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PETITIONER: JAORA SUGAR MILLS (P) LTD.

       Vs.

RESPONDENT: STATE OF MADHYA PRADESH AND OTHERS

DATE OF JUDGMENT: 19/04/1965

BENCH: GAJENDRAGADKAR, P.B. (CJ) BENCH: GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. HIDAYATULLAH, M. SHAH, J.C. SIKRI, S.M.

CITATION:  1966 AIR  416            1966 SCR  (1) 573  CITATOR INFO :  R          1966 SC 764  (29)  RF         1972 SC2455  (14)  E          1975 SC1389  (11,13,15,17)  D          1976 SC 182  (24)  R          1979 SC 537  (6)  F          1979 SC1972  (5,6)  R          1982 SC1012  (2,4)

ACT: The  Sugar Cane Cess (Validation) Act, 1961 (Central Act  38 of  1961), s. 3-State Acts levying Sugar-cane Cess found  to be  ultra  vires--Central Act adopting provisions  of  State Acts   and  validating  assessments  and  collections   made thereunder--Central Act, whether valid.

HEADNOTE: Under the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase)  Act  1958  (1  of 1959)  a  cess  was  levied  on sugarcane  and  for  this purpose a  sugarcane  factory  was treated  as a ’local area’.In the Diamond’ Sugar Mills  case it  was held by this Court that such a levy was  not  valid. Following this decision the Madhya Pradesh High Court struck down s. 23, which was the charging section of the  aforesaid Madhya  Pradesh.   Act No. 1 of 1959.  There  were  Acts  in several other States which suffered from the same  infirmity and  to meet the situation Parliament passed  the  Sugarcane Cess (Validation Act 1961 (38 of 1961).  The Act made valid, by s. 3, all the assessments and collections made before its commencement under the various State Arts and laid down that all  the  provisions.  of  the State Acts  as  well  as  the relevant notifications, rules etc. made under the State Acts would be treated as part of s. 3; further. the said  section was to be deemed to have existed at all material times  when the cess was imposed, assessed and collected under the State Acts.  The, appellant, a sugar factory, was asked to pay the cess  for  the  years  1959-60  and  1960-61.   It  however, challenged  the  levy  in a writ petition  before  the  High Court.   The High Court having dismissed the petition,  the. appellant came to this Court with certificate.

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The contentions urged on behalf of the appellant were :  (1) What  the validation of the Act had done was to  attempt  to cure the legislative incompetence of the State  Legislatures by validating State Acts which were invalid on the ground of absence  of legislative competence in the  respective  State Legislatures; (2) Parliament had passed the Act in  question not  for the purpose of levying a cess of its own,  but  for the purpose of enabling the respective states to retain  the amounts  which  they had illegally collected.  The  Act  was therefore a colourable piece of legislation; (3) The Act had not  been passed for the purposes of the Union of India  and the   recoveries  of  cesses  which   were   retrospectively authorised by it were not likely to go into the Consolidated Fund of India; (4) The sugarcane crushing season was between October  1,  and June 30th.  ’Me  Cane  Development  Council which  was  constituted  on  August  26,  1960  was  not  in existence  throughout the period covered by the  demand  for the year 1950-60. ’Me demand was a ’fee’ and it was  illegal to recover such a wee for a period during which the  council did  not  exist at all and could have  rendered  no  service -whatever. HELD:(i)  In  view  of the decision of  this  Court  in Diamond Sugar Mills it was obvious that the cess in question was outside the legislative competence of the States.   This very  conclusion  led  to the  irresistible  inference  that Parliament  would have legislative competence to  deal  with the  subject-matter in question, having regard to  Art.  248 read with Entry 524 97  in List I of the Seventh Schedule to  the  Constitution. Thus the legislative competence of Parliament to levy a cess such  as  was  imposed  by  s.  3  of  the  Sugarcane   Cess (Validation)  Act 1961 (Central Act 38 of 1961) was  not  in doubt. Diamond Sugar Mills Ltd. & Anr. v. Slate of Uttar Pradesh  & Anr. [1961] 3 S.C.R. 243, referred to. (ii)When an Act passed by a State Legislature is invalid on the   ground  that  the  State  Legislature  did  not   have legislative  competence to deal with the topics  covered  by it,  then  even  Parliament cannot  validate  such  an  Act, because   the  effect  of  such  attempted  validation,   in substance, would be to confer legislative competence on  the State  legislature in regard to a field or topic  which,  by the   relevant   provisions   of  the   schedules   to   the Constitution, is outside its jurisdiction.  Where a topic is not  included  within  the relevant List  dealing  with  the legislative   competence   of   the   Slate    Legislatures, Parliament,  by making a law cannot attempt to  confer  such legislative competence on the State Legislatures. [531 G] But  s. 3 of the impugned Act does not purport  to  validate the  invalid  State Statutes.  What Parliament has  done  by enacting  the  said section is not to validate  the  invalid State-  statutes,  but  to make a law  concerning  the  cess covered by the said Statutes and to provide that he said law shall come into operation retrospectively.  Parliament  knew that the relevant State Acts were invalid because the  State Legislatures  were not competent to enact them.   Parliament also  knew  that it was fully competent to make  an  Act  in respect  of the subject-matter covered by the  said  invalid State Statutes.  Parliament however decided that rather than make  elaborate  and  long  provisions  in  respect  of  the recovery  of  cess, it would be more convenient  to  make  a compendious  provision  such as is contained in  s.  3.  The plain  meaning  of s. 3 is that the  material  and  relevant provisions  of  the State Act as well as the  provisions  of

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notifications,  orders and rules issued or  made  thereunder are  included  in  s. 3 and shall be  deemed  to  have  been included  at all material times in it.  In other words  what s. 3 provides is that by its order and force the  respective cesses  will be deemed to have been recovered,  because  the provisions  in relation to the recovery of the  said  cesses have been incorporated in the Act itself.  The command under which  the  cesses would be deemed to  have  been  recovered would, therefore, be the command of Parliament. [532 C-H] (iii)Where  a  challenge  to the validity  of  a  legal enactment  is  made on the ground that it  is  a  colourable piece  of  legislation,  what  has  to  be  proved  to   the satisfaction of the court is that though the Act  ostensibly is  within the legislative competence of the legislature  in question, in substance and in reality it covers field  which is  outside  its legislative competence.  In  passing  s.  3 however  Parliament  exercised  its  undoubted   legislative competence  to  provide for the recovery of  the  specific(] cesses  and commissions in the respective State  areas  from the  date and in the manner indicated by it.  The Act  could not  therefore  be  attacked  on  the  ground  of  being   a colourable piece of legislation. [533 F-H] K.C.  Gajatpati  Narayan Dea & Ors. v. State  of  Orissa, [1954] S.C.R.1 relied on. (iv)The  validity of an Act must be judged in the light  of the  legislative competence of the legislature which  passes the  Act  and may have to be examined in  certain  cases  by reference to the question as to Whether fundamental right of citizens  have  been  improperly contravened,  or  to  other considerations  which may be relevant in that  behalf.   But normally it would be inappropriate, indeed illegitimate,  to hold an enquiry into the manner in which the funds raised by an Act would be dealt with when  525 the court is considering the question about the validity  of the  Act itself.  Therefore it was impermissible to  contend that the Act was invalid because the funds in question would not go into the Consolidated Fund of India. [535 E-H] (v)If  collections  are made  under  statutory  provisions which are invalid because they deal with a topic outside the legislative competence of the State Legislature,  Parliament can  in  exercise of its undoubted  legislative  competence, pass  a law retrospectively validating the said  collections by  converting their character from collections made  tinder the State Statutes to that of collections made under its own statute operating retrospectively.  To hold otherwise  would be  to cut down the width and amplitude of  the  legislative competence  conferred  on Parliament by Art. 248  read  with Entry 97 in List I of the Seventh Schedule. [536 C-E] (vi)The  functions  of  the  Cane  Development  Council  as prescribed  by s. 6 of the Madhya Pradesh Act show that  the Council is expected to render service to the mills like  the appellant  and  so  it  can  be  safely  assumed  that   the commission which was authorised to be recovered under s.  21 of  the Madha Pradesh Act is a ’fee’.  The imposition  of  a fee  is  generally supported on the basis of quid  pro  quo. The  Council was however constituted for the first  time  on August  26,  1960.  In other words the Council  was  not  in existence  throughout  the  periods covered  by  the  demand relating to the year 1959-60.  It did not render any service at all during the said period.  On the special facts of  the case no amount could therefore be validly claimed by way  of commission for the year 1959-60. [537 A-B; 538 C-D] H.   H.  Sudhindra Thirtha Swamiar v. Commissioner of  Hindu Religious and Chtartible Endowments, Mysore, [1963] Supp.  2

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S.C.R., referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 531 of 1964. Appeal from the judgment and order dated September 24,  1963 of the Madhya Pradesh High Court in Misc.  Petition No.  130 of 1962. G.   S.  Pathok, Rameshwar Nath, S. N. Andley, P. L.  Vohra, for the appellant. M.   Adhikari,  Advocate-Gencral  for the  State  of  Madhya Pradesh and 1. N. Shroff, for the respondents. G.S.  Pathak, B. Dutta, J. B.  Dadachanji, O.  C.  Mathur and Ravinder Narain, for interveners Nos. 1 and 2. V.   M. Lmaye and S. S. Shukla, for intervener No. 3. G. S. Pathak, B. Dutta, S. N. Vakil, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 4. C. B. Agarwala and O. P. Rana, for intervener No. 5. The Judgment of the Court was delivered by Gajendragadker,  C.J.  The principal question of  law  which arises  in this  appeal is in regard to the validity of  the Central Act- 526 the  Sugarcane Cess (Validation) Act, 1961 (No. 38 of  1961) (hereinafter called ’the Act’).  It arises in this way.  The appellant,  Jaora  Sugar  Mills (Pvt.) Ltd.,  is  a  Private Limited  liability  Company incorporated  under  the  Indian Companies Act.  Its registered office is it Jaora within the premises  of  the Sugar Mills owned by  it.   The  appellant manufactures sugar and carries on the business, inter  alia, of the production and sale of the said commodity since  1955 when  it  was incorporated.  The sugarcane  season  for  the manufacture of sugar generally covers the period December to March,  and the sugarcane crushing season usually begins  on the 1st of October and ends on the 30th June. Respondent  No. 1, the State of Madhya Pradesh, enacted  the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act,  195 8 (No. 1 of 1959) (hereinafter called ’the  Madhya Pradesh Act’).  Section 23 of the said Act made a  sugarcane cess  payable  as prescribed by it.  Rules 60 to 63  of  the Madhya  Pradesh Sugarcane (Regulation of Supply &  Purchase) Rules, 1959, made under the said Act, provide for the method of  collection  of  cess.   Section  21  of  the  said   Act prescribes  for  the  payment  of  commission  to  the  Cane Development  Council  which was proposed to  be  constituted under  s.  5.  Rules  45 to  47  prescribe  the  quantum  of commission  payable  to the said Council and  refer  to  the manner in which the said payment has to be made. The  validity  of  S.  23 of  the  Madhya  Pradesh  Act  was challenged  before  the  Madhya  Pradesh  High  Court  under Article  226  of  the  Constitution  in  The  Bhopal   Sugar Industries  v. State of Madhya Pradesh (Misc.  Petition  No. 27  of  1961).   Before the writ  petition  challenging  the validity  of the said Act came to be heard before  the  said High  Court, a similar provision in the U.P. Sugarcane  Cess Act,  1956 (U.P. Act XXII of 1956) had already  been  struck down  by  this Court as unconstitutional  in  Diamond  Sugar Mills Ltd. & Anr. v. The State of Uttar Pradesh and Anr.(1). The  common  feature of the charging sections  in  both  the Madhya  Pradesh and the U.P. Acts was that  they  authorised the  respective  State Governments to impose a cess  on  the entry  of  cane  into the premises of  a  factory  for  use. consumption or sale therein.  It was urged before this Court in the case of Diamond Sugar Mills Ltd.(1) that the premises

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of  a factory was not a ’local area’ within the  meaning  of Entry  52  in  List  II  of  the  Seventh  Schedule  to  the Constitution, and so. the Act passed by the U.P. Legislature was  beyond its competence.  This argument was upheld.   "We are  of opinion", observed Das Gupta J., who spoke  for  the majority of the Court, "that the (1) [1961] 3 S.C.R. 242 at p. 256.  527 proper  meaning to be attached to the words "local area"  in Entry 52 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  is, therefore, not a "local area."  Following  this decision the Madhya Pradesh High Court struck down S. 23  of the  impugned  Madhya  Pradesh  Act  in  the  Bhopal   Sugar Industries,  and allowed the writ petition to  that  extent. This decision was pronounced on August 31, 1961. The validity of S. 21 of the Madhya Pradesh Act  prescribing the  payment of commission to the Cane Development  Council, was also challenged before the Madhya Pradesh High Court  by the  Bhopal Sugar Industries Ltd. by another  writ  petition (Misc.  Petition No. 340 of 1961).  The said High Court held that  the:  commission directed to be paid by  the  impugned section  was  a  "fee"  and  the  delegation  to  the  State Government  to implement the said provision  by  prescribing Rules  thereunder amounted to valid delegation and as  such, the   impugned  section  was  not  open  to  any   effective challenge.  In the result, S. 21 was upheld.  This  decision was pronounced on January 30, 1962. It appears that as a result of the decision of this Court in the case of Diamond Sugar Mills(1), the U.P. Sugarcane  Cess (Validation) Act, 1961 was passed by the Central Legislature on  March  21, 1961 (No.  IV of 1961), and it  received  the assent  of the President the same day.  It may be  mentioned that the decision of this Court in the case of Diamond Sugar Mills(2) was pronounced on December 13, 1960, and Parliament thought that it was necessary to validate the imposition and collection  of  cesses made under the said Act and  so,  the U.P. Sugarcane Cess (Validation) Act, 1961 was passed. Parliament, however, realized that there were several  other State  Acts which suffered from the same infirmity, and  so, on  September 11, 1961, the Act with which we are  concerned in  the  present  proceedings,  was  passed.   It  has  also received the assent of the President the same day.  This Act purports to validate the imposition and collection of ceases on  sugarcane  under  ten  different  Acts  passed  by   the Legislatures  of seven different States.  Section 3  of  the Act is the main validating section.  Section 5 purported  to amend  the, specified provisions in the U.P. Sugarcane  Cess (Validation)  Act, 1961.  The said section was brought  into force at once, and the remaining provisions of the Act  were to. (1) [1961] 3 S.C.R. 242. 528 come  into force in the respective States as from the  dates which  may  be specified in that behalf  by  a  notification issued  by  the  Central Government  and  published  in  the Official  Gazette.   The  relevant  date,  so  far  as   the respondent State is concerned, is December 26, 1961.. On  March  17,  1962, respondent No. 2,  the-  Collector  of District Ratlam, issued a notice to the appellant  demanding payment  of  sugarcane cess at the rate  prescribed  by  the respondent State under the relevant Rules.  The said  notice also demanded payment of cane commission for the years 1959-

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60 and 1960-61, as prescribed by the relevant Rules. The  appellant challenged the validity of these demands  and addressed respondent No. 2 in that behalf.  It alleged  that both  the  demands were invalid, because the Act  under  the authority  of  which they purported to have been  made,  was itself ultra vires and unconstitutional.  In respect of  the demand  for  cane  commission  for  the  year  1959-60,  the appellant   fired  an  additional  (,round  that  the   Cane Development Council itself had come into existence on August 26, 1960, and so, it was not permissible for respondent  No. 2  to  make a demand for commission in respect of  the  year 1959-60.   It  was  also alleged that the  demand  for  cane commission  at  the  flat rate of 3 nP, per  maund  was  not related to the services proposed to be rendered by the  said Council and as such, was invalid. These pleas were resisted by the respondents.  It was  urged on  their behalf that the impugned Act was valid,  and  that the demands made by respondent No. 2 for the recovery of the cess and the commission were fully justified.  On these  the Madhya  Pradesh High Court considered the, two broad  issues which  arose before it.  It has held that the provisions  of the  impugned Act are constitutionally valid, and  that  the demand  for  cess  made by respondent No.  2  could  not  be effectively  challenged.  In regard to the demand  for  cane commission,  the  High Court was not impressed by  the  plea made  by  the  appellant, particularly in  relation  to  the sugarcane season of 1959-60 and it hold that even though the Council may not have come into existence, a demand could  be made with a view to provide for the constitution of the said Council and thus enable it to afford service and  assistance to the mills like the appellant.  That is why the High Court rejected  the,  appellant’s contentions in that  behalf  and dismissed  its writ petition.  This judgment was  pronounced on September 24, 1963. The  appellant then applied for and obtained  a  certificate from the High Court and it is with the said certificate that it has come  529 to this Court by appeal.  That is how the principal question which arises for our decision is whether the High Court  was right in holding that the Act is constitutionally valid.   A subsidiary  question also falls to be decided and  that  has relation to the demand for commission for the year 1959-60. The  Constitutional position with regard to the  legislative competence  of the State Legislatures on the one  hand,  and the Central Legislature on the other in respect of the  cess in  question is not in doubt.  We have already  referred  to the decision of this Court in Diamond Sugar Mills(1), and in view  of the said decision, it is obvious that the  cess  in question  was  outside  the legislative  competence  of  the States.   This  very conclusion leads  to  the  irresistible inference that Parliament would have legislative  competence to deal with the subject-matter in question having regard to Art.  248  read  with  Entry 97 in List  I  of  the  Seventh Schedule  to  the Constitution.   Article  245(1)  provides, inter   alia,  that  subject  to  the  provisions  of   this Constitution, Parliament may make laws for the whole or  any part  of  the  territory of India; and  the  relevant  Entry relates  to  any other matter not enumerated in List  11  or List III including any tax not mentioned in either of  those Lists.  Article 248  provides :               "(1)  Parliament has exclusive power  to  make               any  law  with  respect  to  any  matter   not               enumerated  in  the Concurrent List  or  State

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             List.               (2)  Such  power shall include  the  power  of               making any law imposing a tax not mentioned in               either of those Lists." It is not disputed that if Parliament intended to make a law in regard to the levy of a cess such as has been  prescribed by  s. 3 of the Act, its legislative competence is not  open to  doubt.  Mr. Pathak for the appellant, however,  contends that  what  the  Act  purports to do, and  in  fact  and  in substance  has  done,  is  to  validate  the  invalid  State Statutes:  the  Act,  in other  words,  does  not  represent provisions enacted by Parliament as such, but it  represents an  attempt  made by Parliament to validate laws  which  are invalid  on  the ground that the  State  Legislatures  which enacted  the said laws, had no legislative competence to  do so.   That is the main ground on which the validity  of  the Act  has  been challenged before us.  This  ground  has,  no doubt,  been  placed  before us in two  or  three  different forms. (1) [1961] 3 S.C.R. 242. 530 Before  dealing with these contentions, it is  necessary  to refer  to  the provisions of the Act.  The Act  purports  to have  been passed to validate the imposition and  collection of cesses on sugarcane under certain State Acts and to amend the  U.P. Sugarcane cess (Validation) Act, 1961.  Section  5 which  has  achieved this latter purpose  has  already  been mentioned.   With the said section we are not  concerned  in the present appeal.  Section 1(2) provides for the date from which  the  provisions of the Act shall come into  force  in different  States;  and  as we  have  already  noticed,  the relevant dates for the respective States would be the  dates which  would  be  the notification  issued  by  the  Central Government and published in the Official Gazette.  Section 2 is  a definition section; S. 2(a) defines "cess" as  meaning the  cess payable under any State Act and includes  any  sum recoverable  under  any  such  Act by  way  of  interest  or penalty.  Section 2(b) defines a "State Act" as meaning  any of  the ten Acts specified by it which were in force in  the seven  respective  States  from  time to  time,  by  way  of amendment  or  adaptation.   Then the  ten  State  Acts  are enumerated  under  this  sub-section.   Section  3  is   the validating  section,  and it is necessary to read  it.   Its heading is validation of imposition and collection of cesses under State Acts.  It reads thus :-               "3.  (1) 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   and               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,-               (a)no  suit  or  other  proceeding  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

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             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)                531               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." Section  4  provides  that  nothing in  this  Act  shall  be construed as validating section 1 1 of the Bombay  Sugarcane Cess  Act, 1948 (Bombay Act No. 82 of 1948) and  accordingly the said section shall be omitted.  Section 5 refers to  the amendment  of  U.P. Sugarcane Cess (Validation)  Act,  1961. That,  in  brief,  is  the  position  with  regard  to   the provisions of the Act. Mr. Pathak contends that what the Act has done is to attempt to   cure   the  legislative  incompetence  of   the   State Legislatures  by validating Acts which were invalid  on  the ground   of  absence  of  legislative  competence   in   the respective  State Legislatures.  His case is that if an  Act is invalid not because the Legislature enacting the impugned Act  has no legislative competence, but because some of  its provisions  contravene  the fundamental rights  of  citizens unjustifiably,  it is possible to validate the said  Act  by removing the invalid provisions from its scope.   Similarly, if  an Act passed by the State Legislature is  substantially valid,  but  is  invalid  in  regard  to  a  portion   which trespasses in a field not within the legislative  competence of  the State Legislature, it would be possible to  validate the Act by removing the invalid portion from its scope.   In fact. if the invalid provision is severable from the rest of the  Act, courts dealing with the question of  its  validity may  strike  down the invalid portion alone and  uphold  the validity of the remaining part of the Statute.  But where an impugned Act passed by a State Legislature is invalid on the ground  that the State Legislature did not have  legislative competence  to deal with the topic covered by it, then  even Parliament  cannot validate such an Act, because the  effect of  such  attempted validation, in substance,  would  be  to confer  legislative competence on the State  Legislature  in regard to a field or topic which, by the relevant provisions of  the  Schedules  in  the  Constitution,  is  outside  its jurisdiction.  This position is not and cannot be  disputed. If it is shown that the impugned 532 Act  purports to do nothing more than validate  the  invalid State Statutes, then of course, such a validating Act  would be outside the legislative competence of Parliament  itself. Where  a  topic  is not included within  the  relevant  List dealing  with  the  legislative  competence  of  the   State Legislatures, Parliament, by making a law, cannot attempt to confer   such   legislative   competence   on   the    State Legislatures. The difficulty in accepting Mr. Pathak’s argument,  however,

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arises from the fact that the assumption on which the  whole argument  is  founded,  is  not  justified  on  a  fair  and reasonable construction of s. 3.Section   3   does    not purport  to  validate  the  invalid  State  Statutes.   What Parliament has done by enacting the said section is notto validate  the  invalid  State Statutes, but to  make  a  law concerningthe cess covered by the said Statutes and  to provide  that  the  said  law  shall  come  into   operation retrospectively.  There is a radical difference between  the two  positions.  Where the Legislature wants to validate  an earner  Act  which has been declared to be invalid  for  one reason or another, it proceeds to remove the infirmity  from the  said  Act and validates its provisions which  are  free from any infirmity.  That is not what Parliament has done in enacting the present Act.  Parliament knew that the relevant State Acts were invalid, because the State Legislatures  did not   possess   legislative  competence   to   enact   them. Parliament also knew that it was fully competent to make  an Act  in  respect of the subject-matter covered by  the  said invalid  State Statutes.  Parliament, however, decided  that rather than make elaborate and long provisions in respect of the recovery of cess, it would be more convenient to make  a compendious  provision  such as is contained in  S.  3.  The plain  meaning  of s. 3 is that the  material  and  relevant provisions  of the State Acts as well as the  provisions  of notifications,  orders and rules issued or  made  thereunder are  included  in  s. 3 and shall be  deemed  to  have  been included at all material times in it.  In other words,  what s. 3 provides is that by its order and force, the respective cesses  will be deemed to have been recovered,  because  the provisions  in relation to the recovery of the  said  cesses have been incorporated in the Act itself.  The command under which  the  cesses would be deemed to  have  been  recovered would, therefore, be the command of Parliament, because  all the relevant sections, notifications, orders, and rules have been  adopted by the Parliamentary Statute itself.  We  are, therefore,  satisfied  that  the sole  basis  on  which  Mr. Pathak’s  argument rests is invalid, because the said  basis is inconsistent with the plain and clear meaning of s. 3. As we  have already indicated, Mr. Pathak does not  dispute-and rightly that it is competent to Parliament  533 to make a law in respect of the cesses in question, to apply the provisions of such a law to the different States, and to make them retrospective in operation.  His whole  contention is based on what he records to be the true scope and  effect of  s.  3. If the construction which he places on  s.  3  is rejected, the argument about the invalidity of the Act  must likewise be rejected. The same contention has been placed before us by Mr.  Pathak in another form.  He suggests that the Act in question is  a colourable  piece  of legislation.  His case  is  that  when Parliament  realised that as a result of the  invalidity  of different  State Statutes the respective States  were  faced with  the  problem of refunding very large  amounts  to  the persons  from whom the cesses were recovered, it has  passed the present Act not for the purpose of levying a cess of its own,  but for the purpose of enabling the respective  States to  retain the amounts which they have illegally  collected. This  aspect of the matter, says Mr. Pathak makes the Act  a colourable  piece of legislation.  We are not  impressed  by this argument. The  challenge  to the validity of a Statute on  the  ground that  it is a colourable piece of legislation is often  made under  a  disconnection as to  what  colourable  legislation

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really  means.   As  observed  by Mukherjea  J.,  in  K.  C. Gajapati  Narayan Deo and Others v. The State  of  Orissa(1) "the idea conveyed by the expression ’colourable legislation is  that  although  apparently a Legislature  in  passing  a statute  purported to act within the limits of  its  powers, yet  in  substance  and in  reality  it  transgressed  these powers,  the transgression being veiled by what appears,  on proper examination, to be a mere presence or disguise." This observation  Succinctly and effectively brings out the  true character   of  the  contention  that  any  legislation   is colourable  legislation.  Where a challenge is made on  this -round,  what  has to be proved to the satisfaction  of  the Court  is  that  though the Act  ostensibly  is  within  the legislative  competence of the Legislature in  question,  in substance and in reality it covers a field which is  outside its  legislative  competence.  It would be noticed  that  as soon  as  this aspect of the matter is borne  in  mind,  the argument  that the Act is a colourable piece of  legislation takes  us  back again to the true scope and  effect  of  the provisions of S. 3. If the true scope and effect of s. 3  is as  Mr.  Pathak assumes it to be, then, of course,  the  Act would be void on the -round that it is a colourable piece of legislation.  But if the true scope and effect of s. 3 is as we  have  already held it to be, then in  passing  the  Act, Parliament has (1) [1954] S.C.R. 1 at p. II. 534 exercised  its undoubted legislative competence  to  provide for the recovery of the specified cesses and commissions  in the respective State areas from the dates and in the  manner indicated by it.  When demands were made for the recovery of the  said cesses, they will be deemed to have been made  not in  pursuance  of  the State Acts but in  pursuance  of  the provisions  of the Act itself.  Therefore, we do  not  think there  is  any  substance in the argument that  the  Act  is invalid  on  the  ground that it is a  colourable  piece  of legislation. Mr.   Pathak  has  raised  another  contention  against  the validity  of the Act.  He argues that the Act has  not  been passed  for  the  purposes of the Union of  India,  and  the recoveries of cesses which are retrospectively authorised by it  are not likely to go in the Consolidated Fund of  India. He  contends that the recoveries have already been  made  by the  respective  States  and  they  have  gone  into   their respective Consolidated Funds.  In support of this argument, Mr.  Pathak  has  referred  to the  general  scheme  of  the devolution  of  revenues between the Union  and  the  States which is provided for by the relevant Articles contained  in Part  XII  of  the  Constitution  and  he  has  relied  more particularly on the provisions of Act. 266.  Article 266, no doubt,  provides  for two different Consolidated  Funds  and Public  Accounts, one in relation to India and the other  in relation to the respective States. it reads thus:-               "266. (1) Subject to the provisions of article               267 and to the provisions of this Chapter with               respect to the assignment of the whole or part               of  the  net proceeds of  ,certain  taxes  and               duties to States, all revenues received by the               Government of India, all loans raised by  that               Government  by  the issue of  treasury  bills,               loans  or  ways  and means  advances  and  all               moneys   received   by  that   Government   in               repayment of loans shall form one consolidated               fund to be entitled "the Consolidated Fund  of

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             India",  and  all  revenues  received  by  the               Government  of  a State, all loans  raised  by               that  Government  by  the  issue  of  treasury               bills,  loans or ways and means  advances  and               all  moneys  received by  that  government  in               repayment of loans shall form one consolidated               fund to be entitled "the Consolidated Fund  of               the State".               (2)All  other public moneys received by or  on               behalf  of  the  Government of  India  or  the               Government  ,of a State shall be  credited  to               the public account of                535               India  or the public account of the State,  as               the case may be.               (3)No  moneys out of the Consolidated Fund  of               India  or  the Consolidated Fund  of  a  State               shall  be  appropriated except  in  accordance               with  law  and  for the purposes  and  in  the               manner provided in this Constitution". It will be noticed that the contention raised by Mr.  Pathak on  the  basis of Art. 266 makes an assumption and  that  is that  the cesses already recovered by the  different  States will  not be transferred to the Consolidated Fund of  India, but will remain with the respective States; and that such  a position  would  invalidate  the law  itself.   We  are  not prepared  to accept this argument as well.  What happens  to the cesses already recovered by the respective States  under their invalid laws after the enactment of the impugned  Act, is  a matter with which we are not concerned in the  present proceedings.  It is doubtful whether a plea can be raised by a  citizen  in support of his case that the Central  Act  is invalid  because the moneys raised by it are not dealt  with in  accordance with the provisions of Part XII generally  or particularly the provisions of Art. 266.  We will,  however, assume  that such a plea can be raised by a citizen for  the purpose  of  this  appeal.   Even so.  it  is  difficult  to understand how the Act can be said to be invalid because the cesses  recovered under it are not dealt with in the  manner provided by the Constitution.  The validity of the Act  must be judged in the light of the legislative competence of  the Legislature which passes the Act and may have to be examined in certain cases by reference to the question as to  whether fundamental   rights  of  citizens  have   been   improperly contravened,  or other considerations which may be  relevant in  that  behalf.  Normally. it would be  inappropriate  and indeed  illegitimate to hold an enquiry into the  manner  in which  the funds raised by an Act would be dealt  with  when the Court is considering the question about the validity  of the Act itself.  As we have just indicated, if the taxes  of cesses  recovered  under an Act are not dealt  with  in  the manner prescribed by the Constitution, what remedy a citizen may have and how it can be enforced, are questions on  which we express no opinion in this appeal.  All we are  consider- ing at this stage is whether even on the assumption made  by Mr. Pathak, it would be permissible for him to contend  that the  Act  which  is otherwise  valid,  is  rendered  invalid because  the  funds  in  question  will  not  go  into   the Consolidated Fund of India. L7Sup.165-6 536 In  truth,  this argument again proceeds on the  basis  that Parliament  has  passed  the  Act not  for  the  purpose  of treating  the recoveries made as those under its  provisions retrospectively  enacted, but for the purpose of  validating

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the  said recoveries as made under the invalid  State  Acts; and  we  have  already  pointed out  that  s.  3  completely negatives  such an assumption.  Therefore, we do  not  think that  Mr. Pathak is right in contending that the  provisions of the Act are invalid in any manner. It  would thus be seen that though Mr. Pathak presented  his argument   in  three  different  forms,  in  substance   his grievance is very simple.  He says that s. 3 of the Act does not   purport   to  act  prospectively;   it   acts   merely retrospectively   and  its  effect  is  just   to   validate collections illegally made in pursuance of invalid statutory provisions  enacted by State Legislatures.  So. the  crucial question  is:  if  collections  are  made  under   statutory provisions which are invalid because they deal with a  topic outside   the   legislative   competence   of   the    State Legislatures,  can Parliament, in exercise of its  undoubted legislative   competence,   pass   a   law   retrospectively validating the said collections by covering their  character from  collections made under the State Statutes to  that  of the collections made under its own Statute operating retros- pectively ? In our opinion, the answer to this question  has to be in the affirmative, because to hold otherwise would be to  cut  down  the width and amplitude  of  the  legislative competence  conferred  on Parliament by Art. 248  read  with Entry 97 in List I of the Seventh Schedule.  Whether or  not retrospective  operation  of such a law is  reasonable,  may fall   to   be  considered  in  certain  cases;   but   that consideration  has  not  been raised before us  and  in  the circumstances  of  this case, it cannot  validly  be  raised either.   We must, therefore, hold that the High  Court  was right  in  rejecting the appellant’s case that the  Act  was invalid,  and  hence  no demands could  be  made  under  its provisions either for a cess or for commission. There  is,  however,  one subsidiary  question  which  still remains to be considered and that has relation to the demand for  cess commission for the year 1959-60.  The  appellant’s case is that this demand is invalid.  The material facts  in relation to this point are not in dispute.  We have  already noticed  that  the  sugarcane  crushing  season  is  usually between  1st  October and the 30th June, and that  the  Cane Development  Council was constituted for the first  time  on August  26,  1960.  In other words, the Council was  not  in existence  throughout  the period covered by the  demand  in question  which relates to the year 1959-60.  Section 21  of the  537 Madhya Pradesh Act provides for the payment of commission on purchase of cane; and Rules 45 to 47 prescribe the manner in which the said payment has to be made.  It is true that  the functions  of the Cane Development Council as prescribed  by S.  6 of the said Act show that the Council is  expected  to render  service to the mills like the appellant; and so,  it can be safely assumed that the commission in question  which was  authorised  to be recovered under s. 21 of  the  Madhya Pradesh  Act initially, and which will now be taken to  have been recovered under s. 3 of the Act is a "fee".  Mr. Pathak contends  that it is plainly illegal to recover such  a  fee for  a period during which the council did not exist at  all and  could  have rendered no service whatever.  It  is  well settled that the imposition of a fee is generally  supported on  the basis of quid pro quo, and so, it is urged that  the impugned  recovery for the year 1959-60 is  plainly  without any quid pro quo and as such, cannot be enforced.  The  High Court did not accept this argument, because it held that the doctrine of quid pro quo did not require that actual service

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must  be  rendered  first  before a fee  can  be  levied  or demanded.   In  support  of this view, the  High  Court  has relied upon certain observations made by this Court in H. H. Sudhindra   Thirtha  Swamiar  v.  Commissioner   for   Hindu Religious   and  Charitable  Endowments,  Mysore(1),   While rejecting the contention which was raised before this  Court in  that  case that the levy prescribed by S. 76(1)  of  the Madras Religious Endowments Act, 1951 (No.  XIX of 1951) was invalid, Shah, J., who spoke for the Court observed: "A levy in  the  nature  of  a fee does not  cease  to  be  of  that character  merely because there is an element of  compulsion or  coerciveness present in it, nor is it a postulate  of  a fee that it must have direct relation to the actual services rendered  by  the authority to individual  who  obtains  the benefit  of  the  service.   If with a  view  to  provide  a specific  service, levy is imposed by law and  expenses  for maintaining   the  service  are  met  out  of  the   amounts collected,  there  being a reasonable relation  between  the levy  and the expenses incurred for rendering  the  service, the  levy  would be in the nature of a fee and  not  in  the nature  of  a  tax".   The High  Court  thought  that  these observations justified the view that a fee could be  validly recovered from the appellant by way of commission to be paid to the Cane Development Council, even though the Council may not have come into existence during the whole of the  period in question.  In our opinion, the High Court has ignored the context  in  which  the  Said  observations  were  made  has misjudged their effect.  It is not necessary for us decide (1) [1963] Supp. 2  S.C.R.    323. 538 whether  the service must be rendered for the whole  of  the period  covered by the fee, or whether it is necessary  that the  service  must  be rendered first and  the  fee  can  be recovered thereafter.  These fine and academic questions are not  relevant  in the present case, because it is  not  even suggested  that during the whole of the period  any  service whatever  was  rendered  by the Council  at  all.   In  this connection, it is necessary to bear in mind the fact that s. 23(1)  of the Madhya Pradesh Act required, inter alia,  that the commission had to be paid to the Council at the rate and in  the  proportion  prescribed  by  it.   Other   statutory provisions  including  the Rules further provided  that  the failure  to pay the said commission on the occasion  of  the purchase,  would  entail the liability to pay  interest  and the,  said  commission  along with  the  interest  was  made recoverable  as arrears of land revenue.  Having  regard  to these  provisions, it seems to us very difficult  to  accept the  view  that the commission which had to be paid  to  the Council  fell to be paid even though the Council was not  in existence  at  all throughout the sugar crushing  season  in question.  On the special facts of this case, therefore,  we are satisfied that no amount could be validly claimed by way of  commission for the year 1959-60.  The notice  of  demand (Annexure D) which has been issued in that behalf shows that the cane commission   3 NP per maund which has been demanded from the appellant by respondent No. 2 for the years 1959-60 and  1960-61, amounts to Rs. 1,26,152/86 nP.  It  is  common ground  that out of this amount, Rs.  54,037.57P  represents the  commission for the year 1959-60.  We  must  accordingly hold  that  the  demand made by respondent  No.  2  for  the payment of cess commission for the year 1959-60 amounting to Rs. 54,037.57P is invalid and the notice to that extent must be cancelled. In the result, the appeal substantially fails and the  order passed  by  the  High Court is  confirmed,  subject  to  the

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modification in regard to the demand for the payment of cane commission for the year 1959-60.  There would be no order as to costs. Appeal dismissed and Order modified. 539