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

1. The appellant, who was operating an iron mine within the State of Mysore on the basis of a lease granted by the State, filed a writ petition before the High Court of Mysore challenging the validity of the provisions of the Iron Ore Mines Labour Welfare Cess Act (Central Act 58 of 1961). hereinafter referred to as "the Act". The contentions of the appellant in the writ petition were that the Act is violative of Art 14 of the Constitution in that it imposes a flat rate of excise duty on iron ore without reference to the actual content of iron in the ore and that there was excessive delegation of legislative power in that the power to fix the rate of excise duty was delegated to the government. The prayer in the petition was for a declaration of the invalidity of the Act with the consequential relief of quashing the demand made in pursuance to the Act. That petition was heard along with other similar petitions. The High Court dismissed the writ petitions by a common order and this appeal, by special leave, is against the order in so far as it affects the appellant.2. The Act provides for the levy and collection of a cess on iron ore for financing the promotion of welfare of labour employed in the iron ore mining industry. So far as the Mysore State was concerned, the Act was brought into force from October 1, 1963. Sections 2 and 3 of the Act contain the crucial provisions thereof. As the arguments in this case centred round the said provisions, it is necessary to set themWith effect from such date as the Central Government may, by notification in the official Gazette, appoint, there shall be levied and collected, as a cess for the purposes of this Act on all iron ore produced in any mine, a duty of excise at such rate not exceeding fifty naye paise per metric tonne of iron ore as the Central Government may, from time to time, fix by notification in the official Gazette."3. An amount equivalent to the proceeds of the duty levied under this Act, reduced by the cost of collection as determined by the Central Government, together with any income from investment of the said amount and any other moneys received by the Central Government for the purposes of this Act, shall, after due appropriation made by Parliament by law, be utilised by the Central Government to meet the expenditure incurred in connection with measures which, in the opinion of that Government, are necessary or expedient to promote the welfare of labour employed in the iron ore mining industry and in particular :-(a) to defray the cost of measures for the benefit of labour employed in the Iron Ore Mining Industry directed towards -(i) the improvement of public health and sanitation, the prevention of disease, and the provision and improvement of medical facilities,(ii) the provision and improvement of water supplies and facilities for washing,(iii) the provision and improvement of educational facilities(iv) the improvement of standards of living including housing and nutrition, the amelioration of social conditions and the provisions of recreational facilities and(v) the provision of transport to and from work;(b) to make grants to a State Government, a local authority, the owner of an iron ore mine or any other person, of money in aid of any scheme approved by the Central Government for any purpose connected with the welfare of labour employed in the iron ore mining industry:(c) to pay annually grants in aid to such of the owners of iron ore mines as provided to the satisfaction of the Central Government welfare facilities of the prescribed standard for the benefit of labour employed in their mines, so, however, that the amount payable as grant in aid to the owner of an iron ore mine shall not exceed -(i) the amount spent by the owner of the mine in the provision of welfare facilities, as determined by the Central Government or any person specified by it in this behalf or(ii) such amount as may be prescribed by rules made under this Act; whichever is less:Provided that no grant-in-aid shall be payable in respect of any welfare facilities provided by the owner of an iron ore mine where the amount spent thereon determined as aforesaid is less than the amount prescribed by rules made in this behalf.(d) to meet the allowances, if any of members of the Advisory Committees constituted under Section 4, and the salaries and allowances, if any, of persons appointed under Section 5." Sections 4 and 5 empower the Central Government to appoint Advisory Committees and the necessary staff for enforcement of the provisions of the Act. Section 6 empowers the Central Government to exempt from the operation of the Act such States as those in which there is, in the opinion of the Central Government, a law making adequate provision for the financing of activities similar to those dealt with by the Act. Section 7 requires the Central Government to cause to be published in the official Gazette a report giving an account of its activities under the Act together with a statement of accounts. Section 8 empowers the Central Government to make rules for carrying into effect the purposes of the Act.Pursuant. to the power conferred by Section 8, rules called the Iron Ore Mines Labour Welfare Cess Rules, 1963, were framed and published by a notification dated September 20, 1963.

Court's reasoning:
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.