TATA MOTORS LTD. versus STATE OF MAHARASHTRA AND ORS.

Citation: [2004] SUPP. 2 S.C.R. 452 · Decided: 06-05-2004 · Supreme Court of India · Bench: S. RAJENDRA BABU · Disposal: Case Partly allowed

Judgment (excerpt)

A 
TATA MOTORS LTD. 
V. 
ST A TE OF MAHARASHTRA AND ORS. 
MAY 6, 2004 
B 
[RAJENDRA BABU. CJ. AND P. VENKATARAMA REDDI, J.] 
Sales Tax : 
Maharashtra Sales Tax Laws (Levy, Amendment and Repeal) Act, 
C 1989-Sections 26. 27 and 30-Bombay Sales Tax Rules, 1959-Rule 
41 £-Retrospective amendment-Retrospective withdrawal of benefit of 
set-off in respect of sales tax payable from 1. 7.1981 to 31.3.1988 in respect 
of waste, scrap goods or by products generated-Constitutional validity 
of-Held: In absence of any tangible or rational ground retrospective 
D amendment being confined only to a period of eight years and not either 
before or subsequently riot justified and hence unconstitutional-Bombay 
Sales Tax Act, 1959--Sectiori, 42, Schedule B, Entry 6-Constitution of 
India, 1950. 
E 
Rule 41D--Claim of set off by assessee-Plea that requirement of 
registration under Central Sales Tax Act at appropriate place to which 
goods are exported impossible of performance since Act not extended to 
that place-Held: Though all conditions imposed therein must be complied 
with but it is not necessary for the assessee to carry his business in a place 
where Act is not extended-Assessee can carry his business elsewhere and 
F claim benefit in a place where Act is applicable-Central Sales Tax Act. 
Appellant-assessee procured steel in primary form covered by 
Entry B-6 of Schedule B to Bombay Sales Tax Act, 1959, for 
manufacturing which resulted in the production of vehicles or parts 
G thereof and iron and steel scrap. They claimed set off in respect of sales 
tax payable by them from 1.4.1982 to 31.3.1983 in terms of Rule 41E 
of Born bay Sales Tax Rules, 1959 for the quantum of iron and steel 
purchased which was converted into iron and steel scrap. The claim 
was allowed. Thereafter, writ petition was filed challenging the 
H computation of this amount. Meanwhile the tribunal passed an order 
452 
.. 
TATA MOTORS LID. v. STATE 
453 
with regard to the modalities of working out the relief. Thereafter, A 
Maharashtra Act IX of 1989 was enacted and benefit of set off under 
Rule 41E was denied altogether where the manufactured goods falling 
under Schedule B are in the nature of waste goods/scrap goods/by 
products for the period from 1.7.1981 to 31.3.1988. The constitutional 
validity of the retrospective amendment of Rule 41E was challenged. B 
High Court upheld the validity of the same. Thereafter, by the 
amendment to Rule 41E by Bombay Sales Tax (Amendment) Rules, 
1992 exclusionary clause of goods manufactured out of waste or scrap 
goods or by products was removed and the position as it stood prior 
to 1981 was restored. Hence the present appeal. 
c 
Appellant contended that retrospective withdrawal of benefit of 
set-off for period of eight years imposed prima facie an unreasonable 
restriction and as such must be struck down as unconstitutional; that 
subsequently by deleting the amendment the original provision as it 
stood prior to 1981 has been restored; that there is no material to show D 
as to why a special treatment has to be given only for that period of 
eight years; and that the requirement under Rule 41-D that the 
assessee has to register in the place to which the goods are 'exported' 
under the Central Sales Tax Act is impossible of performance because 
the Central Sales Tax Act was not extended to the place where the E 
assessee's branch office is located. 
Respondent-State contended that the amendments had been made 
to overcome certain defects arising on account of the decision of the 
tribunal in regard to the modalities of working out the relief. 
Partly allowing the appeals, the Court 
F 
HELD : 1. The State has enormous powers in the matter of 
legislation both prospectively and retrospectively and in enacting fiscal 
laws. Great leverage is allowed in the matter of taxation laws because G 
several fiscal adjustments have to be made by the Government 
depending upon the needs of the Revenue and the economic 
circumstances prevailing in the State. Even so an action taken by the 
State cannot be so irrational and so arbitrary so as to introduce one 
set of rules for one period and another set of rules for another period H 
454 
SUPREME COURT REPORTS [2004) SUPP. 2 S.C.R. 
A by amending the laws in such a manner as to withdraw the benefit that 
had been given earlier resulting in higher burdens so far as the assessee 
is concerned without any reason. Retrospective withdrawal of the 
benefit of set-off only

Excerpt shown. Read the full judgment & AI analysis in Lexace.