Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. Vs. The Asstt. Commissioner of Sales Tax & Ors [1973] INSC 257 (21 December 1973)
KHANNA, HANS RAJ KHANNA, HANS RAJ RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN ALAGIRISWAMI, A.
BHAGWATI, P.N.
CITATION: 1974 AIR 1660 1974 SCR (2) 879 1974 SCC (4) 98
CITATOR INFO:
RF 1975 SC1389 (11,12) F 1975 SC1604 (3) RF 1975 SC2299 (151) RF 1976 SC 714 (42) D 1976 SC1031 (29) R 1982 SC 710 (55) RF 1982 SC1126 (9) R 1984 SC1130 (28) R 1984 SC1194 (19,20,22) F 1988 SC 567 (14) RF 1989 SC 222 (4,9) R 1990 SC 560 (13,16) RF 1991 SC 672 (29)
ACT:
Central Sales Tax Act, 1956-S. 8(2) (b)-Whether it suffers from the vice of excessive delegation.
HEADNOTE:
Sec. 8(2)(b) of the Central Sales Tax Act 1956, provides that the tax payable by any dealer on his turnover, in so far as it relates to the sale of goods the course of inter-state trade or commerce, not falling within sub-sec. (1) in, case of goods other than declared goods, shall be calculated at the rate of ` per cent or at the rate applicable to the safe or purchase, of such goods inside the appropriate state, whichever is higher. etc.
The short question which arose for determination in these four appeals was whether the provisions of sec. 8(2)(b) of the Central Sales Tax Act, 1956 suffer from the vice of excessive delegation because the parliament, in not fixing the rate itself and in adopting the rate applicable to the gate or purchase of goods inside the appropriate State had not laid down any legislative policy and thus abdicated its legislative function. The High Court answered this question in the live and upheld the constitutional validity of those provisions.
Dismissing the appeals,
HELD : (I) There is clear legislative policy which can be found in the provisions of Sec. 8 (2) (b) of the Central Sales Tax. Act 1956. The ' Policy of the law in this respect is that in case the rate of local sales tax be less than 10 per cent in such ,in event, the dealer, if the case does not fall within Sec. 8(1) of the Act ' should pay Central Sales Tax at the rate of 10 per cent. If, however the rate of , local sales tax for the goods concerned be more than 10 per cent, in that event, the policy is that the rate of the Central Sales Tax shall also be the same as (bat of the local sales tax for the said goods. The object of the law thus is that the rate of the Central Sales tax shall in no event be less than the rate of local sales tax for the goods in question though it may exceed the local rate in case that rate be less than 10 per cent. [984 A] For example, if the local rate of tax in the appropriate State for the non-declared goods be 6 per cent, in such an event a dealer, whose case is not covered by sec. 8(1) of the Act, would have to pay Central Sales Tax at a rate of 10 per cent. In case, however, the rate of local sales tax for such goods be 12 per cent the rate of Central Sales tax would also be 12 per cent because otherwise if the rate of Central Sales Tax were only 10 per cent, the unregistered dealer who purchases goods in the course of inter-State trade would be in a better position than an intrastate purchases and there would be no disincentive to thedealers to desist from selling goods to unregistered purchasers in course of inter-State trade. The object of' the law apparently is to deter inter-State sales to unregistered dealers as such inter--State Sales would facilitate evasion of tax. [984 C] (2) It is also not possible to fix the maximum rate under or Sec. 8(2) (b) because the local sales tax varies from State to State. The rate of local sales tax can also be changed by the State legislatures from time to time. It is not within the competence of the parliament to fix the maximum rate of local Sales tax. The fixation of the rate of local Sales tax is essentially a matter for the State legislatures and the parliament does not have any control in the matter.
The parliament has therefore necessarily, if it wants to prevent evasion of payment of Central Sales Tax, to tack the rate of such tax with that of local sales tax, in case the rate of local sales tax exceeds t particular limit. [984 E] State of Madras V. N.K. Nataraja Mudaliar, [1968] 3 S.C.R.
829, referred to and 748SCI/174 880 B. Sharma Rao v. The Union Territory of Pondicherry, [1967] 2 S.C.R. 650 explained and distinguished..
(3) The growth of the legislative power of the executive is a significant development of the twentieth century. The theory of laissez-faire has been given a go-by and large and comprehensive powers are being assumed by the State with a view to improve social and economic well-being of the people. Most of the modern socioeconomic legislations passed by the legislature Jay down the guiding principles and the legislative policy. The legislatures because of limitation imposed upon by the time factor hardly go into matters of detail.
Provision is, therefore made for delegated legislation to obtain flexibility, elasticity, expedition and opportunity for experimentation.
The practice of empowering the Executive to make subordinate legislation within a prescribed sphere has evolved out of practical necessity and pragmatic needs of a modern welfare state. [890 D] (4) In questions of delegated legislation, the principle which has been well established is that the legislature must lay down the guidelines, principles or policy for the authority to whom power to make subordinate legislation is entrusted.
The correct position of law thus is that an "unlimited right of delegation is not inherent in the legislative power itself. This is not warranted by the provisions of the Constitution and the legitimacy of delegation depends entirely upon its being used is in ancillary measure which the legislature considers to be necessary for the purpose of exercising its legislative powers effectively and completely. The legislatures must retain in its own hands the essential legislative functions which consist in declaring the legislative policy and laying down the stand which is to be enacted into a rule of law, and what can be delegated is the task of subordinate legislation which by its very nature is ancillary to the statute which delegates the power to make it provided the legislative policy is enunciated with sufficient clearness or a standard laid down. The courts cannot and should not interfere with the discretion that undoubtedly rests with the legislature itself in determining the extent of delegation necessary in a particular case." [892 C] In Delhi Laws Act 1912, [1951] S.C.R. 747 and Municipal Corporation of Delhi v. Birla Mills [1968] 3 S.C.R. 231, Devi Das Gopal Krishan v.State of Punjab A.I.R. 1967 S.C. 1895; Harishankar Bagla v. The State of Madhya Pradesh [1955] 1 S.C.R. 380; Pandit Banarasi Das Bhagat v. The State of Madhya Pradesh & Ors. [1959] S.C.R. 427;
Corporation of Calcutta & Anr. v. Liberty Cinema [1965] 2 S.C.R. 477 and Sita Ram Bishembhar Dayal & Ors. v. State of U.P. & Others [1972] 2 S.C.R.
141, referred to.
It is not possible to subscribe to the view that if the legislature can repeal an enactment, as it normally can, it retains enough control over the authority making the subordinate legislation and, as such, it is not necessary for the legislature to lay down legislative policy, standard or guidelines in the statute. The acceptance of this view would lead to startling results. Supposing the Parliament tomorrow enacts that as the crime situation in the country has deteriorated, criminal law to be enforced in the country from a particular date would be such as is framed by an officer mentioned in the enactment. Can it be said that there has been no excessive delegation of legislative power even though the Parliament omits to lay down in the statute any guideline or legislative policy for the making of such criminal law ? The vice of such an enactment cannot be ignored or lost sight of on the ground that if the Parliament does not approve the law made by the officer concerned, it can repeal the enactment by which that officer was autborised to make the law, [894 H-895 C] (per C.J. and Mathew J :) (1) Delegation is not handing over or transference of a power from one person or body of persons to another. Delegation may be defined as the entrusting, by a person or body of persons, of the exercise of a power residing in that person or body of persons, to another person or body of persons, with complete power of revocation or amendment, remaining in the grantor or delegator. [899-G] (2) Delegation often involves the granting of discretionary authority to another, but such authority is purely derivative. The ultimate power always remains in the delegator and is never renounced. [900 A] Wills J in Huth v. Clarke, [1890] 25, Q.B.D. 391, 395 and Hodge v. The Queen [1883] 9 A.C. 117.
881 (3)What is prohibited, is the conferment of arbitrary power by the legislature upon a subordinate body without reserving to itself control over that body and the self-efacement of legislative power in favour of another agency either in whole or in part. In other words, the legislature should not abdicate its essential function. [904 C] Devi Das Gopal Krshan v. State of Punjab [1967] 3 S.C.R.
557, Corporation of Calcutta & another v. Liberty Cinema, [1965] 2 S.C.R. 477; Municipal Board, Nagpur v. Raghuvendra Kripal, [1966] 1 S.C.R. 950; The Municipal Corporation of Delhi v. Birla Cotton and Spinning and Weaving Mills, [1968] 3 S.C.R. 251 and Sita Ram Bishembar Dayal v. State of U.P. [1972] 2 S.C.R. 141, referred to.
(4)The concept of 'abdication' seems no less vague, fluctuating and uncertain than the "transfer to others of the essential legislative functions". Some writers think that a legislature does not 'abdicate' unless it withdraws from the field and surrenders its responsibility there for;
and to some, there seems to be 'abdication' whenever a legislature while remaining in the field and retaining its responsibility therefore entrusts to others the formulation of policy, otherwise than with a definite standard or purpose laid down by it. [904 D-E] In re Gray, 57 S.C.R. 150; In re Initiative and Referendum Act, [1919] A.C. 935; In Shannon v. Lower Mainland Dairy Products Board, [1938] A.C. 708 P.C.; R. v. Burah [1878] 5 I.A. 178; In Re the Delhi Laws Act 1912 etc. [1951] S.C.R.
747.referred to.
(5) The crucial point is, whether the legislature preserved its capacity intact and retained perfect control over the delegate inasmuch as it could at any time repeal the legislation and withdraw the authority and discretion it bid vested on the delegate. [906 B] (6) Delegation of 'law making' power is the dynamo of modem government. Delegation by the legislature is necessary in order that the exertion of legislative power does not become a futility. Today, while theory still affirms legislative supremacy, power floats back increasingly to the Executive.
One must not take lightly and say that there can be transfer of legislative power under the guise of delegation which would tent amount to abdication. At the same time, one must be aware of the practical reality that the parliament cannot go into details of all legislative matters. (906 D-E] (7) The making of law is only a means to achieve a purpose.
It is not a end in itself. That end can be attained by the legislature making the law. But many topics or subjects of legislation are such that they require expertise, technical knowledge and a degree of adaptability to changing situations etc., which parliament might not possess and, therefore this end is better secured by extensive delegation of legislative power. The legislative process would frequently bog down if a legislature were required to appraise beforehand the myriad situations to which it wishes a particular policy to be applied and to formulate specific rules for each situation. [906 G] (8)In the present case, by Sec. 8 (2) (b) of the Act, parliament has not delegated any power to the State legislatures. Therefore, the question was whether parliament had abdicated its legislative function when it chose to adopt the rate to be fixed by the state legislatures for local sales. In the present case, parliament bad fixed the rate of tax on inter-state sales of the description specified in s. 8(2)(b) of the Act at the rate fixed by the appropriate state legislature is respect of intra-state-sales with a purpose, namely to chech evation and to prevent discrimination between residents of different states. Further, in the instant case. parliament can repeal the provisions of s. 8(2)(b) adopting a higher rate of tax fixed by the appropriate state legislature in respect of intrastate sales. If parliament can repeal the provision, there can be no objection on the score that parliament has abdicated its legislative function. It retains its control over the fixation of the rate itself. [911 H] Cobb & Co. Ltd. v. Kropp. [1967] 1 A.C. 141, referred to.
Therefore there is no excessive delegation of legislative power as contended by the petitioner.
882
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 212-215 of From the judgment and order dated the 29th August, 1972 of the Madhya Pradesh High Court at Jabalpur, in Misc.
Petitions Nos. 191 of 1968, 30 of 1970, 63. and 64 of 1972.
K. Sen, R. V.Patel Biswar up Gupte, R. N. Jhujhunwala and U. K. Khaitan, for the appellants (in C. A. 212-215).
I. N. Shroff, for respondent Nos. 1-3 (in C.A. 212-215).
Sen and S. P. Nayar, for respondent No. 4 (in C.A. 212). S. P. Nayar, for respondent No. 4 (in C.A. 213-215).
The judgment of U. R. Khanna, J. A. Alagiriswami and P. N.Bhagwati, JJ. was delivered by Khanna J. K. K. Mathew, J.
gave a separate Opinion, on behalf of A. N. Ray, C. J. and himself.
KHANNA, J. The short question which arises for determination in these four appeals on certificate against the judgment of the Madhya Pradesh High Court is whether the provisions of section 8(2) (b) of the Central Sales Tax Act, 1956 (Act 54 of 1956) (hereinafter referred to as the Act). suffer from the vice of excessive delegation. The High Court answered this question in the negative and upheld the constitutional validity of those provisions.
Sub-sections (1), (2) and (4) of section 8 of the Act read as under "(1) Every dealer, who in the course of interEstate trade or commerce(a) sells to the Governmentany goods; or (b) sells to a registered dealer other than the Government goods of the description referred to in subsection (3);
shall be liable to pay tax under this Act, which shall, be three per cent of his turnover.
(2)The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of interstate trade or commerce not falling within sub-section (1)(a) in the case of declared goods, shall be calculated at the rate applicable to the sale or purchase of such goods inside the appropriate State; and (b) in the case of goods other than declared goods, shall be calculated at the rate of ten per cent or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher;
and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax under 883 the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.
(4)The provisions of sub-section (1) shall not apply to any sale in the course of interState trade or commerce, unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner(a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed Particulars in a prescribed form obtained from the.
prescribed authority; or (b) if the goods are sold to the Government, not being a. registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of Government." It has been argued on-behalf of the appellants that the, fixation of rate of tax is a legislative function and as the Parliament has, under section 8(2) (b) of the Act, not fixed the rate of central sales tax but has adopted the rate applicable to the sale or purchase of goods inside the appropriate State in case such rate exceeds 10 per cent, the Parliament has abdicated its legislative function. The above provision is consequently stated to be constitutionally invalid because of excessive delegation of legislative power. This contention, in our opinion is not well founded. Section 8 (2) (b) of the Act has plainly been enacted with a view to prevent evasion of the payment of the central sales tax. The Act prescribes a low rate of tax of 3 per cent in the case of inter-State sales only if the goods are sold to the Government or to a registered dealer other than the Government In the case of such a registered dealer, it is essential that the goods should be of the description mentioned in sub-section (3) of section 8 of the Act. In order, however, to avail of the benefit of such a low rate of tax under section 8(1) of the Act, it is also essential that the dealer selling the goods should furnish to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer, to. whom the goods are sold, containing the prescribed particulars in prescribed form obtained from the prescribed authority, or if the goods are sold to the Government not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government. In cases not falling under subsection (1), the tax payable by any dealer in respect of inter-State sale of declared goods is the rate applicable to the sale or purchase of such goods inside the appropriate state vide section 8(2) (a) of the Act. As regards goods other than the declared goods, section 8(2) (b) provides that the tax payable by any dealeron the sale of such goods in the course of inter-State trade or commerce shall be calculated at the rate of 1 0 per cent or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher.
The question with which we are concerned is whether the Parliament in not fixing. the rate itself and in adopting the rate applicable to the sale or purchase of goods inside the appropriate State has not laid down any legislative policy and has abdicated its legislative function.
884 In this connection we are of the view that a clear legislative policy can be found in the provisions of section 8(2) (b) of the Act. The policy of the law in this respect is that in case the rate of local sales tax be less than 10 per cent, in such an event the dealer, if the case does not fall within section.8(1) of the Act, should pay central sales tax at the rate of 10 per cent. If, however, the rate of local sales tax for the goods concerned be more than 10 per cent, in that event the policy is that the rate of the central sales tax shall also be the same as that of the local,sales tax for the said goods. The object of law thus is that the rate of the central sales tax shall in no event be less than the rate of local sales tax for the, goods in question though it may exceed the local rate in case that rate be less than 10 per cent. For example, if the local rate of tax in the appropriate State for the non-declared goods be 6 per cent, in such an event a dealer, whose case is not covered by section 8(1) of the Act would have to pay central sales tax at a rate of 10 per cent. In case, however, the rate of local sales tax for such goods be 12 per cent, the rate of central sales tax would also be 12 per cent because otherwise, if the rate of central sales tax were only IO per cent, the unregistered dealer who purchases goods in the course of inter-State trade would be in a better position than an intra-state purchaser and there would be no disincentive to the dealers to desist from selling goods to unregistered purchasers in the course of inter-State trade. The object of the law apparently is to deter inter-State sales to unregistered dealers as such inter-State sales would facilitate evasion of tax. It is also not possible to fix the maximum rate under section 8(2) (b) because the rate of local sales tax varies from State to State. The rate of local sales tax can also be changed by the State legislatures from time to time. It is not within the competence of the Parliament to fix the maximum rate of local sales tax. The fixation of the rate of local sales tax is essentially a matter for the State Legislatures and the Parliament does not have any control in the matter, The Parliament has therefore necessarily, if it wants, to prevent evasion of payment of central sales tax, to tack the rate of such tax with that of local sales tax, in case the rate of local sales tax exceeds a particular limit. Dealing with the provisions of section 8(2) (b) of the Act, Hegde J.
in the case of State of Madras v. N. K. Nataraja Mudaliar(1) observed "Then we come to el. (b) of s. 8 (2), which deals with goods other than declared goods. Here the law at the relevant time was that the tax shall be calculated at the rate of seven percents of the turnover or at the rate applicable to sale or purchase of such goods inside the appropriate State, whichever is higher. As could be seen from the report of the Taxation Enquiry Committee, the main reason for this provision was to prevent as far as possible the evasion of sales tax. The Parliament was anxious that inter-State trade should be canalised through registered dealers over whom the appropriate government has a great deal of control.
It is not very easy for. them to evade tax. A measure which is intended to check the evasion of tax is undoubtedly a valid measure. Further, inter-State trade carried on through (1) [1968] 3 SCR 829.
885 dealers coming within s' 8 (2), must be in the very nature of things very little. It is in public interest to see that in the guise of freedom of trade, they do not evade the payment of tax. If the sales tax they have to pay is as high or even higher than intre-State sales tax thin they will be constrained to register themselves and pay the tax legitimately due. The impact of this provision on inter-State trade is bound to be negligible, but at the same time it is an effective safeguard against evasion of tax." The adoption of the rate of local, sales tax for the.
purpose of the central, sales tax as applicable in a particular State does not show that the Parliament has in any way abdicated its legislative function. Where a law of Parliament provides that the rate. of central sales tax should be IO per cent. or that of the local sales tax, whichever be higher, a definite legislative policy can be discerned in such a law, the policy being that the rate of central sales tax should in no event be less than the rate of local sales tax. In such a case, it is as already stated above, not possible to mention the precise figure of the maximum rate of central sales tax in the law made by the Parliament because such a rate is linked with the rate of local sales tax which is prescribed by the State Legislatures. The Parliament in making such a law cannot be said to have indulged in self-effacement. On the contrary, the Parliament by making such a law effectuates its legislative policy, according to which the rate of central sales tax should in certain contingencies be not less than the rate of the local sales tax in the appropriate State. A law made by Parliament. containing the above provision cannot be said to be suffering from the vice of excessive delegation of legislative function. On the contrary, the above law incorporates within itself the necessary provisions to carry out the objective of the legislature, namely, to prevent evasion of payment of central sales tax and to plug possible loopholes.
There is, in our opinion, marked difference between the enactment of a law which was struck down by this Court in the case of B. Shama Rao v. The Union Territory of Pondicherry(1) and that contained in section 8 (2) (b) of the Central Sales Tax Act. In Shama Rao's case the Legislative Assembly for the Union Territory of Pondicherry passed the Pondicherry General Sales Tax Act which was published on June 30, 1965. Section 1(1). of the Act provided that it would come into force on such date as the Pondicherry Government may by notification appoint and section 2(1) provided that the Madras General Sales Tax Act, 1959, as in force in the State of Madras immediately before the commencement of the Pondichery Act, shall be extended to Pondicherry subject to certain modifications. The Pondicherry Government issued a notification on March 1, 1966, appointing April 1, 1966 as the date of commencement of he Pondicherry Act. Prior to the issue of the notification, the Madras Legislature had amended the Madras Act and. consequently it was the Madras Act as amended tip to April 1, 1966 which was brought in force in Pondicherry.
A (1) [1967] 2 SCR 650.
886 Petition was thereupon filed challenging the validity of the Pondicherry Act. During the pendency of that petition, the Pondicherry Legislature passed Amendment Act 1 3 of 1966 whereby section 1 (2) of the principal Act was amended to read that the latter Act would come into force on April 1, 1966, and that all proceedings and action taken under that Act would be deemed valid as if the principal Act as amended had been in force at all material times. 'It was held by majority by this Court that the Act of 1965 was void and still-born and could not be revived by the Amendment Act of 1966. According to the Court, the Pondicherry Legislature not only adopted the Madras Act as it stood at the date when it passed the principal Act, but in effect it also enacted that if the Madras Legislature were to amend its Act prior to the notification of its extension to Pondicherry, it would be the amended Act that would apply. The Legislature, it was held, at that stage could not anticipate that the Madras Act would not be amended nor could it would be carried out, whether they would character or whether they would be suitable in Ponies the opinion of the Court, was that the Pondicherry Legislature accepted the amended Act though it was and could provisions of the amended Act would be. There Court, in these circumstances a total surrender tax legislation by the Pondicherry Assembly in favour of the Madras Legislature.
It would appear from the above that the reason which prevailed with the majority in striking down the Pondicherry Act was the total surrender in the matter of sales tax legislation by the Pondicherry Legislature in favour of the Madras Legislature. No such surrender is involved in the present case because of the Parliament having adopted in one particular respect the rate of local sales tax for the purpose of central sales tax. Indeed as mentioned earlier, the adoption of the local sales tax is in pursuance of a legislative policy induced by the desire to prevent evasion of the Payment of central sales tax by discouraging interState sales to unregistered dealers. No such policy could be discerned in the Pondicherry Act which was struck down by this Court.
Another distinction, though not very material, is that in the Pondicherry case the provisions of the Madras Act along with the subsequent amendments were made applicable to an area which was within the Union Territory of Pondicherry and not in Madras State. As against that, in the present case we find that the Parliament has adopted the rate of local sales tax for certain purposes of the Central Sales Tax Act only for the territory of the State for which the Legislature of that State had prescribed the rate of 'sales t, x. The central sales tax in respect of the territory of a State is ultimately assigned to that State under article 269 of the Constitution and is imposed for the benefit of that State. We would, therefore, hold that the appellants cannot derive much assistance from the above mentioned decision of this Court.
It may be stated that this Court in two cases has upheld the validity of statute by which the legislature left the fixation of rates to another body. This was, however, subject to the rider that the legislature 887 must provide guidance for such fixation. In the case of Corporation of Calcutta & Anr. V. Liberty Cinema(1) while dealing with section 548 of the Calcutta Municipal Act relating to the levy of licence fee, on cinema houses Sarkar J (as the then was) speaking for the majority after referring to the earlier case of Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh(2) observed:
"This therefore is clear authority that the fixing of rates may be left to non-legislative body. No doubt when the power to fix rates of taxes is left to another body, the legislature must provide guidance for such fixation. The question then was much guidance provided in the Act? We first wish, to observe that the validity of the guidance cannot be tested by a rigid uniform rule. that must demand on the object of the Act giving power to fix the rate." In Municipal Corporation of Delhi v. Birla Cotton, Spinning and, Weaving Mills Delhi & Anr.(3) this Court dealt with the provisions of sections 113 and 150 of the Delhi Municipal Corporation Act in the context of levy of certain taxes, including tax on consumption or sale of electricity. One of the questions which arose for determination in that case was with section150, of the above mentioned Act transgressed the limits of permissible delegation. According to that section, the Municipal Corporation may at a meeting pass a resolution for the levy of any of the taxes specified in sub-section (2) of section 113 defining the maximum rate of tax to be levied, the class or classes of persons or the description of articles and properties to be taxed, the system of assessment to be adopted and the exemptions. if any, to ranted. Such a resolution has to be sanctioned by the Central Government and thereafter the Corporation has to pass a second resolutions determining subject to the maximum rate, the actual rate of tax. Wanchoo CJ., Hidayatullah, Sikri, Ramaswami and Shelat JJ. upheld the validity of the above section, while Shah and Vaidialingam JJ.. dissented and held that section 150(1) of the; Act was void because of excessive delegation of legislative authority to the Corporation. Wanchoo CJ. and Shelat J. on a consideration of the various of the Act held that the power conferred by section 150 on provisions ration was not unguided and could not be said to amount to excessive delegation. After referring to the earlier authorities, Wanchoo CJ. speaking for himself and Shelat J. observed :
"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 (1) [1965] 2 SCR 477. (2) [1959] SCR 427(3) [1968] 3 SCR 231.
888 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 to also a factor to be taken into consideration in determining whether there is sufficient guidancein the matter of delegation." Hidayatullah J. (as he then was) speaking for himself and Ramaswami J. observed :
"Once it is established that the legislature itself has willed that a particular thing be done and has merely left the "execution of it to a chosen instrumentality (provided that it has not parted with its control) there can be no question of excessive delegation. If the delegate acts contrary to the wishes of the legislature the legislature can undo what the delegate has done." It was further observed "To insist that the legislature should provide for every matter connected with municipal taxation would make municipalities mere tax collecting departments and not self,governing bodies which they are intended to be.
Government might as well collect taxes and make them available to the municipalities.
That is not a correct reading of the history of Municipal Corporations and other selfgoverning institutions in our country." Sikri J. (as he then was) observed "I can see no sign of abdication of its functions by Parliament in this Act. On the contrary Parliament has constituted the Corporation and prescribed its duties and powers in great deal.
But assuming I am bound by authorities of this court to test the validity of s.113(2)(d) and s.150 of the Act by ascertaining whither a guide or policy exists in the Act, I find adequate guide or policy in the expression 'purposes of the' Act' in S. 113. The Act has pointed out the objectives or the results to be achieved and taxation can be levied only for the purpose of, achieving the objectives, or the results. This, in my view, is Sufficient guidance especially to a selfgoverning body like the Delhi Municipal Corporation. It is necessary to rely an the safeguards mentioned by the learned Chief Justice to sustain the delegation.".
889 Shah J. (as he then was) speaking for himself and Vaidialingan J. after referring to the earlier authorities observed "On a review of the cases the following principles appear to be well-settled : (i) Under the, Constitution the Legislature has plenary powers within its allocated field;
(ii) Essentiallegislative function cannot be delegated by the Legislature,that is, there can be no abdication of legislative, function orauthority by complete effacement, or even partially in respect of a particular topic or matter entrusted by the Constitution to the Legislature-; (iii) Power to make subsidiary or ancillary legislation may however be. entrusted by the Legislature to another body of its choice, provided there is enunciation of policy, principles or standards either expressly or by implication for the guidance of the delegate in that behalf.
Entrustment of power without guidance amounts to excessive delegation of legislative authority; (iv) Mere authority to legislate on a particular topic does not confer authority to delegate its power to legislate on that topic to another body. The power conferred upon the Legislature on a topic is specifically entrusted to that body, necessary intendment of the constitutional provision confers that power that it shall not be delegated without laying down principles, policy, standard or guidance to another body unless the Constitution expressly nation; and (v) the taxing provisions are not these rules." It was further observed "The Constitution entrusts the legislative functions to the legislative branch of the State and directs that the functions shall beperformed by that body to which the Constitution has entrusted and not by some, one else to whom the, Legislature at a given time thinks it proper to delegate the function entrusted to it. A body of experts in a particular branch of undoubted integrity or special competence may Probably be in a better position to exercise the power of legislation in that branch, but Constitution has chosen to invest the elected representatives of the people to exercise the power of legislation, and not to' such bodies of experts. Any attempt on the part of the experts to usurp, or of the representatives of the people to abdicate the functions vested in the legislative branch is inconsistent with the constitutional scheme. Power to make subordinate or ancillary legislation may undoubtedly be conferred upon a delegate, but the Legislature must in conferring that power disclose the policy, principles or standards which are to govern the delegate in the exercise of that power so as to set out a guidance. Any delegation which transgresses this limit infringes the constitutional scheme." After referring to the provisions of the Delhi Municipal Corporation Act, Shah and Vaidialingam JJ. held that the delegation could not 890 be upheld merely because of the. special status, character, competence or capacity of the delegate or by reference to the provisions made in the statute to prevent abuse by the delegate of its authority. Shah and Vaidialingam JJ.
accordingly came to the conclusion that Section 150(1) was void as it permitted excessive delegation of legislative authority to the Corporation.
It would appear from the above that not only was the constitutional validity of section 150 of the Delhi Municipal Corporation Act upheld by the majority, the majority of the judges also 'expressed the view that it was essential for the legislature to lay down the legislative it policy and standards before could delegate the task of subordinate legislations to another body.
We find ourselves unable to agree, with the view. which has been canvassed during the course of arguments that if a legislature confers power to make subordinate or ancillary legislation upon a delegate, the legislature need not disclose any policy, principle or standard which might provide guidance for the delegate in the exercise of that power.
It may be stated at the outset that the growth of the legislative powers of the executive is a significant development of the twentieth century. The theory of laissez-faire has been given a go-by and large and comprehensive powers are being assumed by the State with a view to improve social and economic well-being of the people. Most of the modern socioeconomic legislations passed by the legislature lay down the guiding principles and the legislative policy. The legislatures because of limitation imposed upon by the time factor hardly go into matters of detail. Provision is, therefore, made for delegated legislation to obtain flexibility, elasticity, expedition and opportunity for experimentation. The practice of empowering the executive to make subordinate legislation within a prescribed sphere has evolved out of practical necessity and pragmatic needs of a modern welfare state. At the same time it has to be borne in mind that our Constitution-makers have entrusted the power of legislation to the representatives of the people, so that the said power may be exercised not only in the name of the people but also by the people speaking through their representatives. The rule against excessive delegation of legislative authority flows from and is a necessary postulate of the sovereignty of the people. The rule contemplates that it is not permissible to substitute in the matter of legislative policy the views of individual officers or other authorities, however competent they may be, for that of the popular 'will as expressed by the representatives of the people. As observed on page 224 of Vol. 1 in Cooley's Constitutional Limitations, 8th Ed.
"One of the settled maxims in constitutional law is, that the power conferred upon the legislature to make laws cannot be delegated by that department to any other body or authority. Where the sovereign power of the State has located the authority, there it must remain; and by the constitutional agency done the laws must be Made until the constitution 891 Itself is changed. The power to whose judgment, wisdom and patriotism this high prerogative has been intrusted cannot relieve itself of the responsibility by choosingother agencies upon which the power shalt be devoted, nor can it substitute the judgment, wisdom, and patriotism of any other body for those to which atom the people have seen fit to confide this sovereign. trust." According to John Locke when, parliamentary representatives have been chosen and the, authority to make laws has been delegated to them,, they have no right, to redelegate it.
As against that Jeremy Renthas in. The Limits of Jurisprudence Defined distinguishes between laws which belong to the legislator by conception, being his work alone, and laws which belong to him by proadoption, being the joint work of the legislator and the 'subordinate power holder'. In the latter case, he says, the legislator 'sketches out a sort of imperfect mandate which he leaves it to the subordinate holder to fill up'. To economise its own time and to take advantage of export skill in administration, parliament is content to lay down principles and to leave the details (frequently experimental or requiring constant adjustment in the light of experience) to some responsible minister or public body. (see Foreword by Sir Cecil Carr to Hewitt's The Control of Delegated Legislation, 1953 Ed.).
The Constitution, as observed by this Court in the case of Devi Dass Gopal Krishan v. State of Punjab(1) confers a power and imposes duty on the legislature to make laws. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct.
Obviously it cannot abdicate its functions in favour of another. But in view of the multifarious activities of a welfare, State, it cannot presumably work out all the details to suit the varying aspect of a complex situation.
It must necessarily delegate the working out of details to the executive or any other agency. But there is danger inherent in such a process of delegation. An over-burdened legislature or one controlled by a powerful executive may unduly overstep the limits of delegation. It may not lay down any policy at all; it may declare its policy in vague and general terms, it may not set down any standard for the guidance of the executive; it may confer an arbitrary power on the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation. This self effacement of legislative power in favour of another agency either in whole or in part is beyond the permissible limits of delegation. It is for a Court to hold on a fair, generous and liberal construction of an impugned statute whether the legislature exceeded such limits.
The question as to the limits or permissible delegation of legislative power has arisen before this Court in a number of cases. Those cases were reviewed at length in the judgments of Wanchoo CJ. and Shah J. in the case of Municipal Corporation of Delhi v. Birla Mills (supra) and they summed up the conclusions or principles which had been (1) AIR 1967 S.C, 1895.
892 established by those cases. Those conclusions or principles havealready been reproduced above.
The matter came up for the first time before, this Court In re Delhi Laws Act, 1912.(1) Although each one of the learned Judges who beard that case wrote a separate judgment, the view which emerged from the different judgments was that it could not be said that an unlimited right of delegation was inherent in the legislative power itself. This was not warranted by the provisions of the Constitution, which vested the power of legislation either in Parliament or State legislatures. The legitimacy of delegation depended upon its being vested as an ancillary measure which the legislature considered to be necessary for the purpose of exercising its legislative powers effectively and completely. The legislature must retain in its own hands the essential legislative function. Exactly what constituted "essential legislative function" wag difficult to define in general terms, but this much was clear that the essential legislative function must at least consist of the,., determination of the legislative policy and its formulation as a binding rule of conduct. Thus where the law passed by the legislature declares the legislative policy and lays down the standard which is enacted into a rule of law, it can leave the task of subordinate legislation like, the making of rules, regulations or byelaws which by its very nature is ancillary to the statute to subordinate bodies. The subordinate authority must do so within the framework of the law which makes the delegation, and such subordinate legislation has to be consistent with the law under which it is made and cannot go beyond the limits of the policy and standard laid down in the law. As long as the legislative policy is enunciated with sufficient clearness or a standard is laid down, the courts should not interfere with the discretion that undoubtedly rests with the legislature itself in determining the extent of delegation necessary in a particular case (see observations of Wanchoo CJ. in Municipal Corporation of Delhi v. Birla Mills, Supra).
In Harishankar Bagla v. The State of Madhya Pradesh(2) this Court dealt with the validity of clause 3 of the Cotton Textile (Control of Movement) Order, 1948 promulgated by the Central Government under section 3 of the Essential Supplies (Temporary Powers) Act, 1946. While upholding the validity--of the impugned clause, this Court observed that the legislature must declare the policy of the law and the legal principles which are to control any given cases and must provide a standard to guide the officials or the body in power to execute the law, and where the legislature has laid down such a principle in the Act and that principle is the maintenance or increase in supply of essential commodities and of securing equitable distribution and availability at given prices, the exercise of the power was valid.
In Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh & ors. (supra) Venkatarama Aiyar J. speaking for majority observed (1) [1951] SCR 747. (2) [1955] 1 SCR 380.
893 ".... the authorities are clear that it is not unconstitutional for the legislature to leave it-to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like." The learned Judge held that the power conferred on the State Government by section 6(2) of the Central Provinces and Berar Sales Tax Act, 1947, to amend the Schedule relating to exemptions was in consonance with the accepted legislative practice relating to the topic and was not unconstitutional.
In VasantlalMaganbhai Sanjanwala v. The State of Bombay & Ors.(1) the validity of section 6(2) of the Bombay Tenancy and Agricultural Lands Act 67 of 1948 was assailed. The said provision authorised the Provincial Government by notification to fix a lower rate of the maximum rent payable by the tenants of lands situate in any particular area or to fix such rate on any other suitable basis as it thought fit.
Gajendragadkar J. (as he than was) speaking for the majority observed that although the power of delegation was a constituent element of legislative power, the, legislature, cannot delegate its essential legislative function in any case and before it can delegate any subsidiary or ancillary powers to a delegate of its choice, it must lay down the' legislative policy and principle so as to afford the delegate proper guidance in implementing the same.
The views expressed by this Court in Corporation of Calcutta & Anr. v. Liberty Cinema (supra), B. Shama Rao v. Union Territory of Pondicherry (supra) and Devi Dass Gopal Krishan v. State of Punjab (supra) have already been reproduced above. In Sita Ram Bishambhar Dayal & Ors. v. State of U.P.
& Ors.,(2) this Court observed :
"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." It would appear from the above that the view taken by this Court in a long chain of authorities is that the legislature in conferring power upon another authority to make subordinate or ancillary legislation must lay down policy, principle or standard for the guidance of the authority concerned. The said view has been affirmed by Benches of this Court consisting of seven Judges., Nothing cogent, in our opinion, has been brought to our notice as may justify departure from the said view. The binding effect of that view cannot be watered down by the opinion of a writer, however eminent he may be, nor by observations in foreign judgments,made in the context of the statutes with which they were dealing.
(1) [1961] SCR 341. (2) [1972] 2 SCR 141.
894 Regarding the subject of delegation, it has been observed on page 228 of Cooley's Constitutional Limitations, Vol. I, 8th Edition "The maxim that power conferred upon the legislature to make laws cannot be delegated to any other authority does not preclude the legislature from delegating any power not legislative which it may itself rightfully exercise. It may confer an authority in relation to the execution of a law which may involve discretion, but such authority must be exercised under and in pursuance of the. law.
The legislature must declare the policy of the law and fix the legal principle-, which are to control in given cases: but an administrative officer or by may be invested with the power to ascertain the facts and, conditions to which the policy and principles apply. If this could not be done there would be infinite confusion in the laws,, and in an effort to detail and to particularise, they would miss sufficiency both in provision and execution." The matter has been dealt with on page 1637 of Vol. ]it in 'Willoughby on the Constitution of the United States, 2nd Edition, in the following words :
"The qualifications to the rule prohibiting the delegation of legislative power which have been, earlier adverted to are those which provide that while the real law-making power may not be delegated, a discretionary authority may be granted to executive and administrative authorities : (1) to determine in specific cases when and how the powers legislatively conferred are to be exercised and (2) to establish administrative rules and regulations, binding both upon their subordinates and upon the public, fixing in detail the manner in which the requirements of the statutes are to be met, and the rights therein created to be enjoyed." The matter has also been dealt with in Corpus Juris Secundum Vol. 73, page 324. It is stated there that the law-making power may not be granted to an administrative body to be exercised under the guise of administrative discretion.
Accordingly, in delegating powers to an administrative body with respect to the administration of statutes, the legislature must ordinarily prescribe a policy, standard, or rule for their guidance and must not vest them with an arbitrary and uncontrolled discretion with regard thereto, and a statute or ordinance which is deficient in this respect is invalid. In other words, in order to avoid the pure delegation of legislative power by the creation of an administrative agency, the legislature must set limits on such agency's power and enjoin on it a certain course of procedure and rule-. of decision in the performance of its function; and, if the legislature fails to prescribe with reasonable clarity the limits of power delegated to an administrative agency, or if those limits are too broad, its attempt to delegate is a nullity.
We are also unable to subscribe to the view that if the legislature can repeal an enactment, as it normally can, it retains enough control 895 over the authority making the subordinate legislation and, as such, it is not necessary for the legislature to lay down legislative policy, standard or guidelines in the statute.
The acceptance of this view would lead to startling results.
Supposing the Parliament tomorrow enacts that as. the crime situation in the country has deteriorated, criminal law to be enforced in the country from a particular date would be such as is framed by an officer mentioned in the enactment.
Can it be said that there has been no excessive delegation of legislative, power even though the Parliament omits to lay down in the statute any guideline or legislative policy for the making of such criminal law ? The vice of such an enactment cannot, in our opinion, be ignored or lost sight of on the ground that if the Parliament does not approve the law made by the officer concerned, it can repeal the enactment by which that officer was authorised to make the law.
Reference has been made to the decision of the Judicial Committee in the case of Cobb & Co. Ltd. & Ors. v. Norman Eggert Kropp(1). The appellant companies in that case brought two actions against the Commissioner for Transport, who was the nominal defendant for the Government of Queens-land. The first action was for repayment of fees levied under the State Transport Facilities Act for the carriage of goods and passengers on motor vehicles operated by the appellants in the State of Queens-land. The second action was for repayment of fees levied under the State Transport Act for the same purposes as in the first action.
The appellants challenged the validity of the legislation in both the actions. The respondent conceded that the licence fees were an imposition of taxation, which would be illegal and void if not done with the authority of Parliament but contended that the two Acts were within the legislative competence of the queens-land legislature. The Judicial Committee held that the power of the Queens-land legislature to legislate for the peace welfare and good government of the state was full and plenary within certain limits. It was further held that the Queer legislature was entitled to use any agent or any subordinate agency or any machinery that they considered appropriate for carrying out the object and the purposes that they had in mind and which they designated. The legislature, it was observed, was entitled to use the Commissioner for Transport as their instrument to fix and recover the licence and permit fees, provided they preserved their own capacity intact and retained perfect control over him. In this context, the Judicial Committee observed :
"In their Lordships' view the Queens-land legislature were fully warranted in legislating in the terms of the Transport Acts now being considered. They preserved their own capacity intact and they retained perfect control over the Commissioner for Transport inasmuch as they could at any time repeal the legislation and withdraw such authority and discretion as they had vested in him. It cannot be asserted that there was a levying of money by presence or prerogative (1) [1967] AC 141.
-748SCI/74 896 without grant of Parliament or without parliamentary warrant." Reference in the above observations to the retention of control and repeal of legislation, in our opinion, should be taken to be in the context of the overall effect of the impugned legislation. The effect of the impugned legislation had been brought out clearly in the judgment of Stable J. and the Judicial Committee quoted with approval the following passage from that judgment "The Commissioner has not been given any power to act outside the law as laid down by Parliament. Parliament has not abdicated from any of its own power. It has laid down a framework, a set of bounds, within which the person holding the office created by Parliament may grant, or retrain from collecting fees which are taxes.
The above passage shows that the Judicial Committee expressly book-note of the fact that the, impugned legislation had laid down the framework and set of bounds within which the authority holding office could act. The above case, cannot, therefore, be an authority for the proposition that it is not necessary for the Parliament to lay down a framework and set of bounds within which a person authorised by an enactment could act.
We have been referred to the literal meaning of the word "abdication" and it has been argued that even if the legislature does not lay down any guidelines, policy or standard for the guidance, of the authority to whom it gives the power of making subordinate legislation, it (the legislature) does ;not abdicate its function as long as it retains the power to repeal the statute giving that power.
What is the exact connotation of the word "abdication" and whether there is proper use of the word "abdication" if the legislature, retains the right of repealing the law by which uncanalised and unguided power is conferred upon another body for making subordinate legislation are questions which may have some attraction for literary purists or those indulging in sonantic niceties; they cannot, in our view, detract from the principle which has been well established in a long chain of authoritiesof this Court that the legislature must lay down the guidelines, principles or policy for the authority to whom power to make subordinate legislation is entrusted. The correct position of law, if we may say so with all respect, is what was enunciated by Mukherjea J. inthe Delhi Laws Act case (supra). Said the learned Judge "It cannot be said that an unlimited right of delegation is inherent in the legislative power itself. This is not warranted by the provisions of the Constitution and the legitimacy of delegation depends entirely upon its being used as an ancillary measure which the legislature considers to be necessary for the purpose of exercising its legislative powers effectively and completely. The legislature must retain in its own hands the essential legislative functions which consist in declaring the legislative policy and laying down the standard which is to be enacted into a rule of 897 law, and what can be delegated is the task of subordinate legislation which by its very nature is ancillary to the statute which delegates the power to make it. Provided the legislative policy is enunciated with sufficient clearness or a standard laid down the courts cannot and should not interfere with the discretion that undoubtedly rests with the legislature itself in determining the extent of delegation necessary in a particular case." As a result of the above, we hold that section 8 (2) (b) of the Central Sales Tax Act does not suffer from the vice of abdication or excessive delegation of legislative power.
The appeals fail and are dismissed with costs. One hearing fee.
MATHEW, J.-These appeals are preferred on the basis of certificates granted by the High Court of Madhya Pradesh under article 133 (1) (c) of the Constitution from a common judgment of that Court holding that the provisions of s. 8 (2) (b) of the Central Sales Tax Act, 1956 (hereinafter referred to as the Act) do not suffer from the vice of excessive delegation and are therefore immune from attack on the ground that Parliament has abdicated its essential legislative function in enacting them.
Mr. A. K. Sen appearing for the appellants submitted that Parliament, by enacting s. 8(2)(b) has delegated its legislative function to fix the rate of tax leviable on the turnover of sales of goods in the course of inter-State trade coming within the purview of the sub-clause and has abdicated its legislative function in so far as it adopted the rate that might be. fixed in the sales tax law of the appropriate State from time to time for taxing the local sales. Counsel submitted that fixing the rate of tax is an essential legislative function and that this function cannot be delegated without laying down the legislative policy for the guidance of the delegate. In support of this contention council referred to the decisions of this Court on the subject.
In Corporation of Calcutta and Another v. Liberty Cinema,(1) the validity of s. 548(2) of the Calcutta Municipal Act, 1951, which empowered the Corporation to levy fees "at such rates as may from time to time be fixed by the Corporation" was challenged on the ground of excessive delegation as it provided no guidance for the fixation of the amount. The majority upheld the provision relaying on the decision in Banarsidas v. State of Madhya Pradesh ( 2 ) holding that the fixation of rates of tax not being an essential legislative function, could be validly delegated to a non-legislative body, but observed that when it was left to such a body, the legislature must provide guidance for such fixation. The Court found the guidance in the monetary needs of the Corporation for carrying out the functions entrusted to it under the Act.
(1)[1965] 2 I. C. R. 477.
(2) [1959] S.C.R. 427.
898 In Municipal Board, Hapur v. Raghuvendra Kripal(1), 'the validity of the U.P. Municipalities Act, 1916, was involved.
The Act had empowered the municipalities to fix the rate of tax and after having enumerated the kinds of taxes to be levied, prescribed an elaborate procedure for such a levy and also provided for the sanction of the Government.
Section 135(3) of the Act raised a conclusive presumption that the procedure prescribed had been gone through on a certain notification being issued by the Government in that regard. This provision, it was contended, was ultra vires because there was an abdication of essential legislative functions by the legislature with respect to the imposition of tax inasmuch, as the State Government was given the power to condone the breaches of the Act and to set at naught the Act itself. This, it was contended, was an indirect exempting or dispensing power. Hidayatullah, J., speaking for the majority, said that regard being had to the democratic set-up of the municipalities which need the proceeds of these taxes for their own administration, ;at is proper to leave to these municipalities the power to impose and collect these taxes. He further said that apart from the fact that the Board wasa representative body of the local population on whom the tax was levied, there were other safeguards by way of checks and controls by Government which could veto the action of the Board in case it did not carry out the mandate of the legislature.
In Devi Das Gopalkrishnan v. State of Punjab(2), the question was whether s. 5 of the East Punjab General Sales Tax Act, 1948, which empowered the State Government to fix sales tax at such rates as it thought fit was bad. The Court struck down the section on the ground that the legislature did not lay down any policy or guidance to the executive in the matter of fixation of rates. Subba Rao C.J., speaking for the Court, pointed out that the needs of the State and the purposes of the Act would not provide sufficient guidance for the fixation of rates of tax. He pointed out the danger inherent in the process of delegation "Art overburdened legislature or one controlled by a powerful executive may unduly