TaxTMI 
TaxTMI 
TaxTMI 
2013 (11) TMI 482
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....in detail and this writ petition is being taken up as a leading writ petition. The facts of the rest of the writ petitions are being noted in brief. 3. In Writ Petition No. 523 of 2006 the petitioner is a limited company engaged in manufacturing of Mentha Oil, Menthol Powder, Menthol crystal, Dementholized Oil, Peppermint oil and Di-hydromyrcenol and their bye-products. The petitioner's factory is situate in district Rampur established in the year 1997. It is stated in paragraph nos. 10 and 11 of the writ petition that it has been the basic policy of Government of India to make the export competitive and to neutralize the incurrence of custom, excise duties, and other taxes by the schemes known as Duty Drawback Scheme (for short DDS), Advanced Licencing Scheme (for short ALS), Duty Entitlement Pass Book Certificate ( for short DEPB) and Duty Free Replenishment Scheme (for short DFRC). It is alleged that the above schemes are basically introduced to refund the incurrence of the customs, excise duty and taxes on the inputs used in the resultant export product. In paragraph no. 13, it is stated that remission granted under the aforesaid scheme is not a profit. In paragraph no. 14 it ....
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....ot profit or gain in business is oppressive and unreasonable. (iv) The amendment has been made to overrule the judgment of the Tribunal. The legislature is not competent to overrule the binding verdict of the Tribunal. (v) The option given in the 3rd proviso to Section 80 HHC (3) of the Act is sham and total nonexistent inasmuch as the incentive under DEPB and DFRC was more attractive than duty draw back and as such business would certainly opt a more attractive scheme. Thus the levy is not optional but compulsive . (vi) The amendment is discriminatory between exporter under duty draw back and under DEPB and DFRC . The classification meant under the amended proviso is not based on any intelligible differentia or nexus with the object sought to be achieved. Thus amendment is discriminatory. (vii) The retrospective amendment is confiscatory. (viii) The classification between exporters with less than Rs.10 crore and more than Rs. 10 crore export turnover to be eligible for deduction is wholly irrational or arbitrary. (ix) The incentive/ benefit under DEPB and DFRC scheme is not an income and therefore subjecting it to levy income tax with retrospective effect is arbitrary and vi....
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....), it has been stated that the petitioner has preferred an appeal against the assessment order and the demand notices. 6 902 of 2006 Validity of Sections 3 & 4 of the Taxation Laws ( Amendment) Act, 2005 has been challenged whereby Sections 28 and 80 HHC of the Act has been amended. The challenge has been made on the ground that the amendment seeks to impose burden retrospectively on the assessees having export turnover exceeding Rs.10 crores. The petitioner also challenged notice of demand dated 24.3.2006 ( Annexure No.4) It has been stated in paragraph No.5(s) that the petitioner has preferred an appeal under the Act against the impugned demand notice. 7 903/2006 Also challenged the validity of Sections 3 & 4 of the Taxation Laws ( Amendment) Act, 2005 and the consequential amendments effect in Section 28 and 80HHC of the Act, questioned. Also challenged notice of demand and assessment order dated 28.2.2006 ( Annexure No.7). It is stated in paragraph no. 4(m) that the petitioner is an exporter having export turnover exceeding of Rs.10 crores. In paragraph no. 4(t), it is stated that the petitioner has preferred statutory appeal against the impugned assessment order and dema....
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....as preferred an appeal against the impugned assessment order and demand notice. 14 39 of 2007 Validity of amendment in Section 80 HHC(3) of the Act as well as assessment order dated 27.11.2006 ( Annexure No.1) has been challenged. 15 40 of 2007 Validity of amendment in Section 80 HHC(3) of the Act as well as assessment order dated 27.11.2006 ( Annexure No.1) has been challenged. 16 58 of 2007 Validity of the Taxation Laws (Amendment) Act, 2005 inserting 3rd and 4th Proviso in Section 80HHC and amendment in Section 28 of the Act as well as the demand notice and assessment order dated 26.9.2006 ( Annexure No. 4) have been challenged. In paragraph no. 6(r), the petitioner has stated that he has preferred an appeal against the impugned assessment order and demand notice. Validity of Section 80 HHC(3) of the Act and the assessment orders for the A.Y. 2001-02, 2003-04 and 2004-05 have been challenged. 17 920/2008 Validity of the Taxation Laws (Amendment) Act, 2005 inserting 3rd and 4th Proviso in Section 80HHC and amendment in Section 28 of the Act as well as the demand notice and assessment order dated 31.12.2007 ( Annexure No. 7) have been challenged. In paragraph no. 6(s),....
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....ngalore) Ltd. Vs. Union of India and others ) ((2012) 349 ITR 566 (Bom)), which has followed the judgement in Avani Exports and others Versus Commissioner of Income Tax (supra) by Gujrat High Court and submits that the retrospective operation of the impugned amendment is unconstitutional, impermissible and violative of Articles 14 and 19(1)(g) of the Constitution of India. In support of his submission Shri Ravi Kant has relied on the following judgments : - (a) (2012) 348 ITR 391 ( Guj) (Avani Exports and others Vs. Commissioner of Income Tax and others). (b) (2012) 349 ITR 566 (Bom) (Vijaya Silk House ( Bangalore) Ltd. Vs. Union of India and others. (c) AIR 1963 Supreme Court 1667 ( Rai Ramkrishna and others Vs. State of Bihar paras 10 and 12) (d) (1989) 3 SCC 488 paras 65 and 66( M/s Ujagar Prints and others Versus Union of India and others ). (e) (1993) 1 SCC 249 para 16 ( Escorts Limited and another Versus Union of India and others ) (f) (2004) 5 SCC 783 paras 12 to 15 ( Tata Motors Ltd. Vs. State of Maharashtra and others). (g) (2005) 7 SCC 725 paras 31 and 32 ( R.C. Tobacco (P) Ltd. and another Versus Union of India and another) Submission on behalf of Respondents 8.....
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....ssociation Vs. State of Kerala). (c) AIR 1974 SC 2272 paras 16 and 17 ( S. Kodar Vs. State of Kerala & Others). (d) AIR 1963 SC 104 para 12 ( British India Corporation Ltd. Vs. Collector of Central Excise). (e) AIR 1990 SC 1637 paras 46, 48 and 54 ( Federation of Hotel and Restaurant Association of India Vs. Union of India & Others). (IV) The impugned amendment extends benefits to exporters having export turnover not exceeding Rs.10 Crore. Those exporters who have export turnover exceeding Rs.10 Crore, have been given an option under Section 80 HHC(3). The penalty and interest have been waived with respect to the income returned/ assessed and attributable to profits on sale of DEPB credits or DFRC under Section 80 HHC and the demand created under Section 80 HHC shall be recovered over a period of five years. (V) The impugned amendment is neither unreasonable nor confiscatory nor violative of Articles 14 and 19 of the Constitution of India. Discussions and Findings 9. To appreciate the controversy involved in these writ petitions it would be appropriate to reproduce Section 80 HHC and relevant portion of Section 28 of the Act as amended by by Taxation Laws ( Amendment) Act, 2....
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....ent year beginning on the 1st day of April, 2003; (iv) thirty per cent thereof for an assessment year beginning on the 1st day of April, 2004,] and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 2005 and any subsequent assessment year.] (2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are [received in, or brought into, India] by the assessee [(other than the supporting manufacturer)] in convertible foreign exchange [, within a period of six months from the end of the previous year or, [within such further period as the competent authority may allow in this behalf].] [Explanation.--For the purposes of this clause, the expression "competent authority" means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.] (b) This section does not apply to the following goods or merchandise, namely :-- (i) mineral oil ; and (ii) minerals and ores [(other than processed minerals and ores specified in the Tw....
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....urther increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. [Provided further that in the case of an assessee having export turnover not exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiid) or clause (iiie), as the case may be, of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee : Provided also that in the case of an assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this sub-section or after giving effect to the first proviso, as the case may be, shall be further increased....
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.... the assessee.] Explanation.--For the purposes of this sub-section,-- (a) "adjusted export turnover" means the export turnover as reduced by the export turnover in respect of trading goods ; (b) "adjusted profits of the business" means the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3) ; (c) "adjusted total turnover" means the total turnover of the business as reduced by the export turnover in respect of trading goods ; (d) "direct costs" means costs directly attributable to the trading goods exported out of India including the purchase price of such goods ; (e) "indirect costs" means costs, not being direct costs, allocated in the ratio of the export turnover in respect of trading goods to the total turnover ; (f) "trading goods" means goods which are not manufactured [or processed] by the assessee.] (3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be,-- (a) in a case where the business carried on by the supporting manufacturer consists exclusively of sale....
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....on (1A), any income not charged to tax under this Act shall be excluded.] [(4C) The provisions of this section shall apply to an assessee,-- (a) for an assessment year beginning after the 31st day of March, 2004 and ending before the 1st day of April, 2005; (b) who owns any undertaking which manufactures or produces goods or merchandise anywhere in India (outside any special economic zone) and sells the same to any undertaking situated in a special economic zone which is eligible for deduction under section 10A and such sale shall be deemed to be export out of India for the purposes of this section.] Explanation.--For the purposes of this section,-- (a) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder ; (aa) "export out of India" shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962) ;] (b) "export turnov....
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....ort policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);] [(iiie) any profit on the transfer of the Duty Free Replenishment Certificate, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) ;] 10. From the pleadings in the writ petitions and the arguments raised by the learned Senior Counsel appearing for the parties give rise to the following issues for adjudication : - (i) whether the amendments made in Section 80HHC by the Taxation Laws (Amendment) Act, 2005 with retrospective effect is within the legislative competence of parliament. (ii) whether the petitioners having export turnover of more than Rs. 10 crores were entitled to the benefit of deduction under Section 80HHC prior to the amendment by the Taxation Laws (Amendment) Act, 2005 in respect of profit on the transfer of DEPB and DFRC. (iii) whether the 3rd and 4th Proviso of Section 80HHC(3) substituted by the Taxation Laws ( Amendment) Act, 2005 with retrospective effect from 1.4.1998 is arbitrary, unreasonable or discrimi....
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....al income of the assessee. (iv) Deduction is to the extent of profits referred to in sub-Section(1B), derived by the assessee from the export of such goods or merchandise. 13. The explanation (aa) of Section 80HHC defines the words "Export out of India" which exclude any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962. 14. The word "export turnover" has been defined in explanation (b) of 80HHC to mean the sale proceeds, received in, or brought into, India by the assessee in convertible foreign exchange in accordance with clause (a) of sub-section (2) of any goods or merchandise to which this section applies which are exported out of India. 15. The explanation (a) defines the words "convertible foreign exchange" to mean foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 and the Rules. 16. Under Section 74 of the Customs Act, 1962 read with Re-export of Import Goods ( Draw Back of Customs Duty) Rules, 1995, when earli....
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.... called DEPB credit sale. Such sale is neither import nor part of export import. Infact the profits so made on sale of DEPB credit is a premium being simple business profit and not the export profit as in such a case the seller does not earn foreign exchange. The profit in such case does not arise out of export or import activity. This is an activity of trading of licence which has a premium in the market. Thus, the very basic ingredients of Section 80HHC(1) of the Act i.e. "profit derived by the assessee from the export of such goods or merchandise" is absent and no deduction can be claimed under the unamended Section with respect to sale proceeds of DEPB credit sale. It was only because of insertion of 2nd, 3rd and 4th Proviso in Section 80HHC (3) of the Act that such DEPB credit sale proceeds were made eligible for deduction under Section 80HHC. 21. The above noted conclusion is also supported by the speech of the Finance Minister( Annexure No. CA-1) while presenting the amendment by the Taxation Laws ( Amendment) Bill, 2005. The relevant part of the speech of the Finance Minister is reproduced below: "Now, I come to the sixth amendment. It is the one dealing with DEPB. This i....
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...., if you have certain credits in your favour, you can import items against the credit without paying duty. But you can also sell the credit to another importer . If you actually import, it is part of export - import. If you sell it to another importer and make a profit on that - the premium, it is not export profit. It is a simple business profit because profit because the income you earn is not foreign exchange ; it is an Indian rupee. It does not arise out of export activity or import activity. It arises because you are trading in a 'Licence', which has a premium in the market. So, the Department took the view that it does not fall under section 28 read with section 80HHC. I am not going into sub-sections. Therefore, this is not to be counted as exempted export profit. This must be added back as taxable profit. The assessee took a different view. Please remember, the first assessment in respect of this was filed only in the assessment year 1998-99. Some exporters paid ; some exporters did not pay. Some exporters paid but disputed. Some assessing officers assessed it as taxable profit. Some assessing officers exempted as exempted profit. That is bound to happen. When so many asses....
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....nister. What did the Economic Advisory Council recommend? I am reading only the recommendations. "(1) If the export turnover was Rs.10 crore or less, the corresponding income may be treated as exempt. (2) If the export turnover was more than Rs.10 crore, the corresponding income may be exempt provided two conditions are satisfied ; One, if an exporter had claimed DEPB credit and also tax exemption for such DEPB credit, the income should be brought to tax without the benefit of exemption. However, the income should be exempt if the exporter had a choice between draw-back and DEPB and the customs component of the draw back rate was higher than the DEPB rate; (3) No penalty by way of interest or penal interest should be levied ; and (4) The arrears of tax, if any, may be collected over a period of two years." I have accepted all the four recommendations with the improvement that the arrears, if any, will be collected nor over two years but over five years. What more can I do ? ....( Interruptions)." 22. From the above it is clear that the impugned amendment was brought to benefit the exporters to claim deduction under section 80HHC, which was not available to them prior to the ....
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....ilash Chand Mahajan and others), AIR 1998 SC 750 para 20A ( Devadoss (dead) by LRs and another Vs. Veera Makali Amman Koil Athalur) and JT 2005 (12) SC 580 para 76 ( State of Gujarat Vs. Mirzapur Moti Kureshi Kassab Jamat & Ors). 24. Thus, we find that the petitioners who are exporters having export turnover of more than Rs.10 crores were not entitled to the benefit of deduction under the unamended provision of Section 80HHC with respect to DEPB credit sales and DFRC. They became entitled to claim deduction only because of the amended provisions. 25. As already discussed, Section 80HHC is a provision for deduction. As per provisions of sub-Section(1) of Section 80HHC the deduction under this Section is allowable in accordance with and subject to the provisions of this Section. The 2nd, 3rd and 4th proviso of Section 80HHC(3) of the Act are the conditions referable to sub-Section(1) and as such the deduction is available only on compliance of these conditions. No one has any fundamental right to claim deduction or exemption otherwise than in accordance with the relevant provisions. It can be availed strictly in accordance with the provisions of deduction or exemption. In the case ....
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.... person claiming exemption must satisfy that he fulfills the eligibility criteria. In Orient Traders Vs. Comm. Tax Officer, Tirupati (JT 2008 (4) SC 66 para 18 Hon'ble Supreme Court has held the law that it is not open the Courts to add words in the exemption notification to extend benefit to others items which do not finds mentioned in the notification. In Commissioner of Custom (Prev.) Mumbai Vs. M. Ambalal Company (2010) 26 ELT 487 SC para 10 and 12 it was held that if any of the conditions of exemption is not fulfilled the exemption shall not be available. 26. A perusal of the principles of law laid down by Hon'ble Supreme Court in the aforenoted judgments makes it clear that exemption or deduction is prerogative of the Governments; it has to be construed strictly; no one has any fundamental right to claim for exemption; an exemption can be claimed only in accordance with the provisions and subject to fulfillment of the statutory conditions; even if exemption has been wrongly allowed to a person, the same cannot be made basis by another person to claim exemption; the Court can struck down an exemption provision but can not widen its scope so as to include other persons or item....
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....aw, which is either prospective or retrospective. In para 15 the Hon'ble Supreme Court held:- "15. The power of a legislature to enact a law with reference to a topic entrusted to it, is, as already stated, unqualified subject only to any limitation imposed by the Constitution. In the exercise of such a power, it will be competent for the legislature to enact a law, which is either prospective or retrospective. In Union of India v. Madan Gopal, 1954 SCR 541: (AIR 1954 SC 158), it was held by this court that the power to impose tax on income under entry 82 of List I in Schedule VII to the Constitution, comprehended the power to impose income-tax with retrospective operation even for a period prior to the Constitution. The position will be the same as regards laws imposing tax on sale of goods, In M. P. V. Sundararamier and Co. v. State of Andhra Pradesh, 1958 SCR 1422: (AIR 1958 SC 468), this court had occasion to consider the validity of a law enacted by Parliament giving retrospectively operation to laws passed by the State legislatures imposing a tax on certain sales in the course of inter-State trade. One of the contentions raised against the validity of this legislation was th....
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....tion 3(3) read with Section 1(3) only applies to cases of persons who did not pay the tax during the whole of the period, or whose cases were not pending; and it is this limited class of persons whose interests are represented by the appellants before us. Having regard to the somewhat unusual circumstances which furnish the background for the enactment of the impugned statute, we do not think that we could accept Mr. Setalvad's argument that the retrospective operation of the Act imposes restriction on the appellants which contravene the provisions of Article 19(1) (f) and (g). In our opinion, having regard to all the relevant facts of this case, the restrictions imposed by the said retrospective operation must be held to be reasonable and in the public interest under Article 19(5) and (6) and also reasonable under Article 304(b)." 32. In Khyerbari Tea Co. Ltd. & Anr. v. State of Assam & Ors., AIR 1964 SC 925, the Supreme Court held in paragraphs 29 and 30 as follows:- "29. Then as to the argument about the scheme of Part XIII, we do not see how a statute passed under Art. 304(b) would always and necessarily defeat the said scheme if its provisions are made retrospective. It is n....
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....ve in operation, and so, this argument has to be tested by reference to the remaining portion of S. 3(2). Thus tested, it is difficult to accept it as sound. In this connection, we may refer to the recent decision of this Court in Rai Ram Krishna v. State of Bihar. AIR 1963 SC 1667 where a similar plea was rejected and it was pointed out that this Court has consistently held that the mere fact that a validating statute operates retrospectively does not justify the contention that the character of the tax sought to be recovered by such retrospective operation is necessarily changed." 33. In Epari Chinna Krishna Moorthy v. State of Orissa, AIR 1964 SC 1581 the Supreme Court while dealing with the retrospective operation of the Orissa Sales Tax Validation Act of 1961 held in para 7 as follows:- "7. The first argument which has been urged before us by Mr. Sastri is that since the exemption was granted by the State Government by virtue of the powers conferred on it by S. 6, it was not open to the legislature to take away that exemption retrospectively. Section 4 of the parent Sales-tax Act is the charging section and S. 6 is the section which confers on the State Government power to i....
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....held the amendment levying excise duty retrospectively. The Supreme Court observed in paragraphs 49 and 50 as follows:- "49. Imposition of tax by legislation makes the subjects pay taxes. It is well recognised that tax may be imposed retrospectively. It is also well settled that that by itself would not be an unreasonable restriction on the right to carry on business. It was urged, however, that unreasonable restrictions would be there because of the retrospectivity. The power of the Parliament to make retrospective legislation including fiscal legislation are well settled. (See Krishnamurthi and Co. v. State of Madras, (1973) 2 SCR 54: AIR 1972 SC 2455). Such legislation per se is, not unreasonable. There is no particular feature of this legislation which can be said to create any unreasonable restriction upon the petitioners. 50. In the view we have taken of the expression 'manufacture', the concept of process being embodied in certain situation in the idea of manufacture, the impugned legislation is only making 'small repairs' and that is a, permissible mode of legislation. In 73rd Volume of Harward Law Review p. 692 at p. 795, it has been stated as follows :- "It is necessar....
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....lature's mistakes. Validity of legislations retroactively curing defects in taxing statutes is well recognised and Courts except under extraordinary circumstances would be, reluctant to override the legislative judgment as to the need for and wisdom of the retrospective legislation. In Empire Industries Limited v. Union of India 1985 Supp.(1) SCR 292 at p. 327 : (AIR 1986 SC 662 at p. 678) this Court observed : ".......not only because of the paramount governmental interest in obtaining adequate revenues, but also, because taxes are not in the nature of a penalty or a contractual obligation but rather, a means of opportioning the costs of government amongst the who benefit from it". In testing whether a retrospective imposition of a tax operates so, harshly as to violate fundamental rights, under Article l9 (1) (g) the factors considered relevant include the context in which retroactivity was contemplated such, as whether the law is one of validation of taxing statute struck down by, Courts for certain defects; the period of such retroactivity, and the degree and extent of any unforeseen or unforeseeable financial burden imposed for the past period. etc. Having regard to all the ....
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....er the re-enacted law. Sometimes the Legislature gives its own meaning and interpretation of the law under which tax was collected and by legislative fiat makes the new meaning binding upon Courts. The Legislature may follow any one method or all of them and while it does so it may neutralise the effect of the earlier decision of the Court which becomes ineffective after the change of the law. Whichever method is adopted it must be within the competence of the Legislature and legal and adequate to attain the object of validation. If the Legislature has the power over the subject-matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions. The validity of a Validating Law, therefore, depends upon whether the Legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the Courts had found in the existing law and makes adequate provisions in the Validating Law for a valid imposition of the tax." 44. Thus, it is permissible for the Legislature, subject to its legislative competence otherwise, to enact a law which wil....
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....legal and constitutional requirements; (b) whether the Legislature has competence to validate the law; (c) whether such validation is consistent with the rights guaranteed in Part III of the Constitution; (iv) the Court does not have the power to validate an invalid law or to legalise impost of tax illegally made and collected or to remove the norm of invalidation or provide a remedy. These are not judicial functions but the exclusive province of the Legislature. Therefore, they are not encroachment on judicial power; (v) in exercising legislative power, the Legislature by mere declaration, without anything more, cannot directly overrule, revise or override a judicial decision. It can render judicial decision ineffective by enacting valid law on the topic within its legislative field fundamentally altering or changing its character retrospectively. The changed or altered conditions are such that the previous decision would not have been rendered by the Court, if those conditions had existed at the time of declaring the law as invalid......... It is competent for the Legislature to enact the law with retrospective effect; (vi) the consistent thread that runs through all the decision....
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....his regard may be had to the judgments of Hon'ble Supreme Court in the case of Kerla Hotel and Restaurant Association Versus State of Kerla (AIR 1990 SC 913 and S.Kodar Versus State of Kerla ( AIR 1974 SC 2272 at 2276). In the case of ITO Versus N. Takin Roy Rymbai [(1976) 103 ITR 82 (SC); AIR 1976 SC 670 Hon'ble Supreme Court has held that in the context of taxation laws the mere fact that a tax falls more heavily on some in the same category, is not by itself a ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification that there would be a violation of Article 14. In the case of Federation of Hotel Restaurant Association of India Versus Union of India ( AIR 1990 SC 1637) Hon'ble Supreme Court has held that the State, in exercise of its powers, has, of necessity, to make laws operating differently in relation to different groups or class of persons to attain certain ends and must, therefore, possess the power to distinguish and classify persons or things. It is also recognized that no precise or set formula or doctrinaire tests or precise scientific principles of ex....
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....grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation. In order to pass the test, two conditions must be fulfilled, namely,(l) that the classification must be founded on an intelligible differentia which distinguishes those that are grouped together from others and (2) that differentia must have a rational relation to the object sought to be achieved by the Act. 2. The differentia which is the basis of the classification and the object of the Act are distinct things and what is necessary is that there must be a nexus between them. In short, while Article 14 forbids class discrimination by conferring privileges or imposing liabilities upon persons arbitrarily selected out of a large number of other persons similarly situated in relation to the privileges sought to be conferred or the liabilities proposed to be imposed, it does not forbid classification for the purpose of legislation, provided such classification is not arbitrary in the sense above mentioned. It is clear that Article 14 does not forbid reasonable classification of persons, objects and transactions by the legislatur....
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....ore inclined to give judicial deference to legislature judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Dond 354 US 457 where Frankfurter, J. said in his inimitable style: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial difference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events-self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. The court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measu....
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....tification and the terms and conditions prescribed therein represent the policies of the government evolved to subserve public interest and public revenue. A very heavy burden, lies upon the person who challenges them on the ground of Article 14. Unless otherwise established, the court must presume that the said amendment was found by the Central Government to be necessary for giving effect to its policy [underlying the notification] on the basis of the working of the said Notification and that such an amendment was found necessary to prevent persons from taking unfair advantage of the concession" 42. Applying the tests laid down by Hon'ble Supreme Court in the afore noted judgments, we find that classification of exporters on the basis of turn over of less than Rs. 10 crores and more than Rs. 10 crores is a valid classification based on intelligible differentia. The exporters having export turn-over not exceeding Rs. 10 crores referable to the 2nd Proviso of Section 80HHC(3) fall under one group while the exporter having export turn-over exceeding Rs. 10 crores referable to 3rd and 4th proviso of Section 80HHC(3) fall under another group. Thus, the classification so made is found....
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....form of deduction by the impugned amendments, which was promised to them under Section 80 HHC of the Act. It is also submitted that the conditions imposed by the 3rd and 4th proviso has deprived them of the benefit of Section 80 HHC which was available to them from the beginning and, therefore, such deprivation is hit by principles of promissory estoppel. 46. In the case of Maharshi Dayanand University Vs. Surjeet Kaur (2010) 11 SCC 159 para 17 and 18 the Hon'ble Supreme Court has held as under : "17. In UT, Chandigarh Vs. Goswami, GDSDC this Court considered the case under the provisions of the Punjab (Development and Regulation) Act, 1952, wherein a demand had been challenged on the ground of equitable estoppel. This Court held that promissory estoppel does not apply against the Statute. Therefore, the authority had a right to make recovery of outstanding dues in accordance with law. The Court held as under :(SCC pp.666-67, para 4) "4. [The Administration] only corrected a patent mistake which could not be permitted to subsist.......A contract in violation of the mandatory provisions of law can only be read and enforced in terms of the law and in no other way. The question of ....
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....9, Hon'ble Supreme Court has laid down the law that the legislature does not exceed its jurisdiction. In the case of State of Bihar and others Vs. Smt. Charusila Dasi reported in AIR 1959 SC 1002 para 14, Hon'ble Supreme Court has laid down the law that there is presumption that the legislature does not intend to exceed its jurisdiction. In the case of Kedar Nath Singh Vs. State of Bihar reported in AIR 1962 SC 955 para 26 Hon'ble Supreme Court held that provision should be construed in the manner as will uphold its constitutionality. In Corporation of Calcutta Vs. Libery Cinema reported in AIR 1965 SC 1107 Hon'ble Supreme Court has laid down the law that the provision should be read in the manner as will make it valid. Similar view has been expressed by the Constitution Bench of Supreme Court in the case of Anandji Haridas and Co. (P) Ltd. Vs. S.P. Kasture and ors. reported in AIR 1968 SC 565, para 32. In the case of Sunil Batra Vs. Delhi Administration and ors. reported in AIR 1978 SC 1675, Hon'ble Supreme Court observed that the legislature expresses wisdom of community. In the case of State of Bihar VS. Bihar Distilleries reported in AIR 1997 SC 1511, para 18, Hon'ble Supreme C....
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.... challenges it. It is true that it is the duty of the constitutional courts under our Constitution to declare a law enacted by Parliament or the State Legislature as unconstitutional when Parliament or the State Legislaturehad assumed to enact a law which is void, either for want of constitutional power to enact it or because the constitutional forms or conditions have not been observed or where the law infringes the fundamental rights enshrined and guaranteed in Part III of the Constitution. 84. As observed by this Court in CST v. Radhakrishnan in considering the validity of a Statute the presumption is always in favour of constitutionality and the burden is upon the person who attacks it to show that there has been transgression of constitutional principles. For sustaining the constitutionality of an Act, a Court may take into consideration matters of common knowledge, reports, preamble, history of the times, objection of the legislation and all other facts which are relevant. It must always be presumed that the legislature understands and correctly appreciates the need of its own people and that discrimination, if any, is based on adequate grounds and considerations. It is also....
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....and balances" inherent in such scheme." 49. In the case of Promoters and Builders Association Vs. Pune Municipal Corporation (2007) 6 SCC. 143 para 9, Hon'ble Supreme Court has laid down the law that while exercising legislative function, unless unreasonableness and arbitrariness is pointed out it is not open for the Court to interfere. 50. From these decisions out of the long line of decisions with regard to the presumption of constitutional validity of a legislative enactment representing the will of people referred in preceding paragraphs when applied on the facts of the present case and the submissions made by the parties, we find that the petitioners have completely failed to rebut the presumption of constitutional validity of the impugned provision. 51. Learned counsel for the petitioner has heavily relied on the judgment of Gujarat High Court in the case of Avani Exports and others Vs. Commissioner of Income Tax and others (2012) 348 ITR 391 (Gujarat). We have perused this judgemnt and we fully agree with the conclusions reached by the Gujarat High Court that the classification made under the 2nd, 3rd and 4th proviso is wholly valid and the impugned amendment is not viola....