Shri Rama Sugar Industries Ltd v. State of A.P

Shri Rama Sugar Industries Ltd v. State of A.P

Case Comment

Christopher Thomas, BA.,LL.B


Section 20(3) (b) of the Act states that the government may exclude any person from paying taxes by issuing a notification.The cooperative societies of sugarcane growers were awarded a one-year exemption from paying tax in accordance with the said policy. The appellant and other joint stock corporations that run the sugar factories were denied the benefit of the exemption. On behalf of the appellant, it was argued that the government could not restrain itself from assessing the merits of each case by establishing a policy that exempted only cooperative sugar mills.

It was further argued that, because the objective of Sec. 21(3) is to stimulate new or expanded sugar factories, the government could not refuse to examine all but one kind, namely cooperative sugar factories, for exemption purposes. It was also argued that new sugar factories and expanded sugar factories all belong to the same class, and cooperative sugar factories have nothing exceptional to warrant their status as a special class deserving of special treatment.

The state of Andhra Pradesh argued that it had complete discretion in deciding the policy in providing the exemption, and that cooperative sugar factories made up of cane growers are a distinct category that deserves to be treated differently than other sugar factories. According to the facts, the state claimed that the exemption was only given to new cooperative sugar mills, and that it was only for a year. It was also claimed that the appellants’ case was individually evaluated and dismissed on the merits.


  1. Whether the Government  had  fettered its  discretion by laying down a policy  of confining the benefit of exemption to Cooperative Sugar Factories?
  2. Whether it is the discretion of the Government to grant exemption from payment of Purchase Tax?


Justice Alagiriswami, relied upon R. v. Port of London Authority for the proposition that if the administrative authority adopted a policy but heard the appellant and then decided against him because in his opinion there was nothing exceptional in the application to justify departure from the policy, no legal infirmity was committed. In the present case, the appellant company had been heard and their application was rejected because the policy was to grant exemption only to the co-operative sugar factories.

Alagiriswami, J., therefore, observed that it was open to the government to adopt a policy provided it was willing to consider an application on merit.

Mathew ,J., dissenting also observed that there was no objection if the government adopted a policy. He, however, added that “an authority entrusted with discretion must not, by adopting a rule or policy, disable itself from exercising its discretion in individual cases”.


The appeal was dismissed by a majority decision of 3:2

The Majority held that the decision of the Government valid and stated it would be open to the State  Government to grant exemption to new  factories only but  not the expanded factories, to grant the exemption for one year instead of three years or two years as contemplated under  the Section, to grant the exemption to  factories  in one area but not to factories in another area, to grant the exemption during a particular period but not during  another period.

The Minority held that Picking out cooperative societies of sugarcane growers for favoured treatment to  the exclusion of other new  or  substantially expanded industries is wholly unrelated to the object of the exempting  provision and the policy or rule adopted  by the State Government is legally not relevant to the exercise  of the power of granting exemption.


In India, the courts are the defenders of our constitution. They have thought since the beginning that executive and legislative powers that are not subject to judicial examination are a form of defiance of the rule of law. As a result, in order to accomplish justice and maintain the Rule of Law, they have developed a variety of formulations to control the use of administrative discretion through their numerous pronouncements. After combining these formulations, we may divide judicial control at the stage of administrative discretion exercise into two categories. 1.The authority is deemed not to have exercised its discretion at all. 2.The authority has not exercised its discretion properly.

‘The courts exercise judicial control if the administrative authority has either resigned from exercising its power or placed constraints on its exercise of discretion, or if the jurisdictional facts are either missing or have been incorrectly decided.’ The law has been made crystal plain in Indian Railway Construction Co. Ltd. v. Ajay Kumar. The Supreme Court ruled in this instance that discretion can only be used by the authority to which it is entrusted. The authority must legitimately handle the issue at hand; it cannot act on the orders of another body or deny itself the ability to exercise discretion in each case. It must not do what it has been banned to do or what it has not been permitted to do in the ostensible exercise of discretion. The judiciary has the power to compel the administrative authority to exercise discretion, but not in a specific manner.

The state failed to demonstrate why the cooperative sugar factories required protection or why they were exempted. The majority appears to prefer that the government make such economic policy decisions. The legislature gave the government the authority to exempt new and expanding factories from the law. We don’t understand how the government’s action had nothing to do with legislative policy. Because the government held the right to exempt, it was the sole arbiter of whether or not this factory should be exempted. The only ground on which its actions could have been questioned was whether they were genuine. That isn’t likely to be the situation here. Cooperative firms are provided with a variety of benefits, including tax exemption. The government’s policy is to develop and encourage cooperative firms. It is argued that Mathew, J., was incorrect in asserting that preferential treatment for cooperatives was not prohibited by state policy direction principles. One of the state’s directive principles is to ensure that “ownership and control of the community’s material resources are so distributed as to serve the common good” and that “the operation of the economic system does not result in the concentration of wealth and means of production to the detriment of the common good.” Cooperative firms are unquestionably more conducive to the constitution’s vision of social order. The court, it is said, could not be a better judge of economic necessities than the government, which is ultimately accountable to the legislature.

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