JUDGMENT
S.N. Jha, C.J.
1. The dispute in this batch of writ petitions and letters patent appeals relates to vires of Sub-section (5) of Section 3 of the J&K Levy of Tolls Act, Samvat 1995 (1938 A.D), (hereinafter referred to as the Act) and the notification, SRO 80 dated 30-3-2000, issued thereunder.
2. Sub-section (5) was inserted by amendment in 1997 vide Jammu and Kashmir Taxation Laws (Amendment) Act, 1997. The provisions underwent a minor amendment in 1999 vide Jammu and Kashmir Taxation Laws (Amendment) Act, 1999. So amended, it runs as under; —
“The Government may, form time to time, notify the commodities in respect of which tolls may be levied on ad-volarem basis, subject to a maximum of 15% of the value of goods.”
3. Notification, SRO 184 of 1997 dated 30-5-1997, was issued in exercise of the powers under the aforesaid provision levying additional toll on edible oil imported into the State for re-sale, at the rate of 4% on value of the commodity with immediate effect. The notification was challenged in various writ petitions before this court. By judgement titled Shakti Traders v. State of J&K dated 14-3-2001, reported in 2001 JKLR 392 the notification was quashed by Division Bench as being violative of Articles 301 and 304 of the constitution of India. During the pendency of the said writ petitions notification impugned in these writ petitions/appeals was issued vide SRO 80 dated 30-3-2000 with effect from 1-4-2000. The said notification may also be quoted here itself as under: —
“In exercise of the powers conferred by Sub-section (5) of Section 3 of the Jammu and Kashmir Levy of tolls Act, Samvat 1995 (VIII of 1995) and in super session of Notification SRO 184 dated 30-5-1997, the Government hereby direct that additional toll on the following goods brought into and taken out of the State, shall be levied on ad-volarem at the rate of 4% of the value of the goods, namely:
(i) Edible oils,
(ii) Cigarettes, and
(iii) Tobacco.
This order shall have effect from 1-4-2000.
By order of the Government of Jammu & Kashmir.”
4. According to the respondents, the obnoxious part of SRO 184 levying additional toll on import of edible oil for re-sale in the State amounting to discrimination between goods imported from outside the State and those manufactured inside and, therefore, violative of Articles 301 and 304 of the Constitution of India, stands removed. The additional toll is now levied on the notified goods both “brought into and taken out of State” i.e. the goods imported from outside as well as manufactured in the State and hence the defect in the earlier provision, if any, stands cured. It may be mentioned here that the aforesaid judgement in Shakti Traders (supra) was challenged by the State in the Supreme Court where the matter is said to be pending after grant of special leave.
5. Out of various writ petitions challenging vires of Section 3(5) of the Act and SRO 80, OWP Nos. 512, 513 and 524 of 2000 were dismissed by a learned Single Judge on 26-11-2001 giving rise to the LPA NOS. 40, 43 and 260/2002. The judgement is reported in 2002 KLJ 204. The rest of the petitions came up for hearing before another learned Single Judge. He took the view that there was conflict between the two judgements in Shakti Traders (supra) and OWP No. 512/2000 titled Mahavir Oil Company v. State or J&K and analogous cases, and by order dated 21-12-2001 referred the petitions to a larger bench for decision on the following questions of law: —
(a) Is Section 3(5) of Levy of Tolls Act 1995 violative of Articles 286 and 301 of the Constitution of India?
(b) Can the value of goods be the basis for levy of toll under the Levy of Tolls Act?; and
(c) What is the effect of answer to the above two questions on SRO 80-dated 30-3-2000?
6. The case of the petitioners/appellants is that the goods were earlier brought within the ambit of Jammu and Kashmir General Sales Tax Act, 1962. However, with a view to protect the interest of the local industries, the Government of Jammu and Kashmir granted exemption in respect of goods manufactured by registered small scale industrial units of the State subject to certain conditions for a specified period. The levy was challenged by the manufacturers of the goods outside the State. The petitions were dismissed by this Court. However, the Supreme Court vide judgement titled Shri Mahavir Oil Mills v. State of J&K, 1996 (11) SCC 39, held that unconditional exemption to the goods manufactured within the State of Jammu and Kashmir while subjecting those manufactured in other states was discriminatory and prohibited by Article 304(a) of the Constitution of India. The Supreme Court, however, clarified that the judgement would take effect from 1-4-1997 and the manufactures would not be entitled to any refund etc. as a consequence of the judgement. The decision was rendered on 29-11-1996. According to the petitioners/appellants, Sub-section (5) was interested in Section 3 of the Levy of Tolls Act to undo the decision of the
Supreme Court which is evident from the budget speech of the Finance Minister of the State on 20-3-1997 as under:
“The exemption given to small scale industrial units or the sale of edible oil manufactured by them in the State is proposed to be withdrawn in the light of the judgement of the Hon’ble Supreme Court (Shri Mahavir Oil Mills v. State of J&K), but I, however, propose to levy entry tax at the rate of 4% on the edible oil which is imported from outside the State for re-sale in the State.”
7. The statement was followed by insertion of Sub-section (5) in Section 3 of the Levy of Tolls Act and issuance of notification, SRO 184 dated 30-5-1997.
8. The case of the petitioners/appellants is that the impugned provisions are completely illegal and unconstitutional. The Levy of Tolls Act has been enacted to provide for levy of toll on public roads and bridges and, accordingly, Sub-section (1) of Section 3 empowers the State Government to levy toll upon any road, ferry or bridge in the State; the Act does not envisage levy of toll on goods and commodities. However, in utter disregard of the scheme of the Act, Sub-section (5) was inserted empowering the Government to levy toll on goods and commodities at ad-volarem basis. The levy of toll under the Act is compensatory in nature whereas the levy contemplated by Sub-section (5) is a tax on goods and commodities. Such a levy is not permissible in the garb of the ‘toll’ under the Levy of Tolls Act. It is not violative of the Constitutional mandate under Articles 301 and 304 of the Constitution of India. Reliance in this regard is placed on Shri Mahavir Oil Mills v. State of J&K (supra).
9. It was submitted on behalf of the petitioners/appellants that in the case of Hans Raj and Sons v. State of J&K, 2002 (6) SCC 227, while dwelling upon the nature and scope of levy under the Jammu and Kashmir Levy of Tolls Act, the Supreme Court has categorically held that the statue docs not envisage levy of toll on goods or any transaction of sale thereof. It is a levy on user of public roads and bridges in the State and therefore the impugned provision envisaging levy of so called toll on goods and commodities, on ad-volarem basis, is not permissible. The Levy of Toll Act, it was submitted, has been en-acted in exercise of the legislative power under entry 59 read with entry 57 of list 2 of the VII Schedule to the Constitution of India, though entries 54 and 56 empower the State of make laws for levy of taxes on sale or purchase of goods or on goods and passengers carried by road or in-land water ways, the goods and commodities can not be subjected to levy of toll inasmuch as the levy of toll is a compensatory in nature — for use of public roads etc. the levy of tolls Act does not contemplate levy of any tax. Levy provided in Section 5(3) is in the nature of taxes which is not permissible.
10. On behalf of the respondents, it was submitted that the levy of toll is compensatory in nature. In Shri Mahavir Oil Mills (supra), the impugned notification was one under the Sales Tax Act and, therefore, the ratio of the decision cannot be applied while considering the legality and permissibility of compensatory provision like toll under the Levy of Tolls Act. The decision was wrongly applied by the Division Bench in Shakti Traders (supra), the correctness of which decision is under challenge before the Supreme Court. Be that as it may, as now goods imported from outside are at treated at par with those manufactured inside the State, Section 3(5) of the Act and/or SRO 80 cannot be said to be hit by Article 301/304 of the Constitution of India. In any view, in Shakti Traders this Court interfered with the levy on the common ground of discrimination between goods imported from outside and manufactured within the State, it no where held that the State has no power to levy toll. Sub-section (5) of Section 3, it was submitted, was noticed by the Supreme Court in Hans Raj and Sons (supra) but did not find any illegality in it.
11. In reply, it was submitted on behalf of the petitioners/appellants that in Hans Raj and Sons the petitioners has challenged the notification under Sub-section (1) of Section 3 of the Act and, therefore, there was no occasion to consider the validity or otherwise of Sub-section (5).
12. As indicated above, Section 3 of the Levy of Tolls Act is the charging section. Whereas Sub-section (1) provides for tolls upon “any road, ferry or bridge”, Sub-section (5) provides for tolls on “commodities on ad-volarem basis”. Though Sub-section (5) has been quoted above, in order to bring home the point, it would be appropriate to quote entire Section 3 as under: —
“Rate of tolls to be levied: -(1) The Government may from time to time prescribe, annul or alter rates of tolls to be levied upon any road, ferry or bridge in the State and may place the collection of such tolls under such management as may appear to it proper, and all persons employed in the management and collection of such tolls shall be liable to the same responsibilities as would belong to them if employed in the collection of the Excise Revenue under the Jammu and Kashmir Excise Act, 1958.
(2) The rates prescribed to be levied at the commencement of this Act, shall be the rates mentioned in the first Schedule hereto annexed. The rates shall continue to be levied till they are annulled or altered in accordance with the provisions of this section.
(3) The power to annul or alter the rates vested in the Government under the provisions of this section may be exercised from time to time after publication in the Government Gazette. The amendment and alteration shall have the same force and effect as if they had been contained in the first Schedule.
(4) The persons under whose management the tolls are levied at the commencement of this Act shall levy the tolls prescribed and shall be held to have been appointed for collection of tolls under the provisions of this Act.
(5) The Government may, from time to time, notify the commodities in respect of which tolls may be levied on ad-volarem basis, subject to a maximum of 15% of the value of goods.”
13. It is manifest that while Section 3 (1) of the Act empowers the Government to levy toll (fix, annul or alter rates thereof) upon any road, ferry or bridge, Sub-section (5) empowers the Government to levy toll on commodities on ad-volarem basis. In Hans Raj and sons (supra), the Supreme Court went into the meaning of the term ‘toll’ at length. After referring to the various authorities, the Court observed:
“.It is clear from the above that though tolls are of different types and may be levied in different situations, it ordinarily means the amount which the Government, or a local authority or a person duly authorized by the Government may collect for passage of carriage and vehicles over a road or bridge.”
The Supreme Court then noticed the provisions Section 3 of the J&K Levy of Tolls Act and finally observed as under: —
“.The scheme of the statute does not envisage levy of toll on goods or on any transaction of sale thereof. It is clearly a levy upon user of public roads and bridges in the State. The scheme fits in with the concept of tolls, be it toll traverse or toll-thorough, to be levied in lieu of the advantage of privilege provided by the State Government for user of roads and bridges lying within the State.”
14. It is relevant to mention here that the aforesaid case had arisen from a notification, SRO 348 dated 20-8-1998, whereby additional toll was levied on dry fruits including almonds, walnuts and walnut kernels in addition to the duty payable in addition to the toll payable in terms of SRO 115 dated 31-3-1982. Considering the validity of the impugned notification, after referring to the nature and scope of toll leviable under the Levy of tolls Act (as extracted above), the Supreme Court observed as under: –
“.On a prima facie reading of Notification No. SRO 348 in the context of the provisions in Section 3(1), it is manifest that the notification is not in conformity with the power vested in the State Government under the section. On a plain reading of the notification it is clear that the intention is to levy toll on dry fruits including almonds, walnuts and walnut kernels exported out of the State through certain exit points by road or railway. The power to impose such a levy does not flow from the power vested in Section 3 of the Act in purported exercise of which the notification has been issued.”
15. On a bare reading of the afore-quoted passages from the decision in Hans Raj and Sons, it is established that Levy of Tolls Act does not contemplate any levy of toll on goods, it is a levy for user of public roads etc. Levy on dry fruits etc. purportedly under Section 3(1) of the Act was thus held to be impermissible and beyond the power vested under Section 3 of the Act. Any levy of so-called toll on goods, on ad-volarem basis, would stand on similar, if not lesser, footing. The decision in Hans Raj & Sons case, it would thus appear, cover these cases.
16. It would not be out of place to mention here that in the case of M/S Durga Dal and Basin Mills (LPA No. 178 of 2000) and analogous cases decided on 1-5-2004, a question arose as to whether the goods or commodities have any nexus for the purpose of levy of toll. It was clarified that levy on the basis of laden weight of the vehicle has nexus with toll, for, vehicle or carriage laden with goods it likely to cause more stress to the road and, therefore, different rates of toll may be fixed depending on the goods and commodities carried by them. Thus while ‘laden weight’ may be a relevant factor, as ‘value’ of goods can be no stretch of logic be relevant for the purpose of levy of toll. On a plain reading of the Sub-section (5) it is manifest that it seeks to create a liability in the nature of tax on value of goods, and considering that toll can be levied under Levy of Tolls Act only for user of public roads etc. as held by the Supreme Court in Hans Raj and Sons (supra), it necessarily follows that goods and commodities can not be subjected to toll much less on ad valorem basis.
17. The provision, in our opinion, is totally out of place. The Levy of Tolls Act has been en-acted “to consolidate in one Act the provision of levy of tolls upon public roads and bridges in the Jammu and Kashmir State”. No such levy can be made on goods and commodities on ad valorem basis. It is not the stand of the State that Sub-section (5) of Section 3 creates ant tax liability. Indeed, the specific stand of the learned Advocate General was that the toll is compensatory in nature and that is how he attempted to steer clear of Article 301 and 304(b) of the Constitution of India.
18. In the above premises, the answer to question No. 2 formulated by the learned Single Judge vide order of reference must be in the negative, that is, the value of goods cannot be basis for levy of toll under the Levy of Tolls Act.
19. We thus conclude that the levy of toll on goods and commodities on ad valorem basis in terms of Section 3(5) of the Levy of Tolls Act and the provision empowering such levy must be held to be illegal and colourable exercise of power and accordingly struck down. The writ petitions as well as the appeals are, therefore, fit to be allowed.
20. In view of our above conclusion, it is not necessary to consider the question as to whether Sub-section (5) of Section 3 of the Act is violative of Articles 301 and 286 of the Constitution of India.
21. Coming to the appeals, the learned Single Judge dismissed the writ petitions of the appellants on the solitary ground that the impugned provisions are not ultra vires Article 301 of the Constitution of India. The question as to whether toll can be levied on goods, much less on ad valorem basis, was not gone into. The decision, it may be pointed out was rendered prior to the decision in Hans Raj and Sons case.
22. In the result, the writ petitions as well as the letters patent appeals are allowed. The impugned notification SRO 80 dated 30-3-2000 is quashed and the respondents are restrained form giving effect to the provisions of Section 3(5) of the Levy of tolls Act. The impugned order of learned single Judge is also set aside. There will be no order as to costs.