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SUPREME COURT OF INDIA
A.N. RAY, C.J.I., H.R. KHANNA, K.K. MATHEW, A. ALAGIRISWAMI AND P.N. BHAGWATI JJ.
Shri Rama Sugar Industries Ltd., Appellants
Versus
State of A.P. and others, Respondents.
The Andhra Sugars Ltd. etc. etc. Petitioners
Versus
State of A.P. and another Respondents.
And
W. P. Nos. 183, 249 and 250 of 1971 and 3, 105 and 134 of 1972.
Civil Appeal No. 1453 of 1969 W. P. Nos. 183, 249 and 250 of 1971 and 3, 105 and 134 of 1972, D/-17-12-1973.
17-12-1973.
Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961 - Section 21 (3), 21 and 21 (3) (b) - Industrial Development Act, 1966 – Constitution of India, 1950 – Article 14 - Sugar Factories - Exemption From Payment of Tax - Whether exemption should be granted to any factory - Whether any factory has substantially expanded and if so extent of such expansion - Whether a factory had substantially expanded or not and in no other respect - Whether any exemption should be granted at all and if so, for what period that discretion is to be exercised by taking into consideration - Whether word "may" found in that section should be interpreted - Whether any particular factory should be granted exemption or not - Whether that appellant has been discriminated - Whether Government would be justified in refusing to consider question of exemption to all factories other than co-operative sugar factories - Whether, if it had refused to consider an application on ground that it related to an item costing less than £ 25, it would have acted wrongly - Whether Government shut its ears and fettered its discretion when it said that it will confine benefit of exemption provided in clause (b) of sub-section (3) only to factories established in co-operative sector - Whether policy decision of Government to limit benefit of exemption to sugar factories - Whether Government was justified in evolving a policy of its own which has no relevance to purpose of provision in question or object of Act - Whether a factory is established or owned by a co-operative society consisting of sugar cane growers – Held, Court could have understood Government making a policy decision to confine benefit of exemption to factories established by co-operative societies of sugarcane growers, if that policy decision had any warrant in directive principles of Constitution as directive principles are fundamental in governance of country and are binding on all organs of State - There is no provision in Chapter on Directive Principles which would warrant particular predilection now shown by Government to factories established in co-operative sector – Court do not also say that it is illegal for Government to adopt a general line of policy and adhere to it - But policy it adopts must comport with and be reconcilable with provisions of Act and must have some relevance to its object - Classification made by policy or rule must not be arbitrary but must have rational relation to object of exempting provision - That appears to be absent in present case - Here, from point of view of object of exempting provision, co-operative societies of sugarcane growers and other new or substantially expanded industries stand on same footing and there can no justification for specially favouring former class of industries by confining benefit of exemption to them and leaving out of exemption latter class of industries - Picking out co-operative societies of sugarcane growers for favoured treatment, to exclusion of other new or substantially expanded industries, is wholly unrelated to object of exemption provision and policy or rule adopted by State Government is not legally relevant to exercise of power of granting exemption – Court would, therefore, quash Annexure III and issue a mandamus to Government of Andhra Pradesh in each of those writ petitions and Civil Appeal to consider applications of writ petitioners and appellant on merits and pass proper order in each case without taking into account policy decision contained in Annexure III - Appeal dismissed.
Judgment
ALAGIRISWAMI, J. (for himself and on behalf of A. N. Ray, C. J. And H. R. Khanna, J.) :- The appeal and the writ petitions raise the question of interpretation of Section 21 (3) of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase). Act, 1961. The appellant and the petitioners are sugar factories in the State of Andhra Pradesh. They applied under the provisions of Section 21 (3) for exemption from the tax payable under sub-section (1) of that section on the ground that they, having substantially expanded, were entitled, to the extent of such expansion, to exemption from the payment of tax. The Government of Andhra Pradesh having refused that request these writ petitions have been filed before this Court contending that the decision denying them exemption is contrary to Section 21 (3) which does not countenance any classification and that the classification adopted is based on no nexus to the object of the Act. The appeal is against the decision of the Andhra Pradesh High Court dismissing a writ petition filed for similar relief.
2. Two contentions, one regarding promissory estoppel and another regarding the exemption given to Sarvaraya Sugars Ltd. were not pressed before this Court. Though in the beginning it was urged that the grant of exemption under the section was obligatory, later the only contention raised was that the application of each of the factories should have considered on its merits and the State should not have fettered its discretion by laying down a policy of granting exemption only to co-operative sugar factories and that the policy had no nexus to the object of the Act.
3. Section 21 reads as follows :
"21 (1) The Government may, by notification levy a tax at such rate not exceeding five rupees per metric tonne as may be prescribed on the purchase of cane required for use, consumption or sale in a factory.
(2) The Government may, by notification, remit in whole or in part such tax in respect of cane used or intended to be used in a factory for any purpose specified in such notification.
(3) The Government may, by notification exempt from the payment of tax under this section -
(a) any new factory for a period not exceeding three years from the date on which it commences crushing of cane;
(b) any factory which, in the opinion of the Government, has substantially expanded, to the extent of such expansion, for a period not exceeding two years from the date of completion of the expansion.
(4) The tax payable under sub-section (1) shall be levied and collected from the occupier of the factory in such manner and by such authority as may be prescribed.
(5) Arrears of tax shall carry interest at the rate of nine per cent per annum.
(6) If the tax under this section together with the interest, if any, due thereon, is not paid by the occupier of a factory within the prescribed time, it shall be recoverable from him as an arrear of land revenue."
4. In its judgment in Andhra Sugars Ltd. v. State of Andhra Pradesh (1968) 1 SCR 705 this Court upheld the constitutional validity of Section 21 (3) and made the following observations :
"It was next argued that the power under Section 21 (3) to exempt new factories and factories which in the opinion of the Government have substantially expanded was discriminatory and violative of Art. 14. We are unable to accept this contention. The establishment of new factories and the expansion of the existing factories need encouragement and incentives. The exemption in favour of new and expanding factories is based on legitimate legislative policy. The question whether the exemption should be granted to any factory, and if so, for what period and the question whether any factory has substantially expanded and if so, the extent of such expansion have to be decided with reference to the facts of each individual case. Obviously, it is not possible for the State legislature to examine the merits of individual cases and the function was properly delegated to the State Government. T
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