TMI Blog1985 (5) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and the services rendered cannot be reduced to a ritualistic formula so as to close it in a straitjacket nor can it be weighed in golden scales All that is necessary is that there should be a direct nexus between realisation of fees and the services rendered. What would be the nature of the services, when and how it should be rendered and in what measure is entirely a matter for the market committees to decide or determine. So long as the money is realised, even though on the higher side, but is spent on the extention and expansion of the markets, market yards, market facilities, godowns, rest houses, buildings, even roads leading up to the markets, that would be fully within the concept of a fee and could not be labelled as a tax on the purchasers at the action of goods or articles in the market. It is, however, difficult to lay down any hard and fast rule for determining the extent and contours of the services that should be rendered by the Government while imposing a fee. All that the law requires is that the amount of fee realised from the purchasers should be spent for the purposes of the market. For instance, if the fee is on the higher side but the excess amount is reser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority charging it. It may not be exact equivalent of the fee by a mathematical precision, yet, by and large, or predominantly, the authority collecting the fee must show that the service which they are rendering in lieu of fee is for some special benefit of the payer of the fee. To our mind, these observations are not intended and meant as laying down a rule of universal application." The one cardinal principle which flows from Kewal Krishan Puri's case (supra) is that any fee or money realised should not be diverted to any other purpose except for the benefit of the purchaser/seller. In the instant case, though the fee appears to be on the higher side but there is unimpeachable evidence to show that the entire amount realised has not been spent on some other object or purpose but has been kept in reserve for developing the markets during the course of the coming 10-12 years. Though this period is large but it cannot be said that there is no nexus between the fee realised. Whether the development takes place immediately or in the course of a few years, so long as it is done with in a reasonable period, it cannot be said that the fee amounts to a tax and is, therefore, ultr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of India are demarcated fields of legislation and their contours and limits have been expressely described in the entries mentioned in the said three Lists. each State is free and independent to legislate on the field which is covered by the State List (List II) or the Concurrent List (List III). So far as List I is concerned that is reserved purely for Parliament for any legistation to be made. So far so good. The most knotty and difficult problem arises when we find that there is some sort of an inconsistency or convict or collision between the two Lists (List I and II) whether the State List or the Union List should prevail. the instant case we are really concerned with the question of tobacco industry. Entry 52 of List I (Union List) which lays down and fixes the subjects of legislation to be made by Parliament may be extracted thus: "52. Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest." Two problems, however, may arise. The word 'Industries' is very wide and has been used in the other two Lists also. Where a particular industry falls clearly within the four corners of entry No. 52 then the State has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of virginia tobacco having regard to the demand therefore in India and abroad; (c) maintenance and improvement of existing markets, and development of new markets outside India for Indian virginia tobacco and its products and devising of marketing strategy in consonance with demand for the commodity outside India, including group marketing under limited brand names; (cc) establishment by the Board of auction platforms, with the previous approval of the Central Government, for the sale of virginia tobacco by registered grower or curers, and functioning of the Board as an auctioner at auction planteforms established by or registered withit subject to such conditions as may be specifited by the Central Government; (g) purchasing virginia tobacco from growers when the same is considered necessary or expedient for protecting the interests of the growers and disposal of the same in India or abroad as and when considered appropriate; (i) sponsoring, assisting, coordinating or encouraging scientific, technological and economic research for the promotion of tobacco industry, (i) Such other matters as may be prescribed. 14 A (1). Where Virginia tobacco is sold at any auction plat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acts for the working of the railways with respect to areas through which they pass. This is exactly the case here. When the Parliament took over the tobacco industry without any preconditions or permutations and combinations and established a Tobacco Board for regulating the sale and purchase of tobacco under entry 52 of List I the entire field of tobacco industry was fully occupied and nothing remained for the States to do, and thus neither the doctrine of entrenchment nor that of pith and substance would have any application. The crucial point for determination in this cases is whether the Karnataka State had any jurisdiction to encroach upon the limits of entry 52 of List I and the court will have to closely examine the encroachment or entrenchment and the extent of the same. Where the court is of the opinion that the encroachment or entrenchment amounts to defeating the very object sought to be subserved by the Central legislation then the Central legislation must prevail. Where it is a borderline case and covered almost fully by List II but in the course of the implemention of the same there is an entrenchment or encroachment which is only minimal, the question of the doctr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws made by Parliament and by the Legislatures of State (1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. (2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial operation-246. Subject-matter of laws made by Parliament and by the Legislatures of States (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in Seventh Schedule (in this Constitution referred to as the "Union List). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the "State List"). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included (in a State) not with standing that such matter is a matter enumerated in the State List." A close and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entally trench on matters which are beyond its competence." (3) The consideration of encroachment or entrenchment of one List in another and the extent thereof is also well established. If the entrenchment is minimal and does not affect the dominant part of some other entry, which is not within the competence of the State Legislature, the Act may be upheld as constitutionally valid. (4) The nature and character of the scope of the entries having regard to the touch stone of the provisions of Arts. 245 and 246. (5) The doctrine of occupied field has a great place in the interpretation as to whether or not a particular legislature is competent to legislate on a particular entry. This means that when the field is completely occupied by List I, as in this case, then the State legislature is wholly incompetent to legislate and no entrenchment or A encroachment, minimal or otherwise, by a State legislature is permitted. In other words, where the field is not wholly occupied, than a mere minimal encroachment would not affect the validity of the State legislation. Thus, in my opinion, the five principles have to be read and construed together and not in isolation-where however, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latures is supreme. But it does also fall with in List I, then it must be deemed as if it is not included in List II at all. Similarly, if it also falls in List III, it must be deemed to have been excluded from List II But the rigour of the literal interpretation is relaxed by the use of the words "with respect to" which as already pointed out only signify "path and substance," and do not forbid a mere incidental encroachment. But, even if such an incidental encroachment may be ordinarily permissible, the field may not be clear. There may be competency and yet repugnancy also. The question is how to prevent a clash if the trespass is on a field already occupied by a Central Legislation." In the above case their Lordships relied on the leading case reported in [1921] 2 A. C. 91. To the same effect is a decision of this Court in Zaverbhai Amaidas v. State Bank of Bombay [1955] 1 S.C.R 799. where the following observations were made: "The principle embodied in section 107 (2) and article 254 (2) is that when there is legislation covering the same ground both by the Central and by the Province both of them being competent to enact the same, the la v of the Centre should prevail o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his connection, this Court observed thus: "Repugnancy arises when two enanctments both within the competence of the two Legislatures collide and when the Constitution expressly or by necessary implication provides that the enanctment of one Legislature has superiority over the other then to the extent of the repugnancy the one supersedes the other.. The best of two legislation containing contradictory provisions is not, however, the only criterion of repugnancy, for if a competent legislature with a superior efficacy expressly or impliedly evinces by its legislation an intention to cover the whole filed, the enactments of the other legislature whether passed before or after would be overborne on the ground of repugnance." (Emphasis supplied) To the same effect is another decision Or this Court in Sudhir Chandra Nawn v. Wealth Tax Officer, Calcutta Ors. [1969] 1 S.C.R. 108. when Shah, J. Observed thus: "Exclusive power to legislate conferred upon Parliament is exercisable, not with standing anything contained in cls. (2) (3), that is made more emphatic by providing A in cl. (3) that the Legislature of any State has exclusive power to make laws for such State or any part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t validate the Karnataka Act of 1980 so far as the Tobacco Industry is concerned because Article 254(2) applies only to matters contained in the Concurrent List and has nothing to do with matters enumerated in List I or List II. Thus, the Karnataka Act of 1980 would have absolutely no application to entry 52 of List I which was fully occupied by the Central Act of 1975 as referred to above. This circumstance, therefore, is of no consequence. On a careful consideration, therefore, of the facts and circumstances of this case I express my respectful dissent with the view taken by Brother Mukbarji, J., on this point and hold that so far as the case of the I.T.C. (C.A. No. 629 of 1983) is concerned, the Government of Karnataka had no jurisdiction to levy any market fee because that directly collides with the 1975 Act as indicated above. This being the position, 1, therefore, strike down that part of the Karnataka Act which takes in itself the power to levy market fee on tobacco or its products. Even if the products may be sold in the p markets in Karnataka or near about the same place situated in the State, the power to levy fees will not belong to that State: it will remain with Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified agricultural produce leaving a yard shall, unless the contrary is proved be presumed to have been brought within such yard by the persons in possession of such produce. Pursuant to S. 65 {1) the market fee appears to have been fixed by all the market committees in the State of Karnataka at thirty paise per one hundred rupees of the price paid to the buyers. S. 2 of the Karnataka Agricultural Produce Marketing (Regulation) Amendment Act. 20 of 1973 which came into force on 23-10-1973 amended S. 65 of the Act by substituting the words "thirty paise". in sub-section (1) of S. 65 of the Act by the words "one rupee". That Amendment Act was passed in replacement of the Karnataka Ordinance 5 of 1973 which was repealed by S. 4 of that Act with the necessary saving clause by way of the proviso. The market Committees accordingly raised the market fee to the maximum limit of one per cent of the sale price by amendment of the byelaws. The enhancement of the market fee from thirty paise to one rupee per one hundred rupees of the price paid to buyers was upheld by the High Court in the decision rendered on 17.12.1974 in W. P- No. 537 of 1974 (Vaman Rao v. Agricultural Produce market Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed making some amendments to ss. 63 and 65 of the Act. S. 63 which deals with the powers and duties of market Committees was amended with retrospective effect from 19.5.1975 so as to substitute in clause (ii) of sub-section (1) of S.63 the words "transport and marketing" for the word, marketing" In Sub-section (2)(a) of S.63 with reference to the duties, of the Marketing Committees, after item (1) the amendment stated: "provide either independently or along with some other authority necessary facilities for the transport of notified agricultural produce to the yard in such manner as may be prescribed." S.65 was ammended (i) validating market fees levied and collected under sub-section (1) of S. 65 for the period from 19.5.1975 to 28.9.1978; (ii) omitting the amended sub- section (1) of S. 65 with effect from 28.9.1978; (iii) enhancing the maximum permissible limit of market fee levied and collected from buyers of specified agricultural produce under sub-section (2) of S. 65 from one per cent to two per cent, and (iv) omitting sub-section (3) of S. 65 as if it never existed in the Statute. The Karnataka Agriculture Produce Marketing (Regulation) Amendment Act 17 of 1980 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng sub-section shall be deemed to have been substituted with effect from 19th day of May 1975 namely:- (1) In respect of agricultural produce sold in the market area there shall be levied and collected by the Market Committee thereof, from every seller market fees at the rate of one per cent of the sale proceeds of the produce so sold; (2) Sub-section (1) as so substituted shall be and shall deemed to have been omitted with effect from the 29th day of September, 1978; (3) In Sub-section (2) for the words "one rupee" the words "two rupees" shall be substituted; (4) Sub-section (3) shall and shall be deemed always to have been omitted." Thus the levy of market fee subject to a maximum of one per cent of the sale price of specified agricultural produce on sellers for the period from 19.5.1975 has been done away with effect from 28.9.1978 and sub-section (3) of s. 65 which provided for crediting the market fee levied and collected from sellers of specified agricultural produce to the Roads and Bridges Fund has been omitted as if it never existed in S. 65 of the Act by the Amendment Act 17 of 1980. Pursuant to the amendment made to sub-section (2) of S. 65 of the Act enhanci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from sellers during the period from 19.5.1975 to 28.9.1978 was sought to be validated by the aforesaid amendment because by reason of the judgment of the High Court in Rajasekhariah's case (supra) the State was exposed to the liability to refund the market fees collected during that period. The High Court found that S. 65 (1) as substituted by the Amendment Act 17 of 1980 and even S. 42 of that Amendment Act was not constitutionally valid and are liable to be struck down. The reason is that before S. 65 (3) was struck down the levy and collection of market fees under S. 65 (1), as it stood then, were for the benefit of the Karnataka Roads and Bridges Fund constituted under the Karnataka Motor Vehicles Taxation Act, 1957 and that the event which had happened, namely crediting of the market fees to that Fund cannot be reversed by the subsequent amendment of S. 65 (1) and the introduction of S. 42 in the Amendment Act 17 of 1980. The High Court rejected the submission of the learned Advocate General that several crores of rupees collected under S. 65 (1) from sellers had actually been spent for the construction, improvement, repair and maintenance of rural roads, culverts and bridge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hancing the market fee from one per cent to two per cent was made is without any application of the mind of the market committees to the relevant criteria and it should, therefore, be struck down on that ground. It was contended that the amendment of S. 65 (2) providing for enhancement of the maximum permissible limit of the market fee from one per cent to two per cent became effective from 30.6.1979 and that the Market Committees lost no time in mechanically raising the market fee from one per cent to two per cent without any application of the mind to the question whether such enhancement was justified having regard to the financial resources available and the funds required to meet the outlay on the services proposed to be provided in the near future and without preparing any budget estimates and balance sheet and considering them before deciding upon the quantum of enhancement and without giving an opportunity of being heard about the matter to the affected interests. On the other hand, for the Market Committees it was contended that the right to be heard was a creature of S. 148 (1) of the Act and not in recognition of or corollary to any obligation which could be said to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e market Committees to amend the bye-laws for enhancing the market fee from one per cent to two per cent and the bye- laws were accordingly amended by the market committees and the Chief Marketing Officer thereafter accorded sanction. The High Court has held that the Chief marketing Officer's direction can be regarded as his previous sanction for amending the bye-laws. However, the learned Judges themselves do not appear to have been quite happy about what had happened, for they have observed A para 61 of their judgment thus: "The question might, however, become a live issue if the Market Committees were to amend the bye- laws made under s. 65(2) of the Act in future without such an opportunity of hearing effected interests." Even the learned Advocate General appearing for the State and the learned Counsel appearing for the market Committees stated before the High Court, though according to them no obligation of hearing the affected interests was implicit in s. 65(2), that it would be eminently desirable that the Market Committees adopt some reasonable procedure in that behalf and that the amendment to s. 148 made by the Ordinance was only intended to cure the defect in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a procedure would be beyond reproach on procedural grounds, obviating needless and avoidable litigation." Point No. 12 framed in para 7 of the judgment of the High Court relates to the question of justification for enhancement of the market fee payable under s. 65(2) of the Act from one per cent to two per cent and roads thus: "Whether the enhancement of market fees leviable under s. 65(2) of the Act from one per cent to two per cent brought about by amendment of the bye-laws of the Market Committees in unsupportable in law and fails for want of correlation with the value of services rendered to the payers of the fees." The High Court has observed: "In 1974 when the levy had come to be challenged in Vaman Rao's case, (supra) the several market committees had filed financial projections for a I S year period ll from 1974-75 to show the estimated income and expenditure. Just about that time all the market committees had occasion to prepare and furnish similar financial proposals to the Chief Marketing Officer in connection with certain proposals for development with the aid of a loan from the World Bank. As learned counsel wanted A the Court to examine these proposals also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority in the position of the Chief Marketing Officer would reasonably approve such unco- ordinated and disproportionate development of the regulated markets; (3) many of the items of works envisaged in the development such as constructions of shops, godowns and like are unrelated to the concept of special service to the buyers and cannot be reckoned as qualifying for correlation. If these impermissible items are deleted from the estimates, the Market Committees would not be in a position to establish the requisite quid pro quo; and (4) a substantial part of the proposed financial outlays relates to what are called rural markets the outlays on which could not be reckoned as for rendering special service to the buyers. After considering the above proposals and estimate and the arguments advanced at length about them and after taking into consideration the proceedings of the National Seminar on Rural Markets Development held in New Delhi during December 1979 in which it is stated that in Karnataka the Panchayats manage the rural markets as agents of the Market Committees and 75 per cent of the revenues is given to the Panchayats for managing the markets and the remaining 25 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce handled A and transacted; potentialities for expansion and levels of development XX already reached, the proposals reveal a wide divergence. There is admittedly no uniformity or standardisation of norms for growth even broadly and each Market-Committee has its own plans of growth adhoc. Indeed the Indian Standards Institution has standardised the pattern of regulated markets classifying them into 'A', 'B', 'C', 'D', and 'E' classes based on the quantum of the notified agricultural produce handled therein annually. The assessment of the marketing projects in Karnataka made by experts of the Inter national Development Association in connection with the World Bank aid for development of the markets has classified and graded the markets based on certain well accepted common- criteria. The cost-projections for various classes of markets are also made therein. The present proposals have obviously not kept any of them in view. One explanation was that the whole concept of marketing is expanding and these precipitious 7 are not now apposite. However, the wide divergence in the plans for development lends some credence to the criticism of the petitioners that the estimates were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment to these market- yards on a scientific, rational and uniform basis was accepted by all the parties." A time-bound schedule has to be prescribed for the Chief Marketing Officer, as the authority under the 'Act', approving the budgets, to evolve and standardise broad and general norms, taking into account the observations made in the course of this order, both for infra-structural and developmental works and services, on as uniform a basis as may reasonably be feasible, for the various markets depending upon their classification to be made by the C.M.O on the basis of such criteria as he A may deem relevant and also to evolve corresponding cost patterns of the projects with suitable unbuilt indicia for escalation of cost-structures, from time to time, proportional to the rise in the price of material. These norms shall operate as broad and general guide- lines for the development of regulated markets and shall be kept in view of the market-committees in planning developmental projects. Departure from these norms and standards shall, of course, be permissible on grounds of special requirements of individual regulated markets depending upon their specific individual problems a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the finding is in para 111. Para 111 extracted above consists only of the direction given by the learned Judges of the High Court to the Chief Marketing Officer. The learned Judges have not expressed their opinion one way or the other in para 111 as regards the justification for the enhancement of the market fees leviable on buyers under section 65 (2) of the Act from one per cent to two per cent by amendment of the bye-laws though earlier in para 107 they have observed that they "are unable to hold, on the material placed before us by the petitioners that the levy ought to fail for want of quid pro quo; however, having regard to the infirmities noticed in the estimates and financial projections of the proposed developmental works on the basis of which the enhancement is sought to be justified, we are also unable to say with any confidence and without reservations that the enhancement of the fee, depending as it does on those estimate is totally justified. Some time bound directions to which we will refer presently, for a second look at the estimates of the statutory authorities are required in this behalf." and they have given the same in para 109 of their judgment. Dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damus be issued to direct the State Government and the Market Committees to refund to the Writ petitioners who had approached the High Court and had the benefit of the issuance of writs of mandamus for the refund of the sellers' market fees actually paid under S. 65 (1) in cases where the mandamus issued had not been complied with by the respondents in the writ petitioners in view of the validating provision contained in S. 42 of the Amendment Act 17 of 1980 on such writ petitioners filing their claims in writing before the Market Committees concerned, and in the second category of cases where the writ petitioners had not approached the High Court earlier their claims for refund of the market fee paid by them as sellers shall be confined to the market fees paid under S. 65 (1) within a period of 3 years immediately preceding the presentation of the writ petitions, and the same procedure as in the case of the other class of writ petitioners shall be followed. Mr. Soli J. Sorabjee appearing for most of the appellants and the petitioners in the writ petitions and special leave petitions (namely traders) advanced arguments on all the above points. Mr. S.N. Kackar appearing for the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect interests, and ss. 3, 5 (a) and 5 (b) of Ordinance 22 of 1981 promulgated when the hearing of the Writ Petitions in the High Court was in progress would not cure the defect- In the course of the arguments before the High Court it was specifically conceded that there was no compliance with the requirement of s. 148 in making the amendment of the bye-law for enhancement of the market fee from one per cent to two per cent. But on 17.12.1981 Karnataka Ordinance 22 of 1981 was promulgated, and ss. 3 and 5 (a) thereof stated: "3. Amendment of section 148-ID section 148 of the principal Act, in sub-section (1), the words "after previous publication in the prescribed manner", shall be and shall be deemed always to have been omitted. 5 (a) all acts, proceedings or things done or action taken by the State Government or by the Market Committees or by any other authority in connection with the levy Of collection of market fec shall for all purposes be deemed to be and to have always been done or taken in accordance with law" and s. 5 (b) stated that: "no suit or other proceedings shall be instituted, maintained or continued in any court or before any authority for refund of any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as therefore issued the directions contained in paras 109 and 111 of the judgment and those directions have been given in respect of all the Market Committees and not in respect of only 8 or 4 Market Committees in categories 'C', 'D' and 'E' as contended by Mr. A.K. Sen. Enhancement of the market fee from one per cent to two per cent is not justified. The High Court erred in holding that the Tobacco Board Act, 1975 covers only Virginia tobacco and is not repugnant to the provisions of the Act, ignoring the provisions of ss. 8 (2) (a), 8 (3) and 12 of the Tobacco Board Act and r. 35 of the Rules made under the provisions of that Act. Though reference is made in s. 8 (2) (a) to (g) of that Act to Virginia tobacco clause (h) relates to "promoting the gradation of tobacco at the level of growers", clause (1) relates to "sponsoring, assisting, co-ordinating or encouraging scientific, technological and economic research for the promotion of tobacco industry", and s.' (3) says that: "without prejudice to the generality of the provisions of subjection (1) and subject to priority being given to matters specified in sub-section (2), the measures referred to in sub-section (1) may also prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (3) of s. 65 was struck down in Rajasekhariah's case (supra) on 28.9.1978 several crores of rupees bad been collected under s. 65 (1) from 19.5.1975 when it was amended by Amendment Act 24 of 1975 to 28.9.1978 and that amount must be sufficient to meet the estimates and projections envisaged in Exs. R-l to R-111 and other statements prepared and produced by the Market Committees pursuant to the High Court's directions issued on 30.11.1981 having regard to the fact that subsection (3) of s. 65 under which that amount had to be credited to the Roads and Buildings Fund has been struck down in Rajasekhariah's case (supra) and that sub-section has been omitted from the Act as if it never existed in it. The Market Committees had surplus fund with them in 1979 and they bad no scheme for effecting improvements to the regulated markets then they enhanced the market fee from one per cent to two per cent under sub-section (2) of s. 65 of the Act by amending the bye-law except the statements produced in Vaman Rao's case (supra) in 1974. The statements Exs. R-1 to R-111 and other statements produced in the High Court were not in existence when the Writ Petitions were presented in the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Act is repugnant to the Cardamom Act which is almost similar to the Tobacco Board Act in its scope and operation. The consequence is that cardamom has to be taken out of the schedule to the Act. No appeal has been filed against that part of the High Court's judgment. The Act relates to markets falling under entry 28 of List II (markets and fairs) while the Tobacco Board Act falls under entry 52 of List I (industries) of the Seventh Schedule to the Constitution. Industries would certainly include marketing of the products. The Act would therefore be repugnant to the Tobacco Board Act in view of Art. 254 (1) of the Constitution. The attention of the learned Judges does not appear to have been focussed on s. 8 (3) and s. 12 of the Tobacco Board Act extracted above and r. 35 of the Rules framed under that Act, a perusal of which would show that the Tobacco Board Act covers tobacco of all varieties in regard to matters required to be done by the Market Committees under the provisions of the Act. The High Court has thus erred in holding that the provisions of the Act are not repugnant to the Tobacco Board Act, 1975 and that they can co-exist and operate cumulatively. In the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us for purposes alien to the object of the organisation, namely, the better administration of the trusts." This decision indicates what should be borne in mind when there is a complaint that the market fee already levied is A excessive or before any further increase in the levy is made. The second decision is that of a Bench of five learned Judges of this Court (Chandrachud, C.J. and Bhagwati, Untwalia, Murtaza Fazal Ali and Pathak, JJ ) in Kewal Krishan Puri v. State of Punjab (supra) where the purpose for which Marketing Development Fund and Market Committee Funds levied and collected under the Punjab Agricultural Produce Markets Act, 1961 and justification for enhancement of the rate of market fee from two per cent to three per cent came up for consideration. This appears to be a leading decision on this subject. It has been relied upon not only by Mr. Sorabjee and Mr. Kacker but also by Mr A.K. Sen. In that case, Untwalia, J. speaking for the Bench observed thus: "Such a fee cannot be utilised for the purpose of rendering all sorts of facilities and services for the benefit of agriculturists throughout the area. It may be very necessary to render such services to the agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able certainty as being spent for rendering services of the kind mentioned above.................... The benefit of market fee, therefore, has to be correlated with the transactions taking place at the specified place in the market area and not in the whole of the area. Supposing a market has been established consisting of principal market yard or sub-market yards at a particular place where there is no facility for the carts or the trucks and other vehicles to go, then approach roads, and if necessary even culverts and bridges may be constructed, or repaired out of the Market Committee Fund. Such an expenditure within the limited limit will be with the object of facilitating the taking place of the transactions of purchase and sale in the market and will confer some special benefits to the traders apart from a share of the benefit going to the agriculturist who are not required to share the burden of the market fee. But as we have pointed out above, if one were to give a very wide meaning to this phrase of construction and repair of approach roads, culverts and bridges to say that such construction can be permitted anywhere in the market area for the facility of the agriculturis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the rate of the market fec further to a reasonable limit." The third decision is of Chinnappa Reddy, A.P. Sen and Baharul Islam, JJ. in Southern Pharmaceuticals and Chemicals v. State of Kerala Ors. etc. [1982]1 S.C.R. 519 where Sen, J. speaking for the Bench has observed at page 542 thus: "It is also increasingly realised that the element of quid pro quo stricto senso is not always a sine qua DOn of A a fee. It is needless to stress that the element of quid pro quo is not necessarily absent in every tax." It has to be noticed that the observation was made by the learned Judge in a case in which the appellants who were manufacturers of medicinal and toilet preparations containing alcohol challenged the constitutional validity of certain provisions of the Kerala Abkari Act, 1967. In the earlier part of the judgment Sen, J. has observed: "The distinction between a 'tax' and 'fee' is well settled. The question came up for consideration for the first time in this Court in the Commissioner, H.R.E. Madras v. Lakshmindra Thirtha Swamiar of Shirur Mutt (1954 SCR 1005). Therein, the Court speaking through Mukherjee, J. quoted with approval the definition of 'tax' given by Latham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sense is not always a sine qua non for a fee. It is needless to stress that the element of quid pro quo is not necessarily absent in every tax." The above decision arose out of proceedings taken under the Andhra Pradesh (Agricultural Produce and Livestock) Market Act, 1966. With respect, it is not possible to agree with the above observation that there is no generic difference between a tax and a fee and the element of quid pro quo in the stricto senso is not always a sine qua non for a fee in view of my learned brother Sen's approval in Southern Pharmaceutical and Chemical's case (supra) of the I distinction pointed out by Latham, C.J. in Matthews v. Chickory Marketing Board (supra) between a tax and fee and that it is A absolutely necessary that levy of fee should on the face of the legislative provisions be correlated to the expenses incurred in rendering services and the learned Judge's observation in that decision that the same view was reiterated by this Court in Mahant Sri Jagannath Ramanuj Das's case (supra), Rathilat Param Chand Gandhi's case (supra) and also in view of the decision of the larger Bench of five Judges of this Court in Kewal Krishan Puri's case (supra) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eally necessary for that case and we also agree with the clarification of the observation made by Sen, J. With respect, I am not able to see how an why the observations made in Kewal Krishan Puri's case (supra) have to be confined to the special facts of that case. Kewal Krishan Puri's case arose out of proceedings taken under the Punjab Agricultural Produce Markets Act, 1961 which is an Act for the better regulation of the purchase, sale, storage and processing of agricultural produce and for the establishment of markets for agricultural produce in that State. The objects of that Act and the Act with which we are concerned in these cases are almost the same. The maximum rate of market fee which could be levied by the various market committees under s. 23 of the Punjab Act was fifty paise for every hundred rupees. The fee was raised from time to time. A number of writ petitions were filed in the High Court challenging the power of the Board to increase the levy. That is what has happened in these cases arising under the Act which relates to Karnataka State. The question whether quid pro quo was necessary and to what extent and what should be done by the Market Committees before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited by Government auditors for the purpose of raising market fee any further. The balance-sheet will given a true picture of the position also with the budgets and estimates and then and only then there may be legal justification for raising the market fee to a reasonable extent. On drawing the correct balance-sheets and preparing correct estimates and budgets the authorities will be able to know the correct position to decide reasonably as to what extent the raising of the market fee can be justified taking an over-all picture of the matter. It may be noticed that even the High Court has given similar directions to the Market Committees and the Chief Marketing Officer to see whether there is justification for increasing the market fee from one per cent to two per cent on the invitation of the learned Advocate General appearing for the State and the learned Consel appearing for the Market Committee as stated above. Now that I have set out the facts and the decision of the High Court to the extent necessary and the arguments of the learned counsel for the parties and the lay bearing on the questions involved as It understand the same I proceed to record my findings. The princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple of law laid down by this Court in Kewal Krishan Puri's case (supra) and failing to strike down the enhancement of the market fee from one per cent to two per cent on account of the failure to comply with the principles laid down in Kewal Krishan Puri's case (supra). The State Government and the Market Committees appear rightly to have retraced their steps by reducing the rate of the market are from two per cent to one per cent by the Circular No. SMD-268/ RGN-83 dated 27.2 1984 with effect from 1.4.1984. The learned Judges of the High Court themselves do not appear to have been quite happy about how the enhancement of the market fee had been made, for they have observed in para 61 of their judgment, as mentioned above, that the question might become a live issue if the Market Committees were to amend the bye-laws made under s. l48 read with s.65(2) of the Act in future without giving an opportunity to the affected interests of being heard in regard to the proposed enhancement. Even the learned Advocate General appearing for the State and the learned Counsel appearing for the Market Committees had stated before the learned Judges of the High Court that it would be eminently d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent to two per A cent brought about by the amendment of the bye-law responnents-Market-Committees is unsupportable in law and fails for want of correlation with the value of services rendered to the payers of the fee." The burden cast on the appellants is to prove the negative. The appellant are bound to succeed in the light of the decision in Kewal Krishan Puri's case (supra) if they prove that the enhancement of the market fee was made without complying with the law laid down in that case. That has been established by the appellant without any manner of doubt whatsoever. As rightly contended by Mr. Kacker the High Court has erred in giving the direction dated 30.11.1981 to the Chief Marketing Officer for furnishing a comprehensive statement in respect of each of the Market Committees in a tabular form as indicated in para 69 of the impugned judgment, set out in the earlier part of this judgment. The High Court has, thus, given an opportunity to the Market Committees to fill up the lacuna since the materials supplied thereafter by way of Exs. R- I to R- 111 and similar statements perused by the High Court were not available either on the date of the amendment of the bye- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and standardise broad and general norms, taking into account the observations made in the course of this order, both for infra-structural and developmental works and services, on as uniform a basis as may reasonably be feasible, for the various markets depending upon their classification to be made by the C.M.O. On the basis of such criteria he may deem relevant and also to evolve corresponding cost patterns of the projects with suitable inbuilt indicia for escalation of cost structures, from time to time, proportional to the rise in the price of material. These norms shall operate as broad and general guide- lines for the development of regulated markets and shall be kept in view of the market committees in planning developmental projects. Departure from these norms and standards shall, of course, be permissible on grounds of special requirements of individual regulated markets depending upon their specific individual problems and requirements. At the time of sanction of the budgets of the Market-Committees the C.M.O. should scrutinise the budgets with reference to and applying the broad-norms and criteria evolved and adopted by him so that the programme and the projects of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, and if upon such a scrutiny he is of the opinion that the present two per cent of market fee of any Market Committee in categories 'C' 'D' and 'E' is unjustified, he will make the appropriate orders directing the Market Committees concerned to amend their bye-laws to effect an appropriate downward revision in the quantum of the fee and wherever he is of the opinion after examination of the proposals that there is no need to make a downward revision he shall make a specific not in this behalf and he shall make these orders within a period of eight months from the date of the judgment". It is not clear why after giving the general direction in respect of all the Market Committees which had enhanced the market fee from one per cent to two per cent the learned Judges of the High Court thought it necessary to give another set of directions to the Market Committee falling in categories 'C' 'D' and 'E'. This confusion was perhaps responsible for Mr. A.K. Sen contending seriously in the course of his arguments that the directions given by the High Court relate to only 8 or 4 of the Market Committees falling in categories 'C' 'D' and 'E'. It is not possible to accept this argument for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. A.K. Sen that the directions have been given only in repect of 8 or 4 of the Market Committees falling in categories 'C', 'D' and 'E'.As stated earlier the learned Judges of the High Court have not recorded any finding on Point No. 12 to the effect that correlation is established satisfactorily in regard to all the Market Committees which had enhanced the market fee from one per cent to two per cent except 8 or 4 of the Market Committees falling in categories 'C', 'D' and 'E'. The direction given in para 111 is stated under Point No. 12 in para 7 of the impugned judgment to be the finding on that point relating to correlation. I, therefore, agree with Mr. Sorabjee that the directions given in paras 107 to 110 and the first sentence in para 111 of the impugned judgment relate to all the Market Committees which had enhanced the market fee from one per cent to two per cent and not to only 8 or 4 of the Market Committees falling in categories 'C', 'D' and 'E' and that in view of the observation made in para 107 that having regard to the infirmities noticed in the estimates and financial projections of the proposed development works on the basis of which alone the enhancement is sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard with Ordinance 22 of 1981 when the arguments in the Writ Petitions were coming to a close. That Ordinance has since been replaced by the Karnataka Act 4 of 1982. ss. 3 and 5 of the Ordinance which have been replaced by ss. 2 and 114 the Amendment Act may be extracted for easy reference: "3. Amendment of section 148.-In section 148 of the principal Act, in sub-section (1), the words 'after previous publication in the prescribed manner", shall be and shall be deemed always to have been omitted." "5. Validation-Nothwithstanding anything contained in any judgment, decree or order of any court or other authority, any bye-law made or purporting to have been made, and levy or collection of market fee made and any action or thing taken or done in relation to such levy or collection under the provisions of the principal Act, before the commencement of this Ordinance shall be deemed to be as valid and effective as if such bye-law or levy or collection or action or thing had been made, taken or done under the principal Act as amended by section 2 and 3 of this Ordinance and accordingly,- (a) all acts, proceedings or things done or action taken by the State Government or by the Marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensed with retrospectively by s. 3 of Ordiance 22 of 1981. It is seen from the impugned judgment that it was submitted before the learned Judges of the High Court that the affected interests' right of being heard was conferred by the Statute and it has been taken away by the subsequent amendment to the Statute with retrospective effect and that there is. therefore, no ground for the affected interests to complain. No such submissions were, however, made in this Court. Market fee is not a tax which is imposed by law passed by a Legislature where the interests affected are or are supposed to be represented unlike the market fee the enhancement whereof is made by subordinate legislation by way of amendment of the relevant bye-law by the Market Committees. That is why the provision for previous publication was made in s. 148(1) of the Act as it stood at the relevant time. It is not possible to accept the contention that the right given by law was taken away by law and cannot, therefore, be claimed by the affected interests, for though it was mentioned in s. 148(1) of the Act as it stood at the relevant time it was a right A which was available to the affected interests under the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified agricultural produce) in such manner and at such times as may be specified in the bye-laws. S. 65(2) laid down that for the purposes of sub-section (1), all notified agricultural produce leaving a yard shall, unless the contrary is proved, be presumed to have been bought within such yard by the person in possession of such produce. S. 65 was amended by Amendment Act 24 of 1975 which came into force on 19.5.1975. S. 2 of that Amendment Act substituted s. 65 of the principal Act as amended by Act "0 of 1973 by a new section which read as: "S. 65. Levy of market fees.- (1) The market committees shall levy and collect market fees from every buyer in respect of agricultural produce sold by such seller in the market area at the rate of one rupee for one hundred rupees of the price of such produce sold; (2) the market committees shall levy and collect market fees from every buyer in respect of agricultural produce bought by such buyer in the market area at such rate as may be specified in the bye-laws (which shall not be more than one rupee per hundred rupees of the price of such produce bought) in such manner and at such times as may be specified in the bye-laws; (3) every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 of Amendment Act 17 of 1980 relates to validation of market fees-etc. and reads: "S. 42 Notwithstanding anything contained in any decree, order of judgment of any court, or other authority, any levy or collection of market fee made or purported to have been made, any action taken or thing done in relation to such levy or collection under the provisions of the principal Act before the commencement A of this section shall be deemed to be as valid and effective as if such levy or collection or action or thing had been made, taken or done under the principal Act as amended by this Act and accordingly,- (a) all acts, proceedings or things done or action taken by any market committee in connection with the levy and collection of such market fee shall, for all purposes, be deemed to be or to have always been made, done or taken in accordance with law; (b) no suit or other proceedings shall be maintained or continued in any court or before any authority for the refund of any such market fee; and (c) no court shall enforce any decree or order directing the refund of any such fee; ... ... .... " The market fee levied on and collected from sellers under the substituted s. 65(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d collected." In Civil Appeals Nos. 45()0-4501 of 1984 decided on 19.11.1984 this Court has held that what s. 23A of the Punjab Act does is to prevent unjust enrichment by means of a refund to which the person claiming it has no moral or equitable entitlement. The market fee collected from sellers under the substituted s. 65(1) must have been credited to the Karnataka Roads and Bridges Fund and used for the purpose of construction, repair, improvement and maintenance of rural roads which are undoubtedly for the benefit of the general public. The excess fee collected under s. 65(2) of the Act also must have been utilised for the purposes contemplated by the Act. The persons from whom they have been collected, sellers and buyers, would naturally have passed on the levy to those who purchased the agricultural produce from them and the levy must have ultimately been borne by the consumers of the produce. Any refund would go to unjust enrichment of the persons from whom they have been collected. In these circumstances I do not think that any order for refund of the market fee collected under the substituted s. 65(1) and the excess market fee collected under s. 65(2) of the Act could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch had been heard along with those cases would be disposed of, in convenient batches, following the findings on the various contentions recorded in that order. These appeals arise out of the said order. In these appeals we were concerned with the provisions of the Act as well as (1) the challenge to the constitutional validity of section 65 (1) of the Act as substituted by The Karnataka Agricultural Produce Marketing (Regulation) (Amendment) Act, 1980 (hereinafter referred to as the (Amending Act') which sought to validate the market fee levied on the "sellers of notified agricultural produce" under section 65 (1), for and during the period of its operation, prior to its being struck down by the Karnataka High Court in Rajasekhariah' v. Tiplur Agrl. Produce Marketing Committee Anr.(l) (2) to the enhancement of market fee from 1% to 2% effected by the various Market Committees by amending the bye-laws after permissible maximum levy of the fee on the buyers under section 65 (2) was raised to 2 per cent by the said Amending Act, the challenge being both on the ground that the amendment of bye-laws was made in violation of the mandatory requirements of prior publication and prior s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained in this Act, credit to the Karnataka Motor Vehicles Taxation Act, 1957, the market fees collected under sub-section (1) for being spent for the purpose of construction, repair, improvement and maintenance of rural roads in the State." By Act No. 14 of 1976 passed on 24th January, 1976 which replaced and earlier Ordinance. section 65 (1) was amended by insertion of a proviso to section 65 (1) as under:- "Provided that the State Government may, by order in public interest, exempt any Market Committee from such levy and collection in respect of any agricultural produce." On 1st June, 1976, by the Amending Act No. 43 of 1976, the following changes were made:- (a) By section 2 of the amending Act, the word "MARKETING" was substituted for the words "buying and selling" in the long title to the Act. (b) By section (3) of the amending Act, the word 'MARKETING" was substituted for the words "buying and selling" in the preamble to the Act. (c) By section (4) of the amending Act a new clause 18 (A) was inserted as under:- "18 (A) "Marketing" means buying and selling of agricultural produce and includes grading, processing, storage, transport, packaging, market information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. Pursuant to the amendment of sub-section (2) of section 65 of the Act enhancing the maximum Market fee leviable thereto A from I per cent to 2 per cent, all the Market Committees in the State (except that of Mangalore) amended the bye-laws by enhancing the Market fee leviable under sub- section (2) of section 65 of the Act from 1 per cent to 2 per cent and on such enhancement of the market fee from I per cent to 2 per cent, all the buyers-traders filed writ petitions before the High Court assailing the said enhanced levy. By Karnataka Ordinance No. 14 of 1979, on 2nd November, 1979, the earlier Ordinance, namely Ordinance No. 2 of 1979 was repealed. Another Ordinance on the same lines as Ordinance No. 2 of 1979 was promulgated on 3rd November, 1979. On 9th May, ]980, Karnataka Act No. 17 of 1980 containing the same changes were brought as noticed in the ordinance mentioned before. Hearing of these writ petitions before the High Court commenced in October-November, 1981. Section 148 of the Act was amended by Karnataka Ordinance No. 22 of 1981 during the hearing of these writ petitions and by the said Ordinance the conditions of previous publication contemplated in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement and maintenance of rural roads, the construction or repair or improvement and maintenance of Rural roads was not one of the obligatory functions of the Market committees under the Act; and the construction and maintenance of rural roads, which were public roads, were the primary responsibility of the State and its instrumentalities such as the authorities under the Karnataka Municipalities Act, 1976; Karnataka Municipalities Act, 1964; etc. (b) Secondly, having regard to the essential element in the concept of fee requiring some special benefit by A way of quid-pro-quo, "to flow to the class of persons on whom fee is levied, the construction and maintenance of public roads could not be said to constitute or provide any such special benefit to the payer of the fee who, as members of the public were entitled to the use and benefit of public roads and that they could not be compelled to pay a fee for what they, in common with the general public, were otherwise entitled to as of right." Pursuant to the judgment in Rajasekhariah's case, the State was exposed to the liability for refund of fee collected for the period between 19-5-1975 when sub-sections 65 (1) and (3) were intr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deletion of the provisions for previous publication in section 148 proper and valid ? I will, however, notice the other contentions briefly raised in those writ petitions. It was contended that the Act as amended by Act 17 so far as marketing of cardamom was concerned, was repugnant to The Cardamom Act. 1965. The High Court held that Karnataka Legislature was not entitled to impose market fee so far as cardamom was concerned. It may be noted before the High Court that the inclusion of cardamom in the Act was contended to be bad in view of entry 52 of List I and entry 33 of List III but it appears the question was not considered in the light of entry 52 of List I and entry 28 of List II in the present case. The High Court, further, found that the rules framed under the Cardamom Act were at variance with the present Act. So far as sugar-cane was concerned it was held that sugarcane was outside the pale of the present Act. The Government has not appealed against the findings so far as cardamom was concerned. In so far as the High Court held that sugarcane was outside the pale of the Act, no argument impugning that finding was canvassed before us. It was for the first time by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tobacco Board the duty to promote, by such measures as it thinks fit, the development under the control of the Central Government of the tobacco industry. Sub-section (2) of section of the said Act lays down different functions of the Board and, inter alia, by clause (a) permits regulating the production and curing of virginia tobacco having regard to the demand therefor in India and abroad. Clause (cc) of section 8 (2) empowers the Board as follows: "establishment by the Board of auction platforms, with the previous approval of the Central Government, for the sale of virginia tobacco by registered grower or curers, and functioning of the Board as an auctioneer at action platforms established by or registered with it subject to such conditions as may be specified by the central Government." Section 10 provides for registration of the growers of virginia tobacco. Section 13 provides that no registered grower or curer shall sell or cause to be sold virginia tobacco elsewhere than at an auction platform registered. with the Board in accordance with the rules made under this Act or established by the Board under this Act. Section 14 deals with the application, cancellation, fees an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id Act came into force in the State of Karnataka from 1st day of September, 1984. I have already noted the provision of section 13 of the said Act. It may be mentioned that this notification as such would be of no assistance to us because this notification came into force subsequent to the writ petitions and after hearing in these matters was concluded. It was the contention on behalf of the petitioners that by declaration under entry 52 of List I and by the passing of the Act in question i.e. Tobacco Board Act, 1975, tobacco became an occupied field of Central Parliament and would prevail over the 'Act' irrespective of any separate notification making Tobacco Board Act, 1975, applicable to the State of Karnataka. In exercise of powers under section 32 of Tobacco Board Act, 1975 the Central Government was empowered to make rules. These are known as Tobacco Board Rules, 1976. Rule 33 of chapter VII provides for registration of growers, curers, exporters, packers and auctioneers of, and dealers in tobacco, The High Court was of the view that unlike the law governing A the marketing of Cardamom and Sugarcane, the Tobacco Act did not cover the marketing of tobacco in its entirety but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the regulation of tobacco were not repugnant to the Act. The High Court further noted that neither the Union of India nor the Tobacco Board had been impleaded as parties to the writ applications before the findings on these contentions were strenuously challenged before us on behalf of the appellants. On behalf of the appellants, it was urged that tobacco was covered by entry 52 of List I by virtue of the declaration under section 2 of the Tobacco Board Act, 1975 namely the Central Government. It was submitted that once a declaration had been made under section 2, pursuant to Entry 52, the Parliament had exclusive competence to legislate every aspect or activity pertaining to tobacco and the State would have no competence to legislate on that topic. Reference was made to the decision in the case of Baijnath Kedia v. State of Bihar Ors. [1970] 2 S.C.R. 100 at 113. I need not detain ourselves on the permissibility of the regulation of marketing of cardamom under the Act, because the same was not canvassed before us. So far as the point relating to 'wood' and 'forest produce' was concerned, the High Court felt that this point was concluded by the pronouncement of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged not because the persons concerned were not heard but because there was no quid pro quo. The High Court felt that the challenge to the doctrine of ultra vires on the basis that hearing of interests affected was an imperative requirement, not in compliance with rules of natural justice but as a duty implicit in the nature of the power. Section 148(1) of the Act, as it originally stood provided that a market committee could frame bye-laws after previous publication in the prescribed manner and also with the previous sanction of the Chief Marketing Officer. The contention was that no procedure having been prescribed by the rules, the concepts implicit in previous publication and incorporated in section 23 of the General Clauses Act, 1897 were attracted. It was A urged that there had been no compliance with the requirement of previous sanction and publication contemplated in this section. As the narration of events indicated before, an Ordinance was introduced namely Karnataka Ordinance No. 22 of 1981 during the period when the arguments in these cases were coming to a close before the High Court. The amendment sought to amend sections 137,148 and 158 of the principal Act. By sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ultimately, the High Court came to the following conclusions: (a) Section 65(2) of the Act did not confer an unguided, arbitrary power and there was no excessive delegation of legislative power to the market- committees and therefore not vitiated on that account; (b) The question whether, upon a proper construction, section 65(2) must be held to imply an obligation on the part of the market committees to hear affected interested parties before the rate of fee was fixed, was left open with certain observations made in that judgment. (c) The contention that challenged the bye-law for want of previous sanction under section 148(1) of the Act was not accepted. It had been contended before the High Court that there was discrimination on the ground that there was levy of the same rate of fee on all types of produce. The High Court repelled this contention relying mainly on the decision of this Court in the case of Ganga Sagar Corporation Ltd. v. The State of Uttar Pradesh and Others. (1) A.I.R. 1980 286. One of the main contentions urged before the High Court was that there was no quid-pro-quo. The High Court examined this contention with reference to the factual details. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which were relevant for determination of this question. These factors have been mentioned in the judgment of the High Court. Such statements or similar statements were duly filed. The High Court noted that out of 33 market committees which were involved, 2 were tobacco markets. Market committees whose routine recurring annual revenue expenditure was somewhere in the nature of 45 to 60% of the market-fee receipt formed one group. The High Court felt that in the case of these market committees even though revenue expenditure did not sufficiently establish the requisite degree of correlation. It was reasonable to assume that having regard to the extent of infrastructural facilities available in most of the modest allocations on future development work of non-controversial kind will bring about the correlation required to pass the test of market fee. The High Court observed that the market committees where the routine recurring annual revenue expenditure itself was over 60% of the receipts of the market-fee at 2% thereby established a broad and substantial correlation. In the case of these markets, the High Court felt that no further investigation was required. In this class of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that if the logic of some of the market committees in this behalf, is pushed to its logical or illogical conclusions, would mean that the present generation of fee-payers would pay for services which would only be available to the next generation The High Court was of the view that levy of fee could not be justified on such wholly prospective services. The High Court, however, was of the view that during the period of execution of the works particularly at the formative stages of the markets the actual benefit of the services might not be available to the payers of the fees; but if the execution A of the work is so planned as to apply over the years in future as to be incapable of providing any service to the class of fee-payers for and during at least a considerable part of the unit of time-in these cases a 15 years' period from 1974-75 to 1988-89 fixed by the market committees themselves then the concept of quid-pro-quo would dwindle down to something which could not be characterised as illusory.. The High Court then dealt in detail with the category of markets mentioned herein before classed as Category 'E'. It was contended that buyers of different kinds of produce were di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the necessary correlation between the services and fee existed or not, what was required to be examined was only a broad and general correlation not an equivalence with arithmetical accuracy and precision. The Court was neither equipped for, nor should it permit itself, the role of inspecting auditors much less should it assume the role of technical experts. The other aspect which should be borne in mind was that in scrutinising the items of work and services undertaken by market committee, in case of this kind where the controversy was confined to the existence of correlation. the exercise was not whether the items of work should or should not be undertaken by the market committees. The question was somewhat different. The courts merely examined whether the outlays on the concerned works and services qualified was a special service vis-a-vis the 'Fee'. The High Court as a result of the discussion of the aforesaid markets came to the conclusion that it was unable to hold on the materials placed before it that the levy ought to fail for want of quid-pro-quo. However, having regard to the infirmities noticed in the estimates and the financial projections of the proposed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of the High Court, evolve and standardise specifications and norms with regard to the infrastructural and developmental requirements for the market-yards and sub-market yards and communicate the same to the market committees in terms indicated. If, upon such scrutiny, the market-fee under section 65(2) now being levied at 2 per cent was found, in respect of any market committee, to be excessive and without quid pro quo, the Chief marketing Officer should make orders under section ] 5() directing a suitable reduction in the quantum of the market fee of the market-committees concerned. So far as the prayer for issue of mandamus directing refund of sellers' market-fee paid under section 65(1) sought by producer sellers and trader-sellers who had earlier approached the High Court was concerned, the High Court directed that mandamus should issue. In so far as producer-sellers and other petitioners who were trade sellers who had paid sellers fee under section 65(1) of the Act, a mandamus to the State Government and to the concerned Market Committees was directed to be issued in terms indicated in the judgment of the High Court. With the other directions of the High Court for ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dowments Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt., 119541 S.C.R. 1005 this court reiterated that 'the distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is a payment for a special benefit or __ privilege'. From time to time in several decisions the need for imposition of fees by the market-committees have been emphasised and A examined. Rajamanner, C.J. and T.L. Venkatarama Aiyar, J. in the case of Kuttf Keya v. The State of Madras A.T.R. 1943 MAD 621. dealt with the marketing legislation and need for the same and referred to the report of the Royal Commission on Agriculture in India. The decision of the Madras High Court was affirmed by a Constitution Bench of this Court in the case of Arunachala Nadar v. State of Madras (2) A.I.R. 1959 S.C. 300. where Subba Rao, J. referred to the background of the marketing legislation. It is not necessary to deal in detail with the said decisions, Most of these decisions were reviewed by this Court in judging the validity of fees imposed in the case of Kewal Krishan Puri (supra). Several principals deduced from the decision in Kewal Krishan Puri's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reiterated that the mere fact there others besides those paying the fees were also benefited did not detract from the character of the fee. Tn fact the special benefit or advantage to the payers of the fees might even be secondary as compared with the primary motive of regulation in the public interest. The Court was not expected to assume the role of a cost accountant. It is neither necessary nor expedient to weigh too meticulously the cost of the services rendered etc. against the amount of fees collected so as to evenly balance the two. A broad correlationship was all that was necessary. Quid pro quo in the strict sense is not the one and only true index of a fee; nor is it necessarily absent in a tax. A.P. Sen, J. in the said decision observed at page 235 of the report as follows:- "What do we learn from these precedents? We learn that there is no generic difference between a tax and a fee, though broadly a tax is a compulsory exaction as part of a common burden, without promise of any special advantages to classes of tax payers whereas a fee is a payment for services rendered, benefit provided or privilege conferred. Compulsion is not the hallmark of the distinction betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e special services to the payers of the fees, to be a fee it is not necessary that all the services must be to the payers of the fees nor can the correlation between payment of fee and services rendered be established with mathematical exactitude. It is permissible in the modern set up to take into account projections into future and not only the present services can be utilised for justifying the imposition of fee. All planning, project into the future for its existence and survival. Any incidental benefit to those other than the payers of the fee is not decisive of the fact whether it is a 'tax' or a 'fee'. It is necessary to find out the primary object and essential purpose of the imposition (emphasis supplied). If the primary object and essential purpose of the imposition be service of some special kind to the users of the market or payers of fee, other consequences or other benefits to others do not in the least affect the position. The concept of benefit to the users of market must he looked at from a broad commonsense point of view, taking an integrated view. In today's world you cannot build a good market if the accesses through which the produce comes to the market are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be correlated to the expenses incurred in rendering the services. This Court in Salvation Army's case reiterated that in might not however be possible to prove in every case that the fees collected always approximated to the expenses that were incurred in rendering the particular kind of services or in performing any particular work for the benefit of certain individuals. In that case, the Court found that revenue expenditure was about 62 per cent of the amount of revenue receipts from 1953 to 1970 and this was considered approximate correlation and the Court held that the levy was in the nature of a fee. The Court dealt with the question of G capital expenditure and observed that the expenditure in constructing buildings for locating the head offices and regional offices and the increase in allowances or other amenities to the staff had also to be included in the cost of services. The Court observed that when A there was a surplus it could not immediately be said that the surplus must necessarily go in reduction of the rate of contribution to be levied thereafter. This Court was of the view that it was neither expedient nor prudent to lay down any abstract proposition that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was unreasonable to expect that the huge developmental activities now projected for the next eight years were really intended to be acted upon. Secondly, it was submitted that the disparities and variance in the proportion of the proposed development from market-yard to market-yard were so glaring that no authority in the position of the Chief Marketing Officer could reasonably approve of such uncoordinated and disjointed development of the regulated markets. Thirdly, it was urged that many items of work envisaged in the development schemes such as construction of shops, godowns and the like were unrelated to the concept of special service to the buyers and could not be reckoned as qualified for correlation, and that if these impermissible items were deleted from the estimates, the market committees would not be in a position to establish the requisite quid- pro-quo. Fourthly, it was said that a substantial part of the proposed financial outlays related to development of what were called "Rural Markets" and these outlays were ineligible to be reckoned as special service to the buyers. The High Court in its judgment analysed these submissions and contentions carefully with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are; (1) there should be relationship between service and fee, (2) that the relationship is reasonable cannot be established with mathematical exactitude in the sense that both sides must be equally balanced, (3) in the course of rendering such services to the payers of the fee if some other benefits accrue or arise to others, quid-pro-quo is not destroyed. The concept of quid-pro-quo should be judged in the context of the present days-a concept of markets which are expected to render various services and provide various amenities and these benefits cannot be divorced from the benefits accruing incidentally to others, (4) a reasonable projection for the future years of a practical scheme is permissible and (5) services rendered must be to the users of those markets or to the subsequent users of those markets as a class. Though fee is not levied as a part of common burden yet service and payment cannot exactly be balanced. (6) The primary Object and the essential purpose of the imposition must be looked into. Having regard to the detailed analysis of the expenditure of the various market committees, we agree with the conclusion of the High Court that it could not be said that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of directions the High Court is capable of giving under Article 226 of the Constitution Bandhua Mukti Morcha v. Union of India Ors(l) See also the decision in the case of State of Kerala v. Kumari T.P. Roshana Anr.(3) In the case of Kewal Krishan Puri Anr. v. State of Punjab Others, (supra) this Court had given certain directions for future guidance of the authorities. For the purpose of how the Court can mould its directions in order to give relief in a particular situation, we may refer to the nature of directions given by the American Supreme Court, in abolishing racial discrimination and the judicial efforts made with attending difficulties, and how the Supreme Court of America formulated by trial and error the process of making the relief effective to the discussions in Corwin's The Constitution and what it means today' 14th Edn pages 504- 511]. Therefore, the High Court, while finding that there was a correlation between the services rendered and the fees charged with regard to the eight market committees, directed the Chief Marketing Officer to make certain enquiries on certain principles of correlation and directed the surplus, if found, on such enqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981-82 to 1988-89 would amount to Rs. 4.28 crores. These projections are not imaginary, and if the Market committee, in the present trend of inflation and the need for modern markets, had taken these F projections into consideration, the same cannot be condemned as unreasonable. Thus looked at, it appears that the extra expenditure of estimates showed a projected loan for the deficit. In the aforesaid view of the matter, we are of opinion that the High Court was right in holding (a) that the quid pro quo necessary to be established in these types of fees has been established, (b) that the projections have been properly taken into consideration and they are reasonable projections, (c) the directions given by the High Court were within the competence of the High Court to meet the ends of justice. In the premises the first question reserved for our consideration A must be answered by saying that the High Court is right in holding that the increase was justified. Necessarily point No. 3 must also be answered by saying that the High Court had come, in the facts and circumstances of the case, to a definite conclusion of this aspect in respect of eight market committees mentioned h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g" was substituted by the words "transport and marketing". In clause (ii) of sub-section (2) of section 63, item (ia) was newly introduced making the provision for, either independently or along with some other authority, necessary facilities for the transport of notified agricultural produce from and to the yard, as one of the obligatory functions of the market committees. Thirdly, section 20 of the Amending Act brought about certain changes in the structure of section 65 while making such amendment retrospective with effect from 19.5.1975- being the date on which it was originally introduced. The High Court has set out section 42 of the Amending Act which validated the levy of market fee etc. It was urged before the High Court that the market recollected from the sellers between 19.9.1975 and 28.9.1978 under the old section 65(1) had gone to the credit of and merged in the "Karnataka Roads and Bridges Fund" constituted under the Karnataka Motor Vehicles Taxation Act and the market fees have obviously been spent for the purposes and objects of "Karnataka Roads and Bridges Fund", and by deleting section 65(3)-even if it be with retrospective effect - the events that have factually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jain etc. etc. v. State of Orissa and Another(l), Shri Prithvi Cotton Mills Ltd. Anr. v. Broach Borough Municipality Ors. ( '), Municipal Corporation of the City of Ahmedabad, Etc. v. New Shorock Spg. Wvg. Co. Ltd., Etc (B) and l.N. Saksena v. The State of Madhya Pradesh.(4) The tests are well settled and it is not necessary to reiterate those. The validity of a validating law has to be judged mainly by judging, firstly whether a legislature possesses competence over the subject matter i.e., whether by validation, the legislature exercise competence over the subject matter and secondly whether by validation the legislature has removed the defect which the court had found in the previous law and thirdly whether it is consistent with the provisions of Part III of the Constitution. The High Court was of the view that facilities for rural roads could not be a ground for collection of fees. The High Court was A further of the view that this was concluded by the decision of this Court in Kewal Krishan Puri's case (supra). l have set out hereinbefore the principles to be governed in case of judging the correlation between 'service' and 'fee' and the changing pattern of this conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket committees. In my opinion, realisation of fees for such facilities would be justified and valid. If, as we have discussed, without rural roads, markets could not be reached and the functions for which the market committees were constituted could not be performed, if it is of fundamental importance that there should be a network of roadways if effective aid is to be given to buyers and sellers of goods for marketing their products, then in my opinion, the fact that the public streets and roads are public properties and the State holds such streets and roads as trustees would be of no consequences in considering such realisation as fees. The contribution to the "Karnataka Roads and Bridges Fund" maintainable under Motor Vehicles Act having been made as an agency of the market committees for the construction of these roads which facilitated the purpose of the market committees as amended by the Amending Act. I am, therefore, of the opinion that the High Court was in error in holding that the second major defect noticed in the law authorising the levy on the sellers in Rajasekhariah's case (supra) namely construction of rural roads would not qualify being reckoned as a special serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to refund in certain cases as indicated in the judgment of the High Courts I am unable to sustain that part of the order and that order is set aside. I may mention that when there was no provision like section 42 of the Amending Act and there was a liability of refund n the case of Shiv Shenkar Dal Mills Etc.. Etc v. State of Haryana Ors Etc. (2) [1980]1 S.C.R. 1170., this Court had evolved certain procedure for utilisation of the funds collected so as to avoid undue enrichment. In view of the principles discussed above and the cases noted in the aforesaid decision in Amar Nath Om Parkash Ors. case (supra), we are of the opinion that section 42 of the Amending Act is valid and by virtue of the said section, that cannot be any order for refund in the instant case. It must be borne in mind that the High Court has given specific directions for utilisation of the surplus fund in certain matters to the market committees. Point (2) noted above is thus disposed of. The next question that arises is whether the amendment of the bye-laws enhancing the market fee was invalid for want of compliance with the mandate of section 148 of the Act requiring previous publication and previous san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State Government had preferred any appeal in respect of that finding. It was sought to be impressed before this Court that the same reasoning should apply in view of the similarity of provisions of the Central Act as with A Cardamom Act as it should have been held logically by the High Court that the State Legislature was not competent to extend marketing provisions to tobacco in the State Act. Tobacco was brought within the network of the Act by virtue of Karnataka Act 17 of 1980. Two broad principles should be borne in mind in deciding the controversy of this nature. One is whether a particular legislation or enactment is within the competence of particular legislature must be judged after finding out the pith and substance, in other words the true nature and character, of the legislation in question and secondly the entries in the list should be given liberal and generous construction. All the entries should be construed in harmonious manner so as to avoid conflict. In case of conflict, however, in respect of entries where both the State and the Centre can legislate, the Central legislation would prevail over the State Legislation in view of the provisions of Articles 245 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not concerned with virginia tobacco only but covered other tobaccos the High Court was in error. On the construction of the Central Act read with the rules it appears to us that the said Central Act and the declaration made by section 2 of the said Act covers all kinds of tobaccos. It is well-settled principle that Article 246 recognised the principle of Parliamentary supremacy in the field of legislation in case where both legislatures have competence to legislate (emphasis supplied). The constitutional scheme is that Parliament has full and exclusive power to legislate with respect to matters in List I and has also power to legislate with respect to matters in List III. A State Legislature has exclusive power to legislate with respect to matters in List II, excluding the matters falling in List I or List III and has also concurrent power to legislate with respect to matters falling in List III excluding matters falling in List I. The dominant position of the Central Legislature with regard to matters in List I and List III is established. See in this connection the decision in Subrohmanyam v. Muthuswamy. [1940] 45 C.W.N. (FC) I=A.I.R. 194] FC 47 at 57-58. 273. Justice Suliaman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 52 read with entry 96 of List I. It was urged that in the case of Cit. Tika Ramji Others Etc. A v. The State of Uttar Pradesh Others [1956] S.C.R. 393., this Court rejected the contentions that all sugarcane legislation linked to sugar industry was sugar legislation. Furthermore, on the facts of the case, the Court came to the conclusion that the impugned Act did not concern itself at all with the controlling or licensing of sugar industry or with the production or manufacture of sugar or with trade and commerce in sugar and therefore, there was no trenching upon the Union List by the impugned State Act. Reliance was placed on the observations at pages 422-23 of the said decision, mentioned hereinbefore. Reliance was also placed at pages 783-84 in the case of Ganga Sugar Co. Ltd v. State of U.P. (supra) It was submitted on behalf of the appellants that the State Legislature lost its competence because the field was occupied by Parliament in view of the declaration under section 2 of the Central Act. It was evident, it was urged, that the intention to cover the whole field has been expressed by the Central Act and as intended, the Central Act is complete and exhaustive Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with the Central Act. It was evident from the letters dated 15.9.1983 and 23.9.1983 at pages 462 and 466 of the Paper Book that the market committees had not been and even today registered under the Central Act and were therefore incapable of rendering any service at all. For this reason there was complete failure of quid-pro-quo and therefore there cannot be any charge of fees by enacting State legislation on tobacco. It appears that the principles of repugnancy in Indian Constitution are well-settled. These are as follow: (1) A legislation, which in its pith and substance, falls within any of the entries of List I of the Seventh Schedule to the Constitution, would be exclusively within the competence of the Parliament. (2) A legislation falling exclusively, in its pith and sub stance, within any of the entries in List II of the Seventh Schedule, would be within the exclusive competence of the State Legislature. (3) A Central law which in its pith and substance, falls within any entry in List I would be valid even though it might contain incidental provisions in List II which may contain ancilliary provisions which might touch on an entry of List I incidentally. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals with the subject of market in entry 28 read with entry 66 of List II. Such Acts are covered by entry 28 of List II exclusively unlike entries 23,24,26 and 27. It is important to bear in mind that entry 28 is not subject to withdrawal into List I by Parliament as under entries 52 and 54 of List I and entry 33 of List III. The State Act is not on a subject in List III - nor is the Central Act a law relating to any subject in List III. Therefore, there cannot be any question of repugnancy. Section 31 of the Central Act makes it clear that it does not derogate from any law but enacts something in addition. In the High Court, counter-affidavits were filed to establish the quid-pro-quo and rendering of the services to the traders including tobacco merchants by the respective six market committees. In fact A before the High Court, no contention, as it appears from the judgment impugned, was at all advanced on the question of services to tobacco trade in the markets concerned. In fact they are entitled to the same services as other traders as provided by the Act. The provisions of the Marketing Act and Tobacco Board Act and the Rules are not inconsistent. It is therefore necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the same is in addition to, and not in derogation of, the provisions of any other law for the time being in force. Tobacco was brought within the marketing Act in 1980 and section 13 of the Tobacco Board Act, 1975 was made applicable in the State of Karnataka only on 31st August, 1984 by the notification referred to hereinbefore. Therefore essentially the Central Act was for the development of the industry of tobacco and, incidentally, certain provisions for better sale of tobacco through certain auction platforms had been made. There is nothing in the Act or in the Rules which indicate that it is inconsistent with or cannot be operated along with the marketing regulations. It is true that for this purpose certain sanction under the Act is required. Rule 35 of the Tobacco Board Rules provides for registration as exporter, or packer Of auctioneer of or dealer in tobacco and lays down certain provisions. By virtue of section 12 of the Central Act, the market committees cannot auction or deal with tobacco at all unless they are registered with the Board in accordance with the Act. In a letter written on 15.9.1983 in respect of an application made by the Marketing Committee, Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to prevail, the State Act of marketing for coffee would become non est-wholly unnecessary and undesirable result. The Marketing Act is essentially an Act to regulate the marketing of agricultural produce, control of coffee industry would not be defeated if the marketing of coffee is done within the provisions of the Marketing Act. It must therefore be held that the State Act should prevail. One should avoid corroding the State's ambit of powers of legislations which will ultimately lead to erosion of India being a Union of States. The contentions OD behalf of the appellants therefore, on this point have to be rejected. As to who should obtain licence or as to who would have to be registered, the Market Committee or the Tobacco Board is a question which should be settled by proper adjudication. Some argument has been built upon the fact that though more or less identical in nature, in respect of the Cardamom Act, 1965, it was held that the State Legislature was not competent to enact the Cardamom Act, 1965 in view of the declaration under entry 52 of List I of the Seventh Schedule. It was therefore suggested that it would not be correct to take inconsistent views in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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