ALLAHABAD CANNING CO. v. UNION OF INDIA ~~ _:.

The Judgment of the Court was delivered by

BHAOWATt,J. This is an appeal by Special Leave directed against an order of the H igh Court of Allahabad dbmissing a writ petition filtd by tlte appellants claiming refund of a sum of Rs. l 22681.88 from the L~vy Sugar Price Equalisari.,n Fund under Sec· I F

1. tion 6, sub·s(ction (I) of the Ltvy Sugar Price Equallsauon Fuod Act, 1976 (hereinafter r~fcrred to as the Equali.sation Fund Act). t The facts of the ca.e are few .tnd '""Y b~ bri efly stated as follows:

The app~llaots carry on business of manufacture of syrups, 'I I l G squashes, j"rns and jellies, prescrv,1tion of l'cgt·tabk-s and other (O()d product~. One of the essential raw materials for the'o products manufactured by the appellanh is sugar. Ther.i was ut the ·material time Sugar Control Order· t966 · issued unlkr S. 3 of the Ess~ntial Commotlitie! Act, 19SS,' cl<tusc 4 of which provided thnt no purcha~ ser ~hall ~ell or C@ree to sell or oth~rwi'se di,'posc of sugar or deliver

I or a~ree to.dcli.ver ~ug~r, or,, remov~,.ony . sugur . from. tho bond~d gullnwtl of the fa ctory in which it is ~torc:d, except under and io

ALLAHABAD CANNING CO. v. UNION (Bflagwati, J.) 209

accordance with the directions issued in writing by the Central A Government or th.c Chief Olrector. Pursuant to this Order the Cen~ tral Government introduced the policy of partial decontrol of su- gar in August, 1967 a1,1d under this policy, the Central Government adopted a scheme of acquiring levy sugar from the factory. The price of le~y sugar acquired by the Central Govt. was fixed every B year in accordance with the principles set out in Section 3 (3c) of the Essential Commodities Act, 1955 and during the period in ques- tion the price of levy sugar was determined under the sugar (Price Determination) Order 1972. This Order was however challenged by factories manufacturing sugar and an interim order was passed c by the High Court of Allahabad permitting them to charge a price higher than that fixed under the Order, on condition that they· fur- nished bank guarantee for the difference in price in favour of the Registrar of the High Court. No~. different prices were fixed under the sugar (Price Determination) Order, 1972 for different zones and so far as the East U.P. Zone was concerned, the price fixed was Rs. 0 175 per quintal exclusive of ex cis~ duty, sales tax etc. with the re- sult that the price inclusive of these taxes and duties amounted to Rs. 190 per quintal. The appellants purcahsed from K.M. Sugar Mills Limited, Motinagar, Faizabad a certain quantity of sugar un~ der. a release order issued by the Central Government under the E Levy Sugar Supply (Control) Order 1972 and they lifted an aggregate quantity of 400 q,1intals of sugar on 12-8-1972 and 16-8·1972. Now, under the sugar (Price Determination) Order, 1972 K.M. Sugar Mills Limited were not entiled to recover from the appellants price at a rate exceeding Rs. ·190 per quintal but by virtue of the stay order granted by the High Court of Allahabad they recovered from the appellants price at the rate of Rs. 23 4. 89 per quintal and the total excess amount charged by K. M. Sugar Mill~ Limited from the appellants thus came to R<>. 22681.88 for which bank guarantee was given by K. M. Sug.tr Mil1s Limite·d in favour of the Registrar of the High Court. The writ petition filed by K.M. Sugar Mills Limited against the Sugar (Price Determination) Order, 1972 along with other similar writ petitions filed by other manufacturers of sugar was however. ultimately dismissed hy the Allahbad High Court in Nove- mber, 1974 with the result that the Registrar of the High Court be- came ~ntit1ed to encash the. bank guarantee given by K.M. Sugar Mills Limited and a sun of R~. 22,681.88 was accordingly recove- red by the Registrar under the bank guarantee.

Since th~ e')\cess amo~nt recovered by the various manufactu· H

210 SUPREME COURT REPORTS [1985] 1 s.c.R. ...... rers of sugar, including K.M. Sugar Mills Limited really belonged to the consumers to whom sugar had been sold by these manufactu- rers, Parliament enacted Levy Sugar Price Equalisation Fund Act, 1976 with effect from 1-4-1976 for the purpose of ensuring that the excess amount so recovered should not remain in the hands of B manufacturers of sugar so as to unjustly enrich them but should be paid to the consumers of sugar from whom it had been unlawfully recovered by the manuracturers. Section 3(l) of the Equalisation Fund Act established a Fund known as the Levy Sugar Price Equ· lisation· Fund. Sub Section (2) of Section 3 provided that there shaH be credited to the Fund amounts representing aU excess reali- c sations made by the ·manufacturers, irrespective of whether such realisations were made before or after the commencement of the Equalisation Fund Act. Pursuant to this provision, the Registrar of of the High Court de~osited a sum of Rs. 22681.88 to the Credit of the Fund. Section 6 of the Equalisation Fund Act then proceeded to enact that where any amount of excess realisation is credited to 0 the Fund, the buyer of Levy sugar from whom such excess realisa- tion was made by the manufacturer shall be entitled to the refurid of such excess realisation from the Fund. This Section is material for the purpose of determination of the controversy arising in the present appeal and we would, therefore, reproduce it as follows : E (1) Where any amount is credited to the Fund a refund shall be made from the Fund to the buyer of Levy Sugar from whom any excess realisation was made by the producer or dealer, - Provided that no buyer shall be entitled to claim as F refund under this sub-section if he-

(a) being the wholesale dealer, had passed on the inci· dence of such excess over the controlled or fair price of levy sugar to the retail dealer by whom the price of such sugar was paid or G (b) being a retail dealer, had passed on the incidence of such excess over the controlled or fair price of levy sugar to the consumer by whom the price of such su- gar was paid.''

8 Since a sum of Rs: 226~1 ,8~ represeQt~d e-x;cess r~alisation

ALLAHABAD CANNING CO. v. UNION (Bhagwati, J.) 211

made by K.M. Sugar Mills Limited from the appellants and this amount was credited to the Fund by the Registrar of the High Court, the appellants filed an aplication in form IV making a claim for refund ofthis amount from the Fund. This application was filed by the appellants, on 30th April, 1979, admittedly within the pres~ cribed pe.riod of six months. The Central Government, however, rejected the claim made by the appellants on the ground that they had not been abkto establish fully and clearly that the incidence of higher sugar price was not passed on by them to the consum-~rs of the end products.

The appellants thereupon preferred a Writ Petition in the c High Court but the High Court also rejected the Writ Petition on the same groun.d, namely, that according to the finding recorded by the Central Government the appellants had not been able to establish fully and clearly that the incidence of higher sugar price was not passed on to the consumers of the end products and since D this was a finding of fact base on evaluation of the material and evidence produced by the appellants before'the competent authority, the High Court would not be justified in interfering with the order of the Central Government. The appellants therupon preferred the present appea~ with spedalleave obtained from this Court. E The main point of controversy between the parties centres round the true interpretation of S. 6 Sub~section (1) of the Equali~ sation Fund Act. This provision lays down ·as a condition precedent to its applicability that the excess realisation made by the manu~ facturer of sugar should have been credited to the Fund. Now, the F application made by the appellants in from IV stated in so many terms that the amount in qeustion had been deposited by the Regi~ strar of the High Court in terms of the Levy Sugar Price Equalisa· tion Fund Rules, 1972, through the Chief Pay & Accounts Officer, Govt. of India, Ministary of Agriculture & Irrigarion, Department of Food, New Delhi. This statement was not at any time disputed on ·behalf of the Central Government either in the order made by the G Central Government rejecting the claim of the appellants or in the proc-eedings before the High Court. It is indisputable that a sum of Rs. 22681.88 representing the excess realisation made from the appellants by K.M. Sugar Mills Limited was credited to the Fund by th~ Registrar of the High Court. And in any event, this must be H

p. 212 Copy page pinpoint

A presumed to have been done because the Equalisation Fund Act having been enacted for this pupose, the Registrar of the High Court would naturally be expected to carry out his obligation under the statute by depositing the amount of excess realisation recovered by him under the bank guarantee given by K.M. Sugar Mills Limi· B ted. There can, therefore, be no doubt that in terms of Section 6, Sub-section (1) the appellants were entitled to claim refund of the sum of Rs. 22681.88 from the Fund. The only question is whether the proviso to section 6, Sub-section (l) precluded the appellants from claiming refund of that amount. The proviso on its plain terms applied only where the party claiming refund of the amount of c excess realisation is a wholesale or a retail dealer who .has passed on the incidence of the excess over the controlled price of levy su· gar to the retail dealer or to the consumer, as the case may be. The proviso obviously cannot apply to a case where a- claim for refund has been made by a consumer of sugar from whom excess realisa- tion has been made by the manufacturer of sugar. The appellants D were adm~ttedly consumers of sugar and not dealers in sugar and since they were not dealers in sugar, th~re could be no question of any incidence of excess being passed by them to the retail dealer or to the consumer.

E The learned counsel appearing on behalf of the respondent contended that the excess over the controlled or fair price of levy sugar must have been {'assed on by tbe appellants to the consumer when they sold the manufactured products to them, because the higher price paid by them for the sugar purchased from K.M. Sugar Milts Limited must have been taken into account by them in fix- F ing the pdce of the manufactured products. This may be so or may not be so. Tt is not necessarY for us to examine this question becau- se it is irrelevant on the terms of the proviso to Section 6, Sub-sec- tion (l). That proviso deals with a situation where a wholesale or retail dealer passes on the incidence of excess over the controlled or fair price of levy sugar to a retail dealer or consumer, who purchases G such sugar. Tt contemplets a case where a dealer-whether whole sale or retail-sells sugar to a retail dealer or consumer as tht; case may be and not where a person sells a manufactured product con· taining sugar as one of its ingredients, we have, therefore, no dou- bt that the proviso to Section 6, Sub-section (1) was not attracted in the case of the appellants and, consequently, the appellants were entitled to claim refund of the $'\JPl of tb~ R~· ~7681.88 fr~tn th~ sqm of Fund,

ALLAHABAD CANNING CO. V. UNION (iJhagwati,9.) 21J

We accordingly allow the appeal, set aside the judgment of A the High Court and issue a Writ directing the respondent to pay to the appellants a sum of Rs. 22681.88 together with interest thereon at the rate of 6 per cent per annum from today until payment. The respondent will pay the costs of the a peal to the appellants. B

H.S.K. Appeal all,.,wed.