1987 (10) TMI 333 - SC - VAT and Sales Tax

Whether State has made profit by the sale of khandsari sugar at public auction? Held that - Appeal dismissed. The Government issued instructions to distribute the levy sugar liberally through permits for marriages and religious functions. The consumers, however, could not come forward. The Government then directed the disposal of levy sugar by public auction. It was not with a view to earn profit although incidentally the Government made some profit. The levy sugar was brought to public sale only to prevent deterioration when the consumers refused to accept it. We have no reason to doubt the explanation given by the State Government.

Summary

Issues:
Challenge to the validity of the U.P. Khandsari Sugar (Levy) Order, 1981.
Allegations of unreasonable price fixation and excessive restriction on fundamental rights.
Claim of colorable exercise of power by the State Government in selling levy sugar.
Interpretation of relevant considerations in price fixation under the Essential Commodities Act, 1955.
Comparison of judgments regarding the primary consideration in price fixation.
Request for reference to a larger Bench for decision based on diverse views in previous cases.

Analysis:
The judgment delivered by K. Jagannatha Shetty, J., addressed a petition challenging the validity of the U.P. Khandsari Sugar (Levy) Order, 1981, under Article 32 of the Constitution. The petitioner, engaged in khandsari sugar manufacturing, contested the price fixation and alleged a violation of fundamental rights under Articles 19(1)(g) and 14 of the Constitution. The petitioner claimed that the State Government's sale of levy sugar through public auction was a colorable exercise of power. The Court highlighted the limited scope of inquiry in price fixation matters, emphasizing that the primary focus should be on relevant considerations outlined in the Essential Commodities Act, 1955.

In a previous judgment, the Court had emphasized equitable distribution and availability of commodities at fair prices to benefit consumers over individual interests of producers. The Court reiterated that the interest of consumers should prevail in price fixation, and any loss to producers should be minimal. The petitioner argued for a different interpretation, citing previous cases, but the Court found no diversity of views and upheld the consumer-centric approach in price fixation under the Essential Commodities Act.

Regarding the petitioner's grievance about the State Government's profit from selling levy sugar, the Court examined the State's explanation and found no evidence of a colorable exercise of power. The State's decision to sell levy sugar at public auction was justified to prevent deterioration when consumers refused to accept it. The Court dismissed the writ petition, emphasizing that the sale was not for profit but to maintain the quality of the sugar. The judgment concluded by dismissing the petition with costs, affirming the validity of the Levy Order and the State's actions.

Overall, the judgment provided a detailed analysis of the legal principles governing price fixation under the Essential Commodities Act, emphasizing consumer interests, equitable distribution, and the limited role of the court in such matters. The Court's decision reaffirmed the consumer-centric approach in price fixation and upheld the State Government's actions in selling levy sugar through public auction.