Case: Epari Chinna Krishna Moorthy &amp; Another Vs. State of Orissa &amp; Others

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 and 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 S. 6 of the said Sales Tax Act issued a notification exemption 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. During 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.2. 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 S. 12 (7) of the act and it was claimed that the deductions were made on certain sale transactions of gold ornaments were not justified and to that extent, the petitioner had escaped assessment. The petitioner resisted this attempt to reopen 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.3. The Sales-tax Officer, however, disallowed the petitioners contention and proceeded to levy tax on the sale transactions in question. The petitioner then challenged the said 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 petition before the High Court of Orissa (Nos. 151, 161, 162, 204, 209 and 110 of 1957 respectively.)4. The Division Bench of the Orissa High Court which heard the writ petitions upheld the petitioners case and issued appropriate writs directing the Sales-tax Officer to allow the petitioners 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 held that the expression manufacturer meant the first owner of the finished products for whom it was made 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 gold ornaments made by them. This judgment was pronounced on March 13, 1959. Against this judgment 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 still pending disposal.5. After the Orissa High Court pronounced its judgment 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 S. 2. Section 2 provides that notwithstanding anything contained in any judgment, decree or order of any court, the word manufacturer 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, 1959 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 of the articles manufactured therein. It is the validity of this section which is challenged before us by the petitioners in the present writ petitions.

Reasoning: 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 S. 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 gold 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 legislatures competence to make any provision in that behalf either prospectively or retrospectively. Therefore, there is no substance in the argument that the retrospective operation of S. 2 of the impugned Act isargument is fallacious. The notification as interpreted by S. 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 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 goldis 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 turnover 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 S. 2 of the impugned Act retrospective the legislature has imposed a restriction on the petitioners fundamental right under Art. 19(1)(g) which is not reasonable and is not in the interest of the general public.