LexVIJAYALASHMI RICE MILL AND ORS. versus THE COMMERICAL TAX OFFICERS, PALAKOL AND ORS.
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- .. _ VIJA Y ALASHMI RICE MILL AND ORS. A V. THE COMMERICAL TAX OFFICERS, PALAKOL AND ORS. AUGUST 7, 2006 [ASHOK BHAN AND MARKANDEY KATJU, JJ.] B Andhra Pradesh Rural Development Act, 1956-1mposition of cess- Constitutional validity of-Held-Cess was for rendering to rural public facilities of roads, bridges, storage etc.-lt was in substance a fee even if no C specific service was rendered to any particular individual from whom it was realized-However, there had to be a broad correlation between total amount of fees generated by the cess and total value of service rendered-Act found to be valid in absence of specific plea that such correlation was absent- However, liberty reserved to file fresh petition with that plea-Entry 66 of list II of Seventh Schedule to Constitution of India, 1950. Words and phrases--Tax, cess and fee-Difference between-Discussed. D Appellants are registered firms and individual traders engaged in the business of rice milling. They challenged constitutional validity of cess under the Andhra Pradesh Rural Development Act, 1956, which levied cess in addition to the purchase or sales tax being paid by them. High E Court rejected this challenge. Hence the present appeal. Appellant contended that (i) the cess did not fall under any of the entries in List II or List Ill of the Seventh Schedule to the Constitution (ii) there was no quid pro quo in the levy of the cess, and hence it cannot F be said to be a fee. Respondent-State contended that the cess in question is in fact a fee, and hence it comes under entry 66 of List II of the Seventh Schedule to the Constitution. Dismissing the appeals, the Court 'HELD: 1.1. Ordinarily, a cess means a tax which raises revenue, which is applied to a specific purpose. Hence ordinarily a cess is also a tax, but is a special kind of a tax. Generally tax raises revenue which can 279 G H 280 SUPREME COURT REPORTS [2006] SL:PP. 4 S.C.R. A be used generally for any purpose by the State. However, cess is a tax which generates revenue which is utilized for a specific purpose. For instance, health cess raises revenue which is utilized for health purposes like building hospitals, giving to the poor etc. Similarly, education cess raises revenue which is used for building schools or other educational B purposes. 1284-F-H, 285-AI India Cement Ltd. and Ors. v. State of Tamil Nadu and Ors .. 119901 1 sec 12, followed. Guruswamy and Co. v. State of Mysore, AIR (1967) SC 1512, referred C to. D 1.2. In such matters nomenclature is not very important and the nature of the levy has to be seen. Hence, what is called a cess may be in reality a fee depending on its nature. 1285-A-BI 1.3. 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. 1285-B-CI E Kewal Krishan Puri v. State of Punjab, AIR (1980) SC 1008, Sreenivasa General Traders v. State of Andhra Pradesh, AIR (1983) SC 1246, City Corporation of Calicut v. Thachambalath Sadasivam, AIR (1985) SC 756, Amar Nath Om Prakash v. State of Punjab, AIR (1985) SC 218, State of Himachal Pradesh v. Shivalik Agro Poly Products, AIR (2004) SC 4393, Sona Chandi Oaf Committee v. State of Maharashtra, AIR (2005) SC 635 and State F of West Bengal v. Kesoram Industries Ltd and Ors., 12004] to SCC 201, relied on. Kishan Lal Lakshmi Chand and Ors. v. State of Haryana and Ors., 119931 Suppl. 4 SCC 461, referred to. G Jindal Stainless Ltd and Ors. v. State of Haryana and Ors .. JT (2006) H 4 SC 61 I, held inapplicable. Shiv Dayal Singh Ors. v. State of Haryana and Ors., AIR (1989) Punjab, 87 approved. 2.1. The cess in question is in substance a fee as it is being levied for - ·- i VIJAYALASHMI RJCE MILL'· THE COM MERICAL TAX OFFICERS. PALA KOL 281 rendering to the rural public the service of rural development for the A purpose stated in para 9 of the Act Clearly roads, bridges and storage facilities have to be built in rural areas for progress, and naturally this will require generating funds. Thus even if no service is rendered to any particular individual from whom the fee has been realized, the cess in question is nevertheless a fee. Services are being rendered to the people B in the rural as men
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