Back
SUPREME COURT OF INDIA
13th December, 1960
S. JAFER IMAM, J.L. KAPUR, K.C. DAS GUPTA, RAGHUBAR DAYAL AND N. RAJAGOPALA AYYANGAR JJ.
Diamond Sugar Mills Ltd. and another, Appellants
Versus
State of U.P. and another, Respondents.
Civil Appeal No. 35 of 1959.
Advocates appeared
Mr. H. N. Sanyal, Additional Solicitor General of India, M/s. J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, Advocates of M/s. R. N. and Co. with him, for Appellants; M/s. G. C. Mathur and C. P. Lal, Advocates, for Respondents.
TAXATION - Entry of goods into local area for consumption, use or sale therein - Meaning of local area - Whether premises of a factory is a local area - U. P. Sugarcane Cess Act, 1956 (U. P. Act XXII of 1956), S. 3.
Fact of the Case:
The appellant, a sugar factory, challenged the imposition of cess on the entry of sugarcane into their factory. The cess was imposed under the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P. Act No. XXIV of 1953), which was later repealed and replaced by the U. P. Sugarcane Cess Act, 1956 (U. P. Act No. XXII of 1956). The appellant contended that S. 20 of Act XXIV of 1953 was unconstitutional and invalid as it was beyond the legislative competence of the State Legislature.
Finding of the Court:
The Court held that the premises of a factory is not a "local area" within the meaning of Entry 52 of the State List in the Seventh Schedule to the Constitution. The Court further held that S. 3 of the U. P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the entry of sugarcane into the premises of a factory did not fall within Entry 52 of the State List. As there was no other Entry in either State List or concurrent List in which the impugned law could fall, the Court held that the law was beyond the legislative competence of the State Legislature and must be struck down as invalid.
Issues: 1. Whether the premises of a factory is a "local area" within the meaning of Entry 52 of the State List in the Seventh Schedule to the Constitution? 2. Whether S. 3 of the U. P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the entry of sugarcane into the premises of a factory falls within Entry 52 of the State List?
Ratio Decidendi: 1. The Court held that the word "local area" in Entry 52 of the State List in the Seventh Schedule to the Constitution means an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like. The premises of a factory is therefore not a "local area". 2. The Court held that S. 3 of the U. P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the entry of sugarcane into the premises of a factory did not fall within Entry 52 of the State List. As there was no other Entry in either State List or concurrent List in which the impugned law could fall, the Court held that the law was beyond the legislative competence of the State Legislature and must be struck down as invalid.
Final Decision: The Court allowed the appeal, set aside the order passed by the High Court and ordered the issue of a writ directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954-55 and in respect of the crushing season 1955-56 and successive crushing seasons under the U. P. Sugarcane Cess Act, 1956.
Judgment
DAS GUPTA, J. (for himself and S. J. Imam, J. L. Kapur and Dayal JJ.) : This appeal is against an order of the High Court of Judicature at Allahabad rejecting the appellants application under Art. 226 of the Constitution. The first appellant is the Diamond Sugar Mills Ltd., a public limited company owing and operating a sugar factory at Pipraich in the District Gorakhpur, for the manufacture of sugar from sugarcane. The second appellant is the Director of the company. By this application the appellants challenged the imposition of cess on the entry of sugarcane into their factory. On February 24, 1956, when the application was made the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P. Act No. XXIV of 1953), was in force. Section 20 of this Act gave to the Governor of U. P. the power to impose by notification "a cess not exceeding 4 annas per maund on the entry of sugarcane into an area specified in such notification for consumption, use or sale therein". This Act it may be mentioned had taken the place of an earlier Act, the U. P. Sugar Factories Control Act, 1938, S. 29 of which authorised the Governor of U. P. to impose by a notification after consultation with the Sugar Control Board under the Act "a cess not exceeding 10 per cent of the minimum price, if any fixed under S. 21 or 4 annas per maund whichever was higher on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein." Notifications were issued under this provision for different crushing seasons starting from 1938-39, the last notification issued thereunder being for the crushing season of 1952-53. These notifications set out a number of factories in a schedule and provided that during 1952-53 crushing season cess at a rate of three annas per maund shall be levied on the entry of all sugarcane into the local areas comprised in factories mentioned in the schedule for consumption, use or sale therein. Act No. XXIV of 1953 repealed the 1938 Act. The first notification under the provisions of S. 20 of the 1953 Act was in these terms :-
"In exercise of the powers conferred by sub-section (1) of S. 20 of Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P. Act No. XXIV of 1953) the Governor is pleased to declare that during the 1954-55 crushing season, a cess at the rate of three annas per maund shall be levied on the entry of all sugarcane into the local areas comprised in the factories mentioned in the Schedule, for the consumption, use or sale therein."
Similar notifications were also issued on October 23, 1954, for the crushing season 1954-55 and on November 9, 1955, for the crushing season 1955-56. The appellants factory was one of the factories mentioned in the schedule of all these notifications. On the date of the application, i. e., February 24, 1956, a sum of Rs. 2,59,644/9/- was due from the first appellant and a further sum of Rs. 2,41,416/3/- as liability on account of cess up to the end of January, 1956, also remained unpaid.
2. The appellant contended on various grounds that S. 20 of Act XXIV of 1953 was unconstitutional and invalid and prayed for the issue of appropriate writs directing for respondents the State of U. P. and the Collector of Gorakhpur not to levy and collect cess on account of the arrears of cess for the crushing season 1954-55 and in respect of the crushing season 1955-56 and successive crusing season and to withdraw the notifications dated October 23, 1954, and November 9, 1955, which have been mentioned above.
3. During the pendency of this application under Art. 226 before the Allahabad High Court the U. P. Legislature enacted the U. P. Sugarcane Cess Act, 1956 (U. P. Act No. XXII of 1956), repealing the 1953 Act. Section 3 of this Act as originally enacted was in these words :-
"The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises o
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
