Appeals Nos 1883 to 1886 of 1969
From the judgment  Order dated the 12th July 1968 of the Mysore High Court in WP Nos 949 955 956 and 958 of 1968
K Srinivasan and Vineet Kumar for the appellants
H B Datar In CA No 188369 and M Veerappa for the respondents
The Judgment of the Court was delivered by MATHEW J
The appellant was an excise contractor
He secured the privilege of vending arrack in retail in certain taluks in the State of Karnataka for a period of 18 months beginning from 28 12 1967 and ending on 30 6 1969
He purchased arrack from the Government at a price of 17 paise per litre and the Government collected besides the sale price of arrack excise duty health cess and education cess
The Government also collected sales tax on the sale price of arrack on excise duty on health cess and on education cess for the period from 28 12 1967 to 31 1 1968 and made similar demands for the month of February 1968 also
The appellant and other excise contractors filed writ petitions in the High Court of Karnataka challenging the validity of the levy and collection of excise duty education cess health cess and sales tax
The High Court accepted some of the contentions of the appellant granted him reliefs on that basis but rejected the other prayers
The appellant has filed these appeals on the basis of certificates granted by the High Court against the order
The contentions raised by counsel for the appellant before this Court were  that no excise duty can be levied on a licensee in respect of the quantity of arrack purchased by him from Government depots that the power to fix the rate of excise duty conferred under section 22 of the Mysore Excise Act of 1965 on the Government was bad for the 609 reason that it was an abdication by the state legislature of its essential legislative function and that no sales tax could be levied on the price for sale of arrack since section 19 of the Mysore Sales Tax Act 1957 under which the tax was levied was beyond the legislative competence of the state legislature
Section 22 of the Mysore Excise Act 1965 hereinafter referred to as the Act  provides for levy of excise duty at such rate or rates as the government may prescribe on excisable articles manufactured or produced in the State under any licence or permit granted under the Act
Section 23 of the Act deals with the method of levying excise duties
The first contention of the appelant was that sections 16 22 and 23 of the Act read with Mysore Excise Distillery and Warehouse Rules 1967 and with Mysore Excise Excise Duties Rules 1968 enables levy of excise duty only when arrack is issued from a distillery or warehouse or other place of storage established or licensed under the Act and since the government depot from which he purchased arrack does not come under the above category no excise duty can be levied
The High Court found that though sections 22 and 23 of the Act and Rule 2 of the Mysore Excise Excise Duties Rules 1968 do not expressly state that excise duty levied at the stage of issue of liquor from the government depot should be collected from the issuer or from the person to whom it is issued it is obvious that excise duty cannot be collected from the State Government which issues liquor from its depots and that the only person from whom it can be collected is the licensee to whom the State Government issues liquor from its depots
The material portion of section 16 of the Act provides that the Excise Commissioner may with the previous sanction of the State Government establish or license a warehouse wherein intoxicants may be deposited and kept without payment of duty and that without the sanction of the State Government no intoxicant shall be removed from any distillery brewery warehouse or other place of storage established or licensed under the Act unless the duty if any imposed under the Act has been paid or a bond has been executed for the payment thereof
It is clear from the return filed before the High Court that the Government purchase arrack from the distillers and keeps it in the warehouse established or licensed under section 16 and that any removal of arrack after the purchase of the same will attract the liability to pay excise duty shall be levied on the excisable article issued from a ware Excise Commissioner who is competent to establish or license a warehouse wherein intoxicants may be deposited and kept under clause e of section 16 and therefore it is not a warehouse established or licensed by the State Government
We see no force in this contention
Section 23 provides that excise duty shall be levied on the excisable article issued from a ware 610 house also
We see no reason to think that a warehouse established or licensed under section 16e is not warehouse within the meaning of that expression in section 23
The second contention raised by the appellant was that section 22 of the Act provides for delegation of the power to fix the rates of excise duty to the Government by making rules and since no guidance has been furnished to the government by the Act for fixing the rate there was abdication of essential legislative function by the legislature and there fore the section is bad
The High Court after referring to the preamble of the Act said that it was the policy of the Act both to raise revenue and to discourage consumption of liquor by making the price of liquor sufficiently high and that that would serve as a guidance to fix the rates of excise duty that the rates fixed will be such as would keep the balance between these somewhat conflicting objects so as to serve the purpose of each
The Court further said that if the rate of excise duty is too low not only will the revenue from excise duties suffer but also there will be increase in the consumption of liquor but if the rate of excise duty on liquor is too high it is Rely to encourage the production and consumption of illicit liquor and consequently the control and regulation of liquor as well as the revenue from excise duty may be adversely
The Court therefore held that the need to arrive at such rates of excise duty as will serve the twin objects of the policy underlying the Act operates as guidance for determination of the rates of excise duty
We are not certain whether the preamble of the Act gives any guidance for fixing the rate of excise duty
But that does not mean that the legislature here has no control over the delegate
The legislative control over delegated legislation may take many forms
In Corporation of Calcutta  Anr
vs Liberty Cinema1 the validity of section 5482 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 guidance for the fixation of the amount
The majority upheld the provision relying on the decision in Banarsi Das vs State of Madhya Pradesh 2  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 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
In Municipal Board Hapur vs Raghuvendra Kripal2 the validity 1916 was involved
Ile Act had to fix the rate of tax and after having of the UP Municipalities Act empowered the municipalities enumerated the kinds of taxes to be levied prescribed an elaborate 1 1965 2SCR477
2  3  611 procedure for such a levy and also provided for the sanction of the Government Section 135 3 of the Act raised a conclusive prerumption 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 municipalities the power to impose and collert these taxes
He further said that apart from the fact that the Board was representative body of the local population on whom the tax was levied there were 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 Punjab1 the question was whether section 5 of the East Punjab General Sales Tax Act 1948 which empowered the State Government to fix sales tax at such raters 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 CJ 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 theprocess 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 awther agency either in whole or in part is beyond the permissible limits of delegation In Municipal Corporation of Delhi vs Birla Cotton Spining and Weaving Mills1 the main question was about the constitutionality of delegation of taxing powers to municipal corporations
The Delhi Municipal Corporation Act 66 of 1957 by section 1132 had empowered the Corporation to levy certain optional taxes
Under section 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 articler and property to be taxed the systems of assessment to be adopted 1 19673 SCR 557
2   612 and the exemptions if any to be granted
The majority of the court held the delegation to be valid
Wanchoo CJ observed that there were sufficient guidance checks and safeguards in the Act which prevented 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 guidance in the matter of delegation
According to the learned Chief Justice the fact that delegation was made to an clected body responsible to the people including those who paid taxes provided a great check on the elected 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 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 watchdog on the actions of the local body in this matter on behalf of the legislature
There may be other ways in which guidance may be provided In Sita Ram Bisharnbhar Dayal vs State of UP1 section 3 D1 of the UP Sales Tax Act 1948 bad provided for levying taxes at such rates as may be prescribed by the State Government not exceeding the maximum prescribed therein
Hegde J in 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 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 of date
 In this case we think that section 71 of the Act which provides for the rule making power imposes the necessary check upon the wide power given to the government to fix the rate
Sub section 4 of that section provides  Every rule made under this section shall be laid as soon as may be after it is made before each House of the State Legislature while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if before the expiry of the session in which it is so laid or the session immediately following both Houses agree in making any modification in the rule it  shall thereafter have effect only in such modified form or be of no effect as the case may 1  613 be so however that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule The appellant submitted that section 714 does not provide a guarantee for legislative control over delegated legislation
The argument was that the rules would come into force as soon as they are framed and that the power of the legislature to annul the rules subsequently cannot be regarded as sufficient control over delegated legislation
That laying of rules before the legislature is control over delegated legislation is implied in the speech of Lord Thankerton in the House of Lords in Minister of Health vs The King1 where he said  In this case as in similar cases that have come before the courts Parliament has delegated its legislative function to a Minister of the Crown but in this case Parliament has retained no specific control over the exercise of the function by the Minister such as a condition that the order should be aid before Parliament and might be annulled by a resolution of either House within a limited period
 In Institute of Patent Agents vs Joseph Lockwood 2 Lord Watson said  The Legislature retained so far a check that it required that the regulations which they framed should be laid upon the table of both Houses and of course these regulations could have been annulled by an unfavourable resolution upon a motion made in either House In Bernard Schewartz s An Introduction to American Administrative Law it is stated  In Britain Parliamentary control over delegated legislation is exercised through the various forms of laying  prescribed in enabling Acts
Through them the legislature is enabled at least in theory to exercise a continuing supervision over administrative rules and regulations
 As Dean Landis pointed out the English techniques for laying the rules before the Houses have several virtues For one thing they bring the legislative into close and constant contact with the administrative
The legislature may also retain its control over its delegate by exercising its power of repeal
This was the basis on which the Privy Council in Cobb  Co vs Kropp4 upheld the validity of delegation of the power to fix rates to the Commissioner of Transport in that case
The question there was whether the Queensland Legislature had legislative authority under the impugned Acts to invest the Commissioner for Transport with power to impose and levy 1 2 3 see Landis The Administrative Process 77 1938
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614 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 Queensland Legislature was entitled to use any agent or machinery that it considered appropriate for carrying out the object and the purposes of the Acts and to use the Commissioner for Transport as its instrument to fix and recover the licence and permit fees provided it preserved its own capacity intact and retained perfect control over him that as it could at any time repeal the legislation and withdraw such authority and discretion as it had vested in him it had not assigned transferred or abrogated its sovereign power to levy taxes nor had it renounced or abdicated its responsibilities in favour of a newly created legislative authority and that accordingly the two Acts were valid
Lord Morris of Borth y Gest said  What they the legislature created by the passing of the Transport Acts could not reasonably be described as a new legislative power or separate legislative body armed with general legislative authority see R vs Burah 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 see in re the Initiative and Referendum Act 1919 AC 945 at 945
 The point to be emphasized and this is rather crucial is the statement of their Lordships that the legislature preserved its capacity intact and retained perfect control over the Commissioner for T port inasmuch as it could at any time repeal the legislation and with draw the authority and discretion it had vested in him and therefore the legislature did not abdicate its functions
We therefore think that the power to fix the rate of excise duty conferred on the government by section 22 of the Act is valid
The dilution of parliamentary watch dogging of delegated legislation may be deplored but in the compulsions and complexities of modern life cannot be helped
The last contention raised by the appellant was that section 19 of the Karnataka Sales Tax Act 1957 is invalid as it purports to levy sales tax upon the sale of arrack made by the Government to licensees
The appellant submitted that the definition of dealer in section 2 of the Act excludes the Government of Mysore and that by virtue of the provisions in section 53 of that Act no tax could be levied on the sale of arrack by government to the appellant
We see no merit in this contention
Section 19 of the Act reads 19
State Government entitled to collect tax as registered dealers
Notwithstanding anything contained in this Act the Government of Mysore shall in respect of any sale of goods effected by them be entitled to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under this Act
 615 This section makes it clear that notwithstanding anything contained in that Act the Government shall in respect of any sale of goods effected by it be entitled to collect by way of  any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under the Act
The section is clear that the Government could collect the tax on the sale made by it as if it were a registered dealer not withstanding anything contained in section 2 or section 5
The section itself creates a right in the State to recover and an obligation on the purchaser from the State to pay the amount
Any imposition of liability or obligation in respect of sale or purchase of goods will be covered by Entry 54 of List If of the Seventh Schedule of the Constitution
We do not think that section 19 is ultra vires the powers of the legislature
We therefore dismiss the appeals but make no order as to costs
VMK Appeals dismissed


Summary:
The appellant
an excise contractor secured the privilege of vending arrack in retail in certain taluks in the State of Karnataka for a period of 18 months beginning from 28 12 1967 and ending on 30 6 69
He purchased attack from the Government at a price of 17 paise per litre and the Government collected besides the sale price of arrack
excise duty
health cess and education cess rho Government also collected sales tax on the sale price of attacks on excise duty
on health cess and on education cess for the period from 28 12 1967 to 31 1 1968 and made similar demands for the month of February
1968 also
The appellant and other excise contractors filed writ petitions in the High Court at Karnataka challenging the validity of the levy and collection of excise duty education cess
health cess and sales tax
The High Court accepted some of the contentions of the appellant granted him reliefs on that basis but rejected the other prayers
The appellant has filed these appeals on the basis of certificates granted by the High Court against the order
It was contended for the appellant i that no excise duty can be levied on a licensee in respect of the quantity of arrack purchased by him from Government depots ii that the power to fix the rate of excise duty conferred under section 22 of the Mysore Excise Act of 1965 on the Government was bad for the reason that it was an abdication by the state legislature of its essential legislative function and iii that no sales tax could be levied on the price for sale of arrack since section 19 of the Mysore Sales Tax Act 1957 under which the tax was levied was beyond the legislative competence of the state legislature
Rejecting the contentions and dismissing the appeals HELD  i It is clear from the return filed before the High Court that the Government purchases arrack from the distillers and keeps it in the warehouses established or licensed under section 16 and that any removal of arrack after the purchase of the same will attract the liability to pay excise duty
Section 23 provides that excise duty shall be levied on the excisable article issued from a warehouse also
It cannot be said that a warehouse established or licensed under section 16e is not warehouse within the meaning of that expression in section 23
609G 610A ii The High Court held that the preamble of the Act would serve as a guidance to fix the rates of excise duty
It cannot be said with certainty that the preamble of the Act gives any guidance for fixing the rate of excise duty
But that does not mean that the legislature here has no control over the delegate
In this case a 71 of the Act which provides for the rule making power imposes the necessary check upon the wide power given to the Government to fix the rate
The laying of rules before the legislature provides control over delegated legislation
Again the legislature may also retain its control over its delegate by exercising its power of repeal the power to fix the rate of excise duty conferred on the Government by section 22 is valid
 6140E F 614 E F 608 Corporation of Calcutta  Anr
vs Liberty Cinema 1965 2
SC R 477 Batwrsi Das vs State of Madhya Pradesh   Municipal Board Hapur vs Raghuvendra Kripal  Devi Dass Gopal Krishan vs State of Punjab 1967 3 SCR 557 Municipal Corporation of Delhi vs Birla Cotton Spinding and Weaving Mills 1968 3 SCR 251 Sita Ram Bisliambhar Dayal vs State of UP   Minister of Health vs The King  Institute of Patent Agents vs Joseph Lockwood 1894 AC 347 and Cobb  Co vs Kropp  referred to
iii Section 19 of the Karnataka Sales Tax Act
makes it clear that notwithstanding anything contained in this Act of 1957 the Government shall in respect of any sale of goods effected by it be entitled to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under the Act
The section is clear that the Government could collect the tax on the sale made by it as if it were a registered dealer notwithstanding anything contained in section 2 or  5
The section itself creates a right in the State to recover and an obligation on the purchaser from the State to pay the amount
Any imposition of liability or obligation in respect of sale or purchase of goods will be covered by Entry 54 of List II of the Seventh Schedule of the Constitution
Section 19 is therefore not ultra vires the powers of the legislature
615A C