Validating sales tax fiction upheld where a deeming explanation clarified dealer status and cured earlier defects.

Explanation II to section 2(c) of the Orissa Sales Tax (Amendment and Validation) Act, 1979 was upheld as a valid validating and clarificatory provision. The Court held that an explanation may remove ambiguity, suppress mischief, and advance the remedy, and in appropriate cases may function as a substantive adjunct to the main definition. Retrospective operation and validation of prior assessments were not unconstitutional merely because they enlarged the practical reach of the definition of dealer. Deeming the Central and State Governments and their employees acting in official capacity as dealers disclosed no illegality, discrimination, or lack of legislative competence, so the constitutional challenge failed.

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Issues: Whether Explanation II to section 2(c) of the Orissa Sales Tax (Amendment and Validation) Act, 1979, which deems the Central Government, the State Government and their employees acting in official capacity to be dealers, is invalid on the grounds that it is inconsistent with the main definition of dealer, impermissibly creates a deeming fiction in a taxation statute, and is otherwise unconstitutional.

Analysis: The challenge to the amending Act was confined at the hearing to Explanation II and the contention that it could not enlarge the main definition of dealer. The Court held that the legislative object was to cure defects noticed in earlier decisions and to validate assessments and collections made under the principal Act. An explanation may legitimately be used to clarify ambiguity, suppress mischief, and advance the remedy, and in appropriate circumstances it may operate in the nature of a proviso or even as a substantive adjunct to the main enactment. Retrospective operation and validating legislation are not, by themselves, unconstitutional, and the inclusion of Government departments and officials within the deeming provision did not disclose any illegality, discrimination, or want of legislative competence.

Conclusion: Explanation II to section 2(c) was upheld as valid, and the constitutional challenge to it failed.

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