TaxTMI 
TaxTMI 
2007 (12) TMI 428
X X X X Extracts X X X X
X X X X Extracts X X X X
....rit petition is regarding the constitutional validity of section 25 of the Amending Act. Facts relevant for the present petition are that, since 1979 the petitioners have been manufacturing "paper based decorative laminates" ("the goods in question", for short). The petitioners claim to be the pioneers in manufacturing the goods in question. The process of manufacturing the goods in question involves treating several sheets of paper with thermosetting resins and then pressing the same under heat and pressure to form a bonded sheet. These bonded sheets are called paper based decorative laminated sheets because they are manufactured out of several layers of paper and have a shining surface. It is not in dispute that prior to July 1, 1981, the goods in question were assessed to sales tax under entry 19-A of Schedule E to the BST Act, 1959 as goods made primarily from any kind of plastics. After July 1, 1981 the goods in question were assessed under entry C-II-61 of the BST Act as "plastic laminates". The petitioners have paid sales tax accordingly. The petitioners now seek to contend that since inception, the goods in question were classifiable under entry C-II-9. For easy refer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made from non-cellulose synthetic material), straw-board and pulpboard including greyboard, corrugated board, duplex and triplex boards, mill board, pasteboard, and cardboard. 6% 6% 1.4.1984 to 30-9-95 (iv) Wall paper 12% 12% 1.7.82 to 30-9-95. Entry C-II-61 Sr. No. Description of goods Rate of sales tax Rate of purchase tax Period of operation 1 2 3 4 5 61. Plastic laminates Twelve paise in the rupee Twelve paise in the rupee Added from 1-7-1982 As stated earlier, the goods in question manufactured and sold by the petitioners during the period from October 12, 1979 have been assessed to sales tax under entry 19A in Schedule E and under entry C-II-61 of the BST Act from July 1, 1981 and sales tax at 12 per cent has been paid by the petitioners accordingly. On August 14, 1988, the CEGAT in the case of Collector of Central Excise v. Melamine Fibre Board Ltd. reported in [1988] 36 ELT 139 held that the paper based laminated sheets are not plastic sheets covered under tariff item 15A(2) of the Central Excise Tariff and, therefore, the paper based laminated sheets are classifiable under residuary item 6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the kind used for surface lamination of table tops, furniture, panels, partitions or for like purposes. 12% 12% 1-4-1989 to 30-9-1995 To complete the narration of facts, we may note that during the pendency of the writ petition, the Commissioner of Sales Tax by his order dated October 30, 1991 has disposed of the application filed by the petitioners under section 52 of the BST Act by holding that in the light of retrospective amendment to entry C-II-61 which is clarificatory in nature, the goods in question would be covered under Schedule, entry C-II-61. Admittedly, the appeal filed against the said order is pending before the appellate authority. Similarly, the revision applications filed by the petitioners have also been dismissed by the Commissioner of Sales Tax by his order dated October 7, 2005 in the light of the retrospective amendment to entry C-II-61. Although, the present writ petition has been amended to challenge the said order dated October 7, 2005, as stated earlier, the learned counsel for the petitioners has restricted her arguments to the constitutional validity of the retrospective amendment to entry C-II-9 and C-II-61 and agreed to agitate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... question under the amended entry C-II-61. She submitted that although the State has the power to legislate retrospectively, the Legislature cannot introduce a new levy with retrospective effect. In the present case, as per the entries existing at the relevant time, the goods in question were classifiable under entry C-II-9 at six per cent and not under entry C-II-61 at 12 per cent. By the impugned legislation, it is declared that the goods in question are taxable at 12 per cent under entry C-II-61 with retrospective effect from July 1, 1981 instead of six per cent under entry C-II-9. Such a legislation which imposes higher tax liability with retrospective effect is liable to be declared as unconstitutional. In support of the above submission, the learned counsel for the petitioners relied upon the following decisions: Shri Krishna Enterprises v. State of Andhra Pradesh [1990] 76 STC 67 (SC), Mega Traders v. State of Kerala [1991] 83 STC 59 (Ker), Shamanur Kallappa and Sons v. State of Karnataka [2004] 136 STC 132 (Karn) and V. J. Suraiya v. Additional Commissioner [2002] 127 STC 575 (WBTT). Ms. Badheka further submitted that the impugned legislation is arbitrary and discriminat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he power to rationalise or increase sales tax payable on certain goods, the said power cannot be exercised retrospectively. Ms. Badheka further submitted that the very fact that the Legislature chose to amend entry C-II-9 with retrospective effect from July 1, 1981 clearly shows that up to the date of amendment, the goods in question were taxable at six per cent under entry C-II-9. If the goods in question were not covered under entry C-II-9, then, there would not have been any necessity to amend entry C-II-9. Therefore, having realised the mistake that the goods in question were taxable at six per cent, but erroneously taxed at 12 per cent, the Legislature, instead of refunding the excess tax has chosen to enhance the tax from six per cent to 12 per cent retrospectively. Accordingly it is submitted that the impugned legislation enacted to defeat the refund claim of a single individual, namely, petitioner No. 1, who was the pioneer in the manufacture of the goods in question, cannot be said to be a legislation enacted in public interest. Ms. Badheka further submitted that the customers to whom the 12 per cent tax assessed erroneously was passed on, started demanding from t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... submitted that paper based decorative laminated sheets are different from paper board or coated board and because of its characteristics, the goods in question were properly classified as plastic laminates under entry C-II-61. He submitted that the retrospective amendment merely clarifies the original intention of the State Legislature and the same has been accepted by manufacturers such as Bombay Trading Corporation and M/s. Greenply Industries, Calcutta and they are paying tax at 12 per cent on sale of similar goods manufactured by them. In this connection, he relied upon a judgment of the apex court in the case of State of Tamil Nadu v. Pyarelal Malhotra reported in [1976] 37 STC 319 and a decision in the case of Commissioner of Sales Tax v. Dunken Coffee Manufacturing Co. [1975] 35 STC 493 (Bom). Mr. Nair further submitted that since 1979 the petitioners themselves have been classifying the goods in question as plastic laminates and paying sales tax at 12 per cent on the said goods. However, it is only after the decision of CEGAT in the year 1988 delivered under the Central Excise Act, the petitioners, as well as other manufacturers, started filing refund claims/ revision c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as valid, in view of the controversies sought to be raised by the parties in the light of the judgment of CEGAT in the case of Melamine Fibre Board Ltd. [1988] 36 ELT 139, the Legislature thought it fit to clarify retrospectively the items covered under entry C-II-61. He submitted that such a legislation which is clarificatory in nature cannot be said to be unconstitutional merely because it is retrospective. Mr. Nair further submitted that the argument of the petitioners that the impugned legislation is arbitrary and discriminatory cannot be accepted because, by the impugned legislation all the dealers dealing in laminated plastic or plastic sheets are treated at par and taxed equally at 12 per cent. In other words, according to Mr. Nair since the petitioners as well as other manufacturers who have been manufacturing the goods in question have been uniformly taxed at 12 per cent under entry C-II-61, it cannot be said that the impugned legislation is discriminatory. Relying upon the decisions of the apex court in the case of ITW Signode India Ltd. v. Collector of Central Excise [2004] 3 SCC 48 and Gujarat Ambuja Cements Ltd. v. Union of India [2005] 1 VST 1; [2005] 274 ITR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is, whether the goods in question (prior to amendment) were classifiable under entry C-II-9 as "paper board/coated board" or under entry C-II-61 as "plastic laminates". Neither entry C-II-9 nor entry C-II-61, prior to its amendment specifically covered the goods in question. In such a case, how the product was known in the trade at the relevant time assumes importance. It is an undisputed fact that since inception the goods in question were considered to be laminated sheets covered under entry C-II-61. The petitioners have sold the goods in question since inception to various customers as laminated sheets covered under entry C-II-61 attracting tax at 12 per cent. Various customers of the petitioners to whom said liability was passed on, have accepted that liability and paid tax at 12 per cent. Other manufacturers who started manufacturing similar goods subsequent to the petitioners have also sold the goods in question under entry C-II-61 and even their customers have accepted that the goods in question are laminated sheets covered under entry C-II-61 and paid tax at 12 per cent. Accordingly, the returns filed by the petitioners and other manufacturers were accepted and assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....merit in this contention, because from July 1, 1981 admittedly, the goods in question were taxed at 12 per cent under entry C-II-61 and even after the amendment, the goods in question continue to be taxed at 12 per cent under entry C-II-61. By the impugned legislation, laminated sheets impliedly included in the word "plastic laminates" are expressly brought out by amending the entries retrospectively. The concluded assessments are not at all affected by the retrospective amendment. In fact, by the retrospective amendment, the tax liability at 12 per cent already incurred on the goods in question is reiterated. Therefore, the argument of the petitioners that the amendment purports to levy new impost or create new liability with retrospective effect is devoid of any merit. It is contended that prior to the retrospective amendment, the goods in question were classifiable as paper board/coated board under entry C-II-9 at six per cent and not as "plastic laminates" under entry C-II-61. It is contended that merely because the petitioners and other manufacturers have erroneously accepted the assessment of the goods in question under entry No. C-II-61 at 12 per cent instead of en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in, tax was levied and, therefore, the apex court set aside the assessments and directed the assessing officer to give an opportunity to the petitioners. While disposing of the review petition filed by the State, the apex court held that since the incidence of sales tax is ordinarily passed on to the customer, by a retrospective amendment liability cannot be created without affording any opportunity to pass on the incidence of the tax. The above decision has no relevance to the facts of the present case, because the tax liability as per assessment was at 12 per cent and even after amendment the tax liability continues to be at 12 per cent. There is no additional liability imposed by the retrospective amendment. Hence, the decision of the apex court in the case of Shri Krishna Enterprises [1990] 76 STC 67 is distinguishable on facts. Similarly, the decision of the Kerala High Court in the case of Mega Traders v. State of Kerala [1991] 83 STC 59, decision of the Karnataka High Court in the case of Shamanur Kallappa and Sons [2004] 136 STC 132 and the decision of the West Bengal Sales Tax Tribunal in the case of V. J. Suraiya [2002] 127 STC 575, are all distinguishable on facts ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions were taxed differently. In the present case, laminated sheets whether made of paper or not were and are covered under entry C-II-61. Sale of the goods in question whether by petitioners or other manufacturers have been uniformly taxed at 12 per cent under entry C-II-61. Similarly, sale of the goods in question whether used for surface lamination of table tops, furniture, panels, etc., or not, they are taxed uniformly at 12 per cent. Hence, the decision of the apex court in the case of Arya Vaidya Pharmacy 1989] 73 STC 346 does not support the case of the petitioner. Strong reliance was placed on the decision of the Andhra Pradesh High Court in the case of Srinivasa Poultry & Cattle Feed Pvt. Ltd. [1999] 114 STC 67. In that case, a notification issued under the Andhra Pradesh General Sales Tax Act, 1957, granted exemption of tax on sale of poultry feed manufactured from out of the ingredients which have suffered tax in the State or which were exempt from tax in the State. The effect of the notification was that there were two different prices for the very same poultry feed depending upon the ingredients used in the manufacture of the said poultry feed. It was held that th....