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"It is observed that the development in the rural areas in the State has not been accelerated due to paucity of funds. The Government are of the view that there is an imperative need to provide financial assistance for the development of rural areas in the State by creating infrastructure facilities, so that the economic activities in the rural areas will increase and thereby contribute for the growth of the economy. With a view to generating funds for the purpose of development of the rural areas, it is considered desirable to levy a cess @ 5% on the advalorem basis on the quantity of the purchase of goods specified in the Schedule appended to the Bill".

Section 3 of the Act empowers the State Government by notification to establish the Andhra Pradesh Rural Development Board.

Section 7(1) states: "There shall be levied and collected by the Government a cess @ 5% on the advolerem on the quantum of purchase of goods".

Section 8 establishes a fund to be called "The Andhra Pradesh Rural Development Fund" which vests in the Board. The purpose of this fund has been mentioned in Section 9 which states:

"9. Purpose for which the Fund may be applied : The Fund shall be applied for the purposes herein specified :
(i) to provide and accelerate comprehensive rural development including the construction of rural roads and bridges;
(ii) to augment storage facilities for storing agricultural produce; and
(iii) for maintaining and strengthening of Public Distribution System".

The question in the present case is whether the impost in question is a fee or a tax. If it is a tax, then it will have to be held to be unconstitutional because it does not come in any of the Entries in List II of the Seventh Schedule to the Constitution. However, if it is a fee, then it comes under Entry 66 of List II.

In the present case, there is no averment by the petitioner in the writ petition that there is no broad correlation between the amount realized as a cess and the amounts spent for the purposes mentioned in Section 9 of the Act, namely, to provide and accelerate rural development including the construction of rural road and bridges and storage facilities for storing growth and for maintaining and strengthening of the Public Distribution System. All that has been alleged by the petitioner in para 5 of the affidavit to the writ petition is that no specific benefit is given to the dealer from whom the cess is collected.