Case: Shetkari Sahakari Sakhar Karkhana Limited, Sangli, Maharashtra Vs. Collector of Sangli and Others

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 bythe 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 relevantof Name of Amount of Period to Date of Authorityappeal appellant Cess which the the order passing(Rs.) amount of assess the orderrelates ment1 2 3 4 5 6Civil The Shetkari 1-7-1959 SugarcaneAppeal Sahakari to CessNo. 39 Sakhar Kar- 370072.50 30-6-1960 21-12-60 Officer,of 1969 khana Ltd. Sangli.Sangli.1 2 3 4 5 6Civil The Shetkari 1-7-1960 Sugarcaneappeal Sahakari 801131.24 to CessNo.40 Sakhar Kar- 30-6-1961 24-5-66 Officerof 1969 khana Ltd. Sangli.SangliCivil 1-7-1961Appeal toNo. 2470 Do. 324610.35 31-12-1961 24-5-66 DO.of 1968Civil Ashok Saha- 1-7-1961 SugarcaneAppeal kari Sakhar 373640.56 to 12- 4-62 CessNo.1925 Karkhana 31-12-61 Officer,of 1972. Ltd.Ashok- Ahmed-nagar.Civil Girna (i)577329.65 1-7-1960 18-7-62 SugarcaneAppeal Sahakari to Cess OffiNo.1926 Sakhar 30-6-1961 cer, Nasikof 1972 Karkhana (ii)191409.53 1-7-1961 18-7-62 Do.Ltd.Dabhadi. to31-12-19613. 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 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 t he 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 use5 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 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 we re 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 readsTaxes on the entry of goods into a local area for consumption, use or salecounsel 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 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 thethe 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 t he 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 cessmeans the cess payable under any State Act and includes any sum recoverable under any such Act by way of interest or(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(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(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 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(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."

Court's reasoning:
The contention is without force and in this connection we need do no more than refer to the language of clause (c) above extr acted 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 andrespect, 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 al ready 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 becamecontention also was repelled by this Court in Jaora Sugar Mills case (supra) with the followingthe 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 St ate 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 Stat e 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 validity 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 forthe greatest respect, we find no reason at all toproposition 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 provide s 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.e 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. Patels 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 latepoint 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. Secondly, clause (4) of section 2 merely defines the term occupier and ha s 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 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 thethe submissions made by Mr. Patel are therefore repelled.