125 135 and 233 of 1963
Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights
A V Vishwanatha Sastri T A Ramachandran B Par thasarathy 0
C Mathur J B Dadachanji and Ravinder Narain for the petitioner in W P Nos
125 135 1963
H N Sanyal Solicitor General N section Bindra and R N Sachthey for the respondents in W P Nos
125 135  63
O C Mathur J B Dadachanji and Ravinder Narain for the petitioner in W P No 233  1963
R N Sachthey for the respondents in WP No 233 63
187 March 12 1964
The Judgment of the Court was delivered by GAJENDRAGADKAR C J
This group of 12 writ petitions raises a common question about the validity of the Orissa Sales Tax Validation Act 1961 Act No 7 of 1961 hereinafter referred to as the Act
The facts on which the petitioners rely are similar and so we shall mention the facts in the first group consisting of writ petitions Nos
125 135 of 1963
The petitioner in this group is Shri Epari Chinna Krishna Moorthy Proprietor Epari Chinna Krishna Moorthy  Sons Berhampur Orissa
He is a merchant who carries on business in bullion and specie and gold and silver ornaments at Berhampur and as such merchant he has been registered as dealer  under the Orissa Sales Tax Act 1947 Act No 14 of 1947
After the said Act came into force the Government of Orissa purporting to exercise its authority under section 6 of the said Sales Tax Act issued a notification exempting certain articles from the operation of the charging section of that Act
Under this notification gold ornaments were ordered to be exempted from sales tax when the manufacturer selling them charges separately for the value of gold and the cost of manufacture  This notification was issued on July 1 1949 Durinh the course of his business the petitioner manufactures gold ornaments by supplying the gold to the artisans and getting ornaments prepared by them under his supervision and when the ornaments are so prepared he sells them in his shop and has been showing the value of gold and the cost of manufacture separately
That is why the petitioner alleges that he is entitled to claim the benefit of the exemption notification
Consistently with this plea the petitioner filed his returns before the Sales tax Officer at Berhampur and had been claiming exemption of Sales tax on the sales as being entitled to exemption under the said notification
Upto June 1952 the claim for exemption made by him was upheld and the amount represented by sales of the said gold ornaments was deducted from the taxable turnover shown by the petitioner in his returns
Subsequently however these assessments were re opened under section 127 of the Act and it was claimed that the deductions made on certain sales transactions of gold ornaments were not justified and to that extent the petitioner had escaped assessment
The petitioner resisted this attempt to re open the assessment and he pleaded that he was entitled to claim exemption under the notification because he belonged to the class of manufacturers to which the notification referred
The Sales tax Officer however disallowed the petitioner s contention and proceeded to levy tax on the sales transac tions in question
The petitioner then challenged the said 188 decision by preferring appeals but the said appeals were also dismissed
While the appeals were pending similar assessments made in respect of other dealers including the petitioner were challenged by them by writ petitions before the High Court of Orissa
Nos 151 161 162 204 209 and 110 of 1957 respectively
The Division Bench of the Orissa High Court which heard the writ petitions upheld the petitioner s case and issued appropriate writs directing the Sales tax Officer to allow the petitioner s claim for exemption under the notification in question
The main controversy before the High Court was about the precise denotation of the word manufacturer  used in the notification
The High Court hold that the expression manufacturer  meant the first owner of the finished products for whom it was mad
either by his paid employee or even by independent artisans on receipt of raw materials and labour charges from him
According to this view the petitioners before the High Court were found to be manufacturers and as such entitled to claim exemption in respect of sale of old ornaments made by them
This judgement was pronounced on March 13 1959
Against this judgement the State of Orissa has filed appeals to this Court and they are numbered as Civil Appeals Nos 92 to 94 of 1963
These appeals are till pending disposal
After the Orissa High Court pronounced its judgement in the writ petitions to which reference has been made the impugned Act was passed by the Orissa Legislature on August 1 1961
This Act received the assent of the Governor on September 10 1961 and was published on September 18 1961
It contains one operative provision in section 2
Section 2 provides that notwithstanding anything contained in any judgment decree or order of any court the word manufactu rer  occurring against item 33 in the schedule to the notification of the Government of Orissa dated July 28 1947 as amended by another notification of the 1st July 1949 shall mean and shall always be deemed to have meant a person who by his own labour works up materials into suitable forms and a person who owns or runs a manufactory for the purpose of business with respect to the articles manufactured therein
It is the validity of this section which is challenged before us by the petitioners in the present writ petitions
It is clear that the object of section 2 of the impugned Act is to make it clear that the legislature s intention was not as the High Court had held to include within the notification all persons who are first owners of the finished product of gold
Section 2 shows that the legislative intention was to give benefit of the said exemption only to persons who themselves work and produce gold ornaments or who run or own a manufactory for the purpose of business with respect to the articles manufactured therein
In other words the intention of the Government in issuing the notification was not to give the benefit of the exemption to traders or shop keepers who were no more than commission agents and who did not personally work for making gold ornaments or who did not own a manu factory employing artisans for that purpose
If this section is valid it is common ground that the petitioners are not entitled to claim the exemption
On the other hand if this section is invalid the petitioners would be the first owners of gold ornaments and may be entitled to claim exemption
The first argument which has been urged before us by Mr Sastri is that since the exemption was granted by the State Government by virtue of the powers conferred on it by section 6 it was not open to the legislature to take away that exemp tion retrospectively
Section 4 of the parent Sales tax Act is the charging section and section 6 is the section which confers on the State Government power to issue a notification exempting from the tax the sale of any goods or class of goods and likewise withdraw any such exemption subject to such conditions and exceptions as it may deem fit
The argument is the power to grant exemption having been conferred on the State Government it was validly exercised by the State Government and though the legislature may withdraw such exemption it cannot do so retrospectively
It is obvious that if the State Government which is the delegate of the legislature can withdraw the exemption granted by it the legislature cannot be denied such right
But it is urged that once exemption was validly granted the legislature cannot withdraw it retrospectively because that would be invalidating the notification itself
We are not impressed by this argument
What the legislature has purported to do by section 2 of the impugned Act is to make the intention of the notification clear
Section 2 in substance declares that the intention of the delegate in issuing the notification granting exemption was to confine the benefit of the said exemption only to persons who actually produce old ornaments or employ artisans for that purpose
We do not see how any question of legislative incompetence can come in the present discussion
And if the State Government was given the power either to grant or withdraw the exemption that cannot possibly affect the legislature s competency to make any provision in that behalf either prospectively or retrospectively
Therefore there is no substance in the argument that the retrospective operation of section 2 of the impugned Act is invalid
Then Mr Sastri contends that this provision is discrimina tory and as such contravenes the equality before the law guaranteed by article 14
This argument is also misconceived is not seriously disputed that the petitioners belong to the 190 class of traders or shopkeepers who are like commission agents
They give gold to the artisans paying the artisans their labour charges and when the ornaments are thus produced they charge commission before they are sold to the customers
In such a case it is not easy to understand how this class of traders can be said belong to same class of persons who produce gold ornaments themselves or run manufactories where artisans are engaged for producing them
The counter affidavit filed on behalf of the respondent State has also averred that the petitioners sometimes sell goods manufactured by firms outside the State of Orissa and in no case had they manufactured ornaments themselves
Whether the gold which they give to the artisans is their own or is supplied to them by customers is not a matter of any significance because what is important in this connection is that they are not directly concerned with the production of ornaments and admittedly they do not produce the said ornaments themselves
Therefore the persons who get the benefit of the exemption notification as a result of the provisions of section 2 of the impugned Act cannot be said to belong to the same class as that of the petitioners and if that is so the main argument on the basis of article 14 does not subsist
Besides one of the objects of the impugned Act appears to be to make it clear that the legislature intends to benefit the goldsmiths who actually make gold ornaments and that object can be carried out only if exemption is granted to persons who keep in their continuous employment artisans who produce gold ornaments
If a person produces gold ornaments himself and if a person employs artisans to produce gold ornaments for him they fall within the protection of the exemption
In the case of the petitioners however they do not keep any artisans in their continuous employment and so if the legislature thought it was not necessary to give them the benefit of the exemption it cannot be said that the classification made by the legislature has no rational connection with the object intended to be achieved by it
This argument assume that the petitioners belong to the same class as the persons to whom the benefit of the exemption is available
But as we have already stated these two categories are distinct and there is no sameness or similarity between them
It was also suggested by Mr Sastri that the result of the impugned provision is to deny the benefit of the exemption to the poorer classes of persons who are engaged in the business of manufacturing gold ornaments and in that con nection he has commented on the fact that the notification gives the benefit of the exemption to persons who run manu factories but it denies that benefit to persons who carry on the work of producing gold ornaments on a smaller scale and 191 so are unable to run a manufactory
This argument is fal lacious
The notification as interpreted by section 2 of the impugned Act benefits the artisans who produce ornaments themselves and that obviously covers a very large section of independent artisans engaged in the trade
The notification also benefits persons who run manufactories and that ensures the continuous employment of artisans
That is why it seems to us that the main object of ranting exemption can be said to be achieved by holding that manufacturer means either a manufacturer properly so called or one who engages artisans lo manufacture gold ornaments
Mr Sastri also argued that the retrospective operation of the impugned section should be struck down as unconsti tutional because it imposes an unreasonable restriction on the petitioners  fundamental right under article 191g
It is true that in considering the question as to whether legislative power to pass an Act retrospectively has been reasonably exercised or not it is relevant to enquire how the retrospective operation operates
But it would be difficult to accept the argument that because the retrospective operation may operate harshly in some cases therefore the legislation itself is invalid
Besides in the present case the retrospective operation does not spread over a very long period either
Incidentally it is not clear from the record that the petitioners did not recover sales tax from their customers when they sold the gold ornaments to them
The counter affidavit filed by the respondent State alleges that even where sales tax has not been charged separately the price charged included sales tax because it was the usual practice of every registered dealer doing similar business to collect sales tax either by showing it as such separately and thereby claiming deduction of the sales tax from the gross turnover to arrive at the taxable turn  over shown separately or by including it in the price and thereby collecting it as a part of the price charged
In any event we do not think that in the circumstances of this case it would be possible to hold that by making the provision of section 2 of  the impugned Act retrospective the legislature has imposed a restriction on the petitioners  fundamental right under article 191g which is not reasonable and is not in the interest of the general public
The result is the petitions fail and are dismissed with costs
One set of hearing fees
Petitions dismissed


Summary:
The petitioner a merchant carrying on business in bullion and specie and gold and silver ornaments was a registered dealer  under the Orissa Sales Tax Act 1947
The Government purporting to exercise its authority under section 6 of the said Act issued a notification on July 1 1949 exempting certain articles from the operation of the charging section of that Act
Under the notification gold ornaments were ordered to be exempted from sales tax when the manufacturer selling them charges separately for the value of gold and the cost of manufacture
The petitioner filed his returns before the Sales tax Officer and claimed exemption of sales tax under the said notification
Up to June 1952 the claim for exemption was upheld
Subsequently however these assessments were reopened under section 127 of the Act and it was claimed that the deductions made on certain sale transactions of gold ornaments were not justified and the petitioner had escaped assessment
The petitioner pleaded that lie was entitled to exemption because he belonged to the class of manufacturers to which the notification referred
The Sales tax Officer disallowed the petitioner s contention
The petitioner then challenged the said decision by preferring appeals but the said appeals were also dismissed
Pending these appeals similar assessments made in respect of other dealers including the petitioner were challenged by writ petitions before the High Court
The High Court upheld the petitioner s case and issued writs directing the Sales tax Officer to allow the petitioners  claim for exemption
After this judgement was pronounced the impugned Act was passed by the legislature on August 1 1961 and was published on September 18 1961 containing one operative provision in section 2
It provided that notwithstanding anything contained in any judgement decree or order of any court the word manufacturer  occuring against item 33 in the schedule to the notification of the Government dated July 28 1947 as amended by another notification of the 1st July 1949 shall mean and shall always be deemed to have meant a person who by his own labour works up materials into suitable forms and a person who owns or runs a manufactory for the purpose of business with respect to the articles manufactured therein
The validity of this section was challenged in the present writ petition
186 It was urged i that since the exemption was granted by the State Government by virtue of the Powers conferred on it by section 6 it was not open to the legislature to take away that exemption retrospectively ii that the provision in section 2 of the impugned Act was discriminatory and as such contravened the equality before the law guaranteed by article 14 and iii that the retrospective operation of the impugned section should be struck down as unconstitutional because it imposes an unreasonable restriction on the petitioner s fundamental right under article 19 1 g Held i What the legislature had purported to do by section 2 of the impugned Act was to make the intention of the notification clear
And if the State Government was given the power either to grant or withdraw the exemption that could not possibly affect the legislature s competence to make any provision in that behalf either prospectively or retrospectively
ii The notification as interpreted by section 2 of the impugned Act benefits the artisans who produce ornaments themselves and who run manufactories
That is why the main object of granting exemption can be said to be achieved by holding that manufacturer  means either a manufacturer properly so called or one who engages artisans to manufacture gold ornaments
In the present case the petitioners were not directly concerned with the production of ornaments and admittedly they did not produce the said ornaments themselves
Therefore the persons who get the benefit of the exemption notification as a result of the provisions of section 2 of the impugned Act cannot be said to belong to the same class as that of the petitioners
The two categories are distinct and there is no sameness or similarity between them and if that is so the main argument on the basis of article 14 does not subsist
ii It would be difficult to accept the argument that because the retrospective operation may operate harshly in some cases therefore the legislation itself is invalid
In the circumstances of the present case it would not be possible to hold that by making the provision of section 2 of the impugned Act retrospective the legislature has imposed a restriction on the petitioner s fundamental rights under article 191 g which is not reasonable and is not in the interest of the general public