K. Veeraswami, J.
1. The petitioners are carrying in business in jaggery, groundnut and other articles at Vellore and Tirupattur in North Arcot District. This district has been declared under Section 4(1) of the Madras Commercial Crops Act, 1933, to be a notified area in respect of groundnut and certain other commodities. The petitioners state that on their purchases of groundnuts in the notified area in the year 1962-63, a cess of Rs. 5,298-05 by way of sales tax has been levied and collected under Section 18(1) of the Madras Agricultural Produce Markets Act, 1959, read with the relative by-law framed by the committee under Section 30(1), but they were, however served by the Commercial Tax Officer, North Arcot, with a notice dated 21st January, 1963, provisionally proposing to levy under the Madras General Sales Tax Act, 1959, tax on a total turnover of Rs. 32,05,977-50. The notice mentioned that the petitioners had effected purchases of groundnut for the period from 1st April, 1962 to 27th December, 1962, to an extent of Rs. 25,64,502-00 which were liable to tax at 1 per cent. Another notice dated 19th March, 1964, followed, in which it was said that the petitioners had effected purchases of groundnuts to a tune of Rs. 24,55,925-13 from agriculturists, and of Rs. 16,752-38 through market committees, and that they were proposed to be taxed on first purchases in the notified area. The petitioners contend that the proposed assessment will be violative of Article 286(3) of the Constitution and Section 15 of the Central Sales Tax Act, 1956. According to them, tax having already been collected once on the turnovers under Section 18 of the Madras Agricultural Produce Markets Act, 1959, a second levy on identical transactions under the Madras General Sales Tax Act will be illegal. They pray, therefore, that the proposed assessment should be forbidden. The respondents take the stand that the cess under Section 18 of the Madras Agricultural Produce Markets Act is not a tax on sale of goods, but a fee, and, therefore, no question of the proposed final assessment offending Article 286(3) or Section 15 could arise.
2. On the view we are inclined to take, it seems to us to be unnecessary to decide the question whether what is levied under Section 18 of Madras Act XXIII of 1959 is a tax or fee. There are two Bench decisions of this Court, Kutti Keya v. State of Madras : AIR1954Mad621 , and T.M. Kanappa Mudaliar v. State of Madras W.P.No. 711 of 1964, which have expressed different views. The former decision took the view that the levy under Section 18 was in the nature of sales tax though it went into a separate fund called the Market Committee Fund under Section 20 and was to be appropriated to certain purposes specified by the enactment as it stood then. The section has since been amended in 1955 and, as amended, it expressly provides that the market committee shall levy a cess by way of sales tax on any notified agricultural produce bought or sold in the notified market area at a rate not exceeding fifty naye Paise for every hundred rupees of the aggregate amount for which the notified agricultural produce is bought or sold whether for cash or for deferred payment or other valuable consideration. The section as it stands now also says that the cess levied under the section shall be subject to the provisions of Article 286 of the Constitution. Section 20 provides for a separate market committee fund into which the cess levied under Section 18 is to go and Section 21 directs that the market committee fund shall be expended for only the purposes specified in that section. With reference to these provisions, in the latter decision, this Court was of the view that imposts under Section 18 was in the nature of a fee. Kumaran & Co. v. Secretary, Malabar Market Committee (1964) 15 S.T.C. 634, and K. Seshagiri Pai & Co. v. Deputy Commissioner of South Kanara (1961) 12 S.T.C. 629 : A.I.R. 1962 Mys l, the first on the provisions of the Madras Act itself and the second on a similar enactment in the Mysore State, proceeded upon the view that the impost was in the nature of a tax.
3. The dividing line between a 'tax' and a 'fee' has become very much thinned as a result of judicial pronouncements over recent years. Broadly speaking, a tax is an exaction for general purposes of Government and therefore no element of quid pro quo is to be looked for in it. A 'fee' is raised for a defined purpose and is to make good the expenses incurred in rendering service to a specified class of people. A 'fee' is, therefore, a return for services and is paid, normally speaking, by the receipients of the service, actually or in a notional sense. A 'tax' is not identified with any purpose and is unrelated to any specified service to any defined class of persons. Though generically there may be no difference between 'tax' and 'fee', the different indicia just mentioned may assist to distinguish one from the other. The test which was once applied, namely, whether the particular impost when collected goes into the consolidated fund, does not appear to be a decisive test, because there are imposts in the nature of taxes which do not go into the consolidated fund. In recent cases the test has been applied as to what exactly is the object of the levy or its essential purposes or whether there is any service done to the payer of the levy: Hingir Rampur Coal Co. v. State of Orissa : 2SCR537 , and Corporation of Calcutta v. Liberty Cinema : 2SCR477 . The first of these cases was concerned with the Orissa Mining Areas Development Fund Act. The Act was passed for the purpose of the development of mining areas in the State. Section 4 of the Act provides for imposition and collection of cess which shall not, under Section 5, exceed 5 percent. of the valuation of the minerals at the pit's mouth. A fund called the 'Orissa Mining Areas Development Fund' was constituted under Section 5 which vested in the State Government and has to be administered by such officer or officers as may be appointed by the State Government in that behalf. The cess so levied was not to become a part of the consolidated fund of the State and was not subject to appropriation in that behalf. The Supreme Court held that as the fund was a special fund earmarked for carrying out the purposes of the Act and there was a co-relation between the cess levied under the Act and the purposes for which it was levied, the levy was in the nature of a fee and not a tax. In coming to that conclusion, the test applied by the Supreme Court was:
In such a case it is necessary to enquire what is the primary object of the levy and the essential purpose which it is intended to achieve. Its primary object and the essential purposes must be distinguished from its ultimate or incidental results or consequences. That is the true test in determining the character of the levy.
But this test was also invoked in Corporation of' Calcutta v. Liberty Cinema : 2SCR477 , which was concerned with the Calcutta Municipal Act. In that case a licence fee on a cinema house fixed in 1948 at Rs. 400 per year was increased to Rs. 6,000 in 1958. This was done by changing the basis of assessment and fixing it at Rs. 5 per show. The majority view was that though the increase was large, it was authorised by Section 548 of the Act and that it was a tax and not a fee in return for services to be rendered by the Corporation. The majority of learned Judges observed:.The Act does not provide for any services of special kind being rendered resulting in benefits to the person on whom it is imposed. The work of inspection done by the Corporation which is only to see that the terms of the licence arc observed by the licencee is not a service to him.
In Mohammed Hussain v. State of Bombay : 2SCR659 , the Supreme Court had to consider the character of the levy under the provisions of the Bombay Agricultural Produce Markets Act which were more or less in pari materia with the provisions of the Madras Act as it was considered in Kutti Keya v. State of Madras (1954) 1 M.L.J. 117. On an examination of the entire provisions of the Act, the Supreme Court observed that the market committee which was authorised to levy fee provided by Section 11 of the Bombay Act rendered services to the licencees, particularly when the market was established and that under the cirumstances it could not be said that the fee charged for services rendered by the market committee in connection with the enforcement of the various provisions of the Act and the provisions for various facilities in the various markets established under the Act was in the nature of sales tax. In Kutti Keya v. State of Madras (1954) 1 M.L.J. 117, this Court thought that the impost under Section 11 of the Madras Act as it stood then was in the nature of a tax. In taking that view it purported to follow the principle of Attorney-General for British Columbia v. Esquimalt and Nanaima Ry. Co. L.R. (1950) A.C. 87. The Judicial Committee in that case considered the question whether a charge made under the Forest Act on the owners of timber land was a tax or a service charge imposed for protecting forests from fire and the like, and expressed the following opinion:
It is suggested, however, that there are two circumstances which arc sufficient to turn the levy into what is called a 'service charge '. They are, first, that the levy is on a defined class of interested individuals and, secondly, that the fund raised does not fall into the general mass of the proceeds of taxation but is applicable for a special and limited purpose. Neither of these considerations appears to their Lordships to have the weight which it is desired to attach to them... The fact that in the circumstances the persons particularly interested are singled out and charged with a special contribution appears to their Lordships to be a natural arrangement. Nor is the fact that the levy is applicable for a special purpose of any real significance. Imposts of that character are common methods of taxation-taxation for the road fund in this country was a well-known example.
This Court accordingly held that the amounts to be collected under Section 11 of the Madras Act as it stood then were taxes notwithstanding that they were not brought into the consolidated fund of the State under Article 266(1) but went into a separate fund constituted for the purpose and that the levy itself was only on a section of the public. In Shanmuga Oil Mill v. Coimbatore Market Committee (1960) 1 M..L.J. 298 : I.L.R. (1960) Mad. 171, Ramachandra Iyer, J., as he then was, took a similar view. Srinivasan, J., in V. Malaipettai v. State of Madras : AIR1964Mad458 , also thought that the levy under Section 18 of the Madras Agricultural Produce Markets Act, 1959, is a sales tax and not a fee.
4. While on the one hand Mr. Rajah Iyer for the petitioners pressed upon us that the levy under Section 18 is a sales tax, learned Government Pleader for the respondents contended that it is but a fee. Each of them placed reliance upon one or the other decision of this Court which is in his support. That being the position, had it been necessary to decide the point, we should have referred the question to a fuller Bench.
5. In our opinion, however, the petition is capable of disposal on a very narrow point. Article 286(3), as it appears after the sixth amendment of the Constitution, places certain limitations on the taxing power of a State it says:
Any law of a State shall, in so far as it imposes, or authorises the imposition of, a tax on. the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may be law Specify.
That means the Parliament may declare particular goods to be of special importance in inter-State trade or commerce. The Parliament may place such restrictions and conditions on a State law imposing tax on the sale or purchase of such goods. The restrictions and conditions to be prescribed by the Parliament by. law should be related to the system of levy, rates and other incidents of the tax. In accordance with this provision, the Parliament has enacted Sections 14 and 15 of the Central Sales Tax Act, 1956. Section 14 specified certain goods as declared goods which are of special importance in inter-State trade or commerce. Section 15 of the Act is in two parts, of which we are only concerned with the first. That is to the effect that every sales tax law of a State, in so far as it relates to imposition of tax on the sale or purchase of declared goods, would be subject to two limitations, namely, the tax payable under such law in respect of sale or purchase of such goods inside the State shall not exceed two per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage. It follows, therefore, that no State law can impose more than two per cent on the sale or purchase of declared goods, and such levy should be at only one stage. In other words, the State law should be limited to (a) rate of two per cent, and (b) to a single point levy. If a State law contains provisions contrary to the limitations, and provides for a rate higher than two per cent and authorises multi-point tax, the effect of Article 286(3) read with Section 15 of the Central Sales Tax Act would be to automatically modify the State law in so far as it relates to declared goods and to bring such law in confirmity with the said article and the section.
6. Sub-section (1) of Section 18 of the Madras Agricultural Produce Markets Act, 1959, authorities the market committee to levy a cess by way of sales tax on any notified agricultural produce bought or sold in the notified market area at a rate not exceeding fifty naya paise for every hundred rupees of the aggregate amount for which the notified agricultural produce is bought or sold. The first explanation to this provision embodies a rule of presumption, namely, unless the contrary is proved, all notified agricultural produce taken out or proposed to be taken out of a notified market area shall be presumed to be bought or sold within such area. There is a second explanation which does not require to be noticed for the present purpose. Sub-section (2) enacts that the 'cess' referred to in Sub-section (1) shall be paid by the purchaser of the notified agricultural produce concerned. But if such a purchaser cannot be identified, the cess should be paid by the seller. Sub-section (3) says that the cess levied under Sub-section (1) shall be subject to the provisions of Article 286 of the Constitution. It may be seen that the levy that is contemplated under Section 18 is not a single point levy and cess will have to be paid on every sale or purchase of goods within the notified area. The section also does not fix a particular rate at which the levy should be made. It only fixes the maximum and delegates to the market committee the authority to fix a rate subject to the maximum of fifty naye paise for every hundred rupees of the aggregate amount of sale or purchase of agricultural produce. Section 18 also applies to all kinds of goods, including declared goods. But in the case of sale or purchase of declared goods in the notified area, by reason of Article 286(3) of the Constitution and Section 15 of the Central Sales Tax Act, the levy under Section 18 is necessarily not to exceed two per cent and it is allowed only at a single point. In fact, as we mentioned earlier, Sub-section (3) of Section 18 itself makes Sub-section (1) subject to Article 286.
7. Mr. Rajah Iyer's contention is that as a part of the turnover in question has already been subjected to a levy under Section 18(1) at a rate of thirty naye paise for every hundred rupees of such turnover, a second levy under the provisions of the Madras General Sales Tax on the identical turnover is illegal. Realising that the tax levied under the provisions of the General Sales Tax Act on sale of groundnuts at the point of first purchase is at only one per cent and that the tax under both the Acts put together will not exceed two per cent, he contends that whatever be the rate, whether it be two per cent or below, it should be applied only once and a multiple levy on the same transaction, though at an aggregate rate of or below two per cent, is not permissible under Section 18 of Madras Act XXIII of 1959 read with Section 15 of the Central Sales Tax Act. We are unable to accept this contention. Though the levy may be under two different enactments, both should be regarded as one for purposes of Section 15 of the Central Sales Tax Act. Subject only to the requirement that the levy should at identical point at a fixed stage in the series of transactions, there is nothing in Section 15 of the Central Sales Tax Act which forbids multiple levy of rates amounting to two per cent or below in the aggregate on such identical point. If the Madras General Sales Tax Act authorities a levy of one per cent in the case of purchases of groundnuts at the stage of first purchase, in our opinion, it is not objectionable to Madras Act XXIII of 1959 also levying at the point of first purchase a tax which, taken with the tax levied under the Madras General Sales Tax Act, does not exceed two per cent. The whole idea underlying Section 15 of the Central Sales Tax Act is that the declared goods should not in the aggregate suffer a tax at the rate of more than two per cent both in intra-State and inter State trade.
8. The contention for the State, however, is that if the impost under Section 18 is regard as a sales tax, it fixes no particular point at which the levy can be made in light of Article 286(3) of the Constitution and Section 15 of the Central Sales Tax Act. As we mentioned, the scheme of Section 18 is to provide for multi-point tax; but as a result of Article 286(3) and Section 15 of the Central Sales Tax Act, Section 18, as in the case of sale or purchase of declared goods is limited to a rate of two per cent and to a single point levy. But Section 15 itself beyond saying that the levy can only be at one stage, does not prescribe any particular point in the series of sales or purchases. The fixation of the point in conformity with Section 15 is left to the particular State Legislature. The automatic modification of Section 18 brought about by Article 286(3) and Section 15 does not extend, therefore, to defining the single point in the series of transactions at which the levy of cess is to be made under Section 18(1). Our attention has been invited to a by-law made by the market committee in this case, which prescribes thirty naye paise for every hundred rupees of the aggregate amount for which groundnut is brought or sold and proceeds to say.
The cess referred to in sub-law (1) shall not be levied more than once on agricultural produce bought or sold in the notified market area. The cess due in accordance with the rates prescribed under sub-law (1) above shall, in the case of transactions occuring in the regulated markets, be collected from the buyer there. In all other cases the cess shall be payable by the last buyer before the agricultural produce is taken out of the notified market area or before it is taken for being consumed in a processing or manufacturing concern within the notified area.
9. It is manifest from this by-law that the rate of levy is to be at thirty naye paise for every hundred rupees of the aggregate turnover, that the levy is to be at the stage of purchase in the regulated market and that if the transaction is outside the regulated market, the cess is payable by the last buyer before the agricultural produce is taken out of the notified market area or before it is taken for consumption in the manner mentioned in the by-law. The contention for the petitioner is that the by-law, therefore, prescribes a stage different from the point at which tax may be levied under the provisions of the Madras General Sales Tax Act. In the latter the first purchase of groundnut attracts tax. But under Section 18 of the Madras Agricultural Produce Markets Act, read with this by-law, the tax is payable by the last buyer if the purchase is outside the regulated market area. The by-law itself, in our view, appears to be without authority. In the absence of any authority to the committee to prescribe the point at which the levy could be made, we do not see how and under what authority the market committee can take a by-law or a rule fixing the single point in the series of sales at which the cess can be levied under Section 18. Section 18 itself is silent about the point at which the cess can be levied. In fact, Section 18 as we said, contemplates a multi-point tax. But when the section is modified based on Article 286(3) and Section 15, the necessity arises for the State Legislature to fix the point, namely, whether it is the first purchase or the last purchase or any intermediate purchase that will attract the cess or provide for authority to the market committee to fix the point at which the cess will be payable. Since, following the notification effected by Article 286(3) and Section 15 no point of levy has been fixed by the State Legislature and no authority has been given in the alternative to the market committee to fix the point, the case said to have been collected from the petitioners under Section 18 at the point of last purchase which by accident happens to be the first purchase by him is not one authorised by law. On that view, we consider that the respondents are entitled to proceed under the provisions of Madras General Sales Tax Act, in receipt of the turnover in question. Before we part with this case we make it clear that we express no view at to whether any part or whole of the disputed turnover consisted of first purchase of groundnuts. This is a matter entirely for investigation by the assessing Officer in the light of the particular facts present before it.
10. The petition is dismissed, but in the circumstances with no costs.