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TMI Blog1986 (1) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, declare the entire Act, i.e., the Haryana Rural Development Fund Act, 1983, as unconstitutional on the ground that the State Legislature was not competent to enact it. These appeals, therefore, succeed. The judgment of the Division Bench of the High Court is set aside and the Act is declared void. - C.A. 2808 OF 1985 - - - Dated:- 28-1-1986 - Judge(s) : E. S. VENKATARAMAIAH., O. CHINNAPPA REDDY JUDGMENT The judgment of the court was delivered by E. S. VENKATARAMIAH J.-The appellants, in the above appeals, are dealers in agricultural produce carrying on business in certain notified market areas set up under the Punjab Agricultural Produce Markets Act, 1961, in the State of Haryana. They have questioned in these appeals the constitutional validity of the Haryana Rural Development Fund Act, 1983 (Haryana Act No. 12 of 1983) (hereinafter referred to as "the Act"). The Act received the assent of the Governor of Haryana on September 28, 1983, and was published in the State Gazette under the Notification dated September 30, 1983. The Act came into force on its publication. Section 3 of the Act provides that with effect from such date as the State Government may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) of section 4 of the Act states that the Fund shall be applied by the State Government to meet the expenditure incurred in the rural areas, in connection with the development of roads, hospitals, means of communication, water supply, sanitation facilities and for the welfare of agricultural labour or for any other scheme approved by the State Government for the development of the rural areas. The Fund can also be utilised to meet the cost of administering the Fund. Section 5 of the Act provides that any person who contravenes the provisions of the Act or the rules framed thereunder shall be punishable with fine which may extend to five hundred rupees or up to the amount of cess which the dealer is liable to pay, whichever is more. By section 6 of the Act, the State Government is empowered to make rules to carry into effect the purposes of this Act. Section 7 of the Act grants protection to the State Government or any officer of the State Government or the Haryana State Agricultural Marketing Board or a local authority functioning under the Act against any action that may be taken against it or him in respect of any action taken in good faith under the Act. Section 8 of the Act em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f one per centum of the sale proceeds of agricultural produce bought or sold or brought for processing in the notified market area.... 4. (1) There shall be constituted a fund called the Haryana Rural Development Fund and it shall vest in the State Government ...... (3) The amount of cess paid to the officer or the person shall be credited to the Haryana Rural Development Fund within such period as may be prescribed. (4) To the credit of the Fund shall be placed (a) all collections of cess under section 3 ; and (b) grants from the State Government and local authorities. (5) The Fund shall be applied by the State Government to meet the expenditure incurred, in the rural areas, in connection with the development of roads, hospitals, means of communication, water supply, sanitation facilities and for the welfare of agricultural labour or for any other scheme approved by the State Government for the development of rural areas. The Fund may also be utilised to meet the cost of administering the Fund. 2. (h) ' rural area ' means an area the population of which does not exceed twenty thousand persons." The principal contention urged by the appellants before us is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted pursuant to the Directive Principles of State Policy contained in articles 46, 47, 48 and 48A of the Constitution and that the dealers are permitted by the Act to pass on the cess to the purchaser of the agricultural produce from him have no bearing on the question involved here. In these appeals, we are relieved of the necessity of finding out whether the cess in question is tax leviable by the State, since such a claim is not made before us. The only question which remains to be considered is whether the cess levied under the Act is of the nature of a fee levied or leviable on a dealer in market area. The distinction between a tax and a fee is recognised by the Constitution which while empowering Parliament and the State Legislature to levy taxes under the relevant entries in List I and List II, respectively, also refers to the power of the appropriate legislature to levy fees in respect of matters specified in the said Lists and also in the Concurrent List and tests have been laid down by this court for determining the true character of a levy. In determining a levy as a fee, the true test must be whether its primary and essential purpose is to render specific services to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered'. This definition brings out, in our opinion, the essential characteristics of a tax as distinguished from other forms of imposition which, in a general sense, are included within it. It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the taxpayer's consent and the payment is enforced by law ...... The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the taxpayer and the public authority. Another feature of taxation is that as it is a part of the common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay." The three principal characteristics of a tax noticed by Mukherjea J. in the above passage are : (i) that it is imposed under statutory power wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied the tests of a fee. As mentioned earlier, a cess collected under section 3 of the Act is no doubt required to be credited to the Fund constituted under section 4(1) of the Act. The Fund, however, vests in the State Government and not in the municipality or a marketing committee or any other local authority having limited functions specified in the enactment under which it is constituted. The State Government is entitled under sub-section (5) of section 4 of the Act to spend the cess credited to the Fund in the rural areas, in connection with the development of roads, hospitals, means of communication, water supply, sanitation facilities and for the welfare of agricultural labour or for any other scheme approved by the State Government for the development of the rural areas. This sub-section authorises the State Government to spend the money credited to the Fund virtually on any object which the State Government considers to be the development of rural areas. The definition of the expression " rural area " in section 2(h) of the Act which is extracted above is as vague as it can be. It means an area the population of which does not exceed 20,000 persons. It need not necessaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vests in the State and the Fund which also vests in the State. Amounts credited to the Consolidated Fund and the amounts credited to the Fund can both be spent practically on any public purpose almost throughout the State. In such a situation, it is difficult to hold that there exists any correlation between the amount paid by way of cess under the Act and the services rendered to the person from whom it is collected. The impost in these cases lacks the essential qualification of a fee, namely, " that it is absolutely necessary that the levy of fees should, on the face of the legislative provision, be correlated to the expenses incurred by Government in rendering services " (Sri Shirur Mutt's case [1954] SCR 1005, AIR 1954 SC 282). In fact, there is no correlation at all. Reliance is, however, placed on behalf of the State Government on the decision of this court in Hingir-Rampur Coal Co. Ltd. v. State of Orissa [1961] 2 SCR 537; AIR 1961 SC 459, in which the validity of the Orissa Mining Areas Development Fund Act, 1952, was upheld. In that case, the question was whether the cess levied thereunder was a fee or a duty of excise on coal within entry 84 of List I of the Seventh Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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