Retrospective fiscal validation upheld where Parliament may cure defects and confine tax exemption by rational production criteria.

Parliament may enact retrospective fiscal validation legislation and cure defects in an earlier exemption notification, even where prior judicial interpretation had favoured taxpayers. The retrospective exemption scheme and production-based ceiling were treated as a permissible fiscal classification, because exemption is a concession that may be limited to the intended small-scale sector on a rational output criterion. The retrospective measure was also held not to violate Article 14, the business freedom guarantees, or property rights, and promissory estoppel could not block a competent retrospective validating law. The earlier writ-based refund consequence therefore did not survive, and the challenge failed.

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Issues: (i) whether Section 52 of the Finance Act, 1982, adopting Notification No. 22/82 with retrospective effect, was within the legislative competence of Parliament and amounted to an impermissible exercise of judicial power; (ii) whether the retrospective exemption scheme and the production based ceiling were arbitrary, discriminatory, or violative of Articles 14, 19(1)(g), 19(6), 265 and 300-A of the Constitution of India; and (iii) whether the petitioners could resist the retrospective notification on grounds of promissory estoppel, confiscation, or entitlement to refund under the earlier writ ruling.

Issue (i): whether Section 52 of the Finance Act, 1982, adopting Notification No. 22/82 with retrospective effect, was within the legislative competence of Parliament and amounted to an impermissible exercise of judicial power.

Analysis: Parliament possessed the power to enact retrospective fiscal legislation and to validate earlier levies by removing the defect noticed in the earlier notification. The retrospective adoption of the later notification did not merely declare a court decision ineffective; it changed the legal basis on which the earlier excess refund claim rested and thus neutralised the earlier interpretation by legislation within competence. The case law on validating statutes supported the proposition that, where the legislature has power over the subject matter and cures the defect, it may validate past collections notwithstanding prior judicial decisions.

Conclusion: The challenge to Section 52 on the ground of want of legislative competence or usurpation of judicial power failed and was answered against the petitioners.

Issue (ii): whether the retrospective exemption scheme and the production based ceiling were arbitrary, discriminatory, or violative of Articles 14, 19(1)(g), 19(6), 265 and 300-A of the Constitution of India.

Analysis: The exemption was only a concession and the State was entitled to confine it to the intended tiny or cottage sector by adopting output as a rational criterion. A ceiling based on production or clearance was held to be a reasonable classification in the fiscal field and not a hostile discrimination merely because different units were treated differently. Retrospective operation, by itself, did not make the measure arbitrary or confiscatory, and the petitioners had no constitutional right to insist upon an exemption without the qualifying conditions fixed by the legislature. The claim that the measure offended the right to carry on business or amounted to deprivation of property was rejected because the levy itself was lawfully imposed and the dispute concerned the scope of exemption, not the imposition of a fresh tax burden.

Conclusion: The retrospective notification and the output ceiling were held to be constitutionally valid and not violative of the cited fundamental rights or Article 300-A.

Issue (iii): whether the petitioners could resist the retrospective notification on grounds of promissory estoppel, confiscation, or entitlement to refund under the earlier writ ruling.

Analysis: Promissory estoppel could not be invoked against the legislature to prevent a retrospective validating law. The earlier writ ruling did not create an accrued contractual debt or a property right equivalent to compensation-bearing deprivation; it only reflected a judicial interpretation of the earlier notification. Since the legislature was competent to alter the legal basis retrospectively, the petitioners could not insist that the earlier refund consequence must survive. The argument of confiscation also failed because the measure only denied an additional concession and did not confiscate any property.

Conclusion: The pleas based on promissory estoppel, confiscation, and refund entitlement were rejected.

Final Conclusion: The validating provision and the retrospective exemption scheme were upheld, the challenge to the fiscal legislation failed, and all the writ petitions stood dismissed.

Ratio Decidendi: A legislature competent to levy a tax may retrospectively validate past collections and alter the legal basis of an earlier judicial ruling, and a fiscal exemption may validly be confined by a reasonable classification even when applied retrospectively.

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