2018 (11) TMI 212 - HC - GST

States can levy market fee on agricultural produce including timber regardless of dealer location under Entry 66 Schedule VII List-II

The HC dismissed the petition challenging the levy of market fee under the Rajasthan Agriculture Produce Marketing Act, 1961. The court held that states ... Market fee - fee leviable under a statutory market enactment - scope of 'agricultural produce' including timber - regulated market services and liability throughout the notified area - effect of GST regime on pre existing state market fee/cess - concurrent legislative competence under Entry 66, List IIFee leviable under a statutory market enactment - market fee - Levy under Section 17 of the Rajasthan Agriculture Produce Marketing Act, 1961 is a fee and not a cess. - HELD THAT: - The Court found that the petitioner's foundational submission treating the impugned levy as a 'cess' is contrary to the statute and law. The levy under the Act of 1961 (Section 17) is characterised as a fee. As a statutory market levy, it falls within the established principle that the State may impose market fee under its legislative competence, and liability to pay such fee does not depend on a dealer carrying on business within the market proper but extends to transactions within the notified area served by the market committee. The Court relied on settled precedents concerning the nature and territorial scope of market committee services and market fee liability to uphold this characterisation. [Paras 6, 7]The impugned levy is a fee under the Act of 1961 and not a cess.Scope of 'agricultural produce' including timber - Timber ('Imarti Lakadi') is a notified item and falls within the definition of 'agricultural produce' under the Schedule to the Act of 1961, and is therefore exigible to mandi fee. - HELD THAT: - The Court observed that Section 2(i) and the Schedule to the Act expressly enumerate 'timber' at the relevant serial entry, making it an agricultural produce for purposes of the statute. Consequently, the contention that timber is a forest product outside the scope of the Act was held to be inconsistent with the statute. The Court also relied upon an earlier Division Bench decision of this Court which treated timber as covered by the definition and thus within legislative competence to be notified and taxed under the Act. [Paras 9, 10]Timber is an agricultural produce as notified in the Schedule and is subject to the mandi fee under the Act.Effect of GST regime on pre existing state market fee/cess - concurrent legislative competence under Entry 66, List II - The introduction of GST does not automatically obliterate the market fee leviable under the Act of 1961; the market fee is not listed in the repeal/saving provisions and continues to be leviable under the State's legislative competence. - HELD THAT: - The Court acknowledged the object of the One Hundred and First Amendment and the consolidating effect of GST on various indirect taxes and cesses. However, it held that only those levies specifically dealt with by the repeal and saving provisions of the CGST and RGST enactments have been subsumed. The market fee under the Act of 1961 is not enumerated in those repeal/saving provisions and is imposed by a distinct State enactment under Entry 66 of List II; therefore the GST constitutional amendment and resultant statutes do not ipso facto displace the State's power to levy the market fee under the existing market law. For these reasons the contention that GST has done away with the contested levy was rejected. [Paras 11, 12, 13, 14]The advent of GST does not displace the market fee under the Act of 1961; the levy continues to be valid.Final Conclusion: All contentions raised by the petitioner were rejected and the writ petition was dismissed in limine. Issues:1. Declaration sought regarding the power of the state to charge tax/cess under Rajasthan Agriculture Produce Marketing Act, 1961 from society members.2. Legality of cess on purchase and sale of timber by society members.3. Constitutionality of levy and recovery of Mandi cess from society members.4. Impact of Goods and Service Tax on the impugned cess.5. Interpretation of the nature of levy under the Act of 1961.6. Classification of timber as an agricultural produce.7. Continuation of cess under the Act of 1961 post Goods and Service Tax implementation.Analysis:1. The petitioner, a registered society, filed a writ petition challenging the state's power to charge tax/cess under the Rajasthan Agriculture Produce Marketing Act, 1961 from its members.2. The petitioner's counsel argued that the members engaged in timber trade outside the Mandi yard should not be subject to the cess as they do not utilize the Mandi facilities.3. The counsel contended that levying Mandi cess on society members not situated in the Mandi yard is arbitrary, violative of Article 14, and restricts their right to trade under Article 19(1)(g) of the Indian Constitution.4. The court noted that the petitioner's case was based on the assumption that the levy was a 'cess,' while it was actually a 'fee' under Section 17 of the Act of 1961.5. Referring to legal precedent, the court established that market fee is leviable under Entry 66 of the VIIth Schedule, and traders are liable regardless of their location within the notified market area.6. The court clarified that timber is considered an agricultural produce under the Act of 1961, making it subject to Mandi fee as listed in the Schedule.7. The court cited a previous judgment to support the inclusion of timber as an agricultural produce under the legislative competence of the Act.8. Regarding the impact of Goods and Service Tax, the court explained that the GST regime did not abolish the market fee under the Act of 1961, as it falls under the state's legislative power.9. The court dismissed the petitioner's arguments, stating that the market fee was not affected by the GST implementation and upheld the legality of levying the fee on society members engaged in timber trade.