Judgment sc-s-1985-1-145-281

228 IUPREMB COURT RBPOi.TI {1985] SUPPL. I.C.l.

To summarise, my findings are: A (1) S. 65 (1) of the Act as substituted by Amendment Act 24 of 1975 and Act 17 of 1980, and s. 42 of Amend- ment Act 17 of 1980 in so for as it seeks to save that has been done under s. 65 (1) of the Act are unconstitutional and have been rightly struck down by the High Court; B (2) Enhancement of the rate of market fee leviable under s. 65 (2) of the Act by amendments of the bye-laws from one per cent to two percent of the price of the notified agricultural produce is invalid in Jaw for non-com- pliance with the law laid down in Kewal Krishan Puri's case (supra);

(3) There is no correlation between the enhancement of the rate of the market fee leviable under s. 65(2) from one per cent to two per cent and the services rendered or proposed to be rendered by the Market Committees and, therefore, the enhancement is invalid in law;

(4) Amendment of the bye-Jaw~ made for enhance- ment of the rate the market fee levilable under s. 65 (2) of the Act from one per cent to two per cent is invalid in law;

(5) The provisions of the Act are repugnant to the Tobacco Board Act, 1975 and, therefore, tobacco is liable to be removed from the schedule; and

F (6) There shall be no refund of the market fees collected under the substituted s. 65 (1) of excesss fee collected under s. 65 (2) either by the State Government or by any of the Market Committees.

The appeals, writ petitions and special leave petitions are disposed of accordingly. The Market Committees shall pay costs of Rs. 15,000 to the parties represented by Mr. Sorabjee and. Rs. 10,000 to the parties represented by Mr. Kacker.

SABYASACH1 MUKHARJJ, J. Some Writ petitions out of a large number of petitions, nearly 4298 in number arising out of The Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 ()lereiJJafter referred to as the 'Act') were taken up by the High

. i.T.c. v. ~RNAT~KA (S, Mukharjt, /.)

·Court of Karmitaka for hearing and disposed of by one common j'.!dgment as one or more of the contentions in those petitions were .A common, and all the petitions were heard together by the High Court of Kamataka so as to afford opportunities to learned counsel appearing in the c:1ses to address arguments. These were disposed of by a common ofjer which was representative of the contentions urged at the hearing of the argument. The learned judges directed B that the remaining writ petitions which had been heard along with those cases. would be disposed of, in co11venient batches, following the findings on the various contentions recorded in that order.

These.appeals arise out of the said order. In these appeals we were concerned with the provisions of the Act as well' as (1) the c challenge to the constitutional validity of section 65 (I) of the Act as substituted by The Karnataka Agricultural Produce Marketing (Regulation) (Amendment) Act, '1980 (hereinafter referred to as the (Amending Act') which sought to validate the market fee levied on ·the ••sellers of notified agricultural produce" under section 65 (I), D for and during the period of its operation, prior to its being struck down by the Karnataka High Court in Rajasekhariah' v. Tiptur Agrl• . . Produce Ma;keting Committee & Anr.(l) (2) to the enhancement of market fee from 1% to 2% effected by the various Market Commit- tees by amending the bye-laws after permissible maximum levy of the fee on the buyers under section 65 (2) was raised to 2 per cent by the .E said Amending Act, the challenge being both on the ground that the amendment of bye-laws was made in violation of the mandatory· requirements of prior publication and prior sanction contemphited by section 148 and on the ground that the enhancement of fees fail for want of quid-pro-quo ; and (3) to· the inclusion of certain items · F such as wood~ cardamom, sugarcane, tobacco in the list of notified agricultural ..._ '. produce incorporated in the Schedule to the ;Act. ·, On 1st May~ 1968, the Act came into force. Section 65 of the Act as originally stood directed the Market Committtees to levy and G collect Market fees from tbe buyers in respect of agricultural produce by-

...... _ (i) any trader or oth~ person in the yard. and H · (1) 1979 1 Karoataka L.J. p. 43,

230 SUPREME COURT REPORTS [1985) SUPPL. S.C.R.

(ii) any trader o~tside the market or sub-market in tho A market area. i· .. t Section 65 of the Act was amended on 20th October, 1973 by The Karnataka Act No. 20 of 1973 raising the maximum fee leviable by a Market Committee from 30 paise to one rupee. B On the 17th December, 1974, the enhancement of the market fee from 30 paise to one rupee made by the amendment of the bye- laws by some of the Market Committees was challenged by the traders-buyers of the agricultural produce before the High Court of Karnataka in Writ Petition No. 537 of 1974 and the connected c writ petitions in the case of K.S. Varnon Roo v. The Agricultural Produce Market Committee. Sagar and the High Court by its judgment dated 17th December, 1974 held that the levy authorised by the section was in the nature of a fee and after scrutinising the estimate of expenditure of each of the Market Committees spread over a period of 15 years. and the amount recoverable by way of fees thereto held that there was correlation between the services rendered and the amount of fees collected.

On 19th .May, 1975, section 65 of the Act was substituted by a new section (Act No. 24 of 1975). The substituted section reads as follows:-

"65. Levy of Market Fees-( I) The Market Commit· tee shall levy and collect market fees from every seller in respect of agricultural produce sold by such seller in the market area at the rate of one rupee per one hundred rupees of the price of such produce sold.

(2) The Market Committee shall levy and collect market fees from every buyer in respect of agricultural produce bought by such buyer in the market area, at such rate as may be specified in the bye-laws (which of such produce bought) in such manner and at such times as may be specified in the bye-laws.

(3) Every Market Committee shaH, notwithstanding anything contained in this Act, credit to the Karnataka Motor Vehicles Taxation Act, 1957, the market fees collected under sub-section (I) for being spent for the

' I.1·.c. v. KARNATAKA (S. Mukharji,. J.) 231

purpose of construction, repair, improvement and main· tenance of rural roads in the State." A By Act No. 14 of 1976 passed on 24th January, 1976 which replaced and earlier Ordinance. section 65 (1) was amended by insertion of a proviso to section 65 (I) as under :- 8 "Provided that the State Government may, by order in public interest, exempt any Market Committee from such levy and collection in respect of any agricultural produce ...

On 1st June, 1976, by the Amending Act No. 43 of 1976, the c following changes were made :-

(a) By section 2 of the amending Act, the word "MARKETING" was substituted for the words "buying and selling'', in the long title to the Act. D (b) By section (3) of the amending Act, the word '·MARKETING" was substituted for the words "buying and selling'' in the preamble to the Act.

(c) By section (4) of the amending Act a new clause E 18 (A) was inserted as under :-

"18 (A) "Marketing" means buying and selling of agricultural produce and includes grading, pro- cessing, storage, transport, packaging, market infor- F mation and channels of distribution."

On or about 1978 judgment was delivered by the High Court of Karanataka in the case of Rajasekhariah v. Tiptur Agricultural Produce Marketing Committee and Anr. (supra). By the said G judgment, the High Court struck down section 65 (1) and (3) of the Act which authorised the levy and collection of market fee on the sellers of agricultural produce, and the High Court in the said judgment also considered the levy of market fee at the rate of l per cent on the buyers of the agricultural produce levied and collected B by certain Market Committees and upheld such levy on the buyers of agricultural produce following the earlier judgment dated 17th December, 1974 in Vaman Rao's case mentioned hereinbefore.

~32 SUPREME COtiB.T REPORTS (1985} SUPPL. S.C.it.

On or about the 30th June, 1979 Ordinance No. 2 was pro- A mulgated which brought about the following changes :-

(a) Section 63 of the Act which deals with powers and duties of the Market Committees was amended with retrospective effect from 19-5-1975 so as to provide 'that in clause (ii) of sub-section (1) of section 63, the B words "Transport and Marketing" shall be substitu- ted for the word ''Marketing" in the said clause. Clause (ii) of sub-section (1) of section 63 was amen- ded to provide for "it shall be the duty of the Market Committee to provide such facilities for transport c and marketing of agricultural produce therein".

(b) In sub-section (2) of section 63 of the Act and in clause (a) thereto, the following was inserted after item (I): D "(ia) Provide either independently or along with some other authority necessary facilities for the transport of notified agricultural produce to the yard in such manner as may be prescribed."

E (c) Section 65 of the Act was amended to provide for the following consequences :

(i) The Market fee levied and collected under sub- section (l) of section 65 of the Act for the period 19-5·1975 to 28-9-1978 was validated. F (ii) Sub-section (1) of section 65 was deemed to have been omitted with effect from ..<.8-9-1978.

(iii) Sub-section (2) of section 65 of the Act provid· ing for the levy of Market fee on the buyers of the agricultural produce . was amended by enhancing the maximum permissible levy there· to from 1 per cent to 2 per cent.

(iv) Sub-section (3) of section 65 oi the Act which dealt with the crediting of the Market fee levied and collected under sub-section (1) was always deemed to have been om~tted.

t.t.c. v. K.AitNATAKA (S. MuJchar}i, J.) i33 Pursuant to the amendment of sub-section (2) of section 65 of the Act enhancing the maximum Market fee leviable thereto from 1 per cent to 2 per cent, all the Market Committees in the State (except that of Mangalore) amended the bye-laws by enhanc· ing the Market fee leviable under sub-section (2) of section 65 of the Act from I per cent to 2 per cent and on such enhancement of the market fee from 1 per cent to 2 per cent, all the buyers-traders 8 filed writ petitions befort the High Court assailing the said enhanced levy.

By Karnataka Ordinance No. 14 of 1979, on 2nd November, 1979, the earlier Ordinance, namely Ordinance No. 2 of 1979 was repealed. Another Ordinance on the same lines as Ordinance No. 2 c of 1979 was promulgaged on 3rd November, 1979. On 9th May, 1980, Karnataka Act No. 17 of 1980 containing the same changes were brought as noticed in the Ordinance mentioned before.

D Hearing of these writ petitions before the High Court commen· ced in October-November, 1981. Section 148 of the Act was amend- ed by Karnataka Ordinance No. 22 of 1981 during the hearing of these writ petitions and by the said Ordinance the conditions of previous publication contemplated in section 148 of the Act was dispensed with retrospective effect. We shall have to advert to these provisions subsequently.

Judgment was delivered by the High Court of Karnataka on 25th January, 1982 in these writ petitions. Thereafter the rate of market fee payable under section 65 (2) of the Act was reduced from 2 per cent to 1 per cent by all the market committees by Circular dated 27th February, 1984. As mentioned hereinbefore, these appeals challenge the said judgment.

Several contentions were urged before the learned trial judge and iome of these contentions were pressed before us. One of the questions posed was, whether section 65 ( 1) of the Act (as substitu· ted by the Amending Act 17 of 1980) read with section 42 of the said Amending Act retrospectively validating the levy and collection of market fees on the sellers at one per cent for the period between H 19·5·1975 and 28·9·1978. was constitutionally valid. By the said

234 ~UPREME COURT REPORTS [1985j SUPPL, S,C,R.

amending Act it was provided that the following sub-sections shall be deemed to have been substituted with effect from 19th May, 197 5, namely :-

"(1) In respect of the agricultural produce sold in a market area, there shall be levied and collected by the market committee thereof, from every seller, market fees at the rate of one per cent of the sale proceeds of the produce so sold ;

(2) Sub-section (l) as so substituted shall be and c shall be deemed to have been omitted with effect from the 28th day of September, 1978."

It was contended on behalf of the petitioners before the High Court that section 65 ( l) as substituted by Act 17 of 1980 read with section 42 of the Amending Act, seeking to validate the collection of market fee on "sellers" made under the old section 65 (1) was constitutionally invalid. It must be kept in view that this validation had become necessary in view of the judgment of this Court in Rajasekhariah's case (supra) striking down sub-sections (I) and (3) of section 63 of the Act as these then stood. The present substituted section 65 (1) read with section 42 of the Amending Act sought to validate the collections of market fee on sellers made when the earlier section 65 (I) was operative.

The High Court in the case of Rajasekhariah's case struck down section 65 (I) (3) on grounds as follows :

u(a) The though the fees levied under sub-section (1) of section 65 were required to be spent on construc- tion, repair, improvement and maintenance of rural roads, the construction or repair or improvement and maintenance of Rural roads was not one of the obliga- tory functions of the Market committees under the Act ; and the construction and maintenance of rural roads, which were public roads, were the primary responsibility of the State and its instrumentalities such as the authori~ ties under the Karnataka Municipa1ities Act, 1976 ; Karnataka Municipalities Act, 1964 ; etc.

. i.t.c. v. KARNATAKA (S. Mukharji. J.) 2.3.5

- (b) Secondly, having regard to the essential element in the concept of fee requiring some special benefit by way of quid-pro-quo, "to flow to the class of persons on A

whom fee is levied, the construction and maintenance of public roads could not be said to constitute or provide any such special benefit to the payer of the fee who, as

-- members of the public were entitled to the use and benefit B of public roads and that they could not be compelled to pay a fee for what they, in common with the general public, were otherwise entitled to as of right."

Pursuant to the judgment in Rajasekhariah's case, the State was exposed to the liability for refund of fee collected for the c period between 19·5·1975 when sub-sections 65 (1) and (3) were introduced by the Amending Act 24 of 1975 and 28·9·1978 when tha judgment was pronounced. By the Act 17 of 1980, this levy was sought to be validated and the fee retained by the State Government. D

After discussing the rival submissions and after discussing the legal principles and the decisions in the cases of MisrilaT Jairt v. State ofOrissa,(l) Shri Prithvi Cotton Mills Ltd. v. Broach Borough Mnnici· pality,(2) Ahmedabad Corporation v. New Shirock Spg. ond Wvg. Co. E Ltd.,(8) I.N. Saxena v. State of M.P.,( 4) and The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt,(5 ) the High Court of Karnataka distinguished fee and tax and then referred to the case of Kewa/ Krishan Puri v. State of Punjab.(8 ) Reliance was also placed on the observations of this Court in Southern Pharmaceuticals and Chemicals v. State of F Kerala(') and then the Court addressed itself to the question whether construction of rural roads for which fee was levied on the sellers can be said to be a special service primarily and directly intended for the benefit of the class which paid the fee. G (1) A.I.R. 1977 S.C. 1686. (2) A.I.R. 1970 S.C. 192. (3J A.l R. 1970 S.C. 1292. (4) A.I.R. 1976 S.C. 2250. (S) A.I.R. 1954 S.C. 282. H (6) A I.R. 1980 S.C. 1008. (7) A.I.R. 1981 S.C. 1863.

i36 SUPREME COURT iulPOR.TS {i98Sl suPPL. s.c.k.

After discussing several decisions, Karnataka High Court felt that the second major defect noticed in the law in the case of Rajasekhariah's case namely the construction of rural roads could not qualify for being reckoned as special service to a class of persons paying the fee had not been cured or removed by the law which sought to validate the levy and in view of these circumstances, the Court came to the conclusion that section 65 (1) as substituted by section 20 of the Amending Act 17 of 1980 as wen as section 42 of the Amending Act was not constitutionally valid and was liable to be 11truck down.

As mentioned before several other contentions and submissions c were urged before the learned trial Judge but befor us the following main submissions were urged :

(1) There was no quid-pro-quo between the imposition of fees and the services rendered, (2) In so far as the Amending Act 17 of D 1980 sought to validate the taxes realised following the defects mentioned in Rajasekhariah's case valid or not, and, if not, whether the appellants were entitled to refund of any amount ? (3) Is imposition of market fee on Tobacco valid ? (4) Is the deletion of the provisions for previous publication in section 148 proper and valid? E I will, however, notice the other contentions briefly raised in those writ petitions.

It was contended that the Act as amended by Act 17 so far as marketing of cardamom was concerned, was repugnant to The Cardamom Act. 1965. The High Court held that Karnataka Legislature was not entitled to impose market fee so far as car- damom was concerned. It may be noted before the High Court that the inclusion of cardamom in the Act was contended to be bad in view of entry 52 of List I and entry 33 of List III but it appears the question was not considered in the light of entry 52 of List I and entry 28 of List II in the present case. The High Court, further. found that the rules framed under the Cardamom Act were at variance with the present Act. So far as sugar-cane was concerned it was held that sugarcane was outside the pale of the present Act. The Government has not appealed against the findings so far as cardamom was concerned. In so far as the High Court held that

I.r.c. "· I:AitNATAkA (S. Mukhcuji, J.) 237

sugarcane was outside the pale of the Act, no argument impugnin& that finding was canvassed before Ull. A

It was for the first time by the Amending Act 17 of 1980 that tobacco was enumerated as an agricultural produce for the purpose of the Act. It may be borne in mind that the Amending Act 17 of 1980 for the first time enumerated tobacco for the purpose of the B "Act". The amending Act was not reserved for the consideration of the President.

On a consideration of the provisions of the Tobacco Board Act, 1975 and the present Act, after discussing various contentions, the High Court held that there was no repugnancy and conflict as c between the provisions of Tobacco Board Act, 1975 and the present Act.

One of the main contention~ urged before the High Court and reiterated before us was whether the Act in so far as it provided for regulating the marketing of tobacco is unconstitutional as being repugnant to the Central Act and on the same topic marketing of tobacco is regulated by Tobacco Board Act, 1975. It should be borne in mind that there was a declaration under section 2 of the Central Act namely Tobacco Board Act, 1975 pursuant to entry 52 of List I regarding tobacco. It was contended that tobacco after the declaration under section 2 of the Tobacco Board Act became part of entry 52 of List I and it was submitted that once the declaration was made, any legislation by the State after such declaration trench- ing upon the field disclosed in the declaration must necessarily be unconstitutional because that field or area according to the appellants was excluded from the legislative competence of the State Legislature. Entry 52 of List I reads as follows :-

"Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest." G

There has been a declaration by the Union that the control of tobacco industry bas been taken over in public interest. Thereafter Tobacco Board Act, 1975 being Act 4 of 1975 was passed for the development under the control of the Union of the tobacco industry. Chapter li of the said Act deals with the establishment and constitu- Hon of the Board. Section 7 permits the Board to appoint committees

238 SUPIU!ME COURT REPORTS (1985) SUPFL, S.C.R.

as might be necessary for the efficient discharge of its duties and performance of its functions under the Act. Sub·section (2) of section 7 enjoins that the Board shall have powers to co-opt members. Section 8 of the Tobacco Board Act, 1975 deals with the functions of the Board and empowers by sub-section (I) of section 8 of the Tobacco Board the duty to promote, by such measures as it thinks fit, the development under the control of the Central B Government of the tobacco industry. Sub-section (2) of section 8 of the said Act lays down different functions of the Board and, inter alia, by clause (a) permits regulating the production and curing of virginia tobacco having regard to the demand therefor in India and abroad. Clause (cc) of section 8 (2) empowers the Board c as follows:

''establishment by the Board of auction platforms, with the previous approval of the Central Government, for the sale of virginia tobacco by registered grower or curers, and functioning of the Board as an auctioneer at action platforms established by or registered with it subject to such conditions as may be specified by the Central Government."

Section 10 provides for registration of tbe growers of virginia tobacco. Section 13 provides that no registered grower or curer shall sell or cause to be sold virginia tobacco elsewhere than at an auction platform registered with the Board in accordance with the rules made under this Act or established by the Board under this Act. Section 14 deals with the application, cancellation, fees and other matters relating to registration. Section 14A deals with the power to levy fees for the services rendered by the Board in relation to such sale at such rate not exceeding two per cent of the value of such tobacco as the Central Government may specify.

Section 11 provides that no person other than a registered curer shall cure or undertake the curing of virginia tobacco unless he registers himself as a curer with the Board in accordance with the rules made under the Act.

Chapter V deals with the control by Central Government of import and export of tobacco and tobacco products. There are provisions under section 21 for the issuance of directions by the Central Gov€;rnment and by section 22 of returns and reports.

i.T.C. r. IfARNATAKA (S. Mukharji, J.) 239 Chapter VI deals with the penalties and offences by the companies.

- Section 31 provides that the provisions of the said Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force. Section 32 provides for the power A

of the Central Government to make rules. Section 1 provides that the Act will come into force on such date as the Central Government may by notification in the Official Gazette appoint and proviso of sub-section 1 empowers that different dates may be appointed for B · different provisions of the Act and for different States or different parts thereof. Under sub-section (3) of section 1 of Tobacco Board Act, 1975, by Notification dated 31st May, 1980, the Central Government appointed 31st May, 1980 as the date on which sections 10 and 11 would come into force in the States of Maharashtra, c West Bengal, Gujarat, Tamil Nadu and Uttar Pradesh.

Scection 13 of the Tobacco Board Act is important because it empowere that no registered grower or curer shall sell or cause to be sold virginia tobacco elsewhere than at an auction platform registered with the Board in accordance with the rules made under the Act. There was some confusion at the stage of the argument as to on what date it bas come into force or even if it has not specifically come into force in the State of Karnataka, by the passing of the Act itself, the Centre has sufficiently expressed its intention to occupy the field so as to exclude the operation of any activity by the State. Our attention has, however, been drawn to a Notifica- tion being Notification No. S. 0 665 (E) dated 31st August, 1984 whereby section 13 of the said Act came into force in the State of Karnataka from 1st day of September, 1984. I have already noted the provisions of section l3 of the said Act. It may be mentioned that this notification as such would be of no assistance to us because this notification carne into force subsequent to the writ petitions anrl after hearing in these matters was concluded. It was the contention on behalf of the petitioners that by declaration under entry 52 of List I and by the passing of the Act in question i.e. Tobacco Board Act, 1975, tobacco became an occupied field of G Central Parliament and would prevail over the 'Act' irrespective of any separate notification making Tobacco Board Act, 1975, applica- ble to the State of Karnataka. In exercise of powers under section 32 of Tobacco Board Act, 1975 the Central Government was empowered to make rules. These are known as Tobacco Board II Rules, 1976. Rule 33 of chapter VII provides for registration of growers, curers, exporters, packers and auctiopeers of, and dealers in tobacco.

240 SUPREME COURT REPORTS {1985] SUPPL. S.C.lt,

The High Court was of the view that unlike the law governing A the marketing of Cardamom and Sugarcane, the Tobacco Act did not cover the marketing of tobacco in its entirety but only covered a part of the area of the topic of marketing of tobacco. According to the High Court the two legislations could co-exist and operate cumulatively. The High Court was of the view that any intention of the superior legislature to cover the whole field to make a compre· B hensive law with regard to marketing of tobacco was not manifest in the legislation. The High Court noted that it was not disputed during the arguments that the only provision on what might be called the area of marketing covered under the Tobacco Act was the one requiring the auctioneers of tobacco to hold a licence for c establishment of auction platforms. The High Court was of the view that as long as the market committees became such licensees, there was no further requirement under the Tobacco Board Act which could be said to render the provisions of the 'Act' regulating marketing of tobacco under the Act repugnant to or irreconcilable. It may, however, be noted that by letters dated 15th September, D 1983 and 23rd September, 1983 appearing at pages 462 and 466 of the Paper Book, it was pointed out on behalf of the petitioners before this Court that the market committees had not even upto that date been registered under the Tobacco Board Act, 1975, in the first letter written to the Market Committee it was stated that the market E committee could not be given registration because these lacked certain necessary qualifications and was therefore incapable of rendering any service at all. Here it may have to be borne in mind that section 12 of the Tobacco Board Aet, 1975 enjoins that no person shall export tobacco or any tobacco products or function as F a packer, auctioneer of, or dealer in, tobacco unless he registers himself with the Board in accordance with the rules made under - this Act.

The High Court took the view that on the limited aspect of marketing provided for Tobacco Board Act, 1975 it only made G provisions in relation to virginia tobacco and not for all varieties of tobacco. The High Court therefore was of the view that the provisions of the Act were not repugnant to the Tobacco Board Act, 1975 and all that was necessary for the market committees was to obtain auctioneer's licence under the provisions of Tobacce Act H and'or to get the necessary qualifications so as to be able to obtain necessary licence. The High Court came to the conclusion that provisions of tbe Act in relation to the regulation of tobacco were

I.T.C. v. KARNATAKA (S. Mukharji, J.) 241

not repugnant to the Act. The High Court further noted that neither the Union of India nor the Tobacco Board had been implead- A ed as parties to the writ applications before the findings on these contentions were strenuously challenged before us on behalf of the appellants. On behalf of the appellants, it was urged that tobacco was covered by entry 52 of List I by virtue of the declaration under section 2 of the Tobacco Board Act, 1975 namely the Central 8 Government. It was submitted that once a dec:laration had been made under section 2, pursuant to Entry 52, the Parliament had exclusive competence to legislate every aspect or activity pertaining to tobacco and the State would have no competence to legislate on that topic. c Reference was made to the decision in the case of Baijnath Kedia v.State of Bihar & Ors.(l)

I need not detain ourselves on the permissibilty of the regula- tion of marketing of cardamom under the Act, because the same was not canvassed before us.

So far as the point relating to 'wood' and 'forest produce' was concerned, the High Court felt that this point was concluded by the pronouncement of this Court in Ram Chandra Kailash Kumar & Co. v. State of U.P.(2) In any event we are not concerned ~ ith this controversy as the same was not canvassed before us.

It was contended that section 65(2) of the Act gave an uncanaliced and excessive power to the market committees in the matter of -specifying the rate of fee. The upper limit for the levy was fixed at 2 per cent. It could only be related to the notified agricultural produce sold in the market. The concept of fee is itself a further limitation. The High Court therefore was unable to accept the submission that section 65(2) was bad for excessive delegation of legislative powers. G It was contended that the bye-laws were unreasonable and without proper criteria. Reilance was placed before the High Court on the decision in the case of Maneka Gandhi v. Union of India (S) H (1) [1970}2 S.C.R. 100 at 113. (2) A.J.R. 1980 S.C. 1124. (3) A.I.R. 1978 S.C. 597.

242 SUPREME COURT REPORTS (1985] SUPPL. S.C.R.

and Ajay Hasia etc. v. Khalid Mujib Sehravardi & Ors. etc. (1). The A High Court bas, however, found that the legislative measure could not be invalidated on the ground that the relevant criteria was not shown to have been taken into account in making the legislation. Reliance was placed in Tu/sipur Sugar Co. v. Notified Area Committee, Tulsipur ( 2) and in the said case on the observations of Megary, B J. in Bates v. Lord Hailsham of St. Marylebone l3) the following effect:

" ...... Let me accept that in the sphere of the so called quasi-judicial the rules of natural justice run, and that in the administrative or executive field there is a general duty of fairness. Nevertheless, c these considrations do not seem to me to affect the process of legislation whether primary or delegated. Many of those affected by delegated legistation, a"nd affected very substantially, are never consulted in the process of enacting that legislation; and yet they have no D remedy ...... ".

I am in respectful agreement with the aforesaid view. It may further be noted that a minister or any other body in making legislation was not subject to rules of natural justice. See in this connection Prof. Wade's 'Judical Review of Administrative Action', E 4th Edn. page lBS at 192 (De Smith). Though we are in general agreement with the aforesaid view, the High Court, however, did not detain it~elf on this point because the High Court, was of tbe view that the fixation of market fee was challenged not because the persons concerned were not heard but because there was no quid pro quo. F The High Court felt that the challenge to the doctrine of ultra vires on the basis that hearing of interests affected was an imperative requirement, not in compliance with rules of natural justice but as a duty implicit in the nature of the power. Section 148(1) of the Act as it originally stood provided that a market committee could frame G bye-laws after previous publication in the prescribed manner and also with the previous sanction of the Chief Marketing Officer. The contention was that no procedure having been prescribed by the

H (1) A.LR. 1981 S.C. 487. (2) A.l.R. 1980 S.C. 882. ~3) [1972] I W.L.R. 1373.

I.T.c. v. ltARNATAKA (S. Mukharji. J.) 243

rules, the concepts implicit in previous publication and incorporated in section 23 of the General Clauses Act, 1897 were attracted. It was A urged that there had been no compliance with the requirement of previous sanction and publication contemplated in this section. As the narration of events indicated before, an Ordinance was intro- duced namely Karnataka Ordinance No. 22 of 1981 during the period when the arguments in these cases were coming to a close before the B High Court. The amendment sougth to amend sections 137, 148 and 158 of the principal Act. By section 3 of the Ordinance which amended section 148 of the principal Act, the words "after previous publlcation in the prescribed manner" occurring in section 148(~) of the principal Act had been deleted with retrospective effect i. e. from the date of commencement of the Act itself. lt was contended that the requirement of hearing of interests affected was not merely a procedural requirement of section 148 of the Act but an exercise inherent in the exertion of power of delegated legislation. The very concept of 'fee' and the determination of its extent and incidence by subordinate legislation would require for its reasonable exercise an opportunity for the interests affected being heard, it was submitted.

On behalf of the Market-cmmittees and the Government, it was contended that on a proper construction of section 65(2) of the Act, such an implica1ion of a duty to hear affected interests did not at all arise. Any argument of such a statutory implication could not survive the amendment made by Ordinance of 17th December, 1981 which, in turn, clearly took away the obligation of prior hearing.

The High Court was of the opinion that the authorities relied on before it indicated that· the opportunity of consultation and hearing of affected interests were merely informal and extra-judicial. The High Court referred to the observations in Wade's Administrative Law and referred to certain decisions.

The High Court was of the view that persons affected did not have any right to be heard before the statutory rules or bye-Taws were made unless the right was conferred by the statutes.

The High Court ultimately came to the conclusion that in the batch of cases, this was not of much impo~tance on the ground t?at H b . 'fie and express provisions of sectton 5 (a) of the amendmg y ds~eci ht'ch validated these bye-laws notwithstanding the fact Or mance w that affected interest were not hearc;l in any manner.

244 SUPREME COURT REPORTS [1985) SUPPL. S.C.R.

The Advocate-General stated before the High Court that A though there was no obligation, it would be eminently desirable to consult or ascertain the views of those who would be affected and the High Court, therefore, observed that before a market-committee proposed to amend a bye-law to make an upward revision of rate of fee, in future, the market committee could follows the directions of this Court in Kewal Krishan Puri's case and the High Court, B suggested certain means. Ultimately, the High Court came to the following conclusions:

(a) Section 65(2) of the Act did not confer an unguided, arbitrary power and there was no excessive c delegation of legislative power to the markeHommittees and therefore not vitiated on that account;

(b) The question whether, upon a proper construction, section 65(2) must be held to imply an obligation on the part of the market committees to hear affected interested D parties before the rate of fee was fixed, was left open with certain observations made in that judgment.

(c) The contention that challenged the bye-law for want of previous sanction under section 148(1) of the Act was not accepted. E It bad been contended before the High Court that there was discrimination on the ground that there was levy of the same rate of fee on all types of produce. The High Court repelled this contention relying mainly on the decision of this Court in the case of Ganga F Sagar Corporation Ltd. v. The State of Uttar Pradesh and Others.(l)

One ofthe main contentions urged before the High Court was that there was no quid-pro-quo. The High Court examined this contention with reference to the factual details.

G The High court referrd to the decision in the case of KewtJI Krishan Puri (supra) and observed that the following seven principles were laid down by this Court:

(1) The amount of fee realised must be ear·market H for rendering services to the Jlcensees in the notifieg

(I) A.I.R. l980, 28(i.

t.r.c. v. KARNATAKA (S. Mukharji, J.) 245

market area and a good and substantial portion of it must ·, be shown to be expanded for this purpose. A (2) The services rendered to the licensees must be in relation to the transactions of purchase or sale of the agricultural produce.

B (3) While rendering services in the market area for the purpose of facilitating the transactions of purchase and sale with view to achieve the objects of the marketing legisiation it is not necessary to confer the whole of the benefit on the licensees but some special benefits must be conferred on them which have a direct, close and reason- c able correlation between the licensees and the transactions.

(4) While conferring some special benefits on the licensee, it is permissible to render such service in the market which may be in the general interest of all concerned with transactions taking placed in the market.

(5) While spending the amount of market fees for the purpose of augmenting the agricultural produce, its facility to transport in villages and to provide other facilities meant mainly or exclusively for the benefit of the agriculturists is not permissible on the

- ground that such services in the lnng run go to increase the volume of transaction in the market ultimately benefiting the traders also. Such an indirect and remote benefit to the traders is in no sense a special benefit to them.

(6) The element of quid-pro-quo may not be possible or even necessary to be established with arithmeti~ G cal exactitude but even broadly and reasonably it must be established by the authorities who charge the fees that the amount is being spent for rendering services to those on whom falls the burden of the ~. H (7) At least a good and substantial portion of the amount collected on account of fees, may be in the

246 SUPREME COURT REPORTS ( 1985) SUPPL. S.C.k..

neighbourhood of two-thirds or three-fourths must be shown with reasonable certainty as being spent for rendering services of the kind noted before.

The High Court by an order dated 30th November, 1981 had directed the Chief Marketing Officer to furni~h in respect of each marketing committees a comprehensive statement in a tabulation from setting out certain factors which were relevant for determina- tion of this question. These factors have been mentioned in the judgment of the High Court. Such statements or similar statements • were duly filed.

c The High Court noted that out of 33 market committees which were involved, 2 were tobacco markets. Market committees whose routine recurring annual revenue expenditure was somewhere in the nature of 45 to 60% of the market-fee receipt formed one group. The High Court felt that in the case of these market D committees even though revenue expenditure did not sufficiently establish the requisite degree of correlation. It was reasonable to assume that having regard to the extent of infrastructural facilities available in most of the modest allocations on future development work of non-controversial kind will bring about the correlation required to pass the test of market fee. E The High Court observed that the market committees where the routine recurring annual revenue expenditure itself was over 60% of the receipts of the market-fee at 2~~ thereby established a broad and substantial correlation. In the case of these markets, the High F Court felt that no further investigation was required.

In this class of cases were included 33 market committees. Their names are tabulated et page 140 of the High Court judgment (page 314 of the Paper Book). These market committees were classed as Category 'A'. G The High Court at page 315 of the Paper Book (page 141 of the judgment) tabulated other markets and the High Court felt that in case of those markets, estimates for developmental work need not also be subjected to minute examination. These markets were 16 in H number and mentioned in the judgment of the High Court namely, (1) Doddaballapur, (2) Gubbi, (3) Sira, (4) Jamkhandi, (5) Kundgoi.

i.T.C. V. KARNATAKA (S. Mukharji, J.) 247

(6) Laxmeshwar, (7) Siruguppa, (8) Aurad, (9) Gulbarga, (10) Nalwar, (ll) Shorapur, (12) Yadgir, (13) Yelburga, A (14) Kollegal, (15) Bhadravati and (16 Manvi. These are classed as Category 'B'.

The next category was market committees whose routine annual revenue expenditure plus proposed outlays on infrastructural B and developmental works which were indubitably relatable to services to the buyers showed a broad correlation. These were about 14 in number and mentioned at pages 142-143 of the judgment (pages 315-316 of the Paper Book). These market committees were classed as Category ·c•. c In Category 'D', the High Court mentioned ten markets where there were proposals for outlays on account of permissible items of expenditure vis-a-vis the Buyers'-fee.

Then the High Court in Category 'E' dealt with markets whose D financial estimates required to be individually examined. These were the regulated markets of Bangalore, Hubli, Sagar, Bijapur. Raichur, Gadag, Tiptur and Siddapur. The High Court was of the opinion that correlation of fee and services could not be reckoned on the basis of receipts and expenditure for one or two years only. E The High Court noted and in our opinion rightly, that these regulated markets were yet in developmental stage, a stage which should be marked by rapid growth. The initial planning and the infrastructure must be taken into account, not only potentialities for growth and expansion in the immediate near future but also long range possibilities. But apart from such basic infrastructure, which stood on a different footing, tht: bt:nefit of utilitarian projects relatable to and developed from fee resources must be available to the payers of the fee for at least a considerable part of the period, covered by the financial estimates and projections. The High Court noted that if the logic of some of the market committees in this behalf, is pushed to its logical or illogical conclusions, would mean that the present generation of fee-payers would pay for services which would only be available to the next generation The High Court was of the view that levy of fee could not be justified on such }I wholly prospective services. The High Court, however, was of the view that during the period of execution of the works particularly at the formative stages of the markets the actual benefit of the services

248 SUPREME COURT REPORTS (1985] SUPPL, S.C.R.

might not be available to the payers of the fees; but if the execution of the work is so planned as to apply over the years in future as to be incapable of providing any service to the class of fee-payers for and during at least a considerable part of the unit of time-in these cases a 15 years' period from 1974-75 to 1988-89 fixed by the market committees themselves then the concept of quid-pro-quo would dwindle down to something which could not be characterised as illusory.

The High Court then dealt in detail with the category of markets mentioned hereinbefore classed as Category 'E'.

c It was contended that buyers of different kinds of produce were differents, therefore service to one kind of buyers would not be service to the other kind of buyers. Such argument based on the dichotomy of service as between buyers of different kinds of goods for example, buyers of rice and buyers of vegetables, was rightly n rejected by the High Court. Such an argument ignored practical and working problems.

On a detailed examination of the factual position, the High Court was of the view that it should go by financial projections made. These aspects were directed to be examined by the Chief E Marketing Officer and the market committees in terms of certain directions that the High Court gave which I shall mention later.

The High Court, however, felt that on the basis of the estimate as these stood the enhanced levy could not be quashed.

So far as Hubli market committee was concerned, the High Court dealt with it in detail. Amongst the items which were specially mentioned was an item of outlay of Rs. 150 lakhs proposed for construction of large godowns; second item was of Rs. 60 lakhs G for construction of shops and small godowns; and the third item was the proposed outlay on the 'museum' and the fourth item was the estimated outlay of Rs. 75 lakhs for acquisition of 466 acres of land.

H After detailed examination of these projects, the High Court was of the view that the market committees would perhaps be in a position to establish a broad and general correlation of 66 per cent

i:t.c. v. KARNATAKA (S. Mukharji, J.) 249 on the basis of its present proposals and the High Court came to the conclusion that these were not unreasonable. A

As mentioned hereinbefore, there was an outlay of Rs. 75 lakhs on the aquisition of land. The provisions of Rs. 75 lakhs was a modest estimate and it could not be said to be unreasonable. So far as the outlay on museum was concerned, it was an essential amenity 8 for dissemination of ideas and it was therefore valid.

The High Court then examined in detail the markets of Sagar, Bijapur, Raichur, Tiptur, Gadag and Siddapur. The High Court for the reasons recorded and taking all factors into considration came to the conclusion that though there was room for criticism, on the c whole, however taking all the relevant factors into considration it could not be said that the projections were unreasonable.

I am in agreement with the High Court that there was limitation on the powers of the Court in a controversy of this nature. In D ascertaining whether the necessary correlation between the services and fee existed or not, what was required to be examined was only a broad and general correlation not an equivalence with arithmetical accuracy and precision. The Court was neither equipped for, nor should it permit itself, the role of inspecting auditors much less should it assume the role of technical experts. The other aspect which should be borne in mind was that in scrutinising the items of work and services undertaken by market committee, in case of this kind where the controversy was co:1fined to the existence of correla- tion, the exHcise was not whether the items of work should or should not be undertaken by the market committees. The question was somewhat different. The courts merely examined whether the outlays on the concerned works and services qualified was a special service vis-a-vis the 'Fee•.

The High Court as a result of the discussion of the aforesaid markets came to the conclusion that it was unable to bold on the materials placed before it that the levy ought to fail for want of quid-pro-quo. However, having regard to the infirmities noticed in the estimates and the financial projections of the proposed develop- mental works on the basis of which the enhancement was sougth to be justified, they were unable to say with any confidence and without reservations that the enhancement of fee, depending as it did on those

250 SUPREME COURT REPORTS (1985) SUPPL. S.C.k.

estimates was totally justified. The High Court was of the opinion that some time bound progrmme was necessary to be given for a second look at the estimates. At the invitation of the Advocate- General and the counsel for the Market Committee, the High Court was of the opinion that there was obvious scope and imperative need for giving some directions and the High Court gave certain directions which are contained in pragraphs 109 onwards of the judgment of the High Court. This part of the judgment has come in for criticism because on behalf of thl.': petitionersjappeliants, it was contended that in fact the High Court had abandoned its obligation to come to a finding whether there was quid-pro-quo or not when there was a challenge on that point. Therefore, it was contended that c there was no quid-pro-quo established in respect of these markets. On the other hand it was contended that the High Court did come to the conclusion that •here was quid-pro-quo but the High Court gave certain directions which it was competent to give. This position will be dealt with in this judgment later. D The High Court came to the following conclusions: --

(a) that the provisions of section 65(1) of the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 and section 42 of the Karnataka Act 17 of 1980 E in so far as and to the extent these sought to validate the levy of market fee on sellers for the period between 19.5.1975 and 28.9.1978 were declared unconstituitonal and void;

F (b) the provtstons of the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966, in so far as these sougth to provide for the regulation of marketing of cardamom was concerned, were held to be repugnant to the provisions of Cardamom Act, 1965: G (c) the provisions of the KaranatakaA gricultural produce Marketing (Regulation) Act, 1966, in so far as these sougth to regulate the marketing of sugarcane was concerned, were held to be repugnant to the provisions of the Sugarcane (Control) Order, 1956, a statutory order made under section 3 of the Essential Commodities Act, 195~;

i.t.c. v. KARNATAKA (S. Mukharji, J.) 251

(d) the High Court directed that Chief Marketing Officer .should, within four months from the date of the judgment of the Hignt Court, evolve and standardies specification~ and norms with regard to the infra structural and developmental requirements for the market·yards and sub-market yeards and communicate the same to the market committees in terms indicated. If, upon such scrutiny, the market-fee under section 65(2) now being levied at 2 per cent was found, in respect of any market committee, to be exce~sive and without quid pro quo, the Chief marketing Officer should make orders under section 150 directing a suitable reduction in the quantum of the market fee of the market-committees concerned. c So far as the prayer for issue of mandamus directing refund of sellers' market-fee paid under section 65(1) sought by producer· sellers and trader-sellers who had earlier approached the High Court was concerned, the High Court directed that mandamus should D issue. In so far as producer-sellers and other petitioners who were trader-sellers who had paid sellers fee under section 65(1) of the Act, a mandamus to the State Government and to the concerned Market Committees was directed to be issued in terms indicated in the judgment of the High Court. E With the other directions of the High Court for refund and otherwise, it is not necessary to detain overselves.

- The following broad questions were canvassed before us for consideration in these appeals : F (1) Whether the government and the market committees had been able to establish that there was quid-pro-quo and as such levy of fee. and the increase of fee from 1 per cent co 2 per cent was justified? It may be mentioned that after this judgment, the\ evy was decreased G from 2 per cent to 1 per cent again.

(2) Whether there could or should be refund of any of these amounts to any of the parties? H (3) Whether the High Court had come to any definite conclusion in respect of the eight Market Committees mentioned hereinbefore?

SUPREME COURT REPORTS (1 98S] SUPPL. s.c,R..

(4) Whether the High Court had abandoned its jurisdiction in not coming to a definite conclusion about the required correlation to sustain quid pro quo for the imposition of market fees?

(5) Whether the High Court was competent to give directions to the Market Committees in the manner it had done?

(6) Whether in respect of marketing of tobacco, the State Government was entitled to legislate or whether in view of the fact that there was a declaration under item c 54 of List I of the Vllth Schedule, or whether the State Legislature had no competence to legislate on this point as such the impugned legislation was ultra-vires ?

(7) Whether the amendment of section 148 of the Act as mentioned aforesaid whereby the opportunity of previous publication was deleted was valid or not?

It is necessary now to deal with the contentions that arise in these appeals as enumerated hereinbefore. The rationale and the necessity for the impesition of fees in contra-distinction of 'tax' have been recognised for a long time. Our Constitution has recognised the distinction between 'taxes' and 'fees'. Entry 66 of List II of VII Schedule speaks of 'fees' in respect of the matter enumerated in

F List II. Similarly, Entry 96 of List I of VII Schedule speaks of fees' in respect of matters mentioned in List I. Entry 97 of List 1 speaks of 'ta:tt'. The classic distinction between the two was reiterated in ( - the observations of CJ. Latham in the crse of Matthews v. Chicory Marketing Board (60 Commonwealth Law Report p. 263). A 'tax' is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered. In the case of The Commissioner, Hindu Religious G Endowments Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt.,( 1) this court reiterated that 'the distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is a payment for a special benefit or privilege'. H (l) {1954) S.C.R. 1005.

I.T.C. V, KARNATAJ.CA (S. Mukharji, J.) 253

From time to time in several decisions the need for imposition of fees by the market·committees have been emphasised and A examined. Rajamanner, C.J. and T.L. Venkatarama Aiyar, J. in the case of Kutti Keya v. The State of Madras(l) dealt with the marketing legislation and need for the same and referred to the report of the Royal Commission on Agriculture in India. The decision of the Madras High Court was affirmed by a Constitution Bench of this 8 Court in the case of Arunachala Nadar v. State of Madras(') where Subba Rao, J. referred to the background of the marketing legislation. It is not necessary to deal in detail with the said decisions.

Most of these decisions were reviewed by this Court in judging C the validity of fees imposed in the case of Kewal Krishan Puri (supra). Several principales deduced from the decision in Kewal Krishan Puri's case have been noted hereinbefore. Prior thereto the question was considered in the case of Government of Andhra Pradesh v. Hindustan Machine Tools Ltd.(3) which was noted in Kewol Krishan Puri's case. D Kewal Krishan Puri's case specifica11y noted that the element of quid pro quo might not possible of even necessary to be established with arithmetical exactitude even broadly and reasonably it must be established by the authority which charged the fees that the amount was being spent for rendering services to those on whom fell the burden of the fee. At least a good and substantial amount collected on account of fees might be in the neighbourhood of 2/3rd or 3/4th must be shown with reasonable certainty as being spent for rendering services to those from whom the fees are realised. The Court, however, noted that while conferring special benefits to the licensees or payers of fees, it was permissible to render other services in the market which might be in the general interest of aU concerned in respect of transactions that take place in the markets. Services rende· red to the licenses must be in relation to the transactions of purchase or sale of produce in the market. It is not necessary, however, to confer the whole of the benefit on the licensees but some special benefits must be conferred on them which have a dircet, close, and reasonable correlation between the licensees and transactions. But imposition of fees for general benefit like augmenting the agricultural produce, its facility of transport in villages and to provide other

H (1) A.T.R.1943 MAD 621. (2) A.I.R. 1959 S.C. 300. (3) [1975] Supp. S.C.R. 394.

254 SUPilBMB COURT llBPOilTS (1985) SUPPL. S.C.P.

facilities meant mainly or exclusively for the benefit of agriculturists A was not permissible on the ground that such service in the long run augmented the volume of transaction in the market ultimately • benefiting the traders. Such and indirect benefit could not be considered to be wfficient quid·pro·quo to justify imposition of market· fee. B This question was examined in the case of H.H. Shri Swamiji of Shir Admar Mutt, etc. v. the Commis:ioner, Hindu Religious & Charitabie Endowments Department & Ors( 1) The correlation was again reviewed in the decision in the case of Ramesh Chandra etc. v. State of U.P. etc.e> c This question was again examined by this Court in the case of Muncipal Corporation of Delhi and Others v. Mohd. Yasbt.( 3 ) There this Court reiterated that the mere fact there others besides those paying the fees were also benefited did not detract from the character of the fee. In fact the special benefit or advantage to the payers of the fees might even be secondary as compared with the primary motive of regulation in the public interest. The Court was not expected to assume the role of a cost accountant. It is neither necessary nor expedient to weigh too meticulously the cost of the sarvices rendered etc. against the amount of fees collected so as to evenly balance the two. A broad correlationship was all that was necessary. Quid pro quo in the strict sense is not the one and only true index of a fee; nor is it necessarily absent in a tax. A.P. Sen, J. in the said decision observed at page 235 of the report as follows:- F "What do we learn from these precedents? We learn that there is no generic difference between a tax and a fee, though broadly a tax is a compulsory exaction as part of a common burden, without promise of any special advantages to classes of tax payers whereas a fee is a pay- G ment for services rendered, benefit provided or privilege conferred. Compulsion is not the hallmark of the distinc· tion between a tax and a fee. That the money collected

I.T.C. V, KARNATAKA (S. Mukharji. J.) 255

does not go into a separate fund but goes into the con~ solidated fund does not also necessarily make a levy a A tax. Though a fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct; a mere casual relation may be enough. Further, neither the incidence of the fee nor the service rendered need the uniform. That others besides those B paying the fees are also benefited does not detract from the character of the fee. In fact the special benefit or advantage to the payers of the fees may even be secondary as compared with the primary motive of regulation in the public interest. Nor is the court to assume the role of a cost accountant. It is neither c necessary nor expedient to weigh too meticulously the cost of the services rendered etc. against the amount of fees collected so a-; to evenly balance the two. A broad correlationship is all that is necessary. Quid pro quo in the strict sense is not the one and only true index of a fee; nor it is necessarily absent in a tax." D

In the c1se of Southern Pharmaceuticals&: Chemicals Trichur & Ors. Etc. v. State of Keral.J & Ors. Etc.(1) This view as again reiterated at page 542 of the report, A.P. Sen, J. observed as follows:- E

"It is now increasingly realised that merely because the collections for the services rendered or grant of a privillege or licence, are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure for rendering the service is not by itself decisive. That is because the Constitution did not contemplate, it to be an essential element of a fee that it should be credited to a separate fund and not to the consolidated fund. It is also increasingly realised that the element of quid pro qu·J stricto senso is not always a sine quo non of a tee. It is needless to stress that the element of quid pro quo is not necessarily absent in every tax." H (l) [1982] 1 S.C.R. 519.

256 SUPREMB COURT REPORTS (1985] SUPPL. S,C,R.

The learned judge at page 543 of the report observed that the traditional concept of quid pro quo was undergoing a transfor- mation.

It is not necessary, however, for the purpose of this case to express any opinion as to whether the traditional concept of quid pro quo is undergoing any transformation and if so to what extent? Even on the basis of traditional concept it is well-settled that though there must be some special services to the payers of the fees, to be a fee it is not necessary that all the services must be to the payers of the fees nor can the correlation between payment of fee and services rendered be established with mathematical exactitude. It is c permissible in the modern set up to take into account projections into furture and not only the present services can be utilised for justifying the imposition of fee. All planning, project into the future for its existence and survival.

Any incidental benefit to those other than the payers of the fee is not deci~ive of the fact whether it is a 'tax' or a 'fee'. It is necessary to find out the primary object and essential purpose of the imposition (emphasis supplied). If the primary object and essential purpose of the imposition be service of some special kind to the users of the market or payers of fee, other consequences or other benefits to others do not in the least affect the position. The concept of benefit to the users of market must be looked at from a broad commonsense point of view, taking an integrated view. In today's world you cannot build a good market if the accesses through which the produce comes to the market are not maintained. However, at what point the roads will begin and at what point the roads will end to be able to justify the roads necessary to maintain solely the market, appears to be highly theoretical and unreal question in the modern concept of integrated development.

In the case of Sreenivasa General Traders and Others v. State G of Andhra Pradesh and Otherse ), a bench of three judges of this Court had to deal with this question. The said decision reiterated the distinction between a fee and a tax and observed that a tax was levied as part of a common burden, while a fee was for payment of a specific benefit or privilege although the special advantage was secondary to the primary motive of regulation in public interest.

(1) [1983)4 S.C,C. 353.

i.T.C. V. KARNATAKA (S. Mukharji, J.) 257

According to this decision in determining whether a levy was of fee, the true test must be whether its primary and essential purpose was to render specific services to a specified area or class; it might be of no consequence that the State might ultimately and directly be benefited by it. There must, however, be a reasonable relationship between a levy of fee and the services rendered to the payers of fees. According to this decision, Kewal Krishan Puri's case did not lay down any legal principle of general applicability. Sreenivasa General Traders' case (supra) was approved by another decision of the bench of three learned judges in the case of A mar Nath Om Parkash & Ors. etc. v. State of Puniab & Ors.(1) (Judgment delivered by 0. Chinnappa Reddy, J.}. c Prior to all this, in the case of State of Maharashtra & Ors. v. The Salvation Army, Western India Territorye), this Court had to consider the question of fee under Bombay Public Trust Act. 1950. The Court noted that fee was defined as a charge for a special service rendered to individuals by rhe Government or some other D• agency like a local authority or statutory corporation. The amount of fee levied. was supposed to be based on expenses incurred in rendering the services, though in many cases the cost was arbitrarily assessed. This Court noted that fees were generally uniform but absence of uniformity was not a criterion on which alone it could be said that levy was in the nature of a tax. As a f<~e was regarded as a sort of return or consideration for services rendered. it was necessary that levy should be correlated to the expenses incurred in rendering the services. This Court in Sa/ration Army's case reitera- ted that in might not however be possible to prove in every case that the fees collected alwa) s approximated to the expenses that were incurred in rendering the particular kind of services or in performing any particular work for the benefit of certain individuals. In that case, the Court found that revenve expenditure was about 62 per cent of the amount of revenue receipts from 1953 to 1970 and this was considered approximate correlation and the Court held that the levy was in the nature of a fee. The Court dealt with the question of capital expenditure and observed that the expenditure in comtructing buildings for locating the head offices and regional offices and the increase in allowances or other amenities to the staff had also to be

H (I) Civil Appeal No!. 4500 and 4501 of 1984--(judgment delivered by 19.11.1984). (2) {1975) 3 S.C.R. 475,

r 258 SUPlUlME COURT RBPORTS [1985) SUPPL. S.C.R.

included in the cost of services. The Court observed that when there was a surplus it could not immediately be said that the surplus must necessarily go in reduction of the rate of contribution to be levied thereafter. This Court was of the view that it was neither expedient nor prudent to Jay down any abstract proposition that whenever there was surplus in a particular year or years that surplus must always be taken into consideration and the rate of contribution should be reduced for the next year or subsequent years. An orga~ nisation like the Salvation Army had to incur capital expenditure for the better allowances or other amenities to the staff and these had to be incJuded. In after taking into account the capital and other expenditure necessary for efficient functioning of an organisation for c the better administration of Tru~t a very large surplus was still left then, the Court noted that the question would arise whether then it was permissible for the organisation to continue the levy at the rate which would only result in further surplus and to invest the surplus solely for earning income or to divert the surplus for other objects. D The Court noted th.at it was not necessary that all available surplus should always go in reducing the rate of contribution for subsequent years, the organisation could not be allowed to accumulate unreaso- nable amounts i.e., amounts which might not reasonably be required for proper and efficient working of the organisation. In drawing the line, however, the Court would have to look into the nature of the E organisation, the potentiality of its growth, the multiplication in its work consequent or its expansion for rendering to services visualised and the necessity for capital exp~nditure in near future and also the amount of levy collected or expected to be collected. It may be mentioned that in the case of Indian Mica & Micanite Industries Ltd. v. State of Bihar & Ors.(1 ) whether in a particular case there was a F correlation or not is essentially a question of fact.

As has been noted estimates had been filed on behalf of the various market committees before the High Court. These estimates were criticised on behalf of petitioners·appellants as being totally at G variance with the corresponding estimates furnished for the same period and furnished for 1974-75. The present· estimates and pro~ jections, it was submitted on behalf of the appelJants, were prepared only with a view to supply an artificial quid pro quo for the enhan· ced levy and were merely show-pieces on paper to ~et ov~r th~ H (3) {1971J Supp. S.C.R. 319~

J,T.C, V. KARNATAKA (S. Mukharjl, J.) 259 present challenge. It was further contended that having regard to the pace of growth and perfonnance levels over the past seven years out of the fifteen years period, it was unreasonable to expect that the huge developmental activities now projected for the next eight years ·•. were really intended to be acted upon.

Secondly, it was submitted that the disparitie-; and variance in the proportion of the proposed development from market-yard to market-yard were so glaring that no authority in the position of the Chief Marketing Oflh:er could reasonably approve of such uncoordi· nated and disjointed development of the regulated markets.

Thirdly, it was urged that many items of work: envisaged in the c development schemes such as construction of shops, godowns and the like were unrelated to the concept of ~pecial service to the buyers and c:ould not be reckoned as qualified for correlation, and that if these impermhsible items were deleted from the estimates, the market committees would not be in a position to establish the requisite D quid-pro-quo.

Fourthly, it w;ts S<tid that a substantial part of the proposed financial outlays related to development of what were called "Rural Markets" and these outlays were ineligible to be reckoned as special E ' ervice to lhc buyers.

The High Court in its judgment analy;eu these submissions and contentions carefully with reference to -the financial statements and projections filed by the market-committees and these statements were discussed at considerable length by the High Court.

In the context of the said contentions urged on behalf of the appellants, the High Court had examined the said statements and pr~jections and n:cordcd findings on these in its jndgment. . The G High Court uad also given certain directions. It was, therefore. submitted that the market fee on the buyers of the agricultural Produce was originally levied at J l p. which was increased to I per te~t and was further increased from 1 per cent to 2 per cent and the ~atd enhancement of market fees was thus challenged by the appel- II nnt& on the ground of non-existence of qufd pro quo and the responuents-rnurket committee attempted to justify the enhanced evy of 2 per cent Pn the basis of the statements and projections

260 SUPREMB COUllT REPORTS . (1985) SUPPL. S.C.ll

' mentioned hereinbefore. The High Court noted that that were certain inaccuracies and lack of pt'rticulars in the projections but the High Court ultimately came t.o the ccr.dosion that on the materials placed before it on the basis of the principles of Jaw as discussed by the High Court, it could not be said that there was no quid-pro·quo. On the other hand it was contended on behalf of the appellants that there was a total failure on the part of the respondents . to discharge the burden for sustaining the enhanced levy of market- fee, it was urged that the High Court consequent to its findings referred to above; ought to have quashed the bye-laws of the market committees in respect of categories C, D and mentioned hereinbefore. ~ccording to the appellants, the enhanced market fee from 30th ·c 1nne, 1~79 could not be supported.

The contention of lean1ed counsel for the appellant was that the findings of the High Court with reference to eight committees· in category •E• were untenable. On the other· band on : behalf of the respondents·it was 'submitted that out of the 93 market· co~mittees, D · in respec~ of 73 market committees falling under categories A, B, C & D, a clear quid pro quo was established and no further enquiry was needed on the principles laid down by this Court • . I.

Having examined the nature of the transactions and the~- princi- E. ples of Jaw applicable to this case as I have noted before, I am of the opinion that the High Court was right in its conclusion.

The p~oper: principles discernible frorri. these decisions are; (I) there should be relationship between service and fee, (2) that the relationship is reasonable cannot be established with · mathemetical exactitude in the ' sense .that both sides must be equally balanced, ·· - (3) in the course of rendering such services to the payers of the fee ~ ' if some other be~efits accrue or arise to others, quid-pro-quo is not destroyed. _The concept of q:Jid-pro-quo should be judged in the · context of the present days-a concept of markets which are expected . G to· render various. services and provide various amenities and these benefits cannot be divorced from the beriefits accruing incidentally to , others, (4) a reasonable projection for the future yeus of a practical acheme is permissible and (5) services rendered must be to the users II'·-.._ of those markets.or to the subsequent users of those markets as a· ·clan. Though fee· is not levied . as a part of common burden yet . ~e~ce and pa~ment '?aOJ~<?~ e~actty bC? ~alanced. (6) The pri:mary

' l.r.c. v. KARNATAKA (S. Mukharji, J.) ' 261

object and the essential purpose of the imposition must be Jooked into. A

Having regard to the detailed analysis of the expenditure of the various market committees, we agree with the conclusion of the High Court that it could not be said that the expenditure and appropria- tion of fee was so disproportionate to the projects actual and B projocted that it could be said that the levy lost the character of fee. An analysis of the High Court's judgment would indicate that out of 93 market committees about which the High Court was concerned, in respect of 73 market committees falling under categories A, B, C & 0, a clear quid-pro-quo was established on a reasonable view. In respect of the 20 market committees falling in category E. the High G Court found that with regard to the 8 committees only, final pro- jections for the purpose of correlating the fees charged and the services rendered required individual consideration. These were Bangalore, Hubli. Sagar, Bijapur, Raichur, Tiptur, Gadag and Siddapur. The High Court found that the projected expenditure D was relatable to and referrable to the servi~es rendered and to be rendered to the payers of the fee. While the High Court observed that the levy of fee was justified, the High Court laid down certain guidelines and norms for the market committees for the future. E The High Court examined in detail the estimates of each of the market committees. The High Court felt that even if some of the items of expenditure which were specifically challenged and which the High Court noted were not strictly permissible, on the basis of the remaining works there was ground to bold that there was requisite measure of correlation between fees collected and intended F to be collected and services rendered and intended to be rendered but the High Court felt that for proper working of statutory bodies like the market committees, general directions about the future expenditure should be given. G As we have mentioned hereinbefore, at the invitation of Advocate-General and the counsel for the market committees, the High Court gave certain directions. It is not necessary in disposing of these appeals to deal in detail with the spectfic directions given. The High Court was competent to give these directions. We accept H the submissions urged on behalf of the respondents that these directions were within the competence of the Hi~h Court while

SUPRBMB COURT REPORTS [l98S) SUPPL. s.c.R.. dealing with the grievances made under Article 226 of the Consti- A tution to ensure that appropriate statutory authorities acted according to law after properly ascertaining the facts and for the purpose of rendering full justice to the parties. tSee for the nature of directions the High Court is capable of giving under Article 226 of the Constitution Bandhua Mukti Morcha v. Union of India & Ors.( 1 ) See also the decision in the case of State of 'Kerala v. 8 Kumari T.P. Roshana & Anr.(2) In the case of Kewal Krishan Puri & Anr. v. State of Punjab & Others, (supra) this Court had given certain directions for future guidance of the authorities.

For the purpose of how the Court can mould its directions in c order to give relief in a particular situation, we may refer to the nature of directions given by the American Supreme Court, in abolishing racial discrimination and the judicial efforts made with attending difficulties, and how the Supreme Court of America formulated by trial and error the proce~s of making the relief effective to the discussions in Corwin's 'The Constitution and what it means D today' 14th Edn. pages 504-511.

Therefore, the High Court, while finding that there was a · corelation between the services rendered and the fees charged with regard to the eight market committees, directed the Chief Marketing E Officer to make certain enquiries on certain principles of corelation and directed the surplus, if found, on such enquiry, to be appropriately adjusted in the future by way of reductions of fees.

Pursuant to the above directions in respect of eight Marketing F committees, the Chief Marketing Officer went into the facts. After the Marketing Commjttees had submitted their budgets and the projections, these have been approved by the Chief Marketing Officer. After such approval, the concerned Marketing Committes have passed appropriate resolutions for giving effect to the norms laid down and the projects approved. This has been stated in the G affidavit filed by the Chief Marketing Officer in reply to special leave petition. !See the affidavit filed by the Chief Marketing Officer in the Belgana Marketing Committee petition). This, in our opinion is a constructive approach.

H (1) [1984]3 S.C.C. 161 at 240-242. (2) [1965]2 S.C.R. 974.

i.T.C. v. KARNATAKA (S. Mukharjf, J.) 263

Courts of today cannot and do not any longer remain passive with the negative attitude, merely striking down a law or preventing A something being done. 'Thon shall not do't' used to be the previous form of remedy encouraged by Courts. But the new attitude is towards positive affirmative actions, ditrecting people or authorities concerned that 'thou shall do't' in this manner. While it is true that if a law is bad, the Court must strike it down, if the law by and large and i.a its true perspective of a social purpose if implemented in a 8 particular manner could be valid, then, the Court can and should ensure that implementatation should be done in such particular manner and give directions to that effect. In the instant case the High Court having found with which finding we are in agreement, that basically and essentially the fee was justified c on the theory of quid pro quo, the Court was entitled to give positive directions in the manner the money should be spent.

Another argument on this aspect was that estimate of Tiptur Market Committee showed that there was a surplus Rs. 72 lakhs in D the year ending 1982. It was contended that so long as this surplus remained, there was no case for increasing market fee from 1 percent to 2 percent. It was also submitted that according to the projections filed and the estimated expenditure for the future upto 1988-89 there would be a surplus of about Rs. 3 crores at the end of 1988-89. But E reading the projections properly it appears that though estimated earning would be Rs. 3.26 crorer at the end of 1988·89; at the same time the estimate showed the proJected expenditure from 1981-82 to 1988-89 would amount to Rs. 4.28 crores. These projections are not imaginary, and if the Market committee, in the present trend of inflation and the need for modern markets, had taken these F projections into consideration, the same cannot be condemned as unreawnable. Thus looked at, it appears that the extra expenditure of estimates showed a projected loan for the deficit.

In the aforesaid view of the matter, we are of opinion that the G High Court was right in holding (a) that the quid pro quo necessary to be established in these types of fees has been estabished, (b) that the projections have been properly taken into consideration and they are reasonable projections, (c) the directions given by the High Court were within the competence of the High Court to meet the ends of justice.

264 SUPREME COURT REPORTS (1985] SUPPl... S.C.R..

In the premises the first question reserved for our consideration must be answered by saying that the High Court is right in holding that the increase was justified. Necessarily point No. 3 must also be answered by saying that the High Court had come, in the facts and circumstances of the case, to a definite conclusion of this aspect in respect of eight market committees mentioned hereinbefore. The High Court had not abandoned, for the reasons mentioned herein- 8 before, its jurisdiction in not coming to a definite conclusion about the requisite correlation to sustain the quid-pro-quo for the imposition of the market fee. I am also of the opinion that the High Court was competent for the reasons indicated hereinbefore to give directions to the market committees in the manner it had done. c Point Nos. 1, 3, 4 & 5 mentioned hereinbefore are therefore disposed of in favour of the respondents in the manner indicated herein- before.

So far as to the question of refund of the amout of the market fees to any of the party is concerned. I will briefly have to note the D position arising out of the judgment of the High Court.

It was contended on behalf of the appellants that section 65(1) as substituted by Act 17 of 1980, read with section 42 of the Amend- ing Act, seeking to validate the collection of market fee on "sellers" E made under the old section 65 (I) of the Act _is constitutionally invalid. The validation became necessary as mentioned hereinbefore in view of the judgment of the Karnataka High Court in the case of Rajasekhariah (supra). The present substituted section 65(1) read with section 42 of the Amending Act seeks to validate the collection of market fee on sellers made when the ealier section 65(1) was operative. We have set out the relevant provisions and the background of the challenge to the Act.

The High Court of Karnataka in its impugned judgment bad set out exhaustively the grounds upon which the said High Court has previously in Rajasekhariah•s case struck down section 65 (1) (3) of the Act. Pursuant to the judgment in Rajasekhariah's case, the State was exposed to the liability to refund the fee collected for the period from 19.5.1975 when section 65(1) and (3) were introduced by the Amending Act 24 of t 975 and 28.9.1978 when that judgment was pronounced. By the said Act of 1980, the levy was sought to be validated and the fee retained by the State Government. The High Court noticed the relevent substitution. First, by virtue of

t.f.c. v. KARNATAKA (S. Mukhar}i, J.) 265

sub-section 1(2) of section 19 of the amending Act, the amendment had been deemed to have come into force <in 19.5.1975-in other words making it retrospective. Secondly by clause (ii) of sub- section (I) and item (ii) of clause (a) of sub-section (2) of section 63 as amended, the expression "Marketing,. was substituted by the word.s ''transport and marketing". In clause (ii) of sub-section (2) of section 63, item (ia) was newly introduced making the provision for, either independently or along with some other authority, necessary facilities for the transport of notified agricultural produce from and to the yard, as one of the obligatory functions of the market committees.

Thirdly, section 20 of the Amending Act brought about certain c changes in the structure of section 65 while making such amendment retrospective with effect from 19.5.1975-being the date on which it was originally inroduced.

The High Court has set out section 42 of the Amending Act which validated the levy of market fee etc. It was urged before the D High Court that the market fee collected from the sellers between 19.5.1975 and 28.9.1978 under the old section 65(1) had gone to the credit of and merged in the "Karnataka Roads and Bridges Fund" constituted under the Karnataka Motor Vehicles Taxation Act and the market fees have obviously been spent for the purposes and objects of "Karnataka Roads and Bridges Fund", and by deleting section 65(3)-even if it be with retrospective effect- the events that have factully happened pursuant to section 65(3) when it was operative, could not be reversed. The effect of the amendment was not, it was submitted, before the High Court, to put the funds back into the coffers of the respective market committees enabling them to spend them for such of the purposes authorised by the Act as would afford correlation by way of service to the fee. It was further conten- ded that all that, at best, the amendments could be said to have achieved was that providing "facilities for transport'' which was not one of the duties and functions of the market committees earlier had now been made as one of their duties and functions. It was urged that even if the "facilities for transport" could be said to include construction of rural roads, only the first defect or infirmity ponitrd out in Rajasekharih's case could be said to have been cured or removed but not the more important one, the second. H Learned Advocate-General contended that the only ground on which the previous judgment invalidated the levy on the sellers was

266 SUPREME COURT REPORTS (198S) SUPPL. S.C.R.

that the market committees were not statutorily charged with the duty of constructing and maintaining rural roads, and now that, the duty of providing, either independently or along with any other authority, necessary facilities for transport, which included the making of roads in the market area leading to and from the market- yards, the defect noticed in the law has been removed and the legal basis for the levy supplied. Learned Advocate-General submitted that as a result of Rajasekharia!l's case the State was exposed to a liability to refund several crores of rupees which had been realised by way of sellers fee under section 65(1), and which according to him, had, in fact, been spent for providing facilities for transport in the form of construction, improvement and repair and maintenance of c rural roads.

The High Cvurt noticed the relevant prov!Slons and the principles of law which should govern the power of the legislature to cure any defect in law with retrospective effect and to validate acts done or taken under defective law which were declared invalid by the D courts on any ground.

It is well-settled that if such validating law cures the constitutional vice from which the earlier legislation suffered, the validation must be given effect to. E These principles are well-settled by the decisions of this Court in the cases of Misrilal Jain etc. etc. v. State of Orissa and Another(l ), Shri Prithvi Cotton Mills Ltd. & Anr. v. Broach Borough Municipality & Ors.(2), Municipal Corporation of the City of F Ahmedabad, Etc. v. New Shorock Spg. & Wvg. Co. Ltd., Etc (8) and l.N. Saksena v. The State of Madhya Pradesh.{ 4) The tests are well- settled and it is not necessary to reiterate those. The validity of a validating law has to be judged mainly by judging, firstly whether a legislature possesses competence over the subject matter i.e., whether by validation, the legislature exercise competence over the subject G matter and secondly whether by validation the legislature has removed the defect which the court had found in the previous law and thirdly whether it is consistent with the provisions of Part III of the Constitution.

H (l) A.T.R. 1977 S.C. 1686=[1977) 3 S.C.R. 714, (2) A.I.R. 1970 S.C. 192=[1970] 1 S.C.R. 388. (3) A.I.R. 1970 S.C. 1292={1971]1 S,C,R. 288. (4) A.LR. 1976 S.C. 2250.-[1976] 3 S.C.R. 237.

i.t.C. v. KARNATAKA (S. Mukharii, J.) 267

The High Court was of the view that facilities for rural roads could not be a ground for collection of fees. The High Court was further of the view that this was concluded by the decision of this Court in Kewal Krishan Puri's case (supra).

1 have set out hereinbefore the principles to be governed in case of judging the correlation between 'service' and 'fee' and the changing pattern of this concept. Construction of rural roads giving facilities for going to the market is a special service primarily and directly int<!nded for the benefit of the users of market. Market could not be reached and people cannot go and come from the market if there are no good rural roads to reach those markets. This view has been recently reiterated by this Court after discussing c several authorities in the case of M js A mar Nath Om Parkash & Ors. Etc. v. The Swte of Punjab & Ors. Etc. (supra) where it was held that it was of fundamental importance that there should be a net- work of roadways if effective aid was to be given to farmers to transport and market their produce. In this connection reliance may be placed also on the observations of this Court in the case of Municipal Corporation Delhi v. Mohd. Yasin (supra) where it was reiterated that the fact that others besides those paying the fees are also benefited did not detract from the characted of the fee. The Court observed that in fact the special benefit or advantage to the payers of the fees might even be secondary as compared with the primary motive of regulation in the public interest. Quid·pro·quo in strict sense is not the one and only true index of a fee as we have mentioned hereinbefore.

Judged by this concept, in my opinion, the High Court was in error in view of the principles we have discussed about the concept of fee and therefore rural roads for construction, improvement and maintenance of which sellers fees have been applied could be said to be an obligation of the market committee. Now that has been made function and obligation of the market committees by the amendment with retrospective effect which we have noticed before. The learned G Advocate-General had stated before the High Court that the funds from the "Karnataka Roads & Bridges Fund" collected from these fees have in "fact been spent for the rural roads, the facilities for which are for the benefit of the users of the markets. In the facts and circumstances it should be presumed and assumed that the funds spent by the '•Karnataka Roads & Bridges Fund" under the Motor Vehicles Act have in fact been spent as an aiency of tho market

268 SUPR~ME COURT REPORTS [ 1985) SUPPL. S.C.R.

committees in discharge of the functions and obligations of these committees. In view of the amanded provisions of the statute which we have mentioned providing facilities for transport is one of the oblig'ltions of the market committees. In my opinion, realisation of fees for such facilities would be justified and valid. If, as we have discussed, without rural roads, markets could not be reached and 8 the functions for which the market committees were constituted could not be performed, if it is of fundamental importance that there should be a network of roadways if effective aid is to be given to buyers and sellers of goods for marketing their products, then in my opinion, the fact that the public streets and roads are public properties and the State holds such streets and roads as trustees c would be of no consequence in considering such realisation as fees.

The contribution to the "Karnataka Roads and Bridges Fund'' maintainable under Motor Vehicles Act having been made as an agency of the market committees for tne construction of these road~ which facilitated the purpose of the market committees as amended by the Amending Act. I am, therefore, of the opinion that the High Court was in error in holding that the second major defect noticed in the law authorising the levy on the sellers in Rajasekhariah's case (supra) namely construction of rural roads would not qualify being reckoned as a special service to the class of persons paying the fee, bad not been cured or removed by the law which sought to validate the levy. The Act which sought to validate the levy contributed to the "Karnataka Roads and Bridges Fund" was for the maintenance of rural roads which, as I have noticed, forms an integral part of the facilities for marketing of the goods. I . am therefore unable to sustain the findings of the High Court of Karnataka that section 65(1) a~ substiEuted as Section 20 of the Act 17 of 1980 as well as section 4l of the Amending Act was not constitutionally valid and was liable to be struck down. I hold that these are constitutionally valid in view of the perspective in which the concept of fee has to be judged in the light of the decision I have referred to hereinbefore. If that is the position then no question of refund would really arise, in view of the provisions of the said Act as amended by Act 17 of 1980 and section 42 of the Act 17 of 1980 as it validated the market fee on sellers between 19.5.1975 and 28.9.1978. The funds collected had remained with the Government and have been spent for purpo- ses which are valid purposes in view of the amendment. So no question of refund arises.

i.T.C. l', KARNATAKA S. Mukharji, J.) 269 In any ev~nt I am of the opinion that there should not be any refund in the facts and circumstances of the case, Section 42 of the A Amending Act has specifically provided against refund of levy of fees already collected, I am therefore of the opinion that such a provision was valid. At no stage was it claimed or stated that the traders had paid market fees themselves. The appellants before this Court are buyers in the Market but they themselves are trading in B the commodities purchased by them. On further sale of the com- modities as traders they have recovered the fees from their purchasers. For this purpose reliance may be placed on the observations of this Court in the decision in the case of D. Cawasji & Co. Etc. Etc. v. The State of Mysore & Anr.(l) Most of these have been discussed in tne recent decision of this Court in the case of c Amar Nath Om Parkash & Ors. (supra) and in that view of the matter and in view of section 42 of the Amending Act which provi- ded for the validation of the levy of market fee· and which provided further by section 42(1)(b) & (c) that no proceedings for refund would lie, in my opinion, in so far as the High Court had directed to D refund in certain cases as indicated in the judgment of the High Court, I am unable to sustain that part of the order and that order is set aside. I may mention that when there was no provision like section 42 of the Amending Act and there was a liability of refund in the case of Shiv Shankar Dal Milfs Etc. Etc v. State of Haryana & Ors. Etc.(Z), this Court had evolved certain procedure for utilisa- E tion of the funds collected so as to avoid undue enrichment. In view of the principles discus~ed above and the cases noted in the aforesaid deci~ion in Amar Nath Om Parkush & Ors. case (supra), we are of the opinion that section 42 of the Amending .Act is valid and by virtue of the said section, there cannot be any order for refund in the instant case. It must be borne in mind that the High F Court has given specific directions for utilisation of the surplus fund in certain matters to the market committees. Point (2) noted above is thus disposed of.

The next question that arises is whether the amendment of the G bye-laws enhancing the market fee was invalid for want of comp- liance with the mandate of section 148 of the Act requiring previous publication and previous sanction of the Chief Marketing Officer. The High Court had exhaustively discussed this matter and I have H (I) [1975] 2 S.C.R. 511. (2) [1980] 1 S.C.R. 1170.

270 SUPREME COURT REPORTS {1985) SUPPL. S.C.R.

referred to this discussion before and had come to the conclusion A that section 65(2) did not confer any arbitrary power and there was no excessive delegation of legislative power to the market committees and therefore not vitiated on that account. The question whether on a proper construction of section 65(2) there was any obligation on the part of the marketing committee to hear the parties was left open 8 with certain observations and directions contained in paragraph 61 of the judgment of the High Court. I am in respectful agreement with that direction of the High Court.

So far as the High Court held against the contentions of the appellants that bye-laws were invalid for want of previous publica- c tion or for want of consulting the interests affected,· I am also in respectful agreement for the reasons discussed by the High Court which need not to be reiterated again, with that view. The principle of audi alteram partem has application only to judicial, quasi-judicial and administrative functions and not to any legislative functions- D See The Tulsipur Sugar Co. Ltd. v. The Notified Area Committee, Tufsipur.(l), S.A. de Smith ''Judicial Review of Administrative Action'', 4th Edn. pages 181 to 183. In any event the rule of 'audi alteram partem' is applicable in exercise of the States' power of taxation-See Avinder Singh Etc. v. State of Punjab & Anr. Etc.( 2 ) This disposes of point no. (7 ). E The next contention canvassed before us was whether in view of the Tobacco Board Act, 1975, hereinafter referred to as the Central Act and the issue of the Notification dated 31 st August, 1984 by which section 13 of the Central Act was made applicable in the F State of Karnataka, in so far as the Central Act dealt with the marketing of tobacco, the State le~:;islature was not competent to pass this enactment. It was submitted that tobacco was covered by entry 52 of List I by virtue of the declaration under section 2 of the Central Act. It was submitted that the High Court has erred by not acting in the parity of reasoning adopted in respect of Cardamom G Act. As I have noticed that in case of Cardamom Act, 1965, the High Court was of the opinion in the impugned judgment that the said Act was not within the competence of the State Legislature. Yet neither the market committees nor the State Government had preferred any appeal in respect of that finding. It was sought to be H (I) fl980] 2 S.C.R. 1111 at pages 1118 to 1121. (2) (1979] 1 S.C.R, 845.

I.T.C. v. KARNATAKA (S. Mukhorji, J.) 271