Retrospective sales tax validation upheld for hotel food supplies after statutory definition of sale was expanded.

Retrospective tax legislation was upheld where the Uttar Pradesh amendment cured the defect identified in earlier decisions by redefining "sale" to include the supply of food and drink for consideration. The Constitution (Forty-sixth Amendment) Act, 1982 had expanded the constitutional scope of tax on sales or purchases by inserting article 366(29-A), and the Court treated the State's retrospective validation measure as within legislative competence. On that basis, the challenge to the U.P. Sales Tax (Amendment and Validation) Act, 1985 failed, and the impugned levy on hotel food supplies remained sustainable.

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Issues: Whether the U.P. Sales Tax (Amendment and Validation) Act, 1985 could validly operate retrospectively from 2 February 1983 so as to bring within the definition of sale the supply of food and drink by a hotel or restaurant to customers, and thereby sustain the impugned tax assessment.

Analysis: The Constitution (Forty-sixth Amendment) Act, 1982 widened the concept of tax on the sale or purchase of goods by inserting clause (29-A) in article 366 and empowered the States to levy tax on supply of food or drink for consideration. The Court noted that retrospective legislation is competent in tax matters and relied on the settled principle that legislative power includes the power to legislate retrospectively. It further held that the Uttar Pradesh amendment merely cured the defect noticed in earlier decisions by altering the statutory definition of sale so as to include supply of food and drink for consideration, and therefore the challenge to its validity could not succeed.

Conclusion: The retrospective operation and validity of the U.P. Sales Tax (Amendment and Validation) Act, 1985 were upheld, and the tax on the petitioner's supply of food was sustained.

Final Conclusion: The writ petition failed because the amended statutory scheme validly authorised the impugned levy on hotel food supplies with retrospective effect.

Ratio Decidendi: The legislature may validly enact retrospective tax legislation, and where the statute is amended to bring a transaction within the expanded constitutional definition of sale, the levy is sustainable if the amendment is otherwise within legislative competence.

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