On May 8 and 9, the last two working days of the Supreme Court in the last term, 13 Judges of the Supreme Court delivered 25 judgments.
Most judgments were promptly delivered within a reasonable period of having been reserved. However, one judgment took more than five months to deliver, after the Judges concluded hearing in the case.
It is Eurotex Industries and Exports Limited & Anr v State of Maharashtra & Anr, reserved by Justices AK Sikri and Abhay Manohar Sapre on December 1 last year, but delivered only on May 8. The judgment authored by Justice Sikri, disposes of five civil appeals together.
What is special about this judgment?
Well, we have heard about this controversy about tax legislations with retrospective effect, and how inconsistent they are with the objective of encouraging investments. This judgment finds nothing wrong with such a legislation.
The constitutional validity of the Maharashtra Value Added Tax (Levy, Amendment, and Validation) Act, 2009, which amended certain provisions in the Maharashtra Value Added Tax Act, 2002 (MVAT Act) with retrospective effect from April 1, 2005 was under challenge. The Bombay High Court had dismissed the challenges to the amendment.
The appellants before the Supreme Court contended that they had made huge investments in the most extremely backward areas of the State and were led to believe that they were entitled to claim exemption from VAT on 100 per cent of their production. Accordingly, they did not recover any VAT from their producers. The retrospective amendment substantially curtailed this exemption benefit.
The Bombay High Court brushed aside the challenge. It held retrospective operation of the amendment to be permissible on the ground that it was in the nature of a valid legislation and such a legislation can be passed by the Legislature with retrospective effect.
The appellants contended that the State Government and the tax authorities led all industrial units to a bona fide belief, during the relevant period from 2005 to 2009, that the benefit of VAT exemption would be available in respect of the entire production of the industrial unit and not merely a proportionate part thereof. These industrial units were, therefore, prevented from recovering any VAT on any part of their production, as that would have been illegal and would in fact have constituted a criminal offence.
If the same amendment had been made in the year 2005 itself, the industrial units would have availed the VAT exemption benefit over a longer period of time; And they would have recovered VAT from their customers from 2005 onwards on an appropriate proportion of their total production, they argued.
Therefore, the appellants contended that the retrospective amendment was arbitrary, unreasonable and oppressive and, therefore, violated their fundamental rights under Articles 14 and 19(1)(g) of the Constitution.
Justice Sikri, however, found merit in the High Court’s reasons for rejecting the challenges to the amendment, and dismissed the appeals with costs.
Partial similarity with the Aadhaar-PAN case
Reading this judgment brought to mind the heated debates during the recent hearing of the Aadhaar-PAN case before Justices Sikri and Ashok Bhushan. Justice Sikri, during the Aadhaar-PAN hearing was concerned about whether Parliament could change the basis of the Court’s order through a subsequent legislation.
The issue was whether Parliament could enact Section 139AA of the Income Tax Act – which makes Aadhaar mandatory for filing Income Tax returns from July 1 – in order to undo the effect of the Supreme Court’s interim order in the Aadhaar case as per which Aadhaar is voluntary. It was pointed out by the petitioner’s counsel, Arvind Datar that Parliament could do so, provided the ‘mother Act’, the Aadhaar Act, 2016, is also suitably amended to make it mandatory.
The Attorney General, Mukul Rohatgi, had, however, argued that the Aadhaar Act and the Income Tax Act were for two different purposes, and therefore, the mandate of the former does not influence the latter’s mandate.
In Eurotex Industries, Justice Sikri endorsed the idea that legislature is competent to enact a validating legislation to correct an infirmity, which according to the Court, an existing law suffers from. Is it similar to the Aadhaar case, if the Government claims that it enacted Section 139AA of the IT Act, in order to cure a deficiency which the Aadhaar Act, 2016, suffers from?
Although Datar told the Sikri-Bhushan JJ. Bench that Aadhaar presented a unique and unprecedented problem to be resolved, Justice Sikri’s deference to the legislative wisdom in enacting a validating legislation may be viewed as problematic by the petitioners in the Aadhaar-PAN case.
They may be concerned whether Justice Sikri might come up with a similar deference to the Parliament’s wisdom in enacting Section 139AA in the Aadhaar-PAN judgment, which has been reserved.
SCORE-CARD
As usual, Justice Kurian Joseph authored six non-reportable brief judgments. Justice Sikri authored four, while Justices Bhushan, Dipak Misra, Arun Mishra and NV Ramana authored two each. Justices Prafulla Chandra Pant, Ranjan Gogoi, Madan B Lokur, Uday Umesh Lalit, R Banumathi, Amitava Roy , and S Abdul Nazeer authored one each.
Of these, Justice Lalit’s judgment in State Bank of India v Kingfisher Airlines Limited, delivered on May 9, stands out. Justices Adarsh Kumar Goel and Lalit, in this judgment, held Vijay Mallya guilty of contempt of court, and directed him to be present on July 10, to hear him separately on sentencing.
It seems to remind the seven-Judge bench which convicted and sentenced Justice CS Karnan of Calcutta High Court to six months’ imprisonment for contempt of court on the same day, that there are certain principles of sentencing which the Court has to follow, whatever the degree of contempt.