Summary: The proposed retrospective amendment to Section 17(5)(d) of the CGST Act, replacing “plant or machinery” with “plant and machinery,” raises critical questions about legislative powers and judicial precedents. Retrospective legislation generally contradicts the principle of fairness, as highlighted by the Supreme Court in Commissioner of Income Tax vs. Vatica Township Pvt Ltd. (2014). The Court emphasized the presumption against retrospective operation unless explicitly stated or necessary to address legislative omissions or clarify ambiguities. In contrast, retrospective laws imposing new burdens or liabilities are typically presumed prospective unless expressly declared otherwise. The recent amendment appears aimed at rectifying a purported drafting error, but the legislative intent is contested. In the Safari Retreat case, the Supreme Court examined the deliberate use of “plant or machinery” and rejected the notion that it was a legislative mistake, citing its consistent and intentional application in the CGST Act. This judgment underscores the judiciary’s role in interpreting legislative intent and maintaining statutory clarity. While declaratory statutes may justify retrospective application to correct errors or clarify legal provisions, the implications for taxpayers—especially those adversely affected—demand careful scrutiny. The broader debate touches on the balance of power between the judiciary and legislature and the rights of taxpayers under the principle of lex prospicit non respicit, which holds that laws should look forward, not backward. The controversy highlights the need for precise legislative drafting and consideration of judicial guidance to avoid conflicts and ensure fair treatment for all stakeholders.
Whether the Government can arbitrarily amend the provision of tax law with retrospective effect to nullify the supreme court judgment?
GST Council has proposed to amend section 17(5)(d) of CGST Act by mentioning “plant and machinery” instead of “plant or machinery” used therein. The same is proposed to be brought from retrospective effect i.e. from 01-07-2017.
Whether the Government can arbitrarily amend the provision of tax law with retrospective effect to nullify the supreme court judgment?
Supreme court has laid down General principles concerning retrospectively in the matter of Commissioner of Income Tax vs Vatika Township P Ltd decided on 15.09.2014.
(Para 30 to 37) mentioned on page no 15 to 18 is regarding principles of concerning retrospectity. Some portions of paras are being pasted hereunder.
Para -30 – A legislation be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. …. A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in a judgment of a court of law…. Vis-à-vis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof.
Para 31- … this principle of law is known as lex prospicit non respicit : law looks forward not backward. As we observed in Phillips vs Eyre, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of then existing law.
Para -32 – principle of fairness – … legislation which modified accrued rights or which impose obligation or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation
Para 33 – … where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect.
Para 34 – in such cases, retrospectively is attached to benefit the person in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statue shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by our weighing factors.
Para 35 – … under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labelled as “declaratory statues” The circumstances under which a provision can be termed as “declaratory statues” is explained by Justice G P Singh in the following manner.
“Declaratory statutes the presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the supreme Court: for modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes.
Para – 36 – …. “Now it is well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily requires it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure……”
In safari retreat matter, Hon’ble Supreme Court has already discussed the issue of mistake of legislature in mentioning “plant or machinery” instead of “plant and machinery” in length and had denied to accept the same. (Yellow highlighted hereunder)
Assessee contention at Page no 16 – in the model GST law, which the GST council secretariat circulated in November 2016 for inviting suggestions and comments, the expression “plant and machinery” was used both in clause (c) and (d) of section 17(5). However, while enacting the law, the legislature has advisedly used the expression “plant and machinery” in clause (c) and “plant or machinery” in clause (d) of section 17(5). Therefore, the intention of the legislature cannot be brushed aside by contending that the use of the word “or” in section 17(5)(d) is a mistake of the legislature.
At page no 59 para 43 in the matter of Safari Retreat Hon’ble Supreme Court has held “ Learned ASG himself accepted that the expression “plant and machinery” appears at ten different places in chapter V (input tax credit) and VI (tax invoice, credit and debit notes) of the CGST Act. According to him, the expression “plant or machinery” appears only in clause (d) of section 17(5). His submission is that the use of the word “or” in clause (d) is a mistake of legislature. To counter this, it was submitted that in the model GST law, which the GST council secretariat circulated in November 2016 to invite suggestions and comments from the public, the expression “plant and machinery” was used in clauses (c) and (d). However while enacting the CGST Act, the legislature has consciously chosen to use the expression “plant or machinery” only in clause (d). The impugned judgment in the main civil appeal is more than 5 years old. The Writ petition in which the impugned decision was rendered is a six years old petition. If it was a drafting mistake, as suggested by learned ASG, the legislature could have stepped in to correct it. However, that was not done. In such circumstances, it must be inferred that the legislature has intentionally used the expression “plant or machinery” in clause (d) as distinguished from the expression “plant and machinery” which has been used in several places. As the expression “plant or machinery” appears to be intentionally incorporated, it is not possible to accept the contention of the learned ASC that the word “or” in clause (d) should be read as “and” if the said contention is accepted, there will not be any difference between the expression “plant and machinery” and “plant or machinery”. This will defeat the legislative intent.
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