Delegation of power to categorize Consumers as per discretion without any guidance in Duty Act is invalid: Andhra Pradesh HC [Read Order]

In a recent case, the Andhra Pradesh High Court held that delegation of power to categorize Consumers as per discretion without any guidance in A.P. Electricity Duty Act, 1939 is invalid.

A.P. Textile Mills Association, the A.P. Electricity Duty Act, 1939 (the Duty Act) was enacted for levying duty on the sale of electrical energy by licensees. The term Licensee was originally defined to mean any person licensed under the Indian Electricity Act, 1910 to supply energy or any person who was authorized under section 28 of the same Act to supply energy. This definition was amended to mean a person who has been granted a licence under section 14 of the Electricity Act, 2003.

The delegation of the functions of (1) fixation of rate of duty and (2) identification of categories of consumers is challenged on the ground of excessive delegation.

The Central Legislature had empowered an executive authority under its legislative control to apply, at its discretion, laws to an area which was also under the legislative sway of the Centre. The variations occur in the type of laws which the executive authority was authorised to select and in the modifications which it was empowered to make in them.

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The views of the various members of the Bench were not as clear cut here as in the first five cases, so it will be necessary to analyse what each Judge said. The court found that the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature. Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view about this in the former case, but this much is clear from the opinions set out above; it cannot include a change of policy.

The issue again came up in Calcutta Corporation vs. Liberty Cinema. In this case, section 548 of the Calcutta Corporation Act, granted absolute discretion to the Corporation to fix the license fee that can be collected from cinema theatres. A change in the method of calculating the said fees resulted in the fee being increased from Rs. 400 per annum to Rs. 6000 per annum approximately. The scope of delegation came to be challenged, on the ground of unguided delegation amounting to abdication of the essential legislative functions.

The Supreme Court, in its majority decision held that fixation of rate of tax was not an essential legislative function and even otherwise such delegation was permissible if guidelines are given. In that case, the Supreme court also held that such guidance could be found in the financial needs of the corporation and the purposes for which the funds would be used, under the Corporation Act.

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Counsel for the State argued that under Article 162 of the Constitution the executive power of the State shall extend to matters with respect to which the Legislature of a State has power to make laws: that is to say, the executive power of a State extends to matters mentioned in List II of the Seventh Schedule to the Constitution; that under Article 266(1) of the Constitution all the taxes collected will go to the Consolidated Funds of the State, that the State has an unlimited power to raise funds by taxation to discharge its vast constitutional duties and that necessarily the amount of tax required would depend upon its needs which can only be known to it.

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 the Government which acts as a watch-dog on the actions of the local body in this matter on behalf of the legislature.

The Advocate General, contended that, under G.O.Ms.No.7, different rates of duty are levied on sale of electricity, based on the categories of consumers mentioned in the yearly retail supply tariff orders that would be passed by APERC. He submits that G.O.Ms.No.7 is mentioned in the objects and reasons of Act 23 of 2024 and as such the categorization of consumers, by APERC, in the yearly retail supply orders, is the guidance that would be followed by the Government, while identifying different categories of consumers. He also contended that, in similar circumstances, the erstwhile High Court of Andhra Pradesh, in D.K.V.Prasada Rao and Ors., vs. The Government Of Andhra Pradesh, had upheld similar delegation to fix rates of admission to various classes, within cinema theatres.

The division bench of Chief Justice Dhiraj Singh Thakur and Justice R Raghunandan Rao viewed that the stand of the State is that, guidance has to be elicited on the basis of the Objects and Reasons, of Act 23 of 2024. As discussed above, no guidance can be obtained from these Objects and Reasons. Consequently, the delegation of power, to the executive, to identify categories without any guideline or policy, would amount to excessive delegation, which is not permissible.

The court held that the delegation of the power, to categorize, is not accompanied by any guidance, either in the Duty Act or otherwise and consequently, the amendment to section 3, by Act 23 of 2024,as well as Act 10 of 2021, to the extent of giving discretion to the government to categorize consumers as per its discretion is invalid. This invalidity is on account of excessive delegation. The other amendments to section 3 do not suffer from any infirmity and are upheld.

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