TaxTMI 
TaxTMI 
2006 (8) TMI 307
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....ourt of Andhra Pradesh passed in Writ Petitions Nos. 19213, 19299, 19384, 19385, 19387, 19388, 19389, 19523, 19526, 19707, 19709, 19915 and 22448 of 1998 See [1999] 112 STC 418 (SC)., by which the constitutional validity of the Andhra Pradesh Rural Development Act, 1996, has been upheld. Heard Shri M.N. Rao, learned Senior Counsel for the appellants, and Shri Rakesh Dwivedi, learned Senior Counsel for the respondents. Most of the petitioners-appellants are registered firms, while some of them are individual traders engaged in the business of rice milling. It is alleged that they are regularly submitting returns to the commercial tax authorities reflecting their turnovers of purchase of paddy as well as sale of rice every year and accordingly they pay purchase and sales tax. They are challenging the levy of cess under the Andhra Pradesh Rural Development Act, 1996 (hereinafter referred as "the Act"), which levies cess in addition to the purchase or sales tax being paid by them. It is alleged that the aforesaid cess under the Act does not fall under any of the entries in List II or List III of the Seventh Schedule to the Constitution. Hence it is alleged that the aforesaid levy of....
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....n the Board. The purpose of this fund has been mentioned in section 9 which states: "9. Purpose for which the fund may be applied.-The fund shall be applied for the purposes herein specified: (i) to provide and accelerate comprehensive rural development including the construction of rural roads and bridges; (ii) to augment storage facilities for storing agricultural produce; and (iii) for maintaining and strengthening of public distribution system." The question in the present case is whether the impost in question is a fee or a tax. If it is a tax, then it will have to be held to be unconstitutional because it does not come in any of the entries in List II of the Seventh Schedule to the Constitution. However, if it is a fee, then it comes under entry 66 of List II. Ordinarily, a cess means a tax which raises revenue, which is applied to a specific purpose. Thus, in Shinde Brothers v. Dy. Commissioner AIR 1967 SC 1512, Hidayatullah, J. in his dissenting judgment observed: ". . . . . The word 'cess' is used in Ireland and is still in use in the India although the word rate has replaced it in England. It means a tax and is generally used when the levy is ....
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....nd a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest. If the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees there is, and must always be, correlation between the fee collected and the service intended to be rendered . . . . There is no generic difference between a tax and a fee. Both are compulsory exactions of money by public authorities." Similarly in City Corporation of Calicut v. Thachambalath Sadasivan AIR 1985 SC 756, which has placed reliance on an earlier decision of the Supreme Court in Amar Nath Om Parkash v. State of Punjab AIR 1985 SC 218 See [1986] 62 STC 130 (SC)., it was held that: "It is thus well-settled by numerous recent decisions of this Court that the traditional concept in a fee of quid pro quo is undergoing a transformation and that though the fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct, a mere casual relation may be enough. It is not ....
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....tion. As already stated above, the concept of fee has undergone a sea change, while the writ petition has been drafted in the light of the old concept of fee and not the new concept which was subsequently developed by the Supreme Court. In Sona Chandi Oal Committee v. State of Maharashtra AIR 2005 SC 635, this court observed as under: ". . . . . The traditional concept of quid pro quo in a fee has undergone considerable transformation. So far as the regulatory fee is concerned, the service to be rendered is not a condition precedent and the same does not lose the character of a fee provided the fee so charged is not excessive. It was not necessary that service to be rendered by the collecting authority should be confined to the contributories alone. The levy does not cease to be a fee merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have a direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service. The quid pro quo in the strict sense was not always a sine qua non for a fee. All that is necessary is that there should be a reasonable relatio....
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....ed that the particular individual from whom the fee is being realised must be rendered some specific services. It may be noted that the decision in Jindal Stainless [2006] JT 4 SC 611; [2006] 145 STC 0544; [2006] 6 RC 457 was given in connection with article 301 of the Constitution, and it was not regarding the nature of a fee. Hence, it cannot be regarded as an authority explaining the nature of a fee. In our opinion the decisions of this court in Sreenivasa General Traders v. State of A.P. AIR 1983 SC 1246, City Corporation of Calicut v. Thachambalath AIR 1985 SC 756, State of Himachal Pradesh v. Shivalik Agro Poly Products AIR 2004 SC 4393, etc., still hold the field regarding the nature of a fee. In our opinion the cess in question is in substance a fee as it is being levied for rendering to the rural public the service of rural development for the purposes stated in para 9 of the Act. Clearly roads, bridges and storage facilities have to be built in rural areas for progress, and naturally this will require generating funds. Thus, even if no specific service is rendered to any particular individual from whom the fee has been realised, the cess in question is nevertheless ....