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Issues: (i) Whether the Gujarat Sales Tax (Validation) Ordinance, 1997 and the Gujarat Sales Tax (Validation) Act, 1997 were constitutionally valid as retrospective validating legislation; (ii) whether the retrospective amendment could reopen completed and closed assessments or authorise refund denial in respect of milk powder where tax had already been levied and collected.
Issue (i): Whether the Gujarat Sales Tax (Validation) Ordinance, 1997 and the Gujarat Sales Tax (Validation) Act, 1997 were constitutionally valid as retrospective validating legislation.
Analysis: The entry in Schedule I had earlier been interpreted to include milk powder within the expression covering milk in different forms. The impugned legislation retrospectively amended the entry by inserting the words excluding milk powder and validated the levy, assessment and collection of tax already made. Retrospective validation is permissible where the Legislature alters the basis of the decision and does not merely overrule a judicial pronouncement without changing the law. No constitutional infirmity was shown in the legislative competence or in the power to enact a validating law.
Conclusion: The validating Ordinance and Act were upheld as constitutionally valid.
Issue (ii): Whether the retrospective amendment could reopen completed and closed assessments or authorise refund denial in respect of milk powder where tax had already been levied and collected.
Analysis: Fiscal legislation is ordinarily construed strictly when it creates liability with retrospective effect, and retrospective operation is not to be extended beyond clear language or necessary implication. Reading section 3 as a whole, the validation operated only where milk powder had already been assessed, levied or collected, and it preserved the right to question or claim refund in accordance with the Act. There was no clear legislative intention to reopen assessments that had been completed and closed on the footing that milk powder was exempt and no tax had been assessed or collected.
Conclusion: The retrospective amendment did not permit reopening of completed and closed assessments where milk powder had not been subjected to tax, but it barred refund claims where tax had already been assessed and recovered.
Final Conclusion: The legislation was sustained, but its retrospective reach was confined to cases where tax on milk powder had already been levied or collected, and it could not be used to reopen closed assessments that had treated milk powder as exempt.
Ratio Decidendi: A validating fiscal enactment may retrospectively cure the basis of an adverse judicial interpretation, but its retrospective reach is confined to the clear language of the statute and cannot be expanded to reopen completed assessments or create backdated liability absent express words or necessary implication.
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