Retrospective tax legislation and validation clauses: amendment upheld, but a defect requiring constitutional compliance could not be cured by fiat.

Retrospective tax legislation may validly amend the charging provision within legislative competence, and section 2 of the Rajasthan Passengers and Goods Taxation (Amendment and Validation) Act, 1964 was treated as a valid retrospective amendment supporting recovery for the covered period. By contrast, a validating clause cannot itself cure a constitutional defect where the Constitution requires prior compliance with a specific safeguard; section 4, which sought to validate earlier Finance Acts despite want of the required assent, was therefore invalid. Retrospective enhancement of tax rates was not found unreasonable on the facts, but that justification did not extend to the period outside the valid amendment.

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Issues: (i) Whether the retrospective amendment made by section 2 of the Rajasthan Passengers and Goods Taxation (Amendment and Validation) Act, 1964, validating the levy of tax for the earlier period, was constitutionally valid. (ii) Whether section 4 of the same Act, which purported to validate the earlier Finance Acts and taxes levied under them notwithstanding non-compliance with Article 255 of the Constitution of India, was constitutionally valid. (iii) Whether retrospective enhancement of tax rates for the relevant period offended the constitutional guarantee against unreasonable restriction.

Issue (i): Whether the retrospective amendment made by section 2 of the Rajasthan Passengers and Goods Taxation (Amendment and Validation) Act, 1964, validating the levy of tax for the earlier period, was constitutionally valid.

Analysis: Section 2 did not merely validate past collections but retrospectively amended section 3(1) of the principal Act by inserting a proviso with specified rates for identified periods. Retrospective tax legislation is within legislative power, and a tax law may operate prospectively or retrospectively so long as the legislature acts within competence. The principal Act had already been upheld, and the retrospective amendment did not offend any constitutional prohibition.

Conclusion: Section 2 was held valid, and tax could be recovered for the period covered by the retrospective amendment.

Issue (ii): Whether section 4 of the same Act, which purported to validate the earlier Finance Acts and taxes levied under them notwithstanding non-compliance with Article 255 of the Constitution of India, was constitutionally valid.

Analysis: Article 255 contemplates cure of the defect by obtaining the required Presidential assent, but section 4 attempted to declare by legislative fiat that the earlier defect never mattered and that the earlier enactments were always valid notwithstanding want of prior sanction and assent. A legislature cannot itself cure a constitutional infirmity that can be cured only by the constitutionally required assent. The provision went beyond permissible validation and was not saved by the Presidential assent to the 1964 Act.

Conclusion: Section 4 was held invalid, and the earlier enhanced rates for the period not covered by section 2 could not be sustained under that provision.

Issue (iii): Whether retrospective enhancement of tax rates for the relevant period offended the constitutional guarantee against unreasonable restriction.

Analysis: Retrospective tax legislation does not by itself infringe fundamental rights. The validity of such legislation depends on legislative competence and the surrounding circumstances. In the present case, the retrospective operation of the amendment was not shown to be unreasonable, and the legislative background supported its validity.

Conclusion: The challenge to the retrospective operation of section 2 on grounds of unreasonableness failed.

Final Conclusion: The tax assessment was upheld only to the extent covered by the valid retrospective amendment, while the enhanced levy for the uncovered period was struck down and the authorities were directed to reassess that period according to the original notification rates.

Ratio Decidendi: A legislature may enact retrospective tax legislation within its competence, but it cannot, by a validating provision, declare a constitutional defect cured where the Constitution requires compliance with a specified safeguard that can be satisfied only in the manner the Constitution prescribes.

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