Case: State Of Tamil Nadu Vs. Thirumagal Mills Ltd. Etc

other valuable consideration, and includes a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge". By the Madras General Sales Tax (Second Amendment) Act, 1964, cl. (d) of S.2 was substituted by the following clause:"business" includes- (i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern and (ii) any transaction in connection with or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern". Section 9 validated the levy and collection of certain taxes in the following terms:S.9. Notwithstanding anything contained in any judgment, decree or order of any Court, no levy or collection of any tax under the provisions of the principal Act and of rules made thereunder in respect of sales in the course of business, whether or not it is carried on with a motive to make gain or profit shall be deemed to be invalid or ever to have been invalid on the ground only that such levy or collection was not in accordance with law and such tax levied or collected or purporting to have been levied or collected shall, for all purposes, be deemed to be and always to have been validly levied or collected and accordingly- (a) all acts, proceedings or things done or taken by the State Government or by any officer of the State Government or by any other authority in connection with the levy or collection of such tax shall, for all purposes, be deemed to be, and to have always been, done or taken in accordance with law, (b) no suit or other proceedings shall be maintained or continued in any Court against the State Government or any person or authority whatsoever for the refund of any tax so paid; and (c) no Court shall enforce any decree or order directing the refund of any tax so paid; (d) any such tax levied under the principal Act before the commencement of this Act but not collected before such commencement or any such tax leviable under the Principal Act but not levied before such commencement may be collected (after levy of the tax wherever necessary) in the manner provided in the principal Act." 5. It has not been contended before us on behalf of the Revenue that the turnover of the sales by the fair price shop and the canteen could be included in the taxable turnover according to the definition of "business" as it stood in the original Act. The contention raised is that S.2 of the second Amendment Act 1964 substituted the new definition of "business" with retrospective effect. This result flows, it is said, from the language of S.9 although in S.2 of that Act no such language has been used as can give retrospective operation to the amendment made. We are unable to agree that S.9 by itself would make the definition of "business" as substituted in S.2 retrospective. In State of Tamil Nadu v. M. Rayappa Gounder etc. AIR 1971 SC 231, S.7 of the Madras Entertainment Act (Amendment) Act 1966 which was similar to Section 9 mentioned above came up for consideration. The question was whether the assessment were validly protected by that section. Reliance was placed on certain decisions of this Court which laid down that it is over to the legislature within certain limits to amend the provisions of the Act retrospectively and to declare what the law shall be deemed to have been but it was not open to the legislature to say that a judgment of a Court properly constituted and rendered shall be deemed to be ineffective. Hence it was held that the impugned assessment in that case could not be sustained. The principle which has been laid down clearly is that validation of tax which has been declared to be illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is achieved by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law. The legislature can give its own meaning and interpretation of the law under which the tax was collected and by legislative fiat makes the new meaning binding upon the Courts. None of these methods has been adopted in the present case. (See Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, 79 ITR 136 = (AIR 1970 SC 192 ). Although the definition of "business" was substituted by the Second Amendment Act of 1964 it was not made retrospective by the usual words that it should be deemed to have been always substituted nor was any other language employed to show that the substantive provision, namely, the definition of "business" was being amended retrospectively. Section 9, therefore, can be of no avail to the Revenue. It has been pointed out that in the other decision rendered by this Court in which similar validation provision appeared the substantive section had not been amended at all. That, in our judgment will not make any difference between the essence of the matter is that the definition of the word "business" which was material was amended only prospectively and not with retrospective effect. It is common ground and has not been disputed that if retrospective operation is not given to Section 2 (d) of the Second Amendment Act 1964 the Revenue must fail in these appeals. We may add that we have not considered the question of the liability of the assessee to be assessed subsequent to the amendment made by the Second Amendment Act of 1964.

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

Explanation:
0[ds]Hence it was held that the impugned assessment in that case could not be sustained. The principle which has been laid down clearly is that validation of tax which has been declared to be illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is achieved by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law. The legislature can give its own meaning and interpretation of the law under which the tax was collected and by legislative fiat makes the new meaning binding upon the Courts. None of these methods has been adopted in the present caseAlthough the definition of "business" was substituted by the Second Amendment Act of 1964 it was not made retrospective by the usual words that it should be deemed to have been always substituted nor was any other language employed to show that the substantive provision, namely, the definition of "business" was being amended retrospectively. Section 9, therefore, can be of no avail to the Revenue. It has been pointed out that in the other decision rendered by this Court in which similar validation provision appeared the substantive section had not been amended at all. That, in our judgment will not make any difference between the essence of the matter is that the definition of the word "business" which was material was amended only prospectively and not with retrospective effect. It is common ground and has not been disputed that if retrospective operation is not given to Section 2 (d) of the Second Amendment Act 1964 the Revenue must fail in these appeals. We may add that we have not considered the question of the liability of the assessee to be assessed subsequent to the amendment made by the Second Amendment Act of 1964We are unable to agree that S.9 by itself would make the definition of "business" as substituted in S.2 retrospective. In State of Tamil Nadu v. M. Rayappa Gounder etc. AIR 1971 SC 231, S.7 of the Madras Entertainment Act (Amendment) Act 1966 which was similar to Section 9 mentioned above came up for consideration. The question was whether the assessment were validly protected by that sectionReliance was placed on certain decisions of this Court which laid down that it is over to the legislature within certain limits to amend the provisions of the Act retrospectively and to declare what the law shall be deemed to have been but it was not open to the legislature to say that a judgment of a Court properly constituted and rendered shall be deemed to be ineffective.