Retrospective tax legislation upheld where revisional sales tax proceedings could not be used to challenge the statute's validity.
A revisional proceeding under the Kerala General Sales Tax Act could not be used to mount a direct ultra vires challenge to the Finance Act, so the statutory validity issue was not maintainable in revision. The Court also held that a State Legislature may enact retrospective fiscal legislation, and that the enhancement of tax on rubber from 5 per cent to 6 per cent with effect from 1 July 1987 was not shown to be unreasonable or unconstitutional. The retrospective levy was therefore upheld and the enhanced rate remained operative for the relevant period.
Issues: (i) Whether the revision petitioner could, in proceedings under section 41 of the Kerala General Sales Tax Act, 1963, challenge the retrospective operation of the Finance Act as ultra vires; and (ii) whether the enhancement of tax on rubber with retrospective effect from 1 July 1987 was invalid or unreasonable.
Issue (i): Whether the revision petitioner could, in proceedings under section 41 of the Kerala General Sales Tax Act, 1963, challenge the retrospective operation of the Finance Act as ultra vires.
Analysis: The challenge went to the legality of the legislation itself. In a revision under the Kerala General Sales Tax Act, such a direct attack on the validity of the enactment was held to be impermissible. The statutory revisional jurisdiction could not be used to question the vires of the Finance Act.
Conclusion: The challenge to the validity of the retrospective legislation was not maintainable in revision.
Issue (ii): Whether the enhancement of tax on rubber with retrospective effect from 1 July 1987 was invalid or unreasonable.
Analysis: The amended entry raised the rate of tax on rubber from 5 per cent to 6 per cent and section 1(2) of the Kerala Finance Act, 1987 gave the amendment retrospective operation from 1 July 1987. The Court relied on the settled principle that a State Legislature has competence to enact fiscal legislation prospectively as well as retrospectively, and that retrospectivity is not invalid unless it is shown to be unreasonable or otherwise unconstitutional. On the authorities governing retrospective taxation, no legal infirmity was established in the present levy.
Conclusion: The retrospective enhancement of tax was upheld as valid and reasonable.
Final Conclusion: The revision failed on all substantial grounds, and the tax levy at the enhanced rate for the relevant period remained undisturbed.
Ratio Decidendi: A State Legislature may validly impose retrospective fiscal legislation, and a revisional proceeding under the sales tax law cannot be used to mount a direct ultra vires challenge to the statute.
TaxTMI 
AI Drafter ✕
TaxTMI 
