2003 (3) TMI 702 - HC - VAT and Sales Tax

Court upholds retrospective effect of Central Sales Tax Act amendments, validates interest imposition pre-2000

Kajaria Ceramics Limited Versus State of UP. and others

The court dismissed the writ petitions, ruling that the amendments to section 9 of the Central Sales Tax Act by the Finance Act of 2000, including the ... - Issues Involved:1. Retrospective or prospective application of sub-section (2B) of section 9 of the Central Sales Tax Act.2. Validity of section 120 of the Finance Act, 2000.Issue-wise Detailed Analysis:1. Retrospective or Prospective Application of Sub-section (2B) of Section 9 of the Central Sales Tax Act:The petitioners argued that the amendments made by the Finance Act of 2000 to section 9(2) and the introduction of sub-section (2B) were prospective, effective from May 12, 2000, and could not be applied retrospectively. They relied on the Supreme Court's judgment in India Carbon Ltd. v. State of Assam, which held that the imposition of interest on Central sales tax without a substantive provision was illegal. The petitioners contended that since no retrospective effect was explicitly mentioned in the amendment, it should be presumed to be prospective.Conversely, the respondents argued that the plain language of the Finance Act, particularly section 120, indicated a clear legislative intent for retrospective application. Section 120 validated the provisions of section 9 of the Central Sales Tax Act as if they had always included provisions for interest. The court agreed with the respondents, stating that section 120 provided full retrospective effect, making the amendments applicable to unpaid Central sales tax dues even for periods before May 12, 2000. The court emphasized that a fiscal statute could have retrospective operation, and the validation clause in section 120 was unambiguous in its intent to apply retrospectively.2. Validity of Section 120 of the Finance Act, 2000:The petitioners contended that section 120 of the Finance Act was invalid as it purported to validate a provision that never existed. They argued that since there was no substantive provision for levying interest in the Central Sales Tax Act prior to the amendment, the validation clause could not override the Supreme Court's judgment in India Carbon Ltd. The petitioners relied on the Supreme Court's ruling in Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan, which held that a validating provision must cure defects in the substantive provision of the Act.The court rejected this argument, stating that the Parliament had the legislative competence to enact the Finance Act and section 120, which cured the defect pointed out by the Supreme Court by amending section 9(2) of the Central Sales Tax Act. The court cited the Supreme Court's judgment in Welfare Association A.R.P. Maharashtra v. Ranjit P. Gohil, which upheld the principle that the Legislature could enact laws to withdraw or alter the basis of a judicial pronouncement. The court concluded that the Parliament had validly removed the defect and provided for the imposition of interest on unpaid Central sales tax through the amendments, making the validation clause effective.Conclusion:The court dismissed the writ petitions, holding that the amendments made by the Finance Act of 2000 to section 9 of the Central Sales Tax Act, including the insertion of sub-section (2B), had retrospective effect. The validation clause in section 120 of the Finance Act was valid and effectively cured the defect identified by the Supreme Court, thereby allowing the imposition of interest on unpaid Central sales tax dues for periods before May 12, 2000.