MITHAN LAL v. T.FJE STATE OF DELHI & Anr.

"Parliament has power to make laws with respect to any matter for any part of the territory of India not included in Part A or Part B of the First Schedule not- withstanding that such matter is a matter enumerated in the State List.'' In exercise of the power conferred by this Article, Parliament enacted the Part• C 8tates (Laws) Act No. XXX of 1950, ands. 2 thereof is as follows: "The Central Government may, by notification in the Official Gazette, extend to any Part C State (other than Coorg and the Andaman and Nicobar Islands) or to any part of such State, with such restrictions and modifications as it thinks fit, any enactment which is in force in a Part A State at the date M the Notification ............ " On April 28, 1951, the Chief Commissioner of Delhi issued a notification under this section extending the operation of the Bengal 'Finance (Sales Tax) Act, 1941, to Delhi as from November 1, 1951. Acting under the provisions of this Act, the Sales Tax Officer, Karolbagh, l)elhi issued on June 12, 1952, notices to the petitioners calling upon them to submit returns of their receipts from building contracts and to deposit the taxes due thereon. In compliance with these notices, the peti tioners were sending quarterly returns of their taxable turnover and assessment orders were also made in respect of their annual turnover for the years 1951- 1952 and 1952-1953, and the amounts due thereunder the year 1953-1954, natl also been paid. For the quarterly returns had been submitted and the tax due thereon deposited, and procedings were pending for assessment of tax for that year. This was the position whEl''~ the Madras High Court pronounced its decision in Gannon Dunkerley & Co. v. State of Jl,fadras ('),that the provisions of the Madras General Sales Tax Act, 1939, imposing tax on the supply of materials in construction works were ultra vi1es the powers of the Provincial Legislature under Entry 48 (1) (1954] 5 S.T.C. 216 . • • • , ' f .. .• S.C.R. SUPREME COURT REPORTS 449 8 ' I95 Mithan Lal v. Ve>tkatarama Aiyar f. the validity of Basing 'themselves on this judgment, the petitioners in List II, Sch. VII to the Government of India Act, 1935. who had been acting so far on· the view that thene state of Delhi provisions of the Bengal Finance (Sales Tax) Act, 1941, imposing tax· on construction contracts were valid and had been paying tax in 'that belief, filed Civil Writs Nos. 244-D and 247 ·of 1954 in the Punjab High Court challenging p1'ovisions on the gtound that there was no sale of materials used in execution of a building contract, and that a tax thereon was not authorised by Entry 48. They accordingly prayed (a) for a writ of certiorari quashing the assessments for the years 1951- 1952 and 1952-1953, (b) for a writ of prohibition restraining proceedings for assessment of sales tax for the year 1953-1954 or realisation of any tax for that year, and (c) for a writ of mandamus directing the. respondents to forbear in future from assessing the petitioners to sales tax under the impugned provisions. Both these petitions were summarily dismissed by the High Court on October 18, 1954, and the orders of dismissal, not having been challenged in appropriate proceedings have become final. Now, the present attempt of the petitioners is to reopen the question which had been answered agains.t them by the High Court of Punjab by resort to proceedings under Art. 32 of the Constitution. It is therefore not surprising that the learned Solicitor General appearing for the respondents should have taken preliminary objections of a serious charactei; to 1:;.he maintainability of these petitions. He contended that the petitioners having filed petitions under Art. 226 claiming the very reliefs which they have now ·prayed for and on the very grQllnds now put forward, and those petitions having been dismissed and no appeals having been filed against the orders of dismissal, they had no right'to invoke the jurisdic tion of this Court under Art. 32 for · obtaining the samr:i reliefs. He further contended that the claim of the petitioners that the assessments in question, being • • . • 450 SUPREME COUi:tT REPORTS [1959] i95B Aiya' J. Mithan Lal v. unauthorised, constituted an interference with their fundamental right to carry on business under Art. 19 (l)(g) could not he maintained inasmuch as assess- n, Stat, of Ddhi ment proceedings had been completed and the tax realised. He also argued that even if the petitioners y,,.katamma were right in their contention that the assessments were unauthorised, their remedy was to sue for refund of the taxes paid, and that the applications for writ of certiomri to quash the orders of assessment were misconcefrcd. It was further ·contended that the payments having been made by the petitioners voluntarily-it might be under a misconception of their rights-they had no right to claim refund of the amounts even by action. These contentions raise questions of considerable importance; but it is unneces sary to express our opinion thereon, as the petitiov-ers also pray for a writ of mandamus directing the res pondents to forbear from imposing sales tax in future, and it will be more satisfactory to decide the case on the merits. The contention of the petitioners based on the decision of the Madras High Court in Gannon Dunkerley & Co. v. State of ~Madras (1) is that the State Legis latures acting under Entry 48 have no competence to enact laws imposing tax on the supply of materials in execution of works contract, as there is no sale of those materials by the contractor. The decision in Gannon Dunkerley cf1 Co. v. State of Madras (1 ) was taken on appeal to this Court in Civil Appeal No. 210 of 1956, and by our judgment, The State of Madras v . • Gannon Dunkerley & Co., (Madras) Ltd.(') pro nounced on April 1, 1958, we have affirmed it, and if the present case iq governed by that judgment, the petitioners would clearly be entitled to succeed. But it is contended. by the learned Solicitor-General that that decision has no application to the present petitions, because the impugned law was enacted not by a State Legislature in exercise of the power conferred by Entry 54 in List II but by Parliament by virtue of the authority granted by Art. 246( 4) of the Constitution, (1) [1954] 5 S.T.C. 210 . (z) [1959] S.C.R. 3i9· • • • S.C.R; SUPREME COURT REPORTS 451 v. Venkataram,a Aiyar J. and that it was within the competence of Parlia ment acting m.1der that Article to impose a tax on the Mithan Lal supply of materials in building contracts, even though there was no sale of those materials within Entry 54. The State of Delhi . In our opinion, · this contention is well-founded. Art. 246, Cls. (2) and (3), of the Constitution confer on the Legislatures of the States mentioned in Parts A and B the power to make laws with respect to the matters enumerated in Lists II and III of Sch. VII, and one of those m"atters is " Tax on the sale of goods ", Entry 54 .in List II. It is with reference to the corresponding, Entry in the Government of India Act, 1935, Entry 48 in List II, that we have held in The State of Madras v. Gannon Dunkerley & Co., Madras Ltd. (1) that the power to tax sale of goods conferred by that Entry has reference only to sales as defined in the Indian Sale of Goods Act, 1930. But here, we are concerned not with a law of a State mentioned in Part A or Part B but with that of a State in Part C. Under Art. 246(4) it is Parliament that has the power to legislate for Part C States, and that power limitations is untrammelled by the prescribed by Art. 246, Cls. (2) and (3), and Entry 54 of List II, ;:i,nd is plenary and absolute, subject only to such restrictions as are imposed by the Constitution, and there is none such which is material to the present question. It would therefore be competent to Parliament to impose tax on the supply of materials in building contracts and to impose it under the name of sales tax, as has been done by the Parliament of the Commonwealth of Australia or by the Legislatures of the American States. The decision in The State of Madras v. GannonDunkerley & Co., Madras Ltd. (1 which was given on a statute.passed by the Provincial Legislature under the Government of I1'dia Act, 1935, has therefore no application to the present case. ) It is argued that though Parliament has the power under Art. 246(4) to make a law imposing tax on construction contracts, that power is subject to the that under that limita.tion contained in Art. 248, Article it is Parliament that has the exclusive power (1) (1959J s.c.~: 379. • • • • 452 SUPREME COURT REPORTS [1959] l' r958 . d 1 b t "t Aiyar J. Milhan Lal v 1 b p ar 1amen 1 se to enact laws in respect of matters not enumerated in the Lists, including taxation, and that such a power cou proper y e exercise on y y The sia1<. of Delhi imposing a tax and not by its extending the operation of a taxation law passed by the Legislature of a V enkatamma State ; and that s. 2 of the Part C States (Laws) Act to be bad as being repugnant to must be held Art. 248(2) in so far as it conferred on the Government authority to extend a taxation law to Part C States. This argument proceeds on a m"isapprehension of the true scope of Art. 248. That Article has reference to the distribution of legislative powers between ~he Centre and the States mentioned in Parts A and B under the three Lists in Sch. VII, and it provides that in respect of matters not enumerated in the Lists including taxation, it is Parliament that has powJ)r to enact laws. It has no application to Part C States, for which the governing provision is Art. 246( 4 ). Moreover, when a notification is issued by the appro priate Government extending the law of a Part A State to a Part C State, the law so extended derives its force in the State to which it is extended from s. 2 of the Part C States (Laws) Act enacted by Parliament. The result of a notification issued under that section is that the provisions of the law which is extended become incorporated by reference, in the Act itself, and therefore a tax imposed thereunder is a tax imposed by Parliament. There is thus no sub stance in this contention. It is next contended for the petitioners that even a~suming that Parliament was competent to impose a tax on the supply of materials in a building contract and that could be done by a notification extending the law of a Part A State, the notification dated April 28, 1951, is, in oio far as it relates to the impugned provisions, in excess of the authority conferred by s. 2, because that section limits the authority of the Central Government to extend laws of Part A States to Part C States; to "any enactment which is in force" at the date of the notification, and, as the impugned provisions of the Bengal Finance (Sales Tax) Act, 1941, w1ire ultra virea Entry 48 under which' the Legislature . . • • • ' S.O.R. SUPREME COURT REPORTS 453 z958 its power Venkattlrama Aiyar.J. L 1 · " ~~ a of the Province of Bengal derived impose sales tax, they were not "in force " in the M. h State of West Bengal at the date of the notification, and could not therefore be extended to the State of Ths state of Delhi Delhi. According to the petitioners, "enactment in force" in s. 2 must be construed as meaning pro- visions of a statute which are valid and enforceable. We are unable to agree with this contention. Though the language of s. 2 might, in the abstract, be susceptible of the con•struction which the petitioners seek to put upon it, in the context that is not, in our opinion, its true meaning. What is intended by that section is that with reference to different topics of legislation on which the several States in Part A had enacted different statutes, the authority acting under s. 2 ~hould have the discretion to extend that statute in any of the Part A States which is best suited to the conditions in the particular Part C State to which it is to be extended, and that, further, the authority should have the power to extend it with suitable "restrictions and modifications". It could not have been intended by this section that the authority concerned should take upon itself to examine the vires of each and every one of the provisions in the statute, and then extend only such of them as it considers to be valid. In our view, the expression "enactment which is in force in a Part A State" must be construed as meaning " statute which is in operation in a Part A State" as distinct from a statute which had been repealed and it cannot be interpreted as having reference to individual sections or provisions of a statute. But even if we accept the narrow construction contended for by the petitioners, that would not. make any difference in the result, as the authority conferred by s. 2 on the Government to extend the enactments in force in Part A State includes a power to do so with restrictions and modifications, and it was within the competence of the Government acting on thi~ provision to incorporate on its own authority the impugned provisions by way of modification of the Bengal FiI).ance ~Sales Tax) Act, 1941. It is said th~t. • 58 • • .... .. 454 SUPREME COURT REPORTS [1959] . 1 r958 M•t ·~.n Lal the notification does not, as a fact, purport to modify the Bengal Act, but merely extends the whole of it on a mistaken notion that it is all valid. But that does The State of Ddhi not affect the position. The notification intends that all the provisions of the Bengal Finance (Sales Tax) Vsnkatarama Act, 1941, should operate in the State of Delhi, and if that could be effectuated by recourse being had to any of the pmvers of the Legislature, that should be dofJ.e and the legislation upheld as referable to that power. U t res magis valeat quarn per eat~ Aiyar J. It is lastly urged thats. 2 of the Part C States (Laws) Act is bad for the reason that it confers on the Govern ment a power to modify laws passed by State Legisla tures, and that it is an unconstitutional delegation of legislative powers to authorise an outside authority to modify a law enacted by a Legislature on wh~t are essentially matters of policy. Now, it should be noted that in In re The Delhi Laws Act, 1912 etc. (1 ) one of the questions referred. for the opinion of this Court related to the vires of this very provision, and the answer of the majority of this Court was that the first portion of the section, which is what is material for the present discussion, was valid. Counsel for the peti ti6ners, however, relies on the decision of this Court in Rajnarain Singh v. The Chairman, Patna Administra tion Committee, Patna and another ('), wherein it was held than an executive authority could be authorised by a statute to modify either existing or future laws but not in any essential feature, and that a modification which involved a change of policy of the Act would be bad. It is argued that it is a question of policy whether taxes should be imposed on the supply of materials in building contracts; and that, therefore, the power conferred bys. 2 on the Government to extend a law with modificii.tions cannot be exercised so as to modify a/.ifroyision of the Beng:,t~ , Finance (Sales Tax) Act, 1941, rel.ating to that mat~e.r.,. ,The answer to this contentior{ "is . that the' niodifi, cation made by the Central GovetHment, assuming that tlia.t. is its true character, does not.involve any chmige Of poricy iinder- lying the Bengal Fi'nAnce '(Sales Tax) Act, 1941,." Incieed, t}i.e .modification gi-i?es;'~,ff·~ct to the. policy of ~~a:t . (1) [;951) S.C,R. j47. (2) [1955) I S.C.R. 290" . • , <( ' • S.C.R. SUPREME COURT REPORTS enactment .which was to bring· cbnstruction contracts within the ambit of the tax;a.tion powers of the State, Mitha11 Lal and which failed only for want ·of legislative authority. Whether we view the notification as one extending aTJwState of Delhi subsisting statute to Delhi or as extending it with modifications so far as the impugned provisions are concerned, it is intra vires s. 2. • All the contentions urged by the petitioners having failed, the petitions are dismissed with costs . . • Venkatar!lma Aiyar J. x958 · v. . . Petitions dismissed~ • J. K. CHAUDHURI v. H,, K. DATTA GUPT:k & OTlIERS' (BIIAGWATI, J. L. KAPUR and A. K, SARKAR JJ.) ,. . ' ' ' .April 7. ' · University of Gauhati, powers of-:-Principal dismissed by Governing Body of College~If University can interfere-'---Gauhati University Act (Ass. XV I of I947), ss. 2, 9, I2 and ZI, Statutes of the University, els. I, 2 and 3. . · R was appointed Professor of Math'ematics in a College affili ated to the Gauhati University. He was later appointed Princi pal of the College. On complaints being made against R the Governing Body of the College held an enquiry artd or:dered his dismissal as Principal and Professor of Mathematics. R made representations to the Vice-Chancellor of the Gauhati University and the Executive Council of the University appointed a com mittee to report on the propriety of the action taken. Upon the report of the committee that there was no reasonable gro1V1d justifying. the dismissal of R, the Executive Council passed ·a resolution directing the Governing Body to reinstate R : Held, that the Executive Council acted without jurisdiction in so far as it interfered with the action taken against R as the Principal of the College .. The Gauhati Universify Act, 1947, and the Statutes framed under s. 21(g) thereof made a qistinction between a Principal and a teacher. Clause 3(g)(v) ofthe Statutes empowered the Executive Couqcil to interfere only with the action taken by the Governing Body of an affiliated College against a teach~ a·nd not with action taken against a Principal. ,. CIVIL APPELLATE JURISDICTION; Civil Appeal No. 321 of 1957. . . •