TaxTMI 
TaxTMI 
2001 (11) TMI 986
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....gistered under the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956 (hereinafter referred to as "the 1948 and the 1956" Acts respectively). 4.. Under the 1948 Act, the milk purchased for making ghee, paneer and butter, etc., was, hithertofore, subjected to a purchase tax at the rate of 4 per cent. A surcharge at the rate of 10 per cent of the purchase tax was also levied under section 5A of the Act. 5.. On July 19, 2000, the Governor of Punjab promulgated the Punjab Dairy Development Board Ordinance, 2000. It was issued to "provide for the creation of Punjab Dairy Development Board for coordination between the organisations engaged in dairy sector, to uplift professional standard of the dairy industry in the State and to develop modern dairy farming technology system and to levy cess on the milk plants by abolishing purchase tax on milk". 6.. By this Ordinance, the purchase tax was abolished. Instead a cess at the rate of 10 paise per litre of the licensed capacity of a milk plant was levied. In exercise of the powers under the Ordinance, the Rules called "the Punjab Dairy Development Board Rules, 2000" were also framed. These Rules were published in ....
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....entry 15 deals with preservation, protection and improvement of stock and prevention of animal diseases and veterinary training and practice. Entry 27 deals with production, supply and distribution of goods subject to the provisions of entry 33 of List III. Entry 54 which deals with taxes on the sale or purchase of goods other than newspapers...Entry 60 taxes on professions, trades, callings and employments. Similarly, even List IIIConcurrent List....also supports the legislative competence of the Punjab Assembly for imposing the cess on the milk plants. Entry 33 deals with trade and commerce and the production, supply and distribution of....foodstuffs including edible oil seeds and oils". On the basis of these entries, the respondents maintain that "the cess on milk plant is certainly within the legis lative competence of the Punjab Assembly. Therefore, the tax/cess which is being collected by the answering respondent is authorised by law........" (emphasis supplied). Thus, it is admitted that the impugned levy is a tax. However, it is pleaded that it had been validly imposed. 11.. In the reply on merits, it has been averred that "in pith and substance" the cess impos....
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....lk shed area and as such, there is direct corelation between the money being collected from them in the shape of cess and the improvement of their respective milk shed areas so as to bring about qualitative and quantitative improvement in the entire dairy sector". The Dairy Development Department has "written letters to all the milk plants to prepare and suggest schemes for the improvement of their respective milk shed areas". Thus, it is pleaded that there is an element of quid pro quo and the levy is valid. 15.. The position that emerges from the pleadings of the parties is that initially, all the three respondents had admitted that the impugned impost is a tax. However, at a later stage, respondent Nos. 1 and 3 have taken a somersault. They have pleaded that the levy is a fee for the services which shall be provided. However, the Board has not changed its categorical stand that the levy is a tax. 16.. Learned counsel for the parties were heard. Mr. Sibal, learned counsel for the petitioners, contended that the milk process ing units are a "scheduled industry" controlled by the Union of India. The units are governed by the provisions of the Industries (Develop ment and Regu....
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....etitioners, yet, they are the ultimate beneficiaries if the declared objectives are achieved. Thus, the levy is a "fee" and not a "tax". 20.. It would be useful to notice the relevant provisions of the impugned Act at the threshold. The Act has been promulgated "to provide for the creation of the Punjab Dairy Development Board, for coordination between the organisations engaged in dairy sector, to uplift professional standard of the dairy industry in the State, to develop modern dairy farming technology system and to levy cess on the milk plants by abolishing purchase tax on milk". Section 2 provides the definitions. Clause (d) defines a "milk plant" to mean "a milk handling, processing or manufacturing unit registered under the Milk and Milk Products Order, 1992 of the Government of India". Section 3 empowers the State Government to establish the Punjab Dairy Development Board "by notification in the Official Gazette". Clause (2) gives the constitution of the Board. The Chief Minister is the Chairman. The Minister incharge of Animal Husbandry and Dairy Development is the Deputy Chairman. Minister for Cooperation is the second Deputy Chairman. The chief Secretary, the Secr....
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....he Board can make regulations which are consistent with the provisions of the Act and the Rules framed there under. Under section 19, the State Government can direct that "this Act shall during such period as may be specified in the order, but not extending beyond the expiry of two years from the date of commence ment of this Act have effect subject to such adoption whether by way of modification, addition or omission as it may deem to be necessary and expedient". Under clause (2), the order is required to be laid before the State Legislature. Section 20 provides for repeal and savings. 22.. These are broadly the provisions of the Act. However, what emerges from a perusal of the provisions is that the Board has 25 members with the Chief Minister at the apex. All these members are either connected with the Government or nominated by it. Its activi ties are monitored by a Steering Committee with the Secretary, Department of Animal Husbandry as its Chairman. It is "a nodal agency for coordinating, planning and organising the programmes of dairy development". The Board has to work "in consultation with the State Government". It can create posts and make appointments thereto but only....
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....d the public authority, which collects. It is not always absent in case of a tax. However, it is not an essen tial prerequisite. 27.. What is the position in the present case? The functions assigned to the Board are in no way different from those being performed by various departments of the Govern ment. Formulation of policies, coordination of activities, development of technologies and the like are all purely governmental functions. Development of agriculture or dairy farming is in no way different from providing facilities for education or health. Should the petitioners alone be made to bear the burden of it? And what for? 28.. The Act contains no provision to say that "the proceeds of the cess shall be utilised to provide any service to the milk plants". In fact, there is no promise of any service or special benefit. The payer shall have no right to compel the Board or anyone else to provide any facility. The Board is under no obligation to ensure a regular supply of milk, water, electricity or even labour to the plant. In fact, the plant may have to be closed down for nonavailability of power. Yet, the cess shall be levied. That too, on the basis of total capaci....
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.... must be shown with reasonable certainty as being spent for rendering services....". This was, as said by Seervai, a rule of "universal application". 34.. This principle was undoubtedly diluted in the subsequent decisions. In Municipal Corporation of Delhi v. Mohd. Yasin [1983] 142 ITR 737 (SC); [1983] 2 SCR 999, O. Chinnappa Reddy, J., was pleased to observe that the "Vicissitudes of time and necessitudes of history contribute to changes of philosophical attitudes, concepts, ideas and ideals and, with them, the meanings of words and phrases and the language itself. The philosophy and the language of law are no exceptions. ....This is particularly so where the words and phrases properly belong to other disciplines. "Tax" and "fee" are such words. They properly belong to the world of public finance but since the Constitution and the laws are also concerned with public finance, these words have often been adjudicated upon in an effort to discover their content". 35.. These "philosophical" observations have been even com mented upon by Seervai in his treatise"Constitutional Law of India"Volume 3 at page 2371. He notices that on the "facts found by the Supreme Court, the impug....
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....l of these industries vests in the Union. The impugned Act is beyond the competence of the State Legislature as the field is already occupied by the 1951 Act. Is it so? 41.. Before proceeding to consider the issue, the objection of the counsel for the respondents may be noticed. It was contended that no plea regarding the 1951 Act having been raised in the petition, it should not be gone into. 42.. It is undoubtedly true that it is the case as pleaded that has to be found by the court. It is so for the simple reason that no one should be taken by surprise. The party should get the chance to plead relevant facts. However, in the present case, the issue has to be examined in the light of the facts as already pleaded. In the light of the provisions of the statute. Without reference to anything beyond the record of the case. Thus, the objection cannot be sustained. 43.. The 1951 Act was promulgated by the Parliament to "provide for the development and regulation of the industries speci fied in First Schedule". The food processing industries including the "milk foods" were included in the Schedule. The object of the Act was to "provide the Central Government with the means o....
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....ks for production, coordinating production programmes; norms of efficiency with a view to eliminating waste and improving quality and reducing costs; measures for securing the fuller utilisation of the installed capacity and for improving the working of the industries, promoting arrangements for better mar keting and helping in the devising of a system of distribution of sale of the produce of the industry; promoting standardisation of projects; assisting in the distribution of controlled materials and promoting arrangements for obtaining material for the industry. Various other provisions for promotion, improvement and standardisation are included in the Second Schedule. 45.. Another fact which deserves mention is that in exercise of the powers conferred by section 3 of the Essential Commodities Act, 1955, the Milk and Milk Products Order, 1992 has been issued by the Central Government. It extends to the whole of India. Clause 2 gives the definitions. Clause 3 provides for the constitution of the Milk and Milk Product Advisory Board by the Central Government. Clause 4 lays down the functions of the Board. Under clause 5, provision for registration of the milk plants has been ma....
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.... and the applicant will help extension work of cooperatives as well. 48.. It is, thus, clear that the units set up by the petitioners have been licensed under the 1992 Order. These are a scheduled industry. The grant of licence, renewal and revocation are controlled by the Central Government. The development of the milk shed areas is the responsibility of the licensees. The provisions clearly support the conclusion that the Board is under no obligation to provide services in the milk shed areas. 49.. Mr. Sibal contended that the provisions of the impugned Act relate to the matters covered by the 1951 Act. In this behalf, learned counsel pointed out that the powers of the Development Council as contained in the Second Schedule and those of the Board under the impugned Act are akin. Is it so? 50.. Section 10, lays down the functions of the Board. Those of the Development Councils are given in the Second Schedule to the 1951 Act. A comparative reading shall be useful: Section 10 Schedule II (i) to effect coordination (1) Recommending targets for between all organisations production, coordinating pro engaged in dairy sector, duction programmes and viz., the Directorate o....
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....he retraining in new varieties of fodder alternative occupations of seeds to increase the personnel engaged in or yield and nutrition of retrenched from the industry. fodder crops and also (10) Promoting or undertaking scien equipment or machinery tific and industrial research, for their harvesting research into matters affecting and conservation; industrial psychology and research (viii) to take requisite into matters relating to produc measures to increase tion and to the consumption or consumption of drink use of goods and services supplied ing milk and milk by the industry. products through pro (11) Promoting, improvements and per advertisement and standardisation of accounting and other related channels costing methods and practice. of media; (12) Promoting or undertaking the (ix) to provide assistance collection and formulation of of any kind to enhance statistics. the scope of export of (13) Investigating possibilities of dairy products; decentralising stages and pro (x) to plan and execute cesses of production with a view programmes of high to encouraging the growth of level education re allied smallscale and cottage search and training in industries. ....
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.... purpose, which relate to the creation of the fund, the powers and functions of the Board and the levy and collection of the cess. These ancillary provisions are really of no consequence. 54.. It deserves notice that section 9 of the 1951 Act authorises the imposition of cess on scheduled industries in certain cases. It has been further provided that the Central Government may hand over the proceeds of the cess to the Development Council, which have to be utilised to achieve the objects mentioned in clauses (a) to (d). These objects include the promotion of scientific and industrial research, of improvements in design and quality and the provision for the training of labour, etc., employed in the scheduled industry. 55.. It was contended that no cess has been actually levied by the Central Government. It may be so. However, the fact remains that under the 1951 Act the Government is competent to impose the cess as and when it considers it expedient to do so. The fact that none has been imposed, would not mean that the State Legislature is competent to enact the law and usurp the power of the Central Government to levy the impugned cess. On a comparative reading of th....
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....ief to the disabled or for grant of pension does not include the power to levy tax for that purpose. Similarly, the power to provide for preservation of cattle does not entitle the State Legislature to levy a tax for that purpose. 60.. Entries 1 to 44 of List II form one group. These embody the subjects on which the State Legislature can legislate. However, it cannot levy a tax while enacting a law relatable to any of the fields covered by these entries. Similarly, entries 45 to 63 form another group and provide for the levy of taxes by the State Legislature. Entry 66 empowers the State to levy fees. 61.. We have found that the impugned impost is not a fee. Thus, it is a tax. Are the provisions of the Act referable to any entry in List II? There is no entry authorising the State Legislature to impose the impugned levy in List II. Reference has not been made to any taxing entry in List III. Thus, the impugned levy cannot be sus tained. The third question is, accordingly, answered in favour of the petitioners. Conclusions: 62.. In view of the above, it is held that: 1.. There is a wellrecognised distinction between "tax" and "fee". Quid pro quo is still an essential....