1971 Supreme(Del) 9

High Court Of Delhi
LACHMI NARAIN - Appellant
Versus
UNION OF INDIA - Respondent
Civil Writ 574D of 1966
Decided On : 01/13/1971

The power to modify a statute given to the Government by section 2 of the Union Territories (Laws) Act 1950 is limited to modifications which are necessary for the purpose of applying the State law to the Union Territory and cannot be exercised for any other purpose.

Headnote:

DELEGATED LEGISLATION - MODIFICATION OF STATUTE - SCOPE AND CIRCUMSTANCES - VALIDITY OF MODIFICATION - POWER TO MODIFY A STATUTE - EXTENT AND PURPOSE - LEGISLATIVE POLICY - ESSENTIAL LEGISLATIVE FUNCTION - DELEGATION OF AUTHORITY - REASONABLENESS OF MODIFICATION - NOTICE REQUIREMENTS - MANDATORY AND DIRECTORY PROVISIONS - AMENDMENT OF STATUTE - EFFECT ON INVALID MODIFICATION.

Fact of the Case:

The petitioners, who sell durries and ghee, challenged the validity of the withdrawal of exemption from payment of sales tax on the grounds that the modification of section 6(2) of the Bengal Finance (Sales Tax) Act 1941 by the Government of India notification No. SRO. 3908 dated 7th December 1957 was ultra vires section 2 of the Union Territories (Laws) Act 1950, that such a modification could be made only once when the Bengal Finance (Sales Tax) Act 1941 was extended to Delhi in 1951, that the modification could not change the policy of the legislature reflected in the Bengal Finance (Sales Tax) Act 1941, and that the notifications giving notice of intention to withdraw the exemption and withdrawing the exemption were void as the statutory notice of not less than three months as required by section 6(2) prior to its modification by the impugned notification of 7th December, 1957 had not been given.

Finding of the Court:

The court held that the impugned modification of section 6(2) of the Bengal Finance (Sales Tax) Act 1941 was ultra vires section 2 of the Union Territories (Laws) Act 1950 as it was not necessary for the purpose of applying the State law to the Union Territory of Delhi and was unrelated to the purpose for which the power was given by the legislature. The court further held that the modification was not permissible as it changed the legislative policy reflected in the Bengal Finance (Sales Tax) Act 1941 and was, therefore, ultra vires for excessive delegation. The court also held that the Government could not exercise the power of modification repeatedly after the extension of the State Act to the Union Territory had already become complete, unless exceptional circumstances arose, which was not the case in the present instance. The court further held that the grant of exemption to durries by the notification dated 14th December 1957 was not invalid though it was not preceded by compliance with section 6(2) as the object and effect of the grant of exemption and withdrawal of exemption were different, and the procedure was mandatory only for the imposition of the tax but not for exemption from the tax. The court also held that the amendment of section 6(2) by the Bengal Finance (Sales Tax) (Delhi Amendment) Act 1959 did not have the effect of validating the invalid modification made by the Government in 1957 as the amendment was not directed towards the cure of the invalidity of the modification.

Issues: 1. Whether the modification of section 6(2) of the Bengal Finance (Sales Tax) Act 1941 by the Government of India notification No. SRO. 3908 dated 7th December 1957 was ultra vires section 2 of the Union Territories (Laws) Act 1950? 2. Whether the Government could exercise the power of modification repeatedly after the extension of the State Act to the Union Territory had already become complete? 3. Whether the modification was permissible as it changed the legislative policy reflected in the Bengal Finance (Sales Tax) Act 1941? 4. Whether the grant of exemption to durries by the notification dated 14th December 1957 was invalid though it was not preceded by compliance with section 6(2)? 5. Whether the amendment of section 6(2) by the Bengal Finance (Sales Tax) (Delhi Amendment) Act 1959 had the effect of validating the invalid modification made by the Government in 1957?

Ratio Decidendi: 1. The power to modify a statute given to the Government by section 2 of the Union Territories (Laws) Act 1950 is limited to modifications which are necessary for the purpose of applying the State law to the Union Territory and cannot be exercised for any other purpose. 2. The Government cannot exercise the power of modification repeatedly after the extension of the State Act to the Union Territory has already become complete, unless exceptional circumstances arise. 3. A modification which changes the legislative policy reflected in the State law is ultra vires the power of modification given to the Government by section 2 of the Union Territories (Laws) Act 1950. 4. The grant of exemption from tax is not invalid even if it is not preceded by compliance with the notice requirements of section 6(2) of the Bengal Finance (Sales Tax) Act 1941, as the procedure is mandatory only for the imposition of the tax but not for exemption from the tax. 5. An amendment of a statute which is not directed towards the cure of the invalidity of a particular provision of the statute cannot have the effect of validating the invalid provision.

Final Decision: The writ petitions were allowed and it was declared that the purported modification of section 6(2) of the Bengal Finance (Sales Tax) Act 1941 by the Government of India notification No. SRO. 3908 dated 7th December 1957 was ineffective and section 6(2) continues to be the same as before as if it was not so modified at all. Consequently, the Government of India's notifications No. GSR 964 dated 16th June 1966 and GSR 1061 dated 29th June 1966 were quashed because they were not in compliance with the provisions of section 6(2) of the Bengal Finance (Sales Tax) Act, 1941.