STATE OF TAMIL NADU versus THIRUMAGAL MILLS LTD. ETC.

Citation: [1972] 2 S.C.R. 395 · Decided: 17-11-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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395 
'STATE OF TAMIL NADU 
v. 
THIRUMAGAL MILLS LTD. ETC. 
November 17, 1971 
[K. S. HEGDE, A. N. GROVER AND H. R. KHANNA, JJ.] 
Madras General Sales Tax Act, 1959, s. 2(d) as amended by Madras 
General Sales Tax (Second Amendment) Act, 1964-1/ retrospective--
Effect of s. 9. 
The assessee. was a spinning mill. It opened a fair price shop to pro-
vide an amenity to its workmen so that commodities may be made avail-
able to them at fair prices. 
For the assessment year 1960-61 the assess-
ing authority under the Madras General Sales Tax Act, 1959, included in 
the assessee's turnover the sale value of groceries sold in the fair 
price 
shop. 
The Tribunal held in favour of the assessee ano the High Court, 
on reference, found that the asscssee was not carrying on 'business' within 
the meaning of the Act in the fair price shop and confirmed the orders. 
In appeal to this Court it was contended that tho Second Amendment 
Act. 1964, substituted a new definition of 'business' in the Act. which, read 
with s. 9 of the Act. had retrospective effect. 
Di~n1issing_ the appeal, 
HELD : Validation of tax which has been decl~red to be illegal may 
be done only if the ground of illegality or invalidity arc capable of being 
removed and arc in fact removed. The Legislature can give its own mean-
ing and interpretation of law under which the tax was: collected and by 
legislative fiat make the new meaning binding upon the courts. [399 C-DI 
But in the present case. none of the methods for ,·alidating a tax bas 
been adopted. 
Although the definition of '•business' was amended it was 
not macle retrospective by the usual words that it shouid be deemed to have 
been alirays substituted nor was any other language employed to show that 
the substantive provision was being 
amended 
retrospectively. 
On the 
contrary. the definition of the word 'business' was atnendcd onfy prospec-
tively. 
In' the absence of retrospective effect being given to the definition. 
s. 9 was of no avail to the Revenue. (399 E·G] 
Stale of Tamil Nadu v. M. Rayappa Gounder, A.LR. 1971 S.C. 231, 
Shri Pri1hri Collon Mills v. Broach Borough M1micip11llly, [1970] I S .C.R. 
388; 79 I. T. R. 136. followed. 
CIVIL APPELLATE JURISDICTION 
of 1969 and 148 of 1971. 
Civil Appeals Nos. 1454 
Appeals by special leave from the judgments and 
order~ 
dated April 6. 1967 and January 22, 1969 of the Madras High 
Court in Tax Cases Nos. 152 of 1964, and 300 of 1968 res-
pectively. 
S. T. Desai and A. V. Rangam, for the appellant (in both the 
appeals). 
12-LSOOSup.Cl;72 
396 
SUPREME COURT REPORTS 
[1972] 2 S.C.R. 
K. Parasaran, T. Vadivel, R. Shanmughan and K. Jayaram, 
.for l]Je r.::spondent (in C.A. No. 1454169). 
T. A. Ramachandran, for the respondent 
(in C.A. No. 
148171). 
A 
B. Sen, S. P. Mitra and G. S. Chatterjee, for intervener On 
B 
C.A. No. 1454 of 1969). 
The Judgment of the Court was delivered by 
Grove1-, J. These appeals by special leave frum a judgment of 
the Madras High Court involve a conunon question. 
The facts in the fir§t of these appeals may be stated. 
The 
assessce, who is the respondent herein, is a spinning mill manufac-
turing cotton yarn. It was assessed to sales tax under the Madras 
General Sales Tax Act, 1959, hereinafter called the 'Act'. For 
the assessment year 1960-61 the assessing authority included in 
the taxable turnover certain amounts representing the sale value of 
foodgrains and groceries sold in the fair price shop run by the mills 
and the amount realised by sale of articles of food in the canteen 
which was run for its employees. 
The assessee filed an appeal 
questioning its liability to pay tax on these items· The appellate 
authority dismissed that appeal. 
The assessee thereupon filed a 
further appeal to the Sales tax Appellate Tribunal which allowed 
the appeal and directed that the turnover in question be deleted. 
The Revenue went up in revision to the High Court of Madras. 
A division bench of that court dismissed the revision. 
The.Appellate Tribunal had found that the fair price shop and 
the canteen were run exclusively for the benefit of the employees 
and there was no profit motive in running the same. 
The High 
Court referred to the relevant statutory provisions and expressed 
the view that the primary requisite of 'business' as defined by the 
Act should be a trade or commerce or adventure in the nature of 
trade or conunerce. Presence or absence of profit was not material 
but the a

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