PETITIONER:
STATE OF UTTAR PRADESH AND ORS.
Vs.
RESPONDENT:
MODI INDUSTRIES LIMITED
DATE OF JUDGMENT04/01/1977
BENCH:
SHINGAL, P.N.
KRISHNAIYER, V.R.
CITATION:
1977 AIR 513 1977 SCR (2) 548
1977 SCC (1) 697
ACT
U.P. Sales Tax Act, 1948--S. 31--Scope of.
HEADNOTE
The respondent filed its sales tax returns for the
assessment years 1948-49 and 1949-50 on the basis of its
turnover of two previous years. In respect of certain
commodities, the rate of sales tax was enhanced with effect
from certain dates falling within the assessment years.
The High Court on reference took the view that the
dealer who had chosen to be assessed on the basis of its
turnover of the previous year of assessment, was liable to
be assessed at the rule prevailing on the first day of the
relevant assessment year and that any change in the rate
during the assessment year could not be applied to that
assessment.
The assessee, who had paid tax at the enhanced rate,
applied for refund of the excess tax together with interest
thereon under s. 11(6) of the U.P. Sales Tax Act, 1948. The
Additional Judge (Revisions), however, rejected the applica-
tion holding that refund was not permissible in view of s.
31 introduced by the Amending Act (U.P. Act 3 of 1963).
That section provided that where a dealer opted to be as-
sessed to tax on the basis of his turnover of the previous
year, he shall be assessed to tax at such.rates as are
prevalent during the year for which the assessment is being
made, and if the rates of tax are altered during such as-
sessment year, the dealer, in respect of the turnover of
such goods, shall be liable to pay tax at the altered rates,
as if the altered rates were in force during the previous
year also proportionately for the number of days involved as
they were in force during the assessment year. According to
sub-section (2) of that section the assessments made at the
enhanced rates in accordance with the notification dated
April 9, 1948 were to be deemed to be good and valid as if
they had been duly made and as if the amendment made by the
insertion of s. 31 had been in force on all material dates.
It was expressly provided by the sub-section that that was
to be so notwithstanding any judgment, decree or order of
any court.
The High Court quashed the order of assessment on the
ground that the Revising Authority was not free to take a
different view from the one expressed by it (High Court) on
any ground whatsoever, including the ground of any subse-
quent amendment of the law.
Allowing the Appeal to this Court,
HELD: There is nothing wrong with the view taken by
the Revising Authority. When S. 31 of the Act is valid, and
is retroactive .and the Legislature has shown the intention
of restoring the assessments and orders made before the
amendment as good and valid in law as if they had been duly
made. that was enough to set the controversy at rest. The
amendment made by S. 31 was retroactive and applied to
assessments pending or closed as if the Amending Act had
been in force at all material times. [554C-D; 552C]
Commissioner of Sales Tax, U.P.v. Bijli Cotton Mills,
Hathras, [1964] 7 S.C.R. 383 referred to.
(a) Section 31 was sought to be applied to the facts
of the case when the Additional Judge (Revisions) was in
seisin of the case for the purpose of passing the necessary
orders to dispose it of finally in conformity with the
judgment of
549
the High Court. If he had passed an order under s. 11(6) of
the Act as directed by the High Court, that would have been
of no consequence and would have been inoperative because of
s. 31(2). [553B-C & F]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1694 of 1971.
(From the Judgment and Decree dt. 11-2-70 of the Allaha-
bad High Court in Civil Misc. Writ No. 973 of 69).
S.C. Manchanda and O.P. Rana for the Appellants.
K. Sen, J.P. Goyal and Shreepal Singh, for the Re-
spondent.
The Judgment of the Court was delivered by
SHINGHAL J. This appeal by the State of Uttar
Pradesh and three sales tax officers is directed against the
judgment of the Allahabad High Court dated February 11,
1970. The High Court has granted a certificate of fitness
under clause (c) of article 133(1) of the Constitution.
Respondent Modi Industries Limited. hereinafter referred
to as the dealer, was known earlier as the Modi Sugar Mills
Ltd. It manufactured various articles like sugar, oil,
vanaspati and soap. It exercised the option under section
7 (as it stood prior to its amendment by section 7 of U.P.
Act XIX of 1956) of the U.P. Sales Tax Act, 1948, hereinaf-
ter referred to as the Act, to submit its returns of sales-
tax on the basis of its turnover of the previous yearns and
filed the returns accordingly. The assessment years for
which the returns were filed were 1948-49 and 1949-50, and
the corresponding previous years were November 1, 1946 to
October 31, 1947, and November 1, 1947 to October 31, 1948
respectively. The rate of sales tax for certain commodities
was enhanced during the assessment year 1948-49, with
effect from June 9, 1948, and for some other commodities
with effect from July 1, 1948. The dealer contended that
sales tax on its entire turnover of the two previous years
should be assessed at the old rate of 3 pies per rupee and
not at the enhanced rate of 6 pies per rupee because the
enhancement was made after both the previous years had ex-
pired. The Sales Tax Officers rejected that contention and
assessed ’the sales tax at the enhanced rates. The appel-
late authority however upheld the dealer’s contention and
the matter went up in revision to the Judge (Revisions). He
upheld the order of the Sales Tax Officer. The dealer
applied for a reference under section 11 (1) and the fol-
lowing two questions of law were referred to the High
Court,-
"(1) Whether the enhanced rate under notifica-
tions dated 8th Jane, 1948 and 30th June,
1948 issued under section 3-A of the
U.P. Sales Tax Act. 1948 are ap-
plicable to the-sales of goods mentioned
in paragraph 2 above which took place
before 8th June 1948 and 30th June,
1948.
(2) Whether sub-section (ii) of section
3-A of the U.P. Sales Tax Act, 1948,
empowers Provincial Government to fix
the rate of sales tax in respect of an
assessment year or in respect of certain
specified sales only ?"
550
By its judgment dated July 24, 1961, the High Court answered
question No. 1 in favour of the dealer, but declined to
answer the other question. The High Court took the view
that the dealer who had chosen to be assessed on the basis
of its turnover of the previous year was liable to assess-
ment, on the entire turnover of the previous year, at the
rate prevailing on the first day of the relevant assessment
year and that any change in the rate of the sales tax during
the course of the assessment year could not be applied to
that assessment. The dealer filed an application under
section 11(8) of the Act for a direction for the payment
of interest on the amount which had become refundable as a
result of the judgment of the High Court. The High Court
held in its order dated February 22, 1966 that the dealer
was entitled to interest at the rate of two per cent on
the refundable amount. The dealer accordingly made an
application to the Revising Authority on October 11, 1968 to
pass an order under sub-section (6) of section 11 for a
refund of Rs. 3,48,420/13 with interest at two percent per
annum. The Additional Judge (Revisions) Sales Tax however
dismissed the application by his order dated December 28,
1968, as he took the view that that was not permissible
because of the insertion of section 31 in the Act by the
Uttar Pradesh Bikri Kar (Sanshodhan) Adhiniyam, 1962 (U.P.
Act III of 1963) hereinafter referred to as the Amending
Act. The dealer felt aggrieved and filed a writ petition
under article 226 of the Constitution. It is that petition
which has been allowed by the impugned judgment of the
High Court dated February 11, 1970 by which the order of the
Additional Judge (Revisions) Sales Tax Meerut, dated Decem-
ber 28, 1968, has been quashed and a direction has been
given to him to pass an appropriate order under section 11
(6) of the Act in accordance with the law and in the light
of the observations made by the High Court. This is why
the State of Uttar Pradesh and others have come up to this
Court in appeal.
We have made a mention of the facts bearing on the
controversy, and we may as well refer to the relevant provi-
sions of the law.
The Act came into force on April 1, 1948. It provided
for payment of the sales tax on several commodities at a
uniform rate of 3 pies in the rupee. Section 3-A was in-
serted by Act XXV of 1948 conferring certain powers on the
Provincial Government. The provincial Government issued a
notification under that section declaring. inter alia, that
with effect from June 9, 1948 the rate of sales tax in
respect of the turnover of the goods specified in the noti-
fication shall be as stated in the schedule to the notifica-
tion. The rate of tax was thus enhanced to 6 pies per
rupee. The enhancement of the tax was challenged on the
ground that it was not permissible in the case of an asses-
see who had taken the option to submit his return on the
basis of the turnover of the sales in the previous year as
he was liable to pay the tax according to the rates pre-
vailingduring the assessment year. That case came up to
this Court at the instance of the present respondent, which
was then known as the Modi Sugar Mills Limited. and it was
held in Commissioner of Sales Tax, Uttar Pradesh v. The Modi
Sugar Mills Ltd. (1) that the assessee who had
(1) [1961] 2 S.C.R. 189.
551
elected to submit his return on the turnover of the previous
year was liable to be assessed to sales tax at the rate
force on the first day of the year of assessment because the
liability arose on that date, and any subsequent enhance-
ment of the rate by the notification under section 3-A did
not alter the liability, The Legislature however passed
the Amending Act and inserted the following as section 31,--
"31(1) Where any dealer has, in accord-
ance with the provisions of Section 7, as it
stood prior to its amendment by Section 7 of
U.P. Act XIX of 1956, opted to be assessed to
tax on the basis of his turnover of the previ-
ous year, he shall be assessed to tax at such
rates as are prevalent during the year for
which the assessment is being made, and if the
rates of tax on any goods or class of goods
are altered during such assessment year, the
dealer, in respect of the turnover of such
goods, shall be liable to pay tax at the
altered rates, as if the altered rates were in
force during the previous year also propor-
tionately for the same number of days as they
are in force during the assessment year.
(2) Notwithstanding any judgment, decree
or order of any court, all assessments or
orders made, actions or proceedings taken,
directions issued, jurisdictions exercised or
tax levied or collected by any officer or
authority purporting to act under the provi-
sions of sub-section (1) of Section 7, as it
stood prior to its amendment by Section 7 of
U.P. Act XIX of 1956, shall be deemed to be
good and valid in law as if such assessments,
orders, actions, proceedings, directions,
jurisdictions and tax have been duly made,
taken, issued, exercised, levied or collected,
as the case may be, under or in accordance
with the said provisions of this Act as amend-
ed by the Uttar Pradesh Bikri Kar (Sanshodhan)
Adhiniyam, 1962 and as if the amendment so
made had been in force on all material dates.
Explanation--For the purposes of this section the
expression "previous year" shall have the meaning assigned
to it in sub-clause (ii) of clause (j) of Section 2 of this
Act, as it stood prior to its amendment by Section 2 of
the U.P. Act XIX of 1956."
The validity of the aforesaid section 31 of the Act came up
for consideration in this Court in Commissioner of
Sales Tax, U.P. v. Bijli Cotton Mills Hathras(1) and was
upheld. It was held that as the Legislature had amended
the Act and declared that notwithstanding the option exer-
cised by the assessee the tax would have to be computed in
the light of the rates prevailing in 1948-49 as if they
were projected upon the turnover of the previous year, the
Legislature had expressly stated that that rule would pre-
vail as if it were in force during the assessment year and
all assessments would be made in the light of the amended
provision. It was observed that in taking that view this
Court was seeking to apply a legislative provision which
was, by express enactment, in force at the time when the
liability
(1) [1964]7 S.C.R. 363.
552
arose, for section 31 incorporated by the Amending Act was
to be deemed to have been in operation at all material
times in supersession of the previous rule declared by
this Court. It was held further that this would be the
position even if the laws were amended with retroactive
operation during the pendency of a reference to the High
Court. It was accordingly held that "if the law which
the Tribunal seeks to apply to the dispute is amended, so as
to make the law applicable to the transaction in dispute, it
would be bound to decide the question in the light of the
law so amended." The validity and the retroactive operation
of section 31 have therefore been placed beyond challenge by
the aforesaid decision in Bijli Cotton Mills’ case and have
in fact not been challenged by counsel for the dealer. It
may be mentioned that in its judgment in Bijli Cotton
Mills’ case this Court took notice of its earlier decision
in the Modi Sugar Mills’ case (supra) so that it is well
settled that the amendment made by section 31 is retroac-
tive and applies to assessments pending or closed as if the
Amending Act had been in force at material times.
The question is whether the judgment of the High Court
dated July 24, 1961 answering question No. 1 of the afore-
said reference by stating that the sales tax had to be
charged from the dealer for the assessment year 1948-49 at
the rate applicable to the various commodities on April 1,
1948, and for the assessment year 1949-50 at the rate
applicable on April 1, 1949, was binding on the Additional
Judge (Revisions) in spite of the amendment made by the
Amending Act by insertion of section 31 in the Act ? The
High Court has taken’the view in its impugned judgment
dated February 11, 1970 that the Revising Authority was not
free to take a different view from the one expressed by it
(High Court) on "any ground whatsoever", including the
ground of any subsequent amendment in the law, and that it
was bound to decide the case in conformity with the judgment
of the High Court. The High Court has expressed its view
as follows ,--
"The judgment of the High Court may be
said to have become erroneous as a result of
the amendment but so long as the judgment
stands, it is binding upon the parties and
the revising authority has no option except to
give effect to it in its c, order passed under
section 11(6)."
The High Court further made the following
observation,--
"We however, express no opinion as to
the course. which the department should.
adopt in a situation like this, but we have no
doubt in our mind that the amendment
brought about by section 31 of the Act does
not make the judgement of the High Court a
nullity and the Judge ’(Revisions) was not
free to ignore it for any reason whatsoever."
The question is whether lifts view of the High Court is
correct ? The answer to the question depends on the answer
to the further question whether the proceedings for the
assessment of the sales tax had become final after the High
Court’s judgment dated July 24,
553
1961 or whether, after that judgment, something remained to
be done by the Additional Judge (Revisions) ?
Sub-section (6) of section 11 of the Act provides that
the High Court, upon hearing the reference, shall decide
the questions of law and shall deliver its judgment thereon
and shall send its copy to the Revising Authority and the
Commissioner of Sales Tax, "and the Revising Authority
shall thereupon pass such orders as are necessary to dispose
of the case in conformity with such judgment." So while the
Additional, Judge (Revisions) was in seisin of the case for
the Limited purpose for passing such orders as were neces-
sary to dispose it of in conformity with the judgment of the
High Court, it cannot be gain said that he was in such
seisin and was required, in the facts and circumstances of
this case, to make an order which would make the assessment
order final and binding in all respects. It was at that
stage that section 31, which was inserted by section 7 of
the Amending Act, was sought to be applied to the controver-
sy. According to sub-section (2) of that section, the
assessments made at the enhanced rates, in accordance with
the notification dated April 9, 1948, were to be deemed to
be good and valid as if they had been duly made, and as if
the amendment made by the insertion of section 31 had been
in force on all material dates. It was expressly provided
by the sub-section that that was to be so notwithstanding
any judgment, decree or order of any court. The order of
the Additional Judge (Revisions) dated December 28, 1968
had therefore the effect of recognising the restoration of
the orders of assessment which were made by the Sales Tax
Officer at the enhanced rates,and sub-section (2) of section
31 had the effect of making them "good and valid in law".
It cannot be said that the Additional Judge (Revisions)
erred in taking that view, and in not passing an order for
giving effect to the judgment of the High Court dated July
24, 1961 which had become unenforceable by the aforesaid
section 31. It has to be appreciated that even if the
Additional Judge (Revisions) had passed an order under sub-
section C(6) of section 11 of the Act as directed by the
High Court, that would have been of no consequence and
would have been inoperative because of the specific provi-
sions of subsection (2) of section 31, so that the position
would have been the same as if no such order had been
passed at all.
The High Court has expressed the view that if its
judgment (dated July 24, 1961) was considered by the depart-
ment to be erroneous, it could have filed an appeal against
it to this Court. under article 136 of the Constitution to
have it set set aside or modified. It is not clear to us
how that would have been possible when the Amending Act
had not been passed till then, and was enacted some 1 1/2
years thereafter. The other suggestion of the High Court
that it may have been open to the department to ask for a
fresh reference to it against the order of the Revising
Authority under section 11 (6) on the ground that by the
amendment a fresh question of law had arisen, is also
untenable because that order (dated December 28, 1968) was
in favour of the department. In fact any suggestion or
observation of the High Court for seeking any other mode of
redress is beside the point for the State felt aggrieved
against the impugned
554
judgment of the High Court dated February 11, 1970 and has
come up in appeal against it. And now that this Court is in
seisin of the case, it would be a work of supererogation to
require the parties, or any of them, to go back to the
Additional Judge (Revisions) or the High Court for an
order.
It has next been argued that the amendment made in the Act
by insertion of section 31 can not possibly be implemented
as no machinery has been provided to give effect to it and
that it should therefore have been ignored altogether. This
argument has been made with reference to this Court’s
decision in Modi Sugar Mills’ case (supra), but it is futile
because no question regarding any such machinery could
possibly be said to arise for the purpose of giving effect
to section 31 of the Act in the facts and circumstances of
this case.
So when section 31 of the Act is dearly valid and is
retoractive, and the Legislature has shown the intention of
restoring the assessments and orders made under the provi-
sions of sub-section (1) of section 7 (as it stood prior to
its amendment by section 7 of U.P. Act XIX of 1956) as good
and valid assessments in law, as if they had been duly made,
that was enough to set the controversy at rest and there is
nothing wrong with the view which has been taken by the
Additional Judge (Revisions) in his order dated December 28,
1968.
The appeal is allowed and the impugned judgment of the
High Court dated February 11, 1970, is set aside. In the
circumstances of the case, the parties shall pay and bear
their own costs.
P.B.R. Appeal allowed.
555