Module 4- Relationship Between State Government and Central Government

Federal Structure and Federalism

Meaning The term ‘federation’ is derived from a Latin word ‘foedus’ which means
‘treaty’ or ‘agreement’. Thus, a federation is a new state (political system) which is
formed through a treaty or an agreement between the various units. The units of a
federation are known by various names like states (as in US) or cantons (as in
Switzerland) or provinces (as in Canada) or republics (as in Russia).
Modes of Formation
A federation can be formed in two ways, that is, by way of integration or by way of
disintegration. In the first case, a number of militarily weak or economically backward
states (independent) come together to form a big and a strong union, as for example,
the US. In the second case, a big unitary state is converted into a federation by granting
autonomy to the provinces to promote regional interest (for example, Canada). The US
is the first and the oldest federation in the world. It was formed in 1787 following the
American Revolution (1775–83). It comprises 50 states (originally 13 states) and is
taken as the model of federation. The Canadian Federation, comprising 10 provinces
(originally 4 provinces) is also quite old—formed in 1867.
Legal Requisites
1. Two sets of Government
There are 2 sets of government in India and that is union government and central
government. Central government looks after the whole country and state government
mainly works for the states. Working of both governments are different.
2. Division of Powers
Powers between central government and state government have been divided by
Constitution of India. The seventh schedule of the Indian constitution provides how
the division of powers is made between state and central government. Both central and
state governments have separate power and responsibilities.
The 7th schedule of Indian constitution consists of union list, state list, and concurrent
list.
• Union list- It contains all the matters on which only central government can
make laws.
• State list- It contains all the matters on which state government can make laws.
• Concurrent list- It contains all the matters on which both central and state
government can make laws.

3. Written Constitution
India has the one of the largest constitution in the world which consist of 395 articles
22 parts and 12 schedules. Every article of Indian constitution is clearly written down
and has been discussed in full detail.
4. Supremacy of the Constitution
The Constitution of India is regarded as supreme law of land. No law can be made or
passed against the constitution of India. The Constitution of India is above all citizens
and organizations of the country.
5. Supreme judiciary
The Supreme Court of India is regarded as the superior court of the country. The
decision of the Supreme Court is binding upon all courts and it has the power to
interpret the articles of the constitution.
6. Bicameral-legislation
In India, the legislature is bicameral. It has two houses and that are Lok Sabha and
Rajya Sabha. The upper house of the parliament which represents the states is Rajya
Sabha and the lower house of the parliament which represents the people in general is
Lok Sabha.
Advantages and Disadvantages
Advantages:
• Fosters State Loyalties: Many Americans feel close ties to their home state,
and federalism maintains that connection by giving power to the states.
• Practices Pragmatism: Running a country the size of the United States, with
such a diverse population, is much easier to do if power is given to local
officials. Likewise, state and local officials are closer to the problems of their
areas, so it makes sense for them to choose policies to solve those problems.
• Creates Laboratories Of Democracy: State governments can experiment with
policies, and other states (and the federal government) can learn from their
successes and failures.
Disadvantages:
• Prevents The Creation Of A National Policy: The United States does not have
a single policy on issues; instead, it has fifty-one policies, which often leads to
confusion.
• Leads to A Lack Of Accountability: The overlap of the boundaries among
national and state governments makes it tricky to assign blame for failed
policies.
When is federal system appropriate- Indian Context
The Constitution of India provides for a federal system of government in the country.
The framers adopted the federal system due to two main reasons —the large size of
the country and its socio-cultural diversity. They realised that the federal system not
only ensures the efficient governance of the country but also reconciles national unity
with regional autonomy. However, the term ‘federation’ has nowhere been used in the
Constitution. Instead, Article 1 of the Constitution describes India as a ‘Union of
States’. According to Dr B R Ambedkar, the phrase ‘Union of States’ has been
preferred to ‘Federation of States’ to indicate two things: (i) the Indian federation is
not the result of an agreement among the states like the American federation; and (ii)
the states have no right to secede from the federation. The federation is union because
it is indestructible. The Indian federal system is based on the ‘Canadian model’ and
not on the ‘American model’. The ‘Canadian model’ differs fundamentally from the
‘American model’ in so far as it establishes a very strong centre. The Indian federation
resembles the Canadian federation:
(i) in its formation (i.e., by way of disintegration);
(ii) in its preference to the term ‘Union’ (the Canadian federation is also called
a ‘Union’); and
(iii) in its centralising tendency (i.e., vesting more powers in the centre vis-a-
vis the states).
Difference between Federal and Unitary Model
Federal:
• Dual Government (that is, national government and regional government)
• Written Constitution
• Division of powers between the national and regional government
• Supremacy of the Constitution
• Bicameral legislature
Unitary:
• Single government, that is, the national government which may create regional
governments
• Constitution may be written (France) or unwritten (Britain)
• No division of powers. All powers are vested in the national government
• Constitution may be supreme (Japan) or may not be supreme (Britain)
• Legislature may be bicameral (Britain) or unicameral (China)
Challenges to Federal nature of Indian Constitution- Non-Federal Features
Non Federal Features in India are as follows:
• States Not Indestructible: Unlike in other federations, the states in India have
no right to territorial integrity.
• Single Constitution
• Strong Centre
• Flexibility of the Constitution
• No Equality of State Representation
 • Emergency Provisions
• Single Citizenship
• Integrated Judiciary
• Parliament’s Authority Over State List
• Appointment of Governor
Judicial Assessment
Case Law: SR Bommai Case
In Bommai case (1994), the Supreme Court laid down that the Constitution is federal
and characterised federalism as its ‘basic feature’. It observed: “The fact that under the
scheme of our Constitution, greater power is conferred upon the Centre vis-a-vis the
states does not mean that the states are mere appendages of the Centre. The states have
an independent constitutional existence. They are not satellites or agents of the Centre.
Within the sphere allotted to them, the states are supreme. The fact that during
emergency and in certain other eventualities their powers are overridden or invaded
by the Centre is not destructive of the essential federal feature of the Constitution.
They are exceptions and the exceptions are not a rule. Let it be said that the federalism
in the Indian Constitution is not a matter of administrative convenience, but one of
principle—the outcome of our own process and a recognition of the ground realities”.
Case Law: State of Karnataka v. UOI
In that case, the Central Government had issued a notification under section 3 of the
Commissions of Inquiry Act, 1952, to inquire into the conduct of certain Ministers of
the State Government of Karnataka (including the Chief Minister). The State
Government challenged the legality of this notification, mainly raising a constitutional
issue connected with federalism. The principal point raised was, that the scheme of the
Constitution was that the State Cabinet was collectively responsible to the State
Legislative Assembly [article 164 (2) of the Constitution]. The Constitution did not
contemplate a parallel overseeing of the State Cabinet (or its members) by the Centre.
In the end, the contention of the State Government failed. But the jurisdiction of the
Supreme Court (under article 131) to go into the above question was upheld. The point
that is relevant for the present purpose, is the fact that by a majority judgment, the
proceeding was held to be maintainable and it was specifically held, that in this
context, the supposed distinction between the State (an abstract entity) and the State
Government (its concrete representative), was immaterial.
Case Law: State of WB v. UOI
Federalism has been watered down The case of West Bengal v Union of India was
landmark in this discussion since it brought to light the usage of sovereign power by
the states of India. The legislative competence of the Parliament to enact a law for
compulsory acquisition of land and other properties vested in or owned by the state
and the sovereign authority of states as distinct entities had been brought into question
and was examined. This case was essential since the court outlined the characteristics,
which highlight the fact that the Indian Constitution is not a “traditional federal
Constitution”, and held that the Indian Constitution did not propound a principle of
absolute federalism. Though the authority was decentralized, this was mainly due to
the arduous task of governing the large territory. It is clear that the distribution of
powers as provided to be a feature of any federal constitution is to facilitate local
governance by the states and national policies to be decided by the Centre. But, this
case recognized that, as against a federal Constitution, which contains internal checks
and balances, the Indian Constitution renders supreme power upon the courts to
invalidate any action violative of the Constitution.
Case Law: Keshvanada Bharti- Federalism is in the Basic Structure
Co-operative federalism Cooperative federalism, also known as marble-cake
federalism, is a concept of federalism in which federal, state, and local governments
interact cooperatively and collectively to solve common problems, rather than making
policies separately but more or less equally. Indian system has this. Examples:
Demarcation of power, Panchayats system.
Legislative Relation
A. Art 245 to 255
a. Art 245- Territorial Separation
The Constitution defines the territorial limits of the legislative powers vested in the
Centre and the states in the following way:
(i) The Parliament can make laws for the whole or any part of the territory of
India. The territory of India includes the states, the union territories, and
any other area for the time being included in the territory of India.
(ii) A state legislature can make laws for the whole or any part of the state. The
laws made by a state legislature are not applicable outside the state, except
when there is a sufficient nexus between the state and the object.
(iii) The Parliament alone can make ‘extra-territorial legislation’. Thus, the
laws of the Parliament are also applicable to the Indian citizens and their
property in any part of the world.
However, the Constitution places certain restrictions on the plenary territorial
jurisdiction of the Parliament. In other words, the laws of Parliament are not applicable
in the following areas:
(i) The President can make regulations for the peace, progress and good
government of the four Union Territories—the Andaman and Nicobar
Islands, Lakshadweep, Dadra and Nagar Haveli and Daman and Diu. A
regulation so made has the same force and effect as an act of Parliament. It
may also repeal or amend any act of Parliament in relation to these union
territories.
(ii) The governor is empowered to direct that an act of Parliament does not
apply to a scheduled area in the state or apply with specified modifications
and exceptions.
 (iii) The Governor of Assam may likewise direct that an act of Parliament does
not apply to a tribal area (autonomous district) in the state or apply with
specified modifications and exceptions. The President enjoys the same
power with respect to tribal areas (autonomous districts) in Meghalaya,
Tripura and Mizoram.

b. Art 246- Subject Matter

The Constitution provides for a three-fold distribution of legislative subjects between
the Centre and the states, viz., List-I (the Union List), List-II (the State List) and List-
III (the Concurrent List) in the Seventh Schedule:
(i) The Parliament has exclusive powers to make laws with respect to any of
the matters enumerated in the Union List. This list has at present 100
subjects (originally 971 subjects) like defence, banking, foreign affairs,
currency, atomic energy, insurance, communication, inter-state trade and
commerce, census, audit and so on.
(ii) The state legislature has “in normal circumstances” exclusive powers to
make laws with respect to any of the matters enumerated in the State List.
This has at present 61 subjects (originally 662 subjects) like public order,
police, public health and sanitation, agriculture, prisons, local government,
fisheries, markets, theatres, gambling and so on.
(iii) Both, the Parliament and state legislature can make laws with respect to
any of the matters enumerated in the Concurrent List. This list has at
present 52 subjects (originally 473 subjects) like criminal law and
procedure, civil procedure, marriage and divorce, population control and
family planning, electricity, labour welfare, economic and social planning,
drugs, newspapers, books and printing press, and others.
The Constitution expressly secures the predominance of the Union List over the State
List and the Concurrent List and that of the Concurrent List over the State List. Thus,
in case of overlapping between the Union List and the State List, the former should
prevail. In case of overlapping between the Union List and the Concurrent List, it is
again the former which should prevail. Where there is a conflict between the
Concurrent List and the State List, it is the former that should prevail. In case of a
conflict between the Central law and the state law on a subject enumerated in the
Concurrent List, the central law prevails over the state law. But, there is an exception.
If the state law has been reserved for the consideration of the president and has received
his assent, then the state law prevails in that state. But, it would still be competent for
the Parliament to override such a law by subsequently making a law on the same
matter.
B. Doctrine of Territorial Nexus
Article 245, clause 1 states, ‘Subject to the provisions of this Constitution, Parliament
may make laws for the whole or any part of the territory of India and the Legislature
of a State may make laws for the whole or any part of the State. Clause 2, states, ‘a
law made by Parliament cannot be held invalid on the ground that it has an extra-
territorial operation.’
The above-mentioned statement implies that State law cannot have extra-territorial
jurisdiction. Thus, the Doctrine of Territorial Nexus originates from the Apex Court’s
interpretation of this particular provision in context with the extra-territorial operation
of a law made by the state government in India.
Explanation: The Doctrine of Territorial Nexus states, that laws that are made by a
particular State Legislature are only applicable in that particular State and not outside
the territorial boundary of that State, except in scenarios where there is a sufficient
nexus between that State and the object. The significance of this can be determined by
the Supreme Court’s observation wherein it has stated that ‘Territorial nexus doctrine,
thus, plays an important part in the assessment of tax. Tax is levied on one transaction
where the operations which may give rise to income make take place partly in one
territory and partly in another.
The question which would fall for consideration is as to whether the income that arises
out of the said transaction would be required to be apportioned to each of the territories
or not. Income arising out of operation in more than one jurisdiction would have
territorial nexus with each of the jurisdiction on an actual basis. If that be so, it may
not be correct to contend that the entire income “accrues or arises” in each of the
jurisdiction.”
Case Law: Governor General v. Raleigh Investment
How can the Doctrine of territorial nexus be established and found sufficient was very
well illustrated in Governor General v. Raleigh Investment Company. In this case the
assessee was a company registered in England. This company held shares in nine
sterling companies of England. Those sterling companies carried on their business in
British India and earned profits. They declared dividends in England and paid to its
shareholders including the assessee company. The assessee was charged income tax
under the Indian Income Tax Act even though it has no business in India. The
circumstances that nine sterling companies derived their income, profits or gains out
of business carried on by them in British India out of which they paid dividends to the
assessee company, was regarded as sufficient nexus so as to fasten the tax liability on
the assessee company.
Case Law: Wallace Brothers and Co. Ltd v. CIT
In the instant case, a company which was registered and incorporated in also which
also carried out its business in India through a sleeping partner. The firm made a
staggering profit in that accounting year. The income tax authorities sought to levy a
tax upon the company of the respondent. The income tax authority was challenged by
the respondent, but it was held by the Privy Council that there existed the doctrine of
territorial nexus and held the tax valid. It is said that the major part of that income was
extracted from British India was the sufficient ground to establish a territorial nexus.
Case Law: TISCO v. State of Bihar
The state of Bihar passed sales tax act for levying a tax in on the sales whether it took
place within the territorial limits of the state or outside of that limit, it was also stated
that the goods should be manufactured in the state. In the instant case, it was held that
there was an established nexus between the object which was to be taxed and the law.
These are the two essential elements that constitute the doctrine of territorial nexus. It
was held that the nexus theory does not impose tax; it only indicates the circumstances
in which a tax imposed by an act may be enforced in a particular case.
Case Law: State of Bombay v. RMDC
In the instant case, the respondent who was not a resident of Bombay conducted a prize
competition of a crossword puzzle through a newspaper which was printed and
published in the Bangalore. This paper was widely published in Bombay to. For this
competition depots were established so that the forms and fees can be collected. It
attracted a lot of buyers for the ticket of that competition. The state government then
levy take over the respondents company for contesting a prize competition in the state.
The respondent challenged the supreme court and a question was raised whether the
tax can be levied upon a person who resides outside the territorial limits of the state. It
was held by the supreme court that there was a sufficient territorial nexus and the
legislature has the authority to tax the respondent for the revenue earned by his
company through the prize competition.
Circumstances where parliament can make legislations in the State
1. Rajya Sabha passing a Resolution- Art 249
If the Rajya Sabha declares that it is necessary in the national interest that
Parliament should make laws on a matter in the State List, then the Parliament
becomes competent to make laws on that matter. Such a resolution must be
supported by two-thirds of the members present and voting. The resolution
remains in force for one year; it can be renewed any number of times but not
exceeding one year at a time. The laws cease to have effect on the expiration
of six months after the resolution has ceased to be in force. This provision does
not restrict the power of a state legislature to make laws on the same matter.
But, in case of inconsistency between a state law and a parliamentary law, the
latter is to prevail.
2. During National Emergency- Art 250
The Parliament acquires the power to legislate with respect to matters in the
State List, while a proclamation of national emergency is in operation. The
laws become inoperative on the expiration of six months after the emergency
has ceased to operate. Here also, the power of a state legislature to make laws
on the same matter is not restricted. But, in case of repugnancy between a state
law and a parliamentary law, the latter is to prevail.
3. With Consent of State- Art 252
When the legislatures of two or more states pass resolutions requesting the
Parliament to enact laws on a matter in the State List, then the Parliament can
 make laws for regulating that matter. A law so enacted applies only to those
states which have passed the resolutions. However, any other state may adopt
it afterwards by passing a resolution to that effect in its legislature. Such a law
can be amended or repealed only by the Parliament and not by the legislatures
of the concerned states. The effect of passing a resolution under the above
provision is that the Parliament becomes entitled to legislate with respect to a
matter for which it has no power to make a law. On the other hand, the state
legislature ceases to have the power to make a law with respect to that matter.
The resolution operates as abdication or surrender of the power of the state
legislature with respect to that matter and it is placed entirely in the hands of
Parliament which alone can then legislate with respect to it. Some examples of
laws passed under the above provision are Prize Competition Act, 1955; Wild
Life (Protection) Act, 1972; Water (Prevention and Control of Pollution) Act,
1974; Urban Land (Ceiling and Regulation) Act, 1976; and Transplantation of
Human Organs Act, 1994.
4. Art 253- International treaty
The Parliament can make laws on any matter in the State List for implementing
the international treaties, agreements or conventions. This provision enables
the Central government to fulfil its international obligations and commitments.
Some examples of laws enacted under the above provision are United Nations
(Privileges and Immunities) Act, 1947; Geneva Convention Act, 1960; Anti-
Hijacking Act, 1982 and legislations relating to environment and TRIPS.
5. During President’s Rule Art 357 r/w 356
When the President’s rule is imposed in a state, the Parliament becomes
empowered to make laws with respect to any matter in the State List in relation
to that state. A law made so by the Parliament continues to be operative even
after the president’s rule. This means that the period for which such a law
remains in force is not co-terminus with the duration of the President’s rule.
But, such a law can be repealed or altered or re-enacted by the state legislature.
Distribution of Powers and Centralizing Tendencies
1. State list and Union List
The Union-State relations in the legislative domain have been dealt by Articles 245 to
254. The Constitution evidently provides that the Parliament shall have special
authority to make law for the whole or any part of the terrain of India with regard to
subjects mentioned in the Union List. This list contains topics like defence, foreign
affairs, currency, union duties, and communication. On the other hand, the State has
exclusive power over the 66 items enumerated in the State List. This List comprises of
topics like public order, health, sanitation, agriculture etc. Additionally, there is a
Concurrent list containing 47 subjects like criminal law and procedure, marriage,
contracts, trust, social insurance etc. over which both the Union and the State
Governments can legislate.
However, Center has been given an upper hand:
 • If the law of the Union Government and the State Government clash with each
other, the former succeeds.
• However, a State law on the simultaneous list shall prevail over the Central law
if the same had been reserved for the consideration of the President and his
consent had been received before the representation of the Central law on the
same subject. This clearly gives some flexibility to the States.
• The constitution also vests the residuary powers (viz., the enumerated in any
of the three Lists) with the Central Government.
• It is established that in this distribution of powers, the Union Government has
positively been given a preferred treatment. It has not only been granted more
extensive powers than the States, even the residuary powers have been granted
to it contrary to the convention in other federations of the world, where the
residuary powers are given to the States.

2. Doctrine of Repugnancy
It is Article 254 of the Constitution of India that firmly entrenches the Doctrine of
Repugnancy in India. According to Black’s Law Dictionary, Repugnancy could be
defined as “an inconsistency or contradiction between two or more parts of a legal
instrument (such as a statute or a contract).
Article 254 has been beautifully summarized by the Supreme Court in M. Karunanidhi
v. Union of India. The court said that:
• Where the provisions of a Central Act and a State Act in the Concurrent List
are fully inconsistent and are absolutely irreconcilable, the Central Act will
prevail and the State Act will become void in view of the repugnancy.
• Where however a law passed by the State comes into collision with a law
passed by Parliament on an Entry in the Concurrent List, the State Act shall
prevail to the extent of the repugnancy and the provisions of the Central Act
would become void provided the State Act has been passed in accordance with
clause (2) of Article 254.
• Where a law passed by the State Legislature while being substantially within
the scope of the entries in the State List entrenches upon any of the Entries in
the Central List, the constitutionality of the law may be upheld by invoking the
doctrine of pith and substance if on an analysis of the provisions of the Act it
appears that by and large the law falls within the four corners of the State List
and entrenchment, if any, is purely incidental or inconsequential.
• Where, however, a law made by the State Legislature on a subject covered by
the Concurrent List is inconsistent with and repugnant to a previous law made
by Parliament, then such a law can be protected by obtaining the assent of the
President under Article 254(2) of the Constitution. The result of obtaining the
assent of the President would be that so far as the State Act is concerned, it will
prevail in the State and overrule the provisions of the Central Act in their
applicability to the State only.
Case Law: Tika Ramji v. State of UP
There are certain conditions operating on which the Parliament may repeal a state law,
by enacting a subsequent legislation. These conditions are that; there must already be
central law on a matter in the concurrent list, the state law then enacted a subsequent
legislation on the same matter which was inconsistent with the central law and the state
law then received the assent of the Parliament. This was stated by the Supreme Court
in the case of Tika Ramji v. State of Uttar Pradesh, where it interpreted the proviso to
Article 254(2). In this case, the parliament enacted a law subsequent to a state law in
Uttar Pradesh, regulating the supply and purchase of sugarcane. The Supreme Court
held that the Parliament could not repeal a state law if it was not repugnant to an earlier
central law or if there was no parliamentary law already in existence prior to the
enactment of the parliamentary law on that matter. However, in the case of
repugnancy, the parliamentary law would prevail to the extent of repugnancy. It was
also pointed out that the power to repeal a state law could not be delegated by the
Parliament to any executive authority.
Case Law: ITC v Agriculture Produce Market Comm In ITC
Ltd. v. Agricultural Produce Market Committee AIR 2002 SC 852, the Supreme Court
found a direct inconsistency between an Act enumerated by the Centre and an Act
enacted by the State. So, the Court held that there is no chance of allowing the
functioning of both the laws. In the given instance, the law made by the Centre prevails
over the law made by the State. The contradiction of such laws arises during the
application of it. There will be a disagreement in the legal results when the statutes
made regarding the same subject matters are applied.
Rules of Judicial Interpretation in Center State Legislative Relations
1. Doctrine of Pith and Substance
Unfolding the meaning of the doctrine, it can be stated that Pith and Substance denotes
the true nature of law. The doctrine places emphasis on the fact that it is the real subject
matter which is to be challenged and not its incidental effects on another field. Pith
denotes the ‘essence of something’ or the ‘true nature’, while substance states ‘the
most significant or essential part of something’. Hence, it can be stated that the very
doctrine of pith and substance relates to finding out the true nature of a statute.
Case Law: F. N Balsara Case
This case acquires quite a lot of importance as it was the first case which upheld the
doctrine of Pith and Substance in India.
Facts- The sale and possession of liquor was restricted in the state of Maharashtra by
way of the then existing Bombay Prohibition Act and this Act was challenged on the
matter that there was an incidental encroachment on the act of importing and exporting
of liquor through the borders. This matter was taken up by the High Court of Bombay
and the following was held.
Significance of the Doctrine in the judgment– The court gave out the judgment stating
that the act was in its Pith and Substance and rightfully fell under the State list even
though such an act was said to have a bearing on the import of liquor in the state.
2. Harmonious Construction
Unfolding the meaning of the doctrine, it can be stated that Pith and Substance denotes
the true nature of law. The doctrine places emphasis on the fact that it is the real subject
matter which is to be challenged and not its incidental effects on another field. Pith
denotes the ‘essence of something’ or the ‘true nature’, while substance states ‘the
most significant or essential part of something’. Hence, it can be stated that the very
doctrine of pith and substance relates to finding out the true nature of a statute. The
rule of harmonious construction is the thumb rule to interpretation of any statute. An
interpretation which makes the enactment a consistent whole, should be the aim of the
Courts and a construction which avoids inconsistency or repugnancy between the
various sections or parts of the statute should be adopted.
Case Law: Tika Ram Ji v. State of UP
In the instant case the vires of U.P. Sugarcane (Regulation of Supply and Purchase)
Act, 1953 was involved. It was contended that sugarcane being ‘controlled’ industry
fall within the jurisdiction of the Union List by virtue of Entry 52 of List I falls within
the legislative purview of Parliament. The Supreme Court, therefore, had to explain
the Inter-relation between Entries 52 of List I, 24 and 27 of List II and 33 of List III.
Entry 24 of List II and 52 of List I establish that except ‘controlled’ industries, the
industries generally fells within the State Sphere. Entry 27 of List II gives power to
State to regulate the production, supply and distribution of ‘goods’ subject to
provisions of Entry 33 of List III. The sugar industry being controlled industry, the
distribution, supply and production of the product of this controlled industry viz. Sugar
as a finished product, would fall within the legislative jurisdiction of the both Central
and State Legislature by virtue of Entry 33of list III. But, by virtue of Entry 27 of List
II, the sugarcane would be within the State’s jurisdiction because sugarcane can be
regarded as raw material for sugar industry. Dealing of sugarcane under the term
‘goods’ in Entry 27 of List II, by the U.P. Act Sugarcane (Regulation of Supply and
Purchase) Act, 1953, was held valid.
3. Rule of Broad and Progressive Interpretation
This rule made it possible to interpret the Constitution in a way that will reflect the
changing needs of the society at large, rather interpreting it only in a constricted
manner.
Case Law: International Tourist Co v. State of Haryana
The Supreme Court held that where the competing entries are an entry in List II and
entry 97 of List I the entry in the State List must be given a broad and plentiful
interpretation and should not be interpreted in favour of Centre by resorting to the
residuary power. The residuary power cannot be so expansively interpreted as to
whittle down the power of the State Legislature. That might affect and jeopardise the
federal principle. The resort to the residuary power should be the last refuge. In the
instant case the appellants challenged the validity of Section 3 of the Haryana
Passenger and Goods Taxation Act, 1952, which permitted the levy of tax on passenger
and goods carried on by carriages plying on the National Highways. • Entry 56 of List
II empowers the State to levy taxes on goods and passengers carried on by road or on
inland waterways. • It was contended that the State Legislature was incompetent to
levy such a tax on motor vehicles plying on National Highways. The Court rejected
this argument and held that the State Legislature is competent to levy taxes on
passengers and goods carried in the National Highways under Entry 56 of List II. The
Court held that before exclusive legislative competence can be claimed for Parliament
by resorting to the residuary power, the legislative incompetence of the State
Legislature must be clearly established. Entry 97 itself is specific that a matter can be
brought under that Entry only if it is not enumerated in List II or List III.
4. Rule of Colorable Legislation
The doctrine of colorable legislation is based on the maxim that what cannot be done
directly cannot also be done indirectly. The doctrine becomes applicable when a
legislature seeks to do something in an indirect manner when it cannot do it directly.
Case Law: Yashpal v. State of Chhattisgarh
The apex court had then observed that unregulated establishment of private
universities would be detrimental to advancement of knowledge, bring down quality
of education and make degrees awarded by such universities worthless, thereby
frustrating the very purpose of establishing a regulatory body such as the UGC.
5. Rule of Incidental and Ancillary Powers
The doctrine of ancillary and incidental powers extends the field of the legislative
power. It states that the power to legislate contains within it the power to legislate on
ancillary or incidental matters. These powers are meant to aid the main object of the
concerned enactment. This doctrine provides for a wide and liberal interpretation of
the entries in the three legislative lists.
Case Laws: R D Joshi v Ajith Mills Ltd.
The question was whether the State legislature had the power to enact a law that
allowed it to forfeit the sum collected by dealers as sales tax. The Court held that this
was a punitive measure for the proper and effective enforcement of social legislation.
It further held that the entries must be given a wide meaning to also contain the
ancillary and incidental powers.
6. Doctrine of Repugnancy
As mentioned about.
Case Law: Vijaya Kumar Sharma v. State of Karnataka
However, the broad majority of decided cases, as illustrated by the decision of the
three judge bench of the Supreme Court in Vijay Kumar Sharma v. State of Karnataka,
have favoured the view that the inconsistency must arise in relation to matters in the
Concurrent list. The court has declared that the question of repugnancy will arise only
if one Act has been enacted by the Parliament and the other by the State and both the
fields refer to subjects in List III. The question of repugnancy will not arise if the
Parliament has enacted two separate Acts, one under the Central and the other under
the Concurrent List.
Case Law: Zaverbhai Amaidas v. State of Bombay
The Supreme Court observed the words with respect to that matter are of great
importance in the Article 254(2). It stated that the important thing to consider was
whether the legislation was in respect to the same matter. If the later legislation deals
with a matter which is distinct from the subject of the earlier legislation but is of a
cognate and allied character, then Article 254(2) will have no application.
Administrative Relations
One of the complicated problems under a federal system is the adjustment of
administrative relations between the Union and the States. Administration is the direct
consequence of legislation and without administrative machineries for implementing
laws; the laws are of no importance. So our Constitution provides detailed provisions
to avoid clashes between the Union and States in the administrative field. Article 256
to Article 263 deal with the Union control over States in normal times.
Direction by the Centre to the States- According to Article 256 the executive power of
the State shall be exercised ensuring compliance with the laws made by the Parliament
and the executive power of the Union shall extend to the giving of such directions to
the State as it may be essential for the purpose. Article 257 says that the States have to
exercise their executive power in a way by which they do not impede the executive
power of the Union in the State. The powers of the Central Government extend to
giving directions to the State regarding the construction and maintenance of means of
communication which are declared to be of national or military importance and
measures to be taken for the protection of railway within the States.
Delegation of Union’s function to the States- Article 258 says that the Parliament may
entrust either conditionally or unconditionally to the Government or to its offices
functions relating to any matter falling within the executive powers of the Union, with
the consent of the State Government, with the consent of the State Government. The
Parliament under the second clause is empowered to use the State machinery for the
enforcement of Union laws and for this purpose may confer power or impose duties
upon the State or its officers or authorities in respect of these matters to see that the
laws are made applicable to the State.
Financial Relations
Article 264-291 throw light on the financial relations between the Centre and the State.
Article 265 provides that no tax can be levied or collected except by authority of law.
Article 268 deals with the distribution of Revenue between the Union and the States.
The Centre has exclusive jurisdiction over the taxes mentioned in the Union List and
the States have exclusive jurisdiction over the taxes mentioned in the State List and no
taxes have been mentioned in the Concurrent List. The following categories of the
Union taxes are wholly or partially assigned to the States:
• Article 268 says that stamp duties and duties of excise on medicinal and toilet
preparations included in the Union List shall be levied by the Union
Government but are collected by the States within which such duties are being
levied. The States are assigned with the proceeds of such duties.
• According to Article 268A the Union has the power to levy service taxes which
shall be collected and appropriated by the Union and the State according to the
principles formulated by the Parliament by law.
• According to Article 269(1) the taxes on sale or purchase of goods and taxes
on the assignment of goods shall be levied and collected by the Government of
India. It shall be assigned and shall be considered to be assigned to the States
on or after April1, 1996 in the way prescribed by the Parliament by law.
According to Article 269(2) says that the net proceeds in any financial year of
any such tax except in so far as those proceeds represent proceeds attributable
to Union territories, shall not form part of the Consolidated Fund of India; but
shall be assigned to the States within which tax is being levied in that year. It
shall be distributed among those States according to the principles of
distribution as may be prescribed by Parliament by law.
• Article 270 mentions that all taxes and duties referred to in the Union List,
except the duties and taxes referred to in Article 271 and any cess levied for
specific purpose under any law made by the Parliament shall be levied and
collected by the Government of India and be distributed between the Union
and the States in the way provided by the Parliament.
• Article 271 says that if the Parliament at any time increases any of the duties
or taxes provided under Article 269 and Article 270 by imposing a surcharge,
the entire proceeds of such surcharge shall form part of the Consolidated Fund
of India.
• The States receive Grants-in aid from the Centre. Under Statutory grants, the
grants are given to States which require assistance. The grants are given out of
the Consolidated Fund of India. Article 275 provides Specific grants for the
welfare of schedule tribes in a State and to improvise their administrative level.
Article 282 facilitates providing of certain grants to the States on the
recommendations of the Planning Commission at the discretion of the Union
Government. Such grants are known as Discretionary Grants.
The Finance Commission- Article 280 deals with the establishment of a Finance
Commission. It is established by the President within 2 years from the commencement
of the Constitution and after that at the expiration of every 5th year or earlier as is
considered necessary. The Commission includes a Chairman and 4 other members who
are appointed by the President.
Exemption of Union Property from State Taxation- According to Article 285(1) the
Union property shall be exempt from all taxes imposed by a State or any authority
within a State unless otherwise provided by the Parliament. Article 285(2) saves the
power of the State to tax the property of the Union which were taxable by a State under
a law passed before the commencement of the Constitution, until it is otherwise
provided by the Parliament.
Exemption of State property or income from Union Taxation- Under Article 289 the
property and the income of a State is exempted from Union Taxation but the
Parliament can impose tax relating to trade or business of any kind which is carried by
or on behalf of the Government of a State. Under Clause 3 of Article 289 the
Parliament may by law exempt any class of business incidental to ordinary functions
of Government from Union taxation. According to Article 285 the Centre’s property
is exempted from all State taxes whether it is used for commercial purposes or
governmental purpose. However, such exemption is not available to the State property.
Case Law: State of West Bengal v. Union of India
In this case, it was held that the Indian Constitution is not truly federal. The States are
given the matters of local importance and the other powers specially which deal with
the economic, industrial and commercial unity is with the Union.
Case Law: State of Karnataka vs. Union of India
The Court held that the Constitution of India is not federal but is quasi-federal in
nature. The executive and legislative powers are more in the hands of the Centre.
Case Law: S.R. Bommai v. Union of India
In this case, Justice Ahmadi held that the Indian Constitution is quasi-federal as the
word ‘federal’ is not mentioned anywhere in the Constitution. Justice Sawant and
Kuldip Singh held that federalism is an essential feature of the Constitution. According
to Justice Ramaswamy the Indian Constitution is an ‘Organic Federation’. According
to Justice Jeevan Reddy and Justice Agarwal federalism in the Constitution has a
different meaning in accordance with the context.
Proper distribution of powers between the Centre and the States is an important feature
of a Federal Constitution. The makers of the Constitution have divided the powers well
in order to avoid clashes between the Centre and the States. However, it appears that
the framers of the Constitution have allocated more powers to the Centre and made it
stronger.