1. As the issues involved in these original petitions are common and identical, they are dealt with together since submissions were also made by counsel appearing on either side in common.
2. The common prayers in these petitions fall under the following categories : (a) In O.P. Nos. 1059 of 1999, 1064 of 1999, 1069 of 1999, 1074 of 1999, 1181 of 1999, 1192 of 1999, 1385 of 1999 and 1241 of 1999 the prayer is to declare that the provisions of the Tamil Nadu General Sales Tax (Third Amendment) Act, 1999 (hereinafter called "the Act 27 of 1999") are violative of entry 54 of the State List and ultra vires articles 14, 19(1)(g) and Part XIII of the Constitution of India.
(b) In O.P. Nos. 1060 of 1999, 1065 of 1999, 1070 of 1999, 1075 of 1999, 1182 of 1999, 1191 of 1999, 1386 of 1999 and 1239 of 1999, the prayer is to declare that the provisions of Explanation II as enacted by Section 2 of the Tamil Nadu Additional Sales Tax (Amendment) Act, 1999 (Tamil Nadu Act 37 of 1999) (hereinafter called "the Act 37 of 1999") are ultra vires articles 14, 19(1)(g) and Part XIII of the Constitution of India.
(c) In O.P. Nos. 1061 of 1999 to 1063 of 1999, 1066 of 1999 to 1068 of 1999, 1071 of 1999 to 1073 of 1999, 1076 of 1999, 1183 of 1999 to 1185 of 1999, 1193 of 1999 and 1387 of 1999 to 1389 of 1999 the prayer is to quash the notice issued demanding the differential tax/additional sales tax calculated in terms of Act 27 of 1999 and Act 37 of 1999 for the assessment years 1997-98, 1998-99 and 1999-2000 (for the period up to May, 2000 or June, 2000) or asking to file revised returns by working out the tax due on last purchase value in terms of Act 27 of 1999 within the period specified in the notice.
In the meeting held on November 5, 1997 by the honourable Minister for Agriculture, Tamil Nadu with the private sugar mills executives of Tamil Nadu to consider fixation of State advised price for the year 1997-98, among other things, the following are relevant : (a) The payment of State advised price of Rs. 599 per tonne calculated for 8.5 per cent recovery of sugar by the sugar mills during 1996-97, as against the Government of India price of Rs. 459, which was appreciated by the honourable Minister for Agriculture.
(b) The appreciation of the action of the Government of Tamil Nadu by the representatives of the mill owners in fixing State advised price after ascertaining the views of the managements of sugar mills and that of cane growers so as to safeguard the interests of both the sugar mills and cane growers.
(c) While thanking the Government for reducing the purchase tax from 15.15 per cent to 8 per cent a request was made by the representatives of sugar mills to fix a flat rate of tax as in some other States instead of the present tax levy on sugarcane purchase price so as to avoid practical difficulties and court cases, apart from enabling the Government of India to fix the levy sugar price by fully taking the tax element into account. As a result, it was suggested, that there will be no difficulty in effecting payment of cane price.
(d) Considering the fact that cane growers in Tamil Nadu are paid State advised price plus Rs. 35 to 50 per tonne of sugarcane as subsidies, the total price paid to cane growers in Tamil Nadu would compare equal to the price received by cane growers in other States.
4. In pursuance of the discussions on November 5, 1997 which was followed by meeting with cane growers representative, the Government of Tamil Nadu announced the State advised price of sugarcane on December 8, 1997 by fixing it at Rs. 660 per tonne linked to 8.5 per cent recovery for 1997-98, with a premium of Rs. 77.6470 per metric tonne for every 1 per cent point increase in the recovery over and above 8.5 per cent. As regards flat rate of tax, the following passages in Government of Tamil Nadu Letter (Ms) No. 532, Agriculture dated December 8, 1987 of the Agriculture (Sugarcane) Department are relevant : "The management of sugar mills have represented that instead of levying the purchase tax on percentage basis it may be levied on flat rate basis as in other States, since this will avoid practical difficulties in arriving at the quantum of tax and this will enable the Government of India to fix the correct sale price for levy sugar.
9. The Government have examined the representation and consider that the purchase tax for sugarcane may be levied on flat rate basis and that every year it may be calculated on the basis of 8 per cent on the average of State advised price recommended by Government. For 1997-98 crushing season, the Government have recommended the State advised price at Rs. 660 per metric tonne for 8.5 per cent recovery, State average sugar recovery is 9.4 per cent. Therefore, the average State advised price will come to Rs. 730 per metric tonne and the purchase tax at 8 per cent comes to Rs. 58.40.
10. The Government have therefore decided to fix the purchase tax for sugarcane for 1997-98 at the flat rate of Rs. 60 per metric tonne. Necessary orders in this respect will be issued separately by Government in Commercial Tax Religious Endowment Department." Following this order, Government of Tamil Nadu enacted Act No. 27 of 1999 with retrospective effect from April 1, 1997 and this was published in Government Gazette on June 17, 1999. The Act No. 27 of 1999 reads as follows: Be it enacted by the Legislative Assembly of the State of Tamil Nadu in the Fiftieth Year of the Republic of India as follows :-- 1. Short title and commencement.--(1) This Act may be called the Tamil Nadu General Sales Tax (Third Amendment) Act, 1999.
(2) Sections 2 and 3 shall be deemed to have come into force on the 1st day of April, 1997.
2. Insertion of new Section 3-F.--After Section 3-E of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) (hereinafter referred to as the principal Act), the following section shall be inserted, namely :iou '3-F. Levy of tax on sugarcane.iou(1) Notwithstanding anything contained in sub-sections (1) and (2) of Section 3 and Section 7-A, every dealer shall pay a tax on the last purchase of sugarcane excluding sugarcane setts in the State, at the rate of rupees sixty per metric tonne.
(2) The provisions of this Act shall mutatis mutandis apply in respect of the tax payable under this section.' 3. Amendment of First Schedule.--In the First Schedule to the principal Act, in Part C, item 44 and the entries relating thereto shall be omitted.
4. Validation.--Notwithstanding anything contained in any judgment, decree or order of any court, Tribunal or other authority, the tax levied or collected or purporting to have been levied or collected at the last point of purchase in the State in respect of sugarcane excluding sugarcane setts for the period commencing on the 1st day of April, 1997 and ending with the date of publication of this Act in the Tamil Nadu Government Gazette, shall, for all purposes be deemed to be, and to have always been validly levied or collected under the principal Act, as if the principal Act as amended by this Act had been in force at all material times when such tax was levied or collected and accordingly 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 validly done or taken in accordance with law." While Act 27 of 1999 was enacted levying specific duty retrospectively from April 1, 1997, as regards additional sales tax, the existing ad valorem basis was retained and for this purpose Act No. 37 of 1999 was enacted and this Act was published in the Government Gazette on June 21, 1999 and it reads as follows : "An Act further to amend the Tamil Nadu Additional Sales Tax Act, 1970.
Be it enacted by the Legislative Assembly of the State of Tamil Nadu in the Fiftieth Year of the Republic of India as follows : 1. Short title and commencement.iou(1) This Act may be called the Tamil Nadu Additional Sales Tax (Amendment) Act, 1999.
(2) Sub-clause (c) of clause (2) of Section 2 shall be deemed to have come into force on the 1st day of April, 1997.
2. Amendment of Section 2.--In Section 2 of the Tamil Nadu Additional Sales Tax Act, 1970 (Tamil Nadu Act 14 of 1970), in Sub-section (1),iou (a) for the expression commencing with the words 'The tax payable under the said Act' and ending with the words 'outside the State', the following expression shall be substituted, namely :-- 'The tax payable under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) (hereinafter in this section referred to as the said Act), shall, in the case of a dealer including the principal selling or buying goods through agents' ; (b) the Explanation shall be renumbered as Explanation 1 and in Explanation I as so renumbered, the expression 'in this State', shall be omitted ; (c) after Explanation I, the following Explanation shall be inserted, namely :-- 'Explanation II.--Notwithstanding anything contained in the said Act, for the purpose of this clause, "turnover" in respect of sugarcane excluding sugarcane setts shall be arrived at by multiplying the total metric tonnes of sugarcane excluding sugarcane setts purchased during the year, by the minimum price fixed under Clause 3 and the additional price determined under Clause 5-A of the Sugarcane (Control) Order, 1966 and such turnover shall be included in the total turnover of the dealer and the taxable turnover shall be arrived at accordingly for the purpose of this clause.' ; (d) in clause (b), for the expression 'under clause (a)', the expression 'under clause (aa)', shall be substituted." 5. In such circumstances, aggrieved of the order of fixing flat rate at Rs. 60 per tonne and that too retrospectively from April 1, 1997 and the retention of existing system of additional sales tax on ad valorem basis by making amendment and also the issue of notices straightaway demanding the differential tax without following procedures, the petitioners have preferred the present original petitions.
6. Mr. C. Natarajan, learned Senior Counsel for the petitioners in original petitions other than O.P. Nos. 1239 of 1999 and 1241 of 1999 contended as follows : Section 3-F of Act 27 of 1999 which is a charging provision clearly states that "the provisions of this Act shall mutatis mutandis apply in respect of the tax". Therefore, the authorities cannot dispense with the provisions of Section 12 or Section 13 or the relevant rule which cover the methodology for assessment and recovery. Once the assessment year is over, Section 12 of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act") alone is possible. Similar is the position while applying the provisions of Act 37 of 1999 in regard to demand of additional sales tax. In O.P. No. 1602 of 1999, even the tax-paid details have been adopted wrongly. In O.P. No. 1067 of 1999, where the taxable turnover is less than Rs. 100 crore which is applicable for the relevant year, additional tax has been demanded.(J.K. Cotton Spinning & Weaving Mills Ltd. v. Union of India) vide paragraphs 31, 32 and 34 (page Nos. 434 and 435 of STC) it was held that these provisions of Section 11-A for assessment and recovery operated for demands accruing within six months, in spite of the fact that the Finance Act by Section 51 retrospectively amended (with effect from February 28, 1944). Rules 9 and 49 of the Central Excise Rules to recover duty on manufacture and consumption, It was categorically stated that "if the intention of the Legislature was to nullify the effect of Section 11-A, in that case, the Legislature would have specifically provided for the same. Section 51 does not contain any non obstante clause nor does it refer to the provision of Section 11-A. In the circumstances, it is difficult to hold that Section 51 overrides the provision of Section 11-A". This principle equally applies to the present cases.
7. The impugned levy is violative of Article 14 of the Constitution of India because it is-- "(i) irrational in imposing taxes at higher rate on less economical/viable units with recovery and profitability.
(ii) Different rates on the 5-A price which up to 1999 was the measure of levy.
8. Historically the tax has been levied on the price of sugarcane and the value of sugarcane is measured by the sucrose content that is recovered. The minimum sugar price fixed by Government of India, the additional price under Clause 5-A of the control order and State Government's "advise price" are expressed at a sum correlated to sucrose recovery and that the individual mills are required to pay prices related to the recovery obtained on the sugarcane. Thus, the recovery of sugarcane is found to be a significant feature on the economics and the viability of the sugar mill. In fixing the levy price for public distribution, mills with lesser recovery being found less economical, are given the higher price compensation, and mills with higher and less cost of production, are given lesser price for sugar.
The impact of sugar recovery of even plus/minus 1 per cent is very decisive. As indicated in O.P. No. 1181 of 1999, at 7.62 per cent recovery, for 49,439 M.T. sugarcane crushed with a realisation of 6,452 lakhs, with 1 per cent increase in recovery, an additional 6,488 M.T.of sugar could be produced with an extra of Rs. 847 lakhs and whereas a drop of 1 per cent in recovery would result in shortage of 6,488 M.T.sugar and a loss of Rs. 847 lakhs. Thus, 8 per cent purchase tax on the price or value of sugarcane was equitable and rational as the impact is in direct proportion to (i) the price paid ; (ii) the quality of the sugarcane ; (iii) the profitability/viability of the undertaking ; and (iv) capacity to pay. However, the flat rate of Rs. 60 per M.T.operates adversely or favourably as the case may be in direct relation to the recovery of the sugarcane--the quality of sugarcane. The levy is a hostile discrimination against mills in less recovery zone as against mills in higher recovery zone, and the effect is accentuated when the mills in poorer recovery areas are economically less viable than mills in higher recovery areas. Having regard to Clause 5-A price announced for the years 1993-94 to 1995-96 and adopting Rs. 60 per M.T. as a percentage of Clause 5-A price, it could be seen that mills with higher recovery and more viability paid lesser tax compared to mills having lesser recovery. The impact of recovery on purchase tax for 1995-96 season would be as follows : 9. Similarly assuming a flat rate of Rs. 40 per tonne as Clause 5-A price for 1998-99 season, the position is as indicated below : 10. The recovery details for the sugar seasons 1995-96, 1996-97 and 1997-98 are as given below : On that basis, in O.P. No. 1181 of 1999, the total tax liability under Clause 5-A at 8 per cent for the period from April 1, 1997 to June 31, 1999 comes to Rs. 751.87 lakhs as against Rs. 1,014.5 lakhs at Rs. 60 per M.T. Thus, as against 8 per cent liability operating against the Clause 5-A price during April 1, 1997 to June 30, 1999, the rate presently works out to 10.78 per cent with additional liability of Rs. 262.88 lakhs. A constitutional court may frown upon a scheme which substitutes retrospectively from April 1, 1997 as against the existing ad valorem levy when such a scheme imposes different rates on different assessees within the same State, the impact of which is higher on less viable industry and lesser on a better placed assessee. This is a case of failure to classify on rational basis or lack of classification and the following observations in [1995] 96 STC 130 (SC), in the case of Venkateshwara Theatre v. State of Andhra Pradesh at page 146 are relevant : "Just as a difference in the treatment of persons similarly situate leads to discrimination, so also discrimination can arise if persons who are unequals, i.e., differently placed, are treated similarly, In such a case failure on the part of the Legislature to classify the persons who are dissimilar in separate categories and applying the same law, irrespective of the differences, brings about the same consequence as in a case where the law makes a distinction between persons who are similarly placed. A law providing for equal treatment of unequal objects, transactions or persons would be condemned as discriminatory if there is absence of rational relation to the object intended to be achieved by the law." Even if the object of the law was for hassle free assessment, that was defeated by maintaining the valuation basis for additional sales tax.
The Karnataka Sales Tax Act provides for levy under two grades of recovery as indicated below : (a) Rs. 65,00 per tonne when purchased by a manufacturer of sugar (including khandasari sugar) whose rate of recovery of sugar exceeds 10.5 per cent ; (b) Rs. 50.00 per tonne, when purchased by a manufacturer of sugar (including khandasari sugar) whose rate of recovery of sugar does not exceed 10.5 per cent.(SC) (Venkateshwara Theatre v. State of Andhra Pradesh) at page 148 and the following observations are relevant : "In the instant case, we find that the Legislature has prescribed different rates of tax by classifying theatres into different classes, namely, air-conditioned, air-cooled, ordinary (other than air-conditioned and air-cooled), permanent and semi-permanent and touring and temporary. The theatres have further been categorised on the basis of the type of the local area in which they are situate.
It cannot, therefore, be said that there has been no attempt on the part of the Legislature to classify the cinema theatres taking into consideration the differentiating circumstances for the purpose of imposition of tax. The grievance of the appellants is that the classification is not perfect. What they want is that there should have been further classification amongst the theatres falling in the same class on the basis of the location of the theatre in each local area. We do not think that such a contention is well-founded." Thus, Act 27 of 1999 has violated Article 14 of the Constitution of India. The case of the petitioners is distinguishable from the decision of the Supreme Court in the case of Ganga Sugar Corporation Ltd. v.State of Uttar Pradesh reported in [1980] 45 STC 36 (SC) for the following reasons : (a) There was no retrospective levy at specific rate as in Tamil Nadu Act 27 of 1999.
(b) The High Court in that case observed that purchase tax by weight ensures more stable revenue, whereas tax by value rises and falls.
The Supreme Court found that this statement was not upset by the fact. In Tamil Nadu year after year, over the last decade, the price under Clause 3 as well as Clause 5-A has been progressively related to prices, provided tax related to value which was progressive and remunerative to the exchequer.
(c) In Ganga Sugar Corporation Ltd. [1980] 45 STC 36 at page 41, the following observation by High Court have been narrated : "The petitioners have not supplied for any period figures of actual prices paid by them, actual quantity of cane crushed by them, actual quantity of juice derived, actual quantity of sugar produced and their earnings. They have not tried to prove that the standard of price would be more just and equitable than the standard of weight for levy of purchase tax. From the meagre data gleaned from the Tariff Commission's Report, it is not possible to take the view that tax by weight is unfair and inequitable. And Article 14 ensures to the citizen the basic principle on which rests justice under the law. It assures to the citizen the ideal of fairness (Corpus Juris Secundum, Vol. XVI-A, page 296). The petitioners have failed to discharge the heavy burden of proof." (d) The Supreme Court in [1980] 45 STC 36 (SC) (Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh) at page 51 observed that "we have no facts to hold that arbitrary or vagarious burdens are cast because weight, not price, has been yardstick for tax". In the present cases, sufficient statistics have been furnished to show that the yardstick of weight instead of price casts arbitrary or vagarious burden on different mills, especially in mills having lesser recovery of sugar.
(e) In Uttar Pradesh tax by weight was a historical practice.
Further, in Uttar Pradesh it was found that the industry did not have varying recovery but only negligible difference of recovery.
But in Tamil Nadu, the position varies from mill to mill and region to region.
11. The South India Sugar Mills Association requested the Government to adopt purchase tax on weight as adopted in Karnataka and Maharashtra as the present levy of 8 per cent purchase tax and additional tax at 2.5 per cent was found to be oppressive considering the sickness of the industry. As the industry was disabled from securing recoupment of the purchase tax in the determination of levy sugar price since the Government of India took into account only the statutory price, and purchase tax at specific rate will enable determination for levy sugar reckoning on the incidence of the entire purchase tax, the association suggested tax at specific rate as in neighbouring States and certainly the rate at Rs. 60 per M.T. was not opted. Therefore, the rights of the petitioners cannot be considered as waived, as the rights arise directly out of infringement caused by the impugned provisions and the observations of the Supreme Court in AIR 1955 SC 123 (Behram Khurshid Pesikaka v. State of Bombay)(Olga Tellis v. Bombay Municipal Corporation) at paragraphs 28 and 29 are relevant.
12. The Act 27 of 1999 violates Article 19(1)(g) of the Constitution of India as there is no opportunity to recoup the tax since levy sugar prices were announced long back and the sugar was disposed for public distribution at depressed value which took into account only the purchase tax under Clause 3 of the Control Order. The burden is on the respondents to justify retrospective legislation in so far as violation of Article 19(l)(g) of the Constitution is concerned.
13. In the following cases, retrospective legislation was struck down as violative of Part XIII of the Constitution of India : (i) [1973] 32 STC 368 (Cal) (Shew Bhagwan Goenka v. Commercial Tax Officer).
(ii) [1987] 65 STC 191 (Bom) (Olympic Oil Industries Ltd. v. State of Maharashtra).Shri Krishna Enterprises v. State of Andhra Pradesh did not agree to give retrospective effect. Though the State Legislature has power to make retrospective law, considering the hardships over and above Clause 5-A liability even if the subsidies are taken into account and with no scope to recoup the extra burden in respect of levy sugar price as explained supra, definitely the Act 27 of 1999 offends Article 19(1)(g) of the Constitution of India.
14. A retrospective levy is ordinarily found reasonable and not stated to offend Article 14 or Article 19(1)(g) in certain definite circumstances as brought out by the rulings upholding the levy : (i) Legislature cures the infirmity or the defect in phraseology.
The lacuna is repaired to effectively carry out the object for which the earlier principal Act was enacted.(SC) (Krishnamurthi and Co. v. State of Madras) where entry 47 introduced by Act No. 7 of 1964 was held not to cover furnace oil as otherwise contended by the Revenue inspite of being mineral oil, whereas the Statement of Objects and Reasons for Act No. 7 of 1964 intended such levy, as well as the relevant Board of Revenue Circular dated June 28, 1965.
(ii) Court ruling upsetting the arrangements regarding consistent levy and collection of taxes or duties where assessees had already paid the duty or tax from time to time having gathered from the consumers and legislative steps taken to prevent windfall by way of refund arising out of the court ruling.
(a) [1987] 64 STC 42 (SC) (Empire Industries Limited v. Union of India)(SC) (Ujagar Prints v. Union of India) (iii) Situation where court declares the law invalid where the ground of invalidity is removed and re-enacted.(Rai Ramkrishna v. State of Bihar) at page 1675--paragraphs 10, 11 and 13 (page 1674), However, in the present impugned Act No. 27 of 1999, it is not alleged that the law is retrospectively introduced for any of the reasons indicated as-- (a) to carry out the objects of the earlier principal Act--defect in phraseology ; (b) to frustrate a windfall to the assessee arising of a court ruling ; (c) as arising out of a declaration of invalidity of the earlier principal Act.
No material has been placed to show that the restriction caused by retrospective levy is reasonable or unavoidable or did not call for an alternative measure and the burden in this regard is on the respondent and the observations of the Supreme Court in AIR 1983 SC 1155 in the case of (Deena v. Union of India), paragraphs 17 and 18 at page 1167 and AIR 1954 SC 728 in the case of (Saghir Ahmad v. State of U.P.) at page 738 are relevant. As observed in AIR 1983 SC 1155 (Deena v. Union of India) at paragraph 19, the petitioner has to merely show the fact of deprivation and nothing more.
15. The impact of the flat rate levy being discriminatory, Act No. 27 of 1999 violates Article 401 of the Constitution, Unlike Article 14, there need not be hostile discrimination for Article 401. The burden of showing its reasonableness is on the State. Even a reasonable restriction cannot be saved without Presidential assent under Article 404 which is lacking, freedom of trade, commerce and intercourse is not only in respect of inter-State trade, but also intra-State and the observations of the Supreme Court in AIR 1961 SC 232 (Atiabari Tea Co.
Ltd, v. State of Assam) at page 250, at paragraph 43 and at page 251, at paragraph 44 and [1988] 69 STC 305 (SC) (Indian Cement Ltd. v. State of Andhra Pradesh) at page 314 are relevant. Atiabari Tea Company at page 315 quotes [1968] 22 STC 376 (SC) (State of Madras v. Nataraja Mudaliar)Indian Cement Ltd. v. State of Andhra Pradesh ".............all trade is protected whether it is intra-State or inter-State by the prohibition imposed by Article 401, and there is nothing in the language or the context for restricting the power of the Parliament which it otherwise possesses in the public interest to impose restrictions on the freedom of trade, commerce or intercourse, operative only as between one State and another as two entities. There is also no doubt that exercise of the power to tax may normally be presumed to be in the public interest......".
16. Tax law is also within Article 401 and may in circumstances operate as impediment or detriment against freedom of trade as observed in Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305 (SC) at page 316 as follows : "There can be no dispute that taxation is a deterrent against free-flow. As a result of favourable or unfavourable treatment by way of taxation, the course of flow of trade gets regulated either adversely or favourably. If the scheme which Part XIII guarantees has to be preserved in national interest, it is necessary that the provisions in the article must be strictly complied with. One has to recall the far-sighted observations of Gajendragadkar, J., in Atiabari Tea Co.'s case [1961] 1 SCR 809 and the observations then made obviously apply to cases of the type which is now before us."Atiabari Tea Co. Ltd. v. State of Assam AIR "That conclusion leads to a discussion of the other extreme position that taxation is wholly out of the purview of Article 401. That extreme position is equally untenable in view of the fact that Article 404 contains, and Article 406, before it was repealed in 1956, contained reference to taxation for certain purposes mentioned in those articles. But Article 406, which now stands repealed, contained references to tax or duty on the import of goods into one State from another or on the export of goods from one State to another. Such imposts were really in the nature of impediments to the free-flow of goods and commodities on account of customs barriers, which it was the intention of Article 401 to abolish." "......but it is equally clear that legislation should not have the effect of putting impediments in the way of free flow of trade and commerce."Atiabari Tea Co. v. State of Assam AIR 18. The data as provided in paragraph 10 of O.P. No. 1181 of 1999 and similar such data for each sugar mill indicate that the flat rate of Rs. 60 per M.T. reflected as a percentage of the Clause 5-A price shows the difference in the rate impact from mill to mill between about 10 per cent and 12 per cent. As narrated already, there is lack of classification and equal treatment of the mills which has resulted in hostile discrimination thereby violating Article 14. The restriction to the trade or commerce has been established by indicating a discriminatory levy which violates Article 401. A discriminatory impact for the purpose of Article 401 may yet be saved as a reasonable restriction by Article 404(b), provided that sanction of the President had been obtained for the Bill or amendment. As no such Presidential sanction has been obtained in this case, there is clear violation of Article 19(1)(g). Test of reasonableness is the same for Article 19(b) and Article 404(b) as Considered in AIR 1970 SC 129 (Vrajlal Manilal and Co. v. State of Madhya Pradesh) at para 10. Retrospective tax is an unreasonable restriction which could be saved only by a Presidential assent which is mandatory. In AIR 1963 SC 1667 in the case of (Rai Ramkrishna) page 1676, the following observations made are relevant : "In our opinion, having regard to all the relevant facts of this case, the restrictions imposed by the said retrospective operation must be held to be reasonable and in the public interest under Article 19(5) and (6) and also reasonable under Article 404(b)." Similarly, the following observations in AIR 1976 SC 182 at page 195 (A.B. Abdul Kadir v. State of Kerala) are important : "It was also observed that in judging the reasonableness of the retrospective operation of law for the purpose of Article 404(b), the test of length of time covered by the retrospective operation could not by itself be treated as decisive. Again in the case of Epari Chinna Krishna Murthy v. State of Orissa [1964] 15 STC 461 (SC) ; [1964] 7 SCR 185; AIR 1964 SC 1581, the Constitution Bench of this Court repelled the argument that a legislation should be held to be invalid because its retrospective operation might operate harshly in some cases.
As a result of the above, we would hold that the impugned provisions are protected by Article 404(b) of the Constitution."(Madras) (Thiru Arooran Sugars Ltd. v. Deputy Commercial Tax Officer) and(SC) (State of Tamil Nadu v. Kothari Sugars & Chemicals Ltd.) while construing the scheme of tax on consideration or price, held that the respondent-State and its authorities can only tax the price fixation under Clause 3 and the additional tax under Clause 5-A of the Sugarcane (Control) Order, 1966.
20. Even if payment is made pursuant to State advice, as "advance", that payment would not constitute price. The amount higher than under Clause 5-A of the Sugarcane (Control) Order price cannot be taxed.
21. The judgment of the Supreme Court has been applied and followed by the assessees and tax authorities in the submission of return under Rule 18 and the matter of assessments, whether provisional or otherwise.
22. The provisions of Act No. 27 of 1999 claims to bring into force Section 3-F on April 1, 1997 and validates the levy or collection in the past.
23. Section 4 of the amending Act seeks to overturn any judgment, decree, order of any court, Tribunal or other authority.
24. Validation can take place where the levy or collection under the principal Act is sought to be upheld and brought in accordance with law by an amending Act which repairs the flaw in the original law. In other words, the levy and assessment which is otherwise invalid becomes valid by the operation of the amending Act. In the present case, there is nothing invalid about "the tax levied or collected in the past". There was nothing "purporting to have been levied or collected" in the past.
The validation proceeds on an untenable premise that in the past the State law as well as the things done in accordance with that law were either invalid or purportedly done. Section 4 is not validation, but only a purported validation without the force in law.
25. Thus the impugned Act being a retrospective levy which validates has to address itself to the infirmity shown in Kothari Sugars case [1996] 101 STC 197, by the Supreme Court and it cannot merely by-pass the judgment or circumvent the same. In this connection, Mr. C.Natarajan, the learned Senior Counsel referred to the case of D.Cawasji & Co. v. State of Mysore reported in [1973] 31 STC 445 (Mys) which was reversed by the Supreme Court in [1985] 58 STC 1 (D. Cawasji & Co. v. State of Mysore). In that case the Mysore High Court having held that the tax authority can only impose sales tax on the price of arrack excluding excise duty and cess collected from the buyer, the State set about to amend the Act retrospectively and to validate the levy. This was done by merely increasing the rate of tax on the price of arrack so that the tax as imposed on the arrack at the increased rate (excluding the tax on excise duty and cess) may be equivalent of the tax originally collected on all the three elements.
26. The Mysore High Court upheld the retrospective levy and validation stating that the power of the State to impose sales tax on arrack alone had not been denied by the High Court and by increasing the rate of tax retrospectively and by not taxing the excise duty and cess, the declaration of the High Court remained untouched and unviolated. But the Supreme Court invalidated the levy as violative and observed as follows : "(a) The State instead of seeking to test the correctness and effect of the judgment and order of the High Court thought it fit to have the judgment and order nullified by introducing the impugned amendment. The amendment does not proceed to cure the defect or the lacuna by bringing in an amendment providing for exigibility of sales tax on excise duty, health cess and education cess. The impugned amending Act may not, therefore, be considered to be a validating Act.
(b) The retrospective operation of a validating Act properly passed curing the defects and lacuna which might have led to the invalidity of any act done may be upheld, if considered reasonable and legitimate.
(c) In the instant case, the State instead of remedying the defect or removing the lacuna has by the impugned amendment sought to raise the rate of tax from 6 1/2 per cent to 45 per cent with retrospective effect from the 1st of April, 1966, to avoid the liability of refunding the excess amount collected.
(d) It may or may not have been competent for the State Legislature to validly remove the lacuna and remedy the defect in the earlier levy by seeking to impose sales tax through any amendment on excise duty, education cess and health cess ; but, in any event, the State Government has not purported to do so through the amending Act.
(e) In our opinion, the enhancement of the rate of duty from 6 1/2 per cent to 45 per cent with retrospective effect is in the facts and circumstances of the case clearly arbitrary and unreasonable.
(f) In our opinion, this is not a proper ground for imposing the levy at the higher rate with retrospective effect. It may be open to the Legislature to impose the levy at the higher rate with prospective operation but levy of taxation at higher rate which really amounts to imposition of tax with retrospective operation has to be justified on proper and cogent grounds." 27. Mr. C. Natarajan, the learned Senior Counsel submitted that the impugned Act No. 27 of 1999 does not set about to : (i) amend the provisions of the Act particularly Section 2(r) or Section 2(q), etc., to enable a levy adopting State advised price as a measure of levy. This was what was sought to be done and could not be done. The deficiency in the prior law was that the State could not tax State advised price.
(ii) The purpose of the amendment appears to be to circumvent the judgment of the High Court and the Supreme Court by taking the State advised price for assessment but by a device equating the probable tax at 8 per cent to Rs. 60 per M.T. (evidenced by the communication in Lr. No. 532 (Agriculture), dated December 8, 1997 by the Government to the Commissioner of Commercial Taxes.
Thus, in the light of the observations in the case of D. Cawasji & Co, [1985] 58 STC 1 (SC), the impugned Act 27 of 1999 is ultra vires the legislative power under Article 245 of the Constitution.
28. Inasmuch as there is no turnover of sugarcane acquired because of specific levy by Act No. 27 of 1999, no additional tax could be levied.
Inasmuch as the additional tax under the Tamil Nadu Additional Sales Tax Act, 1970 has to be with reference to "taxable turnover" the mere addition of an explanation in Act No. 37 of 1999 will be of no effect.
Further, the explanation indicates only a turnover which does not necessarily established a taxable turnover in terms of the definition in Section 2(p) of the Act.
29. Mr. K.J. Chandran, the learned Senior Counsel for petitioners in O.P. Nos. 1239 of 1999 and 1241 of 1999 adopted the arguments of Mr. C.Natarajan, Senior Counsel.
30. Mr. R. Mahadevan, the learned Government Advocate contended as follows : Prior to the amending Act No. 27 of 1999, for price fixation of sugarcane, clauses 3 and 5-A prices linked to recovery of sugar and subsidies were considered. Based on the specific request made by the sugar mills in the meeting held on November 5, 1997 to fix a flat specific rate as is being done in neighbouring States and to obtain enhanced levy sugar price, the Government fixed a flat rate of Rs. 60 per M.T. with effect from April 1, 1997. In such circumstances, the legislation cannot be construed as a retrospective enactment at all. In [1988] 68 STC 407 (SC) in the case of Gupta Sugar Works v. State of U.P. it was held that fixation of price of levy sugar was not an unreasonable restriction on the fundamental rights guaranteed under articles 14 and 19(1)(g) of the Constitution. In [1968] 21 STC 212 (SC) in the case of Andhra Sugars Ltd. v. State of Andhra Pradesh it was held "that the State Legislature was competent to levy the tax with reference to the weight of the goods purchased. It was not necessary to levy the tax with reference to the price of the goods or to the turnover". Apart from the State of Karnataka, State of Maharashtra and State of Gujarat also have levied tax on sugarcane on weight basis. As explained in [1993] 88 STC 259 (SC) in the case of Polaki Motors v. State of Orissa. "By enacting retrospectively a valid and legal taxing provision the law creates a fiction that the assessments made and the tax collected are under the new re-enacted law". As held in Central Wines v. Govt. of A.P. reported in [1993] 90 STC 178 (AP) "the test of the length of time covered by retrospective operation cannot by itself be a decisive test........Even if a taxation measure has the effect of driving a dealer in liquor out of business, the affected dealer cannot invoke Article 19(1)(g)". As held in G.S. Drugs and Pharmaceuticals v. Commercial Tax Officer reported in [1999] 113 STC 398 (AP) "since the power of the Legislature is a constitutional function to legislate and it is its inherent power to legislate either prospectively or retrospectively including the levy of taxes, there is no sanction of law to demand an explanation from the Legislature as to the necessity of the levy. It is another thing to say that a levy or retrospective levy is unconstitutional because of lack of legislative competence or because of its unreasonable nature, which may be appropriately termed as arbitrary". Similarly as observed in [1973] 31 STC 190 (SC) (Krishnamurthi and Co. v. State of Madras) "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". As held in [1998] 108 STC 135 (AP) (Association of Pesticides Manufacturers v. State of A.P.) "retrospective legislation is a concomitant function of the Legislature..............Merely because the tax is not able to be passed on to the customers, it would not render the legislation itself void".
31. Referring to the equality clause in Article 14, Mr. R. Mahadevan, the learned Government Advocate, quoted the following passage from [1998] 111 STC 89 (Kar) at page 94 in the case of Kathyayini Hotels Pvt. Ltd. v. Deputy Commissioner of Commercial Taxes, Kerala :Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1 (SC) ; (1983) 4 SCC 45, where A. P. Sen, J., speaking for the court observed that on questions of economic regulation and related matters, the court must defer to the legislative judgment, and that the equality clause of Article 14, did not prevent the State from classifying a class of persons who must bear a burden, heavier than the rest. The court affirmed the view expressed in Kodar's case [1974] 34 STC 73 (SC) ; AIR 1974 SC 2272 that the capacity to pay tax increased with an increase in receipts. The legal position was pithily summed up in the following para from the decision : 'On questions of economic regulations and related matters, the court must defer to the legislative judgment. When the power to tax exists, the extent of the burden is a matter for the discretion of the law-makers. It is not the function of the court to consider the propriety or justness of the tax, or enter upon the realm of legislative policy. If the evident intent and general operation of the tax legislation is to adjust the burden with a fair and reasonable degree of equality, the constitutional requirement is satisfied. The equality clause in Article 14 does not take from the State a power to classify a class of person who must bear the heavier burden of tax. The classification having some reasonable basis does not offend against that clause merely because it is not made with mathematical nicety or because in practice it results in some inequalities'."In State of Bihar v. Bihar Chamber of Commerce reported in [1996] 103 STC 1 (SC) levy of entry tax was held to be not violative of Article 14, 301 or 304. As observed in [1987] 64 STC 208 (Kar) in the case of Jyothi Home Industries v. State of Karnataka, "a Legislature which could enact a law with retrospective effect could also in express terms confer upon on delegated authority a power to make a rule or frame a bye-law or issue a notification having retrospective effect".
As held by the Supreme Court in [1995] 96 STC 338 in the case of Entertainment Tax Officer-I v. Ambae Picture Palace, "no explanation was required from the State for amending the law with retrospective effect". In [1999] 112 STC 506 (AP) in the case of ITC Limited v. State of Andhra Pradesh, levy of luxury tax on supply of tobacco was held to be not violative of Article 401 or 304(b). The following observations of the Madras High Court in (1997) III CTC 255 in the case of R. Gandhi v. Union of India, are relevant in the context of assent of the President of India.
"Neither the principal Act nor the aforesaid amendment is relatable to any matter in the Concurrent List. Both of them relate to entry No. 52, List II of the Seventh Schedule of the Constitution. This apart, the amendment Act only varied the form of restriction--about which, indications were made earlier--which was inherent in the principal Act, Such being the position, we are persuaded to hold that the fact that the amendment Act did not receive the assent of the President is of no consequence." Thus, the Act No. 27 of 1999 which levied purchase tax on sugarcane on weight basis from April 1, 1977 is valid. The continued levy of additional tax on ad valorem basis and the amending Act No. 37 of 1999 also is valid. In such circumstances issue of notice demanding the differential tax is also valid.
33. Mr. C. Natarajan, the learned Senior Counsel, in reply referred to the Supreme Court's decision in [1996] 103 STC 1 (State of Bihar v.Bihar Chamber of Commerce) and stated "entry tax" considered in that decision was a compensatory tax and therefore Article 14, 301 or 304 may not be relevant for a compensatory character of a tax.
34. We have considered carefully the rival submissions and perused the connected records. The tax on sugarcane is not a fresh tax. Prior to Act No. 27 of 1999, tax on sugarcane excluding sugarcane setts was levied on the last purchase point at 8 per cent ad valorem under entry 44 of Part C of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, The change in method of tax by Act No. 27 of 1999 with retrospective effect from April 1, 1997 on weight basis at Rs. 60 per M.T. was the result of a specific request mooted out by the representatives of sugar mills at the meeting on November 5, 1997 convened by the Government to consider the State advised price for 1997-98. The power of the State Legislature to levy tax prospectively or retrospectively is not controverted. It is a fact that purchase tax on sugar on weight basis is in vogue in the State of Karnataka, Uttar Pradesh, Maharashtra and Gujarat. In Ganga Sugar Corporation Ltd. v.State of Uttar Pradesh [1980] 45 STC 36, the Supreme Court has held that the levy of tax under the U.P. Sugarcane (Purchase Tax) Act, 1961, on the purchase of sugarcane at a rate regulated by weight and not by price was neither unconstitutional nor ultra vires but was within the competence of the U.P. Legislature. Similarly the Supreme Court in [1968] 21 STC 212 in the case of Andhra Sugars Ltd. v. State of Andhra Pradesh has held that the State Legislature was competent to levy tax with reference to the weight of the goods purchased and that it was not necessary to levy the tax with reference to the price of the goods or to the turnover. Therefore, the point for consideration in the present cases is whether the levy of purchase tax retrospectively on weight basis resulted in hostile discrimination among the mills in Tamil Nadu or that the levy was confiscatory or unreasonable in nature thereby offending the constitutional provisions as contended by the learned counsel for the petitioners. Let us first examine the proposition that Act No. 27 of 1999 was introduced to overcome the judicial pronouncements in the cases of Thiru Arooran Sugar Mills [1988] 71 STC 444 (Mad.) and Kothari Sugars & Chemicals Ltd. [1996] 101 STC 197 (SO and as the infirmity pointed out in the above judgments was not removed, the amending Act No. 27 of 1999 is invalid in law in terms of the judgment of the Supreme Court in D. Cawasji's case reported in [1985] 58 STC 1. The question considered in State of Tamil Nadu v.Kothari Sugars & Chemicals Ltd. [1996] 101 STC 197 (SC) was whether the purchaser is liable to pay purchase tax under the Sales Tax Act on the amount paid by the purchaser to the cane grower over and above the price fixed under clauses 3 and 5-A of the Sugarcane (Control) Order, 1966 In this connection the Supreme Court has observed as follows : "On a perusal of the relevant provisions of the Sugarcane (Control) Order, 1966, particularly clauses 3 and 5-A therein, it is clear that the total price of sugarcane fixed thereunder is the aggregate of the minimum cane price fixed under Clause 3 and the additional cane price fixed under Clause 5-A. Thus, unless there be an agreement between the grower and the purchaser for purchase of the sugarcane at a higher price, the obligation of the purchaser is to pay to the grower only the aggregate of the amounts fixed under clauses 3 and 5-A. In other words, under the statute there is no liability of the purchaser to pay to the grower any amount in excess of this aggregate amount. Thus, without any contractual or statutory basis fixing the sale price of sugarcane at an amount higher than the minimum cane price fixed under Clause 3 and the additional cane price fixed under Clause 5-A, any sum paid by the purchaser to the grower as advance prior to fixation of the additional cane price under Clause 5-A cannot form part of the price of cane sugar.
In these matters there is admittedly no statutory basis since the 'State advice' to the purchasers to pay a certain amount in addition to the minimum cane price fixed under Clause 3, in anticipation of fixation of the additional cane price under Clause 5-A, does not have any statutory basis. The amount paid as advance under the State advice also does not have any contractual basis since this was not paid as a result of an agreement between the grower and the purchaser. The amount of advance was paid in anticipation of fixation of the additional cane price under Clause 5-A which means that in case the fixation under Clause 5-A was at a higher amount than the amount paid as advance then the purchaser would have to pay the deficit amount. Similarly, when the amount of advance was in excess, the purchaser would be entitled to refund of the excess amount, irrespective of the fact whether the refund was actually made or not. For the purpose of determining the price of sugarcane for computation of the purchase tax, the only significant amount is the aggregate of the minimum price fixed under Clause 3 and the additional cane price fixed under Clause 5-A, unless a higher price is paid to the grower by agreement between the purchaser and grower.
It was argued by learned counsel for the State that the higher price inclusive of the excess amount included in the advance paid on State advice is deemed to have been paid by an agreement between the grower and the purchaser and, therefore, the entire amount would be the price of sugarcane. This is a question of fact in each case. It is true that if in a given case it is found as a fact on the basis of evidence that the purchaser had agreed with the grower to pay the higher price described as 'advance' including the amount in excess of the additional price fixed under Clause 5-A then in that case the entire amount would be the price of sugarcane. However, there is no such basis found in the present case wherein the excess amount forming part of the advance was paid only under compulsion on the direction contained in the 'State advice'. It is significant that a provision for adjustment is clearly made in sub-clause (6) of Clause 5-A. This provision supports the view we have taken. The decision of the Madras High Court which is reported in Thiru Arooran Sugars Ltd. v. Deputy Commercial Tax Officer, Mannargudi [1988] 71 STC 444 is, therefore, upheld and the appeals against the decision of the Madras High Court are, therefore, dismissed.
In the connected matters arising out of the judgment of the Karnataka High Court, similar writ petitions filed by the purchasers of sugarcane were dismissed. The two decisions of the Karnataka High Court which require reference are Pandavapura Sahakara Sakkare Kharkhane (P.) Ltd, v. State of Mysore [1973] 32 STC 104 and Tungabhadra Sugar Works Ltd, v. State of Karnataka [1994] 93 STC 561. In Pandavapura [1973] 32 STC 104 (Mys) it was found proved as a fact that the substance of the transaction between the purchaser and the cane growers was for payment of the enhanced price for the sugarcane supplied and the amount paid in excess of the statutory price was paid under the contract and not either as ex gratia payment or towards advance. In that situation the entire amount paid was treated as the price. In our opinion, the nature of contract in that case being such, the entire amount paid had to be treated as price of the sugarcane supplied since the statute does not prohibit an agreement between the grower and the purchaser for payment of a higher price for the sugarcane by the purchaser. In the later decision in Tungabhadra [1994] 93 STC 561 (Kar) also it is noticed that there is no prohibition against the parties agreeing for the payment of a higher price of the sugarcane. In that situation no doubt the entire amount paid has to be treated as the price of the sugarcane. However, as indicated earlier, for treating the entire amount paid by the purchaser as the price of sugarcane supplied, it must be found proved as a fact that the higher price including the excess amount was paid as the price of sugarcane under an agreement between the grower and the purchaser irrespective of a lower amount being fixed as the aggregate of the price fixation under clauses 3 and 5-A of the Control Order. Unless a clear finding to that effect is recorded, the amount paid by the purchaser in excess of the aggregate of the minimum price fixed under Clause 3 and the additional price fixed under Clause 5-A, as a part of the amount paid as advance prior to fixation of the additional price under Clause 5-A, cannot be treated automatically as a part of the total price of sugarcane." 35. Thus, the apex Court categorically held that unless there is a finding that an enhanced price was paid by the purchaser as the price of sugarcane supplied, under the agreement between the grower and the purchaser, irrespective of the price fixation under clauses 3 and 5-A of the Control Order, the excess amount cannot be treated automatically as a part of the total price of sugarcane. It was further held that the statute does not prohibit an agreement between the grower and the purchaser for payment of a higher price for the sugarcane by the purchaser. However, in the case of Thiru Arooran Sugars Ltd. v. Deputy Commercial Tax Officer, Mannargudi [1988] 71 STC 444 (Mad.) as the excess amount forming part of the advance was paid only under compulsion on the direction contained in the "State advice", it was held that the excess amount over and above the clauses 3 and 5-A price of the Control Order would not form part of the purchase consideration for levy of tax. In Thiru Arooran Sugars Ltd. case [1988] 7.1 STC 444 the Madras High Court considered the "State advised price" as "under compulsion" on the ground that the letter of the Director of Sugars dated November 19, 1980 contained the following expression : "All the sugar mills should show the arrears of cane price in their fortnightly cane price statements worked out at the above rates only". These words were considered to be offending in the sense that they meant take-over of the mills and only in that context the Madras High Court in Thiru Arooran Sugars Ltd. case [1988] 71 STC 444 at page 489 observed as follows : "From this it will be clear that if the petitioner had paid the amount under pressure of the directive of the Director of Sugar, the non-payment will be risky and would attract the provisions of the Sugar Undertakings (Taking Over of Management) Act, 1978 (Central Act 49 of 1978). Therefore, it can never be called the voluntary payment." 36. Similarly, the theory of acquiescence" was rejected in [1988] 71 STC 444 (Mad.) (Thiru Arooran Sugars Ltd. v. Deputy Commercial Tax Officer) on the ground that the payment of higher amount to the purchasers was not "voluntary" but under compulsion. However, as seen from the minutes of the meeting of November 5, 1997 the mills were praised for having made payment of "State advised price" to the cane growers for the sugarcane purchases effected during the year 1996-97 and the mills appreciated the Government for fixing the "State advised price" after ascertaining the views of the management of sugar mills and cane growers so as to safeguard the interests of both the sugar mills and cane growers. It is also seen that under agreement or contract with the cane growers price for the sugarcane purchases were made by the sugar mills pending fixing and adjustment of Clause 5-A price. Thus, "payment under compulsion" of higher price than the clauses 3 and 5-A price of control order which was the basis for the decision in [1988] 71 STC 444 (Mad.) (Thiru Arooran Sugars Ltd. v.Deputy Commercial Tax Officer) and(SC) (State of Tamil Nadu v. Kothari Sugars & Chemicals Ltd.) was not there in the relevant years from 1997-98 under consideration. Such payments were made "voluntarily" as a result of meeting with the representatives of sugar mills and cane growers held separately and orders issued thereafter fixing the "State advised price". Nevertheless, Act No. 27 of 1999 was not enacted so as to levy tax on "State advised price" or to overcome the decision of the Supreme Court in [1996] 101 STC 197 (State of Tamil Nadu v. Kothari Sugars & Chemicals Ltd.). As already pointed out, the impugned Act No. 27 of 1999 was enacted to fulfil the demand of the sugar mills on November 5, 1997 to fix a flat rate on weight basis so as to recoup the tax element in respect of levy sugar sales and to avoid practical difficulties and court cases. Thus, Act No. 27 of 1999 is the result of the policy decision of the Government to fulfil the demand of the sugar mills and in such circumstances the ratio of the decision in D. Cawasji's case reported in [1985] 58 STC 1 (SC) is not relevant. In Cawasji's case [1985] 58 STC 1 (SC) sales tax at 24 per cent was collected on arrack sale price which included excise duty and cesses payable on arrack. The Mysore High Court D. Cawasji & Co. v. State of Mysore [1973] 31 STC 445 held that excise duty and cesses would not form part of the turnover. Therefore, during 1968-69 the privilege of vending arrack was sold without variation in the prices of arrack fixed by the Government during previous year at 55 paise per litre. The appeal filed in the Supreme Court was also withdrawn. As a result, the judgment of the High Court became final and the Government was faced with a situation of refund taxes paid arrack contractors other than those who obtained stay in Court proceedings. In order to avoid liability of refund of the excess tax collected, an Ordinance was passed on July 19, 1969 which ultimately became an Act amending the Sales Tax Act. By virtue of this amendment the sales tax was increased from 6 1/2 per cent to 45 per cent and the Act became effective from April 1, 1966. In the Objects and Reasons of this Act it was specifically stated that "in order to get over the effects of the High Court decision and retain the money already recovered by the Government, it is proposed to enhance the rate of tax on arrack to 45 per cent with retrospective effect from 1st April, 1966". The Mysore High Court upheld the validity of the amending Act. However, the apex Court in [1985] 58 STC 1 (D. Cawasji & Co. v. State of Mysore) reversed the decision of the High Court and observed as follows : "It appears that the only object of enacting the amended provision is to nullify the effect of the judgment which became conclusive and binding on the parties to enable the State Government to retain the amount wrongfully and illegally collected as sales tax and this object has been sought to be achieved by the impugned amendment which does not even purport or seek to remedy or remove the defect and lacuna but merely raises the rate of duty from 6 1/2 per cent to 45 per cent and further proceeds to nullify the judgment and order of the High Court. In our opinion, the enhancement of the rate of duty from 6 1/2 per cent to 45 per cent with retrospective effect is in the facts and circumstances of the case clearly arbitrary and unreasonable. The defect or lacuna is not even sought to be remedied and the only justification for the steep rise in the rate of duty by the amended provision is to nullify the effect of the binding judgment. The vice of illegal collection in the absence of the removal of the illegality which led to the invalidation of the earlier assessments on the basis of illegal levy, continues to taint the earlier levy. In our opinion, this is not a proper ground for imposing the levy at the higher rate with retrospective effect. It may be open to the Legislature to impose the levy at the higher rate with prospective operation but levy of taxation at higher rate which really amounts to imposition of tax with retrospective operation has to be justified on proper and cogent grounds. This aspect of the matter does not appear to have been properly considered by the High Court and the High Court in our view was not right in holding that 'by the enactment of Section 2 of the impugned Act the very basis of the complaint made by the petitioners before this Court in the earlier writ petitions as also the basis of the decision of this Court in Cawasji's case (1969) 1 Mys LJ 461 that the State is collecting amounts by way of tax in excess of what was authorised under the Act has been removed'. We, accordingly, set aside the judgment and order of the High Court to the extent it upholds the validity of the impugned amendment with retrospective effect from 1st of April, 1966, and to the extent it seeks to nullify the earlier judgment of the High Court. We declare that Section 2 of the impugned Amendment Act to the extent that it imposes the higher levy of 45 per cent with retrospective effect from the 1st day of April, 1966, and Section 3 of the impugned Act seeking to nullify the judgment and order of the High Court are invalid and unconstitutional." 37. However, in the present cases before us, the amending Act of 27 of 1999 was in pursuance of a policy decision taken to levy tax on weight basis to fulfil the wishes of the sugar mills as discussed in detail supra. In this connection, it is relevant to refer to the decision of the Supreme Court in Entertainment Tax Officer v. Ambae Picture Palace reported in [1995) 96 STC 338. The headnote in [1995] 96 STC 338 at page 339 reads as follows : "In Andhra Pradesh, under the old Government, from March 23, 1984, till September 6, 1984, entertainment tax was being levied on the gross collection capacity per show at certain percentage. On a change of Government, the new Government by an Ordinance promulgated with effect from September 7, 1984, restored the tax to its original base of actual payment received for admission to entertainment.
There was again a change of Government and the old Government which had gone out of power came to power ; and a new Ordinance was issued on October 25, 1984, with retrospective effect from September 7, 1984, reintroducing payment of entertainment tax on the basis of gross collection capacity of the show. The High Court, on a writ petition, held the retrospective amendment by the Ordinance issued on October 25, 1984, to be unreasonable as the then Government had not offered any explanation for retrospectivity of the law. On appeal to the Supreme Court : Held, reversing the decision of the High Court, that no explanation was required from the State for amending the law with retrospective effect from September 7, 1984." Further, the following observations from the Constitution Bench decision of the Supreme Court in Rai Ramkrishna v. State of Bihar [1963] 50 ITR 171 (SC) ; [1964] 1 SCR 897 have also been quoted in [1995] 96 STC 338 at page 342 (Entertainment Tax Officer v. Ambae Picture Palace) "The power of taxing the people and their property is an essential attribute of the Government and Government may legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed so long as they happen to be within the legislative competence of the Legislature can be taxed by the Legislature according to the exigencies of its needs, because there can be no doubt that the State is entitled to raise revenue by taxation. The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the Legislature." "Where the Legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law, but it can also provide for the retrospective operation of the said provisions."D. Cawasji & Co. v. State of Mysore [1985] 58 STC 1 (SC) it was observed that that was a case where the judgment of the court was sought to be circumvented without seeking to rectify or remove the defect or lacuna pointed out in the High Court judgment and that facts of the present case are totally different.
39. Thus, in the present cases also, a policy decision of the Government was implemented by enacting the amendment Act No. 27 of 1999 and it was not for circumventing any judgment as contended. Nor does the impugned Act contravene the legal principles enunciated in the said judgments in [1988] 71 STC 444 (Mad.) (Thiru Arooran Sugars Ltd. v.Deputy Commercial Tax Officer) and(SC) (State of Tamil Nadu v. Kothari Sugars & Chemicals Ltd.).
40. Inasmuch as Act No. 27 of 1999 levied purchase tax on weight basis at Rs. 60 per M.T. with effect from April 1, 1997 and that earlier entry 44 of Part C of the First Schedule to the Act levying 8 per cent tax on ad valorem basis was in operation, a validation provision was introduced. It is an admitted fact that at least provisional assessments have been concluded on the basis of monthly returns filed.
For was any revision against concluded provisional assessment or any court order in regard to proceedings in this regard, and final assessment to be made on specific duty basis validation provision is needed. Definitely the expression "any judgment, decree or order of any court" was not to overcome the decisions of the Supreme Court in State of Tamil Nadu v. Kothari Sugars & Chemicals Ltd. [1996] 101 STC 197 or that of the Madras High Court in [1988] 71 STC 444 (Thiru Arooran Sugars Ltd. v. Deputy Commercial Tax Officer). Thus, the validation clause in the Act was in the context of change of tax levy on weight basis from April 1, 1997. The power to legislate being plenary for the Legislature, it can legislate in any way to suit different contingencies and this is precisely a contingency to fulfil the request to levy specific tax instead of the tax on ad valorem basis, 41. The next point for consideration is whether there was hostile discrimination offending Article 14 of the Constitution of India because of levying tax by taking the State average of 9.4 per cent recovery of sugar instead of classifying the mills linked to sugar recovery as has been done in Karnataka State, The flat rate fixed in Karnataka is Rs. 50 per tonne where the rate of recovery of sugar does not exceed 10.5 per cent and Rs. 60 per tonne where the rate of recovery of sugar exceeded 10.5 per cent. In Tamil Nadu while fixing flat rate of Rs. 60 per tonne as purchase tax, the Government took into account the amount payable by the purchaser of sugarcane per metric tonne of sugarcane on the basis of State advised price for State average sugar recovery of 9.4 per cent which worked out to Rs. 730 and adopting 8 per cent on this value arrived at a purchase tax value of Rs. 58.40 and this was rounded off and a flat rate of Rs. 60 per tonne was fixed. While enacting the amending Act No. 27 of 1999 which was published in the Gazette on June 17, 1999, this Rs. 60 per tonne as purchase tax was adopted from April 1, 1997 onwards, The argument is that purchase tax linked to a single recovery rate of sugar favours mills having higher recovery vis-a-vis mills having low recovery and therefore mini-classification ought to have been done as has been done in Karnataka State. Reliance was placed on the ratio of the decision of the apex Court in [1995] 96 STC 130 in the case of Venkateshwara Theatre v. State of Andhra Pradesh wherein the classification based on areas and classes in theatre has been approved.
42. It is well-settled that in taxing statutes the latitude for classification is much greater. In this connection it is relevant to refer to the following observations of the Supreme Court in East India Tobacco Company v. State of Andhra Pradesh "It is not in dispute that taxation laws must also pass the test of Article 14. That has been laid down recently by this Court in Kunnathat Thathunni Moopil Nair v. State of Kerala AIR 1961 SC 552.
But in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of Article 14. The following statement of the law in Willis on 'Constitutional Law', page 587, would correctly represent the position with reference to taxing statutes under our Constitution :-- 'A State does not have to tax everything in order to tax something.
It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably.......The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation'."In P.M. Ashwathanarayana Setty v. State of Karnataka (1989) Supp. 1 SCC 696, the extent of classification held valid in a taxing statute and the scope of judicial review permitted while considering its validity on the ground of equality under Article 14 was considered. The true position has been succinctly summarised by His Lordship Venkatachaliah, J., speaking for the court as under : "The problem is indeed, a complex one not free from its own peculiar difficulties. Though other legislative measures dealing with economic regulation are not outside Article 14, it is well-recognised that the State enjoys the widest latitude where measures of economic regulation are concerned. These measures for fiscal and economic regulation involve an evaluation of diverse and quite often conflicting economic criteria and adjustment and balancing of various conflicting social and economic values and interests. It is for the State to decide what economic and social policy it should pursue and what discriminations advance those social and economic policies. In view of the inherent complexity of these fiscal adjustments, courts give a larger discretion to the Legislature in the matter of its preferences of economic and social policies and effectuate the chosen system in all possible and reasonable ways. If two or more methods of adjustments of an economic measure are available, the legislative preference in favour of one of them cannot be questioned on the ground of lack of legislative wisdom or that the method adopted is not the best or that there were better ways of adjusting the competing interests and claims. The Legislature possesses the greatest freedom in such areas....." "The Legislature has to reckon with practical difficulties of adjustments of conflicting interests. It has to bring to bear a pragmatic approach to the resolution of these conflicts and evolve a fiscal policy it thinks it best suited to the felt needs. The complexity of economic matters and the pragmatic solutions to be found for them defy and go beyond conceptual mental models. Social and economic problems of a policy do not accord with preconceived stereotypes so as to be amenable to pre-determined solutions......." 44. Further in G.K. Krishnan v. State of Tamil Nadu (1975) 2 SCR 715, the apex Court referred to, with approval the majority view in San Antonio Independent School District v, Rodrigues (1973) 411 US 1, speaking through Justice Stewart : "No scheme of taxation, whether the tax is imposed on property income or purchases of goods and services, has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of criticism under the equal protection clause." 45. Similarly, the following observations of the Supreme Court in Income-tax Officer, Shillong v. N. Takin Roy Rymbai [1976] 103 ITR 82 ; [1976] 3 SCR 413 are worth recalling : "The mere fact that a tax falls more heavily on some in the same category, is not by itself a ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of Article 14." 46. Sugar recovery percentage depends on various factors, namely, better selection of cane variety and active inter-action between the grower arid mills in providing subsidies and timely advices, maximum crushing during peak season and better machinery for crushing apart from the regional imbalances. If some mills are satisfied with more output of bye-products, namely, molasses and bagasse or incentives given during lean crushing season like the months of May and June or do not bother about the wear and tear in the machinery, necessarily the percentage of sugar recovery will suffer. It is often the incentives provided by the sugar mills and inter-action among growers and mills in selecting the right type of cane variety and developing the same result in higher sugar recovery thereby benefiting the cane growers and sugar mills purchasers.
47. In this context, it is relevant to look at some statistical details pertaining to sugarcane and sugar production available from Indian Sugar Year Book 1995-96-97 published by Indian Sugar Mills Association, New Delhi, for certain select States for a comparative study.I. Cane yield per hectare, recovery percentage of sugar and production of sugarcane per hectare during the season 1995-96.
In sugar industry the major by-products are (i) molasses ; (ii) bagasse and (iii) press mud or press cake. However, molasses is the main product in the manufacture of sugar. II. Statement showing molasses and molasses per cent cane from 1993-94 to 1995-96.
III. Statement showing average fibre per cent cane and bagasse per cent cane.
IV. Statement showing State average recovery of sugar per cent cane in India: 48. A glance at the statistical statements shows that though average cane yield is much more in Tamil Nadu than Karnataka and Maharashtra, the recovery percentage of sugar is far less than Karnataka and Maharashtra. Statement IV shows that sugar recovery percentage declined sharply in Tamil Nadu in 1995-96 compared to the position in 1988-89.
In Karnataka and Maharashtra, the variation is minimal. Similarly statement V shows that crushing season in Tamil Nadu is much more than in other States. The variation in bagasse per cent cane is less in Tamil Nadu than Karnataka and Maharashtra, though molasses percentage recovery is more than in Tamil Nadu than in Karnataka and Maharashtra.
49. It is seen that while the State average recovery of sugar for 1997-98 season in Tamil Nadu is reported to be 9.4 per cent, it is averred that in Karnataka State it is 10.50 per cent and in Maharashtra State it is 11.13 per cent.
50. Therefore, it is in the interests of the mill purchasers of sugarcane to co-ordinate and co-operate with the cane growers to develop better varieties and crush the maximum quantity with new machinery during the right season so as to attain higher sugar recovery for the benefit of one and all.
51. As far as the present cases are concerned, the State average of 9.4 per cent was taken as one of the two factors in fixing the rate of purchase tax levy. It is seen that all the sugar mills have been considered as a class. Nothing adverse among the mills was alleged with reference to the economic size of crushing capacity. Thus, treating members of a well defined class cannot be held to be obnoxious. There is bound to be variation in sugar recovery due to various factors as enumerated above. Therefore adopting the State sugar recovery average as the basis cannot be considered as irrational.Twyford Tea Co. Ltd. v. State of Kerala [1970] 3 SCR 383, wherein the Supreme Court considered tax at a uniform rate imposed on plantations. His Lordship Hidayatullah, C.J., speaking for the majority, while upholding the tax, has observed : "...........It may also be conceded that the uniform tax falls more heavily on some plantations than on others because the profits are widely discrepant. But does that involve a discrimination If the answer be in the affirmative hardly any tax direct or indirect would escape the same censure for taxes touch purses of different lengths and the very uniformity of the tax and its equal treatment would become its undoing. The rich and the poor pay the same taxes irrespective of their incomes in many instances such as the sales tax and the profession tax, etc". (pages 389-390) ".....The burden is on a person complaining of discrimination. The burden is proving not possible 'inequality' but hostile 'unequal' treatment. This is more so when uniform taxes are levied. It is not proved to us how the different plantations can be said to be 'hostilely or unequally' treated. A uniform wheel tax on cars does not take into account the value of the car, the mileage it runs, or in the case of taxis, the profits it makes and the miles per gallon it delivers. An Ambassador taxi and a Fiat taxi give different outturns in terms of money and mileage. Cinemas pay the same show fee. We do not take a doctrinnaire view of equality." (Pages 393-94).
53. Similarly in Ganga Sugar Corporation Ltd, v. State of Uttar Pradesh [1980] 45 STC 36 (SC) at page 49, in the context of the counsel's submission that "unequals were being treated equally by a uniform purchase tax where equality would have dictated classification and taxation based on sucrose recovery from the cane or its market price" the following observations of the Supreme Court after quoting from Murthy Match Works case reported in (1974) 3 SCR 121 at 130-131 are worth mentioning : "Another proposition which is equally settled is that merely because there is room for classification it does not follow that legislation without classification is always unconstitutional. The court cannot strike down a law because it has not made the classification which commends to the court as proper. Nor can the legislative power be said to have been unconstitutionally exercised because within the class a sub-classification was reasonable but has not been made.
It is well-established that the modern State, in exercising its sovereign powers of taxation, has to deal with complex factors relating to the objects to be taxed, the quantum to be levied, the conditions subject to which the levy has to be made, the social and economic policies which the tax is designed to subserve, and what not. In the famous words of Holmes, J., in Bain Peanut Co. v. Pinson (1930) 282 US 499 : 'We must remember that the machinery of Government would not work if it were not allowed a little play in its joints.' It is well-established that classification is primarily for the Legislature and becomes a judicial issue only when the legislation bears on its bosom obvious condemnation by way of caprice or irrationality".
54. Thus, in the present cases, the plea that adopting State average recovery of 9.4 per cent as one of the factors for fixing flat rate of purchase tax for all the sugar mills in Tamil Nadu results in hostile discrimination is not well-founded, as the basis adopted is neither capricious nor irrational.
55. The next contention raised is that the purchase tax rate fixed retrospectively is capricious or unreasonable and therefore it violates articles 19(1)(g) and 301 of the Constitution of India. Even if the levy is considered as a reasonable restriction in the context of free flow of trade, then in the absence of assent by the President of India under Article 404(b) of the Constitution of India, the legislative amendment is not valid. It is true that several statements of statistics showing impact of recovery on purchase tax, additional tax burden exclusive of tax on subsidies, additional tax burden inclusive of subsidies, State-wise average recovery of sugar in India, details of State-wise levy price and supplementary affidavits showing the impact of the amending Acts, have been filed. It is worthwhile to notice that in all the statistical statements generated, the position has been worked out on the basis of an estimated Clause 5-A price only. However, in fixing the flat rate of Rs. 60 per M.T, the Government took into account the market price paid for sugarcane which is the "State advised price" and sugar recovery rate of 9.4 per cent which is the State average. As the statistical statements were generated on the basis of a price for below the market price and sugar recovery lesser than State average sugarcane recovery, naturally notional loss is shown in the context of purchase tax fixation of Rs. 60 per M.T. Though details of quantity crushed, sugar produced and price paid are available, adopting an estimated Clause 5-A price to generate statistics to show the impact of purchase tax is not a rational method. Thus, we find that a rate of tax around 8 per cent fixed on the basis of market price paid for sugarcane linked to a sugar recovery of 9.4 per cent, the State average, is not capricious or unreasonable. In fact in Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh [1980] 45 STC 36 (SO a flat rate of purchase tax on weight basis without any linkage to recovery rate was held to be constitutionally valid. As already stated, the levy of purchase tax on weight basis was on the basis of request made by the sugar mills in the meeting held on November 5, 1997 to fix "State advised price" for 1997-98 and that in fixing the price the Government took into account the market price of sugar, State average sugar recovery of 9.4 per cent and the existing rate of 8 per cent tax in arriving at the purchase tax rate of Rs. 60 per M.T. This method adopted by the State to fix the purchase tax rate is rational and reasonable. In such circumstances, there is no violation of Article 401 of the Constitution of India and as the levy is not confiscatory in nature, it did not amount to unreasonable restriction within the meaning of Article 19 of the Constitution of India so as to impose any unreasonable restriction upon the petitioner's right to carry on a business or trade. As observed in Rai Ramkrishna [1963] 50 ITR 171 (SC) ; AIR 1963 SC 1667, only if the retrospective feature of a law is arbitrary and burdensome the statute will not be sustained and the reasonableness of each retrospective statute will depend on the circumstances of each case. Further as observed by the Supreme Court in S. Kodar v. State of Kerala [1974] 34 STC 73, "Generally speaking, the amount or rate of a tax is a matter exclusively within the legislative judgment and as long as a tax retains its avowed character and does not confiscate property to the State under the guise of a tax, its reasonableness is outside the judicial ken". Similarly in Atiabari Tea Company's case [1961] 1 SCR 809 ; AIR 1961 SC 232, his Lordship Gajendragadker, J., observed : "Taxes may and do amount to restrictions ; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of Article 401. The argument that all taxes should be governed by Article 401 whether or not their impact on trade is immediate or mediate, direct or remote, adopts, in our opinion, an extreme approach which cannot be upheld".In Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212, the Supreme Court considered the levy of purchase tax on weight basis under Section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961. In this case, His Lordship Bachawat, J., speaking for the court, after referring to the observations made by His Lordship Gajendragadker, J., in Atiabari Tea Company case [1961] 1 SCR 809 ; AIR 1961 SC 232 observed : "This interpretation of Article 401 was not dissented from in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491. Normally, a tax on sale of goods does not directly impede the free movement or transport of goods. Section 21 is no exception.
It does not impede the free movement or transport of goods and is not violative of Article 401." Section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act which was referred to in the judgment authorised the State Government to levy a tax at such rate not exceeding five rupees per metric tonne as may be prescribed on the purchase of cane required for use, consumption or sale in a factory. It must, therefore, be regarded as settled law that a tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so.
The declaration contained in Part XIII of the Constitution is against creation of economic barriers and/or pockets which would stand against the free flow of trade, commerce and intercourse.
57. As our finding is that the purchase tax imposed by Act No. 27 of 1999 is reasonable and is not confiscatory in nature, naturally the tax is nothing but taxation simpliciter and does not offend Article 401. In such circumstances, the plea that the impugned Act imposes reasonable restriction and therefore assent of the President as contemplated in Article 404(b) is required is untenable. Therefore, in the context of the amending Act of this nature, the relevant article is 200 of the Constitution which inter alia provides that where a Bill has been passed by the Legislative Assembly of a State, it shall be presented to the Governor and the Governor shall declare either that he assents to the Bill or that he withholds assent therefrom or that he reserves the Bill for the consideration of the President. In the present case, the amending Act was assented to by the Governor as he did not think it proper to reserve the Bill for consideration of the President. The amending Act was also duly published in the Gazette on June 17, 1999.
Thus, it is a valid piece of legislation.
58. One other point urged was that the petitioners could not recoup the levy price inclusive of the tax element in pursuance of the retrospective legislation. One of the reasons or the principal reason behind the amending Act is to enable the Sugar mills to recoup the purchase tax element in respect of levy sugar. As could be seen from para 24 of O.P. No. 1059 of 1999 "the petitioners have lost even the opportunity to pass on the incidence, since sugar itself has been sold long back and even the levy price fixation data has already been furnished and account settled for atleast one of the years". As the levy price was settled only for one of the years, the petitioners still can make a request to the authorities to re-open the issue in view of the retrospective levy imposed by Act No. 27 of 1999. Even otherwise, inability to pass on the tax should not be the basis to declare a legislation invalid as rightly contended by the learned Government Advocate and the ratio of the decision of the Supreme Court in S. Kodar v. State of Kerala [1974] 34 STC 73 also is relevant. Similarly the following headnote passage in Krishnamurthi and Co. v. State of Madras [1973] 31 STC 190 (SC) also could be considered : "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." 59. It was also argued that without amending Section 2(r) or Section 2(q), etc., of the Act to adopt State advised price as a measure of levy, no purchase tax as contemplated in Section 3-F of the amending Act No. 27 of 1999 could be levied. It is seen that the definition Section 2 of the Act opens with the following words : "In this Act, unless the context otherwise requires......". Therefore, when Section 3-F specifically levies purchase tax on weight basis at the rate of Rs. 60 per M.T. with effect from April 1, 1997, naturally the self-contained specific provision of Section 3-F of the Act will prevail over Section 2(r) or 2(q) of the definition section as the case may be. Thus, the rule "general provision should yield to special provision" confirmed in Gobind Sugar Mills Ltd. v. State of Bihar reported in [1999] 115 STC 358 (SC) will apply squarely. Further, the specific rate of tax as contemplated in Section 3-F of the Act is Rs. 60 per M.T., though the basis adopted to work out the tax rate may be market price or State advised price linked to a sucrose or sugar recovery of 9.4 per cent, the State average for 1997-98. Therefore, there is no substance in this plea of the petitioners also.
60. As regards Additional Sales Tax amendment in Act No. 37 of 1999, it is contended that no turnover was acquired because of specific levy on weight basis by Act No. 27 of 1999 and therefore the explanation which indicates only a turnover which does not necessarily establish a taxable turnover could not be given effect to. It is seen that the amendment Act No. 37 of 1999 clearly retains ad valorem basis for levy of additional sales tax in respect of "sugarcane" under the Tamil Nadu Additional Sales Tax act, 1970, notwithstanding the specific levy under the Principal Act, Explanation II to Section 2 in the amending Act No.37 of 1999 reads as follows : "Explanation II.--Notwithstanding anything contained in the said Act, for the purpose of this clause, 'turnover' in respect of sugarcane excluding sugarcane setts shall be arrived at by multiplying the total metric tonnes of sugarcane excluding sugarcane setts purchased during the year, by the minimum price fixed under Clause 3 and the additional price determined under Clause 5-A of the Sugarcane (Control) Order, 1966 and such turnover shall be included in the total turnover of the dealer and the taxable turnover shall be arrived at accordingly for the purpose of this clause." Thus, it is clear that the total turnover of sugarcane arrived at on ad valorem basis as indicated above is to be included in the total turnover of the dealer for the purpose of arriving at the "taxable turnover" for the purpose of the Act to levy additional sales tax. It is relevant to note that as per Section 2(p) of the Act "taxable turnover", means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed. Thus, we find no infirmity in the amending Act No. 37 of 1999 in so far as it levies additional tax on taxable turnover of a dealer by taking into account sugarcane purchase turnover on ad valorem basis as indicated in the amending Act No. 37 of 1999.
61. As regards demand notices issued raising demands for differential tax/additional tax or advising to file revised returns and pay tax thereon within the period specified, we find that the authorities have not followed the provisions of Section 12 or Section 13 or the relevant rule which cover the methodology for assessment and recovery of tax as rightly contended by Mr. C. Natarajan, the learned senior counsel. In respect of completed years of assessments, the assessing authority can raise demand in pursuance of the amending Acts only by finalising the assessment for the relevant years under Section 12 of the Act.
Similarly, for the assessment for the year 1999-2000 the provisional demands could be revised only by issuing a notice as contemplated in Section 13(3) of the Act and Rule 18(4) of the Tamil Nadu General Sales Tax Rules, 1959. It is open to the assessee to file revised returns and pay the differential taxes voluntarily. But, the assessing authority has to necessarily follow the provisions of the Act and Rules, 62. Thus, we find that there are valid or cogent reasons for giving retrospective effect to the amended provisions contained in Act No. 27 of 1999 and Act No. 37 of 1999. For the reasons stated supra, by applying the tests laid down for determining the reasonableness and constitutional validity of the provisions, we hold that Act No. 27 of 1999 and Act No. 37 of 1999 are neither unconstitutional nor ultra vires but within the competence of the Tamil Nadu Legislature, However, the demand notices issued raising demands or calling for revised returns without following the provisions of the Act and Rules are not in order and accordingly such notices are quashed.
63. In fine, O.P. Nos. 1059 of 1999, 1064 of 1999, 1069 of 1999, 1074 of 1999, 1181 of 1999, 1192 of 1999, 1385 of 1999, 1241 of 1999, 1060 of 1999, 1065 of 1999, 1070 of 1999, 1075 of 1999, 1182 of 1999, 1191 of 1999, 1386 of 1999 and 1239 of 1999 are dismissed. As regards O.P.Nos. 1061 of 1999, 1062 of 1999, 1063 of 1999, 1066 of 1999, 1067 of 1999, 1068 of 1999, 1071 of 1999, 1072 of 1999, 1073 of 1999, 1076 of 1999, 1183 of 1999, 1184 of 1999, 118.5 of 1999, 1193 of 1999, 1387 of 1999, 1388 of 1999 and 1389 of 1999 they are allowed and it is open to the authorities to raise fresh demands for differential tax due by following the provisions of law.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 24th day of -January, 2000.