Case: M/S. S. K. G. Sugar Ltd Vs. State Of Bihar And Ors

There was in force in the State of Bihar a pre-Constitution law known as Bihar Sugar Factories Control Act, 1937 (Act 7 of 1937). By notification issued under Section 29 of that Act, cane cess and purchase tax were being levied in respect of sugar cane intended to be used or used in a sugar factory. It was a temporary enactment. Ordinarly, it was to remain in force until June 30, 1941. But its life was extended from time to time by different amending Acts. The last extension was made by Bihar Act 6 of 1950 up to January 30, 1955, which came into force on January 9, 1950 when it was published in the Bihar Government Gazette. Thereafter, Bihar Act 7 of 1955, which came into force on March 30, 1955 amended Section 1(3) of Act 6 of 1950 extending the life of Act 7 of 1937, indefinitely beyond June 30, 1955. In the meantime, the Essential Commodities Act No. 10 of 1955 (hereinafter called the Central Act) was enacted by Parliament. After the assent of the President, it came into force on April 1,16(1)(b) of the Central Act expressly repealed "any other law in force in any State immediately before the commencement of this Act in so far as such law controls or authorised the control of the production, supply and distribution of, and trade and commerce in, any essential commodity.Bihar Act 17 of 1963 substituted in Act 7 of 1937 with retrospective effect from January 1, 1962, this new Sectionand tax on cane - The State Government may by notification impose -(a) a cess not exceeding fifty-one naya paise per quintal on the entry of sugarcane into a local area, specified in such notification, for consumption, use or sale therein;(b) a tax not exceeding fifty-one naya paise per quintal on the purchase of sugarcane by or on behalf of the occupier of a factory :Provided that such tax shall not be payable in respect of sugarcane for which a cess imposed under Clause (a) is payable.The Government of Bihar, acting under this Section, issued and published a notification on October 21, 1963, in the Gazette whereby cane cess and purchase tax at certain rates were levied in the local areas specified in the notification.5. The constitutional validity of Bihar Act of 1937 and the rules framed thereunder was challenged by a writ petition in the High Court of Patna which by its judgment, dated July 4, 1966 in A. K. Jain v. Union of India, 1968 Pat LJR 179, held Act 7 of 1937 and the rules framed thereunder to be unconstitutional and invalid. On appeal against that judgment, this Court in A. K. Jain v. Union of India, (1969) 2 SCC 340   = (AIR 1970 SC 267  ), held that if the Bihar Act 7 of 1937 provides anything contrary to Rule 3(3) of the Sugarcane (Control) Order 1955, issued under the Central Act, it must be held to have been altered in view of Article 372 of the Constitution. The Patna High Court followed its earlier decision in A. K. Jains case, 1968 Pat LJR 179, in Sugauli Sugar Works Pvt. Ltd. v. Co-operative Development and Cane Marketing Union Misc. J. C. No. 1344 of 20-4-1966 (Pat) Belsand Sugar Co. Ltd. v. Thakur Girja Nandan Singh, AIR 1969 Pat 8  .6. After Bihar Act 7 of 1937 was struck down by the High Court, no legislative measures were taken until January 12, 1968 when Ordinance No. 3 was promulgated by the Governor of Bihar with instructions of the President.Section 35 of the Ordinance correspondend to S. 29 inserted in Act 7 of 1937 by the Amending Act of 1963, excepting that the maximum rate of the cess/tax leviable was fixed at 67 paise per quintal.n 50 of the Ordinance repealed the Bihar Act 7 of 1937. Its sub-section (2) contained a saving and validating provision with regard to anything done, tax imposed or liability incurred etc. under the Repealed Act 7 of 1937.A notification under Section 35 imposing a tax under this Ordinance 3 of 1968, however, was issued by the Government on February 16, 1968. Ordinance No 3 lapsed on February 28, 1968, on which date, another Ordinance (No. 6 of 1968) was promulgated. Sub-sections (1) and (2) of S. 35 of this Ordinance were the same as those of the preceding Ordinance excepting that a second proviso to sub-sec. (1) was added in these termsfurther that any tax imposed by the State Government in respect of the crushing year 1967-68 under the provisions of the Bihar Sugarcane (Regulation of Supply and Purchase) Ordinance 1968 (Bihar Ordinance No. 3 of 1968) shall be deemed to have been effectively imposed from the date of enforcement of that Ordinance.By Section 35(3) Ordinance 3 of 1968 was repealed. But S. 50 saved and validated everything done under Act 7 of 1937 and the repealed Ordinance.On July 4, 1968, the Governor promulgated Bihar Ordinance 4 of 1969. It provided that except its Sections 1 and 52 which came into force at once, the remaining provisions "shall be deemed to have come into force from the 25th June 1969." Section 49 reproduced the taxing provisions of the preceding Ordinance. Section 66 contained validating provisions analogous to those found in the precedingNotwithstanding any judgment, decree or other of any Court, all cesses and taxes imposed, assessed or collected or purporting to have been imposed, assessed or collected under any State Law, before the 25th June, 1968, shall be deemed to have been validly imposed, assessed or collected in accordance with law as if this Ordinance had been in force at all material times when such cess or tax was imposed, assessed or collected, and accordingly....On August 31, 1969 during the Presidents Rule, Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1969 (Presidents Act 8 of 1969) was passed Section 66(1) of that Act providedany judgment, decree or order of any Court, all cesses and taxes imposed, assessed or collected or purporting to have been imposed, assessed or collected under any State law, before the commencement of this Act, shall be deemed to have been validly imposed, assessed or collected in accordance with law as if this Act had been in force at all material times when such cess or tax was imposed, assessed or collected and accordingly....In January, 1968, the petitioner purchased sugarcane for production of sugar in its factory from the sugarcane growers of the area allotted to its factory on payment of the price fixed by the Sate Government. Respondent 1 sent four requisition for realization of cane cess and purchase tax said to be due under the Bihar Act 7 of 1937. The demand notices were issued under Section 5 of the Bihar and Orissa Public Demands Recovery Act 4 of 1914. One of such notices was a demand of Rupees 1,71,543/56 P. alleged to be cess/purchase tax dues for January, 1968.

Court's reasoning:
It is however well settled that the necessity of immediate action and of promulgating an Ordinance is a matter purely for the subjective satisfaction of the Governor. He is the sole Judge as to the existence of the circumstances necessitating the making of an Ordinance. His satisfaction is not a justiciable matter. It cannot be questioned on ground of error of judgment or otherwise in court - see State of Punjab v. Sat Pal Dang (1969) 1 SCR 478   = (AIR 1969 SC 903  ). The contention is devoid of merit. Moreover, after the coming into force of the Presidents Act 8 of 1969, this question had become merely academic.Matter (a) was referable to Entry 33 of the Concurrent List (III) and matter (b) to Entry 52 of the State List (II) in the 7th Schedule of the Constitution which corresponds to Entry 49 of the Provincial Legislative List (List II) of the Government of India Act, 1935. The Central Act 10 of 1955 related to matter (b) only. Bihar Act 7 of 1937 and Bihar Act 7 of 1955 which purposed to reenact the former permanently, in so far as it provided for regulation of production, supply and distribution of sugarcane - a matter falling under Entry 33 of the Concurrent List - was repugnant to the Central Act 10 of 1955, and, in view of Article 254 of the Constitution, to the extent of that repugnancy or inconsistency would be void. In the light of Article 372 of the Constitution read with S. 16 (1)(b) of the Central Act, the Bihar Act would be deemed to have been repealed with effect from April 1, 1955, only in so far as, it controlled or authorised the control of the production, supply and distribution of, and trade and commerce in sugarcane. The taxing provisions of the Bihar Act were not in any way repugnant to the Central Act or any other law passed by Parliament. Those taxing provisions, as already noticed, fall under Entry 52, List II and that was why Section 16 of the Central Act confined the repeal only to those provisions which were covered by Entry 33, List III. The taxing provisions of the Bihar Act, therefore, never lost their validity and continued to be in force. The notification issued under the Bihar Acts of 1937, (and continued under the Acts of 1955 and 1963), imposing the tax or cess, also remained operative during the period in question, till it was replaced by another notification issued on January 12, 1968 under the Ordinance 3 of 1968. It is therefore, incorrect to say that there was any period, much less in January 1968, during which the tax was levied without the authority of law.Even the High Court found that the matters relatable to Entry 33, Concurrent List were severable from the other provisions of the Act. Before us also it has not been seriously urged that the taxing provisions of the Bihar Act were so interwoven and inextricably connected with the provisions referable to Entry 33 List III, that the whole Act would stand or fall together. There was no competition or collision between the taxing provisions of the Bihar Act and those of the Central Act. The two exist side by side and each remains operative in its own distinct field without interfering with thewill bear repetition that the taxing provisions of the Bihar Act were advisely kept out of the purview of S. 16(1)(b) of the Central Act which repealed the State laws only in so far as they controlled or authorised control of the production, supply and distribution of sugarcane. The taxing provisions of the Bihar Act therefore were neither rendered inoperative by Article 254 (1), nor repealed or altered by the competent Legislature within the contemplation of Art. 372 of the Constitution.Since the taxing provisions of the Bihar Act do not contain "anything contrary" to the Central Act, they could not in the light of the observations of this Court, be held to have been altered in view of Art. 372. Indeed, as pointed out already, the Court in that case was not at all concerned with the taxing provisions of the Biharview of the above discussion the conclusion is inescapable that the taxing provisions of the Bihar Act 7 of 1937, as re-enacted permanently by Bihar Act 7 of 1955, continued to be operative and validity in force at all material times, even after the enactment of the Central Act. Further, the successive Ordinance promulgated by the Governor validated by way of abundant caution those taxing provisions or anything done thereunder.It is well settled that within its competence, a Legislature has the power to make a law imposing a tax retrospectively or validate defective laws by subsequent legislation, or even past unlawful collections, the power of validation being ancillary to and included in the power to legislate on a particular subject.The validity of the impugned notification and the cess and tax imposed thereunder has to be judged with reference to the successive Ordinances and finally to the Presidents Act. By virtue of the legal fiction introduced by the validating provision in S. 66 (1), the impugned notification will be deemed to have been issued not necessarily under the Ordinance No. 3 of 1968 but under the Presidents Act, itself, deriving its legal force and validity directly from the latter.