2001 (11) TMI 986 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Is the impugned levy a fee or a tax?
2. Is the impugned levy illegal and invalid as the State Legislature has impinged upon a field that was already occupied?
3. Was the State Legislature competent to impose the impugned levy?

Detailed Analysis:

1. Is the impugned levy a fee or a tax?
The primary contention was whether the cess levied under the Punjab Dairy Development Board Act, 2000, was a fee or a tax. The petitioners argued that the levy was a tax as it did not provide any specific service to the milk plants and lacked the element of quid pro quo. The respondents initially admitted the levy was a tax but later claimed it was a fee intended for services to be rendered. The court noted that the Act did not promise any special service to the milk plants and the proceeds of the cess were not earmarked for their benefit. The court concluded that the levy was a tax and not a fee, as the essential element of quid pro quo was absent.

2. Is the impugned levy illegal and invalid as the State Legislature has impinged upon a field that was already occupied?
The petitioners argued that the milk plants were governed by the Industries (Development and Regulation) Act, 1951, which is a central legislation. The court examined the provisions of the 1951 Act and the Milk and Milk Products Order, 1992, which regulate the milk industry and found that the impugned Act's provisions overlapped with those of the central legislation. The court held that the state legislation impinged upon a field already occupied by the central legislation, making the impugned Act invalid.

3. Was the State Legislature competent to impose the impugned levy?
The court examined whether the State Legislature had the competence to levy the cess under the taxing entries in Lists II and III of the Seventh Schedule to the Constitution. The court found that neither entry 15 nor entry 27 of List II permitted the levy of any cess. The court also noted that the milk plants were a scheduled industry under the 1951 Act, and any state legislation related to industries must conform to central legislation under entry 52. The court concluded that the State Legislature was not competent to levy the impugned cess as there was no authorizing entry in List II or List III.

Conclusions:
1. The impugned impost is a tax and not a fee as it lacks the essential element of quid pro quo.
2. The impugned Act is ultra vires as it invades a field occupied by the central legislation, specifically the 1951 Act and the 1992 Control Order.
3. The State Legislature is not competent to levy the impugned cess under any of the taxing entries in Lists II and III of the Seventh Schedule to the Constitution.

Judgment:
The writ petitions were allowed, the levy was declared invalid, and the notices for payment were quashed. The parties were left to bear their own costs.