Authority of law is required for compulsory surcharge claims, and arrears recovery needs express contractual authorisation.

A compulsory surcharge on a liquor contract was treated as unauthorised because the auction conditions did not create a binding promise to pay it, the forest commutation rules were inapplicable absent a voluntary agreement to take forest produce, and the levy could not be characterised as royalty when it operated as a tax or cess requiring authority of law under Article 265. The demand also could not be recovered as arrears of land revenue, because the Madhya Pradesh Land Revenue Code permits such recovery of contractual dues only where the contract expressly authorises it. On the stated facts, the surcharge and revenue recovery were unlawful.

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Issues: (i) Whether the surcharge of 7 1/2 per cent on the liquor contract was lawfully leviable under the contract or under the forest commutation rules as royalty. (ii) Whether the amount could be recovered as arrears of land revenue under the Madhya Pradesh Land Revenue Code, 1954.

Issue (i): Whether the surcharge of 7 1/2 per cent on the liquor contract was lawfully leviable under the contract or under the forest commutation rules as royalty.

Analysis: The conditions in the auction memoranda merely indicated a possible future liability and did not establish a binding contractual undertaking to pay the surcharge. Section 32 of the Indian Forest Act, 1927 and the commutation rules framed thereunder were held inapplicable because they proceeded on a voluntary agreement for obtaining forest produce, whereas the contractor had not agreed to take fuel from the protected forest. The levy also did not answer the legal character of royalty, since royalty is ordinarily a payment linked to the quantity removed and rests on agreement. On the facts, the compulsory surcharge was treated as a tax or cess, which can be imposed only by authority of law under Article 265 of the Constitution of India.

Conclusion: The surcharge was not lawfully leviable and was without authority of law.

Issue (ii): Whether the amount could be recovered as arrears of land revenue under the Madhya Pradesh Land Revenue Code, 1954.

Analysis: Section 143 of the Madhya Pradesh Land Revenue Code, 1954 permits recovery of moneys due under a contract as arrears of land revenue only where the contract expressly provides for such recovery. No such express condition was shown to exist in the auction contract. Accordingly, even assuming a contractual liability to pay, the State could not invoke the revenue-recovery machinery.

Conclusion: The amount could not be recovered as arrears of land revenue.

Final Conclusion: The challenged surcharge and the attempted revenue recovery were held unlawful, and the writ petition succeeded with consequential relief.

Ratio Decidendi: A compulsory levy styled as royalty or surcharge, but imposed without statutory authority and without a voluntary contractual basis, cannot be recovered as arrears of land revenue unless the governing contract expressly authorises such recovery.

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