JUDGMENT
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(l)(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. D.B. Civil Writ Petition No. 4674 of 2001:
2. 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 A 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 F Tax Act.
3. 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 A 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 n 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.
4. 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(l)(g) of the Sub-clause (2) of Clause 120 of the Act of 2000.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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 annot go beyond main section from which it derives its validity to A 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.
11. That Section 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 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.
12. 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 substantive 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 , Commissioner of Income-tax v. Sardar Lakhmir Singh (SO, Gadgil (S.S.) v. Lal and Co. , Jani (J.P.), Income-tax Officer v. Indu Prasad Dev Shanker Bhatt , Warangal District Co-operative Marketing Society Ltd. v. State of Andhra Pradesh , Commercial Taxes Officer v. Zoraster & Co. [1993] 89 STC 462 (Raj), State of Rajasthan v. Ghasilal , Associated Cement Co. Ltd. v. Commercial Tax Officer , J.K. Synthetics Ltd. v. Commercial Taxes Officer , Frick India Limited v. State of Haryana , Oswal Spinning & Weaving Mills Ltd. v. State of Punjab [1996] 103 STC 491 (P & H), India Carbon Ltd. v. State of Assam , Evershine Plastics v. Assistant Commissioner (Assessment), Sales Tax Office, Special Circle, Kannur District , Maruti Value Industries Pvt. Ltd. v. Sales Tax Officer, First Circle, Mattancherry , Smt. Tej Kumari v. Commissioner of Income Tax [2001] 247 ITR 210 (Pat) [FB], Commissioner of Sales Tax v. Hindustan Aluminium Corporation and Commissioner of Sales Tax v. Refreshment Centre, Meerut [2000] UPTC 889 (AIL).
13. 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 A 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.
14. 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 and State of Haryana v. Karnal Co-operative Farmers’ Society Limited . 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 .
(ii) K. Nachimuthu v. Sales Tax Officer [1994] 95 STC 539 (Ker).
(iii) Rajagiri Rubber & Produce Co. Ltd. v. Additional Sales Tax Officer .
(iv) Roop Brothers v. State of Uttar Pradesh .
15. He has further cited the case of State of Kerala v. Joy Varghese , 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.
16. 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.
17. It was further submitted that even the amendment and validation of the Finance Act, 2000 could not override the limitation to levy interest as set out in Clause (b) of Sub-section (2) of Section 70 of the Rajasthan Sales Tax Act. The submission has been made that demand amount of CST was paid in full in 1996 itself and therefore, no amount on account of interest could be charged by the Sales Tax Department after 1998 and that the date of payment of Central sales tax in full in 1996 itself has not been disputed by the respondent department. It was then submitted that the consideration of this Court with reference to Section 56(1) of the Act of 94 read with Rule 35 of the Rules, 1995 that it was incumbent upon the assessing authority to pass a comprehensive order for assessment adjusting the refund due to the petitioner-company before arriving at purported sum due by the assessee to the department as tax.
18. That the Act and the Rules mandate adjustment of refund before raising of a demand against an assessee as otherwise gross unfairness and injustice would result to the assessee who would be required to pay fresh demand without being entitled to adjustment of pending refund with the department. The argument is that any demand made by the department against an assesses overlooking A admitted amount of refund due to the assessee along with interest would be wholly contrary to the scheme of the Act and Rules and therefore, it is violative of the article of the Constitution of India.
19. Mr Singhal has made the following submissions:
1. That the notes on Clauses to the Finance Bill, 2000 specifically provide “these amendments will take effect from the date on which Finance Bill, 2000 receives the assent of the President”.
2. That no presumption can be made that the amendment is retrospective or retroactive in view of the clear language/intent of the Parliament providing Section Section 9(2B) which is a substantive provision shall come into force from May 12, 2000.
3. That there cannot be two validation of interest for the same period one by Act No. 103 of 1976 and Clause 9, Sub-clause (4) which validates the levy of interest from January 5, 1957 and another by the Finance Act, 2000 again for the same period. If it is considered retrospective it would be otherwise unreasonable.
4. That Section 9(2A) was amended retrospectively, validity of which was considered in Shiv Dutt Rai Fateh Chand v. Union of India [1983] 53 STC 289. The said decision is not an authority in respect of provisions of Section Section 9(2B) which was inserted only with effect from May 12, 2000. Even the question in this case was different from the present case.
5. That the nature of penalty and interest are different though both are substantive in nature. In penalty the assessing authority has the discretion to levy or not to levy while in interest no such discretion is there and as such the Legislature has inserted the substantive provision of interest prospectively.
6. That no notice could be issued after expiry of two years for charging interest after completion of the assessment Under Section 70(2) of the RST Act and the Parliament has not lifted this ban of limitation.
20. He has relied upon the case of K. Sankaran Nair in and the principle laid down therein that, unless the Legislature by enacting a competent legislative provision retrospectively removes the substratum or foundation of any judgment of a competent court the said judgment would remain binding and operative. In the case of Bhubaneshwar Singh reported in (1994) 6 SCC 77 it has been held that any action in exercise of the power under any enactment which has been declared to be invalid by a court cannot be made valid by a validating Act; by merely saying so, unless the defect which has been pointed out by the court is removed with retrospective effect.
21. In the case of State of Tamil Nadu v. M. Rayappa Gounder reported in AIR 1971 SC 231 it was held that, “we do not propose to go into that question as in our opinion Section 7 of the Act is invalid in so far as it attempts to validate invalid assessments without removing the basis of its invalidity”. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and C then by fiction making the tax already collected to stand under the re-enacted law. In the case of D. Cawasgi & Co., reported in [1985] 58 STC 1, it was held by the Supreme Court that a validating Act seeks to validate the earlier Act declared illegal and unconstitutional by courts by removing the defect or lacunae which led to the invalidation of the law.
22. In the case of Haji Lal Mohd. Biri Works v. State of U.P. reported in [1973] 32 STC 496 the Supreme Court held that the validity to pay interest is created by the statute and the Sales Tax Officer has no discretion to grant any exemption from payment of interest.
23. Reliance has been placed on the decision of the Andhra Pradesh High Court in Ramu and Co. v. State of A.P. wherein it has been held that payment of interest cannot be equated to or mixed up with the levy of penalty.
24. It was submitted by Mr. G.S. Bapna and Bharat Vyas appearing on behalf of respondent-State and the Union of India respectively that there is a provision in Section 9 by virtue of which the provisions of States’ Sales Tax Laws were adopted for the purpose of tax, interest, penalty and offences. Whereas the Supreme Court in the case of Khemka & Co. (Agencies) Pvt. Ltd. v. State of Maharashtra reported in [1975] 35 STC 571 has held that as there is no substantive provision regarding penalty in the Central Sales Tax Act, no such penalty could be imposed under the Central Sales Tax Act. It was in order to overcome this judgment in Khemka’s case [1975] 35 STC 571 that the Central Sales Tax Act, 1956 was amended by the Central Sales Tax (Amendment) Act, 1976. The penalty which is imposed became valid by virtue of Sub-section (2A) which was introduced. In support of this view the reliance was placed on (Shiv Dutt Rai Fateh Chand v. Union of India) [1990] 77 STC 131 (Bom) (Commissioner of Sales Tax v. Machinery Sales Service). Thus in view of the decision of the Supreme Court in the case of Khemka & Co. [1975] 35 STC 571 it was felt that levy of A interest would also be unsustainable, therefore by Central Sales Tax (Amendment) Act, 1976 Section 9 was amended and the words, “charging for payment of interest” was inserted with retrospective effect and a validation section with regard to interest was also introduced. However, in India Carbon Ltd, v. State of Assam it was held that there is no substantive provision in the Central Act regarding charge of interest and as such no interest can be charged under the Central Sales Tax Act, 1956. Thus the decision of the Supreme Court in India Carbon Ltd. v. State of Assam [1997] 106 STC 460 the Parliament has not introduced Section Section 9(2B) and by para 120 retrospective effect has been given to the sales tax. That Section 120 of the Finance Act, 2000 clearly provides that the provision of Section 9 of the Central Sales Tax Act, 1956 shall have effect and shall be deemed always to have effect. This clearly makes the provision of Section 9 with regard to interest as retrospective. This section also provides that it should be presumed that Section 9 also provided for levy of interest. Similar language was used to overcome the judgment of the honourable Supreme Court in Khemka & Co.’s case reported in [1975] 35 STC 571 and the apex Court in Shiv Dutt Rai Fateh Chand v. Union of India reported in [1983] 53 STC 289 held that Section Section 9(2B) is retrospective in nature.
25. In view of the position of facts and law, it has been argued that there is no doubt that the amendment and introduction of Section Section 9(2B) is retrospective in nature and by separate provision validation has been done and the contention of the petitioner in this regard is misconceived. It was then submitted that though by earlier amendment in the Central Sales Tax Act by amendment of 1976 the word “interest” was added in Section 9 and validation was also made, but in view of the judgment of the honourable Supreme Court in India Carbon’s case [1997] 106 STC 460 the aforesaid amendment was insufficient as no interest was provided under the substantive provision and therefore the validation had no effect now when the provisions have been made with retrospective effect and validation section has been introduced. So far as the ground of limitation is concerned, it has been submitted that it is a question of fact as to when the limitation is to commence and as to when the tax would become due in the facts of each case and this question should be left to be decided by the assessing authority in the light of guiding principles laid down by the various courts which can be applied by the assessing officers and if the petitioners have any grievance the same can be raised before the appropriate authority.
26. Reliance has also been placed on the decisions of the Bombay High Court in Commissioner of Sales Tax v. Machinery Sales Service [1990] 77 STC 131 (Bom), and Khemka & Co. v. State of Maharashtra .
27. We have considered the rival submissions and averments made by both the sides. So far as the challenge to the validity of the provisions is concerned we find that the challenge as made to the validity of the impugned amendments, has no basis whatsoever. The legislative history of the relevant provisions shows that in the beginning the provisions were with regard to the tax and penalty. The word “interest” was missing in the substantive provisions of law and therefore, when the Supreme Court held that in absence of any provision with regard to the interest in the substantive law the interest could not be levied, later on the amendment was made with regard to the charging of interest but it was in the procedural part of the provisions and that too was not considered by the Supreme Court for the purpose of charging interest as no charging section was there in substantive provisions. Thereafter, amendment was made and the interest was included in the substantive provisions. The history of these provisions along with the decisions rendered by the Supreme Court to which the reference has been made hereinabove, makes it clear that the provisions as such are not open to challenge and these provisions do not suffer from any unconstitutionality whatsoever.
28. The learned Counsel for the petitioners are right in raising this contention as a proposition of law that unless the provisions with regard to the validation are given retrospective effect, they cannot be held to be sufficient so as to cover the defect. It is trite law that such validating amendment only remains the basis or the bedrock of the principles on which the decisions are rendered by the Supreme Court but so far as the legislative competence to enact the provisions is concerned the same is not in question and the first part of the amendment makes it clear that in the instant case the provisions as were obtaining in the said Act have been incorporated in the Central Act with the use of words that, “they shall always deem to be included”. In our considered opinion the incorporation of the provisions which were with regard to the levy of the interest as to whether insisted in the said law coupled with the further mention in the amendment, they shall always be deemed to have been incorporated, it is clear that retrospective effect has been given by way of Sub-section (1) Under Section 9. In this view of the matter the provisions with regard to the levy of the interest were not there in the Central Sales Tax Act. By the amendment the provisions stand incorporated A and such incorporation of the provisions can be either by way of incorporation or by way of reference.
29. Thus the first contention which has been raised that retrospective effect has not been given and it is effective only from the date when the amendment was made, i.e., May 12, 2000 cannot be accepted and same is hereby rejected. The other question which has been raised in certain petitions as referred above is that demand of interest even in terms of provisions of Clauses 119 and 120 of the Finance Act could not be made by way of rectification beyond the limitation provided Under Section 37 of the Rajasthan Sales Tax Act c is concerned, it may be observed that the provisions with regard to the limitation have to be followed and the action has to be taken within the period of limitation under Sub-sections (2) and (4) of Section 37. The argument has been raised that whereas the assessment order was passed on February 20, 1996 the mere adjustment in favour of the assessee by way of rectification could not extend the period of limitation. Section 37 deals with the cases of rectification of mistake and Sub-section (2) provides that no case for rectification is to be filed under Sub-section (1), after the expiry of the period of three years from the date of order sought to be rectified and under Sub-section (4) no rectification is to be made after the expiry of the four years from the date of the order sought to be rectified. These provisions and both these stages certainly contemplate that the application for rectification cannot be filed beyond the periods as are fixed under Sub-section (2) and no rectification application is to be made after the expiry of four years from the date of order sought to be rectified. However, we find that these provisions have to be given effect to but as and when there is an amendment in law which is retrospective in nature and it is on account of some amendment in law that the rectification becomes necessary, the amendments in law cannot be given a go-bye and they too have to be taken into consideration. More particularly when these amendments with retrospective effect coupled with the validation Clauses are there. We have not been able to persuade ourselves to agree to the contention which has been raised that the amendment in validation brought out by the Finance Act, 2000 could not override the limitation to interest. We may straightway refer to Sub-clause (d) of Clause 120(2) which reads ” as under:
Any proceeding, 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.
30. The learned Counsel for the petitioners on this aspect of the matter laid stress on the decision of the single Bench of this Court in the case of Commercial Taxes Officer v. National Engineering Industries Limited, Jaipur. It was a case in which the notice for assessment was issued on the respondent in February, 1966 in respect of assessment year 1957-58 on the strength of retrospective amendment of Section 12 of the Rajasthan Sales Tax Act, 1954 by which the limitation period for reopening the assessment was extended from 4 to 8 years from the end of assessment year in question. The Tribunal held that the notice was barred by limitation. In revision this Court held that the amendment though retrospective did not empower for reassessment proceedings after the lapse of four years. Even in the instant case we find that the period of four years had expired prior to the amendment. When the amendment itself says that any proceeding, act or thing which could have been validly taken, continued or done for the imposition or the 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. It takes care of this situation that the expiry of the period of limitation prior to the date of the amendment and in our opinion in the light of the validation Clauses which have been given retrospective effect even the contention is accepted that all the provisions of the State Acts is to be incorporated. As argued by Mr. Alok Sharma it is not possible to agree with this contention that the provisions of validation will have no effect on this aspect of the matter and the provisions with regard to the limitation along with the validation Clauses particularly in view of Sub-clause (d) of Clause 120(2).
31. It has been given out before us that rectification applications are still pending for consideration. If any rectification application is pending the same shall be decided in accordance with the relevant provisions by the concerned authorities and we may observe that in this regard the relevant provisions for passing a comprehensive order for assessment supported by reasons shall be passed and it will be open for any of the parties to make their factual as well as legal submissions available to them and such submissions shall also be considered by the concerned authority for passing a speaking order.
32. The other contentions which were raised that no further interest could be charged on interest when the demand for payment of interest came into existence only on January 1, 2001 following the A Finance Act. In our considered opinion this contention has substance and we find that as a question of law there is no problem with regard to the demand for payment of interest prior to the date on which the demand is raised. However, what is the relevant date in such case and the question of interest will depend on the actual date B on which the demand is raised. There is no question of charging interest on interest. In case any amount has been deposited and the same has remained with the department, there is no question of charging interest on such amount. In the instant case a grievance has been raised in this regard that the amount has been deposited and later on refund order has also been passed and yet on that very amount the demand with regard to the interest has been raised. If that be so the concerned authorities would reconsider this matter and depending upon the facts of each case, it will be decided as to whether the interest on interest has been charged or not in the instant case. If any amount as interest on interest and otherwise found that interest has been charged the same shall be reconsidered and orders shall be passed in accordance with law.
33. We may also deal with the contention which was raised on the basis of amendment of 1976 that in view of the validation which was made in the year 1976 this further amendment which has been made now, it seeks to create two validation Acts and it was argued by Mr. Singhal that there cannot be two validation Acts. This argument may on the face of it look attractive but we find that it does not stand a deeper screening of the provisions of law. There is no question of two validations in this case. It was explained in the decisions of the Supreme Court in the case of India Carbon [1997] 106 STC 460 and Khemka’s case [1975] 35 STC 571 which reveal the total history to point out that inclusion of the word “interest” in the procedural part was not considered sufficient and therefore, the necessity arose for second validation when the word interest has been sought to be incorporated in the substantive provisions of law and once the inclusion of the word to levy interest in the procedural part was not considered sufficient by the Supreme Court the Legislature will make the further validation, therefore the arguments with regard to second validation has no substance in our opinion.
34. We find no force in any of these petitions. The same are hereby rejected. “No order as to costs.