1973 (10) TMI 46 - HC - VAT and Sales Tax

Court Upholds Retrospective Tax Amendments, Partially Quashes Demand Notice

Chhotalal Keshavram Versus Additional Assistant Commissioner of Sales Tax, Raipur and Another

The court upheld the validity of the retrospective amendments to the Madhya Pradesh General Sales Tax Act, 1958, and the Madhya Pradesh General Sales Tax ... - Issues Involved:1. Legislative competence to retrospectively amend the Madhya Pradesh General Sales Tax Act, 1958.2. Application of the principle of res judicata to legislative amendments.3. Validity of the Madhya Pradesh General Sales Tax (Second Amendment) Act, 1964.4. Validity of the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1967.5. Liability of transferee-firm for tax dues of transferor-firm under Section 33 of the M.P. General Sales Tax Act, 1958.Issue-wise Detailed Analysis:1. Legislative Competence to Retrospectively Amend the Madhya Pradesh General Sales Tax Act, 1958:The petitioner challenged the order dated 10th July, 1972, passed by the Additional Assistant Commissioner of Sales Tax, Raipur, on the ground that the State Legislature lacked the legislative competence to validate the provisions of the Madhya Pradesh General Sales Tax Act, 1958, retrospectively, thereby nullifying a Supreme Court decision. The court noted that the Madhya Pradesh General Sales Tax (Second Amendment) Act, 1964, inserted Section 18-A retrospectively, which allowed for the assessment of tax escaping assessment for periods before the commencement of the Act. This amendment was challenged as unconstitutional on the grounds that it violated the principle of res judicata and Article 141 of the Constitution of India, which provides that the law declared by the Supreme Court shall be the law of the land.2. Application of the Principle of Res Judicata to Legislative Amendments:The petitioner argued that the principle of res judicata, as laid down by the Supreme Court in various cases, applied to the present case, preventing the State Legislature from nullifying the Supreme Court's decision. However, the court opined that while the principle of res judicata is generally applicable, it is subject to the exception that the Legislature has the power to amend the law retrospectively, thereby nullifying even decisions of law courts. The court cited several Supreme Court cases to support this view and concluded that the retrospective amendment by the Legislature abrogates the principle of res judicata.3. Validity of the Madhya Pradesh General Sales Tax (Second Amendment) Act, 1964:The court examined the validity of the Madhya Pradesh General Sales Tax (Second Amendment) Act, 1964, which inserted Section 18-A retrospectively. The court held that the Amendment Act was validly enacted and not contrary to Article 141 of the Constitution of India. The retrospective amendment of the principal Act was deemed to nullify the earlier decision between the parties, as the principal Act itself was amended and not merely an action validated retrospectively.4. Validity of the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1967:The court also considered the validity of the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1967, which amended Section 52 of the principal Act and validated certain proceedings. The court upheld the validity of this Amendment Act based on the principles laid down by the Supreme Court in various cases. The court noted that the amendments made by the 1967 Act were consistent with the legislative power to enact laws retrospectively and validated proceedings initiated or assessments made before the amendments.5. Liability of Transferee-Firm for Tax Dues of Transferor-Firm under Section 33 of the M.P. General Sales Tax Act, 1958:In Misc. Petition No. 429 of 1971, the petitioner challenged the demand notice issued by the taxing authorities for the tax dues of the transferor-firm. The court noted that the taxing authorities are not bound by any agreement between the transferor and transferee firms but are governed by statutory provisions. The court referred to Section 33 of the M.P. General Sales Tax Act, 1958, which provides that the transferor and transferee shall be jointly and severally liable for the tax dues. However, the proviso to Section 33(4) requires that an attempt be made to recover the amount from the transferor-firm first, and only if it is found to be irrecoverable, can the amount be recovered from the transferee-firm. The court found that the taxing authorities did not attempt to recover the amount from the transferor-firm and quashed the demand notice to the extent that it required the transferee-firm to pay the tax dues without first attempting to recover from the transferor-firm.Conclusion:The court dismissed Misc. Petition No. 835 of 1972, upholding the validity of the retrospective amendments to the Madhya Pradesh General Sales Tax Act, 1958, and the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1967. In Misc. Petition No. 429 of 1971, the court partially allowed the petition, quashing the demand notice to the extent that it required the transferee-firm to pay the tax dues without first attempting to recover from the transferor-firm.