ANDHRA SUGARS LTD. & ANR. ETC. versus STATE OF ANDHRA PRADESH & ORS.

Citation: [1968] 1 S.C.R. 705 · Decided: 29-09-1967 · Supreme Court of India · Bench: K.N. WANCHOO · Disposal: Dismissed
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Judgment (excerpt)

ANDHRA SUGARS LID. & ANR. ETC. 
A 
v. 
STATE OF ANDHRA PRADESH & ORS. 
September 29, 1967 
[K. N. WANCHOO, C.J., R. S. BACHAWAT, 
V. RAMASWAMI, 
B 
G. K. MITTER AND K. S. HEGDE, JJ.] 
Andhra Pradesh Sugar-cane 
(Regulation of Supply and Pur-
chase) Act 1961 (45 of 1961), s. 21-V!'lidity of section-Purchase~ of 
sugar by factories under compulsion of law-Such 
transactions 
whether taxable under Entry 54, List II, Seventh Schedule, Consti-
tution of India, 1950-Section 21 of Act 45 of 1961 whether violates c 
Art. 14 of Constitution of India-Whether impedes free trade! co,m-
merce and intercourse within the meaning of Art. 301 Constitution 
of India. 
Under the Andhra Pradesh (Regulation of Supply and Pur-
chase) Act 1961 the occupier of a sugar factory had to buy sugarcane 
from canegrowoers in conformity with the directions of the Cane 
Commissioner. Under s. 21 of the Act the State Government had D 
power by notification to tax purchases of sugarcane for use, con-
sumption 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 purchas»d 
for production of jaggery was not taxed at all. The petitioners 
were sugar factories in Andhra Pradesh. They filed writ petitions 
under Art. 32 of the Constitution challenging the validity of s. 21 E 
mainly on the ground that as the petitioners or their agents were 
compelled by law to buy cane from the canegrowers, their. purchases 
V.itere not made under agreements and were not taxable under Entry 
54 List II having regard to Gannon Dunkerley's case. It was fur-
ther urged that the tax leviable under s. 21 was not truly a purchase 
tax as it was levied with reference to weight of the goods, that it 
was levied with referenca to use and was therefore a use tax, and 
that it was the entry of the goods into the factory that was sought F 
to be taxed. Articles 14 and 301 of the Constitution were also said to 
be contravened. 
Held: (i) There has been a gradual erosion of the laissez faire 
concept which prevailed in the nineteenth century. It is now reali9' 
ed that in the public interest persons exercising certain callings or 
having monopoly or near monopoly powers should sometimes be G 
charged with the duty to serve the public, and if necessary to 
enter into contracts. The canegrowers scattered in the villages bad 
no real bargaining power. In the unequal contest between the cane-
growers 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 cane-
grower in the factory zone is free to make or not to make an offer B 
of sale of cane to the occupier of the factory. But if he makes an 
oft'er, the oc.cupler of th~ fact'?I}' is bound t~ accept it. The resultin 
agreement is recorded m writmg and is signed by the parties Th~ 
consent. of the occupier of the factory is free as defined in s. '14 of 
the Indian Contract Act. The compulsion of law is not coercion as 
705 
701; 
SUPREMB COURT ltEPORTK 
[1968) 1 s.c.11. 
defined in s. 15 of the Act. The agreements are enforce~ble by law 
and are contracts of sale as defined in s. 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 IL 
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 v. Gannon Dunkerley & Co. [1959] S.C.R. 379 
and New India Sugar Mills Ltd., v. Commissioner of Sales Tax, 
B Bihar, [1963] Supp. 2 S.C.R. 459, distinguished and explained. 
Lane v. Cotton, 1 Ld. Raym 646 :91 E.R. 17, Kirkness v. John 
Hudson & Co. Ltd. [1955] A.C. 696 and Ridge Nominees v. I.RC. 
[1962] 2 W.L.R. 3, referred to. 
The Indian Stee! & Wire Products Ltd., v. The State of Madras. 
[1968] 1 S.C.R. 479, relied on. 
C 
(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 te accapted that 
a purchase tax must be alwoays 
levied on goods generally and never with reference to their use, con-
D sumption or sale. Under List II Entry 54 the State Legislature is 
not bou
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