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TMI Blog1984 (11) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... ilarly placed have been litigating and impeding the levy and collection of market fee by the market committees constitued under the Punjab Agricultural Produce Markets Act. Some times they have been successful, sometimes they have not. One of the occasions when they appeared to be successful was when this Court in Kewal Krishan Puri v. State of Punjab AIR 1980 SC 1008 declared that the enhancement of the fee from 2 per cent to 3 per cent was illegal. The court while striking down the enhancement of the fee laid down no new principle but made certain general observations which, we regret to say, have been so misunderstood and misinterpreted as to lead to some confusion and public mischief. The misunderstanding and confusion have also naturally led to more litigation. Fortunately, in Sreenivasa General Traders v. State of Andhra Pradesh AIR 1983 SC 1246 this Court has removed much of the misunderstanding, cleared many of the cobwebs and retrieved the situation. Before we proceed to consider the question at issue in the present case, it will be fair to recall the object and purpose of the Punjab Agricultural Produce Markets Act and similar enactments in force in other States. Far ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Provinces and Berar open markets for cotton were established through legislation. In 1919, the Indian Cotton Committee observed in their report that the marketing system afforded great protection to the producers and that special legislation should be undertaken to establish such markets in every cotton growing area. "The Royal Commission on Agriculture in India recorded a considerable body of evidence on the state of the trade in food crops and it showed the need for legislative action for safeguarding the interests of the producers (vide report dated 1928). In 1931 the Indian Central Banking Enquiry Committee considered in Chapter VII of its report the conditions with reference to marketing. It is therein pointed out that the village producer was seldom able to get a proper price because he was chronically indebted to the middlemen who advanced loans on the security of the crops to be grown and were thus in a position to dictate their own terms and that the bargains were seldom fair to the seller. "It was also observed that for want of facilities for warehousing the produce, the grower was not in a position to wait and sell the commodities for proper price (vide pages 78 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and suggested that a satisfactory system of agricultural marketing should be introduced to achieve the object of helping the agriculturists to secure a proper return for the produce grown by them." The learned judge then referred to the report of the Royal Commission on Agriculture in India, the report of the Expert Committee appointed by the Government of Madras, and proceeded to observe: "With a view to provide satisfactory conditions for the growers of commercial crops to sell their produce on equal terms and at reasonable prices, the Act was passed on 25th July, 1933. The preamble introduces the Act with the recital that it is expedient to provide for the better regulation of the buying and selling of commercial crops in the Presidency of Madras and for that purpose to establish market and make rules for their proper administration. The Act, therefore, was the result of a long exploratory investigation by experts in the field, conceived and enacted to regulate the buying and selling of commercial crops by providing suitable and regulated market by eliminating middlemen and bringing face to face the producer and the buyer so that they may meet on equal terms, thereby era ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within such area undertaken by other bodies or individuals, propaganda for the improvement of agriculture, livestock and products of livestock and thrift, the promotion of grading services, measures for the preservation of the foodgrains, etc., are not services which are confined to the, market area only. They are services which are required to be performed by the market committee and which may be rendered throughout the notified market area without being confined to the market. Further, the facilities provided in the market area available for the use of every grower of agricultural produce and owner of livestock within the notified market area. It is too much to expect the market committee to provide the same facilities as are available in the market area in every nook and corner of the notified market area. It is up to the growers of agricultural produce and owners of livestock to avail themselves of the facilities afforded in the market. None can complain against the levy of licence fees on the ground that some may not avail themselves of the facilities available in the market." Immedisetti Ramkrishnaiah Sons v. State of Andhra Pradesh AIR 1976 AP 193 was approved by this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 33 of the Act, the State Government have framed the Andhra Pradesh (Agricultural Produce and Livestock) Markets Rules, 1969. Chapter V relates to 'Regulation of trading'. It would appear that rules 48 to 53 are the machinery provisions for controlling the trade in notified agricultural produce, livestock and products of livestock in a notified area while rules 54 to 73 impose restrictions on the carrying on of all such trade in such area. It is clear from the provisions of section 15 of the Act that the services to be rendered by the market committee and facilities to be provided are not confined to the market proper but extend throughout the notified area." The general scheme of the Punjab Agricultural Produce Markets Act and the Act, as amended and in force in Haryana, are broadly on the same lines as the Madras and the Andhra Pradesh Acts and similar enactments in other States. Though we do not consider it necessary to refer to all the provisions of the Punjab and Haryana Acts, we think it may be appropriate to mention here those provisions of the Act which enumerate some of the duties and powers of the market committees constituted under the Acts and the purposes for wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions (3) and (4) shall apply to a person carrying on the business of warehouseman who is licensed under the Punjab Warehouses Act, 1957 (Punjab Act No. 2 of 1958)." Section 25 provides for the creation of a Marketing Development Fund out of which the Board has to defray its expenditure. Section 27 provides for the creation of Market Committee Fund out of which the committee has to defray its expenditure. The purposes for which the Marketing Development Fund may by expended are specified in section 26 as follows: "26. The Marketing Development Fund shall be utilised for the following purposes: (i) better marketing of agricultural produce (ii) marketing of agricultural produce on co-operative lines; (iii) collection and dissemination of market rates and news; (iv) grading and standardisation of agricultural produce; (v) general improvements in the markets or their respective notified areas; (vi) maintenance of the office of the Board and construction and repair of its office buildings, rest house and staff quarters; (vii) giving aid to financially weak committees in the shape of loans and grants; (viii) payment of salary, leave allowance, gratuity, compassionate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and facilities, such as the shelter, shade, parking accommodation and water for the persons, draught cattle vehicles and pack animals, coming or being brought to the market or on construction and repair of approach roads, culverts, bridges and other such purposes; (ix) expenses incurred in the maintenance of the offices and in auditing the accounts of the committees; (x) propaganda in favour of agricultural improvements and thrift; (xi) production and betterment of agricultural produce; (xii) meeting any legal expenses incurred by the committee; (xiii) imparting education in marketing or agriculture; (xiv) payments of travelling and other allowances to the members and employees of the committee, as prescribed; (xv) loans and advances to the employees; (xvi) expenses of and incidental to elections; and (xvii) with the previous sanction of the Board, any other purpose which is calculated to promote the general interest of the committee or the notified market area (supra) (or with the previous sanction of the State Government, any purpose calculated to promote the national or public interest)." It will be seen that sections 26 and 28 cover a vast ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e huge sum of Rs. one crore to the Medical College, Faridkot. Having regard to the huge surpluses and unauthorised items of expenditures, the court came to the conclusion, on the facts of the case, that the increase of fee above Rs. 2 per 100 was not justified. In the course of the discussion, Untwalia, J., who spoke for the court, made certain observations which when turn out of context appear to give rise to some misunderstanding. For example, at page 1016 of AIR 1980 he said: "But generally and broadly speaking, it must be shown with some amount of certainty, reasonableness or preponderance of probability that quite a substantial portion of the amount of fee realised is spent for the special benefit of its payers." This sentence should not be read in isolation. It must be read in the context of the facts of the case. In fact, in the very sentence preceding the one quoted, it was said: "It may be so intimately connected or interwoven with the services rendered to others that it may not be possible to do a complete dichotomy and analysis as to what amount of special service was rendered to the payers of the fee and what proportion went to others." That was why Sen, J., in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not in the nature of a tax ......... but a levy will not be regarded as a tax merely because of the absence of uniformity in its incidence, or because of compulsion in the collection thereof, nor because some of the contributories do not obtain the same degree of service as others may." In Hingir-Rampur Coal Co. Ltd. v. State of Orissa [1961] 2 SCR 537 the court had said: "If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business, the cess is distinguishable from a tax and is described as a fee..." "It is true that when the legislature levies a fee for rendering specific services to a specified area or to a specified class of persons or trade or business, in the last analysis such services may indireclty form part of services to the public in general. If the special service rendered is distinctly and primarily meant for the benefit of a specified class or area, the fact that in benefiting the specified class or area the State as a whole may ultimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enivasa General Traders v. State of Andhra Pradesh AIR 1983 SC 1246: "The traditional view that there must be actual quid pro quo for a fee has undergone a sea of change in the subsequent decisions. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest ...... In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area or class; it may be of no consequence that the State may ultimately and indirectly be benefited by it. The power of any legislature to levy a fee is conditioned by the fact that it must be 'by and large' a quid pro quo for the services rendered. However, correlationship between the levy and the services rendered expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a 'reasonable relationship' between the levy of the fee and the services rendered." Referring to the catena of these cases it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution and the laws are also concerned with public finance, these words have often been adjudicated upon in an effort to discover their content." In Sreenivasa General Traders v. State of Andhra Pradesh AIR 1983 SC 1246, Sen, J., had also pointed out that there was no generic difference between a tax and a fee, that both were compulsory exactions of money by public authorities and that a levy in the nature of a fee did not cease to be of that character merely because there was an element of compulsion or coerciveness present in it nor was it a postulate of a fee that it must have direct relation to the actual service rendered by the authority to each individual, who obtains the benefit of the service. He also drew attention to the increasing realization that the element of quid pro quo in the strict sense was not always sine qua non for fee. Nor was the element of quid pro quo necessarily absent in every tax. He further pointed out that an insistence upon a good and substantial portion of an amount collected on account of fee, say in the neighbourhood of two-thirds or three-fourths, being shown with reasonable certainty as having been spent for rendering services in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case." There are a few other observations in Kewal Krishan Puri's case AIR 1980 SC 1008 to which apply with the same force all that we have said above. It is needless to repeat the oft-quoted truism of Lord Halsbury that a case is only an authority for what it actually decides and not for what may seem to follow logically from it. We have said so much about Kewal Krishan Puri's case AIR 1980 SC 1008 because the learned counsel placed implicit reliance upon it though as we shall presently show, we do not see how a mere declaration that the levy and collection of fee in excess of Rs. 2 per hundred would automatically vest in the dealer the right to get at the excess amount when in fact he did not bear the burden of it and when the moral and equitable owner of it was the consumer-public to whom the burden had be 'en passed on. Soon after judgment was pronounced in Kewal Krishan's case AIR 1980 SC 1008 the question arose as to what was to be done with the fee in excess of Rs. 2 per 100 collected by various market committees. Were the market c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutinise such claims and ascertain the sums so proved. He will thereupon demand of all the market committees concerned payment into the Registry of such sums in regard to which proof of claims have been made. On such intimation, the market committees shall pay into the Registry the amounts so demanded by the Registrar within one week of such intimation. The amount shall be paid together with interest at 10 per cent per annum from today up to the date of deposit with the Registrar. IV. It shall be open to the Registrar to make such periodical claims on appropriate proof by claimants on the line stated above. V. He will devise the mechanics of processing the claims as best as he may and, in the event of dispute, may refer to the High Court for its decision of such disputes, if he thinks it necessary. Otherwise, he may dispose of the objections finally. VI. If any further directions regarding the mechanics of the claim of refund or otherwise are found necessary from this Court, the High Court will report about such matter to this Court and orders made thereon will bind the parties. VII. If parties eligible for repayment of amounts do not claim within one year from today the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Produce Markets (Amendment and Validation) Act, 1976." The primary purpose of section 23A is seen on the face of it; it prevents the refund of licence fee by the market committee to dealers, who have already passed on the burden of such fee to the next purchaser of the agricultural produce and who want to unjustly enrich themselves by obtaining the refund from the market committee. Section 23A, in truth, recognises the consumer-public who have borne the ultimate burden as the persons who have really paid the amount and so entitled to refund of any excess fee collected and therefore directs the market committee representing their interests to retain the amount. It has to be in this form because it would, in practice, be a difficult and futile exercise to attempt to trace the individual purchasers and consumers who ultimately bore the burden. It is really a law returning to the public what it has taken from the public, by enabling the committee to utilise the amount for the performance of services required of it under the Act. Instead of allowing middlemen to profiteer by ill-gotten gains, the legislature has devised a procedure to undo the wrong item that has been done by the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raid that this decision also is of no avail to the appellants. In Orient Paper Mills Limited v. State of Orissa [1961] 12 STC 357 (SC); [1962] 1 SCR 549, a dealer had been assessed to tax and had paid the tax. Later he applied for refund of tax which was held to be not exigible by this Court in State of Bombay v. United Motors (India) Ltd. [1953] 4 STC 133 (SC); [1953] SCR 1069. When the appeals were pending in this Court, the Orissa Legislature intervened in the matter and introduced section 14-A in the principal Act providing that refund could be claimed only by a person from whom the dealer had actually realised the amount as tax. The vires of the provision was challenged in this Court, but it was upheld on the ground that it came within the incidental power arising out of entry 54 of List II. The matter was considered to be a question of refund and it was held that it could not be doubted that refund of the tax collected was always a matter covered by incidental and ancillary powers relating to the levy and collection of tax. The Constitution Bench held: "By item 54 of List II of Schedule VII to the Constitution, the State Legislature was indisputably competent to legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant to pay the amount realised, he refused to do so. On behalf of the Government, reliance was placed upon section 11(2) of the Hyderabad General Sales Tax Act which laid down that any amount collected by way of tax otherwise than in accordance with the provisions of the Act shall be paid over to the Government and in default of such payment, the said amount shall be recovered from such person as if it were arrears of land revenue. The court held that it was clear that the words "otherwise than in accordance with the provisions of this Act" included amounts which may have been collected by way of tax though not exigible as tax under the Act. The court then held that the State Legislature was incompetent to enact a provision like section 11(2) as it enabled the Government to recover an illegal levy and it could not possibly be said to be an incidental or ancillary power capable of exercise in aid of the main topic of legislation, which was a tax on the sale or purchase of goods. The decision in Orient Paper Mills' case [1961] 12 STC 357 (SC); [1962] 1 SCR 549 was distinguished on the ground that it dealt with a case of refund and not the collection of tax, not really due as a ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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