1971 (4) TMI 99 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the cess levied by the Bellary Market Committee.
2. Applicability of the Madras Commercial Crops Market Act amendments to Bellary district.
3. Distinction between a fee and a tax.

Detailed Analysis:

1. Validity of the Cess Levied by the Bellary Market Committee:

The respondents were served a notice by the Secretary of the Bellary Market Committee to pay the cess on groundnut seeds bought or sold in the notified area of the Committee. The High Court quashed the demand on the ground that what was being really demanded was the payment of sales tax. Since the maximum rate of sales tax authorized by Section 15 of the Central Sales Tax Act 1956 read with Section 5(4) of the Mysore Sales Tax Act 1957 had already been imposed, the Market Committee could not make any further or additional levy. A direction was also made for the refund of the cess collected during a period of three years preceding the date of the presentation of the writ petition.

2. Applicability of the Madras Commercial Crops Market Act Amendments to Bellary District:

The Act became applicable to the Bellary district which became a part of the State of Mysore by virtue of Section 53 of the Central Act 30 of 1953. Section 11(1) of the Act as it originally stood empowered the Market Committee to levy fees on the notified commercial crop or crops brought and sold in the notified area. The Madras legislature amended Section 11(1) by Madras Act 33 of 1955 to make it clear that the levy was a cess by way of sales tax. However, this amendment did not apply to the Bellary district, which had been incorporated into the State of Mysore by the Central Act 30 of 1953. The Mysore legislature introduced a Bill in 1958 to amend the Act as in force in the Madras area, and the Madras Commercial Crops Market (Mysore Amendment and Validation of Levy of Cess) Act 1958 received the assent of the Governor on November 30, 1958. This amendment was applicable only to the "Madras Area," which was defined to include the South Kanara district but not the Bellary district.

The High Court's interpretation that the "Madras Area" mentioned in the Amending Act of 1958 must also include that part of Bellary district was incorrect. The Bellary district was governed by Section 11(1) of the Act as it stood before the 1955 amendment by the Madras legislature. The amendment made by the Mysore legislature in 1958 did not apply to the Bellary district and was confined only to the "Madras Area," which meant the district of South Kanara with the exception of specified areas.

3. Distinction Between a Fee and a Tax:

The High Court's finding that the cess demanded was a sales tax was based on the assumption that it was levied under Section 11(1) of the Act as amended by the Amending Act of 1958. However, since it has been determined that the demand by the Market Committee could be made lawfully only in respect of a fee, the validity and legality of that levy will now have to be determined by the High Court. The distinction between a fee and a tax is well known, and there are a series of decisions of this Court on what constitutes a fee and the tests that distinguish it from a tax. The High Court will need to afford the parties an opportunity to file supplementary affidavits and documents, if necessary, for determining whether the levy made is a fee.

Conclusion:

The Supreme Court allowed the appeals and remitted the cases to the High Court for disposal. The High Court is to determine the validity and legality of the levy as a fee and dispose of the writ petitions in accordance with the law. The parties will bear their own costs in the Supreme Court. The appeals are allowed.