D. Biswas, J.
1. Both the writ petitions have been taken up together for disposal.
2. The vires of Sub-section (4) of Section 4 of the Assam Industries (Sales Tax Concession) Act, 1986 and Rule 2(f) of the Assam Industries (Sales Tax Concession) Rules, 1988 are in challenge in Civil Rule No. 1027 of 1994. Civil Rule No. 1110 of 1994 has been filed for adjustment/refund of the amount of tax already paid.
3. Section 4 of the Assam Industries (Sales Tax Concession) Act, 1986 and Rule 2(f) of the Rules framed therein are quoted below :
'Section 4 : Certificate of authorisation.--(1) A person undertaking to manufacture in the State such goods, as may be prescribed, may make an application in the prescribed form to the prescribed authority and within the prescribed time for a certificate of authorisation for the purposes of Sub-section (1) of Section 3.
(2) If the authority to whom an application is made under Sub-section (1) is satisfied that the application is in conformity with the provisions of the Act and the Rules made thereunder it shall grant to the applicant a certificate of authorisation in the prescribed form which shall specify the class or classes of goods for purposes of Sub-section (1) of Section 3 and the period for which it shall remain valid.
(3) A certificate of authorisation granted under this section shall remain valid for a period of five years from the date of completion of effective steps for setting up the industrial unit in respect of which the certificate is granted:
Provided that the authority issuing the certificate may, if he is satisfied on application made in this behalf, extend the validity of the certificate till the expiry of five years from the commencement of production by the industrial unit in respect of which the certificate is granted.
(4) No certificate of authorisation shall be granted under Sub-section (2) except in respect of such raw materials as may be prescribed.
(5) A certificate of authorisation granted under this section may,--
(a) be amended by the authority granting it if he is satisfied either on the application of the holder or, where no such application has been made, after due notice to the holder, that by reason of the holder having changed the name, place or nature of his business or the class or classes of goods bought, sold or manufactured by him or for any other reason the certificate of authorisation granted to him required to be amended ; or
(b) be cancelled by the authority granting it where he is satisfied after due notice to the holder that the holder has ceased to carry on business or for any other sufficient reason.'
'Rule 2(f).--'Raw material' means any material or commodity capable of being used for manufacture of any other product specified, in any authorisation certificate as intended by the holder for use by him as raw material in the manufacture of goods in the State for sale by him but shall not include the following commodities, namely:--
(a) tea, (b) coal, (c) liquefied petroleum gas, (d) plywood, (e) petrol, diesel oil and lubricants.'
4. The Government of Assam announced a scheme known as 'The 1982 Scheme' with a view to exhilarate industrial development in the State. The scheme was in force from October 15, 1982 to March 31, 1985. The scheme, apart from various incentives, also included sales tax exemption on finished products and raw materials. The Assam Industries Act of 1986 came into force w.e.f. August 1, 1988. In pursuance of the scheme, it provided for exemption of sales tax in respect of sale of goods produced in a new industrial unit as may be specified by notification for a period of five years. Accordingly, notification was issued exempting sales tax in respect of sales made during the period from 15th October, 1982 to 31st July, 1988 on furnishing of certificate of eligibility from the authority as specified. The petitioner-firm is carrying on the business of manufacture of coke from coal, used as raw material. As per provisions of Section 3 of the Act of 1986, sales tax paid by the petitioner in respect of goods sold or purchased from August 15, 1982 till commencement of the Act of 1986 has to be reimbursed subject to certain conditions. The Superintendent of Taxes by the order dated May 21, 1993 (annexure 4) refused to issue authorisation certificate in respect of coal purchased by the petitioner on consideration of the provisions of Rule 2(f) of the Rules of 1988. The petitioner's contention is that Rule 2(f) is ultra vires inasmuch as the powers given under Section 4 cannot be exercised to exclude coal as raw material for the purpose of tax exemption.
5. Section 3(1) of the Act of 1986, quoted hereinbefore, provides that no dealer shall be liable to pay any tax in respect of sale of any goods to a person possessing a valid authorisation certificate. Proviso to Sub-section (1) of Section 3 provides for refund of the tax already paid in respect of any goods sold or purchased during the period from 15th day of October, 1982 to the commencement of the Act on production of authorisation certificate. Sub-section (2) of Section 4 lays down the provisions for issuance of certificate of authorisation, and Sub-section (3) provides that a certificate issued under Sub-section (2) shall remain valid for a period of five years subject to extension. Sub-section (4) provides for the rule-making power enabling the State Government to specify the raw materials in order to exclude them from tax exemption. In pursuance of this power under Sub-section (4) of Section 4, the State Government framed the Rules of 1988 and the provisions in Rule 2(f) as quoted above have been made to exclude coal and other commodities from being considered as a raw material for the purpose of sales tax exemption. The Rules of 1988 came into force with effect from August 1, 1988, the day of commencement of the Act of 1986.
6. Dr. Saraf, learned Senior Counsel for the petitioner argued that in pursuance of the 'Scheme of 1982', the petitioner-firm was entitled to purchase raw materials, i.e., 'coal' to be used in manufacturing of finished goods, namely, coke in its new industrial unit without payment of tax. Section 3 of the Act of 1986 specifically provided that any sales tax paid in respect of such raw material during the period from October 15, 1982 to the commencement of the Act, shall be refunded. The petitioner-firm, accordingly, applied to the Superintendent of Taxes for issuance of certificate of authorisation. The Superintendent refused to issue the same on the ground that coal has been exempted from the definition of 'raw material' by Sub-rule 2(f) of the Rules of 1988. Dr. Saraf argued that the provisions of Rule 2(f) are in excess of the rule-making power as provided in Sub-section (4) of Section 4. When coal, according to Dr. Saraf, is used as a raw material for the purpose of manufacturing coke, it has to be treated as raw material for the purpose of Section 3, and the rule-making authority cannot set at naught the provisions of Section 3 in exercise of its delegated powers. According to Dr. Saraf, exclusion of coal from the purview of the definition of raw material is discriminatory and, as such, violative of the provisions of Article 14. Dr. Saraf further argued that Sub-section (4) of the Act is also illegal and ultra vires as it suffers from the vice of excessive delegation inasmuch as one of the important functions of prescribing raw materials has been left to the rule-making authority. Besides, Dr. Saraf further submitted that the rule-making authority has acted even beyond the powers delegated by the State Legislature and, therefore, the provisions of Rule 2(f) cannot stand. Rule 2(f) has also been challenged on the ground that it could not be brought into force with retrospective effect.
7. Mr. R. Baruah, learned State Counsel, submitted that the intention of the Legislature that could be gathered from Sub-section (4) of Section 4 is that while allowing tax concession, it authorised the rule-making authority to exclude any raw material from the purview of tax concession. The State framed the Rules of 1988 excluding certain commodities from the net of tax concession including coal. Mr. Baruah further argued that the objects and reasons of the Act clearly show that it was enacted with a view to grant tax concession on selective basis to new industrial units, and for this purpose, delegated powers to the State Government to frame Rules excluding any raw material from the net of tax concession. Mr. Baruah further submitted that 'coal' has all along been a taxable item and, as such, its exclusion from the net of tax concession, being in tune with the law in force, cannot be deprecated as arbitrary and unreasonable.
8. First let us examine the provisions of Sub-section (4) of Section 4. Sub-section (4) provides that no certificate of authorisation shall be granted under Sub-section (2) except in respect of such raw materials as may be prescribed. There is no ambiguity in the language used. Powers have been given to the rule-making authority to exclude any raw material from the net of tax concession. The question, therefore, is whether this delegation is permissible under law ?
9. There is no dispute that the Act of 1986 is a special piece of legislation intended to give effect to the Industrial Policy of 1982 for a period of five years from October 15, 1982 to March 31, 1985 and, for subsequent period, as per provisions of Section 16 of the Act. The policy of tax exemption as per Scheme of 1982 for a specified period of five years thus stood extended subject to conditions laid down in Section 16. The Act of 1986 incorporates the policy of the State Government to carve out raw materials used in the manufacture of finished goods from the purview of sales tax. It was definitely not possible for the Legislature to work out the details and to specify the raw materials in respect of which either tax concession is to be given or refused. It lays down the general policy of exemption in respect of raw materials used in the manufacture of finished products and delegated the ancillary powers of working out the details for the purpose of implementation. When the policy of the State Government as reflected in the Act of 1986 is clear and unambiguous, delegation of ancillary powers to work out the modalities of exemption cannot be treated as delegation in excess of constitutional limits. The State Legislature has clearly indicated the policy. It, therefore, cannot be said that the Legislature has given arbitrary discretion to the State Government to exclude raw materials from the purview of tax concession given in the Act. There cannot be any dispute that 'an essential legislative function consists in the determination of a legislative policy and its formulation as a binding rule of conduct. Having laid down the legislative policy, the Legislature may confer discretion on an administrative agency as to the execution of the policy and leave it to the agency to work out the details within the framework of the policy.'
10. The observation of the honourable Supreme Court quoted above from Khambhalia Municipality v. State of Gujarat AIR 1967 SC 1048 is relevant for the purpose of the case at hand. The State has laid down its policy of tax exemption in respect of raw materials as an incentive to new industrial units. There appears to be no abdication of its legislative function to lay down any policy in the matter of tax exemption in pursuance of the Scheme of 1982. What is left to the State is the power to determine and specify the raw materials which would be considered for exemption from payment of sales tax even if used for the purpose of manufacture. While specifying the raw materials, the State Government is not required to lay down any policy, but is required to take a decision on overall consideration of the industrial and fiscal scenario prevailing in the State. It was not reasonably practicable on the part of the Legislature to specify in details the raw materials to be excluded. The honourable Supreme Court, at para 20 of the aforesaid judgment (Khambhalia Municipality AIR 1967 SC 1048) observed as follows :
'20. A declaration under Section 9(1) that a local area shall be a nagar or a gram is a legislative function. As stated on several occasions by this Court an essential legislative function consists in the determination of the legislative policy and its formulation as a binding rule of conduct (Cf Rajnarain Singh v. Chairman, Patna Administration Committee [1955] 1 SCR 290 and Delhi Laws Act case [1951] SCR 747). Such a function cannot be surrendered or delegated in favour of another authority or agency for the Constitution entrusts the legislative function to the Legislatures. In view, however, of the diverse activities of a modern State it is recognised that a Legislature cannot be expected to work out all the details of a complex statute such as the instant Act. It is, therefore, competent for a Legislature to delegate in suitable cases some of its ancillary legislative powers to the executive or any other authority to work out such details. But there is an inherent danger in such delegation. As observed in Vasanlal Maganbhai v. State of Bombay [1961] 1 SCR 341 at 346.
'Although the power of delegation is a constituent element of the legislative power, it is well-settled that the Legislature cannot delegate its essential legislative functions in any case and before it can delegate any subsidiary or ancillary power, to a delegate of its choice, it must lay down the legislative policy and principles so as to afford the delegate proper guidance in implementing the same.'
If, therefore, a statute is challenged on the ground of excessive delegation it has to be established that the Legislature has delegated its essential legislative power or function and that it has not laid down its policy or principle for the guidance of its delegate. Even if a policy is declared it may, however, be couched in such vague terms that it may not set down a definite standard or criterion for the guidance of the delegate. The consequence would be to confer an arbitrary or uncanalised power to change or modify the declared policy without reserving to itself any control over the subordinate legislation. Such an effacement or abdication of power in favour of another agency either in whole or in part is beyond the permissible limits of delegation. In Hamdard Dawakhana's case [1960] 2 SCR 671 Clause (d) of Section 3 of the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 which gave power to the Central Government to add to the diseases falling within the mischief of Section 3 was struck down on the ground of its conferring such uncanalised power to include any disease it thought fit.'
11. The ratio available in the aforesaid paragraph amply demonstrate that when a State Act clearly lays down the policy of the Government leaving ancillary matters to be worked out and implemented by the State agency, it cannot be declared as ultra vires for the vice of excessive delegation. The decision in A.V. Nachane v. Union of India AIR 1982 SC 1126 at para 11 may be referred to as an authority in addition to the aforesaid judgment. Para 11 is quoted below :
'11. The question however remains to be answered, does the Life Insurance Corporation Act, 1956 as amended in 1981 state any policy to guide the rule-making authority. We have earlier referred to the observations of Mukerjea, J., in the Delhi Laws case [1951] SCR 747. That the Legislature can formulate a policy as broadly and with as little or as much details as it thinks proper and may delegate the rest of the legislative work to a subordinate authority who will work out the details within the framework of the Policy. In Harishankar Bagla case AIR 1954 SC 465 one of the questions for decision was whether Section 3 of the Essential Supplies (Temporary Powers) Act, 1946 amounts to delegation of legislative power outside the permissible limits. It was held that Legislature had laid down a legislative principle which was 'maintaining or increasing supplies of any essential commodity', and 'Securing their equitable distribution and availability at fair prices'. That statement was held as offering sufficient guidance to the Central Government in exercising its powers under Section 3. In the instant case the policy as stated in the Preamble of the Amendment Act is that 'for securing the interests of the life Insurance Corporation of India and its policy-holders and to control the cost of administration, it is necessary that revision of the terms and conditions of service applicable to the employees and agents of the Corporation should be undertaken expeditiously'. The policy stated here is at least as clear as the one held in Harishankar Bagla case [1955] 1 SCR 380; AIR 1954 SC 465, offering sufficient guidance to the Central Government in exercising its powers under that Act. We have referred to Section 48(3) of the Life Insurance Corporation Act which requires that every rule made by the Central Government under this Act shall be laid before each House of Parliament and that if both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be. This Court in D.S. Garewal v. State of Punjab [1959] Supp. 1 SCR 792; AIR 1959 SC 512, observed as follows in respect of a similar provision requiring the Rules made by the delegated authority to be laid on the table of Parliament and making the Rules subject to modification, whether by way of repeal or amendment on a motion made by Parliament.
'This makes it perfectly clear that parliament has in no way abdicated its authority, but is keeping strict vigilance and control over its delegate'.
In view of what has been held in Harishankar Bagla [1955] 1 SCR 380 ; AIR 1954 SC 465 and D.S. Garewal [1959] Supp 1 SCR 792 ; AIR 1959 SC 512, both of which were decided by a larger Bench, we do not find it possible to accept the contention that the Act is invalid on the ground of excessive delegation of legislative functions.'
12. The Industrial Policy of 1982 was codified and reflected in the Act of 1986. The policy of the State Government being clear, the delegation of ancillary powers to the State Government to work out the modalities for implementation cannot be treated as abdication of essential legislative functions. It was not possible for the Legislature to visualise and identify the raw materials to be exempted from sales tax. Therefore, Sub-section (4) of Section 4 of the Act of 1986 cannot be ultra vires to the Constitution.
13. Rule 2(f) was framed in exercise of powers under Sub-section (4) whereby coal has been excluded from the purview of sales tax concession. This was done within the powers delegated to the State Government. The rule was laid before the State Legislature and there is nothing on record to show that the Legislature disagreed with the Rules framed, or suggested any change. Exclusion of coal, which has all along been subjected to sales tax, therefore, cannot be said to be arbitrary and without reasonable basis. The State Government had to take a decision under the provisions of the Act as to the items and the period for which exemption would continue. In the process, coal has been excluded.
14. Dr. Saraf argued that Rule 2(f) excludes coal from the purview of tax concession for a period prior to the commencement of the Act and, besides, it seeks to obliterate the statutory provisions of tax concession given by the Legislature in the proviso to Sub-section (1) of Section 3. According to Dr. Saraf, the retrospectivity of the provisions of Rule 2(f) is impermissible.
15. The Act was brought into force with effect from August 1, 1988. The Rules framed in the year 1988 was also brought into force with effect from August 1, 1988. There is, therefore, no retrospectivity as such. However, the rule affects a situation prevailing prior to the commencement of the Act. Apparently this sounds incongruent, but the fact remains that the provisions of Sub-section (1) of Section 3 was also retrospective. Sub-section (1) of Section 3 provided for exemption of tax subject to authorisation certificate issued by the authority, and the proviso provided for refund of tax already paid for the period beginning October 15, 1982 till the commencement of the Act, i.e., August 1, 1988. While describing the procedure for issuance of authorisation, the Legislature permitted the State Government to prescribe raw materials not entitled to tax concession. The State Government in exercise of that power specified coal and few other items as ineligible for concession of tax. Since the provisions for refund/adjustment of tax paid relates to a period prior to the commencement of the Act, the Legislature in their wisdom delegated powers to the State Government to consider and identify the items of materials not to be treated as raw materials for the purpose of tax concession for the said period. Therefore, Rule 2(f) shall have application not only for the period after August 1, 1988, but also for the period after October 15, 1982 and before August 1, 1988 for which tax concession has been given. The concession contemplated was not unconditional for each and every item of raw material. The provisions of Section 3(i) is subject to the provisions of Section 4 and particularly the rule-making powers under Sub-section (4) of Section 4. The benefit of tax exemption was given to new industrial units with retrospective effect for specific period in respect of raw materials used in the manufacture of goods with powers to the State Government to exclude any raw material from the purview of tax concession. Therefore, the Government in exercise of delegated powers excluded coal and other materials from the net of tax concession. It would, therefore, be wholly inconsistent to conclude that the State have no power to exclude any raw material merely because the transaction related to a period prior to the commencement of the Act. The provision of Rule 2(f), though apparently retrospective, are co-extensive with the provisions of the Act of 1986. Hence, no question can be raised about the legality and validity of Rule 2(f) on the ground of retrospectivity.
16. The decision in Devi Das Gopal Krishnan v. State of Punjab [1967] 20 STC 430 (SC); AIR 1967 SC 1895 differs on factual matrix. In that case, provisions of Section 5 of the Punjab General Sales Tax Act, 1948 were in challenge for unguided delegation of rule-making power. Section 5 of the Act provided for levy of tax every year on the taxable turnover of a dealer at such rates as the State Government might direct. The honourable Supreme Court declared Section 5 void on the principle that the Legislature practically effaced itself in the matter of fixation of rates without any guidance. The ratio available is not applicable in the present case. The power to identify and specify the raw materials in respect of which tax concession is to be given cannot be equated with the powers to fix the rates of taxation.
17. The ratio available in India Carbon v. State of Assam [1995] 96 STC 636 (Gauhati) ; 1992 (1) GLR 82, for the same reason is also not applicable in the present case. The honourable High Court held that the State Legislature cannot impose tax on the raw petroleum coke and calcinated petroleum coke contrary to the provisions of Clause (a) of Section 15 of the Central Sales Tax Act, 1956. The provisions of the Act in hand is not in clash with the Central legislation.
18. Legislation directed to sensitive and complex economic measure cannot provide for all possible situations on anticipation of possible abuses. Therefore, the power delegated to the State Government in the instant case to identify the raw materials for the purpose of exclusion from tax concession on consideration of prevailing situation cannot be struck down as invalid. The irrefutable conclusion that follows out of the above discussion is that the State Legislature has not abdicated its essential legislative function to the State authority in excluding the raw materials from the purview of tax concession. In this context, it can be emphatically stated that the writ petitioner is not entitled to refund or adjustment of tax paid during the period between October 15, 1982 and August 1, 1988. Therefore, both the writ petitions deserve to be dismissed,
19. In the result Civil Rule Nos. 1027 of 1997 and 1110 of 1994 are dismissed.
No costs.