G.S. Drugs and Pharmaceuticals vs Commercial Tax Officer, M.G. Road, Circle, Secunderabad and Others

Lingaraja Rath, J.—The question raised in this writ petition concerns the competence of the Legislature to make enhanced retrospective levy of sales tax while amending the A.P.G.S.T. Act, 1957, replacing an Ordinance without justifying the reasons assigned in the Statement of Objects and Reasons under the Act. The petitioner is a distributor of drugs and pharmaceuticals for various manufacturers and is a stockist of medicines. By A.P. Ordinance No. 19 of 1996, amending the provisions of the Andhra Pradesh General Sales Tax Act, 1957 with effect from 1st August, 1996 levy was made at 9 per cent on drugs and medicines but in the Andhra Pradesh General Sales Tax (Amendment) Act, 1996 (Act No. 27 of 1996), the rate of tax was enhanced to 10 per cent, i.e., 1 per cent more, though, according to the petitioner, such an enhancement was not in any way justified under the Statement of Objects and Reasons. To support the proposition that enhancement has to be justified under the Statement of Objects and Reasons, reliance is placed on D. Cawasji and Co., Mysore Vs. State of Mysore and Another, : in which the following observations were made :

"It may be open to the Legislature to impose a levy of tax at a higher rate with prospective operation, but levy of taxation at a higher rate, which really amounts to imposition of tax, with retrospective operation has to be justified on proper and cogent grounds."

After hearing the learned Government Pleader for Commercial Tax Department, we are of the view that the objection has no merit. The power of the Legislature to make retrospective levy of taxes is too well-known to need reiteration. The learned Government Pleader has rightly invited our attention to a decision reported in Rai Ramkrishna and Others Vs. The State of Bihar, explaining the position. Since the power of the Legislature is a constitutional function to legislate and it is its inherent power to legislate either prospectively or retrospectively including the levy of taxes, there is no sanction of law to demand an explanation from the Legislature as to the necessity of the levy. It is another thing to say that a levy or retrospective levy is unconstitutional because of lack of legislative competence or because of its unreasonable nature, which may be appropriately termed as arbitrary. What was observed by the apex Court in D. Cawasji and Co., Mysore Vs. State of Mysore and Another, was that in the facts and circumstances of the case, to enhance levy from 6 per cent to 45 per cent with retrospective effect was arbitrary and unreasonable. The enhancement in that case was made to overcome the decision of the High Court wherein certain assessments had been found untenable in law and the Government was under an obligation to refund the levy duty. To obviate such difficulty, tax was enhanced retrospectively which the Supreme Court found in the circumstances to be arbitrary and unreasonable. The case was examined by a later decision of the Supreme Court in Entertainment Tax Officer and Another Vs. Ambae Picture Palace, , while examining a retrospective provision of tax in Andhra Pradesh Entertainments Tax (Amendment) Act, 1985 (Act 16 of 1985) :

"Though it is not for the State to justify or explain the necessity for the amendment even in relation to retrospectivity of the Act but obviously, on the face of it, there appeared to be a change of policy by a succeeding Government on the policy pursued by its predecessor. Surely, the successor Government can have different rules from their predecessor including the matters relating to taxation or mode of taxation or basis of taxation or objects of taxation, etc. No explanation was required from the State for the amending Act having retrospective effect.

Since this decision has considered the earlier in D. Cawasji and Co., Mysore Vs. State of Mysore and Another, and has explained it, it holds the field and is binding.

As it is, the circumstances of increase in the rate of tax by 1 per cent is in no way in comparison to the facts of the case in D. Cawasji and Co., Mysore Vs. State of Mysore and Another, where an abnormal rise was made retrospectively which the Supreme Court observed was prima facie arbitrary and unreasonable.

In these circumstances, we do not find any merit in the petition and the writ petition is accordingly dismissed.

Writ petition dismissed.