# JAORA SUGAR MILLS (P) LTD v. STATE OF MADHYA PRADESH AND OTHERS

- **Citation:** [1966] 1 S.C.R. 523
- **Court:** Supreme Court of India
- **Decided:** 1965-04-19
- **Case number:** Civil Appeal No. 531 of 1964
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jaora-sugar-mills-p-ltd-v-state-of-madhya-pradesh-and-others-3636
- **Pages:** 16

## Headnote

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.JAORA SUGAR MILLS (P) LTD.
v.
STATE OF MADHYA PRADESH AND OTHERS
April 19, 1965
{P. B.
GAJENDRAGADKAR, C.J., K.
N.
WANCHOO,
M. HIDAYATULLAH, J. C. SHAH ANI'l S. M. SJKRI, JJ.J
The Sugar Cane Cess (Validation) Act, 1961 (Central Act 38 of 1961),
1. 3-State Acts levying Sugar-cane Gess found to be ultra vires-Central
Act adopting provisions of State Acts and validating assessments and
collections made thereunder-Central Act, whether valid.
Under the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act 1958 (1 of 1959) a cess was levied on sugarcane and for this
purposo a sugarcane factory was treated as a 'local area'. In the DiamoriJ
Sugar Mills case it was held by this Court that such a levy was not valid.
Followrng this decision the Madhya Pradesh High Court strnck down
s. 23, which was the charging section of the aforesaid Madhya Pradesh
Act No. 1 of 1959. There were Acts in several other States which suffered
from the same infirmity and to meet the situation Parliament passed the
Sugarcane Ce$ (Validation Act 1961 (38 of 1961). The Act made valid,
by s. 31 all the assessments and collections made before its commencement under the various State Acts and laid down that all the provisions
of the State Acts as well as the relevant notifications, rules etc. made
under the State Acts would be treated as part of s, 3;· further. the said
section was to be deemed to have existed at all material times ·\\'hen the
cess was imposed, assessed and collected under the State Acts. The
appellant, a sugar factory, was asked to pay the cess for the years 195960 and 1960-61. It however, challenged the levy in a writ petition bofore
the High Court. The High Court having dismissed the petition,
the
appellant came to this Court with certificate.
The contentions urged on behalf of the appellant were : (I) What
the vaJid::i.tion of the Act had done was to attempt to cure the legislative
incompetence of the State I~egislatures by validating State Acts vvliich were
invalid on the ground of absenc~ of legislative competence in the respective
State Legislatures;
(2) Parliament had passed the Act in question not
for the purpose of levyinG; a cess of its o'.vn, but for the purpose of
enablinq the respective states to retain the amounts which they had il!egally·
collected. The Act 'vas therefore a colourable piece of lcgislriJi0n;
(3)
The Act had not been passed for the purpo<>es of the IJnion of Ir:dia and
the recoveries of cesses \vhich were retrospectively au~horised by it were
not likely to go into the Consolidated Fund of India;
(4) The SU?;?.rcane
crushjng season wa..'> between October 1, and June 30th. The Cane Developmc.n_t Council which \Vas constituted on August 26. 1960 wns not in
existence throughout the period covered bv the demand for the ye:ir 1950--
60. The demand wns a 'fee' nnd it was ille~al to recover such a wee for a
period during which the council did not exist at all andv::ould have rendered
no service \\1hatever.
HEl.D : (i) In view of the decision of this Court in Diamond Su~ar
MUls it was obvious that the cess in question was outside the leci~lative
competence of the States. This very conclusion led to the irresistihle inference that Parliament would have legislative competence to deal with
the subject-matter in question,
havtn~ rog<'.rd to Art. 248 re:id \\'ith Entry
524
SUPREME
COURT
REPORTS
[1966) l S.C.R.
97 in List l of the Se\Cath Schedule to the Constitution. Thus the legisA
lative 001npetenc~ ol Parl1a.1ncnt tu levy a coss such as was in1r0s~J by
1. 3 of the Sugarcane Cess (Vaiidat1on) Act 1961 (Central Act 38 of
1961 J was not m douiJt.
Diamond Sugar Mills Ltd. & Anr. v. Staie of Vilar Pradesh & Anr.
11901] 3 S.C.R. 243, 1eferred to.
lii) \Vbcn an Act pa~scd by a Stale Legislature is invaJid on the
ground Lhat the Stale Leg1:,Jature did not
bilve legislative
compe~cace
to Jeal with the 1op1cs CO~t.!.Cd by 11, I.hen even Parli<.iment (.;annul \'-llidate such an Act,
because 1hc effect ot s

## Text

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.JAORA SUGAR MILLS (P) LTD.
v.
STATE OF MADHYA PRADESH AND OTHERS
April 19, 1965
{P. B.
GAJENDRAGADKAR, C.J., K.
N.
WANCHOO,
M. HIDAYATULLAH, J. C. SHAH ANI'l S. M. SJKRI, JJ.J
The Sugar Cane Cess (Validation) Act, 1961 (Central Act 38 of 1961),
1. 3-State Acts levying Sugar-cane Gess found to be ultra vires-Central
Act adopting provisions of State Acts and validating assessments and
collections made thereunder-Central Act, whether valid.
Under the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act 1958 (1 of 1959) a cess was levied on sugarcane and for this
purposo a sugarcane factory was treated as a 'local area'. In the DiamoriJ
Sugar Mills case it was held by this Court that such a levy was not valid.
Followrng this decision the Madhya Pradesh High Court strnck down
s. 23, which was the charging section of the aforesaid Madhya Pradesh
Act No. 1 of 1959. There were Acts in several other States which suffered
from the same infirmity and to meet the situation Parliament passed the
Sugarcane Ce$ (Validation Act 1961 (38 of 1961). The Act made valid,
by s. 31 all the assessments and collections made before its commencement under the various State Acts and laid down that all the provisions
of the State Acts as well as the relevant notifications, rules etc. made
under the State Acts would be treated as part of s, 3;· further. the said
section was to be deemed to have existed at all material times ·\\'hen the
cess was imposed, assessed and collected under the State Acts. The
appellant, a sugar factory, was asked to pay the cess for the years 195960 and 1960-61. It however, challenged the levy in a writ petition bofore
the High Court. The High Court having dismissed the petition,
the
appellant came to this Court with certificate.
The contentions urged on behalf of the appellant were : (I) What
the vaJid::i.tion of the Act had done was to attempt to cure the legislative
incompetence of the State I~egislatures by validating State Acts vvliich were
invalid on the ground of absenc~ of legislative competence in the respective
State Legislatures;
(2) Parliament had passed the Act in question not
for the purpose of levyinG; a cess of its o'.vn, but for the purpose of
enablinq the respective states to retain the amounts which they had il!egally·
collected. The Act 'vas therefore a colourable piece of lcgislriJi0n;
(3)
The Act had not been passed for the purpo<>es of the IJnion of Ir:dia and
the recoveries of cesses \vhich were retrospectively au~horised by it were
not likely to go into the Consolidated Fund of India;
(4) The SU?;?.rcane
crushjng season wa..'> between October 1, and June 30th. The Cane Developmc.n_t Council which \Vas constituted on August 26. 1960 wns not in
existence throughout the period covered bv the demand for the ye:ir 1950--
60. The demand wns a 'fee' nnd it was ille~al to recover such a wee for a
period during which the council did not exist at all andv::ould have rendered
no service \\1hatever.
HEl.D : (i) In view of the decision of this Court in Diamond Su~ar
MUls it was obvious that the cess in question was outside the leci~lative
competence of the States. This very conclusion led to the irresistihle inference that Parliament would have legislative competence to deal with
the subject-matter in question,
havtn~ rog<'.rd to Art. 248 re:id \\'ith Entry
524
SUPREME
COURT
REPORTS
[1966) l S.C.R.
97 in List l of the Se\Cath Schedule to the Constitution. Thus the legisA
lative 001npetenc~ ol Parl1a.1ncnt tu levy a coss such as was in1r0s~J by
1. 3 of the Sugarcane Cess (Vaiidat1on) Act 1961 (Central Act 38 of
1961 J was not m douiJt.
Diamond Sugar Mills Ltd. & Anr. v. Staie of Vilar Pradesh & Anr.
11901] 3 S.C.R. 243, 1eferred to.
lii) \Vbcn an Act pa~scd by a Stale Legislature is invaJid on the
ground Lhat the Stale Leg1:,Jature did not
bilve legislative
compe~cace
to Jeal with the 1op1cs CO~t.!.Cd by 11, I.hen even Parli<.iment (.;annul \'-llidate such an Act,
because 1hc effect ot su.:h attempted validaii1Jn, in
substance, \Vould be to coufcr legisiative competence on the State legislatu1e in regard tu o tield or topic v.·hich. by the relevant provi~ions of
the schedules to the Cons'itution. is outside its jurisdiction. Where a topic
is not included within the relevant List dealing with lhe ~egislalive competence of the S!ate Legislatures,
Parlian1ent, by
making a
law cannot
anempl to confer such Jcglsla'.ive competence
on
the
State
Legislatures. [531 GI
Bul s. 3 of the impugned Act docs not purport to validate the in\'alid
State Statutes. \Vhat Parliament has done by enac:ing the said sec1ion is
not to validate the invalid State slatutes, but to make a law conccrnln~ the
cess CO\'ered by the said Statutes and to provide that he said la9.' shall
come into operation retro9pcctivcly.
Parliament knew that the relevant
State Acts \\'ere invalid because the Stale Legislatures were not competent
to enact them. Parliament also knev.• that it \Va, fully competent to make an
Act in respect of the suhjcct-mattcr covered by the said in'.'alid State
Statules.
Parliament ho\\·ever decided that ralher than make ebboratc
and long provisions in respect of the recovery of cess, it would b~ more
convenient to make a compendious provision such as
is
contained
in
~. 3. The plain meaning of s. 3 is that the material and relev.:nt provisions
of the Stale Ac1 as \\'ell as the provisions of no1itications. orJcrs and
rules issued or made thereunder are included in s. 3 and shall be deemed
to have heen included :1t all material times in it.
In other words what s. 3
provides is that by its order and force the respeclive ccs~es \\·ill be deemed
to ha,·e been recl1vered, because the provisions in relation to the rccovcrv
of the said cesscs have been incorporated in the Act itself. The command
under \Vhich the ccsse<; \vould be deemed to have been recovered wouiJ.
therefore, he the command of Parliament. [532 C-H]
{iii) \\'here a challenge to the validity of a legal enactntent is made
on the ground rhar it is a colourablc piece of legislation, \\'h:tl h:is to he
proved to the satisfaction of the court is that though the Act ostensihJv
is within the legi9lativc competence of the legislature in ques!ion, in subs·
tance and in reality it covers field which is outside i1s legislative competence. In pas9ing s. 3 ho\\.·cve'" Parliament exercised its undoubted legi,Jat1vc
competence to proYidc for the recovery of the specified ccs~cs ;i;id con1mKsions in the rc-;pcctive Stale areas from the date and in the manner
indicated hy it.
The Act could not therefore he attackrd on the ground
of being a co!ourablc piece of legislation. [533 F·ll]
K. C. Gafapa.'i Narayan Dea & Ors. v. State of Ori'isa, [!954] S.C.R. 1
relied on.
{iv) TI1e validity of an Act must be judged in the li~ht of the te~i~Jati\•e
competence of the Jegisla'ure which passes the Act and may have to be
examined in certain cases by reference to the question as to whether
fundamental rir.ht of citi7..ens have been imrroperly con'ravened.
or to
other considerations \Vhich mav he relevant in that hchalf.
But !'!Ortn;11lv
it would he inapnropriatc, indc°ed illegitimate, to hold an enquiry in!o the
manner in \Vhich the funds rai~ hy an Act \Vould he de;ilt \\'ith n•hen
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JAORA SUGAR MILLS v. STATE (Gajendragadkar, c. !.) 525
the court is considering the question about the valdity of the Act itself.
Therefore it was impermissible to contend that the Act was invalid because
the funds in question would not go into the Consolidated Fund of
India. [535 E-H]
(v) If collections are made under statutory provisions which are invalid because they deal with a topic outside the legislative competence of
the State Legislature, Parliament can in exercise of its undoubted legislative competence, pass a law retrospectively validating the said collections
by converting their character from collections made under the State
Statutes to that of collections made under its own statute operating retrospecively. To hold otherwise would be to cut down the width and amplitude
of the legislative competence conferred on Parliament by Art. 248 read
with Entry 97 in List I of the Seventh Schedule. [536 C-E]
(vi) The functions of the Cane Development Council as prescribed
by s. 6 of the Madhya Pradesh Act show that the Council is expected to
render service to the mills like the appellant and so it can be safely assumed
that the commission which was authorised to be recovered under s. 21
of the Madhya Pradesh Act is a 'fee'.
The imposition of a fee is generally supported on the basis of quid pro quo. The Council \Vas however
constituted for the first time on August 26, 1960.
In other words the
Council was not in existence throughout the periods covered by the
demand relating to the year 1959-60. It did not render any service at
all during the said period.
On the special facts of the case no amount
could therefore be validly claimed by way of commission for the year
1959-60. [537 A-B; 538 C-DJ
H. H. Sudhindra Thirtha Swamiar v. Commissioner of Hindu Religious
and Chartible Endowments, Mysore, [1963] Supp. 2 S.C.R.,
referred
to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 531 of
1964.
Appeal from the judgment and order dated September 24,
1963 of the Madhya Pradesh High Court in Misc. Petition No.
130 of 1962.
G. S. Pathak, Rameshwar Nath, S. N. Andley, P. L. Vohra,
for the appellant.
M. Adhikari, Advocate-General for the State of Madhya
Pradesh and l. N. Shroff, for the respondents.
G. S. Pathak, B. Dutta, l. B. Dadachanji, 0. C. Mathur and
Ravinder Narain, for interveners Nos. 1 and 2.
V. M. Lmaye and S. S. Shukla, for intervener No. 3.
G. S. Pathak, B. Dutta, S. N. Vakil, l. B. Dadachanji, 0. C .
Mathur and Ravinder Narain, for intervener No. 4.
C. B. Agarwala and 0. P. Rana, for intervener No. 5.
The Judgment of the Court was delivered by
Gajendragadkar, C.J. The principal question of law which
arises in this appeal is in regard to the validity of the Central Act-
526
SUPREME
COURT
REPORTS
[1966] I S.C.R.
th~ Sugarcane Cess (Validation) Act, 1961 (No. 38 of 1961)
A
(he:·einafter called 'the Act'). It arises in this way. The appellant,
Jaora Sugar Mills (Pvt.) Ltd., is a Private Limited liability Company incorporated under the Indian Companies Act.
Its registered
office is at Jaora within the premises of the Sugar Mills owned by it.
The appellant manufactures sugar and carries on the business,
inter alia, of the production and sale of the said commodity since B
1955 when it was incorporated.
The sugarcane season for the
manufacture of sugar generally covers the period December to
March, and the sugarcane crushing season usually begins on the
1st of October and ends on the 30th June.
Respondent No. 1, the State of Madhya Pradesh, enacted the
Madhya Pradesh Sugarcane (Regulation of Supply and Purchase)
Act, 1958 (No. 1of1959) (hereinafter called 'the Madhya Pradesh
Act').
Section 23 of the said Act made a sugarcane cess payable
as prescribed by it.
Rules 60 to 63 of the Madhya Pradesh
Sugarcane (Regulation of Supply & Purchase) Rules, 1959, made
under the said Act, provide for the method of collection of cess.
Section 21 df the said Act prescribes for the payment of commission to the Cane Development Council which was proposed to be
constituted under s. 5.
Rules 45 to 47 prescribe the quantum
of commission payable to the said Council and refer to the manner
in which the said payment has to be made.
The validity of s. 23 of the Madhya Pradesh Act was challenged
before the Madhya Pradesh High Court under Article 226 of the
Constitution in The Bhopal Su7ar Industries v. State of Madhya
Pradesh (Misc. Petition No. 27 of 1961). Before the writ petition challenging the validity of the said Act came to be heard before
the said High Court, a similar provision in the U.P. Sugarcane Cess
Act, 1956 (U.P. Act XXII of 1956) had already been struck down
by this Court as unconstitntional in Diamond Su7ar Mills Ltd. &
Anr. v. The State of Uttar Pradesh and Anr. ('). The common
feantre of the charging sections in both the Madhya Pradesh and
the U.P. Acts was that they authorised the respective State Governments to impose a cess on the entry of cane into the premises of a
factory for use, consumption or sale therein.
It was urged before
this Court in the case of Diamond Sugar Mills Ltd.(') that the
premises of a factory was not a 'local area' within the meaning of
Entry 52 in List II of the Seventh Schedule to the Constitution, and
so. the Act passed by the U.P. Legislature was beyond its competence.
This argument was upheld.
"We are of opinion", observed Das Gupta J., who spoke for the majority of the Court, "that the
(I) [1961] 3 S.C.R. 242 at p. 256.
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JAORA SUGAR MILLS v. STATE (Gajendragadkar, C. !.) 527
A
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 th.: like.
The premises of a factory is, therefore, not a "local
ar~a." Following this decision the Madhya Pradesh High Court
B
struck down s. 23 of the impugned Madhya Pradesh Act in the
Bhopal Sugar Industries, and allowed the writ petition to that
extent.
This decision was pronounced on August 31, 1961.
The validity of s. 21 of the Madhya Pradesh Act prescribing
the payment of commission to the Cane Development Council,
c was also chullenged before the Madhya Pradesh High Court by the
Bhopal Sugar Industries Ltd. by another writ petition (Misc.
Petition No. 340 of 1961 ).
The said High Court held that the
commission directed to be paid by the impugned section was a
"fee" and the delegation to the State Government to implement
the said provision by prescribing Rules thereunder amounted to
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valid delegation and as such, the impugned section was not open
to any effective challenge.
In the result, s. 21 was upheld. This
decision was pronounced on January 30, 1962.
It appears that as a result of the decision of this Court in the
case of Diamond Sugar Mills('), the U.P. Sugarcane Cess (ValiE
dation) Act, 1961 was passed by the Central Legislature on March
21, 1961 (No. IV of 196i), and it received the assent of the
President the same day.
It may be mentioned that the decision
o[ this Court in the case of Diamond Sugar Mills(') was pronounced on December 13, 1960, and Parliament thought that it
was necessary to validate the imposition and collection of cesses
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made under the said Act; and so, the U.P. Sugarcane Cess (Validation) Act, 1961 was passed.
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Parliament, however, realized that there were several other
State Acts which suffered from the same infirmity, and so, on
~ptember 11, 1961, the Act with which we are concerned in the
present proceedings, was passed.
It has also received the assent
of the President the same day.
This Act purports to validate the
imposition and collection of ccsses on sugarcane under ten different Acts passed by the Legislatures of seven different States. Section 3 of the Act is the main validating section.
Section 5 purported to amend the specified provisions in the lJ. P. Sugarcane
Cess (Validation) Act, 1961.
The said section was brought into
force at once, and the remaining provisions of the Act were to
(I) (1961] 3 S.C.R. 242.
528
SUPREME
COURT
REPORTS
[1966 J I S.C.!!..
come into force in the respective States as from the dates which
may be specified in that behalf by a notification issued by the
Central Gov~rnmcnt and published in lhe Official Gazette. The
relcYant date, so far as the respondent State is concerned, is
December 26, 1961.
On March 17, 1962, respondent No. 2, the Coll·:ctor of
District Ratlam, issued a notice to the appellant demanding payment of sug;ircane cess at the rate prescribed by the respondent
State under the relevant Rules.
The said notice also d~mandcd
payment of cane commission for the years 1959-60 and 1960-61,
as prescribed by the relevant Rules.
The app~llan! challenged the validity of these demands and
addressed respondent No. 2 in that behalf. It alleged that both
the demands wae invalid, because the Act under the authority of
which they purported to have been made,
wa~ itself ultra vires
and unconstitutional.
In respect of the demand for cane commission for the year 1959-60, the appellant urged an additional ground
that the Cane Development Council itself had come into existence
on August 26, 1960, and so, it was not permissible for respondent
No 2 to make a demand for commission in respect of the year
1959-60.
It was also alleged that the demand for cane commission at the flat rate of 3 nP, per maund was not related to the
services proposed to be rendered by the sc\id Council and as such,
was invalid.
These picas were resisted hy the respondents.
It was urged on
their behalf that the impugned Act was v;ilid, and that the demands
made by respondent No. 2 for the recovery of the ccss and the
commission were fully justified.
On these pleadings, the ~adhya
Pradesh Hi~h Court considered the two broad issues which arose
before it. '11 has held that the provision< of the impugned Act
are constitutionally valid, and that the demand for cess made by
respondent No. 2 could not be cfkctivcly challenged. In regard
to the demand for cane commission. the High Court was not
impressed by the plea n:adc by the appellant, particularly in relati0n to the sugarcane season of 1959-60 and it held that even
thouoh the Council may not have come into existence, a demand
oould be made with a view to provide for the constitution of the
said Council and thus enable it to afford service and assistance to
the mills like the appeJ:.ant.
That is why the High Court rejected
the appellant's roatentions in that behalf and dismissed its writ
petition.
This judgment was pronounced on September 24, 1963.
The appellant then applied for and obtained a certificate from
the High Court and it is with the said certificate that it has come
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JAORA SUGAR MILLS v. STATE (Gajendragadkar, c. J.) 529
A to this Court by appeal.
That is how the principal question which
arises for our decision is whether the High Court was right in holding that the Act is constitutionally valid.
A subsidiary question
also falls to be decided and that has relation to the demand for
commission for the year 1959-60.
B
The Constitutional position with regard to the legislative competence of the State Legislatures on the one hand, and the Central
Legislature on the other in respect of the cess in question is not
in doubt. We have already referred to the decision of this Court
in Diamond Sugar Mills('), and in view of the said decision, it is
obvious that the cess in question was outside the legislative come petence of the States.
This very conclusion leads to the irresistible
inference that Parliament would have legislative competence to
deal with the subject-matter in question having regard to Art. 248
read with Entry 97 in List I of the Seventh Schedule to the Constitution.
Article 245 ( 1) provides, inter. alia, that subject to the
provisions of this Constitution, Parliament may make laws for the
D whole or any part of the territory of India; and the relevant Entry
relates to any other matter not enumerated in List II or List III
including any tax not mentioned in either of those Lists. Article
248 provides :
F
"(1) Parliament has exclusive power to make any law
with resp~ct to any matter not enumerated in the Concurrent List or State List.
( 2) Such power shall include the power of making any
law imposing a tax not mentioned in either of those
Lists."
It is not disputed that if Parliament intended to make a law in
regard to the levy of a cess such as has been prescribed by s. 3
of the Act, its legislative competence is not open to doubt. Mr.
Pathak for the appellant, however, contends that what the Act
purports to do, and in fact and in substance has done, is to valiG
date the invalid State Statutes; the Act, in other words, does not
represent provisions enacted by Parliament as such, but it represents an attempt made by Parliament to validate laws which are
invalid on the ground that the State Legislatures which enacted
the said laws, had no legislative competence to do so.
That is
the main ground on which the validity of the Act has been challengH
ed before us.
This ground has, no doubt, been placed before us
in two or three different forms.
(I) [1961] 3 S.C.R. 242.
530
SUPREME
COURT
REPORTS
[1966] I S.C.R.
Before dealing with these contentions, it is necessary to refer
to the provisions of the Act.
The Act purport~ to have been
passed to validate the imp0sition and collection of cesses on sugarcane under certain State Acts and to amend the U.P. Sugarcane
Ccss (Validation) Act, 1961.
Section 5 which has achieved
this latter purpose has nlrcady been mentioned.
With the said
section we arc not concerned in the present appeal.
Section 1 (2)
provides for the date from which the provisions of the Act shall
come into force in different States; and as we have already noticed.
the relevant dates for tk respective States would bei the dates
which would be the notification issued by the Central Government and published in the Official Gazette.
Section 2 is a definition section; s. 2(a) defines "cess" as meaning the cesg payable
under any State Act and includes any sum recoverable under any
such Act by way of interest or penalty.
Section 2 (b) defines
A
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a "State Act" as meaning any of the ten Acts specified by it which
were in force in the seven respective States from time to time, by
way of amendment or adaptation.
Then the ten State Acts are
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enumerated under this sub-section.
Section 3 is the validating
section, and it is necessary to read it.
Its heading is validation
of imposition and collection of ccsses under State Acts.
It reads
thus:-
"3. (I) Notwithstanding any judgment, decree or order
of any Court, all ccsscs 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 Jaw, as if the
provis'ons of the State Acts ~nd of all notifications,
orders and rules issued or rn::d·~ thereunder, in so far as
5uch provisions relate to the imposition, assessment and
collccti;in of such ce,;s had been included in and formed
part of this section :ind this s~ction had been in force at
al! rn::t·~rial t irncs when such ccss w:.s imposed, ass·oss·~d
or colI~ctcd: and accor<lingly.-
(a) no suit or other proccc<.ling slrnll he maintained or
continti,,J in any Court for the refund of uny cess paid
ur.dcr ::ny State Act;
( b) no Court shall enforce a decree or order directing
the refund of any ccss paid under any State Act; and
(c) any ccss imposed or asses,;ed under any State Act
before the commencement of this Act but not collected
before such commencement may be recovered (after)
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JAORA SUGAR MILLS v. STATE (Gajendragadkar, C.J.)
531
assessment of the cess, where necessary) in the manner
provided under that Act.
(2) For the removal of doub~s it is hereby declared that
nothing in sub-section ( 1) shall be construed as preventing any person-
( a) from questioning in accordance with the provisions
of any State Act and rules made thereunder the assessment of any cess for any period; or
( b) from claiming refund of any cess paid by him in
excess of the amount due from him under any State Act
and the rules made thereunder."
Section 4 provides that nothlng in this Act shall be construed as
validating section 11 of the Bombay Sugarcane Cess Act, 1948
(Bombay Act No. 82 of 1948) and accordingly the said section
shall be omitted.
Section 5 refers to the amendment of U.P.
Sugarcane Cess (Validation) Act, 1961.
That, in brief, is the
position with regard to the provisions of the Act.
Mr. Pathak contends that what the Act has done is to attempt
to cure the legislative incompetence of the State Legislatures by
validating Acts which were invalid on the ground of absence of
legislative competence in the respective State Legislatures.
His
case is that if an Act is invalid not because the Legislature enacting the impugned Act has no legislative competence, but because
some of its provisions contravene the fundamental rights of citizens
unjustifiably, it is possible to validate the said Act by removing
the invalid provisions from its scope.
Similarly, if an Act passed
by the State Legislature is substantially' valid, but is invalid in
regard to a portion which trespasses in a field not within the legislative competence of the State Legislature, it would be possible to
validate the Act by removing the invalid portion from its scope.
In fact. if the invalid provision is severable from the rest of the
Act, courts dealing with the question of its validity may strike down
the invalid portion alone and uphold the validity of the remaining
part of the Statute.
Bnt where an impugned Act passed by a
State Legislature is invalid on the ground that the State Legislature
did not have legislative competence to deal with the topic covered
by it, then even Parliament cannot validate such an Act, because
the effect of such attempted validation, in substance, would be to
confer legislative competence on the State Legislature in regard
to a field or topic which, by the relevant provisions of the Schedules in the Constitution, is outside its jurisdiction. This position
is not and cannot be disputed. If it is shown that the impugned
532
SUPREME
COURT
REPORTS
[1966) l S.C.R.
Act purports to do nothing more than validate the invalid State
A
Statutes, then of course, such a validating Act would be outside
the legislative compckncc of Parliament itself.
Where a topic
is not included within the rele\'ant List dealing with the legislative
competence of the State Legislatures, Parliament, by making a
law, cnnnot attempt to confer such legislative competence on the
State Legislatures.
The difficulty in accepting Mr. Pathak's argument, however,
arises from the fact that the assumption on which the whole argument is founded, is not justified on a fair and reasonable construction of s. 3.
Section 3 docs not purport to validate the invalid
State Statutet;.
What Parliament has done by enacting the said
section is not to validate the invalid State Statutes, but to make a
law concerning the cess covered by the said Statutes and to provide
that the said law shall come into operation retrospectively. There
is a radical difference between the two positions.
Where the
Legislature wants to validate an earlier Act which has been declared to be invalid for one reason or another, it proceeds to remove
the infirmity from the said Act and validates its provisions which
arc free from any infirmity.
That is not what Parliament has
done in enacting the present Act.
Parliament knew that the
relevant State Acts were invalid, because the State Legislatures
did not possess legislative competence to enact them. Parliament
also knew that it was fully competent to make an Act in respect of
the subject-matter covered by the said invalid State Statutes.
Parliament, however, decided that rather than make elaborate and
long provisions in respect of the recovery of ccs<, it would be more
convenient to make a compendious provision such as is contained
in s. 3.
The plain meaning of s. 3 is that the material and relevant
provisions of the State Acts as well as the provisions of notifications, orders and rules issued or made thereunder are included in
s. 3 and shall be deemed to have been included at all material
times in it.
In other words, what s. 3 provides is that hy its order
and force, the respective ccsscs will he deemed to have been
recovered, because the provisions in relation to the recovery of
the said cesses have been incorporated in the Act itself.
The
command under which the cesses would be deemed to have been
recovered would, therefore, be the command of Parliament, because
all the relevant sections, notifications, orders, and rules have been
adopted by the Parliamentary Statute itself.
We are, therefore,
satisfied that the sole basis on which Mr. Pathak's argument rests
is invalid, because the said basis is inconsistent with the plain and
clear meaning of s. 3.
As we have already indicated, Mr. Pathak
does not dispute-and rightly that it is competent to Parliament
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JAORA SUGAR MILLS v. STATE (Gaiendragadkar, C.l.)
533,
to make a law in respect of the cesses in question, to apply the
provisions of such a law to the different States, and to make them
retrospective in operation.
His whole contention is based on what
he regards to be the true scope and effect of s. 3. If the construction which he places on s. 3 is rejected, the argument about the
invalidity of the Act must likewise be rejected.
The same contention has been placed before us by Mr. Pathak
in another form.
He suggests that the Act in question is a colourable piece of legislation.
His case is that when Parliament
realised that as a result of the invalidity of different State Statutes
the respective States were faced with the problem of refunding
very iarge amounts to the persons from whom the cesses were
recovered, it has passed the present Act not for the purpose of
levying a cess of its own, but for the purpose of enabling the
respective States to retain the amounts which they have illegally
collected.
This aspect of the matter, says Mr. Pathak, makes.
the Act a colourable piece of legislation.
We are not impressed
by this argument.
The challenge to the validity of a Statute on the ground that
it is a colourable piece of legislation is often made under a misconception as to what colourable legislation really means. As
observed by Mukherjea J., in K. C. Gajapati Narayan Deo and
Others v. The State of Orissa(') "the idea conveyed by the exE pression 'colourable legislation' is that although apparently a
Legislature in passing a statute purported to act within the limits
of its powers, yet in substance and in reality it transgressed these
powers, the transgression being veiled by what appears, on proper
examination, to be a mere pretence or disguise.'' This observaF tion succinctly and effectively brings out the true character of the
contention that any legislation is colourable legislation. Where a
challenge is made on this ground, what has to be proved to the
satisfaction of the Court is that though the Act ostensibly is within the legislative competence of the Legislature in question, in
substance and in reality it covers a field which is outside its
G legislative competence. It would be noticed that as soon as tlris
aspect of the matter is borne in mind, the argument that the Act
is a colourable piece of legislation takes us back again to the true
scope and effect of the provisions of s. 3. If the true scope and
effect of s. 3 is as Mr. Pathak assumes it to be, then, of course,
H
the Act would be void on the ground that it is a colourable piece
of legislation.
But if the true scope and effect of s. 3 is as we
have already held it to be, then in passing the Act, Parliament has
(I) [1954] S.C.R. I at p. 11.
534
SUPREME
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[1961>] I S.C.R
exercised its undoubted legislative compc:ence to provide for the
recovery oi the specified ccsses and commissions in the respective
State areas from the dates and in the manner indicated by it.
When demands were rnade for the recovery of the said
cesscs,
they will be deemed to ham been made not in pursuance of the
State Acts but in pursuance of the provisions oi the Act itself.
Therefore, \I c do not think there is any substance in the argument that the Act :s invalid on the ground that it is a colourable
piece of legislation.
Mr. Pathak has raised another contention against the validity
of the Act. He argues that the Act has not been passed for the
purposes of the Union of India, and the recoveries of
cesses
which are retrospectively authorised by it arc not likely to go in
the Consolidated fund of India. He contends that the recover:es
have already been made by the respective States and they have
gone into their respective Consolidated Funds.
In support of this
argument. Mr. Pcithak has referred to the general scheme of the
devolution of revenues between the Un:on and the States which
is provided for by the relevant Articles contained in Pan XII of
the Constitution and he has relied more panicularly on the provisions of A~t. 266.
Article 266. no doubt, provides for two
different Consolidated Funds and Public Accounts. one in relation to India and the other in relation to the respective States. It
reads thus : ·-
"266. ( 1 J Subject to the provisions of article 267
and to the provisions of this Chapter with respect to the
assignment of the whole or part of the net proceeds of
certain taxes and duties to States, all revenues received
by the Government of India. all loans raised by
that
Government by the issue of treasury hills, loans
or
ways and means advances and all moneys received by
that Government in repayment of Joans shall form one
consolidated fund to be entitled ""the Consolidated Fund
of India". and all revenues received
by the Government of a State, all loans raised by that Government
hy the iS<uc of treasury bills. Joans or ways and means
advances and all moneys received hy that government
in repayment of loans shall form one consolidated fund
to be entitled '"the Consolidated Fund of the State"'.
(2) All other public
moneys received by or on
behalf of the Government of India or the Government
of a 'state shall he credited to the public account of
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JAORA SUGAR MILLS v. STATE (Gajendragadkar C.I.)
53S
India or the public account of the State, as the case
may be.
(3) No moneys out of the Consolidated Fund of
India or the Consolidated Fund of a State shall be appropriated except in accordance with law and for the
purposes and in the manner provided in this Constitution".
It will be noticed that the contention raised by Mr. Pathak. on
the basis of Art. 266 makes an assumption and that is that the
C cesses already recovered by the different States will not be transferred to the Consolidated Fund of India, but will remain with
the respective States; and that such a position would invalidate the
law itself. We are not prepared to accept this argument as well.
What happens to the cesses already recovered by the respective
States under their invalid laws after the enactment of the imD pugned Act, is a matter with which we are not concerned in the
present proceedings. It is doubtful whether a plea can be raised
by a citizen in support of his case that the Central Act is invalid
because the moneys raised by it are not dealt with in accordance
with the provisions of Part XII generally or particularly
the
provisions of Art. 266.
We will, however, assume that such a
E plea can be raised by a citizen for the purpose of thi<l appeal.
Even so, it is difficult to understand how the Act can be said ID
be invalid because the cesses recovered under it are not dealt
with in the manner provided by the Constitution. The validity of
the Act must be judged in the light of the legislative competence
of the Legislature which passes the Act and may have to be e:11aF mined in certain cases by reference to the question as to whether
fundamental rights of citizens have been improperly contravened,
or other considerations which may be relevant in that behalf.
Normally, it would be inappropriate and indeed illegitimate
ti>
hold an enquiry into the manner in which the funds raised by an
Act would be dealt with when the Court is considering the quesG tion about the validity of the Act itself. As we have just indiGl!.ted, if the taxes of cesses recovered under an Act are not dealt
with in the manner prescnoed by the Constitution, what remedy a
citizen may have and how it can be enforced, are questions on
which we express no opinion in this appeal. All we are considering at this stage is whether even on the assumption made by
H Mr. Pathak, it would be permissible for him to contend that the
Act which is otherwise valid, is rendered invalid because
the.-
funds in question will not go into the Consolidated Fund of India.
l.7Sup./65-6
536
SUPREME
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REPORTS
[1%6] l S.C.R.
In truth, this argument again proceeds on the basis that ParliaA
ment has passed the Act not for the purpose of treating the
recoveries made as those under its provisions retrospectively enacted, but for the purpose of validating the said recoveries
as
made under the invalid State Acts; and we have already pointed
-Out that s. 3 completely negatives such an assumption.
Therefore, we do not think that Mr. Pathak is right in comcnding that
B
the provisions of the Act are invalid in any manner.
It would thus be seen that though Mr. Pathak pre,ented his
argument in three different forms, in substance his grievance is
very simple. He says that s. 3 of the Act docs not purport to act
prospectively; it acts merely retrospectively and its effect is just c
to validate collections illegally made in pursuance of
invalid
statutory- provisions enacted by State Legislatures.
So. the crucial question is: if collections are made under statutory provision;
which arc invalid because they deal with a topic outside the legislative competence of the State Legislatures, can Parliament, in
exercise of its undoubted legislative competence, pass a law retrosD
pectively validating the said collections
by
covcrting their
character from collections made under the State Statutes to that
of the collections made under its own Statute operating retrospectively ? In our opinion, the answer to this question has to be
in the affirmative, because to hold otherwise would be to
cut
down the width and amplitude of ihe legislative competence conE
ferred on Parliament by Art. 248 read with Entry 97 in List I of
the Seventh Schedule. Whether or not retrospective operation of
such a law is reasonable. may fall to be considered in certain
cases; but that consideration has not been raised before us and
in the circumstances of this case. it cannot validly be raised either.
F
We must, therefore. hold that the High Court was right in rejecting the appellant's case that the Act was invalid, and hence no
demands could be made under its provisions either for a cess or
for commission.
There is, however, one subsidiary question which still remains
to be considered and that has relation to the demand for cess
G
commission for the year 1959-60. The appellant's case is that this
demand is invalid.
The material facts in relation to this point
are not in dispute. We have already noticed that the sugarcane
crushing season is usually between !st October and the 30th June,
and that the Cane Development Council was constituted for the
first time on August 26. 1960. In other words, the Council was
U
not in existence throughout the period covered by the demand in
question which relates to the year 1959-60. Section 21 of the
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JAORA SUGAR MILLS v. STATE (Gajendragadkar, c. J.) 537
A Madhya Pradesh Act provides for the payment of commission on
purchase of cane; and Rules 45 to 4 7 prescribe the manner in
which the said payment has to be made. It is true that the functions of the Cane Development Council as prescribed by s. 6 of
the said Act show that the Council is expected to render service
to the mills like the appellant; and so, it can be safely assumed
B that the commission in question which was authorised to
be
recovered under s. 21 of the Madhya Pradesh Act initially, and
which will now be taken to have been recovered under s. 3 of the
Act is a "fee". Mr. Pathak contends that it is plainly illegal to
recover such a fee for a period during which the council did not
exist at all and- could have rendered no service whatever.