Judgment:
S.R. Nayak, J.
1. In these writ petitions, the constitutional validity of Sub-rule (5-A) of Rule 17 of A.P. General Sales Tax Rules, 1957 (for short, APGST Rules) as inserted by way of amendment vide G.O. Ms. No. 816 Revenue (CT. II) Department dated 15-11-2000 is assailed. The first petitioner in WP No.20211 of 2001 is the Andhra Sales Tax Practitioners and Consultants Association whereas petitioners 2 and 3 are Sales Tax Practitioners. The petitioners, 23 in all, in WP No.20152 of 2001 are the traders and registered dealers under the A.P. General Sales Tax Act, 1957 (for short, APGST Act.)
2. The following are the material averments in the affidavit filed in support of Writ Petition No.20211 of 2001.
(i) Section 35 of APGST Act provides that any person who is entitled to appear before any authority may be represented, inter alia by a Sales Tax Practitioner who is duly authorized in writing in this behalf. Under the provisions of Rule 63 of the APGST Rules, 1957, the procedure for registration of a Sales Tax Practitioner is specified. In order to be a qualified Sales Tax Practitioner, a person should possess a degree in commerce or law of any recognised University. Alternatively, an Accountant who has passed the accountancy examination conducted bythe Central Board of Revenue constituted under the Central Board of Revenue Act, 1924 is also entitled to be registered as Sales Tax Practitioner. Rule 63 (3) contemplates an application being made before the Commissioner of Commercial Taxes, Andhra Pradesh and payment of fee of Rs.50/-. Thereupon the Commissioner, if he is satisfied that the applicant possesses the requisite qualification, registers the applicant as Sales Tax Practitioner. Against the order of Commissioner of Commercial Taxes refusing to register a particular person, an appeal is provided to the Government. Under 63-A of the Rules the person authorised under Section 35 of the Act is to file an authorization in Form XXXVI. It may be noticed that Form XXXVI does not make any difference as amongst the various classes of representatives viz-, Advocates, Chartered Accountants and the Sales Tax Practitioners or Accountants.
(ii) For a long number of years the Sales Tax Practitioners have been rendering service to the clientele all over the State. Their services have been unblemished and there never has been a complaint that there is any dereliction of duty on the part of the Sales Tax Practitioners as a class. There has been no complaint from any quarters about the capacity of the Sales Tax Practitioners to represent their clients before the authorities. As a matter of fact, Sales Tax Practitioners appear in appeals before the Appellate Deputy Commissioners and Sales Tax Appellate Tribunal and also in revision proceedings before the Joint Commissioner/Commissioner of Commercial Taxes.
(iii) The Sales Tax Practitioners have assisted their clients in obtaining registration under the Act in preparing the periodic returns as contemplated under the Act, in filing the annual returns of turn over, in procuring the various forms from the Department. The Sales Tax Practitioners have facilitated the process of assessment before the Department. Even in the recentsettlement scheme the Sales Tax Practitioners have assisted their clients in resolving the disputes with the Sales Tax Department.
(iv) All of a sudden the 2nd respondent issued G.O. Ms.No.816 dated 15-11-2000 inserting the provisions of Sub-rule 5 A in Rule 17 of the Rules. It will be noticed that the Sub-rule 5-A comes into force with effect from the assessment year 2000-2001. The rule mandates that every dealer whose turnover exceeds Rs. 40 lakhs should get its accounts audited by a Chartered Accountant, and also furnish to the Assessing Officer a certificate of audit in Form XXXVI and a statement in Form XXXVII along with Form AR1, AR II, and AR IV duty attested by the Chartered Accountant on or before the 30th November, 2000 or 31st December, 2000 as the case may be. This process is made optional for the dealer whose turnover is between Rs.20 lakhs and Rs.40 lakhs.
3. The grievance of the petitioners and Sales Tax Practitioners is that by virtue of insertion of Sub-rule (5-A) of Rule 17, the concerned State authorities are directing the registered dealers to file certificate of audit in From No. XXXVI and XXXVII and statements in Forms AR I to AR. IV duly attested by a Chartered Accountant and, therefore, it affects their profession,
4. The grievance of the petitioner in WP No. 20152 of 2001 is that the impugned amendment is not bona fide and it came to be issued only at the behest of the Chairman, SIRI of ICAI in order to help the Chartered Accountants. The petitioners have also contended that the impugned Sub-rule (5-A) is ultra-vires of Section 39 of the Act.
5. Sri S. Ravi, learned Counsel appearing for the petitioners in WP No. 20211 of 2001 and Mr. M.S. Prasad, learned Counsel appearing for the petitioners in WP No. 20152 of 2001 would contend that(i) insertion of Sub-rule (5-A) in Rule 17 of the APGST Rules by the impugned amendment is not bona fide, for the said amendment was effected at the behest of the Chairman, South Indian Regional Committee of Institute of Chartered Accounts of India (for short, S1RC of ICA1) in order to oblige and help the professional body of Chartered Accountants; (ii) there are large number of competent qualified and experienced Sales Tax Practitioners throughout the State of Andhra Pradesh and they have been assisting the dealers to file necessary returns regularly all these years without any complaint or blemish whatsoever and, therefore, there was absolutely no justification or warrant for inserting Sub-rule (5-A) in Rule 17 making it obligatory for the dealers to file Forms XXXVI, XXXVII, AR I to AR IV with certification of a Chartered Accountant. The procedure now prescribed under the inserted Sub-rule (5-A) would not only cause great hardship to the dealers but also result in denial of professional work to the Sales Tax Practitioners considerably in the matter of filing returns; (iii) the impugned Sub-rule (5-A) of Rule 17 is ultra-vires of the power conferred upon the State Government under Section 39 of the APGST Act as the State Government cannot frame the impugned Sub-rule in exercise of the rule making power under Section 39 of the APGST Act. In other words, the learned Counsel for the petitioners would maintain that the State Government lacks authority to insert Sub-rule (5-A) in Rule 17 of the Rules; (iv) the impugned Sub-rule (5-A) of Rule 17 would apply not only to the assessment under the APGST Act but also to the assessment under the Central Sales Tax Act, 1956 (for short, CST Act) and that the Government of Andhra Pradesh can make rules relating to CST Act only by virtue of the power vested in it by Section 13(3) of the CST Act and, therefore, the impugned Sub-rule (5-A) of Rule 17 is unconstitutional inasmuch as it trenches upon CST Act. In other words, what the learned Counsel for the petitionerscontend is that even assuming that there is power for the State Government to enact Sub-rule (5-A) of Rule 17, that rule cannot be extended to the assessments under the CST Act inasmuch as the procedural aspects relating to assessments under the CST Act are governed by the CST (R and T) AP Rules; (v) Forms AR I to AR IV stipulated under the impugned Sub-rule (5-A) of Rule 17 are mainly compilation of the returns already filed and information already furnished by the dealer to the Assessing Authority and, therefore, there is absolutely no role or responsibility to be assigned to the Chartered Accountant by the impugned Sub-rule (5-A). In that view of the matter, there is absolutely no warrant for providing attestation by the Chartered Accountant in Form XXXVII; (vi) Separate statutory audit is not prescribed either under the APGST Act or CST Act and, therefore, the State Government, by framing a rule, is not justified in imposing an additional obligation on the dealer which is not at all contemplated either under the APGST Act or CST Act nor is it necessary, and in that view of the matter the impugned Sub-rule (5-A) of Rule 17 is ex-fade illegal, arbitrary and unreasonable; (vii) Lastly, the learned Counsel would contend that even assuming that the impugned Sub-rule (5-A) of Rule 17 is valid, that rule can be applied prospectively only and not retrospectively and the action of the Government and its authorities in applying the said rule even for the assessment year 2000-2001 is one without jurisdiction. In other words, the learned Counsel would maintain that even in the event of upholding the validity of Sub-rule (5-A), that Sub-rule would be applied only for the assessment year 2001-2001 and onwards.
6. On the other hand, Mr. Bhaskar Reddy, learned Special G.P. for Taxes, while disputing the tenability of the contentions raised by the learned Counsel for the petitioners would contended that (i) the State Government has undoubtedly necessarydelegation of power to enact the impugned Sub-rule (5-A) of Rule 17 by virtue of the power conferred upon it under Section 39 (2)(a) and (n) of the APGST Act; (ii) Section 9(2) of the CST Act read with Section 13(3) thereof confers power upon the State Government to frame the impugned Sub-rule even if it has application in the matter of collection of tax under the provisions of CST Act; (iii) there are no rules made by the State Government by virtue of the power conferred upon it under Section 13(3) of the CST Act which is contrary to the impugned Sub-rule (5-A) and the impugned Sub-rule (5-A) cannot be said to be contrary to Rule 11 of CST (AP) Rules framed by the State Government in exercise of its power under Section 13(3) of the CST Act; (iv) the motive sought to be attributed to the State Government in inserting the impugned Sub-rule (5-A) is unwarranted as well as untenable and even assuming that the insertion of the impugned Sub-rule (5-A) is the outcome of the representation of the Chairman of SIRI of ICAI, even then, that fact itself without anything further would not vitiate the validity of the impugned Sub-rule in the absence of the proof that the Government acted mala fide, and in the present case there is absolutely no pleading nor proof to establish the plea of mala fide. The learned Special G.P. would alternatively contend that no mala fide could be attributed to a legal person like the State Government in the matter of exercising rule-making power under a statute; (v) that by virtue of Sub-rule (5-A) of Rule 17, only those assessees whose turnover exceeds Rs. 40 lakhs and above have to submit audit certificate from the Chartered Accountant for the purpose of assessment under the APGST Act and the CST Act, whereas for any assessee whose turnover is below Rs. 40 lakhs, his or its account can be audited even by a Sales Tax Practitioner, and as such it cannot be said that Sub-rule (5-A) of Rule 17 is totally prejudicial to the Sales Tax Practitioners.Even assuming that on account of insertion of Sub-rule (5-A), there is some decrease in the work quantum of Sales Tax Practitioners, that fact itself would not be a ground for the Court to invalidate the impugned Sub-rule (5-A); (vi) the impugned Sub-rule (5-A) prescribing compulsory audit is only in the nature of a procedural law and, therefore, it can be applied immediately after it came into force and there is no merit in the contention of the learned Counsel for the petitioners that the inserted Sub-rule (5-A) even if it is valid can be applied only for the assessment year 2001-2002.
The impugned Sub-rule (5-A) of Rule 17 reads-
'(5A) Every dealer whose total turnover in a year is not less than forty lakh rupees, shall get the accounts maintained by him for any year, audited by a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 (Act 38 of 1949) and shall furnish to the assessing authority, a certificate of such audit in Form XXXVI and a statement in Form XXXVII. along with the statements in Form AR I, AR IT, AR III and AR IV, duly attested by such Chartered Accountant on or before the 30th day of November in the case of a dealer, other than body corporate and the 31st December of the year subsequent to the assessment year, in the case of body corporate. All the statutory forms required to be filed in support of any claim of exception or concessional rate, shall also be furnished in original along with such certificate.
Provided that a dealer, whose total turnover in a year is between Rupees twenty lakhs and Rupees forty lakhs may, at his option furnish to the assessing authority the said certificate and statements.'
7. Sub-rule (5-A) of Rule 17 mandates that every assessee whose turnover is over and above Rs. 40 lakhs shall get his accounts audited by a Chartered Accountant for the purpose of assessment under the APGST Act and CST Act. The impugned Sub-rule(5-A) of Rule 17 is a stautorty instrument, a piece of subordinate legislation. It is true that mandamus lies to quash a notification, order, rule, scheme or other form of subordinate legislation where it is ultra vires or unconstitutional, that is to say, where it violates any of the fundamental rights guaranteed under Part III of the Constitution of India or any other limitations imposed by the Constitution. A statutory instrument may be ultra-vires if it exceeds the power delegated to the subordinate authority or where it abuses its power by acting in bad faith or exercising it for an unauthorized purpose or acting on irrelevant considerations or by keeping out of relevant considerations or where it is perverse, in the sense that no fair minded person could have ever made, where it is manifestly erroneous having been made on the basis of facts which do not exist or where it is totally arbitrary or where statutory power is used for extraneous purposes which shocks the conscience of the Court. This position in law is well settled by the binding authoritative pronouncements of the Supreme Court in Maharashtra State Board of Secondary and Higher Secondary Education v. Paritosh Bhupeshkumar and others : [1985]1SCR29 Rayappa v. State of Tamil Nadu, : (1974)ILLJ172SC , Supreme Court Employees v. Union of India , SI Syndicate v. Union of India : [1975]1SCR956 , D.L Breweries v. D.B, Trading Company, (1986) UJSC 506, Venkata Ramana v. Union of India, : (1979)ILLJ25SC , Indian Express Newspapers v. Union of India : AIR1986SC872 . On the other hand, a statutory rule or regulation unlike a bye-law cannot be held invalid on the ground of unreasonableness as distinguished from arbitrariness nor can the Court question the wisdom of the policy behind the subordinate legislation.
8. In the premise of the above noted principles governing judicial review of subordinate legislation, let us consider thecontentions of the learned Counsel for the parties in this case. Let us first dispose of the contention of the learned Counsel for the petitioners based on mala fides and malice. The term 'mala fide' has two meanings. In the popular sense, it means, dishonesty, fraud or ill-will. But in the legal sense, it has a very broad connotation. When an action is taken out of personal animosity, ill-will or vengeance entertained by a holder of a public office, such action will be struck down on the ground of 'malice in fact' and such action occurs only very rarely. Normally, the authorities are found to have erred by ignorance or misunderstanding of the constitution or the statute, yet the Courts constantly accused them of the charge of legal mala fide or 'malice in law', simply because they have acted contrary to the Constitution or statute or on improper grounds or arbitrarily and in violation of Article 14 postulates. Bad faith, many a time, be treated as interchangeable with unreasonableness and extraneous considerations. Bad faith or malice, therefore, scarcely has an independent existence as distinct ground of invalidity. Mala fide exercise of power only means that the statutory power is exercised for the purposes foreign to those, for which it is in law intended. We may draw sustenance in support of the above opinion from the judgments of the Supreme Court in Jaichand Lal Sathia v. State of West Bengal, : 1967CriLJ520 , State of Punjab v. Gurdial Singh and another : [1980]1SCR1071 , Kasturi Lal Lakshmi Reddy rep., by its partner Shri Kasturi Lal v. State of Jammu and Kashmir, : [1980]3SCR1338 , Collector (District Magistrate), Allahabad v. Raja Ram Jaiswal : [1985]3SCR995 and Indian Express Newspapers case (supra).
9. It is true that the impugned G.O. Ms. No. 816 itself refers to a representation of the Chairman, SIRC of ICAI dated 15-7-2000. In the affidavit filed in support of the writ petitions, the petitioners havestated that the Chairman, SIRC of ICAI had made a representation seeking amendment of Rule 17. Further, in the affidavit filed in support of WP No.20152 of 2001, it is alleged that the Government inserted sub-rule (5-A) in Rule 17 only in order to facilitate the Chartered Accountants to garner more work on the Sales Tax side. Except this one isolated self-serving sentence in WP No.20152 of 2001, no factual matrix is laid to bring home the charge of either malice in fact or malice in law (legal mala fide) against the State Government. It is true, malice could be a two kinds. It may be express malice or implied malice. However, in either case, in order to succeed in a writ petition on the basis of malice, the allegation must be established by proper pleading and antecedent facts and circumstances. Mere insinuations or vague suggestions will not do, as held by the Supreme Court in Rajendra Roy v. Union of India : AIR1993SC1236 , and M. Sankara Narayana v. Slate of Karnataka, 1993 (23) ATC 412 . In this case, firstly, antecedent facts, which could constitute a ground for mala fide are not at all pleaded, nor any proof in support of mala fide is laid before the Court. Simply because the impugned G.O.Ms.No.816 refers to the representation of the Chairman of SIRC of ICAI, on that ground itself without anything further, the impugned amendment could not be condemned as the one being vitiated by either legal mala fide or malice in fact. Be that as it may, it is well settled that malice in fact cannot be attributed to a legal person like the State Government without levelling allegation against human agent occupying the public office in the Government. Since there is total lack of pleading as well as proof as regards mala fide, the contention of the learned Counsel for the petitioners relating to the plea of mala fide should fail.
10. Similarly, the attack of the impugned Sub-rule 5-A on the ground that itis totally unreasonable and arbitrary should fail. We say this because, as held by the Apex Court in State of A.P. v. Mc. Dowell and Company : [1996]3SCR721 , while the Court can strike down an enactment or statutory rule for disproportionate, excessive and unreasonable restriction on fundamental right or for violating other constitutional limitations, it cannot strike down an enactment merely on the ground that the impugned enactment or the rule is unreasonable or unnecessary or unwarranted. In Paritosh 's case (supra), the Apex Court has opined that the statutory rule or regulation, unlike a bye-law, cannot be held invalid on the ground of unreasonableness as distinguished from arbitrariness. Whether the impugned amendment was necessary or warranted is in the exclusive domain of the rule making authority, in the instant case, the State Government, and it is not for the Court to question the wisdom of the rule making authority on consideration of necessity and warrant. The impugned Sub-rule (5-A) is the culmination of policy decision on the part of the State Government taking the shape of a statutory rule. The Supreme Court in Paritosh's case (supra) has held that the Court cannot question the wisdom of the policy behind the subordinate legislation unless it is shown to be arbitrary or discriminatory. According to Mr. S. Ravi, learned Counsel for the petitioners, the restriction imposed on the dealers under the impugned Sub-rule (5-A) is unreasonable and uncalled for. He would cite the judgment of this Court in A. Sanyasi Rao v. Government of A.P. : [1989]178ITR31(AP) , and draw our attention to certain observations made by this Court at pages 58 and 59 of the judgment. In that case it was contended by the petitioners therein that the provisions made in Section 44AC of the Income Tax Act, 1961 determining the profits of business in certain goods at a particular percentage of the purchase price was wholly unreasoanble, unwarranted and uncalled for violating their fundamentalright to carry on the business guaranteed under Article 19(1)(g) of the Constitution. This Court, having regard to the peculiar facts and circumstances of that case and the contentions raised therein, and applying the ratio of the judgment of the Apex Court in K.T. Moopil Nair v. State of Kerala : [1961]3SCR77 , opined that imposition of restriction is likely to be characterized as disproportionate and, therefore, an unreasonable restriction upon fundamental right guaranteed by Article 19(1)(g) of the Constitution. We are at a loss to understand as to how those observations would in any way advance the contention of the learned Counsel for the petitioners for the reasons already stated by us supra. In this context, the following observations of Patanjali Sastri, CJ in State of Madras v. V.G. Row : 1952CriLJ966 , are quite apposite -
'...... the Court should consider notonly factors such as the duration and the extent of the restrictions, but also the circumstances under which and the manner in which their imposition has been authorized. It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict. In evaluating such elusive factors and forming their own conception of what is reasonable, in all the circumstances of a given a case, it is inevitable that the social philosophy and the scale of values of the Judges participating in the decision should play an important part, and the limit to their interference with legislative judgment in such cases can only be dictated by their sense of responsibility and self-restraint and the sobering reflection that the Constitution is meant not only for peopletheir way of thinking but for all, and that the majority of the elected representatives of the people have, in authorizing the imposition of the restrictions, considered them to be reasonable.'
In the instant case, it is not difficult to find the rationale of the impugned Sub-rule (5A). With the insertion of Sub-rule (5-A) in Rule 17, an assessee whose turnover is over and above Rs. 40 lakhs shall henceforth submit a certificate from the Chartered Accountant for the purpose of assessment under the APGST Act and CST Act. The cumbersome procedure of producing bulky books of account before the Assessing Authority hitherto in vogue is now done away. By virtue of Sub-rule (5-A) the Assessing Authority now would complete the assessment quickly and without loss of time on the basis of the certification of the Chartered Accountant without further scrutiny of accounts. There is also no difficulty to understand why the State Government has prescribed that the dealers should get the audit certificates from the Chartered Accountants only where the turnover is' Rs. 40 lakhs or more. The object behind this prescription, it seems to our mind, is that the Chartered Accountants are highly qualified in accountancy and allied subjects and they are technically trained also. Be that as it may, it is not for the Court to question the wisdom of the rule making authority. Suffice it to state that the prescription that the dealers should produce certificate from the Chartered Accountant if their turnover is Rs. 40 lakhs or more cannot be said to be irrational or arbitrary nor can it be said that the prescription is not grounded on any reason or rhyme. Therefore, the argument of the learned Counsel for the petitioners that there was no justification or warrant or necessity to amend Rule 17 by inserting Sub-rule (5-A) should fail for the above noted reasons.
11. This takes us to the main contention of the learned Counsel for the petitioners.The main contention is that the impugned Sub-rule (5-A) of Rule 17 is ultra-vires of Section 39 of the Act. Sub-section (1) of Section 39 of the Act confers power on the State Government to carry out the purposes of the act either by issuing notification or by framing rules, whereas Sub-section (2) of Section 39 enumerates the matters in respect of which the State Government may issues notifications and frame rules. However, the learned Counsel for the petitioners would maintain that the power to frame the impugned Sub-rule (5-A) cannot be traced to any of the clauses in Sub-section (2) of Section 39. On the other hand, learned Special G.P. for Taxes would contend that the power of the State Government to frame the impugned Sub-rule could be traced to Clauses (a) and (n) of Section (2) of Section 39 of the APGST Act. Clause (a) of Sub-section (2) of Section 39 reads -
'(a) all matters expressly required or allowed by this Act to be prescribed.'
Clause (n) of Sub-section (2) of Section 39 reads-
'(n) Generally regulating the procedure to be followed and the forms to be adopted in proceedings under this Act.'
It cannot be gainsaid that the obligation cast on the dealer under the impugned Sub-rule (5A) is in respect of a proceeding under the APGST Act. The process of procedure of assessment is also a proceeding under the APGST Act. Clause (n) of Sub-section (2) of Section 39 in clear and unambiguous terms empowers the State Government to regulate the procedure to be followed and the forms to be adopted in proceedings under the APGST Act. Therefore, what is provided under the impugned Sub-rule (5-A) is nothing but a 'procedure to be followed' as well as 'forms to be adopted' within the meaning of those terms occurring in Clause (n) of Sub-section (2) of Section 39. It is also pertinent to note the significance of the word 'generally' occurring in Clause (n) ofSub-section (2) of Section 39. The word 'generally' occuring in Clause (n) in the context would mean that the State Government has a general power to regulate the procedure to be followed and the forms to be adopted in the proceedings under the APGST Act. It is nobody's case that the procedure and forms prescribed in the impugned Sub-rule (5-A) are not procedures or forms to be adapted in proceedings arising out of the APGST Act. Therefore, it cannot be said that the State Government by enacting Sub-rule (5-A) of Rule 17 of the rules has exceeded its jurisdiction. This question can be looked from another angle also. It is trite, the purpose of the APGST Act and the CST Act is to levy Sales. Tax. The tax could be levied only after an assessment is made. In making an assessment, the turnover has to be determined. In determining the total taxable turnover, certain deductions have to be made under the APGST Act and the CST Act. The proceedings for assessment has to be initiated, and in due course, to be concluded. In the course of the proceedings, certain conclusions have to be reached on the basis of the materials and evidence that may be produced by the dealer. From this, it is quite clear that a rule providing for the mode of proof of providing for materials on the basis of which a particular fact might be established or a particular presumption rebutted, is a rule for carrying out the purposes of the Act, and therefore, the impugned Sub-rule (5-A) of Rule 17 can validly be made under Sub-section (1) of Section 39 of the APGST Act read with clauses (a) and (n) of Sub-section (2) of Section 39 thereof. In taking this view, we are also fortified by a decision of the Allahabad High Court in Mansey Lakhansey and Company v. State of Uttar Pradesh, . In that case, the Allahabad High Court held that Rule 12-A of the UP Sales Tax Rules, 1948 framed by the UP State Government in exercise of the power conferred on it under Section 24(2)(c) and (f) of the UP Sales Tax Act, 1948 providing for the mode of proof or providing for the materials on the basis of which a particular fact might be established or a particular presumption rebutted, is a rule for carrying out the purposes of the Act, and can validly be made in exercise of the generality of rule making power.
12. In A.S. Sarma and others v. Union of India : [1989]175ITR254(AP) , the constitutional validity of Explanation to Section 44AB of the Income Tax Act, 1961 was assailed before this Court as unconstitutional and for consequential direction that the petitioners therein are also eligible to audit the accounts for the purpose of Section 44AB of the Income Tax Act, 1961. Section 44AB of the Income Tax Act introduced with effect from 1-4-1985 reads as follows:
'44-AB. Every person, --
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year or years relevant to the assessment year commencing on the 1st Day of April, 1985, or any subsequent assessment year; or
(b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year or years relevant to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year,
get his accounts of such previous year or years audited by an Accountant before the specified date and obtain before that date the report of such audit in the prescribed form duly signed and verified by such Accountant and setting forth such particulars as may be prescribed:
Provided that in a case where such person in required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sectionif such person gets the accounts of such business or profession audited under such law before the specified date and obtains before that date the report of the audit as required under such other law and a further report in the from prescribed under this section.
Explanation :--for the purposes of this section,--
(i) 'accountant' shall the same meaning as in the Explanation below Sub-section (2) of Section 288;
(ii) 'specified date' in relation to the accounts of the previous year or years relevant to an assessment year, means the date of the expiry of four months from the end of the previous year or, where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later.'
The petitioners in that case are the Income Tax Practitioners and an Advocate. The petitioners contended that the restriction that the accounts should be audited by the Chartered Accountants adversely affect the practice of Income Tax Practitioners and Advocates. In other words, it was contended before the Court, confining the audit to Chartered Accountants alone results in invidious discrimination and is violative of Article 14 of the Constitution and elimination of the Income Tax Practitioners and Advocates from doing audit work infringes the fundamental right guaranteed to them under Article 19(1)(g) of the Constitution. On the other hand, on behalf of the State and the Revenue, it was contended that the impugned provision is founded upon reasonable classification having nexus with the object of checking the evasion and avoidance of the petitioners regarding audit and is a reasonable restriction saved under Article 19(6) of the Constitution. In those circumstances, while rejecting thecontentions of the petitioners and upholding the validity of the Explanation to Section 44AB of the Income Tax Act, 1961, this Court held-
'Income Tax Practitioners and auditors cannot be considered on par with Chartered Accountants regarding expertise and excellence in audit. It is contended that the Income Tax Practitioners, Advocates and Chartered Accountants are considered and treated alike under Section 288 and, therefore, there is no logic for this differetiation. Section 288 enumerates the diverse categories of persons entitled to attend on behalf of the assessees before the hierarchy of authorities under the Act and apart from other persons Income Tax Practitioners, Advocates and Chartered Accountants are mentioned. A glance at the list of persons set out in Sub-section (2) of Section 288 reveals that the persons who are expected to make an effective and genuine representation and having an over-view knowledge of the affairs of the assessee are authorized to represent without reference to any specialized proficiency in taxation or otherwise. It is patent that all those categories are lined up on an equal footing under Section 288 for the purpose of representation of the case of the assessee and this equal eye . should be confined to the purpose of representation only and it cannot be expected of advocate and Income Tax Practitioners with their background of education and academic attainment to give a good account of themselves in audit. Equally, Chartered Accountants cannot be credited with legal education. Chartered Accountants constitute a distinct group and Income Tax Practitioners and Advocates cannot be equated with them insofar as audit is concerned as such Section 44AB is not violative of Article 14 of the Constitution. In Nataraj v. Union of India : [1985]155ITR81(KAR) and Mohan Trading Company v. Union of India : [1985]156ITR134(MP) , the Karnataka and Madhya Pradesh High Courts, respectively, took the same view.
The object of Section 44AB is to have a detailed scan of accounts of assessees in higher income brackets so that the detectionof evasion, if any, may yield attractive dividends regarding exigibility to tax. Further, the compulsory audit facilitates the assessing authority to get at a neat eptiome of the transactions without the necessity of devoting considerable time to scrutiny of accounts and transactions. The audit report contributes to expeditious and accelerated assessments and detection of evasion. The stipulation of audit by Chartered Accountants has a legitimate affinity to the object sought to be achieved. Learned Counsel for the petitioner contended that by diverting their clientele to the corridors of Chartered Accountants for the purpose of audit, the petitioners lose their grip over them and there is a remote possibility of such assessees unfolding themselves from the nest of Chartered Accountants. This contention is far-fetched and not founded upon proximity to a realistic approach.'
The above opinion of a co-ordinate Bench of this Court, with which are in respectful agreement, would squarely negative the contention of the learned Counsel for the petitioners. Therefore, we do not find any force in the contention of the learned Counsel for the petitioners that the impugned Sub-rule (5-A) is ultra vires of Section 39 of the APGST Act.
13. However, it is the further contention of the learned Counsel for the petitioners that the impugned Sub-rule (5-A) deals not only with the APGST Act but also with the CST Act and as regards CST Act, the State Government can make rules applicable to the proceedings under the CST Act only under Section 13(3) of the CST Act and since the impugned rule is not the one made under Section 13(3) of the CST Act, that rule should be condemned as unconstitutional, illegal, void and without jurisdiction so far it has application to the proceedings under the CST Act. We do not find any merit in this contention too. Sub-section (2) of Section 9 of CST Act reads -
'9. Levy and collection of tax and penalties (1)xx(2) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-assess, collect and enforce payment of lax, including any interest or penalty, payable by a dealer under this Act as if the tax or interest or penalty by such a dealer under this Act is a tax or interest or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee, of or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions references, refunds, rebates, penalties, charging or payment of interest, compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly;
Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, by rules made in this behalf make necessary provision for all or any of the matters specified in this subsection.'
Sub-section (2) of Section 9 of the CST is a complete answer to the above contention of the learned Counsel for the petitioners. By force of Sub-section (2) of Section 9 of the CST Act, the procedure provided under the General Sale Tax law of the State for the purposes including the purpose relating to returns and provisional assessment is made applicable to the proceedings arising out of the CST Act also. Therefore, merely because new procedure and forms prescribed under the impugned Sub-rule (5-A) apply to theproceedings under the CST Act also, it cannot be said that the impugned Sub-rule is unconstitutional. Sub-section (2) of Section 9 of the CST Act thus enables and Sales Tax authorities under the APGST Act to invoke the provisions of the Act and the rules framed thereunder for the purpose of completing the proceedings under the CST Act. Therefore, it cannot be contended that only those rules framed by the State Government by virtue of the power conferred upon it under Sub-section (3) of Section 13 of the CST Act would govern the proceedings relating to assessment under the CST Act and not the rules framed by the State Government under Section 39 of the APGST Act. It is true that under Subsection (3) of Section 13 of the CST Act, the State Government is empowered to make rules, not inconsistent with the provisions of the CST Act and the rules made thereunder to carry out the purposes of that Act. It is nobody's case that Sub-rule (5-A) of Rule 17 impugned in these writ petitions, is inconsistent with or contrary to the provisions of the CST Act and the rules made by the Central Government under Sub-section (1) of Section 13 of the CST Act. The prescription made in the impugned Sub-rule (5-A) is undoubtedly intended to carry out the purposes of the APGST Act as well as CST Act and, therefore, enactment of Sub-rule (5-A) in Rule 27 is very much within the delegated power of the State Government under Section 39 of the APGST Act.
14, This takes us to the last contention of the learned Counsel for the petitioners. The contention of the learned Counsel for the petitioners that even assuming that Sub-rule (5-A) is valid, that rule should be applied only prospectively and not retrospectively and the action of the State Government and its authorities in applying the said Sub-rule even for the assessment year 2000-2001 is without jurisdiction, in our considered opinion, is misconceived and untenable. Itis relevant to note that the provision contained in Sub-rule (5-A) prescribing compulsory audit by a Chaterted Accountant is a piece of procedural law and it does not create any substantive vested right in the dealers. As regards procedural laws, the laws on the date of assessment or determination are applicable without reference to and regardless of the year of assessment if no one suffers by such application. It is pertinent to note that the provision which enabled the dealers to file their returns through the Sales Tax Practitioners and their certifications before insertion of Sub-rule (5A) of Rule 17 was a mere opportunity to take advantage of the then existing provision and was not a 'right accrued' so as to enforce that opportunity even after Sub-rule (5-A) is inserted. The Judicial Committee of the Privy Council in G. Ogden Industries Private Limited v. Lucas, (1969) 1 All ER 121 held that mere right existing at the date of the repealing statute to take advantage of the provisions of the Act repealed was not a 'right accrued' within the meaning of the saving clause. Lord Morris of Borth-y-Gest in Director of Public Works v. Ho Po Sang, (1961) AC 901 made a distinction between an investigation in respect of a right and an investigation which is to decide whether some right should or should not be given or a liability should or should not be fastened. The enabling provision available to the dealers to file their return through Sales Tax Practitioners with their certification was only a mode of producing evidence in the course of assessment of the Sales Tax liability of the dealers, and it had nothing to do with any of the substantive right of the dealers.
15. It is true that it is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. But, this rule, in general is applicable where the object of thestatute is to affect vested rights or to impose new burdens or to impair the existing obligations. Unless there are words in the statute sufficient to show the intention of the Legislature to affect the existing rights, it is deemed to be prospective only; nova constitutio futuris formam imponere debet non praeteritis. In Delhi Cloth Mills and General Company Limited v. CIT, Delhi Lord Blanesburg opined that provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment. In Re, Pulborough Parish School Education Board Election, Bourke v. Null, (1984) 1 QB 725 Lopes, L.J., held that every statute which takes away or impairs vested rights acquired under existing laws, or creates a new obligation or imposes a new duty, or attaches a new disability in respect of transactions already past, must be presumed to be intended not to have retrospective effect. To the same effect is the opinion of the Supreme Court in Jose De Costa v. Bascora Sadasiva Sinai Narcornim : AIR1975SC1843 , and Amireddy Rajagopala Rao v. Amireddi Sitharamamma : [1965]3SCR122 . However, the above rule applicable to substantive rights is not applicable to matters of procedure. The opinions in Gardner v. Lucas, (1878) 3 AC 582 Delhi Cloth and General Mills Company Limited case (supra), Jose De Costa's case (supra) and Gurbachan Singh v. Satpal Singh : 1990CriLJ562 , are the authorities to state that the statutes dealing with merely matters of procedure are presumed to be retrospective unless such a construction is textually inadmissible. In Blyth v. Blyth, (1966) 1 All ER 524 Lord Denning held that the rule that an Act of Parliament is to be given retrospective effect applies only to statutes, which affect vested rights. It does not apply to statutes which only alter the form of procedure or the admissibility of evidence, or the effect which the Courts to give evidence. Further,in A.G. v. Vernazza, (1960) 3 All ER 97 and K. Eapin Chako v. Provident Fund Investment Company (P) Limited, AIR 1976 SC 2610, it is opined that if the Act affects matters of procedure only, then, prima facie, it applies to all actions pending as well as future. In Anant Copal Sheorey v. State of Bombay : 1958CriLJ1429 , in stating the principle that a change in the law of procedure operates restrospectively and unlike the law relating to vested right is not only prospective, the Supreme Court quoted with approval the reason of the rule as expressed in Maxwell -
'No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner prescribed for the lime being by or for the Court in which the case, is pending, and if, by an Act of Parliament the mode of procedure, is altered, he has no other right than to proceed according to the altered mode.'
For example, as opined in New India Insurance Company Limited v. Shanti Misra (Smt) : [1976]2SCR266 , a change of forum except in pending proceedings is a matter of proceeding and, therefore, if a new Act requires certain types of original proceedings to be instituted before a special Tribunal constituted under the Act to the exclusion of the civil Courts, all proceedings of that type whether based on old or new causes of action, will have to be instituted before the Tribunal. Similarly, in B. Narhari Shivram Shet Narvekar v. Pannalal Umediram : [1976]3SCR149 , it was held that the non-executability of a decree passed by an Indian Court against a foreigner at a place in foreign country is a matter of procedure and the decree becomes executable if the place where it is being executed ceases to be a foreign country and becomes part of Indian and the Indian Code of Civil Procedure is extended to that place. In Statutory Interpretation by Francis Bennoin, 3rd Edition, in Section 98, it is stated -
'Because a change made by the Legislature in procedural provisions is expected to be for the general benefit of litigants and others, it is presumed that it applies to ending as well as future proceedings.'
It is further stated-
'Procedure and practice is the mere machinery of law enforcement. The object of all procedural rules is to enable justice to be done-between the parties consistently with the public interest. If (he procedural rules are defective, the legal apparatus works less efficiently and the public interest suffers. The appropriate authorities then seek to remedy the defect by changing, or persuading Parliament to change, the inadequate rule. If no one suffers thereby, it is sensible to apply this improvement to pending proceedings.'
16. Adverting to fiscal statutes, it is true that fiscal legislation imposing liability generally governed by the normal presumption that it is not retrospective and it is a cardinal principle of tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication, as held by the Apex Court in Reliance Jute and Industries Limited v. Commissioner of Income Tax : [1979]120ITR921(SC) . However, the above rule applies only to the charging section and other substantive provisions and it does not apply to machinery or procedural provisions of taxing Act, which are generally retrospective and apply even to pending proceedings. In Commissioner of Wealth Tax, Meerut v. Sharwan Kumar Swarup : 1995ECR425(SC) , it was held that Rule 1BB of Wealth Tax Rules inserted from 1-4-1979 laying down method of valuation of a house used for residential purpose was applicable to pending assessments of the years 1977-78 and 1978-79 also However, in Income Tax Officer v. S.K. Habibullah, AIR 1962 SC 918 and Delhi Cloth and Genlk, Mill Company Limited case (supra), the Supreme Court held that aprocedural provision, as far as possible, will not be so construed as to affect finality of tax assessment or to open up liability which had become barred, because assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective. But that is not the situation in the present case. It is not the grievance of the petitioner-dealers that the respondent-State authorities apply the newly inserted Sub-rule (5A) to the concluded assessments. Assessment of the petitioners/dealers for the assessment year 2000-2001 are yet to be framed after going through the procedure contemplated under the APGST Act and CST Act. Therefore, it cannot be said that by insisting for compliance of Sub-rule (5-A), any of the vested rights of the dealers is affected or impaired.
17. In a case arising out of Motor Vehicles Act relating to claim of compensation dealing with the restriction imposed under that Act regarding condonation of delay, the Supreme Court in Vinod Gurudas Raikar v. National Insurance Company Limited and others : [1991]3SCR912 , held that though the accident occurred before the amendment and the original petition was filed after the amendment came into force, the amended law is applicable and the claimants are not entitled to seek condonation of delay on the ground that the cause of action arose when the old law was in force when there was no limitation prescribed for condoning the delay. To the same effect is the judgment of this Court in Bakka Venkamma v. Deepa Narisi Reddy, 1995 (3) ALD 724. Judgments in Deputy Commissioner of Commercial Taxes, Madras Division v. Sri Swami and Company, 13 STC 468 Ajanta Printers v. Commissioner of Sales Tax, (1988) 68 STC 441 and Commissioner of Sales Tax v Someswar Dutta Taula, (1991) 82 STC 385also do, in a way, support the above view. Therefore, we do not find any merit in the last contention of the learned Counsel for the petitioners.
18. In the result and for the foregoing reasons, we uphold the constitutional validity of Sub-rule (5-A) of Rule 17 of APGST Rules, as inserted by way of amendment vide G.O. Ms. No.816 Revenue (CT. II) Department dated 15-11-2000, and dismiss the writ petitions with no order as to costs.