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TMI Blog1973 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of that court holding that the provisions of section 8(2)(b) of the Central Sales Tax Act, 1956 (hereinafter referred to as the Act), 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. Mr. A. K. Sen, appearing for the appellant, submitted that Parliament by enacting section 8(2)(b) has delegated its legislative function to fix the rate of tax leviable on the turnover of sales of goods in the course of inter-state trade coming within the purview of the sub-clause and has abdicated its legislative function in so far as it adopted the rate that might be fixed in the sales tax law of the appropriate State from time to time for taxing the local sales. Counsel submitted that fixing the rate of tax is an essential legislative function and that this function cannot be delegated without laying down the legislative policy for the guidance of the delegate. In support of this contention counsel referred to the decisions of this court on the subject. In Corporation of Calcutta v. Liberty Cinema, the validity of section 548(2) of the Calcutta Municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates as it thought fit was bad. 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 purposes of the Act would not provide sufficient guidance for the fixation of rates of tax. He pointed out the danger inherent in the process of delegation : " An overburdened Legislature or one controlled by a powerful executive may unduly overstep the limits of delegation. It may not lay down any policy at all; it may declare its policy in vague and general terms: it may not set down any standard for the guidance of the executive; it 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. " In Municipal Corporation of Delhi v. Birla Cotton Spinning and Weaving Mills, the main question was about the constitutionality of delegation of taxing powers to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come out of date." In this context it is necessary to have a clear idea of the concept of delegation. Delegation is not the complete handing over or transference of a power from one person or body of persons to another. Delegation may be defined as the entrusting, by a person or body of persons, of the exercise of a power residing in that person or body of persons, to another person or body of persons, with complete power of revocation or amendment remaining in the grantor or delegator. It is important to grasp the implications of this, for, much confusion of thought has unfortunately resulted from assuming that delegation involves, or may involve, the complete abdication or abrogation of a power. This is precluded by the definition. Delegation often involves the granting of discretionary authority to another, but such authority is purely derivative. The ultimate power always remains in the delegator and is never renounced. Willis J. said in Huth v. Clarke : " Delegation, as the word is generally used, does not imply a parting with powers by the person who grants the delegation, but points rather to the conferring of an authority to do things which otherwise that person would ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but obviously gave to that phrase a very narrow meaning; for he went on to describe it as "something so inconceivable that the constitutionality of an attempt to do anything of the kind need not be considered" and expressly said that the Dominion Parliament had as much authority to delegate as the Imperial Parliament. Duff J. also thought that an implied prohibition against, "abandonment" must be read into the Act; but for him no delegation of legislative power, however extensive, would amount to "abandonment ", since the executive in making the regulations is no more than an agent of the legislature which can always recall its authority. For him the forbidden point of "abandonment" is not reached until there is, on the part of the legislature, an intention to abandon control over the executive or an abandonment of control in fact. Despite these differences of opinion, the judges agreed in holding that there was no constitutional objection to the extremely extensive delegation contemplated by the Act, and in giving a very narrow meaning to the word "abdication". Unfortunately, In re Gray was a wartime case and the profession tends to regard wartime cases with a cynical but natura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers, Indian Legislatures had, and were intended to have, plenary powers of legislation as large and of the same nature, as the British Parliament itself. And, as already stated, it has never been doubted that the British Parliament can delegate legislative powers without laying down any policy or standard for guidance. In In re the Delhi Laws Act, 1912, the question was elaborately dealt with and all the relevant rulings were considered, but it is difficult to extract any binding principle from that decision. While dealing with this decision in Kathi Raning Rawat v. State of Saurashtra, Patanjali Sastri C.J. said : "While undoubtedly certain definite conclusions were reached by the majority of the judges who took part in the decision in regard to the constitutionality of certain specified enactments, the reasoning in each case was different and it is difficult to say that any particular principle has been laid down by the majority which can be of assistance in the determination of other cases." But that decision is generally held to have laid down the principle that the legislature should not abdicate its essential legislative function by transferring it and thus efface itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... summarized by Schwartz : " ... If standards such as those contained in the Renegotiation and Communications Acts are upheld as adequate, it becomes apparent that the requirement of standards has become more a matter of form than substance. Provided that there is no abdication of the congressional function, as there was in the Schechter case, the enabling law will be upheld, even though the only standard which the court can find is so broad as to be almost illusory. " The position in Australia is also practically the same. In Victorian Stevedoring and General Contracting Co. Pvt. Ltd. v. Dignan, Dixon J. said that the objection to delegation of legislative power was not based on the ground that the doctrine of separation of powers forbade such delegation. He said that when in Huddart Parker Ltd. v. Commonwealth, the judges anwered the objection against delegation of legislative power by observing that Roche v. Kronheimer upheld the validity of such a delegation, it really meant that the time had gone by for assigning to the separation of powers in the Australian Constitution, the effect of restraining Parliament from making a law conferring the power of an essentially legislative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment". Patanjali Sastri J. was of the view that delegation of legislative authority is different from the creation of a new legislative power. In the former, the delegating body does not efface itself but retains its legislative power intact and merely elects to exercise such power through an agency or instrumentality of its choice. In the latter there is no delegation of power to subordinate units, but a grant of power to an independent and co-ordinate body to make laws operative of their own force. For the first, no express provision authorising delegation is required. In the absence of a constitutional inhibition, delegation of legislative power, however extensive, could be made so long as the delegating body retains its own legislative power intact. Mahajan J. was of the opinion that the legislature cannot substitute the judgment, wisdom and patriotism of any other body, for those to which alone the people have seen fit to confide this sovereign trust and that the view that unless expressly prohibited a legislature has a general power to delegate its legislative functions to a subordinate authority is not supported by authority or principle. Mukherjea J. took the view that it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislative power or separate legislative body armed with general legislative authority (see R. v. Burah). Nor did the Queensland Legislature 'create and endow with its own capacity a new legislative power I not created by the Act to which it owes its own existence' (See In re, Initiative and Referendum Act)." The point to be emphasized--and this is rather crucial--is the statement of their Lordships that the legislature preserved its capacity intact and retained perfect control over the Commissioner for Transport inasmuch as it could at any time repeal the legislation and withdraw the authority and discretion it had vested in him and, therefore, the legislature did hot abdicate its functions. Duff J., said in In re Gray : " There is no attempt to substitute the executive for Parliament in the sense of disturbing the existing balance of constitutional authority... The powers granted could at any time be revoked and anything done under them nullified by Parliament, which Parliament did not, and for that matter could not, abandon any of its own legislative jurisdiction. " Delegation of " law-making " power, it has been said, is the dynamo of modern Government. Delegation by the Leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is provided or policy laid down, the fact that the delegate has a representative character could make no difference in principle. Seeing that by section 8(2)(b) of the Act Parliament has not delegated any power to the State Legislatures, the question is : Has Parliament abdicated its legislative function, when it chose to adopt the rate to be fixed by the State Legislatures for taxing local sales ? Counsel said that when the State Legislature makes its sales tax law or amends or alters it from time to time, it does not act as delegate of Parliament. It acts as a sovereign legislature with plenary powers of legislation within its sphere and while legislating in that sphere, it is not subject to any guidance or control from any outside agency including Parliament, and the rates of tax which may be fixed by the State Legislature from time to time would, therefore, be rates for taxing the local sales having nothing to do with the formulation of any policy by Parliament, and Parliament would be adopting those rates for the Central tax even without being aware of what those rates might be when fixed in future. Counsel relied heavily on Shama Rao v. Union Territory of Pondichery in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh it was not and could not be aware what the provisions of the amended Act would be. There was, in these circumstances, the court said, a total surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras Legislature. The court referred with approval to the oft-quoted dictum of Lord Haldane in In re Initiative and and Reference Act that the legislature of a province in Canada could not create and endow with its own capacity a new legislative power not created by the Act to which it owed its own existence and the passage from Cooky on Constitutional Law, 4th Ed., 138, to the effect : " This high prerogative has been entrusted to its own wisdom, judgment and patriotism, and not to those of other persons, and it will act ultra vires if it undertakes to delegate the trust, instead of executing it. " It is prertinent to note that in almost all cases the argument against delegation was built upon the dictum of Lord Haldane but that has never stood in the way of the courts upholding the most extensive delegation. Bora Laskin, after referring to the dictum of Lord Haldane, said : " This oft-quoted passage remains more a counsel of caution than a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s kind is incompatible with a federal State. In his book, Canadian Constitutional Law, 3rd Ed., Bora Laskin has this much to say on the case : " It is important, however, to appreciate the limits of the doctrine affirmed by the Nova Scotia Inter-delegation case. Properly understood, the case does not prohibit either Parliament or a Provincial Legislature from incorporating referentially into the valid legislation of one the future valid enactments of the other. Illustrations of this kind of anticipatory incorporation by reference may be seen in the Cr. Code, s. 534 (fixing the qualifications of jurors in criminal proceedings as those prescribed by 'the laws in force for the time being in a province'); and in the Summary Convictions Act, R.S.O. 1960, c. 387, s. 3 (making applicable to provincial summary conviction proceedings certain provisions of the Cr. Code 'as amended or re-enacted from time to time'). There is no unconstitutional delegation involved where there is no enlargement of the legislative authority of the referred legislature, but rather a borrowing of provisions which are within its competence and which were enacted for its own purposes, and which the referring legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of each legislature was wholly discreet and independent of the other, a relation incompatible with delegation; and that it was a case of adoption of a circumscribed nature in that only a single right was involved, namely, the private right of maintenance between husband and wife; that the right touched a resident of each country; that the obligation of support was recognized by both; and that the material matters of adoption went to the grounds of defence. He was of the view that there was no attempt to permit another legislature to enact generally laws for a province which would obviously be an abdication. He said that the adoption of rules and procedure from time to time in force in another jurisdiction was exemplified by R. 2 of the Exchequer Court; and the adoption of various provisions of the Criminal Code by Provincial Statutes was seen in the Summary Convictions Act, R.S.O. 1950, c. 379, s. 3. According to the learned judge, from the standpoint of legislative competency, there was no difference between the adoption of procedure and that of substantive law, that in each case legislation was enacted by reference to the legislation as it may from time to time be made by ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Tamil Nadu v. Sitalakshmi Mills Ltd. Civil Appeals Nos. 2547- 2549 of 1969 and 105-106 of 1970 the objectives which Parliament wanted to achieve by adopting the rate of tax in the appropriate State for taxing the local sales. And for attaining these objectives Parliament could not have fixed the rate otherwise than by incorporating the rate to be fixed from time to time by the appropriate State Legislature in respect of local sales. It may be noted that in so far as inter-State sales are concerned, the Central Sales Tax Act, by section 9(2) has adopted the law of the appropriate State as regards the procedure for levy and collection of the tax as also for imposition of penalties. 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 fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods furnishes to the prescribed authority in the prescribed manner-- (a) a declaration duly fiiled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or (b) 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 the Government." It has been argued on behalf of the appellants that the fixation of rate of tax is a legislative function and as Parliament has, under section 8(2)(b) of the Act, not fixed the rate of Central sales tax but has adopted the rate applicable to the sale or purchase of goods inside the appropriate State in case such rate exceeds 10 per cent., Parliament has abdicated its 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 ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of 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 non-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 rate of 10 per cent. In case, however, the rate of local sales tax for such 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 10 per cent., the unregistered dealer who purchases goods in the course of inter-State trade would be in a better position than an intrastate 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 apparently 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever be higher, a definite legislative policy can be discerned in such a law, the policy being that the rate of Central sales tax should in no event be less than the rate of local sales tax. In such a case, it is, as already stated above, not possible to mention the precise figure of the maximum rate of Central sales tax in the law made by Parliament because such a rate is linked with the rate of local sales tax which is prescribed by the State Legislatures. The Parliament in making such a law cannot be said to have indulged in self-effacement. On the contrary, 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 local sales tax in the appropriate 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 Central sales tax and to plug possible loopholes. There is, in our opinion, a marked diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be aware what the provisions of the amended Act would be. There was, according to the court, in these circumstances a total surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras Legislature. It would appear from the above that the 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 is involved in the present case because of Parliament having adopted in one particular respect the rate of local sales tax for the purpose of Central sales-tax. Indeed, as mentioned earlier, the adoption of the focal 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 such 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 Pondicherry case the provisions of the Madras Act along with the subsequent amendments were made applicable to an area, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articles and properties to be taxed, the system of assessment to be adopted and the exemptions, if any, to be granted. Such a resolution has to be sanctioned by the Central Government, and, thereafter, the corporation has to pass a second resolution determining, subject to the maximum rate, the actual rate of tax. Wanchoo C.J., Hidayatullah, Sikri, Ramaswami and Shelat JJ. upheld the validity of the above section, while Shah and Vaidialingam JJ. dissented and held that section 150(1) of the Act was void because of excessive delegation of legislative authority to the corporation. Wanchoo C. J. 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 could not be said to amount to excessive delegation. After referring to the earlier authorities, Wanchoo C.J., speaking, for himself and Shelat 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 formulation as a binding rule of conduct and can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t' in section 113. The Act has pointed out the objectives or the results to be achieved, and taxation can be levied only for the purpose of achieving the objectives or the results. This, in my view, is sufficient guidance especially to a self-governing body like the Delhi Municipal Corporation. It is not necessary to rely on the safeguards mentioned by the learned Chief justice to sustain the delegation. " Shah J. (as he then was), speaking for himself and Vaidialingam 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 allotted field ; (ii) Essential legislative function cannot be delegated by the legislature, that is, there can be no abdication 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 legislation may however be entrusted by the legislature to another body of its choice, provided there is enunciation of policy, principles or standards either expressl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted excessive delegation of legislative authority to the Corporation. It would appear from the above that not only was the constitutional validity of section 150 of the Delhi Municipal Corporation Act upheld by the majority, the majority of the judges also expressed the view that it was essential for the legislature to lay down the legislative policy and standards before it could delegate the task of subordinate legislation to another body. We find ourselves unable to agree with the view, which has been canvassed during the 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 laissez--faire has been given a go-by and large and comprehensive powers are 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 legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being the joint work of the legislator and the "subordinate power-holder". In the latter case, he, says, the legislator "sketches out a sort of imperfect mandate which he leaves it to the subrdinate holder to fill up". To economise its own time and to take advantage of expert skill in adminstration Parliament is content to lay down principles and to leave the details (frequently experimental or requiring constant adjustment in the light of experience) to some responsible minister or public body: (see Foreword by Sir Cecil Carr to Hewitt's. The Control of Delegated Legislation, 1953 Ed.). The Constitution, as observed by this court in the case of Devi Dass Gopal Krishnan v. State of Punjab, confers a power and imposes a duty on the legislature to make laws. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct. Obviously it cannot abdicate its functions in favour of another. But, in view of the multifarious activities of a welfare State, it cannot presumably work out all the details to suit the varying aspects of a complex situation. It must necessarily delegate the working out of details to the executive or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standard which is enacted into a rule of law, it can leave the task of subordinate legislation like the making of rules, regulations or bye-laws which by its very nature is ancillary to the statute to subordinate bodies. The subordinate authority must do so within the framework of the law which makes the delegation, and such subordinate legislation has to be consistent with the law under which it is made and cannot go beyond the limits of the policy and standard laid down in the law. As long as the legislative policy is enunciated with sufficient clearness or a standard is laid down, the courts should not interfere with the discretion that undoubtedly rests with the legislature itself in determining the extent of delegation necessary in a particular case: (see observations of Wanchoo C. J. in Municipal Corporation of Delhi v. Birla Mills ). In Harishankar Bagla v. State of Madhya Prdesh, this court dealt with the validity of clause 3 of the Cotton Textile (Control of Movement) Order, 1948, promulgated by the Central Government under section 3 of the Essential Supplies (Temporary Powers) Act, 1946. While upholding the validity of the impugned clause, this court observed that the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of tax is a legislative power but if the legislature lays down the legislative policy and provides the necessary guidelines, that power can be delegated to the executive." It would appear from the above that the view taken by this court in a long chain of authorities is that the legislature in conferring power upon another authority to make subordinate or ancillary legislation must lay down policy, principle or standard for the guidance of the authority concerned. The said view has been affirmed by Benches of this court consistin of seven judges. Nothing cogent, in our opinion, has been brought to our notice as may justify a departure from the said view. The binding effect of that view cannot be watered down by the opinion of a writer, however eminent he may be, nor by observations in foreign judgments made in the context of the statutes with which they were dealing. Regarding the subject of delegation, it has been observed on page 228 of Cooley's Constitutional Limitations, vol. I, 8th edition : "The maxim that power conferred upon the legislature to make laws cannot be delegated to any other authority does not preclude the legislature from delegating any power not legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e limits of power delegated to an administrative agency, or if those limits are too broad, its attempt to delegate is a nullity. We are also unable to subscribe to the view that if the legislature can repeal an enactment, as it normally can, it retains enough control over the authority making the subordinate legislation and, as such, it is not necessary for the legislature to lay down legislative policy, standard or guidelines in the statute. The acceptance of this view would lead to startling results. Supposing 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 an officer mentioned in the enactment. Can it be said that there has been no excessive delegation of legislative power even though Parliament omits to lay down in the statute any guideline or legislative policy for the making of such criminal law ? The vice of such an enactment cannot, in our opinion, be ignored or lost sight of on the ground that if Parliament does not approve the law made by the officer concerned, it can repeal the enactment by which that officer was authorised to make the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d legislation. The effect of the impugned legislation had been brought out clearly in the judgment of Stable J. and the Judicial Committee quoted with approval the following passage from that judgment: " The Commissioner has not been given any power to act outside the law as laid down by Parliament. Parliament has not abdicated from any of its own powers. It has laid down a framework, a set of bounds, within which the person holding the office created by Parliament may grant, or refrain from granting licences, and fix, assess, collect or refrain from collecting fees which are taxes. " The above passage shows that the Judicial Committee expressly took note of the fact that the impugned legislation had laid down the framework and set of bounds within which the authority holding the office could act. The above case cannot, therefore, be an authority for the proposition that it is not necessary for Parliament to lay down a framework and set of bounds within which a person authorised by an enactment could act. We have been referred to the literal meaning of the word "abdication" and it has been argued that even if the legislature does not lay down any guidelines, policy or standard f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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