Civil Appeal No1293 of 1969
Appeal from the Judgment and Order dated the 25th April 1968 of the Madhya Pradesh High Court in Misc
Petition No 40464
ST Desai JB Dadachanji KJJohn Mrs AK Varma for the Appellant
SK Gambhir for Respondents 1 2 and 4
ECAgarwala and RN Sachthey for Respondent No 3
607 The Judgment of the Court was delivered by SHINGHAL J
This appeal by a certificate issued by the Madhya Pradesh High Court is directed against its judgment dated April 25 1968
The appellant is a company which cultivates sugarcane and manufactures sugar in its factory in Sehore Madhya Pradesh by crushing the sugarcane cultivated by it and purchased from other cultivators
The State Legislature enacted the Madhya Pradesh Sugarcane Regulation of Supply and Purchase Act 1958 hereinafter referred to as the State Act which came into force on July 1 1959
The State Government issued a notification on November 28 1959 which appeared in the State Gazette dated December 4 1959 under section 23 of the State Act imposing a cess of 12 paise per maund on the entry of sugarcane during a crushing season in the area comprised within such of the factories in which the total quantity of cane entering for consumption use or sale to the factory during such season exceeded 10 lakh maunds
The appellants challenged the validity of the imposition and the High Court on August 31 1961 held that the notification was illegal as the imposition of the levy was with reference to particular premises
A similar view was taken in regard to the Acts in some other States and Parliament thereupon enacted the  hereinafter referred to as the Validation Act which came into force on December 26 1961
Section 3 of the Validation Act was taken to validate the imposition and collection of the cess under the State Act
The Manager of the appellant company received an intimation from the Additional Collector of Sehore dated April 1315 1964 stating that a sum of Rs 54926292 was due from it on account of cess for the period 1959 60 to December 25 1961 and asking for a bank guarantee for payment of the balance
The appellant wrote back saying that the amount of the cane cess worked out to Rs 54483569 and not Rs 54926292 and that as the collector had not assessed the amount of the cess in accordance with the rules it was not payable by the appellant
As the Collector ignored the objection of the appellant a demand notice was served upon it under section 146 of the Madhya Pradesh Land Revenue Code 1959 asking it to deposit Rs 54926292 by August 1 1964
Once again the appellant denied its liability but as that was not acceptable to the Collector the appellant filed a writ petition in the High Court stating that the Collector s demand on account of the cess was illegal as the Validation Act was ultra vires the Constitution
The State of Madhya Pradesh traversed the claim in the writ petition
The High Court upheld the imposition of the cess but reduced 608 it to Rs 54483569 by its impugned judgment dated May 25 1968 and that is why the Company has come up in appeal to this Court
It has been argued by Mr Desai on behalf of the appellant that section 23 of the State Act was not ultra vires the Constitution and there could be no question of validating a valid Act
According to him the State Act fell within the scope of Entry 52 of List II of the Seventh Schedule of the Constitution and was valid and Parliament could not legislate in respect of that occupied field and pass the Validation Act
These arguments have been based on the main contention that the expression an area in Sub section 1 of section 23 of the State Act really means a local area within the meaning of the aforesaid Entry 52 and no other area
Sub section 1 of section 23 of the State Act reads as follows 23
Levy of cess on cane 1 The State Government may by notification impose a cess not exceeding 25 paise a maund on the entry of cane into an area specified in such notification for consumption use or sale therein There are two provisos to the sub section but they are not relevant for the purpose of the controversy before us
It would appear from sub section that it permits the State Government to impose the cess on the entry of sugarcane into any area that may be specified in its notification and there is nothing in it to confine the imposition to a local area
As has been held by this Court in Diamond Sugar Mills Ltd and Another vs State of Uttar Pradesh and Another when a similar point arose for consideration with the UP Sugarcane Cess Act 1956 the proper meaning to be attached to the words local area in Entry 52 List II of the Seventh Schedule of the Constitution when the area is a part of the State imposing the law is an area administered by a local body like a municipality a district board a local board a union board a panchayat or the like
It has been clearly laid down that the premises of a factory are therefore not a local area
This court accordingly struck down section 3 of the UP Act empowering the Governor to impose a cess on the entry of sugarcane into the premises of the factory on the ground that it did not fall within Entry 52 of the State List and there was no other Entry in the State List or the Concurrent List in which the Act could fall
It is therefore futile for the appellant to contend that section 23 of the State Act was not ultra vires the Constitution or that it can be upheld on such a construction of the words an area in section 23 as to restrict it to mean a local area
609 The decision in Diamond Sugar Mills case came up for consideration in this Court in Jaora Sugar Mills P Ltd vs 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 the relevant sections notification orders and rules had been adopted by the Parliamentary Statute itself
It will thus appear that the argument of Mr Desai to the contrary is of no consequence
The other argument of Mr Desai that the writ of mandamus issued by the High Court on August 31 1961 quashing the notification dated November 28 1959 could not be made and was not in fact made ineffective by the Validation Act is also of no consequence
Section 3 of the Validation Act makes this quite clear for it provides as follows 3
Validation of imposition and collection of cesses under State Acts
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 validly 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 collection of such cess had 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 610 a no suit or other proceedings 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 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
2 For the removal of doubts it is hereby declared that nothing in sub section 1 shall be construed as preventing any person a from questioning in accordance with the provisions of any State Act and rules made thereunder the assessment of any cess for any period or b from claiming refund of any cess paid by him in excess of the amount due from him under any State Act and the rules made thereunder
 The section thus specifically validates the notification in question in regard inter alia to the imposition of the cess
The mandamus which was issued by the High Court on August 31 1961 could not therefore avail the appellant thereafter
It has lastly been argued by Mr Desai that when a law provides for the assessment of a cess or tax it is necessary that it should be done by a specific order to that effect and that an order of assessment cannot be presumed when it has not really been made
It has therefore been argued that as an order of assessment was not made in the present case it could not be presumed or deemed to have been made simply because a demand was raised for the purpose of affecting the recovery of the cess from the apellant
The charging provision for the levy of the cess is to be found in section 23 of the State Act to which we shall continue to refer for the sake of convenience even after the passing of the Validation Act
Sub section 2 of that section provides that the State Government shall make rules specifying the authority empowered to assess and collect the cess and the manner in which it shall be collected
The Madhya Pradesh Government accordingly made the Madhya Pradesh Sugarcane Regulation of Supply and Purchase Rules 1959 hereinafter referred to as the Rules which were also validated by Section 3 of the Validation Act
Rules 60 of the Rules provides that the col 611 lector shall be the authority empowered to assess and collect the cess
Rule 61 makes it obligatory for the occupier of a factory to maintain a correct account day to day in the prescribed form of the cane entering the area specified in the notification under section 23
Rule 62 provides further that the occupier of the factory shall submit to the Collector before the close of each month a return in the prescribed form showing the quantity of cane that has entered the specified area during the immediately preceding month
It further provides that within 15 days of the close of the crushing season the occupier shall deposit the cess leviable on the total quantity of cane which has entered the specified area during the crushing season and shall send the treasury receipt showing the amount of cess deposited to the Collector
Then comes rule 63 which places the following responsibility on the Collector 63
The Collector shall check the amount of cess deposited by the occupier of the factory from the returns submitted under rule 62 and see if the full amount of cess due from the occupier has been credited into the Treasury
If the Collector finds that the full amount of cess due from the occupier of the factory has not been deposited he shall by a written notice call upon the occupier to deposit the amount due from him within the period specified in such a notice and the occupier shall deposit the amount within the period specified
 The responsibility of the Collector for purposes of assessing and collecting the tax under rule 60 of the Rules is therefore to check the amount of the cess deposited by the occupier of the factory
The check has to be made with the returns submitted by the occupier and the Collector has to see that the full amount of the cess has been credited to the treasury
If he finds that this is not so it is his duty to call upon the occupier by a written notice to deposit the amount due from him within the period specified in the notice
The State Act and the Rules do not therefore require that the Collector shall make a formal order of assessment and then collect the cess
It has to be appreciated that the purpose of an assessment is to compute the amount of the cess payable by the person concerned
Assess is a comprehensive word and in a taxing statute it often means the computation of the income of the assessee the determination of the tax payable by him and the procedure for collecting or recovering the tax
In a case where there is a dispute about the identity of the assessee the order of assessment serves the purpose of estab 612 lishing that identity and naming the person from whom the tax has to be recovered
In the present case there is no controversy regarding the identity of the assessee and the provision regarding the assessment of the cess in sub section 2 of section 23 of the State Act and rule 60 of the Rules related to the checking of the quantity of cane which had entered the specified area and the amount of cess deposited in respect of it
It is for that purpose that form 4 provides the details to be submitted by the occupier of the factory and a duty is cast on him to deposit the cess leviable on the total quantity of the cane within 15 days of the close of the crushing season and to send the receipt evidencing the deposit to the Collector
As has been pointed out by the High Court the Appellant s letter Ext
R I dated May 25 1964 shows that it admitted that the amount of the cess payable by it worked out to a total of Rs 54483569 That was therefore the admitted amount of the cess which had to be recovered
The Collector recorded an order exhibit R 2 dated July 21 1964 in which he clearly stated that he had gone through the case and that the Tehsildar should immediately recover the entire amount of the cess due from the appellant forthwith
He further directed that the entire amount of the cane cess due from the BSI should be recovered and monthly progress report sent to him
This shows that the Collector did apply his mind to the matter and made an express order for the recovery of the total amount of the cess admitted by the appellant
It seems that the Naib Tehsildar increased the amount beyond what had been admitted by the appellant and directed by the Collector but the High Court rightly confined the recovery to Rs 54483569 which was admitted by the appellant to be due from it on account of cess for the two seasons
There is thus no force in the argument of Mr Desai to the contrary
The appeal fails and is dismissed with costs
MR Appeal dismissed


Summary:
The appellant company cultivates sugarcane and manufactures sugar in its factory by crushing the sugar cultivated by it and purchased from other cultivators
The State Government enacted the MP Sugarcane RSP Act 1958 which came into force on July 1 1959
The State Government issued a notification under section 23 of the Act imposing a cess of 12 paise per maund on the entry of sugarcane during a crushing season in the area comprised within such of the factories in which the total quantity of cane entering for consumption use or sale to the factory during such season exceeded 10 lakh maunds
 The High Court on a writ application by the appellants declared the notification illegal as the imposition of the levy was with reference to particular premises
The Parliament thereupon enacted the 
Section 3 of the Validation Act was taken to validate the imposition and collection of the cess under the State Act
In April 1964 the appellant received an intimation from the Additional Collector stating that a sum of Rs 54926292 was due from it as cess for the period 1959 60 to December 25 1961 and asking for a bank guarantee for payment of the balance
The appellant replied that the amount of cess worked out only to Rs 54483569 and the Collector had not assessed the cess in accordance with the rules
Its objection was ignored and a demand notice was served on it under s146 of the MP Land Revenue Code 1959 for Rs 54926292
The appellant filed a writ petition challenging the constitutionality of the Validation Act under which the Collector had demanded the cess
The High Court upheld the imposition of cess but reduced it to Rs 54483569
It was contended that section 23 of the State Act was not ultra vires the Constitution as the expression an area in section 231 means a local area within the meaning of Entry 52 of List II 7th Schedule of the Constitution and the Parliament could not therefore enact an Act validating a valid Act
It was further contended that when a law provides for the assessment of a cess or tax it is required to be done by a specific order to that effect but it was not made in this case
Dismissing the appeal the Court 606  HELD 1
Section 23 of the State Act was ultra vires the Constitution and cannot be upheld on such a construction of the words an area in section 1 as to restrict it to mean a local area
The proper meaning to be attached to the words local area in Entry 52 List II of the Seventh Schedule of the Constitution when the area is a part of the State imposing the law is an area administered by a local body like a Municipality a district board a local board a union board a panchayat or the like
The premises of a factory are therefore not a local area falling within Entry 52 of the State List and there is no other Entry in the State List or the Concurrent List in which the Act could fall 608 E H Diamond Sugar Mills Ltd and Anr
vs State of UP  Anr
 and Jaora Sugar Mills P Ltd vs State of MP and Ors
  followed
What the Parliament had done by enacting section 3 of the Validation Act was not to validate the invalid State statute but to make a law concerning the cess covered by the said statute and to provide that the said law shall come into operation retrospectively
By virtue of section 3 the command under which the cess would be deemed to have been recovered would be the command of the Parliament because the relevant sections notifications orders and rules had been adopted by the Parliamentary Statute itself609 B C 3
The State Act and the Rules do not require that the Collector shall make a formal order of assessment and then collect the cess
The purpose of an assessment is to compute the amount of the cess payable by the person concerned
Assess is a comprehensive word and in a taxing statute it often means the computation of the income of the assessee the determination of tax payable by him and the procedure for collecting or recovering the tax
In a case where there is a dispute about the identity of the assessee the order of assessment serves the purpose of establishing that identity and naming the person from whom the tax is to be recovered
The responsibility of the Collector for purposes of assessing and collecting the tax under section 60 of the Rules is to see that the full amount of the cess has been credited to the treasury by the occupier of the factory
If he finds that this is not so it is his duty to call upon the occupier by a written notice to deposit the amount due from him within the period specified in the notice
611E H612A