Case ID: 3933

Judgment:
Civil Appeal No.1293 of 1969. Appeal from the Judgment and Order dated the 25th April	 1968 of the Madhya Pradesh High Court in Misc. Petition No. 404/64. S.T. Desai	 J.B. Dadachanji K.J.John	 Mrs. A.K. Varma for the Appellant. S.K. Gambhir for Respondents 1	 2 and 4. E.C.Agarwala and R.N. Sachthey for Respondent No. 3. 607 The Judgment of the Court was delivered by SHINGHAL J. This appeal by a certificate issued by the Madhya Pradesh High Court is directed against its judgment dated April 25	 1968. The appellant is a company which cultivates sugarcane and manufactures sugar in its factory in Sehore	 Madhya Pradesh	 by crushing the sugarcane cultivated by it and purchased from other cultivators. The State Legislature enacted the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act	 1958	 hereinafter referred to as the State Act	 which came into force on July 1	 1959. The State Government issued a notification on November 28	 1959	 which appeared in the State Gazette dated December 4	 1959	 under section 23 of the State Act imposing a cess of 12 paise per maund on the entry of sugarcane during a crushing season in the area comprised within "such of the factories in which the total quantity of cane entering for consumption	 use or sale to the factory during such season exceeded 10 lakh maunds". The appellants challenged the validity of the imposition	 and the High Court	 on August 31	 1961	 held that the notification was illegal as the imposition of the levy was with reference to particular premises. A similar view was taken in regard to the Acts in some other States and Parliament thereupon enacted the 	 hereinafter referred to as the Validation Act	 which came into force on December 26	 1961. Section 3 of the Validation Act was taken to validate the imposition and collection of the cess under the State Act. The Manager of the appellant company received an intimation from the Additional Collector of Sehore dated April 13/15	 1964	 stating that a sum of Rs. 5	49	262.92 was due from it on account of cess for the period "1959 60 to December 25	 1961" and asking for a bank guarantee for payment of the balance. The appellant wrote back saying that the amount of the cane cess worked out to Rs. 5	44	835.69 and not Rs. 5	49	262.92	 and that as the collector had not assessed the amount of the cess in accordance with the rules	 it was not payable by the appellant. As the Collector ignored the objection of the appellant	 a demand notice was served upon it under section 146 of the Madhya Pradesh Land Revenue Code 1959	 asking it to deposit Rs. 5	49	262.92 by August 1	 1964. Once again the appellant denied its liability	 but as that was not acceptable to the Collector	 the appellant filed a writ petition in the High Court stating that the Collector 's demand on account of the cess was illegal as the Validation Act was ultra vires the Constitution. The State of Madhya Pradesh traversed the claim in the writ petition. The High Court upheld the imposition of the cess but reduced 608 it to Rs. 5	44	835.69	 by its impugned judgment dated May 25	 1968	 and that is why the Company has come up in appeal to this Court. It has been argued by Mr. Desai on behalf of the appellant that section 23 of the State Act was not ultra vires the Constitution and there could be no question of validating a valid Act. According to him	 the State Act fell within the scope of Entry 52 of List II of the Seventh Schedule of the Constitution and was valid	 and Parliament could not legislate in respect of that occupied field and pass the Validation Act. These arguments have been based on the main contention that the expression "an area" in Sub section (1) of section 23 of the State Act really means "a local area" within the meaning of the aforesaid Entry 52 and no other area. Sub section (1) of section 23 of the State Act reads as follows	 "23. Levy of cess on cane. (1) The State Government may	 by notification	 impose a cess not exceeding 25 paise a maund	 on the entry of cane into an area	 specified in such notification	 for consumption	 use or sale therein"	 There are two provisos to the sub section	 but they are not relevant for the purpose of the controversy before us. It would appear from sub section that it permits the State Government to impose the cess on the entry of sugarcane into any area that may be specified in its notification	 and there is nothing in it to confine the imposition to a "local area". As has been held by this Court in Diamond Sugar Mills Ltd and Another vs State of Uttar Pradesh and Another when a similar point arose for consideration with the U.P. Sugarcane Cess Act	 1956	 the proper meaning to be attached to the words "local area" in Entry 52 List II of the Seventh Schedule of the Constitution	 (when the area is a part of the State imposing the law) is an area administered by a local body like a municipality	 a district board	 a local board	 a union board	 a panchayat or the like". It has been clearly laid down that the premises of a factory are therefore not a "local area". This court accordingly struck down section 3 of the U.P. Act empowering the Governor to impose a cess on the entry of sugarcane into the premises of the factory on the ground that it did not fall within Entry 52 of the State List and there was no other Entry in the State List or the Concurrent List in which the Act could fall. It is therefore futile for the appellant to contend that section 23 of the State Act was not ultra vires the Constitution or that it can be upheld on such a construction of the words "an area" in section 23 as to restrict it to mean a "local area". 609 The decision in Diamond Sugar Mills case came up for consideration in this Court in Jaora Sugar Mills (P) Ltd. vs State of Madhya Pradesh and others with a specific reference to the provisions of the State Act	 and it was once again held	 following that decision	 that the imposition of the cess was outside the legislative competence of the State. While examining that aspect of the controversy	 this Court made it clear that what Parliament had done by enacting section 3 of the Validation Act was not to validate the invalid State Statutes	 but to make a law concerning the cess covered by the said Statutes and to provide that the said law shall come into operation retrospectively. This Court clarified that by virtue of section 3 of the Validation Act	 the command under which the cess would be deemed to have been recovered would be the command of the Parliament	 because the relevant sections	 notification	 orders	 and rules had been adopted by the Parliamentary Statute itself. It will thus appear that the argument of Mr. Desai to the contrary is of no consequence. The other argument of Mr. Desai that the writ of mandamus issued by the High Court on August 31	 1961	 quashing the notification dated November 28	 1959	 could not be made	 and was not in fact made	 ineffective by the Validation Act	 is also of no consequence. Section 3 of the Validation Act makes this quite clear for it provides as follows. "3. Validation of imposition and collection of cesses under State Acts. 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 validly 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	 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 610 (a) no suit or other proceedings 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. (2) For the removal of doubts it is hereby declared that nothing in sub section (1) shall be construed as preventing any person (a) from questioning in accordance with the provisions of any State Act and rules made thereunder the assessment of any cess for any period; or (b) from claiming refund of any cess paid by him in excess of the amount due from him under any State Act and the rules made thereunder. " The section thus specifically validates the notification in question in regard	 inter alia	 to the imposition of the cess. The mandamus which was issued by the High Court on August 31	 1961	 could not therefore avail the appellant thereafter. It has lastly been argued by Mr. Desai that when a law provides for the assessment of a cess or tax	 it is necessary that it should be done by a specific order to that effect	 and that an order of assessment cannot be presumed when it has not really been made. It has therefore been argued that as an order of assessment was not made in the present case	 it could not be presumed or deemed to have been made simply because a demand was raised for the purpose of affecting the recovery of the cess from the apellant. The charging provision for the levy of the cess is to be found in section 23 of the State Act	 to which we shall continue to refer for the sake of convenience even after the passing of the Validation Act. Sub section (2) of that section provides that the State Government shall make rules specifying the authority empowered to assess and collect the cess and the manner in which it shall be collected. The Madhya Pradesh Government accordingly made the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Rules	 1959	 hereinafter referred to as the Rules which were also "validated" by Section 3 of the Validation Act. Rules 60 of the Rules provides that the col 611 lector shall be the authority empowered to "assess and collect" the cess. Rule 61 makes it obligatory for the occupier of a factory to maintain a correct account	 day to day	 in the prescribed form	 of the cane entering the area specified in the notification under section 23. Rule 62 provides further that the occupier of the factory shall submit to the Collector	 before the close of each month	 a return in the prescribed form	 showing the quantity of cane that has entered the specified area during the immediately preceding month. It further provides that within 15 days of the close of the crushing season	 the occupier shall deposit the cess leviable on the total quantity of cane which has entered the specified area during the crushing season and shall send the treasury receipt showing the amount of cess deposited to the Collector. Then comes rule 63	 which places the following responsibility on the Collector	 "63. The Collector shall check the amount of cess deposited by the	 occupier of the factory from the returns submitted under rule 62 and see if the full amount of cess due from the occupier has been credited into the Treasury. If the Collector finds that the full amount of cess due from the occupier of the factory has not been deposited he shall by a written notice call upon the occupier to deposit the amount due from him within the period specified in such a notice and the occupier shall deposit the amount within the period specified. " The responsibility of the Collector for purposes of assessing and collecting the tax under rule 60 of the Rules is therefore to check the amount of the cess deposited by the occupier of the factory. The check has to be made with the returns submitted by the occupier	 and the Collector has to see that the full amount of the cess has been credited to the treasury. If he finds that this is not so	 it is his duty to call upon the occupier	 by a written notice	 to deposit the amount due from him within the period specified in the notice. The State Act and the Rules do not therefore require that the Collector shall make a formal order of assessment	 and then collect the cess. It has to be appreciated that the purpose of an assessment is to compute the amount of the cess payable by the person concerned. "Assess" is a comprehensive word	 and in a taxing statute it often means the computation of the income of the assessee	 the determination of the tax payable by him	 and the procedure for collecting or recovering the tax. In a case where there is a dispute about the identity of the assessee	 the order of assessment serves the purpose of estab 612 lishing that identity and naming the person from whom the tax has to be recovered. In the present case there is no controversy regarding the identity of the assessee	 and the provision regarding the assessment of the cess in sub section (2) of section 23 of the State Act and rule 60 of the Rules related to the checking of the quantity of cane which had entered the specified area	 and the amount of cess deposited in respect of it. It is for that purpose that form 4 provides the details to be submitted by the occupier of the factory	 and a duty is cast on him to deposit the cess leviable on the total quantity of the cane	 within 15 days of the close of the crushing season	 and to send the receipt evidencing the deposit to the Collector. As has been pointed out by the High Court	 the Appellant 's letter (Ext. R I) dated May 25	 1964	 shows that it admitted that the amount of the cess payable by it worked out to a total of Rs. 5	44	835.69 That was therefore the admitted amount of the cess which had to be recovered. The Collector recorded an order (exhibit R 2) dated July 21	 1964	 in which he clearly stated that he had gone through the case and that the Tehsildar should immediately recover the entire amount of the cess due from the appellant forthwith. He further directed that the "entire amount of the cane cess due from the B.S.I." should be recovered and monthly progress report sent to him. This shows that the Collector did apply his mind to the matter	 and made an express order for the recovery of the total amount of the cess admitted by the appellant. It seems that the Naib Tehsildar increased the amount beyond what had been admitted by the appellant and directed by the Collector	 but the High Court rightly confined the recovery to Rs. 5	44	835.69 which was admitted by the appellant to be due from it on account of cess for the two seasons. There is thus no force in the argument of Mr. Desai to the contrary. The appeal fails and is dismissed with costs. M.R. Appeal dismissed.

Summary:
The appellant company cultivates sugarcane and manufactures sugar in its factory	 by crushing the sugar cultivated by it and purchased from other cultivators. The State Government enacted the M.P. Sugarcane (R.S.P.) Act	 1958 which came into force on July 1	 1959. The State Government issued a notification under section 23 of the Act imposing a cess of 12 paise per maund on the entry of sugarcane during a crushing season in the area comprised within "such of the factories in which the total quantity of cane entering for consumption	 use or sale to the factory during such season exceeded 10 lakh maunds. " The High Court	 on a writ application by the appellants	 declared the notification illegal as the imposition of the levy was with reference to particular premises. The Parliament thereupon enacted the . Section 3 of the Validation Act was taken to validate the imposition and collection of the cess under the State Act. In April	 1964	 the appellant received an intimation from the Additional Collector stating that a sum of Rs. 5	49	262.92 was due from it as cess for the period 1959 60 to December 25	 1961	 and asking for a bank guarantee for payment of the balance. The appellant replied that the amount of cess worked out only to Rs. 5	44	835.69 and the Collector had not assessed the cess in accordance with the rules. Its objection was ignored and a demand notice was served on it under s.146 of the M.P. Land Revenue Code	 1959	 for Rs. 5	49	262.92. The appellant filed a writ petition challenging the constitutionality of the Validation Act under which the Collector had demanded the cess. The High Court upheld the imposition of cess but reduced it to Rs. 5	44	835.69. It was contended that section 23 of the State Act was not ultra vires the Constitution	 as the expression "an area" in section 23(1) means "a local area" within the meaning of Entry 52 of List II	 7th Schedule of the Constitution	 and the Parliament could not	 therefore	 enact an Act validating a valid Act. It was further contended that when a law provides for the assessment of a cess or tax	 it is required to be done by a specific order to that effect	 but it was not made in this case. Dismissing the appeal	 the Court	 606 ^ HELD: 1. Section 23 of the State Act was ultra vires the Constitution	 and cannot be upheld on such a construction of the words "an area" in section (1) as to restrict it to mean a "local area". The proper meaning to be attached to the words "local area" in Entry 52	 List II of the Seventh Schedule of the Constitution; (when the area is a part of the State imposing the law) is an area administered by a local body like a Municipality	 a district board	 a local board	 a union board	 a panchayat or the like. The premises of a factory are therefore not a "local area" falling within Entry 52 of the State List	 and there is no other Entry in the State List or the Concurrent List in which the Act could fall	 [608 E H] Diamond Sugar Mills Ltd. and Anr. vs State of U.P. & Anr. ; and Jaora Sugar Mills (P) Ltd. vs State of M.P. and Ors. 	 ; followed. What the Parliament had done by enacting section 3 of the Validation Act	 was not to validate the invalid State statute	 but to make a law concerning the cess covered by the said statute and to provide that the said law shall come into operation retrospectively. By virtue of section 3	 the command under which the cess would be deemed to have been recovered	 would be the command of the Parliament	 because the relevant sections	 notifications	 orders and rules had been adopted by the Parliamentary Statute itself.[609 B C] 3. The State Act and the Rules do not require that the Collector shall make a formal order of assessment	 and then collect the cess. The purpose of an assessment is to compute the amount of the cess payable by the person concerned. "Assess" is a comprehensive word and in a taxing statute it often means the computation of the income of the assessee	 the determination of tax payable by him	 and the procedure for collecting or recovering the tax. In a case where there is a dispute about the identity of the assessee	 the order of assessment serves the purpose of establishing that identity and naming the person from whom the tax is to be recovered. The responsibility of the Collector for purposes of assessing and collecting the tax under section 60 of the Rules	 is to see that the full amount of the cess has been credited to the treasury by the occupier of the factory. If he finds that this is not so	 it is his duty to call upon the occupier by a written notice to deposit the amount due from him within the period specified in the notice. [611E H	612A]