Punjab-Haryana High Court
M/S Nestle India Limited vs The State Of Haryana And Others on 28 May, 2010
Author: Jaswant Singh
Bench: Jaswant Singh
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH.
Civil Writ Petition No.16213 of 2002
Date of Decision:- 28th May, 2010
M/s Nestle India Limited
..........Petitioner.
Versus
The State of Haryana and others
..........Respondent
CORAM: HON'BLE MR.JUSTICE M.M.KUMAR
HON'BLE MR.JUSTICE JASWANT SINGH.
Present: Mr. M.L.Sarin, Senior Advocate with
Mr. Sandeep Goyal, Advocate.
Mr.JK Sibal, Senior Advocate with
Mr.Sandeep Suri, Advocate.
Mr. Manoj Bajaj, Advocate.
Mr. HS Deol, Advocate.
Mr. JS Ahlawat, Advocate.
Mr. Adarsh Jain,Advocate
Mr. Pankaj Jain, Advocate.
-for the petitioners.
Ms. Ritu Bahri, Deputy Advocate General, Haryana
for respondents.
1. To be referred to the Reporter or not ?
2. Whether the judgement should be reported in the Digest ?
CWP No.16213/2002 etc. -2-
JASWANT SINGH,J.
This order will dispose of 20* number of cases bearing CWP Nos. 19827, 19828 and 19829 of 2001, 331, 332, 333, 334, 1070, 1083 and 16213 of 2002, 18361 and 19154 of 2003, 3715, 4219, 4241 of 2004, 5012 and 5030 of 2005 and C.R.Nos. 379, 292 and 231 of 2004, as common questions of law and similar facts are involved. However, with the consent of the learned counsel for the parties facts are being taken from CWP No. 16213 of 2002.
2. This writ petition has been filed under Article 226/227 for issuance of an appropriate writ, order or direction and thereby declaring the provisions of the Haryana Murrah Buffalo and Other Milch Animal Breed (Preservation and Development of Animal Husbandry and Dairy Development Sector) Act,2001 (for brevity the 2001 Act) (P2) and the Haryana Murrah Buffalo and Other Milch Animal Breed Rules,2002 (for brevity the 2002 Rules) (P4) as unconstitutional and ultra vires the legislative powers of the State inasmuch as the same encroach upon the legislative field occupied by the Acts of the Union Parliament namely, the Industries (Development & Regulation) Act,1951 (for brevity 1951 Act) read with Essential Commodities Act,1955 (for brevity 1955 Act) read with the Milk and Milk Products Order,1992 qua the regulation of the milk plants/industry. It is further prayed to quash the impugned notification dated 9.9.2001 (P3) as well as the impugned communication/letters dated 7.8.2002, 9.9.2002, 13.8.2002 and CWP No.16213/2002 etc. -3- 19.9.2002 (P5 to P8 respectively).
3. The brief facts giving rise to the matter in controversy are that petitioner-M/s Nestle India Limited, registered and incorporated under the Companies Act,1956, as well as registered under the Haryana Sales Tax Act,1973 and Central Sales Tax Act,1956, is engaged in the manufacturing of various types of food products based on milk and is having its milk plant in Village Patti Kalyana, Kiwana Road, Samalkha, District Panipat. It is alleged that the petitioner is using milk as raw material/ingredient from various sources throughout India. The above said milk plant was established in the year 1992 and started the collection of milk w.e.f. October1996. The petitioner was allotted milk shed areas for collection of milk under the Milk and Milk Products Order,1992 (for brevity Order of 1992) and details of which are given in paragraph 4 of the writ petition. It is further alleged that respondent no.2-Dairy Development Haryana has granted a licence to the petitioner under the Order of 1992 on 28.9.1995 (P/1) with an authorised installation capacity of 75,000 litres milk per day valid for five years and subsequently on 25.10.2000 (P1/A) the said limit was enhanced to the extent of 2.50 lakh litres per day. It is further alleged that on 12.4.2001, the 2001 Act came into force and was enacted to provide for the improvement of genetic stock of the milch animals specifically the Murrah, Sahiwal and Haryana breed of buffalo to improve the dairy farming and for the development of animal husbandry within the state of Haryana and also to constitute the CWP No.16213/2002 etc. -4- Haryana Livestock Development Board (for brevity Livestock Board). Respondent no.2-Department of Animal Husbandry while exercising the powers under section 6(1) of the 2001 Act issued notification dated 9.9.2001 (P3) and levied a cess @ 10 paise per litre on the installed capacity of the milk plant. Government of Haryana in exercise of powers conferred under Section 17(1) and (2) of the 2001 Act, framed and notified The Rules of 2002 w.e.f. 10.7.2002. That after notifying the 2002 Rules, respondent no.5-The Semen Bank Officer, Karnal vide letters dated 7.8.2002 (P5) raised a demand of Rs.73,75,000/- from the petitioner on account of cess @ 10 paise per litre for the period from 9.9.2001 to 30.6.2002. Intimation regarding non-deposit of requisite cess by the petitioner-company was also sent by respondent no.5 to respondent no.4- Deputy Commissioner, Panipat for taking necessary steps to recover the said amount, vide letter dated 9.9.2002 (P6). Subsequently vide letter dated 13.8.2002 (P7) respondent no.4-Deputy Commissioner, Panipat also asked the petitioner to deposit the levy of Rs.73,75,000/-. Again reminder dated 19.9.2002 (P8) was sent to the petitioner by respondent no.4 for making the payment. Ultimately the petitioner vide letter dated 26.9.2002 (Annexure P9) submitted to respondent no.5 that they have not received letter dated 7.8.2002 and 9.9.2002 (Annexure P5 and P6 respectively) and requested to make available the said letters for making proper reply.
4. Feeling aggrieved against the action of the respondents, while demanding an amount of Rs.73,75,000/- on account of cess, the CWP No.16213/2002 etc. -5- present writ petition is filed inter alia on the following grounds:-
(i) That enactment of 2001 Act is a colorable exercise of power as the same is indirectly seeking to regulate the milk plant which is a 'scheduled' industry under the 1951 Act as well as the Order of 1992 and therefore the same is only subject to the regulation by the Union Parliament and as such the impugned letters/communications (P5 to P8) have become non est in the eyes of law.
(ii) Under Entry 27(2) of the First Schedule to the 1951 Act which relates to Milk Foods, the Milk Plants throughout India are a scheduled Industry under the 1951 Act and are subject to regulation under the said Central Act. Therefore keeping in view the provisions of Article 246(1) read with List 1, Entry 52 of the 7th Schedule to the Constitution of India which relates to "Industries", the control of which by the Union is declared by Parliament by law to be expedient in the public interest. Further Section 2 of the 1951 Act declares that it is expedient in the public interest that the Union should take under its control the Industries specified in the First Schedule.
(iii)That under Section 3 of the 1955 Act, the Order of 1992 was issued and which provides for registration of all milk plants with the appropriate authority and therefore, the 1955 Act read with Order of 1992 completely occupy the field of regulation of milk plants and milk food industry and as such the impugned Act of 2001 and Rules of 2002 are ultra vires the powers of the State Legislature as the field is already occupied by the Central Acts and the impugned action of the CWP No.16213/2002 etc. -6- respondent-State is beyond its legislative competence. The action of the respondents is not legitimate in view of the entries 45 to 63 of List II of the 7th Schedule of the Constitution of India and as such the cess is being collected without authority of law and is violative of Article 265 of the Constitution.
(iv) initially the petitioner was registered under the Order of 1992 vide licence dated 28.9.1995 (P1) with an authorised installation capacity of 75,000 litres of milk per day for five years and subsequently the same was enhanced to 2.50 lakh litres of milk per day for five years vide licence dated 25.10.2000 (P1/A) and as such the petitioner is not regulated under the Act of 2001 as well as the Rules of 2002 and on that count also letters/communication for raising a demand of Rs.73,75,000/- is non est, unjustified and untenable in the eyes of law.
(v) The impugned cess to the tune of Rs.73,75,000/- has been imposed on the basis of the licenced capacity of the milk plant of the petitioner and not on the actual quantity of the milk handled and processed at the milk plant and therefore, the same is essentially a tax on handling, processing and manufacturing of milk products and therefore the action is arbitrary.
(vi) Neither any opportunity of hearing was granted to the petitioner before raising a demand of Rs.73,75,000/- as cess nor the details of said liability have been provided
5. Respondents 1 to 5 filed written reply through Dr. V.K. CWP No.16213/2002 etc. -7- Vats, Joint Director, Animal Husbandry Department, inter alia, stating therein that the 2001 Act is enacted to provide for the improvement of genetic stock of milch animals specifically the prime breed Murrah and local breeds like Sahiwal and Haryana to improve the skills and technology in the dairy farming and for development of the animal husbandry. It is further stated that keeping in view the provisions of Article 48 of the Constitution of India there is a duty of the respondents to take steps to organize agriculture and animal husbandry on modern and scientific lines in particular and it should take steps for preserving and improving the breeds and prohibiting the slaughter of cows and calves and other milch and other drought cattle. The 2001 Act was passed by the State Legislature to achieve the objective enshrined in Article 48 of the Constitution through Livestock Board established by the respondents. The impugned cess has been imposed as compensatory fees for the welfare of farmers and animal breeders by providing various facilities namely artificial insemination (AI), training and practice to farmers for improving the breed of the State, animal health services and insurance of animals; and therefore these facilities will ultimately benefit the petitioner by enhancing the production of milk to run the milk plants upto the maximum and optimum utilization of licenced capacity granted to the petitioner. So far as the imposition of cess on the basis of licenced capacity without reference to actual production is concerned is imposed by adopting a feasible method because actual production of milk in a milk plant may CWP No.16213/2002 etc. -8- vary from day to day and season to season. It is further submitted that the respondent-State has the power to impose cess in the nature of fee under Entry No.66 read with Entry No.15 of List II of the Seventh Schedule of the Constitution of India and the scope and object of the 1951 Act read with Order of 1992 is entirely different from the 2001 Act read with 2002 Rules and both are operating in different fields and the case is not attracting the doctrine of occupied field at all. The Order of 1992 was amended on 25.7.2001 for registration of a Unit handling upto 1 lakh litres of milk per day and the registering authority shall be the officer of concerned State Government /Union Territory and the registration shall be made after inspection by the Committee to be constituted under the Order of 1992 for maintenance of proper standard of sanitary requirements of milk and milk products. The cess has been levied by the respondents in the nature of regulatory field to fulfill the expenses incurred during inspection stated above for registration of the milk plant and for improvement of the quality of milk and milk products within the State. It is also the case of the respondents that 2001 Act has been amended by the State Legislature vide amendment dated 10.10.2002 (R1) to facilitate the owners of the milk plants in paying the cess in the nature of fee and after clause (f) of Section 2 clause (ff) was inserted which reads as under:-
(ff) "lean period" means the period commencing from 1st April and ending on 30th June of every year when milk production gets reduced due to climatic CWP No.16213/2002 etc. -9- and biological reasons.
Further the sub-section(1) of Section 6 of the Act was also substituted which reads as under:-
"(1) For the purpose of this Act and subject to the rules made thereunder, a cess not exceeding fifteen paise per litre shall be imposed on the licensed capacity of a milk plant:
Provided that during the lean period the cess at the above rate shall be imposed on the seventy-five percent of the licensed capacity of a milk plant.
Provided further that no cess shall be levied on the day(s) when a milk plant remains closed for the reasons beyond the control of the management."
6. In addition to the written statement, respondents also filed affidavit dated 25.7.2005 of Dr. O.P. Yadav, Poultry Development Officer and which was taken on record vide order dated 14.11.2005 passed by this Court. It was stated therein that Government of India in order to maintain and increase the supply of liquid milk of the desired quality in the interest of public and for regulating the production, supply and distribution of milk and milk produce has made the Order of 1992 and as per the terms and conditions prescribed under paragraph 5(1) of the said Order no new milk plant shall be set up or expand the capacity of the existing milk plant without obtaining permission/registration from the concerned authority for handling milk CWP No.16213/2002 etc. -10- in excess of 10,000 litres per days or milk products containing milk solids in excess of 500 tones per annum. Proper procedure is prescribed for registration and the registration of the Unit handling upto two lakh litres of milk per day or 10,000/- MT of milk solids per annum within the State or Union Territory, the registering authority shall be an officer of the concerned State Government or Union Territory as the case may be. It was further stated that milk plants which are handling milk in excess of 10,000 litres per day registered and operating within the State of Haryana under the Order of 1992 are liable to pay cess at the rate of 10 paise per litre of the milk as imposed by the State of Haryana on the licenced capacity of a milk plant and the same is credited to the "Funds" of the Board as per the provisions of 2001 Act. It is also submitted that as per Section 3 of the Amendment Act 2002 dated 10.10.2002 during the lean period i.e. from Ist April to 30th June the cess shall be imposed on the 75% of the licenced capacity of a milk plant. It is further provided that no cess shall be levied on the days when a milk plant remains closed for the reasons beyond the control of its management and further it is also submitted that milk plants are at liberty to move an application before the proper authority to increase/decrease licenced capacity. It has specifically been submitted that the present petitioner as well as other petitioners in the connected writ petitions, have been working as per their licenced capacity and whenever any application has been moved their capacity has been reduced as per their request and a detailed chart of cases CWP No.16213/2002 etc. -11- showing their licenced capacity and /or reduced capacity on the basis of their request is given in paragraph 8 of the said affidavit. Petitioner's name finds mention at Sr.No.11. A perusal of the said entry reveals that against the licenced capacity of 2.50 lakh litres per day, petitioner has not moved any request for reduction of its capacity. It is further stated in the said affidavit that the levy of cess by the respondents is perfectly legal and is for the improvement of genetic stock of milch animals that will ultimately benefit the petitioner by enhancing the production of milk within the State of Haryana. The Act of 2001 is neither arbitrary nor discriminatory rather the same is legal, just and constitutional. Keeping in view the provisions of Order of 1992, the Central Government as well as the State Governments are competent to register the milk plants and the cess is imposed upon their licenced capacity and the word "licenced capacity" is defined under Section 2(g) of the 2001 Act, to mean that maximum production capacity with reference to milk for which the unit is registered under the Milk and Milk Product Order of 1992. The exclusion of farmers/co-operative societies as well as those who handle milk less than 10000 litres per day by adopting dairy as means to earn livelihood, has been justified on the ground that they cannot be equated with the milk plants like the petitioner which are running their plants solely for commercial objectives. The cess imposed by the respondents is utilised for providing various facilities/ services to the livestock breeders for improving the milch animals to enhance the milk productivity within the State. The details of proposal CWP No.16213/2002 etc. -12- for the utilisation of amount of cess collected by the respondents are enumerated in Annexure R/3.
It is further clarified and submitted by way of an affidavit dated 20.7.2009 filed by Dr. G.S. Jakhar, Chief Co-ordinator (Frozen Semen Technology), Department of Animal husbandry and Dairying, that the said proposal (R3) has been duly approved by the Livestock Development Board in its 9th meeting held on 22.6.2003 under agenda Item No.23. Further the details of expenditure of cess amount as approved by the Livestock Development Board in its 26th meeting held on 13.7.2009 is also given in paragraph no.3 of the said affidavit. So far as The Punjab Dairy Development Board Act,2000 is concerned it is stated that the said Act can not be termed as an identical case and no parallel can be drawn as in case of Punjab cess is imposed on the installed capacity irrespective of variation of production from month to month and from season to season but in case of Haryana the cess is imposed on 75% of the licenced capacity of milk plant during the lean period i.e. from 1st April to 30th June every year and no cess is levied on the days when a milk plant is closed for the reasons beyond the control of its management.
7. Petitioner filed their counter reply dated 13.7.2009 to the affidavit dated 25.7.2005 filed by Dr. O.P.Yadav, Poultry Development Officer and disputed the facts enumerated in para 8 of the affidavit and has appended a self-serving table (P10) (wrongly written as P11) and further reiterated that their case is identical to the Punjab CWP No.16213/2002 etc. -13- case.
8. It may also be noticed here that 2001 Act was amended vide amendment dated 27.2.2006 for clause (h) of Section 2 of the Principal Act and the following clause was substituted:-
(h) "milk plant" means a plant owned by any person or manufacturer registered under the Milk and Milk Product Order,1992, of the Central Government and operating within the limits of the State of Haryana but not including milk chilling centres supplying milk to the milk plants within the State of Haryana paying cess on the quantity of milk supplied by them to the said plants subject to the production of authentic proof of such payment; and".
9. Prior to the amendment dated 27.02.2006, the definition of the 'milk plant' under Clause (h) of Section 2 of 2001 Act was as under:-
"milk plant" means the dairy plant owned by any person undertaking, establishment or unit as has been registered under the Milk and Milk Product Order, 1992, of the Central Government and operating within the limits of the State of Haryana".
10. We have heard learned counsel for the parties at length and perused the record. The primary argument raised on behalf of the CWP No.16213/2002 etc. -14- petitioners is that the provisions with regard to levy of milk cess in case of Haryana is paramateria with the provisions in the case of Punjab, which have already been held to be arbitrary and discriminatory by the Hon'ble Supreme Court in the judgment reported as (2004) 8 Supreme Court Cases 621 titled as Punjab Dairy Development Board and another Versus Cephan Milk Specialties Ltd., and others. Therefore it is contended that on the parity of reasoning the levy of the milk cess impugned herein deserves to be struck down.
First of all we will deal with the judgment reported as (2004) 8 Supreme Court Cases 621 titled as Punjab Dairy Development Board and another Versus Cephan Milk Specialties Ltd., and others. Hereinafter, we will make reference to this case as Punjab Case. In Punjab Case CWP Nos. 14803-11, 14683, 14840, 16838 of 2000 and 6146 of 2001 were decided/allowed by a Division Bench of this Court vide judgment dated 20th November, 2001 and the case is reported as Health and Foods Specialties Pvt. Ltd. and others Versus The State of Punjab and others, 2001(3) PLR 821. The Punjab Dairy Development Board filed an appeal before the Hon'ble Supreme Court against the Division Bench judgment dated 20.11.2001 and the same was dismissed vide judgment reported as 2004(8) SCC
621.
11. In Punjab initially the milk and milk products were subjected to a purchase tax at the rate of 4% as well as surcharge at the CWP No.16213/2002 etc. -15- rate of 10% of the purchase tax under Section 5A of the Punjab General Sales Tax Act, 1948. On July 19, 2000, the Governor of Punjab promulgated the Punjab Dairy Development Board Ordinance, 2000 and it was decided to levy cess on the milk plants by abolishing purchase tax on milk, at the rate of ten paise per litre of the licensed capacity of the milk plant. In these circumstances a demand notice was issued to the Writ Petitioners(therein) to pay cess at the rate of ten paise per litre of the licensed capacity for the period 19.07.2000 to 30.09.2000 and that was subject matter of challenge in those writ petitions. Subsequently, the ordinance was converted into the Act and it was published in the official gazette on October 20, 2000. The writ petitions were amended and the Act was also challenged alongwith the impugned demand of cess. After hearing the counsel for the parties the following questions were framed by learned Division Bench of this court, which are also reproduced: -
i) Is the cess a fee or a tax?
ii) Is the impugned levy illegal and invalid as the state
legislature has impugned upon a field that was already occupied?
iii) Was the state legislature competent to impose the impugned Cess?
12. All the three questions were decided in favour of the petitioners and the Writ Petitions were allowed and it was held that: -
(i) Impugned impost is a "Tax" and not a "Fee".
CWP No.16213/2002 etc. -16-
(ii) Impugned Act impinges upon the field covered by the 1951 Act.
(iii) The State Legislature is not competent to levy the impugned Cess under any of the 'Taxing Entries' in Lists II and III of the VIIth Schedule of the Constitution.
13. Aggrieved against the judgment dated November 20, 2001 passed by this Court, the Punjab Dairy Development Board went in appeal before the Hon'ble Supreme Court and it was held that the High Court was not correct in following the principles laid down in Kishan Lal Lakhmi Chand Versus State of Haryana, 1993 Supp. (4) SCC 464 as the High Court itself had noticed that the principles laid down in that case have been diluted by subsequent decision and it has been held that the observations in that cases are obiter. It was further held by the Hon'ble Supreme Court that the High Court was wrong in concluding that the field was already occupied by the central legislation namely the 1951 Act. It was also held that the High Court was wrong in its conclusion with regard to whether the levy was a tax or a fee. In view of the opinion taken by the Hon'ble Supreme Court, it was felt not necessary to decide whether the levy was a tax or a fee and the question was left open. Consequently the Hon'ble Supreme Court held that the High Court was right in concluding that the levy even if it be a fee, is arbitrary and discriminatory. Rest of the reasoning given by the High Court was held to be erroneous.
14. So now the point for determination is whether the CWP No.16213/2002 etc. -17- petitioners are successful in making out a case of "arbitrariness" and "discrimination" as held by the Hon'ble Supreme Court in Punjab's Case, which is the main thrust of the argument raised on behalf of the petitioners.
It would be at this stage advantageous to refer to the definition of "Milk Plant" in the Punjab case and in the case of Haryana under the 2001 Act.
The definition of word 'milk plant' given under Section 2(d) of the Punjab Act is given as under: -
"(d) 'milk plant' means a milk-handling, processing or manufacturing unit registered under the Milk and Milk Products Order, 1992 of the Government of India."
However the definition of 'milk plant' as given in 2001 Act as amended on 27.02.2006, Haryana is as under: -
"(h) "milk plant" means the dairy plant owned by any person undertaking, establishment or unit as has been registered under the Milk and Milk Product Order, 1992, of the Central Government and operating within the limits of the State of Haryana but not including milk chilling centres supplying milk to the milk plants within the State of Haryana paying cess on the quantity of milk supplied by them to the said plants subject to the production of authentic proof of such payment"CWP No.16213/2002 etc. -18-
Undisputedly as per clause (h) of Section 2 of the amendment dated 27.2.2006, 'milk plant' means the dairy plant owned by any person undertaking, establishment or unit as has been registered under the Milk and Milk Product Order, 1992 but not a milk chilling centre whose supply of milk to the milk plant has been subjected to payment of cess by the said milk plant. Even prior to the amendment, the definition of 'milk plant' as given in Section 2(h) was as under: -
"(h) "milk plant" means the dairy plant owned by any person undertaking, establishment or unit as has been registered under the Milk and Milk Product Order, 1992, of the Central Government and operating within the limits of the State of Haryana".
15. In view of the definition of "milk plant" in the case of Haryana under the 2001 Act, it cannot be construed that no levy of cess on the milk plants owned by farmers or co-operative societies can be imposed. Rather every person, undertaking, establishment or unit is covered under the definition given under clause (h) of Section 2 of the 2001 Act, however, with the rider that the same must be registered under the Milk Order of 1992. The rationale appears to be that only big players involved in handling milk for commercial purposes have been earmarked for the impost by saving the small "Dairy" as also the only convenient method available for measuring and collecting the cess in a totally unorganized sector.
16. Further as per amendment dated 10th of October, 2002, CWP No.16213/2002 etc. -19- Clause (ff) has been inserted vide which lean period was defined, which reads as under: -
"leans period" means the period commencing from 1st April and ending on 30th June of every year when milk production gets reduced due to climatic and biological reasons."
The definition reproduced above means the period commencing from 1st April and ending on 30th June of every year when milk production gets reduced due to climatic and biological reasons. It was further provided by way of this amendment dated 10th of October, 2002 by substituting sub section (1) of Section 6 of the 2001 Act that during the lean period cess at the above rate shall be imposed on the seventy five percent of the licensed capacity of a milk plant and it was further provided under second proviso that no cess shall be levied on the day(s) when a milk plant remains closed for the reasons beyond the control of its management.
To the contrary in the Punjab case, neither there was any provision for the lean period as in the case of Haryana nor there was any safeguard provided to the milk plants in case there was a temporary closure of machines or milk plant. So in a way under the Punjab Act there was no provision to vary levy in the seasons when the milk quantity was not available. Further as is abundantly clear from the aforesaid affidavit dated 25.07.2005 of Dr. O.P. Yadav that the milk plants are at liberty to move an application before the authority to increase or decrease the licensed capacity and whenever any application CWP No.16213/2002 etc. -20- is moved, their capacity has been reduced and detailed chart showing the variance in the capacity/reduced capacity on the basis of request of milk plant is given in para 8 of the affidavit and further the licensing capacity of the petitioner-M/s Nestle was 2.5 lac litre per day and there was no request ever for reduction of its capacity. So the plea of the petitioner that they are being unnecessarily harassed and burdened on the 'licensed capacity' is not supported by any cogent reasons. Had there been any reduction in the capacity, then the petitioner ought to have filed an application, meaning thereby the petitioners are getting the milk upto the optimum utilization of the capacity or if they are not getting, they are still at liberty to move an application for variance of their capacity. In fact , petitioner-M/s Nestle has got its licenced capacity from 75000 litres per day to 2.5 lacs litres per day on 25.10.2000(P1/A). So far as imposition of cess on the "chilling centres" are concerned, it has been clarified by way of an amendment dated 27th February, 2006 that the chilling centres supplying milk to the milk plants within the State of Haryana paying cess on the quantity of milk so supplied to the milk plants subject to authentic proof of such payments by said plants are not included in the definition of "milk plant". This has been done to avoid double taxation as ultimately it is the said milk plant which commercially uses the milk.
17. Further there is marked difference in the objects of Punjab Act and Haryana Act. The purposes of both the Acts are reproduced below in tabulated form:
CWP No.16213/2002 etc. -21-
Punjab Act Haryana Act To provide for creation of An Act to provide for improvement of Punjab Dairy Development the genetic stock of the milch animals Board for co-ordination specifically the prime breed 'Murrah' between the organizations and local breeds like 'Sahiwal' and engaged in dairy sector to 'Hariana' to improve the skills and uplift modern dairy-farming technology in the dairy farming and for technology system and to taking steps for the development of levy cess on the milk plants Animal Husbandry and Dairy by abolishing purchase tax Development Sectors and to constitute on milk the Haryana Livestock Development Board to achieve his objective.
Perusal of the objects of both the Acts reproduced hereinabove makes it clear that in Haryana Act there is specific provision for providing for improvement of genetic stock of milch animals specifically the prime breed 'Murrah' and local breeds like 'Sahiwal' and 'Hariana' to improve the skills and technology in the dairy farming, which is not so in the Punjab's case. The purpose of the Haryana Act as submitted by the respondents in their reply is perfectly in consonance with the directive principles contained in Article 48 of the Constitution, to organize animal husbandry for improving the breeds of milch cattle.
18. Further, for ready reference it is relevant to mention 14 of the judgment rendered by the Hon'ble Supreme Court in Punjab Dairy's case, which reads as under: -
"14. We find that the High Court was, however, right in concluding that the levy, even if it be a fee, is arbitrary and discriminatory. The levy is ostensibly for the purpose of co- ordination between organizations engaged in dairy sector CWP No.16213/2002 etc. -22- and to develop modern dairy-farming technology. However, the levy is on milk plants at the rate of 10 paise per litre of the licensed capacity. The term "milk plant" has been defined under Section 2(d) to mean a milk-handling, processing or manufacturing unit registered under the Milk and Milk Products Order, 1992 of the Government of India. This order has been issued under the Essential Commodities Act. This order has been issued under the Essential Commodities Act. Under this Order, only milk plants having an installed capacity for handling milk in excess of 10,000 litres per day or milk products in excess of 500 tones per annum require registration. Thus, only such milk plants i.e. milk plants which have an installed capacity to handle 10,000 litres per day or which produce milk products in excess of 500 tones per annum have a pay cess. Further the levy is not on the basis of actual production but on the licensed capacity of their plants. Thus if a milk plant had a licensed capacity of 40,000 litres, even though the actual consumption was only 10,000 litres, it would still have to pay cess at the rate of 10 paise per litre on 40,000 litres. It could not be denied that milk production and consumption vary from month to month and from season to season. Irrespective of such variation nand without any regard to the actual production or consumption, the levy is on the CWP No.16213/2002 etc. -23- installed capacity only. The levy was for the purpose of uplifting the standards of the dairy industry. Yet there is no levy on the farmers or co-operative societies, who produce the milk, nor on plants whose installed capacity is less than 10,000 litres per day. No rational explanation could be given as to why the levy was only on these plants. The only explanation given was that these plants could apply for reduction of the installed capacity in case they were not capable of using their entire capacity. It was stated that on such an application being made they would be allowed to reduce their installed capacity. We are not impressed by this explanation. One fails to understand why a milk plant should apply for reducing its capacity. It may consume, as per its capacity in seasons when that quantity of milk is available, but it may not be able to consume, as per its capacity in seasons or at times when milk of that quantity is not available. Further, due to temporary closure of some machines for repairs or maintenance, they may be consuming less during a particular period. Further, even if there is no production/consumption and even if the plant is shut down the cess would still have to be paid. This would be so even if the closure is for more than six months in any particular year. Irrespective of what their consumption/production is, these plants would have to CWP No.16213/2002 etc. -24- continue to pay cess at the rate of 10 paise per litre of their installed capacity." (emphasis supplied)
19. Para 5 of the Milk and Milk Product Order, 1992 S.O. 405 (E) dated 09.06.1992 provides for registration and which is reproduced hereunder: -
"Registration: - (1) On and from the date of commencement of this Order, no person or manufacturer shall set up a new plant or expand the capacity of the existing plant without obtaining registration/ permission as the case may be from the concerned Registering Authority. For this purpose, such person may make an application in the form specified in the first Schedule alongwith the prescribed fee to the Registering Authority for obtaining registration certificate.
(2) The provisions contained in sub-paragraphs (1) shall apply to such person who handles or is equipped to handle or who has in the establishment or unit under his ownership or control (or where he has more than one such establishment, all the establishments put together) installed capacity for handling milk in excess of ten thousand litres per day, or milk product containing milk solids in excess of five hundred tones per annum."
20. Milk production is an unorganized sector and the cess is to CWP No.16213/2002 etc. -25- be imposed in view of mandate of Section 6 of the Act of 2001 on the licensed capacity of the milk of milk plant. Therefore, the rationale behind choosing imposition of the cess on the licensed capacity of the said milk plant is that the handlers/consumers of large quantities of milk measured/quantified on the basis of their licenced capacity being the only feasible method of measuring and collecting the cess in a totally unorganized sector. Since such handlers/consumers are required to be registered under the Milk and Milk Product Order, 1992, so this particular category of milk plant is included in the definition of milk plant under Clause 'h' of Section 2 of the Act irrespective of the fact whether the milk plant is owned by any farmer, co-operative society or any person or undertaking but the only condition is that it should be registered under the Milk and Milk Product Order, 1992 and these milk plants have been liable for payment of cess at the specified rate. Therefore the payment of cess calculated with reference to licenced capacity can safely be described/concluded as only a measure of "cess" and not a "cess" on licenced capacity as essentialy the nature of levy of cess remains on handling/consumption of milk for commercial purposes. It cannot be said that the collection of cess based on licenced capacity is not relatable to handling/consumption of milk and does not carry the purpose of the 2001 Act. The Hon'ble Supreme Court in Express Hotels Private Ltd. Vs. State of Gujarat (1989)3SCC 677 while interpreting the concept of "luxuries" held that the measure of tax is different from subject of the tax, and once the legislative CWP No.16213/2002 etc. -26- competence with regard to subject of tax is established, the actual measure of the levy is a matter of legislative policy and convenience. In the present case, otherwise there is no other way out to levy and collect the cess because it is neither feasible nor makes sense to ask for daily/weekly/monthly/quarterly/ consumption of milk by the milk plant. If plea of the petitioner is accepted that the cess should be leviable only on the actual consumption, in that eventuality, the process for imposing and collecting the cess will become so cumbersome that it will be virtually beyond the control of the authority and be counter productive. The Hon'ble Supreme Court in Commissioner of Central Excise & Custom Vs. Venus Castings (P) Ltd. (2000)4 Supreme Court Cases 206 upheld the scheme of collection of excise duty on the basis of production capacity as appropriate for the reason that in certain sectors, like induction furnances, steel re-rolled mills, etc. evasion of excise duty on goods was substantial and the production was not disclosed accurately. The Hon'ble Supreme Court in Goodricke Group Ltd. & Others Vs. State of West Bengal & Others 1995 Supp(1) Supreme Court Cases 707 upheld the levy of cess on land measured by "income" or "yield" being accepted mode of levy of tax on land. So in our opinion the rationale for choosing the only milk plants for levy of milk cess which are registered under the Milk and Milk Product Order, 1992 is perfectly intra vires to the Constitution of India.
Therefore it is clear that the position in the case of the CWP No.16213/2002 etc. -27- impost of cess in Haryana is substantially different than in the case of Punjab. We have observed and noticed hereabove that the 2001 Act takes care of lean periods where availability of milk is reduced by providing payment at 75% of the licenced capacity (without getting the licenced capacity reduced), further envisages no payment during the periods the milk plant remains closed. Factually it has come on record that the petitioner has functioned at full licenced capacity (even no request was ever made for reduction of the licenced capacity). It has also come on record that whenever any request for reduction in licenced capacity has been made, the same has been aceeded to. It is also amply clear that even a co-operative society or a farmer who handles/consumes milk at the stipulated licenced capacity is also liable to pay cess. Thus it cannot be held that the impost of "cess" under the 2001 Act is arbitrary or discriminatory and therefore covered by the judgment of the Hon'ble Supreme Court in Punjab's case.
21. Further take a hypothetical question like income tax also a particular slab is provided that for the limit upto Rs.1,60,000/- income there will be no income tax. Similarly if the plea of the petitioner is to be accepted that every one is to pay the cess on the milk handling, then the every person who is having one or two buffalo or cattle will also have to pay cess and that will be ridiculous and will render the provision of the Act otiose. It is not and neither can be the intention of the legislature. It is well settled that in choosing subject, object or activity for imposition of any levy, the legislature has been given wide CWP No.16213/2002 etc. -28- latitude/ discretion and the courts should be slow in interfering with such exercise of discretion. The Hon'ble Supreme Court in Secretary to Government of Madras & Another Vs. P.R. Sriramulu & Another (1996)1 Supreme Court Cases 345 has acknowledged and approved this principle and held that lack of perfection in a legislative measure does not necessarily imply its unconstitutionality as no economic measure has so far been discovered which is free from all discriminatory impact and therefore the courts should be slow in imposing strict and rigorous standard of scrutiny. Similar view was reiterated by the Hon'ble Supreme Court in Govt. of A.P. Vs. P. Laxmi Devi, (2008)4 SCC 720. Thus, on this account also we find no legal infirmity in levy of milk cess vide 2001 Act.
22. It is relevant to notice that the cess so collected by the respondents is to be fully utilized as per details given in the Annexure R-3 with the affidavit. The relevant Annexure R-3 is reproduced below: -
Annexure R-3 PROPOSAL FOR THE UTILIZATION OF AMOUNT OF CESS Sr. Activity Amount No (Rs. in lacs) A. Preservation & Improvement of Genetic Stock
i) Identification of 25,000 Top Quality Murrah Buffaloes per year @ Rs.35/- each. 8.75
ii) Identification of Top Quality 5,000 Hariana Cows and 1,000 Sahiwal Cows per cent @ Rs.35/- each 2.1 10.85 B. Enhancing Milk Production CWP No.16213/2002 etc. -29- Sr. Activity Amount No (Rs. in lacs)
i) Subsidy for rearing of young Murrah Male Calves 25.00 of identified buffaloes @ 1,000/- per calf for 2500 calves per year
ii) Purchase of young Murrah male calves of 25.00 identified buffaloes @ 5,000/- per calf for 500 calves per year Iii) Incentive money to identified Top Quality 90.00 Murrah Buffaloes per year
iv) 50% insurance premium 20.00
v) Incentive money to Top Quality Identified 2.00 Sahiwal & Hariana Cows per year
vi) Subsidy for rearing of calves of identified 5.00 Sahiwal & Hariana Cows @ Rs.1,000/- per calf for 500 calves per year 167.00 C. Data Recording Data Recording, monitoring & evaluation per year 12.00 12.00 D. Prophylactic measures
i) Raw material for vaccine production at Haryana 100.00 Veterinary Vaccine Institute, Hisar per year
ii) Purchase of F.M.D. Vaccine 20,00,000 doses for @ Rs.10/- per dose (for areas other than covered under F.M.D.C.P.) per year Dewormers
i) for 5.00 lac large animals @ Rs.60/- per animal 300.00 per year
ii) for 3.00 lac small animals @ Rs.30/- per animal 90.00 per year treatment
i) Purchase of life saving drugs for 1.00 lac animals 125.00 @ Rs.125/- per animal per year CWP No.16213/2002 etc. -30- Sr. Activity Amount No (Rs. in lacs)
ii) Purchase of basic drugs-Antiseptic (Phenyl. T 100.00 Oil), Stomachics (H.B. Mag. Sulph) dressing material (cotton, bandages) Pot, Permanganate to run the dispensaries and hospitals
iii) Purchase of supportive medicines (Minerals, 50.00 vitamins, harmones etc. 275.00 E. Diagnosis & surveillance
i) Establishment of Polyclinics at each Distt. HQ. In 320.00 a phased manner @ Rs.80.00 lacs each for 4 Polyclinics per year
ii) Running of Polyclinics & Sero Survaillance work 20.00 @ 5.00 lacs each for 4 Polyclinics per year
iii) Diagnostic facility at each block HQ in phased 20.00 manner @ Rs.1.00 lac each for 20 block Hqs. Per year
iv) Running of Diag. Labs at block HQ. in a phased 10.00 manner @ Rs.0.50 lacs per block for 20 blocks per year 370.00 F. Infrastructure maintenance and Development
i) Renovation/ repair of 200 Veterinary Institutions 200.00 @ Rs.1.00 lacs each per year
ii) Furniture & Equipments etc. for 500 Veterinary 100.00 Institution exists for 500 villages @ Rs.20,000/-
each per year 400.00 G. Human Resources
i) Continuing education, extension & training 10.00 including women awareness per year
ii) Professional proficiency Development centre 25.00 including Date Bank per year CWP No.16213/2002 etc. -31- Sr. Activity Amount No (Rs. in lacs) 35.00 H. Miscellaneous
i) Maintenance of Administrative-cum-Training 20.00 Complex, Panchkula, expenses like electricity charges, telephone charges and other office expenses per year
ii) Purchase of books and periodicals etc. per year 5.00 25.00
23. Further para 2 of the affidavit dated 20.07.2009 of Dr. G.S. Jakhar, Chief Coordinator (Frozen Semen Technology) Department of Animal Husbandry and Dairying, Panchkula supports that the proposal for utilization of cess amount annexed as Annexure R-3 with the affidavit already filed by Dr.O.P. Yadav, Poultry Development Officer on 4.11.2005 has been duly approved by the Haryana Livestock Development Board in its 9th meeting held on June 22, 2003 under agenda item No.23.
24. Therefore, we find that the cess levied is properly utilized by the State Government keeping in view one of the Directive Principles of governance enumerated in Article 48 of the Constitution. The further contention of the petitioner(s) that they will not get any benefit or special service by paying the cess is not tenable in view of the law laid down by the Hon'ble Supreme Court of India in case reported as (2006) 6 SCC 763 titled Vijaylashmi Rice Mill and CWP No.16213/2002 etc. -32- others Versus Commercial Tax Officers, Palakot and others wherein it was held that even a broad and general correlationship between the totality of the fee imposed and the totalityof the expenses on the service rendered would suffice to sustain the levy of fee. Para 27 of the judgment is reproduced here as under: -
"27. In our opinion the cess in question is an substance a fee as it is being levied for rendering to the rural public the service of rural development for the purposes stated in para 9 of the Act. Clearly roads, bridges and storage facilities have to be built in rural areas for progress, and naturally this will require generating funds. Thus even if no specific service is rendered to any particular individual from whom the fee has been realized, the cess in question is nevertheless a fee, for the reasons already mentioned above. Services are being rendered to the people in the rural areas as mentioned in Section 9 of the Act."
25. In view of the aforesaid discussion, we find no merit in the writ petitions and hence are dismissed with no order as to costs.
In the writ petitions relating to "milk chilling centres" for the periods prior to the amendment dated 27.2.2006 in clause (h) of section 2 of the 2001 Act, whereby they have been exempted from paying cess subject to production of authentic proof of payment of cess by the milk plants to whom the milk had been supplied by the milk chilling centres, the petitioner-milk chilling centres are granted liberty CWP No.16213/2002 etc. -33- to represent to the competent authority within one month from receipt of copy of this order, for granting them similar exemption on similar conditions. Their liability to pay cess for the period prior to the period of amendment dated 27.2.2006 shall be kept in abeyance till their claim is decided, in case they represent in terms of this order. It will be appreciated if such claim is expeditiously decided by the competent authority.
(M.M.Kumar) (Jaswant Singh)
Judge Judge
28th May, 2010
Vinay
* 1. CWP - 19827 - 2001(O&M)M/S.STERLING AGRO INDUSTRIES AND OTHERS V/S STATE OF HY.
2 CWP - 331 - 2002(O&M)M/S PARUL FOODS SPECIALITIES P LTD V/S STATE OF HARYANA AND ORS
3. CWP - 333 - 2002(O&M)M/S MARKANDESHWAR FOODS AND ALLIED V/S STATE OF HARYANA AND ORS
4. CWP - 334 - 2002(O&M)SMRITI PRODUCTS PVT LTD V/S STATE OF HARYANA AND ORS
5. CWP - 17527 - 2004M/S RATTAN MILK PRODUCTS V/S STATE OF HY.
6. CWP - 8722 - 2005M/S ASHA DAIRY V/S STATE OF HY.
7. CWP - 16213 - 2002(O&M)M/S NESTLE INDIA LTD. V/S STATE OF HY. ETC.
8. CWP - 18361 - 2003(O&M)M/S G.K.DAIRY V/S STATE OF HY.
9. CWP - 19828 - 2001(O&M)MODERN DAIRIES LTD. V/S STATE OF HY. ETC.
CWP No.16213/2002 etc. -34-
10. CWP - 19829 - 2001(O&M)HARYANA MILKFOOD LTD. V/S STATE OF HARYANA
11. CWP - 332 - 2002(O&M) BHARAT DAIRY UDYOG V/S STATE OF HARYANA AND ORS.
12. CWP - 3715 - 2004(O&M)M/S GOLDMINE MILKFOOD P.LTD. V/S STATE OF HY.
13. CWP - 4219 - 2004(O&M)M/S MARKANDESHWAR FOODS & ALLIED PRODUCT V/S THE STATE OF HARYANA AND ORS.
14. CWP - 4241 - 2004(O&M)M/S PARUL FOODS SPECIALITIES PVT.
LTD. & V/S STATE OF HARYANA AND ORS.
15. CWP - 5012 - 2005 RAJ FOODS MILK PRODUCTS V/S STATE OF HARYANA
16. CWP - 5030 - 2005 JAI DURGA MILK PRODUCTS V/S STATE OF HARYANA
17. CWP - 1083 - 2002(O&M)M/S RAHUL DAIRY AND ALLIED PRODUCTS LTD. V/S STATE OF HARYANA AND ORS.
18. CWP - 1072 - 2002(O&M)M/S DAILY FOODS INDIA ETC. V/S STATE OF HY.
19. CWP - 1070 - 2002(O&M)M/S KARNAL MILK FOODS V/S STATE OF HARYANA 20 . CWP - 19154 - 2003(O&M)M/S KWALITY DAIRY INDIA LTD. V/S STATE OF HY.
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