# V. NAGAPPA v. IRON ORE MINES CESS COMMISSIONER & ANOTHER

- **Citation:** [1973] 3 S.C.R. 943
- **Court:** Supreme Court of India
- **Decided:** 1973-04-10
- **Case number:** Civil Appeal No. 1695 of 1969
- **Bench:** A. N. Grover, K. K. Mathew1And A. K. Mukherjea
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/v-nagappa-v-iron-ore-mines-cess-commissioner-another-6588
- **Pages:** 9

## Headnote

Iron Ore Mines Labour Welfare Gess Act (58 of 1961), Ss. 2 and
3-Power delegated to Government to fix rate of exciJ:e duty-I/ suffers
from vice of excessive delel(ation.
Section 2 of the Iron Ore Mines Labour Welfare Cess Act, 1961,
provides that the Central Government may levy as a cess for purposes
of the Act, on all iron ore produced, an excise duty at such rate, not
exceeding 50 P. per tonne of iron ore, as the Central Government may,
from time to time, fix by notification.
The appellant, a lessee of an iron mine, challenged the validity of the
Act, but the High Court dismissed the petition,
In appeal to this Court, it was contended that s. 2 of the Act suffers
from the vice of excessive delegation
in that, under the section,
the
Central Government has been given a blanket power to fix the rate of
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excise duty from time to time, without any guidelines.
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Dismissing the appeal,
HELD : The necessary guidance for fixing the rate can be found in
the amount of expenditure .necessary for carrying out the purposes of
the Act. The policy of the Act has beOlll' clearly stated, and s. 3 has
specified the purposes for which the excise duty collected is to be utilised.
The purposes mentioned are not vague, or indefinite, and the expenses to
be incurf'ed for those purposes could be calculated with reasonable certainty. The power to levy the duty must be taken to be limited by the
expenses required to discbarge the statutory function to be performed
by the delegate, and so, the rate that is to be fixed should be such as
would bring in the amount necessary to meet the needs of the delegate
for discharging the functions.
That the amount collected will be expen·
<led for the purposes enumerated in s. 3 is ensured ,first, by requiring
the Governn1ent to make an appropriation by means of parliamentary legislation, and secondly, by requiring accounts and reports to be published in
the offic'al Gazette [951 D-G]
Further, the fact that s. 2 has fixed the maximum rate would indicate
that the delegate is not given an uncontrolled discretion in the matter of
fixing the rate.
The area within which discretion n1ay be exercised is
clearly demarcated, and hence, it cannot be said that a blanket po\\.·er
hall been declared to the Governn1ent. [951 G-H]
Corporation of Calcutta and Another v. Liberty Cine111a A.I.R.
1965
I !07, Banarsidas v. State of M.P., A.LR. 1958 S.C. 909, Municipal Board,
llapur v. Raglmvendra Kripal A.J.R.
1966 S.C.
693, Devi Das Gopal
Krishnan v. State of Punjab, A.J.R. 1967 S.C. 1895, Vasanrlal Maganbhai
Scnjamvala v. Stat• of Bombay, A.I.R. 1961 S.C. 4, Municipal Corporation
of Delhi v. Bir/a Cotton and Spinning and WeavinH Mills, A.LR. 1968 S.C.
1232 Kruse v. Johnson [1898] 2 Q.B. 91 and D. Ramaraju v. State of A.P ..
A.J.R. 1972 S.C. 828. referred to.
9 43
944
SUPREME COURT REPORTS
[1973] 3 s.c.R.

## Text

A
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V. NAGAPPA
v.
IRON ORE MINES CESS COMMISSIONER & ANOTHER
April 10, 1973
[A. N. GROVER, K. K. MATHEW1AND A. K. MUKHERJEA, JJ.J
Iron Ore Mines Labour Welfare Gess Act (58 of 1961), Ss. 2 and
3-Power delegated to Government to fix rate of exciJ:e duty-I/ suffers
from vice of excessive delel(ation.
Section 2 of the Iron Ore Mines Labour Welfare Cess Act, 1961,
provides that the Central Government may levy as a cess for purposes
of the Act, on all iron ore produced, an excise duty at such rate, not
exceeding 50 P. per tonne of iron ore, as the Central Government may,
from time to time, fix by notification.
The appellant, a lessee of an iron mine, challenged the validity of the
Act, but the High Court dismissed the petition,
In appeal to this Court, it was contended that s. 2 of the Act suffers
from the vice of excessive delegation
in that, under the section,
the
Central Government has been given a blanket power to fix the rate of
D
excise duty from time to time, without any guidelines.
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Dismissing the appeal,
HELD : The necessary guidance for fixing the rate can be found in
the amount of expenditure .necessary for carrying out the purposes of
the Act. The policy of the Act has beOlll' clearly stated, and s. 3 has
specified the purposes for which the excise duty collected is to be utilised.
The purposes mentioned are not vague, or indefinite, and the expenses to
be incurf'ed for those purposes could be calculated with reasonable certainty. The power to levy the duty must be taken to be limited by the
expenses required to discbarge the statutory function to be performed
by the delegate, and so, the rate that is to be fixed should be such as
would bring in the amount necessary to meet the needs of the delegate
for discharging the functions.
That the amount collected will be expen·
<led for the purposes enumerated in s. 3 is ensured ,first, by requiring
the Governn1ent to make an appropriation by means of parliamentary legislation, and secondly, by requiring accounts and reports to be published in
the offic'al Gazette [951 D-G]
Further, the fact that s. 2 has fixed the maximum rate would indicate
that the delegate is not given an uncontrolled discretion in the matter of
fixing the rate.
The area within which discretion n1ay be exercised is
clearly demarcated, and hence, it cannot be said that a blanket po\\.·er
hall been declared to the Governn1ent. [951 G-H]
Corporation of Calcutta and Another v. Liberty Cine111a A.I.R.
1965
I !07, Banarsidas v. State of M.P., A.LR. 1958 S.C. 909, Municipal Board,
llapur v. Raglmvendra Kripal A.J.R.
1966 S.C.
693, Devi Das Gopal
Krishnan v. State of Punjab, A.J.R. 1967 S.C. 1895, Vasanrlal Maganbhai
Scnjamvala v. Stat• of Bombay, A.I.R. 1961 S.C. 4, Municipal Corporation
of Delhi v. Bir/a Cotton and Spinning and WeavinH Mills, A.LR. 1968 S.C.
1232 Kruse v. Johnson [1898] 2 Q.B. 91 and D. Ramaraju v. State of A.P ..
A.J.R. 1972 S.C. 828. referred to.
9 43
944
SUPREME COURT REPORTS
[1973] 3 s.c.R.
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
1695
of 1969.
Appeal by special leave from the judgment and order dated
february 20, 21, 1967 of the Mysore High Court Bangalore in
Writ Petition No. 347 of 1965.
A
V. M. Tarkunde andD. N. Mishra, for the appellant.
B
P. P. Rao, for the respondents.
The Judgment of the Court was delivered by
MATHEW, J.
The appellant, who was operating an iron mine
within the State of Mysore on the basis of a lease granted by the
Stak, filed a writ petition before the High Court of Mysore challenging the validity of the provisions of the Iron Ore Mines
Labour Welfare Cess Act (Central Act 58 of 1961), hereinafter
referred to as "the Act". _The contentions of the appellant in the
writ petition were that the Act is violative of article 14 of the
Constitution in that it imposes a fiat rate of excise duty on iron
ere without reference to the actual content of iron in the ore and
that there was excessive delegation of legislative power in that
the po,wer to fix the rate of excise duty was delegated to the government. The prayer in the petition was for a declaration of the
invalidity of the Act with the consequential relief of quashing the
demand made in pursuance to the Act. That petition was heard
along with other similar petitions.
The High Court dismissed
the writ petitions by a common order and this appeal, by special
leave, is against the order in so far as it affects the appellant.
The Act provides for the levy and collection of a cess on iron
ore for financing the promotion of welfare of labour employed in
the iron ore mining industry. So far as the Mysore State was concerned, the Act was brought into force from October 1, 1963.
Sections 2 and 3 of the Act contain the crucial provisions thereof.
As the arguments in this case centred round the said provisions,
it is necessary to set them out :
"2. With effect from such date as the Central Government may, by notification in the official Gazette,
·appoint, there shall be levied and collected, as a cess
for the purposes of this Act on all iron ore produced in
any mine, a dnty of excise at snch rate not exceeding
fifty naye paise per metric tonne of iron ore as the Central Government may, from time to time, fix by notification in the official Gazette.
"3. An amount equivalent to the proceeds of the
duty levied under this Act, reduaed by the cost of colc
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V, NAGAPPA v. IRON ORE COMMR. (Mathew, J.)
945
lection as detennined by the Central Government, together with any income from investment of the said
amount and any other moneys received by the Central
Government for the purposes of this Act, shall, after
duo appropriation made by Parliament by law,
be
utilised by the Central Government to meet the expenditure incurred in connection with measures which, in the
opinion of that Government, are necessary or expedient
to promote the welfare of labour employed in the iron
ore mining industry and in particular :-
(a) to defray the cost of measures for the benefit
of lalx1ur employed in the Iron Ore Mining Industry
directed towards :-
( i) the improvement of public health and sanitation, the prevention of disease, and the provision and improvement of medical facilities,
(ii) the provision and improvement of water
supplies and facilities for washing,
'iii) the provision and improvement of educational
facilities,
(iv J the improvement of standards of living including
housing and nutrition, the amelioration of social
conditions and the provisions of
recreational
facilities, and
( v) the provision of transport to and from work;
(b) to make grants to a State Government, a local
authority, the owner of an iron ore mine or any other
person, of money in aid of any scheme approved by the
Central Government for any purpose connected with
the welfare of labour employed in the iron ore mining
industry :
( c) to pay annually grants in aid to such of the
owners of iron ore mines as provided to the satisfaction
of the Central Government welfare facilities of the prescribed standard for the benefit of labour employed in
their mines, so, however, that the amount payable as
grant in aid to the owner of an iron ore mine shall not
exceed-
(i) the amount spent by the owner of the mine in
the provision of welfare facilities, as detennined
by the Central Government or any person specified by it in this behalf or
946
SUPREME COURT REPORTS
[1973} 3 S.C.R.
(ii) such amount as may be prescribed by rules
made under this Act;
•
which~ver is less : ·Provided that no grant in aid shall
be payable in respect of any welfare facilities provided
by the owner of an iron ore mine where the amount
spent thereon determined as ·aforesaid is less than the
amount prescribed by rules made in this behalf.
( d) to· meet the allowances, if any of members of
the . Advisory Committees constituted under section 4,
and the salaries and allowances, if any, of persons appointed under Section 5."
Sections 4 and 5 empower the Central Government to appoint
Advisory Committees' and the necessary staff for enforcement of
the provisions of the Act. Section 6 empowers the Central Governinent to exempt from the operation of the Act such States as
those in which there is, in the opinion of the Central Government,
·a law making adequate provision for the financing of activities
similar to those dealt with by the Act.
Section .7 requires the
Central Government to cause to be published in · the official
Gazette a report giving an account of its activities under the Act
together with a statement of accounts. Section 8 empowers the
Central Government to make rules. for carrying into effect the
purposes-of the Act.
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Pursuant to the power conferred by Section 8, rules called
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the Iron Ore Mines Labour Welfare Cess Rules,
1963, were
framed and published by a notification dated September 20,
1963.
On the ·first question decided against the appellant by the
High Court, no arguments were addressed before us and we do
not, therefor~, think it necessary to discuss that question.
The only point argued on behalf of the appellant was that
s. 2 of the Act suffers.from the vice of excessive delegation in
that under that Section the Central Government has been given
a blanket power to fix the rate of excise duty. It was contended
that the section, while leaving it to the Central Government to
fix the rate ·and change it from time to time, has failed to give
sufficient guidance to the Government in the matter of fixing the
rate, :r:ior has it indicated the basis for fixation or the relevant consideration to be taken into account for fixing the rate.
The High Court relying on the decision of this Court in Corporation of Calcutta and Another v. Liberty Cinema(') negatived
the contention.
.
(I) A. I .R. 1965 S. C. 1 !07.
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947
In that case 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 relying on the decision in Banarsidas v.
State of M.P.(1) that the fixation of rates of tax being not an
essential legislative function could be validly delegated. to a nonlegislative body, but observed further that when it was left to such
a body, the legislature must provide guidance for such fixation.
The Court found th~ guidance in the monetary needs of the Corporation for carrying out tile functions entrusted to it under the
Act. It was further observed that the power to collect taxes was
limited by "the expenses required to discharge those functions".
The minority, however, held that no guidance could be discovered
from the provisions of the Act. According to them if the monetary needs of the Corporation could afford any guidance, applying the same principle it would have to be held that the monetary
needs of the State or the union would provide sufficient guidance
in c:ase a similar power to 'fix the rate .of tax was delegated to the
Government by the higislature.
The question for consideration is whether subsequent deci-
>ions of this Court have in any way modified or altered the principles laid down in this ruling and if so, to what extent, and·
whether s. 2 of the Act suffers from the vice of excessive dele, ·
gation.
In Municipal Board, Hapur v. Raghuvendra Kripal(') the
validity of the U.P. Municipalities Act, 1916 was involved. The
Act had empowered the municipalities to fix the rates 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 was an indirect exempting or dispensing
power.
Hidayatullah, J., speaking for the majority, pointed out :
" .... regard being had to the democratic set up of
the municipalities which need the proceeds of these taxes
for their own administration, it is proper to leave to
(I) A. I .R. 1958 S. C. 909.
(2) A. I .R. 1966 S. C. 693.
SUPREME COURT REPORTS
[J 973] 3 S.C.R.
these municipalities the power to impose and collect
these taxes.
The taxes are, however,
pre-determined
and a procedure for consulting the wishes of the people
is devised" (at p. 698).
Apart from the fact that the Board was a 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 ac'lion of the Board in case it did not carry out
.the mandate of the legislature.
Jn Devi Das Gopal Krishnan v. State of Punjab (1), s. 5 of
th~ East Punjab General Sales Tax Act, 1948 empowered the
State Government to fix sales tax at such rates as it thought lit.
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 purpose of the Act would not provide sufficient
guidance in the fixation of rates of tax.
It was further contended tha~ s. 5 as amended only
prescribed the
maximum
rate and did not disclose any policy giving guidance to the executive for fixing any rate other_ tha:i the maximum. The Court
rejected this contention on the
gmund
that the
discretion
granted to the executive to fix the rate between one pice and
two pice in a rupee is insignificant and did not exceed the perpermissib[e limits. In this case the learned Chief Justice reiterated
his views about the permissible limits of delegation, expressed in
his dissentng judgment in Vasantlal Maganbhai Sanjanwala
v.
State of Bombay( 2 ). He pointed out the danger inherent in the
process of delegation thus :
"An overburdened legislature or one
controlled
by a powerful executive may unduly over-step
the
limits of delegation. It may not lay down any policy
at all : It may not set down any standard for
the
guidance of the executive; ir 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". (at p. 1901).
In Municipal Corporation of Delhi v.
Bir/a
Cotton and
Spinning and Weaving Mills('), the main question
was the
.::onstitutionality of delegation of taxing powers
to Municipal
(\ l
A. I .R. 1967 S. C. 1895.
(2) A. I .R. 1961 S. C. 4.
(3 ) A. I .R. 1968 S. C. 1232.
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v. NAGAPPA v. IRON ORB COMMR. (Mathew, l.)
949
Corporations. The Delhi Municipal Corporation Act (66 of 1957)
by s. 113(2) had empowered the Corporation to levy optioual
taxes. Under s. 150, power was given to the Corporation to define
the maximum rate of such tax to be levied, the
classes
of
persons and the descriptions of articles and properties
to
be
taxed, the systems of assessment to be adopted and the exemptions
if any to be granted. The delegation made to the Corporation
in the matter of imposing the optional taxes was said to s'uffer
from the vice of excessive delegation.
The majority of
the
Court held the delegation to the valid. Wanchoo, C.J. observed
that there were sufficient guidance, checks and safeguards in the
Act which prevented excessive delegation.
The learned Chic.f
Justice observed that statements in certain cases 'IO the
effect
that the power to fix the rates of taxes was not an essential feature
were too broad.
Sikri. J. (as be then was), in his concurring
j udgmcnt held the
view that there ;was "adequate guide or
policy in the expression "purposes of the Act in section 113"
and "it is not necessary to rely on the safeguards mentioned by
the learned Chief Justice to sus!ain the delegation".
He said :
''Apart from authority, in my
view;
parliament
hus full power to delegate legislative authority to subordinate bodies.
This power flows, in my judgment
from art. 246 of the Constitution.
The word "exclusive" means ex,lusive of any other legislature and
not exclusive of any other subordinate body. There is,
however, one restriction in this respect and that
is
also contained in art. 246. Parliament must pass a law
in respect of an item or items of the relevant list.
Negatively this means that Parliament cannot abdicate
its functions. It seems to me that this was the position under the various Government of India Acts and
the constitution has made no difference in this respect.
I read (1883) 9 AC 117 and (1885) 10 AC 282 as
laying down that legislatures like Indian legislatures
had full power to delegate legislative authority to subordinate bodies. In the judgments in these cases no
G
such words as 'policy', 'standard' or 'guidance' is men_tioned" (at p. 1266).
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Wanchoo, C.J. made a functional approach to the question when
he stated that "the nature of the body to which delegation is
made is also. a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation" (at 1244). Accordine to the leamed Chief Justice the fact
that delegation was made -to an elected body responsible to the
people including those who paid taxes provided a great check
on the elected councillors imposing unreasonable rates of tax.
Again, guide or control on the limit of taxation could be seen
950
SUPREME COURT REPORTS
[1973] 3 S.C.R.
in the expression "purposes of the Act" in s. 113.
The power
lo tax was circumscribed by the need to finance the functions
which were made incumbent on the Corporation
to
perform.
The necessity of adopting budget estimates each year as provided under the Act afforded another limit and guide-line in the
matter. Fmther, the fact that the government was made the
watchdog to control the actions of the Corporation in the
matter of fixinμ the rates provided another check against ·arbi-·
trarily exercising the power of taxation vested with the Corporution.
The guidance may also take the form
of providing
maximum rates of tax upto which a local body may be given
the discretion to make its choice. Lastly, relying on Kruse v.
Johnson(') the learned Chief Justice pointed out that in the case
.of subordinate public representative bodies, such as
municipal
boards, the reasonableness of their action could be reviewed by
the Courts. Thus the majority relied on the safeguards inherent
in delegating the power to an elected body and guidelines provided under the various provisions of the Act for upholding the
delegation. They observed the power from the angle of its exercise aad gauged its propensity for abuse functionally.
In D. Ranuwaju v. State of A.P.(') the question was about
the vires of the Andhra Pradesh (Krishna and Godavari Delta
Area) Drainage Cess Act, 1968. Section 3 of that Act provided
for levy and ·collection of drainage cess.
. According to sub-section (1) of that section there shall be levied and collected by
the Government, for a period of six ·years from the date of the
commencement of the Act, as a drainage cess on every Ja11d in the
delta area comprised within a division specified in column· (2)
of the Schedule, for the purposes of the Act in that division, a
tax at such rate per acre per annum, not exceeding the
rate
specified in the corresponding entry in column (3)
thereof,
as
the Government may, by notification, specify in respect of that
division. The schedule referred to in
the section fixed
the
maximum rate at which drainage cess may be Gollected
and
according to it the maximum rate shall be Rupees 10 per acre
per annum for the Godavari eastern delta, and
the Godavari
central delta.
Section 8(1) provides for a cess fund and any
moneys received from the Central or State Government or any
other source for the purposes of the Act shall be credited to the
Fund toget.her with the proceeds of the Drainage Cess as levied
and collected under the Act.
Sub-section ( 4) of s. 8 provides
that the fund, in so far as it relates to the proceeds of the drainage cess levied and collected in a division, shall be applied towards meeting the cost of the drainage schemes which the Board
may, with the concurrence of the Government, undertake in that
division.
(I) (1898) ~ S. C. 91.
(2) A. I .R. 1972 S.C 828.
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V, NAGAPPA V, IRON ORE COMMR. (Mathew, J.)
951
. In answer to the contention that the section
furnishes
110
sufficient guidelines for exercising the discretion to fix the rate.
and therefore, the section was bad on the ground of excessive
delegation of legislative power, the Court said that
the
Act
contained sufficient guidelines, for the fixation of the rate of cess,
that there was enough materials on records to justify a uniform
rate of cess for each acre of land in a division of the deltaic nrea
and that the imposition of tax on land for raising general revenue is substantially different from the levy of cess for implementa·
tion of a drainage scheme for the benefit of lands in an area.
Tested in the light of the reasoning adopted in the cases
referred to above, we are of opinion that the Act has furnished
definite guideline for the government to exercise the power to
fix the rate of excise duty.
Section 3 has specified the purposes for which the excise duty
collected is to be utilized.
We do not think that the purposes
mentioned are vague or mdefinite or that the expenses to be incurred for those purposes cannot be calculated with reasonable
certainty. The power to lezy the duty must be taken to be
limited by the expenses required to discharge the statutory function to be performed by the delegate and so, the rate that is to
be fixed should be such as would bring in the amount necessary
to meet the needs of the delegate for discharging the functions.
That the amount collected will be expended for the purposes
enumerated in s. 3 is ensured firstly by requiring the Government
to make an appropriation by means of parliamentary legislation
and secondly, by requiring accounts and reports to be published in the official Gazette.
The policy of the J\ct has been dearly stated; the purposes
for which the tax collected should be expended have been enumerated and the purposes are such that it is reasonably possible
for the delegate to calculate the amount necessary to meet them.
In these circumstances, we think that the
necessary
guidance
for fixing the rare can be found in the amount of expenditure
necessary for carrying out the purposes of the Act. Quite apart
from these circumstances, the fact that s. 2 has fixed the maximum rate would indicate that the delegate is not given an uncontrolled discretion in the matter of fixing the rate.
The at'ea
within which the discretion has to be exercised having been clearlv
demarcated, it cannot be said that a blanket power to fix the rate
has been delegated to government.
We dismiss the appeal with costs.
V.P.S.
Appeal dismissed.