2024 (1) TMI 878 - HC - Indian Laws

Post GST era Unconstitutional validity of Goa Cess Act - violation of Articles 301, 303, and 304 of the Constitution of India - violation of petitioner s rights under Article 14 of the Constitution of India, since the levy is on two classes of items, the Goan ore on which royalty is paid and the non-Goan ore on which royalty is not paid - power/competence to sustain the levy of cess. Whether the Goa Cess Act is constitutionally valid when tested on the anvil of Articles 14, 301, 303 and 304 of the Constitution - whether the Goa Cess Act levys an unconstitutional fee or a tax? - whether the State stand denuded of its power to levy cess under the said Act on the ground that levy stands subsumed by the GST Act? HELD THAT - The title of the Goa Cess Act namely Goa Rural Improvement and Welfare Cess Act, 2000 as also the preamble of the Act would indicate that the object of the Act is to provide additional resources for improvement of infrastructure and health with a view to promote the welfare of people residing in the rural areas affected by the use of plastics, dumping of garbage and spillage of materials. It provides that the legislature thought it expedient to provide additional resources for improvement of infrastructure and health with a view to promote the welfare of people residing in the rural areas affected by the use of plastics, dumping of garbage and spillage of material. The legislative competence to enact the Goa Cess Act has been upheld by a Division Bench of this Court in the case Sociedade De Fomento Industrial Pvt.Ltd., Goa 2018 (9) TMI 2141 - BOMBAY HIGH COURT . The Division Bench has held that the Goa Cess Act is relatable to Entries 6, 13, 23 and 66 of List II (State List) under the Seventh Schedule to the Constitution, and its validity is not impaired or affected by Entries 52 and 54 of List I. It is also held that it does not in any manner breach the mandate of the Central Act namely Mines and Minerals (Development and Regulation) Act,1957 read with Act 65 of 1951 and Act 53 of 1948 respectively. The Division Bench held that considering the substance and object of the Goa Cess Act and the Rules framed thereunder vis a vis MMDR Act and the Rules framed thereunder, there was no irrevocable conflict between the concerned Union Legislation and the State Legislation. Whether Tax or Fee? - HELD THAT - In Consumer Online Foundation Ors. Vs. Union of India Ors. 2011 (4) TMI 1275 - SUPREME COURT the Supreme Court was considering the decision of the Delhi High Court upholding levy of development fees on the embarking passengers, by the lessees of the Airports Authority of India, at the Indira Gandhi International Airport, New Delhi and the Chhatrapati Shivaji International Airport, Mumbai. The Supreme Court held that the nature of the levy under Section 22A of the Airports Authority of India Act, were not the charges or any other consideration for services for the facilities provided by the Airports Authority. Referring to the decision in Vijayalashmi Rice Mills Ors. 2006 (8) TMI 307 - SUPREME COURT , it was held that levy under Section 22A though described as fees, is really in the nature of a cess or a tax for generating revenue for the specific purposes mentioned in clauses (a), (b) and (c) of Section 22A. It also needs to be observed that the Division Bench in Sociedade De Fomento Industrial Pvt. Ltd., Goa also considered the contention of the petitioners therein, that the State cannot levy any fee under Entries 6, 13 and 50 of List II, as it was required to provide some special service to the petitioner, and no such service, much less special service, was provided to the petitioners. The petitioners had also contended that the imposts can be by way of tax or fee, but not both - It was observed that it could not be said that the petitioners do not benefit at all from the services rendered and that there is not even a remote connection. It was held that the Goa Cess Act and the Rules are a device for the State to augment its resources and the services rendered by the collection of the levy, benefits the petitioner as well, and there existed a co-relationship. It was thus observed that the Goa Cess Act and the Rules, whether it imposes a tax or fee, could not be said to be unconstitutional. Thus, there is no substance in the contention of the petitioner that the Goa Cess Act levies a tax and not a fee. Whether Goa Cess Act is violative of Articles 301, 303 and 304 of the Constitution? - HELD THAT - By now it is well settled that clauses (a) and (b) of Article 304 are required to be read disjunctively. Clause (a) of Article 304 provides for imposition of any tax on goods imported from other States or Union territories to which similar goods manufactured or produced in that State are subject with an intention as not to discriminate between goods so imported and goods so manufactured or produced. Thus, per se clause (a) of Article 304 is not attracted in the facts of the present case inasmuch as the Cess being levied by Goa Cess Act cannot be strictu sensu categorized as a tax on goods which are sought to be imported - The petitioners are merely concerned in regard to the iron ore/ores or coal. It is thus seen that what is sought to be included in the canvass of the Act is the massive and/ or mass transportation activity of such materials as listed under the schedule to the Act, the spillage of which is a potential threat to the health and welfare of the people and a cause of serious concern to the environment necessitating its preservation. There cannot be two opinions that the transportation of materials of the nature which are provided for in Schedule I of the Goa Cess Act and that too within a small State like Goa, which has a meager land mass would certainly bring about situations of serious issues of public health, for the reason that it is undisputedly that not only normal transportation but such heavy transportation of materials in trucks/heavy vehicles are bound to cause large scale pollution and damage to the environment. There also cannot be two opinions that pollution caused by such transportation would be of varied nature which can be spillage of dust generated from the minerals, coal, fume generated from carriage of fluid substances apart from the smoke pollution and water pollution it would generate. Moreover, the effects on health of smokes/fumes generated from the exhaust of the heavy vehicles is to be imagined. Once the legislation is traceable under Entry 6 read with Entry 66 of List-II, which provides for fees in respect of any matter in List-2 (except fees taken in any Court) and when such legislation concerns an eminent interest in relation to public health, the Courts are required to be extremely slow to tinker with such legislation, as the direct impact of any interference by the Court would be a casualty to human health and life. Challenge on the ground of Article 14 of the Constitution - HELD THAT - It is well settled that Article 14 does not forbid reasonable classification of persons, objects and transactions by the legislature for the purpose of attaining specific ends. Such principle was reaffirmed by the Supreme Court in R.K. Garg And Ors. vs Union Of India (UOI) And Ors. 1981 (11) TMI 57 - SUPREME COURT . It is well settled that fixation of rates of cess is within the domain of the rule making power of the authority and unless there is some strong material, that the rates as fixed are unconscionable and/or are patently arbitrary, it would not be appropriate for the Court to question the wisdom of the Government in fixing of the rates. Even otherwise fixing of rates is a matter of expertise which would depend on several factors to be considered. It would completely lie within the powers of the rule making authority to fix the rates. Except for a bald case of breach of Article 14, no material is placed on record to contend that the rates so arrived at and fixed by the State of Goa as issued by different notifications need interference. Challenge on the ground of GST Laws - HELD THAT - The object of GST laws is totally distinct from the object and purpose of the Goa Cess Act. Even the expert body namely the GST council has refrained from subsuming and thereby recommending the repeal of the Goa Cess Act in view of the incorporation of the GST laws. It would not be out of place to mention that Entry 52 of List II which dealt with taxes on entry of goods into local area for consumption use or sale therein and Entry 55 of List II inter alia in regard to taxes on advertisement, have been repealed, that too without any corresponding amendment in Entry 66 of List II. It is therefore, an unwarranted exercise on the part of the petitioners in making an attempt to attack the validity of the Goa Cess Act on the incorporation of the GST laws. Further Section 174 of the Goa Goods and Services Act, 2017 would list the Acts as existing on the date of introduction of the Goa Goods and Services Act, 2017 and the Acts which would stand repealed. The Goa Cess Act does not figure in the list of the Acts repealed. In fact what is significant is that an Act which is relevant for the entry of goods in the State of Goa namely the Goa Tax on Entry of Goods Act, 2000, has stood repealed by the introduction of the Goa Goods and Services Act, 2017. Thus, it is unfounded for the petitioners to contend contrary to the clear legislative intent as reflected under the Goa Goods and Services Act, 2017 that the Court needs to consider that the Goa Cess Act stands subsumed in the GST laws and therefore, is rendered invalid. Such contention of the petitioners is required to be rejected. Thus to conclude, none of the grounds on which the Court would exercise its powers of judicial review to invalidate an Act of the Legislature are made out by the petitioners so as to declare the Goa Cess Act to be in any manner unconstitutional. The petitions accordingly, need to fail on all counts. Petition dismissed.

Summary

Issues Involved:
1. Whether the Goa Cess Act imposes an unconstitutional cess.
2. Whether the levy under the Goa Cess Act violates Articles 301, 303, and 304 of the Constitution of India.
3. Whether the implementation of the Goa Cess Act violates the petitioners' rights under Article 14 of the Constitution of India.
4. Whether there is power/competence to sustain the levy of cess under the Goa Cess Act post the enactment of the GST Act.

Summary:

1. Unconstitutional Cess:
The petitioners contended that the Goa Cess Act imposes an unconstitutional cess. The court examined whether the cess is a tax or a fee. It was held that the cess is a fee, not a tax, as it is levied for specific purposes like improving infrastructure and public health in rural areas affected by transportation activities. The court cited the Supreme Court's decision in Vijayalashmi Rice Mill and Ors. vs. Commercial Tax Officers, Palako & Ors., which clarified that a broad co-relationship between the fee collected and the services rendered is sufficient to sustain the levy.

2. Violation of Articles 301, 303, and 304:
The petitioners argued that the Goa Cess Act violates their rights under Articles 301, 303, and 304 of the Constitution by imposing restrictions on the free movement of goods. The court held that the Goa Cess Act does not impose any restriction on trade, commerce, and intercourse. The cess is levied on carriers transporting materials, not on the goods themselves. The court referred to the Constitution Bench decision in Jindal Stainless Ltd. & Anr. vs. State of Haryana & Ors., which stated that non-discriminatory taxes do not constitute restrictions on trade and commerce under Article 301.

3. Violation of Article 14:
The petitioners claimed that the Goa Cess Act violates Article 14 of the Constitution by discriminating between ores mined in Goa and those brought from other states. The court found that the classification between ores mined in Goa and those imported from other states is rational and based on intelligible differentia. The court held that the classification is not arbitrary and does not violate Article 14. The court cited the Supreme Court's decision in R.K. Garg And Ors. vs. Union Of India (UOI) And Ors., which emphasized that laws relating to economic activities should be viewed with greater latitude.

4. Subsumed by GST Act:
The petitioners argued that the Goa Cess Act stands subsumed under the GST laws. The court held that the nature of the levy under the Goa Cess Act is distinct from the GST laws. The cess is levied on carriers for specific purposes related to public health and infrastructure, which is not covered under the GST regime. The court noted that the GST Council has not recommended subsuming the Goa Cess Act under the GST laws. The court rejected the petitioners' contention that the Goa Cess Act is subsumed by the GST laws.

Conclusion:
The court concluded that the Goa Cess Act is intra vires Articles 14, 301, 303 read with Article 304 of the Constitution of India. The Act is legal and valid and is not subsumed by the GST laws. The petitions were dismissed with no costs.