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TMI Blog1979 (5) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to have repercussions on the price at which they buy paddy and the price at which rice manufactured by them out of that paddy is sold by them. The tax payable under the Act admittedly being an indirect tax, the tax burden would ordinarily fall on the consumer of rice and not on any of the intermediaries including the appellants. The impugned notification cannot, therefore, be treated as one issued against the policy of the statute. - Civil Appeal No. 1028 of 1076, & 1029, To 1035 of 1976, - - - Dated:- 4-5-1979 - UNTWALIA N.L., PATHAK R.S. AND VENKATARAMIAH E.S. JJ. M.C. Bhandare, Senior Advocate, A.K. Sen, Senior Advocate (in C.A. No. 1029 of 1976), Mrs. Sunanda Bhandare, A.N. Karkhanis, Miss Malini Poduval and G.R. Sethi, Advocates (in C.A. No. 1031 of 1976), for the appellants. Soli J. Sorabjee, Additional Solicitor-General (in C.A. No. 1028 of 1976) (Hardev Singh, Advocate, with him), for the respondents. -------------------------------------------------- The judgment of the Court was delivered by VENKATARAMIAH, J.- In these appeals by special leave, we are called upon to pronounce on the validity of section 31 of the Punjab General Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than sugarcane, foodgrains and pulses" in clause (ff) of section 2. Section 6 of the Act was repealed and substituted by a new section, which read as follows: "6. Tax-free goods.-(1) No tax shall be payable on the sale of goods specified in the first column of Schedule B and on the purchase of goods specified in the first column of Schedule C subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof and no dealer shall charge sales tax or purchase tax on the sale or purchase, as the case may be, of goods which are declared tax-free from time to time under this section. (2) The State Government after giving by notification not less than three months, notice of its intention so to do may by like notification add to or delete from Schedule B or Schedule C and thereupon Schedule B or Schedule C, as the case may be, shall be deemed to be amended accordingly." It is seen from the above provision that the turnover relating to the sale of goods mentioned in the first column of Schedule (sic) C to the Act subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above provision, the State Government issued the notification on 15th January, 1968, adding paddy and rice as items (8) and (9) in Schedule C. The result was that the turnover relating to the purchase of paddy and rice became exigible to payment of purchase tax under the Act in the hands of the purchasers with effect from 15th January, 1968. Aggrieved by the said notification, the appellants, who became liable to payment of purchase tax on the turnover relating to the purchase of paddy made by them, filed petitions under article 226 of the Constitution on the file of the High Court of Punjab and Haryana questioning the validity of section 31 of the Act, the notification dated 15th January, 1968, issued thereunder and their liability to payment of purchase tax. The principal contentions urged by the appellants before the High Court were; (1) that section 31 of the Act which authorised the State Government to amend Schedule C to the Act by adding certain items making the turnover relating to their purchases liable to tax was void on the ground that it suffered from the vice of excessive delegation of legislative power and, therefore, the notification issued thereunder was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislature can delegate the power to fix rates of tax provided there are necessary guidelines regarding such fixation on the ground that, in a modern society, taxation is one of the methods by which economic and social goals of the State can be achieved and the power to tax, therefore, should be a flexible power and capable of being easily altered to meet the exigencies of circumstances. Such delegation has been held to be not amounting to delegation of essential legislative function. In Powell v. Apollo Candle Company Limited (1885) 10 App. Cas. 282 (P.C.)., the Judicial Committee of the Privy Council was called upon to decide whether section 133 of the Customs Regulation Act of 1879 of New South Wales, which conferred the power on the Governor to impose tax on certain articles of import, was an unconstitutional delegation of legislative powers. In holding that it was not unconstitutional, the Privy Council observed: "It is argued that the tax in question has been imposed by the Governor and not by the legislature, who alone had power to impose it. But the duties levied under the Order-in-Council are really levied by the authority of the Act under which the order is issued. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State Government after giving by notification not less than one month's notice of its intention so to do by a notification after the expiry of the period of notice mentioned in the first notification to amend Schedule II to that Act, was constitutional, it was held that it was not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of the taxation laws, such as the selection of persons on whom the tax was to be levied, the rates at which it was to be charged in respect of different classes of goods and the like and that the power conferred on the State Government by section 6(2) of that Act to amend the schedule relating to exemption was in consonance with the accepted legislative practice relating to the topic. In that connection, at page 435 (pages 394-395 of 9 S.T.C.), this Court observed: "Now, 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 levied, the rates at which it is to be charged in respect of different classes of goods, and the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se for consideration. This Court held that such conferment of power on the Government to levy tax at the rates determined by it without any statutory limitation or guidance was void. This Court, however, held that after section 5 was amended by Punjab Act No. 19 of 1952 by imposing the restriction that the rates determined by the State Government should not exceed two pice in a rupee was valid as the legislature had delegated the power to the Government to determine the rates subject to the restriction mentioned above. In the course of the above decision, Subba Rao, C.J., dealing with the decision of this Court in Corporation of Calcutta v. Liberty Cinema [1965] 2 S.C.R. 477., observed: "If this decision is an authority for the position that the legislature can delegate its power to a statutory authority to levy taxes and fix the rates in regard thereto, it is equally an authority for the position that the said statute to be valid must give a guidance to the said authority for fixing the said rates and that guidance cannot be judged by stereotyped rules but would depend upon the provisions of a particular Act. To that extent, this judgment is binding on us. But we cannot go furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the 'New Despotism' of the executive, the very complexity of the modern society and the demand it makes on its Government have set in motion forces which have made it absolutely necessary for the legislatures to entrust more and more powers to the executive. Text book doctrines evolved in the 19th Century have become out of date. Present position as regards delegation of legislative power may not be ideal, but in the absence of any better alternative, there is no escape from it. The legislatures have neither the time, nor the required detailed information nor even the mobility to deal in detail with the innumerable problems arising time and again. In certain matters they can only lay down the policy and guidelines in as clear a manner as possible." When the validity of section 3-D of the U. P. Sales Tax Act, 1948, was again challenged before this Court in Hira Lal Rattan Lal v. State of U.P. [1973] 31 S.T.C. 178 (S.C.); [1973] 3 S.C.R. 502., on the very same ground, it was again upheld by this Court with the following observations: "The only remaining contention is that the delegation made to the executive under section 3-D is an excessive delegation. It is true that the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act authorises the State Government to determine the rates of tax payable on the taxable turnover of a dealer not exceeding the limit prescribed therein. Sub-section (2) of section 5 of the Act lays down the principles governing the determination of "taxable turnover". During the relevant period, sub-section (2) of section 5 of the Act read as follows: "5. (2) In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom- (a) his turnover during that period on- (i) the sale of goods declared tax-free under section 6; (ii) sales to a registered dealer of goods other than sales of goods liable to tax at the first stage under sub-section (1-A) declared by him in a prescribed form as being intended for resale in the State of Punjab or sale in the course of inter-State trade or commerce or sale in the course of export of goods out of the territory of India, or of goods specified in his certificate of registration for use by him in the manufacture in Punjab of any goods, other than goods declared tax-free under section 6, for sale in Punjab and on sales to a registered dealer of containers or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich should be treated as luxury goods, tax-free goods and goods whose purchase turnover is liable to tax in Schedule A, Schedule B and Schedule C respectively, has delegated the power to the State Government to amend Schedule A under the first proviso to sub-section (1) of section 5, Schedule B under sub-section (2) of section 6 and Schedule C under section 31 of the Act. In each of these cases, the State Government can make the amendment only after giving previous publicity to its intention to do so thus giving an opportunity to interested parties to make representations, if any. In the case of a democratic Government, this itself acts as a check on arbitrary exercise of power. At this stage, it is necessary to refer to sub-section (2-A) of section 4 of the Act and that provides that notwithstanding anything contained in sub-sections (1) and (2) of section 4, no tax on the sale of any goods shall be levied if a tax on their purchase is payable under the Act. The Act also contains the machinery for assessment and collection of tax. It follows from the scheme of the Act that no tax is payable on the sale of goods specified in the first column of Schedule B subject to the conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion independent of section 6(2), and an exemption granted thereunder is conditional and subject to any modification that might be issued under section 6(2). In this view, the impugned notification is intra vires and not open to challenge." We are of the view that the case in so far as section 31 of the Act which is also an integral part of a single enactment and which authorises the State Government to amend Schedule C to the Act cannot be different from the case which was dealt with by the Constitution Bench. If it is permissible for the legislature to authorise the State Government to convert tax-free goods into taxable ones, there is hardly any justification for holding that the State Government cannot be entrusted with the power to include goods in Schedule C making their purchase turnover taxable. It was, however, argued by Mr. M. C. Bhandare that, in the instant case, the inclusion of paddy in Schedule C to the Act was against the policy underlying the Act and, therefore, even though section 31 of the Act might be constitutionally valid, the notification issued by the State Government directing inclusion of paddy in Schedule C should be held to be outside the scope of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions depending upon the point at which the tax was levied. In support of this contention, our attention was also drawn to the observations made at page 571 (at page 445 of 20 S.T.C.) in Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 S.T.C. 430 at 445 (S.C.) ; [1967] 3 S.C.R. 557 at 571., and in State of Assam v. Ramesh Chandra Dey [1961] 12 S.T.C. 441 at 445 (S.C.); [1962] 1 S.C.R. 986 at 991. The learned counsel for the appellants contended that since the exemption from payment of sales tax accorded by the legislature under item 39 of Schedule B and under section 5(2)(a)(ii) of the Act was in respect of the transaction of sale, it was not open to the executive Government to take away the exemption by including paddy in Schedule C and since such inclusion was contrary to the express policy of the statute, section 31 of the Act must be so interpreted as not delegating the power to include paddy purchased by the appellants in Schedule C. We are, therefore, asked to hold that even though section 31 was not unconstitutional, the notification was not enforceable against the appellants. The above argument is no doubt quite attractive but we do not find any substance in it sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, complain that any exemption granted to them by the Act has been taken away. Even though the liability to pay purchase tax may be on the appellants, it is bound to have repercussions on the price at which they buy paddy and the price at which rice manufactured by them out of that paddy is sold by them. The tax payable under the Act admittedly being an indirect tax, the tax burden would ordinarily fall on the consumer of rice and not on any of the intermediaries including the appellants. The impugned notification cannot, therefore, be treated as one issued against the policy of the statute. In view of the foregoing, we hold that section 31 of the Act and the notification issued thereunder do not suffer from the vice of excessive delegation of legislative power. We may at this stage refer to one other subsidiary argument urged on behalf of the appellants. It is argued that because paddy and rice are not different kinds of goods but one and the same, the inclusion of both paddy and rice in Schedule C to the Act would amount to imposition of double taxation under the Act. There is no merit in this contention also because the assumption that paddy and rice are one and the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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