# BHOPAL SUGAR INDUSTRIES LTD v. STATE OF MADHYA PRADESH & ORS

- **Citation:** [1979] 2 S.C.R. 605
- **Court:** Supreme Court of India
- **Decided:** 1978-12-05
- **Bench:** P. N. Shjnghal, D. A. Desai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bhopal-sugar-industries-ltd-v-state-of-madhya-pradesh-ors-7616
- **Pages:** 8

## Headnote

Madhya Pradesh Sugarcane (ReRulation of Supply and Purchase) Act, 1958,
s, 23 and s. 23(1), constitutionality, "alt area", whether synonymous to "local
area" in Entry 52, List JI of the Seventh Schedule, Constitution of lndia-s. 23
(2) and Rule 60, M.P.S. (Regulation of Supply and Purcha.~e) Rules, 1959, wh~
ther require formal assessment order prior to collection of cess.
Sugarcane cess (Validation) Act, 1961, Constitutionality, whether purports to
Validate Invalid State Statutes.
T'he appellant company cultivates sugarcane and manufactures sugar in its
factory, by crushing the sugar cultivated by it and purchased from other. cultivators. The State Government enacted the M.P. Sugarcane (R.S.P.) Act, 1958
which came into force on July 1, 1959. The State Government issued a notification under s. 23 of the Act imposing a ccss of 12 paise per maun<l on the
entry of sugarc:ine during. a crushing season in the area comprised within "such
of the factories in which the total quantity of cane entering for consumption,
use or sale to the factory <luring such season exceeded 10 lakh n1aund';." 'fhe
11:igh Court, on a \i.trit application by the appellants. declared the notification
illegal as the imposition of the levy was with reference to particular premises.
rfhe Parliament thereupon enacted the Sugarcane Cess (Validation) Act, 1961. '
Section 3 of the Validation Act '"'as taken to val:date the imposition and collection of the cess under the State Act.
In April, 1964, the appeUant received
an intin1ation from the Additional Collector stating that a sum of Rs. 5,49.262.92
was due from it as cess for the period 1959-60 to December 25, 1'961, and asking
for a bank guarantee for payment of the balance.
"fhe appellant replied that
the amoU'.1t of cess worked out only to R5. 5,44.835.69 and the Collector h&l
not as5essed the cess in accordance with the rules.
Its objection was ignored
and a den1and notice was served on it under s. 146 of the M.P. Land Revenue
Code, 1959, for Rs. 5,49,262.92. The appellant filed a writ petition chalieng1ng
the constitutionality of the Validation Act under which the Collector had d'emanded tbc cess.
The High Court upheld the imposition of cess but reduced
it to Rs. 5,44,835.69.
It was contended that s. 23 of the State Act was not ultra vires the Con·
stitution, as the expression "an area" ins. 23(1) means "a local area" within the
meaning of Entry 52 of List II, 7th Schedule of the Constitution, and the Parliament could not, therefore, enact an Act validating a valid Act. It was further
contended that when a law provides for th~ assessment of a cess or tax, il is
required to be done by a specific order to that effect, but it was not made in
this case.
Dismissing the appeal, the Court1
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606
SUPREME COURT REPORTS
[1979] 2 s.c.R.
1-IELD : 1. Section 23 of the State Act was ultra vires the Constitution, and
cannot be upheld on such a construction of the words "an area" in s. ( 1) as
to restrict it to mean a "l(!Cat area". The proper meaning to be attached to the
words "local area" in Entry 52, List JI of the Seventh Schedule of the Constitution; (when the area is a part of the State imposing the law) is an area administered by a local body like a Municipality, a district boan:l, a local board, a
union board, a panchayat or the like. The premises of a factory are therefore
not a "local area" falling within Entry 52 of the State List, and there is no
other Entry in the State List or the Concurrent List in which the Act could
fall, [608 E-H]
'
Dia111ond Sugar Mills Ltd. and Anr. v. State of U.P. & Anr. [1961] 3 SCR
242 and laora Sugar Mills (P) Ltd. v. State of M.P. and Ors., [1966] I SCR
C
523; followed.
2. What the Parliament had done by enacting s. 3 of the Validation Act, was
not to validate the invalid State statute, but to make a law concerning the cess
covered by the said statute and to provide that the said law shall come into
operation retrospectively.
By virtue of s. 3, the command unde

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605
BHOPAL SUGAR INDUSTRIES LTD.
v.
STATE OF MADHYA PRADESH & ORS.
December 5, 1978
[P. N. SHJNGHAL AND D. A. DESAI, JJ.]
Madhya Pradesh Sugarcane (ReRulation of Supply and Purchase) Act, 1958,
s, 23 and s. 23(1), constitutionality, "alt area", whether synonymous to "local
area" in Entry 52, List JI of the Seventh Schedule, Constitution of lndia-s. 23
(2) and Rule 60, M.P.S. (Regulation of Supply and Purcha.~e) Rules, 1959, wh~
ther require formal assessment order prior to collection of cess.
Sugarcane cess (Validation) Act, 1961, Constitutionality, whether purports to
Validate Invalid State Statutes.
T'he appellant company cultivates sugarcane and manufactures sugar in its
factory, by crushing the sugar cultivated by it and purchased from other. cultivators. The State Government enacted the M.P. Sugarcane (R.S.P.) Act, 1958
which came into force on July 1, 1959. The State Government issued a notification under s. 23 of the Act imposing a ccss of 12 paise per maun<l on the
entry of sugarc:ine during. a crushing season in the area comprised within "such
of the factories in which the total quantity of cane entering for consumption,
use or sale to the factory <luring such season exceeded 10 lakh n1aund';." 'fhe
11:igh Court, on a \i.trit application by the appellants. declared the notification
illegal as the imposition of the levy was with reference to particular premises.
rfhe Parliament thereupon enacted the Sugarcane Cess (Validation) Act, 1961. '
Section 3 of the Validation Act '"'as taken to val:date the imposition and collection of the cess under the State Act.
In April, 1964, the appeUant received
an intin1ation from the Additional Collector stating that a sum of Rs. 5,49.262.92
was due from it as cess for the period 1959-60 to December 25, 1'961, and asking
for a bank guarantee for payment of the balance.
"fhe appellant replied that
the amoU'.1t of cess worked out only to R5. 5,44.835.69 and the Collector h&l
not as5essed the cess in accordance with the rules.
Its objection was ignored
and a den1and notice was served on it under s. 146 of the M.P. Land Revenue
Code, 1959, for Rs. 5,49,262.92. The appellant filed a writ petition chalieng1ng
the constitutionality of the Validation Act under which the Collector had d'emanded tbc cess.
The High Court upheld the imposition of cess but reduced
it to Rs. 5,44,835.69.
It was contended that s. 23 of the State Act was not ultra vires the Con·
stitution, as the expression "an area" ins. 23(1) means "a local area" within the
meaning of Entry 52 of List II, 7th Schedule of the Constitution, and the Parliament could not, therefore, enact an Act validating a valid Act. It was further
contended that when a law provides for th~ assessment of a cess or tax, il is
required to be done by a specific order to that effect, but it was not made in
this case.
Dismissing the appeal, the Court1
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SUPREME COURT REPORTS
[1979] 2 s.c.R.
1-IELD : 1. Section 23 of the State Act was ultra vires the Constitution, and
cannot be upheld on such a construction of the words "an area" in s. ( 1) as
to restrict it to mean a "l(!Cat area". The proper meaning to be attached to the
words "local area" in Entry 52, List JI of the Seventh Schedule of the Constitution; (when the area is a part of the State imposing the law) is an area administered by a local body like a Municipality, a district boan:l, a local board, a
union board, a panchayat or the like. The premises of a factory are therefore
not a "local area" falling within Entry 52 of the State List, and there is no
other Entry in the State List or the Concurrent List in which the Act could
fall, [608 E-H]
'
Dia111ond Sugar Mills Ltd. and Anr. v. State of U.P. & Anr. [1961] 3 SCR
242 and laora Sugar Mills (P) Ltd. v. State of M.P. and Ors., [1966] I SCR
C
523; followed.
2. What the Parliament had done by enacting s. 3 of the Validation Act, was
not to validate the invalid State statute, but to make a law concerning the cess
covered by the said statute and to provide that the said law shall come into
operation retrospectively.
By virtue of s. 3, the command under which the cess
would be deemed to have been recovered, would be the command of the ParliaD
ment, because the relevant sections, notifications, orders and rules had
been
adopted by the Parliamentary Statute itself. [609 B-C]
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3. The State Act and the Rules do not require that the Collector 5hall make
a formal order of assessment, and then collect the cess.
The purpose of an
assessment is to compute the amount of the cess payable by the person con~
cerned. "Assess" is a comprehensive word and in a taxing statute it often mean'>
the computation of the income of the assessee, the determination of tax payable
by him, and the procedure- for collecting or recovering the tax. In a case where
there is a dispute about the identity of the assessee, the order of assessment serves the purpose of establishing that identity and naming the person from whon1
the tax is to be recovered. The responsibility of the Collector for purposes of
assessing and collecting the tax under s. 60 of the Rules, is to see that the full
amount of the cess has been credited to the treasury by the occupier of the factorv. If he finds that this is not so. it is his duty to call upon the occupier by
a ~ritten notice to deposit the amount due from him \vithin the period specified
in the notice.
[611E-H, 612A]
C!V!L APPELLATE JURISDICTION : Civil Appeal No. 1293 of 1969.
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Appeal from the Judgment and Order dated the 25th April, 1968
of the Madhya Pradesh High Court in Misc. Petition No. 404/64.
S. T. Desai, J. B. Dadachanji K. .T. John, Mrs. A. K. Varma for
the Appellant.
II
S .K. Gambldr for Respondents I, 2 and 4.
F. C. Agarwala and R. N. Sachthey for Respondent No. 3.
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BHOPAL SUGAR LTD. V. M. P. STATE (Shingha/, /.)
6 07
The Judgment o( the Court was delivered by
SHINGHAL J. Thi.s appeal by a certificate issued
by the Madhya
Pradesh High Court is directed against its judgment dated April 25,
1968.
The appellant is a company which cultivates sugarcane and manufactures sugar in its factory in Sehore, Madhya Pradesh, by crushing
the sugarcane cultivated by it and purchased from other cultivators .
The St:rle Legislature enacted the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1958, hereinafter referred. to as
the State Act, which came into force on July 1,, 1959.
The
State
Government issued a notification on November 28, 1959, which appeared in the State Gaze,tte dated December 4, 1959, under section
23 of the State Act imposing a o~ss of 12 paise per maurnJ on the entry
of sugarcane during a crushing season in the area comprised within
"such of the factories in which the total quantity of cane entering for
consumption, use or sale to the factory during such season exceeded 10
lakh maunds".
The appellants challenged the validity of the imposition, and the High Court, on August 31, 1961, held that the notification was illegal as the imposition of the levy was with reference to
particular premises.
A similar view was taken in regard to the Acts
i11 some other States and Par:iament thereupon enacted the Sugarcane
Cess (Validation) Act, 1961, hereinafter referred io as the Validation
Act, which came into force on D~cember 26, 1961. Sectiun 3 of the
Validation Act was taken to validate the imposition and collection of
the cess under the State Act. The Manager of the appellant company
received an intimation from the Additional Collector of Sehope dated
April 13/15, 1964, stating that a sum of Rs. 5,49,262.92 was due from
it on account of cess for the period "1959-60 to December 25, 1961"
and asking for a bank guarantee for payment of lhe balance.
The
appellant wrote back saying that the amount of the cane ce" worked
out to Rs. 5,44,835.69 and not Rs. 5,49,262.92, and that as the collector had not assessed the amount of the cess in accordance with the
rules, it was not payable by the appellant.
As the Collector ignored
the
objection of tfoo appellant, a demand notice wa, served upon it
under section 146 of the Madhya Pradesh Land Revenue Code 1959,
asking it to deposit Rs. 5,49,262.92 by August 1, 1964. Once again
the appellant d•enied its liability, but as that was not acceptable to the
Collector, the appellant filed a writ petition in the High Court stating
that the Collector's demand on account of the cess was illegal as the
Validation Act was ultra-vires the Constitution.
The State of Madhya Pradesh traversed the claim in the writ petition.
The High Court upheld the imposition of the cess but reduced
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608
SUPREME COURT REPORTS
[1979] 2 S.C.R.
it to Rs. 5,44,835.69, by its impugned judgment dated May 25, 1968,
and that is why the Company has come up in appeal to this Court.
It has ],ecn argued by Mr. Desai on behalf of the appellant that
section 23 of the State Act was not ultra-vires the Constitution and
there could be no question of validating a valid Act.
According to
him, the State Act fell within the scope of Entry 52 of List U of the
Sewnth Schedule of the Constituticm and was valid, and Parliament
could not legis;ate in respect of that occupied field and pass the Validation Act. These arguments have been based on the main contention
that the expression "an area" in Sub-secticm (1) of section 23 of the
State Act roally means "a local area" within the meaning of the aforesaid Entry 52 and no other area.
Sub-section (1) of section 23 of the State Act reads as !ollows,-
"23. Levy of cess on cane.-(1) The State Government
may, by notification, impose a cess not exceeding 25 paise a
mannd, on the entry of cane into an area, specified in such
notific::tion, for consnmption, use or ·sale therein",
There are two provisos to the sub-section, but they are not relevant
for the purpose of the controwrsy before us.
It would appear from
sub-section that it permits the State Government to impose the cess
on the entry of sugarcane into any area that may be specified in
its
notification, and there is nothing in it to confine the imposi'.ion to a
"local area". As has been held by this Court in Diamond Sugar Mills
Ltd and Aiwther v. State of Uttar Pradesh and Another(')
whion a
similar point arose for consideraticm with the U.P. Sugarcane Cess
Act, 1956, the proper meaning to be attached to th3 words "~ocal area"
in Entry 52 List II of the Seventh Sch<idule 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 nnion board, a panchayat or the like".
It has been clearly laid down
that the premises of a factory are therefore not a "local area". This .
court accordingly struck down section 3 of the U.P. Act empowering
the Governor to impose a cess on the entry of sugarcane into the
premises of the factory on the ground that it did not fall within Entry
5?. of the State List and there was no other Entry in •he State List or
the Concurrent List in which the Act could fall.
It is therrfore futile
for the appellant to contend that section 23 of the S•ate Act was not
ultra-vires the Constitution or tliat it can be upheld on such a construction of the words "an area" in section 23 as to restrict it to mean
a "local area".
(1) [t96i]3 S.C.R. 242.
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BHOPAL SUGAR LTD. V. M. P. STATE (Shingha/, J.)
609
The decision in Diamond Sugar Mills case came up for consideration in this Court in Jaora Sugar Mills (P) Ltd. v. State of Madhya
Pradesh and others C) with a specific reference to the provisions of
the State Act, and it was once again held, following that decision, that
th" imposition of the cess was outside th" legislative competence of
the State.
W\lile examining that aspect of the controversy, this Court
made it clear that what Parliament had done by enacting section 3 of
the Validation Act was not to validate the invalid State Statutes, but to
make a law concerning the cess covered by the said Statuks and to
provide that the said law shall come into operation retrospecfody.
Tbis Court clarified that by virtue of section 3 of the Validation Act,
the command under which the cess would be deemed to have been
recovered would bo the command of the Parliament, because the relevant sections, notification, orders, and rules had been adopted by the
Parliamontary Statute itself.
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It will thus appear that the argument of Mr. Desai to the contrary
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is of no consequence.
The othor argumout of Mr. Desai that the writ of mandamus issued
by the High Court on August 31, 1961, quashing the notification dated
November 28, 1959, could not be made, and was not in fact made,
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ineffective by the Validation Act, is also of no consequence. Section
3 of the Validation Act makes this
quite clear for it provides as
follows.--
"3. Validation of imposition and collection
of
cesses
under State Acts.-Notwithstanding any judgment, decree or
order of any Court, all cesses imposed, assessed or collected
or purporting to have been imposed, assessed or collected
under any State Act before the commencement of this Act
shall be deemed to have been validly imposed, assessed or
collected in accordance with law, as if the provisions of the
State Acts and of all notifications, orders and rules issued or
made thereunder, in so far as such provisions relate to the
imposition, assessment, collection of such cess had b"en 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 co11ected; and accordingly-
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(1) [1966] l S.C.R. 523.
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(a) no suit or other proceedings shall be maintained or
continued in any Court for the refund of any cess paid nndcr
any State Act;
(b) no Court shall e-nforce a decree or order directing
the refund of any cess paid under any State Act; and
( c) any cess imposed or assessed under any State Act
before the commencement of this Act but not coll·ected before
such commencement may be recove.red (after assessment of the
cess where necessary) in lhe manner provided under that Act.
(2) For the removal of doubts it is hereby declared that
no!hing in sub-section ( 1 ) shall be construed as preventing
any person-
( a) from qu2stioning in accordance with the provisions
of any State Act and ru:es made tberennder 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 und•2r any State Act and
the rules made thereunder."
The section thus specifically validates the notification in question in
regard, inter alia, to the imposition of the cess. The mandamus which
was issued by the High Court on August 31, 1961, could not therefore avail the appellant thereafter.
It has lastly been argu2d by Mr. Desai that when a law provides
for the assessment of a cess or tax, it is necessary that it should be done
by a specific order to that effect, and that an order of assessment cannot
be presumed when it has not really been made..
It has therefore been
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argued that as an order of assessment was not made in the present case,
it could not be presumed or deemed to have been made simply because a
demand was raised for the purpose of affecting the recovery of the cess
from the apellant.
The charging provision for tbe levy of the cess is to be found in
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section 23 of the State Act, to which we shall continuz to refer for
the sake of convenience even after the pa·ssing of the Validation Act.
Sub-section (2) of that section provides that th·o State Government
shall make rules specifying the authority empowered to assess-and collect the cess and the manner in which it shall be
co!rzcted.
The
Madhya Pradesh Government accordingly made the Madhya Pradesh
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Sugarcane (Regulation of Supply and Purchase) Rules, 1959, hereinafter referred to as the Rules which were also "validated" by Section
3 of the Validation Act. Rub 60 of the Rules provides that the col-
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BHOPAL SUGAR LTD. v. M. P. STATE (Shinghal, !.)
611
lector shall be the authority empowered to "assess and collect" the cess.
Ruic 61 makes it obligatory for the occupier of a factory to maintain
a correct account, day to day, in the prescribed form, of the cane entering
the area specified in the notification under section 23.
Rule 62 provides further that the occupier of the factory shall submit to the Collector, before the close of each month, a return in the prescribed form,
showing the quantity of cane that has ent·ered the specified area during
tile immediately preceding month.
It further provides that within 15
days o[ the close of the crushing season, the occupier shall deposit
the cess leviablc on the total quantity of cane which has entered the
specified area during the crushing season and shall send the treasury
receipt showing the amount of cess deposited to the Collector. Then
comes ru1c 63, which places the following responsibility on the Collector,-
"63. The Collector shall check the amount of cess deposited by the occupier of the factory from the returns submitted
under rule 62 and see if th·c full amount of cess due from the
occupier has been credited into the Treasury.
If the Collector finds that the full amount of cess due from the occupier
of the factory has not been deposited he shall by a written
notice call upon the occupier to deposit the amount due from
him within the period specified in such a notice and the occupier shall deposit the amount within the period SP'ccified."
The responsibility of the Collector for purposes of assessing and collecting the tax under rule 60 of the Rules is therefore to check the
amount of the cess deposited by the occupier of the factory.
The
check has to be made with the returns submitted by the occupier, and
the Collector has to see that the fuli amount of the eess has been
credited to the tr,asury. If he finds that this is not so, it is his duty
to call upon the occupier, by a written notice, to deposit the amount
. <lue from him within the period specified in the notice.
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The StaDc Act and the Rules do uot therefore reqmre that the
Colkctor shall make a formal order of assessment, and then collect
the cess.
It has to be appreciated that the purpose of an assessment is to
compute the amount of the cess payable by the person concerned.
"Assess" is a comprehensive word, and in a taxing statute it often
means the computation of the income• of the assessee, the determinaA
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tion of th~ tax payable by him, and the procedure for collecting or
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recovering the tax. In a case where there is a disput~ about the iden-
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tity of the assessee, the order of ass•cssment serves the purpose of estab-
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SUPREME COURT REPORTS
[1979] 2 S.C.R.
lishing that identity and namirig the person from whom the tax has to
be recovered.
In the present cas•e there is no controversy regarding
the identity of the assessee, and the provision regarding the assessment
of the cess in sub-s-,ction (2) of section 23 of the State Act and ruk
60 of th·o Rules related to the checking of the quan:ity of cane which
had entered the specified area, and the amount of cess deposited ir:
respect of it. It is for that purpose that form 4 provides the details to
be submitted by the occupier of the factory, and a duty is cast on him
to deposit the cess lcviablc on the total quantity of the cane, within
15 days of the close of the crushing sea,on, and to send the rcce'ipt
evid·oncing the deposit to the Collector.
As has been pointed out by the High Court, the Appe:lant's letter
(Ext. R-1) dated May 25, 1964, show·s that it admitted that the amount
of the ccss payable by it worked out to a total of Rs. 5,44,835,69
That was therefore the, admitted amount of the cess
which
had to be recovered.
The Collector recorded an order (Ex. R-2)
dated July 21, 1964, in which he clearly stated that he had gone. through
the case and that the Tehsildar should immediately recover the entire
amount of the cess dU>e from the appellant forthwith. He further directed that the "entire amount of the cane cess due from the B.S.I." should
be recovered and monthly progress report sent to him.
This shows
that the Collector did apply his mind to the matter, and made an
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express order for the recovery of the total amount of the ce'ss admitted
by the appellant.
It seems that the Naib-Tehsildar increased the amount
beyond what had been admitted by the appellant and directed by
the
Collector, but the High Court rightly confined the recovery to
Rs.
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5,44,835.69 which was admitted by the appellant to be due from it on
account of cess for the two seasons.
Ther•e is thus no force in the
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argument of Mr. Desai to th·~ contrary.
The appeal fails and is dismissed with costs.
M.R.
Appea' dismissed.
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