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PETITIONER: STATE OF UTTAR PRADESH AND ORS.

       Vs.

RESPONDENT: MODI INDUSTRIES LIMITED

DATE OF JUDGMENT04/01/1977

BENCH: SHINGAL, P.N. 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

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       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

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       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

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       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-         vailing-  during 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

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       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

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                     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

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       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