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Diamond Sugar Mills Ltd. and anr. Vs. the State of Uttar Pradesh and anr. - Court Judgment

LegalCrystal Citation
SubjectOther Taxes
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1961SC652; [1961]3SCR242
ActsConstitution of India - Article 226; Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953 - Sections 20 and 20(1); Uttar Pradesh Sugar Factories Control Act, 1938 - Sections 21 and 29; Uttar Pradesh Sugarcane Cess Act, 1956 - Sections 3
AppellantDiamond Sugar Mills Ltd. and anr.
RespondentThe State of Uttar Pradesh and anr.
Cases ReferredEmperor v. Munna Lal I.L.R.
Books referredEncyclopaedia Britannica; Shorter Oxford English Dictionary
Excerpt:
constitution of india - schedule vii list ii entry 52 - u.p. sugarcane cess act 1956 ( up xxii of 1956) s.3 - the imposition of cess on sugar cane and enactment taxing entry of cane into factory - constitutionality of ' 'local area' and connotation of the phrase as per acts. - [a.k. sarkar,; m. hidayatullah,; n. rajagopala ayyangar,; raghuvar dayal, jj.] the respondent had brought a suit in the court of the sub- ordinate judge, jalpaiguri for declaration of his title as the sole heir and successor to his father's impartible estate, which was taken possession of by his step-mother. that suit was on transfer pending in the high court. two other title suits were also pending in the high court in which certain agnates were claiming as successors. the respondent moved an application.....das gupta, j. 1. this appeal is against an order of the high court of judicature atallahabad rejecting the appellants' application under art. 226 of theconstitution. the first appellant is the diamond sugar mills ltd., a publiclimited company owning and operating a sugar factory at pipraich in thedistrict gorakhpur, for the manufacture of sugar from sugarcane. the secondappellant is the director of the company. by this application the appellantschallenged the imposition of cess on the entry of sugarcane into their factory.on february 24, 1956, when the application was made the u.p. sugarcane(regulation of supply and purchase) act, 1953 (u.p. xxiv of 1953), was inforce. section 20 of this act gave to the governor of u.p. the power to imposeby notification 'a cess not exceeding 4 annas per.....
Judgment:

Das Gupta, J.

1. This appeal is against an order of the High Court of Judicature atAllahabad rejecting the appellants' application under Art. 226 of theConstitution. The first appellant is the Diamond Sugar Mills Ltd., a publiclimited company owning and operating a sugar factory at Pipraich in theDistrict Gorakhpur, for the manufacture of sugar from sugarcane. The secondappellant is the Director of the company. By this application the appellantschallenged the imposition of cess on the entry of sugarcane into their factory.On February 24, 1956, when the application was made the U.P. Sugarcane(Regulation of Supply and Purchase) Act, 1953 (U.P. XXIV of 1953), was inforce. Section 20 of this Act gave to the Governor of U.P. the power to imposeby notification 'a cess not exceeding 4 annas per maund on the entry ofsugarcane into an area specified in such notification for consumption, use orsale therein'. This Act it may be mentioned had taken the place of anearlier Act, the U.P. Sugar Factories Control Act, 1938, s. 29 of whichauthorised the Governor of U.P. to impose by a notification after consultationwith the Sugar Control Board under the Act 'a cess not exceeding 10 percent of the minimum price, if any, fixed under s. 21 or 4 annas per maundwhichever was higher on the entry of sugarcane into a local area specified insuch notification for consumption, use or sale therein'. Notificationswere issued under this provision for different crushing seasons starting from1938-39, the last notification issued thereunder being for the crushing seasonof 1952-53. These notifications set out a number of factories in a schedule andprovided that during 1952-53 crushing season cess at a rate of three annas permaund shall be levied on the entry of all sugarcane into the local areascomprised in factories mentioned in the schedule for consumption, use or saletherein. Act No. XXIV of 1953 repealed the 1938 Act. The first notificationunder the provisions of s. 20 of the 1953 Act was in these terms :-

'In exercise of the powers conferred by sub-section(1) of section 20 of Uttar Pradesh Sugarcane (Regulation of Supply and Purchase)Act, 1953; (U.P. Act No. XXIV of 1953) the Governor is pleased to declare thatduring the 1954-55 crushing season, a cess at a rate of three annas per maundshall be levied on the entry of all sugar cane into the local areas comprisedin the factories mentioned in the Schedule, for the consumption, use or saletherein'.

2. Similar notifications were also issued on October 23, 1954, for thecrushing season 1954-55 and on November 9, 1955, for the crushing season1955-56. The appellants' factory was one of the factories mentioned in theschedule of all these notifications. On the date of the application, i.e.,February 24, 1956, a sum of Rs. 2,59,644-9-0 was due from the first appellantand a further sum of Rs. 2,41,416-3-0 as liability on account of cess up to theend of January, 1956, also remained unpaid.

3. The appellant contended on various grounds that s. 20 of Act XXIV of 1953was unconstitutional and invalid and prayed for the issue of appropriate writsdirecting the respondents the State of U.P. and the Collector of Gorakhpur notto levy and collect cess on account of the arrears of cess for the crushingseason 1954-55 and in respect of the crushing season 1955-56 and successivecrushing seasons and to withdraw the notifications dated October 23, 1954, andNovember 9, 1955, which have been mentioned above.

4. During the pendency of this application under Art. 226 before theAllahabad High Court the U.P. Legislature enacted the U.P. Sugarcane Cess Act,1956 (U.P. XXII of 1956), repealing the 1953 Act. Section 3 of this Act asoriginally enacted was in these words :-

'The State Government may bynotification in the official gazette impose a cess not exceeding four annas permaund on the entry of the cane into the premises of a factory for use, consumptionor sale therein :

Provided that the StateGovernment may likewise remit in whole or in part such cess in respect of caneused or to be used in factory for any limited purpose specified in thenotification.

Explanation :- If the StateGovernment, in the case of any factory situate outside Uttar Pradesh, sodeclare, any place in Uttar Pradesh set apart for the purchase of cane intendedor required for use, consumption or sale in such factory shall be deemed to bethe premises of the factory.

(2) The cess imposed undersub-section (1) shall be payable by the owner of the factory and shall be paidon such date and at such place as may be prescribed.

(3) Any arrear of cess not paidon the date prescribed under sub-section (2) shall carry interest at 6 percent. per annum from such date to date of payment.'

5. There is a later amendment by which the words 'four annas' havebeen altered to 'twenty-five naye paise' and the words 'Gur, Rabor Khandsari Sugar Manufacturing Unit' have been added after the words'factory' in sub-section (1). These amendments are however notrelevant for the purpose of this appeal.

6. Section 9 of this Act repealed s. 20 of the Sugar Cane (Regulation ofSupply and Purchase) Act, 1953. Sub-sections 2 and 3 of s. 9 are important. Theyare in these words :-

'2. Without prejudice to thegeneral application of section 24 of the U.P. General Clauses Act, 1904, everynotification imposing cess issued and every assessment made (including theamount of cess collected) under or in pursuance of any such notification, shallbe deemed a notification issued, assessment made and cess collected under thisAct as if sections 2, 3 and 5 to 8 had been in force at all material dates.

3. Subject as provided in clause(1) of Article 20 of the Constitution every notification issued cess imposedand act or thing done or omitted between the 26th January, 1950, and theAppointed date in exercise or the purported exercise of a power under section29 of the U.P. Sugar Factories Control Act, 1938, or of s. 20 of the U.P.Sugarcane (Regulation of Supply and Purchase) Act, 1953, which would have beenvalidly and properly issued, imposed, done or omitted if the said sections hadbeen as section 3 of this Act, shall in law be deemed to be and to have beenvalidly and properly imposed and done, any judgment, decree or order of anycourt notwithstanding.'

7. The position after the enactment of the U.P. Sugarcane Cess Act, 1956,was that the imposition and assessment of cess that had already been made underthe 1953 Act would operate as if made under the 1956 Act. In view of this thefirst appellant, the Diamond Sugar Mills Ltd., prayed to the High Court forpermission to raise the question of constitutionality and validity of the 1956Act. It also prayed for issue of a writ in the nature of mandamus directing therespondents not to levy cess upon the petitioners-appellants under this newAct, the U.P. Sugarcane Cess Act, 1956.

8. This application was allowed and the High Court considered the questionwhether s. 3 of the U.P. Sugarcane Cess Act, 1956, empowering the StateGovernment to impose a cess not exceeding four annas per maund on the entry ofthe cane into the premises of a factory for the consumption, use or saletherein was a valid law.

9. The principal ground urged in support of the appellants' case was thatthe law as enacted in s. 3 was invalid and that it was beyond the legislativecompetence of the State Legislature. Several other grounds including one thatthe provisions of the section went beyond the permissible limits of delegatedlegislation were also raised. All the grounds were negatived by the High Courtwhich accordingly rejected the appellants' petition. The High Court however gavea certificate under Article 132(1) and also under Art. 133(1)(c) of theConstitution and on the basis of that certificate the present appeal has beenfiled.

10. Of the several grounds urged before the High Court only two are urgedbefore us in appeal. One is that the law was invalid, being beyond thelegislative competence of the State legislature; the other is that in any casethe provision giving the Governor power to levy any cess not exceeding 4 annaswithout providing for any guidance as to the fixation of the particular rate,amounted to excessive delegation, and was accordingly invalid. The answer tothe question whether the impugned law was within or beyond the legislativecompetence of the State legislature depends on whether the law falls under Entry52 of the State List - List II of the Seventh Schedule to the Constitution. Itis quite clear that there is no other entry in either the State List or theConcurrent List under which the legislation could have been made. Entry 52 isin these words :- 'Tax on the entry of goods into a local area forconsumption, use or sale therein'. Section 3 of the impugned Act which hasalready been set out provides for imposition of a cess on the entry ofsugarcane into the premises of a factory for use, consumption or sale therein.Is the 'premises of a factory' a local area within the meaning of thewords used in Entry 52 If it is the legislation was clearly within thecompetence of the State legislature; if it is not, the law was beyond the Statelegislature's competence and must be struck down as invalid.

11. In considering the meaning of the words 'local area' in entry52 we have, on the one hand to bear in mind the salutary rule that wordsconferring the right of legislation should be interpreted liberally and thepowers conferred should be given the widest amplitude; on the other hand wehave to guard ourselves against extending the meaning of the words beyond theirreasonable connotation, in an anxiety to preserve the power of the legislature.In Re the Central Provinces & Berar Act No. XIV of 1938 [1939] 18 F.C.R.37 Sir Maurice Gwyer, C.J., observed :-

'I conceive that a board and liberal spirit shouldinspire those whose duty it is to interpret it; but I do not imply by this thatthey are free to stretch or pervert the language of the enactment in theinterests of any legal or constitutional theory, or even for the purpose ofcorrecting any supposed errors'.

12. Again, in Navinchandra Mafatlal v. The Commissioner of Income Tax,Bombay City : [1954]26ITR758(SC) Das, J. (as he then was) delivering thejudgment of this Court observed :-

'........The cardinal rule of interpretationhowever, is that words should be read in their ordinary, natural andgrammatical meaning subject to this rider that in construing words in aconstitutional enactment conferring legislative power the most liberalconstruction should be put upon the words so that the same way have effect intheir widest amplitude.'

13. Our task being to ascertain the limits of the powers granted by theConstitution, we cannot extend these limits by way of interpretation. But ifthere is any difficulty in ascertaining the limits, the difficulty must beresolved so far as possible in favour of the legislative body. The presumptionin favour of constitutionality which was stressed by the learned counsel forthe respondents does not take us beyond this.

14. On behalf of the appellants it has been urged that the word 'localarea' in its ordinary grammatical meaning is never used in respect of asingle house or a single factory or a single plot of land. It is urged that inordinary use the words 'local area' always mean an area covering aspecified region of the country as distinguished from the general area. Whileit may not be possible to say that the words 'local area' haveacquired a definite and precise meaning and the phrase may have differentconnotations in different contexts, it seems correct to say that it is seldom,if ever, used to denote a single house or a single factory. The phrase appearsin several statutes, some passed by the Central Legislature and some by theProvincial or State Legislatures; but in many of these the words have beendefined. These definitions being for the peculiar purpose of the particularstatute cannot be applied to the interpretation of the words 'localarea' as used in the Constitution. Nor can we derive any assistance fromthe judicial interpretation of the words 'local area' as used in theCode of Criminal Procedure or other Acts like Bengal Tenancy Act as these interpretationswere made with reference to the scope of the legislation in which the phraseoccurs. Researches into dictionaries and law lexicons are also of no avail asnone of these give the meaning of the phrase 'local area'. What theysay as regards the meaning of the word 'local' offers no guidanceexcept that it is clear that the word 'local' has different meaningsin different contexts.

15. The etymological meaning of the word 'local' is 'relatingto' or 'pertaining to' a place. It may be first observed thatwhether or not the whole of the State can be a 'local area', for thepurpose of Entry 52, it is clear that to be a 'local area' for thispurpose must be an area within the State. On behalf of the respondents it isargued that 'local area' in Entry 52 should therefore be taken tomean 'any part of the State in any place therein'. So, the argumentruns, a single factory being a part of the State in a place in the State is a'local area'. In other words, 'local area' mean 'anyspecified area inside the State'. The obvious fallacy of this argument isthat it draws no distinction between the word 'area' standing byitself and the phrase 'local area'. If the Entry had been 'entryof goods into any area of the State.........' some area would be specifiedfor the purpose of the law levying the cess on entry. If the Constitutionmakers were empowering the State Legislatures to levy a cess on entry of goodsinto any specified area inside the state the proper words to use would havebeen 'entry of goods into any area..........' It would be meaninglessand indeed incorrect to use the words they did use 'entry of goods into alocal area'. The use of the words 'local area' instead of theword 'area' cannot but be due to the intention of theConstitution-makers to make sure that the power to make laws relating to levyon entry of goods would not extend to cases of entry of goods into any andevery part of the state from outside that part but only to entry from outsideinto such portions of the state as satisfied the description of 'localarea'. Something definite was sought to be expressed by the use of theword 'local' before the word 'area' : The question is :what exactly was sought to be expressed

16. In finding an answer to the question it is legitimate to turn to theprevious history of constitutional legislation in the country on this subjectof giving power to legislature to levy tax on the entry of goods. In the Stateof Madras v. Gannon Dunkerley & Co., Ltd. : [1959]1SCR379 this Courtreferred with approval to the statement of law in Halsbury's Laws of England,Vol. II, para. 157, p. 93, that the existing state of English law in 1867 isrelevant for consideration in determining the meaning of the terms used in theBritish North America Act in conferring power and the extent of that power.This has necessarily to be so as in the words of Mr. Justice Brewer in SouthCarolina v. United States (1905) 199 U.S. 437 'to determine the extentof the grants of power, we must, therefore, place ourselves in the position ofthe men who framed and adopted the Constitution, and inquire what they musthave understood to be the meaning and scope of those grants.'

17. Turning now to the previous legislative history we find that in theGovernment of India Act, 1935, Entry 49 of the Legislative List (List II of the7th Schedule) was in the same words as Entry 52 of the Constitution except thatinstead of the words 'taxes' as in Entry 52 of List II of theConstitution, Entry 49 List II of the Government of India Act, used the word'cess'. The Government of India Act, 1915, the powers of theprovincial legislatures were defined in s. 80A. Under clause (a) of the thirdsub-section of this section the local legislature of any province has with theprevious sanction of the Governor-General power to make or take intoconsideration any law imposing or authorising the imposition of any new taxunless the tax was a tax scheduled as exempted from this provision by rulesmade under the Act.

18. The third of the Rules that were made in this matter under NotificationNo. 311/8 dated December 18, 1920, provided that the legislative council of aprovince may without the previous sanction of the Governor-General make andtake into consideration any law imposing or authorising a local authority toimpose for the purpose of such local authority any tax included in Schedule IIof the Rules. Schedule II contained 11 items of which items 7 and 8 were inthese words :-

7. An octroi

8. A terminal tax on goodsimported into a local area in which an octroi was levied on or before 6th July,1917.

19. Item 8 was slightly modified in the year 1924 by another notification asa result of which it stood thus : 8. A terminal tax on goods imported into orexported from a local area save where such tax is first imposed in a local areain which an octroi was levied on or before July, 6, 1917. Octroi is an old andwell known term describing a tax on the entry of goods into a town or a city ora similar area for consumption, sale or use therein. According to theEncyclopaedia Britannica octroi is an indirect or consumption tax levied by alocal political unit, normally the commune or municipal authority, on certaincategories of goods on their entry into its area. The Encyclopaedia Britannicadescribes the octroi tax system in France (abolished in 1949) and states thatcommodities were prescribed by law and were divided into six classes and forall the separate commodities within these six groups maximum rates of tariffwere promulgated by presidential decree, specific rates being fixed for thethree separate sorts of octroi area, established on the basis of population,namely, communes having (1) less than 10,000 inhabitants, (2) from 10,000 to50,000 and (3) more than 50,000. While we are not concerned here with otherfeatures of the octroi tax system, it is important to note that the tax waswith regard to the entry of goods into the areas of the communes which werelocal political units. According to the Shorter Oxford English Dictionary'commune' in France is a small territorial division governed by amaire and municipal council and is used to denote any similar divisionelsewhere.

20. The characteristic feature of an octroi tax then was that it was on theentry of goods into an area administered by a local body. Bearing in mind thischaracteristic of octroi duty we find on an examination of items 7 and 8 of theSchedule Rules mentioned above that under the Government of India Act, 1919,the local legislature of a Province could without the previous sanction of theGovernor-General impose a tax-octroi - for entry of goods into an areaadministered by a local body, that is, a local government authority and thearea in respect of which such tax could be imposed was mentioned in item 8 aslocal area.

21. It is in the background of this history that we have to examine the useof the word 'local area' in item 49 of List II of the Government ofIndia Act, 1935. Here the word 'octroi' has given place to the longerphrase 'cesses on the entry of goods into a local area for consumption,use or sale therein.'

22. It was with the knowledge of the previous history of the legislationthat the Constitution-makers set about their task in preparing the lists in theseventh schedule. There can be little doubt therefore that in using the words'tax on the entry of goods into a local area for consumption, use or saletherein', they wanted to express by the words 'local area'primarily area in respect of which an octroi was leviable under item 7 of theschedule tax rules, 1920 - that is, the area administered by a local authoritysuch as a municipality, a district Board, a local Board or a Union Board, aPanchayat or some body constituted under the law for the governance of thelocal affairs of the any part of the State. Whether the entire area of theState, as an area administered by the State Government, was also intended to beincluded in the phrase 'local area', we need not consider in thepresent case.

23. The only other part of the Constitution where the word 'localarea' appears is in Art. 277. That Article is in these words :-

'Any taxes, duties, cesses or fees which,immediately before the commencement of this Constitution, were being lawfullylevied by the Government of any State or by any municipality or other localauthority or body for the purposes of the State, municipality, district, orother local area may, notwithstanding that these taxes, duties, cesses or feesare mentioned in the Union List, continue to be levied and to be applied to thesame purposes until provision to the contrary is made by Parliament bylaw.'

24. There can be little doubt that 'local area' in this Articlehas been used to indicate an area in respect of which there is an authorityadministering it.

25. While the scope of Article 277 is different from the scope of entry 52so that no direct assistance can be obtained in the interpretation of the words'local area' in entry 52 from this meaning of the words in Art. 277it is satisfactory to find that the meaning of 'local area' in entry52 which appears reasonable on a consideration of the legislative history ofthe matter is also appropriate to this phrase in its only other use in theConstitution.

26. Reliance was sought to be placed by the respondents on a decision of theAllahabad High Court in Emperor v. Munnalal I.L.R. 1942 All. 302 where theword 'local area' as used in s. 29 of the U.P. Sugar FactoriesControl Act, 1938, fell to be considered. That section, as we have alreadymentioned, authorised the Governor of U.P. to impose by a notification, afterconsulting the Sugar Control Board under the Act, a cess on the entry ofsugarcane into a local area specified in such notification for consumption, useor sale therein. The notifications which were issued under this provision setout a number of factories for the levy of a cess at the rate of three annas permaund on entry of all sugarcane into the local area comprised in the factoriesmentioned in the schedule for consumption, use or sale therein. Section 29 wasclearly within the words of entry 49 of List II. The question that arose beforethe Court was whether the specification of certain factories as local areas wasvalid law. The learned Judge appears to have proceeded on the basis that theGovernor had notified the area comprised in 74 factories as one 'localarea' and held that once this was done the entire area covered by allthese factories should be considered as one statutory local area. It appears tous that the learned Judge was not right in thinking that the area comprised in74 factories was notified as one local area. What appears to have been done wasthat the area of each factory was being notified as a local area for thepurpose of the Act. Proceeding on the basis that the area comprised in the 74factories was notified as one local area the learned Judge addressed himself tothe question whether this entire area was a local area within the meaning ofthe Act. He appears to have accepted the contention that the word local areawas used in the sense of an administrative unit, but, says he, theadministration need not be political, it may be industrial and educational orit may take any other form of governmental activity. 'I cannot see,'the learned Judge observed, 'why it is not open to the provincialgovernment or the provincial legislature to make an industrial survey of theprovince and to divide up the entire province into industrial areas or factoryareas or mill areas or in any other kind of areas, and each one of these areasmay be notified and be treated as a local area. And once such areas come intoexistence and remain in operation they can be regarded as local areas withinthe meaning of entry No. 49 of List II in which a cess may be levied'.

27. Even if this view were correct it would be of no assistance to therespondents. It is not authority for the proposition that the area of onesingle factory is a local area within the meaning of entry 49. We think howeverthat the view taken by the learned Judge is not correct.

28. It is true that when words and phrases previously interpreted by thecourts are used by the Legislature in later enactment replacing the previousstatute, there is a presumption that the Legislature intended to convey by theiruse the same meaning which the courts had already given to them. Thispresumption can however only be used as an aid to the interpretation of thelater statute and should not be considered to be conclusive. As Mr. JusticeFrankfurter observed in Federal Com. Commission v. Columbia B. System (1) 311 U.S. 131 when considering this doctrine, the persuasion that lies behind thedoctrine is merely one factor in the total effort to give fair meaning tolanguage. The presumption will be strong where the words of the previousstatute have received a settled meaning by a series of decisions in thedifferent courts of the country; and particularly strong when suchinterpretation has been made or affirmed by the highest court in the land. Wethank it reasonable to say however that the presumption will naturally be muchweaker when the interpretation was given in one solitary case and was nottested in appeal. After giving careful consideration to the view taken by thelearned Judge of the Allahabad High Court in Emperor v. Munnalal (supra) aboutthe meaning of the words 'local area' and proper weight to the ruleof interpretation mentioned above, we are of the opinion that theConstitution-makers did not use the words 'local area' in the meaningwhich the learned Judge attached to it. We are of opinion that the propermeaning to be attached to the words 'local area' in Entry 52 of theConstitution, (when the area is a part of the State imposing the law) is anarea administered by a local body like a municipality, a district board, alocal board, a union board, a Panchayat or the like. The premises of a factoryis therefore not a 'local area'.

29. It must therefore be held that s. 3 of the U.P. Sugarcane Cess Act,1956, empowering the Governor to impose a cess on the entry of sugarcane intothe premises of a factory did not fall within Entry 52 of the State List. Asthere is no other Entry in either State List or Concurrent List in which theimpugned law could fall there is no escape from the conclusion that this law wasbeyond the legislative competence of the State Legislature. The law as enactedin s. 3 of the U.P. Sugarcane Cess Act, 1956, must therefore be struck down asinvalid.

30. It may be mentioned that this is not a case where the law is in twoparts and one part can be severed from the other and saved as valid whilestriking down the other portion which is invalid. Indeed, that was not evensuggested by the learned counsel for the respondents. It is unnecessary for usto consider whether if s. 3 had instead of authorising levy of cess for entryof sugarcane into the premises of a factory for use, consumption or saletherein had authorised the imposition of a cess on entry of cane into a localarea for consumption, sale, or use in a factory that would have been withinEntry 52. It is sufficient to say that we cannot re-write the law for thepurpose of saving a portion of it. Nor is it for the Court to offer anysuggestion as to how the law should be drafted in order in keep it within thelimits of legislative competence. As the law enacted by the Legislature standsthere is no escape from the conclusion that this entire law must be struck downas invalid.

31. In view of this conclusion on the first ground raised on behalf of theappellant it is unnecessary to consider the other ground raised in the appealthat section 3 has gone beyond the permissible limits of delegated legislation.

32. As we have held that the impugned legislation was beyond the legislativecompetence of the State Legislature the appellants are entitled to the reliefasked for. We accordingly allow the appeal, set aside the order passed by theHigh Court and order the issue of a writ directing that the respondents doforbear from levying and collecting cess from the appellants on account of arrearsof cess for the crushing season 1954-55 and in respect of the crushing season1955-56 and successive crushing seasons under the U.P. Sugarcane Cess Act,1956.

33. The appellants will get their costs here and below.

Ayyangar, J.

34. I have had the privilege of perusing the judgment just now pronounced,but with the utmost respect regret my inability to agree with the orderproposed.

35. The learned Judges of the High Court held that the impugned enactmentwas within the scope of Entry 52 of the State Legislative List in Schedule 7 tothe Constitution, by placing reliance on the following passage in the Judgmentof Das, J. in Emperor v. Munna Lal I.L.R. [1942] All. 302 where thelearned Judge said :

'Indeed I cannot see why it is not open to ProvincialGovernment or Provincial Legislature to make an industrial survey of theProvince and to divide up the entire province into industrial areas or factoryareas or mill areas or in any other kind of areas, and each one of these areasmay be notified and be treated as a local area. And once such areas come intoexistence and remain in operation they can be regarded as local areas withinthe meaning of Entry No. 45 of List II in which a cess may be levied.'

36. In other words, the view which they favoured was to read the expression'local area' practically to mean any 'area' entry intowhich was by the relevant fiscal statute, made the subject of taxation. In myopinion that is not a correct interpretation of the entry and I agree with mylearned brethren that having regard to the historical material, which has beenexhaustively set out and discussed in their judgment, the word 'localarea' can in the entry designate only a predetermined local unit - a unitdemarcated by statutes pertaining to local self government and placed under thecontrol and administration of a local authority such as a municipality, acantonment, a district or a local board, an union or a panchayat etc. and notany region, place or building within the State which might be defined,described or demarcated by the State's taxing enactment as an area entry intowhich is made taxable.

37. But there my agreement stops and we diverge. In my opinion, thisconstruction of the expression 'local area' in entry 52 does notautomatically result in the invalidity of the impugned enactment and of thelevy under it, but the extent to which, if any the charging section exceeds thepower conferred by the entry would depend on matters which have not been thesubject of investigation, and it is this point that I shall elaborate in therest of this judgment.

38. It is unnecessary for the purposes of this case and possibly evenirrelevant, to determine the precise scope, content and incidents of an'octroi' duty - except that in the context in which it appeared inthe Scheduled Taxes Rules framed under the Government of India Act, 1919, theexpression signified a tax levied on entry into an area of an unit of localadministration. It is unprofitable to canvass the question whether a localauthority empowered at that date to levy an 'octroi' might or might notlawfully confine the levy to entry for consumption alone, to use alone or forsale alone. But when that entry was refashioned and enacted as item 49 of theProvincial Legislative List under the Government of India Act, 1935 (in termspractically identical with Entry 52 in the State Legislative List under theConstitution), the matter was no longer left in doubt. The new item ran :

'Cesses on the entry of goods into a local area forconsumption, use or sale therein'.

39. In connection with the use of the words 'for consumption, use orsale therein' in the item three matters deserve notice : (1) Where theentry into the 'local area' was not for one of the purposes set outin it, viz., for consumption, use or sale therein, but the entry was, forinstance in the course of transit or for warehousing during transit, the powerwas not available; in other words, a mere entry could not per se be made ataxable event. (2) it was sufficient if the entry was for any one of the threepurposes : the use of the disjunctive 'or' making this clear. (3) The passageof goods from one portion of a local area to another portion in the same localarea, would not enable a tax to be levied, but the entry has to be 'intothe local area', i.e., from outside the local area.

40. It is the second and the third of the above features that call for amore detailed examination in the context of the points requiring decision inthe present case.

41. With this background I shall analyse the terms of s. 3(1) of the Act(United Provinces Act XXII of 1956) to ascertain where precisely the provisiondeparts from the scope or content of entry 52. I will read that section whichruns :

'3. (1). The StateGovernment may by notification in the official gazette impose a cess notexceeding four annas per maund on the entry of the cane into the premises of afactory for use, consumption or sale therein :

Provided that the StateGovernment may likewise remit in whole or in part such cess in respect of caneused or to be used in factory for any limited purpose specified in thenotification.

Explanation :- If the StateGovernment, in the case of any factory situate outside Uttar Pradesh, sodeclare, any place in Uttar Pradesh set apart for the purchase of cane intendedor required for use, consumption or sale in such factory shall be deemed to bethe premises of the factory.'

42. Leaving the Explanation for the present, there are two matters whichrequire advertence : (1) The first was the point emphasised by Mr. Sanyal forthe appellant, that entry into the premises of a factory 'for the purposeof consumption, use or sale therein' is fastened on as the taxable eventtreating the factory premises as if that were itself a 'local area'.(2) Apart from entry into factory premises for use, consumption or saletherein, entry of the cane into other places within the local area, i.e., into'unit for local administration' is not made the subject of tax levy.

43. The second of the above matters cannot invalidate the legislation,because a power to tax is merely enabling, and apart from any question ofdiscrimination under Art. 14 - which does not arise for consideration before us- the State is not bound to tax every entry of goods into 'a local area'.Again, the tax could undoubtedly be confined to entry of goods into a'local area' for consumption or use in particular modes; in otherwords, there could be no legal objection to the tax levy on the ground that itdoes not extend to entry of goods into 'a local area' for every typeof consumption or use.

44. In my judgment the real vice of the charging s. 3(1) lies not in that inconfines the levy to cases where the entry is for purposes of consumption etc.in a factory but in equating the premises of a factory with 'a localarea' entry of goods into which, occasions the tax. Another way ofexpressing this same idea would be to say, that whereas under Entry 52 themovement of goods from within the same local area in which the factory issituated into the premises of the factory, could not be the subject of taxliability, because there would in such cases be no entry of the goods'into a local area' under s. 3(1) of the Act, not merely is themovement of goods into the factory from outside the 'local area' in which thefactory is situate made the subject of tax, but the words used are capable ofimposing the tax even in those cases where the entry into the factory is fromwithin the same local area.

45. What I have in mind may be thus illustrated : If factory A situated inPanchayat area B gets its supply of cane from outside the Panchayat area, thelevy of the tax on the entry of the cane into the Panchayat area would clearlybe covered by entry 52. The State is not bound to tax every entry of the caneinto the area but might confine the levy to the entry of the cane for thepurpose of consumption in a factory. The tax might be levied and collected atthe border of the Panchayat area but there is no legal obligation to do so, andthe place at which the entry of the goods is checked and the duty realised is amatter of administrative machinery which does not touch on the validity of thetax imposition. It would thus not detract from the validity of the tax if byreason of convenience for effecting collection, the tax was levied at the stageof entry into the premises of a factory. So long, therefore, as the cane whichenters a factory for the purpose of consumption therein comes from outside thatlocal unit of administration in which the factory is situated, in my opinion itwould be covered by the words of entry 52 and well within the legislativecompetence of the State Government. The language of s. 3, as it stands appears,however, also to extend to cases where the supply of cane to a factory is fromwithin the same local unit of administration; in other words, where there is noentry of the cane into the local area as explained earlier. If this were thetrue position, the enactment cannot be invalidated as a whole. It would bevalid to the extent to which the tax is levied on cane entering a factory forthe purpose of consumption etc. therein from outside the local area, withinwhich the factory premises are situated, and only invalid where it outsteps thislimitation.

46. The next question is whether this is a case where the valid and invalidportions are so inextricably interwoven as to leave the Court no option but tostrike down the entire enactment as invalid as beyond the legislativecompetence of the State, or whether the charging provision could be so readdown as to leave the valid portion to operate. In my opinion, what is involvedin the case before us is not any problem of severance, but only of readingdown. Before taking up this question for discussion two objections to thelatter course have to be considered. The first is that this aspect of thematter was not argued before us by learned Counsel for the State as a groundfor sustaining the validity of the legislation. In my judgment this is not anobjection that should stand in the way of the Court giving effect to a view ofthe law if that should appear to be the correct one. In making this observationone has necessarily to take into account the fact that legislation in nearlythis form, has been in force in the State for over twenty years, and though itsvires was once questioned in 1942, that challenge was repelled and the tax levywas held valid and was being collected during all this period. The sugar-canecess has been a prime source of State Revenue for this length of time and thisCourt should not pronounce such a legislation invalid unless it could not besustained on any reasonable ground and to any extent.

47. The second ground of objection which has appealed to my learned brethrenbut with which, I regret, I cannot concur is that it would require a rewritingof the Act to sustain it.

48. Now if the first paragraph of sub-s. (1) of s. 3 had read :

'The State Government may by notification in theofficial gazette impose a cess not exceeding four annas per maund on the entryof the cane into the premises of a factory (from outside the local area inwhich the factory premises were situate) for use, consumption or sale therein:' (The words in brackets added by me)

49. the levy would be entirely within entry 52 even according to my learnedbrethren. The question is whether the implication of these words would be arewriting of the provision or whether it would be merely reading the existingprovision so as to confine it to the powers conferred upon the StateLegislature by the relevant legislative entry. In view of the strong opinionentertained by my learned brethren, I have given the matter the utmostconsideration, but I feel that the words which I have suggested are apermissible mode of construction of a statute by which wide words of anenactment which would cover an event, contingency or matter within legislativepower as well as matters not within it, are read as confined to those which thelaw making body had authority to enact. In my judgment the opinion of theFederal Court in In re Hindu Women's Rights to Property Act, 1937 [1941]F.C.R. 12 affords a useful analogy to the present case. The enactment thereimpugned provided for the devolution or succession to 'property' in generalterms which would have included both agricultural as well as non-agriculturalproperty, whereas the Central Legislature which enacted the law had no power todeal with succession to agricultural property. The contention urged before theCourt was that by the use of the expression 'property', thelegislature had evinced an intention to deal with property of every type andthat it would be rewriting the enactment and not carrying out the legislativeintent if the reference to 'property' in the statute were read as'property other than agricultural property'. Dealing with thiscontention, Sir Maurice Gwyer, delivering the opinion of the Court said :

'No doubt if the Act does affect agricultural landin the Governors' Provinces, it was beyond the competence of the Legislature toenact it : and whether or not it does so must depend upon the meaning which isto be given to the word 'property' in the Act. If that wordnecessarily and inevitably comprises all forms of property, including agriculturalland, then clearly the Act went beyond the powers of the Legislature; but whena Legislature with limited and restricted powers makes use of a word of suchwide and general import, the presumption must surely be that it is using itwith reference to that kind of property with respect to which it is competentto legislate and to no other. The question is thus one of construction, andunless the Act is to be regarded as wholly meaningless and ineffective, theCourt is bound to construe the word 'property' as referring only tothose forms of property with respect to which the Legislature which enacted theAct was competent to legislate; that is to say, property other thanagricultural land. .........The Court does not seek to divide the Act into twoparts, viz., the part which the Legislature was competent, and the part it wasincompetent, to enact. It holds that, on the true construction of the Act andespecially of the word 'property' as used in it, no part of the Actwas beyond the Legislature's powers.'

50. The Court accordingly held that the Hindu Women's Rights to PropertyAct, 1937, applied to non-agricultural property and so was valid. In thisconnection it might be interesting to refer to the decision in Blackwood v.Queen [1882] 8 A.C. 82 which Sir Maurice Gwyer, C.J., referred to withapproval. That case related to the validity of a duty imposed by theLegislature of Victoria (Australia) on the personal estates of deceased person.The learned Chief Justice observed 'The Judicial Committee construed theexpression 'personal estate' occurring in the statute to refer onlyto : 'such personal estate as the colonial grant of probate conferredjurisdiction on the personal representatives to administer, whatever thedomicile of the testator might be, that is to say, personal estate situatewithin the Colony, in respect of which alone the Supreme Court to Victoria hadpower to grant probate : Their Lordships thought that 'in imposing a dutyof this nature the Victorian Legislature also was contemplating the property whichwas under its own hand, and did not intend to levy a tax in respect of propertybeyond its jurisdiction'. And they held that 'the general expressionswhich import the contrary ought to receive the qualification for which theappellant contends, and that the statement of personal property to be made bythe executor under s. 7(2) of the Act should be confined to that property whichthe probate enables him to administer' [Per Sir Maurice Gwyer, C.J. [1941]F.C.R. 12, 28

51. To confine the tax to the limitations subject to which it could, underthe Constitution, be levied is, in my opinion, not an improper method ofconstruing the statute. The manner in which the word 'property' wasread down by the Federal Court in In re Hindu Women's Rights to Property Act,1937 [Per Sir Maurice Gwyer, C.J. [1941] 12 F.C.R. 28] and the word'personal property' construed by the Privy Council in Blackwood v.Queen [1882] 8 A.C. 82 make in my opinion less change in the text of theimpugned provision than the addition of the words I have set out above, whichafter all are words implicit in the power conferred on the State Legislature. Iwould, therefore, hold that the charging section would be invalid and beyondthe legislative competence of the State of Uttar Pradesh only in so far as itseeks to levy a tax on cane entering a factory from within the same local areain which the factory is situate and that in all other cases the tax is properlylevied; and that the impugned section could and ought to be so read down.

52. The matter not having been considered from this aspect at earlierstages, we have necessarily no material before us for adjudicating upon whethertax levied or demanded from the appellant is due and if so to what extent. Wehave nothing before us to indicate as to how far the cane, the entry of whichinto the factory of the appellant is the subject of the impugned levy, hasmoved into the factory from outside the local unit in which the factory issituated or originated from within the same local area. I consider that withoutthese matters being investigated it would not be possible to adjudicate uponthe validity of the tax demanded from the appellants.

53. There is one matter to which it is necessary to advert which I havereserved for later consideration, viz., the validity of the Explanation to s.3(1) of the Act. It would be apparent that the Explanation was necessitated bythe terms of sub-s. (1) of s. 3 which equated 'factory premises' with'local areas', or rather rendering factory premises the sole localareas entry into which occasioned the tax. So far as the purchasing centerswhich are dealt with in the Explanation are concerned, the cane that moves intothem from outside the 'local area' where these centers are wouldclearly be covered by Entry 52, since the purpose of the movement into thecenter is on the terms of the provision for effecting a sale therein. In otherwords, the same tests which I have discussed earlier in relation to entry intofactory premises, would apply mutatis mutandis to these purchasing centers andin so far as a tax is levied on the movement of the cane from outside the localarea the levy would be legal and in order. I would read down the Explanation inthe same manner, as I have read down the main charging provision so as toconfine the levy to entry from outside that 'local area' - local areabeing understood in the sense already explained.

54. I would accordingly allow the appeal, and remand it to the High Courtfor investigating the material facts which I have mentioned earlier with adirection to pass judgment in accordance with the law as above explained.

BY COURT. In accordance with the opinion of the majority the appeal isallowed, the order passed by the High Court is set aside and a writ be issueddirecting that the respondents do forbear from levying and collecting cess fromthe appellants on account of arrears of cess for the crushing season 1954-55and successive crushing seasons under the Uttar Pradesh Sugarcane Cess Act,1956.

55. The appellants will get their costs here and below.


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