same as the tax on which it is imposed as
surcharge. The nature of such imposition is the same, viz., land revenue on
which it is a surcharge". It would thus be settled law that surcharge is
additional duty or tax imposed in addition to the original levy, on the same
A.B. Abdul Kadir & Ors. etc. v. State of Kerala [(1976) 2 SCR 690], the
Finance Act, 1950 had extended the Central Excise and Salt Acts 1944 to Part B
State of Travancore Cochin and repealed the Cochin Tobacco Act, 1909 and the
Tobacco Act [1 of 1087]. Thereafter, a system of licensing was introduced by
which the licensees were required to pay a specified fee in respect of tobacco
imported into the State. The appellants thereafter had challenged in the High
Court the collection of the licence fee for the period. The Act was declared
ultra vires and a refund was ordered to be made of the fees so collected. When
the appellants thereafter filed a writ petition claiming refund pending writ
petitions Kerala Luxury Tax on Tobacco [Validation] Acts 1964 was enacted by
the State legislature to provide for the levy of luxury tax on tobacco and
validated the levy and collection of the fees for licences within the specified
period which had received the assent of the President. When the validity
thereof was challenged on the anvil of Article 304 (b) of the Constitution,
this Court had held that the levy was sought to be made as a luxury tax as a
different character on the production and manufacture of the tobacco was
justified and that, therefore it was within, the legislative competence to
enact the law refusing refund of the collections illegally collected.
of duty goes into the public revenue. It is an impost, a compulsory exaction
for the benefit to the coffers of the public exchequer and, therefore, it is a
tax. 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  of
next question is: whether the validation provision contained in Section 11 is
constitutional? Section ll of the Act reads thus:
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
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 be, and deemed always to have been, done or taken in
accordance with this Ordinance;
suit or other proceeding shall be maintained or continued in any court for the
refund of any such surcharge, and (c) no court shall enforce a decree or order
directing the refund of any such surcharge.
For the removal of doubts, it is hereby declared that nothing in sub-section
 shall be considered as preventing any person from claiming refund of any
surcharge already paid in excess of the amount due from him under the order
referred to in sub-section ." A reading thereof clearly indicates that
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 Area] 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 the [Act 22 of 1984]. Accordingly
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 be, and deemed always to have been, done or taken in
accordance with the Act. Sub section  removes the doubts declaring that
nothing in sub-section [l] shall be considered as preventing any person from
claiming refund of any surcharge already paid in excess of the amount due from
him under the order referred to in sub-section [l].
seen that the Act does not limit to the period covered under Section 11 of the
Validation Act, Section 3, with a non obstante clause provides that
notwithstanding anything to the contrary contained in any agreement entered
into with any consumer or the conditions of service agreed by the Board, the
Government may by notified order provide for the levy and collection of
surcharge on all HT and EHT supplies of energy made by the Board whether
directly or through licensees at such rates not exceeding ; paise per unit as
may be specified therein etc. It is an Act to remain operational in future.
Admittedly, the Act is a permanent statute operating prospectively and
retrospectively validating past transactions as if they have been made, entered
into or transacted under the Act.
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.
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
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. The primary question is whether the legislature
has trespassed and trenched into the preserve of the basic feature of judicial
review, The principle of power of validation vested in the legislature is no
longer res integral. A Constitution Bench of this Court in Shri Prithvi Cotton
Mills Ltd. 8 Anr. v. Broach Borough Municipality & Ors. [(1970) 1 SCR 388] which
is an erudite leading judgment on this topic, laid by an unanimous Constitution
Bench of five Judges that Section 17 of the Bombay Municipal Boroughs Act, 1925
empowers the municipality to levy 'rate on building or lands or both situate
within the municipality. The Rules made under the Act applied the rates on the
percentage basis on the capital value of lands and buildings. In Patel Gordhandas
Hargovindas v. Municipal Commissioner, Ahmedabad [(1964) 2 SCR 608] this Court
had held that the term 'rate' must be given the special meaning it had acquired
in English law and must be confined to an impost on the basis of the annual
letting value; it could not be validly levied on the basis of capital value
though capital value could be used for the purpose of working out the annual
letting value. Thereafter, Gujarat legislature amended the Act and enacted
Gujarat Imposition of Tax by Municipalities [Validation] Act, 1963.
3 thereof which validated past assessments and collections an rate, on lands
and buildings on the basis of capital value or a percentage of capital value,
was declared valid, despite any judgment of a court or Tribunal to the
contrary. Future assessment and collection on the basis of capital value for
the period from and after the Validation Act, was authorized. Section 99 was
enacted in the Gujarat Municipalities Act to provide for the levy of a tax on
lands and buildings "to be based on the annual letting value or the capital
value or a percentage of capital value of the buildings or lands or both".
The same was questioned and the High Court dismissed the writ petition. On
appeals when the constitutionality thereof was challenged, this Court observed
a legislature sets out to validate a tax declared by a court to be Illegally
collected under an ineffective or an invalid law, the cause for ineffectiveness
or invalidity must be removed before validation can be said to take place
effectively. The most important condition, of course, is that the legislature
must 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.
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. Sometimes the legislature gives its own meaning and
interpretation of the law under which the tax was collected and by legislative
fiat makes the new meaning binding upon courts. The legislature may follow any
one method or all of them and while it does so it may neutralise the effect of
the earlier decision of the court which becomes ineffective after the change of
method is adopted it must be within the competence of the legislature and legal
and adequate to attain the object of validation.
legislature has the power over the subject-matter and competence to make a
valid law, it can at any time make such a valid law and make it retrospectively
so as to bind even past transactions.
validity of a Validating law, therefore, depends upon whether the legislature possesses
the competence which it claims over the subject-matter and whether in making
the validation it recovers the defect which the courts had found in the
existing law and makes adequate provisions in the Validating law for a valid
imposition of the tax".
Court upheld the constitutionality of the impugned enactment.
validity of the validating Act is to be judged by the following tests: [i]
whether the legislation enacting the validating Act has competence over the
by validation, the legislature has removed the-defect which the court had found
in the previous law [iii] whether the validating law is inconsistent with the
provisions of Chapter III of the Constitution. If tests are satisfied, the Act
can confer jurisdiction upon the Court with retrospective effect and validate
the past transactions which were declared to be unconstitutional. The
legislature cannot assume power of adjudicating a case by virtue of its
enactment of the law without leaving it to the judiciary to decide it with
reference to the law in force. The legislature also is incompetent to overrule
the decision of a Court without properly removing the base on which the
judgment is founded.
State of Orissa v. Oriental Paper Mills Ltd [AIR 1961 SC 1438]. the Oriental
Paper Mills assessee had successfully challenged the assessability of the sales
the judgment was delivered by this Court in State of Bombay v. United Motors
India Ltd [1953 SCR 1063], the State legislature enacted Section 14A and incorporated
by way of an amendment Act 25 of 1958 to the Orissa Sales Tax Act.
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  (f) of
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 that the State was
not entitled to recover any tax. Under the Validation Act 8 of 1968 the
imposition of the same levy which the State had unsuccessfully attempted to
levy earlier was validated. After the enactment of the Bill, previous assent of
the President was obtained removing the defect pointed out earlier. In para 6,
it was unanimously held by the Bench that the legislature cured the
constitutional vice from which the Act of 1959 suffered, by obtaining the
requisite sanction of the President and thus armed, it imposed as new tax
though with retrospective effect. The imposition of the taxes or validation of
the action under void law is not the function of the judiciary and therefore,
by taking these steps the legislature cannot be accused of trespassing on the
preserve of the judiciary.
have to be vigilant to ensure that non-compliance of power so thoughtfully
conceived by our Constitution is not allowed to be upset but the concern for
safeguarding the judicial power does not justify conjuring up trespassers for
invalidating laws. If the vice from which an enactment suffered is cured by due
compliance with the legal or constitutional requirements, the legislature has
the competence to validate the enactment and such validation does not
constitute an encroachment on the function of the judiciary. It was held at
page 218 that the legislature can pass laws with retrospective effect
nullifying the mandamus issued by the Court.
Tirath Ram Rajindra Nath Lucknow v. State of U.P. & Anr. [(1973) 3 SCC
585], Section 3 of the U.P. Sales Tax Acts 1948 imposes multi-point sales tax
on the sale of certain goods. Section 3-A empowered the Government to levy
sales tax on some of the goods "at such single-point in the series of
sales by successive dealers" as may be prescribed by the State Government.
Rules had been made whereunder State got power to impose sales tax on the total
turnover of the sale of bricks at the point of sale by the manufacturer. The
U.P. Sales Tax Act (Amendment and Validation) Ordinance, 1970 was amended
substituting such single point of sale as the State Government may specify.
v. U.P. [26 STC 270], the Allahabad High Court had held that before attracting
Section 3-A, the goods must have been the subject matter of multiple sales. The
notification did not fall within the purview of Section 3-A as bricks were sold
directly 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.
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 Panchayat passed a
resolution to collect permission fee from the respondent on the capital value
of the factory building at a specified rate. They also imposed house tax and
demanded payment for the period 1966 to 1969. The writ petition was filed
challenging the power to levy house tax and other fees. The A.P. High Court
issued a mandamus prohibiting the Gram Panchayat from collecting the amounts.
The High Court had held that as per the definition of the house under the Act,
the factory and other building was not a house. Against the judgment an appeal
was filed in this Court. Pending appeal, the legislature amended the definition
of "house" with retrospective effect so as to eliminate the
impediment on which the High Court rested its judgment. It also made validation
of the actions by Section 4 of the Validation Act with retrospective effect. On
that basis when it was contended in this Court for the respondent that the
legislature had overruled or set aside the judgment of the High Court and it
was constitutionally g impermissible, a Bench of three Judges had held that the
State legislature had not overruled or set aside the judgment of the High
Court. It had amended the definition of the house by substituting a new section
in the place of an old one, providing a new definition which had retrospective
effect, notwithstanding anything contained in any judgment, decree or order of
the court or other authority. In other words, this Court had held that the
legislature removed the basis of the decision rendered by the High Court so
that the decision could not have been given in the altered circumstances.
v. The State of M.P. [(1976) 3 SCR 237], the State Government amended its
memorandum to compulsorily retire a government servant on attaining the
superannuation of 58 years. However, it empowered the Government to retire a
government servant on his attaining the age of 55 years.
statutory rules under proviso to Art.309 of the Constitution were framed.
However, the clause to retire a government servant on attaining the age of 55
years was not incorporated, though the superannuation was retained at 58 years.
The appellant, judicial officer was compulsorily retired on his completion of
55 years. He successfully challenged the order of retirement which was upheld
by this Court. A Constitution Bench of this Court had held that the distinction
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.
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 unauthorised
occupant by summary procedure the constitutionality thereof was challenged and
upheld. The Act was subsequently amended in 1958 with retrospective operation
from September 16, 1958. Thereunder only one procedure for eviction was
available. It was contended to be a legislative encroachment of judicial power.
A Bench of three Judges held that the legislature possessed competence over the
subject matter and the Validation Act could remove the defect which the court
had found in the previous case.
not the legislative encroachment of judicial power but one of removing the
defect which the Court had pointed out with a deeming date.
A.B. Abdul Kadir & ors. etc.v. State of Kerala [(1976) 2 SCR 690] in the previous decision rendered in A.B. Abdulkadir
& Ors v. The State of Kerala & Anr. [(1962) Supp.2 SCR 741], the Cochin
Tobacco Act and the Rules made thereunder and the similar Acts were in
substance corresponding to the Central Excise and Salt Act, 1944. The Cochin
Tobacco Act stood repealed on April 1, 1950.
there was no law operating to pay licence fee.
Rules made in the 1950 and 1951 and the repealed Act were held void ab initio.
Thereafter, Kerala State legislature enacted Kerela Luxury Tax on Tobacco
[Validation] Act, 1964. Section 5 thereof validated the levy and demand
changing the character of the levy from fee to the tax. When the
constitutionality of the Validation Act was challenged, a three-Judge Bench had
held that the State Legislature had competence to enact luxury tax on tobacco
and to recover the tax in the shape of licence fee for vend and stocking of
tobacco. The legislature, therefore, has competence to convert the of character
of collection "from impermissible excise duty into permissible luxury
tax" which would not render the Act unconstitutional. Only conditions are
that the levy should be of a nature which can answer to the description of
luxury tax" and the State legislature should be competent to enact the law
for recovery of luxury tax. It was held that both the conditions were
the impugned enactment was upheld as valid.
Act can also be provided for retrospective operation of the said provision
validating the law which had been found to be invalid.
Central Coal Fields Ltd. v. Bhubaneswar Singh [(1984) 4 SCC 429] this Court had
declared that the sale price of the stock 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
defect which has been pointed out by the Court is removed with retrospective
the invalidity or lack of validity pointed out by the Court is removed by
subsequent enactment with retrospective effect. the binding nature of the
judgment of the Court cannot be ignored.
is the view taken in Udai Ram Sharma v. Union of India [(1968) 3 SCR 41], Krishan
Chandra Gangopadhyaya v. Union of India [(1975) Supp. SCR 151], Hindustan Gum
and Chemicals Ltd. v. State of Haryana
[(1985) Supp. 2 SCR 630], UtkaL Contractors and Joinery [[P] Ltd v. State of Orissa [(1988) 1 SCR 314] and approved by
this Court in Bhubaneshwar Singh's case [supra].
State of Orissa & Anr. v. Gopal Chandra Rath
& Ors.- [(1995) 6 SCC 242] in the context of service law, validating
statute with retrospective effect was affirmed by this Court.
Sabha, Chhindwara etc. v. The Central provinces syndicate Ltd. & Anr. etc. [(1970) 3 SCR 745], this Court in its
earlier decision in The Amalgamated Coalfields Ltd. v. The Janapada Sabha, Chhindwara
[(1963) Supp. 1 SCR 172] had held that the expression "first
imposition" occurred in Section 51  of the C.P. and Berar Local
Government Act, 4 of 1920. The imposition of levy at the rate of 9 paise per tonne
was declared illegal.
was issued restraining the Government to recover the same. The Madhya Pradesh
Act, 1964 was made and Section 3 thereof validated the invalid imposition
assessment and collection of cess. A Constitution Bench had held that Act 18 of
1964 is a piece of clumsy drafting. By a fiction, it deemed the Act of 1920 and
the Rules framed thereunder to have been amended without disclosing the text or
even the nature of the amendment; nor was there any indication that the invalid
notification must be deemed to have been issued validly under Section 51  of
the 1920 Act without the sanction of the local Government. It was, therefore,
held that it is plain that the legislature attempted to overrule or set aside
the decision of this Court. It was open to the legislature under the
Constitutional scheme within certain limits, to amend the provisions of the Act
retrospectively and to declare what the law shall be deemed to have been.
was not open to the legislature to say that the judgment of the Court properly
constituted and rendered, shall be deemed to be ineffective and "the
interpretation of the law shall be otherwise than as declared by the Court.
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  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 collected; despite the orders of this Court as well as of the
Gujarat High Court, this Court had held that the legislature had no power to
disobey or disregard the decision given by the courts. Section 152-A  was
State of Tamil Nadu & Anr. v. M. Rayappa Counder
[AIR 1971 SC 231] in a writ, the Madras High Court had held that the State had
no power to reassess the escaped turnover under the Entertainment Tax Act,
1939. In 1966, Amendment Act containing a validating provision was introduced
by Section 7 thereof. This Court had held that the said section did not change
the law retrospectively. It attempted to validate invalid assessments and to
overrule the decision of the High Court. Section 7 was, therefore, held
Mohan Pathak v. Union of India & Ors. etc. [(1978) 3
SCR 334], on the basis of a settlement, bonus became payable by the LIC to its
Class III and Class IV employees. In a writ, a single Judge of the Calcutta
High Court issued mandamus directing payment of bonus as provided in the
settlement. During the pendency of Letter Patent Appeal, LIC [Modification of
Settlement] Act, 1976 was enacted denying bonus payable to the employees. The
appeal was withdrawn. The validity of 1976 Act was challenged in this Court
under Article 32 of the Constitution. A Bench of seven Judges had held that the
Parliament was not aware of the mandamus issued by the Court and it was
declared that the 1976 Act was void and writ of mandamus was issued to obey the
mandamus by implementing or enforcing the provisions of that Act and directed
payment of bonus in terms of the settlement. It was pointed out that there was
no reference to the judgment of the High Court in the statement of objects and
reasons, nor any non obstante clause referring to the judgment of the Court was
made in Section 3 of the Act Attention of the Parliament was not drawn to the
mandamus issued by the High Court. When the mandamus issued by the High Court
became final, the 1976 Act was held invalid. Shri R.F. Nariman laid special
emphasis on the observations of learned Chief Justice Beg who in a separate
judgment had pointed out that the basis of the mandamus issued by the Court
could not be taken sway by indirect fashion as observed at page 743, C to F.
From the observations made by Bhagwati, J. per majority, it is clear that this
Court did not intend to lay down 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.
notice was issued on March
3, 1978 by the LIC to
the workmen under Section 19  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 lines was
made in 1957 Order adding a new clause in sub-section  of Section 11 of the
LIC Act. All of them came to be challenged by filing a writ petition under
Article 226 of the Constitution which was allowed by the High Court. Per
majority, this Court had held in The Life Insurance Corporation of India v. D.J. Bahadur & Ors.[(1981) 2
SCR 1083] that the entire attempt was to avoid compliance of the mandamus
issued by the Calcutta High Court and, therefore, it was declared invalid. It
directed the LIC to give effect to the terms of the settlement of 1974 relating
to bonus until superseded by a fresh settlement and industrial award or
the LIC [Amendment] Act, 1981 was enacted.
 of Section 48, [2A], [2B] and [2C] were added providing regulation by the
other provisions in respect of terms and conditions of service of the employees
w.e.f. January 31, 1981. Sub section [2B] empowered the LIC
to make rules under clause (cc) of sub-section [23 to include power to give
retrospective effect to such rules and to amend by way of addition, variation
or repeal, the regulations of the other provisions contained in sub-section
[2A] with retrospective effect but not from June 20, 1979.
[2C] provided validating clause with usual language. The same was challenged
under Article 32 of the Constitution and this Court understood in that
perspective it in A.V. Nachane & Anr. v. Union of India & Anr. [(1982) 2 SCR 246] while upholding the
validation with effect from the date the Amendment had come into force,
declared the retrospective legislation as unconstitutional holding that the
rules sought to abrogate the terms of 1974 settlement relating to bonus which
would be complied with pursuant to the mandamus issued by the High Court. Rule
3 sought to supersede the terms of 1974 settlement which could not make the
writ petition issued by the Court nugatory in view of the decision in M.M. Pathak's
case [supra] and the Amendment did not have the effect of nullifying the writ
of mandamus issued by the Calcutta High Court and in The directions in Bahadur's
case did not stand neutralised.
In D. Cawasji
& Co., Mysore v. State of Mysore & Anr [(1984) Supp. SCC 490] the High
Court in writ filed by the appellant had held that the State Government was
devoid of power under Section 19 of the Sales Tax Act to collect sales tax 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.
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.
Cauvery Water Disputes Tribunal [(1993) Supp. 1 SCC 96] the Inter-State Water
Disputes Tribunal constituted under Inter-State Water Disputes Act, 1956 under
Article 262 directed the Karnataka State by an interim order to release water
to Tamil Nadu. The Governor passed Karnataka Cauvery Basin Irrigation
Protection Ordinance, 1991 nullifying the Tribunal's order. On a reference, a
Constitution Bench had held that by Article 262 of the Constitution, the power of
this Court under Article 131 and all other powers had been taken away and
vested in the Tribunal. The Tribunal's order was binding on the disputant
States. The Ordinance interfered with the obligatory process of the Tribunal.
it amounted to interference with the judicial power of the State vested in the
Tribunal. It ran counter to the binding decisions of the Court regarding the
Tribunal's power to grant interim relief. Accordingly, it was declared
unconstitutional. It may be pointed out at this stage that this decision is on
the anvil of constitutional operation of the special Tribunal constituted
pursuant to the directions issued under the Inter-State Water Disputes Act
which itself was made under the Constitution, conferring exclusive power on the
Tribunal to adjudicate inter-State water disputes.
& Ors. v. State of Mysore [(1995) 4 SCC 16] the controversy
related to Karnataka State Civil Services [Regulation of Promotion, Pay and
Pension] Act, 1973. A Division Bench of the High Court allowed the writ
petitions and directed collection of the pay, posts, seniority and promotion
with all consequential benefits of par with their juniors. The Act was made
denying financial benefits as directed by the Division Bench which became final.
They were challenged under Article 32 and this Court held that a writ of
mandamus or directions which had become final could not be nullified empowering
the State to review such judgments and orders. Therefore, all the provisions of
the impugned Act were held ultra vires the powers of the State legislature.
resume of the above decisions the following principles would emerge:
The adjudication of the rights of the parties is the essential judicial
function. Legislature has to lay down the norms of conduct or rules which will
govern the parties and the transaction and require the court to give effect to
The Constitution delineated delicate balance in the exercise of the sovereign
power by the Legislature, Executive and Judiciary,
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.
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;
its anxiety to safeguard judicial power, it is unnecessary to be overjealous
and conjure up incursion into the judicial preserve invalidating the valid law
The Court, therefore, need to carefully scan the law to find out: (a) whether
the vice pointed out by the Court and invalidity suffered by previous law is
cured complying with the legal and constitutional requirements; (b) whether the
Legislature has competence to validate the law; (c) whether such validation is
consistent with the rights guaranteed in Part III of the Constitution.
The Court does not have the power to validate an invalid law or to legalise
impost of tax illegally made enact the law with retrospective effect and authorise
its agencies to levy and collect the tax on that basis, make the imposition of
levy collected and recovery of the tax made valid, notwithstanding the
declaration by the Court or the direction given for recovery thereof.
The consistent thread that runs through all the decisions of this Court is that
the legislature cannot directly overrule the decision or make a direction as
not binding on it but has power to make the decision ineffective by removing
the base on which the decision was rendered, consistent with the law of the
Constitution and the legislature must have competence to do the same.
from these perspectives, the question is: whether Section 11 can answer the
tests laid down hereinbefore. It is seen that the duty was collected under an
order made in exercise of Section 3 of the Essential Articles Act and it was
held to be not a tax but a duty for the benefit of KSEB. That duty being a
compulsory exaction for the benefit of public exchequer is a tax. Duty on
supply of electricity was declared to be additional burden and a levy within
Entries 26 and 27 of List II, subject to Entry 33 of List III [Concurrent
List]. Duty is an additional burden and partakes the character of a tax. Entry
53 of List II [State List] empowers the State Legislature to impose tax on
consumption or sale of electricity. It is, therefore, a compulsory exaction for
the benefit of the Revenue.
it is an additional tax in the form of a duty under the Act. The vice pointed
out in Chakolas case has been removed under the Act. Consequently, Section 11
validated the invalidity pointed out in Chakolas case removing the base. In the
altered situation, the High Court would not have s rendered Chakolas case under
the Act. It has made the writ issued in Chakolas case ineffective.
of refunding the duty illegally collected under invalid law, Section 11
validated the illegal collections and directed the liability of the past
transactions as valid under the Act and also fastened liability on the
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.
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 To 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 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
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.
appeals are accordingly dismissed, but in the circumstances without costs.