1986 (5) TMI 251 - SC - VAT and Sales Tax

Two notifications dated January 25 1975 issued under section 14 of the U.P. Sugarcane (Purchase Tax) Act 1961 challenged - 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. Held that - Appeal dismissed. 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 non-payment of the cane prices affecting the supply of cane to factories. 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.

Summary

Issues:
Appeal against judgment of High Court challenging notifications under U.P. Sugarcane (Purchase Tax) Act, 1961 - Interpretation of section 14(1) - Discrimination in granting remission of purchase tax - Violation of article 14 of the Constitution.

Detailed Analysis:
The appeals before the Supreme Court challenged the High Court's judgment regarding notifications issued under the U.P. Sugarcane (Purchase Tax) Act, 1961. The petitions under article 226 of the Constitution sought to challenge two notifications dated January 25, 1975, granting remission in purchase tax to certain sugar factories in Uttar Pradesh. The main contention revolved around the interpretation of section 14(1) of the Act and the alleged discrimination in granting remission.

The State of U.P. denied the allegations of promissory estoppel and discrimination raised by the petitioners. The High Court dismissed the petitions, leading the parties to appeal before the Supreme Court. The primary issue was whether the State Government's actions in granting remission of tax to specific factories while excluding others amounted to discrimination and violated article 14 of the Constitution.

The relevant provision under scrutiny was section 14(1) of the Act, which grants the State Government the power to remit tax in the public interest to encourage and regulate the supply of sugarcane to factories. The petitioners argued that the State Government's selective granting of remission was discriminatory as it did not extend the benefit to all factories in need of encouragement and regulation, as envisaged by the Act.

The counsel for the appellants contended that the power under section 14(1)(a) should apply to all factories in the eastern zone, not just a few. However, the Court held that the discretion to grant remission was vested in the State Government, guided by the specific purposes outlined in the different clauses of section 14(1). The Court emphasized that the State's decision to grant remission only to factories purchasing sugarcane with low recovery was within the scope of the Act and did not violate article 14.

Furthermore, the Court addressed the argument of discrimination based on recovery rates, highlighting that different clauses of section 14(1) cater to distinct categories of factories. The classification based on recovery rates was deemed reasonable and in line with the objectives of the Act. The Court emphasized that article 14 permits reasonable classification, provided it is based on intelligible differentia related to the statute's objective.

In conclusion, the Court dismissed the appeals, upholding the State Government's actions in granting remission of tax to specific factories based on recovery rates. The judgment clarified that the remission was granted to assist factories in need and did not violate the constitutional provisions. The parties were directed to bear their own costs, and all related matters challenging the notifications were disposed of in line with the judgment.