1973 (12) TMI 38 - SC - VAT and Sales Tax

Whether the provisions of section 8(2)(b) of the Central Sales Tax Act, 1956 do not stiffer 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? Held that - There can be nodoubt that Parliament can repeal the provisions of section 8(2)(b) adopting the higher rate of tax fixed by the appropriate State Legislature in respect of inter-State 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 intact. In other words, so long as Parliament can repeal the provisions of section 8(2)(b) adopting the higher rate of tax fixed by the State Legislature, it has not abdicated its legislative function. We are glad to find that our conclusion that Parliament has not abdicated its legislative function by enacting section 8(2)(b) of the Act is in agreement with that reached by the High Court of Gujarat in Rallis India Ltd. v. R. S. Joshi, Sales Tax Officer, 1972 (9) TMI 138 - GUJARAT HIGH COURT and the High Court of Punjab in Tek Chand Daulat Rai v. Excise and Taxation Officer, Ferozepore 1971 (4) TMI 89 - PUNJAB AND HARYANA HIGH COURT . Appeals dismissed.

Issues Involved:
1. Excessive delegation of legislative power.
2. Abdication of legislative function by Parliament.
3. Validity of Section 8(2)(b) of the Central Sales Tax Act, 1956.

Detailed Analysis:

1. Excessive Delegation of Legislative Power:
The appellants argued that Section 8(2)(b) of the Central Sales Tax Act, 1956, constitutes excessive delegation of legislative power. They contended that Parliament had delegated its essential legislative function of fixing tax rates to State Legislatures without laying down a clear legislative policy or guidance. The Court referenced several past decisions to address this issue, including:
- Corporation of Calcutta v. Liberty Cinema: The Court upheld the delegation of rate-fixing to a non-legislative body, provided there was legislative guidance.
- Municipal Board, Hapur v. Raghuvendra Kripal: The Court found that delegation to municipalities was valid due to the democratic setup and safeguards provided.
- Devi Dass Gopal Krishnan v. State of Punjab: The Court struck down a provision due to lack of legislative policy or guidance for the executive.

The Court emphasized that delegation involves entrusting discretionary authority to another body while retaining ultimate control. It noted that Parliament had not abdicated its legislative function but had adopted the rate fixed by State Legislatures to prevent tax evasion and discrimination. The Court concluded that Section 8(2)(b) does not suffer from excessive delegation.

2. Abdication of Legislative Function by Parliament:
The appellants argued that Parliament had abdicated its legislative function by adopting the rates fixed by State Legislatures for local sales tax. The Court distinguished between delegation and abdication, explaining that delegation involves retaining ultimate control, while abdication implies a complete surrender of legislative power. The Court referenced several cases to support its analysis:
- Hodge v. Queen: The Privy Council upheld delegation as long as the legislature retained control.
- In re Gray: The Supreme Court of Canada upheld extensive delegation during wartime, emphasizing that the legislature retained control.
- Cobb & Co. Ltd. v. Kropp: The Privy Council held that the Queensland Legislature had not abdicated its power by delegating authority to the Commissioner for Transport, as it retained the power to repeal the legislation.

The Court concluded that Parliament had not abdicated its legislative function by enacting Section 8(2)(b), as it retained control and could repeal the provision if necessary.

3. Validity of Section 8(2)(b) of the Central Sales Tax Act, 1956:
The Court examined whether Section 8(2)(b) of the Act was constitutionally valid. It noted that the provision aimed to prevent tax evasion and discrimination by adopting the higher rate of tax fixed by State Legislatures for local sales. The Court found that Parliament had laid down a clear legislative policy and objective, which was to prevent evasion and ensure uniformity in tax rates. It referenced past decisions to support its conclusion:
- State of Madras v. N. K. Nataraja Mudaliar: The Court upheld a provision aimed at preventing tax evasion.
- Municipal Corporation of Delhi v. Birla Cotton Spinning and Weaving Mills: The Court upheld delegation to a municipal corporation with sufficient legislative guidance.

The Court held that Section 8(2)(b) did not suffer from the vice of excessive delegation or abdication of legislative power. It found that the provision was constitutionally valid and dismissed the appeals.

Conclusion:
The Supreme Court dismissed the appeals, holding that Section 8(2)(b) of the Central Sales Tax Act, 1956, does not suffer from excessive delegation or abdication of legislative power. The provision was found to be constitutionally valid, as Parliament had laid down a clear legislative policy and retained ultimate control over the delegated authority.

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