Case: Satnam Overseas (Export) Vs. State Of Haryana

rules 9 and 49 of the Central Excise Rules, 1944 were amended retrospectively from the date of framing of the rules in 1944. After referring to the cases of Rai Ramakrishna and Jawaharmal (supra), it was observed that the Court might have to consider the question as to whether excessive retrospective operation prescribed by a taxing statute amounted to contravention of the citizens fundamental rights and in dealing with such a question the court might have to take into account all the relevant and surrounding facts and circumstances in relation to the taxation and in that connection the test of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test. By examination of the merits of the case it was held that the retrospective effect given to the said provisions was subject to section 11A of the Act and was, therefore, not excessive and arbitrary. (55) In State of Tamil Nadu v. Arooran Sugars Ltd.2, the same principle is reiterated and it is added that in special situation this Court has held that such excessive retrospectivity was violative of Article 14 of the Constitution. (56) In the instant case, having regard to the provisions of section 40 of the Haryana Act, the authorities can not revise the assessment for period beyond five years. Further, even though section 15A was given retrospectivity with effect from May 27, 1971, it would hardly be effective between 27/05/1971 and 1/04/1991 when the benefit of exemption under section 9 (1)(b) ceased to exist, as such none of the contentions that giving section 15A retrospectivity of 21 years could be harsh, arbitrary and illegal would be devoid of merit. (57) No relief was available in regard to penultimate purchase of paddy which was converted into rice and exported. This position obtained till clause (ca) of section 15 of the CST Act was inserted by Act 33 of 199 6/09/1996. The said clause (ca) provides, where a tax on sale or purchase of paddy is leviable under a state law and the rice procured out of such paddy is exported out of India, then for the purposes of sub-section (3) of section 5 of the CST Act, the paddy and rice have to be treated as a single commodity. What is, however, contended in clause (ca) is only declaratory and, therefore, retrospective. We do not so think. A declaratory Act is defined in "Craies on statute law thus: "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Act are usually held to be retrospective." (sixth edition page 59) (58) It cannot be said to be clarificatory for, it neither supplies an obvious omission in the CST Act nor purports to explain any provision of that Act. It confers a new benefit hitherto not available. It is not given retrospective effect expressly. There is also nothing to imply that it has retrospective operation. However, had it been declaratory or curative, it would have been treated as retrospective. (See. Shri Chaman Singh and Anr. v. Srimathi Jaikaur). (59) We do not also find any force in the contention of Mr. Chidambaram that in not granting refund of purchase tax only in regard to three goods - paddy, cotton and oil seeds - there is violation of Article 14 of the Constitution. It is a settled proposition of law that in the matter of taxation, the legislature has greater latitude to give effect to its policy of raising revenue and for that purpose selecting the goods for taxing. The classification of goods based on the policy of taxing some goods and leaving others outside the net of taxation cannot be assailed as violative of Article 14 of the Constitution. (See: M/s. Steelworth Ltd. v. State of Assam and Gopal Narain v. State of Uttar Pradesh andAnr.) (60) The observations of Krishna lyer, J. in Murthy Match Works, etc. etc. v. The Asstt. Collector of Central Excise, etc. which are approved by a constitution bench in Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh and Ors. are worth quoting: "It is well established that the modern state, in exercising its sovereign powers of taxation, has to deal with complex factors relating to the objects to be taxed, the quantum to be levied, the condition subject to which the levy has to be made, the social and economic policies which the tax is designed to sub-serve, and what not. In the famous words of Holmes, J., in Bain Peanut Co. v. Finson (1930)282 US 499): We must remember that the machinery of government would not work if it were not allowed a little play in its joints." Granting relief, whether of refund or otherwise, stands on the same footing. To sum up: (1) In the specified circumstances in which charge of purchase tax on the raw material is imposed, clause (b) of sub-section (1) of section 9 of the Haryana Act and the exemptions provided therein would apply; the law declared by this Court in Murli Manohar and Co.; Hotel Balaji and K.B. Handicrafts (supra) holds the field; (2) while section 9 remained on the statute till 1/04/1991, retrospective amendments of sections 2(p), 6, 15 and 15A of the Haryana Act would make no difference in regard to levy of purchase tax on paddy; (3) adjustment of purchase tax paid on paddy (raw material) is permissible under section 15A of the Haryana Act during the relevant period; (4) by virtue of section 15 A of the Haryana . Act, denial of refund of purchase tax, if any, paid by a dealer is not illegal much less unconstitutional; and (5) mere similarity between section 9(1) (b) of the Haryana Act and section 4B of the Punjab Act would not relieve a dealer of the liability to pay purchase tax on paddy as the scope of charging sections under the said Acts are different. (6)

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds](39) Though section 4-B of the Punjab Act is not in his dem term in is with section 9 (1) (b) of the Haryana Act, however, they are in pan mater/a. It is not the similarity of the said provisions alone that would determine the liability of a dealer to pay purchase tax on paddy under the said Acts. It is the ambit of charging sections in those Acts, which will be determinative. Section 6 of the Haryana Act, as pointed out above, did not charge purchase tax on paddy before 14/10/1990 and in the circumstances mentioned in section 9 (1) (b) imposed purchase tax but provided for its exemption in specifiedIt is true that section 15A does not permit refund of purchase tax paid on paddy, cotton and oil seeds by an assessee though such a relief is available in regard to other goods. In the light of the above discussion, the challenge to section 15A on the ground of violation of section 15 (c) of the CST Act or Article 286 (1)(b) of the Constitution cannot be sustained because the only relief that is granted by section 15(c) is reduction of tax leviable on the sale of rice procured from out of paddy, where tax has been levied on sale or purchase of such paddy inside the state. This relief is incorporated by the Haryana Act in clause (iii) of the proviso to sub-section (1) of section 15. Even clause (b) of sub-Article (1) of Article 286 does not provide for exemption of tax on the purchase of paddy. There is no other provision either in Article 286 or in the CST Act which bars a state from levying tax on the sale or purchase of paddy which is not exported out of the territory of India. Section 15A proceeds on the premise that purchase tax is payable, inter alia, on paddy. From the above discussion, it is clear that before the omission of section 9 from the Haryana Act, no purchase tax was payable on paddy under section 6 of the Act, therefore, during the aforesaid period, the assessee cannot complain of the denial of the benefit of adjustment and refund of purchase tax on the basis of section 15A of the Haryana Act. The position would, however, be different after 1/04/1991, when section 9 was omitted from the Act.