Retrospective tax validation upheld as interest on excess tax collection was sustained and delay barred relief

Retrospective validating tax legislation was upheld where the legislature was competent to cure the defect identified in earlier decisions, and the amendment was not found violative of Articles 14 or 19(1)(g). Applying the amended provision, the Court held that interest was payable on excess tax collected and retained without authority, and the assessment order and demand notice were sustained. The belated constitutional challenge was also rejected because the amendment had long been in force, no convincing explanation for delay was shown, and the statutory appellate remedy had not been pursued.

---

---

Issues: (i) Whether clause (ii) of sub-section (2) of section 18-AA of the Karnataka Sales Tax Act, 1957, inserted with retrospective effect from 1 April 1992, is constitutionally valid. (ii) Whether the assessment order and consequential demand notice levying interest on excess collection of tax are sustainable. (iii) Whether the belated challenge to the retrospective amendment is barred by delay, laches, and availability of an alternative remedy.

Issue (i): Whether clause (ii) of sub-section (2) of section 18-AA of the Karnataka Sales Tax Act, 1957, inserted with retrospective effect from 1 April 1992, is constitutionally valid.

Analysis: The retrospective provision was examined in the context of the legislative power to validate prior action and cure defects noticed in earlier judicial decisions. The provision was treated as a validating measure intended to supply the missing statutory basis for interest on amounts wrongly collected and retained by dealers. The Court held that retrospective operation, by itself, does not render a taxing provision unconstitutional if the legislature is competent and the basis of invalidity is removed. The challenge under Articles 14 and 19(1)(g) of the Constitution of India was rejected.

Conclusion: The retrospective amendment was held to be constitutionally valid and not violative of Articles 14 or 19(1)(g) of the Constitution of India.

Issue (ii): Whether the assessment order and consequential demand notice levying interest on excess collection of tax are sustainable.

Analysis: The petitioner had collected tax in excess of the permissible rate and retained the excess instead of remitting it to the Government. On those facts, the Court applied section 18-AA(2)(ii) of the Karnataka Sales Tax Act, 1957, and held that interest became payable on the delayed remittance of the wrongly collected amount. The assessment order and demand notice were found to be supported by the statutory scheme and by the principle against retention of tax collected without authority.

Conclusion: The assessment order and demand notice were held to be sustainable in law.

Issue (iii): Whether the belated challenge to the retrospective amendment is barred by delay, laches, and availability of an alternative remedy.

Analysis: The Court found that the retrospective amendment had been in force for years before the petition was filed and that the petitioner had not offered a convincing explanation for the delayed challenge. The petition was also found to have been filed without first pursuing the statutory appellate remedy. On these procedural grounds, and also because the petitioner had retained the excess tax for a long period, the Court declined to grant relief.

Conclusion: The challenge was held to be barred by delay and laches, and the availability of an alternative remedy weighed against interference.

Final Conclusion: The writ petition failed on merits as well as on procedural grounds, and the impugned levy of interest was left undisturbed.

Ratio Decidendi: A legislature competent over the subject may enact retrospective validating tax legislation to cure the defect identified by the courts, and a dealer who has collected and retained tax without authority may be subjected to statutory interest on delayed remittance.

---