Retrospective tax amendment upheld where State withdrawal of an excise-duty deduction governed Central sales tax computation and defeated exemption

Section 10 exemption was unavailable for excise duty turnover because the statutory conditions were not met: the turnover was taxable under the Central Sales Tax framework as finally amended, and the dealer could not rely on earlier non-leviability once the State deduction had been retrospectively withdrawn. The retrospective deletion of the excise-duty deduction under Madras Act 3 of 1969 was within the State Legislature's competence under entry 54 of List II, and its incidental effect on Central sales tax computation did not convert it into impermissible inter-State sales legislation. The amendment was also not shown to be confiscatory or violative of article 19(1)(f).

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Issues: (i) whether a dealer was entitled to exemption under section 10 of Central Act 28 of 1969 in respect of excise duty turnover on the footing that no tax had been collected and that the earlier law did not permit levy on such turnover; (ii) whether Madras Act 3 of 1969, which retrospectively deleted the deduction for excise duty under the State sales tax law, was beyond legislative competence or violative of article 19(1)(f) of the Constitution of India.

Issue (i): Whether a dealer was entitled to exemption under section 10 of Central Act 28 of 1969 in respect of excise duty turnover on the footing that no tax had been collected and that the earlier law did not permit levy on such turnover.

Analysis: Section 10 granted relief only where the dealer had not collected tax on the belief that it was not leviable and where, under the law as it stood before the amendment, such tax could not have been levied or collected. Section 9 of the Central Sales Tax Act, 1956, as retrospectively amended, attracted the State law only for machinery but the State law, as retrospectively modified by Madras Act 3 of 1969, removed the deduction for excise duty for the relevant period. On that construction, the turnover relating to excise duty was taxable under the Central Act before the amendment and the statutory preconditions for exemption were not satisfied.

Conclusion: The claim to exemption under section 10 failed and the assessee was not entitled to the relief sought.

Issue (ii): Whether Madras Act 3 of 1969, which retrospectively deleted the deduction for excise duty under the State sales tax law, was beyond legislative competence or violative of article 19(1)(f) of the Constitution of India.

Analysis: The retrospective deletion of the deduction fell within the State Legislature's power under entry 54 of List II of Schedule VII, and the incidental impact on Central sales tax assessments did not amount to legislation on inter-State sales. The amendment operated through a legal fiction and had to be given full effect. Retrospective taxation was held not invalid merely because it imposed an additional burden, and the measure was not shown to be confiscatory or otherwise unreasonable.

Conclusion: Madras Act 3 of 1969 was valid and did not infringe article 19(1)(f) of the Constitution of India.

Final Conclusion: The retrospective State amendment governed the Central sales tax computation, the exemption under section 10 was unavailable, and the tax cases and writ petition were dismissed.

Ratio Decidendi: Where the Central Sales Tax Act adopts the State sales tax law as amended, a retrospective withdrawal of a State deduction can lawfully determine Central taxability, and exemption provisions conditioned on non-leviability before amendment cannot be invoked if the turnover was legally taxable on the final law in force.

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