TaxTMI 
TaxTMI 
1979 (9) TMI 176
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....62 of 1972) (P.N. Tiwari, K.J. John and J.S. Sinha, Advocates, with them), for the appellants in C.A. Nos. 712, 962-963, 1063-1067, 1140-1142, 1160, 1329, 1330 and 1598 of 1972. -------------------------------------------------- The judgment of the Court was delivered by KRISHNA IYER, J.-This phalanx of appeals, over 200 strong, has stagnated for eight years and slowed down other disposals, which is unfortunate. We believe that the price of healthy justice from the highest bench is eschewal of all but those cases which possess the twin attributes of- (i) substantial question of law of general importance, (ii) which need to be decided by the Supreme Court itself, whether the jurisdiction be under article 133, 134 or 136. Such being the jurisdictional dynamics of the Supreme Court, save in exceptional cases of appalling injustice, we hope the Bar will share this concern and avoid a breakdown for, truly, the question today is: To be or not to be. All these appeals spring from a common demand for tax by the State of Uttar Pradesh from a number of sugar mills on the purchase of sugarcane at a rate regulated by weight, not value, a pragmatic novelty in the sa....
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....ered as sugar, khandsari and, on a cottage industry basis, as gur. Andhra Pradesh, Bihar, Gujarat, Haryana, Kerala, Karnataka, Maharashtra, Madhya Pradesh, Punjab, Pondicherry, Tamil Nadu and Uttar Pradesh not only grow sugarcane but enjoy purchase tax, a majority of which levy by weight rather than on price. And we cannot lose sight of the All-India impact when the law is laid down under article 141. Judgments of this Court are decisional between litigants but declaratory for the nation. Sugar is an export item and, of course, is a daily necessary at home. Uttar Pradesh, according to the Report of the Tariff Commission on the Cost Structure of the Sugar Industry and the Fair Price for Sugar [1969] has the heaviest concentration of sugar mills in the country but several of them are uneconomic and some sick. Modernisation is a message lost on U.P. sugar manufacture and the cane cultivator's fortune hangs on the fluctuating prosperity of the marginal millers. The sugar and sugarcane economy is the victim of a variety of forces which add to the precariousness and poor efficiency of factories. The area under cultivation recedes or expands with the decrease or increase of crushing by ....
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....oughtfully. The Report we have referred to bears testimony to this cyclical factor and the High Court has drawn inferences therefrom. Let us view the inequity of the impost had it been related to the price of cane. The High Court gives some facts: "The price of sugarcane is, according to the Report of the Tariff Commission, determined by the law of supply and demand in a particular year. Accordingly, it may vary disproportionately in various regions of the State. One factory may pay more for the same quantity of sugarcane than the other. Indeed, the Basti Sugar Mills Company Limited has made that allegation. The Basti Sugar Mills Company Limited paid Rs. 7,00,000 less than the Seksaria Sugar Mills Private Limited for the same quantity of sugarcane. If the quantity of sugar manufactured by them in that year is more or less the same, their earnings will be the same. So tax by price would be more oppressive on the Seksaria Sugar Mills Private Limited. On the other hand, as tax is by weight, both of them would have paid the same amount of tax in that year. Neither of them could complain of unfair or inequitable incidence of taxation." Of course, stabilisation or uniform fixation of c....
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....ushing means equal weight of cane. So cane quantity and tax liability roughly match and remove the fear of uneven imposts. Let us go back to pick up the threads, leaving this pertinent detour for a while. Sugarcane agriculture and sugar industry have been the cynosure of legislative attention at Central and State levels for long. We may start a rapid survey from 1932 when the Sugar Industry Protection Act, 1932, was put on the statute book. Its object was to foster and develop the sugar industry by protective tariffs. Then came the Sugarcane Act, 1934, which empowered the Provincial Government to fix a floor price for sugarcane sold to sugar factories. This was followed by the U.P. Sugar Factories Control Act, 1938, which replaced the earlier 1934 Act. Thus came into existence a statutory Sugarcane Control Board and a Cane Commissioner. Section 29(1) of this Act imposed a sales tax on the sale of sugarcane. Sub-section (3) provides for a cess on the entry of sugarcane into a local area. The necessity for the fostering legislative care of sugarcane cultivation and the imposition of a tax in this behalf is explained in the Statement of Objects and Reasons to the Bill of 1938: "The....
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....refore, done. Eventually, the levy of a purchase tax was enacted into law by the U.P. Sugarcane (Purchase Tax) Act, 1961 (referred to as the Act). In a fiscal sense, the Purchase Tax Act is a reincarnation of the Cess Act but, in a legislative sense, it is an independent statute with a different source of power, impact and structure. While the appellants have a case that this fiscal history substantiates their thesis that the present purchase tax is a disingenuous disguise, the State contends that its power to impose a purchase tax is well within List II, entry 54. An appeal to history cannot impeach power. Plainly read, the Act, architectures a typical tax scheme, leviable at the purchase point with one difference, but we have been invited by Shri Shanti Bhushan, the counsel for some of the appellants, to lift the veil, look at the true anatomy of the Act and discover the unseemly unconstitutionality in its bosom. Before we adventure into an assessment of the vulnerability of the provisions to the appellants' artillery, we must project a picture of the impugned Act in its essentials, sufficient to appreciate the grievances and their constitutional merit, remembering the judicial ....
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....sugar. By definition, factories and units fall under different categories, the former being geared to manufacture of sugar by power, the latter being engaged in the production of gur, rab or khandsari sugar in crushers driven by mechanical power. A classification based on scale of operations, product manufactured and other substantial differences bearing on production capacity, profits of business and ability to pay tax, is constitutionally valid and the feeble contention counsel put forward that there is discrimination between owners of factories and units must fail without much argument. Section 3A intended to guard against escape of tax, ensures that the sugar produced out of the sugarcane transaction exigible to tax shall virtually stand security, if we may crudely express ourselves that way. The sugar produced in the factory shall not be removed until the tax levied under section 3 is paid. Other detailed provisions calculated to safeguard the tax are also contained in section 3A. Provision for revision of assessment is contained in section 3B. While fines and punishments for contraventions find a place in section 8, remission of taxes is also provided for in section 14 and ....
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....es, not its quantity, lest the millers be made to pay unevenly for two consignments of equal weight but unequal price. A refinement of the same argument was developed on the basis of the sugar output from the cane crushed. The sucrose content of sugarcane varies from cane to cane and, perhaps, from mill to mill and to lump them together quantitatively for a uniform impost is to turn the Nelson's eye on the inter se inequality. Procrustean cruelty is anathema for the law where unequals are equalised into arbitrary conformity. Counsel submit that sucrose is the touchstone and where that content varies but the levy is standardised on the weight of cane the exaction must be outlawed under articles 14 and 13 and even 19 (unreasonable). We reject all the three contentions and hold that the Act can parachute to safety despite the ineffectual artillery. For, as in Rubaiyat, we "heard great argument about it and about: but evermore came out by the same door as in we 'went'." Let us anyway scan, the "substantial points" which have sojourned in this Court all these years awaiting a constitutional pronouncement. Incidentally, most of these pleas have been negatived by this Court on earlier oc....
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....he impugned legislation is one on a "controlled industry" and therefore out of bounds for the State Legislature. Tika Ramji's case [1956] S.C.R. 393., deals with the identical question of "controlled industry" vis-a-vis a U.P. Legislation regulating sugarcane supply and purchase. Certain sugarcane-growers of Uttar Pradesh assailed the vires of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953. That statute reserved or assigned to sugar factories specified cane purchasing centres for the purpose. This regimentation of sugarcane-growers and regulation of cane supplies to specified millers by a State enactment was attacked on the precise ground that sugar being a "controlled industry" any enactment affecting such industry including the regulation of supplies of raw materials thereto was taboo. The plea was dismissed as specious, and the appeals under our consideration are a fortiori case where the rejection of the contention can be more confidently made. N.H. Bhagwati, J., speaking for the Court, traced the legislative history bearing on sugar and sugarcane. Reference was made to the Industries (Development and Regulation) Act, 1951, which brought in as item 8 of the ....
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....ive province of the Central Legislature, the Provincial Legislature was not entitled to legislate upon the same..........." The court was pressed to impart the widest amplitude to the topic "industry" and take within its wings ancillary matters like raw materials of the industry: "It was, therefore, contended that the legislation in regard to sugarcane should be considered as ancillary to the legislation in regard to sugar industry which is a controlled industry and comprised within entry 52 of List I.........." The edifice of exclusive parliamentary jurisdiction so built stood on shifting sands. The semantic sweep of entry 52 did not come in the way of the State Legislature making laws on subjects within its sphere and not directly going to the heart of the industry itself. The key to the problem was furnished in the Tika Ramji's case [1956] S.C.R. 393 at 414, 416-417, 422-423, 420-421, 427. After comparing the provisions of the U.P. Act there considered, which related to the regulation of sugarcane to factories and securing its price to the grower from the occupier of the factory even by checking the accounts relating to the manufacture of sugar, the court clinched the issue t....
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....rliament exclusive power to legislate on sugarcane supplies to sugar factories, and, pursuing this expansionist logic, any taxation on supplies of cane to mills would be legislation on sugar industry. Ergo the Purchase Tax Act was a usurpation by the U.P. Legislature breaching the dykes of article 246(1) read with entry 52 of List I. He expanded on the theme by urging that any legislation which affected the sugar industry by taxing its raw materials was one with respect to that industry. The Tika Ramji(1) ratio is diametrically opposed to this reasoning and a ruling which has stood the field so long has been followed by another Constitution Bench as late as 1973 in the Kannan Devan case [1973] 1 S.C.R. 356., and its force of logic has our deferential assent and cannot be brushed aside by a mere appeal for reconsideration. Shri Shanti Bhushan candidly conceded that if Tika Ramji [1956] S.C.R. 393., were good law his submission was still-born. We agree. "Industry" as a legislative topic is of large and liberal import; true. But what peripherally affects cannot be confused with what goes to the heart. An acquisition of land for sugar mills or of sugar mills may affect the industry bu....
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.... cent and yet a uniform levy by weight on these unequals is sanctioned by the Act. Price of cane is commended as the only permissible criterion for purchase tax. The whole case is given away by the very circumstance that, substantially, the sucrose content is the same for sugarcane in the State, the marginal difference being too inconsequential to build a case of discrimination or is blamable on the old machinery. Neither in intent nor in effect is there any discriminatory treatment discernible to the constitutional eye. Price is surely a safe guide but other methods are not necessarily vocational. It depends. Practical considerations of the administration, traditional practices in the trade, other economic pros and cons enter the verdict but, after a judicial generosity is extended to the legislative wisdom, if there is writ on the status perversity, "madness" in the method or gross disparity, judicial credulity may snap and the measure may meet with its funeral. Even so, taxing statutes have enjoyed more judicial indulgence. This Court has uniformly held that classification for taxation and the application of article 14, in that context, must be viewed liberally not meticulousl....
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....rice. Even here, we may notice the observations in the Murthy Match Works [1974] 3 S.C.R. 121 at 130-131.: "Another proposition which is equally settled is that merely because there is room for classification it does not follow that legislation without classification is always unconstitutional. The court cannot strike down a law because it has not made the classification which commends to the court as proper. Nor can the legislative power be said to have been unconstitutionally exercised because within the class a sub-classification was reasonable but has not been made. It is well-established that the modern State, in exercising its sovereign powers of taxation, has to deal with complex factors relating to the objects to be taxed, the quantum to be levied, the conditions subject to which the levy has to be made, the social and economic policies which the tax is designed to subserve, and what not. In the famous words of Holmes, J., in Bain Peanut Co. v. Pinson [1930] 282 U.S. 499.: 'We must remember that the machinery of Government would not work if it were not allowed a little play in its joints.'" It is well-established that classification is primarily for the legislature and ....
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....victims or notoriously hazardous habitations, with respect to necessaries of life. Such differentiation cannot be castigated as discrimination out of hand. Of course, it is common and commonsense that reliable standard is the price, although in regard to customs duties there are still items levied on the nature of the goods rather than its value in money. For the present, it is sufficient to state that the practice has been to impose purchase tax by weight of cane. Also, in weight of cane its sucrose content and its price have a close nexus, although, theoretically, they may appear unconnected. The High Court has stated that the quantity crushed, the sugar produced and the profits earned, have a substantial linkage. The quality of cane over the whole of Uttar Pradesh varies over a range of 8 to 10 per cent which, if converted to purchase tax, may inflict a trivial difference per quintal. Moreover, for many years past the bulk of the sugar has been absorbed by "levy" by the State and in the costing components the State, as buyer of sugar, has borne the brunt. We have no facts to hold that arbitrary or vagarious burdens are cast because weight, not price, has been the yardstick for t....