M.R.CALLA, J. - (1.) THROUGH this group of writ petitions, numbering 29, the petitioners have challenged the provisions of sub-clause (2)(d) of the validation clause 120 of the Finance Act, 2000 (Act No. 10 of 2000) be declared to be violative of articles 14 and 19(1)(g) of the Constitution of India and of section 9(2B) of the Central Sales Tax Act, 1956. The challenge to the validity of the aforesaid provisions is coupled with the prayer that the notice for demand of interest may also be declared to be illegal, without jurisdiction and against the principles of natural justice. Whereas the common questions of law are involved in all these matters based on identical facts, we propose to decide all these matters by this common judgment and order as under. The reference shall be made to the pleadings of the parties from D.B. Civil Writ Petition No. 4674 of 2001 and D.B. Civil Writ Petition No. 1165 of 2001 only as leading cases, while deciding this group of 29 petitions.
(2.) D.B. Civil Writ Petition No. 4674 of 2001 : The petitioner-company is registered under the Rajasthan Sales Tax Act, 1994 and the Central Sales Tax Act, 1956 and the Assistant Commissioner, Rajasthan, Kar Bhavan, Jaipur, is the assessing authority. Their assessment for the assessment year 1996-97 under section 9 of the Central Sales Tax Act, 1956 (hereinafter referred to as "the Central Act") read with section 29 of the Rajasthan Sales Tax Act, 1994 (hereinafter referred to as "the State Act") was made on March 22, 1999 and by passing the assessment order, additional demand was created and it is the case of the petitioner that the same had been deposited. The petitioner has set up the case that the interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax, makes a substantive provision in this behalf. It is the case of the petitioner that earlier the assessing authorities were levying interest under the Central Sales Tax Act, as it then was, and that a question came up for consideration before the honourable Supreme Court in the case of India Carbon Ltd. v. State of Assam reported in [1997] 106 STC 460 and the Supreme Court held that the provisions in the latter part of section 9(2) of the Central Act can be employed by the sales tax authorities only if the Central Act makes a substantive provision for the levy and charge of interest on Central sales tax and since there was no substantive provision in the Central Act requiring the payment of interest on Central sales tax, the assessing authorities of the State cannot for the purpose of collecting and enforcing payment of Central sales tax charge interest thereon. In this context, the reference has been made to the Finance Act, 2000 (Act No. 10 of 2000) (hereinafter referred to as "the Act of 2000"). As per clause No. 119, section 9 of the Central Act has been amended and vide sub-clause (c) of the said clause 119, sub-section (2B) has been inserted after sub-section (2A) in section 9 of the Central Act. That clause No. 120 of the Act of 2000 is a validation clause. Clauses 119 and 120 of the Act of 2000 are as under : "119. Amendment of section 9 of Act 74 of 1956. - In the Central Sales Tax Act, 1956, in section 9, - (a) in sub-section (2), for the word 'penalty', wherever it occurs, the words 'interest or penalty' shall be substituted; (b) in sub-section (2A), for the words 'provisions relating to offences and penalties', the words 'provisions relating to offences, interest and penalties' shall be substituted; (c) after sub-section (2A), the following sub-section shall be inserted, namely :- (2B) If the tax payable by any dealer under this Act is not paid in time, the dealer shall be liable to pay interest for delayed payment of such tax and all the provisions for delayed payment of such tax and all the provisions relating to due date for payment of tax, rate of interest for delayed payment of tax and assessment and collection of interest for delayed payment of tax, of the general sales tax law of each State, shall apply in relation to due date for payment of tax, rate of interest for delayed payment of tax, and assessment and collection of interest for delayed payment of tax under this Act in such States as if the tax and the interest payable under this Act were a tax and an interest under such sales tax law; (d) in sub-section (3), for the words 'including any penalty', the words 'including any interest or penalty' shall be substituted. 120. Validation. - (1) The provisions of section 9 of the Central Sales Tax Act, 1956 (hereafter in this section referred to as the Central Sales Tax Act), shall have effect, and shall be deemed always to have had effect, as if that section also provided - (a) that all the provisions relating to interest of the general sales tax law of each State shall, with necessary modifications, apply in relation to - (i) the assessment, reassessment, collection and enforcement of payment of any tax required to be collected under the Central Sales Tax Act, in such State; and (ii) any process connected with such assessment, reassessment, collection or enforcement of payment; and (b) that for the purposes of the application of the provisions of such law, the tax under the Central Sales Tax Act shall be deemed to be tax under such law. (2) Notwithstanding anything contained in any judgment, decree or order of any court, Tribunal or other authority, general sales tax law of any State imposed or purporting to have been imposed in pursuance of the provisions of section 9 of the Central Sales Tax Act, and all proceedings, acts or things taken or done for the purposes of, or in relation to, the imposition or collection of such interest, before the commencement of this section shall, for all purposes, be deemed to be and to have always been imposed, taken or done as validly and effectively as if the provisions of sub-section (1) had been in force when such interest was imposed or proceedings or acts or things were taken or done and, accordingly, - (a) no suit or other proceedings shall be maintained or continued in, or before, any court, Tribunal or other authority for the refund of any amount received or realised by way of such interest; (b) no court, Tribunal or other authority shall enforce any decree or order directing the refund of any amount received or realised by way of such interest; (c) where any amount which had been received or realised by way of such interest is refunded before the date on which the Finance Act, 2000 receives the assent of the President and such refund would not have been allowed if the provisions of sub-section (1) had been in force on the date on which the order for such refund was passed, the amount so refunded may be recovered as an arrear of tax under the Central Sales Tax Act; (d) any proceedings, act or thing which could have been validly taken, continued or done for the imposition or collection of such interest at any time before the commencement of this section if the provisions of sub-section (1) had then been in force but which had not been taken, continued or done, may, after such commencement, be taken, continued or done. (3) Nothing in sub-section (2) shall be construed as preventing any person - (a) from questioning the imposition or collection of any interest or any proceedings, act or thing in connection therewith; or (b) from claiming any refund, in accordance with the provisions of the Central Sales Tax Act, read with sub-section (1). Explanation. - For the purposes of this section, 'general sales tax law' shall have the same meaning assigned to it in the Central Sales Tax Act." The case has been set up by the petitioners that provisions relating to levy of tax as in statute are construed as substantive law as has been laid down by the Constitutional Bench of the honourable Supreme Court while interpreting the provisions of section 11B of the State Act in the case J.K. Synthetics Ltd. v. Commercial Tax Officer reported in [1994] 94 STC 422 at page 437. That the newly inserted section 9(2B) of the Central Act through clause 119 of the Act of 2000 is prospective in nature but the validation provision contained in clause 120 of the Act of 2000 particularly sub-clause (2) has been given retrospective effect. According to the petitioners, the Parliament has deliberately inserted sub-section (2B) in section 9 of the Central Act vide clause 119 of the Act of 2000 prospectively with effect from May 12, 2000 though the Parliament could very well have inserted the said sub-clause retrospectively. That sub-section (2B) was intended to be inserted in section 9 prospectively. The reference has been made to clauses 115 and 116 of the Finance Bill, 2000. It is mentioned that these have to take effect on that date when the Finance Bill, 2000 receives the assent of the President. However, it is not disputed that the Presidential assent was accorded on May 12, 2000. Clause 116 seeks to provide for validation of the provisions of section 9 of the Central Act as amended by clause 115. After the insertion of section 9(2B) in the Central Act, the respondent-assessing authority passed an order on June 1, 2001 under section 58 of the State Act read with section 9 of the Central Act, levying interest of Rs. 9,33,307 for the delayed payments on the basis of the demands dated July 12, 2000, August 21, 2000 and the period of delay is 425 days and 465 days respectively. The interest levied against the demand of Rs. 18,94,924 with the delay of 425 days, the date of payment was July 12, 2000 in respect of demand dated August 21, 2000, there is a delay of 465 days in respect of demand of Rs. 9,00,000 and the interest is Rs. 2,79,000. Similarly, with regard to the date of payment, i.e., August 21, 2000 in relating to the demand of Rs. 3,78,747 there is a delay of 465 days. The total demand against all these periods along with order dated June 1, 2001 the demand notice was served directing the petitioner to pay the aforesaid demand of Rs. 9,33,307. Sub-clause (2) of clause 120 of the Act of 2000 has validated the retrospectivity and the challenge thrown on that basis of imposition or collection of interest which had been imposed and levied in the past. Sub-clause (2) of clause 120 has validated the order of imposition of interest which had already been passed. This sub-clause (2) of clause 120, according to the petitioners does not validate the future passing of the orders levying interest for past period and as such there cannot be any validation in respect of any future action to be taken. Sub-clause (2) of clause 120 of the Act of 2000 which purports to validate the imposition or collection of interest before the commencement of the said section for all purposes retrospectively without any limitation of time and is violative of articles 14 and 19(1)(g) of the Constitution of India and section 9(2B) of the Central Act. Aggrieved from sub-clause (2) of clause 120 of the Act of 2000 and arbitrary action of the assessing authority - Assistant Commissioner under the State Act in passing the impugned order dated June 1, 2001 levying interest of Rs. 9,33,307 and in issuing consequential demand notice dated June 1, 2001 the petitioner preferred the present writ petition. The case of the petitioner has been sought to be traversed on behalf of the respondent Nos. 1 to 3 by filing a reply dated February 29, 2000. D.B. Civil Writ Petition No. 1165 of 2001 : In this case also, the petitioner-company is registered under the State Act as well as the Central Act. The case of the petitioner is that the petitioner-company came to be assessed pertaining to its sales tax liability for the year 1992-93, vide, order dated February 20, 1996. The original assessment was made by the department against the petitioner-company and the balance demanded after adjustment of advance tax as against the petitioner-company was Rs. 3,44,88,800. The aforesaid amount was based on a tax for non-submission of form "C" under the State Act in an amount of Rs. 1,63,12,211 with interest of an amount of Rs. 1,33,76,073. The demand of both principal amount and interest in respect of form "C" was subject to submission of form "C" within a period of six months as permissible under the Act and Rules. Further components in the balance demanded pertaining to assessment year 1992-93 was by way of a demand for Rs. 1,13,725 as interest on delayed payment. In this case also a reply dated August 3, 2001 has been filed and on that basis the prayer has been made as already pointed out earlier. The matter has been seriously argued before us by the learned counsel appearing on behalf of the petitioner and it has been submitted that even the validation clause as has been enacted in the Act of 2000 does not cure the defect nor does it seek to authorise the authorities to levy the interest under the Central Sales Tax Act because the validation clause as has been inserted by way of amending the Finance Act as aforesaid has not been made retrospectively applicable. Their case is that under the Central Act, there was a total absence of the question of levy of interest in any substantive part of such legislation and in absence of it, there is no question of charging interest on the basis of the procedural provisions and even if the amendment as has been made is taken into consideration since it has not been given the retrospective effect though the Legislature was competent to give retrospective effect to it, the same does not clothe the said assessing authority to levy interest for the period in past or in future on the basis of this amendment. Mr. J. N. Sharma, learned counsel for the petitioners, has submitted that section 9(2B) as inserted newly by clause 119 of the Finance Act, 2000 is prospective in nature; the validation clause cannot go beyond main section from which it derives its validity to validate the past tax and sub-clause (2) of clause 120 of the Finance Act, 2000 is therefore, beyond the scope of section 9(2B) of the Central Act and same is therefore, violative of articles 14 and 19 of the Constitution of India and consequently, the assessment and the demand notice itself, deserve to be quashed and set aside.
(3.) THAT section 9(2B) has been inserted in the Central Sales Tax Act, 1956 prospectively, i.e., with effect from May 12, 2000. On this account alone the validation clause containing sub-clause (2) of clause 120 of the Finance Act is violative of article 14 of the Constitution of India and inconsistent with the provisions of section 9(2B) of the Central Sales Tax Act, as such the impugned order levying interest and the consequential demand notice as annexures 1 and 2 deserve to be quashed and set aside. THAT any provision made in statute for charging levy for delayed payment of tax is construed as a substantive law. The provisions related to interest under the said Act have been held as sub-stantive law in the case of J.K. Synthetics Ltd. v. Commercial Taxes Officer reported in [1994] 94 STC 422 and it is only the procedural law which can be enacted retrospectively and not the substantive law, therefore, the validation clause contained in sub-clause (2) of clause 120 of the Finance Act, 2000 giving retrospective effect indefinitely is violative of the Constitution of India. THAT without any substantive provision in the Act the validation clause cannot authorise the assessing authority to charge interest. THAT the validating clause has been challenged and according to the learned counsel for the appellant the remedy of appeal is not an appropriate remedy as the appellate authority is not competent to adjudicate the validity of the section. Mr. Singhal in support of his submission has relied upon the following decisions : State of Tamil Nadu v. Thirumagal Mills Ltd. [1972] 29 STC 290 (SC), Bengal Paper Mills Co. Ltd. v. Commercial Tax Officer [1976] 38 STC 163 (Cal), Commissioner of Income-tax v. Sardar Lakhmir Singh [1963] 49 ITR 70 (SC), Gadgil (S.S.) v. Lal and Co. [1964] 53 ITR 231 (SC), Jani (J.P.), Income-tax Officer v. Indu Prasad Dev Shanker Bhatt [1969] 72 ITR 595 (SC), Warangal District Co-operative Marketing Society Ltd. v. State of Andhra Pradesh [1983] 54 STC 385 (AP), Commercial Taxes Officer v. Zoraster & Co. [1993] 89 STC 462 (Raj), State of Rajasthan v. Ghasilal [1965] 16 STC 318 (SC), Associated Cement Co. Ltd. v. Commercial Tax Officer [1981] 48 STC 466 (SC), J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 (SC), Frick India Limited v. State of Haryana [1994] 95 STC 188 (SC), Oswal Spinning & Weaving Mills Ltd. v. State of Punjab [1996] 103 STC 491 (P&H), India Carbon Ltd. v. State of Assam [1997] 106 STC 460 (SC), Evershine Plastics v. Assistant Commissioner (Assessment), Sales Tax Office, Special Circle, Kannur District [2000] 120 STC 396 (Ker.), Maruti Value Industries Pvt. Ltd. v. Sales Tax Officer, First Circle, Mattancherry [2001] 122 STC 410 (SC), Smt. Tej Kumari v. Commissioner of Income Tax [2001] 247 ITR 210 (Pat) [FB], Commissioner of Sales Tax v. Hindustan Aluminium Corporation [2002] 127 STC 258 (SC); (1999) UPTC 1 (SC) and Commissioner of Sales Tax v. Refreshment Centre, Meerut [2000] UPTC 889 (All.). Alok Sharma, learned counsel for the petitioner, has submitted that sales tax liability of the petitioner-company for the year 1993-94 was assessed to be Rs. 14,19,418. The amount was based on tax for non-submission of form "C" under the Rajasthan Sales Tax Act, 1994 (hereinafter "the Act of 94") in an amount of Rs. 3,48,62,997 (including interest). The amount is based on tax for non-submission of form "C" under the Rajasthan Sales Tax Act, 1994. This form was to be reproduced within six months. The amount of Rs. 14,19,418 including interest was required to be submitted within six months in form "C". The amount of Rs. 14,19,418 was paid within one month. The petitioner-company also allowed the credit of Rs. 99,43,524 as branch incentive. Consequent to the submission of form "C" rectification order was passed giving a credit of Rs. 3,41,65,142. The appellate authority allowed the amount of Rs. 9,14,283 as branch incentive in respect of assessment year 1993-94. Amount of Rs. 25,040 was allowed as refund against voucher in respect of surplus with the Commercial Tax Department in account of the petitioner-company from earlier assessment years. However, based on the judgment of the honourable Supreme Court in the case of India Carbon [1997] 106 STC 460, Commercial Taxes Department, allowed the petitioner-company a reduction in its demand as made by the original order dated February 20, 1996 to the extent of Rs. 7,53,345. Consequent to the rectification dated March 15, 1997 appellate order dated September 9, 1997 branch incentive, refund against voucher of Rs. 25,040 and refund in tax liability by the department vide order dated December 2, 1998 for a sum of Rs. 7,53,345 and the assessing authority found a sum of Rs. 12,54,504 refundable to the petitioner-company. On March 31, 2000 the amount of Rs. 9,21,729 was allowed by way of adjustment against other liability of the petitioner-company to Sales Tax Department. Consequent to the Act of 2000 to validate the chargeability of interest of the late payment of Central sales tax, resorting to sections 17/37 and 58 of the Act of 94 read with section 9 of the Central Sales Tax Act, 1956 and the presumptive interpretation of section 120 of the Finance Act, 2000, the petitioner-company was arbitrarily found to be liable for a sum of Rs. 13,79,572 as tax pertaining to year 1993-94. Accordingly notice of deposit was issued on January 1, 2001. On February 12, 2001, the petitioner-company submitted a representation and thereafter on March 13, 2001, the Assistant Commissioner (Special Circle), Rajasthan, under section 53 of the Act of 94 read with section 9 of the Central Sales Tax Act, 1956 required the petitioner-company to deposit the aforesaid amount of Rs. 13,79,572, failing which proceedings for attachment and recovery of tax would be initiated and lastly the notice to deposit was issued by the Assistant Commissioner. Mr. Alok Sharma, learned counsel for the petitioner, has submitted that section 120 of the Finance Act, 2000 seeking to validate the levy on interest on Central sales tax was itself invalid as the provision of section 9 of the Central Act incorporating sub-section (2B) therein for levying interest on late payment of CST was prospective in nature; the validating Act without curing the defect pointed out by the Supreme Court and failing to amend the section 9 of the Central Sales Tax Act retrospectively cannot stand the scrutiny of this Court as validation without a corresponding retrospective amendment curing the defect is invalid for the reason that it would entail trenching on judicial forum. Reliance has been placed on the decision of the Supreme Court in Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan AIR 1996 SC 2930 and State of Haryana v. Karnal Co-operative Fanners' Society Limited AIR 1994 SC 1. It is further contended by Mr. Alok Sharma that no interest could be further charged on interest, more particularly when the demand came to existence only on January 1, 2001, following the Finance Act, 2000. Whereas valid demand did not exist in the interregnum, no interest could be charged by the assessing authorities for the said period. The following cases were cited : (i) Annapurna Biscuit Manufacturing Co. v. State of Uttar Pradesh [1982] 50 STC 56 (All.). (ii) K. Nachimuthu v. Sales Tax Officer [1994] 95 STC 539 (Ker.). (iii) Rajagiri Rubber & Produce Co. Ltd. v. Additional Sales Tax Officer [1983] 53 STC 370 (Ker.). (iv) Roop Brothers v. State of Uttar Pradesh [1985] 59 STC 318 (All.). He has further cited the case of State of Kerala v. Joy Varghese [1999] 112 STC 651; (1999) 9 SCC 124, where the Supreme Court has held in the matter of interest on sales tax and arrears of tax in the context of interest that liability to pay such interest under section 23(3) of the Kerala General Sales Tax Act, 1963 arises only in case of failure to comply with the provisions of notice of demand and therefore, where there was no notice of demand, the High Court has rightly held that liability to pay interest did not arise. The Supreme Court decided as to whether the liability to pay arises. Mr. Alok Sharma has further contended that the demands for interest in terms of provision of section 119 and section 120 of the Finance Act cannot be made by way of rectification beyond the limitation provided under section 37 of the Rajasthan Sales Tax Act. Rectification could be made only within the period of three years from the original order of assessment on February 20, 1996 and if the rectification order was passed within a period of four years from the date of original assessment. It was submitted that in the instant case the purported order of rectification passed on January 1, 2001 is beyond the limitation, therefore, vitiated under sub-sections (2) and (4) of section 37. That original order of assessment in the instant case was passed on February 20, 1996 and made in favour of the assessee by way of rectification cannot extend the period of limitation. ;