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GWALIOR RAYON SILK MFG. (WVG.) CO. LTD. vs. ASSISTANT COMISSIONER OF SALES TAX &
ORS.

SUPREME COURT OF INDIA

A. N. Ray, C.J., H.R. Khanna, K. K. Mathew, A. Alagiriswami & P. N. Bhagwati JJ.

Civil Appeals Nos. 212-215 of 1973

Decided on 21st December, 1973

Counsel appeared

A. K. Sen & R. V. Patel, Biswarup Gupta, R. N. Jhunjhuwala & U. K. Khaitan, for the Appellants : I. N. Shroff, B.
Sen, S.P. Nayar, for the Respondent

MATHEW, J.:

These appeals are preferred on the basis of certificates granted by the High Court of Madhya Pradesh under Art.
133(1)(c) of the Constitution from a common judgment of that Court holding that the provisions of s. 8(2)(b) of the
Central ST Act, 1956 (herein-after referred to as the Act), do not suffer from the vice of excessive delegation and

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are, therefore, immune from attack on the ground that Parliament has abdicated its essential legislative function in
enacting them.
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Mr. A. K. Sen, appearing for the appellants, submitted that Parliament by enacting s. 8(2)(b) has delegated its
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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
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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
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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.
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In Corporation of Calcutta vs. Liberty Cinema (1965) 2 SCR 477 : AIR 1965 SC 1107, the validity of s. 548(2) of
the Calcutta Municipal Act, 1951, which empowered the Corporation to levy fees "at such rates as may from time
to time be fixed by the Corporation" was challenged on the ground of excessive delegation as it provided no
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guidance for the fixation of the amount. The majority upheld the provision relying on the decision in Banarsi Das
vs. State of Madhya Pradesh (1958) 9 STC 388 : (1959) SCR 429 (SC) holding that the fixation of rates of tax not
being an essential legislative function could be validly delegated to a non-legislative body, but observed that, when
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it was left to such a body, the legislature must provide guidance for such fixation. The Court found the guidance in
the monetary needs of the Corporation for carrying out the functions entrusted to it under the Act.
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In Municipal Board, Hapur vs. Raghuvendra Kripal (1966) 1 SCR 950 AIR 1966 SC 693, the validity of the U. P.
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Municipalities Act, 1916, was involved. The Act had empowered the municipalities to fix the rate of tax and after
having enumerated the kinds of taxes to be levied, prescribed an elaborate procedure for such a levy and also
provided for the sanction of the Government. Sec. 135(3) of the Act raised a conclusive presumption that the
procedure prescribed had been gone through on a certain notification being issued by the Government in that
regard. This provision, it was contended, was ultra vires because there was an abdication of essential legislative
functions by the legislature with respect to the imposition of tax inasmuch as the State Government was given the
power to condone the breaches of the Act and to set at naught the Act itself. This, it was contended, was an indirect
exempting or dispensing power. Hidayatullah, J., speaking for the majority, said that regard being had to the
democratic set-up of the municipalities which need the proceeds of these taxes for their own administration, it is
proper to leave to these municipalites the power to impose and collect these taxes. He further said that, apart from
the fact that the Board was a representative body of the local population on whom the tax was levied, there were

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other safeguards by way of checks and controls by Government which could veto the action of the Board in case it
did not carry out the mandate of the legislature.
In Devi Dass Gopal Krishnan vs. State of Punjab (1967) 20 STC 430 : (1967) 3 SCR 557 (SC), the question was
whether s. 5 of the East Punjab General ST Act, 1948, which empowered the State Government to fix sales tax at
such rates 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 vs. Birla Cotton Spinning & Weaving Mills (1968) 3 SCR 251 : AIR 1968 SC
1232, the main question was about the constitutionality of delegation of taxing powers to municipal corporations.
The Delhi Municipal Corporation Act (66 of 1957), by s. 113(2), had empowered the Corporation to levy certain
optional taxes. Under s. 150, power was given to the Corporation to define the maximum rate of tax to be levied,
the classes of persons and the description of articles and property to be taxed, the system of assessment to be
adopted and the exemptions, if any, to be granted. The majority of the Court held the delegation to be valid.

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Wanchoo C.J. observed that there were sufficient guidance, checks and safeguards in the Act which prevented

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excessive delegation. The learned Chief Justice observed that statements in certain cases to the effect that the
power to fix rates of taxes is not an essential legislative function were too broad and that "the nature of the body to
which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient
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guidance in the matter of delegation". According to the learned Chief Justice, the fact that delegation was made to
an elected body responsible to the people including those who paid taxes provided a great check on the elected
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councillors imposing unreasonable rates of tax. He then said : "The guidance may take the form of providing
maximum rates of tax up to which a local body may be given the discretion to make its choice, or it may take the
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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.
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There may be other ways in which guidance may be provided."

6. In Sita Ram Bishambhar Dayal vs. State of U. P. (1972) 29 STC 206 : (1972) 2 SCR 141 (SC), s. 3-D(1) of the
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U. P. ST Act, 1948, had provided for levying taxes at such rates as may be prescribed by the State Government not
exceeding the maximum prescribed therein. Hegde, J., speaking for the Court, observed : "However much one
might deplore the ‘New Despotism' of the executive, the very complexity of the modern society and the demand it
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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
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of date."
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7. 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.

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8. Willis J. said in Huth vs. Clarke (1890) 25 QBD 391 (QB) : "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 have to do himself . . . . It is never used by legal writers,
so far as I am aware, as implying that the delegating person parts with his power in such a manner as to denude
himself of his rights."

9. See also John Willis, "Delegatus non potest delegare 21 Canadian Bar Review 257."

10. If this essential nature of the concept of delegation is kept in mind, it is not difficult to understand the principle
of the leading decisions on the question of delegation of legislative power and the theory of abdication.

11. In Hodge vs. Queen (1883) 9 App. Cases 117 (PC), the Privy Council said that s. 92 of the British North
America Act conferred powers not in any sense to be exercised by delegation from or as agents of the Imperial
Parliament, but authority as plenary and as ample within the limits prescribed by s. 92 as the Imperial Parliament in
the plenitude of its power possessed and could bestow and that, within these limits of subjects and area the local
legislature is supreme, and has the same authority as the Imperial Parliament, or the Parliament of the Dominion
would have had under like circumstances to confide to a municipal institution or body of its own creation authority
to make bye-laws or resolutions as to subjects specified in the enactment, and with the object of carrying the
enactment into operation and effect.

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12. The main argument in the case was that the delegation of a power to make regulation ancillary to legislation

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might be intra vires but for a legislature to pass a skeleton legislation and to empower the Government to clothe the
bare bones was not delegation but abdication, as that would create and endow with its own capacity a new
legislative power not created by the British North America Act to which it owes its existence.
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13. In 1918, nearly forty years after Hodge vs. Queen (supra), the theory of "abdication" was raised in In re Gray
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57 SCR 150, where the Supreme Court of Canada upheld an Act but the Judges did not agree in their reasoning for
so holding. The Act was called the "Dominion War Measures Act" which empowered the Governor-General to
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make "such regulations as he may by reason of the existence of real or apprehended war . . . deem necessary or
advisable for the security, defence, peace, order and welfare of Canada." The argument was that the legislation
transferred legislative power of the Dominion Parliament to the executive authority. Anglin, J. thought that the
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British North America Act forbade "complete abdication" 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
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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
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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
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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
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the word "abdication".

14. Unfortunately, In re Gray (supra) was a wartime case and the profession tends to regard wartime cases with a
cynical but natural suspicion.

15. In In re Initiative & Referendum Act (1919) AC 935 (PC), Viscount Haldane said that by s. 92 of the British
North America Act, legislative power in a Province is conferred only upon its legislature and went on to make a
statement which has often been quoted : "No doubt a body, with a power of legislation on the subjects entrusted to
it so ample as that enjoyed by a Provincial legislature in Canada, could, while preserving its own capacity intact,
seek the assistance of subordinate agencies, as . . . . in Hodge vs. Queen (supra) . . . . (but) it does not follow that it
can create and endow with its own capacity a new legislative power not created by the Act to which it owes its own
existence."

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16. In Shannon vs. Lower Mainland Dairy Products Board (1938) AC 708 (PC), the usual objection was made that
"in the present case there is practically a surrender by the Provincial legislature of its legislative responsibility to
another body" and as usual Lord Haldane's dictum was cited. The Privy Council did not even call on the Attorney-
General for British Columbia for an answer and dealt with the objection in the following pithy sentences of Lord
Atkin : "Within its appointed sphere the Provincial legislature is as supreme as any other Parliament ; and it is
unnecessary to try to enumerate the innumerable occasions on which legislatures, Provincial, Dominion and
Imperial, have entrusted various persons and bodies with similar powers to those contained in this Act."

17. Now it is well known that the English Parliament may, by legislation, give to any body of its own choosing, the
power to modify or add to a given Act of Parliament (the legality of all English statutory rules and orders derives
from this).

18. In R. vs. Burah (1878) LR 5 IA 178 : 3 App. Cases 889 ILR 4 Cal. 172 (PC), the Privy Council held that the
Indian legislature was in no sense an agent or delegate of the British Parliament, that within the limits of its
powers, the Indian legislature had plenary powers of legislation as wide and of the same nature as those of the
British Parliament, and that the plenary powers of legislation carried with them the power to legislate absolutely or
conditionally. The Privy Council did not require as a prerequisite to a valid delegation of legislative power that the
law must lay down a policy or standard ; nor did it do so in any other case of delegated legislation. Indeed, such a
requirement is opposed to the principle affirmed by it that within the limits of their 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

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without laying down any policy or standard for guidance.

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19. In In re the Delhi Laws Act, 1912 (1951) SCR 747 : AIR 1951 SC 332, 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.
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While dealing with this decision in Kathi Raning Rawat vs. State of Saurashtra (1952) SCR 435 : AIR 1952 SC
123, Patanjali Sastri C. J. said : "While undoubtedly certain definite conclusions were reached by the majority of
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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
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majority which can be of assistance in the determination of other cases."

20. But that decision is generally held to have laid down the principle that the legislature should not abdicate its
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essential legislative function by transferring it and thus efface itself.

21. In Municipal Corporation of Delhi vs. Birla Cotton Spinning & Weaving Mills (supra), already referred to,
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Sikri J. (as he then was), in his concurring judgment, took the view that there was "adequate guide or policy in the
expression ‘purposes of the Act' in s. 113", but that it was not necessary to rely on the safeguards mentioned by
Wanchoo C. J. in his judgment to sustain the delegation. He said : "Apart from authority, in my view, Parliament
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has full power to delegate legislative authority to subordinate bodies. This power flows, in my judgment, from Art.
246 of the Constitution. The word ‘exclusive' means exclusive of any other legislature and not exclusive of any
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other subordinate body. There is, however, one restriction in this respect and that is also contained in Art. 246.
Parliament must pass a law in respect of an item or items of the relevant list. Negatively, this means that
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Parliament cannot abdicate its functions. It seems to me that this was the position under the various Government of
India Acts and the Constitution has made no difference in this respect. I read [1883] 9 AC 117 and [1885] 10 AC
282 as laying down that legislatures like Indian legislatures had full power to delegate legislative authority to
subordinate bodies. In the judgments in these cases no such words as ‘policy', ‘standard' or ‘guidance' is
mentioned."

22. In Lichter vs. United States 334 US 742, the Supreme Court upheld the validity of the Renegotiation Act. That
Act provided for the renegotiation of war contracts and authorised administrative officers to recover profits which
they determined to be excessive ; such profits being defined to mean "any amount of a contract or a sub-contract
price which is found as a result of renegotiation to represent excessive profits" which means, in other words, that
excessive profits mean excessive profits. The Court repelled the challenge on the ground of delegated legislation
by saying : "It is not necessary that Congress supply administrative officials with a specific formula for their

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guidance in a field where flexibility and the adaptation of the congressional policy to infinitely variable conditions
constitute the essence of the program. The statutory terms ‘excessive profits' in the context was a sufficient
expression of legislative policy and standards to render it constitutional."

23. The position, so far as U. S. A. is concerned, has been summarized by Schwartz "American Administrative
Law", 2nd ed., pp. 41-42 : ". . . 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."

24. The position in Australia is also practically the same. In Victorian Stevedoring & General Contracting Co. (P)
Ltd. vs. Dignan (1931) 46 CLR 73, 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. vs. Commonwealth (1931) 44 CLR 492, the Judges anwered the objection against delegation
of legislative power by observing that Roche vs. Kronheimer (1921) 29 CLR 329 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 character on the executive. While logically or theoretically legislative power belonged exclusively to
Parliament, the power of Parliament to authorise subordinate legislation was based more upon the usages of British
legislation and to the theory of English law and whatever may be the rationale, the decision in Roche vs.

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Kronheimer (supra) must be adhered to. And according to that judgment " the true view is that legislative power in

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itself includes the power of delegation" (see also Wynes, Legislative, Judicial and Executive Powers, 4th ed., 118).

25. In the ultimate analysis, what is prohibited, according to Subba Rao C. J. in Devi Dass Gopal Krishnan vs.
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State of Punjab (supra) is the conferment of arbitrary power by the legislature upon a subordinate body without
reserving to itself control over that body and the self- effacement of legislative power in favour of another agency
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either in whole or in part. In other words, the legislature should not abdicate its essential function. The question to
be asked and answered then is, when does a legislature abdicate its legislative function ?
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26. The concept of "abdication" seems no less vague, fluctuating and uncertain than the "transfer to others (of) the
essential legislative functions" banned by the Supreme Court of the United States in Panama Refining Co. vs. Ryan
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293 US 388. To Lord Haldane, a legislature does not "abdicate" unless it withdraws from the field and surrenders
its responsibility therefor. But, in the eyes of some other Judges, there seems to be "abdication" whenever a
legislature, while remaining in the field and retaining its responsibility therefor, entrusts to others the formulation
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of policy otherwise than with a definite standard or purpose laid down by it.

27. In In re the Delhi Laws Act, 1912, etc. (supra), Kania, C. J. said that if full powers to do everything that the
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legislature can do are conferred on a subordinate authority, although the legislature retains the power to control the
action of the subordinate authority by recalling such power or repealing the Acts passed by the subordinate
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authority, there is no abdication or effacement of the legislature conferring such power. Fazl Ali, J. observed that
there are only two main checks in this country on the power of the legislature to delegate, these being its good
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sense and the principle that it should not cross the line beyond which delegation amounts to "abdication and self-
effacement". 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 cannot be said that an unlimited right of

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delegation is inherent in the legislative power itself and the legislature must retain in its own hands the essential
legislative functions which consist in declaring the legislative policy and laying down the standard which is to be
enacted into a rule of law. Das, J. said that the power of delegation is necessary for, and ancillary to, the exercise of
legislative power and is a component part of it. The only qualification upon the power to delegate is that the
legislature may not, without preserving its own capacity intact, create and endow with its own capacity a new
legislative power not created or authorised by the Act to which it owes its existence. Bose J. said that the Indian
Parliament can legislate along the lines of Queen vs. Burah (supra), that is to say, it can leave to another person or
body the introduction or application of laws which are or may be in existence at that time in any part of India
which is subject to the legislative control of Parliament.

In Cobb & Co. Ltd. vs. Kropp (1967) 1 AC 141 (PC), the question was whether the Queensland legislature had
legislative authority under the impugned Acts to invest the CIT for Transport with power to impose and levy
licence and permit fees. It was not disputed before their Lordships that fees imposed are to be regarded as
constituting taxation. Accordingly, it was contended that the legislature had abdicated its exclusive power of
levying taxation. The Privy Council held that the Queensland legislature was entitled to use any agent or
subordinate agency and any machinery that it considered appropriate for carrying out the object and the purposes
that they had in mind and which they designated and to use the CIT 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

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were valid. Lord Morris of Borth-y-Gest said (1967) 1 AC 141 (PC) : What they (the legislature) created by the

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passing of the Transport Acts could not reasonably be described as a new legislative power or separate legislative
body armed with general legislative authority (see R. vs. Burah) (supra). Nor did the Queensland legislature ‘create
and endow with its own capacity a new legislative power not created by the Act to which it owes its own existence'
it.
(See In re Initiative and Referendum Act (1919) A.C. 935 (PC))."
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28. 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 CIT for Transport inasmuch as it could at any
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time repeal the legislation and withdraw the authority and discretion it had vested in him and, therefore, the
legislature did not abdicate its functions.
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29. Duff J., said in In re Gray (supra) : "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,
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abandon any of its own legislative jurisdiction."

30. Delegation of "law-making" power, it has been said, is the dynamo of modern Government. Delegation by the
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legislature is necessary in order that the exertion of legislative power does not become a futility. Today, while
theory still affirms legislative supremacy, we see power flowing back increasingly to the executive. Departure
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from the traditional rationalization of the status quo arouses distrust. The legislature comprises a broader cross-
section of interests than any one administrative organ ; it is less likely to be captured by particular interests. We
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must not, therefore, lightly say that there can be a transfer of legislative power under the guise of delegation which
would tantamount to abdication. At the same time, we must be aware of the practical reality, and that is, that
Parliment cannot go into all legislative matters. The doctrine of abdication expresses a fundamental democratic
concept but at the same time we should not insist that lawmaking as such is the exclusive province of the
legislature. The aim of Government is to gain acceptance for objectives demonstrated as desirable and to realize
them as fully as possible. The making of law is only a means to achieve a purpose. It is not an end in itself. That
end can be attained by the legislature making the law. But many topics or subjects of legislation are such that they
require expertise, technical knowledge and a degree of adaptability to changing situations which Parliment might
not possess and, therefore, this end is better secured by extensive delegation of legislative power. The legislative
process would frequently bog down if a legislature were required to appraise beforehand the myriad situations to
which it wishes a particular policy to be applied and to formulate specific rules for each situation. The presence of
Henry VIII clause in many of the statutes is a pointer to the necessity of extensive delegation. The hunt by Court

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for legislative policy or guidance in the crevices of a statute or the nook and cranny of its preamble is not an
edifying spectacle. It is not clear what difference does it make in principle by saying that since the delegation is to
a representative body, that would be a guarantee that the delegate will not exercise the power unreasonably, for, if
ex hypothesi the legislature must perform the essential legislative function, it is certainly no consolation that the
body to which the function has been delegated has a representative character. In other words, if no guidance is
provided or policy laid down, the fact that the delegate has a representative character could make no difference in
principle.

Seeing that by s. 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 vs. Union Territory of Pondicherry (1967) 20
STC 215 : (1967) 2 SCR 650 (SC) in support of this submission.

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In that case, the Legislative Assembly for the Union Territory of Pondicherry passed the Pondicherry General ST

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Act (10 of 1965), which was published on 30th June, 1965. Sec. 1(2) of the Act provided that it would come into
force on such date as the Pondicherry Government may, by notification, appoint, and s. 2(1) provided that the
Madras General ST Act, 1959, as in force in the State of Madras immediately before the commencement of the
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Pondicherry Act, shall be extended to Pondicherry subject to certain modifications, one of which related to the
constitution of the Tribunal. The Act also enacted a Schedule, giving the description of goods, the point of levy and
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the rates of tax. The Pondicherry Government issued a notification on 1st March, 1966, appointing 1st April, 1966,
as the date of commencement. Prior to the issue of the notification, the Madras legislature had amended the Madras
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Act and consequently it was the Madras Act as amended up to 1st April, 1966, which was brought into force in
Pondicherry. When the Act had come into force the petitioner was served with a notice to register himself as a
dealer and he thereupon filed a writ petition challenging the validity of the Act. After the petition was filed, the
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Pondicherry legislature passed the Pondicherry General Sales Tax (Amendment) Act (13 of 1966) whereby s. 1(2)
of the principal Act was amended to read that the latter Act "shall come into force on the 1st April, 1966" ; it was
also provided that all taxes levied or collected and all proceedings taken and things done were to be deemed valid
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as if the principal Act as amended had been in force at all material times.

34. The Court, by a majority, held that the Pondicherry legislature not only adopted the Madras Act as it stood at
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the date when it passed the principal Act, but in effect also enacted that if the Madras legislature were to amend its
Act prior to the notification of its extension to Pondicherry, it would be the amended Act that would apply ; that
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the legislature at that stage could not anticipate that the Madras Act would not be amended nor could it predicate
what amendments would be carried out or whether they would be of a sweeping character or whether they would
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be suitable in Pondicherry and that the result was that the Pondicherry legislature accepted the amended Act
though 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 Referendum Act (1919) AC 935 (PC) 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 Cooley 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."

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35. 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 See Canadian Bar Review, Vol. 34 (1956), footnote on
p. 919 : "This oft-quoted passage remains more a counsel of caution than a constitutional limitation . . . . This
proposition has in no way affected the widest kind of delegation by Parliament and by a provincial legislature to
agencies of their own creation or under their control : see Reference re Regulations (Chemicals) (1943) 1 DLR 248
; Shannon vs. Lower Mainland Dairy Products Board (1938) AC 708 (PC)."

36. And, as regards the observations of Cooley, we think that they were based on the American doctrine that the
legislature being the delegate of the people cannot further delegate the trust but execute it themselves.

37. We think that the principle of the ruling in Shama Rao vs. Union Territory of Pondicherry (supra) must be
confined to the facts of the case. It is doubtful whether there is any general principle which precludes either
Parliament or a State legislature from adopting a law and the future amendments to the law passed respectively by
a State legislature or Parliament and incorporating them in its legislation. At any rate, there can be no such
prohibition when the adoption is not of the entire corpus of law on a subject but only of a provision and its future
amendments and that for a special reason or purpose. In A. G., N. S. vs. A. G., Can. (Nova Scotia Inter-delegation
case (1950) 4 DLR 369) the Supreme Court of Canada said that neither the Parliament of Canada nor the
legislature of any Province can delegate one to the other (to be exercised by that other as a Parliament or
legislature, as the case may be) any of the legislative authority respectively conferred upon them by the British
North America Act and especially by ss. 91 and 92 thereof. The Court was of the view that the legislative authority

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conferred upon Parliament and upon a Provincial legislature is exclusive and, in consequence, neither can bestow

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upon or accept power from the other, although each may delegate to subordinate agencies ; and to permit through
delegation alteration of the distribution of legislative power established by the British North America Act (save as
permitted by s. 94) would mean that matters within Dominion competence would be incorporated in legislation
it.
assented to by the Lieutenant-Governor instead of by the Governor-General and vice versa ; and, moreover, it
would mean that the debate and judgment of one legislative body would be addressed to matters which were not its
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concern but that of another legislative body as provided in a constituent Act. The Court said that delegation of this
kind is incompatible with a federal State.
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38. 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
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(1950) 4 DLR 369. 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
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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').
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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
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for its own purposes, and which the referring legislature could have validly spelled out for its own purposes. This
was appreciated by Judson J. in In re Brinklow [1953] OWN 325, 105 Can. CC 203 (affirmed on appeal on other
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grounds). However, in Regina vs. Fialka [1953] 4 DLR 440 ; [1953] OWN 596 ; 106 Can. CC 197 (CA), Laidlaw
J. A. reserved the question of the validity of the Provincial Summary Convictions Act if it were construed to
incorporate not only provisions of the Cr. Code in existence when the provincial statute was last enacted but also
provisions subsequently introduced.

This is, with respect, an unnecessary as well as an unwarranted acceptance of a limitation on legislative
competence, and justifiable only as a matter of legislative policy of the referring legislature : see Laskin, Note
[1956] 34 Can. Bar Rev. 215 ; but cf. Bourne Note, [1956] 34 Can. Bar Rev. 500. Once it is determined that a
referring legislature is legislating in relation to a matter within its competence and that the referred legislature is
similarly legislating within the competence and for its own purposes, a borrowing by the one from the other of
future enactments does not involve the latter in exercise of power which it does not otherwise possess. This view is

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amply supported by Regina vs. Glibbery [1963] 1 OR 232 ; 36 DLR (2d) 548." (See Bora Laskin, Canadian
Constitutional Law, 3rd Ed., pp. 40-41).

The decision in A. G., Ont. vs. Scott (1956) SCR 137 was in an appeal from a judgment reversing an order
dismissing a motion for prohibition directed to a Magistrate purporting to act under the Ontario Reciprocal
Enforcement of Maintenance Orders Act, R. S. O. 1950, c. 334. The Act carried out an arrangement, to which
certain other provinces and England became parties, for enforcement in Ontario, against resident husbands, of
provisional maintenance orders for which proceedings had been initiated in a reciprocating jurisdiction by wives
resident there. By s. 5(2) of the Act, a resident husband against whom "confirmation" of a foreign order was sought
was entitled "to raise any defence that he might have raised in the original proceedings had he been a party thereto
but no other defence". Among the objections to the validity of the Act was one directed to s. 5(2) as being an
unconstitutional delegation or abdication of legislative authority.

Rand J., with whom Kerwin C. J. C. Kellock and Cartwright JJ. agreed, held that the action 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

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Criminal Code by Provincial Statutes was seen in the Summary Convictions Act, R. S. O. 1950, c. 379, s. 3.

or
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 another legislature, that no challenge could be made to the
it.
complementary enactment there and that if the Province cannot exercise the same power in relation to a subject of
such a local and civil rights nature, then the oft-quoted words of Lord FitzGerald in Hodge vs. Queen (supra) that
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its power is " as plenary and as ample within the limits prescribed by s. 92 as the Imperial Parliament in the
plenitude of its power possessed and could bestow" would seem to be somewhat rhetorical.
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Locke J. said that the validity of the statute was directed to s. 5(2) which limited the available defences to those
that might have been raised in the original proceedings in England. The defences permitted under the law of
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England, as on the date the Reciprocal Enforcement of Maintenance Orders Act came into force in Ontario, may
have been extended or limited by legislation passed thereafter in England, and this, it was contended, amounted to
a delegation of the authority of the legislature of its power to deal with the civil rights of residents in Ontario and
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that this could not be done was made clear by the judgment of the Supreme Court of Canada in A. G., N. S. vs. A.
G., Can. (supra); but the learned Judge came to the conclusion that this objection should not prevail as it was a
valid exercise of provincial powers under head (13) of s. 92 of the British North America Act to declare that the
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defences which may be relied upon in proceedings of this nature shall be those from time to time permissible under
the laws of England, those laws in substance being adopted and declared to be the law in the Province. As regards
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the correctness of the reasoning of Locke J., see Bora Laskin, comments in [1956] 34 Can. Bar Review, 215-227.
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We think that Parliament fixed the rate of tax on inter-State sales of the description specified in s. 8(2)(b) of the
Act at the rate fixed by the appropriate State legislature in respect of intra-State sales with a purpose, namely, to
check evasion of tax on inter-State sales and to prevent discrimination between residents in one State and those in
other States. Parliament thought that unless the rate fixed by the States from time to time is adopted as the rate of
tax for inter-State sales of the kind specified in the sub-clause, there will be evasion of tax in inter-State sales as
well as discrimination. We have already pointed out in our judgment in State of Tamil Nadu vs. Sitalakshmi Mills
Ltd. Since reported in (1974) 33 STC 200 (SC), 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 ST Act, by s. 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.

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There can be no doubt that Parliament can repeal the provisions of s. 8(2)(b) adopting the higher rate of tax fixed
by the appropriate State legislature in respect of intra-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 s. 8(2)(b) adopting the
higher rate of tax fixed by the State legislature, it has not abdicated its legislative function. As already stated, this
point has been expressly decided by the Privy Council in Cobb & Co. Ltd. vs. Kropp (supra).

We are glad to find that our conclusion that Parliament has not abdicated its legislative function by enacting s.
8(2)(b) of the Act is in agreement with that reached by the High Court of Gujarat in Rallis India Ltd. vs. R. S.
Joshi, STO (1973) 31 STC 261 : (Guj) (FB), and the High Court of Punjab in Tek Chand Daulat Rai vs. Excise and
Taxation Officer, Ferozepore (1972) 29 Tax Cases 585 (Punj).

In the result, these appeals are dismissed with costs.

KHANNA, J.:

The short question which arises for determination in these four appeals on certificate against the judgment of the
Madhya Pradesh High Court is whether the provisions of s. 8(2)(b) of the Central ST Act, 1956 (Act 74 of 1956)
(hereinafter referred to as the Act), suffer from the vice of excessive delegation. The High Court answered this
question in the negative and upheld the constitutional validity of those provisions.

g
2. Sub-ss. (1), (2) and (4) of s. 8 of the Act read as under :
"(1) Every dealer, who in the course of inter-State trade or commerce—
(a) sells to the Government any goods ; or
or
(b) sells to a registered dealer other than the Government goods of the description referred to in sub-s. (3) ; shall be
it.
liable to pay tax under this Act, which shall be three per cent. of his turnover.
(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
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goods in the course of inter-State trade or commerce not falling within sub-s. (1)—
(a) in the case of declared goods, shall be calculated at the rate applicable to the sale or purchase of such goods
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inside the appropriate State ; and

(b) in the case of goods other than declared goods, shall be calculated at the rate of ten per cent. or at the rate
applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher ;
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and for the purpose of making any such calculation any such dealer shall be deemed to be a dealer liable to pay tax
under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that
law.
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(4) The provisions of sub-s. (1) shall not apply to any sale in the course of inter-State trade or commerce, unless
the dealer selling the goods furnishes to the prescribed authority in the prescribed manner-
(a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the
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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
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filled and signed by a duly authorised officer of the Government."

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3. 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 s. 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.
Sec. 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 cent. in the case of inter-State sales only if the goods are sold to
the Government or to a registered dealer other than the Government. In the case of such a registered dealer, it is
essential that the goods should be of the description mentioned in sub-s. (3) of s. 8 of the Act. In order, however, to
avail of the benefit of such a low rate of tax under s. 8(1) of the Act, it is also essential that the dealer selling the
goods should furnish to the prescribed authority in the prescribed manner a declaration duly filled and signed by
the registered dealer, to whom the goods are sold, containing the prescribed particulars in the prescribed form

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obtained from the prescribed authority, or 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. In cases
not falling under sub-s. (1) the tax payable by any dealer in respect of inter-State sale of declared goods is the rate
applicable to the sale or purchase of such goods inside the appropriate State : vide s. 8(2)(a) of the Act. As regards
goods other than the declared goods, s. 8 (2)(b) provides that the tax payable by any dealer on the sale of such
goods in the course of inter-State trade or commerce shall be calculated at the rate of 10 per cent. or at the rate
applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher.

4. The question with which we are concerned is whether Parliament in not fixing the rate itself and in adopting the
rate applicable to the sale or purchase of goods inside the appropriate State has not laid down any legislative policy
and has abdicated its legislative function. In this connection we are of the view that a clear legislative policy can be
found in the provisions of s. 8(2)(b) of the Act. The policy of the law in this respect is that in case the rate of local
sales tax be less than 10 per cent., in such an event the dealer, if the case does not fall within s. 8(1) of the Act,
should pay Central sales tax at the rate of 10 per cent. If, however, the rate of local sales tax for the goods
concerned be more than 10 per cent., in that event the policy is that the rate of Central sales tax shall also be the
same as that of the local sales tax for the said goods. The object of law thus is that 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 s. 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

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tax were only 10 per cent., the unregistered dealer who purchases goods in the course of inter-State trade would be

or
in a better position than an intra-State 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
it.
possible to fix the maximum rate under s. 8(2)(b) because the rate of local sales tax varies from State to State. The
rate of local sales tax can also be changed by the State legislatures from time to time. It is not within the
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competence of Parliament to fix the maximum rate of local sales tax. The fixation of the rate of local sales tax is
essentially a matter for the State legislatures and Parliament does not have any control in the matter. Parliament
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has, therefore, necessarily, if it wants to prevent evasion of payment of Central sales tax, to tack the rate of such
tax with that of local sales tax, in case the rate of such local sales tax exceeds a particular limit. Dealing with the
provisions of s. 8(2)(b) of the Act, Hegde J., in the case of State of Madras vs. N. K. Nataraja Mudaliar (1968) 22
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STC 376 : (1968) 3 SCR 829 : AIR 1969 SC 147 (SC), observed : "Then we come to cl. (b) of s. 8(2), which deals
with goods other than declared goods. Here the law at the relevant time was that the tax shall be calculated at the
rate of seven per centum of the turnover or at the rate applicable to sale or purchase of such goods inside the
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appropriate State, whichever is higher. As could be seen from the report of the Taxation Enquiry Committee, the
main reason for this provision was to prevent as far as possible the evasion of sales tax. Parliament was anxious
that inter-State trade should be canalised through registered dealers over whom the appropriate Government has a
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great deal of control. It is not very easy for them to evade tax. A measure which is intended to check the evasion of
tax is undoubtedly a valid measure. Further, inter-State trade carried on through dealers coming within s. 8(2) must
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be in the very nature of things very little. It is in public interest to see that in the guise of freedom of trade, they do
not evade the payment of tax. If the sales tax they have to pay is as high or even higher than inter-State sales tax
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then they will be constrained to register themselves and pay the tax legitimately due. The impact of this provision
on inter-State trade is bound to be negligible, but at the same time it is an effective safeguard against evasion of
tax."

5. The adoption of the rate of local sales tax for the purpose of the Central sales tax as applicable in a particular
State does not show that Parliament has in any way abdicated its legislative function. Where a law of Parliament
provides that the rate of Central sales tax should be 10 per cent. or that of the local sales tax, whichever 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

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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 difference between the enactment of a law which was struck down by this Court
in the case of B. Shama Rao vs. Union Territory of Pondicherry (supra) and that contained in s. 8(2)(b) of the
Central ST Act. In Shama Rao's case (supra), the Legislative Assembly for the Union Territory of Pondicherry
passed the Pondicherry General ST Act which was published on 30th June, 1965. Sec. 1(2) of the Act provided that
it would come into force on such date as the Pondicherry Government may by notification appoint and s. 2(1)
provided that the Madras General ST Act, 1959, as in force in the State of Madras immediately before the
commencement of the Pondicherry Act, shall be extended to Pondicherry subject to certain modifications. The
Pondicherry Government issued a notification on 1st March, 1966, appointing 1st April, 1966, as the date of
commencement of the Pondicherry Act. Prior to the issue of the notification, the Madras legislature had amended
the Madras Act and, consequently, it was the Madras Act as amended up to 1st April, 1966, which was brought
into force in Pondicherry. A petition was there-upon filed challenging the validity of the Pondicherry Act. During
the pendency of that petition, the Pondicherry legislature passed Amendment Act 13 of 1966, whereby s. 1(2) of
the principal Act was amended to read that the latter Act would come into force on 1st April, 1966, and that all
proceedings and action taken under that Act would be deemed valid as if the principal Act as amended had been in
force at all material times. It was held by a majority by this Court that the Act of 1965 was void and still-born and

g
could not be revived by the Amendment Act of 1966. According to the Court, the Pondicherry legislature not only

or
adopted the Madras Act as it stood at the date when it passed the principal Act, but in effect it also enacted that if
the Madras legislature were to amend its Act prior to the notification of its extension to Pondicherry, it would be
the amended Act that would apply. The legislature, it was held, at that stage could not anticipate that the Madras
it.
Act would not be amended nor could it predicate what amendments would be carried out, whether they would be
of a sweeping character or whether they would be suitable in Pondicherry. The result, in the opinion of the Court,
d

was that the Pondicherry legislature accepted the amended Act though it was and could not be aware what the
provisions of the amended Act would be. There was, according to the Court, in these circumstances a total
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surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras legislature.
6. 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
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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 local sales tax is in pursuance of a legislative policy induced by the desire to
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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.
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7. 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 which was within the Union Territory of
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Pondicherry and not in Madras State. As against that, in the present case we find that Parliament has adopted the
rate of local sales tax for certain purposes of the Central ST Act only for the territory of the State for which the
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legislature of that State had prescribed the rate of sales tax. The Central sales tax in respect of the territory of a
State is ultimately assigned to that State under Art. 269 of the Constitution and is imposed for the benefit of that
State. We would, therefore, hold that the appellants cannot derive much assistance from the above-mentioned
decision of this Court.

8. It may be stated that this Court in two cases has upheld the validity of statute by which the legislature left the
fixation of rates to another body. This was, however, subject to the rider that the legislature must provide guidance
for such fixation. In the case of Corporation of Calcutta vs. Liberty Cinema (supra), while dealing with s. 548 of
the Calcutta Municipal Act relating to the levy of licence fee on cinema houses, Sarkar J. (as he then was),
speaking for the majority, after referring to the earlier case of Pandit Banarasi Das Bhanot vs. State of Madhya
Pradesh (supra), observed : his therefore is clear authority that the fixing of rates may be left to a non-legislative
body. No doubt when the power to fix rates of taxes is left to another body, the legislature must provide guidance

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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."

9. In Municipal Corporation of Delhi vs. Birla Cotton Spinning & Weaving Mills (supra), this Court dealt with the
provisions of ss. 113 and 150 of the Delhi Municipal Corporation Act in the context of levy of certain taxes,
including tax on consumption or sale of electricity. One of the questions which arose for determination in that case
was whether s. 150 of the above-mentioned Act transgressed the limits of permissible delegation. According to that
section, the Municipal Corporation may at a meeting pass a resolution for the levy of any of the taxes specified in
sub-s. (2) of s. 113 defining the maximum rate of tax to be levied, the class or classes of persons or the description
of 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 s. 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 s. 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 cannot be delegated by the legislature. Nor is

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there any unlimited right of delegation inherent in the legislative power itself. This is not warranted by the

or
provisions of the Constitution. The legislature must retain in its own hands the essential legislative functions and
what can be delegated is the task of subordinate legislation necessary for implementing the purposes and objects of
the Act. Where the legislative policy is enunciated with sufficient clearness or a standard is laid down, the Courts
it.
should not interfere. What guidance should be given and to what extent and whether guidance has been given in a
particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to
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deal including its preamble. Further, it appears to us that the nature of the body to which delegation is made is also
a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of
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delegation."

10. Hidayatullah J. (as he then was), speaking for himself and Ramaswami J. observed : "Once it is established that
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the legislature itself has willed that a particular thing be done and has merely left the execution of it to a chosen
instrumentality (provided that it has not parted with its control) there can be no question of excessive delegation. If
the delegate acts contrary to the wishes of the legislature, the legislature can undo what the delegate has done."
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11. It was further observed : "To insist that the legislature should provide for every matter connected with
municipal taxation would make municipalities mere tax-collecting Departments of Government and not self-
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governing bodies which they are intended to be. Government might as well collect the taxes and make them
available to the municipalities. That is not a correct reading of the history of municipal corporations and other self-
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governing institutions in our country."

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12. Sikri J. (as he then was) observed : "I can see no sign of abdication of its functions by Parliament in this Act.
On the contrary Parliament has constituted the corporation and prescribed its duties and powers in great detail. But
assuming I am bound by authorities of this Court to test the validity of s. 113(2)(d) and s. 150 of the Act by
ascertaining whether a guide or policy exists in the Act, I find adequate guide or policy in the expression ‘purposes
of the Act' in s. 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."

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13. 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 expressly or by implication for the
guidance of the delegate in that behalf. Entrustment of power without guidance amounts to excessive delegation of
legislative authority ; (iv) Mere authority to legislate on a particular topic does not confer authority to delegate its
power to legislate on that topic to another body. The power conferred upon the legislature on a topic is specifically
entrusted to that body, and it is a necessary intendment of the constitutional provision which confers that power
that it shall not be delegated without laying down principles, policy, standard or guidance to another body unless
the Constitution expressly permits delegation ; and (v) the taxing provisions are not exception to these rules."

14. It was further observed : "The Constitution entrusts the legislative functions to the legislative branch of the
State, and directs that the functions shall be performed by that body to which the Constitution has entrusted and not
by someone else to whom the legislature at a given time thinks it proper to delegate the function entrusted to it. A
body of experts in a particular branch of undoubted integrity or special competence may probably be in a better
position to exercise the power of legislation in that branch, but the Constitution has chosen to invest the elected
representatives of the people to exercise the power of legislation, and not to such bodies of experts. Any attempt on
the part of the experts to usurp, or of the representatives of the people to abdicate the functions vested in the

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legislative branch is inconsistent with the constitutional scheme. Power to make subordinate or ancillary legislation

or
may undoubtedly be conferred upon a delegate, but the legislature must in conferring that power disclose the
policy, principles or standards which are to govern the delegate in the exercise of that power so as to set out a
guidance. Any delegation which transgresses this limit infringes the constitutional scheme."
it.
15. After referring to the provisions of the Delhi Municipal Corporation Act, Shah and Vaidialingam JJ. held that
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the delegation could not be upheld merely because of the special status, character, competence or capacity of the
delegate or by reference to the provisions made in the statute to prevent abuse by the delegate of its authority. Shah
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and Vaidialingam JJ. accordingly came to the conclusion that s. 150(1) was void as it permitted excessive
delegation of legislative authority to the Corporation.
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16. It would appear from the above that not only was the constitutional validity of s. 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
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legislation to another body.

17. We find ourselves unable to agree with the view, which has been canvassed during the course of arguments,
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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
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power.
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18. 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 legislature lay down the guiding
principles and the legislative policy. The legislatures because of limitation imposed upon them by the time-factor
hardly go into matters of detail. Provision is, therefore, made for delegated legislation to obtain flexibility,
elasticity, expedition and opportunity for experimentation. The practice of empowering the executive to make
subordinate legislation within a prescribed sphere has evolved out of practical necessity and pragmatic needs of a
modern welfare State. At the same time it has to be borne in mind that our Constitution-makers have entrusted the
power of legislation to the representatives of the people, so that the said power may be exercised not only in the
name of the people but also by the people speaking through their representatives. The rule against excessive
delegation of legislative authority flows from and is a necessary postulate of the sovereignty of the people. The

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rule contemplates that it is not permissible to substitute in the matter of legislative policy the views of individual
officers or other authorities, however competent they may be, for that of the popular will as expressed by the
representatives of the people. As observed on page 224 of Vol. I in Cooley's Constitutional Limitations, 8th Ed. :
"One of the settled maxims in constitutional law is that the power conferred upon the legislature to make laws
cannot be delegated by that Department to any other body or authority. Where the sovereign power of the State has
located the authority, there it must remain ; and by the onstitutional agency alone the laws must be made until the
Constitution itself is changed. The power to whose judgment, wisdom, and patriotism this high prerogative has
been entrusted cannot relieve itself of the responsibility by choosing other agencies upon which the power shall be
devolved, nor can it 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."

According to John Locke when parliamentary representatives have been chosen and the authority to make laws has
been delegated to them, they have no right to redelegate it. As against that Jeremy Rentham in The Limits of
Jurisprudence Defined, distinguishes between laws which belong to the legislator by conception, being his work
alone, and laws which belong to him by pre-adoption, 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 subordinate holder to fill up". To economise its own time and to take advantage of expert skill in
administration, 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.).

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The Constitution, as observed by this Court in the case of Devi Dass Gopal Krishnan vs. State of Punjab (supra),

or
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
it.
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 other agency. But there is danger inherent in such a process of delegation An
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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
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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
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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.
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The question as to the limits of permissible delegation of legislative power has arisen before this Court in a number
of cases. Those cases were reviewed at length in the judgments of Wanchoo C. J. and Shah J. in the case of
Municipal Corporation of Delhi vs. Birla Mills (supra), and they summed up the conclusions or principles which
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had been established by those cases. Those conclusions or principles have already been reproduced above.
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22. The matter came up for the first time before this Court in In re Delhi Laws Act, 1912 (supra). Although each
one of the learned Judges who heard that case wrote a separate judgment, the view which emerged from the
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different judgments was that it could not be said that an unlimited right of delegation was inherent in the legislative
power itself. This was not warranted by the provisions of the Constitution, which vested the power of legislation
either in Parliament or State legislatures. The legitimacy of delegation depended upon its being vested as an
ancillary measure which the legislature considered to be necessary for the purpose of exercising its legislative
powers effectively and completely. The legislature must retain in its own hands the essential legislative function.
Exactly what constituted "essential legislative function" was difficult to define in general terms, but this much was
clear that the essential legislative function must at least consist of the determination of the legislative policy and its
formulation as a binding rule of conduct. Thus, where the law passed by the legislature declares the legislative
policy and lays down the 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

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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 vs. Birla Mills) (supra).

23. In Harishankar Bagla vs. State of Madhya Pradesh (1955) 1 SCR 380 : AIR 1954 SC 465, this Court dealt with
the validity of cl. 3 of the Cotton Textile (Control of Movement) Order, 1948, promulgated by the Central
Government under s. 3 of the Essential Supplies (Temporary Powers) Act, 1946. While upholding the validity of
the impugned clause, this Court observed that the legislature must declare the policy of the law and the legal
principles which are to control any given cases and must provide a standard to guide the officials or the body in
power to execute the law, and where the legislature has laid down such a principle in the Act and that principle is
the maintenance or increase in supply of essential commodities and of securing equitable distribution and
availability at given prices, the exercise of the power was valid.

24. In Pandit Banarsi Das Bhanot vs. State of Madhya Pradesh (supra), Venkatarama Aiyar, J., speaking for the
majority, observed : ". . . . . . 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 laid, the rates at which it is to be charged in respect of different classes of goods, and the
like."

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25. The learned Judge held that the power conferred on the State Government by s. 6(2) of the Central Provinces

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and Berar ST Act, 1947, to amend the schedule relating to exemptions was in consonance with the accepted
legislative practice relating to the topic and was not unconstitutional.
it.
26. In Vasanlal Maganbhai Sanjanwala vs. State of Bombay (1961) 1 SCR 341 : AIR 1961 SC 4, the validity of s.
6(2) of the Bombay Tenancy and Agricultural Lands Act (67 of 1948) was assailed. The said provision authorised
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the Provincial Government by notification to fix a lower rate of the maximum rent payable by the tenants of lands
situate in any particular area or to fix such rate on any other suitable basis as it thought fit. Gajendragadkar J. (as he
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then was), speaking for the majority, observed that although the power of delegation was a constituent element of
legislative power, the legislature cannot delegate its essential legislative function in any case and before it can
delegate any subsidiary or ancillary powers to a delegate of its choice, it must lay down the legislative policy and
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principle so as to afford the delegate proper guidance in implementing the same.

27. The views expressed by this Court in Corporation of Calcutta vs. Liberty Cinema (supra), B. Shama Rao vs.
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Union of Territory of Pondicherry (supra) and Devi Dass Gopal Krishnan vs. State of Punjab (supra) have already
been reproduced above. In Sita Ram Bishambhar Dayal vs. State of U. P. (1972) 29 STC 206 : (1972) 2 SCR 141
(SC), this Court observed : "It is true that the power to fix the rate of tax is a legislative power but if the legislature
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lays down the legislative policy and provides the necessary guidelines, that power can be delegated to the
executive."
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28. It would appear from the above that the view taken by this Court in a long chain of authorities is that the
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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 consisting 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.

29. 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 legislative which it may itself
rightfully exercise. It may confer an authority in relation to the execution of a law which may involve discretion,
but such authority must be exercised under and in pursuance of the law. The legislature must declare the policy of

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the law and fix the legal principles which are to control in given cases ; but an administrative officer or body may
be invested with the power to ascertain the facts and conditions to which the policy and principles apply. If this
could not be done there would be infinite confusion in the laws, and in an effort to detail and to particularise, they
would miss sufficiency both in provision and execution."

30. The matter has been dealt with on page 1637 of vol. III in Willoughby on the Constitution of the United States,
2nd edition, in the following words : "The qualifications to the rule prohibiting the delegation of legislative power
which have been earlier adverted to are those which provide that while the real law-making power may not be
delegated, a discretionary authority may be granted to executive and administrative authorities : (1) to determine in
specific cases when and how the powers legislatively conferred are to be exercised ; and (2) to establish
administrative rules and regulations, binding both upon their subordinates and upon the public, fixing in detail the
manner in which the requirements of the statutes are to be met, and the rights therein created to be enjoyed."

The matter has also been dealt with in Corpus Juris Secundum, vol. 73, page 324. It is stated there that the law-
making power may not be granted to an administrative body to be exercised under the guise of administrative
discretion. Accordingly, in delegating powers to an administrative body with respect to the administration of
statutes, the legislature must ordinarily prescribe a policy, standard or rule for their guidance and must not vest
them with an arbitrary and uncontrolled discretion with regard thereto, and a statute or ordinance which is deficient
in this respect is invalid. In other words, in order to avoid the pure delegation of legislative power by the creation
of an administrative agency, the legislature must set limits on such agency's power and enjoin on it a certain course
of procedure and rules of decision in the performance of its function ; and, if the legislature fails to prescribe with

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reasonable clarity the limits of power delegated to an administrative agency, or if those limits are too broad, its
attempt to delegate is a nullity.
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We are also unable to subscribe to the view that if the legislature can repeal an enactment, as it normally can, it
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
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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
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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
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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 law.
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Reference has been made to the decision of the Judicial Committee in the case of Cobb & Co. Ltd. vs. Norman
Eggert Kropp (supra). The appellant-companies in that case brought two actions against the CIT for Transport,
who was the nominal defendant for the Government of Queensland.
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The first action was for repayment of fees levied under the State Transport Facilities Act for the carriage of goods
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and passengers on motor vehicles operated by the appellants in the State of Queensland. The second action was for
repayment of fees levied under the State Transport Act for the same purposes as in the first action. The appellants
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challenged the validity of the legislation in both the actions. The respondent conceded that the licence fees were an
imposition of taxation, which would be illegal and void if not done with the authority of Parliament but contended
that the two Acts were within the legislative competence of the Queensland legislature. The Judicial Committee
held that the power of the Queensland legislature to legislate for the peace, welfare and good Government of the
State was full and plenary within certain limits. It was further held that the Queensland legislature was entitled to
use any agent or any subordinate agency or any machinery that they considered appropriate for carrying out the
object and the purposes that they had in mind and which they designated. The legislature, it was observed, was
entitled to use the CIT for Transport as their instrument to fix and recover the licence and permit fees, provided
they preserved their own capacity intact and retained perfect control over him. In this context, the Judicial
Committee observed : "In their Lordships' view the Queensland legislature were fully warranted in legislating in
the terms of the Transport Acts now being considered. They preserved their own capacity intact and they retained
perfect control over the CIT for Transport inasmuch as they could at any time repeal the legislation and withdraw

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such authority and discretion as they had vested in him. It cannot be asserted that there was a levying of money by
pretence or prerogative without grant of Parliament or without parliamentary warrant."

34. Reference in the above observations to the retention of control and repeal of legislation, in our opinion, should
be taken to be in the context of the overall effect of the impugned 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."

35. 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.

36. 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 for the guidance of the authority to whom it gives
the power of making subordinate legislation, it (the legislature) does not abdicate its function as long as it retains
the power to repeal the statute giving that power. What is the exact connotation of the word "abdication" and
whether there is proper use of the word " abdication" if the legislature retains the right of repealing the law by

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which uncanalised and unguided power is conferred upon another body for making subordinate legislation are

or
questions which may have some attraction for literary purists or those indulging in semantic niceties ; they cannot,
in our view, detract from the principle which has been well-established in a long chain of authorities of this Court
that the legislature must lay down the guidelines, principles or policy for the authority to whom power to make
it.
subordinate legislation is entrusted. The correct position of law, if we may say so with all respect, is what was
enunciated by Mukherjea J. in the Delhi Laws Act case (supra). Said the learned Judge : "It cannot be said that an
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unlimited right of delegation is inherent in the legislative power itself.

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This is not warranted by the provisions of the Constitution and the legitimacy of delegation depends entirely upon
its being used as an ancillary measure which the legislature considers to be necessary for the purpose of exercising
its legislative powers effectively and completely. The legislature must retain in its own hands the essential
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legislative functions which consist in declaring the legislative policy and laying down the standard which is to be
enacted into a rule of law, and what can be delegated is the task of subordinate legislation which by its very nature
is ancillary to the statute which delegates the power to make it. Provided the legislative policy is enunciated with
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sufficient clearness or a standard laid down the Courts cannot and should not interfere with the discretion that
undoubtedly rests with the legislature itself in determining the extent of delegation necessary in a particular case."
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37. As a result of the above, we hold that s. 8(2)(b) of the Central ST Act does not suffer from the vice of
abdication or excessive delegation of legislative power. The appeals fail and are dismissed with costs. One hearing
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fee.
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