TMI Blog2010 (4) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... atory notification dated April 8, 1999 and the 2002 Act (Act No. 8 of 2002), as valid and intra vires, and the levy of imposts thereunder being sustainable in law. - C.W.P. Nos. 6676 of 1999 - - - Dated:- 6-4-2010 - KHEHAR J.S. AND UMA NATH SINGH , JJ. The judgment of the court was delivered by UMA NATH SINGH J. This judgment shall also dispose of the connected batch of 112 writ petitions as mentioned in annexure A See page 459 infra.hereto since they raise, amongst others, important common questions of law, based on somewhat identical facts, relating to challenge to the validity of (i) the Punjab Infrastructure Development Ordinance, 1998 (Punjab Ordinance No. 7 of 1998)/the Punjab Infrastructure Development Act, 1998 (Punjab Act No. 1 of 1999) and the Punjab Infrastructure Development Cess (Collection) Rules, 1998 framed thereunder; (ii) the Punjab Infrastructure (Development and Regulation) Act, 2002 (inclusive of Schedules I, II and III); (iii) levy of cess under the 1998 Ordinance/Act and Rules at one per cent, and fee at three per cent (though chargeable up to six per cent) under the 2002 Act, on ad valorem basis on sale and purchase of all agricultural produces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) that if the cess or fee is to be levied, then it should be collected only from the registered dealers on the first sale and purchase; (vii) that the impost amount is not being deposited in a consolidated fund provided in article 266 of the Constitution of India; (viii) that the petitioner-flour and rice mills are entitled to claim the refund of imposts amount paid to the FCI, which being a registered dealer under the Central Sales Tax Act ( the CST Act ) and the Punjab General Sales Tax Act ( the PGST Act ), is required to pay on the first purchase and sale; (ix) that the petitioners were not given the opportunity to submit objections or of being heard before deciding to levy the imposts in question nor is there any effective representation on their behalf in the apex body of the organisation, namely, the Punjab Infrastructure Development Board (for short, the PIDB ); (x) that the 1998 Ordinance was repealed on January 12, 1999 with coming into force of the 1998 Act and the liability to pay the cess under the 1998 Ordinance was not retained by the Act of 1998, thus, no cess could be payable before January 12, 1999; and (xi) that the levy of cess or fee amounts to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98. In reply to the writ petition, the State of Punjab has questioned the locus standi of the petitioner-corporation to invoke the extraordinary jurisdiction of this court under article 226 of the Constitution of India, which can be invoked only in exceptional and rare circumstances where private or public wrongs are inextricably mixed up and where it is required to prevent some public injury necessary for the vindication of justice. Thus, it is invoked only in cases with patent injustice. This is also mentioned in the reply that the Punjab Infrastructure Development Board ( the PIDB ), respondent No. 2, has been authorised by the Legislature to impose the impugned cess vide the 1998 Ordinance/Act (No. 1 of 1999) for the development of infrastructure in Punjab and the Assessing Authority under the PGST Act, has been authorised to collect the cess through its own agency only in public interest. The cess amount after collection is transferred to the account of PIDB and the State Government is not entitled to retain the impost amount even though collected under the PGST Act. The Government of Punjab (Department of Finance) which issued the Cess (Collection) Rules vide the notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etables and pulses has not increased from the rider of four per cent as this being a separate levy under a separate enactment cannot be plugged in the sales tax. Moreover, if the petitioners have been paying the market fee and other taxes on the goods in question, then they should not have raised any objection to the payment of cess under the 1998 Act also, and this would not amount to the incidence of double taxation. For the development and maintenance of infrastructure sectors in Punjab, roughly an amount of Rs. 5,000 crores per annum is required which cannot be met with the budgetary resources which are not adequate enough to fulfil the demand. Besides, the sales tax on declared goods is charged only at four per cent which is perfectly in consonance with the provisions of articles 286 and 254 of the Constitution of India read with sections 14 and 15 of the Central Sales Tax Act and section 5(3) of the PGST Act. The Finance Secretary, Government of Punjab, while notifying the Cess (Collection) Rules, and issuing the clarificatory notification dated April 8, 1999 has not entered into the realm of State Legislature inasmuch as the word purchase was inadvertently omitted in the 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half of the petitioners, they have reiterated the averments made in the writ petition that the Finance Secretary was not competent to issue the notification relating to Cess (Collection) Rules, and also the clarificatory notification dated April 8, 1999. The petitioners have maintained that the cess in question is an additional sales tax for it is being collected only under the PGST Act. The clarificatory notification dated April 8, 1999 has added the levy of cess also on purchase which was not mentioned in the 1998 Ordinance and the Cess (Collection) Rules. Thus, the levy of cess, being an additional sales tax, is violative of the provisions of sections 14 and 15 of the Central Sales Tax Act and article 286 of the Constitution of India. Coming to the facts of C.W.P. No. 2343 of 2000 (Ludhiana Flour and General Mills Limited v. State of Punjab), this writ petition has been filed by a roller flour mill situated at Ludhiana against (1) the State of Punjab, (2) the Punjab Infrastructure Development Board, (3) the Excise and Taxation Officer-cum-Assessing Authority (Sales Tax), Ludhiana, and (4) the Food Corporation of India. In order to carry out the business, the petitioner-mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force. Thus, the 1998 Act has not retained the applicability clause of Ordinance imposing cess for the period from October 15, 1998 to January 11, 1999. Besides, no cess can be levied at the purchase stage as it is payable only on the sale of goods. This is also averred that the liability under the 1998 Act cannot be passed on to a subsequent purchaser and it should also be only at the stage of first purchase by a dealer. Thus, the incidence of payment of cess shall only be on the purchaser at the stage envisaged under the PGST Act. This is also a submission of learned counsel that on the date of issuance of notification, i.e., April 8, 1999, the Ordinance itself had stood repealed, therefore, the notification in question is void and non-enforceable for that reason as well as also for the reasons that it was never published in the Government Gazette. Besides, the wheat supplied to the mills between April 16, 1999 to February 7, 2000 had been purchased by the FCI before coming into force of the Act. That being an old stock was not chargeable to cess under the 1998 Ordinance/Act, thus, the FCI could not have charged the cess at one per cent from the mills. As such, the petitioner mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution. PIDB-respondent No. 2 in its counter-affidavit has only reiterated the averments of the State. Respondent No. 3 in its reply has questioned the maintainability of the writ petition for extraordinary relief on the ground that it should be invoked only in exceptional and grave circumstances for the purpose of preventing of public injury in order to vindicate justice. Written statement of the respondent is only in line with the written statement filed in reply to the writ petition No. 6676 of 1999. The petitioner-mill has not filed any replication to the written statements. In C.W.P. No. 3295 of 2003 (Garg Rice and General Mills v. State of Punjab), filed by various rice millers against the respondents, namely, (1) the State of Punjab; (2) the Punjab Infrastructure Development Board, and (3) the Excise and Taxation Officer-cum-Assessing Authority, a relief has been sought to declare section 25 of the Punjab Infrastructure (Development and Regulation) Act, 2002 (being the charging section corresponds to section 4 of the 1998 Act), as ultra vires in as much as it is beyond the legislative competence of the State. This Act was published in the Punjab Gazette (extraord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed qua the entries of tax and fee. In order to justify the levy of fee, the authorities must render some special services to the category of individuals from whom the amount is exacted, and the total amount so collected must have a reasonable correlation to the cost of such services. Where these dual basic features are absent, the authority cannot legally levy the fee. Thus, a fee is distinguishable from a tax. According to the writ petitioners, the impost in question is a tax and it cannot be claimed as a fee. Therefore, it is not justifiable being beyond the pale of competence of the Legislature and is also violative of section 15 of the CST Act, 1956. The impost has to be collected for the purpose given in sections 21 and 22 of the 2002 Act. The fee so collected has no relation with the kind of services provided to the petitioner-dealers nor these services are meant for their benefit in any manner. Thus, it is a tax imposed without the authority of law. According to the writ petitioners, the only entry in List II of the Seventh Schedule that covers the tax is entry No. 54 and therefore, undisputedly, tax can be imposed on the purchase of paddy. However, it should not exceed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government has now enacted the present Act of 2002. This Act has also laid down a regulatory framework which provides clear guidelines on all aspects for infrastructure development from the conception to the implementation through structures of private participation and transfer (BOT), Build-Operate-Own (BOO), Build Own Operate Transfer (BOOT). This imposition of fee for facilitating the development, maintenance and providing of infrastructure facilities is well in consonance with the spirit of the 2002 Act which aims to provide the infrastructure facilities through financial sources other than those provided by the State budget. The sole purpose of enacting the 2002 Act is to accelerate the infrastructure development in the State through partnership of private sector and public sector. The Punjab Infrastructure Development Board is the apex body for overall planning for development of infrastructure sectors and infrastructure projects. The Board acts as a model agency to coordinate all efforts of the State Government regarding the development of infrastructure sectors involving private participation and funding from sources other than those provided by the State Budget. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose provided by the State budget. In terms of section 20(3) of the Act of 2002, the Board has no role in the infrastructure projects undertaken by the State Government exclusively through its budgetary provisions. According to the answering respondent, different enactments, as referred to in the averments of the writ petition, have no direct nexus with the Act of 2002. The fee imposed under section 25 of the Act of 2002 does not exceed the limit of four per cent tax provided under section 15 of the Central Sales Tax Act, 1956, in as much as the fee under the 2002 Act is leviable for overall growth of infrastructure in the State, and there is no co-relation between the provisions of section 15 of the CST Act and the 2002 Act. This has been asserted that the State Government derives its legislative powers from article 246 read with the relevant entries of Lists II and III of Schedule 7 of the Constitution of India. Exercising power under these entries and List of the Seventh Schedule and imposing fee thereunder can neither be framed as illegal nor unconstitutional. Under articles 265 and 266 of the Constitution of India, the tax collected is to be deposited in the consolidated fund, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Punjab, have till date never raised any such objections that the development fund or any part thereof has been applied for any object other than those provided in the 2002 Act. The Government of India has also notified the PIDB in the official gazette under section 10(23)(c)(iv) of the Income-tax Act, 1961 and, therefore, the development fund (including any interest earned/accrued thereon), is completely exempt from the payment of income-tax, so that the spending on infrastructure projects is optimized. From the details filed with the affidavit as annexure R2, it is apparent that the total amount of funds released by the Board out of the development fund from 1999-2000 to 2008-09 (up to March 31, 2009) for undertaking the projects in various infrastructure sectors is Rs. 1,941.79 crores. A summary statement regarding the sectorwise overview of all the projects under the aegis of the Board up to March 31, 2009 has also been provided. This includes the projects funded by the Board out of development fund as well as the private public participation projects in which PIDB has successfully attracted the investments from private sector entrepreneurs. According to the details annexed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (4) of section 18 of the 2002 Act, which is headed by the Chief Secretary. From the affidavits, it is clear that till March 31, 2009, the total amount of fee collected and credited in the development fund was Rs. 1,875.92 crores. The bank interest earned on the development fund till that date was Rs. 231.56 crores; Bonds money, (i.e., loan raised) received was Rs. 1,549.96 crores; OUVGL receipt is Rs. 38.17 crores and Misc. receipts like refund from Income-tax Department, and receipt of railway share, etc., amount was Rs. 89.97 crores. Thus, the total fund that is available with the PIDB, was to the tune of Rs. 3,767.48 crores. The PIDB has not received any fund or financing for its projects from the State till date. This is reiterated in the reply that under the aegis of the PIDB, the works of infrastructure projects costing approximately Rs. 10,197.55 crores have already been awarded. The total amount of fee received by the PIDB till March 31, 2009 is only Rs. 1,857.92 crores, out of which the amount of fee paid by the individual writ petitioners herein would hardly be a few thousands and in some cases, a few lacs rupees. According to reply, the writ petitioners as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the averments of the writ petition in its reply, and asserted that the right to do business under article 19(1)(g) of the Constitution of India is in no manner affected and the allegations are also vague and baseless. The respondent has given the reasons for imposition of fee and justified the competence of the State Legislature in enacting the Act. The same is the reply on behalf of respondent No. 1. In the replication filed on behalf of the petitioners, they have reiterated the averments made in the writ petition. We have heard learned counsel for the parties and perused the writ records. Sh. Kashmiri Lal Goel, learned counsel for the petitioners, submitted that imposition of cess at one per cent is in the nature of an additional tax. Alternatively, this is also his submission that even if the impost is found to be fee, then it would be the liability of the FCI and not of the petitionermills to pay it, but on the contrary, the FCI has been coercively recovering the amount of cess from the millers. This is also his submission that the levy of impost in question is discriminatory in as much as it is being levied only on agricultural produces (except fruits, vegetable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een framed and notified in the excess of section 4 of the 1998 Ordinance/Act, thus, such provisions need to be read down and brought in line with section 4, as aforesaid. However, in case it is read down to come within the comprehension of section 4 of the 1998 Act, then the Act itself would become unenforceable. The learned counsel also assailed the 1998 Act to be arbitrary and discriminatory in nature, and there is no element of quid pro quo as the amount collected towards cess and utilized for providing infrastructure by the Board are not being utilized towards special services being rendered to the petitioners. This is also his contention that the services should be provided for the class which makes the payment of impost and it cannot be utilized by anyone and everyone. According to learned counsel, the concept of sale is to be read as provided under section 2(h) of the Punjab General Sales Tax Act. The learned counsel also contended that the relief by way of quid pro quo must be the relief other than those flowing to the petitioners as an ordinary citizen. According to learned counsel, the purpose for which the fund is to be utilized is mentioned in section 6(1) of the 1998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, much less to say in favour of a Government department. Moreover, the taxable events have been fixed only at the point of sale and purchase of declared goods under Schedule D of section 5(3) of the PGST Act, and also correspondingly section 25 and Schedule III of the 2002 Act. Mr. Bawa Singh Walia, learned counsel appeared for the petitioners in C.W.P. No. 8890 of 2003, which related to levy of one per cent impost on the petrol and diesel. According to learned counsel, as a result of levy of impost, there was a sharp decline in the sale of the petroleum in the State of Punjab and in the process, there was a loss to the State revenue. According to learned counsel, earlier also when the octroi was abolished, there was a marked growth in the State revenue. The learned counsel further submitted that there are 961 filling stations in Punjab, and out of which 50 per cent are situated on the Highways and 40 per cent on the inter-State borders. In case of 40 per cent petrol pumps, the vehicle owners prefer to purchase petrol or diesel from across the border where the rate is cheaper. According to learned counsel, the imposition of impost without providing infrastructure is arbitrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Constitution to make laws in relation to fee in respect of any matter contained in List II (State List), and List III (Concurrent List), but would not include fees taken in any court. The learned counsel submitted that the compensatory tax has been held to be a sub-clause of fee and is a judicially evolved concept. This is also his submission that the State has taken a categorical stand in the written statements that levy under the impugned legislation is a fee and not a tax and, therefore, it is well within the legislative competence of the State to charge fee in respect of the items mentioned in Lists II and III in terms of the power conferred upon it by virtue of articles 245 and 246 of the Constitution. The 1998 Act, impugned herein, according to learned counsel, was introduced with a view to accelerate the development of infrastructure with or without the private sector participation in the State. Under the 1998 Act, in section 2(c) the word fund has been defined to mean Punjab Infrastructure Development Fund constituted under section 5. Sub-section (d) of section 2 of the 1998 Act defined the Government to mean the Government of Punjab in the Department of Finance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 11 of the 1998 Act, if any difficulty arises in giving effect to the provisions of the 1998 Act, the Government can by order make such provisions which are necessary or expedient for the purpose of removing the difficulty; The word 'Government' under section 2(d) of the 1998 Act, has been defined to mean the Government of Punjab in the Department of Finance; Under section 4 of the 1998 Act, 'cess' has to be charged on ad valorem basis at a rate of rupee one for every one hundred rupees in respect of all the articles specified in the Schedule on the sales and purchases (as notified vide notification dated April 8, 1999); In exercise of the powers conferred by section 9 read with subsection (8) of section 4 of the Punjab Infrastructure Development Ordinance, 1998 (Punjab Ordinance No. 7 of 1998), Rules have been framed, which are known as 'the Punjab Infrastructure Development Cess (Collection) Rules, 1998 (for brevity, 'the 1998 Cess Rules'). Rule 3(1) whereof reads thus: '3. (1) The authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under the Punjab General Sales Tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (15) of section 2, infrastructure sectors are provided in Schedule I. Thus, if any work has to be carried on the infrastructure sector mentioned in Schedule I, then as per Schedule III (section 25), fee can be charged on the articles and goods mentioned therein. Schedule III is subject to change as would be clear from a perusal of section 53. Thus, from a bare perusal of the aforesaid provisions of the 1998 Act as well as 2002 Act, it would be clear that the State has the legislative competence to charge fee under articles 245 and 246 read with entries 66 and 47 of the List II and List III, respectively. All the items mentioned in Schedule I of the 2002 Act as well as under section 6 of the 1998 Act, would be covered under Lists II and III. Thus, from the facts and circumstances, it would be clear that being a fee, the 1998 Act and the 2002 Act cannot be challenged on the grounds of legislative incompetence of State Legislature or on the ground that the Government has no power to levy cess/fee. This is also a submission of learned counsel that the cess in question is not discriminatory as under section 2(15) of the 2002 Act as well as under section 6 of the 1998 Act, vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only related to the proportionality of services rendered by the State. Further, this has been held to be an obiter dicta in case of Sreenivasa General Traders v. State of Andhra Pradesh [1983] 4 SCC 353. The learned counsel further submitted that fee and taxes are compulsory exactions of money by public authority. Specific services rendered to a specific area or specific class of persons or trade or business or any local area meet the requirement of principle of quid pro quo. The class or person or area cannot plead that they do not want the service. As to whether a particular cess is tax or fee, would depend upon the facts and circumstances of each case. Fee collected by the PIDB forms a part of fund of the Board. This is also a submission of learned counsel that co-relation of a fee has to be of general category and not of arithmetical exactitude. This is his further submission that the fees are ordinarily uniform but absence of uniformity is not a criterion on the basis of which alone it can be said that the levy is in the nature of tax. If the service is meant for the benefit of a class or area, in fact, in that benefiting of the specific class or area, the State as a whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fee, has placed on record affidavits in 2006 as well as in 2008, giving the details of the funds released and spent. It is factually incorrect to say that there is no provision for auditing of the accounts of the Board, which is regularly done by the Local Fund Examiner, Punjab. The learned counsel while referring to section 11 of the 1998 Act, submitted that though this has been submitted on behalf of the petitioners that the State Government has no power to issue notification dated April 8, 1999, but the position is different in the sense that section 11 specifically empowers the Government to issue notification to remove the difficulties. The intent of the provisions is to delegate this power to the Government. The essential legislative function is the charging of cess and this cannot be found fault with. Our Constitution is a growing document and the pressure on Legislatures is immense and, therefore, once the Act itself grants the power to the State Government to do something, it cannot be called an excessive delegation at all. The Legislature can part with the performance of ancillary functions in favour of some other authority. That apart, Legislature may, after laying dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 246 provides for the subject-matter of laws made by Parliament and by the Legislatures of States. Clauses 2 and 3 of article 246, in particular, are relevant for the purpose of defining the area of legislation to be undertaken by the State Legislature. For ready reference, clauses (2) and (3) of article 246 are reproduced hereunder: 246. Subject-matter of laws made by Parliament and by the Legislatures of States. (1) . . . (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the 'Concurrent 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) . . . As the Acts in question have been passed by the State Legislature of Punjab, we need to find out the relevant entries of List II (State List) and List III (Concurrent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cidence of cess on purchase was issued on April 8, 1999. The clarificatory notification was to apply retrospectively but only in respect of the items as mentioned in the Schedule attached to the 1998 Act, therefore, the number of items appended to the 1998 Ordinance is irrelevant and the items mentioned in the Schedule attached to the 1998 Act above were to be subjected to the levy of cess in question. As all the items mentioned in various schedules attached to both the Acts, directly or indirectly relate to the aforesaid entries of Lists II and III, the State Legislature would be competent to make legislation in regard to the subject-matters mentioned therein. Besides, the 1998 Ordinance as well as the 1998 Act in the purpose and object clearly state the reasons for these enactments, namely, to provide for establishment of the Punjab Infrastructure Development Board and Punjab Infrastructure Fund with a view to accelerate the development of infrastructure with or without private sector participation in the State. Besides, section 6 of the 1998 Act provides for the items for which the fund would be utilized as under: 6. (1) The fund shall be applied for the development of inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State are grossly inadequate. Thus, in order to provide a sustained source of funding for infrastructure development, the State has levied an infrastructural cess at one per cent on sale/purchase of all agricultural produces except fruits, vegetables and pulses. The money so collected will constitute the corpus of Punjab Infrastructure Development Fund to be administered by the Board. This fund is to be used only for the purpose of power generation, industrial transportation, etc., and to raise loan from the financial institution/private investors. In order to provide infrastructure on priority and without waiting for investment from the meagre and in adequate budgetary resources, this corpus has been created. In this way, delay, inconvenience, escalation of price and set back to the economy of the State can be avoided. The purpose and object of the 2002 Act are reproduced as: . . . to provide for the partnership of private sector and public sector, participation of private sector in the development, operation and maintenance of infrastructure facilities and development and maintenance of infrastructure facilities through financial sources other than those provided by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy or an imposition is questioned, the court has to inquire into its real nature inasmuch as though an imposition is labelled as a fee, in reality it may not be a fee but a tax, and vice versa. The question to be determined is whether the power to levy the tax or fee is conferred on that authority and if it falls beyond, to declare it ultra vires. From a careful reading of the aforesaid elucidation and observations of the honourable apex court, it is clear that the State Legislatures have the power to levy fee under entry 66 of List II, which is co-extensive with the powers to legislate in respect of substantive matters, and it may as well levy a fee with reference to service that would be rendered by the State authority. In the case of State of West Bengal v. Kesoram Industries Limited reported in [2004] 2 RC 298; [2004] 10 SCC 201, the apex court has articulated that articles 245, 246 and 248 are the fountain source of legislation and has elaborated on the scheme of the Seventh Schedule to the Constitution as (at pages 328-330 and 345-347 of RC): . . . 31. Article 245 of the Constitution is the fountain source of legislative power. It provides subject to the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a distinct matter for purposes of legislative competence. There is a distinction made between general subjects of legislation and taxation. The general subjects of legislation are dealt with in one group of entries and power of taxation in a separate group. The power to tax cannot be deduced from a general legislative entry as an ancillary power. (4) The entries in the Lists being merely topics or fields of legislation, they must receive a liberal construction inspired by a broad and generous spirit and not in a narrow pedantic sense. The words and expressions employed in drafting the entries must be given the widest possible interpretation. This is because, to quote V. Ramaswami, J., the allocation of the subjects to the Lists is not by way of scientific or logical definition but by way of a mere simplex enumeratio of broad categories. A power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse the legislations touching incidental and ancillary matters. (5) Where the legislative competence of a Legislature of any State is questioned on the ground that it encroaches upon the legislative competence of Parliament t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysis. It was held, inter alia: (1) In List I, entries 1 to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. An examination of these two groups of entries shows that while the main subject of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. (2) In List II, entries 1 to 44 form one group mentioning the subjects on which the States could legislate. Entries 45 to 63 in that List form another group, and they deal with taxes. (AIR page 493, para 51) (3) Taxation is not intended to be comprised in the main subject in which it might on an extended construction be regarded as included, but is treated as a distinct matter for purposes of legislative competence. And this distinction is also manifest in the language of article 248, clauses (1) and (2) and of entry 97 in List I of the Constitution. Under the scheme of the entries in the Lists, taxation is regarded as a distinct matter and is separately set out. (AIR page 494, paras 51 and 55) (4) The entries in the Legislative Lists must be construed broadly and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, then, subject to the provisions of clause (2), the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void. (2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State: Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State. From a bare reading of the aforesaid Constitutional provisions, it is wide evident that a State Legislature is competent to enact laws in relation to fee in respect of any matters contained in List II (State Lis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has objected to the levy of impugned cess/fee. Regarding the contention of discrimination under the impugned enactments that only a few articles and individuals have been selected for the purpose of levy of imposts, we may hold that as the articles in question are the major agricultural produces in Punjab and the services rendered out of utilisation of the fund created from the collection of imposts are mainly directed towards augmenting the infrastructure facilities in agriculture sectors, there is no discrimination in the levy and collection of the imposts. In a three-judge Bench judgment in G.K. Krishanan v. State of Tamil Nadu AIR 1975 SC 583, this has been held that as the State Legislature was competent to pass the Act, and as the Government was authorised under section 4 to levy the tax, the question of motive with which the tax was imposed is immaterial and, therefore, it would not be a ground to question its validity. Besides, in the case of Sri Krishna Das v. Town Area Committee, Chirgaon [1990] 77 STC 395 (SC); [1990] 3 SCC 645, the honourable apex court has held that it is for the Legislature or the taxing authority to determine the question of need and policy, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other', meaning thereby 'you charge the fee for the service'. But the element of quid pro quo may not be possible, or even necessary, to be established with arithmetical exactitude but even broadly and reasonably it must be established, with some amount of certainty, reasonableness or preponderance of probability that quite a substantial portion of the amount of fee realised is spent for the special benefit of its payers. Each case has to be judged from a reasonable and practical point of view for finding out the element of quid pro quo. The aforesaid judgment was later discussed and further elucidated in a three-judge Bench judgment of the apex court in the case of Sreenivasa General Traders v. State of Andhra Pradesh [1983] 4 SCC 353. While dealing with the test to determine as to whether an impost is a tax or fee, this was held that element of quid pro quo in the true sense was not an essential element for fee, though a reasonable relationship between levy and fee and services rendered must be present. The court also held that the decision in Kewal Krishan Puri's case [1980] 1 SCC 416 does not lay down any legal principle of general applicability. The observa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied essentially for services rendered. In case of fee, there is essentially an element of quid pro quo between the person who pays and the public authority which collects. It is not always absent in the case of tax. However, it is not an essential pre-requisite. A Constitution Bench of the honourable apex court in the case of State of West Bengal v. Kesoram Industries Limited [2004] 2 RC 298; [2004] 10 SCC 201, has held that it is the object and essential purpose of the Act, which would determine the character of levy and not the ultimate or incidental results or consequences like effect on the price of the commodity. A three-judge Bench of the honourable apex court in the case of State of H.P. v. Shivalik Agro Poly Products [2004] 8 SCC 556, has also held that there is no generic difference between a tax and fee, which both are a compulsory exaction of money by public authorities. As regards the fee, this has been held that there is no co-relationship between the levy and the services rendered which should be of general character and not of mathematical exactitude. During the course of arguments, we were also taken through some latest judgments of the honourable apex cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory tax has been judicially evolved as an exception to the provisions of article 301 and as the parameters of this judicial concept are blurred particularly by reason of the decisions in Bhagatram's case [1995] 96 STC 654 (SC) and Bihar Chamber of Commerce's case [1996] 103 STC 1 (SC); [1996] 9 SCC 136, we are of the view that the interpretation of article 301 vis-a-vis compensatory tax should be authoritatively laid down with certitude by the Constitution Bench under article 145(3). In the circumstances let all these matters be placed before the honourable Chief Justice for appropriate directions. In the case of Vijayalashmi Rice Mill v. Commercial Tax Officer, Palakol [2006] 147 STC 609; [2006] 6 SCC 763, the honourable apex court has held that a cess is ordinarily a tax which generates revenue to be utilized for a specific purpose. In paras 27 and 28 of the judgment, honourable court has held as (paras 28 and 29 in STC): 28. In our opinion the cess in question is in substance a fee as it is being levied for rendering to the rural public the service of rural development for the purposes stated in para 9 of the Act. Clearly roads, bridges and storage facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses on account of providing or adding to the trading facilities either immediately or in future, provided the quantum of tax is based on a reasonable relation to the actual or projected expenditure on the cost of the service or facility. However, the post-1995 decisions in Bhagatram's case [1995] 96 STC 654 (SC) (Jindal Strips Ltd. v. State of Haryana [2003] 8 SCC 60) and in the case of Bihar Chamber of Commerce [1996] 103 STC 1 (SC); [1996] 9 SCC 136 (Sharma Transport v. Govt. of A.P. [2002] 2 SCC 188) now say that even if the purpose of imposition of the tax is not merely to confer a special advantage on the traders but to benefit the public in general including the traders, that levy can still be considered to be compensatory. According to this view, an indirect or incidental benefit to traders by reason of stepping up the developmental activities in various local areas of the State can be brought within the concept of compensatory tax, the nexus between the tax known as compensatory tax and the trading facilities not being necessarily either direct or specific. . . . 37.. The concept of compensatory tax is not there in the Constitution but is judicially evol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;a tax', 'a fee' and 'a compensatory tax' Parameters of compensatory tax 39.. As stated above, in order to lay down the parameters of a compensatory tax, we must know the concept of taxing power. 40.. Tax is levied as a part of common burden. The basis of a tax is the ability or the capacity of the taxpayer to pay. The principle behind the levy of a tax is the principle of ability or capacity. In the case of a tax, there is no identification of a specific benefit and even if such identification is there, it is not capable of direct measurement. In the case of a tax, a particular advantage, if it exists at all, is incidental to the States' action. It is assessed on certain elements of business, such as, manufacture, purchase, sale, consumption, use, capital, etc., but its payment is not a condition precedent. It is not a term or condition of a licence. A fee is generally a term of a licence. A tax is a payment where the special benefit, if any, is converted into common burden. 41.. On the other hand, a fee is based on the 'principle of equivalence'. This principle is the converse of the 'principle of ability' to pay. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular measurable advantage, it is only fair to the community at large that the beneficiary shall pay for it. The basic difference between a tax on one hand and a fee/compensatory tax on the other hand is that the former is based on the concept of burden whereas compensatory tax/fee is based on the concept of recompense/reimbursement. For a tax to be compensatory, there must be some link between the quantum of tax and the facility/services. Every benefit is measured in terms of cost which has to be reimbursed by compensatory tax or in the form of compensatory tax. In other words, compensatory tax is a recompense/ reimbursement. 43.. In the context of article 301, therefore, compensatory tax is a compulsory contribution levied broadly in proportion to the special benefits derived to defray the costs of regulation or to meet the outlay incurred by some special advantage to trade, commerce and intercourse. It may incidentally bring in net revenue to the Government but that circumstance is not an essential ingredient of compensatory tax. 44.. Since compensatory tax is a judicially evolved concept, understanding of the concept, as discussed above, indicates its parameters. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, taxing laws are not excluded from the operation of article 301, which means that tax laws can and do amount to restrictions on the freedom guaranteed to trade under Part XIII of the Constitution. This principle is well settled in the case of Atiabari Tea Co. AIR 1961 SC 232. It is equally important to note that in Atiabari Tea Co. AIR 1961 SC 232, the Supreme Court propounded the doctrine of 'direct and immediate effect'. Therefore, whenever a law is challenged on the ground of violation of article 301, the court has not only to examine the pith and substance of the levy but in addition thereto, the court has to see the effect and the operation of the impugned law on inter-State trade and commerce as well as intraState trade and commerce. 48.. When any legislation, whether it would be a taxation law or a non-taxation law, is challenged before the court as violating article 301, the first question to be asked is: What is the scope of the operation of the law? Whether it has chosen an activity like movement of trade, commerce and intercourse throughout India, as the criterion of its operation? If yes, the next question is: What is the effect of operation of the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... data available on record towards the mandate of aforesaid directions of the Supreme Court. As referred to hereinabove, the PIDA has filed three affidavits and, thus, it would be apposite to detail the relevant averments of the affidavits showing the services rendered in lieu of the levy of the imposts. According to these affidavits, in pursuance of Notification No. 6343 dated July 11, 2002, issued under section 25 of the Act of 2002, the State Government has levied fee as defined in section 2(13) thereof as: Fee means a charge levied and collected for facilitating the development, maintenance and providing of infrastructure facilities under this Act. The latest affidavit dated April 27, 2009 refers to section 27 of the 2002 Act, which is reproduced as: 27. Constitution of the Development Fund. (1) The State Government shall constitute a Fund to be known as the development fund which shall vest in the Board. (2) The amount of fee charged and collected under this Act, shall be credited to the development fund. (3) The development fund shall be applied for the development of infrastructure sectors by providing infrastructure facilities in the State of Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters provided in the Act of 2002 or the earlier Act of 1998. This is also mentioned that the main stay of the natives of Punjab is agriculture. Thus, most of the infrastructure facilities in the shape of good roads, bypasses, rail over bridges (ROBs), high level bridges (HLBs), expressways, irrigation canals and minors, bus terminals, water supply and sewerage facilities in villages and towns, etc., would provide a major relief to the agrarian sector. From the details filed with the affidavit as annexure R2, it is apparent that the total amount of funds released by the PIDB out of the development fund from 1999-2000 to 2008-09 (up to March 31, 2009) for undertaking the projects for various infrastructure is Rs. 1,941.79 crores. A summary statement regarding the sectorwise overview of all the projects under the aegis of the PIDB up to March 31, 2009 has also been provided in the affidavits. This includes the projects funded by the PIDB out of the development fund as also by way of the private public participation in which the PIDB has successfully attracted the investments from private sector entrepreneurs. According to the details annexed with the affidavit, the total cost of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner-rice and general mills would become much easier and quicker with lesser wear and tear of vehicles, besides reduction in accidents and increased safety while travelling, transporting goods, etc. The land acquisition notifications for the project have already been issued and the expression of interest has also been invited from the prospective bidders who would construct the project on BOT basis, PIDB would be spending about Rs. 2,500 crores for meeting the land acquisition cost, whereas, the construction cost of about Rs. 2,600 crores would be financed by the BOT operator to be selected in due course. 1981 of 2005 M/s. Nauhria Rice General Mills, Moga Barnala Road, Village Badani Kalan, Moga. Widening and strengthening work of Raikot-Barnala road (57.9 kms) is being carried out on BOT basis. Project cost Rs. 78.66 cores. Construction work to be completed shortly. A number of other projects in the area surrounding village Badni Kalan are being developed at nearby places, i.e., Dhuri, Sangrur, Moga and Bathinda. All such projects would bring direct and indirect economic benefits to the petitioners, their workers/employees, etc., residing in the nearby areas. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 villages of Punjab. These development efforts focused in the agri-rural sectors indicate that the agriculturists spread across various parts of the State who are covered by the entries of Schedule III under section 25 of the 2002 Act would be immensely benefited by the provisions of infrastructure facilities. It cannot be denied that the provisions of roads connecting the rural areas with the urban areas, which have been provided by the PIDB are going to benefit the petitioner-rice millers by making the transport of the agricultural produces from rural areas to their rice mills located in the urban areas easier and economical. Besides, the flour and rice millers would be immensely benefited by the large number of urban infrastructure works including urban roads, water supply, sewerage, street lighting, etc., provided in the periphery of their respective flour and rice mills. Technical education infrastructure, i.e., 9 industrial training institutes which are strategically located in major agricultural belts of the State would make available skilled workmen as required by the petitioner-millers. Since most of the PIDB sponsored projects are to focus on the persons connected wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board has immensely focused on the agricultural rural sectors and the development efforts are largely connected with the agriculturists spread across the various parts of the State and are covered by the entries in Schedule III of section 25 of the 2002 Act. It is they who are going to be immensely benefited by the provisions of infrastructure facilities. Spending on roads is just one example of amount of fee in question being utilized either directly or indirectly for the benefit of the persons paying the same. The PIDB has till date released an amount of Rs. 182.76 crores for the upgradation of irrigation canals and minors, and no funds were provided by any department or agency of the State Government. Further, a mega irrigation project costing approximately Rs. 3,500 crores is also being developed and substantially funded by the PIDB out of the fee collected under the 2002 Act. The decisions regarding expenditure from the development fund spent for infrastructure development are taken at the level of the Board headed by the Chief Minister and constituted under sub-section (2) of section 18 of the 2002 Act or at the level of Executive Committee of the Board constituted under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject management practices and models such as build, operate and transfer (BOT), etc., and therefore, this organisation has been successfully and sincerely leveraging the amount available in the development fund. In other words, by adopting the modern projects management practices and models and by involving private sector participants to invest in projects, the PIDB has ensured that with every one rupee spent out of the development fund, infrastructure facilities worth two, three or four rupees should be created for the benefit of individuals paying the fee as well as for the public at large. The judgment of Constitution Bench of the honourable apex court in the case of Jindal Stainless Ltd. [2006] 145 STC 544 (SC); [2006] 7 SCC 241 was referred and considered in the case of Vijayalashmi Rice Mill v. Commercial Tax Officers, Palakol reported in [2006] 147 STC 609 (SC); [2006] 6 SCC 763 in the context of principle of equivalence and the honourable court held that the aforesaid decision cannot be interpreted to mean that the sea-change which has taken place in the concept of fee has vanished and that by this decision, the old concept of fee has been restored and that now it has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidating Acts because the power to pass such validating Acts is essentially subsidiary to the main power of legislation on the topics included in the relevant list. Therefore, if the Legislature felt that the infirmity in the earlier Act could be cured and it proceeded to comply with the requirement of article 304(b), it cannot be said that the law passed is void because the Legislature has thereby attempted to recover taxes, which could not be recovered under the earlier Act owing to the constitutional infirmity in the said Act. Thus, the exercise of legislative powers does not become colourful or confiscatory only because it has been passed substantially for the purpose of validating the recovery made under the earlier Act and enforcing the assessment orders passed under that Act. Besides, it is for the Legislature to decide from which date a particular law should come into operation. (Pl. see Jain Brothers v. Union of India [1970] 77 ITR 107 (SC); AIR 1970 SC 778, para 9). In the instant case, the clarificatory notification issued on April 8, 1999 and the Cess (Collection) Rules notified on November 11, 1998 have been made applicable also in respect of collection of cess under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, took the precaution of adding that 'whether in a particular case the tax ceases to be in essence as excise duty and the rational connection between the duty and the person on whom it is imposed ceased to exist, is to be decided on a fair construction of the provision of a particular Act'. Again in Ram Chandra Kailash Kumar's case AIR 1980 SC 1124, a Constitution Bench of the honourable apex court has held that the absence of machinery under the Act or the Rules framed thereunder for adjudication of disputes does not mean that fee cannot be recovered or collected. Thus, in this case, use of machinery under the PGST Act for the purpose of collection of cess/fee under the impugned Acts would not invalidate the levy of cess simply because there is no such machinery of its own under the 1998 or the 2002 Act to collect the imposts. In view of all the aforesaid, we are of the view that the use of machinery provided under the PGST Act for the purpose of collection of imposts in question would not in any manner invalidate the levy and collection of cess/fee under the 1998 and 2002 Acts; the Cess (Collection) Rules and the clarificatory notification dated April 8, 1999. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce/Act as well as in the Rules as clarified in the affidavits filed by the State. Besides, in the affidavits filed on behalf of the PIDB and the State, the contention that originally there were 16 items in the Schedule attached to the Ordinance has been denied. Moreover, the objects and reasons of the Ordinance as well as of the Acts clearly provide for utilisation of funds only for the development of infrastructure essentially related to the agriculture sector. Thus, if the articles related to this sector have been selected for imposition of fee by adding purchase as aforesaid under the clarificatory notification, it cannot be said that the amendment in the Schedule suffers from dearth of legislative sanction. As such, this contention on behalf of the petitioners also does not find favour with the court and is hence rejected. Coming to the question of increase in rate of levy of cess/fee, a Constitution Bench of the honourable apex court in the case of Corporation of Calcutta v. Liberty Cinema AIR 1965 SC 1107 has upheld the increase of fee by holding that it does not amount to expropriation and violation of article 19(1)(f) and (g) of the Constitution. Similarly, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to select the items for levy of tax, cess or fee. So far as the submission on behalf of some of the petitioners that though they are not a party to the first purchase, still they have been subjected to levy of imposts, is concerned, it is needless to say that the imposts in question are to be collected from a registered dealer on the event of first purchase as per rule 3 of the Cess (Collection) Rules and Schedule D of the PGST Act, thus, it is only the foodgrain procuring agencies which, being the registered dealers and first purchasers, would be under the obligation to pay the imposts to the Government. Hence, if such an agency has passed on the burden to the subsequent purchasers, this may amount to unjust enrichment and the agency would return the amount of cess/fee to such purchasers. In view of the aforesaid, the subsequent purchasers would be at liberty to take appropriate steps under law for the refund of the amount of imposts collected by the registered dealers/foodgrain procuring agencies. Last but not the least, before parting with this judgment, we may like to observe that though the services shown to have been rendered by the respondents in their affidavits as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. 13. CWP-3797-2000 Shree Ram Roller Flour Mills v. State of Punjab. 14. CWP-3842-2000 Samana Roller Flour Mills v. State of Punjab. 15. CWP-2938-2000 Lakshmi Electric Flour Mil v. State of Punjab, etc. 16. CWP-260-2000 Singla Gram Udyog Samiti v. State of Punjab. 17. CWP-7030-2000 Sant Ram Udyog Samiti v. State of Punjab, etc. 18. CWP-7905-2000 Kochar Brothers Rice Mills v. State of Punjab. 19. CWP-3295-2003 Garg Rice General Mills, etc. v. State of Punjab. 20. CWP-1449-2003 FCI v. State of Punjab and others. 21. CWP-8890-2003 Chawla Filling Station v. State of Punjab. 22. CWP-1984-2005 Maijroa Fppd (Rpdicts v. State of Punjab). 23. CWP-1981-2005 Nauhria Rice General Mills v. State of Punjab and others. 24. CWP-9192-2006 Shree Ram Cotton Factory v. State of Punjab and others. 25. CWP-9640-2006 Chahal Cotton Factory v. State of Punjab and others. 26. CWP-10069-2006 Aggarwal Cotton Co. v. State of Punjab and others. 27. CWP-10093-2006 Shree Ganesh Cotton Company v. State of Punjab and others. 28. CWP-10833-2006 Rama Krishna Trading Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hok Kumar v. State of Punjab and others. 57. CWP-20660-2008 Bhole Nath Rice Mills v. State of Punjab and others. 58. CWP-20662-2008 Ram Foods v. State of Punjab and others. 59. CWP-20663-2008 S. K Traders v. State of Punjab and others. Page No: 460 60. CWP-21806-2008 Olam Exports Ltd. v. State of Punjab and others. 61. CWP-21058-2008 Vishal Rice Mills v. State of Punjab and others. 62. CWP-21036-2008 Ashoka Rice General Mills v. State of Punjab and others. 63. CWP-11155-2008 Asa Singh Rice Mills v. State of Punjab and others. 64. CWP-11156-2008 Asa Singh Commission Agents Pvt. Ltd. v. State of Punjab and others. 65. CWP-11161-2008 Gaba Enterprises v. State of Punjab and others. 66. CWP-11261-2008 Central Agro Corp. v. State of Punjab and others. 67. CWP-11602-2008 Janta Rice Mill v. State of Punjab and others. 68. CWP-11599-2008 Ram Singh Rawail Singh v. State of Punjab and others. 69. CWP-11603-2008 Modern Foods v. State of Punjab and others. 70. CWP-11641-2008 Ajmer Singh Cotton General Mills v. State of Punjab and others. 71. CWP-1953-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
