Retrospective sales tax increase upheld where legislative competence existed and the levy was not confiscatory or discriminatory.

Retrospective enhancement of sales tax on drugs, medicines, pesticides and insecticides was upheld as a valid exercise of legislative power. The Court held that mere retrospectivity does not invalidate a fiscal statute, and the levy was not shown to be confiscatory, discriminatory, or so unreasonable as to amount to a colourable exercise of power. The challenge based on freedom to carry on trade failed because tax liability is not unconstitutional merely because dealers cannot pass it on to purchasers. The short period of retrospectivity, marginal rate increase, and stated revenue-neutral justification were treated as sufficient to sustain the amendment.

---

---

Issues: Whether the retrospective increase of sales tax on drugs, medicines, pesticides and insecticides under the amending Act was unconstitutional as arbitrary, unreasonable or discriminatory.

Analysis: The retrospective enhancement of tax by one per cent was upheld on the footing that the Legislature has competence to enact retrospective fiscal legislation unless restrained by the Constitution. Mere retrospectivity does not by itself render a taxing provision invalid. The challenge under the freedom to carry on trade or business failed because a tax is not unconstitutional merely because it is not capable of being passed on to purchasers or because it may increase the burden on dealers. The Court also held that the short period of retrospectivity and the marginal increase in rate did not make the levy confiscatory or ex facie unreasonable. The explanation offered for the amendment, namely compensating the revenue impact of exemptions granted by the Government, was treated as a sufficient fiscal basis. The contention based on delayed availability of the Gazette was rejected because the levy was made retrospectively effective from an earlier date.

Conclusion: The retrospective increase in sales tax was held valid and the constitutional challenge was rejected.

Ratio Decidendi: Retrospective taxation is constitutionally permissible if it is within legislative competence and is not shown to be confiscatory, discriminatory, or so unreasonable as to amount to a colourable exercise of power; mere inability to pass the tax on does not invalidate the levy.

---