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CASE NO.: Appeal (civil)  3042 of 2008

PETITIONER: Mumbai Agricultural Produce Market Committed & Anr

RESPONDENT: Hindustan Lever Limited & Ors

DATE OF JUDGMENT: 29/04/2008

BENCH: S.B. Sinha & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T REPORTABLE

CIVIL APPEAL NO.     3042          OF 2008 (Arising out of SLP (C) No.1847 of 2007)

S.B. Sinha,J.

1.      Leave granted. 2.      Appellant is a Market Committee constituted under the Maharashtra  Agricultural Produce Marketing (Regulation) Act, 1963 (for short, ’the  Act’).  First respondent herein deals in Edible Oils and Vanaspati.  By  reason of a Notification dated 25.9.1987, the State of Maharashtra in  exercise of its power under Section 62 of the said Act added some items in  the Schedule appended thereto such as sugar, dry fruits, edible oils and  vanaspati to the Schedule of the Act.  Appellant No.1, Market Committee,  started collecting market fee as also supervision charges on all notified  agricultural produces marketed on wholesale basis.  The wholesale market in  respect of condiments, spices, dry fruits etc. was shifted from Greater  Bombay to New Bombay on and from 1.1.1991 where a huge market had  been constructed by the appellants. 3.      Respondents allegedly, despite the applicability of the provisions of  the said Act as also the Notification dated 25.9.1987, did not get itself  registered thereunder contending that ’Vanaspati’ had not been included in  the Schedule appended thereto.  Some of the traders dealing in edible oil had  also obtained exemption from payment of market fee and supervision  charges for a short time.  Such exemption granted was, however, withdrawn.   Various litigations were initiated before the Bombay High Court  questioning the validity of the said notification as also levy of market fee  and supervision charges by the Committee. 4.      Respondent Nos.1 and 2 also filed writ petitions in the year 1988  contending that they were not liable to pay any market fee or supervision  charges. 5.      The High Court by reason of a judgment and order dated 16.6.2006  although rejected the contention that the respondents were not liable to pay  any market fee, opined that the appellant was not entitled to collect  supervision charges.  Supervision charges as also interest accrued thereon  were payable to the State Government.   The High Court in its judgment held: "The impugned orders which have been passed  either during the pendency of the petition or before  the petition was filed are silent on the quantum of  supervision charges paid by the respondent No.1- Committee to the State Government in respect of  the sale/distribution of vanaspati produced by the  petitioners and marketed in the market area of

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respondent No.1, though not from the market yard.   In the absence of the petitioners having an outlet or  a depot or a trading centre in the market yard of  respondent no.1, the other place is only the  premises of the petitioners as admittedly the  respondent no.1 has not established any other  collection centres or subsidiary markets by  exercising powers under Section 5 and Section  30A of the Act.  We are, therefore, of the  considered view that the respondent No.1- Committee has no powers to cause recovery of  supervision charges from the petitioners as at  present and the impugned orders to that extent are  unsustainable."

       In regard to the payment of interest, it was held : "We are afraid Clause (y) below Rule 120 does not  come to the rescue of the Market Committee in  support of its case that it has the power to charge  interest varying from 12% to 21% on the delayed  dues of market fees and supervision charges under  bye-law No.14(A).  Section 31 as well as sections  34A to 34C clearly provide for only penal charges  and bye-law no.14 cannot be termed so as to cover  condition of trading and marketing in the market  area.  We have also noticed that on issuance of the  notice by the Market Committee, the petitioners  have taken due steps and during the pendency of  the petitions or before the impugned orders for  recovery were passed, they have deposited certain  sums.  In both the petitions, it is not a case of  inordinate delay in responding to the demands and,  in fact, the demands have been substantially met  within few months.  No reasons have been given in  the impugned orders as to why the Market  Committee felt it appropriate to recover interest  and not the penal charges from the petitioners.   We, therefore, hold that the respondent No.1 has  no powers to charge interest at the rate of 12% or  any higher rate upto 21% on the delayed payment  of market fees and supervision charges and it was  not even otherwise justified to levy such charges in  the instant cases."

6.      Mr. Bhatt, learned senior counsel appearing on behalf of the appellant,  would submit that the question as to whether any supervision charges were  payable or not had not been raised by the respondents and in that view of the  matter, the High Court committed a serious error in arriving at the  aforementioned conclusion. 7.      Mr. Gopal Jain, learned counsel for the respondents, however, would  support the impugned judgment. 8.      Levy of market fee and supervision charges stand on different  footings.  Whereas market fee is payable on the transactions carried out in  the market area, the power to realize the supervision charges is vested in the  State.  For the said purpose, it has to issue a general or special order.  Staff  must be appointed by the State for the purpose of carrying out supervision of  the market areas.  Only when the pre-requisites contained in Section 34A of  the Act are fulfilled, the question of recovery of such charges from the  person purchasing such produce in such market or market area would arise.   The costs of supervision is to be calculated by the Market Committee  in such a manner so as to enable it to levy the said fee under Section 31.   Sub-section (2) of Section 34B of the Act provides that the cost of  supervision collected by a Market Committee shall be paid to the State  Government in the prescribed manner.

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9.      The fact that Vanaspati is an item which has validly been added to the  Schedule appended to the Act and the Rules framed thereunder is now not in  dispute. The judgment of the High Court rendered in this regard has been  accepted by the respondent.  It deposited the amount of market fee on  various dates as detailed herein below :

"Date of Payment Amount Deposited 2.03.1998 Rs.4,00,000/-  31.03.1998 Rs.18,00,000/- 21.07.1998 Rs.62,84,779/- 7.09.1998 Rs.6,000/-"     

10.     It, however, appears that the validity of the levy and collection of the  supervision charges was specifically raised by the respondent herein on the  ground that no service whatsoever of any kind was being rendered in the  said market area.  The High Court, by reason of its judgment, opined that the  costs for supervision were incidental charges to be recovered and paid to the  Government in respect of the staff employed by it.  It is not a power vested  in the Committee and, thus, the conditions precedent therefor were required  to be shown to be existing, i.e., that the Government had employed staff and  had been rendering services by way of supervising the buying and selling of  the agricultural produces in the market area. 11.     The power to recover the charges for the supervisory staff employed  at the expenses of a section of the industry is not a general power.  It is  provided for specifically in terms of the Act.   When the statute mandates  that the cost of supervision would be borne by the licensee, it does not  constitute levy of tax.  It may be a part of contract. It may have to be paid as  a liability to comply with the provisions of the statute and statutory Rules  validly made.  The cost has to be determined.  It may have to be  apportioned.  It cannot be levied or calculated in such a manner so as to  cause unjust enrichment in favour of the State. 12.     The quantum of recovery, however, need not be based on  mathematical exactitude as such cost is levied having regard to the liability  of all the licensees or a section of them.  It would, however, require some  calculation. 13.     A finding of fact has been arrived at by the High Court that no service  was being rendered by the State.  If no service is being rendered, even no fee  could have been levied.  It has been so held by a Constitution Bench of this  Court in Jindal Stainless Ltd. and Anr. v. State of Haryana and Ors. [(2006)  7 SCC 241] in the following terms : "40. Tax is levied as a part of common burden.   The basis of a tax is the ability or the capacity of  the tax payer to pay.  The principle behind the levy  of a tax is the principle of ability or capacity.  In  the case of a tax, there is no identification of a  specific benefit and even if such identification is  there, it is not capable of direct measurement.  In  the case of a tax, a particular advantage, if it exists  at all, is incidental to the State’s action.  It is  assessed on certain elements of business, such as,  manufacture, purchase, sale, consumption, use,  capital, etc. but its payment is not a condition  precedent.  It is not a term or condition of a  licence.  A fee is generally a term of a licence.  A  tax is a payment where the special benefit, if any,  is converted into common burden. 41. On the other hand, a fee is based on the  "principle of equivalence".  This principle is the  converse of the "principle of ability" to pay.  In the  case of a fee or compensatory tax, the "principle of

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equivalence" applies.  The basis of a fee or a  compensatory tax is the same.  The main basis of a  fee or a compensatory tax is the quantifiable and  measurable benefit.  In the case of a tax, even if  there is any benefit, the same is incidental to the  government action and even if such benefit results  from the government action, the same is not  measurable.  Under the principle of equivalence, as  applicable to a fee or a compensatory tax, there is  an indication of a quantifiable data, namely, a  benefit which is measurable."

14.     The principle of equivalence, therefore, is the foundation for levy of a  fee.  It must be held to be the foundation of a statutory charge like  supervisory charges.  It was for the State to prove it.  Once the State has  failed to bring record the foundational facts, it is not for the appellant who is  merely a statutory authority for collecting the same as an agent of the State  to contend that the same was payable.  The State of Maharashtra is not  before us.         In Aashirwad Films v. Union of India (UOI) and Ors. [(2007) 6 SCC  624], it has been held : "It is also required to be realized that imposition of  reasonable tax is a facet of good governance."

15.     Cost of supervision, if borne by the State has to be recovered by it.   The burden was, therefore, on the State to justify the levy.  Even the general  or special order, if any, purported to have been issued by the State has not  been brought on record.  On what basis, the supervision charges were being  calculated is not known.  The premise for levy or recovery of the amount of  supervisory charges is not founded on any factual matrix. Only the source of  the power has been stated but the basis for exercise of the power has not  been disclosed. 16.     We, therefore, are of the opinion that there is no infirmity in the  impugned judgment. 17.     So far as the question of payment of interest is concerned, it must be  referable to the statute. When the statute controls the levy, the interest  payable thereupon, as envisaged thereunder must also govern the field.  The  general principle of restitution may not apply in this case.   18.     The High Court having exercised its discretionary jurisdiction in the  matter, we do not find any reason to take a different view.  The impugned  judgment, therefore, needs no interference.  The appeal is dismissed with no  order as to costs.