Case: V. Nagappa Vs. Iron Ore Mines Cess Commissioner &amp; Another

"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" (at 1244). 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 councillors imposing reasonable rates of tax. Again, guide or control on the limit of taxation could be seen in the expression "purposes of the Act" in S. 113. The power to tax was circumscribed by the need to finance the functions which were made incumbent on the Corporation to perform. The necessity of adopting budget estimates each year as provided under the Act afforded another limit and guideline in the matter. Further, the fact that the Government was made the watchdog to control the actions of the Corporation in the matter of fixing the rates provided another check against arbitrarily exercising the power of taxation vested with the Corporation. The guidance may also take the form of providing maximum rates of tax upto which a local body may be given the discretion to make its choice. Lastly, relying on Kruse v. Johnson, (1898) 2 QB 91 the learned Chief Justice pointed out that in the case of subordinate public representative bodies, such as municipal boards, the reasonableness of their action could be reviewed by the Courts. Thus the majority relied on the safeguards inherent in delegating the power to an elected body and guidelines provided under the various provisions of the Act for upholding the delegation. They observed the power from the angle of its exercise and guaged its propensity for abuse functionally."12. In D. Ramaraju v. State of A. P. AIR 1972 SC 828 the question was about the vires of the Andhra Pradesh (Krishna and Godavari Delta Area) Drainage Cess Act, 1968. Section 3 of that Act provided for levy and collection of drainage cess. According to sub-sec. (1) of that section there shall be levied and collected by the Government, for a period of six years from the date of the commencement of the Act, as a drainage cess on every land in the delta area comprised within a division specified in Column (2) of the Schedule, for the purposes of the Act in that division, a tax at such rate per acre per annum, not exceeding the rate specified in the corresponding entry in column (3) thereof, as the Government may, by notification, specify in respect of that division. The schedule referred to in the section fixed the maximum rate at which drainage cess may be collected and according to it the maximum rate shall be Rs. 10 per acre per annum for the Godavari eastern delta, and the Godavari central delta. Section 8 (l) provides for a cess fund and any moneys received from the Central or State Government or any other source for the purposes of the Act shall be credited to the Fund together with the proceeds of the Drainage Cess as levied and collected under the Act. Sub-section (4) of S. 8 provides that the fund, in so far as it relates to the proceeds of the drainage cess levied and collected in a division, shall be applied towards meeting the cost of the drainage schemes which the Board may, with the concurrence of the Government, undertake in that division.13. In answer to the contention that the section furnishes no sufficient guidelines for exercising the discretion to fix the rate, and therefore, the section was bad on the ground of excessive delegation of legislative power, the Court said that the Act contained sufficient guidelines for the fixation of the rate of cess, that there was enough material on record to justify a uniform rate of cess for each acre of land in a Divison of tile deltaic area and that the imposition of tax on land for raising general revenue substantially different from the levy of cess for implementation of a drainage scheme for the benefit of lands in an area.14. Tested in the light of the reasoning adopted in the cases referred to above, we are of opinion that the Act has furnished definite guidelines for the Government to exercise the power to fix the rate of excise duty.15. Section 3 has specified the purposes for which the excise duty collected is to be utilized. We do not think that the purposes mentioned are vague or indefinite or that the expenses to be incurred for those purposes cannot be calculated with reasonable certainty. The power to levy the duty must be taken to be limited by the expenses required to discharge the statutory function to be performed by the delegate and so, the rate that is to be fixed should be such as would bring in the amount necessary to meet the needs of the delegate for discharging the functions.16. That the amount collected will be expended for the purposes enumerated in S. 3 is ensured firstly by requiring the Government to make an appropriation by means of parliamentary legislation and reports to be published in the official Gazette.17. The policy of the Act has been clearly stated; the purposes for which the tax collected should be expended have been enumerated and the purposes are such that it is reasonably possible for the delegate to calculate the amount necessary to meet them. In these circumstances, we think that the necessary guidance for fixing the rate can be found in the amount of expenditure necessary for carrying out the purposes of the Act. Quite apart from these circumstances, the fact that S. 2 has fixed the maximum rate would indicate that the delegate is not given an uncontrolled discretion in the matter of fixing the rate. The area within which the discretion has to be exercised having been clearly demarcated, it cannot be said that a blanket power to fix the rate has been delegated to Government.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]13. In answer to the contention that the section furnishes no sufficient guidelines for exercising the discretion to fix the rate, and therefore, the section was bad on the ground of excessive delegation of legislative power, the Court said that the Act contained sufficient guidelines for the fixation of the rate of cess, that there was enough material on record to justify a uniform rate of cess for each acre of land in a Divison of tile deltaic area and that the imposition of tax on land for raising general revenue substantially different from the levy of cess for implementation of a drainage scheme for the benefit of lands in an area.14. Tested in the light of the reasoning adopted in the cases referred to above, we are of opinion that the Act has furnished definite guidelines for the Government to exercise the power to fix the rate of excise duty.15. Section 3 has specified the purposes for which the excise duty collected is to be utilized. We do not think that the purposes mentioned are vague or indefinite or that the expenses to be incurred for those purposes cannot be calculated with reasonable certainty. The power to levy the duty must be taken to be limited by the expenses required to discharge the statutory function to be performed by the delegate and so, the rate that is to be fixed should be such as would bring in the amount necessary to meet the needs of the delegate for discharging the functions.16. That the amount collected will be expended for the purposes enumerated in S. 3 is ensured firstly by requiring the Government to make an appropriation by means of parliamentary legislation and reports to be published in the official Gazette.17. The policy of the Act has been clearly stated; the purposes for which the tax collected should be expended have been enumerated and the purposes are such that it is reasonably possible for the delegate to calculate the amount necessary to meet them. In these circumstances, we think that the necessary guidance for fixing the rate can be found in the amount of expenditure necessary for carrying out the purposes of the Act. Quite apart from these circumstances, the fact that S. 2 has fixed the maximum rate would indicate that the delegate is not given an uncontrolled discretion in the matter of fixing the rate. The area within which the discretion has to be exercised having been clearly demarcated, it cannot be said that a blanket power to fix the rate has been delegated to Government.