TULSIPUR SUGAR CO. LTD. ETC.versusSECRETARY TO THE GOVERNMENT OF U.P. & ORS.

    942

A
                      lULSIPUR SUGAR CO. LTD. ETC.
                                    v.
               SECRETARY IO 1llE GOVERttmN'l" OF U.P. & ORS.

                              MAY 2, 1986.

B     [P.N.   Blli\Gi/ATI, C.J., 0. CHINNAPPA REDDY,    R.B. MISRA,
                         V. KHALID AND G.L. OZA, JJ,]
                                                                      >--
          U.P. Sugarcane (Purchase Tax) Act, 1961, s. 14 - Sugar
    factories - Grant of remission of purchase tax - Whether
    premissible/discriminatory.
c
          Words and Phraseq: "encourage or regulate" - Meaning of -..,
    - s.14(l)(a) U.P. Sugarcane (Purchase Tax) Act, 1961.             '

          Section 3(l)(a) of the U.P. Sugarcane (Purchase Tax)
    Act, 1961 provides for imposition of tax on the purchase of
D   sugarcane by the owners of sugar factories. Section 14(1) of
    the Act empowers the State Government to grant remission in
    whole or in part of the tax payable in the public interest,
    with a view to (a) encourage or regulate the supply of
    sugercane to, or its purchase by the factories, or (b)
    encourage the establishment of new factories, or (c) assist
E   factories established after the crushing season 1957-58 and
    purchasing sugarcane yielding low sugar recovery.

          The Central Government by a notification dated September
    29, 1973 issued under cl.(3) of the Sugarcane (Control) Order,
    1966, fixed the minillllm price of sugarcane for factories
F   situated in eastern U.P. at Rs. 8,38 per quintal. To meet the
    growers demand for a higher price the Government of U.P.
    refixed the sugarcane price at Rs.12. 25 per quintal for the
    sugar mills situated in the east zone. The sugar factories not
    being in a position to pay the higher price approached the
                                                                        II
    State Government who by two notifications dated January 25,
G   1975 issued under s.14(l)(a) of the Act granted remission in
    purchase tax to the extent of Re. 0.51 per quintal to twenty
    sugar factories in the area for the assessment year 1973-74.

          The appellants and some other factories having been
    denied any remission in purchase       tax,   challenged the
H   notifications by filing petitions under Art. 226 of the
    Constitution which were dismissed by the High Court.
                 TULSIPUR SUGAR CO. v. SECY. GOVT. OF U.P.        943


 -""        In these appeals by special leave, it was contended for      A
      the appellants that the State Government in ref using to extend
      the remission to the appellants had discriminated against them
      by singling them out for treating differently as the
      encouragement and regulation contemplated by cl..(a) of s.14(1)
      of the Act was necessary to all the factories in the eastern
      zone and not to a fortunate few, and that the impugned             B
      notifications suffered from the vice of Art. 14 of the
 -.;, Constitution inasmch as the Government had discriminated
      between the factories falling in the same group as those which
      had a recover)' of 8. 5 or less had been granted remission,
      while the appellants who were also in similar position had



r
      been left out.
                                                                         c
            Dismissing the appeals, the Court,

              HELD: l. Article 14 of the Constitution forbids class
      legislation but permits reasonable classification. It,
      however, 1111st fulfil the twin requirements: (l) it 1111st be
      founded on an intelligible differentia which distinguishes         D
      persons or things that are grouped together from others left
      out of the group, and (2) that the intelligible differentia
      1111st have s relationship to the object sought to be achieved
  ""' by the statute. (950 C-D]

              2. Section 14(1) of the Act confers a discretionary        'E
        power on the State Government. It has been left entirely to
        the State to decide whether any particular factory should be
        granted remission or not, guided by the purpose set out in the
    -'< relevant clause. Neither in cl. (a) nor in any other clause of
        s. 14(1) there is anything to indicate that the State
    L Government 1111st grant remission to all sugar factories for       F
....,.; encouraging or regulating the supply of sugarcane. [948 E-F]

              3. The three clauses of sub-s. (1) of s.14 of the Act
       have different object and purpose. The purpose of granting the
       power of remission under cl. (a) is encouragement and
       regulation of the supply of sugarcane, the object of cl.(b) is    G
       to encourage the establishment of new factories, and that of
 "-1   cl. (c) is to assist factories established after the crushing
       season 1957-58 and purchasing sugarcane yielding low recovery.
       A factory situated in one area or falling in one category may
       be in need of remission, while those which were not either
                                                                         H
    944                  SUPRE)IE COURT REPORTS    [1986] 2 S.C.R.

A
    situated in that area or did not fall in that category may not .
    need it. Though the power conferred by cl. (a) is to be "'
    exercis~ for the purpose of encouraging and regulating the
    supply of sugarcane, in exercising this power the State
    Government may legitimately take the view that this purpose
    necessitates the grant of remission only to the su&ar
B   factories purchasing sugarcane yielding low recovery.
    [948 C-E]
                                                                     ~
          4. The word 'encourage' in cl. (a) of s.14(1) suggests
    that the State Government is required to exercise the power
    where it feels that the sugar factory requires the help for
C   the purpose of making purchases of sugarcane. The word
    'regulate' contemplates that the said power can be exercised·~
    with a view to take measures to pro1110te the sale of sugarcane.
    If the power conferred by cl.(a) of s.14(1) has been exercisedi
    for the purpose of granting remission to only those sugar
    factories which purchase sugarcane of low recovery, there is
D   nothing wrong in so doing. [949 D-E)

           5. In the instant case by granting the remission only to
    sugar factories purchasing sugarcane of low recovery, the
    State Government has not violated Art. 14 of the Constitution.
    Nor was there any contravention of the provisions of cl.(a) of ~
E   s.14(1 ). Such a question would have arisen if the grant of
    remission were founded on a gr'>und extraneous to the
    provisions of s. 14(1). [949 A-Bl

          6. The immediate factor affecting the economy is the
    recovery of sugar from sugarcane and the sugar content in the /I-
F   cane produced goes a long way to determine the cost of sugar.
    Thus, the sugar factories which were purchasing sugarcane
    yielding low recovery are distinguishable as         a class~
    separately from those which did not fall in it and there was a
    resonable basis to classify those left out of that group.
    (950 F-G]
G
          .Anant Mills Co. Ltd. v. State of Gijarat & Ors., (1975)
    3 S.C.R. 220, referred to.
                                                                     ~
          CIVIL APPELLATE JURISDICTION    Civil Appeal No. 1774 of
    1980 etc.
H
          From the Judgment and Order dated 28. 7. 1978 of the
    Allahabad High Court in Civil Misc. Writ No. 495 of 1975.
     TULSIPUR SUGAR CO. v. SECY. GOVT. OF U.P. [MISRA, J,]     945

                                                                      A
            B.R.L. Iyenger, Yogeshwar Prasad, S.P. Gupta, V.P.
 ,o(sachthey, K.K. Venugopal, O.P. Rana, Dr. Y.S. Chitale, K.G.
     Bhagat, F.S. Nariman, Soli J, Sorabjee, H.K. Puri, G,
     Gopalakrishnan, Khaitan & Co., A. Subba Rao, Naunit Lal,
     K.M.K. Nair, J.B.D. & Co., P.R. Ramasesh, Bishambar Lal, G.
     Subramanium, Ms. S. Dikshit, Ms. A. Subhashini, K.R. Nambiar,    B
     R.N. Poddar, B.M. Nagaria, Mrs. Rani Chhabra, R.B. Datar,
     P.H. Parekh, K.R. Nagaraja, B.D. Sharma, V• .J. Francis, S.
     Markendaya, R.N. Sachthey, R. Ramachandran, S.S. Khanduja,
  ---IManoj Swarup & Co., P.K. Pillai, Baggar, K.L. Mehta, Swarup
     John & Co., G.S. Ramarao, C.V. Subba Rao, S.K. Gupta, G.S,
     Chatterjee, Probir Mittra, Mrs. J, Wad, S.K. Gambhir, Pramod
      Dayal, R.K. Jain, S,R, Srivastava, K.K. Mohan, Dhantaraj,D.K.   c
     Agarwal, S.K. Gupta, Raju Ramachandran, Ravindra Bana, Vinoo
       hagat, K.K. Jain, A.O. Sanger, Girish Chandra, C.K.
      Sucharita, T.C. Sharma, Mrs. Kitty Kumaramangalam. A.V.
      Rangam, R.V. Ratnam and D.M. Popat for the appearing parties.

         The Judgment of the Court was delivered by                   D

          R.B. MISRA, J. The present group of appeals directed
    against the judgment of the High Court of Judicature at
    Allahabad dated July 28, 1978 raises a common question of law.
    These appeals arise out of petitions under Article 226 of the
 "'Constitution challenging the two Notifications dated January       E
    25, 1975 issued under section 14 of the U.P. Sugarcane
    (Purchase Tax) A.ct, 1961 (hereinafter referred to as the A.ct
    for short). The petitioners also sought a Mandamus directing
    the State Government to grant remission in purchase tax of
 _.,0.51 paise per quintal to all the Sugar factories situated in
    the State of U.P. As the pattern of facts is similar in all       F
    the cases, we would refer to the facts of Civil Appeal arising
~ut of Writ Petition No. 409 of 1975 filed by M/s. Shree
  . Sitaram Sugar Company Limited, Bhailtapur, District Deoris,
    against the State of Uttar Pradesh and others to bring out the
    question for consideration in these appeals.
                                                                      G
            The petitioner is a Public Limited Company and owns a
      sugar factory in Deoria known as Shree Sitaram Sugar Company
      Limited, Bhailtapur, U.P. The Sugar Factory is engaged in the
  "-1 manufacture of sugar by Vacuum Pan Process. It purchases
      sugarcane from the reserved area allocated to it under the
      provisions of U.P. (Regulation of Supply and Purchase) A.ct,    H
      1953 and Sugarcane Control Order, 196~.
    946                  SUPREME COURT REPORTS     [19861 2 s.c.R.


A           By a Notification dated September 29, 1973 issued under
                                                                    ~
     clause 3 of the Sugarcane (Control) Order, 1966, Central
     Government fixed the price of sugarcane for the factories
     situated in Uttar Pradesh. The minimum price fixed by this
     Notification for the area in which the petitioner's factory
     was situated was Rs. 8.38 per quintal. The cane growers felt
    agitated as according to them, the price fixed was much too
B    low. They, therefore, made representation to the U.P.
    Government and as a result thereof the U.P. Government)._
     intervened in the matter and fixed sugarcane price at Rs.
     12.25 per quintal for the Sugar Mills situated in the East
    Zone. According to the petitioner, however, the price fixed
    was exorbitant and as the petitioner and other sugar factories
c   were likely to suffer enormous loses, the Sugar Factorie~
    approached the State of U.P. and brought to its notice that-
    t.hey were not in a position to pay the higher sugarcane price.
    The stand of the appellant-petitioner and others is that the
    Chief Minister was satisfied with the demand made by the sugar
    factories and he assured them that the State Government would
D   grant remission in purchase tax to all the factories situated
    in the East Zone. By a Notification issued under section 14(1)
    of the Act, the State Government granted remission to the
    extent of 0.51 paise per quintal to 18 Sugar Factories
    mentioned in the area. By another Notification of the same
    date, two more factories were granted the remission. As the;.._
E   remission was not granted to the appellant-petitioner and to
    some other factories similarly situated, they filed petitions
    under Article 226 of the Constitution challenging the afore-
    said Notification issued by the State Government.

          The State of U.P. resisted the petitions and denied the
F   allegation of promisory estoppel and discrimination set up i~
    the writ petition. The High Court dismissed those petitions b~   r--
    the impugned judgment. They have now approached this Court by
    special leave and raised the same contention before this Court
    as was raised by them before the High Court.
G         In order to appreciate the points involved in the case,
    it would be appropriate at this stage to refer to the relevant
    provisions of the Act. Section 3 of the Act lays down that.,.
    there shall be levied a tax on the purchase of sugarcane by
    the owner of (a) a factory at the rate of twenty five paise
    per maund of sugarcane; and (b) a unit at the rate of fifty
H
            TULSIPUR SUGAR CO. v. SECY. GOVT. OF U.P. (MISRA, J.]    947

                                                                            A
      paise per quintal. Section 3-A(l) provides that no owner of a
    ~ factory shall remove, or cause to be removed any sugar
      produced in the factory either for consumption or for sale, or
      for manufacture of· any other cot111lodity in or outside the
      factory, until he has paid the tax levied under section 3, a
      sum specified under sub-section (2), sub-section (3) or sub-
                                                                            B
      section (4). The next relevant section with which we are
      directly concerned is section 14. It confers powers on the
      State Government to grant remission. As the decision of these
    ~ appeals hinges upon the interpretation of section 14( 1), it
      would be advisable to read the section in full. Section 14(1)
      reads :

                     "Section 14(1 ). The State Government, on being
                                                                            c
                     satisfied that it is necessary so to do in the
                     public interest, with a view to -

                     (a) encourage or regulate the supply of sugarcane
                     to, or its purchase by factories ; or
                                                                            D
                     (b) encourage the establishment of new factories
                     or

                     (c) assist factories established after the crushing
                     season 1957-58 and purchasing sugarcane yielding
                     low sugar recovery,

                     May by notification in the Gazette, remit, in whole
                     or in part, the tax payable under this Act, in any
                     assessment year, by every such factory falling
                     under Clause (a) or Clause (b) or Clause (c)."
                                                                            F
....Jr--        In the   instant case, the Notification remitting the
           purchase tax was issued by the State Government on being
           satisfied so to do in the public interest with a view to
           encourage and regulate the supply of sugarcane to, or its
           purchase by the factories in the State of Uttar Pradesh during
                                                                            G
           1973-74 assessment year.

                Dr. Chitale, appearing for the appellants with his usual
           candour and fairness, gave up the plea of promisory estoppel
           and confined his argument to discrimination made by the State
           Government in granting remission of tax to some factories and
                                                                            H
    948                  SUPREME COURT REPORTS      [19861 2 s.c.R.

A
    not to the appellants. According to him the encouragement and
    regulation as contemplated by clause (a) of section 14(1) of:>-
    the Act was necessary to all the factories in the eastern zone
    and not only to a fortunate few. But the U.P. Government has
    refused to extend the remission to the appellant illegally
    when clause (a) of section 14(1) contemplates giving benefit
B   to all the factories and there was no justification for
    singling out the appellants for treating them differently.

         The power conferred by clause (a) of section 14(1) of the,>-
    Act, the counsel contends, could not be confined to factories
    purchasing sugarcane yielding low recovery inasnuch as this
c   was a consideration foreign to the purpose contemplated by
    clause (a) of section 14(1) of the Act.

         The three clauses of sub-section (1) of section 14 of
    Act have different object and purpose. The purpose of granting
    the power of remission under clause (a) is "encouragement and
D   regulation" of the supply of sugarcane, the object of clause
    (b) is to encourage the establishment of new factories, and
    that of clause (c) ls to assist factories established after
    the crushing season 1957-58 and purchasing sugarcane yielding
    low recovery. Section 14(1) confers a discretionary power on
    the State Government. Reading section 14 as a whole, it cannot
E   be said that it was obligatory on the part of the State to ;.
    grant exemption or remission to all the factories. The
    discretion has been left to the State Government to decide
    whether any particular factory should be granted remission or
    not guided by the purpose set out in the relevant clause.
    Neither in clause (a) nor in any other clause of section 14(1) ~
F   of the Act, there is anything to indicate that the State
    Government must grant remission to all sugar factories for
    encouraging or regulating the supply of sugarcane.             ·.f..--
                                                                        1

         The reason is obvious. It may be that a factory situated
    in one area or falling in one category ls in need of this
G   remission while those which are not either situated in that
    area or do not fall in that category may not need it. lt is
    true that the power conferred by clause (a) ls to be exercised
    for the purpose of encouraging and regulating the supply of
    sugarcane but in exercising this power, the State Government ~
    may legitimately take the view that this purpose necessitates
H   the grant of remission only to the sugar factories purchasing
       TULSIPUR SUGAR CO. v. SECY, GOvr, OF U.P. [MISRA, J,]    949

                                                                       A
      sugarcane ylelding low recovery. By grantlng the remission
      only to sugar factories purchasing sugarcane of low recovery,
      the State Government ln our opinion has not violated Article
      14 of the Constitution. Nor is there any contravention of
      the provisions of clause (a) of section 14. The question of
      contravention would arlse if the grant of remission were         B
      founded on a ground extraneous to the provisions of section
      14. The Notifications issued by the State Government clearly
      show that the remission was granted with the sole object of
      encouraging and regulatlng the supply of sugarcane to these
      factories. The exerclse of the power by the State Government
      was in accordance with the provlstons of clause (a),
      sub-section (1) of section 14 and that by grantlng the           c
      remission to a few sugar factories it dld not frustrate the
y     purpose of the aforesaid provision. The use of expression
.,,   "encourage or regulate" clearly indicates that the factorles
      which really need encouragement or regulation should get the
      benefit of the remisslon under clause (a) of sub-sectlon (1)
      of section 14. The word "encourage" suggests that the State      D
      Government ls required to exercise the power where it feels
      that the sugar factory requlres the help for the purpose of
      making purchases of sugarcane. Similarly, the word "regulate"
      also shows that the said power can be exercised with a view to
       take measures to promote the sale of sugarcane. If the power
       conferred by clause (a) of sub-section (1) of section 14 has    E
       been exerclsed for the purpose of grantlng remlsslon to only
       those sugar factories which purchase sugarcane of l~
       recovery, there is nothing wrong in so doing.

           It was next contended by Dr. Chitale that the factories
      which had recovery of 8.5 or less had been granted the           F
      remission. Some of the appellants were also in simllar
      position and they have been refused unjustifiably and the
      State Government had dlscriminated between the factories
      falllng in the same group and thus the Notification lssued on
      January 25, 1975 suffered from the vice of Article 14 of the
      Constitution on that account also. This argument losses sight    G
      of the other clauses of the section, viz, clauses (b) and (c)
      of sub-section (l) of section 14. Clause (b) provides for
      encouraging the establishment of new factorles and clause (c)
      contemplates asslstance to factories established after
      crushing season 1957-58 and purchasing sugarcane yielding low
      sugar recovery. If the State Government had chosen to give       H
    950                   SUPREME COURT REPORTS      [!9861 2 s.c.R.

A
    remission to these factories because they fall under clause
    (c), some argument could have been advanced against the ~
    validity of the Notification on that basis. Under clause (c),
    remission is granted by way of support or aid to newly
    established factories to lesson the cost so that they could
    profitably compete in the market. The remission under clause
B   (c) has to be confined to new factories which is a different
    category of sugar factories. The considerations needed for
    exercising the power under clause (c) are different from those
    under clause (a) or (b). Considered from this aspect there is ~
    no discrimination at all.

c         Article 14 of the Constitution forbids class legislation
    but permits reasonable classification. It however l!llSt fulfil
    the twin requirements: (1) it must be founded on an
    intelligible differentia which distinguishes persons or things
    that are grouped together from others left out of the group,
    and (2) that the intelligible dif ferentia must have a
0   relationship to the object sought to be achieved by the
    Statute. If authority be needed, we may refer to Anant Mllls
    Co. Ltd. v. State of Gujarat &Ors., [!975] 3 S.C.R. 220.

         The remission was granted only to the factories where the
    recovery from the sugarcane was low to enable the factories to
E   make timely payments towards the cost of sugarcane and
    ~on-payment of the cane prices affecting the supply of cane to
    factories. It was in these circumstances that the Government
    granted remission to the factories which needed the help.

         The immediate factor affecting the economy is the
F   recovery of sugar from sugarcane and the sugar content in the
    cane produced goes a long way to determine the cost of sugar.
    Thus the sugar factories which were purchasing sugarcane
    yielding low recovery are distinguishable as a class
    separately from those which did not fall in it and there was a
    reasonable basis to classify those left out of that group.
G
         For the foregoing discussion, the appeals !lllSt fail. They
    are accordingly dismissed. In the circumstances of the case,
    however, the parties shall bear their own costs.

         All matters pending in this Court challenging the
H   constitutional validity of the two Notifications dated January
    25, 1975, will stand disposed of in terms of this judgment.

    P. S.S.                                       Appeals dismissed.