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D37

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B. N. NAGARAJAN AND ORS.

v. '···

STATE OF KARNATAKA AND ORS. ETC.

May 3, 1959

{\>'. R. KRISHNA !YER, P. S. KAILASAM AND A:. D. KOSHAL, JJ.J

Mysore Government Servants (Seniority) Rules 1957 Rule 2 rf:ad H'ith Rule 2 f, th.e Mysore Government Servants (Probation) Rules \957-Scnpe of .

co-,,, m.itution of India, Art. 226-Whether the scope of the fVrit Petition be limited to the prayer portion alone?

In the new State of Mysore (Now Karnatalro:) which came into existence on € 1-ll-56 as a result of integration of the areas which formed part of crtwhile States of M:ysore, Madras, Coorg, Bomb<tf and Hyderabad, the Government on 6-2-58, 7-2-58 and 2-12-60 respectively promulgated the following Ru!es (a\

. fnriled uv-der Article 309 of the Constitution) namely, "The fySore Govern

ment Servants (Probation) Rules 1957, "The Mysore Government Servanh; (Sea_iority) Rules 1957 and "The Mysore Public Works Engineering Departn1ent Services (Recruitment) Rules, 1960" The recruitment.Rules envisaged 3ppoint..

D ment of Assistant Engineers in the Public Works Departn1ent by direct recruitment to the extent of 40% and by promotion for the rest viz. 50% fron1 the cadre of JuiJ.ior Engineers and 10% from the cadre of supervisors. T'he .dre of Assistant Engineers was to consist of 344 permanent and 345 temporary posts.

Prior to 1-11-56 in the merged Stt:ttes, there was a non gazetted class designated a~ graduate supervisors in Mysore State, as Junior Engineers in the Madras State and as supervisors in the States of Bombay and Hyderabad. The claim of the graduate supervisors who were given charge of subdivisions prior to 1-11-56 and continued to hold the san1e eyen thereafter. for equation of their posts with those of Assistant Engineers, was rejected by the Central Government. However, on 15-11-58. 167 of them (including 107 graduate supervisors from Mysore) and between the period 2nd Dec. 1958 and 13th October '60, 299 more persons of the same class were promoted as officiat ing Assistant Engineers. With reference to three notifications of the Mysore Public Service Commission dt. 1-10-58, 4-5-59 and 1-4-61, eighty eight candidates were appointed on 31st Oct.' 61i i.e. 8 days after the amendment of the Recruitment Rules giving them retrospective effect from 1st March 1958, as Probationary Assistant E.ngineers by direct recruitment. The challenge to their appointment was ultimately rejected by this Court in B. N. Nagarajan v. State of Mysore & Ors., [1966] 3 S.C.R. 'I>· 682 holding thltt their appointment although made after the Recruitment Rules had come is.to force, were valid, as the process of direct recruitment had been set in motion by the State Government in exercise of its executive power under Article 162 of the Constitution of India well before the Recruitment Rules were promulgated and that ilese appointments were therefore, "outside the Recruitment Rules".

In the year 1971 various orders were passed promoting some of the direct II

r~9ruitsto the posts of Executive Engineers and those orders 'R1ere challenged by

4-409 SCI /79

the promotees on' the ground th; lt they had been given promotions "on regular basis" which amounted to substantive appOintments and that therefore they should rank senior to the direct recruits. Subsequent to the issue on 4.9.73 of arevised seniority list superseding the list (G) prepared on 28·9·72 fM.rther writ petitions were filed by the promotees. AU the petitions were heard together by the High Court and allowed with the following directions :

(i) Promotees other than those covered by direction (ii) and direct recruits, would not be governed by the quota system as envisaged in the Recruitment Rules.

(ii) Prornotees who were appointed to posts of Assistant Engineers with effect from Ist of }.larch 1958, or later dates, would be governed by the quota system as envisaged in the Recruitment Rules.

(iii) Promotees appointed as Assistant Engineers prior to 31st October 1961 would rank senior to the direct recruits whose appointments \Vere made on that date.

(iv) The claim of each of the promotees to the next higher post shall be considered with effect from a day prior to that on which. any officer found junior to him was promoted

Allowilig the appeals by special leavei the Court

HELD:

1. The scope of the writ petition was not limited to the question of promotion of Assistant Engineers as Executive Engineers. The. attack on the seniority list dated 4th Sept. 1973 was inherent in the case set up by the pron1otees, of E which it formed an integral plart. Though no prayer had been made by the promotees to quash or rectify the seniority list dated 4th September 1973, their hole case was based on the coll.t, ntion that they had been promoted to the posts of Assistant Engineers in a substantive capacity prior to the appointment of direct recruits, that they would take precedence over direct recruits in the matter of seniority and regular absorption in the cadre of Assistant Engineers and that it was on that account that the promoion of F direct recruits to the posts of Executive Engineers without consideration of the case of the promotees for such promotion was illegal.

[946E~G]

2. No exception is or can be taken on behalf of the promotees to the finding arrived at by the High Court that the appointment of direct recruits to the posts of Assistant Engineers was in order, in view of the judgment of this Court in B. N. Nagarajan v. State of Mysore, [1966) 3 SCR p. 682.

Nor can it be urged with any plausibility on behalf of direct recruits that the appointment of the promotees as Assistant Engineers prior to the enforceilent of the Recruitment Rules ltly outside the powers of the Government or was otherwise illegal. [946G-

H, 947AJ

V. B. Badami and Ors. v. State of Mysore ond Ors .. [1976] 1 SCR 815 and B. N. Nagarajan v. State of Mysore and Ors., [1966] 3 SCR 682; followed.

3. A combined reading of Rule 2 'of the Seniority Rules and the definition of the -words "appf>inted on probation" and

1'Probationer" in Rule 2 of the 'Probation Rules, makes it clear that tbe direct recruits were appointed as 'ASsistant ''r.

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B. N. l\AGARAJAN V. KARNATAKA 939

Engineers, "substantively in clear vacancies" as envisaged by clause (a) of rule A 2_ of the Seniority Rules. If any of the promotees also satisfied that requirement at any time ea:; lier to the 31st of October 1961, he would be bracketed with the 8.irect recruiis under that clause and his seniority vis-a-vis those recruits \VOuld

then be governed by clause (b) of the rule i.e., on the basis of his and their respective dates of confirmation. If, on the other hand, none of the promotees can be said to have been appointed substantively in a clear vacancy, clause (a) aforesaid would.have no application to them and all direct recruits would rank B senior to them.

[947G-H, 948A-B]

4. In the instant case, all through the relevant period the promotees held appointn1cnts as Assistant Engineers in nonsubstantive capacity, i.e., either on an officiating or a temporary basis. This being the position, they would all rank junior to the direct recruits who, from the very start, held appointments made "substantively in clear vacancies".

[950H, 951~]

(a) The language employed fa the first order dated 15th November 1958 {Ex.A) appointing promotees as Assistant Engineers makes it clear that the promolion of the 167 officers was not substantively made, the tenure being specifically stated to be either "officiating'' or "purely temporary" and "subject

10 review after the finalisation of th~ inter se seniority list of supervi.Sors and the

F..ecruitm.ent Rules", which expressions clearly militate against a substantive D appointment.

[948E-G]

(b) Orders made by the State Government later on right upto the 31st October, 1961 when the direct recruits '\\'ere appointed as Assistant Engineers did not improve the position of any of the promotees in any manner. These orders \Vere either silent on the point of the nature of the tenure of the promotees as Assistant Engineers, or stn-ted in no uncertain terms that the promotees would hold the posts of Assistant Engineers on a temporary or officiating basis. [948G-

H, 949AJ

(c) The two Notifications dated 27th Febmary 1962, and order Exhibit (D), dated 6th October 1962-the combined effect of which was to promote the said

107 officers es Assistant Engineers \Vith effect from 1st of November 1956 "on a reg"l'l.1ar basis" do not give it the colour of permanence to the appointments of tke promotees as Assistant Engineers which cannot therefore be deemed to have been made substantively right from the 1st of November 1956 for two reasons; Firstly, the words "regular'' or "regularisation" do not connote permanence. They are terms calculated to condone any procedural irregularities and are meant to cure only such defects as are attributable to the methodology followed in making the appointments. Secondly, when rules framed under Article 309 of the Constitution of India are in force, , no regularisation is permissible in exercise of the -executive powers of the Government under Article 162 thereof in contravention of the Rules. The regularisation order was made Jong after the Probation Rules, the Seniority Rules and the Recruitment Rules were promulgated and could not therefore direct something which would do violence to any of the provisions thereof.

Regularisation in the present case, if it meant permanence operative from the 1st of November, 1956 would have the effect of giving seniority to promotees over the direct recruits '\\'ho, in the absence of such regularisation. would rank senior to the forn1er because of the Seniority Rules read with the Pr9bation Rules and may in consequence also confer on the p.romotees a right of priority in the matter of sharing the quota under the Recruitment Rules. Jn

other words, the regularisation order, in colouring the appointments of prorootees as Assistant Engineers with permanence would run counte-r to the rules framed under Article 309 of the Constitution of India. What could not be done under the three sets of Rules as they stood, would thus be achieved by an executive fiat.

And such a course is not permissible because an act done in the e"ercise of the executive power of the Government, cannot override rules framed under Article 309 of the Constitution. [949B-D, 950D-GJ

State of Mysore and A.nr. v. S. V. Naraynaswami, [1967] 1 SCR 128 and R. N. Nanjundappa v. T. Tlummia/i, [1972] 2 SCR 799; applied.

[The Court m::ide it clear (a) "that this order does not cover such officers es were holding the posts of Assistant Engineers on a substantive basis prior to the 1st of November, 1956 when the new State of Mysore nO\V kno\vn as Karnataka came into being, and the case of any Ai; istant Engineer \\ho acquired a substantive status prior to the promulgation of the Rec111itrnent Rules and the appointment of the direct recruits; (b) that persoos falling within these two categories will first have to be accommodated in the clear vacancies available ; i.nd only the remaining vacancies will have to be utilised for fitting in the direct recruits and the Assistant Engineers \\'ho have disputed their claim in these proceedings; and (c) that the quota rule will not stand in the way of the Government giving effect to this arrangement which has been taken care of in the amendment (promulgated on the 23rd of October 1961 \ to the Recruitment Rules"].

ClvrL APPELLATE JURISDICTION : Civil Appeal No. 2329 of 1977.

Appeal by Special Leave from the Judgment and Order dated 30-11-1976 of the Karnataka High Court in W.P. No 2307/71.

CIVIL APPEAL NOS. 2330-2350/77

Appeals by Special Leave from the Judgment and Order dated 30-11-1976 of the Karnataka High Court in W.P. Nos. 2307/71. 796/72, and 462-467,. 553-560, 943, 944, 1033, 1027 and 1032/ 73; and

CIVIL APPEAL NOS. 2351-2370/77

Appeals by Special Leave from the Judgment and Order dated 30-11-1976 of the Karnataka High Court in W.P. Nos. 462-467, 553- 560, 796. 943, 944. 1027, 1033/73.

P. Ram Reddy and S.S. Javali for the Appellant in CA 2329/77.

F. S. Nariman, B. P. Singh and A. K. Srivastava for the Appellants in C.A. Nos. 2351-2370/77.

L. N. Sinha and Narayan Nettar for the AppeUants in C.A. 2330 to 2370/77.

A. K. Sen, , Afuralidhar Rao and P. R. Ramasesh f,1r RR. 2, 3, 5, and 7 in C.A. 2329/77.

P. R. Ramasesh for RR/Promotees in CA 2330c2350/77 and RR in C.A. 2352-2370/77,

l ,

Y. S. Chitale, M. Muralidhar Rao, P. R. Ramasesh and S. S.

Kliinduja, for the RR in C.A. 2351/77.

The Judgment of the Court was delivered by

KosHAL, J.-By this judgment we shall dispose of 42 appeals by special leave, namely, Civil Appeals Nos. 2329 to 2370 of 1977, all of which are directed against a judgment dated the 30th November, 1976 of a Division Bench of the High Court of Karnataka.

Civil Appeals Nos. 2329 and 2351 to 2370 of 1977 have been filed by different persons who were appointed Assistant Engineers in the Karnataka State on 31st October, 1961, by way of direct recruitment while the other 21 appeals have been filed by that State.

2. The facts giving rise to the impugned judgment may be ' set down in some detail.

A new State came into existence on the 1st of November, 1956 as a result of integration of the areas which formed part of the erstwhile States of Mysore, Madras, Coorg, Bombay and Hyderabad (hereinafter referred to as the Merged States).

It was then given the name of one of its constituents, namely, the State of Mysore, which was later changed to that of the Karnataka State. In the Public Works Departments of the Merged States there was a class of non-gazetted officers ranking below Assistant Engineers.

The class was designated as Graduate Supervisors in the Merged State of Mysore, as Junior Engineers in the Merged State of Madras and as Supervisors in the Merged States of Hyderabad and Bombay.

The Graduate Supervisors were paid a fixed salary of Rs. 225 /- per mensem which was lower by Rs. 25 /- per mensem as compared to the starting salary of Assistant Engineers, who, in the normal course, were expected to head sub-divisions.

To the post of Assistant Engineer a Graduate Supervisor was appointed only on promotion.

Prior to the 1st of November, 1956, quite a few Graduate Supervisors were given charge of sub-divisions and designated as Subr:iivisional Officers in order to meet the exigencies of service and they continued to act as such after the merger when they claimed equation of their posts with those of Assistant Engineers in the matter of integration of services.

To begin with their claiJJ.1 was turned down by the Central Government who equated the posts of Graduate Supervisors with the posts of Junior Engineers of the Merged State of Madras and the posts of Supervisors of the Merged States of Hyderabad and Bombay.

By a notification dated the 6th of February, 1958, the Government of Karnataka (then known as the Government of Mysore)

promulgated the Mysore Government Servants (Probation) Rules .• 1957 (hereinafter called the Probation Rules) and on the next day came into force the Mysore Government Servants (Seniority) Rules, 1957 (hereinafter referred to as the Seniority Rules), both havin!'; been framed under Article 309 of the Constitution of India.

On the 1st of October, 1958, the Karnataka Public Service Com mission invited applications from candidates for appointment to tile

posts of Assistant Engineers by direct recruitment.

In the meantime Graduate Supervisors and Government employees holding equivalent posts had continued to press their claim for the equation of their posts with the posts of Assistant Engineers and they succeeded partially when, on the 15th of November, 1958, th• Karnataka Government promoted 167 of them (including 107 Graduate Supervisors who had been working as suc:h in the Merged State of Mysore) as officiating Assistant Engineers with immediate effect.

The promotion was notified in the State Gazette dated the 20th of November, 1958 (Exhibit A) the relevant portion whereof may be reproduced for facility of reference :

" ... The following supervisors of Public Works Department are promoted as officiating Assistant Engineers with immediate effect and until further orders against the existing vacancies subject to review after the finali- E sation of the Inter-Se Seniority List of Supervisor> and the Cadre and Recruitment Rules of Public Works Department. The promotion of officers from S.I. No. 74 to 167 against existing vacancies will be purely on a temporary basis pending filling up of the vacancies by Direct Recruitment as per rules.

The Seniority inter se of tbc Promotees will be provisional according to the order .civen below : ................ ".

299 more persons of the same class were promoted to the posts of Assistant Engineers by eight notifications puhlished during the period from 22nd of December, 1958 to the 13th of October, 1960.

G On the 21st (31st?) of August, 1960, the State Government passed an order in regard to the 107 Graduate Supervisors from the Merged State of Mysore and mentioned above. directing that they be treated as Assistant Engineers and be paid the pre-revision scale of pay of Rs. 250-25-450 from the 1st of November, 1956 fo the 31st of December, 1956 and the revised scale of pay of Rs. 250- B 25-450-30-600 from the 1st of January, 1957 onwards.

The order further directed that the said 107 officers shall be placed in the inter-se seniority list below the Assistant Engineers.

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B. N. NAGARAJAN v. KAR'<ATAKA (Kasha/, J.) 943

On the 3rd of December, 1960, the Karnataka Government promulgated the Mysore Public Works Engineering Department Services (Recrnitment) Rules, 1960 (hereinafter referred to as the Recruitment Rules) under Article 309 of the Constitution of India, which envisaged appointment of Assistant Engineers in the Public Works Departµient by direct recruitment to the extent of 40 per cent and by promotion for the rest, viz., 50 per cent from the cadre of Junior Engineers and 10 per cent from the cadre of Supervisors.

The cadre of Assistant Engineers was stated in the Rules to consist of 344 permanent and 345 temporary posts.

On the 23rd of October, 1961, thd Recruitment Rules were amended so as to be. operative retrospectively i.e., with efkct fron: the 1st of March, 1958.

On the 31st of October, 1961, 88 candidates were appointed as Probationary Assistant Engineers by direct recruitment.

Two notifications were issued by the State Government on the

27th of February, 1962. By each one of them 231 Junior Engineers D were given "regular promotions" as Assistant Engineers with effect from specified dates falling within the period 15th of November, 1958 to the 10th of November, 1960. The first of these notifications stated inter alia :

" .... However, the promotions are subject to revie'v after finalisation of the interse Seniority List of Junior Engineers .... ".

The second ofi the notifications issued on the 27th of February. 1962, mentioned that the officers named therein would be deemed to be temporarily promoted and pemitted to continne to officiate as Assistant Engineers on a provisional basis and until further orders.

The case of the said 107 officers received further consideration at the hands of the State Government, who, on the 6th of October, 1962, issued another order (Exhibit D) superseding the one dated the 31st of August, 1960, and promoting them as Assistant Engineers with effect from the 1st of November, 1956.

By the 24th of September, 1966. the number of Probationary Ass.istant Engineers appointed through direct recruitment (hereinafter called direct recruits) had fallen to 85 for reasons which need not be stated.

On that day the State Government passed an order that

they had all completed their period of probation satisfactorily and H stood absorbed against substantive vacancies with effect from the 1st of November, 1962.

! n 1971 various orders were pa'5ed promoting some of the direct recruits to the posts of Executive Engineers and those orders were challenged in a writ petition dated the 15th of September, 1971, by the promotees to the posts of Assistant Enginc"rs (hereinafter referred to as the promotees).

On the 28th of September, 1972 .• a list (Exhibit G) of Assistant Engineers indicating their seniority inter se as ou the I st of November, 1959, was prepared by the State Government ... In that list the pro; notc.?s \Vere accorded seniority to their satisfaction. However, that !i&t was superseded by another list dated the 4th of September, 1973, in which the seniority inter se of all Assistant Engineers functioning in the State Public Works Department as on 1st of January, 1973 was declared.

The new list purported to have be.on framed in accordance with the Recruitment Rules.

Objections to the list were invited and were submitte~ by various officers.

During the year 1973 more writ petitions challeuging the promo- .tion of direct recruits to the posts of Executive Engineers were instituted by the promotees on whose hehalf two c)aims were made before the High Court, namely :

r 1) that they had been regularly promoted as Assistant

E.ngineers against substantive vacancies with retrospective effect and rightly so; and

(2) that in the case of those of them whose promotion

was made effe.ctiw from a date prior to the lst of March, 1958, the Recruitment Rules, especially the quota rule, could not affect them adveP<ely.

Both these claims were accepted by the High Court, thr first on the basis of the decision of this Court in Ram Prakash Khanna &: Others

v. S. A. F. Abbas(') coupled with the pleadings of the parties and the various orders i.-sued by the State Government and mentioned abow, and the second on the authority of another decision of this Court in V. B. Budami & Others v. State of Mysore & Others(') /The High Court accordingly held that the quota rule would not be atwicted to the case of those promolees who had been appointed to ti)~ pas.ts of A"istant Engineers with effect from a date prior to t!1ll 'ist of March, 1958. By way of a 'clarification' the High Court further ruled that the promotion of the 107 officers working in tl1e Merged.State of

(!) A. I. R. 1972 S. C. 2350.

(2) [1976] I S. C. R. 815.

)'vlysore was made to substantive posts of Assistant Engineers with effect

from the 1st of November, 1956, and that the State Government or the direct recruits could not be alk>wed to urge to the contrary. According to the High Court such promotion was subject to review only if the course was warranted and necessitated by the final inter se seniority list o! Junior Engineers, the right to review having bee11 reserved by the Government in its orders dated the 27th o! February, 1962. Ill relation to the direct recruits the High Court made a reference to the judgment of th; s Court in B. N. Nagarajan v. State of Mysore & Others(') wherein it was held that their appointments, although made after the Recruitment Rules had come into force, were valid, as the process of direct recruitment had been set in motion by the State Government in exercise of its executive powers under article 162 of the Constitution of India well before the Recruitment Rules were promulgated and that those appointments were therefore "outside the Recruitment Rules".

The High Court consequently held that the direct recruits were also not subject to the quota rule which

could not, according to it, affect them adversely.

Summing np, the High Court gave the following directions (I) Promotees other than those covered by direction ( 2) and direct recruits would not be governed by the quota system as envisaged in the Recruitment Rules.

(2) Promotees who were appointed to posts of Assistant Engineers with effect from the 1st of March, 1958, or later dates, would be governed by the quota system as envisaged in the Recruitment Rules.

(3) Promotees appointed Assistant Engineers prior to the 31st of October, 1961, would rank senior to the direct recruits whose appointments were made on that date.

( 4) The claim of each of the promotees to the next higher post shall be considered with effect from a day prior to that on which any officer found junior to him was promoted. ·

3. The first contention we would like to deal with is one raised by Mr. F. S. Nariman appearing for the direct recruits.

He argued that the scope of the writ petitions instituted by the promotees was limited to the question of promotion of Assistant Engineers as Executive Engineers and that no challenge to the seniority list dated the 4th of September, 1973 could be entertained. In this connection

ii) [1966] 3 S. C. R. 682.

refereace was made to the prayer clause appeariug in Writ l'etitio" No. 462 of 1973 which is in the following terms :

"In this writ petition, it is prayed that this Court may lie pleased to :

(1) quash the promotion of respondents 2 to 31 to the

cadre of Executive Engineers made "' per order dated 3-2-1973;

(2) direct the respondent 1 to consider the case of the

petitioner for promotion to the cadre of Executiv0 Engineers with effect from 3-2-1973 on which date respondents 2 to 31 were promoted; and

(3) pass an interim order, restraining the respondent l from making further promotion to the cadre of Executive Engineers without considering the case of the petitioner for such promotion, pending disposal ef this writ petition."

(It was assumed at the hearing of the appca ls that the prayer made in the other writ petitions is to a similar effect).

It is true that no prayer has been made by the promotees tcY quash or rectify the seniority list dated the 4th of September, 1973, but then their whole case is based on the contention that they llad beeli. promoted to the posts of Assistant Engineers in a substantive capacity prior to the appointment of the direct recruits, that they would take precedence over direct recruits in the matter of seniority and regi.1lar absorption in the cadre of Assistant Engineers and that it was on that account that the promotion of direct recruits to the posts of Executive Engineers without consideraion of the case of the pro motees for such promotion was illegal.

The attack on the said seniority list therefore is inherent in the case set up by the promctees,.

of which it forms an integral part.

In this view of the mattoc we cannot agree with Mr. Nariman that the scope of the writ petitions is limited as stated by him.

4. No exception is or can be taken on behalf of the promotees to the finding arrived at by the High Court that the appointment of direct recruits to the posts of Assistant Engineers was in order, in H view of the judgment of this Court in B. N. Nagarajan v. State of Mysore(supra). Nor can it be urged with any plausibility on behalf of direct recruits that the appointment of the promotees as Assistant

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B. N. NAGARAJAN v. KARNATAKA (Kasha/, .T.) 947

Engineers prior to the enforcement of the Recruitment Rules lay outsWe the powers of the Government or was otherwise illegal.

The real di>pute between the direct recruits and the promotees revolves round the quality of the tenure held by the latter immediately prior to the enforcement of the Recruitment Rules and that is so because of thE language employed in rule 2 of the Seniority Rules.

The relevant portion of that rule is extracted below :

"2. Subject to the provisions hereinafter contained, the , eniority of a person in a particular cadre of service or class of post shall be determined as follows :

(a) Officers appointed substantively in clear vacancies C shall be senior to all persons appointed on officiating or any

o:her basis in the same cadre of service or class of post;

(b) The seniority inter se of officers who are confirmed sl!all be determined according to dates of confirmation, but where the date of confirmation of any two officers is the "ame, their relative seniority will be determined by their seniority inter se while officiating in the same post and if not, by their seniority inter se in the lower cadre;

( c) Seniority inter se of persons appointed on temporary basis will be determined by the dates of their conti- E nuous officiation in that grade and where the period of officiation is the satne the seniority ; nter se in the lov.rer grade shall prevail.

Explanation ...

(d) .... ' ... ' ' ............................ " Now ire w far as the direct recruits arc concerned they were appointed as PrPfKltionary Assistant Engineers, i.e.. Assistant Engineers "appointed on probation" which term is defined in rule 2 of the Probation R:iles.

That rule states :

"'.:. For the purpose of these rules :--·

( 1) "Appointed on Probation" means appointed on trial in or against a substantive vacancy.

t 2) "Probationer" means a Government servant appointed on probation.

A Government servant so H appointed (and continuing in service) remain a probationer until he is confirmed."

In view of these definitions it cannot be gainsaid that the direct recruits were appointed Assistant Engineers "substantively in clear vacancies" as envisaged by clause (a) of rule 2 of the Seniority Rules. If any of the promotees also satisfied that requirement at any tiJ:ne earlier to the 31st of October, I 96L be would be bracketed with the direct recruits under that clause and his seniority vis-a-vis those recruits would then be governed by clause (b) of the ::ule, i.e .. on the basis of his and their respective dates of confirmation. If, on the other hand, none of the promotees can be said to have been appointed substantively in a clear vacancy. clause (a) aforesaid would have no application to them and all direct rccruib would ra.nk senior to them; and it is in the light of the said clauses , a) and

(b) therefore that learned counsel for the State a,1d the direct recruits have challenged the finding of the High Court that the promotion of the 1 07 officers working in the Merged State of Mysore was made to substantive posts of Assistant Engineers with effect from the Jst of November, 1956 and that the State Government er the direct recruits could not be allowed to urge to the contrary. The controversy has to .be resolved in the light of the orders passed by the State Government from time to time in relation to those officers and

lthcrs simiJarlv situated.

5. The first order appointing promotees as Ass; stant Engineers '' E dated the 15th of November, 1958 (Exhibit A).

That order made it clear that all the promotees covered by it were appohted ofjicia1i11g

Assistant Engineers and were to hold office until further orders. The promotion was also made suh.iect to review after the finalisation of the inter se seniority list of Supervisors and the Recruitment Rules.

The not; fication went on to state that in the case of 94 of the officers promoted under it, their appointment as Assistant Engineers was being made on a purely temporary basis inasmuch hs they would have to vacate the posts against which they were befog fitted, as soon as candidates \Vere available through a process of direct recruitment.

The language employed leaves no doubt that the promotion of the :l 67

officers was not substantively made, the tenure being specifica!ly stated to he either uofficiating" or "purely temporary" \Vhich expressions cle:1!'.ly militate against a suhstantive appointment

Ordec made by the State Government later on and right upto the J !st of October, 1961 when the direct recruits were appointed Assis- H tan! Engineers did not improve the position of any of the promoters in any manner.

Those orders were either silent on the point of the natrn"' of the tenure of the rromotees as Assistant Engineers. er stated

.. ..

in no uncertain terms that the promotees would hold the posts of Assistant Engineers on a temporary or officiating basis. That is why Dr. Chitalcy and Mr. Sen, learned counsel for the promotees, mainly placed their reliance on the two notifications dated the 27th of February, 1962, and order exhibit D dated the 6th of October, 1962, the combined effect of which was to promote the said 107 ofticers as AS!ristant Engineers. with effect from the 1st of November, 1956 "on a regular basis". It was argued that the regularisation of the promotion gave it the colour of permanence and the appointments of the promotees as Assistant Engineers must therefore be deemed to have been made substantively right from the 1st of November, 1956. The argument however is unacceptable to us for two reasons.

Firstly the wordt: "regular" or "regularisation" do not connote permanence. They are terms calculated to condone any procedural irregularities and are meant to cure only such defects as are attributable to the methodology followed in making the appointments.

They cannot be construed so as to convey an idea of the nature of tenure of the appointments. In

this connection reference may with advantage be made to State of Mysore and Another v. s. V. Narayanappa(') and R. N. Nanjundappa v. T. Thiliilniah and A not her("). In the former this Court observed :

"Before we proceed to consider the construction placed by tho High Court on the provisions of the said order we may mention that in the High Court both the parties appear to have proceeded on an assumption that regularisation meant permanence.

Consequently it was never contended before tbe High Court that the effect of the application of the said order would mean only regularising the appointment and no more and that regularisation would not ipean that the appointment would have to l;>e considered to be permanent as an appointment to be permanent would still require confirmation.

It seems that. on account of this assumption on the part of botl1 the parties the High Court equated regularisation with permanence."

In Nanj1mdappa's case also the question of regularisation of an appointment arose and this Court dealt with it thus :

" ...... Courisel on behalf of the resp0t1dent contended that regularisation would mean conferring the quality of permanence on the appointment whereas counsel on behalf

(I) [1967] I S. CR. 128.

(2) [1972] 2 S. C. R. 799.

I B

; c

:A of the State contended that regularisation did not mean permanence but that it was a case of regularisation of the rules under Article 309.

Both the contentions are fallacious. It the appointment itself is in infraction of the rules or if it is in violation of the provisions of the Constitution illegality

cannot be regularised.

Ratification or regularisation is possible of an act which is within the power and province of the authority but there has been sollle non-compliance with procedure or manner which does not go to the root of the appointment.

Regularisation cannot be said to be a mode of recruitment.

To accede to such a proposition would be to introduce a new head of appointment in defiance of rules or it may have the effect of setting at naught the rules."

Apart from repelling the contention that regularisation connotes permanence, these observations furnish the second reason for rejection of the argument advanced on behalf of the promotees and that reason is that when rules framed under article 309 of the Constitution of India are in force, no regularisation is permissible in exercise of the executive powers of the Government under article 162 thereof in contravention of the rnles.

The regularisation order was made long after the Probation Rules, the Seniority Rules and the Recruitment Rules were promulgated and could not therefore direct something which would do violence to any of the provisions thereof.

Regularisation in the present case, if it meant permanence operative from the 1st of November, 1956, would have the effect of giving seniority to promotees over the direct recruits who, in the absence of such regularisation, would rank senior to the former because of the Seniority Rules read with the Probation Rules and may in consequence lliso confer on the promotees a right of priority in the matter of sharing the quota under the Recruitment Rules.

In other words, the regularisation order, in colouring the appointments of promotees as Assistant Engineers with permanence would run counter to the rules framed under article 309 of the Constitution of India.

What could not be done under the three sets of Rules as they stood, would thus be achiel"-

ed by an executive fiat.

And such a course is not permissible because an act done in the exercise of the executive power of the Government &s already stated, cannot override rules framed under Article

309 of the Constitution.

The case has, for both the above reasons, to be decided on the ii footirig that all through the relevant period the promotees held appointments as Assistant Engineers in a non-substantive capacity, i,~., either on an officiating or a temporary basis.

This bein~ the :iosition,

~·

,.,

they would all rank junior to the direct recruits who, from the very

£tart, held appointments made "substantively in clear vacancies."

6. We may here make it clear that this order does not cover such officers as were holding the posts of Assistant Engineers on a substantive basis prior to the 1st of November, 1956 when the new State of Mysore now known as Karnataka came into being. Nor would it adversely affect the case of any Assistant Engineer who acquired a

substative status prior to the promulgation of the Recruitment Rules and the appointme11t of the direct recruits. Persons falling within these two categories will first have to be accommodated in the clear vacancies available and only the remaining vacancies will have to be :utilised for fitting in the direct recruits and the Assistant Engineers who have disputed their claim in these proceedings. It may also be

mentioned that the quota rule will not stand in the way of the Government giving effect to this arrangement which has been taken care of in the amendme11t (promulgated on the 23rd of October, 1961) to the Recruitment Rules. The relevant portion of tliat amendment is contained in item 3 thereof which is reproduced below :

"3. To rule 2 of the following proviso shall be added and shall be deemed always to have been added, namely-

"Provided that in respect of direct recruitment of Assistant Engineers for the first time under these rules the percentages relating to direct recruitment and recruitment by promotion specified in colu1!1_n 2 of the Schedule shall not be applicable and the minimum qualifications and the period of production shall be the following, namely-

"Qualifications : .................. ".

It is common ground between the parties that the posts comprised in the cadre of Assistant Engineers coi:i_stituted by the Recruitment Rules have yet to be filled in for the first time.

The proviso extracted above therefore will apply fully to the utilization of those vacancies as stated above. It goes without saying that all questions of seniority shall be decided in accordance with the Seriiority Rules and that the Recruitrnent__Rules, as amended from time to tiine, shall be fully implemented as from the date of their enforcement, i.e., 1st of March, 1958.

7. In the result we accept the appeals, set aside the judgment of the High Court and decide the dispute between the prties in accord- !nce with the observations made in paragraphs 5 and 6 hereof.

V.D~K.

Appeals allowed.

B. N. NAGARAJAN AND ORS

STATE OF KARNATAKA AND ORS. ETC

P. S. KAILASAM

A:. D. KOSHAL, JJ

Art. 226

Mysore

Madras

Coorg

Hyderabad

Article 309

Mysore State

Madras State

Bombay

Central Government

Mysore

2nd Dec. 1958

13th October '

Mysore Public Service Commission

dt. 1-10-58

31st Oct.' 61i

1st March 1958

Article 162

Constitution of India

31st October 1961

[1976] 1 SCR 815

[1966] 3 SCR 682

B. N. l\AGARAJAN V. KARNATAKA

31st October, 1961

1st of November 1956

Article 309

Constitution of India

Article 162

1st of November, 1956

Article 309

Constitution of India

Article 309

[1967] 1 SCR 128

[1972] 2 SCR 799

23rd of October 1961

P. Ram Reddy

S.S. Javali

F. S. Nariman

B. P. Singh

A. K. Srivastava

L. N. Sinha

Narayan Nettar

A. K. Sen

Afuralidhar Rao

P. R. Ramasesh

Y. S. Chitale

M. Muralidhar Rao

S. S.

Kliinduja

High Court of Karnataka

State of Mysore

Karnataka State

6th of February, 1958

Government of Karnataka

Government of Mysore

Article 309

Constitution of India

1st of October, 1958

15th of November, 1958

Karnataka Government

20th of November, 1958

22nd of December, 1958

13th of October, 1960

21st (31st?) of August, 1960

31st of December, 1956

1st of January, 1957

3rd of December, 1960

Article 309

Constitution of India

23rd of October, 1961

1st of March, 1958

31st of October, 1961

27th of February. 1962

6th of October, 1962

31st of August, 1960

24th of September, 1966

1st of November, 1962

15th of September, 1971

28th of September, 1972

4th of September, 1973

1st of January, 1973

vlysore

27th o! February, 1962

article 162

Constitution of India

F. S. Nariman

[1966] 3 S. C. R. 682

Nariman

31st of October, I 96L

Supervisors and the Recruitment Rules

J !st of October, 1961

Chitalcy

Sen

27th of February, 1962

[1972] 2 S. C. R. 799

Article 309

article 309

Constitution of India

article 162

article 309

Constitution of India

Article

309

Karnataka


BABU RAM JAGDISH KUMAR & CO., ETC., ETC.

STATE OF PUNJAB & ORS., ETC., ETC.

May 4, 1979

[N. L. UNTWALIA, R. S. PATHAK AND E. S. VENKATARAMIAH, JJ.J

Puttjab Sales Tax Act, Legislatutc. If could delegate in Schedules to the A.ct.

1948-S. 31-Constitutional validity of-. po1ver to executire to add or delete anything

Words &: Phrases "Taxable ee1u" 1uui "taxablt person''- ,\leaning of.

S<ction 5(1) of the Punjab Sales Tax Act, 1948 authorises the Stato Government to deternline the rates of tax payable on ihe taxable .turnover of a dealer not exceeding the limit prescribed therein.

Sub-section (2) lays down the principles governing the Jetermination of the taxable turnover.

Schedule 'C' -of the r\ct refers to goods, the tun1over of which is subject to purchase tax. Section 31 of the Act \Vhich gives specific power to the State Government to amend Schedule '(:' provides that afler giving by notification, not less than three months' notice of its intention so to d•J the State Govern ment may add to or delete from Schedule 'C' any goods and thereupon Schedule 'C' shall be deemed to be an1ended accordingly.

By a notification dated January 15. 1968 the- State Government added in Schedule 'C', "paddy" and "rice" as items on which purchase tax could' be levied. .As a result of thi.:; notification turnover relating to the purchase of paddy and rice became exigible to purchase tax in the hands of the purchasers with effect from that date.

Tn.e appellants who are dealers in paddy, buy paddy ln the first instance and sell rice after converting paddy into rice.

They filed writ petitions in the High Court questioning the validity of s. 31 of the i\ct and the notifica tion issued thereunder and their liability to payment of purchase tax.

T-be High Court dismissed the writ petitions.

In appeal to this Court it was contended that s. 31 of the Act which authorised the State Government to vary Schedule 'C' by adding certain goods \Vh06e turnover was not liable to payment of sales tax earlier, suffered from the vice of excessive delegation of legistatiYe power.

Dismissing the appeals,

HELD: l(a) The delegation of po-wer to the State (iovernment to determine whether any class of goods should be included or excluded from Schedule 'C: to the Act cannot be considered as unconstitutio:aal. [967 G].

(b) The case in so far as s. 31 of the Act which is an integral part of a single enactment and which authorises the Stat~ Government to . amend Schedu1e 'C' to the Act cannot be different from the case which was dealt

• ' 1

1, j

" "

l .. , . ))..._

... " •

with by the Constitution Bench, in Pt. Banarsi Das Bhanot v. State of M.P., .\ [1959] SCR 427. If it is permissible for the Legislature to authorise the State Government to convert tax free goods into taxable ones, there is hardly any justification for holding that the State Government cannot be entrusted with the power to include goods in Schedule 'C' n1aking their purchase turnover taxable. [968 D-Fl.

(c) It is well established that the delegation of power by the legislature hl a local authority or to the executive Government to vary or modify an existing Jaw would not be unconstitutional so long as such delegation does not involve the abdication of essential legislative power by the 'legislature.

Such delegations of legislative powers have been upheld by this Court on several varied and diverse grounds such as the scheme and policy of the statute under which the power is delegated, the presence of guidelines in the statute regarding the exercise of delegated power, the lack of time for the legislature to make provision with regard to all the details involved in the adm:nistration of law, the incapacity of the legislature to foresee future events, the nature of the subject matter of the legislation and the nature of the:. donee of power etc.

Even in matters relhting to taxation laws, it has been consistently held that the legislature can. delegate the power to fix rates of tax provided there are necessary guidelines regarding such fixation on the ground that in a ntodern society, taxation is one of the methods by which economic and social goals of State can be achieved and the power to tax should be flexible and capable of being easily altered to meet the exigencies of circumstances. Such delegation has been held to be not amounting to delegation of essential legislative function.

[959A-DJ.

Pt. Banarsi Das Bhanot v. State of M.P. &: Ors., {1959] SCR 427; /l;!unicipal Corp. of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi & Anr., [1968] 3 SCR 251; Corporation of Calcutta & Anr. v.

T/Je Liberty Cinema, [1965] 2 SCR 477; Sita Rain Bisha1nbar Dayal & Ors. v. State of U.P. & Ors., [1972] 2 SCR 141; Hirata/ Rattan/al etc., etc. v.

State of U.P & Anr. Pfc., etc. [1973] 2 SCR 502; referred to.

i(a) The argument that even though s. 31 was not unconstitutional the

aotiffcaton was not enforceable against the appellants has no force.

In Pt.

Banarsi Das Bhanot v. State of M.P. it has been held that it is open to the Legislature to delegate the power to withdra\v the exemption which has been given by the Legislature in respect of certain transactions specified, 1n the Act under consideration in that case.

It cannot be said that the principal object 'of the Act is to encourage manufacturing industry.

The Act is a fiscal legislation and its object is to collect revenue for the purpose of n1eeting the expenditure of the Government.

It is true that while levying tax under the Act, the Legislature may grant exemptions in certain cases and may decline to grant exemption in other.

The question whether such exeniption should be given or not is only incidental or ancillary to the principal object viz., the object of levying tax for the purpose of collecting revenue.

Jt cannot be said that wJlen certain goods are sold in favour of a manufacturer, the seller is always entitled to deduct such sales turnover from the grosl! turnover. He can do so only when such goods are specified in the certificate of registration obtained by the purchaser and they are used by him in the

5-409 SCI /79

manufacture in the State of any goods other than goods declared tn. free under s. 6 of the Act for sale in the State. Transactions in paddy cannot be considered as having been generally exempted from payment of tax under the Act. Section 5(2)(a)(ii) of the Act grants exe!Ilj>tion from payment of sales tax on the turnover of goods sold in favour of a manufacturer under the circumstances mentioned therein only to the seller and not to the boyer even though indirectly the buyer may be benefited thereby. [970A-F]

(b) 1be terms "taxable goods", "taxable event" and "taxable person'' are three distinct concepts. In the instant case the "'taxable event" is the pur chase of paddy and not its sale which alone attracts s. 5(2)(a)(ii) of the Acl ''Taxable person" i.e. the person liable to pay tax is the purchaser and not the seller. The appellants cannot complain that any e-xem.ption graated to them by the Act has been taken away. Even though the liability to pay purchase tax may be on the appellants, it is bound to, have repercussions on the price at which they buy paddy and the price at which rice manufactured by them out of that padey is sold by them.

The tax payable under the Act being an indirect ta""\, the tax burden would ordinarily fall on the consumer of rice and not on any of the intermediaries including the appellants.

The iinpugned notification cannot therefore, be treated as one issued against the policy of the statute. [970G-H, 971A-B]

State of Tamil Nadu v. M. K. Kandaswanii, etc., itc., [1976] 1 SCR 38; referred to.

CIVIL APPELLATE JuRiso1cTJON : Civil Appeal No. 1028 of 1976.

Appeal by Special Leave from the Judgment and Order dated 8-3-1976 of the Punjab and Haryana High Court in Civil Writ Petition No. 354/75.

AND

CIVIL APPEAL NOS. 1029-1032 OF 1976

Appeals by Special Leave from the Judgment and Order dated 8-3-1976 of the Punjab & Haryana High Court in C.W.P. Nos. 564 and 582/75 and C.W.P. Nos. 1988 and 2000/76 respectively.

AND

CIVIL APPEAL NO. 1033 OF 1976 Appeal by Special Leave from the Judgment and Order dated 31-5-1976 of the Punjab and Haryana High Court in C.W. Petition No. 2580/76.

AND

CIVIL APPEAL NO. 1034 OF 11976 o Appeal by Special Leave from the Judgment and Order 10-6-1976 of the Punjab & Haryana High Court in Civil Writ Petition No. 2890/76.

i •

) •

BABU RAM JAGDISI! & co. v. PUNJAB (Venkataramiah, J.) 955

AND

CIVIL APPEAL NO. 1035 OF 1976

Appeal by Special Leave from the Judgment and Order dated 28-6-1976 of the Punjab & Haryana High Court in Civil Writ Jurisdiction No. 3216 of 1976.

M. C. IJhandare, A. K. Sen, (in CA 1029/76), Mrs. Sunanda Bhandare A. N. Karkhanis, Miss Malini Poduval and G. R. Sethi (in '

CA 1031/76).

:~ Soli J. Sorabjee, Addi. Sol. Genl. ' ).._ Singh for the Respondents. (In CA 1028/76), Hardev

The Judgment of the Court was delivered by

VENKATARAMIAH, J.-In these appeals by special leave, we are called upon to pronounce on the validity of section 31 of the Punjab General Sales Tax Act, 1948 (hereinafter referred to as 'the Act'), the Notification dated the 13th January, 1968 issued thereunder by the Government of Punjab and the liability of the appellants to pay purchase tax under the Act in respect of the turnover relating to the purchases of paddy made by them during the relevant period.

The appellants are dealers in paddy and engaged in the business of millers in the State of Punjab. They buy paddy from growers or katcha adatias, convert it into rice and sell rice. Most of the rice manufactured by them is purchased by the State Government under food procurement orders.

A brief history of the relevant provisions of the Act is as follows :-

Under the Act as it was originally enacted, there was no provision levying tax on the purchase turnover of the goods dealt with by a dealer as defined in the Act.

The Act was amended by Punjab Act No. 7 of 1958 which received the assent of the Governor on April 18, 1~58 and the amending Act came into force at once. The amending Act brought about the following changes in the Act :-

In the long title of the Act, after the word "sale" the wo d " ch " d , r s or pur ase were mserte . Clause ( d) of section 2 of the Act whi h defined the expression 'dealer' was amended so as to bring withn the scope of that expression a person who purchased any goods the course of trade or business. The turnover relating to purchas~~ ?1ade by a deal~ subsequent to the commencement of the amendmg Act of certam goods was made liable to pa}'lllent of tax.

The

A word 'pm chase' was defined by clause (ff) of section 2 whih was introduced by the amending Act as follows :- "-

"2. (ff) 'purchase' wilih all its grnmmatical or cognate expressions, means the acquisition of goods other than sugarcane, foodgrains, and pulses for nse in the manufacture of goods for sale for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge.". . . . . . . . (The rest of the clause is not necessary for the purpose of these cases).

<, Section 4 of the Act was amended by imposing tx on pur r.· chases also subject to sections 5 and 6 of the Act. It is, however,_,.( •. seen from clause (ff) of section 2 that the purchase of foodgrains c

was not covered by the definition and remained unaffected by the above amending Act.

The Act was further amended by Punjab Act No. 13 of 1959 which deleted the words "other than sugarcane, foodgrains and pulses" in clause (ff) of section 2.

Section 6 of the Act was repealed and substituted by a new section which read as follows :-

"6. Tax free goods.-(!) No tax shall be payable on the sale of goods specified in the first column of Schedule C subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof and no dealer shall charge sales tax or purchase tax on the sale or purchase, as the case may be, of goods which are declared tax free from time to time under this section.

(2) The State Government after giving by notification not less than three months' notice of its intention so to do may by like notification add to or delete from Schedule B or Schedule C and thereupon Schedule B or Schedule C, as the case may be, shall be deemed to be amended accordingly.''

It is seen from the above provision that the turnover relating to G the sale of goods mentioned in the first column of Schedule 'C' to the Act subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof was exempted from payment of tax.

By Punjab Act No. 24 of 1959, the above section 6 was substituted by a new section which read as follows :--

"6. Tax free goods.-(1) No tax shall be payable on the sale of goods SJ'.>ified in the first column of Schedule B.

subject to the couditious and exceptiou, if any, set out in the corresponding entry in the second column thereo~ and no dealer shall charge sale tax on the sale of goods which are declared tax-free from time to time under this section.

(2) The State Government after giving by notification not Jess than three months' notice of its intention so to do, may by like notification add to or delete from Schedule B and thereupon Schedule B shall be deemed to be amended accordingly."

By Punjab Act No. 18 of 1960, clause (ff) of section 2 of the Act which had undergone some alteration when Punjab Act No. 24 of 1959 came into force was snbstituted by a new clause which read :

"2. (ff) 'purchase', wtth all its grammatical or cognate expressions, means the acquisition of goods specified in Schedule C for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge."

The effect of the said amendment was that the turnover relating to the purchase of goods mentioned in Schedule 'C' to the Act became liable to tax subject to the other provisions of the Act.

Section 4 of the Act was also amended by the introduction of subsection (2-A) providing that notwithstanding anything contained in sub-sections (1) and (2) of section 4 of the Act, no tax on the sale of any goods should be levied if a tax on their purchase was payable under the Act.

Originally seven items of goods had been specified by the State Legislature in Schedule 'C' to the Act.

By the Punjab General Sales Tax (Amendment) Act, 1965 (Punjab Act No. 28 of 1965) section 31 was inserted in the Act authorising the State Government to amend Schedule 'C'. It read as follows . _

"31. Power to amend Schedule C-The State Government, after giving by notification not less than three months' notice of its intention so to do, may by notification add to, or delete from, Schedule C any goods, and therepon Schedule C shall be deemed to be amended accordmgly."

The words 'three months' 1"n the b a ave sect10n were substituted by 'twenty days' by Punjab Act No. 7 of 1967.

In exercise of the power conferred by the above provision, the State Government issued the Notification on the 15th January, 1968 adding paddy and rice as items (8) and (9) in Schedule 'C'.

The result was that the turnover relating to the purchase of paddy and rice became exigible to payment of purchase tax under the Act in the hands of the purchasers with effect from the 15th January, 1968.

Aggrieved by the said notification, the appellants who became liable to payment of purchase tax on the turnover relating to the purchases of Paddy made by them filed petitions under Article 226 of the Constitution on the file of the High Court of Punjab and Haryana questioning the validity of section 31 of the Act, the Notification dated the 15th January, 1968 issued thereunder and their liability to payment of purchase tax.

The principal contentions urged by the appellants before the High Court were (1) that section 31 of the Act which authorised the State Government to amend Schedule 'C' to the Act by adding certain items making the turnover relating to their purchases liable to tax was void on the ground that it suffered from the vice of excessive delegation of legislative power and therefore the notification issued thereunder was also void and (2) that the appellants who were carrying on the business of manufacturers of rice could not be denied the benefit of section 5(2) (a) (ii) of the Act which authorised the deduction from the gross turnover die turnover relating to the sales of paddy effected in their favour notwithstanding the inclusion of paddy in Schedule 'C' to the Act.

The High Court rejected both the contentions of the appellants and dismissed the writ petitions.

Hence these appeals under Article 136 of the Constitution.

In this Court also, the very same contentions which were urged before the High Court were urged in support of the appeals with some slight variations.

The first contention urged by Mr. M. C.

Bhandare, learned counsel for the appellants was that section 31 of the Act which authorised the State Government to vary Schedule 'C' to the Act by adding certain goods whose turnover was not liable to payment of sales tax before suffered from the vice of excessive delegation of legislative power and in the alternative he submitted that even if the said provision was otherwise valid, it could not be interpreted as including within its scope the power to issue a notification which would run counter to the express legislative policy of the Act contained in section 5(2)(a)(ii) thereof which had been enacted with the avowed purpose of giving assistance to manufacturing industries.

I i

~)..

A review of the decisions of this Conrt to some of which we will presently refer shows that the delegation of power by the legislature to a'. local authority or to the Executive Government to vary or modify an existing law would not be unconstitutional so long as such delegation does not involve the abdication of essential legislativ~ power by the legislature.

Such delegations of legislative power have been upheld by this Court on several varied and diverse grounds such as the scheme and policy of the statute under which the power is delegated, the presence of guidelines in the statute regarding the exercise of delegated power, the lack of time for the Legislature to make provision with regard to all the details involved in the administration of the law, the incapacity of the Legislature to foresee all future events, the nature of the subject matter of legislation and the nature of the douee of power etc.

Even in matters relating to taxation law, it has been consistently held that the Legislature can delegate the power to fix rates of tax provided there are necessary guidelines regarding such fixation on the ground that in a modern society, taxation is one of the methods by which economic and social goals of the State can be achieved and the power to tax, therefore, should be a flexible power and capable of being easily altered to meet the exigencies of circumstances. Such delegation has been held to be not amounting to delegation of essential legislative function.

In Powell v. Appollo Candle Company Limited(') the Judicial Committee of the Privy Council was called upon to decide whether section 133 of the Customs Regulation Act of 1879 of New South Wales which conferred the power on the Governor to impose tax on certain articles of import was an unconstitutional delegation of legislative powers.

In holding that it was not unconstitutional the Privy Council observed : '

"It is argued that the tax in question has been imposed by the Governor and not by the Legislature who alone had power to impose it.

But the duties levied under the 0rder-in-Council are really levied by the authority of the Act under which the Order is issued.

The Legislature has not parted with its perfect control over the Governor and has the power, of course, at any moment, of withdrwing

or altering the power which, they have entrusted to him.

In these circumstances, their Lordships are of opinion that

the judgment of the Supreme Court was wrong in declar-

(1) [1885] 10 A.C. 282.

ing Section 133 of the Customs Regulation Act of 1879 to be beyond the power of the Legislature."

In J. W. Hampton Jr. & Company v. United States(') the validity of the action of the President to make changes in the rates provided in the Tariff Act, 1922 under the power delegated by the Congress arose for consideration. That was challenged as a forbidden delegation of legislative power to executive authority.

The challenge was negatived by the Supreme Court of the United States on the ground that the Congress bad laid down by legislative act an intelligible principle to which the person authorised to fix the rate of customs duties on imported merchandise was to conform.

The principle enunciated in the above two decisions has been substantially adopted and followed by this Court in two cases- ( 1) Pandit Banarsi Das Bhanot v. The State of M1dhya Pradesh & Ors.(') und (2) Municipal Corporation of Delhi v.

Bir/a Cotton, Spinning and Weaving Mills, Delhi & Anr.( 3) to which we shall D refer hereafter.

In Rajnarain Singh v. The Chairman, Patna Administration Comndttee, Pdtna and Another(4 ) where an earnest atternpt was made to analyse and explain the judgment of this Court in re. The Delhi Laws Act, 1912('). Bose, J. after referring in detail to the observations E made by the learned Judges in the latter case observed at page 301 :-

"In our opinion, the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature.

Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view abont this in the former case, but this much is clear 'from the opinions set out above : it cannot include a change of policy."

In Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh & Ors. (supra) where this Court was called upon to decide whether section 6 (2) of the C.P. and Berar Sales Tax Act, 194 7 which authorised the State Government after giving by notification riot less than one month's notice of its intention so to do by a notification

(1) 276 U.S. 394.

(2) [1959] S. C. R. 427.

(3) [!968]3 SC. R. 251.

(4) [1955] S. C.R. 290.

(5) [!95!] S. C.R. 747.

after the expiry of the period of notice mentioned in the first notification to amend Schedule II to that Act was constitutional, it was held that it was not unconstitutional for the Legislature to leave it to the executive to determine details relating to the working of the taxation laws, such as the selection of persons on whom the tax was to be laid, the rates at whlch it was to be charged in respect of different classes of goods and the like and that the power conferred on the State Government by section 6(2) of that Act to amend the Schedule relating to exemption was in consonance with the accepted

legislative practice relating to the topic.

In that connection at page 435, this Court observed :

"Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of

different classes of goods, and the like." D

The next case to which reference may be made is Corporotion of Calcutta & Anr. v. The Liberty Cinema(') where the majority upheld the fixation of a tax on cinema shows by the Corporation of Calcutta even though the Calcutta Municipal Act of 1951 prescribed no limits to which the tax could go. In that case, reliance was placed on the case of Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh & Ors. (supra) and it was held that the fixation of rate of tax could be left to a non-legislative body provided the Legislature gave necessary guidance for such fixation. This Court in that case found guidance in the various provisions of the statute including the fact that the body which had been authorised to levy the rate was a municipal body whose fiscal requirements were restricted by the nature and area of its jurisdiction.

In Municipal Corporation of Delhi v. Bir/a Cotton, Spinning and Weaving Mills, Delhi & Anr. (supra) Hidayatullah, J. (as he then

was) upholding the imposition of a tax by the Delhi Municipal Cor- G poration in exercise of the power granted to it under !lie Delhi Municipal Corporation Act 66 of 1957 observed at page 2'87 as follows :-

"The doctrine that Parliament cannot delegate its powers, therefore, must be understood in a limited way. It __ o~1!- ~ans that the legislature must not efface itself but

(1) [1965] 2 S. C.R. 477.

must give the !egisltive sanction to the imposition of tile tax and must keep the control in its own hands.

There is no specific provision in the Constitution which says that the Parliament cannot delegate to certain specified instrumentalities the power to effectuate its own will.

The question always is whether the legislative will has been exercised or not.

Once it is established that the legislature itself haS willed that a particular thing be done and has merely left the execution of it to a chosen instrumentality (provided that it has not parted with its control) there can be no question of excessive delegation. If the delega_te acts contrary to the wishes of the legislature the legislature can undo what the delegate has done."

In Devi Das Gopal Krishnan & Ors. v. State of Punjab & Ors.(') the validity of section 5 of the Act (as originally enacted) which conferred on the Government power to levy tax at such rates as the Government might fix arose for consideration.

This Court held that such conferment of power on the Government to levy tax at the rates determined by it without any statutory limitation or guidance was void.

This Court, however, held that af!er section 5 was amended by Punjab Act No. 19 of 1952 by imposing the restriction that the rates determined by the State Government should not exceed two paise in a rupee was valid as the Legislature bad delegated the power to the Government to determine the rates subject to the restriction mentioned above.

In the course of the above decision, Subba Rao, C.J., dealing with the decision of this Court in Corporation of Calcutta v. Liberty Cinema (supra) observed :

"If this decision is an authority for the position that the Legislature can delegate its power to a statutory anthority to levy taxes and fix the rates in regard thereto, it is equally an authority for the position that the said statute to be valid must give a guidance to the said authority for fixing the said rates and that guidance cannot be judged by stereotyped rules but would depend upon the provisions of a particular Act To that extent this judgment is binding on us.

But we cannot go further and hold, as the learned counsel for the respondents asked us to do, that whenever a statute defines the purpose or purposes for which a statutory authority is constituted and empowers it to levy a tax that statute necessarily contains a guidance to fix the rates : it depends upon the provisions of each statute."

'. 1) [1967] 3 S. C. R. 557.

In Sita Ram Bishambher Dayal & Ors. v. State of U.P. & Ors.(') the validity of section 3D(l) of the U.P. Sales Tax Act, 1948 which authorised the levy of a tax on the turnover of first purchases made by a dealer or through a dealer acting as a purchasing agent in respect of such goods or class of goods, and at such rates, not exceeding two paise per rupee in the case of foodgrains, including cereals and pulses, and five paise per rupee in the case of other goods and' with effect from such date, as may, from time to time, be notified by the State Government in that behalE was questioned on the ground that the delegation of power to the State Government to determine

the goods or class of goods whose purchase turnover would be liable to tax and the rates of purchase tax subject to the reslriction imposed in that regard by that section suffered from the vice of excessive delegation.

Repelling the above contention and upholding the said provision, Hegde, J. speaking for the Court observed thus :-

"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, tnat power can be delegated to the executive.

Though a 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 aspects, such as the availability of the goods, administrative convenience, the extent of evasion, the impact of tax levied on the various sections of the society etc. have to be considered.

In a modern society taxation iS an instrument of planning.

It can be used to achieve the e'conomic and social , goals of the State.

For that reason the power to tax must be a flexible power. It must be capable of being 1t10dulated to meet the exigencies of the sitnation. In a Cabinet form of Government, the executive is expected to reflect the views of the legislatures.

In fact in most matters it gives the lead to the legislature.

However, much one might deplore the "New Despotism" of the executive, the very complexity of the modern society and the demand it makes on its Government have set in motion forces which have made it absolutely necessary for the legislatnres to entrust more and more powers to the executive.

Textbook doctrines evolved in the 19th Century have become out of date.

Present position as regards delegation of legislative power

(I) [1972] 2 S. C.R. 141.

may not be ideal, but in the absence of any better allernative, there is no escape from it.

The legislatures have neither the time, nor the required detailed information nor even t@ mobility to deal fn detail with the innumerable problems arising time and again. In certain matters they can only lay down the policy and guidelines in as clear a manner as possible."

When the validity of section 3-D of U.P. Sales Tax Act, 1948 was again challenged before this Court in Hira Lal Rattan Lal etc. etc., v. State of U.P. & Anr. etc., e:c. Cl on the very same ground, it was agair; upheld by this Court with the following observations :-

"The only remaining wntcntion is that the delegation made to the executive under s. 3-D is an excessive delegation. It is true that the legislature cannot delegate its legislative functions to any other body.

But subject to that qualificaltion, it is permissible for the legislature to delegate the power to select the persons on whom the tax is to be levied or the goods or the transactions on which the tax is to be levied.

In the Act, under s. 3 the legislature has sought to impose multi-point tax on all sales and purchases.

After having done that it has given power to the executive, a high authority and which is presumed to command the majority support in the legislature, to select for special treatment dealings in certain class of goods. In the very nature of things, it is impossible for the legislature to enumerate goods, dealings in which Sales tax or purchase tax should be imposed. It is also impossible for the legislature to select the goods which should be subjected to a single point sales or purchase tax.

Before making such selections several aspects such as the impact of the levy on the society, economic consequences and the administrative convenience will have to be considered.

These factors may change from time to time. Hence in the very nature of things, these details have got to be left to the executive."

We shall now proceed to examine the validity of section 31 of the Act in the light of the decisions referred to above.

The expression 'dealer' is defined in section 2( d) of the Act as "any person including H a Department of Government who in the normal course of trade sells or purchases any goods, in the State of Punjab." Section 2(ff) of the

(1) [1973] 2 S. C. R. 502.

\ .r,

Act defines the expression 'pnrchase' as "acquisition of goods specified in Schedule 'C' for cash or deferred payment." The word 'sale' is defined in section 2(h) of the Act as meaning "any transfer of property in goods other than goods specified in Schedule 'C' for cash or deferred payment." Sub-section (1) of section 4 of the Act which is the charging section provides that "subject to the provisions of sections 5 and 6, every dealer (except one dealing exclusively in goods declared tax-free under section ( 6) whose gross turnover during the year immediately preceding the commencement of the Act exceeded the taxable quantum shall be liable to pay tax under the Act on all sales effected after the coming into force of the Act and purchases made after the commencement of East Punjab General Sales Tax (Amendment) Act, 1958." Section 5(1) of the Act authorises the State Government to determine the rates of tax payable on the taxable turnover of a dealer not exceeding the limit prescribed therein.

Subsection (2) of section 5 of the Act lays down the principles governing the determination of "taxable turnover".

During the relevant period, sub-section (2) of section 5 of the Act read as follows :-

"5. (2) In this Act the expression "taxable turnover" means that part of a dealer's gross turnover during any period which remains after deducting therefrom-

(a) his turnover during that period on-

(i) the sale of goods declared tax-free under seci tion 6;

(ii) sales to a registered dealer of goods other than sales of goods liable to tax at the first stage under sub-section (1-A); declared by him in a prescribed form as being intended for resale in the State of Punjab or sale in the course of inter-Siate trade or commerce or sale in the conrse of export of goods out of the territory of India, or of goods specified in his certificate of registration or use by him in the manufactnre in Punjab of any goods, other than goods declared tax-free under section 6, for sale in Puniab and on sales to a registered dealer of containers or other materials for the packing of such goods :

Provided that in case of such sales, l\ declaration duly filled up and signed by the registered dealer

(ii)

(iii)

to whom the goods arc sold and containing prc<- cribed particulars on a prescribed form obtained from the prescribed authority is furnished by the dealer who sells the goods

(iv) sales to any und 1ertaking supplying electric<!! energy to the public under a licence or sanction granted or deemed to have been granted under the Indian Electricity Act, 1910, of goods for use by it in the generation or distribution cf such energy;

( v) sales or purchases of goods falling under section

29;

(vi) the purchase of goods which are sold not later than six monts after the close of the year, to a registered dealer, or in the course of interstate trade or commerce, or in the course of export out of the territory of India;

Provided that in the case of such a sale to a registered dealer, a declaration, in the prescribed form and duly filled up and signed by the registered dealer to whom the goods are sold, is furnished by the dealer claiming deduction.

(vii) Such other sales or purchases as may be prescribed;

(b) the amount of sales tax included in the gross turnover.''

Section 6 of the Act during the relevant period read as imbstituted by Punjab Act No. 24 of 1959 with the modification made by Punjab Act No. 7 of 1967 which substituted the words "twenty days" in the place of "three months" in sub-section (2) thereof.

Schedule 'A' to the Act specified certain goods which were considered as luxury goods for purposes of levy of tax at the rates prescribed by the State Government under the first proviso to section 5 (1), Schedule 'B' to the Act referred to the items of goods which were treated as tax-free goods under section 6 and Schedule 'C' during the relevant period referred to the goods the turnover of which was subject to purchase tax.

The State Government was, however, given power to amend all the three Schedules.

BABU RAM JAGDISH & co. v. PUNJAB (Venkdtaramiah, J.) 967

It is seen from the provisions of the Act referred to above that the Legislature while directing that the tax shall be levied on the tum- -0ver of sales and purchases of goods under section 4 left the rates of tax payable to be determined by the State Government under section 5 ( 1) of the Act subject to the limits prescribed therein. The Legislature after specifying the goods which should be treated as luxury goods, tax-free goods and goods whose purchase turnover is liable to tax in Schedule 'A', Schedule 'B' and Schedule 'C' respectively has delegated the power to the State Government to amend Schedule 'A' under the first proviso to sub-section (1) of section 5, Schedule 'B' under sub-section (2) of section 6 and Schedule 'C' under section 31 .of the Act. In each of these cases, the State Government can make the amendment only after giving previous publicity to its intention to do so thus giving an opportunity to interested parties to make representatioru;, if any. In the case of a democratic Government, this itself

acts as a check on arbitrary exercise of power. At this stage it is necessary to refer to sub-section (2A) of section 4 of the Act and that provides that notwithstanding anything contained in sub-sections

(1) and (2) of section 4, no tax on the sale of any goods shall be levied if a tax on their purchase is payable under the Act. The Act also contains the machinery for assessment and collection of tax. It follows from the scheme of the Act that no tax is payable on the sale of goods specified in the first column of Schedule 'B' subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof and no dealer shall charge sales tax on the sale of goods which are declared tax-free. In so far as goods included in Schedule 'C' to the Act are concerned, tax can be levied only on their purchase turnover. In the case of all other goods, tax is levied on their sales turnover subject to section 5 and other provisions of the Act. When the State Government in exercise of its power under section 6(2) of the Act deletes any goods from Schedule 'B', they cease to be tax-free goods and their sales turnover would become liable to payment of tax.

When the State Government in exercise of its power under sectiou 31 of the Act includes any goods in Schedule 'C', their sales turnover would become exempt from payment of tax but their purchase turnover would become liable for payment of tax. We are of the view that the delegation of power to the State Government to determine whether any class of goods should be included or excluded from Schedule 'C' to the Act cannot be considered as unconstitutional in view of the decisions of this Court referred to above and in particular the decision in Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh & Ors. (supra) where section 6(2) of the Central Provinces and Berar Sales Tax Act, 1947 corres-

A ponding to section 6(2) of the Act was upheld by a Constitution Bench of this Court. The Constitution Bench while rejecting the challenge of section 6(2) observed thns :-

"The contention of the appellant that the notification in question is ultra vires inust, in our opinion, fail on another ground.

The basic assumption on which the arg; ument of the appellant proceeds is that the power to amend the Schedule conferred on the Government under s. 6(2) 1s wholly independent of the grant of exemption under s. 6 (1) of the Act, and that in consequence, while an exemption under s. 6 ( 1) w.ould stand, an amendment thereof by a notification under s. 6(2) might be bad. But that, in our opinion, is not the correct interpretation of the section. The two sub-sections together form integral parts of a single enactment, the object of which is to grant exemption from taxation in respect of such goods and to such extent as may from time to time be determined by the State Government.

Section 6 (1), therefore, cannot have an operation independent of s. 6(2), and an exemption granted thereunder is conditional and subject to any modification that might be issued under s. 6(2). In this view, the impugned notification is intra vires and not open to challenge."

/ E We are of the view that the case in so far as section 31 of the Act which is also an integral part of a single enactment and which authorises the State Government to amend Schedule 'C' to the Act cannot be different from the case which was dealt with by the Constitution Bench. If it is permissible for the Legislature to authorise the State Government to convert tax free goods into taxable ones, there F is hardly any justification for holding that the State Government cannot be entrusted with the power to include goods in Schedule 'C' making their purchase turnover taxable.

It was, however, argued by Mr. M. C. Bhandare that in the instant case, the inclusion of paddy in Schedule 'C' to the Act was against the policy underlying the Act and, therefore, even though section 31 of the Act might be constitutionally valid, the notification issued by the State Government directing inclusion of paddy in Schedule 'C' should be held to be outside the scope of section 31 of the Act. In other words, he contended that having regard to the scheme of the Act, it was necessary for us to read section 31 of the Act as not delegating the power to the State Government to include paddy in Schedule 'C' to the Act. The argument of the learned counsel was that the appellants were purchasing paddy either from agriculturists who had grown it on their land or from katcha adatias for purposes of manufacture of rice in the circumstances mentioned in soction 5(2) (a) (ii) of the Act. In either case no sales tax was being levied on the turnover relating to the sales in their favour by reason of item 39 of Schedule 'B' to the Act which declared that agricultural or horticultural produce sold by a person or a member of his family grown by himself or grown on any land in which he has an interest whether as owner or usufructuary mortgage tenant or otherwise were tax free goods or of sub-clause (ii) of clause (a) of sub-section (2) of section 5 of the Act which required the turnover relating to sales to a registered dealer of goods specified in his certificate of registration for .1so by him in the manufacture in Punjab of any goods other than !}Xlds declared tax-free under section 6 for sale in Punjab to be deducted from the gross turnover of any dealer in order to arrive at 'taxable turnover'. It was argued that the tax payable under the Act w.as an indirect tax and since no sales tax was leviable, the appellants could purchase paddy before the issue of the impugned notification witho•Jt being saddled with the liability of payment of sales tax. The policy underlying section 5(2)(a) (ii) of the Act was that manufacturers of goods specified in the certificate of registration obtained by them should be able to acquire raw material for their industry without incurring the extra liability of sales tax.

This exemption which the appellants were enjoying was taken away indirectly by the State Government by including paddy in Schedule 'C' to the Act resulting in the imposition of purchase tax in respect of its turnover on them.

Relying upon the decision of the High Court of Madras in Syed Mohamed & Co. v. The State of Madras(') it was argued that sales tax was in effect tax on the transaction of sale of goods by one person to another and that it was unreasonable to assume that the Legislature contemplated different categories of transactions dej>Cnding upon the point at which the tax was levied. In support of this contention, our attention was also drawn to the observation made at page 571 in Devi Das Gopal Krishnan & Ors. T. State of Punjab & Ors. (supra) and in State of Assam v. Ramesh Chandra Dey & Ors.(2). The learned counsel for the appellants contended that since the exemption from payment of sales tax accorded by the Legislature under item 39 of Schedule 'B' and under section 5(2) (a) (ii) of the Act was in respect of the transaction of sale, it was not open to the Executive Government to take away the exemption by including paddy in Schedule 'C' and since such inclusion was contrary to the express policy of the statute, section 31 of the Act must be so interpreted as not delegating the power to

(I) [1952] 3 S. T. c, 367 r

(2) {1962] l S. C. R. 986 at p. 991. 6-409SCl/79

include paddy purchased by the appellants in Schedule 'C'.

We arc, therefore. asked to hold that even though section 31 was not unconstitutional, the notification was not enforceable against the appellants ..

The abovG argument is no doubt quite attractive but we do not find any substance in it since it overlooks the decision of the Constitution Bench of this Court in Pandit Banarasi Das Bhanot v. The State of Madhya Pradesh & Ors. (supra) where it has been held that it is open to the Legislature to delegate the power to withdraw the exemption which has been given by the Legislature in respect of ce:rtain transactions specified in Schedule II to the C.P. and Bcrar Sales Tax Act,

1947. Moreover it cannot be said that the principal object of the Act is to encourage manufacturing industry. The Act is a fiscal legislation and its object is to collect revenue for the purpose of meeting the expenditure of the Government. It is no doubt true that while levying tax under the Act, the Legislature may grant exemptions in certain cases and may decline to grant exemptions in other cases. 'The question whether such exemption should be given or not is only incidental or ancillary to the principal object viz. the object of levying tax for the purpose of collecting revenue. It cannot also be said that when certain goods are sold in favour of manufacturer, the seller is always entitled to deduct such sales turnover from the gross turnover. He can do so only when such goods are specified in the certificate of registration obtained by the purchaser and they are used by him in the manufacture in Punjab of any goods other than goods declared tax-free under s~:ction 6 of the Act for sale in Punjab.

Transaction in paddy cannot, therefore, be considered as having been generally exempted from payment of tax under the Act.

It is also to be seen that section 5 (2) (a) (ii) of the Act grants exemption from payment of sales tax on the turnover of goods sold in favour of a manufacturer under the circumstances mentioned therein only to the seller and not to the buyer even though indirectly the buyer may be benefited thereby. If the observation made by this Court in State of Tamil Nadu v. M. K.

Kandaswami etc., etc.(') that 'taxable goods', 'taxable event' and 'taxable person' arc three distinct concepts is borne in mind, there will be no room foc any confusion. In the instant case, the taxable event is the purchase of paddy and not its sale which alone attracts section 5(2) (a) (ii) of the Act and taxable person, that is person liable to pay tax, is the purchaser and not the seller. The appellants cannot, therefore, complain that any exemption granted to them by the Act has been taken away. Even though the liability to pay purchase tax may be on appellants, it is bound to have repercussions on the price at which they buy paddy and

(I) [1976! I S. C.R. 38.

,..

the price at which rice manufactured by them out of that paddy is sold by them. The tax payable under the Act admittedly being an indirect tax the tax burden would ordinarily fall on the consumer of rice and not on any of the intermediaries including the appellants. The impugned notification cannot, therefore, be treated as one issued against the policy of the statute.

~ Jn view of the foregoing, we hold that section 31 of the Act and

the Notification issned thereunder do not suffer from the vice of excessive delegation of legislative power.

We may at this stage refer to one other subsidiary argument urged on behalf of the appellants. It is argued that because paddy and rice are not different kinds of gqocls but one and the same, inclusion of both paddy and rice in Schedule 'C' to the Act would amount to imposition of double taxation under the Act. There is no merit in this contention also because the assumption that paddy and rice are one and the same is erroneous. In Ganesh Trading Co., Karna/ v. State of Haryana & Anr.(1) arising under the Act, this Court has held that although rice is produced outof paddy, it is not true to say that paddy continued to be paddy even after dehusking; that rice and paddy are two different things in ordinary parlance and therefore, when paddy is dehusked and rice produced, there is a change in the identity of the goods. Tile above decision follows the principle enunciated by this Court in State of Punjab v. Chandu Lal Kishori Lal(') in which it was held that cotton seeds when separated from cotton constituted distinct commercial goods different from cotton. The above contention has, therefore, to be rejected.

In the result these appeals fail and they are dismissed. The pa11ies shall, however, bear their own costs.

N.K.A.

Appeals dismissed .

, I) 32 S. T. C. 62.l.

(2) [1969] 3 S.C R. 840.

A ., ..

BABU RAM JAGDISH KUMAR & CO., ETC

ETC.

STATE OF PUNJAB & ORS., ETC.

N. L. UNTWALIA

R. S. PATHAK

E. S. VENKATARAMIAH, JJ

Puttjab Sales Tax Act

S. 31

Punjab Sales Tax Act, 1948

Section 31

January 15. 1968

s. 31

s. 31

s. 31

[1968] 3 SCR 251

[1965] 2 SCR 477

[1972] 2 SCR 141

[1973] 2 SCR 502

s. 31

s. 6

Section 5(2)(a)(ii)

s. 5(2)(a)(ii)

[1976] 1 SCR 38

CIVIL APPELLATE JuRiso1cTJON :

M. C. IJhandare

A. K. Sen

Sunanda Bhandare A. N. Karkhanis

Malini Poduval

G. R. Sethi

Soli J. Sorabjee

VENKATARAMIAH

section 31

Punjab General Sales Tax Act, 1948

13th January, 1968

Government of Punjab

Punjab

April 18, 1~58 and

section 2

section 2

Section 4

sections 5 and 6

section 2

section 2

Section 6

Schedule C

Schedule C

Schedule C

section 6

section 2

Schedule C

Section 4

section 4

section 31

Schedule C

Schedule C

Schedule C

15th January, 1968

Article 226

section 31

section 31

section 5(2)

Article 136

M. C.

Bhandare

section 31

section 5(2)(a)(ii)

section 133

Supreme Court

Section 133

Supreme Court of the United States

Delhi Laws Act, 1912

Bose

section 6

Berar Sales Tax Act

S. 394

Schedule II to that Act

section 6(2)

Corporation of Calcutta

Hidayatullah

Delhi Municipal Corporation Act

Parliament

[1965] 2 S. C.R. 477

section 5

section 5

Subba Rao

[1967] 3 S. C. R. 557

section 3D(l)

Sales Tax Act, 1948

Hegde

[1972] 2 S. C.R. 141

section 3

Sales Tax Act, 1948

s. 3

s. 3

section 31

section 2( d)

Section 2(ff)

[1973] 2 S. C. R. 502

section 2(h)

section 4

sections 5 and 6

Section 5(1)

section 5

section 5

India

section 6

Puniab

Indian Electricity Act, 1910

section

29

Section 6

section 5

section 6

section 4

section 5

section 5

section 6

section 31

section 4

section 4

section 5

section 6(2)

section 6(2)

section 6(2)

Constitution Bench

section 6(2)

s. 6(2)

s. 6

s. 6

s. 6(2)

Section 6

s. 6(2)

s. 6(2)

section 31

M. C. Bhandare

section 31

section 31

section 31

section 5

section 6

section 5(2)(a)

High Court of Madras

section 5(2)

section 31

section 31

Schedule II

Bcrar Sales Tax Act

section 5

section 5(2)

section 31

[1969] 3 S.C R. 840