Government policy and statutory discretion under sugarcane exemption law: majority upheld a rational classification, dissent found an impermissible fetter.

Section 21(3) of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961 is discussed as conferring a discretionary power on the Government to grant or refuse exemption from purchase tax. The majority view accepts that a general policy may guide that discretion if it is relevant to the statutory object and not arbitrary, and treats confinement of exemption to co-operative sugar factories as a rational classification. The dissent views that policy as lacking nexus with the Act's purpose and as preventing consideration of individual applications on their merits.

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Issues: Whether the Government's policy of granting exemption from purchase tax only to co-operative sugar factories under section 21(3) of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961 unlawfully fettered its discretion or created an arbitrary classification; and whether the applications for exemption were required to be considered independently on their merits.

Analysis: The majority held that section 21(3) conferred a discretionary power on the Government to grant or refuse exemption, and that the word "may" did not impose a mandatory duty to exempt every eligible factory. A public authority may adopt a general policy to guide the exercise of statutory discretion, provided the policy is relevant to the object of the enabling provision and is not arbitrary or capricious. On the facts, the majority found that the State had considered the requests and was entitled to adopt a policy confining the exemption to co-operative sugar factories, which were treated as a distinct category having a rational basis connected with the statutory purpose. The majority further held that the policy did not frustrate the object of the Act and did not amount to an unlawful refusal to consider individual applications.

Conclusion: The policy was upheld, the discretion was held to have been validly exercised, and the challenge to the refusal of exemption failed.

Dissenting Opinion: Mathew J., speaking for himself and Bhagwati J., held that the policy decision to confine the exemption to the co-operative sector had no nexus with the object of the Act, shut out consideration of individual applications on their merits, and amounted to an impermissible fetter on discretion. On that view, the policy should have been quashed and the applications reconsidered without regard to it.

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