Case: Sangam Spinners Ltd Vs. Union of India &amp; Others

Supreme Court in paragraph 4 has stated thus:- "4. Before we examine Section 3 to find out whether it is effective in its purpose or not we may say a few words about validating statutes in general. When a Legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, 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 courts 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. Ordinarily, a court holds a tax to be invalidly imposed because the power to tax is wanting or the statute or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done 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. Sometimes the Legislature gives its own meaning and interpretation of the law under which tax was collected and by legislative fiat makes the new meaning binding upon courts. The Legislature may follow any one method or all of them and while it does so it may neutralise the effect of the earlier decision of the court which becomes ineffective after the change of the law. Whichever method is adopted it must be within the competence of the legislature and legal and adequate to attain the object of validation. If the Legislature has the power over the subject-matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions. The validity of a Validating Law, therefore, depends upon whether the Legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the Validating Law for a valid imposition of the tax." 40. There are similar decisions to that effect of this Court in D.G. Gose & Co. (Agents) Pvt. Ltd. Vs. State of Kerala & Anr. reported in (1980) 2 SCC 410 . In paragraph 14 of the said judgment, this Court stated thus:- "14. Craies on Statute Law, seventh Edn., has stated the meaning of "retrospective" at p. 367 as follows:"A statute is to be deemed to be retrospective, which takes away or impairs any vested right acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect of transactions or considerations already past. But a statute `is not properly called a retrospective statute because a part of the requisites for its action is drawn from a time antecedent to its passing."It has however, not been shown how it could be said that the Act has taken away or impaired any vested right of the assessees before us which they had acquired under any existing law, or what that vested right was. It may be that there was no liability to building tax until the promulgation of the Act (earlier the Ordinances) but mere absence of an earlier taxing statute cannot be said to create a "vested right", under any existing law, that it shall not be levied in future with effect from a date anterior to the passing of the Act. Nor can it be said that by imposing the building tax from an earlier date any new obligation or disability has been attached in respect of any earlier transaction or consideration. The Act is not therefore retrospective in the strictly technical sense." 41. In the light of the aforesaid decisions and legal position which emanates from reading of the provisions of the Act and the Rules framed there under and notifications which are issued from time to time, the contentions of the counsel appearing for the appellants are found to be without any merit. Since the product High Speed Diesel oil was excluded specifically from the list of eligible inputs in the notifications, there was no question of creation of any right in favour of the appellant to avail such benefit. Therefore, contention that a vested or accrued right is sought to be taken away by giving retrospective effect is without any merit. Consequently, in the facts of this case we are not required to answer whether a vested or accrued right could be taken away with retrospective effect. Further on a conjoint reading of all the notifications it is clearly established that the intention of the Government all along was to exclude the appellants from getting the benefit of the MODVAT credit, therefore, the contentions that the Finance Act violates the vested right is without any basis. The various decisions referred to and relied upon by the counsel appearing for the appellants in support of his contention that the vested right created in their favour could not have been divested by the respondent retrospectively is found to be based on misreading of the language of the aforesaid notifications which do not support, but in fact destroy the very basis of the case of the appellants.

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

Explanation:
0[ds]41. In the light of the aforesaid decisions and legal position which emanates from reading of the provisions of the Act and the Rules framed there under and notifications which are issued from time to time, the contentions of the counsel appearing for the appellants are found to be without any merit. Since the product High Speed Diesel oil was excluded specifically from the list of eligible inputs in the notifications, there was no question of creation of any right in favour of the appellant to avail such benefit. Therefore, contention that a vested or accrued right is sought to be taken away by giving retrospective effect is without any merit. Consequently, in the facts of this case we are not required to answer whether a vested or accrued right could be taken away with retrospective effect. Further on a conjoint reading of all the notifications it is clearly established that the intention of the Government all along was to exclude the appellants from getting the benefit of the MODVAT credit, therefore, the contentions that the Finance Act violates the vested right is without any basis. The various decisions referred to and relied upon by the counsel appearing for the appellants in support of his contention that the vested right created in their favour could not have been divested by the respondent retrospectively is found to be based on misreading of the language of the aforesaid notifications which do not support, but in fact destroy the very basis of the case of the