Author Name:   nivedha krishnamurti

though taxation is as essential legislative function, it can also be delegated to executive authority

Delegation of Taxation Power

One of the most significant developments of the present century is the growth in the legislative powers of the executives. The development of the legislative powers of the administrative authorities in the form of the delegated legislation occupies very important place in the study of the administrative law. We know that there is no such general power granted to the executive to make law it only supplements the law under the authority of legislature. This type of activity namely, the power to supplement legislation been described as delegated legislation or subordinate legislation. Delegated legislation means legislation by authorities other than the legislature, the former acting on express delegated authority and power from the later. Delegation is considered to be a sound basis for administrative efficiency and it does not by itself amount to abdication of power if restored to within proper limits. The delegation should not, in any case, be unguided and uncontrolled. In a democratic country levying tax is exclusively the function of the legislature. Such a power is a strong weapon at the disposal of the legislature to control the executive. But in modern times, a dent has been made in this principle as well, as delegation has permeated even the tax area. This paper is an endeavour to explain as to how the taxing been delegated to executive. Power of taxation is an inherent and an essential attribute of sovereignty which primarily rests on necessity. Modern constitutions of nations recognise this power by making express provisions therein. The sovereign attribute of taxation is the authority of the sovereign to compulsorily impose burden or charges upon persons or property to raise money as public revenue for public purposes. In a federal constitution the power of taxation is distributed among the federal and the provincial legislatures i.e the central and the state legislatures. Our constitution makes a fine balance in the taxing powers of the Parliament and the state legislatures. However, the distribution is not based on the distinction of direct and indirect unlike other federal constitutions. While the Parliament has the power to levy tax vis. income, excise and customs, service tax etc., the state enjoys the power to levy taxes on sale and purchase of goods, on land and buildings, land revenue and excise duties on alcohol consumption etc. In the modern times, the executive has made more laws in the exercise of their administrative powers than the legislature itself.

Scope And Aim of The Study:
The process of delegated legislation enables the Government to make a law without having to wait for a new Act of Parliament to be passed. Further, delegated legislation empowers the authority to modify or alter sanctions under a given statute or make technical changes relating to law. Delegated legislation plays a very important role in the process of making of law as there is more delegated legislation each year than there are Acts of Parliament. In addition, delegated legislation has the same legal standing as the Act of Parliament from which it was created. So, the ultimate aim of this project is to put forth the cases which would be helpful in understanding the delegation of taxation power.

Hypothesis:
The power to impose a tax is essentially a legislative function. Under article 265 of the constitution no tax can be levied or collected except by the authority of law. Therefore, the legislature cannot delegate the essential legislative function of imposition of tax to an executive authority.

Methodology:
This project is done on the basis of doctrinal method. Secondary data is one type of quantitative data that has already been collected by someone else for different purpose to our topic in discussion. It always convenient to use data collected by someone else if exists it may be on a much larger scale than we could hope to collect and could contribute to our feelings considerably. Secondary sources can be classified as:

· Paper based sources books, journals, periodicals, abstracts, indexes, directions, research reports, conference papers, market reports, annual reports, internal records of organizations, newspapers and magazines.
· Electronic sources: CD-ROMS, online databases, internet, videos, broadcast.

Essential Legislative Function:

The essential legislative function can be performed by legislature itself and they cannot be delegated to the executive. In other words, legislative policy must be laid down by the legislature itself and by entrusting their power to the executive, the legislature cannot create a parallel legislature. Once the essential functions are performed all the ancillary and incidental functions can be delegated to the executive. Unless the term ` essential legislative function’ is defined with specificity, the limits of delegation of legislative power cannot be precisely drawn. This term is difficult to define. The court, however, ventured to spell out the most prominent aspects of the essential legislative function in hari shankar bagla vs Madhya Pradesh as follows:

It was settled by the majority judgment in the article 143 of the constitution of India and In re Delhi Laws Act 1912 etc., that essential powers of legislation cannot be delegated. In other words, the legislature cannot delegate its function of laying down the legislative policy in respect of a measure and its formulation as a rule of conduct. The legislature must declare the policy of the law and the legal principles, which are to control any given cases and must provide a standard to guide officials or the body in power to execute the law. The essential legislative function consists in the determination or choice of the legislative policy and of formally enacting that policy into binding rule of conduct.

S. 3 of the Essential Supplies (Temporary Powers) Act, 1946 amounts to delegation of legislative power outside the permissible limits is again without any merit. It was settled by the majority judgment in the - 'Constitution of India and Delhi Laws Act, 1912, etc.,' that essential powers of legislation cannot be delegated. In other words; the Legislature cannot delegate its function of laying down legislative policy in respective of a measure and in formulation as a rule of conduct. The Legislature must declare the policy of the law and the legal principles which are to control any given cases and must provide a standard to guide the officials or the body in power to execute the law. The essential legislative function consists in the determination or choice of the legislative policy and of formally enacting that policy into a binding rule of conduct. In the present case the Legislature has laid down such a principle and that principle is the maintenance or increase in supply or essential commodities and of securing equitable distribution and availability at fair prices. The principle is clear and offers sufficient guidance to the Central Government in exercising its powers under S. 3. Delegation of the kind mentioned in S. 3 was upheld before the Constitution in a number of decisions of their Lordships of the Privy Council, and since the coming into force of the Constitution delegation of this character has been upheld in a number of decision of this Court on principles enunciated by the majority in the. As already pointed out the preamble and the body of the sections sufficiently formulate the legislative policy and the ambit and character of the Act is such that the details of that policy can only be worked out by delegating them to a subordinate authority within the framework of that policy. The supreme court upheld section 3 (2) (d) of the essential commodities act which delegated legislative power in almost similar terms in c lingam vs India.

In Bhatnagars and co vs India the supreme court upheld s (3) (a) of the imports and exports control act 1947 which authorised the central government to prohibit or restrict the import or export of goods of any specified description. The act did not contain any statement of policy. The court however referred to the preamble of the defence of india act 1939, which was a predecessor act providing for similar control of imports and exports, to find the policy which the impugned statute had purported to continue.

In makhansingh vs Punjab, the supreme court upheld s 3 of the defence of india act 1962, which empowered the central government to make rules as it ` appears expedient’ to it for the defence of india and maintenance of public order and safety. In d s garewal vs Punjab, s 3 of the all india services act 1951, which authorised the central government to make rules to regulate conditions of service in the All India Services was upheld though the act contained absolutely no guidance. The act provided that pending the making the new rules, the rules existing on the date on which the law was enacted were to continue and the court observed that the policy had been indicated in such existing rules. While upholding the delegation of rule making power, the court relied upon the fact that the rules were required to be laid before the parliament.

In harak chand vs India, s 5 (2) (b) of the gold control act 1968 was held to be invalid on the ground of excessive delegation. The section authorised the administration ` so far as it appeared to him to be necessary or expedient for carrying out the provisions of the act’ to regulate by licenses, permits or otherwise, the manufacture, distribution, transportation, acquisition, possession, transfer, disposal, use or consumption of gold. The court held that the power was `legislative’ in character and was not controlled either by any guidance in the act or by a provision for legislative supervision.

In dk Trivedi vs Gujarat, the supreme court held s 15 (1) of the mines and miner ( regulation and development) act 1957. The section conferred rule making power on the state government for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith. It was contented that s 15 (1) much as the power delegated was unguided and uncanalised enabling the state governments to act arbitrary with respect to minor minerals. Madan j held that the power conferred on the state governments was subject to guidelines contained in the objects for which the power was conferred and therefore it did not amount to excessive delegation of legislative power. It was held that the delegation of power to enhance the rate of royalty on mines and minerals under the above act did not amount to excessive delegation of legislative power was subject to the following restrictions:

(i) Bar to enhancement of royalty before the end of three years;
(ii) A requirement that the royalty to be fixed ought to have a nexus with the royalties elsewhere;
(iii) The rules were required to be laid before the parliament.

Permissible And Impermissible Delegation:

The functions that may be delegated by legislature to the executive are stated below:

Commencement : Several statues contain an 'appointed day' clause, which empowers the government to appoint a day for the act to come into force. In such cases, the operation of the act depends on the decision of the government e.g. section 3 of the Bombay Rents, hotel and Lodging house rates control act, 1947 provides that the act shall come into operation on such date as the state Government may by notification in the official gazette appoint in this behalf. Here the act comes into force when the notification is published in the official gazette. Such a provision is valid for, as Sir Cecil Carr remarks, "the legislature provides the gun and prescribes the target, but leaves to the executive the take of pressing the trigger".

Supplying details:
If the legislative policy is formulated by the legislature, the function of supplying details may be delegated to the executive for giving effect to the policy. What is delegated here is an ancillary function in aid of the exercise of the legislative function e.g. section 3 of All India Service Act, 1951 authorizes the central government to make rules to regulate conditions of service n All India Services.

Inclusion:
Sometimes, the legislature passes an act and makes it applicable, in the first instance, to some areas and classes of persons, but empowers the government to extend the provisions thereof to different territories, persons or commodities, etc, e.g., the transfer of property act, 1882 was made applicable to the whole of India except certain areas, but the government was authorized to apply the provisions of the act to those areas also. In the same manner, the Dourine Act, 1910 was made applicable to horses in the first instance but by section 2(2), the government was authorized to extend the provision of the act to asses as well. By section 146 of the Indian Railways act, 1980, the government was authorized to apply the provision to tramways. In hamdarddawakhana, however, flexibility to law without interfering with legislative policy was held ultra vires.

Exclusion:
There are some statutes which empower the government to exempt from their operation certain persons, terrorist, commodities, etc. section 30 of the payment of Bonus Act, 1965 empowers the government to exempt any establishment or a class of establishment from the operation of the act. Suspension : Some statutes authorize the government to suspend or relax the provisions contained therein, e.g. under section 48 (1) of the Tea Act, 1953, the central government is empowered under certain circumstances to suspend the operation of all or any of the provision of the said act. Application of existing laws : Some statutes confer the power on the executive to adopt and apply statutes existing in other states without modifications (with incidental changes) to a new area. There is no unconditional delegation in such cases, as the; legislative policy s laid down in the statute by the competent legislature.

Suspension:
Some statutes authorise the government to suspend or relax the provisions contained therein, eg. Under section 48 (1) of the tea act, 1953, the central government is empowered under certain circumstances to suspend the operation of all or any of the provisions of the said act.

Application of existing laws:
Some statues confer power on the executive to adopt and apply statutes existing in other states without modifications (with incidental changes) to a new area. There is no unconstitutional delegation in such cases, as the legislative policy is laid down the statute by the competent legislature.

Modification:
Sometimes, provisions are made in the statute authorizing the executive to modify the existing statute before application. This is really a drastic power as it amounts to an amendment of the act, which is a legislative act, but sometimes, this flexibility is necessary to deal with the local conditions. Thus, under the power conferred by the delhi laws act, 1912, the central government extended the application of the Bombay agricultural debtors relief act.1947 to Delhi. The Bombay Act was limited in application to the agriculturists whose annual income was less than Rs. 500 but that limitation was removed by the government.

Prescribing Punishments:
In some cases the legislature delegates to the executive the power to take punitive action e.g., under section 37 of the electricity act,1910, the electricity board is empowered to prescribe punishment for breach of the provision of the act subject to the maximum punishment laid down in the act. By section 59(7) of the Damodar Valley Act, 1948, the power to prescribe punishment is delegated to a statutory authority without any maximum limit fixed by the parent act.

According to the Indian Law Institute, this practice is not objectionable, provided two safeguards are adopted:
1) The legislation must determine the maximum punishment which the rule making authority may prescribe for breach of regulations; and
2) If such power is delegated to any authority other than the state or central government, the exercise of the power must be subject to the previous sanction or subsequent approval of the state or central government. Framing of rules : A delegation of power to frame rules, bye laws, regulations, etc. is not unconstitutional, provided that the rules, bye laws and regulations are required to be laid before the legislature before they come into force and provide further that the legislature has power to amend, modify or repeal them.

Removal of difficulties (Henery VIII clause) :
Power is sometime conferred on the government to modify the provisions of the existing statutes for the purpose of removing difficulties. When the legislature passes an act, it cannot foresee all he difficulties which may arise in implementing it.

The executive is, therefore, empowered to make necessary changes to remove such difficulties. Such provision is also necessary when the legislature extends a law to a new area or to an area where the socio- economic condition are different. Generally, two types of "removal of difficulties" clauses are found in statutes. A narrow one, which empowers the executive to exercise the power of removal of difficulties consistent with the provisions of the parent act; e.g. section 128 of the States Reorganization Act, 1956 reads as under: "If any difficulty arises in giving effect to the provisions of this act, the president may by order do anything not inconsistent with such provision which appears to him to be necessary or expedient for the purpose of removing the difficulty". Such a provision is not objectionable. According to the committee on Ministers Power, the sole purpose of Parliament in enacting such a provision is 'to enable minor adjustments of its own handiworks to be made for the purpose of fitting its principle into the fabric of existing legislation, general or local'. Sir Cecil Carr rightly says, "the device is partly a draftsman's insurance policy in case he has overlooked something, and partly due to the immense body of local acts in England creating special difficulties in particular areas". By exercising this power the government cannot modify the parent act nor can it make any modifications which are not consistent with the parent act. Another type of "a removal of difficulties' clause is very wide and authorizes the executive in the name of removal of difficulties to modify even the parent act or any other act.

The classic illustration of such a provision is found on the constitution itself. Usually, such a provision is for a limited period. This provision has been vehemently criticized by Lord Hewart and other jurists. It is nicknamed as the Henry VIII clause to indicate executive autocracy. Henry VIII was the king of England in the 16th century and during his regime he enforced his will and got his difficulties removed by using instrumentality of a service parliament for the purpose of removing the difficulties that came in his way. According to the committees of minister' powers, the king is regarded popularly as the impersonation of executive autocracy and such a clause 'cannot but be regarded as inconsistent with the principle of parliamentary government'.

In Jalan Trading company v. Mill Majdur Sabha the supreme court was called upon to decide the legality of such a clause. Section 37 (1) of the payment of Bonus Act 1965 empowered the central government to make such orders, not inconsistent with the purpose of the act, is might be necessary or expedient for the removal of any doubts or difficulties. Section 37 (2) made the order passed by the central government under sub section (1) final. The court by a majority of 3:2 held section 37 ultra vires on the ground of excessive delegation in as much as the government was made the sole judge of whether any difficulty or doubt had arisen, whether it was necessary to remove such doubt or difficulties and whether the order made was consistent with the provisions of the act. Again, the order passed by the central government was 'final'. Thus, in substance, legislative power was delegated to executive authority, which was not permissible.

The minority, however, took a liberal view and held that the functions to be exercised by the central government was not legislative functions at all but were intended to advance the purpose which the legislature had in mind. In the words of Hidautllah, J. (as he then was): "parliament has not attempted to set up legislation. I have stated all that it wished n the subject of bonus in the act. Apprehending, however, that in the application of the new act doubts and difficulty might arrive and not leaving there solutions to the court with the attendant delays and expense, parliament have chosen to give power to the central government to remove doubt and difference by a suitable order." It is submitted that the minority view is correct and after Jalan trading company, the Supreme Court adopted the liberal approach

In Gammon India Ltd. V. union of India a similar provision was held constitutional by the court. Distinguishing Jalan Trading Company, the court observed: "in the present case, neither finality nor alteration is contemplated in any order under section 34 of the act. Section 34 is for giving effect to the provisions of the act. This provision is an application of the internal functioning of the administrative machinery." It, therefore, becomes clear that after Jalan Trading Company, the court changed its view and virtually overruled the majority judgment.

In Patna University v. Amita Tiwari, the relevant statute enabled the chancellor to issue the directions to universities "in the administrative and academic interest."

In exercise of that power, the chancellor directed the university to regularize services of an ineligible teacher "on compassionate grounds." When the action was challenged, it was sought to be supported on the basis of "removal difficulties" clause. Holding that the "removal of difficulties" clause had only limited application, the Supreme Court quashed the order. It is submitted that by using a 'removal of difficulties' clause, the government "may slightly tinker with the act to round off angularities and smoothen the joint or remove minor obscurities o make it workable, but it cannot change or disfigure the basic structure of the act. In no case can it under the guise of removing a difficulty, change the scheme and essential provision of the act" the committee on ministers' powers rightly opined that it would be dangerous in practice to permit the executive to change an act of parliament and made the following recommendations: "the use of the so called Henry VIII clause conferring power on a minister to modify the power of on a minister to modify the provision of acts of parliament should be abounded in all but most exceptional cases and should not be permitted by parliament except upon special grounds stated in a ministerial memorandum to the bill. Henry VIII clause should never be used except for the sole purpose of bringing the act into operation but subject to the limitation of one year."

Fiscal Federalism In India:

The federal character of public finance in India has its origin as far as the seventies of the last century. Although at that time the country had a unitary form of government, some division of functions and financial powers between the Center and the state was found administratively desirable. Ever since then the arrangements have been revised and improved from time to time. Fiscal federalism entails the division of responsibilities in respect of taxation and public expenditure among the different layers of the government, namely the Center, the states and the local bodies. Fiscal federalism helps governmental organization to realize cost efficiency by economies of scale in providing public services, which correspond most closely to the preference of the people. From the point of view of economy, it creates a unified common market, which promotes greater economic activity.

India has a federal form of government, and hence a federal finance system. The essence of federal form of government is that the Centre and the State Governments should be independent of each provided with sources of raising adequate revenues to discharge the functions entrusted to it. For the successful operation of the federal form of government financial independence and adequacy form the backbone. The Seventh Schedule (Article 246) delineates ‘the subject matter of laws made by the Parliament and by the Legislatures of the states’ and indicates the Union List (List I), states List (List II) and the Concurrent List (List III). List I invests the union with all functions of national importance such as defence, external affairs, communications, constitution, organization of the Supreme Court and the high courts, elections etc, List II invests the states with a number of important functions touching on the life and welfare of the people such as public order, police, local government, public health, agriculture, land etc. List III is a concurrent List, which includes administration of justice, economic and social planning, trade and commerce, etc.

According to Article 246, Seventh Schedule, Parliament has exclusive powers to make laws regarding matters enumerated in List I, notwithstanding the provisions of the other clauses of this Article. On the other hand, the Legislature of any state has exclusive power to make laws for the state regarding any of the matters enumerated in List II, subject to other clauses.With regard to List III, both the Parliament and a State Legislature can make laws but the law listed in I or III, vests with the Union. Thus, the Union has supremacy over a wide range of the legislative field.

These lists include the powers of taxation also. The union List includes among others, taxes on income other than agricultural income, excise duties, customs and corporation tax. The State list includes land revenue, excise on Alcoholic liquors, tax on agricultural incomes, estate duty, taxes on sale or purchase of goods, taxes on vehicles, on professions, on luxuries, on entertainment, on stamp duties, etc. the concurrent list does not include any important taxes.

Accordingly there are both mandatory and enabling provisions in the Constitution for facilitating a wide-ranging transfer of resources, arranged in a systematic manner, through:
1) Levy of duties by the Center but collected and retained by the States;
2) Taxes and duties levied and collected by the Center but assigned in whole to the states;
3) Mandatory sharing of the proceeds of income tax;
4) Permissible participation in the proceeds of the Union excise duties;
5) Statutory grants –in-aid of the revenues of states;
6) Grants for any public purpose; and
7) Grants of loans for any public purpose.

Thus, having provided for a certain division of powers of taxation between the union and the states, the Constitution gives the States a share in the resources available to the Center. Any amendment of the lists from the Union and the States derive their power of taxation is covered by the Proviso to Article 368. This requires ratification by the Legislatures of not less than one half of the States. On the other hand, if any provisions of the Part XII are to be amended, this can be done under Article 368(2), which requires the approval of only half of the members of each house of the Parliament. This means that the share of the Union resources that the states are entitled to, can be altered by Parliament by its power of amendment.

Though considerations of national policy and administrative convenience require that some of the more elastic taxes should be assigned to the Union Governments, these considerations themselves require that some of the most expansive expenditure heads apart from defense should be undertaken by the States. Consequently, a salient characteristic of federal government is legislative autonomy with financial dependence. This feature is accentuated in a developing economy where the functions of the States develop by leaps and bound with no corresponding increase in the sources of revenue.

Constitutional Limitation Upon Taxing Power:

Apart from the limitation by the division of the taxing power between the Union and State Legislature by the relevant Entries in the legislative Lists, the taxing power of either Legislature is particularly subject to the following limitations imposed by particular provisions of our Constitution:
(1) It must not contravene Art.13.
(2) It must not deny equal protection of the laws, must not be discriminatory or arbitrary .(Art.14)
(3) It must not constitute an unreasonable restriction upon the right to business.(19(1)(g))
(4) No tax shall be levied the proceeds of which are specially appropriated in payment of expenses for the promotion or maintenance of any particular religion or religious denomination (Art.27).
(5) A State Legislature or any authority within the State cannot tax the property of the Union.(Art.285)
(6) The Union cannot tax the property and income of a State (Art.289).
(7) The power of a State to levy tax on sale or purchase of goods is subject to Art.286.
(8) Save in so far as Parliament may, by law, otherwise provide, a State shall not tax the consumption or sale of electricity in the cases specified in Art.287

Delegation of Taxation Power:

The doctrine of excessive delegation is applied by the courts to adjudge the validity of the provision delegating the power. Therefore, too board power ought not to be vested in the executive matters of taxation; the parent act ought to contain policy in the light of which the executive is to exercise the power delegated to it. The courts uphold delegation of power to decide “ matters of details” concerning the working of the tax law in question. The expression “matters of details”, in truth, is really an euphemism to cover the delegation of significant powers to the executive in the tax area.

With regard to delegation in taxing legislation, the following principles may be treated as well settled:
The power to impose a tax is essentially a legislative function, under article 265 of the constitution no tax can be levied or collected except by the authority of law, and here law means law enacted by the legislature and not made by the executive. Therefore, the legislature cannot delegate the essential legislative function of imposition of tax to an executive authority.Subject to the above limitation, a power can be conferred on the government to exempt a particular commodity from the levy of tax. A power may also be delegated to bring certain commodity under the levy of tax.The power to fix the rate of tax is a legislative function, but if the legislative policy has been laid down, the said power can be delegated to the executive.It is open to the legislature or executive to fix different rate of tax for different commodities.Commodities belonging to the same category should not, however, be subjected to different and discriminatory rates in the absence of any rational basis.Needs of the taxing body is not a test for determining whether guidance was furnished by the legislature in exercising power to tax. The circumstance that the affairs of the taxing body (panchayat, municipality, corporation, etc.,) are administered by the elected representatives responsible to the people is wholly irrelevant and immaterial in determining whether the delegation is excessive or otherwise.A taxing statute should be strictly construed. If a provision is ambiguous, the interpretations that favour the assesse should be accepted.A distinction, however, should always be made between charging provisions and machinery provisions should be construed liberally so as to make charging provisions effective and workable.General principles of delegated legislation apply to taxing statutes also.

Rates of Taxation:

The power to decide what to tax as well as whom to tax was delegated, there are other varieties of delegation. The executive or the delegate may be empowered to fix the rates of taxation. Under the central excise and salt act 1944, the government can by notification increase upto 50% the excise duty levied by the parliament on commodity. Such a notification is required to be laid before the parliament. Similarly, under the sea customs act, the executive can vary the rates of taxation provided under the act by exempting certain goods partially from duty. In such delegation valid? In devi das vs Punjab, the supreme court upheld a provision which authorised the executive to levy sales tax at a rate between 1 percent and 2 percent. In the same act, however, where power was given to the government to levy sales tax at such rates `as it deems fit’, the delegation was held to be invalid. In delhi municipality vs BCS & W Millsthe court upheld a provision, which delegated power to levy electricity tax, without setting any limits, to the corporation. The court while distinguishing this case from devi das pointed out that:

(i) The delegation was to a local body which was popularly elected and whose decisions were taken after public debate;
(ii) The upper limit to the total levy was provided by the needs of the body which had to be deduced from the nature of its functions;
(iii) The body was subject to government control.

Similar grant of power to a municipal corporation was upheld in corporation of Calcutta vs liberty cinema, the court is generally more willing to uphold delegation of fiscal power in favour of elected bodies such as panchayats or municipalities. In darshanlal mehra vs India, the supreme court observed that the rate of tax to be levied and the persons or the class of persons liable to pay the same was to be determined by inviting objections which were finally considered and decided by the state government. The tax was to be levied in accordance with the statutory rules framed by the state government and those rules were required to be laid before each house of the state legislature. These, in the opinion of the court, constituted sufficient guidance and safeguards for valid delegation of legislative power.

In  nagappa vs IO mines cess commissioner &anor,the supreme courtheld that s 2 of the iron mines labour welfare act 1958, which authorised the government to levy and collect excise duty not exceeding 50% tone on iron ore by a notification in the official gazette, was valid. The proceeds of the levy were to be used fot the welfare of labour and the maxima had been laid down.

Must the law always lay down the maxima subject to which the duty or tax may be levied by the subordinate law making authority? GB modi vs Ahmedabad municipality, the supreme court observed that absence of such a provision per se did not make the delegation of the power to levy excise duty to the government was upheld because the impugned act specified the purpose for which it was to be utilised and the duty was to be limited to the expenses required for discharging the statutory function. In sbdayul vs uttar pradesh the supreme court said:

It is true that the power to fix the rate of a tax is a legislative power but if the legislature lays down the legislative policy and provides the necessary guidelines, that power can be delegated to the executive. Though tax is levied primarily for the purpose of gathering revenue, in selecting the objects to be taxed and in determining the rate of tax, various economic and social social aspects such as the availability of the goods, administrative convenience, the extent of evasion, the impact of tax levied onn the various sections of the society taxation is an instrument of planning. It can be used to achieve the economic and social goals of the state. For that reason the power to tax must be a flexible power.

several variants of formulae used to delegate power:
First, power may be delegated to the government to exempt a commodity from the purview of a tax. In orient weaving mills vs union of India,a provision conferring power on the central government to exempt any excisable goods from the whole or part of the duty leviable on such goods was held valid against the plea of excessive delegation. A statute levied a multi-point sales tax, but in the case of goods notified by the government, a single point tax could be levied. The supreme court held the provision to be valid saying that while a legislature cannot delegate its essential legislative function, it can delegate the power to select the persons on whom, or the goods or the transactions on which, the tax is to be levied. In the instant case, it is not possible for the legislature itself to select goods to be subjected to the single point tax. Before making such a selection, several matters need to be considered, such as impact of the levy on society, economic consequences, administrative convenience, etc., these factors change front time to time. Hence, in the very nature of things these details have got to be left to the government.

Secondly, power may be conferred on the government to bring additional transactions, commodities or persons within the purview of a tax. In banarsidas, a provision authorising the government to bring any goods within the purview of sales tax law was held valid.

Thirdly, power may be conferred on the executive to fix from time to time the rates of the tax itself. Law may impose a tax but may leave it to the executive to quantify the rate at which it is to be levied. The statute usually fixes a maximum limit subject to which the executive may fix the rate of taxation from time to time. At times the statute without fixing the minimum and maximum limit, may delegate the power to enhance or reduce the rate of tax by fixing a time limit that such a power shall be exercised only once within the time prescribed by the statute.

A few examples of this type of delegation are mentioned below:

(i) Under the coal mines ( conservation and safety ) act, 1952, the central government is empowered to impose a duty of excise, subject to a maximum prescribed, on all coal raised and despatched, and as a corollary thereof, the government may impose an equivalent import duty on the coal imported.

(ii) The terminal tax on railway passengers act, 1956 authorised the central government to fix rates of taxation subject to the maximum fixed in the act.

(iii) Section 9(3) of the mines and minerals (development and regulation) act, 1957, provides that central government may by notification in the official gazette amend the schedule enhancing or reducing the rate of royalty which is to be paid by a lessee. However, the proviso to s. 9(3) mandates the central government not to enhance the rate of royalty in respect of any mineral more than once in a period of 3 years.

The courts, speaking generally, do not favour delegation of an unrestricted power to fix rates of tax; they require that the legislature should itself fix the maximum limit subject to which the executive may fix the rates. Such a provision, in effect, confers only a limited legislative power on the executive. In devi das vs state of Punjab, the law empowering the executive to levy sales tax at a rate not exceeding 2% was held valid. The supreme court stated that it was alright to confer a reasonable area of discretion on the government by a fiscal statute, but a large statutory discretion placing a wide gap between the minimum and the maximum rates, And thus, enabling the government to fix an arbitrary rate might not be sustainable.

Exemption:
Having given a broad overview of the growth and expansion of the delegation principle in tax law, in this section I will deal with one particular aspect of this power, viz. exemptions.

The government’s power to exempt the payment of taxes can either be through ad hoc exemptions on case to case bases, or by framing rules that govern when and to whom exceptions are made. Both these powers can possibly be delegated to the executive. Despite the content of the power being similar, the status of validity of such powers is different.

In the second and more general delegation of the power to make rules allowing for exemptions, the Supreme Court has held in Union of India v. Jalyan that the power to grant exemptions through rule making can best be described as conditional legislation. However, it held that since the Parliament ‘cannot constantly monitor the needs of the economy, it is essential to empower the Central Government to exercise certain functions’. In the exercise of such functions, the Central Government may make rules that exempt some goods or persons from the tax net. While it may be some form of legislation, it is a necessary and legal delegation. This is in consonance with other decisions of the Court such as Dwarka Prasad v. State of Madhya Pradesh and Irani v. State of Madras, wherein the Court held that ‘whenever the legislature lays down the policy of law, it may authorize the executive to make subordinate rules. This would not amount to anything more than ‘filling up the details’.

Regarding ad hoc exemptions, the Court has been even more liberal and has almost allowed the executive the power to grant ad hoc exemptions (as long as permitted in some form by the parent statute), such as in Banarasi Das. The rationale for this has simply been that as long as contemplated by the parent statute, the State always has the power to decide when an exemption can be given to a certain person or group of persons as it may deem fit. The use of such power would obviously not amount to any type of legislation.

Role of Judiciary In Taxing Power:

In Gwalior rayon silk manufacturing co ltd vs assistant commissioner of sales tax, S8 (2)(b) of the central sales tax act which authorised levy of sales tax on sale of goods in the course of inter state trade and commerce at the rate of 10 percent or at the rate applicable to the sale or purchase of goods inside the appropriate state, whichever is higher was challenged. The impugned section was upheld by all the judges, though they differed on the extent of permissible delegation. Khanna j rejected the argument that since the legislature could repeal the act it had retained enough control over subordinate legislation and therefore it was not necessary to lay down legislative policy or guidelines for the delegate. Mathew j, in his dissenting judgment, upheld the argument, which he again pursued in a majority opinion in n k papiah vs excise commissioner.

Banarasi Das v. State of Madhya Pradesh. In this case the Supreme Court was confronted with the question as to whether Section 6(2) of Berar Sales Tax Act, 1947 which empowered the State government to amend the schedule of the Act providing either for exemption from sales tax or to bring in other goods within the purview of sales tax, was suffering from the vice of excessive delegation. The Supreme Court speaking through Justice VenkataramaAiyer held that the impugned provision was not an impermissible delegation of legislative power. The Supreme Court relied on Raj Narain’s Case and held that the executive can determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid and the rates at which it is to be charged. In the instant case the Court also referred to Powell v. Apollo Candle Co. Ltd. and Syed Mohammed and Co. v. Madras and Hampton Junior and Co. v. US and went on to hold that the power conferred by Section 6(2) was not unconstitutional. Actually, the judicial comprehension of the judgment in Banarasi Das case came to light only after the subsequent judgments like in the case of Corp. of Calcutta v. Liberty Cinema, wherein the court held there was no distinction in principle between delegating a power to fix rates of taxes to be charged on different classes of goods and a power to fix rates simpliciter. Thus, in the instant case the majority upheld the validity of Section 548(2) of the Calcutta Municipal Act, 1951 was not void notwithstanding that no guideline was issued

. Two years later in the year 1967 in the case of Devi Das v. State of Punjab, the Supreme Court was confronted with the question as to whether Section 5 of the Punjab General Sales Tax (Amendment) Act, 1948 suffered from the vice of excessive delegation. The provision empowered the executive to levy sales tax at the rate not exceeding 2%. The Court stated that it was alright to confer a reasonable area of discretion on the Government by a fiscal statute, but a large statutory discretion by means of a wide gap between the maximum and the minimum rates and thus enabling the government to fix an arbitrary rate is not sustainable. While over the other provision in the same case which gave a power to the government to impose tax at any rate from time to time was held to be void. Justice Subba Rao, speaking for the constitution bench held that the power conferred on the provincial government to levy every year on the taxable turnover of a dealer a tax at such rates as the said government might direct was an uncontrolled power. He also added that the legislature practically effaced under that section as no guidance could be gathered under that section or any other provisions of the Act.

In the case of CST, UP v. Bakhtawar Lal Kailash Chand Arhtiit was that it is immaterial whether a completed sale precedes the movement of goods or follows the movement of goods or takes place while the goods are in transit. What is important is that movement of goods and the sale must be inseparably connected, moreover the movement shall be physical and such movement must be inextricably connected with sale. This Sale need not precede the inter-State movement. Sale can be either before the movement or after the movement.

As the purposes differ, the nature and the modes of exercise of sovereign power by the Parliament, as the Peoples’ delegate, under Parts XI and XX, differ. The exercise of Power by the Parliament under Part XI is ordinary legislative Power, within the prescribed limits of authority. The exercise of Power by the Parliament under Part XX, being special in nature, is extra-ordinary, in its mode of exercising the law making Power within its prescribed limits of authority. Considering, the special nature with reference to the mode of exercising the extraordinary power, under Part XX, the unenumerated power to amend Part III under Art. 368 of Part XX, the exercise of which by any organ in the state, is expressly forbidden under Art.13(2), as an incident of the Peoples’ exercise of sovereign power of retaining Fundamental Rights under Part III, in the process of exercising the Rights of Self-Determination, the unenumerated power to amend Part III under Art.368 of Part XX cannot be construed as one identical with unenumerated ordinary legislative power, under Entry 97, List I, Schedule VII read with Art.248 of Part XI as is held in the decision of Golak Nath v. The State of Punjab

Conclusion
The article was an attempt to address the issue of delegated legislation in tax laws. The very concept of delegation is opposing to the idea of rigid separation of powers. A strict adherence to the age old doctrine of separation of powers might do more harm than good. The legislature cannot be logically expected to enact on the plethora of situations dealing with different classes of people. In appropriate cases, there could be delegated legislation in tax laws as well but then the legislature cannot wipe out itself. Thus, the direct and immediate effect of delegation should not be to confer uncontrolled power on the executive which might endanger the interests of the subjects. In fact controlling the powers of the executive is the very purpose of the legislative. According to Wade, administrative law is the law relating to the control of powers of the executive authorities. Justice Markandey Katju writes in one of his articles that there was a need to create a body of legal principles to control and to check misuse of these new powers conferred on the State authorities in this new situation in the public interest. But then it will be a mistake to think that administrative law is hostile to efficient government. Wade also pointed out that, “intensive administration will be more tolerable to the citizen, and the Government’s path will be smoother, where the law can enforce high standards of legality, reasonableness and fairness.” As per the comparative study of the delegation of tax laws in India, United States and England, one phenomenon which is common in the three systems is that despite the recognition that there could be a delegation of tax laws by the legislature yet it cannot confer an arbitrary power on the executive. It is submitted that the model is most developed in the United States where the Courts look for several checks on the power conferred on the executive. The author will conclude with this quote by Sir John Donaldson, M.R., in R. v. Lancashire CC, ex p Huddleston on the development of administrative law: “…administrative law has created a new relationship between the courts and those who derive their authority from the public law, one of partnership based on a common.

Suggestion
(i) It is clear that there is a need for the legislature to delegate some tasks to its executive. The existence of this need in the case of tax laws is even clearer. What is not so clear, however, is how far this need translates into legally valid actions. The jurisprudence on this point has expanded and today, we see that the Supreme Court upholds a majority of tax legislations that confer powers on the executive.

(ii) It might even be said that this attitude displays a sort of special treatment to tax laws. Unlike in other spheres where the law operates, the Supreme Court seems to be mindful of the fact that taxation imposes a heavy burden on the State; one that cannot be managed without deep cooperation between the organs of government. Such cooperation sometime involves extensive support by the executive.

(iii) To encourage and facilitate this necessary cooperation, the Supreme Court has taken a lenient view on delegation of legislative functions to the executive. The result has been an ever-increasing occupation of power by the executive. The only concern that remains unaddressed so far is whether such extensive delegation will at some time lead to an over powerful executive. Only time and further case law will give us the answer to this question.

Bibliography:
1. Takwani C.K. Lectures on Administrative Law. (Lucknow: Eastern Book Company) 2007.
2. Joshi K.C. An Introduction to Administrative Law, (Allahabad: Central Law Publication) 2006.
3.Dr. Kailash rai Lectures on administrative law. (Allahabad: law agency) 2013.
4.S. P.sathe , administrative law, 7th edition.

Web-biliography:
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# AIR 1959 SC 512, (1959) SCJ 399
# AIR 1970 SC 1453, [1970] 1 SCR 470
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[16] Delegated legislation in india, (ILI) (1964) 25.
# AIR 1967 SC 691: (1967) 1 SCR 15.
# AIR (1986)3 SCC 596: AIR 1974 SC 960.
# AIR (1997) 7 SCC 198, AIR 1997 SC 3456
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# AIR 1965 SC 1107.
# AIR 1966 SC 1963.
# AIR 1973 SC 1374.
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# AIR 1972 SC 828.
# S. p.sathe , administrative law, 7th edition.
# AIR 1963 SC 98: 1962 SUPP (3) SCR 481.
# Hira lal rattan lal vs s.t.o. Kanpur, AIR 1973 SC 1034: (1973) 1 SCC 216.
# Banarsi das vs state of Madhya Pradesh, AIR 1958 SC 909, 913: (1958) 9 STC 388: 1959 SCR 427.
# AIR 1967 SC 1895, para15: (1967) 3 SCR 557; JAIN,CASES, ch, III, 95.
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