Case: Jaora Sugar Mills (P) Ltd Vs. State Of Madhya Pradesh And Others

case, it cannot validly be raised either. We must, therefore, hold that the High Court was right in rejecting the appellants case that the Act was invalid, and hence no demands could be made under its provisions either for a cess or for commission. 20. There is, however, one subsidiary question which still remains to be considered and that has relation to the demand for cess commission for the year 1959-60. The appellants case is that this demand is invalid. The material facts in relation to this point are not in dispute. We have already noticed that the sugarcane crushing season is usually between 1st October and the 30th June and that the Cane Development Council was constituted for the first time on August 26, 1960. In other words, the Council was not in existence throughout the period covered by the demand in question which relates to the year 1959-60. Section 21 of the Madhya Pradesh Act provides for the payment of commission on purchase of cane; and Rules 45 to 47 prescribe the manner in which the said payment has to be made. It is true that the functions of the Cane Development Council as prescribed by S. 6 of the said Act show that the Council is expected to render service to the mills like the appellant; and so, it can be safely assumed that the commission in question which was authorised to be recovered under S. 21 of the Madhya Pradesh Act initially, and which will now be taken to have been recovered under S. 3 of the Act is a "fee". Mr. Pathak contends that it is plainly illegal to recover such a fee for a period during which the Council did not exist at all and could have rendered no service whatever. 21. It is well settled that the imposition of a fee is generally supported on the basis of quid pro quo, and so it is urged that the impugned recovery for the year 1959-60 is plainly without any quid pro quo and as such, cannot be enforced. The High Court did not accept this argument because it held that the doctrine of quid pro quo did not require that actual service must be rendered first before a fee can be levied or demanded. In support of this view, the High Court has relied upon certain observations made by this Court in Sudhundra Tirtha Swamiar v. Commr. for Hindu Religious and Charitable Endowments. Mysore, 1963 Supp (2) SCR 302 at p. 323 (AIR 1963 SC 966 at p. 975). While rejecting the contention which was raised before this Court in that case that the levy prescribed by S. 76 (1) of the Madras Religious Endowments Act, 1951 (No.XIX of 1951) was invalid, Shah. J., who spoke for the Court observed:"A levy in the nature of a fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual services rendered by the authority to individual who obtains the benefit of the service. If with a view to provide a specific service, levy is imposed by law and expenses for maintaining the service are met out of the amounts collected, there being a reasonable relation between the levy and the expenses incurred for rendering the service, the levy would be in the nature of a fee and not in the nature of a tax". The High Court thought that these observations justified the view that a fee could be validly recovered from the appellant by way of commission to be paid to the Cane Development Council, even though the Council may not have come into existence during the whole of the period in question. In our opinion, the High Court has completely ignored the context in which the said observations were made and has misjudged their effect. It is not necessary for us to decide whether the service must be rendered for the whole of the period covered by the fee, or whether it is necessary that the service must by rendered first and the fee can be recovered thereafter. These fine and academic questions are not relevant in the present case, because it is not even suggested the during the whole of the period any service whatever was rendered by the Council at all. In this connection, it is necessary to bear in mind the fact that S 23(1) of the Madhya Pradesh Act required, inter alia, that the commission had to be paid to the Council at the rate in the proportion prescribed by it. Other statutory provisions including the Rules further provided that the failure to pay the said commission on the occasion of the purchase would entail the liability to pay interest and the said commission along with the interest was made recoverable as arrears of land revenue. Having regard to these provisions, it seems to us very difficult to accept the view that the commission which had to be paid to the Council fell to be paid even though the Council was not in existence at all throughout the sugar crushing season in question. On the special facts of this case, therefore, we are satisfied that no amount could be validly claimed by way of commission for the year 1959-60. The notice of demand (Annexure D) which has been issued in that behalf shows that the cane commission at 3 nP. per maund which has been demanded from the appellant by respondent No. 2 for the years 1959-60 and 1960-61, amounts to Rs. 1,26,152.86 nP. It is common ground that out of this amount, Rs. 54,037.57 nP. represents the commission for the year 1959-60. We must accordingly hold that the demand made by respondent No. 2 for the payment of cess commission for the year 1959-60 amounting to Rupees 54,037.57 nP. is invalid and the notice to that extent must be cancelled. 22.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In fact, if the invalid provision is severable from the rest of the Act, courts dealing with the question of its validity may strike down the invalid portion alone and uphold the validity of the remaining part of the State. But where an impugned Act passed by a State Legislature is invalid on the ground that the State Legislature did not have legislative competence to deal with the topic covered by it, then even Parliament cannot validate such an Act, because the effect of such attempted validation, in substance, would be to confer legislative competence on the State Legislature in regard to a filed or topic which, by the relevant provisions of the Schedules in the Constitution, is outside its jurisdiction. This position is not and cannot be disputed. If it is shown that the impugned Act purports to do nothing more than validate the invalid State Statutes, then of course, such a validating Act would be outside the legislative competence of Parliament itself. Where a topic is not included within the relevant List dealing with the legislative competence of the State Legislature, Parliament, by making a law, cannot attempt to confer such legislative competence on the State LegislaturesWe are, therefore, satisfied that the sole basis on which Mr. Pathaks 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 provisions of such a law to the different States, and to make them retrospective in operation. His whole contention is based on what he regards to be the true scope and effect of S. 3. If the construction which he places on S. 3 is rejected, the argument about the invalidity of the Act must likewise be rejectedThis observation succinctly and effectively brings out the true character of the contention that any legislation is colourable legislation. Where a challenge is made on this grounds, what has to be proved to the satisfaction of the Court is that though the Act ostensibly is within the legislative competence of the Legislature in question, in substance and in reality it covers a filed which is outside its legislative competence. It would be noticed that as soon as this aspect of the matter is borne in mind, the argument that the Act is a colourable piece of legislation takes us back again to the true scope and effect of the provisions of S. 3. If the true scope and effect of S. 3 is as Mr. Pathak assumes it to be, then, of course, the Act would be void on the ground that it is a colourable piece of legislation. But if the true scope and effect of S. 3 is as we have already held it to be, then in passing the Act, Parliament has exercised its undoubted legislative competence to provide for the recovery of the specified cesses and commissions in the respective State areas from the dates and in the manner indicated by it. When demands were made for the recovery of the said cesses, they will be deemed to have been made not in pursuance of the State Acts but in pursuance of the provisions of the Act itself. Therefore, we do not think there is any substance in the argument that the Act is invalid on the ground that it is a colourable piece of legislationNormally, it would be inappropriate and indeed illegitimate to hold an enquiry into the manner in which the funds raised by an Act would be dealt with when the Court is considering the question about the validity of the Act itself. As we have just indicated, if the taxes or cesses recovered under an Act are not dealt with in the manner prescribed by the Constitution, what remedy a citizen may have and how it can be enforced, are questions on which we express no opinion in this appeal. All we are considering at this stage iswhether even on the assumption made by Mr. Pathak, it would be permissible for him to contend that the Act which is otherwise valid, is rendered invalid because the funds in question will not go into the Consolidated Fund of India.In truth, this arguments again proceeds on the basis that Parliament has passed the Act not for the purpose of treating the recoveries made as those under its provisions retrospectively enacted, but for the purpose of validating the said recoveries as made under the invalid State Acts; and we have already pointed out that S. 3 completely negatives such an assumption. Therefore, we do not think that Mr. Pathak is right in contending that the provisions of the Act are invalid in any mannerIn 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 validly be raised either. We must, therefore, hold that the High Court was right in rejecting the appellants case that the Act was invalid, and hence no demands could be made under its provisions either for a cess or for commissionIn our opinion, the High Court has completely ignored the context in which the said observations were made and has misjudged their effect. It is not necessary for us to decide whether the service must be rendered for the whole of the period covered by the fee, or whether it is necessary that the service must by rendered first and the fee can be recovered thereafter. These fine and academic questions are not relevant in the present case, because it is not even suggested the during the whole of the period any service whatever was rendered by the Council at all. In this connection, it is necessary to bear in mind the fact that S 23(1) of the Madhya Pradesh Act required, inter alia, that the commission had to be paid to the Council at the rate in the proportion prescribed by it. Other statutory provisions including the Rules further provided that the failure to pay the said commission on the occasion of the purchase would entail the liability to pay interest and the said commission along with the interest was made recoverable as arrears of land revenue. Having regard to these provisions, it seems to us very difficult to accept the view that the commission which had to be paid to the Council fell to be paid even though the Council was not in existence at all throughout the sugar crushing season in question. On the special facts of this case, therefore, we are satisfied that no amount could be validly claimed by way of commission for the year 1959-60. The notice of demand (Annexure D) which has been issued in that behalf shows that the cane commission at 3 nP. per maund which has been demanded from the appellant by respondent No. 2 for the years 1959-60 and 1960-61, amounts to Rs. 1,26,152.86 nP. It is common ground that out of this amount, Rs. 54,037.57 nP. represents the commission for the year 1959-60. We must accordingly hold that the demand made by respondent No. 2 for the payment of cess commission for the year 1959-60 amounting to Rupees 54,037.57 nP. is invalid and the notice to that extent must be cancelled.