judgement:
itions Nos. 53, 100, 101, 105 and 106 of 1967.
Petitions under article 32 of the Constitution of India for the enforcement of the fundamental rights.
M. C. Setalvad, A. V. Koteswara Rao, K. Rajendra Chaudhuri and K. R. Chaudhuri, for the petitioners (in W. P. No. 53 of 1967).
N. C. Chatterjee, A. V. Koteswara Rao, K. Rajendra Chau dhuri and K. R. Chaudhuri, for the petitioners (in W.P. No. 100 of 1967).
A. V. Koteswara Rao, K. Rajendra Chaudhuri and, K. R. Chaudhuri, for the petitioners (in W.P. No.101 of 1967).
K. R. Chaudhuri and K. Rajendra Chaudhuri, for the peti tioners (in W.P. Nos. 105 and 106 of 1967).
C. K. Daphtary, Attorney General and A. V. Rangam, for he respondents (in W.P. No. 53 of 1967).
P. Ram Reddy and A. V. Rangam, for the, respondents (in V. Ps.
No. 100, 101, 105 and 106 of 1967).
Sachin Chaudhury, G. L. Sanghi and O. C. Mathur, for the intervener (in W.P. No. 53 of 1967).
The Judgment of the Court was delivered by Bachawat, J.
In all these writ petitions under article 32 of the the petitioners ask for an order declaring that section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961 (Andhra Pradesh Act No. 45 of 1961) is unconstitutional and ultra vires and a direction prohibiting the respondents from levying tax under section 21 and to refund the tax already collected.
Section 21 of the Act is in these terms: "21(1) The Government may, by notification, levy a tax at such rate not exceeding five rupees per metric tonne as may be prescribed on the purchase of cane required for use, consumption or sale in a factory.
(2) The Government may, by notification, remit in whole or in part such tax in respect of cane used, or intended to be used in a factory for any purpose specified in such notification.
(3) The Government may, by notification, exempt from the payment of tax under this section (a) any new factory which, in the opinion of the Government has substantially expanded, to the extent of such expansion, for a period not exceeding two years from the date of completion of the expansion.
P(N)7SCI 6 708 (4) The tax payable under sub section (1) shall be levied and collected from the occupier of the factory in such manner and by such authority as may be prescribed.
(5) Arrears of tax shall carry interest at the rate of nine per cent per annum.
(6) If the tax under this section together with the interest, if any, due thereon, is not paid by the occupier of a factory within the prescribed time, it shall be recoverable from him as an arrear of land revenue." Section 2(1) defines a factory which means "any premises including the precincts thereof, wherein twenty or more workers are working or were working on any day during the preceding twelve months and in any part of which any manufacturing process connected with the production of sugar by means of vacuum pans in being carried on or is ordinarily carried on with the aid of mechanical power.
Section 2(m) defines the occupier of a factory.
B: Ordinance No. 1 of 1967 which was replaced by Act No. 4 on 1967, the following new sub section (I A) was inserted and other consequential amendments were made in section 21 of the principal Act "(1 A) The Government may, by notification, levy a tax at such rate, not exceeding three.
rupees and fifty paise per metric tonne, as may be prescribed on the purchase of cane required for use, consumption or sale in a khandsari unit".
Also the following sub sections (kk) and (kkk) were inserted in section 2 of the principal Act: "(kk) 'khandasari sugar ' means sugar produced by open pan process in a khandasari unit from sugarcane juice, or from rab or gur or both, containing more than eighty per cent sucrose; (kkk) 'khandasari unit ' means a unit engaged or ordinarily engaged in the manufacture of khandasari sugar and includes a bel;" It may be mentioned that sales and purchases of sugarcane a exempt from tax under the Andhra Pradesh General Sales Tax Act, 1957.
The petitioners own sugar factories as defined in 2(1).
Their agents are the occupiers of the factories as defined in section 2(m).
They purchased cane from canegrowers within their respective factory zones.
The State Government had issued notifications levying tax under section 21.
For the last several years the petitioners have paid the tax on their purchases of sugarcane and further demands are being made on them for payment of the tax They challenge the vires and the , constitutionality of section 21 of various grounds.
The principal submissions were made by M. M. C. Setalvad who appeared in Writ Petition No. 53 of 196 709 and his arguments were adopted by counsel appearing in the other petitions.
Mr. N. C. Chatterjee who appeared in Writ Petition No. 100 of 1967 raised a few additional contentions.
The submission of Mr. Setalvad is that section 21 so far as it levies a tax on the purchases of sugarcane by or on behalf of the petitioners from the canegrowers in their respective factory zones is ultra vires the powers of the legislature under Entry No. 54, List 11, Sch.
VII of the Constitution in the light of the decision in State of Madras vs Gannon Dunkerley & Co.(1).
Now, in Gannon Dunkerley 's case(1), the actual decision was that the legislature had no power under List II, Entry 48, Sch.
VII of the Government of India Act, 1935 to impose a tax on the supply of materials under an entire and indivisible contract for construction of buildings.
But the Court also held that the phrase "sale of goods" in the Entry must be interpreted in the legal sense which it had in the Indian Sale of Goods Act, that the Provincial Legislature had no power to tax a transaction which was not a sale of goods in that sense and that in order to constitute a sale there must be an agreement for sale of goods for a price and the passing of property therein pursuant to such an agreement.
Ventakarama Aiyar, J. laid at pp.
397 398: "Thus, according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods which of course presupposes capacity to contract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods.
Unless all these elements are present, there can be no sale.
" in the light of this decision, the expression "sale of goods" in Entry 54, List II, Sch.
VII of the Constitution must be given the ame interpretation.
On a parity of reasoning, to constitute a purchase of goods" within this Entry, there must be an agreement for purchase of goods and the passing of property therein pursuant to such an agreement.
The question, therefore, is whether the purchases by or on behalf of the petitioners from the cane growers in their respective factory zones were made under agreements of purchase and, sale.
It appears that the Cane Commissioner is empowered under s.15 of Act No. 45 of 1961 to declare any area as the factory one for the purpose of supply of cane to a factory during a particular crushing season.
Under section 16(1), on the declaration of the factory zone the occupier of the factory is bound to purchase such quantity of cane grown in that area and offered for sale to the factory (1) ; 710 as may be determined by the Cane Commissioner in accordance with the provisions of the schedule.
Section 16(2) prohibits the the canegrowers in a factory zone from supplying or selling cane to any factory or other person otherwise than in accordance with the provisions of the schedule.
Section 28(2)(1) empowers the Government to make rules providing for the form of agreement to be entered into under the provisions of the Act.
Rule 20 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Rules, 1951 framed under the Act provides that a canegrower or a canegrower 's co operative society may within 14 days of the order declaring an area as the factory zone or such extended time as may be fixed by the Cane Commissioner, offer in Form No. 2 to supply cane grown in that area to the occupier of the factory and such occupier of the factory within 14 days of the receipt of the offer shall enter into an agreement in Form No. 3 or Form No. 4 with the canegrower or the canegrower 's co operative society as the case may be for the purchase of the cane offered.
Form No. 3 is the statutory form of agreement with a canegrower.
By the agreement in Form No. 3 the occupier of the factory agrees to buy and the canegrower agrees to sell during the crushing season certain sugarcane crop grown in the area at the minimum price noticed by the Government from time to time upon the terms and conditions mentioned in the agreement.
The agreement contains an arbitration clause and is signed by or on behalf of the occupier of the factory and the canegrower.
The agreement in Form No. 4 with a canegrower 's co operative society is on the same lines.
All the terms and conditions of the agreements and the mode of their performance are fixed and regulated by the Act, the Rules and orders made under the Act.
Contravention of the provisions of the Act or of any rule or order made under the Act is punishable under section 23.
The minimum price of sugarcane is fixed under the Sugarcane Control Order, 1966.
The learned Attorney and Mr. Ram Reddy attempted to argue that the occupier of the factory has some option of not buying from the canegrower and some freedom of bargaining about the terms and con ditions of the agreements.
But after having read all the relevant provisions of the Act and the Rules, they did not pursue this point.
We are satisfied that under the provisions of Act No. 45 of 1961 And the Rules framed thereunder, a canegrower in a factory zone is free to sell or not to sell his sugarcane to the factory.
He may consume it or may process it into jaggery and then sell the finished product.
But if he offers to sell his cane, the occupier of the factory is bound to enter into an agreement with him on the prescribed terms and conditions and to buy cane pursuant to he agreement in conformity with the instructions issued by the Cane Commissioner.
The submission of the petitioners is that as ,hey or their agents are compelled by law to buy cane from the 711 canegrowers their purchases are not made under agreements and are not taxable under Entry No. 54, List 11 having regard to Gannon Dunkerley 's case(1).
This contention requires close examination.
Under section 4(1) of the Indian , a con tract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.
By section 3 of this Act, the provisions of the apply to contracts of sale of goods save in so far as they are inconsistent with the express provisions of the later Act.
Section 2 of the provides that when one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence, he is said to make a proposal.
When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.
A proposal when accepted becomes a promise.
Every promise and every set of promises forming the consideration for each other is an agreement.
There is mutual assent to the proposal when the proposal is accepted and in the result an agreement is formed.
Under section 10, all agreements are contracts if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object and are not by the Act expressly declared to be void,.
Sec tion 13 defines consent.
Two or more persons are said to consent when they agree upon the same thing in the same sense.
Section 14 defines free consent.
Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake as defined in sections 15 to 22.
Now, under Act No. 45 of 1961 and the Rules framed under it, the canegrower in the factory zone is free to make or not to make an offer of sale of cane to the occupier of the factory.
But if he makes an offer, the occupier of the factory is bound to accept it.
The resulting agreement is recorded in writing and is signed by the parties.
The consent of the occupier of the factory to the agreement is not caused by coercion, undue influence, fraud, mis representation or mistake.
His consent is free as defined in section 14 of the though he is obliged by law to enter into the agreement.
The compulsion of law is not coercion as defined in section 15 of the Act.
In spite of the compulsion, the agreement is neither void nor voidable.
In the eye of the law, the agreement is freely made.
The parties are competent to contract The agreement is made for a lawful consideration and with a lawful object and is not void under any provisions of law.
The agreements are enforceable by law and are contracts of sale of sugarcane as defined in section 4 of the Indian .
The purchases of sugarcane under the agreement can be taxed by the State legislature under Entry 54, List 11.
(1) ; 712 Long ago in 1702, Holt, C.J. said in Lane vs Cotton(1): "When a man takes upon himself a public employment, he is bound to serve the public as far as this employment goes, or an action lies against him for refusing.
" The doctrine that one who takes up a public employment is bound to serve the public was applied to innkeepers and common carriers.
Without lawful excuse, an innkeeper cannot refuse to receive guests at his inn, and a common carrier cannot refuse to accept goods offered to him for carriage.
See Halsbury 's Laws of England, 3rd Edn., Vol. 4, article 375 and Vol.
21, article 938.
A more general application of the doctrine was arrested by the growth of the principle of laissez faire which had its heyday in the.
midnineteenth century.
Thereafter, there has been a gradual erosion of the laissez faire concept.
It is now realised that in the public interest, persons exercising certain callings or having monopoly or near monopoly powers should sometimes be charged with the duty to serve the public, and, if necessary, to enter into contracts.
Thus, section 66 of the Indian Railways Act, 1890 compels the railway administration to supply the public with tickets for travelling on the railway upon payment of the usual fare.
Section 22 of the compels a licensee to supply electrical energy to every person in the area of supply on the usual terms and conditions.
Cheshire and Fifoot in their Law of Contract, 6th Edn., p. 23 observe that for reasons of social security the State may compel persons to make contracts.
One of the objects of Act No. 45 of 1961 is to regulate the purchase of sugarcane by the factory owners from the canegrowers.
The canegrowers scattered in the villages had no real bargaining power.
The factory owners or their combines enjoyed a near monopoly of buying and could dictate their own terms.
In this unequal contest between the canegrowers and, the factory owners, the law stepped in and compelled the factory to enter into contracts of purchase of cane offered by the canegrowers on prescribed terms and conditions.
In The Indian Steel & Wire Products Ltd. vs The State of Madras(2), the Court held that.
sales of steel products authorised by the Controller under cls.
4 and 5 of the Iron and Steel (Control of Production and Distribution) Order, 1941 were eligible to tax under Entry 54, List 11.
The Court found that the parties had entered into contracts of sale though in view of the Order the area of bargaining between the buyer and the seller was greatly reduced.
Hegde, J. speaking for the Court said that as a result of economic compulsions and changes in of the political outlook the freedom to contract was now being confined gradually to narrower and narrower limits.
We have here a case where one party (1); , (2) ; 713 to a contract of sale is compelled to enter into it on rigidly prescribed terms and conditions and has no freedom of bargaining.
But the contract, nonetheless, is a contract of sale.
In Kirkness vs John Hudson & Co. Ltd.,(1) the House of Lords by a majority held that a compulsory vesting of title of the company 's railway wagons in the British Transport Commission under section 29 of the Transport Act, 1947 was not a sale within the meaning of the phrase "is sold" in section 17 of the Income tax Act, 1945.
Under section 29, there was a compulsory taking of property.
The assent of the company to the taking was not required by statute.
By force of law, the property of the company was taken without its assent.
There was no offer, no acceptance and no mutual assent and no contract resulted.
The House of Lords held that mutual assent was an element of a transaction of sale.
In Gannon Dunkerley 's case(1), the Court approved of this principle and rejected the argument of counsel that an involuntary transfer of title as in Kirkness 's case(2) was a sale within the meaning of the legislative Entry.
But the Court did not say that if one party was free to make an offer of sale and the other party was obliged by law to accept it and to enter into an agreement for purchase of the goods, a contract of sale did not result.
In the present case, the seller makes an offer and the buyer accepts it.
The parties then execute and sign an agreement in writing.
There is mutual assent and a valid contract, though the assent of the buyer is given under compulsion of statute.
Setalvad relied on the following passage in the Law of Contract by G.H. Treitel, at p. 5: "Where the legislation leaves no choice at all to one party, the transaction is not a contract.
" But the author does not cite any authority in support of the proposition.
, He adds that even a compulsory disposition of property may be treated as contract for the purpose of a particular statute and cites the case of Ridge Nominees vs I.R.C.(3).
There, the Court distinguishing Kirkness 's case(3) held that the compulsory transfer of shares of a dissenting shareholder by a person "authorised to make the transfer on his behalf under section 209 of the Companies Act, 1948 corresponding to section 395 of our was having regard to the machinery created by the section a conveyance on sale within section 54 of the Stamp Act, 1 91.
The Lord Justices gave separate opinions.
It is worthwhile quoting the opinion of Donovan, L. J. who said: "When the legislature, by section 209 of the Companies Act, 1948, empowers the transferee company to appoint an agent on behalf of a dissenting shareholder for the purpose of executing a transfer of his shares (1) (2) ; (3) 714 against a price to be paid to the transferor company and held in trust for the dissenting shareholder, it is clearly ignoring his dissent and putting him in the same position as if he had assented.
For the purpose of considering whether this results in a sale, one must, I think, bear that situation in mind, and regard, the dissent of the shareholder as overridden by an assent which the statute imposes upon him, fictional though this may be.
in the context of section 209 the transfer becomes in law a conveyance on sale.
This conclusion, in my opinion, does not run counter to what was said in the House of Lords in Kirkness (Inspector of Taxes) vs John Hudson & Co. Ltd.,(1), where, in terms of the statute there under consideration, property belonging to other persons was declared to vest on a specified date in the Transport Commission against payment of compensation.
This may be no more than a difference of machinery, but machinery may make the very difference between a sale and a mere expropriation against compensation. "Lord Simonds, I venture to think, implies as much when he says he gets no assistance from the cases decided under the Stamp Acts.
" In M/s. New India Sugar Mills Ltd., vs Commissioner of Sales Tax, Bihar(2), the Court by a majority held that the supply of sugar by a sugar factory to a Provincial Government in obedience to the directions of the Sugar Controller given under the Sugar and Sugar Products Control Order, 1946 was not a sale taxable under List II, Entry 48, Sch.
VII of the Government of India Act, 1935.
Mr. Setalvad placed strong reliance on the fol lowing passage in the judgment of Shah, J. at pp.
469 470: "A contract of sale between the parties is therefore a pre requisite to a sale.
The transactions of despatches of sugar by the assessees pursuant to the directions of the Controller were not the result of any such contract of sale.
It is common ground that the Province of Madras intimated its requirements of sugar to the Controller, and the Controller called upon the manufacturing units to supply the whole or part of the requirement to the Province.
In calling upon the manufacturing units to supply sugar, the Controller did not act as an agent of the State to purchase goods: he acted in exercise of his statutory authority.
There was mani festly no offer to purchase sugar by the Province, and no acceptance of any offer by the manufacturer.
The manufacturer was under the Control Order left no volition: he could not decline to carry out the order; if he (1) (2) [1963] Supp. 2 S.C.R. 459, 469.
715 did so he was liable to be punished for breach of the order and his goods were liable to be forefeited.
The Government of the Province and the manufacturer had no opportunity to negotiate, and sugar was despatched pursuant to the direction of the Controller and not in acceptance of any offer by the Government." Divorced from the context, this passage gives some support to the contention that there can be no contract if the acceptance of the offer is made under compulsion of a direction given by a statutory authority.
But the passage must be read with the facts of the case.
By cl. 3 of the Sugar and Sugar Products Control Order, 1946, producers of sugar were prohibited from disposing of sugar except to persons specially authorised in that behalf by the Controller to acquire sugar on behalf of certain Governments.
Clause 5 required every producer or dealer to comply with the directions issued by the Controller regarding production, sales, stocks and distribution of sugar.
Clause 6 authorised the Controller to fix the price of sugar.
Clause 7(1) authorised the Controller to allot quotas of sugar for any Province and to issue directions to any producer or dealer for the supply of the sugar specifying the price, quantity and type or grade of the sugar and the time and manner of supply.
Contravention of the directions entailed forfeiture of stocks under cl. 11 of the Order and was punishable under r. 81(4) of the Defence of India Rules, 1939.
The admitted course of dealings between the parties was that the Governments of the consuming States used to intimate to the Sugar Controller their requirement of sugar and the factory owners used to send to him statements of their stocks of sugar.
On a consideration of the requisitions and the statements of stock, the Controller used to make allotments.
The allotment order used to be addressed by the Controller to the factory owner, directing him to supply sugar to the Government in question in accordance with the latter 's despatch instructions.
A copy of the allotment order used simultaneously to be sent to the Government concerned and the latter then used to send to the factory detailed despatching instructions.
In these circumstances, Kapur and Shah, JJ.
(Hidayatullah, J. dissenting) held that by giving intimation of its requirement of sugar to the Controller and applying for allotment of sugar, the Government of Madras did not make any offer to the manufacturer.
The direction of the Controller to the manufacturer to supply sugar to the Government was given in the exercise of his statutory authority and was not the communication of any offer made by the Government.
The despatch of the goods in compliance with the directions of the Controller was not the acceptance by the manufacturer of any offer, nor could it be deemed to be an offer by the manufacturer to supply goods.
On the, special facts of that case, the majority decision was that there was no offer and acceptance and no contract resulted.
That decision should not be 716 treated as an authority for the proposition that there can be no contract of sale under compulsion of a statute.
It depends upon the facts of each case and the terms of the particular statute regulating the dealings whether the parties have entered into a contract of sale of goods.
Under Act No. 45 of 1961, a canegrower makes an offer to the occupier of the factory directly and the latter accepts the offer.
The parties then make and sign an agreement in writing.
There is thus a direct privily of contract between the parties.
The contract is a contract of sale and pur chase of cane, though the buyer is obliged to give his assent under compulsion of a statute.
The State Legislature is competent to tax purchases of canes made under such a contract.
Mr. Setalvad submitted that there can be no levy of a pur chase tax with reference to the tonnage of the cane.
We cannot accept this contention.
Usually the purchase tax is levied with reference to the price of the goods.
But the legislature is competent to levy the tax with reference to the weight of the goods purchased.
The contention of Mr. Chatterjee that a purchase tax must be levied with reference to the turnover only is equally devoid of merit.
Where the purchase tax is levied on a dealer, the levy is usually with reference to his turnover, which normally means the aggregate of the amounts of purchase prices.
But the tax need not necessarily be levied on a dealer or by reference to his turnover.
It may be levied on the occupier of a factory by reference to the weight of the goods purchased by him.
Mr. Chatterjee next submitted that a purchase tax must be levied on goods generally, and there can be no purchase tax with reference to their subsequent use, consumption or sale.
He based his argument on paragraphs 17 to 20.
III, Vol.
III of the Report of the Taxation Enquiry Committee.
There, the Committee while discussing the comparative merits of sales tax in relation to customs, excise and octroi, pointed out that sales tax was a major source of revenue and could be applied to the generality of goods, while customs, excise and octroi could be applied to only a limited portion of the industrial output of the country.
The Committee did not express any opinion on the scope of List II, Entry 54.
Under that Entry, the State legislature is not bound to levy a tax on all purchases of cane.
It may levy a tax on purchases of cane required for use, consumption or sale in a factory.
The legislature is competent to tax and also to exempt from payment of tax sales or purchases of goods required for specific purposes.
Other instances of special treatment of goods required for particular purposes may be given.
Section 6 and Sch.
1, item 23 of the Bombay Sales Tax Act, 1946 levy tax on fabrics and articles for personal wear.
Section 2(j)(a)(ii) of the C.P and Berar Sales Tax Act, 1947 exempts sales of goods intended for use by a registered dealer as raw materials for the manufacture of goods.
717 Mr. Chatterjee submitted that the tax levied under section 21 was a use tax and referred to McLeod vs Dilworth & Co.(1) and C. G. Naidu & Co. The State of Madras(2).
He argued that the State legislature could not levy a use tax which was essentially different from a purchase tax.
The assumption of counsel that section 21 levies a use tax is not well founded.
The taxable event under section 21 is the purchase of goods and not the use or enjoyment of what is purchased.
The constitutional implication of a use tax in American law is entirely irrelevant.
The observation in the Madras case that the Explanation to article 286(1)(a) of the Constitution conferred, a power on the State legislature to levy a use tax is erroneous.
The Explanation fixed the situs of certain sales.
It did not confer upon the legislature any power to levy a use tax.
To appreciate another argument of Mr. Chatterjee, it is necessary to refer to a few facts.
It appears that paragraph 21 of the Bill published in the Gazette on March 3, 1960 preliminary to the passing of Act No. 45 of 1961 provided for a levy of a cess on the entry of cane into the premises of a factory for use, consumption or sale therein.
On December 13, 1960, this Court in Diamond Sugar Mills Ltd. and Another vs The State of Uttar Pradesh and Another(3) struck down a similar provision in the U.P. Sugarcane Cess Act, 1956 on the ground that the State legislature was not competent to enact it under Entry 52, List II as the premises of a factory was not a local area within the meaning of the Entry.
Having regard to this decision, paragraph 21 of the Bill was amended and section 21 in its present form was passed by the State Legislature.
The Act was published in the Gazette on December 30, 1961.
Mr. Chatterjee submitted that in this context the levy under section 21 was really a levy on the entry of goods into a factory for consumption, use or sale therein.
We are unable to accept this contention.
As the proposed tax on the entry of goods into a factory was unconstitutional, paragraph 21 of the original Bill was amended and section 21 in its present form was enacted.
The tax purchase of goods.
The taxable event is the purchase of cane for use, consumption or sale in a factory and not the entry of cane into a factory.
As the tax is not on the entry of the cane into a factory, it is not payable on cane cultivated by the factory and entering the factory premises.
Mr. Setalvad submitted that section 21 impeded free trade, com merce and intercourse and offended article 301 of the Constitu tion and relied on the decision in Firm A. T. Mehtab Majid & (1) ; (2) A.I.R. 1953 Mad.
116, 127 128, (3) ; 718 Co. vs State of Madras(1).
In that case, the Court held that r. 16(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939 discriminated against imported hides or skins which had been purchased or tanned outside the State by levying a higher tax on them and contravened article 304(a) of the Constitution.
At p. 442, Raghubar Dayal, J. said: "It is therefore now well settled that taxing laws can be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulatory measures.
Sales tax of the kind under consi deration here, cannot be said to be a measure regulating any trade or a, compensatory tax levied for the use of trading facilities.
Sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free flow of trade and it will then offend against article 301 and will be valid only if it comes within the terms of article 304(a).
" That case decides that a sales tax which discriminates against goods imported from other States may impede the free flow of trade and is then invalid unless protected by article 304(a).
But the tax levied under section 21 does not discriminate against any imported cane.
Under section 21, the same rate of tax is levied on purchases of all cane required for use, consumption or sale in a factory.
There is no discrimination between cane grown in the State and cane imported from outside.
As a matter of fact, under the Act the factory can normally buy only cane grown in the factory zone.
A non discriminatory tax on goods does not offend article 301 unless it directly impedes the free movement or transport of the goods.
In Atiabari Tea Co. Ltd., vs The State of Assam and others(2).
Gajendragadkar, J. speaking for the majority said: "We are, therefore, satisfied that in determining the limits of the width and amplitude of the freedom guaranteed by article 301 a rational and workable test to apply would be: Does the impugned restriction ope rate directly or immediately on trade or its movement?.
It is the free movement of the transport of goods from one part of the country to the other that is intended to be saved, and if any Act imposes any direct res trictions on the very movement of such goods it attracts the provisions of article 301, and its validity can be sustained only if it satisfies the requirements of article 302 or article 304 of Part XIII.
" (1) [1963] Supp.
2 S.C.R. 435.
(2) ; , 860 861. 719 This interpretation of article 301 Was not dissented from in Automobile Transport (Rajasthan) Ltd. vs State of Rajasthan(1).
Normally, a tax on sale of goods does not directly impede the free movement or transport of goods.
Section 21 is no exception.
It does not impede the free movement or transport of goods and is not violative of article 301.
Mr. Setalvad next submitted that section 21 offended article 14 of the Constitution in several ways.
It was argued that section 21 read with section 2(e) discriminated between producers of sugar using the vacuum pan and open pan processes.
Under section 2 1, as it stood before its amendment by Act No. 4 of 1967 tax was levied on purchases of cane by factories producing sugar by means of vacuum pans but purchases of cane by khandasari units producing khandasari sugar by the open pan process were entirely exempt from the tax.
Even the amended section 21 levies a lower rate of tax on the purchases of cane by khandsari units.
It was also argued that there was discrimination in favour of producers of jaggery by exempting their purchases of cane from payment of the tax.
But the affidavits filed on behalf of the respondents show that factories producing sugar by means of vacuum pans and khandasari units producing sugar by the open pan processes form distinct and separate classes.
The industry using the vacuum pan process is in existence since 1932 33.
No tax was levied on this industry until 1949.
In 1949 when the industry became well established, tax was levied on it for the first time by section 14 of the Madras Sugar Factories Control Act, 1949.
The khandasari units carry on a small scale industry.
They are of recent origin in the State of Andhra Pradesh.
Until 1967, this industry was exempt from the levy.
When the industry came to be somewhat established by 1967 a smaller rate of tax was levied on it.
In 1965 66, factories adopting the vacuum pan process bought over 32 lakh tonnes of cane while the khandasari sugar units in the State bought about 2.70 lakh tonnes of cane.
The manufacture of jaggery has no resemblance to the manufacture of sugar by the vacuum pan or the open pan system.
It is a cottage industry wherein individual canegrowers process their cane into jaggery and market it as a finished product.
Having regard to the affidavits, we are satisfied that the differential treatment of the factories producing sugar by means of vacuum pans, khandasari units producing sugar by.
the open pan process and cane growers using cane for the manufacture of jaggery is reasonable and has a rational relation to the object of taxation.
There are marked differences between the three classes of users of cane and their capacity to pay the tax.
The legislature could reasonably treat the three sets of users of cane differently for purposes of levy.
(1) [1963] 1 S.C.R. 491, 533. 702 It was next argued that the power under section 21(3) to exempt new factories and factories which in the opinion of the Government have substantially expanded was discriminatory and violative of article 14.
We are unable to accept this contention.
The establishment of new factories and the expansion of the existing factories need encouragement and incentives.
The exemption in favour of new and expanding factories is based on legitimate legislative policy.
The question whether the exemption should be granted to any factory, and if so, for what period and the question whether any factory has substantially expanded and if so, the extent of such expansion have to be decided with reference to the facts of each individual case.
Obviously, it is not possible for the State legislature to examine the merits of individual cases and the function was properly delegated to the State Government.
The legislature was not obliged to prescribe a more rigid standard for the guidance of the Government.
We hold that section 21 does not violate article 14.
The petitioner in Writ Petition No. 101 of 1967 raised the contention that it was a new factory and that the Government of Andhra Pradesh should have exempted it from payment of tax under section 21(3)(a).
The contention was controverted by the respondents.
The affidavits do not give sufficient materials on the point, nor is there any prayer in the petition for the issue of a mandamus directing the State Government to grant the exemption.
In the circumstances, we do not think it fit to express any opinion on the matter.
It will be open to the petitioner in Writ Petition No. 101 of 1967 to raise this contention in other proceedings.
In the result, the petitions are dismissed with costs, one hearing fee.
G.C. Petitions dismissed.

summary/full:
Under the Andhra Pradesh (Regulation of Supply and Purchase) Act 1961 the occupier of a sugar factory had to buy sugarcane from canegrowers in conformity with the directions of the Cane Commissioner.
Under section 21 of the Act the State Government had power by notification to tax purchases of sugarcane for use, consumption or sale in a sugar factory.
The tax was leviable subject to a maximum rate per metric tonne.
The maximum rate for khandsari units was less than that for factories; sugarcane purchased for production of jaggery was not taxed at all.
The petitioners were sugar factories in Andhra Pradesh.
They filed writ petitions under article 32 of the Constitution challenging the validity of section 21 mainly on the ground that as the petitioners or their agents were compelled by law to buy cane from the canegrowers, their purchases were not made under agreements and were not taxable under Entry 54 List II having regard to Gannon Dunkerley 's case.
It was further urged that the tax leviable under section 21 was not truly a purchase tax as it was levied with reference to weight of the goods, that it was levied with reference to use and was therefore a use tax, and that it was the entry of the goods into the factory that was sought to be taxed Articles 14 and 301 of the Constitution were also said to be contravened.
Held: (1) There has been a gradual erosion of the laissez faire concept which prevailed in the nineteenth century.
It is now realised that in the public interest persons exercising certain callings or having monopoly or near monopoly Powers should sometimes be charged with the duty to serve the public, and if necessary, to enter into contract& The canegrowers scattered in the villages had no real bargaining power.
In the unequal contest between the canegrowers and the factory owners, the law stepped in and compelled the factory to enter into contracts of purchase of cane offered by the canegrowers on prescribed terms and conditions.
[713 C.F.].
Under Act 45 of 1961 and the Rules framed under it, the canegrower in the factory zone is free to make or not to make an offer of sale of cane to the occupier of the factory.
But if he makes an offer, the occupier of the factory is bound to accept it.
The resulting agreement is recorded in writing and is signed by the parties.
The consent of the occupier of the factory is free as defined in section 14 of the Indian Contract Act.
The compulsion of law is not coercion as 706 defined in section 15 of the Act.
The, agreements are enforceable by law and are contracts of sale as defined in section 4 of the Indian Sale of Goods Act.
The purchases of sugarcane under the agreement can be therefore taxed by the State Legislature under Entry 54 List II.
Section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1961 is accordingly not ultra vires.
[712 F H].
State of Madras vs Gannon Dunkerley & Co. ; and New India Sugar Mills Ltd., vs Commissioner of Sales Tax, Bihar, [1963] Supp. 2 S.C.R. 459, distinguished and explained.
Lane vs Cotton, ; E.R. 17, Kirkness vs John Hudson & Co. Ltd. and Ridge Nominees vs I.R.C. , referred to.
The Indian Steel & Wire Products Ltd., vs The State of Madras, ; , relied on.
(ii) Purchase tax need not always be levied with reference to price of goods or with reference to turnover.
It may be levied on the occupier of a factory by reference to the weight of the goods purchased by him.
[717 C E].
It cannot he accepted that a purchase tax must be always levied on goods generally and never with reference to their use, consumption or sale.
Under List II Entry 54 the State Legislature is not bound to levy a tax on all purchases of cane.
It may levy a tax on purchases of cane required for use, consumption or sale in a factory.
The tax so levied is not a use tax.
[717 F 718 B].
McLeod vs Dilworth & Co. ; and C. G. Naidu & Co. vs State of Madras, A.I.R. 1953 Mad.
116, referred to.
The tax under section 21 is not a levy on the (entry of goods into the factory.
Cane cultivated by the factory and entering it cannot be taxed under the section.
[718 G].
Diamond Sugar Mills Ltd., and Anr.
vs State of Uttar Pradesh and Anr.
, ; , referred to.
(iii) Section 21 does not impede free trade, commerce and intercourse and therefore does not offend article 301 of the Constitution.
The tax levied under section 21 does not discriminate against any imported cane.
[719 E 720 A].
A. T. Mehtab Majid and Co. vs State of Madras, [1963] Supp.
2 S.C.R. 435, Atiabari Tea Co ' Ltd., vs State of Assam (Rajasthan) Ltd., vs State of Rajasthan, [1963] 1 S.C.R. 491, referred to.
(iv) The differential treatment of factories producing sugar by means of vacuum pans, khandsari units producing sugar by the open pan process and canegrowers using cane for the manufacture of jaggery is reasonable and has a rational relation to the object of the Act.
There is thus no violation of article 14 of the Constitution.
[720 G H].
Nor does discrimination result from the exemption under section 21(3) of factories which are new or which in the opinion of the Government have substantially expanded.
The exemption is based on legitimate legislative policy.
The question whether the exemption should be granted to a factory and if so for what period and the question whether a factory has substantially expanded and if so the extent of such expansion have to be decided with reference to the facts of each individual case.
It is not possible for the State 707 Legislature to examine the merits of individual cases and the function was properly delegated to the State Government.
The legislature was not obliged to prescribe a more rigid standard for the guidance of Government.
[721 A C].


judgement:
Appeal No. 136 of 1965.
Appeal from the judgment and decree dated March 4, 1960 of the Calcutta High Court in Appeal from Appellate Decree No. 1021 of 1957.
S.V. Gupte, and D.N. Mukherjee, for the appellants.
B.K. Bhattacharya, M.K. Ghose and P.K. Ghose, for respondent No. 1.
P.C. Chatterjee, G.S. Chatterlee and P.K. Bose, for respondent No. 2.
The Judgment of the Court was delivered by Shelat, J.
One Arunshashi Dasi, Charu Chandra Sur and Jotish Chandra Sur were the owners of the suit land admeasuring 1.15 acres situate in Rishra Municipality, West Bengal.
On ' November 15, 1920 they leased the land to Srikrishna Goshala.
On September 10, 1924, the said Goshala sold its leasehold interest in the said land to the 1st respondent Society.
On September 5, 1935 the Society sold the said leasehold interest to one Sovaram Sarma.
In 1941, the said Jostish Sur filed a Rent Suit against Sovaram and obtained an ex parte decree against him.
On September 9, 1941 the said Jotish in execution of the said decree and at an auction sale held thereunder purchased Sovaram 's interest and took possession of the land.
Thereafter, Sovaram 's widow and son flied a suit against the said Jotish alleging that as Sovaram had died during the pendency of the said suit the decree passed against him was a nullity and so also the auction sale.
On June 27, 1945 the said suit was decreed against the said Jotish and appeals by him against the said decree both in the District Court and the High Court were dismissed.
While the said suit was pending, Swaika, the first appellant herein, purchased from the said Jotish his interest in the said land for Rs. 6 '000/ and also agreed to carry on the said litigation against Sovaram 's widow and son.
Swaika thereafter tried to obtain possession of the land but was foiled in doing so by an injunction obtained by Sovaram 's widow ' and son, the plaintiffs in the said suit.
Swaika then got the Education Department to move for the acquisition of the said land for a Girls ' High School of which, it appears, he was the prime spirit.
On July 1, 1946 the State Government 'issued the notification under see.
4 of the Land Acquisition Act in respect of the suit land.
An 'inquiry under section 5A was held and thereafter on April 18, 1951 the Government issued the notification under sec.
6 and passed the necessary order under sec.
On December 22, 1951 the 1st respondent Society purchased the leasehold interest in the said land from Sovaram 's widow and 119 son after their suit was finally disposed of but after the said notification under sec.
6 was issued.
The 1st respondent Society then filed the present suit against the State of West Bengal, the said Swaika and other members of the managing committee of the said school for a declaration that the said notifications and the proceedings taken thereunder were mala fide and null and void and for an injunction against the Government taking possession of the said land.
The Trial Court framed five issues but so far as this appeal is concerned the relevant issue is Issue No. 3, viz. "Is the plaintiff entitled to a decree for a declaration that the declaration under section 6 and order under section 7 and, proceedings under the L.A. Act in Preliminary Land Acquisition Case No. 2 of 1945 46 of Howrah Collectorate were mala fide and in fraud of the Government 's powers under the said Act and null and void and not binding on the plaintiffs ?" On this is issue, the Trial Court found that the 1st respondent Society failed to establish the allegations as to mala fides and abuse of power under the said Act and consequently dismissed the suit.
In the appeal by the 1st respondent Society before the, Additional District Judge the only points urged for determination were (1) whether the said acquisition proceedings were mala fide and in fraud of the Act and therefore null and void and (2 ) whether the Society was entitled to.
an injunction against the Government taking possession of the said land.
It appears from the pleadings as also.
the issues framed by the Trial Court that the question as to whether the State Government was satisfied or not as to the purpose and the need for acquiring the said land was not specifically raised.
Therefore, an attempt was made to.
raise the contention at the time of the heating of the appeal that the declaration under sec.
6 did not prove such satisfaction.
The District Judge, however, dismissed the application for amendment of the plaint by the 1st respondent Society.
The contention was sought to be raised because the notification used the words "as it appears to the Governor that the land is required to be taken for a public purpose" instead of the words, viz., "the Governor is satisfied that the land is needed for a public purpose.
" The argument was that the said words used in the notification did not ex facie indicate the satisfaction of the government which is a condition precedent to such a declaration and that therefore sec.
6 notification was no.t in proper form and the acquisition proceedings taken thereafter were bad in law.
It appears that though the amendment was disallowed, the said cOntention was allowed to be urged, for, the District Judge has answered it in the following terms : 120 declaration under sec.
6 the point that requires for consideration is whether the executive authority did actually form an opinion about the requirement of the land for public purpose.
So far as the present declaration (exhibit 10A) is concerned it will go to show that the land was required for public purpose and it is conclusive in view of the provisions of section 6 of the Land Acquisition Act" On this reasoning he dismissed the appeal.
The District Judge also agreed with the findings of the Trial Court that the 1st respondent Society failed to prove mala fides on the part of the Government or the misuse of its power under the Act.
The 1st respondent Society filed a Second Appeal which was heard by a Division Bench of the High Court.
Before the High Court, Counsel for the respondent Society raised two contentions: as to mala fides and abuse of power and (ii) that the notifications under secs.
4 and 6 were not in accordance with law and were therefore invalid.
The High Court took up the second contention first and held as regards sec.
4 notification that it was valid and could not be assailed.
As regards sec.
6 notification however the High Court was impressed with the contention that after the amendment of sec.
6 by Act 38 of 1923, which substituted the words "when the ' Local Government is satisfied ' for the words "whenever it appears to the Local Government", satisfaction that the land is needed for a public purpose or for a Company is a condition precedent for the declaration under sec.
6 and that therefore the Government should make a declaration "to that effect", i.e., of its satisfaction in the notification itself.
The High Court accepted this contention and held that such satisfaction must appear in the declaration.
The High Court also held that as the notification used the words "whereas it appears to the Governor that the land is required" instead of the words, viz, "whereas the Governor is satisfied that the land is required" the declaration did not show such ,satisfaction and therefore it was not in proper form and could not be said "to afford sufficient statutory or legal basis for proceeding in acquisition.
" As regards the contention as to mala fides and fraud on the statute the High Court held that there was no evidence on the record from which it could be inferred that there was collusion between the said Swaika and the Education Department or the officers of the Land Acquisition Department and that therefore it could not be held that the proceedings were in fraud of the statute or mala fide.
The High Court also observed that "prima facie, there is no reason to differ from the findings made by the courts below.
" 121 The question as to mala fides of the Government or the Government having misused 'its powers or having acted in fraud of the statute was entirely a question of fact.
There being a concurrent finding on that question by the Trial Court and the District Court against the 1st respondent Society, the High Court could not have reopened their concurrent finding except on the ground that it was perverse or unreasonable or without evidence.
Such an argument not having been urged, the High Court could not go into that question.
But it was urged that the High Court has merely expressed a prima facie view and has not conclusively accepted the finding of the Trial Court and the District Court.
That argument has no merit.
What the High Court really meant by the expression "prima facie" was that the finding being concurrent was binding on it and that no contention as to that finding being perverse etc., having been urged before it there was not even a prima facie case to justify the reopening of that finding.
Therefore, the allegation as to mala fides or abuse of power by the Government was conclusively negatived and Counsel for the 1st respondent Society was therefore not entitled to canvass that question before us in this appeal.
The only question therefore that we are called upon to decide is whether the High Court was correct in holding that (i) the Government 's satisfaction must be stated in the notification itself and (ii) that because the notification has used the words "it appears to the Governor" etc., and not the words that the Governor was satisfied, sec.
6 notification was not valid.
To appreciate the construction placed by the High Court it is necessary to consider the effect of the change of words made by sec.
4 of Act 38 of 1923 in sec.
As sub section 1 stood prior to 1923 the words were "subject to the provisions of Part VII of the Act, when it appears to the Local Government that any particular :land is needed for a public purpose or for a Company, a declaration shall be made" etc.
The amendment of 1923 dropped these words and substituted the words "when the Local Government is satisfied after considering the report, if any, made under section 5A of sub section 2" etc.
It seems that the amendment was considered necessary because the same Amendment Act inserted section 5A for the first time in the Act which gave a right to persons interested in the land to be acquired to file objections and of being heard thereon by the Collector.
The new section enjoined upon the Collector to consider such objections and make a report to the Government, whose decision on such objections was made final.
One reason why the word "satisfaction" was substituted for the word "appears" ' seems to be that since it was the Government who after considering the objections and the report of the Collector thereon was to arrive at its decision and then make 'the declaration required LI sup.
CI/68 9 122 by sub section 2, the appropriate words would be "when the Local Government is satisfied" rather than the words "when it appears to the Local Government".
The other reason which presumably led to the change 'in the language was to bring the words in sub see.
1 of see.
6 in line with the words used in see.
40 where the Government before granting its consent to the acquisition for a Company has to "be satisfied" on an inquiry held as provided thereinafter.
Since the Amendment Act 38 of 1923 provided an inquiry into the objections of persons interested in the land under section 5A, section 40 also was amended by adding therein the words "either on the report of the Collector under section 5A or".
41 which requires the acquiring Company to enter into an agreement with the Government also required satisfaction of the Government after considering the report on the inquiry held under sec.
The Amendment Act 38 of 1923 now added in section 41 the report of the Collector under section 5A, if any.
These amendments show that even prior to the 1923 Amendment Act, whenever the Government was required by the Act to consider a report, the legislature had used the word satisfaction on the part of the Government.
Since the Amendment Act 1923 introduced section 5A requiring the Collector to hold an inquiry and to make a report and required the Government to consider that report and the objections dealt with in it, the legislature presumably thought it appropriate to use the same expression which it had used in sees.
40 and 41 where also an inquiry was provided for and the Government had to consider the report of the officer making such inquiry before giving its consent.
But Counsel for the 1st respondent Society argued that since the legislature has used different language from the one it had used earlier, it must mean that it did so deliberately and because it considered the new words as more appropriate.
On the other hand, Counsel for the appellant argued that the meaning of both the expressions is synonymous.
It is not necessary for us in this appeal to construe the two expressions as on a construction of the section we have come to the conclusion that it is not necessary that satisfaction of the Government must ex facie appear in declaration made under the section.
Sub section 1 provides that when the Government is satisfied that a particular land is needed for a public purpose or for a Company, a declaration shall be made "to that effect".
Satisfaction of the Government after consideration of the report, if any, made under sec.
5A is undoubtedly a condition precedent to a valid declaration, for, there can be no valid acquisition under the Act unless the Government is satisfied that the land to be acquired is needed for a public purpose or for a Company.
But there is nothing in sub sec. 1 which requires that such satisfaction need be stated in the declaration.
The only declaration 123 as required by sub sec.
1 is that the land to be acquired is needed for a public purpose or for a Company.
Sub section 2 makes this clear, for it clearly provides that the declaration "shall state" where such land is situate, "the purpose for which it is needed", its approximate area and the place.
where its plan, if made, can be inspected.
It is such a declaration made under sub sec.
1 and published under sub see.
2 which becomes conclusive evidence that the particular land is needed for a public purpose or for a Company as the case may be.
The contention therefore that it is imperative that the satisfaction must be expressed in the declaration or that otherwise the notification would not be in accord with sec.
6 is not correct.
The construction which we have put on sec.
6 is supported by the decision in Ezra vs The Secretary of St 'ate (1) where it was held that a notification under sec.
6 need not be in any particular form.
The case went up to the Privy Council but it appears from the report of that case that these observations were not challenged or disputed before the Privy Council.(2) We are also told by Counsel that no statutory forms are prescribed by the West Bengal Government for such a declaration either under the Act or the rules made thereunder though there are model forms framed presumably for the guidance.
only of the officers of the Acquisition Department.
There being thus no statutory forms and see.
6 not requiring the declaration to be made in any particular form, the mere fact that.
the notification does not ex facie show the Government 's satisfaction, assuming that the words "it appears" used in the notification do not mean satisfaction, would.
not render the notification invalid or not in conformity with sec.
Apart from the clear language of sec.
6 it would seem that it is immaterial whether such satisfaction is stated or not in the notification.
For, even if it is so.
stated.
a person interested in the land can always challenge as a matter of fact that the Government was not actually satisfied.
In such a case the Government would have to satisfy the Court by leading evidence that it was satisfied as required by sec.
In the present case No. such evidence was led because the fact that the Government was satisfied was never challenged in the pleadings and no issue on that question was sought to be raised.
Even when the 1 st respondent Society sought to amend its plaint it did so only to say that the notification did not state such satisfaction and therefore did not establish such satisfaction.
The High Court no doubt thought that this question was covered by Issue No. 3 framed by the Trial Court.
But the contention said to be covered by that issue was not that there was no satisfaction on the part of the Government that the land was needed for a public purpose, viz., for he said Girls ' School, but that (1) I. , 81.
(2) 32 I. A. 93.
124 the notification in the absence of words to that effect did not prove that satisfaction.
That being the position and no issue having been raised on the factum of satisfaction, the State Government was never called upon to lead evidence to prove its satisfaction.
The fact that sec.
5A inquiry was held and objections were filed and heard, the fact that the Additional Collector had recommended the acquisition and had sent his report to that effect and the Government thereafter issued sec.
6 notification would, in the absence of any evidence to the contrary, show that the condition precedent as to satisfaction was fulfilled.
We are therefore of the view that the High Court was in error when it held that sec.
6 notification was not in accord with that section and that proceedings taken thereafter were vitiated.
We may mention that Counsel for the 1st respondent Society cited certain authorities and also attempted to canvass the issue as to mala fides on the part of the Government.
As to the authorities cited by him we think that they were neither relevant nor of any assistance to him.
As regards the question of mala fides, we do not think there is any justification for reopening the concurrent finding of the Trial Court and the AdditiOnal District Judge.
In the result, the appeal is allowed, the High Court 's judgment and decree are set aside and the judgment and decree passed by the Trial Court and confirmed by the Addl.
District Judge dismissing the suit of the 1st respondent Society are restored.
The 1st respondent Society will pay to the appellant the costs in this Court as also in the High Court.
V.P.S. Appeal allowed.

dataset_name: IN-Abs

summary/full:
Under section 6 of the Land Acquisition Act, 1894, the State Government issued a declaration with respect to the land of the 1st respondent after considering the report under section 5A of the Act.
The declaration used the words 'as it appears to the Governor that the land is required to be taken for a.public purpose ' instead of the words 'the Governor is satisfied that the land is needed for a public purpose '.
A suit filed by the 1st respondent against the State Government and others challenging the declaration was decreed in second appeal by the High Court.
on the ground that: (1) the satisfaction of the Government as to the purpose of and the need for acquiring the suit land must appear in the declaration itself; and (2) as the declaration used the words 'it appears to the Governor etc., ' instead of the words 'the Governor is satisfied etc. ' it did not show such satisfaction and therefore was.
not in proper form and could not form the legal basis for the acquisition.
In appeal to this Court, HELD: There being no statutory form and section 6 not requiring the declaration to be made in any particular form.
the mere fact that the declaration does not ex facie show the Government 's satisfaction.
assuming that the words 'it appears ' used in the declaration do not mean satisfaction.
would not make the declaration invalid or not in conformity with section 6.
[123 E] Satisfaction of the Government after consideration of the report, any.
made under section 5A is undoubtedly a condition precedent to a valid declaration.
But there is nothing in section 6(1) which requires that the satisfaction should be stated in the declaration, the only declaration required by the sub section being, that the land to be acquired is needed for a public purpose or for a company.
[122G H] Observations in Ezra ' vs Secretary of State, I.L.R. 30 Cal.
36, at p. 81.
approved Further, it is immaterial whether or not such satisfaction is stated in the declaration.
even if it was so stated a person interested in the land can always challenge.
as a matter of fact, that the Government was not actually satisfied, and in such a case, the Government would ' have to satisfy the court by leading evidence that it was so satisfied.
In the present case, the fact that the Government was satisfied was never challenged, the only contention raised being.
that as the declaration dissatisfied was never not state such satisfaction it did not establish such satisfaction.
Therefore, it was not necessary for the Government to lead any evidence prove its satisfaction.
[123F H].
[Whether the words 'it appears to the Governor that the land is required to be taken for a public purpose ' and the words 'the Governor is satisfied that the land is needed for a public purpose ' are synonymous,.
not decided.
[122F G] 118.


judgement:
s Nos. 49, 60, 61 and 80 of 1967.
Writ Petitions under article 32 of the Constitution of India for the enforcement of fundamental rights.
K. Narayanaswamy and Lily Thomas, for the petitioner (in W.P. No. 49 of 1967).
Sadhu Singh, for the petitioner (in W.P. No. 60 of 1967).
S.K. Dholakia and Sadhu Singh, for the petitioner (in W.P. No. 61 of 1967).
S.T. Desai and Sadhu Singh, for the petitioner (in W.P. No. 80 of 1967).
C.K. Daphtary, Attorney General, B.L. lyengar, R.H. Dhebar for R.N. Sachthey, for the respondents (in W.P. No 49 of 1967).
R.H. Dhebar for R.N. Sachthey, for the respondents (in W.Ps.
Nos. 60, 61 and 80 of 1967).
The Judgment of the Court was delivered by Bachawat, J.
In all these writ petitions, the petitioners challenge the vires of the Taxation Laws (Extension to Union Territories) Regulation No. 3 of 1963.
The contention is that the President had no power to promulgate the Regulation under article 240 of the Constitution.
On August 16, 1962, Pondicherry became a Union Territory.
On December 5, 1962, Parliament enacted the Pondicherry Administration Act, 1962 (Act No. 49 of 1962).
Section 4 (1 ) of this Act provided that all laws in force immediately before August 19, 1962 would continue to be in force in 105 Pondicherry until amended or repealed by a competent legislature or other competent authority.
Section 4(2) empowered the Central Government to make necessary adaptations and modifications for the purpose of facilitating the application of any such law in relation to the administration of Pondicherry and bringing the provisions of any such law into accord with the provisions of the Constitution.
Section 7 provided that all taxes, duties, cesses and fees which immediately before August 19, 1962 were being lawfully levied would continue to be levied in Pondicherry and to be applied for the same purposes, until other provision was made by a competent legislature or other competent authority.
After the passing of this Act, the petitioners continued to be sub.jeer to the existing French laws relating to income tax.
On March 30, 1963, the President in the exercise of the powers conferred on him by article 240 of the Constitution promulgated the impugned Regulation No. 3 of 1963.
The Regulation extended certain Indian Acts relating to taxation to the Union territories mentioned therein.
Section 3 (2) of the Regulation extended the Income tax Act, 1961, subject to the modifications mentioned in Part II of the Schedule, to Pondicherry as from April 1, 1963.
Section 4(1) provided that any law in force in Pondicherry corresponding to the Income tax Act, 1961 would stand repealed on April 1, 1963.
The petitioners carry on business at Pondicherry and are being assessed to income tax under the Income tax Act.
They have filed the present writ petitions asking for a declaration that the Income tax Act, 1961 was not legally extended to Pondicherry and a direction prohibiting the respondents from implementing that Act in relation to Pondicherry.
In the Constitution of India as originally enacted, India was declared to be a Union of States, [article 1 (1)].
The States and their territories were specified in Parts A, B and C of the First schedule [article 1(2)].
The territory of India consisted of the territories of the States, the territories specified in Part D of the First Schedule (Andaman and Nicobar Islands) and such other territories as may be acquired, [article 1 (3)].
As original enacted.
part VI of the Constitution dealt with Part A States, Part VII dealt with Part B States, Part VIII dealt with Part C States and Part IX dealt with the territories specified in Part D of the First Schedule.
The Constitution (Seventh Amendment) Act passed on October 19, 1956 altered the scheme of division of India in to A B and C States and the territories mentioned in Part D of the first Schedule.
Article 1 and the First Schedule were amended so that the territory of India would comprise the territories of the states, the Union territories specified in the First Schedule and such other territories as may be acquired.
By cl. 30 added to article 66. "Union territory" was defined to mean any Union territory specified in the First Schedule and to include any other territory supp.
C.I./68 8 106 comprised within 'the territory of India but not specified in that Schedule.
Consequential amendments were made in Part VI and other Parts of the Constitution.
Parts VII and IX were repealed.
Part VIII was drastically amended.
The title of Part VIII was altered to that of "Union Territories".
The amended article 239 provided for the administration of Union territories by the President acting through an administrator to be appointed by him.
The amended article 240 was in these terms: "240.
Power of President to make regulations for certain Union territories. ( 1 ) The President may make regulations for the peace, progress and good government of the Union territory of (a) the Andaman and Nicobar Islands; (b) the Laccadive, Minicoy and Amindivi Islands.
(2) Any regulation so made may repeal or amend any Act made by Parliament or any existing law which is for the time being applicable to the Union territory and, when promulgated by the President, shall have the same force and effect as an Act of Parliament which applies to that territory.
" The amended article 241 dealt with High Courts for Union territories.
Article 242 relating to Coorg was repealed.
Article 240 (1) and the First Schedule were amended from time to time.
The Constitution (Fourteenth Amendment) Act passed on December 28, 1962 amended the First Schedule and article 240 and added article 239A. Article 239A and the amended article 240 are in these terms: "239A. (1 ) Parliament may by law create for any of the Union territories of Himachal Pradesh, Manipur, Tripura, Goa, Daman and Diu, and Pondicherry (a) a body, whether elected or partly nominated and partly elected, to function as a Legislature for the Union territory, or (b) a Council of Ministers,or both with such constitution, powers and functions, in each case, as may be specified in the law.
(2) Any such law as is referred to in clause (1) shall not be deemed to be an amendment of this Constitution for the purposes of article 368 notwithstanding that it contains any provision which amends or has the effect of amending this Constitution.
107 240.
(1) The President may make regulations for the peace, progress and good government of the Union territory of (a) the Andaman and Nicobar Islands; (b) the Laccudive, Minicoy and Amindivi Islands; (c) Dadra and Nagar Haveli; (d) Gao, Daman and Diu; (e) Pondicherry: Provided that when any body is created under article 239A to function as a Legislature for the Union teriyaki of Goa, Daman and Diu or Pondicherry, the President shall not make any regulation for the peace, progress and good government of that Union territory with effect from the date appointed for the first meeting of the Legislature.
(2) Any regulation so made may repeal or amend any Act made by Parliament or any existing law which is for the time being applicable to the Union territory and, when promulgated by the President, shall have the same force and effect as an Act of Parliament which applies to that territory." Regulation No. 3 of 1963 was made by the President in the exercise of the power conferred on him to make regulations for the peace, progress and good government of the Union territories.
The contention that under article 240 the President can make regulations limited to the subject of law and order only cannot be accepted.
The grant of legislative power to make laws, regulations or ordinances for British dependencies has long been expressed in the common form of that of making laws, regulations or ordinances for "peace and good government" of the territory or similar objects such as "peace, order and good government", "peace, welfare and good government" and "peace, progress and good government" of the territory.
Instances of this common form of grant of legislative power to legislatures and authorities in India are section 42 of the Indian Councils Act, 1861, sections 71, 72, 80A of the Government of India Act, 1915, section 72 of the ninth Schedule and section 92(2) of the Government of India Act,1935.
Such a power was held to authorise the utmost discretion of enactment for the attainment of peace, order and good government of the territory and a Court will not enquire whether any particular enactment made in the exercise of this power, in fact, promotes those objects, Riel vs Queen), Chenard and Co. vs Joachim Arissol(2).
The words "peace, order and good government" and (1) , 678 679.
(2) , 132.
108 similar expressions are words of very wide import giving wide discretion to the authority empowered to pass laws for such purposes, Attorney General for Saskatchewan vs Canadian Pacific Ry.
CO.(1) King Emperor vs Benoari Lal Sarma(2).
In Jogendra Narayan Deb vs Debendra Narayan Roy(3) Sir George Rankin said that the words have reference to the scope and not to the merits of the legislation.
Girindra Nath Banerjee vs Birendra Nath Pal(4), he said that "these words are used because they are words of the widest significance and it is not open to a Court of law to consider with regard to any particular piece of legislation whether in fact it is meritorious in the sense that it will conduce to peace or to good government.
It is sufficient that they are words which are intended to give, subject to the restrictions of the Act, a legislating power to the body which it invests with that authority.
" Article 240 of the Constitution confers on the President a general power of making regulations for the peace, progress and good government of the specified Union territories.
In exercise of this power, the President may make a regulation repealing or amending any Act made by Parliament or any existing law which is for the time being applicable to the Union territory.
The regulation when promulgated by the President has the stone force and effect as an Act of Parliament which applies to that territory.
The President can thus make regulations on all subjects on which Parliament can make laws for the territory.
Parliament has plenary power to legislate for the Union territories with regard to any subject.
With regard to Union territories there is no distribution of legislative power.
Article 246(4) enacts that "Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.
" In R.K. Sen vs Union(3) it was pointed out that having regard to article 367, the definition of "State" in section 3(58) of the applies for the interpretation of the Constitution unless there is anything repugnant in.
the subject or context.
Under that definition, the expression "State" as respects any period after the commencement of the Constitution (Seventh Amendment) Act, 1956 "shall mean a State specified in the First Schedule to the Constitution and shall include a Union territory. ' But this inclusive definition is repugnant to the subject and con text of article 246.
There, the expression "State" means the State specified in the First Schedule.
There is a distribution of legislative power between Parliament and the legislatures of the States Exclusive power to legislate with respect to the matters enumerated in the State List is assigned to the legislatures of the States esta (1) , 613 614. ' (2) [1914] L.R. 72 I.A. 57, 72.
(3) [1942] L.R. 69 I.A. 76, 90.
(4) Cal.
727, 738, (5) ; , 433. 109 blished by Part V1.
There is no distribution of legislative power with respect to Union territories.
That is why Parliament is given power by article 246(4) to legislate even with respect to matters enumerated in the State List.
If the inclusive definition of "State" in section 3(58) of the were to.
apply to article 246(4), Parliament would have no power to legislate for the Union territories with respect to matters enumerated in the State List and until a legislature empowered to legislate on those matters is created under article 239A for the Union territories, there would be no legislature competent to legislate on those matterS; moreover, for certain territories such as the Andaman and Nicobar Islands no legislature can be created under article 239A, and for such territories there can be no authority competent to legislate with respect to matters,enumerated in the State List.
Such a construction is repugnant to the subject and context of article 246.
It follows that m view of article 246(4), Parliament has plenary powers to make laws for Union territories on all matters.
Parliament can by law extend the Income tax Act, 1961 to a Union territory with such modifications as it thinks fit.
The President in the exercise of his powers under article 240 can make regulations which have the same force and effect as an Act of Parliament which applies to that territory.
The President can therefore by regulation made under article 240 extend the Income tax Act, 1961 to that territory with such modifications as he thinks lit.
The President can thus make regulations under article 240 with respect to a Union territory occupying the same field on which Parliament can also make laws.
We are not impressed by the argument that such overlapping of powers would lead to.
a clash between the President and Parliament.
The Union.
territories.
are centrally administered through the President acting through an administrator.
In the cabinet system of Government the President acts on the advice of the Ministers who are responsible Parliament.
The proviso to article 240(1) lays down the condition for the cesser of power of the President to make regulations under article 240(1).
The power of the President to make regulations for the Union territory of Goa, Daman and Diu or Pondicherry ceases when a legislature for the territory is created with effect from the date appointed for the first meeting of the legislature.
But until such a legislature is created, the President retains his full power to make regulations for those territories.
The proviso does not act as a fetter on the general power of the President to make regulations for the Union territory while no legislature for that territory is brought into.
existence.
The proviso does not enact, as is suggested by the petitioners, that the power of the President is confined 110 to making laws with respect to the matters enumerated in the State List and the Concurrent List.
The argument is that a legislature created under article 239A can be authorised to pass laws with respect to those matters only and having regard to.
the proviso to article 240(1) the President 's power to make regulations under article 240 is similarly circumscribed.
As a matter of fact, the created local legislatures for the Union territories of Himachal Pradesh, Manipur.
Tripura, Goa, Daman and Diu and Pondicherry and section 18 of the Act conferred on those legislatures power to make laws for those territories with respect to the matters enumerated in the State List or the Concurrent List.
Assuming that the local legislature created under article 239A can be authorised to make laws with respect only to the matters enumerated in the State List or the Concurrent List, it does not follow that the power of the President to make regulations under article 240 is so limited.
By the express words of article 240, the President can make regulations for the peace, progress and good government of the specified Union territories.
Any regulation so made may repeal or amend any Act made by Parliament and applicable to that territory.
When promulgated by the President the regulation has the same force and effect as an Act of Parliament applicable to that territory.
This general power of the President to make regulations extends.
to all matters on which Parliament can legislate.
It may be recalled that article 239A and the proviso to article 240(1) were inserted by the Constitution (Fourteenth Amendment) Act.
Under article 240 as it stood after the Constitution (Seventh Amendment) Act and before the enactment of the Constitution (Fourteenth Amendment) Act, it could not be contended that the general power of the President to make regulations under article 240(1) was limited to matters enumerated in the State List and the Concurrent List.
The position was not changed by the insertion of article 239A and the proviso to article 240(1) by the Constitution (Fourteenth Amendment) Act.
Moreover, article 239A does not authorise Parliament to create legislatures for the Union territories of the Andaman and Nicobar Islands, Laccadive, Minicoy and Amindivi Islands and Dadra and Nagar Haveli.
It is clear, therefore, that the power of the President to make regulations with respect to those territories is not limited by the proviso to article 240( 1 ).
We are satisfied.
that the proviso to article 240(1) on its true construction does not fetter the power of the President to make regulations for any of the Union territories specified in article 240(1) including Pondicherry as long as no Legislature is created for the territory.
It was suggested that there is no provision for the distribution of the income tax attributable to Union territories and therefore the President could not extend the Income tax Act, 1961 to the Union territories.
If this argument were sound, even Parliament 111 could not extend the Income tax Act to the Union territories.
Moreover, the argument overlooks article 270 which shows that the income tax attributable to Union territories forms part of the Consolidated Fund of India.
It is not necessary to make any distribution of income tax with respect to Union territories as those territories are centrally administered through the President.
There is no force in the contention that the President cannot make a law with respect to income tax in the absence of an express grant of such a power.
There is distribution of legislative power between the Centre and the States and consequently distinct grants of taxing power are made in the legislative lists.
With respect to Union territories, there is no distribution of legislative power.
For the Union territories, Parliament has plenary powers to make laws and the President has general powers to make regulations.
In the exercise of his powers under article 240, the President could make Regulation No. 3 of 1963 extending the Income tax Act, 1961 and other laws to the Union territories.
The petitions are dismissed with costs, one hearing fee.
Petitions dismissed.

summary/full:
Parliament enacted the Pondicherry Administration Act.
which provided that all laws in force immediately before August 19.
1962, when Pondicherry became a Union territory, were to continue to be in force until amended or repealed by a competent legislature or other competent authority.
The President, in exercise of the powers conferred on him by article 240 of the Constitution to make regulations of "peace, progress and good government" of the Union territories promulgated the Tax Laws (Extension to Union Territories) Regulation.
By this Regulation the laws in force in relation to income tax in Union territory of Pond:cherry were repeated and the Indian Income tax Act, 1961 was made applicable.
The petitioners challenged the rites of the Regulation.
HELD: The Regulation is valid.
The power of the President to make regulations under article 240 is not limited to the subject of law and order.
Authority to make regulations for "peace.
progress and good government" is a common form of grant of legislative power and the expression "peace, progress and good government" is of very wide import giving wide discretion to the authority empowered to pass laws for such purposes.
The President can make regulations with respect to a Union territory occupying the same field on which Parliament can also make laws.
Such a regulation may repeal or amend any Act made by Parliament or any existing law which is for the time being applicable to the Union territory and when promulgated has the same force and effect as an Act of Parliament which applies to that territory.
[107E 108D] Riel vs queen.
Chenard and Co. vs Joachim Arissol, , Attorney General for Saskatchewan vs Canadian Pacific Ry.
Co., , King Emperor vs Benoari Lal Sarma, [1914] L.R. 72 I.A. 57.
Jogendra Narayan Deb vs Debendra Narayan Roy, [1942] L.R. 69 I.A. 76 and Girindra Nath Banerjee vs Birendra Nath Pal.
Cal. 727, referred to.
Parliament has, by virtue of article 246(4), power to make laws with respect to any matter including matters enumerated in the State List, for any part of the territory of India not included in a State.
With regard to Union territories there is no distribution of legislative power 104 and Parliament has plenary power to make laws for those territories on any subject.
Though the definition of "State" in section 3(58) of the , taking within it Union territories, applies to the interpretation of the Constitution, this inclusive definition is repugnant to the subject and context of article 246.
There, the expression "State" means the State specified in the FirSt Schedule.
Parliament can by law extend the Income tax Act, 1961, to a Union territory with such modifications as it thinks fit.
The President can, therefore, by regulation do the same.
[108E; 109A D] R.K. Sen vs Union, ; , referred to.
The power of the President to make regulations for any of the Union territories specified in article 240(1) so long as no legislature is created for the territory is not fettered by the.
proviso to article 24 0(2 ) or limited to matters enumerated in the State List and the.
Concurrent list.
[110G] It is not necessary to make any distribution of income tax with respect to Union territories, as those territories are centrally administered through the President.
[111A B]