# RAMA SUGAR INDUSTRIES LTD v. STATE OF ANDHRA PRADESH & ORS

- **Citation:** [1974] 2 S.C.R. 787
- **Court:** Supreme Court of India
- **Decided:** 1973-12-17
- **Bench:** A. N. Ray, H. R. Khanna, K. K. MAmEW, A. Alagjriswmu, P. N. Bhagwati
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rama-sugar-industries-ltd-v-state-of-andhra-pradesh-ors-6187
- **Pages:** 16

## Headnote

Arullira Pradesh Sugarcane (Regulation of Supply and Purchase) Acl, l-951Sec. 21(3)(b)-Gof'ernment.r discretion to grant exemption from payment of
Purchase Tax.
Adniinistrative discretion-Wllelher Government had fettered its discrerion by
·laying' down- a policy of confining tire benefit of ·exemption to Cooperative Su;:ar
·Factories.
Section 20(3)(b) of the Act lays down that the Government may, by notifi·
cation, exempt from the payment of tax any factory which in the opinion of the
Government. has substantially expanded to the extent of such expansion for a
period not exceeding two years from the date of completion of the expansion.
The Andhrll Pradesh Government took a policy decision to grant exemption from
payment of purchase tax to new and expanded supr factories in- the cooperative
sector only due to present financial poo1tiOn of the Government. In pursuance
of the said policy, the exemption was granted for one year from the ·payment of
tax to the cooperati_ve societies of arowers of sugarcane. The benefit of the
exemption wiu refused to the appellant and other joint stock companies running
the sugar- factories.
On behalf Of the appellant it was contended that the Government could not by laying down a policy to exempt OD!y cooperative sugar factories
fetter their hands from examiains the merits of each individual case. It was also
contended that the policy beblnd oec. 21 (3) being to encourage new •agar factories or expanded factories the Government could not refuse to consider all except
one clus, that is, the cooperative sugar factories, for the purpose of granting
exemption. lt was further urged that new sugar factories and· expanded sugar
factories all fall into one clUB and there is nothing particular or special about
. cooperative auaar factories justifying their treatment 81 a special class deserving
a special treatment, The State of Andhra Pradesh contended that it had full dis·
-cretion to decide the Policy in granting the exemption and that cooperati\'e sugar
!actories consisting of cane growers is a distinct category justifying their treatment
as a class separate from other sugar factories. On facts it was asserted. by the
State that the exemption was granted only to new cooperative sugar factories and
that too only for one year. It was also asserted that the case of the appeJlant-;
was individually comidered and rejected on merits.
• Dismissina the appeal and writ petitions, the majority of the Court,
HEID: Per A. N. Ray, C.J., H. R . .Khanna and A. Alagiriswami, JJ (I) The
purpose of the Act is tQ encourage new nor factories and expanded sugar factories.
But how that Power is ID be exercised will have to be decided by taking into
consideration all tile relevant factors relating to the sugar industry. It is
\vell
known that there is a difference in the sycrose content in the cane produced - in
different areu. At one period the industry may be in a very prosperous condition and miaht not.need the exemption. It may also be that factories in a particular area are in need of this concession but not factories in another area.
We are
therefore of opinion that it would be open to the State Government to grant exemption to new factories only but not the expanded factories, to grant the exemption
for one year instead of three years or two years as contemplated under the Section,
to grant the exemption to factories in QQe area but not to factories in .another
area, to Jtrant the exemption during a particular period but not during another
period. (791 H-792 Cl
(II) The coonerative sugar factories consisting of sugarcane growers faU
under a distinct category different from other categories and the Government is
justified in treating the cooperative sugar factories as a distinct class for the pur•
poses of the protection and concessions, considering their contribution to tilt
sizable sugar Industry now built up in this country. {792 'C-D]
788
SUPREME COURT REPORTS
(1974j. Z S.C.R.
(Ill) There is DO reason to reject the

## Text

_Characters 0–39,985 of 47,448. This is a partial read: ask again with offset=39985 for what follows._

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RAMA SUGAR INDUSTRIES LTD.
v.
STATE OF ANDHRA PRADESH & ORS.
December 17, 1973
787
[A. N. RAY, CJ., H. R. KHANNA, K. K. MAmEW, A. ALAGJRISWMU
AND P. N. BHAGWATI, ]J.]
Arullira Pradesh Sugarcane (Regulation of Supply and Purchase) Acl, l-951Sec. 21(3)(b)-Gof'ernment.r discretion to grant exemption from payment of
Purchase Tax.
Adniinistrative discretion-Wllelher Government had fettered its discrerion by
·laying' down- a policy of confining tire benefit of ·exemption to Cooperative Su;:ar
·Factories.
Section 20(3)(b) of the Act lays down that the Government may, by notifi·
cation, exempt from the payment of tax any factory which in the opinion of the
Government. has substantially expanded to the extent of such expansion for a
period not exceeding two years from the date of completion of the expansion.
The Andhrll Pradesh Government took a policy decision to grant exemption from
payment of purchase tax to new and expanded supr factories in- the cooperative
sector only due to present financial poo1tiOn of the Government. In pursuance
of the said policy, the exemption was granted for one year from the ·payment of
tax to the cooperati_ve societies of arowers of sugarcane. The benefit of the
exemption wiu refused to the appellant and other joint stock companies running
the sugar- factories.
On behalf Of the appellant it was contended that the Government could not by laying down a policy to exempt OD!y cooperative sugar factories
fetter their hands from examiains the merits of each individual case. It was also
contended that the policy beblnd oec. 21 (3) being to encourage new •agar factories or expanded factories the Government could not refuse to consider all except
one clus, that is, the cooperative sugar factories, for the purpose of granting
exemption. lt was further urged that new sugar factories and· expanded sugar
factories all fall into one clUB and there is nothing particular or special about
. cooperative auaar factories justifying their treatment 81 a special class deserving
a special treatment, The State of Andhra Pradesh contended that it had full dis·
-cretion to decide the Policy in granting the exemption and that cooperati\'e sugar
!actories consisting of cane growers is a distinct category justifying their treatment
as a class separate from other sugar factories. On facts it was asserted. by the
State that the exemption was granted only to new cooperative sugar factories and
that too only for one year. It was also asserted that the case of the appeJlant-;
was individually comidered and rejected on merits.
• Dismissina the appeal and writ petitions, the majority of the Court,
HEID: Per A. N. Ray, C.J., H. R . .Khanna and A. Alagiriswami, JJ (I) The
purpose of the Act is tQ encourage new nor factories and expanded sugar factories.
But how that Power is ID be exercised will have to be decided by taking into
consideration all tile relevant factors relating to the sugar industry. It is
\vell
known that there is a difference in the sycrose content in the cane produced - in
different areu. At one period the industry may be in a very prosperous condition and miaht not.need the exemption. It may also be that factories in a particular area are in need of this concession but not factories in another area.
We are
therefore of opinion that it would be open to the State Government to grant exemption to new factories only but not the expanded factories, to grant the exemption
for one year instead of three years or two years as contemplated under the Section,
to grant the exemption to factories in QQe area but not to factories in .another
area, to Jtrant the exemption during a particular period but not during another
period. (791 H-792 Cl
(II) The coonerative sugar factories consisting of sugarcane growers faU
under a distinct category different from other categories and the Government is
justified in treating the cooperative sugar factories as a distinct class for the pur•
poses of the protection and concessions, considering their contribution to tilt
sizable sugar Industry now built up in this country. {792 'C-D]
788
SUPREME COURT REPORTS
(1974j. Z S.C.R.
(Ill) There is DO reason to reject the 'statement OD behalf of the State of
Andhra Pradesh tbat they had con:;idered the rcqu:st of the appellant as well as
of the petitioners on their merits and that the exemption had been granted only
to new cooperative factories· for the short period of one year only. [793C·D]
R. v. Port of London Authority, (1919) I KB 176 at 184) Padfitld '"Min. of
Agriculture etc. (1968 1 All ER 694) British Oxygen v. Minister of Technology
(1970 3 All ER 165) and Obserrations i11 Halsbury's Lall's of f:11g/a11d (4th
edition, Vol. I, para 33 at p. 35) cited with approval.
Per minority ( ~fathe~' and Bhagwati, JI.) : Picking out cooperative societies
of sugarcane growers for favoured treatment to the exclusion of other new or subs·
tantiaHy expanded industries is wholly unrelated to the object of the exempting
provision and the policy or rule adopted by the State Government is le~ally not
relevant to the exercise of the ~O\'.'er of granting exem,Ption.
Considennj: the
object of sub·section (b) of Sec. 21 (3), there is no distinction between a factory
ostablished by a cooperative society consisting of sugarcane growers or a company
or a firm "'hose share holders and partners are suaarcane growers. The classifi·
cation made by the poficy or rule must not be arbitrary but must have a rational
relation to the object of the exempting provision. The Government, by making
the policy decision, bad shut its ears to the merits of the individual applications.
That the exemption is granted to few cooperati,·e factories and for a short time
nre not relevant considerations.
[802 C-E]
R. v. Torquay Lise11si11g (1951) 2 K.B. 784, Obserratio11s of S. A. de S111i1h,
i11 15 Modern Law Rei·lew, 73, and obsen·ations of H.W.R. Wadi' in 'Adn1inistra·
1ive Law' 3rd edition pages 66·67 cited \Vith approval in addition to the references
n1ade by the n1ajority decision.
CIVIL ArPrLLATE ORIGINAL JURISDICTION : Civil Appeal No. 1453
of 1969.
Appeal by special leave from the judgment and order dated the
29th November, 1968 of the Andhra Pradesh High Court at Hyderabad in Writ Appeal No. 345 of 1968 and
Writ Petitions Nos. 183, 249 & 240 of 1971 & 3, 105 & 134 of
l972.
Under Article 32 of the Constitution for enforcement of Fundamental rights.
S. V. G11ptc and G. Naraya110 Roa.
for the appellant (in C.A.
1453/69).
Nire11 De, Attorney General of India and P. Paramesflwara Rao,
for the respondent (In C.A. 1453/69).
1
Y. S. Chitale, K. P. Chaudhry, K. Raje11dra Chaudhry and Veena
IJ,'l'i Ta/war, for the petitioner (In W.P. 183171).
K. Sri11frasa11wrthy and Na1111it Lal, for the petitioner (in W.Ps.
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~49. 250/71 and 3 and 105/72).
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A. S11bba Rao. for the petitio11er (in W.P. 134/72).
P. Rr1111 !?eddy and P. Para111es11'ara Rao. fOr the respondents (in
all W.Ps.)
The Judgment of A. N. Ray, CJ .. H. R. Khanna and A. Alagiri-
~wami, JJ. was delivered by Alagiriswami, J. K. K. Mathew. J. gave
a disscnting·Opinion on behalf of P. N. Bhagwati J. and himself.
H
ALAGIRISWAMI, J. The appeal and the writ petitions raise the question of interpretation of section 21 (3) of the Andhra Pradesh Sugar-
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R,AMASUGAR LTD. v. 'A ... P. STATE (A.lagiriswami, 1.)
789
cane (Regulation of Supply and Purchase) Act, 1961. The appellant and the petitioners are sugar factories in the State of Andhra
Pradesh. They applied under the provisic:ms of section 21(3) for
exemption from the tax payable under sub-section (I) <if that section
on the ground that they, having substantially 'expanded, were entitled, to the extent of such expansion, to exemption from the payment
of .tax. The Government of Andhra .Pradesh having refused that
request these writ petitions have been filed before this Court contending that the decision denying them exemption is contrary to section 21 (3) wipch does not countenance anY. classification and that the
classi1\cation adopted is based on no nexus to the object of the Act.
The apepal is against the decision of the Andhra Pradesh High Court
dismissing a writ petition filed for similar relief.
Two contentions, one regarding promissory· estoppel and another
regarding the exemption given to Sarvaraya Sugars Ltd was not pressed before this Court. Though in the beginning it was urged that
the gr~ of exemption under the section was obligatory, later the onlY
contention raised was that the application of each of the factorills
should have been co11sidered on its merits and the State should not
have fettered its discretion by laying down a policy of granting exemption only to co-Operative sugar factories and that the policy had no
nexus to the object of the Act;
· Section 21 reads as follows :
"21. (1) The Government may, by notification, levy a
tax at such rate not exceeding five rupees per metric tom1e
as may be prescribed on the purchase of cane required for
use, consumption or sale in a factory.
(2) The Government may, by notification, remit in
whole or in part such tax in respect of cane used or intended
to be used in a factory for any purpose specified in such
notification.
(3) The Government may, by notification, exempt from
the payment of tax under this section-
(a) any new factory for a period not. exeeeding three
years from the date on which it. commences crushing of
cane;
Cb) any factory which,. in the opinion of the Government, has substantially ei<panded, to the extent of such expan·
sion, for a period not exceeding two years from the date of
completion of the expansion. ·
( 4) The tax payable under sub.section (1) shall be
levied and collected from the occupier of the factory in
such. manner and by such authority as may be prescribed.
(,5) Arrears of tax shall carry interest at the rate. of nine
per cent per annum.
( 6) If the tax under this section together with the in-
. terest, if any, due thereon, is not paid by the occupier of
790
SUPREME COURT REPORTS
[1974] 2 ~.C.R.
a factory within the prescribed time, it shall be recoverable
A
from him as an arrear of land revenue."
In its judgment in Andhra Sugars Ltd. v. A.P. State (1968 1 SCR
705) this Court upheld the constitutional validity of section 21(3) and
.illade the following observations :
"It was next argued that the power under s. 21(3) to
exempt new factories and fttctories which in the opinion of
the Government have substantially expanded was discriminatory and violative of Art. 14. We are unabl~ to accept this
contention.
The establishment of new factories and the
expansion of the existinj! factories need encouragement and
incentives. The exemption in favour of new and expanding
factories is based on legitimate legislative policy.
The question whether the exemption should be granted to any f;lctory, and if so, for what period and the question whdher
any factory has substantially expanded and it so, the extent
of such expall/iion have to be decided with reference to the
facts of each individual case.
Obviously, it is not possible
for the State legiS:; ture to examine the merits of individual
cases and the function was properly delegated to the State
G"vernment. The legislature was not obliged to prescribe
a 1: ~re rigid standard for the guidance of the Government.
We . ild that s. 21 does not violative Art. 14."
Though, as we have stated, it was sought to be urged originally that
· under the provisions of this section it was obligatory on the part of
the Government to grant exemption, it was later argued based on the
above observations that the questihn whether the exemption should be
granted to any factory and if so for what period and tho question
whether any factory has substantially expanded a'*1 if so the extcot of
~uch expansion, has to be decided with reference to the facb of eacl1
individual case.
It was also further argued that the Government could
not by laying down a policy to exempt only co-operative sugar factories fetter their hands. from examining the merits of each individual
case. Reliance was placed on the observations in S.A. ·de Smith's
Judicial Review of AdmilTistrative Action (2nd Edn.) where at page
294 it is observed :
"A' tribunal entrusted with a discretion must not, by the
adoption of a general rule of policy, disable itself from
exercising its discretion in individual cases. . ..
... But the rule that it formulates must not be based on
considerations extraneous to those contemplated by the enabling Act; otherwise it has exercised its discretion invalidly by taking irrelevant considerations into .account. Again,
a factor that may properly be taken into account in exercising a discretion may become an unlawful fetter upon discretion if it is eleva•ed to the status of a general rule that
results in the pursuit of consistency at the expense of the
merits of individual cases. . . . A fortiori,
the authority
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11.AMA SUGAR LTD. v. A· P. STATE (A/agiriswami, /.)
791
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must not predetermine the issue, as by resolving to refuse
all applications or all applications of a certain class or all
applications except those of a .certain class and then proceeding to refuse an application before it ~n pursuance of
such a resolution ... "
. .
It was contended that the policy behind section 21(3) being to encourage new sugar factories or expanded sugar factories the Government could not refuse to consider. all except one class i,e. the co·
operative sugar factories for the purpose. of granting· exemption. It
was further urged that new sugar factories and expanded sugar factories alt fall into one clas.• and there is nothing particular or special
about ~tive
su~ar factories justifying their treatment as a special
class deservin~ a special treatment. It was also urged •hat the only
discre•ion which the Government had wa• in deciding whether a factory ·had substantially expanded or not and in no other resoect.
On behalf of the State·of Andhra Pradesh, however, i• was stated
that onlv new co-onerative su~ar factories have been l(ranted exemp·
tion and that too onlv for one year as aeain•t the period of three years
contemnlated bv •he Act in the case of new factories and no exnan.ded
factorv. even a co-Onerative su~ar factorv. has been l!"a"ted any
exemniir1n.
Tt wa• cnntended that the d;scretion has been fliven to the
State to <ledde whirh factory or which class of
factone< · sho•11rl
h...
l!r•"t-d
at
•11
•nd
.if
sn
fnr
what
""rio<i.
that
th"';. tii<i:r.r'"'finn-
;~ tn hP. e-,;erclc;erl bv talcinq into consideratiQt1 the state
of th~ in<ln•trv and the f;nancial nositinn of anv su~ar factorv durinq
anv ptlrticuhr neriad or in anv narticufar area. t'1at it is o1'tn to the
i<:••t• tn take i"t"' accou"t all! releva"t considertaicin• an~ decide
w'h;r:'h ,r:1~~<: of f~ctnrlP.c: c.ly,ulct he 11ran.fP~ exemotion. 1'nd th~t the
co-onerati~~ suC?ai' f~ctories cons;stin2 nf cane erowers is :\ distinct
r-..atP.<rnrv iustifyine: their treatment as a cl~ss senarate from ·nthf'r !=l11~nr
factori...
·
Tn vi~ nf t'1e Ah""""""'P.11t Rt !!' lqtfll:,. cit"°" nf the contP.'1tinn fhA.t it
.:F
WA• n~:~m11tnt'V nn _ tlu•' 9"q1'f ,.., t-1-tP nnve~mfl:nf .,,. errant t'h"' ,.."l"Pt'l'\ntioti.
,.:_nftf&Trift1"'f•~ 11t'U~~ ll!P,.~l\ft ?1 (~\ .tn PUl&"f ,,llt-U:1 far:fn..,r nt' PTf'l~ndC<t
f11,.•"1r '"'" +i. •. """~"" m-.,f11W1"!''1 ;" t1,. 111•r.~n11 it f< 11'1"~fl:4:"1"V to
00"'
411~'"" ""'1fll:fliP.T th,. wn""' "mAv" .fnn"" ;n th'lt sectfe'ln <t'1ou1d be
. ilitl!l'."r•'l'it to mean "•hall" excent to i"dieat• that the nntlev behind
th• whnl• nf • ..,,t;on 21 ~""" n<>t indicat• that it is obltt!•torv on the
G part of the State to ~t mm11tlon.
Quite clearly th• discretion
h•• i,-., left to t'1e Stato to decide whether anv ·particnlar factory
A""""' '1o °"""'"' ... ...,,.,11on or not. 1"11• · I~ what this Court stallici
in Its earlier decision.
In deciding this question It Is. open to tie
Government to take ,into considerati0n the state of the Industry at
anv °""ticular period. At one neriod the industry may be in a wry
t'roso~rous condition, and ·might not need this concession. It mav
J . "\so be that factories in a particular area are in need of this concessioii
but not factories in another area. How a newer vested in, an authority
is to he exercised has got to be decided bv taldng into consideration
the whole of the backgi;ound. of the Act and the purpose behind it.
The vurpose of the Act is. of course, to enco.urage new sugar factories
\:
792
SUPREME COURT REPORTS
[1974] 2 S.C.R.
and expanded sugar factories. But how that power is to be exercised
will have to be decided . by taking into consideration all the relevant
factors relating to the sugar industry. It is well known that there is
a difference in the sucrose content in the cane produced in different
areas.
The· quantity of sugarcane produced per acre varies from
60 tons per acre in Maharashtra to 40 tons in Tamilnarlu and far
less in ll ttar Pradesh. These facts are available in any standard literature and official publications on the subject.
The varying fortunes of
the sugar industry at various periods are too wellknown to need emphasis.
We are, therefore, of opinion that it would be open to the
State Government to grant exemption to new factories only but not
the expanded factories, to giant the exemption for one year instead
of the three years or two years as contemplated under the section, to
grant the exemption to factories in one area but not to factories in
another area, to grant the exemption during a particular period but
not during another period.
We are also of opinion that co-operative sugar factories consisting
of sugarcane growers fall . uqder a distinct category different from
other categories.
Sugarcane growers have been the object of particular consideration ad care of the legislature.
This country which
was at one time a big importer of sugar has built up a sizeable sugar
industry by a policy of protection given to the sugarcane growers and
sugar industry.
The figures we have given .above have been one of
the factors \n, fixing the price of sugarcane so that even a: sugarcane
grower in U. P. might get a reasonable return on his produce. We are
of opinion, therefore, that the Government are justified in treating the
sugar factories consisting of sugarcane growers as a distinct category.
In this connection we should mention that the appellant in Civil Appeal No. 1453 of 1969 urged before this Court that out of its 1280
shares 124 7 shares were held by canegrowers. But this was not urged
in the petition before the High Court nor had the State an opportunity of meeting •.such a contention. It is therefore not possible for us
at this stage to go into the question whether that appellant has been
discriminated against.
The only question that arises is whether the Government would
be justified in refusing to consider !he question of exemption to all
factories other than co-operative sugar factories.
In its counter affid~vit the State of Andhra Pradesh has stated that application of each
one of the petitioners was considered on its merits and it was refused.
On the other hand the petitioners referred to the letter (iAnnex.IU)
written by the Government of Andhra Pradesh to the appellant in
Civil Appeal No. 1453 of 1969 which reads ;
"! am to in1'ite reference to your letter cited and to stated
that the Government have given careful consideration to
your request for exemption from payment of purchase tax
to the extent of expansion for two crushing seasons in respect of Bobbili c"n<l Seethanagaram Units. The present 'policy of the Goven1mec.' is to grant exemption from payment
of purchase tax to new and expanded sugar factories in the
Co-operative Sector only.
Besides Bobbili and Seethana..
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J,AMA SUGAR LTD, v. A· P. STATE (Alagiriswami, J.)
79 Jo
gram Sugar Factories, there are a few other sugar factories
m the private sector which have also embarked on expan·
sion programmes. Any concession given in one case will be
a precedent for others and it cannot be denied to others who
will naturally apply for a similar concession.
The present
financial position of the Government does not permit them
to be generous.
In the cirmumstances,
'th~ Government
very much regret that it is not possible for them to accede to
your request."
and urged that the Govemment could not have exemined the request.
of each of the factories on their merits. But it is to be noticed that
that letter itse1[ shows that the Government have given careful con·
sideration to the appellant's request. It also shows that the present
policy of the Government is not a policy for all times.
We have,.
therefore, no r~ason not to accept the statement 011} behalf of the
State of Andhra Pradesh that they have considered the request of the
appellant as well as the petitioners on their merits.
The fact that.
after such examination they have laid. down a policy of exempting.
only sugarcane growers' factories cannot show that the{have fettered.
their discretion: in any way.
As we have already mentioned, even in
the case of co-operative sugar factories the exemption is granted only
to new factories and that too only for one year.
As regards the power ·of a statutory authority- vested with a dis--
cretion, de Smith also points out :
"but its statutory discretion may be wide enough, to justify ·
the adoption of a rule not to award any costs save in exceptional circumstances, as distini:t from a rule never to award
any costs at all ......... although it is not obliged to consi-
, der every application before it with a fully open mind, it
must at least kep its mind a jar."
In R. v. Port of London Authority (1919 1 Kn 176 at 184) Bankes L.J. ·stated the relevant· principle in the following words :
"There ate on the one hand cases where a tribunal in
the ho~est exercis~ of its discretion ~as. adopted a policy,
and, without refusmg to hear an apphcant, intimates to him
what its. policy is, and that after hearing him it will in ac·
' )!dance with its .policy decide against him, unless there is
somet/Uni? exceptional in his case .... if the policy has been
adopted for reasons which the tribunal may Jegitimaiely entertain, no objection could be aken to such a course. On
the other hand there are ca~es Y'here a tribunal has passed a
r_ule, . or com~ to a determmation, not to hear any applicat10n of ff particular character by whomsoever made. There
is a wide distinction to be drawn between these two classes.'
The prese_nt cases come under the earlier part apd not the latter,
~he ~ase m Rex v. London County Council (1918 1 KB 68) is distmgu1shab\e on the facts of the case.
The policy ·behind the Act
SUPREME COURT REPORTS
[1974] 2 s.c.R.
there under consideration was obviously to permit sale of any arlil:le
or distribution of bills or like things and in deciding that no pennission would be granted at aU the London County Council was righUy
held not to have properly exercised the discretion vested in it. In
the decision in Pad~ld v. Min. of Agriculture etc. (1968 1 All ER
694) the refusal of the Minister to exercise the power vested i~ him
was considered ·as frustrating the object of the statute which conferred the discretion and that is why a direction was issued to the Minister to consider the appellants' complaint according to law.
We have
already discussed the background and the purpose of the Act under
consideration and are u_nable to hold that in refusing to grant exemption in theSe cases the State of Andhra Pradesh was acting so as to
frustrate the purpose of the Act.
In a recent case, British Oxygen v. MiniSter of Technology (1970
3 All ER 165) the whole question has been discussed at length after
referring to the decisions in R. v. Port of Lon4on Authority (1919 1
KB 176) and Pad~ld v. Minister of Agriculture
(1968 1 All ER
694). The House of Lords was in that case considering the provisions of the Industrial Development Act 1966. The Act provided for
the Board of Trade making to any person a grant towards aPPfOVed
capital expenditure incurred by that per so ti in providing new ma chi·
nery or plant for carrying on a qualifying industrial process in the
course of the business.
After stating that the Board was intended
{o have a discretion and after examining the provisions of the Act
1he House of Lords came to the conclusion that the Board was not
bound to pay grants to all who are eligible nor did the provisions
·give any right to any person to get a grant.
After quoting the passage from the decision in R. v. Port of London Authority,
already
referred to, Lord Reid went on to state :
"But the circumstances in which discretions are exercised
vary enormously and that pa8sage cannot be appliecj, !ifarally
jn every case. The general rule is that anyone who has to
<0xercise a· statutory discretion must not 'shut (bis) ears to
the application (to quote from Bankes Ll). I do not think
.that there is afly great difference between a policy and a rule.
'There may be cases -where an officer or authority ought to
1is•en to a substantial argument reasonably presented urging
a change of policy.
What the authority must not do is to
refuse to listen at all.
But a Ministry or large authority may
have had to deal alreadv with a multitude of similar applications and then they will almost certainlv have evolved a
policy so precise that it could well be called a rule. There
can be no objection to that previded the authority is alwavs
willing to listen to anyone with something new to say---0!
course I do not mean to say that there need be an oral
hearing.
In the present case
the Min'ister's officers have
carefullv considered all that the anoellants have had to say
ll_ncl T liave no doubt that thev will continue to do so.
The
-Minister might at anv time change his mind a·nd therefore I
think •hat the aonellants are entitled to have a decision'
whether these cylinders are eligible for grant."
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R,AMA SUGAR LTD. v. A. P. STATE (A.lagiriswami, /.)
J~5
Viscount Dilhome again after referring to the passage in R. v. Port
of London Authority, said :
·
"Bankes U clearly meant that in the latter case there is
a refusal to. exercise the discretion entrusted to the authority or tribunal but the distinction between a Policy decision
and a rule may not be easy to d'raw .. In this caSe it was not
challenged that it was within the power of the Board to
adopt a policy not to make a grant in respect of such an
item. That policy might equallr well be described as a r)lle.
It was both reasonable and nght that the Board should
make known to those interested the_ policy that it was go!n&
to follow.
By doing so fruitless applications involving
expense and expenditure of time might be avoided.
The
Board says that it has not μ:fused to consider any application. It considered
the appellants'. In these cin:wnstances it is not necessary to decide in this case whether, if
it had refused to consider. an application on the ground
that it rclaled to an item costillg Jess than £25, it would
have• acted wrongly.
I must. confess that I feel some doubt whether the words
used by Bankes LJ in the plSSBge cited above are really
applicable to a case of this kind. It seems someWbat pointless and a waste QJ time that the Board should have to.consider applications ~
are bound as a resuh of its policy
decision to fail.
Representations could of course be made
that tho policy should be changed."
It is, therefore, clear that it is open to the Government to adopt
a policy not to make a grant at all or to make a grant only to 1
certain class and not to a certain other class, though such a decision
must be based. on considerati!'ns relevant to the subject matter on
hand. Such .l\ consideration is found in this case. Ha!sbury \Vol. 1.
4th Edn., para 33 at page 35) puts the matter succinctly tlius :
"A public body endowed with a statutory discretion may
legitimately adopt general rules or principles of pciliCy to
guide itself as to the manner of exercising its own discretion in individual cases, provided that such rules or principles are legally relevant to the exercise of.Jts ·powers, consistent with the purpose of the enabling-1egislr'ion and not
arbitrary or capricious.
Nevertheless, it must not disable
itself from exercising a genuine discreti>JD in a particul~r
case directly involving individiial interests, hence it must be
prepared to consider making an exception to the general
ru1e if the circumstances of the case warrant special treatm, ·
These propositions, evolved mainly in the context of
lice1J>,ng and other regulatory powers, have been applied to
other situatiollS, for example, the award of .discretionary
•
796
SUPREME COURT REPORTS
[1974] 2 $.C.R.
investment grants and the allocation of pupils to different
classes of schools.
The amplitude of a discretionary power
may, however, be so wide that the competent authority may
. be impliedly entitled. to adopt a fixed rule never to exercise
. its discretion in favour of a particular class of person; ·and
such a power may be expressly conferred by statute."
We are satisfied that.in this case the State of A11Jhra Pradesh has
·properly exercised the discretion conferred on it by the statute.
The appeal and the writ petitions are dismissed with costs, oae
·Set.
MATHEW, J.
The short question for consideration in these writ
. petitions and the Civil Appeal is whether the Government of Andhra
Pradesh was right in dismissing the applications filed by the writ
petitioners and the appellant claiming, benefit of exemption from payment of the tax as provided ins. 21(3)(b) of the Andhra Pradesh
Sugarcane (Regulation of Supply and Purchase) Act, 1951, herein·
after called the Act for the teason that the Government has taken a
policy decision to confine the benefit of the exemption to sugar factori<S
'in the cooperative sector.
The material provisions of s. 21 of the Act are as follows :
"21 (1) The Government may, by notification, levy a
tax at such rate not exceedin_g five rupees per metric tonne
as may be prescribed on the purchase of cane required for
use,_· consumption or sale in a factory.
(2) The Government may, by notification, remit in whole
or i!l part such tax in respect of cam; used or intended to
be used in a factory
for any purpose specified
in such
notification.
(3) The Government may, by notification, exempt from·
the payment of tax under this section-
( a) any new factory for a period not exceeding three
years from the date on which it commences cmshing
of cane:
(b) any factory which, in the opinion of the Government,
has substantially expanded, to the extent of such
expansion. for a period not exceeding two years from
the date of completion of the expansion."
It was contended that looking at the scheme of s. 21 the word
may' occurrin,g in sub-section (3) thereof should be read as 'shall'
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RAMA SUGAR LTD. v. A. P. STATE (Mathew, J.)
797
as otherwise the sub-section will be unconstitutional in that it does
not provide guidelme tqr ·the exercise of the discretion to grant or
refuse the exemption when all applicants fulfil the conditions specified
in eta use ( b) of the sub-section.
The argument was that since no
gu1uc1ines arc furmshed by the legislature for choosing between two
factories fulfilling the conditions specified in clause (b ), the sub-section
must be read as mandatory, nameiy, that it imposes an obligation upon
the Government, by notification, to exempt from payment of the tax
all factories which, Ill the opinion of the Government, have substantiaily
expanded, to the. extent of such expansion, for a p:riod not exceeding
two years from the date of the completion of the expansion.
We do not think that there is any merit in the contention. Chusc
(b) of sub-section (3) only says that if any factory "in the opinion
of the Government, has substantially expanded", the Government may
exempt it from the payment of tax to the extent of such expansion for
a period not exceeding two years from the date of completion ot the
expansion.
So, if in the opinion of the Government, a factory has
substantially expanded, it .is open to the Government in its discretion.
to exempt that factory from payment of tax to the extent of such
expansion and that for a period not exceeding two years from the date
of the completion of the expansion. We are unable to read the section
as imposing a mandatory obligation upon the Government to grant the
exemption even if all the conditions specified in clause (b) of subsection (3) are satisfied.
There is nothing in the context which compels us to read the word 'may' as 'shall' and it seems to us clear that
the Government was intended to have a discretion.
But hO\V wa~ the
Govcrnn1eot intended to operate or exercise the discretion ? ·Docs
the Act as a \Vholc Or the provision in question in particular indi.::atc
any policy which the Government has to follow?
The legislature has.
no doubt, clearly laid down the conditions of eligibility for the exemption and it has clearly given to the Government a discretion so that
the Government is not bound to grant the exemption to a factory
which is eligible to the exemption.
But the discretion must not so
unreasonably be exercised as to show that there cannot have been any
real or genuine exercise of it.
The general rule is that anybody exercising a statutory discretion should not, in the words of Bankes L.J.
in R. v. P.L.A. ex.p. Kynoch Ltd.(') "shut his cars to the application').
The question, therefore, is whether the Government shut _its cars
and fettered its discretion when ir said that it will confine the benefit
of the exemption provided in clause (b) of sub-section (3) onl\' to
factories established in cooperative sector.
(I) [19t9] 1 K.B. t76, at 184.
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SUPREME COURT REPOJ.TS
(1974) 2 S.C.R.
It was s11bmitted that there is nothing in the provisions of subsection ( 3 )( b) to indicate that the Government could confine the
benefit of the exemption only to new and expanded sugar factories in
the cooperative sector fulfilling the conditions therein ~ified, and
tf the Uovemment chose to fetter the exercise of its discretion by a
self-imposed rule or policy by confining the benefit of the exemption
only to new and expanded supr factories established or owned by
cooperative societies, no discretion was exercised by Government in
disposing of the individual applications and that, at any rate, considerations lor<ign to the exercise of the discretion had entered into its
exercise.
It is therefore to be seen whether the· policy decision of the Uovcrnment to limit the benefit of the exemption to sugar factorios owned
or established by cooperative societies of sugar cane growers is derivable frOlll the sub-section or from any other provision of the Act or
could be gleaned even from its preamble. The question to be asked
nod answered arc : Has the policy decision any nexus with the object
of tile provision in question or is it 1based on consideration.s which arc·
irrelevant to the purpose and object of the Act ? Is there anything
in the provisions of thl' Act from which. it is possible to infer that the
legislature could have contemplated that 'the benefit of the c.1emption
provided by sub-section(3)(b) should be confined only to factorle;
owned by cooperative societies consisting of sugar cane growers ?
It appears to us that the object of s. 21(3)(b) is to give incentive
to sugar factories which are new and which have exj>anded.
It might
be that the factories situate in one area may require greater coasidera,
tion at one time then factories situate in other areas.
We will ~ume
that cooperative sugar factories consisting only of sugar cane growers
stand on a different footing and form a class by themselves or for
that matter a distinct category. But what follows?
Can the Government evolve a policy confining the benefit of the exemption to that
category alone and exclude others however deserving they might be
from the point of view of the object of the provision for the legislative
bounty?
The letter of the Government (Annexure Ill) reading as under
leaves no doubt in our mind that the Government could not !:aw
considered the applications of the writ petitioners and the appdlanl
on their merits :
uAnne:rure Ill
S. A. Guadar, I.A.S.
Hyderabad
Special Secretary to Govt.
Dated 6th Jan. 1963.
Food & Agriculture Department
D.O. letter No. 3960/ Agri. IIl/67-1.
D·:ar Rajah Sahcb,
Sub : Purchase tax on sugarcane-Exemption front payn1cnt of
purchase tax to the extent of expansion-r.:-garding.
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RAMA SUGAR LTD. ·v. A. P. STATE (Mathew, J.).
799
Ref: Your letter No. 54/66-67 dt. 6·2-1967 addressed to the
Director of Agriculture.
·
I am to invite reference to your letter cited and to state that the
Government have given careful consideration to your request for
exemption from payment of purchase tax to the· extont ot expJnr.ion
for two· crushing seasons in respect of Bobb11i and
Seetnan.;gararn
Units. The present policy of the Government is to grant exemption
from payment of purchase. tax to new and expanded sugar factories
in lhe Co-operative Sector only.
Besides- Bobbili and Scetnanagaram,
Sugar Factories, there are a few other sugar factories in the private
sector 1which have al~ embarked on expansion programmes. Any
concession given in one case will be a precedent !or otners anJ it
cannot be denied to others wlio will naturally apply fo1 a sllllilar
concession. The present financial position of the Govcrrnnent dues
not permit them to be generous.
In the circumstances, tnc Government very much regret that it is not possible for them to accede to
your request.
With regards,
To : Rajah of 'Bobbili;
The Palace, Bobbili,
Srikakulam District."
Yours sincerely,
Ml.
S. A. Quuder
We think that by' the. policy decision the· Government had precluded itself from considering the applications of the petitioners and
the awellant . on their merits. In fact, the Governnient. by making
the Policv decision, had shut its ears to the merits of the individual
applications. We SC!l no merit in the contention of Andhra Pradesh
Government that it considered the applications for exemption filed
by the writ petitioners· and the appelllint on their merits as, by its
policy decision, it had precluded itself from doing so. What are not
verv much 'concerned with the . auestitm that only a few oi the cooperative societies have been granted the exemption . or that the
exemption to them has been limited to a peri<XI of one year. We are
here reallv concerned with a principle and that is whether the Government was justified in evolving a policy of its own which has . no
relevance to tho purpose of the provision in auestion or the object
of the Act, as gatherable from the other · provisions. We could
have understood the Government making. a policy decisiOn to confine the benefit of the exemption to factories
established by co-.
operative societies of su~ar-cane growers,- if that policy decision had
anv warrant in the directive principles of the Constitution as direc11-1748 Sup. CI/74
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SUPREME COURT REPORTS
[1974] 2 S.Cl.R.
tive principles are fundamantal in the &ovcrnance of the country
and arc bmdin~ Oil all· orpns of the State.
There l~ no provision
un the Chapter on Directive Principles
which would
warrant the
particular predilection now shown by Government to
the factories
establish<d in the co-operative sector.
Whence then did the Government draw its inspiration
for the policy? We
should not be
tmderstood as saving that sugar-<:ane factories
established
by cooperative societies of sugar-cane iuowers do not deserve encourage·
ment or that they should not b,e )lranted exemption from payment of
tax.
All that we say is that the wholesale exclusion of other factories established, say, by a firm consisting of sugar-cane growers,
or a company of which sugar-cane growers are the shareholders, is
not warranted
by anythin_g in the provisions of s. 21( 3).