Judgment in summary
Lachmi Narain v. Union of India (1975):
Legal Framework and Historical Context
1. Union Territories (Laws) Act, 1950
Originally called the Part States (Laws) Act, 1950, this Act gave the Central
Government the power under Section 2 to:
Extend any law in force in a Part A State to a Part C State (like Delhi), with such restrictions
and modifications as it thinks fit, through a notification.
2. Extension of Bengal Finance (Sales Tax) Act, 1941 to Delhi (1951 Notification)
In 1951, the Central Government extended the Bengal Finance (Sales Tax) Act, 1941
to Delhi through a notification.
It included Section 6, which laid out rules for exemption of goods from sales tax.
📌 Section 6(2) (as modified and extended to Delhi):
"The Central Government, after giving not less than 3 months’ notice in the Official Gazette
of its intention to do so, may amend the Schedule [of exempted goods]..."
✅ This meant: Any withdrawal of tax exemption had to be preceded by a 3-month public
notice.
3. 1957 Notification – Attempt to Curtail the Notice Period
In 1957, the Central Government issued another notification amending the earlier
1951 notification.
It replaced the words:
“not less than 3 months’ notice”
with
“such previous notice as it considers reasonable”.
✅ Purpose: To give the government flexibility to withdraw tax exemptions without waiting 3
months.
👨⚖️High Court Ruling – Dealers’ Challenge Dismissed
Over time, the government withdrew several exemptions with less than 3 months’
notice.
Dealers affected by these sudden changes challenged the withdrawals in court.
Their claim: The mandatory 3-month notice had not been followed, so the
withdrawals were invalid.
❌ High Court Decision:
The High Court dismissed their petitions.
It ruled that:
Because Parliament passed the Bengal (Sales Tax) Delhi Amendment Act, 1959, after the
1957 notification, and did not restore the 3-month rule,
Parliament must be seen as having approved the change.
So, the shorter “reasonable notice” was valid.
✅ In short: Parliament’s silence = approval, according to the High Court.
⚖️Supreme Court Ruling – Lachmi Narain Case (1975)
✅ Supreme Court Reverses High Court
The Supreme Court overturned the High Court’s reasoning and delivered a landmark ruling:
🟨 Key Findings:
1. The 1957 Notification was invalid:
o The Central Government did not have the power under Section 2 of the
Union Territories (Laws) Act, 1950 to change a law after it was already
extended.
o After the States Reorganisation Act, 1956, only Parliament had the authority
to amend laws in Union Territories like Delhi.
2. Section 21 of the General Clauses Act, 1897 doesn’t apply here:
o That section allows a government to amend its own notifications, but not to
change statutory provisions (like the 3-month notice in Section 6(2)).
3. Parliament’s silence ≠ approval:
o Just because Parliament amended other sections of the Act in 1959 and
didn’t touch Section 6(2), it does not mean it approved the 1957 change.
o To amend Section 6(2), Parliament had to do it expressly, which it did not.
4. Mandatory nature of the 3-month notice:
o Section 6(2)’s 3-month notice was a mandatory legal safeguard.
o Any exemption withdrawal without full 3 months’ notice was invalid.
📌 Final Legal Position
Issue Answer / Ruling
What version of Section 6(2) applied in ✅ The original version with “not less than 3
Delhi? months’ notice”.
❌ No. It was beyond the Central Government’s
Was the 1957 Notification valid?
powers (ultra vires).
Did Parliament approve the change by ❌ No. Silence ≠ legal approval. Only explicit
silence? amendment counts.
What happens to withdrawals made
❌ They are invalid and legally ineffective.
with short notice?
🧠 Conclusion (in simple terms):
When the Bengal Finance (Sales Tax) Act was applied to Delhi, it included a clear
rule:
3 months' notice was required before removing any sales tax exemptions.
The Central Government tried to shorten this in 1957 — but it had no authority to
do so.
The Supreme Court confirmed in Lachmi Narain that:
o The original 3-month rule remained valid.
o Any withdrawal of exemption without following it is null and void.
