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PETITIONER: ALLAHABAD CANNING CO.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT24/07/1984

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. SEN, AMARENDRA NATH (J) MISRA RANGNATH

CITATION:  1984 AIR 1741            1985 SCR  (1) 207  1984 SCALE  (2)227

ACT:      Levy Sugar Price Equalisation Fund Act, 1976-Proviso to s. 6 (1)-When attracted-Scope of.

HEADNOTE:      Section 3 (1) of the Levy Sugar Price Equalisation Fund Act, 1976  established a  fund known as the Levy Sugar Price Equalisation Fund.  Sub-sec. (2)  of section 3 provided that there shall be credited to the Fund amounts representing all excess realisations made by the manufacturers. Section 6 (1) provided that  where any  amount of  excess realisation  was credited to the fund, the buyer of levy sugar from whom such excess realisation  as made  by the  manufacturers shall  be entitled to  the refund  of such excess realisation from the Fund. There  was a proviso to section 6 (1) which inter alia precluded buyers  of levy  sugar to  claim refund  of excess realisation in certain cases. The appellants, who carried on the business  of manufacture  of syrups,  squashes, jams and jellies, preservation  of vegetables and other food products and from  whom excess  realisation was  made and credited to the Fund,  applied  for  refund  of  such  realisation.  The Central Government  rejected the appellants’ application for refund on  the  ground  that  they  had  not  been  able  to establish fully  and clearly  that the  incidence of  higher sugar price  was not  passed on  by them to the consumers of the end  products. The  appellants preferred a writ petition which was  dismissed by  the High  Court on the same ground. Hence this appeal by special leave.      Allowing the appeal, ^      HELD: The proviso on its plain terms applies only where the  party   claiming  refund   of  the   amount  of  excess realisation is a wholesale or a retail dealer who has passed on the  incidence of the excess over the controlled price of levy sugar  to the  retail dealer or to the consumer, as the case may  be. The  proviso obviously  cannot apply to a case where a  claim for  refund has  been made,  by a consumer of sugar from  whom excess  realisation has  been made  by  the manufacturer of sugar. [106C-D]      In the  instant case  the  appellants  were  admittedly consumers of sugar

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208 and not  dealers in sugar and since they were not dealers in sugar, there could be no question of any incidence of excess being passed  on by  them to  the retail  dealer or  to  the consumer. [106D]      The proviso  to section 6 (1) contemplates a case where a dealer-whether wholesale or retail-sells sugar to a retail dealer or consumer as the case may be and not where a person sells a  manufactured product containing sugar as one of its ingredients. [106G]      In the  instant case  the appellants  sold manufactured product  containing   sugar  as   one  of   its  ingredient. Therefore, the  proviso to  section 6  (1) was not attracted and the  appellants were  entitled to  claim refund  of  the excess realisation from the Fund. [106H]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1487 of 1984.      Appeal by  Special leave  from the  Judgment and  Order dated the  21st August,  1981 of the Allahabad High Court in Civil Misc, Writ Petition No. 9820 of 1981      Harbans Singh for the appellant.      Abdul Kader and G.S. Narayanan for the Respondent.      The Judgment of the Court was delivered by      BHAGWATI,  J.  This  is  an  appeal  by  Special  Leave directed against  an order  of the  High Court  of Allahabad dismissing a  writ petition filed by the appellants claiming refund of  a sum  of Rs.  22681.88 from the Levy Sugar Price Equalisation Fund  under Section  6, sub-section  (1) of the Levy Sugar  Price Equalisation  Fund Act,  1976 (hereinafter referred to  as the Equalisation Fund Act). The facts of the case are few and may be briefly stated as follows:      The appellants  carry on  business  of  manufacture  of syrups,  squashes,   jams  and   jellies,  preservation   of vegetables and other food products. One of the essential raw materials for  these products manufactured by the appellants is sugar. There was at the material time Sugar Control Order 1966 issued  under S.  3 of  the Essential  Commodities Act, 1955, clause  4 of  which provided  that no  purchaser shall sell or  agree to  sell or  otherwise dispose  of  sugar  or deliver or  agree to  deliver sugar or remove any sugar from the bonded  godown of  the factory  in which  it is  stored, except under and in 209 accordance with  the directions  issued in  writing  by  the Central Government  or the  Chief Director. Pursuant to this Order  the  Central  Government  introduced  the  policy  of partial decontrol  of sugar  in August,  1967 and under this policy, the Central Government adopted a scheme of acquiring levy sugar  from  the  factory.  The  price  of  levy  sugar acquired by  the Central  Govt.  was  fixed  every  year  in accordance with  the principles set out in Section 3 (3c) of the Essential Commodities Act, 1955 and during the period in question the  price of  levy sugar  was determined under the sugar (Price  Determination)  Order  1972.  This  order  was however challenged  by factories  manufacturing sugar and an interim order  was passed  by the  High Court  of  Allahabad permitting them  to charge  a price  higher than  that fixed under the  order, on  condition  that  they  furnished  bank guarantee for  the difference  in price  in  favour  of  the Registrar of  the High  Court. Now,  different  prices  were fixed under  the sugar (Price Determination) order, 1972 for

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different zones  and so  far  as  the  East  U.P.  Zone  was concerned, the price fixed was Rs. 175 per quintal exclusive of excise  duty, sales  tax etc.  with the  result that  the price inclusive  of these  taxes and  duties amounted to Rs. 190 per  quintal. The  appellants purchased  from K.M. Sugar Mills Limited,  Motinagar, Faizabad  a certain  quantity  of sugar under a release order issued by the Central Government under the  Levy Sugar  Supply (Control)  order 1972 and they lifted an aggregate quantity of 400 quintals of sugar on 12- 8-1972  and   16-8-1972.  Now,   under  the   sugar   (Price Determination) order, 1972 K.M. Sugar Mills Limited were not entitled to  recover from  the appellants  price at  a  rate exceeding Rs.  190 per  quintal but  by virtue  of the  stay order granted  by the High Court of Allahabad they recovered from the  appellants price  at the  rate of  Rs. 234.89  per quintal and  the total  excess amount  charged by K.M. Sugar Mills Limited  from the  appellants thus came to Rs 22681.88 for which  bank guarantee  was given  by  K.M.  Sugar  Mills Limited in  favour of  the Registrar  of the High Court. The writ petition  filed by K.M. Sugar Mills Limited against the Sugar (Price  Determination) Order,  1972 along  with  other similar writ petitions filed by other manufacturers of sugar was however, ultimately dismissed by the Allahbad High Court in November,  1974 with the result that the Registrar of the High Court  became entitled  to encash  the  bank  guarantee given by K.M. Sugar Mills Limited and a sun of Rs. 22,681.88 was accordingly  recovered by  the Registrar  under the bank guarantee.      Since  the  excess  amount  recovered  by  the  various manufactu- 210 rers of  sugar, including  K.M. Sugar  Mills Limited  really belonged to  the consumers  to whom  sugar had  been sold by these manufacturers,  Parliament enacted  Levy  Sugar  Price Equalisation Fund  Act, 1976  with effect  from 1-4-1976 for the purpose  of ensuring that the excess amount so recovered should not  remain in the hands of manufacturers of sugar so as to  unjustly enrich  them  but  should  be  paid  to  the consumers  of   sugar  from  whom  it  had  been  unlawfully recovered  by   the  manufacturers.   Section  3(1)  of  the Equalisation Fund  Act established  a Fund known as the Levy Sugar Price  Equlisation Fund.  Sub Section (2) of Section 3 provided that  there shall  be credited  to the Fund amounts representing   all   excess   realisations   made   by   the manufacturers, irrespective  of  whether  such  realisations were  made   before  or   after  the   commencement  of  the Equalisation Fund  Act.  Pursuant  to  this  provision,  the Registrar of  the High Court deposited a sum of Rs. 22681.88 to the  Credit of  the Fund.  Section 6  of the Equalisation Fund Act  then proceeded  to enact  that where any amount of excess realisation  is credited  to the  Fund, the  buyer of Levy sugar from whom such excess realisation was made by the manufacturer shall  be entitled to the refund of such excess realisation from  the Fund. This Section is material for the purpose of  determination of  the controversy arising in the present appeal  and we  would, therefore,  reproduce  it  as follows:           (1)  Where any  amount is  credited to  the Fund a                refund shall  be made  from the  Fund to  the                buyer of  Levy Sugar  from  whom  any  excess                realisation  was  made  by  the  producer  or                dealer,                Provided that  no buyer  shall be entitled to                claim as refund under this sub-section if he-           (a)  being the wholesale dealer, had passed on the

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              incidence of  such excess over the controlled                or fair  price of  levy sugar  to the  retail                dealer by  whom the  price of  such sugar was                paid or           (b)  being a  retail dealer,  had  passed  on  the                incidence of  such excess over the controlled                or fair  price of  levy sugar to the consumer                by whom the price of such sugar was paid."      Since  a   sum  of   Rs.  22681.88  represented  excess realisation 211 made by  K.M. Sugar  Mills Limited  from the  appellants and this amount was credited to the Fund by the Registrar of the High Court,  the appellants  filed an application in form IV making a claim for refund of this amount from the Fund. This application was  filed by  the appellants,  on  30th  April, 1979, admittedly within the prescribed period of six months. The Central  Government, however, rejected the claim made by the appellants  on the ground that they had not been able to establish fully  and clearly  that the  incidence of  higher sugar price  was not  passed on  by them to the consumers of the end products.      The appellants  thereupon preferred  a Writ Petition in the High  Court but  the High  Court also  rejected the Writ Petition on  the same  ground, namely, that according to the finding recorded  by the  Central Government  the appellants had not  been able  to establish  fully and clearly that the incidence of  higher sugar  price was  not passed  on to the consumers of  the end  products and since this was a finding of fact  base on  evaluation of  the material  and  evidence produced by  the appellants  before the competent authority, the High  Court would  not be  justified in interfering with the  order   of  the   Central  Government.  The  appellants thereupon preferred  the present  appeal with  special leave obtained from this Court.      The main  point  of  controversy  between  the  parties centres round  the true  interpretation of  S. 6 Sub-section (1) of  the Equalisation  Fund Act. This provision lays down as a  condition precedent  to  its  applicability  that  the excess realisation  made by the manufacturer of sugar should have been credited to the Fund. Now, the application made by the appellants  in from  IV stated in so many terms that the amount in  question had  been deposited  by the Registrar of the High Court in terms of the Levy Sugar Price Equalisation Fund Rules,  1972, through the Chief Pay & Accounts Officer, Govt.  Of  India,  Ministry  of  Agriculture  &  Irrigation, Department of Food, New Delhi. This statement was not at any time disputed  on behalf of the Central Government either in the order made by the Central Government rejecting the claim of the  appellants or  in the  proceedings before  the  High Court. It  is  indisputable  that  a  sum  of  Rs.  22681.88 representing the excess realisation made from the appellants by K.M.  Sugar Mills Limited was credited to the Fund by the Registrar of the High Court. And in any event, this must be 212 presumed to have been done because the Equalisation Fund Act having been  enacted for  this purpose, the Registrar of the High Court  would naturally  be expected  to carry  out  his obligation under  the statute  by depositing  the amount  of excess realisation recovered by him under the bank guarantee given by  K.M. Sugar Mills Limited. There can, therefore, be no doubt  that in  terms of  Section 6,  Sub-section (1) the appellants were  entitled to  claim refund of the sum of Rs. 22681.88 from  the Fund.  The only  question is  whether the proviso  to   section  6,   Sub-section  (1)  precluded  the

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appellants from  claiming refund of that amount. The proviso on its  plain terms  applied only  where the  party claiming refund of the amount of excess realisation is a wholesale or a retail  dealer who  has passed  on the  incidence  of  the excess over the controlled price of levy sugar to the retail dealer or  to the  consumer, as the case may be. The proviso obviously cannot  apply to  a case  where a claim for refund has been  made by  a consumer  of  sugar  from  whom  excess realisation has  been made by the manufacturer of sugar. The appellants  were  admittedly  consumers  of  sugar  and  not dealers in  sugar and  since they were not dealers in sugar, there could  be no question of any incidence of excess being passed by them to the retail dealer or to the consumer.      The  learned   counsel  appearing   on  behalf  of  the respondent contended  that the excess over the controlled or fair price  of levy  sugar must  have been  passed on by the appellants to  the consumer  when they sold the manufactured products to  them, because the higher price paid by them for the sugar  purchased from K.M. Sugar Mills Limited must have been taken  into account  by them in fixing the price of the manufactured products.  This may  be so or may not be so. It is not  necessary for us to examine this question because it is irrelevant on the terms of the proviso to Section 6, Sub- section (1).  That proviso  deals with  a situation  where a wholesale or retail dealer passes on the incidence of excess over the  controlled or fair price of levy sugar to a retail dealer  or   consumer,  who   purchases   such   sugar.   It contemplates a  case where  a dealer-whether  whole sale  or retail-sells sugar  to a  retail dealer  or consumer  as the case may  be and  not where  a person  sells a  manufactured product containing sugar as one of its ingredients, we have, therefore, no  doubt that  the proviso  to Section  6,  Sub- section (1)  was not attracted in the case of the appellants and, consequently,  the appellants  were entitled  to  claim refund of the sum of the Rs. 22681.88 from the sum of Fund. 213      We accordingly allow the appeal, set aside the judgment of the  High Court and issue a Writ directing the respondent to pay to the appellants a sum of Rs. 22681.88 together with interest thereon  at the  rate of  6 per cent per annum from today until  payment. The  respondent will  pay the costs of the appeal to the appellants. H.S.K.                                       Appeal allowed. 214