MISRILAL JAIN ETC. ETC. versus STATE OF ORISSA & ANOTHER

(1977] 3 S.C.R.

MISRILAL JAIN ETC. ETC.

STATE OF ORISSA & ANOTHER

May 2, 1977

[M. H. BEG, C.J., Y. V. CHANDRACHUD, P. N. BHAGVATI, V. R. KRISHNA !YER, N.1 L. UNTWALLA, S. MURTAZA FAZAL ALI ANU P. S. KAILASAM, JJ.}

Orissa 1axation (On goods carried by Roads or Inland Watenvays) Act 8 of 1968-Sections 3 and 27-Constitutlonaf validity of.

The Orissa Taxation (On goods carried by Roads or Inland Waterways) Act 7 of 1959 and the Orissa Taxation (On Goods carried by Road or In-land Waterways) Validation Act 18 of 1962 were struck down by this Court on 10-8~1967 as invalid and it was held that the respondents were not entitled tQ recover any tax from the appellants under the &foresaid Acts. On March 26, 1968, the Orissa Taxation (On Goods carried by Roads or Inland Water-ways) Act 8 of 1968 was passed after obtaining the previous- sanction of the President under Art. 304 of the Constitution to the moving of the Bill, imposing the same levy which it had unsuccessfully ait:tempted to levy under : the Act of 1959 and to validate under the Act of 1962. By section 1(3) of the 1968 Act, the Act was to be deemed to have come into force on April 27, 1959 being the date on which the Act of 1959 had come into force. Section 27 ot the Act provides that notwithstanding the expiry of the Act of 1959 <M.ld notwithstanding anything contained in any judgment decree or order of any court, all assessments made, all taxes imposed or realised, any liability incurred or any action taken under the Act of 1959 shall be deemed to have been validly made, imposed, incurred or taken under the corresponding provisions of the Act 1968. The claims of some of the appellants who had asked for refund of the tax collected under the Act of 1962 which was held unconstitutiona.1, having been refused by the Government, they filed wTit peti-tions in the Orissa High Court challenging the validity of the 1968 Act. The Hieb Court dismissed the writ petitions. In appeal to this <;;curt by special leave, the Court, HELD : (I) The· impugned enactment is valid exercise of legislative power and is in no sense fraud on the Constitution. Since it is well established that the povver to legislate carries with it the power to legislate retrospectively as much as prospectively, the circumstance that an enactment operates en-tirely in the past and has no prospective life cannot affect the competence of the· Legislature; to pass the enactment if it falls with.in the list on which that competence can operate. As regards the power to pass validating Act, that power is essentially subsidi:M)' to the legislative competence to pass law under an appropriate entry of the relevant list. [718 B-E]

Khyerbar! Tea Co. Ltd. v.· State of Assam [1964] 5 S.C.R. 975, applied.

(2) In the instant case, the St:"lte Legislature passed an independent enact-men~ in 1968. after complying with. the l.'Onstitutional requirements, but it gave to that enactment retrospective effect from the date. that! the 1959 Act had come into force and it created legal fiction which was permissible for it to do, that all attions taken under the Act of '1959 shall be deemed to have been taken under the Act of 1968. [717 F-G]

Jawaharmal v. State of Rajasthan [1966] I SCR 890, not applicable.

(3) If the vice from which an enactment suffers is cured by due com-pliance with the legal or constitutional requirement, the Legislature has compe-

tence to validate the enactment and such validation does not constitute an en-A croachment on the functions of the judiciary. The validity of validating; taxing law depends upon \vhether. the legislature possesses the competence over the subject-matter of the· law; whether in making the validation it has removed the • defect from which the earlier enactment suffered and whether it has made due and adequate provision in the validating law for va•lid imposition of the tax. (718 G·H]

Prithvi Cotton Mills v. Broach Borough Mu11icipality [1970] 1 SCR 388; Tirc.th Rani Rajindra Nath v. State of U.P. A.LR. 1973 SC 405 and Govern· nient of Andhra Pradesh v. Hindustan Mac/line Tools Ltd. (1975) Supp. SCR 394, referred to.

( 4) Jf any appeal challenging an order of1 assessment is filed beyond the period of lin1itation and the authority is satisfied that the apper.·1 could not be filed "Within limitation for the reason that the Acts of 1959 and 1962 were held to be unconstitutional, the delay in filing the appeal can be con~ cloned under the second proviso to section 12 of the Act of 1968. lf any appeal fifed for challenging the order of <:-ssessment was withdrawn or not pursued for the reason that the t"'O Acts were held unconstitutional, the authority· concerned can pass appropriate orders reviving the appeal. [719 D-F] Observation :

It is hoped that Ari. 144A introduced by the 42nd Amend-ment wiJI engage the prompt attention of the Pz..rliament so that it may, by so that it may, by general consensus, be so amended as to general consensus, be so amended as to leave to the court itself ]) the duty to decide how large Bench should decide any particular case. court which has large arrears to contend with has now to undertake an unnecessary burden by 7 of its members assembling to decide all sorts of oonsri.tutional questions, no matter what their weight or worth. Since Art. 13(3) (a) of the Constitution defines "law" to inc[ude any Ordinance, Order, bye-law, rule, regulation, notification etc. having the force of law, seven Judges of this C.Ourt may have to sit for detennining any al)d every question as to the constitutional validity of even orders and E·. notifications issued by the Government, which have the force of l<JJW. This will inevitably cause great inconvenience and undue delay in disposal of cases. f720' C-Dl

CIVIL APPELLATE JURISDICTION : c. A. No. 1810 of 1971.

(Appeal by Special Leave from the Judgment and Order dated 1.3.1971 ef the Orissa High Court in O.J.C. No. 1597 of 1968)

AND

C. A. No. 1170 of 1972

(Appeal by Special Leave from the Judgment and Order dated 8.3.1971 9f the Orissa High Court in 0. J.C. No. 316 of 1970)

AND

Civil Appeal No. 1981 of 1972

SAppeal by Special. Leav~ from the Judgment and Order dated ,:08.3.1971 of the Onssa High Court in 0. J. C. No. 1885 of 1968)

AND

Civil Appeal No. 1982 of 1972.

(Appeal by Special ~~ve !rom the Judgment and Order dated 28.6.1971 of the Onssa High Court in 0. J. C. No. 153 of 1971)

AND

Civil Appeal No. 1603 & 1604 of 1972

(Appeal by Special Leave from the Judgment and Order dated 2.3.1971 of the Orissa High Court in O J Nos 202 ·rnd 203 of 1969.) . . . . '

A. K. Se11, Bishamber Lal Khanna and Bishamber L"l for the appellants in CA No: 1810/71.

A. K.Sen, (CA No. 40/72) H. R. Gokhale (CAs 1603-1604) G?_bmd Das (CAs 1170, 198, 1982, SLPs and for the interveners) B11oy Mohen(>', Mrs. Sunanda Bhandare, M. S. Narsimlwn, A. K. Mathur, A. K. Sharma and Miss Malini Poduval for the appellants in CA Nos. 1170, 1981-1982, 1603-1604 of 1972 and CA No. 40172 and in the SLPs Nos. 305-310/72 and for the Interveners.

G. Rath, Adv. General Orissa and G. S. Chatterjee and R. K. Mehta for respondents in CAs 1810, 1170, 1981 1982, 1603-1604 and 40)

The Judgment. of the court was delivered by

CHANDRACHUD, J.-In 1959, the Orissa Legislature enacted the Orissa Taxation (on Goods carried by Roads or Inland Waterways) Act, 7 of 1959,_ the constitutionality of which was challenged by the appellants on the ground that· the Bill leading to the Act was moved without the previous sanction of the President of India, as required by the proviso to Art. 304 of the Constitution. During the pendency of the writ petitions filed by the appellants in the Orissa High Court, the Orissa Legislature passed the Orissa Taxation (on Goods carrieu by Roads or Inland Waterways) Validation Act, 18 of 1962, validating the Act of 1959. The High Court accepted the appellants' contention that the Act of 1959 was unconstitutional but it dismissed the Writ petitions on the ground that the appellants were not entitled to any relief as they had not challenged the Act of 1962 which had validated the Act of 1959. After the decision of the High Court, respondent No. 2, the Tax Officer, assessed tax in varying amounts for different quarters on the goods carried by the appellants by road. The appel-F lants then filed fresh writ petitions under Art. 226 of the Constitution challenging the Act of 1962. Those petitions were dismissed by the High Court but in appeal, the judgment of the High Court was set aside by this Court ·On August 10, 1967. It was held by this Court that the Validating Act of 1962 did not cure the defect from which the Act of 1959 suffered and therefore, respondents were not ·entitled to recover any tax from the appellants under the aforesaid Acts. On March 25, 1968 the Orissa Legislature, having obtained the previous sanction of the President to the moving of the Bill, passed the Orissa Taxation (on_ Goods carried by Roads or Inland Water-ways) Act, 8 of 1968, imposing the same levy which it had unsuccess-fully attempted to levy under th~ Act of 1959 and to validate under the Act of 1962. Some of the appellants from whom the State Govern-H ment had recovered taxes after the Act of 1962 was upheld by the High Court asked for refund thereof after th~t Act was declared un-constitutional by this Court. The refund havmg been refused by the Governments, the appellants filed writ petitions in the High Court

challenging the validity of the 1968 Act. The dismissal petitions has given rise to these appeals by special leave.

The dismissal of those writ

There is no substance in any of the contentions raised on behalf of the appellants regarding the constitutionality of the Act of 1 %8. The bill which matured into the impugned Act was introduced by the ·Orrrisa Legislature after. obtaining the previous sanction of the Presi-dent under the Proviso to Art. 304 of the Coustituti(jn. As shown by the Preamble, the Act was passed in order to provide for the lev)1 of tax on certain goods carried by roads or inland waterways in the State of Orissa and to validate certain taxes imposed on such goods. By s. ) ( 3), the Act was to be deemed to have come into force on Aprll 27, 1959 being the date on which the Act of 1959 had come into force. Section 3 of the Act which contains the charging provision provides that there shall be levied tax on goods of the descriptio11 mentioned in the section and carried by means specified therein. Sec-tion 27 of the Act provides in so far as material that notwithstanding the expiry of the Act of 1959 and notwithstanding anything contained in any judgment, decree or order of any Court, all assessments made; all taxes imposed or realised, any liability incurred or any action taken under the Act of 1959 shall be deemed to have been validly mad~, imposed, realised, incurred or taken under the corresponding provisions of the Act of 1968. These provisions of the Act of 1968 show that what the State Legislature did thereby was to enact, with retrospective effect, fresh piece of taxing statute after complying with the consti-tutional mandate contained in the proviso to Art. 304 that no Bill tor the purposes of clause (b) of the Article sha 11 be introduced or moved in the Legislature of State without the previous sanction of the President. ·

The reliance of the appellants on the judgment of this Court in Jawaharmal v. State of Rajasthan (') is wholly misconceived. In that case, s. 4 of the impugned Act of 1964 in truth and substance provided that the failure to comply with the constitutiona I mandate of Presidential sanction shall not invalidate the Finance Acts of 1961 and 1962. It wa1s held by this Court that it was not competent to the legislature to pass an Act providing that an earlier Act shal] be deemed to be valid even though it did not comp:y with the requirements of the Constitution. In the instant case, the State Legislature passed an independent enactment in 1968 after complying with the constitutional requirement but it gave to that enactment retrospetive effect from the date that the 1959 Act had come into force and it created legal fiction, which was permissible for it to do, that all actions taken under the Act of 1959 shall be deemed to have been taken under the Act ot 1968.

Mr. Gobind Das, appearing on behalf of some of the apocllants rnised P?int~ commonly associated with high constitutional concepts', but lackmg m substance. He urged that the Act of 1968 is piece -of co'.ourable legislation, that it constitutes flagrant encroachment on

(I) [1966] l S.C.R. 890

the functions of the judiciary and that since the Act has no operation in futuro and operates only on the dead past, it is void as lacking in • legislative competence. Leame~ counsel also employed the not un-familiar phrase that the Act is fraud on the Constitution. Happily all of these attacks, in so far as they at all require an .answer, -can be n:iet effectively in brief compass. In Khyerbari Tea Co. Ltd. v. State of Assam('), it was held by this Court that Art. 304(b) of the Constitution does not require that Jaws passed under it must always be prospective. Nor was it correct to say that once the State Legisla-ture passes an Act without recourse lo that Article and that Act is struck down, the Legislature cannot re-enact, that Act under that arti-cle and give it retrospective effect. The Court further held in Khyer-bari (supra) that the mere fact that validating taking statute has retrospective operation does not change the character of the tax nor can it justify the Act being branded as colourable piece of legisla-tion in any sense. We may only add that since it is well-settled that the power to legislate carries with it .the power to legislate retrospec-tively as much as prospectively, the circumstance that an enactment operates entirely in the past and has no prospective .Jife cannot effect the competence of the legislature to pass the enactment, if it falls with-in the list on which that competence can operate. As regards the power to pass validating Act, that power is essentially subsidiary to the legislative competence to pass law under an appropriate entry of the relevant list. Thus the impugned enactment is valid exercise of legislative power and is in no sense fraud on the Constitution.

As regards the alleged encroachment by the legislature on fields judicial, the argument overlooks ·that the Act of 1968 does not, like the Act under consideration in Jawaharmal([2]), declare that an invalid Act shall be deemed to be valid. It cures the constitutional vice from which the Act of 1959 suffered by obtaining the requisite sanction of -the President and thus armed, it imposes new tax, though with retrospective effect. Imposition of taxes or validation of action ta1<en under void laws is not the function of the judiciary and therefore, by taking these steps the legislature cannot be accused of trespassing on the preserve of the judiciary. Courts have to be vigilant to ensure that the nice balance of power so thoughtfully conceived by our Con-stitution is not allowed to be upset but the concern for safeguarding the judicial power does not justify conjuring up trespasses for invali-dating laws. There is large volume of authority showing that if the vice from which an enactment suffers is cured by due compliance with the legal or constitutional requirements, the legislature has the competence to validate the enactment and such validati<Jn does not constitute an encroachment on the functions of the judiciary. The validity of validating taxing law depends upon whether the legislature possesses the competence over the subject-matter of the law, whetl1er in making the validation it has removed the defect from which the ear-lier i;nactment suffered and whether it has made due and adequate pro-vision in the validating .Jaw for valid imposition of tlie tax. ( See, for example Prithvi Cotton Mills v._ Broach Borough Municipality('!;

(1) [19641 5 S.C.R. 975

(2) [196611 S.C.R. 890-

(3) [1970] 1 S.C.R. 388.

Tira th Ram Rajindra Nath v. State of U.P. ('); Government of Andhra Pradesh v. Hindustan Machine Tools Ltd.('). The passage from Cooley's Constitutional Limitations' (Ed. 1927, Vol. I, p. 183) that legislative act is "pre--Oetermination of what the law shall be for the regulation of all future cases falling under its provisions" does not bear upon the power of the ·legislature to pass laws which are exclusively retrospective. Mr. Gobind Das's reliance on that passage cannot there-fore further his contention.

Mr. Gokhalc, who appears on. behalf of some of the appellant~, attempted to challenge the Act of 1968 on the ground of unreasonable-ness but he did not pursue that argument. But he made another point which requires some attention. The appellants, or some of them, did not challenge the orders of assessment passed against them as the Acts of 1959 and 1962 were held unconstitutional. Counsel's apprehension is that any appeal filed hereafter for'thallenging the assess-ment made under the earLer Acts would be barred by litnltation and the appellants would be deprived of their statutory right to question the correctness of the assessment. This apprehension is unfounded because the 2nd proviso to s. 12 of the Act of 1968 empowers the appro-. priate authority to admit an appeal after the period of limitation is over if it is satisfied that the dealer had sufficient cause for not pre-ferring the appeal within the said period. Sub-section (3) confers on the Commissioner the power of revision and sub-section ( 4) of s. 12 confers the power of review subject to the rules made under the Act. We have no doubt that if any appeal challenging an order of assess-ment is filed beyond the period of limitation and the authority is satis-fied that the appeal could not be filed within limitation for the reason that the Acts of 1959 and 1962 were held to be unconstitutional, the delay in filing the appeal would be condoned. We are eqnally con-fident that if any appeal filed for challenging an order of assessment was withdrawn or not pursued for the reason that the two Acts were held nnconstitutional, the authority concerned would pass appropriate orders reviving the appeal. We are happy to note the assurance of the learned Advocate-General of the State of Orissa that the State wiU not· oopose in such cases the condonation of delay or the revival of appeals. For these reasons we dismiss the appeals but there will be no order as to costs. The Special Leave Petitions which were kept pending to await the decision of these appeals are hereby dismissed.

We may take this opportunity to dwell njlon the inconvenience resulting from the enactment of art. 144A which was introduced by the 42nd Amendment to the Constitntion. That article reads thus :

" "Special provisions as to disposal of questions relating to Constitutional validity of laws.

(I), A.I.R. (1973) S.C. 405.

(2) (!975] S•ipp S.C.R. 394.

"144A (1) The minimum number of Judges of the Supreme • Court who shall sit for the purpose of determining any ques-tion as to the Constitutional validity of auy central law or State law shall be seven.

(2) Central law or State law shall not be declared to be coustitiltionally invalid by the Supreme Court unless. majo-rity of not less than two-thirds of the Judges sitting for the purposes of determining the question as to the constitutional validity of such law hold it to be constitutionally invalid." "

The points raised in these appeals undoubtedly involve the determina-tion of questions as to the constitutional validity of State law but they are so utterly devoid of substance that Mr. Asoke Sen and Mr. Gokhale who appear for the appellants could say nothing in support of their contentions beyond barely stating them. Were it not for the valiant, though vain, attempt of Mr. Gobind Das to pursue his points, the appeals would have taken lesser time to dispose of than for Court of seven to assemble. Article 13(3) (a) of the Constitution defines "hw" to include any Ordinance, Order, bye-law, rule, regula-tion, notification etc. having the force of law with the result that seven judges of this Court may have to sit for determining any and every · question is to. the constitutional validity of even orders and notifica-tions issued by the Government, which have the force of Jaw. Court which has large arrears to contend with has now to undertake an unnecessary burden by seven of its members assembling to decide all sorts of constitutional questions, no matter what their weight or worth. It is hoped that Art. 144A will engage he prompt attention of the Parliament so that it may, be general consensus, be so amended as to leave to the Court itself the duty to decide how large Bench should decide any particular case.

Appeals dismissed.