M/S KISHAN LAL LAKSHMI CHAND AND ORS. versus STATE OF HARYANA AND ORS.

Citation: [1993] SUPP. 1 S.C.R. 433 · Decided: 29-07-1993 · Supreme Court of India · Bench: K. RAMASWAMY · Disposal: Dismissed

cites 3 · see the full citation network in Lexace

Judgment (excerpt)

MIS KISHAN LAL LAKSHMI CHAND AND ORS. 
v. 
STATE OF HARYANA AND ORS. 
JULY 29, 1993 
[K. RAMASWAMY, R.M. SAHA! AND S.P. BHARUCHA, JJ.] 
Haryana Rural Development Ac• 1986: Sections 5( I) and II-Con-
stitutional validity of-Distinction between tax and fee-Held: Section 5(1) 
and 11 are valid-Levy is not a tax but a fee towards the fund to expend for 
the pwpose enumerated under Section 6(5) of the Act. 
Constitution of India, 1950: A1ticles 246(3), 286(2) and Entry 28 read 
with Ent1y 66 in List II of the Vllth Schedule-constitutional validity of the 
Haryana Rural Development Act, 1986-Power of the legislature to validate 
the law declared invalid by Cowt-Scope of 
Sequel to the decision of the Supreme Court in Om Prakash Agarwal 
& Ors. v. Giriraj & Ors., [1986] 1 S.C.C. 722 declaring Section 3 of the 
Haryana Rural Development Act, 1983 as unconstitutional on the ground 
A 
B 
c 
D 
of legislative incompetence, as the levy of cess under the Section was in the 
nature of tax and not fee, quid pro quo being absent; the Haryana Rural E 
Development Act, 1986 was enacted purporting to remove the defects 
pointed out by the Court. The vires of the 1968 Act was c.hallenged by the 
appellants before the High Court. A Full Bench of the High Court repelled 
the challenge and upheld the validity of the Act. 
In the appeal before this Court, on behalf of the appellal)fs it was 
F 
contended that the agriculture produce was a declared goods under Article 
286(2) of the Constitution; this Court had declared in Kewa/, Kishan Puri 
& Anr. v. State of Punjab & Ors., [1979] 3 S.C.R. 1217 that co~stitutionally 
it was impermissible to levy market fee in excess of 2 per cent, and the 
State Legislature was incompetent to levy sales tax in excess of 4 per cent. 
·on sale of goods; but the State Legislature found the Act a camoullage and G 
colourable device to circumvent the constitutional ma'nda'tes and effected 
cosmetic changes in the Act and imposed 1 per cerit fee as developme)'t 
' fund to bypass the mandate of the Constitution and the law declared by 
this Court; the impost at 1 per cent was no less than a tax; it was colourable 
exercise of the power by the State Legislature and the Act could not be H 
433 
434 
SUPREME COURT REPORTS [1993] SUPP. 1 S.C.R. 
A brought under any of the entries 45 to 63 of List II of the Seventh Schedule 
to the Constitution; imposition and collection of the fee by operation of 
Section 5 of the Act, was not expended in any particular market or market 
area but to general development in rural area; the principle of ·quid pro 
quo at least in the region of 2/3rd or 3/4th as envisaged by this Court in 
B Kewal Kish an Puri & Anr. v. State of Punjab & Ors., (1979] 3 S.C.R. 1217, 
was absent; the traders as a class and appellants, in particular, were not 
c 
deriving any benefit therefrom; resultantly there was total lack of correla-
tion between the fund collected and the service intended to be rendered to 
the dealers; the impost partook the character of the tax, and the Act, 
therefore, was ultra vires. 
The State resisted the contentions. 
Dismissing the appeals; this Court 
HELD: 1. Sections 5(1) and 11 are valid. The fee levied therein is not 
D a tax, but a fee towards the fund to expend for the purpose enumerated 
under Section 6(5) of the Act. The fuud would be expended accordingly. 
[442-B] 
2.1 The object of the Act is to improve the agricultural production 
and the marketing and sale of the agricultural produce, bought or sold or 
E bought for processing. The levy is on the agricultural produce and the 
burden is passed on to the second purchaser. The dealer bears on burden 
under Section 5(3). The primary and essential purpose of the impost an 
collection of the fee is to effect improvem~,t of communications and other 
related amenities and facilities to argument agricultural production and 
to improve storage and marketing of agricultural products. !440-E-F]' 
F 
G 
2.2. From the scheme of the Act is would be clear that there is broad 
reasonable and general correlationship between the levy and resultant 
benefit to the producer of the agricultural produce, dealer and purchasers 
as a class though no single payer of the fee receives direct or personal 
benefit from those services. He represents that class. Though tl1e general 
public may be benefitted from some of the services like laying roads, the 
primary service is to the producers, dealers and purchasers of agricultural 
produce. By

Excerpt shown. Read the full judgment & AI analysis in Lexace.