Full Judgment Text
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PETITIONER:
M/S. AMAR NATH OM PARKASH AND ORS. ETC
Vs.
RESPONDENT:
STATE OF PUNJAB AND ORS. ETC.
DATE OF JUDGMENT29/11/1984
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
SEN, A.P. (J)
VENKATARAMIAH, E.S. (J)
CITATION:
1985 AIR 218 1985 SCR (2) 72
1985 SCC (1) 345 1984 SCALE (2)769
CITATOR INFO :
F 1985 SC 756 (6)
R 1985 SC 901 (13)
R 1989 SC 317 (34)
ACT:
Punjab Agricultural Produce Markets Act Excess See
collected from dealers by Market Committee u/s 23 declared
invalid by Court-Sec. 23A enacted enabling market committees
to retain excess collection in case of dealers who had
passed on the burden of such fee to the next purchaser of
such agricultural produce-Section-Whether within legislative
competence-Whether State Legislature competent to validate
levy declared by Court as bad in law.
HEADNOTE:
After the decision of the Supreme Court in Kewal
Krishan Puri v. State of Punjab AIR 1980 SC 1008 holding
that the increase of the market fee from Rs. 2 to Rs. 3
perhundred leviable on the agricultural produce brought or
sold by a licensee in the notified market area under section
23 of the Punjab Agricultural Produce Markets Act was not
justified, some dealers wanted refund of the market fee in
excess of Rs. 2/-per hundred already collected by various
market committees. But, the Supreme Court held in Shiv
Shankar Dal Mills v. State of Haryana AIR 1980 SC 1037 that
dealers who had not passed on the liabilities to others and
others who had contributed to or paid the excess one percent
were entitled to make claim for such sums as were due to
them from the Concerned market committees and directed the
market committees to pay the same The Court further directed
that the unclaimed amounts, if any, shall be permitted to be
used by the respective market committee for the purposes
falling within the statute as interpreted by this Court in
C.A. 1083 of 1977. Thereafter more or less in tune with
these directions given by the Court, the Punjab Agricultural
Produce Markets Act was amended by the introduction of
section 23-A It provided, inter alia, that not with standing
anything contained in any judgment decree or order of any
court, it shall be lawful for a committee to retain the fee
levied and collected by it from a licensee in excess of that
leviable under section 23 if the burden of such fee passed
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on by the licensee to the next purchaser of the agricultural
produce in respect whereof such fee was levied and collected
The appellants challenged before the High Court the
constitutional validity of section 23-A and the same was
upheld.
The appellant contended (1) that Section 23-A was a
blatant attempt to validate a levy which had been declared
invalid by the Supreme Court and this was not permissible
(2) that while the legislature was competent to enact a law
for the levy of fee and matters incidental and ancillary
thereto, it was incompetent to legislate providing for the
retention by any authority of fee illegally levied.
73
Dismissing the appeals by the appellants ,.
^
HELD: (1) The general scheme of the Punjab Agriculture
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.
Sections 13, 26 and 28 of the Act covers a vast range of
topics and are so wide as take in a multitude of direct and
indirect ways of achieving the principal object of the Act,
namely, the better regulation of the purchase, sale, storage
and processing of agricultural produce and the establishment
of markets for agricultural produce. Some of the purposes
for which the funds may be expended may on a first
impression appear to be municipal or governmental functions,
but a closer scrutiny will reveal that they are clearly
associated with providing better facilities for marketing of
agricultural produce. [81H; 86C-D]
(2) The primary purpose of s. 23-A is to prevent 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. S. 23-A, 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 there- fore direct
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 illgotton gains, the legislature has
devised a procedure to undo the wrong that has been done by
the excessive levy by allowing the Committees to retain the
amount to be utilised hereafter for the benefit of the very
persons for whose benefit the marketing legislation was
enacted. [97D-G]
(3) There is no substance in the argument that sec. 23-
A is an attempt at validating an illegal levy. Section 23-A
does not permit any recovery of fee at the rate of Rs 3 per
hundred in respect of any sales of agricultural produce
before or after the coming into force of that provision.
There is no attempt at retrospective validation of excess
collection nor any attempt at providing for future
collection at the rate of Rs. 3 per hundred. All that
section 23-A does is to prevent unjust enrichment by those
dealers who have already passed on the burden of the fee to
the next purchaser and so reimbursed themselves by also
claiming a refund from the market committees. It gives to
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the public through the market committee what it has taken
from the Public and is due to it. There is no justification
for characterising a provision like section. 23.A as one
aimed at validating an illegal levy. It is consistent with
the spirit of Kewal Krishan case and the Letter of Shiv
Shankar Dal Mills case. [98B D]
Walati Ram Mahabir Prasad v. State of Punjab, AIR 1983
P & 120 & R. S. Joshi v. Ajit Mills AIR 1977 SC 2279
approved.
74
Shiv Shankar Dal Mills v. State of Haryana AIR 1980 SC
1037 followed.
orient Paper Mills Limited v. State of Orissa [1962]
SCR 549, R.S. Joshi v. Ajit Mills AIR 1977 SC 2279 relied
upon.
Kewal Krishan Puri v. State of Punjab AIR 1980 SC 1008,
Srinivasa General Traders State of Andhra Pradesh AIR 1983
S. C. 1246 Kutti Keya v. State of Madras AIR l954 Mad 621
Arunachala Nadar, State of Madras, AIR 1959 SC 30O,
Immedisetti Ramkrishnaiah Sons v. State of Andhra Pradesh,
AIR 1976 AP 193 Sreenivasa General Taaders v. State A. P.
AIR 1983 SC 1246, Shirur Matt [1954] SCR 1005; Hingir-Rampur
Coal Co. Ltd. v. State of Orissa, [1962] 2 SCR 537,
Corporation of Calcutta v. Liberties Cinema [1965] 2 SCR
477, H. H. Sudhundra Thirtha Swamiar v. Commissioner, [1963]
Supp. 2 SCR 302, H. H. Shri Swamiji v. Commisssioner, Hindu
Religious and Charitable Fndowments Department [1980] I SCR
368, Municipal Corporation Delhi v. Mohd. Yasin [1983] 3 SCC
229, Craving Dock Co. Ltd. v. Horton, [1951] A. C. 737 at
761, Home office v. Dorset Yacht Co., [1970] 2 All E. R.
294, Herington v British Railways Board [1972] 2 W. L R.
537, & State OF Bombay v. United Motor. (India) Ltd., [1953]
SCR 1069 referred to.
A. V Nachane and Ors. v. Union of India, [1982] 1 SCC
2’6 and Abdul Quadar & Co. v. Sales tax officer, AIR 1964 SC
922; held inapplicable.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 450O
and 4501 of 1984.
Appeals by Special leave from the Judgment and order
dated the 18th January and 18 January, 1984 of the Punjab
and Haryana High Court in Civil Writ Nos. 33OO of 1981 aud
4757 of 1982.
H.K. Puri, M.P. Jha and Sanjeev Walia for the
Appellants.
S.K Bagga for the Respondent.
L.N. Sinha, A.K Panda and Ashwani Kumar for the Respon.
dent
The Judgment of the Court was delivered by
CINNABAR REDDY J. The appellants, who are traders
engaged in the purchase and sale of agricultural produce,
appear to be a determined lot. For over a decade, they or
those similarly placed have been litigating and impeding the
levy and collection of Market fee by the Market Committees
constituted under the Punjab Agricultural Produce Markets
Act. Sometimes 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
75
Of Punjab(l) declared that the enhancement of the fee from
2% to 3 % was illegal. The court while striking down the
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enhancement of the fee laid down no new principles 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 Srinivsa General Trader. v. Slate of Andhra
Pradesh(2) 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
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 back in
1953, Rajamannar, CJ and T.L. Venkatarama Aiyar, J, in Kutti
Keya v. The State of Madras(3) considered the provisions of
the Madras Commercial Crops Markets Act 1933, one of the
fore-runner of the Punjab Agricultural Produce Markets Act
and other similar enactments elsewhere. The general nature
of the legislation was explained by Venkatarama Aiyar, J, as
follows:
"...the Subject-matter of the impugned Act is
marketing and legislation on marketing is now a well-
recognised feature of all commercial countries The need
for such a legislation arises whenever societies pass-d
on from the stage of self-supporting economic unit,
producing only articles for its own consumption to that
of a commercial community producing articles for sale
in outside areas for profit. While in the former stage,
transactions would be generally settled directly
between the seller and the purchaser, the price being
paid and delivery of the commodity taken at the time of
the deal, the conditions would be different when
commercial crops are begun to be raised. The ultimate
purchasers of these commodities would generally be
persons outside the area of production, a merchant
residing in another State and even in a foreign
country.
"To bring about a deal between the local producers
and the outside purchasers, there emerged a class of
(1) AIR 1980 SC 1008.
(2) AIR 1983 S.C, 1246.
(3) AIR 1954 Mad. 621.
76
middlemen. Even in well-organised and economically
advanced countries like England, it was found that the
agrIculturist producer had not facilities for disposing
of the goods to his best advantage (vide the statement
of Dr. Addison, Minister for Agriculture, quoted at
page 80 of the Indian Central Banking Enquiry Committee
Report, Vol. r, Part II). It is these conditions that
have led up to the enactment of marketing laws in all
countries having a large volume of trade in commercial
crops The object of this legislation is to protect the
producers of commercial crops from being exploited by
middlemen and profiteers and to enable them to secure a
fair need for their produce.
The need for such legislation is even greater in
India as the producers are as a class illiterate and
economically dependent and unstable. This question had
engaged the attention of several committees which had
been constituted to report on various economic matters.
Indian Cotton was a commodity greatly in demand in
England and other countries and in the Central
Provinces and Berar open markets for cotton were
established through legislation. In 1919, the Indian
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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
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 ware-housing the produce, the grower was
not in a position to wait and sell the commodities for
proper price (vide
77
pages 78 and 79). In 1933 the Act now under
consideration A was passed with the object of providing
for "the better regulation of buying and selling of
commercial crops". It must be mentioned that at that
time the only products which had become commercial
crops having an international market were cotton,
groundnuts and tobacco; and the definition of
commercial crops as enacted originally corn- prised
only these three crops."
.......................................................
...........
"Various suggestions were made for improving the
market conditions (vide pp 92 and 63). In the report of
the Planning Comission published in 1952, Chapter XVII,
Vol l, deals with agricultural marketing and after
referring to the working of the regulated markets in
Bombay, Madras, Hyderabad and Madhya Pradesh, it throws
out several suggestions for future improvements. It
must be added that there has been legislation on lines
similar to those of the Madras Act in several of the
States in India.
"It will be clear from the above survey of the
market ing legislation that its object is to enable
producers to get a fair price for their commodities and
that it has been generally adopted in all commercial
States Such laws have been held in America to be within
the Police Power of the State as tending to promote
general welfare (Vide-’Parker v. Brown [(1942) 87 Law
ED 315 (D).] Under the Indian Constitution, they must
be upheld under Art. 19 (6) as reasonable and enacted
in the interests of the general public."
The decision of the Madras High Court in Kutti Keva v.
The State was affirmed by a Constitution Bench of The
Supreme Court in Arunachala Nadar v. State of Madras.(l)
Subba Rao, J. referring to the background of the Act,
observed:
"There is a historical background for this Act.
Market ing legislation is now a well-settled feature of
all commercial countries. The object of such
legislation is to protect the producers of commercial
crops from being exploited by the middlemen and
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profiteers and to enable them to secure a fair return
for their produce. In Madras State, as in other
(l) AIR l959 SC 30O.
78
parts of the country, various Commissions and
Committees have been appointed to investigate the
problem, to suggest ways and means of providing a fair
deal to the growers of crops particularly commercial
crops, and find a market for selling their produce at
proper rates. Several Commit tees, in their reports,
considered this question 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 exports 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 produces and the buyer so that they
may meet on equal terms, thereby eradicating or at any
rate reducing the scope for exploitation in dealings.
Such a statute cannot be said to create unreasonable
restrictions on the citizens and right to do business
unless it is clearly established that the provisions
are too drastic, unnecessarily harsh and over-reach the
scope of the object to achieve which it is enacted."
........................................................
........................................................
" ..Shortly stated, the Act, Rules and the Bye-
laws framed thereunder have a long-term target of
providing a net work of markets where in facilities for
correct weighment are ensured, storage accommodation
is provided, and equal
79
powers of bargaining;, ensured, so that the growers may
t, bring their commercial crops to the market and sell
them at reasonable prices 1 11 such markets are.
established, the said provisions, by imposing licensing
restrictions, enable The buyers and sellers to meet in
licensed premises, ensure correct weighment, make
available to them reliable market information and
provide for them a simple machinery for settlement of
disputes. After the markets are built or opened by the
marketing committees, within a reasonable radius from
the market, as prescribed by the Rules, no licence is
issued; thereafter all growers will have to resort to
the market for vending their goods. The result of The
implementation of the Act would be to eliminate, as far
as possible, the middlemen and to give reasonable
facilities for the growers of commercial crops to
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secure best prices for their commodities "
In Immedisetti Ramkrishnaiah Sons v. State of
Andhra Pradesh(l), the nature of the duties of a Market
Committee was explained:
"Another unfounded assumption of the learned
counsel was that the activities of the Market Committee
and the facilities provided by it were confined by the
Act to the market area only. The establishment,
maintenance and improvement of the market is one of the
purposes for which the Market Committee Fund might be
expended under Sec. I S of the Act. The other Services
such as the pro vision and maintenance of standard
weights and measures, the collection and dissemination
of information regarding all matters relating to crop
statistics and marketing in respect of noticed
agricultural produce, livestock and pro ducts of
livestock schemes for the extension or cultural
improvement of notified agricultural produce including
the grant of financial aid to scheme for such extension
on improvement 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
(1) AIR 1976 AP 193.
80
confined to the market area only. They area services
which are required to be performed by the Market
Committe and which may be rendered throughout the
notified market area without being confined to the
market. Further, the facilities provided in the market
are available for the use of every grower of
agricultural produce and owner of live stock 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 Ramakrishnayya Sons v. State of
Andhra Pradesh (supra) was approved by this Court in
Sreenivasa General Traders v. State of A.P.,(1) where it was
observed:
"It is obviously in the interests of the
producers of agricultural produce that they can get the
best competitive prices in an open market and that they
have not to pay the middlemen. Sale or purchase of
agricultural produce in h such a market under the
supervision and control of the market committee is
likely to be in ready cash and there fore advantageous
to the producers and the use of standard weights must
eliminate the possibility of his being victimized by
malpractices. Supervision of the operations in the
notified market area can be more conveniently done if
business is carried on in a specified area or areas
intended for that purpose. The Act is an integrated one
and it regulates the buying and selling of notified
agricultural produce, livestock and products of
livestock from a centralized place. "
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..........
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............................................................
......
"The contention that there is no liability cast on
the petitioners to pay market fee on transactions of
sale and purchase of notified agricultural produce,
livestock and
(1) ATR.1983 S.C. 1246.
81
product of livestock proceeds on a wrongful assumption
that they can still carry on such trade from their
premises in the notified market area, but outside the
market in that area. In view of the express prohibition
contained in subsection (6) of Sec. 7, the petitioners
cannot carry on such trade by not resorting to the
market proper."
"There is a fallacy underlying the argument that
since the services are rendered by market committees
Within the market proper, there is no liability to pay
a market fee on purchase or sale taking place in the
notified market area but outside the market. The
contention does not take note of the fact that
establishment of a regulated market for the purchase or
sale of notified agricultural produce, livestock or
products of live stock is itself a service rendered to
persons engaged in the business of purchase or sale of
such commodities. The duty of a market committee
constituted under sub-section (1) of sec. 4 of the Act
does not end with establishing such number of markets
in the notified market area under the first part of
sub-section (3) but also extends to the providing of
such facilities in the market as the Government may
from time to time by general or special order specify
under the second part of sub-section (3). In exercise
of their powers under sec. 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 sec. 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,
82
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 which the
Marketing Development Fund and the Market Committee Fund may
be expended. We may mention that while there is to be a
State Agricultural Marketing Board for the entire State for
performing the functions and duties assigned to the Board by
the Act, the State Government may declare specified,
notified areas as market areas for each of which there shall
be a market committee. The Board is vested with powers of
superintendence and control over the committees. Section 13
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prescribes the duties and powers of market committees and is
in the following terms:
"13-Duties and powers of Committee-(1) It shall
be the duty of a Committee-
(a) to enforce the provisions of this Act and the
rules and bye-laws made thereunder in the notified
market area and, when so required by the Board , to
establish a market therein providing such facilities
for persons visiting it in connection with the
purchase, sale, storage, weighment and processing of
agricultural produce concerned as the Board may from
time to time direct;
(b) to control and regulate the admission to the
market, to determine the conditions for the use of the
market and to prosecute or confiscate the agricultural
produce belonging to person trading without a valid
licence;
(c) to bring, prosecute or defend or aid in
bringing, prosecuting or defending any suit, action,
proceeding, application or arbitration, on behalf of
the Committee or otherwise when directed by the Boards.
(2) Every person licensed under sec. 10 or sec.
13 and every person exempted under sec. 6 from taking
out licence, shall on demand by the Committee or any
person
83
authorised by it in this behalf furnish such
information and returns, as may be necessary for proper
enforcement A of Act or the rules and bye-laws made
thereunder.
(3) Subject to such rules as the State Government
may make in this behalf, it shall be the duty of a
Committee to issue licences to brokers, weighmen,
measurers, surveyors, godown keepers and other
functionaries for carrying on their occupation in the
notified market area in respect of . agricultural
produce and to renew, suspend or cancel such licences.
(4) No broker, weighman, measurer, surveyor,
godown keeper or other functionary shall, unless duly
authorised by licence, carry on his occupation in a
notified market area in respect of agricultural
produce:
Provided that nothing in sub-sections (3) and (4)
shall apply to a person carrying on the business of
warehouse- man who is licensed under the Punjab
Warehouses Act, l957 (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. Sections 27 provides for the creation of Market
Committee Fund out of which the Committee has to defray its
expenditure. The purpose for which the Marketing Development
Fund may be expended are specified in sec. 26 as follows:
"26-The Marketing Development Fund shall be
utilised out of 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;
(vi) maintenance of the office of the Board and
construction and repair or its office buildings, rest-
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house and staff quarters;
84
(vii) giving aid to financially weak Committees in
the shape of loans and grants,
(viii) payment of salary, leave allowance, gratuity,
corn passionate allowance, compensation for injuries or
death resulting from accidents while on duty, medical
aid, pension or provident fund to the persons employed
by the Board and leave and pension contribution to
Government servants on deputation;
(ix) travelling and other allowances to the employees
of the Board, its members and members of Advisory
Committees;
(x) propaganda, demonstration and publicity in favour
of agricultural improvements;
(xi) production and betterment of agricultural produce;
(xii) meeting any legal expenses incurred by the
Board;
(xiii) imparting education in marketing or
agriculture;
(xiv) construction of godowns;
(xv) loans and advances to the employees;
(xvi) expenses incurred in auditing the accounts of
the Board;
(xvii) with the previous section of the State
Government, any other purpose which is calculated to
promote the general interests of the Board and the
Committees (or the national or public interests);
Provided that if the Board decides to give aid of
more than five thousand rupees to a financially weak
Committee under clause (vii), the prior approval of the
State Government to such payment shall be obtained.
The purposes for which the Market Committees Fund may be
expended are specified in sec. 28 as follows:-
"28-Purposes for which the Market Committee Funds may
be expended. Subject to the provisions of section 27
the Market Committee Funds shall be expended for the
following purposes:-
(1) AIR 1983 SC 1246
85
(i) acquisition of sites for the market; A
(ii) maintenance and improvement of the market;
(iii) construction and repair of buildings which
are necessary for the purposes of the market and for
the health, convenience and safety of the persons using
it;
(iv) provision and maintenance of the standard weights
and measures:
(v) pay, leave, allowances, gratuities, compassionate
allowances and contributions towards leave allowances,
compensation for injuries and death resulting from
accidents while on duty, medical aid, pension or
provident fund of the persons employed by the
Committee;
(vi) payment of interest on loans that may be raised
for purposes of the market and the provisions of a
sinking fund in respect of such loans;
(vii) collection and dissemination of information
regarding all matters relating to crop statistics and
marketing in respect of the agricultural produce
concerned;
(viii) providing comforts and facilities, such as
the shelter, shade, parking accommodation and water for
the per sons, draught cattle vehicles and pack animals
link roads I coming or being brought to the market or
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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;
86
(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
range of topics and are so wide as to take in a multitude of
direct and indirect ways of achieving the principal object
of the Act, namely, the better regulation of the purchase,
sale, storage and processing of agricultural produce and the
establishment of markets for agricultural produce. Some of
the purposes for which the funds maybe expended may on a
first impression appear to be municipal or govemental
functions, but a closer scrutiny will reveal that they are
clearly associated with providing better facilities for
marketing of agricultural produce. In fact, some of them may
be municipal or governmental functions, but may yet be
purpose for which the funds of the marketing board and
marketing committees may be usefully, lawfully and perhaps
necessarily expended. For example, it is of fundamental
importance that there should be a network of roadways if
effective aid is to be given to farmers to transport and
market their produce. Section 23 of the Act enables the
Committee, subject to such rules as may be made by the State
Government in that behalf, to levy on ad volorem basis, fee
on the agricultural produce bought or sold by a licensee in
the notified market area at a rate not exceeding the rate
mentioned in sec. 23 from time to time for every one hundred
rupees. The fee which was originally 50 paise per 100 was
raised to Re. l per 100 in 1969, thereafter to Rs. 1.50 in
1973 and to Rs. 2.25 in 1974. Later the fee was raised to
Rs. 3 per 100. It was this enhancement of fee to Rs. 3 per
100 that was challenged by several dealers from Punjab and
Haryana in Kewal Krishan v. State of Punjab (Supra). A
Constitution Bench of this Court, after referring to the
principles laid down in the leading cases of Shirur Malt,(1)
Hingir-Rampur Coal Co. Ltd. v. State of Orissa,(2)
Corporation of Calcutta v. Liberties Cinema etc. thought
that in all the
(1) [1954] SCR 10O5
(2) 119621 2 SCR 537
87
circumstances of the case, an increase of the license fee
beyond Rs 2 A per 100 was not justified. The court noticed
that each of the market Committees had huge surpluses and
had made large donations to educational institutions and
expended funds for other purposes wholly unconnected with
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the purpose stipulated by the Act. It appeared that the
increase from Rs. Z to Rs. 3 in the year 1978 was made
largely to compensate the market committees for having
contributed the huge sum of Rs. One crore to the Medical
College, Faridkot. Having regard to the huge surpluses and
unanthorised 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, 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 the 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 Sreenivasa General Traders v.
State of Andhra Pradesh (Supra) took immense pains to
explain the observations of Untwalia J. and place them in
their proper setting. He observed, very rightly indeed, G
"In the ultimate analysis, the Court held in
Kewal Krishan Puri’s case, supra that so long as the
concept of fee remains distinct and limited in contrast
to tax, such expenditure of the amounts recovered by
the levy of a market fee cannot be countenanced in law.
A case is an authority H
88
only for what it actually decides and not for what may
logically follow from it. Every judgment must be read
as applicable to the particular facts proved, or
assumed to be proved, since the generality of the
expressions which may be founded there are not intended
to be expositions of the whole law but governed or
qualified by the particular facts of the case in which
such expressions are to be found. It would appear that
there are certain observations to be found in the
judgment in Kewat Krishan Puri’s case, supra. which
were really not necessary for purposes of the decision
and go beyond the occasion and therefore they have no
binding authority though they may have merely
persuasive value. The observation made therein seeking
to quantify the extent of correlation between the
amount of fee collected and the cost of rendition of
service, namely:
"At least a good and substantial portion of the
amount collected on account of fees, may be in the
neighborhood of two-thirds or three-fourths must be
shown with reason able certainty as being spent for
rendering services in the market to the payer of fee".
appears to be an obiter".
obviously Untwalia, J. did not purport to lay down any
new principles and could not have intended to depart from
the series of earlier case of this Court. For instance, in
H. H. Sudhundra Thirtha Swamiar v. Commissioner(l) the Court
had said,
".... nor is it a postulate of a fee that it must
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have direct relation to the actual services rendered by
the authority to individual who obtains the benefit of
the service. If with a view to provide a specific
service, levy is imposed by law and expenses for
maintaining the service are met out of the amounts
collected there being a reasonable relation between the
levy and the expenses incurred for rendering the
service, the levy would be in the nature of a fee and
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, or because some of the
contributories do not obtain the same degree of service
as others may".
(1) [1963] Supp 2 SCR 302.
89
In Hingir-Rampur Coal Co. Ltd. v. State of orissa
(Supra) the A 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
indirectly 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 while may ultimately and
indirectly be benefited would not detract from the
character of the levy as a fee. Where, however, the
specific service is indistinguishable from public
service, and in essence is directly a part of it,
different considerations may arise. In such a case, it
is necessary to enquire what is the primary object of
the levy and the essential purpose which it is intended
to achieve. Its primary object and the essential
purpose must be distinguished from its ultimate or
incidental results or consequences. That is the true
test in determining the character of the levy,
Again in H.H. Shri Swamiji v. Commissioner, Hindu
Religious and Charitable Endowments Department (1)
Chandracud C.J. said:
"For the purpose of finding whether there is a
correlationship between the services rendered to the
fee payers and the fees charged to them, it is
necessary to Know the cost incurred for orgainsing and
rendering the services. But matters involving
consideration of such a correlation ship are not
required to be proved by a mathematical formula. What
has to be seen is whether there is a fair
correspondence between the fee charged and the cost of
(1) [1980] 1 S.C.R. 368.
90
services rendered to the fee payers as a class. The further
and better particulars asked for by the appellants under
order 6, Rule S of the Civil Procedure Code, would have
driven the Court, had the particulars been supplied, to a
laborious and fruitless inquiry into minute details of the
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Commissioner’s departmental budget. A vivisection of the
amounts spent by the Commissioner’s establishment at
different places and for various purposes and the ad hoc
allocation by the Court of different amounts to different
heads would at best have been speculative. It would have
been no more possible for the High Court if the information
were before us than it would be possible for us if the
information were before us, to find out what part of the
expenses incurred by the Commissioners establishment at
various places and what part of the salary of his staff at
those places should be allocated to the functions discharged
by the establishment in collection with the services
rendered to the appellants. We do not therefore think that
any substantial prejudice has been caused to the appellants
by reasons of the non-supply of the information sought by
them."
On a consideration of these cases Sen J. concluded as
follows in Sreenivasa General Traders v. State of Andhra
Pradesh (Supra):
"The traditional view that there must be actual
quid pro quo for a fee has undergone a sea 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"
91
a quid pro quo for the services rendered. However,
correlationship between the levy and the services
rendered A 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 was observed
by this Court in Municipal Corporation Delhi v. Mohd. Yasin
(1):
"What do we learn from these precedents ? We
learn that there is no generic difference between a tax
and a fee, though broadly a tax is a compulsory
exaction as part of a common burden, without promise of
any special advantages to classes of taxpayers whereas
a fee is a payment for services rendered, benefit
provided or privilege conferred. Compulsion is not the
hallmark of the distinction between a tax and a fee.
That the money collected does not go into a separate
fund but goes into the consolidated fund does not also
necessarily make a levy a tax. Though a fee must have
relation to the services rendered, or the advantages
conferred, such relation need not be direct, a mere
causal relation may be enough. Further, neither the
incidence of the fee nor the service rendered need be
uniform. That others besides those paying the fees are
also benefited does not detract from the character of
the fee. In fact the special benefit or advantage to
the payers of the fees may even be secondary as
compared with primary motive of regulation in the
public interest. Nor is the court to assume the role of
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a cost accountant. It is neither necessary nor
expedient to weigh too, meticulously the cost of his
service reinduced etc. not against the amount of fees
collected so as to evenly balance the two. A broad
correlationship is all that is necessary. Quid pro quo
the strict sense is not the one and only true index of
a fee; nor is it necessarily absent in tax."
Earlier on a question of interpretation it was pointed
out:
" A word on interpretation. Vicissitudes of time
and necessitudes of history contribute to changes of
philosophical attitudes, concepts, ideas and ideals
and, with them, the meanings of words and phrases and
the language itself. The philosophy and the language of
the law are no excep-
(1) [1983] 3 S.C.C. 229. H
92
tions. Words and phrases take colour and character from
the context and the times and speak differently in
different contexts and times. And, it is worthwhile
remembering that words and phrases have not only a
meaning but also a content, a living content which
breathes, and so, expands and contracts. This is
particularly so where the words and phrases properly
belong to other disciplines. ’Tax’ and ’fee’ are such
words. ’they properly belong to the world of Public
Finance but since the Constitution and the laws are
also concerned with Public Finance, these words have
often been adjudicated upon in an effort to discover
content."
In Sreenivasa General Traders v. State of Andhra
Pradesh (supra), 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 quo 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-forths, being shown with reasonable
certainty as having been spent for rendering services in the
market to the payer of fee, could not be a rule of universal
application, and that it was a rule which had necessarily to
be confined to the special facts of Kewal Krishan Puri’s
case. Otherwise, it would affect the validity of marketing
legislations undertaken throughout the country during the
past half a century. We agree with the view of Sen, J. that
the observations extracted by him from Kewol Krishan Puri’s
case were not really necessary for that case and we also
agree with the clarification of the observation made by Sen,
J.
There is one other significant sentence in Sreenivasa
General Traders v. State of A.P. (Supra) with which we must
93
express our agreement. It was said, . with utmost respect,
these observations of the learned judge are not to be read
as Euclid’s A theorems, nor as provisions of the statute.
These observations must be read in the context in which they
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appear." We consider it proper to say, as we have already
said in other cases, that judgments of courts are not to be
construed as statutes. To interpret words, phrases and
provisions of a statute, it may become necessary for judges
to embark into lengthy discussions but the discussion is
meant to explain and not to define. Judges interpret
statutes, they do not interpret judgments. They interpret
words of statutes; their words are not to be interpreted as
statutes. In London Graving Dock Co. Ltd. v. Horton (1) Lord
Mac Doormat observed,
"The matter cannot, of course, resettled merely
by treating the ip sesame verba of Willes, J., as
though they were part of an Act of Parliament and
applying the rules of interpretation appropriate
thereto. This is not to detract from the great weight
to be given to the language actually used by that most
distinguished judge." D
In Home office v. Dorset Yacht Co.(2) Lord Reid said,
"Lord Atkin’s speech.. is not to be treated as if it was a
statutory definition. It will require qualification in new
circumstances." Megarry, J. in 1971(1) W.L.R. 1062 observed,
"one must not, of course, construe even a reserved judgment
of even Russell L. J. as if it were an Act of Parliament.
And, in Herington v. British Railways Board."(2) Lord Morris
said:
"There is always peril in treating the words of a
speech or judgment as though they are words in a
legislative P 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 Rewal Krishan
Puri’s case to which apply with the same force all that we
have said above. It is needless to repeat the of quoted
truism of Lord Halsbury that
(1) [1951] A.C. 737 at 761
(2) [1970] 2 All. E.R. 294
(3) [19721 2 W.L.R. 537 H
94
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 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 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 been passed
on.
Soon after judgment was pronounced in Kewal Krishan’s
case, 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 Committees to be permitted to
retain the excess amounts ? Were the excess amounts to be
refunded to the traders from whom the amounts had been
collected notwithstanding the fact that the traders
themselves had already passed on the burden to the next
purchasers and consumers ? In other words, were the traders
to be allowed to get a refund from the market committees and
unjustly enrich themselves ? Were they to be allowed to
profiteer by ill-gotten gains ? or were the next purchasers
or consumers to be traced and the amounts refunded to them,
which of course, would well-nigh be an impossible task in
practice? If it was not possible to trace the individual
consumers who had borne the burden, was it not right that
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the public authority who levied and collected it should be
allowed to hold and retain the amount as if it were in trust
for their benefit to be used for the purposes for which the
statute . desired the levy of the fee ? Some dealers,
however, wanted the monies to be refuned to them and moved
this Court. Instead, in the circumstances, the court in Shiv
Shankar Dal Mil1s v. State of Haryana.’’(l) gave the
following directions:
"I. Subject to the directions given below, all
the sums collected by the various market committees who
are respondents in these various writ petitions or
appeals shall be liable to be paid into the High Court
of Punjab and Haryana within one week of intimation by
the Registrar of the amount so liable to be paid into
the court.
"II. A statement of the amounts collected in
excess
(1) AIR 1980 SC 1037
95
(1%) shall be put into this Court by the dealers with copies
A to the various market committees aforesaid and furnished
to the writ petitioners and appellant with 1O days from
today, and if there is any difference between the parties it
shall be brought to the notice of this Court in the shape of
miscellaneous petitions. On final orders, if any passed
thereon by this Court, those amounts, so as determined,
shall be treated as final.
llI. The Registrar of the High Court shall issue public
notice and otherwise give due publicity to the fact that
dealers who have not passed on the liabilities to others and
others who have contributed to or paid the excess one
percent covered by these writ petitions and appeals may make
claims for such sums as are due to them from him Within one
month or such other period as he may fix. The Registrar
shall scrutinise such claims and ascertain the sums so
proved. He will thereupon demand of all the market commit-
tees 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. G
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. N
96
VII. If parties eligible for repayment of amounts
do not claim within one year from today the Registrar
will not entertain any further claims. It will be open
to such parties to pursue their remedies for recovery
for any sums that may be due to therm.
VIII. Each State Marketing Board will deposit
within 1O days from today a sum of Rs. 5.000/- before
the Registrar for the preliminary expenses of publicity
and other incidentals for the implementation of the
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directions given above. Any unexpended amount, at the
end of one year, will be repaid to the respective State
Marketing Board.
IX. We further direct that the unclaimed amount,
if any, shall be permitted to be used by the respective
Marketing Committees for the purpose falling within the
statute as interpreted by this Court in the C. A. No.
1083/77".
Thereafter, more or less in tune with the
directions given by the Court in ShivShankar Dal Mills case,
the Punjab Agricultural Produce MarKets Act was amended by
the introduction of sec. 23-A providing as follows:
"In the Principle Act, after Section 23, the
following section p shall be inserted namely:-
’23-A(1) Notwithstanding anything contained in any judgment
decree or order of any Court, it shall be lawful for a
Committee to retain the fee levied and collected by it from
a licensee in excess of that levied under Section 23, if the
burden of such fee was passed on by the licensee to the next
purchaser of the Agricultural Produce in respect whereof
such fee was levied and collected.
(2) No suit or other proceedings shall be instituted,
main trained or continued in any court for the refund
of whole or any part of the fee retained by a Committee
under sub-section (1) and no court shall enforce any
decree or order directing the refund of whole or any
Part of such fee.
(3) If any dispute arises as to the refund of any fee
retained by a Committee by virtue of sub-section (1)
and
97
the question is whether the burden of SUCH fee was
passed on by the licensee to the next purchaser of the
concerned agricultural produce, it shall be presumed
unless proved otherwise that such burden was so passed
on by the licensee.
(4). If any amount of tee retainable by a Committee
under sub-section (1) has been refunded to any
licensee, the same shall be recoverable by the
Committee in the manner indicated in sub-section (2) of
Section 41.
(5). The provisions of this section shall not effect
the operation of Section 6 of the Punjab Agricultural
Produce Markets (Amendment and Validation) Act, 1976".
The primary purpose of sec. 23-A is seen on the face of
it; it prevents the refund of license 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 went to unjustly enrich themselves by
obtaining the refund from the market committee. S. 23-A, 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
illgotten gains, the legislature has devised a procedure to
undo the wrong item that has been done by the excessive levy
by allowing the Committees to retain the amount to be
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utilised here after for the benefit of the very persons for
whose benefit the Marketing legislation was enacted. The
constitutional validity of sec. 23A was questioned before
the High Court of Punjab and Haryana, but was upheld in
Walati Ram Mahabir Prasad v. State of Punjab(l). The
correctness of this decision is questioned before us in
these two civil appeals.
The submission of the learned counsel was that sec. 23-
A was
(1). AIR 1984 P&H 120
98
a blatant attempt to validate a levy which had been declared
invalid by this court and this, according to the learned
counsel, was not permissible. We entirely disagree with the
submission that sec. 23-A is an attempt at validating on
illegal levy. Section 23-A does not permit any recovery of
fee @Rs. 3 per 100 in respect of any sales of agricultural
produce before or after the coming into force of that
provision. There is no attempt at retrospective validation
of excess collection nor any attempt at providing for future
collection at the rate of Rs. 3 per 100. All that sec. 23-A
does is to prevent unjust enrichment by those dealers who
have already passed on the burden of the fee to the next
purchaser and so reimbursed themselves by also claiming a
refund from the Market Committees. We have already explained
the true purpose of S 23-A. It gives to the public through
the market committee what it has taken from the public and
is due to it. It renders into Caesar what is Caesar’s. We do
not see any justification for characterising a provision
like Sec. 23-A as one aimed at validating an illegal levy.
The decision of this Court in A. V. Nachane and ors. v.
Union of lndia(1) on which the counsel placed reliance has
no application whatsoever. Section 23-A in our view, is
consistent with the spirit of Kewal Krishan and the letter
of Shiva Shankar Dal Mills.
Another submission of the learned counsel was that
while the legislature was competent to enact a law for the
levy of a fee and matters incidental and ancillary thereto
it was incompetent to legislate providing for the retention
by any authority of fee illegally levied. For this purpose,
reliance was placed by the learned counsel on the decision
of this Court in Abdul Quadar & Co. v. Sales tax officer(a).
We are afraid that this decision also is of no avail to the
appellants.
In orient Paper Mills Limited v. State of
Orissa(3), a dealer had been assessed to tax and had paid
the tax. Later he applied for re fund of tax which was held
to be not exigible by this Court in State of Bombay v.
United Motors (India) Ltd(’) . When the appeals were pending
in this Court, the orissa Legislature intervened in the
matter and introduced sec. 14-A in the Principal Act
providing that
(1) [1982] I SCC 206.
(2) AIR 1964 SC 922.
(3) [19621 1 SCR 549
(4) [19531 SCR 1069.
99
refund could be claimed only by a person from whom the
dealer has A 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
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relating to the levy and collection of tax. The Constitution
Bench held,
"By item 54 of List Il of Schedule 7 to the
Constitution, the State Legislature was indisputably
competent to legislate with respect to taxes on sale or
purchase of papersand paper-boards. The power to
legislate with respect to a tax comprehends the power
to impose the tax, to prescribe machinery for
collecting the tax, to designate the offers by whom the
liability may be enforced and to prescribe the
authority, obligations and indemnity of those officers.
The diverse heads of legislation in the Schedule to the
Constitution demarcate the periphery of legislative
competence and include all matters which are ancillary
or subsidiary to the primary head. The Legislature of
the orissa State was therefore competent to exercise
power in respect of the subsidiary or ancillary matter
of granting refund of tax improperly or illegally
collected, and the competence of the legislature in
this behalf is not canvassed by counsel for the
assesses. If competence to legislate for granting
refund of sales-tax improperly collected be granted, is
there any reason to exclude the power to declare that
refund shall be claimable only by the person from whom
the dealer has actually realised the amounts by way of
sales-tax or otherwise ? We see none. The question is
one of legislative competence and there is no
restriction either express or implied imposed upon the
power of the Legislature in that behalf."
The present case is a case akin to orient Paper Mills
case (supra). Section 23-A, as we have seen, disables a
dealer from getting a refund of fee paid by him, the burden
of which he has already passed on to the next purchaser. As
we said all that sec. 23-A does is to prevent unjust
enrichment by means
100
of a refund to which the person claiming it has no moral or
equitable entitlement.
Abdul Quader & Co. v. Sales Tax officer (supra) on
which considerable reliance was placed by the learned
counsel for the appellants was an entirely different case.
The dealer in that case had collected sales tax from the
purchasers in connection with the sales made by him on the
basis that the incidence of the tax lay on the sellers and
assured the purchaser that after paying the tax to the
appellant, there would be no further liability on them.
After realizing the tax, however, the appellant did not pay
the amount realized to the Government, but kept it in a
suspense account. When the Sales Tax Department discovered
this and called upon the appellant to pay the amount
realized, he refused to do so. On behalf of the Government,
reliance was placed upon sec. 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 income tent
to enact a provision like sec. 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
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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 was distinguished on the
ground that it dealt with a case of refund and not the
collection of tax, not really due as a tax under the law. In
their precise words, they said:
"The matter (In orient Paper Mills case) dealt
with a question of refund and it cannot be doubted that
refund of the tax collected is always a matter covered
by incidental and ancillary powers relating to the levy
and collection of tax. We are not dealing with a case
of refund in the present case. What sec. 11(2) provides
is that some thing collected by way of tax, though it
is not really due as a tax under the law enacted under
Entry 54 of List II must be paid to the Government.
This situation in our
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Opinion is entirely different from the situation in
orient ,
A Paper Mills case."
The decision in orient Paper Mills case was
expressly affirmed by a Bench of Seven Judges of this Court
in R.S. Joshi v. Ajit Mills(l) and observations to the
contrary Ashoka Marketing Company case(2) were expressly
dissented from. We are, therefore. satisfied that sec. 23-A
of the Punjab Agricultural Produce Markets Act was within
the competence of the Punjab Legislature and that it was
not also otherwise invalid in any manner. The appeals are,
therefore, dismissed with costs.
M .L.A. Appeals dismissed.
(1) AIR 1977 SC 2279.
(2) AIR 1971 SC 946.
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