TaxTMI 
TaxTMI 
1972 (8) TMI 118
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion relating to the vires of section 8(2)(b) and section 9 of the Central Sales Tax Act has been argued. No other point has been pressed. The details of facts relating to the transactions have also been incorporated in the writ petitions in order to show that they were really outside sales and could not be treated as inter-State sales. But that question has also not been pressed and it has been definitely stated by the learned counsel for the petitioners that this question may not be decided and, if necessary, they will raise it in other appropriate proceedings. We will, therefore, confine our attention in all these petitions only to the question of the vires of section 8(2)(b) and section 9 of the Central Sales Tax Act. The relevant part of section 8 reads as follows: "8. (1) Every dealer, who in the course of inter-State trade or commerce- (a) * * * (b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3); shall be liable to pay tax under this Act,.......... (2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-Stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions. We may here quote a few passages of the learned author: "In the case of referential legislation each legislature acts independently in the exercise of its own legislative authority; in the case of delegation, the authority to enact the legislation to be incorporated is derived from the other legislature and cannot stand on its own feet." The learned author then gives an example of a valid legislation by reference as follows: "On the other hand, Parliament has enacted in the Criminal Code that a person who is qualified as a juror according to the laws in force in a province is qualified to serve as a juror in criminal proceedings in that province. The validity of this provision is beyond dispute." Laying down the test in this matter the author states as follows: "The test is this; in the absence of any federal legislation, is the provincial law a valid exercise of constitutional legislative authority? If so, then a reference to it in federal legislation cannot be delegation." In Statutes and Statutory Construction by Sutherland, Volume 2, 3rd Edition, it is stated as follows in article 5207: "There are two general types of reference statutes: statutes of specific refere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quiring guidance are only applicable to delegated legislation where the authority, which has acquired the power by delegation, has to act on behalf of the Legislature, which delegates the power. In such a case, it would be necessary for the Legislature to keep the delegate within control. But, in the case of laws passed by Legislatures with plenary powers, the laws so passed are good laws and can be adopted by other Legislatures. 8.. With regard to the contention that this was a legislation by adoption, the learned counsel for the petitioners contended that even as such it would be invalid, for Parliament at the time of passing the Act did not even know what rate would be applied in future by different States and there can be no adoption of something which did not exist at the time of adoption and which was not known. For this proposition the learned counsel relied upon Shama Rao v. Union Territory of Pondicherry[1967] 20 S.T.C. 215 (S.C.). That was a case in which the legislative authority for Pondicherry extended the Madras Sales Tax Act to Pondicherry and authorised the State Government to make it applicable on such date as the Government considered proper and the Madras Act ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....so be noted that in this case the power to enforce the Pondicherry Act was delegated to the executive and, consequently, it was the act of the executive of enforcing the Madras Act in Pondicherry at a particular date which incorporated the Madras Act into the Pondicherry legislation. As in the meanwhile amendments had been made in the Madras Act, the amended Act was incorporated into the Pondicherry legislation by an act of the delegate and not by an Act of the Legislature. To our mind, therefore, this case is distinguishable from the present one. This case is analogous to revenue laws adopting personal law of succession for some kinds of tenancies or applying Civil Procedure Code to some proceedings in the revenue courts. 9.. Another case, where the Bengal Finance (Sales Tax) Act, 1941, was extended to Delhi, came up for consideration before the Supreme Court in Mithan Lal v. State of Delhi[1958] 9 S.T C. 417 (S.C.)., and the adoption even by modification was upheld as valid. 10.. We, therefore, think that section 8(2)(b) is not an invalid piece of legislation. Even looked at from a practical point of view it was almost a necessity to enact it in that form. It was not possib....
X X X X Extracts X X X X
X X X X Extracts X X X X
....were not brought to the notice of the court'." The same view was taken by the Allahabad High Court in Ram Manohar Lohia v. State A.I.R. 1968 All. 100. 12.. With regard to section 9 of the Central Sales Tax Act the contention of the learned counsel for the petitioners was that before its amendment in the year 1969 by the Central Sales Tax (Amendment) Act (No. 28 of 1969), section 9 provided for levy of sales tax and for that levy adopted the machinery of the different State Acts and this amounted to an excessive delegation and effacement of the parliamentary powers of legislation. For the same reasons given in respect of section 8, it is held that section 9 was not invalid. It was also said that even though after the amendment the power to levy has been taken away by the amendment of section 9 in 1969, yet the amended provision is also infructuous because section 9 as originally enacted was invalid and could not be resuscitated by a subsequent amendment. The contention, therefore, is that section 9, even as amended, is invalid and no assessment can be made by virtue of that section. This argument also does not appeal to us because the Act as a whole was not still-born. The chargi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the aforesaid entries read with articles 246 and 286 of the Constitution that the legislative spheres of the Central Legislature and the State Legislature in the matter of sales tax are distinct and separate and each has exclusive jurisdiction within its own sphere. The question, therefore, arises whether it is open to the Central Legislature in exercise of its powers under entry 92-A of List I of the Seventh Schedule to leave the determination of the rate of sales tax in respect of the sales which take place in the course of inter-State trade or commerce to be determined by the State Legislature. 4.. It may here be mentioned that the validity of the aforesaid provision was upheld by a Full Bench of the Punjab and Haryana High Court in Tek Chand Daulat Rai v. Excise and Taxation Officer[1972] 29 S.T.C 585. But the learned counsel for the petitioner urged that that decision is of no help because in that case the matter was neither argued nor considered from the point of view he wished to press. The validity of this provision was also upheld by their Lordships of the Supreme Court in State of Madras v. N.K. Nataraja Mudaliar[1968] 22 S.T.C. 376 (S.C.). The learned counsel contend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-effacement in a case of legislation by reference and, therefore, it would be worth-while examining the various principles laid down for determining the scope and extent of valid delegation of legislative power. 7.. In the instant case, the main ground of attack, as pointed out above, is that the power to determine the rate of tax has been left to the State Legislature inasmuch as if the State Legislature itself chooses to determine the rate at a figure exceeding 10 per cent. in the case of intraState sales, such rate would become automatically applicable to inter-State sales under the Central Act. It has been urged that the determination of the rate of tax being an essential legislative function in the field of tax legislation cannot be delegated to another legislative body, the executive or any other authority. 8.. It would be necessary here to consider the various aspects of delegated legislation. The main reasons why delegation has become a normal feature of law-making are as under: (i) Pressure on parliamentary time. In these days of intensive legislation, Parliament can only concentrate on essentials, leaving the details to be worked out by other authorities subject ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve; it cannot include a change of policy." 11.. From the decision of their Lordships in Banarsi Das' case[1958] 9 S.T.C. 383 (S.C.)., it may be inferred that it is open to a 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 laid, the rate at which it is to be charged in respect of different classes of goods, and the like. It can, therefore, be said that rate of tax is not an essential feature of legislation relating to tax and hence can be assigned to another authority. 12.. The learned counsel for the petitioner was at pains to point out that the aforesaid observations of their Lordships in this case should not be treated as laying down an unqualified principle of law that rate of tax is not an essential feature of tax legislation and as such could be left to be determined by any other authority without any guidance or control. According to him, the delegation of the power to determine the rate of tax would be bad on the ground of excessive delegation if the upper limit is not laid down. He referred in this connection to Devi Dass Gopal Krishnan and Others v. The S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....per limit is prescribed by the Legislature but not otherwise. He tried to distinguish the decision of their Lordships in the Municipal Corporation of Delhi v. Birla Cotton Spinning and Weaving Mills, Delhi, and AnotherA.I.R. 1968 S.C. 1232. , on the ground that the case of delegation of the taxing power to a municipal corporation stands on a different footing. In that case power conferred by section 150 of the Delhi Municipal Corporation Act on the corporation to levy certain taxes without specifying any limit was upheld and their Lordships made the following observations in paragraph 27: "There is, in our opinion, a clear distinction between delegation of fixing rate of tax like sales tax to the State Government and delegation of fixing rates of certain taxes for purposes of local taxation. The needs of the State are unlimited and the purposes for which the State exists are also unlimited. The result of making delegation of a tax like sales tax to the State Government means a power to fix the tax without any limit even if the needs and purposes of the State are to be taken into account. On the other hand, in the case of a municipality, however large may be the amount required b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any other authority. 16.. The learned counsel for the petitioner pointed out that in a case under the Punjab General Sales Tax Act in M/s. Rattan Lal and Co. and Another v. The Assessing Authority, Patiala, and Another[1970] 25 S.T.C. 136 (S.C.); A.I.R. 1970 S.C. 1742., the delegation was upheld because the limits were prescribed and, therefore, it could not be said to be a case of unguided delegation to the administration: (vide paragraph 11 of the judgment). 17.. On carefully examining the various authorities on the subject it appears to me that the principle of delegation in the case of municipal corporations is not essentially different from the one applicable to delegation to other authorities. The basic principle in either case is that the rate of tax can be delegated to an authority provided the statute contains a policy or principle furnishing guidance to the delegate in exercising such powers. The following observations of their Lordships in paragraph 19 of the judgment in G.B. Modi v. Municipal Corporation, Ahmedabad, and AnotherA.I.R. 1971 S.C. 2100., are pertinent: "The position which emerged from the decisions so far, therefore, was that the power to fix rate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....question would arise whether in such a case the Legislature has abdicated its legislative function or had effaced itself. The question of abdication of the legislative function or self-effacement in a case of reference legislation must, in my view, be examined on the same principles which govern the limits of valid delegation. 21.. The learned counsel for the petitioner strongly relied on the decision of the Supreme Court in B. Shama Rao v. The Union Territory of Pondicherry[1967] 20 S.T.C. 215 (S.C.)., in respect of his contention that the impugned provision is illegal and ultra vires. In that case, their Lordships held that there was a total surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras Legislature inasmuch as under the Pondicherry Act the enactment of the Madras Legislature was adopted which was not in force at the time of enactment of the Pondicherry Act. My Lord, the Chief Justice, has pointed out the distinguishing features of that case in paragraphs 7 and 8 of his judgment. I would like to add that that case stands on a different footing also because an entire enactment which was not in force at the time of the enactm....