9911796707
TMI Blog1994 (11) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... Krishi Upaj Mandi Adhiniyam, 1973 (for short 'the Act'), the State Government is empowered to declare by a notification its intention to establish a market for regulating the purchase and sale of such agricultural produce and in such area as may be specified in the notification, and invite objections for the same. Under Section 4 thereof, after the expiry of the period specified in the notification and after considering the objections and suggestions as may be necessary, the State Government is authorised to establish by another notification a market, for the areas specified in the notification issued under Section 3 or in any portion thereof. Under Section 5, in every market area, there has to be a market yard and there may be more than one sub- market yards. For every market yard or sub-market yard, there has to be a market proper. On the establishment of market under Section 4, Section 6 prohibits local authorities from setting up or establishing or continuing or using or allowing to be set up, established, continued or used, any place in the market area for the marketing of any notified agricultural produce. Likewise, no person is permitted to use any place in the mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erating in the market area in respect of the notified agricultural produce as commission agent, trader, broker, weighman, hammal, surveyor, warehouseman, owner or occupier of processing or pressing factories or as other market functionary except in accordance with the provisions of the Act and the rules and the bye-laws made thereunder. Section 32 requires every person specified in Section 31 who desires to operate in the market area to apply to the market committee for the grant of a licence. The application has to be accompanied by such fees as the Director of Marketing appointed by the State Government may subject to the minimum, prescribe in this behalf. Under Section 33, the market committee is given power to cancel or suspend the licence for reasons and under the procedure laid down therein. Section 38 provides for the constitution of a Market Committee Fund in which all the moneys received by the market committee are paid and from which all expenditure incurred by the committee is defrayed. Section 39 lays down the purposes for which the Market Committee Fund is to be expended. They are: "39. Application of market committee fund.- Subject' to the provisions of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication declare from time to time. All expenditure incurred by the Board according to the object sanctioned by it has to be defrayed out of the said fund. 6. It appears that the Committees levied fees on the sale and purchase of bamboos. The Mills challenged the said levy by way of a writ petition in the M.R High Court on the ground that the Act was ultra vires the Constitution, that the requirement of obtaining the licence under Section 32 and of paying the market fee under Section 19 of the Act was also unconstitutional. 7. The High Court relied upon a decision of the same Court in Miscellaneous Petition No. 4063 of 1986 decided on 12-1- 1988 and allowed the writ petition. The High Court by the said decision of 12-1-1988 had repelled the challenges to the constitutional validity of the Act and its provisions, but had upheld the contention of the petitioners that the levy was not justified on the ground that it was not established that any direct or indirect benefit was conferred either on the purchasers or traders of bamboos as a class by the market committee. For the purpose, the High Court relied upon a decision in Om Parkash Agarwal v. Giri Raj Kishoril. The High Court furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred by the market committee either on the purchasers or traders of bamboos as a class, is valid or not. 9. We may now refer to the authorities cited at the bar. The earliest decision of this Court on the definition of 'fee' and 'tax' and the distinction between the two is of the Constitution Bench of seven learned Judges in Commissioner, Hindu Religious Endowments v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt [1954 SCR 1005 : AIR 1954 SC 282]. It was observed then that though levying of fee is only a particular form of the exercise of the taxing power of the State, our Constitution has placed fee under a separate category for purposes of legislation, and at the end of each one of the three Legislative Lists, it has given power to the particular legislature to legislate on the imposition of fee in respect of every one of the items dealt with in the list itself. Referring then to the definition of 'tax', the Court referred to the decision of the Australian High Court in Matthews v. Chicory Marketing Board [(1938) 60 CLR 263 (Aus HC)]. There 'tax' is defined as a compulsory exaction of money by public authority for public purposes enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fee lies primarily in the fact that a tax is levied as a part of the common burden while a fee is a payment for a special benefit or privilege. Fees confer a special capacity although the special advantage is secondary to the primary motive of regulation in the public interest. Public interest seems to be at the basis of all impositions but in a fee it is some special benefit which the individual receives. The special benefit accruing to the individual is the reason for payment in the case of fees. In the case of a tax, the particular advantage if it exists at all, is an incidental result of State action. A fee is a sort of return or consideration for services rendered and hence it is primarily necessary that the levy of fee should on the face of the legislative provision be correlated to the expenses incurred by Government in rendering the services. As indicated in Article 110(2) of the Constitution, ordinarily there are two classes of cases where Government imposes fees upon persons. In the first class of cases, Government simply grants a permission or privilege to a person to do something which otherwise that person would not be competent to do, and extracts fees either heavy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the expenses incurred in connection with the same, no objection could be taken to the provisions of the section on the ground of its infringing the fundamental rights of the appellants. The Court referred to its earlier decision in Shirur Mutt case2 and the observations made and principles laid down there and reiterated the same. 12. In Hingir-Rampur Coal Co. Ltd. v. State of Orissa [(1961) 2 SCR 537 : AIR 1961 SC 459] the Constitution Bench of five learned Judges reiterated that although there can be no generic difference between a tax and fee since both are compulsory exaction of money by public authorities, there is this distinction between them that whereas the tax is imposed for public purposes and requires no consideration to support it, a fee is levied essentially for services rendered and there must be an element of quid pro quo between the person who pays it and the public authority that imposes it. While a tax invariably goes into the consolidated fund, a fee is earmarked for the specified services in a fund created for the purpose. Whether a cess is one or the other would naturally depend on the facts of each case. If in the guise of a fee, the legislature imposes a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted to keep open any cinema house for public amusement without a licence granted by the Municipal Corporation. Under Section 548(2), for every licence under the Act, a fee could be charged at such rates as may from time to time be fixed by the Corporation. In 1948, the appellant-Corporation fixed fees on the basis of annual valuation of the cinema house and it was paid by the respondent. In 1958, the appellant changed the basis of assessment of the fee and levied it at rates prescribed per show according to the sanctioned seating capacity of the cinema house. The respondent-cinema, therefore, moved the High Court by a writ petition and the petition was allowed. In appeal to this Court, the appellant-Corporation contended that (i) the levy was a tax and not a fee in return for services, and (ii) Section 548(2) did not suffer from the vice of excessive delegation. On behalf of the respondent, it was contended that (i) the levy was a fee in return for the services to be rendered and not a tax, and since it was not commensurate with the costs incurred by the Corporation in providing the services, the levy was invalid; (ii) if Section 548 authorised a levy of tax as distinct- from fee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different footing altogether. In the case of such a fee, the test of quid pro quo is not to be satisfied with such close or proximate relationship as in the case of many other fees. By and large, the registration fee is charged as a regulatory measure. The Court then culled the following principles from the conspectus of various authorities on the subject: (SCR pp. 1243-1244 : SCC pp. 434-35, para 23) (i) That the amount of fee realised must be earmarked for rendering services to the licensees in the notified market area and a good and substantial portion of it must be shown to be expended for this purpose. * * * (iii) That while rendering services in the market area for the purpose of facilitating the transactions of purchase and sale with a view to achieve the objects of the marketing legislation it is not necessary to confer the whole of the benefit on the licensees but some special benefits must be conferred on them which have a direct, Close, and reasonable correlation between the licensees and the transactions. (iv) That while conferring some special benefits on the licensees it is permissible to render such service in the market which may be in the general interest of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licensees. Every market committee was obliged under sub-section (2)(a) of Section 27 of that Act to pay out of its fund to the marketing board as contribution such percentage of its income derived from licence fee, market fee and fines levied by the courts as specified therein. The purpose of this contribution was to enable the Board to defray expenses of the office establishment of the Board and such other expense incurred by it in the interests of the Committees in general. The purposes for which the Marketing Development Fund might be expended were enumerated in Section 26 and the purpose for which the Market Committee Funds might be expended were catalogued in Section 28 of that Act. The whole of the State was divided into market areas. The propaganda in favour of agricultural improvement and expenditure for production and betterment of agricultural produce would be in the general interest of agriculture in the market area. It was not permissible to spend the market fees realised from the traders for any purpose calculated to promote the national or public interest. No market committee could be permitted to utilise the fund for an ulterior purpose, however benevolent, laudable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. But if they are meant to be supplied to the agriculturists for use at their village homes or in their fields, the market fee cannot be spent for the purpose. The charging of fee at the rate of ₹ 2 per ₹ 100 was not considered unjustifiable. The Court observed that any increase in the rate should be corelated to the expenditure made strictly for the purposes mentioned above. 16. It may be mentioned here that the purposes mentioned in Sections 26 and 28 of the Punjab Agricultural Produce Marketing Act which fell for consideration there are similar to the provisions of the M.P. Krishi Upaj Mandi Adhiniyam, 1973. 17. In Southern Pharmaceuticals & Chemicals v. State of Kerala [(1981) 4 SCC 391 : 1981 SCC (Tax) 320: (1982) 1 SCR 519] which is a decision of three learned Judges, what fell for consideration was the validity of the levy of supervisory charges under the Kerala Abkari Act, 1967. In this connection, it was observed that it was increasingly realised that merely because the collections for the services rendered or grant of a privilege or licence, are taken to the Consolidated Fund of the State and are not separately appropriated towards the expenditure for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which prohibited any person purchasing, producing or selling any notified agricultural produce, livestock and products of livestock in a notified market area but outside the market in that area were valid having regard to the purpose and object of the legislation. The Court further held that the levy of market fee under Section 12(1) of that Act on the transactions effected by the petitioners from their business premises located in the notified market area but outside the market proper was legal. The petitioners' contention to the contrary proceeded on the wrong assumption because, firstly, in view of the express prohibition contained in Section 7(6) of the Act, the petitioners could not carry on such a trade without resorting to the market proper. The contravention of Section 7(6) was penally an offence under Section 23(1) of that Act. Secondly, the establishment of regulated market for agricultural produce is a service rendered to those who are engaged in the business of purchase and sale of such commodity. That duty of the market committee does not end with the establishment of markets but extends under Section 15 of that Act to providing facilities in the market. The servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to levy a fee is conditioned by the fact that it must be by and large a quid pro quo for services rendered. Every corelationship between the levy and the services rendered is one of general character and not a mathematical exactitude. All that is necessary is that there should be a reasonable relationship between the levy of fee and the services rendered. There is no postulate of a fee that it must have a direct relation to the actual services rendered by the authority to each individual to obtain the benefit of the service. It is now increasingly realised that merely because the collections for the services rendered or for grant of a privilege or licence are taken to the Consolidated Fund of the State and not separately appropriated towards the expenditure for rendering the service, is not by itself decisive of the nature of the levy whether it is a fee or a tax. The Court further held that presumably, the attention of the Court in the Shirur Mutt case2 was not drawn to Article 266 of the Constitution. The Constitution nowhere contemplates it to be an essential element of a fee that it should be credited to a separate fund and not to the Consolidated Fund. The element of quid p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creation of the fund called the Haryana Rural Development Fund which was vested in the State Government and the amount of cess was to be credited to the said fund. Sub-section (5) of Section 4 of the Act stated that the fund would be applied by the State Government to meet the expenditure incurred in the rural areas in connection with the development of roads, hospitals, means of communication, water supply, sanitation facilities and for the welfare of agricultural labour or for any other scheme approved by the State Government for the development of the rural areas. This Court held that the Act was unconstitutional since the State Legislature was not competent to enact it. The Court held that in the guise of a fee, the legislation imposed a tax. It was constitutionally impermissible for the State to do so. The Court pointed out that in the present case, the definition of expression "rural areas" was vague. There was no specification in the Act that the amount or a substantial part of the amount collected by way of cess would be spent on any public purposes within the market area where the dealer was carrying on his business. The purpose for which the fund could be spent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the levy of the fee and the services rendered. The Court then held that the cess levied therein is a fee and that the levy for the fund was created to expend for the purposes enumerated under Section 6(5) of the Act. 21. Thus what emerges from the conspectus of the aforesaid decisions is as follows: (1)Though levying of fee is only a particular form of the exercise of the taxing power of the State, our Constitution has placed fee under a separate category for purposes of legislation. At the end of each one of the three Legislative Lists, it has given power to the particular legislature to legislate on the imposition of fee in respect of every one of the items dealt with in the list itself, except fees taken in Court. (2)The tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered. There is no quid pro quo between the taxpayer and the public authority. It is a part of the common burden and the quantum of imposition upon the taxpayer depends generally upon his capacity to pay. (3)Fee is a charge for a special service rendered to individuals or a class by some governmental agency. The amount of fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cases, the Government does some positive work for the benefit of persons and the money is taken as the return for the work done or services rendered. (6)There is really no generic difference between tax and fee and the taxing power of the State may manifest itself in three different forms, viz., special assessments, fees and taxes. Whether a cess is tax or fee, would depend upon the facts of each case. If in the guise of fee, the legislature imposes a tax it is for the Court on a scrutiny of the scheme of the levy, to determine its real character. In determining whether the levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specific area or classes. It is of no consequence that the State may ultimately and indirectly be benefited by it. The amount of the levy must depend upon the extent of the services sought to be rendered and if they are proportionate, it would be unreasonable to say that since the impost is high it must be a tax. Nor can the method prescribed by the legislature for recovering the levy by itself alter its character. The method is a matter of convenience and though relevant, has to be tested in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he levy of fee we have to consider whether the fee levied by the appellant-Market Committees in the present case is illegal. The impugned decision has relied upon the earlier decision of the same Court to come to the conclusion that in the absence of any services rendered by the Market Committees with regard to the transactions of sale and purchase of bamboos, the respondent-Mills is not liable to pay the market fee. It is, therefore, necessary to deal with the said earlier decision of the said Court which was delivered on 12-1-1988 in Miscellaneous Petition No. 4063 of 1986 filed by the respondent-Mills against the State. 23. As stated at the outset, there is no dispute that bamboo is an agricultural produce within the meaning of the Act and is a notified agricultural produce under it. The respondent-Mills purchases and takes delivery of the bamboos from the forest depots of the Forest Department of the State Government. These depots are situated within the market area of the appellant-Market Committees. After taking delivery from the forest depots, the bamboos are transported by the respondent-Mills to its factory which is also situated within the market area of one of the commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... things, the market committees are required to (i) maintain and manage the market yards; (iii) provide the necessary facilities for marketing of agricultural produce in the market yard; (iii) grant or refuse licences to the market functionaries and renew, suspend or cancel such licences; (iv) supervise the conduct of the market functionaries; (v) regulate the opening, closing and suspending of trading in the market yards; (vi) enforce the conditions of the licences; (vii) regulate the making, carrying out and enforcement or cancellation of agreement of sales, the weighment, delivery, payment and all other matters relating to the marketing of notified agricultural produce; (viii) provide for the settlement of all disputes between the seller and the buyer arising out of any kind of transaction connected with the marketing of notified agricultural produce and all matters ancillary thereto; (ix) collect and maintain information in respect of production, sale, storage, processing, prices and movement of notified agricultural produce and disseminate such information as directed by the Director of Marketing appointed by the State Government under the Act; (x) take all possible steps to pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for the purposes mentioned in Section 39 of the Act. Those purposes, among others, are (i) the acquisition of a site or sites for the market yards; (ii) the maintenance and improvement of the market yards; (iii) the construction and repairs of buildings, necessary for the purposes of the market and for convenience or safety of the persons using the market yard; (iv) the maintenance of standard weights and measures; (v) the meeting of establishment charges including payments and contribution towards provident fund, pension and gratuity of the officers and servants employed by a market committee; (vi) the payment of interest on the loans that may be raised for the purpose of the market and provisions of sinking fund in respect of such loans; (vii) the collection and dissemination of information relating to crops' statistics and marketing of agricultural produce; (viii)(a) the expenses incurred in auditing the accounts of the market committee; (b) contribution to State Marketing Development Fund; (c) to develop necessary infrastructure within a radius of one kilometre from the market yard/sub- market yard for facilitating the flow of notified agricultural produce. 27. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said produce. The machinery and the facilities for which the market fees are being expended are all necessary to provide the necessary infrastructure to further the object of the Act. But for such infrastructure, the objects of the Act cannot be properly and adequately implemented. The fact that the respondent-Mills may not be the direct beneficiary of anyone or some of the said facilities or does not make use of them does not absolve it from payment of -the market fees. The said machinery and the facilities are meant for the benefit of all the buyers and sellers of all the agricultural produce within the market area and it cannot be denied that they are so. It is further difficult to appreciate the contention that in the circumstances, the respondent-Mills is not either directly or indirectly a beneficiary of the said machinery and the facilities as a buyer of the bamboos when the purchase is admittedly made in the market area as pointed out above. In the circumstances, the High Court was in error in holding that there was no evidence of the services rendered by the Committees. 29. In this connection, a reference may be made to Kewal Krishan Puri case9. There this Court has u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to show that any services were rendered to the respondent-Mills in return for the market fees levied oil them for the purchase of bamboos which transaction took place at various forest depots. The bamboos were purchased by them not for sale but for being used for manufacture of paper. Although, the Court noted the fact that it is not necessary that each individual trader must be benefited by the services provided, the Court held that it was necessary to justify the levy by proving that some direct or indirect benefit was conferred either on the purchasers or traders of bamboos as a class by the Market Committee. The Court also held that since the State Government's stand was that the Forest Department would be a trader within the meaning of the Act while selling bamboos and since respondent-Mills are also traders according to the State Government, the sale of bamboos to the respondent by the Forest Department would be a sale by a trader to a trader and in such a case, the proviso to sub-section (2) of Section 19 of the Act shall be attracted. That proviso contemplates that in a case of commercial transaction between traders in the market area, the market fee shall be collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court on the second proviso to sub-section (2) of Section 19 of the Act which provides that in case of a commercial transaction between traders in the market area, the market fee shall be collected and paid by the seller, we are unable to understand as to how the said provision can be pressed into service to negative the levy of the market fee, even assuming that the Forest Department is for the purposes of the said provision, a trader when it sells the bamboos. The Forest Department is required by that provision to collect the fees from the buyers- in the present case, from the respondent-Mills. The market fee has, therefore, in any case, to be paid by the respondent-Mills if not to the Market Committee directly, at least to the Forest Department, and it is to be paid at the time of the purchase of the bamboos. It is immaterial for this purpose whether the bamboos are purchased by the respondent-Mills for selling them or for using them as their raw material in the manufacture of paper. The liability of the respondent-Mills to pay the market fees is in no way negated on that account. The provision requiring the seller to collect the market fees in such cases is made for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
