IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2352 OF 2007

M/s. Indodan Industries Ltd. ...Appellant(s)

Versus

State of U.P. & Ors. ...Respondent(s)

W I T H

CIVIL APPEALS NOS.2353, 2354, 2355, 2356, 2357 & 2358 OF 2007

O R D E R

In this batch of Civil Appeals, the following issues  

arose for determination before the Allahabad High Court:

(1) Whether sub-Section (2B) of Section 9  of the Central Sales Tax Act, 1956,  inserted  on  12th May,  2000  by  the  Finance Act of 2000 is retrospective?  and

(2) Whether  Section  120  of  the  Finance  Act, 2000 which was a validating Act  was invalid inasmuch as it purports to  validate a provision which had never  existed on the statute book?

For the sake of convenience, we may refer to a few  

facts in the lead matter in the case of Shivalik Cellulose  

Limited  Vs.  State  of  Uttar  Pradesh  &  Ors.  (Civil  appeal  

No.2354 of 2007).

Prior to 12th May, 2000, there was no provision for levy  

of interest for delayed payment under Section 9 of the Central  

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Sales Tax Act, 1956 (hereinafter referred to as 1956 Act).  On  

12th May, 2000, Finance Act 2000 came into force.  Vide Section  

119 of the Finance Act, 2000, sub-Section (2B) came to be  

inserted in Section 9 of the 1956 Act.  We quote hereinbelow  

sub-Section (2B) which stood inserted in Section 9:

"If the tax payable by any dealer under this Act is  not paid in time, the dealer shall be liable to  pay interest for delayed payment of such tax and  all the provisions for delayed payment of such tax  and all the provisions relating to due date for  payment  of  tax,  rate  of  interest  for  delayed  payment of tax, of the gene1.2ral sales tax law of  each State, shall apply in relation to due date  for payment of tax, rate of interest for delayed  payment of tax, and assessment and collection of  interest for delayed payment of tax under this Act  in  such  States  as  if  the  tax  and  the  interest  payable under this Act were a tax and an interest  under such sales tax law.”

This sub-Section (2B) came into force with the assent of the  

President only on 12th May, 2000.  In all these Civil Appeals,  

we are concerned with assessment years prior to 12th may, 2000.  

In the lead matter of Shivalik Cellulose Limited, we  

are concerned with the Assessment Years 1979-80, 1980-81 and  

1981-82.  On facts, there is no dispute that in each of these  

years, the taxes with penalty have been paid.  However, they  

have been paid after considerable delay.  The question which,  

therefore, arises for determination in this batch of Civil  

Appeals  is  whether  sub-Section  (2B)  inserted  in  Section  9  

operated  restrospectively  and  whether  it  would  cover  the  

aforestated Assessment Years 1979-80, 1980-81 and 1981-82.  At  

this stage, we may also mention one more fact.  Vide  Section  

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120  of  the  Finance  Act,  2000,  which  was  the  validating  

provision, the Legislature made it clear that the provisions  

of Section 9 of 1956 Act shall have effect, and shall be  

deemed always to have effect as if that section provided for  

levy of interest for delayed payment for the period when the  

1956 Act came into force.  We quote hereinbelow Section 120 of  

the Finance Act, 2000, which reads as under:

“Validation.--(1) The provsions of section 9  of  the  Central  Sales  Tax,  1956  (74  of  1956),  (hereafter in this section referred to as the Central  Sales  Tax  Act),  shall  have  effect,  and  shall  be  deemed always to have had effect, as if that section  also provided-

(a)  that  all  the  provisions  relating  to  interest of the general sales tax law of each State  shall,  with  necessary  modifications,  apply  in  relation to-

(i) the assessment, reassessment, collection  and enforcement of payment of any tax required to be  collected under the Central Sales Tax Act, in such  State; and

(ii)  any  process  connected  with  such  assessment, reassessment, collection or enforcement  of payment; and

(b) that for the purposes of the application  of the provisions of such law, the tax under the  Central Sales Tax Act shall be deemed to be tax under  such law.

(2) Notwithstanding anything contained in any  judgment, decree or order of any court, tribunal or  other authority, general sales tax law of any State  imposed  or  purporting  to  have  been  imposed  in  pursuance  of  the  provisions  of  section  9  of  the  Central Sales Tax Act, and all proceedings, acts or  things  taken  or  done  for  the  purposes  of,  or  in  relation  to,  the  imposition  or  collection  of  such  interest, before the commencement of this section,  shall, for all purposes, be deemed to be and to have  always been imposed, taken or done as validly and  

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effectively as if the provisions of sub-section (1)  had been in force when such interest was imposed or  proceedings or acts or things were taken or done and,  accordingly,-

(a)  no  suit  or  other  proceedings  shall  be  maintained  or  continued  in,  or  before,  any  court,  tribunal or other authority for the refund of any  amount received or realised by way of such interest;

(b)  no  court,  tribunal  or  other  authority  shall  enforce  any  decree  or  order  directing  the  refund of any amount received or realised by way of  such interest;

(c) where any amount which had been received  or  realised  by  way  of  such  interest  is  refunded  before  the  date  on  which  the  Finance  Act,  2000  receives the assent of the President and such refund  would not have been allowed if the provisions of sub- section (1) had been in force on the date on which  the order for such refund was passed, the amount so  refunded may be recovered as an arrear of tax under  the Central Sales Tax Act;

(d) any proceeding, act or thing which could  have been validly taken, continued or done for the  imposition or collection of such interest at any time  before  the  commencement  of  this  section  if  the  provisions of sub-section (1) had then been in force  but which had not been taken, continued or done, may,  after such commencement, be taken, continued or done.

(3)  Nothing  in  sub-section  (2)  shall  be  construed as preventing any person-

(a)  from  questioning  the  imposition  or  collection of any interest or any proceedings, act or  thing in connection therewith; or

(b) from claiming any refund,

in  accordance  with  the  provisions  of  the  Central  Sales Tax Act, read with sub-section (1).

Explanation.-For the purposes of this section,  "general sales tax law” shall have the same meaning  assigned to it in the Central Sales TAx Act.”

For deciding this batch of Civil Appeals, we need to  

emphasize clause (d) of sub-Section (2) of Section 120 which,  

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inter alia, states that any proceeding, act or thing which  

could  have  been  validly  taken  but  not  taken  may,  after  

commencement, be taken, continued or done.  Clause (d), in our  

view, gives a complete answer to the contention advanced by  

the assessee on retrospectivity.  Section 120 of the Finance  

Act, 2000 makes sub-Section (2B) effective right from the very  

first date of commencement of 1956 Act, i.e. 5th January, 1957.  

One  more  aspect  needs  to  be  highlighted.   In  the  

present case, we are concerned with the levy of interest for  

delayed payment.  Under sub-Section (2B) to Section 9, such  

interest for delayed payment is given the status of “tax due”.  

The said interest is compensatory in nature  in the sense that  

when  the  assessee  pays  tax  after  it  becomes  due,  the  

presumption is that the Department has lost the revenue during  

the interregnum period (the date when the tax became due and  

the date on which the tax is paid).  The assessee enjoys that  

amount during the said period.  It is in this sense that the  

interest is compensatory in nature and in order to recover the  

lost revenue, the levy of interest is contemplated by Section  

120 of the Finance Act, 2000 retrospectively.

Keeping in mind the above, we find no infirmity in the  

judgment of the Allahabad High Court and, for the aforestated  

reasons,  we  dismiss  all  the  Civil  Appeals  mentioned  

hereinabove.  We, however, make it clear, in conclusion, that  

in  none  of  these  cases,  the  assessee  has  challenged  the  

constitutional  validity  of  sub-Section  (2B)  inserted  vide  

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Finance  Act,  2000  with  retrospective  effect.   In  the  

circumstances, we are not required to express any opinion on  

the  constitutional  validity  of  the  said  sub-Section  

particularly, in the context of retrospectivity.

Subject to above, Civil Appeals are dismissed with no  

order as to costs.

                                      ..................J.                      (S.H. KAPADIA)

                                      ..................J.                      (AFTAB ALAM) New Delhi, October 20, 2009.

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