Gajendragadkar, C. J. - (1.) The principal question of law which arises in this appeal is in regard to the validity of the Central Act - the Sugarcane Cess (Validation) Act, 1961 (No. 38 of 1961) (hereinafter called 'the Act'). It arises in this way. The appellant, Jaora Sugar Mills (Pvt.) Ltd., is a Private Limited liability Company incorporated under the Indian Companies Act. Its registered office is at Jaora within the premises of the Sugar Mills owned by it. The appellant manufactures sugar and carries on the business, inter alia, of the production and sale of the said commodity since 1955 when it was incorporated. The sugarcane season for the manufacture of sugar generally covers the period December to March and the sugarcane crushing season usually begins on the 1st of October and ends on the 30th June.
(2.) Respondent No. 1, the State of Madhya Pradesh, enacted the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1958 (N0. 1 of 1959) (hereinafter called 'the Madhya Pradesh Act'). Section 23 of the said Act made a sugarcane cess payable as prescribed by it. Rules 60 to 63 of the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Rules, 1959, made under the said Act, provide for the method of collection of cess. Section 21 of the said Act prescribes for the payment of commission to the Cane Development Council which was proposed to be constituted under S. 5. Rules 45 of 47 prescribe the quantum of commission payable to the said Council and refer to the manner in which the said payment has to be made.
(3.) The validity of S. 23 of the Madhya Pradesh Act was challenged before the Madhya Pradesh High Court under Article 226 of the Constitution in Bhopal Sugar Industries vs. State of Madhya Pradesh, Misc. Petn. No. 27 of 1961 (Madh. Pra.). Before the writ petition challenging the validity of the said Act came to be heard before the said High Court, a similar provision in the U. P. Sugarcane Cess Act, 1956 (U. P. Act XXII of 1956) had already been struck down by this Court as unconstitutional in Diamond Sugar Mills Ltd. vs. State of Uttar Pradesh, (1961) 3 SCR 242 at page No. 256. The common feature of the charging sections in both the Madhya Pradesh and the U. P. Acts was that they authorised the respective State Governments to impose a cess on the entry of cane into the premises of a factory for use, consumption or sale therein. It was urged before this Court in the cess of Diamond Sugar Mills Ltd., (1961) 3 SCR 242, that the premises of a factory was not a 'local area' within the meaning of Entry 52 in List II of the Seventh Schedule to the Constitution, and so, the Act passed by the U. P. Legislature was beyond its competence. This argument was upheld. "We are of opinion", observed Das Gupta J., who spoke for the majority of the Court, "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 area". Following this decision, the Madhya Pradesh High Court struck down S. 23 of the impugned Madhya Pradesh Act in the Bhopal Sugar Industries, Misc. Petn. No. 27 of 1961 (Madh. Prs.), and allowed the writ petition to that extent. This decision was pronounced on August 31, 1961.;