1. GHULAM SAMAR SHAH, J.--These 24 petitions are directed against what is called the production capacity tax imposed on the textile and sugar manufacturing mills by the Central Board of Revenue exercising power under section 3(4) of the Central Excises and Salt Act, No, 1 of 1944 (hereinafter called the Act). Since the petitions in question involved common questions of law and facts they were heard together. But considering that it would have been difficult to dispose of each petition on merits the learned counsel for the petitioners agreed that except for one or two petitions which may be disposed of both on facts and law the judgment in the other petitions should be confined to the disposal of legal questions and thereafter each petition should be argued on facts. Under the circumstances this suggestion appears to be both practical and convenient and what I propose to do is first to dispose of by this judgment the legal questions arising in all the petitions and thereafter take up each petition separately for disposal on merits.
2. The relevant facts, shortly stated, are these.
2. By Act No, II of 1966 (the Constitutional (6th) amendment Act, 1966) Entry 43 of the 3rd Schedule of the Constitution was amended authorising the levy of production capacity tax on any plant, machinery, undertaking, establishment or installation in lieu of the taxes and duties specified in items (b), (c), and ( f ) thereof. After this amendment the Central Legislature, by Finance Act XI of 1966, amended section 3(4) of the Act in order to effectuate the constitutional amendment. Section 3(4), as amended, reads : "(4) With the prior approval of the Central Government, the Central Board of Revenue may, in lieu of levying and collecting under subsection (I) duties of excise on excisable goods, by notification in the official Gazette, levy and collect duties on the production capacity of plants, machinery, undertakings, establishments or installations producing or manufacturing such goods ; and such notification shall specify--
(a) the guiding principles for the determination of production capacity, (b)the production capacity, as determined in accordance with such guiding principles, of the plants, machinery undertakings, establishments or installations affected by it, (c)the duty or the rate of duty on production capacity, and (d)the manner of collection of such duty.
(5) The production capacity of any plant or machinery or part thereof specified in a notification under subsection (4) shall, upon an application made to the Central Government within thirty days of the notification by any aggrieved person, be reviewed by a Review Board constituted under subsection (6) to which the application shall be referred ; and the decision of the Review Board shall be final.
(6) The Central Government shall, for the purpose of subsection (5), constitute a Review Board consisting of the following : (a)the Secretary to the Government of Pakistan, Ministry of Finance, who shall be the Chairman, (b)the Secretary to the Government of Pakistan, Ministry of Commerce, and (c)the Secretary to the Government of Pakistan, Ministry of Industries.
(7) The Central Board of Revenue may, by notification in the official Gazette at any time, cancel a notification under subsection (4) ; and where a notification is so cancelled or, for any reason whatsoever, cannot be given effect to, the duty ur der subsection (1), in lieu whereof the duty under subsection (4) was levied by such notification, shall be levied and, with necessary adjustment, collected for the financial year during which such notification is cancelled or for the period for which it cannot be given effect to."
3. The case of the respondents is that since the levy of production capacity tax was dependent upon the determination of the production capacity of each mill the Central Government, in consultation with the Central Board of Revenue, appointed High Powered Committee for that purpose. This Committee consisted of Mr. S. B. Awan, C. S. P., Joint Secretary to the Government of Pakistan, Islamabad, Mr. S. Nizamuddin, Deputy Director-General, Department of Investment Promotion and Supplies, Karachi, Mr. M. A. Jagirwalla, Chief Accounts Officer, Ministry of Finance, Karachi and Mr. M.
4. Akbar Khan, Director of Textiles, Department of Investment Promotion and Supplies, Karachi. The names of these gentlemen, and the functions which they were required to perform, were notified in the Gazette of Pakistan, Extraordinary, dated 12-8-1967. Since this notification has been the subject of considerable arguments from both sides we would like to reproduce it. In relevant parts it reads : "No, 5/16-CX (R & L)/67.--The Government of Pakistan are pleased to appoint the following officers as Members of the Committee which will determine the production capacity of individual cotton textile factories for the levy of duty on the production capacity of such factories :
(1) Mr. S. B. Awan, C. S. P., Chairman.
(2) Mr. S. Nizamuddin, Member.
(3) Mr. M. A. Jagir walla, Member.
(4) Mr. Muhammad Akbar Khan, Member."
(2) The Chairman of the Committee may appoint such persons as he may consider necessary to assist the Committee in its work. The Members of the Committee, or such persons as are appointed by the Chairman, will be authorised to call for such information and inspect such records as they may consider necessary.
(3) The duty on the production capacity of a cotton textile factory as determined by the Committee will be levied under subsection (4) of section 3 of the Central Excises and Salt Act, 1944, and the notified capacity of individual factories will be subject to review, on application by the manufacturers, by the Review Board constituted under subsection (6) of section 3 of that Act. The relevant provisions of the Act are reproduced below : "(4)
5. (a)
6. (b)The entire section 3 (4) (5) (6) has been already reproduced.
7. (c)
8. (5)
9. (6)
(4) The guiding principles, to be notified under subsection (4) of section 3 of the Act, on the basis of which the Committee should determine the production capacity of individual cotton textile factories, are as follows :-- (i)The national average annual production of each statutory category of cotton fabric/cotton yarn on a per loom/ spindle basis taking production of the past three years into account.
10. (ii)Category-wise annual production of the individual units for the past three years or such lesser period as may be available.
11. (iii)Category-wise annual production of comparable units for the same period.
12. (iv)Production capacity of an individual unit calculated on the basis of the technically possible maximum production potential of the plant and machinery installed in the Unit, if it were to aim at maximising its profits before tax.
13. (v)Growth factor, keeping in view the past rate of improvement in production and likely to increase in efficiency relating to improvement in technical, managerial, labour and financial factors of individual mills.
(5) The annual production capacity of individual factories shall be expressed for each statutory category of cotton fabrics in terms of square yards, and for each category of cotton yarn in terms of pounds.
14. (6)For the purpose of determining the liability to duty of a factory, the production capacity of the factory for each Excise category of fabrics/yarn, determined on the basis of the above principles, will be multiplied by the statutory rate of excise duty for that category.
15. (7)The Committee should determine the number of working days/shifts on the basis of which the annual production capacity of cotton textile factories should be determined. The Committee will also recommend the basis on which abatement in the annual production capacity may be allowed on account of the closure of the factory for reasons beyond its control within the number of working days/shifts reckoned for fixing the annual production capacity of individual factories.
16. (8)The Committee should also recommend the proce-dure for the grant of refund in respect of various categories of cotton fabrics and cotton yarn which are exported.
17. (9)The Committee shall submit its recommendations to the Central Board of Revenue of Ministry of Finance by a date not later than the 15th November 1967."
3. The High Powered Committee, by virtue of the power given to it by this notification, appointed working groups each consisting of an account Member and a textile technical expert. These working groups were to assist the Committee in determining the production capacity of mills and for that purpose were required to visit each mill to collect the necessary data. Before visiting the mills, however, the working groups sent to each mill, in advance, a pro forma informing them about the particulars which they were required to furnish. Later, when the working groups visited the mills the management supplied them the filled-in-pro formas in which the required information was furnished. This information was then discussed by the working groups with the respective managements and thereafter the working groups inspected each mill to see the manner in which it was working, the production processes it followed, the efficiency of the management, the number of shifts and the type of machinery and labour it employed and the supply of power and climatic conditions affecting its production capacity. The data thus collected by the working groups was submitted to the Committee which, keeping in view the guiding principles given in notification dated 12-8-1967 and all other factors bearing upon the production capacity, calculated the production capacity of each mill and submitted its report to the Central Board of Revenue as required by the said notification. After this report was received by the Central Board of Revenue, the case of each mill was scrutinized in the light of the guiding principles and the data collected by the working groups. It was only after the Central Board of Revenue thus satisfied itself that it determined the production capacity of each mill and notified it in the schedules attached to the cotton fabrics rules and cotton yarn rules 1968, published in the Gazette of Pakistan, Extraordinary, dated 22-4-1968. Consequent upon the publication of this notification, the petitioners filed Review Applications before the Review Board under section 3(5) of the Act. In these proceedings the petitioners are alleged to have been heard, assisted by their Advocates and textile experts, and in many cases the Review Board reduced the production capacity of the mills after the managements were able to point out that the determination in their case was erroneous. After the proceedings before the Review Board ended, the petitioners were given notices by the respondents directing them to pay the production capacity tax by specified dates failing which they were warned that action would be taken against them under the provisions of Act. Being aggrieved of these orders the petitioners have filed these petitions under Article 93 of the Constitution.
3. On behalf of the petitioners the arguments on law points were mainly addressed by the learned Advocates Messrs A. S. Pirzada, A. K. Brohi, S. A. Nusrat, Khalid M. Ishaq and the late lamented Mr. Manzare Alam who expired a few days ago in one of the hospitals at Karachi. These arguments were adopted by the learned Advocates appearing in other petitions. The respondents in the proceedings were represented by Mr. Shah Jamil Alam, the learned Deputy Attorney-General, assisted by Mr. S. M. Shafiq, Advocate, and at our request Syed Sharifuddin Pirzada, the learned Attorney-General for Pakistan, appeared in the proceedings to assist us on certain points of constitutional importance.
5. The first objection of the petitioners is that the amended provisions of section 3 (4), (5), (6) and
(7) of the Act are unconstitutional on the ground of excessive or impermissible delegation. The grievance is that by leaving it to the Central Board of Revenue to formulate The guidelines, to determine the rate of the production capacity tax and even to levy the tax the Legislature has totally effaced itself of its essential legislative authority. In support of this argument reliance is placed on the two well-known cases of the American Supreme Court reported as Panama Refining Co. v. Ryan and Schechter Poultry Corporation v. United States . Reliance is also placed on few judgments of the Indian Supreme Court in the cases of Corporation of Calcutta and another v.
18. Liberty Cinema , New Manek Chowk Spg. & Wvg. Mills Co. Ltd. v. Municipal Corporation of the City of Ahmedabad and others , Messrs Devi Das Gopal Krishan etc. v. State of Punjab and others and Messrs Jalan Trading Co. (Private) Ltd. v. Mill Mazdoor Sabha .
19. It is true that the two American judgments and the dissenting views expressed in the judgments of the Indian Supreme Court appear to support the contention of the petitioners. But the learned Attorney-General pointed out that these judgments have out-lived their utility in that the American Supreme Court has not followed the said two judgments while the Supreme Court of India, whose earlier views were mainly based on these two American cases, has changed its opinion in the subsequent judgments. In support of this contention the learned Attorney-General referred to three cases of the American Supreme Court in which the delegated legislation was unsuccessfully impugned for want of standards or guiding principles. These cases are reported in Fehey v.1 2 3 4 5 6 Mallonee , St. Louis, I. N. & S. R. Co. v. Taylor and McKinley v. United States . By reading these cases it is clear to me that the Court not only repelled the attack on delegated legislation for want of standards but in effect dis-approved the principles laid down in earlier two cases of Panama Refining Co. and Schechter Poultry Corporation. The fact that this is so is clearly demonstrated by the following excerpts from the treatise on Administrative Law by Kenneth Culp Davis (Vol. I), 1958 edition, pp. 75-76 :-- ' Congress may and does lawfully delegate legislative power to administrative agencies, Lawyers who try to win cases by arguing that congressional delegations are unconstitutional almost invariably do more harm than good to their client's interests. Unrealistic verbiage in some of the older judicial opinions should not now be taken seriously. The effective law is in accord with a 1940- statement of the Supreme Court : `Delegation by Congress has long been recognized as necessary in order that the exertion of legislative power does not become a futility. Much of the judicial talk about requirement of standards is contrary to the action the Supreme Court takes when delegations are made without standards. The vaguest of standards are held adequate, and various delegations without standards have been upheld. Moreover, the Supreme Court sometimes releases agencies from standards provided in the statutes.
20. In only two cases in all American history have congressional deiegations to public authorities been held invalid. Neither delegation was to a regularly constituted administrative agency which followed an established procedure designed to afford the customary safeguards to affected parties. The Panama's case was influenced by exceptional executive disorganization and in the absence of such a special factor would not be followed today. The Schechter's case involved excessive delegation of the kind that Congress is not likely again to make. The fact is that Congress avoided such delegation through the entire period of the Second World War.
21. In the absence of palpable abuse or true congressional abdication, the non-delegation doctrine to which the Supreme Court has in the past often paid lip service is without practical force'.
22. Recent opinions of the Supreme Court have generally been reasonably 'frank in recognizing the law-making power as delegable. Thus Mr. Justice Cardozo once observed: What is done by the Tariff Commission and the President in changing the tariff rates to conform to new conditions is in substance a delegation, though a permissible one, of the legislative process'.
23. Mr. Justice Douglas has declared, with only Mr. Justice McReynolds dissenting: 'Delegation by Congress has long been recognized as necessary in order that the exertion of legislative power does not become a futility'. Even as early as 1916 Elihu Root asserted that 'the old doctrine prohibiting the delegation of legislative power has virtually retired from the field and given up the fight'.
24. 'Beware of the Supreme Court's misleading language. That the literal opinions in the Panama and Schechter's cases do not embody the effective law is entirely clear. This is dramatically shown when a lower Court takes those opinions seriously. For instance, the opinions were followed to the letter by a three-judge district Court, which held a delegation invalid because; we are unable to find in the Act a declaration of policy or standard of action which can be deemed to relate to the subject. Because the lower Court took literally what the Supreme Court had said in the Panama and Schechter opinions, the Supreme Court reversed it."
25. In this opinion the learned author is supported by the above three judgments of the American Supreme Court which are of comparatively recent origin. Therefore, the learned Attorney-General appears to be right that according to the latest trend a delegated legislation would not be struck down for want of standards even in the U. S. A., unless it leads to palpable abuse or true abdication by the Congress of its legislative authority.
9. The learned Attorney-General then referred to the judgments of the Indian Supreme Court, upon which reliance is placed by the petitioners, and successfully pointed out that the dissenting views7 8 9 expressed therein were mainly influenced by the two American cases of Panama Refining Corporation and Schechter Poultry Farm, but nevertheless the majority of their Lordships had repelled the attack on delegated legislation for want of standards or guiding principles. Not only this but he also referred to a number of other judgments of the Indian Supreme Court to show that delegated legislation has never been struck down for want of guiding principles and further that after noticing the change in the United States of America the Indian Supreme Court also started modifying its earlier views. In this respect he referred to the case of In re: Art. 143, Constitution of India etc., Special Reference No, 1 of 1951 which appears to be the first judgment on the subject.
26. The law laid down in this case was that the Legislature could validly authorise an executive authority to modify either existing or future laws but not in any essential Nature. Their Lordships however held that what exactly would constitute an essential feature cannot be enunciated in general terms, but at least it would not include a change of policy.
27. 10.The second judgment of the Indian Supreme Court is reported in Rajnarain Singh v. Chairman, Patna Administration Committee, Patna and another . In this judgment the same principle was reiterated except that upon the peculiar facts of the case the delegated legislation was struck down as it was in conflict with sections 4, 5 and 6 of the main Act.
28. 11.The third judgment of the Indian Supreme Court is reported in Pandit Banarsi Das v. State of Madhya Pradesh and others . In this case, which was evidently an extreme case, the Central Provinces of Berar Sales Tax Act XXI of 1947 was impugned on the ground of permissive delegation.
29. What had actually happened was that by a notification the State Government amended the schedule of the Act and as a result the petitioners were subjected to sales tax upon goods sold to the Government from which they were exempted under the unamended Schedule.
30. Notwithstanding this however the challenge against the impugned legislation was repelled after the Court took into consideration all its previous judgments on the subject as well as judgments from foreign jurisdiction. The conclusion of the Court was that in taxation matters it was not unconstitutional for the Legislature to leave it to the executive to determine details relating to the working of taxation laws such as to selection of persons on whom the tax is to be levied, the rates at which it is to be charged and the selection of goods which were to be subjected to the tax.
31. 12.The next case is State Trading Corporation of India Ltd. v. The Commercial Tax Officer and others . This was a case of excise duty in which the delegated legislation was impugned on the ground of excessive or impermissible delegation. However the conclusion reached was that in taxation laws the Legislature had wide discretion by leaving it to the executive to select the objects which were to be taxed and therefore the delegated legislation would be unobjectionable.
32. 13.The next case of the Indian Supreme Court is Kalawati Devi Harlalka v. The Commissioner of Income-tax, West Bengal and others . This was also a tax case in which the impugned legislation was challenged on the ground of impermissible delegation. The conclusion reached by the Court however was that in taxation matters the Legislature could validly authorise the executive to work out the details such as fixing the rates at which the tax is to be levied and the executive action in that behalf would be immune from attack on the ground of excessive or impermissible delegation.
14. The other cases of the Indian Supreme Court are the Corporation of Calcutta and another v.
33. Liberty Cinema (upon which the petitioners also relied) and V. Venngopala Ravi Varma Pajah v.
34. Union of India and another . AIR 1965 Supreme Court appears to be an extreme case in which the constitutionality of delegated legislation came up for consideration. The facts of the case were that the Calcutta Municipality, exercising power under section 548 (2) of the Municipality Act, 1951, enhanced the rate of tax on cinema houses from Rs, 400.00 to Rs, 6,000.00 per annum in view of the new formula by which the tax was imposed at the rate of Rs, 5.00 per seat. This action of the Municipality was challenged on the ground that section 548 (2) of the Act, under which the new tax was levied, was in the nature of excessive or impermissible delegation as it furnished no guidelines10 11 12 13 14 15 16 as to how the Municipality was to impose taxes on cinema houses. The objection was repelled by the majority of their Lordships with these observations :-- "No doubt a delegation of essential legislative power would be bad. But the fixation of the rates of taxes is not of the essence of legislative power of taxation. The fixation of rates of taxes may be legitimately left by a statute to a non-legislative authority, for there is no distinction in principle between delegation of power to fix rates of taxes to be charged on different classes of goods and power to fix rates simpliciter, if power to fix rates in some cases can be delegated then equally the power to fix rates generally can be delegated. No doubt when the power to fix rates of taxes is left to another body, the Legislature must provide guidance for such fixation. The validity of the guidance cannot be tested by a rigid uniform rule, that must depend on the subject of the Act giving power to fix the rate."
35. And further : "The validity of the guidance required to make delegation of power good cannot be judged by a stereotyped rule. The guidance furnished must be held to be good if it leads to the achievement of the object of the statute which delegated the power. The validity of the power to fix rates of taxes delegated to the Corporation by section 548 of the Act must be judged by the same standard. All taxes including the one under section 548 can be collected and used by the Corporation only for discharging its functions under the Act. The Corporation, subject to certain controls is an autonomous body. It has to perform various statutory functions. It is often given power to decide when and in what manner the functions are, to be performed. For all this it needs money and its need will vary from time to time with the prevailing exigencies. Its power to collect tax, however, is necessarily limited by the expenses required to discharge those functions. It has, therefore, where rates have not been specified in the statute, to fix such rates as may be necessary to meet its needs. That would be sufficient guidance to make the exercise of its power to fix the rates valid."
15. The learned Attorney-General lastly referred to a judgment of the Privy Council in the case of Powell v. Apollo Candle Company, Ltd. in which the same question fell for consideration. In this case the power to fix rates, at which a certain tax was to be imposed, was left by the Legislature to the Governor of one of the States of Australia. When the Governor, in exercise of this power, fixed the rate of tax his decision was challenged on the ground of impermissible delegation by the State Legislature of its essential legislative authority. The conclusion reached by the Privy Council however was that the tax imposed was under the warrant of the relevant Act and that the action of the Governor was merely designed to carry out the policy of the Legislature.
36. 16.From all this discussion it is sufficiently clear that when the Court is called upon to determine the vires of delegated legislation--particularly the legislation relating to taxation matters--it does not insist upon standards or guiding principles provided the Legislature does not appear to have abdicated its essential legislative authority. In fact the consensus of opinion in regard to taxation matters is that to fix the rate of tax or to select the persons upon whom the tax is to be levied can be left to the executive as it neither involves policy nor it is considered to be the essential features of legislation.
37. 17.This subject has also received the attention of our own Supreme Court in the well-known case of Sirajul Haque Patwari . Although in that case the constitutionality of delegated legislation fell for consideration in the context of Basic Democracies Order, 1959 and the Electoral College Act, 1964, yet the judgment lays down authoritative principles, and we say so with respect, as to how the constitutionality of delegated legislation is to be determined.
38. By reading this judgment it appeared to me that in the first place their Lordships doubted the very application of the doctrine of excessive or impermissible delegation to the laws of this country and in the second place they were of the view that even if it applied the standards or guidelines should not be insisted upon by the Courts in too strict a measure, bearing in mind the well-known maxim17 18 ut res maqis valeat, quain pereat i,e, that the affair should prosper rather than brought to destruction. The following observations of Mr. Justice Hamoodur Rahman (as his Lordship then was) at page 952 of the judgment are instructive :- "The line of separation between the powers that have to be exercised directly by the Legislature itself and those that may be delegated is incapable of clear definition. Difficulties, therefore, often arise not in determining the governing principles but in the application of those principles to concrete cases. The tendency, as already indicated, even in the United States of America is towards the enlargement of the powers of delegation due to the growing complexity in the functions of the State. The powers of delegation have, therefore, been held to vary not only with the scope of the authority of the delegating body but also by the variety of the conditions and circumstances a particular law is intended to meet and the status and authority of the body to which the power is delegated. The nature of the law--whether it is of a penal nature or merely of a regulatory character--has also been considered to be of importance in this connection. Where the provisions are not new and unknown to existing law or where it is a subject-matter in which "accumulated experience" has established well defined practices or where the delegate is an expert in whom the Legislature has confidence, even the American jurists concede that a greater degree of latitude may be conferred upon the. Legislature of delegating legislative powers for adequately and effectively carrying out the purpose of the legislation. In such circumstances, "to require more would", as suggested by Douglas, J. in the case of the Sunshine Anthracite Coal Company, "be to insist on a degree of exactitude which not only lacks legal necessity but which does not comport with the requirements of the administrative process".
39. These observations are significant in that they lay down the principle as to how the constitutionality of the delegated legislation has to be determined. The first principle is that the power of delegation has to vary not only with the scope the of authority of the delegating body but also by the variety of the conditions and circumstances a particular law is intended to meet and the status and authority of the body to which the power is delegated. The second principle is whether the law is of a penal nature or merely of a regulatory character. The third principle is whether the provisions of the law are not new and unknown to the existing law and further whether it is a subject in which accumulated experience has established well defined practices or the delegate is an expert in whom the Legislature has confidence. The fourth principle is that standards or guiding principles should not be insisted upon in too strict a measure bearing in mind the maxim ut res maqis valeat, quam pereat i,e, the affair should prosper rather than brought to destruction.
18. I would also like to reproduce the following observa-tions from the judgment of Cornelius, C. J.
40. (as his Lordship then, was) which appear to be relevant in the same context : "The learned Chief Justice was of the view that section 57 was vitiated by what is known as excessive delegation i,e,, that the subject-matter of the legislation, viz., section 57 was such that it was a legislative imperative that the executive authority to which powers were being entrusted should be furnished with "norms, standards, directives, policies" for the carrying out of the intention of the Legislature, and in this case, there was no guidance whatsoever provided. Therefore, it appears that the learned Chief Justice was not concerned to view the actual and practical implementation of the dictate of the Constitution, but was concerned rather with an aspect of legal theory which in his view was of sufficient force by itself to undermine the validity of the law that was made. Whether, in the circumstances, such an approach can be regarded as appropriate for the exercise of the powers of the High Court derived from Article 98 of the Constitution is a question which will be considered in the sequel. In my view, it is entirely necessary for the purpose of gaining a correct appreciation of the full scope of the scheme of Article 158 subsection (4) of the Constitution as implemented by section 57 of the Electoral College Act, that the principles formulated and the general instructions which was issued by the Provincial Government should be stated and should receive due consideration.
41. For the Legislature to provide in detail for the great number of considerations that would require to be scrutinised, balanced and harmonised on occasions when a new Thana or a new District or, much more so, a new Division has to be created, would seem to be impossible.
42. The Legislature always appears to have acted on the basis that with its very wide and long- continued experience of administrative problems, the Provincial Government could be trusted when, in aid of Self-Government, it delegates its own administrative functions to local representative, to fix the area within which the delegated functions were to be exercised with due regard to the nature of the terrain, to the density of its population, and to considerations of general and administrative convenience, what it was necessary for the Legislature to prescribe when it was empowering Commissioners directly was wholly unnecessary in relation to the Provincial Government itself, and it would indeed have been extraordinary to find that whereas in the Basic Democracies Order, the empowerment of the Provincial Government was always in direct and absolute terms, yet when the legislative dictate of the National Assembly, carried out under the constitutional mandate of Article 158, the Provincial Government was being empowered to mark out the smallest areas of local Government for the primary units of Basic Democracies the necessity should have been felt of providing guidelines to control the Provincial Government's actions. The instructions of the 27th January 1965 to which reference has been made above, show by their clarity and comprehensiveness, that the trust imposed in the Provincial Government by the terms of section 57 was well founded. And a point can also be made of the fact that for the National Assembly, to specify how the Provincial Government was to carry out so large and detailed an opera-tion, lying entirely in its own exclusive executive field, would be extraordinary indeed, if not ultra constitutional. In truth, the marks of a legislative imperative, such as has been conceived by the learned Chief Justice are indeed very far to seek."
19. Muhammad Yaqub Ali, J. at page 969 of the judgment, has this to say on the subject : "There are further comments to the effect that the difference between absence of definite standards and conferment of uncontrolled and arbitrary power is that the former may not render a statute unconstitutional, but the latter would. Court's opinion should be formed not on mere absence of standards, but on factual lack of procedural safeguards, the grant of substantial power to petty political officials, absence of statutory rights and importance of subject-matter to the parties affected. In the same context it is observed that Courts are influenced by relatively empty talk about standards than by a concern for protecting against arbitrary or discriminatory action. It is against this background that I look upon the circular letter of the 27th January 1965, as an instrument embodying the necessary guidelines. It has not the force of law, but would compare favourably with the rules framed under the Basic Democracies Order for the constitution of 'Unions' and 'Towns'. In adopting this construction the Court may be judicially legislating but even so to provide needed safeguards would be preferable to striking down the law."
43. 20.From all these observations the principles which can be deducted are that when the Court is called upon to determine the vires of delegated legislation, enacted in implementation of the dictate of the Constitution, it should be guided more by the consideration to ensure that the intention of the Legislature is not frustrated ; that the absence of standards or guidelines in a statute would not necessarily render the statute unconstitutional while the conferment of uncontrolled and arbitrary power on the delegate would render the statute void ; that the Court's opinion should be formed not on mere absence of standards but on factual lack of procedural safeguards and whether substantial powers have been conferred on petty officials ; that the furnishing of guidelines in a statute should not be insisted upon as an indispensable measure without taking into consideration the various ramifications of the object which the statute is intended to achieve and that if the Court is satisfied, upon the materials placed before it, that to regulate the exercise of delegated power the delegate has imposed upon itself certain restrictions, to ensure against arbitrary decisions and actions, then the absence of standards or guidelines in the statute would not render it unconstitutional.
44. 21.The facts of the case, in which these observations were made, were that by section 57 of Electoral College Act (IV of 1964) the Legislature conferred upon the members of the Electoral College, who were to constitute the union council, union committees and town committees at the lowest tier of local Government bodies, the powers of self-Government under the Basic Democracies Order, 1959. However by section 57 of Act IV of 1964, it was left to the Provincial Government of West Pakistan to group together the various units and to notify the date on which the assumption of powers was to commence. Section 57 furnished no guidelines as to how the Government was to conduct itself in achieving this object ; although by circular letter dated 27-1- 1965 the Government issued com-prehensive instructions for the guidance of its officers who were engaged to carry out the required operation. When the task was finally completed and the new units notified by a Gazette notification the entire action of the Provincial Government was challenged by petitions under Article 98 of the Constitution, amongst others, on the ground that section 57 of Act IV of 1964 was unconstitutional for want of guiding principles. This contention prevailed with the High Court of East Pakistan. But when the matter came in appeal before the Supreme Court the judgment of the High Court was set aside. In reaching this conclusion their Lordships appear to have been considerably influenced by the letter of the Provincial Government dated 27-1-1965 in which comprehensive instructions were issued to its officers. According to their Lordships these instructions constituted sufficient safeguards against the arbitrary exercise of delegated power by the Provincial Government and con-sequently the requirement of guidelines in section 57, even if it could be insisted upon, would be sufficiently satisfied.
45. It is, therefore, clear that the absence of standards or guiding principles is not the decisive test when the Court is called upon to determine the constitutionality of delegated legislation. In fact what the Court is required to do is to approach the problem in the light of the above-mentioned principles always bearing in mind the maxim ut, res maqis valeat, quam pereat. This being the background in which the constitutionality of section 3 (4) of the Act has to be determined, we would now proceed to examine the objection of the petitioners.
22. Now the admitted position is that by amending Entry 43 of 3rd Schedule of the Constitution, the Legislature authorised the levy of production capacity tax on any plant, machinery, undertaking, establishment or institution producing or manufacturing excisable goods in lieu of the taxes and duties specified in items (b), (c) and (f) thereof. After this constitutional amendment, the Central Legislature by Finance Act XI of 1966, amended section 3(4) of the Act empowering the Central Board of Revenue to levy and collect the new taxes subject to conditions specified therein. Since the levy of this tax was dependent upon the production capacity of each plant, mill and undertaking the enormity of the operation, with which the Central Board of Revenue was confronted, can well be imagined. For this purpose each plant and mill had to be surveyed separately to ascertain all the kindred factors which would influence its production capacity such as the type of machinery it used, the year in which it was manufactured, whether the machinery was utilized to its full capacity, the technical know-how available to the mill, the number of workmen, employed and their technical skill, the incidence of waste, the system of power supply available to the mill and the climatic conditions under which the mill was operating. Surely the Legislature itself could not be expected to carry out this vast and complicated operation and it had to be entrusted to an outside agency. The agency chosen for this purpose was the Central Board of Revenue which, in the words of the Supreme Court of Pakistan, was an "expert" in the field of taxation matters and obviously "enjoyed the confidence of the Legislature". In order to enable it to implement this scheme, section 3(4) of the Act empowered the Central Board of Revenue, with the prior approval of the Central Government, to levy and collect the production capacity tax by a notification in which it was required to publish the guidelines, the rate of tax and the manner in which the tax was to be collected. I have already noted the objection of the petitioners that by leaving it to the Central Board of Revenue to frame the guidelines, to fix the rate of tax and to prescribe the manner in which the tax is to be collected, the Legislature has abdicated its essential legislative authority. I have discussed this subject in sufficient detail and noted that the absence of guidelines in a statute is not the decisive test to determine the constitutionality of delegated legislation and further that even to fix the rate of tax can be left by the Legislature to an outside agency as it is not deemed to be an essential feature of legislation. In fact the consensus of opinion is that when the Court is called upon to determine the constitutionality of delegated legislation all that it has to see is if the Legislature has really effaced itself of its essential legislative functions.
46. The admitted position is that subsection (4) and the other subsections of section 3 of the Act did not furnish- any guidelines to regulate the exercise of delegated power by the Central Board of Revenue. But the question is whether on this account G these provisions can be held to be in the nature of impermissible delegation ? I have no hesitation to answer this question in the negative for the various reasons discussed hereinabove. Additionally the Legislature in this case does not appear to have abdicated its essential legislative authority as it did not confer upon the Central Board of Revenue any arbitrary or unregulated power but directed that for the exercise of this power the Revenue Board would frame guiding principles with the prior approval of the Central Government. I would consider the constitutionality of these principles in sequal. But it would be sufficient to mention at this stage that they were published in the notification dated 12-8-1967 which has been reproduced in extenso in the earlier part of the judgment. The guiding principles in question are precise and comprehensive in nature and would appear to constitute sufficient safeguard against the arbitrary exercise of delegated power by the Central Board of Revenue. Not only this but the requirement of guideline in subsection (4) of section 3 of the Act, even if it could be insisted upon, would be sufficiently satisfied as upon analogous facts the circular letter of the Provincial Government of East Pakistan dated 27-1-1965, in which comprehensive instructions were issued for the guidance of its officers, was construed by their Lordships of the Supreme Court in the same manner in Sirajul Haque Patwari's case. We are, therefore, of the view that subsection (4) and the other subsection (3) of the Act cannot be said to be in the nature of impermissible delegation keeping in view the vast and technical nature of the operation entrusted to the Central Baard of Revenue by the Legislature and the observations of their Lordship of the Supreme Court in Sirajul Haque Patwari's case that the powers of delegation would vary "not only with the scope the authority of the delegating body but also by the variety of the conditions and circumstances a particular law is intended to meet and the status and authority of the body to which the power is delegated". And further that the "standards or guidelines should not be insisted upon by the Court in too strict a measure, bearing in mind the well known maxim ut res maqis valeat, quam pereat i. e. that the affair should prosper rather than brought to destruction.
47. 23.The contention of the petitioners however is that upon the facts of this case conclusion would be unwarranted. Their case is that the notification dated 12-8-1967 was published under the authority of the Central Government and consequently the guiding principles mentioned therein cannot be said to have been framed by the Central Board of Revenue which alone had the authority in that behalf under subsection (4) of section 3 of the Act. In other words the objection is that the Central Government was stranger in the scheme of the Act and therefore the determination of the production capacity in accordance with the said guiding principles would be unconstitutional. The respondents have denied this position. Their case is that the notification dated 12-8-1967 was, no doubt, published under the authority of the Central Government but it was published after co nsultation with the Central Board of Revenue. In this respect the learned Deputy Attorney-General produced before us the Official file on the subject which supports his contention.
48. In this fi e there is a photostat copy of the letter dated 23-6-1967 of Mr. IN. H. Jaffrey, Member, Central Board of Revenue addressed to the Finance Secretary of the Central Government. Along with this letter was forwarded the proposed resolution in which the guiding principles were mentioned. This letter bears the endorsement of the Secretary of Finance and the Finance Minister.
49. The copy of the proposed resolution also shows certain corrections in the hand of the Finance Secretary and his observations that it may be sent to the Ministry of Law for scrutiny. From all this it is clear that although the resolution in question was published under the authority of the Central Government yet in substance it was the notification of the Central Board of Revenue. I am therefore, inclined to agree with the learned Deputy Attorney-General that the publication of the notification in that form was a mere technical omission of which no advantage could be taken by the petitioners in line with the observations of the Supreme Court in the case of Saiyyid Abul A`la Maudoodi artd others v. Government of West Pakistan and others .
50. 24.The further reason in support of this conclusion is that by section 2 of Act IV of 1924 the Central Board of Revenue is placed under the control of the Central Government in the exercise of its powers and the performance of duties entrusted to it by the Government itself or by or under any law. The expression "any law" being wide enough would extend the control of the Central Government to the powers and duties conferred upon the Board of Revenue by subsection (4) of section 3 of the Act. Not only this but under subsection (4) of section 3 of the Act the Central Board of Revenue is obliged to obtain the prior approval of the Central Government in case it decides to levy and collect the production capacity tax from the mills. In this view the 23 Central Government does not appear to be altogether stranger in the scheme of the production capacity tax and consequently no objection could be taken to the form in which the notification dated 12-8-1967 containing the guiding principles was published.
51. 25.It may also be pointed out that the guiding principles now form part of the Production Capacity (Cotton Fabrics) and (Cotton Yarns) Rules, 1968. These Rules were framed by the Central Board of Revenue, exercising power under subsection (4) of section 3 read with section 37 of the Act, and published in the Gazette of Pakistan, Extraordinary, dated 22-4-1968. According to section 38 of the Act the rules thus framed and published would form part of the Act itself provided that they are laid before the Central Legislature in the manner prescribed therein. The learned Attorney- General produced before us Vol. I of the official debates of the National Assembly of Pakistan in which (at S. No, 12 page 928) the rules in question are shown to have been laid before the National Assembly and approved. It would, therefore, follow that now the guiding principles in question would not only form part of the Act but would be deemed to have been framed by the Legislature.
52. The result would be that the amended provisions of subsection (4) of section 3 of the Act cannot be said to be in the nature of impermissible delegation or unconstitutional.
53. 26.The next objection of the petitioners is that the production capacity of the mills was determined by the High Powered Committee appointed by notification dated 12-8-1967 and not the Central Board of Revenue which alone was empowered in that behalf under subsection (4) of section 3 of the Act. In support of this contention the learned counsel for the petitioners referred to the text of the said notification by which the Committee is required to determine the production capacity of the textile Mills in accordance with the guiding principles. However by reading the notification as a whole it is clear that all that the committee was required to do was to ascertain the production capacity of each mill and submit its recommendations to the Central Board of Revenue. This is clear from paras. 8 and 9 of the notification which read :-- "8. The Committee should also recommend the procedure for the grant of refund in respect of various categories of cotton fabrics and cotton yarn which are exported.
9. The Committee shall submit its recommendations to the Central Board of Revenue of the Ministry19 of Finance by a date not later than the 15th November 1967."
54. The case of the respondents is that after the Committee collected the necessary data of the mills it submitted its recommendations to the Central Board of Revenue. The Board then scrutinized this data, in the light of the guiding principles, and determined the production capacity of each mill and notified it in the annexures to the rules published on 22.4-1968. This position is confirmed by the Rules which are framed by and published under the authority of the Central Board of Revenue. The report of the committee, which is an official document published under the authority of the Central Government, also confirms this position. At page 21 of the report is mentioned that the Committee, after it collected the necessary data of the mills, submitted its report to the Central Board of Revenue.
55. 27.The grievance of the petitioners however is that the appointment of the High Powered Committee was unconstitutional and therefore the entire operation relating to the determination of production capacity invalid. Their case is that the Committee was appointed by the Central Government and not by the Central Board of Revenue which alone had the authority in that behalf under section 3 (4) of the Act. This objection is identical with the objection taken against the guiding principles which we have discussed in the earlier part of the judgment. I was not impressed by this objection for various reasons and consequently the present objection would be equally without force. Therefore I would not like to repeat, myself except to mention an additional circumstance against the present objection. This circumstance is the notification of the Central Board of Revenue dated 12-8-1967 in which the names of the Members of the Committee, which were notified in the Central Government is notification of the same date, were published. This notification also mentions the names of 20 other officers who were to assist the Committee and for that purpose required to visit each mill to collect the necessary data relating to the production capacity. In order to facilitate their task, the Central Board of Revenue empowered these officers to exercise all powers under rule 197 of the Central Excise Rules, 1944 as would be exerciseable by a Central Excise Officer. In this view the Members of the Committee would be deemed to have been appointed by the Central Board of Revenue itself or in consultation with the Board by the Central Government. This conclusion finds support from the fact that the Committee had no discretion in the matter inasmuch as its duties were purely administrative in nature and its recommendations were subject to the approval of the Central Board of Revenue. Therefore, looked at from whatever angle, the appointment of the Committee would be valid.
56. 28.The next objection of the petitioners is that the determination of the production capacity was in violation of the requirements of subsection (4) of section 3 of the Act. Their case is that according to this section the Central Board of Revenue was required to publish two notifications; one containing the guiding principles and the second the actual production capacity of each mill.
57. The grievance is that this procedure was circumvented and the desired object achieved by a single notification dated 22-4-1968. In support of this contention reliance is placed on the word "notifications" appearing in the said subsection.
58. This contention is obviously premised on the assumption as if prior to the notification dated 22-4- 1968 there existed no guiding principles for the determination of the production capacity. But I have already pointed out that the necessary guiding principles were published in advance in the Gazette Notification dated 12-8-1967 and it was thereafter that the production capacity of each mill determined. On the other hand if the objection is that the guiding principles in question were framed by the Central Government and not by the Central Board of Revenue even then the objection would be misconceived. I have already dealt with this topic and come to the conclusion that for &l practical purposes the guiding principles are deemed to have been framed by the Board.
59. 29.The next objection is that the production capacity rules were to come in force on 1-5-1968, but the production capacity was determined and notified in the annexures to the rules published on 22-4-1968. In other words the objection is that the action of the respondents was without jurisdiction as the production capacity of the mills was determined long before the rules actually come into force. It is true that the production capacity of the mills was published in the annexures to the rules on 22-4-1968, but it would not have the binding force until 1-5-1968 when the rules were to come in force. The fact that this was intended to be the case is clear from rule 3(7), (8), (9), (10) and (11) of the Rules in which it is mentioned that if on 1-5-1961, a mill is found to have installed additional looms or the number of looms, according to which the determination of its production capacity had been made, had diminished then the production capacity tax would be accordingly adjusted.
60. 30.The next objection of the petitioners is that the Pro-duction Capacity (Cotton-Yarn) Rules are improper and at least some of them being discriminatory are liable to be struck down. In this respect Mr. A. K. Brohi, the learned counsel argued that by rule 9 of these Rules the rules made under section 37 of the Act were made applicable to the production capacity tax but this was illegal. His contention is that the rules made under section 37 of the Act apply to taxes under section 3 (1) of the Act and not to the taxes under subsection (4) of section 3 of the Act as both these provisions are inconsistent with each other. Mr. Brohi therefore contended that in fact no rules existed to carry out the policy of taxation under subsection (4) of section 3 of the Act and consequently the levy of production capacity tax was unconstitutional. In order to appreciate the force of this contention rule 9 of the Capacity Tax (Cotton-Yarn) Rules may be reproduced: "9. The provisions of the Central Excise Rules, 1944, except the rules contained in Chapter XV of the said Rules, shall, in so far as they are not inconsistent with these Rules, apply to cotton fabrics and the manufacturers governed by these Rules as they apply to excisable goods and manufacturers of excisable goods on which duties of excise are levied under subsection (1) of section 3 of the Act."
61. The preamble of 1944 rules shows that they were framed by the Central Board of Revenue, in exercise of the powers under sections 3(4) and 37 of the Act, with the prior approval of the Central Government. Section 37 of the Act contains the rule-making power of the Central Board of Revenue to enable it to carry out the policy of the Act and considering that by the amendment of subsection
(4) of section 3 of the Act the Legislature introduced the levy of production capacity tax it would be necessary to frame rules so as to carry out this new policy. Since the existing rules had no provisions to meet this new situation the Central Board of Revenue had to frame the necessary rules and for this purpose it could validly invoke its power under section 37 of the Act. The reason being that the amended provisions of subsection (4) of section 3 of the Act would form part of the Act to which the rule-making power of the Central Board of Revenue, under section 37 would be undoubtedly applicable. However, instead of framing a full set of new rules the Central Board of Revenue assimilated the rules of 1944 in the new rules and I fail to see as to how this would be open to objection.
62. 31.I regret that I have also not been able to agree with Mr. Brohi, the learned counsel, that subsection (1) of section 3 of the Act is inconsistent with subsection (4) thereof and therefore the rules framed for the purpose of the former subsection could not be assimilated in the new rules. By comparing these two subsections, it is clear to me that they are designed to achieve the same object, namely the levy and collection of taxes on excisable goods produced or manufactured by any plant, mill or undertaking. The only difference between the two sections is that if the Central Board of Revenue, to which discretion is given under subsection (4) of section 3 of the Act, does not resort to the levy and collection of production capacity tax then it would be empowered to levy and collect taxes specified in subsection (1) of section 3 thereof. The fact that the Central Board of Revenue has invoked its power under subsection (4) of section 3 of the Act would necessarily mean that it cannot levy and collect taxes under subsection (1) of section 3 of the Act unless it cancels the notification issued under the amended section in exercise of the power given to it by subsection (7) thereof. In this view of subsection (1) and subsection (4) of section 3 of the Act cannot be said to be in conflict with each other and therefore the rules framed under section 37 of the Act could be properly assimilated in the new rules for the reasons already mentioned.
63. 32.The next objection of the petitioners is that sub-rule (3) of rule 3, sub-rule (4) of rule 6 and rule 8 of the production capacity rules are unreasonable and liable to be struck down. Before considering the merit of this objection, it may be pointed out that unlike bye-laws framed by a Corporation under the authority of a statute, the statutory rules cannot be struck down on the ground of unreasonableness. The reason being that statutory rules are framed under the express provisions of a statute in order to carry out the policy of the Legislature. The power to frame rules is invariably left to the Government and once framed the rules form part of the Act and are governed by the same principles as the statute itself. Therefore unless a rule is violative of any provisions of the Constitution or the Act itself it cannot be struck down on the ground of unreasonableness as the power of the Court in this behalf is altogether limited. In this respect it would suffice to quote the following observations from the judgment of Chagla, C. T., (AIR 1952 Born. 296) in which the facts were almost analogous : "Now, it is contended by Mr. Kotwal that rule 36 is '. It is pointed out that the petitioner is considerably handicapped by having to appear before the arbitrators Board without the assistance of a lawyer and that the rule inasmuch as it totally prohibits representation of a party by a legal practitioner is unreasonable and therefore should be held to be bad by this Court. Now, the power which Courts have to consider the validity of statutory rules is very limited power. If a rule is within the ambit of the statute, then it cannot be successfully challenged on the ground that it is an unreasonable rule. As a matter of fact, Courts in India until our Constitution was enacted had no power at all to consider the reasonableness of any legislation. Reasonableness was a matter of policy which was left to the Legislature and a law could only be challenged on the ground of its being 'ultra vires' of the Legislature; but if it was within the competence of the Legislature, the law could not further be challenged on the ground that it was not a reasonable law. Similarly statutory rules formed part of the statute, and if they were within the scope of the statute and permitted by the statute to be framed, then they could not be challenged on the ground of unreasonableness."
64. In the present case it is little more difficult to impugned the vires of the Production Capacity (Cotton Yarn) and (Cotton Fabrics) Rules as they are framed under section 37 of the Act and by virtue of section 38 thereof shall be deemed to have effect as if enacted in the Act itself provided they are approved by the Central Legislature. The fact that they were so approved is borne out by the official debates of the National Assembly of Pakistan to which detailed reference has already been made earlier. Therefore the rules in question could not be struck down on the ground of unreasonableness.
65. Even on merits I have been unable to appreciate the contention. Rule 3(3) of the Rules, to which exception has been taken, treats the factories in East Pakistan preferentially as against the factories in West Pakistan. This seemingly preferential treatment consists of reducing the production capacity of the factories in East Pakistan by 40% for the period 1-5-1968 to 30-6-1968 and for the financial year commencing from 1-7-1968. Similarly for the financial years commencing from 1-7-1969 to 1-7-1970 the production capacity of the factories in the eastern wing is respectively reduced by 25% and 15 % provided that the average annual production of a factory for three years, preceding the financial year commencing from 1-7-1969 has not equalled or exceeded the annual production capacity as specified in the schedule attached to the Cotton Fabric and Cotton Yarn Rules, 1968. The grievance of the petitioners is that the rules are discrimi-natory inasmuch as no such concession has been granted to the factories in West Pakistan. It is obvious that this contention proceeds in disregard of the climatic conditions in East Pakistan during the period for which the factories there have been treated differently. During this period East Pakistan receives its annual quota of monsoon-rains by which the production capacity of the mills is bound to be adversely affected as against the mills in West Pakistan.
66. The next rule is Rule 6 (4) of the Rules by which the manufacturer is made to pay penalty at the specified rates in case he fails to pay the instalments of duty in terms of rule 5(3) of the Rules. The rate of penalty is on the sliding scale depending as to for how long the duty is not paid. The maximum penalty under the rule is 10 % of the amount of duty if it is not paid for more than six months. The grievance is that subsection (4) of section 3 of the Act does not authorise the imposition of any penalty and consequently the rules are invalid.
67. It is obvious that this contention has been advanced in disregard of the various sections of the Act in which provision is made for the confiscation of goods and the imposition of penalty in certain specified circumstances. Not only this but under section 37(1) of the Act the Central Board of Revenue is empowered to make rules to carry into effect the purposes of the Act and in this respect it may invoke the power given to it by subsection (2) of this section which is to the following effect :- "(2) In particular, and without prejudice to the generality of the foregoing power, such rules may
(i) provide for the assessm ent and collection of duties of excise, the authorities by whom functions under this Act are to be discharged, the issue of notices requiring payment, the manner in which the duties shall be payable, and the recovery of duty not paid ; It would be seen that the power of the Central Board of Revenue under this subsection is without prejudice to the generality of the power given to it under subsection (1) of section 37 of the Act. By this subsection the Central Board of Revenue is empowered to make rules to carry into effect the purposes of the Act and the question arises if the power to provide for penalty in certain circumstances would be a power relatable to the purposes of the Act? By reading these two subsections together it is clear to me that the provision of penalty in the rules would appear to be indispensable with a view to carrying out the purposes of the Act. This conclusion finds support from the language of the two subsections by which the Central Board of Revenue is empowered to make rules to provide "the manner in which the duties shall be payable and the recovery of duty not paid".
33. Another reason in support of this conclusion is that these subsections have been construed in the same manner by the Department since 1944 when the Act was enacted. By rule 7 of the Rules, framed under section 37 of the Act, a provision for penalty was made in case an incumbent failed to pay the duties due from him to the Department. The rate of penalty specified in this rule is 5 times the duty chargeable on goods and further that the goods, in respect of which the demand for duty is made, shall be liable to confiscation. The fact that this rule has stood the test of about 26 years would show that the provision of penalty by rules would be the necessary adjunct without which the very object of the Act is bound to be frustrated.
68. There is yet another reason for which the validity of rule 6 (4) cannot be questioned. As already mentioned the Cotton Fabrics and Yarn Rules were framed under subsection (4) of section 3 read with section 37 of the Act and approved by the Central Legislature. Therefore, by virtue of section 38, they would now form part of the Act and their validity would not be open to question ; unless it is shown that they were violative of any provision of the Constitution or the Act.
69. 34.The next rule is rule 8 to which exception has been taken on the same ground upon which rule 6(4) was challenged. This rule also provides for penalty in case a manufacturer is found to have contravened any of the conditions mentioned therein. In my opinion the rule in question would be unexceptional for the same reasons upon which rule 6(4) of the Rules was found by us to be valid.
70. 35.The next objection of the petitioners is that sub-section (4) of section 3 of the Act is void for being in conflict with Fundamental Right No, 15 of the abrogated 1962-Con-stitution. In support of this objection three grounds are urged by the learned counsel for the petitioners : firstly that the section is discriminatory in that it provides the levy of production capacity tax only on excisable goods produced or manufactured by the textile mills ; secondly that the impugned action of the respondents, purported to have been taken under this section, is directed only against textile mills and not against mills producing or manufacturing excisable goods of diverse nature and thirdly, that the section leaves it to the Central Board of Revenue to levy or not to levy the production capacity tax in its unfettered discretion. In this respect reliance is placed upon the well known judgment of the Supreme Court of Pakistan in Waris Meah's case .
71. 36.So far as the first ground is concerned it does not find support from the language of the impugned subsection. The language of this subsection is altogether general and would appear to apply to all mills, plants, undertakings and establishments producing or maunfacturing excisable goods of diverse nature. Therefore, it is not correct to contend that the section is discriminatory. The second ground of objection is factually incorrect as the cement and sugar industries have also been subjected to the production capacity tax and the action of the respondents has been impugned in similar petitions in which we have heard arguments. The third ground of objection is obviously premised an Waris Meah's case but that case is distinguishable. The facts in that case were that by section 22-A of the Foreign Exchange Act, 1947, the Legislature authorised the State Bank of Pakistan or the Central Government to determine whether an offender was to be tried under ordinary law or by an Adjudication Officer or a Tribunal. All these three forums were invested with different power and could inflict different punishments. It was for these reasons that section 22-A of the Act of 1947 was struck down as it clearly contravened Fundamental Right No, 5 of 1956- Constitution.
72. 37.In the instant case none of these features are present. The Central Board of Revenue is the only authority which the Legislature has authorised to impose taxes on all mills producing excisable goods and in this respect it may either invoke the power under section 3(1) or section 3(4) of the Act. In whatever manner the Central Board of Revenue acts in the performance of this duty at least this much is clear that it would be under one of these subsections and the petitioners would be put under no hazard like the petitioners in Wads Meah's ease.
73. 38.Apart from this position the learned Attorney-General contended that this argument, based as it was on Fundamental Right No, 15, could not now be pressed firstly because of the abrogation of 1962-Constitution and the fundamental rights and secondly because the said fundamental right could be invoked only by the citizens of Pakistan, i. e. living persons, and not the petitioners all of which are limited Companies. In support of the first contention he placed before us copies of the two judgments of the Supreme Court of Pakistan in Civil Appeals Nos, 37 and 38 of 1967 and 75-D, 293-D of 1966 respectively delivered on 20th June 1969 and 28th November 1969. In both these judgments their Lordships held, relying upon sub-clause (3) of Article 3 of the Provisional Constitution Order, 1969, that any argument based on fundamental rights cannot be pressed after the abrogation of 1962-Constitution and the proceedings, in which a fundamental right is sought to be enforced, will have to abate. The learned Attorney-General is, therefore, right that the vires of section 3 (4) of the Act cannot be assailed now for the alleged contravention of Fundamental Right No,
15. Having reached this conclusion, I would rather not deal with the other argument of the learned Attorney-General that Fundamental Right No, 15 could be invoked only by the citizens of Pakistan and not by the petitioner companies and leave this question open for consideration at a suitable opportunity in future.
74. 39.The next objection of the petitioners is that "capacity tax" is not defined by the Legislature and further subsection (4) of section 3 of the Act is silent as to the period during which the said tax could be levied and consequently the said subsection would be unconstitutional. It is true that "capacity tax" has not been defined in subsection (4) of section 3 of the Act but this is immaterial.20 This expression unmistakably indicates that the tax would now be levied on what a mill ought to produce and not on the goods actually produced by it. So far as the second objection is concerned it is well established that the power conferred by the Legislature can be exercised from time to time subject to any limitations prescribed by the Legislature itself.
75. In this view the Central Bard of Revenue would be empowered to recover the production capacity tax under subsection (4) of section 3 of the Act so long as this power is not withdrawn by the Legislature.
40. The next objection is that the impugned action was taken by the respondents in violation of the principles of natural justice and therefore void. The grievance of the petitioners is that before determining the production capacity of their mills they were neither heard nor afforded any such opportunity by the Central Board of Revenue. They admit, however, that they were heard by the Review Board, constituted under subsection (6) of section 3 of the Act. But this according to Mr. Brohi, the learned counsel would not validate the action of the Central Board of Revenue which was ab initio void. In other words the contention is that if the initial order was passed in violation of the principles of natural justice it would be totally ineffective and regardless of the fact that the aggrieved person is later heard in the appellate or revisional proceedings the said order would remain void. In support of this contention Mr. Brohi, the learned counsel relied upon the Supreme Court judgment in the case of Commissioner of Income-tax, East Pakistan v. Fazulur Rahman , the judgment of the Karachi Bench in the case of Wali uhammad v. Badrul Jalil , a judgment from the English jurisdiction in the case of Ridge v. Baldwin and others a judgment from the King's Bench Division in the case of the King v. The Electricity Commissioners and a judgment from the Privy Council in the case of Estate and Trust Agencies v. Singapore Improvement Trust .
76. It is true that in each one of these judgments the orders of the authorities were held to be void but the learned Attorney-General correctly pointed out that in some of these cases the aggrieved persons were not heard at any stage of the proceedings and in the others the orders of the authorities were violative of the provisions of the statutes. The facts in PLD 1964 Supreme Court were that the petitioner had filed a Revision Application before the Income-tax Commissioner against the assessm ent orders of the Income-tax Officer. The Commissioner rejected this application without affording the petitioner any opportunity of hearing. his order of the Commissioner was final and since the petitioner was neither heard by him nor the Income-tax Officer it was held that the entire proceedings were ineffective and the two orders passed by these officers void.
77. The facts in PLD 1956 Kar. 250 were that certain allottees were ejected from the premises by the Rehabilitation Authorities not only without giving them a show-cause notice but in violation of the express provisions of Rule 6 of the Rehabilitation Rules, 1951. Since the requirement of this rule was that even an unauthorised occupant must be served with show-cause notice of at least seven days, before he could be summarily evicted, the impugned action of the authorities was struck down as void. The ratio of this judgment obviously is that if it is the requirement of the statute or a rule made thereunder that before action is taken against any person he must be served with a show-cause notice then any action taken against him would be void if the direction of the statute or rules is disregarded. However, this judgment was distinguished in the later Full Bench judgment in the case of Mohammad Ishaq and another v. Dr. Saiduddin Swaleh and another in which it was held that if a person is heard in the appellate or revisional proceedings then the initial order passed against him would be valid although he was not heard in those proceedings.
78. The next case is (1963) 2 All E R 66. The head notes of this judgment appear to support the contention of Mr. A. K. Brohi, the learned counsel. But by reading the judgment as a whole I observed that the majority of their Lordships declined to subscribe to the view that if the initial order is passed in violation of the principles of natural justice it would be void although the21 22 23 24 25 26 aggrieved person is heard at a later stage of the proceedings.
79. The last two cases are (1924) 1 K B 171 and AIR 1937 P C 265. In both these cases the impugned orders of the authorities were struck down mainly because they were passed in violation of the relevant provisions of the statutes and not on the ground of violation of the principles of natural justice.
80. After having distinguished these cases, the learned Attorney-General referred to two judgments of this Court and another of the High Court of Dacca to show that if a person is heard in the appellate or revisional proceedings then the original order passed against him would be valid although he was not afforded any opportunity of hearing before the original authority. The first judgment is in the case of Mohammad Ishaq v. Dr. Saiduddin Swaleh to which reference has been made in the preceding para. The next judgment is in the case of Agha Abdul Karim Shorish Kashmiri v. Province of West Pakistan . In this case the same principle was reiterated as laid down in the Karachi Full Bench case. The third judgment is in the case of Tafazzal Hussain v. Province of East Pakistan. In this case also the order of the original authority was impugned on the ground of violation of the principles of natural justice but the contention was repelled as the petitioner had been heard in the later proceedings. From all this discussion it is clear that the determination of the production capacity of the petitioner's mills by the Central Board of Revenue would be valid as each one of the petitioners was heard by the Review Board assisted by their Advocates and technical experts. In facts it was admitted before me that the Review Board had heard the petitioners both on facts and law and it is on record that in many cases the board reduced the production capacity of the mills after it was satisfied that their grievance was genuine.
41. The next objection is that the production capacity of the mills has been determined on the basis of some standard formula of which the petitioners were not aware nor had the respondents disclosed as to what this formula is. The case of the respondents, in this respect, is set out in paras.
81. 3 and 17 of the counter-affidavit filed in the case of Zebtan Textile Mills Ltd., in which it is alleged that the standard formula was nothing more than the information collected by the working groups from each mill in line with the guiding principles published in the Gazette Notification dated 12th August 1967. This position is not specifically denied in the rejoinder affidavits. In fact what is alleged by Zebtan Textile Mills is that the standard formula is not the only basis upon which the production capacity of the mills was determined and further that the respondents should be directed to disclose the manner in which they had applied the guiding principles. In order to meet this objection the respondents produced before us the original files of Zebtan and Ismail Textile Mills which support their contention. These files contain the standard printed forms which were circulated to the mills for eliciting the information relating to the production capacity. These forms have been duly filled in and signed by the managements. The case of the respon-dents is that it was upon the basis of this information and the information contained in the monthly returns of each mill that the production capacity was determined with the help of standard books on textile industry. In support of this contention the learned Deputy Attorney-General produced before me three books: "Textile Calculations simplified" by John H. Strong, "an introduction to the study of spinning" by W. E. Morton and the "American Cotton hand book" by Gilbert R. Merrill in which the relevant discussion appears at pages 180-182, 127 and 324-325 respectively. This discussion clearly supports the contention of the respondents which finds due corroboration from the High Powered Committee's report (pages 16 and 18) in which the principles of this discussion have been followed.
82. Not only this but the said report clearly reveals that after the necessary data was collected from the mills it was discussed with the respective managements and thereafter the production capacity determined in the light of the guiding principles mentioned in the notification dated 12th August 1967. The petitioners have not been able to controvert this position which leaves me with no alternative but to accept the version of the respondents.27 The next objection is that the survey reports of the working groups and the findings of the Committee were kept secret from the petitioners and therefore they could not form the valid basis for the determination of production capacity in support of this contention reliance was placed on two judgments of the Supreme Court one in the case of the Federation of Pakistan and another v.
83. Sardar All and others and the other in the case of Messrs Eastern Rice Syndicate v. Central Board of Revenue . The case of the respondents is that the survey reports of the working groups and the findings of the Committee were based entirely on the information supplied by the mills and further that all these reports were shown to the petitioners during proceedings before the Review Board and discussed by their learned Advocates and technical experts. This position is not specifically denied by the petitioners in their rejoinder affidavits. It would, therefore, follow that the grievance of the petitioners is untenable that the survey reports and the findings of the Committee were kept secret by the Central Board of Revenue.
84. 42.Having reached this conclusion, it is unnecessary to consider the effect of the two Supreme Court judgments which are even otherwise distinguishable. In the first case the Custom Officers and the Central Board of Revenue both had held the petitioner guilty under section 177-A of the Sea Customs Act on the basis of a one-sided official enquiry and reports without affording the petitioner a fair opportunity of defence. It was upon these facts that the action of the authorities was found to be ineffective and consequently struck down. In the second case the petitioners were heavily fined under the provisions of the Sea Customs Act and they challenged this decision before the Central Board of Revenue. The appeal of the petitioners was however dismissed summarily as they had failed to deposit the penalty amounts in terms of the original order of the Collector of Customs. It was upon this basis that the Supreme Court struck down the order of the Central Board of Revenue with these observations :- "We have been impressed in each of these cases by the extreme severity of the relevant law which is on the one hand understood to empower the authorities to multiply penalty up to as much as five times any value they may fix for the goods in question, and on the other hand renders the right of appeal subject to the condition that the whole amount of the penalty shall be deposited. These cases by themselves furnish proof that the grant of an appeal by a law in such cases is probably in respect of most of the important cases coming under the relevant provisions, merely nugatory."
85. It would be seen that these two cases have no relevancy to the contention of the petitioners.
86. 43.The next objection is that the impugned orders of the Review Board are arbitrary as the petitioners were not informed of the reasons in support of these orders. The case of the respondents is that the reasoned orders of the Review Board were supplied to the petitioners during the course of the arguments. In this respect the respondents have filed counter-affidavits and their assertion has not been controverted by the petitioners in rejoinder affidavits. If this be so then the objection would be more technical than real.
87. An objection was taken by late Mr. Manzare Alam, the learned counsel, that the Central Board of Revenue has even enhanced the rate of duty of the production capacity tax than the rates prescribed in the schedule of the Act and this according to him amounted to legislation in essential respects which was impermissible. To answer this objection the learned Deputy Attorney-General pointed out that the Act in force at the relevant time was the Finance Act of 1967 and not 1966 and further that the rate at which the production capacity tax was levied was lower than the rates prescribed in the schedule of the former Act. This contention of the learned Deputy Attorney- General is borne out by the two Acts and their schedules and it is obvious that the objection of Mr. Manzare Alam was misconceived; being based on the Act of 1966.
88. 44.The next objection is that the Capacity Tax (Cotton Fabrics) and (Cotton Yarn) Rules, 1968 have been applied retroac-tively without the warrant of the Act. The learned counsel for the petitioners did not elaborate this argument as to how the rules were applied in that manner. But upon the28 29 examination of the rules the objection appears to be misconceived. The admitted position is that the rules were to come in force on 1-5-1968 and if on that date it was found that the number of looms in a mill had increased or decreased then according to rules 3 (7), (8), (9) and (10) of the Rules the production capacity tax was to be accordingly adjusted. Not only this but the rules as a whole make it clear that they are prospective in operation as the production capacity tax on the mills has been levied from 1-5-1968, i,e, the date on which the rules were to come in force.
89. 45.The last objection is that the guiding principles, accor-ding to which the production capacity of the mills was determined, are outside the scope of subsection (4) of section 3 of the Act and further that some of these principles are completely irrelevant for the determination of the production capacity of the mills. I have already reproduced the said guiding principles and by examining them I am unable to subscribe to the objection of the petitioners. In fact the object of the guiding principles appears to be to lay down certain rational basis upon which the production capacity of the mills was to be determined with a view to implement the legislative mandate expressed in subsection (4) of section 3 of the Act. Additionally each one of the guiding principles appears to me to be relatable to the determination of the production capacity and I, therefore, fail to see as to how they can be said to be outside the scope of subsection (4) of section 3 of the Act.
90. Mr. Brohi, the learned counsel however argued that so far as guiding principle No, 1 is concerned it has no relevancy to the determination of the production capacity of individual mills and further that guiding principle No, 5 could not be invoked in the case of old mills such as Zebtan Textile Mills Ltd. I have already observed that each one of the guiding principle is relatable to the determination of production of the mills and therefore they would be unexceptional. Additionally this objection does not arise in the case of old mills installed prior to 1953, as the learned Deputy Attorney- General stated before me that guiding principles Nos, 1 and 5 were not applied to such mills. It is an admitted position that Zebtan Textile Mills Ltd., was installed in 1948 and therefore Mr. Brohi, who represents this mill, cannot have any grievance. Not only this but the learned Deputy Attorney- General also stated before me that even the new mills installed after 1953, in the case of which guiding principle No, 1 was applied, have benefited a position not denied by the learned counsel appearing for such mills in some of the petitions.
91. 46.These being all the legal objections raised by the learned counsel for the petitioners, I would now proceed to dispose of two Petitions Nos, 538 and 660 of 1969 in which arguments were addressed on merits as well by the learned counsel Mr. Khalid Anwar, who assisted Mr. Brohi in these petitions.
92. The first objection of Mr. Anwar, the learned counsel is that the determination of the production capacity of Zebtan Textile Mills Ltd., was in disregard of the report of the Survey Team and further that the Central Board of Revenue had relied on certain extraneous considerations in that regard.
93. In order to appreciate this objection I would like to reproduce the following observations from the report of the Survey Team :- "We have already examined the situation of this unit in detail. As pointed out earlier the main cause of the decline of this unit, it has virtually reached the point of extinction, is the criminal indifference of their owners to the fundamental aspects of machine maintenance, productivity and kindred factors. Though the control of the unit now rests in the owners son, who has acquired qualification, the present management are paying for the past sins. In my judgment the plea of their being loaded with an absolute plant, H and B Textile machinery, is weak when we compare the performance of older units both Sutlej Cotton Mills and the Lyallpur Cotton Mills. Unless and until the owners change their mind, rather reorientate their method and outlook this unit is doomed. There is hardly an aspect of their operation, be it output, labour deployment, prior consumption provision of basic facilities which one can pass over."
94. It is no doubt true that according to this report of the Survey Team the machinery of Zebtan Textile Mills Ltd., has reached the point of extinction. But I cannot ignore the reasons due to which the mill has been placed in this situation namely "the criminal indifference of their owners to the fundamental aspects of machine maintenance, productivity and kindred factors". These observations of the Survey Team appear to be objective inasmuch as it compared the machinery of this mill and its performance with older mills such as Sutlej Cotton Mills and the Lyallpur Cotton Mills and discovered that "there is hardly any aspect of their operation, be it output, labour deployment, prior consumption provisions of basic facilities which one can pass over". It is clear that by this report of the Survey Team the predicament of Zebtan Textile Mills is spot-lighted, but it could not conceivably enure to the benefit of the mill keeping in view the scheme of subsection (4) of section 3 of the Act that the mills are now required to pay tax on the excisable goods which they ought to produce and not what they actually produce. In fact the very object of amending subsection (4) of section 3 of the Act by the Legislature appears to be that any mills, which are installed at the huge cost of hard-earned foreign exchange, must be able to produce maximum goods by using their machinery at the optimum attainable standards of efficiency prescribed by the manufacturers. Obviously this can only be done if the mills are run on scientific lines and would avoid the pitfalls of which mention is made in the report of the Survey Team. Seen in this context, Zebtan Textile Mills cannot conceivably claim any advantage from the report of the Survey Team as it would be against the spirit of legislative policy manifested in subsection (4) of section 3 of the Act. This is precisely what the case of the respondents is. They have alleged in their counter- affidavit that due to the indifference of the management of Zebtan Textile Mills substantial part of its machinery has been allowed to remain idle which has contributed to the poor level of its production. The case of the respondents further is that the production capacity of this mill was determined on the basis of necessary data supplied by its management and strictly in accordance with the guiding principles. They have denied the allegation of the petitioner mill that for this purpose the Central Board of Revenue had relied upon any extraneous consideration. For all these reasons I regret to be unable to agree with the objection of the petitioners.
95. 47.The next objection of the petitioners is that the produc-tion capacity of their mill, as determined by the respondents, bears no relation to its actual production and further that the mill is not physically capable of producing the quantum of goods as determined by the respondents. In substance the objection is that according to the report of Survey Team the machinery of the mill is old and in dilapidated condition and consequently it cannot be expected to produce goods according to the determined production capacity. This objection clearly proceeds in disregard of the scheme of subsection (4) of section 3 of the Act in which the emphasis is on the possible achievable standards of production by the mills and not on their actual performance. In this view I do not see any force in the objection.
96. 48.The next objection of the petitioners is that according to the specification of the manufacturers their mill, when brand-new, would be capable of producing at the most 8353152 lbs. of cotton yarn per annum, but the respondents have now fixed its capacity at 9762087 lbs., when the mill is admittedly 22 years' old. In support of this objection the petitioners have filed a photo-stat copy of the specifications of production-data by H and B Amercian Machine Company, who are alleged to be the manufacturers of the machinery installed at their mill. I regret that I cannot consider this objection firstly, because the order of the Review Board shows that it was not taken during the departmental proceedings and secondly, even if it was taken it was given up. Additionally the photo-stat copy in question does not indicate if it relates to the petitioners' mill and consequently I have no means to determine this question. In any case the objection of the petitioners would require investigation into facts and since it was not raised before the Review Board it cannot possibly be raised in the present proceedings.
97. 49.The next objection is that the Revenue Board was wrong to hold that there was no shortage of bag-processing machinery for the petitioner-mill when in this respect the Survey Team had given a contrary finding. It appears to me that the report of the Survey Team in this respect has been misconstrued. All that the report in question substantially says is that on account of the indifference of the management there was shortage of bag-processing-machinery, but that would not mean that the machinery in question was not available. In any case this objection was considered by the Review Board and rejected. On my part I am unable to disagree with this finding in the present proceedings not only because no material has been placed before me in support of the objection but also because the finding in question is necessarily a finding of fact.
50. The next objection is that by fixing the speed of 25000 spindles of the petitioners' mill at 8700 RPM, and of the remaining 10000 spindles at 10000 RPM, the respondents acted arbitrarily as they failed to take into con-sideration that the mill was about 22 years' old and it was impossible for it to achieve these standards. In support of this objection reference is made to the case of few other mills which are alleged to be superior than the mill of the petitioners and it is contended that these mills were assessed to lower production capacity. This and the other allied objections were taken before the Review Board and in consequence the petitioners were given an allowance of 10 % for 25024 spindles instead of the allowance of 5% allowed them earlier. The petitioners were further allowed the additional allowance of 3/18 % on account of the fact that the manufacturers had gone out business and therefore the spares for the mill were not available and 2/1 % on account of the weft spindles installed in their factory. The order of the Review Board shows that this conclusion was reached after the manufacturers recommended speed of 8700 RPM was accepted for 25024 spindles.
98. From this it is clear that while deciding these questions the Review Board was conscious of the fact that the petitioners' mill was about 22 years old and it was on this account that their annual tax liability was reduced by about Rs, 8.8 lakhs. Under the circumstances it would be incorrect to say that the decision of the Review Board is arbitrary.
99. Additionally the decision of the Review Board on all these questions is necessarily a decision on facts which cannot be interfered with in these proceedings for the wellknown reason that if the authority had the jurisdiction in the matter its decision would not be open to review just because it was found to be wrong in certain respects.
100. 'So far as the second objection it seems to have not been taken before the Review Board. On my part I find it difficult to give any opinion, one way or other, If the various mills, to which reference has been made, are really superior to the mill of the petitioners and further whether they have been assessed at the lower rate of production capacity. This question is necessarily a question of fact which cannot be decided without taking evidence. Since no evidence has been produced by the petitioners to enable me to see the force of this objection all that I can do is to leave it open so that if they are so advised the petitioners might agitate it before the authorities.
101. 51.The petitioners have also objected to the determination of the production capacity vis-a-vis the manufacture of fabrics and in this respect they have urged the same grounds which were urged against the determination of their production capacity of yarn. The order of the Review Board, however, shows that the standard of efficiency of the petitioners' mill was found to be at the low level of 40% as against the standard efficiency of 83%. The reason, amongst others, being that the petitioners had employed lesser number of shifts as against the standard numbers employed by other mills. These findings of the Review Board being findings of facts cannot be questioned in these proceedings.
102. 52.The last objection of the petitioners is that upon the goods exported by them the respondents have refused them the full amount of rebate under Rule 8 (1) read with rule 3 (2) of the Rules to which they were entitled. The respondents have denied this suggestion in para. 19 of their comments and also in their counter-affidavit. They have further alleged that if the petitioners were aggrieved they should have resorted to the statutory remedy provided in sections 35 and 36 of the Act. The admitted case of the petitioners is that in the impugned demand notices the respondents have not allowed them the full amount of rebate. The fact that these notices have originated from the Assistant Collector of Central Excise and Land Customs, Karachi would appear to support the contention of the respondents that the remedy of the petitioners, if any, lay in filing Appeal before the higher authorities under sections 35 and 36 of the Act. It is not the case of the petitioners that they have resorted to this remedy and consequently I am unable to consider this question which on facts is also disputed by the respondents.
103. Before ending this discussion I may also dispose of certain subsidiary objections of Mr. Khalid Anwar. These objections are that the petitioners are now required to pay Rs, 95,00,000 annually by way of production capacity tax which in fact exceeds the gross value of the goods produced by them in three years; that in determining their production capacity the Review Board and the Central Board of Revenue both have ignored the figures of production supplied by them, the survey reports and their annual returns; that the respondents have ignored the guiding principles in calculating the production capacity of the petitioners' mill and that Mr. Saleem, who had signed the impugned orders, had usurped the jurisdiction of the Review Board as he himself had no authority under the law to take the impugned decision. I have considered each one of these objections but found them without force. It is true that under the new rules the petitioners have been made liable to pay considerably larger amounts by way of production capacity tax but that by itself would not mean that the levy is illegal. In fact the action of the respondents in this behalf is completely in accord with the legislative intent as manifested in subsection (4) of section 3 of the Act. As already observed the petitioners' mill was found to have been operating at the low standard of 40% as against the standard efficiency of 83% on account of their own mismanagement. The fact that this higher standard has been achieved by older mills, such as Sutlej Cotton Mills and the Lyallpur Cotton Mills, would convincingly indicate that it is the petitioners themselves who are to blame and therefore they cannot be heard to complain of the impugned levy.
104. The next objection of petitioners is factually incorrect inasmuch as all these documents were taken into consideration by the Review Board and the Central Board of Revenue in determining the production capacity of their mill. Not only this but the official file of the Department was shown to the petitioners in Court in support of the respondents' contention that the figures submitted by the petitioners, their annual returns and the reports of the Survey Teams were duly considered but the learned counsel failed to point out that this was not the position.
105. The other two objections are also without force. I have already discussed in the earlier part of this judgment that in the case of Zebtan Textile Mill's principles Nos, 1 and 5 were not applied and that its production capacity was determined only in accordance with guiding principles Nos, 2, 3 and 4.
106. It was also noted that by this method the mill had substantially benefited and therefore it would be incorrect to say that while determining the production capacity of the mill the respondents have ignored the guiding principles. As regards the other objection the learned Deputy Attorney-General produced before us the original orders of the Review Board and I noted that they were signed by the Members themselves. It would, therefore, be wrong to say that Mr. Saleem was the person who had taken the impugned decisions. It is true that the orders served upon the petitioners were signed by Mr. Saleem but under the circumstances this would be immaterial particularly when Mr. Saleem happened to be the Secretary of the Review Board at the relevant time.
53. I would now take up Petition No, 660/1969 which was also argued on facts by Mr. Khalid Anwar, the learned counsel for the petitioner-Company. In this case Mr. Khalid Anwar urged only two grounds against the impugned order of the respondents; firstly that the action of the respondents was manifestly arbitrary in that their production capacity had been determined at different figures for the three years of 1967-68, 1968-69 and 1969-70. And secondly, that by order dated 9-6-1969 the respondents called upon the petitioners to pay the production capacity tax at a higher rate than what was demanded in the earlier order dated 4-6-1969. The contention of the learned counsel is borne out by these two orders. But the learned Deputy Attorney-General argued that this was not the actual position. In support of his contention the learned Deputy Attorney-General took us through both these orders and pointed out that the production capacity figures for the three years of 1967-70 mentioned therein were identical except that in the order dated 4-6-1969 the production capacity of the mill for the year 1970-71 was also given. He further pointed out that the production capacity for the year 1970-71 was mentioned in the subsequent order dated 9-6-1969, but since it was not assigned to any period it contributed to the misapprehension of the petitioners.
107. Particulars : Elaborating this contention he argued that the production capacity of the petitioners' mill, vis-a-vis the manufacture of yarn, was determined at the figure shown for the year 1970.71, but as a matter of Policy the said figures were considerably reduced for the years 1967-68 and 1968-69 so as to make it easier for the petitioners to improve their standard of efficiency. The learned Deputy Attorney-General further pointed out that for the subsequent year 1969-70, although the margin of concession was reduced, the petitioners were still treated with considerable indulgence and it is only in the financial year 1970-71 that the concession was finally withdrawn and the petitioners required to pay the tax at the actual capacity.
108. I have examined this contention of the learned Deputy Attorney-General which is clearly borne out by the tenor of the two orders of the respondents. By scrutinizing the contents of these documents I observed that they are completely in accord with each other except for this difference that while in the order dated 4-6-1969 the production capacity of the petitioners' mill, vis-a-vis the manufacture of yarn is also given for the financial year 1970-71, yet no year is assigned to them in the subsequent order dated 9-6-1969. The fact that the said figures have been mentioned in both the orders would appear to support the contention of the learned Deputy Attorney-General that they in fact indicated the actual production capacity of the mill and further that as a matter of policy the tax at that rate was not charged from the petitioners for the first three financial years of 1967-70 so as to enable them to improve their standards of efficiency. Apart from this difference there is no other discrepancy between the two orders and consequently the objection of the petitioners, based as it was on clear misconception, is untenable.
109. By all this discussion I thought that this judgment was finally concluded but on re-examining my notes I discovered that one legal objection of some importance had escaped fuller treatment. This objection is that subsection (4) of section 3 of the Act is wholly unconstitutional as the Central Legislature has authorised the Central Board of Revenue even to levy and collect duties on the production capacity of plants, machinery, undertakings etc., in lieu of levying and collecting duties of excise on excisable goods under subsection (1) of that section. In support of this contention the petitioners relied upon the words 'the Central Board of Revenue may, in lieu of levying and collecting under subsection (1) duties of excise on excisable goods, by notification in the official Gazette, levy and collect duties on the production capacity of plants, machinery, undertakings, establishments or installations producing or manufacturing such goods " Their case is that by Act No, II of 1966 (the Constitutional (6th) Amendment Act, 1966) the power to "levy" these taxes was vested in the Central Legislature but it having abdicated its power in favour of the Central Board of Revenue would render subsection (4) of section 3 of the Act as unconstitutional.
110. The contention of the petitioners plainly is as if the word "levy" appearing in subsection (4) of section 3 of the Act tantamounts to creating the liability to pay the production capacity tax but this is not the meaning in which this word has been understood by the Legislature for quite a few years.
111. In order to illustrate that this is the position reference may be made to the language of repealed subsection (4) of section 3 of the Act and that of section 3-A thereof which respectively read : "(4) Notwithstanding anything contained in subsection (1), the Central Government may, in lieu of levying and collecting duties of excise on excisable goods under that subsection levy and collect, in such manner and at such rates as may be prescribed, duties of excise on the productive capacity of the plant or machinery, or a part thereof, manufacturing or producing excisable goods.
112. 3-A.--(1) The Central Government may, by notification in the official Gazette, levy, in addition to the duty leviable under section 3, a regulatory duty on any excisable goods at a rate not exceeding 25 per cent. of the rate of duty leviable thereon under the said section, or at a rate not exceeding 10 per cent. ad valorem."
113. It may be mentioned that the repealed subsection (4) was introduced into the Act by the Finance Ordinance, 1961 whereas section 3-A was introduced by the Finance Act, 1965. So far as am aware the constitutionality of these sections, has not been challenged before any Court and the question arises if by the incorporation of the words of these sections, in subsection (4) of section 3 of the Act the Legislature could be said to have abdicated its Legislature power in favour of the Central Board of Revenue? By reading all these sections carefully I am clear in my mind that the word "levy" used in subsection (4) of section 3 of the Act cannot be construed to mean that the power to create the liability to pay the production capacity tax has been left by the Central Legislature to the Central Board of Revenue. Apart from this position I have sufficiently discussed this question in the earlier part of the judgment supported by authorities that even to "levy" the tax could be left to the delegate. Assuming, therefore, that what the petitioners contend is factually correct even then it would not render section 3 (4) of the Act unconstitutional.
114. Another reason for which this conclusion can be supported in that section 3 (1), (2) and (3) of the Act are still part of the Act and in order to understand the intention of the Legislature in subsection
(4) of section 3 thereof all these provisions will have to be read together. It is not disputed before me that section 3 (I) of the Act is the charging section. If this be so then it would be factually incorrect to contend that under subsection (4) of section 3 of the Act the power to create the liability for paying the production capacity tax was left to the Central Board of Revenue by the Central Legislature. Furthermore according to section 3 (1) of the Act the duties are charged on all excisable goods produced or manufactured in Pakistan and it is not denied that the object of subsection (4) of section 3 of the Act is identical. The only difference between the two however is that while formerly the duties were charged on the excisable goods actually produced by a mill whereas the new duties are levied on what a particular mill or plant ought to produce.
115. I have also not been able to agree with the petitioners that the word "levy" appearing in subsection
(4) of section 3 of the Act is mean to create the basic liability to pay the production capacity tax.
116. The word "levy" is defined in the dictionary of English Law by Earl Jowitt (1959 Edition) to mean "the act of raising money or men. To levy execution ; to raise a sum of money by a writ of execution against the property of a judgment-debtor". In concise Oxford Dictionary (1964 Edition) the said word has been defined thus: "Collecting of assessment, tax, etc. (capital--appropriation by the State of a fixed proportion of all or some of the wealth in the country); " In the Chambers 20th Century Dictionary the word "levy" is defined to mean "to raise, collect ; as an army or tax ; to call for ; to impose to begin to wage ; the act of levying; a contribution called for from members of an association; a tax; the amount collected; From these meaning of the word "levy" it is clear that it does not necessarily mean the creating of basic liability to pay tax but it equally means the collection of tax etc. In this view, the word "levy" being open to two meanings it would be the duty of the Court to adopt that meaning which would advance the intention of the Legislature and not the one which is bound to defeat it. In support of this conclusion we would refer to two judgments of the Supreme Court of Pakistan reported in the cases of Muhammad Amir Khan v. Controller of State Duty and Muhammad Ismail and others v.
117. State . In the first case their Lordships, upon a similar point, observed that: "We are satisfied that this is a case where the Court can modify the language of an enactment. It30 31 will be observed that there cannot be the slightest doubt in the present case as to the intention of the Legislature. In fact. It is admitted on behalf of the appellants that the failure to make a consequential amendment in section 57 could only be due to a slip. After providing that the Controller could determine value subject to an appeal to the Appellate Tribunal the Legislature could not possibly have intended that duty should be paid only on the account which was filed by the accounting party itself. All that has happened is that the draftsman failed to refer in section 57 to the provisions relating to determination in accordance with the amended Act. That we can modify the language of an Act to give effect to the manifest and undoubted intention of the Legislature is a proposition which is well supported by authority and well justified in reason."
118. Similarly by the following observations of their Lordships in the other case this rule of construction by various authors such as Halsbury, Maxwell and Craies was quoted with approval.
119. "As a general rule a Court of law is not authorised to supply a cassus omissus, or to alter the language of a statute for the purpose of supplying a meaning, if the language used in the statute is incapable of one, even though they may be of opinion that a mistake has been made in drawing the Act" (Craies on Statute Law, 6th Edition, page 520). The purpose of construction or interpretation of a statutory provision is no doubt to ascertain the true intention of the Legislature, yet that intention has, of necessity, to be gathered from the words used by the Legislature itself. If those words are so clear and unmistakable that they cannot be given any meaning other than that which they carry in their ordinary grammatical sense, then the Courts are not concerned with the consequences of the interpretation however drastic or inconvenient the result, for the function of the Court is interpretation, not legislation. In construing an enactment, passed by legislative authority, it is also not permissible for the Courts to rely upon oral declarations of the intention of the law-giver, made at the Bar of the Court, if the language used in the legislative enactment is not reasonably capable of bearing such a meaning. But what is permissible is this that "where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence", because, "where the main object and intention of a statute are clear, it must not be reduced to a nullity by the draftsman's unskilfulness or ignorance of the law, except in a case of necessity, or the absolute intractability of the language used" (Maxwell, 11th Edition, page 221). Even though, as a general rule, a Court of law is not authorised to supply a cassus omissus or to alter the language of a statute for the purpose of supplying a meaning, yet in certain circumstances it is permissible for the Courts to give effect to the true and patent intention of the law-maker to supply the omission in order to avoid doing a manifest injustice."
120. 'The principles which follow from these observations are that where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest construction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence, because, where the main object and intention of a statute are clear, it must not be reduced to a nullity by the draftsman's unskilfulness or ignorance of the law, except in a case of necessity, or the absolute intractability of the language used. Even though, as a general rule, a Court of law is not authorised to supply a cassus omissus or to alter the language of a statute for the purpose of supplying a meaning, yet in certain circumstances it is permissible for the Courts to give effect to the true and patent intention of the lawmaker to supply the omission in order to avoid doing a manifest injustice.
121. Now by looking at the history of legislation of the levy of production capacity tax, it is clear that for this purpose entry No, 43 of the Constitution was first amended and the Central Legislature authorised to levy the production capacity tax. In implementation of this dictate of the Constitution the Central Legislature amended subsection (4) of section 3 of the Act and consequently it cannot be disputed that the object of the impugned legislation was to implement this constitutional intention of the Legislature. Having reached the conclusion it would be permissible for me, in view of the above Supreme Court judgment, to read the words "the Central Board of Revenue may, in lieu of levying and collecting under subsection (1) duties of excise on excisable goods, by notification in the official Gazette, levy and collect duties on the production capacity of plants etc." appearing in subsection (4) of section 3 of the Act to mean as if the "levy" (if its meaning of imposing liability is taken into consideration) was by the Central Legislature itself and the Central Board of Revenue was authorised only to collect the production capacity tax. Not only this but in my view the draftsman of subsection (4) of section 3 of the Act appears to have followed the language of repealed subsection (4) of section 3 and the existing section 3-A of the Act presumably because it had stood the test of some years and in his view this was the expedient way of drafting the said section. Whatever may be the case I have found that the intention of the Legislature was to "levy" the production capacity tax, then subsection (4) of section 3 of the Act cannot be held to be unconstitutional simply because of it, inapt drafting and keeping in mind the observations of the Supreme Court in Sirajul Haque Pat wari's case that the "affair should rather prosper than brought to an end".
122. There is yet another reason for which the objection of the petitioners cannot be upheld. The admitted position is that the production capacity tax was imposed by the Cotton Fabric and Cotton Yarn Rules, 1968. It is also the admitted position that these rules were framed by the Central Board of Revenue exercising power under section 37 read with subsection (4) of section 3 of the Act and further that these rules were notified in the official Gazette and thereafter placed before the Central Legislature, as required by section 38 of the Act, and duly approved. It was after the rules were thus approved by the Central Legislature that they came in force with effect from 1-5- 1958. According to section 38 of the Act the rules in question would have effect as if enacted in the Act itself and consequently it cannot be denied that after the rules were approved by the Legislature the "levy" of production capacity tax would in fact be the act of the Central Legislature.
123. In reaching this conclusion, it may be pointed out, that I have not been unmindful that Fiscal Statutes have to be construed strictly and if by such construction the citizen can benefit then it is bound be objectionable.
54. For all these reasons each one of the legal objections raised in all these petitions is repelled and I hold that subsection (4) and the other subsections of section 3 of the Act are intra vires of the Legislature and perfectly constitutional. The result would be that all these petitions would now be fixed for hearing on facts before a Division Bench of this Court except for Petitions Nos, 538 and 660/1969, which are without force and hereby dismissed. But under the circumstances there would be no order as to costs.
124. ABDUL KADIR SHAIKH, J.--I have gone through the judgment proposed to be delivered by my learned brother Ghulam Safdar Shah, J., and I regret I cannot subscribe to his views on certain legal questions and therefore, have to differ, but I do so with deep regrets for the reason that I always hold his views in the greatest esteem.
125. The facts leading to these cases have been variably narrated by his Lordship and I need not repeat these; suffice it to say that the petitioners who are the manufacturers of cotton-fabrics and cotton- yarn have challenged the levy of the excise duty, popularly known as "Capacity-Tax", that was recognized by the Constitution (Sixth Amendment) Act, 1966, by the addition of item (i) to Entry No, 43 of the 3rd Schedule to 1962-Constitution. By this amendment the Central Legislature was authorised to make laws in respect of taxes and duties on production capacity of any plant, machinery, undertaking, establishment, or installation in lieu of the taxes and dues specified in any one or more of Items (b), (c) and (f) of the Entry No, 43; these cases however, pertain to the duty of excise, to be more particular, the one imposed under the Finance Act, 1966, whereby the new subsection (4) to section 3 was replaced in the Central Excise and Salt Act, 1944.
126. In order to appreciate the contentions raised it will be necessary to refer to the various provisions of this Act in extenso, I may however, start with subsections (1) and (2) of section 3. these read : "3(1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in (Pakistan) and a duty on salt manufactured in, or imported by land into, any part of Pakistan as, and at the rates, set forth in the First Schedule.
(2) The Central Board of Revenue may, by notification in the official Gazette fix, for the purpose of levying the said duties, tariff values of any articles enumerated, either specifically or under general headings, in the First Schedule as chargeable with duty ad valorem and may alter any tariff values for the time being in force."
127. The provisions against which objections have been raised are those that came to be introduced on the 30th of June 1966 by the Finance Act IX of 1966. These in the present form read as follows: "4. With the prior approval of the Central Government, the Central Board of Revenue may, in lieu of levying and collecting under subsection (1) duties of excise on excisable goods, by notification in the official Gazette, levy and collect duties on the production capacity of plants, machinery, undertakings, establishments or installations producing or manufacturing such goods ; and such notifications shall specify-- (a)the guiding principles for the determination of production capacity, (b)the production capacity, as determined in accordance with such guiding principles, of the plants, machinery, undertakings, establishments or installations affected by it, (c)the duty or the rate of duty on production capacity, and (d)the manner of collection of such duty.
128. 5.The production capacity of any plant or machinery or part thereof specified in a notification under subsection (4) shall, upon an application made to the Central Government within thirty days of the Notification by any aggrieved person, be reviewed by a Review Board constituted under subsection (6) to which the application shall .be referred ; and the decision of the Review Board (confirming, reducing or increasing the production capacity) shall be final.
6. The Central Government shall, for the purpose of subsection (5), constitute a Review Board consisting of three officers not below the rank of a Joint Secretary to the Government of Pakistan, one each from the Ministry of Finance, Ministry of Commerce and Ministry of Industries, the officers from the Ministry of Finance being the Chairman : Provided that when, for any reason, either or both of the officers from the Ministry of Commerce and Ministry of Industries are not available for a meeting of the Review Board for the purpose of subsection (5), the Central Government may nominate one or two other officers, as the case may be, not below the rank of a Joint Secretary to the Government of Pakistan to act as Members of the Review Board.
7. The Central Board of Revenue may, by notification in the official Gazette, at any time, cancel, a notification under sub-section (4) ; and where a notification is so cancelled or, for any reason whatsoever, cannot be given effect to, the duty under subsection (1), in lieu whereof the duty under subsection (4) was levied by such notification, shall be levied and with necessary adjustment, collected for the financial year during which such notification is cancelled or for the period for which it cannot be given effect to.
129. Explanation.--For the purposes of this subsection, an order of a Court suspending or staying the collection of the whole or any part of the duty under subsection (4) shall be deemed to be a reason for which a notification under subsection (4) cannot be given effect to."
130. How the governmental agencies, in particular the Central Government and the Central Board of Revenue came to execute the command of this legislation is laid bare before us.
131. Let me start what everyone concerned should have known; I mean what is contained in the Gazette of Pakistan, Extraordinary, dated the 12th of August 1967. It reads :- "The Government of Pakistan are pleased to appoint the following officers as Members of the Committee which will determine the production capacity of individual cotton textile factories for the levy of duty on the production capacity of such factories : (1)Mr. S. B. Awan, C. S. P., Secretary to the Government of Pakistan, Ministry of Industries and Natural Resources, Islam, abad--Chairman.
132. (2)Mr. S. Nizamuddin, Deputy Director General, Department of Investment Promotion and Supplies, Government of Pakistan, Karachi--Member.
133. (3)Mr. M. A. Jagirwala, Chief Cost Accounts Officer, Ministry of Finance, Government of Pakistan, Karachi--Member.
134. (4)Mr. Mohammad Akbar Khan, Director of Textiles, Department of Investment Promotion and Supplies, Government of Pakistan, Karachi--Member.
2. The Chairman of the Committee may appoint such persons as he may consider necessary to assist the Committee in its work. The Members of the Committee, or such persons as are appointed by the Chairman, will be authorised to call for such information and inspect such records as they may consider necessary.
3. The duty on the production capacity of a cotton textile factory as determined by the Committee will be levied under subsection (4) of section 3 of the Central Excises and Salt Act, 1944, and the notified capacity of individual factories will be subject to review, on application by the manufacturers, by the Review Board constituted under subsection (6) of section 3 of that Act. The relevant provisions of the Act are reproduced below :
(4) With the prior approval of the Central Government, the Central Board of Revenue may, in lieu of levying and collecting under subsection (1) duties of excise on excisable goods, by notification in the official Gazette, levy and collect duties on the production capacity of plants, machinery, undertakings, establishments of installations producing or manufacturing such goods; and such notifications shall specify-- (a)the guiding principles for the determination of production capacity, (b)the production capacity, as determined in accordance with such guiding principles of the plants, machinery, undertakings, establishments or installations affected by it, (c)the duty or the rate of duty on production capacity, and (d)the manner of collection of such duty.
135. (5)The production capacity of any plant or machinery or part thereof specified in a notification under subsection (4) shall, upon an application made to the Central Government within thirty days of the notification by any aggrieved person, be reviewed by a Review Board constituted under subsection (6) to which the application shall be referred; and the decision of the Review Board shall be final.
136. (6)The Central Government shall, for the purpose of sub-section (5), constitute a Review Board consisting of the following :- (a)the Secretary to the Government of Pakistan, Ministry of Finance, who shall be the Chairman.
137. (b)the Secretary, to the Government of Pakistan, Ministry of Commerce, and (c)the Secretary to the Government of Pakistan, Ministry of Industries.
4. The guiding principles, to be notified under subsection (4) of section 3 of the Act, on the basis of which the Committee should determine the production capacity of individual cotton textile factories are as follows :-- (i)The national average annual production of each statutory category of cotton fabrics/cotton- yarn on a per loom/spindle basic taking production of the past three years into account.
138. (ii)Category-wise annual production of the individual units for the past three years or such lesser period as may be available.
139. (iii)Category-wise annual production of comparable units for the same period.
140. (iv)Production capacity of an individual unit calculated on the basis of the technically possible maximum production potential of the plant and machinery installed in the unit, if it were to aim at maximising its profits before tax.
141. (v)Growth factor, keeping in view the past rate of improve-ment in production and likely in efficiency relating to improve-ment in technical, managerial, labour and financial factors of individual mills.
5. The annual production capacity of individual factories shall be expressed for each statutory category of cotton fabrics in terms of square yards, and for each category of cotton yarn in terms of pounds.
6. For the purpose of determining the liability to duty of a factory, the production capacity of the factory for each Excise category of fabrics/yarn, determined on the basis of the above principles will be multiplied by the statutory rate of excise duty for that category.
7. The Committee should determine the number of working days/shifts on the basis of which the annual production capacity of cotton textile factories should be determined. The Committee shall also recommend the basis on which abatement in the annual production capacity may be allowed on account of the closure of the factory for reasons beyond its control within the number of working days/shifts reckoned for fixing the annual production capacity of individual factories.
8. The Committee should also recommend the procedure for the grant of refund in respect of various categories of cotton fabrics and cotton-yarn which are exported.
9. The Committee shall submit its recommendations to the Central Board of Revenue of the Ministry of Finance by a date not later than the 15th November 1967."
142. My learned brother Ghulam Safdar Shah, J. has mentioned the events that followed and I need only say this much that by February 1968, the Committee set up, officially described as "The Textile Industry Capacity Committee", submitted quite a comprehensive report to the Central Government. This printed report was produced before us, and it is the case of petitioners that for all intents and purposes their fate as to what was ultimately determined as the capacity of their plants and machinery, was determined then.
143. However, the Central Board of Revenue in the exercise of powers conferred upon it under section 3
(4) of the Act, notified the Rules in the official Gazette, described as the Excise Duty on Production Capacity (Cotton-Fabric) Rules, 1968, (to be referred hereafter as Cotton-Fabric Rules), and the Excise Duty on Production Capacity (Cotton-Yarn) Rules, 1968, (which would be referred to as Cotton-Yarn Rules). These rules came into force on the 1st of May 1969, and in result the mode of levy of the excise duty was determined according to the production capacity of the petitioners' mills as shown in the relevant schedules appended thereto.
144. The petitioners have challenged these Rules, the Finance Act, 1966, under which these Rules were framed; not only this but all the action taken thereunder; I would however, deal with only those legal questions which I feel must prevail in any case. The first one is that the Central Legislature has done no legislative function, but abdicated or transferred it to be performed by the Central Board of Revenue and therefore, the amendment of section 3(4) of the Central Excise and Salt Act made by the Finance Act, 1966, was not made by the law that the Constitution envisaged the Central Legislature to pass, or the one that can be recognized by the Courts of law.
145. While considering this contention, it has to be recognized that the growing complexity of modern life, the multiplication of the subjects of governmental regulations and the increased difficulty of administering the laws, there is constantly growing tendency towards the delegation of greater powers by the Legislature, and towards the approval of the practice by the Courts. This variety of conditions and circumstances and the laws intended to meet them has led to a large number of judicial decisions and utterances which the Courts have found difficult to harmonize. The difficulty is for the reason that neither the Constitution nor the law defines the lines of separation between powers that shall be directly exercised and those that may be delegated by the Legislature. The Courts have however, always made certain lines of separation, in the words of the famous American Jurist Thomas M. Cooley in his treaties on Constitutional Limitations, Volume I at page 227: "The maxim that power conferred upon the Legislature to make laws cannot be delegated to any other authority does not preclude the Legislature from delegating any power not legislative which it may itself rightfully exercise. It may confer an authority in relation to the execution of a law which may involve discretion, but such authority must be exercised under and in pursuance of the law.
146. The Legislature must declare the policy of the law and fix the legal principles which are to control in given cases; but an administrative officer or body may be invested with the power to ascertain the facts and conditions to which the policy and principles apply if this could not be done there would be infinite confusion in the laws, and in an effort to detail and to particularise, they would miss sufficiency both in provision and execution."
147. I may also usefully quote the following passage from page 558, Corpus duds Secundum, Volume 16 :- "While the Legislature may not delegate the exercise of its discretion as to what the law shall be, it may confer discretion in the administration of the laws, and the Constitution has never been regarded as denying to the Legislature the necessary resources of flexibility and practicability which will enable it to perform its functions in laying down policies and establishing standards, while leaving to selected instrumentalities the making of subordinate rules within prescribed limits and determination of facts to which the policy as declared by the Legislature is to apply."
148. In other words the Legislature may delegate its non-legislative I functions and confer discretion in the administration of law, but /14. cannot delegate the powers purely legislative. In the words of Hamood ur Rahman, J. (as he then was) in the case of Province of East Pakistan v. Sirajul Haq Patwari .
149. "The Legislature cannot abdicate altogether from its legislative functions or totally efface itself but where the Legislature has sufficiently expressed its will and exercised its judgment as to the territorial extent, scope and subject-matter of the legislation the provision of details, particularly when such details are by their very nature incapable of being laid down by the Legislature itself, can well be left to be done by another agency in whom the Legislature places confidence."
150. It is not difficult to ascertain what legislative powers, or legislative function is. It is defined as the powers to pass Rules of law for the Government and regulation of people or property N or as the power to enact law or to declare what the law shall be; and the `legislative function' has been held to involve the exercise of discretion as to the contents of statute and their policy. The functions of Legislature of making laws, or power, the exercise of which would effect the repeal, variation, change or suspension of a Statute or existing of provisions of general law thus cannot be delegated.
151. On the other hand, a certain policy or rule having been prescribed by Statute, matters of detail in carrying out the executive duty of giving effect to the legislation may be left to the executive or Administrative Officers, Boards or Commissions. The Legislature is however not required to legislate for the guidance of executive agencies further t :an what is practicable, and may express the policy or standard in mere general terms. Indeed under some authorities, if it is impossible or impracticable to lay down guidelines or standard without destroying the flexibility necessary to enable the Executive Officers to effect the legislative will, it may even confer discretion without such32 restrictions.
152. It is in the light of these settled principles that the legislation under challenge may now be examined. The scrutiny would require examination of section 3 of the Central Excises and Salt Act, 1944 from the beginning and as a whole. This section is also the beginning of Chapter II of the Act with its heading "levy and collection of Duty". Its head-note reads: "Duties specified in the First Schedule to be levied." It is the command of the Legislature in subsection (1) that the duties of excise on all excisable goods produced or manufactured in Pakistan shall be levied and collected at the rates set forth in the First Schedule. Reference to this Schedule would show that not only the excisable goods are described in specific details, but the rates of duty are also fixed in the manner that would involve minimum controversy. The relevant entry in respect of which the Central Excise and Salt Act, 1944 had the constitutional sanction is Item (b) of Entry No, 43 of the Third Schedule of 1962-Constitution which reads: "(b) Duties of excise (including duties on salt, but not including duties on alcoholic liquor, opium or other narcotics)." As compared to this, the Constitutional sanction to the Enactment under challenge is Item (i) of Entry No, 43 which is to this effect: "(i) Taxes and duties on the production capacity of any plant, machinery, undertaking, establishment or insallation in lieu of the taxes and duties specified in items (b) and (f) of this entry, or in lieu of any one or more of them."
153. The question now is whether the Central Legislature actually performed its essential legislative function by the introduction of subsection (4) to section 3 of the Central Excise and Salt Act, 1944, which has been reproduced in extenso above.
154. Reference to the provisions contained therein makes it clear that the Central Board of Revenue was authorised, with the approval of the Central Government to levy and collect duties of excise on excisable goods on the basis of production capacity of plant, machinery, undertaking etc. in lieu of the levy and collection of the excise duty as prescribed by the Legislature under subsection (1) of section 3. What at once strikes the eye is the power to make the choice i,e, to levy and collect the excise duty on the basis of the production capacity of the plant etc. in lieu of the levy and collection of the duty as prescribed by the Legislature under subsection (1) which is handed over to the Central Board of Revenue. This power is however, available subject to the approval of the Central Government. But the contents of the power clearly is the authority to levy and collect the excise duty on the basis of production capacity of plant, machinery etc., in. lieu of at the rates prescribed on the excisable goods j, and when manufactured. In making the former choice, the Central Board of Revenue is to undergo, however, the requirements of notifying-- (a)the guiding principles for the determination of production capacity, (b)the production capacity, as determined in accordance with such guiding principles of the plant, machinery, undertaking, establishment or installation affected by it, (c)the duty or the rate of duty on production capacity, and (d)the manner of collection of such duty.
155. In the making of the law in respect of Item (i) read with Item (b) of the Entry 43, what was expected from the Central Legislature was to manifest its own Will' as to the levy and the collection of excise duty on the production capacity of any plant, machinery, undertaking or establishment or installation in lieu of the excise duty as was levied before the amendment under challenge, namely, under subsection (1) of section 3. It was for the Central Legislature to record its own judgment that the excise duty henceforth was not to be levied and collected in the manner prescribed under subsection (1), put on the basis of production capacity of plant, machinery, undertaking etc. In other words, the decision as to the levy and collection of excise duty in lieu of the levy and collection under subsection (1) was the Legislature function and was to be made by the Central Legislature itself. It is the requirement of the Constitution in Article 131 that the Central Legislature shall have exclusive power to make laws with respect to any matter enumerated in the Third Schedule. The making of the law in respect of item (i) of Entry 43 in lieu of the excise duty under item (b) i,e, the choice of the levy and collection of excise duty in the different manner than under subsection (1) of section 3, had thus to be made by the Central Legislature itself, and no one else. It is unquestionable, as stated earlier, that variation as to the levy and the collection of the taxes is an essential legislative function, as much as the levy and collection of the taxes in the first instance.
156. This power being an essential legislative function could not be delegated to any other agency howsoever trusted, howsoever efficient or appropriate it may be. I would have been inclined to agree, if the Central Legislature had really performed this essential legislative function, that the rest of the functions could perhaps be delegated to the Central Board of Revenue for the several reasons that have commended themselves to my brother Ghulam Safdar Shah, J. I, however, cannot reconcile myself with the argument that the levy and the collection of the excise duty on the basis of the production capacity of plant, machinery etc. in lieu of the levy and collection as previously prescribed by the Central Legislature under subsection (1) of section 3 could be delegated by the Central Legislature. In my opinion, the decision as to the collection of the excise duty in the mode permitted by the Constitution under Entry (i) in lieu of Entry (b) of Item No, 43 is an essential legislative function and had to be performed by the Central Legislature itself and could not be delegated to any other agency; There is no question that under section 3 (4) of the Central Excise and Salt Act, 1944 as it now reads, the decision to levy and collect the excise duty ," on the basis of capacity of plant, machinery etc. in lieu of what is prescribed under subsection (1) of section 3, lies with the Central Board of Revenue. Even after that decision is taken, the Central Board of Revenue has been given the power to reverse it, and after its reversal, it can take again the same decision. There is no check on the Central Board of Revenue to make these decisions any number of times, and reverse these equal number of times, and even levying the excise duty at different rates and determining the production capacity of the same machinery differently every time. Are these powers, to bring about the change or the variation in the rates of the taxes and the collection thereof, not legislative functions ? The answer in my opinion must be in the affirmative.
157. I am not unconscious of the cases where delegation of powers to levy and collect taxes is held permissible but these mostly relate to the levies that are incidental to the objects or the functions of the local governmental agencies, Municipal Corporations, or the Statutory bodies set up under the Statute. The General doctrine prohibiting the delegation of legislative powers has no application to the vesting of such powers in political sub-divisions created for the purpose of local self-Government. In this connection I may quote a passage from page 651, Corpus Juris Secundum, Volume 16 : "The Legislature may delegate to local Governmental bodies authority to pass Regulations with respect to streets or highways, levies, drains, and sewers, and may, within constitutional limits, delegate the power to levy taxes for local purposes."
158. It is within the constitutional powers of the Legislature in many jurisdictions to authorise the power of taxation for local purposes to be exercised by local authorities. Except to the extent authorised by constitutional provisions, however, the Legislature may not delegate its powers to levy and collect taxes. The Legislature cannot delegate to a body having no governmental function the authority to determine the amount to be raised by taxation.
159. The next contention that in my opinion must also prevail is that no compliance was made in the field of law in the matter of the determination of the production capacity of the plant machinery etc. of the petitioners, even if it be assumed that the piece of legislation under challenge is valid. In this connection reference to section 3(4) of the Central Excises of Salt Act, 1944 would clearly show that in the making of the notice to the levy and the collection of the excise duty on the basis of the production capacity of plant or machinery etc. the Central Board of Revenue is required to issue notifications in the official Gazette specifying the details in (a) to (d) of this subsection. What was done instead has already been stated, namely, the initial role played by the Central Government by the issue of the notification dated the 12th of August 1967. In this notification the Central Government direct-ed that the "Textile Industry Capacity Committee". "will determine the production capacity of individual cotton textile factories for the levy of duty on the production capacity of such factories".
160. It is further noteworthy to point out here that it is categoritally stated in the published report produced before us that the task of determining the production capacity of the cotton textile mills in Pakistan was actually undertaken by this Committee. It was the Central Government that constituted this Committee, the Chairman appointed was even authorised to appoint "such persons as he may consider necessary to assist in its work". What was required to be done by the Central Board of Revenue under the Statute was actually performed in some measure by the Central Government and the rest by the Chairman and three - Members that constituted the "Textile Industry Capacity Committee", and the persons appointed by Chairman. At best what can be said about this action is that it was under the authority of the Central Government which is competent to generally take an executive action in respect of any Departmental activity.
161. What is rather astonishing to find is that although by the executive action, the Committee was set up on the 12th of August 1967, yet it actually started functioning as from the 1st of August 1967. This is clear from the report of the Committee itself under Chapter II at page 2.
162. It reads : "The Committee started functioning with two Members and a Chairman from the 1st August 1967.
163. The third Member joined after a few days. . . . with the appointment of a Secretary who arrived in Karachi on 9th August 1967, immediate steps were taken to establish an office of the Committee in Block Nos, 91 and 92. An inaugural sessions was held on the 2nd August 1967 at Karachi. To start with, seven working groups were formed on the 2nd August 1967. More Accountants and Textile Technicians joined late in August. The weekly progress of formation of the groups was as under:-- Date Number of Groups available 9-8-1967 7 16-8-1967 8 23-8-1967 11 30-8-1967 13"
164. Nothing done by this Committee can be said to have any basis in or reference to section 3(4) of the Central Excises and Salt Act, 1944. Yet the admitted position is that the determination of the production capacity of the mills of the petitioners was made by this Committee.
165. Not only this is the admitted position of the respondents, it is further clear that the petitioners were not even heard by the Central Board of Revenue before the determination of the production capacity of their mills was made by it. In this connection I may only reproduce an extract from the counter-affidavit filed in this Court by Muhammad Saleem, Secretary of the Central Board of Revenue.
166. This is what he had affirmed :- "The duty in the light of the guiding principles and taking various factors including the point of views of the manufacturers as given to the working groups, calculated the production capacity on each unit, applying the 5 guiding principles and sumbitted its report to the Central Board of Revenue as required by the Legislation. The Central Board of Revenue again checked and scrutinized these recommendations of the said Committee and keeping in mind the guiding principles fixed the production capacity of each unit. The same was notified on 22-4-1968 as a Schedule to the Rules."
167. The issue of these Rules was the first action purportedly done under the Statute. What is obvious from the above is that the Officers appointed by the Central Government actually did the function solely to be performed by the Central Board of Revenue under the Statute, according to the will and command of the Legislature, and later on the Central Board of Revenue merely adopted the action of these Officials as its own action. Legal cloak given to an action outside the law or an unauthorised action given a garb of law has never been recognized by the Courts. These cases display such an action and in my opinion the Central Board of Revenue not having performed the duty cast upon it by the Statute and having only adopted an action outside the law cannot be said to have taken the action in the lawful exercise of powers granted to it.
168. Yet another reason why such an action cannot be upheld is that the Central Board of Revenue did at one and the same time all that section 3(4) of Act clearly contemplates to be done in stages.
169. The production capacity of the plant, machinery etc. had to be determined in accordance with the guiding principles to be notified by the Central Board of Revenue. It is therefore, imperative in these provisions of law themselves that the guiding principles ought to have been notified before the production capacity of the plant, machinery is determined thereunder. The tax-payer cannot be said to be a stranger while the production capacity of his plant or machinery on the basis of the guiding principles is determined. The guiding principles on the basis of which the production capacity of his plant or machinery are to be made known to him, the Act itself makes it compulsory by providing for notifying of these, and before the determination if the production capacity takes place, he must have a say in aspect of the application of these guiding principles. Nothing this kind took place and in these circumstances I see no escape from the conclusion that the determination of the production capacity of the plant or machinery of the petitioners was made in the manner not warranted by the relevant provisions of the Statute.
170. I need not say further because in my opinion all these reasons re sufficient to declare that the acts of the respondents in mposing, levying and collecting duties on the basis of production capacity fixed under the rules are without lawful authority and of legal effect.
171. It was sought to be argued that by the fact that the decisions were ultimately made by the Review Board, and in these proceedings, the petitioners were heard, any illegality that took place earlier was regularized. It is difficult for me to accept this argument. In my opinion the actions of the Departed it before the cases came to be decided by the Review Board were totally illegal and in violation of law, and all these patent illegalities could not be cured just because the petitioners had to seek a emedy provided by law before approaching this Court in its Constitutional Jurisdiction.
172. All these petitions must therefore, succeed.
173. Before parting with this judgment, I must record a note of appreciation as to the brilliant arguments that were addressed at the Bar in these cases, particularly by Messrs A. K. Brohi, A. S. Pirzada, Manzar-i-Alam, Advocate for the petitioners, and Mr. S. J. Alam, the learned Attorney-General of Pakistan who appeared for the respondents. Syed Sharifuddin Pirzada, the learned Attorney- General of Pakistan appeared at our request as amicus curie, and in his usual able manner gave a very valuable assistance by placing up-to-date case-law on all the Constitutional questions that were raised.
174. NOORUL ARFIN, J.--These cases have come to me upon a difference of opinion between my learned brothers, Abdul Kaddir Shaikh and Ghulam Safdar Shah, IL The facts are very elaborately set out in the judgment of Mr. Justice Ghulam Safdar hah. However, to explain my point of view, I consider it necessary briefly review these facts. The challenge in the petitions is to the imposition of production capacity tax on the textile factories by the Central Board of Revenue under section 3(4) of the Central Excises and Salt Act (I of 1944) (hereinafter referred to as the Act). Section 3 of the Act, as it stood before amendments thereto, provided for levy and collection of excise duties on excisable goods in such manner as may be prescribed, and at the rates set forth in the First Schedule to the Act. These rates were from time to time altered under the Finance Acts and Finance Ordinances according to the necessities of the Central Government. In 1961, a new subsection (4) was added to section 3 of the Act by the Finance Ordinance (XXII of 1961), which provided that the Central Government may, in lieu of levying and collecting duties of excise on excisable goods under section 3, levy and collect, in such manner and at such rates as may be prescribed, duties of excise on the plant and machinery, or a part thereof, manufacturing or producing excisable goods. In 1965, the Finance Act (V of 1965) amended subsection (4) by adding thereto the words "productive capacity of the" after the words "on the". However, nothing turns on these amendments as far as the present enquiry is concerned. In 1966, the Constitution (6th)
175. Amendment Act of 1966 was passed which amended Entry No, 43 of the Third Schedule to the Constitution of 1962, by addition of item (i) thereto, by which the Central Legislature was given power to make laws providing for imposition of taxes and duties on the production capacity of any plant, machinery, undertaking, establishment or installation in lieu of the duties specified in Items (b), (c) and ( f) of Entry No,
43. Consequent upon this constitutional amendment, the Central Legislature, by Finance Act (XI of 1966), amended subsection (4) of section 3 and added new subsections (5), (6) and (7) to this section. These amendments are as follows :- "(4) With the prior approval of the Central Government, the Central Board of Revenue may, in lieu of levying and collecting under subsection (1) duties of excise on excisable goods, by notification in the official Gazette, levy and collect duties on the production capacity of plants, machinery, undertakings, establishments or installations producing or manufacturing such goods; and such notification shall specify -- (a)the guiding principles for the determination of production capacity, (b)the production capacity, as determine in accordance with such guiding principles, of the plants, machinery, undertakings, establishments or installations affected by it, (c)the duty or the rate of duty on production capacity, and (d)the manner of collection of such duty.
(5) The production capacity of any plant or machinery or part thereof specified in a notification under subsection (4) shall, upon an application made to the Central Government within thirty days of the notification by any aggrieved person, be reviewed by a Review Board constituted under subsection (6) to which the application shall be referred; and the decision of the Review Board shall be final.
(6) The Central Government shall, for the purpose of subsection (5), constitute a Review Board consisting of the following; (a)the Secretary to the Government of Pakistan, Ministry of Finance, who shall be the Chairman.
176. (b)the Secretary to the Government of Pakistan, Ministry of Commerce, and (c)the Secretary to the Government of Pakistan, Ministry of Industries.
(7) The Central Board of Revenue may, by notification in the official Gazatte, at any time, cancel a notification under subsection (4); and where a notification is so cancelled or, for any reason whatsoever, cannot be given effect to, the duty under subsection (1), in lieu whereof the duty under subsection (4) was levied by such notification, shall be levied and, with necessary adjustment, collected for the financial year during which such notification is cancelled or for the period for which it cannot be given effect to."
177. It may be added here that the Finance Ordinance (XI of 1970) made further amendments in section 3 of the Act, but it was agreed that except, perhaps, with regard to the new remedy by way of revision, these new amendments were not relevant to the present enquiry.
2. Upon the coming into effect of these amendments, the Central Government, on the recommendation of and in consultation with, the Central Board of Revenue, appointed a Committee, which came to be known as the Awan Committee, with Mr. S. B. Awan, Joint Secretary of the Government of Pakistan, as Chairman, and representatives of various departments concerned with the levy of production capacity tax as members. This was done by Notification No, 5/16-CX (R & L)/67, published in the Gazette of Pakistan, Extraordinary, dated 12-8-1967. The notification further provided that duty on the production capacity of a cotton textile factory as determined by the Awan Committee will be levied under section 3(4) of the Act, but that notified capacity of each individual factory shall be subject to review, on application by the manufacturer, by the Review Board constituted under subsection (6) of section 3 of the Act. The same notification laid down the guiding principles to be followed by the Committee for the determination of the production icapacity. In this connection, paragraphs 4 to 9 of the notification are relevant and these read as under: "(4) The guiding principles, to be notified under subsection (4) of section 3 of the Act, on the basis of which the Committee should determine the production capacity of individual cotton textile factories, are as follows :-- (i)The national average annual production of each statutory category of cotton fabric/cotton yarn on a per loom/spindle basis taking production of the past three years into account.
178. (ii)Categorywise annual production of the individual units for the past three years or such lesser period as may be available.
179. (iii)Categorywise annual production of comparable units for the same period.
180. (iv)Production capacity of an individual unit calculated on the basis of the technically possible maximum production potential of the plant and machinery installed in the unit, if it were to aim at maximising its profits before tax.
181. (v)Growth factor, keeping in view the past rate of improvement in production and likely increase in efficiency relating to improvement in technical, managerial, labour and financial factors of individual mills.
182. (5)The annual production capacity of individual factories shall be expressed for each statutory category of cotton fabrics in terms of square yards, and for each category of cotton yarn in terms of pounds.
183. (6)For the purpose of determining the liability to duty of a factory, the production capacity of the factory for each excise category of fabrics/yarn, determined on the basis of the above principles, will be multiplied by the statutory rate of excise duty for that category.
184. (7)The Committee should determine the number of working days/shifts on the basis of which the annual production capacity of cotton textile factories should be determined. The Committee will also recommend the basis on which abatement in the annual production capacity may be allowed on account of the closure of the factory for reasons beyond its control within the number of working days/shifts reckoned for fixing the annual production capacity of individual factories.
185. (8)The Committee should also recommend the procedure for the grant of refund in respect of various categories of cotton fabrics and cotton-yarn which are exported.
186. (9)The Committee shall submit its recommendations to the Central Board of Revenue of Ministry of Finance by a date not later than the 15th November 1967."
187. The Committee collected the necessary data on the basis whereof production capacity of each factory was calculated. The Committee submitted its report to the Central Board of Revenue, which then scrutinized the case of each factory in the light of the guiding principles and the data furnished by the Awan Committee and then made orders determining the production capacity of each factory. The capacities so determined were incorporated in the Excise Duty on Production Capacity (Cotton Fabric) Rules and the Excise Duty on Production Capacity (Cotton Yarn) Rules of 1968, published in the Gazette of Pakistan, Extraordinary dated 22-4-1968. The aggrieved parties, including the present petitioners, filed review applications before the Review Board under section 3(5) of the Act. The Government's case is that each petitioner was duly heard with the assistance of petitioners' legal practitioners and textile experts, and that in some cases the Board in fact reviewed the production capacity on the basis of the material placed before it by the affected parties. Upon the conclusion of the proceedings by the Review Board, the textile manufacturers, including the petitioners, were given notices for payment of the production capacity tax as determined by the Central Board of Revenue, and confirmed or revised by the Review Board, by specified dates. As many as 22 petitions were filed in this Court under Article 98 of the Constitution of 1962 to challenge the validity of the amendments in the Act brought about by the Finance Act of 1966, and the orders of the Central Government and the Central Board of Revenue with regard to the imposition of the production capacity tax. However, full lengthy arguments were heard only in two cases, namely, Petition No, 538 of 1969 Zaibtun Textile Mills Ltd. v. Central Board of Revenue and others and Petition No, 660 of 1969, Ismail Textile .dills Ltd. v. Central Board of Revenue and others.
188. But since constitutionality of the impugned amend-ments was in question, the petitioners in other cases were also heard through their counsel on various questions of law common to all cases.
189. However, this judgment will decide only two petitions mentioned above. The remaining petitions will have to be heard and decided by a Division Bench of this Court.
3. My learned brothers did not frame the questions on which they disagreed. However, from a reading of their learned judgments and from the arguments of counsel before me, the following questions arise for my opinion, on which questions there appears dissent between my learned brothers: (1)Whether the Central Legislature by enacting the aforesaid amendments, in section 3 of the Act,by Finance Act,1966, effaced itself or abdicated from its legislative functions or whether this legislation suffers from the defect of impermissible and excessive delegation of legislative powers ?
190. (2)Whether this legislation conferred uncontrolled discretion on the Central Board of Revenue, so that the legislation should not be treated as law on any of the subjects within the legislative sphere of the Central Legislature ?
191. (3)Whether the provisions for levy of excise duties according to production capacity by the Central Board of Revenue suffer from such uncontrolled power given to the Board that the legislation in question should be held to be void as containing no safeguards for the persons affected by such tax ?
192. (4)Whether the functions entrusted to the Central Board of Revenue under the said legislation were not discharged by the Board, but instead were performed by the aforesaid Awan Committee or by the Central Government, thereby resulting in violation of the amended provisions of section 3 of the Act ?
193. (5)Whether there was violation of the rules of natural justice in the Central Board of Revenue notifying the guiding principles and the determination of production capacities of each cotton textile factory and the duty payable by it simul-taneously and at one and the sin time, without hearing the parties affected thereby, and whether it was necessary for the Central Board of Revenue to give such hearing before taking any such action and, whether the parties affected by the Central Board's notification were not given any hearing at all ?
194. Mr. Justice Ghulam Safdar Shah answered these questions against the petitioners whereas Mr. Justice Abdul Kadir Shaikh took a contrary view on these questions and held that the petitions should be allowed. The learned counsel appearing in these cases addressed before me very elaborate and lengthy arguments on these questions which continued for as many as eighteen days. The questions were discussed with reference to the provisions of the Constitution of 1962 and the Constitutions which preceded it, and with reference to the development of the law relating to delegated legislation in various jurisdictions, such as under the British constitutional system, and in the United States, Australia and India and also with reference to the law laid down by the Federal Court of Pakistan and Supreme Court of Pakistan in various decisions on this subject from time to time. It has, therefore, become necessary to refer to the decisions from these foreign jurisdictions which were cited at the Bar, though I am conscious that in doing so this judgment will become unduly lengthy. On behalf of the petitioners, the arguments were opened before me by Mr. A. K.
195. Brohi, and his arguments were developed further by Mr. Khalid Anwar who, in the course of his arguments, made extensive references to various decisions, which will be discussed by me in the course of this judgment. Mr. Brohi first made out a distinction between the duty imposed under the unamended Act and the duty proposed to be imposed under the amendments introduced to this Act by the Finance Act, 1966. According to him, under the unamended Act, excise duty was charged on the actual production as against on the capacity for production of a plant and machinery. The amendments introduced in the Act in 1966, by making provisions for imposition of tax on production capacity of a plant and machinery, introduced a fundamental alteration in the nature of the tax. In doing so, the Legislature, according to Mr. A. K. Brohi, had abdicated from its essential legislative functions in that: (i) the amendment in section 3 of the Act conferred unfettered discretion on the Central Board of Revenue to introduce a new mode of charging duty, or a new duty altogether, on manufacturers, (ii) the Finance Act, 1966, by which section 3 of the Act was amended, did not contain any standards or guiding principles for imposition of the new duty, but left the standards and guiding principles to be determined by the Central Board of Revenue; and
(iii) these amendments empowered the Central Board of Revenue to formulate standards and guiding principles and impose production capacity tax without giving any hearing to the effected parties. This, according to the learned counsel, was delegation of essential legislative functions, which was totally impermissible under the Constitution of 1962, and this delegation was of such nature as to amount to effacement of the Legislature or abdication by the Legislature from its essential legislative functions. The other learned Advocates for the petitioners attacked the imposition of the production capacity tax on different grounds. According to Mr. Mohammad Akram, this tax was repugnant to the financial and budgetory provisions of the Constitution of 1962, particularly Article 237. Mr. Abdus Sattar Pirzada added to Mr. A. K. Brohi's arguments by stating that the amendments introduced in the Act by the Finance Act, 1966, and the notifications and rules dated 22-4-1968 imposing the capacity tax, were bad, in that these amendments left the selection of either of two duties, namely, imposition of duty on actual production, or imposition of duty according to the production capacity of the factory, to the uncontrolled discretion of the Central Board of Revenue without containing any guidance as to the circumstances under which either of the two duties should be levied. Mr. Khalid M. Ishaque, on his part, contended, firstly, that there was violation of Article 48 of the Constitution of 1962, in that the determination of imposition of tax according to the production capacity was left to be decided by notifications or rules and, secondly, the impugned tax was imposed without hearing the affected parties and thereby there was violation of rules of natural justice. Mr. Z. H. Lari took the view that sections 37 and 38 of the Act could not be invoked at all, and therefore, it was impermissible for the Central Board of Revenue to frame any rules which would have the force of a statute under these sections, as, according to the amendments introduced in the Act by the Finance Act of 1965, the principles for the imposition of the new tax were provided to be laid down in a notification and not in the rules. Mr. Sharifuddin Pirzada, the Attorney-General of Pakistan, traced the history of the development of the rule against delegated legislation from Montesquieu's theory of separation of powers and the common law rule of agency that delegate cannot further delegate the powers conferred on him. He referred to the various decisions of the Supreme Court of the United States to show that this doctrine, which at one time held firmed ground in that country, has practically been given up due to the requirements of the modern social and economic complexities. He further referred to the decisions of the Privy Council, the High Court of Australia, the Supreme Court of India and of our own Supreme Court, to show that under our constitutional system the division of Government powers has not proceeded on the theory of separation of powers nor have our Legislatures ever been treated as delegates and that, consequently, the legislative entries conferred plenary and ample powers on our Legislatures within the assigned spheres. Mr. Shah Jamil Alam, the Deputy Attorney-General, produced the Government's file showing that it was not correct to say that the functions of the Central Board of Revenue under the amended provisions of the Act were in fact performed by the Awan Committee or the Central Government.
4. The overall question which arises in this case is whether there is impermissible delegation of legislative functions by the Legislature when it delegated to the Central Board of Revenue the function to impose tax according to the production capacity of an industrial unit, and whether the Legislature, in doing so, effaced itself or abdicated from its essential legislative functions. The rule against delegation of legislative power gained much prominance in the constitutional system of the United States. There, this rule has come to rest on three principles: (i)theory of separation of powers; (ii)the common law rule of agency, "delegata protestas non potest delegari", (that delegate may not further delegate the powers conferred on him); and (iii)due process of law.
196. The theory of separation of Governmental powers, though pronounced by John Locke in his writings on Government emanates mainly from Montesquieu's great work, "L' Espirit Des Lois", which he wrote after a study of the working of the English Governmental system in the eighteenth century.
197. It is recognized now that there is no such sharing out of Governmental, powers, nor has it been ever so, in the English constitutional system, and that what actually misled Montesquieu was the fact that the machinery of Government in England consisted of officials and bodies possessing a large measure of autonomy. Still, Montesquieu's theory was raised to the rank of a new and universal constitutional principle to which, it was believed, the English people owed their liberty, so much so that the founders of the American Constitution applied the theory to the American Constitution by distributing the Governmental powers between the Legislature, the Executive and the Judiciary. In particular, Madison and John Adams were greatly influenced by this doctrine which they fervently propagated in "The Federalist", so much so that it came to be accepted generally that the American Constitution incorporates within itself the theory of separation of Governmental powers.
198. Thus Webster stated that-- "The separation of the departments (of Government) as far as practicable, and the preservation of clear lines between them is the fundamental idea in the creation of all of our constitutions, and doubtless the continuance of regulated liberty depends on maintaining these boundaries."
199. Willoughby, in his work on the Constitutional Law of the United States (1929 Edition, Volume III, page 1616) states that:-- "a Fundamental Principles of American constitutional j irisprudence, accepted alike in the public law of the Federal Government and of the States, is that, so far as the require-ments of efficient administration will permit, the exercise of the executive, legislative, and judicial powers are to be vested in separate and independent organs of Government."
5. The role of "due process of law" in delegated legislation under our Constitutional system will be referred to by me in the course of this discussion, but I should make mention here of the other foundation on which the rule against delegation of legislative powers is frequently sought to be based in the American system and other constitutional systems which have followed the English or American models. This is the rule of the law of agency that delegate may not further delegate the powers conferred on him. Cooley in his "Constitutional Limitations' (Eighth Edition p. 224) states this doctrine as follows :- "One of the settled maxims in constitutional law is that the power conferred upon the Legislature to make laws cannot be delegated by the department to any other body or authority. Where the sovereign power of the State has located the authority, there it must remain, and by that constitutional agency alone the law must be made until the Constitution itself is changed. The power to whose judgment, wisdom and patriotism this high prerogative has been entrusted cannot relieve itself of the responsibility by choosing other agencies upon which the power shall be devolved, nor can it substitute the judgment, wisdom and patriotism of any other body for those to which alone the people have seen fit to confide this sovereign trust."
6. Though the rule against delegation of legislative power was asserted by the United States Supreme Court as recently as 1952 in Youngstown Sheet & Tube Co. v. Sawyer , in which it was declared that the founders of the nation entrusted the lawmaking powers to the Congress alone in both good and bad times, set the practical necessities of efficient Government prevented complete application of the theory of the separation of powers and of the rule that delegate may not further delegate the powers conferred on him. In the United States from the beginning it has been found necessary to vest in each of the three departments of the Government certain powers, which in their essential nature, have not belonged to it. Thus, Marshall, C. J., who strongly asserted himself in favour of the non-delegation theory came to modify his opinion in 1825, when faced with the question whether the U. S. Supreme Court could frame its rules of procedure under powers delegated to it in this behalf. This he did in Wayman v. Southard , in this way :- "It will not be contended that Congress can delegate to the Courts, or to any other tribunal powers which are strictly and exclusively legislative. But Congress may certainly delegate to others, powers which the Legislature may rightfully exercise itself.....
200. The line has not been exactly drawn which separates those important subjects, which must be entirely regulated by the Legislature itself, from those of less interest, in which a general provision may be made, and power given to those who are to act under such general provisions to fill up the details."
201. Another idea which gained favour with the American constitutional lawyers came from the judgment in Cincinnati, W. & Z. Co. v. Commissioner , in which it was stated that: "The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law."
202. Willoughby (Constitutional Law of the United States; 1929 Ed., Vol. III, p. 1619) states that-- "It is not a correct statement of the principle of the separation of powers to say that it prohibits absolutely the performance by one department of acts which, by their essential nature, belong to another. Rather, the correct statement is that a department may constitutionally exercise any power, whatever its essential nature, which, has by the Constitution, been delegated to it, but that it may not exercise powers not so constitutionally granted, which, from their essential nature, do not fall within its division of Governmental functions unless such powers are properly incidental to the performance by it of its own appropriate functions."
7. Notwithstanding repeated declarations by the Courts in the United States that the law making power vests in the Congress alone, the administrative agencies have become more and more a law-making authority, both qualitatively and quantitatively, so much so that the volume of delegate) legislation in the United States is now comparable to legislation by the Congress. Modern economic conditions have required the State to play a more positive role towards becoming a welfare State, for which purpose the Legislature has been found to be an inappropriate organ of Government, so that it has had to delegate its functions in ever-increasingly wide field to administrative agencies. This growing delegation of rule-making power is sometimes not treated as delegation of legislative functions at all, and the constitutional jurists, who still adhere to the33 34 35 theory of separation of powers and the doctrine that a delegate may not further delegate powers conferred on it, seek to soften the impact of delegation of legislative powers by such legal terms as "quasi-legislative" functions. According to willing (The Parliamentary Powers of English Government Departments, 1933 ed.), the Courts were thus "able to grant the fact of delegated legislation and still to deny the same." This attitude has been well put by Professor Cushman in the following syllogism :- "Major premise.--Legislative power cannot be constitutionally delegated by Congress.
203. Minor premise.--It is essential that certain powers be delegated to administrative officers and regulatory commissions.
204. Conclusion.--Therefore the powers thus delegated are not legislative powers."
205. Thus, that powers delegated are sometimes treated as "administrative powers" (as in United States v. Grimaud , and sometimes as "quasi-legislative" powers (as in Hunphrey's Executor v.
206. United States ).
8. It will be useful to refer to some cases decided by the United States Supreme Court, which were cited at the bar, in which the question of delegation of legislative power has come up for discussion. I have already referred above to the decision of Chief Justice Marshal in Wayman v.
207. Southard. In another case, Field v. Clarke , the Court, though reiterating that Congress cannot delegate legislative powers still upheld the grant of power to the President, to charge duty on imports.
208. In a case decided as recently as 1932, United States v. Shreveport Grain Elevator & Co. , the Court, stating that the legislative power of Congress cannot be delegated, still attempted to justify delegation of legislative powers by drawing a distinction between the legislative powers as such, and subsidiary powers to fill up the details, or to find facts to carry out the policies declared by the Legislature. The Court thus said: - "the Congress may declare its will and after fixing a primary standard devolve upon administrative officers the power to fill up the details by prescribing administrative rules and regulations."
209. In United States v. Chicago M. St. P. & P. R. Co. , the delegation of legislative powers was made to rest on the premise that Congress cannot delegate any part of its powers except under the limitation of a prescribed standard. But the sufficiency of the standards has very often been quite flexible. Accordingly, "just and reasonable", "public interest", "unreasonable obstruction to navigation", "reciprocal", "unequal and unreasonable", "public convenience", "interest of necessity", "commodity of inferior quality", "unfair methods of competition", "reasonable variation", "unduly or unnecessarily complicating the structure of a holiday company system", or "unfairly and inequitably distributing the powers amongst the security holders", have been held to be adequate standards, notwithstanding the admittedly vague nature of several of these expressions. For the cases in which these standards have been accepted reference may be made to "Administrative Law Treatise" of Kenneth Culp Davis (1958 edition, section 2.03, page 81). In United States v. Rock Royal Cooperative Inc. , the Agricultural Marketing Agreement Act authorised the Secretary of Agriculture to establish prices of agricultural commodities by reference to several factors including "other economic conditions", which expression, however, was left unspecified. Further, the selection of the commodities to be regulated by the Secretary, the areas in which the commodities could be regulated and the period of regulation were left to the judgment of the Secretary. The Court held that it was not beyond the powers of Congress to leave all these determinations to a designated administrator with the standards named in the enactment and, further, that -- "for the purpose of determining whether legislation involving questions of economic adjustment involves an invalid delegation of legislative power, each enactment must be considered to determine whether it states the purpose which the Legislature sought to accomplish and the standards by which that purpose is to be worked out with sufficient exactness to enable those36 37 38 39 40 41 charged with the enforcement of the law to understand these limits.
210. In Sunshine Anthracite Coal Company v. Adkins , under the provisions of section 4 of Bituminous Coal Act, 1937 the administrative agency was empowered to fix maximum prices when in public interest it deemed it necessary or in order to protect the consumer against unreasonable high prices. The Court held that there was no invalid delegation of legislative power, and in saying so observed :- "Delegation by Congress has long been recognised as necessary in order that the exertion of legislative power does not become a futility the effectiveness of both the legislative and administrative process would become endangered if Congress were under Constitutional compulsion of filling in the details beyond the liberal prescription here. Then the burdens of minutes would be apt to clog the administration of the law and deprive the agency of that flexibility and dispatch which are its salient virtues. For these reasons we hold that the standards with which Congress has supplied the Commission are plainly valid."
211. In National Broadcasting Company v. United States the validity of the Federal Communication Commission Regulations was challenged. The Act had conferred upon the Commission powers to licence broadcasting stations and the criterion laid down was "public interest", "convenience" or "necessity". The Supreme Court held that the standard was as complete as the complicated factors for judgment in such a field as radio transmission permitted and that the generality of the grant of power was justified as the grant was limited by the purpose of the Act, the requirements it imposes, and its c ontext. In Yakus v. United States , the Emergency Price Control Act of 1942 sought to stabilize prices, to eliminate profiteering, to ensure that the defined appropriations are not dissipated by excessive prices, to protect persons with relatively fixed and limited incomes and to prevent a post emergency collapse of values. The Administrator was given power to fix prices which, in his judgment, were generally ' fair" and "equitable" and would effectuate the purpose of the Act. As Davis has stated in his Treatise (referred to above), this Act provided no direct answer to the question whether prices should be allowed to go up by 5 per cent. 20 per cent. and 100 per cent. nor did the Act answer such fundamental questions as to whether prices should be fixed below cost, whether profits on products should be eliminated or whether profits on whole industries should be eliminated or drastically reduced. Despite absence of any standards on these questions, the Court upheld the delegation, saying merely that Congress had stated the legislative object-- maximum price fixing--and had laid down standards to guide the administrative determination for the exercise of the price fixing power, and the particular price to be established. What was in some respects the greatest delegation of legislative power upheld by the U. S. Supreme Court was that of the Renegotiation Acts sustained in Lichter v. United States . The first Renegotiation Act, 1942, provided for renegotiation of war contracts entered into before as well as after the Act came into force. The adminis-trative officers were authorised under the Act to recover excessive profits.
212. The Act, however, did not define "excessive". A later Act passed in October 1942 defined the term "excessive profits" to mean any amount of a contract or sub-contract price which is found as a result of renegotiation to represent "excessive profits". In effect, this later Act merely said that "excessive" means "excessive". The Supreme Court held :
(1) a constitutional power implies a power of delegation of authority under it sufficient to effect its purposes ; (ii)the term 'excessive profits', in its context, was a sufficient expression of legislative policy and standard to render it constitutional ; (iii)legislative power is not un-constitutionally delegated by the provisions of the War Contracts Renegotiation Act for the renegotiation of war contracts on a basis which will not yield excessive profits, upon a finding by administrative agencies that profits under the original contract will be excessive, without prescribing standards by which profits may be determined to be excessive42 43 44 45 where renegotiation is to take place only when profits can be determined with reasonable certainty, and other portions of such legislation and the administrative practices developed under it, subsequently confirmed by a mandatory legislation, indicate that only a profit beyond what is reasonable is to be deemed excessive ; (iv)the degree to which Congress must specify its policies and standards in order that administrative authority granted by it may not be an unconstitutional delegation of its own legislative power, is not capable of precise definition ; (v)in order to avoid unconstitutional delegation of power it is not necessary that Congress supply administrative officials with a specific formula for their guidance in a field where flexibility and the adaptation of the congressional policy to infinitely variable conditions constitute the essence of the programme.
9. Another formula adopted by United States Supreme Court to sustain legislative delegation is whether the Act laid down intelligible principles even though no standards or definitions were found in the statute. One such case is Hampton v. United States . In this case the Tariff Act of 1922 empowered the President to determine, with the aid of advisers, differences in cost of production at home and abroad and making such variances in the rates of duty as were found necessary to equalize the cost of production. It was held that the Congress may not delegate its purely legislative power to a commission, but, having laid down the general rules of action under which a commission shall proceed, it may require of that commission the application of such rules to particular situations and the investigation of facts, with a view to making orders in a particular matter within the rules laid down by the Congress. If Congress shall lay down by legislative act an intelligible principle to which the person or body authorized to fix such rates is directed to conform, such legislative action is not a forbidden delegation of legislative power. Another case of this type is that of Mer. Power and Light Co. v. S. E. C. . In this case the Public Utility Holding Company Act, 1935, came up for review. The Act empowered the Securities and Exchange Commission to ensure that corporate structure or continued existence of any company in a particular holding company system did not "unduly or unnecessarily complicate the structure", or "unfairly or inequitably distribute voting power among security holders". These phrases were undefined by the Act. It was held that "these standards are certainly no less definite in nature than such terms as 'public interest', 'just and reasonable rates', 'unfair methods of competition', or 'relevant factors', and that the judicial approval accorded these 'broad' standards for administrative action is a reflection of necessities of modern legislation dealing with complex economic and social problems. The Court further observed that the legislative process would frequently bow down if Congress were constitutionally required to appraise before hand the myriad situations to which it wishes a particular policy to be applied and to formulate specific rules for each situation; necessity therefore fixes a point beyond which it is reasonably impracticable to compel Congress to prescribe detailed rules; it then becomes constitutionally sufficient if Congress clearly delineates the general policy, the public agency which is to apply it, and the boundaries of this delegated authority.
10. The United States Supreme Court has even upheld dele-gation in cases where the Legislature has failed to prescribe any intelligible principles of legislation at all. In such cases the Supreme Court has justified its decision by saying that "Congress legislated on the subject as far as was reasonable and practicable". In St. Louis and Southern Railway Co. v. Taylor , a statute provided that after a date named, only cars with drawbars of uniform height shall be used in interstate commerce and that the standard shall be fixed by the American Railway Association and declared by the Interstate Commerce Commission. No standard was prescribed in the statute itself. The Court rejected the contention of unlawful delegation and did not even make any attempt to find any intelligible principle in this statute. In mutual Film Corporation v. Industrial Commission of Ohio,46 47 48 the vagueness of the principles of legislation was acknowledged but its limits were restated in this way: "While administration and legislation are quite distinct powers, the line which separates their exercise is not easy to define in words. It is best recognized in illustration. Undoubtedly the Legislature must declare the policy of the law and fix the legal principles which are to control in given cases; but an administrative body may be invested with the power to ascertain the facts and conditions to which the policy and principles apply. If this could not be done there would be infinite confusion in the laws, and in an effort to detail and to particularize, they would miss "sufficiency both in provision and execution."
213. In McKinley v. U. S. , by an Act of Congress the Secretary of War was authorized-- "to do every thing by him deemed necessary to suppress and prevent the keeping or setting up of houses of 'ill fame within such distance as he may deem needful of any military camp ;; Violation of any rule promulgated by the Secretary was made a misdemeanour. The Court rejected the plea of unlawful delegation with the remarks that-- "Congress having adopted restriction; in the statute may leave details to the regulation of the head of an executive department."
214. In Fahey v. Mallonee , the Home Owners' Loan Act, 1933 gave to a board power to provide through rules and regulations for the liquidation of savings and loan associations and the appointment of conservators or receivers to take charge of the association. Congress had declared no policy with respect to liquidation or appointment of conservators. No criterion was at all established. The Court held that-- "It may be that explicit standards would have been a desirable assurance of responsible administration. The provisions are regulatory. They do not deal with unprecedented economic problems of varied industries. They deal with . problems of insecurity and mismanagement which are as old as banking enterprise . A discretion to make regulations to guide supervisory action in such matters may be constitutionally permissible while it might not be allowable to authorize creation of new crimes in unchartered fields."
215. In another case, United States of America Interstate Commerce Commission v. Atchison, T. & S. F. R.
216. Co. , a long-and-short haul clause of the Interstate Commerce Act was challenged as an invalid delegation. A proviso in the Act provided that upon application to the Interstate Commerce Commission, a common carrier may in special cases, after investigation, be authorized by the Commission to charge less for longer than for shorter distances for the transportation of passengers or property; and the Commission may from time to time prescribe the extent to which such designated carrier may be relieved from the operation of certain provisions of the Act. The policy of the Act was against charging more for short than for long hauls, but stated no standard or intelligible principle to guide the Commission in granting exceptions, not even public interest. The power granted to the Commission was so immense that whole communities could be made or destroyed, yet the delegation of such power was upheld by the Supreme Court. Another important case on the subject is that of American Trucking Association v. United States .
217. In this case, the Interstate Commerce Commission had issued a set of rules drastically changing motor carrier practices in the leasing of equipment. One change brought about by the rules was prohibition of leasing of equipment for less than thirty days, which resulted in completely prohibiting trip-leasing. These rules seriously affected the carriers of agricultural commodities, but the Court upheld the rules, even though the effect of the rules was to drive some operators out of business. The Court placed reliance upon the provision in the statute granting power to the Commission to administer, execute and enforce all provisions of this Act, to make all necessary orders in connection therewith, and to prescribe rules, regulations and procedure for such administration. In rejecting the argument that the rules were unauthorized the Court said:49 50 51 52 "We hold then that the promulgation of these rules for authorised carriers falls within the Commission's power, despite the absence of specific reference to leasing practices in the Act. The grant of general rule-making power necessary for enforcement compels this result."
218. It may be noted that the Court neither found nor attempted to find any standards, general policy or intelligible principles in the statute. Another important example of a statute without any guiding standards is given in the case of Arizona v. California . The problem in this case was the apportionment of water amongst South Western States and the question was what to do in time of shortage. The statute contained limits on the Secretary's power but no standards were provided to guide the exercise of power by the Secretary within those limits. The majority of the Court held that -- "While the Secretary must follow the standards (limits) set out in the Act, he nevertheless is free to choose among the recognized methods of apportionment or to devise reasonable methods of his own."
219. In effect what the Court held was that the Congress had prescribed no methods of apportionment but had left the Secretary entirely free to devise reasonable methods of his own. The Court upheld the power of the Secretary to choose or to create his own standards and guides or methods and said so in these words : "None of this is to say that in case of shortage, the Secretary cannot adopt a method of proration or that he may not lay stress upon priority of use, local laws and customs, or any other factors that might be helpful in reaching an informed judgment."
220. The extent of delegation to the Secretary of what were essentially legislative powers without guiding principles becomes clear from the dissenting opinion of Mr. Justice Harlan, who said : "But what of that wide area between these two outer limits ? Here, when we look for the standards defining the Secretary's authority, we find nothing in other words, Congress has made a gift to the Secretary of almost 1,500,000 acre-feet of water a year, to allocate virtually as he pleases in the event of any shortage preventing the fulfilment of all of his delivery commitments. The unrestrained power to determine the burden of shortage is the power to make a political decision of the highest order Whatever the Secretary decides to do, this Court will surely be unable effectively to review his actions, since it will not know what guides were intended by Congress to govern those actions."
221. It should be noted that the dissenting opinions in this case against delegation mainly rested on the consideration that the. Court would be unable to effectively review the Secretary's decision because of absence of standards. But the U. S. Supreme Court has been accepting various standards in various statutes which are hardly of any help in judicial review. In all such cases, however, the Court has read in the statutes the standards of reasonableness or the standard of due process, both substantive due process and procedural due process.
11. It will thus be seen that though the U. S. Supreme Court has often reiterated that legislative power may not be/ delegated, the ultimate decisions have sustained such delegations. In recent history only in two cases the non-delegation theory has been applied, both of which were decided in 1935.
222. The first case is commonly known as Panama case Panama Refining Co. v. Rayon . In this case the National Industrial Recovery Act, 1933 delegated to the President the power to prohibit shipment of "hot oil" (that is, oil produced in contravention of state laws) in interstate commerce. The Court found no standards or adequate statements of general policy, although such phrases as "to eliminate unfair competitive practices", and "to conserve natural resources" were used in the Act.
223. The delegation was held unconstitutional by the Court. But this decision seems explainable in terms of two factors -
(I) the other parts of the Act provided for "delegation running riot" ; and
(ii) the content of provisions of the Code to be promulgated under the Act, for violation of which provision producers were criminally liable, was not readily ascertainable.53 54 But it has been said about this decision that the case involved a narrow power with a somewhat vague but recognizable standard, and that the Act should have been upheld and probably would have been if the Court had not been eager to chastise the New Deal's failings. (See Jaffe, An Essay on Delegation of Legislative Power : 47 Co. L. Rev. 339, 561, 573). The other case is that of Schecter v.
224. U. S. . In this case section 3 of the National Industrial Recovery Act authorized the making of codes by the President for the government of trades and industries. No standards were provided except the statement of the general aim of rehabilitation, correction and development of trades and industries. The Act did not define "fair competition" for the protection of which the codes were to be made. It was held : "the Constitution has never been regarded as denying to Congress the necessary resources of flexibility . which will enable it to perform its function in laying down policies and establishing standards, while leaving to selected instrumentalities the making of subordinate rules within prescribed limits and the determination of facts to which the policy as declared by the Legislature is to apply. But the Congress is not permitted to abdicate or transfer to others the essential legislative function with which it is . . . vested."
225. This case is explainable because the delegation here included power to approve detailed codes to govern all business subject to federal authority, including fixing of prices for all trades and industries and for approval of comprehensive codes to cover all business practices. The Court held : "In view of the scope of . . . broad declaration, and of the nature of the few restrictions that are imposed the discretion of the President in approving or prescribing codes, and thus enacting laws for the Government of trade and industry throughout the country is virtually unfettered."
226. As Davis has said in his Administrative Law Treatise, page 101, the literal opinions in these cases do not embody the effective law, as shown by the fact that when a three-Judge District Court held delegation invalid, following the opinion of the Supreme Court in these two cases, on the ground that the impugned enactment did not contain a declaration of policy or standard of action relatable to the subject-matter of the legislations the Supreme Court reversed the decision of the lower Court (See Fahey v. Malone).
12. On the question of delegation of legislative power to impose rates and taxes, reference may be made to a decision of the Supreme Court of Minnesots in Minnesota Ex Rel. Railroad & Warehouse Commission v. Chicago, Milwaukee & St. Paul Railway Co. . The Court stated the principle as follows:-- "The power of taxation is legislative, but this does not require the Legislature itself to assess the value of each man's property, or determine his share of the tax. The exercise of the police power in requiring persons who follow certain occupations to obtain a licence is legislative; but nothing is more common than to delegate to certain officers or boards the power to ascertain and to determine whether persons have the proper qualifications as to learning, skill, or moral character, and to grant or refuse a licence according as they find the facts to be. The difference between the power to say what the law shall be, and the power to adopt rules and regulations, or to investigate and determine the facts, in order to carry into effect a law already passed, is apparent. The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and the conferring an authority or discretion to be exercised under and in pursuance of the law."Further on, the Court observed: "For a popular Legislature that meets only once in two years, and then only for 60 days, to attempt to fix rates, would result only in the most ill-advised and haphazard action, productive of the greatest inconveniences and injustice alike to the railways and the public. If such a power is to be exercised at all, it can only be satisfactorily done by a board or commission, constantly in session, whose time is exclusively given to the subject, and who, after investigation of the facts, can fix rates55 56 with reference to the peculiar circumstances of each road, and each particular kind of business, and who can change or modify these rates to suit the ever-varying conditions of traffic."
227. At another place, the Court stated thus: "Our Legislature has gone a step further than most others, and vested our commission with full power to determine what rates are equal and reasonable in each particular case. Whether this was wise or not is not for us to say; but in doing so we cannot see that they have transcended their constitutional authority. They have not delegated to the commission any authority or discretion as to what the law shall be which would not be allowable--but have merely conferred upon it an authority and discretion, to be exercised in the execution of the law, and under and in pursuance of it, which is entirely permissible. The Legislature itself has passed upon the expediency of the law, and what it shall be."
13. The decisions of the United States Supreme Courts with regard to the delegation of legislative powers and the theory of separation of powers have been succinctly summarised in American Jurisprudence (2nd), and Corpus Juris Secundum. Section 43 of 42 American Jurisprudence 336 states as follows:-- "In considering the true test as to whether a power is strictly legislative or whether it is administrative and merely relates to the execution of the law, the true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and the conferring of authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made. The inherent necessities of Governmental co-ordination must fix the extent and character of the assistance which the Legislature may seek from another branch of the Government. While the Legislature may not divest itself of its proper functions or delegate its general legislative authority, there are questions which are beyond determination by the Legislature and which must necessarily be left to the determination of executive or administrative agencies; and the Legislature may authorize others to do those things which it might properly, yet cannot understandingly or advantageously, do itself, Legislation must often be adapted to complex conditions involving a host of details with which the Legislature cannot deal directly, and where the Legislature legislates and indicates it will, it may delegate administrative authorities the power to fill up the details, within prescribed limits, by the determination of facts, or the enactment of rules, and regulations."
228. In section 49 on page 353, it is further stated that: "The Legislature, having declared its policy and purpose and provided standards for the exercise of the power, may confer upon administrative authorities the power to enact rules and regulations to promote the purpose and spirit of the legislation and carry it into effect, and, even though such rules and regulations are given the force and effect of law, there is no violation of the constitution inhibition against delegation of the legislative functions. The authority to make rules to carry out a policy declared by the law-maker is administrative and not legislative, even though the law-maker has provided that a violation of such rules shall be punished as a public offence. Such power is not the power to make law, but the power to carry into effect the will of the law-maker as expressed by the statute, and its use by administrative officers is essential to the complete exercise of the powers of all the departments. The binding effect of such administrative rules and regulation is derived from the sanction of the Legislature itself."
14. 73 Corpus Juris Secundum states the rule as under: "The power to declare whether or not there shall be a law; to determine the general purpose or policy to be achieved by the law; to fix the limits within which the law shall operate--is a power which is vested by our Constitution in the Legislature and may not be delegated. When, however, the Legislature has laid down these fundamentals of a law it may delegate to administrative agencies the authority to exercise such legislative power as is necessary to carry into effect the general legislative purpose; in the language of Chief Justice Marshall 'to fill up the details'; in the language of Chief Justice Taft 'to make public regulations interpreting the statute and directing the details of its execution'. "
229. 16 Corpus Juris Secundum 558-559 states the principles in the following words: "The constitution has never been regarded as denying to the Legislature the necessary resources of flexibility and practicability which will enable it to perform its functions in laying down policies and establishing standards, while leaving to selected instrument abilities the making of subordinate rules with prescribed limits and the determination of facts to which the policy as declared by the Legislature is to apply and the Legislature may make a law to determine some facts or state of things on which the law makes or intends to make its own action depend."
230. On page 562 it is further stated that:-- "With the growing complexity of modern life, the multiplications of the subjects of Governmental regulation and the increased difficulty of administering the laws, there is a constantly growing tendency towards the delegation of greater powers by the Legislature, and towards the approval of the practice by the Courts."
231. With regard to the requirement that the Legislature should lay down standards of action, 73 Corpus Juris Secundum, 328-329, states that:-- "The policy of the law and the standard of action to guide the administrative agency may be laid down in very broad and general terms, provided it is capable of reasonable application, and what is sufficiently definite declaration of policy and standard varies in some degree according to the complexity of the subject to which the law is applicable."
232. With regard to taxation it is stated in 51 American Jurisprudence 199 that-- "a statute which gives to the. administrative officers a discretionary power to employ a certain procedure for the assessm ent or collection of certain taxes which the Legislature has established is not objectionable."
233. On the same subject it is stated in 16 Corpus Juris Secundum 625-26 that-- "Legislature may fix a rule of taxation and leave to an administrative body to promulgate rules for its administration and effectuation and to determine the existence of facts on which its operation depends."
15. The decisions of the United States Supreme Courts reviewed above has led an American author, Bernard Shwartz (An Introduction to American Administrative Law (2nd Ed. p. 26) to state that despite the frequent categorical assertions to the contrary by the superior Courts in the United States, it can hardly be gainsaid that the administrative agency in the United States today is a law- making agency and that in recent years the American Legislature has been more and more delegating to the administration significant powers of legislation. According to the author, the administrative law-making powers in the U. S. A. have become fully comparable (both quantitatively and qualitatively speaking) to those exercised directly by the Legislature. Another American author, Kenneth Culp Davis states in "Administrative Law and Government" (1960 Ed. p.
234. 55) as follows:-- "Congress may and does lawfully delegate legislative power to administrative agencies. Lawyers who try to win cases by arguing that congressional delegations are unconstitutional almost invariably do more harm than good to their clients' interests. Unrealistic verbiage in some of the older judicial opinions should not now be taken seriously. The effective law is in accord with a 1940, statement of the Supreme Court: "Delegation by Congress has long been recognized as necessary in order that the exertion of Legislative power does not become a futility' (Sunshine Anthracite Opal Co. v. Adkins 310 US 381) ; "In only two cases in all American history have congressional delegations to public authorities been held invalid. Panama Refining Co. v. Ryan 293 U S 388, 55 S Ct. 241, 79 L Ed. 446, (1935); Schechter Poultry Corpn. v. United States, 295 U S 495, 55 S Ct. 837, 79 L Ed. 1470 (1935). Neither delegation was to a regularly constituted administrative agency which followed an established procedure designed to afford the customary safeguards to affected parties. The Panama's case was influenced by exceptional executive disorganization and in absence of such a special factor would not be followed today. The Schechter's case involved excessive delegation of the kind that Congress is not likely again to make .
235. "In absence of palpable abuse or true congressional abdi-cation, the non-delegation doctrine to which the Supreme Court has in the past often paid lip service is without practical force."
236. I should give here two quotations from Elihu Root and Holmes. Elihu Root has stated that "the old doctrine prohibiting the delegation of legislative power has virtually retired from the field and given up the fight." (See (1916) 41 ABAR 368). Holmes stated in Springer v. Government of Phillipine Island that "many of the consequences of the separation of powers are avoided in substance although acknowledged in form." On the same question the following remark of Freund (Administrative Powers Over Persons and Property) is also of interest : "The Court have never had any criterion of validity except that of reasonableness, the common refuge of thought and expression in the face of undeveloped or unascertainable standards."
237. Davis (Administrative Law Treatise 1958 Ed. page 68-69) has reached the following conclusion with regard to the law of delegation of legislative powers as it prevails in the United States today:-- "In the organic arrangements that we have been making in recent decades in the establishment and control of administrative agencies, the principle that has guided us is the principle of check, not the principle of separation powers. We have had little or no concern for avoiding a mixture of three or more kinds of powers in the same agency; we have had much concern for avoiding or minimizing unchecked power. The very identifying badge of the modern administrative agency has become the combination of judicial power (adjudication) with legislative power (rule-making). But we have taken pains to see that the agencies report to and draw their funds from our legislative bodies, that the personnel of the agencies are appointed and re-appointed by the executive, and that the residual power of check remains in the judiciary. As long as we continue to emphasize the principle of check, we 'may safely continue our increasingly deep-seated habit of allowing the blending of three or more kinds of power in the same agency."
16. 1 will now refer to some Indian cases, on which great reliance was placed by Mr. A. K. Brohi and Mr. Khalid Anwar. The post-independence Indian Constitution has to some extent borrowed American Constitutional theories. Accordingly, the question of excessive delegation of legislative power has come for discussion before the Indian Supreme Court in several cases. But before I review these cases, I should first refer to a case which was decided by the Federal Court of India under the Government of India Act, 1935. This case is Jatindra Nath Gupta v. Province of Bihar .
238. The majority of the Court held that the proviso to section 1 (3) of the Bihar Maintenance of Public Order Act, 1947, giving power to the Provincial Government to extend the Act for the period of one year and when doing so to modify the Act, were essentially legislative powers, as it is for the Legislature to state how long a particular legislation, and with what modifications or alterations, will be inoperation, which power cannot be left to the discretion of an external body. It may, however, be noted that this power of extension was exercisable by the Provincial Government only on a resolution passed by the two Chambers of the Legislature. Fazl Ali, J., took a different view, and held the impugned enactment, only in so far as it conferred power on the Government to extend the life of the Act, to be a piece of conditional legislation on the authority of the Privy Council decision in Rex v. Burrah . The first case of the Indian Supreme Court under the post-independence Constitution is that of Delhi Laws Act (AIR 1951 SC 332). The majority of the Court upheld the validity of the laws authorising the executive to apply to Delhi the existing or future laws of other57 58 59 jurisdiction with or without modification as its discretion. The Court was divided on the question whether authorbsation to apply existing or future laws of other jurisdictions with alterations and modifications amounts to delegation of legislative power. Chief Justice Kania and Mahajan, J. took the view adopted by the majority of the Indian Federal in fatindra Nath Gupta's case and held that the legislative functions cannot be delegated except powers of legislation of conditional or ancillary or of subsidiary or ministerial nature. Patanjli Sastri and Das, JJ., followed the Privy Council's decision in Burrah's case and held that short of self-abdication, legislative power can be delegated. Fazl Ali, J., held that though the primary legislative functions should be discharged by the Legislature, but it may utilise any outside agency for the full and effective exercise of its power.
239. Bose, J. adhered to the view of the Privy Council in Croft v. Dunphy and Burrah's case and observed as follows : "The concept of legislative power which has hitherto been accepted in India continued to hold good but that this limitation was placed upon it by the Constitution, namely, that wherever the Constitution empowers Parliament to do a particular thing as opposed to legislating generally on a particular topic, there can be no delegation. Parliament must itself act . . . . It has been held from the earliest times, even when viewed through purely British eyes, that a Legislature created by Parliament (1) cannot act beyond the ambit of its powers--the extent of which must be gathered from the document which brings it into being, (2) it cannot create a new Legislature for the purpose of legislating generally, and (3) it cannot abdicate. The same limitations exist in the case of the Indian Parliament because that, unlike the British Parliament, is not free to do as it likes, it is bound by the Constitution."
240. Mukherjea, J., on his part rested his opinion on the theories of "Separation of Powers", "Popular Will" and "Delegatus non-potest delegare" and "Legislative supremacy" and then observed as follows : " 'vast complexities of social and economic conditions of the modern age, and the ever growing amount of complicated social necessities, have made it practically impossible for the Legislature to provide rules of law which are complete in all their details. Delegation of some sort, therefore, has become indispensable for making the law more effective and adaptable to the varying needs of society. Thus in America one comes across numerous rules and regulations passed by non- legislative bodies in exercise of authority bestowed on them by the Legislature in some shape or other. In fact, the rule of non-delegation has so many exceptions engrafted upon it that it is difficult to decide whether the dogma or the exceptions state the rule correctly."
241. The learned Judge then proceeded to refer to the Government of India Acts, 1919 and 1935, and the Indian Constitution of 1950 and came to the conclusion that there had never been a rigid or institutional separation of powers in India in the form it exists in America. As regards the theory of "Delegatus non-potest delegare", the learned Judge held that its adoption in the Indian context was inappropriate as the Legislature, as it exists in India though creation of the Constitution, which defines its powers and lays down its duties, is not a mere delegate of the people, but has within the assigned limits, powers as plenary as those of the British Parliament, though he did not subscribe to the proposition that the Indian Legislature like the British Parliament could do through an agent anything which it could do itself, as he took the view that right of delegation is not an inseparable adjunct of the legislative power in the way it had been accepted in England. But the learned Judge agreed that there was no justification for the theory that under the Indian Constitution delegation of legislative power was not permissible at all. On this subject he stated his views as follows :- "A constitutional power may be held to imply a power of delegation of authority which is necessary to effect its purpose, and to this extent delegation of a power may be taken to be implicit in the exercise of that power Such authority can employ an outside agency or machinery for the purpose of enabling it to discharge its duties properly and effectively as a secondary or ancillary measure ; but it can on no account throw the responsibility which the Constitution imposes upon it60 on the shoulders of an agent or delegate and thereby practically abdicate its own powers."
242. But he found it difficult to demarcate "essential legislative function" from "permissible delegation" and, therefore, resorted to the principles laid down in the United States jurisdiction, particularly the following statement of the U. S. Supreme Court in A. L. A. Schechter Poultry Corporation V. U. S. "So long as a policy is laid down and a standard established by statute no constitutional delegation of legislative power is involved in leasing to selected instrumentalities the making of subordinate rules within prescribed limits and determination of facts to which the legislation is to apply.... "
243. Mukherjea, J., summarised his views as follows "essential legislative function consists in the determination or choosing of the legislative policy and formally enacting that policy into a binding rule of conduct. It is open to the Legislature to formulate the policy as broadly and with as little or as much details as it thinks proper and it may delegate the rest of this legislative work to a subordinate authority who will work out the details within the framework of that policy .The Court can interfere if no policy is discernible at all or the delegation is of such an indefinite character as to amount to abdication, but as the discretion rests with the Legislature in determining whether there is necessity for delegation or not, the exercise of such discretion is not to be disturbed by the Court except in clear cases of abuse."
244. On this test he held that the power to repeal modify or alter a statute is an essential legislative function, and as such incapable of being delegated. Fazl Ali, J.'s views in the same case may be summarised as follows :-- "(i) the Legislature must normally discharge its primary legislative function itself and not through others ; (ii) Once it is established that it has sovereign powers within a certain sphere, it must follow as a corollary that it is free to legislate within that sphere in any way which appears to it to be the best way to give effect to its intention and policy in making a particular law, and it may utilize any outside agency to any extent it finds necessary for doing things which it is unable to do itself or finds it convenient to do. In other words, it can do everything which is ancillary to and necessary for the full and, effective exercise of its power of legislation ;
(iii) It cannot abdicate its legislative functions, and therefore while entrusting power to an outside agency, it must see that such agency acts as a subordinate authority and does not become a parallel Legislature ;
(iv) the doctrine of separation of powers and the judicial interpretation it has received in America ever since the American Constitution was framed, enables the American Courts to check undue and excessive delegation but the Courts of this country are not committed to that doctrine and cannot apply it in the same way as it has been applied in America. Therefore, there are only two main checks in this country on the power of the Legislature to delegate, these being its good sense and the principle that it should not cross the line beyond which delegation amounts to "abdication and self-effacement." "Delegated legislation", using the expression in the popular sense, has become a present-day necessity, and it has come to stay it is both inevitable and indispensable.
245. The Legislature has now to make so many laws that it has no time to devote to all the legislative details and sometimes the subject on which it has to legislate is of such a technical nature that all it can do is to state the broad principles and leave the details to be worked out by those who are more familiar with the subject. Again, when complex schemes of reform are to be the subject of legislation, it is difficult to bring out a self-contained and complete Act straightway, since it is not possible to foresee all the contingencies and envisage all the local requirements for which provision is to be made. Thus, some degree of flexibility becomes necessary, so as to permit constant adaptation to unknown future conditions without the necessity of having to amend the law again and again. The advantage of such a course is that it enables the delegated authority to consult interests likely to be affected by a particular law, make actual experiments when necessary, and utilize the results of its investigations and experiments in the best way possible.
246. There may also arise emergencies and urgent situations requiring prompt action and the entrustment of large powers to authorities who have to deal with the various situations as they arise. The complexity of modern administration and the expansion of the functions of the State to the economic and social sphere have rendered it necessary to resort to new forms of legislation and to give wide powers to various authorities on suitable occasions. But while emphasizing that delegation is in these days inevitable, one should not omit to refer to the dangers attendant upon the injudicious exercise of the power of delegation by the Legislature. The dangers involved in defining the delegated power so loosely that the area it is intended to cover cannot be clearly ascertained and in giving wide delegated powers to executive authorities and at the same time depriving a citizen of protection by the Courts against harsh and unreasonable exercise of powers, are too obvious to require elaborate discussion."
17. The question of delegation of legislative power came up again before the Indian Supreme Court in Rajnarain Singh v. Chairman, Patna Administration Committee and others the decision in which appears to follow previous decision of the same Court in Delhi Laws Act (AIR 1951 SC 332). It held that an executive authority can be authorized to modify either existing or future laws but not in any essential feature. As to what constitutes an essential feature, it was held that no general principle can be enunciated except that the executive authority cannot change the policy of a statute, but subject to this limitation the executive can be entrusted with the function of extending an Act or part of an Act to any area either with or without modifications. In another case, Harishankar Bagla and another v. The State of Madhya Pradesh the Court had to deal with the validity of section 3 of the Essential Supplies (Temporary Powers), Act, 1946, which empowered the Central Government, so far as it appeared to it to be necessary or 'expedient for maintaining or increasing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, to make orders providing for regulating or prohibiting the production, supply and distribution of such commodity, or any trade and commerce therein. Section 4 empowered the Central Government to direct that the power to make orders under section 3 shall, in relation to 'such matters' and subject to 'such conditions', if any, as may be specified in the direction, be exercisable by any officer or authority subordinate to the Central Government, or by a State Govern, meet or an officer or authority subordinate to the State Government, as may be specified in the direction. Section 6 of the Act provided that an order made under section 3 shall have effect notwithstanding anything inconsistent therewith contained in any other enactment.
247. Under section 3, the Central Government of India promulgated Cotton Textiles (Control of Movement) Order, 1948, which laid down provisions with regard to transport of cloth, yarn or apparel except under general or special permit issued by the Textile Commissioner. Sections 3 and 4 of the impugned Act were attacked on two grounds, firstly, that these provisions amount to excessive delegation of legislative power and, secondly, that instrumentalities have not been specified by the Legislature to whom powers from the Act could be delegated. The Court, however, upheld the validity of these provisions declaring that it was enough if the Legislature declares the policy of the law, the legal principles and standards which are to control or guide the officials of the body empowered to execute the law, and that the essential legislative function consists in the determination or choice of the legislative policy and of formally enacting that policy into binding rule of conduct. It should here be noted that the Court resorted to the preamble and the body of the enactment to come to the conclusion that the Act sufficiently formulated the legislative policy and this being so, the details of the policy could be left to be worked out by selected instrumentalities, which instrumentalities were in fact selected in very broad terms. In another case, Bhatnagars & Co., Ltd.. v. the Union of India and others the attack was on the Imports and Exports (Control) Act, 1947, which gave powers to the executive to prohibit and to control imports and61 62 63 exports of various commodities. Dealing with the question whether there was excessive delegation of legislative power, the Court formulated its view in the following words :- "Legislation which is conditional, properly so-called, must be distinguished from legislation which is delegated. Where the Legislature provides and lays down principles underlying the provisions of a particular statute and also affords guidance for the implementation or enforcement of the said principles, it is open to the Legislature to leave the actual implementation or enforcement to its chosen delegate. The time when the provision should be implemented, the period during which it should be implemented or the place where it should be applied can, in appropriate cases, be validly left by the Legislature to its delegate. If the Court can find a reasonably clear statement of policy underlying the provisions of the Act either in the provisions of the Act or in the preamble, then any part of the Act cannot be attacked on the ground of delegated legislation by suggesting that questions of policy have been left to the delegate."
248. Reference may be made to another case, Western India Theatres Ltd. v. Municipal Corporation, Poora in which section 59 (1) (xi) of the Bombay District Municipalities Act (III of 1901), which gave taxing powers to the Municipalities, was challenged on the ground of excessive delegation of legislative functions. The Court, however, upheld the validity of this provision on the ground that the legislative policy, for the purposes of imposition of taxes by the Municipalities, was ascertainable from the expression "for the purpose of this Act," which expression, according to the Court, pointed out the objects for which taxes could be levied by the Municipalities. In Swadeshi Cotton Mills Co. Ltd. v. State Industrial Tribunal U. P. and others use of such expressions as "public safety", "convenience", and "maintenance of public order or supplies or services essential to the life of the community or for maintaining employment", were held to be sufficient indication of the legislative policy and guidance for the purpose of conferment of powers on the State Government to make certain provisions by general or special orders under the statute attacked in this case. In Banarsi Das v. State of Madhya Pradesh the Indian Supreme Court had to deal with a taxation statute, C. P. and Berar Sales Tax Act, 1947. Section 6 (1) of this Act provided that tax shall not be payable on the sale of goods specified in Schedule II. But subsection (2) of section 6 conferred power on the State Government to amend the Schedule by notification. It was held that conferment of such power was not unconstitutional as it was competent 'for the Legislature to leave it to the executive to determine the details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be levied and the rates at which it is to be charged in respect of different classes of goods etc. etc. Another case of importance from the Indian jurisdiction is that of Vasanlal Maganbhai Sanjanwala v. The State of Bombay . In this case the question at issue was the conferment of power a on the Provincial Government for fixing a reasonable rent payable by a tenant for his lease of any land. The majority of the Court held that the power of delegation was a constituent element of the legislative power as a whole, and that in modern times when the Legislatures enact laws to meet the challenge of the complex socio- economic problems, they often find it convenient and necessary to delegate subsidiary or ancillary powers to delegates of their choice for carrying out the policy laid down by their Acts. With regard to the extent of delegation, the Court stated that essential legislative functions cannot be delegated, but that an Act must lay down legislative policy and guidance for carrying out such policy, which policy may be gathered from the statements in the preamble. The Court found that the impugned enactment contained the legislative Policy, in its preamble, which was to improve the economic and social conditions of the people and to ensure the full and efficient use of the land for agriculture, which objects were held to be sufficient guidance for the executive, which was thus enabled to fix lower rate of maximum rent of land on any suitable basis in the Corporation of Calcutta v. Liberty Cinema . Section 548 (2) of the Calcutta Municipal Act (33 of 1951) enabled the Calcutta Municipal Corporation to impose license fee on cinema houses. Dealing with the question64 65 66 67 68 whether conferment of such power constitutes excessive allegation, the majority of the Court, led by A. K. Sarkar, J., held that (i) there was no illegal delegation of the legislative functions to the Corporation merely on the ground that the impugned Section of the Calcutta Municipal Act left it entirely to the Corporation to fix the amount of the tax and provided na guidance for that purpose;
(ii) fixation of the rates of tax is not of the essence of legislative power of taxation, which function could legitimately be left by a statute to a non-legislative authority; (iii) there is no distinction in principal between delegation of power to fix rates of tax to be charged on different classes of goods and power to fix rates simpliciter, and if power to fix rates in some cases can be delegated then equally the power to fix rates generally can be delegated. The majority of the Court agreed that the Legislature must provide guidance for fixation of taxes, but at the same time took the view that the validity of the guiding principles cannot be tested by a rigid uniform rule and must depend on the object of the Act giving power to fix the rate. They also held that specification of the maximum rate does not supply any guidance as to how the amount of tax should be fixed, because any provision to this effect only sets out a limit of the rate to be imposed and "a limit is only a limit and not a guidance". It was further held that the guidance furnished must be held to be good if it leads to the achievement of the statute which delegates the power of taxation and that a guiding principle may be implied from the statute itself. The minority, consisting of Subba Rao and Ayyangar, JJ., held to the contrary and took the view that the power to fix a rate of tax is an essential legislative function and cannot be delegated unless the subordinate law-making authority is afforded guidance by the policies being formulated, principles enunciated and standards laid down in the statute, as otherwise the legislation will suffer from the vice of excessive delegation. In passing I may also refer to another decision of the Indian Supreme Court, State of Nagaland v. Ratan Singh . The case involved the vires of the Rules for Administration of Justice and Police in the Naga Hill Districts made by the Lt.-Governor in 1906 under sections 6 and 7 of the Scheduled Districts Act, 1874, which Rules were subsequently revised in 1937. Hidayatullah, J., giving the opinion for the whole Court, held that this Act was not bad on account of excessive delegation of legislative authority by the Legislature, in that this statute contained the policy of the Legislature which policy was, as implied from the enactment, to promulgate in the areas coming within the jurisdiction of the Act, simple rules of procedures as against technicalities of a complex code like the Criminal Procedure Code, which it was difficult for people of backward areas to understand.
18. The next case decided by the Indian Supreme Court which requires consideration is that of Davi Das v. The State of Punjab. In this case the Punjab General Sales Tax Act (X LVI of 1948), as amended by Punjab Act (XIX of 1952), conferred on the Provincial Government power to levy tax on the taxable turnover every year of a dealer at such a rate as the Government might by notification direct, it being provided that the tax should not exceed two pice in a rupee. The judgment of the Court in this case was delivered by Subba Rao, C. J., who had given dissenting opinions in Vasanalal Maganbhai v. State of Bombay and Calcutta Corporation v. Liberty Cinema. But in this case, the learned Chief Justice came to recognize that in view of the multifarious activities of a welfare State, the Legislature cannot work out all the details to suit the varying aspects of a complex situation and, therefore, it must necessarily delegate the working out of the details to the executive or any other agency, through the Legislature, in doing so, could not efface itself or abdicate its functions in favour of another agency. In this view of the matter, the impugned enactment before its amendment in 1952, when there was no limit prescribed for fixation of the rates of tax, was held invalid, but when the Amendment Act, 1952 prescribed the maximum rate of tax, the validity of the Act was upheld. But one should bear in mind what another judge of the Indian Supreme Court, Sarkar, J., said in a previous decision of that Court, the Corporation of Calcutta v. Liberty Cinema that specification of the maximum rate cannot be treated as amounting to a guiding principle, as such specification sets out only a limit and not a guiding69 70 principle. I will now come to the last of the series of Indian decisions, on the subject under discussion the Municipal Corporation of Delhi v. Birla Cotton Spinning and Weaving Mills . This case would bear detailed examination, as it expresses the latest trends in the Indian jurisdiction on the subject of delegated legislation. The question at issue was the vires of section 150 of the Delhi Municipal Corporation Act (LXVI of 1957), which empowered the Corporation to levy any of the optional taxes by prescribing the maximum rates of tax to be levied; to fix classes of persons or the descriptions of articles and properties to be taxed ; and to lay down the system of assess-ments and exemptions, if any, which may be granted. Wanchoo, C. J., and Shelat, J. expressed themselves as follows: "The principle is well established that the Legislature must retain in its own hands the essential legislative functions and what can be delegated is the task of subordinate legislation necessary for implementing the purposes and objects of the Act. Where the legislative policy is enunciated with sufficient clearness or a standard is laid down, the Courts should not interfere. What guidance should be given and to what extent and whether guidance has been given in a particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to deal including its preamble. Further, the nature of the body to which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation. What form the guidance should take is again a matter which cannot be stated in general terms. It will depend upon the circumstance of each statute under consideration.
249. In some cases guidance in broad general terms may be enough. In other cases more detailed guidance may be necessary. In the field of taxation the guidance may take the form of providing maximum rates of tax up to which a local body may be given the discretion to make its choice, or it may take the form of providing for consultation with the people of the local area and then fixing rates after such consultation. It may also take the form of subjecting the rate to be fixed by the local body to the approval of Government which acts as a watch-dog on the actions of the local body in this matter on behalf of the Legislature."
250. In the opinion of the learned Judges, guiding principles of the legislation could be inferred from, amongst other circumstanses, the purposes of the Act, that is, the obligations, to be performed by the Corporation for which purposes it must find money by taxation; from the requirement that the maximum rates fixed by the Corporation must be sanctioned by the Government; and from the further requirement, inherent in all exercise of power by subordinate law-making bodies, that if such bodies act unreasonably, the Courts can hold exercise of subordinate legislative power by them to be void for unreasonableness. Hidayatullah, J. with whom Ramaswami, J. concurred was of the view, which is in accord, and perhaps follows the opinion of Hamoodur Rahman, J. (as he then was), in The Province East Pakistan v. Sirajul Haq Patwari, that the consideration of safeguards is not the only approach to test the permissible limits of delegation. The test to apply, in their opinion, is whether the legislative will to impose the tax is adequately expressed so as to bind those who have to pay the tax, and this test requires the examination of the policy and provisions of the statute. In the view of the learned Judges, the question of permissible limits of the delegation of legislative power should be resolved on the basis of sovereignty which the legislative entries in the constitution are intended to confer upon the Legislature. The rule that Parliament cannot delegate its powers, in their opinion, must be understood to mean only this that the Legislature must not efface itself but must give the legislative sanction to the imposition of the tax and must keep the control in its own hands. Referring to the Indian Constitution, the learned Judges stated that there was no specific provision in the Constitution prohibiting delegation by the Parliament to certain specified instrumentalities of the power to effectuate the legislative will, and the question is always to be decided by the enquiry whether the Legislature has itself willed that a particular thing be done and has merely left the execution of it to a choosen instrumentality. On the question as to71 when Legislature can be said to have abdicated from its essential functions, Hidayatullah, J., stated that the question of abdication arises only when it is found that the Legislature has lost its control over the action of the delegate. In this opinion Hidayatullah and Ramaswami, JJ , followed the Privy Council decisions in Powell v. Apollo Candle Company Limited Sikri, J. held that the Indian Parliament had full power under Article 246 of the Indian Constitution to delegate legislative authority to subordinate bodies and, further, the word "exclusive" In this article means "exclusive of any other Legislature and not exclusive of any subordinate body". Shah and Vaidialingam, JJ., held that under the Indian Constitution the Legislature has plenary powers within its allotted field, but essential legislative function cannot be delegated by the Legislature, that is, there can be no abdication of legislative functions or authority by complete effacement, or even partially in respect of a particular topic or matter entrusted by the Constitution to the Legislature, though power to make subsidiary or ancillary legislation may be entrusted by the Legislature to another body of its choice, provided there is enunciation of policy, principles, or standards either expressly or by implication for the guidance of the delegate in that behalf. The majority of the Court upheld the validity of the legislation and appears to have been guided in this view by the opinion of Hidayatullah, J., according to whom the legislative entries in the Constitution conferred plenary and sovereign powers on the Legislature to make laws within the allotted field.
19. Thus, the Indian Courts have now come to the view that the powers of the Legislatures under written Constitutions to make laws within the allotted field are in the nature of plenary and sovereign powers. This is the view which has been consistently taken by the High Court of Australia and by the superior Courts in Pakistan. This view is in accord with the pronouncements of the Judicial Committee of the Privy Council on the subject of delegated legislation, to which decisions it will be useful to refer here. I may state that the view taken by the Privy Council with regard to the sovereign and plenary nature of the powers possessed by the colonial Legislatures was first laid down by the Court of Exchequer in Chamber in Philips v. Eyrc . The first case in which the Privy Council adopted this view is Rex v. Barah in which the Privy Council held that a section of an Indian Act conferring upon the Lt.-Governor of Bengal the power to determine whether the Act or any part of it should be applied to a certain state was intra vires, as the Indian Legislature, though its powers were expressly limited by the Act of Imperial Parliament, which created it, could not in any sense be deemed an agent or delegate of the Imperial Parliament when acting within the limits laid down by the Imperial Parliament, but had and was intended to have plenary powers of legislation as large and of the same nature, as those of the Imperial Parliament itself. The Privy Council reiterated this view in Hodge v. The Queen . In this case the validity of the Liquor Licence Act of 1877, c. 181, Revised Statutes of Ontario, was considered with reference to sections 91 and 92 of the British North America Act, 1867. Section 3 of the Act provided for the appointment of a Board of Licenses Commis-sioner for each city, county etc. Section 4 provided that the Licenses Commissioner may at any time pass resolution for regulating and determining various matters relating to sale of spirits and liquors under licenses, and regulating the taverns and shops for such sales, and other ancillary matters. Section 5 of the Act empowered the Licenses Commissioner to impose penalties for the infraction of its resolutions. This enactment was impugned on the ground that the Imperial Parliament had conferred no authority on the Local Legislature to delegate any of the above powers to the Licenses Commission or any other person. The Judicial Committee took the view that this objection was founded on a misconception of the true character and position of the provincial Legislatures in the British dominions and colonies, which Legislatures, according to the advice of the Privy Council, were in no sense delegates acting under any mandate from the Imperial Parliament, but that the powers of such Legislatures were as plenary and ample within the limits prescribed by the Imperial Act as the Imperial Parliament in the plenitude of its powers possessed; that within the limits assigned to them the Local Legislatures were supreme and had72 73 74 the same powers as the Imperial Parliament to confide to a municipal institution or body of its own creation authority to make bye-laws or resolutions as to subjects specified within its legislative authority, which authority, it was observed, was ancillary to legislation, and without it an attempt to provide for varying details and machinery to carry them out might become oppressive, or absolutely fail. In another case, Powell v. Apollo Candle Company Limited, which was from Australia, the enactment impugned was the Customs Regulation Act, 1879, of the New South Wales. Section 133 of this Act provided that whenever any article of merchandise was in the opinion of the Collector imported as a substitute for a known dutiable article, or possessed properties in the whole or in part which could be used to be applied for a similar purpose as a dutiable article, then in that case the Collecter could direct that duty be levied on such article at a rate to be fixed in proportion to the degree in which such unknown article approximated in its qualities or uses to such dutiable articles. In pursuance of this section, an order-in-Council was issued imposing duty on the importation of stearin. It was contended that section 133 in effect operated to delegate legislative power to an external authority. The Privy Council reiterated the rule laid down in the earlier cases, Rex v. Burrah and Hodge v. The Queen and stated that these cases had put an end to the doctrine, which appeared at one time to have had some relevancy, that the colonial Legislature is a delegate of the Imperial Legislature; that the colonial Legislature, though restricted in the area of its powers, had unrestricted and as plenary and ample powers with in that area as possessed by the Imperial Parliament and could not be treated as acting as an agent or a delegate.
20. Coming now to the Australian jurisdiction, I may first refer to two cases decided by the High Court of Australia under the War Precautions Acts, 1914-1916, namely, Farey v. Burvett and Ferrando v. Pearce and another . The Australian High Court considered in these cases the conferment on the Governor-General of powers to make regulations or orders to provide for any matter which appeared necessary or expedient for public safety and the defence of the Commonwealth, including provisions for fixation of prices of commodities including flour and bread. This conferment of power was challenged on the ground of impermissible delegation of legislative power, but the validity of the impugned enactment was upheld by the Court, though the Court rested its decision mainly on the defence power given to the Government of the Commonwealth of Australia under the Australian Constitution. I have referred to these cases because the rule laid down therein has been reiterated in subsequent decisions relating to delegation of legislative power during peace time. One of these subsequent decisions is that of Roche and others v. Kronheimer and another . The enactment impugned in this case was the Treaty of Peace Act, 1919 and Regulation 20 of the Treaty of Peace Regulation (Statutory Rules 1920, No, 25). Under the Regulations the Minister made an order for vesting in the Public Trustee of the property, rights and interests of a German national. The Regulations were promulgated by the Governor-General under section 2 of the Treaty of Peace Act, which gave power to the Governor- General to make such regulations as appeared to him necessary for carrying out part X of the Treaty of Peace. It was contended that this section was not conditional legislation, but bestowed on the executive full legislative power upon a particular matter and that a law which merely authorised the Executive to make laws with respect to a particular subject-matter was not a law for the peace, order and good government of the country. But the High Court of Australia followed the Privy Council decision in Hodge v. The Queen and upheld the validity of the impugned enactment and regulation. The next important case from Australia is that of Victorian Stevedoring and General Contracting Company Proprietary Limited v. Dignan . In this case the High Court of Australia considered the validity of section 3 of the Transport Workers Act, 1928-29, which provided that the Governor-General may make Regulations, notwithstanding in any other Act, with respect to the employment of transport workers and for regulating their engagement, service and discharge, for licensing such workers and for prohibiting the employment of unlicensed persons and for the75 76 77 78 protection of transport workers in general. One of the Regulations so made by the Governor- General made it an offence to give priority in employment, engagement, or picking-up in or for that work except in accordance with the provisions of the Regulation. It will thus be noted that the Act committed to the Executive Government an extensive power to make regulations, including penal provisions, which were provided to have the force of law notwithstanding anything to the contrary in any other Act of the Legislature. The validity of this section was attacked on the ground that it attempted to grant to the Executive a portion of the legislative power vested by the Constitution in the Australian Parliament, which was inconsistent with the distribution of legislative, executive and judicial powers made by the Constitution, which distribution closely followed the American model.
251. The leading judgment was given by Dixon, J., who referred to the various decision of the United States Supreme Court on the question of impermissible delegation of legislative power, and in particular to an often cited opinion (referred to above), which Taft C. J., quoted in his judgment in Hampton v. United States that "the true distinction. . , is between the delegation of power to make a law, which necessarily involves a discretion as to what it shall be and conferring an authority or discretion as to its execution to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made". The learned Judge also quoted with approval the following opinion of Taft, C. J. in the same case:-- "It is a breach of the National fundamental law if Congress gives up its legislative power and transfers it to the President, or to the judicial Branch, or if by law it attempts to invest itself or its members with either executive power or judicial power. This is not to say that the three branches are not co-ordinate parts of one Government and that each in the field of duties may not invoke the action of the two other branches in so far as the action invoked shall not be an assumption of the constitutional field of action of another branch. In determining what it may do in seeking assistance from another branch, the extent and character of that assistance must be fixed according to common sense and the inherent necessities of the governmental co-ordination. The field of Congress involves all and many varieties of legislative action, and Congress has found it frequently necessary to use officers of the Executive Branch, within defined limits, to secure the exact effect intended by its acts of legislation, by vesting discretion in such officers to make public regulations interpreting a statute and directing the details of its execution, even to the extent of providing for penalizing a breach of such regulations . . . . Congress may feel itself unable conveniently to determine exactly when its exercise of the legislative power should become effective, because dependent on future conditions, and it may leave the determination of such time to the decision of the Executive, or, as often happens in matters of State legislation, it may be left to a popular vote of the residents of a district to be affected by the legislation."
252. Dixon, J. also referred with approval to the decision of the United States Supreme Court in Mutual Film Corporation v. Industrial Commission of Ohio which has already been discussed by me at length in the course of my review of the United States decisions. He specifically held that the doctrine of "Delegata potestas non potest delegari," relied upon in the United States, had no application to the Australian Constitution, as such doctrine had never existed in respect of the British Dominion and colonial Legislatures, whether established in virtue of the prerogative of the Crown or by an Imperial statute. The learned Judge also relied on the dictum of Willes, J. in Phillips v. Eyre that "a confirmed Act of the local Legislature whether in a settled or a conquered colony, has, as to matters within its competence and the limits of its jurisdiction, the operation and force of sovereign legislation, . . ." and the observations of the judicial Committee of the Privy Council in Rex v. Burrah, Hodge v. The Queen and Powell v. Apollo Candle Co. Dixon, J. came to the conclusion that the powers of the Parliament of the Commonwealth of Australia upon the subjects assigned to it are in the nature of plenary and absolute powers. He cited with approval the previous decision of the High Court of Australia, referred to above, on the subject of conferment of legislative power on79 the Executive and in particular on his own opinion in the decision in Roche v. Kronheimer which judgment, according to him, meant that the time had passed for assigning to the constitutional distribution of powers among the separate organs of the Government, an operation which confined the legislative power to the parliament . . . so as to restrain it from reposing in the Executive an authority of an essentially legislative character. The learned Judge emphasized this view by the further statement that a statute which confers upon the Executive a power to legislate upon some matter contained within one of the subjects of the legislative power of the Parliament is a law with respect to that subject, and that the distribution of legislative, executive and judicial powers in the Constitution does not operate to restrain the power of the Parliament to make such law. But this statement was qualified by the observation that there may be such a width or such an uncertainty of the subject-matter to be handed over that the enactment attempting it is not a law with respect to a particular head or heads of the legislative power. Dixon, J. then considered a hypothetical enactment to the effect, "the executive Government may make regulations having the force of law upon the subject of trade and commerce with other countries or among the States".
253. Such a law, according to him, could not be avoided on the doctrine of separation of powers, but would be invalid on another principle, that is, that it is beyond the competence of the Parliament, in the sense that though the nature of the legislative power of the Parliament is plenary, but it must be possible to predicate of every law passed by the Parliament that it is the law with respect to one or other of the matters specified in the legislative list. In the words of Dixon, J. himself, an enactment which is merely a law with respect to the legislative power to deal with any of the legislative subjects would be invalid as such a law may amount to abdication by the Legislature of its power to make laws. The question of delegation of legislative powers again came before the High Court of Australia in Wishart v. Fraser . The statute impugned in this case was the National Security Act, 1939-40, section 5 whereof gave to the executive the power which vested in the Parliament to legislate for the peace, order and good Government of the Commonwealth in respect of the Naval and Military defence of the Commonwealth and of the several states, and the control of the forces to execute and maintain the laws of the Commonwealth. The Court upheld the conferring of such power on the executive notwithstanding that the National Security (General) Regulations, which were framed under this Act, contained penal provisions the infraction whereof was subject to conviction and punishment. The two propositions that (a) the Legislature cannot delegate any of its power, and (b) the distribution of legislative, executive and judicial powers in Constitution prohibited the conferment of the power of one organ of the Government on the other, were both rejected as invalid propositions, Dixon, J. holding that the question was concluded by the earlier decision in Dignan's case.
21. The subject of delegated legislation came up first in this country in Sobho Gyanchandani v.
254. Crown , with regard in the proviso in the Public Safety Ordinance, 1949, by which the Central Government was empowered, from time to time, by notification in the official Gazette, to direct that the Ordinance was to remain in force for such further period as may be specified in the notification, the duration of the Ordinance itself having been fixed for one year by the Legislature in the first instance. Abdul Rashid, C. J., held that the Legislature cannot delegate its powers for making, modifying or repealing any law to an external authority, and that the power to extend the life of an enactment is in the nature of a legislative power as distinguished from the power which is conferred on an outside agency to determine the commencement or application of an enactment, Akram, J., took the view that in the ever growing complexities of modern state, substantial delegation of legislative powers was necessary, but a distinction should be made between powers in matters of fundamental nature or of general policy, which cannot be delegated by the Legislature, and such ancillary matters as the determination of the time, place, persons etc., with regard to the application of any enactment, which ancillary matters could be validly delegated to80 81 an outside agency by the Legislature. Cornelius, J., (as he then was) held that the extension of the life of an enactment is in effect in the nature of a power to place and keep a law on the statute book, or to remove a law therefrom, and therefore was essentially a legislative function, which could not be delegated by the Legislature to an outside agency. But the learned Judge agreed with the view that in the complex conditions of modern society, ancillary powers may validly be delegated to executive authorities, so that these authorities are enabled to make statutory rules and regulations for carrying into effect the provisions of a statute in matters of detail. His Lordship expressed the opinion that legislative delegation is permissible (i) where it is not possible to lay down any definite comprehensive rules, and (ii) where the policy of the Legislature, though not expressly stated, is implicit in the enactment. In another case, decided with reference to the Constitution of Pakistan, 1956, that is, East and West Steamship Company v. Pakistan , Munir, C. J., observed that it was a generally accepted position that no provision of the law could fall within the rule against delegated legislation if it is based on a policy discoverable from that provision itself, which has to be implemented by the person against whom the charge of unauthorised legislation is made, and that exceptions to the rule against delegation of legislative power have always been recognized in situations which require the vesting of discretion in an official when it is difficult or impracticable to lay down a definite comprehensive rule or where the discretion relates to the administration of licensing requirements to protect the general welfare. This observation was made with reference to the power conferred on the Central Government to make rules to carry out the purposes of the Control of Shipping Act (XXVI of 1947), which authorised the Central Government to make rules providing for the forms of licence for taking a ship to sea from a port or place within or outside Pakistan, the manner in which the shipping rates may be fixed, the constitution and function of a board to advise the Central Government in respect of such rates etc. The learned Chief Justice took the view that the Act could not be attacked on the ground of unauthorised delegation of legislative power, as the Act proceeded on a definite policy, namely, the policy of placing the ships, for the period of the emergency, substantially at the disposal of the Government to enable it to direct what classes of cargo or passengers may be carried, to know the exact position of a Pakistan ship at a particular time and to claim priority for Government cargo and passengers. The next case of importance on the subject decided by our Supreme Court is that of District Magistrate, Lahore v. Syed Raza Kazim . The enactment impugned in this case was the Arms Act (XI of 1878), section 17 of which conferred power on the Government to make rules as to licenses for arms, without indicating any criterion or policy for grant or refusal of such licenses.
255. Their Lordships held that there was no delegation of legislative powers in this case. The leading judgment was given by Hamoodur Rahman, J. (as he then was), who said that the test with regard to excessive delegation of legislative power had been laid down by the judicial Committee of the Privy Council in Rex v. Burrah in which it was held that the Indian Legislature had "plenary powers of legislation, as large, and of the same nature as those of Parliament itself", and that while the Indian Legislature could not create "a new legislative power", it could, within the limits of its own sphere, legislate "either absolutely or conditionally". His Lordship also referred to another decision of the Privy Council, King-Emperor v. Benori Lal Sharma , in which it was held that legislation by which the Local Government or some Officers of that Government were empowered to direct what offences or class of offences or what cases or class of cases should be tried by the Special Courts was merely an example of the not uncommon legislative arrangement by which the local application of the provisions of a statute is determined by the judgment of the local administrative body, and that statutes which confer such discretion could not be treated as invalid enactments.
256. Dealing with section 17 of the Arms Act, his Lordship observed that on examining the language of the Indian Councils Act, 1'61 and the legislative powers of the Governor-General-in-Council under this Act and the provisions of the Arms Act, it could not be said that the Legislature had abdicated82 83 84 or effaced itself or created a new legislative body, because having regard to the nature of the object sought to be achieved by section 17 of the Arms Act it was impossible for the Legislature to attempt to provide for every detail and machinery to carry it into effect, the nature of the object discernible from the provisions of the Arms Act being the policy underlining the legislation that no one should have any right to possess or carry any kind of arms or ammunition except when permitted to do so by the appropriate authority. Another relevant case is that of Sheikh Muhammad Ismail and others v. The Chief Cotton Inspector and others , in which the attack was on rule 26(1) framed by the Provincial Government under section 30 of the West Punjab Cotton (Control) Act (IV of 1949), which provision enabled the Government to frame rules to carry out the purposes of the Act. Rule 26(1) provided for imposition of fees by the Government on the occupiers of factories, the managers of Companies and cotton dealers to cover the cost of the staff appointed under the Act, or for improvement of agriculture relating to the cotton crop grown in West Punjab. In exercise of this power, the Provincial Government issued notifications from time to time imposing a fee on unginned cotton received in factories for ginning. It was contended that section 30 of this Act amounted to excessive and unconstitutional delegetaion of power to the executive in so far as it left unguided discretion to the Government to pick and choose, out of certain categories of persons mentioned in the section, for imposition of the fee, there being no guideline laid down by the legislative authority in this respect. Rahman, J. (as he then was) held that section 30 of the impugned Act sufficiently indicated the legislative policy by mentioning the categories of persons from whom the fee may be imposed, and that so long as the rule-making authority limits itself to the levy of the fee to these categories, it cannot be said that an unfettered discretion had been bestowed on the executive authority, and that "choice of persons" from amongst indicated categories is within the permissible limits of delegation. Dealing with the question that the rate of fee had been left to be determined by the executive auhority, his Lordship observed that "the statutory practice of leaving the power to specify rates of fee to be imposed to the relevant executive agency has a respectable ancestry", as is evident from several statutes, such as section 4 of the Special Marriage Act (III of 1872), section 17 of the Official Trustees Act (II of 1913), sections 79 and 199 of the Sea Customs Act (VIII of 1878) and section 57 of the Patents and Designs Act (II of 1911). In the result, his Lordship held that delegation of this nature does not involve the delegation of an essential legislative power, and that the fixation of the fee has, of necessity, to be left to the executive authority because of the variability of the schemes which may be taken in hand from year to year under the Act, and thus entailing differences in the expenditure incurred thereon. His Lordship's judgment was concurred in by Cornelius, C. J., and Fazle-Akbar and Hamoodur Rahman, JJ.
22. I should lastly refer to the latest decision of the Supreme Court in the Province of East Pakistan v.
257. Sirajul Hay Patwari in which the question of delegation of legislative power has been discussed in great detail. To understand the impact of the decision in this case, it will be useful to briefly refer to the facts and to the questions on which their Lordships' opinion was invited. The point at issue related to the " vires " of section 57 of the Electoral College Act (IV of 1964). The Constitution of Pakistan, 1962, by Chapter 2, Part VII, constituted an Electoral College of Pakistan. Under Article 158
(4) of this Constitution, the Members of the Electoral College were required to be invested with functions in relation to local Governments besides those of being the college for the election of the President and of the National and Provincial Assemblies. Section 57 of the Electoral College Act gave effect to this mandate of the Constitution by providing that the Provincial Government, for the purpose of conferring on the Members of the Electoral College functions in relation to matters of local Government may arrange :-
(a) the Electoral units in the rural and urban areas into groups, so that it is a Union, or as the case may be a Town, and85
(b) declate by notification in the official Gazette that the Members of the Electoral Units within the Union or Town shall constitute the Union Council, or as the case may be a Town Committee for the Town.
258. Section 57 was attacked before the East Pakistan High Court on several grounds, two of which are relevant for our purpose in the present case, namely :
(1) that section 57 was hit by the doctrine of excessive and impermissible delegation of legislative powers, and that by delegating the power of grouping to the Provincial Government the Central Government had abdicated in favour of the Provincial Government in respect of its legislative functions and thereby effaced itself.
259. These two objections were sought to rest on another objection, that is, that in delegating its functions the National Assembly had failed to lay down any legislative principles, policies or norms according to which the Provincial Government should act.
260. Cornelius, C. J. dealt with these questions as follows: (1)that the question should be regardedwith reference to the background of the Basic Democracies Order and the larger background of legislative technique employed since at least 1885 in giving power to the Provincial Government to delegate its functions of local administration in small pockets, and if so viewed, then it was not imperative for the National Assembly to lay down principles, policies or norms according to which the Provincial Government should act.
261. (2)for the Legislature to provide in detail for the great number of considerations that would require to be scrutinised, balanced and harmonised on occasions when a new thana or a new district or, much more so, a new division has to be created, would seem to be impossible.
262. (3)the concept of excessive delegation, which is derived from Judge-made law in the United States, and where now it is losing much of its authority, must be applied in this country with the greatest circumspection, in that laws of the Legislatures in this country or made in continuation of pre-existing laws dating from the early nineteenth century, and that this rule, if it has to be applied should be applied after the fullest consideration of the entire administrative and legislative complex, not only as it exists after the making of the law in question, but with reference to the immediately preceding conditions and in relation to the technique employed ; (4)Constitutional restriction on the avoidance of laws should be confined to cases where there has been violation of Article 6 of the Constitution of 1962, and where excessive delegation is pleaded, it should be established that this delegation has led to the defeat of the requirement of "reasonable restriction" in relation to the exercise of a fundamental right.
263. Hamoodur Rehman, J. (as he then was) stated that it had been the consistent policy of the Legislatures in this country to delegate to the Provincial Government powers to set up and demarcate areas of local authorities, as this function, by its very nature, could not properly be performed by the Legislature itself, as the Legislature could not be expected to be aware of the varying local conditions and administrative conveniences pertaining to each individual local area.
264. Dealing with the question whether section 57 could be avoided on the ground of impermissible delegation or delegation of an essential legislative function, his Lordship held that this section, to the extent that it delegated the function of demarcation of local Government areas, has dealt only with administrative functions. On the larger question of impermissible delegation, or delegation of essential legislative functions, his Lordship stated that if the subject-matter of legislation is within the competence of the Legislature, then it can certainly legislate in any one of the generally accepted forms of legislation, either directly or referentially, absolutely or conditionally, within its own sphere of legislation, and that it has always been recognised under all systems of legislation that the Legislature may well leave it to some external authority to implement its policy or to determine a state of things on which the law intends to make its action depend, or to fix in its discretion the time at which the law is to come into operation, the area over which it is to extend and the manner in which it is to be carried into effect. According to his Lordship, the correct rule on this question had been declared by the Judicial Committee of the Privy Council in Rex v. Burrah.
265. Referring to the American doctrine of delegation of legislative power, his Lordship noted that in the American system itself the doctrine had undergone considerable change and that it has now come to be recognized that there may be practical difficulties for the Legislature in providing for every minute detail, and so legislative power may be exerted through the intervention of a fact- finding administrative instrumentality requisite to the consummation of the legislative object.
266. While agreeing that the Constitution of 1962 divided the Governmental functions into legislative, executive and judicial departments, his Lordship held that it did not necessarily follow from this that the doctrine of excessive and impermissible delegation should be imported into our own constitutional system which has adopted the English pattern and therefore does not contain any rule for exclusiveness of the various Governmental powers but is based on the intermingling of governmental functions. His Lordship noted with approval the rule laid down by the U. S. Supreme Court in John H. Fahey v. Paul Mallonee where it was held that the absence of explicit standards in the Home Owners Loan Act, 1933, did not render the Statute bad since the provisions of the statute were only of a regulatory nature and did not make penal provisions. The observations of Douglas, J. in Sunshine Anthracite Coal Company v. Homer M. Adkins that "delegation by Congress has long been recognized as necessary in order that the exertion of legislative power does not become a futility . . . ." and that "the effectivenss of both the legislative and administrative processes would become undangered if Congress were under the constitutional compulsion of filling in the details beyond the liberal prescription ." found favour with his Lordship, who further noted that the recent trend in American Jurisprudence with regard to delegation of legislative power showed that the American practice was coming nearer to the English view which view is laid down in Rex v. Burah and has consistently held the field up to now in England, in the dominions of the Commonwealth and in the IndoPakistan sub-continent. However, his Lordship qualified his view by stating that though the Legislature may validly delegate legislative functions to an external authority, it cannot abdicate altogether from its legislative functions or totally efface itself, but subject to this, if the Legislature has sufficienty expressed its view and exercised its judgment as to the territorial extent, scope and subject-matter of the legislation, the provision of details, particularly when details are by their very nature on capable of being laid down by the Legislature itself, can well be left to be done by another agency in whom the Legislature places confidence and, further, the power of delegation may vary from case to case according to the scope of the authority of the delegating body, the variety, conditions and circumstances which a particular law is intended to meet, and the status and authority of the body to which the power is delegated, and according to the nature of the law, that is, whether it is penal or regulatory in character, and that in case of an expert in whom the Legislature has confidence, a greater latitude may be conferred upon the Legislature for the purpose of delegating legislative powers, so that the purpose of the legislation may be carried out adequately and effectively.
267. Thus, according to Hamoodur Rahman, J. (as he then was)-- (1)the powers of the Legislatures in the Indo-Pakistan sub-continent have always been as plenary as the powers of legislation exercised by the British Parliament, and (2)even essential legislative functions may be delegated to an external authority subject, however, to the condition that the Legislature does not altogether abdicate from its legislative functions or totally efface itself.
268. Muhammad Yaqub Ali, J. dealing with the same question, agreed with the statement in the decision from Ohio Court, Cincinnati W. and Z. R. v. Clinton (already referred to in preceding paragraphs), where it was held that :-- "the true distinction is between the delegation of power to make the law which necessarily involves a discretion as to what it shall be, and conferring authority, or discretion as to its execution to be exercised under and in pursuance of the law."
269. To this, his Lordship added a further rule to the effect that if the law promulgated on a subject is known to have a certain policy and the outside body to which its execution is entrusted has framed regulations which provide uniformity and ensure against arbitrariness, then the law will not be struck down for excessive delegation. His Lordship observed that the Court's opinion with regard to excessive delegation should be formed not on the mere absence of standards, but on factual lack of procedural safeguards.
23. It has thus been seen that wherever Constitutions have followed the British pattern, such as in the British Dominions and Colonies, and the Constitutions in the Indo-Pak. subcontinent, the Legislature has never been treated as delegate, or acting under mandate of any superior Legislature or Parliament. The powers of these Legislatures have always been considered to be sovereign powers within the assigned subjects, and to be as plenary and ample as the powers of the British Parliament itself. But this statement of law is subject to one qualification which, as I have noted above, has been recognised in several decisions, that is, that the Legislature should not efface itself and should not abdicate from its essential legislative powers altogether. Now the question is what is effacement of the legislation or abdication by it of its legislative powers? One of the ways this question can be answered is by reference to a Privy Council decision, In re : The Initiative and Referendum Act . Section 92 of the British North America Act, 1867, empowered the provincial Legislatures in the Dominion of Canada to amend the Constitution of the provinces "excepting as regards the office of the Lieutenant-Governor". Thus, the provincial Legislature was precluded from making laws which would abrogate any power which the Crown possessed through the Lieutenant-Governor, including the power to assent to a law passed by a provincial Legislature. The Initiative and Referendum Act (6 Geo. 5 c. 59), passed by the Legislative Assembly of Manitoba, made provision for submission by the Lieutenant-Governor of a proposed law to a body of voters totally distinct from the Legislature of which he was the constitutional head. This law would have rendered him powerless to prevent any measure from becoming an actual law if approved by those voters. The law was held to be invalid by the Privy Council. This is a case of effacement of the Legislature or abdication by the Legislature of its essential legislative powers. The Crown through the Lieutenant-Governors was part of the Provincial Legislature in Canada, as no law passed by such Legislatures could become law unless assented to by the Lieutenant-Governor.
270. But in place of this Legislature, the Initiative and Referendum Act attempted to put up, what I should call, a substitute Legislature, where the law would be passed by a body of voters and would not require the assent of the Crown through the Lieutenant-Governor. Another instance of legislative effacement or abdication, or irrevocable delegation, in fact, of legislative power may be found in the India Independence Act, 1947 which was passed by the British Parliament to set up the independent dominions of Pakistan and India. But so long as the Legislature retain its power intact and can, whensoever it pleases, destroy the agency on whom it has conferred power to make regulations in the nature of legislation, and to take the matter back in its own hand, it cannot be said that the Legislature has either effaced itself or has abdicated from its legislative powers.
271. Support for this view is found in the two Privy Council decisions referred to above, Hodge v. The Queen and Powell v. Apollo Candle Co. Ltd. To the same effect is the rule stated by the Supreme Court of the United States in Chester Bowles v. Mrs. Kate C. Willinghan . In this case the validity of the Emergency Price Control Act passed by the United States Congress was attacked on the ground of impermissible delegation of legislative power with reference to the exercise by the Administrator of the power to regulate rents of premises. Dealing with the question whether the Congress could be said to have abdicated its functions, the Court stated as follows:--86 87 "In terms of hard-headed practicalities Congress frequently could not perform its functions if it were required to make an appraisal of the myraid of facts applicable to varying situations, area by area throughout the land, and then to determine in each case what should be done. Congress does not abdicate its functions when it describes what job must be done, who must do it, and what is the scope of his authority. In our complex economy that indeed is frequently the only way in which the legislative process can go forward. Whether a particular grant of authority to an officer or agency is wise or unwise, raises questions which are none of our concern. Our enquiry ends with the constitutional issue."
272. Another test of legislative effacement or abdication is, of course, to find out whether the delegation consist, in conferring discretion on an external agency as to what the law shall be, or conferment is merely of authority as to the execution of the law enacted by the Legislature, that is, it should be ascertained whether any legislative policy or principle, or standards are discernible from the impugned legislation, or if there is such width of uncertainty in the language used in the enactment that no policy or principle or standard can be found out therefrom, in which event it would be a case of conferment on the external authority of discretion as to what the law shall be.
24. We have now to review the provisions of the Constitu-tion of 1962 as much arguments were addressed to me to show that the impugned amendments to the Act for levy of production capacity tax were repugnant to the financial provisions of this Constitution. But before I do so, I would refer to the opinion of Hamoodur Rahman, J. (as he then was) in the Province of East Pakistan v. E. S. Siraj-ul-Haq Patwari , that though the Constitution of 1962, as also the previous Constitutions, divided z the Governmental powers between the Legislature, Executive and Judiciary, it did not follow that the doctrine of excessive and impermissible delegation, and the theory of separation of powers considered to be the special characteristics of the American Constitution, must necessarily be imported into our own Constitutional system. In our system, there is considerable intermingling of Governmental functions. A large part of the legislation is carried by Ordinances promulgated by the Chief Executive Head of the State and the Chief Executive Head of the Province. In the 1962-Constitution itself, several provisions can be referred to in support of the view that close co-ordination between the various organs of Government, rather than strict division of powers between them, is the underlying principle of our Constitutional system. Keeping this characteristic of our Constitutional system in mind, we may now examine the relevant parts of the Constitution of 1962. For the purpose of this enquiry, we have to refer to Chapter 4 of Part III of the Constitution which relates to the financial procedure of the centre, Chapter 4 of Part IV which relates to the financial procedure of the Province and Articles 237 in Part XII, Chapter 3, which makes transitional and temporary provisions. Reference will also have to be made to Article 131 which makes provisions for exercise of law-making powers by the Legislatures. In considering these Constitutional provisions, Mr. Sharifuddin Pirzada, the learned Attorney-General, submitted a comparative study of the Constitution of Pakistan of 1962. Constitution of Pakistan of 1956 post- Independence Constitution of India and the Government of India Act, 1935, to show that the financial provisions of the Constitution of 1962 have not made any material departure from the Constitutions which preceded it. The first relevant provision of our Constitution is Article 38 which provides for the custody and regulation of the Central Consolidated Fund. The point which has to be taken note of in respect of this Article is that it provides for regulation of the Central Consolidated Fund by or under the authority of an Act of the Central Legislature, or by Rules made by the President. Similar provision is made for the Article 62 of the Constitution of 1956, but with the difference that regulation of the Federal Consolidated Fund was provided for only through an Act of the Parliament. These provisions may be compared to Article 266 (3) of the Indian Constitution of 1950, which provides for the regulation of the Central or Provincial Consolidated Funds in accordance with law, the expression law to mean not only acts of the Legislatures but also Rules,88 Regulations, Instruments etc. Article 39 of the 1962-Constitution makes provision for expenditure charged on the Central Consolidated Fund. Under Article 40, provision is made for the Annual Budget statement to be laid before the National Assembly, this statement being required to contain the estimated receipts into and the estimated expenditure from the Central Consolidated Fund for that year and the sources from which the estimated receipts are to be derived, including existing taxation, new and increased taxation, borrowings and other sources. Article 41 contains the procedure to be followed by the National Assembly in considering the Annual Budget Statement.
273. Under this Article, expenditure charged upon the Central Consolidated Fund may be discussed, but may not be submitted to the vote of the National Assembly. Likewise, a demand for a grant in Zaibtun respect of a sum that is not shown in the Annual Budget Statement as new expenditure may be discussed in the National Assembly, but may not be submitted to the vote of the Assembly, central though, with the consent of the President, it may reduce a Board of demand for a grant for new expenditure. Under clause (5), the National Assembly may assent to or refuse a demand for a grant in respect of a sum that is shown in the Annual Budget Statement as new expenditure. Articles 42 to 46 contain provision for estimates (or projects extending over several years, for prepara-tion and authentication by the President of the Schedule of Authorised Expenditure, supplementary and excess budget statements provisions for unexpected expenditure and provision for withdrawal from the Consolidated Fund of amounts necessary to meet expenditure pending authentication of the Schedule of Authorised Expenditure. Then comes Article 47, upon which great reliance was placed by the petitioners. Under this Article no Money Bill could be moved in the National Assembly except on the recommendation of the President if, amongst other matters the Bill made provision for the imposition, abolition, remission, alteration or regulation of any tax. Clause (2) of this Article provides that Clause (1) shall not apply to a Bill or amendment by reason only that it provides -- (a)for the imposition or alteration of any fine or other pecuniary penalty, or for the demand or payment of the licence fee or a fee or charge for any service rendered, or (b)for the imposition, abolition, remission, alteration or regulation of any tax by any local authority for local purposes.
274. The petitioners' learned Advocates laid great emphasis on the requirement of this Article, as read with the provisions of Article 41, that no Money Bill for the abolition, remission or alteration of any tax could be moved in the National Assembly without the recommendation of the President, to support their contention that the Legislature, in delegating to the Central Board of Revenue or the Central Government the power to levy production capacity tax in lieu of duties of excise, had, in effect effaced itself and abdicated from its essential functions of taxation, as after the levy of this tax, it would be impossible to move any Bill for its abolition, remission or alteration except with the consent of the Government. The first answer to this contention is that it cannot be assumed that the President, in discharging his Constitutional obligations, would always and invariably, without any valid reason, have withheld his recommendation from any Money Bill aimed at the abolition, remission, alteration of a tax or duty. It should be noted that a Money Bill was, in case it was passed by the National Assembly, subject to the assent of the President in any case. The requirement of prior consent of the President for such Bill did not introduce any fundamental alteration in our legislative system under which the Head of the State is an active participant in lawmaking. Further, the requirement of this Article that a Money Bill should have recommendation of the President before it can be moved in the National Assembly, is a peculiar feature of Constitutional systems which are based on the British pattern. It will be interesting to note that Article 47 of the 1962-Constitution is in identical terms with Articles 58 and 59 of the Constitution of 1956, and Articles 110 and 117 of the Indian Constitution. This last Article also provides that a Money Bill, including a Bill which provides for the imposition, abolition, remission, alteration or regulation of any tax, shall not be introduced or moved in the Indian Legislature except on the recommendation of the President, but that a Bill or amendment shall not be treated as Money Bill by reason only that it provides for the imposition of fine or other pecuniary penalty, or for fees for licences or fees for services rendered or by reason that it provides for imposition, abolition, remission, alteration or regulation of any tax by any local authority or body for local purposes. The provisions relating to Money Bills contained in the Constitution of Pakistan of 1962. Constitution of Pakistan of 1956 and the Indian Constitution of 1950, are similar to Article 37 of the Government of India Act, 1935, with this difference that under the first three Constitutions, a Bill or amendment would be a Money Bill or Financial Bill even if it contains provisions for abolition, remission, alteration or regulation of any tax, whereas under the Government of India Act 1935, such a Bill would he deemed to be a Financial Bill only, if it contains provisions for imposing or increasing any tax. Thus, provision for abolition, remission, alteration or regulation of any tax, unlike the Government of India Act, 1935, were brought within the ambit of a Money Bill in the Constitutions which have succeeded the Government of India Act, 1935. But this change is not something unusual, but is in accord with the English rule that the Crown demands money "applies not only to authorisation of expenditure, but also to revenue, that is, the authorisation of taxes. Reference may be made to the Parliament Act, 1911, Standing Orders of the House of Commons and to May's Parliamentary Practice (17th Ed. Chapters 26-31).
275. According to May, the principle that the sanction of the Crown must be given to every grant of money drawn from the public revenue, applies equally to the taxation levied to provide that revenue, and no motion can, therefore, be made to impose a tax, save by a Minister of the Crown, nor can the amount of a tax proposed on behalf of the Crown be augmented, nor any alteration made in the area of imposition except on the motion of the Minister. Likewise, no increase can be considered either of an existing, or of a new or temporary tax for the service of the year, except on the initiative of a Minister acting on behalf of the Crown; nor can a member other than a Minister move for the introduction of a Bill framed to effect a reduction of duties, which would incidentally effect the increase of an existing duty, or the imposition of a new tax, although the aggregate amount of imposition would be diminished by the provision of the Bill. This characteristic of a Money Bill has been adopted in nearly all the constitutions which have borrowed the British Constitutional practice. I have already referred to the Indian Constitution in this respect. Here I would reproduce section 69 of the Ceylonese Constitution Order-in-Council: "No Bill or motion authorizing the disposal of, or the imposition of charges upon, the Consolidated Fund or other funis of the Island, or the imposition of any tax or the repeal, augmentation or reduction of any tax for the time being in force shall be introduced in the House of Representatives except by a Minister, nor unless such Bill or motion has been approved either by the Cabinet or in such manner as the Cabinet may authorise."
276. Thus, the requirement of Article 47 of the 1962-Constitution that a Money Bill should have the recommendation of the President, is in conformity with the well-established practice that no such Bill should be moved in the Legislature, whether for authorization of any expenditure, or for imposition, remission, reduction or addition of any tax, except by the Government or on the recommendation of the Head of the State.
26. The next relevant financial provision in the Constitution of 1962 is Article 48, which is quite material for the present discussion. This Article reads as under:-- "No tax shall be levied for the purposes of the Central Government except by or under the authority of an Act of the Central Legislature."
277. The Constitution of 1955 contained a similar provision in Article 60, to the effect that-- "no tax shall be levied for the purposes of the Federation except by or under the authority of an Act of Parliament."
278. The comparable provision in the Indian Constitution of 1950 is Article 265, which provides that no tax shall be levied or collected except by "authority of law", the expression "law" in the Indian Constitution being used to include Acts, Rules, Bye-Laws, Regulations, Orders, etc. It will thus be seen that under the three Constitutions, a tax for the purposes of the Central Government may be levied either by an Act of the Legislature directly, or "under the authority" of an Act of Legislature.
279. Now, what is the meaning of the expression "under the authority of." A tax would be levied "by an Act of the Legislature when a statute directly imposes a tax. As against this, the expression "under the authority of an Act" signifies those cases where the tax is not imposed by the Statute itself, but is imposed by virtue of statutory powers enabling this to be done, that is, where it is imposed by a law made by a subordinate law-making authority under powers conferred on it by an Act of the Legislature. For this distinction between the expression "by" and "under the authority of", reference may be made to G. Narajanaswa my Naidu v. C. Krishnamuthi . The 1962-Constitution, by using the expression "under the authority of", has expressly permitted delegation of taxing powers by the Legislature. I may hear note one argument canvassed by the petitioners before me, that is, that Article 48 of the Constitution of 1962 uses the expression "levy", which signifies merely machinery for collection of central taxes as distinguished from imposition of a tax. For this purpose, the learned Advocates for the petitioners referred me to the corresponding Article in the Indian Constitution of 1950, that is, Article 265, where the words used are "levied or collected. " On the basis of the difference in the use of the words in Article 48 of our Constitution and Article 265 of the Indian Constitution, it was argued that Article 48 merely permits delegation of the powers to collect taxes imposed by a statute. In my opinion, the expression "levy" does not carry this restricted meaning. In Shorter Oxford Dictionary the word "levy" is defined to include powers to impose tax or to raise taxes as well as power to collect taxes. This is also the meaning of the word "levy" adopted in a Canadian decision City of Vancover v. B. C. Telephone Co. , cited in Butterworth's "words and phrases Legally Defined" (1969 Edn., Vol. 3, page 151). The word "collection" was thus a surplusage and was rightly omitted by the framer of the Constitution of 1956 and the Constitution of 1962.
25. The petitioners' contention is that Article 48 of the Constitution of 1962 does not stand alone, but should be read with the other provisions of this Constitution, namely, Articles 131 and 237. Article 131 provides that the Central Legislature shall have exclusive power to make laws for the whole or any part of Pakistan with respect to any matter enumerated in the Third Schedule. As noted before, one of the matters enumerated in the Third Schedule, item 43(1), is levy of taxes and duties on the production capacity of any plant, machinery, undertaking, establishment or installation in lieu of duties of excise, corporation taxes or taxes on income, other than agricultural income, and taxes on sales and purchases. It is argued that the power of the Central Legislature to make laws with respect to such taxes was exclusive of every other Legislature and every subordinate law-making body. But this view appears to ignore the context in which Article 131 is placed in the 1962- Constitution. This Article appears in Part VI of the Constitution which deals with relations between the Centre and the Provinces and, therefore, the word "exclusive" would mean that the Central Legislature had power in the specified subjects exclusive of the Provinces. This meaning becomes clear from the other clauses of this Article, under which the Central Legislature was empowered to make laws with respect to any matters not enumerated in the Third Schedule if it is necessary to do so in the national interest of Pakistan in relation to the security and financial stability of the country, or in relation to planning or coordination, or achievement of uniformity in respect of any matter.
280. Under the same article, the Central Legislature could further make laws on any matter not within its assigned sphere if a request was made by a Provincial Assembly, or could make laws concurrently with the Provinces for Islamabad Capital Territory and the Dacca Capital Territory, and exclusively make laws for any part of Pakistan not forming part of any of the Provinces.
281. Thus, the expression exclusive should be read in the context in which it has been used, that with reference to the relations between the Centre and the Provinces in their respective legislative89 90 spheres. With regard to Article 237, which provided that notwithstanding anything in the Constitution, taxes or fees levied under any law in force immediately before the "commencing day" would continue to be levied until they were varied or abolished by an Act of the appropriate Legislature, again reference should be made to the context in which this Article appears in the Constitution. This Article forms part of Chapter 3 of Part XII of the Constitution, which made transitional and temporary provisions. The necessity for this Article arose because of change in the legislative spheres of the Centre and the Provinces brought about by the Constitution of 1962, and, therefore, a provision had to be made for the con inuance of taxes and fees already in force.
282. However, this Article did not preclude the Central Legislature from delegating its taxing powers to a subordinate law-making body. The Article should be read with Article 48, which expressly provided that a tax may be levied either by an Act of the Legislature, or under the authority of an Act of the Legislature. A provision similar to Article 237 was contained in Article 230(6) of the Constitution of 1956. Their Lordships of t' e Supreme Court considered the effect of this latter Article in Pakistan Textile Mill-Owner's Association v. The Administrator of Karachi with reference to the sanction by the Chief Commissioner of Karachi of a revised schedule of terminal taxes imposed by the Karachi Municipal Corporation under the Karachi Municipal Act of 1933. This revised schedule added many items of goods which were made liable to terminal tax and also altered the rates of the then existing taxes and, further, made provision for imposition of terminal tax on goody imported by sea or air, in addition to goods imported by railway. Their Lordships upheld the validity of the revised Schedule and the sanction given to it by the Chief Commissioner only to the extent of goods imported by railway. An argument was raised before their Lordships that even the revision of taxes to this extent could be made only by an Act of the appropriate Legislature as required by Article 230(6) of the Constitution of 1956. This argument was rejected on two grounds--firstly, that the Karachi Municipal Act, 1933, was an existing law within the meaning of Article 224 of that Constitution and, therefore, the power conferred by that Act on the Karachi Municipal Corporation and the Provincial Government to revise the Schedule of terminal taxes was validly exercised, and, secondly, the addition of new items of goods for imposition of terminal tax and change in the rates of taxes did not amount to a variation of the tax itself within the meaning of section 230,6) because the tax was in effect a variation in the then existing rates and had been imposed by an existing law, which merely left the filling in of the details of the rates to the Municipal Corporation with the approval of the Provincial Government. What has to be noticed from this judgment is this--that revision of the schedule of taxes in exercise of the power of taxation delegated under the Karachi Municipal Act, 1933 was upheld, as the source of this power was an "existing" law, notwithstanding the requirement of Article 230(6) that existing taxes could not be varied or altered except by an Act of the appropriate Legislature. A fortiori, the validity of a tax levied under the authority of a newly enacted statute of the Legislature should not be open to doubt, as, though such tax is levied by a subordinate body, the source of power for the levy of the tax is the Act of the Legislature. As Articles 224 and 230(6) of the Constitution of 1956 did not prohibit change in the schedule of taxes by addition of new items of goods and by change in rates of taxes in exercise of delegated authority of taxation likewise Article 237 of the 1962-Constitution cannot be interpreted in a way so as to exclude conferment by an Act of the Legislature of power on a subordinate body to levy taxes, particularly when Article 237 has to be read with Article 48 of the Constitution. One further rule laid down by their Lordships in the case just noted is that addition of new items of goods ar change in the rates of taxes was not a variation in the nature of the taxes itself, and therefore, such a change did not come within the mischief of Article 230(6) of the Constitution of 1956. In the present case also, there is much substance in the contention of the learned Attorney-General that levy of excise duties according to production capacity in lieu of levy of such duties on actual production of goods, is, in effect, not a variation in the nature of the tax but merely amounts to alteration in the91 method of assessm ent of the tax. However, I would revert to this particular point later in the course of the present discussion. Turning to the petitioners' arguments, if they are taken to logical conclusion, then an anomalous situation may arise. Excise duties according to the production capacity may be levied, under Article 48, under the authority of an Act of the Legislature, but only in addition to the existing excise duties, and not in lieu thereof. According to the petitioners, the existing excise duties according to actual production could be varied or abolished only directly by an Act of the Legislature, but could not be substituted by duties according to production capacity in exercise of the powers conferred on the Central Board of Revenue and the Central Government under the impugned amendments to section 3 of the Act. I do not think that it is really the case of the petitioners that they should have been made simultaneously liable to two taxes in the nature of excise duty--one according to the actual production of their factories, and the other on the production capacity of their factories. One further point for consideration with regard to the construction of Articles 48, 131 and 237 is that the whole question of delegation of powers of taxation, even of legislative powers, should be considered in the larger background of the fiscal and legislative techniques which were employed in this country prior to the 1962-Constitution. In the Statute Book of Pakistan are found many laws under which wide discretionary powers of taxation are delegated by the Legislature to the Central Government or to other subordinate bodies. Some such laws have already been noticed in the judgment of Rahman, J. (as he then was) in Sheikh Muhammad Ismail v. The Chief Cotton Inspector and others . I may here refer, in addition, to some other important statutes of this nature. One is the Protective Duties Act (LXI of 1950) under which the Legislature has empowered the Central Government to impose duties of custom of such amounts and for such period as the Central Government may think fit on any goods produced or manufactured in any country outside Pakistan, or to change the nature of duty of custom on any such goods, or to reduce the duties so impose at any time the Central Government think fit and proper. The other statute is the Tariff Act (XXXII of 1934). Section 2-A of this Act empowers the Central Government to levy regulatory duties on all or any of the Articles specified in the First Schedule to the Act at any rate not exceeding 25 per cent, of the rate, if any, specified in the Schedule read with any notification issued under section 2(1) or section 3 of the Protective Duties Act, 1950, or at a rate not exceeding 10 per cent. of the value of such articles as determined under section 30 of the Sea Customs Act, 1878. The levy of such regulatory duty Is made subject to such conditions, limitation or restrictions as the Central Government may deem fit or proper. Under section 2 of the Act of 1934, the Central Government is empowered to change the tariff values of any articles enumerated in the First and Second Schedules for the purpose of levy of duties under subsection (1) of this section. It will thus be seen that the Protective Duties Act, 1950 gives uncontrolled powers to the Central Government to fix duties in any amount or at any rate which it considers fit. Under the Tariff Act, 1934, the Central Government is given power to impose regulatory duty in its discretion subject to the rates fixed in section 2-A. But the power to change the tariff values given to the Central Government under section 2(2) of this Act goes much further and no limitation is placed on the exercise of this power, nor any principles are specified for the guidance of the Central Government in this ,behalf. Another law of this nature is the Municipal Administration. Ordinance (X of 1960), section 33 of which empowers a Municipal Committee. With the previous sanction of the Government, to levy all or any of the taxes, rates, tolls and fees mentioned in the Third Schedule. No limitation is prescribed on the rate of taxes etc. which the Municipal Committee may levy. But with regard to the powers of the Municipal committees to levy taxes, it was contended that both in India as well as in the United States the Courts have recognised that such powers have to be implied from the constitutions as local bodies with powers of taxation pre-date the Constitutions themselves. But this is a judge-made rule without any explicit sanction in the language used in the Constitutions. In the fiscal field, the British Parliament92 has employed similar techniques as have been vogue in this country. Reference may be made to the Import Duties Act, 1950 which confers wide powers on the Treasury to alter the rules of duty prescribed by this Statute, and to the Purchase Tax Act, 1963 which confer powers on the Treasury to change the rates of taxes prescribed in the Statute altogether. In considering the validity of the impugned amendments and the notification of the Central Government issued thereunder, the scheme of the Central Excise and Salt Act, 1944, and the fiscal and legislative techniques employed therein should also be kept in consideration. Section 3(1) of the Act provides for levy and collection of duties of excise on all excisable goods which are produced or manufactured in Pakistan, and duty on salt produced in or imported by land into, any part of Pakistan, at the rates set forth in the First Schedule. It is the accepted position that the rates in this Schedule were subject to variation every year by the Finance Acts or Ordinances. Thus, excise duty under section 3(1) of the Act is an impost on actual production. The amendments brought in section 3 of the Act by the Finance Act, 1966 provided that with the prior approval of the Central Government, the Central Board of Revenue may, in lieu of levying and collecting duties of excise on the actual production of excisable goods by notification in the official Gazette, levy and collect duties on the production capacity of plants, machinery, undertakings, establishments or installations producing or manufacturing excisable goods. Under section 38, such a notification is to have effect as if enacted in the Act itself. The Act is an existing law and was provided to continue in force by Article 225 of the Constitution of 1962. The Act contains other provisions which enable notifications and rules issued or made thereunder to be deemed as if enacted in the Act itself. Thus, section 5 empowers the Central Government by notification in the official Gazette to impose on any excisable goods brought into Pakistan duty of customs equivalent to the duty imposed under the Act itself on the like goods produced or manufactured is Pakistan. Under section 6, the Central Board of Revenue is empowered to provide by notification that no person shall, except under the authority and in accordance with the terms and conditions of a licence granted under the Act, engage in the production or manufacture or whole sale purchase or sale or storage of any specified excisable goods. Section 8 contains provisions to enable the Central Board of Revenue by notification in the official Gazette to restrict possession of excisable goods. Under section 12-A, the Central Government is empowered by notification in the official Gazette to exempt any goods or class of goods from the whole or any part of the duty leviable under this Act, and under the same provision, the Central Board of Revenue may by special order in each case exempt any goods from the payment of the duties leviable under the Act. Section 9 of the Act makes contravention of the notifications issued under section 6 or 8 offences punishable with imprisonment for a term which may extend to six months or to fine up to Rs, 2,000 00 or with both. Thus, the Act, even before the amendments introduced in section 3 thereof by the Finance Act of 1966, conferred on the Central Government and the Central Board of Revenue large and wide powers of legislation and taxation by way of imposition of duties or exemption from duties leviable under the Act, and contravention of the provisions so made by the Central Government or the Central Board of Revenue are punishable as offences under section 9 of the Act. The Central Government and the Central Board of Revenue were, in addition to these powers, given powers to make what may be said to be subordinate penal legislation and all such legislation is to be deemed as if enacted in the Act itself. Accordingly, to judge the validity of the impugned amendments to section 3 of the Act, the scheme of the Act itself has to be borne in mind and note has to be C taken of the fact that the Act already contained provisions which conferred considerable powers of legislation, including penal legislation, and taxation on the Central Government and the Central Board of Revenue and that this Act was expressly saved by Article 225 of the 1962-Constitution. Note may here be taken of Mr. Z. H. Lari's argument that the Central Board of Revenue has not exercised its functions in the manner prescribed by the impugned amendments. In that instead of issuing a notification, the Central Board of Revenue has made rules under section 37. According to Mr. Z. H. Lari neither section 37 nor section 38 are now available to save the effect of the impugned amendments. I cannot accept this view. The provisions made by the Central Board of Revenue under the impugned amendments for levy of production capacity tax can be said to have been made through notification, as there is hardly any substantial line of demarcation between notifications and rules under the Act, except that the rules have to be laid before the Central Legislature in the manner prescribed by section 38. Therefore, what the Central Board of Revenue did can validly be treated as notification under section 3(4) of the Act. Here, I should refer to another argument put forth by Mr. Shah Jamil Alam, the learned Deputy Attorney- General, that the Central Board of Revenue exercised the powers conferred on it under the amended provisions of section 3 of the Act not only through notification provided for in the amended subsection (4), but also by invoking the aid of section 37 of the Act. The rules made by the Central Board of Revenue, namely, the Excise Duty on Production Capacity (Cotton Fabrics)
283. Rules, 196S and the Excise Duty on Production Capacity (Cotton Yarn) Rules, 1968, which are under attack in these proceedings, are expressed to be made not only under section 3(4) of the Act, but also under section 37 of the Act, which confers wide rule-making powers on the Central Board of Revenue. It was stated at the Bar, which statement was not disputed, that these rules were placed before the Central Legislature in conformity with the requirement of section 38 of the Act, and therefore, it should be deemed that both the principles formulated by the Central Board of Revenue with the Central Government's prior approval for determination of productive capacity, as well as the determination of productive capacity of the various textiles units, have been approved by the Central Legislature. This argument was perhaps advanced in view of the opinion expressed in some American decisions that where delegated legislation is required to obtain approval of the Legislature before it comes into effect, then it is not necessary for the Legislature to specify legislative policy, standards and principles in the enabling statute under which the subordinate legislation is made. Accordingly, it was contended by the learned Deputy Attorney-General that the petitioners' objections are without force, as the essential legislative or taxing functions have been exercised by the Central Legislature itself in accordance with the provisions of section 38 of the Act.
284. It is possible to take the view that notwithstanding the provisions of section 3(4) of the Act, the Central Board of Revenue could still have recourse to the rule-making powers conferred on it by section 37 of the Act. However, I will refrain from expressing any final opinion on this point, which, for the purposes of this case, is not necessary to decide.
26. The main objections of the petitioners with regard to impermissible and excessive delegation of legislative power by the impugned amendments in section 3 of the Act may now be particularised in this way: (1)that the amendments to section 3 of the Act merely declared that production capacity tax may be levied, without prescribing the guiding principles for this purpose, the formulation of which principles has been left to the Central Board of Revenue subject to the approval of the Central Government, and (2)that the impugned provisions do not lay down the maximum limit at which duties of excise of production capacity were leviable on each cotton textile unit.
285. Before I deal with each of these objections, I would like to make myself clear about the meaning of expressions "Excise Duty" and 'Production capacity". The expression "excise duty" itself has not been defined in this Act. However, in English law the name "excise" is given to duties or taxes levied on certain articles produced and consumed at home. In the United States jurisdiction, this expression is used to signify imposition, sometimes upon the consumption of commodities, and sometimes upon the retail sales thereof. The scheme of the Act suggests that "excise duty" generally signifies an impost on production of commodities in Pakistan. As regards the expression "production capacity", according to K. G. Lockyer (Production Control in Practice-1967 Edn., p. 103), it means the volume of out-put being capable of production in any convenient time by any plant or installation.
286. Another author, Charles A. Koepke in his "Plant Production Control" (p. 94) says-- "that each (item) of equipment in any plant has a certain maximum productive capacity under normal conditions. A foundry cupola can melt a certain quantity of iron at a definite temperature.
287. This capacity is based on the coke--iron ratio, the pressure, the quantity of air blown through the tuyeres and other lesser factors. If any of these factors is changed very much from the theoretical ideal, the production per hour is materially changed."
288. In an article published in "F or ward" a publication of the West Pakistan Industrial Development " under the head "Zeal Cement Factory, A General Review 1956-70", M. A. Ghani Ltd. states, "there are several different concepts of plant capacity. Central The capacity of plant might be viewed from the standpoint of Board of its total maximum output. This is referred to as Theoretical Revenue or Maximum Plant Capacity. Since even under ideal mann-facturing conditions, some bottlenecks, delays and other types of production interruptions normally occur, this ideal level of capacity is almost never used to set predetermined overhead rates. Practical plant capacity represents the theoretical capacity less unavoidable time losses". According to the Attorney-General, it is in context of these meanings that the effect of levy of production capacity tax should be viewed. The tax, according to this argument, retains its character of excise duty on manufactures. Only the method of assessm ent or the tax and its collection has been changed. Previous to the amendments, duty of excise was leviable on actual production of goods, for which purpose a large excise staff and machinery had to be employed. There are no two opinions that this system suffered from abuses and grave irregularities and unnecessary complexities. The change in the method of assessm ent was designed to remove D these difficulties and to simplify the procedure for collection of excise duties. Instead of charging and collecting these duties on actual production, a more simple method was devised, that is, to determine the production capacity of each plant, machinery etc., and charge excisable duty according to the volume of output being capable of production by such industrial unit. With regard to the contention of impermissible or excessive delegation of legislative power, the Attorney-General pointed that the change from levy of duty according to actual production to levy of duty according to production capacity introduced a new experiment in the fiscal field and involved questions of economic adjustments of complicated and technical nature, depending on investigation of myriad facts and situations relating to cotton textile industry through the country. Production capacity of a cotton textile unit could not be determined except by a body, of experts exclusively given to ascertain by continuous investigations economic and technical facts, which would ordinarily include such factors as the age, model and the country of origin of the plant and machinery, the location of industry, the nature of power supply, relations between management and labour, climatic conditions of the E location, availability and use of technical and managerial skill, availability and use of advanced techniques of production, availability and use of skilled, semi-skilled and unskilled labour, the condition of communications and the relations of the place where a particular industry is located with other places in the country which are centres of trade, commerce, export, import and finance.
289. An. idea of the complicated nature of the work involved in determining the production capacity of an industrial unit can be had from the Report of the Awan Committee referred to above. This Committee was appointed, as the report itself suggests, to investigate into the conditions of the textile industry for the purpose of the determination of the production capacity of each textile industrial unit. The Committee worked with the assistance of textile technicians and cost accountants, deputed by the Central and the Provincial Governments and autonomous bodies like the West Pakistan Industrial Development Corporation, Water and Power Development Authority, Pakistan Industrial Credit and Investment Corporation and the Industrial Development Bank of Pakistan. The Committee's investigations extended over several months. The Committee formed Working Groups, each consisting of one textile technician and one cost accountant. These Working Groups were assigned to different regions of the country which are the centres of textile industry.
290. The Committee and the Working Groups carried out consultations with the All Pakistan Textile Mills Association and the managements of the various textile mills. A "pro forma" was prepared and supplied to each textile mill for the purpose of collection of production data. Necessary data was also gathered from the Textile Directorate of the Government of Pakistan. Each group prepared a separate survey report, though there was continuous co-operation and consultation between these groups. On the basis of these reports, analyses and graphical results were prepared with the assistance of qualified staticians deputed by the Director-General, Central Statistical Organization.
291. In the course of the surveys carried out by the Working Groups it was found that a number of mills did not possess any production record at all, and several mills possessed unreliable records which showed considerable gap between the average production of the mill concerned and the standard production of the mill concerned and the standard production of such mill. The Committee, as well as the working Groups, in preparing the final report, took into consideration such factors as machine utilization, machine efficiency from blow-room through looms, incidence of waste, labour deployment, advanced techniques of production and modern techniques in administration and accountancy, control of production exercised in each textile unit, relations between management and the labour, availability and employment of technical staff and the state of specialization in each cotton industrial unit. The Committee worked out the average operations per one thousand spindles and average number of looms per weaver. Thus, a general productive picture was worked out in the spinning and weaving sections of the textile industry, on which the Committee based its conclusion that the efficiency in the spinning field ranged between 75 per cent. to 95 per cent. and in the weaving sector between 45 per cent. to 85 per cent. The Committee then worked out the National Average Annual Production with reference to these varying factors. In another chapter of its report, the Committee worked out the standards of production on the basis of which National Average Production was arrived at. The remaining chapters dealt with the implementation of these standards, the growth factor in each cotton industrial unit, and the prices and profits which prevailed between 1959-60 to 1966-67. Thus, the study of the Awan Committee's Report would show that the National Assembly could hardly be said to be properly equipped to carry out all these investigations and to determine the production capacity of each cotton textile industrial unit. This task had, of necessity, to be entrusted to technically qualified experts, who had to investigate the varying situations and conditions in each Board Industrial unit. If the Legislature was required to carry out all this work before it enacted the impugned amendments to the Act, then the whole scheme would have been impracticable.
292. This function could be performed satisfactorily only by persons technically conversant with the textile industry, who would sit constantly in session and devote their time exclusively to the ascertainment of conditions and factors on the basis of which the production capacity of each cotton textile industrial unit had to be determined. It is with this background that the validity of the amendments introduced by the Finance Act, 1966, in section 3 of the Central Excise and Salt Act, 1944 has to be judged. Now these amendments first provide that in lieu of excise duty on the actual production of goods, the Central Board of Revenue may, with the prior approval of the Central Government, levy and collect duties on the production capacity of plant, machinery, installations etc. By using the expression "duties on the production capacity", the Legislature declared the primary legislative standard as well as the legislative principle for the guidance of the functionaries who were entrusted with the execution of the legislative policy. In one of the American decisions referred to above, legislative policy was found to be implicit in the expression "excessive profits".
293. Everyone understood what this expression meant and, therefore, this expression was held to contain the legislative policy and standards. Likewise, the meaning of the expression "production capacity", as explained above, should be clear to every person engaged in industry. It is a familiar concept in the industrial and economic field, as each industrial unit has to work keeping in view the volume of output capable of production by its plant and machinery. As I have stated, the working out of "production capacity" of any factory is a technical subject and involves complicated factors of economic and fiscal adjustments. The only thing the Legislature could do was to set out the object, that is, that excise duties should be charged according to the production capacity and not according to actual production, and then leave the whole subject to the experts for the purpose of invstigating the conditions in the textile industry and determination of the production capacity of each textile unit. Further, is my view, the Legislature not only declared the primary legislative policy and standard by using the expression "production capacity", but also set out further principles for the guidance of the functionaries to whom task of determining production capacity was entrusted.
294. After declaring the primary standard, the Legislature directed the Central Board of Revenue in section 3(4)(b) of the Act to specify the production capacity of the various plants, machinery, undertakings establishments or installations affected by the imposition of the excise duty according to production capacity. This direction is in the nature of a legislative principle. It was necessary to avoid oppressive and discriminatory enforcement of the new provisions, for which purpose uniform rules had first to be set out for the determination of the production capacity of each industrial unit. This requirement was laid down by the Legislature when it imposed, under clause (a) of subsection (4), an obligation on the Central Board of Revenue to specify in the notification "the guiding principles for the determination of production capacity." After formulation of the principles and determination of the production capacity of each industrial unit, the Central Board of Revenue was required to specify the rates of duty according to the production capacity of each industrial unit and the manner of collection of such duty. Thus, subsection (4) of section 3 of the Act, declares the primary legislative policy and standard. Clauses (a) to (d) of this subsection set out the secondary principles of legislative policy in the shape of directions as to how the Central Board of Revenue should carry out the functions enterested to it. It appears to me that confusions has arisen by the use of the words "guiding principles" in clause (a) of subsection (4).
295. But these, "guiding principles" are not legislative principles, but they are in the nature of subsidiary rules for the purpose of attaining uniformity in the application of the new provisions of the Act to different industrial units. What the Central Board of Revenue was required, when it was directed to specify "guiding principles" was to fill in the details to give effect to the legislative will declared in subsection (4), and to the secondary legislative principles specified in clauses (b) to (d) of this subsection. One further point which may be taken into consideration is, that the process of determining the liability to tax or duty, like determination of production capacity, cannot be treated as legislative function at all. In the present case, the Central Board of Revenue was required to (i) formulate principles for the purpose of determining the production capacity of an industrial unit and, (ii) determine the production capacity of each such industrial unit. This whole process can legitimately be treated as one relating to the determination of the liability of an industrial unit to duties of excise in accordance with productive capacity, and therefore, to fall outside the field of essential legislative functions.
27. As regards the absence of provision for the maximum limit up to which the Central i3oard of Revenue could levy excise duty according to the production capacity of the industrial unit concerned, the judicial view now is that fixation of rates can properly be left to be determined by the executive authority. I have referred to the decision of the Supreme Court in Sheikh Muhammad Ismail & Co. Ltd. v. The Chief Cotton Inspector in which Rahman, J. (as he then was) observed that: -- "the statutory practice of leaving the power to specify the rates of fee to be imposed to the relevant executive agency has a respectable ancestry, as is evident from several statutes.
296. His Lordship referred to several enactments in which such device for levy of rates was resorted to by the Legislature. In the foregoing discussion, I have made reference to the Protective Duties Act, 1950, the Municipal Administration Ordinance, 1960 and the Tariff Act, 1934. Under the first two statutes maximum limit of duties or taxes was prescribed for levy by the Central Government or the Municipal bodies. In the Tariff Act, 1934, the maximum limit of regulatory duty was Mills Ltd. prescribed, but unrestricted power was conferred on the central Central Government to change to any limit or extent the tariff Board of values of any goods liable to be subjected to duty. In a way Revenue such change in the tariff values of goods could result in imposition of duty to an unspecified limit. Notice has been taken in this discussion of an Indian case, the Corporation of Calcutta v. Liberty Cinema in which Sarkar, J. observed that fixation of the rates of tax is not of the essence of legislative power of taxation, which function could legitimately be left by the statute to non-legislative authority, and that making of provision for maximum rate does not supply any guidance as to how the amount of tax should be fixed, because any provision to this effect only sets out a limit of the rate to be imposed and "the limit is only a limit and not a guidance", Then there is the American decision from the Supreme Court of Minnesota Minnesota Ex. Rel. Railroad & Warehouse Commission v. Chicago, Milwaukee & St. Paul Railway Co. in which it was observed that for a Legislature which meets only for a short period of time to attempt to fix rates, would result in ill-advised and haphazard action, productive of the greatest inconvenience and injustice to the public and that such a power could satisfactorily be left to be exercised by a Board or Commission constantly in session, whose time is exclusively given to the subject and who, after investigation of the facts, can fix rates with reference to the peculiar circumstances of each case. Thus fixation of maximum rates of duty is not generally treated as equivalent to legislative guidance, and sometimes it is advisable to entrust fixation of rates to a body consisting of experts in the particular field. I would again repeat that levy of excise duties in accordance with production capacity is a new experiment in the fiscal field. Some degree of flexibility was necessary for the purpose of levy of such duties, so as to permit constant adaptation to varying economic and fiscal conditions without the necessity of recourse to Legislature again and again for the amendment of duties. I should say that it was necessary that fixation of duties in accordance with productive capacity should have been left to the determination of the Central Board of Revenue. This course permitted the Central Board of Revenue to carry out investigations, utilise the results of these investigations and consult the industries affected by the levy of this tax. Fixation of rates according to production capacity by an Act of the Legislature may possibly have resulted in oppressive inconveniences to the cotton textile industry, which would have had no opportunity of recourse to any authority for rectification of any defects either in the rates so fixed, or in the enforcement of production capacity as determined by direct authority of an Act of the Legislature.
28. In the arguments before me, one factor which perturbed the petitioners was that the impugned legislation gave uncontrolled and unbridled discretion and power to the Central Board of Revenue to impose excise duties on productive capacity in any amount and in any manner which they may consider proper, without leaving any remedy to the persons who may be affected by exercise of this discretion. in my opinion, these fears are misplaced. Any legislation of the nature, which is under discussion before me, to save it from being challenged in a Court of law, should contain both substantive as well as procedural safeguards. As to substantive safeguards, a statute should be such that the Legislature should retain intact its control over the statute and its working, that is, the enactment of the statute should not be the result of effacement of the Legislature or abdication by the Legislature of its essential legislative functions. Further, the statute should satisfy the condition that it is law on any of the subjects within the legislative sphere, and should not merely be a law dealing with such subject. In other words, such a law should satisfy the test laid down by Yaqub Ali, J. in the Province of East Pakistan v. Sirajul Haq Patwari that in testing the validity of any such law distinction should be made "between delegation of power to make the law which necessarily involves a discretion as to what it should be and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law." Another test would be, at least with regard to laws enacted under the Constitution of 1962, whether such a law violated the provisions of Article 6 of this Constitution, and whether the delegation of legislative power has led, in the words of Cornelius, C. J. to the defeat of the requirement of "reasonable restrictions" in relation to the exercise of fundamental rights. Further, even independently of the requirements of fundamental rights incorporated in the Constitution, delegated or subordinate legislation must not be in violation of the rule of due process of law, not in the sense in which this expression is understood in the United States, but in the sense that such legislation must be reasonable, and also in the sense in which this expression was employed by Cornelius, C. J., in Abdul Maudoodi v.
297. The Government of West Pakistan . A rule made in exercise of delegated legislative power is liable to be declared invalid by the Courts if it is found to be unreasonable. This test has been .4 applied by the English Courts to bye-laws. Thus in Kruse v. Johnson Lord Russell, C. J., said :-- "if, for instance, they (the bye-laws) were found to be partial and unequal in their operation as between different classes; if they were manifestly unjust ; if they disclosed bad faith; if they involved such oppressive or gratuitous interference with the rights of those subject to them as could find no justification in the minds of reasonable men, the Court might well say `Parliament never intended to give authority to make such rules' they are unreasonable and ultra vires."
298. This rule was applied in two other English cases, Parker v. Bonru-smouth Corporation and Repton School v. Repton R. D. C. . I see no valid reason why the test of reasonableness should not be applied to every rule made in exercise of delegated legislative power. Delegated or subordinate legislation should promote, rather than defeat, the object of the enabling Act. In the present case, it would be open to the Court to examine the provisions of the notifications and rules made by the Central Board of Revenue with reference to this test, and to ascertain whether the statutory power conferred on the Central Board of Revenue to make quasi-legislation has not been exercised for objects which have no sanction in the main Act. It would also be open to the Court to examine whether in fact this quasi-legislation has defeated the main legislation itself or caused results which could not be in the contemplation of the Legislature at all when it conferred statutory powers on the Central Board of Revenue with regard to the levy of duties of excise according to production capacity. Support for this view can also be found in a decision of our own Supreme Court. Thus, in Jibendra Kishore Achharyya Chowdhury v. The Province of East Pakistan , it was observed by Munir, C. J., that action taken in exercise of statutory power may be avoided if it is unjust, oppressive and partial, and that exercise of every such power must be in good faith and for the promotion of the public good and not for annoyance or oppression of a particular class. It is no doubt correct that this observation was made with reference to the exercise of statutory administrative powers. But the principle will apply to every power exercised under a statute, whether it is a power to make subordinate legislation or whether it is a power to take administrative action under the enabling Act. In addition to these sub-stantive safeguards, every rule or quasi- legislation made in exercise of delegated legislative powers should contain procedural safeguards as held by Yaqub Ali, J. in the Province of East Pakistan v. Sirajul Haq Patwari, that is, the persons affected by such delegated legislation should have recourse to some remedy if they are subjected to oppressive, unreasonable and unfair treatment. I have already pointed out that the impugned amendments to section 3 of the Central Excises and Salt Act, 1944 do not suffer from the defects of absence of legislative policy, standards or principles. Nor did the Legislature efface itself or abdicate from its essential legislative functions when it conferred, by the I impugned amendments, power on the Central Boards of Revenue to determine the production capacity of an industrial unit in accordance with the rules formulated by it, nor can this Legislation be said not to93 94 95 96 97 be a law at all on any of the subjects coming within the legislative list of the Central Legislature. As regards the reasonableness of the notifications and rules made by the Central Board of Revenue, I specifically invited the petitioners' learned Advocates to address me on this subject, and to show whether these rules or any part thereof could be treated as unfair, unreasonable or oppressive.
299. However, no arguments were at all addressed to me in this connection. As regards the procedural safeguards, it is enough to point out that the impugned legislation made two provisions in this respect, namely, that the Central Board of Revenue was permitted to enforce excise duties according to the production capacity only with the prior approval of the Central Government, which prior approval was also required for the guiding principles to be formulated by the Central Board of Revenue as well as for determination of production capacities and specification of the rates of duty. The second procedural safeguard is contained in the provision for review made in subsections (5) and (6) of section 3 of the Act, under which production capacity of any industrial unit could be reviewed by a Review Board constituted by the Central Government on the application of an aggrieved party. Thus, the amendments in section 3 introduced by the Finance Act, 1965, satisfy the requirements of both substantive as well as procedural safeguards. One further fact may be noted in connection with the procedural safeguards. During the progress of the discussion before me, the Finance Ordinance (XI of 1973) came into effect, which amended section 3(5) of the Central Excises and Salt Act, 1944, by adding the following proviso :-- "Provided that, in the case of any plant or machinery used for the manufacture of cotton fabrics or cotton yarn, the production capacity of which was determined before the 30th June 1970, any aggrieved person may, within such time as the Central Government may, by notification in the official Gazette, specify in this behalf, make an application in writing to Central Government for re- examination of the prod action capacity, and such application shall be referred by the Central Government to a special Committee constituted for the purpose; and the decision of the Special Committee on such reference shall be final."
300. Thus, additional remedy by way of revision became available to the petitioners. I would adhere that the petitioners' attention was specifically invited to this new provision, but no statement was made at the Bar whether the petitioners have invoked or would invoke this new remedy. Therefore, if there was any absence of procedural safeguards, which there was not, the defect was removed by making provisions for the new remedy of revision. The conclusion from this discussion is that the amendments made in section 3 of the Central Excises and Salt Act, 1944 by the Finance Act of 1966, cannot be said to suffer from the vice of impermissible or excessive delegation of legislative power, nor can the Legislature be said to have effaced itself or abdicated from its essential legislative functions. Considering the nature of the subject with which the Legislature had to deal, sufficient legislative guidance, by way of declaring the legislative policy and primary legislative standards and also secondary legislative principle according to which the Central Board of Revenue was required to act, has been fully set out in the impugned amendments, which also contain both substantive as well as procedural safeguards.' The petitioners' contentions to the contrary cannot be upheld.
29. I will now take up the remaining contentions of the petitioners. One objection put forth on the petitioners' behalf is that even if the validity of the impugned legislation be assumed, the Central Board of Revenue has failed to discharge the functions entrusted to it under the amended provisions of section 3 of the Act. This objection is based on the resolution of the Central Government published in the Gazette of Pakistan, Extraordinary, dated 12th August 1967, by which the Awan Committee was appointed to determine the production capacity of individual cotton textile factories. It is pointed out that this resolution also laid down the guiding principles which were subsequently adopted by the Central Board of Revenue in the notification and the rules referred to above, in addition to the directions with regard to the manner in which the Committee was required to carry out its functions. Thus the contention is that all that which had to be done under the amended provisions of section 3 of the Act by the Central Board of Revenue, had already been done by the Central Government by its aforesaid resolution. But this contention is not borne out by the Government's file which was male available in Court by the Deputy Attorney-General.
301. This file shows that the Central Board of Revenue prepared a draft of the guiding principles and forwarded this draft on 23rd June 1967 to the Ministry of Finance, Government of Pakistan, for Central Government's approval with the suggestion that a Committee be appointed to carry out the necessary investigations for determination of the production capacity of the individual cotton textile factories. It was on this recommendation that the Central Government passed its aforesaid resolution and appointed the Awan Committee. This resolution was published under the signature of Mr. N. H. Jaffery, who held the office of the Member of the Central Board of Revenue as well as that of Joint Secretary to the Government of Pakistan in the Ministry of Finance. The Government's file, therefore, shows that the guiding principles were first formulated by the Central Board of Revenue and then submitted to the Central Government for its approval as required by the amended provisions of section 3 of the Act. Moreover, the exercise of power conferred on the Central Board of Revenue by the impugned legislation was subject to the prior approval of the Central Government, and under this power of approval it was quite competent for the Central Government to cause investigation of facts and conditions to be made by appointing a Committee for this purpose, so that the Central Government should have the full picture before it to enable it to form opinion whether it should approve the notification of the Board under section 3(4) of the Act.
302. The next objection of the petitioners is that the Awan Committee itself determined the production capacity of each cotton textile factory, though this function had to be discharged by the Central Board of Revenue under the impugned legislation. Again, the Government's file does not support this objection. The Awan Committee did in fact make suggestions with regard to the production capacity of the individual cotton textile factories, but pages 6 to 10 of the Government's file show that in each case the Central Board of Revenue made alterations in the production capacity suggested by the Awan Committee. Another objection of the petitioners is that the Central Board of Revenue, instead of performing its functions under the amended provisions of section 3 of the Act at different stages, did all these acts simultaneously. What the petitioners argue is that first guiding principles should have been formulated and published, then production capacities of individual cotton factories should have been determined, and thereafter rates of duty should have been specified, but that, by doing all these things at one and the same time through one notification, the Central Board of Revenue deprived the petitioners of the right to be heard, which has resulted in breach of the rules of natural justice. But the petitioners, in taking this objection, ignore the fact that the notifications and the rules promulgated by the Central Board of Revenue are in the nature of subordinate or delegated legislation. It is a well-accepted principle now that making of subordinate legislation need not be preceded by notice of hearing unless the enabling Act so provides (See: Judicial Review of Administrative Action by S. A. de Smith, 2nd Edn., p. 169). Moreover, the petitioners as well as all the other managements of cotton textile factories were in fact heard and consulted by the Awan Committee before the Central Board of Revenue notified the guiding principles, the production capacity of each individual factory and the rates of duty leviable on such factories. This fact is fully borne out by the report of the Committee. However, even if it be assumed' that it was statutorily necessary to give hearing to the petitioners, then sufficient provision to this effect was made in subsections (5) and (6) of section 3 of the Act, which provided for the constitution of a Review Board to hear the review application of an aggrieved party against the determination of production capacity of its factory. This was sufficient compliance with the requirements of the rules of natural justice. For support of this view I would make reference to the decision of the Supreme Court in M. M. Ispahani Ltd. v. Haji Muhammad Sultan , in which it was98 held, with reference to the Sind Rent Restriction Act (X of 1947), that rules of natural justice should be held to have been complied with by grant of right of revision to the landlord, and, therefore, the Rent Controller was under no obligation to issue notice to the landlord before making an order of allotment of his premises under section 5 of the Act. In fact, the two petitioners before me did submit review applications to the Review Board set up under subsections (5) and (6) of section 3 of the Act. The orders made in review are before me, and I find that they are well reasoned orders and have taken into consideration every submission put forth by the petitioners before the Review Board. These petitioners failed to show that the Review Board either refused to take into consideration any of their submissions or rejected any such submission unfairly or unreasonably.
303. Therefore, the plea that rules of natural justice have not been complied with cannot prevail in these cases. It was then contended that the amended provisions of section 3 of the Act gave uncontrolled discretion to the Central Board of Revenue to select for any industry or any factory one of the two duties, that is, excise duties on actual production of goods, and duties according to the production capacity of a particular factory, merely by an executive order. But conferment of this kind of power is not unknown in our Constitution and the validity thereof has been sustained in several decisions. I would refer to the Privy Council decision in King-Emperor v. Benori Lai Sharma , in which it was held that legislation by which the local Government or some officers of that Government were empowered to direct what offences or class of offences or what cases or class of cases should be tried by the Special Courts was merely an example of the not uncommon legislative arrangement by which the local application of the provisions of a statute is determined by the judgment of the local administrative bodies. This view was approved by Hamoodur Rahman, J. (as he then was) in the Province of East Pakistan v. Sirajul Haq Patwari. In the same connection it was further contended that sub-section (4) of section 3 of the Act empowered the Central Board of Revenue to levy the excise duties according to production capacity by an executive order, and at the same time subsection (7) conferred authority on the Central Board of Revenue to cancel any notification issued under subsection (4) by a mere executive order. The petitioners' complaint on these provisions is that the Central Board of Revenue is thus enabled, by such unqualified power, to pick out any industry or any particular industrial unit for levy of excise duty according to production capacity and, again, in its unfettered discretion to withdrew such levy and substitute it by charging excise duty according to subsection (I) of section 3 of the Act on actual production of goods. It was suggested that the amended provisions of section 3 of the Act are ex facie discriminatory, and at least liable to be enforced in an arbitrary and discriminatory manner. One reply to this argument is that it is not sufficient for the petitioners merely to show that the impugned legislation is capable of being used in a discriminatory manner. They should further establish that in fact the enactment has been used in a discriminatory manner. This is the rule laid down by their Lordships of the Supreme Court in Jibendra Kishore Achharyya Chowdhury v. The Province of East Pakistan. To succeed in this argument, the petitioners had to show that the enforcement of the amended provisions of section 3 of the Act was discriminatory as against them, but no such case was made out before me. As regards the discretion conferred by subsections (4) and (7) on the Central Board of Revenue to levy excise duties according to productive capacity by notification in the official Gazette, and to subsequently cancel such notification, it is enough to repeat what I have said above, that introduction of the new provisions for levy of excise duties according to the production capacity was a new experiment in the fiscal field, and, therefore, some flexibility had to be allowed to the Central Board of Revenue to enable it to withdraw excise duty according to production capacity if this experiment did not prove a success. In view of the nature of the new fiscal experiment, provision had to be made to enable the Central Board of Revenue to adapt its policies to unknown future conditions without the necessity of having to approach the Central Legislature99 to amend the law again and again. Further, it is not the petitioners' case that subsections (4) and
(7) of section 3 of the Act have been enforced in any discriminatory or arbitrary manner.
30. Thus, I have dealt in detail with each and every point put forth by the petitioners before me either against the validity of the amendments made in section 3 of the Act by the Finance Act of 1966 or against the validity of the notifications issued by the Central Board of Revenue under these amended provisions, or against the levy of excise duties according to production capacity of the petitioners' cotton textile factories. The petitioners have not been able to sustain any of their contentions or objections. I would, therefore, hold that Petitions Nos, 538 of 1969 and (60 of 1969 should fail and I, therefore, order accordingly. However, I make no order as to costs as these cases involved complicated questions of constitutional law relating to delegation of legislative functions and powers of taxation.
304. In the end I must express my indebtedness to the learned counsel who have appeared before me in this case, particularly to Mr. Sharifuddin Pirzada, the Attorney-General of Pakistan, Mr. A. K. Brohi, Mr. A. S. Pirzada, Mr. Khalid Anwar and Mr. Muhammad Ak ram, on whom the main burden of arguments before me fell, for the valuable assistance they provided to me in resolving intricate constitutional and legal problems on which very elaborate and lengthy arguments were addressed to me, and also to another Advocate, Mr. S. A. Sarwana, who made available to me standard works on industrial production to which reference has been made by me in the course of this judgment. 293 U S 388 295 U S 495 AIR 1965 SC 1107 AIR 1967 SC 1801 AIR 1967 SC 1895 AIR 1967 SC 691 332 U S 245 210 U S 281 249 U S 397 AIR 1951 SC 332 AIR 1954 SC 569 AIR 1958 SC 909 AIR 1963 SC 1811 AIR 1968 SC 162 AIR 1965 SC 1107 AIR 1969 SC 1094 (1885) 10 A C 282 PLD 1966 SC 865 PLD 1964 SC 673 PLD 1957 SC (Pak.) 157 PLD 1964 SC 410 PLD 1956 Kar. 250 (1963) 2 All E R 66 (1924) 1 K B 171 AIR 1937 P C 265 PLD 1959 Kar. 669 PLD 1969 Lah. 289 PLD 1959 SC (Pak.) 251 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLD 1959 SC (Pak.) 364 PLD 1961 SC 119 PLD 1969 SC 241 PLD 1966 SC 854 343 U S 579 23 U S 10 (1852) 1 Ohio St. 77 220 U S 506 295 U S 602 143 U S 649 287 U S 77 289 U S 310 307 U S 533 310 U S 381 319 U S 190 321 U S 414 334 U S 742 277 U S 394 329 U S 90 210 U S 281 249 U S 397 332 U S 245 234 U S 476 344 U S 298 373 U S 546 293 U S 388 295 U S 495 38 Minn 28=137 N W 782 278 U S 189 AIR 1949 FC 175 (1877) 3 A C 889 1933 A C 156 AIR 1954 SC 569 AIR 1954 SC 465 A 1 R 1957 SC 478 AIR 1959 SC 586 AIR 1961 SC 1381 AIR 1958 SC 909 AIR 1961 SC 4 AIR 1965 SC 1107 AIR 1967 SC 212 AIR 1967 SC 1895 AIR 1968 SC 1232 (1885) 10 A C 282 (1871) 4 QB1 (1884) 9 AC 117 (1915-1916) 21 C L R 433 (1918) 25 C L R 24129 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 (1920-21) 29 C L R 329 (1931-32) 46 C L R 73 276 U S 394 (1940-41) 64 C L R 470 PLD 1952 FC 29 PLD 1958 SC (Pak.) 41 PLD 1961 SC 178 72 I A 57 PLD 1966 SC 388 1919 A C 935 321 LI S 503 PLD 1966 SC 854 AIR 1958 Mad, 343 1951 SCR 3 PLD 1963 SC 137 PLD 1966 SC 388 PLD 1964 SC 673 (1898) 2 Q El 91 (1902) 66 J P 440 (1918)2 K B 133 PLD 1957 SC (Pak.) 9 PLD 1961 SC 76 72 I A 57