Legislature Can't Directly Overrule Judgment, But Law Can Be Made To Alter Basis Of Court Verdict : Supreme Court

The Supreme Court has ruled that it is permissible for the legislature to remove a defect in an earlier legislation, as pointed out by a constitutional court in exercise of its powers of judicial review. The court said the defect can be removed both prospectively and retrospectively by a legislative process and previous actions can also be validated. “However, where a legislature merely seeks to validate the acts carried out under a previous legislation which has been struck down or rendered inoperative by a Court, by a subsequent legislation without curing the defects in such legislation, the subsequent legislation would also be ultra-vires,” the bench comprising Justices B.V. Nagarathna and Ujjal Bhuyan said. The bench remarked that such instances would amount to an attempt to ‘legislatively overrule’ a Court’s judgment by a legislative fiat, and would therefore, be illegal and a colourable legislation. The court made the observation while considering the vires of the Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended by the Amendment and Validation Act of 1997. The court concluded that the Amendment and Validation Act passed by the State Legislature had validly removed the basis of the judgment of the Division Bench of the High Court, dated 27th March, 1997, where the court had ruled that the appellant-assessee, NHPC Ltd, was not liable to pay tax under the 1955 Act for providing free transportation services to its employees, and their children.Accordingly, the Supreme Court said the activity of providing free transportation to the employees and their children, would be a taxable activity under Section 3(1-A) of the 1995 Act, as inserted by the Amendment and Validation Act of 1997.Facts of the case:Assessment orders were passed by the Assessing Authority under the Himachal Pradesh Passengers and Goods Taxation Act, 1955 against the appellant- NHPC Ltd, assessing its liability to pay passenger tax under the Act in respect of the free transport facilities provided by the PSU to its employees and their children. Assessment Orders were passed on the ground that NHPC’s employees and their children were passengers under the Act and therefore, NHPC was liable to pay passenger tax for providing them with transport facilities.NHPC filed a writ petition before the Himachal Pradesh High Court, challenging the vires of the 1955 Act and the assessments made in accordance with the provisions of the Act.It was the case of NHPC that no tax could be levied on it as its employees and their children were being carried in the buses, without any fare or consideration. NHPC claimed that passenger tax under the Act can be levied only on fare-paying passengers against tickets issued by the owner of the motor vehicle, who is engaged in the business of carrying passengers for hire and reward.The Division Bench of the High Court observed that the Explanation to Section 3 (1) of the Act introduced a legal fiction, requiring assessments to be made on the assumption that even passengers who did not actually pay a fare, were being carried at the normal rate chargeable on the concerned route. However, the Division Bench was of the view that for charging tax by invoking the Explanation to Section 3(1), routes were required to be prescribed. Since, the routes on which the NHPC plied its buses were not ‘routes’ in the sense defined under the MV Act, the Explanation was not attracted in the case. The SLP filed by the tax authorities against the High Court’s decision was dismissed by the Supreme Court. Subsequently, with a view to remove the basis of the judgment of the Division Bench, the Himachal Pradesh Passengers and Goods (Amendment and Validation), Act, 1997 was passed by the Legislative Assembly. Accordingly, the tax authorities issued notices for recovery of tax under the amended Act in respect of NHPC’s activity of providing free transport facilities to its employees and their children.NHPC challenged the vires of the Amendment and Validation Act of 1997 and the assessments made under it, by filing a writ petition before the High Court. The High Court, however, dismissed the writ petition and upheld the vires of the 1955 Act, as amended by the Amendment and Validation Act of 1997.The High Court observed that the Explanation to Section 3(1) of the 1955 Act, which was previously referred to by the Division Bench of the High Court, had been removed by omitting the said Explanation and inserting Section 3(1-A). The court remarked that Section 3(1-A) sought to bring non-fare paying passengers at par with fare paying passengers. When read with the amended definition of the term ‘business’, the court said, all kinds of passengers and goods carried in private service vehicles were now subject to tax under the 1955 Act, irrespective of whether such passengers or goods were being carried for hire or reward.Thus, the High Court concluded that the Amendment and Validation Act of 1997, covered non-fare paying passengers- such...

Legislature Can't Directly Overrule Judgment, But Law Can Be Made To Alter Basis Of Court Verdict : Supreme Court

Parina Katyal

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