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PETITIONER: COMORIN MATCH INDUSTRIES (PVT.) LTD.

       Vs.

RESPONDENT: STATE OF TAMIL NADU

DATE OF JUDGMENT:       16/04/1996

BENCH: SEN, S.C. (J) BENCH: SEN, S.C. (J) SINGH N.P. (J)

CITATION:  1996 AIR 1916            1996 SCC  (4) 281  JT 1996 (5)   167        1996 SCALE  (3)538

ACT:

HEADNOTE:

JUDGMENT:             (With Civil Appeal No. 2207 of 1982)                       J U D G M E N T SEN, J.      The appellant is a manufacturer of safety matches. During the period relevant For the assessment years 1957-58 to 1965-66, the appellant sold matches in the course of inter-State trade and commerce for which sales tax was charged  under the Central Sales Tax Act. The assessment orders were  challenged by  the petitioner  by  filing  writ petition before  the High  Court. The  ground taken was that Central Sales  Tax was  levied on  turnover  which  included excise duty.  No Central Sales Tax could be levied on excise duty. The  provisions of  subsections (2),  (2A) and  (5) of Section 8  of the Central Sales Tax Act were ultra vires the Constitution  of   India.  Claims  for  refund  of  the  tax collected by the Sales Tax Authority were also made. Several other similar  writ petitions  were heard  by the High Court along with  the appellant’s  case. The  High  Court  by  the judgment dated 30th January, 1968 allowed the writ petitions in the  case of  Larsen and  Toubro v.  Joint Commercial Tax Officer, (1967)  20 STC  150. Following  that decision,  the High Court allowed the writ petitions filed by the appellant and the  other writ petitioners. The Sales Tax Authority did not prefer any appeal in the case of the appellant, but went up in  appeal in  another case  (The State of Madras v. N.K. Nataraja Mudaliar, AIR 1969 SC 147) in which this Court held that the  provisions of  sub-sections (2),  (2A) and  (5) of Section 8  of the  Central Sales  Tax Act  were  valid.  Is, however, held  that tax  on  excise  duty  was  illegal  and affirmed the decision of the High Court on this point.      The case of the appellant is that even after the judgment of  the  Madras  High  Court.  the  Commercial  Tax Officer did not refund the amount of tax illegally collected even though  specific direction  had been  given by the High Court to that effect.

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    The position  after the  decision of  this Court in the case of  The State  of Madras  v.  N.K.  Nataraja  Mudaliar, (supra) was  that levy  of sales tax could not be said to be invalid because provisions of sub-sections (2), (2A) and (5) of Section  8 of  the Central Sales Tax Act were ultra vires the Constitution of India. In disposing of the appeal, Shah, J. (as His Lordship then was) directed:      "The appeal will be allowed and the      order  passed  by  the  High  Court      declaring   the    provisions    of      Sections 8(2), 8(2A) and 8(5) ultra      vires must be set aside.           The petition out of which this      appeal arises was one of 8 group of      petitions  filed  before  the  High      Court.  Against  orders  passed  in      favour of  the other  assessees the      State has  not  preferred  appeals.      The amount involved in the claim is      small  The   State  apparently  has      approached this  Court with  a view      to obtain  a final determination of      the important  question  which  was      raised  in   the  petitions   filed      before the High Court. We therefore      direct that  there will be no order      as to  costs in  this Court  and in      the High Court."      The other  reason for  which the  assessments were  set aside was  inclusion of  excise duty  in the  computation of ’turnover’. There  was a  controversy as to how the turnover under the  Central Sales  Tax Act  should be computed. Under the Madras  General Sales Tax Act, 1959 and the rules, as it stood at  the material  time, provisions  had been  made for deduction of  excise duty  in the  computation of chargeable turnover.  Madras  High  Court  held  that  the  quantum  of turnover for the purpose of levy of Central Sales Tax had to be made in the same manner by excluding the excise duty paid on the  goods sold.  In the  case of  State of Madras v. N.K Nataraja Mudaliar, (supra), this Court held:-      "If under  the Madras General Sales      Tax Act  in computing  the turnover      the excise duty is not liable to be      included and  by virtue  of section      9(1) of  the Central  Sales Tax Act      has to be levied in the same manner      as the  Madras  General  Sales  Tax      Act, the  excise duty  will not  be      liable  to   be  included   in  the      turnover .  . .  We are of the view      that in  the matter  of determining      the taxable turnover the same rules      will apply  by  virtue  of  Section      9(1) of  the Central Sales Tax Act,      whether the  tax is  to  be  levied      under the  Central Sales Tax Act or      the General Sales Tax Act."      The Central Sales Tax Amendment Act, 1969 brought about a number  of changes in the Central Sales Tax Act, 1956. The definition of  ’turnover’ in  Section 2(j)  was modified and the wording  of Section  9 was  radically altered.  The  new provisions were deemed always to have been substituted. This amendment was  effected with  a view  to put  an end  to the controversy  whether   ’turnover’  should   be  computed  in accordance with the provisions of the State Sales Tax law or

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not. This  amendment was  necessary to  get  over  the  view expressed by  this Court  in N.K.  Nataraja Mudaliar’s  case that the  Central Sales  Tax had  to be  levied in  the same manner as  provided in the Madras General Sales Tax Act When the Central  Sales Tax  Act was  examined by the Madras High Court in the case of Larsen and Toubro and this Court in the case of  N.K. NataraJa Mudaliar, ’turnover’ had been defined by the  Central Sales  Tax Act  in Section 2(j) to mean "the aggregate of  sale prices  received and receivable by him in respect of  sales of  any goods in the course of inter-State trade or  commerce made  during Any  prescribed  period  and determined in  the prescribed  manner". By  Section 2 of the Central Sales  Tax Amendment  Act, 1979  (28 of  1969),  the words  ’and   determined  in   a  prescribed   manner’  were substituted by  the words ’and determined in accordance with the provisions  of this  Act and  he rules made thereunder’. This amendment  was given  effect with  retrospective effect from the  date on  which the  Central Sales Tax Act ame into force. In  other words,  the very  basis of the law on which the judgment  in N.K. Nataraja Mudaliar’s was pronounced was removed from the statute book .      The scope  of the  validating provision of the Amending Act of  1969 must be viewed in the background of these facts The amending Act, after amending the aforesaid provisions of the Central Sales Tax Act and various other provisions, went on to  validate  all  assessments,  reassessments,  levy  or collection  of   any  tax   made  ’notwithstanding  anything contained in  the judgment, decision, decree or order of any court or other authority to the contrary’. The result of the various provisions of the Amending Act and in particular the validating  provision   was   to   change   the   law   with retrospective  effect   and  to   impart  validity   to  all assessments made  under the  Central Sales Tax Act which had been struck  down by  the judgment in the case of Larsen and Toubro  and   all  other  orders  passed  pursuant  to  that judgment.      Mr. Vaidyanathan  has strenuously  contended  that  the legislature cannot nullify any judgment of the court. In the instant case,  the assessment  made under  the Central Sales Tax Act  had been quashed by the Madras High Court. This was one of  a large number of writ petitions which were heard by the Madras High Court. Although in the case of N.K. Nataraja Mudaliar (supra),  an appeal  was preferred  to the  Supreme Court and  the judgment  was reversed,  in the  case of  the appellant the judgment was not questioned and was allowed to stand. Therefore,  it  is  in  full  force  and  has  to  be respected as  valid and  binding.  This  judgment  could  be reversed by the Supreme Court, but could not be nullified by legislature by  an Act. In support of this contention he has relied on  a judgment  of this  Court in  the case  of Madan Mohan Pathak v. Union of India & Ors., (1978) 3 SCR 334,      In that case, a dispute between workers’ union and the Life Insurance Corporation was settled by an agreement for payment of cash bonus at the rate of 15% of gross wages. The settlement was valid for four years from 1st April, 1973 to 31st March, 1977. There was some dispute about the implication of this settlement and on 21st May, 1976 on a writ petition, the Calcutta High Court passed an order recognizing the right of the employees to payment of bonus for the year 1975-76 which had become payable along with the salary in April, 1976. The Calcutta High  Court ordered  that it  must be  paid to  the employees. On  29th May, 1976 the Life Insurance Corporation (Modification of  Settlement) Act,  1976 was  passed by  the Parliament denying  the employees  the right  which had been

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conferred  by   the  settlement,  approved  by  the  Central Government, acted  upon by  actual payment  of bonus  to the employees and  finally recognized  as a  right protected  by Articles  19(1)(f)  and  31(1)  of  the  Constitution  by  a decision of the Calcutta High Court on 21st May, 1976.      It was  noted in  the judgment  of Beg,  C.J., that the Statement of  Objects and  Reasons of the Act disclosed that the purpose  of the Act was to undo the settlement which had been arrived  at between  the Corporation  and Class-III and Class-IV employees  on January 24 and January 26, 1974. Beg, C.J., was of the view that it would, in any event, be unfair to adopt  legislative procedure  to undo  such a  settlement which had  become the  basis of  a decision of a High Court. Even if  legislation can  remove-the basis  of a decision it has to  do it  by an alteration of general rights of a class but not by simply excluding two specific settlements between the Corporation  and its  employees from  the purview of the section 18  of the  Industrial Disputes Act, 1947, which had been held  to be valid and enforceable by a High Court. Such Selective exclusion could also offend Article 14."      Strong reliance  was placed  by Mr. Vaidyansthan on the following observation of Beg, C.J. :-      "I   find    myself   in   complete      agreement with  my learned  brother      Bhagwati that to give effect to the      judgment of the Calcutta High court      is not  the same thing as enforcing      a right  under Article  19  of  the      constitution becomes  liked up with      the enforceability of the Judgment.      Nevertheless,  the   tow  could  be      viewed as separable sets of rights.      If  the   right  conferred  by  the      judgment independently is sought to      be set aside, section 3 of the Act,      would in,  my opinion,  be  invalid      for  trenching  upon  the  judicial      power."      Mr. Vaidyanathan  has argued  that whatever  may be the effect of  the validation  provision of  Central  Sales  Tax Amendment Act  of 1969,  it could  not nullify  the judgment pronounced by  the Madras  High Court whereby the assessment order had been quashed.      Before examining this argument of Mr. Vaidyanathan, the majority judgment  in Madan Mohan Pathak’s case (supra) will have to  be read and properly understood. The Life Insurance Corporation (Modification  of Settlement)  Act, 19?6  was an Act to  alter the  settlement  which  had  been  arrived  at between the  Corporation  and  its  class-III  and  Class-IV employees  on   24th  January,  1974  under  the  Industrial Disputes Act,  1947 and  which was in force upto 31st March, 1976. The Act did not purport to change the law which formed the basis  of the judgment of the Calcutta High Court in any manner. The  Act did not contain any clause that it would be enforced notwithstanding  anything contained in any judgment to the  contrary. The majority judgment. which was delivered by  Justice   Bhagwati,  J.  (as  His  Lordship  then  was), highlighted this-aspect. Bhagwati,J. observed:-      "It is  significant  to  note  that      there  was   no  reference  to  the      judgment of the Calcutta High Court      in the  Statement  of  Objects  and      Reasons,   nor   any   non-obstante      clause referring to a judgment of a      court in  section 3 of the impugned

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    Act  The  attention  of  Parliament      does not  appear to have beer drawn      to the  fact that the Calcutta High      Court had  already issued a writ of      mandamus   commanding    the   Life      Insurance Corporation  to  pay  the      amount of  bonus for  the year  1st      April, 1975 to 31st March, 1976. It      appears  that   unfortunately   the      judgment of the Calcutta High Court      remained almost  unnoticed and  the      impugned   Act    was   passed   in      ignorance of that judgment. Section      3 of the impugned Act provided that      the provisions of the Settlement in      so far as they relate to payment of      annual cash  bonus to Class III and      Class IV  employees shall  not have      any force  or effect  and shall not      be deemed  to have had any force or      effect from  1st April,  1975.  But      the writ  of mandamus issued by the      Calcutta High  Court directing  the      Life Insurance  Corporation to  pay      the amount  of bonus  for the  year      1st April, 1975 to 31st March, 1976      remained untouched  by the impugned      Act. So  far as  the right of Class      III  and   Class  IV  employees  to      annual cash  bonus for the year 1st      April, 1975 to 31st March, 1976 was      concerned, it became crystalized in      the judgment  and  thereafter  they      became entitled to enforce the writ      of mandamus granted by the judgment      and not  any right  to annual  cash      bonus under  the  settlement.  This      right under  the judgment  was  not      sought to  be  taken  away  by  the      impugned    Act.    The    judgment      continued to  subsist and  the Life      Insurance Corporation  was bound to      pay annual  cash bonus to Class III      and Class IV employees for the year      1st April, 1975 to 31st March, 1976      in  obedience   to  the   writ   of      mandamus."      After referring  to the  decision of this Court in Shri Prithvi Cotton  Mills Ltd.  v. Broach  Borough Municipality, (1970) 1 SCR 388, Bhagwati, J. pointed out that in that case validity of  Gujarat Imposition  of Taxes  by Municipalities (Validation) Act, 1963, altered the very basis of the law on which this  Court’s judgment in Patel Gordhandas Hargovindas v. Municipal  Commissioner, Ahmedabad, (1964) 2 SCR 608, was pronounced. Not  only substantive provisions of the Act were altered but  Section 3  of the  Validation Act provided that notwithstanding anything  contained in  any judgment, decree or order  of a  court or tribunal or any other authority, no tax assessed  or purported  to have  been  assessed  by  the municipality on  the basis of capital value of a building or land and imposed, collected or recovered by the municipality at any  timebefore the  commencement of  the Validation  Act shall be  deemed to  have invalidly  assessed or  imposed or collected or  recovered and  the imposition or collection of the tax  so assessed  shall be  valid and shall be deemed to

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have always  been valid  and shall not be called in question merely on  the ground  that the assessment of the tax on the basis of  capital value  of the  building or  land  was  not authorized by law and accordingly any tax so assessed before the commencement  of the  Validation Act  and leviable for a period prior  to such  commencement  but  not  collected  or recovered before  such  commencement  may  be  collected  or recovered in accordance with the relevant municipal law.      After referring to the provisions of the Act, Bhagwati, J. observed:      "It is  difficult to  see how  this      decision given  in the context of a      validating statute  can be  of  any      help   to    the   Life   Insurance      Corporation.  Here,   the  judgment      given by  the Calcutta  High Court,      which  is   relied  upon   by   the      petitioners,   is    not   a   mere      declaratory  judgment   holding  an      impost or  tax to  be  invalid,  so      that  a   validation  statute   can      remove the  defect pointed  out  by      the judgment  amending the law with      retrospective effect  and  validate      such impost or tax."      Krishna Iyer and Desai, JJ. agreed with the judgment of Justice Bhagwati,  Chandrachud, Fazal  Ali and Shinghal, JJ. observed:-      "We agree  with the  conclusion  of      brother Bhagwati but prefer to rest      our decision on the ground that the      impugned    Act     violates    the      provisions of Article 31(2) and is,      therefore,  void.  We  consider  it      unnecessary to  express any opinion      on the  effect of  the judgment  of      the Calcutta High Court in W.P. 371      of 1976."      Therefore, the  majority view  appears to  be that if a judgment is  pronounced by  a court  and the  effect of that judgment is  sought to  be  taken  away  by  legislature  by passing an  Act without altering the statute on the basis of which the  judgment was  pronounced, then  such  legislation will not  nullify  the  effect  or  force  of  the  judgment pronounced by  a court in any manner. The statute being what it was, the judicial interpretation of the statute could not be held  to be  erroneous by  legislative imprimatur, but if the statute  itself was  amended retrospectively so that the very basis of the judgment disappeared, then it could not be said the  judgment was  still in  force and  will have to be given effect to even though the legislature had specifically laid down  that the amended law will operate notwithstanding any judgment  or decision  or decree  by the  court  to  the contrary. In  fact, that is how the judgment of Shri Prithvi Cotton Mills Ltd. understood and explained .      In the  instant case,  after this  Court’s decision  in N.K. Nataraja  Mudaliar’s case  the legislature  has defined ’turnover’ in  a new  manner and  has also  amended  certain other provisions  of the  Act which formed very basis of the Madras Judgments  in the  case of  Larsen  Toubro  and  this Court’s judgment  in the  case of  N.K.  Nataraja  Mudaliar. Therefore, we  are unable  to uphold  the contention  of Mr, Vaidyanathan that  the Judgment  of the Madras High Court in the assessee’s  own case must be held to be in full force in spite of the Amendment Act of 1969.

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    The legislature ordinarily cannot reverse a decision of 8 court  of law  given in  exercise  of  judicial  power.  A settlement between  the management  and the  employees under the Industrial  Disputes  Act  cannot  be  declared  by  the legislature invalid  and not  enforceable even  after a High Court had  declared the  settlement  as  valid  and  binding between the  parties. This  is what was sought to be done in Madan Mohan  Pathak’s case  (supra) and this Court held that it was  not permissible  But if a High Court quashes several assessment orders interpreting a taxing statute in a certain certain manner  and that  interpretation is  by a subsequent judgment of  the Supreme  Court and  the statute  itself  is amended as  e result  of which the law on the basis of which the High  Court’s judgment was given is drastically altered, in such a situation,’ it is permissible for the legislature, by a Validation Acts to declare the assessments as valid and binding notwithstanding  the judgment  of the  High Court to the contrary. The principle to be applied in cases like this was stated  by Hidayatullah,  C.J.,  in  the  case  of  Shri Prithvi Cotton  Mills Ltd.  v. Broach  Borough Municipality, (1970) 1 SCR 388:-      "When a  legislature  sets  out  to      validate a  tax declared by a court      to be  illegally collected under an      ineffective  or  invalid  law,  the      cause   for    ineffectiveness   or      invalidity must  be removed  before      validation  can  be  said  to  take      place   effectively.    The    most      important  condition  is  that  the      legislature must  possess the power      to impose  the tax,  for if it does      not, the  action must  ever  remain      ineffective  and  illegal.  Granted      legislative competence  it  is  not      sufficient to  declare merely  that      the decision of the court shall not      bind, for  that  is  tantamount  to      reversing the  decision in exercise      of   judicial   power   which   the      legislature  does  not  possess  or      exercise. A  Court’s decision  must      always bind  unless the  conditions      on  which   it  is   based  are  so      fundamentally  altered   that   the      decision could  not have been given      in the altered circumstances.’      In  Shri   Prithvi  Cotton  Mill’s  case  (supra),  the assessment years involved were 1961-62, 1962-63 and 1963-64. Broach Borough  Municipality imposed  a  purported  rate  on lands and  buildings at  a certain percentage of the capital value. The  assessment lists  were  published  and  tax  was imposed on  the basis  of capital  value of  the property. A number  of  writ  petitions  were  filed  for  quashing  the assessments. During  the pendency  of the  writ petition,  a Validation Act  was passed  which  was  also  challenged  by amending the writ petition.      The Validation  Act was  passed because of the decision of this Court in the case of Patel Gordhandas Hargovindas v. The Municipal  Commissioner, Ahmedabad,  AIR 1963  SC 1742 = (1964) 2  SCR 608.  In that  case this Court struck down the municipal tax levied as a percentage of the capital value of the property. The assessments were declared ultra vires. The Validation Act  of 1963  redefined ’rate’  and converted the municipal tax  as a  ’rate’ on  lands and  buildings. In the

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case of  Shri Prithvi  Cotton Mills  (supra),  Hidayatullah, C.J.,  pointed  out  that  the  legislature  by  legislative enactment retrospectively  imposed the  tax by giving to the expression ’rate’  a new  meaning and "while doing so it put out of  action the  effect of the decisions of the courts to the contrary."  This principle  laid down  in  Shri  Prithvi Cotton Mills,  case has not been overruled or doubted by the majority view in the case of Madan Mohan Pathak (supra).      In the  instant case also. the High Court’s judgment in Larsen and  Toubro’s case  (supra), in so far as it declared certain provisions  of the  Sales Tax  Act ultra  vires, was reversed in the case of N.K. Nataraja mudaliar (supra). The   includibility  of  the  excise  duty  element  in  the turnover was  validated by  the  statutory  amendments  with retrospective effect. Therefore, the very basis on which the assessments sere  quashed in  the case  of Larsen and Toubro disappeared. The  legal basis of the decisions following the Larsen and  Toubro’s  case  including  that  case  also  had disappeared  by   judicial  pronouncements  and  legislative enactment. The  validating provision  of the  1969  Act,  to borrow the  language of  Hidayatullah, C.J.,  has put out of action the  effect of the decision of the High Court in this case. The  field is  now occupied  by the  judgment of  this Court in  N.K. Natraja  Mudaliar’s   case  (supra)  and  the provisions of  the Central  Sales Tax  Act as amended by the Act of 1969.      We shall now examine some of the other cases which were cited on  the question  of the  scope of  various Validation Acts passed  by the  legislature from time to time. The case of A.V.  Nachane v.  Union of India  (1982) 2 SCR 246, was a sequel to  the decision  in the  case of Madan Mohan Pathak, where this  Court had  directed the  Union of India and Life Insurance  Corporation  to  forbear  from  implementing  the provisions of  the Validation  Act of 1976 and to pay annual cash bonus  for the years in question to Class III and Class IV employees  in accordance  with the  settlements. On March 31, 1978 the Corporation issued a notice under Section 19(2) of the  Industrial Disputes  Act declaring  its intention to terminate the  settlement on  the expiry  of two months from the date  of the notice. Another notice was issued to effect a change  in the  conditions of  service applicable  to  the workmen. The  validity of  the aforesaid two notices and the consequential notification  issued to  nullify  any  further claim to annual cash bonus was challenged by a writ petition in the  Allahabad High Court. The writ petition was allowed. On appeal  this Court  pointed out  that the  settlements of 1974 could  only be superseded by a fresh settlement. It was held that in view of the decision in Madan Mohan Pathak case (supra). the  amended rules,  in so  far as  they sought  to abrogate the  terms of  1974 settlement  relating to  bonus, could only  operate prospectively.  This judgment  does  not advance the  case of the appellant. It merely reiterates the principles laid down in the case of (supra).      In the  case of Janpada Sabha, Chhindwar v. The Central Provinces Syndicate Ltd., (1970) 3 SCR 745, the question was raised  as  to  the  validity  of  enhancement  of  cess  on extraction of  coal. The  rate of  cess originally  was at 3 pies per  ton This  was later enhanced to 4 pies per ton, in 1946 to  7 pies  and in  1947 to 9 pies. The enhanced levies were  challenged  in  this  Court.  It  was  held  that  the increased levies were not valid because previous sanction of the local  Government  had  not  been  obtained.  The  State Legislature thereafter  passed Act  in 1964 by which a Board (Janapada Sabha)  was constituted  and cess  was defined  to mean a  cess imposed  by the  Board or  its successor  body.

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Section 3(1)  of the  Act contained  a validating  provision that notwithstanding  any  judgment  of  any  court,  cesses imposed, aisessed  or collected by the Board shall be deemed to be, and to have always been, validly imposed, assessed or collected. When  the case came to this Court, the inadequacy of the Amending Act was pointed out in the following words:      "But the Act in terms is limited in      its application  to the Independent      Mining Local Board, Chhindwara, and      its  successor  body  the  Janapada      Sabha, Chhindwara constituted under      Act 38 of 1948, and only in respect      of    the    three    notifications      specified    in    the    Schedule.      Obviously the  Act limited  to  one      local Board  in its application and      to certain  specific  notifications      cannot operate to repeal the clause      insofar  as  it  applied  to  other      Boards.           The nature  of  the  amendment      made in  Act 4 of 1920 has not been      indicated. Nor  is  there  anything      which enacts that the notifications      issued without  the sanction of the      State Government  must be deemed to      have been  issued validly  under s.      51(2) without  the sanction  of the      Local Government "      This case  does not  lay down that after a judgment has been pronounced  on the  basis of  an Act, the provisions of that Act  cannot be amended so as to cure the defect pointed out in  the judgment  retrospectively.  The  effect  of  the Amending Act  of 1969  is not to over rule a judgment passed by a  court of law, which the legislature cannot do What the legislature can  do is  to change  the law  on the  basis of which  the   judgment  was  pronounced  retrospectively  and thereby  nullify  the  effect  of  the  judgment.  When  the legislature enacts  that  notwithstanding  any  judgment  or order the  new law  will  operate  retrospectively  and  the assessments shall  be deemed to be validly made on the basis of the  amended law,  the legislature  is not  declaring the judgment to  be void  but rendering things or acts deemed to have been  done under  amended statute valid notwithstanding any judgment  or order  on the basis of the unamended law to the contrary.  The validity  to the  assessment orders which had been  struck down  by the  Court,  is  imparted  by  the Amending Act by changing  the law retrospectively.      In the  case of  P.S. Mohal  v. Union of India (1984) 3 SCR 847, certain seniority rule of  Government of India came up for  consideration. In the case of A.K. Subraman v. Union of India  (1975) 2  SCR 979,  a direction  had been given by this Court  to the  government of  India to amend and recise the seniority  list in  a  certain  manner.  The  government instead of  complying with this direction framed Rules 2(ii) and 2(vi) by which a totally different rule of seniority was framed. This  was contrary  to the  direction given  in A.K. Subraman’s case. This Court pointed out that A.K. Subraman’s case was  "not a mere declaratory judgment holding an impost or tax  to be  invalid, so  that a  validation  statute  can remove the  defect pointed out by that judgment and validate such impost  or tax,  But it  is a decision giving effect to the right of the Executive Engineers promoted form the grade of Assistant Engineers to have their inter se seniority with Executive Engineers  promoted form  the grade  of  Assistant

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Executive Engineers  determined on  the  basis  of  rule  of length  of   continuous  officiation  by  issue  of  a  writ directing the  Government of  India to  amend and revise the seniority list in accordance with such rule of seniority."      Far from  supporting the  contention of  the appellant, this decision  completely goes against the argument advanced by the  appellant. This  Court clearly  laid down that if an impost or  tax is  declared  to  be  invalid,  a  validation statute can  remove the  defect pointed  out by the judgment and validate  such impost or tax. This is precisely what has happened in  the instant  case. The  provisions of  the  Act which were  declared ultra  vires in  the case of Larsen and Toubro have  been held to be valid by this Court in the case of N.K.  Nataraja Mudaliar  (supra) Includibility  of excise duty  in   ’turnover’   was   also   specifically   provided retrospectively by  the amendments to the various provisions of the Central Sales Tax Act by the Amendment Act of 1969      In the  case of  Bhubaneshwar Singh  v. Union of India, (1994) 6  SCC 77,  a Bench of three judges to which on of us (N.P. Singh,J) was party, held :      "The Validating Acts are enacted to      validate the action taken under the      particular enactments  by  removing      the   defect    in   the    statute      retrospectively  because  of  which      the statute  or the  pert of it had      been  declared   ultra  vires.  The      exercise of  rendering  ineffective      the   judgments    or   orders   of      competent courts  by  changing  the      very  basis  by  legislation  is  a      well-known  device   of  validating      legislation.    Such     validating      legislation which removes the cause      of   the   invalidity   cannot   be      considered to be an encroachment on      judicial power.  At the  same time,      any action in exercise of the power      under any  enactment which has been      declared to  be invalid  by a court      cannot   be   made   valid   by   a      Validating Act  by merely saying so      unless the  defect which  has  been      pointed out by the court is removed      with  retrospective   effect.   The      validating legislation  must remove      the cause  of invalidity. Till such      defect or  the  lack  of  authority      pointed out  by the  court under  a      statute   is    removed   by    the      subsequent      enactment      with      retrospective effect,  the  binding      nature of the judgment of the court      cannot be Ignored."      In that  case Bhubaneshwar  Singh, the  petitioner, was the owner of a coking coal mine which had been taken over by the  Central  Government.  He  filed  on  application  under Article 226  of the Constitution alleging that the Custodian had debited the expenses for raising coal to his account but had not  given him  credit for  the price of the coal raised which was  lying in  stock on  the date  when the  coal mine vested in the Central Government, The High Court allowed the writ petition  holding that  the petitioner was the owner of the coal  mine and  was entitled  to credit for the stock of coal lying  unsold as on 30.4 1972. A direction was given to

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recast  the   account  and  make  certain  payments  to  the petitioner. The Special Leave Petition against that judgment was dismissed by this Court by a reasoned order. Whereafter, by  the   Amendment  Act   of  1976,   Coking   Coal   Mines (Nationalization) Act,  1972 was  amended with retrospective effect. The  question  before  this  Court  was  whether  by introduction  of  sub-section  (2)  to  Section  10  of  the Amending Act with retrospective effect, the respondents were absolved of  their liability  and were  exonerated from  the responsibility of  complying with the direction given by the High Court  in the  earlier writ petition filed on behalf of the writ  petitioner. It  was held that the amendments which had been  introduced  retrospectively  had  taken  away  the substratum of  the claim  made on  behalf of the petitioner. This Court  held since  the Validation  Act  had  cured  the lacunae or  defect pointed  out by  the High  Court  in  its earlier decision  by  introduction  of  sub-section  (2)  of Section 10  with retrospective  effect, it  shall be  deemed that compensation had been paid even for the stock of unsold coke lying on the date prior to the appointed day.      In the  case of S.R. Bhagwat v. State of Mysore, (1995) 6 SCC 16, a Bench of three Judges held that a judgment which had attained  finality and  was binding upon the State could not be overruled by any legislative measure. In that case by an interpretation of the relevant service law the High Court had given  certain  benefits  to  the  writ  petitioners  by issuing a  writ in the nature of mandamus. That order of the High Court  was sought to be nullified by enactment of a new statute. The  Court held that this was impermissible because the High  Court had  not struck  down any  legislation which could   be    re-enacted   after    removing   the    defect retrospectively. In  other words,  it was recognized by this Court that  in a  case where  provisions of  a statute  were declared  inadequate   or  ultra   vires,  it  was  open  to legislature to  remove the  defect retrospectively  so as to cure the defect and make the statute valid.      What has  happened in  this case is that a large number of writ  petitions were  dismissed by  the High Court on the basis of  its decision  in the  case of Larsen and Toubro as result of  these decisions.  a large  number  of  assessment orders under  the Central  Sales Tax  Act were set aside. It was held in the case of Larsen and Toubro certain provisions of the  Act were  ultra vires  and in  any event excise duty could not  be included  in the  assessee’s turnover  for the purpose of  levy of Central Sales Tax. The main basis of the High Court’s  judgments disappeared  when the  Supreme Court held that  the impugned  provisions of the Central Sales Tax Act which  had been  declared ultra vires by the Madras High Court were  validly enacted.  The other defect which relates to the  includibility of excise duty in the ’turnover’ of an assessee  was   cured  retrospectively   by   amending   the provisions of  the Central Sales Tax Act. The new provisions introduced by the Amending Act were deemed to have come into effect  retrospectively   Section  9  of  the  Amending  Act declared all  assessments made  upto 9th January, 1969 valid and binding.  There is nothing in the long line of decisions cited by  Mr. Vaidyanathan  to suggest  that the legislature could not  take such  a step  until and unless the judgments were specifically  reversed by  this Court. This argument is not tenable having regard to the principles of law laid down in the  case of  Shri Prithvi  Cotton Mills   (supra), which have been  reiterated in  the subsequent  judgments of  this Court. This is not a case of passing a legislation trying to nullify the interpretation of 19# given in the judgment of a court of  law. This  is a case of changing the law itself on

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the basis  of which the judgment was pronounced holding that the assessment orders were erroneous in law.      The next  contention of  Mr. Vaidyanathan is that, even after the  Act of  1969 was passed, the High Court passed an order in  the contempt  application, directing  the State to pay the  disputed amount to the appellant and that order was carried out.  The respondents  could have  but did  not take shelter behind  the Amendment  Act of 1969 The special leave petition filed  against that  order was  dismissed  by  this Court. Therefore,  this is  a case  of res  judicata and the respondent could not nor raise this point at this stage by a fresh proceeding.      The appellant has not been able to cite any decision to show that  a direction  given in  a  contempt  petition  can operate as  res judicata in a suit. In the contempt petition the only  issue was  whether the  court’s order  in the writ petition was  carried out  or not.  If the order of the writ court was  not carried  out, the contempt court was bound to pass suitable orders to ensure obedience to the order of the court. The  question  of  correctness  or  validity  of  the judgment passed  on the writ petition could not be raised in a contempt proceeding. No question of res judicata arises in such a case.      Be that  as it  may, the  petitioner was  successful in getting an order of payment on the contempt petition. We are unable to uphold the contention that merely because an order was passed  in the  contempt proceeding to make payment, the respondent is  estopped from  claiming  the  amount  of  tax raised by  an assessment order validated by the Act of 1969. If this  argument is  accepted, strange  result will follow. The assessment  order will  remain  valid.  That  notice  of demand raised  pursuant to  the assessment order will remain intact and  in force,  but  it  will  not  be  open  to  the Department to  realise the  amount of  tax merely because of the order  passed  in  the  contempt  proceeding.  The  writ court’s order had to be carried out, which is why the refund order was  passed in the contempt proceeding. This direction to refund the amount of tax already collected was given only because the assessment orders had been set aside by the writ court. But,  when the  assessment orders  were validated  by passing the Amendment Act of 1969 with retrospective effect, the tax  demand became valid and enforceable. The tax demand is a  debt owed  by an assessee which can be realised by the State in  accordance with  law. Merely because the amount of tax which  had been  realised earlier  was  directed  to  be refunded by court’s order on the finding that the assessment order  was   invalid,  will  not  preclude  the  State  from realizing the tax due subsequently when the assessment order was validated  by the Amending Act of 1969. The order passed in the  contempt proceeding  will not  have  the  effect  of writing off  the debt  which  is  statutorily  owed  by  the assessee to  the State.  The State  has  filed  a  suit  for recovery of  this debt. Unless it can be shown that the debt does not  exist or  is not  illegally due,  the court cannot intervene and prevent the State from realizing its dues by a suit. All  that the  Department has  done in this case is to bring a suit to recover the Amount of tax due and payable to it as  a result  of what  must now  be treated  as  a  valid assessment order.      It is  needless to speculate as to what would have been the position,  had the Amending Act been produced before the court in  the contempt  case.  But,  in  our  view,  in  the contempt proceeding the court was only endeavoring to ensure that the  order of  refund passed  by  the  writ  court  was carried out.  In the contempt jurisdiction the court was not

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really concerned with the merit of the case.      It is  also to be noted that the vires of the Amendment Act of  1969 has  not been  questioned by  the appellant  by filing  any  substantive  application.  The  effect  of  the Amending Act  is to  impart  validity  to  those  assessment orders which  had been struck down by the High Court. If the assessment orders  are now held to be valid, the tax demands raised in  the assessment orders are still enforceable. What the State of Tamil Nadu is seeking to do is to enforce these demands.  Merely  because  taxes  which  had  been  realized earlier had  been  refunded  under  an  order  passed  on  a contempt petition,  the  respondent  is  not  debarred  from realizing the  demands which  are now deemed to be valid and subsisting.      Therefore, in  our view,  the appeal  has no merit. The Department is entitled to recover the amount refunded to the appellant pursuant  to the  direction given  in the contempt proceeding. The  appeal is  dismissed. Each  party will bear its own costs. CIVIL APPEAL NO. 2207 OF 1982      In vies  of our  judgment in  Civil Appeal  No.2206  of 1982, the above appeal is also dismissed. There will be no order as to costs.