1992 (4) TMI 220 - HC - VAT and Sales Tax

Bombay High Court restricts retrospective amendment of tax rules beyond delegated authority.

The High Court of Bombay ruled in a case concerning the retrospective amendment of Rule 41D of the Bombay Sales Tax Rules, 1959. The Court held that the ... - Issues:1. Validity of amending rule with retrospective effect.Analysis:The judgment delivered by the High Court of Bombay addressed the issue of whether the State Government had the authority to amend a rule with retrospective effect. The petitioner, a company engaged in manufacturing motor vehicles, challenged the amendment to Rule 41D of the Bombay Sales Tax Rules, 1959. The contention was that the rule was amended with retrospective effect from July 1, 1982, through a proviso added on August 10, 1983, which was beyond the power of the rule-making authority. The petitioner argued that imposing additional liability on the assessee with retrospective effect was impermissible.In response to the petition, the Sales Tax Officer contended that the rule amendment was necessitated by the amendments to sections 13A and 14 of the Act, effective from July 1, 1982. The respondents claimed that the retrospective applicability of the proviso in Rule 41D was essential to align the set-off provisions with the amended sections of the Act. They argued that the liability to pay tax remained unchanged, and the amendment only affected the calculation of set-off available to the assessee.The Court delved into the legal principles governing retrospective operation of laws and rules. Citing precedents, including decisions of the Supreme Court, the Court emphasized that a delegated authority could not enact rules with retrospective effect unless expressly empowered to do so. The Court highlighted that while a sovereign Legislature could enact retrospective laws, the same power was not automatically conferred on delegated authorities. The Court scrutinized the language of the statutory provisions and concluded that neither Section 42 nor Section 74 of the Act empowered the State Government to make rules with retrospective effect.The respondents' reliance on a Supreme Court decision regarding retrospective operation of a rule under the Income-tax Act was dismissed by the Court as inapplicable to the present case. The Court ruled that the proviso to sub-rule (3)(a) of Rule 41D could only come into force from the date of publication of the Government Notification on August 10, 1983, and not retrospectively from July 1, 1982. Consequently, the Court allowed the petition, declaring the proviso valid but effective only from the specified date. No costs were awarded in the case.In conclusion, the judgment clarified the limits of rule-making authority in imposing fiscal liabilities retrospectively and underscored the necessity for specific or implied authorization for such actions. The Court's decision provided clarity on the application of the proviso in Rule 41D and upheld the principle that rules cannot create retrospective liabilities without proper legislative empowerment.