WA 381/2010 BEFORE THE HON’BLE MR JUSTICE IA ANSARI THE HON’BLE MR JUSTICE AK GOSWAMI Can a subordinate legislation be retrospective in operation, when the parent leg islation, whereunder such a legislation stands made, is prospective in nature? When a person is statutorily entitled to be exempted from payment of sales tax, or is statutorily entitled to pay tax at a reduced rate, can such benefit of exe mption, or payment of tax at a reduced rate, be denied to him on equitable consi deration, because of the fact that the person had already availed exemption from payment of sales tax, or had availed of the benefit of payment of sales tax at a reduced rate during the period, when he was not so entitled to avail such bene fit? In short, whether, on equitable considerations, a person can be denied the benefit of exemption from payment of sales tax, or the benefit of payment of sa les tax at a reduced rate, which the legislature has, otherwise, vested in him? 2. In the answers to the questions, posed above, rest the decision in this appeal. However, an incidental question, which we have to answer, in this appe al, has also arisen, and the question is: when a statutory authority, while det ermining the question of reopening of assessment of taxable liability, acts on t he basis of the clarification, which such an authority obtains from his superior authority, on the issue raised in the proceedings of reopening of assessment, a nd opens the assessment and makes assessment on the basis of the clarifications received from his superior authority, whether such an action is sustainable in l aw, particularly, when, there is no independent application of mind by the autho rity, who re-opens the assessment as to whether the clarification, as given by h is superior authority, are attracted to the facts of the case or not? 3. The questions, indicated above, have arisen in the context of Section 9 of the Assam General Sales Tax Act, 1993 (in short, ’the AGST Act, 1993’), which , in some specified cases, provides for granting of exemption from payment of ta x in respect of sale of goods and empowers the State Government to issue notific ation granting exemption from payment of sales tax, or payment of sales tax at a reduced rate inasmuch as the root of the controversy lies in the notification, dated 03.01.2003, published in the Assam Gazette (Extraordinary) on 22.01.2003, whereby the rates of payment of tax, on the sale/supply of certain classes of go ods including water supply and sanitary fittings, pipes used for the purpose, sp ecified in the notification, were reduced if the goods were sold by a dealer, re gistered under the AGST Act, 1993, to the Government of India, Government of Ass am and to any undertaking, corporation or enterprises of the Government of India or of the Government of Assam, for the purpose of their own use provided that a certificate, in writing, as prescribed by Form ’C’, was issued, in this regard, in favour of the dealer ? 4. Before attempting to answer the questions, raised above, the legal histo ry behind the notification, dated 03.01.2003, aforementioned needs to be traced. In this regard, it is pertinent to note that though the sale of PVC pipes were taxable @ 13.2% under the AGST Act, 1993, the State Government could not have r ealized more than 4.4% of tax on the turnover from a dealer, who sold PVC pipes, at any place, outside the territory of the State of Assam, for being carried to , and used in, the State of Assam, because such transactions amounted to inter-S tate sale; whereas a local manufacturer, in Assam, was required to pay tax @ 13. 2%, because the sale of PVC pipes by a local manufacturer, within the State of A ssam, even if such sale was made to the Government of India, Government of Assam and or to any undertaking, corporation, enterprise of the Government of India o r of the Government of Assam for the purpose of use by the Government undertakin gs, corporations or enterprises aforementioned amounted to intra-State sale and nor inter-State sale. 5. In other words, while the manufacturers of PVC pipes, situated outside A ssam, were required to pay barely 4.4% of tax on the sale or supply of PVC pipes to the State Government or its undertakings, in Assam, the local manufacturers of PVC pipes were required to pay sales tax @ 13.2% on the sale or supply of PVC pipes manufactured or supplied by them. Since the intra-State sale of PVC pipe s carried higher rate of tax, the State Government decided to reduce the rate of tax, in respect of local manufacturers, to 4.4%. The benefit of such reduced r ate of tax could not have been given to the local manufacturers except by way of issuing requisite notification under Section 9 of the AGST Act, 1993, which emp owers the State Government, as indicated above, to grant exemption from payment of tax, or to pay tax at a reduced rate. A notification was accordingly issued, on 28.04.1998, under Section 9(3) of the AGST Act, 1993, making the notificatio n effective for a period of three years. 6. It is noteworthy, now, that according to Section 9(3) of the AGST Act, 1 993, the validity of a notification, issued under Sub-Section(3) of Section 9 of the AGST Act, 1993, shall not exceed a period of three years from the date of i ts issue. Ordinarily, therefore, a notification, issued under Section 9 of the A GST Act, 1993, would remain, unless earlier withdrawn, valid and effective for a period of three years from the date of its issue. Seen in this light, the notif ication, dated 28.04.98, (which was initially issued), could not have remained e ffective beyond the period of three years from the date of its issue, i.e., 28.0 4.98. Naturally, therefore, the notification, dated 28.04.98, aforementioned, la psed on 27.04.2001 inasmuch as no notification was issued by the State Governmen t in exercise of its power under Section 9(3) extending the period of effectiven ess or validity of the notification aforementioned beyond 27.04.2001. 7. In order to enable, therefore, a local manufacturer/dealer to receive th e benefit of exemption, which the notification, dated 28.04.98, had envisaged, t he State Government, in exercise of its powers under Section 9(3), issued a noti fication, on 03.01.2003, making exemption, in the form of reduced rate of tax, a s indicated hereinbefore, available to the local manufacturers/dealers. However, though the notification was issued on 03.01.2003, the notification declared tha t it shall come into force with effect from 01.05.2001. The notification, dated 03.01.2003, was, thus, retrospective in nature. 8. The question, therefore, is: whether the notification, dated 03.01.2003, could have been given retrospective effect from 01.05.2001 or whether a notific ation, such as, the one at hand (i.e., the notification, dated 03.01.2003) canno t but be read to have had come into force prospectively with effect from 03.01.2 003 and not on any date prior thereto. 9. Thus, the answer to the controversy, which the present appeal has raised , lies in the correct interpretation of the expression, ’date of its issue’, whi ch appears in the second proviso to Section 9(3) of the AGST Act, 1993. 10. The appellant herein is a small scale private limited company, registere d under the Companies Act, 1956, and engaged in the manufacture, sale and supply of PVC pipes and plastic tanks, having its principal place of business at Bonda , Narangi, Guwahati, Assam. The company, apart from being registered as a deale r under the Central Sales Tax Act, 1956, was also registered as a ’dealer’ under the AGST Act, 1993, and, later on, it came to be registered as a ’dealer’ under the Value Added Tax Act, 2003 (in short, ’the VAT Act, 2003). 11. Notwithstanding the fact that a notification, under the 2nd proviso to S ection 9(3), cannot exceed a period of three years from the date of its issue an d the notification, dated 03.01.2003, aforementioned had claimed to have come in to force on 01.05.2001, the appellant herein claimed and was given by the assess ing authority the benefit of the notification, in question, for the assessment y ear 2004-05, inasmuch as the appellant was allowed to pay tax at the reduced rat e of interest, even for the assessment year 2004-2005, against supply of PVC pip es, manufactured by it, to various Government Departments in Assam. To be precis e, for the assessment year 2004-05, the Superintendent of Taxes completed assess ment, on 14.02.2006, by allowing payment of tax by the appellant at a concession al rate of 4%. 12. However, the problem for the appellant started, when a notice was issued , on 06.11.2008, to the appellant by respondent no 4 herein, namely, Superintend ent of Taxes, contending therein, inter alia, that the appellant had been wrongl y allowed payment of tax at the concessional rate of 4%, on its turnover, for th e assessment year 2004-05, against supply of PVC pipes to various Government dep artments of the State Government on the strength of the notification, dated 03.0 1.2003, aforementioned inasmuch as the notification, being effective from 01.05. 2001, could not have continued to remain in force beyond a period of three years and the notification had, thus, stood elapsed on 30.04.2004. The appellant was , therefore, directed to show cause as to why the appellant should not be made t o pay the balance amount of tax @ 8.8% [13.2% - 4.4%] and also the interest accr ued thereon. 13. Responding to the notice of show cause, dated 06.11.2008, the appellant furnished its reply, on 20.11.2008, to respondent No. 4, namely, Superintendent of Taxes, contending therein, inter alia, that the notification, in question, ha ving been issued on 03.01.2003, the appellant could have availed exemption for a period of three years with effect from 03.01.2003 inasmuch as a notification, i ssued under Section 9(3), remains in force for a period of three years with effe ct from the date of its issuance. As the notification was issued on 03.01.2003, the notification remained, according to the appellant, in force till 02.01.2006. The appellant contended that since the assessment, in question, was in respect of the assessment year 2004-05 and the notification was effective, during the as sessment year 2004-2005, the appellant had rightly claimed and was legally allo wed to avail the benefit of concesssional rate of tax, while making payment of t ax for the year 2004-2005. 14. As regards the contention of the respondent No. 4 in its letter, dated 0 6.11.2008, aforementioned, that the notification, in question, was effective fro m 01.05.2001, and, therefore, on completion of three years, elapsed, by efflux o f time, on 30.04.2004, the appellant contended that the notification, in questio n, was a piece of subordinate legislation and since a subordinate legislation ca nnot go against the parent legislation, the notification, in question, must be t reated to have remained valid for three years from the ’date of its issue’, i.e. , 03.01.2003. 15. On receipt of the appellant’s reply to the show cause notice, dated 06.1 1.2008, aforementioned, respondent No. 4 herein sought for, vide its letter, dat ed 05.12.2008, a clarification from respondent No. 3, namely, Commissioner of Ta xes, Assam, as to whether the notification, in question, should be treated to ha ve remained in force till 30.04.2004 or shall the notification be treated to hav e lapsed by counting the validity of the notification with effect from 01.05.200 1. 16. Reacting to the clarification, which the respondent No. 4 had so sought for by his letter, dated 05.12.2004, respondent No. 3, namely, Commissioner of T axes, Assam, issued a clarification, on 19.02.2009, conveying to the respondent No. 4 to the effect that though the notification, in question, had been issued o n 03.01.03, yet since the notification was brought into force with effect from 0 1.05.2001, the notification ought to be treated to have remained in force from 0 1.05.2001 to 30.04.2004. The clarification, so issued by respondent No.3, on 19 .02.2009, being relevant to the present appeal, is reproduced below: Sub - Clarification Ref - Your letter No.6356 dated 05.12.2008. With reference to your letter seeking clarification in respect of Govt. Notification issued vide FTX-189/93/pt/268, dt 03.01.2003, giving effect from 01 .05.2001, it is stated that the notification was issued under Section 9(3) of th e Assam General Sales Tax Act, 1993, since repealed. As per proviso to Section 9 (3) (ii) the validity of notification issued under said section shall not exceed a period of 3 years from the date of its issue. However, since the notification was brought into force from 01.05.2001, therefore, the notification was in forc e w.e.f. 01.05.2001 to 30.04.2004. (Sd/- Sanjay Lohiya) Commissioner of Taxes, Assam Dispur, Guwahati. 17. Following the clarification, dated 19.02.2009, so issued by respondent N o. 3 and acting upon the same, respondent No. 4 passed an order, on 06.03.2009, to the effect that the appellant had been wrongly allowed to pay tax at the conc essional rate of 4.4% for the assessment year 2004-2005 inasmuch the notificatio n, in question, had remained in force with effect from 01.05.2001 to 30.04.2004 and could not have, therefore, entitled the appellant to claim benefit of reduce d rate of tax. With the reason, so assigned, respondent No. 4 reopened the asses sment of the taxable liability of the appellant, made assessment afresh, and dir ected the appellant to pay the balance amount of tax @ 8.8%, with interest, whic h had accrued thereon. 18. Aggrieved by the reopening of the assessment and the reassessment of its taxable liability, the appellant filed a revision before the respondent No. 3, namely, Commissioner of Taxes, Assam. By order, dated 24.09.2009, the responden t No. 3 dismissed the revision by observing to the effect, inter alia, that thou gh the date of notification was 03.01.2003, the same having been brought into fo rce with effect from 01.05.2001, the notification had remained in force from 01. 05.2001 to 30.04.2004 and, hence, the notification, having elapsed, on 30.04.200 4, by efflux of time, the concessional rate, which the appellant had enjoyed dur ing the assessment year 2004-2005, was illegal. In order to strengthen his conc lusion that the appellant was not entitled to claim concesssional rate of tax, t he respondent No. 3 further pointed out, in its order, dated 24.09.2009, aforeme ntioned, that the appellant had already enjoyed concessional rate of tax during the period from August, 2001, to January, 2003, and that by its act of having en joyed the benefit of concessional rate between August 2001 and January 2003, the appellant had shown its clear understanding that the notification was retrospec tive in nature and, hence, the appellant, after having enjoyed the benefit, with retrospective effect, cannot make contrary claim and derive benefit of the noti fication by contending that the notification was effective from the date of its issue, i.e., 03.01.2003, and shall be treated to have remained valid till 02.01. 2006. The revision, filed by the appellant, was accordingly dismissed on the pr emises aforementioned. 19. It is, thus, clear that the appellant was denied the benefit of the noti fication aforementioned on two grounds, namely, that the notification having men tioned that it had come into force on 01.05.2001, the notification could not hav e been treated to have remained in force beyond 30.04.2004, and, secondly, equit y estopped the appellant from claiming the benefit of the notification, because the appellant had already availed the benefit for a maximum period of three year s covering thereby the period, when (according to the appellant itself), the not ification could not have been, in law, effective. 20. Aggrieved by the dismissal of the revision, the appellant filed a writ p etition under Article 226 of the Constitution of India, which gave rise to WP(C) No. 4859/2009, seeking issuance of appropriate writ(s) setting aside and quashi ng not only the reopening of the assessment, but also the revisional order. In the writ petition, a learned Single Judge of this Court took the view that in th e facts and circumstances of the case, the expression, ’date of its issue’, appe aring in the 2nd proviso to Section 9(3), has to be understood within the ceilin g of three years, which is allowable for seeking the benefit of reduced rate of tax. The learned Single Judge also took the view that as the appellant had alre ady availed consessional rate of tax for the period from 01.05.2001 to 30.04.200 4 by drawing strength from the said notification, the appellant cannot, having e njoyed the benefit of the notification, turn back and claim further right to con tinue to receive the benefit of concessional rate of tax. 21. In effect, the learned Single Judge too took the view that the appellant was estopped from claiming the benefit of the notification, because of equitabl e consideration inasmuch as it had already availed the benefit, for the maximum period of three years, by drawing strength from the said notification and the ap pellant could not have, having enjoyed such benefit, turn back and claim further exemption for the assessment year 2004-2005. In order to buttress this conclusi on, the learned Single Judge took the view (as already indicated hereinabove) th at the expression, ’date of its issue’, appearing in the 2nd proviso to Section 9(3), has to be understood within the ceiling of three years, which is allowable for obtaining exemption from payment of tax or the benefit of payment of tax at a reduced rate. Because of the conclusions so reached, the writ petition was di smissed on 06.09.2010. The appellant is, therefore, before us. 22. We have heard Mr. N. Dutta, learned Senior counsel, appearing on behalf of the appellant, and Mr. D. Saikia, learned counsel, appearing on behalf of the respondents. 23. Appearing on behalf of the appellant, Mr. N. Dutta, learned Senior couns el, submits that a bare reading of Section 9 of the AGST Act, 1993, clearly show s that the benefit of reduced rate of tax can be granted by the State Government by issuing appropriate notification, in this regard, but, under the 2nd proviso to Section 9(3), the validity of such a notification is three years from the da te of its issue. Thus, the notification, as envisaged by the 2nd proviso is, ac cording to Mr. Dutta, prospective in nature. When the parent legislation, i.e., AGST Act, 1993, makes the exemption prospective in nature, the subordinate legi slation, i.e., the notification, in question, could not have been made retrospec tive and cannot be read in law as retrospective. So contends Mr. Dutta. In supp ort of this submission, Mr. Dutta places reliance on Bakul Cashew Co. and Others vs. Sales Tax Officer, Quilon and another, reported in (1986) 2 SCC 365. 24. Elaborating his submission, as noted above, Mr. Dutta points out that th e 2nd proviso to Section 9(3) makes it clear that the validity of the notificati on, which is issued under Section 9(3), shall not remain valid for more than thr ee years from the ’date of its issue’. Since the proviso uses the expression, ’ from the date of its issue’, Mr. Dutta contends that the date of issue of the no tification, in the present case, being 03.01.2003, the notification ought to hav e been held to have remained valid for a period of three years commencing from 0 1.03.2003 and, in such circumstances, the notification could not have been treat ed, contrary to the parent legislation, to have come into force on a date prior to the date of its issuance, i.e., 03.01.2003; whereas, the respondents have bee n insisting that though the notification had been issued on 03.01.2003, it was g iven effect to, or had been brought into force, on 01.05.2001, and, therefore, t he notification could not have remained in force beyond 30.04.2004. Such a cons truction of the notification by the respondents is, according to Mr. Dutta, whol ly untenable in law. 25. Referring to the decision, in Mangalam Timber Products Ltd. v. State of Orissa, reported in (2008) 18 VST 1 (Orissa), Mr. Dutta submits that in similar circumstances, Orissa High Court has decided that the notification could not be retrospective, when the legislation is prospective in nature and the notificatio n must, therefore, be read to be effective from the date of notification and not from any date prior thereto. 26. Mr. Dutta points out that since the statutory authorities, namely, respo ndent No. 4 and also respondent No. 3 failed to hold that the notification, havi ng been issued on 03.01.2003, must be taken to have been remained in force for a period of three years, i.e., till 02.01.2006, and, hence, the assessment year 2 004-2005 was well within the validity period of the notification, in question, t he appellant was left with no alternative, but to approach this Court. The lear ned Single Judge, however, contends Mr. Dutta, fell in serious error in ignoring the fact that the parent legislation being prospective in nature, the notificat ion, which is a piece of subordinate legislation, could not have been given retr ospective effect and ought to have, therefore, been treated to be prospective ef fect. Moreover, as there was no outer limit fixed in respect of the validity of the notification, the notification, according to Mr. Dutta, ought to be treated to have remained valid till 02.01.2006. 27. Mr. Dutta further points out that the respondent No. 4 is a statutory au thority and, while deciding the question as to whether the assessment, which had already been made, needed to be reopened and reassessed, the authority function ed as a quasi-judicial body and such an authority cannot be made to act at the d ictates of its superior authority nor can its decision be controlled and/or guid ed by any superior authority, for, such a conduct of being guided and controlled by superior authority would amount to abdication of authority by the authority, which has to exercise quasi-judicial power in determining the question as to wh ether it shall or shall not reopen the assessment. 28. In the present case, submits Mr. Dutta, in order to reach a decision as to whether the assessment, already made, needed to be reopened or not, responden t No. 4 looked to his superior, namely, the respondent No. 3 for guidance as to whether the notification, in question, should be treated to have come into force on 03.01.2003, which was the date of issuance of the notification, or should it be read retrospectively with effect from the date on which the notification sta ted to have come into force. Responding to the clarification, which the respond ent No.4 had so sought for, respondent No.3, points out Mr. Dutta, gave his ’cla rification’ and it is this ’clarification’, which the respondent No. 4 treated a s his guidance and reopened the assessment. There was, thus, contends Mr. Dutta , no independent application of mind by the respondent No. 4, which was nothing but complete abdication of authority by respondent No. 4. The impugned order, t herefore, submits Mr. Dutta, reopening the assessment and making the assessment afresh was wholly illegal. 29. Mr. Dutta submits that aggrieved by the wrong construction of the notifi cation and the conduct of the respondents, when the appellant approached this Co urt by way of writ petition, the learned Single Judge too misconstrued the notif ication inasmuch as the learned Single Judge was of the view that a notification , issued under Section 9(3), cannot exceed a period of three years and, since th e notification mentioned that it had come into force on 01.05.2001,