1984 (11) TMI 291 - SC - VAT / Sales Tax

Law upheld barring refunds of market licence fees when dealers passed the cost to buyers, preventing unjust enrichment

Amar Nath Om Parkash and Others Versus The State of Punjab and Others

SC upheld validity of statutory provision preventing refund of market licence fees to dealers who had passed the fee burden to subsequent purchasers, ... Levy and collection of market fee by the market committees constitued under the Punjab Agricultural Produce Markets Act - Validity of Punjab Agricultural Produce Markets Act - purchase and sale of agricultural produce - Held that:- The primary purpose of section 23A is seen on the face of it; it prevents the refund of licence fee by the market committee to dealers, who have already passed on the burden of such fee to the next purchaser of the agricultural produce and who want to unjustly enrich themselves by obtaining the refund from the market committee. 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 section 23A 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 the public through the market committee what it has taken from the public and is due to it. It renders unto Caesar what is Caesar's. We do not see any justification for characterising a provision like section 23A as one aimed at validating an illegal levy. The decision of this Court in A.V. Nachane v. Union of India [1981 (12) TMI 171 - SUPREME COURT] on which the counsel placed reliance has no application whatsoever. Section 23A, in our view, is consistent with the spirit of Kewal Krishan [1979 (5) TMI 136 - SUPREME COURT] and the letter of Shiv Shanker Dal Mills [1979 (11) TMI 261 - SUPREME COURT]. The present case is a case akin to Orient Paper Mills' case [1961] 12 STC 357 (SC); [1962] 1 SCR 549. Section 23A, 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 section 23A does is to prevent unjust enrichment by means of a refund to which the person claiming it has no moral or equitable entitlement. We are, therefore, satisfied that section 23A 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. Appeals dismissed. Issues Involved:1. Legality of market fee levied by market committees.2. Validity of the enhancement of market fee from 2% to 3%.3. Interpretation of judicial observations regarding the correlation between fees collected and services rendered.4. Legality of refunding excess fees collected by market committees.5. Constitutional validity of Section 23A of the Punjab Agricultural Produce Markets Act.Issue-wise Detailed Analysis:1. Legality of Market Fee Levied by Market Committees:The judgment discusses the historical and legislative context of market fees under the Punjab Agricultural Produce Markets Act. The Act aims to regulate agricultural markets to protect producers from middlemen and ensure fair prices. The primary object is to provide facilities like correct weighment, storage, and reliable market information. The court reaffirms that such fees are within the police power of the state and reasonable under Article 19(6) of the Indian Constitution.2. Validity of the Enhancement of Market Fee from 2% to 3%:The enhancement of the market fee from 2% to 3% was challenged and declared illegal in Kewal Krishan Puri v. State of Punjab (AIR 1980 SC 1008). The court noted that the market committees had substantial surpluses and had made unauthorized expenditures, including large donations. The court concluded that the increase beyond 2% was not justified. The judgment emphasizes that the fee must have a reasonable correlation with the services rendered.3. Interpretation of Judicial Observations Regarding the Correlation Between Fees Collected and Services Rendered:The judgment clarifies the observations made in Kewal Krishan Puri's case, which were misunderstood to suggest a strict quantification of the correlation between fees collected and services rendered. The court in Sreenivasa General Traders v. State of Andhra Pradesh (AIR 1983 SC 1246) explained that a broad correlationship is sufficient and that the primary purpose of the fee must be to render specific services to a specified area or class. The court reiterated that judgments should not be treated as statutes and must be read in the context of the facts of each case.4. Legality of Refunding Excess Fees Collected by Market Committees:Following the Kewal Krishan Puri judgment, the question arose about the refund of excess fees collected. The court in Shiv Shankar Dal Mills v. State of Haryana (AIR 1980 SC 1037) directed that the excess amounts be deposited in the High Court and refunded to those who had not passed on the burden to others. The judgment emphasized preventing unjust enrichment by traders who had already passed on the burden of the fee to consumers.5. Constitutional Validity of Section 23A of the Punjab Agricultural Produce Markets Act:Section 23A was introduced to prevent the refund of excess fees to traders who had passed on the burden to the next purchaser. The court upheld the constitutional validity of Section 23A, stating that it prevents unjust enrichment and recognizes the consumer-public as the ultimate bearers of the fee. The provision ensures that the excess amounts are retained by the market committees and used for public benefit, consistent with the spirit of the Kewal Krishan judgment and the directions in Shiv Shankar Dal Mills.Conclusion:The appeals challenging the constitutional validity of Section 23A were dismissed. The court affirmed that Section 23A was within the legislative competence of the Punjab Legislature and was not invalid. The judgment underscores the importance of a reasonable correlation between fees collected and services rendered, preventing unjust enrichment, and ensuring that public funds are used for the intended purposes of the legislation.