Retrospective sales tax reduction cannot be deferred arbitrarily; higher rate recovery for the interim period was quashed.

Retrospective subordinate legislation altering sales tax rates was held valid only where the State could show a reasonable justificatory basis, such as clarification or validation; absent that basis, the amendment was arbitrary. The Punjab and Haryana HC quashed the notification that postponed the reduced rate on motor tyres, tubes and tractor tyres and tubes back to 1 April 1992, and held that tax could not be recovered at the higher unamended rate for the intervening period from 1 April 1992 to 20 August 1992. Liability had to be computed under the earlier notification.

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Issues: Whether the notification amending the rate of sales tax could validly be given retrospective effect from 1 April 1992 instead of 20 August 1992, and whether the State could levy tax at the higher unamended rate for the interregnum.

Analysis: The amended notification reduced the tax rate on motor tyres and tubes and tractor tyres and tubes, but the subsequent notification sought to postpone its operation retrospectively without any disclosed justification. Retrospective exercise of delegated legislative power is permissible only when it is reasonable and not arbitrary. A retrospective levy or alteration cannot be sustained merely on the basis of legislative competence, and the State did not show any validating or clarificatory basis for the change. The assessee had acted on the earlier notification and had also refunded amounts accordingly, which was not specifically controverted.

Conclusion: The retrospective amendment was invalid and was quashed. The State was not entitled to recover sales tax at the higher rate for the period from 1 April 1992 to 20 August 1992, and tax liability had to be worked out in accordance with the earlier notification.

Ratio Decidendi: Retrospective subordinate legislation affecting tax rates is valid only if it is reasonable and supported by a sufficient justificatory basis such as clarification or validation; absent such justification, it is arbitrary and liable to be struck down.

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