Case: State Of Mysore &amp; Anr Vs. Pendakur Virupanna Setty &amp; Sons &amp; A

Bill 1958 when it was introduced in the Mysore legislature there was mention only of the Act as amended by the Madras legislature in 1955 being in force in South Kanara district. The entire reading of the statement shows that whatever changes in law and the validation provisions which were being made were confined only to the levy of a cess by way of sales tax by the South Kanara Market Committee. (2) The Amending Act of 1958 was made applicable only to what was called the "Madras Area." This area could have reference only to the South Kanara district with the exception of the specified areas which was a part of the State of Madras immediately before the States Reorganisation Act of 1956. It would be stretching the language too far to include in it the Bellary district which had ceased to be a part of the State of Madras much earlier than 1953. The adaptation made in the Mysore General Clauses Act, 1899 by virtue of the provisions contained in the States Reorganisation Act, 1956 defined "Madras Area" to mean the territory specified in Clause (d) of subsection (1) of Section 7 of that Act. That would, as stated before, comprise only the territory of South Kanara district with the exception of specified areas. The reasoning of the High Court that the definition given in the General Clauses Act should not be applied to the expression "Madras Area" in the Amending Act of 1958 can by no means be sustained. (3) The distinction between what may be called the "Bellary Area" and the "Madras Area" which came to be incorporated in the State of Mysore in 1953 and 1956 respectively is fully substantiated by Section 154 of the Mysore Act 27 of 1966. It is stated there in unambiguous language that the Act as in force in the Bellary district and as in force in the "Madras Area" was being repealed. If "Madras Area" also included the Bellary district as is the view of the High Court there was no question of Section 154 being worded as it is, making it quite clear, that the Act as applicable in Bellary district, was not the same as in force in the "Madras Area". (4) The bye-laws of the Bellary Market Committee which were framed in exercise of the powers conferred by Section 19 of the Act read with the Madras Commercial Crops Market Rules 1948 give an indication that the Amending Act of 1958 was not applicable to the Bellary district. These bye-laws were approved in May,1960. Under bye-law 19 the Market Committee could levy fee or cess on the notified crops or commodities at the rates specified in the schedule. The schedule included cotton bales, loose cotton, kapas, groundnut seeds, groundnut pods and various other commodities. The Amending Act of 1958 specified the rates of only two commodities Arecanut and Coconut. These are not to be found in the schedule of the bye-laws of the Bellary Market Committee. In the bye-laws of the South Kanara Market Committee which came into force on July 1, 1955 these two commodities namely, Arecanut and Coconut are the principal if not the only, commodities which figure. The suggestion which has been made at the bar and which does not seem to be without substance is that in the South Kanara district these are the only or the principal commodities which constitute commercial crops; whereas in the Bellary district there are other commodities mentioned in the bye-laws which do not include these two that constitute commercial crops. Certain notifications have also been produced which show that rice, paddy etc., were declared to be commercial crops for the purpose of the Act even in the "Madras Area". But the bye-laws as also the Amending Act of 1958 seem to show that Arecanut and Coconut are the main or the principal commodities in the "Madras Area" and these commodities, according to the bye-laws, are confined to South Kanara district and are not included as commercial crops in the Bellary district at all. 10. Once, it is held that the Mysore Amending Act of 1958 did not apply to the Bellary district only fee could be levied under Section 11 (1) of the Act as it originally stood. Under bye-law 19 the rate specified for groundnut seeds was 9 paise per kilogram. The notice sent by the Market Committee making the demand from the respondents employed the word "cess" but that cannot stand in the way of it being held that the demand related to a fee which alone could be levied under Section 11 (1) of the Act. The, finding of the High Court was that the cess demanded was a sales tax since it was levied under Section 11 (1) of the Act as amended by the Amending Act of 1958. It was observed that if it was not a cess the question that remained to be considered was whether the cess demanded was a fee and if so whether the levy of the fee was open to criticism that it was not correlated to the services rendered. 11. As it has been determined by us that the demand by the Market Committee could be made lawfully only in respect of a fee the validity and legality of that levy will now have to be determined by the High Court. The distinction between a fee and a tax is well known and there are a series of decisions of this Court on what is a fee and what are the tests which distinguish it from a tax. See Delhi Cloth and General Mills Co. Ltd. v. Chief Commr., Delhi, (1970) 2 SCR 348 = (AIR 1971 SC 344 ). The High Court will no doubt afford the parties an opportunity of filing supplementary affidavits and document, if necessary, for determining whether the levy made is a fee. After deciding that matter the writ petitions will have to be disposed of in accordance with law.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. It may be observed at this stage that the attention of the High Court does not appear to have been drawn to several matters including Section 154 of the Mysore Act 27 of 1966. Indeed before us also these matters escaped the notice of the counsel until more information was obtained under our directions which necessitated a rehearing of the case9. We have no manner of doubt that the Bellary district which became a part of the State of Mysore as a result of the Central Act 30 of 1953 was governed by Section 11 (1) of the Act as it stood at the time it had become applicable to that area by virtue of Section 53 of the aforesaid Central Act of 1953. The amendment made by the Mysore legislature in 1958 by whichsubsection(1) of Section 11 was substituted by a new section did not apply to the Bellary district and was confined only to the Madras Area which meant the district of South Kanara with the exception of specified areas. We now proceed to give our reasons for coming to the above conclusion. (1) In the statement of objects and reasons relating to the Madras Commercial Crops Markets . (Mysore Amendment and Validation of Levy of Cess) Bill 1958 when it was introduced in the Mysore legislature there was mention only of the Act as amended by the Madras legislature in 1955 being in force in South Kanara district. The entire reading of the statement shows that whatever changes in law and the validation provisions which were being made were confined only to the levy of a cess by way of sales tax by the South Kanara Market Committee. (2) The Amending Act of 1958 was made applicable only to what was called the "Madras Area." This area could have reference only to the South Kanara district with the exception of the specified areas which was a part of the State of Madras immediately before the States Reorganisation Act of 1956. It would be stretching the language too far to include in it the Bellary district which had ceased to be a part of the State of Madras much earlier than 1953. The adaptation made inthe Mysore General Clauses Act, 1899 by virtue of the provisions contained inthe States Reorganisation Act, 1956 defined "Madras Area" to mean the territory specified in Clause (d) ofsubsection(1) of Section 7 of that Act. That would, as stated before, comprise only the territory of South Kanara district with the exception of specified areas. The reasoning of the High Court that the definition given in the General Clauses Act should not be applied to the expression "Madras Area" in the Amending Act of 1958 can by no means be sustained. (3) The distinction between what may be called the "Bellary Area" and the "Madras Area" which came to be incorporated in the State of Mysore in 1953 and 1956 respectively is fully substantiated by Section 154 of the Mysore Act 27 of 1966. It is stated there in unambiguous language that the Act as in force in the Bellary district and as in force in the "Madras Area" was being repealed. If "Madras Area" also included the Bellary district as is the view of the High Court there was no question of Section 154 being worded as it is, making it quite clear, that the Act as applicable in Bellary district, was not the same as in force in the "Madras Area". (4) Thes of the Bellary Market Committee which were framed in exercise of the powers conferred by Section 19 of the Act read with the Madras Commercial Crops Market Rules 1948 give an indication that the Amending Act of 1958 was not applicable to the Bellary district. Theses were approved in May,1960. Underw 19 the Market Committee could levy fee or cess on the notified crops or commodities at the rates specified in the schedule. The schedule included cotton bales, loose cotton, kapas, groundnut seeds, groundnut pods and various other commodities. The Amending Act of 1958 specified the rates of only two commodities Arecanut and Coconut. These are not to be found in the schedule of thes of the Bellary Market Committee. In thes of the South Kanara Market Committee which came into force on July 1, 1955 these two commodities namely, Arecanut and Coconut are the principal if not the only, commodities which figure. The suggestion which has been made at the bar and which does not seem to be without substance is that in the South Kanara district these are the only or the principal commodities which constitute commercial crops; whereas in the Bellary district there are other commodities mentioned in thes which do not include these two that constitute commercial crops. Certain notifications have also been produced which show that rice, paddy etc., were declared to be commercial crops for the purpose of the Act even in the "Madras Area". But thes as also the Amending Act of 1958 seem to show that Arecanut and Coconut are the main or the principal commodities in the "Madras Area" and these commodities, according to the, are confined to South Kanara district and are not included as commercial crops in the Bellary district at all10. Once, it is held that the Mysore Amending Act of 1958 did not apply to the Bellary district only fee could be levied under Section 11 (1) of the Act as it originally stood. Underw 19 the rate specified for groundnut seeds was 9 paise per kilogram. The notice sent by the Market Committee making the demand from the respondents employed the word "cess" but that cannot stand in the way of it being held that the demand related to a fee which alone could be levied under Section 11 (1) of the Act. The, finding of the High Court was that the cess demanded was a sales tax since it was levied under Section 11 (1) of the Act as amended by the Amending Act of 1958. It was observed that if it was not a cess the question that remained to be considered was whether the cess demanded was a fee and if so whether the levy of the fee was open to criticism that it was not correlated to the services rendered11. As it has been determined by us that the demand by the Market Committee could be made lawfully only in respect of a fee the validity and legality of that levy will now have to be determined by the High Court. The distinction between a fee and a tax is well known and there are a series of decisions of this Court on what is a fee and what are the tests which distinguish it from a tax. See Delhi Cloth and General Mills Co. Ltd. v. Chief Commr., Delhi, (1970) 2 SCR 348  = (AIR 1971 SC 344 ). The High Court will no doubt afford the parties an opportunity of filing supplementary affidavits and document, if necessary, for determining whether the levy made is a fee. After deciding that matter the writ petitions will have to be disposed of in accordance with law.