As has been held by this Court in Diamond Sugar Mills Ltd. and Another Vs. The State of Uttar Pradesh and Another, when a similar point arose for consideration with the U.P. Sugarcane Cess Act, 1956, the proper meaning to be attached to the words “local area” in Entry 52 List II of the Seventh Schedule of the ConstitutionConstitution The Constitution encompasses the global system of rules governing constitutional authority. Simply reading selected provisions of the written text may be misleading. Understanding the underlying principles, such as federalism, democracy, constitutionalism, the rule of law, and respect for minorities, is crucial. Democratic institutions must allow for ongoing discussion and evolution, reflected in the right of participants to initiate constitutional change. This right entails a reciprocal duty to engage in discussions. Democracy involves more than majority rule, existing within the context of other constitutional values. Therefore, a profound understanding of these principles informs our appreciation of constitutional rights and obligations. Read more, (when the area is a part of the State imposing the law) is an area administered by a local body like a municipality, a district board, a local board, a union board, a panchayat or the like”.
It has been clearly laid down that the premises of a factory are therefore not a “local area”. This court accordingly struck down Section 3 of the U.P. Act empowering the Governor to impose a cess on the entry of sugarcane into the premises of the factory on the ground that it did not fall within Entry 52 of the State List and there was no other Entry in the State List or the Concurrent List in which the Act could fall. It is therefore futile for the appellant to contend that Section 23 of the State Act was not ultra-vires the Constitution or that it can be upheld on such a construction of the words “an area” in Section 23 as to restrict it to mean a “local area”.
BHOPAL SUGAR INDUSTRIES LTD.  Vs. STATE OF MADHYA PRADESH AND OTHERS [ (1979) AIR(SC) 537 : (1979) 3 SCC 792 ]