KEWAL KRISHAN PURI & ANR. v. STATE OF PUNJAB & OTHERS
Citation: [1979] 3 S.C.R. 1217; 1979 INSC 102
Court: Supreme Court of India
Bench: Y.V. CHANDRACHUD , P.N. BHAGWATI, N.L. UNTWALIA, S. MURTAZA FAZAL ALI, R.S. PATHAK
Judgment date:
Case summary
1979 INSC 102. Supreme Court of India judgment dated 1979-05-04. KEWAL KRISHAN PURI & ANR. v. STATE OF PUNJAB & OTHERS. Read the judgment and case details...
Judgment text
KEW AL KRISHAN PURI & ANR. v. STATE OF PUNJAB & OTHERS May 4, 1979 1217 fY. V. CHANDRACHUD, CJ. , P. N. BHAGWATI, N. L. UNTWALIA, B S. MURTAZA FAZAL ALI AND R. S. PATHAK, JJ. ] Punjab AgriculJural Produce Mnrkets Act, 1961 Ss. 23, 26 and 28 i: Punjab Agricultural Produce (General) Rules, R 29-Marketing Developtt1ent Fttnd & fee-ValidiJy-Principlcs for satisfying the test for a valid levy of market fees. Punjab Agricultural Produce Markets Act, 1961 Ss. 23. 26 and 28 &: Punjab Agricultural Produce (General) Rules, R29-Marketing Development Fund & . 41 f transnctions ·in the market ultimately benefiting thei traders also. ~uch an indirect and remote benefit to the t1t. 1tlers is in no sense a special benefit to them: [l244E-F] (vi) That the element of quid pro quo may not be possible, or even . neces- sary, to be established \vith arithmetical exactitude but even broa . 'State of Bil 1 ar & Or~. , [1968] 3 SCR 534; referred to. 4.
(i) A dispute arose between th~ parties as to whether the lic1.. -n~e is g1anted for the whole of the area or for particular places therein. On examin- ing Form B in the Rules meant for grant of licence under s. 10, it i" found that the licence is granted for one or more places of business spe .. :ified in col. 6 situated in a particular notified market area named at the top of the licence. There will be no sense in specifying the place of busines~ in the licence if the licensee is to be permitted to establish his place of business any where in a notified ma. rket area which i~ too big and extensh:e for the control and supervision of a particular 1\. Iarket Committee. Market yards are declared under s. 7. For each notified market area there can be one principal market yard 21nJ. one or more sub-market yards as may be neces-sary. The marginal note of sec. 8 is, "No private market to be opened in or near places declared to be markets.
" [1246D-E] (ii) There is no special prov1s1on in this Statute for an establishment of markets or markets proper as per the definition contained in cl. (i) and (k) of s. 2 of the Act, it is reasonable to assume that the intention of the le£i8'lature is to constitute the n1arket yards as the market proper and ordinarily and gene- rally the market would be the same but may include some other places where transactions of purchase of ngricultural produce by the traders from the pro- ducers has been allo\\-·ed in order to avoid rush in the precincts of the riarket proper. But one thing is certcJiR that the whole of the marJ... et ai c~1 in rio ~en r outside buyers who are not licensees when they buy the agricultural pro- cl~ce from or through the licensees. [1249D-E] B c E F II. Every Market Committee is obliged under sub-sec. (2) (•) of s.
l7 H to pay ont of its funds to the Marketing Board as contribution such percelltage of its income derived from licence fee, market fee and fines levied by the A B 1222 SUPREME COURT REPORTS [1979) 3 S. C. R. c. c:urts as spec. i_fied in sub-cl. (i) and _(ii). The purpOse of this contribution '. l" mentioned in sub-sec. (2)(a) is to enable the Board to defray expenses of th. : office, establishment of the Board and such other expenses incurred hy it i-;1 the interest of the Committees in general. The income of almost all the ,\larket Committees were several lakhs of rupees per year and, therefore, each is required to· pay 30 per centum of its income to the Board by \! irtue of the amendment brought about by Punjab Act 4 of 1978. Under s. 25 ,all receipts of the Board are to be credited into a fund to be called thi ~larketing Deve- lopment Fund: Purposes for which the Marketing Development Fund may be experided are enuIDerated in s.
26 and the puiposes for which the hf~ket Committee Funds may· be expended are c™-alogued in s. 28. [1250A-C] 12~ No serious objection to- the items of expenditure mentioned in clauses (xii), (xiv), (xv) and (xvi) can be taken. Clause (x) and clause (xi) cannot -C form the items of expenditure of the market fees. The whole of the State is d,ivided into market areas. The propaganda in favour of agricultural im- provement and expenditure for production and betterment of -agricultural pro- duce will be in the general interest of agriculture in the market area. So lung as the concept of fee remains distinct and limited in contrast to tax such expen· diture out of t~ market fee cannot be countenanced in law. [1252F·G] D E 13. The first part of cl. (xiii) may be justified in the sense of imparting education in marketing to the staff of the 1farket Committee. But imparting education in agriculture in general cannot be correlated with the market fee. (1252H] 14.
How ill-conceived the second part of clause (xvii) is? Is- it permissible to spend the market fees realised from the traders for any purpose calculated to promote the national or public interest? Obviously not. No market Com· mittee can be permitted to utilise the fund for an ulterior purpose how;oever benevolent, laudable and charitable th. e object may be. The v. - hole concept of fee will collapse if the amount realised by market fees could be permitted to be spent in this fashion. [1253A-B] Technically and legally, one may _not have any objection to the expenditure of such money for the purposes mentioned in clauses (x), (xi), (xiii) and . F (xvii). [12530] . G H ·, __ JS. It is· not necessary to strike down any clauses of s. 28 as being uncons· titutional merely on the ground that the expenditure authorised therein goes beyond· the scope of the purpose of the utilisation of the market fees. The authorities ha.
Ye to bear this in mind aitd on a proper occasion the matter will have to be dealt with by courts in the light of this Judgment v1here a concrete case comes of· raiSing of a loan, spending thi money so raised which cannot be reasonably connected with the purposes for "'·bich the market fee can be spent, as to whether such a loan can be repaid or interest on it can be paid out of the realisations of the market fees. [1253G) _16. The Board in the State is the Central Controlling and superintending • authority over all the }rfarket Committees, the primary function of which i! to render service in the market. Parting with 30% income by a 1farket Com· mittee in favour of the Board is not so exCessive or unreasonable so as to warrant any interference with the law in this regard on the ground of violation of the principle of quid Pro quo in the utilisation of the market fee realised • • • ~- • K. K. PURI v. PUNJAB 1223 from the traders in the inarket area.
En1phasised that the Marketing Deve- lopment Fund can only be expended for the purposes of the :rtfarket Com·· mittees in a general way, or to L'e more accurate, as far as practicable, for the purposes of the particular Market Committee which n1akes the contribution. [1254C-DJ 17. Section 26 of the Act provides for purposes for \vhich the Marketing Development Fund may be expended. The Marketing Development Fund constituted primarily and mainly out of the contributions by the Market Con1- mittees from realisation Of market fee can also be expended for the purposes ,of the market in the notified n1arket area in relation to the transactions of pur- -::1 chase and sale of agricultural prcxluce and for no other general purpose or in -~ the general interest of the agriculture or the agriculturists.
The purposes ' ~{ mentioned in clauses (i), (ii), (iii), (iv), Hrst part of clause (v), clauses (vi), (vii), (viii), (ix), (xii), first part of clause (xiii), clauses (xiv), (xv) and (xvi) held valid. The Marketing Development Fund constituted out of the J\.! arket fees cannot be eJtPended for the purposes nlentioned in second part of clause (v), clauses (x), (xi), second part of clause (xiii) and clause (xvii). As the purpose of the law will be sen'ed by restricting the operation of s. 26, it is not necessary to strike down those provisions as being constitutionally invalid. [l254E, 1255F-l256A] • • 18. The High Court has extracted s. 28 of the Act but has failed to scan the effect of the various purposes in some of the clauses. [1256H-1257A] 19.
The High Court seems to be of the vie\V that since transportation is very essential for the development of a market and to enable the growers of the agricultural produce to bring the same to the market, the construction of link roads becomes an essential purpose of the n1a. rket committe'es. It may be so but the purpose cannot be allowed to be achieved at the cost of the market fee realised fron1 the dealers. [1257G] 20. The impost must be correlated with the service to be rendered to the payers of the fees in the sense and to th'e extent pointed out. [1260A] 21. Everybody seems to have allowed hi1nself to be carried too far by the sentiment of the laudable object of the Act of Uoing whatever is possible to do under it for the amelioration of the conditions and the uplift of the villagers .... -- and the agriculturists.
Undoubtedly the Act is primarily meant for that pur- pose and to the extent it is permissible under the Jaw to achieve that object of utilising the money collected by the n1arkct fee, it should be done. But if the la\v does not permit carrying on the sentiment too far for achieving of all the laudable objects under the A. ct, then primarily it becomes the duty of the Court to allow the la~' to have an upper hand over the sentiment and not vice versa. [1263G-H] 22. If insecticides and pesticides are for use at the place \Vhere actually the marketing operations are carried on it \VouJd be a justifiable expenditure. But . if they are meant to be supplied to the agriculturists for use at their village homes or in their fields surely they cannot be valid expenditure out of the col- Jectio! lB of the n:iarket fee.
[1267G-H] In the instant cases the authorities took full liberty to treat the realisation itom inarket fee as a general realisation of tax which they were free to spend in any manner they liked for the purposes of the Act, the development of the aroo, for giving a fillip to agricultural prod11ction and so forth and so on. The A B c D E F G H A B c D E 1224 SUPREME COURT REPORTS l1979J 3 S. C. R. - sooner the authorities are made to reatis·e the correct position in la. \V the better it will be for all concerned. [1269FJ 23. Taking a reasonable and practical vie\v of the matter and on apprecia- tion of the true picture of justifiable and legal expenditure in relation to the market fee income, even though it had to be done on the basis of some reason- able gue11! il work, the court did not disturb the raising of an imposition of the rate of market fee upto Rs. 2 /- per hundred by the various Market Committees and the Boards both in the State of Punjab and Haryana.
After all, consider- able deTelopment work seen1s to have been done by tnany Market Committees in their reipective markets. The charging of fee @ Rs. 21- therefore, is justi- fied and fit to be sustained. [1269G-1270A] 24. The dealers of Haryana preferred from this judgme~. ,.. Writ Petition No. 3849 of 1978 was filed in the High Court by a large} number of dealers, which was dismissed in I/mine by order dated Sep- tember 18, 1978. Civil Appeal 1616 of 1978 arises out of this Writ Petition. Several other dealers have filed separate Writ Petitions also being Writ Petitions 4470, 4472, 4481, 4485 and 4564 of 1978 chal- lenging in the increase of market fee in the State of Punjab. In the State of Haryana the rate of fee was raised from Rs. 2 /- to Rs. 3/- with effect from September S, 1977 by Ordinance 12 of 1977 replaced by Act 22 of 1977. The Haryana State Marketing Board directed all the Market Committees in that State to collect market flOC @ Rs. 3/- with effect from 5-9-1977.
A number of Writ Petitions were filed in the High Court challenging the said increai;e and the High Co4rt dismissed all the Writ Petitions by its judgment dated August 30, 1978. Civil Appeals 1700 to 1773 of 1978 and Civil Appeals 1626 and 1627 of 1978 are from the judgment of the High Court dated August 30, 1978. The said increase has also been challenged by filing Writ Petitions in this Court and they are Writ Petitions 4420, 4450, 4460 and 4484 of 1978. Although by now there is a catena of cases of this Court pointing out the difference between "tax" and "fee" with reference to the consti- tutional provisions and otherwise also, the problem before us has presented some new angles and facets. We, therefore, think it advis- able and necessary to review many of the earlier decisions to pin-point the precise difference as far as practicable in order to resolve the rival contentions of the parties.
The arguments of the learned counsel for the parties whenever thought necessary would be referred to at the appropriate places hereinafter in this judgment. Clause (2) of Article 110 and clause (2) of Article 199 of the Constitution, the former occurring in the Chapter of Parliament and the r • • ' • • . " K. K. PURI v. PUNJAB (Ulltwalia, !. ) 1229 btter in relation to the State Legislature, are in identical terms as · A . follows:- "A Bill shall not be deemed to be a Money Bill by reason only that it provides •..... for the demand or payment of fees for licences or fees for services rendered . ... : ..... " The Constitution, therefore, clearly draws a distinction between the imposition of a tax by a Money Bill and the impost of 'fees by · any other kind of bill. . So also in the Seventh Schedule both in List I and II a distinction has been maintained in relation to the entires of tax B and fees.
In the Union List entries 82 to 92A relate· to taxes and C duties and entry 96 carves out the legislative field for fees in respect of any of the matters in the said list except the fees taken in any Court. Similarly in the State List entries relating to taxes are entires 46 to 63 . and entry 66 provides for fees in respect of any of the matters in List n but not including fees taken in any Court. Entry relating to . fees in List III is entry 47: Our Constitution, therefore, recognises a D· ,different and distinct"connotation between taxes and fees. . . . The leading case of this Court which has been referred and follow- · rd in many subsequent decisions is the 'case 'of The Commissioner, Hindu Religious Elldowments, Madras . v. Sri. Lakshmindra. Thirtha Swamiar of Sri Shirur Mutt.
(') The point decided therein was that the provision relating to the payment of annual contribution contain- ed in section 76(1) of the Madras Hindu Religious and Charitable Endowments Act, 1951 is a tax and not a fee and so it was beyond the legislative competence of the Madras State Legislature to enact . such a provision. The meaning given to the word "tax" by Latham C. J. of the High Court of Australia in Matthews v. Chicory Marketing Board(') has been quoted with approval at page 1040 and has been ·Often repeated in many other decisions. Generally. speaking a fee is defined to be a charge for a special service rendered to· individuals by some governmental agency. A question arises--"specia\ service" rendered to whom which kind of individuals? Mr. V. M. Tarkunde who appeared for the Haryana Marketing Board stressed the argument ·that service rendered must be correlated to those on whom the ultimate ·burden of the fee falls. In our opinion this argument is neither logical .
nor sound. The impost of fee and the liability to pay it is on a parti- . cular individual or a class of individuals. They arc under the obliga-'· (I) [1954] S. C. R. 1005. (2) 60 C. L. R. 263. E F G R A B c 1230 SUPRE~! E COURT REPORTS [1979] 3 S. C. R. tion to submit accounts, returns or the like to the authorities concerned in cases where quantification of the amount of fees depends upon the same. They have to undergo the botherations and han. ssments, sometimes justifiably and sometimes even unjustifiably, in the process of discharging their liability to pay the fee. _ The authorities levying the fee deal with them and realize the fee from them. By operation of the economic laws _in certain kinds of impositions of fee the burden may be passed on to different other persons one after the other.
A few lines occurring at page 1_19 in the judgment of the Privy Council in the case of Attorney-General for Br_itish Columbia and Esquima/t and Nanaimo Railway Company and others(') may be quoted withi advantage. They are as follows :- "It is probably true of many forms of tax which are in- disputably direct that the assessee will desire, if he can, to. pass the bnrden of the tax on to the shoulders of another but this is only an economic tendency. The assessee's D efforts may be conscious or unconscious, successful or un- successful; they may be defeated in whole or in part by other economic forces. · This type of tendency appears to their Lordships_ to be something fundamentally different from the "passing on" which is regarded as the hall-mark of ari indifect tax. " E F G H The authorities, more often than not, almost invariably, will nor be able to know . the individual or individuals on whom partly or wholly the ultimate burden of th<> fee will fall.
They arc not concerned to· investigate and· find out the position of the ultimate burden. It is axiomatic that the special service rendered must be to the poyer of the fee. · The element of quid pro quo must bo establ"shcd between the· __ payer of the fee and the authority charging it. It may not be the exact equivalent of the fee by a mathematical precision, yet, by and large:' or predominantly, the authority collecting the fee must show · that the service which they are rendering in lieu of fee is for some spe- cial benefit of the payer of the fee. r It may be so intimately connected or interwoven with the service 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 payer of the fee and what pro-- pcrtion went to others.
_ But· generally and broadly speaking it must be shown with some amount of certainty, reasonableness or prepon- derance of probability that quite a substantial portion of the amount of fee realised is spent for the special benefit of its payers. (1) (19501 Appeal Cases 87. • • • ~· • • K. K. PURI v. PUNJAB (Untwalia, J. ) 1231 We may now extract some very useful and leading principles from A the decision of this Court in Shirur Mutt's (1954 S. C. R. , 1005, supra) pciintmg out the difference between tax and fee. At pages 1040-41 says Mukherjea J. , as he then was: 'The second characteristic of tax is that it is an imposi- tron 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 te confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the tax-payer and the pnblic authority ........ " "a 'fee' is generally defined to be a charge for a special service rendered to individuals by some governmental agency. " At page 1042 the learned Judge enunciates-"The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege ....... Public interest seems to be at the basis of c all impositions, but in a fee it is some special benefit which (he indi- vidual receives.
" After pointing out that ordinarily there are two E classes of cases where Government imposes 'fee' upon persons, the first being the type of cases of the licence fees for Motor V chicles or the like and in the other class of case' "the Government does some posi'ive work for the benefit of persons and the money is taken as the return for the work done or services rendered" ( vide page I 043), it is said further--"If the money thus paid is set apart and appropriated specifically for the performance of such work and is not merged in the public revenues for the benefit of the general public, iP could be count- ed as fees and not a tax. There is really no generic difference bet- ween lhe tax and fees and as said by Seligman, the taxing power of a State ·may manifest itself in three different forms known respectively as special assessments. fees and taxes.
'' Finally at page 1044 the striking down by the High Court of the imposition of fee under section 76 of 1he Madras Act was upheld on the ground-"It may be noticed, however, that the contribution that has been levied under section 76 of the Act has been made to depend upon the capacity of the payer and not upon the quantum of benefit that is supposed to be conferred on any particular religious institution. " Benefit conferred or ~ny parti- cular religious institution would have been undoubtedly benefit con- ferred on the payer of the fee. F G H ' . , 1232 SUPREME COURT REPORTS [1979] 3 S. C. lt. A After the decision of this Court in Shirur Mutt's case (supra) st:c- B c D E F G tion 76 of the Madras Act was amended. The effect of the amend- ment came to be considered by this Court in the case of H. H. Sudhun- dra Thirtha Swamiar v. Commissioner for Hindu Religious & Chari- tuble Endowments, Mysore.
(') Pointing out the various differences between the earlier law and the amended one at pages 320-21 the im- posi'ion of fee was upheld. In two other cases of this Court following the ratio of Shirur Mutt"s deci:;ion the imposition of fee was upheld, vide, Mahant Sri Jagcaznath Ramanuj Das and another v. The State of Orissa and an- other(") and Ratilal Panachand Gandhi v. The State of Bombay and others. (3) We now proceed to coosidcr some more decisions of this Court in which apparently some different phrases were used for explaiaing the meaning of the word 'fee' and its distinction from 'tax'. Both sides placed reliance upon those decisions. But if the phrases are under- stood in the context they were used and with reference to the facts of those cases it would be noticed that the leading principle has not basically undergone any change. In the case of The Hingir-Rampur Coal Co. , Ltd. & Ors. v.
The Slate of Orissa and others(') the challenge was to the cess levied by the Orissa Mining Areas Development Fund Act, 1952. The peti- tioners" stand in the first instance was that the cess levied was not a lee but a duty of excise on coal and hence beyond the competence of the State Legislature. Alternatively they contended that even if it was a fee it was beyond the competence of the State Legislature for some other reasons not necessary to be mentioned here. The cess imposed was upheld as a 'f cc' re la table to Entry 23 of List II read with Entry 66. In other words it was upheld as a 'fee' in respect of regulatioFl of mines and mineral development. Gajendragadkar J. , as he then wa•, delivered the judgment on behalf of the majority and discussed the point at some length. At page 545 arc to be found a few words which go directly against the contention of Mr. Tarkunde. Says the learned Judge :-" ......
a fee is levied essentially for scrvic~ ren- dered and as such there is an clement of quid pro quo between the person who pays the fee and the public authority which imposes it. " (I) [1963] Suppl. 2 S. C. R. 302. H (2) [1954] S. C. R. 1046. (3) [1954] S. C. R. 1055. (4) _[1961] 2 S. C. R. 537. r • "" K. K. PURI v. PUN. TAB (Untwalia, J. ) . 1233 (Emphasis supplied). Mr. Tarkunde, however, relied upon a passage at the same page which runs thus :- "If specific services are rendered to a specific area or to a specific cl= 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 dis- tinguishable from a tax and is described as a fee. " ~ ~· The above passage does not mean that the service rendered is un- ~ connected with or not meant for the payer of the fee.
As pointed out earlier, service rendered to an institution like a Malh is a service ren- dered to the payer of the fee. Similarly services rendered to a specific area or to a specific class of trade or business in any local area must mean, and cannot but mean, that it is for the special benefit of the person operating in that area. The service rendered was to the mining area for the benefit of the mine owners of that area. Th~ area or trade does not pay the fee nor does it get the benefit in vacuum. The fee is paid by the person who is liable to pay it and service to the payer does not mean any personal or domestic service to him but it means service in relation to the transaction, property or the institution in respect of which he is :made to pay the fee.
Says the learned Judge at page 549 :- "It is true that when the Legislature levies a fee for rendering specific services to a specified area or to a speci- fied 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 distinc- tly and primarily meant for the benefit of a specified class or area the fact that in benefitting the specified class or area the State as a whole may ultimately and indirectly be benefitted would not detract from the character of the levy as a fee. Where, however, the specific service is indis- tinguishable 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 obiect 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 fJr incidental results or co11Se- quences. That is the true test in determining the character of the levy. " (underlining, ours) At pages 549-50 in the decision of The Hingir-Rmnpur Coal Co. Ll s collected is constituted into a specific fund and it has not become a part of the consolidat- ed fund, its application is regulated by a statute and is con- fined to its purposes, and there is a definite correlation between the impost and the purpose of the Act which is to render service to the notified area. " (underlining, ours). In the case of Corporation of Calcutta and another' v. Liberty H Cinema(') the respondent was charged by the Calcutta Corporation a (! ) 80 C. L. R. 229. (2) (1965] 2 S .. R. 477. ,. • - K. K. PURI l'. PUNJAB (Vntwalia, !. ) 12 35, • very high licence fee assessed according to the sanctioned seating capacity of the Cinema house. The High Court quashed the imposi- tion.
In appeal to the Supreme Court the stand of the appellant Corporation was that the levy was a tax and section 548(2) of the Calcutta Municipal Act did not suffer from the vice of excessive dele- gation; while the respondent cinema contended that the levy was a fee and had to be jus. ilicd as being imposed in return for services to be rendered. Alternatively the respondent submitted that if it was a tax it was invalid as it amounted to an illegal delegation of legislative functions. The majority view was expressed by Sarkar J. , as he then was, and the impost was upheld as a tax. In the minority opinion delivered by Ayyangar J. , it was held that even in the case of a licence fee a correlation between the fee charged and the service rendered was uocessary to be established. It was, therefore, held to be a tax but invalidly imposed under a power suffering from the vice of unconsti- tutional legislative delegation.
In the cases before us the licence fee& charged from the various traders in the market areas are not excessive and ha·,e not been attacked on any ground whatsoever. We are, therefore, not concerned to find out whether an element of quid pro quo is necessary in cases of all kinds of licence fees. Some licences are imperative to be taken 9nly by -v. 1 ay of regulatory measure, some are in the nature of grant of exclusive right or privilege of the State, such as, excise cases noticed by this Court in the case of Har Shankar & Ors. etc. etc. v. The Dy. Excise & Taxation Commr. & Ors. (') Some may be cases of licence fees where element of quid pro quo is necessary to be established. But what is important to be pointed out from the case of Liberty Cinema (supra) is that in the case of a fee of the kind with which we are concerned in this case the element of quid pro quo must be established. Otherwise the imposition of fee will be had. In the majority opinion.
it is stated at page 490 :- "The conclusion to which we then arrive is that the levy under s. 548 is not a fee as the Act does not provide for any sen·icc to him. No question here arises of correlating the to the person on whom it is imposed. The work of in~pcc tion done by the Corporation which is only to s•"e that the terms of the licence arc observed by the licensee is not a service to him. No question here arises of correlating the amount of the levy to the costs of any serv:cc. The L~w :s a tax. " Ill [1975] 3 S. C. R. 254. A B c D F G H 1236 SUPREME COURT REPORTS ·" [1979] 3 s. c.! l. . A Ayyangar J. , ·also said at page 526 that there being no correla- tion between the fee charged and the service rendered the impugned · ·. t- levy was not authorised. Mr. Tarkunde "ii one stage of the hearing endeavoiired: to submit, although. the Sol'citor-General appearing for the State of Punjab'·and :B . l\lr. H. L.
Sibbal for, the Punjab Marketing Board had made n~ such submissions, that the impugned impost could be justified as a tax. There was no lack of legislative competence in imposing a tax of the kind under issue. · Counsel furiher submitted that in almost all the cases-·hi. abs~rice of quid pro quo the :levy was held to be bad"'and unsustainable as a tax for want of legislative competence: On the • • • other hand learned counsel for the appellan~s a·m1 the petitioners M/s. ·+ A. K. Sen, Anil Dewan, B. S. Malik and A. K. Goel pointed out that c :D E F G H at no point of time the respondent sought to justify the impost as a tax obviously because it would have then violated the provisions of the Sales Tax law which did not authorise the imposition of such a tax beyond a certain percentage, and as a tax it could not be but a sales tax.
Finally this controversy was not pursued when we pointed out that at no stage_ the question was raised and no attempt 1t any stage was made to justify it as a tax. Obviously the Market Com- mittees could not . be competent under the Act to impose any tax on the sale and purchase of the agricultural produce in the market nor did it ever purport to do so. The nature of the impost and the power· under which it was levied squarely and uniformally remained within +· the realm of the fee and fee of the kind which could not but be sus- tained on the establishment of the element of quid pro quo l:>otween the authority charging the fee arid its payer. . The next case to be considered is the decision of this Court in ,Nagar Mahapalika Varanasi v. Durga Das Bhattacharya & Ors. (') in \vhich it was held that the annual licence fee charged from the rickshaw owners and the . drivers by the Varanasi Municipal Board -could be justified only on the basis of the clement of quid pro quo.
The fee was held to be ultra vires afld illegal because after excluding certain items o( expenditure the balance did not constitute sufficient quid pro quo for the amount of the licence fee charged. It could not be sustained as a tax. Certain· major items of expenditure in:::urre (xvii) of Section 26 of the Act. " E The High Court further proceeds to say :- . "After ·giving my careful consideration, I am of the opinion that the expenditure on the construction of link roads for which amounts were deposited with the Public Works Department is fully justified as it is for the benefit of the growers, the licensed dealers and the general public and pro- motes the interests of the notified market area. " The High Court seems to be of the view that since transportation is very es·sential for the development of a market and to enable, the growers of the agricultural prod. uce to bring the same to the market, the construction of link roads becomes an essential purposes of the market committees.
It may be so but the purpose cannot be allowed to be ach'eved at· the cost of the market fee we realised from the dealers. The High Court point out that the money cannot be spent in construction of the government activities for providing main roads in the State. How, then, the Market Committees can be made to con- tribute a very big chunk of their market fee income in construction of the link roads throughout all villages ? To push the matter logically, 24--409SCI J19 F G ff A B c D E F . H 1258 SUPREME COURT REPORTS (1979] 3 S. C. R. if a link road is to be constructed from a village to the main road for enabling an agriculturist to transport his produce upto the main road then the Market Committee should be under an obligation to construct or at least to maintain the main road also in order to enable that agri- culturist to react the market which may be at distance of say 20 miles from the link road.
ft is plain that construction of such link roads is as much ~ part of the governmental activity as that of the main roads. It is_ interesting to find out from paragraph 36 of the judgment that the Market Committees were made to pay donations to educational institutions imparting general education. The Market Committee, Hissar, spent Rs. 1,07,794/- on the water supply schcm' for a village. Even the High Conrt was constrained to disapprO\'e of this. It also spent a sum of Rs. 6,00,000j- for the constructica of a Panchayat Bhawan. Many other instances arc mentioned in 1nragraph 37 of the judgment which show that the Market Committ~es were getting enormous income from market fees and they were made to squander away a good portion of that money unauthorisedly, although none of the purposes in itself was objectionable or bad. Rather, they were very laudable. But taking an overall view of the matter the High Court felt persuaded in the case of Haryana to uphold the maximum limit of Rs.
2/- by adding "no interference seems to be called for at this time. " In the case of Punjab, however, the allegation of the peti- tioners before the High Court was that the market committees were collecting lakhs of rupees every month and the Marketing Board was collecting crores of rupees. The Marketing Board was aske-0 to contri- bute one crcire of rupees to the Guru Gobind Singh Medical College which had been recently establishe-0 at Faridkot. A good portion of the money was already paid and the High Conrt was constrained to observe that "the State Government shall be well advised to compen- sate the Agricultural Marketing Board and the Market Committees for the misutilisation of their funds for this unauthorised purposes".
The High Court held at page 19, column 2 :- "In the historical background, set out above, I am con- vinced that the enhancement in the amount of fee from one rupee and fifty paise to two rupees and twenty-five paise per one hundred rupees was not genuine and it was made with a view to enable the market committees and tha Agricultural Marketing Board to reimburse themselves for the amounts which they were directed to contribute to Guru Govind Singh Me-Oical College at Faridkot. The Market Committees were having enough income and could meet their legitimate requirements from the amounts of fees which were being realised prior to the enhancement. " ... • • x. K. PURI v. PUNJAB (Untwa/ia, l. ) 1259 The enhancement of fee from Re. I/- to Rs. 1. 50 was upheld but the A further increase to Rs. 2. 25 was knocked down. We may note here that in the batch of appeals we heard there was no appeal from the judgment of the High Court in the case of Hanuman Dall & General Mills.
We may reasonably assume, therefore, that the dealers of Haryana were reconciled for payment of the market fees upto tlie maximum limit of two rupees per hundred rupees. In the case of Punjab, as we traced the history at the very outset, the maximum fixed later was Rs. 2. 20 by Act 14 ol 1975. But by telegraphic instruc- tions issued by the Board the Market Committees were asked to charge Rs. 2/- only with effect from 23-8-1975. This was challenged before the High Court but unsuccessfully in the case of Kewal Krishan Puri and another v. The State of Punjab and others (supra). Civil Appeal 1083 of 1977 is from this judgment of the High Court. The Full Bench judgment in this case also suffers more or less from the same kind of error in the approach of the legal problem as is to be found in the earlier Division Bench decision.
In paragraph 13 of the judgment at page 352 the High Court repelled the attack on clauses (x), (xi) and (xiv) of section 26 of the Act on the ground :- "The broad object of the legislation like the present one is only to protect the producers of _agricultural produce from being exploited by middlemen and profiteers and to enable them to secure a fair return of their produce. The Legislation like the present one has its root in the attempt on the part of the nation to provide a fair deal to the growers of crops and also to find a market for its sale at proper rates without reasonable chances of exploitation. If this object is kept in view, then the clauses of which the constitutionality has been chanllenged, would certainly fall within the ambit of Entry 28.
Clauses (x), (xiii), and (xiv) would help the growers to make improvements1 in the production of agricultural pro- duce with the result that their agricultural produce would find a better market resulting in getting them high price for their agricultural produce. " It is to be emphasised at this stage that the question is not of the legis- lative competence to enact those clauses, nor is there a question of the fee assuming the character of a tax and therefore, its imposition being beyond the legislative competence of the State Legislature. The precise and the short question is whether the Market Committees and B c I> E F G the Board can be authorised to spend the amount realised by market e fees, as fee and fee alone, for achieving all the objects of the Act when such expenditure cannot be justified and sustained on the well-known 1260 SUPREME COURT REPORTS [1979] 3 S. C. R, A concept of fee as pointed ont by this Court in several decisions.
The impost must be correlated with the service to be rendered to the payers of the fees in the sense and to, the extent we have pointed out above. Again the High Court fell into an error in paragraph 15 of the judg- ment when, while upholding the construction and repair of approach B c D E F G B roads, culverts and bridges in the larger sense of the term it said :- "If the approach roads, culverts or bridges are in such a bad shape that they would become hindrance iu the mobility of the produce from one part ot me nouried market area to the principal market yard, then the worst sufferer would be the grower for whose benefit the Act has been enacted. " The Full Bench approved the view of the Division Bench in the earlier case as is apparent from paras 17 and 18 of the judgment at pages 352 and 353.
We have said a bit earlier that the Market Committee and the Board laboured nnder a mistaken notion that they could spend the income from the market fee for all good purposes and objects of the Act in the general interest of agriculture and agriculturists in the village. We are going to extract some of the averments made in the affidavit of the Secretary of the Market Committee of Moga from the judgment of the High Court at pages 354 and 355 :- "Besides the above, the answering-respondent has under- taken the cleaning of mandis, lining of village khals (water courses), link roads; constructions of culverts and bridges; supply of pesticides and spray pumps on subsidized basis as also the electrification of villages. All these activities are go- ing to cost the answering-respondent an amount of several lakhs of rupees. " "Para 8 of the writ petition is denied. It is wrong to suggest that the Board and the answering-respondent have already given Rs.
5 crores to the Markfed without charging any interest. The fact of the matter is that on account of the withdrawal of the Cotton Corporation of India from the various markets, the price of cotton came down suddenly. In order to provide and ensure a reasonable price to the farmer, the Government asked the Markfed to enter the market. For this purpose, the Board contributed some amount of money. So far as the answering-respondent is concerned, it has not contributed any money at all. The answering-respondent believes that the Board has contributed only an amount of Rs. 1. 43 crores and not 5 crores. " .......................................... f ·)'··r o..... ,j,,, I • -' to Civil Appeal 1700 of 1978.
Jn paragraph IO(i) it is stated :- "The construction o{ link roads within the notified mar- ket area is a work of public importance and promotes the general interest of the farmers, traders and the notified market area which is one of the purposes enumerated in clause XVII of section 28 of the Act. " In para IO(ii) it is admitted :- 'Thus the enhancement of market fee from 2 % to 3 % is wholly reasonable and has co-relation with the services rendered or to be rendered. 65% of its income had to be rightly deposited with the P. W. D. and the Government, as the Committee had got its link roads constructed through Government Agency and is still getting so constructed. " It is thus a clear admission that 65% of the income has gone by way of contribution to the P. W. D. fund for construction of the link roads. • . C. R. A Con1n1ittecs in their respective markets. The charging of £. -::e @ Rs. 2/-, therefore, is justified and fit to be sustained. We accordingly do it.
As pointed out earlier the dealers of Haryana did not feel aggrieved when the High Court maintained the raising of mark~t fee to the extent of Rs. 2/- per hundred rupees. We are, however, not inclined to uphold the raising of the fee from Rs. 2/- to Rs. 3/-, as B c D E F G H on the materials placed before us it is clear that this has been done ' chiefly because of the wrong impression of law that the amount of market fee can be spent for any development work in the notified 'I'~ market area and specially for the dc,elopment of agriculture ar. d thi'\. _... ~ welfare of the agriculturists. On the basis of the facts and figures} placed before us from the High Court records and also some new ma'erials filed here we have come to the conclusion that there was no justification in raising the fee from Rs. 2/- to Rs. 3/-. The High Court was wrong in maintaining this rise on an erroneous view of the matter.
We, therefore, allow the appeals and the writ Petitions to the extent and in the manner indicated above and direct the Market Committees and the State Marketing Boards not to realize market f,e at tl". e rate of Rs. 3 /- per hundred rupees on the basis of their impugned decisions and actions which have been found to be invalid by us. We leave the parties to bear their own costs throughout Before we part with these cases we would like to observe ;hat in future if the market fee is sought to be raised beyond the rate of Rs. 2/- per hundred rupees, proper budgets, estimates, balance-sheets show- ing the balance of the money in hand and in deposit, the estimated income and expenditure, etc. should carefully oo prepared in the light of this judgment.
It may be, as was submitted before us, that it is not imperative either for the Market Committees or the Board to pre- pare balance-sheets because their accounts are audited by governm~ auditors but for the purposes of raising the market fee any further, the . • balance-sheets will give a true picture O! f the position also with t'1e bud- gets and estimates. Then, and then only there may be a legal justi- fication for raising the rate of the market fee further to a reasonable extent. On drawing of the correct balance-sheets and framing of the correct estimates and budgets the authorities as also the State Govern- ment will be able to know the correct position ancl to decide reasonably · ·as to what extent the raising of the market fee can be justified taking on overall picture of the matter and keeping in view the reason behind the restrictions of sales tax law concerning the transactions of food- grains and the other agricultural produce. N. V. K. Appeals and petitions allowed.
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