CHAMPARAN SUGAR COMPANY Vs. STATE OF BIHAR

JUDGEMENT

(1.) PETITIONERS in these cases are registered sugar factories under the Companies Act and engaged in manufacture of sugar by vacuum pan process. The raw materials for manufacturing sugar is admittedly sugar cane, which they used to purchase either through cane growers or co -operative societies of the respective areas. In Bihar, with a view to regulate supply and purchase of sugarcane, payment of price etc. Bihar Sugar Cane (Regulation, Supply & Purchase) Act (in short the 'Act') has been introduced. Under Section 49 of the Act, the State Government is authorised to impose tax not exceeding Rs. 1/ - per quintal on the entry of sugarcane in the local area specified by a notification, for consumption and use and sale to a sugar factory situated therein.

(2.) EARLIER , sales tax was being paid by the sugar factories as per the provisions of the Bihar Sales Tax Act. Ultimately, the Bihar Finance Act, 1981, replaced the Bihar Sales Tax Act with effect from 1.4.1981. Under Section 4 of the Act, every dealer, who is liable to pay tax under Section 3 and who purchase goods, on which no sales tax is payable, or has been paid on the sale price of such goods, either consumes such goods in manufacturing of other goods for sale, shall be liable to pay tax on the purchase price of such goods on the same rate on which it would have been leviable on sale of such goods at the same rate at which it would have been leviable under Section 12. Under Section 13, a special rate of tax has been provided on sales by a registered dealer of goods. The State government, therefore, in exercise of its power conferred under Section 13(1) has fixed special rate of tax on industrial raw materials, including sugarcane at the rate of 2 percentum of the taxable turnover with effect from 1. 8.1985.

(3.) INITIALLY , these writ petitions were filed for a sole consideration - whether sugar companies are liable to pay purchases tax and penalty under the provisions of Section 4 on the purchase of sugarcane, which is the main raw material for manufacture of sugar? It was pleaded that Section 4 of the Act was ultra vires to Article 247(3) of the Constitution read with Entry 54 of List II of the 7th Schedule. The other grievance was, if petitioners are compelled to pay tax under the provisions of Section 4, it would be a case of double taxation since admittedly they have been paying purchase tax as per the provisions of Bihar Sugarcane (Regulation of Supply & Purchase) Act, 1981.