Validating amendment and retrospective sales tax provisions upheld for supply of food and drinks in hotels and restaurants.

A validating constitutional amendment expanded "sale of goods" to include supply of food and drinks in hotels, restaurants and eating houses, curing the defect identified in earlier decisions and sustaining past sales tax levies, subject to statutory exemption. The Andhra Pradesh sales tax amendment was also upheld: the legislature's retrospective charging and machinery provisions were treated as within competence, the retrospective operation was not found arbitrary, and the burden of proving non-collection of tax for exemption purposes could be placed on the dealer because the relevant facts were within the dealer's special knowledge.

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Issues: (i) Whether section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, was within the constituent power of Parliament and valid, and whether it validated past sales tax levies on supply of food and drinks in hotels, restaurants and eating houses. (ii) Whether sections 5C, 5D and 38 of the Andhra Pradesh General Sales Tax (Amendment) Act, 1985, including their retrospective operation and the burden placed on the dealer to prove non-collection of tax, were constitutionally valid.

Issue (i): Whether section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, was within the constituent power of Parliament and valid, and whether it validated past sales tax levies on supply of food and drinks in hotels, restaurants and eating houses.

Analysis: The constitutional amendment enlarged the expression "tax on the sale or purchase of goods" so as to include supply of food and drinks by way of service and deemed such supplies to be sales. The validating provision was intended to remove the defect pointed out by earlier decisions and to cure the basis on which levy on such transactions had been held ineffective. The Court held that the amendment did not offend the basic structure and was a valid exercise of constituent power. The past transactions were therefore validly validated, subject to the statutory exemption.

Conclusion: The challenge to section 6 of the Constitution (Forty-sixth Amendment) Act, 1982, failed and the provision was upheld.

Issue (ii): Whether sections 5C, 5D and 38 of the Andhra Pradesh General Sales Tax (Amendment) Act, 1985, including their retrospective operation and the burden placed on the dealer to prove non-collection of tax, were constitutionally valid.

Analysis: The amendment Act amended the definitions of dealer, sale, turnover and tax, introduced charging and machinery provisions, and gave them retrospective effect from 2 February 1983. The Court held that the State Legislature was competent to levy tax on such supplies after the constitutional amendment, that the retrospective operation was not arbitrary or unreasonable, and that the burden of proving non-collection of tax for claiming exemption was properly placed on the dealer because the relevant facts were within the dealer's special knowledge. The Court also held that the impugned provisions did not violate Articles 14, 19(1)(g), 21, 141, 265 or 300-A.

Conclusion: Sections 5C, 5D and 38 of the Andhra Pradesh General Sales Tax (Amendment) Act, 1985, were upheld, including their retrospective effect and burden allocation.

Final Conclusion: The impugned constitutional and statutory provisions were sustained, and the petitioners remained liable to tax on the covered supplies for the relevant past and retrospective periods, subject to the exemption conditions.

Ratio Decidendi: A validating constitutional amendment and a retrospective taxing statute are valid where they remove the basis of prior judicial invalidation, operate within legislative competence, and do not impose an unconstitutional restriction merely because liability is made retrospective or because the burden of proving an exemption is placed on the person claiming it.

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