Case: Mahe Beach Trading Company and Etc Vs. Union Territory of Pondicherry and Others

The appellants are the dealers in petrol and diesel oil in the former french Establishment of Mahe now in the Union Territory of Pondicherry. The Erstwhile French Establishments in India w ere divided by the French Government into 17 communes approximating to Municipalities or Local Self Government. Mahe was one suchFrench Decree dated 12 3 1880 governed and regulated the municipal body of each commune. It inter alia provided for setting up of a mayor and elected Municipal Council Paragraph 46 of the said Decree inter alia contemplated the Municipal Councils to deliberate the budget of the Communes as well as the mode of assessment, rates and rules regarding collection of all municipal revenues etc. The deliberations of the Municipal Councils were required to be forwarded to the Governor and would become enforceable only after the approval by the Governor in Privyan agreement dated 2 1.10.1954 there was a de facto transfer by the French Government of all its French Territories to the Indian Government. Thereafter the Government of India in exercise of the powers conferred by Section 4 of the Foreign Jurisdiction A ct, 1947 made the French Establishments (Application of Laws) Order, 1954 and the French Establishments (Administration) Order, 1954. On 28.5.1956, there was a treaty of cession between the President of India and the President of French Republic in respect of the French Establishments in India including16.8.1962, de jure merger of the French Establishments with India was carried out through an Instrument of Ratification between the two countries as a result of which France ceded to India the sovereignty of its territories namely: Pondicherry, Karikal, Mahe and Yaman. The aforesaid four cerritories constituted the Pondicharry Union Territory.On 16.8.1962. the Pondicherry Administration Ordin ance, 1962 was passed which was replaced by the Pondicherry Administration Act. 1962. By Section 4 of this Act, all laws in force immediately before the appointed day in the former French Establishments were continued to be in force in the Pondic herry Union Territory, Until they were amended or repealed by a competent Legislature or other competent authority. By Section 7, all taxes, duties, cases and fees being lawfully levied in the former french Establishments were continued to be levied in Pondicherry Union Territory and were required to be applied for the same purpose until other provisions are made by a competent Legislature or other competent authority. The result of this was that the Municipal Decree dated 12.3.1 880 could continue to be in force. Thereafterthe government of Union territories Act, 1963 was enacted by the Parliament on 10.5.1963, in exercise of powers under Article 239 A (1). This Act provided for the establishment of a local Legislature and Council of Ministers and their powers, procedure and otherMunicipal Council of Mahe on 7.8.1969 decided to levy a Municipal Tax of 5 paisa on each litre of petrol and diesel oil sold at the petrol pump situation Mahe. T he Mayor, based on that decision of the Municipal Council and considering the Decree dated March 12, 1880, issued an "arrete" with effect from 13.1.1970 for the Receveur Municipal, or the agent appointed by him. On a representation by the appellant, the Municipal Council by another Resolution dated 15.5.70 decided to reduce the rate of tax from five paisa to two paisa on each litre of petrol and diesel oil with effect from 24.2.1970 and an "arrete" to that effect was issue d onappellants then filed petitions under Article 226 of the Constitution of India challenging the said levy. A Single Judge of the Madras High Court struck down the said levy by holding that the tax was on the sale of goods and that it was levied in excess of the Municipalitys power of taxation and the said levy also violated section 7 ofthe Pondicherry (Administration) Act, 1962. Lastly, it was held that the Pondicherry Legislature had itself enacted a General Sales Tax Act applicable to the Union Territory and, therefore, the Municipal Council, in any case, possessed no power to levy a parallel sales tax for municipal purposes.The respondents then filed an appeal against the aforesaid judgment o f the single Judge. During the pendency of this appeal, the Administrator of Pondicherry, on 18.3.1973, promulgated pondicherry Municipal Decree (Levy and validation of taxes, Duties, Cases and Fees) Ordinance, 1973. This was replaced by the A ct (hereinafter referred to as the Validation Act) and it became the law on 21.3.1973 when it received the assent of the President of India and was published in the Pondicherry Gazette. This Act was given retrospective operation from 18.1.1973, the day of Ordinance. This Validation Act was again challenged by the appellants before the Madras High Court by filing a fresh writDivision bench of the High Court heard the Appeals against the Single Judge order as well as the new Writ petition which was filed challenging the Validation Act. By a common judgment, the High Court allowed the Writ Appeals and dismissed the Writ Petitions. It, inter alia, held that the Validation Act was intraDivision bench, however, granted leave to appeal to his Court because in its opinion, substantial question of law of general importance arose in the case. Hence, these appeals.

Court's reasoning:
The principle which emanates from the aforesaid decisions relied upon by the appellants is very clear namely; that if there is abdication of legislative power or there is excessive delegation of if there is a total surrender of transfer by the Legislative power or there is excessive delegation of if there is a total surrender or transfer by the Legislature of its legislative functions to another body than that is not permissible. There is, however, no abdication, surrender of legislative functions of excessive delegation so long as the Legislative functions of excessive delegation so long as the Legislature has expressed its will on a particular subject matter, indicated its policy and left the effectuation of the policy to subordinate of subsidiary of ancillary legislation, provided the Legislature has retained the control in its hand with reference to it so that it can act as a check or a standard and prevent or undo the mischief by subordinate legislation when it chooses to or thinks fit. It is however, not necessary for us to go into these aspects in any great detail because this question of excessive delegation does not really arise in the present case.The tax had been levied in the year 1970 under the Municipal Decree of 1880. The items to be taxed and the rate of tax to be levied were specifically determined. After the learned Single Judge held the said levy to be ultra virus, the Legislative Assembly of Pondicherry passed the Validationquestion does not arise in the present case. Section O of the Validation Act has been enacted by the competent Legislature and it specifically empowers the levy of any tax, duty, cess or fee which the Legislature of a Union Territory had the power to levy. It further provides the tax to be assessed and collected for the purposes of the Municipal Decree in accordance with the provisions contained in the said municipal decree, and notwithstanding the provisions of Section 7 of the pondicherry (Administration Act) 1962 of any other provision in that regard. This Section has to be read with Section 4 of the Validation Act which specifically validates the taxes which had already been levied, assessed of collected in the municipal communes, including the tax in question. At the time when the validation Act was passed, all the essential ingredients of the levy and assessment of tax of petrol and diesel oil w ere known and available to the Legislature. The tax had been levied at the rate of 2% on the sale of diesel and petrol and the Legislative Assembly of the Pondicherry Union Territory in effect, levied this tax itself when it passed the Validation Act. As a result of this Validation Act. no further act of subordinate legislation had to be performed by any one. The effect of this Act, as already observed, clearly was that a specific levy which had been made in 1970, with the issuance of the "arrete" by the Mayor of Mahe, was reenacted, with retrospective date, by the competent legislature. Therefore, the question of Section 3 and Section 4 of the Validation Act suffering from excessive delegation does not really arise in this case.Before dealing with the Second contention raised by the learned counsel for the appellant. it would be more appropriate to deal with the third contention. It was submitted that the Pondicherry Legislature had no plenary powers as the same vested only in the Parliament. The submission was that the Pondicherry Legislature could not make retrospective laws, or laws contrary to the laws made by The Parliament, under Articles 239 and 239 A of the Constitution. Elaborating further it was submitted that the Pondicherry Legislature did not have the power to pass the Validation Act which had the effect of re-enacting and imposing restrictions on diesel and petrol with retrospectivevirtue f [The] Government of Union Territories Act, 1963, the Pondicherry Legislature had to enact laws with respect to the ma tters enumerated in the State List or the Concurrent List of course, sub-section (2) of Section 18 provides that the powers conferred under sub-section (1) shall not derogate from the powers conferred on Parliament by the Constitution to make laws with respect to any matter for Union Territory. But, there is no such law relating to the imposition of sales tax on diesel and petrol which has been enacted by the parliament, while the validation Act has imposed such a tax. It is not in dispute, and now it is well settled, that the State Legislature as well as the Parliament has the power to legislate with retrospective effect and also to pass a validation Act, This being so, and the powers of the legislature of Pondicherry being co-extensive with the powers of a State Assembly, by virtue of Section 18 of [The] Government of Union Territories Act, 1963 there is no reason for this Court to hold that the Pondicherry Legislature could not enact a law with retro spective effect. In other words by virtue of Section 18 of [The] Government of Union Territories Act, 1963, there is no reason for this court to hold that the Pondicherry Legislature could not enact a law with retrospective effect.In other words, by virtue of Section 18 of [The] Government of Union Territories Act, 1963, the Parliament vested with the Pondicherry Legislature the plenary powers to legislate with respect to the matters said power has been validly exercised with the enactment of the Validationis no merit in this submission. Section 7 of the Pondicherry Administration Act merely continues the existing taxes. Assuming that there was no valid levy of the tax under the Municipal decree of 1880 a competent Legislature could impose a tax and Section 7 of the Pondicherry Administration Act does not in any way prohibit such imposition. Furthermore, in Sect ion 3 of the Validation Act itself it is stated that the tax may be levied notwithstanding the provisions of Section 7 of the Pondicherry Administration Act or any other provision of any Act passed by the Legislature or the Union Territory of passed by the Legislature or the Union Territory of Pondicherry. The levy under Sections 3 and 4 of the Validation Act cannot be said to be repugnant to Section 7 of the Pondicherry Administration Act, 1962. For that very reason there is also no merit in the contention that the Validation Act is repugnant to Section 21 of [The] Government of Union Territories Act, 1963, which section deals with inconsistency between the laws made by the Parliament and the laws made by the Legislative