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PETITIONER: BHOPAL SUGAR INDUSTRIES LTD.

       Vs.

RESPONDENT: STATE OF MADHYA PRADESH & ORS.

DATE OF JUDGMENT05/12/1978

BENCH: SHINGAL, P.N. BENCH: SHINGAL, P.N. DESAI, D.A.

CITATION:  1979 AIR  537            1979 SCR  (2) 605  1979 SCC  (3) 792  CITATOR INFO :  F          1979 SC1972  (5)

ACT:      Madhya Pradesh  Sugarcane  (Regulation  of  Supply  and Purchase) Act,  1958, s. 23 and s. 23(1), constitutionality, "an area",  whether synonymous  to "local area" in Entry 52, List II  of the  Seventh Schedule,  Constitution of India-s. (2) and  Rule 60, M.P.S. (Regulation of Supply and Purchase) Rules, 1959,  whether require  formal assessment order prior to collection of cess.      Sugarcane     cess      (Validation)     Act,     1961, Constitutionality,  whether  purports  to  Validate  Invalid State Statutes.

HEADNOTE:      The  appellant   company   cultivates   sugarcane   and manufactures sugar  in its  factory, by  crushing the  sugar cultivated by  it and  purchased from other cultivators. The State Government  enacted the  M.P. Sugarcane  (R.S.P.) Act, 1958 which  came into  force on  July  1,  1959.  The  State Government issued  a notification  under s.  23 of  the  Act imposing a  cess of  12 paise  per maund  on  the  entry  of sugarcane during  a crushing  season in  the area  comprised within "such of the factories in which the total quantity of cane entering  for consumption,  use or  sale to the factory during such season exceeded 10 lakh maunds." The High Court, on a  writ  application  by  the  appellants,  declared  the notification illegal  as the imposition of the levy was with reference to  particular premises.  The Parliament thereupon enacted the Sugarcane Cess (Validation) Act, 1961. Section 3 of the  Validation Act  was taken to validate the imposition and collection  of the  cess under  the State Act. In April, 1964,  the   appellant  received   an  intimation  from  the Additional Collector  stating that  a sum of Rs. 5,49,262.92 was due  from it  as cess for the period 1959-60 to December 25, 1961, and asking for a bank guarantee for payment of the balance. The  appellant replied  that  the  amount  of  cess worked out only to Rs. 5,44,835.69 and the Collector had not assessed  the   cess  in  accordance  with  the  rules.  Its objection was  ignored and  a demand notice was served on it under s.146  of the  M.P. Land  Revenue Code,  1959, for Rs. 5,49,262.92. The appellant filed a writ petition challenging

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the constitutionality  of the Validation Act under which the Collector had  demanded the  cess. The High Court upheld the imposition of cess but reduced it to Rs. 5,44,835.69.      It was  contended that  s. 23  of the State Act was not ultra vires the Constitution, as the expression "an area" in s. 23(1) means "a local area" within the meaning of Entry 52 of List  II, 7th  Schedule  of  the  Constitution,  and  the Parliament could  not, therefore,  enact an Act validating a valid Act. It was further contended that when a law provides for the  assessment of  a cess  or tax, it is required to be done by a specific order to that effect, but it was not made in this case.      Dismissing the appeal, the Court, 606 ^      HELD: 1.  Section 23  of the  State Act was ultra vires the  Constitution,   and  cannot   be  upheld   on  such   a construction of the words "an area" in s. (1) as to restrict it to mean a "local area". The proper meaning to be attached to the  words "local  area" in  Entry 52,  List  II  of  the Seventh Schedule  of the  Constitution; (when  the area is a part of  the State imposing the law) is an area administered by a  local body  like a  Municipality, a  district board, a local board,  a union  board, a  panchayat or  the like. The premises of  a factory  are therefore  not  a  "local  area" falling within  Entry 52  of the State List, and there is no other Entry  in the  State List  or the  Concurrent List  in which the Act could fall, [608 E-H]      Diamond Sugar  Mills Ltd.  and Anr.  v. State of U.P. & Anr. [1961]  3 SCR  242 and  Jaora Sugar  Mills (P)  Ltd. v. State of M.P. and Ors., [1966] 1 SCR 523; followed.      2. What the Parliament had done by enacting s. 3 of the Validation Act,  was  not  to  validate  the  invalid  State statute, but  to make  a law  concerning the cess covered by the said statute and to provide that the said law shall come into operation  retrospectively. By  virtue  of  s.  3,  the command under  which the  cess would  be deemed to have been recovered, would  be the  command of the Parliament, because the relevant  sections, notifications,  orders and rules had been adopted by the Parliamentary Statute itself.[609 B-C]      3. The  State Act and the Rules do not require that the Collector shall  make a formal order of assessment, and then collect the cess. The purpose of an assessment is to compute the amount  of the  cess payable  by the  person  concerned. "Assess" is  a comprehensive word and in a taxing statute it often means  the computation  of the income of the assessee, the determination  of tax  payable by him, and the procedure for collecting  or recovering the tax. In a case where there is a  dispute about  the identity of the assessee, the order of  assessment  serves  the  purpose  of  establishing  that identity and  naming the  person from  whom the tax is to be recovered. The  responsibility of the Collector for purposes of assessing  and collecting  the tax  under s.  60  of  the Rules, is  to see  that the full amount of the cess has been credited to  the treasury by the occupier of the factory. If he finds  that this  is not  so, it is his duty to call upon the occupier  by a  written notice to deposit the amount due from him  within the  period specified in the notice. [611E- H,612A]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No.1293 of 1969.

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    Appeal from  the Judgment  and  Order  dated  the  25th April, 1968  of the  Madhya  Pradesh  High  Court  in  Misc. Petition No. 404/64.      S.T. Desai,  J.B. Dadachanji  K.J.John, Mrs. A.K. Varma for the Appellant.      S.K. Gambhir for Respondents 1, 2 and 4.      E.C.Agarwala and R.N. Sachthey for Respondent No. 3. 607      The Judgment of the Court was delivered by      SHINGHAL J.  This appeal by a certificate issued by the Madhya Pradesh  High Court  is directed against its judgment dated April 25, 1968.      The appellant  is a  company which cultivates sugarcane and manufactures  sugar in  its factory  in  Sehore,  Madhya Pradesh, by  crushing the  sugarcane cultivated  by  it  and purchased from  other  cultivators.  The  State  Legislature enacted the  Madhya Pradesh  Sugarcane (Regulation of Supply and Purchase)  Act, 1958,  hereinafter referred  to  as  the State Act,  which came into force on July 1, 1959. The State Government issued a notification on November 28, 1959, which appeared in  the State Gazette dated December 4, 1959, under section 23  of the State Act imposing a cess of 12 paise per maund on  the entry of sugarcane during a crushing season in the area  comprised within  "such of  the factories in which the total  quantity of cane entering for consumption, use or sale to  the factory  during such  season exceeded  10  lakh maunds". The  appellants  challenged  the  validity  of  the imposition, and  the High  Court, on  August 31,  1961, held that the  notification was  illegal as the imposition of the levy was  with reference  to particular  premises. A similar view was  taken in  regard to  the Acts in some other States and  Parliament   thereupon  enacted   the  Sugarcane   Cess (Validation) Act,  1961,  hereinafter  referred  to  as  the Validation Act,  which came into force on December 26, 1961. Section 3  of the  Validation Act  was taken to validate the imposition and  collection of  the cess under the State Act. The Manager  of the appellant company received an intimation from the  Additional Collector  of Sehore dated April 13/15, 1964, stating  that a sum of Rs. 5,49,262.92 was due from it on account  of cess  for the period "1959-60 to December 25, 1961" and  asking for  a bank  guarantee for  payment of the balance. The  appellant wrote back saying that the amount of the cane  cess worked  out to  Rs. 5,44,835.69  and not  Rs. 5,49,262.92, and  that as the collector had not assessed the amount of  the cess in accordance with the rules, it was not payable by  the appellant.  As  the  Collector  ignored  the objection of  the appellant, a demand notice was served upon it under section 146 of the Madhya Pradesh Land Revenue Code 1959, asking  it to  deposit Rs.  5,49,262.92 by  August  1, 1964. Once  again the appellant denied its liability, but as that was  not acceptable  to the  Collector,  the  appellant filed a  writ petition  in the  High Court  stating that the Collector’s demand on account of the cess was illegal as the Validation Act was ultra-vires the Constitution.      The State  of Madhya Pradesh traversed the claim in the writ petition.  The High  Court upheld the imposition of the cess but reduced 608 it to  Rs. 5,44,835.69,  by its  impugned judgment dated May 25, 1968,  and that is why the Company has come up in appeal to this Court.      It has  been argued  by Mr.  Desai  on  behalf  of  the appellant that  section 23  of the  State Act was not ultra- vires the  Constitution and  there could  be no  question of validating a valid Act. According to him, the State Act fell

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within the  scope of  Entry 52  of List  II of  the  Seventh Schedule of  the Constitution  and was valid, and Parliament could not  legislate in  respect of  that occupied field and pass the  Validation Act. These arguments have been based on the main  contention that  the expression  "an area" in Sub- section (1)  of section  23 of the State Act really means "a local area" within the meaning of the aforesaid Entry 52 and no other area.      Sub-section (1) of section 23 of the State Act reads as follows,-           "23.  Levy   of  cess   on  cane.-(1)   The  State      Government may,  by notification,  impose  a  cess  not      exceeding 25  paise a  maund, on the entry of cane into      an  area,   specified   in   such   notification,   for      consumption, use or sale therein", There are  two provisos to the sub-section, but they are not relevant for  the purpose  of the  controversy before us. It would appear  from sub-section  that it  permits  the  State Government to impose the cess on the entry of sugarcane into any area  that may  be specified  in its  notification,  and there is nothing in it to confine the imposition to a "local area". As has been held by this Court in Diamond Sugar Mills Ltd and Another v. State of Uttar Pradesh and Another when a similar  point   arose  for   consideration  with  the  U.P. Sugarcane Cess  Act, 1956, the proper meaning to be attached to the words "local area" in Entry 52 List II of the Seventh Schedule of  the Constitution,  (when the  area is a part of the State  imposing the  law) is  an area  administered by a local body  like a  municipality, a  district board, a local board, a  union board, a panchayat or the like". It has been clearly laid  down  that  the  premises  of  a  factory  are therefore not  a "local area". This court accordingly struck down section  3 of  the U.P.  Act empowering the Governor to impose a cess on the entry of sugarcane into the premises of the factory  on the ground that it did not fall within Entry 52 of  the State  List and  there was  no other Entry in the State List  or the  Concurrent List  in which  the Act could fall. It  is therefore  futile for  the appellant to contend that section  23 of  the State  Act was  not ultra-vires the Constitution or that it can be upheld on such a construction of the  words "an  area" in  section 23 as to restrict it to mean a "local area". 609      The decision  in Diamond  Sugar Mills  case came up for consideration in this Court in Jaora Sugar Mills (P) Ltd. v. State of Madhya Pradesh and others with a specific reference to the  provisions of  the State  Act, and it was once again held, following  that decision,  that the  imposition of the cess was  outside the  legislative competence  of the State. While examining  that aspect  of the controversy, this Court made it  clear that  what Parliament  had done  by  enacting section 3  of the  Validation Act  was not  to validate  the invalid State  Statutes, but  to make  a law  concerning the cess covered  by the  said Statutes  and to provide that the said law  shall come  into operation  retrospectively.  This Court  clarified   that  by  virtue  of  section  3  of  the Validation Act,  the command  under which  the cess would be deemed to  have been  recovered would  be the command of the Parliament, because  the  relevant  sections,  notification, orders, and  rules had  been adopted  by  the  Parliamentary Statute itself.      It will  thus appear  that the argument of Mr. Desai to the contrary is of no consequence.      The other  argument of  Mr.  Desai  that  the  writ  of mandamus issued  by the  High  Court  on  August  31,  1961,

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quashing the notification dated November 28, 1959, could not be made,  and was  not in  fact  made,  ineffective  by  the Validation Act,  is also of no consequence. Section 3 of the Validation Act  makes this  quite clear  for it  provides as follows.-           "3. Validation  of imposition  and  collection  of      cesses under  State Acts.-Notwithstanding any judgment,      decree or  order of  any  Court,  all  cesses  imposed,      assessed  or  collected  or  purporting  to  have  been      imposed, assessed  or collected  under  any  State  Act      before the  commencement of this Act shall be deemed to      have been  validly imposed,  assessed or  collected  in      accordance with  law, as if the provisions of the State      Acts and  of all notifications, orders and rules issued      or made thereunder, in so far as such provisions relate      to the  imposition, assessment, collection of such cess      had been  included in  and formed  part of this section      and this  section had  been in  force at  all  material      times  when   such  cess   was  imposed,   assessed  or      collected; and accordingly- 610           (a)  no   suit  or   other  proceedings  shall  be      maintained or  continued in any Court for the refund of      any cess paid under any State Act;           (b) no  Court shall  enforce  a  decree  or  order      directing the  refund of  any cess paid under any State      Act; and           (c) any  cess imposed  or assessed under any State      Act  before  the  commencement  of  this  Act  but  not      collected before  such commencement  may  be  recovered      (after assessment  of the  cess where necessary) in the      manner provided under that Act.           (2)  For  the  removal  of  doubts  it  is  hereby      declared that  nothing  in  sub-section  (1)  shall  be      construed as preventing any person-           (a)  from   questioning  in  accordance  with  the      provisions of  any State  Act and rules made thereunder      the assessment of any cess for any period; or           (b) from  claiming refund  of any cess paid by him      in excess  of the  amount due  from him under any State      Act and the rules made thereunder." The section  thus specifically validates the notification in question in  regard, inter  alia, to  the imposition  of the cess. The  mandamus which  was issued  by the  High Court on August 31,  1961, could  not therefore  avail the  appellant thereafter.      It has  lastly been argued by Mr. Desai that when a law provides for  the  assessment  of  a  cess  or  tax,  it  is necessary that it should be done by a specific order to that effect, and  that an  order of assessment cannot be presumed when it  has not  really been  made. It  has therefore  been argued that  as an  order of  assessment was not made in the present case,  it could  not be  presumed or  deemed to have been made simply because a demand was raised for the purpose of affecting the recovery of the cess from the apellant.      The charging  provision for  the levy of the cess is to be found  in section  23 of the State Act, to which we shall continue to refer for the sake of convenience even after the passing of  the Validation  Act.  Sub-section  (2)  of  that section provides  that the State Government shall make rules specifying the authority empowered to assess and collect the cess and  the manner  in which  it shall  be collected.  The Madhya  Pradesh   Government  accordingly  made  the  Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Rules, 1959, hereinafter  referred to  as the Rules which were also

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"validated" by  Section 3 of the Validation Act. Rules 60 of the Rules provides that the col- 611 lector shall  be the  authority  empowered  to  "assess  and collect" the  cess.      Rule 61 makes it obligatory for the occupier of  a factory to maintain a correct account, day to day, in  the prescribed  form, of the cane entering the area specified in  the notification  under section  23.  Rule  62 provides further  that the  occupier of  the  factory  shall submit to  the Collector,  before the close of each month, a return in  the prescribed form, showing the quantity of cane that has  entered the  specified area during the immediately preceding month.  It further provides that within 15 days of the close of the crushing season, the occupier shall deposit the cess  leviable on  the total  quantity of cane which has entered the  specified area  during the  crushing season and shall send  the treasury  receipt showing the amount of cess deposited to the Collector. Then comes rule 63, which places the following responsibility on the Collector,-           "63. The  Collector shall check the amount of cess      deposited by  the, occupier  of the  factory  from  the      returns submitted  under rule  62 and  see if  the full      amount of  cess due from the occupier has been credited      into the Treasury. If the Collector finds that the full      amount of cess due from the occupier of the factory has      not been  deposited he  shall by  a written notice call      upon the  occupier to  deposit the  amount due from him      within the  period specified  in such  a notice and the      occupier shall  deposit the  amount within  the  period      specified." The  responsibility   of  the   Collector  for  purposes  of assessing and  collecting the tax under rule 60 of the Rules is therefore  to check  the amount  of the cess deposited by the occupier  of the  factory. The check has to be made with the returns submitted by the occupier, and the Collector has to see that the full amount of the cess has been credited to the treasury.  If he  finds that  this is  not so, it is his duty to  call upon  the occupier,  by a  written notice,  to deposit the  amount due from him within the period specified in the notice.      The State  Act and  the Rules  do not therefore require that the  Collector shall make a formal order of assessment, and then collect the cess.      It has  to  be  appreciated  that  the  purpose  of  an assessment is  to compute  the amount of the cess payable by the person  concerned. "Assess" is a comprehensive word, and in a  taxing statute  it often  means the computation of the income of the assessee, the determination of the tax payable by him,  and the  procedure for collecting or recovering the tax. In  a case  where there is a dispute about the identity of the  assessee, the order of assessment serves the purpose of estab 612 lishing that  identity and  naming the  person from whom the tax has  to be  recovered. In  the present  case there is no controversy regarding  the identity of the assessee, and the provision regarding  the assessment  of  the  cess  in  sub- section (2)  of section  23 of  the State Act and rule 60 of the Rules  related to  the checking  of the quantity of cane which had entered the specified area, and the amount of cess deposited in respect of it. It is for that purpose that form 4 provides  the details  to be  submitted by the occupier of the factory,  and a  duty is cast on him to deposit the cess leviable on  the total  quantity of the cane, within 15 days of the close of the crushing season, and to send the receipt

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evidencing the deposit to the Collector.      As  has  been  pointed  out  by  the  High  Court,  the Appellant’s letter (Ext. R-I) dated May 25, 1964, shows that it admitted that the amount of the cess payable by it worked out to  a total  of Rs.  5,44,835.69 That  was therefore the admitted amount  of the  cess which had to be recovered. The Collector recorded  an order  (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  due from  the appellant  forthwith.  He further directed  that the  "entire amount  of the cane cess due  from  the  B.S.I."  should  be  recovered  and  monthly progress report  sent to  him. This shows that the Collector did apply  his mind to the matter, and made an express order for the recovery of the total amount of the cess admitted by the appellant.  It seems  that the  Naib-Tehsildar increased the amount  beyond what  had been  admitted by the appellant and directed  by the  Collector, but  the High Court rightly confined the  recovery to Rs. 5,44,835.69 which was admitted by the  appellant to  be due  from it on account of cess for the two  seasons. There  is thus no force in the argument of Mr. Desai to the contrary.      The appeal fails and is dismissed with costs. M.R.                                       Appeal dismissed. 613