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TMI Blog2003 (5) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act and the Rules made thereunder it shall grant to the applicant a certificate of authorisation in the prescribed form which shall specify the class or classes of goods for purposes of subsection (1) of section 3 and the period for which it shall remain valid. (3) A certificate of authorisation granted under this section shall remain valid for a period of five years from the date of completion of effective steps for setting up the industrial unit in respect of which the certificate is granted: Provided that the authority issuing the certificate may, if he is satisfied on application made in this behalf, extend the validity of the certificate till the expiry of five years from the commencement of production by the industrial unit in respect of which the certificate is granted. (4) No certificate of authorisation shall be granted under subsection (2) except in respect of such raw materials as may be prescribed. (5) A certificate of authorisation granted under this section may,- (a) be amended by the authority granting it if he is satisfied either on the application of the holder or, where no such application has been made, after due notice to the holder, that by reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the purpose of tax exemption. 5.. Section 3(1) of the Act of 1986, quoted hereinbefore, provides that no dealer shall be liable to pay any tax in respect of sale of any goods to a person possessing a valid authorisation certificate. Proviso to sub-section (1) of section 3 provides for refund of the tax already paid in respect of any goods sold or purchased during the period from 15th day of October, 1982 to the commencement of the Act on production of authorisation certificate. Sub-section (2) of section 4 lays down the provisions for issuance of certificate of authorisation, and sub-section (3) provides that a certificate issued under sub-section (2) shall remain valid for a period of five years subject to extension. Subsection (4) provides for the rule-making power enabling the State Government to specify the raw materials in order to exclude them from tax exemption. In pursuance of this power under sub-section (4) of section 4, the State Government framed the Rules of 1988 and the provisions in rule 2(f) as quoted above have been made to exclude coal and other commodities from being considered as a raw material for the purpose of sales tax exemption. The Rules of 1988 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n including coal. Mr. Baruah further argued that the objects and reasons of the Act clearly show that it was enacted with a view to grant tax concession on selective basis to new industrial units, and for this purpose, delegated powers to the State Government to frame Rules excluding any raw material from the net of tax concession. Mr. Baruah further submitted that "coal" has all along been a taxable item and, as such, its exclusion from the net of tax concession, being in tune with the law in force, cannot be deprecated as arbitrary and unreasonable. 8.. First let us examine the provisions of sub-section (4) of section 4. Sub-section (4) provides that no certificate of authorisation shall be granted under sub-section (2) except in respect of such raw materials as may be prescribed. There is no ambiguity in the language used. Powers have been given to the rule-making authority to exclude any raw material from the net of tax concession. The question, therefore, is whether this delegation is permissible under law? 9.. There is no dispute that the Act of 1986 is a special piece of legislation intended to give effect to the Industrial Policy of 1982 for a period of five years from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is not required to lay down any policy, but is required to take a decision on overall consideration of the industrial and fiscal scenario prevailing in the State. It was not reasonably practicable on the part of the Legislature to specify in details the raw materials to be excluded. The honourable Supreme Court, at para 20 of the aforesaid judgment (Khambhalia Municipality AIR 1967 SC 1048) observed as follows: "20. A declaration under section 9(1) that a local area shall be a nagar or a gram is a legislative function. As stated on several occasions by this Court an essential legislative function consists in the determination of the legislative policy and its formulation as a binding rule of conduct (Cf Rajnarain Singh v. Chairman, Patna Administration Committee [1955] 1 SCR 290 and Delhi Laws Act case [1951] SCR 747). Such a function cannot be surrendered or delegated in favour of another authority or agency for the Constitution entrusts the legislative function to the Legislatures. In view, however, of the diverse activities of a modern State it is recognised that a Legislature cannot be expected to work out all the details of a complex statute such as the instant Act. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Act, 1956 as amended in 1981 state any policy to guide the rule-making authority. We have earlier referred to the observations of Mukerjea, J., in the Delhi Laws case [1951] SCR 747. That the Legislature can formulate a policy as broadly and with as little or as much details as it thinks proper and may delegate the rest of the legislative work to a subordinate authority who will work out the details within the framework of the Policy. In Harishankar Bagla case AIR 1954 SC 465 one of the questions for decision was whether section 3 of the Essential Supplies (Temporary Powers) Act, 1946 amounts to delegation of legislative power outside the permissible limits. It was held that Legislature had laid down a legislative principle which was 'maintaining or increasing supplies of any essential commodity', and 'Securing their equitable distribution and availability at fair prices'. That statement was held as offering sufficient guidance to the Central Government in exercising its powers under section 3. In the instant case the policy as stated in the Preamble of the Amendment Act is that 'for securing the interests of the life Insurance Corporation of India and its policy-holders and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment. The rule was laid before the State Legislature and there is nothing on record to show that the Legislature disagreed with the Rules framed, or suggested any change. Exclusion of coal, which has all along been subjected to sales tax, therefore, cannot be said to be arbitrary and without reasonable basis. The State Government had to take a decision under the provisions of the Act as to the items and the period for which exemption would continue. In the process, coal has been excluded. 14.. Dr. Saraf argued that rule 2(f) excludes coal from the purview of tax concession for a period prior to the commencement of the Act and, besides, it seeks to obliterate the statutory provisions of tax concession given by the Legislature in the proviso to sub-section (1) of section 3. According to Dr. Saraf, the retrospectivity of the provisions of rule 2(f) is impermissible. 15.. The Act was brought into force with effect from August 1, 1988. The Rules framed in the year 1988 was also brought into force with effect from August 1, 1988. There is, therefore, no retrospectivity as such. However, the rule affects a situation prevailing prior to the commencement of the Act. Apparently this sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trix. In that case, provisions of section 5 of the Punjab General Sales Tax Act, 1948 were in challenge for unguided delegation of rule-making power. Section 5 of the Act provided for levy of tax every year on the taxable turnover of a dealer at such rates as the State Government might direct. The honourable Supreme Court declared section 5 void on the principle that the Legislature practically effaced itself in the matter of fixation of rates without any guidance. The ratio available is not applicable in the present case. The power to identify and specify the raw materials in respect of which tax concession is to be given cannot be equated with the powers to fix the rates of taxation. 17.. The ratio available in India Carbon v. State of Assam [1995] 96 STC 636 (Gauhati); 1992 (1) GLR 82, for the same reason is also not applicable in the present case. The honourable High Court held that the State Legislature cannot impose tax on the raw petroleum coke and calcinated petroleum coke contrary to the provisions of clause (a) of section 15 of the Central Sales Tax Act, 1956. The provisions of the Act in hand is not in clash with the Central legislation. 18.. Legislation directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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