Validating turnover tax amendment upheld as a retrospective cure that preserves the levy and defeats constitutional objections.

A validating amendment to the Karnataka Sales Tax Act was held capable of retrospectively curing defects in the earlier turnover tax provision because the Legislature had competence, removed the identified infirmities, and enacted an independent charging provision with express validation of past assessments, collections, refunds, and recoveries. The amended section 6B(1) was also upheld against challenges based on legislative incompetence, hostile discrimination, trade restrictions, and arbitrariness. The court treated total turnover as a basis for identifying the taxable class, not as taxation of constitutionally immune transactions, and found the classification of higher-turnover dealers rational. The amended turnover tax was therefore sustained as constitutionally valid.

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Issues: (i) Whether the validating amendment enacted by Karnataka Act No. 13 of 1982 could retrospectively cure the defects noticed in the earlier turnover tax provision and neutralise the prior writ mandamus restraining collection and directing refund. (ii) Whether the amended turnover tax under section 6B(1) of the Karnataka Sales Tax Act, 1957 was unconstitutional on the grounds of legislative incompetence, hostile discrimination, restriction on trade, or arbitrariness.

Issue (i): Whether the validating amendment enacted by Karnataka Act No. 13 of 1982 could retrospectively cure the defects noticed in the earlier turnover tax provision and neutralise the prior writ mandamus restraining collection and directing refund.

Analysis: A validating law is competent if the Legislature has subject-matter competence, removes the defect noticed in the earlier law, and remains consistent with Part III of the Constitution. The amended section 6B was recast as an independent charging provision, the earlier procedural language was removed, additional exclusions were inserted, and section 3 expressly validated past assessments, levies, collections, refunds, and recoveries notwithstanding any judgment, decree, or order. Those changes were held sufficient to remove the infirmities on which the earlier writ relief had rested, and the Legislature was competent to give the amendment retrospective operation and validate past collections.

Conclusion: The validating amendment was effective, and the prior mandamus could not survive against the retrospectively cured law.

Issue (ii): Whether the amended turnover tax under section 6B(1) of the Karnataka Sales Tax Act, 1957 was unconstitutional on the grounds of legislative incompetence, hostile discrimination, restriction on trade, or arbitrariness.

Analysis: The amended provision was treated as taxing only dealers within the class identified by total turnover, while the reference to total turnover served to identify the class and not to levy tax on constitutionally immune inter-State, export, or import transactions. The proviso operated as a qualifying restriction, and the levy remained on the taxable local turnover. The classification of dealers above the turnover threshold was held to have a rational basis, the absence of collection-pass-through did not make the levy invalid, and the provision did not infringe the freedom of trade or the equality clause. The court also rejected the contention that the scheme of single-point levy barred the Legislature from introducing a higher levy on a selected class of dealers.

Conclusion: The amended turnover tax was upheld as constitutionally valid.

Final Conclusion: The petitions were held to fail in all material respects, and the amended turnover tax provision was sustained against the constitutional and validating challenges.

Ratio Decidendi: A validating Act may retrospectively sustain a levy and neutralise an earlier judicial ruling if the Legislature has competence, cures the defect identified by the court, and enacts a constitutionally valid charging provision that merely uses total turnover to identify the class of taxable dealers.

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