1. In these eight petitions under Art.226 of the Constitution, the validity of the levy of tax on purchase of sugarcane, has been challenged by two Sugar Factories.

2. In W.Ps. Nos. 2208 of 1967 and 32 to 34 of 1968, the petitioner is Indian Sugar and Refineries Ltd. having its Factory at Hospet in Bellary District, and the impugned tax and penalty relate to the period 1-4-1962 to 30-6-1967. In W.Ps. Nos. 2225 of 1967 and 29 to 31 of 1968, the petitioner is Salarjung Sugar Mills Ltd. having its Factory at Munirabad in Raichur District, and the impugned tax and penalty relate to the period 1-7-1963 to 30-6-1967.

3. We may briefly refer to the historical background of the levy of purchase tax on sugarcane. Practically all the States in which sugarcane was grown for the purpose of manufacturing sugar, used to levy a cess on sugarcane brought into the premises of Sugar Factories. The proceeds of such levy were utilised for the purpose of development and improvement of cultivation of sugar - cane and for development of the sugarcane growing area.

4. In the former State of Madras sugar - cane cess was levied under S.14 of the Madras Sugar Factories Control Act, 1949 (hereinafter referred to as the Madras Act). Under S.53 of the Andhra State Act. 1953, the Madras Act continued to be in force in that part of Bellary District which came over to Mysore State on the formation of Andhra State. Indian Sugar and Refineries Ltd. situate in Bellary District continued to be governed by the Madras Act after 1-10-1953.

5. In the former State of Hyderabad, sugarcane cess was levied under the Hyderabad Sugarcane Cess Act, 1953 (hereinafter referred to as the Hyderabad Act). Under S.119 of the States Reorganisation Act, the Hyderabad Act continued to be in force in the Hyderabad area of the new State of Mysore even after 1-11-1956. Salarjung Sugar Mills Ltd. situate in the Hyderabad area, continued to be governed by the Hyderabad Act.

6. The New State of Mysore enacted the Mysore Susarcane Cess Act, 1958, which provides for levy of sugarcane cess in the entire State. This Act repealed the Hyderabad Act and those provisions of the Madras Act which related to sugarcane cess.

7. In Diamond Sugar Mills Ltd v. State of U.P. AIR 1961 SC 652 the majority of the Bench of the Supreme Court held that the proper meaning to be attached to the term 'local area' in Entry 52 of List II of Schedule VII to the Constitution, is an area administered by a local body like a Municipality, a District Board, a Panchayat or the like, that S.3 of the U.P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on entry of sugar - cane into the premises of a Factory, did not fell within Entry 52 of the State List, and that as there is no Entry in either State List or Concurrent List in which the said Act could fall, it was beyond the Legislative competence of the State Legislature.

8. This decision of the Supreme Court was rendered on 13-12-1960. The levy of cess under State Legislative enactments, having been declared void, the State Governments could, not only, not levy and collect the cess, but had to refund the cess already collected. To save such a situation, Parliament passed the Sugarcane Cess (Validation) Act, 1961, validating the imposition and collection of cess on sugarcane under several State enactments before the commencement of this Act. This Act received the assent of the President and came into force on 11-9-1961. But this Act did not enable the State to levy sugarcane cess after 11-9-1961 though arrears of cess levied before that day could be collected.

9. In place of sugarcane cess, the Mysore State Legislature ought to impose tax in purchase of sugarcane by Sugar Factories. By Act No. II of 1961 which came into force on 1-10-1961, sugarcane was included at Serial No. 11 - A in the Third Schedule to the Mysore Sales Tax Act, 1957. This Schedule comprises of goods in respect of which a Single point Purchase Tax only is leviable under S.5(3)(b) of