1. Dispute regarding sales tax rates for a dealer opting for previous year turnover assessment under the U.P. Sales Tax Act. (Para 1 , 2 , 3 )
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1964 Supreme(SC) 95
SUPREME COURT OF INDIA
20th March, 1964
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO, J.C. SHAH, N. RAJAGOPALA AYYANGAR AND S.M. SIKRI, JJ.
Commissioner of Sales Tax, U. P., Appellant
Versus
Bijli Cotton Mills, Hathras, U. P., Respondent.
Civil Appeal No. 546 of 1962.
Advocates appeared
Mr. C. B. Agarwala, Senior Advocate, (Mr. C. P. Lal Advocate, with him), for Appellant ; Mr. S. K. Kapur, Senior Advocate, (M/s. S. K. Mehta and K. L. Mehta Advocates, with him), for Respondent.
Advocates:
C.B.AGARWAL, C.P.LAL, K.L.Mehta, S.K.KAPOOR, S.K.MEHTA
C.B.AGARWAL, C.P.LAL, K.L.Mehta, S.K.KAPOOR, S.K.MEHTA
A court must apply a retroactive legislative amendment to a transaction under reference, even if the amendment post-dates the reference, provided it is expressly designed to supersede previous law and apply to the material dates of the dispute.
Headnote:(A) Sales Tax Act - Sections 3-A, 7, and 31 - Assessment based on previous year's turnover - Application of altered tax rates - Where a dealer opts to be assessed on the basis of turnover of the previous year, and the rates of tax are altered during the assessment year, the dealer shall be liable to pay tax at the altered rates, applied proportionately for the number of days they were in force during the assessment year. (Paras 4, 5)
(B) Statutory Interpretation - Retroactive Legislation - Application to pending references - When a statute is amended with retroactive operation to apply to a transaction that is the subject matter of a reference, the court is duty-bound to apply the amended law, even if the amendment occurred after the reference was made. The court must give effect to legislative intent when a new statutory provision supersedes the old law by legislative direction. (Paras 6, 8)
Facts of the case:
A manufacturer of cotton yarn opted to be assessed on the turnover of the previous year. During the assessment year, the tax rate for the goods was increased via notification. The initial assessment applied the increased rate proportionately, but the High Court held that the flat rate prevailing at the start of the assessment year should apply to the previous year's turnover. Subsequently, the legislature enacted a validating amendment providing that dealers opting for previous year turnover must be assessed at rates prevalent during the assessment year, applied proportionately, and that this rule applies retrospectively to all material dates.
Findings of Court:
The retroactive amendment expressly overrides previous judicial interpretations and mandates that the tax liability for the turnover of the previous year be determined by projecting the rates applicable in the assessment year onto that turnover.
Issues: Whether a court, while answering a reference regarding tax liability, is bound to apply the law as it existed at the date of the reference or whether it must apply a subsequent retroactive amendment that specifically targets the transaction in dispute.
Ratio Decidendi: The court ruled that if the legislature amends a law with retroactive operation to apply to the transaction in dispute, the court must apply the amended law. The legislative intent to supersede previous rules and apply a new standard retrospectively must be given effect, provided the question referred is of sufficient amplitude to cover the enquiry and does not necessitate the investigation of fresh facts. (Paras 6, 8)
Result: Appeal allowed.
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Table of Contents
2. Whether the court should apply the law prevailing at the date of reference or a subsequent retrospective legislative amendment. (Para 6 )
3. Retrospective amendments supersede prior judicial rulings and must be applied to the transaction in dispute if the reference allows for such an inquiry. (Para 6 , 8 )
4. Courts must apply retrospective legislative amendments to pending references if the law is deemed to be in operation at all material times. (Para 6 , 8 )
5. Appeal allowed; the assessee is liable for tax based on rates prevailing during the assessment year. (Para 9 )
6. Must a court apply a retrospective legislative amendment to a question referred to it before the amendment was enacted?
Yes. If the law is amended with retroactive operation to apply to the transaction in dispute, the court must apply the amended law, as it gives effect to legislative intent and supersedes the previous rule. (Para 6 , 8 )
7. Can the legislature retrospectively override a judicial interpretation of a tax statute?
Yes. The legislature can enact validating legislation that retrospectively modifies a legal position previously held by the courts, making the new provision applicable to assessments pending or closed. (Para 4 , 5 )
8. How are tax rates determined for a dealer who opts for assessment based on previous year turnover under Section 31 of the U.P. Sales Tax Act?
The dealer is assessed at rates prevalent during the assessment year. If rates are altered during that year, the dealer pays the altered rates proportionately for the duration they were in force. (Para 4 )
Judgment
SHAH, J. : Bijli Cotton Mills - respondent in this appeal - is a manufacturer of cotton yarn and is registered as a dealer under the U.P. Sales Tax Act (15 of 1948). Under the U.P. Sales Tax Act (15 of 1948) which came into force on April 1, 1948, sales-tax became payable on sales of a uniform rate of three pies in a rupee. By Act 25 of 1948 , S. 3-A was incorporated in Act 15 of 1948 conferring upon the Provincial Government power to declare by notification that the proceeds of sale of any goods or class of goods shall not be included in the turnover of any dealer except at such single point in the series of sales by successive dealers as the State Government may specify. By S.7 as amended by Act 25 of 1948, a dealer had the option to submit his return on the basis of the turnover of the sales in the previous year or on the basis of turnover of the sales in the current year. The respondent company opted to be assessed on the basis of the turnover of the previous year ending March 31, 1948.
2. In exercise of the power under S. 3-A of the Act the Government of U.P. issued a notification declaring that with effect from June 9, 1948, the proceeds of goods entered in column 2 of the schedule to the said notification (which included cotton yarn) shall not be included in the turnover of any dealer except at the point in the series of sales by successive dealers, and that with effect from June 9, 1949, the rate of tax in respect of the turnover of the aforesaid goods shall be as set out in the schedule. As a result of the notification the sale of cotton yarn became taxable at a single point i.e., at a point of sale by the importer if the goods were imported from outside Uttar Pradesh and at a point of sale by the manufacturer, if manufactured in Uttar Pradesh, and the rate of tax in respect of cotton yarn was fixed, since the date of the notification, at six pies per rupee.
3. The Sales -Tax Officer, Hathras in assessing the respondent company to sales-tax for the assessment year 1948-49 held that because of the notification issued by the Government, the rate of three pies per rupee in respect of sales of cotton yarn was to apply in the year of assessment for the first 69 days and for the remaining part of the year the rate of six pies per rupee was to apply, and on that account notwithstanding that the assessee had opted under S. 7 to be assessed on the basis of the turnover of the previous year, the rate of three pies was applicable to the assessable turnover for the first 69 days and for the rest of the year the rate applicable was six pies per rupee. This order was modified in appeal by the Judge (Appeals) Sales Tax, Meerut, who directed assessment of tax on the turnover at a uniform rate of three pies per rupee. But the order of the appellate court was reversed by the Judge (Revisions) Sales Tax, U.P. who restored the order of the Sales -tax Officer. The Judge (Revisions) Sales Tax at the instance of the respondent company then referred to the High Court of Judicature at Allahabad the following question :
"Whether the assessees who had elected the previous year are liable to pay tax in the assessment year 1948-49 according to the rates prevailing during the year ", and
the High Court following its judgement in Modi Food Products Ltd. v. Commissioner of Sales Tax, U.P. , AIR 1956 All 35 answered the question as follows :
"all sales of the assessee during the previous year which corresponded with the calendar year 1947 have to be taxed at the flat rate of 3 pies per rupee when making the assessment for the assessment year 1948-49".
With special leave, the Commissioner of Sales Tax, U.P. has appealed to this Court against the order of the High Court.
4. It may be observed that the judgement of the Allahabad High Court in Modi Food Products Ltd. s case, AIR 1956 All 35 was confirmed by this Court ; Commissioner of Sales Tax, U.P. v. Modi Sugar Mill Ltd. , 1961-2 SCR 189 : But the Legislature of the State of Uttar Pradesh has sin
