Custom, Excise & Service Tax Tribunal
Bharat Coking Coal Ltd vs Dhanbad on 25 July, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No.75714 of 2017
(Arising out of Order-in-Original No.07/CEX/COMMR/DNB/2017 dated 08.02.2017
passed by Commissioner of Central Excise & Service Tax, Dhanbad.)
M/s. Bharat Coking Coal Ltd.
(Kusunda Area-VI, Area Finance Manger, Office of the General Manager, Kusunda,
Dhanbad, Jharkhand-820116
Head Office - General Manager (Finance), Central Accounts & Taxation, Koyla Nagar,
Koyla Bhawan, Dhanbad, Jharkhand-826025.)
...Appellant
VERSUS
Commr., CGST & CX, Dhanbad
.....Respondent
(8th & 9th Floor, Ozone Center, Ashoknagar, Jharia Road, Dhanbad-826001.)
APPEARANCE
Shri Rajeev Kumar Agarwal, Advocate for the Appellant (s)
Shri S.K.Jha, Authorized Representative for the Revenue
CORAM: HON'BLE SHRI R. MURALIDHAR, MEMBER(JUDICIAL)
HON'BLE SHRI RAJEEV TANDON, MEMBER(TECHNICAL)
FINAL ORDER NO. 77032/2025
DATE OF HEARING : 19.06.2025
DATE OF DECISION : 25.07.2025
Per : RAJEEV TANDON :
Factual Matrix
Aggrieved by the Order-in-Original No.07/CEX/COMMR/DNB/2017
dated 08.02.2017 passed by Commissioner of Central Excise & Service
Tax, Dhanbad, the appellant has filed the impugned appeal, assailing
the correctness and legality of the said order.
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2. The appellant M/s. Bharat Coking Coal Ltd., a Govt. of India
Undertaking is a 100% subsidiary of M/s. Coal India Ltd. and is
engaged in mining and selling of coal in the state of Jharkhand. Central
Excise Duty on Coal @ 5% ad valorem was levied w.e.f. 01.03.2011.
For purpose of levying Central Excise duty on coal, the basic price as
fixed by M/s. Coal India Ltd. was considered as the assessable value
while with reference to auction sales of coal, the agreed sale price along
with other charges like surface transportation charge etc. was
considered as the assessable value. This however excluded taxes and
levies charged to the customers as indicated in the excise/sales invoice.
3. A show cause notice dated 01/03.02.2016 was issued to the
appellant by the jurisdictional authority, alleging suppression of the
actual transaction value by not including the value of Market Area
Development Authority Market Fee, loosely nomenclatured as "Bazaar
Tax/Fee" collected by the appellant, from their customers, during the
period March 2011 to October 2015. It is therefore the case of the
Revenue that the appellant failed to pay appropriate Central Excise
Duty (along with cess), as leviable on the said goods. The appellant
have therefore been issued a show cause notice for allegedly evading
Central Excise Duty (including cess) amounting to Rs.2,49,46,326/-
(BED Rs.2,43,28,850/-, Education Cess Rs.4,11,651/- and Secondary
and Higher Education Cess Rs.2,05,825/-), on the value of goods
cleared during the aforestated period.
4. It was in the course of the audit of the appellant, undertaken in
October 2013 for the period February-September 2013, that the
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department noticed that the appellant was effecting clearance of coal
on payment of Central Excise duty, however, was not including in the
transaction/assessable value certain cost elements for the purpose of
levy of Central Excise duty, levied by way of MADA Market Fe and
collected by the appellant from their customers, resulting in aforestated
short payment of duty. During the course of the scrutiny of the sales
invoices, the department noticed that this Market Fee was being
charged and collected @ 1% of the invoice value. Accordingly, the
Range Officer vide letter dated 24.09.2015, followed by
communications dated 03.11.2015, 18.11.2015 and 06.01.2016, called
from the appellant the details of "Bazaar Fee/Tax" collected from their
customers, during the period aforestated. Monthwise details of such
sums collected, were communicated by the appellant to the authorities
vide their letter No.BCCL/KA/FIN/2015-16/16/353 dated 22.01.2016,
whereby the Revenue determined that the appellant had collected an
amount of Rs.41,78,32,279/- from their customers, during the said
period (March 2011 to October 2015) towards the said "Bazaar
Fee/Tax". The Revenue‟s case therefore concerns about non-inclusion
of this sum (which was collected from the buyers) in the transaction
value, for purpose of levy of Central Excise duty. It is the Revenue‟s
case that this MADA Market Fee, referred to as "Bazaar Fee/Tax" ought
to be an ingredient for determination of transaction value for purpose of
assessment of goods and to determine the quantum of the levy
chargeable and payable amount of Central Excise Duty.
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5. In the meanwhile the very powers and competence of the State
Government for levy of such tax by the State Government was subject
to question and challenged by the various coal companies including the
appellant before the hon‟ble Patna High Court. Vide its order dated
24.03.1999 the hon‟ble High Court in the case of Central Coalfields
Limited & Others v. The State of Bihar & Others [1999 SCC
OnLine Pat 198] held that the State Legislature was not empowered
to tax coal mining land as it fell within the powers vested in the Central
Government. The levy of said tax/fee by the State Government was
therefore held as ultra vires. The material finding rendered by hon‟ble
Patna High Court in this regard is as follows :
―25.It is clear that the Act covers and deals with the same matter
which is covered and dealt with by M.M.R.D. Act. Section 89 is the part
of the overall scheme of the Act and it has been enacted in order to
generate funds to meet the expenditure incurred by the Authority in
the performance of functions under the Act. That apart as mentioned
above, it is not open to State Legislature to tax coal mining land. The
Act has, thus, trespassed into forbidden territory and, therefore, it
must suffer.
26. SECOND POINT/SUBMISSION
27. Section 89 as substituted by the Amendment Act is as follows:-
―89. Levy of Tax on use of land for other than Agricultural and
Residential Purposes - (1) The Authority shall subject to the
provisions of this Act and Rules framed thereunder levy tax, by
notification published in the Official Gazette, on land being used
by any person, group of persons, company, the Central
Government or the State Government, local or Corporate Body
for mining, Commercial or Industrial purposes with the prior
approval of the State Government;
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Provided that the tax so levied shall not exceed Rupees 1.50 per
square meter annually for any such land but such tax shall not
be levied on land which is subject to Holding Tax.
(2) The State Government shall, out of the tax so levied and
collected, determine the amount to be deposited into the
Consolidated Fund of the State Government from time to time.‖
28. The submission of the learned counsel for the petitioners is that
the section 89 imposes tax on ―use of land‖ and not on land. The
learned Advocate General and the learned counsel for the Mineral
Development Area Authority, on the other hand, submitted that it is a
case of tax on land which is covered by Entry 49 of List II of 7th
Schedule of the Constitution.
29. What constitutes ―tax on land‖ has been settled by the Apex
Court in series of its decisions. It is sufficient to refer to the latest
decisions in State of Bihar v. Indian Aluminium Company [(1997) 8
SCC 360] which contains the summary of law on the subject laid down
by the Apex Court in various cases. In the said case, the Apex Court
held that ―Entry 49 of List II has been interpreted to mean the levy of
tax directly on land as a unit. The land has been regarded as meaning
the land on surface and also below the surface‖. In that case, the Apex
Court declared that the Bihar Forest Restoration And Improvement Of
Degraded Forest Land tax, is ultra vires on the ground that it is a tax
―on use of various land and not on the forest land as such‖.
30. The caption of section 89 states that levy of tax is ―on use of
land for other than agricultural and residential purposes‖. Sub-section
(1) of the said section says that the Authority shall levy tax ―on land
being used‖ for mining, commercial and industrial purposes. It means
that tax can be imposed only when land is used for any of the above
three purposes. The tax is, thus, dependent on use of the land. If
there is no use of the land, there is no tax. In The India Cement Ltd. v.
State of Tamil Nadu (AIR 1990 SC 85), levy of cess on royalty or
mineral rights was declared bad on the ground that it is not a tax on
land. In this connection, the Apex Court observed as follows:-
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―23. .....In the Western India Threatres Ltd. v. The Cantonment
Board, Poona Cantonment (1959) 2 Suppl. SCR 63 at p. 69 :
(AIR 1959 SC 582 AT P. 585), it was held that an entertainment
tax is dependent upon whether there would or would not be a
show in a cinema house. If there is no show, there is no tax.It
cannot be a tax on profession or calling. Profession tax does not
depend on the exercise of one's profession but only concerns
itself with the right to practice. It appears that in the instant
case also no tax can be levied or is leviable under the impugned
Act if no mining activities are carried on. Hence, it is manifest
that it is not related to land as a unit which is the only method
of valuation of land under entry 49 of list II, but is relatable to
minerals extracted.......‖
31. It is, therefore, clear that the tax is not on land as a unit and it is
not covered by Entry 49 of List II of 7th. Schedule of the Constitution.
The State Legislature has no power to enact such a provision.
32. That apart, the Authority under section 89 of the Act can levy tax
―subject to the provisions of this Act and rules framed thereunder‖.
The State Government has framed rules in 1994 which have provided
for filing of returns by assessee, assessment of his tax and payment of
the same by him. The ―assessee‖ has been defined in Rule 2(h) as
under:--
―2(h) ―Assessee‖--means any person, group of persons
company, the Central or the State Government, Local or
corporate Body or Undertaking using land for other than
agricultural or residential purposes.‖
33. The assessee is, thus, a person who uses land for other than
agricultural and residential purposes. The assessee, therefore, may or
may not be the owner of the land. When tax imposed is not on owner
but on the person who uses the land, it cannot be said to be a ―tax
onland‖. In this regard, the Apex Court in State of Bihar v. Indian
Aluminium Company (supra) has laid down as under:--
―18. One of the facets of tax being levied on land is that the
primary responsibility of the payment of tax is on the owner of
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the land. In the instant case the levy is not on the general
ownership of the land but is on the person who uses it and who
may or may not be the owner. The primary liability is on the use
by the occupier and if the occupier and the owner are two
different persons the liability would be that of the occupier alone
and not of the owner.‖
34. The learned Advocate General and the learned counsel for the
Mineral Development Area Authority have submitted that the State
Legislature by enacting section 89 has not subjected use of land to tax
but it has imposed tax on such land which is being used for mining,
commercial and industrial purposes. They say that the expression
―being used‖ has been employed as a mechanism to select the land for
taxation. According to the learned counsel, expression ―land being
used‖ is an indicator showing the subject of taxation. Their further
submission is that as the rate of tax has been fixed by the proviso at
the flat rate of Rs. 1.50 per square meter and the tax has been treated
at par with the ‗holding tax' under the Bihar & Orissa Municipal Act, it
is directly connected with the land and is squarely covered by the
Entry 49 of List II of the 7th. Schedule of the Constitution. It has also
been submitted that the caption of section 89, which states that levy
of tax is on use of land, is due to ill drafting and is, therefore, liable to
be ignored. It is not possible to accede to the said submissions.
35. As mentioned before, the Act deals with the development of coal
mining area only. The question of selection of land for taxation,
therefore, does not arise. Even the coal mining area is not liable to be
taxed unless it is used for one of the three purposes mentioned in
section 89. The taxing event is the use of land. Merely because the
proviso has laid down measure of tax at flat rate and has excluded the
land which has been subjected to holding tax from purview of section
89, the nature of tax which is clear from the caption as well as
subsection (1) of the said section, cannot be changed. It is also not a
case where caption of the section is inconsistent with the main
provisions. According to the caption, levy of tax is ―on use of land for
other than agricultural and residential purposes‖. After excluding the
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said two purposes, what is left is the mining, commercial and industrial
purposes, which have been mentioned in sub-section (1).
36. That apart as observed while dealing with the first point, it is not
open to the State Legislature to enact any law subjecting coal-mining
land and mineral-bearing land to tax, royalty etc. Even if it is
presumed that section 89 imposes tax on land, which, in the instant
case, is the coal mining land with which the Act is concerned, the same
cannot be sustained because the State Legislature has no power to
impose tax on such land. For this reason also, section 89 has to go.
37. Goodricke Group Ltd. v. State of W.B. (1995 Supp. (1) SCC
707) and Ajoy Kumar Mukherjee v. Local Board of Barpeta (AIR 1965
SC 1561), on which heavy reliance has been placed by the learned
counsel for the respondents cannot be of any help. Goodricke Group
Ltd. case has already been explained and distinguished by the Apex
Court in State of Orissa v. Mahanadi Coal fields Ltd. (supra) with the
observation that there ―the Act was held to be a law relating to tax on
land and that makes all the difference‖. Ajoy Kumar Mukherjee case
was also distinguished for the similar reason in Orissa Cement Ltd. v.
State of Orissa (supra).
38. Although in the writ petitions challenge is made to the Bihar
Coal Mining Area Development Authority (Amendment) Act, 1992, but
the learned counsel for the petitioners during the course of their
arguments have stated that the petitioners are really aggrieved by
section 89 and the rules framed thereunder only and they are,
therefore, confining their challenge to the said provisions only. It is,
therefore, not necessary to declare whole of the Amendment Act as
ultra vires. Moreover, there is no challenge to the main Act.
39. For the reasons given above, these writ petitions are allowed.
Section 89 of the Bihar Coal Mining Area Development Authority
Act,1986, as amended by the Bihar Coal Mining Area Development
Authority (Amendment) Act 1992 and the rules framed there under
namely the Bihar Mineral Area Development Authority (Land Use
Tax)Rules, 1994, are declared ultra vires. The assessment orders,
demand notices and other notices issued under or pursuant to section
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89 and the rules are quashed. The respondents are directed not to
realize any tax under and in pursuance of the section 89 and the rules.
No costs.‖
6. The aforesaid decision of Patna High Court was challenged before
the hon‟ble apex court by the State Government in the case of Mining
Area Development Authority & Ors v. SAIL & Ors. [2011 (4) SCC
450] and the subject matter subsequently came to be referred to a
Bench of nine judges of the apex court noting that there was a contrary
view in the case of State of West Bengal v. Kesoram Industries
Ltd.[2004 (10) SCC 201]. The nine Judges Bench vide its judgement
dated 25.07.2024 in the case of Mineral Area Development
Authority v. Steel Authority of India Ltd. [2024 (21) CENTAX
378 (SC)] held that the State Legislature had the power to tax mineral
right and it enjoyed the legislative competence under Article 246A read
with Entry 49 of List II to tax land which comprises of mines and
quarries. Mineral bearing land falls within description of "Land" - [Entry
49 of List II]. The relevant portion of the judgement of the nine judges
Bench is reproduced hereinbelow:
―275. In view of the above discussion, we can summarize the following
principles for a tax under Entry 49 of List II:
(i) The expression ―lands‖ means all kinds of lands irrespective of
the use to which the land is put;
......................
(vii) A tax levied on the activity or service rendered on or in
connection with lands and buildings does not fall within the description
of taxes on lands and buildings under Entry 49 of List II;
(viii) The use to which the land is put does not affect the competence
of the State legislature to tax it; and
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(ix) The legislature may take into account the use of land for
determining the measure of taxation under Entry 49 of List II.‖
7. It is not disputed that the appellant noticee is charging 1% of
value of sale of coal towards MADA Fee, commonly held by noticee as a
"Bazaar Fee/Tax" levied under section 90A(i) of the Bihar Mineral Area
Development Authority Act, 19861, as amended and adopted in the
state of Jharkhand vide notification dated 15.02.2001 as Jharkhand
Mineral Area Development Authority Act, 2001. The fee in question is
leviable under Section 90A of the act ibid and not in terms of Section
89 of the Act. The two sections read very differently, use different
terminologies and were introduced to the main statute by virtue of
separate sections viz. Section 8 and Section 10 of the Amendment Act,
1992 (24 of 1992) respectively. The two sections read as :
89. [Levy of tax on use of land for other than agricultural and
residential purposes. [New Section 89 Substituted for old Section 89
vide Section 8 of the (Amendment) Act, 1992. [24 of 1992]]
(1) The Authority shall subject to the provisions of this Act, and
Rules framed thereunder levy tax, by notification published in the
Official Gazette, on land-being used by any person, group of persons,
company, the Central Government or the State Government, local or
Corporate Body for mining, Commercial or Industrial purposes with the
prior approval of the State Government:
Provided that the tax so levied shall not exceed Rupees 1.50 per square
meter annually for any such land but such tax shall not be levied on
land which is subject to Holding Tax.
(2) The State Government shall, out of the tax so levied and
collected, determine the amount to be deposited into the consolidated
Fund of the State Government from time to time.]
.....................
....................
1 The Act
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90A. [New Section 90A added by Section 10 of the (Amendment) Act,
1992. [24 of 1992].]
Declaration and purpose of Market Area-The State Government
may, by notification in the Official Gazette, declare any area as a
Market Area where sale or transaction of commodities takes place with
the purpose to provide civic amenities, infrastructure and marketing
facilities subject to the following conditions:-
(i) Market-fee shall be chargeable on sale or transaction of any
commodity at a rate which may, by the State Government in
the Official Gazette, be determined from time to time:
Provided that the rate so fixed shall not be more than One percentum
of the sale value of the commodity.
(ii) The Authority may, with the approval of the State Government,
make a list of such chargeable commodities and may add,
amend or cancel any of the items of commodity specified in
the said list, by notification in the Official Gazette:
Provided that no such commodity shall be included in the list of
chargeable commodities under this Act on which Market-Fee is
chargeable under the Bihar State Agriculture Produce Market's Act,
1960.
(iii) A person or Commercial concern engaged in the sale,
transaction or trade of commodities specified in the list as
mentioned in clause (ii) shall be required to obtain a licence
from the Authority concerned, on payment of fee to be
prescribed:
Provided that the rate of the licence fee so fixed shall not be more than
Rupees Two Hundred annually.]
8. Coal is a notified commodity under the Mining Area Development
Authority Act and the market fee collected is required to be deposited
with the treasury. The said amount collected is shared between the
State Government and the Mineral Area Development Authority (MADA)
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for provisioning of civic amenities. It is the Revenue‟s case that the said
Fee is imposed and collected for a given and specified purpose of
developmental related work in the areas of health and sanitation,
environmental protection in the districts of Dhanbad and Bokaro, for
setting up/maintenance of crematorium and burial ground, providing of
maternity facilities, prevention from epidemic, water supply (through
stand post) and are provided free of cost in the coal-belt(mineral area)
to the inhabitants.
9. The show cause notice alleged that the said Market Fee or
"Bazaar Fee/Tax" as collected by the appellants from their buyers, was
actually different from a levy of tax as the former was a sort of a "user
charge", in lieu of services provisioned by the institutions- thereby
strongly and clearly displaying an element of quid pro quo and was
therefore in the nature of a fee. It is for this reason that the notice
proposed the inclusion of the said fee in the computation of assessable
value and determination of transaction value. It is the revenue‟s case
that this "fee" like royalty, transit fee, entry tax etc. was required to be
included while arriving at the assessable value. Pointing out that the
statutory provisions being unambiguous only taxes leviable on the
goods cleared, could be considered for exclusion from the costing
structure and determination of assessable value. It further added that
since the present levy was not on goods i.e. cleared coal but on coal
bearing land and it ultimately being a cost component of coal produced
from the said land, would be required to be taken into account for
purpose of transaction value determination. It therefore referred to the
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definition of "transaction value", in Section 4 of the Central Excise Act
to emphasise its inclusion in the assessable value. Relevant provision of
Section 4 is extracted below: -
SECTION [4. Valuation of excisable goods for purposes of
charging of duty of excise. -- (1) Where under this Act, the
duty of excise is chargeable on any excisable goods with
reference to their value, then, on each removal of the goods,
such value shall -
(a) in a case where the goods are sold by the assessee, for delivery at the
time and place of the removal, the assessee and the buyer of the goods are
not related and the price is the sole consideration for the sale, be the
transaction value;
(b) in any other case, including the case where the goods are not sold, be
the value determined in such manner as may be prescribed.
[Explanation. -- For the removal of doubts, it is hereby
declared that the price-cum-duty of the excisable goods sold by
the assessee shall be the price actually paid to him for the goods
sold and the money value of the additional consideration, if any,
flowing directly or indirectly from the buyer to the assessee in
connection with the sale of such goods, and such price-cum-
duty, excluding sales tax and other taxes, if any, actually paid,
shall be deemed to include the duty payable on such goods.]
(2) The provisions of this section shall not apply in respect of
any excisable goods for which a tariff value has been fixed under
sub-section (2) of section 3.
(3) For the purpose of this section,-
(a) ―assessee‖ means the person who is liable to pay the duty of excise
under this Act and includes his agent;
(b) persons shall be deemed to be ―related‖ if -
(i) they are inter-connected undertakings;
(ii) they are relatives;
(iii) amongst them the buyer is a relative and a distributor of the assessee,
or a sub-distributor of such distributor; or
(iv) they are so associated that they have interest, directly or indirectly, in
the business of each other.
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Explanation ...................
(c) ―place of removal‖ means -
(i) a factory or any other place or premises of production or manufacture of
the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods
have been permitted to be deposited without [payment of duty;]
[(iii) a depot, premises of a consignment agent or any other place or
premises from where the excisable goods are to be sold after their clearance
from the factory;]
from where such goods are removed;
(d) ―transaction value‖ means the price actually paid or payable for the
goods, when sold, and includes in addition to the amount charged as price,
any amount that the buyer is liable to pay to, or on behalf of, the assessee,
by reason of, or in connection with the sale, whether payable at the time of
the sale or at any other time, including, but not limited to, any amount
charged for, or to make provision for, advertising or publicity, marketing and
selling organization expenses, storage, outward handling, servicing, warranty,
commission or any other matter; but does not include the amount of duty of
excise, sales tax and other taxes, if any, actually paid or actually payable on
such goods.]
Submissions
10. Shri Rajeev Agarwal, Ld.Counsel for the appellant has argued
before us that in view of the hon‟ble apex court upholding the
competence of the State Legislature in levying the said „Bazaar Tax‟, - it
therefore is a "Tax" (imposed by the State Government) and being so,
would not be includible for the determination of transaction value for
purpose of ascertaining the assessable value for payment of Central
Excise Duty. The Ld.Counsel sought to draw an analogy from this
Tribunal‟s decision in the case of Eastern Coalfields Ltd. v.
Commissioner of Central Excise, Bolpur [Final Order NO.75656-
75666/2025 dated 11.03.2025], wherein the co-ordinate bench of this
Tribunal held that the levy of Rural Employment and Rural Production
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Cess, Primary Education Cess, PWD Road Cess, Asansol Mines Board of
Health Cess payable by the coal companies to the State Government
were not includible in the assessable value for payment of Central
Excise Duty on coal.
11. As for the extended period of limitation invoked in the show cause
notice, the Ld.Advocate submitted that there certainly was no intent to
evade payment of duty. He fairly conceded that the said sums were
however collected from the buyers and were not considered for
computation of assessable value, hence not shown in the ER-1 returns.
He however points out that the said amount was indicated on the
invoices raised, thereby making clear their intents of not concealing
anything. Being a Public Sector Organization there was no room for any
willful intent to evade duty payment. For the said reason he submitted
that no penalty was imposable on the appellant.
12. On the other hand, the Ld.AR Sri S.K.Jha, for the Revenue
contends that the said Market Fee or "Bazaar Tax" is neither a tax nor a
duty component as would entitle its exclusion from the ambit of
transaction value. He submits that instead the said sum is an
expenditure/expense, collected from the customers, and is therefore
includible in the transaction value for payment of Central Excise
Duty/cess as leviable. He strongly asserts that it is a fee as leviable in
terms of Section 90A of the Act and not tax as leviable under Section
89 of the Act. He further states that the element of quid pro quo is very
much evident, as it itself is made out in the statutory provisions and
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this was the determinative test to convincingly hold the true nature of
Market Fee as a Fee and not tax.
13. Post-conclusion of the hearing held on June 19, 2019, before this
Tribunal, both sides were directed to file their Written Submissions for
which sufficient time upto to 05.07.2025 was granted. Written
Submissions of the two sides have now been received in the matter and
taken on record. As observed earlier, the essential question before us in
the matter remains the determination, as to whether the subject
impost is in the nature of a tax or a fee, which determination would
accordingly hold good for inclusion or not of the said Market Fee in the
determination of assessable value under Section 4 of the Central Excise
Act. The arguments rendered by both the sides in the matter will fall for
such a determination in the matter.
Discussion & Analysis
14. The appellant not canvassing against and not disputing the
competence of the State Legislature to levy Tax on coal bearing land,
having been upheld by the hon‟ble apex court, the only question that
now remains for our consideration is the ascertainment of the nature of
this levy as falls from the statutory provisions, its objectives and
purpose, as to whether the same is in the nature of "Tax" or a "Fee".
15. At the outset it can be noted from records that in effect the
adjudication carried out in the matter by the lower authority has been
rendered ex parte. The Ld.Commissioner has stated in Para 6 that no
defence reply was tendered by the appellant even though the show
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cause notice was issued on 01/03.02.2016. The Adjudicating authority
has categorically noted in the matter that -
"the Noticee have not submitted their defence reply till date even after
being granted sufficient time after personal hearing commenced on
14.12.2016 where the Authorized Representative of the Noticee had
promised to submit the same by 10.01.2016."
Assuming thus, as considerable time had elapsed, that the noticee
indended to prolong the adjudication and that they had nothing to say
in person, the Ld.Adjudicating authority proceeded to decide the matter
on the basis of available documents and evidence as available with the
Department.
16. The Ld.Adjudicating authority has noted that Noticee were
―charging and collecting Bazaar Fee/Tax (MADA Fee) from their
customers on the value of coal, inclusive of basic value and other cost
element such as surface transportation charges, breaking charges etc.,
they however did not include this MADA Fee in the assessable value for
discharging Central Excise Duty on clearance of Coal.‖ The ld.
adjudicating authority further noted that "Bazaar Fee" was charged on
"Coke-Semi coke of coal" under the Bihar Coal Mining Area
Development Authority Act, 1986 and Jharkhand Mineral Area
Development Act (Amendment and Adoption) Act, 2001 for any sale of
coal and other notified non-agricultural commodities in the area notified
under MADA. Proceeds for which were required to be deposited in the
Government Treasury.
17. It is in terms of powers vested in the Authority by virtue of
Section 128 of the Act, that the state of Jharkhand has prescribed
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Excise Appeal No.75714 of 2017
Mineral Development Authority Market Fee Rules, 2010, that regulate
and carry out the purpose and object of the enactment. These rules
provide for detailed procedures relating to all aspects and sphere of
activity to carry out the purpose of the said act like issuance and
cancellation of licence, declaration of market area, levy and collection
of Licence Fee and/or Market Fee, its deposit with the State
Government (inclusive of the procedures for temporary deposit in a
separate authority fund), filing of returns, their assessment, appeal,
processes, issuance of demand notice, recovery provisions, appeals
and other areas of working concerned like interest, refund, penal and
other miscellaneous provisions etc. Various formats for carrying out
the purpose and objectives of the Act have thus been prescribed.
18. We note that this Market Fee (Bazaar Fee) so collected by the
appellant is required to be statutorily deposited in the State Fund
Section 90B(2) of the Act, from where the authority prescribed shall
make yearly appropriate allocations for the provisioning of civic
amenities, infractructure and marketing facilities within the concerned
area. In terms of Rule 19 of Jharkhand Mineral Area Development
Authority Market Fee Rules, 2010, the said Market Fee collected is
required to be temporarily deposited in a separate authority fund, and
thereafter required to be deposited into the State fund on 15th day of
each month. In terms of Section 4 of the Central Excise Act, 1944, Sub-
section 1(a) thereof, a duty of Excise is chargeable on excisable goods
with reference to the value as at the time of removal of such goods for
delivery at the time and place of removal, where the assessee and the
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Excise Appeal No.75714 of 2017
buyer of the goods are not related and the price is the sole
consideration for the same. The said transaction value would include in
addition to the amounts charged as price any amount that the buyer is
liable to pay in connection with the sale, including any amount charged
for provision of advertising, publicity, marketing/selling, organization
expenses, storage, outward handling etc. However, in terms of the
statutory provisions the transaction value excludes the amount of Duty
of Excise, Sales Tax and other Taxes, if any actually paid or payable. In
the aforesaid backdrop the Ld.Commissioner has recorded a finding
that the "Bazaar Fee" was collected on basic value of coal for specified
purpose of development work in the mineral area (coal belt). Relevant
para of his order is extracted below:
―12. In the instant case, I find that the noticee charged & collected
Bazar Fee @1% on the basic price of coal from their customers on sale
of Coal, but did not include the same in the assessable value for
discharging Central Excise duty on clearance of coal to the Government
exchequer. In the instant case, the Bazar Fee was collected on basic
value of coal for specified purpose of development work in the mineral
area (coal belt) viz. health and sanitation schemes, protection of
environment from the pollution in Dhanbad and Bokaro Districts,
crematorium and burial ground, maternity facilities prevention from
epidemic, water supply (through stand post) free of cost in the given
areas etc.‖
19. Notification dated 12.05.2010, issued by the Urban Development
Department of the State Government of Jharkhand laying down the
Mineral Area Development Authority Market Fee Rules, 2010 provides
for the manner of declaration of Market Area, grant/cancellation of
Licence, filing of Returns , assessment and deposit of Market Fee,
recovery of Short Levy if any along with interest etc. amongst other
20
Excise Appeal No.75714 of 2017
provisions as required for regulation and operation of the Act. The said
rules in themselves are a complete code as they cater to the mechanics
of refunds, demand, penalty, appeal, interest amongst others. A feeble
argument to suggest that in view of existence of such an elaborate
scheme to deal with and administer the Market Fee collected, was
indicative of the fact that the same was merely a tax, was also raised.
We are not amused by the said logic for essentially two reasons viz. (i)
that it is nowhere a prohibition in law to lay down well established
procedures and practices regulating the mechanics of the Market Fee
levied and collected. It, but is for sake of ease of, for both the
administrators and the administered. Such well defined procedures
bring about greater clarity in management of the Funds, provide
consistency and transparency to the working of the statutory provisions
and are an aid to smooth governance (ii) We also draw a parallel to
emphasize that such structured and notified provisions are not an
exclusive prerogative of administration of a "tax" levy. Thus for
instance The Andhra Pradesh Agricultural Produce and Livestock Market
Act, 1966, that levies "Market Fee" on notified agricultural produce, live
stock etc. similarly provides for a well laid out extensive mechanism for
its administration and working. So is the position with regard to several
other statutes. This argument thus cuts no ice in the matter.
20. Section 90(A) of the Bihar Mineral Area Development Authority
Act, 1986, provides for the declaration of "Market Area" where sale and
transaction of commodities takes place besides the levy of "Market
Fee". The objective of such a levy is to provide for civic amenities,
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Excise Appeal No.75714 of 2017
infrastructure and marketing facilities in the said area as indicated in
the section itself (refer para 7 above for the legal provision). The
"Market Fee" at the rate 1% was fixed on the value of coal cleared, as a
non-agricultural product. Section 90B of the Act provides for collection
of Market Fee and allocation of Fund for Developmental purposes.
Given this backdrop the Ld.Commissioner too had arrived at the
following findings to distinguish "Market Fee" (also colloquily referred to
as Bazar Fee/Bazar Tax) from a "Tax" holding it to be a user charge in
lieu of certain specific services provided in the realm of developmental
sphere of the notified area; that is to say as by way of a symbiotic
relationship as a trade-off between collection of the levy and execution
of developmental programmes.
21. In this regard, for sake of records we would like to place on
record the following findings of the ld.Commissioner, thus :
―15. I observe that the Bazaar Tax charges are nothing but a ‗fee'
which is charged from the noticee for the purpose of developmental
activities of the concerned mining and operational area. In other words
such amount is nothing but a cost incurred by the noticee for the
purposes of mining out minerals/coal and hence such element of cost
necessarily enriches the value of product produced i.e. coal. Therefore,
such charges are to be included in the assessable value of the coal
produced by the noticee in terms of Section 4 of the Act.
15.1 Moreover, I find that such Bazar fee is charged for a specific
purpose by the local authority and its nature and character cannot, at
all be equated with that of tax. The subject Mada charges (Bazar fee) is
nothing but a ‗fee' which is taken for a specific purpose of
developmental work of the concerned region and therefore is a cost
incurred by the noticee, hence must form a part of assessable value.
15.3 Even otherwise also I find that the noticee on their own are
including (i) Royalty Charges (ii) Stowing Excise duty in the assessable
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Excise Appeal No.75714 of 2017
value of coal produced by them. I also place reliance of above facts and
accordingly I hold that the Bazar Fee (MADA Fee) should also be
included in the assessable value for clearance of coal.
15.4 From the forgoing discussion, I hold that ―Bazar fee‖ are not
taxes or duties which require exclusion from the ambit of ‗transaction
value' as per Section 4(3)(d) of the Act, instead these are
expenditures/expenses collected from the customers and therefore
includible in the transaction value for payment of Central Excise duty
and Ed.Cess and S&H Ed. Cess and thus the amount so collected under
the head ―Bazar Fee‖ in course of sale of coal are part and parcel of the
transaction value on which Central Excise duty is required to be paid.
The noticee did not pay Central Excise duty on such amount by not
declaring and including such element in the transaction value and
therefore, the same recoverable under Section 11A(4) of the Act from
them alongwith interest in terms of Section 11AA of the Act.‖
22. In their written submissions filed post-hearing the appellant, has
submitted that vide Notification dated 12.05.2010 issued by the State
Government "Market Fee/Bazaar Tax" was levied (statutorily known as
"Market Fee"), and that the appellant was making such payments to the
State Government which are in the nature of "Tax" and not "Fee",
therefore such expenses were allowable as a deduction from the
computation of assessable value, by virtue of the provisions of the
Central Excise Act. The Ld.Counsel has further pointed out that merely
because the term "Market Fee" has been used in the Act, the fact of
such payment cannot be assumed to be in the nature of "fee". He
therefore emphasizes that the nomenclature could not be a
determinate criteria to ascertain whether the impugned levy is "Tax" or
a "Fee". We find no qualms in the nomenclatural proposition of the
Ld.Counsel for the appellant. The nomenclature made use of in the
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Excise Appeal No.75714 of 2017
statute though a very important indicator however cannot ipso facto be
a conclusive determinate to arrive at the nature of the levy. Whether a
particular levy is a tax or a fee can only be decided by reference to the
terms of the Section and other provisions of the statute. Certainly to
ascertain whether the levy is a tax or a fee would however call for
scrutiny and analysis in the backdrop of judicial pronouncements and
analogies. The variation in phraseology is of no practical importance in
determining the true and essential character of the levy as a fee or a
tax. The label will certainly not clarify or determine the nature of the
levy. The character of the levy will have to be deduced and determined
from its nature, specifics of the taxing event, the unit-class upon which
the levy is imposed and for whose benefit the same is intended.
23. The determination of a levy whether "Tax" or "Fee" would be
dependent on the nature of its scope and the purpose meant to be
subserved, the existence of a quid pro quo between the levy and the
purpose it is put to sub-serve.
24. The distribution of power to levy a tax is not identical with that of
power to levy a fee. Taxes are specifically distributed between the
Union and State Legislature by way of various entries in List I and List
II and Residuary Power (to levy a tax not enumerated under Entry 97
to List I, - exclusively for the Parliament). On the other hand entry
relating to fee has been specifically mentioned at the end of the List I,
II and III in the 7th Schedule vide entry No.96, 66 and 47 respectively.
Every Legislature has power to levy fee along with power to legislate
with respect to substantive matters. The Legislature may, while making
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Excise Appeal No.75714 of 2017
a law relating to a special matter within its competence levy a fee with
reference to services that would be rendered by the State under such
law. While taxes are specifically divided between List I and List II
entries, it is not so for the fees which is included as a general entry
empowering the legislature to levy a fee in respect of any matter over
which it has legislative competence.
25. Chapter II of the Urban Development Department‟s Notification of
the State of Jharkhand dated 12.05.2010, prescribing the Mineral Area
Development Authority Market Fee Rules, as concerned with the
declaration of Market Area, grant of Licence or its cancellation,
whereby the State Government was empowered to declare the whole
area of the Authority or part thereof as a Market Area where
production/sale/transaction of commodities takes place. MADA
thereunder is empowered (with the approval of the State Government)
to make a list of such commodities as well as collect such Market Fee as
levied by the State Government over the commodity, for which purpose
such person, company, corporate body engaged in the production/sale
or transaction of trade is required to obtain a licence in the prescribed
format. Thereunder the designated officers are required to assess the
Market Fee as leviable on production, sale, transaction, trade or
commerce of the concerned commodity. Rules provide for not
permitting such sale/transaction or trade in the market area without
acquiring the aforesaid licence. The mechanics of the operation of such
amount (Market Fee) as levied and collected from and by the licence
holders are provided for in Clause 18, 19 and 20 of the said Rules.
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26. For a holistic appreciation of the facts, the legal postulates and
the issue involved, it would be necessary to place on record the legal
provisions of Bihar Coal Mining Development Authority Act of 1986
(Act 9 of 1986) (published on 20th June 1970). This Act provides for
growth and development of coal mining areas in the state of Bihar and
for matters ancillary thereto. Vide Notification No.5 dated 15.02.2001
issued by the Government of Jharkhand, the Bihar Mineral Area
Development Authority Act came to be known as Jharkhand Khaniz
Ksehtra Vikas Adhiniyam (Jharkhand State Mineral Area Development
Authority) Act, 2010 (the word Bihar in the original enactment came to
be read as Jharkhand). The following legal provisions as have a play in
the matter are thus indicated below:
URBAN DEVELOPMENT DEPARTMENT
NOTIFICATION
The 12th May, 2010
CHAPTER-I
1. Short Title, extent and commencement
(i) These Rules may be called Mineral Area Development Authority
Market Fee Rules, 2010.
(ii) ..............
(iii) ...............
2. DEFINITIONS :
(i) ......................
(ii) ......................
.........................
............................
CHAPTER-II
Declaration of Market Area, Grant of Licence and Cancellation
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3. The State Government may by notification in the Official Gazette
declare the whole area of the authority or part thereof as market area
where production, sale or transaction of commodities takes place.
4. The Authority may with approval of the State Government make
a list of commodities, the production, sale or transaction of which
takes place in the market area and may add, delete or amend any of
the items or rate of fee of the commodity specified in the list notified
in the Official Gazette. The power to include or exclude any of the
items of commodity vests with the State Government.
5. A person, company or corporate body engaged in the
production, sale or transaction or trade of commodities specified in the
list under the Act & the Rules shall be required to obtain a licence in
Form 'A' from the Revenue Officer on payment of fee to the authority
through bank challan as prescribed in Form-'F' of the authority.
6. The Revenue Officer shall assess the fee on production, sale,
transaction, trade of commercial concern, company and person.
7. .............. .
8. ............. .
17. This authority shall have power to levy and collect licence fee
from traders, company, firm, corporate body, enterprises and person
operating in the market area as per rates to be assessed by the
authority.
18. The market fee shall be chargeable on the transaction on any
commodity at a rate which may be determined by the State
Government in the Official Gazette from time to time which shall not
be more than 1% (one per cent) of the sale value of the commodities.
19. Market fee levied and collected by the authority shall be
deposited temporarily in the separate authority fund and the authority
shall deposit essentially the amount so levied and collected as a
market fee to the State fund on 15th day of each month.
20. (a) The State Government shall release quarterly at least 50%
(fifty percent) of the deposited amount to the authority.
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Excise Appeal No.75714 of 2017
(b) The authority shall make available a quarterly statement of the
amount so collected and deposited in the State fund in Form 'G'.
Thereafter, the State Government shall make a request to the
Accountant General, Jharkhand in prescribed Form 'H' to release the
amount as specified in 'a' in the name of Managing Director, Mineral
Area Development Authority (MADA) and on the basis of authority
letter received from AG, the amount shall be withdrawn from the
treasury concern.
(c) The authority shall deposit the said amount in the P.L. Account of
the authority and the Managing Director of the authority shall be
drawing and disbursing authority.
(d) The authority shall suitably spend the amount so received from the
State Government in the prescribed sectors as specified in the Section
90(b)(2) of the Act.
(e) The authority shall essentially make available utilization certificate
annually to the State Government in the prescribed form.
Indeed the said Rules as stated earlier, provide for the entire
gamut of work including levy, collection, assessment, licensing, appeal,
penalty, interest, recovery of arrears, refund etc. and are self-contained
governing the entire working and management of the operation of the
amount so collected, referred to as a "Market Fee".
27. As per Section 2 of the Bihar (Coal Mining) Area Development
Authority Act renamed as Jharkhand MADA (Amendment Adoption Act,
2001),"Fee" is defined as "means the amount chargeable under
section 90A of this Act". Chapter IV of the said enactment which
concerns Development Plan, vide Section 16(3) thereof has
provisioned for the Development Plan to necessarily indicate defines
and provide for certain specified activities. Amongst others these
include the following:
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Excise Appeal No.75714 of 2017
16. Development Plan
(1) ...............
(2) ...............
(3) The Development Plan shall, as far as may be necessary,
indicate define and provide for -
(i) Areas reserved for agriculture, public and semi-public open
spaces, parks, playground, gardens and other recreational uses, green
belt and natural reserve;
(ii) ...............
(iii) Complete road and street pattern and traffic circulation pattern
for present and future requirements;
(iv) Major roads and street improvements;
(v) .............................
(vi) .............................
(vii) Water-supply, drainage, sewage, sewage disposal and other
public utilities, amenities and services including electricity and gas;
(viii) Proposals for flood control and prevention of water and air
pollution control;
(ix) Filling up or reclamation of low lying, swampy or unhealthy
areas and leveling up of lands;
(x) .....................
(xi) Prevention, conservation and development of areas of natural
scenery and landscape;
(xii) Preservation of features, structures or places of historical,
industrial, architectural and scientific interest and education value;
(xiii) .......................
(xiv) Detailed development of specific areas for housing of coal
miners, establishing industries, civil amenities, educational and
cultural facilities;
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Excise Appeal No.75714 of 2017
(xv) Preservation of erosion, provision for afforestation or
reformation, improvement and re-development, waterfront areas,
rivers and lakes;
(xvi) Proposals for irrigation and hydro-electric works and other
sources of water-supply;
(xvii) ....................
(xviii) .....................
(xix) Infrastructure for health, education, rural housing etc.;
(xx) ...................
(xxi) ..................
(xxii) Such other matters as incidental to or emerging from the above.
28. The Ld.Counsel has also drawn our attention to the hon‟ble apex
court‟s decision in the case of Jalkal Vibhag Nagar Nigam And
Others vs. Pradeshiya Industrial And Investment Corporation
And Another [2021) 20 Supreme Court Cases 657 : 2021 SCC
OnLine SC 960] to draw a simile of understanding and to point out
that the levy of water tax of Jalkal Vibhag Nagar Nigam was essentially
a Fee and not Tax. As held by us earlier, we find no contest in the
proposition that the nomenclature alone would not be the determining
characteristic to classify the particular levy as a Tax or a Fee. It was
further pointed out that the Market Fee levied by virtue of the
Notification dated 12.05.2010 is deposited to the credit of Consolidated
Fund of the State Government. This argument to our understanding
would also be of no consequence to the contention of the appellants, as
governmental sums are ordinarily deposited into the said fund. He has
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Excise Appeal No.75714 of 2017
further reiterated and drawn our attention to the Supreme Court nine
judges Bench decision referred in earlier paras to state that State
Legislature was fully competent to initiate and enforce such levies. It is
however clear that in as much as the usage to which the said amount is
put to does not affect the competence of the State Legislature to tax it
[Para 275(viii) of the apex court‟s order - 2024 (21) Centax 378 - refer
para 6 above]. It was therefore the appellant‟s argument that the very
levy of Market Fee/Bazaar Tax has been considered by the hon‟ble
court as Tax and the State Government was fully empowered to tax the
mining land and therefore the appellant was rightly eligible for
deduction of the said amount for purpose of arriving at the assessable
value. While we have no qualms with that part of the proposition as
regards the competence of the State to levy tax, we are afraid we do
not find anything in the hon‟ble apex court‟s order to hold that Market
Fee indeed was considered by the court to hold it as a tax and not a
fee. The subject of consideration before the hon‟ble Patna High Court
which fell ultimately in appeal before the hon‟ble apex court and later
culminated as a judgement of the 9 Member Bench was in effect for the
state‟s competency to levy tax over land bearing mineral as envisaged
in section 89 of The Bihar (Coal Mining) Area Development Authority
Act and not section 90 of the Act ibid. Actually the question pertinent to
the matter in the said case was with regard to Royalty payments arising
as a consequence of mining rights. It was under such circumstances
that the hon‟ble court had held royalty as a contractual consideration
paid by the mining lessee to the lessor for enjoyment of mineral rights.
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Excise Appeal No.75714 of 2017
The apex court under the circumstances further holding royalty as not a
tax, outright dismissed the argument that as the Statute provided for
its recovery even by way of arrears, it got to be tax.
29. Before proceeding any further it would be pertinent to state here
that both Section 89 and Section 90A of the Act operate in separate
fields, are distinctly worded, independent in their scope and objectives
and meant to play out in their isolated domains. Even the taxing
structure under the two Sections is at complete variance, thus while
Section 89 provides for levy of tax at specific rates, Section 90A
warrants the levy of a fee, the charging basis of which is an ad valorem
structure. Not only this the two sections in the Act have been
incorporated independently in the principal statute - The Act, by way of
different Sections of the amending act (24 of 1992). Moreover, the
authority for levy under the two sections viz. Section 89 and Section
90A is also derived from different provisions of the Constitution. Thus
while section 89 was in valid exercise of power vested in the State in
terms of Entry 50 of List II of the Seventh Sehedule of Constitution, the
States are empowered to levy fee, as in section 90A, in terms of sr. 66
of List II of the Seventh Schedule of the Constitution. In view of the
remarkability of variances noted above in the two provisions, setting
them distinctly apart to construe levy of Market Fees under Section 90A
as to be by way of tax (for which levy a separate provision by way of
Section 89 under the statute has been carved out) belies sound logic
and fails to appeal to reason. Moreover, the tax levied under section 89
of the Act is on mineral bearing land with an upper cap of it, not to
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Excise Appeal No.75714 of 2017
exceed Rs.1.50 per square meter whereas the Market Fee leviable
under Section 90A of the Act is levied on the sale or transaction of the
specified commodity (coal) in the notified Market Area, at a rate not
exceeding one per cent of the sale value. The two levies i.e. a Tax and
Fee are thus mutually exclusive, independent of one another and in no
way equitable, so as to be understood as one for the other.
30. Another over-arching argument to distinguish the impugned
Market Fee impost as at to be at variance with a "Tax", can also be
drawn from the fact that the law does not believe in redundancies,
there is nothing superfluous in law and each and every word is
required to be understood in its natural sense and every word in law is
required to be meaningfully read into so as not to render other
provisions a nullity. Also the broad purpose of the enactment and the
intent of the legislature has to be kept in focus. Moreover, a provision
within the statute cannot be so construed and read so as to make the
other provision nugatory or diminish in its purport. Thus when a clear
provision exists by way of Section 89 to levy taxes, a Market Fee
levied under a different Section (Section 90A) (also nomenclatured as
Market fee) cannot be inferred and concluded as a Tax.
31. It is thus clear from the above that in terms of section 90A of
Jharkhand Coal Mining Area Development Authority Act, a Market Fee
is chargeable on sale or transaction of another commodity at the rate
fixed by the Government while Section 90B ibid provides for collection
of said Market Fee and allocation of Fund for developmental purposes.
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Excise Appeal No.75714 of 2017
By virtue of sub-section 2 thereof it is incumbent upon the State
Government to allocate out of the Market Fee, to the Authority such
Funds on an yearly basis, to provide for civic amenities, infrastructure
and marketing facilities within its area. Further, by virtue of Rule 20(d)
of the MADA Market Fee Rules, the Authority is duty bound to spend
the amount so received from the State Government in the prescribed
sectors, as contained in Section 90B of the Act1.
32. However, Market Fee/Bazaar Tax indeed appears to be different
in its true purport, than "tax" because it is a kind of user charge in lieu
of services provided by institution. Market Fee, therefore cannot be
considered as a tax. It being in the nature of a Fee and like some
other charges viz. royalty, transit fee, entry tax, etc. would be
required to be included in the assessable value of the goods for
purpose of levy of Central Excise Duty. The levy-"Market Fee" is
chargeable on sale of coal and being an expense incurred in the
production/supply of goods produced, is certainly an element of cost,
and has been so invoiced by the appellant. As it forms part of the
element of cost for extraction/production of coal, it therefore enriches
the value/cost of the coal produced. Thus it would ordinarily be
required to be included in the determination of transaction value. If
this levy does not qualify as a tax, same would not be deductible from
the assessable value in terms of the statutory exclusion contained in
Section 4 of Central Excise Act, 1944.
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Excise Appeal No.75714 of 2017
33. It be noted that the statutory provision is unambiguous as
regards the levy of the said impost-Market Fee. In an oft quoted case
on literal interpretation of statute- Kanailal Sur Vs.
ParamnidhiSadhukhan (1957-SCC Online 8), the hon‟ble apex
Court had held:-
―If the words used are capable of one construction only
then it would not be open to the courts to adopt any other
hypothetical construction ................... ―
Where the language is clear, plain and unambiguous, the courts
are duty bound to give effect to the meaning that can be inferred from
the statute, irrespective of the consequences. Even inconvenience
caused by such a plain/literal interpretation can be no ground to
forego the same. In fact, if the statute is plain and unambiguously
worded, the consequences of such a construction are no more a
consideration for the court to decide upon (Tamilnadu State
Electricity Board Vs. Central Electricity Regulatory Commission
- 2007(7)SCC 636), even if they appear to be unreasonable, unjust
or oppressive or strange or surprising (Mahalaxmi Mills Ltd,
Bhavnagar Vs. CIT, Bombay-1963 SCC Online SC 190,
Nasiruddin Vs. State Transport Appellate Tribunal-1975(2) SCC
671, Precision Steel and Engineering Works Vs. Premdeva -
1982(3) SCC 270), In fact hon‟ble justice SR Das had once very
pertinently observed:
"The spirit of the law may well be an elusive and unsafe
guide and the supposed spirit can certainly not be given effect
to in opposition to the plain language of the Sections of the Act"
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Excise Appeal No.75714 of 2017
(Rananjaya Singh Vs. Baijanath Singh -1954(2)SCC 314)
34. Lord Atkinsion in the case of Corporation of the City of
Victoria Vs. Bishop of Vancouver Island (1921-SCC Online PC
75) had observed:
―In the construction of statutes their words must be
interpreted in their ordinary grammatical sense unless there be
something in the context or in the object of the statue, in which
they occur, or in the circumstances in which they are used to
show that they were used in a special sense different from their
ordinary grammatical sense.‖
That the words used in the statute are to be understood in their
natural, ordinary and popular sense can be underscored no better than
in the words of justice Frankfurter:
"After all legislation when not expressed in technical
terms is addressed to common run of a man and is therefore to
be understood accordingly to sense of the thing, as the ordinary
man has a right to rely on ordinary words addressed."
(Wilma E Addison Vs. Holly Hill Fruit Products -322
US 607)
35. It is thus clearly evident that when the words used are plain and
unambiguous, courts are duty bound to give them a meaning as
commonly understood and flowing from the plain reading of the words.
It is imperative those words are carried in their natural and ordinary
sense. Thus "Tax" and "Fee" in the impunged matter will have to be
construed differently in varied sense of the terms also more so for
reasons as discussed, deliberated and detailed in subsequent paras of
this order.
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Excise Appeal No.75714 of 2017
36. Thus on the face of it as the appellant has not included the said
"Market Fee" in the transaction value during the period from March,
2011 to October, 2015, the demand as made out is payable by the
appellant on the merits of the case.
37. While legitimacy of the levy of tax by the State, has been upheld
by the nine Judges Bench decision of the hon‟ble apex court and is
therefore a given, there is no need now to go into the background and
genesis of the matter which has been dwelt upon before us by the
Ld.Counsel for appellant at great length. What is important now is to
ascertain and determine the question that actually arises in the
matter, viz. what is the nature/character of the sums collected by the
State under the garb of "Market Fee" and whether the same could be
considered as a Tax or but be Fee and thus to validate or invalidate
our aforesaid assertion of the impugned levy being in the nature of a
fee. The following paras therefore dwell on the said issue.
38. As is well known, a tax is an imposition made for public purpose,
but carries no reference thereto with regard to any specificity of
services required to be rendered by the State or a specific benefit to
be conferred upon the taxpayer. The objective of the tax levied is
essentially to raise the general revenue of the exchequer. Contrast this
with Fee that is in the nature of a payment levied by the State or the
Authorized Body in respect of services performed by it for the benefit
of the individuals of the area. The levy of Fee is on a principle at
significant variance with that of a tax. Thus while tax is paid for a
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Excise Appeal No.75714 of 2017
common benefit conferred by the Government on all taxpayers, a fee
is a payment made for special benefit enjoyed by the payer and the
payment is a proportion of the said special benefit. The hon‟ble apex
court in the case of Municipal Corporation of Delhi & Others vs.
Mohd. Yasin etc. [1983 SCR (2) 999] and Sreenivasa General
Traders & Others vs. State of Andhra Pradesh & Ors. [1983 AIR
1246 SC (Para 33 & 38)] have held that what is to be seen for a fee
is whether there is a fair correspondence between the fee charged and
the cost of services rendered to the fee payers as a class; a broad co-
relationship is all that is necessary. Such relationship need not be
strict and even a casual relation may be enough. Neither the incidence
of fee nor the service rendered need be uniform.
39. It has been repeatedly held by courts, that there is no generic
difference between a tax and fee, though broadly a tax is a
compulsory exaction as part of a common burden, without promise of
any special advantages to classes of tax payers whereas a fee is a
payment for services rendered, benefit provided or privilege conferred.
40. It is also settled law that merely because others are also getting
benefitted will not detract the character of the fee. The said view has
been reiterated by the hon‟ble apex court in the case of M/s. Kishan
Lal Lakhmi Chand & Ors. vs. State of Haryana [1993 (3) SCALE
296] while dwelling on the vires of the Haryana Rural Development
Act. It was held therein:
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Excise Appeal No.75714 of 2017
―7. The object of the Act is to improve the agricultural production
and the marketing and sale of agricultural produce and the burden is
passed on to the second purchaser. The dealer bears no burden under
Section 5(3). The primary and essential purpose of the impost and
collection of the fee is to effect improvement of communications and
other related amenities and facilities to augment agricultural
production and to improve storage and marketing of agricultural
products. From the scheme of the Act it would be clear that there is
broad reasonable and general corelationship between the levy and
resultant benefit to the producer of the agricultural produce, dealer
and purchasers as a class though no single payer of the fee receives
direct or personal benefit from those services. He represents that
class. Though the general public may be benefitted from some of the
services like laying roads, the primary service is to the
producers/dealers and purchasers of agricultural produce ....................‖
[Emphasis supplied]
While upholding the vires of the statutory provision, the hon‟ble court
dismissed the appeal filed with costs, clearly holding that the fee levied was
not a tax. Para 9 of the judgement is extracted below:
―9. Accordingly we hold that Section 5(i) (ii) are valid. The fee
levied therein is not a tax but a fee towards the fund to expand for the
purpose enumerated under Section 6(5) of the Act. The fund would be
expended accordingly. In this view we hold that the appeals bear no
merit. They are accordingly dismissed with costs quantified at
Rs.5,000/- in each appeal.‖
41. The present matter is no different in its intent, purpose or
objectives but for the fact that the statute concerned operates in a
different domain and concerns the welfare amenities of and for the
people of the coal-mining region.
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42. As for the element of reciprocity or quid pro quo, it is settled law
that it would not necessarily be lost merely because the statute
prescribes a minimum rate. The fee such as a Market Fee is levied in
respect of public properties for example public road, or other common
amenities. The benefit to be derived from fee is not simultaneous but
is deferred and the amount collected by way of fee is a result for
future services. It has been so held by the hon‟ble apex court as well
in a series of cases.
43. In the case of Krishi Upaj Mandi Samity v. Orient Paper &
Industries Ltd. [1994 (11) TMI-421 (SC)], the hon‟ble apex court
while upholding the constitutionality of the MR Krishi Upaj Mandi
Adhiniyam, 1973 and after going through a variety of arguments and
series of judgements inter alia held as under :
―21. Thus what emerges from the conspectus of the aforesaid
decisions is as follows:
(1)Though levying of fee is only a particular form of the exercise of the
taxing power of the State, our Constitution has placed fee under a
separate category for purposes of legislation. At the end of each
one of the three Legislative Lists, it has given power to the particular
legislature to legislate on the imposition of fee in respect of every one
of the items dealt with in the list itself, except fees taken in Court.
(2)The tax is a compulsory exaction of money by public
authority for public purposes enforceable by law and is not
payment for services rendered. There is no quid pro quo
between the taxpayer and the public authority.
It is a part of the common burden and the quantum of imposition upon
the taxpayer depends generally upon his capacity to pay.
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Excise Appeal No.75714 of 2017
(3)Fee is a charge for a special service rendered to individuals
or a class by some governmental agency. The amount of fee
levied is supposed to be based on the expenses incurred by the
Government in rendering the service though in some cases the costs
are arbitrarily assessed. Ordinarily, the fees are uniform and no
account is taken of the varying abilities of different recipients to pay.
These are various kinds of fees and it is not possible to formulate a
definition that would be applicable to all cases.
(4)The element of compulsion or coerciveness is present in all
kinds of impositions though in different degrees and it is not totally
absent in fees. Hence it cannot be the sole or even a material
criterion for distinguishing a tax from fee. Compulsion lies in the
fact that payment is enforceable by law against an individual in spite of
his unwillingness or want of consent and this element is present in
taxes as well as in fees.
(5)The distinction between a tax and a fee lies primarily in the
fact that a tax is levied as a part of the common burden while a
fee is a payment for a special benefit or privilege. Fees confer a
special capacity although the special advantage is secondary to
the primary motive of regulation in the public interest. Public
interest seems to be at the basis of all impositions but in a fee
it is some special benefit which is conferred and accruing which
is the reason for imposition of the levy. In the case of a tax, the
particular advantage if it exists at all, is an incidental result of
State action. A fee is a sort of return or consideration for
services rendered and hence it is primarily necessary that the
levy of fee should on the face of the legislative provision be
corelated to the expenses incurred by Government in rendering
the services. As indicated in Article 110(2) of the Constitution
ordinarily there are two classes of cases where Government
imposes fees upon persons. The first is of grant of permission
or privilege and the second for services rendered. In the first
class of cases, the cost incurred by the Government for
granting of permission or privilege may be very small and the
amount of imposition levied is based not necessarily upon the
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Excise Appeal No.75714 of 2017
costs incurred by the Government but upon the benefit that the
individual receives. In such cases, the tax element is
predominant. If the money paid by privilegeholders goes entirely for
the expenses of matters of general public utility, the fee cannot but be
regarded as a tax. In the other class of cases, the Government does
some positive work for the benefit of persons and the money is taken
as the return for the work done or services rendered.
(6)There is really no generic difference between tax and fee and the
taxing power of the State may manifest itself in three different forms,
viz., special assessments, fees and taxes. Whether a cess is tax or fee,
would depend upon the facts of each case. If in the guise of fee, the
legislature imposes a tax it is for the Court on a scrutiny of the scheme
of the levy, to determine its real character. In determining whether
the levy is a fee, the true test must be whether its primary and
essential purpose is to render specific services to a specific
area or classes. It is of no consequence that the State may
ultimately and indirectly be benefited by it. The amount of the
levy must depend upon the extent of the services sought to be
rendered and if they are proportionate, it would be unreasonable to
say that since the impost is high it must be a tax. Nor can the method
prescribed by the legislature for recovering the levy by itself alter its
character. The method is a matter of convenience and though
relevant, has to be tested in the light of other relevant circumstances.
(7)It is not a postulate of a fee that it must have relation to the
actual service rendered. However, the rendering of service has
to be established. The service, further, cannot be remote. The test of
quid pro quo is not to be satisfied with close or proximate relationship
in all kinds of fees. A good and substantial portion of the fee must,
however, be shown to be expended for the purpose for which the fee is
levied. It is not necessary to confer the whole of the benefit on the
payers of the fee but some special benefit must be conferred on them
which has a direct and reasonable corelation to the fee. While
conferring some special benefits on the payers of the fees, it is
permissible to render service in the general interest of all concerned.
The element of quid pro quo is not possible or even necessary to be
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Excise Appeal No.75714 of 2017
established with arithmetical exactitude. But it must be established
broadly and reasonably that the amount is being spent for
rendering services to those on whom the burden of the fee
falls. There is no postulate of a fee that it must have a direct relation
to the actual services rendered by the authorities to each individual to
obtain the benefit of the service. The element of quid pro quo in the
strict sense is not always a sine qua non for a fee. The element of quid
pro quo is not necessarily absent in every tax. It is enough if there is a
broad, reasonable and general co-relationship between the levy and
the resultant benefit to the class of people on which the fee is levied
though no single payer of the fee receives direct or personal benefit
from those services. It is immaterial that the general public may also
be benefited from some of the services if the primary service intended
is for the payers of the fees.
(8)Absence of uniformity is not a criterion on which alone it can be
said that the levy is of the nature of a tax. The legislature has power
to enact appropriate retrospective legislation declaring levies as fees
by denuding them of the characteristics of tax.
(9)It is not necessary that the amount of fees collected by the
Government should be kept separately. In view of the provisions
of Article 266, all amounts received by the Governments have to be
credited to the Consolidated Funds and to the public accounts of the
respective Governments.‖
[Emphasis supplied]
These postulates as laid down by the apex court are actually a
gospel for the determination of the question impugned in the present
matter.
44. It is settled law that a Fee is levied for special purposes or
services. The fact that besides those paying a Fee, others are also
benefited cannot detract the character of the Fee [ITC v. State of
Karnataka -1985 Supplement SCC 476, Para 3]. This landmark
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case, lays down 5 cardinal principles concerning the competency of the
legislature to legislate with regard to the Entries of the Seventh
Schedule.
Hon‟ble Justice Faizal Ali, while delivering his assenting
judgement, therein observed.
―.................The theory of nexus between the fee levied and the services
rendered cannot be reduced to a ritualistic formula so as to close it in
a straitjacket nor can be weighed in golden scales. All that is necessary
is that there should be a direct nexus between realization of fees and
the services rendered. What would be the nature of the services, when
and how it should be rendered and in what measure is entirely a
matter for the market committees to decide or determine. So long as
the money is realized, even though on the higher side, but is spent on
the extention and expansion of the markets, market yards, market
facilities, godowns, rest houses, buildings, even roads leading up to
the markets, that would be fully within the concept of afee and could
not be lebelled as a tax on the purchasers at the action of goods or
articles in the market. It is, however, difficult to lay down any hard
and fast rule for determining the extent and contours of the services
that should be rendered by the Government while imposing a fee. All
that the law requires is that the amount of fee realized from the
purchasers should be spent for the purposes of the market. For
instance, if the fee is on the higher side but the excess amount is
reserved for the present or future expansion of the market, the
provision for making further facilities, the building up of roads upto the
point of markets so as to benefit the purchasers and make there task
easier to collect all their goods at one place or to build rest houses for
their stay while transacting their business in which case any
reasonable fee levied by the market committees would be justifiable.‖
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45. Cases may arise whereunder under the garb of levying a fee, the
legislature may attempt imposition of tax. In case of such colourable
action, it would be for the court to scrutinize the scheme of levy very
carefully and therefore determine whether in the facts and
circumstances, there is a co-relation between the service and the levy.
46. It is noteworthy that the Constitution provides for the legislative
purpose and makes a categorical distinction between a Tax and a Fee.
Further, it cannot be conclusively held that power to levy tax and the
power to levy fee are identical. As pointed earlier, taxes are specifically
distributed as between the State and the Union Legislatures by virtue
of Entries in List I and List II and the Residuary List. To levy a Tax, not
enumerated in any of the Entries in List II or List III would fall within
the exclusive domain of the Parliament, by virtue of Entry 97 of List I.
On the other hand Entry relating to Fee have been specifically provided
for at the end of List I, II and III of the 7th Schedule. Thus, while the
State Legislature would have the power to levy Fee, co-extensive with
power to legislate with respect to substantive matters and with
reference to making of law within its competence, it may levy a Fee
with reference to services that would be rendered by the State under
such a law. In this regard reference is invited to the case of Mahant
Sri Jagannath Ramanuj Das And Another v. State of Orissa And
Another [AIR 1964 SC 400, Para-9], wherein Para 9 of its order,
the apex court has prescribed the following criteria to determine the
nature of levy as a Tax or as a Fee.
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Excise Appeal No.75714 of 2017
"A tax is undoubtedly in the nature of a compulsory extraction of
money by a public authority for public purposes, the payment of which
is enforced by law. But the essential thing in a tax is that the
imposition is made for public purposes to meet the general expenses
of the State without reference to any special benefit to be conferred
upon the payers of the tax. The taxes collected are all merged in the
general revenue of the State to be applied in the general revenue
public purposes. Thus, tax is a common burden and the only return
which the tax -payer gets is the participation in the common benefits
of the State. Fees, on the other hand, are payments primarily in the
public interest but for some special service rendered or some special
work done for the benefit of those from whom payments are
demanded. Thus, in fees there is always an element of 'quid pro quo'
which is absent in a tax. Two elements are thus essential in order that
a payment may be regarded, as fee. In the first place, it must be
levied in consideration of certain services, which the individuals
accepted either willingly or unwillingly. But this by itself is not enough
to make the imposition of a fee, if the payments demanded for
rendering of such services are not set apart or specifically appropriated
for that purpose but are merged in the general revenue of the State to
be spent for general public purposes.‖
[Emphasis supplied]
47. The aforesaid view was reiterated by the hon‟ble apex court in
the case of M/s. Kishan Lal Lakhmi Chand & Ors. v. State of
Haryana & Ors. [1993 (3) SCALE 296]. The appellant in the case
had taken a plea that the said levy by the State by way of market fee
was actually a tax and the State had camouflaged the import levying it
@ one percent and thus the State had resorted to colourable exercise
of power to circumvent the Constitutional mandate. The appellant
further argued that the principle of Quid Pro Quo in the region of at
least 2/3 or ¾ as envisaged in the case of Kewal Krishan Puri v. State
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Excise Appeal No.75714 of 2017
of Punjab [1979 (5) TMI -136 (SC)] was completely lost, in as much as
the traders as a class and the appellants in particular were not
deriving any benefit therefrom and thus there apparently was no
correlation between the fund collected and the service intended to be
rendered to the dealers. After extensive arguments on each side and
consideration of several judgements, the hon‟ble apex court, while
noting that there was a change in the old concept held as under:
"5. ............the traditional view that there must be actual quid pro
quo for a fee has undergone a sea change. The distinction between a
tax and fee lies primarily in the fact that a tax is levied as part of a
common burden, while a fee is for payment of a specific benefit or
privilege although the special advantage is secondary to the primary
purposes of regulation in public interest, if the element of revenue for
general purposes of the State predominates, the levy becomes a tax.
In regard to fee, there is, and must always be, co-relation between the
fee collected and the service intended to be rendered. In determining
whether a levy is a fee, the true test must be whether its primary and
essential purposes it to render specific services to a specified area or
class; it may be of no consequence that the State may ultimately and
indirectly be benefited by it. The power of any legislature to levy a fee
is conditioned by the fact that is must be "by and large" a quid pro quo
for the services rendered. However, co- relationship between the levy
and the services rendered/expected is one of general character and
not of mathematical exactitude. All that is necessary is that there
should be a "reasonable relationship" between the levy of the
fee and the services rendered. There is no genetic difference
between a tax and a fee. Both are compulsory extractions of money by
public authorities. Compulsion lies in the fact that payment is
enforceable by law against a person in spite of his unwillingness or
want of consent. A levy in the nature of a fee does not cease to
be of that character merely because there is an element of
compulsion or coerciveness present in it, not is it a postulate of
a fee that it must have direct relation to the actual service
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Excise Appeal No.75714 of 2017
rendered by the authority to each individual nor that each
should obtain the benefit of the service....................... "
[Emphasis supplied]
―6. In Ramesh Chandra Etc. v. State of U.P. Etc. , Southern
Pharmaceuticals & Chemicals Trichur and Ors. etc. v. State of Kerala
and Ors. etc. benches of three Judges and Municipal Corpn. of Delhi
and Ors. v. Mohd. Yasin a bench of two Judges took the same view. In
Ramesh Chandra's case declaration of the entire U.P. State as market
area and sub divisions thereafter as notified markets, levy and
collection of 1 per cent ad valorem market fee by each market
committee was held to be valid. In Sirsilk Ltd. v. Textiles Committee
and Ors. JT 1988 (4) SC 592 : (1989)Suppl. 1 SCC 168 a specific
argument that no individual trader was receiving benefit from the
services rendered was negated. Considering the scope of the powers of
the Committee under Section 3 of the Textiles Committees Act, 1963
read with Rule 21 of the Textiles, Committee Rules; 1965 this Court
held that the purpose therein was quality control of all textiles. The
interpretation, therefore, should be the benefit to the textiles industry
as such though it has no specific relationship to the particular industry
which bears the burden. The broad correlationship between the
imposition of fee and the nature of the service rendered to the entire
textiles industry satisfied the test of quid pro quo, though no specific
service was rendered to the Payer of the fee. The administrative
expenditure incurred by the Committee from the fund was held to be
integral component of the fund. In Ramesh Chandra's case similar
contention was rejected.‖
Finding no merit in the appeal filed, while upholding the
Constitutionality of the statutory provisions the apex court dismissed
the appeals with costs quantified at Rs.5,000/- per appeal.
48. In the cases of (i) Indian Mica Micanite Industries v. State
of Bihar [1971 AIR 1182] (ii) Om Prakash and Ors. v. Giri Raj
Kishore and Ors. [AIR-1985 P & H 52] (iii) The Municipal
Council, Madurai v. R. Narayanan etc. [1075 AIR 2193], as well
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hon‟ble courts have considered Fee that was charged for services
rendered and observed that in such cases where the Fee is charged for
a service rendered, an element of quid pro quo is necessary and there
has to be a co-relationship of a general character between the cost of
rendering of such service and the Fee charged. This principle has been
followed regularly in umpteen cases since.
49. In one of the earliest cases concerned with the question whether
a particular levy is Fee or a Tax, the five Member Bench of the apex
court in the case of Commissioner, Hindu Religious Endowments
Vs. Sri Sri Lakshmindra Thirtha Swamiar of Sri Shirir Mutt
[1954 AIR 282 SC] held that Constitution, particularly the legislative
entries in Schedule VII make a clear distinction between Tax and Fee.
It however laid down certain general characteristics of fee and tax in
this regard. To quote the following extract from the order would be
imperative to place the issue in its proper perspective.
―This Court reproduced the definition of what ―tax" means, given by
Latham, C.J. of the High Court of Australia in Matthews vs. Chicory
Marketing Board (CLR at p 276) (See at p. l040). ―A tax" according to
the learned Chief Justice, 'tis a compulsory extraction of money by
public authority for public purposes enforceable by law and is not
payment for services rendered". A fee, on the other hand, is generally
defined to be a charge for a special service rendered to individuals by
some governmental agency. The amount of fee levied is supposed to
be based on the expenses incurred by the Government in rendering
the service, though in many cases, the costs are arbitrarily assessed.
Ordinarily, the fees are uniform and no account is taken of the varying
abilities of different recipients to pay.‖
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50. Expressly stating the distinction between a tax and a fee, the
honourable Court held that primarily a tax is levied as part of a
common burden while a fee is a payment for a special benefit or a
privilege. It was clearly noted in the said judgment that -
―A tax is a compulsory exaction of money by public
authority for public purposes enforceable by law and is not
payment for services rendered.
It is not possible to formulate a definition of fee that can
apply to all cases as there are various kinds of fees. But a fee
may generally be defined as a charge for a special service
rendered to individuals by some governmental agency. The
amount of fee levied is supposed to be based on the expenses
incurred by Government in rendering the service, though in
many cases such expenses are arbitrarily assessed.
The distinction between a tax and a fee lies primarily in the
fact that a taqx is levied as part of a common burden, while a
fee is a payment for a special benefit or privilege.‖
51. The hon‟ble apex court reproduced therein the definition of a tax
given by LATHM C.J. of the High Court of Australia in Matthews v.
Chicory marketing Board [(Vict)-1938HCA 38], "tax" according to Ld.
Chief Justice - "It is a compulsory extraction of money by public
authority for public purposes and forcibly by law and is not payment
for services rendered. The "Fee" on the other hand is generally
defined to be a charge for special services rendered to individuals by
some Governmental agencies. The amount of fee levied is supposed to
be based on the expenses incurred by the Government for rendering
the service, (though in some cases cost may be arbitrarily assessed).
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Excise Appeal No.75714 of 2017
Ordinarily, the fees are willing and no account is taken of the varying
capacity of different recipients to pay. These are undoubtedly some of
the general characteristics as far may be of various kinds of fees. It is
not possible to formulate a definition that would be applicable to all
cases. The court further said.
―The difference between a tax and a fee lies primarily in the fact that a
tax is levied as part of the common burden, the fee is a payment for
special advantage‖
as for example in the case of registration fee for documents or
marriage licences is secondary to the primary motive of regulation in
public interest.
52. The said order of the apex court further noted that there really
was no generic difference between a tax and a fee as noted by the
apex court in several other decisions; that the the Constitution
however clearly draws a distinction between imposition of a tax (by
way of Money Bill) and the impost of fees by way of the Bill being of
the ordinary kind. So also in the Seventh Schedule both in the List-I
and List-II a distinction has been maintained in relation to the Entry of
tax and fee. It therefore referred to the three lists of the Seventh
Schedule. Thus in the Union List Entries 82 to 92C relate to taxes and
duties and Entry 96 carves out the legislative field for imposition of a
Fee in respect of matters contained in the State List except those
relating to court fees. Likewise in State List Entries relating to taxes
are listed at Sl.No.46-63, while Entry 66 provides for fee in respect of
any of the matters contained in List-II but not including fees taken in
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any court. Entry No.47 in List III specifically provides for charging of
Fees. Therefore, the court laid emphasis that the Constitution did
recognize and makes a distinction between taxes and fees.
53. In the case of Secundarabad Hyderabad Hotel Owners
Association and Others v. Hyderabad Municipal Corporation,
Hyderabad [1999 (2) SCC 274] the apex court has once again
dwelt upon considerable length the various aspects and characteristics
to identify Fee and had elaborately discussed therein various case
including the one decided by the apex court in the case of Sri
Lakshmindra Thirtha Swaminar of Sri Shirir Mutt [1954 AIR 282]. It was
held by the apex court that Fee may be regulatory or compensatory
that when a Fee is charged for rendering specific services, there
necessarily has to be a certain element of quid pro quo between the
service rendered and the Fee charged. Referring to the Licence Fee
which is largely regulatory for the purpose, when such licence is given,
the apex court clarified that the Fee which is charged for regulation for
such activity would be validly classifiable as Fee and not Tax, although
no service is rendered and in such cases the element of quid pro quo
may not be imperative. It may further be added Supreme Court had
categorically held in the Sri Lakshmindra Thirtha Swamiaar of Sri
Shirir Mutt case that "distinction between a Tax and the Fee lies
primarily in the fact that a Tax is levied as a part of a common burden,
while the Fee is payment for special advantage. The court noted in its
order that there is really no generic difference between a Tax and a
Fee, as was said by Seligman - that the taxing power of the State may
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manifest itself in three different forms viz. Fees, Taxes and Special
Assessments.
54. In the case of Corporation of Calcutta v. Liberty Cinema
(1965 AIR 110 7 SC) referring to the constitutional provisions, the
apex court once again noted that the Constitution provided for a
distinction between a fee and a tax and pointed out that under the
Constitution, a fee for services rendered are contemplated as a
different kind of levy, as was apparent from a consideration of Article
110(2) and Article 199(2) where both the expressions are made use
of, thereby indicating that the two as not to be the same.
55. In the case of ACC Ltd. v. Commissioner of CGST & CE
[2019 (31) G.S.T.L. 103 (Tri.-Del.)], dwelling on the subject of
Clean Energy Cess levied on coal, this Tribunal clearly held that
irrespective of the nomenclated as Excise Duty Clean Energy Cess
which provide for specific purpose of funding the Clean Energy
initiatives and for other purposes related thereto, besides was not for
use of general public and deposited into the Consolidated Fund of
India, was not a Duty of Excise or Tax, but in the nature of Fees. In
arriving at the said finding, the Tribunal in its order considered the
apex court‟s pronouncements and the Constitutional provisions as
referred to by it in its order. Relevant paras 6.2 and 6.3 of the said
order are enumerated below:-
6.2 Apparent from these clauses is the fact that clean energy cess is
nomenclated as duty of Excise and the provisions of Central Excise
Act, 1944 are made applicable in relation to levy/exemption, etc.
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thereof. But whether the cess is actually in the form of excise duty or
tax or it is merely a fee, the question is still to be adjudicated for
deciding the above mentioned substantial question of law. For the
purpose, we refer to the following case laws :
―17. The Constitution Bench of the Apex Courtin the case of
Kewal Krishna Puri & another v. State of Punjab & another
reported in (1980) 1 SCC. 416 in which it was held, the quid pro
quo must exist between the payer of the fee and the special
services rendered. It was observed :
―that a fee is a charge for special services rendered to
individuals by the Governmental Agency and therefore for a
levy of fee an element of quid pro quo for the service rendered
was necessary; service rendered does not mean any personal
or domestic service and it meant service in relation to the
transaction, property or the institution in respect of which the
fee is paid. The element of quid pro quo may not be possible or
even necessary to be established with arithmetical exactitude
but even broadly and reasonably it must be established, with
some amount of certainty, reasonableness or preponderance of
probability that quite a substantial portion of the amount of fee
realized is spent for the special benefit of its payers. Each case
has to be judged from a reasonable and practical point of view
for finding an element of quid pro quo.‖
18. The Constitution Bench of the Apex Court in the case of
Hingir Rampur Coal Co. Ltd. v. State of Orissa reported in 1961
(2) SCR. 537 explained the different features of tax, a fee and
cess in the following passage.
―The neat and terse definition of Tax which has been given by Latham,
C.J., in Matthews v. Chicory Marketing Board, (1938) 60 CLR. 263 is
often cited as a classic on this subject. ―A Tax‖, said Latham, C.J., ―is a
compulsory exaction of money by public authority for public purposes
enforceable by law, and is not payment for services rendered‖. In
bringing out the essential features of a tax this definition also assists
in distinguishing a tax from a Fee. It is true that between a tax and a
fee there is no generic difference. Both are compulsory exactions of
money by public authorities; but whereas a tax is imposed for public
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purposes and is not, and need not, be supported by any consideration
of service rendered in return, a fee is levied essentially for services
rendered and as such there is an element of quid pro quo between the
person who pays the fee and the public authority which imposes it. If
specific services are rendered to a specific area or to a specific class of
persons or trade or business in any local area, and as a condition
precedent for the said services or in return for them cess is levied
against the said area or the said class of persons or trade or business
the cess is distinguishable from a tax and is described as a fee. Tax
recovered by public authority invariably goes into the consolidated
fund which ultimately is utilised for all public purposes, whereas a cess
levied by way of Fee is not intended to be, and does not become, a
part of the consolidated fund. It is earmarked and set apart for the
purpose of services for which it is levied.
It was further held that,
―It is true that when the Legislature levies a fee for rendering specific
services to a specified area or to a specified class of persons or trade
or business, in the last analysis such services may indirectly form part
of services to the public in general. 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 ultimately and indirectly be benefited would not detract
from the character of the levy as a fee. Where, however, the specific
service is indistinguishable from public service, and in essence is
directly a part of it, different considerations may arise. 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 purpose must be distinguished from its
ultimate or incidental results or consequences. That is the true test in
determining the character of the levy.‖
19. Again, yet another Constitution Bench of the Apex Court
in the case of State of W.B. v. Kesoram Industries Ltd. & Ors. -
2004 (10) SCC. 201 explained the distinction between the terms
‗tax and fee' in the following words :
―The term cess is commonly employed to connote a Tax with a
purpose or a tax allocated to a particular thing. However, it also means
an assessment or levy. Depending on the context and purpose of levy,
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Excise Appeal No.75714 of 2017
cess may not be a tax; it may be a fee or fee as well. It is not
necessary that the services rendered from out of the fee collected
should be directly in proportion with the amount of Fee collected. It is
equally not necessary that the services rendered by the Fee collected
should remain confined to the person from whom the fee has been
collected. Availability of indirect benefit and a general nexus between
the persons bearing the burden of levy of fee and the services
rendered out of the fee collected is enough to uphold the validity of the
fee charged.‖
20. Again the Apex Court in the case of Sreenivasa General
Traders and Ors. v. State of Andhra Pradesh and Ors. reported
in 1983 (4) SCC 353 held as under :
―The traditional view that there must be actual quid pro quo for a fee
has undergone a sea change in the subsequent decisions. The
distinction between a tax and a fee lies primarily in the fact that a tax
is levied as part of a common burden, while a fee is 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 State predominates, the
levy becomes a tax. In regard to fees there is, and must always be,
correlation between the fee collected and the service intended to be
rendered. In determining whether a levy is a fee, the true test must be
whether its primary and essential purpose is to render specific services
to a specified area of class; it may be of no consequence that the
State may ultimately and indirectly be benefited by it. The power of
any legislature to levy a fee is conditioned by the fact that it must be
―by and large‖ a quid pro quo for the services rendered. However,
correlationship between the levy and the services rendered (sic or)
expected is one of general character and not of mathematical
exactitude. All that is necessary is that there should be a ―reasonable
relationship‖ between the levy of the Fee and the services rendered.‖
From the aforesaid judgm 21.ents it is clear that the traditional view
is that there must be actual quid pro quo for a fee, has undergone a
sea change in the recent years. The tax recovered by a public
authority invariably goes into the Consolidated Fund, which ultimately
is utilized for all public purposes. Whereas, a cess levied by way of fee
is not intended to be, and does not become, a part of the Consolidated
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Excise Appeal No.75714 of 2017
Fund. It is earmarked and set apart for the purpose of services for
which it is levied.‖
6.3 In accordance of Articles 266 and 270 of the Constitution of
India it becomes clear
―26.Any cess levied and collected in order to constitute a fee after such
collection should go into a special fund earmarked for carrying out the
purpose of the Act. The said fund so set apart should be appropriated
specifically for the performance of the specified purpose and it should
not be merged in the public revenues. In other words, the cess levied
by way of fee is not intended to be and does not become a part of the
Consolidated Fund. It should be earmarked and set apart for the
purpose of services for which it is levied. Then only it should be
described as a fee and not tax. If the cess levied and collected is
credited to the Consolidated Fund of India and it has to be
appropriated by the Parliament by law and then only the said amount
could be credited to the Fund; it ceases to be a fee and partakes the
character of a duty or a tax.‖
56. It was in this backdrop and analysis that the Tribunal arrived at
the finding that Clean Energy Cess being levied for the specific purpose
of funding a Clean Energy initiative and for any other purpose in
relation thereto, was not for the use of general public as such and was
required to be utilized by the Union Government for a particular
Section and a particular purpose therefor irrespective of the
nomenclature the said Cess was not a duty of Excise, but was a fee.
The said decision also distinguishes therein the case of Commissioner
v. Shree Renuka Sugars Ltd. (2014 (302) E.L.T. 33 (Kar.)],
citing which the Appellant had pleaded that the sugar cess was
invariably going to the Consolidated Fund was ultimately utilized for all
purpose and therefore there was no quid pro quo between the sugar
cess levied and collected and services referred for such payment. On
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Excise Appeal No.75714 of 2017
the contrary for Clean Energy Cess, the proceeds though credited to
Consolidated Fund of India were being utilized for a specific purpose as
that of driving the Clean Energy Initiative and therefore there was the
existence of quid pro quo. Para 7 of the Tribunal‟s order reads as
under:
―7. Reading the above settled principles along with Section 83 of
Finance Act, 2010 it becomes clear that the cess was collected,
irrespective of being nomenclated as excise duty, but for the specific
purpose of funding the clean energy initiatives and for any other
purpose in relation thereto. Thus, it becomes clear that the cess was
not for the use of general public as such irrespective it was deposited
into the Consolidated Fund of India. Also, it was not to be distributed
to the States but was to be utilized by the Union Government for a
particular section and a particular purpose. Thus, it becomes clear that
the impugned cess, irrespective of its nomenclature, was not at all the
duty of excise or tax but was a fee. The present case is different from
the case law of Shree Renuka Sugars Limited (supra) as relied upon by
the appellant in the sense that the sugar cess in that case invariably
goes to consolidated fund and is ultimately utilized for all purposes.
There was no quid pro quo between the cess levied and collected and
the services referred for such payment on the contrary for clean
energy cess, the proceeds though are credited to Consolidated Fund of
India but for being utilized for a specific purpose as that of clean
initiative, as a quid pro quo.‖
57. To similar ratio is the Tribunal‟s decision in the case of Deccan
Cements Ltd. v. CCE, Rangareddy [2020 (371) ELT 795 (Tri.-
Hyd.)], while dealing with Clean Energy Cess levied on coal where
again the same was not held as cenvatable being not a duty of Excise.
The said case is cited to point out that irrespective of the
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nomenclature there is ample room to suggest that the nature of the
levy is determinative, taking note of its purpose and objectives.
58. In the case of Ibadatali s/o Abbas Ali Vs. Municipal Council,
Khargone and Ors (AIR-1994-MP58), by virtue of an expressive
definition of the term "Tax" to include toll, rate, cess fee or other
imposts levied under the MP Municipal Corportion Act, 1956 the
Hon‟ble High Court outright rejected the plea to the contrary leasing of
the ley of tax, and further noted that:
―It is therefore clear that the terms of ―a sum payable,‖
―fees ―rate‖ and ―toll‖ are used in Section 127 itself in
contradistinction with the terms ―Tax‖ in order to specifically
differentiate them from the term ―Tax‖ ...........
The Court therein noted the variation in the terminologies used
and observed ―instead of using these terms at some places, every
where the term ―Tax‖ could have been used. This law as laid down is
cited in the present matter, to draw an analogy to the MADA Act,
where the two terms "Tax" and "Fee" are used in contradistinction of
one another under separate provisions of the statute. Thus, as held by
the hon‟ble High Court the term "Tax‖ and ―Fee" would be required to
be understood, read and interpreted in the sense the legislature
intended thereto, being two different financial terms with difference in
approach, meaning and understanding both statutorily as well as in
common parlance.
59. We have also perused and gone through the Hon‟ble apex courts
judgement in the case of State of Punjab Vs. M/s Punjab Spintex
Ltd, (CA Nos. 10970-10971 of 2014) decided on July 15, 2024,
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Excise Appeal No.75714 of 2017
wherein the respondent though granted exemption from payment of
Market Fee, was however called upon to pay Rural Development Fee,
payable in terms of Agricultural Produce Markets Act 1961 and Punjab
Rural Development Act, 1987 respectively The plea of automatic
exemption for Rural Development Fee was outright declined by the
Court pointing out the difference in the two enactment and the
statutory provisions that levied the two Fees. The hon‟ble apex court
denounced the respondents plea of there being a clear convergence of
interest between the two enactments even though the 2003 Policy
Document exempted the recovery of fees under the two laws, by way
of an incentive for development of Agro and Food Processing
Industries. This case though completely unrelated to the present
matter is to drive home the thought and remind that each statutory
provision will hold firm within its area of operation. Thus Section 89 of
the Act as well as Section 90A of the Act as impugned in the present
matter will stand their ground, independent of each other and will
have to be given their due priority importance and allowed free area of
operability. Section 90A of the Act cannot be read, as to be a product
of Section 89 thereof. The two provisions cannot be equated or
assumed to be same or similar in their purpose and objective. This is
more so demonstrated and evident, as in earlier paras conspicuous
variations between the two provisions have already been dealt with in
substantial measure. Though the said matter is purely unconnected to
the facts of the present case, its reference herein has been cited to
bring to fore the fact of levy of tax and Market Fee under the MADA,
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are by way of distinct and independent statutory provisions viz.
Section 89 and Section 90A of the Act respectively; something akin to
levy of Market Fee and/or Rural Development Fee under different
statutory provisions.
60. In the case of Kewal Krishan Puri And Anothers v. State of
Punjab & Others [1979 (5) TMI 136 - SUPREME COURT], where
the hon‟ble apex court was concerned with the question of validity of
certain provisions of Punjab Agricultural Produce Markets Act, 1961,
whereunder Market Fees is fixed by the Market Committees under the
direction of the Punjab State Agricultural Produce Market Board and
the Haryana State Agricultural Produce Market Board, the hon‟ble apex
court after extensive arguments observed as under:-
―............................... The impost of fee and the liability to pay it is on a
particular individual or a class of individuals. They are under the
obligation to submit accounts, returns or the like to the authorities
concerned in cases where quantification of the amount of fees depends
upon the same. They have to undergo the botherations and
harassments, sometimes justifiable and sometimes even unjustifiably,
in the process of discharging their liability to pay the fee. The
authorities levying the fee deal with them and realize the fee from
them. By operation of the economic laws in certain kinds of
impositions of fee the burden may be passed on to different other
persons one after the other. A few lines occurring at page 119 in the
judgment of the Privy Council in the case of Attorney-General for
British Columbia and Esquimalt and Nanaimo Railway Company and
others may be quoted with advantage. They are as follows:-
―It is probably true of many forms of tax which are indisputably direct
that the assesss will desire, if he can, to pass the burden of the tax on
to the shoulders of another but this is only an economic tendency. The
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assessee's efforts may be conscious or unconscious, successful or
unsuccessful; they may be defeated in whole or in part by other
economic forces. This type of tendency appears to their Lordships to
be something fundamentally different from the ―passing on‖ which is
regarded as the hall-mark of an indirect tax.‖
The authorities, more often than not, almost invariably, will not be
able to know the individual or individuals on whom partly or wholly the
ultimate burden of the fee will fall. They are not concerned to
investigate and find out the position of the ultimate burden. It is
axiomatic that the special service rendered must be to the payer of the
fee. The element of quid pro quo must be established between the
payer of the fee and the authority charging it. It may not be the exact
equivalent of the fee by a mathematical precision, yet, by and large, or
predominantly, the authority collecting the fee must show that the
service which they are rendering in lieu of fee is for some special
benefit of the payer of the fee. It may be so intimately connected or
interwoven with the service rendered to others that it may not be
possible to do a complete dichotomy and analysis as to what amount
of special service was rendered to the payer of the fee and what
proportion went to others. But generally and broadly speaking it must
be shown with some amount of certainty, reasonableness or
preponderance of probability that quite a substantial portion of the
amount of fee realized is spent for the special benefit of its payers.
We may now extract some very useful and leading principles
from the decision of this Court in Shirur Mutt's (1954 S.C.R.
1005, supra) pointing out the difference between tax and fee.
At pages 1040-41 says Mukherjea J., as he then was:
―The second characteristic of tax is that it is an imposition
made for public purpose without reference to any special
benefit to be conferred on the payer of the tax. This is
expressed by saying that the levy of tax is for the purposes of
general revenue, which when collected forms part of the public
revenues of the State. As the object of a tax is not to confer any
special benefit upon any particular individual, there is, as it is
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said, no element of quid pro quo between the tax-payer and the
public authority‖
―a ‗fee' is generally defined to be a charge for a special service
rendered to individuals by some governmental agency.‖
At page 1042 the learned Judge. Enunciates- ―the distinction
between a tax and a fee lies primarily in the fact that a tax is
levied as a part of a common burden, while a fee is a payment
for a special benefit or privilege Public interest seems to be at
the basis of all impositions, but in a fee it is some special
benefit which the individual receives.‖ After pointing out the
ordinarily there are two classes of cases where Government
imposes ‗fee' upon persons, the first being the type of cases of
the licence fees for Motor Vehicles or the like and in the other
class of caes.... The Government does some positive work for
the benefit of persons and the money is taken as the return for
the work done or services rendered‖ (vide page 1043), it is
said further-―If the money thus paid is set apart and
appropriated specifically for the performance of such work and
is not merged in the public revenues for the benefit of the
general public, it could be counted as fees and not a tax. There
is really no generic difference between the tax and fees and as
said by Seligman, the taxing power of a State may manifest
itself in three different forms known respectively as special
assessments, fees and taxes. ―Finally at page 1044 the striking
down by the High Court of the imposition of fee under section
76. Of the Madras Act was upheld on the ground - ―It may be
noticed, however, that the contribution that has been levied
under section 76 of the Act has been made to depend upon the
capacity of the payer and not upon the quantum of benefit that
is supposed to be conferred on any particular religious
institution. ―Benefit conferred or any particular religious
institution would have been undoubtedly benefit conferred on
the payer of the fee.
After the decision of this Court in Shirur Mutts case (supra) section 76
of the Madras Act was amended. The effect of the amendment came to
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Excise Appeal No.75714 of 2017
be considered by this Court in the case of H.H. Sudhundra Thirtha
Swamiar v. Commissioner for Hindu Religious & Charitable
Endowments. Mysore.1963 Supl. 2 SCR 302 Point out the various
differences between the earlier and the amended one at pages 320-21
the imposition of fee was upheld.
In two other cases of this Court following the ratio of Shirur Mutt's
decision the imposition of fee was upheld, vide, Mahant Sri Jagannath
Ramanuj Das and another v. The State of Orissa and another and
Ratilal Panachand Gandhi v. The State of Bombay and other [1954]
SCR 1055.
61. As evident from above the apex court elaborately considered
several cases to arrive at a distinction between a fee and a tax. It
noted therein that in the case of (i) The Hinger-Rampurr Coal
Co.Ltd. & Ors v. The State of Orissa and Others [1961] 2 SCR
537 it was noted as under:
―...... the challenge was to the cess levied by the Orissa Mining Areas
Development Fund Act, 1952. The petitioners' stand in the first
instance was that the cess levied was not a fee but a duty of excise on
coal and hence beyond the competence of the State Legislature.
Alternatively they contended that even if it was a fee it was beyond
the competence of the State Legislature for some if other reason not
necessary to be mentioned here. The cess imposed was upheld as a
‗fee' relatable to Entry 23 of List II read with Entry 66. In other words
it was upheld as a ‗fee' in respect of regulation of mines and mineral
development. Gajendragadkar J, as he then was, delivered the
judgment on behalf of the majority and discussed the point at same
length. At page 545 are to be found a few words which go directly
against the contention of Mr. Tarkunde. Says the learned Judge:‖ ..... a
fee is levied essentially for services rendered and as such there is an
element of quid pro quo between the person who pays the fee and the
public authority which imposes it.‖
62. The apex court in the aforesaid matter further added :
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―It is true that when the Legislature levies a fee for rendering
specific services to a specified area or to a specified class of
persons or trade or business, in the last analysis such services may
indirectly form part of services to the public in general. If the special
service rendered is distinctly and primarily meant for the
benefit of a specified class or area the fact that in benefitting
the specified class or area the State as a whole may ultimately
and indirectly be benefitted would not detract from the
character of the levy as a fee. Where, however, the specific service
is indistinguishable from public service, and in essence is directly a
part of it, different considerations may arise. 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 purpose must be distinguished from its ultimate or
incidental results or consequence. That is the true test in determining
the character of the levy.‖
63. Dwelling on fee, it may be pointed out that, at times a fee
charged, may have a regulatory connotation and not be intended for
delivering of a service. Dealing with such regulatory fees, the apex
court in the case of State of U.P. & Ors. v. Vam Organics
Chemicals Ltd. [AIR 2003 SC 4650] noted that the locus classicus,
on the distinction between a "fee" and "tax" as was its decision in the
case of The Commissioner, Hindu Religious Endowments,
Madras v. Shri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt
(1954 SCR 1005), wherein the apex court had laid down the
distinctive characteristics of a tax and fee. It is pertinent to quote the
following gextract from the said judgement, as was reiterated by the
apex court in its order.
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―a fee is generally defined to be a charge for a special service
rendered to individuals by some governmental agency. The amount of
fee levied is supposed to be based on the expenses incurred by the
Government in rendering the service, though in many cases the costs
are arbitrarily assessed. Ordinarily, the fees are uniform and no
account is taken of the varying abilities of different recipients to pay.
These are undoubtedly some of the general characteristics, but as
there may be various kinds of fees, it is not possible to formulate a
definition that would be applicable to all cases‖.
However, the Court made it clear that the service need not necessarily
be one which is voluntarily taken by the person responsible for paying
the fee. There may be an element of compulsion or coerciveness
present ―if in the larger interest of the public, a State considers it
desirable that some special service should be done for certain people,
the people must accept these services, whether willing or not.‖
................
The word ―service‖ in the context of a fee could, therefore, include
therefore a levy for a compulsory measure undertaken vis-a-viz the
payer in the interest of the public. This ‗coercive' measure has been
subsequently judicially clarified to mean a ‗regulatory measure'. But in
the case of both kinds of services whether compulsorily imposed or
voluntarily accepted, there would have to be a correlation between the
levy imposed and the ―counter payment or quid pro quo‖. However,
correlationship between the levy and the services rendered is one of
the general character and not of mathematical exactitude. All that is
necessary is that there should be a reasonable ‗relationship' between
levy of the fee and the service rendered.‖
64. In essence for a levy to be a fee quid pro quo was necessary, not
in mathematical exactitude and such fee charged should not be
excessive. Distinction between regulatory and compensatory nature of
a fee has also been made by the courts in several cases - for records
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Excise Appeal No.75714 of 2017
in the case of State of Tripura & Ors. v. Sudhir Ranjan Nath [AIR
1997 SC 1168] can be referred to.
65. It is thus clear from the above that the courts have held the
sums payable as „Fee‟, when charged for services rendered
demonstrating an element of quid pro quo, and there being a general
co-relationship between the cost of rendering such services and the
Fee charged.
66. Justice R.P. Sethi‟s seminal Work "Supreme Court on Words &
Pharases-Third Edition" on "fee" and "tax" has the following to
state:
It can also be noted from the paras extracted, that it fairly
brings out the differences between a "fee" and a "tax" as we have
already noted and discussed in paras above.
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The main difference between "a fee" and
"a tax" is on account of the source of
power. 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
from an exercise of the police power. The
"police power" is different from the
"taxing power" in its essential principles.
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 charge levied on that class to defray
the costs of providing benefit to such a
class is "a fee". Therefore, in the
judgment in State of West Bengal v.
Kesoram Industries Ltd. : 2004 AIR SCW
5998: (2004) 10 SCC 201, 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 to regulate, the charge is not a
Fee and Tax. According to Words and tax even if it produces revenue for the
Phrase‟, Permanent Edition, Vol. 41 Page Government. But where the Government
230, a charge or fee, if levied for the intends to raise revenue as the primary
purpose of raising revenue under the object, the imposition is a tax. Int eh
taxing power is a „tax‟. Similarly, case of synthetics and Chemicals Ltd. vs.
imposition of fees for the primary State of U.P., (1990) 1 SCC 109 : AIR
purpose of „regulation and control‟ may 1990 SC 1927, it has been held that
be classified as fees as it is in the regulation is a necessary concomitant of
exercise of „police power‟, but if revenue the police power of the State and that
is the primary purpose and regulation is though the doctrine of police power is an
merely incidental, then the imposition is American doctrine, the power to regulate
a „tax‟. A tax is an enforced contribution is a part of the sovereign power of the
expected pursuant to a legislative State, exercisable by the competent
authority for purpose of raising revenue legislature. However, as held in
to be used for public or governmental Kesoram's case (supra), in the garb
purposes and not as payment for a of regulation, any fee or levy which has
special privilege or service rendered by a no connection with the cost or
public officer, in which case it is a „fee‟. expense of administering the
Generally speaking „taxes‟ are burdens of regulation cannot be imposed and
a pecuniary nature imposed for defraying only such levy can be justified which can
the cost of governmental functions, be treated as part of regulatory measure.
whereas charges are „fees‟ where they To that extent, the State‟s power to
are imposed upon a person to defray the
cost of particular services rendered to his
account ...................................................
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Agency. The amount of fee levied is Cannot be regarded as "tax" since the
supposed to be based on the expenses characteristics of tax, namely, its levy
incurred by the Government in rendering being compulsive in nature, its burden
the service, though in many cases the being common, it being payable
costs are arbitrarily assessed. Ordinarily, according to the varying abilities of the
the fees are uniform and no account is person to be charged, are wholly absent
taken of the varying abilities of different in both of them. As „duty‟ or „cess‟ stands
recipients to pay. These are undoubtedly on the same footing as „tax‟, the „licence
some of the general characteristics, but fee‟ of „fixed fee‟ cannot be regarded
as there may be various kinds of fees, it either as „duty‟ or „cess‟. State of U.P. an
is not possible to formulate a definition dothers v. Sheopat Rai an dothers.
that would be applicable to all cases. The (1994) Supp 1 SCC 8.
Commissioner, Hindu Religious
Endowments, Madras v. Sri Lakshmindra
Thirtha Swamiar of Sri Shirur Mutt.
(1954) SCR. 1005: AIR 1954 SC 282,
295, 296.
The term "licence fee" and the term
"fixed fee" in the context of the U.P.
Excise Act, 1910, the Ordinance and the
Excise (Amendment) Rules, 1972 being
the consideration, which the Government
receives from a private party to part in
latter‟s favour its exclusive privilege or
right to vend foreign liquor in specified
shops of any locality in U.P. State under
a contract by way of Shop Licence Form
(Form FL-4) or (Form FL-5), it is held by
us, to be not „fee‟ at all, falling in line
with the view expressed in this regard by
a Constitution Bench of the Court in Har
Shankar v. Deputy Excise and Taxation
Commissioner, (1975) 1 SCC 737: AIR
1975 SC 1121, and other decisions
adverted to. If that be so, the „licence
fee‟ or „fixed fee‟ cannot partake of the
character of either „regulatory fee‟ or
„compensatory fee‟ so as to regard it as
„fee‟. Thus, neither the „licence fee‟
nor „fixed fee‟ realizable from a private
party for granting the privilege or
right to sell or vend foreign
liquor to such party can fall within
the ambit of the subject „fee‟ in the entry
to List II of the Seventh Schedule to
the Constitution. Then, the „licence
fee‟ or „fixed fee‟ under consideration,
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Excise Appeal No.75714 of 2017
67. In the case of H.M. Sudhundra Tirtha Swamiar v.
Commissioner for Hindu Religious and Charitable Endowment,
Mysore (1963 AIR 1966) while dealing with a separate question,
relating to authority and power of Mahant, the hon‟ble apex court with
regard to identity fee noted that
―a fee does not cease to be of that character merely because
there is an element of compulsion in it, nor is it a postulate of a fee
that it must have direct relation to the actual service rendered.
Absence of uniformity is not a criterion on which alone it can be said
that the levy is of nature of a tax.‖
Thus what characteristically comes out from the aforesaid
discussions for a levy to be held as fee, is
(i) there ought to be provisioning of special services and
(ii) benefit thereof also need to accrue in some measure to/on
the person responsible for paying the said levy.
To the aforediscussed multitude of cases, can also be added
cases, where the levy was in fact held to be in the nature of tax, as
the apex court has laid down principles that help determine and
establish the nature of levy as a tax of a fee. We may thus added the
following citations as they too bring out the difference between a "fee"
and a "tax" -
(i) Commissioner of Central Excise, Lucknow v. M/s. Chhata Sugar
Co. Ltd. [ AIR (2004) SC 3005]
(ii) Nagar Mahapalika v. Durga Das Bhattacharya
[1968 (3) SCR 374]
(iii) Kandivali Co-Operative Municipal Corporation of Greater
Bombay [AIR (2015) SC 1434]
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Excise Appeal No.75714 of 2017
68. Having stated and examined the legal position it is of foremost
importance to understand the concept of tax vs. fee. In view of the
enunciation as flows from the case law pronouncements and
judgements of the apex court, it is evident that distinction between tax
and fee lies primarily in the fact that a tax is levied as part of a
common burden, while "fee" is for payment of specific benefit or
privilege. The aspect of a special advantage could also be secondary to
the main objective of regulatory controls in public interest. If the
element for generation of revenue for general purposes of the State
predominates, the levy would take the colour of the "tax". In regard to
fee, there is a co-relation between the fee collected and the service
intended to be rendered. In ascertaining whether the levy is by way of
a fee the true test is whether the primary and essential purpose of the
levy is to render specific/specified services to a specified area or a
class. State reaping dividends/benefit out of the levy, is
inconsequential to such a determination, as in any which case
indirectly the state too would benefit by bringing around greater
development for/of its people and or its area. Only caveat could be
that the power of the State to levy fee would be conditioned by the
fact that it by and large would and is a quid pro quo for the services
rendered. The said correlation would however be of a general nature
and character and not one with mathematical exactitudes. All that is
required is the existence of a "reasonable relationship" between the
levy and the service when characterized as a fee, as has been
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Excise Appeal No.75714 of 2017
extensively deliberated, discussed and demonstrated in respect of the
present matter, and the impugned appeal.
69. The appellant in support of their stance have referred to this
Tribunal‟s decision in the case of the Eastern Coalfields Ltd. Vs.
Commissioner of Central Excise, Bolpur, decided vide Final Order No.
75656-75666 of 2025. That was a case concerning non-inclusion in
assessable value of certain components like royalty, stowing excise
duty and certain cesses like rural employment and production cess,
primary education cess, road cess and health cess. In the said case 8
out of 11 appeals were allowed by this Tribunal following the Tribunal‟s
ruling in the case of Koperteck Metals Pvt. Ltd., Vs. Commissioner of
CGST & Central Excise, New Delhi ( Final Order No. 59511-59720 of
2024 ) on account of delayed adjudication, one appeal was dismissed
on grounds of limitation, while in respect of the remaining two the
question pertaining to royalty was decided against the appellant in
view of the express findings of a nine Member Constitution Bench of
the apex court and the binding precedent, holding royalty as not to be
a ―tax‖, in the case of Mineral Area Development Authority Vs. SAIL
(2024 (21) Centax 378 SC) and as for cess we are of the view that the
said decision was rendered sub silentio. Hence we are of the view that
the appellant cannot draw any support in its favour, therefrom.
Interestingly, it may not be out place to point out that a question
pertaining to clean Energy Cess payable on Coal imported, albeit in a
different context of availment of CENVAT Credit, did come up for
consideration before a co-ordinate bench of this Tribunal in the case of
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Excise Appeal No.75714 of 2017
Deccan Cements Ltd., Vs. Commissioner of Central Tax,
Rangareddy (2020-371-ELT 795 (Tri.-Hyd.) and has already been
dwelt upon in earlier para 57, wherein while holding inadmissibility of
the cess so paid to CENVAT Credit, the Tribunal also distinguished the
case of Commissioner Vs. Shree Renuka Sugar Ltd., (2014 (302) ELT
33 Kar) that was decided in favour of the appellant. Thus it can
certainly be stated that each case of levy of cess would have to stand
on its own merit and no precedent support can be drawn from a
judgement of the co-ordinate bench, decided over a different kind of
levy of cess, as may be put to question. Moreover, as elaborately
discussed in foregoing paras we do not find any akinness in the
"Market Fee" in question in the impugned matter with Cess (es) as
concerned for the cited case of Eastern Coalfield Ltd., besides the fact
of their leviability under different statutes with different objective,
scope and purpose of the enactment. Moreover, with a different set of
scope, objective and purpose, the question of creation of any specific
MADA kind of a body also does not arise therein.
CONCLUSION
70. In view of the aforesaid and the detailed conspectus of the
matter it cannot be doubted that the impugned levy herein is in the
nature of fee and therefore would certainly form part of the assessable
value for the purpose of determination of the transaction value in
terms of Section 4 of the Central Excise Act and would be required to
be included therein. From the facts of the present case, we note that
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Excise Appeal No.75714 of 2017
the show cause notice in the present matter was issued on 03.02.2016
for the period March 2011 to October 2015 i.e. invoking the extended
period of limitation as envisaged under Section 11A(4) of the Central
Excise Act. Given the tortuous history of litigation in the matter and
the broad framework of law it is evident that the appellant appeared to
have harboured a bonafide belief that the nature of the impugned levy
was a "tax" imposed and not a „fee‟, and therefore not includible in the
determination of the assessable value, being statutorily excludible.
This belief and perception gets buttressed further when a look at
the excise invoice raised by the appellant are taken note of. For ready
reference one such invoice is scanned below:-
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Excise Appeal No.75714 of 2017
71. It can be seen from the said invoice that MADA Market Fee @
1% of the basic value has been clearly indicated in the invoice. Under
such circumstances it would be well impossible to fasten the charge of
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Excise Appeal No.75714 of 2017
suppression on the appellant and we are of the firm view that there is
no case for alleging suppression on part of the appellant. The extended
period of limitation would thus fail on this ground, there being
considerable force in the appellant‟s plea on the time bar aspect. The
question pertaining to the authority‟s competence to levy tax being
initially decided against the State by the hon‟ble Patna High Court and
only in July 2024 it came to be settled by the apex court, thus was
clearly an interpretational matter, as well. The demand for normal
period alone, would thus survive in the circumstances. Given the fact
that the normal period of limitation as then prescribed was for a period
of 1 year, we hold that the appellant shall in the present matter be
required to pay Central Excise duty after inclusion of the MADA fee
collected, for the period as flowing within the normal period of
limitation. Under the circumstances the appellant is also not liable for
imposition of any penalty.
ORDER
In view of our discussions above, we order as under:
(i) Market fee levied levied under Section 90A of the MADA Act is a "fee" and not "tax".
(ii) The Market fee, levied @ 1% and collected by the appellant from its customers is required to be included in the determination of the assessable/transaction value under Section 4 of the Central Excise Act, 1944.78
Excise Appeal No.75714 of 2017
(iii) The demand confirmed by the lower authority for extended period does not survive and is thus set aside.
(iv) Differential Excise Duty for normal period is payable along with interest, by the appellant.
(v) Penalty imposed by the lower authority is set aside.
The appeal is disposed in the aforesaid terms.
(Order pronounced in the open court on 25.07.2025.) Sd/ Sd/ (RAJEEV TANDON) (R. MURALIDHAR) MEMBER (TECHNICAL) MEMBER (JUDICIAL) sm