PETITIONER: ORGANON (INDIA) LTD. Vs. RESPONDENT: COLLECTOR OF EXCISE DATE OF JUDGMENT22/07/1994 BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) PUNCHHI, M.M. AGRAWAL, S.C. (J) CITATION: 1994 AIR 2489 1995 SCC Supl. (1) 53 JT 1994 (4) 438 1994 SCALE (3)421 ACT: HEADNOTE: JUDGMENT:
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J.- In these appeals, validity of Section
5 of the Opium Act, 1878 and of certain rules made
thereunder by the Madhya Pradesh Government is called in
question. Though the Opium Act, 1878 has since been
repealed by Section 82 of the Narcotics Drugs and
Psychotropic Substances Act, 1985, things done under the
repealed Act are saved and continued under the 1985 Act. We
shall first state the relevant facts.
2. The appellant-company obtained a wholesale licence in
Form No. 1 under Rule 5 read with Rule 6 of the Madhya
Pradesh Poppy Husks Rules, 1959 in February and March 1974.
In the month of March 1974, it entered into a contract with
M/s Veregngde Pharmacutische Fabricken B.V. Kloosterstreat 6
oss Holland (hereinafter referred to as the “Dutch buyer”)
for supplying to the Dutch buyer 1000 metric tonnes of poppy
husks. This contract was entered into in pursuance of
“certificate of official approval of import” dated 5-4-1973
granted by the Dutch authorities in favour of the said Dutch
buyer to purchase/import 10,00,000 kilograms of poppy husks
from the appellant on or before 31-8-1974. The appellant in
turn obtained the “official authorisation of export” from
the Office of the Narcotics Commissioner, Government of
India permitting him to export 1000 metric tonnes of poppy
shells (broken and crushed) to the aforesaid Dutch buyer.
This certificate dated 14-3-1974 refers specifically to the
aforementioned Import Certificate dated 5-4-1973 issued by
the Dutch authorities. It further specifies that the said
goods shall be exported through the Customs House, Bombay,
by sea, to Holland within three months from the date of
issue of the said authorisation. On 30-3-1974, the
appellant applied to the Collector of Excise, District
Mandsaur, Madhya Pradesh for grant of permission to
transport the said quantity of poppy husks from Madhya
Pradesh. In this application the appellant stated the
following facts: The appellant holds a wholesale licence
granted under Rules 5 and 6 of Madhya Pradesh Poppy Husks
Rules, 1959. It has received an order from the aforesaid
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Dutch buyer for supply of 1000 tonnes of poppy husks in
Holland. In pursuance of the said order, the appellant has
to despatch from Mandsaur, poppy husks of the said quantity
for transportation across Indian customs frontier to
Holland. The appellant has obtained the export
authorisation dated 14-3-1974 from the Narcotics
Commissioner of India for despatch of the said poppy husks
to Holland a copy of which is enclosed. The Dutch buyer
has also obtained the permit from the Dutch Government on 5-
4-1973 for the import of the said goods. The Dutch buyer
has also arranged for a ship to call at the Bombay Port on
5-6-1974 for taking delivery of the said consignment of
poppy husks. Accordingly, the appellant is applying “for
permission to transport and for the despatch of the said
consignment of poppy husks of 1000 tonnes from Madhya
Pradesh for the purpose of executing the said order……
Inasmuch as the said consignment of poppy husks will be
despatched from Madhya Pradesh for export across customs
frontier of India, no excise duty is leviable or payable
under the Madhya Pradesh Poppy Husks Rules and hence, no
amount is remitted along with the application. The
appellant requested for grant of permit urgently so as to
fulfil the contract within the specified date.
3.On 15-4-1974, the Collector of Excise, Mandsaur intimated
the appellant that permission to transport poppy husks from
Mandsaur District to the Port of Bombay would be granted
only on payment of the export duty under and in accordance
with the Madhya Pradesh Poppy Husks Rules. He declined to
grant any such permit without payment of duty.
4.On 16-4-1974, the appellant approached the Madhya Pradesh
High Court for issuance of a writ of mandamus and other
appropriate writs directing the Collector of Excise,
Mandsaur to grant the permit applied for without insisting
on the payment of the export duty as demanded by him. In
fact more than one writ petitions were filed by the
appellant before different Benches of the said High Court.
In one of the writ petitions, an interim order was granted
directing the Collector of Excise, Mandsaur to permit the
export without collecting the export duty but subject to the
condition of the appellant furnishing a bank guarantee for
the said amount in favour of the Registrar of the High
Court. No such interim order was granted in other writ
petitions. The writ petitions were heard and dismissed by a
Division Bench on 21-10-1976, against which the appellant
approached this Court. Leave was granted on 28-1-1977.
Interim orders were passed from time to time permitting the
appellant to export poppy husks to Holland either on
furnishing bank guarantee or on deposit of a part of the
export duty, as the case may be.
5.The main issue in these appeals is whether the State of
Madhya Pradesh and its authorities are entitled in law to
levy and collect ‘duty’ as a condition for permitting the
export of poppy husks from Madhya Pradesh when the said
export is not an export from one State to another State
within India but an export across the customs frontier of
India, i.e., export to Holland?
6.Opium is a noxious drug. It is dangerous to the health of
human beings. The cultivation and trade in opium leads to
problems of law and order. Over the last few decades, the
trade in such drugs has become intertwined with crime
transcending national borders. With a view to control
cultivation, possession, transport and sale of opium and its
derivatives, the Opium Act, 1857 was
59
enacted. A few years later Opium Act, 1878 was enacted. (In
these appeals we are not concerned with the 1857 Act but
only with the later Act. All references hereafter to Opium
Act mean references only to the 1878 Act). The provisions
of the Opium Act have undergone several amendments,
alterations and adaptations over the years. We need not,
however, notice all of them except those effected in 1930
and thereafter.
7.India was a State signatory to the convention relating to
dangerous drugs held at Geneva in the year 1925, whereunder
the contracting parties resolved to take further steps to
suppress the contraband traffic in and abuse of dangerous
drugs, especially those derived from opium, Indian hemp and
coca leaf, as set out in the said convention. Accordingly,
the Dangerous Drugs Act, 1930 was enacted. Since by that
time the Opium Act was already in operation, it was
simultaneously amended so as to make both the enactments,
viz., Opium Act and the Dangerous Drugs Act, 1930
complimentary to each other, occupying different fields. Of
course the Dangerous Drugs Act deals not only with opium but
also certain other dangerous drugs. [The expression
“dangerous drug” is defined to include coca leaf, hemp and
opium and all manufactured drugs Section 2(h).] It would be
appropriate at this stage to notice the provisions of both
the enactments insofar as they pertain to opium.
8.The expression ‘opium’ has been defined in identical terms
in both the enactments, viz., Section 3 of the Opium Act and
clause (e) of Section 2 of the Dangerous Drugs Act with a
slight difference. We shall set out the said definition
from the Opium Act, underlining the portion which is not
found in the definition in the Dangerous Drugs Act, 1930:
“3. In this Act, unless there be something
repugnant in the subject or context,-
‘opium’ means-
(i) the capsules of the poppy (Papaver
somniferum L.), whether in their original form
or cut, crushed or powdered, and whether or
not juice has been extracted therefrom;
(ii) the spontaneously coagulated juice of
such capsules which has not been submitted to
any manipulations other than those necessary
for packing and transport; and
(iii) any mixture, with or without neutral
materials, of any of the above forms of opium;
but does not include any preparation
containing not more than 0.2 per cent of
morphine, or a manufactured drug as defined in
Section 2 of the Dangerous Drugs Act, 1930.”
9. The expressions ‘import’ and ‘export’ have been defined
in the Opium Act to “mean respectively to bring into, or
take out of, a State otherwise than across any customs
frontiers”. “Customs frontiers” is defined to mean “any of
the customs frontiers of India as defined by the Central
Government under Section 3-A of the Sea Customs Act, 1878”.
10. Two other expressions defined in the Opium Act are
‘transport’ and ,sale’. They read as follows:
” ‘Transport’ means to remove from one place
to another within the same State.
60
‘Sale’ does not include sale for export across
customs frontiers, and ,sell’ shall be
construed accordingly.”
11. The expression “opium derivative” is defined in clause
(f) and the expression ‘manufactured drug’ in clause (g) of
Section 2 of the Dangerious Drugs Act. (These expressions
are not defined in the Opium Act.) 1. not necessary to
notice the said definitions inasmuch as it is stated before
us by counsel for both the parties that poppy husks fall
within the expression ‘opium’ and do not represent opium
derivative or manufactured drug as defined in the Dangerous
Drugs Act. Clause (i) of Section 2 of the Dangerous Drugs
Act defines “to import into India” to mean “to bring into
India by land, sea or air across any of the customs
frontiers defined by the Central Government” and as
including “the bringing into any port or place in India of a
dangerous drug intended to be taken out of India without
being removed from the ship or conveyance in which it is
being carried”. Clause (k) defines the expression “to
export from India” to mean “to take out of India by land,
sea or air across any of the said customs frontiers”.
Clauses (j) and (1) define the expressions “to import inter-
provincially” and “to export inter-provincially” to mean to
bring into or to take out of a State, as the case may be,
otherwise than across any of the said customs frontiers.
Clause (m) defines the expression “to transport” as meaning
taking out from one place to another in the same State.
12. Now, coming to the substantive provisions central to
both enactments, insofar as opium is concerned, the
following is the position. Section 4 of the Opium Act
(notwithstanding the heading of the section which does not
appear to have been amended correspondingly while amending
the body of the section) deals only with possession,
transport, import, export and sale of opium. It would be
appropriate to set out Section 4 of Opium Act. It reads:
“4. Except as permitted by this Act, or by any
other enactment relating to opium for the time
being in force, or by rules framed under this
Act, or under any such enactment, no one
shall-
(a) possess opium;
(b) transport opium;
(c) import or export opium; or
(d) sell opium.”
13. Correspondingly, Dangerous Drugs Act deals with
cultivation of poppy and manufacture of opium (Section 5)
import into India and export from India and transhipment of
any dangerous drug (Section 7) matters which are not dealt
with by the Opium Act. It would be appropriate to set out
Sections 5 and 7 of the Dangerous Drugs Act:
“5. Control of Central Government over
production and supply ofopium.- (1) No one
shall-
(a) cultivate the poppy (Papaver somniferum
L.) or
(b) manufacture opium,
save in accordance with rules made under sub-
section (2) and with the conditions of any
licence for that purpose which he may be
required to obtain under those rules.
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(2) The (Central Government) * may make
rules permitting and regulating the
cultivation of the poppy (Papaver somniferum
L.) and the manufacture of opium, and such
rules may prescribe the form and conditions of
licences for such cultivation and manufacture,
the authorities by which such licences may be
granted, the fees that may be charged
therefor, and any other matter requisite to
render effective the control of the (Central
Government) over such cultivation and
manufacture.
(3) The (Central Government) may also make
rules permitting and regulating the sale of
opium from Government factories for export or
to (State Governments) or to manufacturing
chemists.
7. Control of Central Government over
operations at land and sea frontiers.- (1) No
one shall-
(a) import into India,
(b) export from India, or
(c) tranship
any dangerous drug, other than prepared opium,
save in accordance with rules made under sub-
section (2) and with the conditions of any
licence for that purpose which he may be
required to obtain under those rules.
(2) The Central Government may make rules
permitting and regulating the import into and
export from India and the transhipment of
dangerous drugs, other than prepared opium,
and such rules may prescribe the ports or
places at which any kind of dangerous drug may
be imported, exported or transhipped, the form
and conditions of licences for such import,
export or transhipment, the authorities by
which such licences may be granted, the fees
that may be charged therefor, and any other
matter requisite to render effective the
control of the Central Government over such
import, export and transhipment.”
Each Act contains machinery provisions providing for
regulation, control and other allied and incidental matters
relevant to the field covered by each of them.
14.It is thus clear that while the Opium Act defines
‘import’ and ‘export’ as meaning bringing into or taking out
of State otherwise than across any customs frontiers, the
Dangerous Drugs Act deals with import into India and export
from India across customs frontiers. Evidently, with a view
to avoid any confusion, while the Opium Act uses the
expression ‘import’ and ‘export’, the Dangerous Drugs Act
speaks of “to import into India” and “to export from India”.
The expression ‘transport’ has been defined in identical
terms under both the enactments; it means removal of opium
from one place to another within the same State.
‘Transhipment’ referred to in Section 7 evidently means
transhipment in the course of or as part of import into
India or export from India, as the case may be. The two
enactments thus operate in two distinct, though
complimentary, fields so far as opium is concerned. In the
interest of clarity, it may be stated that so far as the
manufactured opium and opium derivatives are concerned, all
its aspects including possession, sale, export, import
whether from one State to another in India or across the
customs frontiers are governed by the Dangerous Drugs Act
alone.
* (a) Substituted for “Governor-General in Council” by A.O.,
1937
62
15.Section 5 of the Opium Act empowers the State Government
to make rules regulating the possession, transport, import,
export and sale of opium subject to payment of duty or
subject to such other conditions, as it may impose. In view
of the contentions urged before us, it is necessary to set
out Section 5 in its full entity:
“5. The State Government may, from time to
time by notification in the Official Gazette,
make rules consistent with this Act, to permit
absolutely, or subject to the payment of duty
or to any other conditions, and to regulate,
within the whole or any specified part of the
territories administered by such Government,
all or any of the following matters-
(a) the possession of opium;
(b) the transport of opium;
(c) the importation or exportation of opium;
and
(d) the sale of opium and the farm of duties
leviable on the sale of opium by retail:
Provided that no duty shall be levied under
any such rule on any opium imported and on
which a duty is imposed by or under the law
relating to sea customs for the time being in
force or under the Dangerous Drugs Act, 1930.”
16. Section 13 empowers the State Government to frame rules
regarding disposal of things confiscated and rewards.
17. In exercise of the powers conferred by Section 5 (read
with Section 13) of the Opium Act, 1878, the Government of
Madhya Pradesh framed the Rules called “Poppy Husks Rules,
1959”. Rule 2(e) defines “poppy husks” to mean “such
capsules of cleft, cut open, crushed and powdered poppy
seeds as have been drained of juice”. Rule 3 prohibits
possession of poppy husks of more than specified quantity.
Rule 3-A prescribes the duty chargeable on export of poppy
husks. It is 25 paise per kilogram upon export (despatch
out) of poppy husks and 50 paise per kilogram upon sale by a
wholesale licence holder. Rule 4 prohibits sale of poppy
husks otherwise than in accordance with a permit or licence
granted under the Rules. Rule 5 prescribes the Collector as
the licensing authority. Rule 8(1) says that “none other
than the wholesale licenceholder shall export (i.e. despatch
out) poppy husks”. For such export, application for licence
has to be made to the Collector and the duty paid in advance
at the rates prescribed by Rule 3-A, i.e., along with the
application for licence. It is not necessary to refer to
other rules except to say that they seek to regulate and
monitor the movement, export and import of opium.
18. Rules have also been framed by the Central Government
under Section 7 of the Dangerous Drugs Act called “Dangerous
Drugs (Import, Export and Transhipment) Rules, 1957”. Rule
2(2) defines “Narcotics Commissioner” as the Narcotics
Commissioner appointed by the Government of India. Part IV
of the Rules deals with export by sea, land or air. Rule 6,
which is the first rule occurring in this part, says that no
dangerous drug shall be exported from India by sea, land or
air without obtaining an export authorisation from the
competent authority. Rule 7 says that “save as provided in
Rule 10, dangerous drugs, other than those mentioned in sub-
rule (2) of Rule 6, shall not be exported by sea from India
except under an authorisation granted in accordance with
Rule 8 and
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from a port appointed for the purpose in Rule 9″. Rule 8
says that the export authorisation contemplated by Rule 7
shall be granted by the Narcotics Commissioner and that
except in the case of special permission of the Central
Government, the export of opium shall be on behalf of the
Central Government. Rule 9 prescribes that opium shall be
exported by sea only from two ports, viz., Bombay and
Calcutta. Rules 11 and 12 deal with export by land while
Rules 13, 14 and 15 deal with export by air. Rule 17 in
Part V deals with transhipment. (This rule incidentally
makes it clear that transhipment contemplated by the Rules
is transhipment in the course of or as part of import into
or export from India.)
19. We shall first deal with the contention of Shri Salve,
learned counsel for the appellant that inasmuch as the
movement of poppy husks from Mandsaur district in Madhya
Pradesh to Bombay Port for export to Holland is part of one
single integrated transaction, it is a case of “export from
India” within the meaning of Section 2(k) and Section 7 of
the Dangerous Drugs Act and, therefore, outside the purview
of the Opium Act. Counsel submitted that first the Dutch
buyer obtained the import permit from the Dutch authorities
for importing the said quantity of poppy husks from the
appellant. Correspondingly, the appellant applied for and
obtained an export authorisation from the Narcotics
Commissioner for exporting the said quantity from Mandsaur
District in Madhya Pradesh to the said Dutch buyer. On the
basis of the export authorisation issued by the Narcotics
Commissioner and the permit for import granted by the Dutch
authorities, the appellant applied to the Collector of
Excise, Mandsaur for grant of export permit. It was thus
not a case of export from Madhya Pradesh to Maharashtra. As
per the Rules, the poppy husks packages could not be opened
in Maharashtra. In fact, the very same packages transported
from Madhya Pradesh were to be loaded on to the ship without
breaking bulk and the same packages reached Holland. Thus,
there is a continuity and unity of movement. Indeed, there
is no sale of poppy husks in Madhya Pradesh; the only sale
being to the Dutch buyer. The permit issued by the
Collector of Excise, Mandsaur and the permit issued by the
Maharashtra Excise Authorities must all be read as part and
parcel of one single transaction covered by the import
permit issued by the Dutch authorities and export
authorisation granted by the Narcotics Commissioner. All
these permits dovetail into one another and represent one
unbroken, continuous movement. The levy of export duty,
therefore, by the Collector of Excise, Mandsaur under the
Rules made under Section 5 of the Opium Act is incompetent.
The Opium Act itself has no application to the said
transaction. The only Act applicable is the Dangerous Drugs
Act says the learned counsel.
20. For a proper appreciation of the said contention, it is
necessary to reiterate certain features of both the said
enactments. Section 5 of the Opium Act empowers the State
Government to do two things, viz., (i) to make Rules
permitting absolutely or subject to the payment of duty or
to any other conditions, the possession, transport,
import/export and sale of opium and (ii) to make Rules
regulating the aforesaid matters relating to opium in the
whole or any specified part of the territories administered
by such Government. The matters specified in Section 5 are
the very same as are specified in Section 4, viz.,
possession, transport, import/export and sale. (We have
already pointed out
64
that import and export as defined in the Opium Act does not
mean import into or export from India but import into or
export out of a particular State otherwise than across any
customs frontiers.) In other words, Section 5 empowers the
State Government to permit inter alia export of opium
subject to such conditions, including payment of duty, as it
may deem appropriate to impose, as part of control and
regulation over opium. Another feature to note is that
import or export, as defined in the Opium Act, does not
necessarily involve the element of sale. It is not
necessary that the import or export should be occasioned by
or result in a sale. Mere movement from one State to
another is sufficient to constitute export or import, as the
case may be, within the meaning of the Act so long as such
movement is not across the customs frontiers. (Sale of opium
is dealt with separately from import/export under Sections 4
and 5.) Now coming to the other Act, taking opium out of
India across the customs frontiers is ” export from India”
within the meaning of the Dangerous Drugs Act and is
governed by Section 7 of the Dangerous Drugs Act and the
Rules made thereunder. The Rules under the Dangerous Drugs
Act, referred to hereinbefore, specifically provide only two
ports from which opium can be exported by sea. They are
Bombay and Calcutta. Therefore, any opium to be exported by
sea has to first reach either Bombay or Calcutta. Thus,
while movement within India from one State to another (not
involving crossing of any customs frontiers) is governed by
the Opium Act, the movement across the customs frontiers is
governed by the Dangerous Drugs Act. In all these matters,
the element of sale is irrelevant. It is not one of the
requirements. Mere movement of goods is enough. The
movement may be the result of sale or may not be; that is
immaterial. Therefore, so far as the movement of poppy
husks from Mandsaur District in Madhya Pradesh to the Bombay
Port in Maharashtra is concerned, it is an export within the
meaning of the Opium Act. It is export from the State of
Madhya Pradesh to the State of Maharashtra. The “export
from India” begins only from the Port of Bombay and is
governed by the Dangerous Drugs Act. These two movements
may be parts of the same transaction but so far as law is
concerned, they are two different movements governed by two
different enactments a case of “string of movements”, if we
may borrow the expression with a slight adaptation from the
decision of this Court in Mohd. Serajuddin v. State of
Orissa1. The two movements are links in the same chain but
each subject to a different law. As a matter of fact, the
principle of Serajuddin1 has a close bearing upon the
question at issue herein.
21. Let us first examine the principle of Serajuddin1. The
appellant had entered into four contracts for sale of chrome
concentrates. Two of them were directly with the foreign
buyers. The other two were with the State Trading
Corporation since export of mineral ores was canalised
through the said Corporation. The State Trading Corporation
in turn entered into contracts with the foreign buyers. So
far as the first two contracts entered into directly with
foreign buyers were concerned, it was held by the High Court
itself that they were sales in the course of export within
the meaning of Section 5 of the Central Sales Tax Act
[before the insertion of sub-section (3) therein]. But so
far as the two contracts entered into with State Trading
Corporation were concerned, it
1 (1975) 2 SCC 47: 1975 SCC (Tax) 269
65
was held that they were not export sales since the sales
were to the State Trading Corporation and because the State
Trading Corporation had in turn entered into separate
contracts with the foreign buyers. The said view was
challenged by the appellant in this Court. It was argued by
the appellant that the said two sales too were really sales
to the foreign buyers through the instrumentality and agency
of the State Trading Corporation which was termed as an
“agent of necessity” and hence, export sales. This Court
(by majority) rejected the said contention holding inter
alia: (SCC p. 60, para 26)
“The appellant sold the goods directly to the
Corporation. The circumstance that the
appellant did so to facilitate the performance
of the contract between the Corporation and
the foreign buyer on terms which were similar
did not make the contract between the
appellant and the Corporation the immediate
cause of the export. The Corporation in
regard to its contract with the foreign buyer
entered into a contract with the appellant to
procure the goods. Such contracts for
procurement of goods for export are described
in commercial parlance as back to back
contracts. In export trade it is not unnatura
l
to find a string of contracts for export of
goods. It is only the contract which
occasions the export of goods which will be
entitled to exemption. The appellant was
under no contractual obligation to the foreign
buyer either directly or indirectly. The
rights of the appellants were against the
Corporation. Similarly the obligations of the
appellant were to the Corporation. The
foreign buyer could not claim any right
against the appellant nor did the appellant
have any obligation to the foreign buyer. All
acts done by the appellant were in performance
of the appellant’s obligation under the
contract with the Corporation and not in
performance of the obligations of the
Corporation to the foreign buyer.”
(emphasis supplied)
It was further observed by the majority that:
(SCC pp. 60-61, para 27)
“The expression ‘sale’ in Section 5 of the Act
has the same meaning as in Sale of Goods Act.
String contracts or chain contracts are
separate transactions even when there is
similarity relating to quantity, quality of
goods, shipment, sampling and analysis,
weighment and force majeure etc. or other
similar terms. A contract of sale is a
contract whereby the seller transfers or
agrees to transfer the property in goods to
the buyer for the money consideration called
the price. There were two separate contracts.
The price was different in the two contracts.
This difference also dissociates the two
contracts from each other. The High Court was
right in holding that the sales of the
appellant to the Corporation were exigible to
tax because the appellant’s sales to the
Corporation were not sales in the course of
export.”
(emphasis supplied)
22. Since Serajuddin1 arose under the Sales Tax enactments,
the central concept was the sale of goods, whereas in the
enactments concerned herein, we are concerned with the
movement of opium and not with its sale, as explained
hereinbefore. If we read the expression ‘movement’ in the
place of expression ,sale’ in the aforesaid passages from
Serajuddin1 the matter will become self evident. It would
be a case of string of movements links in a chain of
movement. They would be separate movements even where there
is similarity relating to quantity and quality of goods,
shipment, sampling and analysis. It would thus be a case of
string of movements resulting in export of opium. It is
66
only the movement of goods across the customs frontiers that
constitutes the “export from India” and not the earlier
movements. The earlier movements, i.e., from one State to
another within India not involving crossing of customs
frontiers would be governed by the Opium Act and if the
Opium Act provides for levy of export duty on such export,
it has to be paid. The appellant cannot disown the
liability to pay the said export duty levied under Rule 3-A
read with Rule 8 of the Madhya Pradesh Poppy Husks Rules,
1959 on the ground that it is one single movement commencing
in Mandsaur and terminating in Holland. So far as the
Collector of Excise, Mandsaur is concerned, the permit
granted by him is governed by Rule 8 of the Madhya Pradesh
Poppy Husks Rules, in Form P-H. It is true that he would
not have granted such permit unless the appellant had
produced the export authorisation from the Narcotics
Commissioner, Government of India but that only shows that
the said export authorisation is the basis for grant of
export permit by the Collector. It does not mean that the
export permit granted by the Collector is not an independent
permit. The Collector’s permit is limited and operative
within the four corners of the Opium Act and the Rules made
thereunder. He cannot grant a permit for export of opium
from India. It is equally relevant to notice that the
authorisation of export issued by the Narcotics Commissioner
mentions ‘Bombay’ against the Column “(e) Name of the
customs house through which export is to be effected” and
under clause (g), which requires the route to be followed by
the goods to be specified, it says “Bombay to Holland”. It
does not refer to the presence of poppy husks within Madhya
Pradesh or Mandsaur District nor does it say from where the
poppy husks should be moved or transported to Bombay. This
shows that while the Narcotics Commissioner is concerned
only with the movement of goods from Bombay across the
customs frontiers, by sea, to Holland, it is the Collector
of Excise, Mandsaur, who is concerned with the movement of
the said poppy husks from Mandsaur District in Madhya
Pradesh to a place beyond Madhya Pradesh. As a matter of
fact, even for movement within the State of Maharashtra,
i.e., from the Madhya Pradesh-Maharashtra border to the Port
of Bombay, a permit had to be and was obtained from the
Maharashtra Excise Authorities. The Shipping Bill (found at
p. 172 of Vol. V) furnished by the appellant also refers
only to the export authorisation granted by the Narcotics
Commissioner from Bombay to Holland and not the prior
movement. Indeed, it may be said that Narcotics
Commissioner was not strictly concerned from which place was
the appellant to procure the said quantity for being shipped
from the Port of Bombay though it is true, he would not have
granted the said export authorisation unless he was
satisfied that such quantity was available at some place in
India for fulfilling the said export obligation. The
Narcotics Commissioner, who is a creature of the Dangerous
Drugs Act could not have permitted or authorised the
movement of poppy husks from Madhya Pradesh (Mandsaur
District) to Bombay Port, since the Dangerous Drugs Act does
not deal with or govern that aspect. Under the export
authorisation granted by the Narcotics Commissioner, the
appellant could not have moved the poppy husks from Madhya
Pradesh to any other place within the country; the export
authorisation does not purport to authorise such movement.
There is no provision in the Dangerous Drugs Act saying
either expressly or by necessary implication that an export
of opium within the meaning of Opium Act shall
67
cease to be an export under the said Act, if that export
forms part of “export from India” as defined in and dealt
with by the Dangerous Drugs Act. These are two Acts which
operate in two distinct spheres and respect each other’s
jurisdiction. The amendments effected in Opium Act in 1930
simultaneously with the enactment of Dangerous Drugs Act
were meant to achieve this precise purpose. We are,
therefore, of the opinion that the appellant cannot refuse
to pay the export duty prescribed by Rule 3-A read with Rule
8 of the Madhya Pradesh Poppy Husks Rules on the ground that
the movement of poppy husks from Madhya Pradesh was really
an integral part of the export of the said quantity from
India, i.e., beyond the customs frontiers of India to
Holland.
23. The next contention of Shri Salve pertains to the
validity of levy of duty (export duty in this case) under
the rules made by the Madhya Pradesh Government under
Section 5 of the Opium Act. The learned counsel contends
that Section 5 is in truth and in effect a taxing provision.
Parliament is not competent to levy duty (tax) on opium.
Entry 59 of ListI or for that matter Entry 19 of List III
does not encompass the power to levy duty on opium. For
this proposition, he relies upon the principle enunciated in
M.P.V. Sundararamier & Co. v. State of A.p.2 The learned
counsel contends that power to levy duty of excise on opium
is the exclusive province of the States under Entry 51 of
List II. The duty levied in this case, it is true says the
counsel is levied under the rules made by the Madhya Pradesh
Government but on that account it cannot be said to be a
duty of excise levied by the State inasmuch as the said
rules are made by the State Government as a delegate of
Parliament. Only a State Legislature can levy the duty of
excise by means of a law made by it. The learned counsel
submits that the said levy cannot be justified even on the
ground of being a “price for parting with the privilege”
evolved by this Court in matters relating to intoxicating
liquors. The said theory, the learned counsel contends, has
in any event been negatived by this Court in Synthetics and
Chemicals Ltd. v. State of Up.3 The power of regulation
conferred by the said section cannot also warrant the levy
of duty of excise nor can the duty be justified as a
regulatory fees, says the counsel.
24. The first question that arises is whether Section 5 is
a taxing provision? We think not. Section 5 is really a
continuation of Section 4. Section 4, as it stands after the
amendments in 1930, prohibits the possession, transport,
import/export and sale of opium by anyone except as
permitted by the said Act or by any other enactment relating
to opium for the time being in force or by the Rules framed
under the Opium Act or any such other enactment. As stated
hereinbefore, opium is a noxious drug. It is dangerous to
health. Addiction to opium has brought nations to grief.
It is several times more dangerous to health than liquor or
tobacco. In the modern era, it has got mixed up with
international crime and terror. It is but natural that the
State should seek to prohibit its possession, movement, sale
and all dealings therein except under strict and close
control. To start with, there is the prohibition, which
prohibition is lifted only to the extent provided for by the
statute or the rules made thereunder. Sections 4 and 5 are
thus motifs of the same pattern. Section 4 provides the
prohibition
2 1958 SCR 1422: AIR 1958 SC 468 : (1958) 9 STC 298
3 (1990) 1 SCC 109
68
while Section 5 empowers the State Government to specify
situations in which the prohibition will be lifted, either
fully or partially and either unconditionally or subject to
such conditions, as may be deemed necessary, including
“payment of duty”. Section 5 provides for two things, viz.,
(a) the State Government may, from time to time, by
notification in the Official Gazette make rules consistent
with this Act to permit absolutely or subject to the payment
of duty or to any other conditions, possession, transport,
import/export and sale of opium and the farm of duties
leviable on the sale of opium by retail and (b) the State
Government may, from time to time, by notification in the
Official Gazette make rules consistent with this Act to
regulate within the whole or any specified part of the
territories administered by such Government, all or any of
the following matters, viz., possession, transport,
import/export and sale of opium and the farm of duties
leviable on the sale of opium by retail. The primary
purpose of Section 5 is controlling and regulating the
possession, transport, import/export and sale of opium and
not collection of revenue though the relevance and validity
of the said purpose is undeniable in the case of noxious
goods, as emphasised by this Court in Cooverjee B. Bharucha
v. Excise Commr. & Chief Commr., Ajmer4. The section
empowers the State Government to make rules prescribing the
situations in which the possession etc. of opium will be
permitted and also to specify in which situations the
permission would be absolute, i.e., unconditional and in
which situations would it be subject to prescribed
conditions. One of the conditions that can be so prescribed
is “payment of duty”. The other part of Section 5 speaks of
regulating possession etc. of opium again by means of rules.
Can it be said in the above situation that Section 5 is a
provision primarily concerned with levy of duty. Would it
not be more correct to say that it is a provision designed
to control and regulate the possession, transport etc. of
opium and it is only as a part of such control and
regulation (which must be understood in the light of the
prohibition contained in Section 4) that it provides that
payment of duty can also be insisted upon as a condition for
permitting the possession, transport etc. of opium. Much
should not be read into the expression ‘duty’ used in
Section 5. Having regard to the context in which the said
expression occurs, it cannot be understood in the sense it
carries in Entry 51 of List II. Opium Act is a pre-
Constitutional Act. Indeed, it is a law preceding the 1935
Act. In the context, the expression ‘duty’ means an
,amount’ which shall be collected as a condition for
granting the permission to possess, transport, import/export
or sell opium. [We need not say anything about “the farm of
duties leviable on the sale of opium by retail” referred to
in clause (d) of Section 5 since we are concerned herein
only with the validity of the “payment of duty” referred to
in the main limb of Section 5.1 All that it means is that it
is open to the State Government to make rules providing for
payment of such amount as it thinks appropriate as a
condition for granting the permission contemplated by
Section 5. The idea is not to allow possession, transport
etc. of opium freely (except in those cases where it is to
be so permitted having regard to the objects and purposes of
Act and public interest) but to make it prohibitive, to make
it a non-paying proposition in commercial sense. In this
context, it would be appropriate to refer to the decision of
this Court in Har Shankar v. Dy.
4 AIR 1954 SC 220: 1954 SCR 873
69
Excise and Taxation Commr.5 which affirms the fact that the
name given to a particular payment is not always indicative
of the true nature of the payment. The following passages
bring out the said principle: (SCC pp. 759-60, paras 55-56)
“Section 34 of the Act read with Section 59(d)
empowers the Financial Commissioner to direct
that a licence, permit or pass be granted
under the Act on payment of such fees and
subject to such restrictions and on such
conditions as he may prescribe. In such a
scheme, it is not of the essence whether the
amount charged to the licensees is
predetermined as in the appeals of Northern
India Caterers and of Green Hotel or whether
it is left to be determined by bids offered in
auctions held for granting those rights to
licensees. The power of the Government to
charge a price for parting with its rights and
not the mode of fixing that price is what
constitutes the essence of the matter. Nor
indeed does the label affixed to the price
determine either the true nature of the charge
levied by the Government or its right to levy
the same.
The distinction which the Constitution makes
for legislative purposes between a ‘tax’ and a
‘fee’ and the characteristic of these two as
also of ,excise duty’ are well-known. ‘A tax
is a compulsory exaction of money by public
authority for public purposes enforceable by
law and is not a payment for services
rendered’. A fee is a charge for special
services rendered to individuals by some
governmental agency and such a charge has an
element in it of a quid pro quo. Excise duty
is primarily a duty on the production or
manufacture of goods produced or manufactured
within the country. The amounts charged to
the licensees in the instant case are,
evidently, neither in the nature of a tax nor
of excise duty. But then, the ‘licence fee’
which the State Government charged to the
licensees through the medium of auctions or
the ‘fixed fee’ which it charged to the
vendors of foreign liquor holding licences in
Forms L-3, L-4 and L-5 need bear no quid pro
quo to the services rendered to the licensees.
The word fee’ is not used in the Act or th
e
Rules in the technical sense of the
expression. By ‘licence fee’ or ‘fixed fee’
is meant the price or consideration which the
Government charges to the licensees for
parting with its privileges and granting them
to the licensees. As the State can carry
on a trade or business, such a charge is
the normal incident of a trading or business
transaction.”
(emphasis supplied)
25. We are also not prepared to place the tag of “price for
parting with the privilege” on the said payment. We refuse
to be drawn into the controversy whether such a concept
affirmed by this Court consistently over a period of forty
years has been negatived in this Court’s decision in
Synthetics & Chemicals Ltd 3 Incidentally, we may say that
the majority opinion delivered by Sabyasachi Mukharji, J.,
on behalf of the six learned Judges, does not expressly say
so. The said question was not put in issue and was not
pronounced upon expressly. Rejection of such a well-
established proposition cannot be inferred. If it is
proposed to be rejected, it must be put in issue in a
straight manner and be pronounced upon. This has not been
done in the majority judgment. Actually, the said case was
concerned only with the States’ power to levy taxes and
other regulatory fees on industrial alcohol. It was held
that the States are denuded of
5 (1975) 1 SCC 737 :(1975) 3 SCR 254
70
the legislative power to do so under Entry 24 of List II by
virtue of the declaration made by Parliament under and in
terms of Entry 52 of List I. Only the separate concurring
opinion delivered by G.L. Oza, J. says that the said concept
is unacceptable under our constitutional scheme. We need
express no opinion on the said opinion. It is enough to say
for the present purpose that Section 5 of the Opium Act does
not purport to levy duty of excise but that it only purports
to empower the State Government to make rules to permit
possession, export etc. of opium subject to such conditions
as it may think appropriate to impose including the payment
of an amount (called ‘duty’ by the section). In this view
of the matter, the principle enunciated in Sundararamier2
has no application herein. That principle could perhaps
have been relevant if Section 5 had purported to levy duty
of excise or other tax on opium. Perhaps, it could then
have been argued that Entry 59 of ListI or for that matter
Entry 19 of List III does not take in the power to levy
taxes and duties on opium. We need express no opinion on
the said aspect. For the same reason, the argument of Shri
Salve that opium among other narcotic drugs has been
excluded from the purview of Entry 84 of ListI need not be
dealt with.
26. We are, therefore, of the opinion that the duty
provided by Rule 3-A read with Rule 8 of the Madhya Pradesh
Poppy Husks Rules is perfectly within the four corners of
Section 5 and cannot be faulted on the ground aforesaid.
27. It is then submitted by learned counsel that the
payment of so-called duty (which according to us must
properly be called ‘an amount’) is excessive and is almost
as much as or more than the price of poppy husks. In our
opinion, this contention is equally unsustainable. Firstly,
no material has been placed before us to show the price of
poppy husks during the several years under consideration.
Secondly, even if the contention is factually true, it
matters very little for the very idea underlying Sections 4
and 5 is to make possession and dealings in opium
prohibitive and, commercially speaking, a non-paying
proposition. The idea is to discourage the people from
possessing or otherwise dealing in matters specified in
Sections 4 and 5. Even otherwise, duties of excise at more
than 100% is not unknown in law. [See in this connection the
observations of this Court in Har Shankar5 (SCR at p. 279 E
to G : SCC p. 760, para 57).]
28. There is another good reason for upholding the validity
of Section 5, viz., the provision in Article 372. Opium Act
is a law preceding the Government of India Act, 1935. The
division of powers between the Centre and the provinces was
first introduced by the 1935 Act. Section 292 of the said
Act provided that:
“Notwithstanding the repeal by this Act of the
Government of India Act, but subject to the
other provisions of this Act, all the law in
force in British India immediately before the
commencement of Part III of this Act shall
continue inforce in British India until
altered or repealed or amended by a competent
Legislature or other competent authority.”
Article 372(1) provides similarly that:
“Notwithstanding the repeal by this
Constitution of the enactments referred to in
Article 395 but subject to the other
provisions of this Constitution, all the laws
in force in the territory of India immediately
71
before the commencement of this Constitution
shall continue in force therein until altered
or repealed or amended by a competent
Legislature or other competent authority.”
Explanation 1 to the article defines the
expression “law in force”. It reads thus:
“Explanation /.- The expression ‘law in force’
in this article shall include a law passed or
made by a Legislature or other competent
authority in the territory of India before the
commencement of this Constitution and not
previously repealed, notwithstanding that it
or parts of it may not be then in operation
either at all or in particular areas.”
The effect of these provisions was considered by the
Constitution Bench of this Court in South India Corpn. (P)
Ltd. v. Secy., Board of Revenue6. It was held that the said
provisions save and continue a law notwithstanding the fact
that according to the provisions of the Constitution, the
law could not have been made by the legislature which had
enacted it, though they do not save such enactment from
inconsistency with other provisions of the Constitution,
viz., provisions other than those relating to legislative
competence. The following statement of law brings out the
ratio: (AIR pp. 213-14, paras 13-14)
“The object of this article is to maintain the
continuity of the preexisting laws after the
Constitution came into force till they were
repealed, altered or amended by a competent
authority. Without the aid of such an article
there would be utter confusion in the field of
law. The assumption underlying the article is
that the State laws may or may not be within
the legislative competence of the appropriate
authority under the Constitution. The article
would become ineffective and purposeless if it
was held that pre-Constitution laws should be
such as could be made by the appropriate
authority under the Constitution. The words
‘subject to the other provisions of the
Constitution’ should, therefore, be given a
reasonable interpretation, an interpretation
which would carry out the intention of the
makers of the Constitution and also which is
in accord with the constitutional practice in
such matters. The article posits the
continuation of the pre-existing laws made by
a
competent authority notwithstanding the repeal
of (in?) Article 395; and the expression
‘other’ in the article can only apply to
provisions other than those dealing with
legislative competence.
The learned Advocate General relied upon the
following decisions for the said legal
position; Gannon Dunkerley and Co. v. Sales
Tax Officer, Mattancheri7; Sagar Mal v.
State8; Kanpur Oil Mills v. Judge (Appeals)
Sales Tax9; Amalgamated Coalfields Ltd. v.
Janapada Sabha, Chhindwara10; Lala Jagdish
Prasad v. Saharanpur Municipality11;
Sheoshankar v. State Govt. of M. P. 12; State
v. Yash Pal 1 3 and Binoy Bhusan
6 AIR 1964 SC 207: (1964) 15 STC 74
7 ILR 1957 Ker 462: AIR 1957 Ker 146
8 ILR (1952) 1 All 862: AIR 1951 All 816
9 AIR 1955 All 99: 1955 All LJ 19: (1955) 6STC 77
10 (1962) 1 SCR 1 : AIR 1961 SC 964
11 AIR 1961 All 583: 1961 All LJ 386: 1961 All WR (HC) 262
12 AIR 1951 Nag 58 :52 Cri LJ 1140: ILR 1951 Nag 646
13 AIR 1957 Punj 91 : ILR 1956 Punj 1377 : 1957 Cri LJ 540
72
v. State of Bihar14. It is not necessary to
consider in detail the said decisions, as they
either resume the said legal position or
sustain it, but do not go further. They held
that a law made by a competent authority
before the Constitution continues to be in
force after the Constitution till it is
altered or modified or repealed by the
appropriate authority, even though it is
beyond the legislative competence of the said
authority under the Constitution. We give our
full assent to the view and hold that a pre
Constitution law made by a competent
authority, though it has lost its legislative
competency under the Constitution, shall
continue in force, provided the law does not
contravene the ‘other provisions’ of the
Constitution.”
(emphasis added)
29.Now, objection of Shri Salve to Section 5 is this: It is
a taxing provision. It levies excise duty on opium. But
excise duty on opium can be levied only by a law made by a
State Legislature with reference to Entry 51 of List II of
the Seventh Schedule to the Constitution. Parliament has no
such power, though it can make a law relating to
cultivation, manufacture and sale for export of opium by
virtue of Entry 59 List I- or for that matter with respect
to opium generally with reference to Entry 19 of List III.
The said section is thus alleged to be beyond Parliament’s
legislative competence. Assuming that the said argument is
correct, which argument we have rejected hereinbefore
still such a law is saved by virtue of Article 372 of the
Constitution as interpreted by this Court in South India
Corpn.6 It is not suggested by the learned counsel that
Section 5 is inconsistent with any other provision of the
Constitution.
30.Once it is held that the Opium Act is a pre-Constitution
statute and is saved by Article 372, the rules made by the
Madhya Pradesh Government in 1959 under Section 5 of the
said Act are equally within the protection. The principle
of the decision of the Constitution Bench in Sardar Inder
Singh v. State of Rajasthan15 clearly supports this
proposition. It was held in the said decision: (SCR pp.
619-20)
“It is next contended that the notification
dated 20-6-1953, is bad, because after the
Constitution came into force, the Rajpramukh
derived his authority to legislate from
Article 385, and that under that article his
authority ceased when the Legislature of the
State was constituted, which was in the
present case, on 29-3-1952. This argument
proceeds on a misconception as to the true
character of a notification issued under
Section 3 of the Ordinance. It was not an
independent piece of legislation such as could
be enacted only by the then competent
legislative authority of the State, but merely
an exercise of a power conferred by a statute
which had been previously enacted by the
appropriate legislative authority. The
exercise of such a power is referable not to
the legislative competence of the Rajpramukh
but to Ordinance No. IX of 1949, and provided
Section 3 is valid, the validity of the
notification is coextensive with that of the
Ordinance. If the Ordinance did not come to
an end by reason of the fact that the
authority of the Rajpramukh to legislate came
to an end and that is not and cannot be
disputed neither did the power to issue a
notification which is conferred therein. The
true position is that it is in his character
as
14 AIR 1954 Pat 346
15 1957 SCR 605: AIR 1957 SC 510
73
the authority on whom power was conferred
under Section 3 of the Ordinance that the
Rajpramukh issued the impugned notification,
and not as the legislative authority of the
State. This objection should accordingly be
overruled.”
31.If Section 5 is supposed to empower levy of duty by State
Government by making rules, as contended by Shri Salve, this
power is saved by Article 372. Once the power is saved, it
can be exercised even after the commencement of the
Constitution. Otherwise, there would be no meaning behind
the saving clause in Article 372. The reliance upon the
decision of this Court in Kalyani Stores v. State of
Orissa16 by Shri Salve is of no help to the appellant
inasmuch as the notification of 1961 considered therein was
held to be violative of Article 301 and not saved by Article
305 which too is a provision saving the existing law from
the operation of Articles 301 and 303. The said decision
did not really turn upon the language of Article 372, as
would be evident from the discussion (at SCR p. 874). The
principle of the said decision cannot be extended to a
provision like Section 5 of the Opium Act. The scheme of
Part XIII of the Constitution is different and the object of
Article 305 is a limited one.
32.We are also of the opinion that it is unnecessary to go
into the question whether Mandsaur District was a part of a
Princely State and whether the Opium Act was extended to the
said area after the commencement of the Constitution because
no factual foundation has been laid for this argument in the
High Court, though Article 372 was expressly relied upon by
the State. In any event, Explanation 1 to Article 372
appears to be a complete answer to this argument. For all
the above reasons, we hold that Section 5 is a perfectly
valid piece of legislation and cannot be faulted on the
grounds suggested.
33.The last submission of Shri Salve is that Section 5 is
void on the ground of excessive delegation of the
legislative power. It is argued that Section 5 empowers the
State Government to levy duty without prescribing either the
minima or the maxima. The rate of duty is left entirely to
the State Government. No guidance whatsoever is provided by
the Act in the said matter. It is open to the State
Government to prescribe such rate of duty as it thinks
appropriate. This is a clear case of excessive delegation.
Parliament has not retained any control over the acts of its
delegate, viz., the State Government; it is a case of total
abnegation, it is submitted. It is brought to our notice
that the Allahabad High Court has held so in Rameshwar
Prasad Kishan Gopal v. State of U. p. 17 It is pointed out
that appeals were preferred by the State in this Court
against the said decision but by the time the said appeals
came up for hearing, the Uttar Pradesh Legislature had
intervened and effected local amendments purporting to
remedy the defect pointed out by the High Court. In view of
the said amendments, this Court disposed of the appeals
(Civil Appeal Nos. 1657-58 of 1975 and batch on 13-7-1993)
without going into the said question. This Court also took
note of the fact that the respondents in the said appeals
had filed another writ petition in this Court (WP No. 314 of
1991) challenging the said State Amendments.
34.It is not possible to agree with the learned counsel. It
would be seen at once that this argument is based upon the
same premise as the previous
16 (1966) 1 SCR 865 : AIR 1966 SC 1686
17 1973 Tax LR 2503 :(1973) 71 All LJ 739 (All)
74
argument. The argument proceeds on the assumption that
Section 5 is a taxing provision; that its main purpose is to
levy excise duty. We have pointed out hereinbefore that
Section 5 is not a taxing provision, that the ‘duty’
referred to therein is not ‘duty’ in the sense in which it
is used in Entry 51 of List II of the Seventh Schedule to
the Constitution and that the said expression really means
an amount. As explained hereinbefore, Section 5 is a
continuation of Section 4 and it merely empowers the State
Government to lift the prohibition on the possession,
transport, import/export and sale of opium in such cases as
it deems appropriate and subject to such conditions, as it
may deem fit to impose including payment of an amount. It
has been held that it is a regulatory provision. For this
reason, the decisions of this Court (e.g., Devi Das Gopal
Krishnan v. State of Punjabl81 which lay down the
proposition that where the taxing power to fix rates of tax
is delegated by the Legislature to another body, the
Legislature must either fix minima or maxima or retain some
control over the Acts of the delegate are not really
relevant and need not be dealt with. So far as guidance in
the matter of making of rules providing for the matters
contemplated by Section 5 is concerned, the provisions of
the Act do furnish sufficient guidance in the matter of
making rules under Section 5. The scheme of the Act
including Section 4, which bars any and every person from
possessing, transporting, importing/exporting and selling
opium except as provided by the said Act or the rules made
thereunder (or by any other Act or rules made under such
other Act) furnish adequate guidance to the State
Government. It must also be noticed that the rule-making
power is conferred upon a responsible body like the State
Government. The very noxious nature of opium and the
desirability to closely control and regulate possession,
transport, movement and all dealings therein are matters
which the State Government has also to keep in mind while
making the rules. We may in this connection refer to the
decision of the Constitution Bench of this Court in
Harishankar Bagla v. State of M.P. 19 Section 3(1) of the
Essential Supplies (Temporary Powers) Act, 1946 conferred
rule-making power upon the Central Government. Sub-section
(1) read as follows: (SCR p. 384)
“3. (1) The Central Government, so far as it
appears to it to be necessary or expedient for
maintaining or increasing supplies or any
essential commodity, or for securing their
equitable distribution and availability at
fair prices, may by order provide for
regulating or prohibiting the production,
supply and distribution thereof and trade and
commerce therein……
35. Sub-section (2) elucidated the grounds mentioned in
sub-section (1). It was argued before this Court that the
Cotton Textiles (Control of Movement) Order, 1948 made under
Section 3 is invalid inasmuch as the said section delegated
legislative power beyond the permissible limits. The
argument was rejected in the following words: (SCR p. 388)
“It was settled by the majority judgment in
the Delhi Laws Act case2O that essential
powers of legislature cannot be delegated. In
other words, the
18 (1967) 3 SCR 557: AIR 1967 SC 1895: (1967)
20 STC 430
19 (1955) 1 SCR 380: AIR 1954 SC 465
20 Delhi Laws Act, 1912, Re, 1951 SCR 747: AIR
1951 SC 332
75
legislature cannot delegate its function of
laying down legislative policy in respect of a
measure and its formulation as a rule of
conduct. The legislature must declare the
policy of the law and the legal principles
which are to control any given cases and must
provide a standard to guide the officials or
the body in power to execute the law. The
essential legislative function consists in the
determination or choice of the legislative
policy and of formally enacting that policy
into a binding rule of conduct. In the
present case the legislature has laid down
such a principle and that principle is the
maintenance or increase in supply of essential
commodities and of securing equitable
distribution and availability at fair prices.
The principle is clear and offers sufficient
guidance to the Central Government in
exercising its powers under Section 3.”
36. The same principle was reiterated in State of TN. v.
Hind Stone21. It was contended before this Court that a rule
made by the Government of Tamil Nadu under Section 15 of the
Mines and Minerals (Regulation and Development) Act
providing that no lease for quarrying black granite should
be granted to private persons and creating a monopoly in
favour of a Corporation wholly owned by the State Government
was beyond the rule-making power. This argument was
rejected holding that the provisions of the Act furnished
sufficient guidance. It was held: (SCC p. 213, para 6)
“The public interest which induced Parliament
to make the declaration contained in Section 2
of the Mines & Minerals (Regulation and
Development) Act, 1957, has naturally to be
the paramount consideration in all matters
concerning the regulation of mines and the
development of minerals. Parliament’s policy
is clearly discernible from the provisions of
the Act. It is the conservation and the
prudent and discriminating exploitation of
minerals, with a view to secure maximum
benefit to the community. There are clear
sign posts to lead and guide the subordinate
legislating authority in the matter of the
making of rules.”
We are, therefore, of the opinion that Section 5 cannot be
faulted either on the ground that it delegates essential
legislative functions to the State Government or on the
ground that it confers rule-making power upon the State
Government without furnishing any guidance and without
laying down any policy in that behalf. In this view of the
matter, it is not possible to agree with the decision of the
Allahabad High Court in Rameshwar Prasad Kishan Gopal17.
37. For the above reasons, the appeals fail and are
dismissed with costs. Advocate’s fee quantified at Rs
10,000.
21 (1981) 2 SCC 205 : (1981) 2 SCR 742
76