Avinder Singh Versus State Of Punjab And Haryana
– AIR 1979 SC 321
(5) Likewise, the plea that a flat rate of Re. 1.00
per bottle, be it brandy or other stronger beverage or be it Rs. 50.00 or
500.00 per bottle, cannot be seriously pressed. In the field of taxation many
complex factors enter the fixation and flexibility is necessary for the
taxing authority to make a reasonably good job of it.
(22). The correct law is found in East India Tobacco Co.
(1963) 1 SCR 404 at p. 409 : (AIR 1962 SC 1733 at pp. 1734-35.)
"It is not in dispute that taxation laws must also
pass the test of Art. 14. That has been laid down recently by this Court in
Moopil Nair V/s. The State of Kerala. But in deciding whether a taxation
law is discriminatory or not it is necessary to bear in mind that the State
has a wide discretion in selecting the persons or objects it will tax, and
that a statute is not open to attack on the ground that it taxes some persons
or objects and not others. It is only when within the range of its selection,
the law operates unequally, and that cannot be justified on the basis of any
valid classification, that it would be violative of Art. 14.
The following statement of the law in Wills on
"Constitutional Law" page 587, would correctly represent the
position with reference to taxing statutes under our Constitution :-
"A State does not have to tax everything in order to
tax something. It is allowed to pick and choose districts, objects, persons,
methods and even rates for taxation if it does so reasonably.... The Supreme
Court has been practical and has permitted a very wide latitude in
classification for taxation."
Both the sides relied on certain important criteria
contained in the Judgement of Wanchoo, C. J., especially because it is a
Bench of seven Judges and the ratio therein laid down has considerable
authority and binds us. Dealing with municipal bodies and the nature and
content in that Municipal Act, the court observed what is instructive for us
in the present case :
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Municipal
Corporation Of Delhi Versus Birla Cotton, Spinning And Weaving Mills Limited,
Delhi – AIR 1968 SC 1232
(34) Another
guide or control on the limit of taxation is to be found in the purposes of
the Act. The Corporation has been assigned certain obligatory functions which
it must perform and for which it must find money by taxation. It has also
been assigned certain discretionary functions. If it undertakes any of them
it must find money. Even though the money that has to be found may be large,
it is not, as we have already indicated, unlimited for it must be only for
the discharge of functions whether obligatory or optional assigned to the
Corporation. The limit to which the Corporation can tax is therefore,
circumscribed by the need to finance the functions, obligatory or optional
which it has to or may undertake to perform. It will be not open to the
Corporation by the use of taxing power to collect more than it needs for the
functions it performs. It cannot, for example, raise the rate of taxation to
such an extent, as to provide a surplus which is much more than what it needs
for its existence in carrying out the functions assigned to it, subject to
its having the minimum cash balance of Rs. 4,00,000.00 as provided in the Act
at the end of a year.
(35) Another
limit and guide-line is provided by the necessity of adopting budget
estimates each year as laid down in sec. 109 of the Act. That section
provides for division of the budget of the Corporation into four parts, i.e.,
general, electricity supply, transport, water and sewage disposal. The budget
will show the revenue and expenditure and these must balance so that the
limit of taxation cannot exceed the needs of the Corporation as shown in the
budget to be prepared under the provisions of the Act. These four budgets are
prepared- by four Standing Committees of the Corporation and are presented to
the Corporation where they are adopted after debate by the elected
representatives of the local area. Preparation of budget estimates and their
approval by the Corporation is therefore another limit and guide-line within
which the power of taxation has to be exercised. Even though the needs may be
large, we have already indicated that they cannot be unlimited in the case of
the Corporation, for its functions both obligatory and optional are well
defined under the Act. Here again there is a limit to which the taxing power
of the Corporation can be exercised in the matter of optional taxes as well,
even though there is no maximum fixed as such in the Act.
(37) Finally
there is another check on the power of the corporation which is inherent in
the matter of exercise of power by subordinate public representative bodies
such as municipal boards. In such cases if the act of such a body in the
exercise of the power conferred on it by the law is unreasonable, the courts
can hold that such exercise is void for unreasonableness. This principle was
laid down as far back as 1898 in Kruse V/s. Johnson, in connection with a
bye-law made by a county council. In that case the county council made a
certain bye-law and its validity was challenged on the ground that it was
unreasonable. The Court held that a bye-law could be struck down on the
ground of unreasonableness but took pains to point out that in determining
the validity of a bye-law made by a public representative body, such as a
county council, the Court ought to be slow to hold that the bye-law was void
for unreasonableness. The Court further held that "a bye-law so made out
ought to be supported unless it is manifestly partial and unequal in its
operation between different classes, or unjust or made in bad faith, or
clearly involving an unjustifiable interference with the liberty of those
subject to it." The same principle would apply to the fixation of rates
of taxation and if per chance the Corporation fixes rates which are
unreasonable, there is control in the court to strike down such an
unreasonable impost.
(90) It
was asserted that the doctrine of excessive delegation of legislative power
is inapplicable to the conferment of taxing power on local authorities. It
was said that the power to tax is in its essence a sovereign power of the
State, and since a Municipal Corporation exercises auxiliary authority in the
important business of local self-government, in exercising the power to tax
for limited municipal purposes, it is not acting as a delegate, but on behalf
of the State. We are unable to accept the broad proposition that when
authority is conferred upon a local authority by the Legislature to tax, the
local authority exercising power so conferred acts as an agent of the State.
A local authority is undoubtedly an instrument of the State in the matter of
local government restricted to a particular area in which it functions. By
investing a local authority with powers of legislation for administration of
the Act relating to local government, sovereign power of the State is
entrusted to the body for limited purpose; but the entrustment of power is as
a delegate, and must in our view be within the limits of permissible
entrustment consistent with the constitutional scheme. The power of the State
to legislate in matters of taxation within the allotted field is plenary, but
in entrusting that power to a local authority the legislature cannot confer
unguided authority.
(95) It was also said that the standards or guidance
furnished by the Act for exercising the delegated authority are to be found
in the "the needs of the Corporation", and "needs of the
Corporation" are of necessity an adequate guidance. Strong reliance in
that behalf was placed upon the Judgement of this Court in the Liberty
Cinema's case, 1965 2 SCR 477, which we have already referred. Sarkar, J.,
speaking for the majority of the Court observed (of SCR)
"It
seems to us that there are various decisions of this Court which support the
proposition that for a statutory provision for raising revenue for the
purposes of the delegate, as the section now under consideration is, the
needs of the taxing body for carrying out its functions under the statute for
which alone the taxing power was conferred on it, may afford sufficient
guidance to make the power to fix the rate of tax valid."
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