# ANOTHER v. THE STATE OF UTTAR PRADESH AND

- **Citation:** [1961] 3 S.C.R. 242
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeal No. 35 of 1959
- **Bench:** Jafer Imam, J. L. Kapur, K. C. DAs GUP'l'A, Rag~Ar Dayal, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/another-v-the-state-of-uttar-pradesh-and-1975
- **Pages:** 25

## Headnote

Sugar Cane-Imposition of cess-Enactmtnt taxing entry of
cane into factory-Constitutionality of-"Local are((', Connotat$011
of-Constitution of India, Sch. VII, Lisl II, Entry 52-U. P.
Sugarcane Cess Acl, I956 (U. P. XXII of I956), s. 3·
Entry 52 of List II of the Seventh Schedule to the Constitution empowered State Legislatures to make a Jaw relating to
''taxes on the entry of goods into a local area for consumptiOd,
use or sale therein". The U. P. Legislature passed the U. P.
Sugarcane Cess Act, 1956, which authorised the State Government to impose a cess on the entry of cane into the premises of a
factory for use, consumption or sale therein. The appellant
contended that the premises of a factory was not a 'local area·.
within the meaning of Entry 52 and the Act was beyond the
competence of the legislature.
' .
3 S.C.R. SUPREME COURT REPORTS
243
Held, (per Imam, Kapur, Das Gupta and Raghubar Dayal;
JJ.) that the impugned Act was beyond the competence of the
legislature and was invalid. The premises of a factory was not
a "local area" within the meaning of Entry 52. The proper
meaning to be attached to the words "local area" in Entry 52 ·
was an area administered by a local body like a municipality, a
district board, a local board, a union board, a Panchayat or the
like.
In re: the Central Provinces & Berar Act No. XIV of I938,
[1939] F.C.R. 18, Navinchandra Mafatlal v. The Commissioner of
Income~tax, Bombay City, [1955] I S.C.R. 829, State of Madras v.
Gannon Dunkerley & Co., Ltd., [1959] S.C.R. 379 and South Carolina v. United States, (1905) 199 U.S. 437, referred to.
Emperor v. Munnalal, I.L.R. 1942 All. 302, disapproved.
Per Ayyangar, J.-The Act was invalid only in so far as it
sought to levy a tax on cane entering a factory from within the
same local area in which the {actory was situate and was valid
in other cases. It was permissible to read the Act so as to confine
the tax to the limitations subject to which it could be constitutio~
nally levied an~ to strike down that portion which outstepped
the limitations.
In re Hindu Women's Rights to Property Act, I937, [1941]
F.C.R. 12 and Blackwood v. Queen, (1882) 8 A.C. 82, applied.

## Text

_Characters 0–39,476 of 55,242. This is a partial read: ask again with offset=39476 for what follows._

242
SUPREME COURT REPORTS
I
(1961]
Finance Act was not applicable in that pa.se. In the
The Income-ta:¥ second there was no profit in any preceding year and
Officer, Alwaye therefore the fiction failed because it postulates that
v.
there should be undistributed profits of one or more
lte Asok Te:¥tiles years immediately preceding the previous year. In
Ltd., Alwaye
the third case also the Finance Act was inapplicable
Kapu, 1.
because the additional tax was not properly laid upon
the total income and what was actually taxed was
never a part of the total income of the previous
year.
.rg6o
December I3.
In our opinion the order of the High Court was
erroneous. We therefore allow this appeal and set
aside the judgment and order of the High Court with
costs in this court and in the High Court.
Appeal allowed .
DIAMOND SUGAR MILLS LTD., AND
ANOTHER
v.
THE STATE OF UTTAR PRADESH AND
ANOTHER
(JAFER IMAM, J. L. KAPUR, K. C. DAs GUP'l'A,
RAG~AR DAYAL and N. RAJAGOPALA
AYYANGAR, JJ.)
Sugar Cane-Imposition of cess-Enactmtnt taxing entry of
cane into factory-Constitutionality of-"Local are((', Connotat$011
of-Constitution of India, Sch. VII, Lisl II, Entry 52-U. P.
Sugarcane Cess Acl, I956 (U. P. XXII of I956), s. 3·
Entry 52 of List II of the Seventh Schedule to the Constitution empowered State Legislatures to make a Jaw relating to
''taxes on the entry of goods into a local area for consumptiOd,
use or sale therein". The U. P. Legislature passed the U. P.
Sugarcane Cess Act, 1956, which authorised the State Government to impose a cess on the entry of cane into the premises of a
factory for use, consumption or sale therein. The appellant
contended that the premises of a factory was not a 'local area·.
within the meaning of Entry 52 and the Act was beyond the
competence of the legislature.
' .
3 S.C.R. SUPREME COURT REPORTS
243
Held, (per Imam, Kapur, Das Gupta and Raghubar Dayal;
JJ.) that the impugned Act was beyond the competence of the
legislature and was invalid. The premises of a factory was not
a "local area" within the meaning of Entry 52. The proper
meaning to be attached to the words "local area" in Entry 52 ·
was an area administered by a local body like a municipality, a
district board, a local board, a union board, a Panchayat or the
like.
In re: the Central Provinces & Berar Act No. XIV of I938,
[1939] F.C.R. 18, Navinchandra Mafatlal v. The Commissioner of
Income~tax, Bombay City, [1955] I S.C.R. 829, State of Madras v.
Gannon Dunkerley & Co., Ltd., [1959] S.C.R. 379 and South Carolina v. United States, (1905) 199 U.S. 437, referred to.
Emperor v. Munnalal, I.L.R. 1942 All. 302, disapproved.
Per Ayyangar, J.-The Act was invalid only in so far as it
sought to levy a tax on cane entering a factory from within the
same local area in which the {actory was situate and was valid
in other cases. It was permissible to read the Act so as to confine
the tax to the limitations subject to which it could be constitutio~
nally levied an~ to strike down that portion which outstepped
the limitations.
In re Hindu Women's Rights to Property Act, I937, [1941]
F.C.R. 12 and Blackwood v. Queen, (1882) 8 A.C. 82, applied.
CIVIL APPELLATE JuRISDICTION: Civil Appeal No.
35 of 1959.
Appeal from the judgment and decree dated October 29, 1956, ofthe Allahabad High Court in Writ
Petition No. 327 of 1956.
H. N. Sanyal, Additional Solicitor-General of India,
J. B. Dadachanji, 8. N. Andley, Rameshwar Nath and
P. L. Vohra, for the appellants.
G. 0. Mathur and 0. P. Lal, for the respondents.
1960, December 13. The Judgment of Imam,
Kapur, Das Gupta and Dayal, JJ. was delivered by
Das Gupta, J. Ayyangar, J. delivered a separate judgment.
DAs GUPTA, J.-. This appeal is against an order
of the High Court of Judicature at Allahabad rejecting the appellants, application under Art. 226 of the
Constitution. The first appellant is the Diamond
Sugar Mills Ltd., a. public limited company owning
and operating a sugar factory at Pipraich in the District Gorakhpur, for the manufacture of sugar from
Diamond Sugar
Mills Ltd.,
& Another
v.
The State of
Uttar P!'adesh
& Anothe!'
Das Gupta].
.". ,'
~SUPREME COURT REPORTS
i
[1961]
244 -
~ -,_:960 :
sugarcane. ' The second a'pp~lla~t'" is . the Director of
Dia~;:;;; suga~· the company. By this application _ the_ appellants ·
Mills Ltd..
challenged the imposition· of cess on the entry of
· c&- Another.
sugarcane into their factory:\ On:Fcbruary :24, 1956,
v.
when the application was. made theU. P. Sugarca'ne
The State of- {Regulation of Supp1y and Purchase} Act, 1953(U. P.':
u~~:;tah::s" XXIV of 1953), was ih force. Section 20 of this Act
gave to the Governor of U. P. the power to impose by _
Das Gupta J· notification "a cess not exceeding 4 arinas per maund
on the· entry- of sugarcane into an area specified in
-- suchnotificati,lm for consumption; use or sale therein''. This Act it may be mentioned bad taken the
place of an earlier Act, the U. P. Sugar Factories Control Act, 1!}38, s. 29 of which authorised the Governor
of U.' P. to impose by a notification after consultation'
with the Sugar Control Board under the Act "a cess
not e·xcceding 10 per cent of the minimum price, if
any, fixed under _s. 21 or 4 annas per maund which- .
ever was higher ori the entry of sugarcane_ into a local
area specified in such notification for consumption,
usc or sale therein'\ Notifications were issued under
this provision for different crushing seasons starting
from 193S-30, the last notification -issued thereunder
being for the crushing season of 1052-53. These notifications set out a number of factories in a schedule
and provided that during 1952-53 crushing season cess
at a rato of three annas per maund shall be levied on,
the entry of all sugarcane into tho local areas , comprised in factories mentioned in the schedule for consumption, useor sale therein. Act No. XXIV of 1953
repealed tho 1038 Act. The first notification under
tho provisions' of s. 20 of tho 1D53 Act was in these·
terms:-
" In exorcise of the powers conferred by sub-sec-
-tion (1) of section 20 of , Uttar Pradesh Sugarcane
(Regulation of. Supply and Purchase)- Act~ ·1953;.
(U-P. Act No. XXIV of 1953) the Governor is pleas-
~ ed to declare that during the 1954-55 crushing sea-
. son, a cess at a rate of three annas per maund shall·
be levied _ on the -entry of, all sugar cane into the
·local-.areD.s comprised in the factories mentioned- in~
the Schedule, foJ; the consumption, use or sale therein". ·.
·
' .
l v ·;
I.
3 S.C.R. SUPREl\ffi COURT REPORTS
245
Similar notifications were also issued on October 23,
1954, for the crushing season 1954-55 and on Novem1955 56
Th
Diamond Sugar
ber 9, 1955, for the crushing season
-
·
e
Mitis Ltd.,
appellants' factory was one of the factories mentioned
&- Anotl1dr
in the schedule of all these notifications. On the date
v.
of the application, i.e., February 24:, 1956, a sum of
The State of
Rs. 2,59,644-9-0 was due from the first appellant and a.
Uttar Pradesh
&- Another
further sum of Rs. 2,41,416-3-0 as liability on account
of cess up to the end of January, 1956, also remained
unpaid.
The appellant contended on various grounds that
s. 20 of Act XXIV of 1953 was unconstitutional and
invalid and prayed for the issue of appropriate writs
directing the respondents the State of U. P. and the
Collector of Gorakhpur not to levy and collect cess oil
account of the arrears of cess for the crushing season
1954:-55 and in respect of the crushing season 1955-56
and successive crushing seasons and to withdraw the
notifications c:lated October 23, 1954:, and November 9,
1955, which have been mentioned above.
During the pendency of this application under Art.
226 before the Allahabad High Court the U. P. Legislature enacted the U. P. Sugarcane Cess Act, 1956
(U. P. XXII of 1956), repealing the 1953 'Act. Section 3 of this Act as originally enacted was in these
words:-
"Tho State Government may by notification in
the official gazette impose a. cess not exceeding four
annas per maund on tho entry of tho cane into the
promises of a factory for use, consumption or t...}le
therein:
_I'rovid_ed. that tho ~tate GO\·ernment may like·
wtse rom1t m whole or m part such cess in respect
of cane used or to be used in fa.ctory for any limited
purpose spe_cifietl in the notification.
Expln.natwn:-If the State Government in the
case of any factory si}:uato outside Uttar Pradesh
so declare, any p~a.ce 1~ .Uttar Pradesh set apart fo;
the purct~a.se of ca
1
n~ mtenhded or required for URe,
consump ton or sa e m sue factory shall bo d
otl to be tho premises of the factory.
eem-
(2) The cess imposed under sub-section (l) shall
Das Gupta J.
Diamond Suga'
Mills Ltd.,
.S. Another
v.
The State of
Uttar Prad~sh
· .S. A not her
Das Gupta j
246
SUPREME COURT REPORTS
[1961]
be payable by the owner of the factory and shall be
paid on such date and at such place as may be
prescribed.
(3) Any arrear of cess not paid on the date prescribed under sub-section (2) shall carry interest at
6 per cent. per annum from such date to date of
payment.n
There is a later amendment' by which the words
''four annas" have been altered to "twenty-five naye
paise" and the words "Gur, Rab or Khandsari Sugar
Manufacturing Unit" have been added after the
words "factory" in sub-section (1). These amendments
are however not relevant for the purpose of this
appeal.
Section 9 of this Act repealed s. 20 of the Sugar
Cane (Regulation of Supply and Purchase) Act, 1953.
Sub-sections 2 and 3 of s. 9 are important. They are
in these words:-
"2. Without\prejudice to the general application
of section 24 of the U.P. General Clauses Act, 1904,
every notification imposing cess issued and every
· assessment made, (including the amount- of cess
collected) under or in pursuance of any such notification, shall be deemed a notification issued, assessment made and cess collected under this Act as if
sections 2, 3 and 5 ·to 8 had been in force at all
materia] dates.
3. Subject as provided in clause (1) of Article 20
of the Constitution every notification issued cess
imposed and act or thing done or omitted between
the 26th January, 1950, and the Appointed date in
exercise or the purported exercise of a power under
section 29 of the U. P. Sugar Factories Control Act,
1938, or of s. 20 of the U. P. Sugarcane (Regulation
of Supply and Purchase) Act, 1953,. which would
have been validly and properly issued, imposed,
done or omitted if the said sections had been as
section 3 of this Act, shall in law be deemed to be
and to have been validly and properly imposed and
done, any judgment, decree or order of any court
not withstanding."
The pos~tion after the enactment of the U. P.
I
I
l
J
3 S.C.R. SUPREME COURT REPORTS
247
Sugarcane Cess Act, 1956, was that the imposition and
r960
assessment of cess that had already been made under Diamond suga,
the 1953 Act would operate as if made under the 1956
Mills Ltd.,
Act. In view of this the first appellant, the Diamond
tf>. Anon,,
Sugar Mills Ltd., prayed to the High Court for permisv.
sion to raise the question of constitutionality and vali-
~~:,s~:;d:~ ..
dity of the 1956 Act. It also prayed for the issue of a
tf>. Another
writ in the nature of mandamus directing the respondents not to levy cess upon the petitioners-appellants Das Gupta ].
under this new Act, the U. P. Sugarcane Cess Act,
1956.
This application was allowed and the High Court
considered the question whether s. 3 of the U. P.
Sugarcane Cess Act, 1956, empowering the State
Government to impose a cess not exceeding four annas
per maund on the entry of the cane into the premises·
of a factory for the consumption, use or sale therein
was a valid law.
The principal ground urged in support of the appellants' case was that the law as enacted ins. 3 was
invalid and that it was beyond the legislative competence of the State Legislature.
Several other
grounds including one that the provisions of the· section went beyond the permissible limits of delegated
legislation were also raised. All the grounds were
negatived by the High Court which. accordingly rejected the appellants' petition. . The High Court however
gave a certificate under Article 132(1) and also under
Art. 133(1)(c) of the Constitution and on the basis of
that certificate the present appeal has been filed.
Of the several grounds urged before the High Court
only two are urged before us in appeal. One is that
the law was invalid, being beyond the legislative competence of the Sta.te legislature; the other is that in any
case the provision giving the Governor power to levy
any cess not exceeding 4 annas without providing for ·
any guidance as to the fixation of the particular rate,
amounted to excessive delegation, and was accordingly invalid. The answer to the question whether the
impugned law was within or beyond the legislative
competence of the State legislature depends on whether the law falls under Entry 52 of the State List-
Diamond Sugar
Mills Ltd.,
& Another
v.
The State of
Uttar Prc1desh
& Anoth~r
Das Gupta J.
248
SUPREME COURT REPORTS
[1961]
List II of the Seventh Schedule to the Constitution.
It is quite clear that there is no other entry in either
tho State List or the Concurrent List under· whioh tho
legislation could have been made. Entry 52 is in
these words:-"Tax on the' eritry of goods into a JocaJ
area for consumption, use or sale therein". Section 3
of the impugned Act which has .already been set out
provides for imposition of a cess on the entry of suga.rcane into the premises of a factory for use, oonsumption or sale therein. Is the "premises of a factory" a
local u.rea within the meu.ning of the words used in
Entry 52? If it is the legislu.tion was clearly within
the competence of the State legislature; if it is not,
the law was beyond the Stu.te legislature's competence
and must be struck down as invalid.
In considering the meaning of the words "local
area" in entry 52 we have, on the one hand to bear in
mind the salutary rule that words .conferring the
right of legislation should be interpreted liberally and
the powers conferred should be given tho widest
amplitude; on the other hand we have to guard oursol vcs agaim;t extending the meaning of the words
beyond their reasonable connotation, in an u.nxiet.y
to preserve the power of tho legislature. · ln Re the
Central Provinces & Berar Act No. XIV of 1938 C) Sir
Maurice Gwycr, C. J., observed:-
"1 conceive that a broad and liberal spirit should
inspire those whose duty it is to interpret it; but I
do not imply by this that they are free to stretch or
pervert the language of the enactment in the interests of any legal or constitutionnl theory, or even
for the purpose of correcting any supposed errors".
Again, in Navinchandra ]'Jafatlal v. The Comrnis8ione-r
of lncume 'Pax, Bombay City(2 ) Das, J. (as he then
was) delivering the judgment of this Court observed:-
" ......... The cardinal rule of interpretation however, is that words should be read in their ordinary,
natural and grammatical meaning Sllbject to this
ridor that in construing words in a constitutional
· ermctment conferring legislative power the most
li) [193'JJ F.C.R. 18, 37·
(2) [1955] 1 S.C.R. 829.
- .
~·
·····~
3 S.C.R. SUPREME COURT REPORTS
249
liberal construction should be put upon the -words
so that the same may have effect in their widest
amplitude."
Our task being to ascertain the limits of the
powers granted by the Constitution, we cannot extend
these limits by way of interpretation. But if there is
any difficulty in ascertaining the limits, the difficulty
must be resolved so far as possible in favour of the
legislative body. The presumption in favour of constitutionality which was stressed by the learned
counsel for the respondents does not take us beyond
this.
On behalfof the appellants it has been urged that
the word "local area" in its ordinary grammatical
meaning is never used in :oospect of a single house or
a single factory or a single plot of land. It is urged
that in ordinary use the words "local area" always
mean an area covering a specified region of the country as distinguished from the general area. While it
may not be possible- to say that the words "local area."
have acquired a definite {l.nd precise meaning and the
phrase may have different connotations in different
contexts, it seems correct to say that it is seldom, if
ever, used to denote a single house or a single factory.
The phrase appears in several statutes, some passed
by the Central Legislature and some by the Provincial
or ~tate Legislatures; but in many of these the words
have been defined. These definitions being for the
peculiar purpgse of the particular statute cannot be
applied to the interpretation of the words "loeal area."
as used in the Constitution. Nor can we derive any
assistance from the judicial interpretation of the words
"local area" as used in the Code of Criminal Procedure
or other Acts like Bengal Tenancy Act a.s these interpretations were made with reference to the scope of
the legislation in which the phrase occurs. Researches
into dictionaries and law lexicons are also of no avail
a.s none of these give the meaning of the phrase "local
area''. What they say as regards the meaning of the
word "local" offers no guidance except that it is clear
that the word "local" has different meanings iu different contexts.
3a
1960
Diamond Sugar
Mills Ltd.,
& Another
v.
The Slate of
Uttar Pradesh
& Another
Das Gupta].
250
SUPREME COURT REPORTS
[1961]
z96o
The etymological meaning of the word ~'local" is
D.
~-
"relating to" or "pertaining to, a place. It may be
'';:;,~;s L:;,~ar first observed that whether or not the whole of the
&- Anoth~r
State can be a "local area", for the purpose of Entry
v.
52, it is clear that to be a. "local area" for this purpose
The State of must be an area within the State. On behalf of the
Uttar Pradesh respondents it is argued that "local area" in Entry 52
~ Another
should therefore be taken to mean ''any part of the
Das Gupta f. State in any place therein". So, the argument runs,
a single factory being a part of the State in a place in
the State is a "local area". In other words, "local
area'' mean "any specified area inside the State". The
e1bvious fallacy of this. argument is that it draws no
distinction between the word "area" standing by itself
and the phrase "local area". If the Entry had been
"entry of goods into any area of the State ............ "
some area would be specified for the purpose of the
law levying the cess on entry. If the Constitutionmakers were empowering the State Legislatures to
levy a cess on entry of goods into_ any specified area
inside the state the proper words to use would have
been "entry of goods into any area ............... " It
would be meaningless and indeed incorrect to use the
words they did use ''entry of goods into a local area".
The use of the words "local area" instead of the word
"area" cannot but be due to the intention of the Constitution-makers to make sure that the power to make
laws relating to levy on entry of goods would not
extend to cases of entry of goods into any and every
part of the state from outside that part but only to
entry from outside into such portions of the state as
satisfied the description of "local area". SoJL.ething
definite was sought to be expressed by the use of the
word "local" before the word "area": The question is:
what exactly was sought to be .expressed?
In finding an answer to the question it is legitimate
to turn to the previous history of constitutional legislation in the country on this subject of giving power to
legislature to levy tax on the entry of goods. In the
State of Madras v. Gannon Dunkerley & Go., Ltd. (1)
(I) [1959) S.C.R. 379·
3 S.C.R. SUPREME COURT REPORTS
251
this Court referred with approval to the stateme~t
1 960
of law in Halsbury's Laws of England, Vol. II, n·
a 5
157
93 h . h
' '
f E
1' h 1
'amon
~gar
para.
, p.
, t at t e ex1stmg state o
ng 1s
aw
Mills Ltd
in 1867 is relevant for consideration in determining
~So Anotht;
the meaning of the terms used in the British North
v.
America Act in conferring power and the extent of
The State of
that power. This has necessarily to be so as in· the
Uttar Pradesh
words of Mr. Justice Brewer in South Carolina v.
& Another
United States (1 ) "to determine the extent of the grants
Das Gupta J,
of power, we must, therefore, place ourselves in the
position of the men who framed and adopted the
Constitution, and inquire what they must have understood to be the meaning and scope of those grants."
.Turning now to the previous legislative history we
find that in the Government Of India Act, 1935, Entry
49 of the Legislative List (List II of the 7th Schedule)
was in the same words as Entry 52 of the Constitution
except that instead of the words "taxes" as in Entry
52 of List II of the Constitution, Entry 49 List II of
the Government of India Act, used the word "cess".
In Government of India Act, 1915, the powers of the
provincial legislatures were defined ins. 80A. Under
clause (a.) of the third sub-section of this section the
local legislature of any province has with the previous
sanction of the Governor-General power to make or
take into consideration any law imposing or authorising the imposition of any new tax unless the tax was
a tax scheduled ~s exempted from this provision by
rules made under the Act.
The third of the Rules that were made in this
matter under Notification No. 311/8 dated December
18, 1920, provided that the legislative council of a
province may without the previous sanction of the
Governor-General make and take into consideration
any law imposing or authorising a. local authority to
impose for the purpose of such local authority any tax
included in Schedule II of the Rules. Schedule II
contained 11 items of which items 7 and 8 were in
these words:-
7.
An octroi
8.
A terminal tax on goods imported into a local
(l) (1905) 199 u.s. i37·
Diamond Sugar
Mills Lid.,
&- Another
v.
The State of
Uttar Pradesh
6- Another
Das Gupta ].
252
SUPREME COURT REPORTS
[1961]
area in which an octroi was levied on or before 6th
July. 1917.
Item 8 was\.slightly modified in the year 1924 by
another notification as a result of which it stood
thus: 8.
A terminal tax on goods imported into
or exported from a local area save where such tax
is first imposed in a local area in which an octroi
was levied ')nor before July 6, 1917. Octroi is an old
and well known term describing a tax on the entry of
goods into a town or a city or a similar area for consumption, sale or use therein. According to the Encyclopaedia Britannica octroi is an indirect or consumption tax levied by a local political unit, normally
the commune or municipal authority, on certain categories of goods on their entry into its area. The Encyclopaedia Britannica describes the octroi tax system
in France (abolished in 1949) and states that commodities were prescribed by law and were divided into
six classes and for all the separate commodities within
these six groups maximum rates of tariff were promulgated by presidential decree, specific rates being fixed
for the three separate sorts of octroi area, established
on the basis of population, namdy, communes having
(I) less than 10,000 inhabitants, (2) from 10,000 to
50,000 and (3) more than 50,000. While we are not
concerned here with other features of the octroi tax
system, it is important to note that the tax was with
regard to the entry of goods into the areas of the
communes which were local political units. According to the Shorter Oxford English Dictionary "commune" in France is a small territorial division governed by a maire and municipal council and is used to
denote any similar division elsewhere.
The characteristic feature of an octroi tax then was
that it was on the entry of goods into an area administered by a local body.
Bearing in mind this characteristic of octroi duty we find on an examination
of items 7 and 8 of the Schedule Rules mentioned
above that under the Government of India Act, 1919,
the local legislature of a Province could without the
previous sanction of the Governor-General impose a
't
,.
(
3 S.C.R. SUPREME COURT REPORTS
253
tax-octroi-for entry of goods into an area adminis·
tered by a local body, that is, a local government
authority and the area in respect of which such tax
could be imposed was mentioned in item 8 as local
area.
It is in the background of this history that we have
to examine the use of the word ''local area" in item
49 of List II of the Government of India Act, 1935.
Here the word "octroi" has given place to the longer
phrase "cesses on the entry of goods into a local area
for conbilrnption, use or sale therein.n
It was with the knowledge of the previous history
of the legislation that the Constitution-makers set
about their task in preparing the lists in .the seventh
schedule. There can be little doubt therefore that in
using the words "tax on the entry uf goods into a
local area for consumption, use or sale therein", they
wanted to express by the words "local area" primarily
area in respect of which an octroi was leviable under
item 7 of the schedule tax rules, 1920-that is, the
area administered by a local authority such as a
municipality, a district Board, a local Board or a
Union Board, a Panchayat or some body constituted
under the law for the governance of the local affairs
of any part of the State. Whether the entire area of
the
Stat€~, as an area administered by the State
Government, was also intended to be included in the
phrase "local area", we need not consider in the present case.
The only other part of the Constitution where the
word "local area" appears is in Art. 277. That Article
is in these words:-
,, Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution,
were being lawfully levied by the Government of any
State or by any municipality or other local authority
or body for the purposes of the State, municipality.
district, or other local area may, notwithstanding
that these taxes, duties, cesses or fees are mentioned
in the Union List, continue to be levied and to be
applied to the same purposes until provision to the
contrary is made by Parliament by law.,
Diamond Sugar
Mills Ud.,
& Anothet·
v.
The State of
Uttar Pradesh
c!). Anoth6r
Das Gupta f.
Diamond Sugar
Mills Ltd.,
~Another
v.
The State of
Uttar Pradesh
& Anolher
Das Gupta ].
254
SUPREME COURT REPORTS
[1961]
There can be little doubt that ''local area" in £his
Article has been used to indicate an area in respect of
which there is an authority administering it.
While the scope of Article 277 is different from the
scope of entry 52 so that no direct assistance can be
obtained in the interpretation· of the words "local_
area" in entry 52 from this meaning of the words in
Art. 277 it is satisfactory to find that the meaning of
"local area" in entry 52 which appears reasonable on
a consideration of the legislative history of the matter
is also appropriate to this phrase in its only other use
in the Constitution.
Reliance was sought to be placed by the respondents on a decision of the Allahabad High Court in
Empero~· v. M unnalal (1 ) where the word "local area" as
used in s. 29 of the U. P. Sugar Factories Control Act,
1938, fell to be considered. That section, as we have
already m~ntioned, authorised the Governor ofU. P. to
impose by a notification, after consulting the Sugar
Control Board under the Act, a cess on the entry of
sugarcane into a local ar~:;a specified in such notification
for consumption, use or sale therein. The notifications
which were issued under this provision set out a number of factories for the levy of a cess at the rate of
three annas·per maund on entry of all sugarcane into
the loca:I area comprised in the factories mentioned in
the schedule for consumption, use or sale therein.
Section 29 was clearly within the words of entry 49
of List II. The question that arose before the Court
was whether the specification of certain factories as
local areas was valid law. The learned Judge appears
to have proceeded on the basis that the Governor had
notified the area comprised in 74 factories as one
"local area" and held that once this was done the
entire area covered by all these factories should be
considered as one statutory local area. It appears to
us that the learned Judge was not right in thinking
that the area comprised in 74 factories was notified as
one local area. What appears to have been done was
that the area of each factory was being notified as a.
local area for the purpose of the Act. Proceeding on
(I) I.L.R. I9f2 All. 302.
3 S.C.R. STJPREME COURT REPORTS
255
the basis that the area comprised in the 74 factories
was notified as one local area the learned Judge addressed himself to the question whether this entire
area was a local area within the meaning of the Act.
He appe:;~.rs to have accepted the contention that the
word local area was used in the sense of an administrative unit, but, says he, the administration need not
be political, it may be industrial and educational or it
may take any other form of governmental activity.
"I cannot see,'' the learned Judge observed, "why it
is not open to-the provincial government or the·provinciallegislature to make an industrial survey of the
province and to divide up the·entire prqvince into
industrial areas or factory areas or mill areas or in
any other k~nd of areas, and each one of these areas
may be notified and be· treated as a local area. And
once such areas come into exitence and remain in
operation they can be regarded as local areas within
the meaning of entry No. 49 of List II in which a cess
may be levied".
Even if this view were correct it would be of no assistance to the respondents. It is no authority for the
proposition that the area of one sing~e factory is a
local area within the meaning of entry 49. We think
however that the view taken by the learned Judge is
riot correct.
It is true that when words and phrases previously
interpreted by the courts are used by the Legislature
in a later enactment replacing the previous statute,
there is a presumption that the Legislature intended
to convey by their use the same meaning which the
courts had already given. to them. This presumption
can 'however only be used as aD- aid to the interpretation of the later statute and should not be considered
to be conclusive. As Mr. Jastice Frankfurter observed
in Federal Com. Comm;ssion v. Columbia B. System (1)
when considering this doctrine, the persuasion that
lies behind the doctrine is merely one factor in the
t9tal effort to giv~ fair meaning to language. The
presumption will he strong where the words of the
previous statute have received a. settled meaning by a.
(1) 311 u.s. 131·
Diamond .Sugar
Mills Ltd.,
.S. Anoth~r
v.
The State of
Uttar Pradesh
.S. Another
Das Gupta].
256
SUPREME COURT REPORTS
[1961]
series of decisions in the difl'erent courts of the country;
Diamond Sugar and particularly strong when such interpretation has
Mills Ltd.,
been made or affirmed by the highest court in the land.
~ Another
We think it reasonable to say however that the prev.
sumption will naturally be much weaker when the
The State of
interpretation was given in one solitary case and was
Uttar Pradesh not tested in appeal. After giving careful considera-
~ Another
tion to the view taken by the learned tftrdge -Of the
Das Gupt(J. ]. Allahabad High Court in Emperor v. Munnalal (supra)
about the meaning of the words "local area" and proper weight to the rule of interpretation mentioned
above, we are of opinion that the Constitution.makers
did not use the words "local area" in the meaning
which the learned Judge attached to it. We are of
opinion that the 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".
It must therefore be held that s. 3 of the U. P.
Sugarcane Cess Act, 1956, empowering the Governor
to impose a cess on the entry of sugarcane into the
premises of a factory did not fall within Entry 52 of the
State List. As there is no other Entry in either State
List or Concurrent List in which the impugned law
could fall there is no escape from the conclusion that
this law was beyond the legislative competence of the
State Legislature. The law as enacted ins. 8 of the
U. P. Sugarcane Cess Act, 1956, must therefore be
struck down as invalid.
It may be mentioned that this is not a. case where
the Jaw is in two parts and one part can be severed
from the other and saved a.s valid while striking down
the other portion which is invalid. Indeed, that was
not even suggested by the learned counsel for the respondents. It is unnecessary for us to consider whether
if s. 3 had instead of authorising levy of cess for .entry
of sugarcane into the premises of a factory for use,
consumption or sale therein had authorised the imposition of a. cess on entry of cane into a local area for
-
3 S.C.R. SUPREME COURT REPORTS
257
consumption, sale or use in a factory that would have
1960
been within Entry 52. It is sufficient to say th~t we Diamond sugar
cannot re-write the law for the purpose of savmg a
Mills Ltd.,
portion of it. Nor is it for the Court to offer any sugb Another
gestion as to how the law should be drafted in order
v.
to keep it within the limits of legislative competence.
The SJate of
d b
d
h
Uttar Pt·adesil
As the law enacte
y the Legislature stan s t ere
b Another
is no escape from the conclusion that this entire law
must be struck down as invalid.
..
Das Gupta ).
In view of this conclusion on the first ground raised. '
on behalf of the appellant 'it is unnecessary to consider
the other ground raised in the appeal that section 3
has gone beyond the permissible limits of· delegated
legislation.
·
As we have held that the impugned legislation was
beyond the legislative competence of the State Legislature the appdlants are entitled to the relief asked for.
We accordingly allow the appeal, set aside the order
passed by the High Court and order the issue of a
writ directing th~o~.t the respondents do forbear from
levying and collecting cess from the appellants on
account of arrears of cess for the crushing season
1954-55 and in respect of the crushing season 1955-56
and successive crushing seasons under the U. P. Sugarcane Cess Act, 1956.
The appellants will get their costs here and below.
AYY.ANGAR, J.-1 have had the privilege of perusAyyangar J.
ing the judgment just now pronounced, but with the
utmost respect regret my inability to agree with the
order proposed.
The learned Judges of the High Court held that the
i~pugned enactment was within the scope of Entry 52
of the ·State Legislative List in Schedule 7 to the
Constitution, by placing reliance on the following
passage in the Judgment of Da.s, J. in Emperor v.
Munna Lal ( 1) where the learned Judge said:
"Indeed I · cannot see why it is ;not open to Pro~
vincia.l Government or Provincial Legislature to
make an industrial survey of the Province and to
divide up the entire province into industrial areas
(I) I.L.R. [194~] AU. 30:z, 328.
33
Diamond S11gar
Mills Lt4.,
,£. A 110ther
v.
'fhe State of
Ullar Pradesh
c$. tl not her
AyyaJ~gar ].
258
SUPREME COURT REPORTS
[1961]
or factory areas or mill areas or in any other kind
of areas, and each one of these areas may be uotified and be treated as a local area. And once such
areas come into existence and remain in operation
they can be regarded as local areas within the
meaning of Entry No. 45 of List II in which a cess
may be levied."
In other words, the view which they favoured was to
read the expression "local area" practically to mean
any "area" entry into which was by the relevant fis-_
cal statute, made the suoject of taxation. In my
opinion that is not a corr~ct interpretation of the
entry and I agree with my learned brethren th~t having regard to the historical material, which~ has been
exhaustively set out and discussed in their · judgment,
the word "local area" can in the entry designate only
a predeter.mined local unit-a unit demarcated by
statutes pertaining to local self government and placed under the control and administration of a local
authority such as a municipality, a cantonment, a
. district or a local board, an union or a panchayat etc.
and not any region, place or building within the State
which might be defined, described or demarcated by
the State's taxing enactment as an : area entry into
which is made taxable.
·
But there my agreement stops and we diverge. In
my opinion, this construction of the expression
·. "local area" in entry 52 does not automatically result
in the invalidity-of the. impugned enactment and of
the levy under it, but the extent to which, if any the
. charging section exceeds the pow~r conferred by the
entry would.depend on ·matters which.have not been
the subject of investigation, and it is this point that
I sha.ll elaborate in.the rest of this judgment.
It_ is unnecessary for the purposes of this case and
possibly eveh irrelevant, to determine the precise
scope, content and incidents of a.n "octroi" dutyexcept that in the context in which it appeared in the
Scheduled Taxes Rules framed under the Government
of India Act, 1919, the expression signified a tax levied
on entry into an area of an unit of local l¥imi.nistration.
It is unprofitable to canvass the question
3 S.C.R. SUPREME COURT REPORTS
259
whether a local authority empowe~ed at that date to
196o
levy an 'octroi' might or might not lawfully con-
. -"
fine the levy to entry for consumption alone, to use D
1:
1
.~;d L;;gat
alone or for sale alone. But when that entry was
e,.
1
Asnothe;
refashioned and enacted as item 49 of the Provincial
v.
Legislative List under the Government of India Act,
The State of
1935 (in terms practically identical with Entry 52 in Ullar Pradesh
the Sta.te Le-gislative List under the Constitution),
&- • .J1Iothcr
the matter was no longer left in doubt. The new
A)'JII>tgar ] .
item ran:
"Cesses on the entry of goods into a local area for
consumption, use or sale therein".
In connection with the use of the words "for consumption, use or Rale therein" in the item three
matters deserve notice: (1) Where the entry into the
"local area" was not for one of the purposes set out in
it, viz., for consumption, use or sale therein, but the
entry was, for instance in the course of t,ransit or for
warehousing during transit, the power was not available; in other words, a mere entry could not per se be
made a taxable event. (2) It was sufficient if the entry
-
was for any one of the three purposes; the use of the
disjunctive 'or' making this clear. (3) The passage of
goods from one p'Ortion of a local area to another
portion in the same local area, would not enable a. tax
to be levied, but the entry has to be. "into the local
area'', Le., from outside the local area.
It is the second and the third of the above features
that caU for a more detailed examination in the context of the points requiring decision in the present case.
With this background I shall analyse the terms of
s. 3(1) of the Act (United Provinces Act XXII of 1956)
to ~scertain where precisely the provision departs
froni the scope or content of entry 52. I will read
that section which runs:
. "3.