Diamond Sugar Mills Ltd., and another
Vs. The State Of Uttar Pradesh and another  INSC 292 (13 December 1960)
GUPTA, K.C. DAS IMAM, SYED JAFFER KAPUR, J.L.
DAYAL, RAGHUBAR AYYANGAR, N. RAJAGOPALA
CITATION: 1961 AIR 652 1961 SCR (3) 242
CITATOR INFO :
RF 1966 SC 416 (3,5,11) RF 1967 SC1801 (18) C
1968 SC 599 (13) D 1969 SC 903 (23) RF 1972 SC 87 (5) RF 1972 SC 425 (27) D
1976 SC 182 (24) R 1979 SC 537 (5) F 1979 SC1972 (4,5) E 1980 SC 286 (18) RF
1981 SC 991 (11) RF 1989 SC 516 (22)
Sugar Cane-Imposition of cess-Enactment
taxing entry of cane into factory--Constitutionality of-"Local area",
Connotation of-Constitution of India, Sch. VII, List II, Entry 52-U. P.
Sugarcane Cess Act, 1956 (U. P. XXII of 1956), s. 3.
Entry 52 of List II of the Seventh Schedule
to the Constitution empowered State Legislatures to make a law relating to
"taxes on the entry of goods into a local area for consumption, use or
sale therein". The U. P. Legislature passed the U. P. Sugarcane Cess Act,
1956, which authorised the State Government to impose a cess on the entry of
cane into the premises of a factory for use, consumption or sale therein. The
appellant contended that the premises of a factory was not a 'local area'
within the meaning of Entry 52 and the Act was beyond the competence of the
243 Held, (per Imam, Kapur, Das Gupta and
Raghubar Dayal, jj.) that the impugned Act was beyond the competence of the
legislature and was invalid. The premises of a factory was not a "local
area" within the meaning of Entry 52. The proper meaning to be attached to
the words "local area" in Entry 52 was an area administered by a
local body like a municipality, a district board, a local board, a union board,
a Panchayat or the like.
In re: the Central Provinces & Beray Act
No. XIV of 1938,  F.C.R. 18, Navinchandra Mafatlal v. The Commissioner of
Income-tax, Bombay City,  1 S.C.R. 829, State of Madras v. Gannon
Dunkerley & Co., Ltd.,  S.C.R. 379 and South Carolina v. United
States, (1905) 19 U. S. 437, referred to.
Emperor v. Munnalal, I.L.R. 1942 All. 302,
Per Ayyangar, J.-The Act was invalid only in
so far as it sought to levy a tax on cane entering a factory from within the
same local area in which the factory was situate and was valid in other cases.
It was permissible to read the Act so as to confine the tax to the limitations
subject to which it could be constitutionally levied and to strike down that
portion which out stepped the limitations.
In re Hindu Women's Rights to Property Act,
1937,  F.C.R. 12 and Blackwood v. Queen, (1882) 8 A.C. 82, applied.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 35 of 1959.
Appeal from the judgment and decree dated October 29, 1956, of the Allahabad High Court in Writ Petition No. 327 of 1956.
H. N. Sanyal, Additional Solicitor-General of
India, J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, for
G. C. Mathur and C. P. Lal, for the
1960, December 13. The Judgment of Imam,
Kapur, Das Gupta and Dayal, JJ. was delivered by Das Gupta, J. Ayyangar, J.
delivered a separate judgment.
DAS GUPTA, J.-This appeal is against an order
of the High Court of Judicature at Allahabad rejecting the appellants' application
under Art. 226 of the Constitution. The first appellant is the Diamond Sugar
Mills Ltd., a public limited company owning and operating a sugar factory at
Pipraich in the District Gorakhpur, for the manufacture of sugar from 244
sugarcane. The second appellant is the Director of the company. By this
application the appellants challenged the imposition of cess on the entry of
sugarcane into their factory. On February 24, 1956, when the application was
made the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P.
XXIV of 1953), was in force. Section 20 of this Act gave to the Governor of U.
P. the power to impose by notification "a cess not exceeding 4 annas per
maund on the entry of sugarcane into an area specified in such notification for
consumption, use or sale therein".
This Act it may be mentioned had taken the
place of an earlier Act, the U. P. Sugar Factories Control Act, 1938, s. 29 of
which authorised the Governor of U. P. to impose by a notification after
consultation with the Sugar Control Board under the Act "a cess not
exceeding 10 per cent of the minimum price, if any, fixed under s. 21 or 4
annas per maund whichever was higher on the entry of sugarcane into a local
area specified in such notification for consumption, use or sale therein".
Notifications were issued under this provision for different crushing seasons
starting from 193839, the last notification issued thereunder being for the
crushing season of 1952-53. These notifications set out a number of factories
in a schedule and provided that during 1952-53 crushing season cess at a rate
of three annas per maund shall be levied on the entry of all sugarcane into the
local areas comprised in factories mentioned in the schedule for consumption,
use or sale therein. Act No. XXIV of 1953 repealed the 1938 Act. The first
notification under the provisions of s. 20 of the 1953 Act was in these terms:"In
exercise of the powers conferred by subsection (1) of section 20 of Uttar
Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953; (U. P. Act No.
XXIV of 1953) the Governor is pleased to declare that during the 1954-55
crushing season, a cess at a rate of three annas per maund shall be levied on
the entry of all sugar cane into the local areas comprised in the factories
mentioned in the Schedule, for the consumption, use or sale therein".
245 Similar notifications were also issued on
October 23, 1954, for the crushing season 1954-55 and on November 9, 1955, for
the crushing season 1955-56. The appellants' factory was one of the factories
mentioned in the schedule of all these notifications. On the date of the
application, i.e., February 24, 1956, a sum. of Rs. 2,59,644-9-0 was due from
the first appellant and a further sum of Rs. 2,41,416-3-0 as liability on
account of cess up to the end of January, 1956, also remained unpaid.
The appellant contended on various grounds
that s. 20 of Act XXIV of 1953 was unconstitutional and invalid and prayed for
the issue of appropriate writs directing the respondents the State of U. P. and
the Collector of Gorakhpur not to levy and collect cess on account of the
arrears of cess for the crushing season 1954-55 and in respect of the crushing
season 1955-56 and successive crushing seasons and to withdraw the
notifications dated October 23, 1954, and November 9, 1955 , which have been
During the pendency of this application under
Art. 226 before the Allahabad High Court the U. P. Legislature enacted the U.
P. Sugarcane Cess Act, 1956 (U. P. XXII of 1956), repealing the 1953 Act.
Section 3 of this Act as originally enacted was in these words:"The State
Government may by notification in the official gazette impose a cess not
exceeding four annas per maund on the entry of the cane into the premises of a
factory for use, consumption or sale therein:
Provided that the State Government may like.
wise remit in whole or in part such cess in
respect of cane used or to be used in factory for any limited purpose specified
in the notification.
Explanation:-If the State Government, in the
case of any factory situate outside Uttar Pradesh, so declare, any place in
Uttar Pradesh set apart for the purchase 'of cane intended or required for use.
consumption or sale in such factory shall be deemed to be the premises of the
(2) The cess imposed under sub-section (1)
shall 246 be payable by the owner of the factory and shall be paid on such date
and at such place as may be prescribed.
(3) Any arrear of cess not paid on the date
prescribed under sub-section (2) shall carry interest at 6 per cent. per annum
from such date to date of payment." There is a later amendment by which
the words "four annas" have been altered to "twenty-five naye
paise" and the words "Gur, Rab or Khandsari Sugar Manufacturing Unit"
have been added after the words "factory" in sub-section (1). These
amendments are however not relevant for the purpose of this appeal.
Section 9 of this Act repealed s. 20 of the
Sugar Cane (Regulation of Supply and Purchase) Act, 1953. Sub-sections 2 and 3
of s. 9 are important. They are in these words:"2. Without prejudice to
the general application of section 24 of the U.P. General Clauses Act, 1904,
every notification imposing cess issued and every assessment made (including
the amount of cess collected) under or in pursuance of any such notification,
shall be deemed a notification issued, assessment made and cess collected under
this Act as if sections 2, 3 and 5 to 8 had been in force at all material
3. Subject as provided in clause (1) of
Article 20 of the Constitution every notification issued cess imposed and act
or thing done or omitted between the 26th January, 1950, and the Appointed date
in exercise or the purported exercise of a power under section 29 of the U. P.
Sugar Factories Control Act, 1938, or of s. 20 of the U. P.
Sugarcane (Regulation of Supply and Purchase)
Act, 1953, which would have been validly and properly issued, imposed, done or
omitted if the said sections had been as section 3 of this Act, shall in law be
deemed to be and to have been validly and properly imposed and done, any
judgment, decree or order, of any court notwithstanding." The position
after the enactment of the U. P.
247 Sugarcane Cess Act, 1956, was that the
imposition and assessment of cess that had already been made under the 1953 Act
would operate as if made under the 1956 Act. In view of this the first
appellant, the Diamond Sugar Mills Ltd., prayed to the High Court for
permission to raise the question of constitutionality and validity of the 1956
It also prayed for the issue of a writ in the
nature of mandamus directing the respondents not to levy cess upon the
petitioners-appellants under this new Act, the U. P. Sugarcane Cess Act, 1956.
This application was allowed and the High
Court considered the question whether s. 3 of the U. P. Sugarcane Cess Act,
1956, 'empowering the State Government to impose a cess not exceeding four
annas per maund on the entry of the cane into the premises of a factory for the
consumption, use or sale therein was a valid law.
The principal ground urged in support of the
appellants' case was that the law as enacted in s. 3 was invalid and that it
was beyond the legislative competence of the State Legislature. Several other
grounds including one that the provisions of the section went beyond the
permissible limits of delegated legislation were also raised. All the grounds
were negatived by the High Court which accordingly rejected the appellants'
petition. The High Court however gave a certificate under Article 132(1) and
also under Art.
133(1)(c) of the Constitution and on the
basis of that certificate the present appeal has been filed.
Of the several grounds urged before the High
Court only two are urged before us in appeal. One is that the law was invalid,
being beyond the legislative competence of the State legislature; the other is
that in any case the provision giving the Governor power to levy any cess not
exceeding 4 annas without providing for any guidance as to the fixation of the
particular rate, amounted to excessive delegation, and was accordingly invalid.
The answer to the question whether the impugned law was within or beyond the
legislative competence of the State legislature depends on whether the law
falls under Entry 52 of the State List248 List II of the Seventh Schedule to
the Constitution. It is quite clear that there is no other entry in either the
State List or the Concurrent List under which the legislation could have been
made. Entry 52 is in these words:-"Tax on the entry of goods into a local
area for consumption, use or sale therein". Section 3 of the impugned Act
which has already been set out provides for imposition of a cess on the entry
of sugarcane into the premises of a factory for use, consumption or sale
therein. Is the "premises of a factory" a local area within the
meaning of the words used in Entry 52? If it is the legislation was clearly
within the competence of the State legislature; if it is not, the law was
beyond the State legislature's competence and must be struck down as invalid.
In considering the meaning of the words
"local area" in entry 52 we have, on the one hand to bear in mind the
salutary rule that words conferring the right of legislation should be
interpreted liberally and the powers conferred should be given the widest amplitude;
on the other hand we have to guard ourselves against extending the meaning of
the words beyond their reasonable connotation, in. an anxiety to preserve the
power of the legislature. In Re the Central Provinces & Berar Act No. XI V
of 1938 (1) Sir Maurice Gwyer, C. J., observed:"I conceive that a broad
and liberal spirit should inspire those whose duty it is to interpret it; but I
do not imply by this that they are free to stretch or pervert the language of
the enactment in the interests of any legal or constitutional theory, or even
for the purpose of correcting any supposed errors".
Again, in Navinchandra Mafatlal v. The
Commissioner of Income Tax, Bombay City (2) Das, J. (as he then was) delivering
the judgment of this Court observed:"........... The cardinal rule of
interpretation however, is that words should be read in their ordinary, natural
and grammatical meaning subject to this rider that in construing words in a
constitutional enactment conferring legislative power the most (1) 
F.C.R. 18, 37.
(2)  1 S.C.R. 829.
249 liberal construction should be put upon
the words so that the same may have effect in their widest amplitude." Our
task being to ascertain the limits of the powers granted by the Constitution,
we cannot extend these limits by way of interpretation. But if there is any
difficulty in ascertaining the limits, the difficulty must be resolved so far
as possible in favour of the legislative body. The presumption in favour of
constitutionality which was stressed by the learned counsel for the respondents
does not take us beyond this.
On behalf of the appellants it has been urged
that the word "local area" in its ordinary grammatical meaning is
never used in respect of a single house or a single factory or a single plot of
land. It is urged that in ordinary use the words "local area" always
mean an area covering a specified region of the country as distinguished from
the general area. While it may not be possible to say that the words
"local area" have acquired a definite and precise meaning and the
phrase may have different connotations in different contexts, it seems correct
to say that it is seldom, if ever, used to denote a single house or a single
The phrase appears in several statutes, some
passed by the Central Legislature and some by the Provincial or State
Legislatures; but in many of these the words have been defined. These
definitions being for the peculiar purpose of the particular statute cannot be
applied to the interpretation of the words "local area" as used in
the Constitution. Nor can we derive any assistance from the judicial
interpretation of the words "local area" as used in the Code of
Criminal Procedure or other Acts like Bengal Tenancy Act as these
interpretations were made with reference to the scope of the legislation in
which the phrase occurs. Researches into dictionaries and law lexicons are also
of 'no avail as none of these give the meaning of the phrase "local
area". What they say as regards the meaning of the word "local"
offers no guidance except that it is clear that the word "local" has
different meanings in different contexts.
32 250 The etymological meaning of the word
"local" is "relating to" or "pertaining to" a
place. It may be first observed that whether or not the whole of the State can
be a "local area", for the purpose of Entry 52, it is clear that to
be a "local area" for this purpose must be an area within the State.
On behalf of the respondents it is argued that "local area" in Entry
52 should therefore be taken to mean "any part of the State in any place
therein". So, the argument runs, a single factory being a part of the
State in a place in the State is a "local area". In other words,
"local area" mean "any specified area inside the State".
The obvious fallacy of this argument is that
it draws no distinction between the word "area" standing by itself
and the phrase "local area". If the Entry had been " entry of
goods into any area of the State.............. some area would be specified for
the purpose of the law levying the cess on entry. If the Constitutions were
empowering the State Legislatures to levy a cess on entry of goods into any
specified area inside the state the proper words to use would have been
"entry of goods into any area...............
" it would be meaningless and indeed
incorrect to use the words they did use "entry of goods into a local
area". The use of the words "local area" instead of the word
"area" cannot but be due to the intention of the Constitution makers
to make sure that the power to make laws relating to levy on entry of goods
would not extend to cases of entry of goods into any and every part of the
state from outside that part but only to entry from outside into such portions
of the state as satisfied the description of "local area".
Something definite was sought to be expressed
by the use of the word "local" before the word "area": The
what exactly was sought to be expressed? In
finding an answer to the question it is legitimate to turn to the previous
history of constitutional legislation in the country on this subject of giving
power to legislature to levy tax on the entry of goods. In the State of Madras
v. Gannon Dunkerley & Co., Ltd.(1) (1)  S.C.R. 379.
251 this Court referred with approval to the
statement of law in Halsbury's Laws of England, Vol. II, para. 157, p. 93, that
the existing state of English law in 1867 is relevant for consideration in
determining the meaning of the terms used in the British North America Act in
conferring power and the extent of that power. This has necessarily to be so as
in the words of Mr. Justice Brewer in South Carolina v. United States (1)
"to determine the extent of the grants of power, we must, therefore place
ourselves in the position of the men who framed and adopted the Constitution,
and inquire what they must have understood to be the meaning and scope of those
grants." Turning now to the previous legislative history we find that in
the Government of India Act, 1935, Entry 49 of the Legislative List (List II of
the 7th Schedule) was in the same words as Entry 52 of the Constitution except
that instead of the words "taxes" as in Entry 52 of List II of the
Constitution, Entry 49 List II of the Government of India Act, used the word
"cess". In Government of India Act, 1915, the powers of the
provincial legislatures were defined in s. 80A. 'Under clause (a) of the third
subsection of this section the local legislature of any province has with the
previous sanction of the Governor General power to make or take into
consideration any law imposing or authorising the imposition of any new tax
unless the tax was a tax scheduled as exempted from this provision by rules
made under the Act.
The third of the Rules that were made in this
matter under Notification No. 311/8 dated December 18, 1920, provided that the
legislative council of a province may without the previous sanction of the
Governor-General make and take into consideration any law imposing or
authorising a local authority to impose for the purpose of such local authority
any tax included in Schedule II of the Rules. Schedule II contained 11 items of
which items 7 and 8 were in these words:
7. An octroi
8. A terminal tax on goods imported into a
local (1)  199 U.S. 437.
252 area in which an octroi was levied on or
before 6th July, 1917.
Item 8 was slightly modified in the year 1924
by another notification as a result of which it stood thus: 8. A terminal tax
on goods imported into or exported from a local area save where such tax is
first imposed in a local area in which an octroi was levied on or before July
Octroi is an old and well known term
describing a tax on the entry of goods into a town or a city or a similar area
for consumption, sale or use therein. According to the Encyclopedia Britannica
octroi is an indirect or consumption tax levied by a local political unit,
normally the commune or municipal authority, on certain categories of goods on
their entry into its area. The Encyclopedia Britannica describes the octroi tax
system in France (abolished in 1949) and states that commodities were
prescribed by law and were divided into six classes and for all the separate
commodities within these six groups maximum rates of tariff were promulgated by
presidential decree, specific rates being fixed for the three separate sorts of
octroi area, established on the basis of population, namely, communes having
(1) less than 10,000 inhabitants, (2) from 10,000 to 50,000 and (3) more than
50,000. While we are not concerned here with other features of the octroi tax
system, it is important to note that the tax was with regard to the entry of
goods into the areas of the communes which were local political units.
According to the Shorter Oxford English Dictionary "commune" in
France is a small territorial division governed by a maire and municipal
council and is used to denote any similar division elsewhere.
The characteristic feature of an octroi tax
then was that it was on the entry of goods into an area administered by a local
body. Bearing in mind this characteristic of octroi duty we find on an
examination of items 7 and 8 of the Schedule Rules mentioned above that under
the Government of India Act, 1919, the local legislature of a Province could
without the previous sanction of the Governor-General impose a 253 tax-octroi--for
entry of goods into an area administered by a local body, that is, a local
government authority and the area in respect of which such tax could be imposed
was mentioned in item 8 as local area.
It is in the background of this history that
we have to examine the use of the word "local area" in item 49 of
List II of the Government of India Act, 1935. Here the word "octroi"
has given place to the longer phrase "cesses on the entry of goods into a
local area for consumption, use or sale therein." It was with the
knowledge of the previous history of the legislation that the
Constitution-makers set about their task in preparing the lists in the seventh
schedule. There can bring title doubt therefore that in using the words
"tax on the entry of goods into a local area for consumption, use or sale
therein", they wanted to express by the words "local area"
primarily area in respect of which an octroi was leviable under item 7 of the
schedule tax rules, 1920-that is, the area administered by a local authority
such as a municipality, a district Board, a local Board or a Union Board, a
Panchayat or somebody constituted under the law for the governance of the local
affairs of any part of the State. Whether the entire area of the State, as an
area administered by the State Government, was also intended to be included in
the phrase "local area", we need not consider in the present case.
The only other part of the Constitution where
the word "local area" appears is in Art. 277. That Article is in
these words:"Any taxes, duties, cesses or fees which, immediately before
the commencement of this Constitution, were being lawfully levied by the
Government of any State or by any municipality or other local authority or body
for the purposes of the State, municipality, district, or other local area may,
notwithstanding that these taxes, duties, cesses or fees are mentioned in the
Union List, continue to be levied and to be applied to the same purposes until
provision to the contrary is made by Parliament by law." 254 There can be
little doubt that "local area" in this Article has been used to
indicate an area in respect of which there is an authority administering it.
While the scope of Article 277 is different
from the scope of entry 52 so that no direct assistance can be obtained in the
interpretation of the words "local area" in entry 52 from this
meaning of the words in Art. 277 it is satisfactory to find that the meaning of
"local area" in entry 52 which appears reasonable on a consideration
of the legislative history of the matter is also appropriate to this phrase in
its only other use in the Constitution.
Reliance was sought to be placed by the
respondents on a decision of the Allahabad High Court in Emperor v. Munnalal
(1) where the word "local area" as used in s. 29 of the U.
P. Sugar Factories Control Act, 1938, fell to
That section, as we have already mentioned,
authorised the Governor of U. P. to impose by a notification, after consulting
the Sugar Control Board under the Act, a cess on the entry of sugarcane into a
local area specified in such notification for consumption, use or sale therein.
The notifications which were issued under this provision set out a number of
factories for the levy of a cess at the rate of three annas per maund on entry
of all sugarcane into the local area comprised in the factories mentioned in
the schedule for consumption, use or sale therein. Section 29 was clearly
within the words of entry 49 of List 11. The question that arose before the
Court was whether the specification of certain factories as local areas was
valid law. The learned Judge appears to have proceeded on the basis that the
Governor had notified the area comprised in 74 factories as one "local
area" and held that once this was 'done the entire area covered by all
these factories should be considered as one statutory local area. It appears to
us that the learned Judge was not right in thinking that the area comprised in
74 factories was notified as one local area. What appears to have been done was
that the area of each factory was being notified as a local area for the
purpose of the Act. Proceeding on (1) I.L.R. 1942 All. 302.
255 the basis that the area comprised in the
74 factories was notified as one local area the learned Judge addressed himself
to the question whether this entire area was a local area within the meaning of
the Act. He appears to have accepted the contention that the word local area
was used in the sense of an administrative unit, but, says he, the
administration need not be political, it may be industrial and educational or
it may take any other form of governmental activity. "I cannot see,"
the learned Judge observed, "why it is not open to the provincial
government or the provincial legislature to make an industrial survey of the
province and to divide up the entire province into industrial areas or factory
areas or mill areas or in any other kind of areas, and each one of these areas
may be notified and be treated as a local area. And once such areas come into
existence and remain in operation they can be regarded as local areas within
the meaning of entry No. 49 of List II in which a cess may be levied".
Even if this view were correct it would be of
no assistance to the respondents. It is no authority for the proposition that the
area of one single factory is a local area within the meaning of entry 49. We
think however that the view taken by the learned Judge is not correct.
It is true that when words and phrases
previously interpreted by the courts are used by the Legislature in a later
enactment replacing the previous statute, there is a presumption that the
Legislature intended to convey by their use the same meaning which the courts
had already given to them. This presumption can however only be used as an aid
to the interpretation of the later Statute and should not be considered to be
conclusive. As Mr. Justice Frankfurter observed in Federal Commissioner v.
Columbia B. System (1) when considering this doctrine, the persuasion that lies
behind the doctrine is merely one factor in the total effort to give fair
meaning to language. The presumption will be strong where the words of the
previous statute have received a settled meaning by a (1) 311 U.S. 131.
256 series of decisions in the different
courts of the country;
and particularly strong when such
interpretation has been made or affirmed by the highest court in the land. We
think it reasonable to say however that the presumption will naturally be much
weaker when the interpretation was given in one solitary case and was not
tested in appeal. After giving careful consideration' to the view taken by the
learned Judge of the Allahabad High Court in Emperor v.
Munnalal (supra) about the meaning of the
words "local area" and proper weight to the rule of interpretation
mentioned above, we are of opinion that the Constitution-makers did not use the
words "local area" in the meaning which the learned Judge attached to
it. We are of opinion that the proper meaning to be attached to the words
"local area" in Entry 52 of the Constitution, (when the area is a
part of the State imposing the law) is an area administered by a local body
like a municipality, a district board, a local board, a union board, a
Panchayat or the like. The premises of a factory is therefore not a "local
It must therefore be held that s. 3 of the U.
P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the
entry of sugarcane into the premises of a factory did not fall within Entry 52
of the State List. As there is no other Entry in either State List or
Concurrent List in which the impugned law could fall there is no escape from
the conclusion that this law was beyond the legislative competence of the State
Legislature. The law as enacted in s. 3 of the U. P. Sugarcane Cess Act, 1956,
must therefore be struck down as invalid.
It may be mentioned that this is not a case
where the law is in two parts and one part can be severed from the other and
saved as valid while striking down the other portion which is invalid. Indeed,
that was not even suggested by the learned counsel for the respondents. It is
unnecessary for us to consider whether if s. 3 had instead of authorising levy
of cess for entry of sugarcane into the premises of a factory for use,
consumption or sale therein had authorised the imposition of a cess on entry of
cane into a local area for 257 consumption, sale or use in a factory that would
have been within Entry 52. It is sufficient to say that we cannot rewrite the
law for the purpose of saving a portion of it.
Nor is it for the Court to offer any
suggestion as to how the law should be drafted in order to keep it within the
limits of legislative competence. As the law enacted by the Legislature stands
there is no escape from the conclusion that this entire law must be struck down
In view of this conclusion on the first
ground raised on behalf of the appellant it is unnecessary to consider the
other ground raised in the appeal that section 3 has gone beyond the
permissible limits of delegated legislation.
As we have held that the impugned legislation
was beyond the legislative competence of the State Legislature the appellants
are entitled to the relief asked for. We accordingly allow the appeal, set
aside the order passed by the High Court and order the issue of a writ
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 in respect of the crushing season 1955-56 and successive crushing seasons
under the U.
P. Sugarcane Cess Act, 1956.
The appellants will get their costs here and
AYYANGAR, J.-I have had the privilege of
perusing the judgment just now pronounced, but with the utmost respect regret
my inability to agree with the order proposed.
The learned Judges of the High Court held
that the impugned enactment was within the scope of Entry 52 of the State
Legislative List in Schedule 7 to the Constitution, by placing reliance on the
following passage in the Judgment of Das, J. in Emperor v. Munna Lal (1) where
the learned Judge said:
"Indeed I cannot see why it is not open
to Provincial Government or Provincial Legislature to make an industrial survey
of the Province and to divide up the entire province into industrial areas (1)
I.L.R.  All. 302, 328.
33 258 or factory areas or mill areas or in
any other kind of areas, and each one of these areas may be notified and be
treated as a local area.
And once such areas come into existence and
remain in operation they can be regarded as local areas within the meaning of
Entry No. 45 of List II in which a cess may be levied." In other words,
the view which they favoured was to read the expression "local area".
practically to mean any "area" entry into which was by the relevant
fiscal statute, made the subject of taxation. In my opinion that is not a
correct interpretation of the entry and agree with my learned brethren that
having regard to the historical material, which has been exhaustively set out
and discussed in their judgment, the word "local area" can in the
entry designate only a predetermined local unit--a unit demarcated by statutes
pertaining to local self government and placed under the control and
administration of a local authority such as a municipality, a cantonment, a
district or a local board, an union or a panchayat etc. and not any region,
place or building within the State which might be defined, described or
demarcated by the State's taxing enactment as an area entry into which is made
But there my agreement stops and we diverge.
In my opinion, this construction of the expression "local area" in
entry 52 does not automatically result in the invalidity of the impugned
enactment and of the levy under it, but the extent to which, if any the
charging section exceeds the power conferred by the entry would depend on
matters which have not been the subject of investigation, and it is this point
that I shall elaborate in the rest of this judgment.
It is unnecessary for the purposes of this
case and possibly even irrelevant, to determine the precise scope, content and
incidents of an "octroi" duty except that in the context in which it
appeared in the Scheduled Taxes Rules framed tinder the Government of India
Act, 1919, the expression signified a tax levied on entry into an area of an
unit of local administration. It is unprofitable to canvass the question 259
whether a local authority empowered at that date to levy an 'octroi' might or
might not lawfully confine the levy to entry for consumption alone, to use
alone or for sale alone.
But when that entry was refashioned and
enacted as item 49 of the Provincial Legislative List under the Government of
India Act, 1935 (in terms practically identical with Entry 52 in the State
Legislative List under the Constitution), the matter was no longer left in
doubt. The new item ran:
"Cesses on the entry of goods into a
local area for consumption, use or sale therein".
In connection with the use of the words
"for consumption, use or sale therein" in the item three matters
deserve notice: (1) Where the entry into the "local area" was not for
one of the purposes set out in it, viz., for consumption, use or sale therein,
but the entry was, for instance in the course of transit or for warehousing
during transit, the power was not available; in other words, a mere entry could
not per se be made a taxable event. (2) It was sufficient if the entry was for
any one of the three purposes; the use of the disjunctive 'or' making this
(3) The passage of goods from one portion of
a local area to another portion in the same local area, would not enable a tax
to be levied, but the entry has to be "into the local area", i.e.,
from outside the local area.
It is the second and the third of the above
features that call for a more detailed examination in the context of the points
requiring decision in the present case.
With this background I shall analyse the
terms of s. 3(1) of the Act (United Provinces Act XXII of 1956) to ascertain
where precisely the provision departs from the scope or content of entry 52. I
will read that section which runs:
"3. (1). The State Government may by
notification in the official gazette impose a cess not exceeding four annas per
maund on the entry of the cane into the premises of a factory for use,
consumption or sale therein:
Provided that the State Government may
likewise remit in whole or in part such cess in respect 260 of cane used or to
be used in factory for any limited purpose specified in the notification.
Explanation:-If the State Government, in the
case of any factory situate outside Uttar Pradesh, so declare, any place in
Uttar Pradesh set apart for the purchase of cane intended or required for use,
consumption or sale in such factory shall be deemed to be the premises of the
factory." Leaving the Explanation for-the present, there are two matters
which require advertence: (1) The first was the point emphasised by Mr. Sanyal
for the appellant, that entry into the premises of a factory "for the
purpose of consumption, use or sale therein" is fastened on as the taxable
event treating the factory premises as if that were itself a "local
area". (2) Apart from entry into factory premises for use, consumption or
sale therein, entry of the cane into other places within the local area, i.e.,
into "unit for local administration" is not made the subject of tax
The second of the above matters cannot
invalidate the legislation, because a power to tax is merely enabling, and
apart from any question of discrimination under Art.
14--which does not arise for consideration
before us-the State is not bound to tax every entry of goods into "a local
area". Again, the tax could undoubtedly be confined to entry of goods into
a "local area" for consumption or use in particular modes; in other
words, there could be no legal objection to the tax levy on the ground that it
does not extend to entry of goods into "a local area" for every type
of consumption or use.
In my judgment the real vice of the charging
s. 3(1) lies not in that it Confines the levy to cases where the entry is for
purposes of consumption etc. in a factory but 'in equating the premises of a
factory with "a local area" entry of goods into which, occasions the
tax. Another way of expressing this same idea would be to say that whereas
under Entry 52 the movement of goods from within the same local.
area in which the factory is situated into
the premises of the factory, could not be the subject of tax liability, because
there 261 would in such cases be no entry of the goods "into a local
area" under s. 3(1) of the Act, not merely is the movement of goods into
the factory from outside the 'local area' in which the factory is situate made
the subject of tax, but the words used are capable of imposing the tax even in
those cases where the entry into the factory is from within the same local
What I have in mind may be thus illustrated:
If factory A situated in Panchayat area B gets its supply of cane from outside
the Panchayat area, the levy of the tax on the entry of the cane into the
Panchayat area would clearly be covered by entry 52. The State is not bound to
tax every entry of the cane into the area but might confine the levy to the
entry of the cane for the purpose of consumption in a factory. The tax might be
levied and collected at the border of the Panchayat area but there is no legal
obligation to do so, and the place at which the entry of the goods is checked
and the duty realised is a matter of administrative machinery which does not
touch on the validity of the tax imposition. It would thus not detract from the
validity of the tax if by reason of convenience for effecting collection, the
tax was levied at the stage of entry into the premises of a factory. So long,
therefore, as the cane which enters a factory for the purpose of consumption
therein comes from outside that local unit of administration in which the
factory is situated, in my opinion it would be covered by the words of entry 52
and well within the legislative competence of the State Government. 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 steps this limitation.
262 The next question is whether this is a
case where the valid and invalid portions are so inextricably interwoven as to
leave the Court no option but to strike down the entire enactment as invalid as
beyond the legislative competence of the State, or whether the charging
provision could be so read down as to leave the valid portion to operate. In my
opinion, what is involved in the case before us is not any problem of
severance, but only of reading down. Before taking up this question for
discussion two objections to the latter course have to be considered. The first
is that this aspect of the matter was not argued before us by learned Counsel
for the State as a ground for sustaining the validity of the legislation. In my
judgment this is not an objection that should stand in the way of the Court
giving effect to a view of the law if that should appear to be the correct one.
In making this observation one has necessarily to take into account the fact
that legislation in nearly this form, has been in force in the State for over
twenty years, and though its vires was once questioned in 1942, that challenge
was repelled and the tax levy was held valid and was being collected during all
this period. The sugarcane cess has been a prime source of State Revenue for
this length of time and this Court should not pronounce such a legislation
invalid unless it could not be sustained on any reasonable ground and to any
The second ground of objection which has
appealed to my learned brethren but with which, I regret, I cannot concur is
that it would require a rewriting of the Act to sustain it.
Now if the first paragraph of sub-s. (1) of
s. 3 bad read:
"The State Government may by
notification in the official gazette impose a cess not exceeding four annas per
maund on the entry of the cane into the premises of a factory (from outside the
local area in which the factory premises were situate) for use, consumption or
sale therein:" (The words in brackets added by me) 263 the levy would be
entirely within entry 52 even according to my learned brethren. The question is
whether the implication of these words would be a rewriting of the provision or
whether it would be merely reading the existing provision so as to confine it
to the powers conferred upon the State Legislature by the relevant legislative
entry. In view of the strong opinion entertained by my learned brethren, I have
given the matter the utmost consideration, but I feel that the words which I
have suggested are a permissible mode of construction of a statute by which
wide words of an enactment which would cover an event, contingency or matter
within legislative power as well as matters not within it, are read as confined
to those which the law making only had authority to enact. In my judgment the
opinion of the Federal Court in In re Hindu Women's Rights to Property Act,
1937 (1), affords a useful analogy to the present case. The enactment there
impugned provided for the devolution or succession to "property" in
general terms which would have included both agricultural as well as
nonagricultural property, whereas the Central Legislature which enacted the law
had no power to deal with succession to agricultural property. The contention
urged before the Court was that by the use of the expression
"property", the legislature had evinced an intention to deal with
property of every type and that it would be rewriting the enactment and not
carrying out the legislative intent if the reference to "property" in
the statute were read as "property other than agricultural property".
Dealing with this contention, Sir Maurice Gwyer, delivering the opinion of the
"No doubt if the Act does affect
agricultural land in the Governors 'Provinces, it was beyond the competence of the
Legislature to enact it: and whether or not it does so must depend upon the
meaning which is to be given to the word "property" in the Act. If
that word necessarily and inevitably comprises all forms of property, including
agricultural land, then clearly the Act went beyond the powers (1) 
264 of the Legislature; but when a
Legislature with limited and restricted powers makes use of a word of such wide
and general import, the presumption must surely be that it is using it with
reference 'to that kind of property with respect to which it is competent to
legislate and to no other. The question is thus one of construction, and unless
the Act is to be regarded as wholly meaningless and ineffective, the Court is
bound to construe the word "property" as referring only to those
forms of property with respect to which the Legislature which enacted the Act
was competent to legislate; that is to say, property other than agricultural
land.............. The Court does not seek to divide the Act into two parts,
viz., the part which the Legislature was competent, and the part it was
incompetent, to enact. It holds that, on the true construction of the Act and
especially of the word "property" as used in it, no part of the Act
was beyond the Legislature's powers." The Court accordingly held that the
Hindu Women's Rights to Property Act, 1937, applied to non-agricultural
property and so was valid. In this connection it might be interesting to refer
to the decision in Blackwood v. Queen (1) which Sir Maurice Gwyer, C.J.,
referred to with approval. That case related to the validity of a duty imposed
by the Legislature of Victoria (Australia) on the personal estates of deceased
person. The learned Chief Justice observed "The Judicial Committee construed
the expression "personal estate" occurring in the statute to refer
only to: "such personal estate as the colonial grant of probate conferred
jurisdiction on the personal representatives to administer, whatever the
domicile of the testator might be, that is to say, personal estate situate
within the Colony, in respect of which alone the Supreme Court of Victoria had
power to grant probate: Their Lordships thought that "in imposing a duty
of this nature the Victorian Legislature also was contemplating the property
which was under its own hand, and did not intend to levy a tax in respect of
property (1)  8 A.C. 82.
265 beyond its jurisdiction". And they
held that "the general expressions which import the contrary ought to
receive the qualification for which the appellant contends, and that the
statement of personal property to be made by the executor under s. 7(2) of the
Act should be confined to that property which the probate enables him to
To confine the tax to the limitations subject
to which it could, under the Constitution, be levied is, in my opinion, not an
improper method of construing the statute. The manner in which the word
"property" was read down by the Federal Court in re Hindu Women's
Rights to Property Act, 1937 (1) and the word "personal property"
construed by the Privy Council in Blackwood v. Queen (2) make in my opinion
less change in the text of the impugned provision than the addition of the
words I have set out above, which after all are words implicit in the power conferred
on the State Legislature. I would, therefore, hold that the charging section
would be invalid and beyond the legislative competence of the State of Uttar
Pradesh only in so far as it seeks to levy a tax on cane entering a factory
from within the same local area in which the factory is situate and that in all
other cases the tax is properly levied; and that the impugned section could and
ought to be so read down.
The matter not having been considered from
this aspect at earlier stages, we have necessarily no material before us for
adjudicating upon whether tax levied or demanded from the appellant is due and
if so to what extent. We have nothing before us to indicate as to how far the
cane, the entry of which into the factory of the appellant is the subject of
the impugned levy, has moved into the factory from outside the local unit in
which the factory is situated or originated from within the same local area. I
consider that without these matters being investigated it would not be possible
to adjudicate upon the validity of the tax demanded from the appellants.
There is one matter to which it is necessary
to (1) Per Sir Maurice Gwyer, C. J.  F.C.R. 12, 23, (2)  8 A.C. 82.
34 266 advert which I have reserved for later
consideration, viz., the validity of the Explanation to s. 3(1)of the Act. 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 centers 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