BHOPAL SUGAR INDUSTRIES LTD v. STATE OF MADHYA PRADESH & Ors.

of the Madhya Pradesh High Court in Misc. Petition No. 404/64. S. T. Desai, J. B. Dadachanji K. .T. John, Mrs. A. K. Varma for the Appellant. II S .K. Gambldr for Respondents I, 2 and 4. F. C. Agarwala and R. N. Sachthey for Respondent No. 3. ,.. • BHOPAL SUGAR LTD. V. M. P. STATE (Shingha/, /.) 6 07 The Judgment o( the Court was delivered by SHINGHAL J. Thi.s 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 manu factures sugar in its factory in Sehore, Madhya Pradesh, by crushing the sugarcane cultivated by it and purchased from other cultivators . The St:rle Legislature enacted the Madhya Pradesh Sugarcane (Regu lation of Supply and Purchase) Act, 1958, hereinafter referred. to as State the State Act, which came into force on July 1,, 1959. The Government issued a notification on November 28, 1959, which appear ed in the State Gaze, tte dated December 4, 1959, under section 23 of the State Act imposing a o~ss of 12 paise per maurnJ 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 imposi tion, and the High Court, on August 31, 1961, held that the notifica tion was illegal as the imposition of the levy was with reference to particular premises. A similar view was taken in regard to the Acts i11 some other States and Par:iament thereupon enacted the Sugarcane Cess (Validation) Act, 1961, hereinafter referred io as the Validation Act, which came into force on D~cember 26, 1961. Sectiun 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 Sehope 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 lhe balance. The appellant wrote back saying that the amount of the cane ce" worked out to Rs. 5,44,835.69 and not Rs. 5,49,262.92, and that as the col lector 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 tfoo appellant, a demand notice wa, 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 d•enied 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 peti tion. The High Court upheld the imposition of the cess but reduced A B c D E F G H 608 SUPREME COURT REPORTS [1979] 2 S.C.R. A B c D E F G H 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 ],ecn argued by Mr. Desai on behalf of the appellant 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 U of the Sewnth Schedule of the Constituticm and was valid, and Parliament could not legis; ate in respect of that occupied field and pass the Vali dation Act. These arguments have been based on the main contention that the expression "an area" in Sub-secticm (1) of section 23 of the State Act roally means "a local area" within the meaning of the afore said Entry 52 and no other area. Sub-section (1) of section 23 of the State Act reads as !ollows,- "23. Levy of cess on cane.-(1) The State Government may, by notification, impose a cess not exceeding 25 paise a mannd, on the entry of cane into an area, specified in such notific::tion, for consnmption, use or ·sale therein", There are two provisos to the sub-section, but they are not relevant for the purpose of the controwrsy 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 notification, and there is nothing in it to confine the imposi'.ion to a "local area". As has been held by this Court in Diamond Sugar Mills whion a Ltd and Aiwther v. State of Uttar Pradesh and Another(') similar point arose for consideraticm with the U.P. Sugarcane Cess Act, 1956, the proper meaning to be attached to th3 words "~ocal area" in Entry 52 List II of the Seventh Sch<idule 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 nnion 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 5?. of the State List and there was no other Entry in •he State List or It is therrfore futile the Concurrent List in which the Act could fall. for the appellant to contend that section 23 of the S•ate Act was not ultra-vires the Constitution or tliat it can be upheld on such a con struction of the words "an area" in section 23 as to restrict it to mean a "local area". (1) [t96i]3 S.C.R. 242. BHOPAL SUGAR LTD. V. M. P. STATE (Shingha/, J.) 609 The decision in Diamond Sugar Mills case came up for considera tion in this Court in Jaora Sugar Mills (P) Ltd. v. State of Madhya Pradesh and others C) with a specific reference to the provisions of the State Act, and it was once again held, following that decision, that th" imposition of the cess was outside th" legislative competence of the State. W\lile 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 Statuks and to provide that the said law shall come into operation retrospecfody. Tbis 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 bo the command of the Parliament, because the rele vant sections, notification, orders, and rules had been adopted by the Parliamontary Statute itself. A B c It will thus appear that the argument of Mr. Desai to the contrary D is of no consequence. The othor argumout 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, E 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 b"en in cluded 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 co11ected; and accordingly- - - - - · - - - (1) [1966] l S.C.R. 523. F G H SUPREME COURT REPORTS [1979) 2 S.C.R. -<. A B c D (a) no suit or other proceedings shall be maintained or continued in any Court for the refund of any cess paid nndcr any State Act; (b) no Court shall e-nforce 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 coll·ected before such commencement may be recove.red (after assessment of the cess where necessary) in lhe manner provided under that Act. (2) For the removal of doubts it is hereby declared no!hing in sub-section ( 1 ) shall be construed as preventing any person- ( a) from qu2stioning in accordance with the provisions of any State Act and ru:es made tberennder 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 und•2r 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 fore avail the appellant thereafter. It has lastly been argu2d 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 tbe levy of the cess is to be found in section 23 of the State Act, to which we shall continuz to refer for the sake of convenience even after the pa·ssing of the Validation Act. Sub-section (2) of that section provides that th·o State Government shall make rules specifying the authority empowered to assess-and col lect the cess and the manner in which it shall be co!rzcted. The Madhya Pradesh Government accordingly made the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Rules, 1959, herein after referred to as the Rules which were also "validated" by Section 3 of the Validation Act. Rub 60 of the Rules provides that the col- F G H • :.:· , BHOPAL SUGAR LTD. v. M. P. STATE (Shinghal, !.) 611 lector shall be the authority empowered to "assess and collect" the cess. Ruic 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 pro vides further that the occupier of the factory shall submit to the Col lector, before the close of each month, a return in the prescribed form, showing the quantity of cane that has ent·ered the specified area during It further provides that within 15 tile immediately preceding month. the occupier shall deposit days o[ the close of the crushing season, the cess leviablc 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 ru1c 63, which places the following responsibility on the Collec tor,- "63. The Collector shall check the amount of cess deposit ed by the occupier of the factory from the returns submitted under rule 62 and see if th·c full amount of cess due from the If the Collec occupier has been credited into the Treasury. tor 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 occu pier shall deposit the amount within the period SP'ccified." The responsibility of the Collector for purposes of assessing and col lecting 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 fuli amount of the eess has been credited to the tr, asury. 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 . <lue from him within the period specified in the notice. A n c D E F The StaDc Act and the Rules do uot therefore reqmre that the Colkctor shall make a formal order of assessment, and then collect the cess. G 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 determina- tion of th~ tax payable by him, and the procedure for collecting or H recovering the tax. In a case where there is a disput~ about the iden- tity of the assessee, the order of ass•cssment serves the purpose of estab- • .. .~ ! ) • • "' A B c D E F 612 SUPREME COURT REPORTS [1979] 2 S.C.R. lishing that identity and namirig the person from whom the tax has to In the present cas•e there is no controversy regarding be recovered. the identity of the assessee, and the provision regarding the assessment of the cess in sub-s-,ction (2) of section 23 of the State Act and ruk 60 of th·o Rules related to the checking of the quan:ity of cane which had entered the specified area, and the amount of cess deposited ir: It is for that purpose that form 4 provides the details to respect of it. be submitted by the occupier of the factory, and a duty is cast on him to deposit the cess lcviablc on the total quantity of the cane, within 15 days of the close of the crushing sea, on, and to send the rcce'ipt evid·oncing the deposit to the Collector. therefore the, admitted amount of the ccss payable by it worked out to a As has been pointed out by the High Court, the Appe:lant's letter (Ext. R-1) dated May 25, 1964, show·s that it admitted that the amount total of Rs. 5,44,835,69 That was the cess which had to be recovered. The Collector recorded an order (Ex. 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 dU>e from the appellant forthwith. He further direct ed 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 ce'ss admitted It seems that the Naib-Tehsildar increased the amount by the appellant. beyond what had been admitted by the appellant and directed by 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. Ther•e is thus no force in the argument of Mr. Desai to th·~ contrary. The appeal fails and is dismissed with costs. M.R. Appea' dismissed. •. • I ·~ _.-