Express Newspapers Limited Vs. the State of Maharashtra - Court Judgment

Tulzapurkar, J.

1. This is plaintiff's appeal against dismissal of its suit to recover back the aggregate sum of Rs. 19,39,337-13-0 paid by it (the plaintiff Company) as tax under the provisions of the Bombay Lotteries and Prize Competitions Control and Tax Act, 1948.

2. The facts which led the plaintiff Company (Express Newspapers Ltd.) to file the suit may briefly be stated. : The plaintiff is a Company incorporated, under the Indian Companies Act, 1918 and carries on the business of printing and publishing of newspapers and magazines etc. The plaintiff Company also promoted cross-word prize competitions through its papers published in Bombay. Between October 1948 and July 20, 1954 the plaintiff ran a Marathi cross-word prize competition in its Marathi Daily called 'Lokasatta,' while from January 1951 till October 1952 it ran a cross-word prize competition called 'Squarewords' in its English weekly 'Sunday Standard.' The Bombay Lotteries and Prize Competitions Control and Tax Act, 1948 (hereinafter referred to as 'the Act') came into force on December 1, 1948 which required every promoter to apply for and obtain a licence in respect of such prize competitions and therefore the plaintiff Company obtained requisite licences for running the said Marathi prize competition in 'Lokasatta' and English prize competition in 'Sunday Standard' under Section 7 of the Act. Under a notification dated December 24, 1948 issued under Section 12(1)(b) of the Act, the Government of Bombay directed that in respect of every prize competition for which licence had been obtained under Section 7 of the Act tax shall be levied at the rate of 25% of the total sum received in respect of such competition. Accordingly in respect of its English prize competition called 'Squarewords' run in its weekly 'Sunday Standard' the plaintiff Company between February 1951 and October 1952 made a total payment of tax to the tune of Rs. 5,23,542-14-0. In respect of Marathi prize competition in 'Lokasatta' the plaintiff Company paid tax at the rate of 25% from December 30, 1948 to August 81, 1950, in accordance with the notification dated December 24, 1948. By a notification dated July 15, 1950 issued under a. 12(2) of the Act the Government of Bombay directed that the tax to be levied with effect from September 1, 1950 in respect of each Lokasatta Marathi crossword prize competition shall be at the rate of 80% of the total sum. received or due in respect of each such competition and not at the rate of 25% as specified in the earlier notification dated December 24, 1948, and accordingly the plaintiff Company paid tax at the rate of 80% in respect of each of its Lokasatta Marathi competition from September 1, 1950 to October 31, 1952. It appears that as a result of representation made by the plaintiff Company, the Government of Bombay directed that the liability of the plaintiff Company to pay tax in respect of Lokasatta Marathi competition should be reduced to 25% with effect from April 1, 1952 and in that connection the excess amount of 5% paid was directed to be refunded to the plaintiff Company and accordingly the sum of Rs. 30,854-7-6 for the period from April 1, 1952 was actually refunded ; in other words, the excess of 5% recovered from the plaintiff Company in respect of its Lokasatta competition from September 1, 1950 up to March 31, 1952 (amounting to Rs. 82,819-6-6) was retained by the Government. The plaintiff Company further paid tax at the rate of 25% for Lokasatta competition from November, 1, 1952 to July 20, 1954. According to the plaintiff Company, the total payment of tax made in respect of its Lokasatta competition for the entire period from December 1, 1948 to July 1954 came to Rs. 14,46,649-6-6 and after giving credit for the amount of Rs. 80,854-7-6 refunded to it, the total amount thus retained by the Government as tax recovered from the plaintiff Company in respect of Lokasatta competition amounted to Rs. 14,15,794-15-0. The plaintiff Company thus claimed that in respect of its Lokasatta cross-word competition and English cross-word competition run in Sunday Standard, an aggregate sum of Rs. 19,89,337-18-0 had been paid as tax under the provisions of the said Act which the plaintiff sought to recover from the defendant ( State of Bombay ) and the basis on which it claimed to recover the same from the defendant was set out in paras. 9, 10,10-A and 11 of the plaint.

3. By the aforesaid paragraphs of the plaint the plaintiff Company challenged the validity of the taxing provisions of the said Act as contained in Sections 12 and 12A thereof, as also the Government's action in levying, recovering and collecting the said tax on several grounds. The plaintiff Company submitted that the taxing provisions as contained ins. 12 and Section 12A of the said Act imposed a tax on the trade or calling of running prize competitions at a rate exceeding Rs. 250 per annum in respect of any person and thereby violated Section 142-A of the Government of India Act, 1935 and/or Article 276(2) of the Constitution and as such were void, invalid and ultra vires the Provincial or State Legislature ; secondly, the plaintiff Company submitted that the said provisions of the Act amounted to unreasonable restrictions on the plaintiff's fundamental right to carry on its occupation, trade and/or business guaranteed under Article 19(1)(g) of the Constitution ; thirdly, it was submitted that Section 12(1)(b) of the Act as it stood before it was amended by the Bombay Act XXX of 1952 was violative of Article 14 of the Constitution, firstly because it delegated uncontrolled power to the Government so as to enable it to discriminate between prize competitions even if similarly situated in the matter of selection or classification of prize competitions to levy tax at any rate up to 25% on selected prize competitions and such discrimination was inherent in the statute itself and secondly because the said provision suffered from the vice of excessive delegation, inasmuch as, no policy or guidelines had been laid down by reference to which the executive could act; (this ground of attack was inserted by amendment of the plaint granted on October 13, 1959); fourthly, it was submitted that the provisions of Section 12 (2) of the Act which authorised the State Government to levy a tax in respect of a particular prize competition at a rate higher than the rate of tax levied in respect of other prize competitions were violative of Article 14, in that they denied to the promoters of the prize competitions so singled out (as the plaintiff had been) equality before the law and the equal protection of the laws ; fifthly, it was further submitted that in any event the executive action taken by the Government subjecting the plaintiff to tax at the rate of 80% of the total sum received or due in respect of its Lokasatta prize competition when other prize competitions of a similar character were taxed at the rate of 25% was discriminatory against the plaintiff and violated the equal protection clause contained in Article 14; sixthly, the plaintiff Company further submitted that the provisions of Section 12 (2) of the Act as it stood before the amendment suffered from the vice of excessive delegation, inasmuch as, no policy or guidelines had been laid down by reference to which the executive could act; (this ground of attack against Section 12 (2) was inserted by amendment of the plaint granted on October 18, 1959); and lastly, it was submitted that in the circumstances aforesaid the levy and collection of tax under the said Act were without authority of law and violated Article 265 of the Constitution, After challenging the taxing provisions of the said Act as above, the plaintiff submitted that whole of the tax amount which had been illegally and unauthorisedly recovered had been paid by the plaintiff to the defendants under coercion and/or mistake and, therefore, having regard to Section 72 of the Contract Act and/or other principles of law and equity, the defendants were bound to refund the whole tax amount recovered from the plaintiff. In any event, the plaintiff submitted that the defendant was bound and liable to refund and repay to the plaintiff the said 5% excess of tax levied, recovered and collected from the plaintiff under coercion and despite the plaintiff's protest from September 1, 1950 up to October 81, 1952 which amounted to Its. 82,819-6-6 in respect of the plaintiff's Lokasatta prize competition, the executive action of the defendant in that behalf having been challenged as discriminatory. The plaintiff submitted that payment of that amount also had been made under coercion or mistake and it was entitled to recover the same under Section 72 of the Contract Act and/or other principles of law and equity.

4. By a further amendment sought by Chamber Summons dated April 6, 1960 and granted by order dated June 27, 1960 the plaintiff inserted a new paragraph being para. No. 10-A in the original plaint and by this amendment the plaintiff Company stated that its prize competitions involved a substantial degree of skill and that success in their solution depended upon the exercise of a substantial degree of skill and as such its prize competitions were not prize competitions within the meaning of the said Act, and the plaintiff submitted that the Supreme Court by its judgment delivered on April 9, 1957 in the case of State of Bombay v. Chamarbaugwala : [1957]1SCR874 for the first time held that the said Act applied only to prize competitions of a gambling nature and did not apply to prize competitions involving a substantial degree of skill for their solution and until the aforementioned judgment was delivered the plaintiff mistakenly was under the impression that the said Act applied to all prize competitions including its prize competitions and that the plaintiff discovered its said mistake on and after the said decision was pronounced by the Supreme Court. Under those circumstances the plaintiff further submitted that the total amount of tax was paid by it to the defendant due to the aforesaid mistake and the same was wrongfully, unauthorisedly and illegally recovered by the defendant and the defendant was bound to refund the same to the plaintiff. It may be stated that the aforesaid amendment in the plaint was granted by the learned Judge hearing the Chamber Summons subject to any point of limitation being allowed to be raised at the hearing.

5. The suit was resisted by the defendant (The State of Bombay) on several grounds. The defendant denied that the taxing provisions of the Act were violative of the provisions of Section 142(a) of the Government of India Act, 1935 and/or Article 276(2) or Article 19(1)(g) or Article 14 or Article 265 of the Constitution. The defendant further denied having been guilty of any discrimination as against the plaintiff or having violated the plaintiff's fundamental rights. It was further denied that the plaintiff had made payment of tax under coercion and/or by mistake ; on the contrary it was contended that the plaintiff had made the payment of tax voluntarily without protest and without making any reservation at all. It was emphatically denied that the plaintiff's prize competitions involved a substantial degree of skill and/or were of such nature that the Act did not apply to them. The defendant further contended that the suit was barred by limitation as prescribed under Section 28(2) of the said Act and even otherwise it was barred by the law of limitation. It was further contended that the notice under Section 80 of the Code of Civil Procedure given by the plaintiff did not contain the new cause of action as included in the plaint by insertion of para No. 10-A and the notice being bad the plaintiff was not entitled to any relief on the basis of the averments contained in the said para No. 10-A.

6. At the trial, in view of the Supreme Court's decision in State of Bombay v. Chamarbaugwala all challenges to the taxing provisions as contained in Sections 12 and 12-A of the Act, except the challenge under Article 14 of the Constitution, were given up by the plaintiff Company and on the remaining rival pleadings the learned Judge framed the necessary issues which appear at pages 42-43 of the Appeal Paper Book. Out of several issues so framed, by consent of parties, the trial of issues Nos. 8 and 14 (the former related to the question whether the executive action of the defendant in subjecting the plaintiff to tax at the rate of 30% was discriminatory or not and the latter related to the question as to whether the plaintiff's prize competitions involved a substantial degree of skill and as such were outside the purview of the Act) was put off till after the remaining issues were tried with intent that issues Nos. 8 and 14 should be tried only if it was found necessary to do so after hearing on the remaining issues was completed and findings recorded. On behalf of the plaintiff, oral evidence of only one witness Shri T. S. Krishnan, who was the Manager of the plaintiff Company at Bombay at the material time, was led. The notifications under which levy was imposed as also the correspondence exchanged between the plaintiff Company on the one hand and the Collector of Bombay on the other were produced. On appreciation of oral as well as documentary evidence and on a careful scrutiny of the provisions of the Act and the rules framed thereunder, the learned Judge came to the conclusion that the plaintiff's challenge to the taxing provisions of the Act under Article 14 of the Constitution failed. He further held that the payments made by the plaintiff towards tax in respect of its prize competitions were made under coercion emanating from coercive machinery and penal provision of the Act. On the question of mistake alleged in the plaint, the learned Judge took the view that on admitted facts and from the facts as proved on evidence the plaintiff was aware from the first date of payment of tax under the said Act that the provisions of that Act and levy and collection of tax were ultra vires the Constitution and illegal from the very inception and as such the cause of action for refund had arisen in favour of the plaintiff on the footing of moneys had and received as from the first date of payment under Article 62 of the Limitation Act, 1908, notwithstanding the plea that the mistake was discovered by the plaintiff as a result of the Supreme Court's decision in the Chamarbaugwala case. Alternatively he took the view that the mistaken impression of the plaintiff that the Act was applicable to all prize competitions including even competitions involving skill must be taken to have been discovered to be wrong by the plaintiff not on April 9, 1957 ( being the date of decision of the Supreme Court in the Chamarbaugwala case) but on January 12, 1955 (being the date of decision in Appeal by the Division Bench of this Court in the same case and in Appeal No. 73 of 1954 arising from Miscellaneous Application No. 4 of 1953 preferred by plaintiff Company itself challenging Section 12A of the Act) when the Division Bench of this Court made a clear finding that the Act was not applicable to cross-word competitions involving skill; in other words, according to the learned Judge, the plaintiff must be taken to have discovered the mistake on January 12, 1955 and from that date onward the plaintiff did not bring in the suit the claim on the basis of such discovery till after the expiry of three years from the date of discovery, inasmuch as, the new para. 10-A in the plaint containing the new cause of action was sought to be added on April 6, 1960. He, therefore, held that since the claim based on such discovery was made more than three years after the discovery of the mistake, the plaintiff was not entitled to any relief on the basis of such cause of action as contained in para, 10-A of the plaint. On the plea of the defendant that the suit was barred by the period of limitation as prescribed under Section 28 (2) of the Act, the learned Judge held that the issuance of the notifications in question and recoveries made thereunder were 'things done' by the Government 'under the Act' and the suit being 'in respect of such acts' was barred under Section 28 (2), inasmuch as, the same had not been instituted within 6 months from the date of acts complained of. In this view of the matter, he dismissed the plaintiff's suit with costs.

7. In this appeal Mr. Bhabha, learned Counsel for the plaintiff-Company, challenged the findings of the learned Judge on both the principal issues which arose for decision in this case. He contended that the taxing provisions contained in the unamended Section 12 of the Act should have been held to be violative of Article 14 of the Constitution. He also urged that the learned Judge had erred in law in taking the view that the suit fell within the provisions of Section 28 (2) of the Act and was therefore barred by the special limitation prescribed therein. On the other hand, Mr. Joshi for the respondent attempted to sustain the findings of the learned Judge on both the points. Alternatively he urged that in case it was held that the suit was not barred under Section 28 (2) of the Act, he would satisfy this Court that the same was otherwise barred by the general law of limitation. We shall therefore proceed to consider the rival contentions urged before us one after the other.

8. Since the taxing provisions contained in Section 12 of the Act before its amendment by Bombay Act XXX of 1952 were challenged as being violative of Article 14 and since certain parts of the amended Section 12 of the Act as amended by Act XXX of 1952 were relied upon by Mr. Bhabha in support of the challenge, it would be desirable to set out the provisions of the said unamended Section 12, as also Section 12 as amended by Act XXX of 1952. The relevant provisions of the unamended Section 12 of the Act run as follows :

12. (1) There shall be levied-

(a) in respect of every lottery...

(b) in respect of every prize competition for which a licence has been obtained under section 7, a tax at such rate not exceeding 25 per cent, of the total sum received in respect of such competition as may be specified by the Provincial Government in a notification in the Official Gazette.

The tax shall be collected from the promoter of such... prize competition, as the case may be.

(2) Notwithstanding anything contained in Sub-section (1), the Provincial Government may, by notification in the Official Gazette, direct that the tax to be levied in respect of a...prize competition, shall be at such rate not exceeding 50 per cent, of the total sum received or due in respect of such...prize competition as may be specified in the notification.' The relevant provisions of Section 12 as amended by Act XXX of 1952 run as follows :

12. (1) There shall be levied,-

(a) in respect of every lottery...

(b) in respect of every prize competition for which a licence has been obtained under section 7, a tax at the rate of 25 per cent, of the total sum received in respect of such competition.

The tax shall be collected from the promoter of such... prize competition, as the case may be.

(2) Notwithstanding anything contained in Clause (6) of sub-section {1), the State Government may, by notification in the Official Gazette, direct that the tax to be levied in respect of a prize competition shall be at such rate not exceeding 50 per cent, of the total sum received or due in respect of such prize competition as may be specified in the notification. Such rate may be different in the case of different prize competitions, having regard to the total sum received in respect of such competitions as disclosed from the statements submitted to the Collector under section 15 for the period of twelve consecutive months immediately preceding the date of the notification under this sub-section.

A comparison of the said two provisions will show that whereas under the unamended Section 12(1)(b) discretion was conferred upon the State Government to fix the rate of tax between 1 per cent and 25 per cent on the total sum received in respect of every prize competition, under the amended Section 12(1)(b) a flat rate of tax at 25 per cent has been prescribed to be levied on the total sum received in respect of every prize competition ; further though Sub-section (2) of the unamended Section 12 remains the same after the amendment, there is some guidance provided in the amended provision of Section 12 (2) to the effect that while enhancing the rate of tax up to 50 per cent in respect of any particular prize competition the State Government shall have regard to the total sum received in respect of such competition as disclosed from the statement of accounts submitted by the promoter under Section 15 for 12 months immediately preceding the date of the notification fixing the enhanced rate.

9. The challenge to the taxing provisions contained in the unamended Section 12 of the Act under Article 14 was presented by Mr. Bhabha in a two-fold manner. In the first place, according to him, on a true construction of Section 12(1)(b) of the Act, the State Government was authorised to levy tax on individual prize competitions arbitrarily at different rates varying from 1% to 25% on the total sum received in respect of such competition and no principle or policy for the purpose of classification having been indicated, the State Government could discriminate between prize competitions even if similarly situated in the matter of selection or classification of prize competitions for the purpose of levying tax at any rate up to 25% on the selected prize competitions and as such discrimination was inherent in the statute itself and, therefore, the said provision violated Article 14 of the Constitution. Secondly, he contended that uncontrolled and unfettered power and discretion had been delegated by the Legislature to the State Government in the matter of selection or classification of the prize competitions similarly situated, as well as in the matter of fixation of rates at which tax was to be levied and/or enhanced up to 50% without indicating any principle, policy or guidance by reference to which the executive could act in the exercise of such discretion and as such the said taxing provisions contained in Section 12(1)(b) and Section 12(2) violated Article 14 of the Constitution ; in other words, according to him, the said taxing provisions suffered from the vice of excessive delegation.

10. On the matter of construction of Section 12(1)(b), Mr. Bhabha relied upon the expression 'every prize competition' occurring therein and contended that that expression must mean 'a prize competition' or 'each prize competition' or 'individual prize competition,' and, according to Mr. Bhabha, Government had been authorised to levy tax on individual prize competitions arbitrarily at different rates varying from 1% to 25% and, if that be so, it was clear that the Government could indiscriminately levy tax at varying rates on different prize competitions and, therefore, the discrimination was inherent in the statute itself. Mr. Joshi, on the other hand, contended that the expression 'every prize competition' occurring in Section 12(1)(b) should be construed to mean 'all prize competitions' so that Government could be said to have been authorised to levy tax at a uniform rate in respect of all prize competitions. In our view, it is not possible to accept the interpretation which Mr. Bhabha has sought to put on the expression 'every prize competition' occurring in that provision. The provision in question clearly stated that there shall be levied in respect of every prize competition a tax at such rate not exceeding 25% of the total sum received in respect of such competition as may be specified by the State Government in a notification. In the first place, the said provision uses the expression 'a tax at such rate' and not 'tax at such rates,' that is to say, with reference to rate of tax to be levied singular word 'rate' has been used, which would be indicative of the fact that whatever may be the rate at which tax would be levied, it would be one and the same for every prize competition. Secondly, if the said provision contained ins. 12[1)(b) is contrasted with the provision contained in Section 12 (2), whereunder levying of tax at enhanced rate in respect of individual prize competition was contemplated, a different phraseology had been used. Sub-section (2) of Section 12 stated that the State Government may, by notification, direct that the tax to be levied in respect of ' a prize competition' shall be at such rate not exceeding 50% of the total sum received or due in respect of such prize competition as may be specified in the notification ; in other words, when the Legislature wanted to refer to an individual prize competition in respect whereof tax at higher rate was thought fit to be levied, the Legislature clearly expressed its said intention by using the expression 'in respect of a prize competition.' Obviously, therefore, the expression 'every competition' occurring in Section 12(1)(b) could not mean 'a prize competition' or 'individual prize competition' or each prize competition.' Thirdly, we may point out that under Section 12(1)(b) tax as mentioned therein had been levied only on competitions in respect whereof a licence had been obtained under Section 7 of the Act, that is to say, tax had been levied only on licenced prize competitions and under Section 7 of the Act it is permissible for the Collector to grant one licence for more than one such prize competition conducted by the same person and it is obvious that if such a licence covering more than one such prize competition was issued by the Collector, all such competitions covered by such licence will have to be taxed at such 'rate' as may be specified in the notification. There is, therefore, some indication in the other provisions of the Act to show that in respect of more than one prize competition covered by the same licence a tax at the uniform rate had to be levied as specified in the notification. In our view, therefore, the expression 'every prize competition' occurring in Section 12(1)(b), could not mean 'each' or 'individual' or 'a prize competition' but must be construed to mean 'all prize competitions.' In our view, therefore, on a true and correct construction of the provision contained in the unamended Section 12(1)(b) it is clear that the said provision never authorised the Government to levy tax at different rates in respect of different prize competitions, but though the rate may vary between 1% and 25% the Government thereunder had always been authorised to fix a uniform rate of tax in respect of all prize competitions. In this view of the matter, it is difficult to accept Mr. Bhabha's contention that any discrimination was inherent in the statute itself as suggested by him and the challenge to the said provision on that ground, therefore, must fail.

11. Mr. Bhabha's next contention was that even if the aforesaid construction of Section 12(1)(b) were to be accepted, the provisions of Section 12(1)(b), as also of Section 12 (2) should, be regarded as providing for delegation of all legislative power in regard to a tax matter, and such delegation had been done without any policy or principle or guidelines having been laid down by the Legislature by reference to which the State Government could implement the provisions of the Act, According to him, the said taxing provisions authorised the State Government to fix the rate of tax as also to select any individual competition and fix the enhanced rate of tax thereon arbitrarily and indiscriminately without any standard or guidance having been provided for in that behalf. In this connection he emphasised the fact that some guidance, though insufficient and inadequate, has been furnished by the amended Section 12 (2) in the matter of fixation of enhanced rate of tax up to 50% in respect of individual prize competition but according to him, no such guidance, not even meagre guidance, had been given in the corresponding old or unamended Section 12 (2) of the Act, He pointed out that no machinery nor procedure containing checks and safeguards in favour of the promoters in the matter of assessment of tax had been provided. He, therefore, urged that the said taxing provisions suffered from the vice of excessive delegation. Mr. Joshi, on the other hand, pointed out that a statute when challenged on the ground of excessive delegation has to be subjected to two tests, whether it delegates essential legislative function or power and whether the legislature has enunciated its policy and principle for the guidance of the delegate and he urged that the purpose and the policy of the law had been sufficiently made clear in the Act and the provisions also indicated the standard or guidance by reference to which the State Government could exercise the discretion conferred on it to implement the provisions of the Act. He further urged that the guidance could take any form and need not necessarily be by way of machinery providing for checks and balances or safeguards and so long as there was guidance by reference to which the discretion left with the delegate could be exercised, the legislation will have to be upheld. Both these tests, Mr. Joshi contended, were satisfied in the case of this Act.

12. We may observe that the topic of conditional legislation and/or delegated legislation has come up for consideration before the Supreme Court in a large number of cases but it is not necessary to refer to all those cases, inasmuch as, all the previous decisions have been discussed and reviewed in the latest judgment of the Supreme Court in the case of Delhi Municipality v. B. C. S. & W. Mills A.I.R. [1968] S.C.1282 where the statement of law on the point has been comprehensively set out. Since the question before us has been raised in connection with fixation of rates of tax, it would be desirable to indicate in brief the position in law with reference to delegated legislation in connection with taxing matters as obtained in a couple of earlier decisions of the Supreme Court. In Western India Theatres v. M'pal Corporation Poona : AIR1959SC586 the question related to the validity of Section 59(1)(ii) of the Bombay District Municipal Act which gave power to the Municipality to levy 'any other tax to the nature and object of which the approval of the Governor in Council shall have been obtained prior to the selection contemplated in Sub-clause (i) of Clause (a) of Section 60.' This provision was challenged on the ground that the Legislature had completely abdicated its functions and had delegated essential legislative power to the municipality to determine the nature of the tax to be imposed on the tax payers and the power was unguided, uncanalised and vagrant. The delegation was upheld by the Supreme Court on the ground that Section 59 authorised the Municipality to impose tax thereunder for the purpose of the Act and for no other purpose. It is clear that details as to the manner of tax, persons to be taxed and the rates of tax were left to the discretion of the Municipal Corporation under that section, and even so, the Supreme Court upheld such delegation by observing that the impugned section had laid down the procedure which the Municipality had to follow in imposing the tax and the Legislature could not under the circumstances be said to have abdicated its functions in favour of the municipality. In Banarsi Das v. State of M.P. : [1959]1SCR427 the Court observed as follows (p. 913):.Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like.

Before this authority was reviewed by the Supreme Court in Birla Cotton Spinning & Weaving Mills' case the statement of law as contained in the observation quoted above was regarded as correctly laying down the principle governing the matter of delegated legislation in regard to tax matters. But it may be pointed out that in regard to the said observation in Banarsi Das's case the Supreme Court in Birla Cotton Mills' case observed as follows (p. 1242) :.With respect, it seems to us that if this observation means that it is open to the legislature to delegate the power to fix the rate of tax to another authority without any qualification, guidance, control or safeguard, it is too widely stated and does not appear to be supported by the authorities on which it is based, though those authorities do indicate that in certain cases it is open to the legislature to give power to another authority to fix rates under proper guidance, control and safeguard.

We may further point out that in Birla Cotton Mills' case the Supreme Court also made a distinction between the case where Legislature delegated power to Municipal or local authority to fix the rates of tax and the case where the Legislature gave power to the State Government to fix rates of tax. In para. 27 of its judgment the Supreme Court has observed as follows (p. 1248) :.There is in our opinion a clear distinction between delegation of fixing the rate of tax like sales tax to the State Government and delegation of fixing rates of certain taxes for purposes of local taxation. The needs of the State are unlimited and the purposes for which the State exists are also unlimited. The result of making delegation of a tax like sales tax to the State Government means a power to fix the tax without any limit even if the needs and purposes of the State are to be taken into account. On the other hand, in the case of a municipality, however large may be the amount required by it for its purposes it cannot be unlimited, for the amount that a municipality can spend is limited by the purposes for which it is created. A municipality cannot spend anything for any purposes other than those specified in the Act which creates it. Therefore in the case of a municipal body, however large may be its needs, there is a limit to those needs in view of the provisions of the Act creating it. In such circumstances there is a clear distinction between delegating a power to fix rates of tax, like the sales tax, to the State Government and delegating a power to fix certain local taxes for local needs to a municipal body.

13. After bringing out the distinction between delegation of powers to fix rates of tax to municipality or local authority and delegation of powers to fix such rate of tax to the State Government and after reviewing all the previous authorities on the point, the Supreme Court observed to the following effect (p. 1244) :

A review of these authorities therefore leads to the conclusion that so far as this Court is concerned the principle is well established that essential legislative function consists of the determination of the legislative policy and its formulation as a binding rule of conduct and cannot be delegated by the legislature. Nor is there any unlimited right of delegation inherent in the legislative power itself. This is not warranted by the provisions of the Constitution. The legislature must retain in its own hands the essential legislative functions and what can be delegated is the task of subordinate legislation necessary for implementing the purposes and objects of the Act. Where the legislative policy is enunciated with sufficient clearness or a standard is laid down, the courts should not interfere. What guidance should be given and to what extent and whether guidance has been given in a particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to deal including its preamble. Further it appears to us that the nature of the body to which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation.

What form the guidance should take is again a matter which cannot be stated in general terms, it will depend upon the circumstances of each statute under consideration; in some cases guidance in broad general terms may be enough; in other cases more detailed guidance may be necessary. As we are concerned in the present case with the field of taxation, let us look at the nature of guidance necessary in this field. The guidance may take the form of providing maximum rates of tax upto which a local body may be given the discretion to make its choice, or it may take the form of providing for consultation with the people of the local area and then fixing the rates after such consultation. It may also take the form of subjecting the rate to be fixed by the local body to the approval of Government which acts as a watch-dog on the actions of the local body in this matter on behalf of the legislature. There may be other ways in which guidance may be provided. But the purpose of guidance, whatsoever may be the manner thereof, is to see that the local body fixes a reasonable rate of taxation for the local area concerned. So long as the legislature has made provision to achieve that reasonable rates of taxation are fixed by local bodies, whatever may be the method employed for this purpose-provided it is effective, it may be said that there is guidance for the purpose of fixation of rates of taxation. The reasonableness of rates may be ensured by fixing a maximum beyond which the local bodies may not go. It may be ensured by providing safeguards laying down the procedure for consulting the wishes of the local inhabitants. It may consist in the supervision by Government of the rate of taxation by local bodies. So long as the law has provided a method by which the local body can be controlled and there is provision to see that reasonable rates are fixed, it can be said that there is guidance in the matter of fixing rates for local taxation. As we have already said there is pre-eminently a case for delegating the fixation of rates of tax to the local body and so long as the legislature has provided a method for seeing that rates fixed are reasonable, be it in one form or another, it may be said that there is guidance for fixing rates of taxation and the power assigned to the local body for fixing the rates is not uncontrolled and uncanalised. It is on the basis of these principles that we have to consider the Act with which we are concerned.

(Italics are ours.)

14. It is in the light of the aforesaid observations of the Supreme Court that the questions in the present case will have to be considered, namely whether the delegation of power or authority to the State Government to fix the rate of tax under Section 12(1)(a) and to select individual prize competition for levy of tax at enhanced rate under Section 12(2) is within the permissible limits of the delegated legislation or not, and that will depend upon whether the policy and purpose of the Act have been indicated therein and whether sufficient guidance for the purpose of exercising discretion conferred upon the State Government in the above behalf has been given or not. The purpose of this legislation as mentioned in the preamble of the Act is: 'it is expedient to control and to levy a tax on lotteries and prize competitions.' The long title of the Act indicates that the enactment was passed to control and to tax lotteries and prize competitions in the Province of Bombay. The definition of 'prize competition' as given in Section 2(d) clearly indicates that the prize competitions have been regarded on the same footing as a game of chance or gambling, and even so, the Legislature thought fit to allow prize competitions to exist under certain circumstances. Section 7 of the Act provides that a prize competition shall be deemed to be unlawful unless a licence in respect of such competition has been obtained by the promoter thereof, and any promoter conducting a prize competition without a licence has been subjected to a penal term of imprisonment ; Section 9 authorises the Collector to grant licence on payment of certain fees and impose such conditions as may be prescribed, while Section 11 empowers the Collector to suspend or cancel a licence in certain circumstances ; then comes the charging provision contained in Section 12 of the Act, and machinery for calculation and recovery of tax levied under Section 12 has been provided for by Section 13; Section 14 makes the fees or taxes under the Act recoverable as arrears of land revenue ; Section 15 casts a duty on promoter of a prize competition to keep and maintain accounts, while Section 16 provides for penalty for failure to keep such accounts. Under Section 30 the State Government has been authorised to exempt any prize competition, the net proceeds whereof are to be devoted to a charitable purpose, from all or any of the provisions of the Act. In our view, these provisions of the Act including the preamble thereof make the policy of the Act abundantly clear. The policy of the Act is to control the prize competitions which are a species of gambling and the manner of control is clearly indicated not only by the provisions relating to licensing thereof but also by the taxing provision, for, in our view, tax has been levied on the amounts received or due in respect of prize competitions not only with a view to augment the revenue of the State but also to curb the gambling element present in such prize competitions. The policy to levy tax for the purpose of controlling the gambling element present in every prize competition has been clearly laid down by the Act. The questions as to whether a particular prize competition should be given exemption or not, at what rate tax should be levied, on what particular competition enhanced rate of tax should be levied and if so what should be the enhanced rate are matters of detail which could be and have been properly left to the State Government. It is clear that the question whether tax to be levied should be at a particular rate would obviously depend upon several factors, such as the necessities of the Government, the volume of the receipts received in respect of a particular prize competition, the conditions in which the prize competitions are functioning in the State etc. and since these factors would, vary from time to time certain amount of discretion in the matter of fixing of rate of tax as also in selecting an individual prize competition for levying enhanced rate has perforce to be left with the State Government, but at the same time, the Legislature has by fixing the maximum rate both under Section I2(1)(b) and Section 12 (2) circumscribed the discretion of the Government in the matter of fixation of rates and that, in our view, affords sufficient guidance to the State Government by reference to which such discretion could be exercised. In fact by prescribing the outer limits within which the State Government has to fix the rate of tax, the Legislature could be said to have kept or retained its control within which the State Government has to implement the policy laid down in the Act. The Legislature having thus indicated in the Act the purpose and policy of the law and having furnished the standard or sufficient guidance by reference to which discretion vested in the Government in the matter of fixation of rate of tax under Section 12(1)(b) and selection of a prize competition for the purpose of levying tax at enhanced rate under Section 12(2) could be exercised, it is not possible to accept Mr. Bhabha's contention that the said taxing provisions of the Act suffered from the vice of excessive delegation and therefore violated Article 14 of the Constitution.

15. Mr. Bhabha however contended that while enacting the charging provision contained in Section 12 of the Act no classification or categorization of promoters of prize competitions had been made by the Act, and different types of promoters had been treated alike by imposition of uniform rate of tax. According to Mr. Bhabha, there could be new promoters of prize competitions entering the line afresh or old experienced promoters working in the line for a number of years; similarly, there could be promoters running prize competitions through the newspapers having a large circulation owned by them and other independent promoters not having the facility of newspapers with them; he further pointed out that the promotional expenses would vary between promoters depending upon from what place the prize competitions were promoted, and whether the media or facility of a newspaper was available or not. In other words, according to Mr. Bhabha, all promoters belonging to these different categories were clubbed together for the purpose of levying tax at a uniform rate, and it was well settled that in such a case discrimination may result, for, refusal to make rational classification may itself in some cases operate as denial of equality. In this behalf, he relied upon two or three decisions of the Supreme Court, namely, the decisions in K.T. Moopil Nair v. State of Kerala : [1961]3SCR77 ; N.M.C.S.W. Mills v. Ahmedabad Municipally : [1967]2SCR679 and State of Kerala v. Haji K. Kutty : [1969]1SCR645 . In our view, the fallacy underlying this argument and the line of approach is that it assumes that the incidence of tax under the Act is on the promoters of the prize competitions which assumption is not correct. The charging provision contained in Section 12 of the Act makes the position clear that the tax sought to be imposed thereunder has been a percentage of the aggregate of the entry fees received in respect of a prize competition of gambling nature and it is not a tax on the promoters as such. To collect tax from the promoters is not to tax the promoters but it is a convenient way of imposing tax on gambling, indirectly taxing the gamblers themselves. It is also clear that the tax levied has never been on the profits made by the promoters but it is a percentage on the total sum received by them as entry fees without deduction of any expenses. This position regarding the incidence of the tax under the Act has been well stated by the Supreme Court in Chatnarbaugwala's case, though in connection with another charging provision contained in Section 12A of the Act. If that be the correct position of the incidence of tax, there was really no occasion for the Legislature to make classification or categorization of promoters of prize competitions, rational or otherwise, as suggested by Mr. Bhabha and no question of denial of equality would arise by refusing to make any classification. The three decisions of the Supreme Court relied upon by Mr. Bhabha dealt with cases of tax on properties-lands or houses and the ratio underlying the said decisions has been set out by Mr. Justice Shah in the last mentioned case-State of Kerala v. Haji K. Kutty in the following terms (p. 380) :.Where objects, persons or transactions essentially dissimilar are treated by the imposition of a uniform tax, discrimination may result, for, in our view, refusal to make a rational classification may itself in some cases operate as denial of equality.

In other words, in order that discrimination in the manner indicated in the aforesaid decision should result, it is absolutely necessary that objects, persons or transactions essentially dissimilar should first be the targets of taxation and these should be clubbed together and treated by the imposition of a uniform tax. In the instant case, tax levied under the Act is not a tax on promoters at all but on the gamblers themselves, that is, on persons who send entries in prize competitions and therefore there is no question of any inequality arising by refusing to make any classification of the promoters belonging to different categories. The Legislature has clearly indicated that the Act shall apply to all prize competitions which are of gambling nature alone and since the gambling element present in each such competition is of the same and not dissimilar character shared by all those who send the entries, there could be no difficulty in taxing all prize competitions involving such element at a uniform rate and by such imposition of tax at a uniform rate on such prize competitions there could be no occasion for any discrimination resulting from it. In the result, we agree with the learned Judge that challenge to the taxing provisions contained in Section 12(1)(b) and Section 12(2) of the Act under Article 14 must fail.