Very important point
The Cess and other Taxes on Minerals (Validation) Act, 1992 is valid but by the aforesaid Act, what in fact has been validated is only the taxes on minerals already realised under the invalid law and not the right to levy tax and realise the same which became due after 4.4.91 even if the liability was incurred under the validation laws before 4.4.91. Patna High Court’s decision upheld and decisions of other High Courts contrary to Patna, relying on Supreme Court’s earlier decision in Kannadasan’s case, 1996(5) SCC 670 are held to be incorrect and overruled.

Headnote:The Cess and Other Taxes on Minerals (Validation) Act, 1992 whether valid?—Whether by the aforesaid Act, what in fact has been validated, is it only the taxes on minerals already realised under the invalid law or the right to levy tax and realise the same, which became due upto 4th April, 1991?—High Court of Patna upholding the validity of the validation Act, but has held that the said validation Act does not authorise the recovery of any tax or cess after 4.4.91, even if the liability was incurred under the validation laws before 4.4.91 and consequently the demand raised by the State of Bihar were quashed and the State was restrained from taking any steps to realise such demand—Whether correct? (Yes)—Decisions of other High Courts contrary to Patna view, relying on Supreme Court judgment in Kannadasan’s case, held are incorrect—Order accordingly—Case law discussed—Intention of Parliament stated—Impact of Article 265 of Constitution on the Act considered —Whether the Act is a temporary statute or not answered—Order accordingly (Cross Ref. Contract Act, 1872—Section 72) (Constitution of India—Articles 136 and 265).
       Held : In the context of the submissions made by the counsel for different parties, noted above, the crutial question that arises for consideration is what really Parliament intended to validate by enacting the Validation Act? (Para 18)
       It is no doubt true, that in Kannadasan’s case, a Bench of two learned judges of this Court interpreted the provisions and held that the effect of validation would confer a right on the State Government to make fresh levy and collection of dues which was collectable upto 4th April, 1991, but we are in respectful disagreement with the aforesaid conclusion, as in our considered opinion, neither the language of Section 2(1) nor the Objects and Reasons appended to the Validation Act, as Prefatory Note, stipulates that to be the object, nor even the Parliament thought it fit to have a saving clause in the Validation Act, as was done in Joara Sugar Mills case. On a construction of the provisions of the Validation Act, and bearing in mind the situation under which the Act was enacted and a void Act was given life upto a particular period by drafting legislative competence for the same in the teeth of the provisions contained in Article 265 of the Constitution, we are persuaded to accept the arguments advanced by the learned counsel appearing for the assessee in different cases, Mr. Shanti Bhushan, Mr. K.K. Venugopal, Mr. Parasaran, Dr. Singhvi, Mr. Ranjit Kumar, and others that the said Validation Act cannot be construed to have conferred a right to make levy and collection of cess or taxes on minerals which was collectable up to 4th April, 1991, as was held in Kannadasan’s case, but it merely validated the collections already made so that the State will not be burdened with the liability of refunding the amount, already collected under void law. In our considered opinion, therefore, the earlier decision in Kannadasan’s case to the contrary must be held to have been not correctly decided. At this stage it would be appropriate to discuss the provisions of Article 265 of the Constitution and its impact on the interpretation of the Validation Act. Under Article 265 of the Constitution, no tax shall be levied or collected except by authority of law. It is thus explicit that not only the levy, but also the collection of a tax must be under the authority of some law. The authority of law refers to a valid law which in turn would mean that the tax proposed to be levied must be within the legislative competence of the legislature, imposing the tax and the law must be validly enacted. It must not also contravene the specific provisions of the Constitution and the tax in question must be authorised by such valid law. The expression "levy and collection" are used in Article 265 in a comprehensive sense and are intended to include the entire process of taxation commencing from taxing statute to the taking away of the money from the citizen. What the Article enjoins is that every stage in this entire process must be authorised by the law. This being the position, in the case in hand, several tax legislations enumerated in the Schedule to the Validation Act having been declared ultra vires, on the ground that the State Legislature had not the legislative competence to make the legislation, there existed no authority of law for making any levy or collection of tax and cesses on minerals. The Parliamentary intervention by enacting the Validation Act and giving it retrospective effect and making the law existed till 4.4.91. What has been achieved is a valid and legal taxing provision and then by fiction, making the tax already collected to stand under the re-enacted law. In the absence of any provisions in the Validation Act, the relevant provisions of the State laws, which stood expired on 4.4.1991, to hold that the Validation Act authorises, imposing and collection of tax and cesses on minerals, even after 4.4.1991, in respect of the minerals extracted till 4th of April, 1991, on which the cess was collectable, would contravene Article 265 of the Constitution, inasmuch as there did not exist any valid provision or authority of law for making such collection. In this view of the matter, we are persuaded to agree with the submission made by Mr. Shanti Bhushan on this question that the Parliament never intended to confer an authority on the State Government to make any fresh levy and collection of the cess and taxes on minerals, which was collectable upto 4th of April, 1991 under the Validation Act and the judgment of this Court in Kannadasan’s case, must, therefore, be held not to have been correctly decided. (Para 19)
       Let us now examine the question, as to whether the Statute is a temporary Statute or not? (Para 20)
       While infusing life into the void State laws by fictional Parliamentary enactment under the Validation Act and keeping it alive till 4th April, 1991, the Parliament never conferred any right upon the State Government to make any levy or collect cess which have not been collected though collectable upto 4.4.1991. The Parliament merely conferred the life to the void statute by fictional re-enactment and granting legislative competence for limited purpose so that the State would not be called upon to refund the cess already collected under such void law. In the aforesaid premises, we do not find much force in the contention of Mr. Dwivedi about the enduring nature of the law in question and we hold that relevant provisions of the State laws which were validated under the Validation Act and were alive till 4.4.1991 having expired on that date there is no authority of law under which the State would raise any demand or make any collection of cess and tax on minerals under the expired provisions of the State laws. The conclusion of this Court in Kannadasan’s case to the contrary, therefore, must be held to be not correct in law. In Orissa Cement Case, this Court though declared the levy of cess to be unconstitutional, but further directed that there shall be no direction to refund to the assessee of any amounts of cess collected until the date on which the levy in question has been declared un-constitutional. This date so far as Bihar was concerned, was the date of the judgment i.e. 4.4.91, in case of Orissa, the date was 22nd December, 1989 and in case of Madhya Pradesh, the date was 28th of March, 1986. It was held that any cess collected after the aforesaid dates by the respective States has to be refunded and the States cannot be permitted to retain the cess collected. It is to obviate the aforesaid difficulty, particularly in case of States of Orissa and Madhya Pradesh, though such difficulty was not there in case of Bihar, the Parliament came forward with the Validation Act. It is true, as Mr. Dwivedi contended that there was no necessity for including the Bihar Act in the Schedule, since the Parliament was enacting the Act only till 4.4.1991, but since several State laws were being re-enacted and 4.4.91 was the last date of the judgment of this Court in Orissa Cement, it was thought fit to have the legislation effective till 4.4.91 but for the limited purpose, so that the State would not be liable to refund any cess which it might have collected even subsequent to the relevant State laws having been declared unconstitutional. We find sufficient force also in the contention of Mr. K.K. Venugopal that the law never existed after 4.4.1991 and consequently, there cannot be any right with the State to make any levy or collection of the cess, which was collectable upto 4.4.91. Mr. Venugopal is right in his submission that under the Validation Act, only past actions have been sought to be validated and that too by a fictional enactment of the State laws by the Parliament, keeping it alive till 4.4.91. There is also some force in the contention of Mr. Venugopal that even if there might have been an imposition of levy but not collected, the same cannot be collected after 4.4.91. as the machinery for collection would not be available and permitting any such collection beyond that date would contravene Article 265 and such an action may be violative of Article 300A of the Constitution. The expression "law" in the context of Article 300A must mean an Act of Parliament or of a State legislature, a rule or statutory order having the force of law, as has been held by this Court in Bishambhar Dayal, 1982 (1) SCC 39. Consequently, in the absence of any such law after 4.4.91 being in force, the State cannot be conferred a right to levy or collection after 4.4.91. (Para 20)
       When Parliament enacted the Validation Act and infused life into the void Act for lack of legislative competence, it must be assumed that the Parliament knew the constitutional position and was fully aware of the position of the law and the necessity of providing a saving Clause, in the event, the Parliament intended to confer a right of collection as well as levy subsequent to 4.4.91. The deliberate and conscious omission of the saving clause by the Parliament, as contended by Dr. A.M. Singhvi, is of considerable significance and cannot be lightly brushed aside, as contended by Mr. Dwivedi, appearing for the State of Bihar. It is true that the pattern of validation, as indicated by Mr. Parasaran, may not be a clinching factor in construing the provisions of the Act, but at the same time the fact that in Joara Sugar Mills case, as well as in some other cases, while validating, laws have been enacted and saving clause has been provided which are in pari materia with Section 6 of the General Clauses Act and absence of such a provision in the present Validation Act is in consonance with the very object and reasons, as appended to the Act. The said object being to validate the cess and taxes on minerals, already collected under a void law. Dr. Singhvi is also right in his submission that this Court in Kannadasan’s case drew wrong analogy from Gangopadhyay’s case and erroneously held that provisions therein were identical to the provisions of the Validation Act of 1992. Section 2(1) of the Validation Act having used the expression "upto 4.4.91", it unequivocally indicates that what is validated is the process of levy and collection made upto that date and no further. This being the position and the Validation Act not having provided any provision, permitting levy or collection after 4.4.91, we are of the opinion that the Act never conferred a right of levy or collection after 4.4.91. The Judgment of Patna High Court, therefore, must be held to be in accordance with law and the judgment of this Court in Kannadasan’s case must be held to have been wrongly decided. In Kannadasan’s case, this Court while interpreting the Validation Act, held that the Act authorises levy and collection even after 4.4.91, as otherwise, it will be held to be discriminatory and violative of Article 14 inasmuch as if two persons would be equally liable to pay, the person who has paid the tax would be at the disadvantage, than the person, who did not pay and challenge the demand. This reasoning of the Court in Kannadasan runs contrary to the observations of this Court in Mafatlal Industries, 1997(5) SCC 536 : 1997(1) Supreme 684, while this Court dealing with the principle of unjust enrichment, categorically stated that a person who has not paid and has successfully challenged the demand in a Court of law stands on a different footing from a person who has chosen to pay and has not challenged the same. We are, therefore, of the considered opinion that this Court erroneously held that Article 14 would be attracted unless the provision of the Validation Act is interpreted to mean that it not only validates the collection made but also entitles fresh collection and levy, even after 4.4.91 of the dues which was collectable upto 4.4.91. The contention advanced by the State with reference to Section 2(3) of the Validation Act to the effect that it is indicative to confer a substantive power to levy and collect cess and other taxes on minerals, is in our opinion, wholly misconceived. All that sub-section (3) of Section 2 means, which has been introduced for removal of difficulty is that notwithstanding the fact that the State law remained in force till April, 1991, if an assessee has paid more than what he is legally liable to pay and an application for refund had already been made, then he would have the right to get refund of the excess tax paid, even though the life of the Act expires on April 04, 1991. This can be held to be a limited saving clause, conferring a right of refund on the assesses if such assessee has paid in excess of what is due and the said provision cannot be invoked to give a wider interpretation of Section 2(1) or Section 2(2). In this context, we are persuaded to accept the submission of Mr. Ganguli that the removal of difficulty clause, engrafted in Section 2(3) of the Validation Act is of a limited application, dealing with the right of the assessee to get refund of the excess tax paid and by no stretch of imagination could be construed to hold that it conceives of both levy and collection of cess and taxes on minerals by the State even after expiry of 4.4.1991. It will be appropriate to notice one of the contentions raised by Mr. Ranjit Kumar, appearing for India Cement Limited in S.L.P. (Civil) Nos. 12993-12995 of 1998 to the effect that notwithstanding the promulgation of the Tamil Nadu Act, the assessee challenged the levy and the High Court had granted stay of the levy and collection of cess. Even after the judgment of the High Court, while the appeal was pending in this Court, the stay order was overrating and the assessee never passed on the cess component to the consumer or end user, and also could not have passed on the same, as the commodity was a controlled commodity. If after this length of time, the Validation Act is interpreted to mean a right being conferred upon the State to impose the levy and collection of the same from 1964, it would work out gross injustice to the assessee and even would run contrary to the very judgment of the Court inter-parties. Though this contention may not be a clinching issue in interpreting the provisions of the Validation Act, but it cannot be totally lost sight of, and if any other interpretation is permissible, then the same must be adhered to, particularly, in relation to a taxing Statute. We do find considerable force in the aforesaid submission, as in our view, the interpretation, we have already given to the Validation Act was the real intention of the Parliament and it never intended to confer a right of collection of cess. In agreement with the conclusion arrived at by Patna High Court, we hold the Validation Act to be valid, but such validated Acts do not authorise any fresh levy or collection in respect of liabilities accrued prior to 4.4.91, though it prohibits refund of the collection already made prior to that date. (Paras 21 to 24)
       Held consequently : In view of our conclusions, as aforesaid, we do not find any infirmity with the conclusion of the Division Bench of Patna High Court requiring our interference with the same. The said judgment of the Division Bench of Patna High Court is accordingly upheld. C.A. Nos. 13102-13107 stand dismissed. The batch of cases from the judgment of Karnataka High Court are allowed and the judgment of Karnataka High Court following the decision of this Court in Kannadasan’s case is set aside. The batch of cases arising out of the judgment of Andhra Pradesh High Court for the self same reason are allowed and the judgment of Andhra Pradesh High Court is set aside. The Review Petitions filed in this Court for Reviewing the judgment of Kannadasan’s case at the behest of the assessees cannot be disposed of, notwithstanding our conclusion that the decision of this Court in Kannadasan’s case is not correct in law in as much as no formal notice had been issued to the State of Tamil Nadu. Notice may, therefore, be issued to the State of Tamil Nadu in those Review Petitions whereafter the Review Petitions could be posted for disposal. So far as the batch of cases which are pending before Madhya Pradesh High Court, though application under Article 139(a) had been filed for getting Writ Petitions transferred, but no order of transfer had been passed and, as such, the Writ Petitions are still pending before the High Court of Madhya Pradesh. In these circumstances, the Transfer Applications filed stand disposed of with the direction that the High Court will dispose of the pending Writ Petition in the light of our judgment in Bihar case. But Civil Appeal No. 9917/96 against the judgment of Madhya Pradesh High Court, directed against the judgment of the said Court dated 10.5.95, stands disposed of. Similarly, Review Petitions Nos. 2363, 2364 , 2365 of 1998, filed in Civil Appeal Nos. 9913 of 1996, 9912 of 1996 and 9905 of 1996 also stand disposed of. (Para 25)
       Held finally : All these appeals and applications stand disposed of accordingly. There will be no order as to costs. (Para 26)

JUDGMENT

Pattanaik, J.—Delay condoned.

2. Leave granted in all the SLPs.

3. This batch of cases relate to the Cess and other Taxes on Minerals (Validation) Act, 1992 [hereinafter referred to as ‘the Act’]. The question for consideration is, by the aforesaid Act, what in fact has been validated, is it only the taxes on minerals already realised under the invalid law or the right to levy tax and realise the same, which became due upto 4th of April, 1991? Several cases arising from different States have been tagged on to the main matter arising out of the judgment of the Patna High Court, were listed together, but we think it appropriate to decide the Bihar matter, so that the law laid down therein would be followed in other cases. Incidently, the earlier judgment of this Court arising out of the said Validation Act in relation to the levy of tax on minerals in the State of Tamil Nadu in the case of P. Kannadasan and Ors. v. State of Tamil Nadu and Ors.1, is required to be reconsidered and it is for that purpose, these cases have been referred to a three Judge Bench. In the case arising out of the judgment in Patna High Court in S.L.P. (Civil) No.13102-13107 of 1996, the State through the District Mining Officer is the petitioner and by the impugned judgment, the High Court though has upheld the validity of the Validation Act, but has held that the said Validation Act does not authorise the recovery of any tax or cess after 4.4.91, even if the liability was incurred under the Validated laws before 4.4.1991 and consequently, the demand raised by the State were quashed and the State was restrained from taking any steps to realise such demand. Be it be stated that a batch of writ petitions were filed by several assessees, assailing the legality of the demands raised by the Mining Authorities for payment of cess in respect of such dues, which would be leviable till 4th of April, 1991. In the batch of cases relating to State of Madhya Pradesh, after the judgment of this Court in Kannadasan’s case, the State of Madhya Pradesh issued notice to several assessees, raising the demand and such demand was assailed by filing writ petitions in the High Court. Applications had been filed in this Court for getting those writ petitions transferred, but no order of transfer has been passed by this Court and as such the writ petitions are still pending before the High Court of Madhya Pradesh and we, therefore, do not propose to deal with those matters, since the High Court can well dispose of the same, on the basis of our judgment in the Bihar Case. Civil Appeal No. 9917 of 1996, however is directed against the judgment of Madhya Pradesh High Court dated 10.5.1995. Before the High Court , the validity of the Ordinance No.7 of 1992 as well as Cess Validation Act 16 of 1992 had been assailed. The High Court, by the impugned judgment upheld the validity of the aforesaid Validation Act. We are in respectful agreement with the said conclusion and hold the Validation Act to be constitutionally valid. Hence no interference is called for in the Civil Appeal. But the dispute, whether fresh notice could be issued for collection and levy of dues in respect of liability accrued till 4.4.91 is the subject matter in pending writ petitions in the High Court. In the cases arising out of the judgment in Karnataka High Court , the High Court has followed the judgment of this court in Kannadasan and thus upheld the right of the State to levy demand and collect, which was collectable upto 4.4.1991 and the assessees are challenging the said judgment in this Court. Several Writ Petitions were filed under Article 32, challenging the constitutional validity of the Validation Act as well as for quashing the demand notices dated 1.8.98 and 2.9.98, issued by the Department of Mines and Zoology in the State of Karnataka. In the cases arising out of judgment of Andhra Pradesh High Court, the High Court followed the judgment of this court in Kannadasan and upheld the Constitutiona

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2001 Supreme(SC) 1011

Cases Referred (16)