I. Concept of delegated legislation –

Ramanatha Aiyar’s, The Law Lexicon, defines delegation as an act of making or commissioning a delegate. Subordinate/delegated legislation is a process by which the executive is given powers by primary legislation to make laws in order to implement and administer the requirements of that primary legislation. Thus, the phrase “to implement and administer the requirements of that primary legislation” defines the boundaries or the scope for implementing a subordinate legislation. In Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. v. The Assistant Commissioner of Sales Tax and Others observed that delegation often involves the granting of discretionary authority to another, but such authority is purely derivative. The ultimate power always remains in the delegator and is never renounced. The type of delegation legislation can comprise of law made by a person or body, may include order, rules, regulation, notification etc. The term Rule and Regulation are used as interchangeable words. However, is the power to make delegated legislation is conferred on different authorities under the same act, the two words may be used to distinguish the source. Circulars issued under the act can also be referred to as delegated legislation however, circulars with no statutory backing cannot override or dilute the effect of a constitutional or statutory provision.

The power to make subordinate laws is provided under Article 13(3) of the Indian Constitution which is entitled in the words that law includes any Ordinance, order, bye law, rule, regulation, notification, custom or usages having in the territory of India the force of law;. Similarly, the essence of delegated legislation is conveyed through section 164 of the CGST Act that gives the power to the Government on recommendations of the council to make rules or regulations. Provided such rules are notified through a Notification, which is not necessary for an order or direction issued from the GST council, which is a constitutional body.

II. Judicial Control over Delegated Legislation

When the permissible delegation is delegated excessively the doctrine of ultra vires is invoked, which envisages that an authority can exercise only so much power as is conferred on it by law. Thus, when the piece of delegated legislation becomes ultra vires, it cannot effect the rights of a person and is declared void. A void rule cannot be the basis of any administrative action. However, until a rule is declared invalid, it is presumed to be valid. Provided, if the valid and invalid part of the rule can be severed then the invalid portion is quashed and the valid portion remains to be operative. If the subordinate or delegated legislation goes beyond the scope of authority conferred on the delegate or it is in conflict with the parent or enabling act, it is called substantive ultra vires.

Grounds under which the subordinate legislation can be challenged –

1. If Parent Act (i.e the act providing for the delegation) is void then the subordinate legislation made under the act will also be declared to be unconstitutional and therefore void.

2. Where the Parent Act is not violative of the Constitution, but the subordinate legislation made under it violates the provisions of the Constitution. Such subordinate legislation will be unconstitutional and void though the Parent Act would be valid.

3. Subordinate legislation can be ultra vires the Enabling or Parent Act i.e. made in excess of the powers conferred by the Parent Act or is in conflict with the provisions of the Parent Act

Briefly stated, the principle is that the delegate cannot make a rule which is not authorized by the parent statute. If the subordinate legislative authority keeps within the bounds of the power delegated, the delegated legislation is valid, however, if the authority exceeds the power delegated, then the courts will certainly declare it to be ultra vires. Supreme Court has emphasized in State of U.P v Renusagar Power Co., “if the exercise of power is in the nature of subordinate legislation, the exercise must conform to the provisions of the statute.”

How to test the validity of RulesA rule cannot enlarge the meaning of a statutory provision. If a rule goes beyond what the section in the Act contemplates, the rule has to go away with. The delegated legislation can be struck down through the essential function test. The Courts have consistently held that an essential legislative function cannot be delegated to the executive and has to be exercised by the legislature. Thus, levy of tax is an essential legislative function and cannot be delegated. However, when a statutory provision is in the form of ‘’except as may eb otherwise prescribed by the rules’ or when it ‘subject to the rules’, the rules may prevail over the statute.

Constitutional Limitation of Delegated LegislationSupreme court, in Kishan Prakash Sharma & Ors. Vs. Union of India 2001 (3) TMI 1018 held that the Legislature must set the limits of the power delegated by declaring the policy of the law and by laying down standards for the guidance of those on whom the power to execute the law is conferred. Supreme Court in Delhi Race Club Ltd. Vs. Union of India 2012 (7) TMI 498 laid down two broad principles of delegated legislation to pass through the test of constitutionality i.e. (i) that delegation of the non-essential legislative function (Eg. Fixing rates) and (ii) while delegating the power of fixation of rate of tax, there must be in existence, inter-alia, some guidance, control, safeguards and checks in the concerned Act. In Indian Association of Tour Operators v. Union of India and others, reported in 2017(5) GSTL (Del.) it was held that through the delegated legislation there cannot be a deeming fiction to ascertain the value on which the tax is payable as it is an essential legislative function.

III. Standard Principles for application of a delegated legislation – Erstwhile laws

It is a settled principle of law that levy and collection of tax must be in conformity with the authority conferred by the law as held by Supreme Court in the case of District Mining Officer and Ors. v. Tata Iron and Steel Co. and Ors., reported in AIR 2001 SC 3134. Thus, the expression “authority of law” would refer to existence of a lawful enactment, which authorizes the levy or collection of a tax. Article 265 mandates every tax to be imposed by “law” it is to follow that it could only be imposed by a valid law, otherwise would be declared unconstitutional as held in Chhotabhai Jethabhai Patel & Co. Vs. Union of India 2002-TIOL-1602-SC-CX-CB.

Subordinate Legislation to not override the statuteIt is a settled general principle of law that if a delegated legislation goes beyond the power conferred by the statute, it has to be declared as ultra vires. The essence of this principle is laid on the foundation that a delegated legislation derives its power from the parent statute and not without it. Thus, the delegated legislation is to supplant the statute and not to supplement it.

In case of any conflict between the primary and the subordinate legislation, there is no reasoning required to conclude that the statute shall prevail over the subordinate legislation and bye-laws if not in conformity with the statute should be ignored as held in Babaji Kondaji Garad Vs. Nasik Merchants Co-operative Bank 1983 (10) TMI 270 – SC. It is also relevant to note that rules are made and meant only for the purpose of running the machinery provision of the act and cannot take away the right vested under the Act as held in CIT Vs. Taj Mahal Hotel 1971 (8) TMI 2 (SC)

No tax to be levied on articles outside the scope of the taxing statuteSupreme Court in Bimal Chandra Banerjee Vs. State of M.P 1970 (8) TMI 30 (SC) held that – “No tax can be imposed by any bye-law or rule or regulation unless the statute under which the subordinate legislation is made specially authorises the imposition even if it is assumed that the power to tax can be delegated to the executive. The basis of the statutory power conferred by the statute cannot be transgressed by the rule making authority. A rule making authority has no plenary power. It has to act within the limits of the power granted to it.”. Similarly, under GST, alleged supply cannot survive until the exact “form” of supply is established. The term “such as” used in Section 7 of the CGST Act, 2017 has expanded the forms of supply however, it is permissible only to the extent it indicates a transaction pattern listed in ‘eight’ forms of supply mentioned as “Form” used in the section as it is sine qua non for “charge”.

Substantive right cannot be denied through a procedural handbook – In IFGL Refractories Vs. Joint Director General of Foreign Trade 2018 ACR 584 Calcutta High Court held that – There is no expressed procedure for granting benefit in the Handbook of Procedures but this cannot take away petitioner’s right granted under Exim Policy. The Handbook of Procedures is nothing but Rules provide for procedure and manner for granting benefit as provided in the Exim Policy has been made the provision of the procedural law and rule cannot be overridden or whittle down the substantive law.

Executive Instruction / Department Order to not override rules/statute – Executive instructions can supplement a statute or cover areas which statute does not extend but cannot run contrary to statutory provisions or whittle down their effect. Thus, executive instructions cannot amend or supersede the statutory rules, nor can an orders be issued in contravention to the statutory rules for the reason that an administrative instruction is not a statutory Rule nor does it have any force of law;. In Punit Rai v. Dinesh Chaudhary, (2003) 8 SCC 204; Union of India v. Naveen Jindal, (2004) 2 SCC 510; and State of Kerala v. Chandra Mohan, (2004) 3 SCC 429, the Apex Court held that executive instructions cannot be termed as law within the meaning of Article 13(3)(a) of the Constitution. Since the very objective of Article 265 is to guarantee that there shall be no taxation without representation, if there is any conflict between an executive instruction and rules framed under law, the rules shall prevail over the other. A mere Departmental communication does not amount to notification and an earlier notification cannot be said to have withdrawn by such communication. However, if an order can be referred to a statutory provision and held to have been passed under the said statutory provision, it would not be merely an executive fiat but an order under the Statute having statutory force.

Conclusion – The question, whether any legislation suffers from excessive delegation is to be decided by courts having regard to the subject matter, scheme, provisions of the statute. The courts have often been quiet generous and liberal to understand that having regard to the complex problems, delegated legislation is a necessity and has its own advantages. However, contrary to it is also the duty of the court to strike down the arbitrary use of excessive power of the executive. Series II of this Article, would be stressing upon the recent trend of judicial control of a delegated legislation under GST.

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Qualification: LL.B / Advocate
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October 2021