Back
Supreme Court Of India
Andhra Sugars Limited
Versus
State of Andhara Pradesh
Decided On : September 29, 1967
SUGAR CANE PURCHASE TAX - Levy of tax on purchase of sugarcane by or on behalf of sugar factories from canegrowers in their respective factory zones - Validity - Whether such purchases are made under agreements of purchase and sale - Whether the State Legislature has power to levy such tax under Entry No. 54, List II, Schedule VII of the Constitution - Whether such tax is violative of Articles 14 and 301 of the Constitution.
Fact of the Case:
The petitioners, who own sugar factories, challenged the vires and constitutionality of Section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961, which levied a tax on the purchase of sugarcane by or on behalf of the petitioners from the canegrowers in their respective factory zones.
Finding of the Court:
The Court held that the purchases of sugarcane under the agreements were exigible to tax by the State Legislature under Entry 54, List II. The Court found that the parties had entered into contracts of sale though in view of the Order the area of bargaining between the buyer and the seller was greatly reduced.
Issues: 1. Whether the purchases of sugarcane by or on behalf of the petitioners from the canegrowers in their respective factory zones were made under agreements of purchase and sale? 2. Whether the State Legislature has power to levy such tax under Entry No. 54, List II, Schedule VII of the Constitution? 3. Whether such tax is violative of Articles 14 and 301 of the Constitution?
Ratio Decidendi: 1. The Court held that the purchases of sugarcane under the agreements were exigible to tax by the State Legislature under Entry 54, List II. The Court found that the parties had entered into contracts of sale though in view of the Order the area of bargaining between the buyer and the seller was greatly reduced. 2. The Court held that the State Legislature has power to levy such tax under Entry No. 54, List II, Schedule VII of the Constitution. The Court held that the phrase "sale of goods" in the Entry must be given the same interpretation as in the Indian Sale of Goods Act, and that to constitute a "purchase of goods" within this Entry, there must be an agreement for purchase of goods and the passing of property therein pursuant to such an agreement. 3. The Court held that such tax is not violative of Articles 14 and 301 of the Constitution. The Court held that the differential treatment of the factories producing sugar by means of vacuum pans, khandasari units producing sugar by the open pan process and cane growers using cane for the manufacture of jaggery is reasonable and has a rational relation to the object of taxation.
Final Decision: The petitions were dismissed with costs.
Judgment
R. S. BACHAWAT, J.
( 1 ) IN all these writ petitions under Article 32 of the Constitution, the petitioners ask for an order declaring that S. 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961 (Andhra Pradesh Act No. 45of 1961) is unconstitutional and ultravires and a direction prohibiting the respondents from levying tax under S. 21 and to refund the tax already collected. S. 21 of the Act is in these terms :"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 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-sec. (1) shall he 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 S. 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. " S. 2 (i) defines a factory which means "any premises including the precincts thereof wherein twenty or more workers are working or were working on any day during the preceding twelve months and in any part of which any manufacturing process connected with the production of sugar by means of vacuum pans is being carried on or is ordinarily carried on with the aid of mechanical power. S. 2 (m) defines the occupier of a factory. By Ordinance No. 1 of 1967 which was replaced by Act No. 4 of 1967, the following new sub-section (I-A) was inserted and other consequential amendments were made in S. 21 of the principal Act. " (I-A) The Government may, by notification, levy a tax at such rate, not exceeding three rupees and fifty paise per metric tonne, as may be prescribed on the purchase of cane required for use, consumption or sale in a Khandsari unit. "also the following sub-sections (kk) and (kkk) were inserted in S. 2 of the principal Act :" (KK) khandasari sugar means sugar procured by open-pan process in a khandasari unit from sugarcane juice or from rab or gur or both, containing more than, eighty per cent sucrose; (KKK) khandasari unit means a unit engaged or ordinarily engaged in the manufacture of khandasari sugar and includes a bel;"it may be mentioned that sales and purchases of sugarcane are exempt from tax under the Andhra Pradesh General Sales Tax Act, 1957. The petitioners own sugar factories as defined in S. 2 (i ). Their agents are the occupiers of the factories as defined in S. 2 (m ). They purchased cane from canegrowers within their respective factory zones. The State Government had issued notifications levying tax under S. 21. For the last several years the petitioners have paid the tax on their purchase of sugarcane and further demands are being made on them for payment of the tax. They challenge the vires and the constitutionality of S. 21 on various grounds. The principal submissions were made by Mr. M. C. Setalvad who appeared in Writ Petition No. 53 of 1967 and his arguments were adopted by counsel appearing in the other petitions. Mr. N. C. Chatterjee who appeared in Writ Petition No. 100 of 1967 raised a few additional contentions.
( 2 ) THE submission of Mr. Setalvad is that S. 21 so far as it levies a tax on the purchase of sugarcane by or on behalf of the petitioners from the canegrowers in their respective factory zones is ultra vires the po
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
