Appeal No 1220 of 1966
Appeal by special leave from the judgment and order dated April 6 1965 of the Punjab High Court Circuit Bench at Delhi in Letters Patent Appeal No 58 D of 1966
MC Chagla B Datta and JB Dadachanji for the appellant
Niren De Attorney General V A Seyid Muhammad RH Dhebar and SP Nayar for respondent No 1
Niren De Attorney General VA Seyid Muhammad RH Dhebar SP Nayar and Joy Joseph for respondent No 2
SJ Sorabji AJ Rana KL Hathi and KN Bhat for the interveners
The Judgment of the Court was delivered by Grover J
This is an appeal by special leave from a judgment of the Punjab High Court Circuit Bench Delhi in which the validity and legality of the levy of cess by way of excise duty on the rubber used by manufacturers of chappals under the provisions of the  Act XXIV of 1947 as amended hereinafter called the Act have been assailed
70 Ms Jullundur Rubber Goods Manufacturers  Association is an association of rubber chappal manufacturers at Jullundur in the State of Punjab
Its members who manufacture chappals are stated to use
about 15 to 20 of rubber in the process of their manufacture while the rest of the material used by them consists of various other articles
A petition was filed under articles 226  227 on behalf of the aforesaid Association the second petitioner being its Secretary challenging the levy and collection from the manufacturers of chappals under the provisions of the Act the Rules framed and the relevant notification issued thereunder of a duty as a result of the amendment made in section 12 of the Act by the Rubber Amendment Act of 1960
A learned Single Judge dismissed the writ petition and his judgment was affirmed by a division bench of the High Court
The contentions which have been raised are 1  the duty sought to be imposed under section 12 as amended being outside the ambit of Entry 84 of List I in the Seventh Schedule to the Constitution is beyond the legislative competence of the Parliament 2 Section 122 suffers from the vice of excessive delegation
It confers uncontrolled and unrestricted discretion upon the Rubber Board to levy upon and collect duty of excise from either the owners of the rubber producing estates or the users so called manufacturers of rubber without specifying the circumstances under which it should be imposed upon the one or the other nor has any guiding policy or principle been laid down in the Act for making a choice
3 In any case the Rules which have been framed do not satisfy the provisions of section 122 of the Act and do not indicate with sufficient clarity and precision on whom the levy is to be made and from whom the duty is to be collected as between the owners of the estates and the manufacturers
The relevant statutory provisions may first be noticed
In 1947 the Central legislature enacted The Rubber Production and Marketing Act 1947
Its name was changed to by the Rubber Production and Marketing Amendment Act 1954
The Act was enacted to provide for the development under the control of the Union of the rubber industry
Under section 4 the Rubber Board was to be constituted
The functions of the Board were enumerated in section 8
It was to be its duty to promote by such measure as it thought fit development of the rubber industry
Under section 10 it was obligatory on every person owning land planted with rubber plants to get himself registered as an owner by applying to the Board
Section 12 provided for the imposition of rubber cess
Under section 14 no person could sell or otherwise dispose of or buy or otherwise acquire rubber 71 except in accordance with the terms of general or special license issued by the Board
The Central Government was given the over all control over the acts of the Board by section 22
Section 25 empowered the Central Government to make Rules
Prior to the amendment made by the Rubber Amendment Act of 1960 Act XXI of 1960 the duty of excise was payable under s122 by the owners of the estates on which rubber was produced and it was to be paid by  them to the Board within one month from the date on which they received a notice of demand
By Act XXI of 1960 an important change was made which affected the manufacturers and the duty could be collected by the Board either from the owners of the estates or from the manufacturers by whom the rubber is used
At this stage the relevant provisions of the Act with which we are concerned may be reproduced  section Be manufacturer means any person engaged in the manufacture of any article in the making of which rubber is used h rubber means i ii iii latex dry rubber content in any state of concentration and includes scrap rubber sheet rubber rubber in powder and all forms and varieties of crepe rubber but does not include
rubber contained in any manufactured article section 43  The Board shall consist of a a Chairman to be appointed by the Central Government b two members to represent the State of Madras one of whom shall be a person representing rubber producing interests c eight members to represent the State of Kerala six of whom shall be persons representing the rubber producing interests three of such six being persons representing the small growers d ten members to be nominated by the Central Government of whom two
shall represent the manufacturers and four labour and e three members of Parliament of whom two shall be elected by the House of the People and one by the Council of States and 72 f the Rubber Production Commissioner ex Officio section 124For the purpose of enabling the Board to assess the amount of duty of excise levied under the section a the Board shall by notification in the Official Gazette fix a period in respect of which assessments shall be made and b without prejudice to the provisions of section 20 every manufacturer shall furnish to the Board a return not later than fifteen days after the expiry of the period to
which the return relates stating i in the case of an owner the total quantity of rubber produced on the estate in each such period Provided that in respect of an estate situated only partly in India the owner shall in the said return show separately the quantity of rubber produced within and outside India ii in the case of a manufacturer the total quantity of rubber used by him in such period out of the rubber produced in India
 The contention raised on behalf of the appellant association is that under Entry 84 of List I in the Seventh Schedule to the Constitution the duties can be levied on goods manufactured or produced in India
Excise duty it is pointed out can be levied only on the actual producers and manufacturers of rubber but in the very nature of such duty it could not be imposed on users or consumers of that commodity
It is suggested that sub section
1  of section 12 is the charging section and sub section
2 provides for the machinery for levy and collection of tax
But sub section 2 cannot alter the substantive provision in the charging sub section 1 and since the Parliament has employed the words duty of excise which have a well understood meaning the incidence of tax would fall only on the actual producers
Once the incidence of tax was shifted to the users the tax would cease to be one which would fall within Entry 84
In re the Central Provinces and Berar Act No XIV of 19381 Gwyer CJ described excise duty thus But its primary and fundamental meaning in English is still that of a tax on articles produced or 1  40 41
73 manufactured in the taxing country and intended for home consumption
The learned Chief Justice however proceeded to add that there could be no reason in theory why such duty should not be imposed even on the retail sale of an article if the taxing Act so provided
It could obviously be imposed at the stage which was found to be most convenient and lucrative as that was a matter of the machinery of collection and did not affect the essential nature of the tax
Referring to this decision of the Federal Court and several other cases it was observed in RC Jail vs Union of India1 at page 451 Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country
It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer that is its ultimate incidence will always be on the consumer
Therefore subject always to the legislative competence of the taxing authority the said tax can be levied at a convenient stage so long as the character of the impost that is it is a duty on the manufacture or production is not lost
The method of collection does not affect the essence of the duty but only relates to the machinery of collection for administrative convenience
Whether in a particular case the tax ceases to be in essence an excise duty and the rational connection between the duty and the person on whom it is imposed ceased to exist is to be decided on a fair construction of the provisions of a particular Act
The above statement of law in no way supports the argument that the excise duty cannot be collected from persons who are neither producers nor manufacturers
Its incidence certainly falls directly on the production or manufacture of goods but the method of collecting will not affect the essence of the duty
In our opinion sub section
2 of section 12 provides for the method of collection as the excise duty can be collected either from the producers or from the manufacturers as defined by the Act which would include members of the appellant association who use rubber in the manufacture of chappals
It seems to us that if the provisions of Entry 97 in List I in the Seventh Schedule as also the provisions of article 248 of the Constitution are kept in view the Parliament would have legislative competence even with regard to the imposition of a tax which does not fall within Entry 84
It will be a kind of non descripts tax which has been given the nomenclature of a duty of excise
1 1962 Supp 3 SCR 436
CI70 6 74 Counsel for the appellant association quite properly has not challenged this position but has merely sought to lay emphasis on sub section  1  being the charging section
We find it difficult to endorse the reading of sub section
1  and sub section
2 of section 12 in isolation
Not only the statute but also the section have to be read as a whole and together and in our judgment whatever be the nature of duty Parliament would undoubtedly have legislative competence under Entry 97 of List I in the Seventh Schedule read with article 248 of the Constitution
We may next deal with the question whether section 122 suffers from the vice of excessive delegation and whether there has been violation of article 14 as uncontrolled and unbridled discretion has been conferred on the Board to levy and collect the tax from either the producer or the manufacturer the user of rubber
It is pointed out that there is no guiding principle or policy laid down in the Act to enable the Board to make a choice between the two categories
The principles governing such questions have been laid down in several decisions of this Court
It is well established that essential legislative functions consist of the determination of the legislative policy and its formulation as a binding rule of conduct and cannot be delegated by the legislature
What can be delegated is the task of subordinate legislation necessary for implementing the purpose and objects of an enactment
Where legislative policy is enunciated with sufficient clearness or a standard is laid down the courts will not interfere
It will depend on consideration of the provisions of a particular Act including its preamble as to the guidance which has been given and the legislative policy which has been laid down in the matter
In a taxing statute the guidance may take the form subjecting the rate to be fixed by the local body to the approval of the Government which acts as a watch dog on the actions of the local body in this matter on behalf of the legislature
The reasonableness of the rates may be ensured by providing Safeguards laying down the procedure for consulting the wishes of the local inhabitants
So long as the law has provided the method by which the local body can be controlled and there is a provisions to see that reasonable rates are fixed it can be said that there is guidance in the matter of fixing the rates for local taxation vide Wanchoo CJ in Municipal Corporation of Delhi vs Birla Cotton Spinning and Weaving Mills Delhi  Anr1 In section 122 the Parliament has made it quite clear that the Board can levy and collect the duty of excise either from the owner of a rubber estate on which the rubber is produced or from the manufacturer by whom such rubber is used
The Board has 1  at pp
269 270
75 further been enjoined to do so in accordance with Rules made in this behalf
The Board as constituted under section 4 has to be a high powered body and among its members those representing the rubber producing interests the small growers the manufacturers and the labour are included
It can therefore keep in view the interests of all concerned
AccOrding to the preamble of the Act it was meant for the development of the rubber industry under the control of the Union
That is the main purpose for which the Board has to function
All amounts paid to the Board by the Central Government under section 127 of the Act have to go to the general fund of the Board under section 9A Section 127 provides that the proceeds of the duty of excise collected has first to be credited to the Consolidated Fund of India reduced by the cost of collection and then it has to be paid over by the Central Government to the Board
The Board is thus vitally interested in the collection of the duty and it has to see that such duty is collected without undue delay and proper expedition
It has also to look to the best possible method of realization
In the light of this scheme as embodied in the Act it is difficult to sustain the challenge on the ground of excessive delegation
The policy of the Act has been enunciated with sufficient clarity and the guidance has been furnished by the provisions to which reference has been made as to how the Board should exercise its powers in the matter of levy and collection of tax
There is also another important safeguard which is contained in section 22 of the Act
All acts of the Board by virtue of that section shall be subject to the control of the Central Government which may cancel suspend or modify any action taken by the Board
The provision in section 122 that the Board shall levy and collect the duty in accordance with the Rules is another important safeguard against the Board acting arbitrarily in the matter of collection of duty from the owners of the rubber estates or the manufacturers
These Rules are to be framed by the Central Government under section 251xxa which is to the following effect the cases and circumstances in which the duty of excise under section 12 shall be payable by the owner and the manufacturers respectively the manner in which the duty may be assessed paid or collected the regulation of the production manufacture transport or sale of rubber in so far as such regulation is necessary for the proper levy payment or collection of duty Section 253 makes it obligatory on the Central Government to place every rule before each House of Parliament for a specified period of 30 days and those Rules can be subject to criticism and can be modified or even be abrogated
Thus it is not possible 76 to hold that the Parliament has abdicated its functions in enacting section 122 of the Act
Learned Attorney General has relied on certain decisions of this Court according to which it can be left to the authority which has to levy and collect the tax to decide whether to collect from one category of persons or the other category where persons in both categories can be subjected to tax
In MM Ipoh  Ors
Income tax Madras1 the validity of section 3 the Income tax Act 1922 was challenged on the ground that it was violative of article 14 of the Constitution
That section invested the taxing authority with an option to assess to tax the income collectively of the association of persons
The argument raised was that that Act set no principles and disclosed no guidance to the Income tax Officer in exercising the option
The scheme of the Income tax Act was considered and it was observed that the duty of the Income tax Officer was to administer its
provisions in the interest of public revenue and to prevent evasion of tax and his function was mainly quasi judicial
The decision of bringing to tax either the income of the association collectively or the shares of the members of the association separately was not final and was subject to appeal
It was held that the very nature of the authority exercised by the Income tax Officer and his duty to prevent evasion or escapement of liability constituted adequate enunciation of principles and policy for his guidance
In Raghubar Dayal Jai Prakash vs The Union of India2 the validity of certain provisions of the Forward Contracts Regulation Act 1952 was assailed
In regard to section 15 of that Act the argument was that it conferred unguided and arbitrary power upon the Central Government to choose any commodity it liked and bring the Act into operation in respect of the commodity which the Government chose at any time it pleased
In this manner the interest of the traders could be vitally affected by rendering illegal a contract which was
perfectly legal when it was entered into
This Court referred to the Report of the Expert Committee on the Bill which became an Act dealing with the economic implications of forward trading and for the necessity of regulating such contracts in particular goods
It was observed that the suitability of a commodity for forward trading depended on factors which were far from static and which were subject to variations over a period of time
A continuous assessment was required of all elements which would necessitate regulation
All this could not
be specified in a statute
It was for that reason that a Forward Markets Commission had been constituted on whom the duty had been cast of advising the Government on the situation as it existed from time to time
The following observations are pertinent and may be reproduced 1  2 1962 3 SCR
547 77 In our opinion the selection of the commodity the regulation of forward trading in it or of prohibition such trading can only be left to the Government and the purpose for which the power is to be used and the machinery created for the investigation furnish sufficient guidance as to preclude any challenge on the ground a violation of article 14
 In the statement of objects and reasons appended to Bill No 32 of 1960 when amendments were made in section 12 of the Act by the Rubber Amendment Act 1960 it was stated inter alia This method of collection of the cess provided under the Act has led to considerable evasion of cess by the owners of the estates either by evasion of registration or by failure to submit correct returns or any returns at all
There are about 26000 estates under production in the country and most of them are small holdings
Many of them do not render returns of production to the Rubber Board and thus evade payment of duty
From October 1947 to December 1954 it was found that 20608 tons of rubber escaped assessment and the Board suffered during the period a loss Rs 230805
The Rubber Board estimates that under the present system there is no likelihood of more than 65 per cent of the potential revenue being realised each year
With a view to improving the efficiency of collection it is proposed to amend section 12 of the Act so as to enable the cess to be collected either from the owners or the manufacturer who ultimately consumes the rubber produced in the estates
There are at present 347 registered rubber manufacturers in the country
It is felt that it would be far more easy to collect the cess from a small number of manufacturers than from about 26000 producers whose number will increase year by year
The proposed amendment of section 12 in the amending Bill is an enabling measure for the administrative change in the method of collection being contemplated
 Although it may not be permissible to take the statement of objects and reasons into consideration for construing the provisions of an Act the facts contained in such a statement can certainly be looked at for the purpose of seeing any alleged infringement of article 14
It is quite clear from the data given that the Rubber Board was finding it difficult to levy and collect 78 the duty from the owners of rubber estates and it was considered that it would be much easier to collect the same from the manufacturers
The Board was therefore to collect the duty in accordance with the rules made in this behalf by the Central Government
Thus it was necessary in view of the entire facts and circumstances stated before that it should be left to the rule making authority to indicate the cases and the circumstances in which the duty of excise was to be collected from the owner or the manufacturer respectively
It was open to the rule making authority to vary the rules according to the changing circumstances and conditions
The Board which was a high powered body was mainly responsible for collection of the duty and the rules would naturally be made in consultation with it from time to time
We are unable to see how the challenge on the ground of discrimination under article 14 can be sustained in view of all these reasons
It does not appear that the Board can discriminate in an arbitrary manner between owners of rubber estates and the manufacturers or between persons inter se of the same category
The Central Government has framed rules pursuant to the power conferred by section 25 of the Act
Unfortunately the rules relating to furnishing of returns and collection of duties are not properly worded and suffer from lack of clarity
Under Rule 33 the Board can call for information and documents from owners of rubber estates or any licensed dealer or manufacturer relating to the stock of rubber held and sale of rubber etc
Under el
e all manufacturers have to submit half yearly returns in form M showing the total quantity of all rubber purchased or otherwise acquired and consumed or used in the process of manufacture
Rule 33A provides for production of accounts by an owner if he fails to furnish in time the return referred to in sub section
4 of section 12 or if he furnishes a defective return
The Board can after checking the amounts and after making such further enquiry as it may deem fit assess the amount payable under sub s2 of section 12
Similar provision is made with regard to manufacturers by Rule 33B
Rule 33D however is material and may be reproduced 1  Every manufacturer shall by demand notice sent through registered post or in such other manner as the Board may direct be intimated of the amount assessed on the quantity of rubber acquired during the periods specified in rule 33e
On receipt of such notice the manufacturer shall pay to the Board the amount specified therein either in cash at the Board s office at Kottayam or by money order or by 79 bank draft or cheque duly crossed and payable at Kottayam to the Secretary of the Board within 30 days of the receipt of the said notice
2 On such demand being made if a manufacturer fails to pay the amount within the due date the Board may take steps to report the fact to the Central Government or the State Government concerned for recovery of the outstanding amount as an after of land revenue
 Now the above rule seems to contemplate the filing of return both by the owners of rubber estates and manufacturers
But under Rule 33D the demand notice can be sent only to a manufacturer on receipt of which he must make payment to the Board of the amounts specified therein
On his failure to make such payment the Board can take steps for recovery of the amounts due as arrears of land revenue by reporting to the Central Government or the State Government as the case may be There is no such procedure prescribed with regard to owners of estates
It would follow that under the rules the demand notice is to be sent only to the manufacturers and the amounts of duty are to be realised from them alone
The substantive provisions of sub sections
4 5 and 6 of section 12 also contemplate assessment being made with regard to the returns to be furnished by owners and manufacturers
Any person aggrieved by an assessment has been given the right of appeal to the District Judge
But as pointed out before there is no provision either in the statute or in the rules for a demand to be made and a coercive process to be employed in the event of failure to make the payment
That is done by Rule 33D alone from which it would be reasonable to conclude that under the rules it is only the manufacturers who are liable to pay the amount of duty
The rules can therefore be said to make a definite provision with regard to the category of persons from whom the collection of the duty is to be made namely the manufacturers
For all the reasons given above the appeal fails and it is dismissed with costs
YP Appeal dismissed


Summary:
The appellants an association of rubber chappal manufacturers who were using rubber in their manufacturing process filed a petition in the High Court challenging the levy and collection from the manufacturers of chappals of a duty under section 12 of the aS amended by Rubber Amendment Act 1960
The grounds of challenge were 1 that the imposition on the appellants was outside the ambit of Entry 84 of List I of VII Schedule of the Constitution which deals with the duties which can be levied on goods manufactured or produced in India 2 Section 122 which provides the machinery for levy and collection has given uncontrolled and unbridled discretion to the Rubber Board and no guiding principle or policy was laid down in the Act to enable the Board to choose between the owners of estates of rubber or the users of the rubber and 3 the rules framed under the section do not indicate with sufficient clarity and precision on whom the levy was to be made
The High Court dismissed the petition
In appeal to this Court HELD 1 a The excise duty could be imposed at the stage which was found to be most convenient and lucrative as that is a matter relating to the machinery of collection and did not affect the essential nature of the tax
Therefore merely because the incidence of tax is shifted to the users of rubber under section 122 which provides for the method of collection the tax would not cease to be one falling within Entry 8473 B CF G RC fall vs Union of India 1962 Supp
3 SCR 436 followed
Re the Central Provinces and Berar Act 14 of 1938  applied
b If the duty is not excise duty because it is imposed on the user Parliament would even then have legislative competence to provide for its collection from users whatever be its nature under Entry 97 of List I read with article 248 of the Constitution
73 H 74 A B 2 The task of subordinate legislation necessary for implementing the purpose and objects of an enactment can be delegated so long as the law has provided the method by which the
delegate can be controlled there is a guidance for fixing rates of tax and there is a provision to see that reasonable rates are fixed
74 D F Municipal Corporation of Delhi vs Birla Cotton Spinning and Weaving Mills   followed
In the present case the Act was enacted for the purpose of development of rubber industry under the control of the Union Parliament has 69 enacted that the Rubber Board can levy and collect the duty either from the owner of the rubber estate or the user of the rubber
But the Board is enjoined to do so in accordance with the Rules made by Central Government under section 251 a of the Act and which are placed before each House of Parliament for approval
The Board itself is a high powered body and all interests are represented among its members and all its acts are subject to the control of the Central Government under section 22
74 H 75 Ii 78 C Further
the Board is vitally interested in the collection of the duty and it has to see that such duty is collected without undue delay and proper expedition
The objects and reasons of the Amending Act which can be taken into consideration for the purpose of seeing if there is any alleged infringement of article 14 show that the Board was finding it difficult to levy and collect the duty from the owners and it was considered that it would be much more easy to collect it from the users in accordance with the rules
Thus it is necessary that it should be left to the rule making authority to indicate the cases and the circumstances in which the duty was to be collected from the owner or user
75 C 77 H 78 A B Since the policy of the Act has been enunciated with sufficient clarity and guidance has been furnished as to how the Board should exercise its powers in the matter of levy there is no discrimination and article 14 is not violated
Ipoh vs
CIT Madras  and Raghubar Dayal Jai Prakash vs Union of India   referred to
3 A combined reading of rr
33 33A and 33D indicates that a definite provision is made with regard to the category of persons on whom the collection of the duty is to be made namely the users of rubber