2002 (7) TMI 513 - SC - VAT and Sales Tax

Legality and validity of the levy of additional toll tax under Notification No. S.R.O. 348 dated August 20, 1982 on dry fruits like almonds, walnuts and walnut kernels Held that - Appeal allowed. The position that emerges is that the Notification S.R.O. No. 348 in which the additional toll tax was levied was clearly beyond the purview of section 3 of the Act. Further, the finding of the High Court that in the context of facts and circumstances of the case, processing of the dry fruits like almonds, walnuts and walnut kernels did not come within the expression manufacture cannot be said to be erroneous. The judgment of the High Court upholding the levy of additional toll tax in the case is also unsustainable.

Issues Involved:
1. Legality and validity of the levy of additional toll tax on dry fruits under Notification No. S.R.O. 348 dated August 20, 1982.
2. Whether the levy of toll tax involves the principle of quid pro quo.
3. Authority of the State Government to levy toll tax on national highways.
4. Exemption from toll tax for dry fruits subjected to manufacturing processes.
5. Discrimination in the levy of additional toll tax on dry fruits.
6. Determination of taxable turnover by weight under sales tax laws.

Issue-wise Detailed Analysis:

1. Legality and validity of the levy of additional toll tax on dry fruits under Notification No. S.R.O. 348 dated August 20, 1982:
The controversy centered around the legality of the additional toll tax imposed by the State Government on dry fruits like almonds, walnuts, and walnut kernels. The petitioners argued that the notification was ultra vires the statute and violated fundamental rights under Articles 19(1)(g) and 14 of the Constitution of India, as well as Article 286(1). The High Court upheld the levy, but the Supreme Court found that the notification was beyond the purview of Section 3 of the Levy of Tolls Act, 1995 (Samvat 1938 A.D.), and thus invalid.

2. Whether the levy of toll tax involves the principle of quid pro quo:
The petitioners contended that toll tax is in the nature of a fee requiring quid pro quo, i.e., a corresponding service by the State. The High Court, however, held that the toll in question was a tax and not a fee, and the concept of quid pro quo was not applicable. The Supreme Court agreed with the High Court's view that the toll was a tax levied under the Act and did not require a corresponding service.

3. Authority of the State Government to levy toll tax on national highways:
The petitioners argued that the State Government could not levy toll tax on national highways maintained by the Central Government without a specific agreement approved by Parliament. The High Court found that the petitioners used both national and state highways, and the State retained ownership of the soil, allowing it to impose the tax. The Supreme Court did not find this reasoning erroneous.

4. Exemption from toll tax for dry fruits subjected to manufacturing processes:
The petitioners claimed exemption from toll tax, arguing that their processes constituted "manufacture." The High Court concluded that the activities did not fall within the concept of "manufacture" and thus did not qualify for exemption. The Supreme Court upheld this finding, agreeing that the processes described did not amount to manufacturing under the law.

5. Discrimination in the levy of additional toll tax on dry fruits:
The petitioners argued that the additional toll tax created a separate and discriminatory category for dry fruits. The High Court dismissed this claim, finding no violation of constitutional provisions. The Supreme Court did not address this issue separately, focusing instead on the broader legality of the toll tax.

6. Determination of taxable turnover by weight under sales tax laws:
The petitioners challenged the method of determining taxable turnover by weight. The High Court found this method consistent with the Jammu and Kashmir General Sales Tax Act of 1962. The Supreme Court did not find any reason to overturn this finding.

Conclusion:
The Supreme Court allowed the appeals, setting aside the High Court's judgment upholding the levy of additional toll tax. The judgment was given prospective operation, meaning the State need not refund any toll/additional toll tax already collected. Each party was ordered to bear its own costs.

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