http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10  

PETITIONER: M/S.  KRISHNAMURTHI & CO.  ETC.

       Vs.

RESPONDENT: STATE OF MADRAS & ANR.

DATE OF JUDGMENT05/09/1972

BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ HEGDE, K.S. REDDY, P. JAGANMOHAN

CITATION:  1972 AIR 2455            1973 SCR  (2)  54  CITATOR INFO :  MV         1985 SC 421  (77)  R          1986 SC 662  (49)

ACT: Madras  General Sales Tax (Third Amendment) Act, 1967  Entry 47  and 47-A of the First Schedule-Whether invalid  as  they seek to impose Sales Tax with retrospective effect.

HEADNOTE: Under  Entry 47 of the First Schedule of the Madras  General Sales  Tax  Act,  1959, the sale  of  ’lubricating  oil  and greases’ was liable to sales tax at the point of first  sale in the State at 6 per cent.  With effect from April 1, 1964, Entry  47 was amended and instead of the words  "lubricating oils  and greases;" "lubricating oils, all kinds of  mineral oils (not otherwise provided for in this Act) quencing  oils and greases," were included. Till  September 30, 1965, the assessments were made  on  the assumption  that  the  amendment of entry  47  had  made  no difference  to  sale of furnace oil.  The dealers  paid  and collected the tax on that basis and the department  accepted it.   Thereafter, according to a resolution of the Board  of Revenue,  the  dealers started charging tax on  furnace  oil from  September 14, 1965 at the rate of 6 per cent  although furnace  oil  was  a non-lubricating mineral  oil,  and  the assessment orders were made accordingly.  The view expressed by  the Board of Revenue that entry 47 as  amended  included furnace  oil was challenged before the High Court by a  writ and  the  High Court held that entry 47 as amended  did  not include  furnace oil.  Appeal against the said  judgment  is pending before the Supreme Court. Thereafter, Madras General Sales Tax Act was a.-lain amended (Third  Amendment)  by  which  all  kinds  of  mineral  oils including  furnace oil were included in entry 47  and  Sales Tax would be payable during the period from April 1, 1964 to November  30,  1965  at the rate of 6%  and  the  rate  from December 1, 1965 to June 17, 1967, had been fixed at 61% and with effect from June 18, 1967, the rate had been fixed at 7 per  cent  and  Sec.  4  validated  all  taxes)  levied  and collected before the passing of the amending Act and no suit lay for the refund of any tax paid or collected. The  appellants  who are dealers in mineral  oils  including

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10  

furnace   oils   filed  writ   petitions   challenging   the retrospective  imposition of a single point tax  on  furnace oil  and other non-lubricating oils for the period prior  to January  5,  1968,  as violative of Art. 14 and  19  of  the Constitution.   The High Court, however, dismissed the  writ petitions.  Dismissing the appeals, HELD   :  (i)  The  legislative  power  conferred   on   the appropriate legislatures to enact laws in respect of  topics covered  by  the several entries in the three lists  can  be exercised both prospectively and retrospectively. The legislative power, in addition, includes the  subsidiary or auxiliary power to validate laws which have been found to be invalid. if a law passed by a legislature is struck  down by the Court as being invalid for one infirmity or  another, it would be competent to the appropriate legislature 55 to  cure the said infirmity and pass a validating law so  as to  make  the provisions of the said earlier  law  effective from the date when it was passed. [59B] Rai Ramkrishna & Ors. v. The State of Bihar, [1964];  S.C.R. 897, referred to. (ii) In the present, case, the amending Act was intended  to cure an infirmity as revealed by the judgment of the  Madras High  Court and to validate the past levy and collection  of tax in respect of all kinds of non-lubricating mineral oils, including furnace oils, with effect from April 1, 1964.  For this  purpose, the legislature split the original  entry  47 into two entries 47 and 47-A whereby, the sale of all  kinds of  mineral  oils were made liable to tax. it  is  axiomatic that   the  Government  needs  revenue  to  carry   on   the administration  and fulfil its obligation to  the  citizens. Further amending and validating Act to make "small  repairs" is  a  permissible  mode of legislation  and  is  frequently resorted to in fiscal enactments. [61B] Therefore, the impugned provisions of the Amending Act are a valid piece of legislation and do not contravene Art. 19  of the Constitution. Enari  Chinna Krishana Moorthy v. State of Orissa  [1964]  7 S.C.R. 185; M/s.  J. K. Jute Mills Co. Ltd. v. The State  of U.P. and Anr. [1962] 2 S.C.R. 1; The Union of India v. Madan Gopal Kabra, [1954] S.C.R. 451; Jaora Sugar Mills (P)  Ltd., v.  State  of  Madhya Pradesh & Ors. [1966]  1  S.C.R.  523, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 471-474 of 1969. Appeals  by certificate from the judgment and  order,  dated September  27,  1968  of  the  Madras  High  Court  in  Writ Petitions Nos. 283 to 286 of 1968. M.   C. Setalvad, Ravinder Narain, A. K. Verma, J. B.  Dada- kanji and O. C. Mathur, for the appellants. S.   T.  Desai,  A.  V. Rangam and A.  Subhashini,  for  the respondents. The Judgment of the Court        was delivered by KHANNA, J.-This judgment would dispose of four civil appeals No. 471 to 474 of 1969 which have been filed on  certificate granted  by the Madras High Court and are directed  against the, common judgment of that court, whereby petitions  under article  226  of  the Constitution of  India  filed  by  the appellants  were  dismissed.   The  crucial  question  which arises  for  determination in these appeals is  whether  the provisions  of  Madras General Sales Tax  (Third  Amendment)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10  

Act,  1967  (Act No. 19 of 1967) are invalid on  the  ground that they seek to impose sales tax with retrospective effect in an unreasonable manner. According  to  entry  47 of First  Schedule  to  the  Madras General  Sales  Tax  Act,  1959  (Madras  Act  1  of   1959) (hereinafter referred to as the principal Act), the sale  of "lubricating oils and 56 greases" was liable to sales tax at the point of first  sale in the State at 6 per cent.  With effect from April 1,  1964 entry 47 was amended by Madras Act 7 of 1964 and instead  of the words "lubricating oils and greases" in that entry,  the following words were substituted               "Lubricating  oils, all kinds of mineral  oils               (not  otherwise  provided  for  in  this  Act)               quenching oils and greases" Till September 30, 1965, it is stated, the assessments  were made  on the assumption that the amendment of entry  47  had made  no  difference to sales of furnace oil and  they  were liable  to multipoint tax at 2 per cent.  The  dealers  paid and collected tax on that basis and the department  accepted it.   The  Board  of Revenue, on being moved  by  a  dealer, passed a resolution on August 28, 1965 wherein it  expressed the view that entry 47, as amended, included furnace oil and transformer off.  The dealers thereafter from September  14, 1965  started charging tax on furnace oils at the rate of  6 per cent on the first sale of those oils and the  assessment orders  were  made  accordingly.  Furnace  oil,  it  may  be stated,   is  a  non-lubricating  mineral  oil.   The   view expressed  by the Board of Revenue that entry 47 as  amended included  furnace  oil  was challenged in  a  writ  petition before  the  Madras  High Court.  The High  Court  gave  its decision  on  August  2, 1967.  The title of  the  case  is Burmah  Shell Oil Storage and Distributing Company of  India Limited, Madras 1 and Others v. The State of Madras, and  it is  reported in (1968) 21 S.T.C. 227.  The High  Court  held that  having regard to the objects and reasons  appended  to Madras  Act  7 of 1964 and the association  of  words  which preceded and followed the words "all kinds of mineral oils", the  words ",III kinds of mineral oils" had only  a  limited meaning, namely, mineral oils which were lubricants.   Entry 47  as amended was, therefore, held not to  include  furnace oil.   Appeal against the said judgment, we have been  told, is pending in this Court. The  above decision of the Madras High Court led to the  en- actment  of the Madras General Sales Tax  (Third  Amendment) Act,  1947 (Act No. 19 of 1967) (hereinafter referred to  as the amending Act).  The amending Act received the assent  of the  Governor on December 29, 1967 and was published in  the Fort  St. George Gazette, Extraordinary on January 5,  1968. Section  2  of the amending Act has recast entry 47  in  the First Schedule to the principal Act and has also inserted  a new entry 47-A.  Section 2 reads as under               "2.  Amendment of First Schedule to Madras Act               1 of 1959.-In the First Schedule to the Madras               General  Sales Tax Act, 1959 (Madras Act 1  of               1959)   (hereinafter   referred  to   as   the               principal Act),-               57               a)    during the period commencing on the  1st               April  1964 and ending with the 30th  November               1965,  for  item 47 and the  entries  relating               thereto, the following shall be deemed to have               been substituted, namely :-              "47       Lubricating   oils   (not   otherwise

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10  

             provided for inDo    6    this Act), quenching               oils and greases.      47-A All kinds  of  mineral  oils  (other  than   those               failingDo  6";  under   item   47   and    not               otherwise provided for in      this      Act),               including furnace oil. (b)   during the period commencing on   the   1st   December 1965 and ending with the 17th June 1967, for item 47 and the entries  relating thereto, the following shall be deemed  to have been substituted, namely :-      "47  Lubricating oils (not otherwise provided for in Do   61/ 2       this               Act), quenching oils and greases.      47-A All kinds  of  mineral  oils  (other  than   those               falling Do 6 1/2";        under  item  47  and               not otherwise provided for in       this Act),               including furnace oil.      (c)  with effect  on  and from the 18th  June1967,  for               item 47 and the entries relating thereto,  the               following   shall  be  deemed  to  have   been               substituted, namely :-      "47  Lubricating oils (not otherwise provided for Do  7               in this Act), quenching oils and greases.      47-A All kinds  of  mineral  oils  (other  than   those               falling Do 7". under item 47 and not otherwise               provided for in           this Act), including               furnace oil. It  would  thus appear that according to the  amendment  the sales  tax would be payable during the period from April  1, 1964 to, November 30, 1965 on items mentioned in entries  47 and 47-A at the rate of 6 per cent.  The rate for the period from  December 1, 1965, to June 17, 1967 has been  fixed  at 61/2  per cent and with effect from June 18, 1967  the  rate has been fixed at 7 per cent.  Section 4 of the amending Act is the validating section and reads as under :               "4. Validation.-Notwithstanding anything  con-               tained  in. any judgment, decree or  order  of               any court or other authority, all taxes levied               or collected or purporting to have been levied               or  collected under the principal Act  on  the               sale  of the goods specified, in item 47-A  of               the  First  Schedule to the principal  Act  as               amended by this Act for the period  commencing               on the 1st April 1964 and ending with the date               of the publication of this Act in the Fort St.               George  Gazette  shall  for  all  purposes  be               deemed to be, and to have always been  validly               levied or collected in accordance with law  as               it section 2 had               58               been in force at all material times when  such               tax was levied or collected and accordingly,-                (a)  all acts, proceedings or things done  or               taken  by any authority, officer or person  in               connection with the levy or collection of such               tax  shall, for all purposes, be deemed to  be               and  to  have  always been done  or  taken  in               accordance with law;               (b)   no  suit  or other proceeding  shall  be               maintained  or continued in any court for  the               refund of any tax so paid;               (c)   no  court  shall enforce any  decree  or               order  directing  the  refund of  any  tax  so               paid." The  appellants, who are dealers in mineral  oils  including

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10  

furnace  oils,  filed writ petitions in the  High  Court  to challenge  the  validity  of  the  amending  Act.   It   was contended on their behalf that retrospective imposition of a single  point tax on furnace oil and  other  non-lubricating oils  for  the period prior to January 5, 1968  was  illegal inasmuch   as  it  violated  articles  14  and  19  of   the Constitution.    This  contention  of  the  appellants   was repelled  by  the High Court and their writ  petitions,  as mentioned earlier, were dismissed. Mr.  Setalvad in appeal before us has assailed the  validity of the provisions of sections 2 and 4 of the amending Act on the  ground  that  the  retrospective  operation  of   those provisions  is  violative  of article 19 (1  )  (g)  of  the Constitution   inasmuch  as  it   constitutes   unreasonable restriction on the right of the appellants to carry on their trade and business.  As against that Mr. Desai on behalf  of the respondents contends that there has been no unreasonable restriction  on the exercise of the right of the  appellants and  the  impugned provisions cannot be struck down  on  the ground   that  the  legislature  has   given   retrospective operation   to  those  provisions.   In  our  opinion,   the contention of Mr. Desai is well founded. We  may at the outset state that though the legislature  can pass  a law and make its provisions retrospective, it  would be relevant to consider the effect of the said retrospective operation  of  the law both ’in respect of  the  legislative competence of the legislature and the reasonableness of  the restriction imposed by it.  It would thus be open to a party affected  by  the provisions of an Act to contend  that  the retrospective operation of the Act so completely alters  the character  of the tax imposed by it as to take  out  outside the  limits  of  the  entry  which  gives  the   legislature competence  to enact the law or it may be open to the  party to contend in the alternative that the restrictions  imposed by the Act are so unreasonable 59 that they should be struck down on the ground that they con- travene the fundamental rights granted under article 19 (  1 ) (f and (g) of the Constitution.  At the same time, we have to  bear ’ in mind that the legislative power  conferred  on the  appropriate  legislatures to enact laws in  respect  of topics covered by the several entries in the three lists can be exercised both prospectively and retrospectively.   Where the  legislature  can make a valid law, it may  provide  not only   for  the  prospective  operation  of   the   material provisions  of  the said law, it can also  provide  for  the retrospective   operation  of  the  said  provisions.    The legislative  power, in addition, includes the subsidiary  or auxiliary power to validate laws which have been found to be invalid.  If a law passed by a legislature is Struck down by the court as being invalid for one infirmity or another,  it would  be competent to the appropriate legislature  to  cure the  said infirmity and pass a validating law so as to  make the  provisions  of the said earlier law effective from  the date when it   was  passed lsee Ramakrishna & Others v.  The State ofBihar (2)   . In  the light of what has been stated above, we can find  no legal infirmity in the provisions of the amending Act.  As a result  of  the amendment made by Madras Act 7  of  1964  in entry  47 of the First Schedule to the principal Act,  sales tax,  it appears, was intended to be levied on all kinds  of mineral  oils.   The Madras High Court, however’,  took  the view   in  the  case  of  Burmah  Shell  Oil   Storage   and Distributing Company of India Limited (supra) that the words "at kinds of mineral oils" took colour from the words  which

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10  

preceded  and followed them and, as such, the  mineral  oils mentioned  in  the  entry had  a  limited  meaning,  namely, mineral   oils  which  were  lubricants.   Entry   47   was, therefore, held not to include furnace oil which was a  non- lubricant  mineral oil.  It was with a view to get over  the effect  of that decision and to prevent the refund of  sales tax  already realised on the assumption that the words  "all kinds  of  mineral oils" also covered mineral oils  of  non- lubricating  nature  that the amending Act was  passed.   It would  ’be  pertinent  in  this  context  to  reproduce  the statement  of  Objects and Reasons appended  to  the  Madras General Sales Tax (’Third Amendment) Bill, 1967 as under:               "In  Tax  Case  Nos. 108 to 110  of  1967  the               Madras  High  Court held that  the               expression  "all kinds of mineral  oils  (,not               otherwise provided for in this Act)" occurring               in  entry  47  of the First  Schedule  to  the               Madras General Sales Tax Act, 1959 (Madras Act               1  of 1959) as amended by the  Madras  General               Sales Tax (Amendment) Act, 1964 (Madras Act  7               of  1964) will cover only such of the  mineral               oils as are lubricants               (1)   [1964] 1 S.C.R. 897.               6 0               and  not  furnace  oil, etc.,  which  are  not               lubricants.   It  is, therefore,  proposed  to               make a separate entry in the First Schedule to               the  Act so as. to cover all kinds of  mineral               oils (other than those falling under entry  47               and  not otherwise provided for in the  Act),               including furnace oil the rate being the  same               as for entry 47 and to validate the past  levy               and collection of +ax in respect of all  kinds               of mineral oils (other than lubricating  oils,               quenching oils and greases) including  furnace               oil  with  effect from the  1st  April,  1964.               Existing  entry  47  is also  proposed  to  be               amended  to cover only lubricating  oils  (not               otherwise provided for in the Act),  quenching               oils and greases." It  would thus appear that the amending Act was intended  to cure  an infirmity as revealed by the judgment of  the  High Court and to validate the past levy and collection of tax in respect  of  all  kinds  of  non-lubricating  mineral  oils, including furnace oils, with effect from April 1, 1964.  The legislature  for-this  purpose split the original  entry  47 into two entries, 47 and 47-A.  The new entry 47 related  to lubricating  oils (not otherwise provided for in  the  Act), quenching  oils  and greases, while entry 47-A  covered  all kinds  of mineral oils (other than those falling under  item 47  and not otherwise provided for in the  Act)  including furnace oil.  The tax levied by entry 47-A, in our  opinion, was  not a fresh tax.  It seems, as mentioned earlier,  that the legislature had intended as a result of the change  made in entry 47 by Act 7 of 1964 to levy tax on sale of  mineral oils  of  all kinds, including non-lubricants, at  the  rate mentioned  in  that  entry.  As the  language  used  by  the legislature in that entry was found by the High Court to  be not  appropriate  for levying tax on sale  of  non-lubricant mineral oils, the amending Act was passed by the legislature to  rectify and remove the defect in the language  found  by the  High  Court, so that the tax on sale  of  non-lubricant mineral oils might be levied at the rate specified in  entry 47  from April 1, 1964 when Act 7 of 1964 came  into  force. It  is axiomatic that the Government needs revenue to  carry

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10  

on  the  administration  and fulfil its  obligation  to  the ctizens.   For  that purpose it resorts  to  taxation.   The total amount needed is a apportioned under different  heads. The  fiscal enactments brought on the statute book  in  that connection  are  sometimes challenged by the  tax  payer  in courts  of  law.   The  courts  then  scrutinise  the  legal provision to decide whether the levy of tax is legally valid or suffers from some infirmity.  In case the court conics to the  conclusion  that the levy of tax is not  valid  as  the legal  provision enacted for this purpose does  not  warrant the   levy  of  tax  imposed  because  of  some  defect   in phraseology or other infirmity. the                              61 legislature  quite often passes an amending  and  validating Act.   The  object  of such an enactment is  to  remove  and rectify the defect in phraseology or lacuna of other  nature and also to validate the proceedings, including  realisation of  tax, which have taken place in pursuance of the  earlier enactment  which has been found by the Court to be  vitiated by  an, infirmity.  Such an amending and validating  Act  in the  very  nature of things has a  retrospective  operation. Its aim is to effectuate and carry out the object for  which the  earlier  principal  Act  had  been  enacted.   Such  an amending  and validating Act to make "small   a  permissible mode of legislation and is frequently resorted to in  fiscal enactments.  As observed in 73 Harvard Law Review 692 at  p. 705 :               "It  is necessary that the legislature  should               be   able  to  cure  inadvertent  defects   in               statutes  or  their administration  by  making               what  has  been aptly called  ’small  repairs’               Moreover,  the  individual who claims  that  a               vested  right  has arisen from the  defect  is               seeking a windfall since had the legislature’s               or  administrator’s action had the  effect  it               was  intended to and could have had,  no  such               right  would have arisen.  Thus, the  interest               in the retroactive during of such a defect  in               the administration of government outweighs the               individual’s  interest in benefiting from  the               defect.     The   Court  has   been   extremely               reluctant to override the legislative judgment               as to the necessity for retrospective taxation               not only because of the paramount governmental               interest  in obtaining adequate revenues,  but               also because taxes are not in the nature of  a               penalty or  a  contractual  obligation   but               rather  a means of apportioning the costs.  of               government among those who benefit from it." The   above  passage  was  quoted  with  approval   by   the Constitution  Bench of this Court in the case  of  Assistant Commissioner of Urban Land Tax and Others v. The  Buckingham & Carnatic Co. Ltd., etc. (1) The  period from April 1, 1964 to September 13, 1965  during which  the sales tax authorities charged multipoint  tax  on sale  of furnace oil at the rate of 2 per cent was,  in  our opinion;  very short and did not give rise to some  kind  of vested  right in favour of the appellants.  It may  well  be that  the  matter  had not till then been  examined  by  the higher  authorities.  It was only when the Board of  Revenue was moved that the opinion was expressed by the Board as per resolution  dated  August  28, 1965 that  entry  47  covered furnace oil. (1)  [1970] 1 S.C.R. 268. 62

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10  

In  the case of Rai Ramkrishna & Others (supra)  this  Court dealt with the, validity of Bihar Taxation on Passengers and Goods  (Carried by Public Service Motor Vehicles) Act,  1961 in  the  following  circumstances.   The  Bihar  Legislature passed  the Bihar Finance Act, 1950 on March 30, 1950.   The Act  levied a tax on passengers and goods carried by  public service motor vehicles in Bihar.  The appellants  challenged the validity of the Act and Its provisions were struck  down by  this  Court.   The  respondent  then  issued  the  Bihar Ordinance  on  August  1,  1961.   By  that  Ordinance,  the provisions of the Act of 1950 which had been struck down  by this   Court   were  validated  and   brought   into   force retrospectively from the date when the earlier, Act purport- ed to come into force.  Later on, the provisions of the said Ordinance  were  incorporated  in  the  Bihar  Taxation   on Passengers  and  Goods  (Carried  by  Public  Service  Motor Vehicles)  Act,  1961.   As a result  of  the  retrospective operation  of the Act of 1961, its material provisions  were deemed  to  have come into force from April  1,  1950.   The validity  of  the Act of 1961 was challenged on  the  ground that  the retrospective operation of the provisions  of  the Act   changed  its  character  and  took  it   outside   the legislative  competence of the legislature.  It was  further argued that the retrospective operation was so  unreasonable that  it  could not be saved under clauses (5)  and  (6)  of article 19 of the Constitution.  Both these contentions were repelled and it was held that the test of the length of time covered  by the retrospective operation could not by  itself be treated as a decisive test. In  the  case of Epari Chinna Krishna Moorthy  v.  Stale  of Orissa(1)  this Court dealt with the validity of the  Orissa Sales Tax Validation Act, 1961.  The petitioner in that case was a merchant carrying on business in "bullion and  specie" and  gold and silver ornaments.  He was a registered  dealer under  the  Orissa  Sales Tax  Act,  1947.   The  petitioner claimed  exemption from payment of sales tax in  respect  of certain gold ornaments on the basis of a notification issued on July 1, 1949 under section 6 of that Act.  The sales  tax authorities disallowed the petitioner’s claim who  thereupon filed  writ  petitions in the High Court.   The  High  Court upheld  the petitioner’s claim and issued  writs  directing. the  sales  tax officer to allow the petitioners  claim  for exemption.   After  the  judgment of the  High  Court,  the impugned Act was passed by the legislature on August 1, 1961 and  was published on September 18, 1961.  Section 2 of  the impugned Act sought to put a meaning on the notification  of July  1, 1949 and stated that the notification shall  always be  deemed to have meant like that.  One of the  contentions raised in that case was that the retrospective operation  of the impugned section should (1)  [1964] 7 S.C.R. 185.                              63 be  struck  down  as unconstitutional because  it  imposed unreasonable  restrictions on the  petitioner’s  fundamental right  under  article 19 (1) (g).  This contention  did  not find  favour  with  this Court and it was  observed  that  a legislation   could   not  be  struck  down   although   the retrospective operation might operate harshly in some cases. In  the case of M/s J. K.  Jute Mills Co. Ltd. v. The  State of  Uttar Pradesh and Another(1) this Court referred to  the earlier  case of The Union of India v. Madan Gopal  Kabra(2) and held that the power to make retrospective legislation in cases  relating to tax on sale of goods was the same  as  in the case of income tax.  It was observed :               "The  power  of a legislature to enact  a  law

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10  

             with reference to a topic entrusted to it, is,               as already stated, unqualified subject only to               any  limitation imposed by  the  Constitution.               In  the exercise of such a power, it  will  be               competent for the legislature to enact a  law,               which is either prospective or  retrospective.               In  the Union of India v. Madan Gopal  (supra)               it  was held by this Court that the  power  to               impose tax on income under entry 82 of List  I               in  Schedule VII to the Constitution,  compre-               hended  the  power to impose  income-tax  with               retrospective  operation  even  for  a  period               prior to the Constitution.  The position  will               be  the same as regards laws imposing  tax  on               sale of goods." Mr.  Setalvad has referred to the fact that  the  appellants did not realise the sales tax on the sale of furnace oil  at the  rate  of 6 per cent during at least some  part  of  the period  for which retrospective operation had been given  to the  amending  Act.  It is contended that this  fact  should weigh with this Court in striking down the provisions of the amending  Act.  There is, in our opinion, no force  in  this contention.  The fact that a dealer is not in a position  to pass  on  the  sales  tax to  others  does  not  affect  the competence of the legislature to enact a law imposing  sales tax retrospectively because that is a matter of  legislative policy.  A similar argument was advanced in the case of  M/s J.  K.  Jute Mills Co. Ltd. (supra) and was repelled in  the following words:               "And then it is argued that a sales tax  being               an indirect tax, the seller who pays that  tax               has  the right to pass it on to the  consumer,               that  a  law which imposes a  sales  tax  long               after  the sales had taken place deprives  him               of  that right, that  retrospective  operation               is,  in consequence, an incident  inconsistent               with  the true character of a sales  tax  law,               and that the Validation Act is,               (1) [1962] 2 S.C.R. 1.               (2) [1954] S.C.R. 451.               64               therefore, not a law in respect of tax on  the               sale of goods- as recognized, and it is  ultra               vires  entry  54.   We see no  force  in  this               contention.  It is no doubt true that a  sales               tax   is,  according  to   accepted   notions,               intended  to  be passed on to the  buyer,  and               provisions  authorising  and  regulating   the               collection of sales tax by the seller from the               purchaser  are, a usual feature of  sales  tax               legislation.   But  it is-  not  an  essential               characteristic of a sales tax that the  seller               must  have  the  right to pass it  on  to  the               consumer, nor is the power of the  legislature               to  impose a tax on sales conditional  on  its               making a provision for sellers to collect  the               tax from the purchasers.  Whether a law should               be   enacted,   imposing  a  sales   tax,   or               validating  the imposition of sales tax,  when               the seller is not in a position to pass it  on               to  the  consumer, is a matter of  policy  and               does   not  affect  the  competence   of   the               legislature.   This question is  concluded  by               the decision of this Court in The Tata Iron  &               Steel Co. Ltd. v. The State of Bihar(1)."-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10  

In the case of Jaora Sugar Mills (P) Ltd. v. State of Madhya Pradesh and Others(1) this Court dealt with the validity  of section 3 of the Sugar Cess (Validation) Act, 1961  (Central Act  38  of 1961).. The said section concerned the  levy  of sugar-cane  cess  and  provided that  "all  cesses  imposed, assessed  or  collected or purported to have  been  imposed, assessed  or  collected  under  any  State  Act  before  the commencement  of  this  Act, shall be deemed  to  have  been validly imposed, assessed or collectedin  accordance  with law as if the provisions of the said Act andof notifications, orders and rules issued or made thereunder in so  far  as  such  provisions  relate  to  the   imposition, assessment  and collection of such cess had Ben included  in and have been part of the section and this section had  been enforced  at all material times when such cess was  imposed, assessed  or collected".  Earlier the State Act under  which the sugar-cane cess had been levied was found to be  invalid on the ground of want of legislative competence to deal with topics covered by it.  The attack on the validity of section 3  of  that  Act  was repelled and  it  was  held  that  the Parliament could, in exercise of its legislative competence, pass  a law retrospectively validating the collections  made under the State statutes.  The present case is on a stronger footing  from the point of view of the respondents’  because we  are dealing in this case with retrospective  legislation made  by the same legislature which had enacted the  eariler law.  We are, (1) [1958] S.C.R. 1355. (2) [1966] 1 S.C.R. 523.                              65 therefore, of the opinion that the impugned provisions are a valid piece of legislation and do not contravene article  19 of the Constitution. The appeals consequently fail and are dismissed with costs. One hearing fee. S.C.                                     Appeals dismissed. 48Sup.C.I./73 66