Asian Peroxide Limited, Nellore V. Government of Andhra Pradesh, represented by Its Principal Secretary, Revenue (CT II) Department, Hyderabad

WP/22768/2006

AI Insights

The case involves multiple writ petitions filed by M/s. Asian Peroxide Limited and others against the Government of Andhra Pradesh, challenging the constitutional validity of Section 13(4) of the VAT Act and Rule 20(2)(h) of the VAT Rules, which retrospectively disallowed ITC on certain goods. The petitioners argued that the retrospective application of these rules was arbitrary and violated principles of natural justice. The government defended the rules, emphasizing the need to prevent revenue loss and maintain tax compliance. The court examined the legislative intent, the scope of delegation under the VAT Act, and the reasonableness of the retrospective application, ultimately finding the retrospective application unjustified but upholding the rules' validity in general.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 799732 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 30-12-2010
• Assessment Year: misc
• Other Referred Cases: Chatla Narsaiah Ramaiah v State of A.P., BSNL v Union of India, Trends and Issues in Tax Policy and Reform in India, M.Govinda Rao and R.Kavita Rao, Commissioner of Income Tax v Mahaliram Ramji Das, Associated Cement Company Limited v Commercial Tax Officer, Kota, State of Gujarat v Raipur Manufacturing Co. Ltd., Lohia Machines Ltd v Union of India, J.K. Industries Ltd v Union of India, Indian Express Newspapers Bombay (Private) Ltd v Union of India, Kerala Hotel and Restaurant Assn. v State of Kerala, Nandanam Construction Company v Assistant Commissioner, Birla Cotton, Spg. and Wvg. Mills, Delhi v Municipal Corporation of Delhi, Hiralal Rattanlal v State of U.P, Sita Ram Bishambhar Dayal v State of U.P, Maharashtra S.B.O.S. & H.S. Education v Paritosh, Global Energy Ltd v Central Electricity Regulatory Commission
• Laws Referred To: Andhra Pradesh Value Added Tax Act, 2005, Andhra Pradesh Value Added Tax Rules, 2005, Andhra Pradesh General Sales Tax Act, 1957
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: A V KOUNDINYA
• Assessee Lawyers: S RAVI; M S A K JAISWAL S DWARAKANATH BHASKAR REDDY VEMIREDDY M V J KUMAR SHAIK JEELANI BASHA B SRINIVAS TEJPRAKASH TOSHNIWAL MS ANJALI AGARWAL
• Keywords: Constitutional Validity; Excessive Delegation; Input tax credit; Retrospective Rule; Value Added Tax
• Section: 13(4); 78(1); 20(2)(h)

Judgement Text

"* THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN + WRIT PETITION Nos.3259, 4728, 4880, 4881, 5071, 5080, 5160, 5310, 5573, 11833, 13314, 20691, 21315, 21712, 21846, 22145, 22768, 22769, 22770, 22773, 22774, 22882, 25283, 26326, 27037 of 2006; WRIT PETITION Nos.6409, 8988, 9302, 9305, 9311, 9396, 9524, 11075, 13081, 16049, 17320, 17330, 17412, 20694, 20789, 20802, 21255, 21665, 22332, 24376, 25949 of 2007; WRIT PETITION Nos.475, 1271, 1649, 4401 and 18633 of 2008; WRIT PETITION No.4658 of 2009 and WRIT PETITION No.5740 of 2010 % 30.12.2010 # M/s.Asian Peroxide Limited, Nellore And others … Petitioners Vs. $ Government of Andhra Pradesh, represented by Its Principal Secretary, Revenue (CT II) Department, Hyderabad And others … Respondents ! Counsel for the petitioners: Mr.S.Ravi, the Senior Counsel and M/s.A.K.Jaiswal, S.Dwarakanath, Bhaskar Reddy Vemireddy, M.V.J. Kumar, Shaik Jeelani Basha, B.Srinivas, Tejprakash Toshniwal & Ms.Anjali Agarwal Counsel for the Respondents: Mr.A.V. Krishna Koundinya, Special Counsel for Commercial Taxes < Gist : > Head Note: ? Cases referred 1) (2005) 41 APSTJ 45 2) (2006) 3 SCC 1 : AIR 2006 SC 1383 3) AIR 1940 PC 124 4) (1981) 4 SCC 578 : AIR 1981 SC 1887 : (1981) 48 STC 466 (SC) 5) (1999) 3 SCC 346 : AIR 1999 SC 1275 6) (2004) 10 SCC 201 (para 106) 7) AIR 1967 SC 1066 : (1967) 19 STC 1 8) (1975) 4 SCC 22 : AIR 1975 SC 1039 : (1975) 35 STC 513 9) (2003) 8 SCC 413 (para 44) : AIR 2003 SC 3397 10) (2004) 11 SCC 497 (para 19) : AIR 2004 SC 5080 11) (2003) 11 SCC 699 : AIR 2003 SC 4156 12) AIR 1961 SC 751 13) (1981) 2 SCC 205 : AIR 1981 SC 711 14) AIR 1958 SC 909 : (1958) 9 STC 388 (SC) 15) (1925) 10 AC 282 16) (1928) 276 US 394; 72 L. Ed. 624 17) AIR 1968 SC 1232 18) (1972) 4 SCC 485 : AIR 1972 SC 1168 : (1972) 29 STC 206 19) (1973) 1 SCC 216 : AIR 1973 SC 1034 : (1973) 31 STC 178 20) (1985) 2 SCC 197 : AIR 1985 SC 421 : (1985) 152 ITR 308 (SC) 21) (2007) 13 SCC 673 : (2008) 297 ITR 176 22) AIR 1959 SC 512 23) 467 US 837 24) (1984) 4 SCC 27 : AIR 1984 SC 1543 25) (1985) 1 SCC 641 : AIR 1986 SC 515 26) (2000) 3 SCC 40 : AIR 2000 SC 1069 27) (2006) 4 SCC 327 : AIR 2006 SC 3480 28) (2009) 15 SCC 570 : AIR 2009 SC 3194 29) (2002) 5 SCC 466 : AIR 2002 SC 2405 30) (1981) 4 SCC 173 : AIR 1981 SC 1922 (para 17) 31) (1991) 1 SCC 212 : AIR 1991 SC 537 32) AIR 1967 SC 1427 33) (1969) 2 SCC 55 : AIR 1970 SC 169 34) AIR 1963 SC 1667 35) (1990) 2 SCC 502 : AIR 1990 SC 913 36) (1983) 53 STC 42 (AP) 37) AIR 1955 SC 166 : (1955) 1 SCR 1004, 38) (2001) 7 SCC 231 : AIR 2001 SC 3435 39) AIR 1962 SC 1733 : (1962) 13 STC 529 40) (1999) 8 SCC 69 : AIR 1999 SC 3496 : (1999) 115 STC 427 41) (1999) 2 SCC 361: AIR 1999 SC 892 42) (2004) 5 SCC 783 : AIR 2004 SC 3618 : (2004) 136 STC 1 THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION Nos.3259, 4728, 4880, 4881, 5071, 5080, 5160, 5310, 5573, 11833, 13314, 20691, 21315, 21712, 21846, 22145, 22768, 22769, 22770, 22773, 22774, 22882, 25283, 26326, 27037 of 2006; WRIT PETITION Nos.6409, 8988, 9302, 9305, 9311, 9396, 9524, 11075, 13081, 16049, 17320, 17330, 17412, 20694, 20789, 20802, 21255, 21665, 22332 24376, 25949 of 2007; WRIT PETITION Nos.475, 1271, 1649, 4401 and 18633 of 2008; WRIT PETITION No.4658 of 2009 and WRIT PETITION No.5740 of 2010 December 30, 2010 Between: M/s.Asian Peroxide Limited, Nellore … Petitioner And Government of Andhra Pradesh, represented by Its Principal Secretary, Revenue (CT II) Department Hyderabad And others … Respondents THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION Nos.3259, 4728, 4880, 4881, 5071, 5080, 5160, 5310, 5573, 11833, 13314, 20691, 21315, 21712, 21846, 22145, 22768, 22769, 22770, 22773, 22774, 22882, 25283, 26326, 27037 of 2006; WRIT PETITION Nos.6409, 8988, 9302, 9305, 9311, 9396, 9524, 11075, 13081, 16049, 17320, 17330, 17412, 20694, 20789, 20802, 21255, 21665, 22332 24376, 25949 of 2007; WRIT PETITION Nos.475, 1271, 1649, 4401 and 18633 of 2008; WRIT PETITION No.4658 of 2009 and WRIT PETITION No.5740 of 2010 COMMON ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) Introduction The challenge in these cases is to Section 13(4) of the Andhra Pradesh Value Added Tax Act, 2005 (the VAT Act) and Rule 20(2)(h) of the Andhra Pradesh Value Added Tax Rules, 2005 (VAT Rules). The impugned rule was introduced by an amendment issued under Section 78(1) of the VAT Act by a Government notification vide G.O.Ms.No.2201, Revenue (CT-II), dated 29.12.2005. The effect of this rule is that all the petitioners, who are VAT dealers and availing Input Tax Credit (i.t.c.) in respect of coal, naphtha or natural gas under Section 13(1) of the VAT Act, have now been denied i.t.c. retrospectively with effect from 01.4.2005. This is the grievance and grudge that forced the petitioners to approach this Court. Background facts We may notice the relevant facts and allegations from writ petition No.5080 of 2006. M/s.Vishnu Cement Limited a manufacturer of cement, is a registered dealer under the VAT Act. Limestone, coal, iron ore and gypsum are their main raw materials. In quantitative terms, coal constitutes 13% of the raw material and on clinker production 19%. Under the provisions of the VAT Act, the tax paid on intrastate purchase of raw materials is given credit against the output tax payable on cement. The rate of VAT on coal is 4% and 12.5% on cement on which i.t.c. is allowed in respect of purchases of coal and other raw materials. The rate of sales tax under the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act) on cement was 4% (with Form G). But the rate of VAT is higher at 12.5%. Due to i.t.c. allowance the company could withstand and absorb the increase in the tax rate. Under Section 13(1) of the VAT Act, i.t.c. was allowed to VAT dealers except in respect of the goods specified in Schedule VI. No i.t.c. is allowed even on certain deemed sales enumerated in Clauses (a) to (h) of Section 13(5) of the VAT Act. Section 13(4) of the VAT Act empowers the Government to prescribe purchases in respect of which i.t.c. shall not be allowed. In exercise of the powers under Section 78 of the VAT Act, VAT Rules were promulgated. Rule 20(2) of the VAT Rules prescribes, in clauses (a) to (q), various items/goods which are not eligible for i.t.c. Rule 20(2)(h) has been substituted by the impugned amended Rule. Now, natural gas, naphtha and coal are also included in the negative list, unless the dealer is in the business of these goods. Thus the petitioner was not allowed to claim i.t.c. on the coal used as raw material. After the impugned amendment of Rule 20(2)(h) of the VAT Rules, the second respondent, namely, the Assistant Commissioner, issued notice dated 27.1.2006 proposing to disallow i.t.c. already claimed on the tax paid on coal purchases for the tax periods from April, 2005 to December, 2005. Ignoring petitioners’ objections, the Assistant Commissioner, by an order dated 28.2.2006, confirmed the VAT proposals. Defence of the State The Government of Andhra Pradesh, through an authorised officer on special duty, filed a counter affidavit in W.P.No.5740 of 2010. The assessing officer also filed counter in majority of the cases. The sum and substance of the counter is as follows. After repeal of the APGST Act the general indirect taxation system has been enforced by the VAT Act. The dealers thereunder are given set off on the tax paid on the sale of goods by another VAT dealer or used in the manufacture of goods. Though the output tax was assessed after giving i.t.c., the legislature conferred power on the Government under Section 13(4) of the VAT Act to prescribe certain purchases of goods on which i.t.c. is not allowed. In exercise of such power, the Government identified goods under Rule 20(2) of the VAT Rules. The petitioner was claiming set off while paying output tax on manufactured cement, but the Government amended Rule 20(2)(h) of the VAT Rules with effect from 01.4.2005. The same is sustainable and does not suffer from any constitutional vice. The legislature has widest discretion to pick and choose any commodity for the purpose of taxation. If the power is now granted to the Rule making body, the same is sustainable. Section 5- B(1)(b) of the APGST Act, which is similar to Section 13(4) of the VAT Act, was upheld by this Court in Chatla Narsaiah Ramaiah v State of A.P.[1]. When the legislature specifically conferred retrospective Rule making power, it is of no consequence even if the tax is passed on to the customer as the primary liability to pay VAT is on the dealer. But for the i.t.c. allowed earlier, the petitioner would have paid the entire output tax due. The assessment was taken up, and after issuing the notice and considering the explanation, the impugned demand was raised. Issues for consideration The Senior Counsel, Mr.S.Ravi, and M/s.A.K.Jaiswal, S.Dwarakanath, Bhaskar Reddy Vemireddy, M.V.J. Kumar, Shaik Jeelani Basha, B.Srinivas, Tejprakash Toshniwal and Ms.Anjali Agarwal for the petitioners and Mr.A.V. Krishna Koundinya, Special Counsel for the Commercial Taxes Department, made their submissions. They also referred to precedents. A reference will be made to these submissions and relevant precedents at an appropriate place. From the submissions, the following issues arise which are taken up for consideration one after the other. I. Constitutional Validity of Section 13(4) of the VAT Act, II. Constitutional Validity of Rule 20(2)(h) of the VAT Rules, and III. Validity of the impugned assessment orders. CONSTITUTIONAL VALIDITY OF SECTION 13(4) OF VAT ACT This issue can be examined under four sub-headings, namely, (i) Enacting History; (ii) Analysis of the VAT Act & the Rules; (iii) Scope and extent of Section 13(4); and (iv) Constitutional vires of Section 13(4). (i) Enacting History The pre-enacting history of legislation under challenge is relevant to deal with the interpretative issues that arise before the Court (BSNL v Union of India[2]). Brief history of legislation in Andhra Pradesh referable to the power under Entry 54 of List II of Schedule VII to the Constitution of India is as follows. Under the Government of India Act, 1935 (1935 Act) by reason of Entry 48 in List II of Schedule VII thereto, the State had legislative power to levy and collect tax on “all materials, commodities and articles, compendiously referred to as the goods”. All the provincial states had Sales Tax laws imposing tax on the sale and purchase. It was a major source of income. After the inauguration of the Constitution of India, the Legislative entry in the 1935 Act became Entry 54 in List II of Schedule VII. Many States either continued the legislation that existed prior to the Constitution, or made new legislation to consolidate and amend the sales tax law. The Madras General Sales Tax Act, 1939, and the Hyderabad General Sales Tax Act, 1950, applied to Andhra and Telangana regions respectively. After formation of the State of Andhra Pradesh, these were repealed and replaced by the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act). The object of retaining sales tax as a major source of revenue, however, remained elusive for many reasons. The levy was either at the point of first purchase/sale or at the point of last purchase/sale or at every point of sale. The tax paid at the point of first sale, or every point of purchase, became part of the purchase price determining the subsequent sale price. This left a cascading effect. Due to unplugged holes in the tax collection mechanism, if once there is a tax evasion, it had a negative impact on the collection as the tax once escaped caused permanent loss to the State. Thirdly, with as many as 16 to 20 rate categories introduced to fulfill a variety of objectives, the sales tax became complicated. Fourthly, many tax rate categories and multi point levy lead to unsatisfactory tax compliance. Lastly, sales taxes which accounted for 60% of the State revenue over the years remained stagnated. Initiatives for tax reforms began between 1980s and 1990s. Tax Review Committee (TRC) 1991 of Government of India recommended reform of direct taxes (income tax) and indirect taxes (excise and customs). The State level tax reforms, however, took off only in late 1990s necessitated by increasing budget pressures and demands for social welfare. An empowered committee of State Finance Ministers under the Chairmanship of Dr.Asim Das Gupta (empowered committee) was formed to study the tax reforms. On being assured by the Central Government to compensate the State for any loss over a period of three years, a consensus was reached by the States to migrate from sales tax to VAT with the sole object of simplification and rationalization of the taxes on ‘sale or purchase of goods’. This move to replace sales tax is a major landmark. Besides extending the tax base and strengthening the information base for better tax administration, VAT also attempts rationalizing the consumption tax to ensure better tax compliance. As a sequel to the consensus reached by the empowered committee in regard to implementation of VAT in the country, A.P. VAT Act, 2003 (A.P. Act No.9 of 2004) was enacted. But it was not brought into force. The time frame set by the empowered committee was to have VAT in place by April, 2005. Therefore to begin with the A.P. VAT Ordinance, 2005 (A.P. Ordinance No.1 of 2005) was promulgated by the Governor, which became the A.P. VAT Act that came into force from 01.4.2005. In “Trends and Issues in Tax Policy and Reform in India” the learned Authors[3] in “India Policy Forum[4]” summarized the salient features of the VAT regime thus. · The tax is levied at two rates (except for bullion, and precious metals, which are taxed at 1 percent). Basic necessities (about 75 items) are exempted. Most items of common consumption, inputs, and capital goods (about 275 items) are taxed at 4 percent, and all other items are taxed at 12.5 percent. Gasoline and diesel fuel (which contribute about 40 percent of the sales tax) are kept outside the VAT regime, and a floor rate of 20 percent is to be levied on them. · The tax credit facility covers inputs and purchases as well as capital goods for both manufacturers and dealers. Credit for taxes paid on capital goods can be used over three years of sales. · The tax credit mechanism operates fully only for intrastate sales. In interstate transactions, the exporting state is supposed to give an input tax credit for purchases made locally, against the collection of the central sales tax. The central sales tax credit in the importing state, or other mechanisms of zero-rating of interstate sales, will be introduced in two years, when the central sales tax in its present form will be phased out. In the meantime, an information system on interstate trade will be built up. · The central government has agreed to compensate the states for any loss of revenue at rates of 100 percent in the first year, 75 percent in the second year, and 50 percent in the third year. The loss will be calculated by estimating the difference between the projected sales tax revenue using 2004–05 as the base and the actual revenue collected. The projected revenues will be estimated by applying the average of the best three years’ growth rates during the last five years. · Tax incentives given to new industries by different states could be continued so long as it does not break the VAT chain. Many states propose to convert tax holidays into deferment of the tax. · All dealers with annual turnover above Rs.500,000 are required to register for the VAT. However, the states may levy a simple turnover tax not exceeding 2 percent on those dealers with turnover up to Rs.5 million. Such dealers, paying the turnover tax, do not have to keep detailed accounts of their transactions. But these small dealers will not be a part of the VAT chain, and no credit will be available for the taxes paid on purchases from these dealers. They may therefore voluntarily register as regular VAT dealers. VAT is levied and collected at every point of sale although it works out to be tax on the last sale, but collected in instalments at every point. As the tax paid by the dealer at the point of purchase is given “set off” or credit, ordinarily the same shall not form part of the purchase price and may have minimum objections. By and large this is the norm. But the literature on this aspect does not accept the “set off” or “credit” of tax paid at the earlier stage (i.t.c.) as being universal legislative norm. Most items of common consumption, inputs and capital goods are allowed the i.t.c.; but on certain items like petrol, diesel, liquor, i.t.c. is not permitted. Similarly select goods and transactions are kept outside and no i.t.c. can be claimed. (ii) Analysis of VAT Act and the Rules We may take up a brief analysis of the VAT Act. ‘There are three stages in imposing of tax’: (i) there is the declaration of liability. It is the part of the statute which determines what persons in respect of what property are liable to tax (commonly described as 'charging provisions’); (ii) there is the assessment which particularizes the exact sum which a person liable has to pay (commonly described as ‘taxable quantity’; and (iii) the methods of recovery if the person does not voluntarily pay the determined tax (Commissioner of Income Tax v Mahaliram Ramji Das[5] quoted with approval in Associated Cement Company Limited v Commercial Tax Officer, Kota[6]). VAT Act has dictionary clause (Section 2) defining as many as 46 terms and expressions used in the Act. These are however not exclusive and rigid in that if the “context otherwise so requires” can take different meaning and purport. “Tax” (Section 2(34)), which means tax on the sale or purchase of goods payable under the Act and includes tax on deemed sales. VAT means, ‘value added tax on sales levied under the provisions of the Act’ (Section 2(42)). Chapter III contains charging provisions. Chapter V, VI and VII deal with tax administration which includes assessment and collection of tax. Chapter VIII speaks of offences and penalties under the Act. Section 78 of the VAT Act empowers the Government to make Rules and Section 79 of the VAT Act enables the Government to alter, add to or cancel any of the six Schedules appended to the Act. As per Section 2(10) of the VAT Act, “dealer” means any person who carries on the business of buying, selling, supplying or distributing goods or delivering goods on hire purchase or in any system of payment. Every such dealer other than a casual dealer, as defined in Section 2(7) of the VAT Act, shall be liable to be registered as a VAT dealer if his estimated taxable turnover is more than Rs.40.00 lakhs. Every dealer whose turnover exceeds Rs.5.00 lakhs, but is not registered as a VAT dealer, shall be registered as a Turnover Tax dealer (ToT). The charging Section 4 of the VAT Act obliges a VAT dealer to pay tax on every sale of goods at the rates specified in the Schedules. The liability under Section 4 of VAT Act is subject to Section 13, and the rates specified in the Schedules. VAT payable shall be calculated in accordance with the formula prescribed[7] (Section 12). Wherever it is permissible a VAT dealer will get i.t.c. in respect of purchases of taxable goods if such goods are used in his business. The Act also contains an effective appeal/revision system (Sections 31 to 36). While expressing their choice as to essential features of VAT, the legislature left it to the Government (delegated agency or authority) to make Rules to cover many other aspects. In exercise of such power under Section 78 of the VAT Act, the Governor of Andhra Pradesh promulgated the VAT Rules to which a reference is made infra wherever necessary. After referring to the enacting history, and the above brief analysis, it cannot be denied that replacement of sales tax by VAT is mainly intended to improve revenue collections and to prevent cascading effect on sale price, besides plugging the gaps in tax collection. It also becomes clear that though the legislature permits the dealers to avail i.t.c. in respect of most items of common consumption, it was never intended that all taxable goods and businesses should invariably be allowed i.t.c. (iii) Scope and extent of Section 13(4) In designing a tax system, to minimize the excess burden of raising highest revenue, optimal rate of tax on commodities should be related to the direct demand for the goods. That is one school of thought. Another way is to adopt the system that will minimize the tax induced distortions and at the same time, the system remains administratively feasible and, politically acceptable. So the policy planners evolved a tax system with uniform tariffs and broad based VAT. In India, to start with rationalization of indirect taxes commenced in 1977, by converting specific duties into ad volarem taxes and introducing i.t.c. to convert the cascading sales tax into manufacturing stage VAT. This was replaced by a major reform in 2000-01 when Central VAT (CenVAT) was introduced in the Central Indirect Tax system. Then came a stage when all the States adopted the VAT system by April, 2005 generally with the facility of set off of the tax on inputs. But certain commodities were left out of VAT system, which necessarily means that i.t.c. was not allowed on the purchase of those items. As per Section 2(19) of the VAT Act, “input tax” means tax paid or payable under the Act by a VAT dealer to another VAT dealer on the purchase of goods in the course of business. As per Sections 4, 11 and 12 of the VAT Act, the VAT payable shall be calculated by applying the rate of tax specified in the applicable Schedule, and shall be calculated in accordance with the formula prescribed. Rule 19 of the VAT Rules contains the formula. In simpler terms, the tax payable b y the VAT dealer shall be X – Y where X is the total of the VAT payable in respect of all taxable sales made by a VAT dealer and Y is the total i.t.c. which the VAT dealer is eligible to claim as set off. The relevant dual provisions, namely, Sections 9 and 13 of VAT Act read as under. 9. Input tax credit for dealers for goods in Schedule VI.- Every dealer, who is liable to pay tax on the sale of goods specified in Schedule VI, shall be eligible for input tax credit subject to the conditions in Section 13 of the Act and in the manner prescribed. 13. Credit for input tax.- (1) Subject to the conditions if any, prescribed, an input tax credit shall be allowed to the VAT dealer for the tax charged in respect of all purchases of taxable goods, made by that dealer during the tax period, if such goods are for use in the business of the VAT dealer. No input tax credit shall be allowed in respect of the tax paid on the purchase of goods specified in Schedule VI. ( 2) (a) A dealer registered as a VAT dealer on the date of commencement of the Act, shall be entitled to claim for the sales tax paid under Andhra Pradesh General Sales Tax Act, 1957 on the stocks held in the State on the date of commencement of the Act subject to the conditions and in the manner as may be prescribed: Provided that such goods should have been purchased from 01-04- 2004 to 31-03-2005 and are goods eligible for input tax credit. (b) Subject to the conditions if any, prescribed, input tax credit shall be allowed to a VAT dealer on registering as VAT dealer if any input tax is paid or payable in respect of all purchases of taxable goods, where such goods are for use in the business as VAT dealer, provided the goods are in stock on the effective date of registration and such purchase occurred not more than three months prior to such date of registration. (3) A VAT dealer shall be entitled to claim :- (a) input tax credit under sub-section (1), on the date the goods are received by him, provided he is in possession of a tax invoice; (b) input tax credit or sales tax credit under sub-section (2), on the date of registration, provided he is in possession of documentary evidence therefor. (4) A VAT dealer shall not be entitled for input tax credit or sales tax credit in respect of the purchases of such taxable goods as may be prescribed. (5) No input tax credit shall be allowed on the following: (a) works contracts where the VAT dealer pays tax under the provisions of clauses (b),(c) and (d) of sub-section (7) of Section 4; (b) transfer of a business as a whole; (c) sale of exempted goods except when such goods are sold in the course of export or exported outside the territory of India; (d) exempt sale; (e) transfer of exempted goods on consignment basis or to branches of the VAT dealer outside the State otherwise than by way of sale; (f) supply of goods by the VAT dealer as mentioned in sub-section (9) of Section 4. (6) The input tax credit for transfer of taxable goods outside the State by any VAT dealer otherwise than by way of sale shall be allowed for the amount of tax in excess of 4%. (7) Where any VAT dealer pays tax under clause (a) of sub- section (7) of Section 4, the input tax credit shall be limited to 90% of the related input tax. (8) Where goods purchased by a VAT dealer are partly for his business use and partly for other than his business use, the amount of the input tax credit shall be limited to the extent of input tax that relates to the goods used in his business. (9) A Turnover Tax dealer or a casual trader shall not be entitled to claim input tax credit. (10) Any dealer covered by Explanation III & IV of clause (10) of Section 2 shall not be eligible for input tax credit against or relatable to sale of un-serviceable goods or scrap, surplus, old, obsolete or discarded material or waste products whether by auction or otherwise. (11) Any VAT dealer who purchases any taxable goods from a dealer covered under sub-section (10) above, shall be eligible for input tax credit, on production of documentary evidence that tax has been charged. (emphasis supplied) The conspectus of above two provisions is as follows. A VAT dealer can avail i.t.c. in respect of all purchases of taxable goods only if such goods are used in his business. But no such credit will be allowed in respect of goods, specified in Schedule VI subject to special rates of tax. The benefit under Section 9 of the VAT Act, and Section 13(1) of the VAT Act is, however, subject to the conditions as may be prescribed by the VAT Rules. A VAT dealer cannot claim any i.t.c. in respect of certain deemed sales. Furthermore, as per Section 13 (10) and (11) read with Explanations III and IV to Section 2(10) of the VAT Act, the Central Government, State Government and Government Undertakings are not eligible for i.t.c. against sale of unassessable goods or scrap and discarded material. The purchases by a VAT dealer from such organizations shall, however, be eligible for i.t.c. on proof of payment of tax. Be it also noted that a VAT dealer shall be entitled to claim tax credit only when such a dealer is registered, and is in possession of a tax invoice containing the particulars as stipulated in Rule 27 of the VAT Rules. Section 13(4) of the VAT Act has specifically conferred the power on the Government to select and prescribe other taxable goods (other than those mentioned in Section 13(5) of the VAT Act) in respect of which a VAT dealer shall not be entitled to claim i.t.c. Rule 20 of the VAT Rules is the provision which deals with items/goods not eligible for tax credit. In this case, we are not concerned with Sub-rule (1) of Rule 20 of the VAT Rules. Rule 20(2) of the VAT Rules contains a list of 17 items/goods which are not eligible as specified in Section 13(4) of the VAT Act. To begin with when the Rules came into force (with effect from 31.1.2005 and/or 01.4.2005), 11 (eleven) items were enumerated in Clauses (a) to (k). By an amendment vide G.O.Ms.No.1452, dated 26.7.2005, with effect from 01.4.2005, clause (l) was added. By another amendment vide G.O.Ms.No.1675, dated 23.9.2005, with effect from 01.4.2005, clause (m) was added. This was followed by yet another amendment vide G.O.Ms.No.2201, dated 29.12.2005, with effect from 01.4.2005, substituting “natural gas and coal used for power generation” with “natural gas, naptha and coal unless the dealer is in the business of dealing in these goods”. By the same notification, clauses (n), (o) and (p) were also added. Clause (q) was added by an amendment vide G.O.Ms.No.503, dated 08.5.2009, with effect from 01.5.2009. After these four amendments, Rule 20(2) of the VAT Rules reads as under. 20. Input Tax Credit. 2) The following shall be the items not eligible for input tax credit as specified in sub-section (4) of Section 13,- (a) all automobiles including commercial vehicles / two wheelers / three wheelers required to be registered under the Motor Vehicles Act 1988 and including tyres and tubes, spare parts and accessories for the repair and maintenance thereof; unless the dealer is in the business of dealing in these goods. (b) fuels used for automobiles or used for captive power generation or used in power plants; (c) air conditioning units other than used in plant and laboratory, restaurants or eating establishments, unless the dealer is in the business of dealing in these goods. d) any goods purchased and used for personal consumption. (e) any goods purchased and provided free of charge as gifts otherwise than by way of business practice. (f) any goods purchased and accounted for in the business but utilized for the purpose of providing facilities to employees including any residential accommodation. (g) crude oil used for conversion or refining into petroleum products; (h) Natural gas, naptha and coal unless the dealer is in the business of dealing in these goods. (i) any input used in construction or maintenance of any buildings including factory or office buildings, unless the dealer is in the business of executing works contracts and has not opted for composition. (j) earth moving equipment such as bulldozers, JCB’s, and poclain etc., and parts and accessories thereof unless the dealer is in the business of dealing in these goods; (k) generators and parts and accessories thereof used for captive generation unless the dealer is in the business of dealing in these goods. (l) rice purchased by Food Corporation of India from VAT dealers or farmers or farmers clubs or associations of farmers in the State. (m) rice purchased by Andhra Pradesh State Civil Supplies Corporation Ltd., from the Depots of Food Corporation of India, in Andhra Pradesh or from any other VAT dealer in the State. (n) refrigerators, coolers and deep freezers purchased by Soft Drink Manufacturers not for use in their manufacturing premises. (o) any goods purchased and used as inputs in job work. (p) PDS Kerosene purchased by wholesale dealers for the purpose of supplying to Fair Price Shops. (q) Furnace Oil, LSHS and other similar fuels, used in the furnaces and boilers of the factories or manufacturing or processing units. When any goods mentioned above are subsequently sold without availing any input tax credit, no tax shall be levied and recovered from a VAT dealer having been denied the input tax credit at the time of purchase. Any VAT dealer having purchased items mentioned above shall maintain a separate account or record without including such purchases in the purchase of eligible inputs taxable at each rate. Whenever a VAT dealer makes a claim for input tax credit for any tax period, the tax paid on the purchases of above goods shall be excluded for arriving the eligible input tax credit. This principle applies to all the sub rules in this rule. (emphasis supplied) A reading of Sections 4(3) and 13(1) of the VAT Act would reveal that i.t.c. shall be allowed in respect of purchases of taxable goods except tax paid on purchase of goods in Schedule VI. This is however subject to conditions that may be prescribed by the VAT Rules. Subsection (4) of Section 13 of the VAT Act bars a VAT dealer claiming i.t.c. in respect of the purchases of taxable goods as may be prescribed by the rule making authority. To that extent the position is not denied. In exercise of the powers conferred under Section 78 of the VAT Act, by Rule 20(2) of the VAT Rules, purchases of goods in respect of which i.t.c. cannot be claimed have been prescribed. As of now seventeen (17) items/ goods are mentioned in Rule 20(2) of the VAT Rules. It is submitted that Section 13(4) of the VAT Act enables i.t.c. to be denied only on the goods which are exempt from tax or if they are included in Schedule VI in respect of which i.t.c. cannot be claimed by reason of Section 13(1) of the VAT Act. They would, therefore, urge that Section 13(1) read with Section 13(4) of the VAT Act cannot be construed as conferring power on the Government to deny i.t.c. on all the goods. According to them i.t.c. can be denied only in respect of those goods which are exempt from tax or attracts special rates of tax provided under Schedule VI. Per contra, the Special Counsel for Commercial Taxes submits that the Court has to give a plain meaning to Section 13(1) and Section 13(4) of the VAT Act. Doing so, it does not warrant any interpretation as suggested by the petitioners. According to him, all the items in Rule 20(2) of the VAT Rules, except the item electrical energy, attracts VAT. While asserting that Rule 20(2) of the VAT Rules refers to goods and items he would urge that Section 13(4) of the VAT Act cannot be read narrowly. If the petitioners’ plea is accepted, he would contend, it amounts to supplying casus omissus which ought to be avoided. The power to tax is neither incidental nor implied power. It is to be conferred specifically on the competent legislature. Ordinarily, the legislative power includes all incidental and subsidiary powers. But not so in respect of taxation. If the source of taxing power is silent, it cannot be implied. Expanding the width of source, to include the power to tax is not permissible. “The power to tax”, ‘the person to be taxed’, ‘the thing to be taxed’ and ‘the event to be taxed’ must be specifically indicated. Any vagueness in the statute must benefit the taxpayer and not the Sovereign because “the burden of showing taxing power lies on the State”. In ‘Principles of Statutory Interpretation’ by Justice G.P.Singh (Tenth edn., 2006), the general principles of strict interpretation are summarized as below. A taxing statute is to be strictly construed. The well- established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY and LORD SIMONDS, means: “The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words”. In a classy passage LORD CAIRNS stated the principle thus: “If the person sought to be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute”. VISCOUNT SIMON quoted with approval a passage from ROWLATT, J. expressing the principle in the following words: “In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used”. Relying upon this passage LORD UPJOHN said: “Fiscal measures are not built upon any theory of taxation”. The above passage was quoted with approval in Commissioner of Income Tax v Kasturi and Sons Ltd.[8]. In State of West Bengal v Kesoram Industries Ltd.[9], citing the same, the apex Court summed up the following settled principles of interpretation (i) In interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) Before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature’s failure to express itself clearly. Applying the above settled rules, the submission of the Counsel cannot be accepted. A reading of Sections 13(1), 13(4) and 2(19) of the VAT Act would show that the tax payable under VAT Act is considered as input tax if the purchase of such goods is in the course of business. As per the charging section, every VAT dealer is liable to pay tax on every sale of goods at the rates specified in the schedules. Therefore irrespective of inclusion in one or the other schedules all the sales and purchases are taxable goods, if such transactions take place in the course of business. Section 2(6) of the VAT Act defines the term “business”. It means and includes trade, commerce or manufacture, whether or not it is carried on with profit motive. All transactions, incidental or ancillary to trade, are also included within the definition. I n State of Gujarat v Raipur Manufacturing Co. Ltd.[10] dwelling on the expression ‘business’, the Supreme Court laid down as follows. The expression “business” though extensively used in taxing statutes, is a word of indefinite import. In taxing statutes, it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure. Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity, of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. By the use of the expression “profit motive” it ‘is not intended that profit must in fact be earned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive which pervades the whole series of transactions effected by the person in the course of his activity. In actual practice, the profit motive may be easily discernible in some transactions: in others it would have to be inferred from a review of the circumstances attendant upon the transaction. Therefore, on a true construction of Section 13(4) of the VAT Act, it has to be held that the Government can prescribe any or all ‘purchases of such taxable goods’ in respect of which i.t.c. shall not be allowed. Whether or not those taxable goods are included in Schedule I (exempted from tax) or Schedule II (zero rated transactions) or Schedule VI (special rate tax category), does not make any difference. All the goods which are subject matter of sale or purchase attract tax and VAT under Sections 4(1) and 4(3) of the VAT Act and, therefore, necessarily no such distinction can be made while interpreting Section 13(4) of the VAT Act. It is altogether different matter if the Rule making authority to begin with, decided to prescribe such goods which may incidentally find place in Schedule I or Schedule II or Schedule VI. The same may not preclude the Government from prescribing other goods on which there is no output tax. If the submission of the petitioners is accepted, one would be forced to read Section 13(4) of VAT Act somewhat as follows: “a VAT dealer shall not be entitled for tax credit or sales tax credit in respect of the purchases of such taxable goods as may be prescribed on which no output tax is payable or on which special rates of tax are levied under Schedule VI.” The underlined phrase cannot be inferred by imputing an interpretation as suggested. We are afraid, it is impermissible. It is axiomatic that in construing a taxing statute the interpreter cannot and should not introduce words or something to give different meaning which was never the legislative intent. When the legislature clearly expresses nothing can be implied nor read into it. The Court cannot diminish or enlarge its scope by supplying casus omissus. I n Commissioner of Sales Tax v Parson Tools and Plants[11], the respondent’s turnover for the years 1958-59 and 1959- 60 was assessed under U.P. Sales Tax Act, 1948 (UP Act). The assessee’s appeals were dismissed for default. They filed applications to set aside the order. During the pendency of those applications, Rule 68(5) of U.P. Sales Tax Rules, which enabled the appellate authority to dismiss for default, were declared ultra vires. Therefore the applications to set aside were dismissed. The assessee then filed revision under Section 10 of UP Act before revisional authority beyond the period of 18 months. The revisional authority excluded the time spent in the proceedings under Section 68(6) and computed the period by applying Section 14 of Limitation Act. On a reference, a Full Bench of the Allahabad High Court agreed with the revisional authority and held that the time spent in prosecuting applications for setting aside the order of dismissal can be excluded. Before the Supreme Court, it was contended that Section 10 of UP Act excludes the unrestricted application of principles of Sections 5 to 10 of Limitation Act and that by analogy the provisions of Limitation Act including Section 14(2) cannot be incorporated in the UP Act. The submission weighed with the Division Bench of Supreme Court, who applied the principle of not supplying the omission. Therein it was held as follows. Be that as it may, from the scheme and language of Section 10, the intention of the legislature to exclude the unrestricted application of the principles of Sections 5 and 10 of the Limitation Act is manifestly clear. These provisions of the Limitation Act which the legislature did not, after due application of mind, incorporate in the Sales Tax Act, cannot be imported into it by analogy. An enactment being the will of the legislature, the paramount rule of interpretation, which overrides all others, is that a statute is to be expounded “according to the intent of them that made it”. “The will of the legislature is the supreme law of the land and demands perfect obedience”. “Judicial power is never exercised”, said Marshall, C.J. of the United States, “for the purpose of giving effect to the will of the Judges; always for the purpose of giving effect to the will of the legislature; or in other words, to the will of the law”. If the legislature wilfully omits to incorporate something of an analogous law in a subsequent statute, or even if there is a casus omissus in a statute, the language of which is otherwise plain and unambiguous, the Court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation, by analogy or implication, something what it thinks to be a general principle of justice and equity. To do so “would be entrenching upon the preserves of legislature”, the primary function of a Court of law being jus dicere and not jus dare. (emphasis supplied) In Illachi Devi v Jain Society, Protection of Orphans India[12], law is stated thus: It is equally well settled that when the Legislature has employed a plain and unambiguous language, the Court is not concerned with the consequences arising therefrom. Recourse to interpretation of statues may be restored only when the meaning of the statute is obscure. The Court is not concerned with the reason as to why the Legislature thought it fit to lay emphasis one category of suitors than the others. A statute must be read in its entirety for the purpose of finding out the purport and object thereof. The Court, in the event of its coming to the conclusion that a literal meaning is possible to be rendered, would not embark upon the exercise of judicial interpretation thereof and nothing is to be added or taken from a statute unless it is held that the same would lead to an absurdity or manifest injustice. (emphasis supplied) In Sri Ram Saha v State of West Bengal[13], the appellant who was the owner of garden land desired to plant hybrid saplings after removing worm affected and non-fruit bearing old trees in his land. When he was doing so, the land reforms officer prevented him from felling the trees. He challenged the same before the High Court of Calcutta. The Division Bench relied on Section 4B of the West Bengal Land Reforms Act, 1955, which required the Collector’s permission for felling the trees by owners of non-forest private plantations, and held that the appellant was entitled to cut one out of ten trees in two years. Before the Supreme Court, the appellant contended that in the absence of any provision in the Act, or in any other legislation, he cannot be prevented from felling trees in his garden land. The Apex Court referred to the decisions in Parson Tools and Sankar Ram & Co., v Kasi Naicker[14] and observed as under. It is well-settled principle of interpretation that a statute is to be interpreted on its plain reading; in the absence of any doubt or difficulty arising out of such reading of a statute defeating or frustrating the object and purpose of an enactment, it must be read and understood by its plain reading. … … At any rate, in the guise of purposive interpretation, the Courts cannot re-write a statute. A purposive interpretation may permit a reading of the provision consistent with the purpose and object of the Act but the Courts cannot legislate and enact the provision either creating or taking away substantial rights by stretching or straining a piece of legislation. (emphasis supplied) As rightly contended by the Government the goods included in the negative list do not support any contention that the power conferred is to prescribe the purchases of only non-taxable goods. The items/goods which are found in Rule 20(2)(a) to (q) are included either in IV or V or VI Schedules. Schedule I and Schedule II are either exempted goods or zero rated goods whereas Schedule III attract 1% VAT. If we exclude Schedules I to III, the Schedules IV, V and VI form the core VAT structure. The goods included in the negative list are thus spread over in all the three schedules which deal with goods/transactions attracting VAT of 4%, 12.5% (now 14.5%) or higher rates. We, accordingly, hold that Section 13(4) read with Section 78(1) of the VAT Act confers widest power on the delegate to prescribe the taxable goods in respect of which i.t.c. cannot be allowed. It is not possible to argue with the petitioners that legislature intended to deny i.t.c. only in respect of VAT exempted goods or goods attracting maximum VAT. (iv) Constitutional vires of Section 13(4) The petitioners argue that Section 13(4) of the VAT Act is ultra vires the legislative power of the State. According to them, without broad legislative policy, it confers unguided power and suffers from the vice of excessive delegation. Indisputably the legislature expressed its intent that the liability to pay VAT under Section 4(3) is subject to Section 13 of the VAT Act i.e., i.t.c. as may be allowed. The policy is clear. But according to the Counsel, for inclusion in the negative list no guidelines are provided to the delegated authority. The question for our consideration is whether there is excessive delegation? and if so whether the impugned provision ought to suffer curial invalidation? We shall begin with a brief reiteration of settled principles in this regard. In ‘Administrative Law’ by Justice C.K.Thakker (first edition, 1992), the following permissible legislative aspects which can be delegated are pointed out: (i) commencement of the statute; (ii) function of supplying details; (iii) inclusion or area of operation or class of persons to whom the law is applied; (iv) power to exempt; (v) power to suspend the operation of the provisions; (vi) application of existing laws; (vii) modification of existing statute before its application; (viii) prescribing punishments, framing of rules, bylaws, regulations; and (ix) the power to remove difficulties (popularly called Henry-VIII Clause). The following impermissible acts of delegation are also enumerated by the learned author: (i) essential legislative functions; (ii) power to repeal law; (iii) power to modify without limitation; (iv) power to grant exemption without norms and policy for guidance; (v) power to give retrospective effect to legislature; (vi) power to adopt the laws which may be passed in future; (vii) power to oust the Court’s jurisdiction; and (viii) power to define and prescribe punishment for offences. In relation to the Taxing legislation the learned author after referring to various Supreme Court decisions enumerated the following well settled principles of delegated legislation. (1 ) The power to impose a tax is essentially a legislative function. Under Article 265 of the Constitution no tax can be levied or collected save by authority of law, and here ‘law’ means law enacted by the competent legislature and not made by the executive authority. Therefore, the legislature cannot delegate the essential legislative function of imposition of tax to executive authority; (2) Subject to the above limitation, a power can be conferred on the government to exempt a particular commodity from the levy of tax. Similarly, the power may also be delegated to bring certain commodities under the levy of tax; (3) The power to fix the rate of tax is a legislative function, but if the legislative policy has been laid down and necessary guidelines have been provided, the said power can be delegated to the executive; (4) It is open to the legislature or executive to select different rates of tax for different commodities; (5) Commodities belonging to the same category should not, however, be subjected to different and discriminatory rates of tax in absence of any rational basis or justifiable grounds; (6) Needs of the taxing body is not a test for determining whether guidance was furnished by the legislature in exercising the power to tax; (7) The circumstance that the affairs of the taxing body are administered by the elected representatives responsible to the people is wholly irrelevant and immaterial in determining whether the delegation is excessive or otherwise; (8) A taxing statute should be construed strictly. If the provision is clear and unambiguous, full effect should be given to it. Where, however, such a provision is ambiguous or two interpretations are possible, the interpretation which favours the assessee should be accepted; and (9) A distinction should, however, be made between charging provisions and machinery provisions. Machinery provisions should be construed liberally so as to make charging provisions effective. It is not disputed that Section 13(4) of the VAT Act is an enabling provision under which the Government may make Rules to include certain goods in the negative list. Section 78(1) of the VAT Act empowers the making of Rules, “to carry out the purpose of the Act.” Clauses (a) to (r) of subsection (2) of Section 78 of the VAT Act illustratively enumerate the matters or subjects which may be prescribed by Rules. Clause (a) reads, “all matters expressly required or allowed by the Act to be prescribed.” Wherever a section or subsection or a clause in the Act requires a thing to be done or dealt with as may be prescribed, the Government is competent to make rules. Section 78(3) explicitly empowers retrospective rule making. Section 78(5) of the VAT Act makes it obligatory to table the Rules before the legislative assembly for a period of 14 days. During that period the legislative assembly may modify or annul any of them, and the rules so made shall have effect only as modified. In view of this, it is clear that the legislature has retained control over the delegated legislative authority. Further, it is well settled that when once rules are made, they get incorporated into the main statute whereafter they have to be read and interpreted as if they are made by the legislature itself (State of U.P. v Babu Ram Upadhya[15] and State of Tamil Nadu v Hind Stone[16]). It is argued that Section 13(4) of the VAT Act does not give any guidance, it confers absolutely unchannelled power and suffers from the defect of excessive delegation. Two questions spring up, namely, is there any guidance provided under Section 13(4) and/or is there any excess delegation of the legislative power. In Banarsi Das Bhanot v State of M.P[17], the Constitution Bench of the Supreme Court was concerned with the validity of the provisions of the Central Provinces and Berar Sales Tax Act, 1947. It was urged that the notification issued by the Government under Section 6(2), empowering amendment of the schedule, suffers from unconstitutional delegation of legislative authority. The Bench unanimously held that executive authority can be authorized to modify either existing or future laws but it cannot modify essential features. It was observed that what constitutes essential features has to be decided depending on the nature of the delegated legislation. “It is not unconstitutional for the legislature to leave it to the executive to determine details relating to working of Tax laws, such as selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different class of goods and the like.” Reliance was placed on Powell v Appollo Candle Company Limited[18] and Hampton Jr & Co., v United States[19]. In the second of these under the U.S. Tariff Act, 1922, the President was empowered to make such increases or decreases in the rates of import duty as were found necessary for carrying out policies declared in the statute on the principle that, “so long as the motive of Congress and the effect of its legislative action are to secure revenue for the benefit of the general government, the existence of other motives in the selection of the subjects of taxes cannot invalidate congressional action.” In Municipal Corporation of Delhi v Birla Cotton, Spg. and Wvg. Mills, Delhi[20] a seven Judge Bench observed that, considering the complexity of modern life, the legislature cannot have time to legislate in every minute detail and, therefore, it is open to delegate the power to make ancillary rules for the purpose of carrying out the intention of the legislature indicated in the law which gives the power to frame. The relevant placitum reads; A review of these authorities therefore leads to the conclusion that so far as this Court is concerned the principle is well established that essential legislative function consists of the determination of the legislative policy and its formulation as a binding rule of conduct and cannot be delegated by the legislature. Nor is there any unlimited right of delegation inherent in the legislative power itself. This is not warranted by the provisions of the Constitution. The legislature must retain in its own hands the essential legislative functions and what can be delegated is the task of subordinate legislation necessary for implementing the purposes and objects of the Act. Where the legislative policy is enunciated with sufficient clearness or a standard is laid down, the courts should not interfere. What guidance should be given and to what extent and whether guidance has been given in a particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to deal including its preamble. Further it appears to us that the nature of the body to which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation. (emphasis supplied) In Sita Ram Bishambhar Dayal v State of U.P[21] a provision in the U.P. Sales Tax Act, 1948, empowering the Government to make rules for determination of taxable turnover was assailed as a piece of excessive delegation. Repelling the contention, the apex Court ruled as follows. It is true that the power to fix the rate of a tax is a legislative power but if the Legislature lays down the legislative policy and provides the necessary guidelines, that power can be delegated to the executive. Though a tax is levied primarily for the purposes of gathering revenue, in selecting the objects to be taxed and in determining the rate of tax, various economic and social aspects such as the availability of the goods, administrative convenience, the extent of evasion, the impact of tax levied on the various sections of the society etc. have to be considered. In a modern society taxation is an instrument of planning. It can be used to achieve the economic and social goals of the State. For that reason the power to tax must be a flexible power. It must be capable of being modulated to meet the exigencies of the situation. In a Cabinet form of Government, the Executive is expected to reflect the views of the legislatures. In fact in most matters it gives the lead to the Legislature. However much one might deplore the “New Despotism” of the Executive, the very complexity of the modern society and the demand it makes on its Government have set on motion forces which have made it absolutely necessary for the Legislatures to entrust more and more powers to the executive. Text book doctrines evolved in the 19th century have become out of date. Present position as regards delegation of legislative power may not be ideal, but in the absence of any better alternative, there is no escape from it. The Legislatures have neither the time, nor the required detailed information nor even the mobility to deal in detail with the innumerable problems arising time and again. In certain matters they can only lay down the policy and guidelines in as clear a manner as possible. In Hiralal Rattanlal v State of U.P[22], the question was posed and answered thus. It is true that the Legislature cannot delegate its legislative functions to any other body. But subject to that qualification, it is permissible for the legislature to delegate the power to select the persons on whom the tax is to be levied or the goods or the transactions on which the tax is to be levied. In the Act, under Section 3 the Legislature has sought to impose multi-point tax on all sales and purchases. After having done that it has given power to the executive, a high authority and which is presumed to command the majority support in the Legislature, to select for special treatment dealings in certain class of goods. In the very nature of things, it is impossible for the Legislature to enumerate goods, dealings in which sales tax or purchase tax should be imposed. It is also impossible for the Legislature to select the goods which should be subjected to a single-point sales or purchase tax. Before making such selections several aspects such as the impact of the levy on the society, economic consequences and the administrative convenience will have to be considered. These factors may change from time to time. Hence in the very nature of things, these details have got to be left to the executive. (emphasis supplied) In Lohia Machines Ltd v Union of India[23], the Constitution Bench of the apex Court was concerned with the constitutional validity of Rule 19-A of the Income Tax Rules, 1962 and interpretation of Section 80-J of the Income Tax Act, 1961. One of the grounds urged was that Section 80-J of the Income Tax Act leaving the power to Central Board of Direct Taxes to prescribe items that shall be included or excluded in computation of the “capital employed” suffers from excessive delegation of legislative power and consequently void. Relying on Banarsi Das Bhanot, Sitaram Bishambhar Dayal and Hiralal Rattanlal, the Supreme Court by a majority of 4 : 1 rejected the contention observing as follows. The legislature having laid down the legislative policy of giving relief to an assessee who is starting a new industrial undertaking or the business of a hotel, had necessarily to leave it to the Central Board of Revenue to determine what should be the amount of capital employed that should be required to be taken into account for the purpose of determining the quantum of the relief allowable under the section. What should be the quantum of the relief allowable to the assessee would necessarily depend upon diverse factors such as the impact of the relief on the industry as a whole, the response of the industry to the grant of the relief, the adequacy or inadequacy of the relief granted in promoting the growth of new industrial undertakings, the state of the economy prevailing at the time, whether it is buoyant or depressed and administrative convenience. These are factors which may change from time to time and hence in the very nature of things, the working out of the mode of computation of the “capital employed” for the purpose of determining the quantum of the relief must necessarily be left to the Central Board of Revenue which would be best in a position to consider what should be the quantum of the relief necessary to be given by way of tax incentive in order to promote setting up of new industrial undertakings and hotels and for that purpose, what amount of the “capital employed” should form the basis for computation of such relief. (emphasis supplied) I n J.K. Industries Ltd v Union of India[24], the question before the apex Court was whether Accounting Standard 22 (AS 22) insofar as it relates to differed taxation is ultra vires the provisions of the Companies Act, 1956. Section 642(1) of the Companies Act conferred power on the Central Government to make rules. It was inter alia urged that the impugned AS 22 suffers from the vice of excessive delegation and that it is incongruous/inconsistent with the provisions of the Companies Act. In that context the Supreme Court reiterated the extent and scope of the power of the legislature to delegate ancillary legislative functions to another agency. We shall quote Para 133 (of SCC) which sums up the law of the land. It is well settled that, what is permitted by the concept of “delegation” is delegation of ancillary or subordinate legislative functions or what is fictionally called as “power to fill up the details”. The judgments of this Court have laid down that the legislature may, after laying down the legislative policy, confer discretion on administrative or executive agency like the Central Government to work out details within the framework of the legislative policy laid down in the plenary enactment. Therefore, power to supplement the existing law is not abdication of essential legislative function. Therefore, power to make subordinate legislation is derived from the enabling Act and it is fundamental principle of law which is self-evident that the delegate on whom such power is conferred has to act within the limitations of the authority conferred by the Act. It is equally well settled that rules made on matters permitted by the Act in order to supplement the Act and not to supplant the Act, cannot be held to be in violation of the Act. A delegate cannot override the Act either by exceeding the authority or by making provisions inconsistent with the Act. The conspectus of the above often cited precedents may be enumerated is four principles. These are (i) the essential legislative function which consists of determination of legislative policy and its formulation as a binding rule of conduct. This cannot be delegated by the legislature. There is no unlimited right of delegation inherent to the legislative power itself; (ii) it is permissible for the legislature to retain essential legislative functions and delegate all other things for implementing the purposes and objects of the Act to the subordinate legislative authority. This can be sustained only when proper guidance is provided to the delegate. Such guidance has to be deduced from the provision empowering the rule making or from different provisions of the statute; (iii) it is not unconstitutional for the legislature to delegate the determination of details relating to working of Tax laws. The details can be with regard to enumeration of goods, transactions in which sales/purchase tax should be imposed, taxable events whether single point or multi point and the grant or denial of relief in the computation of income etc; and (iv) while determining the working details of tax laws, it is always open to the delegated authority to consider market conditions, state of the economy prevailing at that time, economic consequences, administrative convenience and the impact of levy on the society and State exchequer. Whether Section 13(4) of VAT Act is devoid of broad legislative guidelines? We are afraid; the answer must be in the negative. It is not uncommon that the legislature while conferring power to make rules indicates the subjects illustratively for the purpose of making rules specifically and for making rules, “to carry out the purpose of the Act”. Enacting history of VAT Act would show that the State intended to minimize evasion of tax; to prevent cascading effect of multi point taxation; to introduce dual rates of tax (except for bullion and other specified items) and by doing so to increase the revenue recoveries from VAT. We have also seen from the enacting history that the legislature never intended to provide the benefit of i.t.c. to all the dealers in respect of purchases of inputs they made. The submission of the Counsel that, by enacting Section 4(3) subject to Section 13 of the VAT Act, the legislature intended not to deny i.t.c. at every stage cannot be countenanced. It is not permissible to do so and any such construction would offend Sections 4(1), 4(3), 13(1) and 13(4) of the VAT Act. As rightly pointed out by the respondents, the credit for input tax is allowed to the VAT dealer (subject to the conditions prescribed), and when the State, by making rules under Section 78, has prescribed ineligible purchases under Section 13(4) of the VAT Act, it is not possible to hold that the legislature did not give any guidance, and has conferred unguided power. In every case of delegated legislation, especially in respect of a taxing statute, mere absence of explicit guiding principles at one place cannot compel inference of Constitutionally impermissible excess delegation. It is well settled that when the legislature retains prior control to modify or annul the Rules, they are not vulnerable to the defect of excessive delegation. In Birla Cotton, the Supreme Court considered this aspect and laid down the law as under. What form the guidance should take is again a matter which cannot be stated in general terms. It will depend upon the circumstances of each statute under consideration; in some cases guidance in broad general terms may be enough; in other cases more detailed guidance may be necessary. As we are concerned in the present case with the field of taxation, let us look at the nature of guidance necessary in this field. The guidance may take the form of providing maximum rates of tax upto which a local body may be given the discretion to make its choice, or it may take the form of providing for consultation with the people of the local area and then fixing the rates after such consultation. It may also take the form of subjecting the rate to be fixed by the local body to the approval of the Government which acts as a watch-dog on the actions of the local body in this matter on behalf of the legislature. There may be other ways in which guidance may be provided. But the purpose of guidance, whatsoever may be the manner thereof, is to see that the local body fixes a reasonable rate of taxation for the local area concerned. So long as the legislature has made provision to achieve that reasonable rates of taxation are fixed by local bodies, whatever may be the method employed for this purpose — provided it is effective —, it may be said that there is guidance for the purpose of fixation of rates of taxation. (emphasis supplied) The Constitution Bench in Lohia Machines referring to the decision of Judicial committee in Powell and Garewal v State of Punjab[25] applied the principle while upholding Section 80J of Income Tax Act. The relevant observations are as follows. Moreover, it may be noticed that under Section 296 of the Income Tax Act, 1961 every rule made under the Act is required to be laid before each House of Parliament so that both Houses of Parliament have an opportunity of knowing what the Rule is and considering whether any modification should be made in the Rule or the Rule should not be made or issued and if both Houses agree in making any modification in the Rule or both Houses agree that the Rule should not be made or issued, then the Rule would thereafter have effect only in such modified form or have or have no effect at all, as the case may be. Parliament has thus not parted with its control over the Rule-making authority and it exercises strict vigilance and control over the Rule-making power exercised by the Central Board of Revenue. Here we may quote Section 78(5) of the VAT Act. 78. Power to make rules (5) Every rule made under the Act, shall immediately after it is made, be laid before the Legislative Assembly of the State if it is in session and, if it is not in session, in the session immediately following, for a total period of fourteen days which may be comprised in one session or in two successive sessions, and if before the expiration of the session in which it is so laid or the session immediately following, the Legislative Assembly agrees in making any modification in the rule or in the annulment of the rule, the rule shall, from the date on which the modification or annulment is notified have effect only in such modified form or shall stand annulled as the case may be; so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule. On a plain reading, it is clear that prior legislative control on the rule making authority is retained by the legislature. VAT Rules so laid before the legislative assembly for a period of 14 days can be modified or annulled and they shall be enforced only subject to such modification or annulment. Therefore Section 13(4) of the VAT Act does not suffer from excessive delegation. This point is decided accordingly against the petitioners. CONSTITUTIONAL VALIDITY OF RULE 20(2)(h) OF VAT RULES We will consider this under two broad headings, namely, (i) Vires of Rule 20(2)(h) of VAT Rules; and (ii) Infringement of Article 14 of the Constitution. (i) Vires of Rule 20(2)(h) Delegation is a constituent element of legislative power. But, a zealous delegate cannot overstep the power donated nor ignore statutory essentials in making rules as it would offend plenary legislation. The legislative power to delegate to fill is wide, “subject to limitation, namely, it cannot be the delegate in control of the power … … delegation is valid only when it is confined to policy and guidelines” (J.K. Industries Ltd). When a Court reviews the Rules and the delegate’s construction of the statute, balancing legislative intent with the rule making executive policy is a somewhat difficult task. I n Chevron v Natural Resources Defence Council[26], a decision often cited in administrative law cases, Justice Paul Stevens summed up judicial review parameters in this regard. We quote the relevant passages. When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute. If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. Sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency... We have long recognized that considerable weight should be accorded to an executive department's construction of a statutory scheme it is entrusted to administer, and the principle of deference to administrative interpretations has been consistently followed by this Court whenever decision as to the meaning or reach of a statute has involved reconciling conflicting policies, and a full understanding of the force of the statutory policy in the given situation has depended upon more than ordinary knowledge respecting the matters subjected to agency regulations. Judges are not experts in the field, and are not part of either political branch of the Government. Courts must, in some cases, reconcile competing political interests, but not on the basis of the judges' personal policy preferences. In contrast, an agency to which Congress has delegated policymaking responsibilities may, within the limits of that delegation, properly rely upon the incumbent administration's views of wise policy to inform its judgments. While agencies are not directly accountable to the people, the Chief Executive is, and it is entirely appropriate for this political branch of the Government to make such policy choices -- resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities. (emphasis supplied) In somewhat similar terms Chevron test is reiterated in Maharashtra S.B.O.S. & H.S. Education v Paritosh[27]. It was held that validity of the rule has “to be determined with reference only to the specific provisions contained in the relevant statute conferring the power to make the rule, regulation, etc., and also the object and purpose of the Act as can be gathered from the various provisions of the enactment. It would be wholly wrong for the court to substitute its own opinion for that of the legislature or its delegate as to what principle or policy would best serve the objects and purposes of the Act and to sit in judgment over the wisdom and effectiveness or otherwise of the policy laid down by the regulation-making body and declare a regulation to be ultra vires merely on the ground that, in the view of the Court, the impugned provisions will not help to serve the object and purpose of the Act.” So long as the body, entrusted with the task of framing VAT Rules or regulations, acts within the scope of the authority conferred on it, in the sense that Rules made by it have a rational nexus with the object and purpose of the Statute, the court should not concern itself with the wisdom or efficacy of such Rules. It is exclusively within the province of the legislature and its delegate to determine, as a matter of policy, how the provisions of the Statute can best be implemented and that measures, substantive as well as procedural, would have to be incorporated in the VAT Rules or regulations for the efficacious achievement of the objects and purposes of the Act. It is not for the Court to examine the merits or demerits of such a policy because its scrutiny has to be limited to the question as to whether the impugned regulations fall within the scope of the donated power to the delegate. Precedents are galore on the point that delegated legislation must comply with statutory essentials. I n Indian Express Newspapers Bombay (Private) Ltd v Union of India[28], it was held that subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute and that it can be questioned on any of the grounds on which plenary legislation may be questioned. In addition it may also be questioned on the ground that it does not conform to the statute under which it is made as well as on the ground that it is manifestly arbitrary and unreasonable. It is also settled that the expression, “for carrying out the purpose of the Act” is not construed as to bring something in the statute which has been excluded by the Act itself (see Kunj Behari Lal Butail v State of H.P.[29], Kerala Samsthana Chethu Thozhilali Union v State of Kerala[30] and Global Energy Ltd v Central Electricity Regulatory Commission[31]). To be able to succeed on the ground, it should be demonstrated that subordinate legislation lacks statutory essentials, in that it is not in accordance with the plenary legislation or it included something which was excluded by the Act itself. Vague allegation of general hardship cannot render the rules ultra vires. One must look to the entire Act to determine the intention and purpose of the legislation in giving power to the agency to make rules for the purpose of implementing the Act. Looking to the illustrative subjects mentioned in the rule making provision, or the long title of the enactment, itself may not be pivotal. The entire Act has to be churned before coming to the conclusion that it did not empower the agency to exclude or include something in the Rules never intended by the legislation itself. Section 13(4) of the VAT Act empowers the Government of Andhra Pradesh to prescribe on ‘purchases of such taxable goods’ which shall not be entitled for i.t.c. The use of the word ‘such taxable goods’ in Section 13(4) and 78(1) of the VAT Act makes it very clear that there is no limit on the power delegated to make VAT Rules. The term “prescribed” should receive broader meaning. I n Nagrik Upbhokta M. Manch v Union of India[32], Government of Madhya Pradesh framed rules under Section 3 of the Essential Commodities Act, 1955 and Para 2(d) of the Kerosene (Restriction on Use of Fixation of Selling Price) Order, 1993 providing for rounding of the rates to utilize such saved amount for strengthening public distribution system. The challenge to this as ultra vires failed before the High Court of Madhya Pradesh. The argument before the Supreme Court was that the rule is ultra vires. Accepting the point, appeals were allowed by observing as under. The Kerosene Order defines the “declared price” being the maximum selling price by reference to an area. Apart from the cost of production, what can be included therein are other charges, rates, duties, taxes prescribed by the State Government or District Collector in the case of an area of a State. The term “prescribed” contemplates the determination of charges, rates, duties and taxes which are leviable on kerosene under the law of the State or local legislation and are, therefore, better known to the State Government or District Collectors and would be available to be added to the maximum selling price declared by the Central Government or by the State Government subject to delegation of power by the Central Government. The definition of “declared price” cannot be so read as empowering the State Government, the Director or the District Collectors to prescribe by themselves and levy on the kerosene, any charges, rates, duties and taxes in purported exercise of power under the Control Order. In other words, the charges, rates, duties and taxes must be pre-existing or originating from a lawful source other than the provisions of the Kerosene Order and can only be quantified by the State Government or District Collector so as to be prescribed for being added to the declared maximum selling price. The term “charges” must be read ejusdem generis taking colour from the succeeding terms — rates, duties and taxes. The term ‘prescribed’ should be given a broad and extended meaning to include any item as the Government may deem fit and proper in the negative list. If it is construed as permitting the Government to prescribe only such goods on which there is no output tax or special rate of VAT it would render Section 13(4) of the VAT Act itself unconstitutional. Any interpretation which has the effect of making a statutory provision unconstitutional must be avoided. The Court must always uphold the constitutionality of a provision of an Act, if necessary by construing in such a manner that it is intra vires (K.P.Varghese v ITO[33]). We have already rejected the petitioner’s argument that the legislature never intended the Government to exclude i.t.c. on purchase of all goods. In our considered opinion the object of the VAT Act is to increase State’s revenue. It is always open to the rule making agency to explore all possibilities within the permissible limits to do so. If the power is conferred on the agency to disentitle any ‘such purchase of goods’ from claiming i.t.c. it has to be upheld. Thus Rule 20(2)(h) of the VAT Rules which disqualifies natural gas, naphta and coal from claiming i.t.c. is valid and does not suffer from any defect of being ultra vires. (ii) Infringement of the Article 14 of Constitution of India The three aspects here are (a) Whether the impugned Rule is arbitrary and unreasonable; (b) Whether it is discriminatory; and (c) Whether retrospective operation is unconstitutional. (a) Whether the impugned Rule is unreasonable The test is not whether it is not reasonable but whether it is manifestly arbitrary. It may be noticed that any challenge on the ground of competency and jurisdiction calls for primary review whereas the challenge on the ground of arbitrariness, irrationality and unreasonableness calls for secondary review. The latter has its own limitations. What is reasonable to one person in one context might be unreasonable for another. If the agency was expressed a reasonable policy of including or excluding a particular thing from the tax net, the Court cannot substitute its opinion merely because the Court feels that it is unreasonable. The question in such a situation is whether the plenary legislation intended that the delegate should not grant any tax benefit or should not include such goods in the tax ambit. In this regard a reference need to be made to the following oft quoted passage from Shrilekha Vidyarthi v State of U.P.[34] in which the meaning and true import of arbitrariness was considered as follows. The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that ‘be you ever so high, the laws are above you’. This is what men in power must remember, always. Shrilekha Vidyarthi refers to the following observations from the decision of the Constitution Bench in S.G. Jaisinghani v Union of India[35] wherein it was held that every decision taken without any principle would violate the equal protection clause. In this context it is important to emphasize that the absence of arbitrary power is the first essential of the rule of law upon which our whole constitutional system is based. In a system governed by rule of law, discretion, when conferred upon executive authorities, must be confined within clearly defined limits. The rule of law from this point of view means that decisions should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizen should now where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis of a decision taken in accordance with the Rule of law. The petitioners vehemently contend that the impugned provision is without any rational basis and without any sustainable principle. The counter affidavit, filed on behalf of the Government of Andhra Pradesh, to say the least, is silent on this aspect. The Special Counsel, however, submits that the purpose of amending the rule was to prevent huge loss of revenue by disallowing i.t.c. on naphtha, natural gas and coal. He has placed before this Court the relevant files containing correspondence between the Commissioner and the Government. The Government of Andhra Pradesh issued G.O.Ms. No.485, dated 20.7.2004, constituting a three member Cabinet sub committee of Group of Ministers (GoM). They were required to meet from time to time to resolve various VAT issues. After coming into force of the VAT Act with effect from 01.4.2005, the committee regularly met and decided various amendments to the VAT Rules. The Commissioner sent proposals vide his letter dated 21.9.2005 to the Government for amendment of the VAT Act and the VAT Rules. In his letter he refers to the proposals agreed to by the Review committee chaired by the Hon’ble Chief Minister on 08.5.2005. Inter alia these proposals also related to denying i.t.c. on the purchases of coal, naphtha and natural gas irrespective of usage. A month thereafter the Commissioner again sent a D.O. letter dated 22.10.2005 to the Special Chief Secretary (Revenue) requesting for early convening of the GoM meeting. In the agenda for the said meeting dealing with the aspect of the inclusion of coal, naphtha and natural gas in the negative list, the Commissioner clearly mentioned that these items attract rate of tax at 12.5% and the amount of tax paid will have to be given back in the form of i.t.c. to the purchasing dealers. This results in huge loss of revenue and hence proposal was muted for inclusion of these commodities in the negative list. The proposal was approved by the GoM in its meeting held on 14.11.2005. To our mind the involvement of huge revenue was the reason for amending Rule 20(2)(h) of the VAT Rules. Is it not sufficient enough to dispel the argument that it is manifestly arbitrary and irrational? In Assistant Commissioner v Buckingham & Carnatic Co. Ltd.[36], the Constitution Bench of Supreme Court considered the constitutional validity of the Madras Urban Land Tax Act, 1966. The appeal arose out of the Full Bench decision of the Madras High Court which, by a majority of 4 : 1, struck down Section 6 of the said Act. The said Section provided that, for the purposes of the Act, the market value of any urban land shall be estimated to the price, which in the opinion of the Assistant Commissioner or Tribunal, such urban land would fetch if sold in the open market. Before the Supreme Court, two questions arose, namely, the competence of the Madras legislature, and the reasonableness of the law impugned therein. Both the grounds were decided against the assessee relying on the decision in Rai Ramakrishna v State of Bihar[37]. Dealing with reasonableness of the law, the unanimous Bench indicated the test as extracted hereunder. It is not possible to put the test of reasonableness into the straight jacket of a narrow formula. The objects to be taxed, the quantum of tax to be levied, the conditions subject to which it is levied and the social and economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to the Legislature and not to the Courts. In applying the test of reasonableness it is also essential to notice that the power of taxation is generally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit. … … As a general rule it may be said that so long as a tax retains its character as a tax and is not confiscatory or extortionate, the reasonableness of the tax cannot be questioned. (emphasis supplied) The law is thus well settled that, as long as taxing power is exercised within the legislative competence, the sovereign right to raise revenue by taxation is to be accepted. The quantum of tax levied, the condition subject to which it is levied, and the manner in which it is sought to be recovered are all matters within the competence. If the taxing statute is plainly discriminatory, devoid of any machinery for assessment or the tax is confiscatory, it is possible to strike down a taxing statute as unconstitutional. But for doing so there should be “palpable arbitrariness” (Kerala Hotel and Restaurant Assn. v State of Kerala[38]). We have referred to the events preceding the impugned amended Rule. There is no denial that as per Section 4(3) of the VAT Act, naphtha and natural gas stand included in Schedule V to the VAT Act, which are taxable at the standard rate of 12.5%. This indicates that all the dealers who are engaged in the manufacture of various products like cement, fertilizers etc., buy these goods paying VAT at 12.5% except coal (which attracts VAT of 4%). If they are allowed to claim i.t.c., virtually there would not be any VAT on the purchase of these goods. Resultantly there would be huge loss of revenue to the Government. Schedule V is incorporated in the VAT Act to deal with such of those goods attracting VAT at 12.5% and, if i.t.c. is allowed even in respect of such goods, it would make them zero rates goods. Before we part with this aspect, we may quote the passage from an unreported judgment in M/s.MAKS Casting Private Limited v Government of Andhra Pradesh (W.P.No.12804 of 2009 and batch, dated 16.9.2010) which upheld the validity of Rule 67 of VAT Rules. Dealing with the question of reasonableness, the Division Bench consisting of one of us (Ramesh Ranganathan, J) made the following observations. The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality. In such a complex arena, in which no perfect alternatives exist, the Court does well not to impose too rigorous a standard of criticism, under the equal protection clause, reviewing fiscal provisions. The law of taxation is, in the ultimate analysis, the result of the balancing of several complex considerations, and it would be unreasonable to insist upon the application of a general rule. In the field of taxation, if the test of Article 14 is satisfied by generality of the provisions, Courts would not substitute judicial wisdom for that of the legislature. Classification for taxation, and the application of Article 14 in that context, must be viewed liberally, not meticulously. In tax cases, there are good reasons for judicial self-restraint if not official deference to legislative judgment. The complexity of economic regulation, the uncertainty, and the bewildering conflict of expert opinion, would show that self-limitation is the path to judicial wisdom. In view of the inherent complexity of fiscal adjustments, Courts give a larger discretion to the legislature in these matters and effectuate the chosen system in all possible and reasonable ways. If two or more methods of adjustment are available, the legislative preference in favour of one of them cannot be questioned on the ground of lack of legislative wisdom or that the method adopted is not the best or that there are better ways of adjusting the competing interests and claims. The legislature possesses the greatest freedom in such areas. The test applicable for striking down a taxing provision is one of “palpable arbitrariness” applied in the context of the felt needs of the times and societal exigencies informed by experience’. Therefore, in our considered opinion, it is not unreasonable to include coal, naphtha and natural gas in the negative list. The plea of unreasonableness, applying the tests in Rai Ramakrishna and Buckingham and Carnatic Co. Ltd., is unacceptable. (b) Whether the impugned Rule is discriminatory Rule 20(2)(h) of the VAT Rules for the purpose of denying i.t.c. classified purchases of goods into two categories. First, where naphtha, natural gas and coal are used by non-traders who use the goods for manufacturing, and the second category are those trader- dealers who only deal in these goods for their business. This, as urged by petitioners, is vitiated and hit by Article 14. There cannot be any dispute that a dealer who is in the business of dealing in these goods is entitled to claim i.t.c. But manufacturers like the petitioners cannot claim i.t.c. For the purpose of i.t.c., the legislature resorted to classification of goods which are eligible for claiming i.t.c, and the goods which are not eligible for i.t.c. Even among them, the goods used by a non-trader in the business of manufacturing are not eligible whereas a trader who is dealing in non-manufacturing business is eligible to claim i.t.c. The petitioners point out that Section 13(4) of the VAT Act empowers to prescribe “purchase of such taxable goods” which is not entitled for i.t.c. As the manufacturers as well as dealers have purchased these goods by paying VAT there cannot be discrimination between the two categories. The point is whether classification of dealers into traders and non-traders for the purpose of Rule 20(2)(h) of the VAT Rules offends the equality clause? As of now, as noticed supra, there are seventeen items/goods in clauses (a) to (q) of Rule 20(2) of the VAT Rules. Clauses (a), (c), (h), (i), (j) and (k) make the distinction between traders and non-traders. In these classes, the purchases made by the dealers are eligible for i.t.c. whereas the purchases made by non-traders are not eligible. But Rule 20(2) of the VAT Rules itself makes it clear that when the goods mentioned in clauses (a) to (q) are sold subsequently without availing i.t.c., no tax shall be levied and recovered from a VAT dealer who has been denied i.t.c. at the time of purchase. If the trader or non-trader category dealers sell the goods subsequently, they need not pay output tax on the goods on which they were denied i.t.c. This brings out the rationale in classifying the traders and non-traders. Traders who buy the goods mentioned in Rule 20(2)(a) to (q) of the VAT Rules and sell the goods as such. The non-traders, on the other hand, buy these goods and use them as raw material or fuel in producing different products with considerable value addition. It is permissible for the sovereign – especially in taxing statutes – to classify goods and persons for the purposes of levying and collecting different rates of tax in respect of different taxable events. The Sovereign power to tax, extends to choosing things and persons having regard to need based innumerable situations. The person challenging any such classification, as violating the equality clause or the equal protection clause, has to discharge the initial burden. The onus then shifts to the State to sustain the classification. Assuming that the challenger discharges the burden satisfactorily the Court may face two distinct situations. A classification may suffer from the defect of under-inclusion or over-inclusion. If a group of people are classified as one category for the purpose of denying, or for the purpose of conferring, benefit the people who are left out of the category can always complain that they have been discriminated. It is a case of under-inclusion because the benefits or burdens go to some persons denying others. In the second situation, while burdening a group of people, other dissimilar people are also included. It is a case of over-inclusion. The Courts interfere and strike down the offending part when it is the case of over- inclusion. But, ordinarily, the Courts seldom touch cases of under- inclusion; the principle being that the legislature is free to recognize the degree of harm, and that it may confine benefits or burdens to those classes of cases where the need seem to be the clearest. If the Court comes to conclusion that, by reason of under-inclusion, eligible class is left out, no direction can be given to include that category. We are well supported by precedents on this. In Sakhawant Ali v State of Orissa[39], Section 16(1)(ix) of the Orissa Municipalities Act disqualified the advocate for the municipality from contesting election to a seat in the municipality. This provision was upheld by the apex Court holding: The simple answer to this contention is that legislation enacted for the achievement of a particular object or purpose need not be all embracing. It is for the Legislature to determine what categories it would embrace within the scope of legislation and merely because certain categories which would stand on the same footing as those which are covered by the legislation are left out would not render legislation which has been enacted in any manner discriminatory and violative of the fundamental right guaranteed by Article 14 of the Constitution. In B.R Kapur v State of T.N.[40], a submission was made that Sub-section (4) of Section 8 of the Representation of Peoples Act, 1951 requires reading down so as to apply the same to a non- Legislator and to render the same constitutionally valid. Section 8(4) of the Representation of Peoples Act, 1951 lays down that the disqualification under Section 8(3) thereof shall in the case of elected Member of Parliament or Legislature of a State, shall not take into effect until a final Court has confirmed the conviction and sentence. The submission was rejected by a Constitution Bench. It is apposite to refer to the observations made by the Supreme Court: Section 8 (4) opens with the words \"notwithstanding anything in Sub-section (1), Sub-section (2) or Sub-section (3)\", and it applies only to sitting members of Legislatures. There is no challenge to it on the basis that it violatives Article 14. If there were, it might be tenable to contend that Legislators stand in a class apart from non-Legislators, but we need to express no final opinion. In any case, if it were found to be violative of Article 14, it would be struck down in its entirety. There would be, and is no question of so reading it that its provisions apply to all, Legislators and non-Legislators, and that, therefore, in all cases the disqualification must await affirmation of the conviction and sentence by a final Court. That would be \"reading up\" the provision, not \"reading down\", and that is not known to the law. Any tax administration cannot be efficiently run without there being a proper classification of persons, things and rates of taxes. It does not, however, mean that a taxing law can escape the rigour of Article 14 of the Constitution. I n East India Tobacco Company v State of Andhra Pradesh[41], it was argued that the classification of Virginia tobacco and country tobacco by itself was not sufficient for justifying a classification for the purpose of sales tax. The argument was rejected by the Supreme Court observing that, “the State can validly pick and choose one commodity for taxation and that is not open to attack under Article 14.” It was also held that the distinction between Virginia tobacco and country tobacco was also taken as crucial in holding that the classification is not obnoxious to Article 14 of the Constitution. The relevant observations are as follows. It is not in dispute that taxation laws must also pass the test of Article 14. That has been laid down recently by this Court in Kunnathat Thathunni Moopil Nair v. State of Kerala, AIR 1961 SC 552. But in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of Article 14. The following statement of the law in Willis on “Constitutional Law” p.587, would correctly represent the position with reference to taxing statutes under our Constitution: “A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably.... The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation.” In Hiralal, levy of sales tax on dal splits or processed food grains was challenged as discriminatory. The argument was that the State cannot classify dal into independent commodity of split and unsplit pulses or processed or unprocessed pulses both being same. This was rejected by a Constitution Bench observing that the classification which is based on, “the use to which those goods can be put” is a reasonable classification. In Kerala Hotel the issue was whether levy of sales tax under the Kerala Act on cooked food served in luxury hotels, while exempting the food served in modest eating houses, was a reasonable classification. Approving the classification, the Supreme Court observed as follows. We are here concerned with the constitutional validity of a legislative provision which has the effect of making the cooked food sold in the posh eating houses alone eligible to sales tax while exempting from that levy the cooked food sold in the moderate eating houses. Reasonableness of the classification has to be decided with reference to the realities of life and not in the abstract. A discernible dissimilarity between those grouped together and those excluded is a pragmatic test, if there be a rational nexus of such classification with the object to be achieved. In the abstract all cooked food may be the same since its efficacy is to appease the hunger of the consumer. But when the object is to raise only limited revenue by taxing only some category of cooked food sold in eating houses and not all cooked food sold anywhere, it is undoubtedly reasonable to tax only the more costly cooked food. The taxed cooked food being the more costly variety constitutes a distinct class with a discernible difference from the remaining tax free cooked food. A blinkered perception of stark reality alone can equate caviar served with champagne in a luxury hotel with the gruel and buttermilk in a village hamlet on the unrealistic abstract hypothesis that both the meals have the equal efficacy to appease the hunger and quench the thirst of the consumer. Validity of a classification under our Constitution does not require such a blurred perception. (emphasis supplied) Traders and non-traders do not stand on the same footing when it comes to use of the goods referred to in the impugned Rule. Out of the 53 cases before us, in 49 cases coal is used as a raw material and it is not sold as such. The traders in coal again sell the entire quantity with little or no value addition whereas non traders sell the products like cement, fertilizers etc., with considerable value addition. As seen from the precedents “the purpose or the use to which goods are put to” can be basis for a valid classification. As we already noticed supra, the object of denying i.t.c. on these goods is to increase the revenue. Thus the twin tests of classification, namely, nexus test and rationality test are satisfied. We have, therefore, no manner of doubt in rejecting the submission that the impugned Rule is discriminatory. As it is a case of under inclusion we cannot give direction to include the petitioners and the likes in the exempted category. The alternative submission that all the petitioners should be treated as dealers as they also have been engaged in the continued and continuing activity of buying these goods, does not merit any consideration. Section 2(10) of the VAT Act defines ‘dealer’ to mean any person who carries on the business of buying, selling, supplying or distributing goods or carries on any works contract involving supply or use of material. Section 2(6) of the VAT Act defines ‘business’ to include any trade, commerce and manufacture carried on with a motive to make gain or profit. Therefore dealers, for the purpose of VAT, are of two kinds: those who merely engage in buying and selling and those dealers who buy goods and manufacture them into other goods. For the purpose of VAT both are similarly situated but there is a considerable difference between trader and non-trader business. It is nobody’s case that in these cases these non trader dealers are denied i.t.c. on all the goods which they use as raw material in manufacturing goods. The admitted case is that they are denied i.t.c. only on one of the raw materials used in the manufacture of cement, burnt lime, fertilizers or drugs as the case may be. This is the distinguishing feature which has to be kept in mind while considering the effect of Rule 20(2)(h) of the VAT Rules. I n Nandanam Construction Company v Assistant Commissioner[42] Section 6A of the APGST Act was assailed as violating Article 14 of Constitution. Section 6A made a distinction between a registered dealer and an unregistered dealer while levying tax on the purchase of certain goods. The petitioners, who were construction companies buying materials like sand, bricks, granite and metal from unregistered dealers or non-dealers, were levied tax on the turnover of these goods bought from unregistered dealers. The argument was that, as they sell the flats they cannot be treated as ‘dealers’ within the meaning of the APGST Act. The submission was rejected on the reasoning that, “a person who purchases goods in the course of his business is as much a dealer as a person who sells the goods or distributes the goods and that even though the petitioners engage in the business of constructing and selling flats as they purchase goods like sand, gravel etc., in the course of the business, they are the dealers”. But the writ petitions were allowed by the Division Bench on the ground that in the absence of consumption of the original goods, the petitioners are not liable to pay the tax. The appeal by the State (as reported in Asst. Commissioner v Nandanam Construction Company[43]), however, was accepted by a Constitution Bench of the Supreme Court observing that the intention of the legislature is to bring to purchase tax in either event of consumption of goods in the manufacture of goods for sale or consumption of goods in any other manner and that once the goods are utilized in the construction of buildings, the goods ceased to exist or cease to be available in that form for such sale or purchase so as to attract the tax and, therefore, the correct meaning to be attributed to the said provision would be that tax will be attracted when such goods are consumed in the manufacture of other goods or are consumed otherwise. After perusing the decision of this Court as well as the decision of the Supreme Court, we are not able to countenance the petitioners’ plea that they are dealers in the sense in which the term is used in Rule 20(2)(h) of VAT Rules. As is pointed out by the Act itself there is a clear dissimilarity between traders and non-traders although they are dealers for the purpose of the VAT Act. (c) Whether retrospectivity is unreasonable and arbitrary? VAT Act came into force with effect from 01.04.2005. The Government of Andhra Pradesh promulgated VAT Rules under Section 78 vide notification in G.O.Ms.No.394, dated 31.03.2005. Indeed, as per Rule 2(i), Rules 1, 2(i) and 3 to 11 are deemed to have come into force with effect from 31.1.2005 and all others from 01.4.2005. As originally made, Rule 20(2) consisted of eleven items in clauses (a) to (k) of sub-rule (2) of Rule 20 of VAT Rules. Except when natural gas and coal was used for power generation, all trader and non-trader dealers buying natural gas, naphtha and coal were eligible to claim i.t.c. The Government of Andhra Pradesh issued G.O.Ms.No.2201, dated 29.12.2005 amending Rule 20(2)(h) of the VAT Rules, the effect of which is except a trader dealer, all others are denied i.t.c. on these three goods. This has been given retrospective effect from 01.04.2005. By reason of this, demands have been raised from the petitioners to pay the re-assessed VAT without providing for i.t.c. from April to December, 2005. Is this amendment, giving retrospective effect which is assailed, inequitable and arbitrary? The source of legislative power to levy tax, it is well settled, includes the power to legislate retrospectively, subject however to the constitutional restrictions. If a legislature can make a valid law imposing tax, it can always provide for its retrospective operation. But, unless and until it is expressly provided for, the delegated authority cannot make rules retrospectively. There is no dispute that Section 78(3) of the VAT Act specifically empowers the Government to make any rule so as to have retrospective effect. Relying on precedents, counsel for petitioners submit that the rule with retrospective effect is without reasons, inequitable and arbitrary. In Eicher Motors Limited v Union of India[44], the issue was the vires of Rule 57F (4A) of the Central Excise Rules, 1944, under which MODVAT credit lying unutilized on 16.03.1995 with the manufacturers, stood lapsed. The plea was that MODVAT credit was a vested right accrued or acquired by the assessee under the existing law and, therefore, the Central Government lacks power to take away the vested right. The submission was accepted by the Supreme Court observing thus: As pointed out by us that when on the strength of VAT Rules available, certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the Scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that the right, which had accrued to a party such as the availability of a scheme, is affected and, in particular, it loses sight of the fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned. Therefore, the Scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier Scheme was applied under which the assessees had availed of the credit facility for payment of taxes. It is on the basis of the earlier Scheme necessarily that the taxes have to be adjusted and payment made complete. Any manner or mode of application of the said Rule would result in affecting the rights of the assessees. … We may look at the matter from another angle. If on the inputs, the assessee had already paid the taxes on the basis that when the goods are utilised in the manufacture of further products as inputs thereto then the tax on these goods gets adjusted which are finished subsequently. Thus a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facility available thereto gets worked out or until those goods existed. Therefore, it becomes clear that Section 37 of the Act does not enable the authorities concerned to make a rule which is impugned herein and, therefore, we may have no hesitation to hold that the Rule cannot be applied to the goods manufactured prior to 16-03-1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods. (emphasis supplied) In Tata Motors v State of Maharashtra[45], the Supreme Court found fault with retrospective withdrawal of the benefit of drawback and set off for a specified period by reason of an amendment to the rule observing as under. Assuming that it was the legislative policy not to grant set-off in respect of waste or scrap material generated, it becomes difficult to appreciate the stand of the State in the light of the fact that the original rule continued to be in operation (with certain modifications) subsequent to 1-4-1988. The reason for withdrawal of the benefit retrospectively for a limited period is not forthcoming. It is no doubt true that the State has enormous powers in the matter of legislation and in enacting fiscal laws. Great leverage is allowed in the matter of taxation laws because 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 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 for a particular period should be justified on some tangible and rational ground, when challenged on the ground of unconstitutionality. Unfortunately, the State could not succeed in doing so. (emphasis supplied) The petitioners all along for a period of nine months availed i.t.c., on the coal, naphtha and natural gas. In the absence of any denial, a reasonable inference can be drawn that, while working out their production and marketing costs, the tax credit availed by them was a factor. All the goods manufactured have been sold and there is no opportunity now for the petitioners to collect the increased cost by reason of non-availability of i.t.c. We have perused the files produced before us. No reasons whatsoever are forthcoming as to why the Government sought to amend the rule retrospectively. In the absence of any such reasons, much less strong reasons, we have no hesitation to hold that giving retrospectivity to the impugned rule would certainly be inequitable and arbitrary. To that limited extent, we are persuaded to accept the petitioners’ plea. VALIDITY OF THE IMPUGNED ASSESSMENT ORDERS In all the writ petitions, besides impugning Section 13(4) of the VAT Act and 20(2)(h) of the VAT Rules, the assessment orders for the period from April, 2005 to December, 2005 and subsequent thereto are also challenged. There are effective, efficacious and speedy alternative remedies available under the Statute. The petitioners have not availed these remedies. This is condonable as the provision of the Act and Rule have been challenged. These issues would not have been decided by the appellate authorities or statutory tribunals. The assessment orders are challenged mainly on the ground that they were passed without issuing notice and without giving opportunity of being heard. The Act requires every VAT dealer to file Tax return in Form VAT 200 for every calendar month within twenty days after the end of the calendar month. As per Section 20(2), such return shall be accepted as self assessment subject to correction of any arithmetical error. But, an assessing authority may assess to the best of his judgment within four years of the due date of return if he is not satisfied with the self assessment. Thereafter, re-assessment can be taken up by the revisional authority within a period of four years. It is nobody’s case that in any of these cases assessment as contemplated under Section 21(3) was completed. The admitted case is that all the petitioners filed self- assessment VAT returns. Therefore, till expiry of the period contemplated under Section 21(3), no VAT dealer can have a grudge if assessment is taken up thereunder. We have come to the conclusion that the retrospective denial of i.t.c. to the petitioners in respect of VAT returns for nine months is unsustainable and, therefore, all these assessment orders must go. If so advised the assessing officers may now take up the assessment after issuing notice and after affording an opportunity of being heard if requested. In the view taken, we are not inclined to consider the validity of the assessment orders in these writ petitions. Conclusions In the result, we dispose of the writ petitions declaring and directing that (i) the impugned Section 13(4) of the Andhra Pradesh Value Added Tax Act, 2005 does not suffer from the vice of excessive delegation; (ii) the Rule 20(2)(h) of the Andhra Pradesh Value Added Tax Rules, 2005 is valid with effect from the date it is notified i.e., 31.12.2005; (iii) all the assessment orders be and hereby are set aside and stand remitted to the respective authorities to take action in accordance with this judgment and order; and (iv) there shall be no order as to costs. _______________ (V.V.S. RAO, J) ______________________________ (RAMESH RANGANATHAN, J) December , 2010 NOTE: L.R. Copy be marked. (By order) YS [1] (2005) 41 APSTJ 45 [2] (2006) 3 SCC 1 : AIR 2006 SC 1383 [3] M/s.M.Govinda Rao and R.Kavita Rao [4] pp.55 – 122 at p.77 [5] AIR 1940 PC 124 [6] (1981) 4 SCC 578 : AIR 1981 SC 1887 : (1981) 48 STC 466 (SC) [7] ‘Prescribed’ means prescribed by VAT Rules made under the Act (Section 2(24)) [8] (1999) 3 SCC 346 : AIR 1999 SC 1275 [9] (2004) 10 SCC 201 (para 106) [10] AIR 1967 SC 1066 : (1967) 19 STC 1 [11] (1975) 4 SCC 22 : AIR 1975 SC 1039 : (1975) 35 STC 513 [12] (2003) 8 SCC 413 (para 44) : AIR 2003 SC 3397 [13] (2004) 11 SCC 497 (para 19) : AIR 2004 SC 5080 [14] (2003) 11 SCC 699 : AIR 2003 SC 4156 [15] AIR 1961 SC 751 [16] (1981) 2 SCC 205 : AIR 1981 SC 711 [17] AIR 1958 SC 909 : (1958) 9 STC 388 (SC) [18] (1925) 10 AC 282 [19] (1928) 276 US 394; 72 L. Ed. 624 [20] AIR 1968 SC 1232 [21] (1972) 4 SCC 485 : AIR 1972 SC 1168 : (1972) 29 STC 206 [22] (1973) 1 SCC 216 : AIR 1973 SC 1034 : (1973) 31 STC 178 [23] (1985) 2 SCC 197 : AIR 1985 SC 421 : (1985) 152 ITR 308 (SC) [24] (2007) 13 SCC 673 : (2008) 297 ITR 176 [25] AIR 1959 SC 512 [26] 467 US 837 (1984) [27] (1984) 4 SCC 27 : AIR 1984 SC 1543 [28] (1985) 1 SCC 641 : AIR 1986 SC 515 [29] (2000) 3 SCC 40 : AIR 2000 SC 1069 [30] (2006) 4 SCC 327 : AIR 2006 SC 3480 [31] (2009) 15 SCC 570 : AIR 2009 SC 3194 [32] (2002) 5 SCC 466 : AIR 2002 SC 2405 [33] (1981) 4 SCC 173 : AIR 1981 SC 1922 (para 17) [34] (1991) 1 SCC 212 : AIR 1991 SC 537 [35] AIR 1967 SC 1427 [36] (1969) 2 SCC 55 : AIR 1970 SC 169 [37] AIR 1963 SC 1667 [38] (1990) 2 SCC 502 : AIR 1990 SC 913 [39] AIR 1955 SC 166 : (1955) 1 SCR 1004, [40] (2001) 7 SCC 231 : AIR 2001 SC 3435 [41] AIR 1962 SC 1733 : (1962) 13 STC 529 [42] (1983) 53 STC 42 (AP) [43] (1999) 8 SCC 69 : AIR 1999 SC 3496 : (1999) 115 STC 427 [44] (1999) 2 SCC 361: AIR 1999 SC 892 [45] (2004) 5 SCC 783 : AIR 2004 SC 3618 : (2004) 136 STC 1 "