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High Court Of Madhya Pradesh
P. V. Dixit, C. J. and K. L. Pande, J.
JOARA SUGAR MILLS PRIVATE LTD. - Appellant
Versus
STATE OF MADHYA PRADESH - Respondents
M. P. 130 Of 1962
Decided On : 09/24/1963
The Sugarcane Cess (Validation) Act is not colourable in character on the ground that under the guise or pretence of doing something permitted it is in reality doing something prohibited or beyond power. The Parliament is competent under Art. 248 and Entry 97 of List 1 in Sch. VII of the Constitution to pass a legislation imposing for Union purposes a tax of the type and character levied by or under the State Acts enumerated in S.2(b) of the Act. The deeming provision of S.3 only creates an artificial imposition of causes for a
Period before the commencement of the Act and makes the imposition, assessment and collection thereof. “in accordance with law”. It does not give retrospective validity to any State Act imposing a cess. The “law” spoken of in
the expression “in accordance with law” occurring in S.3 of the Act is not any State Act mentioned in S.2(b) it is the law contained in S.3 itself as stated in the words and expressions which follow the phrases “in accordance with law” used in that section. (The effect of the provision in S.3 stated). The non-obstante expression with which S/3 begins can only mean that the imposition by or under S.3 of the Act shall not be treated as invalid because of any judgment, decree or order of any Court invalidating the imposition made under any State Act. It cannot be construed to mean as validating any State Act. Thus the imposition by S.3 of the Act is under the legislative authority of Parliament itself and not under the authority of any State Legislature as expressed in any State Act. M.P. No. 27 of 1961 D. 31-8-1961 (M.P.) and AIR 1961 SC 652, Explained. (Paras 10, 11 & 12
The Act being merely and simply an Act imposing taxation for Union purposes, the Parliament had the power to enact that legislation under Entry 97 of List I. The Act, which Parliament was competent to enact, could not be treated as a piece of colourable legislation either on the ground that it was designed to enable the States to retain the proceeds of the cesses which they had invalidly imposed and collected or on the ground, that the proceeds of the cesses had already gone into the Consolidated Funds of the States and there is no provision in the Act with regard to appropriation, in conformity with Art.266 of the proceeds of the cesses retained by the States. AIR 1953 SC 375 and AIR 1959 SC 308 and AIR 1962 SC 458 Relied on. [Para 13
The omission of a provision in the Act with regard to the appropriation of the proceeds cannot make the legislation one of a colourable character or affect its validity. Even if it be assumed that later on Parliament makes an appropriation out of the proceeds or the cesses not in conformity with the provisions contained in the Constitution with regard to appropriations to be made out of the Consolidated Fund of India, that cannot reflect back upon the Act 'so as to made it invalid. So to hold would be to accept the altogether untenable proposition that any unauthorised expenditure of the Consolidated Fund of India or that of a State would invalidate all the Acts under or by virtue of which moneys come into that Consolidated Fund Such a result would no doubt be astounding. The character and validity or the Act, therefore, in no way depend on the appropriation of payments to be made out of the receipts of the cesses imposed by it. [Para 14
(2) Sugarcane (Regulation of Supply and purchase) Act, 1958 (M.P.) - Ss.21, 6 and 8 - demand of commission for period when cane development council not in existence-validity - commission though in nature of fee actual service not necessary before it is levied or demanded.
A commission under S.21 can be demanded in respect of a period during which the Council did not come into existence for the purpose of forming the Council Fund and with a view to enable it to function effectively for providing the services mentioned in S.6. Reading Ss. 6, 8 and 21 together, it is clear that the coming into being of the Cane Development Council is not a sine qua non for making a demand for payment of commission under S. 21. [Para 16
Section 21 only provides for the allocation of the commission amount. The expression "shall be payable to the Council" in that section does not carry the implication that the Council must come into existence, and having come into existence must actually render service, before any demand for commission can be made on the occupier of a factory for payment of commission under S.21. The commission paid by an occupier under S.21 can be paid to the Council after it is established. The commission amount forms the bulk of the Council Fund and it is easy to see that if the' rule 'service first and payment of commission after wards is applied, then the Council will never be able to carry out the functions entrusted to it by S.6.
The commission levied under S.21. is no doubt in the nature of a fee. Hut according to the connotation and import of 'fee', it is not necessary that actual services must be rendered first before it can be vied of demanded. A levy in the nature of 'fee' can be imposed with a view to provide a specific service AIR 1963 SC 966 relied on [Para 17
(3) Interpretation of Statutes-title of Act.
The true nature of the law is to be determined not by the name given to it or by its form but by its substance. [Para 10
( 1 ) IN this application under Article 22b of the constitution of India by a private limited company engaged in the business of manufacture, production and sale of sugar, the petitioner claims a declaration that the Sugarcane Cess (Validation) Act, 1961 (XXXVIII of 1961 ). (here-matter referred to as to the Act) passed by parliament 4s beyond the constitutional powers of Parliament and is, therefore, invalid, and prays for the issue to a writ or certiorari for quashing a notice dated 17th March 1962 given to it by the collector of Ratlam calling noon it to pay a total amount of Rs. 6,33,917. 52 ape. as due from it on account of cane cess and cane commission tinder the Act and the Madhya Pradesh Sugarcate (Regulation to supply and purcnase) Act, 1958, (hereinafter referred to as the local Act ).
( 2 ) IN order to appreciate the merits to the controversy arising in this case it is necessary to reier first to the local Act by which a cuss on sugarcane entering into an area specified in a notification issued in that ornate for consumption, use or sale therein was imposed and we occupier of a sugar factory was made name for the payment of commission on sugarcane purchased by the factory. The local Act was enacted in 1959. It came into force on 1st July 1959. Section 23 (1) of that act, so far as ft is material here, ran as follows:-" 23. (1) the State Government may, by NOTINFICATION, impose a cess not exceeuing25 np. a maund, on tne entry ot cane into an area, specified such noth-catton, for consumption, use or sale therein; xx xx xx. x" on 4th December 1959 the State Government issue" a notification in exercise of the powers conferred on it toy Section 23 (1) to the local Act imposing with ettect from that date a cess at the rate of 12 no. per maund on "the entry of cane during a crushing season in the area comprised within such of the factories in which the fom quantity of cane entering for consumption, use or sale the factory during such season" exceeded 10 laktis maunos. Section 21 of the local Act read with rule 45 ot the Madhya Prades sugar-cane (Regulation of Supply and Purcnase)Rules 1959 made under that Act, makes the occupier of a factory liable tor the payment of a commission on every mant ot cane purchased by the factory in the circumstances and at the rate mentioned in the provision and the rule. The validity of section 23 of the local Act was challenged before us in Bhopal Sugar industries v. State of M. P. , M. P. No. 27 of 1961, DA 31-8-1961 (M. P ). to that case we held, following the decision of the Supreme Court in Diamond sugar Mills v. State of U. P. , AIR 19bl SC 652, that the notification dated the am December 1359, in so far as it imposed a cess on tn" entry ot cane during a crushing season in the area comprised within such of the factories trt which tne tout quantity of cane entering for consumption, use or sate to the factory during such season exceeded 10 lakh maunds, was invalid. In Diamond Sugar Mills' case AIR 1961 sc 652 (supra) tne Supreme court struct down as invalid the law as enacted in section 3 of the D. P. Sugarcane Cess Act, 1956, imposing a cess on the entry of sugarcane into the premises of a factory on the ground that the legislation did not fall within Entry 52 of the State List in the seventh Schedule to tne Constitution and there was no other entry either in tne State List or in the Concurrent List in which the law could fall. We pointed out in M. P. No. 27 of 1961 D/-31-8-1961 (MP) that section 23 of the local Act was an analogous provision to Section 3 of the U. P. Sugarcane Cess ACT, 1956, and, therefore, the decision of the Supreme Court in Diamond Sugar Mills' case, AIR 1961 SC 652 (supraj invalidated the levy and collection of cess on sugarcane under section 23 (1) and the notification issued thereunder.
( 3 ) THE validity of Section 21 was also cnauengea though without success by tne bhopal Sugar Industries no. , by another petition in Bhopal Sugar Industries Ltd. v
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