CWP No.6676 of 1999 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No.6676 of 1999 Date of decision: 22.06.2009 Food Corporation of India. ... Petitioner Versus State of Punjab and another ... Respondents CORAM: Hon'ble Mr. Justice J.S.Khehar. Hon'ble Mr.Justice Uma Nath Singh. Present: Mr.R.C.Setia, Senior Advocate, with Mr.S.K.Goel, Advocate, Mr.Rajiv Atma Ram, Senior Advocate with Mr.Daman Dhir, Advocate, Mr.J.S.Sethi, Advocate, Mr.K.L.Goyal, Advocate, Mr.B.S.Walia, Advocate, Mr.I.D.Singla, Advocate, Mr.Hari Pal Verma, Advocate, Mr.Vipin Mahajan, Advocate, Mr.Sajal Kasan, Advocate, and Mr.Amit Prashar, Advocate, for the petitioners Mr.Amol Rattan Singh, Addl. A.G, Punjab, for respondent-State. Mr.Puneet Bali, Advocate, for Punjab Industrial Development Board-respondent. ... UMA NATH SINGH, J. This judgment shall also dispose of the connected batch of 112 writ petitions as mentioned in Annexure-A hereto since they raise, amongst others, important common questions of law, based on some what identical facts, relating to challenge to the validity of (i) The Punjab CWP No.6676 of 1999 2 Infrastructure Development Ordinance 1998 (Punjab Ordinance No.7 of 1998)/The Punjab Infrastructure Development Act 1998 (Punjab Act No.1 of 1999) and The Punjab Infrastructure Development Cess (Collection) Rules, 1998 framed thereunder; (ii ) The Punjab Infrastructure (Development & Regulation) Act, 2002 (inclusive of Schedule I, II and III); (iii) Levy of cess under 1998 Ordinance/Act and Rules @ 1%, and fee @ 3% (though chargeable upto 6% ) under the 2002 Act, on ad valorem basis on sale and purchase of all agricultural produces except fruits, vegetables and pulses; (iv) use of machinery as provided under the Punjab General Sales Tax Act for collection of cess/fee, and (v) the clarificatory notification No.7/8/98-5FBI/-4865 dated 8.4.1999 issued by the Government of Punjab (Department of Finance). Broadly, the common grounds of challenge are: (i) that the levy of cess under The Punjab Infrastructure Development Ordinance/The Punjab Infrastructure Development Act 1998 (for short `the 1998 Act') and The Punjab Infrastructure Development Cess (Collection) Rules 1998 (for short `the Cess (Collection) Rules)' and fee under the Punjab Infrastructure (Development & Collection) Act 2002 (for short `the 2002 Act') is discriminatory being violative of Articles 14 & 286 (3) of the Constitution of India, as they were levied at the rate of 1% and 3% (extendable upto 6%) respectively only on the items mentioned in Schedule III to the Acts, and collected in the manner prescribed in the Acts which is not sustainable in law; (ii) that there is absence of the element of Quid Pro Quo to justify the levy of cess and fee as the services rendered in lieu of the levy of imposts are devoid of proportionality and are not provided exclusively for the payers of imposts; CWP No.6676 of 1999 3 (iii) that the State legislature has passed the impugned statutes beyond the pale of competence as the same could be passed only under the entries of lists II and III of Seventh Schedule of the Constitution, and the Government of Punjab (Department of Finance) has encroached upon legislative field in issuing clarificatory notification dated 8.4.1999 (Annexure P-4) in the absence of express delegation of such powers or in the excess thereof; (iv) that this is not clear from the factual background, and the purpose and objects of the enactments as to whether the imposts in question are a tax or cess/fee; (v) that the charging Section 4 of the 1998 Act and Section 25 of the 2002 Act are violative of Sections 14 and 15 of the Central Sales Tax Act in as much as they empower the assessing authority to recover an additional Sales Tax in the guise of cess @1% under the 1998 Act and fee @3% (chargeable upto 6%) under the 2002 Act, as per the mechanism and procedure provided under the Punjab General Sales Tax Act (for short the PGST Act); (vi) that if the cess or fee is to be levied, then it should be collected only from the registered dealers on the first sale and purchase; (vi) that the impost amount is not being deposited in a consolidated fund provided in Article 266 of the Constitution of India; (viii) that the petitioner Flour and Rice Mills are entitled to claim the refund of imposts amount paid to the FCI, which being a registered dealer under the Central Sales Tax Act (the CST Act) and the Punjab General Sales Tax Act (the PGST Act), is required to pay on the first purchase and sale; CWP No.6676 of 1999 4 (ix) that the petitioners were not given the opportunity to submit objections or of being heard before deciding to levy the imposts in question nor is there any effective representation on their behalf in the apex body of the Organisation namely the Punjab Infrastructure Development Board (for short the PIDB); (x) that the 1998 Ordinance was repealed on 12.1.1999 with coming into force of the 1998 Act and the liability to pay the cess under the 1998 Ordinance was not retained by the Act of 1998, thus, no cess could be payable before 12.1.1999, and (xi) that the levy of cess or fee amounts to collecting an excessive and unreasonable amount of imposts at the higher rate in as much as the total amount of tax, cess and fee being paid on the articles in question under various Acts is comparatively higher than the imposts being charged on other taxable goods. During the course of hearing, learned counsel for both parties extensively referred to the averments of four writ petitions namely CWP No.6676 of 1999 (Food Corporation of India versus State of Punjab and another) and CWP No.2343 of 2000 (M/s Ludhiana Flour and General Mills Limited, Ludhiana versus State of Punjab and others), while assailing the validity of the 1998 Ordinance (No.7 of 1998)/the 1998 Act (No.1 of 1999), and CWP No.3295 of 2003 (Garg Rice & General Mills, Mundi Kharar and others versus State of Punjab and others), and CWP No.1449 of 2003 (Food Corporation of India versus State of Punjab and others) for laying the challenge to the provisions of the 2002 Act. According to learned counsel, the questions of law raised in the factual background of these writ petitions would squarely cover the subject matters of the other connected writ petitions also. CWP No.6676 of 1999 has been preferred by the Food CWP No.6676 of 1999 5 Corporation of India (for short the 'FCI') against the State of Punjab and its instrumentality, namely, the Punjab Infrastructure Development Board (PIDB). The FCI has claimed to be the biggest food grains procuring agency in the country created under the Food Corporation of India Act, for purchase of agricultural produces and preserving and distributing the same at proper places from time to time throughout the country. It is also registered as a dealer under the CST Act and the PGST Act, and is regularly filing returns and paying purchase and sales tax on taxable goods thereunder. It is also paying market fee under the Punjab Agricultural Produce Markets Act, 1961 (for short `the PAPM Act'), besides paying fee @ 2% under the Punjab Rural Development Act, 1987 (for short `the Punjab Rural Development Act'). The FCI has challenged the validity of the 1998 Ordinance/Act and the Cess (Collection) Rules, and has prayed for declaring the offending provisions thereof as ultra vires to the extent they levy a cess on ad valorem basis at a rate of Rs.one for every one hundred rupees in respect of the sale of wheat, paddy and all other agricultural produces except fruits, vegetables and pulses, w.e.f. 15.10.1998. In reply to the writ petition, the State of Punjab has questioned the locus-standi of the petitioner-corporation to invoke the extra-ordinary jurisdiction of this Court under Article 226 of the Constitution of India, which can be invoked only in exceptional and rare circumstances where private or public wrongs are inextricably mixed up and where it is required to prevent some public injury necessary for the vindication of justice. Thus, it is invoked only in cases with patent injustice. This is also mentioned in the reply that the Punjab Infrastructure Development Board (the PIDB), respondent No.2 has been authorised by the legislature to impose the CWP No.6676 of 1999 6 impugned cess vide the 1998 Ordinance/Act (No.1 of 1999) for the development of infrastructure in Punjab and the Assessing Authority under the PGST Act, has been authorised to collect the cess through its own agency only in public interest. The cess amount after collection is transferred to the account of PIDB and the State Government is not entitled to retain the impost amount even though collected under the PGST Act. The Government of Punjab (Department of Finance) which issued the Cess (Collection) Rules vide the notification dated 11.11.1998 (Annexure P-3), and also a clarificatory notification dated 8.4.1999 (Annexure P-4) regarding levy of cess on sale and purchase, both, under Section 4 of the 1998 Act, has not been made a party. The respondent-State has been given the duty to collect the infrastructure cess on behalf of the PIDB also vide the Punjab Infrastructure Development (General) Rules (for short `the PID(G) Rules'), notified vide No.G.S.R.80/P.O.7/98/S.3/98 dated 10.11.1998. This is emphatically averred that the impugned levy of cess does not amount to the incidence of double taxation in the garb of cess which is being collected under the PGST Act in public interest under the sanction of the 1998 Act duly enacted by the State legislature within the pale of its competence. The cess in question is not a tax also for the fact that it is only confined to a local and specific area and is levied for a particular purpose. The word `tax' is to be construed in generic sense under Articles 265 and 266 which also includes cess. Further, the expression `tax' as used in Article 265 of the Constitution of India, also includes duties, cess or fee etc. As regards the sales tax, it is collected for the general welfare of State and not for a specific purpose and time. It discharges a common burden and its sole object is to raise general public revenue. Besides, the State legislature is competent to pass two CWP No.6676 of 1999 7 different types of Acts to tax the same person and objects more than once. Under the 1998 Act, the cess was levied with a purpose to accelerate the development of infrastructure in Punjab, and it was not a new tax imposed under the PGST Act, simply, because the Authorities working under the PGST Act has been given powers to assess, re-assess, collect and enforce the payment of cess on all articles and goods specified in the schedule. The cess amount so collected is to be deposited in the Punjab Infrastructure Development Fund ( for short the PID Fund) within a week from the date of collection, and is not to be used as sales tax revenue. The levy of cess under the 1998 Act is, thus, not hit by Articles 254 and 286 of the Constitution of India or sections 14 & 15 of the CST Act, 1956 read with Section 5 (3) of the PGST Act. Besides, this has also been clarified that the rate of sales tax on wheat, paddy and other agricultural produces, except fruits, vegetables and pulses has not increased from the rider of 4% as this being a separate levy under a separate enactment cannot be plugged in the sales tax. Moreover, if the petitioners have been paying the market fee and other taxes on the goods in question, then they should not have raised any objection to the payment of cess under the 1998 Act also, and this would not amount to the incidence of double taxation. For the development and maintenance of infrastructure sectors in Punjab, roughly an amount of Rs.5000 crores per annum is required which cannot be met with the budgetary resources which are not adequate enough to fulfill the demand. Besides, the sales tax on declared goods is charged only @ 4% which is perfectly in consonance with the provisions of Articles 286 and 254 of the Constitution of India read with Sections 14 & 15 of the Central Sales Tax Act and Section 5 (3) of the PGST Act. The Finance Secretary, Government of Punjab, while notifying the Cess CWP No.6676 of 1999 8 (Collection) Rules, and issuing the clarificatory notification dated 8.4.1999 has not entered into the realm of State Legislature inasmuch as the word `purchase' was inadvertently omitted in the 1998 Ordinance and the relevant Rules made thereunder. Hence, a clarification was needed to bring the word 'purchase' in the Rules so as to levy the cess on the first purchase of the agricultural produces in question namely wheat, paddy and rice etc., which is also the stage of imposition of tax under the PGST Act. This has also been clarified in the reply that wheat and paddy being the agricultural produces are exempted vide Entry No.39 of Schedule B of the CST Act, at the stage when it is sold by the farmers, but it is not exempted at the hands of purchasers. A tax is squarely covered by Entry No.54 of List II of the Seventh Schedule of Constitution. Further, Sales Tax on declared goods is being charged @ 4%, whereas, the cess is collected only @1%. Thus, the collection of cess under the impugned enactments, is in consonance with Articles 286 and 254 of the Constitution read with Sections 14 & 15 of the CST Act and Section 5 (3) of the PGST Act. In the reply on behalf the PIDB, this is pointed out that the FCI has violated the memorandum No.53/3, 10/99-Cab. Cabinet Secretariat, Rashtrapathi Bhawan, dated 24.1.1994 relating to the settlement of dispute between two Government Agencies. Besides, as per the directions contained in the judgment of Apex Court in CWP No.2058-59/1989 (I.A. No.324 of 1992) (Oil and Natural Gas Commission versus Collector of Central Excise), every High Court and every Tribunal while dealing with such disputes, shall demand a clearance from the Committee constituted for resolution of disputes in case it has not been so pleaded, and in the absence of clearance, the proceeding is not to proceed further. This is also an CWP No.6676 of 1999 9 assertion of the PIDB that the FCI has not sought any such clearance, hence, this writ petition deserves to be dismissed at the threshold. This is emphatically contended in the reply that if these foodgrain procuring agencies like the FCI, PUNSUP, Punjab State Warehousing Corporation, PAIC, Food and Supply Department etc., are already paying a market fee @ 2% to the Market Committee apart from payment of impost also to the Rural Development Board, then they should not have any objection to the levy of cess under the 1998 and 2002 Acts. Moreover, except the FCI, no other agency has objected to the levy of cess as well as fee. In the replication filed on behalf of the petitioners, they have reiterated the averments made in the writ petition that the Finance Secretary was not competent to issue the notification relating to Cess (Collection) Rules, and also the clarificatory notification dated 8.4.1999. Petitioners have maintained that the cess in question is an additional sales tax for it is being collected only under PGST Act. The clarificatory notification dated 8.4.1999 has added the levy of cess also on `purchase' which was not mentioned in the 1998 Ordinance and the Cess (Collection) Rules. Thus, the levy of cess, being an additional Sales Tax, is violative of the provisions of Sections 14 & 15 of the Central Sales Tax Act and Article 286 of the Constitution of India. Coming to the facts of CWP No.2343 of 2000 (M/s Ludhiana Flour and General Mills Limited versus State of Punjab & Others), this writ petition has been filed by a Roller Flour Mill situated at Ludhiana against (1) The State of Punjab, (2) The Punjab Infrastructure Development Board, (3) The Excise and Taxation Officer-cum-Assessing Authority (Sales Tax), Ludhiana, and (4) The Food Corporation of India. In order to carry out the CWP No.6676 of 1999 10 business, the petitioner mill has to purchase wheat from different sources. One of the sources for the procurement of wheat is by way of purchase from the FCI which is the main procurer in Punjab and Haryana. According to the writ petitioner, the FCI has been constituted under the FCI Act to ensure payment of minimum procurement price to farmers which may be enhanced from time to time, and also in order to protect the consumers from a speculative trade. The FCI sells wheat in Punjab as per the policy decided by it from time to time. As per its policy, the release orders in respect of purchase of wheat are to be issued only after the payment of full cost, and thus, the Flour Mills are forced to pay cess @ Re.1/- for every 100 rupees on ad valorem basis. This is also a submission that the Cess (Collection) Rules notified and published on 11.11.1998 were made available for general public only on 23.11.1998, therefore, the date of enforcement of Rules whereunder the cess was to be collected, was not 11.11.1998, but 23.11.1998. In this writ petition also, collection of cess under the PGST Act from the registered dealer has been assailed. After the Cess (Collection) Rules were published on 11.11.1998, another notification in regard to Rules framed under Section 9 of the Ordinance was published on 26.11.1998. These Rules are known as the Punjab Infrastructure Development (General) Rules (PID(G) Rules). Thereafter, the 1998 Act was published on 12.1.1999 whereunder the Schedule appended to the 1998 Ordinance was amended and only 2 types of goods namely, all agricultural produces (except fruits, vegetables and pulses) as defined in the Punjab Agricultural Produces Markets Act, 1961 (the PAPM Act), and petrol, were retained, whereas, initially, there were 16 items in the schedule appended to the Ordinance. Section 12 (1) of the 1998 Act provided that the 1998 Ordinance shall stand repealed. However, CWP No.6676 of 1999 11 anything done or any action taken under the 1998 Ordinance, shall be deemed to have been done or taken under the corresponding provisions of this Act. This is also averred in the writ petition that the Ordinance was repealed on 12.1.1999, hence, no cess could have been levied before 12.1.1999 as the legislature has specifically repealed the Ordinance and retained the liability to pay tax only from the date on which the Act came into force. Thus, the 1998 Act has not retained the applicability clause of Ordinance imposing cess for the period from 15.10.1998 to 11.1.1999. Besides, no cess can be levied at the purchase stage as it is payable only on the sale of goods. This is also averred that the liability under the 1998 Act cannot be passed on to a subsequent purchaser and it should also be only at the stage of first purchase by a dealer. Thus, the incidence of payment of cess shall only be on the purchaser at the stage envisaged under the PGST Act. This is also a submission of learned counsel that on the date of issuance of notification i.e. 8.4.1999, the Ordinance itself had stood repealed, therefore, the notification in question is void and non-enforceable for that reason as well as also for the reasons that it was never published in the Government Gazette. Besides, the wheat supplied to the Mills between 16.4.1999 to 7.2.2000 had been purchased by the FCI before coming into force of the Act. That being an old stock was not chargeable to cess under the 1998 Ordinance/ Act, thus, the FCI could not have charged the cess @1% from the mills. As such, the petitioner mills would be entitled to seek the recovery of cess, as other procurers like PUNSUP has already decided to refund the cess collected on the sale and purchase of the old stocks. Wheat is one of the declared goods under Section 15 (a) of the CST Act, hence, it cannot be subjected to levy of tax at more than one stage and, CWP No.6676 of 1999 12 moreover, no tax could be leviable in excess of 4% of the sale or purchase price. Besides, if Section 4 (1) of the 1998 Ordinance/Act provided for levy of cess on sale of articles, the Cess (Collection) Rules, 1998 should be interpreted to levy the cess only at the stage of sale, even though the PGST Act, whereunder the cess is being recovered, provides for levy of tax on the event of purchase also. Thus, the business of petitioner has been adversely affected on account of unilaterally action on the part of FCI in recovering the cess in connivance with the State of Punjab and, therefore, it amounts to infringement of fundamental right of the petitioner under Article 19 (1) (g) of the Constitution. In reply to the writ petition on behalf of the State, it is denied that as many as 16 items were mentioned in the schedule of 1998 Ordinance, which was amended, and later only two items have been retained in the Schedule of the 1998 Act. This is also denied that the notification regarding Cess (Collection) Rules was made available only on 23.11.1998 and not on the date of publication on 11.11.1998. This is asserted that the respondents were competent to levy cess for the period between 15.10.1998 to 11.11.1999 in view of the 1998 Ordinance, and anything done or any action taken under the Ordinance is deemed to have been done or taken under the corresponding provisions of the 1998 Act under sub-section 1 of Section 12 thereof. This is also submitted that the events of sale and purchase are the facets of same transaction. Wheat being an agricultural produce is subject to levy of cess in terms of the schedule appended to the 1998 Act. The petitioner mill is a registered dealer under the PGST Act, hence, the cess can be levied on all the sale and purchase done by the Mill. The cess is not a tax, therefore, not to be subjected to the rider of 4% limit CWP No.6676 of 1999 13 under the CST Act. Thus, the levy of infrastructure cess is in no manner violative of Section 15 (1) of the CST Act, nor of Article 19 (1) (g) of the Constitution. PIDB-respondent No.2 in its counter affidavit has only reiterated the averments of the State. Respondent No.3 in its reply has questioned the maintainability of the writ petition for extra-ordinary relief on the ground that it should be invoked only in exceptional and grave circumstances for the purpose of preventing of public injury in order to vindicate justice. Written statement of the respondent is only in line with the written statement filed in reply to the writ petition No.6676 of 1999. The petitioner mill has not filed any replication to the written statements. In CWP No.3295 of 2003 ( Garg Rice and General Mills and others versus State of Punjab and others), filed by various Rice Millers against the respondents namely, (1) The State of Punjab; (2) The Punjab Infrastructure Development Board, and (3) The Excise and Taxation Officer-cum-Assessing Authority, a relief has been sought to declare Section 25 of the Punjab Infrastructure (Development and Regulation) Act, 2002 (being the charging Section corresponds to Section 4 of the 1998 Act), as ultra vires in as much as it is beyond the legislative competence of the State. This Act was published in the Punjab Gazette (extra-ordinary) on 9.7.2002. Admittedly, as per the notification of the Government of Punjab, the Act came into force w.e.f. 11.7.2002. Under Section 25 of the Act, every dealer is liable to pay a fee under the Act on the sale or purchase of the goods specified in Schedule-III thereof within the State of Punjab at the CWP No.6676 of 1999 14 rate not exceeding 6% of the value of the goods as the State Government may by notification direct. In