Toll tax and manufacture exemptions upheld as valid tax computation by weight was not a colourable exercise of power

Additional toll tax on dry fruits exported from the State was treated as a tax-like toll traverse, so strict quid pro quo was not required; the levy was upheld despite the goods moving on national highways. The dry-fruit processing activities of grading, sorting, bleaching, drying, cleaning, shelling and packing were held not to amount to manufacture because no new and distinct commercial commodity emerged, so toll exemption notifications did not apply. A sales tax notification fixing tax computation by weight was upheld because it only prescribed a mode of determining turnover and did not change the incidence of tax or amount to colourable exercise of power.

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Issues: (i) Whether the levy of additional toll tax on dry fruits exported from the State, including when the goods moved over national highways, was valid and required a strict quid pro quo; (ii) whether the petitioners were entitled to exemption under the toll exemption notifications on the footing that their activities amounted to manufacture; (iii) whether the sales tax notification levying tax at a rate per kilogram by reference to weight was invalid as a colourable exercise of power.

Issue (i): Whether the levy of additional toll tax on dry fruits exported from the State, including when the goods moved over national highways, was valid and required a strict quid pro quo.

Analysis: The levy was examined in the light of the distinction between tax and fee and the nature of tolls. The Court held that tolls of the kind in question were in the nature of tax and not fee, and that even otherwise the levy fell within the category of toll traverse, where a strict quid pro quo is not essential. The petitioners were found to use State highways and other roads in addition to national highways, and the vesting of national highways in the Union was held to be only for a limited purpose and not to divest the State of ownership of the soil.

Conclusion: The levy of additional toll tax was upheld as valid and the challenge on the ground of absence of quid pro quo failed.

Issue (ii): Whether the petitioners were entitled to exemption under the toll exemption notifications on the footing that their activities amounted to manufacture.

Analysis: The process applied to the dry fruits and kernels, consisting mainly of grading, sorting, bleaching, drying, cleaning, shelling and packing, was tested against the settled meaning of manufacture. Applying the principle that manufacture requires the emergence of a new and distinct commercial commodity with a different name, character or use, the Court held that the petitioners' processes did not bring into existence a new product. The exemption notifications were therefore unavailable.

Conclusion: The claim to exemption was rejected and the petitioners were held not to be engaged in manufacture for the purpose of the notifications.

Issue (iii): Whether the sales tax notification levying tax at a rate per kilogram by reference to weight was invalid as a colourable exercise of power.

Analysis: The Court held that the incidence of taxation remained on sale and purchase, while the notification merely provided a different method for determining turnover by reference to weight. Since the Act permitted turnover to be determined subject to prescribed conditions and restrictions, the method adopted did not alter the nature of the levy or show any colourable exercise of power.

Conclusion: The sales tax notification was held valid.

Final Conclusion: All substantive challenges to the toll levy, the claimed exemption and the sales tax notification were rejected, and the petitions failed in their entirety.

Ratio Decidendi: A statutory toll imposed as a tax does not require strict quid pro quo, toll traverse is supported by the general amenities and advantages enjoyed by the user, manufacture requires emergence of a distinct commercial commodity, and a tax notification may validly prescribe the mode of turnover computation so long as the incidence of tax remains unchanged.

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