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Delhi Cloth and General Mills Vs. Municipal Corporation of Delhi and ors. - Court Judgment

LegalCrystal Citation
SubjectOther Taxes
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal Nos. 1321 of 1978 and 24 of 1979
Judge
Reported inILR1981Delhi846
ActsDelhi Municipal Corporation Act, 1957 - Sections 150; Constitution of India - Article 14
AppellantDelhi Cloth and General Mills
RespondentMunicipal Corporation of Delhi and ors.
Advocates: Ravnder Narain,; A.N. Haksar,; T.A. Ansari,;
Cases ReferredDelhi Municipality v. B.C.S.
Excerpt:
delhi municipal corporation act, 1957 - section 150--when can the corporation levy tax on different criteria--when it is discriminatory and vocative of article 14 of the constitution--test.; the writ petitions in the instant case give rise to the questions relating to the validity of the levy of the tax by the municipal corporation of delhi payable by the consumers of electricity on energy generated by themselves within the area of the corporation under the delhi municipal corporation act, 1957. delhi municipal corporation is created by statute and authorised to levy taxes on persons, articles and properties. under section 150 of the act, the corporation is required to pass a resolution defining the maximum rate of tax to be levied, the class or classes of persons or the description or.....s.s. chadha, j. (1) civil writ 1321178 and civil writ 24179 raise common questions relating to the validity of title levy of the tax by the municipal corporation of delhi payable by the consumers of electricity on energy generated by themselves within the area of the corporation. (2) an act to consolidate and amend the law relating to the municipal corporation of delhi was enacted by parliament in delhi municipal corporation act, 1957 (hereinafter referred to as the act). the relevant provisions for the purposes of disposal of these cases are briefly these. section 42 of the act lays down the obligatory functions of the municipal corpora'ion of delhi (hereinafter referred to as the corporation). section 43 lays down the discretionary functions of the corpora'ion. the provisions relating.....
Judgment:

S.S. Chadha, J.

(1) Civil Writ 1321178 and Civil Writ 24179 raise common questions relating to the validity of title levy of the tax by the Municipal Corporation of Delhi payable by the consumers of electricity on energy generated by themselves within the area of the Corporation.

(2) An Act to consolidate and amend the law relating to the Municipal Corporation of Delhi was enacted by Parliament in Delhi Municipal Corporation Act, 1957 (hereinafter referred to as the Act). The relevant provisions for the purposes of disposal of these cases are briefly these. Section 42 of the Act lays down the obligatory functions of the Municipal Corpora'ion of Delhi (hereinafter referred to as the Corporation). Section 43 lays down the discretionary functions of the Corpora'ion. The provisions relating to revenue and expenditure are contained in Sections 99 to 112 in Chapter VII. Section 99 provides for the constitution of the Municipal Fund. All moneys raised by tax, rate or cess levied, for the purposes of the Act, form one fund entitled the Municipal Fund of Delhi. The Municipal Fund is held by the Corporation in trust for the purposes of the Act. Section 102 lays down the prohibition to the effect that no payment of any sum out of the Municipal Fund shall be made unless the expenditure of the same is covered by a current budget-grant and a sufficient balance of such budget-grant is still available notwithstanding any reduction or transfer thereof which may have been made under the provisions of the Act. This is subject to a proviso, which is not relevant here. That proviso, however, lays down certain exceptional circumstances when payments can be made. Section 105 lays down the application of the Municipal Fund by saying that the moneys from time to time credited to the Municipal Fund shall be applied in payment of all sums, charges and costs necessary for carrying out the provisions of the rules, regulations and bye-laws made there under, or of which paymeat is .duly directed, sanctioned or required by or under any of the provisions of the Act. Such moneys shall likewise be applied :in payment of all sums payable out of the Municipal Fund under any other enactment for the time being in force. Under Section 109 the Corporation is obliged on or before the 31st day of March of every year to adopt for .the ensuing year the budget estimates, namely :

(A)budget estimate (general) which shall be an estimate of the income and expenditure of the Corporation to be received and incurred on account of the Municipal Corporation of Delhi,

(B)budget estimate (electric supply) which shall be an estimate of the income and expenditure of the Corporation to be received and incurred on account of the Delhi 'Electric Supply Undertaking,

(C)budget estimate (water supply and sewage disposal) which shall be an estimate of the income and expenditure of the Corporation to be received and incurred on account of the Delhi Water Supply and Sewage Disposal Undertaking. On or before the 15th day of February of each year the Corporation is obliged to determine the rates at which various municipal faxes, rates and cesses are to be levied in the next following year and 'save as otherwise provided in the Act the -rates so fixed cannot be subsequently altered for the year for which they have been fixed. Section 110 empowers the Corporation to alter the budget estimates relating to budget grants from time to time during the year. Under Section 111 power is conferred on the Corporation to re-adjust income and expenditure during the .year. For the purpose of adjusting the year's income to the expenditure, the Corporation is empowered either to diminish the sanctioned expenditure of the year so far as it may be possible so t'o do yvi'h regard to all the requirements of the-Act,orhave recourse to supplementary taxation under Section 151 or to increase of the rates .of cesses, fees, fares and other charges livable under the Act, or to adopf all or any of those methods.

(3) Chapter Viii provides for the taxation. The taxes to be imposed by the Corporation under the Act are enumerated in Section 113. Sub-section I of Section 113 requires the Corporation to levy the six named taxes. By sub-section 2 the Corporation is authorised in addition to the compulsory taxes specified in Sub Section (1) to levy for the purposes of the Act any of the seven named taxes which, inter alias includes 'a tax on the consumption, sale or supply of electricity'. Sections 114 to 149 of the Act set out elaborate provisions relating to the rates of compulsory taxes to be levied, the class or classes of persons or the description or descriptions of articles and properties to be taxed, the system of assessment to be adopted and the exemptions, if any, to be granted, the standards and guide lines for determining the rates of taxes, the specification of the maximum rates of taxes, etc.

(4) Imposition of other taxes is provided in Section 150 reading as follows:

'(1)The Corpora ion may, at a meeting, pass a resolution for the levy of any of the faxes specified in sub-section (2) of section 113, defining the maximum rate of the tax to be levied, the class or classes of persons or the description or descriptions of articles and properties to be taxed, the system of assessment to be adopted and the exemptions, if any, to be granted.

(2)Any resolution, passed, under sub-section (1) shall be submitted to the Central Government for its sanction, and if sanctioned by that Government, shall come. into force on and from such date as may be specified in the order of sanction.

'.....(3)After a resolution has come into force under sub-section (2), the Corporation may, subject to the maximum rate, pass a second resolution determining the actual rates at which the tax shall be leviable; and the fax shall come info force on the first day of the quarter of the year next following the date on which such second resolution is passed.

(4)After a tax has been levied in accordance with the foregoing provisions of this section, the provisions of sub-section (2) of section 109, shall apply in relation to such tax as they apply in relation to any tax imposed under sub-section (1) of section 113.'

Section 151 lays down that whenever the Corporation decides to have recourse to supplementary taxation under sub-section 2 of Section 111 in any year, it shall do so by increasing from such date as the Corporation may determine, the rates at which any tax livable under the Act is being levied, but every such increase shall be made subject to the maximum rate and any other limitation specified in respect of such tax. In the backdrop of these statutory provisions the facts arising in these cases may now be noticed.

(5) The procedure prescribed for approval of the maximum rate under Section 150 of the Act is that in first instance the Corporation is required to pass a resolution defining the maximum rate of tax to be levied, the class or classes of persons or the description or descriptions of articles and properties to be taxed, the system of assessment to be adopted and the exemption, if any, to be granted. The Corporation passed such a resolution and submitted to the Central Govt. for its sanction. The maximum rates on the consumption, sale or supply of electricity under Section 150(2)' of the Act were notified vide their Notification No. 13l3j65-Delhi dated Decembers, 1965. The maximum rate of tax payable bytile consumers of electricity on energy obtained from a licensee within the area of Corporation for commercial, agricultural and industrial power was 1 paise per KWHR. The tax payable by the consumers of electricity on energy generated by themselves within the area of the Corporation for the similar purposes was also I paise per 'KWHR. The resolution was made effective by a second resolution of the Corporation as required by the Section 150(3). Later the Commissioner of the Corporation in his letter dated November 24, 1977, suggested an increase in the maximum rates. The maximum rate proposed by the Commissioner was 3 paise per Kwhr for the aforesaid two categories of the consumers. The Corporation by Resolution No. 294 dated January 2, 1978 resolved that the maximum rates on the consumption, sale or supply of the electricity be fixed as given in that Resolution. In it the tax payable by the consumers of electricity on energy obtained from a licensee within .the area &f; the Corporation for commercial and industrial power was resolved as 3 paise per KWHR. The tax proposed as payable by the consumers of electricity on energy generated by themselves within the area of the Corporation for lighting and fans as well as for commercial and industrial power was 5 paise per KWHR. The Central Government was requested to accord its sanction to the Resolution as required under Section 150(2) of fhe Act.

(6) As noticed earlier Section 109 deals with the adoption of the annual budget estimates of the Corporation cm or before the 31st day of March of every year for the ensuing year and the determination of the -rates etc. on or before the 15th day of February of each year. By resolution No. .380 dated February 9, 1978, the Corporation determined to levy in the next following year i.e. 1978-79, the municipal taxes, rates and cesses specified in Section 113 of the Act at the rates mentioned against each of them. Under the heading of discretionary tax on consumption, sale or supply of electricity, the tax payable by the consumers of electricity on energy obtained from' a licensee within the area of Corporation for commercial, agricultural and industrial power was specified as I paise per Kwhr as also the tax payable by the consumers of electricity on energy generated by themselves within the area of Corporation for lighting and fans as well as commercial, agricultural, and industrial power was I paise per KWHR. After the determination of the aforesaid rates of faxes as required under Section 109(2) of the Act, the budget estimates were adopted by the Corporation for the year 1978-79 also on the same date i.e. on February 9, 1978. The extrac:s of the revenue income and revenue expenditure had been filed by the petitioners Along with the petition. During the hearing of the case the Corporation wanted to produce the entire budget-estimates for the year 1978-79 containing the recommendations made by the Commissioner of the Corporation, the resolutions of the Standing Committee and the budget estimates thereafter adopted by the Corporation. I allowed the placing of that document on the record.

(7) By notification dated March 14, 1978 and in exercise of fhe powers conferred by sub-section 2 of Section 150 of the Act read with Government of India, Ministry of Home Affairs Notification No. F. 3/6/66-Delhi dated October 19, 1966, the Lt. Governor thereby with immediate effect sanctioned the said resolution No. 294 dated January 2,1978. The Standing Committee Of the Corporation by resolution No. 822 dated March 23, 1978 resolved that it be recommended to the Corporation that the tax Ob the consumption, sale or supply of electricity with effect from April 1, 1978, be fixed at the rates specified in the resolution. The Corporation vide resolution No. , dated March 31, 1978, resolved that the tax on the consumption, sale or supply of electricity with effect from Aprill, 1978 be fixed at the following rates : Paise/KWHR. Schedule 1. Tax payable by the consumers of Electricity on energy obtained from a licensee within the area of Corporation for (a) Domestic Lighting & Fans. 2 (b) Domestic Power (c) 1. Commercial & Industrial Power (Low, Medium & Higher Volt'age) 2. Agriculture, Power, Low, Medium & High Voltage 1 (d) Non domestic mixed, Local Supply (Low, Medium & High Voltage) 2. Tax payable by the consumers of electricity on energy generated by themselves within the area of the Corporation for any of the purposes specified in (a) and (c). . 5 3. Tax payable of licensees operating outside the area of the Corporation on electricity sold to them within the area of the Corporation except in case of supplies to the N. D. M. C. and Cantonment Board, Delhi. 5 '. ....4. Tax payable by N. D. M. C. and Cantonment Board. Delhi, on the electricity sold] supplied to them by the Corporation within area of the Corporation. 2' In pursuance thereof, the Delhi Electric Supply Underfaking which is a tax collecting agency of the Corporation submited the bills for payment to the petitioners. This action of the respondents is challenged in lhis petition as being illegal and without jurisdiction and the prayer is for quashing the bills, issued by the statutory Corporation. Besides the prayer is for holding that the impugned levy is patently and manifestly discriminatory being vocative of Article 14 of the Constitution of India.

(8) The first submission of Shri Ravinder Narain, the learned counsel for the petitioners is that inaccordance with the mandatory provision of Section 109(2) of the Act, on or before the 15th day of February of each year the Corporation is enjoined to fix the rate of taxes etc. livable in the next following year and the Corporation in fact by resolution No. 380 dated February 9, 1978, determined the actual rate of tax on the consumers of electricity at the rate of 1 paise per kilowat hour. According to the counsel this rate cannof be subsequently altered for the year which the same has been fixed as it is specifically prohibited by Section 109(2) of the Act. This contention does not stand close scrutiny. Section 109(2) of the Act does provide that on or before the 15th day of February of each year, the Corporation shall determine 'he rates at which various Municipal taxes, rates and cases shall be levied in the next following year. It further provides that save as otherwise provided in the Act, The rates so fixed shall not be subsequently altered for the year for which they have been fixed. 'Save as otherwise provided in the Act' has reference to various provisions contained in the Act. Section 111 empowers the Corporation to re-adjust income and expenditure during the year and for that purpose, interalia, have recourse to supplementary taxation under Section 151 or to an increase of rates, cesses, fees, fares and other charges livable under the Act, or to adopt all or any of those methods. Section 151 provides that whenever the Corporation decides to have recourse to supplementary taxation under Subsection (2) of Section 111 in any year, it shall do so by increasing from' such date' as the Corporation may determine, the rates at which any tax livable under the Act is being levied, but every such increase shall bemade subject to the maximum rate and any other limitation specified in respect of such tax. This power of supplementary taxation is bound to be within the '' financial year. The imposition of other taxes is provided in Section 150 and the methodology of levy is provided in the various provisions of Sub-sections of Section 150 as quoted above. Under Sub-section (1), the Corporation may pass a resolution for the levy of any of the taxes specified in Sub-section (2) of Section 113 defining the maximum rate of tax to be levied etc. Under Sub-section (2), the sanction of the Central Government is obtained and the date from which the sanction comes into force is specified in the order of sanction. The second resolution is then passed by the Corporation determining the actual rates at which the tax shall be livable and the tax comes into force on the first day of quarter of the year next following the date on which such second resolution is passed. This exercise of power under Section 150 is thus obviously after 15th of February of each year. For the purposes of clarity, the legislature in Subsection 4 of Section 150 has expressed that after a tax has been levied in accordance with the foregoing provisions of the Section, the provisions of Sub-section (2) of Section 109, shall apply in relation to such tax as they apply in relation to any tax imposed under Sub-section (1) of Section 113. The word 'after' is significant and has to be given full meaning. Thus the provisions of Subsection (2) of Section 109 are applicable fo the imposition of optional taxes only in the next year after the tax imposed comes into force by virtue of the second resolution passed by the Corporation. This would be so whether the optional tax is levied for the first time or different rafes have been defined of an existing levy. The provisions of Section 109(2) and Section 150 have to be read harmoniously so as to give an effective meaning to all the statutory provisions. Any other interpretation would curtail the power of the Corporation fo the imposition of optional taxes during a financial year or to the re-defining of the maximum rate of taxes etc. to be levied by changing the existing rates, getting the sanction of the Central Government and passing the second resolution determining the actual rates at which the tax shall be levied.

(9) The second submission of the learned counsel is that under the scheme of the Act and in particular the provisions contained in Section 109 of the Act, the actual levy of tax must be prior to the adoption of the budget for the ensuing year and the income estimated for the ensuing year to be included in the budget estimates can only be determined after fixing, the actual rate of taxes must necessarily precede the adaptation of the budget. The counsel urges that the budget estimates indicate the need for taxation in order to enable the Corporation to discharge its obligatory and discretionary functions. An amount of tax not provided for in the budget estimates can never represent the need of the Corporation and such a fax not provided for and included in the budget estimates cannot be levied and recovered as it is not for the purposes of discharging the obligatory and discretionary functions of the Corporation under the Act. Reference was made to the various provisions of the Act noticed above to the Constitution of the Municipal Fund and the extent of expenditure out of it. Great reliance was placed by the learned counsel on the decision of the Supreme Court in 'Delhi Municipality v. B.C.S. & W. Mills,' : [1968]3SCR251 where the virus of certain provisions of the Act were questioned. The view expressed there is that the legislature must retain in its own hands the legislative function 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 Court should not interfere. Their Lordships considered the provisions of the Act for the purpose of guidance, whatsoever may be the manner thereof, to see whether the local body fixes a reasonable rate of taxation for the local area concerned. In para 35 of the report, their Lordships considered limit and guideline provided by the necessity of adopting budget estimates each year as laid down in Section 109 of the Act. It was held :

'EVENthough the needs may be large, we have already indicated that they cannot be unlimited in the case of the Corporation, for its functions both obligatory and optional are well defined under the Act. Here again there is a limit to which the taxing power of the Corporation can be exercised in the matter of optional taxes as well, even though there is no maximum fixed as such in the Act.'

The contention is that the validity of the statutory provisions was upheld because of the necessity of adopting budget estimates every year as laid down in Section 109 and the budget receipts and the budget expenditure must balance so that the limit of taxation cannot exceed the needs of the Corporation. The Corporation first adopted the budget estimates on the basis of a tax on the consumers of energy at 1 paisa per kilowat hour and on that basis the budget expenditure was estimated. The budget estimates were adopted on February 9, 1978 and no fresh budget estimates were either prepared or adopted subsequently and thus, according to the counsel, the additional taxation exceeds the needs of the Corporation and has to be struck down.

(10) As already pointed out, the maximum rate of tax payable by the consumers of electricity was I paisa per kilowat hour and was so notified. The Commissioner of the Corporation in his letter dated November 24, 1977, suggested an increase in the maximum rates. The Corporation by resolution No. 294 dated January 2, 1978 resolved that the maximum rates on the consumption, sate or supply of electricity be fixed as given in that Resolution. In it the tax payable by the consumers of electricity on energy obtained from' a licensee within the area of the Corporation for commercial and industrial power was resolved to be as 3 paise per kilowat hour. The tax proposed as payable by the consumers of electricity on energy generated by themselves within the area of the Corporation for lighting and fans as well as for commercial and industrial power was* resolved to be as 5 paise per kilowatt hour. The Central Government was requested to accord its sanction to the Resolution as required under Section 150(2) of the Act. The Commissioner of the Corporation had estimated the revenue for the year 1978-79 and the total budget estimates under the heading general tax, indirect taxation and miscellaneous revenue was Rs. 42,41,80,000. When the matter came up before the Standing Committee of the Corporation. Resolution No. 487 was passed recommending to the Corporation for approval of the proposals of the Commissioner with certain modification. In the income a provision for an increase by Rs. 5.50 crores was proposed. Under the bead of account of discretionary taxes, a proposal was made for an increase of tax on consumption and sale of electricity to the extent of Rs. 1 crore. The budget estimates as approved by the Standing Committee of the estimated revenue was thus Rs. 47,41,80,000. This was adopted by the Corporation. The increase to the extent of Rs. 1 crore by taxation on consumption and sale of electricity was provided in the budget estimates. The total income adopted by the Corporation in the budget estimates for the year 1978-79 was Rs. 59,69,07,500. This was on the basis of an increase in the taxation on the consumption and sale of electricity to the extent of Rs. I crore. The expenditure of the Corporation was estimated at Rs. 59,64,87,400 based on the additional taxation of Rs. 5.50 crores which included the additional taxation of Rs. 1 crore. The Corporation could not increase the rates as the maximum prescribed at that time was 1 paisa per kilowat hour so as to collect the additional Rs. I crore. The increase in the rates were approved by sanction of the Central Government on March 14, 1978. The second Resolution of the Corporation making the actual levy was passed on March 31, 1978. The taxation is in that sense within the budget estimates prepared by the Corporation to meet the needs of the Corporation.

(11) There is no warrant to hold that in the matter of budget the Corporation becomes functus officio after the budget estimates are adopted by 31st March of every year. The statutory requirements of imposition of optional taxes are contained in Section 150 of the Act. After a second Resolution determining fhe actual rate at which the tax shall be livable is passed by the Corporation as required under Sub-section (3) of Section 150, the tax comes into force on the 1st day of the quarter of the year next following the date on which such second resolution is passed. The statute does not require that it can only be done by having recourse to supplementary budget estimates. The extent of taxation may be such that the limit of taxation cannot exceed the needs of the Corporation. Section 110 of the Act contains the provisions empowering the Corporation to alter budget estimates in so far as the budget grants are concerned. Section 111 empowers .he Corporation to adjust income and expenditure during the year. The recourse can be had to supplementary taxation under Section 151 or to an increase of the rates of cesses,. fees, fares and other charges livable under the Act or to adopt all or any of those Methods. No requirement has been laid by the Statute that when recourse is to be had to supplementary taxation or to an increase it can be done only after the adaptation of revised budget estimates. If during the year if appears to the Corporation that the Municipal Fund will not suffice to meet the expenditure sanctioned in the budget estimates of that year, then it is incumbent to sanction forthwith any measures which it may consider necessary for adjusting the year's income to expenditure. The Corporation adopts the budget estimated expenditure turn the year 1978-79 by taking into account the increased taxation and estimated income of Rs. 1 crore on the tax on consumption and sale of electricity. The Corporation had by Resolution No. 794 dated January 2, 1978, resolved that the maximum rates on the consumption, sale or supply of electricity be increased. If cannot, thereforee, be held that the increased taxation was not for meeting the needs of the Corporation to discharge its functions or was outside the budget estimates. When the Corporation has to sanction any measures which it may consider necessary for ad- justing the years income to expenditure, the Corporation is already faced with the excess expenditure and is unable to diminish the sanctioned expenditure. The legislature has not laid down any precondition of adopting a supplementary or revised budget. Of course, if in a given case the challenge is that the supplementary taxation or levy is not to meet the needs of the Corporation, then the Corporation is obliged to explain. But I am not persuaded to hold that the impugned levy could not be made, because it was not for financing the functions of the Corporation.

(12) The next submission of Shri Ravinder Narain, the learned counsel for the petitioners is that there is a five fold increase in the rate of tax payable by the consumers of electricity on energy generated by themselves within the area of the Corporation for commercial or industrial or lighting or fans purposes which rate is more than the rate of ta'x payable by the consumers of electricity on energy obtained and supplied by the Delhi Electric Supply Undertaking; being 3 paise per Kwhr for commercial or industrial consumers. This levy is urged as patently and manifestly discriminatory being vocative of Article 14 of the Constitution. On the other hand the argument of Shri D. D. Chawla, the learned counsel for the Corporation is that whethsr a taxation law is discriminatory or not, it is necessary to bear in mind that the State has a wide discretion in selecting the persons or object's it will tax and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. Relying on the law laid down in 'Commr. H.B.E. v. L. T. Swamiar' AIR. 1954 282, the counsel submits that tax is a compulsory exaction of money by public authority for public purposes unforceable by law and is not payment for services rendered. The levy of tax is for the purposes of general revenue which when collected forms part of the public revenues of the State and as the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the tax-payer and the public authority. The arguments proceed that the legislature which is competent to levy a tax must inevitably be given full freedom to determine which articles or persons should be taxed and in what manner and at what rate. In tax matters the State is allowed to pick and choose objects and persons and even rates for taxation. The quantum; of imposition upon the tax-payer depends generally upon his capacity to pay. Reliance is also placed by the counsel on 'Ram Kishan Dalmia v. Justice S.R. Tandolkar'. : [1959]1SCR279 , 'Khandige Sham Bhat v. Agri. I.T. Officer', Air 1963 Sc 591 and 'Anant Mills v. State of Gujarat', : [1975]3SCR220

(13) Another facet of the submission of 'he learned counsel. for the Corporation is that there is a presumption to the constitutional validity of a statutory provision. In case any party assails the validity of any provision on the ground that if is vocative of Article 14 of the Constitution, then according to the counsel, it is for the party to make the necessary averments and adduce valid material to show discrimination vocative of Article 14, but in this case no averments have been. made in the writ petition by the petitioners of any facts on which the arguments of discrimination could be based. Reliance is placed on 'Gopal Narain v. State of Uttar Pradesh', : [1964]4SCR869 wherein it was held that there is persumption, when a statutory authority makes an order for imposition of tax, that it has followed the prescribed procedure. Reliance is also placed on 'State of Uttar Pradesh v. Kartar Singh', : 1964CriLJ229 wherein it was held that in the absence of a pleading or proof of unreasonableness or arbitrariness the court cannot accept the statement of a party as to the unreasonableness or unconstitutionality of a rule and refuse to enforce the rule as it stands, merely because in view of fhe party the standards are too high and for this reason the rule is unreasonable. Reliance is next placed on 'Probudas v. Union of India'. : AIR1966SC1044 wherein it was held that an applicant's pleading that Article 14 has been violated must make out that not only he had been treated differently from others but he has been so treated from persons similarly circumscribed without' any reasonable basis and such differential treatment is unjustifiably made.

(14) There can be no dispute that the courts are required to make every possible presumption in favor of the constitutionality of an Act or other law. It is also true that it is for the party who challenges the constitutionality to show how the State ha's violated the true principles of classifications or ceeded the fruits of classification. If the party establishes similarily between persons who are subject to a differential treatment, then it is for the State to establish that the differentiation on os based on a rational object sought to be achieved by the legislature. Let me advert to the pleading in this case in that in that regard.

(15) The averments in the affidavit of the petitioner are that the circumstances under which the present rate of tax of 5 paise per Kwhr is sought to be levied on the consumers of electricity on energy generated by themselves clearly demonstrates that the same has been done in a discriminatory and arbitrary manner without any proper classification, and the purported classification is not based on any intelligible differentiation showing any rationale nexus. Units like those of the petitioner company have been put to a heavier burden even though such units are otherwise bearing the entire burden of expense of generating electricity themselves as against those units who are not generating electricity themselves and are obtaining supply of electricity from D. E. S. U. generated at the expense of D. E. S. U. Fixation of tax on such classification is stated as unconstitutional, arbitrary, unreasonable and invalid.

(16) The factual justification in the affidavit in opposition to the writ petition is that the Corporation has imposed a tax at the flat rate of 3 paise per Kwhr payable by the consumers of electricity on energy obtained from D. E. S. U. within the area of the Corporation for industrial units which includes units ranging from small to medium and that in case the Corporation imposes the rate of 5 paise on every consumer, it would be too onerous for the small and medium units whereas' it is not so in the case of big units like the petitioner. According to the averments of the Corporation the petitioner and other such units form a class by themselves as units generating electricity themselves as against the other class of units consuming electricity generated by D. E. S. U. It is further deposed that not only the impugned tax is intra-vires Article 14 but it in fact furthers the aims and aspirations of our people as provided under the Constitution of achieving an egalitarian society and that the Corporation has been formed to discharge various social functions and for that it has to harness all its resources keeping in mind the various conflicting social interests and uphill task of balancing the same. The affidavit further is that any increase in the tax payable by the consumers of the electricity generated by D. E. S. U. affects all' and sundry and pinch may be felt by all whether rich or poor while on levy of tax on consumers on selfgenerated electricity only that class of consumers is affected which can afford to have their own generators and are comparatively better of.

(17) It is well established that Article 14 forbids. class legislation but does not forbid classification. Permissible classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and the differentia must have a rational relation to the effect sought to be achieved by the statute in question. In permissible classification mathematical nicety and perfect equality are not required. Similarly, identity of treatment, is not essential. If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstances arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment. Taxation law is not an exception to this doctrine. But, in the application of the principil.es, the Courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the legislature in the matter of classification, so long as it adheres to the fundamental principles underlying the said doctrine. The power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways.

(18) Law is thus settled that in matters of taxation the legislature is the best judge to decide the amount of tax to be levied and the class of persons or the goods to be taxed. It is also within the province of the legislature to classify persons and properties into different categories and tax them differently. But it is not in dispute that taxation laws must also pass the test of Article 14. A statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of selection, the law operates unequally, and that cannot be justified on the basis of a valid classification that it would be vocative of Article 14. Again the classification must be truly founded on substantial differences which distinguish persons grouped together from those left out of the group and such differential attributes must bear a just and rational relation to the object sought to be achieved. There is no violation of Article 14 if the classification created is founded on an intelligible differentia bearing a reasonable relation to the object sought to be achieved by the legislation. Section 113 of the Act provides for the levy of taxes. Sub-section (1) thereof provides for obligatory taxes and sub-section (2) thereof provides discretionary taxes. Section 113(2)(d) provides that in addition to the taxes specified in sub-section (1) the Corporation may, for the purposes of the Act, levy 'a tax on the consumption, sale or supply of electricity'. The. rates could be specified by virtue of power under Section 150. The essential legislative function has been retained by the legislative policy and what has been delegated is the task of subordinate legislation necessary for implementing the purposes and objects of the Act. In Delhi Municipality v. B.C.S. & W. Mills, : [1968]3SCR251 a question arose whether the provisions of Section 150 of the Act suffers from the vice of excessive delegation or is valid. Section 150 of the Act delegates power to the Corporation to levy any of the optional taxes at such rates as it thinks fit and further gives power to it to specify persons, articles and properties on which tax will be levied and the system of assessment to be adopted and exemptions if any to be granted. The delegation made is certainly wide and the question before the Supreme Court was whether there is any guidance in carrying out the duties imposed upon it under Section 150 of the Act. 'Their Lordships considering the constitution and set up of the Municipal Corporation, it need for finance to carry out the functions entrusted to it, its elective character, its responsibility to the electors the safeguards and control in the Act, procedural and otherwise, upheld the power of taxation as canalised and guided by policy.

(19) The legislature here retained in its own hand the essential legislative function of specifying that the optional tax may be levied 'on the consumption, sale or supply of electricity' at rates to be fixed in accordance with the provisions contained in Section 150. The Corporation cannot go beyond the taxes the imposition of which has been entrusted to it by the legislature. The legislature has circumscribed and controlled that the tax is on the consumption, sale or supply of electricity. There is no doubt that it is for the legislature to decide on what objects to levy and the legislature decided in this case that it will be on, inter alia, 'consumption of electricity'. The Corporation levied tax at various rates on the consumers of electricity and created Various classes for different rates. Tax payable by the consumers of electricity for lighting and fan was at the rate of 2 paise per KWHR. Tax payable by the consumers of electricity for domestic power wa& at the rate of 2 paise per KWHR. Tax payable by consumers of electricity for commercial and industrial power was at the rate of 3 paise per KWHR. Tax payable by consumers of electricity for agricultural power was at the rate of 1 paise per KWHR. The classification of various categories of consumers of electricity has been made and different rates have been levied. The agriculturists are made to pay less because of the encouragement to consume more for agricultural purposes. The Courts have always recognised the validity of distinctions made for the benefit of agricultural activities. The consumers of electricity for commercial purposes have been made to pay more because they are using it for their trade and professions. There is a reasonable classification based on each, separate and distinct class of consumers of electricity.

(20) Tax payable by the consumers of electricity generated by themselves for commercial and industrial power is 5 paise per Kwhr whereas consumption for the same purpose on energy generated by the D.E.S.U. is 3 paise per KHWR. The manufacturing activities of the petitioner company in the industrial establishment are of a continuous nature and as such require large amounts of an uninterrupted supply of electricity which the Corporation or D. E. S. U. is unable to provide and for this purpose the petitioner company installed its own generators to get its supply. To tax the petitioner company more on that account would be putting a premium on the inefficiency or the inadequacy of services by the D. E. S. V. to make the requisite supply. The tax levied cannot be on the production of the energy for the Corporation has no such power. The power is only to levy tax on consumption and between two consumers of the energy for the same purposes, there cannot be any further classification based on the source of supply. The legislature delegated the taxation on 'consumption of electricity' and the Corporation could not in the range of selection of consumers of electricity apply the law unevenly on the basis of the source of energy. The Courts are inclined to take a more lenient view in regard to taxing statutes, but this does not mean that a deleberate intention of discrimination between two Consumers of electricity for the same purpose who are similarly situated can be overlooked by this Court when its jurisdiction is invoked. The two consumers of electricity for commercial purposes are being subjected to a differential' treatment on the only ground that one is generating the energy himself and then consuming and the other is consuming the electricity generated by D. E. S. U. The object of taxation sought to be achieved is' to augment the finances for the purposes of the functions by the Corporation by taxing consumers of electricity. There has to be an identity of treatment to a class of consumers of electricity. There has to be equality and uniformity of treatment to that class of consumers of dectricity. The tax has to be condemned as discriminatory if in the same class of consumers of electricity some are made to pay more and others less because of the source of the energy.

(21) It may be conceded that the object of taxation is to raise revenue for the functions of the Corporation and one of the ingredients of this power is that tax may be levied according to the paying capacity of the tax payer. The Corporation has not chosen to levy tax on the capacity of the consumers though in the counter-affidavit it is stated that the petitioners have more capacity to pay. The rates charged in the impugned levy is not made dependent on the capacity of the person paying. The tax is payable by the consumers of electricity on energy generated by themselves within the area of the Corporation for any of the purposes at the rate of 5 paise per KWHR. The classification of more taxation on the consumers of self generated electricity does not seem to me to be based on intelligible defferentia and the excessive taxation has to be struck down.

(22) The last submission of the counsel for the petitioners is that the power to grant sanction under Section 150(2) of the Act is conferred expressly on the Central Government alone and on no other authority and this power to grant sanction cannot be delegated and must be exercised by the Central Government itself. The sanction for prescribing the maximum rate of tax on the consumers of energy generated by themselves at 5 paise per Kwhr not having been accorded by the Central Government itself, the notification dated March 14, 1978 made in the name of Lt. Governor is argued as illegal and without jurisdiction. Another facet of this submission is that assuming without admitting that the power of the Central Government to grant sanction could be delegated to the Lt. Governor, the same had to be exercised by the Lt. Governor himself and notification dated March 14, 1978 purporting to grant sanction having been issued by one Shri B. K. Kaul, Under Secretary is illegal without the validity of law. In the reply-affidavit of the Corporation, it is stated that the power under Section 150(2) was delegated to the Lt. Governor vide notification No. 3-6-66-Delhi dated October 19, 1966 and the Lt.Governor had personally considered the proposal under Section 150(2) of the Act and had sanctioned the same. The averment further is that Shri B.K. Kaul Under Secretary had simply authenticated the notification which he was empowered to do under notification No. F. 4/2/66-AB dated September 7, 1966.

(23) Section 150(2) of the Act provides that any resolution passed under Sub-section (1) shall be submitted to the Central Government for its sanction, and if sanctioned by that Government, shall come into force on and from such date as may be specified in the order of sanction. Article 239 of the Constitution provides that save as otherwise provided by Parliament by law, every Union Territory shall be administered by the President acting, to such extent as it things fit, through an Administrator to be appointed by him with such designation as he may specify. The President has appointed an Administrator by the designation of Lt. Governor for the Union Territory of Delhi. In pursuance of Clause (1) of Article 239 of the Constitution, the President directed vide notification dated October 19, 1966 that the powers of the Central Government under the provisions of the Delhi Municipal Corporation Act, 1957 mentioned in the schedule thereto annexed, shall', subject to the control of the President and until further orders, be exercised by the Lt. Governor of the Union Territory of Delhi. The schedule men- tions, inter alia, 'sub-section (2) of Section 150'. Section 3(8) of the General Clauses Act No. 10 of 1897 provides that 'Central Government shall in relation to anything done or to be done after the commencemeat of the Constitution means the President and shall include in relation to the administration of a Union Territory, the Administrator thereof acting within the scope, of the authority given to him under Article 239 of the Constitution. Thus the Lt. overnor was empowered by the President to exercise the powers and discharge the functions of the Central Government under the provisions of the Delhi Municipal Corporation Act, including those conferred by Section 150(2) of the Act. The Lt. Governor had the same power as the Central Government for the purposes of Section 150(2) of the Act. The Lt. Governor was thereforee, the authority competent to issue the notification dated March 14, 1978. The notification itself mentions the source of the power as contained in the Ministry of Home Affairs Notification dated October 19, 1976 for exercising the powers conferred by subsection (2) of Section 150 of the Act. The notification also expressly mentions that the Lt. Governor thereby with immediate effect sanctions the said resolution No. 294 dated January 2, 1978. The notification is issued by the order of the Lt. Governor and specifically so mentions, and authenticated in the manner as specified in the rules in that behalf. The notification is published in the official gazette. The validity of such an order cannot be called into question on the ground that it is not an order made by the Lt.Governor. Apart from it. the affidavit of Shri Rama Sharma. Deputy Assessor & Collector (HQ), Municipal Corporation of Delhi is that the Lt. Governor had personally considered the proposal under Section 150(2) and had sanctioned the same. This contention of the learned counsel for the petitioners thus fails.

(24) The result of the above discussion is that the classification of more taxation on the consumers pf self-generated electricity does not seem to be besed on intelligible differentia and the excessive taxation is hereby struck down. The effect is that the Resolution No. 554 dated March 31, 1978 resolving the tax. on the consumption, sale or supply of electricity with effect from April 1, 1978 will be effective for 3 paise per kilowat hour payable by the consumers of electricity on energy generated by themselves within the area of the Corporation for the purposes of domestic lighting and fans and commercial and industrial power (low, medium and higher voltage). On the facts and circumstances of the case, I make no order as to costs.


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