Retrospective tax validation upheld where Parliament removed the defect in the earlier decision and sustained the levy.

A validating statute can retrospectively sustain levy, assessment and collection of sales tax where it removes the defect identified by an earlier judgment and is enacted within legislative competence. The Delhi High Court held that the repeal and saving framework did not erase the earlier provisions for all purposes, and Parliament could use referential retrospective legislation to deem the amendment and withdrawal of exemptions valid. The constitutional challenge under Articles 141, 265 and 19 failed because the enactment altered the legal basis of the prior decision and did not establish an impermissible infringement of protected freedoms or an unconstitutional delegation. The writ petitions were dismissed and the revenue action upheld.

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Issues: (i) Whether the Delhi Sales Tax (Amendment and Validation) Act, 1976 validly removed the basis of the earlier judicial decision and retrospectively validated the levy, assessment and collection of sales tax on the commodities in question. (ii) Whether the validating legislation was unconstitutional as violating Articles 141, 265, 19(1)(f) and 19(1)(g) of the Constitution of India.

Issue (i): Whether the Delhi Sales Tax (Amendment and Validation) Act, 1976 validly removed the basis of the earlier judicial decision and retrospectively validated the levy, assessment and collection of sales tax on the commodities in question.

Analysis: The validating statute was examined in the light of the repeal effected by the Delhi Sales Tax Act, 1975, the saving effect of Section 6 of the General Clauses Act, and the legislative competence of Parliament. It was held that the repealed provisions were not obliterated for all purposes, and that Parliament could, by referential and retrospective legislation, deem the earlier amendment and withdrawal of exemptions to have been validly made by legislative authority. The basis of the prior judicial decision was thus removed by a substantive parliamentary enactment.

Conclusion: The validation was effective and the levy, assessment and collection of tax were retrospectively sustained.

Issue (ii): Whether the validating legislation was unconstitutional as violating Articles 141, 265, 19(1)(f) and 19(1)(g) of the Constitution of India.

Analysis: The challenge based on Articles 141 and 265 failed because the legislature was competent to enact a retrospective validating law that altered the legal basis of the earlier decision. The challenge under Article 19 also failed because retrospective fiscal legislation designed to validate revenue already levied or collectible was not shown to infringe the protected freedoms in the manner alleged. The Court also found no unconstitutional excessive delegation in the parliamentary scheme adopted for validation.

Conclusion: The constitutional challenge to the validating enactment was rejected.

Final Conclusion: The writ petitions failed on both the statutory and constitutional challenges, and the revenue action was upheld.

Ratio Decidendi: A validating statute is effective where it removes the defect identified by the earlier judicial decision and is enacted within legislative competence, and retrospective validation of tax demands is not invalid merely because it follows a prior contrary judgment.

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