STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE CRUSHER

46. If, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolute(v necessary that the levy of fees should, on the face of t/1!! legislative provision, be co-related to the expenses incurred by Government in rendering the services. As indicated in article E 110 of the Constitution, ordinarily there are two classes of cases where Government imposes 'fees' upoff.persons. In the first class of cases, Government simply grants a permission or privilege to a person to do something, which oiherwise that person would not be competent to do and extracts fees .either heavy or moderate from that person in return for the privilege that is conferred. A most common illustration of this type of cases is fi1rnished by the licence fees for motor vehicles. Here the costs incurred by the Government in maintaining an office or bureau for the granting of licences may be very small and the amount of imposition that is levied is based really not upon the costs incurred by the Government but upon the benefit that the individual receives. In such cases, according to all the writers on public finance, the tax element is predominant (Vide Seligman s Essays on Taxation, p. 409.), H

680 SUPREME COURT REPORTS [2017] ll S.C.R.

A and if the money paid by licence holders goes for the upkeep of roads and other matters of general public utility, the licence fee cannot but be regard as a tax. "

159. In another Constitution Bench in Corporation of Calcutta andAnr. vs. Liberty Cinema, AIR 1965 SC 1107, following was stated B in paragraphs 16 and 17: "16. Both these cases discussed other tests besides the requirement of the rendering of services for determining whether a levy is a fee, but with these we are not concerned in the prese111 case. These cases also discussed the c correlation of the costs of the services to the levy but with also we are not concerned as it is not sought to uphold the present levy on the ground of such correlation. We have referred to these cases only for showing that to make a levy a fee the services rendered in respect of it must benefit, or confer advantage on, the person who pays the levy. D

20. The other case lo which we wish to refer in this connection is The Hingir-Rampur Coal Co., Ltd. v. The State of Orissa and ors1, {1961]2SCR537. There the imposition by a certain statute of a levy on lessees of coal mines in a certain area and the creation of a fimd with it, was called in question. It E was held that the levy was a fee in return for services and was valid. It was there said at p. 549, "If the special service rendered is distinctly and primarily meant for the benefit of a specified class or area, the fact that in benefiting the specified class or area the State as a whole may ultimate(y F and indirectly be benefited wo11ld not detract from the character of the levy as a fee. " It may be mentioned that the levy there went to meet expenditure necessary or expedient for providing amenities like communication. water supply and electricity for the heller development of the mining area and to meet the welfare of the labour employed and other G persons residing or working in the area of the mines. Here again there is no element of control b11t the services res11/ted in real benefit special(v accruing to the persons on whom the levy was imposed. These decisions of this <::ourt clearly establish that in order to make a levy a fee for services rendered the levy m11st confer special benefit on the persons H

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 681 CRUSHER [ASHOK BHUSHAN, J.]

on whom it is imposed. No case has been brought to our A notice in which it has been held that a mere control exercised on the activities of the persons on whom the levy is imposed so as to make these activities more onerous, is service rendered to them making the levy a fee."

160. The nature of transit fee came for consideration before this B Court in State of Tripura and others vs. S11dhir Ranjan Nath, 1997 (3) SCC 665. The Tripura Transit Rules levy the transit fee. The High Court has declared Rule 3 which provided for charging of transit fee as · unconstitutional. In appeal against the said judgment, referring to the judgment of the Corporation of Calcutta and Anr. vs. Liberty Cinema (s11pra) it was held that expression 'licence fee' does not necessarily c mean a fee in lieu of services and that in the case of regulatory fees, no quid pro quo need be established. Following was held in paragraph 15: "15. This decision has been followed in several decisions, including the recent decisions of this Court in Vam Organic Chemicals ltd. v. State ofU.P., 1997 (2) SCC 715 and Bihar D Distille1y v. Union of India, 1997 (2) SCC 727. The High Court was, therefore, not right in proceeding on the assumption that every fee must necessarily satisfY the test of quid pro quo and in declaring the fees levied by sub-rules (3) and (4) of Rule 3 as bad on that basis. Since we hold E that the fees levied by the said sub-rules is regulatory in nature, the said levy must be held to be valid and competent, being jillly warranted by Section 41." 16 l. This Court held that transit fee is a regulatory fee in nature.

162. In Sec1111derabad Hyderabad Hotel Owners' Assn. v. F Hyderabad Municipal Corpn., 1999 (2) SCC.274, where this Court held that a fee which is charged for regulation for such activity. would be validly classified as a fee and not a tax although no service is rendered. In paragraph 9 following was stated: "9. It is, by no1v, well settled that a licence fee JJUlY be either G regulatory or compensatory. When a fee is charged for rendering specific services, a certain element of quid pro quo must be there between the service rendered and the fee charged so that the licence fee is commensurate with the cost of rendering the service although exact arithmetical H

682 SUPREME COURT REPORTS (2017] II S.C.R.

A equivalence is 1101 expected. However, this is not the only kind of fee which can be charged. Licence fees can also be regulatory when the activities for which a licence is given require to be regulated or controlted. The fee which is charged for regulation for such activity would be validly classifiable as a fee and not a tax although no service is B rendered. An element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive. "

163. The Uttar Pradesh Transit of Timber and other Forest Produce Rules, 1978, itself came for consideration before this Court in State of U.P. vs. Sitapur Packing Wood Suppliers, 2002 (4) SCC 566. The c High Court had held the Rules to be constitutionally valid but levy of transit fee was invalidated. In absence of quid pro quo, the High Court did not strike down the Rules and observe that it is open to the State Government to levy transit fee by rendering service as quid pro quo. Rules 3 and 5of1978 Rules as well as provisions of Section 41 of Forest D Act, 1927 were considered by this Court. This Court relying on the judgments of this Court in State of Tripura v. Sudhir Raujan Nath, Corpn. of Calcutta v. Liberty Ci11ema and Secunderabad Hyderabad Hotel Owners' AJsn. v. Hyderabad Municipal Corpn. held transit fee under Rule 5 as clearly regulatory and it was held that it was not necessary for the State to establish quid pro quo. Following was held in paragraphs 8, 9 and I 0: "8. The distinction between tax and fee is well settled and need not bf! restated herein. It is clear from the afore-noticed provisions of the Act and the Rules that the transitory fee is regulatory in nature. The question of quid pro quo is necessary when a fee is compensatory. It is well established that for every fee quid pfo quo is not necessary. The transit fee being regulatory, it is not necess(//y lo establish the factum of rendering of service. Thus, there is no question of a levy of transit fee being invalidated on the ground that quid pro quo has not been established.

9. In State of Tripura v. Sudhir Ranjan Nath almost similar question came up for consideration in relation to the State of Tripura. It was held that Sections 41 and 76 _of the Act vest total control over the forest produce in the State H Government and empower it to regulate the transit of all

STATE OF UTTARAKHAND & ORS. v. MIS. KUMAON STONE 683 CRUSHER [ASHOK BHUSHAN, J.]

timber or other forest produce for which purpose.the State .A Government is also empowered to make the Rules. The decision of the High Court invalidating the levy ofapplication fee in the said case on the ground that the State had not established that the services were rendered in lieu of the said fee, was reversed by this Court holding that the fee was B regulatory and not compensatory. Reference may be made to the decision in the cose of Corpn. of Calcutta v. Liber~v Cinema wherein it was held that the expression licence fee does not necessarily mean a fee in lieu of services and in case of regulatory fee no quid pro quo need be established. Following Liberty Cinema easel similar views have been c expressed in Secunderabad Hyderabad Hotel Owners' Assn. v. Hyderabad Municipal Corpn. and P. Kannadasan v. Stale ofT.N JO. The transit fee under Rule 5 is clearly regulatory and, thus, it was not necessary for the State to establish quid pro D quo. The High Court was in error in holding that transit fee is invalid in absence of quid pro quo. As a consequence the penalty Would also be valid.. The penalty was held to be invalid by the High Court in view of its conc.lusion about the invalidity of the transit fee. The penaltv, . however, cannot be E ' '

beyond what is permissible in the Act. That aspect, however, is ;wt under challenge in these .appeals as the Stale Government after the impugned judgment of the High Court realizing its mistake amended the Rule so as to bring the provision ofpenalty in accord with the provisions of the Act."

164. In view of the foregoing discussion, it is now well settled that F transit fee charged under 1978 Rules is regulatory fee in character·and further the State is not to prove qilid pro quo for levy of transit fee. After having noticed the nature and character of the transit fee as envisaged in 1978 Rules, we now proceed to notice various provisions of 1978 Rules as well as Fourth and Fifth Amendment Rules. G

165. Section 41 of the Forest Act, 1927 empowered the State to make Rules to regulate transit of forest produce. The State of Uttar Pradesh by Uttar Pradesh Act 23 of 1965 with effect from 23.11.1965 after sub-section (2) of Section 41 inserted sub-sections (2A) and (2B ). Sub-section {2A) is as follows: ·· H.

684 SUPREME COURT REPORTS (2017] l l S.C.R.

A "(2A) The Stale Government may by notification in the Gazelle delegate, either unconditionally or subject to such conditions as may be specified in the notification, to any Forest-officer, not below the rank of Conservat01; the power to prescribe fees under clause (c) of sub-section (2). "

B 166. The ~tate of U.P. in exercise of power under Section 41 framed Rules, namely, the Uttar Prndesh Transit of Timber and other Forest Produce Rules, 1978. Rule 3 provided for regulation of transit of forest-produce by means of passes which is to the following effect: "3. Reg11lation of transit of forest produce by means of c passes. - No forest produce shall be moved into, or ji-om, or within, the State of Uttar Pradesh except as hereinafter provided, without a transit pass in the form in Schedule A to these Ru/es, from an officer of the Forest Department or a person didy authorised by or ·under these Rules to issue such pass or otherwise than in accordance with the conditions of such pass or by any route or to any destination other than the route or destination·specified in such pass : Provided that no transit pass hall be required for the removal- (iii.) of any forest produce which is being removed for bona fide consumption by any person in exercise of a privilege granted i11 this behalf by the 'State Governme/I/' or of a right recognised under this Act, within the limits of a village in which it is produced; (iv.) offorest produce by contractor '.I· agency from the forests managed by the Forest Department, in which case the movement shall be regulated by the relevant conditions of sale and terms of the corresponding agreement deed executed by the buyer; (v.) of such forest produce as may be exempted by the State Government from the operation of these mies by notification in the official Gazette. "

167. Rule 5 prescribes for fees payable for different classes of passes. Rule 5(as originally framed) is as below: "5. Fees payable for different classes of passes. - At lhe H Check Chowki or depot established under Rule 15 and

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 685 CRUSHER [ASHOK BHUSHAN, J.]

specified under proviso (ii) to clause (b) of sub-rule (I) of A Rule 4, the forest produce alongwith the two copies of the pass (duplicate and trip/icate)_shal/ be producedfor examination under sub-rule (4) of Rule 6 andfor payment of transit fee on the forest produce calculated at the following· ··-·rates; corresponding receipt shall be granted in the form 8 given in Schedule 'C'- (i.) per lorry load of timber or .Rs. other forest produce 5.00 per tonne of capacity (ii) per cart load of timber or other .Rs. 2.50 c forest produce (iii) per eamel load of timber or .Rs. 1.25 other forest produce. (iv) per pony load of timber or .Re. 0.50 D · other forest produce . . (v) per head load ·of timber or .Re. 025 other forest produce. Note. - In respect of resin and resin products. the provisions of the Uttar Pradesh Resin and Other Forest Produce (Regulation of Trade) Act, 1976 and the rules fi"amed thereunder, shall apply. "

168. By the Uttar Pradesh Transit of Timber and other Forest . ··Produce (Third Amendment) Rules, 2004 fee prescribed in Rule 5 was increased, for example per lorry load of timber or other forest produce in place of Rs.5/- per tonne of capacity fee of Rs.38/- per tonne of capacity is shown. Now, comes to Fourth Amendment Rules, 2010 dated 20.10.2010, the fee which was Rs.38/- for per tonne per lorry load of timber or other forest produce was increased as Rs.200/- per cubic meter of capacity other than ofKhair, Sal and Sagaun (Teak), Shisham, ·sandal Wood and Red Sanders. Then comes to Fifth Amendment G Rules,2011 dated 04.06.2011. Rule 5 was amended where the basis of levy of fee was changed into advalorem at the rate of 5% or minimum Rs:2,000/- for per lorry load of timber or other than of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders. Relevant extract of Rule 5 as amended by Fifth Amendment is as follows: H

686 SUPREME COURT REPORTS [2017) 11 S.C.R.

A ( i) (a) per lorry Rs.200.00 (i) (a) per lorry Adva1orem at load of timber per cubic load or timber the rate of 5% other than of Meter of of Khair, Sal or minimum Khair, Sal and capacity and Sagaun Rs.2000/- Sagam1 (T~ak) (Teak) B Shisham, Saqdal Shisham,Sandal Wood and Red Wood and Red Sanders Sanders

(b) per lorry load Rs.75.00 (b) per lorry Advalorem at of timber other per cubic load of timber the rate of 5% than of Kh,Ur, Meter of other than of or minimum c Sal and Sagaun capacity Khair, Sal and Rs.750. (Teak), Shisham, Sagaun (Teak), Sandal Wood Shisham, Sandal and Red Sanders Wood and Red or other forest Sanders or other produce forest produce except as mentioned lll (i)c)

( c) per lorry Adval or em at load of other the rate of forest produce 15% of coming from minimum mines. e.g., Rs.400/- coal, lime, stone, sand, Bajari, and other minerals.

169. Before we proceed further with the discussion it is necessary to note the actual impact on Transit Fee ofFourth and Fifth Amendment Rules. We have already noted that initially when Transit Fee Rules were framed in 1978, Transit Fee on per lorry load of timber was Rs. 5 per tonne of capacity. By 3"' amendment with effect from 14.06.2004 Rs. 5/- was increased as Rs. 38 per tonne of capacity. By 4" amendment rules, the Transit Fee was increased as Rs. 200/- per cubic meter with regard to timber, Khair, Sal & Sagaun, Sisham, Sandal wood and Red Sanders and with regard to other timber Rs. 75 per cubic meter. H

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 687 CRUSHER [ASHOK BHUSHAN, J.]

170. The same amount was leviable on other forest produce. The A chart has been given by learned Counsel for the petitioners reflecting the effect of Third, Fourth & Fifth Amendment Rules with regard to a lorry load having different capacities. The chart is as follows: TRANSIT FEE CHARGED B Vehicles Asper Asper GO. As perG 0. dt AsperGO.U 1978 u 20.10.2010 04.06.2011 Rttles 16.04.:rol (a) Ro;. 200'- per R5. 5/- R-;.3&'-p.T Oibic M::tcr per Ton Capacity Ton (b)R-;. 75/- Per c OJbic M::tcr carmty 6 9Tonx 9TonxR-;. (a) 28.57 Gibic (a) Per lnny load Ad- \\heeler R5. 51- 38'-=Rs. M::tcr x R5. XJJ/- of tinb;r ofKhair, Val<rcmat =Rs. 3421- =Rs. 5714'- Sal and Sagnn1 th: rare of 451- (Teek), Slisham 5%cr D San:lal \\OOd and rrinimun Red Saxlaers Rs.2000'- 10.12 15Ton 15Tonx 36.50Cubic (b) Perlony load Ad- "heeler XR.5. R5. 3&'-= M."ler x R5. XJJ/- oftinfx:r other valorcmat 51-= R5. 57fY- =Rs. 7300/- than ofKltlir, Sal ti>: rate of R5. and Sagnn1 (Teek), 5%cr E 75'- Slislllll\ Sanlal ninimun \\OOdand Red Rs. 750/- Sanders mid other forest produ:e a5 m:ntionedin (i)(c) F 6 (b) 28.57 Cllbic (c) Per lony load Ad- "heeler M,ux Rs. 75'- of other fcrcot Valm:mat =R5. 2142/- produ:c cooing ti>: rate of fiunmincs i.e. 15%cr coal, Jim:, stone, ninimun sand, bajri and Rs. 750/- other mnerals. G

10.12 36.500Jbic \\heeler .M::tcrx Rs. 75'- =Rs. 2737/-

688 SUPREME COURT REPORTS (2017] l l S.C.R.

A 171. The above_ chart indicates that by Third Amendment Rules which was enforced from 14.06.2004 that is after 26 years of enforcement of Transit Rule, the Transit Fee was increased 7 times. Whereas by Fourth amendmel)t which was imposed with effect from 20.10.2010. Transit Fee was increased more than 16 times. As per Fifth amendment rules, Transit Fee was based on ad-valorem basis and although the B minimum amowit was fixed but there was no cap on the maximum amowit. Thus Transit Fee payable was on the value of all forest produce. Whereas with regard to timber ad-valorem was at the rate of 5 per cent but with regard to coal, Jim~ stone, sand, stone, bajri & other minerals ad-valorem is at the rate of 15 per cent. c 172. High Court after considering the impact of Fifth Amendment has held that by Fifth Amendment the increase in Transit Fee is more than ten times. The Fifth Amendment Rule was issned in six months of issuance of Fourth Amendment Rule. In the affidavit filed before the High Court the State has pleaded that every year expenditure increases D 10% to 20%, When every year expenditure increases only I0 to 20%, what was necessity to increase the transit fee several times by 5'" Amendment, remains unexplained.

173. Learned senior counsel Shrl N. K. Kaul appearing for the respondent, IndiaQ Wood Products Co. has explained the impact of E increase of Transit Fee on the basis of ad-valorem. According to the chart in so far as the Transit Fee on Khair wood as paid by Indian Wood Products Ltd, the payment was made 96.38 times by 4'" amendment and 362.33 times from 3"' amendment on the basis of 5'" amendment of the Rules dated 04.06.2011.

F 174. Before we arrive at any conclusion regarding validity or otherwise of the Fourth and Fifth Amendment Rules following three issues need to be addressed: (a) Whether there is a broad correlation between increase in the fee and expenses incurred in regulation of forest produce, although the State is not liable to prove any quid pro quo'! (b) Whether the State has satisfactorily justified the increase in Transit Fee by 4'' & S" amendment by producing relevant material? (c) Whether by adoption of ad-valorem basis by 5'" amendment Rules the Transit Fee no longer remains a fee and has changed into character ofa tax?

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 689 CRUSHER [ASHOK BHUSHAN, J.]

175. We have already noticed the pronouncement of this Court A that for regulatory fee, State is not to prove any quid pro quo. Regulatory. Fee can be charged, even if, no services are rendered by the State in lieu of fee realised. This Court in few more cases had occasion to advert to the aforesaid issue which need to be noted. In The State of Maharashtra and Others vs. Salvation Army, Western India Territory, (1975) 1 SCC B 509, this Court had occasion to consider the provisions of Bombay Public Trust Act, 1950 wherein, two per cent contribution was required to be paid to Public Trust Administration Fund. This Court noticed the essential elements to characterise the payment as a fee. In para 14 following was stated: "14 ... Thus . two elements are essential in order that a payment c may be regarded as a fee. Jn the first place, it must be levied in consideration of certain services. which the individuals accept either willingly or unwifiingly and in the second place, the amount collected must be earmarked to meet the expenses . of rendering these services and must not go to the general D revenue of the state lo be spent for general public purposes."

176. Another case which needs to be noted is Sreenivt1st1 Genert1/ Traders t11ul Others vs. State of Andhra Pradesh .and Others, (1983) 4 SCC 353. In this case, the Court after referring to earlier judgments of this Court laid down the following in para 31: E "31.The traditiont1l view that there must be actual quidpro quo for a fee has undergone a sea change in thf! subsequent decisions. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part ofa common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest. If the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees there is, and must always be, correlation between the fee collecte<t and the service intended to be rendered. In determining whether a levy is a fee, the true test must be whether its primary and essenliC1l purpose is to render specific services to a specified area or class; it may be of on consequence that the StC1te niay ultimately and indirectly be benefited by it. The power of any legislature to levy "fee is conditfoned H

690 SUPREME COURT REPORTS (2017) ll S.CR.

A by the fact thar it must be "by and large .. a quid pro quo }or the services rendered. However, correlationship between the levy and the services rendered (sic o(i expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a "reasonable relatio11ship .. between the levy of the fee, and the service B rendered... "

177. In Delhi Race Club Limited vs. Union oflltdia and Others, (2012) 8 sec 680, following was laid down in para 39 and 43: "39. Dealing with such regulatory fees, this Court in Vam c Organi<; Chemicals Lid. & Am: V.~. Stale of UP. observed that in case of a regulatory fee, like the licence fee. no quid pro quo is necessary, but such fee should not be excessive... " "43 ... Hence, in our opinion, the licence fee imposed in the present case is a regulatory fee and need not necessarily entail rendition of specific services in retum but al the same time slu,mld not be excessive. In any case, the appellal1/ has not challenged the amount of the levy as unreasonable and expropriatory or excessive ... "

178. Thus the issue (a) as noted above, has to be answered holding that although, the State is not required to prove any quid pro quo for levy or increase in fee but a broad correlation has to be established between expenses incunied for regulation of Transit and the fee realised.

179. The issue (b) that whether State has satisfactorily justified the increase in Transit Fee by Fourth and Fifth Amendment Rules by producing any material has to be answered on the basis of material which has been produced by the State before the High Court and has been adverted to before us by learned senior counsel Shri Ravindra Srivastava. The submission of learned counsel for the State is that the High Court has not adverted to the relevant material produced by the State which was filed before the Court by means of a counter affidavit. G The above submission is not correct since in para 85 of the judgment, the High Court has noticed the figures which were placed by the State in its affidavit regarding amount of collection of Transit Fee and the expenses incurred by the State on the establishment and other miscellaneous expenses. The following chart of expenses and Transit F cc and the cost of enforcement by Forest Department has been noticed H by the High Court in para 85 which is to the following effect:

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 691 CRUSHER [ASHOK BHUSHAN, J.]

A Clal ~ ~ "° <;!1(1 mrBf ('!1IT ~ <;!1(1 m f;CJ; ~tr< ~m!T&l<r

~ Clal~ Clal fcrn:m ~ tf{ ~ mil" &l<r ~<)" B 3lftrari1 3rr<r ;,i 1HiIll "' <im / <;!J('f m!Bf &l<r m;;irur*> 2 3 4 5 6 7 2004-05 3867.00 10997.33 15.37 201.33 11213.93 c 2009-10 9086.17 27684.38 15.61 238.73 27938.72 2010-11 11288.2 31786.85 31.09 387.22 32205.16 2011-12 3848.33 11338.75 2.94 41.89 11383.58 I D (Upto July 201 l

180. Learned counsel appearing for the writ petitioners with regard to above collection and expenses has submitted that by collection of Transit Fee State was trying to meet the entire expenses of Forest E Department and the expenses of entire establishment and no details were given of expenses incurred for regulation ofTransit Fee separately. It is submitted that Transit Fee is not the only source of Forest Department to meet the expenses of entire establishment of the Forest Department.

181. Shri Udit Chandra, learned counsel appearing for some of the ~ F petitioners has referred to a Division Bench judgment ofAllahabad High Court in Civil Misc. Writ Petitio11No.72465 ofiOIJ-i)f/s. Si11gh Timber Trader a11d others v~~ State of U.P. a11d others (reported i11 2016(1) Allahabad Daily J11dg111e11t 174). It is submitted that the writ petitioners in the above case, the manufacturers of plywood and veneer prayed for quashing of the notification dated 20. I 0.20 I 0 by which Rule 11 of the G U.P. Establishment and Regulation of Saw Mills Rules, 1978 had been substituted by U.P. Establishment and Regulation of Saw Mills (Fourth Amendment) Rules, 20 lO. By the said Fourth Amendment, Rules, 2010 licence fee for Saw Mills had been enhanced by 15 times from Rs.5,000/- per year to Rs.75,000/- per year. What is submitted is that the State in H

692 SUPREME COURT REPORTS [2017] 11 S.C.R.

A the said writ petition for justifying the enhancemmt of licence fee for Saw Mills has relied on the same figures of expenditure on enforcement/ regulation in U.P. Forest Department which has been relied in the High Court in the imp11gned judgment in support of increase in the transit fee. It is submitted that thus the figures of expenditure which are claimed by the State are not clearly figures of expenditure on regulation of transit 8 but include other expenditures of the forest department also. It is useful to extract the following portion of the above mentioned Division Bench judgment dated 23"' December, 2014: 'The State Government in the coulller affidavit has tried to justify the enhancement in the fee in the following manner. c (a) Expenditure on enforcement/ regulation in U.P Forest Department has increased about three times i.e. from Rs.ll213.93 lakh in year 2004-05 to 32205.16 lakh in year 2010-11.

D Year Expenditure on regulation

(Rupees in Lakh)

Establish- Other Incidental Total ment expenditure E 2004-05 10997.33 15.37 201.33 11213.93 2009-10 27684.38 15.61 238.73 27938.72 2010-11 31786.85 31.09 387.22 32205.16 F

The license fee/renewal of saw mills and veneer/plywood are thus regulatory in nature and the same has been enhanced with a view to balance and meet the enhanced expenditure being incurred on enforcement/regulation of the Forest Department.." G

182. From the above it is clear that the submission of learned counsel for writ petitioners is correct that the expenditure which is claimed by the State as noticed in paragraph 85 of the impugned judgment of the High Court is the expenditure not confined to regulation of transit but other expenditures of the forest department as well. Thus, the correlation sought to be established by the State on account oftransit fee raised and

STATE OF UTTARAKHAND & ORS. v. MIS. KUMAON STONE . 693 CRUSHER [ASHOK BHUSHAN, J.]

those expenditures as claimed is unfounded and has rightly not been accepted by the High Court.

183. The High Court after considering the stand of the State has held the following in paragraphs 141and142: "141 .... The increase of the transit fees by the 4th Amendment on cubic feet basis and thereafter by impugned 5th B Amendment on ad valorem basis on movement of forest produce on the ground that the value of the forest produce has increased, has made it unconstitutional on poth the counts namely that the cost of forest produce h.as no co-relation with the objects sought to be achieved by regulation of transit, c and secondly the State has not justified the increase on any empirical data based on scientific evaluation of the cost of regulation.· The fee has thus· changed its character from . regulatmy fee, and in the absence of any defence on quid pro quo, to a compensatory tax, which has the effect of augmenting the revenue of the State. D

142. In our opinion, considering the arguments raised and the material placed before us, even if the Rules of 1978 are valid, the notifications dated 13.12.2010, dated 4th June, 2011 under challenge, increasing the transit fees firstly on cubic feet basis and thereqfter item wise on ad valorem basis E . /inked to the price by making distinction between the forest produce, and the minor minerals, which are also forest produce, and without providing justification for such increase, converted the regulatory fees into compensatory tax. The State has completely failed to justify, such arbitrary F increase, both on the principle of reasonableness and in public interest. "

184. The aforesaid figures, as noticed in paragraph 85, were expressly considered by the High Court in para 181 of the judgment where following observation has been made: G "181 .... The collections in 2010-11, before the 4th and 5th Amendments to the Rules of 1978 was 11288. 2 lacs, whereas the expenditure of the establishment and other administrative expenses on the enforcement for the entire year 2010-11 on the i:ollection of transit fees by the department was 32205.16 H

694 SUPREME COURT REPORTS [2017] l 1 S.C.R.

A lacs. It is likely lo 128 increase, as admilled by only 10-20% every yew: The revenue 10 be generated by the transit Jee, would thus be al least JO limes more than the cost in collection offees. By any conservative estimate the increase of fees on ad valorem basis, would be far above the entire expenses born by the department for enforcement on collection of the B fees, and 1/hus the large amount of the collection of transit fees will go into the coffers of the State to ra1'.ve its revenues. Even if entire collections are spent on maintenance of staff, vehicles, fuel and other administrative expenses of/ores/ department, it looses its character as regulatory fees, to c regulate transit of forest produce, with no benefit or service directly or indirectly to facilitate the trade or transit offorest produce. There is no averment, nor ii is argued by learned Counsel appearing for the State that any facility or services are to be provided or are contemplated for the trade."

D 185. The High Court thus held, after considering the material brought by the St~tc for increase in transit fee, that increase in transit fee was excessive and the character of the fee has changed from simple regulatory fee to a fee which is for raising revenue.

186. The High Court in para 181 has returned the finding that E "The revenue to be generated by the transit fee, would thus be at least 10 times more thap the cost in collection of fees."

187. A three-judges Bench in Calcutta M1111icipal Corpn. A11d others vs. Slrrey Merca11ti/e (P) Ltd. and others, 2005 (4) SCC 245 had considered prqvisions of Calcutta Municipal Corporation (Taxation) F Regulations, 1989 whether levy was made on advalorem basis. The Court examined the issue as to whether such levy is a "fee" or a "tax". The Court held the levy in the nature of tax and also held it arbitrary and discriminatory, violative ofAiticle 14. The following was held in paragraph 16 by the High Court:

G "'16.Therefore, the main difference between ··a fee" and "a tax" is on account of the source of powe1: Although "police power" is not mentioned in the Constitution, we may rely upon it as a concept to bring out the difference between "a fee" and "a tax". The power to tax must be distinguished jiwn an exercise of the police powe1: The "police power" is different jivm the "taxing power" in its essential principles.

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 695 CRUSHER [ASHOK BHUSHAN, J.]

The power to regulate, control and prohibit with the main object of giving some special benefit to a specific class or group of persons is in the exercise of police power and the charge levied on that class to defray the costs of providing benefit to such a class is "a fee''. Therefore, in the aforestated judgment in Kesoram easel it has been held that where regulation is the primary purpose, its power is referable to the "police power". If the primary purpose in imposing the charge is to regulate, the charge is not a tax even if ii produces revenue for the Government. But where the Government intends to raise revenue as the primary object, the imposition is a tax. In the case of Synthetics & Chemicals c Ltd. v. State of U.P.' it has been held that regulation is a necessary concomitant of the police power of the State and that though the doctrine of police power is an American doctrine, the power to reg11/a1e is a part of the sovereign power of the State, exercisable by the competent legislature. D However, as held in Kesoram easel in the garb of regulation, any fee or levy which has no connection with the cost or expense of administering the regulation cannot be imposed and on~v such levy can be justified which can be treated as a part of regulatory measure. To that extent, the States power to regulate as an expression of the sovereign power has its E limitations. It is not plena1y as in the case of the power of taxation. "

188. The Court further held that since the Regulation provides for imposition offee on advalorem basis. which is a circumstance to show that the impugned levy is in the nature of tax and not in the nature of a F fee. In paragraph 18 following was stated; "18 .. Further, under the Regulations, the Corporation while prescribing fees has levied fees on ad valorem basis which is one more cirumstance to show that the impugned levy is in the nature of tax and not in the nature of a fee. F11rthe1; the G qunatum of levy indicates that ii is a tax and not a fee. The analysis of the various provisions of the Act and the impugned Regulations shows that the impugned levy is in exercise of power of taxation under the said Act to augment the revenues primarily and not as a part of regulatory measure." H

696 SUPREME COURT REPORTS (2017] l l S.C.R.

A 189. Shri Ravindra Srivastava, learned senior counsel. appearing for the State has submitted that no exception can be taken to the adoption of advalorem basis for imposition of transit fee by means of Fifth Amendment Rules. He submits that when a State is competent to levy foe, what shall ~e the yardstick of such levy depends on facts of each case and the State can find its own basis for determining the extent of B fee. He has relied on three-Judges Bench judgment in P.M. Ashwathanarayana Sefty and others vs. State of Karnataka a11d others, 1989 S11pp.(l) SCC 696. He submits that this Court in the above case was considering the levy of Court fee under Karnataka Court Fee Valua!ion Act, l 958. The Court fee was leviable on advalorem c basis and the Court proceeded to examine the issue as to whether Court fee can be levied on advalorem basis. This Court in the above case has also held that a fee may shed its complexion as a fee and assume that of a tax. In paragraph 40 of the judgment followin.g was held: "40. A fee which at the inception is supportable as one might shed its complexion as a fee and assume that of a tax by reason of the accumulation of surpluses or the happening of even/s which tend to affect and unsettle the requisite degree of correlation. " I 90. The <;::ourt also addressed the issue as to whether advalorem principl"C which Is appropriate to taxation would be inapplicable in the context of an impost which is meant as a contribution towards the costs of service. The Court held that in view of the inherent complexity of these fiscal adjustments, courts give a larger discretion to the legislature in the matter of its preferences of economic and social policies. The Cou11 further held that the question of the measure of tax or a fee should be advalorem or ad quantum is again a matter of fiscal policy. The Court ultimately held that although advalorem principle which may not be an ideal basis for distribution of a fee but no unconstitutionality or infirmity can be incurred. However, the Court has held that 'fee' meant to defray expenses of services cannot be applied towards objects of general public utility. In paragraph 96 following is stated: "96. The power to raise funds through the fiscal tool of a fee is not to be confused with a compulsion so to do. While "fee" meant to defray expenses ofservices cannot be applied towards objects of general public utili~v as part of general revenues, the converse is no/ valid. General public revenues H

STATE OF UTTARAKHAND & ORS. v. MIS. KUMAON STONE 697 CRUSHER [ASHOK BHUSHAN, J.]

can, with justification, be utilised to meet, wholly or in substantial part, the expenses on the administration of civil justice. Many States including Karnataka and Rajasthan had, earlier, statutory upper limits fixed for the court fee. But later legislation has sought to do away with the prescription of an upper limit. The insistence on raising court fees al high rates recalls of what Adam Smith-"W""" ofN"';o.,·· said: "There is no art which one government sooner learns of another than that of drawing money from the pockets of the people."" 19 l. In the aforesaid case, the Court; however, had struck down c Enll'y 20 in Schedule I of the Bombay Act where advalorem Court fee was imposed without the benefit of upper limit of Rs.15,000/- whi~h was prescribed in respect of other suits and proceedings. The Court held the aforesaid imposition as arbitrary and upheld the judgment striking down the above provision. Paragraph 90 to 93 of the judgment are relevant and are extracted below: D "90. In the appeal of the Stale of Maharashtra arising out of the Bombay Court Fees Act. 1959, the High Court has struck down the impugned provisions on the ground that the levy of court fee on proceedings for grant of probate and letters of administration ad valorem without the upper limit prescribed for all other litigants-the court fee in the present case amounts to Rs 6,14,814-is discriminatory. The High Court has also held that, there is no intelligible or rational dijferentia between the two classes of litigation and that having regard to the fact that what is recovered is a fee, the purported classification has no rational nexus to the object. The argument was noticed by the learned Single Judge thus: Petitioners next contend that the impugned clause discriminates as between different types of suitors and that there is no justification for this discrimination. Plaintiffs who go. to civil courts claiming decrees are not required to pay court fees in excess of Rs 15,000. This is irrespective of the amounts claimed over and above Rs 15 lakhs. As against this, persons c:laiming probates have no such relief in the form of an upper limit to fee payable. H

698 SUPREME COURT REPORTS (2017] I l S.C.R.

A 91. This contention was accepted by the learned Singh Judge who has upheld the appeal. Indeed, when proceeding for grant ofprobate and letters of administra/iu" becomes a contentious niatter, it is registered as a .'J·uit r.ou! proceedeq with accordingly. If in respect of'al/ other s11i1s u: whatever nature and complexity an upper limit of Rs 15,0UO B on the court fee is fixed, there is no logical justification for singling ~ut this proceeding for an ad valorem impost withu111 the benefit of some upper limit prescribed by the same statute respecting all other litigants. Neither before the High Court - · - nor before 11s here - was the impos/ sought to be suppor1ed c or justified as something other than a mere fee, levy of which is otherwise within the Stales power or as separate ''fee" fi'om another distinct sottrce. ft is purporred to be collected and so11ght to be justified only as court fee and nothing else.

D 92. The discrimination brought about by the statute, in our opinion, fails to pass the constitutional muster as rightly pointed out by the High Court. The High Court, in our opinion right~v, held: "There is no answer to this contelllion, except that the legislature has not thought it fit to grant relief to the seekers of probates, whereas plaintiffs in civil suits were thought deserving of s11ch an upper limit. The discrimination is a piece of class legislation prohibited by the guarantee of equal protection of laws embodied in Article 14 of the Constitution. On this ground also item /0 cannot he sustained. "

93. We approve this reasoning of the High Court and the decision of the High Court is sustained on this ground alone. ln view of this any other ground urged against rh,· constitutionality of the levy is unnecessary to be examined · G

192. The Court th us struck down a provision of the Court fee· where there was no maximum cap on advalorem basis. There was n" maximum cap in the Fifth Amendment Rules although minimum fee w'" prescribed. Even in some of the cases of fee adva/orem principle mav be applied but we arc of the considered opinion that in case of transit fee H

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 699 CRUSHER [ASHOK BHUSHAN, J.]

where the object and purpose is regulation of transit of forest produce adoption of advalorem principle for levy of transit fee was not appropriate and such levy changed the character of fee into a tax which has rightly been so held by the High Court. We are, thus, of the view that the High Court has given cogent and valid reason for striking down the Fourth and Fifth Amendment Rules which decision was rendered by the High B Court after elaborate and proper consideration of material brought before the Court after analysing the purpose and object of the imposition of transit fee. We, thus, affirm the judgment of the High Court striking down Fourth and Fifth Amendment Rules. Transfer Petitions c

193. This Court vide its order dated 19.11.2012 had already directed the transfer petitions to be heard along with SLP(C)N0.11367 of2007. The Transfer Petitions, thus, deserve to be decided in terms of the Civil Appeal arising out of SLP(C)No.11367 of 2007. Contempt Petitions D

194. The seven Contempt Petitions have been filed in which notices have not yet been issued. All the Civil Appeals being decided by this order, the contempt petitions deserve to be dismissed. XVIII. Interim orders passed against the judgment of the Allahabad High Court E

195. In this batch of appeals in some appeals interim order were passed. In some of the appeals, no interim order was passed. This Court noticing the divergent orders passed in the batch of appeals, passed a detailed.interim order on 29.10.2013 which was to the following effect: F "I) The State shall be free to recover transit fee for forest produce' removed from within the State of U.P. at the rate stipulated in the 3rd amendment to the Rules mentioned in the earlier part of this order. 2) Any such recovery shall remain subject to the ultimate outcome of present petitions pending in this Court. G

3) In the event of writ petitioners/private parties succeeding in their cases, the amount deposited/recovered from them shall be refunded to them with interest at the rate of 9% p.a. from the date the deposit was made till actual refund. H

700 SUPREME COURT REPORTS [2017) ll S.C.R.

A 4) The State shall maintain acmrate amount ofrecoverv made and the nature and the quantumlquan1ity of the p.roduce removed by the private parties concerned. 5) Even in the 2nd batch of cases arising out of Writ Petition No. 975 of 2004 whereby the High Court has struck down the 4th and 5th amendment to the Rules. the State shall be free to niake recoveries in terms of the 3rd amendment in regard to the forest produce removed ji-0111 within the State of UP. Tbe operation of the orders passed hy the High Court shall to that extent remain srayed. C 6) This modification shall no/ app(y to exempted goods or industrial by products like Klinker and jly ash. ··

196. By a subsequent order dated 26.04.2016, this Court further modified the interim order dated 29.10.2013. The order dated 29.10.2013 was modified on 26.04.2016 to the following effect: D "(J) Insofar as forest produce as defined in sub-clause(a} of Clause(4) of Section 2 is concerned, the State shall be free to recover transit fee within the State of UP. at the rate stipulated in the fifth amendment to Rule 5 as aforesaid; (1) Insofar as forest produce originating fi·om Stale of UP. E and covaed by sub-clause (b} of Clause (4) of Section 3 is concerned, the State shall be free recover transit fee at the rate stipulated in the fifth amendment to the aforesaid Rule 5. (3) Insofar as forest produce covered under sub-c/ause(b) of Clause(4} of Section ], which does not originate from F Stale of U.P. but is merely passing through the State, the State shall be free to recover transit fee in respect of such forest produce at the rate stipulated in the fimrth amendment to aforesaid Rule 5. (4) Any such recove1:v shall remain subject to the ultimate G outcome of present petitions pending in this Court. (5) In the event of writ petitioners/private parties succeeding in their cases, the amount deposited/recovered 27 Jfom them shall be refunded to them with interest @ 9% per annum from the date of deposit till actual refimd. H

STATE OF UTTARAKHAND & ORS. v. MIS. KUMAON STONE 701 CRUSHER [ASHOK BHUSHAN, J.]

(6) The State shall maintain accurate amount of recovery made and the nature/quantity of the produce removed by the private party is concerned. (7) These modified directions shall come into effect 011 and from 1st May 2016. (8) This modification shall not apply to exempted goods or industrial by-products like Klinker fly ash."

197. This Court directed that State shall be free to recover transit fee within the State ofU.P. at the rate stipulated in the Fifth Amendment to Rule 5.

198. The Court also held that such recovery shall remain subject to the ultimate outcome of present cases pending in this Court. With further condition that in the event of writ petitioners/private parties succeeding in their cases, the amount deposited/recovered from them . be refunded with interest @9%.

199. We having upheld the judgment of the High Court dated D 11.11.2011 striking down Fourth and Fifth Amendment Rules further steps needs to be taken as per interim direction dated 26.04.2016 which came into the effect from 01.05.2016. It is made clear that in so far as prior to Ol.05.2016 recovery was permitted as per Third Amendment Rules which has been upheld, there is no question of considering any claim of refund of any transit fee prior to OI .05.2016. The transit fee is an indirect tax and the State is entitled to consider the claim ofrefund provided the transit fees has hot passed on to the consumer which may result into unjust enrichment. Thus we pennit the State to consider any claim of refund of transit fee on the condition that State shall permit refund only after being satisfied that there is no passing of the transit fee to the ultimate consumer and refund may not result in unjust enrichment. XIX. CIVIL APPEALS OF STATE OF M.P. FILED AGAINST THE JUDGMENT DATED 14.05.2007

702 SUPREME COURT REPORTS [2017] 11 S.C.R.

A Act, 1927(hereinafter referred to as 'Act, 1927') as unconstitutional and ultra vires to the extent they relate to minerals. Ruic 5 of Rules, 2000 as well as Notification dated 28.05.2001 was also sought to be declared as ultr41 vires to the powers of the State Government under Act, 1927. In the Writ Petition the writ petitioners raised the following contentions: B

201. The Regulatory Fee with regard to transit fee on minerals is totally illegal and without jurisdiction in as much as the field is covered by the MMDR Act 1957. Regulatory Fee imposed by the State of Madhya Pradesh is a direct encroachment on the regulatory measures which are covered within the Act, 1957. Mineral Concession Rules, c I 960(hereinafter referred to as 'Rules, I 960') read with Mineral Transit Pass Regulations, l 996(hereinafter referred to as 'Regulations, 1996'), which specifically provides for issue of transit pass and charging of fee covers the field and State Government cannot frame any rule of the present nature effecting the transportation of mineral. Ruic 5 of Rules, D 2000 as well as Notification dated 28.05.2001 are contrary to Section 41 of Act, I 927. Th¢ Act, J 927 being a pre-constitutional statute enacted by the dominion legislature and Act, 1957 being a parliamentary enactment will have overriding effect over the provisions of the earlier statute. The State Government has put the fee on Transit Pass qua tonnage which makes it colourable piece of exercise of power. E

202. The Smte contested the Writ Petition by filing counter-affidavit and contended that the Act, 1927 has been designed to protect and increase the forest wealth and Notification dated 28.05.2001 has been issued in exercise of power under Ruic 5 of Rules, 2000, which were framed underSection41oftheAct,1927. The Regulatory Fee is not charged on extraction of mineral and there is no encroachment on the provisions of Act, I 957. The Regulatory Fee is charged only on the transportation of minerals. The method chosen by State Government to levy the fee on the basis of quantity of minerals would not change the nature and character of the levy. The power of regulation and control under Act, 1957 is totally different from the imposition of Regulatory Fee on Forest Produce by the State.

203. The Division Bench of the High Court by its judgment dated 14.05.2007, although repelled the several arguments of petitioner which we shall shortly notice hereinafter but declared the Notification dated 28.05.200 I as beyond the scope of Section 4 I of Act, I 927. H

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 703 CRUSHER (ASHOK BHUSHAN, J.)

204. Learned senior counsel in support of the appellants contends A that the Act, 1927, the Transit Rules, 2000, and Act, 1957 operate in different fields and spheres and the mere incidental trenching or overlapping of the provisions of the State enactment will not render the State enactment unconstitutional. The view of the High Court that Notification dated 28.05.2001 is invalid and beyond the scope of Section B 41 of Act, 1927 is erroneous. The Transit Pass is computed on the basis of weight/volume of the Forest Produce so as to maintain the consistency · and transparency in computation of transit fees. The computation or measure of levy will never change the nature of the levy which in the present case is regulatory in nature.

205. The High Court having held that the rules framed by the C State under Section 41 of the Act, 1927 operates in different fields and spheres from the MMDR Act, 1957 and the State government has the · Jegislative competence to frame the rules, holding that the computation of fee on the basis of weight/volume of the Forest Produce is illegal, cannot be .sustained. He further contended that the High Court has issued o direction for refund of the fees collected by the State in pursuance of the Notification dated 28.05.2001 and it is submitted that the direction of the High Court to refund the fees is contrary to the law settled by this Comt that in indirect taxes the burden is already transferred to the consumers and therefore, direction to refund the tax so collected,~the burden of which has already been transferred, will lead to unjust enrichment of assessee.

206. Learned counsel appearing for the writ petitioner have refuted the contention of the State amt has reiterated the submissions. Respqndent-petitioners have further raised the submissions, which were pressed before the High Comt. It is submitted that even· though the respondent-petitioners has not filed any Special Leave Petition challenging the judgment of the High Court dated 14.05.2009, they are entitled to urge the grounds which were pressed before the High Court in support of the Writ Petition.

207. It is submitted that petitioner docs not mine coal but buys it from Northern Coal Fields Ltd. or from other coal fields. Petitioner also reimburses the royalty etc on the coal purchased from different coal fields as per the provisions ofAct, 1957. The impugned demand is illegal and without jurisdiction as the field is fully occupied by rules made thereunder. The Transit Fee of Rs. 7 per tonne fixed by Notification H

704 SUPREME COURT REPORTS [2017] l l S.C.R.

A dated 28.05.200.l is Transit Fee on minerals which is illegal and without jurisdiction.

208. We have considered the submissions raised by learned counsel for the parties and perused the record. Before we proceed to consider the submission, it is necessary to notice the finding given by the B Division Bench of the High Com1 in the impugned judgment on various contentions raised before it. The Division Bench of the High Court considered the submission of learned counsel for the writ petitioners that Act, 1957 occupies the field and the State had no jurisdiction to frame any rules regarding transit of minerals. After noticing the various C · judgments of this Court, the Division Bench concluded that two enactments i.e. Acl, 1927 and Act, 1957 operate in different areas. The Division Bench specifically rejected the argument of writ petitioners that Section 2(4)(b)(iv) and Section 41 of the Act, 1927 be declared ultra vires. The Division Bench of the High Court also noticed the judgment of this <;'ourt in Sudhir Ranjan Nath (sJtpra) and Sitap11r D Packing Wood Suppliers (s11pra). In para 63 of the judgment following was held: "63 ... We have referred to two judgments of the Apex Court and .we are of the considered opinion 011 that both the enactments operate in different areas. The operational sphere E being diffe,rent we conclude and hold that the submission that Section 2 (4)(b)(iv) and Section 41 should be declared ultra vires is sans substratum and we repel the same. "

209. The Division Bench of the High Court further rejected the submission of the writ petitioners impugning the Rul'~ 5 of Rules, 2000 F framed under Section41 of the Act, 1927. In para 71 & 72 following has been held: "71. On a perusal of the aforesaidfom1 it is perceptible that there is mention of locality of storage. name and address of the owner, description of produce and quantity, name of G place of transportation, route and barrier at which forest produce would be produced for check. On a perusal of the aforesaid form it is manifest that it pertains to forest produce at large. Fee can be levied b11t the fee must have ne.ws with the transit for checking in the context offoi·est goods. Hence, we are not inclined to accept the contention of the learned H

STATE OF UTTARAKHAND & ORS. v. M/S. KUMAON STONE 705 CRUSHER [ASHOK BHUSHAN, J.]

senior counsel for the petitioners that framing of the said rule under Section 41(2) is not permissible." "72 .... At this juncture we may repeat at the cost of repetition that the purpose of Section 41 of the 1927 Act, and the purpose of the MMDR Act are quite different ... "

210. The High Court thus has rejected the submission of the writ petitioners, holding that both 1927 Act and 1957 Act operate into different spheres. The High Court further held that rule framed by the State under Section 41 of the Act, 1927 i.e. Rule 5 ofRules,-2000 is valid. Various submissions of the writ petitioners reiterated before us on the basis of Act, 1957 and rules framed thereunder including Section 4( 1A) and c Section 23C of Act, 1957 have already been considered by us, while considering the submission raised with regard to Civil Appeals arising from the judgment of the Allahabad High Court. The above submission having already noted and considered, it needs no repetition here. Hence, submission raised by learned counsel for the writ petitioners on the basis of Act, 1957 is thus rejected. D

21 I. Now, we come to the reason on the basis of which Division Bench of the High Court has allowed the Writ Petition by quashing the Notification dated 28.05.2001. The High Court held that the Notification dated 28.05.2001 is contrary to the provisions of Section 41 of the Act, 1927 and the notification transgresses Rule 5 of Rules, 2000 because E Rule 5 provides that State Government or an authorised officer by it, from time to time, shall fix the rate of the fee for issue of Transit Pass. The fee is to be issued for issue of Transit Pass and Transit Pass by no stretch of imagination can have any nexus with unit of minerals. Thus in fact, it is a fee pertaining to the minerals and not a fee issued on Transit F Pass. In para 74 of the judgment, following has been held by the High Court: "74 ... Hence, we have no doubt in holding that the notification issued is contrary to the provisions of Section 41 of the Forest Act and in fact such issuance of notijicatio11 cannot be said G to be in consonance with the said provision. It transgresses Rule 5 because Rule 5 stipulates that the State Government or an officer authorised by it from time to time shall fix the rate of fee for issue of transit pass as per the provisions of Rule 4. Thus the fee is to be fixed for issue of a transit pass H

706 SUPREME COURT REPORTS [2017] l l S.C.R.

A and a ~ransit pass by no stretch of imagination can have any nexus with the unit ofminerals inj(1ct ifwe allow ourselves lo say, it is said to be a gymnastic in the rule making process to impose a fee on the minerals in the guise of collection of fee on transit pass. In fact it is a fee pertaining to minerals and not a fee on issue o.f transit pass. ~4s lve have scannetl B the ana/omy of the provisions of both the enactments rules framed there under and analysed the purport and import af the notijication, the true nature and character of levy surface somethi'ng different. The exact nature of levy cannot be marginalised by making a sweeping statement that is a c measure of levy and the unit of minerals has been chosen as a rational basis as there is transportation by rope ways by land and by other means. The units chosen really tries to enter into the arena of regulation and control. It may innocuous look to be a measure or standard offee on transit but in essentialit)' it is a trespass into the area of regulation and control. As has been slated earlier the 1957 Act is a regulatory Act and meant for minerals and minerals area development but such imposition of fee as we are disposed to think on the basis of foregoing analysis creates a dent and coneavity in the regulation and control. That apart the standard or measurement does not have any nexus with the essential character of the levy. Therefore the notification rims coullter lo the rule because that was not the intendment of the Rule and further that cannot be the intendment of the language in which sections 41 and 76 of the 1927 Act have been couched. Quite apart from the above, once we have held that Section 41 of the 1927 Act and the provisions of 1957 Act operate in different spheres and judged by those parameters, the notification has lo be /anceted and accordingly we so hold. "

212. Whether the above view of the High Court, holding that State G could not have asked for payment of fee on Forest Produce on the basis of quantity/volume of the Forest Produce is correct '! We revert back to provision of Section 41 of the Act, 1927. Section 41 empowers the State to make rules to regulate the transit of Forest Produce. The rules thus can very well regulate the transit of the Forest Produce. Sub section 2 H of Section 41 provides that "in particular and without prejudice to the

STATE OF UTTARAKHAND & ORS. v. MIS. KUMAON STONE 707 CRUSHER [ASHOK BHUSHAN, J.]

generality of the foregoing provision such rules may, .... (c) provide for the issue, production and return of such passes and for the payment of fees therefore." Thus, power given to State is to regulate the transit of all timber and other Forest Produce and the rules may provide for issue of passes and for the payment of fees, therefore, fee for issue of the passes has correlation with the Forest Produce which is clear from the scheme of Rules, 2000. According to Rule 3 no Forest Produce shall move into or outside or within the State of Madhya Pradesh except in the manner as provided without a Transit Pass in Form A, Band C. The Forms of Transit Pass are part of the rules. For example, for ready reference, we extract the Form A of the Rule, which is to the following effect: c FORM A [Sec Rule 6(2)]

213. Column three provides for description ofproduce and quantity. G Ruic 5 of Rules, 2000 provides for as follows: s "5. Rates of fee for issue of transit pass:-The State Government or an officer authorised by the State Government from time to time, shall fix rates of fee for issue of transit pass as per the provisions of Rule 4." / H

708 SUPREME COURT REPORTS (2017] 1I S.C.R.

A 214. The Rule provides for fixing of rates of fee for issue of Transit Pass. The word 'rate' has been defined in Advanced Law Lexicon by P. Ramanatha Aiyar, in the following words: ..Rate means a rate, cess or assessme/1/ the proceeds of which are applicable to public focal purposes and leviable on the B basis of 41 valuation ofpropert}> and includes any sum which, although obtained in the first instance by a precept, certificate or other instrument requiring /.Ja.v111ent ji·o111 son1e authority or ojfice1; is or can be ultimatezv raised out of a rate."

c 215. When the State is empowered to fix rates offee, it can very well fix the fee on the quantity of Forest Produce. High Court having upheld both Section 41 of the Act, 1927 as well as Rule 5 of Rules, 2000, we see no reason as to how the notification issued under Rule 5 can be held to be beyond the powers of the State.

D 216. When, the State is empowered to fix the rate of fee, it has latitude under the statute to adopt a basis, for fixation of rates of fee. It cannot be said that under the statute fee can be charged only to meet the expenses which are incurred for printing or preparation of passes. The High Court has taken a incorrect view of the matter while coming to the conclusion that Notification dated 28.5.2001 is beyond the power E of the State under Rule 5 of Rules, 2000. Rule 5 clearly empowers the State to fix the rate of fee and the rate of fee can be fixed on the basis of quantity/ vollllllle of the Forest Produce. We thus are of the view that the High Court committed error in setting aside the Notification dated 28.05.2001. This Court in State of U.P. Vs. Sitap11r Packi11g Wood F Supplier (Supra) which judgment has already been noticed by Division Bench of High Court has considered the rules framed by State of U .P. under Section 41 of 1927 Act. Rule 5 of the U.P. Transit of Timber and Other Forest Produce Rules. 1978, provided for payment of transit fee on the forest produce calculated on the rates as mentioned therein. High Court had upheld the competence of the State in providing fee as set out in Rule 5 which was noticed by this Court in paragraph 7 of the judgment, which is to the following effect:- " 7. Having found that the constitutional competence in providing fee as set out in Rule 5 is not lacking, the High Court accepted the challenge to the validity of levy on the ground that the fee is not supported by the principle of quid

STATE OF UTTARAKHAND & ORS. v. MIS. KUMAON STONE 709. CRUSHER [ASHOK BHUSHAN, J.)

pro quo. It held that no service is provided in lieu of the fee to any person much less to the person from whom the transit fee is charged. In the view of the High Court. reasonable relationship between the levy of the fee and the services rendered had not been established."

217. High Court although upheld the competence of the State to provide fee but held that fee is not supported by principles of quid pro quo. On that ground transit fee was held to be invalid. The view of the High Court was reversed and this Court held that charging of transit fee was valid. Following was held in paragraph I 0 and 11 :- " / 0. The transit fee under Rule 5 is clearly regulatory and, c thus, it was not necessary for the State to establish quid pro quo. The High Court was in error in holding the transit fee is invalid in absence of quid pro quo ....

11. For the aforesaid reasons, we allow these appeals and hold that the levy of the transit fee is valid and the judgment of the High Court is accordingly set aside. The parties are, however, leji to bear their own costs. "

218. It is also relevant to note that although the High Court in its judgment bas held that both 1957 Act and I 927 Act operate in different fields. However, it had also made observations that imposing fee by fixing tonnage and cubic meter as unit had entered into regulation and control, which is in the realm of the MMDR Act. In paragraph 74, following has been observed:- "74 .... Though a stance has been taken that ii is a regulatory fee and the Stale has to undertake many works for routes and environment and, therefore, it is lo be regarded as regulato1y fee but as we perceive, imposing fee by fixing tonnage and cubic meters as unit, it enters into the 'regulation and conrro/' which is in the realm of the MMDR Act, for it has impact on the mining aclivizy and the primary purpose, as is patent, is lo regulate the mineral. It is not for the purpose of regulating the transit of minerals but to have a regulatory measure of control of minerals. The difference between issue of transit pass for a fee has been galvanised into a fee on mineral unit which has a controlling effect on the developnzent of niinerals." H

710 SUPREME COURT REPORTS [2017] l l S.C.R.

A 219. We have already found that 1927 Act and 1957 Act operate in different fields. State has power to regulate transit of forest produce under section 41 of 1927 Act and the regulation of minerals and effect of transit rules framed by the State is only incidental on the regulatory control on the mineral as exercised under 1957 Act. The above observations of the Division Bench thus cannot be approved. B

220. In result, in view of the foregoing discussion, we are of the view that High Court committed error in quashing the order dated 28.05.2001. The Civil Appeals filed by the State of Madhya Pradesh deserves to be allowed. C XX. CONCLUSIONS

221. In vi~v of the foregoing discussion, we arrived at following conclusions: I. (a) The crushing of stones, stone boulders into stone grits, stone chips and stone dust does not result into a new commodity different from D forest produce. The crushed materials continue to be stone and retain their nature of forest produce. (b) Coal with its various varieties, limestone, hydrated lime, quick limestone, slake lime, veneer and plywood waste are all forest produce. (c) Marble blocks, marble slabs, marble chips arc all forest produce. E (d) Flay ash, clinker, synthetic gypsum are not forest produce. Gypsum, however, is a forest produce. II. The Indian Forest Act, 1927 and the Rules framed under Section 41 arc neither overridden nor impliedly repealed, altered or amended by Mines and Minerals (Development and Regulation) Act, 1957 and the F Rules framed the~eunder. Both the above legislations operate in different spheres and fields. III. The words "brought from" as occurring in Section 2(4 )(b) of 1927 Act means brought from forest from where forest produce has originated. The words 'brought from forest' cannot be read as "brought through forest''. We, however, clarify that for an item to be treated as forest produce, its origin may be in any forest within the State ofU.P. or in a forest outside the State of U.P. IV. The forest has to be understood according to its dictionary meaning which covers the statutory recognised forest and also shall include any area regarded as forest in the Government record irrespective of the

STATE OF UTTARAKHAND & ORS. v. MIS. KUMAON STONE 711 CRUSHER [ASHOK BHUSHAN, J.]

ownership. The meaning of forest cannot be restricted only to reserve forests, protected forests and village forests. V The roads notified by notification dated 10.02.1960 under Section 80A of 1927 Act cannot be read to mean that such roads have been declared as protected forest. The notification dated I 0.2.1960 can only be read to mean that both sides of the road have been declared as protected forest on which Chapter IV of the 1927 Act shall be applicable. VI. Rule 3 of 1978 Rules is not independent of Ruic 5 of 1978 Rules. Transit fee is payable on all kinds of transit passes and cannot be confined only to transit passes as referred to in Ruic 4(l)(b) only. VII. After issuance of notification under Section 4 of 1927 Act. removal of forest produce therefrom shall be governed by the Rules framed by the State in view ofU.P.Act 23of1965 by which original Section 5 has been substituted in its application in the State ofU.P. The fact that no notification under Section 20 has been issued does not mean that restriction put by the State Government by Rules are not applicable. D VIII. The Division Bench of the Allahabad High Court by its judgment dated 11.11.2011 has rightly struck down Fourth and Fifth Amendment Rules to 1978 Rules as being cxccssi vc and confiscatory in nature. IX. The notification dated 28.05.2001 issued by the State of Madhya Pradesh in exercise of power wider Rule 5 of2000 Rules cannot be said E to be beyond the scope of Rule 5 of2000 Rules and Section 41of1927 Act. The State of Madhya Pradesh was fully justified in fixing rate of transit fee at the rate of Rs.7/- and Rs.4/- per tonne which was well within the power of the State under Rule 5 of2000 Rules framed under the 1927 Act. F

222. In view of the foregoing discussion, we decide this batch of cases in following manner: ( l) All Civil Appeals filed by the State ofU.P. and State of Uttarakhand challenging the judgments of the High Court of Uttarakhand dated OJ. 7.2004, 20.03.2005, 26.06.2007 and subsequent judgments following the aforesaid three judgments are allowed. The impugned judgments G arc set aside and the writ petitions stand dismissed. (2) All the Civil Appeals filed by the State ofU.P. against the judgment dated 11.11.2011 and subsequent jndgments following judgment dated 11.11.2011 arc dismissed. H

712 SUPREME COURT REPORTS [2017] l l S.C.R.

A (3) The Civil Appeals filed by the writ petitioners against the judgment of the Allahabad High Court dated 27.04.2005 and the subsequent judgments following the judgment dated 27.04.2005 as well as the Civil Appeals filed by the writ petitioners against the judgment dated 11.11.20 l l and other subsequent judgments following the judgment dated 11.11.2011 arc disposed of in terms of our conclusion as recorded in paragraph B 221 (I to VIII). ( 4) The transfet petitions are disposed of in terms of our conclusion as recorded in paragraph 221(1 to VIII) and Writ Petition(C) No.203 of 2009 (Mis. Pappu Coal Master & Ors. vs. State of U.P. & Anr.) is also disposed of in terms ofour conclusion as recorded in paragraph 221 (I to c VIJI) (5) The writ petitioners from whom the transit foe was realised with cffoct from OJ.05.2016 in accordance with the Fifth Amendment to 1978 Rules shall be entitled to claim for refund along with interest @ 9% which shall be considered by the State or any officer authorised by the D State. The claim of refund shall be allowed only if the assessee alleges and establishes that he has not passed on the burden to any other person, since it is well settled that the power of the Court is not meant to be exercised for unjustly enriching a person. ( 6) All the Cont~mpt Petitions are dismissed. E (7) All the Civil Appeals filed by the State of Madhya Pradesh against judgment dated 14.05.2007 arc allowed. The judgment of the Division Bench of the High Court dated 14.05.2007 is set aside and the writ petitions stand dismissed.

223. Parties shall bear their own costs. F

NiJhi Jain Matters disposeJ of.