Sukumar Mukhopadhyay: Controversy on Retrospective Legislation largely due to Ignorance

Yesterday I was talking to a senior Chartered Accountant known to be highly knowledgeable and also known for having a roaring practice.  When he mentioned that the retrospective legislation in the Vodafone case should not have been effective from 1962,  I realized that ignorance is largely responsible for so much of writing in the media against retrospective legislation.  Of course, the stake in the Vodafone case being very big and having been mixed up with the issue of Foreign Direct Investment to India, the issue has become more complicated.  When I explained to the Chartered Accountant that although the retrospective legislation is from 1962, the effectiveness of the legislation is limited to the time bar applicable for the Income Tax law, he would not readily accept the position thinking that I was just talking to support what the government has done, being a retired government myself .            Let me explain, therefore, the question about the time bar first in respect of the retrospective legislation.

            The period over which retrospective can extend has been extensively discussed by the Supreme Court in one of the earliest judgments is in the case of Rai Ramakrishna vs. State of Bihar – AIR1963SC1667. Here the Supreme Court has elaborately discussed the issue of period of time which should be reasonable from the point of view of extending retrospectivity.   The Court concluded that due to the challenge of the validity of the Act and the long time to decide it by the Court, the subsequent validating Act may be passed after a long time but that itself cannot be held against it.  “That is why we think the test of the length of time covered by the retrospective operation cannot by itself be treated as a decisive test”, held the Supreme Court.  The validity of the retrospective legislation up to a very long past has been upheld by other Supreme Court judgments namely, The State Controller of Store, Northern Railway  vs. Asst. Commercial Tax Officer – 1976(37)STC423(SC).  It has also been upheld by several decisions of the High Court of Punjab & Haryana .


            At the same time the judicial pronouncements hold that while  the retrospectivity  can be extended  back to a very long period, it has to be  subjected to time limit of one or five years as given in a particular statute .  The Supreme Court has held in the case of JK Spinning and Weaving Mill – 1987(32)ELT234(SC) that the retrospective amendment  as in Section 51 of the Finance Act 1982 cannot override the provision of Section 11(A) of Excise Act under which duties short levied or  erroneously refunded cannot be recovered beyond a period of six months.  The Supreme Court has further reiterated in the case of Murarji GokulDass – 1996(83)ELT259(SC) that even where retrospective amendments has been made, the demand has to be made within six months of the date of amendment.  There are other Supreme Court judgments also but it should suffice to quote from the land mark judgement in the case of Mafatlal Industries Vs. UOI in which the Supreme Court held that Section 11B of the Excise Act as amended in 1991 has retrospective effect but such claims continue to be governed by the time limit under Section 11B .



The above position effectively counters the allegation often made that retrospective amendments are unfair and unjust.  The legal position enunciated by the Supreme Court is also that if retrospective law is expressly oppressive that alone can be a reason for striking it down.  This has been held in the case of RC Tobacco Pvt. Ltd.  Vs. UOI – 2005(188)ELT129(SC).  In this case the Supreme Court held that oppressiveness can be a reason for striking down a retrospective statute when the material provisions of the statute is such that the Court would feel justified in taking the view that it is a cloak adopt by the legislature for achieving its  confiscatory purpose.  This is, however, not only true for retrospective legislation only but for all legislations.


            Conclusion:  Analyzing the above judgments we find that the Supreme Court has now been stressing the need for an evolving legal system in a developing country to promote judges to pay a creative role to ensure justice and equity without doing violence to the language used.  Retrospective legislation has to be going back to the past when the Act was created which is necessary for validation of the law.  But when it is subject to the time bar for six months or five years as given in the particular Act, the oppressiveness or inequity or hardship are taken care of.  So it is not only that the legality remains , even the fairness also remains if the amendment is decidedly in the public interest.