LI Network
Published on: 09 September 2023 at 11:32 IST
The Supreme Court has asserted that while a legislature cannot directly overturn a judicial judgment, it does have the authority to rectify deficiencies in prior legislation, as highlighted by a constitutional court during its judicial review.
The court explained that these deficiencies can be rectified through legislative action, both retrospectively and prospectively, and previous actions can also be validated.
However, the court emphasized that if a legislature merely attempts to validate actions conducted under a previous legislation that has been nullified or rendered ineffective by a court, without addressing the underlying issues, such subsequent legislation would also be considered ultra vires (beyond its legal authority).
The court referred to such attempts as an endeavor to “legislatively overrule” a court’s judgment through legislative fiat, which would be illegal and characterized as “colorable legislation.”
This observation by the court was made in the context of assessing the validity of the Himachal Pradesh Passengers and Goods Taxation Act of 1955, as amended by the Amendment and Validation Act of 1997.
Background of the Case:
The case involved NHPC Ltd, which had received assessment orders under the Himachal Pradesh Passengers and Goods Taxation Act of 1955. These orders imposed a tax liability on NHPC for providing free transportation services to its employees and their children.
NHPC challenged these assessments in the Himachal Pradesh High Court, arguing that it should not be subject to passenger tax because it was providing free transport without any fare.
The Division Bench of the High Court determined that although the Act’s Explanation to Section 3(1) introduced a legal fiction, allowing for assessments on the assumption that non-fare paying passengers were being carried at the normal rate, it required the prescription of routes for charging tax under this provision. Since NHPC’s routes did not fall under the definition of “routes” as defined by the Motor Vehicles Act, the Explanation did not apply in this case.
The Supreme Court upheld the High Court’s decision when the tax authorities filed a Special Leave Petition (SLP) against it. Subsequently, the Himachal Pradesh Passengers and Goods (Amendment and Validation) Act of 1997 was enacted to address the basis of the High Court’s judgment. The tax authorities then issued notices to NHPC for tax recovery under the amended Act for providing free transport to its employees and their children.
NHPC challenged the validity of the Amendment and Validation Act of 1997 and the associated assessments in the High Court, but the High Court upheld the amended Act’s validity.
Supreme Court Analysis:
The Supreme Court analyzed the legislative changes introduced by the Amendment and Validation Act of 1997, which included alterations to the Act’s Preamble and various provisions. Notably, the Amendment Act removed the word “certain” from the Preamble, altered definitions of terms like “business,” “motor vehicle,” “owner,” and “road,” among others.
The court highlighted that while a legislature cannot directly overturn a judicial decision, it is within its authority to retrospectively eliminate the legal basis for a judgment, rendering it ineffective. However, this must be done in a way that prevents the court from reaching the same verdict based on the altered circumstances.
The court underlined that the legislature cannot validate actions under a previously invalidated legislation without addressing the deficiencies in that legislation. Such an action would be considered a violation of the rule of law, and any amendment enacted with the intent to defy a judicial pronouncement could be deemed ultra vires and characterized as “colorable legislation.”
In this case, the Supreme Court concluded that the Amendment and Validation Act of 1997 had effectively addressed the deficiencies identified by the High Court, thereby removing the basis for the High Court’s judgment. Consequently, the court dismissed the appeals brought by NHPC.
Case Title: NHPC LTD. VS. STATE OF HIMACHAL PRADESH SECRETARY & ORS.