TaxTMI 
TaxTMI 
2024 (1) TMI 878
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....ith Mr. Harshal Nahata, Mr. Nikhil Vaze, Ms. Susan Linhares, Mr. Geetesh R. Shetye, Ms. Sapna Mordekar, Mr. Shubham Priolkar, Mr. Shivdutt P. Munj, Mr. Deep D. Shirodkar, Ms. Sulekha Kamat, Mr. Tukaram Gawas, Mr. Prashil Arolkar, Additional Government Advocates for the Respondents State in all Writ Petitions. JUDGMENT (PER G. S. KULKARNI, J.) (A) Prelude 1. The Goa Rural Improvement and Welfare Cess Act, 2000 (for short 'the Goa Cess Act') enacted with an object to augment revenue for improvement of infrastructure and health, to promote welfare of the people residing in rural areas, being affected by the use of plastics, dumping of garbage and spillage of materials is the subject matter of challenge in this batch of petitions, by the petitioners, who are inter-alia engaged in transportation of iron and coal into the State of Goa from the other States. (B) Challenge 2. The challenge of the petitioners is primarily mounted on the following counts : (i) that the Goa Cess Act imposes an unconstitutional cess; (ii) The levy as imposed is violative of Articles 301, 303, and 304 of the Constitution of India; (iii) the implementation of the Goa ....
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.... argued before us in this petition, are not be construed as foreclosed by this decision." 4. Accordingly, the grounds as raised by the petitioners in the present petitions have fallen for consideration of this Court, as according to the petitioners, they were not subject matter of adjudication in the case of Sociedade De Fomento Industrial Pvt. Ltd. (supra). 5. Writ Petition No.244 of 2009 (Sesa Goa Limited & Anr. Vs. State of Goa) is argued as the lead matter. The issues of law as raised in the connected proceedings are not different. Learned Counsel for the parties have also addressed the Court on such common issues of law. Hence, all these petitions are being disposed of by this common judgment. (C) Facts 6. For convenience the facts as pleaded in the lead writ petition can be noted hereunder: The petitioner company is stated to be engaged in the business of mining iron ore, extraction, processing, transportation, and export of iron ore from the State of Goa. It also carries on mining activity in the State of Karnataka and Orissa. It is contended that the mineral ore as also coal brought by the petitioner from the State of Karnataka, is required to be transp....
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.... the levy of cess on transportation of mineral ore / coal under the Goa Cess Act and the Rules framed thereunder, has filed this petition on 13 April 2009 inter alia making the following substantive prayers:- "(A) That this Hon'ble Court be pleased to issue a Declaration that the Goa Rural Improvement and Welfare Cess Act, 2000; Rules made thereunder and the Notifications issued thereunder are ultra vires the Constitution and is therefore illegal, null and void; (B) That this Hon'ble Court also be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, Order or Direction for striking down the Goa Rural Improvement and Welfare Cess Act, 2000; the Rules made thereunder and the Notifications issued thereunder and/or forebear the Respondent from enforcing the same; (B1) That this Hon'ble Court be pleased to issue a Writ of Certiorari or Writ in the nature of Certiorari or any other appropriate Writ, order or direction calling for the records from the Respondents and upon examining the legality, propriety and reasonability thereof be pleased to quash and set aside the Corrigendum issued vide Notification d....
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....us, the stand of the State Government as reflected in these affidavit on certain issues was already subject matter of consideration in the said decision of the Division Bench. Be that as it may, for completeness, we note such pleadings on behalf of the State. There are about four reply / additional affidavits filed on behalf of the State. 12. The first affidavit is of Mr. Arun Dessai, Director, Department of Transport, Government of Goa dated 28 September 2010. At the outset, the affidavit referring to the decision of the Supreme Court in the case of "State of A.P. Vs. Mc.Dowell & Co." AIR 1996 SC 1627 contends that none of the grounds as urged by the petitioner in assailing the constitutional validity are tenable to strike down the legislation. It is contended that there is neither violation of Article 301 of the Constitution nor there is an infringement of Article 14 or any other constitutional provision. In justifying the legislation it is contended that mining is one of the major industries in the State of Goa. Different ores like manganese and iron ore, which are extracted in Goa are exported by using facilities at the Mormugao Port. In addition to the ores extracted from G....
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....e State Government proposed to utilize the funds generated, for the purpose of improvement of water supply and road as well as for afforestation and control of dust pollution, in the areas directly affected by mining activities. It is stated that at the time of the introduction of the bill in the year 2000, it was estimated that the annual revenue to be received would be in the tune of Rs.6 crores (approx.). The affidavit states that in these circumstances, the bill was passed by the Legislative Assembly, which was granted an assent by the Governor of Goa on 29 September 2000. Further the rules under the Goa Cess Act namely the Goa Rural Improvement and Welfare Cess Rules 2001 were framed. It is stated that the Goa Cess Act was accordingly brought into force by a notification dated 23 January 2006, with effect from 1 February 2006. 15. The reply affidavit referring to the provisions of Section 3 of the Goa Cess Act, contends that it provides that there shall be levied and collected from the owner, a cess on all "carrier transporting material." It is stated that "carrier" has been defined under Section 2(a) to mean any mode or conveyance or facility by which material is transport....
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....ional resources for improvement of infrastructure and health, to promote the welfare of people residing in rural areas. It is stated that it is not a levy of cess on carrier transporting only mineral ore, as the levy of cess is on the carrier, which transports other materials also which are listed in 'Schedule I' of the Goa Cess Act. It is contended that the true nature of the legislation is to levy cess on the carrier for improvement of the infrastructure. It is contended that the legislation is essentially on facets which adversely affect the health of the people residing in rural areas. The entire structure of the Goa Cess Act is with a view to promote the welfare of the people by interalia having an infrastructure improvement. The levy is thus on the carrier alone. The measure of liability is defined in terms of weight of the items/materials as listed in the schedule to the Goa Cess Act. It is contended that, there is thus a clear relationship between the levy of cess on the materials and the criteria for determining the measure of liability. It is contended that the statutory provision for measuring the liability on account of the levy throws sufficient light on the general ch....
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.... of materials listed in the Schedule to the impugned Act in question, as it is seen that large dumps of rejects (garbage) and pollution to rivers waterbodies and wells, air pollution, spillage, dust, and plastic are common problems caused by the transportation of materials under the Schedule affecting the health of people especially in rural areas, hence the Goa Cess Act provides to remedy such situation by imposing cess to have a system to safeguard and improve the conditions of such affected people. It is next contended that the State has derived its powers under Article 246 of the Constitution and has passed the impugned Act under Entry 6 and 66 of List-II of Schedule VII to the Constitution. It is contended that the Court would be required to apply the doctrine of pith and substance to determine whether the impugned law relates to the particular subject mentioned in List II. It is contended that in substance the Goa Cess Act falls within the State List. There is no encroachment on the Union List in the present case. This affidavit also places on record the data/figures in relation to the expenditure incurred for the various infrastructural facilities provided by the State Gover....
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....ia by the Constitution (101st Amendment Act) 2016 under which clause 4(a) provides that the GST Council shall make recommendation to the Union and States on the taxes, cesses, and surcharges levied by the Union, the States, and the local bodies, which may be subsumed in the Goods and Services Tax. It is contended that accordingly on recommendation of the GST Council, the Ministry of Finance issued a Notification dated 14 November 2018, notifying the Acts which were subsumed under the GST Act in which the Goa Cess Act in question does not feature, therefore, the Goa Cess Act has not been subsumed by the GST Act. 22. It is on the above backdrop submissions are made on behalf of the learned Senior Counsel appearing for the parties which are as under: (E) Submissions on behalf of the Petitioners 23. Mr. Dhond, learned Senior Counsel appearing for the petitioners in Writ Petition No. 244 of 2009 and Mr. Nadkarni and Mr. Sawant, learned Counsel appearing for the petitioners in Writ Petition No. 474 of 2012 have made the following submissions. 24. It is urged on behalf of the petitioners that the Cess as levied by the Goa Cess Act, is unconstitutional on the following counts: ....
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....lege conferred. (ii) It is a settled principle of law that if the cess is to be regarded as a fee then essentially there needs to be an element of quid pro quo between the person who pays it and the authority that imposes cess. The quid pro quo must involve the conferment of some benefit on the persons on whom the fee is imposed. While there is no requirement that such benefit should be in proportion with the amount of fee collected, if that to be confined to those from whom it is collected, there must be, at the very least, availability of indirect benefit or a general nexus between the persons bearing the burden of levy of fee or the services rendered out of the fee collected. The State has shown neither such indirect benefit nor any nexus whatsoever between the petitioners or the others like the petitioners and the services allegedly rendered from the impugned cess. In supporting such contention, reliance is placed on the decision in Hingir-Rampur Coal Co. Ltd. Vs. State of Orissa AIR 1961 SC 459, Corporation of Calcutta Vs. Liberty Cinema AIR 1965 SC 1107 and State of West Bengal vs. Kesoram Industries Ltd. & Ors. (2004)10 SCC 201. (iii) At least three Constitution Benche....
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....ds that Section 3 of the Goa Cess Act is the charging section, this would make it clear that the tax is on the carrier transporting the material. The State has also contended that the cess is levied only on account of transportation. The State of Goa has also taken a stand that the impugned "Cess is a tax". Consequently, the State having taken a stand that the impugned Cess is a tax, as opposed to a fee, is bound by the said pleadings. The contention is supported relying on the decision in Nagindas Ramdas v. Dalpatram Ichharam (1974)1SC 242. It is hence, submitted that the impugned Cess is avowedly a tax, and in its application to the Petitioners in this case, is a levy on the consignment of goods in the course of inter-State trade or commerce, for which the State has no legislative competence to impose it. V. Discriminatory On the ground that the impugned cess is discriminatory, the submissions are to the effect that both, as originally enacted and as on date, the impugned Act discriminates between persons who transport the ore which is locally mined, that is where mining-lease royalty is paid to the Government of Goa and those who mine it outside Goa, but transport it into ....
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....eing subsumed by the incorporation of the GST laws, is on the premise that transportation is clearly a service and the levy imposed on all carrier transporting material is one on the supply of a service and therefore, in relation to any inter-State supply, it can be only the Parliament, which would be the Government of India, to levy and collect the tax. It is also the petitioner's case that all laws relating to tax on services in force in any State, immediately before the implementation of the Constitution (101st Amendment) Act, 2016 would stand subsumed in the GST. The case of the State Government that such subsuming is not automatic and is only required to be made by the GST Council, is also untenable. The petitioner has also contended that Article 246A(2), Article 269 and Article 286 as amended by the Constitution (101st Amendment) Act operate proprio vigore and hence, would not depend on any recommendation by the GST Council. It is also the case of the petitioners that the State's case that the subsuming is restricted to Entries 66 read with Entries 52, 54, 55 and 62 of List II of the Seventh Schedule is affected by the Constitution(101st Amendment) Act, would not assist the S....
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....omento's case. In the present matter, the Petition seeks to agitate the issue of constitutional validity on grounds which were pleaded in Fomento's matter. It is trite law that once the constitutional validity of a statute is upheld, no challenge on additional grounds is permissible. To substantiate this, following precedents are relied on: (i) Delhi Cloth and General Mills Ltd. vs Shambhu Nath Mukherji and ors (1977) 4 SCC 415 (paragraphs 10 to 12); (ii) Tika Ram and ors vs State of Uttar Pradesh and Ors (2009) 10 SCC 689 (paragraphs 68 and 98); (iii) KAIL Ltd. vs Sahebrao Deshmukh Cooperative Bank Ltd. and ors. reported in (2016) SCC OnLine Bom 4471 paras 4, 5 and 6. It is thus submitted that the challenge to the constitutional validity on basis of additional grounds is required to be dismissed. (II) It is submitted that the Goa Cess Act is a fee and therefore cannot be challenged for violation of Part XIII of the Constitution. The reasons being:- a) this Court in Fomento's case has relied upon the ratio of the decision of the Supreme Court in the case State of West Bengal vs Kesoram Industries reported in (2004) 10 SCC 201, by rendering....
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....rticle 14 of the Constitution by considering the following:- a) Assuming that the Goa Cess Act is a tax, there is no discrimination in either the Act or Rules. When a discrimination is alleged on fixation of rates by the executive in the Schedule of the Goa Cess Act, it must also be borne in mind that the Petitioner's contention/grievance is about discrimination in rates fixed in the Schedule based on origin of the iron ore, that is iron ore for which royalty is paid to the State of Goa which attracts nil cess and on the other hand the iron ore coming into Goa from other states for which royalty is not paid to the State of Goa. b) Thus essentially, there is no grievance about either the Act or the Rules thereunder to be discriminatory. The grievance is about exercise of power by the executive in fixing the rates in the Schedule is stated to be arbitrary. Such a ground has not been raised in this Petition at all and therefore the Petition must fail. c) The Goa Cess Act confers powers on the executive to fix rates in the Schedule. This is a piece of delegated legislation. Different rates prescribed with respect to carrier, transportation of ore from outside....
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....ged this burden. g) It is submitted that the presumption of constitutionality is strong and in order to sustain it, this Court may have to take into consideration matters of common knowledge, matters of common report, the history of the times and also this Court may have to assume every state of facts which can be conceived at the time of legislation of the Act. h) On the petitioner's case on Article 304, it is submitted that Article 304 (a) does not apply to the Goa Cess Act. The Cess Act is not relatable to any entry regarding trade or commerce. The judgment in the matter of Fomento (supra) upholds the validity of the Act on entries not related to trade and commerce. i) In any case, there is no similar tax in other corresponding States and hence the question of the Goa Cess Act being violative of Article 304 (a) does not arise. j) It is submitted that the Goa Cess Act is not in relation to supply. The word "supply" was considered by the House of Lords in the matter of Regina vs Maginnis, reported in (1987) 2 WLR 765 wherein it is held "the word "supply" in its ordinary natural meaning conveys the idea of furnishing or providing to another somet....
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....1 SCC 70 (paragraph 14, 15 and 16); (v) Federation of Hotels and Restaurant Association vs UOI (1989) 3 SCC 634 (paragraphs 46, 47 and 48). IV) It is next submitted that the Goa Cess Act is not subsumed under GST for the following reasons ; a) It is submitted that the petitioners' contention that the Goa Cess Act is subsumed under the GST is not tenable in law for the reason that the Goa Cess Act, does not target supply of goods and in contrast the GST takes in its fold supply of goods. It is submitted that the Goa Cess Act also does not violate any provisions of 101st Amendment Act of the Constitution. b) It is submitted in this context reliance placed by the Petitioner on Section 19 of the 101st Amendment Act is misplaced for the following reasons: i) The Goa Cess Act does not levy tax on goods and services and it is not referable to relevant entries. In fact, deletion of some of the entries supports the case of the Respondent in as much as it gives indication in regard to coverage of taxes by GST regime. ii) The Constitution (101st Amendment) Act, 2016, more particularly Section 17 thereof provides for deletion of entries 84, 92 an....
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....levy of the Goa Cess Act is referable to Entry 6, 13, 17, 18 and 66 of List -II of the Constitution of India. The Goa Cess Act is enacted in furtherance of Articles 38, 47 and 48-A (Directive Principles of State Policy) of the Constitution of India. The test of pith and substance to consider constitutional validity, if applied, will sustain the validity of the said Goa Cess Act. In pith and substance, Goa Cess Act is not relatable to mode of transportation. Section 2 (a) of the Goa Cess Act defines word "carrier". The said definition supports this contention that the Goa Cess Act is not relatable to mode of transportation. Incidental encroachment on List-I of the VII schedule of the Constitution would not invalidate the Goa Cess Act. Entries in Lists of Schedule VII of the Constitution must be given wide and broad interpretation while considering legislative competence of the state. It is specifically so in case of taxing statutes. The State has produced data regarding user of additional resources, and this has been noted in paragraph 56 in Fomento's judgment (supra). (b) The Goa Cess Act is not on occupied field of MMDR Act 1957. MMDR Act is not a complete code and occupies a l....
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....nt or the legislature can be struck down by Courts on two grounds alone namely, firstly on legislative competence and secondly, violation of any of the Fundamental rights guaranteed in Part III of the Constitution or of any other constitutional provision. It was held that there is no third ground. It was observed that if an enactment is challenged of being violative of Article 14, it can be struck down only if it is found that it is violative of the equality clause /equal protection clause enshrined therein. Similarly, if an enactment is challenged as violative of any of the fundamental rights guaranteed by Clauses (a) to (g) of Article 19(1), it can be struck down only if it is found not saved by any of the Clauses (2) to (6) of Article 19 and so on. It was held that no enactment can be struck down by just saying that it is arbitrary or unreasonable. The Supreme Court observed that some or other constitutional infirmity needs to be found, before invalidating an Act, and that an enactment cannot be struck down on the ground that Court thinks it unjustified. It was held that the Parliament and the Legislatures, composed as they are of the representatives of the people, are supposed ....
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....additional resources for improvement of infrastructure and health with a view to promote the welfare of people residing in the rural areas affected by the use of plastics, dumping of garbage and spillage of materials." 30. We also note the 'statement of object and reasons' leading to enactment which provides that the cess on transshipment of mineral ore from one mode of surface transport to another at the rate of Rs. 21/- per tonne of ore transported within the State and Rs. 5/- per tonne of ore (including coal) brought into the State for the purpose of shipping was proposed in the Budget Speech for the year 2000-2001, relating to Goa Fund. The proceeds were proposed to be put in the Green Goa Fund and utilized for the purpose of improvement of water supply and roads, as well as, afforestation and control of dust pollution in the region directly affected-by mining activity. It was, therefore, proposed to introduce such Bill for the levy of cess on the carriers which transport certain items like coal, coke, sand, murrum, debris, garbage, mineral water bottles using plastic packaging, iron ore, manganese ore, etc. The statement of object and reasons reads thus: "Statement....
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.... Companies'. Section 12 provides for 'Compounding of offences'. Section 13 provides for 'Recovery of certain sums as arrears of land revenue.' Section 14 provides for 'Rules and notifications to be laid before State Legislature.' Section 15 provides for 'Power to Revise'. 33. The relevant provisions being Sections 3, 4, 5, 8 and Schedule I read thus:- Section 3. Levy and collection of cess.- (1) With effect from such date as the Government may, by notification in the Official Gazette, appoint, there shall be levied and collected from the owner a cess on all carrier transporting material and at such rates as specified in Schedule I, for the purposes of this Act. (2) The Government may, from time to time, by notification in the Official Gazette, revise the items and the rates of cess by amending Schedule I. Section 4. 'Application of proceeds of cess.- An amount equivalent to the proceeds of cess levied under this Act, reduced by the cost of collection as determined by the Government in the prescribed manner, together with any income from investment of the said amount and any other moneys received by the Government for the purposes of this Act shall,....
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....s Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for:- (a) the assessment and collection of cess levied under this Act; (b) the period within which the cess shall be payable to the Government; (c) the determination of the cost of collection of the cess; (d) the manner in which the amount of cess and other moneys, if any, may be applied on the measures specified in section 4; (e) the composition of the Advisory Committee constituted under ,section 5, the manner in which the members thereof shall be chosen, the term of office of such members, the allowances, if any, payable to them and the manner in which the Advisory Committee shall conduct its business; (f) the furnishing by the owner of the carrier of statistical and other information. ... .. .. SCHEDULE - I (See section 3) Material Rate 1 Iron ore where royalty is paid to Government Rs.2/- per metric ton 2 Manganese ore where royalty is paid to Government Rs. 2/- per metric ton 3 Bauxite ore where royalty is paid to Government Rs. 2/- per metric to ....
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....f proceeds of cess.- An amount equivalent to the proceeds of cess levied under this Act, reduced by the cost of collection as determined by the Government in the prescribed manner together with any income from investment of the said amount and any other moneys received by the Government for the purposes of this Act shall, after due appropriation made by the State Legislature by law, be utilized by the Government to meet the expenditure incurred in connection with measures which, in the opinion of the Government, are necessary or expedient to promote the welfare of the people residing in the rural areas affected by the movement of carriers transporting material on public roads or dumping of garbage or use of plastics and in particular:- (a) to defray the cost of measures taken for the benefit of the villagers affected by the transportation of material on public roads, as well as, dumping of garbage, material and plastics; (b) for improvement of public health, the prevention of disease and the provision for improvement of medical facilities; (c) for provision and improvement of water supply; (d) for improvement of public roads and the erection of t....
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....al numbers 1 to 9 and the entries thereof, the following shall be substituted, namely:- "1 Iron ore, where royalty is paid to the Government Rs. 20/- per metric ton 2 Manganese ore, where royalty is paid to the Government Rs. 20/- per metric ton 3 Bauxite ore, where royalty is paid to the Rs. 20/- per metric ton Government 4 Iron ore, where royalty is not paid to the Government Rs. 50/- per metric ton 5 Manganese ore, where royalty is not paid to the Government Rs. 50/- per metric ton 6 Bauxite ore, where royalty is not paid to the Government Rs. 50/- per metric ton 7 Coal Rs. 50/- per metric ton 8 Coke Rs. 50/- per metric ton 9 a) Sand, where royalty is paid to the Government Rs. 2/- per cubic metre b) Sand, where royalty is not paid to the Government Rs. 20/- per cubic metre." This Notification shall come into force with effect from the date of its publication in the Official Gazette. By order and in the name of the Governor of Goa. Sandip Jacques, Director of Transport & ex officio Joint Secretary (Tpt). Panaji, 13th May, 2008. In the said Notification, ....
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....itution, and its validity is not impaired or affected by Entries 52 and 54 of List I. It is also held that it does not in any manner breach the mandate of the Central Act namely Mines and Minerals (Development and Regulation) Act,1957 read with Act 65 of 1951 and Act 53 of 1948 respectively. The Division Bench held that considering the substance and object of the Goa Cess Act and the Rules framed thereunder vis a vis MMDR Act and the Rules framed thereunder, there was no irrevocable conflict between the concerned Union Legislation and the State Legislation. It was observed that the Goa Cess Act and Rules thereunder are targeted for augmentation of revenue to provide infrastructures in the State without impinging on the mineral regulation. The Court observed that the Goa Cess Act is traceable to the entries relied upon by the State as noted above. (I) Whether Tax or Fee 38. The petitioners have raised a contention that the Cess Act levies a 'tax' and not a 'fee'. It is the petitioners' case that there needs to be an element of quid pro quo, if the cess is to be regarded as a fee. It appears that the petitioners intention to re-raise this contention is to buttress their challen....
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....served that a broad co-relationship between the two is sufficient to sustain the levy. The relevant observations of the Supreme Court in this regard are required to be noted which read thus: "15. It is well settled that the basic difference between a tax and a fee is that a tax is a compulsory exaction of money by the State or a public authority for public purposes, and is not a payment for some specific services rendered. On the other hand, a fee is generally defined to be a charge for a special service rendered by some governmental agency. In other words there has to be quid pro quo in a fee vide Kewal Krishan Puri v. State of Punjab, AIR (1980) SC 1008. 16. The earlier view of the Supreme Court was that to sustain the validity of a fee some specific service must be rendered to the particular individual from whom the fee is sought to be realized. However, subsequently in Sreenivasa General Traders v. State of Andhra Pradesh, AIR (1983) SC 1246, Supreme Court observed: "The traditional view that there must be actual quid pro quo for a fee has undergone a sea change in the subsequent decisions. The distinctions between a tax and a fee lies preliminary in ....
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....for collecting the fee is satisfied." 23. In State of West Bengal v. Kesoram Industries Ltd. and Ors., [2004] 10 SCC 201 a Constitution Bench of the Supreme Court (vide para 140) observed: "The imposition of cess envisaged through the SADA Act and the Rules was a step towards developing the special area. It is a matter of common knowledge, and does not need any evidence to demonstrate, that mining activity carried on the land within the special area involves extraction, removal, loading-unloading and transportation of the minerals accompanied by its natural consequences entailed on the environment and the infrastructure such as roads, water and power supply etc. within the special area. The impugned cess can, therefore, be justified as a fee for rendering such services as would improve the infrastructure and general development of the area, the benefits whereof would be availed even by the stone-crushers. Entry 66 in List II is available to provide protective constitutional coverage to the impugned levy as fee." 24. In Shiv Dayal Singh Ors. v. State of Haryana & Ors., AIR (1989) Punjab 87, the Punjab and Haryana High Court has upheld the validity of the H....
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....nature. It was observed that the earlier concept of fee has undergone a sea change and rendering of some specific service to a particular payer of fee is no longer considered necessary to sustain the levy of fee provided there is a broad and general correlationship between the totality of the fee imposed and the totality of the expenses on the service rendered. This discussion makes it clear that the distinction between a tax and a fee remains, even though the concept of a fee has undergone a sea change." (emphasis supplied) 41. In Consumer Online Foundation & Ors. Vs. Union of India & Ors. (2011) 5 SCC 360 the Supreme Court was considering the decision of the Delhi High Court upholding levy of development fees on the embarking passengers, by the lessees of the Airports Authority of India, at the Indira Gandhi International Airport, New Delhi and the Chhatrapati Shivaji International Airport, Mumbai. The Supreme Court held that the nature of the levy under Section 22A of the Airports Authority of India Act, were not the charges or any other consideration for services for the facilities provided by the Airports Authority. Referring to the decision in Vijayalashmi Rice Mi....
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....ufficient evidence was placed on record of spending the money, both on road infrastructure and welfare activities. It was observed that it could not be said that the petitioners do not benefit at all from the services rendered and that there is not even a remote connection. It was held that the Goa Cess Act and the Rules are a device for the State to augment its resources and the services rendered by the collection of the levy, benefits the petitioner as well, and there existed a co-relationship. It was thus observed that the Goa Cess Act and the Rules, whether it imposes a tax or fee, could not be said to be unconstitutional. The Division Bench referring to the decision in Kesoram (supra) it was observed that it was immaterial that the nature of the impost is fee or tax, if both could be justified and it was not necessary that one of the pleas must be given up. In our opinion, as rightly urged on behalf of the respondents, the following observations of the Division Bench in Sociedade De Fomento Industrial Pvt.Ltd., Goa (supra) cannot be overlooked by the petitioners in raising the plea that cess is a tax and not fee:- "53. The next contention of the Petitioner is that the....
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....ntial change. The State does not have to show with a mathematical exactitude that the fee charged corresponds to the service provided, but some link is required to be established between the fees collected and the benefit conferred. It is good enough to establish that a link exists but it need not be direct. 58. Sufficient evidence placed on record of spending the money, both on road infrastructure and welfare activities. It cannot be said that the Petitioners do not benefit at all from the services rendered and that there is not even a remote connection. The Goa Cess Act and the Rules are a device for the State to augment its resources. The services rendered by the collection of the levy benefits the Petitioner as well, and there exists a co-relationship. Therefore, the Goa Cess Act and the Rules, whether it imposes a tax or fee, cannot be said to be unconstitutional. Kesoram holds that it is immaterial if the nature of the impost is fee or tax, if both could be justified and it is not necessary that one of the pleas must be given up. It is not necessary to direct the State to choose whether the levy is a fee or tax. This distinguishing is only academic as far as legislat....
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.... Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free. Freedom of trade, commerce and intercourse. Article 302. Power of Parliament to impose restrictions on trade, commerce and intercourse.: Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest. Power of Parliament to impose restrictions on trade, commerce and intercourse. Article 303 Restrictions on the legislative powers of the Union and of the States with regard to trade and commerce. (1) Notwithstanding anything in article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule. Restrictions on the legislative powers of the Union and of the States with regard to trade and ....
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....dealing with a situation arising from scarcity of goods in any part of the territory of India. Article 304 when it provides for restrictions on trade, commerce, and intercourse is again an exception to Article 301, or Article 303 which recognizes the powers with the legislature of a State to make law so as to impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so however as, not to discriminate between goods so imported and goods so manufactured or produced; and further to impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest. However, for introducing such Bill, previous sanction of the President would be necessary as provided for in the proviso. 48. We may also note the relevant entries in the Union List and State List, which have been referred on behalf of the parties in addressing the issues. The entries in the Union List are entries 42, 93, 96 and 97 whereas the entries referred to the State List (List II) are entries 6, 13, 56 and 66. Such entries read thus: LIST I - UNION ....
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....tate are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; b) so as to impose such reasonable restriction on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest. 51. By now it is well settled that clauses (a) and (b) of Article 304 are required to be read disjunctively. Clause (a) of Article 304 provides for imposition of any tax on goods imported from other States or Union territories to which similar goods manufactured or produced in that State are subject with an intention as not to discriminate between goods so imported and goods so manufactured or produced. Thus, per se clause (a) of Article 304 is not attracted in the facts of the present case inasmuch as the Cess being levied by Goa Cess Act cannot be strictu sensu categorized as a "tax on goods" which are sought to be imported. This is clear from the plain reading of the charging section of the Goa Cess Act, namely, Section 3 providing for "Levy and Collection of cess". Section 3 clearly provides that there shall be levied and collected from the owner a cess on all "carriers transporting mate....
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....petitioners is that such material ores which are being brought in from other States are subjected to levy of cess, whereas such cess is not levied on the ore which is mined in Goa and for which royalty and other charges are paid. On such reason, the petitioners contend that there is a restriction imposed on the petitioners by levy of cess under the Goa Cess Act and which would be violative of Article 301. 53. We are afraid to accept such contention for more than one reason. The first and foremost reason is that such contention is premised on a manifest and untenable comparison of two categories of ores, namely, the ores brought in from Karnataka and ores as mined in Goa. The petitioner in raising such contention has overlooked that in the context and the implications which are brought about by the Goa Cess Act, a comparison between ores/materials brought from the State of Karnataka or other States into the State of Goa and the ore mined in Goa would not be well founded. The petitioners who are utilizing the roads and infrastructure in Goa by their carriers to transport iron ore or coal cannot be heard to say that levy of such cess is affecting their freedom of trade, commerce an....
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....vying cess by way of tax so as to generate its funds. It was observed that although it was termed as, a 'cess on mineral right', the impact thereof fell on the land delivering minerals. It was observed that the levy of cess also fell within the scope of Entry 49 of List II apart from clearly falling under Entry 5 of List II and Entry 50 of State List II. It was observed that the levy of cess on mineral rights does not contravene any of the limitations imposed by the Parliament by law relating to mineral development. One of the significant observations made by the Constitution Bench was that the power to levy any tax or fee lying within the legislative competence of the State Legislature can certainly be delegated to any institution of local government constituted by law within the meaning of Entry 5 in List II and that the other Entries, namely, Entries 5, 23, 49, 50 and 66 of List II which provided for an adequate constitutional coverage to the impugned levy of cess. It was also observed that the method of quantifying the cess is by reference to the quantum of mineral produced. However, this would not alter the character of the levy. The Court observed that there are myria....
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....e restriction on freedom of trade, commerce and intercourse is being foisted by the legislation. Thus, when neither a discrimination is brought about by imposing such levy or in other words, such levy which is non- discriminatory in nature and/or also when there is no restriction much less any reasonable restriction, is imposed/brought about on freedom of trade or commerce, there is no question of an argument of such levy being violative of Article 301 being attracted. The jurisprudence in relation to levy of such taxes which are cess, fees or taxes is to the effect that the Courts have repeatedly held that any levy when is recognized for providing facilities which are supportive and conducive to the activities of business and trade (as in the present case) like providing for roads, maintaining of rights which aid transportation of materials and for creation of necessary infrastructure to promote, facilitate free trade and commerce, it may not be correct to infer any restriction. Thus, for such reason, the contention of the petitioner that the Goa Cess Act is violative of Article 301 read with 304 (a) and (b) deserves to be rejected. 56. In Hingir-Rampur Coal Co. Ltd. Vs. State ....
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....tution of India was also set-up as a ground of challenge to the levies imposed by the respective State legislatures. A Division Bench of the Punjab and Haryana High Court had dismissed a writ petition which assailed the constitutional validity of the Haryana Local Development Act, 2000, relying upon the decisions of the Supreme Court in Atiabari Tea Co. Ltd. v. State of Assam & Ors. AIR 1961 SC 232; Automobile Transport (Rajasthan) Ltd. etc. v. State of Rajasthan & Ors. AIR 1962 SC 1406; M/s. Bhagatram Rajeev Kumar v. Commissioner of Sales Tax, M.P. and Ors. 1995 Supp [1] SCC 673; and State of Bihar and Ors. v. Bihar Chamber of Commerce and Ors. (1996) 9 SCC 136. 58. The proceedings having reached the nine Judges Constitution Bench, wherein the Constitution Bench framed the following questions which fell for determination: "11.1. (i) Can the levy of a non-discriminatory tax per se constitute infraction of Article 301 of the Constitution of India? 11.2. (ii) If answer to Question (i) is in the affirmative, can a tax which is compensatory in nature also fall foul of Article 301 of the Constitution of India?" 59. Considering the long line of the decisions holdi....
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.... contributions from persons and property, levied by the State by virtue of its sovereignty for the support of Government and for all public needs. This definition of taxes, often referred to as "Cooley's definition", has been quoted and endorsed, or approved, expressly or otherwise, by many different courts. While this definition of taxes characterises them as 'contributions', other definitions refer to them as 'imposts', 'duty or impost', 'charges', 'burdens', or 'exactions'; but these variations in phraseology are of no practical importance." *** The term is defined also in The Major Law Lexicon by P. Ramanatha Aiyar, Vol. 6, 4th Edn., pp. 6678 and 6679 in the following words: "The term "tax" and "taxes" have been defined as a rate or sum of money assessed on the person or property of a citizen by Government for the use of the nation or State; burdens or charges imposed by the legislative power upon persons or property to raise money for public purposes, and the enforced proportional contribution of persons and property levied by authority of the State for the support of Government and for all public needs. *** Taxes are public bur....
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....e of Gujarat v. Akhil Gujarat Pravasi V.S. Mahamandal, (2004) 5 SCC 155] and State of W.B. v. Kesoram Industries Ltd. [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201 : AIR 2005 SC 1646] ) 67.3. Thirdly, and lastly, the concept of compensatory taxes being outside Part XIII, is difficult to apply in actual practice. Experience in the present batch of cases has amply demonstrated that difficulty. Most of the legislations enacted by the States in these cases have described the entry tax levied under the same to be compensatory in character. This may have been done to take the levy outside the mischief of Article 301 of the Constitution. The question however is whether tax amount collected in terms of the said legislation is really used by the State for the purpose of providing or maintaining services and benefits to the taxpayers and whether the courts can follow the money trail to determine whether the State concerned has actually used the amount for the avowed purpose underlying the legislation. This process is fraught with serious difficulties, a fact that was not disputed by the learned counsel for the assessees/dealers. Actual application of the Compensatory ....
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....he meaning of Article 301. 76.9. Reasonable restrictions in public interest referred to in clause (b) of Article 304 do not comprehend levy of taxes as a restriction especially when taxes are presumed to be both reasonable and in public interest." (emphasis supplied) 61. Answering question No. 1 (as framed in paragraph 11.1) the majority judgment observed thus: "127. In the light of what we have said above, we answer Question (i) in the negative and declare that a non-discriminatory tax does not per se constitute a restriction on the right to free trade, commerce and intercourse guaranteed under Article 301. Decisions taking a contrary view in Atiabari case [Atiabari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 232 : (1961) 1 SCR 809] followed by a series of later decisions shall, therefore, stand overruled including the decision in Automobile Transport [Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, AIR 1962 SC 1406 : (1963) 1 SCR 491] declaring that taxes generally are restrictions on the freedom of trade, commerce and intercourse but such of them as are compensatory in nature do not offend Article 301. Resultantly decisions of this Cour....
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....Ali, J. in his concurring judgment explained the concept in the following words : (Kathi Raning case [Kathi Raning Rawat v. State of Saurashtra, (1952) 1 SCC 215 : AIR 1952 SC 123 : 1952 Cri LJ 805] , AIR p. 127, para 19) "19. I think that a distinction should be drawn between "discrimination without reason" and "discrimination with reason". The whole doctrine of classification is based on this distinction and on the well-known fact that the circumstances which govern one set of persons or objects may not necessarily be the same as those governing another set of persons or objects, so that the question of unequal treatment does not really arise as between persons governed by different conditions and different sets of circumstances. The main objection to the West Bengal Act was that it permitted discrimination "without reason" or without any rational basis." 136. Any challenge to a fiscal enactment on the touchstone of Article 304(a) must in our opinion be tested by the same standard as in Kathi case [Kathi Raning Rawat v. State of Saurashtra, (1952) 1 SCC 215 : AIR 1952 SC 123 : 1952 Cri LJ 805] . The Court ought to examine whether the differentiation made is inte....
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....ronics (P) Ltd. v. State of Punjab, (1990) 3 SCC 87 : 1990 SCC (Tax) 327] is, in our opinion, juristically sound and legally unexceptionable. Video Electronics [Video Electronics (P) Ltd. v. State of Punjab, (1990) 3 SCC 87 : 1990 SCC (Tax) 327], therefore, correctly states the legal position as regards the approach to be adopted by the courts while examining the validity of levies. So long as the differentiation made by the States is not intended to create an unfavourable bias and so long as the differentiation is intended to benefit a distinct class of industries and the life of the benefit is limited in terms of period, the benefit must be held to flow from a legitimate desire to promote industries within its territory. Grant of exemptions and incentives in such cases must be deemed to have been inspired by considerations which in the larger context help achieve the constitutional goal of economic unity." 63. As a sequel to the above discussion, in paragraph 144, the majority judgment observed that so long as the intention behind the grant of exemption/adjustment/credit is to equalize the fall of the fiscal burden on the goods from within the State and those from outside the ....
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....59.8. Article 304(a) frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation. Therefore, incentives, set-offs, etc. granted to a specified class of dealers for a limited period of time in a non-hostile fashion with a view to developing economically backward areas would not violate Article 304(a). The question whether the levies in the present case indeed satisfy this test is left to be determined by the regular Benches hearing the matters. 1160. States are well within their right to design their fiscal legislations to ensure that the tax burden on goods imported from other States and goods produced within the State fall equally. Such measures if taken would not contravene Article 304(a) of the Constitution. The question whether the levies in the present case indeed satisfy this test is left to be determined by the regular Benches hearing the matters. 1161. The questions whether the entire State can be notified as a local area and whether entry tax can be levied on goods entering the landmass of India from another country are left open to be determined in appropriate proceedings." 65. Thus, even applying the pr....
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....at the holder that is when the goods enter the State on cross the border of the State, is not a sound proposition as Article 304 (a) allowed the Legislature of a State to impose taxes on goods imported from other States and does not support the contention that the imposition must be at the point of entry only. We are at a loss to understand as to how such decision can support the case of the petitioners, as certainly any principle which would be applicable in the context of the Sales Tax Act, may not be relevant in the present context, where the question is imposition of cess on carriers transporting materials. 67. In H. Anraj Vs. Government of Tamil Nadu (1986)1 SCC 414 as relied on behalf of the petitioners, the Supreme Court was considering the question whether the sales tax can be levied by the State Legislature on the sale of lottery tickets in the concerned State. It is in such context an issue had arisen whether any discriminatory treatment is meted out in the matter of levy of sales tax on imported lottery tickets, so as to hamper free flow of trade, commerce and intercourse. Considering the decisions in Atiabari Tea Co. Ltd. Vs. State of Assam (supra), Firm A.T.B Mehtab....
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....Goodyear India Ltd. v. State of Haryana (supra) as relied on behalf of the petitioners, is also not applicable in the facts of the present case. It was a case in regard to imposition of purchase tax under Section 9(1)(b) of Haryana General Sales Tax Act, 1973, at the point of despatches of the goods made by the petitioner therein of the goods to the depots outside the State. It is seen that such decision has also been overruled. 70. On behalf of the petitioners, reliance is also placed on the decision in Gujarat Ambuja Cements Ltd. & Anr. Vs. Union of India & Anr. (2005) 4 SCC 214 wherein the Supreme Court was considering the effect of a validating Act, namely the constitutional validity of Sections 116 and 117 of the Finance Act, 2000 and Section 158 of the Finance Act, 2003, by which the decision of the Supreme Court in Laghu Udyog Bharati case (1999)6 SCC 418, striking down Rule 2(1)(d)(xii) and (xvii) (as amended in 1997) of Service Tax Rules, 1994, was sought to overcome. It is in such context the Supreme Court considered the question whether levy of service tax on carriage of goods by transport operators was legislatively competent. Such question was not considered in the ....
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.... two opinions that the transportation of materials of the nature which are provided for in Schedule I of the Goa Cess Act and that too within a small State like Goa, which has a meager land mass would certainly bring about situations of serious issues of public health, for the reason that it is undisputedly that not only normal transportation but such heavy transportation of materials in trucks/heavy vehicles are bound to cause large scale pollution and damage to the environment. There also cannot be two opinions that pollution caused by such transportation would be of varied nature which can be spillage of dust generated from the minerals, coal, fume generated from carriage of fluid substances apart from the smoke pollution and water pollution it would generate. Moreover, the effects on health of smokes/fumes generated from the exhaust of the heavy vehicles is to be imagined. 73. We are therefore, required to certainly bear in mind the direct impact of such activities of the carriers on the health of the people of Goa residing in such rural areas. Can we at all come to a conclusion that no pollution whatsoever would be generated by such activity and in no manner whatsoeve....
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....tate of Karnataka. Also 10% of sales proceeds of ore payable into the "Goa Iron Ore Permanent Fund" as per the decision of Supreme Court in Goa Foundation v. Union of India & Ors. (supra) cannot justify the discriminatory impugned Cess, as the ore in Karnataka is also subjected to such charge as per the decision of Supreme Court in Samaj Parivartan Samudaya vs. State of Karnataka (supra). 76. We are also not inclined to accept the petitioners' contention that the Goa Cess Act brings about any discrimination and is violative of Article 14 of the Constitution. We do not find that the classification between the ores as brought within the State of Goa by the petitioners and the ore which is mined in Goa when considered in the context of the Goa Cess Act for levy of the cess, would cause any discrimination. In our opinion, the iron ore which is mined in Goa on which royalty is paid on such mining at the rates as fixed and specified and the nature of the ore as dealt by the petitioners, are certainly differently classified. The classification is certainly not arbitrary, it is rational as it is based on characteristics which are distinct. The classification is definitely founded on "in....
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....n the writ petitions namely, whether the provisions of the Act are violative of Article 14 of the Constitution. The true scope and ambit of Article 14 has been the subject matter of discussion in numerous decisions of this Court and the propositions applicable to cases arising under that Article have been repeated so many times during the last thirty years that they now sound platitudinous. The latest and most complete exposition of the propositions relating to the applicability of Article 14 as emerging from "the avalanche of cases which have flooded this Court" since the commencement of the Constitution is to be found in the Judgment of one of us (Chandrachud, J. as he then was) in Re: Special Courts Bill, 1978. It not only contains a lucid statement of the propositions arising under Article 14, but being a decision given by a Bench of seven Judges of this Court, it is binding upon us. That decision sets out several propositions delineating the true scope and ambit of Article 14 but not all of them are relevant for our purpose and hence we shall refer only to those which have a direct bearing on the issue before us. They clearly recognise that classification can be made for the p....
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....re is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. This rule is based on the assumption, judicially recognised and accepted, that the legislature understands and correctly appreciates the needs of its own people, its laws are directed to problems made manifest by experience and its discrimination are based on adequate grounds. The presumption of constitutionality is indeed so strong that in order to sustain it, the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation. 8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or....
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....on, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues." 79. There is another facet which is required to be considered namely, that by the first notification issued under section 3 dated 13 May, 2008, the rates of cess were revised from Rs. 5 per metric ton to Rs. 50/- per metric ton in respect of coal and coke. By a further notificati....
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....he State Government by issuing a notification in exercise of its powers under section 5 of the Uttar Pradesh Trade Tax Act. 1948 discriminates between the goods imported from neighbouring States and goods manufactured and produced in the State of Uttar Pradesh and it is in such context, whether the provisions would contravene the Constitutional provisions of Articles 301 and 304(a) of the Constitution of India. We may observe that the context in which the Supreme Court considered the issues as raised under Articles 301 and 304(a) of the Constitution of India is certainly not an issue as would be applicable in the facts of the present case. In any event, as discussed hereinabove, we are of the considered opinion that the levy as imposed by enactment in question, in the present facts cannot be nullified on the ground of a discrimination which is sought to be brought about on what would constitute a tax and/or a fee or the Act being violative of any provision in Part XIII of the Constitution as discussed hereinabove. We have discussed the law in this regard and considering the Constitution Bench decision of the Supreme Court in the case of Jindal Stainless Ltd. (supra), we accordingly....
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....a matter of expertise which would depend on several factors to be considered. It would completely lie within the powers of the rule making authority to fix the rates. Except for a bald case of breach of Article 14, no material is placed on record to contend that the rates so arrived at and fixed by the State of Goa as issued by different notifications need interference. We, therefore, cannot accept the petitioner's case relying on the decision of UOI vs. N.S. Rathnam and Sons (supra). (IV) Challenge on the ground of GST Laws 83. The contention as urged on behalf of the petitioners that in view of introduction of the GST laws by the Constitution (101st Amendment) Act, the Goa Cess Act stands subsumed in the GST Act, is also untenable, for more than one reason. Firstly, that the nature of levy as brought about by the Goa Cess Act is completely distinct and different from the Scheme of the GST laws, inasmuch as, what is imposed by the Goa Cess Act is a cess on the "carrier". The cess is intended to be levied for a specific object and purpose namely for providing additional resources for improvement of infrastructure and health with a view to promote welfare of the people residin....
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.... the GST council has refrained from subsuming and thereby recommending the repeal of the Goa Cess Act in view of the incorporation of the GST laws. It would not be out of place to mention that Entry 52 of List II which dealt with taxes on entry of goods into local area for consumption use or sale therein and Entry 55 of List II inter alia in regard to taxes on advertisement, have been repealed, that too without any corresponding amendment in Entry 66 of List II. It is therefore, an unwarranted exercise on the part of the petitioners in making an attempt to attack the validity of the Goa Cess Act on the incorporation of the GST laws. 86. Further Section 174 of the Goa Goods and Services Act, 2017 would list the Acts as existing on the date of introduction of the Goa Goods and Services Act, 2017 and the Acts which would stand repealed. The Goa Cess Act does not figure in the list of the Acts repealed. In fact what is significant is that an Act which is relevant for the entry of goods in the State of Goa namely the Goa Tax on Entry of Goods Act, 2000, has stood repealed by the introduction of the Goa Goods and Services Act, 2017. Thus, it is unfounded for the petitioners to contend....
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....t of the construction site. It shall also be ensured that all construction material being taken to the construction site including the ready-mix concrete is transported to the construction site in fully covered trucks or mixer plants. g) On the next date, if the air quality does not substantially improve, the Court may pass an order banning transportation of the construction material in and out of the construction sites. h) We also direct that the Authorities shall ensure that no burning of any waste, including solid waste is permitted in open areas, specially at the dumping sites where the municipal solid waste is dumped." 89. We thus appreciate the endeavour of the Government of Goa in its awakening at the right time albeit on the call of "we the people", to have the enactment in question framed, as far as back in the year 2000 although implemented in the year 2006, so as to create a robust infrastructure to cater to the damage and ill-effects being created on the environment by mass transportation of the kind of materials as listed in the Schedule to the Goa Cess Act, as also to set up facilities in the interest of the health and welfare of persons living in....