TaxTMI 
TaxTMI 
1986 (1) TMI 100
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.... the purposes of the Act, a cess, on ad valorem basis, at the rate of one per centum of the sale proceeds of agricultural produce bought or sold or brought for processing in the notified market area. It, however, provides that except in case of agricultural produce brought for processing, no cess shall be leviable in respect of any transaction in which delivery of the agricultural produce bought or sold is not actually made. The cess is payable by the dealer in such manner as may be prescribed to such officer or person as may be appointed or designated by the State Government in that behalf. The dealer is, in his turn, entitled to pass on the burden of the cess paid by him to the next purchaser of the agricultural produce from him. He may, therefore, add the same in the cost of the agricultural produce or the goods processed or manufactured out of it. The arrears of cess are recoverable as arrears of land revenue. The expression " dealer " is defined by section 2(c) of the Act. " Dealer " means any person who within the notified market area sets up, establishes or continues or allows to be continued any place for the purchase, sale, storage or processing of agricultural produce, or....
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.... effect to the provisions of the Act. A reading of the Act shows that it imposes a cess on ad valorem basis at the rate of one per centum of the sale proceeds of the agricultural produce bought or sold or brought for processing in the notified market area on the dealer carrying on business within the notified market area. The cess is in the nature of a compulsory exaction. The arrears of cess, if any, can be recovered as arrears of land revenue, and any person who contravenes the provisions of the Act is liable to be prosecuted for an offence punishable under section 5 of the Act. The Act, however, provides that the cess collected under it shall be credited to the Fund for being spent as provided in sub-section (5) of section 4 of the Act in the rural areas in connection with the development of roads, hospitals, means of communication, water supply, sanitation facilities and for the welfare of agricultural labour or for any other scheme approved by the State Government for the development of rural areas. The expression " rural area " has been defined in section 2(h) of the Act as an area the population of which does not exceed 20,000 persons. These are the principal features of t....
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.... the entries in List II of the Seventh Schedule to the Constitution under which the State Legislature can levy a tax. Although when the proceedings were pending in the High Court, an attempt was made on the part of the State to sustain the cess as a tax leviable under entry 52 of List 11 of the Seventh Schedule to the Constitution which authorises State Legislature to levy " taxes on the entry of goods into a local area for consumption, use or sale therein ", neither the learned single judge nor the Division Bench accepted the said contention. In these appeals, the said contention is not pressed before us. The ground on which the Division Bench upheld the constitutional validity of the cess was that it was in the nature of a fee and, therefore, it could be levied as a fee imposed on dealers carrying on business within the market area for services rendered to them by the State Government. The very same contention is urged before us in these appeals on behalf of the State Government. In support of its contention, the State Government has relied upon the decisions of this court in Srinivasa General Traders v. State of . Andhra Pradesh [1983] 3 SCR 843 ; AIR 1983 SC 1246, Municipal Cor....
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....irectly be benefited by it. As observed in M .P. V. Sundararamier & Co. v. State of Andhra Pradesh [1958] 9 STC 298 ; AIR 1958 SC 468 ; [1958] SCR 1422, in List II of the Seventh Schedule to the Constitution, entries I to 44 form one group mentioning the subjects on which the States can legislate and entries 45 to 63 in that List form another group dealing with taxes that may be levied by States. Entry 64 refers to offences against laws with respect to any of the matters in List II and entry 65 refers to jurisdiction of courts. Entry 66 empowers the State to levy fees in respect of any of the matters in List 11. Unless the cess in question can be brought under any of the entries from 45 to 63, it cannot be levied as a tax at all. It is no doubt true that under entry 66 of List 11, it is permissible for the State to levy any amount by way of fees in respect of any of the matters in that List. The relevant entry in the present case is entry 28 dealing with " Markets and Fairs " but the amount so levied should be truly a fee and not a tax with the mask of a fee. The primary meaning of taxation is raising money for purposes of Government by means of contributions from individual person....
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....made for public purposes without reference to any special benefit to be conferred on the payer of the tax; and (iii) that it is a part of the common burden, the quantum of imposition upon the taxpayer depending generally upon the capacity of the taxpayer to pay. As regards fees, Mukherjea J. observed in the above decision thus (at p. 295 of AIR): " Coming now to fees, a 'fee ' is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the government in rendering the service, though in many cases the costs are arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay. These are undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases ....... If, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should, on the face of the legislative provision, be correlated to the expenses in....
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....ation, town municipality, a panchayat, a notified area, a sanitary board, etc. Any geographical area the population of which does not exceed 20,000 persons can be conveniently brought within the scope of section 2(h) of the Act. If it is understood that way, even urban areas can be divided into areas with population not exceeding 20,000 and labelled as rural areas. Even if we exclude from the scope of the expression " rural area ", a town or a city having a population exceeding 20,000 persons, the area in which the amount credited to the Fund can be spent is almost 90 per cent. of the total area of the State of Haryana. The amount may be spent on any purpose which the State Government considers to be a purpose intended for the development of the rural areas. There is no specification in the Act that the amount or a substantial part of the amount collected by way of cess under section 3 of the Act will be spent on any public purpose within the market area where the dealer is carrying on his business. The purposes over which the Fund can be spent are the same purposes on which any amount collected by way of tax is spent by any State and there is nothing which is done specially to ben....