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1960 (12) TMI 83 - SC - Indian LawsImposition and assessment of cess - arrears of cess for the crushing season - legislative competence of the State Legislature - Interpretation of the words local area - scope of Entry 52 of the State Legislative List in Schedule 7 to the Constitution - Constitutionality and validity of Section 20 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act 1953 - HELD THAT - The language of s. 3 as it stands appears however also to extend to cases where the supply of cane to a factory is from within the same local unit of administration; in other words where there is no entry of the cane into the local area as explained earlier. If this were the true position the enactment cannot be invalidated as a whole. It would be valid to the extent to which the tax is levied on cane entering a factory for the purpose of consumption etc. therein from outside the local area within which the factory premises are situated and only invalid where it out It would be apparent that the Explanation was necessitated by the terms of sub-s. (1) of s. 3 which equated factory premises with local areas or rather rendering factory premises the sole local areas entry into which occasioned the tax. So far as the purchasing centres which are dealt with in the Explanation are concerned the cane that moves into them from outside the local area where these centres are would clearly be covered by Entry 52 since the purpose of the movement into the centre is on the terms of the provision for effecting a sale therein. In other words the same tests which I have discussed earlier in relation to entry into factory premises would apply mutates mutandis to these purchasing centres and in so far as a tax is levied on the movement of the cane from outside the local area the levy would be legal and in order. I would read down the Explanation in the same manner as I have read down the main charging provision so as to confine the levy to entry from outside that local area -local area being understood in the sense already explained. I would accordingly allow the appeal and remand it to the High Court for investigating the material facts which I have mentioned earlier with a direction to pass judgment in accordance with the law as above explained. BY COURT. In accordance with the opinion of the majority the appeal is allowed the order passed by the High Court is set aside and a writ be issued directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954-55 and successive crushing seasons under the Uttar Pradesh Sugarcane Cess Act 1956. The appellants will get their costs here and below. Appeal allowed.
The judgment concerns an appeal against an order of the High Court of Judicature at Allahabad, which rejected the appellants' application challenging the imposition of a cess on the entry of sugarcane into their factory under the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, and the subsequent U.P. Sugarcane Cess Act, 1956. The primary legal issues considered were the legislative competence of the State Legislature to enact such laws and whether the delegation of power to the Governor to impose the cess was excessive.
Issues Presented and Considered The core legal questions considered were:
Issue-Wise Detailed Analysis 1. Legislative Competence The relevant legal framework involves Entry 52 of the State List, which permits the State Legislature to impose "taxes on the entry of goods into a local area for consumption, use or sale therein." The Court's interpretation centered on whether the premises of a factory could be considered a "local area" under this entry. The Court reasoned that the term "local area" historically referred to areas administered by local bodies such as municipalities or district boards, not individual premises like a factory. The Court examined the legislative history and previous statutes, concluding that the phrase "local area" was intended to cover areas under local governmental administration, not individual factory premises. The Court found that Section 3 of the 1956 Act, which imposed a cess on sugarcane entering factory premises, did not fall within Entry 52 as factory premises could not be considered a "local area." Consequently, the law was beyond the legislative competence of the State Legislature and was struck down as invalid. 2. Delegated Legislation Although the issue of excessive delegation was raised, the Court did not find it necessary to address this point, given its conclusion on legislative competence. Significant Holdings The Court held that:
Dissenting Opinion Justice Ayyangar dissented, arguing that the term "local area" in Entry 52 should be interpreted to include any area defined by the State for taxation purposes. He suggested that the legislation could be read down to apply only to entries from outside the local administrative unit in which a factory is situated, thereby bringing it within legislative competence. He proposed remanding the case for further investigation into the facts to determine the validity of the tax levied on the appellants. In conclusion, the majority opinion allowed the appeal, set aside the High Court's order, and directed that the respondents refrain from levying and collecting cess from the appellants under the impugned Act. The appellants were awarded costs for both the appeal and the proceedings below.
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