V. Nagappa Vs. Iron Ore Mines Cess
Commissioner & ANR  Insc 78 (10 April 1973)
MATHEW, KUTTYIL KURIEN MATHEW, KUTTYIL KURIEN
CITATION: 1973 AIR 1374 1973 SCR (3) 943 1973
SCC (2) 1
Iron Ore Mines Labour Welfare Cess Act (58 of
1961), Ss. 2 and 3--Power delegated to Government to fix rate of excise
duty--If suffers from vice of excessive delegation.
Section 2 of the Iron Ore Mines Labour
Welfare Cess Act, 1961, provides that the Central Government may levy as a cess
for purposes of the Act, on all iron ore produced, an excise duty at such rate,
not exceeding 50 P. per tonne of iron ore, as the Central Government may, from
time to time, fix by notification.
The appellant, a lessee of an iron mine,
challenged the validity of the Act, but the High Court dismissed the petition.
In appeal to this Court, it was contended
that s. 2 of the Act suffers from the viceof excessive delegation in that,
under the section, the Central Government has been given a blanket power to fix
the rate of excise duty from time to time, without any guidelines.
Dismissing the appeal,
HELD : The necessary guidance for fixing the
rate can be found in the amount of expenditure necessary for carrying out the
purposes of the Act. The policy of the Act has been clearly stated, and s. 3
has specified the purposes for which the excise duty collected is to be
utilised. The purposes mentioned are not vague, or indefinite, and the expenses
to be incurred for those purposes could 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. That the amount collected will be expended for the purposes
enumerated in s. 3 is ensured first, by requiring the Government to make an
appropriation by means of parliamentary legislation, and secondly, by requiring
accounts and reports to be published in the official Gazette [951 D-G] Further,
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 discretion may be exercised is clearly demarcated, and hence,
it cannot be said that a blanket power has been declared to the Government.
[951 G-H] Corporation of Calcutta and Another v. Liberty Cinema A.I.R.
1965 1107, Banarsidas v. State of M.P.,
A.I.R. 1958 S.C.
909, Municipal Board, Hapur v. Raghuvendra
1966 S.C. 693, Devi Das Gopal Krishnan v.
State of Punjab, A.I.R. 1967 S.C. 1895, Vasantlal Maganbhai Sanjanwala v. State
of Bombay, A.I.R. 1961 S.C. 4, Municipal Corporation of Delhi v. Birla Cotton
and Spinning and Weaving Mills, A.I.R. 1968 S.C. 1232 Kruse v. Johnson. 2
Q.B. 91 and D. Ramaraju v. State of A.P., A.I.R. 1972 S.C. 828, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1695 of 1969.
Appeal by special leave from the judgment and
order dated February 20, 21, 1967 of the Mysore High Court Bangalore in Writ
Petition No. 347 of 1965.
V. M. Tarkunde and D. N. Mishra, for the
P. P. Rao, for the respondents.
The Judgment of the Court was delivered by
MATHEW, J. 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 article 14 of the Constitution in that it
imposes a flat rate of excise duty on iron are 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 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 argument-, in this case centered round the
said Provisions, it is necessary to set them out :
"2. With 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 col945 election as
determined by the Central Government, to, ether 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
(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 946 (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
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.
On the first question decided against the
appellant by the High Court, no arguments were addressed before us and we do
not, therefore, think it necessary to discuss that question.
The only point argued on behalf of the
appellant was that s.
2 of the Act suffers from the vice of
excessive delegation in that under that Section the Central Government has been
given a blanket power to fix the rate of excise duty. It was contended that the
section, while leaving it to the Central Government to fix the rate and change
it from time to time, has failed to give sufficient guidance to the Government
in the matter of fixing the rate, nor has it indicated the basis for fixation
or the relevant consideration to be taken into account for fixing the rate.
The High Court relying on the decision of
this Court in Corporation of Calcutta and Another v. Liberty Cinema(1)
negatived the contention.
(1) A. I.R. 1965 S. C. 1107.
947 in that case the validity of s. 548(2) of
the Calcutta Municipal Act, 1951 which empowered the corporation to levy fees
"at such rates as may from time to time be fixed by the Corporation"
was challenged on the ground of excessive delegation as it provided no guidance
for the fixation of the amount. The majority upheld the provision relying on
the decision in Banarsidas v. State of M.P. (1) that the fixation of rates of
tax being not an essential legislative function could be validly delegated to a
non-legislative body, but observed further that when it was left to such a
body, the legislature must provide guidance for such fixation. The Court found
the guidance in the monetary needs of the Corporation for carrying out the
functions entrusted to it under the Act. It was further observed that the power
to collect taxes was limited by "the expenses required to discharge those
functions". The minority, however, held that no guidance could be discovered
from the provisions of the Act. According to them if the monetary needs of the
Corporation could afford any guidance, applying the same principle it would
have to be held that the monetary needs of the State or the union would provide
sufficient guidance in case a similar power to fix the rate of tax was
delegated to the Government by the legislature.
The question for consideration is whether
subsequent decisions of this Court have in any way modified or altered the
principles laid down in this ruling and if so, to what extent, and whether s. 2
of the Act suffers from the vice of excessive delegation.
In Municipal Board, Hapur v. Raghuvendra
Kripal(2) the validity of the U.P. Municipalities Act, 1916 was involved.
The Act had empowered the municipalities to
fix the rates of tax and after having enumerated the kinds of taxes to be
levied, prescribed an elaborate procedure for such a levy and also provided for
the sanction of the government.
Section 135(3) of the Act raised a conclusive
presumption that the procedure prescribed had been gone through on a certain
notification being issued by the Government in that regard. This provision, it
was contended, was ultra vires because there was an abdication of essential
legislative functions by the legislature with respect to the imposition of tax
inasmuch as the State Government was given the power to condone the breaches of
the Act and to set at naught the Act itself. This, was an indirect exempting or
dispensing power. Hidayatullah, J., speaking for the majority, pointed out :
". . . . regard being had to the
democratic set up of the municipalities which need the proceeds of these taxes
for their own administration, it is proper to leave to (1) A.I.R. 1958 S. C.
(2) A.I.R. 1966 S. C. 693.
948 these municipalities the power to impose
and collect these taxes. The taxes are, however, predetermined and a procedure
for consulting the wishes of the People is devised" (at p.698).
Apart from the fact that the Board was a
representative, body of the local population on whom the tax was levied, there
were other safeguards by way of checks and controls by government which ,could
veto the action of the Board in case it did not carry out the mandate of the
In Devi Das Gopal Krishnan v. State of Punjab
(1), s. 5 of the East Punjab General Sales Tax Act, 1948 empowered the State
Government to fix sales tax at such rates as it thought fit. The Court struck
down the section on the ground that the legislature did not lay down any policy
or guidance to the executive in the matter of fixation of rates. Subba Rao,
C.J. speaking for the Court pointed out that the needs of the State and the
purpose of the Act would not provide sufficient ,guidance in the fixation of
rates of tax. It was further contended that s. 5 as amended only prescribed the
maximum rate and did not disclose any policy giving guidance to the executive
for fixing any rate other than the. maximum. The Court rejected this contention
on the ground that the discretion granted to the executive to fix the rate
between one pace and two pace in a rupee is insignificant and did not exceed
the per-permissible limits.
In this case the learned Chief Justice
reiterated his views about the permissible limits of delegation, expressed in
his dissenting judgment in Vasantlal Maganbhai Sanjanwala v.
State of Bombay(2). He pointed out the danger
inherent in the process of delegation thus :
"An overburdened legislature or one
controlled by a powerful executive may unduly over-step the limits of
delegation. It may not lay down any policy at all : 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 ill whole or in part is
beyond the permissible limits of delegation". (at p.1901).
In Municipal Corporation of Delhi v. Birla
Cotton and Spinning and Weaving Mills(3), the main question was the
constitutionality of delegation of taxing powers to Municipal (1) A.I.R. 1967
S. C. 1895.
(3) A.I.R. 1968 S. C. 1232.
(2) A.I.R. 1961 S. C. 4.
949 Corporations. The Delhi Municipal
Corporation Apt (66 of 1957) by s. 113(2) had empowered the Corporation to levy
optional taxes. Under s. 150, power was given to the Corporation to define the
maximum rate of such tax to be levied, the classes of persons and the
descriptions of articles and properties to be, taxed, the systems of assessment
to be adopted and the exemptions if any to be granted. The delegation made to
the Corporation in the matter of imposing the optional taxes was said to suffer
from the vice of excessive delegation. The majority of the Court held the
delegation to the valid. Wanchoo, C.J.
observed that there were sufficient guidance,
checks and safeguards in the Act which prevented excessive delegation, The
learned Chief Justice observed that statements in certain cases to the effect
that the power to fix the rates of taxes was not an essential feature were too
Sikri, J. (as be then was), in his concurring
judgment held the view that there was "adequate guide or policy in the
expression "purposes of the Act in section 113" and "it is not
necessary to rely on the safeguards mentioned by the learned Chief Justice to
sustain the delegation". He said.
"Apart from authority, in my view,
'Parliament has full power to delegate legislative authority to subordinate
bodies. This power flows, in my judgment from art. 246 of the Constitution. The
word "exclusive" means exclusive of any other legislature and not
exclusive' of any other subordinate body.
There is, .however, one restriction in this
respect and that is also contained in art.
246. Parliament must pass a law in respect of
an item or items of the relevant list.
Negatively this means that Parliament cannot
abdicate its functions. It seems to me that this was the position under the
various Government of India Acts and the constitution has made no, difference
in this respect. I read (1883) 9 AC 117 and (1885) 10 AC 282 as laying down
that legislatures like Indian legislatures had full power to delegate
legislative authority to subordinate bodies.
In the judgments in these cases no such words
as 'policy', 'standard' or 'guidance' is mentioned" (at p. 1266).
Wanchoo, C.J. made a functional approach to
the question when he stated that "the nature of the body to which
delegation is made is also a factor to be taken into consideration in
determining whether there is sufficient guidance in the matter of
delegation" (at 1244). According to the learned Chief Justice the fact
that delegation was made to an elected body responsible to the people including
those who paid taxes provided a great check on the elected councillors imposing
unreasonable rates of tax. Again, guide or control on the limit of taxation
could be seen 950 in the expression "purposes of the Ace' in S. 113. The
power to tax was circumscribed by the need to finance the functions which were
made incumbent on the Corporation to perform. The necessity of adopting budget
estimates each year as provided under the Act afforded another limit and
guide-line in the matter. Further, the fact that the government was made the
watchdog to control the actions of the Corporation in the matter of fixing the
rates provided another check against arbitrarily exercising the power of
taxation vested with the Corporation. The guidance may also take the form of
providing maximum rates of tax upto which a local body may be given the
discretion to make its choice.
Lastly, relying on Kruse v. Johnson(1) the
learned Chief Justice pointed out that in the case of subordinate public
representative bodies, such as municipal boards, the reasonableness of their
action could be reviewed by ,the Courts. Thus the majority relied on the
safeguards inherent in delegating the power to an, elected body and guidelines
provided under the various provisions of the Act for upholding the ,delegation.
They observed the power from the angle of its exercise and gauged its
propensity for abuse functionally.
In D. Ramaraju v. State of A.P.(2) the
question was about the vires of the Andhra Pradesh (Krishna and Godavari Delta
Area) Drainage Cess Act, 1968. Section 3 of that Act provided for levy and
collection of drainage cess.
According to sub-section (1) of that section
there shall be levied and collected by the Government, for a period of six
years from the date of the commencement of the Act, as a drainage cess on every
land in the ,delta area comprised within a division specified in column (2) of
the Schedule, for the purposes of the Act in that division, a tax at such rate
per acre per annum, not exceeding the rate specified in the corresponding entry
in column (3) thereof, as the Government may, by notification, specify in
respect of that division. The schedule referred to in the section fixed the
maximum rate at which drainage cess may be collected and according to it the
maximum rate shall be Rupees 10 per acre per annum for the Godavari eastern
delta, and the Godavari central delta. Section 8(1) provides for a cess fund
and any moneys received from the Central or State Government or any other
source for the purposes of the Act shall be credited to the Fund together with
the proceeds of the Drainage Cess as levied and collected under the Act. Subsection
(4) of S. 8 provides that the fund, in so far as it relates to the proceeds of
the drainage cess levied and collected in a division, shall be applied towards
meeting the cost of the drainage schemes which the Board may, with the
concurrence of the Government, undertake in that division.
(1) (1898) 2 S.C. 91.
(2) A.I.R. 1972 S.C. 828.
951 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 materials on records to justify a uniform rate of cess for each acre of
land in a division of the deltaic area and that the imposition of tax on land
for raising general revenue is substantially different from the levy of cess
for implementation of a drainage scheme for the benefit of lands in an area.
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
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.
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
secondly, by requiring, accounts and reports to be published in the official
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.
We dismiss the appeal with costs.