Introduction

The case of Union of India vs. M/S G.S. Chatha Rice Mills, decided by the
Supreme Court of India in 2020, is a significant judgment that highlights
the nuances of administrative law and the complex interplay between the
powers of the executive and the judiciary. This case deals with the issue of
delegated legislation and the extent of judicial review over such
administrative actions.

The central question before the Supreme Court was whether the Customs
Notification issued by the Central Board of Indirect Taxes and Customs
(CBIC) was ultra vires the parent statute, the Customs Act, 1962. The court
was tasked with examining the scope of the executive's power to issue
subordinate legislation and the grounds on which such delegated legislation
can be struck down by the judiciary.
Factual Background

The Central Government, through the CBIC, issued a Customs Notification

in 2018 which imposed an export duty on certain varieties of non-basmati
rice. The notification was issued under the powers granted to the executive
by Section 11 of the Customs Act, 1962.

M/S G.S. Chatha Rice Mills, a rice exporting company, challenged the
validity of this Customs Notification before the Punjab and Haryana High
Court. The primary contention of the rice mill was that the Notification was
ultra vires the parent statute, as it went beyond the scope of the power
granted to the executive under Section 11.

The High Court upheld the validity of the Notification, following which the
rice mill appealed to the Supreme Court.

Issues before the Supreme Court

1. Whether the Customs Notification issued by the CBIC imposing export

duty was within the scope of the power granted under Section 11 of the
Customs Act, 1962.
2. The extent of judicial review available over delegated legislation issued by
the executive.
Arguments
Arguments made by M/S G.S. Chatha Rice Mills (the rice exporting
company):

1. Lack of legislative competence: The rice mill argued that the Customs
Notification issued by the CBIC was ultra vires the parent statute, the
Customs Act, 1962. They contended that the power to impose an export
duty was not within the scope of the executive's authority under Section 11
of the Act.

2. Arbitrary exercise of power: The rice mill claimed that the Notification was
manifestly arbitrary, as it did not follow any intelligible differentia or rational
basis in determining the applicable export duty rates.

3. Violation of principles of natural justice: The rice mill argued that the
Notification was issued without providing the stakeholders a reasonable
opportunity to be heard, thereby violating the principles of natural justice.

4. Overreach of executive's powers: The rice mill asserted that the broad and
expansive interpretation given to Section 11 by the CBIC amounted to an
overreach of the executive's delegated powers. They argued that the courts
should adopt a restrictive reading of such enabling provisions to curb the
arbitrary exercise of authority by the administration.

Arguments made by the Union of India (the government):

1. Broad scope of Section 11: The government defended the Customs

Notification by arguing that the power to impose export duty falls squarely
within the ambit of Section 11, which grants the executive broad powers to
"prohibit, restrict or otherwise regulate" exports.

2. Deference to executive's policy choices: The government contended that

the courts should exercise judicial restraint and not interfere with the policy
decisions of the executive, as long as they are relatable to the objectives of
the parent statute.

3. Need for administrative flexibility: The government emphasized that in the

modern regulatory state, it is essential to grant the executive a certain
degree of flexibility and discretion in issuing subordinate legislation. A
restrictive interpretation of such enabling provisions would hamper the
effective functioning of the administration.

4. Presumption of constitutionality: The government argued that there is a

presumption in favor of the constitutionality of delegated legislation, and the
onus is on the challenger to establish that it is ultra vires the parent statute
or unconstitutional.

5. Procedural fairness: While defending the Notification, the government

conceded that principles of natural justice and due process must be followed
by the executive in issuing such subordinate legislation.
The Supreme Court's Analysis and Findings

The court observed that the power to levy duties is primarily a legislative
function, which has been delegated to the executive under Section 11 of the
Customs Act. The provision empowers the Central Government to prohibit,
restrict or otherwise regulate, the export of goods from India.

The Supreme Court held that the power to impose an export duty falls
within the scope of Section 11, as it is a form of regulation of exports. The
court relied on the expansive language used in the statute, which grants the
executive broad powers to regulate exports "in any manner".

Furthermore, the court noted that the Customs Act does not prescribe any
specific procedures or conditions that must be fulfilled before issuing such a
Notification. As long as the Notification is relatable to the objective of
regulating exports, it would be considered intra vires the parent statute.

On the second issue of judicial review, the Supreme Court reiterated the
well-established principle that the courts can examine the validity of
delegated legislation on limited grounds. These include:
1. Lack of legislative competence of the delegating authority
2. Violation of fundamental rights
3. Manifest arbitrariness
4. Lack of procedural fairness

The court held that the judiciary cannot delve into the wisdom or policy
merits of the executive's decision, as long as it is within the framework of
the parent statute.

Applying these principles, the Supreme Court upheld the validity of the
Customs Notification. It found that the Notification was issued pursuant to
the powers granted under Section 11, and did not suffer from any of the
grounds for judicial review.

The court emphasized that the executive's power to issue subordinate

legislation should be given a broad and liberal interpretation, as long as it is
relatable to the objectives of the parent statute. It cautioned against the
judiciary substituting its own views over the policy choices of the executive.

Jurisprudential Analysis

The judgment in Union of India vs. M/S G.S. Chatha Rice Mills contributes
significantly to the jurisprudence on delegated legislation and the scope of
judicial review in administrative law.

Firstly, the case reaffirms the principle of separation of powers between the
legislature, executive and judiciary. It underscores the need to maintain the
delicate balance between these organs of the state, by according due
deference to the policy decisions of the executive.

The Supreme Court's observation that the judiciary cannot delve into the
"wisdom or policy merits" of delegated legislation is a clear acknowledgment
of the limited role of courts in reviewing administrative actions. This
approach is in line with the doctrine of "judicial self-restraint", which
cautions against the judiciary overstepping its bounds and encroaching on
the domain of the executive.

Secondly, the judgment provides valuable insights into the interpretation of

enabling statutes that empower the executive to issue subordinate
legislation. The court's expansive reading of Section 11 of the Customs Act
highlights the importance of avoiding a narrow, pedantic interpretation of
such provisions.

By holding that the power to impose export duty falls within the scope of
"regulating exports", the Supreme Court has adopted a pragmatic and
purposive approach to statutory interpretation. This aligns with the
principle that delegated legislation should be construed liberally to
effectuate the objectives of the parent statute.

Thirdly, the case underscores the limited grounds available for judicial
review of delegated legislation. The court has reiterated that the courts can
only examine the legality and constitutionality of such administrative
actions, and not their merits or wisdom.

This approach is crucial in maintaining the delicate balance between the

executive's policy-making function and the judiciary's role as the guardian
of the Constitution and the rule of law. It prevents the courts from
substituting their own views over the policy choices of the democratically
elected government.

Furthermore, the judgment highlights the importance of procedural fairness

in the exercise of delegated powers. While the court upheld the Customs
Notification, it emphasized that the executive must follow due process and
ensure that the stakeholders are granted a reasonable opportunity to be
heard.

This aspect of the judgment is significant, as it recognizes that even in the

realm of policymaking, the principles of natural justice and procedural
fairness cannot be overlooked.

Lastly, the case has implications for the broader discourse on the legitimacy
of delegated legislation. By affirming the validity of the Customs Notification,
the Supreme Court has reinforced the position that the executive's power to
issue subordinate legislation is an essential feature of modern governance.

The judgment acknowledges that in an increasingly complex regulatory

environment, it is often necessary for the legislature to delegate certain
powers to the executive. As long as such delegated legislation remains
within the contours of the parent statute, the courts should be reluctant to
interfere.

Conclusion

The Supreme Court's judgment in Union of India vs. M/S G.S. Chatha Rice
Mills is a significant contribution to the jurisprudence on delegated
legislation and administrative law in India. The case underscores the
importance of maintaining the balance between the executive's policymaking
function and the judiciary's role as the guardian of the Constitution.

By adopting a pragmatic and deferential approach towards the executive's

exercise of delegated powers, the court has upheld the principle of
separation of powers and the legitimate role of administrative agencies in
modern governance. The judgment also emphasizes the need for procedural
fairness and adherence to due process, even in the realm of policymaking.

Overall, the case serves as a valuable precedent that will guide the courts in
navigating the complex interplay between the executive and the judiciary in
the domain of delegated legislation.