# lULSIPUR SUGAR CO. LTD. ETC v. SECRETARY IO 1llE GOVERttmN'l" OF U.P. & ORS

- **Citation:** [1986] 2 S.C.R. 942
- **Court:** Supreme Court of India
- **Decided:** 1986-05-02
- **Case number:** Civil Appeal No. 1774 of 1980
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/lulsipur-sugar-co-ltd-etc-v-secretary-io-1lle-goverttmn-l-of-u-p-ors-9342
- **Pages:** 9

## Headnote

942
A
lULSIPUR SUGAR CO. LTD. ETC.
v.
SECRETARY IO 1llE GOVERttmN'l" OF U.P. & ORS.
MAY 2, 1986.
B
[P.N.
Blli\Gi/ATI, C.J., 0. CHINNAPPA REDDY,
R.B. MISRA,
c
D
E
F
G
V. KHALID AND G.L. OZA, JJ,]
U.P. Sugarcane (Purchase Tax) Act, 1961, s.
factories -
Grant of remission of purchase tax
premissible/discriminatory.
>--
14 - Sugar
-
Whether
Words and Phraseq: "encourage or regulate" - Meaning of -..,
- s.14(l)(a) U.P. Sugarcane (Purchase Tax) Act, 1961.
'
Section 3(l)(a) of the U.P. Sugarcane (Purchase Tax)
Act, 1961 provides for imposition of tax on the purchase of
sugarcane by the owners of sugar factories. Section 14(1) of
the Act empowers the State Government to grant remission in
whole or in part of the tax payable in the public interest,
with a view to (a) encourage or regulate the supply of
sugercane to, or its purchase by the factories, or (b)
encourage the establishment of new factories, or (c) assist
factories established after the crushing season 1957-58 and
purchasing sugarcane yielding low sugar recovery.
The Central Government by a notification dated September
29, 1973 issued under cl.(3) of the Sugarcane (Control) Order,
1966, fixed the minillllm price of sugarcane for factories
situated in eastern U.P. at Rs. 8,38 per quintal. To meet the
growers demand for a higher price the Government of U.P.
refixed the sugarcane price at Rs.12. 25 per quintal for the
sugar mills situated in the east zone. The sugar factories not
being in a position to pay the higher price approached the
State Government who by two notifications dated January 25,
1975 issued under s.14(l)(a) of the Act granted remission in
purchase tax to the extent of Re. 0.51 per quintal to twenty
sugar factories in the area for the assessment year 1973-74.
The appellants and some other factories having been
denied any remission
in purchase
tax,
challenged
the
I
I
H
notifications by filing petitions under Art.
226 of the
Constitution which were dismissed by the High Court.
TULSIPUR SUGAR CO. v. SECY. GOVT. OF U.P.
943
-""
In these appeals by special leave, it was contended for
the appellants that the State Government in ref using to extend
the remission to the appellants had discriminated against them
by singling them out
for treating differently as
the
encouragement and regulation contemplated by cl..(a) of s.14(1)
of the Act was necessary to all the factories in the eastern
zone and not to a fortunate few, and that the impugned
notifications suffered from the vice of Art.
14 of the
-.;, Constitution inasmch as the Government had discriminated
between the factories falling in the same group as those which
had a recover)' of 8. 5 or less had been granted remission,
while the appellants who were also in similar position had
been left out.
r
Dismissing the appeals, the Court,
HELD: l. Article 14 of the Constitution forbids class
legislation
but
permits
reasonable
classification.
It,
however, 1111st fulfil the twin requirements: (l) it 1111st be
founded on an intelligible differentia which distinguishes
persons or things that are grouped together from others left
out of the group, and (2) that the intelligible differentia
1111st have s relationship to the object sought to be achieved
""' by the statute. (950 C-D]
2. Section 14(1) of the Act confers a discretionary
power on the State Government. It has been left entirely to
the State to decide whether any particular factory should be
granted remission or not, guided by the purpose set out in the
-'< relevant clause. Neither in cl. (a) nor in any other clause of
s. 14(1) there is anything to indicate that the State
L Government 1111st grant remission to all sugar factories for
....,.; encouraging or regulating the supply of sugarcane. [948 E-F]
3. The three clauses of sub-s. (1) of s.14 of the Act
have different object and purpose. The purpose of granting the
power
of remission under cl.
(a) is encouragement
and
regulation of the supply of sugarcane, the object of cl.(b) is
to encourage the establishment of new fac

## Text

942
A
lULSIPUR SUGAR CO. LTD. ETC.
v.
SECRETARY IO 1llE GOVERttmN'l" OF U.P. & ORS.
MAY 2, 1986.
B
[P.N.
Blli\Gi/ATI, C.J., 0. CHINNAPPA REDDY,
R.B. MISRA,
c
D
E
F
G
V. KHALID AND G.L. OZA, JJ,]
U.P. Sugarcane (Purchase Tax) Act, 1961, s.
factories -
Grant of remission of purchase tax
premissible/discriminatory.
>--
14 - Sugar
-
Whether
Words and Phraseq: "encourage or regulate" - Meaning of -..,
- s.14(l)(a) U.P. Sugarcane (Purchase Tax) Act, 1961.
'
Section 3(l)(a) of the U.P. Sugarcane (Purchase Tax)
Act, 1961 provides for imposition of tax on the purchase of
sugarcane by the owners of sugar factories. Section 14(1) of
the Act empowers the State Government to grant remission in
whole or in part of the tax payable in the public interest,
with a view to (a) encourage or regulate the supply of
sugercane to, or its purchase by the factories, or (b)
encourage the establishment of new factories, or (c) assist
factories established after the crushing season 1957-58 and
purchasing sugarcane yielding low sugar recovery.
The Central Government by a notification dated September
29, 1973 issued under cl.(3) of the Sugarcane (Control) Order,
1966, fixed the minillllm price of sugarcane for factories
situated in eastern U.P. at Rs. 8,38 per quintal. To meet the
growers demand for a higher price the Government of U.P.
refixed the sugarcane price at Rs.12. 25 per quintal for the
sugar mills situated in the east zone. The sugar factories not
being in a position to pay the higher price approached the
State Government who by two notifications dated January 25,
1975 issued under s.14(l)(a) of the Act granted remission in
purchase tax to the extent of Re. 0.51 per quintal to twenty
sugar factories in the area for the assessment year 1973-74.
The appellants and some other factories having been
denied any remission
in purchase
tax,
challenged
the
I
I
H
notifications by filing petitions under Art.
226 of the
Constitution which were dismissed by the High Court.
TULSIPUR SUGAR CO. v. SECY. GOVT. OF U.P.
943
-""
In these appeals by special leave, it was contended for
the appellants that the State Government in ref using to extend
the remission to the appellants had discriminated against them
by singling them out
for treating differently as
the
encouragement and regulation contemplated by cl..(a) of s.14(1)
of the Act was necessary to all the factories in the eastern
zone and not to a fortunate few, and that the impugned
notifications suffered from the vice of Art.
14 of the
-.;, Constitution inasmch as the Government had discriminated
between the factories falling in the same group as those which
had a recover)' of 8. 5 or less had been granted remission,
while the appellants who were also in similar position had
been left out.
r
Dismissing the appeals, the Court,
HELD: l. Article 14 of the Constitution forbids class
legislation
but
permits
reasonable
classification.
It,
however, 1111st fulfil the twin requirements: (l) it 1111st be
founded on an intelligible differentia which distinguishes
persons or things that are grouped together from others left
out of the group, and (2) that the intelligible differentia
1111st have s relationship to the object sought to be achieved
""' by the statute. (950 C-D]
2. Section 14(1) of the Act confers a discretionary
power on the State Government. It has been left entirely to
the State to decide whether any particular factory should be
granted remission or not, guided by the purpose set out in the
-'< relevant clause. Neither in cl. (a) nor in any other clause of
s. 14(1) there is anything to indicate that the State
L Government 1111st grant remission to all sugar factories for
....,.; encouraging or regulating the supply of sugarcane. [948 E-F]
3. The three clauses of sub-s. (1) of s.14 of the Act
have different object and purpose. The purpose of granting the
power
of remission under cl.
(a) is encouragement
and
regulation of the supply of sugarcane, the object of cl.(b) is
to encourage the establishment of new factories, and that of
"-1 cl. (c) is to assist factories established after the crushing
season 1957-58 and purchasing sugarcane yielding low recovery.
A factory situated in one area or falling in one category may
be in need of remission, while those which were not either
A
B
c
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'E
F
G
H
A
944
SUPRE)IE COURT REPORTS
[1986] 2 S.C.R.
situated in that area or did not fall in that category may not .
need it. Though the power conferred by cl. (a) is to be "'
exercis~ for the purpose of encouraging and regulating the
supply of sugarcane, in exercising this power the State
Government may legitimately take the view that this purpose
necessitates the grant of remission only to the su&ar
B
factories
purchasing
sugarcane
yielding
low
recovery.
[948 C-E]
~
4. The word 'encourage' in cl. (a) of s.14(1) suggests
that the State Government is required to exercise the power
where it feels that the sugar factory requires the help for
C
the purpose of making purchases of sugarcane. The word
'regulate' contemplates that the said power can be exercised·~
with a view to take measures to pro1110te the sale of sugarcane.
If the power conferred by cl.(a) of s.14(1) has been exercisedi
for the purpose of granting remission to only those sugar
factories which purchase sugarcane of low recovery, there is
D
nothing wrong in so doing. [949 D-E)
5. In the instant case by granting the remission only to
sugar factories purchasing sugarcane of low recovery, the
State Government has not violated Art. 14 of the Constitution.
Nor was there any contravention of the provisions of cl.(a) of ~
E
s.14(1 ). Such a question would have arisen if the grant of
remission were
founded
on
a
gr'>und
extraneous
to the
provisions of s. 14(1). [949 A-Bl
6. The immediate factor affecting the economy is the
recovery of sugar from sugarcane and the sugar content in the /IF
cane produced goes a long way to determine the cost of sugar.
G
H
Thus, the sugar factories which were purchasing sugarcane
yielding low recovery are
distinguishable
as
a
class~
separately from those which did not fall in it and there was a
resonable basis to classify those left out of that group.
(950 F-G]
.Anant Mills Co. Ltd. v. State of Gijarat & Ors., (1975)
3 S.C.R. 220, referred to.
~
CIVIL APPELLATE JURISDICTION
Civil Appeal No. 1774 of
1980 etc.
From the Judgment and Order dated 28. 7. 1978 of the
Allahabad High Court in Civil Misc. Writ No. 495 of 1975.
TULSIPUR SUGAR CO. v. SECY. GOVT. OF U.P. [MISRA, J,]
945
B.R.L.
Iyenger,
Yogeshwar
Prasad,
S.P.
Gupta,
V.P.
,o(sachthey, K.K. Venugopal, O.P. Rana, Dr. Y.S. Chitale, K.G.
Bhagat,
F.S.
Nariman,
Soli J,
Sorabjee,
H.K.
Puri,
G,
Gopalakrishnan, Khaitan & Co.,
A.
Subba Rao, Naunit Lal,
K.M.K. Nair, J.B.D. & Co., P.R. Ramasesh, Bishambar Lal, G.
Subramanium, Ms. S. Dikshit, Ms. A. Subhashini, K.R. Nambiar,
R.N. Poddar, B.M. Nagaria,
Mrs. Rani Chhabra, R.B. Datar,
P.H. Parekh, K.R. Nagaraja, B.D. Sharma, V • .J. Francis, S.
Markendaya, R.N. Sachthey, R. Ramachandran, S.S. Khanduja,
---IManoj Swarup & Co., P.K. Pillai, Baggar, K.L. Mehta, Swarup
John & Co., G.S. Ramarao, C.V. Subba Rao, S.K. Gupta, G.S,
Chatterjee, Probir Mittra, Mrs. J, Wad, S.K. Gambhir, Pramod
Dayal, R.K. Jain, S,R, Srivastava, K.K. Mohan, Dhantaraj,D.K.
Agarwal, S.K. Gupta, Raju Ramachandran, Ravindra Bana, Vinoo
hagat,
K.K.
Jain,
A.O.
Sanger,
Girish
Chandra,
C.K.
Sucharita,
T.C.
Sharma,
Mrs.
Kitty Kumaramangalam.
A.V.
Rangam, R.V. Ratnam and D.M. Popat for the appearing parties.
The Judgment of the Court was delivered by
R.B. MISRA, J. The present group of appeals directed
against the judgment of the High Court of Judicature at
Allahabad dated July 28, 1978 raises a common question of law.
These appeals arise out of petitions under Article 226 of the
"'Constitution challenging the two Notifications dated January
25,
1975 issued under section 14 of the U.P.
Sugarcane
(Purchase Tax) A.ct, 1961 (hereinafter referred to as the A.ct
for short). The petitioners also sought a Mandamus directing
the State Government to grant remission in purchase tax of
_.,0.51 paise per quintal to all the Sugar factories situated in
the State of U.P. As the pattern of facts is similar in all
the cases, we would refer to the facts of Civil Appeal arising
~ut of Writ Petition No.
409 of 1975 filed by M/s. Shree
. Sitaram Sugar Company Limited, Bhailtapur, District Deoris,
against the State of Uttar Pradesh and others to bring out the
question for consideration in these appeals.
The petitioner is a Public Limited Company and owns a
sugar factory in Deoria known as Shree Sitaram Sugar Company
Limited, Bhailtapur, U.P. The Sugar Factory is engaged in the
"-1 manufacture of sugar by Vacuum Pan Process. It purchases
sugarcane from the reserved area allocated to it under the
A
B
c
D
E
F
G
provisions of U.P. (Regulation of Supply and Purchase) A.ct,
H
1953 and Sugarcane Control Order, 196~.
A
B
c
D
E
F
G
H
946
SUPREME COURT REPORTS
[19861 2 s.c.R.
By a Notification dated September 29, 1973 issued under
~
clause 3 of the Sugarcane (Control) Order, 1966, Central
Government fixed the price of sugarcane for the factories
situated in Uttar Pradesh. The minimum price fixed by this
Notification for the area in which the petitioner's factory
was situated was Rs. 8.38 per quintal. The cane growers felt
agitated as according to them, the price fixed was much too
low.
They,
therefore,
made
representation to
the
U.P.
Government and as a result thereof the U.P.
Government)._
intervened in the matter and
fixed sugarcane price at Rs.
12.25 per quintal for the Sugar Mills situated in the East
Zone. According to the petitioner, however, the price fixed
was exorbitant and as the petitioner and other sugar factories
were likely to suffer enormous loses, the Sugar Factorie~
approached the State of U.P. and brought to its notice thatt.hey were not in a position to pay the higher sugarcane price.
The stand of the appellant-petitioner and others is that the
Chief Minister was satisfied with the demand made by the sugar
factories and he assured them that the State Government would
grant remission in purchase tax to all the factories situated
in the East Zone. By a Notification issued under section 14(1)
of the Act, the State Government granted remission to the
extent of 0.51 paise per quintal to 18 Sugar Factories
mentioned in the area. By another Notification of the same
date, two more factories were granted the remission. As the;.._
remission was not granted to the appellant-petitioner and to
some other factories similarly situated, they filed petitions
under Article 226 of the Constitution challenging the aforesaid Notification issued by the State Government.
The State of U.P. resisted the petitions and denied the
allegation of promisory estoppel and discrimination set up i~
the writ petition. The High Court dismissed those petitions b~ r--
the impugned judgment. They have now approached this Court by
special leave and raised the same contention before this Court
as was raised by them before the High Court.
In order to appreciate the points involved in the case,
it would be appropriate at this stage to refer to the relevant
provisions of the Act. Section 3 of the Act lays down that.,.
there shall be levied a tax on the purchase of sugarcane by
the owner of (a) a factory at the rate of twenty five paise
per maund of sugarcane; and (b) a unit at the rate of fifty
TULSIPUR SUGAR CO. v. SECY. GOVT. OF U.P. (MISRA, J.]
947
paise per quintal. Section 3-A(l) provides that no owner of a
~ factory shall remove, or cause to be removed any sugar
produced in the factory either for consumption or for sale, or
for manufacture of· any other cot111lodity in or outside the
factory, until he has paid the tax levied under section 3, a
sum specified under sub-section (2), sub-section (3) or subsection (4). The next relevant section with which we are
directly concerned is section 14. It confers powers on the
State Government to grant remission. As the decision of these
~ appeals hinges upon the interpretation of section 14( 1), it
would be advisable to read the section in full. Section 14(1)
reads :
"Section 14(1 ). The State Government, on being
satisfied that it is necessary so to do in the
public interest, with a view to -
(a) encourage or regulate the supply of sugarcane
to, or its purchase by factories ; or
(b) encourage the establishment of new factories
or
(c) assist factories established after the crushing
season 1957-58 and purchasing sugarcane yielding
low sugar recovery,
May by notification in the Gazette, remit, in whole
or in part, the tax payable under this Act, in any
assessment year, by every such factory falling
under Clause (a) or Clause (b) or Clause (c)."
....Jr--
In the instant case, the Notification remitting the
purchase tax was issued by the State Government on being
satisfied so to do in the public interest with a view to
encourage and regulate the supply of sugarcane to, or its
purchase by the factories in the State of Uttar Pradesh during
1973-74 assessment year.
Dr. Chitale, appearing for the appellants with his usual
candour and fairness, gave up the plea of promisory estoppel
and confined his argument to discrimination made by the State
Government in granting remission of tax to some factories and
A
B
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B
c
D
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F
G
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948
SUPREME COURT REPORTS
[19861 2 s.c.R.
not to the appellants. According to him the encouragement and
regulation as contemplated by clause (a) of section 14(1) of:>-
the Act was necessary to all the factories in the eastern zone
and not only to a fortunate few. But the U.P. Government has
refused to extend the remission to the appellant illegally
when clause (a) of section 14(1) contemplates giving benefit
to all the factories and there was no justification for
singling out the appellants for treating them differently.
The power conferred by clause (a) of section 14(1) of the,>-
Act, the counsel contends, could not be confined to factories
purchasing sugarcane yielding low recovery inasnuch as this
was a consideration foreign to the purpose contemplated by
clause (a) of section 14(1) of the Act.
The three clauses of sub-section (1) of section 14 of
Act have different object and purpose. The purpose of granting
the power of remission under clause (a) is "encouragement and
regulation" of the supply of sugarcane, the object of clause
(b) is to encourage the establishment of new factories, and
that of clause (c) ls to assist factories established after
the crushing season 1957-58 and purchasing sugarcane yielding
low recovery. Section 14(1) confers a discretionary power on
the State Government. Reading section 14 as a whole, it cannot
be said that it was obligatory on the part of the State to ;.
grant exemption or remission to all the factories.
The
discretion has been left to the State Government to decide
whether any particular factory should be granted remission or
not guided by the purpose set out in the relevant clause.
Neither in clause (a) nor in any other clause of section 14(1) ~
of the Act, there is anything to indicate that the State
Government must grant remission to all sugar factories for
encouraging or regulating the supply of sugarcane.
·.f..--
1
The reason is obvious. It may be that a factory situated
in one area or falling in one category ls in need of this
remission while those which are not either situated in that
area or do not fall in that category may not need it. lt is
true that the power conferred by clause (a) ls to be exercised
for the purpose of encouraging and regulating the supply of
sugarcane but in exercising this power, the State Government
~
may legitimately take the view that this purpose necessitates
the grant of remission only to the sugar factories purchasing
y
.,,
TULSIPUR SUGAR CO. v. SECY, GOvr, OF U.P. [MISRA, J,]
949
sugarcane ylelding low recovery. By grantlng the remission
only to sugar factories purchasing sugarcane of low recovery,
the State Government ln our opinion has not violated Article
14 of the Constitution. Nor
is
there any contravention of
the provisions of clause (a) of section 14. The question of
contravention would arlse if the grant of remission were
founded on a ground extraneous to the provisions of section
14. The Notifications issued by the State Government clearly
show that the remission was granted with the sole object of
encouraging and regulatlng the supply of sugarcane to these
factories. The exerclse of the power by the State Government
was
in accordance with
the
provlstons of
clause
(a),
sub-section (1) of section 14 and that by grantlng the
remission to a few sugar factories it dld not frustrate the
purpose of the aforesaid provision. The use of expression
"encourage or regulate" clearly indicates that the factorles
which really need encouragement or regulation should get the
benefit of the remisslon under clause (a) of sub-sectlon (1)
of section 14. The word "encourage" suggests that the State
Government ls required to exercise the power where it feels
that the sugar factory requlres the help for the purpose of
making purchases of sugarcane. Similarly, the word "regulate"
also shows that the said power can be exercised with a view to
take measures to promote the sale of sugarcane. If the power
conferred by clause (a) of sub-section (1) of section 14 has
been exerclsed for the purpose of grantlng remlsslon to only
those
sugar
factories
which
purchase
sugarcane of
l~
recovery, there is nothing wrong in so doing.
It was next contended by Dr. Chitale that the factories
which had recovery of 8.5 or less had been granted the
remission.
Some of the appellants were also in simllar
position and they have been refused unjustifiably and the
State Government had dlscriminated between the factories
falllng in the same group and thus the Notification lssued on
January 25, 1975 suffered from the vice of Article 14 of the
Constitution on that account also. This argument losses sight
of the other clauses of the section, viz, clauses (b) and
(c)
of sub-section (l) of section 14. Clause
(b)
provides for
encouraging the establishment of new factorles and clause (c)
contemplates
asslstance
to
factories
established
after
crushing season 1957-58 and purchasing sugarcane yielding low
sugar recovery. If the State Government had chosen to give
A
B
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A
950
SUPREME COURT REPORTS
[!9861 2 s.c.R.
remission to these factories because they fall under clause
(c), some argument could have been advanced against the
~
validity of the Notification on that basis. Under clause (c),
remission is granted by way of support or aid to newly
established factories to lesson the cost so that they could
profitably compete in the market. The remission under clause
B
(c) has to be confined to new factories which is a different
category of sugar factories. The considerations needed for
exercising the power under clause (c) are different from those
under clause (a) or (b). Considered from this aspect there is
~
no discrimination at all.
c
0
E
F
G
Article 14 of the Constitution forbids class legislation
but permits reasonable classification. It however l!llSt fulfil
the
twin
requirements:
(1) it must
be
founded
on
an
intelligible differentia which distinguishes persons or things
that are grouped together from others left out of the group,
and
(2)
that the intelligible dif ferentia must
have a
relationship to the object sought to be achieved by the
Statute. If authority be needed, we may refer to Anant Mllls
Co. Ltd. v. State of Gujarat & Ors., [!975] 3 S.C.R. 220.
The remission was granted only to the factories where the
recovery from the sugarcane was low to enable the factories to
make
timely payments
towards the cost of sugarcane and
~on-payment of the cane prices affecting the supply of cane to
factories. It was in these circumstances that the Government
granted remission to the factories which needed the help.
The
immediate
factor affecting the
economy is the
recovery of sugar from sugarcane and the sugar content in the
cane produced goes a long way to determine the cost of sugar.
Thus
the sugar factories which were purchasing sugarcane
yielding
low
recovery
are
distinguishable
as
a
class
separately from those which did not fall in it and there was a
reasonable basis to classify those left out of that group.
For the foregoing discussion, the appeals !lllSt fail. They
are accordingly dismissed. In the circumstances of the case,
however, the parties shall bear their own costs.
All
matters
pending in this Court
challenging the
H
constitutional validity of the two Notifications dated January
25, 1975, will stand disposed of in terms of this judgment.
P. S.S.
Appeals dismissed.