Holding

Section 39(2) of the U.P. Sales Tax (Amendment) Act, 1995 does not prescribe a time limit for disposing of review applications, whereas the limitation in Section 39(3) applies only to rectification, and a validating Act can retrospectively validate earlier orders by removing the cause of invalidity.

Summary

The Uttar Pradesh Sales Tax (Amendment) Act, 1995 amended sections 3‑A and 4 of the U.P. Sales Tax Act, 1948 to make the turnover of rectified and denatured spirit taxable. The Trade Tax Tribunal had earlier held such turnover non‑taxable for assessment years 1974‑75 to 1983‑84. The Revenue filed review applications under section 39(2) of the Amendment Act, which were allowed by the Tribunal but set aside by the Allahabad High Court on the ground that the review orders were passed beyond the time limit prescribed in section 39(3). The Supreme Court examined whether section 39(2) imposes any limitation on the disposal of review applications and distinguished it from the limitation applicable to rectification under section 39(3). The Court held that no time limit is fixed for disposing of a review application; only the filing deadline of 30 September 1995 is mandatory, and the limitation in 39(3) pertains solely to rectification. Consequently, the High Court’s order was set aside and the Tribunal’s review order restored. The judgment also affirmed that a validating Act can retrospectively render earlier orders effective if it removes the cause of invalidity.

Issues considered

Whether section 39(2) of the U.P. Sales Tax (Amendment) Act, 1995 imposes a time limit for disposal of review applications.
Whether the limitation period prescribed in section 39(3) applies to review as well as rectification.
Whether a validating Act can retrospectively validate orders of a competent authority by removing the cause of invalidity.
Whether the High Court erred in holding that review orders must be passed within the period specified in section 39(3).

Legislation cited

U.P. Sales Tax (Amendment) Act, 1995s. 39(2), s. 39(3)

Subjects

sales taxamendment actvalidationreviewrectificationlimitation periodretrospective legislationturnover of alcoholtribunalhigh court

Judgment

-- COMMISSIONER OF TRADE TAX, U.P.
v.
A

M/S. UPPER DOAB SUGAR MILLS LTD.

MARCH 15, 2000

[S. RAJENDRA BABU AND S.N. PHUKAN, JJ.] B

U.P.. Sales Tax (Amendment) Act, 1995/U.P. Sales Tax Act, 1948 :

S.39(2) & (3)/ss.3-A, 4 and 22-Applicationsfor review/rectification-
Orders-Limitation-Alcohol-Rectified spirit and denatured spirit-Turno-
ver held by Tribunal not taxable-Turnover made taxable by Amendment Act-
c
Provision.for review and rectification of orders inconsistent with amended
provisions-High Court holding that orders for review to be passed within the
time prescribed under s.39(3)-Held, no time limit has been fixed to dispose of
application for review-Specific period mentioned in s.39(3) is for purposes of
rectification-Validating Act. D
Validating Act-Held, a validating Act can render ineffective judgments
and orders of a competent court or authority provided it by retrospective
legislation removes the cause of invalidity or basis which led to the judgments.

The turnover of rectified spirit and denatured spirit in respect of E
', assessment years 1974-75to1976-77and1978-79to1983-84, was held to be
'. non-taxable under the U.P. Sales Tax Act, 1948 by the Trade Tax Tribunal.
Sections 3-A and 4 of the Act were amended by the U.P. Sales Tax (Amend-
ment) Act, 1995, making provisions to remove certain defects pointed out
by the Tribunal or other authorities, and the turnover of alcohol was made
........ F
taxable. Section 39 of the Amendment Act validated the proceedings in
respect of assessment, levy or collection of any tax or the order passed
imposing any penalty or making any demand which was consistent with the
amended provisions of the Principal Act and provided for review and
rectification of the order which was inconsistent with the Principal Act; as
amended by the Amendment Act. Consequently, Revenue tiled review G
applications before the Tribunal, which allowed the same. But, the High
Court, in revision set aside the orders of the Tribunal holding the same to
r
~ have been passed beyond the time prescribed under s.39 of the Amendment
Act. The High Court was of the opinion that, in view of provisions of s.39 of
the Amendment Act and s.22 of the Principal Act, the applications were to
H
457
A
458 SUPREME COURT REPORTS (2000) 2 S.C.R.
be filed by 30;9.1995 and orders of review or rectification were to be made
within the time prescribed under s.39(3) of the Amendment Act. Aggrieved,
Revenue filed the present appeals.
-
Allowing the appeal, the Court

B HELD : 1.1. No time limit has been fixed to dispose of an application
for review as provided under Section 39(2) of the U.P. Sales Tax (Amend-
ment) Act, 1995 but a specific date has been prescribed therein within
which the application has to be made; whereas in section 39(3), specific
period is mentioned for purposes of rectification. Section 22 of the U.P.
Sales Tax Act, 1948 provides for rectification of mistakes; whereas Section
c 39(2) of the Amendment Act enables the Authority, Tribunal or the Court
to review, as may be necessary to give effect to the provisio~s of the
. Principal Act; the requirement being that the application for review was to
be made before September 30, 1995. [463-D]

D 1.2. The scope of rectification is different from the scope of review
though sometimes they may overlap. From the scheme of the Amendment
Act, it is clear that both the powers of review and rectification were
conferr~d upon different authorities to modify the earlier order to give
necessary effect to the provisions of the Principal Act as amended _by the
Amendment Act. When two specific and independent powers have been
E conferred upon the authorities, both the powers can be exercised alterna-
tively. The scheme of the Amendment Act is that an application will have to
be made to an authority within the specified date for review of the assess-
ment order or such other order, as the case may be, for varying the same to
bring it in terms with the Amendment Act while the period ofmaking the
F order pursuant to rectification is coalesced with Section 39 of the Amend-
ment Act imposing certain limitations of time. Those limitations cannot be
- read into sub-section (2) of Section 39 of the Amendment Act. [463-E-H]

2. A validating Act can render ineffective judgments and orders of a
competent court or an authority, provided, by retrospective legislation, it
G removes the cause of invalidity or the basis which had led to the judgments.
In the instant case, provisions have been made in the U.P. Sales Tax
(Amendment) Act, 1995 to remove certain defects, which had been pointed
out by the Trade Tax Tribunal or other authorities on earlier occasions.
Thus, it enabled the turnover relating to alcohol to be brought to taxation.
H (462-H, 463-A]
COMMR. OF TRADE TAX v. UPPER DOAB SUGAR MILLS LTD [RAJENDRA BABU, J.] 459
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2878 of 1998. A
From the Judgment and Order dated 7.7.97 of the Allahabad High Court
in T.T.R. No. 556 of 1997.

WITH
B
Civil Appeal Nos. 2884, 2880, 2881, 2882, 2883 and 2879/98.

From the Judgment and Order dated 7. 7.97 of the Allahabad High Court
in T.T.R. Nos. 551, 555, 552, 554, 557 and 550 of 1997.

Adarsh Kumar Goel, Additional Advocate General, (U.P.), Niti Dikshit,
Prashant Kumar, Pradeep Misra, S.N. Bhat, Kavl.n Gulati, Ms. Alka Agrawal
c
and Ajay Agrawal for the Appellants.

Vijay Hansaria, Dhruv Agarwal and Praveen Kumar for the Respond-
ents.

The Judgment of the Court was delivered by D

RAJENDRA BABU, J. In these batch of cases, the question for
consideration is the interpretation of Section 39 of the Uttar Pradesh Sales
Tax (Amendment) Act, 1995 [U.P.Act No.31 of 1995] [hereinafter referred
to as 'the Amendment Act'}'. The turnover in respect of rectified spirit and E
denatured spirit was held to be non-taxable under the U.P. Sales Tax Act,
1948 [hereinafter referred to as 'the Principal A'ct'] by the Trade Tax
Tribunal, Muzaffar Nagar [hereinafter referred to as 'the Tribunal'] in respect
of assessment years 1974-75 to 1983-84, except 1977-78, as there was no
levy on such items at the relevant point of time. An application was filed
F
by the Department before the Tribunal for review on the basis of the
amendment of Sections 3-A and Section 4 of the Principal Act as amended
by the Amendment Act. By amendment to Section 3-A of the Principal Act,
a specific clause was added to bring the turnover of alcohol as defined under
the United Provinces Sale of [Motor Spirits, Diesel Oil and Alcohol]
Taxation Act, 1939, amongst other goods, at such point and at such rate not G
exceeding twenty six percent, as the State Government may, by notification
declare. The result is that in the Principal Act sale of alcohol as defined in
· the U .P. Sale of (Motor Spirits, Diesel Oil and Alcohol] Taxation Act, 1939
became taxable. The review applications filed on behalf of the Revenue was
opposed by the respondents on various grounds. The Tribunal, however, H
460 SUPREME COURT REPORTS [2000] 2 S.C.R.
A rejected the contentions raised on behalf of the respondents and allowed the
review application of the Department and levied the tax on the turnover of
the respondents.

The matter was carried in revision to the High Court. The learned
Single Judge took the view that the provisions of Section 39 of the
B Amendment Act .merely enabled the Assessing, Appellate or Revising
Authority to rectify the orders passed prior to the commencement of the
said section in conformity with the amendment made in the Principal Act
within a time frame. It was observed that Section 39(2) of the Amendmeri.t
Act made abundantly dear that an application has to be filed by September
C 30, 1995 and orders of review or rectification are to be made either within
one year from the commencement of Section 39 or within the period
prescribed in Section 22 of the Principal Act, that is, three years from the
date of the order sought to be rectified and proviso to Section 22 has no
application to such a case. The period prescribed by Section 22(1) is three
D years and there is no other period and, therefore, the learned Single Judge
held that the question of extension of the period of limitation for the
passing of the order as provided under the proviso to Section 22 has no
relevance while interpreting the provisions of Section 39 of the Amendment
Act. He took the view that such orders of review or rectification should
E have been passed on or before March 14, 1996 and not beyond that time.
In the present case the orders of the Tribunal had been passed on March
22, 1997, as such, the same were held to have been made beyond time as
prescribed under Section 39 of the Amendment Act. This order is called
in question in these appeals.

F For purposes of clear understanding, we may set out the relevant
provisions here under:

"Section 22 of the Principal Act:

Section 22. Rectification of mistakes. - (1) The Assessing, Appellate
G or Revising Authority or the Tribunal may, on its own motion or on
the application of the dealer or any other interested person rectify any
mistake in its order, apparent on the record within three years from
the date of the order sought to be rectified:

Provided that where an application under this sub-section has been
H
COMMR. OF TRADE TAX v. UPPER DOAB SUGAR MILLS LTD [RAJENDRABABU, J.) 461
made within such period of three years, it may be disposed of even A
beyond such period:

Provided further that no such rectification as has the effect of
enhancing the assessment, penalty, fees or other dues shall be made
unless reasonable opportunity of being heard has been given to the
dealer or other person likely to be affected by such enhancement. B

(2) Where such rectification has the effect of enhancing the assess-
ment, the authority ·shall serve on the dealer a revised notice of
demand in the prescribed form and therefrom all the provisions of the
Act and the Rules framed thereunder shall apply as if such notice had c
been served in the first instance."

"Section 39 of the Amendment Act:

Section 39. Validation.-(!) Notwithstanding anything in any judg-
ment, decree or order of any court or authority, any notification issued D
or anything done or any action taken before the commencement of
this section which conforms to the provisions of the Principal Act as
amended by this Act shall be deemed to be and always to have been
valid and lawful as if the provision of this Act where in force at all
material times.
E
(2) Where before the commencement of this section any authority or
court, in any proceeding made any assessment, levy or collection of

-
any tax or passed any order imposing any penalty or making any other
demand under the Principal Act, or passed any other m9difying,
setting aside or quashing (wholly or in part), such assessment levy, p
connection, penalty or demand and such assessment or other order
becomes inconsistent with the provisions of the Principal Act as
amended by this Act then, subject to the provisions of sub-section (3),
any party to the proceeding or the Commissioner of Trade Tax may
by September 30, 1995, make an application to such authority or court
for review of the assessment order and thereupon such authority or
G
Court may review the proceeding make such order, varying or
revising the order previously made, as may be necessary to give effect
to the provisions of the Principal Act as amended by this Act.

(3) the assessing, appellate or revising authority, as the case may be, H
462 SUPREME COURT REPORTS [2000) 2 S.C.R.
A may within the period specified in Section 22 of the Principal Act,
whichever expires later, make any rectification in any order passed
by it where such rectification becomes necessary in consequence of
the amendment of the Principal Act :

Provided that no rectification which has the assessment, penalty or
B other dues, shall be made unless the authority concerned has given
notice to the dealer or person concerned of his intention to do so and
has allowed him a reasonable opportunity of being heard."

It is the contention of the Department that the view taken by the High
C Court is erroneous and does not correctly interpret the provisions of Section
39(2) of the Amendment Act. It is submitted that the whole object of Section
39(2) is that any order passed, modified, set aside or quashed by the
assessing, appellate or revising authority or by a court will have to be
brought in conformity with the. provisions of the Principal Act as amended
by the Amendment Act. The expression "subject to the provisions of sub-
D
section (3)" would only provide for rectification also. Otherwise, if the
provisions relating to rectification alone will be applicable and there is no
need to have provided for a specific provision for review at all. Review or
rectification in this case would arise only to bring in conformity an order
with the amended provisions, and either of these powers is distinct and
E separate though they have certain restrictions which have to be adhered to.

The respondents would, however, contend that Section 39(2) and (3)
have to be read together and it would mean that an application made under
Section 39(2) can be disposed of only within one year from the date of
p enforcement of the Amendment Act or within three years of the order sought
to be reviewed, whichever is later. It was further submitted that proviso to
Section 22(1), which does not prescribe any limitation for passing an order
on an application for rectification, is not applicable to the application made
under Section 39(2) of the Amendment Act and that otherwise the whole
purpose of providing limitation under Section 39(3) becomes superfluous. On
G
that basis, the respondents sought to support the view taken by the High
Court. On behalf of the respondents, certain other additional grounds were
raised to which we shall advert later.

A validating Act can render ineffective judgments and 0rders of a
H . competent court or an authority provided it b~1 retrospective legislation
COMMR. OF TRADE TAX v. UPPER DOAB SUGAR MILLS LTD [RAJENDRA BABU, J.] 463
removes the cause of invalidity or the basis which had leq to those A
judgments. In the present case, the provisions have been made in the
Amendment Act to remove certain defects, which had been pointed out by
the Tribunal or other authorities on earlier occasions. Thus, it enabled the
turnover relating to alcohol to be brought to taxation. Section 22 of the
Principal Act provides for rectification of mistakes. Proviso to Clause (1) B
makes it very clear that where an application under sub-section (1) has been
made within the period of three years from the date of the orders sought to
be rectified, such an application could be disposed of even beyond such
period. In clause (3) of Section 39, with which we are concerned now, it is
made clear that the Assessing, Appellate or Revising Authority, as the case
may be, may within a period of one year from the date of commencement
c
of this section or within a period specified in Section 22 of the Principal Act,
whichever expires later, make any rectification in any order passed by it
where such rectification becomes necessary in consequence of the amend-
ment to the Principal Act. Section 39(2) enables the Authority, Tribunal or
the Court to review as may be necessary to give effect to the provisions of D
the Principal Act, the requirement being that an application should be made
before to that effect September 30, 1995. A specific date has been prescribed
within which the application has to be made for review and no time limit
has been fixed to dispose of such an application. While in Section 39(3),
specific period is mentioned for parposes of rectification. E
It is well known that the scope of rectification is different from the

- scope of review though sometimes they may overlap. From the scheme of
the Amendment Act, it is clear that both the powers of review and
rectification were conferred upon different authorities to modify the earlier
order to give necessary effect to the provisions of the Principal Act as
F
amended by the Amendment Act. When two specific and independent
powers have been conferred upon the authorities, both the powers can be
exercised alternatively. In the present case, if the interpretation adopted by
the High Court is to be accepted then the provision for review becomes
totally redundant or otiose and there will be no difference between the power G
of review and power of rectification. As stated earlier, the scheme of the
Amendment Act is that an application will have to be made to an authority
within the specified date for review of the assessment order or such other
order, as the case may be, for varying the same to bring it in terms with the
Amendment Act while the period of making the order pursuant to rectifica- H
464 SUPREME COURT REPORTS [2000) 2 S.C.R.
A tion is coalesced with Section 39 of the Amendment Act imposing certain
limitations of time. Those limitations cannot be read into sub-section (2) of
Section 39 of the Amendment Act.

In that view of the matter, we have no hesitation in setting aside the
order made by the H~Court and restoring that"()f the Tribunal. The appeals
B are allowed accordingly. In the circumstances, there shall be no orders as to
costs.

R.P. Appeals allowed.

-