MAHE BEACH TRADING COMPANY AND ETC.versusUNION TERRITORY OF PONDICHERRY AND ORS.

         MAHE BEACH TRADING COMPANY AND ETC.                                        A
                           v.
        UNION TERRITORY OF PONDICHERRY AND ORS.

                                APRIL 4, 1996

         [AM. AHMADI, CJ, SUJATA V. MANOHAR AND                                     B
                      B.N. KIRPAL, JJ.]

       Co11stinttio1J of l1Jdia, 1950: Article 239A read with Sectioll 18, Govem-
ment of Unio11 Tenitmies Act, 1963-Pondicheny Legislature-Competence
of-To legislate ill respect of matters ill State List or Co11current List-Ellact-   C
mellt of Pondicheny Mullicipal Decree (Leiy a11d Validation of T{l)Ce,~ Duties,
Cesses a11d Fees) Act, 1973 with retrospective effect-Whether intra
vires-Held, yes.

      Pondicheny Municipal Decree (Leiy and Validation of T{l)Ces, Duties,          D
Cesses and Fees) Act, 1973-Sections 3 & 4: Whether suffer from vice of
excessive delegatio11 of legislative power-Held, /JO. Whether 1epugnant to
Section 7 of the Pondicheny (Administratioll) Act, 1962 a11d Section 21 of
Govemment of U1Jio1J Tenitolies Act, 1963-Held, llo.

      The French Decree dated 12 March 1880 governed and regulated                  E
the municipal bodies of French Establishments in India. Paragraph 46
of the said Decree contemplated the Municipal Councils to deliberate
the budget as well as the mode of assessment, rates and rules regarding
collection of all municipal revenues.
                                                                                    F
     The sovereignty of the French Establishments viz, Pondicherry,
Karikal, Mahe and Yaman was ceded to India on 16th August 1962.
Section 4 of the Pondicherry (Ad1ninistration) Act, 1962, all laws, in force
immediately before the aJlpointed day in the former French Estab-
lishments continued to be in force in the Pondichcrry Union Territory.              G
By section 7 of that Act all taxes, duties, cesses and fees being lawfully
levied in the said Establishments were continued to be levied.

      Article 239A of the Constitution (inserted by the Constitution
(Fourteenth Amendment) Act, 1962), provid.ed for the Parliament creat-
ing, by law, for the Union Territory of Pondicherry, a body to function H
                                        l
    2                      SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A as a Legislature. The Government of Union Territories Act, 1963 passed
    by Parliament in pursuance of Article 239A, was made applicable to tbe
    Union Territory of Pondicherry from 1st July 1963. Section 18(1) of that
    Act empowered the Legislative Assembly of a Union Territory to make
    laws for the Union Territory with respect to any of the matters
B   enumerated in the State List or the Concurrent List in the Seventh
    Schedule to the Constitutim1, and section 18(2) provided that such
    powers shall not derogate from the powers conferred on Parliament by
    the Constitution, while section 21 dealt with inconsistency between the
    laws made by the Parliament and the laws made by the legislative
    assemblies.
c
        The Municipal Council of Mahe on 7th August 1969 decided to
  levy a municipal tax on each letter of pertol and diesel oil sold at the
  petrol pumps situate in Mahe. Thereupon, the Mayor issued an "arrete"
  under the Municipal Decree 1880 for the levy of the aforesaid tax and
D its collectiou with effect from 13th January 1970.

          A Single Judge of the Madras High Court struck dowu the said
    levy on the view that the tax was on the sale of goods, ,that it was levied
    in excess of the municipality's power of taxation, that the said levy
E   violated section 7 of the Pondicherry (Administration) A~t, 1962, and
    that since the Pondicherry Legislature had itself enacted a General Sales
    Tax Act applicable to the Union Territory, the Municipal Council, in any
    case, possessed no power to levy a parallel sales ~ for municipal
    purposes.
F
          During the pendency of the appeal against that judgment the
     Pondicherry Legislature passed the Pondicherry Municipal Decree (Levy
     and \'alidation of Taxes, Duties, Cesses and Fees) Act, 1973. Section 3
     of that Act provided for the levy, assessment and. collection of any tax,
G duty, cess or fee, which that Legislature had power to levy, also for the
        purposes of the Municipal Decree in accordance with the provisions
        contained in or made under the Municipal Decree. It provided further
        that notwithstanding the provisions of section 7 of the Pondicherry
        (Administration) Act, 1962, or any provision of any Act passed by the
H       Legislature of the Union Territory of Pondicherry, the Municipal Decree
         MAHE BEACH TRADING CO. v. U.T.PONDICHERRY                        3

shall have and shall be deemed to have had on and from the 16th day A
of August 1962, effect accordingly. Section 4 validated the taxes which
had already been levied, assessed or collected under the said Municipal
Decree. The appellants challenged that Act also before the High Court
by a fresh writ petition. The Division Bench by a common judgment held,
inter alia, that the Validation Act was intra vires.                    B
      It was contended for the appellants that the Pondicherry Legisla-
ture had no plenary powers, as the same vested only in the Parliament,
and hence it could not pass the Validation Act, which had the effect of
re-enacting and imposing restrictions on diesel and petrol with retros-
pective effect, that sections 3 and 4 of the Validation Act were ultra vires   c
on the ground of excessive delegation, and that the said sections 3 and
4 were repugnant to and in derogation of section 7 of Pondicherry
(Administration) Act, 1962 and section 21 of the Government of Union
Territories Act, 1963, which were both enacted by Parliament.
                                                                               D
      Dismissing the appeals, the Court

      HELD : 1.1. It was in pursuance of Article 239A that the Govern-
ment of Union Territories Act, 1963 was passed by the Parliament and
it was under this Act that the Legislative Assembly for the Pondicherry        E
Union Territory was constituted, and by virtue of section 18 given the
powers, which any other State Legislature had, to legislate with respect
to the matters enumerated in the State List or the Concurrent List. Levy
of sales tax would undoubtedly be within its legislative competence by
virtue of Entry 54 of List II of the Seventh Schedule. [12-E-F; HJ
                                                                               F
      1.2. It is well settled that the State legislature as well as the
Parliament bas the power to legislate with retrospective effect and also
to pass a \ralidation Act. That being so, and the plenary po"'ers of the
Legislature of Pondicherry being co-extensive with the powers of a State
Assembly by virtue of section 18 of the Government of Union Territories G
Act, 1963, it could not be said that the Pondicherry Legislature could
not enact a law with retrospective effect. Furthermore, there was no such
law relating to imposition of sales tax on diesel and petrol enacted by
Parliament in respect pf the Union Territory of Pondicherry. The
Pondicherry Municipal Decree (Levy and Validation of Taxes, Duties, H
    4                     SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A Cesses and Fees) Act, 1973 has thus been validly enacted. [13-B-D]

          1.3. The effect of Validation Act being promulgate~ was that the
    specific levy on diesel and petrol which had been made in 1970 with the
    issuance of the "arrete" by the Municipal Council of Mahe, would no
    longer be regarded as one being made under Municipal Decree of 1880
B
    but, in law, will have to be regarded as being a levy made by a competent
    legislature exercising its powers by virtue of section 18 Qf the Govern-
    ment of Union Territories Act, 1963 read with Article 239A of the
    Constitution. [12-F-G]

C          2.1. If there is abdication of legislative power or there is excessive
    delegation or if there is a total surrender or transfer by the legislature
    of its legislative functions to another body then that is riot permissible.
    There is, however, no abdication, surrender of legislative functions or
    excessive delegation so long as the legislature has expressed its will on
D   a particular subject matter, indicated its policy and left the effectuation
    of the policy to subordinate or subsidiary or anciliary legislation,
    provided the legislature bas retained the control in its band with
    reference to it so that it can act as a check or a standard and prevent
    or nndo the mischief by subordinate legislation when it chooses to or
E   thinks fit. [9-C-E)

          Hamdard Dawakhana (Wakf) Lal Kuan, Delhi & ,,jl.nr. v. Union of
    India & Ors., [1960] 2 SCR 671; Devi Das Gopal Krishnan & Ors. v. State
    of Punjab & Ors., [1967) 3 SCR 557; Municipal Coiporation of Delhi v.
    Bir/a Cotton Spinning & Weaving Mills, Delhi & Anr., [1968] 3 SCR 251
F   and Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt. Commissioner
    of Sales Tax & Ors., [1974] 2 SCR 879, referred to.

          2.2. In the instant case, section 3 of the \'alidation Act had'becn
    enacted by the competent legislature aud it specifically empowered the
G   levy of any tax, duty, cess or fee which the legislature of a Union
    Territory had the power to levy. It further provided for the tax to be
    assessed and collected for the purposes of the Municipal Decree in
    accordance with the provisions contained in the said Municipal
    Decree, and notwithstanding the provisions of section 7 of the Pon-
H   dicherry (Administration) Act, 1962 or any other provision in that
        MAHE BEACH TRADING CO. '" U.T. PONDICHERRY                   5

regard. This section has to be read mth section 4 of the Validation Act, A
which specifically validates the taxes that had already been levied,
assessed or collected in the municipal communes, including the tax in
question. At the time when the Validation Act was passed, all the
essential ingredients of the levy and assessment of tax on petrol and
diesel oil were known and available to the Legislature. The tax had been B
levied at the rate of 2% on the sale of diesel and petrol and the
Legislative Assembly of the Pondicherry Union Territory, in effect, levied
this tax itself when it passed the Validation Act. As a result of this
Validation Act, no further act of subordinate legislation bad to be
performed by any one. Sections 3 and 4 of the Validation Act, cannot C
therefore be said to suffer from the vice of excessive delegation. [11-A-E]

      3. Section 7 of the Pondicberry Administration Act, 1962 merely
continued the existing taxes. Assuming that there was no valid levy of
the tax under the Municipal Decree of 1880, a competent Legislature
could impose a tax and section 7 of the Pondicherry Administration Act D
did not in any way prohibit such imposition. Furthermore in section 3
of the Validation Act itself it was stated that the tax may be levied
notmthstanding the provisions of section 7 of the Pondicherry Ad·
ministration Act or any other provision of any Act passed by the
Legislature of the Union Territory of Pondicherry. The levy under         E
sections 3 and 4 of the Validation Act cannot, therefore, be said to be
repugnant to section 7 of the Pondicherry (Administration) Act, 1962.
For that very reason also it cannot be said that the Validation Act was
repugnant to section 21 of the Government of Union Territories Act,
1963. [13-F-H; 14-A-B]                                                    F

      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1412-13
of 1975.

     From the Judgment and Order dated 22.4.75 of the Madras High         G
Court in W.P. Nos, 1666 and 1667 of 1973.

      K.V. Viswanatban and K.R. Nambiar for the Appellants.

     A.S. Nambiar, P.K. Manohar and Ms. Shanta Vasudevan for the
Respondents.                                                     H
    6                    SUPREME COURT REPORTS [1996j SUPP. 1 S.C.R.

A         The Judgment of the Court was delivered by

          KIRPAL, J. The appellants are the dealers in petrol and diesel ·oil
    in the former French Establishment of Mahe, now in the Union Territory
    of Pondicherry. The Erstwhile French Establishments' in India were
    divided by the French Government into 17 Communes approximating to
B
    Municipalities or Local Self Governments. Mahe was one such Commune.

          A French Decree dated 12.3.1880 governed and regulated the
    municipal body of each commune. It, inter alia, provided for setting up
    of a Mayor and elected Municipal Council. Paragraph 46 of the said
c   Decree inter alia, contemplated the Municipal Councils ,to deliberate the
    budget of the Communes as well as the mode of assesi;ment, rates and
    rules regarding collection of all municipal revenues etc. The deliberations
    of the Municipal Councils were required to be forwarded to the Governor
    and would become enforceable only after the approval 'by the Governor
D   in Privy Council.

          By an agreement dated 21.10.1954, there was a de facto transfer by
    the French Government of all its French Territories to the Indian
    Government. Thereafter the Government of India in exercise of the
E   powers conferred by Section 4 of the Foreign Jurisdiction Act, 1947 made
    the French Establishments (Application of Laws) Order, 1954 and the
    French Establishments (Administration) Order, 1954. dn 28.5.1956, there
    was a treaty of cession between the President of India ,and the President
    of French Republic in respect of the French Establishments in India
    including Mahe.
F
          On 16.8.1962, de jure merger of the French Establishments with
    India was carried out through an Instrument of Ratification between the
    two countries as a result of which France ceded lo India the sovereignly
    of its territories namely; Pondicherry, Karikal, Mahe and Yaman. The
G   aforesaid four territories constituted the Pondicherry Union Territory.

         On 16.8.1962, the Pondicherry Administration Ordinance, 1962 was
    passed which was replaced by the Pondicherry Administration Act, 1962.
    By Section 4 of this Act, all laws in force immediately before the
H   appointed day in the former French Establishments were continued to be
   MAI-IE BEACH TRADING CO. v. U.T. PONDICHERRY [KIRPAL, J.J             7

in force in the Pondicherry Union Territory, until they were amended or A
repealed by a competenent Legislature or other competent authority. By
Section 7, all taxes, duties, cesses and fees being lawfully levied in the
former French Establishments were continued to be levied in Pontlicherry
Union Territory and were required to be applied for the same purpose
until other provisions are made by a competent Legislature or other B
competent authority. The result of this was that the Municipal Decree
dated 12.3.1880 could continue lo he in force. Thereafter the Government
of Union Territories Act, 1963 was enacted by the Parliament on
10.5.1963, in exercise of powers under Article 239A(l). This Act provided
for the establishment of a local legislature and Council of Ministers and C
their powers, procedure and other matters.

      The Municipal Council of Mahe on 7.8.1969 decided to levy a
Municipal Tax of 5 paisa on each litre of petrol and diesel oil sold at
the petrol pump situate in Mahe. The Mayor, based on that decision of         D
the Municipal Council and considering the Decree dated March 12, 1880
issued an "arrete" with effect from 13.1.1970 for the levy of the aforesaid
tax and its collection by the Receveur Municipal, or the agent appointed
by him. On a representation by the appellant, the Municipal Council by
another Resolution dated 15.5.1970 decided to reduce the rate of tax from
five paisa to two paisa on each litre of petrol and diesel oil with effect    E
from 24.2.1970 and an "arrete" to that effect was issued on 16.10.1970.

       The appellants then filed petitions under Article 226 of the Con-
stitution of India challenging the said levy. A Single Judge of the Madras
High Court struck down the said levy by holding that the tax was on the       F
sale of goods and that it was levied in excess of the Municipality's power
of taxation and the said levy also violated Section 7 of the Pondicherry
(Administration) Act, 1962. Lastly, it was held that the Pondichcrry
Legislature had itself enacted a General Sales Tax Act applicable to the
Union Territory and, therefore, the Municipal Council, in any case,           G
possessed no power to levy a parallel sales tax for municipal purposes.

     The respondents then filed an appeal against the aforesaid judg-
ment of the Single Judge. During the pendency of this appeal, the
Administrator of Pondicherry, on 18.3.1973, promulgated Pondicherry H
    8                    SUPREME COURT REPORTS [1996] SUPP.1 S.C.R.

A   Municipal Decree (Levy and Validation of Taxes, Duties, Cesscs and
    Fees) Ordinance, 1973. This was replaced by the Act (hereinafter referred
    Lo as 'the Validation Act') and it became the law on 21.3.1973 when it
    received the assent of the President of India and was published in the
    Pondicherry Gazette. This Act was given retrospective operation from
B   18.11.1973, the day of the Ordinance. This Validatiol\ Act was again
    challenged by the appellants before the Madras High Court by filing a
    fresh writ petition.

          The Division Bench of the High Court heard the Appeals against the
    Single Judge order as well as the new Writ Petition which was filed
C   challenging the Validation Act. By a common Judgment, the High Court
    allowed the Writ Appeals and dismissed the Writ Petitions. It, inter alia,
    held that the Validation Act was intra vires.

          The Division Bench, however, granted leave to ap1>eal to this Court
D   because in its opinion, substantial question of law of general importance
    arose in the case. Hence, these appeals.

          On behalf of the appellants, the learned counsel attacked the validity
    of the Validation Act on three main grounds :

E           (i) There was excessive delegation of legislative power. There was,
            it was submitted, total abdication and effacement by the Pon-
            dicherry Legislature of its e,sential legislative functions and from
            the terms of Section 3, no guidelines or policy was discernible;

            (ii) Sections 3 _& 4 of the Validation Act were repugnant to Section
F
            7 of the Pondicherry (Administration) Act, 196;! and Section 21 of
            Government of Union Territories Act, 1963;

            (iii) The Pondicherry Legislature had no plenary powers and
            hence, could not legislate with retrospective effect or make laws
G           contrary to the law made by the Parliament under Article 239 and
            239A

          While relying upon the decisions in Hamdard Dawakhana (Wakf)
    Lal Kuan, Delhi and Another v. Union of India and Others, [1960] 2 SCR
H   671; Devi Das Gopal Klishnan & Ors. v. State of Punjab & Ors., [1967) 3
       MAHE BEACH TRADING CO. v. UT. POND!CHERRY [K!RPAL,J.]                9

    SCR 557; Municipal C01poration of Delhi v. Bir/a Cotton, Spinning and A
    Weaving Mills, Delhi and Anothei; [1968] 3 SCR 251 and Gwalior Rayon
    Silk Mfg. (Wvg.) Co. Ltd. v. T11e Asstt. Commissioner of Sales Tax and
    Othm·, [1974[ 2 SCR 879, it was contended by the learned counsel for
    the appellants that the provisions of the Validation Act do not contain
    any guidelines and the power of the municipality is absolute and unbrid- B
    dled and, therefore, the said Sections 3 & 4 of the Validation Act suffer
    from the vice of excessive delegation and is bad in law.

           The principle which emanates from the aforesaid decisions relied
    upon by the appellants is very clear namely; that if there is abdication of C
    legislative power or there is excessive delegation or if there is a total
    surrender or transfer by the Legislature of its legislative fuPctions to
    another body then that is not permissible. There is, however, no abdica-
    tion, surrender of legislative functions or excessive delegation so long as
    the Legislature has expressed its will on a particular subject matter,
    indicated its policy and left the effectuation of the policy to subordinate D
    or subsidiary or anciliary legislation, provided the Legislature has retained
;
    the control in its hand with reference to it so that it can act as a check
    or a standard and prevent or undo the mischief by subordinate legislation
    when it chooses to or thinks fit. It is however, not necessary for us to go
    into these aspects in any great detail because this question of excessive E
    delegation does not really arise in the present case.

          The tax had been levied in the year 1970 under the Municipal
    Decree of 1880. The items to be taxed and the rate of tax to be levied
    were specifically determined. After the learned Single Judge held the said   F
    levy to be ultra vires, the Legislative Assembly of Pondicherry passed the
    Validation Act. Section 3 & 4 of the said Act are as follows :

            "3 : Levy of taxes etc. for the purpose of Municipal Decree.- Any
            tax, duty, cess or fee which the Legislature of the Union Territory G
            of Pondicherry has power to levy may, subject to any general or
            special order which the Government may make in this behalf, also
            be levied, assessed and collected for the pnrposes of the Municipal
            Decree in accordance with the provisions contained in or made
            under the Municipal Decree and notwithstanding the provisions H
    10                   SUPREME COURT REPORTS [1996] SUPP. l S.C.R.

A           of Section 7 of the Pondicherry (Administration) Act, 1962
            (Central Act 49 of 1962), or of any provision of any Act passed by
            the Legislature of the Union Territory of Pondicherry, the
            Municipal Decree shall have, and shall be deemed to have had on
            and from the 16th day of August, 1962, effect accordingly.
B
            4 : Validation of Certain taxes, etc. levied, assessed or collected in
            municipal communes - Notwithstanding any judgment, decree or
            order of any court, all taxes, duties, cesses and fees (being taxes,
            duties, cesses and fees which the Legislature of the l,Jnion Territory
            of Pondicherry has power to levy) levied, assessed or collected or
c           purporting to have been levied, assessed or collected under the
            Municipal Decree before the commencement of this Act shall be
            deemed to have been validly levied, assessed or collected in ac-
            cordance with law as if the provisions of Section 3 had been in
            force at all material times when any such tax, duty, cess or fee was
D           levied, assessed or collected; and accordingly, -

            (a) all acts, proceedings or things done or taken by the municipal
            councils or by any authority, officer or person in Connection with
            the levy, assessment or collection of any such tax, <;!uty, cess or fee
E           shall, for all purposes, be deemed to be, and to have always been
            done or taken in accordance with law;

            (b) no suit or other pruceedings shall be maintained or continued
            in any court against the municipal councils or any. other authority,
            officer or person whatsoever for the refund of any tax, duty, cess
F
            or fee so collected; and

            (c) no court shall enforce any decree or order directing the refund
            of any tax, duty, cess or fee so collected :

G           Provided that no act or omission on the part of any person shall
            be punishable as an offence which would not have been so punish-
            able if this Act had not been passed."

         The question whether Sections 3 & 4 are ultra vires on the ground of
H excessive delegation would have been relevant if by virtue of the said
       MAHE BEACH TRADING CO. v. U.T. PONDICHERRY [KIRPAL,J.] 11

    provisions any subordinate or delegated legislation had to to follow or any A
    decision by the delegatee had to be taken. That question does not arise in
    the present case. Section 3 of the Validation Act has been enacted by the
    competent Legislature and it specifically empowers the levy of any tax,
    duty, cess or fee which the Legislature of a Union Territory had the power
    to levy. It further provides the tax to be assessed and collected for the B
    purposes of the Municipal Decree in accordance with the provisions
    contained in the said municipai decree, and notwithstanding the provisions
    of Section 7 of the Pond.icherry (Administration Act) 1962 or any other
    provision in that regard. This Section has to be read with Section 4 of the
    Validation Act which specifically validates the taxes which had already
    been levied, assessed or collected in the municipal communes, including
                                                                                  c
    the lax in question. At the time when the Validation Act was passed, all
    lhc essential ingredients of the levy and assessment of tax on petrol and
    diesel oil were known and available to the legislature. The tax had been
    levied at the rate of 2% on the sale of diesel and petrol and the Legislative
    Assembly of the Pondicherry Union Territory in effect, levied this tax itself D
    when it passed the Validation Act. As a result of this Validation Act, no
    further act of subordinate legislation had to be performed by any one. The
    affect of th.is Act, as already observed, clearly was that a specific levy which
    had been made in 1970, with the issuance of the "arrete" by the Mayor of
     Mahe, was re-enacted, with retrospective date, by the competent legisla- E
     ture. Therefore, the question of Section 3 and Section 4 of the Validation
    Act suffering from excessive delegation does not really arise in this case.

          Before dealing with the second contention raised by the learned
    counsel for the appellant, it would be more appropriate to deal with the
                                                                                  F
    third contention. It was submitted that the Pondicherry Legislature had no
    plenary powers as the same vested only in the Parliament. The submission
    was that the Pondicherry Legislature could not make retrospective laws, or
    laws rnmrary to' the laws made by the Parliament, under Articles 239 and
    239 A of the Constitution. Elaborating further it was submitted that the
    Pondicherry Legislatures did not have the power to pass the Validation        G
    Act which had the effect of re-enacting and imposing restrictions on diesel
    and petrol with retrospective effect.



-         Article 239 A of the Constitution provides for the Parliament creat-
    ing, by law, for the Union territory of Pondicherry, a body to function as · H
       12                   SUPREME.COURT REPORTS [1996)SUPP.1 S.C.R.

   A   a legislature with such constitution, powers and functions as may be
       specified in the law. It was in pursuance of this that (The)' Government of
       Union Territories Act, 1963 was passed by the Pcrliament .and the said Act
       was made applicable to the Union Territory of Pondicherry from 1.7.1963.
       This Acl provided for the setting up of Legislative Assemblies and Council
   B   of Ministers for the Union Territories and it was under ,this Act that the
       Legislative Assembly for the Pondicherry Union Territory was constituted.
       Section 18 of (The) Government ol Union Territories Act, 1963 deals with
       the extent of the Legislature's power and it reads as follows :

               "Extent of legislative powers - (l) Subject to the provisions of this
   c           Act the Legislative Assembly of a Union Territory may make laws
               for the whole or any part of the Union Territory with respect to
               any of the matters enumerated in the State List or the Concurrent
               List in the Seventh Schedule to the Constitution in so far as any
               such matter is applicable in relation to Union territories.
   D           (2) Nothing in sub-section (1) shall derogate from the powers
               conferred on Parliament by the Constitution to make laws with
               respect of any matter for the Union territqry or any any part
                       11
               thereof.

  E           Reading Article 239 A and Section 18 of (1he) Government of
       Union Territories Act, 1963 together, it is clear that the Pondicherry
       Assembly had the power to make laws for the whole or part of Pondicheiry
       with respect to any of the matters enumerated in the State List or the
       Concurrent List. Levy of sales tax would undoubtedly be within its legisla-
  F    tive competence by virtue of Entry 54 of List II of the Seventh Schedule.
       The effect of Validation Act being promulgated was that the levy on diesel
       and petrol would no longer be regarded as one being made under
       Municipal decree of 1880 by the Municipal Council but, in law, will have
       lo be regarded as being a levy made by a competent Legislature, exercising
       its powers by virtue of Section 18 of (The) Government of Union Ter-
   G   ritories Act, 1963 read with Article 239 A of the Constitution.

           By virtue of (The) Government of Union Territories Act, 1963, the
     Pondicherry Legislature was given the powers which any other State Legis-
     lature had to enact laws with respect to the matters enumerated in the State
  H 'List or the Concurrent List. Of course, sub-section 2 of •ection 18 provides




WW&&        w,1aamaw11
   MAHE BEACH TRADING CO. v. U.T. PONDICHERRY [KIRP AL, J.]                13

that the powers conferred under sub-section (1) shall not derogate from A
the powers conferred on Parliament by the Constitution to make laws with
respect to any matter for the Union Territory. But, there is no such law
relating to the imposition of sales tax on diesel and petrol which has been
enacted by the Parliament, while the Validation Act has imposed such a
tax. It is not in dispute, and now it is well settled, that the State Legislature B
as well as the Parliament has the power to legislate with retrospective effect
and also to pass a Validation Act. This being so, and the powers of the
legislature of Pondicherry being co-extensive with the powers of a State
Assembly, by virtue of Section 18 of (The) Goverrunent of Union Ter-
ritories Act, 1963, there is no reason for this Court to hold that the
Pondicherry Legislature could not enact a law with retrospective effect. In
                                                                                 c
other words, by virtue of Section 18 of (The) Government of Union
Territories Act, 1963, the Parliament vested with the Pondicherry Legisla-
 ture the plenary powers to legislate with respect to the matters in List II
 and List III of the Seventh Schedule and the said power has been validly
 exercise with the enactment of the Validation Act.                               D

      It w•s next. contended by the learned counsel that Sections 3 and 4
of the Validation Act are repugnant to or are in derogation of Section 7
of Pondicherry Administration Act, 1962 and Section 21 of (The) Govern-
ment of Union Territories Act, 1963 which were both enacted by the               E
Parliament. In this connection it was further submitted that the expression
'lawfully levied under Section T means that the levy under the Municipal
decree had been validly and actually levied. In this connection it was also
submitted that the tax authorised by the Validation Act did not come under
Section 7 which prohibited a new levy and the Validation Act made by the
Pondicherry Legislature could not override Section 7 of the Pondicherry          F
Administration Act, 1962 and Secfon 21 of (The) Government of Union
Territories Act, 1963. There is no merit in this submission. Section 7 of the
Pondicherry Ad1ninistration Act merL1y continues the exi~ting taxes. As-
suming that there was no valid levy of the tax under the Municipal decree
of 1880, a competent Legislature could impose a tax and Section 7 of the         G
Pondicherry Administration Act does not in any way prohibit such imposi-
tion. Furthermore, in Section 3 of the Validation Act itself it is stated that
 the tax may be levied notwithstanding the provisions of Section 7 of the
 Pondicherry Administration Act or any other provision of any Act passed
                                                                                 H
    14                   SUPREME COURT REPORTS [1996[ SUPP. 1 S.C.R.

A   by the Legislature or the Union Territory of Pondicherry. The levy under
    Sections 3 and 4 of the Validation Act cannot be said, to be repugnant to
    Section 7 of the Pondicherry Administration Act, 1962. For that very
    reason there is also no merit in the contention that the Validation Act is
    repugnant to Section 21 of (The) Government of Union Territories Act,
B   1963, which section deals with inconsistency between the laws made by the
    Parliament and the Laws made by the Legislative Assemblies.

         For the aforesaid reasons, we find no merit in these appeals and the
    same are dismissed with costs.

C   P.S.S.                                                Appeals dismissed.




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