What did Section 8(2)(b) of the CST Act do?

It pegged inter-State tax on non-declared goods at the higher of a fixed rate or the local intra-State rate for such goods in the relevant State.

Was this excessive delegation to States?

No. Parliament itself chose the standard and could amend or repeal it; States did not get new law-making power over CST through this clause.

Why did Parliament adopt State rates?

To deter tax evasion and prevent discrimination between local and inter-State sales of the same goods.

Did Parliament abdicate its legislative function?

No. Because Parliament set the rule and retained control to change it; hence no abdication.

What was the final outcome?

The Supreme Court upheld Section 8(2)(b) as constitutional and dismissed the challenge.

Gwalior Rayon Silk Manufacturing v. Assistant Commissioner of Sales Tax (AIR 1974 SC 1660)

Quick Summary

The Supreme Court upheld Section 8(2)(b) of the Central Sales Tax Act, 1956. Parliament did not hand over its law-making power to States. It simply chose a benchmark: inter-State tax on some goods should be at least the State’s own local rate (or a fixed rate), whichever is higher. This policy checks evasion and avoids discrimination between local and inter-State sales.

Issues

Does Section 8(2)(b) suffer from excessive delegation?
Did Parliament abdicate its function by adopting State intra-State rates for inter-State sales?

Rules

Section 8(2)(b) CST Act: For inter-State sales (other than declared goods not under 8(1)), tax = higher of the prescribed fixed rate or the applicable intra-State rate in the relevant State.
Delegation principle: Parliament may use adoption by reference or external standards if it sets the policy and keeps power to amend/repeal.

Facts (Timeline)

1956: Parliament enacts the Central Sales Tax Act; Section 8(2)(b) links inter-State tax to State local rates (or fixed rate), whichever is higher.

High Court: Challenge on excessive delegation fails; provision upheld.

Supreme Court: Appeal questions if Parliament abdicated by adopting State rates for inter-State sales.

Timeline: CST Act, High Court decision, Supreme Court upholding Section 8(2)(b)

Arguments

Petitioners

Section 8(2)(b) lets State legislatures dictate inter-State tax rates → excessive delegation.
Parliament has abdicated by tying CST to State rate changes.

State/Union

Parliament set the policy and standard itself—no power was delegated.
The design prevents rate shopping, evasion, and discrimination between local and inter-State sales.

Judgment

Provision upheld. The Supreme Court held that Parliament did not delegate power to States through Section 8(2)(b).

Parliament fixed the inter-State rate by linking it to an objective standard (the State’s own intra-State rate) to achieve a clear purpose: check evasion and avoid discrimination.
Since Parliament can amend or repeal the clause, there is no abdication of legislative function.

Judgment visual: Parliament set policy; States did not receive CST law-making power

Ratio Decidendi

Adopting State rates as a yardstick for CST is a legislative choice by Parliament, not a hand-over of power. The clause pursues legitimate aims—anti-evasion and non-discrimination—and remains under Parliament’s control.

Why It Matters

Clarifies when adoption by reference is valid in fiscal laws.
Supports uniformity and fairness in inter-State taxation.
Shows how Parliament can use external standards without losing control.

Key Takeaways

Point	Quick Note
No excessive delegation	Parliament set the rule and purpose; States didn’t get CST power.
Higher-of rule	Inter-State rate is the fixed rate or State local rate, whichever is higher.
Policy goals	Stop evasion and ensure non-discrimination across sales channels.
Parliament’s control	Ability to amend/repeal defeats “abdication” claims.

Mnemonic + 3-Step Hook

Mnemonic: “HIGHER-of TWO keeps CST TRUE.”

Ask: Inter-State sale of non-declared goods?
Compare: Fixed CST rate vs that State’s local rate.
Apply: Use whichever is higher—no evasion, no bias.

IRAC Outline

Issue: Is Section 8(2)(b) unconstitutional for excessive delegation/abdication?

Rule: Delegation valid if Parliament sets policy/standard and retains control; adoption by reference may be used.

Application: Parliament fixed the higher-of benchmark to prevent evasion and discrimination; no power was shifted to States.

Conclusion: Section 8(2)(b) is valid; appeal fails.

Glossary

CST Act, 1956: Law governing tax on inter-State sales in India.
Declared Goods: Goods of special importance with distinct CST treatment.
Excessive Delegation: When legislature hands over core law-making without clear policy/limits.

FAQs

No. It only uses the State’s local rate as a reference. CST remains a parliamentary law.

To stop dealers from routing sales across borders just to pay less tax, and to treat local and inter-State sales fairly.

Yes. Parliament kept full power to amend or repeal—hence no abdication.

Case Meta

CASE_TITLE	GWALIOR RAYON SILK CO. V. THE ASSISTANT COMMISSIONER OF SALES TAX (AIR 1974 SC 1660)
PRIMARY_KEYWORDS	Section 8(2)(b) CST Act; excessive delegation; inter-State sales tax; higher-of rule
SECONDARY_KEYWORDS	adoption by reference; non-discrimination; tax evasion; constitutional validity
PUBLISH_DATE	23 Oct 2025
AUTHOR_NAME	Gulzar Hashmi
LOCATION	India
Slug	gwalior-rayon-silk-manufacturing-v-assistant-commissioner-of-sales-tax-air-1974-sc-1660