Skip to content


Saurashtra Khandsari Manufacturers Association and ors. Vs. Sales Tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Judge
Reported in(1975)16GLR610
AppellantSaurashtra Khandsari Manufacturers Association and ors.
RespondentSales Tax Officer and ors.
Cases ReferredSusannah Sharp v. Wakefield
Excerpt:
- - 4. being aggrieved by this, the petitioners moved the higher authorities including the then finance minister of the state, but without any success. 5. the said industry should be certified by the board or the commission as a 'village industry'.unless all these conditions are satisfied, the dealer in question would not be able to earn any exemption from the purchase tax on the purchase of sugar canes, the dispute between the parties is with regard to the certificate which is contemplated to be given by the board or the commission. but curiously enough, the legal stand taken during the course of the hearing of these petitions, by the learned advocate of the commission, supports the petitioners' case that the authorisation of the commission for the purpose of granting a certificate.....t.u. mehta, j.1. the petitioners in all these writ petitions are the manufacturers of khandsari sugar and claim to be utilising sugar canes for manufacturing khandsari in village industry. the state government have issued a notification under section 49(2) of the gujarat sales tax act, 1969, which is hereinafter referred to as 'the act' giving exemption to certain categories of dealers from paying purchase tax on the purchase of sugar canes for manufacturing khandsari sugar. one of these categories of dealers can get the exemption only after obtaining a certificate from gujarat rajya khadi gramodyog board, which is hereinafter referred to as 'the board' or khadi and village industries commission, which is hereinafter referred to as 'the commission', to the effect that the industry of a.....
Judgment:

T.U. Mehta, J.

1. The petitioners in all these writ petitions are the manufacturers of Khandsari sugar and claim to be utilising sugar canes for manufacturing Khandsari in village industry. The State Government have issued a notification under Section 49(2) of the Gujarat Sales Tax Act, 1969, which is hereinafter referred to as 'the Act' giving exemption to certain categories of dealers from paying purchase tax on the purchase of sugar canes for manufacturing Khandsari sugar. One of these categories of dealers can get the exemption only after obtaining a certificate from Gujarat Rajya Khadi Gramodyog Board, which is hereinafter referred to as 'the Board' or Khadi and Village Industries Commission, which is hereinafter referred to as 'the Commission', to the effect that the industry of a dealer is a village industry. The case of the petitioners is that this requirement of obtaining such a certificate is illegal and unconstitutional and that even if the same is found to be legal and constitutional, the Board or the Commission cannot refuse to grant this certificate on irrelevant considerations such as whether the petitioners are running their industries in co-operative sector or not. The petitioners have, therefore, prayed for a declaration that the requirement of a certificate from the Board or the Commission is illegal and unconstitutional, that the Board or the Commission cannot refuse to grant the required certificate on any ground which is extraneous to the consideration of the question whether the concerned industry is a village industry and that the Sales Tax Officers have got no authority to take any action against them on the footing that they have not shown in their returns the purchase tax on the purchase of sugar canes used by them in the manufacture of Khandsari. The petitioners have also prayed for the appropriate consequential reliefs.

2. Since the facts and points of law involved in all these three petitions are the same, with a view to understand the nature of the disputes between the parties, we shall state the facts of only one petition, which is Special Civil Application No. 472/73. This petition is filed by 'Shri Saurashtra Khandsari Manufacturers Association' and some other petitioners who claim to be manufacturing Khandsari. These other petitioners are 24 in number. Many of these petitioners are registered dealers and some are in process of obtaining registration under the Act. Under Section 49(2) of the Act, the State Government is authorised by the Legislature to issue notification in the Official Gazette giving exemption from sales tax to any specified class or classes of sales or purchase. This exemption is required to be given by the State Government 'in the public interest'. Accordingly on 29th April, 1970, the State Government issued a notification under the Act exempting from the payment of tax certain articles mentioned in the Schedule attached to it. On 15th January, 1971 entry No. 55 of this Schedule exempted the purchase of sugar canes used in the manufacture of Khandari sugar from the whole of the purchase tax. The relevant portion of this notification was as under:

Purchases by a person, who under Sub-section (2) of Section 18 of the Act is deemed to be a registered dealer of sugar canes used by him in the manufacture of Khandsari sugar (i.e. to say sugar in the manufacture of which neither vacuum pan nor vacuum evaporator is employed) upto 31st January, 1972.

Thus by virtue of this notification, the exemption above referred to was given upto 31st January, 1972. This date of exemption was thereafter extended upto 31st March, 1972. It appears that thereafter the petitioners moved the concerned authorities for further extension of this date and in their said attempt they could also obtain the co-operation of the Board as is clear by the Board's letter dt. 20th March, 1972 as found at Ana. A/3. It, however, appears that the above date was not extended by the State Government but on 16th August, 1972 the State Government issued another notification by which the above referred entry 55 of the original Schedule was changed and a new entry was inserted. This new notification is found in the above referred Special Civil Application at Ana. A/4. This notification contemplates three categories of dealers who are exempted from the purchase tax on the purchase of sugar canes for use by them in the manufacture of Khandsari. Since this notification is the bone of contention between the parties, it would be necessary to quote the smea:

Finance Department.

otification.

Sachivalaya, Gandhinagar,

16th August, 1972.

Gujarat Sales Tax Act, 1969:

No. (GHN-119-GST-1072/(S. 49)-(22) -TH: In exercise of the powers conferred by Section 49 of the Gujarat Sales Tax Act, 1969 (Guj. I of 1970), the Government, of Gujarat hereby amends the Government Notification, Finance Department No. (GHN-627)-GST-1073/fS.49)-TH dated the 29th April, 1970 as follows, namely:

In the Schedule to the said notification for the entry serial No. 55, the following entry shall be substituted, namely:------------------------------------------------------------------------------1 2 3 4 5------------------------------------------------------------------------------55. Purchases by:(i) The Gujarat Rajya Whole of purchase tax Nil NotificationKhadi and Gramodyog under Section 18 of the No. (GHN. 119)Board established under Act -GST-1972/(S-the Bombay Khadi and 49(22)-TH, datedVillage Industries Act, the 16th August,1960, which under Sub- 1972section (2) of Section 18 isdeemed to be registereddealer, or(ii) the Khadi and VillageIndustries Commissionconstituted under theKhandi and Village IndustriesAct, 1956, which under Sub-section (2) of Section 18 is deemed to be a registereddealer, or(iii) any other person whounder Sub-section (2) ofSection 18 is deemed to bea registered dealer, ofsuger-canes, for useby such Board, Commission,or as the case may be,dealer, in the manufactureof Khandsari in a villageindustry establishedby such Board on Commissionor in an industry owned by such dealer and certified as a villageindustry by such Board or Commission.------------------------------------------------------------------------------

3. We shall deal with the analysis of this notification at a subsequent stage. For the present, however, it should be noted that the third category of exempted dealers is of those persons who purchase sugar canes for use in the manufacture of Khandsari in an industry owned by them but certified as a village industry either by the Board or by the Commission. Thus, the dealers who were running Khandsari industries as a village industry are expected to get a certificate either from the Board or from the Commission to the effect that their industry is a village industry. Some of the petitioners therefore applied to the Board on 13th November, 1972 to obtain the requisite certificate ,to enable them to get exemption under the amended entry No. 55. On 7th December, 1972, however, the Board refused to issue any such certificate stating as under:

With reference to the said letter, it is to be intimated that the Board is recommending for the purposes of exemption from the purchase tax on sugar canes only those cooperative societies or registered public institutions which are recognised by the Board for the purpose of Khandsari industry. This may be noted.

This letter is not in dispute and the same is found at Annexure A/5. From this letter it is evident that the Board refused to give any certificate to the petitioners not on the ground that their industry was not a village industry but on the ground that they did not happen to be the co-operative societies or registered public institutions.

4. Being aggrieved by this, the petitioners moved the higher authorities including the then Finance Minister of the State, but without any success. Ultimately the petitioners have moved this Court by these writ petitions, challenging not only the authorisation of the Board and the Commission by the State Government for the purpose of issuing the required certificate but also the Board's action in refusing to issue the said certificate. At this stage it should be noted that the petitioners have not moved the Commission for obtaining any such certificate.

5. Before stating the contentions raised by the contending parties, it would be necessary to make a short reference to the relevant provisions of law.

6. Section 18 of the Act provides for the levy of sales tax or purchase tax on turnover of sugar canes. It is in the following terms:

(1) There shall be levied a sales tax or purchase tax of the turnover of sales or as the case may be, turnover of purchases, of sugarcane sold or purchased for such purposes and at such rate not exceeding ten paise in the rupee and at such one stage as the State Government may, by notification in the official Gazette, specify; and the seller or purchaser, as the case may be, shall be liable to pay tax on such turnover notwithstanding anything contained in Section 3.

(2) Every person who is liable to pay tax under Sub-section (1) shall, unless he is already a registered dealer, be deemed to be a registered dealer for the purposes of Sections 40, 41, 47, 57 and 58 and a dealer for the purposes of Sections 43, 44, 45, 46 and 56.

This Section operates notwithstanding the provisions of Section 3 of the Act. If a reference is made to Section 3 of the Act, it will be found that it fixes limits of turnover of liability to tax under the Act and since Section 18 operates notwithstanding these limits which are fixed by Section 3, it follows that even if the turnover for incurring a particular dealer, who purchases sugar canes, is not crossing the limits of turnover contemplated by Section 3, the said dealer would, none-the-less, be liable to sales tax or purchase tax on the sale or purchase of the sugar canes and such a dealer is by the fiction contemplated by Sub-section (2) of Section 18, deemed to be a registered dealer for the purpose of different Sections mentioned in Sub-section (2) of Section 18. Therefore, even if the turnover of a particular dealer is otherwise not such as would make him liable to the payment of tax under the Act, the said dealer would, none-the-less, be liable to the payment of tax under the Act, if he sells or purchases sugar canes. Section 18 fixes the limits of the rate at which the tax should be charged as not exceeding 10 paise in a rupee, and authorises the State Government to issue the necessary notification in the Official Gazette. Pursuant to this, the State Government have, in fact, issued one notification on 1st February, 1971 fixing the rate of purchase tax on the turnover of purchases of sugar cane and also mentioning the purpose for which there purchases are required to be made. This notification is in the following terms:

Sachivalaya, Gandhinagar, 1st February, 1971. Gujarat Sales Tax Act, 1969:

No. (GHN-8) GST-1071/S. 19)-TH: In exercise of the powers conferred by Section 18 of the Gujarat Sales Tax Act, 1969 (Guj. I of 1970) and in supersession of the Government Notification, Finance Department, No. STA (S.G.C.) 1061-K, dated the 26th December, 1961, the Government of Gujarat hereby specifies that there shall be levied a purchase tax at the rate of eight paise in the rupee on the turnover of purchases of sugarcane of a purchaser, where such sugarcane is purchased by the purchaser either directly or through an agent for being used by him in the manufacture of sugar as defined in item No. 1 of the first Schedule to the Central Excises and Salt Act, 1944.

The notification makes a reference to the definition of sugar given in the First Schedule to the Central Excises and Salt Act, 1944. This definition is as under:

----------------------------------------------------------------------------------Item No. Description of goods. Rate of duty.----------------------------------------------------------------------------------1. Sugar, produced in a factory ordinarily using powerin the course of production of sugar-'Sugar' means any form of sugar in which the sucrosecontent, if expressed as a percentage of the materialdried to constant weight at 105 centigrade, wouldbe more than ninety.(1)Sugar other than Khandsari or palmyra ...Twenty two rupees and fif-teen naya paise per quintal.(2) Khandsari sugar-that is to say, sugar in themanufacture of which neither a vacuum pan norvacuum evaporator is employed. ...Eleven rupees per quintal.(3) Palmyra sugar-that is to say, sugarmanufactured from jaggery obtained by boilingthe juice of the palmyra palm. nil.----------------------------------------------------------------------------------

It is this definition of sugar which is incorporated in the above referred notification dated 1st February, 1971. The result, therefore, is that if sugar canes are purchased for manufacturing any of the above referred three types of sugars, then the dealer in question is, by virtue of the above referred notification, expected to pay purchase tax at the rate of 8 paise in a rupee.

7. At this stage it should be noted that sugar as defined in the above referred item 1 of the First Schedule of the Central Excises and Salt Act, 1944 is one of the exempted items mentioned in the First Schedule to the Act (vide entry No. 42 of the First Schedule). However, sugar is liable to Central sales tax, but so far as the product of village industries are concerned, they are exempted from any tax under the Act as provided in entry No. 35 of the First Schedule. This entry is as under:

35(a) Products of village industries as defined in Khadi and Commission Act, 1956.

This is exempted subject to the condition that it is certified by a certificate issued by the Commissioner of sales tax in the prescribed manner. As will be subsequently seen Khandsari is one of the village industries as defined in Khadi and Village Industries Act, 1956. Therefore, it is not in dispute that the finished product which is known as Khandsari is the product of village industries and as such the same is exempted from tax under the Act.

8. However, in these writ petitions, the question is not about the exemption of Khandsari from any tax under the Act but the question is whether sugar canes which are purchased for the purpose of manufacturing Khandsari are exempt from purchase tax. Such exemption could be given by the State Government under the provisions of Section 49 of the Act. If a reference is made to this Section 49, it will be found that Sub-section (1) thereof contains a list of the exemption from the payment of tax given to sales or purchases of various items. We are not concerned with this Sub-section (1). Sub-section (2), however, authorises the State Government with general power to grant exemption to any specified class of sales or purchases by issuing the necessary notification in the official gazette. Sub-section (3) contemplates a laying of the said notification before the State Legislature. Both these Sub-sections are relevant for our purpose and, therefore, they are quoted as under:

(2) Subject to such conditions as it may impose, the State Government may, if it considers it necessary so to do in the public interest, by notification in the official gazette, exempt any specified class of sales or purchases from payment of the whole or any part of any tax payable under the provisions of this Act.

(3) Every notification issued under Sub-section (2) shall be laid for not less than thirty days before the State Legislature as soon as possible after it is issued and shall be subject to rescission by the State Legislature or to such modifications as the State Legislature may make during the session in which it is so laid or the session immediately following. Any rescission or modification so made by the State Legislature shall be published in the official Gazette and shall thereupon take effect.

The point to be noted at this stage is that the notification contemplated by Sub-section (2) above referred to can be issued 'in the public interest.' It is also necessary to note at this stage that whatever notification is issued by the State Government under Sub-section (2) is required to be laid as soon as possible before the State Legislature and the State Legislature may make modifications to such notifications, if such modifications are found necessary. The above referred notifications found as Anns. A/1 and A/4 have been issued by the State Government under the above quoted Sub-section (2) of Section 49 of the Act.

9. Having thus noted the relevant provisions of law, we shall now make a brief analysis of the disputed notification. Though we have quoted the notification in the fore-going portion of this judgment, we find that it is not happily framed and its structure and the arrangement of different categories of dealers contemplated by this notification as found in the office gazette does not give a proper idea of the three categories of dealers who are exempted from paying purchase tax on the purchase of sugar canes We, therefore, set the contents of this notification as under having due regard to the grammatical structure of Clause (3). A clear cut mention of the three categories can be made as under:

1. Purchases by the Gujarat Rajya Khadi and Gramodhyog Board established under the Bombay' Khadi & Village Industries Act, 1960, which under Sub-section (2) of Section 18 is deemed to be a registered dealer of sugarcane for use by such Board in the manufacture of Khandsari in a village industry established by such Board;

OR

2. Purchases by the Khadi & Village Industries Commission constituted under the Khadi & Village Industries Act, 1956, which under Sub-section (2) of sec 18 is deemed to be a registered dealer, of sugarcane for use by such commission in the manufacture of Khandsari in a village industry established by such commission.

OR

(3) Purchases by any other person who under Sub-section (2) of Section 18 is deemed to be a registered dealer, of sugarcane for use by such dealer in the manufacture of Khandsari in an industry owned by such dealer and certified as a village industry by such Board or Commission.

The learned advocates of the parties have admitted that the above arrangement of the notification is the correct arrangement. Now a bare perusal of this arrangement shows that the first category of dealers refers to Board, the second category refers to the Commission and the third refers to a private dealer, who is neither the Board nor the Commission. So far as the first two categories are concerned, there is no dispute. But the dispute is confined to the third category of dealers. We shall, therefore, analyse the Clause relating to the third category. This category shows the following important ingredients:

1. The dealer should be one who is deemed to be a registered dealer under Section 18(2) of the Act.

2. He may be 'any person' other than the Board or the Commission.

3. The purchases of sugarcane made by such a person should be for the use in the manufacture of Khandsari.

4. The said industry manufacturing Khandsari should be owned by him.

5. The said industry should be certified by the Board or the Commission as a 'village industry'.

Unless all these conditions are satisfied, the dealer in question would not be able to earn any exemption from the purchase tax on the purchase of sugar canes, The dispute between the parties is with regard to the certificate which is contemplated to be given by the Board or the Commission.

10. At this stage it would be necessary to say something about the nature of functions and duties of the Board and the Commission. It should be noted that both these institutions are statutory bodies established under different enactments. The Board is the creature of Bombay Khadi and Tillage Industries Act, 1960 (Act No. XIX of 1960), which is hereinafter referred to as 'Bombay Act of 1960.' The preamble of this Act shows that it was put in the statute book as it was expedient to provide for the encouragement, organisation, development and regulation of Khadi and Village Industries in the State of Bombay. The Board is established under Section 3 of the Act. The Act gives the definition of 'village industry' in Section 2(f) of the Act. This definition shows that 'village industry' means 'all or any of the industries specified in the Schedule to this Act and includes any other industry which the State Government may by notification in the official Gazette specify in this behalf, in consultation with the Khadi and Village Industries Commission'. Schedule which is attached to this Act mentions 12 industries out of which 'manufacture of cane-gur and khandsari' is found at Sr. No. 8. Section 11 of the Act describes the functions and powers of the Board and it inter-alia, states that it shall be the duty of every Board to encourage, organise, develop and regulate khadi and village industries and perform such functions as the State Government may prescribe, from time to time. Sub-section (2)(a) of this Section further provides that it shall also be the function of the Board to start, encourage, assist and carry on khadi and village industries and to carry on trade or business in such industries and in the matters incidental to such trade or business and Clause (j) of this Sub-section (2) provides that it is the function of the Board to discharge such other duties and to perform such other functions as the State Government may direct for the purpose of carrying out the objects of this Act. Going further, we find Section 26 which provides that in the discharge of its functions, each Board shall be guided by such instructions on question of policy as may be given to it by the State Government. Reference to these provisions thus shows that the Board is bound to carry out all statutory functions entrusted to it by the State Government from time to time.

11. The Commission is also a statutory body which owns existence to Khadi and Village Industries Act, 1956. This Act is a Central Act and its preamble shows that it was enacted for the development of Khadi and Village Industries and for the matters connected therewith. Section 4 provides for the establishment of Commission called Khadi and Village Industries Commission Section 15 of this Act provides for the functions of the Commission and says that its function shall generally be to plan, organise and implement programmes for the development of khadi and village industries. Clause (h) of Sub-section (2) of this Section says that the Commission may take such steps as may think fit 'for ensuring the genuineness of, and for granting certificates to producers of, or dealers in, khadi or the products of any village industry'. Even this Act defines in Clause (h) of Section 2 the expression 'village industries'. This definition is almost is the same as is found in the above referred Bombay Act of 1960. Even this Act has a schedule, the item No. 8 of which refers to the industry of 'manufacture of cane-gur and Khandsari.' Thus, even according to this definition of the expression 'village industry' given in this Act, Khandsari industry is a village industry.

12. As already stated above, the dispute involved in these petitions have arisen on account of the fact that when some of the petitioners approached the Board for obtaining the certificate contemplated by the above referred third category of the disputed notification, the Board refused to grant any such certificate on the ground that the petitioners were not working either in the co-operative sector or in the public sector. On behalf of the petitioners, their learned advocate Shri Pathak, therefore, raised the following four points challenging the action of the State Government in authorising the Board and the Commission to grant such a certificate and also challenging the action of the Board in refusing to Brant the said certificate to the petitioners. The arguments advanced by Shri Pathak can be stated in the following four points;

(1) The Legislature has delegated the powers to grant exemption under Section 49 of the Act to the State Government and, therefore, there cannot be any sub delegation of these delegated powers, and hence authorisation of the Board or the Commission to grant such certificate for the purpose of exemption from the purchase tax is ultra vires.

(2) The sub-delegation of power to grant certificate is severable from the operation of the Clause relating to the third category of exemption contemplated by the disputed notification and, therefore, the exemption contemplated by this third Clause should operate without insisting upon a certificate that a particular industry is a village industry.

(3) Even if it is believed that the authorisation of the Board or the Commission to give the required certificate is valid, the Board has violated the guidelines for the exercise of this authority by rejecting the petitioners request for the said certificate on the ground that such certificates are given only to the co-operative societies and registered public institutions.

(4) The Board is the statutory body having a duty to act in a quasi-judicial manner in granting or refusing to grant the required certificate and hence it cannot act in a manner which would infringe Article 14 of the Constitution by choosing a particular class of Khandsari manufacturers for the grant of the required certificate.

These are the four points which are raised on behalf of the petitioners.

13. In reply to these contentions of the petitioners the respondents have contended that the authorisation of the Board or the Commission to grant the required certificate does not amount to any delegation whatsoever and, therefore, there is no question of sub-delegation of a delegated power. According to the respondents, the requirement of the above referred certificate is merely working as a condition precedent for earning the exemption contemplated by entry 55 of the notification, and therefore, it would not be correct to say that any such sub-delegation of any of the statutory powers is involved in this notification.

14. The respondents have also contended that in case it is believed that the authorisation of the Board or the Commission to grant the required certificate amounts to sub-delegation of a statutory power and that such a sub-delegation is illegal and void, then the result would be that the petitioners would not be entitled to any exemption whatever because the whole of the third category of the dealers contemplated by the notification would in that case be treated as a category which is not given any exemption. The respondents have further contended in this connection that the requirement as to the certificate contemplated by the third category of dealers is not severable from the other provisions of the third class of the notification because it forms an integral part of the third category which was contemplated by the State Government in issuing this notification.

15. So far as the third and the fourth points are concerned, the contention of the respondents was that since the requirement of the certificate is merely a condition precedent for earning the exemption contemplated by the notification, it should be held that the real intention of the State Government in making provisions for this certificate and in authorising the Board and the Commission to issue such a certificate was to give exemption only to such industries as fell within the policy adopted by the Board or the Commission for the time being for judging whether a particular industry is a village industry or not. In this connection, it was further contended by the learned Government Pleader that the State Government having once authorised the Board or the Commission to issue the required certificate with a view to ascertain whether a particular industry is a village industry or not, it would be open to the Board or the Commission to resort to a proper sub-classification, and to choose only those village industries which would fall within the purview of the activities carried out by the Board and the Commission under the Acts by virtue of which they have come into existence.

16. The above are the contentions which are jointly raised by all the respondents. But curiously enough, the legal stand taken during the course of the hearing of these petitions, by the learned Advocate of the Commission, supports the petitioners' case that the authorisation of the Commission for the purpose of granting a certificate for earning exemption is bad. According to Shri Shah, who appeared on behalf of the Commission, the Commission is a statutory body which is expected to perform only the statutory functions under the Khadi and Village Industries Act, 1956 (which is hereinafter referred to as 'the Commission Act of 1956') and hence this authorization by the State Government for the purpose of Sales Tax Act is ultra vires and invalid because such authorisation is not covered by any of the objects for which the Commission is constituted and established. It should be noted here that no such contention has been raised by the Commission in its affidavit in reply. But since this is a contention purely of law, which even otherwise arises to be considered from a different aspect, as pleaded by the petitioners, we have heard Shri Shah on this contention.

17. We shall now take up for our consideration the different contentions raised on behalf of the petitioners. The first contention of the petitioners is based on the maxim delegatus non-potest delegate which is based on the principle that when a power has been confided to a person, he must exercise that power personally unless he has been expressly empowered to delegate it to another. The question however is whether the authorisation of the Board or the Commission to grant certificate as to whether a particular industry which manufactures Khandsari is a village industry, really amounts to a 'delegation' of a statutory power. While considering this question, it is necessary to examine what is the statutory power which the State Government possesses under Section 49(2) of the Act. Obviously this statutory power is to grant an exemption from the payment of tax under the Act and that too for a public purpose. The question is whether this statutory power of granting exemption for a public purpose has been re-delegated by the State Government by providing for a certificate to be issued by the Board or the Commission. Our answer to this question is in the negative because neither the Board nor the Commission is authorised by the State Government under the disputed notification to grant any such exemption. The exemption is granted by the State Government itself to all Khandsari industries which can legitimately be called village industries. However, the State Government wanted to satisfy itself whether a particular industry is really a village industry of the concept of the Board or the Commission functioning under the above referred two Acts, namely, the Commission Act, 1956 and the Bombay Act, 1960. In other words, the requirement of a certificate is only for the purpose of reaching a satisfaction whether a particular industry is a village industry or not. It is only for this purpose that the Board and the Commission have been authorised to issue a certificate. Such authorisation obviously does not amount to sub-delegation of any statutory power. The power which is invested in the Board or the Commission is merely of the nature of an administrative power though it cannot be disputed that it does involve a quasi-judicial approach. In this connection it should be noted that so far as the Board is concerned, the provisions of the Bombay Act of 1960 to which we have already made a reference above, clearly provide in Section 26 thereof that in discharge of its function, the Board shall be guided by such instructions on the question of policy as may be given by the State Government. Section 11 of that Act enjoins upon the Board to perform such functions as the State Government may prescribe from time to time. Therefore, when the State Government entrusts to this Board a function to issue a particular certificate obviously the Board acts on the directions of the State Government and, therefore, the exercise of this power are under the complete control of the State Government. This would be so even when the Board exercises this power to issue the certificate required by the third category of the disputed notification. It need not be said that this authorisation can be cancelled by the State Government at any time it pleases. Moreover, the power to issue the certificate is required to be exercised by the Board as well as by the Commission only within the guidelines prescribed by the notification and as culled out from the different provisions of the Act. When all these facts are taken together, it becomes apparent that the task of issuing certificate which is entrusted to the Board and the Commission, does not amount to a sub-delegation but merely amounts to the entrustment of an administrative function. Under these circumstances Shri Pathak's argument that this is a case in which the maxim delegates non-potent delegare applies, cannot be entertained.

18. We find that even if this authorisation to grant the required certificate is construed as sub-delegation, it should be borne in mind that the maxim delegates non-potest delegare is merely a rule of construction and does not enunciate a principle which knows of no exception. As held by the Supreme Court in Barium Chemicals v. Co. Law Board : [1967]1SCR898 , this maxim must not be pushed too far. In the words of Bachawat J. the maxim delegates non potest delegare does not embody a rule of law. It indicates a rule of construction of a statute or other instrument conferring an authority. Bachawat J. has further observed that prima facie, a discretion conferred by a statute on any authority is intended to be exercised by that authority and by no other. But the intention may be negatived by any contrary indications in the language, scope or object of the statute. The construction that would best achieve the purpose and object of the statute should be adopted. His Lordship has referred to 'contrary indications' and such a contrary indication is found in this case in the fact that though this notification was placed before the Legislature as contemplated by Section 49(3) of the Act, no modification thereof has been made by the Legislature. This means the Legislature has approved of the authorisation of the Board and the Commission for the purpose of issuing the required certificate.

19. Shri Pathak however put reliance upon the English decision in Ellis v. Dubowski (1921) 3 K.B. 621. The facts of that case show that a licensing committee, in granting a licence under the Cinematograph Act, 1909, attached to the licence a condition 'that no film be shown which has not been certified for public exhibition by the British Board of Film Censors'. It was held that such a condition was unreasonable and ultra vires. In order to appreciate the decision given in this case, it would be necessary to know the exact wording of the condition. This condition was in the following terms:

That no film be shown which is likely to be injurious to morality or to encourage or incite to crime, or to lead to disorder, or be in any way offensive in the circumstances to public feeling or which contains any offensive representations of living persons, or which has not been certified for public exhibition by the British Board of Film Censors.

This condition shows that only those films which were injurious to morality or were likely to encourage or incite crime or to lead to disorder or offensive to public feelings etc. were prohibited. However, British Board of Film Censors were invested with carte blanche powers of certification which could prohibit the exhibition of film even if the same was not injurious to morality etc. This aspect of the case has been explained by Avory, J. in the following words:

I also agree, although with considerable doubt and hesitation, that the last paragraph in the condition as to the certificate of the British Board of Film Censors is so unreasonable as to be ultra vires the licensing authorities. I do so solely because, as the condition stands, the Board could prohibit the exhibition of a film, although it might be neither injurious to morality, nor an encouragement to crime or disorder, nor contain offensive representations of living persons'. The Board are thus given absolute power to prohibit for reasons which may be private or may be influenced by trade considerations.

It is thus clear that the condition in dispute in that case was struck down because it vested with the Board totally uncontrolled powers even though other requirements such as injury to morality etc. were not satisfied, so far as this case is concerned, we find that it cannot be said that either the Board or the Commission is invested with absolute power of certification, whimsically or arbitrarily, nor any of those statutory bodies can exercise the same in a manner which would be inconsistent with the object of the disputed notification which proposes to give exemption to village industry in Khandsari. We further find that this disputed notification reveals sufficient guidelines, inasmuch as it contemplates exemption to be given only to a genuine village industry which purchases sugar canes for its own use in manufacture of Khandsari. The Board and the Commission are expected to function within the boundaries of these guidelines while considering whether a particular dealer is entitled to the required certificate or not. Thus, unlike the powers of the British Board of Film Censors, the powers of the Board or the Commission are not found absolute and hence the above referred case of Ellis v. Dubowski has no application to the facts of these petitions.

20. To conclude, therefore, we find (1) that the power given to the Board and the Commission does not amount to sub-delegation, but amounts merely to entrustment of an administrative function which is required to be discharged in a quasi-judicial manner, (2) that even if it is found to be amounting to sub-delegation, the said sub-delegation is authorised by the Legislature inasmuch as it has not objected the same when the disputed notification was laid before it and (3) that the sub-delegation, if any, is not uncontrolled and does not vest the Board and the Commission with carte blanche and unguided powers.

21. Before going to the next point we may here consider Shri Shah's contention on behalf of the Commission that even if the State Government has authorised the Commission to issue the required certificate, the Commission is not bound to issue any such certificate, because, the said authority is illegal and void. This contention of Shri Shah was based on the premise that the Commission is the statutory body and is expected to discharge only those functions which are entrusted to it by the statute under the provisions of which it came into existence. We find that this contention has absolutely no merits. We have already referred to some relevant provisions of the Commission Act, 1956 and while dealing with this contention we may also profitably refer to the Statement of Objects and Reasons for the Act. This Statement is as under:

With a view to promoting and developing khadi and village industries, the Central Government constituted a Board called the All India Khadi and Village Industries Board and vested it with powers to prepare and organise programmes for the production and development of khadi and village industries and to deal with other matters incidental thereto. It has, however, been found in actual practice that the work of the Board has been hampered by certain procedural and financial difficulties, difficulties which would be removed if a Commission were set up by law. It is, therefore, proposed to set up a commission, called the All India Khadi and Village Industries Commission which will be vested with powers, executive as well as administrative, for the proper development of Khadi and village industries. The Bill also provides for the All India Khadi and Village Industries Board functioning as an Advisory body which will advise the Commission generally in the discharge of its duties.

This Statement shows that the Commission came into existence with a view to promote and develop Khadi and Village Industries and the Commission is vested with powers, executive as well as administrative, for proper development of Khadi and Village Industries. Even the preamble of this Act, to which we have already made a reference, as well as Section 15, which describes the function of the Commission, show that the Commission is expected to implement the programmes for and the development of Khadi and Village Industries. Now what the disputed notification seeks to do is to give encouragement to a village industry and thus to develop the same. Since the Board and the Commission are the statutory bodies possessing expert knowledge about a genuine village industry the State Government have thought it fit to entrust to them the work of issuing the required certificate so that no Khandsari industry which is not a genuine village industry in the opinion of these two bodies can take the disadvantage of the tax concession. Giving of such a certificate therefore squarely falls within the purview of the Board and the Commission. We were, therefore, rather surprised at the contention of the Commission that its authorisation by the State Government to issue the required certificate is illegal. Since we find absolutely no substance in this contention of the Board, we shall now proceed to consider the second point as regards the severability of the requirement of a certificate from the rest of the provisions of the third Clause of the disputed notification. Here the contention of Shri Pathak was that if the court comes to the conclusion that this requirement is not valid, then it is not necessary to give a declaration that the whole of the third Clause of the notification is ultra-vires and illegal, because, the requirement as to the certificate can be severed from the other requirements of the third Clause and a dealer can be made free from the condition of obtaining a certificate either from the Board or from the Commission or from any other authority. We find absolutely no justification for taking such a view. If again a reference is made to the third Clause of the notification, it will be found that the State Government had in mind only those village industries manufacturing Khandsari which were genuine in character. The State Government seems to have rightly given some importance to the certificate on this question issued by the Board and the Commission because both these statutory bodies are created and established only for the purpose of looking after the Khadi and Village Industry throughout the country and especially the State of Gujarat. It should be noted here that it was open to the State Government to authorise any of its officers to issue such a certificate. In fact entry No. 35 of the first Schedule does authorise the Commissioner of Sales-Tax to give certificate for the purpose of earning exemption from tax under the Act. Similar provisions could have been made by the State Government even with regard to the certificate that a particular Khandsari industry is a village industry. But the State Government has advisedly not done so, because, it found that the Board and the Commission are the only proper authorities which can take a proper judgment on the question whether a particular industry is a genuine village industry. Therefore, if the requirement as to obtaining a certificate from these bodies is taken out from the third clause, the basic object to achieve which the third Clause was enacted would be defeated. In R.M.D. Chamarbaugwalla and Anr. v. Union of India and Anr. : [1957]1SCR930 , Their Lordships of the Supreme Court have summarised the principles for determining whether valid parts of a statute are severable from invalid parts thereof. Seven tests have been prescribed by Their Lordships in paragraph 22 of the reported judgment. It is the first test which is relevant for our purpose in this case. It says that whenever a question arises whether the valid parts of a statute are severable from invalid parts thereof, it is the intention of the Legislature that is the determining factor. The test to be employed, observed Their Lordships, is whether the Legislature would have enacted the valid part if it had known that the rest of the statute was invalid. Now if we apply this test to the facts of the present case, could it be said that the State Government would have preferred to exempt from purchase tax the purchases of sugar canes for the use in the manufacture of Khandsari without insisting on any certificate from the Board or the Commission? If the State Government wanted to give exemption to every Khandsari industry irrespective of its character as a village industry, there was no need to cancel the previous notification found at Annexure A/1 and to bring into force the disputed notification. In our opinion, therefore, if once it is held that the requirement of a certificate by the Board or the Commission is illegal and invalid then the whole of the third Clause of the notification must be struck down as invalid because the aforesaid requirement is not severable from the rest of the provisions of the clause. Shri Pathak was very much conscious of this aspect of the matter because if whole of the third Clause of the notification is struck down as invalid, none of the petitioners has even the remotest chance of being recognised as a village industry which is entitled to earn any exemption under the notification. Shri Pathak, therefore, rightly put greater stress on the third and the fourth points which relate to the validity of the refusal of the Board to grant any certificate on the ground that the petitioners are not running their Khandsari industry in the co-operative sector. This brings us to the consideration of points Nos. 3 and 4.

22. Both these points arise out of the rejection of the petitioners' request for a certificate that the industry conducted by them to manufacture Khandsari is a village industry on the ground that they are not working in the co-operative or public sector. The contention of the petitioners is that the Board's insistance that the certificate should be granted only to those, who are working in the co-operative sector or public sector militates against the very purpose for which the disputed notification was issued because it is very apparent that the said notification was issued with the sole object of giving encouragement to a genuine village industry manufacturing Khandsari, irrespective of the consideration whether it is in private-sector or co-operative-sector or public-sector. It is pointed out that it was not open to the Board to limit or circumscribe the original object of the State Government by insisting that the village industry in Khandsari should not belong to a private individual because any such insistance runs contrary to the Clause relating to the third category of exempted dealers contemplated by the notification. The petitioners further contend that classification on dealers functioning in private-sector and those functioning in co-operative or public sector has no nexus with the main object of the notification, namely, encouragement to any person manufacturing Khandsari as village industry.

23. Respondents' answer to this contention was that requirement of a certificate by Board or the Commission works as a condition precedent to earn exemption from payment of tax and the history of this exemption shows that the State Government did not want to exempt Khandsari industries as such, but wanted to exempt only that Khandsari industry which fell within the Board or the Commission's concept of a village industry. It was pointed out on behalf of the respondents that it was not without reason that the State Government thought it proper to insist upon a certificate by Board or Commission because if the State Government wanted to give exemption to a 'village industry' simplicitor, there was no need to introduce a new notification on 16-8-72 as Khandsari industry which was exempted under the previous notification is recognised as a village industry both by Bombay Act, 1960 as well as by the Commission Act of 1956. However, since the State Government wanted to recognise only that Khandsari industry which complies with the concept of village industry entertained by the Board or the Commission, the Government brought into picture the necessity of certificate from those two statutory bodies. Therefore, according to the respondents, if within the concept of the Board or the Commission only the village industries, which are functioning in co-operative or public-sector can be considered as real village industries, it cannot be said that the Board has exercised its discretion arbitrarily or perversely and if that be so, the court should not interfere with this discretion under its extraordinary writ jurisdiction. In this connection, the learned Government Pleader drew our attention to a recent decision given by the Supreme Court in Shri Rama Sugar Industries Ltd. v. State of A.P. and Ors. (1974) 33 S.T.C. 277, wherein, on the facts of that case, it is held that it was open to the State Government to adopt a policy of treating the co-operative sugar factories as a distinct category, and that it could not be said that in refusing to grant exemption from tax to others, the State Government was acting so as to frustrate the purpose of Andhra Pradesh Sugar Cane (Regulation of Supply and Purchase) Act, 1961. The learned Government pleader relied upon this decision in support of his contention that it was open to the Board to treat co-operatives and public institutions as distinct categories of tax exemption.

24. Before dealing with the rival contentions, it is necessary to note the distinction between the previous notification dt. 15-1-71, which is found at Ann. A/1 and the subsequent notification dt. 16-8-72 (Ann. A/4) which is the subject matter of this dispute. Reference to the previous notification shows that the purchase of sugar canes used in the manufacture of Khandsari sugar was exempted without any requirement as to the character of the industry. Khandsari sugar is described in that notification as meaning sugar in the manufacture of which neither vacuum pan nor a vacuum evaporator is employed. Thus, under the previous notification every Khandsari industry which did not employ vacuum pan or vacuum evaporator for its manufacture was exempted. That notification did not require that the character of this industry should be a village industry. The result, therefore, was that irrespective of this character, every Khandsari industry got the exemption by that notification. The subsequent notification, which is the disputed notification, did not want to exempt all Khandsari industries irrespective of their character. Therefore, this notification introduced three categories of dealers and all these three categories of dealers were those industries which could legitimately be described as village industries. It is this distinction which is very important so far as points Nos. 3 and 4 are concerned. This distinction further suggests that the insistance of the Government on the certificate of the Board or the Commission possesses a special significance. This special significance becomes more evident by the discussion which follows.

25. It is important to note that ordinarily the very nature of a Khandsari industry is such that it cannot be called anything but a village industry as understood in the statutory definitions given to this expression in the Bombay Act of 1960, as well as the Commission Act of 1956. In the foregoing portion of this judgment, we have already referred to item No. 1 of the Central Excises and Salt Act, 1944 as well as the definition of the expression 'village industry' given in the Bombay Act of 1960 and the Commission Act of 1956. Both these Acts statutorily define Khandsari industry as a village industry. The pertinent question which, therefore, arises to be considered is where was the necessity of providing for the requirement of a certificate by the Board or the Commission when a statutory definition of the expression 'village industry' was already available. The petitioners' answer to this question is that this certificate was required because the State Government wanted to ascertain whether the claim of being a village industry advanced by a particular dealer is genuine or not, while the answer of the respondents to this question is that the State Government wanted to give exemption only to those industries which were considered as village industries by the Board or the Commission according to its prevalent policy. On proper consideration of the relevant facts and circumstances of the case, we are of the opinion that both these answers are partly correct and partly wrong. Our answer to the question is that the Government have found the necessity of, a certificate from the Board or the Commission for two obvious reasons, namely,

(1) For verifying that to false claim about running a village industry is advanced by a dealer who manufactures Khandsari; and

(2) For ascertaining that a particular industry is a genuine village industry falling within the wide conceptual aspect of village industry as entertained by the statutory expert bodies like the Board and the Commission, which are created for the sole purpose of encouraging village industries in India. We do not think that this conceptual aspect would admit of any current policy adopted either by the Board or the Commission on the ground of sheer expediency.

That the Government had these two aspects in mind will become evident from a further scrutiny of some of the relevant provisions of the Sales Tax Act and the Rules, and some scrutiny of the concept of the expression 'village industry'.

26. We have already quoted above the entry 35 of the First Schedule attached to the Act. It gives exemption from tax to 'products of village industry as defined in the Khadi and Village Industries Act, 1956'. This entry further contemplates a condition subject to which the exemption is required to be granted and this condition requires a certificate for the purpose of exemption granted by the Commissioner of Sales Tax. Now if a further reference is made to Rule 77 of the Gujarat Sales Tax Rules, 1970, it will be found that these Rules require that the Commissioner shall grant a certificate of exemption contemplated by the above referred entry No. 35 of the First Schedule 'after taking into account the recommendations of the Gujarat Rajya Khadi and Gramodyog Board established under the Bombay Khadi and Village Industries Act, 1960 or of the Khadi and Village Industries Commission constituted under the Khadi and Village Industries Commission Act, 1956 or of the Registrar of Co-operative Societies, Gujarat State.' Thus if we read entry No. 35 along with Rule 77, it becomes clear that in order to earn exemption contemplated by entry No. 35 a dealer has first to obtain a 'recommendation' from either the Board or the Commission or the Registrar of Co-operative Societies. The Commissioner of Sales-tax exercises his power to grant certificate for the purpose of exemption only after considering the 'recommendation' of the Board or the Commission. Now if again a reference is made to the disputed notification, it will be found that it makes an important departure from its requirement of a recommendation by the Board or the Commission, because, under the disputed notification, the power of the Board or the Commission is not merely 'recommendatory' but that power is of a granting certificate which is final, and which is bound to decide the fate of a particular dealer who wants to earn concession contemplated by the notification. The question is why this departure is made by the State Government. If the intention of the State Government was merely to verify a false claim of being a village industry, as is contended by Shri Pathak on behalf of the petitioners, a mere recommendation by the Board or the Commission would have been enough. But the State Government have obviously not found this to be sufficient for the purpose of giving concession. Obviously, the State Government is of the opinion that since the Board and the Commission are supposed to possess a proper socio-economic concept of Khadi and Village Industry, the Government have intentionally made a departure from Rule 77 by asking these two expert bodies to give a certificate to which a sort of finality attaches. Obviously, therefore, it is for the Board or the Commission to consider, after applying the objective standards on their own, to the question whether a particular Khandsari industry is a village industry or not. The question is what are these standards.

27. While considering this question, it would be necessary to understand the proper amplitude and ramifications of the expression 'village industry'. We, on our part, would not have ventured to embark upon this exercise but for the fact that both the sides have put much emphasis on the meaning of this expression in support of their respective contentions. Shri Pathak, who appeared on behalf of the petitioners, contended that a village industry is that industry which is defined in Section 2(b) of the Commission Act of 1956 and in Section 2(f) of the Bombay Act of 1960. According to him, therefore, since Khandsari industries fall within the schedules referred to in these two provisions of law, the only inquiry which the Board or the Commission is expected to make is to find out whether the claim of being a village industry advanced by a particular dealer is false or true. The learned Advocates of the respondents, on the other hand, contended that a village industry would be that industry which the Board or the Commission prefers to treat as such because if the Board or the Commission were expected merely to look at the statutory definition of this expression as given by the above two statutes, there was no purpose in insisting upon a certificate from the Board or the Commission, as any officer of the State could have verified the falsity or otherwise of the claim made by a dealer that his industry is a village industry. In view of these two rival contentions, it is necessary to consider what exactly the Government intended when it provided for obtaining a certificate from the Board or the Commission that a particular industry is a village industry manufacturing Khandsari.

28. The disputed notification has one very distinctive and striking feature, namely, that it gives complete recognition to the purchases of sugar canes made by the Board or the Commission itself for use in the manufacture of Khandsari in village industry established by it Obviously the Government has not insisted upon any certificate so far as the industries established by these two bodies are concerned. But so far as the private dealers are concerned, though the Government did intend to give exemption even to their Khandsari industry. This exemption was not intended to be given to it merely because it was found to be a genuine village industry as defined in the Commission Act of 1956. The Government definitely wanted to be sure that it was a village industry which fulfil the conceptual requirements of a village industry, which is otherwise looked after and attended to by the Commission or the Board. The whole pattern of the disputed notification therefore, attaches a special significance to that concept of village industry, which the Board and the Commission are supposed to have If this was not so, the Government could have simply said that 'Khandsari industry' which is covered by the definition of the expression given in the Commission Act of 1956 and Bombay Act of 1960, would earn exemption from tax on purchase of sugar canes. At the most, the Government would have provided for a mere recommendation of the Board or the Commission as is done by entry No. 35 of the Schedule I of the Act read with Rule 77. But by insisting on a certificate by the Board or the Commission, the Government has disclosed its intention to give exemption to that type of Khandsari industry which fits in with the objectives for which the Board and the Commission function.

29. Thus, the question which now emerges for our consideration is what are these objectives.

30. It was Gandhiji, the Father of our Nation, who was the principal architect of the concept of Khadi and Village Industry. For him, this concept was not merely an economic concept because he visualised it as a vemry basis of socio-economic revolution which he wanted to bring in this country. It would be a serious mistake, therefore, to think that his concept of village industry was satisfied the moment it was shown that a particular industry eliminated the help of sophisticated machinery. He wanted to avoid sophisticated machinery, which saves human labour not because he was anti-machinery, but because he realised that the use of such machinery resulted in concentration of wealth in hands of a few, which, in its turn, resulted in exploitation of labour and other known vices of a capitalistic structure. He was more concerned with the development of human dignity and freedom-economic, political and social. In Khadi and Village Industries, he saw the fulfilment of these objectives. All this is evident from a few of his observations quoted below:

According to me the economic constitution of India and, for the matter of that the world should be such that no one under it should suffer from want of food and clothing. In other words, everybody should be able to get sufficient work; to enable him to make the two ends meet. And this ideal can be universally realised only if the means of production of the elementary necessaries of life remain in the control of the masses, These should be freely available to all as god's air and water are or ought to be; they should not be made a vehicle of traffic for the exploitation of others. This' monopolization by any country, nation or group of persons could be unjust'. The neglect of this simple principle is the cause of destitution that we witness today not only in this unhappy land but other parts of the world too.

(Young India, November, 1928).

The political and economic organisation of the State shall be based on principles of social justice and economic freedom. While this organisation shall cater to the national requirements of every member of society, material satisfaction shall not be its sole objective. It shall aim at healthy living and the moral and intellectual development of the individual. To this end to secure social justice the State shall endeavour to promote small-scale production carried by individual or co-operative effort for the equal benefit of all concerned. All large scale collective production shall be eventually brought under collective ownership and control, and in this behalf 'the State shall begin by nationalizing heavy industries. The textile industries shall be progressively decentralized.

(Harijan, 20th April, 1940)

Granting for the moment that the machinery may supply all the needs of humanity, still it would concentrate production in particular areas, so that you would have to go in a round about way to regulate distribution, whereas if there is production and distribution both in the respective areas where things are required, it is automatically regulated and there is less chance for fraud, none for speculation. Distribution can be equalised when production is localized, in other words when distribution is simultaneous with production.

(Harijan, 2-11-1934)

It is mass production, but mass production in people's own homes. If you multiply individual production to millions of times, would it not give you mass production on a tremendous scale? But I quite understand that your mass production is a technical term for production by the fewest possible number through the aid of highly complicated machinery. I have said to myself that is wrong. Machinery must be of the most elementary type which I can put in homes of the millions.

(Harijan, 2-11-1934)

Khadi mentality means decentralization of the production and distribution of the necessaries of life. Heavy industries will necessarily be centralised and nationalised. But they will occupy the least part of the vast national activity in the villages.

(Constructive work-its meaning and place)

31. Gradually, the original concept of Gandhiji about village industries has undergone a change in its attitude towards employing machines, but the basic idea of achieving the wider socio-economic objectives through Khadi and Village Industries has remained the same, as is clear from the following excerpts from 'Khadi and Village Industries' Committee Report of February, 1968.'

2.9 Mahatma Gandhi had emphasised that mere pursuit of the social objective of providing employment to the people or the economic objective of producing khadi for sale was not the core of the khadi programme. Khadi, according to him, could begin 'to have permanent effect only when carried out as part and parcel of the wider programme of non-violent village uplift or village reconstruction'. 'Today', he stated, 'our main concern should be to lay the foundation for this (Khadi) work as deep as possible and not merely be satisfied with the production of khadi and sale of khadi itself.' The cardinal point in the above approach was to build up self-reliance among the rural people. To achieve this wider objective he had emphasised the need for (i) self-sufficiency, (ii) decentralisation of production and consumption (iii) close personal contact with artisans (iv) production of khadi without any subsidies from Government and its sale in local market and to the people in villages (v) Government assistance to be confined to education, technical research and technical guidance and (vi) cultivation of cotton to reduce dependence on the supply of raw materials from outside areas.

2.14. Keeping in view the recent trends in the production and sale of khadi and the worsening unemployment situation in the rural areas, especially in backward areas, we are of the view that the basic approach and purpose of the khadi programme has to be worked out in terms of the following broad objectives and the relative emphasis to be placed on each of them:

(i) the economic objective of producing saleable article;

(ii) the social objective of providing employment; and

(iii) the wider objective of creating self-reliance amongst the people and building up a strong rural community spirit.

Thus, the basic concept of 'village industry' is not a static one found in the statutory definition given in an enactment. It is the dynamic concept which principally takes into account, inter-alia the following objectives:

1. It aims at preventing the displacement of human labour by sophisticated machinery.

2. It strives to enlarge the scope of employment at and around the homes of artisans and labourers.

3. It sees to it that ideal of decentralisation of economic growth and financial power at the village level is adhered to.

4. It always frowns upon exploitation of human labour by financial sharks and tries to protect human values and human dignity.

5. Its attempt is to make village economy self sufficient and self productive of its needs so far as the same is possible.

From the available materials, which are placed at our disposal, we find that the Commission and the Board are expected to further these objectives through encouragement, development and establishment of village industries and it was for that reason that the Government thought it fit and proper to insist upon their certificates. Thus, in our opinion, it would not be correct to say that the intention of the Government was to give exemption to all those Khandsari industries which merely satisfy the formula of statutory definition found in Commission Act of 1956 and Bombay Act of 1960.

32. Having thus conceded that the expression 'village industry' used in the disputed notification, has a wider and more pragmatic connotation, we find it difficult to agree with the respondents that this pragmatism includes within its scope a power to decide the question of certification in a manner which suits the current policy of the Board or the Commission. Both these statutory bodies may adopt any relevant principle which they find suitable in discharging their statutory functions under the Commission Act of 1956 and the Bombay Act of 1960, but while discharging their functions under the disputed notification for the purpose of issuing certificate they are not at liberty to take a policy decision which would frustrate the very object of the disputed notification. Thus, if the notification intends to give protection to every village industry, whether owned by a co-operative society or by a private individual, the Board cannot say that it will not certify the industry working in the private sector even though the said industry is for all intents and purposes, a village industry. The provisions of the Commission Act of 1956 and the Bombay Act of 1960 show that the Commission as well as the Board are expected to encourage every type of village industry as such irrespective of its ownership. It is undoubtedly true that both of these Acts had contemplated encouragement to co-operative efforts in village industry. But encouragement to co-operative sector does not mean dis-encouragement to the private-sector, and the over-riding fact that the intention of the State Government in framing the disputed notification was to encourage even the private-sector in village industry cannot be overlooked by the Board. To use the words of Rand, J. in Roncarelli v. Duplessis (1956) SCR (Can LR) 121, 'there is always a perspective within which a statute is intended to operate', and any clear departure from its lines or objects is just as objectionable as fraud or corruption.'

33. The learned Advocates of the respondents more or less realized this situation and hence they leaned more on the legal contention that the power given to the Board and the Commission to certify is wide and uninhibited by any such consideration. It was contended by the learned Government Pleader that though the Board was not bound to issue the required certificate, to an industry which was not a village industry, it was at liberty to decide which of the different classes of village industry should be preferred for such certificates. It was at this stage that he relied upon the Supreme Court decision in Rama Sugar Industries (supra). We find that this decision is not in any manner helpful to the respondents. The facts of the case considered by their Lordships of the Supreme Court therein show that under Section 21(3) of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, exemption from the payment of purchase tax could be given to new and expanded sugar industries. The petitioners claimed that they were covered by the category of industries contemplated by the above referred Section of the A.P. Act of 1961 and, therefore, the Government could not have restricted the exemption only to the industries functioning in the co-operative sector. The majority decision given in that case rejected this contention of the petitioners on the ground that the Act itself did not create any right in favour of any of the dealers to claim exemption merely on the ground that particular industry was a new or expanded sugar industry, and, therefore it was open to the Government to select the new and expanded sugar a co-operative sector only For the purpose of earning exemption from tax. So far as the facts of the present case are concerned, the Legislature has authorised the Government to give exemption by a proper notification in public interest. The Government have exercised this discretion by issuing the disputed notification and by saying that the village industries covered by the third category were entitled to get the exemption. Thus, when the Government exercised its powers to grant exemption under Section 49(2) of the Act, the right of a village industry manufacturing Khandsari was complete and the only fact which was required to be inquired into was whether the industry was a genuine village industry as such or not. Under the circumstances, it was not open to the Board to select only the co-operative sector out of the village industries manufacturing Khandsari. To do this would obviously be to frustrate the very object of the notification. In our opinion, therefore, the decision given by the Supreme Court in Rama Sugar Industries does not help the respondents in any manner.

34. At this stage, it is important to note that when the Board or the Commission considers the question of issuing a certificate contemplated by the disputed notification, it acts as a statutory body invested with power which necessarily implies a legal obligation to act objectively and in a quasi-judicial manner. The reason is that the decision which the Board or the Commission is expected to take is involving the right of a concerned dealer to obtain exemption under the disputed notification. We have already stated above that the power given by the disputed notification to the Board and the Commission is of an administrative nature. But as pointed out by the Supreme Court in Union of India v. K.P. Joseph and Ors. : [1973]2SCR752 , it would be too wide a proposition to say that an administrative order can never confer any right. In this decision, the Supreme Court has pointed out that there are administrative orders which confer rights and impose duties and it is because an administrative order can abridge or take away rights that Courts have imported the principle of natural justice of audi alterant partem into this area. Thus the Board and the Commission are expected to exercise this power of certification in a quasi-judicial manner because the exercise of that power involves the legal right of a dealer to get exemption from the payment of purchase tax. The exercise of this power obviously carries with it the duty or an obligation to comply with the recognised rules of natural justice. Such an obligation includes the consideration of only the relevant matters, and also the necessity of reaching the conclusions on relevant objective considerations of formulated principles, without bias, without prejudice and without predilection. At this stage it would be worth to note that neither the Board nor the Commission has formulated any principles on the basis of which the required certificates should be issued by them. During the course of hearing of these matters, Shri Shah, who appeared on behalf of the Commission, pointed out to certain regulations framed by the Commission with regard to the certification for khadi, and said that these certification rules are to be followed by the Board even with regard to the certification for village industries. No resolution of the Board or the Commission is produced before us to show that certification rules for khadi are to be followed even for the certification of a village industry. The only thing which we find in the record of the case is the ipse-dixit of one of the officers of the Board conveying to the petitioners the fact that the Board is issuing the certificates only to co-operative societies and registered public institutions. There is nothing in the case to show at what time the Board or the Commission has taken such a decision. It is thus quite obvious that the Board refused to give certificate to the petitioners in a very arbitrary manner.

35. In this connection we may with some advantage point out the principles of Judicial Review of a discretionary power stated by the Supreme Court in Rohtas Industries Ltd. v. S.D. Agarwal : [1969]3SCR108 . In para 28 of the reported judgment, Their Lordships have quoted with approval the following observations of Lord Hulsbury, L.C. in Susannah Sharp v. Wakefield (1891) A.C. 173 at page 179:

Discretion means when it is said that something is to be done within the discretion of the authorities that that something is to be done according to the rules of reason and justice, not according to private opinion; Rooke's case, according to law and not humour. It is to be, not arbitrary, vague and fanciful, but legal and regular.

Speaking of this case, it is evident that the Board at the time of disposing of the petitioners' request for certificate that their industry is a village industry, has preferred to be guided by an irrelevant consideration, namely, whether the petitioners are running their industry in co-operative sector or a private sector. The Board has forgotten to take into account that the third category of exempted dealers contemplated by the disputed notification refers to 'any person' which obviously includes a dealer in a private sector.

36. We find that even on Commission's own standards, most of the petitioners prima-facie deserved an objective consideration of their request to be certified as running a village industry in Khandsari. In this connection, it would not be out of place to make a reference to a booklet which is submitted to us during the course of the hearing and which is published by the Commission itself. The caption of the booklet is 'handbook on khandsari sugar manufacture.' At pages 2 and 3 thereof, we find following portions which throw good deal of light on this question. The relevant portions are reproduced as under:

Gut and Khandsari is one of the major agro-industries of the country. It is a traditional cottage industry and accounts for about 60 percent of the total consumption of sugarcane in the country. This decentralized industry fits in well with the infrastructure of rural industries. According to the 1971 Census over 22 lakh persons were employed in the production of gur and khandsari throughout the cane crushing season.

Despite the inroads made by the mill sector and the restrictions imposed from time to time on the movement of gur and khandsari from one State to another and demarcation of areas of sugarcane for the mill sector, this age-old industry still braved the challenge from the organised sector. The industry offers the following advantages over the large scale sector.

(a) Employment to labourers at and around their homes.

(b) Higher food value at comparatively law cost.

(c) Strengthening of the bullock economy.

d) Decentralized production.

(e) Home-made equipments which need no foreign exchange.

(f) Saving on transport of raw material.

(g) Ready market in the neighbourhood of production centres.

(h) Capacity to swift production, i.e., manufacturing of jaggery, rab or khandsari sugar whichever might be more advantageous to the producers.

Most striking feature of the cottage sector of the industry is its vast employment potential.

37. It is therefore clear that refusing to consider the petitioners' request for a certificate summarily on the ground that they were not running their industries in co-operative or public sector, the Board has acted in an arbitrary manner and has attempted to make the classification of village industry in khandsari in a manner which bears no nexus to the real object of the disputed notification.

38. The proper course for the Board or Commission as experts was to evolve and apply the relevant necessary principles to guide them in the decision as to whether a particular khandsari industry can be properly considered a village industry as such. In evolving these principles they could take into account not only the whole historical background of the development of village industry in India, the principles which the Father of the Nation propounded in this connection, the object of the disputed notification and the intention of the State Government in framing this notification and while doing so, they could also take into account the need for special consideration in application of these principles as far as the co-operative and public sectors are concerned. It is only after the objective application of these principles that they can justly come to the decision as to whether a particular dealer runs khandsari industry as a village industry or not. Since this is not done, we declare that the action of the Board in summarily rejecting the petitioners' request for the required certificate on the ground that they do not run their industries in the cooperative sector or public sector is void and illegal. The Board is, therefore, directed to perform its legal duties of arriving at a just and proper decision on appropriate relevant principles in the context of granting such certificates and to consider the request of the petitioners afresh accordingly, as expeditiously as possible as long time has now expired.

39. The concerned Sales-tax officers are found to have proposed tome legal, action against the petitioners for not showing purchase tax on the purchase of sugar canes made by them for use in the manufacture of khandsari in the returns submitted by them. It is directed that they shall not take any further action in this regard till the request of the petitioners for obtaining the required certificate under the disputed notification is considered and finally disposed of by the Board or the Commission. We do not consider it necessary to grant any further prayer in any of these petitions. All these petitions are accordingly allowed and the Rule is accordingly made absolute without any order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //