Torrent Power Ltd Vs Union of India (Gujarat High Court)
“Transmission” and “distribution” being separately understood in the trade concerning electricity and they having been separately defined and dealt with under the Electricity Act, the impugned circular “clarifying” that transmission and distribution are one and the same cannot be held as valid and legal. Transmission and distribution are separate activities. If the Respondents chose to include even “distribution” in the list of prohibited activities for the purpose of EPCG scheme they could have always done so prospectively by amending Para 5.01(g) of the scheme. It is not even the case of the writ applicants that the respondents cannot prospectively enlist the distribution activity in the prohibited category under the EPCG scheme. However the attempt made by the respondents to give retrospective effect to the prohibition of distribution activity by using the nomenclature “clarification” is liable to be quashed and set aside.
The issue can be looked at from another angle. It was clearly mentioned in the applications for the EPCG license made by the writ applicants that the capital goods will be used for distribution of electricity. Thus the EPCG licenses were issued to the writ applicants in full light of the fact that the capital goods were to be used in distribution of electricity. Thus the allegation of misdeclaration against the writ applicants does not merit acceptance. In fact, as pointed out by the learned Senior Counsel on behalf of the writ applicants, there was a specific discussion in the case of one M/s Vadhman Chemicals in the EPCG committee meeting held on 19th September 2014 that since transformer was required for distribution of power and not transmission of electricity, the issuance of EPCG license for the import of distribution transformer was permissible. The EPCG licenses were also issued to the writ applicants despite disclosure by the writ applicants that the capital goods were required for distribution of electricity. It thus appears that even the Respondents at the relevant point of time believed that the EPCG licenses could be issued to the persons engaged in the distribution of electricity. Had the respondents raised objection to issuance of the EPCG licenses at the relevant point of time, then the entire issue would not have arisen. Having granted the EPCG licenses to the writ applicants on the basis of their disclosure that the capital goods will be used in distribution of electricity, the writ applicants cannot now be put to prejudice for the past transactions by issuing retrospective circular. Such retrospective circular, apart from being legally fallacious as held herein before, is also manifestly arbitrary and violative of Articles 14 and 19(1) (g) resply of the Constitution in so far as it operates retrospectively.
We are further fortified in our conclusion by the judgement of the Apex Court in the case of Director General of Foreign Trade vs. Kanak Exports and Another (2016) 2 SCC 226 wherein in the context of Export Import Policy 2002-07 it was held that the policy could not have been retrospectively amended by the Government without there being any express power in this regard and that in any case the retrospective amendment of policy cannot take away vested rights of the exporters.
in the case of Khemka (supra), the Supreme Court held that a penalty not being merely an adjunct to or consequential to an assessment, could not be levied in the absence of an express provision under Section 9 of the Central Sales Tax Act. Section 9 was retrospectively amended. This was challenged in Shiv Dutt Rai Fateh Chand vs. Union of India [1984 AIR 1195 : 1983 SCR (3) 198]. Shiv Dutt Rai’s case (supra) dealt with a penalty under the Central Sales Tax Act. The Supreme Court upheld the retrospective operation of the newly added Sub-section (2A) of Section 9 and held that it did not contravene the provisions of Article 19(1)(f) and (g) of the Constitution. The Supreme Court said that it has to be presumed that all the tax had been collected by the dealers from their customers. There was also no dispute that the law requires the dealer to pay the tax within a specified time, the dealers had also knowledge of the provisions relating to penalty in the General Sales Tax law of the respective States. It was only owing to the defect in the Act pointed out by the Supreme Court in Khemka’s case that penalties became not payable. In the Situation, if the Parliament calls upon the dealers to pay the penalties in accordance with the law as amended with retrospective effect, it cannot be said that there has been any unreasonable restriction imposed on the rights guaranteed under Article 19(1)(f) and (g) of the Constitution even though the period of retrospectivity is nearly 19 years. It also pointed out that the Amending Act provided for exclusion of the period between the date on which the judgment in Khemka’s case , was delivered up to the date of the commencement of the Amending Act in computing the period of limitation for questioning any order levying penalty. Looking to all the circumstances, it said that the Section 9(2A) cannot be said to be violative of Article 19(1)(f) and (g) of the Constitution.
However, when a fresh levy is imposed retrospectively by any legislation, the Courts have tended to strike down such levy as being an unreasonable restriction on the fundamental rights guaranteed under Article 19(1)(f) and (g) for the Constitution. Thus, in the case of Shew Bhagwan Goenka v. CTO [1973] 32 STC 368, the Calcutta High Court considered the West Bengal Taxation Laws (Amendment) Act of 1969, in so far as it gave retrospective operation to a new definition of “business” incorporated retrospectively by virtue of the amendment. The court observed that the object of the amendment was not to remove or rectify any defect in phraseology or lacuna or to validate proceedings which had taken place on the basis of the earlier enactment, the object was to enlarge the scope and ambit of the expression “business” by including within it transactions which without the amendment could not be brought within the meaning of the word “business” as understood in the commercial world and as interpreted by courts of law. The effect of such retrospective operation of the amendment would be to impose an unexpected liability in respect of transactions which, when they took place, were not subject to any charge or liability under the Act. The retrospective amendment, the court said, imposed an unreasonable restriction upon a person’s fundamental right guaranteed under Article 19(1)(f) and (g) of the Constitution and was, therefore, invalid.
A similar view was taken by the Division Bench of the Calcutta High Court in the case of Bengal Paper Mill Co. Ltd. v. CTO [1976] 38 STC 163.
Similarly, a retrospective amendment which does not remove the lacuna which it intended to remove, but merely legislates to impose a new burden has also been held to be unconstitutional. In the case of D. Cawasji and Co. v. State of Mysore reported in (1984) 150 ITR 648 : (AIR 1984 SC 1780), the Mysore State Government, with effect from April 1, 1966, had started collecting sales tax on the sale price of arrack as well as on the excise duty and cesses payable on it, so computed. The sales tax came to 24 paise per litre. The validity of the levy of sales tax on the price of arrack inclusive of excise duty and cess was challenged before the High Court. The High Court held that the State Government was not entitled to levy sales tax on excise duty and cess. In order to get over the High Court decision and to retain the tax already recovered, the State Government retrospectively levied sales tax at the increased rate of 45 per cent, instead of 6 1/2 per cent, with effect from April 1, 1966, and validated, inter alia, all collections already made. The Supreme Court said that the Amending Act did not proceed to cure the defect or lacuna by bringing in an amendment providing for exigibility of excise duty, health cess and education cess to sales tax. Instead of removing the defect, the Amending Act had merely sought to raise the rate of tax with retrospective effect to avoid the liability of refunding the excess amounts collected. Thus, the only object of the amendment was to enable the State Government to nullify the effect of the judgment and retain the amount wrongfully and illegally connected. The enhancement of the rate of tax was, therefore, clearly arbitrary and unreasonable. It could not be considered as rectifying any defect. The Supreme Court, therefore, set aside the Amending Act to the extent that it imposed a higher levy with retrospective effect and considered it as invalid and unconstitutional.
For all the foregoing reasons, the present writ application succeeds and is accordingly allowed. The circular dated 4th January 2019 (annexed at Annexure A) issued by the Government of India is declared and held to be ultra vires Para 5.01(g) of the Foreign Trade Policy 2015-20/Foreign Trade Policy 2009-14 read with the provisions and scheme of the Electricity Act. It is further declared that the retrospective operation of the circular dated 4th January 2019 is manifestly arbitrary and violative of Articles 14 and 19(1)(g) resply of the Constitution of India.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs:
“A. This Hon’ble Court may be pleased to issue a writ striking down and declaring the circular dated 4.1.2019 (annexed at Annexure A) issued by the Government of India as being ultra-vires Para 5.01(g) of the Foreign Trade Policy 2015-20/Foreign Trade Policy 2009-14 read with the provisions and scheme of the Electricity Act;
B. Without prejudice to the above and in the alternative, this This Hon’ble Court may be pleased to declare that retrospective operation of circular dated 4.1.2019 (annexed at Annexure A) issued by the Government of India is without competence, manifestly arbitrary, in breach of principles of promissory estoppel and violating Article 14 and 19(1)(g) of the Constitution of India;
C. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith return/issue EPCG licenses and invalidation letters surrendered by the Petitioners on the basis of impugned circular dated 4.1.2019;
D. Without prejudice to the above and in the alternative this Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order directing the Respondents to forthwith return the bank guarantees furnished for the EPCG licenses which have already been surrendered by the Petitioners pursuant to impugned circular dated 4.1.2019;
E. Pending notice, admission and final hearing of this petition, this Hon’ble Court be pleased to suspend the retrospective operation and implementation of the impugned circular dated 4.1.2019 (annexed at Annexure A);
F. Ex parte ad interim relief in terms of prayer E may kindly be granted;
G. Such further relief(s) as deemed fit in the facts and circumstances of the case may kindly be granted in the interest of justice for which act of kindness your petitioners shall forever pray.”
