# M/S Triveni Engineering and Industies Ltd. and another v. State of U.P. and another

- **Citation:** (2011) 1 ILRA 327
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2011-03-17
- **Case number:** Writ Petition No. 11959 (MB) of 2009
- **Bench:** Rajiv Sharma, Dr. Satish Chandra
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-triveni-engineering-and-industies-ltd-and-another-v-state-of-u-p-and-another-41890
- **Pages:** 30

## Text

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1 All] M/S Triveni Engineering and Industies Ltd. and another V. State of U.P. and another 327

ii. Issue a writ , order or direction in
the nature of mandamus commanding the
District
Magistrate
Maharajganj
(
Respondent no. 3) to take an appropriate
action in the matter, so that the illegality
prevailing regarding allotment of Fair
Price Shop in favour of respondent no. 7,
Smt. Sumitra Devi may be removed, which
has been allotted in her favour by Sub.
Divisional Magistrate , Maharajganj vide
order dated 22.12.2011 ( Annexure no. 5
to the Writ Petition ) relying on the
Scheduled Caste Certificate ( Anneuxre
no. 4 to the Writ Petition ) as Smt.
Sumitra Devi, wife of Sri Ramesh
Chandra ( respondent no. 7) belongs to
the caste "Kahar" ( O.B.C.) and not the "
Gond" ( Scheduled Caste ).

iii. Issue any other suitable writ and
just order which this Hon'ble Court may
deef fit and proper under the facts and
circumstances of the case.

iv. Allow the Writ Petition with
costs."

2. As per the averments made in the
Writ Petition, the petitioner was Ex-Fair
Price Shop dealer in question. The
agreement of the petitioner regarding the
Ex-Fair
Price
shop
dealership
was
cancelled. Thereafter, the said shop was
allotted to the respondent no.7 ( Smt.
Sumitra Devi ).

3. The petitioner has , thereupon ,
filed the present Writ Petition seeking the
reliefs mentioned above.

4. The grievance of the petitioner is
that the Caste Certificate submitted by the
respondent no.7 (Smt. Sumitra Devi)
showing herself to be Caste 'Gond'
(Scheduled Tribe) was not correct. In fact ,
the respondent no.7 ( Smt. Sumitra Devi )
belong to the caste 'Kahar ' (Other
Backward Classes).

5. We have heard Sri H.K.Asthana,
learned counsel for the petitioner , learned
Standing Counsel appearing for the
respondent nos. 1 to 5 and Sri Gulab
Chandra holding brief for Sri Ashok
Kumar Yadav, learned counsel for the
respondent no.7.

6. Sri H.K.Asthana, learned counsel
for the petitioner has fairly stated that the
petitioner is not one of the applicant in the
fresh exercise of allotment of fair-price
shop in question whereby the said shop
was allotted in favour of the respondent
no.7 ( Smt. Sumitra Devi ).

7. In the cirumstances, we are of the
opinion that petitioner has no locus-standi
to file the present Writ Petitioner seeking
the reliefs mentioned above.

8. The Writ Petition is liable to be
dismissed on the said ground

9. The Writ Petition is accordingly
dismissed on the said ground.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED LUCKNOW 17.03.2011

BEFORE
THE HON'BLE RAJIV SHARMA, J.
THE HON'BLE DR. SATISH CHANDRA, J.

Writ Petition No. 11959 (MB) of 2009

M/s Triveni Engineering & Industries
Ltd. and another
 ...Petitioners
Versus
State of U.P. and another ...Respondents
328 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
U.P. Sheera Adhiniyam Amended by U.P.
Act No. 10 of 2009-Section 2(d) (I), 8(4)
and 8(5)-imposition of regular tax on
captive
consumption-ignoring
the
judgment of Apex Court in Chhata Sugar
Mill's case-held binding effect-statutory
rules be framed in co nonce with verdict
of
constitutional
scheme-proposed
amended provision-suffers from callous
experience of Power-set-a-side.

Held: Para 37,60 and 67

In our opinion, thirty percent reservation
has been made in clear violation of the
statutory provision enshrined in Section
7-A and Section 8 of the Adhiniyam of
1964 and Niyamavali framed thereunder,
which does not empower the State
government
to
reserve
a
certain
percentage of molasses in favour of the
distilleries
for
the
manufacture
of
country liquor. Section 7-A and Section 8
of Adhiniyam of 1964 envisages the
making of individual orders by the
Respondent
No.2
upon
receipt
of
application form a distillery requiring
molasses. Therefore, the order impugned
in the writ petitions is wholly arbitrary
and violative of the rights of the
petitioners guaranteed under Article 14
and 19 (1) (g) of the Constitution of
India and ultra vires the provisions of
the
Adhiniyam
and
Rules
made
thereunder.

The aforesaid discussions leads us to an
irresistible
conclusion
that
such
a
transfer cannot amount to sale as it is a
company which is a person who owns
both the units and that 'transfer' and
'sale'
cannot
be
interchanged,
nor
'transfer' can be read as 'sale'. The
impugned legislation is also bad in law
as Article 265 of the Constitution of
India prohibits the imposition of tax and
says that no tax shall be levied or
collected except by authority of law.

In view of the above, we are of the
considered opinion that the provisions of
Section 2(d-1), Section 8(4) and 8(5) of
the U.P.Sheera Niyantran Adhinimaym
amended by U. P. Act No. 10 of 2009,
reproduced hereinabove, suffer from
callous exercise of power and it can
safely be concluded that the State has
over-stepped its limit of power.
Case law discussed:
(2004) 3 SCC 466; 2007 (8) SCC 338; AIR
2007 SC 1984; 1997 UPTC 624; 1978 UPTC
653; AIR 1985 SC 1293; AIR 1980 SC 1124;
1996 ALJ 468; 1956 SC 676; [(1998) 7 SCC
26]; (2007) 8 SCC 338; [(1983) 4 SCC 45];
AIR 2007 SC 1984; AIR 1980 SC 1124; [1997
UPTC
624];
T.Mohindra
vs.
Additional
Commissioner Commercial Taxes (103) STC
345; KCP Limited vs. State of Andhra Pradesh
1993 Vol (88) STC 374; AIR 1958 SC 296;
(2004) 5 SCC 632; (2001) 6 SCC 697; (2007) 6
SCC 317; M/s SAF Yeast Company Private
Limited vs. State of U.P. and another[VSTI
2008 Vol. III December Part-23].

(Delivered by Hon'ble Rajiv Sharma, J.)

1. Heard S/Sri Bharat ji Agarwal &
R.N.Trivedi, Senior Advocates assisted
by Dr R.K.Srivastava, Akhilesh Kalra,
Dhruv Mathur on behalf of the petitioners
and Sri J.N.Mathur, Addl. Advocate
General assisted by Sri H.P.Srivastava,
Addl. Chief Standing Counsel on behalf
of the respondents-State.

2. Petitioners are the Public Limited
Companies in terms of Companies Act,
1956 and are engaged in the business of
manufacturing sugar by Vacuum Pan
Process and to sugar factories, distilleries
are also attached. Molasses, is the byeproduct of the sugar mill owned by the
petitioners' company which is the rawmaterial for distilleries and is utilized at
the
distilleries
for
captive/own
consumption.

3. In all the afore-captioned writ
petitions, the petitioners have questioned
the validity of Clause 2(d-1), 8(4) and
8(5) of the U.P. Sheera Niyantran
1 All] M/S Triveni Engineering and Industies Ltd. and another V. State of U.P. and another 329
Adhiniyam [hereinafter referred to as the
'impugned Act' for the sake of brevity] as
amended by the U.P. Act No. 10 of 2009,
therefore, all the writ petitions have been
clubbed together and are being disposed
of by this common judgment. By these
petitions, the petitioners have assailed the
levy of "Administrative Charges" on the
molasses, which is carried outside the
premises of the Sugar factories, maybe for
own distilleries located at distinct places.

4. According to petitioners, the
following amendments have been made in
the principal Act, i.e. U.P. Sheera
Niyantran Adhiniyam, 1964:-

(i) A new clause (d) (i) "molasses for
captive consumption" has been added in
Section 2 of the U. P. Sheera Niyantran
Adhiniyam, 1964. The impugned Act seeks
to restrict the meaning of the expression
"molasses for captive consumption" to
mean and include only such transfer of
molasses by an occupier of the sugar
factory to a distillery or to industrial unit
having the same ownership provided the
distillery or industrial unit is situated
within the same premises or where it is in
such "contiguous vicinity" of the sugar
factory
so
that
the
transfer
or
transportation of such molasses outside
the premises or the gate of the sugar
factory is not required to be effected by a
vehicle.

(ii) Section 8 of the Act has also been
amended and by the said impugned
amendment in sub-section (1) of Section 8
of the Principal Act, the words "sell or
supply" have been substituted by the
words "transfer or sell or supply" and in
sub-sections (4) and (5) of the Section 8 of
the Principal Act, the words "sold or
supplied" have been substituted by the
words "transferred or sold or supplied".

5. Therefore, it has been strenuously
argued
that
the
effect
of
these
amendments is that the sugar factory will
be required to pay administrative charges
even on molasses, which is transferred to
its own distillery, although it does not
involve
any
sale
or
commercial
transaction and the molasses is required
for captive consumption.

6. According to learned Counsel for
the petitioners, the storage, gradation and
control of molasses produced by the sugar
factories in Uttar Pradesh including
regulation of its supply and distribution is
governed by the provisions of 1964
Adhiniyam. In the statutory scheme so
laid in the Adhiniyam of 1964, a person
requiring molasses for his distillery or for
any purposes of industrial development is
obliged to apply to the Controller of
Molasses in terms of Section 7-A of the
Adhiniyam of 1964. Sub-Section (4) of
Section 8 provides that occupier of a
factory shall be liable to pay to the State
Government administrative charges on the
molasses "sold or supplied" by him. The
administrative charges are intended to be
levied only in the circumstances where
there is a sale or supply by the sugar
factory to some other legal entity by
transfer of title for valuable consideration
as enshrined in the Constitution of India.

7.

Every
year,
the
Excise
Commissioner and Controller of Molasses
issues a Molasses Policy with regard to
supply and sale of molasses by the sugar
factories. Accordingly, the Molasses
Policy for the year 2008-09 was issued by
the respondent No.2 vide order dated
31.1.2009. As per this policy, the sugar
330 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
factories are required to supply 30% of
molasses produced by them to the
distilleries for the manufacture of country
liquor. Prior to the year 2007-08, the
Molasses Policy used to provide that
sugar factories were liable to supply
molasses to the distilleries engaged in the
manufacture
of
country
liquor,
irrespective of their own need. This
controversy has been set at rest by the
Supreme Court vide its judgment dated
24.9.2007 in the case of Dhampur Sugar
Mills Ltd. Versus State of Uttar Pradesh
and others [2007 (8) SCC 338].

8. It has been vehemently argued on
behalf of the petitioners that with an
avowed view to negate the directions
contained in the aforesaid decision of the
Apex Court, the State Government
brought in the legislation to amend the
U.P. Sheera Niyantran Adhiniyam, 1964
and impugned Act was promulgated
which is against the pronouncement of the
Apex Court made in S. R. Bharat and
others Versus State of Mysore, (1995)
SCC (6) 16 that it is now well settled by a
catena of decisions of this Court that a
binding judicial pronouncement between
the parties cannot be made ineffective
with the aid of any legislative power by
enacting a provision which in substance
over-rules such judgment and is not in the
realm of a legislative enactment which
displaces the basis or foundation of the
judgment.

9. It is submitted by the Counsel for
the petitioners that the State by amending
the impugned Act seeks to nullify the
decision of the Apex Court. Pursuant to
the impugned amendment in the Act, the
respondents have issued draft rules,
namely, Uttar Pradesh Sheera Niyantran
(Fifth Amendment) Niyamavali, 2009.
Under the general presumption and
understanding of law, the "captive
consumption"
means
"self
consumption". Significantly this was also
the meaning of the captive consumption
as per the provisions of the U. P. Sheera
Niyantran Adhiniyam, 1964. The State
Government cannot vary from the exact
meaning of the said definition, which is
beyond the scope of the U.P. Sheera
Niyantran Adhiniyam, 1964. Further, the
definition of "molasses for captive
consumption" under the new Section
2(d)(i) is contrary to the general principle
of law and understood by the Apex Court
in catena of judgments.

10. According to Counsels for the
petitioners, the definition of "molasses for
captive consumption" as sought to be
introduced is clearly discriminatory and
violative of Article 14 of the Constitution
of India and the impugned Act is nothing
but a colourable exercise of power by the
State. The classification of units or
distilleries within the same premises or in
contiguous vicinity of the sugar factory is
not a reasonable classification. The words
"captive consumption" clearly mean that
anything which is manufactured or
produced would not go out of the hands of
the manufacturer but would be consumed
for his own purpose. Viewed in the light
of the above, it is clear that the distance of
the unit to which the molasses is
dispatched is clearly immaterial and
irrelevant. The impugned amendments
have a direct immediate effect and impact
impeding the freedom of trade and
commerce
guaranteed
under
the
Constitution of India and thus is in serious
violation of the Constitution of India.

11. Elaborating their arguments, it
has been urged by the petitioners' Counsel
1 All] M/S Triveni Engineering and Industies Ltd. and another V. State of U.P. and another 331
that in view of the provisions of the
Constitution
of
India,
the
State
Legislature is only empowered to impose
tax on sale or purchase of goods
(molasses) and not on the transfer of such
goods (molasses) as the same does not
resemble the character of "sale" as
recognized by general law and/or defined
in Sales of Goods Act, 1930. In such
circumstance, since the State Legislature
is empowered to impose tax only on sale
and purchase of goods other than
newspapers, therefore, the impugned
amendment imposing tax (administrative
charges) on such transfer of molasses is
not only arbitrary and illegal but ultra
vires to the Constitution of India and thus
unsustainable.

12. The next contention of the
petitioner's Counsel is that the power of
the State to impose a tax stands enshrined
in Entries 52-62 of List II of the Seventh
Schedule to the Constitution of India; a
perusal of the aforementioned entires
clearly establishes that none of them
could be read as empowering the State to
levy a tax on stock transfer or captive
consumption. The provisions of Article
366 (29A) of the Constitution of India are
also not attracted. A stock transfer of
molasses or captive consumption thereof
is neither a sale nor a purchase of goods
and therefore, the State clearly lacks the
legislative competence to subject the
administrative charges to tax.

13. The administrative charges
levied under the Act is not in the nature of
a regulatory fee but is clearly a tax as has
been held by the Hon'ble Supreme Court
in the case of CCE-Vs. Chhata Sugar
reported in (2004) 3 SCC 466 and,
therefore, the said judgment places an
unimpeachable embargo on the State
levying such a tax on stock transfers.
Admittedly, the captive consumption or a
stock transfer of molasses involves no
sale or supply to another unit; the impost
of administrative charges, therefore, on
the same is in pith and substance a tax on
manufacture; it therefore partakes the
nature of a duty of excise and therefore,
also is beyond the legislative competence
of the State.

14. Narrating the background, it has
been submitted by the learned Counsel for
the petitioners that before the aforesaid
amendment in Section 2, companies
having more than one sugar factory and a
distillery either in the premises of the
sugar factory or situated at a distance,
were not required to supply reserved
quantity of molasses for country liquor, in
view of Supreme Court judgment dated
24.9.2007 in Dhampur Sugar Mills Ltd.
Versus State of Uttar Pradesh and others
reported in 2007 (8) SCC 338. By the
impugned
amendment,
the
State
Government has negated the judgment of
the Supreme Court. The petitioners
submit that the premise on which the
State
proceeded
to
promulgate
the
impugned Act is clearly fallacious and
basically illegal and unconstitutional. The
Supreme Court was merely dealing with
the question of whether a sugar factory
could be compelled to supply molasses to
distilleries other than its own despite its
own needs. In this sense, the impugned
enactment neither removes the basis upon
which the judgment was rendered nor is
valedictory in nature.

15. It has been vehemently argued
that the words "captive consumption"
cannot be given a restrictive meaning of
being consumed within the factory
premises. What is really necessary and
332 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
essential is that the articles must be
utilized by the entity/company itself as
distinct from a sale or transfer for a
consideration.
The
factory
premises
within which the goods are so consumed
has no nexus or correlation to, nor does
not it restrict the meaning of the words
"captive consumption". This was the
intent of the Supreme Court decision,
which is purported to be negated by the
said
amendment
and
is,
therefore,
constitutionally invalid.

16. The definition "molasses for
captive consumption" is also clearly
discriminatory and violative of Articles
14, 19 (1) (g), and 300-A of the
Constitution of India, inasmuch as there is
no rational basis for differentiating
between (i) a distillery which may be
situated in the same premises as the sugar
factory and a distillery which may be
situated in different premises as the sugar
factory and a distillery outside the
premises of a sugar factory, but under the
same ownership and management, i.e.
belonging to one and same company.
Secondly, the words sold or supplied
clearly
did
not
envisage
levy
of
administrative
charge
on
selfconsumption and rightly so, and if the
same were deemed to include transfer for
captive consumption, it would have
clearly
transgressed
the
legislative
competence of the State.

17. The administrative charge is a
tax, as held by the Hon'ble Apex Court in
the case of Central Excise Lucknow,
U.P. v. M/s Chhata Sugar Company Ltd.
reported in 2004 (3) SCC 466, is sought
to be levied on molasses transferred or
captively consumed in the distillery
belonging to the same company/person,
owning the sugar factory as well.
Undisputedly, a sugar factory and a
distillery are two units of one juristic
personality i.e. the company. Therefore,
the administrative charge becomes a tax
on the company and is thus beyond the
legislative competence of the State.
Undisputedly, the Administrative charges
under Section 8 (4) and 8 (5) which
provide for levy of administrative charges
read with Rule 23, is a tax as held by the
Hon'ble Apex Court in the case of M/s
Chhatta Sugar Company Limited (supra)
and as such, the said tax is referable only
to Entry 54 List II of 7th Schedule of the
Constitution of India which authorizes the
State to levy tax on the sale or purchase or
goods other than newspapers. In this
regard reliance on paragraphs 53,54 and
56 Southern Petrochemical Industries
vs. Electricity Inspector and E.T.I.O. &
others; AIR 2007 SC 1984 has been
placed. Paragraphs 53, 54 and 56 read as
under:-

"53. Article 245 of the Constitution
of Inda vests the parliament with power of
legilsation on all matters enumerated in
List and also the matters enumerated in
List III of the Seventh Schedule of the
Constitution
of
India.
The
State
Legislature, however, has the exclusive
right to legilslate matters specified in the
Entries contained in List II.

54.Various entries in the three Lists
provide for the fields of legislation. They
are, therefore, required to be given a
liberal construction inspired by a broad
and generalize spirit and not in a
pedantic manner. A clear distinction is
provided for in the scheme of the lists of
the Seventh Schedule between the general
subjects of legislation and heads of
taxation. They are separately enumerated.
Taxation is treated as a distinct matter for
1 All] M/S Triveni Engineering and Industies Ltd. and another V. State of U.P. and another 333
purposes of legislative competence vis-avis the general entries. Clauses (1) and
(2) of Article 248 of the Constitution of
India also manifest the aforementioned
nature of the entries of the List, and, thus,
the matter relating to taxation has been
separately set out. The power to impose
tax ordinarily would not be deduced from
a general entry as an ancillary power. In
List II, entries 1 to 44 form one group
providing for the legislative competence
of the State on subjects specified therein,
whereas entries 45 to 63 form another
group dealing with taxation. .."

56.A bare perusal of Entry 53 of List
II and Entry 38 of List III, however,
clearly suggests that they are meant to
operate in different fields."

18. In the backdrop of the aforesaid
facts, it has been argued that the
impugned amendment i.e. provisions of
Section 2(d-1), 8(4) and 8(5) of the Act
insofar as it purports to levy tax, namely,
administrative
charges
on
the
supply/transfer of molasses from the
sugar factory to the distillery owned by
the same person in Section 8 is bad in the
eyes of law being inoperative and
unworkable
as
the
levy
of
such
administrative charges under Section 8 (4)
has to be made "in the manner prescribed"
in the Rule 23 of the U. P. Sheera
Niyantran Niyamavali, 1964 which does
not include any transfer. The provisions
of Rule 23 are as follows:-

"Every occupier of a sugar factory
shall deposit the amount of administrative
charges payable on molasses sold or
supplied by him in the treasury or subtreasury of the district in which the sugar
factory is situated and produce the
treasury challan as evidence of such
payment "to Excise Officer-in-charge of
the sugar factory before making the actual
delivery of the molasses to the purchaser."

19. As regards the imposition of tax
as per provisions of the Constitution of
India, the State Legislature is only
empowered to impose tax on sale or
purchase of goods and not on the transfer
of such goods as the same does not
resemble the character of "sale" as
recognized by general law and/or Sales of
Goods Act, 1930. In such circumstances,
since the State Legislature is empowered
to impose tax only on sale and purchase
of
goods
other
than
newspapers,
therefore,
the
impugned
amendment
imposing the tax (administrative charges)
on such transfer of molasses is not only
arbitrary and illegal but ultra vires to the
provisions of Constitution of India and are
unsustainable. For convenience relevant
provisions of Section 8 of the U. P.
Sheera Niyantran Adhiniyam, 1964 prior
and after the impugned amendment are
reproduced here-in-below:-

SECTION 8 -PRIOR TO
AMENDMENT

"8. Sale and supply of molasses - (1)
The Controller may by order require the
occupier of any sugar factory to sell or
supply, in the prescribed manner such
quantity of molasses to such person, may
be specified in the order, and the occupier
shall,
notwithstanding
any
contract,
comply with the order.

(2) .... ....

(3) .... ....

(4) The occupier of a sugar factory
shall be liable to pay to the State
Government, in the manner prescribed,
334 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
administrative charges at such rate, not
exceeding five rupees per quintal as the
State Government may from time to time
notify, on the molasses sold or supplied
by him.

(5) The occupier shall be entitled to
recover from the person to whom the
molasses is sold or supplied an amount
equivalent to the amount of such
administrative charges, in addition to the
price of molasses.

Section 8- After Amendment

"8. Sale and supply of molasses - (1)
The Controller may by order require the
occupier of any sugar factory to transfer
or sell or supply in the prescribed manner
such quantity of molasses to such person,
may be specified in the order, and the
occupier
shall,
notwithstanding
any
contract, comply with the order.

(2) .... .... ....

(3) ... .... ....

(4) The occupier of a sugar factory
shall be liable to the State Government, in
the manner prescribed, administrative
charges at such rate, not exceeding five
rupees
per
quintal
as
the
State
Government may from time to time
notify, on the molasses transferred or sold
or supplied by him.

(5) The occupier shall be entitled to
recover from the person to whom the
molasses is transferred or sold or supplied
an amount equivalent to the amount of
such administrative charges, in addition to
the price of molasses."

20. The impugned Act seeks to
amend the provisions of the Uttar Pradesh
Sheera Niyantran Adhiniyam, 1964 which
had received the assent of the President of
India on 17.10.1964 under the provisions
of Article 254 of the Constitution of India.
The background for seeking the assent of
the President of India appears to have
been motivated by the fact that sugar
industry is a 'Scheduled Industry', the
control of which was taken over by the
Union, being expedient in the public
interest. The sugar industry finds mention
at item No.25 in the First Schedule to the
Industries (Development and Regulation)
Act, 1951 likewise molasses comes under
Item No. 26 in the same First Schedule.
The sugar industry and its products as
well as raw material are covered under the
Essential Commodities Act, 1955, Sugar
Control Order, 1966 and Sugarcane
Control Order, 1966. Being conscious of
the aforesaid facts, it appears that the said
Act was reserved for and received the
assent of the President of India. However,
the impugned Amendment Act of 2009
has not been reserved nor it has received
the assent of the President of India and is
thus Constitutionally invalid.

21. According to learned Counsel
for the petitioners the word 'Sale' and
'Purchase' having not been defined in
Section 2 of the U.P.Sheera Niyantran
Adhiniyam, one has to go to definition of
sale as provided in Section 4 of the Sale
of Goods Act, which provides transfer of
property from one person to another
person for valuable consideration. There
is no dispute that both the sugar mill and
distillery are owned by the same persons,
namely, by the same juristic persons i.e.
the petitioners, hence there is no transfer
of property from one person to another for
any price or valuable consideration, which
are necessary ingredient for sale by one
person and purchase by another person. In
1 All] M/S Triveni Engineering and Industies Ltd. and another V. State of U.P. and another 335
support of this contention reliance has
been placed on Vam Organics Limited
and another vs. State of U.P. and
another 1997 UPTC 624, U.P. State
Cement Corporation Limited vs. CST
1978 UPTC 653. Reliance has also been
placed on State of Orissa vs. Titagarh
Paper Mills; AIR 1985 SC 1293 and Ram
Chandra Kailash Kumar vs. State of
U.P.; AIR 1980 SC 1124 wherein it has
been observed that on any transaction,
which is not a purchase or sale, no tax can
be imposed. Thus, it has been asserted
that the impugned amendments in the Act
are clearly arbitrary and the State clearly
lacks legislative competence to enforce
the
amendments
contained
in
the
impugned Act.

22. Lastly, it has been informed that
after the impugned amendment, the
respondents have issued an order dated
23.3.2009 to all the Excise Inspectors
directing them to charge administrative
charges from all the sugar factories on
transfer of molasses. In compliance of this
order issued by the Excise Commissioner,
the Excise Inspectors have started issuing
notice to the sugar factories for payment
of administrative charges on molasses
transferred/
supplied
for
captive
consumption.

23. On the other hand, Sri
J.N.Mathur, Addl. Advocate General has
submitted that U.P. Sheera Niyantran
Adhiniyam 1964 amended by U.P. Act
No. 10 of 2009 has been enacted in public
interest for the control of storage,
gradation and price of molasses produced
by sugar factories in the State and for the
regulation of supply and distribution
thereof. Thus the Adhiniyam is clearly
referable to Entry No. 33 of List III of the
Seventh Schedule to the Constitution of
India. The U.P. Act No. 10 of 2009 is also
squarely covered by the legislative field
as provided under the aforesaid Entry
No.33. Thus allegation of lack of
legislative competence as alleged by the
petitioners is wholly baseless and without
substance.

24. Scheme of Adhiniyam would
reveal that the Adhiniyam provides for
regulation of supply and distribution of
molasses
to
distilleries
and
other
industrial establishment and all the
regulatory measures are for the benefits of
distilleries
and industries
in
public
interest. The regulatory nature of the
Adhiniyam would be evident from
reading of the relevant provisions of the
said Adhiniyam, which are as under:-

(i) Section 3 of the Adhiniyam
provides for constitution of Advisory
Committee to advice on matters relating
to the control of storage, preservation,
gradation, price, supply and distribution
of molasses. Rule 3 of the Uttar Pradesh
Molasses Advisory Committee Rules,
1965 provides for the Chairman and the
Members of the Advisory Committee
which
consist
of
representative
of
concerned department, representatives of
distilleries and Alcohol Based Industries
and Mouldering and Foundry Industries in
U. P.

(ii)
Section
4
provides
for
appointment of Controller of Molasses by
the State Government for exercising
powers and performing the duties of
Controller
of
Molasses
under
the
Adhiniyam and the Rules.

(iii)
Section
5
requires
every
occupier of a sugar factory to make
provision of molasses and to take
336 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
adequate safeguards against leakage,
seepage, overflow or any other accident
likely to damage the quantity of molasses
stored in the factory; and to make
adequate arrangements to prevent the
mixing up of water or old deteriorated
molasses
and
to
provide
adequate
facilities for handling of molasses etc.
Contravention to this provision renders
the occupier of sugar factory to penalties
under Section 11.

(iv)
Section
6
provides
for
preservation against adulteration.

(v) Section 7 provides for removal of
adulterated
molasses. This provision
directly
benefit
the
distilleries
and
industries and industries using molasses
so as to get quality molasses and to
remove possibility of distribution or
supply of adulterated molasses.

(vi) Section 7 A of the Adhiniyam
enables any person who requires molasses
for his distillery or for any purpose of
industrial development to apply in the
prescribed manner to the Controller of
Molasses specifying the purpose for
which it is required and on receipt of the
application the Controller of Molasses
may make an order under Section 8 of the
Adhiniyam considering the availability of
molasses,
various
requirements
of
molasses, better utilization to which
molasses may be put in the public interest,
genuineness of requirement etc.

(vii)
Section
8
provides
that
Controller of Molasses may, with the
prior approval of the State Government,
by order require the occupier of any sugar
factory to transfer, sell or supply in the
prescribed manner such quantity of
molasses to such persons, as may be
specified in the order and the occupier
shall,
notwithstanding
any
contract,
comply with the order. Sub-section (4)
requires the occupier of a sugar factory to
recover administrative charges at the time
of transfer, sell or supply and deposit the
same with the State Government.

(viii) Section 11 to 16 deals with
offences and penalties, search and seizure
and compounding of offences.

(ix) Section 17 mandatorily requires
the
maintenance
of
accounts
and
furnishing of return by the occupier of the
sugar factories and the person to whom
the molasses is transferred and supplied.

(x) Section 22 empowers the State
Government to frame rules.

25. As regards control of Sugar
Industry, it has been submitted that the
'Sugar Industry' has been included in the
First
Schedule
of
the
Industries
(Development & Regulation) Act, 1951.
The Sugar Mills produce the molasses as
a by-product. Distilleries/Chemical units
buy molasses from the sugar-factories and
use it as a raw material for production of
rectified spirit and other organic products.
The molasses and the alcohol policies
affect the farmers, who supply sugarcane
and get its price from the sugar factories.
The State Government has to examine the
accounts of all these factories pertaining
to the production including the production
of molasses in a given year as well. The
field of Sugar Industry is having been
covered within the purview of clause (a)
of the Entry 33 of List III of the VII
Schedule.

26. Under chapter III-B of the
Industries (Development and Regulation )
1 All] M/S Triveni Engineering and Industies Ltd. and another V. State of U.P. and another 337
Act, 1951, the provisions of control of
supply, distribution and price of certain
articles are given in Section 18-G of the
Act, which reads as under-

"18-G Power of Control, Supply,
Distribution, Price etc. of certain
articles:- (1) The Central Government, so
far as it appears to it to be necessary or
expedient for securing the equitable
distribution and availability at fair price of
any article or class of articles relatable to
any
scheduled
industry,
may
notwithstanding anything contained in
any other provision of this Act, by
notified order, provided for regulating the
supply and distribution thereof and trade
and commerce therein."

Section 26 empowers the Central
Government
to
issue
appropriate
directions to the State Government and it
reads as under:-

"The Central Government may give
directions to any State Government as to
the carrying into execution in the State of
any of the provisions of this act or of any
order or direction made thereunder."

27. According to State Counsel,
Entry-33 of the Concurrent List covers the
field of trade and commerce in, and the
production, supply and distribution of the
products of any industry where the control
of such industry by the Union is declared
by the Parliament by law to be expedient
in the public interest and imported goods
of the same kind products. There is no
law enacted by the Union Government
under this field and as such the
notification
issued
by
the
State
Government
for
the
administrative
charges on molasses is not repugnant to
the law made by the Union Government.
Moreover, a Full Bench of this Court in
the case of M/s Shriram Industrial
Enterprises Ltd. Vs. Union of India and
others; 1996 ALJ 468, while considering
the question of legislative competence
and the provision of Section 18-G of the
Industries (Development & Regulation)
Act, 1951 observed in paragraph 69 as
under:-

"69. The result of the aforesaid
discussion is that Section 18-G of the
Industries (Development & Regulation)
Act, 1951 enacted by the Parliament
being a legislation under Entry 33 of List
III has not denuded the power of the State
Legislature to legislate on regulating
supply,
distribution,
and
price
of
molasses-a product of the sugar industry.
The said legislation being on a concurrent
field, the State Legislature was competent
to enact Section 7, 8 and 10 of the U.P.
Sheera
Niyantran
Adhiniyam,
1964
subject to assent the President of India in
terms of Article 254 of the Constitution.
Since the Adhiniyam has assent of the
President of India, Sections 7, 8 and 10 of
the Adhiniyam are the valid piece of
legislation."

28.

As
regards
legislative
competence of the State Government, the
State Counsel has placed reliance on Ch.
Tika Ramji and others v. State of U. P.
and others;AIR 1956 SC 676 and SIEL
Ltd and others v. Union of India and
others; [(1998) 7 SCC 26]. In Tika
Ramji's case (supra), the Apex Court
observed in paragraph 34 of the report as
under:-

" .... Even assuming that Sugarcane
was an article or class of articles relatable
to the sugar industry within the meaning
of section 18-G of Act LXV of 1951, it is
338 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
to be noted that no order was issued by
the Central Government in exercise of the
powers vested in it under that section and
no question of repugnancy could ever
arise because, as has been noted above,
repugnancy must exist in fact and not
depend merely on a possibility. The
possibility of an order under section 18-G
being issued by the Central Government
would not be enough. The existence of
such an order would be the essential
prerequisite before any repugnancy could
ever arise."

Relevant paragraphs of SIEL Ltd.
and others (supra), i.e. 21, 24 and 25 are
reproduced hereunder:-

"21. In this connection our attention
was drawn to the observations of this
Court in Ch. Tika Ramji's case (supra).
The Court in that case was concerned
with the legislative competence of the
State Government to legislate in respect
of sugarcane in the light of Section 18G
of the Industries (Development and
Regulation)
Act,
1951.
This
Court
observed (at page 432) that even
assuming that sugarcane was an article
relatable to the sugar industry within the
meaning of Section 18G, no order had
been issued by the Central Government in
exercise of the powers vested in it under
that Section. Hence no question of
repugnancy would arise. Repugnancy
must exist in fact and not depend merely
on a possibility. Ch. Tika Ramji's case
(supra) has been cited with approval in
the more recent case of Indian Aluminum
Company Ltd. and Anr. v. Karnataka
Electricity
Board
and
Ors.,:
[1992]3SCR213 where this Court again
held that
in the
absence
of
any
notification under Section 18G of the
Industries (Development and Regulation)
Act there was no question of any
repugnancy on the score of tariff of
electricity fixed by the State Amending
Act. Section 18G per se did not take away
the State's right also to legislate under
Entry 33 of List III. This Court also noted
the provisions of Article 254(2) of the
Constitution in this connection.

24.The respondents have pointed out
that
the
U.P.
Sheera
Niyantran
Adhiniyam, 1964 has also received
President's assent under Article 254(2). In
any event, looking to the fact that the
Molasses Control Order of 1961 passed
by the Central Government in exercise of
powers conferred by Section 18G was not
extended at any point of time to the State
of U.P. or the State of Bihar, the question
of repugnancy between the Molasses
Control Order, 1961 and the U.P. Sheera
Niyantran Adhiniyam, 1964 does not
arise. In fact, the present litigation has
commenced after the Molasses Control
Order, 1961 of the Central Government
has
been
rescinded
and
the
only
legislation which holds the field is the
U.P. Sheera Niyantran Adhiniyam of
1964 which is in legitimate exercise of
power of legislation under Entry 33 of
List III.

25. In the premises the U.P. Sheera
Niyantran Adhiniyam of 1964 is within
the legislative competence of the State
Government."

29. As regards Chhatta Sugar's
case (supra), on which reliance has been
placed by the petitioners, the State
Counsel has submitted that this case is not
applicable in the instant matter, as the
controversy involved in Chhata Sugar's
case was with regard to non-inclusion of
administrative charges in the value of
1 All] M/S Triveni Engineering and Industies Ltd. and another V. State of U.P. and another 339
goods under Section 4 of the Central
Excise Act, 1944. He has also pointed out,
in Chhatta sugar's case, the State
Government was not a party and as such,
factual aspects of rendering of services
could not be noticed by the Apex Court.
Further, the interpretation of law relating
to admissibility or otherwise of a
deduction under the Central Excise Act,
1944 has to be confined to that Act alone
and cannot be applied to the U.P. Sheera
Niyantran Adhiniyam which altogether is
a
different
statute
book.
Similarly,
petitioners cannot derive any benefit of
the judgment rendered in Dhampur
Sugar Mills Ltd. v. State of U.P. and
others; (2007) 8 SCC 338 as U.P. Sheera
Niyantran Adhiniyam has been amended
by U. P. Act No.