Case: Avinder Singh Etc Vs. State Of Punjab &amp; Anr. Etc

This heavy bunch of writ petitions impeaching the validity of a tax on foreign liquor raises a few familiar legal riddles. A rupee per bottle sold within every municipal town or city is the impugned levy, meant, according to the Punjab Government, to serve the twin purposes of replenishing the resources of municipal bodies reduced by house tax exemptions and of weaning drinkers from overly consuming foreign liquor as a prohibitionist gesture. To pick the pocket of every spirituous bibber of the higher brackets by a tiny tax may be but a feeble homage to Art. 47 of the Constitution, and to finance welfare projects with this tainted tax may be queer Gandhiana. The will to enforce dry sobriety in society and to abolish massive human squaller by fleecing the fat few, is made of s terner stuff, maybe. But matters of means and ends, of police and morality, are largely for the legislature and validity is the province of the court. We let slip the observation only because, from a certain angle, these dual grounds make od d companions and add to the credibility gap, although our focus is solely on the legality of the levyIt is better to begin with the story of the tax under challenge. The petitioners are all licensees to trade in foreign liquor including Indian made foreign liquor. They are either wholesalers or retailers and pay excise duty and other fees and taxes including sales tax under the general sales tax law which imposes a levy of 10 per cent, on sales of foreign liquor. There are also o ctroi levies of 10 per cent, and educational tax of 2 per cent, and these add up to a considerable burden; but the commodity taxed is foreign liquor, Indian made or other, whose consumer usually belongs to the well to do sectors.The municipalitie s of Punjab are governed by two enactments. The numerous little ones are statutory bodies created and controlled by the Punjab Municipal Act, 1911 and the few large ones bythe Punjab Municipal Corporation Act, 1976 (the Act, for brevity, hereafter). For our purposes, the provisions run on identical terms and so we will take up the latter statute which compresses into one section a plurality of sections in the former, and set out the common scheme to study the critical issues raised. Arguments have been addressed only on this basisThe immediate facts which have launched the litigative rocket need to be narrated now to get a hang of the core questions in their correct perspective. The State of Punjab, in April 1977, under its statutory power [s. 90(4)] required the various municipal bodies in the State to impose a tax on the sale et al, of foreign liquor at the rate of Re. 1/- per bottle with effect from May 20, 1977. The municipal authorities having tarried t oo long or totally failed to take action pursuant to this directive, the State directly entered the fiscal arena and issued a Notification under s. 90(5) dated May 31, 1977, which reads thus:"Whereas the Government of Punjab, in exercise of the powers conferred by sub-section (4) of section 90 of the Punjab Municipal Corporation Act, 1063-A-PSLG-77/12170, dated 11th April, 1977, required of the Municipal Corporation of Ludhiana in Punjab to impose tax on the sale of "Indian made Foreign Liquor" at the rate of rupee one per bottle, by the 20th May, 19772. And Whereas, the Municipal Corporation of Ludhiana has failed to carry out the aforesaid order of the Punjab Government within the stipulated period3. Now, therefore, in exercise of the powers conferred by sub-section (5) of section 90 ofthe Punjab Municipal Corporation Act, 1976, the President of India is pleased to impose/modify the tax on the sale of "Indian made Foreign Liquor" within the Municipal Corporation of Ludhiana at the rate of rupee one per bottle. The tax shall come into force with effect from 1st June, 1977.L.S. BINDRALocal Government Department"This notification, issued under s. 90(5) read with s. 90(2)(b) of the Act, was later modified marginally but survives substantially. The petitioners (licensees) challenge its vires both as contrary to the statutory provision (s. 90) and as violative of the Constitution. The triple shapes of the fatal constitutional pathology are that (a) s. 90 (2)(b) of the Act suffers from the vice of excessive delegation or legislative abdication; (b) there are no guidelines for the exercise of the vagariously wide fiscal power of the corporation or Government which make it too unreasonable to be salvaged by Art. 19(5) and too arbitrary to be equal under Art. 14; and (c) the order itself is vitiated by multiple infirmities. The principal invalidatory charge, based on the Act, is that s. 90(4) interdicts any tax already imposed. The present tax is on sales and there is, under the general sales tax law, already a like levy on sales of foreign liquor in the State, and so the second fiscal venture is beyond Governments power. We have to consider these grounds of attack on the notification which are the emphatic submissions of Shri Tarkunde who led the arguments. There are more subsidiary submissions urged by other counsel on a lower key, though, but we have to deal with them too in due course. Briefly, they are (a) that in picking out for taxation, from the broad spectrum of luxury goods or intoxicants, foreign liquor alone, discrimination has been practised, (b) that even assuming that Government can exercise the power of the municipal body, it may not do so without adhering to the procedural fairness implied in the Explanation to s. 90(2) applicable to municipal bodies and (c) that unequals are being treated equally because the tax of Re. 1/- bottle at a flat rate disregards germane considerations like the price of the liquor or the degree of alcoholic content. A feeble plea that the tax is bad because of the vice of double taxation and is unreasonable because there are heavy prior levies was also voiced. Some of these contentions hardly merit consideration, but have been mentioned out of courtesy to counsel. The last one, for instance, deserves the least attention. There is nothing in Art. 265 of the Constitution from which one can spin out the constitutional vice called double taxation. (Bad economics may be good law and vice versa). Dealing with a somewhat similar argument, the Bombay High Court gave short shrift to it in Western India Theatres(1). Some undeserving contentions die hard, rather survive after death. The only epitaph we may inscribe is: Rest in peace and dont be re-born ! If on the same subject-matter the legislature chooses to levy tax twice over there is no inherent invalidity in the fiscal adventure save where other prohibitions exist.Likewise, the plea that a flat rate of Re. 1/- per bottle, be it brandy or other stronger beverage or be it Rs. 50/- or Rs. 500/- per bottle, cannot be seriously pressed. In the field of taxation many complex factors enter the fixation and flexibility is necessary for the taxing authority to make a reasonably good job of it. Moopil Nairs case(2) does not discredit as unconstitutional anathema all flat rates of taxation. Maybe, in marginal cases where the virtual impact of irrationally uniform impost on the same subject is glaringly discriminatory, expropriatory and beyond legislative competence, different considerations may arise; but to condemn into invalidity a tax because it is levied at a conveniently flat rate having regard to the commodity or service which has a high range of prices and the minimal effect on the overall price, its easy means of collection and a variety of other pragmatic variables, is an absurdity, especially because in fiscal matters large liberality must be extended to the Government having regard to the plurality of criteria which have to go into the fiscal success of the measure. Of course, despite this forensic generosity, if there is patent discrimination in the sense of treating dissimilar things similarly or vice-versa, the court may treat the tax as suspect and scrutinise its vires more closely. In the present case, intoxicating liquids falling in the well-known category of foreign liquors form one class and a flat minimal rate of Re. 1/- per bottle has no constitutional stigma of inequality. It is so easy to conceive of innumerable taxes imposed in this manner in the daily governance of the country t hat illustrations are unnecessary. As excisable articles go, foreign liquor is a distinct category and absence of micro-classification within the broad genus does not attract the argument of inequality. Likewise, picking and choosing within limits is inevitable in taxation. The correct law is found in East India Tobacco Co.(1)"It is not in dispute that taxation laws must also pass the test of Art 14. That has been laid down recently by this Court in Moopil Nair v. The State of Ker ala. But in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of Art. 14. The following statement of the law in Willis on "Constitutional Law" page 587, would correctly represent the position with reference to taxing statutes under our Constitution:-"A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably........The Supreme Court has been practical and has pe rmitted a very wide latitude in classification for taxation."An examination of excessive delegation of legislative power takes us to the scheme of the Act and insight into the dynamics of municipal administration. Certain fundamentals must be remembered in this context and then the text of the provision understood in the constitutional perspective. The Founding Document of the nation has created the three great instrumentalities and entrusted them with certain basic powers-legislative, judicative and executive. Abdication of these powers by the concerned instrumentalities, it is axiomatic, amounts to betrayal of the Constitution itself and it is intolerable in law. This means that the legislature cannot self-efface its personality an d make over, in terms plenary, the essential legislative functions. The legislature is responsible and responsive to the people and its representatives, the delegate may not be and that is why excessive delegation and legislative hara kiri have been frowned upon by constitutional law. This is a trite proposition but the complexities of modern administration are so bafflingly intricate and bristle with details, urgencies, difficulties and need for flexibility that our massive legislatures may not get off to a start if they must directly and comprehensively handle legislative business in all their plenitude, proliferation and particularisation. Delegation of some part of legislative power becomes a compulsive necessity for viability. If the 500-odd parliamentarians are to focus on every minuscule of legislative detail leaving nothing to subordinate agencies the annual output may be both unsatisfactory and negligible. The Lawmaking is not a t urnkey project, ready-made in all detail and once this situation is grasped the dynamics of delegation easily follow. Thus, we reach the second constitutional rule that the essentials of legislative functions shall not be delegated bu t the inessentials, however numerous and significant they be, may well be made over to appropriate agencies. Of course, every delegate is subject to the authority and control of the principal and exercise of delegated power can always be directed, corrected or cancelled by the principal. Therefore, the third principle that emerges is that even if there be delegation, parliamentary control over delegated legislation should be a living continuity as a constitutional necessity. Within these triple principles, Operation Delegation is at once expedient, exigent and even essential if the legislative process is not to get stuck up or bogged down or come to a grinding halt with a few complicated bills. It is apt to excerpt here an oft-quoted observation from Vasantlal Maganbhai Sanjanwala affirmed in Devi Das Gopal Krishnane Constitution confers a power and imposes a duty on the legislature to make laws. The e ssential 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 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. Bu t there is a danger inherent in such a process of delegation. An over burdened 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. It is for a Court to hold on a fair, generous and liberal construction of an impugned statute whether the legislature exceeded such limits. But the said liberal construction should not be carried by the Courts to the extent of always t rying to discover a dormant or latent legislative policy to sustain an arbitrary power conferred on executive authorities. It is the duty of the Court to strike down without any hesitation any arbitrary power conferred on the executive by the legislature."Such being the basics, accepted by presidential profusion of this Court, we have to examine whether any essential legislative function has been transplanted into the hands of Government or corporation by the Act, whether the delegation itself is an entrustment of overboard power, so unguided that the delegate may run amok and do what is arbitrary, unreasonable and violative of Articles 14 and 19 of the Constitution. Taxation is exaction and even expropriation and, therefore, the right to property is in peril when a fiscal measure is afoot. Article 10 comes into play when law is made for purposes of taxation and that law must comply with Part III. Arbitrariness must be exc luded in the law, for, if power is arbitrary it is potential inequality and Art. 14 is fatally allergic to inequality before the law.These generalities take us to the particularities of the present case. Shri Tarkunde turned the forensic fusillade on the total absence of guidance and regulation anywhere in the statute, expressly or implicitly, and on a true construction, according to him, a blanket power has been vested by s. 90 on the corporation and, indubitably, on the Government.

Court's reasoning:
It must be remembered that as between two interpretations that which sustains the validity of the law must be preferred. A close look at the schematic provisions and administrative realities is very revealing. Is Government innocent of the total needs of municipal bodies and indifferent to the legitimate pressures of its denizens?This conspectus of provisions brings into bold relief the anaemic nature of municipal autonomy. Full-blooded units of self-government, reflecting full faith in decentralised democracy uninhibited by a hierarchy of bureaucrats is the vision of Art. 40. While the Gandhian goal is of a shining crescent on a starry sky the sorry reality is that our municipalities vis-a-vis government are wan like a full moon at middayThis study of the statutory scheme shows that, in large measure, municipal councils reign, municipal commissioners rule; local self government is an experiment in directed democracy by the bureaucracy, Art. 40, notwithstanding. State Governments master-mind municipal administration in broad policies and even in smaller details and legally can suspend resolutions and supersede the organ itself. Municipal legislation sanctions this Operation Mask. If pluralism and decentralisation are to strengthen our democracy more authority and autonomy, at least experimentally, must be vested in local bodies. To day, prompt elections when periods expire are rare; councillors exist, debate, resolve, but power eludes them. Even so, municipal maya also counts ceremonially and otherwise.To set the record straight, we must state that many municipal bodies do exercise their limited powers properly and serve the public without nagging interference by Government officials. Municipalities are realities, often precarious, thoughThis statutorily sanctified comprehensive oversight by Government weaken the assumption of Shri Tarkunde that State Governments know little of the needs and respond remotely to the pressures of the locality and that the guidelines stressed in the rulings cited above vanish when Government directly operates under s. 90(5). The finances, budgetary estimates and many aspects of the affairs of each municipal body, reach the Government, channelled through its minions, and, by force of statute, are approved, sanctioned, modified or reversed by the State Secretariat. So, there is not much force in the submission that under s. 90(5) governmental action may b e a blind mans buff, not intelligent appreciationSecondly, under s. 90(5) Government acts to augment municipal revenues and so will, understandably, inform itself of the needs of the corporation and, on fiscal economics, o f what the traffic will bear. The statutory strategy also ensures this. First, a directive is given, obviously after considering relevant matters. Only if indifference or intractability is displayed, the fiscal sword of s. 90(5) is unsheathedMoreover, there is overall control by the legislature, sometimes, ineffective, sometimes meaningful. It is familiar knowledge that there are a number of institutionalised means by which the legislature exercises supervision and control over municipal matters. Broadly speaking, they are: (a) through inter-relations, (b) by discussions and debates, (c) by approval or otherwise of rules and orders, and (d) by financial control when the budget is presented. A study of the legislative proceedings in the various States of the country brings out many of these means of control (see Indian Administrative System, edited by Ramesh K. Arora & Co. Chapter 17). In a sense, the general municipal administration comes under fire in the House on many occasions, including during the debate on the Governors Address. Financial control and supervision by the legislators come up when budget proposals which contain allocation for municipal administration are presented to the House and at the time of the Appropriations Bill. Moreover, the Public Accounts Committee, the Estimates Committee and like other bodies also make functional probes into municipal administration-fiscal and other. There may be a big gap between the power of control and its actual exercise but it is also a fact that in a general way the political echelons in Government and the bureaucracy in turn are influenced in their policies by the criticisms of the municipal administration on the floor of the House and through other representations. We cannot, therefore, dismiss the legal position that there is control by the Legislature over Government in its supervision of municipal administration therefore, delegated legislation cannot be said to be uncontrolled or unchecked by the delegator.This discussion is of critical importance in view of the argument put forward by Shri Tarkunde that when Government exercises power under s. 90(6) it is a law unto itself, unbridled and uncontrolled by the Legislature. We may now refer to a few decisions which have been brought to our notice by counsel appearing for the municipal bodies and the State of Punjab to make out that the needs of municipalities and the pressures of local people are within the ken of the State Government and they also respond like municipal bodies and guide themselves in the manner corporations do. More importantly, excessive delegation stands negatived because of legislative control over Government. Even in the Liberty Cinema case, (supra) the control by Government over the municipal administration was relied upon as a policy guideline and it is an a fortiori case if the Government itself takes action, responsible and responsive as it is to the elected representatives of the HouseIn the course of the argument certain observations of this Court were read to the effect that there was always a check by the courts on unconstitutional misuse of delegated power and that, in itself with out more, was good enough to make the delegation good. So stated, the proposition may be perhaps too wide to be valid; for any naked delegation may then be sustained by stating that the court is there as the watch-dog. We do not have to go that far in the present case and so we make no final pronouncement on this extension of delegations jurisprudenceWe must state, while concluding that Punjab & Haryana High Court has overruled similar contentions on grounds which have our approval [see AIR 1977 P & 297 and 74 PLR (1972) P 149]We are conscious that constitutional legitimation of unlimited power of delegation to the Executive by the Legislature may, on critical occasions, be subversive of responsible government and erosive of democratic order. That peril prompts us to hint at certain portents to our parliamentary system, not because they are likely new but because society may have to pay the price some dayPlenary powers of law-making are entrusted to elected representatives. But the political government instructed by the bureaucracy, by and large, gets bills through with the aid of the three-line whip. Even otherwise, legislators are some times innocent of legal skills; and complex legislations call for considerable information and instruction. The law-making sequence leaves much to subordinate legislation which, in practical terms, means surrender to the surrogate, viz., the bureaucracy which occupies commanding heights within the Secretariat. The technocracy and the bureaucracy which mostly draft subordinate legislation are perhaps well-meaning and well- informed but insulated from parliamentary audit, isolated from popular pressure and paper-logged most of the time. And units of local self-government are reduced to a para-babel mechanisms, what with a pyramid of officialdom above them. The core of Shri Tarkundes argument, even though rejected in legal terms by force of precedents, has a realistic touch to the effect that municipal administration in the matter of taxation, if taken over by Government as under s. 90(5) of the Act, becomes administration by the barrel of the Secretariat pen. The doctrine of delegation, in its extreme positions, is fraught with democracy by proxy of a coterie, of which the nation, in its naivete, may not be fully cognizant.Therefore, the system of law-making and performance auditing needs careful, yet radical, re-structuring, if participative, pluralist Government by the People is not to be jettisoned. We have laid down the law and obeyed the precedents but felt it necessary to lay bare briefly the political portents implicit in the extent law, for action by the national leadership betimes. Who owns and operates India, that is Bharat ? That disturbing interrogation becomes deeply relevant as we debate and decide the jurisprudence of delegation of power and vicarious exercise and so we have pardonably ventured to make heuristic hints and to project new perspectives.