# [1974] 2 S.C.R. 879

- **Citation:** [1974] 2 S.C.R. 879
- **Court:** Supreme Court of India
- **Decided:** 1973-12-21
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1974-2-s-c-r-879-6211
- **Pages:** 34

## Headnote

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GWALIOR RAYON SILK MFG. (WVG.) CO. LTD.
"·
THE ASSTT. COMMISSIONER OF SALES TAX & ORS.
December 21, 1973
[A. N. R;.Y, C.J., K. K. MATHEW, H. R, KHANNA,
A. ALAGJRJSWAMI AKO P. N. BiiAGWAT!, I/.]
87!>
.Central Salis Tax Act, 1956-S. 8(1) (h)-Whether it suffers fronz the lice of
t'.H:'essil•c delegation. .
Sec. 8(2)(b) of the Central Sales Tax Act 19S6, provides that tbe tax payable
by any dealer on his turnover, in so far as it relates to the sale of goods in the
course of intcr·state trade or-commerce not falling -wi_thin sub-sec. (1),~,.....
ia· cas_e of· ioods other than declared goods, shall bo Calcu_Iated at the rate Of ,ten
per -cent or at the rate applicable to the sale or purchase of such 1:0Qds jnside·tbe
:.i.ppropriate state, 'whichever is higher ... ·.etc.
The short-question which arose ·ror determination in these four _ ilppcals . , \\'as
whether the provisions of sec. 8(2)(b) Of the Central Sales Tax Act, 1956 5iJ.lI~r
from the vice of excessive delegation because the parliament, 'in not fixing tlie'_Tate
itself and in- adopting the rate applicable to the sale or purchase of goods iDside
the appropriate State had not laid down any legislative policy and thus-.. abd~c;tcd
its· Ie!::islittive function.
The High Court ti:nsw~re~_-th!~ quc:stion_in the .nc.gati\re
and upheld" the Constitutionul" validity of those -prOviSions.
Dismiss.Ing ihe appeals,
HELD : (I) There is cl~ar Jegislati\"C policy which can be found in the _prod·
sions of Sec. -8(2)(b) of the Central Sales Tax Act ·19S6 .. The polie'y cif"-the law
in _this _respect is. that .in_ case the rate of local &ales :tax.l:Je less than 1_-0 pe;r:-;ce11-t,,, in
such an event; the dealer, if the case- doc!s ·!lot fall within Sec. R(l') Of . t.be_: Act,
E
shoiJltf pay Central S;ilcs Tax at the rare of JO per cent. If, ho\\cvi:r, the J~te of
local s<iles tax for the goods concerned be more than 10 per cent, in that e\·ent,
the policy is that the rate of the Central Sales Tax shall also be the same as that
of lhh local sales tax for the said goods.
The object of the law thus is that the
fJtC of the _CCotral Sales tax: shall in no event be less than the rate of loc<if' &ales
1a.i.: for- the goods in question though it may exceed the Joc~.l rate in case thoit rate
be le~s than JO per cent. [984 A]
F
For example, if the local rate of tax in the appropriate State· tor the uondeclared goods be 6 per cent, in such an event a dealer, whose case is not covered
by sec. 8(1) of the Act, would hu\'e to pay Central Sales Tax at a rate of 10 per
cent.
Jn ca'!e, ho\vever, the rate of Jocal sa1es tax for such goods be 12 per cent
tbe rate of Central Sales tax \\'ould also be 12 per cent because otherwise, if the
rate of Central Sates 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
.:n intru-Slate purchaser and there would be no disincentive to the dealers to
desist fron1 selling goods to unre¥tstcre<l purchasers in course of inter-State trade.
The object of the law apparently t'i to deter inter-State sales to unregiStered deale-rs
G
as such inter-Stnte Sales \\'OUld facilitate evasion of tax. [984 CJ
(2) Jl is also not possible to fix the maximum rate under Sec. 8(2) (b) because
the local sa!es tax: varies from State to State. The rate of Jocal sales tax' can also
be changed by the State legislatures front time to time. Jt is not within the com·
DCtence of the parliament to fix the maximum rate of local Sales tax. _The fixa·
lion Of the rate of local Sales tax is essentially a matter for the State·legisl_atures
aod the parliament does not ha\'e any control in the matter. The parliament has
therefore necessarily, if it wants to prevent evasion o[ payment of Central Sales
H
Tax, to tack the rate of such tax \\'ith that of local sales tax, in case the rate of
local sales tax _exceeds a partict1lar limit. [984 E]
Sta" of Madras v. N. K. Nalarain Mridaliar, [1968] 3 S.C.R. 829, re

## Text

_Characters 0–39,879 of 107,736. This is a partial read: ask again with offset=39879 for what follows._

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GWALIOR RAYON SILK MFG. (WVG.) CO. LTD.
"·
THE ASSTT. COMMISSIONER OF SALES TAX & ORS.
December 21, 1973
[A. N. R;.Y, C.J., K. K. MATHEW, H. R, KHANNA,
A. ALAGJRJSWAMI AKO P. N. BiiAGWAT!, I/.]
87!>
.Central Salis Tax Act, 1956-S. 8(1) (h)-Whether it suffers fronz the lice of
t'.H:'essil•c delegation. .
Sec. 8(2)(b) of the Central Sales Tax Act 19S6, provides that tbe tax payable
by any dealer on his turnover, in so far as it relates to the sale of goods in the
course of intcr·state trade or-commerce not falling -wi_thin sub-sec. (1),~,.....
ia· cas_e of· ioods other than declared goods, shall bo Calcu_Iated at the rate Of ,ten
per -cent or at the rate applicable to the sale or purchase of such 1:0Qds jnside·tbe
:.i.ppropriate state, 'whichever is higher ... ·.etc.
The short-question which arose ·ror determination in these four _ ilppcals . , \\'as
whether the provisions of sec. 8(2)(b) Of the Central Sales Tax Act, 1956 5iJ.lI~r
from the vice of excessive delegation because the parliament, 'in not fixing tlie'_Tate
itself and in- adopting the rate applicable to the sale or purchase of goods iDside
the appropriate State had not laid down any legislative policy and thus-.. abd~c;tcd
its· Ie!::islittive function.
The High Court ti:nsw~re~_-th!~ quc:stion_in the .nc.gati\re
and upheld" the Constitutionul" validity of those -prOviSions.
Dismiss.Ing ihe appeals,
HELD : (I) There is cl~ar Jegislati\"C policy which can be found in the _prod·
sions of Sec. -8(2)(b) of the Central Sales Tax Act ·19S6 .. The polie'y cif"-the law
in _this _respect is. that .in_ case the rate of local &ales :tax.l:Je less than 1_-0 pe;r:-;ce11-t,,, in
such an event; the dealer, if the case- doc!s ·!lot fall within Sec. R(l') Of . t.be_: Act,
E
shoiJltf pay Central S;ilcs Tax at the rare of JO per cent. If, ho\\cvi:r, the J~te of
local s<iles tax for the goods concerned be more than 10 per cent, in that e\·ent,
the policy is that the rate of the Central Sales Tax shall also be the same as that
of lhh local sales tax for the said goods.
The object of the law thus is that the
fJtC of the _CCotral Sales tax: shall in no event be less than the rate of loc<if' &ales
1a.i.: for- the goods in question though it may exceed the Joc~.l rate in case thoit rate
be le~s than JO per cent. [984 A]
F
For example, if the local rate of tax in the appropriate State· tor the uondeclared goods be 6 per cent, in such an event a dealer, whose case is not covered
by sec. 8(1) of the Act, would hu\'e to pay Central Sales Tax at a rate of 10 per
cent.
Jn ca'!e, ho\vever, the rate of Jocal sa1es tax for such goods be 12 per cent
tbe rate of Central Sales tax \\'ould also be 12 per cent because otherwise, if the
rate of Central Sates 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
.:n intru-Slate purchaser and there would be no disincentive to the dealers to
desist fron1 selling goods to unre¥tstcre<l purchasers in course of inter-State trade.
The object of the law apparently t'i to deter inter-State sales to unregiStered deale-rs
G
as such inter-Stnte Sales \\'OUld facilitate evasion of tax. [984 CJ
(2) Jl is also not possible to fix the maximum rate under Sec. 8(2) (b) because
the local sa!es tax: varies from State to State. The rate of Jocal sales tax' can also
be changed by the State legislatures front time to time. Jt is not within the com·
DCtence of the parliament to fix the maximum rate of local Sales tax. _The fixa·
lion Of the rate of local Sales tax is essentially a matter for the State·legisl_atures
aod the parliament does not ha\'e any control in the matter. The parliament has
therefore necessarily, if it wants to prevent evasion o[ payment of Central Sales
H
Tax, to tack the rate of such tax \\'ith that of local sales tax, in case the rate of
local sales tax _exceeds a partict1lar limit. [984 E]
Sta" of Madras v. N. K. Nalarain Mridaliar, [1968] 3 S.C.R. 829, referred I<>
and
l&-748SCI/74
880
SUPREME COURT RE~ORTS
[1974] 2 s.c.11.
B. Sfl(1111a Rao \'. The Union Territory of Po11dicllerry, [1967] 2 S.C.R. 650,
A
explained and distinguished.
(3) The growth of the' legislative power of the executive is a significant dev::-
lo_pment 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 in1prove social arid economic well-being of the people.
Most of the
modern socio-economic le~islations passed by the legislature lay down the guiding
principles and the legislative policy. The legislatures because of Ii1nitati~n imposed upon by the time factor hardly go into matters of detail.
Provision is, thereB
for~ mnde for delegated legi'>lation to obtain flexibility, elasticity, expedition and
opportunity for experimentation. The practice of empowering the Executive to
mak~ subordinate legislation within a prescribed sphere has .evolved out of practic.11 necessity and pragmatic needs of :.i n10Jern welfare '!.late. [890 DJ
( ~) Jn questions of delegated legislation, the principle which has been well
et)tablished is that the legislature must lay down the guidelines, principles or policy
for the authority to whon1 power to make subordinate legislation is entrusted.
The correct position of law thus is that an "unlimited right of delegation is not
C
inherent in the legislative power itself.
This is not warranted by the provisions of
the Constitution <ind the legitin1acy of delegation depends entirely upon its being
u .. eJ as an ancillary measure which the legislature considers to be necessary for the
purppse of exerci~ing its legislntive powers effectively and completely. The legis·
latures_ must retain in its o_wn hands the essential legislative functions which con·
sist in declaring the legislative policy and laying down the stand which is to ho
enacted into a rule of law, and what can be delegated is tbe task of subordinate
legislation which by its very nnture is ancillary to the statute which delegates the
power to m:.1ke it provided the legislative policy is enunciated
with sufficient
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clearness or ti standard laid down. The courl'i cannot and should not interfere
v.ith the discretion that undoubtedly rests with the legislature itself in determining
the ..:".'\tent of delegation ncCCS!iary in <L particulnr case.'' [892 CJ
In re JJdlii Lair.\· Act 1912. [19511 S.C.lt 747 and Municipal Corporlltion of
Dt•fhi v. Bir/a J.1i/fs [1968j 3 S.C.R. 23], Devi D!ls Gopal Kri.~ha1i v. State of
P111Jjah A.LR. 1967 S.C. 1895; Jlart~f1a11kar Baf!/a v. The State of Madhya Prades11 [1955] 1 S.C.R. 380; Pane/it Banarasi Das Bhagat v. The Stare of Madhya
Pradesh & Ors. rt 9591 S.C.R. 427; Corporation gf Calcutta &: A11r.
v.
Liberly
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Ci11e111a rt965] 2 S.C.R. 477 and Sita Ra111 Bislienibhar Dayal & Ors. V. State of
U.P. & Otltm [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 makin~
the subordinate legislation an<l, as such, it is not necessary for the legislature to lay
Llown 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
<in olficer n1entioned in the enactment. Can it be said that there has been no
excessive delegation of legislative power even though ihe Parlian1ent omits to lay
down in the stlltnte 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
th~ ground that if the Parliament does not approve the law made by the officer
concerned, it can repeal the enactn1ent by which that officer was authorised to
n1~1ke the law. [894 H-895 C]
(per CJ. ;ind ~fathew J:)
( 1) Delegation is not handing over or transference of a power from one per·
'iOtl or body of 'Persons to another: Delegation may be defined as the entrust_ing,
by a Person or bo<ly of persons, of the exercise of a power res~ding in that person
or body of persons, to another person or body of persons, with complete :PQ:wer
of revocation or amendment, remaining in the grantor or delegator, [899 G]
F,
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(2) Delegation often involves the granting: of discretionary authority
to
!"! nother, but such authority is purely derivative. The ultimate
po,,...·er always
H
remains in the de1egator and is never renounced. {900 A]
Wills l in H11tl1 v. Clarke. (1890] 25, Q.B.D. 391, 395 an<l Hodge v. The Queen
[1S8J] q A.C. 117.
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GWALIOR RAYON co. v, C.S.T. (Khanna, J.)
881
(3) What is prohibited, is the conferment of arbitrary power by the lesisla·
turc 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 Qther words, the legislature should not. abdicate its essential
function . ..[904 CJ
·
Devi Das Gopal Krishan v. State of Pun/ab, [1967] 3 S.C.R. 551, Corroration
o/Calcutta & another v. Liberty Cinema, [1965] 2 S.C.R. 477; Municipa Board,
Nagpur v. Raghuvendra Kripal, [1966] I S.C.R. 956; The Municipal Corporation
of Dellli v. Bir/a Cotton and Spinning and Weaving Mills, (1968] 3 S.C.R..251 and
Sita Ram Bislrcmbhar Dayal v. Siate of U.P. [1972] 2 S.C.R, 141, referred to.
(4) The.concept of·
1abdication' seems no less· vague, fluctuating and μncertain
than the "transfer to others of tbC essential legislative functions". Some wrHers
think that a legislature does not 'abdicate' unless it withdraws from the field and
surrenders its responsibility thCrefor; and to some, there ·seems to be 'abdication'
whenever. a legislatu~ while remaining in the field' and retaining its responsibility
. C
therefOre entrusts to others the formulation of policy, otherwise than with a definite
.standard· or purpose -laid down by it. [904. D-E]
0
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111 re Gray• 57 S.C.R. tso; In re Initiative and Referendum Act, .[1919] A.C
935; 111 Sl1an11011 v~ Lower. Mainland l)dlry--Pruducts BOtlrd, [19381 A.C. 708 P,C.;
R: v. B11rali [1878] 5 I.A. 178; fll Re lhe Deihl Laws Act 1912 etc. [1951] S.C.R.
747, .referred to.
(5) The cruciar point is, whether the legislature preserved its capacity inta:cf
and retained perfect control over the delegate inasmuc11 as it could at any time
repeal the legislation· and withdraw the. authori~ aild dis:cretion it .had vested -ori
the· delegate. [906 BJ
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·
·
'(6), Deiegation of 'law makingt 2QWer is .tlie 'dynamo of modern governmeQt,
DelegatioJ! by; the legislature is nectlSP!i);Jtli order that the exertion of legislativb
power does norbecome a futility. · Ti>day; whit~ theoiy &till affirms legjslative
supremacy, power floats: back increasingly to the Executive.
One must not taki
lightly and say that there can be transfer of legislative pow(
under the guise of
dCiegation which would tentamount to abdication. At the t. ne time, one must
be aware .of the practical reality that the parliament cannot g.._ into details of all
legislative matters. [906 ·D-E]
. .(7) The making of law is only a means to achi
.. ·eve,!f~rpose. It is not a en. d
in itself .. That end can be attained by the legislature
· g 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, therefo.ro ·1ws end is better secured ,by extensive dele;"
gation of legislative power. The legisiative procesS would frequtntly bog down: if
a Ie~islalure were required to appraise before hand the myriad situations to which
it wishes a particular policy to·. be applied and to fo'rmulate specific rules for each
situa.tion. [906 GJ
(8) ·In the present case, by Sec. 8(2)(b) of the Act, parliament has not dele·
gated any power to the State leaislatures~ Therefore, die question was whether
parliament had abdicated its Je&isJ:ative fUnction· when it.-choae to adopt ~e rate to
be fixed by the state!cgislaturcs for local sales. Jn. the prosent case, parliament
had fixed.the iate of tax on inter-state iatcs of .th• descrlptlon specified lD s. 8(2)-
(b) of the Act at the rate. fixed by the appropriate state leplature in respect of
intra-state-sales. with a. pu.rpose. , namel.y,. to check evasion of tax on inter-state sales
and to prevent discrimination betwct11·riiidents Of different states .. Further, ln the
instant case, parliament can repeal the provisions of s. 8(2)(b) adopting a hilber
rate of tax .fixed by the appropriate state legislaturdn res~! of intra ...
ta. le $ales.
If parlitune'nt can repeal tho provision, there can be no ob1ection on the score that
parliament has abdicated its· legislative-·functioo. It retains"its control over· the
fixation of the ratdtself. [911 HJ
· ·
.
·
.
· ·
Cobb & Co. Ltd. v,'/(ropp. [1967j 1 A.C. 141, referred to.
Therefore' there ·is no excessive. delegation ·of tegislativt . power as contended
by the petitioner.:
·
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SUPllEME COURT REPOllTS
[1974') 2 S.C,R.
CI'<:IL APPELLATE JURtst>ICTION: Civil !\pPCals Nos. 2'12-215 of
A
1973.
From the judgment and order dated the 29th August, 197-2 of the
Ma'!,!1fr PJadesh High Court atJabalpur, in Misc. Petitions Nos. 191
of ll'OlS, 30 of 1970, 63 and 64 of 1972.
A .. K. Stn, R .V. Patel, Biswar11p Oupte, R. N. Jhunjhunwala and
U. K. Kluiita11, for the appellants {in C. A. 212-215).
I. N. Shroff, for respondent Nos. 1 .• 3 {in C.A. 212-215).
B. Sen and S. P. Nayaf', for respondent No. 4 (in C.A. 212).
S. P. Nayar, for respondent No. 4 {in C.A. 213-215).
Tllo judgment of H. R. Khattna, A. Alagiriswami and P. N. Bhagwati, JJ. was delivered by Khanna J. K. K. Mathew, J. gave a separate
Opillion 011 behalf of A. N. Ray, C. J. and himself.
B
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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 refer- ·
red to as the Act) suffer from the vice of excessive delegatiOn.
The
D
High Court answered this question in the negative and upheld the constitutional validity of those provisions.
Sub-sections (!), (2) and (4) of section 8 of the Act read as
under:·
"(!) Every dealer, who in the course of inter-Estate
trade or commercela} sells to the Government any goods; or
(b) sells to a registered dealer other than the
ment goods of the description referred to
iection (.3) ;
shall be liable to pay tax under this Act, which
three per cent of fiis turnover.
Governin
sub·
shall . be
.
(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 tl).e course of inter-Staie trade or commerce not
falling within sub-section (1 )-
·
·
E
F
(a) in the case of declared goods, shall be calculated at
G
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;
H
and for the purpose of making any such calculation any such
dealer shall be deemed to be a dealer liable to pay tax under
A
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GWALIOR RAYOS. co .. \'. c.s.r. (K//ll!l//(I, J.)
s.s:<
the sales tax law of the appropriate State, notwithstaoding
that he, in fact, may not be so liable under that law.
( 4) The provisions .of sub-section (I) shall not apply to
any sale in the course of inter-State trade or commerce, un-.
less the dealer selling the goods furnishes to the prescrib.:d
authority in the prescribed manncr-
(a) a declaration duly filled and signed by tbe registered dealer to whom the goods arc sold containing the
prescribed particulars in a prescribed form obtained
from the prescribed authority; or
lb) 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 ou behalf of the appellants that the fixation of
rate of tax is a legislative .function and as the Parliament has,
und~r
section 8(2) (b) of the Act, not fixed the rate of central sales tax bur
has adopted the rate applicable to the sale or purchase of goods in.,idc
the appropriate State in case such rate exceeds 10 per cent, the Parliament has abdicated i.ts 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 dcal~r other than the Go\·crnn1cnt.
In the case of
such a registered dealer, it is essential that the goods should be o[ the
description mentioned in sub-section (3) of section 8 of the Act.
ln
order, however, to avail of the benefit of such a Io\V rate of tax unc.h.::r
section 8 (I) of the Act, it is also essential that the dcakr selling the
goods should furnish to the.prescribed authority in the prescribed manner a declaration duly filler I and signed by the registered dealer, to
whom the goods ai·c sold. i:ontaining the
prescrihed
particulars
in
prescribed form obtained from the prescribed authOl'ity. or ff the goods
arc sold to the Government not being a rcgist~r~d d..:-a!L:r, a ccrtiti~ .. :..::
in the prescribed form duly Jilled and signed by a duly authorised.oCT\-::·;r
of the Government.
In cases not falling under sub-section (l), the
tax payable by any dealer in respect of inter-Stat< sak of declared
goods is the rate applicable to the sale or purchase of such goods inside
the appropriate state 1·hfe section 8(2) (a) of the Act.
As rcgardgooJs other than the <lcclared goods, section 8(2) (b) ·provides
t'nao
the tax payable by any dealer on the sale of such goods in the course
of inter-State trade or commerce shall be .calculateJ at the rate of IC
per cent t}r at the rate applicable to the sale or purchase of such gocd'
inside the appropriate State, whichever is higher.
The question with which we arc concerned is whether the Parlia -
ment 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
clown any legislative policy and has abdicated its legislative function.
884
SUPREME COURT REPORTS
[1974] 2 s.c.R.
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 Jaw 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 (!) of tho 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 lie 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 n.on-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 rato
of 10 per cent.
In case, however, the rate of local sales tax for •uch
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 lO
per cent, the unregistered dealer who pur~hases goods in the course ef
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 appar.ently 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 ot
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 necc•sarily, if it wants to prevent evasion of payment ot
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-ibe
case of State of Madras v. N. K. Nataraja Mudaliar( 1) observed :
"'Then we come to cl. (b) of s. 8(2), which deals with
goods other than declared goods.
Here the law at the r.elevant time was that the tax shall be calculated at the rate of
seven percentum of the turnover or at the rate applicable to
sale or purchase of such goods i!lliide the appropriate State,
wbiche~cr 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 bas 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.
(t) [t968J J SCR 829.
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dealers coming within s, 8 (2); must be in the very natμre of
things very little. It is iil public interest to see that in the
guise of freedom of irade, they do not evade the payment of
tax. lf the sales tax they have to pay is as high or e•en
higher than intre-State sales tax then they will be coJISlrained
to register themselves and pay the tax legitimately due. The
impact of this provislonon infer-State trade is bound to ·be
negligible, but at 'the ilame time it .is an effecti\le saf~guard.
against evasion of tax:" ·
·
' 1be adoption of the rate of local sales tax for the purpose of the
central; sales tax as applicable iri a particular State does not show that
the" Parliament has in any way adbicated its legislative function.
Where a law of Parliament provides that the rate of central sales tax
should be 10 per cent or that of the !Ocal sales tax, whichever be higlter,
a definite legislative policy can be discerned in such a .law, the i:olicy
being ·that the rate of central sales tax should. in no event be Jess than
the rate of local sales tax. In such a case, it is as Wrea:dy stated above,
not possible to mention the precise figure of the maximum rate of .::entral sales tax In the law made by the Parliament because such Ii rate is
linked with the rate of local sales tax which is prescribed by the State
Legislatu~es. 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
approp~ate 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 c.entral salestax and to plui
possible loophples.
There is, in our opiniOn, marked difference between the enactmeni
of a law which was struck down by this Court in the case of B. Shama
Rao v. The Union Territory of Pontlicherry~t.) and that containod in
section 8 (2)(b) of the Central Sales Titx Act. In Shama. Rao's case
the Legislativt> Assembly for the Union Territory of Pondicherry
passed the Pondicherry General Sales. Tax Act which was published on
June 30, 1965, Section 1(2) of the Act provided that it would come
into force on such date as the Pondicherry Government may by notification appoirit and section 2(1) provided that the Madras General
Sales l'ax Act, 1959, as in force in the State of Madras imoledWJ!ly
before the collimencement of the Pondicherry Act; shall he extended to
Pondicberry subject to certain . modifi~ation$. The Pondicberry
Government issued a· nQtification on .March 1, 1966, appointing April
1, 1961! as the ·date of l;OJD!Dencement Of the· Pondicherry Act.. Prior
to the issue of the notification,· th~ Madras. Legislature had
am~ed·
the Madras Ac.t and ronsequently it was the. Madras Act. as amended
Up. to April 1, 1966 which WM brought into f~ in Pondicherry. A
(I) (1967] 2 SCR 6SO.
886
SUPREME COURT l\EPOB.TS
[1974] 2 s.c.R.
petition was tbereupol) filed challenging the validity of the Pondicherry
Act.
During tlie pendency of that petition, the Pondicberry Legisla·
ture tiassed Amendment Act 13 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 a!T material times.
1t was hefd by majority by this
Gourt that the Act of 1965 was void and still-born and cou,ld 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 piincipal Act, but in effect it also euactcd
that if the Madras Legislature were to amend its Act prior to the notifl·
cation 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
predicate what amendments would be carried out, whether they would
be of a sweeping character or whether they would be suit.able in Pondieherry.
The result, in the opinion of the Court, was that the. Pondicherry Legislature accepted the amended Act though it was and could
not be aware what the provisions of the amended Act would be .. There
was, according to the Court, in these circumstances a total suxrender
in the matter of sales tax legislation by the Pondicherry Assembly in
favour of the Madras Legislature.
It would a{'pear from the above that tbe 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
ls involved in the present case because or the Parliament having adopted in one particular respect the rate of local sales tax for the purpose
ot 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 inter-State sales to unregistered dealers.
No sucn
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 PondiC.
cherry case the provisions of the Madras Act along with the subsequent
ameudments 'were made applicable to an area which was witlun the
Union Territory of Pondichcrry am! not in Madras State .. As against
that, ln the present case we find that th.e 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 tax. The central sales tax in res·
peel of the territory of a State is ultimately assigned to that State under
article 269 of the Constitution and ;, 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 bas 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. !lie legislature
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887
must pfovide guidance for such fixation. In the case of Corporation
of Cillcutta & Anr. v. Liberty Ci1iema(I) while dealing with section 548
of the Calcutta Municipal Act relating to the levy of licence fee on
cinema houses, Sarkar 1. (as the then was) speaking for the majority
after refenilrg to the earlier case of Pa11dit Banarsi Das Bhanot v. The
State of Madhya Pr/Jdesh(') 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 is, was much guidance provided in the Act? We first
wish to observe that the validity of the guidance cannot he
tested by a riglid uniform rule: that must demand on the object of the Act giving power to fix the rate."
In Municipal Corporation of Delhi v. Bir/a Cotto11, Spinning and
Weaving Mills Delhi & Anr.(3 ) this Court dealt with the provisions of
sections 113 and J 50 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 whether section 150 of the abovementioned Act transgressed the limits of permissible delegation. According to that section,
the Municipal Corporation may at a meeting pass a resolution for the
~evy 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 articleg and properties to be taxed, the
sy_stem of 8Slessmcnt to be adopted and the exemptions, if any, to be
granted. Snch a resolution has to be sanctioned by the Central Government and thereafter the Corporation bas to pass a second resolution
determining, subject to the maximum rate, the actual rate of tax. Wanchoo CJ., Hidayatullab, Sikri, Ramaswami and Shela! JJ. unheld the
validity of the above section, while Shah and Vaidialingam JJ. dis·
sented and held that section 150(1) of the Act was void beause of
excessive delegation of .legislative authority to the Corporation. Wanchoo CJ. and Shelat J. on a consideration of the various provisions
of the Act held that the power conferred by section 150 on the Corporation was not unguided and cculd not be said to amount to excessive
delegation. After referring to the earlier authorities, Wanchoo CJ.
speaking for himself and Shela! 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 fo1mulation as a binding rule of conduct and cannot be delegated
by the legislature. Nor is there any unlimited right of delc·
gation inher~nt in the legislative power itself. This is. not
(1) 11965) 2 SCR 477.
(2) {1959] SCR 427~
(3) (1968) 3 SCR 231.
888
SUPREME COURT REPORTS
[1974) 2 S.C.R,
warranted by the provisions of the Constitution. ~
legislature must retain in its own hands the essential legislative
functions and what can be delegated is the task of subordinate
~egislation necessary for implementing the purposes and ob1ects of the Act. Where the legislative policy is enunciated
wit.h sufficient clearness or a standard is laid dow.n.
the
courts should not interfere. What ¥uidance should be given
and to. what extent and whether gwdance has been given in
a particular case at all depends on a consideration of the
provisions of the particular Act with which the Court bas
to deal includiqg its preamble. Further it appears to us that
the. nature of the body to "'.hich delegation is made to also
a factor to be taken into consideration in determining whether
there is sufficient guidance in the matter of delegation."
Hidayatullah J. (as he then was) 'speaking for himself and Rania-
:swami J. observed :
· ·
"Once it is established that the legislature itself has willed
that a particular thing be done and has merely left the exe·
cution 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 bas done."
l t was further observed :
"To insist that tlfto legislature should provide for every
matter connected'..tith municipal taxation would make muni·
cipalities mer\i'!tx 'collecting departments and
not
selfgoverning bodies which they arc intended to be.
Go~ernment
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 self-governing
institutions in our country."
Sikri J. (as he then was) observed:
"L.ca11 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.
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G
·court to test the vali4ity of s.ll3(2)(d) and s.150 of the
Act by ascertaining whether a guide, or policy exists in 'the
Act, I find adequate guide or policy ·in the expression 'purp05es of the Act' ins. 113. The. Act has point~ out· the
objectives or the results to be achieved and taxation can be
levied only for the purpose of achieving the .objectives o~ the
results.
This in my view, is sufficient gmdance especially
H
to a self-gove~ning body like the Delhi Municipal Corporation. It is necessary to rely
on the safeguards mentioned by the learned Chief JustiC4' to sustain the delegation."
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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)
Essential
legislative function cannot be delegated by the
Legislature; t!tat is, there can be no ~bdication of legislative
function or authority 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 legislatfon may .howev~r be en!f11Sted 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 guidanee 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, and it is a
necessary intendment of the constitutional provision which
confers that power that it shall not be delegated without
laying down principles, policy, standard or guidance
to
another body unless the Constitution expressly permits dele·
gation; and (v) the taxing provisions are not exception to
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 be performed by that body to which the Constitution bas 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
pr?b~lyl f?e in a better position to e~ercise the power of
legislation m that branch, but the Constitution bas chosen to
invest the. elected representatives of the people to exercise
the power of legislation, and not to such bodies of exP.erts.
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 incpnsistent 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 di~lose
the policy, principles or standards which are to govern the
d 'IC!lllt~ in the exercise of that power so as to set out a
guidance. Any delegation which transgtesses this limit infrin8Jl8 the constitutional scheme."
After 1'.. zrring to the provisions of the Delhi Munici)1al Corporation
Acf, Shah and Vaidialingam JJ, held that the delegation could not
890
SU~REME COURT REPORTS
[1974J 2 s.c.L
be upheld merely because of the special status, character, competence
or capacity of the· delegate or by reference to the provisioll$ made in
the statute to prevent abuse by the delegate or its authority. Shah
and VaidiaJingam JJ. ~rdingly came tc, the conclusion thJt Section
150(1) was void as it permitted excessive delegation of legislative
authority to the Corporation.
h would appear from Ille above that not only was the constitutional validity of section 150 of the Delhi Municipal Corporaiion Act
upheld by the majority, the majority of the jude;es also expressed the
view that it was essential for the legislature to lay. down the legislative
policy and standards before it could delegate the. tas\t of subordinate ·
legislation to another body.
We find ourselves unable to agree with the view, which has .been
canvassed during ti1e 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 laiss~z-faire has been given a go-by and large
and comprehensive powers arc being assumed by the State with a
view to improve social and economic well-being of the people. Most
of the modern socio-economic legislations passed by the legislature
lay down the guiding principles and the legislative policy. The le~
latures because of limitation imposed upon by the time factor hardly
go into matters of detail. Provision is, therefore, made for delegated
legislation to obtnin flexibility, elasticity, expedition and opportunity
for experi01entation.
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.