AGRICULTURAL INCOME TAX OFFICER vs. GOODRICKE GROUP LTD

Page 4 JUDGMENT C.A. No. 9043/2003 4 final judgment in Goodricke Group Ltd.'s case , an interim order was passed dated 25.01.1990 in the following terms: “Issue notice. In the meantime the assessment may be made as usual but there will be no enforcement of demand under the Act or Rules. Status quo to be maintained as far as refund of Cess is concerned.” Learned counsel for the appellant Shri Anip Sachthey has argued before us that the impugned judgment should be set aside on the ground that the interim order dated 16.06.1983 in the Buxa Dooars Tea Company Ltd.'s case did not survive as it was substituted by the final order in the Buxa Dooars Tea Company Ltd.'s case, which is to be found in Para 16 thereof, which stated that the two West Bengal Acts were declared void and consequential refund ordered. There was no separate order as to payment of interest in the final judgment and therefore the interim order which merges with the final judgment had no independent existence. He has also urged that since the two West Bengal Acts were amended in 1989 with retrospective effect from 1981 and 1984 respectively, the basis of the judgment in Buxa Dooars Tea Company Ltd.'s case was removed and as a result, it is clear that no refund at all is payable. Mr. C. U. Singh, learned senior counsel appearing on behalf of the respondent, on the other hand, supported the judgment on both counts and submitted that the levy under the original Act no longer remained the same, so that the

Page 5 JUDGMENT C.A. No. 9043/2003 5 levy under the 1989 amendment was a separate and new levy of rural employment cess and education cess, and this being the position, the interim order as well as the final judgment in Buxa Dooars Tea Company Ltd.'s case still remain intact. He further submitted that the interim order was self operative inasmuch as interest became payable at the rate of 12 per cent the moment the writ petitions were finally decided in the petitioner's favour. He also supported the second portion of the impugned judgment saying that the final order in Goodricke Group Ltd.'s case is to be read with the interim order thereof and if so read, the result is that interest is only payable under the new Act with effect from the date of assessment and not before. We have heard learned counsel for the parties. In our opinion, Mr. C. U. Singh, learned counsel appearing on behalf of the respondents, is right in saying that the interim order dated 16.06.1983 is self operative. In any case, the final order in Buxa Dooars Tea Company Ltd.'s case did not say anything to the contrary, and when both the judgment and the interim order are read together, it is clear that the refund will have to be made together with 12 per cent interest. But the matter does not end here. The Amendment Act contains two very important provisions, namely, Section 4B

Page 6 JUDGMENT C.A. No. 9043/2003 6 of the West Bengal Rural Employment and Production Act and Section 78C of the West Bengal Primary Education Act. Both the sections are set out hereinbelow: - “4B. (1) Where any sum has been paid by, or collected from, any owner of a tea estate during the period commencing on the 1st day of April, 1981 and ending on the day immediately preceding the date of coming into force of the West Bengal Taxation Laws (Second Amendment) Act, 1989 as rural employment cess in respect of any period prior to the coming into force of the said Act, such portion of the said sum as may become payable in accordance with the provisions of this Act after the coming into force of the said Act shall, notwithstanding any judgment, decree or order of any court, be deemed to have been validly levied, paid or collected under this Act, and where after assessment or fresh assessment any portion of such sum is found to have been levied, paid or collected in excess of the rural employment cess payable for the said period shall be refunded to such owner in accordance with the provisions of this Act and the rules made thereunder. (2) Where any assessment is purported to have been made, or any order is purported to have been passed on appeal, revision or review, by any authority, or any appeal or application for revision or review has been made before such authority under this Act, or any order has been passed by a court or where any sum has been paid or collected as rural employment cess, before the coming into force of the West Bengal Taxation Laws (Second Amendment) Act, 1989, in respect of any period prior to the coming into force of the said Act, assessment or fresh assessment shall, notwithstanding such order on appeal, revision or review, or the pendency of such appeal or application for revision or review, or any order passed by a court, be made in accordance with the provisions of this Act within four years from the date of coming into force of the said Act. (3) Notwithstanding anything contained in this Act, any default by an owner of a tea estate to make payment of the rural employment cess or to apply for registration or to file return in accordance with the provisions of this Act after the coming into force of the West Bengal Taxation Laws (Second Amendment) Act, 1989 in respect of any

Page 7 JUDGMENT C.A. No. 9043/2003 7 period prior to the coming into force of the said Act shall not be deemed to be a contravention of such provisions if such owner makes payment of such rural employment cess within one month or files return within six months, as the case may be, from the date of coming into force of the said Act. (4) The amount of the rural employment cess payable by any owner of a tea estate under sub- section (2A) of section 4 of this Act in respect of any period prior to the coming into force of the West Bengal Taxation Laws (Second Amendment) Act, 1989, shall, notwithstanding anything contained in this Act, be reduced by such amount of rural employment cess payable in respect of such tea estate on such quantity of green tea leaves produced therein during the said period as may be equivalent to the quantity of any tea despatched for which such owner has purported to have enjoyed or would have enjoyed exemption from payment of the rural employment cess during such period, and it is hereby declared that for determining the amount of the rural employment cess to be reduced, each kilogram of tea despatched during such period shall be equivalent to four and a half kilograms of green tea leaves produced in such tea estate.” “78C. “Validation and exemption. (1) Where any sum has been paid by, or collected from, any owner of a tea estate during the period commencing on the 14th day of April, 1984 and ending on the day immediately preceding the date of coming into force of the West Bengal Taxation Laws (Second Amendment) Act, 1989 as education cess in respect of any period prior to the coming into force of the said Act, such portion of the said sum as may become payable in accordance with the provisions of this Act after the coming into force of the said Act shall be deemed to have been validly levied, paid or collected under this Act, and where after assessment any portion of such sum is found to have been levied, paid or collected in excess of the amount payable as education cess for the said period shall be refunded to such owner in accordance with the provisions of this Act and the rules made thereunder. (2) Where any assessment is purported to have been made, or any order is purported to have been passed on appeal, revision or review, by any authority, or any appeal or application for revision or review has been made before such authority under this Act, or any order has been passed by a court, or where any sum has been paid or collected as education cess, before the coming

Page 8 JUDGMENT C.A. No. 9043/2003 8 into force of the West Bengal Taxation Laws (Second Amendment) Act, 1989, in respect of any period prior to the coming into force of the said Act, assessment

fresh

assessment

shall, notwithstanding such order on appeal, revision or review or the pendency of such appeal or application for revision or review or any order passed by any court, be made in accordance with the provisions of this Act within four years from the date of coming into force of the said Act. (3) Notwithstanding anything contained in this Act, any default by an owner of a tea estate to make payment of the education cess or to apply for registration or to file return in accordance with the provisions of this Act after the coming into force of the West Bengal Taxation Laws (Second Amendment) Act, 1989 in respect of any period prior to the coming into force of the said Act shall not be deemed to be a contravention of such provisions if such owner makes payment of such education cess within three months or applies for registration within one month or files return within six months, as the case may be, from the date of coming into force of the said Act. (4) The amount of the education cess payable by any owner of a tea estate under sub-section (2A) of Section 78 of this Act in respect of any period prior to the coming into force of the West Bengal Taxation Laws (Second Amendment) Act, 1989, shall notwithstanding anything contained in this Act, be reduced by such amount of education cess payable in respect of such tea estate on such quantity of green tea leaves produced therein during the said period as may be equivalent to the quantity of any tea despatched for which such owner has purported to have enjoyed or would have enjoyed exemption from payment of the education cess during such period, and it is hereby declared that for determining the amount of the education cess to be reduced, each kilogram of tea despatched during such period shall be equivalent to four and a half kilograms of green tea leaves produced in such tea estate. (5) The provisions of this section shall have effect, notwithstanding any judgment, decree or order of any court, tribunal or other authority to the contrary.” It is clear from a reading of Section 4B and 78C that where any sum is paid by or collected from an owner

Page 9 JUDGMENT C.A. No. 9043/2003 9 of a tea estate during a period commencing from 01.04.1981 or 14.04.1984, as the case may be, up to the date of the Amendment Act as rural employment cess or as education cess, such portion of the said sum as may become payable under the provisions of the Amendment Act shall, notwithstanding any judgment, decree or order of any court, be deemed to have been validly levied, paid or collected under the Amendment Act. In our view, the purport of these two sections is clear. Whatever may have been the subject matter of Buxa Dooars Tea Company Ltd.'s case, that is the subject matter of the two Acts as originally enacted, will now, notwithstanding the interim order or the final judgment in Buxa Dooars Tea Company Ltd.'s case, be deemed to have been validly levied, collected and paid as rural employment cess and education cess under the Amendment Act. This being the case, it is clear that Section 4B and Section 78C have changed the basis of the law as it existed when Buxa Dooars Tea Company Ltd.'s case was decided and consequentially, the judgment and interim order passed in Buxa Dooars Tea Company Ltd.'s case will cease to have any effect. Also, what would have been payable under the Act as unamended, is now payable only under the 1989 Amendment Act which has come into force

Page 10 JUDGMENT C.A. No. 9043/2003 10 with retrospective effect. Mr. C. U. Singh, however, referred us to 'Madan Mohan Pathak v. Union of India and others' [1978 (3) SCR 334] and in particular to Justice P. N. Bhagwati's judgment thereof, in which it has been decided by this Court that a Legislative Act cannot directly undo a writ of mandamus that is granted by an order of a superior court. We are of the view that Madan Mohan Pathak's case would not apply to the facts in the present case for the simple reason that what has been undone by Section 4B and Section 78C is not a mandamus issued by a superior court. What is undone is the very basis of the judgment in Buxa Dooars Tea Company Ltd.'s case by retrospectively changing the levy of rural employment cess and education cess. It must be understood that rural employment cess and education cess continue to be the same cess whether before or after the Amendment Act. What has been changed is the basis for the said levy so as to undo the defects that were found in the Buxa Dooars Tea Company Ltd.'s case judgment. It is obvious that when the basis of Buxa Dooars Tea Company Ltd.'s case has gone, on a retrospective amendment of these two acts, the interim order and the judgment and order in Buxa Dooars Tea Company Ltd.'s case can no longer survive. For this reason, we are of the view that the impugned judgment needs to be set aside on this score. In fact, Madan

Page 11 JUDGMENT C.A. No. 9043/2003 11 Mohan Pathak has been explained in Indian Aluminium Company v. State of Kerala, [(1996) 7 SCC 637] as follows: “49. In Madan Mohan Pathak v. Union of India [(1978) 2 SCC 50 : 1978 SCC (L&S) 103] , on the basis of a settlement, bonus became payable by LIC to its Class III and Class IV employees. In a writ, a Single Judge of the Calcutta High Court issued mandamus directing payment of bonus as provided in the settlement. During the pendency of letters patent appeal, LIC (Modification of Settlements) Act, 1976 was enacted denying bonus payable to the employees. The appeal was withdrawn. The validity of 1976 Act was challenged in this Court under Article 32 of the Constitution. A Bench of seven Judges had held that Parliament was not aware of the mandamus issued by the court and it was declared that the 1976 Act was void and writ of mandamus was issued to obey the mandamus by implementing or enforcing the provisions of that Act and directed payment of bonus in terms of the settlement. It was pointed out that there was no reference to the judgment of the High Court in the Statement of Objects and Reasons, nor any non obstante clause referring to the judgment of the Court was made in Section 3 of the Act. Attention of Parliament was not drawn to the mandamus issued by the High Court. When the mandamus issued by the High Court became final, the 1976 Act was held invalid. Shri R.F. Nariman laid special emphasis on the observations of learned Chief Justice Beg who in a separate judgment had pointed out that the basis of the mandamus issued by the court could not be taken away by indirect fashion as observed at p. 743c to f. From the observations made by Bhagwati, J. per majority, it is clear that this Court did not intend to lay down that Parliament, under no circumstance, has power to amend the law removing the vice pointed out by the court. Equally, the observation of Chief Justice Beg is to be understood in the context that as long as the effect of mandamus issued by the court is not legally and constitutionally made ineffective, the State is bound to obey the directions. Thus understood, it is unexceptionable. But it does not mean that the learned Chief Justice intended to lay down the law that mandamus issued by court cannot at all be made ineffective by a valid law made by the legislature, removing the defect pointed out by the court.” This statement of law has been accepted in yet

Page 12 JUDGMENT C.A. No. 9043/2003 12 another judgment of this Court. (See: State of Kerala v. Peoples Union for Civil Liberties, Kerala State Unit & Ors., [(2009) 8 SCC 46 at paragraph 65]. Bhagwati, J.’s judgment in Madan Mohan Pathak also makes it clear that Section 3 of the impugned Act in that case sought to modify a settlement dated 24th January, 1974 arrived at between the LIC and its employees. There was no reference to a Mandamus issued by the Calcutta High Court in the Statement of Objects and Reasons as a result of which Section 3 of the impugned Act did not contain a non- obstante clause referring to any judgment of any court. The right given under the said judgment was therefore not sought to be taken away by the impugned Act. Further, inexplicably, the Letters Patent Appeal filed by the LIC was not pressed as otherwise Section 3 of the impugned Act would only have to be applied to the facts in that case to upset the Single Judge judgment that had issued the Writ of Mandamus. Bhagwati, J. also went on to state that the judgment given by the Calcutta High Court was not a mere declaratory judgment holding an impost or tax to be invalid, so that a validation statute can remove the defect pointed out by the judgment and amend the law with retrospective effect to validate such impost or tax – See: Madan Mohan Pathak v. Union of India, [(1978) 3 SCR 334 at 352 to 355].

Page 13 JUDGMENT C.A. No. 9043/2003 13 In the present case, the 1989 amendment Act expressly seeks to remove the basis of Buxa dooars’s judgment by retrospectively changing the basis of the levy of the cesses mentioned above. In the present case, what is done away with by the Amending Act of 1989 is a declaratory judgment holding the above cesses to be invalid. On all these grounds also the judgment in Madan Mohan Pathak’s case is distinguishable. However, insofar as interest is concerned, post Goodricke Group Ltd.'s case, we are of the view that Mr. C. U. Singh is correct in supporting the impugned judgment. Goodricke Group Ltd.'s case made it clear that the petitioners shall pay cesses stayed by an order of this Court along with interest at 12 per cent per annum. The expression “cesses stayed” has reference to the interim order dated 25.01.1990 which had stated that there would be no enforcement of demand under the Act or Rules and in the meanwhile, assessment may be made. We have been informed that assessments were made with effect from July, 1993 onwards and consequential demands have been made with effect from 1995 onwards. It is clear, therefore, that the impugned judgment is right in holding that with regard to the payment of interest by the petitioner on the amount of cess payable by virtue of the Goodricke Group Ltd.'s case, interest would only be payable from the respective dates of assessment for the various relevant periods till recovery.

Page 14 JUDGMENT C.A. No. 9043/2003 14 On facts here, no question arises as to whether interest would become payable from the date of demand or from the date of the assessments inasmuch as counsel for the respondents supports the impugned judgment on this score and is not aggrieved thereby. The respondents here have made payment of interest from time to time to the State. These payments will be adjusted against any sum that would become payable as a result of this judgment. The appeal is disposed of accordingly. ..........................., J. [ A.K. SIKRI ] ..........................., J. [ R. F. NARIMAN ] New Delhi; March 25, 2015.