Civil Appeal No 1774 of 1980 etc
From the Judgment and Order dated 28
1978 of the Allahabad High Court in Civil Misc
Writ No 495 of 1975
945 BRL Iyenger Yogeshwar Prasad SP Gupta VP Sachthey KK Venugopal OP Rana Dr YS Chitale KG Bhagat FS Nariman Soli J Sorabjee HK Puri G Gopalakrishnan Khaitan  Co A Subba Rao Naunit Lal KMK Nair JBD  Co PR Ramasesh Bishambar Lal G Subramanium Ms section Dikshit Ms A Subhashini KR Nambiar RN Poddar BM Nagaria Mrs Rani Chhabra RB Datar PH Parekh KR Nagaraja BD Sharma VJ Francis section Markendaya RN Sachthey R Ramachandran SS Khanduja Manoj Swarup  Co PK Pillai Baggar KL Mehta Swarup John  Co GS Ramarao CV Subba Rao SK Gupta GS Chatterjee Probir Mittra Mrs J Wad SK Gambhir Pramod Dayal RK Jain SR Srivastava KK Mohan DhantarajDK Agarwal SK Gupta Raju Ramachandran Ravindra BanaVinoo Bhagat KK Jain AD Sanger Girish Chandra CK Sucharita TC Sharma Mrs Kitty Kumaramangalam
AV Rangam RV Ratnam and DM Popat for the appearing parties
The Judgment of the Court was delivered by D RB MISRA J
The present group of appeals directed against the judgment of the High Court of Judicature at Allahabad dated July 28 1978 raises a common question of law
These appeals arise out of petitions under Article 226 of the Constitution challenging the two Notifications dated January 25 1975 issued under section 14 of the UP Sugarcane Purchase Tax Act 1961 hereinafter referred to as the Act for short
The petitioners also sought a Mandamus directing the State Government to grant remission in purchase tax of 051 paise per quintal to all the Sugar factories situated in the State of UP
As the pattern of facts is similar in all the cases we would refer to the facts of Civil Appeal arising out of Writ Petition No 409 of 1975 filed by Ms Shri Sitaram Sugar Company Limited Bhailtapur District Deoris against the State of Uttar Pradesh and others to bring out the question for consideration in these appeals
The petitioner is a Public Limited Company and owns a sugar factory in Deoria known as Shri Sitaram Sugar Company Limited Bhailtapur UP The Sugar Factory is engaged in the manufacture of sugar by Vacuum Pan Process
It purchases sugarcane from the reserved area allocated to Lt under the provisions of UP Regulation of Supply and Purchase Act 1953 and Sugarcane Control Order
1966 946 By a Notification dated September 29 1973 issued under clause 3 of the Sugarcane Control Order 1966 Central Government fixed the price of sugarcane for the factories situated in Uttar Pradesh
The minimum price fixed by this Notification for the area in which the petitioner s factory was situated was Rs 838 per quintal
The cane growers felt agitated as according to them the price fixed was much too low
They therefore made representation to the UP Government and as a result thereof the UP Government intervened in the matter and fixed sugarcane price at Rs 1225 per quintal for the Sugar Mills situated in the East Zone
According to the petitioner however the price fixed was exorbitant and as the petitioner and other sugar factories were likely to suffer enormous loses the Sugar Factories approached the State of UP and brought to its notice that they were not in a position to pay the higher sugarcane price
The stand of the appellant petitioner and others is that the Chief Minister was satisfied with the demand made by the sugar factories and he assured them that the State Government would grant remission in purchase tax to all the factories situated in the East Zone
By a Notification issued under section 141 of the Act the State Government granted remission to the extent of 051 paise per quintal to 18 Sugar Factories mentioned in the area
By another Notification of the same date two more factories were granted the remission
As the remission was not granted to the appellant petitioner and to some other factories similarly situated they filed petitions under Article 226 of the Constitution challenging the aforesaid Notification issued by the State Government
The State of UP resisted the petitions and denied the allegation of promissory estoppel and discrimination set up in the writ petition
The High Court dismissed those petitions by the impugned judgment
They have now approached this Court by special leave and raised the same contention before this Court as was raised by them before the High Court
In order to appreciate the points involved in the case it would be appropriate at this stage to refer to the relevant provisions of the Act
Section 3 of the Act lays down that there shall be levied a tax on the purchase of sugarcane by the owner of a a factory at the rate of twenty five paise per maund of sugarcane and b a unit at the rate of fifty 947 paise per quintal
Section 3 Al provides that no owner of a factory shall remove or cause to be removed any sugar produced in the factory either for consumption or for sale or for manufacture of
any other commodity in or outside the factory until he has paid the tax levied under section 3 a sum specified under sub section 2 sub section 3 or sub section 4
The next relevant section with which we are directly concerned is section 14
It confers powers on the State Government to grant remission
As the decision of these appeals hinges upon the interpretation of section 141 it would be advisable to read the section in full
Section 141 reads  Section 141
The State Government on being satisfied that it is necessary so to do in the public interest with a view to a encourage or regulate the supply of sugarcane to or its purchase by factories  or D b encourage the establishment of new factories  or c assist factories established after the crushing season 1957 58 and purchasing sugarcane yielding low sugar recovery May by notification in the Gazette remit in whole or in part the tax payable under this Act in any assessment year by every such factory falling under Clause a or Clause b or Clause c
 In the instant case the Notification remitting the purchase tax was issued by the State Government on being satisfied so to do in the public interest with a view to encourage and regulate the supply of sugarcane to or its purchase by the factories in the State of Uttar Pradesh during 1973 74 assessment year
Dr Chitale appearing for the appellants with his usual candour and fairness gave up the plea of promissory estoppel and confined his argument to discrimination made by the State Government in granting remission of tax to some factories and 948 not to the appellants
According to him the encouragement and regulation as contemplated by clause a of section 141 of the Act was necessary to all the factories in the eastern zone and not only to a fortunate few
But the UP Government has refused to extend the remission to the appellant illegally when clause a of section 141 contemplates giving benefit to all the factories and there was no justification for singling out the appellants For treating them differently
The power conferred by clause a of section 141 of the Act the counsel contends could not be confined to Factories purchasing sugarcane yielding low recovery inasmuch as this was a consideration foreign to the purpose contemplated by clause a of section 141 of the Act
The three clauses of sub section 1 of section 14 of the Act have different object and purpose
The purpose of granting the power of remission under clause a is encouragement and regulation of the supply of sugarcane the object of clause b is to encourage the establishment of new factories and that of clause c is to assist factories established after the crushing season 1957 58 and purchasing sugarcane yielding low recovery
Section 141 confers a discretionary power on the State Government
Reading section 14 as a whole it cannot be said that it was obligatory on the part of the State to grant exemption or remission to all the factories
The discretion has been left to the State Government to decide whether any particular factory should be granted remission or not guided by the purpose set out in the relevant clause
Neither in clause a nor in any other clause of section 141 of the Act there is anything to indicate that the State Government must grant remission to all sugar Factories for encouraging or regulating the supply of sugarcane
The reason is obvious
It may be that a factory situated in one area or falling In one category is in need of this remission while those which are not either situated in that area or do not fall In that category may not need it
It is true that the power conferred by clause a is to be exercised For the purpose of encouraging and regulating the supply of sugarcane but in exercising this power the State Government may legitimately take the view that this purpose necessitates the grant of remission only to the sugar factories purchasing 949 sugarcane yielding low recovery
By granting the remission only to sugar factories purchasing sugarcane of low recovery the State Government in our opinion has not violated Article 14 of the Constitution
Nor Is there any contravention of the provisions of clause a of section 14
The question of contravention would arise if the grant of remission were founded on a ground extraneous to the provisions of section 14
The Notifications issued by the State Government clearly show that the remission was granted with the sole object of encouraging and regulating the supply of sugarcane to these factories
The exercise of the power by the State Government was in accordance with the provisions of clause a sub section 1 of section 14 and that by granting the remission to a few sugar factories it did not frustrate the purpose of the aforesaid provision
The use of expression encourage or regulate clearly indicates that the factories which really need encouragement or regulation should get the benefit of the remission under clause a of sub section 1 of section 14
The word encourage suggests that the State Government is required to exercise the power where it feels that the sugar factory requires the help for the purpose of making purchases of sugarcane
Similarly the word regulate also shows that the said power can be exercised with a view to take measures to promote the sale of sugarcane
If the power conferred by clause a of sub section 1 of section 14 has been exercised for the purpose of granting remission to only those sugar factories which purchase sugarcane of low recovery there is nothing wrong in so doing
It was next contended by Dr Chitale that the factories which had recovery of 85 or less had been granted the remission
Some of the appellants were also in similar position and they have been refused unjustifiably and the State Government had discriminated between the factories falling in the same group and thus the Notification issued on January 25 1975 suffered from the vice of Article 14 of the Constitution on that account also
This argument losses sight of the other clauses of the section viz clauses b and c of sub section 1 of section 14
Clause b provides for encouraging the establishment of new factories and clause c contemplates assistance to factories established after crushing season 1957 58 and purchasing sugarcane yielding low sugar recovery
If the State Government had chosen to give 950 remission to these factories because they fall under clause c some argument could have been advanced against the validity of the Notification on that basis
Under clause c remission is granted by way of support or aid to newly established factories to lesson the cost so that they could profitably compete in the market
The remission under clause c has to be confined to new factories which is a different category of sugar factories
The considerations needed for exercising the power under clause c are different from those under clause a or b
Considered from this aspect there is no discrimination at all
Article 14 of the Constitution forbids class legislation but permits reasonable classification
It however must fulfil the twin requirements 1 it must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and 2 that the intelligible differentia must have a relationship to the object sought to be achieved by the Statute
If authority be needed we may refer to Anant Mills Co Ltd vs State of Gujarat  Ors The remission was granted only to the factories where the recovery from the sugarcane was low to enable the factories to make timely payments towards the cost of sugarcane and non payment of the cane prices affecting the supply of cane to factories
It was in these circumstances that the Government granted remission to the factories which needed the help
The immediate factor affecting the economy is the recovery of sugar from sugarcane and the sugar content in the cane produced goes a long way to determine the cost of sugar
Thus the sugar factories which were purchasing sugarcane yielding low recovery are distinguishable as a class separately from those which did not fall in it and there was a reasonable basis to classify those left out of that group
For the foregoing discussion the appeals must fail
must are accordingly dismissed
In the circumstances of the case however the parties shall bear their own costs
All matters pending in this Court challenging the constitutional validity of the two Notifications dated January 25 1975 will stand disposed of in terms of this judgment
PSS Appeals dismissed


Summary:
Section 31a of the UP Sugarcane Purchase Tax Act 1961 provides for imposition of tax on the purchase of sugarcane by the owners of sugar factories
Section 141 of the Act empowers the State Government to grant remission in whole or in part of the tax payable in the public interest with a view to a encourage or regulate the supply of sugarcane to or its purchase by the factories or b encourage the establishment of new factories or c assist factories established after the crushing season 1957 58 and purchasing sugarcane yielding low sugar recovery
The Central Government by a notification dated September 29 1973 issued under cl 3 of the Sugarcane Control Order 1966 fixed the minimum price of sugarcane for factories situated in eastern UP at Rs 838 per quintal
To meet the growers demand for a higher price the Government of UP refixed the sugarcane price at Rs1225 per quintal for the sugar mills situated in the east zone
The sugar factories not being in a position to pay the higher price approached the State Government who by two notifications dated January 25 1975 issued under s141a of the Act granted remission in purchase tax to the extent of Re 051 per quintal to twenty sugar factories in the area for the assessment year 1973 74
The appellants and some other factories having been denied any remission in purchase tax challenged the notifications by filing petitions under article 226 of the Constitution which were dismissed by the High Court
943 In these appeals by special leave it was contended for the appellants that the State Government in refusing to extend the remission to the appellants had discriminated against them by singling them out for treating differently as the encouragement and regulation contemplated by cla of s141 of the Act was necessary to all the factories in the eastern zone and not to a fortunate few and that the impugned notifications suffered from the vice of article 14 of the Constitution in as much as the Government had discriminated between the factories falling in the same group as those which had a recovery of 85 or less had been granted remission while the appellants who were also in similar position had been left out
Dismissing the appeals the Court  HELD 1
Article 14 of the Constitution forbids class legislation but permits reasonable classification
It however must fulfil the twin requirements 1 it must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and 2 that the intelligible differentia must have a relationship to the object sought to be achieved by the statute
950 C D 2
Section 141 of the Act confers a discretionary power on the State Government
It has been left entirely to the State to decide whether any particular factory should be granted remission or not guided by the purpose set out in the relevant clause
Neither in cl
a nor in any other clause of section 141 there is anything to indicate that the State Government must grant remission to all sugar factories for encouraging or regulating the supply of sugarcane
948 E F 3
The three clauses of sub section
1 of s14 of the Act have different object and purpose
The purpose of granting the power of remission under cl
a is encouragement and regulation of the supply of sugarcane the object of clb is to encourage the establishment of new factories and that of clc is to assist factories established after the crushing season 1957 58 and purchasing sugarcane yielding low recovery factory situated in one area or falling in one category may be in need of remission while those which were not either 944 situated in that area or did not fall in that category may not need it
Though the power conferred by cla is to be exercised for the purpose of encouraging and regulating the supply of sugarcane in exercising this power the State Government may legitimately take the view that this purpose necessitates the grant of remission only to the sugar factories purchasing sugarcane yielding low recovery
948 C E 4
The word encourage  in cla of s141 suggests that the State Government is required to exercise the power where it feels that the sugar factory requires the help for the purpose of making purchases of sugarcane
The word regulate  contemplates that the said power can be exercised with a view to take measures to promote the sale of sugarcane
If the power conferred by cla of s141 has been exercised for the purpose of granting remission to only those sugar factories which purchase sugarcane of low recovery there is nothing wrong in so doing
949 D E 5
In the instant case by granting the remission only to sugar factories purchasing sugarcane of low recovery the State Government has not violated article 14 of the Constitution
Nor was there any contravention of the provisions of cla of s141
Such a question would have arisen if the grant of remission were founded on a ground extraneous to the provisions of section 141
949 A B 6
The immediate factor affecting the economy is the recovery of sugar from sugarcane and the sugar content in the cane produced goes a long way to determine the cost of sugar
Thus the sugar factories which were purchasing sugarcane yielding low recovery are distinguishable as a class separately from those which did not fall in it and there was a reasonable basis to classify those left out of that group
950 F G Anant Mills Co Ltd vs State of Gujarat  Ors  referred to