MEGA TRADERS v. STATE OF KERALA. — 1990 DIGILAW 502 (KER)

JUDGMENT D. J. JAGANNADHA RAJU, J. - These nine original petitions relate to the question as to at what rate the turnover relating to agarbathis is liable to Kerala general sales tax during the period from April 1, 1984 to August 29, 1989. Though separate original petitions are filed, the Revenue filed a common counter in original petition No. 9375 of 1989 and requested the court to treat this as counter in all the nine original petitions. It would be advantageous to deal with these nine original petitions together as the same legal question arises for consideration. As and when necessary, I shall advert to the facts of individual original petitions during the later portion of this judgment. 2. Before I set out the facts of the case, it would be just and proper to indicate the rate of tax for agarbathis at different points of time. Prior to September 16, 1980, neither agarbathis, nor raw bathis, nor scented sticks, were in the First Schedule of the Kerala General Sales Tax Act, 1963 (hereinafter called "the Act"). They were treated as items which are chargeable at the general rate of 5 per cent. Prior to September 16, 1980, there was exemption of sales tax for agarbathis. By virtue of the Finance Act of 1984, with effect from April 1, 1984, entry 80B was introduced in the First Schedule and the entry reads as follows : Rate "80B Raw bathis At the point of first sale in 10 per cent" the State by a dealer who is liable to tax under section 5. The Finance Act of 1984 did not include agarbathis and scented sticks as specific items in the First Schedule, nor were they introduced in entry 80B. By virtue of Act 18 of 1987 entry 80B became entry 155, and it continued to be only raw bathis and the rate of tax continued to be at 10 per cent. The amended First Schedule came into force with effect from July 1, 1987. By Act 18 of 1987 also agarbathis were not included in the First Schedule. By G.O.Rt. No. 344/82/TD dated May 28, 1982, a clarification was issued in exercise of the powers under section 59A and agarbathis were sought to be taxed as a specific item covered by the First Schedule. By Act 18 of 1987 also agarbathis were not included in the First Schedule. By G.O.Rt. No. 344/82/TD dated May 28, 1982, a clarification was issued in exercise of the powers under section 59A and agarbathis were sought to be taxed as a specific item covered by the First Schedule. The clarification was to the effect that entry 80 in the First Schedule which deals with talcum powder, other perfumeries and cosmetics, not falling under any other items in this Schedule was construed as including agarbathis. That clarification came to be challenged in T.R.C No. 72 of 1986, and a Division Bench of this Court by judgment dated May 28, 1986 reported as Deputy Commissioner of Sales Tax v. K. A. Latheef [1988] 69 STC 29, declared that the phrase "perfumeries and cosmetics" occurring in entry 80 of the First Schedule does not cover agarbathis. The court held that the Appellate Tribunal was justified in holding that the turnover of agarbathis can be assessed only at the general rate and not at 10 per cent under entry 80 of the First Schedule. Dealing with the specific language of the entry, the court observed as follows : "It is settled law that you should not only look at the words, but should also look at the context, the collocation and the object of such words, relating to such a matter and interpret the meaning, according to what would appear to be the meaning intended to be conveyed by the use of the words under such circumstances ........ 'other perfumeries and cosmetics' occurring in entry 80 of the First Schedule to the Kerala General Sales Tax Act, should be understood with reference to the preceding words 'talcum powder'. So viewed, we have no doubt in our mind that agarbathi cannot be considered to be a 'perfumery', akin to 'talcum powder', (the preceding words) occurring in entry 80 of the First Schedule." After this attempt to tax agarbathis at 10 per cent as an item covered by the specific entry in the First Schedule failed, and the High Court held against the Government, the State Legislature took steps to amend the First Schedule and it first promulgated Ordinance 7 of 1989 which was published in the Gazette on September 28, 1989. In this Ordinance clause 6(d) was introduced to amend entry 155 and after the words "raw bathis" the words "agarbathis and other scented sticks" were added in entry 155. Under clause 1(2) of the Ordinance sub-clause (d) of clause 6 was deemed to have come into force with effect from April 1, 1984. The controversy in these original petitions arose as a result of the promulgation of this ordinance. Subsequently 7 of 1989 was replaced by Act 3 of 1990. 3. As soon as the Ordinance was promulgated, the Sales Tax Department took vigorous and active steps to reopen and revise the assessments already made in all cases where turnover of agarbathis was involved. 4. Some of these original petitions are filed while the Ordinance was in force, and before the Act came into existence, while some were filed after the Act came into force. In those original petitions which were filed while the Ordinance alone was in force petitions have been filed to amend the prayers in the original petitions. As a result of the ordinance and the subsequent Act 3 of 1990 the State tries to tax the turnover on agarbathis under entry 155 and levy tax at 10 per cent while earlier, agarbathis were a general rate item for which tax is to be paid at five per cent. The crucial question is whether the retrospective operation sought to be given by the Ordinance and the Act with effect from April 1, 1984, for the amendment of entry 155 is valid, and whether the State has the right to collect tax for sales effected prior to August 29, 1989, at 10 per cent. 5. As the pleadings are almost similar, I shall briefly set out the pleadings in Original Petition No. 9375 of 1989, and as all the pleadings are similar to the pleadings in Original Petition No. 9375 of 1989, it would be unnecessary to refer in detail to the pleadings in all the nine original petitions. 6. Original Petition No. 9375 of 1989 is filed by nine traders dealing in agarbathis. Though various reliefs are asked for, for the nine petitioners only exhibit P1 notice issued to the first petitioner, Mega Traders, is filed as an enclosure to the original petition. Similar notices issued to the other petitioners, namely, petitioners 2 to 9, have not been filed. Original Petition No. 9375 of 1989 is filed by nine traders dealing in agarbathis. Though various reliefs are asked for, for the nine petitioners only exhibit P1 notice issued to the first petitioner, Mega Traders, is filed as an enclosure to the original petition. Similar notices issued to the other petitioners, namely, petitioners 2 to 9, have not been filed. Similarly in the other original petitions documents have been filed indicating that the Revenue was trying to collect tax at 10 per cent, while in fact earlier tax has been paid at the general rate of 5 per cent for the turnover relating to agarbathis. Original Petition No. 9375 of 1989 relates to the assessment year 1987-88. The first petitioner's turnover of agarbathis is Rs. 1,30,007.32. It is claimed that tax has already been paid at 5 per cent before the Ordinance was promulgated, and for the assessment year 1988-89 returns were filed on the basis of 5 per cent tax, but the assessment proceedings were not completed. Then after narrating the history of the taxation law relating to agarbathis, it is claimed that there is no sanction to collect sales tax at the rate of 10 per cent for agarbathis sales of which took place prior to the promulgation of Ordinance 7 of 1989. It is claimed that for transactions which had already taken place, it is not possible for the petitioners to collect the higher rate of sales tax and the retrospective effect given to the Ordinance and the Act is not valid. The following reliefs are prayed for : (1) to issue a writ of certiorari, or any other appropriate writ, declaring that clause (d) of section 6 of the Ordinance is bad in law and ultra vires and unreasonable, and to quash exhibit P1. (2) to quash the levy of sales tax in respect of agarbathis and scented sticks for period anterior to August 29, 1989, that is not to give retrospective effect to the amendment made by the Ordinance to entry 155. 7. The counter-affidavit filed by the Revenue briefly runs as follows : Raw bathis were taxable at the point of first sale at 10 per cent under entry 80B of the First Schedule, that is from September 16, 1980 to July 1, 1987. The entry was introduced with effect from April 1, 1984. 7. The counter-affidavit filed by the Revenue briefly runs as follows : Raw bathis were taxable at the point of first sale at 10 per cent under entry 80B of the First Schedule, that is from September 16, 1980 to July 1, 1987. The entry was introduced with effect from April 1, 1984. Subsequently that entry became entry 155 of the present First Schedule by reason of Act 18 of 1987. Entry 155 of the First Schedule has been amended to include agarbathi and other scented sticks by promulgation of Ordinance 7 of 1989, and the amendment was given retrospective effect with effect from April 1, 1984. The Ordinance was replaced by Act 3 of 1990. The combined effect of the Ordinance and the Act and the amendment made is that agarbathis are taxable at the point of first sale at the rate of 10 per cent with effect from April 1, 1984. Originally raw bathis, agarbathis and scented sticks were not specifically included in the First Schedule. By G.O.Rt. No. 344/88/TD dated May 28, 1982, a clarification was issued to the effect that agarbathis are taxable under entry 80 of the First Schedule. This Court dealt with the effect of that clarification in Deputy Commissioner of Sales Tax v. K. A. Latheef [1988] 69 STC 29 and came to the conclusion that agarbathis are not taxable under entry 80. The court never considered whether the agarbathis can be taxed under entry 80B, which has been in the statute book with effect from April 1, 1984. As a result of the decision of this Court, the State found that assessments already completed on the turnover of agarbathis on the basis of entry 80 of the First Schedule have to be reopened, and in order to avoid such a situation, Ordinance 7 of 1989, has been promulgated with retrospective effect from April 1, 1984. Subsequently it was replaced by Act 3 of 1990. The Legislature is perfectly entitled to pass this Act and it has also got the power to pass a taxing enactment with retrospective effect. By passing this law there is no question of overruling or setting aside the judgment of this honourable Court. The amendment made to entry 155 is nothing more than only a clarification and hence it is given retrospectivity. By passing this law there is no question of overruling or setting aside the judgment of this honourable Court. The amendment made to entry 155 is nothing more than only a clarification and hence it is given retrospectivity. As this Court did not consider the question earlier as to whether agarbathis could be covered by entry 80B, that is present entry 155, the decision in Deputy Commissioner of Sales Tax v. K. A. Latheef [1988] 69 STC 29 (Ker) is no bar for the present legislation. Out of the taxable turnover of the first petitioner, the turnover of agarbathis is Rs. 1,32,007.33. He never claimed exemption. He has paid the tax on agarbathis at five per cent instead of paying tax at the scheduled rate of 10 per cent. Exhibit P1 notice issued is in accordance with the amended law. As the law came into force with effect from April 1, 1984, the petitioners are bound to pay tax at the rate of 10 per cent for the turnover of agarbathis. It should also be remembered that passing on of the tax to the consumer is not a necessary incidence of sales tax. The various grounds urged by the petitioner are untenable. 8. The State Legislature has the legislative competence to enact the law and it has the power to tax agarbathis with retrospective effect. It is well accepted that even for a taxation statute retrospective operation can be given once there is a legislative competence. The present amendment to entry 155 is nothing more than a clarification or validation of the earlier taxing provision. The original petition is liable to be dismissed as it is devoid of merits. 9. In this batch of original petitions Shri K. L. Narasimhan who appeared for the petitioners in the first seven original petitions leads the arguments, and the same have been adopted by Shri G. Sivarajan, counsel for the petitioner in original petition No. 1059 of 1990 and by Shri K. Padmanabhan, counsel for the petitioner in original petition No. 10378 of 1989. Shri Narasimhan contends that prior to promulgation of Ordinance 7 of 1989, agarbathis are an item on which sales tax is exigible at five per cent. Transactions have taken place on that basis. Tax was collected from the buyers at 5 per cent and the same has been paid to the Sales Tax Department. Shri Narasimhan contends that prior to promulgation of Ordinance 7 of 1989, agarbathis are an item on which sales tax is exigible at five per cent. Transactions have taken place on that basis. Tax was collected from the buyers at 5 per cent and the same has been paid to the Sales Tax Department. If 10 per cent tax is collected by reason of the amendment of entry 155 with retrospective effect from April 1, 1984, the dealers in agarbathis will be compelled to pay money from out of their pockets, there is no possibility of passing on the additional tax burden to the buyer. Such an imposition of tax with retrospective effect is most unreasonable and arbitrary. Legislature is competent to enact a law imposing taxes prospectively. But it is not entitled to give retrospective effect to such legislation, especially for a long period of five years and four months. Shri Narasimhan submitted that though in the original petitions he has raised the question of legislative competence, he is not now questioning the legislation on the ground of want of legislative competence, and that he is only attacking the impost on the ground of retrospectivity which amounts to an unreasonable and arbitrary imposition of a tax burden on the dealer. He places reliance upon Shri Krishna Enterprises v. State of Andhra Pradesh [1990] 76 STC 67, a decision of the Supreme Court, Hotel Elite v. State of Kerala [1988] 69 STC 119 (Ker) Shew Bhagwan Goenka v. Commercial Tax Officer [1973] 32 STC 368 (Cal) and State of A.P. v. V. V. Rama Rao and Company [1989] 74 STC 190 (AP). Shri Narasimhan contends that taxing statutes whose retrospectivity has been upheld by the courts are mostly statutes which are in the form of validating statutes or statutes which have been brought in to impose an enhanced tax with very little retrospectivity. In all these cases, the reasonableness of the tax burden is taken into consideration, while upholding the statute. In the present case, an unreasonable burden for the first time is imposed by Ordinance 7 of 1989 with retrospective effect for five years and four months. The effect of retrospectivity in the present case would force many of the traders to close down their business, and on the ground of unreasonableness, the retrospective operation of the law should be struck down. The effect of retrospectivity in the present case would force many of the traders to close down their business, and on the ground of unreasonableness, the retrospective operation of the law should be struck down. He contends that as far as he could search, there is no instance of any other taxation statute which has imposed tax with retrospective effect for five years and four months being upheld by a court. Only in cases of validating enactments, retrospectivity of the taxing statute has upheld. In the present case, there is no question of any validating enactment. Ordinance 7 of 1989 and Act 3 of 1990 are not introduced as validating enactments. 10. The learned Government pleader, Shri Anil Babu, contends that in this particular instance the State has been trying to tax agarbathis from 1982. First an entry was introduced as 80B for taxing bathis. The entry described the item as raw bathis. Subsequently in G.O.Rt. No. 344/82/TD dated May 28, 1982 a clarification was issued under section 59A and the item was brought under entry 80 of the First Schedule. When the court did not uphold the clarification, immediately action was taken and Ordinance 7 of 1989 and Act 3 of 1990 were brought into existence. The whole exercise is one in the nature of a validating enactment. He also contends that the State Legislature is fully competent to legislate for imposing a tax with retrospective effect. He places reliance upon a large number of decisions of the High Courts and Supreme Court. He mainly relies upon Empire Industries Limited v. Union of India [1987] 64 STC 42 (SC); (1985) 3 SCC 314 , Malabar Fruit Products Company v. Sales Tax Officer [1972] 30 STC 537, Yusuf Shabeer v. State of Kerala [1973] 32 STC 359; which are both decisions of this Court, Ujagar Prints v. Union of India [1989] 74 STC 401 (SC), Federation of Hotel & Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC), Government of Andhra Pradesh v. Hindustan Machine Tools Ltd. AIR 1975 SC 2037 ; (1975) 2 SCC 274 , Utkal Contractors & Joinery (P) Ltd. v. State of Orissa AIR 1987 SC 1987 SC 2310 and Misrilal Jain v. State of Orissa AIR 1977 SC 1686 ; (1977) 3 SCC 212 . Shri Anil Babu contends that the opportunity of the dealer passing on the tax burden to the buyer is not a determining factor for upholding the validity of a taxation statute. He contends that the decision reported in Shri Krishna Enterprises v. State of Andhra Pradesh [1990] 76 STC 67 has no application to the facts of the present case. It is clearly distinguishable. 11. The points that arise for consideration in all these original petitions are : (1) Whether the amendments to entry 155 of the First Schedule introduced by Ordinance 7 of 1989 and Act 3 of 1990 can have valid retrospective operation from April 1, 1984, though the Ordinance was promulgated on August 29, 1989. (2) Whether retrospective taxation of agarbathis from April 1, 1984, imposes an unreasonable and unexpected fresh burden which is liable to be quashed ? (3) As per the settled principles governing the validity of taxing laws, can Ordinance 7 of 1989 and Act 3 of 1990 have only prospective operation or whether they can have retrospective operation ? 12. Points 1 to 3 : It is true that whenever the Legislature has the competence to enact a taxing statute it is also said to be competent to enact laws with retrospective effect. The retrospective taxation has to be within certain narrow confines so as to be upheld by courts. Where certain retrospective taxation partakes of the character of a confiscatory legislation, or where the retrospective operation of the taxing statute imposes an unreasonable burden, then courts would be reluctant to protect its retrospectivity. From a through examination of the various decisions upholding retrospective operation of taxing statutes, we find that such legislations normally come under the category of either validating legislations or legislations which try to effect minor repairs to the earlier existing statutes. The element of reasonableness of the burden cast by the retrospective taxation has always been considered by the court. I shall now carefully examine the various decisions relied upon by the counsel to find out whether in this particular case the retrospective taxation by Ordinance 7 of 1989 and Act 3 of 1990 can be upheld. 13. The petitioners' counsel Shri Narasimhan places a lot of reliance on the Supreme Court decision reported in Shri Krishna Enterprises v. State of Andhra Pradesh [1990] 76 STC 67. 13. The petitioners' counsel Shri Narasimhan places a lot of reliance on the Supreme Court decision reported in Shri Krishna Enterprises v. State of Andhra Pradesh [1990] 76 STC 67. In that decision, the Supreme Court was dealing with a case relating to the effect of the Forty-sixth amendment to the Constitution and the effect of an amendment to the A.P. General Sales Tax Act, 1957. By the Forty-sixth amendment to the Constitution supply of food in eating houses to consumers was treated as sale assessable to tax. On the basis of that amendment, the State of Andhra Pradesh amended the A.P. General Sales Tax Act, and the amended provisions came into force on 13th September, 1985, with a corresponding provision as in the Forty-sixth amendment. The Supreme Court observed in such a situation as follows : "As the law stands, the petitioners before us are to satisfy the designated authority that no tax had been collected before the Forty-sixth amendment or for the matter of that prior to the amendment of the State legislation. We find from the record that no such opportunity was extended to the petitioners when tax was levied." To remedy the situation, the Supreme Court set aside the assessments and required the assessing officer to give opportunity to the petitioner to satisfy him that no tax was collected until September 13, 1985. Subsequently, a review petition was filed before the Supreme Court stating that the latest amendment of the State Sales Tax Act was not considered at the time of decision, and by virtue of the latest amendment, the demand raised should have been sustained. Dealing with such a situation, the Supreme Court observed as follows : "This is on account of the fact that after the Forty-sixth amendment of the Constitution, State legislation was necessary to give effect to liability of sales tax and the Andhra Pradesh Act was a prospective legislation. The incidence of sales tax is ordinarily passed on to the customer and in the event of accepting the retrospective amendment a liability would be created without affording any opportunity to the hoteliers to pass on the incidence of the tax." With that observation the Supreme Court dismissed the application for review. 14. Shew Bhagwan Goenka v. Commercial Tax Officer [1973] 32 STC 368, is a decision of the Calcutta High Court. 14. Shew Bhagwan Goenka v. Commercial Tax Officer [1973] 32 STC 368, is a decision of the Calcutta High Court. Debiprosad Pal, J., after a very exhaustive examination of the case law relating to retrospective effect of taxing statutes classified the different types of taxing statutes and indicated that validating enactments are treated separately and in all cases of retrospective effect for taxing statutes "reasonableness" test has to be applied, and the court also held that the principles of ex post facto legislation would be offended whenever a taxing statute imposed a fresh unreasonable burden with retrospective effect. At page 375 the learned Judge observed as follows : "The test of reasonableness should be applied to each individual statute impugned and no abstract standard or general pattern of reasonableness can be laid down as applicable to all cases. 'The nature of the rights alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evils sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict' : State of Madras v. Rao AIR 1952 SC 196 ." Then quoting with approval certain decisions, His Lordship observed that "the word 'reasonableness' implies intelligent care and deliberation, that is the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed under article 19(1)(g) and the social control permitted by clause (6) of article 19, it must be held to be wanting in that quality." Then the learned Judge observed as follows : "Applying this test one has to examine whether there is any nexus between the retrospective operation of the amendment in question and the mischief sought to be remedied by such amendment. I have already stated that the amendment was not introduced to validate the proceedings which were taken on the basis of any enactment declared by court of law to be invalid. The object of the amendment is to widen the definition of business so as to include for the first time transactions which without the amendment fell outside the concept of business hitherto understood and judicially determined. The object of the amendment is to widen the definition of business so as to include for the first time transactions which without the amendment fell outside the concept of business hitherto understood and judicially determined. The amendment for all intents and purposes seeks to impose sales tax for the first time on transactions which till the amendment fell outside the purview of the Act. In my view, the effect of retrospective operation of such an amendment would be to impose an unexpected liability in respect of transactions which when took place were not subject to any charge or liability under the Act. Under the Act, a dealer will be saddled with a liability to pay sales tax with respect to transactions which will now constitute business as defined by the amendment. He might have entered into such transactions several years back, and at the time when these transactions took place such sales were not taxable. As a result of the retrospective operation of the amendment, he is now to be treated as a dealer liable to pay tax in respect of such transaction of sales". The learned Judge further observed : "Thus, by introducing the amendment with retrospective effect, the petitioner is subjected to pay tax which could never be contemplated or foreseen at the time when sales were actually effected. No tax could be recovered by the petitioner from the purchasers ......" The learned Judge in the last portion of the judgment dealt with article 20 of the Constitution of India, and observed as follows : "Article 20 provides an injunction against conviction of a person or his subjection to a penalty under ex post facto laws. 'The phrase "law in force" as used in article 20 should be understood in its natural sense as being the law in fact in existence and in operation at the time of the commission of the offence as distinct from the law "deemed" to have become operative by virtue of the power of the Legislature to pass retrospective laws'" 15. The State of A.P. v. V. V. Rama Rao and Company [1989] 74 STC 190, a decision of the A.P. High Court is very near to the facts of our case. The State of A.P. v. V. V. Rama Rao and Company [1989] 74 STC 190, a decision of the A.P. High Court is very near to the facts of our case. In that decision the Court had to deal with a situation, when an amendment to entry 3 of the First Schedule of the Andhra Pradesh General Sales Tax Act, 1957, was made in 1976 and the word "television" was inserted in entry 3. Entry 3 deals with "wireless reception instruments and apparatus, radios, radio gramophones, electrical valves, accumulators, amplifiers and loud speakers and spares parts and accessories thereof." By the amendment of 1976 with effect from September 1, 1976, "televisions" were also included in entry 3. A contention was raised that a television is nothing but an essentially wireless reception instrument, and it is merely an improvement upon a radio. The Government Pleader further argued that merely because the word 'televisions' was inserted by way of Amendment Act No. 49 of 1976, it, by itself, does not mean that televisions were not included earlier within the said entry. The Government Pleader claimed that the amendment was brought only to clarify the matter and to eliminate any room for controversy or dispute. Dealing with such an argument, the Division Bench of the A.P. High Court observed at page 192 as follows : "We agree with the learned Government Pleader that it cannot be stated as a rule of law that whenever particular goods are included in a particular entry by way of an amendment, those goods have become taxable under the entry for the first time. That may not be the only or the necessary inference." Then dealing with the scope of the entry prior to the amendment and the entry after "televisions" were included in the entry, to court observed as follows : "The meaning given to the expression 'television' shows that the accent is upon reproduction of actual or recorded scene at a distance on a screen, etc., by radio transmission usually with appropriate sounds. The accent is upon the reproduction of the scene and sound is treated as merely an accompaniment. The accent is upon the reproduction of the scene and sound is treated as merely an accompaniment. Be that as it may, in common parlance or commercial parlance, one would not ordinarily refer to the television set as a wireless set, though it may be possible by an involved process of reasoning to include the television set also within the meaning of wireless reception instrument and apparatus. Since we have to understood these entries in the common or in the commercial parlance we are inclined to hold that television sets or parts and accessories thereof were not taxable under entry 3 of the First Schedule to the Act prior to 1st September 1976." 16. In the present original petitions agarbathi was not included under any specific entry in the First Schedule. There is nothing to indicate that raw bathis introduced as a specified entry 80B included agarbathis. The effort of the Government to cover agarbathis under entry 80 dealing with talcum powder and other perfumeries was not upheld by courts. In this context it may also be observed that a Division Bench of this Court (to which I am a party) held in Dadha Pharma Pvt. Ltd. v. State of Kerala [1991] 81 STC 254; 1990 (2) KLT 307 that the power to issue clarifications under section 59-A cannot be utilised for the purpose of enhancing the tax rates or to give retrospective operation so as to adversely affect an assessee, while dealing with a tax revision case. Subsequent to that a Division Bench of this Court by judgment [Reported as Travancore Chemical & Manufacturing Ltd. v. State of Kerala [1991] 81 STC 313 (Ker)] dated November 15, 1990, in a batch of original petitions, Original Petition No. 2330 of 1987, etc., held that section 59-A of the Kerala General Sales Tax Act is unconstitutional and invalid and that all orders passed in exercise of such invalid and unconstitutional provision shall stand quashed. The effect of the Division Bench decision is that section 59-A was not in the statute book from the time it was introduced into the statute book by Act 21 of 1978 with effect from April 1, 1978. In view of these two Bench decisions, the clarification issued in 1982 by G.O.Rt. No. 344/82/TD dated May 28, 1982, is deemed to be not in existence at any time. In view of these two Bench decisions, the clarification issued in 1982 by G.O.Rt. No. 344/82/TD dated May 28, 1982, is deemed to be not in existence at any time. There is no possibility for the State claiming that the present Ordinance 7 of 1989 and Act 3 of 1990 are in the nature of clarification or validating the earlier legal position. It should be remembered for the first time, by virtue of Ordinance 7 of 1989 dated August 29, 1989, agarbathis and scented sticks are introduced in entry 155 of the First Schedule of the Kerala General Sales Tax Act. Prior to August 29, 1989, there was no enactment, law or clarification which would cover agarbathis as an item taxable at the rate of 10 per cent. 17. I shall now deal with the very elaborate arguments advanced by the learned Government Pleader to substantiate the retrospective operation of Ordinance 7 of 1989 and Act 3 of 1990. The Government Pleader contends that the State Legislature has the legislative competence to enact the Ordinance and the amendment. It has the power to legislate. That power carries with it the power to legislate with retrospective operation. In support of this argument, he relied upon the decision in Hotel Elite v. State of Kerala [1988] 69 STC 119 (Ker). In this decision the court was dealing with a case of cooked food being served in two star hotels and above, and the amending Act brought the Act into force with retrospective effect from July 1, 1987, while in fact the Act was first published on August 19, 1987. The learned Judges observed : "The competence of the State Legislature to impose sales tax on these items is not in question in view of the Forty-sixth Amendment of the Constitution introducing clause (29A) to article 366 whereby the scope of entry 54 of List II of the Seventh Schedule to the Constitution is rendered wide enough to cover cooked food and beverages served in hotels and restaurants." The amendments to the Kerala General Sales Tax Act introduced by the Finance Act 18 of 1987 are challenged as violative of article 14 of the constitution. Its retrospective effect from July 1, 1987 is also challenged on the same ground. Its retrospective effect from July 1, 1987 is also challenged on the same ground. Dealing with the arguments relating to retrospectivity, in paragraph 13 at page 133 the Court noted down the concession made by the Advocate-General and observed as follows : "The learned Advocate-General appearing on behalf of the State submits that even though the retrospective levy can be legally supported, he assures on behalf of the Government that the tax as per entry 57 of the First Schedule and entry 4 of the Fifth Schedule will be collected only with effect from 20th of August, 1987 and that no collection will be made or recovery effected of the tax as per the amended provision relating to the above entries for the period between 1st of July, 1987 and 19th of August, 1987. We record this submission made by the Advocate-General and direct that tax as per the amended provisions on the two items mentioned above will not be recovered for the period prior to the date of publication of the Kerala Finance Act 18 of 1987 in the Gazette." Strictly speaking the court did not pronounce on the question whether retrospective effect can be given for this taxing statute. On the basis of the concession made by the Advocate-General, it gave a direction and closed the case. Utkal Contractors & Joinery (P) Ltd. v. State of Orissa AIR 1987 SC 2310 laid down the law as follows : 14. "The next question to be considered is whether the State while purporting to amend the Act has encroached upon the judicial power and set aside the binding judgment of this Court." Answering that question the court observed as follows : "The legislature may, at any time, in exercise of the plenary power conferred on it by articles 245 and 246 of the Constitution render a judicial decision ineffective by enacting a valid law. There is no prohibition against retrospective legislation. The power of the legislature to pass a law postulates the power to pass it prospectively as well as retrospectively. That of course, is subject to the legislative competence and subject to other constitutional limitation. The rendering ineffective of judgments or orders of competent courts by changing their basis by legislative enactment is a well-known pattern of all validating Acts. The power of the legislature to pass a law postulates the power to pass it prospectively as well as retrospectively. That of course, is subject to the legislative competence and subject to other constitutional limitation. The rendering ineffective of judgments or orders of competent courts by changing their basis by legislative enactment is a well-known pattern of all validating Acts. Such validating legislation which removes the causes of ineffectiveness or invalidity of action or proceedings cannot be considered as encroachment on judicial power. The legislature, however, cannot by a bare declaration, without more directly overrule, reverse or set aside any judicial decision." This decision did not deal with instances where retrospective operation would impose an unreasonable and heavy or unexpected burden. It only tried to rectify the mistake that arose due to the defect in the earlier enactment, which was not upheld by the High Court. Mohd. Rashid Ahmed v. State of U.P. (1979) 1 SCC 596 is a case of an enactment giving power to the State Government to make rules with retrospective effect. Dealing with such a situation, and discussing the scope of "deeming" and "validation", the court observed as follows; in paragraph 25 at page 606 : "25. It was legitimately within the powers of the State Government to give to the amended rule a retrospective effect. As a result of the amendment, the original clause (iii) was substituted by a new clause (iii) by which the date for passing an order of absorption by the State Government was shifted to August 31, 1967, which again introduced another legal fiction. It provided that if there was a failure on the part of the State Government to pass an order of absorption by August 31, 1967, the officer or servant concerned shall be deemed to be finally absorbed. This legal fiction was brought into force with effect from July 9, 1966." The court observed that by virtue of the amendment, the State Government had the power to pass the necessary orders till August 31, 1967. The introduction of the second fictional date August 31, 1967, was to eclipse the earlier fictional date of absorption. Then in paragraph 27 the court pointed out : "27. The introduction of the second fictional date August 31, 1967, was to eclipse the earlier fictional date of absorption. Then in paragraph 27 the court pointed out : "27. Perhaps no rule of construction is more firmly established than this - that retrospective operation is not to be given to a statute so as to impair an existing right or obligation other than as regards the matter of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in a language which is fairly capable of either interpretation, it ought to be construed as prospective only. But where, as here, it is expressly stated that an enactment shall be retrospective, the courts will give it such an operation. It is obviously competent for the Legislature, in its wisdom, to make the provisions of an Act of Parliament retrospective. That is precisely the case here". It should be remembered that this decision does not deal with the question of retrospective imposition of tax. It only deals with regularisation and absorption of servants with effect from a particular date and before a particular date. There can be no objection to the principle that a legislation can be both prospective and retrospective. This decision itself lays down that normally it is to be treated as prospective in operation, unless the statute expressly mentions retrospective operation. Malabar Fruit Products Company v. Sales Tax Officer [1972] 30 STC 537 is a single Bench decision of this Court. In this case section 5A of the Kerala General Sales Tax Act was given retrospective operation from April 1, 1970. As in our case the amendment was introduced first by way of ordinance and then replaced by Act 14 of 1970. The objects and reasons clearly indicate that it is meant as a measure for checking evasion of sales tax. Dealing with the question of retrospectivity in paragraph 17 at page 548 the court observed as follows : "It is contended that the retrospective operation given to section 5A is such as to violate the fundamental rights of the petitioner under articles 14, 19(1)(f) and 31 of the Constitution. Dealing with the question of retrospectivity in paragraph 17 at page 548 the court observed as follows : "It is contended that the retrospective operation given to section 5A is such as to violate the fundamental rights of the petitioner under articles 14, 19(1)(f) and 31 of the Constitution. This is founded on the plea that while all dealers are enabled to pass on the tax to the purchasers, those affected by section 5A, like the petitioner, were not in a position to collect this new levy during the period 1st April, 1970 to 15th May, 1970, for which period the section has been made retrospective, for the reason that there was no such levy then. It is urged that the result of retrospectivity of section 5A is that the petitioner has to pay very large amounts out of the capital investment in the business. In short, the argument is that the retrospectivity of a levy may operate as an unreasonable burden which is likely to make the carrying on of business of the dealer impossible and this is an unreasonable restriction on the right to carry on business." 18. It should be remembered that the retrospective operation was confined only to one month and 15 days. Dealing with such a situation His Lordship observed : "that a taxation statute has also to satisfy the test of reasonableness. Taxing statutes are not beyond the purview of the constitutional limitations imposed by articles 14 and 19 of the Constitution or the test of reasonableness prescribed by article 304(b). Taxing statutes should not be confiscatory, and it is open to the courts to see whether the statute is really a disguise or a cloak to achieve confiscatory purposes. But mere retrospective operation of a taxing statute cannot give it the character of a confiscatory statute. Taxing statutes should not be confiscatory, and it is open to the courts to see whether the statute is really a disguise or a cloak to achieve confiscatory purposes. But mere retrospective operation of a taxing statute cannot give it the character of a confiscatory statute. This is the case even in regard to a tax which the person sought to be taxed is allowed to pass on to a third party like the consumer." Then after dealing with the earlier judgments of the Supreme Court, the learned Judge observed with approval the following passage : "It is conceivable that cases may arise in which the retrospective operation of a taxing or other statute may introduce such an element of unreasonableness that the restrictions imposed by it may be open to serious challenge as unconstitutional, but the test of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test." Applying the various decisions laid down by the courts with regard to retrospectivity of section 5A and its effect, the court observed in paragraph 18 at page 550 as follows : "18. ..... On the facts of this case, it has not been shown that by the retrospectivity for the short period there has been any such situation here. It has also not been shown with reference to the facts that the business is likely to suffer so heavily as to render the tax confiscatory. It is not the counsel's case that the Legislature is not competent to pass a taxing statute of the nature of the Act before me to operate not only prospectively but retrospectively too." This decision has been upheld by a Division Bench of this Court in Yusuf Shabeer v. State of Kerala [1973] 32 STC 359. The discussion relating to the attack on the retrospectivity is from paragraph 13 onwards. The court observed as follows : "The argument was that the dealer in question made only a profit of 1/2 per cent and that the tax imposed was much higher. He had made no provision for collection of tax on the commodities that he bought and that the introduction of the tax has resulted in loss and that he had to pay from his pocket a large sum of money. It was further contended that this would jeopardise the trade or business. He had made no provision for collection of tax on the commodities that he bought and that the introduction of the tax has resulted in loss and that he had to pay from his pocket a large sum of money. It was further contended that this would jeopardise the trade or business. It is now well-established that the passing on of tax is not a necessary incidence of sales tax. From the economic point of view the sales tax on almost all occasions will be reflected by an increase in the price at which a consumer may have to buy goods. But it is a direct tax on the sale or purchase and it can be imposed either on the seller or purchaser. The tax does not become invalid because in given circumstances it cannot be passed on. It is possible to conceive of circumstances where a tax can infringe article 19(1)(g) of the Constitution." Then the court observed that they had not seen any case where the imposition of a tax has infringed article 19(1)(g) and that no material has been placed before them to show that in that case the imposition of the tax has infringed article 19(1)(g) of the Constitution. 19. It is clear from these two decisions that even while dealing with a case of retrospective effect for a very short period of six weeks, the courts were conscious of the fact that reasonableness of the burden should be considered and if it amounts to confiscatory, it offends the Constitution. Judged in the light of these principles, we find that imposing tax with retrospective effect for five years and four months would certainly have the effect of imposing an unreasonable and unexpected burden and in many cases such an imposition of tax, which cannot be passed on to the buyer may result in the business being closed down. 20. Empire Industries Ltd. v. Union of India [1987] 64 STC 42 (SC); (1985) 3 SCC 314 , and Ujagar Prints v. Union of India [1989] 74 STC 401 (SC) are cases of retrospective legislation relating to excise duty. 20. Empire Industries Ltd. v. Union of India [1987] 64 STC 42 (SC); (1985) 3 SCC 314 , and Ujagar Prints v. Union of India [1989] 74 STC 401 (SC) are cases of retrospective legislation relating to excise duty. The facts of Empire Industries Ltd. [1987] 64 STC 42 (SC); (1985) 3 SCC 314 reveal that originally by virtue of certain amendments certain excise duty was being collected from persons who were not involved in the manufacture of the fabric, but who were only doing certain processes like bleaching, dyeing, printing, finishing and mercerising. The question arose as to whether these processes would come within the definition of "manufacture". The department was collecting duties treating them as manufacturing processes. When the courts held that these processes did not come within the ambit of "manufacture" then amendments were made with retrospective effect to avoid refunding the taxes that were collected. In such a context the Supreme Court considered the contention regarding the retrospectivity and dealt with the question from paragraph 48 onwards. The court considered whether the impugned Act by giving retrospective effect imposes unreasonable restrictions on the fundamental rights. Then after referring to the Statement of Objects and Reasons and the judgment of the Gujarat High Court in Real Honest Textiles v. Union of India, Civil Appl. Nos. 1552, 1553 of 1977 and Nos. 249, 1292, 1293, 1294 and 1295 of 1978, which held that "fabric" used in the tariff description would only mean something that was woven, and it only relates to cloth in the grey stage, the Supreme Court observed in paragraphs 49 and 50 (at page 66 of 64 STC) as follows : "49. It has therefore to be borne in mind that the petitioners have already paid excise duty demanded of them from time to time and the present petitioners have gathered the duties from the consumers. 50. Imposition of tax by legislation makes the subjects pay taxes. It is well-recognised that tax may be imposed retrospectively. It is also well-settled that that by itself would not be an unreasonable restriction on the right to carry on business. It was urged, however, that unreasonable restrictions would be there because of the retrospectivity. The power of the Parliament to make retrospective legislation including fiscal legislation are well-settled. (See Krishnamurthy & Co. v. State of Madras [1973] 31 STC 190 (SC); [1973] 2 SCR 54). It was urged, however, that unreasonable restrictions would be there because of the retrospectivity. The power of the Parliament to make retrospective legislation including fiscal legislation are well-settled. (See Krishnamurthy & Co. v. State of Madras [1973] 31 STC 190 (SC); [1973] 2 SCR 54). Such legislation per se is not unreasonable. There is no particular feature of this legislation which can be said to create any unreasonable restriction upon the petitioner." Then referring to the history as to how the various amendments created difficulty, etc., the court observed that this is an instance of retroactive curing of a defect which arose due to the defects in the drafting of the legislation. In such circumstances, giving retrospective operation to the amendment introduced, cannot be considered as imposing unreasonable restriction. 20A. The court after referring to the passage in Harvard Law Review, volume 73, observed in paragraph 52 (at page 67 of STC) as follows : "The impugned legislation does not act harshly nor there is any scope for arbitrariness or discrimination." Then the court went on to observe in paragraph 53 (at page 67 of STC) as follows : "53. .... A tax-payer subject is entitled only to such benefit as is granted by the legislature. Taxation under the Act is the rule and benefit and exemption, the exception. And in this case there is no hardship." On the other hand, if the retrospective effect is not given to the statute, the Government will have to reopen several assessments and refund crores of rupees, which were already collected. In the present batch of cases, we are not concerned with such a situation. Ujagar Prints v. Union of India [1989] 74 STC 401, is a decision of the Supreme Court which upholds and approves the earlier decision in Empire Industries Ltd. v. Union of India [1987] 64 STC 42 (SC); (1985) 3 SCC 314 . Contention (d) raised in this decision is whether the retrospective operation of the Amending Act is an unreasonable restriction on the fundamental right of the "processors" under article 19(1)(g) of the Constitution. The various questions raised are given at page 420. The contention(d) was considered at pages 430 and 431. Contention (d) raised in this decision is whether the retrospective operation of the Amending Act is an unreasonable restriction on the fundamental right of the "processors" under article 19(1)(g) of the Constitution. The various questions raised are given at page 420. The contention(d) was considered at pages 430 and 431. At page 430 the Court observed : "A competent legislature can always validate a law which has been declared by courts to be invalid, provided the infirmities and vitiating factors noticed in the declaratory judgment are removed or cured. Such a validating law can also be made retrospective." Then the court observed at the bottom of page 430 as follows : "In testing whether a retrospective imposition of a tax operates so harshly as to violate the fundamental rights under article 19(1)(g), the factors considered relevant include the context in which retroactivity was contemplated such as whether the law is one of validation of taxing statutes struck down by courts for certain defects; the period of such retroactivity, and the degree and extent of any unforeseen or unforeseeable financial burden imposed for the past period, etc. Having regard to all the circumstances of the present case, this Court in Empire Industries' case, [1987] 64 STC 42; [1986] 162 ITR 846; [1985] Supp 1 SCR 292, held that the retroactivity of the amending provisions was not such as to incur any infirmity under article (19(1)(g). We are in respectful agreement with that view." 21. If we judge the facts of the present batch of original petitions in the light of the principles laid down in these two decisions, Empire Industries case [1987] 64 STC 42 (SC); (1985) 3 SCC 314 and Ujagar Prints' case, [1989] 74 STC 401 (SC) we find that the present cases come under the category of fresh taxation which imposes an unforeseen and unforeseeable financial burden with retrospective effect for a long period of five years and four months. The present taxation is not in the nature of a validation of a taxing statute struck down by courts. The protection available to the Acts considered in these two decisions is not available to the present Ordinance 7 of 1989 and Act 3 of 1990. 22. The Government Pleader relied upon Government of A.P. v. Hindustan Machine Tools Ltd. AIR 1975 SC 2037 ; (1975) 2 SCC 274 . The protection available to the Acts considered in these two decisions is not available to the present Ordinance 7 of 1989 and Act 3 of 1990. 22. The Government Pleader relied upon Government of A.P. v. Hindustan Machine Tools Ltd. AIR 1975 SC 2037 ; (1975) 2 SCC 274 . In this decision the State had to amend the definition of "house" with retrospective effect to get over a decision of the High Court. When a factory was built in the outskirts of the Hyderabad City, a huge township was built along with the factory. The question arose whether the factory and the huge township constructed as a colony are taxable by the Gram Panchayat or not. In view of the earlier decision of the High Court, amendment was brought with retrospective effect. In such a situation an argument was raised that the amending Act giving retrospective effect amounts to encroaching upon the judicial function. The court observes in paragraph 10 at page 278 as follows : "... The power of the Legislature to pass a law postulates the power to pass it prospectively as well as retrospectively, the one no less than the other. Within the scope of its legislative competence and subject to other constitutional limitations, the power of the Legislature to enact laws is plenary." Then dealing with the aspect as to whether the amending Act has the effect of encroaching upon judicial functions, the court observed as follows : "... the new definition shall have retrospective effect, notwithstanding anything contained in any judgment, decree or order of any court or other authority. In other words, it has removed the basis of the decision rendered by the High Court so that the decision could not have been given in the altered circumstances ..." This is also a case of validating a levy which the panchayat thought it was entitled to under the old Act. 23. Misrilal Jain v. State of Orissa AIR 1977 SC 1686 ; (1977) 3 SCC 212 is a case of validating enactment imposing tax with retrospective effect. The court observed at page 216 in paragraph 5 as follows : "..... 23. Misrilal Jain v. State of Orissa AIR 1977 SC 1686 ; (1977) 3 SCC 212 is a case of validating enactment imposing tax with retrospective effect. The court observed at page 216 in paragraph 5 as follows : "..... The Court further held in Khyerbari AIR 1964 SC 925 , that the mere fact that a validating taxing statute has retrospective operation does not change the character of the tax nor can it justify the Act being branded as a colourable piece of legislation in any sense." The court further observed in paragraph 6 as follows : "... There is a large volume of authority showing that if the vice from which an enactment suffers is cured by due compliance with the legal or constitutional requirements, the Legislature has the competence to validate the enactment and such validation does not constitute an encroachment on the functions of the judiciary. The validity of a validating taxing law depends upon whether the Legislature possesses the competence over the subject-matter of the law, whether in making the validation it has removed the defect from which the earlier enactment suffered and whether it has made due and adequate provision in the validating law for a valid imposition of the tax." Federation of Hotel & Restaurant Association of India v. Union of India [1989] 74 STC 102 (SC) is a decision dealing with expenditure tax. It was contended that the imposition of the tax reduces the profits. Dealing with such a case, the court observed at page 126 in paragraph 21 as follows : "It is now well-settled that though taxing laws are not outside article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy, the legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc., for taxation. The tests of the vice of discrimination in a taxing law, are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. The tests of the vice of discrimination in a taxing law, are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory." The Court further observed in paragraph 24 as follows : "It is also contended : '......... Several of the hotels belonging to members of petitioner associations have entered into long-term contracts for supply of food and beverages and for providing accommodation. The execution of such contracts would become onerous and even impossible in view of the levy of the present expenditure tax. There is no provision in the Act or any separate legislation whereby hotels can pass on such a tax to persons who have contractually agreed to avail of any services at contracted rates .....'" "25. A taxing statute is not, per se, a restriction of the freedom under article 19(1)(g). The policy of a tax, in its effectuation, might, of course, bring in some hardship in some individual cases. But that is inevitable, so long as law represents a process of abstraction from the generality of cases and reflects the highest common factor. Every cause, it is said, has its martyrs. Then again, the mere excessiveness of a tax or even the circumstance that its imposition might tend towards the diminution of the earnings of profits of the persons of incidence does not, per se, and without more, constitute violation of the right under article 19(1)(g)." Excepting the last observation in this decision, the other principles laid down by this decision are not applicable to the facts of our case. 24. If we analyse the ratio of the decisions relied upon by the Government Pleader, we find that taxation statutes with retrospective effect have been upheld when the process is one of retroactive curing of a defect which arose due to defects in the law or as a result of courts decisions. In such cases, validating enactments are passed to avoid making refund and reopening of the assessments. Such instances do not impose an unreasonable burden by virtue of the retrospective operation of the taxation law. In such cases, validating enactments are passed to avoid making refund and reopening of the assessments. Such instances do not impose an unreasonable burden by virtue of the retrospective operation of the taxation law. So also we come across instances where retrospective operation in taxing statute is given for a very short period, as in the case of Hotel Elite v. State of Kerala [1988] 69 STC 119 (Ker) and Malabar Fruit Products Company v. Sales Tax Officer [1972] 30 STC 537 (Ker) and Yusuf Shabeer v. State of Kerala [1973] 32 STC 359 (Ker). In Hotel Elite's case [1988] 69 STC 119 (Ker) at the stage of arguments, the Advocate-General gave an assurance that tax would be collected only prospectively and not retrospectively. The court did not actually uphold the validity of the retrospective effect, but recording the concession made by the Advocate-General, it refused to pronounce on the validity of the retrospectivity of the taxation. In Malabar Fruit Products Company's case [1972] 30 STC 537 (Ker) and Yusuf Shabeer's case [1973] 32 STC 359 (Ker), the court considered the instance where retrospectivity extended only for six weeks, and on facts, after going into the question of reasonableness of the retrospective effect, it found that it did not actually operate as an unreasonable burden. It also held that on facts retrospectivity for the short period has not amounted to making the businessmen suffer heavily nor has it rendered the tax into one of a confiscatory character. The Division Bench approved the decision, and held that there may be instances where the retrospectivity may impose unreasonable burden and where the retrospective imposition of the tax may infringe article 19(1)(g) of the Constitution. On facts they found that there was neither unreasonable burden, nor infringement of the right under article 19(1)(g). The two decisions are based mostly on the test of reasonableness and on the basis of the short period for which the retrospectivity is given. The third set of cases are all cases where to get over the judgment of the High Court or the Supreme Court, Acts have been passed with retrospective operation and in such cases, on the basis of the principle that validating enactments are given a more liberal interpretation, retrospective operation has been upheld. The third set of cases are all cases where to get over the judgment of the High Court or the Supreme Court, Acts have been passed with retrospective operation and in such cases, on the basis of the principle that validating enactments are given a more liberal interpretation, retrospective operation has been upheld. There is absolutely no decision relied upon by the Government Pleader which shows that retrospective imposition of tax for a period of five years and four months has been upheld by any court. Considering the fact that Ordinance 7 of 1989 and Act 3 of 1990 are instances of first time taxation, they can only have prospective operation and they cannot have retrospective operation. 25. On the other hand, we come across instances as in Hotel Elite's case [1988] 69 STC 119 (Ker), where even for a short period the State undertook not to give retrospective effect. In Shew Bhagwan Goenka's case [1973] 32 STC 368 (Cal) the court refused to uphold the retrospective operation, applying the test of reasonableness, and it also held that retrospective taxation which imposes an unreasonableness and unforeseen and unforeseeable burden partakes of the character of ex post facto legislation, and offends the the rationale of article 20 of the Constitution. In State of A.P. v. V. V. Rama Rao and Company [1989] 74 STC 190, the Andhra Pradesh High Court, dealing with a case where television sets were being taxed for the first time by virtue of the amending entry 3 in 1976, refused to give it retrospective operation and declared that it will have only prospective operation. 26. If we judge the facts of our cases in the light of these three decisions, we find that Ordinance 7 of 1989 and Act 3 of 1990 which were sought to be given retrospective effect from April 1, 1984, though the Ordinance was promulgated on August 29, 1989, cannot be upheld because they impose an unreasonable and unexpected fresh burden. They cannot also be upheld because of the unduly long period for which the retrospectivity is sought to be given, namely, five years and four months. In the very nature of things, according to the settled principles applicable to taxing statutes, Ordinance 7 of 1989 and Act 3 of 1990 can only have prospective operation, and they cannot have retrospective operation. 27. In the very nature of things, according to the settled principles applicable to taxing statutes, Ordinance 7 of 1989 and Act 3 of 1990 can only have prospective operation, and they cannot have retrospective operation. 27. For the various reasons given above, I hold on point No. 1 that amendments to entry 155 of the First Schedule introduced by Ordinance 7 of 1989 and Act 3 of 1990 cannot have retrospective operation from April 1, 1984. They can only have prospective operation from August 29, 1989, the date of promulgation of the Ordinance. I hold on point No. 2 that the retrospective taxation of agarbathis from April 1, 1984 imposes an unreasonable and unexpected fresh burden and hence it is liable to be quashed. I hold on point No. 3 that as per the well-accepted and settled principles governing the validity of taxing statutes, Ordinance 7 of 1989 and Act 3 of 1990 can only have prospective operation, and giving them retrospective operation is not valid. 28. I shall now briefly refer to each original petition and record my findings. (1) O.P. No. 9375 of 1989 : In this case there are nine petitioners, who are all dealers in agarbathis. Exhibit P1 is the notice given to the first petitioner. It is claimed that similar notices were issued to the other petitioners. In the case of all the petitioners, they have paid tax at 5 per cent on the turnover of agarbathis. The department is now claiming to tax them at 10 per cent and it proposes to reopen the assessment and demand the other 5 per cent. Exhibit P1 and similar notices issued to petitioners 2 to 9 are not valid. They are liable to be quashed. In the result Original Petition No. 9375 of 1989 is allowed. Exhibit P1 notice is quashed and similar notices issued to petitioners 2 to 9 shall stand cancelled. (2) O.P. No. 10385 of 1989 : This original petition is filed by four petitioners. Exhibit P1 notice given to the first petitioner alone is filed. Exhibit P1 proposes to tax the first petitioner for the sales turnover of agarbathis at 10 per cent, while he has already paid 5 per cent tax on the turnover. Exhibit P1 is liable to be quashed, and it is accordingly quashed. Similar notices issued to other three petitioners shall stand cancelled, as there is no retrospective operation. Exhibit P1 proposes to tax the first petitioner for the sales turnover of agarbathis at 10 per cent, while he has already paid 5 per cent tax on the turnover. Exhibit P1 is liable to be quashed, and it is accordingly quashed. Similar notices issued to other three petitioners shall stand cancelled, as there is no retrospective operation. The original petition is allowed. (3) O.P. No. 7682 of 1990 : In this original petition there is only one petitioner. Exhibit P1 is the pre-assessment notice. Exhibit P2 is the assessment order. Exhibit P3 is the revised assessment order. The revised assessment order, exhibit P3, which seeks to collect another 5 per cent of sales tax on the turnover of agarbathis which comes to Rs. 1,76,407.40 is hereby quashed. The Sales Tax Department is not entitled to collect Rs. 11,025.43 sought to be claimed under exhibit P3 demand notice. The original petition is allowed. (4) O.P. No. 1092 of 1990 : This is a case of one petitioner. On the turnover of agarbathis of Rs. 1,57,789.18, the State is entitled to collect only 5 per cent sales tax and it is not entitled to collect 10 per cent sales tax. Exhibit P1 shall stand modified accordingly. The original petition is allowed. (5) O.P. No. 1022 of 1990 : There is only one petitioner, and the turnover of agarbathis is Rs. 6,45,246.39. Under exhibit P3 tax at 10 per cent is imposed on the turnover of agarbathis. Exhibit P3 order dated December 21, 1989, shall be modified so as to levy only 5 per cent sales tax on the turnover of agarbathis instead of 10 per cent tax levied under exhibit P3. Exhibit P3 order reveals that there appears to be some mistake because the total turnover of agarbathis is indicated in exhibit P3 as the taxation amount. This mistake may be looked into by the authorities concerned. The original petition is allowed. (6) O.P. No. 433 of 1990 : Under exhibit P1 on the turnover of agarbathis, though 5 per cent tax has been suffered, the proposal is to impose tax at 10 per cent. Hence it is hereby declared that the turnover of agarbathis is exigible to tax only at 5 per cent and not at 10 per cent. The original petition is allowed and exhibit P1 is quashed. Hence it is hereby declared that the turnover of agarbathis is exigible to tax only at 5 per cent and not at 10 per cent. The original petition is allowed and exhibit P1 is quashed. (7) O.P. No. 7571 of 1990 : This original petition is filed by one petitioner, namely, Karunagappally Traders. In this case tax has already been paid at the rate of 5 per cent on the sales turnover of agarbathis amounting to Rs. 4,76,825.18. Exhibit P1 order which seeks to levy tax at 10 per cent shall stand quashed. The original petition is allowed. (8) O.P. No. 10378 of 1989 : Here the solitary petitioner challenges exhibit P1 assessment order, and exhibit P2 demand notice. He has already paid at the rate of 5 per cent and now under exhibits P1 and P2 another amount of Rs. 21,866.50 is sought to be collected. Exhibit P2 demand notice is hereby quashed. The original petition is allowed. (9) O.P. No. 1059 of 1990 : In this petition the petitioner prays for only quashing exhibit P2 which relates to the demand for sales tax at 10 per cent based upon the monthly returns for June, 1989 to October, 1989. In view of the findings recorded by me, for the months of June and July the petitioner is only liable to pay tax on the turnover of agarbathis at 5 per cent. The department is not entitled to demand sales tax at 10 per cent for these two months. For the month of August, up to August 28, 1989, the turnover should be taxed at the rate of 5 per cent only. For the turnover effected on 29th, 30th and 31st August, 1989, the Ordinance would be applicable and the petitioner would be liable to pay 10 per cent sales tax on the turnover of agarbathis. For the months of September and October, 1989, the petitioner is certainly liable to pay sales tax at the rate of 10 per cent on the turnover of agarbathis. The petitioner is not entitled to any relief for the period from August 29, 1989 to the end of October, 1989. For the months of September and October, 1989, the petitioner is certainly liable to pay sales tax at the rate of 10 per cent on the turnover of agarbathis. The petitioner is not entitled to any relief for the period from August 29, 1989 to the end of October, 1989. In this view of the matter, there shall be a direction to the Sales Tax Officer, First Circle, Cannanore, directing him to modify exhibit P1 so that tax at the rate of 5 per cent is demanded from June 1, 1989 to August 28, 1989 on the turnover of agarbathis, and 10 per cent sales tax is demanded for the sales turnover of agarbathis for the period from August 29, 1989 to October 31, 1989. The original petition is partly allowed. 29. In the result, all the original petitions stand allowed as indicated above. Each party shall bear its own costs in each case. In some of the original petitions where petitions have been filed to amend the prayer as a result of Act 3 of 1990 replacing of the Ordinance, the petitions are allowed.