Case: Zila Parishad Kheri Vs. Hindustan Sugar Mills &amp; Anr

2. It is necessary to refer to the facts in Civil Appeal No. 1893/68 only. The Hindustan Sugar Mills Ltd. is a company manufacturing sugar. Its factory is situate in Cola Gokaran Nath in District Kheri in the State of U. P. For manufacturing sugar the company purchases sugarcane in the District of Kheri. It maintains some staff and also makes certain advances to cultivators within the rural area of the said District. It was assessed to what is known as the circumstances and property tax. The relevant provision under which this tax could be levied was Sec. 114 of the District Boards Act 1922 which was repealed by the U. P. Kshettra Samitis and Zilla Parishads Adhiniyam, 1961, hereinafter referred to as the "Adhiniyam" but a similar provision, Section 121 was enacted in that statute. The material portion of Section 121 is as"Conditions and restrictions for tax on Circumstances and Property. - The power of a Parishad to impose a tax on Circumstances and Property shall be subject to the following conditions and restrictions, namely-(a) the tax may be imposed on any person residing or carrying on business in the rural area provided that such person has so resided or carried on business for a total period of at least six months in the year under assessment;(b)company objected to the Ievy of aforesaid tax but the assessing authorities did not accept its objections and made the assessment for the years 1961-1962 and 1962-63. The company filed an appeal to the Commissioner, Lucknow Division, who held that the tax had been wrongly imposed. Thereupon the Zilla Parishad, Kheri, filed a petition under Article 226 of the Constitution challenging the order of the Commissioner. A learned Single Judge of the High Court dismissed that petition. The matter was taken by way of special appeal to a Division Bench. That appeal also failed.3. The short question which the High Court was called upon to decide and which has to be determined by us is whether on the admitted and undisputed facts any tax could be levied under Section 121 of the Adhiniyam on the company whose factory for manufacturing sugar was situate outside the jurisdiction of the Zilla Parishad. On behalf of the Zilla Parishad it was maintained that the company was purchasing sugarcane in the rural area within its jurisdiction for the purpose of manufacturing sugar in its factory and since the purchases were made within the rural area it was "carrying on business" in that area and was thus liable to the levy and payment of tax. All that has to be decided, therefore, is whether the company was carrying on business in the rural area within the jurisdiction of the Zilla Parishad when the activity attributed to it consisted of regularly buying or purchasing sugarcane for the business of manufacturing sugar in its factory which was outside the rural area. It was not disputed before the learned single Judge that the business of the company consisted of manufacturing sugar. For that purpose it was essential to purchase the raw material at the mill gate and in the mofussil area including the rural area in the District of Kheri.

Court's reasoning:
These observations can hardly be of any avail to the Zilla Parishad. The buying of raw material in the shape of sugarcane may be a process or activity of a continuous character but even according to the test laid down by Mukherjea, J., which related to entirely different statutory provisions and facts it cannot be said that the company was making any separate profits or income by means of purchasing sugarcane. It is futile to refer to all the other cases on which learned counsel for the Zilla Parishad has relied as they are totally distinguishable on facts except to notice the decision in Zilla Parishad, Muzaffarnagar v. Jugal Kishore Ram Swarup, 1969 All LJ 24. There a firm had set up crushers in certain rural areas from where it purchased sugarcane. The sugarcane was crushed and converted into a juice. That juice was sent to the town of Miranpur for being pressed into sugar. The High Court was of the view that the juice which was called "Rab" was a saleable commodity in itself and was also a finished product. It was used in home consumption and could also be pressed for producing sugar. The firm was, therefore, working for gain in the places where that activity took place which was for making a profit. It was held that the circumstances and property tax was leviable in these circumstances on the firm because it carried on business in that place where it converted the sugarcane into Rab. The facts that have been stated clearly establish the distinguishing features from the present case. The sugarcane which was being purchased by the Company was not subjected to any such process by which any such commodity or finished product came into existence which by itself could earn profits. In our opinion the contention of the Zilla Parishad, if accepted, would lead to the astounding and extraordinary result that if a manufacturing concern continuously acquires raw material not only from different parts of India but also from other parts of the world it could be said that it was carrying on business in all those places from where the raw materials were acquired or purchased. We are unable to give any such wide connotation to the words "carrying on business", employed in Section 121 (a) of the Adhiniyam.