Comorin
Match Industries (Pvt.) Ltd. Vs. State of Tamil Nadu [1996] INSC 551 (16 April 1996)
Sen,
S.C. (J) Sen, S.C. (J) Singh N.P. (J) Sen, J.
CITATION:
1996 AIR 1916 1996 SCC (4) 281 JT 1996 (5) 167 1996 SCALE (3)538
ACT:
HEAD NOTE:
(With
Civil Appeal No. 2207 of 1982)
The
appellant is a manufacturer of safety matches.
During
the period relevant For the assessment years 1957-58 to 1965-66, the appellant
sold matches in the course of inter-State trade and commerce for which sales
tax was charged under the Central Sales Tax Act. The assessment orders were
challenged by the petitioner by filing writ petition before the High Court. The
ground taken was that Central Sales Tax was levied on turnover which included
excise duty. No Central Sales Tax could be levied on excise duty. The
provisions of subsections (2), (2A) and (5) of Section 8 of the Central Sales
Tax Act were ultra vires the Constitution of India. Claims for refund of the
tax collected by the Sales Tax Authority were also made. Several other similar
writ petitions were heard by the High Court along with the appellant's case.
The High Court by the judgment dated 30th January, 1968 allowed the writ
petitions in the case of Larsen and Toubro v. Joint Commercial Tax Officer,
(1967) 20 STC 150. Following that decision, the High Court allowed the writ
petitions filed by the appellant and the other writ petitioners. The Sales Tax
Authority did not prefer any appeal in the case of the appellant, but went up
in appeal in another case (The State of Madras v. N.K. Nataraja Mudaliar, AIR
1969 SC 147) in which this Court held that the provisions of sub-sections (2),
(2A) and (5) of Section 8 of the Central Sales Tax Act were valid. Is, however,
held that tax on excise duty was illegal and affirmed the decision of the High
Court on this point.
The
case of the appellant is that even after the judgment of the Madras High Court.
the Commercial Tax Officer did not refund the amount of tax illegally collected
even though specific direction had been given by the High Court to that effect.
The
position after the decision of this Court in the case of The State of Madras v.
N.K. Nataraja Mudaliar, (supra) was that levy of sales tax could not be said to
be invalid because provisions of sub-sections (2), (2A) and (5) of Section 8 of
the Central Sales Tax Act were ultra vires the Constitution of India. In
disposing of the appeal, Shah, J. (as His Lordship then was) directed:
"The
appeal will be allowed and the order passed by the High Court declaring the
provisions of Sections 8(2), 8(2A) and 8(5) ultra vires must be set aside.
The
petition out of which this appeal arises was one of 8 group of petitions filed
before the High Court. Against orders passed in favour of the other assessees
the State has not preferred appeals.
The
amount involved in the claim is small The State apparently has approached this
Court with a view to obtain a final determination of the important question
which was raised in the petitions filed before the High Court. We therefore
direct that there will be no order as to costs in this Court and in the High
Court." The other reason for which the assessments were set aside was
inclusion of excise duty in the computation of 'turnover'. There was a
controversy as to how the turnover under the Central Sales Tax Act should be
computed. Under the Madras General Sales Tax Act, 1959 and the rules, as it
stood at the material time, provisions had been made for deduction of excise
duty in the computation of chargeable turnover. Madras High Court held that the
quantum of turnover for the purpose of levy of Central Sales Tax had to be made
in the same manner by excluding the excise duty paid on the goods sold. In the
case of State of Madras v. N.K Nataraja Mudaliar, (supra), this Court held:-
"If under the Madras General Sales Tax Act in computing the turnover the
excise duty is not liable to be included and by virtue of section 9(1) of the
Central Sales Tax Act has to be levied in the same manner as the Madras General
Sales Tax Act, the excise duty will not be liable to be included in the
turnover . . . We are of the view that in the matter of determining the taxable
turnover the same rules will apply by virtue of Section 9(1) of the Central
Sales Tax Act, whether the tax is to be levied under the Central Sales Tax Act
or the General Sales Tax Act." The Central Sales Tax Amendment Act, 1969
brought about a number of changes in the Central Sales Tax Act, 1956. The
definition of 'turnover' in Section 2(j) was modified and the wording of
Section 9 was radically altered. The new provisions were deemed always to have
been substituted. This amendment was effected with a view to put an end to the
controversy whether 'turnover' should be computed in accordance with the
provisions of the State Sales Tax law or not. This amendment was necessary to
get over the view expressed by this Court in N.K. Nataraja Mudaliar's case that
the Central Sales Tax had to be levied in the same manner as provided in the
Madras General Sales Tax Act When the Central Sales Tax Act was examined by the
Madras High Court in the case of Larsen and Toubro and this Court in the case
of N.K. NataraJa Mudaliar, 'turnover' had been defined by the Central Sales Tax
Act in Section 2(j) to mean "the aggregate of sale prices received and
receivable by him in respect of sales of any goods in the course of inter-State
trade or commerce made during Any prescribed period and determined in the
prescribed manner". By Section 2 of the Central Sales Tax Amendment Act,
1979 (28 of 1969), the words 'and determined in a prescribed manner' were
substituted by the words 'and determined in accordance with the provisions of
this Act and he rules made there under'.
This
amendment was given effect with retrospective effect from the date on which the
Central Sales Tax Act ame into force. In other words, the very basis of the law
on which the judgment in N.K. Nataraja Mudaliar's was pronounced was removed
from the statute book .
The
scope of the validating provision of the Amending Act of 1969 must be viewed in
the background of these facts The amending Act, after amending the aforesaid
provisions of the Central Sales Tax Act and various other provisions, went on
to validate all assessments, reassessments, levy or collection of any tax made
'notwithstanding anything contained in the judgment, decision, decree or order
of any court or other authority to the contrary'. The result of the various
provisions of the Amending Act and in particular the validating provision was
to change the law with retrospective effect and to impart validity to all assessments
made under the Central Sales Tax Act which had been struck down by the judgment
in the case of Larsen and Toubro and all other orders passed pursuant to that
judgment.
Mr. Vaidyanathan
has strenuously contended that the legislature cannot nullify any judgment of
the court. In the instant case, the assessment made under the Central Sales Tax
Act had been quashed by the Madras High Court. This was one of a large number
of writ petitions which were heard by the Madras High Court. Although in the
case of N.K. Nataraja Mudaliar (supra), an appeal was preferred to the Supreme
Court and the judgment was reversed, in the case of the appellant the judgment
was not questioned and was allowed to stand. Therefore, it is in full force and
has to be respected as valid and binding. This judgment could be reversed by
the Supreme Court, but could not be nullified by legislature by an Act. In
support of this contention he has relied on a judgment of this Court in the
case of Madan Mohan Pathak v. Union of India & Ors., (1978) 3 SCR 334, In
that case, a dispute between workers' union and the Life Insurance Corporation
was settled by an agreement for payment of cash bonus at the rate of 15% of
gross wages. The settlement was valid for four years from 1st April, 1973 to 31st March, 1977. There was some dispute about the implication of this
settlement and on 21st May, 1976 on a writ petition, the Calcutta High Court
passed an order recognizing the right of the employees to payment of bonus for
the year 1975-76 which had become payable along with the salary in April, 1976.
The Calcutta High Court ordered that it must be paid to the employees. On 29th
May, 1976 the Life Insurance Corporation (Modification of Settlement) Act, 1976
was passed by the Parliament denying the employees the right which had been
conferred by the settlement, approved by the Central Government, acted upon by
actual payment of bonus to the employees and finally recognized as a right
protected by Articles 19(1)(f) and 31(1) of the Constitution by a decision of
the Calcutta High Court on 21st May, 1976.
It was
noted in the judgment of Beg, C.J., that the Statement of Objects and Reasons
of the Act disclosed that the purpose of the Act was to undo the settlement
which had been arrived at between the Corporation and Class-III and Class-IV
employees on January 24 and January 26, 1974.
Beg, C.J., was of the view that it would, in any event, be unfair to adopt
legislative procedure to undo such a settlement which had become the basis of a
decision of a High Court.
Even
if legislation can remove-the basis of a decision it has to do it by an
alteration of general rights of a class but not by simply excluding two
specific settlements between the Corporation and its employees from the purview
of the section 18 of the Industrial Disputes Act, 1947, which had been held to
be valid and enforceable by a High Court. Such Selective exclusion could also
offend Article 14." Strong reliance was placed by Mr. Vaidyansthan on the
following observation of Beg, C.J. :- "I find myself in complete agreement
with my learned brother Bhagwati that to give effect to the judgment of the
Calcutta High court is not the same thing as enforcing a right under Article 19
of the constitution becomes liked up with the enforceability of the Judgment.
Nevertheless,
the tow could be viewed as separable sets of rights.
If the
right conferred by the judgment independently is sought to be set aside,
section 3 of the Act, would in, my opinion, be invalid for trenching upon the
judicial power." Mr. Vaidyanathan has argued that whatever may be the
effect of the validation provision of Central Sales Tax Amendment Act of 1969,
it could not nullify the judgment pronounced by the Madras High Court whereby
the assessment order had been quashed.
Before
examining this argument of Mr. Vaidyanathan, the majority judgment in Madan
Mohan Pathak's case (supra) will have to be read and properly understood. The
Life Insurance Corporation (Modification of Settlement) Act, 19?6 was an Act to
alter the settlement which had been arrived at between the Corporation and its
class-III and Class-IV employees on 24th January, 1974 under the Industrial
Disputes Act, 1947 and which was in force upto 31st March, 1976. The Act did
not purport to change the law which formed the basis of the judgment of the
Calcutta High Court in any manner. The Act did not contain any clause that it
would be enforced notwithstanding anything contained in any judgment to the
contrary. The majority judgment. which was delivered by Justice Bhagwati, J.
(as His Lordship then was), highlighted this-aspect. Bhagwati,J. observed:-
"It is significant to note that there was no reference to the judgment of
the Calcutta High Court in the Statement of Objects and Reasons, nor any non-obstante
clause referring to a judgment of a court in section 3 of the impugned Act The
attention of Parliament does not appear to have beer drawn to the fact that the
Calcutta High Court had already issued a writ of mandamus commanding the Life
Insurance Corporation to pay the amount of bonus for the year 1st April, 1975
to 31st March, 1976. It appears that unfortunately the judgment of the Calcutta
High Court remained almost unnoticed and the impugned Act was passed in
ignorance of that judgment. Section 3 of the impugned Act provided that the
provisions of the Settlement in so far as they relate to payment of annual cash
bonus to Class III and Class IV employees shall not have any force or effect
and shall not be deemed to have had any force or effect from 1st April, 1975.
But the writ of mandamus issued by the Calcutta High Court directing the Life
Insurance Corporation to pay the amount of bonus for the year 1st April, 1975 to 31st March, 1976 remained untouched by the impugned Act. So far as the right
of Class III and Class IV employees to annual cash bonus for the year 1st April, 1975 to 31st March, 1976 was concerned, it became crystalized in the judgment and
thereafter they became entitled to enforce the writ of mandamus granted by the
judgment and not any right to annual cash bonus under the settlement. This
right under the judgment was not sought to be taken away by the impugned Act.
The judgment continued to subsist and the Life Insurance Corporation was bound
to pay annual cash bonus to Class III and Class IV employees for the year 1st April, 1975 to 31st March, 1976 in obedience to the writ of mandamus." After referring
to the decision of this Court in Shri Prithvi Cotton Mills Ltd. v. Broach
Borough Municipality, (1970) 1 SCR 388, Bhagwati, J. pointed out that in that
case validity of Gujarat Imposition of Taxes by Municipalities (Validation)
Act, 1963, altered the very basis of the law on which this Court's judgment in
Patel Gordhandas Hargovindas v. Municipal Commissioner, Ahmedabad, (1964) 2 SCR
608, was pronounced. Not only substantive provisions of the Act were altered
but Section 3 of the Validation Act provided that notwithstanding anything
contained in any judgment, decree or order of a court or tribunal or any other
authority, no tax assessed or purported to have been assessed by the
municipality on the basis of capital value of a building or land and imposed,
collected or recovered by the municipality at any timebefore the commencement
of the Validation Act shall be deemed to have invalidly assessed or imposed or
collected or recovered and the imposition or collection of the tax so assessed
shall be valid and shall be deemed to have always been valid and shall not be
called in question merely on the ground that the assessment of the tax on the
basis of capital value of the building or land was not authorized by law and
accordingly any tax so assessed before the commencement of the Validation Act
and leviable for a period prior to such commencement but not collected or
recovered before such commencement may be collected or recovered in accordance
with the relevant municipal law.
After
referring to the provisions of the Act, Bhagwati, J. observed:
"It
is difficult to see how this decision given in the context of a validating
statute can be of any help to the Life Insurance Corporation. Here, the
judgment given by the Calcutta High Court, which is relied upon by the
petitioners, is not a mere declaratory judgment holding an impost or tax to be
invalid, so that a validation statute can remove the defect pointed out by the
judgment amending the law with retrospective effect and validate such impost or
tax." Krishna Iyer and Desai, JJ. agreed with the
judgment of Justice Bhagwati, Chandrachud, Fazal Ali and Shinghal, JJ.
observed:-
"We agree with the conclusion of brother Bhagwati but prefer to rest our
decision on the ground that the impugned Act violates the provisions of Article
31(2) and is, therefore, void. We consider it unnecessary to express any
opinion on the effect of the judgment of the Calcutta High Court in W.P. 371 of
1976." Therefore, the majority view appears to be that if a judgment is
pronounced by a court and the effect of that judgment is sought to be taken
away by legislature by passing an Act without altering the statute on the basis
of which the judgment was pronounced, then such legislation will not nullify
the effect or force of the judgment pronounced by a court in any manner. The
statute being what it was, the judicial interpretation of the statute could not
be held to be erroneous by legislative imprimatur, but if the statute itself
was amended retrospectively so that the very basis of the judgment disappeared,
then it could not be said the judgment was still in force and will have to be
given effect to even though the legislature had specifically laid down that the
amended law will operate notwithstanding any judgment or decision or decree by
the court to the contrary. In fact, that is how the judgment of Shri Prithvi
Cotton Mills Ltd. understood and explained .
In the
instant case, after this Court's decision in N.K. Nataraja Mudaliar's case the
legislature has defined 'turnover' in a new manner and has also amended certain
other provisions of the Act which formed very basis of the Madras Judgments in
the case of Larsen Toubro and this Court's judgment in the case of N.K. Nataraja
Mudaliar.
Therefore,
we are unable to uphold the contention of Mr, Vaidyanathan that the Judgment of
the Madras High Court in the assessee's own case must be held to be in full
force in spite of the Amendment Act of 1969.
The
legislature ordinarily cannot reverse a decision of 8 court of law given in
exercise of judicial power. A settlement between the management and the
employees under the Industrial Disputes Act cannot be declared by the
legislature invalid and not enforceable even after a High Court had declared
the settlement as valid and binding between the parties. This is what was
sought to be done in Madan Mohan Pathak's case (supra) and this Court held that
it was not permissible But if a High Court quashes several assessment orders
interpreting a taxing statute in a certain certain manner and that
interpretation is by a subsequent judgment of the Supreme Court and the statute
itself is amended as e result of which the law on the basis of which the High
Court's judgment was given is drastically altered, in such a situation,' it is
permissible for the legislature, by a Validation Acts to declare the
assessments as valid and binding notwithstanding the judgment of the High Court
to the contrary. The principle to be applied in cases like this was stated by Hidayatullah,
C.J., in the case of Shri Prithvi Cotton Mills Ltd. v. Broach Borough
Municipality, (1970) 1 SCR 388:- "When a legislature sets out to validate
a tax declared by a court to be illegally collected under an ineffective or invalid
law, the cause for ineffectiveness or invalidity must be removed before
validation can be said to take place effectively. The most important condition
is that the legislature must possess the power to impose 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.' In Shri Prithvi Cotton Mill's case (supra),
the assessment years involved were 1961-62, 1962-63 and 1963-64.
Broach Borough Municipality imposed a purported rate on lands
and buildings at a certain percentage of the capital value. The assessment
lists were published and tax was imposed on the basis of capital value of the
property. A number of writ petitions were filed for quashing the assessments.
During the pendency of the writ petition, a Validation Act was passed which was
also challenged by amending the writ petition.
The
Validation Act was passed because of the decision of this Court in the case of
Patel Gordhandas Hargovindas v. The Municipal Commissioner, Ahmedabad, AIR 1963
SC 1742 = (1964) 2 SCR 608. In that case this Court struck down the municipal
tax levied as a percentage of the capital value of the property. The
assessments were declared ultra vires. The Validation Act of 1963 redefined
'rate' and converted the municipal tax as a 'rate' on lands and buildings. In
the case of Shri Prithvi Cotton Mills (supra), Hidayatullah, C.J., pointed out
that the legislature by legislative enactment retrospectively imposed the tax
by giving to the expression 'rate' a new meaning and "while doing so it
put out of action the effect of the decisions of the courts to the
contrary." This principle laid down in Shri Prithvi Cotton Mills, case has
not been overruled or doubted by the majority view in the case of Madan Mohan Pathak
(supra).
In the
instant case also. the High Court's judgment in Larsen and Toubro's case
(supra), in so far as it declared certain provisions of the Sales Tax Act ultra
vires, was reversed in the case of N.K. Nataraja mudaliar (supra).
The includibility
of the excise duty element in the turnover was validated by the statutory
amendments with retrospective effect. Therefore, the very basis on which the
assessments sere quashed in the case of Larsen and Toubro disappeared. The
legal basis of the decisions following the Larsen and Toubro's case including
that case also had disappeared by judicial pronouncements and legislative
enactment. The validating provision of the 1969 Act, to borrow the language of Hidayatullah,
C.J., has put out of action the effect of the decision of the High Court in
this case. The field is now occupied by the judgment of this Court in N.K. Natraja
Mudaliar's case (supra) and the provisions of the Central Sales Tax Act as
amended by the Act of 1969.
We
shall now examine some of the other cases which were cited on the question of
the scope of various Validation Acts passed by the legislature from time to
time. The case of A.V. Nachane v. Union of India (1982) 2 SCR 246, was a sequel
to the decision in the case of Madan Mohan Pathak, where this Court had
directed the Union of India and Life Insurance Corporation to forbear from
implementing the provisions of the Validation Act of 1976 and to pay annual
cash bonus for the years in question to Class III and Class IV employees in
accordance with the settlements. On March 31, 1978 the Corporation issued a notice
under Section 19(2) of the Industrial Disputes Act declaring its intention to
terminate the settlement on the expiry of two months from the date of the
notice. Another notice was issued to effect a change in the conditions of
service applicable to the workmen. The validity of the aforesaid two notices
and the consequential notification issued to nullify any further claim to
annual cash bonus was challenged by a writ petition in the Allahabad High
Court. The writ petition was allowed.
On
appeal this Court pointed out that the settlements of 1974 could only be superseded
by a fresh settlement. It was held that in view of the decision in Madan Mohan Pathak
case (supra). the amended rules, in so far as they sought to abrogate the terms
of 1974 settlement relating to bonus, could only operate prospectively. This
judgment does not advance the case of the appellant. It merely reiterates the
principles laid down in the case of (supra).
In the
case of Janpada Sabha, Chhindwar v. The Central Provinces Syndicate Ltd.,
(1970) 3 SCR 745, the question was raised as to the validity of enhancement of cess
on extraction of coal. The rate of cess originally was at 3 pies per ton This
was later enhanced to 4 pies per ton, in 1946 to 7 pies and in 1947 to 9 pies.
The enhanced levies were challenged in this Court. It was held that the increased
levies were not valid because previous sanction of the local Government had not
been obtained. The State Legislature thereafter passed Act in 1964 by which a
Board (Janapada Sabha) was constituted and cess was defined to mean a cess
imposed by the Board or its successor body.
Section
3(1) of the Act contained a validating provision that notwithstanding any
judgment of any court, cesses imposed, aisessed or collected by the Board shall
be deemed to be, and to have always been, validly imposed, assessed or
collected. When the case came to this Court, the inadequacy of the Amending Act
was pointed out in the following words:
"But
the Act in terms is limited in its application to the Independent Mining Local
Board, Chhindwara, and its successor body the Janapada Sabha, Chhindwara
constituted under Act 38 of 1948, and only in respect of the three
notifications specified in the Schedule.
Obviously
the Act limited to one local Board in its application and to certain specific
notifications cannot operate to repeal the clause insofar as it applied to
other Boards.
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 " This case does not lay down
that after a judgment has been pronounced on the basis of an Act, the
provisions of that Act cannot be amended so as to cure the defect pointed out
in the judgment retrospectively. The effect of the Amending Act of 1969 is not
to over rule a judgment passed by a court of law, which the legislature cannot
do What the legislature can do is to change the law on the basis of which the
judgment was pronounced retrospectively and thereby nullify the effect of the
judgment. When the legislature enacts that notwithstanding any judgment or
order the new law will operate retrospectively and the assessments shall be
deemed to be validly made on the basis of the amended law, the legislature is
not declaring the judgment to be void but rendering things or acts deemed to
have been done under amended statute valid notwithstanding any judgment or
order on the basis of the unamended law to the contrary. The validity to the
assessment orders which had been struck down by the Court, is imparted by the
Amending Act by changing the law retrospectively.
In the
case of P.S. Mohal v. Union of India (1984) 3 SCR 847, certain seniority rule
of Government of India came up for consideration. In the case of A.K. Subraman
v. Union of India (1975) 2 SCR 979, a direction had been given by this Court to
the government of India to amend and recise the seniority
list in a certain manner. The government instead of complying with this
direction framed Rules 2(ii) and 2(vi) by which a totally different rule of
seniority was framed. This was contrary to the direction given in A.K. Subraman's
case. This Court pointed out that A.K. Subraman's case was "not a mere
declaratory judgment holding an impost or tax to be invalid, so that a
validation statute can remove the defect pointed out by that judgment and
validate such impost or tax, But it is a decision giving effect to the right of
the Executive Engineers promoted form the grade of Assistant Engineers to have
their inter se seniority with Executive Engineers promoted form the grade of
Assistant Executive Engineers determined on the basis of rule of length of
continuous officiation by issue of a writ directing the Government of India to amend
and revise the seniority list in accordance with such rule of seniority."
Far from supporting the contention of the appellant, this decision completely
goes against the argument advanced by the appellant. This Court clearly laid
down that if an impost or tax is declared to be invalid, a validation statute
can remove the defect pointed out by the judgment and validate such impost or
tax. This is precisely what has happened in the instant case. The provisions of
the Act which were declared ultra vires in the case of Larsen and Toubro have
been held to be valid by this Court in the case of N.K. Nataraja Mudaliar
(supra) Includibility of excise duty in 'turnover' was also specifically
provided retrospectively by the amendments to the various provisions of the
Central Sales Tax Act by the Amendment Act of 1969 In the case of Bhubaneshwar
Singh v. Union of India, (1994) 6 SCC 77, a Bench of three judges to which on
of us (N.P. Singh,J) was party, held :
"The
Validating Acts are enacted to validate the action taken under the particular
enactments by removing the defect in the statute retrospectively because of
which the statute or the pert of it had been declared ultra vires. The exercise
of rendering ineffective the judgments or orders of competent courts by changing
the very basis by legislation is a well-known device of validating legislation.
Such validating legislation which removes the cause of the invalidity cannot be
considered to be an encroachment on judicial power. At the same time, any
action in exercise of the power under any enactment which has been declared to
be invalid by a court cannot be made valid by a Validating Act by merely saying
so unless the defect which has been pointed out by the court is removed with
retrospective effect. The validating legislation must remove the cause of
invalidity. Till such defect or the lack of authority pointed out by the court
under a statute is removed by the subsequent enactment with retrospective
effect, the binding nature of the judgment of the court cannot be Ignored."
In that case Bhubaneshwar Singh, the petitioner, was the owner of a coking coal
mine which had been taken over by the Central Government. He filed on
application under Article 226 of the Constitution alleging that the Custodian
had debited the expenses for raising coal to his account but had not given him
credit for the price of the coal raised which was lying in stock on the date
when the coal mine vested in the Central Government, The High Court allowed the
writ petition holding that the petitioner was the owner of the coal mine and
was entitled to credit for the stock of coal lying unsold as on 30.4 1972. A
direction was given to recast the account and make certain payments to the
petitioner. The Special Leave Petition against that judgment was dismissed by
this Court by a reasoned order. Whereafter, by the Amendment Act of 1976,
Coking Coal Mines (Nationalization) Act, 1972 was amended with retrospective
effect. The question before this Court was whether by introduction of
sub-section (2) to Section 10 of the Amending Act with retrospective effect,
the respondents were absolved of their liability and were exonerated from the
responsibility of complying with the direction given by the High Court in the
earlier writ petition filed on behalf of the writ petitioner. It was held that
the amendments which had been introduced retrospectively had taken away the
substratum of the claim made on behalf of the petitioner.
This
Court held since the Validation Act had cured the lacunae or defect pointed out
by the High Court in its earlier decision by introduction of sub-section (2) of
Section 10 with retrospective effect, it shall be deemed that compensation had
been paid even for the stock of unsold coke lying on the date prior to the
appointed day.
In the
case of S.R. Bhagwat v. State of Mysore, (1995) 6 SCC 16, a Bench of three
Judges held that a judgment which had attained finality and was binding upon
the State could not be overruled by any legislative measure. In that case by an
interpretation of the relevant service law the High Court had given certain
benefits to the writ petitioners by issuing a writ in the nature of mandamus.
That order of the High Court was sought to be nullified by enactment of a new
statute. The Court held that this was impermissible because the High Court had
not struck down any legislation which could be re-enacted after removing the
defect retrospectively. In other words, it was recognized by this Court that in
a case where provisions of a statute were declared inadequate or ultra vires,
it was open to legislature to remove the defect retrospectively so as to cure
the defect and make the statute valid.
What
has happened in this case is that a large number of writ petitions were
dismissed by the High Court on the basis of its decision in the case of Larsen
and Toubro as result of these decisions. a large number of assessment orders
under the Central Sales Tax Act were set aside. It was held in the case of
Larsen and Toubro certain provisions of the Act were ultra vires and in any event
excise duty could not be included in the assessee's turnover for the purpose of
levy of Central Sales Tax. The main basis of the High Court's judgments
disappeared when the Supreme Court held that the impugned provisions of the
Central Sales Tax Act which had been declared ultra vires by the Madras High
Court were validly enacted. The other defect which relates to the includibility
of excise duty in the 'turnover' of an assessee was cured retrospectively by
amending the provisions of the Central Sales Tax Act. The new provisions
introduced by the Amending Act were deemed to have come into effect
retrospectively Section 9 of the Amending Act declared all assessments made upto
9th January, 1969 valid and binding. There is nothing in the long line of decisions
cited by Mr. Vaidyanathan to suggest that the legislature could not take such a
step until and unless the judgments were specifically reversed by this Court.
This argument is not tenable having regard to the principles of law laid down
in the case of Shri Prithvi Cotton Mills (supra), which have been reiterated in
the subsequent judgments of this Court. This is not a case of passing a
legislation trying to nullify the interpretation of 19# given in the judgment
of a court of law. This is a case of changing the law itself on the basis of
which the judgment was pronounced holding that the assessment orders were
erroneous in law.
The
next contention of Mr. Vaidyanathan is that, even after the Act of 1969 was
passed, the High Court passed an order in the contempt application, directing
the State to pay the disputed amount to the appellant and that order was
carried out. The respondents could have but did not take shelter behind the
Amendment Act of 1969 The special leave petition filed against that order was
dismissed by this Court. Therefore, this is a case of res judicata and the
respondent could not nor raise this point at this stage by a fresh proceeding.
The
appellant has not been able to cite any decision to show that a direction given
in a contempt petition can operate as res judicata in a suit. In the contempt
petition the only issue was whether the court's order in the writ petition was
carried out or not. If the order of the writ court was not carried out, the
contempt court was bound to pass suitable orders to ensure obedience to the
order of the court. The question of correctness or validity of the judgment
passed on the writ petition could not be raised in a contempt proceeding. No
question of res judicata arises in such a case.
Be
that as it may, the petitioner was successful in getting an order of payment on
the contempt petition. We are unable to uphold the contention that merely
because an order was passed in the contempt proceeding to make payment, the
respondent is estopped from claiming the amount of tax raised by an assessment
order validated by the Act of 1969.
If
this argument is accepted, strange result will follow.
The
assessment order will remain valid. That notice of demand raised pursuant to
the assessment order will remain intact and in force, but it will not be open
to the Department to realise the amount of tax merely because of the order
passed in the contempt proceeding. The writ court's order had to be carried
out, which is why the refund order was passed in the contempt proceeding. This
direction to refund the amount of tax already collected was given only because
the assessment orders had been set aside by the writ court. But, when the
assessment orders were validated by passing the Amendment Act of 1969 with
retrospective effect, the tax demand became valid and enforceable. The tax
demand is a debt owed by an assessee which can be realised by the State in
accordance with law. Merely because the amount of tax which had been realised
earlier was directed to be refunded by court's order on the finding that the
assessment order was invalid, will not preclude the State from realizing the
tax due subsequently when the assessment order was validated by the Amending
Act of 1969. The order passed in the contempt proceeding will not have the
effect of writing off the debt which is statutorily owed by the assessee to the
State. The State has filed a suit for recovery of this debt. Unless it can be
shown that the debt does not exist or is not illegally due, the court cannot
intervene and prevent the State from realizing its dues by a suit. All that the
Department has done in this case is to bring a suit to recover the Amount of
tax due and payable to it as a result of what must now be treated as a valid
assessment order.
It is
needless to speculate as to what would have been the position, had the Amending
Act been produced before the court in the contempt case. But, in our view, in
the contempt proceeding the court was only endeavoring to ensure that the order
of refund passed by the writ court was carried out. In the contempt
jurisdiction the court was not really concerned with the merit of the case.
It is
also to be noted that the vires of the Amendment Act of 1969 has not been
questioned by the appellant by filing any substantive application. The effect
of the Amending Act is to impart validity to those assessment orders which had
been struck down by the High Court. If the assessment orders are now held to be
valid, the tax demands raised in the assessment orders are still enforceable.
What the State of Tamil Nadu is seeking to do is to enforce these demands.
Merely because taxes which had been realized earlier had been refunded under an
order passed on a contempt petition, the respondent is not debarred from
realizing the demands which are now deemed to be valid and subsisting.
Therefore,
in our view, the appeal has no merit. The Department is entitled to recover the
amount refunded to the appellant pursuant to the direction given in the
contempt proceeding. The appeal is dismissed. Each party will bear its own
costs.
CIVIL
APPEAL NO. 2207 OF 1982 In vies of our judgment in Civil Appeal No.2206 of
1982, the above appeal is also dismissed. There will be no order as to costs.
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