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PETITIONER: MAHE BEACH TRADING CO. & ETC.

       Vs.

RESPONDENT: UNION TERRITORY OF PONDICHERRY AND ORS.

DATE OF JUDGMENT:       04/04/1996

BENCH: KIRPAL B.N. (J) BENCH: KIRPAL B.N. (J) AHMADI A.M. (CJ) MANOHAR SUJATA V. (J)

CITATION:  1996 SCC  (3) 741        JT 1996 (4)    45  1996 SCALE  (3)306

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T KIRPAL, J.      The appellants are the dealers in petrol and diesel oil in the  former french Establishment of Mahe now in the Union Territory   of    Pondicherry.    The    Erstwhile    French Establishments  in   India  were   divided  by   the  French Government into  17 communes approximating to Municipalities or Local Self Government. Mahe was one such Commune.      A French  Decree dated 12 3 1880 governed and regulated the municipal  body of  each commune. It inter alia provided for setting  up of  a mayor  and elected  Municipal  Council Paragraph 46  of the said Decree inter alia contemplated the Municipal Councils  to deliberate the budget of the Communes as well as the mode of assessment, rates and rules regarding collection of  all municipal revenues etc. The deliberations of the  Municipal Councils  were required to be forwarded to the Governor  and would  become enforceable  only after  the approval by the Governor in Privy Council.      By an  agreement dated  21.10.1954 there was a de facto transfer  by   the  French  Government  of  all  its  French Territories  to   the  Indian   Government.  Thereafter  the Government of  India in  exercise of the powers conferred by Section 4  of the  Foreign Jurisdiction  Act, 1947  made the French Establishments  (Application of Laws) Order, 1954 and the French  Establishments (Administration)  Order, 1954. On 28.5.1956,  there  was  a  treaty  of  cession  between  the President of  India and  the President of French Republic in respect of  the French  Establishments  in  India  including Mahe.      On  16.8.1962,   de   jure   merger   of   the   French Establishments  with   India  was  carried  out  through  an Instrument of  Ratification between  the two  countries as a result of which France ceded to India the sovereignty of its territories namely:  Pondicherry, Karikal,  Mahe and  Yaman.

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The aforesaid  four cerritories  constituted the Pondicharry Union Territory.      On 16.8.1962. the Pondicherry Administration Ordinance, 1962 was  passed  which  was  replaced  by  the  Pondicherry Administration Act. 1962. By Section 4 of this Act, all laws in force  immediately before the appointed day in the former French Establishments  were continued  to be in force in the Pondicherry Union  Territory, Until  they  were  amended  or repealed by  a  competent  Legislature  or  other  competent authority. By  Section 7,  all taxes, duties, cases and fees being lawfully  levied in  the former  french Establishments were continued  to be levied in Pondicherry Union  Territory and were  required to  be applied for the same purpose until other provisions  are made  by a  competent  Legislature  or other competent  authority. The  result of this was that the Municipal Decree  dated 12.3.1880  could continue  to be  in force. Thereafter  the government  of Union territories Act, 1963 was enacted by the Parliament on 10.5.1963, in exercise of powers under Article 239 A (1). This Act provided for the establishment  of   a  local   Legislature  and  Council  of Ministers and their powers, procedure and other matters.      The Municipal  Council of  Mahe on  7.8.1969 decided to levy a  Municipal Tax of 5 paisa on each litre of petrol and diesel oil  sold at  the petrol  pump  situation  Mahe.  The Mayor, based  on that  decision of the Municipal Council and considering the  Decree dated  March  12,  1880,  issued  an "arrete"  with   effect  from  13.1.1970  for  the  Receveur Municipal,  or   the  agent   appointed   by   him.   On   a representation by  the appellant,  the Municipal  Council by another Resolution  dated 15.5.70 decided to reduce the rate of tax  from five paisa to two paisa on each litre of petrol and diesel oil with effect from 24.2.1970 and an "arrete" to that effect was issued on 16.10.1970.      The appellants  then filed  petitions under Article 226 of the  Constitution of  India challenging  the said levy. A Single Judge  of the  Madras High Court struck down the said levy by  holding that  the tax  was on the sale of goods and that it  was levied in excess of the Municipality’s power of taxation and  the said  levy also  violated section 7 of the Pondicherry (Administration)  Act, 1962. Lastly, it was held that  the  Pondicherry  Legislature  had  itself  enacted  a General Sales Tax Act applicable to the Union Territory and, therefore, the  Municipal Council, in any case, possessed no power to levy a parallel sales tax for municipal purposes.      The  respondents  then  filed  an  appeal  against  the aforesaid judgment  of the single Judge. During the pendency of  this   appeal,  the  Administrator  of  Pondicherry,  on 18.3.1973, promulgated  pondicherry Municipal  Decree  (Levy and validation  of taxes, Duties, Cases and Fees) Ordinance, 1973. This  was replaced by the Act (hereinafter referred to as ’the  Validation Act’) and it became the law on 21.3.1973 when it  received the  assent of the President of India  and was published in the Pondicherry Gazette. This Act was given retrospective  operation   from  18.1.1973,   the   day   of Ordinance. This  Validation Act  was again challenged by the appellants before  the Madras  High Court  by filing a fresh writ petition.      The Division  bench of the High Court heard the Appeals against the  Single Judge  order as  well as  the  new  Writ petition which  was filed challenging the Validation Act. By a common  judgment, the  High Court allowed the Writ Appeals and dismissed  the Writ Petitions. It, inter alia, held that the Validation Act was intra virus.      The Division bench, however, granted leave to appeal to his Court  because in  its opinion,  substantial question of

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law of  general importance  arose in  the case. Hence, these appeals.      On  behalf  of  the  appellants,  the  learned  counsel attacked the  validity of  the Validation  Act on three main grounds:      (i) There  was excessive delegation      of legislative power. There was, it      was submitted, total abdication and      effacement   by   the   Pondicherry      Legislature   of    its   essential      legislative functions  and from the      terms of  Section 3,  no guidelines      of policy was discernible;      (ii)  Sections   3  &   4  of   the      validation Act  were  repugnant  to      Section  7   of   the   Pondicherry      (Administration)  Act,   1962   and      Section 21  of Government  of Union      Territories Act, 1963;      (iii) The  Pondicherry  Legislature      had no  plenary powers  and  hence,      could    not     legislate     with      retrospective effect  or make  laws      contrary to  the law  made  by  the      Parliament under  Article  239  and      239A.      While relying  upon the  decisions in Hamdard Dawakhana (Wakf) Lal  Kuan, Delhi  and Another  Vs. Union of India and others 1960(2)  SCR 671,  Devi Das Gopal Krishnan & Ors. Vs. State  of   Punjab  &   Ors.,  1967(3)  SCR  557,  Municipal Corporation of  Delhi Vs. Birla Cotton, Spinning and Weaving Mills, Delhi and another, 1968 (3) SCR 251 and Gwalior Rayon silk Mfg (WVG,) Co. Ltd. Vs. The Asstt Commissioner of Sales Tax and  others. 1974  (2) SCR  879, it was contended by the learned counsel  for the  appellants that  the provisions of the Validation  Act do  not contain  any guidelines  and the power of  the municipality  is absolute  and unbriddled and, therefore, the  said Sections  3 &  4 of  the Validation Act suffer from  the vice  of excessive delegation and is bad in law.      The  principle   which  emanates   from  the  aforesaid decisions relied  upon  by  the  appellants  is  very  clear namely; that  if there is abdication of legislative power or there is  excessive  delegation  of  if  there  is  a  total surrender of  transfer by  the Legislative power or there is excessive delegation  of if  there is  a total  surrender or transfer by  the Legislature of its legislative functions to another  body  than  that  is  not  permissible.  There  is, however, no  abdication, surrender  of legislative functions of excessive delegation so long as the Legislative functions of excessive  delegation so  long  as  the  Legislature  has expressed its will on a particular subject matter, indicated its policy  and left  the  effectuation  of  the  policy  to subordinate of subsidiary of ancillary legislation, provided the Legislature  has retained  the control  in its hand with reference to  it so that it can act as a check or a standard and prevent  or undo the mischief by subordinate legislation when  it  chooses  to  or  thinks  fit.It  is  however,  not necessary for  us to  go into  these aspects  in  any  great detail because  this question  of excessive  delegation does not really arise in the present case.      The tax  had been  levied in  the year  1970 under  the Municipal   Decree of  1880. The  items to  be taxed and the rate of tax to be levied were specifically determined. After the learned  Single Judge  held the  said levy  to be  ultra

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virus, the  Legislative Assembly  of Pondicherry  passed the Validation Act.  Sections 3  & 4  of the  said  Act  are  as follows:      "3: Levy  of  taxes  etc.  for  the      purpose of  Municipal Decree:-  Any      tax, duty,  cess or  fee which  the      Legislature of  the Union Territory      of Pondicherry  has power  to  levy      may,  subject  to  any  general  of      special order  which the Government      may make  in this  behalf, also  be      levied, assessed  and collected for      the  purposes   of  the   Municipal      Decree  in   accordance  with   the      provisions  contained  in  of  made      under  the   Municipal  Decree  and      notwithstanding the  provisions  of      Section  7   of   the   Pondicherry      (Administration) Act, 1962 (Central      Act  49   of  1962),   or  of   any      provision of  any Act passed by the      Legislature of  the Union Territory      of   Pondicherry,   the   Municipal      Decree shall  have,  and  shall  be      deemed to  have had on and from the      16th day  of august,  1962,  effect      accordingly.      4:  Validation  of  certain  taxes,      etc. levied  assessed of  collected      in        municipal        communes      Notwithstanding    any    judgment,      decree or  order of  any court, all      taxes,  duties,   Cases  and   fees      (being taxes,duties,cesses and fees      which the  Legislature of the Union      Territory of  Pondicherry has power      to  levy)   levied,   assessed   of      collected  of  purporting  to  have      been levied,  assessed of collected      under the  Municipal Decree  before      the commencement  of this Act shall      be  deemed  to  have  been  validly      levied, assessed  of  collected  in      accordance  with   law  as  if  the      provisions of Section 3 had been in      force at  all material  times  when      any such tax, duty, cess of fee was      levied, assessed  of collected; and      accordingly:-      (a) all acts, proceedings or things      done  of  taken  by  the  municipal      councils  or   by  any   authority,      officer  or  person  in  connection      with  the   levy,   assessment   or      collection of  any such  tax, duty,      cess  or   fee   shall.   for   all      purposes, be  deemed to  be, and to      have always  been done  or taken in      accordance with law;      (b) no  suit of  other  proceedings      shall be maintained or continued in      any  court  against  the  municipal      councils or  any  other  authority,      officer of  person  whatsoever  for      the refund  of any  tax, duty, cess

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    or fee so collected; and      (c)  no  court  shall  enforce  any      decree  of   order  directing   the      refund of  any tax,  duty, cess  or      fee so collected:           Provided at no act of omission      on the  part of any person shall be      punishable as  an person  shall  be      punishable  as   an  offence  which      would not  have been  so punishable      if this Act had not been passed."      The question  whether Sections 3 & 4 are ultra virus on the ground  of excessive delegation would have been relevant if by  virtue of  the said  provisions  any  subordinate  of delegated legislation  had to  follow or any decision by the delegatee had  to be  taken. That question does not arise in the present  case. Section  O of the Validation Act has been enacted by  the competent   Legislature  and it specifically empowers the  levy of  any tax,  duty, cess or fee which the Legislature of  a Union  Territory had the power to levy. It further provides  the tax  to be  assessed and collected for the purposes  of the Municipal Decree in accordance with the provisions contained  in  the  said  municipal  decree,  and notwithstanding  the   provisions  of   Section  7   of  the pondicherry (Administration Act) 1962 of any other provision in that  regard. This  Section has to be read with Section 4 of the Validation Act which specifically validates the taxes which had  already been levied, assessed of collected in the municipal communes,  including the  tax in  question. At the time when  the validation  Act was passed, all the essential ingredients of  the levy and assessment of tax of petrol and diesel oil  were known and available to the Legislature. The tax had  been levied at the rate of 2% on the sale of diesel and petrol  and the  Legislative Assembly of the Pondicherry Union Territory  in effect,  levied this  tax itself when it passed the  Validation Act.  As a  result of this Validation Act. no  further act  of subordinate  legislation had  to be performed by  any one.  The effect  of this  Act, as already observed, clearly  was that  a specific  levy which had been made in 1970, with the issuance of the "arrete" by the Mayor of Mahe,  was reenacted,  with retrospective  date,  by  the competent legislature.  Therefore, the question of Section 3 and Section 4 of the Validation Act suffering from excessive delegation does not really arise in this case.      Before dealing with the Second contention raised by the learned  counsel   for  the  appellant.  it  would  be  more appropriate to  deal  with  the  third  contention.  It  was submitted that  the Pondicherry  Legislature had  no plenary powers as  the same  vested  only  in  the  Parliament.  The submission was  that the  Pondicherry Legislature  could not make retrospective  laws, or  laws contrary to the laws made by The  Parliament, under  Articles 239  and 239  A  of  the Constitution. Elaborating  further it was submitted that the Pondicherry Legislature  did not  have the power to pass the Validation Act  which had  the  effect  of  re-enacting  and imposing   restrictions    on   diesel   and   petrol   with retrospective effect.      Article 239  a of  the Constitution  provides  for  the Parliament Creating  by law,  for  the  Union  territory  of Pondicherry, a  body to  function as a Legislature with such constitution, powers  and functions  as may  be specified in the law.  It was  in pursuance of this that [The] Government of Union  Territories Act, 1963 was passed by the Parliament and the  said Act was made applicable to the Union Territory of Pondicherry  from 1.7.163.  This  Act  provided  for  the

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setting  up   of  Legislative   Assemblies  and  council  of Ministers for  the Union  Territories and  it was under this Act that  the Legislative Assembly for the Pondicherry Union Territory was constituted. Section 18 of [The] Government of Union Territories  Act, 1963  deals with  the extent  of the Legislature’s power and it reads as follows:      "Extent of legislative powers - (1)      Subject to  the provisions  of this      Act the  Legislative Assembly  of a      Union Teritorry  may make  laws for      the whole  or any part of the Union      Territory with  respect to  any  of      the matters enumerated in the State      List or  the Concurrent List in the      Seventh     Schedule     to     the      Constitution in  so far as any such      matter is applicable in relation to      Union territories.      (2)  Nothing   in  sub-section  (1)      shall  derogate   from  the  powers      conferred  on   Parliament  by  the      Constitution  to   make  laws  with      respect of any matter for the Union      territory or any part thereof".      Reading  Article   239  A   and  Section  18  of  [The] Government of Union Territories Act, 1963 together, is clear that the Pondicherry Assembly had the power to make laws for the whole  or part of Pondicherry with respect to any of the matters enumerated in the State List or the Concurrent List. Levy  of   sales  tax   would  undoubtedly   be  within  its legislative competence  by virtue  of Entry 54 of List II of the Seventh  Schedule The  effect of  Validation  Act  being promulgated was  that the levy on diesel and petrol would no longer be  regarded as one being made under Municipal decree of 1880 by the Municipal Council but in law, will have to be regarded as  being a  levy made  by a  competent Legislature exercising its  powers by  virtue of  Section  18  of  [The] Government of  Union Territories Act, 1963 read with Article 239 A of the constitution.      By virtue  f [The] Government of Union Territories Act, 1963, the  Pondicherry Legislature  had to  enact laws  with respect to  the matters  enumerated in the State List or the Concurrent List  of course,  sub-section (2)  of Section  18 provides that  the powers  conferred under  sub-section  (1) shall not  derogate from  the powers conferred on Parliament by the  Constitution to make laws with respect to any matter for Union  Territory. But,  there is no such law relating to the imposition  of sales  tax on diesel and petrol which has been enacted by the parliament, while the validation Act has imposed such a tax. It is not in dispute, and now it is well settled,  that   the  State   Legislature  as  well  as  the Parliament has  the power  to legislate  with  retrospective effect and also to pass a validation Act, This being so, and the powers  of the  legislature  of  Pondicherry  being  co- extensive with  the powers of a State Assembly, by virtue of Section 18  of [The]  Government of  Union Territories  Act, 1963 there  is no  reason for  this Court  to hold  that the Pondicherry  Legislature   could  not   enact  a   law  with retrospective effect. In other words by virtue of Section 18 of [The] Government of Union Territories Act, 1963, there is no reason  for this  court  to  hold  that  the  Pondicherry Legislature could not enact a law with retrospective effect. In other  words, by virtue of Section 18 of [The] Government of Union  Territories Act,  1963, the Parliament vested with the Pondicherry  Legislature the plenary powers to legislate

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with respect  to the  matters said  power has  been  validly exercised with the enactment of the Validation Act.      It was  next contended  by  the  learned  counsel  that Sections 3  and 4  of the Validation Act are repugnant to or are in derogation of Section 7 of Pondicherry administration Act. 1962  and Section  21  of  [The]  Government  of  Union Territories Act,  1963,  which  were  both  enacted  by  the Parliament. In this connection it was further submitted that the expression  ‘lawfully levied under Section 7’ means that the levy  under the  Municipal decree  had been  validly and actually levied.  In this  connection it  was also submitted that the  tax authorized  by the Validation Act did not come under  Section  7  which  prohibited  a  new  levy  and  the Validation Act made by the Pondicherry Legislature could not over ride  Section 7  of the Pondicherry Administration Act, 1962 and Section 21 of [The] Government of Union Territories Act, 1963.  There is  no merit in this submission. Section 7 of the  Pondicherry Administration  Act merely continues the existing taxes. Assuming that there was no valid levy of the tax  under   the  Municipal   decree  of  1880  a  competent Legislature  could  impose  a  tax  and  Section  7  of  the Pondicherry Administration  Act does not in any way prohibit such imposition. Furthermore, in Section 3 of the Validation Act  itself  it  is  stated  that  the  tax  may  be  levied notwithstanding  the   provisions  of   Section  7   of  the Pondicherry Administration Act or any other provision of any Act passed  by the  Legislature or  the Union  Territory  of passed  by   the  Legislature  or  the  Union  Territory  of Pondicherry.  The  levy  under  Sections  3  and  4  of  the Validation Act  cannot be  said to be repugnant to Section 7 of the  Pondicherry Administration  Act, 1962. For that very reason there  is also  no merit  in the  contention that the Validation  Act   is  repugnant   to  Section  21  of  [The] Government of  Union Territories  Act, 1963,  which  section deals with  inconsistency  between  the  laws  made  by  the Parliament and the laws made by the Legislative Assemblies.      For the  aforesaid reasons,  we find  no merit in these appeals and the same are dismissed with costs.