Retrospective tax validation upheld where the Legislature cured a defect in the sales tax computation provision and preserved constitutional limits.

Retrospective validation of the explanation to section 5(1-A) of the Karnataka Sales Tax Act was upheld because the Legislature had competence to amend the charging and computation provision and cure the defect identified by the court. The amendment clarified that turnover for tax on sales of alcoholic liquor would not include tax, and it lawfully removed the effect of the earlier judicial interpretation that allowed deduction of tax collected on the previous sale. The retrospective operation was treated as not altering the essential nature of the levy, and the resulting hardship did not make the measure unconstitutional. The challenge based on arbitrariness and violation of Articles 14 and 19(1)(g) was rejected.

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Issues: Whether the explanation inserted to section 5(1-A) of the Karnataka Sales Tax Act, 1957 with retrospective effect was a valid validating measure and whether it amounted to an unconstitutional fresh levy or arbitrary burden on dealers.

Analysis: Section 5(1-A) was a charging provision relating to tax on sales of alcoholic liquors, and the amendment introduced an explanation to clarify that the relevant turnover would not include tax. The retrospective validation was made to remove the effect of the earlier judicial interpretation that had permitted deduction of tax collected on the previous sale. The legislative power to enact retrospective fiscal legislation and to validate prior assessments was upheld, provided the Legislature had competence and cured the defect pointed out by the court. The retrospective operation was held not to change the essential nature of the levy, and the hardship resulting from the period between the judicial decision and the amendment did not render the provision unconstitutional. The challenge based on arbitrariness and violation of Article 14 and Article 19(1)(g) was rejected in view of the settled principle that retrospective tax legislation and validation are permissible if within legislative competence and consistent with constitutional limits.

Conclusion: The explanation to section 5(1-A) and the validating effect of the amendment were held valid, and the challenge to retrospective levy failed.

Ratio Decidendi: A Legislature competent to impose a tax may retrospectively amend the charging or computation provision and validate prior assessments by removing the defect identified by the court, so long as the amendment does not transgress constitutional limitations.

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