Retrospective tax validation upheld for condensed milk, but a final writ mandamus remained binding between the parties.
Retrospective sales tax amendment excluding condensed milk from exemption was upheld as a rational tax classification; the State could validly tax condensed milk retrospectively, and the corresponding Central Sales Tax liability also followed. The constitutional challenges under Articles 14, 19 and 301 failed because taxation legislation enjoys wide latitude and the amendment concerned intra-State sales, not inter-State trade. The retrospective validation could also cure the basis of earlier assessments and the prior Full Bench view. However, a final writ mandamus already issued under Article 226 between the same parties remained binding and could not be displaced by ordinary validation.
Issues: (i) Whether the U.P. Sales Tax (Amendment) Act, 1974, retrospectively excluding condensed milk from exemption and validating prior action was unconstitutional under Articles 14, 19 and 301 of the Constitution, and whether it could also sustain liability under the Central Sales Tax Act; (ii) Whether the amendment could displace the effect of the prior Full Bench judgment and the writ mandamus already issued under Article 226 of the Constitution.
Issue (i): Whether the U.P. Sales Tax (Amendment) Act, 1974, retrospectively excluding condensed milk from exemption and validating prior action was unconstitutional under Articles 14, 19 and 301 of the Constitution, and whether it could also sustain liability under the Central Sales Tax Act.
Analysis: The amended section 4 expressly removed condensed milk, milk powder and baby milk from exemption and operated retrospectively. The legislative classification of condensed milk apart from ordinary milk was held to be rational in the field of taxation, where the Legislature enjoys wide latitude in selecting taxable commodities. The retrospective levy was not treated as unreasonable merely because the period of retrospectivity was short or because dealers could not pass on the burden. The challenge under Article 301 also failed because the amendment concerned intra-State sales taxation and not the regulation of inter-State trade or commerce. Since the amended State law made condensed milk taxable, the corresponding liability under the Central Sales Tax Act also followed, and the validating provision was effective for that purpose.
Conclusion: The amendment was held valid and intra vires, and the constitutional challenges under Articles 14, 19 and 301 failed.
Issue (ii): Whether the amendment could displace the effect of the prior Full Bench judgment and the writ mandamus already issued under Article 226 of the Constitution.
Analysis: The retrospective amendment could neutralise the basis of the Full Bench decision and validate assessments made under the amended law, because the Legislature had cured the defect by re-enacting section 4 with retrospective effect. However, the earlier writ petition had resulted in a final mandamus directing modification of the assessment for assessment year 1967-68. A legislative validation clause could not extinguish the binding force of that concluded writ order between the parties, and the authorities remained bound to obey it in the absence of any statutory mechanism for reopening that judgment.
Conclusion: The prior Full Bench-based claim failed, but the mandamus issued in the writ petition remained binding and had to be obeyed.
Final Conclusion: The amendment statute was upheld, but limited relief survived in relation to the final writ mandamus for assessment year 1967-68, so the petitions succeeded only to that extent.
Ratio Decidendi: Retrospective tax legislation may validly cure the basis of earlier assessments and judgments by re-enacting the charging or exemption provision with retrospective effect, but it cannot, by ordinary validation alone, nullify a final mandamus already issued under Article 226 between the same parties.
TaxTMI 
AI Drafter ✕
TaxTMI 
