Levy sugar pricing must respect Clause 5A surplus-sharing; entire excess realisation from free sale sugar cannot be absorbed.

Clause 5A of the Sugarcane (Control) Order, 1966 introduced a statutory scheme under which the additional price payable to sugarcane growers is to be met from surplus realised on free sale sugar, shared 50:50 between growers and industry. Levy sugar price under Section 3(3C) of the Essential Commodities Act, 1955 must therefore be fixed by reading the pricing provision with that scheme, while also having regard to minimum cane price, manufacturing cost, taxes, duties and a reasonable return on capital employed. A pricing method that mops up the entire excess realisation from free sale sugar cannot extinguish the industry's statutory share. Accordingly, later levy price notifications based on that approach were held unsustainable, and fresh refixation was directed.

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Issues: Whether, after the insertion of Clause 5A of the Sugarcane (Control) Order, 1966, the Central Government could determine levy sugar price under Section 3(3C) of the Essential Commodities Act, 1955 by mopping up 100 per cent of the excess realisation from free sale sugar, and whether the impugned price fixation notifications could therefore be sustained.

Analysis: Section 3(3C) requires the Government, while fixing the price payable for levy sugar, to have regard to the minimum sugarcane price, manufacturing cost, taxes and duties, and securing a reasonable return on capital employed. Clause 5A, introduced pursuant to the Bhargava Commission recommendations, created a statutory scheme under which the additional price payable to sugarcane growers is to be met from the surplus realised from sugar sales on a 50:50 sharing basis between growers and industry. The statutory scheme and the pricing provision had to be read together. Once Clause 5A came into force, the industry became entitled to retain its statutory share of the excess realisation, and that share could not be wholly neutralised by depressing the levy sugar price. The Court held that the later pricing methodology, which proceeded on the basis of mopping up the entire excess realisation from free sale sugar, was inconsistent with the altered legal regime and did not properly reflect the statutory entitlement created by Clause 5A.

Conclusion: The levy price notifications issued after 1 October 1974, except the interim notification dated 28 November 1974, were not sustainable. The Central Government was directed to amend the notifications and refix the levy sugar price in accordance with Section 3(3C) of the Essential Commodities Act, 1955, keeping Clause 5A of the Sugarcane (Control) Order, 1966 in view.

Final Conclusion: The manufacturers obtained partial relief: the impugned levy price fixation was set aside in substance for the relevant later period, while the interim notification issued before the new pricing policy was left undisturbed and the Government was directed to undertake fresh refixation.

Ratio Decidendi: After the introduction of Clause 5A of the Sugarcane (Control) Order, 1966, levy sugar price under Section 3(3C) of the Essential Commodities Act, 1955 cannot be fixed by appropriating the entire excess realisation from free sale sugar, because the statutory sharing of surplus between growers and industry must be respected in price determination.

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