ORDER
P. Venkatarama Reddi, J.
1. The petitioners in this batch of writ petitions challenge the validity and vires of A.P. Charcoal (Production and Transport) Rules, 1992 more especially Rule 3(3) framed by the State Government in G.O.Ms.No. 291 (For. III) Department dated 28-12-1992 published in the A.P. Gazette on 28-1-1993. The alternative prayer is also made in some of the writ petitions to declare that the said Rules have no application to the manufacture of charcoal out of Prospis Juliflora (Known as 'Seema Tumma'). Excepting the petitioner in W.P.No. 6778 of 1993 who is a landholder, others are traders in charcoal.
2. In exercise of powers conferred by Section 68 of the A.P. Forest Act, 1967, the Governor of A.P. framed the Rules known as A.P. Charcoal (Production & Transport) Rules, 1992 regulating the production and transport of charcoal in the State of Andhra Pradesh. 'Charcoal' is defined to mean as a form of Carbon derived from incomplete combustion of wood derived from a tree. The main target of attack is Rule 3(3). Rule 3 reads as follows:-
3. (1) No person shall make charcoal, or cut or cause to cut trees for the purposes of making charcoal, without the previous written permission of Divisional Forest Officer concerned.
(2) No person shall transport or cause to be Transported charcoal within the State of Andhra Pradesh except in accordance with the provisions of Andhra Pradesh Forest Produce Transit Rules, 1970.
(3) 'Every applicant seeking permission for manufacture and transport of charcoal should pay a fee of Rs. 5/- per bag or any sum, as may be fixed from time to time, on the estimated quantity of charcoal towards the cost of permits, inspections etc.'
3. Rule 4 provides for inspection by Forest, Revenue and other officials to inspect the charcoal under manufacturing in Kilns, in storage or in transit and for scrutiny of the permits issued. Rule 5 enjoins that a licence should be obtained as provided in A.P. Forest Produce (Storage & Depot) Rules, 1989, in the event of storage of charcoal for trade purposes. Earlier to these Rules, the Forest Department was collecting 10 paise per permit to defray the cost of issuing a permit. The contention of some of the learned Counsel for petitioner that there is increase in fee by 12 thousand times and therefore the rate of fee under Rule 3(3) is exorbitant and unreasonable does not merit acceptance. In fact, such argument proceeds on a fallacy. What was being collected earlier was only the cost of issuing the permit, that is to say towards the cost of stationary preparation. The fee for manufacture and transport of charcoal was introduced for the first time by the impugned Rules. The comparison of this fee with the cost of permit that was collected earlier is therefore unwarranted.
4. The most important submission made by the learned Counsel for some of the petitioners Sri M. Ramachander Rao and the other learned Counsel is that the licence fee envisaged by Rule 3 (3) is really not a fee and as it is not being collected for any service rendered to the petitioners who are required to take the permits. It is submitted by the learned Counsel that the fee collected to meet the expenditure incurred by the Department for the purpose of inspection and supervision in order to check smuggling or unauthorised transport of charcoal cannot be recouped from the petitioners in the name of licence fee as the element of quid pro quo is utterly lacking. It is also contended that the Act does not confer any power on the rule making authority to levy such fee. On the other hand, it is contended by the learned Government Pleader that the impugned rule is well within the Rule making power of the Government and there is no taboo against collection of licence fee for the purpose of enforcing the Rules framed under the A.P. Forest Act more effectively. He contends that the fee could be collected even for regulatory purposes.
5. As far as the contention that Rule 3 is beyond the Rule making power of the Government, we find no substance in this contention. Regulation of trading in and transport of charcoal with a view to prevent the smuggling of forest produce and passing off the wood illicitly obtained from forest as charcoal got out of Prospis Juliflora plants grown on patta lands, the rules were framed. The Forest Department is enabled to issue transport permits and collect the fee. The power to levy fee need not be conferred specifically by the Act itself. If the fee is levied in order to carry out the purposes of the Act or if the fee is incidental to the specific power conferred by Section 68, the power to levy such fee is comprehended within the general rule-making power of the State Government denoted by the expression ' in particular and without prejudice to the generality of the foregoing power'. Moreover, Section 68 specifically provides for making rules to regulate the transit of all timber and other forest produce. In order to achieve this objective, if any fee is to be levied, that could be imposed by the rule making authority. The imposition of fee and the quantum thereof can be left to the ambit of subordinate legislation. This legal position is no longer in doubt in view of a recent judgment of the Supreme Court in State of Bihar v. Ranchi Timber Traders Association, 1996 (5) Supreme Today 718. There, the question arose whether the power to regulate by license the upkeep of saw-pits and Depots goes beyond the rule making power of the State Government. The Supreme Court while refering to the prefatory expression' in particular and without prejudice to the generality of the foregoing power' made this pertinent observation':
'The variety of subjects provided in the sub-heads of Sub-section (2) of Section 41 are preluded with the expression ' in particular and without prejudice to the generality of the foregoing power'. Wholesome power stands conferred on the State Government to make rules under Sub-section (1) of Section 41 with regard to transit of timber and other forest produce by land or water. Conferral of such powers inheres in it the power to frame rules in order to regulate places for stoppage, reporting, examination and marking of timber or other forest produce. Necessarily, duty, fee, royalty or charges due thereon become due, if imposed. In order to avoid breach of the Rules, Section 42 gets into line. Then, comprehensive power on the subject is given generally to the State Government as additional powers to make rules to carry out the provisions of the Act. No one can be permitted to deny that regulating the activity of keeping a saw-pit or a depot is not an activity to which the provisions of the Indian Forest Act, 1927 would not be attracted. Thus, requiring all the saw-pit holders or depot holders to obtain regulatory licences, squarely fall within Clause (d) of Section 76, if not, (without holding so) under the power to regulate transit by land or air available Under Section 41 of the Act. These three provisions namely Sections 41, 42 and 76 reflect an integrated scheme to carry out the provisions of the Act and as the preamble of the Act is suggestive to consolidate the laws relating to forests, the transit of forest produce and the duty leviable on timber and other forest produce.'
6. The aforementioned observations of the Supreme Court is a complete answer to the first contention raised by the learned Counsel for petitioner. But, the rule-making authority or for that matter the State Legislature has no power to exact money from those who intend to transport or sell charcoal in the guise of fee, unless the amount collected as fee really partakes the character of fee in contra-distinction to tax. There is a clear line of demarcation in our Constitution between the power to levy tax and power to levy fee. Entry 47 of List III to VII schedule enables the Legislature to impose fees in respect of any of the matters in that list. Entry 66 of List II and Entry 96 of List 1 also provide for imposition of fees in identical terms. 'Forests' is a subject assigned to List III vide Entry 17-B. Hence Entry 47 is the source of power as far as fee is concerned. It is trite to say that tax and fee are compulsory exactions from the public. But their purposes vary, though in a general sense, they go to augment the public revenues. If what is collected is not in truth and substance a fee, it could only be justified as a tax, provided. It falls within one of the entries conferring the taxing power. Straightaway, it may be mentioned that there is no entry in List II or List III which empowers the State Legislature to levy tax on the manufacture and transport of charcoal. Therefore the impost under Sub-rule (3) of Rule 3 shall have to be justified only as fee, as understood in legal parlance. This takes us to the familiar concept of fee and its essential attributes.
7. The traditional concept of fee being in the nature of 'quid pro quo' which means giving something in return has been substantially diluted by a series of pronouncements of the Supreme Court. But, the basic principle that fee is a payment for services rendered or benefit provided still holds good. Suffice it to refer to the decision of the Supreme Court in City Corporation of Calicut v. Thachambalath Sadasivan, : [1985]2SCR1008 wherein D.A. Desai, J. after reviewing the case law summarised the legal position in the following words:
'It is thus well-settled by numerous recent decisions of this Court that the traditional concept in a fee of quid pro quo is undergoing a transformation and that though the fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct, a mere casual relation may be enough. It is not necessary to establish that those who pay the fee must receive direct benefit of the services rendered for which the fee is being paid. If one who is liable to pay receives general benefit from the authority levying the fee, the element of service required for collecting fee is satisfied. It is not necessary that the person liable to pay must receive some special benefit or advantage for payment of the fee.'
8. In that case, the Supreme Court upheld the demand of licence fee from the dealers of coconut by the Corporation of Calicut. The contention that no service is rendered or special advantage is conferred by the Corporation and therefore it is not a fee was rejected by the Supreme Court. It was said 'Soaking coconut husks emit foul odour and contaminates the environment. The Corporation by rendering scavenging services, carrying on operations for cleanliness of city, to make habitation tolerable is rendering general service of which amongst others respondents are beneficiaries. Levy as a fee is thus justified.'
9. In Municipal Corporation of Delhi v. Mohd. Yasin, : [1983]142ITR737(SC) referred to in the aforementioned decision, the Supreme Court was concerned with the question whether the enhancement of the fee for slaughtering animals in the slaughter houses maintained by the Corporation was justified. The Supreme Court disapproved the view taken by the High Court that the fees collected should be shown to be related to the expense incurred directly and exclusively in connection with the slaughtering of animals. Chinnappa Reddy, J. observed:
'Though a fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct, a mere casual relation may be enough. Further, neither the incidence of the fee nor the service rendered need be uniform. That others besides those paying the fees are also benefited does not detract from the character of the fee. In fact the special benefit or advantage to the payers of the fees may even be secondary as compared with the primary motive of regulation in the public interest. Nor is the Court to assume the role of a Cost Accountant. It is neither necessary nor expedient to weigh too meticulously the cost of the services rendered etc. against the amount of fees collected so as to evenly balance the two. A broad correlationship is all that is necessary. Quid pro quo in the strict sense is not the one and only true index of a fee; nor is it necessarily absent in a tax.'
Still later the learned Judge observed that there need not be any fastidious balancing of the cost of the services rendered with the fees collected.
10. In the light of these settled principles, let us examine whether the amount collected as fee under Rule 3(3) is in reality a fee and satisfies the basic characteristics of fee as understood in recent times. What for is this fee collected? The rule makes no secret of the fact that it is collected not only towards the cost of issuing permits which is bound to be nominal but also towards the cost of inspections. Defraying the cost in inspection or supervision by the officials for the purpose of checking unauthorised removal of or dealing with the forest produce and ensuring the compliance of Rules is thus the avowed objective of the levy. This idea is reinforced in categorical terms by what is stated in the counter-affidavit filed by the respondents. The material portion of the counter reads as follows:-
'It is submitted that in the case of manufacturing of the P.J. Charcoal from the extracted P.J. and Misc. wood in the patta lands, the Divisional Forest Officer has to inspect the patta land before granting cutting permission of standing tree growth in the patta land and further inspection during the course of operations for strict compliance of rules. In addition to this, the Forest Range Officer and his staff have to inspect the patta lands on the following occassions:-
(1) For granting permission for felling and uprooting of P.J. Misc. growth in the specified survey number.
(2)After felling and stocking.
(3)Inspection of kilns and verify whether any forest produce is mixed in the kilns.
(4) After burning, inspection of charcoal kilns.
(5) After filling the charcoal into bags to assess the quantity of bags.
(6) Loading of charcoal bags into the lorry and issue of permit for transport for each lorry.
Besides the above, the Flying Squad Party will also have to inspect the patta lands and transport of charcoal through lorries for strict compliance of rules under the Forest Act.
For the purposes of the above inspections of Forest Officials, there is heavy expenditure to the State Exchequor by way of propulsion charges to Govt. Vehicles and on their T.A. and D.A. etc. and further to do lot of official work in issuing of permits.'
11. By undertaking these successive inspections in order to discharge the statutory duties, even assuming that they are being done in actual practice, it cannot be said that the Forest Department renders any service or confers any benefit-direct or indirect on the petitioners who are either landholders or traders. As far as the Trader is concerned, he is required to obtain a licence as provided for by A.P. Forest Produce (Storage & Depot) Rules, 1989. For obtaining that licence, he has to pay a fee of Rs. 250/- as per Rule 4(2) and security deposit at varying rates under Rule 5. The validity of that licence fee has not been questioned in these writ petitions. We are only concerned with the fee collected from the persons who seeks permission for the manufacture and transport of charcoal. The fee payable is estimated at Rs. 5/- per bag of charcoal. None of the activities mentioned in the counter-affidavit except the issuance of permit as such spells out even a casual or indirect service to the payers of the fee. They are not in any way benefited by the inspections made by the officials in order to administer the regulatory law. The decision of the Constitution Bench of the Supreme Court in Corporation of Calcutta v. Liberty Cinema, : [1965]2SCR477 is a direct authority for the proposition that fee cannot be levied to recoup the cost of inspection or supervision unrelated to the services to the persons from whom the fee is collected. The Supreme Court repelled the contention that the bye-law framed by the Municipality required inspection of the cinema houses by the Corporation and that was the service that the Corporation had to render in return for the licence fee. Sarkar, J. who delivered the majority judgment observed: 'The Inspection was not certainly a service to the licencee; it was necessary only to make sure that he carried out the conditions on which the licence had been granted to him... .The inspection was therefore necessary also for enforcing the conditions of the licence by penalising a breach of them by the licencee. We cannot imagine that an inspection by the Corporation for such purposes can at all be said to be rendering of service to the licencee.'
12. Again, it was observed:' The conclusion to which we then arrive is that the levy Under Section 548 is not a fee as the Act does not provide for any services of special kind being rendered resulting in benefits to the person on whom it is imposed. The work of inspection done by the Corporation which is only to see that the terms of the licence are observed by the licencee is not a service to him. No question here arises of correlating the amount of the levy to the costs of any service. Earlier, it was observed 'We have referred to these cases only for showing that to make a levy a fee the services rendered in respect of it must benefit, or confer advantage on the person who pays the levy.'
13. Atleast, if it were a licence fee it could be contended that the element of service or benefit need not be present at all, because to put it in the words of Sarkar, J. 'the words 'licence fee' do not necessarily mean a fee in return for service. In fact, in our constitution fee for licence and fee for services rendered are contemplated as different kinds of levyies.'
14. After referring to the decision of Privy Council in Shannon v. Lower Mainland Dairy Products Board (AIR 1939 PC 36), the Supreme Court further observed: 'It would, therefore, appear that a provision for the imposition of a licence fee does not necessarily lead to the conclusion that the fee must be only for services rendered.'
15. Different considerations may arise if the inspection by the officials though undertaken for the purpose of ensuring compliance with the provisions of the Act and the Rules incidentally benefits the persons who are called upon to pay the fee. Instances of this nature are furnished by the decision of the Supreme Court in The Delhi Cloth & General Mills Co. Ltd. v. Chief Commissioner, Delhi, : [1970]2SCR348 and in Commissioner H.R. & E., Madras v. Sri Laxmindra Thirtha Sivamiar, : [1954]1SCR1005 . But no such incidental or indirect benefit in any measure is derived by the petitioners as a result of the so-called inspections made by the forest officials and therefore the cost of such expenses including the establishment expenditure cannot be recovered from the petitioners in the guise of fee. The only item in respect of which fee could be legitimately imposed is the cost of issuing permits such as the stationery and typing. As already observed, the cost thereof would be negligible. Ten paise was being collected towards a single permit earlier. Even making due allowances for the increase in the cost, the fee that could be levied on that account would come no where near the rate of fee prescribed under the impugned Rule 3 (3).
16. The learned Government Pleader appearing for the respondents relied upon the observations of the Supreme Court in State of Bihar v. Ranchi Timber Traders Assn. (1 supra) which are already extracted above and which, for the sake of clarity are repeated hereunder:
'Conferral of such powers inheres in it the power to frame rules in order to regulate places for stoppage, reporting, examination and marking of timber or other forest produce. Necessarily, duty, fee, royalty or charges due thereon become due, if imposed.'
17. The Supreme Court was concerned in that case with the licence fee for the upkeep of saw-pits and depots. It is not a case of fee levied for the purpose of manufacture and transport of the forest produce. Moreover, we do not think that their Lordships of the Supreme Court by making the aforementioned observation intended to lay down that whatever fee, royalty or charge is levied it is constitutionally valid. Their lordships were only considering the question whether the provision for levy of fee was within the rule making power. It cannot be said that the Supreme Court in deviation of settled principles governing the concept of fee laid down by a serious of pronouncements including Constitution Benches, intended to lay down the proposition that whatever be the nature of fee and the quantum thereof, it should be upheld provided it is incidental to the purposes of the Act. The nature and character of fee did not come up for consideration at all in that case.
18. In the light of the foregoing discussion, we hold and declare Rule 3(3) of the A.P. Charcoal (Production and Transport) Rules, 1992 is without authority of law and unconstitutional. Consequently, we direct that no fee shall be collected hereafter under Rule 3(3). The fee can only be collected to meet the actual cost of issuing permit as was and hitherto being done. However, we are not inclined to direct refund of any amount paid by the petitioners except the petitioner in W.P.No. 6778 of 1993 as they would have in all probability passed on, the burden of fee to their buyers or consumers. No material to the contra has been placed before us. As far as the petitioner in W.P.No. 6778 of 1993 is concerned, the permission for uprooting, burning and transporting P.J. Charcoal was issued to him under the A.P. Forest (Produce & Transport) Rules before the Rules came into force. Even the permits for transportation were issued to him on 6-2-1993 and 5-2-1993 by collecting 10 paise per unit before the said Rules were actually implemented by the Forest Department. Two months thereafter, i.e., on 15-5-1993, a notice was issued to recover an amount of Rs. 32,400/- representing the fee leviable under the impugned Rule. By that time, the charcoal was already transported. This Court did not grant stay of collection of the said amount but only granted some time for payment. If the amount of Rs. 32,400/- or any part thereof has been paid to the Forest Department, the same shall be refunded to the petitioner within three months from the date of receipt of this order. We are directing refund in this case as the transaction took place before the impugned rule was implemented and there was no possibility of the petitioner passing on the fee burden to the buyers or consumers.
The writ petitions are allowed accordingly. No costs.