Case ID: 5065

Judgment:
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 B.R.L. Iyenger	 Yogeshwar Prasad	 S.P. Gupta	 V.P. Sachthey	 K.K. Venugopal	 O.P. Rana	 Dr. Y.S. Chitale	 K.G. Bhagat	 F.S. Nariman	 Soli J. Sorabjee	 H.K. Puri	 G. Gopalakrishnan	 Khaitan & Co.	 A. Subba Rao	 Naunit Lal	 K.M.K. Nair	 J.B.D. & Co.	 P.R. Ramasesh	 Bishambar Lal	 G. Subramanium	 Ms. section Dikshit	 Ms. A. Subhashini	 K.R. Nambiar	 R.N. Poddar	 B.M. Nagaria	 Mrs. Rani Chhabra	 R.B. Datar	 P.H. Parekh	 K.R. Nagaraja	 B.D. Sharma	 V.J. Francis	 section Markendaya	 R.N. Sachthey	 R. Ramachandran	 S.S. Khanduja	 Manoj Swarup & Co.	 P.K. Pillai	 Baggar	 K.L. Mehta	 Swarup John & Co.	 G.S. Ramarao	 C.V. Subba Rao	 S.K. Gupta	 G.S. Chatterjee	 Probir Mittra	 Mrs. J. Wad	 S.K. Gambhir	 Pramod Dayal	 R.K. Jain	 S.R. Srivastava	 K.K. Mohan	 Dhantaraj	D.K. Agarwal	 S.K. Gupta	 Raju Ramachandran	 Ravindra Bana	Vinoo Bhagat	 K.K. Jain	 A.D. Sanger	 Girish Chandra	 C.K. Sucharita	 T.C. Sharma	 Mrs. Kitty Kumaramangalam. A.V. Rangam	 R.V. Ratnam and D.M. Popat for the appearing parties. The Judgment of the Court was delivered by D R.B. 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 U.P. 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 0.51 paise per quintal to all the Sugar factories situated in the State of U.P. 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 M/s. 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	 U.P. 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 U.P. (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. 8.38 per quintal. The cane growers felt agitated as according to them	 the price fixed was much too low. They	 therefore	 made representation to the U.P. Government and as a result thereof the U.P. Government intervened in the matter and fixed sugarcane price at Rs. 12.25 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 U.P. 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 14(1) of the Act	 the State Government granted remission to the extent of 0.51 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 U.P. 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 A(l) 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 14(1)	 it would be advisable to read the section in full. Section 14(1) reads : "Section 14(1). 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 14(1) of the Act was necessary to all the factories in the eastern zone and not only to a fortunate few. But the U.P. Government has refused to extend the remission to the appellant illegally when clause (a) of section 14(1) 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 14(1) 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 14(1) 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 14(1) 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 14(1) 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 8.5 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. P.S.S. Appeals dismissed.

Summary:
Section 3(1)(a) of the U.P. Sugarcane (Purchase Tax) Act	 1961 provides for imposition of tax on the purchase of sugarcane by the owners of sugar factories. Section 14(1) 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 U.P. at Rs. 8.38 per quintal. To meet the growers demand for a higher price the Government of U.P. refixed the sugarcane price at Rs.12.25 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 s.14(1)(a) of the Act granted remission in purchase tax to the extent of Re. 0.51 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 cl.(a) of s.14(1) 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 8.5 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 14(1) 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 14(1) 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 s.14 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 cl.(b) is to encourage the establishment of new factories	 and that of cl.(c) 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 cl.(a) 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 cl.(a) of s.14(1) 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 cl.(a) of s.14(1) 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 cl.(a) of s.14(1). Such a question would have arisen if the grant of remission were founded on a ground extraneous to the provisions of section 14(1). [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.