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'REPORTABLE' IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 9043 OF 2003

AGRICULTURAL INCOME TAX OFFICER & ANR.     ... Appellants VERSUS

GOODRICKE GROUP LTD. & ANR.                ... Respondents

J U D G M E N T

R. F. Nariman, J.

An  interesting  question  is  raised  in  this  appeal  which arises out of two judgments of this Court, namely,  'Buxa Dooars Tea Company Ltd. and others v. State of West  Bengal and others' [(1989) 3 SCC 211] and 'Goodricke Group  Ltd. and others v. State of W.B. and others' [1995 Supp. (1) SCC 707].   

In  the  present  appeal,  we  are  concerned  with  The  West Bengal Rural Employment and Production Act, 1976 and  The West Bengal Primary Education Act, 1973.  The High  Court has found, based on a reading of the interim orders  passed in both  Buxa Dooars Tea Company Ltd.'s case  and  Goodricke Group Ltd.'s case, that for the period prior to  the  Amendment  Act  of  1989,  the  respondent  herein  is  entitled to a refund of the cess paid by it together with  interest at 12 per cent per annum, and has further found

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that insofar as interest is payable after the Amendment  Act  is  concerned,  such  interest  would  only  be  payable  after assessment orders are passed (which on facts here,  we  are  informed,  were  passed  on  27.07.1993  and  thereafter).

By  an interim  order dated  16.06.1983 in  the  Buxa  Dooars  Tea  Company  Ltd.'s  case,  this  court  held  as  hereunder: -

“Rule NISI.  There will be no order on stay  application but if the petitioner succeeds in the  writ  petition,  the  State  of  West  Bengal  will  refund the amount of cess collected with interest  thereon  @  12%  per  annum  from  the  date  of  collection.”

By the judgment delivered in Buxa Dooars Tea Company  Ltd.'s case in 1989, this Court held that the charging  sections under both the aforesaid Acts were invalid both  on  the  ground  of  legislative  competence  as  well  as  violation  of  Article  301  inasmuch  as  the  impugned  legislative measures were outside Entry 49 in List II of  the Seventh Schedule of the Constitution, which speaks of  “taxes of lands and buildings”; and it was further held  that the levy being on movement of goods, Article 301 of  the Constitution would be attracted and these levies are  not saved under Article 304(b) as no Presidential assent  has been taken on either of these legislative measures.   

The West Bengal legislature was swift to act after

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the judgment of this court.  By the West Bengal Taxation  Laws  (Second  Amendment)  Act  of  1989  amending  the  provisions  of  both  the  aforesaid  Acts,  the  charging  sections were substituted with retrospective effect, and  the levy of the rural employment cess and education cess  (which was levied under the earlier principal Acts on the  basis of despatch of manufactured tea) was now levied on  the basis of production of tea leaves.  A challenge to  this  Amendment  Act  was  made  before  this  Court  which  challenge  failed  in  the  second  judgment  referred  to  hereinabove (in Goodricke Group Ltd.'s case).  

The 1989 Amendment Act was upheld in the following  terms:  

“Lastly, the learned counsel for the petitioners  questioned the validity of the retrospective effect  given to the impugned enactment.  We fail to see  any substance in this submission.  If the Act is  good,  it  is  good  both  prospectively  and  retrospectively.  Retrospective effect is given for  the period covered by the anterior provisions which  were struck down in Buxa Dooars.  Once we hold that  the defect pointed out in Buxa Dooars is rectified  and  remedied  in  the  impugned  enactment,  it  can  certainly be given retrospective effect to cover  the period covered by the earlier enactment which  is not only a well-known but a frequently adopted  measure by all the legislatures.

For the above reasons, the writ petitions  fail and are accordingly dismissed.  The interim  orders made in these writ petitions shall also come  to an end.  The petitioners shall pay the cesses  stayed  by  the  orders  of  this  Court  along  with  interest @ 12% p.a.  There shall no order as to  costs.”

It is a little important to note that before the

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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

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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

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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

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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

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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 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

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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

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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

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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

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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].  

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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.

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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.