Supreme Court of India
POLAKI MOTORS AND ORS.versusSTATE OF ORISSA AND ORS.
- Citation
- 1992 INSC 280
- Decided
- 14 October 1992
- Disposal
- Dismissed
- Bench
- S RANGANATHAN
Holding
The Orissa Additional Sales Tax (Amendment and Validation) Act, 1983 is constitutionally valid, and its retrospective validation of assessments does not violate the single‑point levy scheme or the earlier undertaking.
Summary
The petitioners, registered dealers under the Orissa Sales Tax Act, 1947, challenged the constitutional validity of the Orissa Additional Sales Tax (Amendment and Validation) Act, 1983, which retrospectively validated assessments of an additional tax levied on gross turnover, allegedly violating the single‑point levy scheme of the principal Act. They also argued that the Act contravened an earlier Supreme Court order requiring the State to refund tax if the appeals were allowed. The Court examined whether the State could retrospectively amend and validate tax provisions, whether such amendment conflicted with the single‑point levy principle, and whether it exceeded the State’s legislative competence. It held that retrospective amendment and validation are within the legislature’s ancillary power, that the Validation Act does not infringe the undertaking, and that the assessments made under the amended provision are valid and enforceable. Consequently, the writ petitions and the civil appeal were dismissed.
Issues considered
- The constitutional validity of the Orissa Additional Sales Tax (Amendment and Validation) Act, 1983, particularly its retrospective operation.
- Whether the Validation Act violates the single‑point levy scheme of the Orissa Sales Tax Act, 1947 (Section 8).
- Whether the Validation Act defeats the Supreme Court’s undertaking to refund tax if the appeals are allowed.
- Whether the State Legislature has competence to enact a multi‑point additional sales tax under Entry 54 of List II.
- Whether the assessing authority has jurisdiction to assess and collect the additional tax under the Validation Act.
Legislation cited
- Central Sales Tax Act, 1956
- Orissa Additional Sales Tax Act, 1975s. Sec. 2, s. Sec. 3, s. Sec. 4, s. Sec. 5
- Orissa Additional Sales Tax (Amendment) Act, 1979s. Sec. 2, s. Sec. 3
- Orissa Additional Sales Tax (Amendment & Validation) Act, 1983s. Sec. 3, s. Sec. 5
- Orissa Sales Tax Act, 1947s. Sec. 3, s. Sec. 4, s. Sec. 5, s. Sec. 6, s. Sec. 7, s. Sec. 8
Subjects
constitutional validityretrospective legislationvalidation actadditional sales taxsingle‑point levymulti‑point taxstate legislative competencetax assessmentrefund undertaking
Judgment
A POLAK! MOTORS AND ORS.
v.
STATE OF ORISSA AND ORS.
OCTOBER 14, 1992
B [S. RANGANATHAN, V. RAMASWAMI AND
B.P. JEEVAN REDDY, JJ.]
The Orissa Additional Sales Tax (Amending & Validation) Act, 1983
(Act 22 of 1983) :
c
Sec. 3-<:onstitutional validity of-Additional Sales T~Si.ngle Point
Tax convened into Multi point tax validity or-Validation Act whether retros-
pective-Effect on Govt.· undenaldngs for refund of excess Tax.
Orissa Additional Sales Tax (Amending & Validation) Act, 1983:
D
Sec. rAdditional Tax on Taxable Turnover or Gross. Turnover or
Total tumovel"'--[)etermination by reopening assessment-Legality of-Ap-
plicability of Orissa Sales Tax Act, 1947.
In this matter, there were three sets of petitions/Appeals. First set
E of writ petitions questions the Constitutional validity of the Orissa Addi·
tional Sales Tas (Amendment and Validation) Ordinance, 1983. The
second set contains the writ petitions that relate to the question of Con-
stitutional validity of the Orissa Additional Sales Tas (Amendment and
Validation) Act, 1983 (Act 22 of 1~83) which replaced the Ordinance, while
F Civil Appeal of third set challenges the judgment of the Orissa High Court
in which the Constitutional yalidity of the said Act was upheld. All these
three sets relate to the vires of the said Act i.e. Orissa Act 22 of 1983.
The Appellant in the Civil Appeal and Writ petitioners are the
registered dealers under the Orissa Sales Tas Act, 1947 (hereinafter
G referred to as the principal Act). Sec. 4 imposes the liability upon every
dealer whose gross turnover during the fiscal year exceeds Rs. 50000.00 to
pay lases in accordance with the principal Act. Sec. S says that the tas is
payable by the dealer only on his taxable turnover at the percentage
notified by the Government from time to time. Section 6 enables the
H Government, by notification, to exempt from tas the sale or purchase of
994
POLAKI MOTORS v. STATE OF ORJSSA 995
any goods or class of goods and likewise withdraw any such exemption. A
Sec. 7 pr'lvldes that notwithstanding anything contrary in the Principal
Act, the State Government may eJ1empt In whole or In part any class of
dealers from the payment of Tax or allow any class of dealers to defer from
payment of tax. Sec. 8 which is relevant for the purposes of this Appeal
describes the 'power of the State Government to prescribe points at which
goods may be taxed or exempted. In all possibility, it may be seen that the
B
scheme of the Princlpal Act provides that if the goods are not exempted
under sec. 6 then either the sale or the purchase could be taxed and not
both. Sec. 8 also restricts the levy of either the sales tax or purchase tax
to a single point in the same series of sales or purchase by successive
dealers of the same goods. It may also be seen that the Principal Act C
provides a Tax on the taxable turnover and not on the gross turnover.
The State Legislatnre enacted the Orissa Additional Sales Tax Act,
1975 which levied an additional tax, on the tax payable by a dealer under
the Principal Act, in the nature of enhancement of their liability. However D
they were prohibited from passing on the incidence of additional tax to the
purchasers. Though the validity of this provision was never questioned but
a similar enactment of the Tamil Nadu Additional Sales Tax Act, 1970 was
upheld by this Court in S. Koder v. State of Kera/a, [1975] 1 SCR 121.
By a notification, in exercise of powers under sec. 3 of the Amending E
Act, the State Governme"t on 23rd March, 1979 notifi•d the rates of addi-
tional tax payable at one-half per cent of the annaal cross turnover. The
assessing authority took the view that every dealer was liable to pay addition-
al tax on his annual gross turnover irrespective of its taxability under the
Principal Act and that the new levy was in the nature of multipoint tax. This F
view of the Assessing Officers was challenged in the High Court by way of
Appeal. Dismissing these appeals, the High Court deemed the Additional
Sales Tax Act as a seperate enactment with an independent existence. The
assessees preferred Appeals to this Court and they were disposed of in tlje
Judgment reported lnAshok Service Centre & Ors. v.State of Orissa, [1983] 2 G
SCC 82. The point for determination by this Court in those appeals was'
whether the levy of additional tax under the Additional Sales Tax Act, 1979 is
a single point levy or a multipoint levy, and this Court was of the view that
since additional tax is only an enhancement of the tax payable under the
Principal Act therefore it does not affect the general .scheme of the Principal
Act including the principle of single-point levy contained in Sec. 8 and that H
993
996 SUPREME COURT REPORTS [1992] SUPP. 1 S.C.R.
A the Additional Sales Tax Act will have to be read subject to the provisions of
th~ Principal Act. Secs. 4, 5 & 8 of the Principal Act are the mai.n provisions
which prohibit multi point levy.
After this judgment the Orissa Additional Sales Tax (Amendment &
Validation) Act, 1983 (Act 22 of 1983) was enacted and was given retrospec·
B live effect from 1.4.1979. The need for this validation Act was stated to be
that as assessments under the Amending Act were made on the basis that
additional tax is leviable on the gross turnover and the provision of sec. 8
of the Principal Act do not apply to the levy of additional tax and also that
it was intended to cure the defects pointed out in the earlier judgment of
C the Supreme Court in this regard.
The idea behind enacting the instant Validation Act was to validate
any action taken or thing done or purported to have been done und<r the
Principal Act before its enactment.
D On behalf of assessees it was submitted that during the pendency of
the Civil Appeals filed against the judgment of High Court of Orissa
holding the provisions of the Amending Act, 1979 as intra-vircs, the asses·
sees sought an interim stay of realisation of tax to be recovered which was
granted but by an order m,ted 4.10.1982, this Supreme Court vacated the
E stay on the condition that the respondents were to file an undertaking to
the effect that if the appeals are allowed then they will have to refund to
the appellants the entire money realised with interest at the rate of 12%
per annum within three months from the disposal of the appeals. Accord·
ingly the respondents filed their undertaking but when assessees ap·
proacbed them for the refund, their applications were rejected on the
F ground that in view of the Ordinance, later replaced by the Validation Act,
the assessments bad become valid and the assessees are not entitled for
refund. It was further argued that the respondents are bound to honour
their undertaking and that the Ordinance and the Act could not disturb
its status regarding those cases which were the subject matter of appeals
G in the earlier proceedings though the the Act may apply In respect of those
who were not parties in the proceedings and in respect of all prospectively.
Rejecting all these arguments and dismissing the appeals, this
Court,
H HELD: It Is well settled that the power to amend and to validate
POLAK! MOTORS v. STATE OF ORISSA 997
actions taken under statutes not sufficiently comprehensive to sustain A
those actions is a power ancilliary or subsidiary to the power of legislation
on any subject matter within the competence of the State Legislature. It is
also settled law that the legislature has the power to legislate retrospec-
tively and also validate invalid laws, or invalid executive acts and notifica-
tions. [1013-G)
B
The impugned amending and Validating Act was enacted io remedy
the defects pointed out by this Court in Ashok Service Centre case. The
object of the Act was not only to amend the law from a past date but also
to protect and validate actions already taken. By enacting retrospectively
a valid and legal taxing provision the law creates a fiction that the c
assessments made and the tax collected are under the new re-enacted law.
Once the amended provision is given retrospective operation,_ the fiction
operates and it was not necessary to specifically provide that all assess-
ments made or actions taken or notifications issued under the new
provision though the legislatures as in this case often resort to such
practice. [1013-H, 1014 A-BJ D
The effect of retrospectively amending the provisions would, for all
legal purposes, be that amended provision shall be deemed to have been E
included in the Original Act from 1.4.1979 and all consequences and
incidences which if this amended provision had been there since 1.4.1979
has to be carried to its logical conclusion. [1014-EJ
The validating Act was given retrospective operation and by section
3 which has been extracted above also provided that the assessments shall F
be deemed to have been made in fnrtheranc~ of the Additional Sales Tax
Act as amended by the Amending and Validation Act. In the circumstances
it could not be stated that there was any violation of the undertaking by
the Government. We do not find also any submissions of the learned
connsel for the petitioners that either the Validation Act was not applicable G
to their cases in view of the undertaking or that there was any violation of
the undertaking given by the Government in the earlier cases. [1015 F-G]
By reasons of Amending Act the earlier assessments levying addi-
tional tax on gross turnover has become valid and enforceable. It may also
be noticed that the earlier decision of this Court did not invalidate the H
998 SUPREME COURT REPORTS [1992] SUPP. 1 S.C.R.
A assessments as such had what was held was that the additional sales tax
was payable on the taxable turnover by a dealer who is liable to pay the
tax under section 3(i) of the Principal Act. It means that assessment
proceedings will have to be reopened if necessary and the taxable turnover
to be detel'!"ined and that tax payable will have to be ascertained and
B demand be issued. But only after that is done, if any amount is refundable,
the government will be bound to refund the same. [1014 G,H)
Mis Ashok Service Centre & Ors. v. State of Orissa, [19831. 2 SCC 82
and S. Kodar v: State of Kera/a, [1975) 1 SCR 121, referred to.
C ORIGINAL JURISDICTION: Writ Petition (Civil) Nos. 9925 to
· 9933 of 1983.
(Under Article 32 of the Constitution of India).
WITH
D
W.P.(C) No. 10726 of 1983, W.P.(C) Nos. 13452 to 13463 of 1983,
13379 to 13384 of 1983, 207 to 211 of 1984, 1302 of 1986 and Civil Appeal
No. 4596 of 1990.
M.L. Verma, P.N. Misra, P.K. Jena and Vinoo Bhagat for the
E Petitioners.
G.L. Sanghi, B.A. Mohanty and R.K. Mehta for the Respondents.
The Judgment of the Court was delivered by
F V. RAMASWAMI, J. In the Writ Petitions filed in the year 1983 the
constitutional validity of the Orissa Additional Sales Tax (Amendment and
Validation) Ordinance, 1983 is questioned. In Writ Petition Nos. 207 to 211 of
1984 and 1302of1986 the constitutional validity of the Orissa Additional Sales
Tax(Amendment and Validation) Act, 1983 (Act 22of1983) which replaced
G the Ordinance is in question. Civil Appeal No. 4596 of 1990 has 1 :en filed
against the judgment of the Orissa High Court in which the can• itutional
validity of Orissa Ac.I 22 ·of 1983 was upheld. The arguments in 1be mt peti-
tions and the civil appeal therefore related 10 the vires of the Ori1Sa Act 22 of
1983 which we will hereinafter referred to as the 'Validation Act'.
H The writ petitioners and the appellants in the Civil A1 peal are
POLAKIMOTuRS v. STATEOFORISSA [RAMASWAMl,J.] 999
registered dealers under the Orissa Sales Tax Act, 1947 (hereinafter A
referred to as the 'Principal Act'). Section 4 imposes the liability to pay tax
in accordance with the provisions of the Principal Act on every dealer
whose gross turnover during the fiscal year exceeds Rs. 50,000. 'Gross
turnover' is defined in Section 2 ( dd) as meaning the total of the turnover
of sales and turnover of purchases. ,;Turnover of Sales" is defined in Section B
2 (i) as meaning the aggregate of amounts of prices and tax, if any, received
and receivable by a dealer in respect of sale or supply of goods other than
those declared under section 3-B of the principal Act effected or made
during a given period. 'Turnover of purchases' is defined in Section 2G) as
meaning the aggregate of the amounts of pmchase price paid and payable
by a dealer in respect of the purchase or supply of goods or classes of C
goods declared under Section 3-B. However, under Section 5, tax is pay-
able by the dealer only on his taxable turnover at the percentage notified
by the Government from time to time. Under Section 3-B the Government
may from time to time by notification declare any goods or class of goods
to b<; liable to tax on turnover of purchases but there is a proviso which D
says no tax will be payable on the sale of such goods or class of goods
declared under this Section. Section 6 enables the Government by notifica-
tion to exempt from tax the sale or purchase of any goods or class of goods
and likewise withdraw any such exemption. Section 7 provides that not-
withstanding anything to the contrary in the Act the State Government may
subject to such condition or restriction by notification exempt in whole or E
in part any class of dealers from the payment of tax or allow any class of
dealers to defer from payment of tax. Section 8 which is relevant for the
purpose of this decision may be quoted and that reads as follows:
"8. Power of the State Government to prescribe points at
F
which goods may be taxed or exempted.
Notwithstanding anything to the contrary, in this Act, the
State Government may prescribe the points in the series
of sales or purchases by successive dealers at which any
goods or classes or descriptions of goods may be taxed or G
exempted from taxation and in doing so may direct that
sales to or purchases by a person other than a registered
dealer shall be exempted from taxation:
Provided that the same goods shall not be taxed at more H
1000 SUPREME COURT REPORTS (1992] SUPP.1 S.C.R.
A than one point in the same series of sales or purchases by
successive dealers.
Explanation. Where in a series of sales, tax is prescribed
to be levied at the first point, such point in respect of
goods despatched from outside the State of Orissa shall
B mean and shall always be deemed to have meant the first
of such sales effected by a dealer liable under the Act
after the goods are actually taken delivery of by him inside
the State of Orissa."
C It may be seen froin the scheme as contained in the provisions of Prin-
cipal Act, if the goods are not exempted under Section 6 either the sale or
purchase could be taxed and not both. In the case of goods covered by the
notification under Section 3-B the tax is levied on the purpose and in the case
of other taxable commodities on the sale. Section 8 which has an over-riding
effect by reason of the openingnon-obstante clause in that section restricts the
D levy of either the sales tax or purchase tax to a single point in the same series of
sales or purchases by successive dealers of the same goods. Though Section 4
as such does not restrict the power of the Government to levy multi point tax
since that provision was expressly made subject to Section8 and also by reason
of the non-obstante clause in Section 8 the levy of tax at a single prescribed
E point and prohibition against levy of tax at more than one point is the scheme
of the Act. It may also be seen that the Principal Act provided a tax on the
taxable turnover and not on the gross turnover.
4
The State Legislature enacted the Orissa Additional Sales Tax Act,
1975 {Act 24 of 1975} which levied an additional tax on the tax payable by
F a dealer under the Principal Act. This Act came irito force from the !st of
April, 1975. As the subsequent amending Act which we are going to notice
and the impugned Validation Act were with reference to this enactment,
it is better we set out Sections 2, 3 and 4 of this Act in full.
"2.(1} The tax payable by a dealer for a year under the
G
Orissa Sales Tax Act, 1947 {hereinafter referred to as the
said Act) shall be increased by an additional tax at the
rate of-
(a) two per cent of the tax, if his gross turnover for
H that year does not exceed one lakh of rupees;
POLAK! MOTORS v. STATE OF ORISSA [RAMASWAMI, J.] 1001
(b) three per cent of the tax, if his gross turnover for A
that year exceeds one lakh of rupees but does not exceed
five lakhs of rupees;
(c) five per cent of the tax, if his gross turnover for
that year exceeds five lakhs of rupees;
B
Provided that where in respect of declared goods the
tax payable by such dealer under the said Act together
with the additional tax payable under this sub-section
exceeds the maximum percentage of the sale or purchase
. price thereof specified, from time to time, under clause
(a) of Section 15 of the Central Sales Tax Act, 1956 the
c
rate of additional tax in respect of such goods shall _be
reduced to such an extent that the tax and the additional
tax together shall not exceed such maximum percentage
of the sale or purchase price of such goods.
D
Explanation:- 'Declared goods' shall have reference to
declared goods as defined in the Central Sales Tax Act,
1956.
(2) The provisions of the said Act shall, mutatis mutan-
dis apply in relation to the said additional tax as they apply E
in relation to the tax payable under the said Act.
(3) Notwithstanding anything contained in the said
Act, no doaler referred to in sub-section (1) shall be
entitled to collect the additional tax payable under this
F
Act.
3( 1) Any dealer who collects the additional tax payable
under this Act, in contravention of the provisions of sub-
section (3) of Section 2 shall be punishable with fme which
may extend to one thousand rupees. G
(2) No court inferior to that of a Judicial Magistrate
of the first class shall try an offence under this Act.
4(1) The State Government may make rules for carry-
ing out the purposes of this Act. . H
1002 SUPREME COURT REPORTS [1992] SUPP. 1 S.C.R.
A (2) All rules made under this Act shall, as soon as may
be after they are made, be laid before the State Legislature
for a total period of fourteen days which may be com-
prised in one session or in two or more successive session&
and if during the said period the State Legislature makes
modifications, if any, therein, the rules shall thereafter
B
- have effect only in such modified form, so, however that
such modifications shall be without prejudice to the
validity of anything previously done under the rules."
It may be seen from the reading of these provisions that the additional sales
C tax payable by the dealer was in the nature of an enhancement of their
liability to pay tax under the principal Act by specified percentage but they
were prohibited from passing on the incidence of additional tax to the
purchasers. The validity of this provision was never questioned but in fact
a similar ~nactment of the Tamil Na~u Additional Sales Taxt Act, 1970 was
upheld by this Court in S. Kodar v. State of Kera/a, (1975) 1 SCR 121. On
D an interpretation of the provisions of the Orissa Act, this Court in the case
of Mis Ashok Service Centre and Ors. v. State of Orissa, (1983) 2 SCC 82,
was of the view that the additional tax thus levied being only an enhance-
ment of the tax payable under the Principal Act by a specified percentage
it did not effect the general scheme of the Principal Act including the
E principal of single point levy contained in Section 8 thereof and that the
two Acts, namely, the Principal Act and the Additional Sales Tax Act had
to be read together in order to make the provisions contained in the Act
effective. In fact it was held that it is not an independent Act in that sense
and the Legislature instead of incorporating the provisions in the Principal
Act have provided for the additional levy in a separate enactment. It is only
F a matter of style. The Act will have to be read subject to the provisions of
the principal Act
The State Legislature enacted in 1979 the Orissa Additional Sales
Tax (Amendment) Act, 1979 {Act 3 of 1979) which came into force on
G 1.4.1979. This Act substituted Sections 2 and 3 of the Additional Sales Tax
Act by two new sub-sections {2) and (3), which read as follows:
'2. In this Act, unless the context otherwise requires:-
(a) 'declared goods' shall have to same meaning as in
H clause (o) of Section 2 of the Central Sales Tax Act, 1956;
POLAK! MOTORS v. STATE OF ORISSA [RAMASWAMI, J.] 1003
(b) words and expressions used but not defined shall have A
the same meanings as are. respectively assigned to them
in the Orissa Sales Tax Act, 1947 (hereinafter referred to
as the said Act).
3. (1) Every dealer shall, in addition to the tax payable by
him for a year under the said Act, be liable to pay B
additional tax at such rate not exceeding one percent of
his gross turnover for that year, as may notified, from time
to time by the State Government;
Provided that no additional tax as aforesaid shall be pay-
able on that part of the gross turnover which relats to sale
c
and purchase of declared goods;
Provided further that the State Government may by
notification, subject to such conditions and restrictions, if
any, exempt any class of dealers or the turnover relating D
to any goods or class of goods from the levy of the
additional tax and likewise withdraw any such exemption.
(2) The provisions of the said Act shall, mutatis mutandis
apply in relation to the said additional tax as they apply
in relation to the tax payable under the said Act."
E
By a notification dated 23rd March, 1979 the State Government notified,
in exercise of the powers under Section 3 of the Amending Act, 1979 the
rate of additional tax payable at one- half per cent of the annual gross
turno.,er. The Assessing Officers took the view that under the Amending F
Act, 1979 every dealer was liable to pay additional tax on his annual 'gross
turnover' irrespective of its taxability under the Principal Act and that the
new levy was in the nature of multi-point tax. A number of writ petitions
were filed in the High Court of Orissa challenging among others the
constitutional validity of the amending Act, 1979. The High Court. dis-
missed these writ petitions holding that under the Principal Act the dealer G
is liable to pay sales tax on the basis of his taxable turnover which is
determined ir. the manner prescribed under the Act while under the 1975
Act as amended in 1979 the liability of the dealer is with reference to his
gross turnover and that it was competent to the Sovereign legislature to
adopt a different base and a different scheme from the Principal Act H
1004 SUPREME COURT REPORTS [1992] SUPP.1 S.C.R.
A because they are two different independent enactments. Being an inde-
pendent Act it could not read subject to the provisions of the principal
Act. The assessees preferred appeals in this Court and they were disposed
of in the judgment reported inAshok Service Centre v. State of Orissa [1983]
2 SCC 82. The point for determination by this Court in that batch of
B appeals was whether the levy of additional tax under the Additional Sales
Tax Act as amended by Additional Sales Tax (Amendment) Act, 1979 is a
single point levy or a multi point levy. After a consideration of the relevant
provisions this Court held that the view of the High Court that the Addi-
tional Sales Tax Act as amended in 1979 was an independent Act having
nothing to do with the Principal Act was not correct and that it had to be
C read together to be effective. After a consideration of the relevant
provisions of the Principal Act and the impugned Additional Tax (Amend-
ment) Act this Court held:
i) the word 'dealer' referred to in Section 3(1) of the
amending Act should be understood as a dealer who
D is liable to pay tax under the Principal Act as provided
in Section 4(1) of the Principal Act;
ii) the gross turnover referred to in Section 3 (1) of the
Amending Act should be understood as that part of
E the gross turnover which is taxable under the Principal
Act;
iii) by reasons of the sub-section (2) and Section (3) of
the Amending Act Section 8 of the Principal Act which
is given an over-riding effect by the use of non-obstante
F clause, is applicable to the levy of additional tax also;
iv) if the object of the Amending Act was to make the
additional tax a multi point levy nothing was easier
than using the appropriate words in the Act by exclud-
ing the application of Section 8 of the Principal Act
G
expressly in Section 3(2) of the Amending Act.
In that view this Court ultimately summarised the
resultant position as follows:
H "In view of the foregoing we hold that any dealer who
POLAK! MOTORS v. STATE OF ORISSA [RAMASWAMI, J.] 1005
is not liable to pay tax under the Principal Act either by A
reason of his not having sufficient gross turnover or by
reason of exemption given under Section 7 of the Principal
Act is not liable to pay additional tax under the Act. If a
dealer is exempted by the State Government under the
second proviso to section 3(1) of the Act he is also not
liable to pay the additional tax under the Act. If the
B
turnover of a dealer relating to any sales or purchases of
goods is exempted under Section 6 of the Principal Act,
such turnover cannot be subjected to the levy of additional
tax under the Act by virtue of Section 3(2) Qf the Act. The
Government Notification S.R.O. 410n9 dated March 23, c
1979 issued under the second proviso to section 3(1) of
the Act exempting the turnover relating to goods whose
turnover is exempted from payment of tax under Section
6 of the Principal Act from payment of additional tax
under the Act, is, therefore, redundant. The turnover in
D
respect of goods whose sales or purchases are not taxable
under the Principal Act in the hands of any dealer by
reason of section 8 of the principal Act is not liable to the
payment of additional sales tax under the Act. The turn-
over in respect of sales and purchases of declared goods
is not taxable under the Act by reason of the first proviso E
to Section 3(1) of the Act. Any other turnover which is
exempted by the State Government under the second
proviso to Section 3(1) of the Act is also not taxable under
the Act. The levy of the addtional tax on the gross turnover
of a dealer under section 3 of the Act is subject to these
F
conclusions. 11
After this judgment the State Legislature enacted the Orissa Addi-
tional Sales Tax (Amendment and Validation) Act, 1983 (Act 22 of 1983).
The writ petitions, as already stated, were filed in this Court under Article
32 questioning the constitutionality of this Validation Act and the Or- G
dinance which preceeded it. The Civil Appeal is against the judgment of
the High Court which upheld the validity of the Validating Act.
Section 2 of the Validation Act substituted with effect from the !st
day of April, 1979 for Section 3 of the Orissa Additional Sales Tax Act, H
1006 SUPREME COURT REPORTS [1992] SUPP. 1 S.C.R.
A 1975 as amended in 1979 the following section:
"3. {1) Notwithstanding anything contained in sections 4,
5 and 8 of the said Act, every dealer, whose gross turnover
exceeded twenty-five thousand rupees during the period
not exceeding twelve months immediately preceding the
B !st day of April, 1979 or between the side date and the
thirtieth day of June, 1981 or whose gross turnover for a
period not exceeding twelve months exceeded fifty
thousand rupees on or after the !st day of July, 1981 shall
be liable to pay the additional sales tax at such rate not
c exceeding one per cent of his gross turnover as may be
notified from time to time by the State Government.
Provided that no additional sales tax as aforesaid shall be
payable on that part of the gross turnover which relates
to sale and purchase of declared goods.
D
{2) Every dealer who has become liable to pay tax under
this Act, shall continue to be so liable until the expiry of
three consecutive years during each of which his gross
turnover has failed to exceed fifty thousand rupees and
such further period after the date of the said expiry as
E
may be prescribed and his liability to pay tax under this
Act, shall cease on the expiry of the prescribed period;
Provided that in calculating the period of three consecu-
tive years, the part of a year during which a dealer became
F first or again liable shall be excluded.
{3) Where a dealer liable to pay tax under this Act, starts
a new business, partnership, firm or concern, whether by
changing the constitution, style or the name of the pre-
vious business, partnership, firm or concern or otherwise,
G either singly or jointly with any other person, such newly
started business, partnership, firm or concern shall, not-
withstanding anything contained in this section but always
subject to the other provisions of this Act, be liable to pay
tax on his gross turnover from the date of commencement
H of the said business, partnership, firm or concern, as the
POLAKIMOTORS v. STATEOFORISSA (RAMASWAMl,J.] 1007
case may be. A
(4) A dealer, who is not liable to pay tax under the
foregoing sub-sections, shall nevertheless be liable to pay
tax on his gross turnover if such dealer has voluntarily or
provisionally registered himself under the said Act, or if
such dealer is liable to pay tax or registered as a dealer B
under the Central Sales Tax Act, 1956.
(5) All the provisions of the said Act, excluding those
contained in sections 4, 5, 8, 29 and 29A but including
those relating to appeal, revision, reference and penalty
shall mutatis mutandis apply in relations to the additional
c
'
sales .tax payable under this Act."
Section 3 of the Validation Act further provided:
"3. Notwithstanding anything contained in any judgment, D
decree or order of any Court or other authority to the
contrary, any assessment, re-assessment, levy or collection
of additional sales tax or imposition of penalty made, any
action taken or thing done or purported to have been done
under the Principal Act before commencement of this Act
shall be deemed to have been made, taken, done under
E
and in furtherance of. the Principal Act as amended by
this Act."
The argument of Mr. M.L. Verma, learned Senior Counsel appearing
for some of the writ petitioners was that the scheme of the Principal Act F
of 1947 was of a levy of tax at a single prescribed point and prohibition
against levy of tax at more than one point. This tax was also payable on the
taxable turnover and not on the gross tunover. This Court in the decision
in Ashok Service and Anr. v. Sales Tax Officer (supra) has interpreted the
Additional Sales Tax Act, 1975 as amended by the Amending Act, 1979 as
not levying additiona! tax on the gross turnover but levied additional tax G
on the taxable turnover as determined under the Principal Act. This Court
also had taken the view that the additional Tax Act could not be considered
as an independent statute and that both the enactments have to be con-
strued together and while doing so give effect to the provisions of the
Additional Sales Tax Act which is a latter one in preference to the H
1008 SUPREME COURT REPORTS (1992) SUPP. 1 S.C.R.
A provisions of the Principal Act wherever the Act has manifested an inten-
tion to modify the Principal Act. It is on the basis of. these interpretations
this Court in the earlier decision held that the Additional Sales Tax Act
does not conflict with a scheme of single point taxation as envisaged in the
Principal Act. However, under the present Validation enactment Section
3 of the Additional Sales Tax Act seeks to over-ride even the charging
B
sections under the Principal Act by making Section 3 of the Additional
Sales Tax Act operate notwithstanding anything contained in Sections 4, 5 '
and 8 of the Principal Act. The additional tax is now levied on the gross
turnover and not on the taxable turnover which will amount to a multi point
tax going against the very scheme of the Principal Act, and it is no longer
C possible to treat the Additional Sales Tax Act as supplement or ancillary
to the Principal Act. In the circumstances, therefore, it may not be possible
to read both the Principal Act and the Additional Sales Tax Act together
and the effect of it is that both the Acts taxed the same transaction and
that would be an unreasonable restriction affecting their fundamental right
D to carry on business.
Before considering this argument of the leaerned counsel let us
consider what was the defect in the earlier Act which the Validation Act
seeks to remove or remedy and whether the Validating Act has achieved
that purpose. The Statement of Objects and Reasons in introducing the
E Bill seeking amendment of the Additional Sales Tax Act by the Validation
Act reads as follows:
1. "The Orissa Additional Sales Tax Act, 1975 was
introduced from the !st day of April, 1975 with a view to
mobili~ing additional resources for the State. The scheme
F
of additional Sales Tax was rationalised with effect from
the !st day of April, 1979 by the Orissa Additional Sales
Tax (Amendment) Act, 1979 by levy of additional tax on
gross turnover of dealers which was multi point in nature.
G 2. The Supreme Court of India in their judgment dated
18.2.1983 in the case of Mis. Ashok Service Centre v. State
of Orrisa held that the additional tax imposed under the
Orissa Additional Sales Tax (Amendment) Act, 1979
which is an extension of the Orissa Sales Tax Act, 1947
H cannot be a multi point levy since the Orissa Sales Tax
POLAKIMOTORS v.STATEOFORISSA (RAMASWAMl,J.] 1009
A,ct, 1947 envisages a single point levy. It was also ob- A
served that the multi point levy of additional tax was not
clear in the State of Objects and Reasons of the Orissa
Additional Sales Tax (Amendment) Bill.
3. In order to cure the defectes in the statute and validate
the levy and collection of additional tax, two Ordinances, B
viz. the Orissa Additional Sales Tax (Amendment and
Validation) Ordinance, 1983 (Orissa Ordinance No. 5 of
1983) and the Orissa Additional Sales Tax (Second)
Amendment Ordinance, 1983 (Orissa Ordinance No. 7 of
1983) have been promulgated and it is proposed to retain C
the provisions of the said Ordinance by enacting a suitable
Bill to amend the Orissa Additional Sales Tax Act, 1975.
4. The Bill seeks to achieve the above objective."
This Court in the earlier decision held that since Section 3(2), as it D
then stood, provided that the provisions of the Principal Act shall mutatis
mutandis apply in relation to the additional tax as they apply in relation to
the tax payable, Sections 4, 5 and 8 of the Principal Act in terms were
attracted to the levy of additional tax. Since those provisions, in particular
section 8, contemplated a single point levy of tax at the prescribed point it E
is not possible or permissible to read the charging section in the Additional
Sales Tax Act as in conflict with the Principal Act and therefore the
charging provision in the Additional Sales Tax Act should have to be
rundown so as to make additional tax leviable on the taxable turnover
alone. As assessments under the Act were made on the basis that addition-
al tax is leviable on the gross turnover and the provisions of Section 8 of F
the Principal Act did not apply to the levy of additional tax, the State
Legislature has stated in the statement of Objects and Reasons that as the
reason for enacting the Validation Act and also that it was intended to cure
the defects pointed out in the earlier judgment.
Under Section 3 of the Act the dealer is liable to pay additional sales G
tax at such rate not exceeding one per cent of his gross turnover. The words
and expressions used in the Additional Sales Tax Act but not defined
therein shall have the same meaning as defined in the Principal Act.
'Gross Turnover' is defined in the Principal Act as meaning the total of
turnover of sales and turnover of purchases. Excluding the turnover relat- H
lOIO SUPREME COURT REPORTS [1992] SUPP. 1 S.C.R.
A ing to sale and purchase of declared goods under the Central Act the gross
turnover on which additional sales tax is payable would thus include within
it turnove~ taxable under the Principal Act, the second or subsequent sales
which are not taxable under the Principal Act and goods or class of goods
exempted under Section 6 of the Principal Act. Only dealers who are
exempted under Section 7 of the Principal Act would not be liable to pay
B the additional tax as provided under section 3 of the Validation Act. Thus
in effect it means, in respect of the taxable turnover under the Princpal
Act, that the additional tax is an increase of the tax levied thereon and is
valid as held in the earlier decision. In respect of the second or subsequent
sales and the goods exempted under Section 6 of the Principal Act the tax
c is levied at not more than one per cent on the value of the goods purchased
and sold by the dealers. It is a tax on the aggregate of the sales effected
by a dealer during a year. What was taxable turnover of the dealer may
become part of the gross turnover of his purchaser as the sale by the dealer
in that case may be a second or subsequent sale. Thus successive transac-
D tions become liable for levy of additional tax and the levy becomes multi
point. The Act does not follow the scheme of single point levy provided
under the Principal Act in respect of this tax.
Secti~s 4, 5 and 8 of the Principal Act are the main provisions which
prohibited the multi point levy. In order to give effect to the multi point
E scheme section 3 of the Additional Sales Tax Act as amended provides that
the levy of additional sales tax under that section would be "notwithstanding
anything contained in sections 4, :; and 8" of the Principal Act. Sub-Section
(5) of Section 3 which corresponds to Section 3 (2) prior to its amendment
by the Validation Act while providing that the provisions of the Princpal
Act mutatis mutandis apply in relation to the additional sales tax payable
F
expressly excluded the applicability of Sections 4, 5, 8, 29 and 29-A of the
Principal Act. This Court on the earlier occasion in Ashok Service Centre's
case (supra) observed:
"If the State Legislature wanted that the new levy i.e. the
G additional tax should be a multi point tax which bad to be
paid by every dealer irrespective of the fact that the entire
annual gross turnover in his hands may not be liable to
bear the tax under the Principal Act, it would have ex-
pressly said so as it would have amounted to a substantial
H departure from the general scheme of the Principal Act
POLAKIMOTORS v. STATEOFORISSA [RAMASWAMl,J.] 1011
as set out in the proviso to Section 8 thereof which A
stipulated that no goods should suffer tax which could be
passed on to the purchaser at more than one point in the
same series of sales or purchases by successive dealers to
which the people of the State of Orissa had become
accustomed. If the object of the amendment was to make
the additional tax a multi point levy, nothing was easier
B
than using the appropriate words in the Act by excluding
the application of Section 8 of the Principal Act expressly
in Section 3 (2) of the Act. In the absence of any such
words in the Act, by reason of Section 3(2) of the Act, we
have to construe that Section 8 of the Principal Act which c
is given an over-riding effect by the use of the non-obstante
clause is applicable to the levy of additional tax also."
By use of non-obstante clause in Section 3 (1) and express-
ly excluding the operation of the provisions of Section 4,
D
5, 8, 29 and 29A of the Principal Act in Section 3 (5) also
the State Legislature has achieved its twin objectives of
levying additional tax on gross turnover and at multi
points, de hors the scheme of single point sales tax on
taxable turnover under the Principal Act.
E
The further argument of the learned counsel was the Additional
Sales Tax Act as now amended is not a supplement to the original Act,
and that it is an independent statute and that the legislative competence
would have to be tested as an independence taxing enactment. Even so the
impugned Act cannot be held to be beyond the legislative competence. F
Both these enactments deal with the topic of levy sales tax on sales or
purchases which is within the legislative competence of the State Legisla-
ture. Both the levies come under the same topic of taxes on the sale or
purchase of goods under Entry 54 List II. Instead of levying the tax under
one enactment the State has chosen to levy the same under two different
. enactments. By choosing some transactions of sale of goods alone for levy G
of sale tax in the first instance the legislature does not exhaust its legislative
power in the field of tax on sale of goods. The law does not require the
entire gamut under the topic of tax on sales to be covered in the first or
one enactment itself on peril of losing its legislative competence on that
topics or field. Legislature may choose certain goods alone or certain H
1012 SUPREME COURT REPORTS (1992] SUPP. 1 S.C.R.
A dealers or class of dealers alone for purposes of levy. Later certain other
goods or dealers or class of dealers may be included in the taxation net or
some already in the net omitted. Rates of tax, points of taxation and single
point and multi point scheme are all subject the legislative changes, addi·
tions and modifications. If the State Legislature at the time of enactment
of the Princpal Act had provided in the charging section that certain
B transactions are liable to single point levy and certain other transactions
are liable for multi point levy and yet other transactions are exempted and
if some dealers or class of dealers or the purchaser or a class of purchasers
are exempt and others not exempt no exception to such levy coulrl have
been taken. Will it make any difference if same thing is done under two
c different enactments or more than one enactment? It is not correct to state
that because the Principal Act contemplated a single point levy it is not
open to the State Legislature to adopt a multi point levy at a different stage
or take certain specific transactions or gross turnover. for multi point
taxation. As held by this Court in Kodar v. State of Kera/a [1958] SCR l21
D it is also not necessary that the dealer should be enabled to pass on the
incidence of the tax on sale to the purchaser in order that it might be a tax
on sales of goods. There being rio legal or constitutional bar for a com·
bination of single point levy and a multi point levy and levying of additional
tax, there is no infirmity or constitutional inhibition which would invalidate
the impugned Validation Act.
E
It was then contended by the learned counsel for the assessees that
during the pendency of the civil appeal filed against the judgment of the
High Court of Orissa holding the provisions of the Amending Act, 1979 as
intra vires, when the assessees sought an interim stay of realisation of tax
sought to be recovered, this Court passed the following order on 4.10.1982:
F
"In the circumstances of this case, the stay is vacated. The
respondents will file an undertaking within a month from
today that in case they fail in these appeals and the appeals
are allowed, then the entire money realised shall be
G refunded to the appellants with interest at the rate of 12%
per annum within three months from the disposal of these
appeals. 11
The respondents in those appeals, namely, the State of Orissa filed an
H undertaking through the Special Officer-cum-Deputy Secretary, Finance
POLAKIMOTORS v.STATEOFORISSA [RAMASWAMl,J.] 1013
Department of the Government of Orrisa on the 2nd December, 1982 to A
the effect that the Government "undertake that in case they fail in these
appeals and the appeals are allowed than the entire amount of additional
sales tax realised from the appellants shall be refunded to the appellants
with interest at the rate of 12% per annum within three months from the
disposal of these appeals." It is stated by the assessees that when they B
applied for refund they were rejected on the ground that in view of the
Ordinance, later replaced by the Validation Act, the assessment have
become valid and the assessees are not entitled for refund. The learned
counsel cm1tended that firstly the respondents are bound to honour their
undertaking to this Court regardless of the effect of the Validation Act and
they cannot be permitted to violate their undertaking; secondly, the Or- C
dinance and the Act could not affect the solemn undertaking given to this
Court in those cases which were the subject matter of appeals in the earlier
proceedings though the Act may apply in respect of those who were not
parties in the earlier proceedings and in respect of all _prospectively. The
learned counsel further submitted that the State Government in fairness D
should first refund the amount which he calls illegally collected then assess
or reassess or reopen assessments as the case may be in accordance with
the Act as amended by Act ZZ of 1983 and collect any tax due.
It is well settled that the power to amend and to validate actions
taken under statutes not sufficiently comprehensive to sustain those actions E
is a power ancilliary or subsidiary to the power of legislature on any subject
matter within the competence of the Btate Legislature. It is also settled law
that the legislature have the power to legislate retrospectively and also
validate invalid laws, or invalid executive acts and notifications.
F
The impugned amending and Validatillg Act was enacted to remedy
the defects pointed out by this Court in Ashok Service Centre case. The
object of the Act was not only to amend the law from a past date but also
to protect and validate actions already taken. By enacting retrospectively a
valid and legal taxing provision the law creates a fiction that the assess- G
ments made and the tax collected are under the new re-enacted law. Once
the amended provision is given retrospective operation, the fiction operates
and it, was not necessary to specifically provide that all assessments made
or aCtions taken or notifications issued under the Act before amendment
shall be deemed to be made, taken or issued und~r the new provision H
1014 SUPREME COURT REPORTS (1992] SUPP. 1 S.C.R.
A though the legislatures as in this case often resort to such practice. As
observed by Lord Asquith in East and End Dwellings Co.Ltd. v. Finsbury
Borough Council, 1952 AC 109 which was quoted and followed by this
Court in M.K. Venkatacha/am, ITO & Anr. v. Bombay Dyeing and Mfg. Co.
Ltd., 1958 SC 575:
B
"If you are bidden to treat an imaginary state of affairs as
real, you must surely, unless prohibited from doing so, also
imagillJ'l as real the consequnces and incidents which,'·if
the putative state of affairs had in fact existed, must
inevitably have flowed from or accompanied it. One of
c those in this case is emancipation from the 1939 level of
rents. The statute says that you must imagine a certain
state of affairs; it does not say that having done, you must
cause or permit your imagination to boggle when it comes
to the .inevitable corolaries of that state of affairs."
D
Thus the effect of retrospectively amending the provisions would, for all
legal purposes, be that amended provisions shall be deemed to have been
included in the original Act from 1.4.1979 and all consequences and
incidences which if this amended provision had been there since 1.4.1979
has to be carried to its logical conclusion.
E
By reason of the amending Act the earlier assessments levying addi-
tional tax on gross tunronver the become valid and enforceable. It may also
be noticed that the earlier decision of this Court did not invalidate the
assessments as such and what was held was that the additional tax was
F payable on the taxable turnover by a dealer who is liable to pay tax under
Section 3 ( 1) of the Principal Act. It means that assessment proceedings
will have to be reopened if necessary and the taxable turnover to be
determined and that tax payable will have to be ascertained and demand
be issurd. But only after that is done, if any amount is refundable, the
G Government will be. bound to refund the same. However before that could
be done the Ordinance and the Amending Act came into force, made the
liability to pay additional tax on the total turnover or gross turnover and
by e.very dealer which was the basis on which the earlier assessments were
made and therefore the assessment itself became valid. The decision in
H Municipal Corporation of the City of Ahmedabad, etc. v. New Shorock Spg.
POLAKIMOTORS v. STATEOFORISSA (RAMASWAMI,J.) 1015
Wvg. Co. Ltd., etc., (1971] 1 SCR 288 relied on by the learned cause! has A
no application. In that case the original property tax assessment was made
on 'flat rate' method This Court struck down the rules framed under the
Bombay Provincial Municipal Corporations Act permitting the Corpora-
tion to value the lands and buildings on the flate rate method and set aside
the assessments made on that basis. By an Amending Act the Corporation B
was enabled to assess or reassess in accordance with the provisions of the
Act and the rules as amended by the Amending Act as if the said Act had
been in force during the year for which such tax is to be assessed or
reassessed. In view of the fact that the Court had earlier set aside the
assessments and that in the light of new amended provisions a new assess- C
ment or reassessment will have to be made, the Court held that _the
Corporation cannot retain the amount collected earlier as property tax
under the old unamended provisions. This Court was of the view that
before a Corporation can retain any amount collected as property tax there
must be an assessment according to law. The situation in our case is
different. Not only the earlier assessments were not cancelled but also this D
Court held that it was valid to the extent it taxed the taxable turnovers. The
validating Act was given retrospective operation and by the Section 3 which
has been extracted above. also provided that the assessments shall be
deemed to have been made in furtherance of the Additional Sales Tax Act
as amended by the Amending and Validation Act. In the circumstances it E
could not be stated that there was any violation of the undertaking by the
Government. We do not find also any substance in the submissions of the
learned counsel for the petitioners that either the Validation Act was not
applicable to their case in view of the undertaking or that there was any
violation of the undertaking given by the Government in the earlier cases. F
Mr. Vinoo Bhagat, the learned counsal appearing for the appellant
in Civil Appeal No. 45% of 1990 while supporting the arguments of the
learned counsel for the petitioners in the other cases further contended
that no machinery has been created under the Additional Sales Tax Act,
as amended by the Amending and Validation Act, for assessment and G
collection of additional tax and that therefore the Act is unenforceable and
assessment orders made under the earlier enactments cannot be treated as
legal and valid. The argument was that the Commissioner has delegated in
exercise of his powers under Section 17 only certain of the powers under
specified Sections in the Principal Act in the Notification dated 30th H
' 1016 SUPREME COURT REPORTS [1992] SUPP. l S.C.R.
A August, 1947 and no powers of the Commissioner under the Additional
Sales Tax Act to make assessements or for any other purpose under any
of the sections of the Additional Sales Tax Act have been delegated to
anyone at any time. His further submission was that the assessments to
additional sales tax are made under Rule 5 of the Orissa Additional Sales
B Tax Rules, 1975 and not under Section 12 and that therefore in the absence
of delegation by the Commissioner of his powers as assessing authority
under Rule 5 of the Additional Sales Tax Rules no Sales Tax Officer acting
under the Principal Act has power- or jurisdiction to make any assessment
lillder the Additional Sales Tax Act.
C Section 3(5) of the Additional Sales Tax Act made all the provisions
of the Principal Act including those relating to appeal, revision, reference
and penalty as applicatble in relation to the additional sales tax payable.
Rule 2 (c) of the Orrissa Additional Sales tax Rules, 1975 defines 'Assess-
ing Authority' as meaning the Assessing Authority under the Orissa Sales
D Tax Act, 1947. Rule 5 of the said Rules requires the assessing authority
assessing tax under the Principal Act to simultaneously assess the amount
of additional tax payable by a dealer and pass an order and Rule 7 of the
said Rules states that save as otherwise expressly provided in the Addition-
al Sales Tax Rules the provisions of the Orissa Sales Tax Rules, 1947 shall
mutatis mutandis apply in respect of all the procedural and other matters
E incidental to the carrying out of the purposes of the Act. Therefore, all the
assessment and collection provisions under the Principal Act and the Rules
framed thereunder are attracted and would apply for the assessment and
collection of the additional tax as well. The notification issued under
Section 17 of the Principal Act delegating the powers of the Commissioner
F therefore would automatically apply in so far as the officers authorised to
assess and collect are concerned. There was no need for a further delega-
tion of power in respect of the Orissa Additional Sales Tax are concerned.
The point raised by the learned counsel in this connection is, therefore,
devoid of any merit.
G
For the foregoing reasons the Writ Petitions and the Civil Appeal
are liable to be dismissed and they are accordingly dismissed. Rule Nisi is
discharged. However, there will be no orders as to costs.
J.B. Petitions/Appeal dismissed
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