Rama Sugar Industries Ltd vs.
State of Andhra Pradesh & Others
NAME: Vaibhav Gupta
COURSE: BBALLB
SEMESTER: 4th Semester (2nd year)
SUBJECT: Administration Law
ROLL NO: 180BBALLB019
SUBMITTED TO: Prof. Deepak Miglani
NAME OF THE CASE: Rama Sugar Industries Ltd vs State Of Andhra Pradesh & Ors
CITATION: Civil Appeal No. 1453 of 1969 1974 AIR 1745
BENCH: ALAGIRISWAMI, A, RAY, A.N. (CJ), KHANNA, HANS RAJ, MATHEW,
KUTTYIL KURIEN, BHAGWATI, P.N.
CASE LAWS INVOLVED:
Andhra Sugars Ltd. v. A.P. State (1968 1 SCR 505)
R. v. Port of London Authority (1919 1 KB 176 at 184)
Padfield v. Min. of Agriculture (1968 1 All ER 694)
FACTS OF THE CASE
Rama Sugar Industries Ltd, a sugar factory in the State of Andhra Pradesh applied under the
provisions of section 21(3) for exemption from tax payable under Section 21(1) of the Andhra
Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1951 on the ground that since they
have substantially expanded, they were entitled, to the extent of the expansion, exemption from
the payment of tax. The Government of Andhra Pradesh refused the application of Rama Sugar
Industries Ltd for the exemption of tax payable under Section 21(1) of the Andhra Pradesh
Sugarcane (Regulation of Supply and Purchase) Act, 1951. Subsequent to the refusal of the
application, Rama Sugar Industries Ltd filed a writ petition in the Supreme Court under Article
32 of the Constitution of India. This appeal is against the decision of the Andhra Pradesh High
Court dismissing the writ petition filed for similar relief.
ISSUES RAISED BY THE PETITIONER
1. Whether the refusal of the application for the exemption of the tax payable was violative
of Section 21(3)(b) of the Andhra Pradesh Sugarcane (Regulation of Purchase and
Supply) Act, 1951?
2. Whether Section 21(3) of the Act violates Article 14 of the Indian Constitution?
3. Whether the interpretation of Section 21(3) of the Andhra Pradesh Sugarcane (Regulation
of Purchase and Supply) Act, 1951, obligates or provides discretion to, the Government
of Andhra Pradesh in granting exemption to the sugar factories from paying the taxes?
4. If the refusal of the application was violative of Section 21(3) of the Andhra Pradesh
Sugarcane (Regulation of Purchase and Supply) Act, 1951, whether the Government of
Andhra Pradesh is liable to pay damages to the petitioners under the Doctrine of
Promissory Estoppel along with the grant of exemption from payment of tax?
ARGUMENTS FROM THE PETITIONER’S SIDE
1. Whether the refusal of the application for the exemption of the tax payable was violative
of Section 21(3)(b) of the Andhra Pradesh Sugarcane (Regulation of Purchase and
Supply) Act, 1951?
ARGUMENT: The petitioners contended that the refusal of their application for the
exemption of the tax payable under Section 21(1) of the Andhra Pradesh Sugarcane
(Regulation of Purchase and Supply) Act, 1951 by the Andhra Pradesh Government was
violative of Section 21(3) of that Act. Section 21 of the Act reads as follows:
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 for a period not exceeding three years from the date on which it
commences crushing of cane;
(b) any 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.
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.
The petitioners argued that according to Section 21(3)(b) of the Andhra Pradesh
Sugarcane (Regulation of Purchase and Supply) Act, 1951 the Government was supposed
to accept the application for the exemption of the tax payable under sub-section (1) of the
section. But the Government of Andhra Pradesh denied their exemption from paying the
tax, thereby violating Section 21(3)(b) of Andhra Pradesh Sugarcane (Regulation of
Purchase and Supply) Act, 1951.
2. Whether Section 21(3) of the Act violates Article 14 of the Indian Constitution?
AGUEMENT: The petitioners contended that the policy behind section 21(3) being to
encourage new sugar factories or expanded sugar factories the Government could not refuse
to consider all except one class i.e. the cooperative sugar factories for the purpose of granting
exemption. The petitioners contended that new sugar factories and expanded sugar factories
all fall into one class and there is nothing particular or special about co- operative sugar
factories justifying their treatment as a special class deserving a special treatment. Thereby
resulting in violation of Article 14 of the Indian Constitution.
3. Whether the interpretation of Section 21(3) of the Andhra Pradesh Sugarcane (Regulation
of Purchase and Supply) Act, 1951, obligates or provides discretion to, the Government
of Andhra Pradesh in granting exemption to the sugar factories from paying the taxes?
ARGUMENT: The petitioners referring to the case of Andhra Sugars Ltd. v. A.P. State
(1968 1 SCR 505), argued that under the provisions of this section it was obligatory on the
part of the Government to grant exemption to all factories. Based on this contention, it was
further argued that the question whether to grant an exemption 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, has to be decided with reference to the facts of each individual
case.
It was contended that looking at the scheme of Section 21 the word may' occurring in sub-
section (3) thereof should be read as 'shall' as otherwise the sub-section will be
unconstitutional in that it does not provide guideline for the exercise of the discretion to grant
or refuse the exemption when all applicants fulfil the conditions specified in clause (b) of the
sub-section. The argument was that since no guidelines are furnished by the legislature for
choosing between two factories fulfilling the conditions specified in clause (b), the
subsection must be read as mandatory, namely, that it imposes an obligation upon the
Government, by notification to exempt from payment of the tax all factories which, in the
opinion of the Government, have substantially expanded, to the extent of such expansion, for
a period not exceeding two years from the date of the completion of the expansion.
4. If the refusal of the application was violative of Section 21(3) of the Andhra Pradesh
Sugarcane (Regulation of Purchase and Supply) Act, 1951, whether the Government of
Andhra Pradesh is liable to pay damages to the petitioners under the Doctrine of
Promissory Estoppel along with the grant of exemption from payment of tax?
ARGUMENT: The petitioners contended that since the refusal of the application for
exemption of tax by the Andhra Pradesh Government violated Section 21(3) of the Andhra
Pradesh Sugarcane (Regulation of Purchase and Supply) Act, 1951, the Government of
Andhra Pradesh was liable to pay damages to the petitioners under the Doctrine of
Promissory Estoppel along the exemption of Tax to be paid under Section 21(1) of the Act.
ARGUMENTS FROM THE RESPONDENT’S SIDE
1. Whether the refusal of the application for the exemption of the tax payable was violative
of Section 21(3)(b) of the Andhra Pradesh Sugarcane (Regulation of Purchase and
Supply) Act, 1951?
ARGUMENT: The respondents contended that the refusal of the application for the
exemption of tax payable under Section 21(1) was not violative of the Section 21(3)(b). They
urged that the clause (b) of the sub-section read a phrase, “in the opinion of the
Government”. Since the Government was not of the same opinion as of the petitioners
regarding the expansion, they dismissed the application for the exemption of payment of tax.
Thereby, not violating section 21(3)(b) of the Andhra Pradesh Sugarcane (Regulation of
Purchase and Supply) Act, 1951.
2. Whether Section 21(3) of the Act violates Article 14 of the Indian Constitution?
ARGUMENT: In reference to the case of Andhra Sugars Ltd. v. A.P. State (1968 1 SCR
505), the respondents argued that section 21(3) does not violate Article 14 of the Indian
Constitution. On behalf of the respondents, it was stated that only new co-operative sugar
factories have been granted exemption and that too only for one year as against the period of
three years contemplated by the Act in the case of new factories and no expanded factory
even a cooperative sugar factory has been granted any exemption. It was contended that the
discretion has been given to the State and this discretion is to be exercised by taking into
consideration several factors like the state of the Industry and the Financial position of any
sugar factory during any particular period and decide which class of factories should be
granted exemption, and that the co-operative sugar factories consisting of cane growers is a
distinct category justifying their treatment as a class separate from other sugar factories. They
urged that there is reasonable classification between privately owned sugar factories and co-
operative sugar factories consisting of cane growers. They also urged that sugarcane growers
have been the object of particular consideration and care of the legislature. Therefore they are
treated as a separate category. Hence, Section 21(3) does not violate Article 14 of the Indian
constitution.
3. Whether the interpretation of Section 21(3) of the Andhra Pradesh Sugarcane (Regulation
of Purchase and Supply) Act, 1951, obligates or provides discretion to, the Government
of Andhra Pradesh in granting exemption to the sugar factories from paying the taxes?
ARGUMENT: The respondents referring to the earlier decision of the court in a similar case
urged that the interpretation of Section 21(3) does not obligates the Government in granting
the exemption to every new factory or expanded factory for the period mentioned in the
section. They contended that it is unnecessary to consider whether the word “may” found in
the section should be interpreted as “shall”. Respondents contended that the word “may” only
indicates the policy behind the whole Section 21(3) and does not obligates the State to grant
exemption. The section clearly entrusts discretionary powers in the hands of the Government
to decide whether a particular factory should be granted exemption or not. In this matter it is
open to a Government to take into consideration several factors like the state of the industry
at any particular period, factories in a particular area are in need of this concession but not
factories in another area, etc.
4. If the refusal of the application was violative of Section 21(3) of the Andhra Pradesh
Sugarcane (Regulation of Purchase and Supply) Act, 1951, whether the Government of
Andhra Pradesh is liable to pay damages to the petitioners under the Doctrine of
Promissory Estoppel along with the grant of exemption from payment of tax?
ARGUMENT: As contended earlier also the refusal of the application for exemption of
payment tax does not violate Section 21(3). Since there is no violation of the Section 21(3),
the Government is not liable to pay damages under the Doctrine of Promissory Estoppel.
Therefore the question to pay damages and to exempt the factory from paying taxes does not
arise.
JUDGEMENT GIVEN BY THE COURT
The bench consisting A. N. Ray, C.J., H. R. Khanna, Alagiriswami, J. K. K. Mathew, J and
P. N. Bhagwati J, in this case gave a dissenting judgment. The court dismissed the petition
based on the contentions and arguments given from the respondents side and also referring to
the several case laws. The court quoting a passage of judgment given in R. v. Port of London
Authority (1919 1 KB 176 at 184), “There are oil the one hand cases where a tribunal in the
honest exercise of its discretion has adopted a policy, and, without refusing to hear an
applicant, intimates to him what its policy is, and that after hearing him it will in accordance
with its policy decide against him, unless there is something exceptional in his case if the
policy has been adopted for reasons which the tribunal may legitimately entertain, no
objection could be taken to such a course. On the other hand there are cases where a tribunal
has passed a rule, or come to a determination, not to hear any application of a particular
character by whosoever made. There is a wide distinction to be drawn between these two
classes”, said that the present case does falls under the earlier part and not the latter. The
court citing decision of Padfield v. Min. of Agriculture (1968 1 All ER 694) said that in
refusing the grant of exemption of tax in these cases, the State of Andhra Pradesh was not
acting so as to frustrate the purpose of the Act.
The court in response to the petitioner’s contentions that whether Section 21(3) imposes a
mandatory compulsion on the State to accept the application to grant the tax exemption, said
that there is no merit in this contention. Clause (b) of sub-section (3) only says that if any
factory "in the opinion of the Government, has substantially expanded", the Government may
exempt it from the payment of tax to the extent of such expansion for a period not exceeding
two years from the date of completion of the expansion. So, if in the opinion of the
Government, a factory has substantially expanded, it is open to the Government in its-
discretion to exempt that factory from payment of tax to the extent of such expansion and
that for a period not exceeding two years from the date of the completion of the expansion.
The court dismissed the petitioners argument of reading the word “may” of the section as
“shall”. The court said that section does not impose a mandatory obligation upon the
Government to grant the exemption even if all the conditions specified in clause (b) of
subsection (3) are satisfied. There is nothing in the context which compels the court to read
the word 'may' as 'shall' and it seems clear that the Government was intended to have a
discretion.
The court was of the opinion that the object of s. 21 (3) (b) is to give incentive to sugar
factories which are new and which have expanded it might be that the factories situated in
one area may require greater consideration at one time then factories situate in other areas.
The court assumed that cooperative sugar factories consisting only of sugar cane growers
stand on- a different footing and form a class by themselves or for that matter a distinct
category.
Hence, keeping in mind all the contentions, arguments and decisions of the case laws the
court dismissed the writ petition.
