Full Judgment Text
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PETITIONER:
SHETKARI SAHAKARI SAKHAR KARKHANA LTD., SANGLI, MAHARASHTRAS
Vs.
RESPONDENT:
THE COLLECTOR OF SANGLI AND OTHERS
DATE OF JUDGMENT22/10/1979
BENCH:
KOSHAL, A.D.
BENCH:
KOSHAL, A.D.
CHANDRACHUD, Y.V. ((CJ)
KRISHNAIYER, V.R.
UNTWALIA, N.L.
SHINGAL, P.N.
CITATION:
1979 AIR 1972 1980 SCR (1) 882
1980 SCC (1) 381
ACT:
Bombay Sugarcane Cess Act, 1948, Ss. 4, 7 and 8 &
Sugarcane Cess (Validation )Act 1961, Ss. 2(a) and 3(1)(c)-
State Act levying sugarcane cess found to be ultra-vires-
Central Act enacted adopting provisions of State Act and
validating assessment made thereunder-Central Act whether
validates or re-enacts the state Act-Cess whether
recoverable from owner of factory.
HEADNOTE:
The Bombay Surgacane Cess Act,1948 empowers the State
Government to specify any factory the area comprised in
which shall be a local area for the purposes of the Act and
to levy cess on the entry of sugarcane into a local area for
consumption or use therein. A duty is cast on every occupier
to furnish to the prescribed authority a return stating the
total quantity in tons of sugarcane which enters the local
area comprised in his factory for consumption or use therein
during the preceding month.
In Diamond Sugar Mills Limited v. State of Uttar
Pradesh & another [1961] 3 S.C.R. 242 this Court struck down
the U.P. Sugarcane Cess Act, 1956 which contained provisions
similar to those of the Bombay Act on the ground that the
proper meaning to be attached to the words local area under
Entry 52 in List II of the Seventh Schedule to the
Constitution was an area administered by a local body such
as municipality, district board, or the like and that the
premises of a factory were not a local area within the
meaning of the said Entry. Since prior to this decision,
several State Legislatures had passed similar enactments,
all of which became unconstitutional by reason of that
decision, Parliament passed the Sugarcane Cess (Validation)
Act, 1961, section 3 sub-section (1), Clause (c) whereof
provides that any cess imposed or assessed under any State
Act before the commencement of the Central Act, but not
collected before such enactment may be recovered (after
assessment of the cess where necessary).
The appellant’s petitions impugning the levy and demand
of cess imposed under the Bombay Act supplemented by the
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Central Act were dismissed by the Bombay High Court.
In appeals to this Court it was contended (1) that the
Central Act merely authorised the collection of amounts
which had already been imposed, assessed or collected and
that no assessment, recovery or collection could be made
under section 3 of the Central Act read with the relevant
provisions of the State Act after the enforcement of the
Central Act, and (2) that Parliament could not pass a law
retrospectively validating invalid assessments by converting
their character from assessments under the State Acts to
those under its on statute operating retrospectively.
983
Dismissing the appeals,
^
HELD: 1(i) In two earlier decisions this Court has
repelled an identical argument on the ground that what
Section 3 of the Central Act provides is that by its order
and force, the respective cesses would be deemed to have
been recovered, because the provisions in relation to the
recovery of this cess have been incorporate in that Act
itself so that the command under which the cesses would be
deemed to have been recovered would be the command of
Parliament because all the relevant sections, notifications,
order and rules had been adopted by the Parliamentary
statute itself. It is, therefore, plain that Section 3 of
the Central Act did not merely validate what the State
authorities had already done under the Bombay Act but re-
enacted the provision of the Bombay Act by virtue of the
authority vested in Parliament under Entry 97 in List I of
the Seventh Schedule to the Constitution so that the Bombay
Act became fully alive and operative as an enactment of
Parliament as soon as the Central Act was promulgated and
the authorities named in the Act were invested with full
powers to assess and recover the cess not under the Bombay
Act but under the Central Act into which the provisions of
the Bombay Act and the rules framed as well as the
notifications issued thereunder became incorporate. [988 D.
989 B-C,990 B-C]
Jaora Sugar Mills (P) Ltd. v. State of Madhya Pradesh
[1966] 1 S.C.R. 523; Bhopal Sugar Industries v. State of
Madhya Pradesh and others [1979] 2 S.C.R. 605; referred to.
(ii) Clause (c) of Section 3 of the Central Act
specifically authorises both assessment and recovery of any
cess imposed under any State Act before the commencement of
the Central Act. [998 A.C]
2. In Jaora Sugar Mill’s case, this Court held that if
collections were made under statutory provisions which were
invalid, Parliament could pass a law retrospectively
validating the collections by converting their character
from collections made under the State statutes to that of
collections made under its own statute operating
retrospectively, because to hold otherwise would be to cut
down the width and amplitude of the legislative competence
conferred on Parliament by Article 248 read with Entry 97 in
List I of the Seventh Schedule to the Constitution. [990 F-
H]
3. It cannot be said that there is lack of authority in
Parliament to pass the Central Act incorporating into it
provisions of the State Act. Entry 97 in List I of the
Seventh Schedule to the Constitution, provides full
legislative competence to Parliament in relation to the
Central Act inasmuch as it vests all residuary powers of
legislation in Parliament. [991 B-C]
4. There is no substance in the contention that the
managing agents alone would be liable and that the cess
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could not be recovered from the owners of the factories. The
definition of occupier has nothing to say about the person
on whom the cess is to be imposed or from whom it is to be
recovered. The relevant provisions indicate that the
authorities assessing or recovering the tax should deal with
the occupier and were enacted as a matter of convenience
both for the authorities and the assessees, so that an
absent owner may not be unduly harassed nor proceedings
delayed by reason of his absence, and not for limiting to
the occupier alone the liability to pay the cess. [991 F-992
A]
984
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2470 of
1968.
From the Judgment and Order dated 17-1-68 of the Bombay
High Court in Special Civil Application No. 6/68.
AND
CIVIL APPEAL NOS.39-40 OF 1969
From the Judgment and Order dated 17-1-68 of the Bombay
High Court in S.C.A.Nos. 4 and 5 of 1968.
AND
CIVIL APPEAL NOS. 1925-1926 OF 1972
From the Judgement and Order dated 7/8-3-1972 of the
Bombay High Court in Civil Application Nos. 3077/67 and
570/68.
A.K. Sen, Shanti Bhusan, B. Dutta, K. K.Manchanda and
A. K. Srivastava for the Appellants in CA 2470/68 and CA
Nos. 39-40/69.
D. V. Patel, P. H. Parakh, C. B. Singh, Miss Vineeta
Caprihan and B. L. Verma for the Appellants in CA 1925-
1926/72.
J. L. Nain, S. P. Nayar and M. N. Shroff for the
Respondents.
The Judgment of the Court was delivered by
Koshal, J. By this Judgment we shall dispose of five
civil appeals in each one of which the appellant who is a
registered co-operative society, challenges a judgment of
the High Court of Bombay dismissing its petition for the
issuance of an appropriate writ striking down the levy and
demand of the cess imposed on it under the Bombay Sugarcane
Cess Act, 1948 (hereinafter referred to as the ’Bombay Act’)
supplemented by the Sugarcane Cess (Validation) Act, 1961
(for short, the ’Central Act’).
2. The following table indicates the name of the
appellant and the amount of cess impugned in each of the
appeals as also other relevant particulars:
____________________________________________________________
No.of Name of Amount of Period to Date of Authority
appeal appellant Cess which the the order passing
(Rs.) amount of assess the order
relates ment
____________________________________________________________
1 2 3 4 5 6
Civil The Shetkari 1-7-1959 Sugarcane
Appeal Sahakari to Cess
No. 39 Sakhar Kar- 370072.50 30-6-1960 21-12-60 Officer,
of 1969 khana Ltd. Sangli.
Sangli.
____________________________________________________________
985
____________________________________________________________
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1 2 3 4 5 6
____________________________________________________________
Civil The Shetkari 1-7-1960 Sugarcane
appeal Sahakari 801131.24 to Cess
No.40 Sakhar Kar- 30-6-1961 24-5-66 Officer
of 1969 khana Ltd. Sangli.
Sangli
Civil 1-7-1961
Appeal to
No. 2470 Do. 324610.35 31-12-1961 24-5-66 DO.
of 1968
Civil Ashok Saha- 1-7-1961 Sugarcane
Appeal kari Sakhar 373640.56 to 12-4-62 Cess
No.1925 Karkhana 31-12-61 Officer,
of 1972. Ltd.Ashok- Ahmed-
nagar.
Civil Girna (i)577329.65 1-7-1960 18-7-62 Sugarcane
Appeal Sahakari to Cess Offi
No.1926 Sakhar 30-6-1961 cer,Nasik
of 1972 Karkhana (ii)191409.53 1-7-1961 18-7-62 Do.
Ltd.Dabhadi. to
31-12-1961
____________________________________________________________
3. It may be of advantage to reproduce here the
relevant provisions of the Bombay Act, Clause (1), (2), (3)
and (4) of section 2 thereof read thus:
’2. In this Act, unless there is anything repugnant in
the subject or context,-
(1) "factory" means any premises including the
precincts thereof, wherein twenty or more
workers are working or were working on any
day of 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
power;
(2) "local area" means any area comprised in such
factories as may be specified in the
notification under section 3;
(3) "notified factory" means a factory specified
in the notification under section 3;
(4) "occupier" means the person who has ultimate
control over the affairs of a notified
factory; provided that where the affairs of
such factory are entrusted to a
986
managing agent, such agent shall be deemed to
be the occupier;
Section 3 empowers the State Government to specify, by
notification in the official gazette, any factory the area
comprised in which shall be a local area for the purposes of
the Act. Section 4 minus the proviso states:
"4. A cess at such rate not exceeding ten rupees
per ton as may be specified by the State Government in
a notification in the Official Gazette shall be levied
on the entry of sugarcane into a local area for
consumption or use therein :"
Section 5 provides for licences to be taken out by
consumers or users of sugarcane in notified factories while
section 6 lays down that every occupier shall furnish to the
prescribed authority before the seventh day of each month a
return in the prescribed form stating the total quantity in
tons of sugarcane which entered the local area comprised in
his factory for consumption of or use therein during the
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preceding month. Section 7 and 8 provide for the assessment,
recovery and collection of the sugarcane cess. The rest of
the Act consists of miscellaneous provisions which need not
be referred to here.
4. Now we may detail the circumstances in which the
Central Act was made part of the statute book. In 1956 the
U.P. legislature passed the U.P. Sugarcane Cess Act
(hereinafter referred to as the ’U.P. Act’) the provisions
of which were similar to that of the Bombay Act. Section 3
of the U.P. Act authorised the State Government to impose,
by notification in the official gazette, a cess not
exceeding four annas per maund on the entry of sugarcane
into the premises of a factory for use, consumption or sale
therein. The constitutional validity of that section was
challenged in Diamond Sugar Mills Ltd. & Another v. The
State of Uttar Pradesh & Another. Reliance on behalf of the
State was placed on Entry 52 in List II forming part of the
Seventh Schedule to the Constitution of India in support of
the argument that the cess was validly levied. That Entry
reads thus:
"52. Taxes on the entry of goods into a local area
for consumption, use or sale therein."
The counsel for the appellant in that case however contended
that the premises of a factory were not a local area within
the meaning of the Entry and that the Act was therefore
beyond the competence of the State legislature. Out of the
five Judges of this Court who decided
987
the case, four (Jafar Imam, J. L. Kapur, K. C. Das Gupta and
Raghubar Dayal, JJ.) accepted the contention and struck down
the Act as a whole, being of the opinion that the proper
meaning to be attached to the words ’local area’ in Entry 52
was an area administered by a local body like a
municipality, a district board, a local board, a union
board, a Panchayat or the like and that the premises of a
factory were therefore not a ’local area’ within the meaning
of the Entry.
By the time the Diamond Sugar Mills’ case was decided,
enactments similar in content and effect to the Bombay Act
had been passed by legislatures of various States and
Parliament considered it advisable to make the cess imposed
by these enactments a constitutionally valid cess and that
was the reason for the passage of the Central Act.
Clause (a) of section 2 of the Central Act defined
’cess’ thus:
"’cess’ means the cess payable under any State Act
and includes any sum recoverable under any such Act by
way of interest or penalty;"
Clause (b) of the section defined ’State Act’ as any of the
Acts mentioned in the latter portion of the clause as in
force in any State from time to time. The Acts mentioned
included the Bombay Act.
Sub-section (1) of section 3 of the Central Act may be
set out in extenso as it is mainly that provision which has
been attacked before us on behalf of the appellants :
"3. (1) Notwithstanding any judgment, decree or
order of any court, all cesses imposed, assessed or
collected or purporting to have been imposed, assessed
or collected under any State Act before the
commencement of this Act shall be deemed to have been
validity imposed, assessed or collected in accordance
with law, as if the provisions of the State Acts and of
all notifications, orders and rules issued or made
thereunder, in so far as such provisions relate to the
imposition, assessment and collection of such cess had
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been included in and formed part of this section and
this section had been in force at all material times
when such cess was imposed, assessed or collected; and
accordingly,-
(a) no suit or other proceeding shall be maintained or
continued in any court for the refund of any cess
paid under any State Act;
(b) no court shall enforce a decree or order directing
the refund of any cess paid under any State Act;
and
988
(c) any cess imposed or assessed under any State Act
before the commencement of this Act but not
collected before such commencement may be
recovered (after assessment of the cess, where
necessary) in the manner provided under that Act."
5. We may now take up for consideration the contentions
raised at the hearing before us. Mr. A. K. Sen representing
the appellant in Civil Appeal No. 2470 of 1968 argued in the
first instance that the Central Act merely authorized the
collection of amounts which had already been imposed,
assessed or collected and that no assessment, recovery or
collection could be made under section 3 of the Central Act
read with the relevant provisions of the Bombay Act after
the enforcement of the Central Act. The contention is
without force and in this connection we need do no more than
refer to the language of clause (c) above extracted which
specifically authorizes both assessment and recovery of the
cess after the commencement of the Central Act, and to two
earlier decisions of this Court in which an identical
argument was made and repelled. The first of those decisions
is reported as Jaora Sugar Mills (P) Ltd. v. State of Madhya
Pradesh and Others. The following observations made therein
by Gajendragadkar, C.J., who delivered the judgment of the
Court, are pertinent :
"Section 3 does not purport to validate the
invalid State statutes. What Parliament has done by
enacting the said section is not to validate the
invalid State statutes, but to make a law concerning
the cess covered by the said statutes and to provide
that the said law shall come into operation
retrospectively. There is a radical difference between
the two positions. Where the legislature wants to
validate an earlier Act which has been declared to be
invalid for one reason or another, it proceeds to
remove the infirmity from the said Act and validates
its provisions which are free from any infirmity. That
is not what Parliament has done in enacting the present
Act. Parliament knew that the relevant State Acts were
invalid, because the State Legislatures did not possess
legislative competence to enact them. Parliament also
knew that it was fully competent to make an Act in
respect of the subject-matter covered by the said
invalid State statutes. Parliament, however, decided
that rather than make elaborate and long provisions in
respect of the recovery of cess, it would be more
convenient to make a
989
compendious provision such as is contained in s. 3. The
plain meaning of s. 3 is that the material and relevant
provisions of the State Acts as well as the provisions
of notifications, orders and rules issued or made
thereunder are included in s. 3 and shall be deemed to
have been included at all material times in it. In
other words, what s. 3 provides is that by its order
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and force, the respective cesses will be deemed to have
been recovered, because the provisions in relation to
the recovery of the said cesses have been incorporated
in the Act itself. The command under which the cesses
would be deemed to have been recovered would,
therefore, be the command of Parliament, because all
the relevant sections, notifications, orders, and rules
have been adopted by the Parliamentary statute itself.
We are, therefore satisfied that the sole basis on
which Mr. Pathak’s argument rests is invalid, because
the said basis is inconsistent with the plain and clear
meaning of s. 3. As we have already indicated, Mr.
Pathak does not dispute-and rightly-that it is
competent to Parliament to make a law in respect of the
cesses in question, to apply the provision of such a
law to the different States, and to make them
retrospective in operation...."
The second case on the point is reported as Bhopal
Sugar Industries Ltd., v. State of Madhya Pradesh and others
in which Shinghal and Desai, JJ., followed the Jaora Sugar
Mills’ case and Shinghal, J., who delivered the judgment of
the Court spoke thus in connection therewith :
The decision in Diamond Sugar Mills’ case came up
for consideration in this Court in Jaora Sugar Mills
(P) Ltd. v. State of Madhya Pradesh and Others with a
specific reference to the provisions of the State Act,
and it was once again held, following that decision,
that the imposition of the cess was outside the
legislative competence of the State. While examining
that aspect of the controversy, this Court made it
clear that what Parliament had done by enacting section
3 of the Validation Act was not to validate the invalid
State statutes, but to make a law concerning the cess
covered by the said statutes and to provide that the
said law shall come into operation retrospectively.
This Court clarified that by virtue of section 3 of the
Validation Act, the command under which the cess would
be deemed to have been recovered would be the command
of the Parliament, because
990
the relevant sections, notifications, orders and rules
had been adopted by the Parliamentary statute itself."
With respect, we also fully agree with the view
expressed in Jaora Sugar Mills’ case (supra). It is thus
plain that section 3 of the Central Act did not merely
validate what the State authorities had already done under
the Bombay Act but actually re-enacted the provisions of the
Bombay Act by virtue of the authority vested in Parliament
under Entry 97 in List I of the Seventh Schedule to the
Constitution of India so that the Bombay Act became fully
alive and operative as an enactment of Parliament as soon as
the Central Act was promulgated and the authorities named in
the Act were invested with full power to assess and recover
the cess not under the Bombay Act but under the Central Act
into which the provisions of the Bombay Act and the rules
framed as well as the notifications issued thereunder became
incorporated.
6. The only other contention put forward by Mr. Sen
(which was reiterated by Mr. Shanti Bhushan on behalf of the
appellant in Civil Appeal No. 39 of 1969) was that the
assessments having been made under statutory provisions
which were invalid because of lack of legislative competence
on the part of the Bombay Legislature, Parliament could not
pass a law retrospectively validating those assessments by
converting their character from assessments under the State
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statutes to those made under its own statute operating
retrospectively. This contention also was repelled by this
Court in Jaora Sugar Mills’ case (supra) with the following
observations :
"So, the crucial question is : if collections are
made under statutory provisions which are invalid
because they deal with a topic outside the legislative
competence of the State legislatures, can Parliament,
in exercise of its undoubted legislative competence,
pass a law retrospectively validating the said
collections by converting their character from
collections made under the State statutes to that of
collections made under its own statute operating
retrospectively ? In our opinion, the answer to this
question has to be in the affirmative, because to hold
otherwise would be to cut down the width and amplitude
of the legislative competence conferred on Parliament
by Art. 248 read with Entry 97 in List I of the Seventh
Schedule. Whether or not retrospective operation of
such a law is reasonable, may fall to be considered in
certain cases; but that consideration has not been
raised before us and in the circumstances of this case,
it cannot
991
validity be raised either. We must, therefore, hold
that the High Court was right in rejecting the
appellant’s case that the Act was invalid, and hence no
demands could be made under its provisions either for a
cess or for commission."
With the greatest respect, we find no reason at all to
differ.
7. Article 265 of the Constitution of India was pressed
into service by Mr. Shanti Bhushan in support of the
proposition that no tax could be levied or collected except
by authority of law. The proposition is unexceptionable but
we fail to see in what manner Parliament lacked the
authority of law while enacting the Central Act and
incorporating into it the provisions of the Bombay Act. As
pointed out above, Entry 97 in List I of the Seventh
Schedule to the Constitution of India provides full
legislative competence to Parliament in relation to the
Central Act inasmuch as it vests all residuary powers of
legislation in Parliament. The contention based on alleged
lack of authority of law in Parliament is therefore
repelled.
8. The submissions made by Mr. Patel appearing for the
appellants in Civil Appeals No. 1925 and 1926 of 1972 alone
now remain to be considered. He put forward two points. The
first one was that section 4 of the Bombay Act was
discriminatory, that the power conferred by it was unguided
and uncanalised and that therefore it was hit by article 14
of the Constitution of India. When asked as to whether the
point had been raised before the High Court, Mr. Patel’s
answer was in the negative and it transpired that no
foundation for the point had been laid even in the pleadings
submitted to the High Court. It was therefore not allowed to
be raised by us at this late stage.
Mr. Patel’s second point was that in view of the
proviso to clause (4) of section 2 of the Bombay Act, the
managing agents of the factories in question would alone be
liable and that the assessed cess could not be recovered
from his clients who were owners of the concerned factories.
The point is wholly without substance and that for two
reasons. For one thing, no managing agent is involved in the
two appeals in which Mr. Patel has put in appearance.
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Secondly, clause (4) of section 2 merely defines the term
’occupier’ and has nothing to say about the person on whom
the cess is to be imposed or from whom it is to be
recovered. There are no doubt other provisions in the Bombay
Act [section 6, sub-section (1) of section 7 and section 8]
which indicate that the authorities assessing or recovering
the tax are primarily to deal with the occupier but those
provisions have obviously been enacted as a matter of
convenience
992
both for the said authorities and the assessees so that an
absent owner may not be unduly harassed nor proceedings
delayed by reason of his absence and not for limiting to the
occupier alone the liability to pay the cess. In fact sub-
section (2) of section 7 which is in the following terms
would indicate that the liability of the owner of the
concerned factory is not excluded :
"7. (1)........................
(2) If the occupier fails to furnish in due time the
return referred to in section 6 or furnishes a
return which in the opinion of the prescribed
authority is incorrect or defective, the
prescribed authority shall assess the amount
payable by him in such manner as may be prescribed
and the provisions of sub-section (1) shall apply
as if such assessment has been made on the basis
of a return furnished by the owner...."
Both the submissions made by Mr. Patel are therefore
repelled.
9. In the result all the five appeals fail and are
dismissed with costs, one set.
N.V.K. Appeals dismissed.
993