Retrospective validating tax legislation upheld where limitation barred only the remedy, not the underlying tax liability.

The Karnataka High Court considered whether the amendment inserting Section 40(1A) in the Mysore Sales Tax Act was within legislative competence, whether a time-barred remedy for escaped assessment could be revived by retrospective amendment, and whether the amended provision and validating clause violated Article 14. It held that retrospective and validating tax legislation is permissible within legislative power, that colourable legislation turns on competence rather than motive, and that limitation bars the remedy without extinguishing the underlying liability. It also found the classification of assessees to be based on a real distinction with a rational nexus to preventing tax escape. The amended and validating provisions were upheld and the petitions dismissed.

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Issues: (i) Whether the amendment inserting Section 40(1A) in the Mysore Sales Tax Act, 1957 was beyond legislative competence or was a colourable exercise of power; (ii) whether a time-barred remedy for escaped assessment could be revived by the amending Act; (iii) whether the amended provision and the validating clause offended Article 14 of the Constitution of India.

Issue (i): Whether the amendment inserting Section 40(1A) in the Mysore Sales Tax Act, 1957 was beyond legislative competence or was a colourable exercise of power.

Analysis: The power of the legislature extends to retrospective and validating legislation within its allotted field, unless forbidden by the Constitution. Colourable legislation is judged by legislative competence, not by motive. If the legislature had power to enact the measure, the reason for its enactment was immaterial.

Conclusion: The challenge on the ground of lack of competence or colourable legislation failed.

Issue (ii): Whether a time-barred remedy for escaped assessment could be revived by the amending Act.

Analysis: The Court treated the bar of limitation as a bar to the remedy and not as extinction of the underlying liability. Once the statutory bar was removed by valid retrospective legislation, recovery of the escaped turnover was not obstructed.

Conclusion: The contention that a barred right could not be revived was rejected.

Issue (iii): Whether the amended provision and the validating clause offended Article 14 of the Constitution of India.

Analysis: The Court held that the classification of assessees whose reassessments were directed in earlier proceedings was based on a real and substantial distinction having a rational relation to the object of preventing tax from escaping assessment. The legislation was therefore supported by a reasonable basis and the presumption of constitutionality was not displaced.

Conclusion: The challenge under Article 14 failed.

Final Conclusion: The amended and validating provisions were upheld, and the petitions were dismissed.

Ratio Decidendi: A legislature may enact retrospective validating tax legislation within its competence, and a limitation bar to recovery does not extinguish the liability itself; a classification upheld under Article 14 must rest on a real distinction with a rational nexus to the object of the law.

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