TMI Blog1978 (9) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... ce welfare projects with this tainted tax may be queer Gandhiana. The will to enforce dry sobriety in society and to abolish massive human squaller by fleecing the fat few, is made of sterner stuff, maybe. But matters of means and ends, of police and morality, are largely for the legislature and validity is the province of the court. We let slip the observation only because, from a certain angle, these dual grounds make odd companions and add to the credibility gap, although our focus is solely on the legality of the levy. It is better to begin with the story of the tax under challenge. The petitioners are all licensees to trade in foreign liquor including Indian made foreign liquor. They are either wholesalers or retailers and pay excise duty and other fees and taxes including sales tax under the general sales tax law which imposes a levy of 10 per cent, on sales of foreign liquor. There are also octroi levies of 10 per cent, and educational tax of 2 per cent, and these add up to a considerable burden; but the commodity taxed is foreign liquor, Indian made or other, whose consumer usually belongs to the well to do sectors. The municipalities of Punjab are governed by two e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution. The triple shapes of the fatal constitutional pathology are that (a) s. 90 (2)(b) of the Act suffers from the vice of excessive delegation or legislative abdication; (b) there are no guidelines for the exercise of the vagariously wide fiscal power of the corporation or Government which make it too unreasonable to be salvaged by Art. 19(5) and too arbitrary to be equal under Art. 14; and (c) the order itself is vitiated by multiple infirmities. The principal invalidatory charge, based on the Act, is that s. 90(4) interdicts any tax already imposed . The present tax is on sales and there is, under the general sales tax law, already a like levy on sales of foreign liquor in the State, and so the second fiscal venture is beyond Government s power. We have to consider these grounds of attack on the notification which are the emphatic submissions of Shri Tarkunde who led the arguments. There are more subsidiary submissions urged by other counsel on a lower key, though, but we have to deal with them too in due course. Briefly, they are (a) that in picking out for taxation, from the broad spectrum of luxury goods or intoxicants, foreign liquor alone, discrimination has been prac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criteria which have to go into the fiscal success of the measure. Of course, despite this forensic generosity, if there is patent discrimination in the sense of treating dissimilar things similarly or vice-versa, the court may treat the tax as suspect and scrutinise its vires more closely. In the present case, intoxicating liquids falling in the well-known category of foreign liquors form one class and a flat minimal rate of Re. 1/- per bottle has no constitutional stigma of inequality. It is so easy to conceive of innumerable taxes imposed in this manner in the daily governance of the country that illustrations are unnecessary. As excisable articles go, foreign liquor is a distinct category and absence of micro-classification within the broad genus does not attract the argument of inequality. Likewise, picking and choosing within limits is inevitable in taxation. The correct law is found in East India Tobacco Co.(1) It is not in dispute that taxation laws must also pass the test of Art 14. That has been laid down recently by this Court in Moopil Nair v. The State of Kerala. But in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No taxation without representation is a slogan with a different dimension and has nothing to do with a levy by a government controlled by an elected legislature exercising its power of taxation. We are unable to accede to the contention that representations from the residents not having been invited the taxation notification is bad in law. What is wholesome is different from what is imperative. Indeed, we are left with the two major arguments addressed by Shri Tarkunde and echoed or endorsed by other counsel. Even here, we may dispose of the submission based on the wording in s. 90(4), namely, that taxing power under section can be exercised in respect of a particular impost only if that species of tax is not already imposed . The power under s. 90(4) is permissible only if the tax is new and not already imposed. The petitioner s argument is that the tax is on sales and is clearly a sales tax. There is already a sales tax on foreign liquor at the rate of 10 per cent, under the Punjab General Sales Tax Act, 1948. So the present rupee tax is a second round in breach of the forbiddance in s. 90(4). Simple enough, if the expression not already imposed in s. 90(4) is a ban on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excessive delegation of legislative power takes us to the scheme of the Act and insight into the dynamics of municipal administration. Certain fundamentals must be remembered in this context and then the text of the provision understood in the constitutional perspective. The Founding Document of the nation has created the three great instrumentalities and entrusted them with certain basic powers-legislative, judicative and executive. Abdication of these powers by the concerned instrumentalities, it is axiomatic, amounts to betrayal of the Constitution itself and it is intolerable in law. This means that the legislature cannot self-efface its personality and make over, in terms plenary, the essential legislative functions. The legislature is responsible and responsive to the people and its representatives, the delegate may not be and that is why excessive delegation and legislative hara kiri have been frowned upon by constitutional law. This is a trite proposition but the complexities of modern administration are so bafflingly intricate and bristle with details, urgencies, difficulties and need for flexibility that our massive legislatures may not get off to a start if they must di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. It is for a Court to hold on a fair, generous and liberal construction of an impugned statute whether the legislature exceeded such limits. But the said liberal construction should not be carried by the Courts to the extent of always trying to discover a dormant or latent legislative policy to sustain an arbitrary power conferred on executive authorities. It is the duty of the Court to strike down without any hesitation any arbitrary power conferred on the executive by the legislature. Such being the basics, accepted by presidential profusion of this Court, we have to examine whether any essential legislative function has been transplanted into the hands of Government or corporation by the Act, whether the delegation itself is an entrustment of overboard power, so unguided that the delegate may run amok and do what is arbitrary, unreasonable and violative of Articles 14 and 19 of the Constitution. Taxati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther this over-broad provision accords with or exceeds the principles of delegation. Sub-section (3) leaves the rates of levy to be specified by the Government and the legislature, argue petitioners counsel, has given no indication of the minima or the maxima of such rates. Can such non-fixation of at least the maximum rate of taxation be upheld or does it enable the delegate to usurp the essential functions of the legislature ? When we proceed further to sub-section (5), the Government is clothed with the power to notify the tax which the corporation shall levy and, in exercising this power, not even the wholesome obligation of receiving representations could considering objections, contained in the Proviso to s. 90(2), is present. Can such untrammeled power, liberated from local pressures and intimate appreciation of municipal needs, be sanctioned as within the deligible ambit ? These are the substantial grounds of attack which we have to consider presently. Back to the Liberty Cinema case (supra), Sarkar, J. who spoke for the majority overruled the contention that the levy in question was a fee and held that it was a tax and addressed himself to the question of excessive del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) it was contended that the rate of tax was an essential feature of legislation and if the power to fix it were abandoned it amounted to abdication of legislative power. After an exhaustive examination of the judgments of this Court, Sarkar, J. reached the conclusion that there was clear authority that the fixing of rates may be left to the non-legislative body . The matter does not end here, since the delegate may under guise of this freedom tyrannies and exact exorbitant sums which the legislature would hardly have intended. If this possibility exists and there is no guideline given to the non-legislative body in the matter of fixation of rates, the result may be a frustration of the legislative object itself. For this reason, the Court in the Liberty Cinema (supra) case observed as axiomatic : No doubt when the power to fix rates of taxes is left to another body, the legislature must provide guidance for such fixation. The question then is, was such guidance provided in the Act ? We first wish to observe that the validity of the guidance cannot be tested by a rigid uniform rule; that must depend on the object of the Act giving power to fix the rate. It is said that the dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egation, was upheld. Delegation coupled with a policy direction is good. Counsel emphasised that the court had made a significant distinction between the local body with limited functions like a municipality and Government : 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 by it for its purposes it cannot be unlimited, for the amount that a municipality can spend is limited by the purposes for which it is created. A municipality cannot spend anything for any purposes other than those specified in the Act which creates it. Therefore in the case of a municipal body, however large may be its needs, there is a limit to those needs in view of the provisions of the Act creating it. In such circumstances there is a clear distinction between delegating a power to fix rates of tax, like the sales tax, to the State Government and delegating a power t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. But when the Government did it, it did not have any such restraint and could, therefore, run berserk. We do not appreciate this contention as we will explain at a later stage. Suffice it to say that flexibility in the form the legislative guidance may take, is to be expected. Wanchoo, C.J. explained : It will depend upon the circumstances of each statute under consideration; in some cases guidance in broad general terms may be enough; in other cases more detailed guidance may be necessary. As we are concerned in the present case with the field of taxation, let us look at the nature of guidance necessary in this field. The guidance may take the form of providing maximum rate of tax upto which a local body may be given the discretion to make its choice, or it may take the form of providing for consultation with the people of the local area and then fixing the rates after such consultation. It may also take the form of subjecting the rate to be fixed by the local body to the approval of Government which acts as a watch-dog on the actions of the local body in this matter on behalf of the legislature. There may be other ways in which guidance may be provided. But the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and fixing unreasonable rates of taxation. This is a democratic method of bringing to book the elected representatives who act unreasonably in such matters. It is however urged that s. 490 of the Act provides for the supersession of the Corporation in case it is not competent to perform or persistently makes default in the performance of duties imposed upon it by or under the Act or any other law or exceeds or abuses its power. In such a case the elected body may be superseded and all powers and duties conferred and imposed upon the Corporation shall be exercised and performed by such officer or authority as the Central Government may provide in this behalf. It is urged that when this happens the power of taxation goes in the hands of some officer or authority appointed by Government who is not accountable to the local electorate and who may exercise all the powers of taxation conferred on the elected Corporation by the Act. . . . Another guide or control on the limit or taxation is to be found in the purposes of the Act. The Corporation has been assigned certain obligatory functions which it must perform and for which it must find money by taxation. It has also been assigne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for the rate fixed by the corporation were a guideline and a control indicative of a legislative policy, that was absent in the impugned levy since the Government directly acted. Shelat, J. negatived a kindred submission: .......It is impossible to say that when a provision requiring sanction of the Government to the maximum rate fixed by the Corporation is absent, the rest of the factors which exist in the Act lose their efficacy and cease to be guidelines. Furthermore, if the Corporation were to misuse the flexibility of the power given to it in fixing the rates, the State legislature can at any moment withdraw that flexibility by fixing the maximum limit up to which the Corporation can tax. Indeed, the State Legislature has now done so by s. 4 of Gujarat Act, 8 of 1968. In view of the decisions cited above it is not possible for us to agree with counsel s contention that the Act confers on the Corporation such arbitrary and uncontrolled power as to render such conferment an excessive delegation. (1) We have no hesitation in holding that the law is wellsettled and none of the canons governing delegation of legislative power have been breached in the present case. We wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hobbling their locomotion. Their exercises are strictly overseen by the State Government, their resources are precariously dependent on the grace of the latter and their, functions are fulfilled through a chief executive appointed by the State Government. Floor-level democracy in India is a devalued rupee, Art. 40 and the evocative opening words of the Constitution, notwithstanding. Grass roots never sprout until decentralisation becomes a fighting creed, not a pious chant. What happens to Panchayats applies to municipalities. This description has critical relevance to the cases on hand because one of the propositions underlying the major arguments advanced before us is that while municipal bodies know their needs and respond to local pressures and tailor their taxes accordingly, the distant State Government is neither aware nor responsive and the impugned tax measure is bad because the pragmatic and policy guidelines of (a) the local people s welfare requirements vis-a-vis available municipal finances, and (b) people s pressurising proximacy and municipality correctional reaction to undue tax burdens are absent when the power is exercised by a remote control board niched in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control upto even supersession of the corporation itself. Even the resolutions of corporations may be suspended by Government and its proceedings annulled or modified. There is a whole army of governmental minions in the department of local self government to sit upon, check, oversee and control municipal doings that the elective element becomes a decorative parlour. This conspectus of provisions brings into bold relief the anaemic nature of municipal autonomy. Full-blooded units of self-government, reflecting full faith in decentralised democracy uninhibited by a hierarchy of bureaucrats is the vision of Art. 40. While the Gandhian goal is of a shining crescent on a starry sky the sorry reality is that our municipalities vis-a-vis government are wan like a full moon at midday. This study of the statutory scheme shows that, in large measure, municipal councils reign, municipal commissioners rule; local self government is an experiment in directed democracy by the bureaucracy, Art. 40, notwithstanding. State Governments master-mind municipal administration in broad policies and even in smaller details and legally can suspend resolutions and supersede the organ itself. Municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 17). In a sense, the general municipal administration comes under fire in the House on many occasions, including during the debate on the Governor s Address. Financial control and supervision by the legislators come up when budget proposals which contain allocation for municipal administration are presented to the House and at the time of the Appropriations Bill. Moreover, the Public Accounts Committee, the Estimates Committee and like other bodies also make functional probes into municipal administration-fiscal and other. There may be a big gap between the power of control and its actual exercise but it is also a fact that in a general way the political echelons in Government and the bureaucracy in turn are influenced in their policies by the criticisms of the municipal administration on the floor of the House and through other representations. We cannot, therefore, dismiss the legal position that there is control by the Legislature over Government in its supervision of municipal administration therefore, delegated legislation cannot be said to be uncontrolled or unchecked by the delegator. This discussion is of critical importance in view of the argument put forward by Shri Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : The legislature may also retain its control over its delegate by exercising its power of repeal. This was the basis on which the Privy Council in Cobb Co. v. Kropp(2) upheld the validity of delegation of the power to fix rates to the Commissioner Transport in that case. The learned Judge quoted the Privy Council(3) which held that the Legislature was entitled to use any agent or machinery that it considered for carrying out the object and the purposes of the Acts and to use the Commissioner for Transport as its instrument to fix and recover the licence and permit fees, provided it preserved its own capacity intact and retained perfect control over him; that as it could at any time repeal the legislation and withdraw such authority and discretion as it had vested in him, it had not assigned, transferred or abrogated its sovereign power to levy taxes, nor had it renounced or abdicated its responsibilities in favour of a newly created legislative authority and that, accordingly, the two Acts were valid, Lord Morris of Borth-y-Gest said: What they (the legislature) created by the passing of the Transport Acts could not reasonably be described as a new legislative power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso reinforces the highly centralised system of power. It is time that we considered the desirability and feasibility of building into the law-making processes a substantial amount of public participation. People s participation in the enforcement and implementation of the law is also not actively sought, sponsored or structured by the State....Equally now is the idea that there should be a social audit of major legislations by the beneficiaries or, more generally, the consumers of legal justice. ...The situation in regard to delegated legislation the volume of which is immensely greater than that of usual legislation, is even more alarming. The Indian Parliament enacted from the period 1973 to 1977 a total of 302 laws; as against this the total number of statutory orders and rules passed in the same period was approximately 25,414. Corresponding figures for States and union territories are not just available but the number of rules issued under the delegated legislation powers may well be astronomical...... Plenary powers of law-making are entrusted to elected representatives. But the political government instructed by the bureaucracy, by and large, gets bills thro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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