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16. III. The competence of the State Legislature It is argued that the impugned Act is ultra vires the State Legislature. It is common ground that the tax will not be within the powers of that Legislature unless the enactment falls within the ambit of Entry 52 of List 2 of the 7th Schedule to the Constitution: unless it is, that is to say, a tax "on the entry of goods into a local area for consumption, use or sale therein." The petitioners contend that it is not such a tax on two grounds; first, that the cess is levied on the entry of goods into an area which is not a 'local area' within the meaning of Entry 52, of the State List and, secondly, that the cess is either a duty of excise which falls within Entry 84 of the Union List or, in the alternative, is a law in respect of a controlled industry, namely the sugar industry, and falls within Entry 52 of the Union List, and is therefore in either case a matter which is within the exclusive power of Parliament.

23. (iii) Legislation with respect to a controlled industry.

The second branch of the argument is that the impugned Act, being legislation with respect to an industry the control of which the Union has been declared by law to be expedient in the public interest, fell within Entry 52 of List I and was therefore ultra vires the State Legislature.

24. In 1951 Parliament enacted the Industries (Development and Regulation) Act 1951-Act 65 of 1951--whereunder, by virtue of Section 2 read with item (8) of the First Schedule, the sugar industry was declared to be an industry the control of which by the Union was expedient in the public interest. Mr. Shanti Bhushan's argument is that in these circumstances the impugned Act by imposing a tax on the entry of sugarcane into the factory premises is, in pith and substance, a law with respect to the sugar, industry and consequently within the exclusive province of Parliament.

It held that they did not. The Court pointed out that industry in the wide sense of the term is capable of comprising three different aspects: (1) raw materials which are an integral part of the industrial process, (2) the process of manufacture or production, and (3) the distribution of the products of the industry. The Court then proceeded to state that, in the case of a controlled industry, whereas the process of manufacture or production would be comprised in Entry 24 of the Union List, the raw material (in our case sugarcane) and the product of the industries (in our case sugar) would be comprised in Entry 33 of the concurrent List. "In no event" then said the court "could the legislation in regard to sugar and sugarcane be thus included within Entry 52 of List I.'' The Court then proceeds to point out that whereas the 1938 Act included both sugar and sugarcane within its compass, the 1953 Act was concerned only with the regulation of the supply and purchase of sugarcane required for use in sugar factories; and consequently ''there was no question whatever of its trenching upon the jurisdiction of the Centre in regard to the sugar industry."

A clear distinction was drawn between an industry and its products. The industry might be an exclusive Union subject, but the product was a concurrent subject of legislation. In paragraph No. 24 of the Report their Lordships are reported to have held, "It is clear, therefore, that all the Acts and the notifications issued thereunder by the Centre in regard to sugar and sugarcane were enacted in exercise of the concurrent jurisdiction."

And about a page later they say, "Before sugar industry became a controlled industry, both sugar and sugarcane fell within Entry 27 of List II but, after a declaration was made by Parliament in 1951 by Act LXV of 1951, sugar industry became a controlled industry and the product of that industry viz., sugar was comprised in Entry 33 of List III taking it out of Entry 27 of List II.