1999 (8) TMI 947 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of additional toll tax on dry fruits.
2. Exemption from toll tax under specific notifications.
3. Validity of sales tax levied based on weight.
4. Distinction between "toll" and "tolls".
5. Use of national highways maintained by the Central Government.
6. Definition of "manufacture" in the context of toll tax exemption.
7. Compliance with the National Highways Act, 1956.

Detailed Analysis:

1. Levy of Additional Toll Tax on Dry Fruits:
The primary issue was the challenge to the levy of additional toll tax at Re. 0.60 per kilogram on dry fruits, including almonds, walnuts, and walnut kernels, exported from Jammu and Kashmir. The court upheld the levy, stating that the toll is a tax and not a fee, thus the concept of quid pro quo does not apply. The toll was justified as it is levied in consideration of all the conveniences, advantages, and amenities provided by the State.

2. Exemption from Toll Tax Under Specific Notifications:
Petitioners claimed exemption based on notifications under section 5 of the Tolls Act, which exempted raw materials brought into the State or goods manufactured from such raw materials by small-scale industrial units. The court concluded that the processes undertaken by the petitioners did not constitute "manufacture" as defined in legal precedents, thus they were not entitled to exemption.

3. Validity of Sales Tax Levied Based on Weight:
The court examined the notification issued under the Jammu and Kashmir General Sales Tax Act, 1962, which levied sales tax at Re. 0.60 per kg on dry fruits for a specific period. The court found this method of determining taxable turnover by weight to be valid, stating that the incidence of taxation remained on the sale, and the method of calculation was within the State's legislative competence.

4. Distinction Between "Toll" and "Tolls":
The court discussed the distinction between "toll" and "tolls". "Toll" involves an element of quid pro quo, whereas "tolls" represent a tax without the need for corresponding services. The court upheld the State's position that the levy in question was a tax.

5. Use of National Highways Maintained by the Central Government:
Petitioners argued that since the national highways are maintained by the Central Government, the State could not levy toll tax. The court rejected this argument, stating that the State highways and other roads maintained by the State are also used by the petitioners, thus justifying the toll tax. Additionally, the vesting of national highways in the Union of India is for maintenance purposes, and the ownership of the land remains with the State.

6. Definition of "Manufacture" in the Context of Toll Tax Exemption:
The court analyzed whether the processes undertaken by the petitioners (grading, sorting, bleaching, drying, and packing of dry fruits) constituted "manufacture". It concluded that these processes did not transform the raw material into a new product with a distinct name, character, or use, and thus did not meet the legal definition of "manufacture".

7. Compliance with the National Highways Act, 1956:
The court addressed the argument that the State lacked the authority to levy tolls without an agreement with the Central Government, as required by the National Highways Act. It concluded that non-compliance with the requirement to lay notifications before Parliament did not invalidate the rules, and the toll tax was validly levied.

Conclusion:
The court dismissed the writ petitions, upholding the levy of additional toll tax and rejecting the claims for exemption. It affirmed that the toll tax was a valid exercise of the State's sovereign power and did not violate any constitutional provisions. The processes undertaken by the petitioners did not qualify as "manufacture," and the method of determining sales tax based on weight was within legal bounds.