Retrospective validation of sales tax notification upheld where amendment cured the mode of specifying the taxable point.
A retrospective amendment can validate a prior sales tax notification where the amendment is deemed always to have formed part of the principal Act, because the defect concerns only the mode of specifying the taxable point and not the existence of taxing power. On that footing, the notification fixing the single point of levy for cotton cloth and cotton yarn, and the assessments based on it, were treated as valid. The amendment also was not invalid under Article 286(3), since it did not itself impose tax or authorise its imposition; it merely regulated the manner of notification and did not attract the presidential assent requirement.
Issues: (i) Whether the notification fixing the point of levy for cotton cloth and cotton yarn was invalid for want of a prior rule under section 3-A of the U.P. Sales Tax Act, 1948, and whether the retrospective amendment validating the substitution of "as the State Government may specify" operated to cure the defect. (ii) Whether the U.P. Sales Tax (Amendment) Act, 1952 was void under Article 286(3) of the Constitution of India for having been enacted without Presidential assent in relation to essential goods.
Issue (i): Whether the notification fixing the point of levy for cotton cloth and cotton yarn was invalid for want of a prior rule under section 3-A of the U.P. Sales Tax Act, 1948, and whether the retrospective amendment validating the substitution of "as the State Government may specify" operated to cure the defect.
Analysis: Section 3-A empowered the State Government to declare single point taxation by notification. Even if the original wording "as may be prescribed" was construed as requiring prescription by rules, the defect went only to the manner of specifying the point of tax and not to the existence of power to make the declaration. By section 4 of the U.P. Sales Tax (Amendment) Act, 1952, the substituted words were deemed always to have been in the principal Act. The legal fiction had to be carried to its logical conclusion, so that the notification was tested as if the amended wording had always existed. On that footing, the notification and the assessments based on it were valid. The earlier contrary view in the Full Bench decision was not accepted.
Conclusion: The notification was valid and the challenge to the assessment on this ground failed, against the assessee.
Issue (ii): Whether the U.P. Sales Tax (Amendment) Act, 1952 was void under Article 286(3) of the Constitution of India for having been enacted without Presidential assent in relation to essential goods.
Analysis: Article 286(3) struck at a State law imposing or authorising the imposition of tax on declared essential goods unless reserved for the President and assented to by him. The amendment here did not itself impose tax or authorise its imposition; section 3 of the principal Act was the charging provision, while section 3-A merely regulated the single point and manner of notification. The amendment altered the mode of specifying the taxable point and validated the existing notification, but did not create the tax liability. Accordingly, the constitutional prohibition was not attracted.
Conclusion: The amendment was not hit by Article 286(3), and the constitutional challenge failed, against the assessee.
Final Conclusion: The retrospective amendment sustained the notification and the assessments, and the appellants' challenge to the levy and recovery was rejected.
Ratio Decidendi: Where a statute retrospectively deems an amended provision always to have been in force, a prior notification made under that provision is validated if it would have been lawful on the footing of the amended text; a provision that merely regulates the mode of selecting or notifying the taxable point is not a law imposing or authorising the imposition of tax for the purposes of Article 286(3).
TaxTMI 
AI Drafter ✕
TaxTMI 
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