Ramesh Chandra Agrawal v. State of U. P — 1991 DIGILAW 1281 (ALL)

JUDGMENT R.B. Mehrotra, J. - By means of the present group of writ petitions, the petitioners have challenged the validity of the Opium (U.P. Amendment) Act, 1982 (U.P. Act No. 28 of 1982) whereby the State Legislature has inserted S. 5A to Section 5C in Act No. 1 of 1878, after Section 5, of the Opium Act, 1978. (sic) Section 1(3) of the Act gives retrospective effect to the provisions of the Act from July 1, 1969 and Section 3 of the Act validates the U.P. Poppy Head (Amendment) Rules, 1969 notwithstanding any judgment, decree or order of any court to the contrary. 2. Brief facts for decision of the writ petitions are that the State legislature framed U.P. Poppy Head (Amendment) Rules, 1969 and promulgated the same by notification, dated July 1, 1969. By means of the aforesaid Rules, it was provided : "42-A (i) Excise duty shall be payable on popy heads produced in Uttar Pradesh at the following rates :- (a) on poppy-heads exported outside Uttar Pradesh 25 paise per kilogram. (b) On poppy-heads other than mentioned at (a) 50 paise per kilogram. (ii) A countervailing duty at the rate of 50 paise per Kilogram shall be payable on poppy-heads produced outside Uttar Pradesh and imported into Uttar Pradesh. 3. The validity of the aforesaid Rules as well as S. 5 of the Opium Act, 1978 was challenged by means of a group of writ petitions in this Court. A Division Bench of this Court, vide its judgment, dated 12-4-1973 in the case of Rameshwar Prasad Kishan Gopal v. State of U.P. reported in, 1973 All LJ 739 quashed the notification dated July 1, 1969 promulgating U.P. Poppy-Head (Amendment) Rules 1969 on the ground that Rules are beyond the rule making power of the Act and issued a writ to the State Government prohibiting it from taking any action against the petitioners under the proviso of Rule 42A of the said Rules. The amount deposited by the petitioners on account of duty imposed under the said Rules was also ordered to be refunded. Aggrieved by the aforesaid order, the State Government filed a Special Leave petition in the Hon'ble Supreme Court. The amount deposited by the petitioners on account of duty imposed under the said Rules was also ordered to be refunded. Aggrieved by the aforesaid order, the State Government filed a Special Leave petition in the Hon'ble Supreme Court. We have been informed by the Learned Advocate General appearing on behalf of the State Government that the said Special Leave petition is still pending decision with the Hon'ble Supreme Court and it has not Yet been decided. No interim order passed by the Hon'ble Supreme Court in the aforesaid Special Leave petition has been brought on record, as such it is to be presumed that the Supreme Court has not passed any interim order in the matter. The learned Advocate General appearing on behalf of the State Government has also not stated that any interim order has been passed in the matter. 4. The petitioners are wholesale dealers in dried poppy heads and sale and purchase of poppy heads from other dealers. The petitioners are holding licences in Form PH-I granted under the U.P. Poppy Heads Rules, 1961. Under the aforesaid Rules, the currency of licence is only for year and it is renewable each year. Petitioner's licences were renewed from year to year regularly. 5. The present group of petitioners were not party in the group of writ petitions where in the Poppy-Head Rules, 1969 were quashed. So present petitioners filed another writ petition sometime in the year 1978. To be specific, petitioners of writ petition No. 92 of 1983 filed writ petition No. 1604 of 1979 on 13-2-1978 and in the aforesaid writ petition, they obtained an interim order on 13-2-1978 in the following terms. "Operation of Rule 42A of the Poppy-Head Rules is stayed in regard to its applicability to the petitioners only." 6. In the aforesaid writ petition, the petitioners contended that they had no knowledge of the fact that 1969 rules have been held to be ultra vires and have been quashed an in ignorance of the aforesaid facts, the petitioners had been depositing the duty imposed by the aforesaid Rules. The petitioners claimed that they came to know of the aforesaid fact i.e., quashing of the Notification dated 1-7-1969 only in the year 1978 and thereafter they filed a writ petition. The petitioners claimed that they came to know of the aforesaid fact i.e., quashing of the Notification dated 1-7-1969 only in the year 1978 and thereafter they filed a writ petition. Ultimately the petitioner's writ petition No. 1604 of 1978 was allowed on 24-8-1979 where in similar directions were issued as were issued in the Division Bench decision, reported in 1973 All LJ 739 and a direction to refund the poppy-head duty deposited by the petitioners was also made. The petitioners have contended that despite the orders of the Court, the State Government has not refunded the duty on poppy heads paid by the petitioners and instead thereof have enacted Opium (U.P. Amendment) Act, 1982 retrospectively incorporating in the Act the provisions of the Excise duty on opium and validating the provisions of U.P. Poppy-Head (Amendment) Rules, 1969. The petitioners have challenged the validity of the aforesaid Act in the present group of writ petition mainly on two grounds : 7. Firstly, that the Amendment Act to the extent it validates U.P. Poppy-Head (Amendment) Rules, 1969 is confiscatory in nature and it is violative of Article 19(1) (g) of the Constitution of India, and Secondly, the Amendment Act to the extent it gives retrospective effect to the provisions of the Act .is unreasonable and as such violative of Article 14 of the Constitution of India. 8. In support of their contention that the impugned Act is confiscatory in nature, the petitioners in Civil Misc. Writ No. 92 of 1983 have filed supplementary affidavit giving details of the total profits earned by the petitioners from the year 1977-78 to the year 1982-83 demonstrating that the petitioners are being made to pay more excise duty by means of the retrospective amendment in the Act than the total profits earned by them. The petitioners have stated that in the year 1977-78, the total sales effected by the petitioners amounted to Rs. 463.87 quintals of opium. The total price of the goods sold was for the sum of Rs. 51,000/- and the total gross profit representing the difference between the purchase price and sale price came to Rs. 17,000/-. After deducting necessary expenses, the net profit came to Rs. 12,000/- whereas the petitioners have to pay the excise duty to the tune of Rs. 23,000/- if the impugned Act is given retrospective effect. 51,000/- and the total gross profit representing the difference between the purchase price and sale price came to Rs. 17,000/-. After deducting necessary expenses, the net profit came to Rs. 12,000/- whereas the petitioners have to pay the excise duty to the tune of Rs. 23,000/- if the impugned Act is given retrospective effect. The petitioners have likewise demonstrated it in every year till 1982-83 that the petitioners are required to pay more excise duty under the amended Act than the total profits earned by the petitioners. 9. The petitioner's contention is that this Court has itself struck down the provisions of U.P. Poppy-Head (Amendment) Rules, 1969 whereby the duty and countervailing duty was imposed on sale of opium within the State and outside the State the petitioners did not realise the said duty from their customers as there was no valid law on the basis of which such duty could have been realised. In these circumstances, the petitioners' contention is that by amending the Act retrospectively the petitioners are being compelled to pay excise duty on poppy heads for past period during which the petitioners did not and could not pass over the duty to its customers. Sri Ravi Kant, learned counsel appearing for the petitioners in the leading case has submitted that imposition of duty on the petitioners in the aforesaid circumstances is both confiscatory and unreasonable. 10. The petitioner's counsel has mainly relied upon the observations made in the case of Rai Ramkrishna v. State of Bihar, reported in, 1963 SC page 1667. The observations relied upon from the aforesaid decision are being quoted for convenient reference. "It is also true that though the Legislature can pass a law and make its provisions retrospective, it would be relevant to consider the effect of the said retrospective operation of the law both in respect of the legislative competence of the legislature and the reasonableness of the restrictions imposed by it. "It is also true that though the Legislature can pass a law and make its provisions retrospective, it would be relevant to consider the effect of the said retrospective operation of the law both in respect of the legislative competence of the legislature and the reasonableness of the restrictions imposed by it. In other words, it may be open to a party affected by the provisions of the Act to contend that the retrospective operation of the Act so completely alters the character of the tax imposed by it as to take it outside the limits of the entry which gives the Legislature competence to enact the law or it may be open to it to contend in the alternative that the restrictions imposed by the Act are so unreasonable that they should be struck down on the ground that the) contravene his fundamental rights guaranteed under Article 19(l)(f) and (g). (Paragraph `11') .............. Where for instance it appears that the taxing statute is plainly discriminatory or provides no procedural machinery for assessment and levy of the tax, or that it is confiscatory, Courts would be justified in striking down the impugned statute as unconstitutional. (paragraph `12') ..........................." 11. On the basis of the aforesaid observations, Sri Ravi Kant, learned counsel for the petitioners, has submitted that it is open to the Courts to strike down a taxing statute on the ground that it is so unreasonable that it contravenes the fundamental rights guaranteed under Article 19 (1) (g) of the Constitution of India and also contends that the taxing statute can be struck down if it is held to be confiscatory in nature. On the facts of the present case, Sri Ravi Kant has submitted that Poppy-Head Rules, 1969 were struck down as far back as in the year 1973. For nine years there was no law authorising any person to levy excise duty on poppy heads. The Act was amended in the year 1982 after a lapse of nine years. In this view of the matter, the petitioners were not in a position to charge any excise duty on poppy heads from their customers. In the circumstances of the present case, the petitioners submitted that in the year 1978 they obtained a stay order from the High Court by virtue of which the operation of the 1969 Poppy Head Rules was stayed. In the circumstances of the present case, the petitioners submitted that in the year 1978 they obtained a stay order from the High Court by virtue of which the operation of the 1969 Poppy Head Rules was stayed. The petitioner's writ petition was also allowed in the year 1969 and in these circumstances, the petitioners did not charge any excise duty from their customers on poppy heads, right from the year 1978 to 1982 - till the aforesaid Amendment Act was promulgated retrospectively. The retrospective application of the Act, and the validation of the Rules are confiscatory in nature as under the Act and the validated rules, the petitioners will be required to pay more duty than the total profits earned by the petitioners in the trade, as such the duty will be clearly confiscatory as well as unreasonable as the petitioners could not have imagined that after lapse of nine years, the State Legislature would validate the law retrospectively. Under the licence granted to the petitioners for wholesale vend of poppy heads, the petitioners were entitled to pass over the duty to their customers but since there was no law permitting the petitioners to charge duty on poppy heads, the petitioners did not charge any such duty and the retrospective operation of the Act has created a situation where the petitioners are, being required to pay the duty beyond the total profits earned by them in the relevant years, as such the duty is clearly confiscatory in nature and is liable to be struck down. 12. In reply to the aforesaid submissions, Sri V.K.S. Chaudhary, learned Advocate General appearing for the State Government has submitted.- (1) That on the date the Opium (U.P. Amendment) Act, 1982 was enacted, Article 19(.1) (f) was not in existence, the petitioner can only contend that the Amending Act is violative of Article 19(1) (g) i.e., the petitioner's right to carry on trade is being affected by making confiscatory provisions. Since the right of trade of the petitioners is being claimed to be affected, the trade as a whole is to be considered and mere circumstances that the petitioners have suffered loss in particular years will not make the provisions confiscatory qua the petitioners trade. Since the right of trade of the petitioners is being claimed to be affected, the trade as a whole is to be considered and mere circumstances that the petitioners have suffered loss in particular years will not make the provisions confiscatory qua the petitioners trade. The petitioner's trade is a continuing process and merely on the ground that the petitioners have suffered loss in particular years, the provisions as such cannot be held to be confiscatory. (2) That the trade in opium is a trade in obnoxious goods, as such no fundamental right to trade in opium can be claimed to be affected, therefore, the petitioners cannot urge that the Amending Act is violative of petitioner's fundamental right to carry on trade and as such the ground, that the provisions of the Amending Act are confiscatory in nature qua petitioner's trade is not available to the petitioners. 13. The learned Advocate General has relied upon the following decisions in support of his contentions : - (1) AIR 1961 SC 1534 , J.K. Jute Mills Co, Ltd. v. State of Uttar Pradesh; (2) AIR 1963 SC 1667 , Rai Ram Krishna v. State of Bihar; (3) AIR 1970 SC 169 , Asstt. Commr. Urban Land Tax, Madras v. Buckingham and Carnatic Co. Ltd. (4) AIR 1977 SC 1686 , Misti Lal Jain v. State of Orissa; (5) (1987) 2 UPTC 1258, Food Corporation of India v. Commissioner of Sales Tax, U.P. 14. In the case of Rai Ram Krishna, AIR 1963 SC 1667 (supra), the Hon'ble Supreme Court held; "The position, therefore, appears to be well settled that if in its essential features a taxing statute is within the legislative competence of the Legislature which passed it, by reference to the relevant entry in the List, its character is not necessarily changed merely by its retrospective operation so as to make the said retrospective operation outside the legislative competence of the said Legislature ..............."(paragraph 15) That takes us to the question as to whether the restriction imposed on the appellants' right under Article 19(l)(f) and (g) by the retrospective operation of the Act is reasonable so as to attract the provisions of Article 19(5) and (6) ........................................ (Paragraph (16). "We do not think that such a mechanical test can be applied in determining the validity of the retrospective operation of the Act. (Paragraph (16). "We do not think that such a mechanical test can be applied in determining the validity of the retrospective operation of the Act. 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 ............................................................ (Paragraph 17). "In other words, between 1950 and 1960 proceedings were pending in Court in which this validity of the Act was being examined and if a validating Act had to be passed, the Legislature cannot be blamed for having awaited the final decision of this Court in the said proceedings ........ ............................ (paragraph 18). 15. In Asst. Commr. of Urban Land Tax Madras ( AIR 1970 SC 169 ) (supra) the Hon'ble Supreme Court held (paras 11 and 12). "In this connection it was said that the new Act by imposing a tax on the capital value at a certain rate was not correlated to the income or rateable value and, therefore, violates the requirement of reasonableness. We are unable to accept the proposition put forward by Mr. Chari. It is not possible to put the test of reasonableness into the strait-jacket of a narrow formula. The objects to be taxed, the quantum of tax to be levied, the condition subject to which it is levied, and the social and economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to the Legislature and not to the Courts. In applying the test of reasonableness it is also essential to notice that the power of taxation is generally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit. ................" "The impugned Act provides for the retrospective operation of the Act .......... It is not right to say as a general proposition that the imposition of tax with retrospective effect per se renders the law unconstitutional. ................" "The impugned Act provides for the retrospective operation of the Act .......... It is not right to say as a general proposition that the imposition of tax with retrospective effect per se renders the law unconstitutional. In applying the test of reasonableness to a taxing statute it is of course a relevant consideration that the tax is being enforced with retrospective effect but that is not conclusive in itself. Taking into account the legislative history of the present Act we are of opinion that there is no unreasonableness in respect of the retrospective operation of the new Act ................................ In M/s. Misri Lal Jain case ( AIR 1977 SC 1686 ) (supra), the Hon'ble Supreme Court held as under (at p. 1689 of AIR) :. "As regards the alleged encroachment by the legislative on fields judicial the argument overlooks that the Act of 1968 does not, like the Act under consideration in Jawaharmal AIR 1966 SC 764 declare that an invalid Act shall be deemed to be valid. It cures the constitutional vice from which the Act of 1959 suffered by obtaining the requisite sanction of the President and thus armed it imposes a new tax, though with retrospective effect. Imposition of taxes or validation of action taken under void laws is not the function of the judiciary and, therefore, by taking these steps the legislature cannot be accused of trespassing on the preserve of the judiciary ..................................." 16. In M/s. J.K. Jute Mills Company Ltd. ( AIR 1961 SC 1534 ) (supra), the Supreme Court held. "It is no doubt true that a sales tax is according to accepted notions, intended to be passed on to the buyer, and provisions authorising and regulating the collation of sales tax by the seller from the purchaser are a usual feature of sales tax legislation. But it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer, nor is the power of the legislature to impose a tax on sales conditional on its making a provision for seller to collect the tax from the purchaser. But it is not an essential characteristic of a sales tax that the seller must have the right to pass it on to the consumer, nor is the power of the legislature to impose a tax on sales conditional on its making a provision for seller to collect the tax from the purchaser. Whether a law should be enacted, imposing a sales tax, or validating the imposition of sales tax, when the seller is not in a position to pass it on to the consumer is a matter of policy and does not affect the competence of the legislature .............. ..........................." (Paragraph `13') "The power of a legislature to enact a law with reference to a topic entrusted to it, is as already stated, unqualified subject only to any limitation imposed by the Constitution. In the exercise of such a power, it will be competent for the legislature to enact a law, which is either prospective or retrospective. ........................................... ........................................ ." (Paragraph 15.) 17. In the case of Food Corporation of India, 1987 (2) UPTC 1258 (supra), a Division Bench of this Court held: "While considering the question whether a tax is confiscatory in nature, all the activities of a business organisation as a whole have to be taken into account. The confiscatory Government decided to validate the law after nature of tax cannot be judged a lapse of nine years, the same cannot be transaction wise. Admittedly, the petitioner held to be unreasonable. also deals in foodgrains other than covered under the levy order, e.g. pulses etc. The second submission of the learned additional tax was leviable upon food grains Advocate General has also substance. The dealers in general. There may be some loss in law was in relation to regulating the trade of one kind of transactions which may make up opium which was an obnoxious article. The the loss and still leave some profit in the petitioner cannot claim any fundamental right hands of dealers, or in a particular year there in dealing in opium as such any legislation may a set back but the position may not be may be made regulating the trade of opium the same in subsequent years. 17A. From a survey of the above that the same is violative of petitioner's decisions, following principles are fundamental right. However, even if it is culled out. 17A. From a survey of the above that the same is violative of petitioner's decisions, following principles are fundamental right. However, even if it is culled out. - (i) That legislature has power to make such a law for violation of their fundamental law both prospective and retrospective rights, the only fundamental rights the nature. (ii) A retrospective legislation cannot be challenged merely on the ground that tax payer has not been able to pass on the burden of the tax on the purchaser. (iii) A time gap in validating a law, in itself is of no consequence, it depends on the facts and circumstances of each case, to determine as to whether validation has been made within reasonable time in the circumstances of the case. (iv) Confiscatory nature of the imposition qua petitioner's right to carry on trade will have to be determined qua trade as a whole, merely showing losses in same years is not enough to hold the imposition as confiscatory in nature. 18. In the present case the mere fact that the retrospective validation of the Act was made after a lapse of nine years is of no consequence as the Hon'ble Supreme Court has held in Rai Ram Krishna's case ( AIR 1963 SC 1667 ) that no hard and fast rule can be laid down regarding time gap for validating a law. It depends on the facts and circumstances of the case as to whether the time gap in validating the law was reasonable in the circumstances of the case. It was held that if the Government waited for a decision of the final Court, a time gap of even 11 years in validating the law is justified. In the present (case, the matter is pending in the Supreme Court. In these circumstances, if the State Government decided to validate the law after a lapse of nine years the same cannot be held to be unreasonable. 19. The second submission of the learned Advocate General has also substance. The law was in relation to regulating the trade of opium which was an obnoxious article. The petitioner cannot claim any fundamental right in dealing in opinum as such any legislation may be made regulating the trade of opinum or imposing a tax cannot be challenged on the ground that the same is violative of petitioner's fundamental right. The law was in relation to regulating the trade of opium which was an obnoxious article. The petitioner cannot claim any fundamental right in dealing in opinum as such any legislation may be made regulating the trade of opinum or imposing a tax cannot be challenged on the ground that the same is violative of petitioner's fundamental right. However, even if it is assumed that the petitioners can challenge such a law for violation of their fundamental rights, the only fundamental rights the petitioners could claim to nave been violated is under Article 19(1)(g) of the Constitution of India that the impugned duty is confiscatory in nature. As already stated, the petitioners have relied upon the submissions made in the supplementary affidavit. From the aforesaid submission, it cannot be said that the petitioners have suffered a loss in the trade as such. The petitioners have not given any details of the profits earned by the petitioners after 1982-83 or before 1978. Assuming the statement made in the supplementary-affidavit in only one writ petition to be correct the only allegation. is that the petitioners will suffer some loss if they are compelled to pay the duty in particular years. Assuming it to be correct, the said loss cannot be of such nature that it can be held that the imposition was confiscatory in nature for the entire trade. Moreover, it may also be stated that details of figures given by the petitioners are not supported by any document nor it is clear from the aforesaid details whether the petitioners have already passed over the duty to its customers and are now being required to pay the said duty. The details given in the supplementary-affidavit are in vague term and on the basis of the aforesaid details, it cannot be said that the said duty imposed on the petitioners is of confiscatory nature. The petitioners have also failed to make out any case that the alleged imposition of duty by the amending Act is unreasonable. In view of these factual findings, it is clear that the petitioners have failed to make out any case for interference in exercise of jurisdiction under Article 226 of the Constitution of India. The imposition of duty by the amending Act has neither been established to be unreasonable or confiscatory in nature. 20. As a result, the writ petitions fail and are dismissed. The imposition of duty by the amending Act has neither been established to be unreasonable or confiscatory in nature. 20. As a result, the writ petitions fail and are dismissed. The parties will bear their own costs.