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Joara Sugar Mills Private Ltd. Vs. State of Madhya Pradesh and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtMadhya Pradesh High Court
Decided On
Case NumberM.P. No. 130 of 1962
Judge
Reported inAIR1964MP118
ActsSugarcane Cess (Validation) Act, 1961 - Sections 2 and 3; Constitution of India - Article 248; Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1959 - Sections 6, 8 and 21
AppellantJoara Sugar Mills Private Ltd.
RespondentState of Madhya Pradesh and ors.
Appellant AdvocateK.A. Chitaley and ;V.S. Dabir, Advs.
Respondent AdvocateC.K. Daftari, Attorney General, ;M. Adhikari, Adv. General and ;R.J. Bhave, Govt. Adv.
DispositionPetition dismissed
Cases ReferredDelhi v. State of Delhi
Excerpt:
- - 3. the validity of section 21 was also cnauengea though without success by tne bhopal sugar industries no. he contended that the commission levied under section 21 was payable to the council and it was for promoting better sugarcane cultivation by introducing better varieties ot sugarcane, improving the yield, providing irrigation facilities, preventing disease to crop and any other wayr that the council functioned; that the benefit conferred by the council was spread over a local area and was enjoyed by sugarcane cultivators as a class and its beneficial activities were not confined to a particular period; that therefore the existence of a council was not a condition precedent for the levy or collection ot commission under section' 21, and that the collection could be levied and.....dixit, c. j.1. in this application under article 226 of the constitution of india by a private limited company engaged in the business of manufacture, production and sale of sugar, the petitioner claims a declaration that the sugarcane cess (validation) act, 1961 (xxxviii of 1961). (here-matter referred to as to the act) passed by parliament 4s beyond the constitutional powers of parliament and is, therefore, invalid, and prays for the issue to a writ or certiorari for quashing a notice dated 17th march 1962 given to it by the collector of ratlam calling noon it to pay a total amount of rs. 6,33,917.52 ape. as due from it on account of cane cess and cane commission tinder the act and the madhya pradesh sugarcate (regulation to supply and purcnase) act, 1958, (hereinafter referred to as.....
Judgment:

Dixit, C. J.

1. In this application under Article 226 of the constitution of India by a private limited company engaged in the business of manufacture, production and sale of sugar, the petitioner claims a declaration that the Sugarcane Cess (Validation) Act, 1961 (XXXVIII of 1961). (here-matter referred to as to the Act) passed by Parliament 4s beyond the constitutional powers of Parliament and is, therefore, invalid, and prays for the issue to a writ or certiorari for quashing a notice dated 17th March 1962 given to it by the collector of Ratlam calling noon it to pay a total amount of Rs. 6,33,917.52 ape. as due from it on account of cane cess and cane commission tinder the Act and the Madhya Pradesh Sugarcate (Regulation to Supply and purcnase) Act, 1958, (hereinafter referred to as the local Act).

2. in order to appreciate the merits to the controversy arising in this case it is necessary to reier first to the local Act by which a cuss on sugarcane entering into an area specified in a notification issued in that ornate for consumption, use or sale therein was imposed and we occupier of a sugar factory was made name for the payment of commission on sugarcane purchased by the factory. The local Act was enacted in 1959. It came into force on 1st July 1959. Section 23 (1) of that ACT, so far as ft is material here, ran as follows:--

'23. (1) the State Government may, by NOTINFICATION, impose a cess not exceeuing25 nP. a maund, on tne entry ot cane into an area, specified such noth-catton, for consumption, use or sale therein;

xx xx xx . x'

On 4th December 1959 the State Government issue'a notification in exercise of the powers conferred on ittoy Section 23 (1) to the local Act imposing with ettect fromthat date a cess at the rate of 12 no. per maund on

'the entry of cane during a crushing season in the area comprised within such of the factories in which the fom quantity of cane entering for consumption, use or sale the factory during such season' exceeded 10 laktis maunos. Section 21 of the local Act read with rule 45 ot the Madhya Prades sugar-cane (Regulation of Supply and Purcnase) Rules 1959 made under that Act, makes the occupier of a factory liable tor the payment of a commission on every mant ot cane purchased by the factory in the circumstances and at the rate mentioned in the provision and the rule.

The validity of section 23 of the local Act was challenged before us in Bhopal Sugar Industries v. State of M. P., M. P. No. 27 of 1961, DA 31-8-1961 (M.P). to that case we held, following the decision of the Supreme Court in Diamond sugar Mills v. State of U. P., AIR 19bl SC 652, that the notification dated the am December 1359, in so far as it imposed a cess on tn' entry ot cane during a crushing season in the area comprised within such of the factories trt which tne tout quantity of cane entering for consumption, use or sate to the factory during such season exceeded 10 lakh maunds, was invalid. In Diamond Sugar Mills' case AIR 1961 sc 652 (supra) tne Supreme court struct down as invalid the law as enacted in section 3 of the D. P. Sugarcane Cess Act, 1956, imposing a cess on the entry of sugarcane into the premises of a factory on the ground that the legislation did not fall within Entry 52 of the State List in the seventh Schedule to tne Constitution and there was no other entry either in tne State List or in the Concurrent List in which the law could fall.

We pointed out in M. P. No. 27 of 1961 D/-31-8-1961 (MP) that section 23 of the local Act was an analogous provision to Section 3 of the U. P. Sugarcane Cess ACT, 1956, and, therefore, the decision of the Supreme Court in Diamond Sugar Mills' case, AIR 1961 SC 652 (supraj invalidated the levy and collection of cess on sugarcane under section 23(1) and the notification issued thereunder.

3. The validity of Section 21 was also cnauengea though without success by tne Bhopal Sugar Industries no., by another petition in Bhopal Sugar Industries Ltd. v. State ot M.P., MP NO. 340 of 1961 D/- 30-1-1962 (MP). the grounas ot challenge were that Section 21 was invalid being beyond the legislative competence of the State Legislature ana that the provision given to the Government the power to tix the rate of commission amounted to excessive delegation and was accordingly invalid, in that case, it was held by a Division Bench of this Court that tne imposition described as 'commission' in Section 21 ot the Act, was a fee; that the legislative power to impose the fee was to be found m Entry 21 ot the state List, read with Entry 66 of that List; and that consequently the imposition of the fee was within the competence of the State Legislature. On the question of excessive delegilature, the Division Bench, after referring to the decisions of the Supreme Court in Harishankar Bagia v. State of M.r. 1955-1 SCR 380: (AIR 1954 SC 465), Union ot India v. Bhana Mat Gulzari Mal Ltd., 1960-2 SCR 621: (AIR 1960 SC 475) and Vasanlal Maganbhai v. State of some (1961) 1 SCR 341: (AIR 1961 SC 4), expressed the following view-

'In the light of these: decisions, it is dear mat tne indication of the general purpose and policy of the ACI gives adequate guidance and tne delegation to the state Government to frame rules for giving effect to tne policy of tne Act cannot be said to be excessive even tnougn tne particular section granting the delegation, does not state the limitations expressly. In tne instant case, as we nave already sard, the amount of commission is limited by the needs of the Council for performing tne functions gpeemea In the Act; and as tne imposition is a fee, it must bear reasonable proportion to the expenditure, mere is, there-fore, no reason to say that tne delegation is excessive.

4. In 1961 after our decision in M. p. No. 27 of 1961 D/- 31-8-1961 (MP) declaring invalid tne notification issued on 4th December iy59 under Section 23(1) or ths Act Parliament enacted the Sugarcane Cess (vanda-tion) Act, 1961. The Act is intituled 'An Act to validate; tne imposition and collection of cesses on sugarcane under certain State Acts and to amend the U. P. sugarcane cess (Validation) Act, 1961.' The Act received the assent of me President on nth September 1961 and was published in the Gazette on 12th September 1961. Section 1(2) of the Act provides that. Section 5 thereof shall come into force at once, and the remaining provisions of the Act, in so tar as they relate to any State, shall come into force in that State on such date as the Central Government may. by notification in the Official Gazette, appoint. In exercise of the powers under Section 1(2) a notification' was issued, on 19th December 1961 by the Central Government appointing 26th December 1961. as the date of the coming into force of the provision of the Act in Madnya Pradesn, except section' 5 (See Gazette of India dated 23rd December 1961). Clause (a) of Section 2 of the Act defines 'cess' as meaning 'the cess payable under any State Act and Includes any sum recoverable under any such Act oy way of interest or penalty.' 'State Act' has been denned by clause (b) of section 2 as meaning the local Act and the other Acts enumerated therein as in force in any State from time to time, by way of amendment or adaptation. Section 3, which is the material provision here, is as follows-- -

'3. (l-J Notwithstanding any judgment, decree or oraer 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 vaiidly 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 or such cess had been included in and formed part of this section and this section had been in force at all material times wnen such cess was imposed, assessed or collected; and accordingly,--

(a) no suit or other proceeding shall be maintained or continued in any court for tne 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;

(c) any cess imposed or assessed under any state Act before the commencement of this Act but not collector before such commencement may be recovered (after assessment of cess, where necessary) in the manner provided under that Act

(2) for the removal of doubts it is heresy deciarea tnat 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 ay him in excess of the amount due from him under any State Act ana the rules made thereunder.'

We are not concerned with the remaining two sections or the Act which deal with the omission of sectinn 11 of the Bombay sugarcane Cess Act, 1948, and the amendment at U. P. Sugarcane Cess (Validation) Act, 1961.

5. Shri Chitale, learned counsel appearing for the petitioner-company, put the petitioner's case tnus. It was submitted that in form and substance1 the Act was a plece of legislation validating the levy and collection of cess OB sugarcane under section 23 of the local Act which had been invalidated by this Court in M.P. No. 27 of 1961 D/ 31-8-1961 (MP) following the decision of the supreme Court in the case of Diamond Sugar Mills, AIR 1S61 SC 652 (supra) on the ground that the cess on sugarcane as imposea by the terms of Section 23 of the local Act was beyond the legislative competence of the State Legislature; that it merely validated the levy and collection of the csss made by the State till 26th December 1961 when Section A of the Act came into force in this State and did not levy or impose any cess after that date; that the impugned Act was purported to have been enacted by Parliament under the authority of its legislative powers conferred uy Article 248, read with Entry 97 of the Union List; that in the exercise of these residuary powers of legislation Parliament could not do indirectly what the State Legislatures had not been empowered by the Constitution' to do directly; and that the residuary powers could not be invoked for passing a legislation, transgressing the limitations under which the State could levy and collect the cess. ft was said that the cess imposed was a tax, that a tax could be imposed by Parliament in the exercise of its residuary powers ot legislation but it could be imposed only for the purposes ot the Union; and that the Act unoer challenge was not an independent legislation imposing cess tor any purpose of the Union, Learned counsel proceeded to say that the Act was a colourable piece of legislation inasmuch as in effect it levied a tax for state-purposes and not for Union-purposes to which the power of taxation conferred by Article 248 and Entry 1 of List 1 was limited; tnat th& object of the Act was to enable the State Government to retain, the amount of cess levied and collection under the Acts enumerated in Section 2(b) which they would have been otherwise required to refund; tnat under the scheme of the Act the State Governments had been empowered to collect the cess tor themselves and not as agents or delegates for the Union and the amounts of .ess collected by the State Governments had already become parts of the Consolidated Funds of the States: that the amounts did not go into the Consolidated Fund of India; and that the Act did not contain any provision consistent with Articles 266 and 275 of the Constitution indicating that appropriation of the proceeds of the tax out of tne Consolidated Fund of India had been made to the States by Parliament.

Learned counsel referred us to the provisions of Article 269(g) and the new section 9(4) of the Central sa'es iax Act, 1956, dealing with the assignment to a State, and retention by it, of the proceeds of any tax levied and collected under that Act. in any State on behalf of the Government of India, to emphasize the contention that provision with regard to the assignment to and retention by the States of the proceeds of the cess was necessary in the Act to give the levy-and collection of cess -validated by it the real character of the levy and imposition of a tax for Union purposes. Thus, it was urged, that Parliament in passing the Act transgressed the limits of ITS residuary power of legislation and the Act was, therefore, of a colourable nature and invalid.

6. in regard to the demand made under Section 21 of the local Act on account of commission on purchases of cane, learned counsel for the petitioner submitted mat the demand of commission for the sugarcanei season 1959 60 was illegal inasmuch as under Sections 21(1) (&) of the local Act the commission amount was payable to the Cana Development Council constituted under Section 5 of inat Act and during the period 1959-60 no such Council had been constituted and none was in existence; that on the true constriction of Section 21 and rule 45 of the M. P. sugarcane (Regulation of Supply and Purchase) Rules, 1959, tne commssion, which was a fee, could not be demandea in respect of a period when the Council to whom it was payable did not come into being and could not and did not render any service.

7. In reply, learned Attorney General appearing for the union of India asserted the authority of Parliament to enact the law in question by saying that as held by the supreme Court in, Diamond Sugar Mills' case, AIR 1961 sc 652 (supra) there was no entry in tne State List or tne Concurrent List under which the various Acts enumeratea in Section 2(b) of the Act imposing the cess could fall; and that, therefore, a legislation with regard to the imposition and collection of those cesses on sugarcane could valloly be enacted by Parliament under Article 248 read with Entry 97 of List I.

It was said that though the Act was described as an 'Act to validate the imposition and collection of cesses on sugarcane under certain State Acts', it was in SUDS-tance a legislation not validating the imposition and collection made under State Acts, but one imposing under tne legislative sanction of Parliament cesses at the rate in the manner imposed, assessed or collected by tna various States under the relevant State Acts, and sne imposition in any State was for the period before tne commencement of the Act in that State during which tne cess was imposed, assessed or collected unaer trie State Act, albeit invaiidly; and that Parliament had the power to make a retrospective imposition of a tax and to pass a legislation for that purpose having effect tor a short period.

Learned Attorney General further urged that the ACT did not trench upon the State Legislative field; that even if the motive of Paliament in passing the legislation was to enable the state Governments to have the benefit OT the amount of cess levied and collected by them under various State Acts, that did not make the Act colourable in character or alter its true nature; and that the question of motive; of the legislation and its consequences wore irrelevant to the issue of the legislative competence or Parliament.

It was not disputed by the learned Attorney General that the cess imposed by the Act was a tax and that under Article 248, read with Entry 97, a tax could be levied only for the purposes of the Union. It was, however, sub-mitted that the imposition and collection by the various States of the cesses imposed by them being invalid, the proceeds of those cesses could never become part of the consolidated Fund1 of any State; that the cesses under section 3 of the Act being improed by Parliament, there proceeds automatically formed at Article 265 of the cons-stitution part of the Consolidated Fund of India; and that being so, the amount of cesses collected by the state Governments under the various State Acts were notnmg but moneys received by them for and on benaif of the Union Government.

Learned Attorney General pointed out that the Act nowhere said that the proceeds of the tax would be retamed by the states concerned, andi it was now tor Parliament to-decide whether to allocate the whole or part of the proceeds of the tax to the States by making art appropriation, under Article 266 or grants under Article 275; that was not necessary to provide in the Act itself for appropriation of the proceeds' of the tax as the imposition by the Act was not for a period in future after its commencement in any State; and that the absence of a provision with regard to appropriation did not make the Act colourable or invalid.

8. The argument of the learned counsel lor the petitioner questioning the legality of the demand for commission under section 21 of the local Act was answered by Shri Adhikari, learned Advocate General appearing tor the State of Madhya Pradesh. He sought to meet the argument by reference to the functions of the Cane Development Council set out in section 6 of the local Act.

He contended that the commission levied under section 21 was payable to the Council and it was for promoting better sugarcane cultivation by introducing better varieties ot sugarcane, improving the yield, providing irrigation facilities, preventing disease to crop and any other wayr that the Council functioned; that it was not necessary that the Council should give a direct benefit to anyone; that the benefit conferred by the Council was spread over a local area and was enjoyed by sugarcane cultivators as a class and its beneficial activities were not confined to a particular period; that therefore the existence of a Council was not a condition precedent for the levy or collection OT commission under Section' 21, and that the collection could be levied and recovered in respect of a period before the coming into being of the Council with a view to pay it to the Council when constituted for enabling it to tunction effectively for providing the services enumerated in Section 6.

To support the legality of the demand for commission. for the period when the Council was not in existence, learned Advocate General relied on the observations made by the Supreme court in Sudhindra Thirtha Swamiar v. Commr. for Hindu Religious and Charitable Endowments, Mysore, AIR 1963 SC 966 at p. 975 on the nature and incidence of a fee.

9. On the arguments presented before us, the substantial question in dispute here is not simpliciter whether the Act falls within Entry 97 of the Union List. It is whether the Act is colourable in character in tnai under the guise or pretence of doing something permittee it is in reality doing something prohibited or beyond power. The competency of Parliament to pass a legislation imposing for Union purposes a tax of the type and character levied by or under the State Acts enumerated in Section 2(b) of the Act does not admit of any doubt.

In the case of Diamond Sugar Mills Ltd. AIR: 1961 SC 652 (supra) the Supreme Court invalloated me levy and collection of cess on sugarcane under the U. P. Sugarcane Cess Act, 1956, on the ground that the said Act was beyond the competence of the State Legislature, and observed that it did not fall within Entry 52 ot the State List and there was no other entry in either the State List or the Concurrent List in which the law could fall Following this decision of the Supreme Court, it was, held by us in M. P. No. 27 of 1961 D/- 31-8-1961 (MP) that the cess on sugarcane as imposed by the terms ofSection 23 of the local Act was beyond tne legislative competence ot the State Legislature. it, then, the matter of imposition of cess on Sugarcane as levied by tne acts mentioned in Section 2 (b) does not tall under any entry in tne state list or the Concurrent List it follows that Parliament has power under Article 248 ana entry 91 to impose a cess of that type.

These constitutional provisions give to parliament the authority of making any law for imposing a tax not mentioned in tne concurrent list or the State List. no doubt, the power of imposing a tax under Lntry 97/ can be exercised only tor imposing a tax for tne purposes at the Union. It could not be exercised for validating the levy and collection of cesses under the various state Acts the validity ot which was affected by the decision of the Supreme Court in Diamond sugar Mills' case, AIR 1961 _SC 652 (supra) by giving to the State egis-tatures the' legislative competence denied by the constitution. In the exercise of its resiquary power ot egis-tation, it is competent for Parliament to make a law imposing a tax retrospectively tor a period before the commencement of the law. This proposition is unquestionable and firmly settled by the decisions ot are supreme Court in Union of India v. Madan Goptal Kabra 1954 SCR 541 : AIR 1954 SC 158 and M.P.V. Sundararamier and Co. v. I he State of Andnra Pradesh, 1958 SCR 1422 : (AIR 1958 SC 468).

It also cannot be doubted that the power ot legislature to pass a law includes the power to make a law which is effective /inly for a certain period. It follows, therefore, that in the exercise of its residuary power of legislation Parliament can pass a law imposing a cess on sugar-cane not falling under any entry in the State List or me Concurrent List for the purposes of the Union and for a period before the commencement of the law mace.

The question, therefore, for determination is narrowed gown to this : whether by Section 3 of the Act Parliament has imposed cesses which the State Legislatures could not for lack of legislative competency or whether it has validated the imposition matte under the State Ads enumerated in Section 2 (b) by clothing the State Legislatures with the legislative power which they did not possess under the Constitution and whether Parliament has attempted to do in an indirect manner that which it was not entitled to do in a direct manner.

10. It is, therefore, necessary to examine and scrutinise Section 3 of the Act to find out what it does, the Act has no doubt been described1 as an 'Act to valldate the imposition and collection of cesses on sugarcane under certain State Acts' and section 3 of the Act also bears the heading 'Validation of imposition and collection of cesses under States Acts'. But the true nature of the law is to be determined not by the name given I to it or by its form but by its substance.

Now, section 3 of the impugned Act first says that notwithstanding any judgment, decree or order of any court, a cess imposed, assessed or coneted or purporting TO have been imposed, assessed or collected under any State Act before the commencement of the Act shall'be deemed to have been validity imposed or collected in accordance with law. This deeming provision only creates an artificial imposition of cesses tor a period Before the commencement of the Act and make the imposition, assessment and collection thereof 'in accordance with law'. it does not give retrospective valldity to any state Act imposing a cess.

11. It is important to note that the 'law' spoken of in the expression 'in accordance with law' occurring in Section 3 of the Act is not any state Act mentioned in Section 2 (b); it is the law contained in Section 3 itself as stated in the words and expressions which follow we phrase 'in accordance with law' used in that section the provision in section 3 'as if the provisions of theState Acts and ot all notifications, oraers and rules issued or made thereunder, in so tar as such provisions relate the imposition, assessment and collection of such cess had been included in and formed part of this section ano this section had been in force at all material times when such cess was imposed, assessed or collected' is very impon-tant and significant. Its effect is to incorporate m Section 3 itself all the provisions of the State Acts and notifications orders and rules issued or maae tnereunder relationing to the imposition, collection and assessment of cesses, if those provisions, notifications, orders etc., are read as incorporated into section 3, they become part of it, ano the imposition, assessment and collection ot the cess then becomes one under section 3 itself and not under any State Act. Section 3 further enjoins that it should be read as if it had been in force at all mareial times when such cess was imposed, assessed or collected. It thus provides for the imposition, assessment and collection of cesses for a period before the commencement or the Act. It will thus be seen that the non obstante ex-pression with which section 3 begins can only mean that the imposition by or under section 3 of the Act snail not be treated as invalid because of any judgment, decree or order of any court invalidating the imposition made under any state Act.' It cannot be construed to mean as validating any state Act.

12. me sanction for the imposition, collection ano assessment of cesses dealt with by Section 3 is tne legisia-tive sanction of Parliament and tie impugned Act itseif, and not the provisions of any state Act or of any notifications, orders or rules issued thereunder. me cess imposed in any State by Section 3 of the Act for a past period would no doubt be of the same quality and character as that imposed invalidly under the State Act. But from that it does not follow that the invalid imposition, assessment or collection made under a State Act has Been validated. The imposition by Section 3 of the Act is under the legislative authority of parliament itself and not under the authority of any State Legislature as expressed in any State Act. What section 3 does is to adopt by reference the provisions of the State ACT and all the notifications, orders and rules made thereunder, and thus make the imposition, assessment ana collection of the cesses done by the State Government as acts done by them for the Union Government under the authority of section 3.

13. If, as we think, the Act is merely and simply an Act imposing taxation for Union purposes, then n is clear that Parliament had the power to enact that legislation under Entry 97 of List I. But it is said that the Act is 'colourable' in character and seers to accomplish indirectly what Parliament could not do directly and is, therefore, invalid. The 'coiouranie' character of the Act was suggested on two grounds, the tirst was that the Act is designed to enable the States to retain the proceeds of the cesses which they had invalidty imposed and collected. The second ground, which was very strongly insisted on, was that the proreeds of the cesses had already gone into tne Consolidated hunds of the States and there is no provision in the Act with' regard to appropriation, in conformity with Article 200, of the proceeds of the cesses retained by the Slates. Both these grounds are unsubstantial, it may be that in enacting the legislation the object of Parliament was to allow the States ultimately the benefit of the proceeds ot tne cesses collected by them. But if the enactment is within the legiclative competence of parliament then the motives which impelled parliament to act and the consequences ot the legislation are really irrelevant and have no bearing on the question whether tne Act is or is not a piece of colourable legislation, the dpctrine of 'colourable legislation' nas been explained by the Supreme Court in many cases, and it must now be regarded as settled law that the doctrine does not involve any question of bona fides or mala fidss on tne part of legislature and if the legislature is competent to pass a particular law the motives which impelled to act are really irrelevant. In Gajapati Narayan Deo v. State of Orissa 1954 SCR 1 AIR 1953 SC 375 the Supreme Court said:

'It may be made clear at the outset that the doctrine of colourable legislation does not involve any question of bona fides or mala fides on the part of the legislature. The whole doctrine resolves itself into the question or competency ot a particular legislature to enact a particular law. If the legislature is competent to pass a particular law, the motives which Impelled it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at alt. whether a statute is constitutional or not is tnus always a question ot power ...... If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specified legislative enines, or it there are limitations on the legislative autnorny in the snape or fundamental rights, questions do arise as to whether the legislature in a particular case nas or has not in respect to the subject matter of the Statute or in tne method of enacting it transgressed the limits of its constitutional powers. Such transgression may be patent, manifest or direct, but it may also be disguised, coven and indirect and it is to this latter class of cases that the expression 'colourable legislation' has been applied in certain judicial pronouncements. The idea conveyed by tne expression, is that although apparently a legislature in passing a statute purported to act within the timits of its powers yet in substance and in reality in transgressed these powers, the transgression being veiled by what appears on proper examination, to be a mere pretence or disguise.'

Observations to the same effect are to be found tn G. nfflagswara Rao v. A. P. S. R. T. Corporation, (1959) Supp 1 SCR 319 : AIR 1959 SC 308 and Board Of Trustee's Ayurved and Unani Tibla College, Delhi v. State of Delhi, AIR 1982 SC 458. These decisions of the Supreme Court make it very clear that wnen legislative power is granted the motive or object of the legislature in exercising it is not relevant to the question of the validity of its exercise. The Act, which parliament was competent to enact, cannot therefore, be treated as a piece of 'colourable legislation' on the motive attributed to parliament by the petitioner.

14. The argument that as the proceeds of ARE cesses had already become part of the consonoatea funds of the States, the Act could not therefore be regarded as imposing taxation for Union purposes is fallacious. Under Article 2b6 all revenues received by the Government of India automatically become part of the Consolidated Fund of India. Likewise, all revenues received by the Government of a State become part of the Consolidated Fund of that State. If, as we think, the Impugned Act is a legislation imposing taxation for Union purposes and the proceeds of the cesses collected by the States under the invalidated Acts are now moneys received and held by them on behalf of the Union of India, then it is manifestly clear that those proceeds, even if they went into the Consolidated Funds of the States before the State Acts were invalidated, now automatically become under Article 266 part of the Consolidated Fund ot India. It is true that the Act does net contain any provision with regard to the appropriation of those moneys. But none is necessary for the simple reason that tt is for Parliament to decide whether the whole or part of the proceeds of the cesses should or should not be assigned to the States. Parliament may choose not to assign any part of the proceeds of the cesses to the States or it may assign the whole or part of the same to them. That being so, the omission of a provision in the Act with regard to the appropriation of the proceeds cannot make the legislation one of a colourable character or affect its validity. Even if it be assumed mat later on rama-ment makes an appropriation out of the proceeds of the cesses not in conformity with the provisions contained in the Constitution with regard to appropriations to be made out of the Consolidated Fund of India, that cannot reflect back upon the Act so as to make it invalid. So to hold would be to accept the altogether untenable proposition that any unauthorised expenditure of the Consolidated Fund of India or that of a State would invalidate all the Acts under or by virtue of which moneys come into that Consolidated Fund. Such a result would no doubt be astounding. The character and validity of the Act, therefore, in no way depend on the appropriation of payments to be made out of the receipts of the cesses imposed by it. In our judgment, the legislation, which is attacked, is not colourable. It admits its character upon its face. There is no justification for saying ID regard to it that therein is a pretence of doing one thing under the guise of doing another and that Parliament has attempted to do in an indirect manner that which it was not entitled to do in a direct manner. Thus the attack made against the validity of the Act must fail.

15. Before dealing with the question of validity of the demand for payment of commission under Section 21 of the local Act, it may be added that during the course of his arguments Shri Chitale, learned counsel for the petitioner, suggested that the Act was also open to attack on the ground of excessive delegation. As this objection has not been taken in the petition, learned counsel did not rightly pursue It before us. It is, therefore, unnecessary for us to consider whether when Parliament adopted the rate of cesses which had been fixed by the States as the rate for imposition of cesses by Section 3, there was any abdication of essential legislative function and the delegation, if any, involved in Section 3 was permissible under Article 258(2) of the Constitution.

16. The petitioner's objection to the validity of the demand of commission under Section 21 of the focal Act in respect of the period during which the Cane Development Council was not in existence is not sound. The argument is made to rest on the expression 'the commission shall be payable to the Council' occurring in Section 21. The demand questioned no doubt penams to the sugarcane season 1959-60 when the Council had not been constituted. But readme Sections 6, 8 and 21 of the local Act together, it is abundantly clear that the coming into being of the Cane Development Council is not a sine qua non for making a demand for payment of commission under Section 21. Under Section 5 of the local Act a Cane Development Council has to be established for the reserved area of a factory. A declaration of reserved area for the petitioner's factory was made here under Section 15. As provided by Section 8 of the local Act, funds of the Council are made up of the grants made by the Indian Central Sugarcane Committee, and by the State Government, sums received by the Council by way of commission under Section 21 and other sums. Its functions are enumerated in Section 6. They are diverse and wide. The activities of the Council are not confined to a particular period. They are continuous with no limitation of time. A glance at the functions which the Council has to carry out shows that it cannot be in a position to render any service or confer any benefits unless it has effectively functioned for some years. The Council cannot clearly function without any funds. The formation of a Council Fund before the constitution of the Council is only a prudent measure taken for enabling the Council to function immediately after it is brought into existence, ihere is nothing in Section 3 or Section 21 to prohibit the formation of a Council Fund before the Council is constituted. Section 21, when it says that commission shall be payable to the Council in certain proportion when the put' chase of sugarcane is made through a Cane-growers' Cooperative Society and wholly to it when1 the purchase fs made, directly from the Cane-grower, only provides for- the allocation of the commission amount. The expression 'shall be payable to the Council' does not carry the implication that the Council must come into existence, and having come into existence must actually render service, before any demand for commission can be made on the occupier of a factory for payment of commission under Section 21. The commission paid by an occupier under Section 21 can be paid to the Council after it is established. The commission amount forms the bulk of the Council Fund and it is easy to see that if the rule 'service first and payment of commission afterwards' is applied, then the Council will never be able to carry out the functions entrusted to it by Section 6.

17. The commission levied under Section 21 is no doubt in the nature of a fee. But according to the connotation and import of 'fee', .it is not necessary that actual services must be rendered first before it can be levied or demanded. A levy in the nature of 'fee' can be imposed with a view to provide a specific service. This is now made clear by the following observations of the Supreme Court in AIR 1963 SC 965 at p. 975-

'A levy in the nature of a fee dees not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual services rendered by the authority to each individual who obtains the benefit of the service. If 'with a view to provide a specific service', levy is imposes by law and expenses for maintaining the service- ara met cut of the amounts collected there being a. reasonable relation between the levy and the expenses incurred for rendering the service, the levy would be in the nature of a fee and not in the nature of a tax.' {Underlining (here in ' ' ) is ours),

These observations support the contention advanced by the learned Advocate General that a commission under Section 21 could be demanded in respect of a period during which the Council did not come into existence tor ne purpose of forming the Council Fund and with a view to enable to function effectively for providing the services mentioned in Section 6 of the local Act. In our judgment, the petitioner's contention that it is under no lability to pay any commission under Section 21 for the period when the Council was not in existence is not sound and cannot be accepted.

18. For the foregoing reasons our conclusion is mat the Sugarcane Cess (Validation) Act, 1961, is a valid piece of legislation and the demand made on the petitioner by tne Collector, Ratlam, for payment of Rs. 6,33,917.52 as due from it on account of cane-cess and cane-commission under the Ad and the local Act is valid. The result is that this petition is dismissed with costs of the Union of India and the State of Madhya Pradesh Counsel's fee for the Union of India is fixed at Rs. 300/-and for the State of Madhya Pradesh it is assessed at Rs. 200/.


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