Decided on November 13,1964

Lakshmi Kant Jhunjhunwala, partner in firm Kamalapat Moti Lal Appellant
STATE OF U. P. Respondents

Cited Judgements :-



DESAI, J. - (1.)THIS and the connected petition have been laid before a Full Bench because the questions that are raised in them are of far-reaching consequences and a Division Bench decision of this Court in Fakirey Lal Ram Bharosev Lal v. State, Writ Petn. No. 2311 of 1961, D/-2-11-1962 (All) may have to be reconsidered.
(2.)IN 1956 the legislature of Uttar Pradesh enacted the U.P. Sugarcane Cess Act No. XXII of 1956. Section 3 of it provided that the State Government could impose a cess not exceeding a certain rate on the entry of sugarcane into the premises of a factory for use, consumption or sale therein. It was payable by the owner of the factory on prescribed dates. If an arrear of cess was not paid on the prescribed date it was to carry interest at 6% per annum from that date to the date of payment. When a person was in default in making payment of the cess the authority empowered to collect the cess could direct that in addition to the amount of the arrear and interest a sum not exceeding 10% thereon was recoverable from him by way of penalty. Any sum imposed as a penalty was to be recovered in the manner prescribed for the recovery of the arrear of cess. Section 3 came into force with retrospective effect on 26-1-1950. In exercise of the powers conferred by S. 10 of the Act the State Government made rules known as the Sugarcane Cess Rules 1956. The Rules provided for appointment of assessing officers for assessing the cess, submission of returns showing the quantity of sugarcane entering the premises of the factory and the amount of cess due thereon to the assessing officer and for payment of the cess in the Government Treasury by a certain date every month. If the cess had not been correctly stated in the return the assessing officer was empowered to ascertain the correct amount and to require the owner to pay the balance. The Rules provided for collecting officers in addition to assessing officers, their duty was to impose a penalty for nonpayment of the cess and to give notice to the owner of a factory to deposit the arrears of cess with interest within a specified period.
Section 3 of the Sugarcane Cess Act was held by the Supreme Court on 13-12-1960 to be ultra vires the State Legislature on account of this kind of cess being beyond its legislative competence. It could not have been enacted by the State Legislature under any entry of List II or List III of the Constitution of India.*

(3.)THE effect of the decision of the Supreme Court declaring the Sugarcaiie Cess Act as ultra vires was that the State Government stood to lose crores of rupees which it had realised as cess under the Act. It seems that at its persuasion Parliament passed the U.P. Sugarcane Cess (Validation) Act, No. IV of 1961. It came into force on 3-2-61. Sections of it defined "cess" to mean the cess payable under the U.P. Sugarcane Cess Act and to include any sum recoverable by way of interest or penalty. Section 3 is as follows :
"(1) Notwithstanding any judgment, decree or order of any court, all cesses imposed, assessed or collected or purporting to have been imposed, assessed or collected under any State Act during the period beginning with the 26th day of January 1950, and ending on 3rd day of February, 1961, shall be deemed to have been validly imposed, assessed or collected in accordance with law, as if the provisions of the State Acts and all notifications, orders and rules issued or made thereunder, in so far as such provisions relate to the imposition, assessment and collection of such cess had been included in and formed part of this Section and this Section had been in force at all material times when such cess was imposed, assessed or collected;"
This was the main provision.

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