Retrospective tax assessment rule struck down, while uniform sales tax year definition was upheld as a valid machinery provision.

Section 43(11)(i) of the Karnataka Sales Tax Act could not validly require dealers to close accounts on 31 March 1987 and file returns for a truncated period, because that would impose a retrospective burden without express legislative authority. The amended definition of "year" in section 2(1)(x) was treated as a machinery provision within the State's taxing power under entry 54 of List II, as it supported uniform assessment and tax administration. The challenges under article 19(1)(g), article 19(6), and article 25 failed because the uniform closing date was viewed as a regulatory measure for assessment and not an unreasonable trade restraint or interference with religion.

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Issues: (i) whether section 43(11)(i) of the Karnataka Sales Tax Act, as inserted by the amending Act, could validly require dealers to close their accounts on 31 March 1987 and file returns for the truncated period; (ii) whether the amended definition of "year" in section 2(1)(x) was within the legislative competence of the State Legislature under entry 54 of List II; (iii) whether the amendment violated the freedom of trade under article 19(1)(g) and constituted an unreasonable restriction under article 19(6); and (iv) whether the amendment infringed article 25 of the Constitution of India.

Issue (i): whether section 43(11)(i) of the Karnataka Sales Tax Act, as inserted by the amending Act, could validly require dealers to close their accounts on 31 March 1987 and file returns for the truncated period.

Analysis: The amended definition of "year" was to operate from 1 April 1987, but section 43(11)(i) compelled dealers to treat 31 March 1987 as the closing date for the assessment year already in progress. The provision thus imposed a retrospective burden by splitting the existing accounting period and fastening a new obligation for a period already underway. Such retrospectivity was not expressly authorised by the amending Act, and the measure could not be treated as a mere procedural adjustment. The provision also disturbed the position that had prevailed under the earlier regime, under which dealers were allowed to close accounts according to their chosen accounting year.

Conclusion: Section 43(11)(i) was held to be ultra vires and was struck down in favour of the assessee.

Issue (ii): whether the amended definition of "year" in section 2(1)(x) was within the legislative competence of the State Legislature under entry 54 of List II.

Analysis: The amendment was treated as a machinery provision designed to secure a uniform assessment year and to aid the administration and collection of sales tax. A provision of this kind was held to fall within the incidental and ancillary powers attached to the State's taxing power under entry 54. The fact that the amendment affected the mode of assessment did not take it outside the legislative field, because machinery provisions may be enacted to give effective content to the charging scheme and should be construed so as not to defeat taxation.

Conclusion: The amendment to section 2(1)(x) was upheld as within legislative competence and not ultra vires entry 54, against the assessee.

Issue (iii): whether the amendment violated the freedom of trade under article 19(1)(g) and constituted an unreasonable restriction under article 19(6).

Analysis: The requirement to adopt a uniform financial year was held to be a regulatory incident of the sales tax scheme and not a prohibition on trade. The measure served administrative expediency and simplification of assessment and was not shown to impose a restriction so excessive as to be unreasonable. As the amendment was sustained as an ancillary and incidental measure in aid of taxation, the challenge under article 19(1)(g) necessarily failed, and the restriction was treated as justified under article 19(6).

Conclusion: The challenge under article 19(1)(g) and article 19(6) was rejected, against the assessee.

Issue (iv): whether the amendment infringed article 25 of the Constitution of India.

Analysis: No material was shown to establish that fixing 31 March as the uniform closing date interfered with any religious practice or belief protected by article 25. The provision regulated the accounting and assessment structure of dealers and did not amount to a law abridging freedom of religion.

Conclusion: The challenge based on article 25 was rejected, against the assessee.

Final Conclusion: The writ petitions succeeded only to the extent of invalidating the retrospective enforcement provision, while the challenge to the amended definition of "year" and the constitutional attacks under articles 19 and 25 failed.

Ratio Decidendi: A statutory amendment regulating the assessment year in a fiscal law may be upheld as an incidental and ancillary machinery provision within the taxing power, but it cannot be given a retrospective operation that fastens a new liability without clear legislative authority.

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