TaxTMI 
TaxTMI 
2007 (9) TMI 597
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....the purchase of liquor for the assessment year 2006-07. The appellants are registered dealers under the provisions of the Kerala General Sales Tax Act, 1963, hereinafter for the sake of brevity referred to as "the Act, 1963". They are running bar-attached hotels within the area of Municipal Corporation, Municipal Council and other places. Section 5(2) of the Act, among other things provides for levy of turnover tax at 10 per cent on the sales turnover of alcohol by bar hotels. The KGST Act was amended by the Kerala General Sales Tax (Amendment) Act, 2005 providing for payment of tax at compounded rate by bar licencees running hotels not being star hotels of and above three-star classification, heritage hotel or club. The said provision reads as under: "4. Insertion of section 7. - In the principal Act, after section 6, the following section shall be inserted, namely: 7. Payment of tax at compounded rates. - Notwithstanding anything contained in sub-section (2) of section 5, any bar-attached hotel, not being a star hotel of and above three-star hotel, heritage hotel or club, may at its option, instead of paying turnover tax on liquor in accordance with the provisions of t....
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....tober 24, 2006 and was published in the Kerala Gazette (Extraordinary) No. 1670 on the same day. As per section 2(1) of the Act, the proposal in the Bill relating to amendment of section 7 of the KGST Act has been accepted with an amendment in clause (b) reducing the rate of tax provided therein from 125 per cent to 115 per cent. As per section 1(2)(d) of the Kerala Finance Act, 2006, the amendment would take effect from July 1, 2006. Section 7 of the Kerala General Sales Tax Act, 1963 as substituted by section 2(1) of the Kerala Finance Act is as under: "7. Payment of tax at compounded rates.-Notwithstanding anything contained in sub-section (2) of section 5, any bar-attached hotel, not being a star hotel of and above three-star hotel, heritage hotel or club, may, at its option, instead of paying turnover tax on foreign liquor in accordance with the provisions of the said sub-section pay turnover tax on the turnover of foreign liquor calculated,- (a) at one hundred and forty per cent of the purchase value of such liquor, in the case of those situated within the area of a municipal corporation or a municipal council or a cantonment, and at one hundred and thirty five per cent of....
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....the option relates. (3) When an option for compounding under the above section is accepted, the assessing authority shall compute monthly tax liability worked out on an average basis, in accordance with item (ii) above. He shall then compare the said figure with figures worked out under item (i) based on the details conceded as per the return. The tax payable for a month will be the higher amount so worked out. This will be subject to revision based on the annual figures. (4) In respect of the dealers who had not opted for compounding during 2005-06 and are now opting for compounding for the year 2006-07, the value of closing stock of foreign liquor held by such dealers as on March 31, 2006 will have to be considered for the purpose of computing the compounded tax liability under item (i) above. (5) There are some cases where option of dealers for compounding for the year 2006-07 in accordance with the pre-amended provisions of the Act were filed and accepted; such dealers will be eligible to pay tax in accordance with the pre-amended provisions only up to June 30, 2006 since there would be no promissory estoppel against statute. These dealers may opt for the new compounding sy....
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....was repelled by the learned single judge and their writ petitions, as mentioned earlier, were dismissed. Mr. Sudhi Vasudevan, learned counsel for the appellants in the appeals filed before us, while assailing the common judgment passed by the learned single judge, would contend that the appellants have a vested right under section 7 of the Act, as it stood originally to pay the turnover tax at the compounded rate in the manner provided in clauses (a) and (b) of section 7 of the Act for the year 2005-06 in view of insertion of section 7 in the statute book by Kerala General Sales Tax (Amendment) Act, 2005 and the said right to exercise the option envisaged in the said section was allowed to be exercised during the financial year 2006-07 also and the option so exercised was accepted by the authorities under the Act and once the application for exercising the option is accepted, the contract stands concluded and the right gets accrued in favour of the appellants and such a right cannot be allowed to be divested by bringing an amendment retrospectively. Alternatively, it is contended by the learned counsel that the Legislature has provided the alternate method of discharging th....
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.... and canvas for a contra position." The learned counsel would then contend that in view of the promise made by the Legislature under section 7 of the Act, the dealers had opted for payment of turnover tax under section 5(2) of the Act at a compounded rate and accordingly have arranged their affairs in relation to turnover tax payable under the Act and the Government is bound by the promise and it would not be open to the Government to go back on the promise made by introducing retrospective legislation, to nullify the permission granted for payment of turnover tax under the compounding scheme. The sum and substance of the argument is, the doctrine of promissory estoppel is available even against the statute. In support of his contention, the learned counsel strongly relies on the observations made by the apex court in the case of State of Punjab v. Nestle India Ltd. [2004] 136 STC 35; [2004] 269 ITR 97; [2004] 6 SCC 465 and the decision of the Supreme Court in the case of State of Himachal Pradesh v. Ganesh Wood Products AIR 1996 SC 149. The learned counsel would further contend that a reading of the amended provision would show that the words found in clause (a) of section 7 are....
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....considering what was the substance of the matter." The learned counsel would further contend that his submission is also supported in view of the amendment introduced in the Kerala Finance Bill 2007 to section 7 of the Act which has come into force with effect from 1st day of April 2007, wherein after the word "calculated" the words "at the rates in clause (a) or (b) whichever is higher" is inserted and in clause (b) the words "whichever is higher" shall be omitted. Per contra, learned counsel Mr. Mohammed Rafiq, appearing for the Revenue, would submit that the legislative power conferred on the appropriate Legislatures to enact laws in respect of topics covered by the several entries in the three Lists can be exercised both prospectively and retrospectively and when the Legislature can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law, it can also provide for the retrospective operation of the said provision. To derive support to his contention, the learned counsel relies upon the observations made by the Supreme Court in the case of Mycon Construction Limited v. State of Karnataka [2002] 127 STC 105. The learned ....
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....4 STC 42; [1979] 118 ITR 326, and we find ourselves wholly in agreement with what has been said in that decision on this point." Insofar as the last issue, the learned counsel would submit that the intention of the Legislature is expressed by the Finance Minister in his Budget Speech for the year 2006-07 and if that is kept in view, the only conclusion that is possible is that the Legislature, while substituting the earlier provision with the amended provision, was to collect higher rate of turnover tax at the compounded rate and clauses (a) and (b) of section 7 should be read conjunctively and not disjunctively. Re-contention (i): Section 5(2) of the KGST Act provides for levy of turnover tax at 10 per cent on the sales turnover of alcoholic liquor by bar hotels. Section 7 of the Act provides that any bar-attached hotel, not being a star hotel of above three-star hotel, club, heritage hotel liable to tax under this Act, may at their option exercisable in the manner prescribed in lieu of tax payable under sub-section (2) of section 5 of the Act, pay turnover tax at the rate specified under that sub-section on the turnover of foreign liquor calculated in the case of bar-attached h....
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....ous three years, whichever is higher. The proposal so made was given effect in the Kerala Finance Act, 2006 which was published in the Official Gazette dated October 24, 2006 and the amended provisions on turnover tax were made effective with effect from July 1, 2006. In the amendment so made, the Legislature has not tinkered with the composition scheme for payment of turnover tax as such by the bar hotel owners, but has altered the method of quantification for payment of turnover tax on the turnover of foreign liquor. In the amended provision, under clause (a), it could be still at one hundred and forty per cent or one hundred and thirty five per cent, as the case may be, on the purchase value of foreign liquor, but in view of clause (b) of section 7, the payment of turnover tax for the purpose of compounding scheme is made on the turnover of tax paid or payable for the previous consecutive three years, whichever is higher. Since the provisions looked little ambiguous to us, at the time of hearing these appeals, because of the poverty of the language of the draftsman, we had directed the learned Government Pleader for the Revenue to file additional affidavit explaining the scheme....
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.... the parties and such an agreement would bind the parties for the entire assessment year and the same cannot be altered in the middle of the year and even if it is altered, the appellants are entitled to continue to pay turnover tax under the unamended provision till the end of the year. It is further stated by the learned counsel for the appellants that once an offer is made for permission to pay turnover tax under the compounding scheme and if that offer is accepted by the assessing authority, there is binding contract between the parties, which would create a vested right in the dealer and that cannot be taken away by subsequent amendment. In our view, the law on that point is now well-settled by several authoritative pronouncements by the apex court. The settled legal position appears to be that an agreement between the parties would be binding on both the parties but, the said agreement can be modified or altered in a manner known to law. It is true that the agreement between two parties would be binding on both the parties and it would definitely create a vested right for both parties, since the same would be binding on both the parties. The apex court in the case of Enterta....
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....o contend in the alternative that the restrictions imposed by the Act are so unreasonable that they should be struck down on the ground that they contravene the fundamental rights granted under article 19(1)(f) and (g) of the Constitution. At the same time, we have to bear in mind that the legislative power conferred on the appropriate Legislatures to enact laws in respect of topics covered by the several entries in the three lists can be exercised both prospectively and retrospectively. Where the Legislature can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law, it can also provide for the retrospective operation of the said provisions. ...". In a recent decision in the case of Mycon Construction Limited v. State of Karnataka [2002] 127 STC 105, the Supreme Court was considering a more or less similar question as has been argued in the instant appeals. The questions that came up for consideration was whether sub-section (6) of section 17 of the Karnataka Sales Tax Act, 1957 as amended by Act No. 5 of 1996 is unconstitutional and secondly whether the amendment brought in clause (1) of sub-section (6) of section 17 o....
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....sel for the appellant tried to impress on us the practical difficulties and inequalities produced by the impugned retrospective legislation and therefore requests us to hold that the impugned amended provisions is unreasonable and arbitrary. We do not think that these inequalities and practical difficulties, assuming they exist which may be but peripheral and procedural, would be sufficient by themselves to render the retrospective effect unreasonable and to enable us to declare that impugned amendment giving retrospective effect as unreasonable and arbitrary on the touchstone of articles 14 and 19(1)(g) of the Constitution. Apart from this, the Revenue in their statement of objections filed, has made it clear that it is open to the dealers either to continue to opt for payment of turnover tax at the compounded rate or to go for regular assessment as provided under the Act and this assurance of the State Government, in our opinion, should alleviate the difficulties expressed by the appellants. Before we conclude on this issue, we add none of the decision on which reliance placed by the learned counsel for the appellant had an occasion to deal with the legal issue urged and canvasse....
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....the legislative competence of entry 54 of List II of Schedule VII, there can be no plea of estoppel against the statute. However, Sri. Sudhi Vasudevan, learned counsel for the appellant heavily relying on the observations made by the apex court in the case of State of Punjab v. Nestle India Ltd. [2004] 136 STC 35; [2004] 269 ITR 97; [2004] 6 SCC 465, contended that the concept that there can be no plea of estoppel against the statute has been watered down and that plea of doctrine of estoppel is available against the Legislature. The facts in Nestle India Ltd.'s case [2004] 136 STC 35; [2004] 269 ITR 97 (SC); [2004] 6 SCC 465 was that several representations were made by the Chief Minister, Finance Minister and Commissioner of Commercial Taxes announcing the abolition of purchase tax on milk with effect from April 1, 1996. But, notification pursuant thereto was not issued as required under the Act. The manufacturers acting on this assurance did not pay purchase tax in 1996-97 and passed on the benefit to the milk producers by providing various concessions and facilities. The dealers had relied upon the statements made and had arranged their business affairs and the State Gover....
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....Nestle India Ltd.'s case [2004] 136 STC 35; [2004] 269 ITR 97; [2004] 6 SCC 465 is in no way nearer to the fact situation in the instant case and therefore, we are of the view that the said decision would not assist the appellants in support of their contention. Re-contention No. (iii): In Statutory interpretation by Francis Bennion, it is said, punctuation forms part of an Act, and may be used as a guide to interpretation. Punctuation is generally of little weight, however, since the sense of an Act should be the same with or without punctuation. It is further said, that punctuation is a device not for making meaning, but for making meaning plain. Its purpose, as Bouvier said, is to denote the stops that ought to be made in oral reading, and to point out the sense. Drafters are instructed that they should on no account, allow the meaning to turn, on the presence or absence of a punctuation mark. The good drafter consciously drafts every clause with an eye to what its sense would be if all such marks were removed. Crawford in his book on "Statutory Construction" says that when a statute is careful by punctuation, there is no doubt as its meaning, weight should undoubtedly be ....
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....ance. The amendment made to section 7 of the Act, as proposed by the Finance Minister in his Budget Speech for the financial year 2006-07, was that, the earlier provisions has led to fall in revenue in some cases and therefore, amendment requires to be made to the compounding scheme by adding the stipulation that they may continue to pay turnover tax at the present compounding rate or at 125 per cent of the highest of turnover tax paid or payable for any of the previous three years. This is the legislative policy of the State Government. The draftsman while drafting the legislation has ineptly used the semi-colon immediately after clause (a) of section 7 and then again the word "or" in between clauses (a) and (b) of section 7 of the Act. We are aware of the fact that the statement of a Minister cannot be taken for interpreting the provisions of the enactment, but can be looked at to ascertain the mischief sought to be remedied and the object and purpose for which legislation is enacted. Tax structure is a question of policy and it is a matter of consideration by the Legislature. Where there is no challenge to the provisions and the statute is not shown to be beyond the legislativ....