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2013 (8) TMI 420 - HC - VAT and Sales TaxConstitutional validity - Legislative competence for enhancing transit fee and changing the basis of levy from cubic feat to advalorum between 5% to 15%, on variety of forest produce including timber, firewood, and other forest produce coming from mines e.g., coal, limestone, sand, bajari and other minerals - Meaning of forest and forest land - words forest and forest land are not defined - words must be understood according to its dictionary meaning for purpose of section 2(1) Forest Conservation Act - forest land would also include forest like areas, whether notified or not forest like area explained by court by referring various correspondences between departments - it would cover all statutory recognized forest either notified as reserved, protected or village forest or not - principles and criteria of defining forest has to be based on sound ecological and scientific basis. Forest produce - Definition of forest produce is inclusive and not exhaustive - Only those articles and goods, which are defined in Section 2 (4), (a) & (b) are included within meaning of words forest produce Held that - Where a forest produce changes its essential character into a commercially new article - totally different from forest produce, having a distinct character - with aid of human skill it ceases to be forest produce court did not persuaded to hold that Kattha and Cutch which come within ambit of expression Katechu that is covered within definition of forest produce as same has been decided in State of M.P. vs. S.P. Sales Agencies (2004 (3) TMI 713 - SUPREME COURT) Whether Kattha and Cutch expression catechu comes within sweep of cutch and kattha and is included within meaning of word as forest produce - sponge iron made by manufacturing process from iron ore is not a forest produce - all minerals from mines and quarries are forest produce. Monopolized Transportation - State monopolized entire trade of tendu patta - collection, packing, storage and transportation of tendu leaves in State of U.P. is strictly regulated by statute and Rules - Rule 4 regulates entire transport of tendu leaves under prescribed forms Held that - trade and transportation of tendu leaves which is monopolised by S/G is not valid in law thus restraining respondents from requiring transit passes and transit fees on it - no object is sought to be achieved in regulating transportation of same forest produce within, brought from outside or within or to be taken out from State of U.P. is thus not covered and regulated by provisions of Rules of 1978. Transit fees - imposition of transit fee under Rule 5 of Rules of 1978 is challenged court held that fees is transitory and regulatory in nature purpose of imposing transit fee on movement of forest produce is to protect environment from deforestation and overexploitation of natural resources including mines and minerals - found in or brought from forest and not only include notified, protected reserved and village forest but also forest lands, and forest like areas, whether notified by State Government or not. Amount of levy of transit fee Held that - levy of transit fee at rate of Rs.38 p.m.t per truck, by notification (14.6.2004) declared to be valid by court as same has been decided in Kumar Stone Works and others vs. State of UP and others (2005 (4) TMI 544 - ALLAHABAD HIGH COURT) . Ad-valorem Increase in transit fees - increase of transit fee under Rules of 1978 as notified by 4th Amendment of Rules notified on 20.12.2010, on cubic meter of capacity and thereafter by 5th Amendment to Rules notified on 4.6.2011 on a-valorem basis - Held that - S/G has not justified increase of transit fees as regulatory fees on quid pro quo - S/ G has no powers to levy under IFA - increasing on ad valorem basis price of forest produce coming from mines as notified in Schedule C , has changed character of regulatory fees, to compensatory tax - same has also been decided in Ahmedabad Urban Development Authority v. Sharad kumar Jayanti kumar Pasawalla and others (1992 (5) TMI 175 - SUPREME COURT). Increase of fees validity of 4th and 5th amendments were challenged on ground of increase in fees as not valid Held that - basis of increase has not been justified and established mainly in co-relation with objects sought to be achieved as stated namely to maintain ecological balance- further no empirical data with scientific and sociological concerns has been produced before Court. Restriction on trade increase in transit fee challenged on constitutional grounds Held that - exorbitant increase of transit fees by 4th and 5th Amendment to Rules of 1978 - without rendering any services to facilitate trade - Rules have been framed by State Government under Indian Forest Act which is Central Act it further restrict freedom of trade, commerce and intercourse - and is thus violative of Art.301 not saved by Art.304 (b) - increase in transit fee thus cannot be treated to be reasonable restriction on freedom of trade, commerce and intercourse with or within State in public interest. Mohd. Yasin v. John Mohammad 1986 (3) SCC 20.( John Mohammad 1986 (3) SCC 20. 1986 (4) TMI 330 - SUPREME COURT). Principles of sustainable development - increase in transit fee on ad valorem basis on timber, coal and other minerals, necessary for raising infrastructure, generating power and manufacture of essential goods have a direct impact and impede development of State - No scientific study in this regard has been conducted by S/G - nor any reports placed before Court to justify increase of fees - taking into consideration right to development, which is a fundamental right of citizens of State under Art.21. (T.N. Godaverman s) Justifiability of increase in transit fees - S/G failed to justify increase of transit fees on ad valorem basis by linking it only with increased cost of enforcement for collections- collections are above cost of enforcement and raising revenue for State - imposition will increase cost of generation of power, and manufacture of essential goods necessary for creating infrastructure affecting development of State. Legislative competence rules regulating transit of forest produce challenged on ground of competence of S/G Held that - S/G has legislative competence under Section 41, 42, 51 and 76 to make rules regulating transit of forest produce after providing transit passes and transit fees under Section 41 (2) (c) - Rules of 1978 are intra vires Forest Act r.w. Forest Conservation Act- There is no repugnancy between Mines and Minerals Regulation and Development Act, 1957, enacted with reference to Entry 54 of List 1 in Seventh Schedule - Forest Act and Rules framed therein w.r.t Entry 17A of List 3 of Seventh Schedule - Rules of 1978, are not violative of Art.245 (2) - even if they have extra-territorial operations main reason stated for this is that Rules of 1978 have been made by S/G under Act of Parliament with close nexus with residents of State of U.P. as citizens of India main purpose to be achieved is to protect environment from deforestation, poaching, maintaining ecological balance and to restrict over-exploitation of mineral resources of State - Jindal Stainless Limited & anr vs. State of Haryana and others (2006 (4) TMI 120 - SUPREME Court.) All the writ petitions are consequently allowed. The Notifications dated 20.10.2010, by which the U.P. Transport of Timber and Other Forest Produce Rules, 1978 , was amended by the 4th Amendment; and the Notification dated 4.6.2011, by which the U.P. Transport of Timber and Other Forest Produce Rules, 1978 was amended by the 5th Amendment, are quashed. - Decided in favor of petitioner.
Issues Involved:
1. Applicability of Indian Forest Act, 1927 to mines and minerals. 2. Validity of U.P. Transport of Timber and Other Forest Produce Rules, 1978. 3. Legislative competence of the State Government. 4. Violation of Articles 14, 19(1)(g), and 301 of the Constitution. 5. Concept of 'forest' and 'forest produce'. 6. Extra-territorial operation of laws. 7. Imposition of transit fees and their nature (regulatory fee vs. compensatory tax). 8. Impact of increased transit fees on trade and development. 9. Specific regulation of tendu leaves under U.P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1972. Detailed Analysis: 1. Applicability of Indian Forest Act, 1927 to Mines and Minerals: The petitioners challenged the applicability of the Indian Forest Act, 1927, on mines and minerals, including coal and other forest produce. The court held that the Indian Forest Act, 1927, and the Forest Conservation Act, 1980, cover all statutory recognized forests and forest-like areas. The term 'forest' includes not only reserved, protected, and village forests but also any area recorded as forest in government records irrespective of ownership. 2. Validity of U.P. Transport of Timber and Other Forest Produce Rules, 1978: The Rules of 1978 were challenged for increasing transit fees and changing the basis of levy from cubic feet to ad valorem. The court found that the increase of transit fees by the 4th and 5th Amendments to the Rules of 1978 rendered the fees as compensatory tax rather than regulatory fees. The State Government failed to justify the increase of transit fees as regulatory fees on quid pro quo. The increase was found to be violative of Articles 14, 19(1)(g), and 301 of the Constitution of India. 3. Legislative Competence of the State Government: The court upheld the legislative competence of the State Government under Sections 41, 42, 51, and 76 of the Indian Forest Act, 1927, to make rules regulating the transit of forest produce. The Rules of 1978 were found to be intra vires the Indian Forest Act, 1927, and the Forest Conservation Act, 1980. There was no repugnancy between the Mines and Minerals Regulation and Development Act, 1957, and the Indian Forest Act, 1927. 4. Violation of Articles 14, 19(1)(g), and 301 of the Constitution: The increase in transit fees was found to be violative of Article 301 as it restricted the freedom of trade, commerce, and intercourse. The fees were also found to be unreasonable and not in public interest, thus violating Article 304(b). The court held that the exorbitant increase in transit fees without rendering any services to facilitate trade was unconstitutional. 5. Concept of 'Forest' and 'Forest Produce': The court clarified that the term 'forest' includes all statutory recognized forests and forest-like areas. The definition of 'forest produce' is inclusive and not exhaustive. Articles that change their essential character through processing or manufacturing into commercially new articles cease to be forest produce. The court held that minerals from mines and quarries such as clinker, fly ash, calcium hydroxide, calcium oxide, quick lime, hydrated lime, hard coke, gypsum, rejected coke, ash burn coke, and soil (mitti) are forest produce. 6. Extra-Territorial Operation of Laws: The court held that the Rules of 1978, made by the State Government under the Indian Forest Act, 1927, are not invalid on the ground of extra-territorial operation. The rules have a close nexus with the residents of the State of U.P. and are aimed at protecting the environment from deforestation and overexploitation of natural resources. 7. Imposition of Transit Fees and Their Nature: The court found that the imposition of transit fees at ad valorem rates changed the character of the fees from regulatory to compensatory tax. The State Government failed to justify the increase in transit fees as regulatory fees on quid pro quo. The increase in fees was found to be far above the cost of enforcement, raising revenue for the State, and thus unconstitutional. 8. Impact of Increased Transit Fees on Trade and Development: The court held that the increase in transit fees on ad valorem basis would impede the development of the State. The State Government failed to consider the principles of sustainable development while raising environmental concerns. The increase in transit fees would adversely affect the cost of generation of power and the manufacture of essential goods necessary for creating infrastructure. 9. Specific Regulation of Tendu Leaves: The court held that the entire trade of tendu leaves is monopolized by the State Government under the U.P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1972. The transportation of tendu leaves within the State of U.P. is regulated by the permits issued under the Adhiniyam, and thus, the Rules of 1978 do not apply to tendu leaves. Conclusion: The court quashed the Notifications dated 20.10.2010 and 4.6.2011, which amended the U.P. Transport of Timber and Other Forest Produce Rules, 1978, increasing the transit fees. The imposition of transit fees on 'Sponge Iron' and 'Tendu Patta' was declared invalid. The State Government was allowed to impose and collect transit fees at the rates prevailing before the 4th Amendment.
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