1987 (3) TMI 507 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Constitutionality of the Haryana Rural Development Act, 1986.
2. Validity of Section 11 of the 1986 Act regarding the retention of cess/fee collected under the 1983 Act.

Issue-wise Detailed Analysis:

1. Constitutionality of the Haryana Rural Development Act, 1986:

The petitioners challenged the constitutionality of the Haryana Rural Development Act, 1986, arguing that it suffers from the same vice as the 1983 Act, which was declared unconstitutional by the Supreme Court due to the lack of quid pro quo. The petitioners contended that the 1986 Act does not provide for any specific service to be rendered to the dealers of the market area upon whom the levy is imposed, making it a tax rather than a fee.

In response, the State argued that the legislative deficiencies highlighted by the Supreme Court in the 1983 Act have been addressed in the 1986 Act. The 1986 Act specifies the purposes for which the fee is to be spent, including the development of roads, establishment of dispensaries, water supply, sanitation, welfare of agricultural labor, and other public facilities in rural areas.

The court examined various judicial pronouncements on the distinction between tax and fee. It noted that a fee is a charge for a special service rendered to individuals by a governmental agency and must have a reasonable correlation with the services rendered. The court referred to several Supreme Court judgments, including the case of Commissioner, Hindu Religious Endowments, Madras, which distinguished between tax and fee based on the element of quid pro quo.

The court concluded that the 1986 Act satisfies the requirements laid down by the Supreme Court in Om Parkash Agarwal's case. The object of the 1986 Act is to levy a fee for services rendered to dealers in market areas, the fee levied bears a close relationship with the services rendered, and the element of quid pro quo is adequately satisfied. Therefore, the 1986 Act is constitutionally valid.

2. Validity of Section 11 of the 1986 Act:

The petitioners argued that Section 11 of the 1986 Act is bad in law as it provides for the retention of cess/fee levied and collected under the 1983 Act, which was declared unconstitutional by the Supreme Court. They contended that the State cannot retain the cess collected under an invalidated Act.

The State relied on the Supreme Court judgment in Amar Nath Om Parkash's case, which upheld the validity of a similar provision (Section 23A) in the Punjab Agricultural Produce Markets Act, 1961. The court in that case held that Section 23A was not an attempt to validate an illegal levy but aimed to prevent unjust enrichment by dealers who had passed on the burden of the fee to the next purchaser and also claimed a refund from the market committees.

The court found that the reasoning in Amar Nath Om Parkash's case applies to Section 11 of the 1986 Act. Section 11 does not permit the recovery of fee under the 1983 Act but prevents unjust enrichment by allowing the State to retain the cess if the burden was passed on by the dealer to the next purchaser. Therefore, Section 11 of the 1986 Act is constitutionally valid.

Conclusion:

The court dismissed all thirty-nine writ petitions, holding that the Haryana Rural Development Act, 1986, is constitutionally valid. There was no order as to costs.