Mehta Food Pvt. Ltd. Vs. State of Jammu and Kashmir and ors. - Court Judgment

Tejinder Singh Doabia, J.

1. The levy of additional toll tax Re. 0.60 paise per kilogram on dry fruits including almonds, walnuts and walnut kernels, to be exported out of the State of Jammu and Kashmir through the barriers located at Lakhanpur, Jammu Railway Station, Manwal and other toll posts, as may be notified by the State Government, from time to time, is the subject-matter, of challenge in a group of writ petitions listed before this Bench. A challenge is also being made to another notification issued by the State Government under Section 5 of the Jammu and Kashmir General Sales Tax Act of 1962. By this notification, the sales tax is sought to be levied on a turnover to be determined by weight, i.e., Rs. 0.60 per kg. on dry fruits including almonds, walnuts and walnut kernels for a limited period from 1st May, 1982 to 19th August, 1982. In the alternative, it is urged that even if the levy of toll tax is held to be valid, even then, this additional toll tax is not payable by the petitioners. In support of this, is said to be a notification issued by the State Government under which exemption from payment of toll tax has been granted. The challenge to toll tax is broadly being made, inter alia, on the ground that these goods are carried on highways which are maintained by the Central Government under the National Highways Act of 1956. It is urged that the levy being in the nature of fee, therefore, there has to be an element of quid pro quo, i.e., there has to be a corresponding service to be provided by the State Government. As in the maintenance and up-keep of the national highways, the State Government is not spending any amount from the State funds, it is submitted that levy of toll tax by the State Government is not sustainable.

2. The learned Advocate-General, who has put in appearance on behalf of the State, has sought to make a distinction between the term 'toll' and 'tolls'. Relying upon Blacks Law Dictionary, page 1488, he submits that the words 'tolls' and 'toll' have different content and scope. It is submitted that the word 'toll' may represent the concept of grant of privilege of travel over a particular highway with a corresponding duty to maintain it, thus involving an element of quid pro quo. It is urged that in the case of toll, it is compatible with the principle that he who receives the toll has to do something equivalent to, to him who pays it. But 'tolls' as per the learned Advocate-General represent an entirely different concept. This as per him does not involve the concept of quid pro quo. This according to him is a tax like any other tax. What is sought to be urged is that when levy is imposed by an Act of Legislature, the concept of quid pro quo is alien, and therefore, the challenge made to the various notifications referred to in the writ petitions is without any basis. It is otherwise urged that the question stands concluded by a Full Bench decision of this Court reported as Girdharilal Anand Saraf v. State of Jammu and Kashmir AIR 1969 J&K; 113. It is accordingly urged that the challenge made to the levy of toll tax is without any basis. The learned Advocate-General also urged that the petitioners are not entitled to any exemption as the activity undertaken by them is not covered by the term 'manufacture'.

3. With a view to examine the above basic contentions and some other ancillary arguments put across by the learned counsel for the parties, the facts in brief be noticed :

The petitioners submit that they are engaged in the business of sale and export of dry fruits including almonds, walnuts and walnut kernels not only to the places located outside the State of Jammu and Kashmir but also to the foreign countries. It is stated that the dry fruits referred to above after collecting from the growers and before exporting them, are subjected to various processes. The processes which are undertaken by them as per the petitioners fall within the term 'manufacture'. It is stated that the petitioners purchase walnuts and bitter apricots in shell from different parts of the State. This raw material is transported to their factories. In the factories, the walnuts and bitter apricots are subjected to various tests and processes. These processes are manual as well as mechanical. This as per the petitioners is done with a view to see that the best quality material is supplied to the foreign markets. The process which is undertaken by the petitioners is detailed as under :

The walnuts and bitter apricots in shell are first graded by a grading machine. This is done to ensure size segregation. After completing the process of grading, the dry fruits in shell are sorted out manually. This is done so that split nuts, damaged nuts and spoiled nuts as also the oily nuts are separated. After completing the process of sorting, the nuts are subjected to bleaching. They are treated with a chemical solution. This gives them a lustre and attractive appearance. It is this process of bleaching which completely transforms the original look of the nuts and renders the outer shell softer than the original one. After bleaching the nuts are put in another machine for drying process. This is done with a view to attain retention of 3 per cent of moisture content. After drying, the nuts are sorted manually. This eliminates unwanted nuts. On the completion of this process, the nuts are again inspected. This ensures quality control. As regards the walnut kernels and bitter apricots, the process and treatment is the same which is applicable to walnuts. After the process of grading, the walnuts and bitter apricots are soaked over-night in water. They are then shelled by the semi-skilled labourers to remove the kernels with special emphasis on the object of obtaining maximum percentage of halves. After removing the kernels, they are dried. This is done mechanically. Later on, they are sorted according to the colour and size. This is achieved by mechanically motor driven conveyor belts. The halves thus removed are subjected to the process of gravity separation. By this process, the quarter and broken pieces are removed from the halve pieces. Crumbs and dust is also removed. The pieces of crumbs which are left out go to the grading machine and are further graded. These different sizes are then cleaned. After all this process is over, the net product is packed and exported outside the State. It is this process which is said to be covered by the term 'manufacture'. It is accordingly submitted that even if it be presumed that the tolls have been validly levied, even then the petitioners would be entitled to exemption under the various notifications issued by the State Government, appended with the writ petitions.

4. The sequence of events which led to various notifications being issued and the statute under which these have been issued be also noticed at this stage.

5. On July 4, 1938, a statute by the name of The Levy of Tolls Act, Samvat 1995 (1938 A.D.), received the assent of the then Ruler of the State, 'Maharaja Bahadur'. This statute authorised the State Government to levy tolls upon any road, ferry or bridge in the State. The charging section in this regard is Section 3. For facility of reference, this section is being quoted below :

'The Government may from time to time prescribe, annul or alter rates of tolls to be levied upon any road, ferry or bridge (in the State) and may place the collection of such tolls under such management as may appear to it proper, and all persons employed in the management and collection of such tolls shall be liable to the same responsibilities as would belong to them if employed in the collection of the (excise) revenue under the Jammu and Kashmir (Excise) Act, 1958.'

6. In the Schedule appended to the Act, the rates at which the tolls were to be collected have been indicated. Camel, donkey, bullock, buffalo, bicycle, vehicle drawn by one or two bullocks, etc., etc., have included in the Schedule and each item is levied toll tax at different rates. Again a perusal of the various notifications issued from time to time indicates that the empty trucks and loaded trucks are to be subjected to the payment of tolls at different rates.

7. The further fact is that a notification came to be on August 20, 1982. This is SRO No. 348. It is by this notification, additional toll tax was levied at Re. 0.60 paise per kg. on dry fruits including almonds, walnuts and walnut kernels. The further case of the petitioners is that in the exercise of power conferred by Section 5 of the Tolls Tax Act, exemption was granted from the payment of tolls. This exemption was towards the raw material brought into the State or goods manufactured out of such raw material by small-scale industrial units in the State of Jammu and Kashmir and registered with the Directorate of Industries and Commerce, Directorate of Handlooms/Directorate of Handicrafts. The conditions under which this exemption was to be available have been enumerated in this notification. As per the petitioners, a further notification came to be issued on May 25, 1984. This is SRO No. 224. Some amendments were made. For the words 'raw material brought into the State or goods manufactured out of such raw material', the words 'raw material brought into the State or goods manufactured out of such raw material or goods manufactured out of raw material procured locally', were substituted and these were to be deemed to have been substituted with retrospective effect. Again in the proviso to the original notification, for the words 'provided that such consignment of raw material or goods manufactured out of such raw material', the words 'provided that such consignment of raw material brought into the State or goods manufactured out of such raw material or goods manufactured out of raw material procured locally', stand substituted. The effect of these substitution was that the exemption was available not only to the raw material brought into the State but also to the raw material which was procured locally.

8. Some other notifications to which reference has been made in the petitions, may also be noticed.

Vide SRO No. 258, exemption was granted from the levy of tolls. This notification was issued on April 29, 1976. This was to remain in force up to June 21, 1978. There is another notification dated August 11, 1977. This is SRO No. 484. In this exemption was available for a period of ten years from the date, the unit was to go into production. Vide SRO No. 437 issued on August 22, 1983, exemption was again granted. This notification superseded the earlier notification issued vide SRO No. 484.

9. It may, however, be seen that the material notifications which are relevant for the purposes of these petitions are SRO No. 348, issued on August 20, 1982, SRO No. 121, issued on March 31, 1984 and SRO No. 224, issued on May 25, 1984. For facility of reference, these notifications are being reproduced below :

'SRO No. 348 :

In exercise of the powers conferred by Sub-section (1) of Section 3 of the Levy of Tolls Act Samvat 1995 (VIII of 1995) and in supersession of Notification SRO No. 341 dated August 19, 1982, the Government hereby direct that additional toll tax shall be levied at Re. 0.60 per kg. on dry fruit including almonds, walnuts and walnut kernels thereof exported out of State through Lakhanpur, Jammu Railway Station, Manwal and other toll posts as may be notified by the Government from time to time in addition to the toll payable in terms of SRO No. 115 dated March 31, 1982.'

'SRO No. 121 :

In exercise of the powers conferred by Section 5 of the Levy of Tolls Act Samvat 1995 (VIII of 1995) the Government hereby direct that the raw material brought into the State or goods manufactured out of such raw materials by the SSI units in the Jammu and Kashmir State registered with the Directorate of Industries and Commerce/Directorate of Handlooms/Directorate of Handicrafts shall be exempt from payment of additional toll leviable at the toll posts, Lakhanpur, railway station Jammu (Tawi), railway station Bari-Brahmana and railway station Kathua (Govindsar) under the said Act except the goods specified in the list forming annexures `A' and `B' hereto :

Provided that consignment of such raw materials or goods manufactured out of such raw materials are accompanied by a machine numbered certificate duly sealed and signed by the authorised representative of the unit concerned in three foils in the form as may be prescribed by the Excise Commissioner, which shall be produced before the toll officer in-charge of the toll post concerned:

Provided further an officer authorised by the Director of Industries and Commerce/Director of Handlooms/Director of Handicrafts in this behalf shall invariably furnish quarterly verification certificates in respect of such raw materials or finished goods, as the case may be, to the toll officer concerned and the Deputy Excise Commissioner (Accounts), J&K;, Jammu to the effect that--

1. Raw materials exempted from payment of additional toll have been actually received by the concerned small-scale unit and entered in its store register prescribed by the Industries and Commerce Department/Handloom Department/Handicrafts Department; and

2. Finished goods sent outside the State by the small-scale unit concerned and exempted from payment of additional toll were actually manufactured by it and entered in the finished goods register prescribed by the concerned department:

Provided also that in respect of the goods specified at S. No. 6 of the list forming annexure `A' hereto, the actual need based annual requirement for eligible units shall be communicated to the Excise Department by the Director of Industries and Commerce Department at the beginning of each year.'

'SRO No. 224 :

In exercise of the powers conferred by Section 5 of the Levy of Tolls Act Samvat 1995 (VIII of 1995) the Government hereby direct that in Notification SRO No. 121 dated March 31, 1984, the following amendments shall be made namely :

1. In first para :

For the words 'raw materials brought into the State or goods manufactured out of such raw materials', the words 'raw materials brought into the State or goods manufactured out of such raw material or goods manufactured out of raw material procured locally' shall and shall always be deemed to have been substituted.

2. In second para :

For the words 'provided that each consignment of such raw materials or goods manufactured out of such raw materials', the words 'provided that each consignment of raw materials brought into the State or goods manufactured out of such raw materials or goods manufactured out of raw material procured locally' shall and shall always be deemed to have been substituted.'

10. Another notification to which challenge is also being made is issued under the Jammu and Kashmir General Sales Tax Act, 1962 (20 of 1962). This was issued on August 19, 1982. For a period commencing from May 1, 1982 to August 19, 1982, the sales tax was to be charged at Re. 0.60 per kg. This notification is also reproduced below :

'SRO No. 342 :

In exercise of the powers conferred by Section 5 of the Jammu and Kashmir General Sales Tax Act, 1962 (20 of 1962), the Government hereby direct that the entry appearing against serial No. 7 of Schedule `A'--IV to notification SRO No. 80 dated March 12, 1982 shall and shall always be deemed to have been omitted with effect from May 1, 1982 provided that the dealers, who purchased or sold the goods specified in the said entry and which were exported to any place outside the State during the period commencing from May 1, 1982 up to the date of issue of this notification shall within thirty days pay to the Government a sum at the rate of Re. 0.60 per kg.' It is on the basis of the aforementioned notifications submitted:

(i) that the additional toll tax cannot be levied ;

(ii) that in any case, the small-scale units which bring raw material in the State or when they obtain raw material locally and this raw material is used for manufacturing process, then they are exempt from the levy of additional toll tax ;

(iii) that the process undertaken by the petitioners with a view to make the dry fruits and kernels fit for export, falls within the term 'manufacture'.

11. So far as the notification imposing sales tax is concerned, it is urged that the normal method for imposing and collecting sales tax is to determine the turnover by methods other than giving emphasis to weight. The novel method which is adopted in this case, i.e., arriving at a turnover by taking into consideration the weight, as per the petitioners, is not known to the sales tax laws. It is accordingly stated that this is nothing but a colourable exercise of power. What could not be done under the Tolls Act, is sought to be done by the levy of sales tax.

12. As indicated above, in addition to the above arguments, it is urged that the national highways are maintained by the Central Government. As no amount is being spent by the State Government for the up-keep of the highways, it is urged that element of quid pro quo is missing in this case. It is accordingly urged that no toll tax can be levied at the barriers specified in the notifications reproduced above. To summarize, the arguments raised are :

(i) that levy of tolls visualises an element of quid pro quo. This would involve examination of the distinction between tax and fee ;

(ii) that no toll tax can be levied as the petitioners are using national highways which highways are being maintained by the Central Government;

(iii) that under the National Highways Act of 1956, the responsibility of maintaining the highways is on the State Government. If any levy is to be made by the State Government then there has to be a specific agreement between the Central Government and the State Government and this agreement has necessarily to be approved by the Parliament. In the present case, it is submitted that no such agreement exists between the Central Government and the State Government and none has been placed before the Parliament, therefore, the State Government cannot levy any toll tax;

(iv) that additional toll tax on dry fruits cannot be levied. By issuing notification a separate category is said to have been carved out for dry fruits and kernels. By creating this category, the petitioners have been discriminated ;

(v) that in any case, the walnuts are subjected to a manufacturing process. Therefore, walnuts themselves and other dry fruits including its kernels are exempt from the payment of toll tax ;

(vi) that the method of determining taxable turnover by weight, so far as sales tax law is concerned, is not known to law.

13. Before dealing with the various propositions put across by the learned counsel for the petitioners and the learned Advocate-General, appearing for the State, it would be apt to point out that all material issues and more particularly issues raised at Sl. Nos. (i), (ii) and (iii) have already been dealt with and stand concluded by an elaborate and well reasoned judgment of a Full Bench of this Court. This decision is reported as Girdharilal Anand Saraf v. State of Jammu and Kashmir AIR 1969 J&K; 113. This aspect of the matter would be adverted to at appropriate place.

14. Before going into the question as to whether the levy of toll is valid or not, it would be apt to notice the distinction between the 'tax' and 'fee'. This is because the Full Bench in Girdharilal Saraf's case AIR 1969 J&K; 113 has held the levy in question in the nature of 'tax'. If it is not a fee then the question of quid pro quo would not arise. The judicial pronouncements on the subject are noticed below :

15. Commissioner, Hindu Religious Endowments, Madras v. Shri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt AIR 1954 SC 282 is considered a 'locus classicus' on the subject of the contradistinction between tax and fee. The definition of 'tax' given by Latham, C.J., In Mathews v. Chicory Marketing Board 60 CLR 263, as a compulsory exaction of money by public authority for public purposes enforceable by law and not payment for services rendered was accepted by the Supreme Court as representing the essential attributes and characteristics of a tax. Turning to the nature of 'fee', it was said--a fee is generally a charge for a special service rendered to individuals by some Governmental agency but it was observed that as there may be various kinds of fee and it may not be possible to formulate a definition that would be applicable to all eventualities and all cases. As regards the distinction between a tax and a fee, it was noticed that compulsion could not be made the sole or even a material criterion for distinguishing a tax from fee. It was observed that the distinction between a tax and fee lay primarily in the fact that tax was levied as a part of a common burden while a fee was a payment for a special benefit or privilege. At the same time, it was pointed out that the special benefit or advantage might be secondary to the primary motive of regulation in the public interest as for instance in the case of registration fees for documents or marriage licences. It was further noticed that Article 110 of the Constitution indicates two classes of cases where fees could be imposed :

(i) where the Government simply granted a permission for privilege to a person to do something which otherwise that person would not be competent to do and extracted from him in return heavy or moderate fees ;

(ii) where the Government did some positive work of the benefit of the person and money was taken as return for the work done or services rendered, such money not being merged in the public revenues for the benefit of the general public.

16. It was, however, made clear that the circumstance that all the collections went to the consolidated fund of the State and not to a separate fund, may not be conclusive. The Supreme Court finally observed that there was really no generic difference between the tax and fee though the Constitution had for legislative purposes made a distinction between a tax and a fee. While there were entries in the legislative Lists with regard to various forms of taxes, there was an entry at the end of each one of the three Lists as regards fee which could be levied in respect of any of the matters that was included in it. The implication seemed to be that fee had special reference to Governmental action undertaken in respect of any of those matters.

17. There would be a third class of fee which is neither a tax nor fee but is a charge which the State charges for selling a privilege. One such example is excise fee charged from those who want to trade in intoxicants. This levy stands explained in Har Shankar v. Deputy Excise and Taxation Commissioner AIR 1975 SC 1121.

18. In Sudhindra Thirtha Swamiar v. Commissioner for Hindu Religious and Charitable Endowments, Mysore AIR 1963 SC 966 the Supreme Court reiterated the principle that a levy in the nature of a fee did not cease to be of that character merely because there was an element of compulsion or coerciveness present in it and added :

'.................nor is it a postulate of a fee that it must have direct relation to the actual services rendered by the authority to each individual who obtains the benefit of the service. If with a view to provide a specific service, levy is imposed by law and expenses for maintaining the service are met out of the amounts collected there being a reasonable relation between the levy and the expenses incurred for rendering the service, the levy would be in the nature of a fee and not in the nature of a tax.........., but a levy will not be regarded as a tax merely because of the absence of uniformity in its incidence, or because of compulsion in the collection thereof, nor because some of the contributories do not obtain the same degree of service as others may.'

19. In Hingir-Rampur Coal Co. Ltd. v. State of Orissa AIR 1961 SC 459, the Supreme Court of India while reiterating that there was an element of quid pro quo between the person paying the fee and the authority imposing it, said:

'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.'

Later it was said :

'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.'

20. In Shri Swamiji of Shri Admar Mutt v. Commissioner, Hindu Religious and Charitable Endowments Department AIR 1980 SC 1 Chandrachud, C.J., speaking for the Constitution Bench emphasised the necessity as well as the sufficiency of a broad correlationship between the services rendered and the fees charged and discounted the attempts to go into minutiae to discover meticulously whether or not there was mathematical equality. He said :

'For the purpose of finding whether there is a correlationship between the services rendered to the fee payers and the fees charged to them, it is necessary to know the cost incurred for organising and rendering the services. But matters involving consideration of such a correlationship are not required to be proved by a mathematical formula. What has to be seen is whether there is a fair correspondence between the fee charged and the cost of services rendered to the fee payers as a class...............we do not therefore think that any substantial prejudice has been caused to the appellants by reason of the non-supply of the information sought by them.'

21. In Southern Pharmaceutical and Chemicals, Trichur v. State of Kerala AIR 1981 SC 1863, A.P. Sen, J., speaking for the court noticed the broadening of the court's attitude and observed :

'It is now increasingly realised that merely because the collections for the services rendered or grant of a privilege or licence, are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure for rendering the service is not by itself decisive. That is because the Constitution did not contemplate it to be an essential element of a fee that it should be credited to a separate fund and not to the consolidated fund. It is also increasingly realised that the element of quid pro quo stricto senso is not always a sine qua non of a fee...............The traditional concept of quid pro quo is undergoing a transformation.'

22. The Supreme Court in the case of Municipal Corporation of Delhi v. Mohd. Yasin AIR 1983 SC 617 said :

'What do we learn from these precedents We learn that there is no generic difference between a tax and a 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. Compulsion is not the hall-mark of the distinction between a tax and a fee. That the money collected does not go into a separate fund but goes into the consolidated fund does not also necessarily make a levy a tax. 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.'

23. Thus, fine distinction noticed in the concept of the tax and fee has been narrowed down to great extent. As a matter of fact, similar view has been expressed in the decisions of the Supreme Court of India. Ratilal Panachand Gandhi v. State of Bombay AIR 1954 SC 388 and in Sri Jagannath Ramanuj Das v. State of Orissa AIR 1954 SC 400 in which the position of law laid down by earlier judgment in Commissioner, Hindu Religious Endowments, Madras case AIR 1954 SC 282 was reiterated.

24. The Supreme Court in Sreenivasa General Traders v. State of Andhra Pradesh AIR 1983 SC 1246 observed :

'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 the 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.......... There is no generic difference between a tax and a fee. Both are compulsory exactions of money by public authorities.'

25. In the light of above decision, the argument sought to be put across by the learned counsel for the petitioners that whenever a toll is sought to be recovered, there has to be a rendering of corresponding service, may not be true.

26. Under the common law, a charge by the nomenclature of toll traverse and toll thorough was commonly recognised. A toll traverse was independent of the concept of quid pro quo but a toll thorough imposed a corresponding liability on the person asking for the toll, to repair and maintain the highway. In addition to the above two categories, there is another type of toll. This represents that toll which is imposed by a sovereign in the exercise of 'sovereign function' to levy and collect taxes. Where such a toll is imposed under an Act of Legislature, then there need not be a corresponding obligation to render any service as it is levied in consideration of all the conveniences, advantages and amenities which the user enjoys on account of availing these amenities either for personal or commercial business purposes within the State frontiers.

27. With a view to examine the aforementioned concept in detail, it would be apt to notice the origin meaning, content and scope of the word 'toll'.

28. The origin of tolls goes back to the disturbed times which followed the fall of the Roman Empire. In those days periodic markets were the only seats of commerce. Maintenance of peace in those markets was considered to be a duty of the church. But the Kings and Emperors also considered themselves the protectors of the merchants. They encouraged formation of markets and especially guaranteed the preservation of peace in those markets. As they considered themselves entitled to some compensation for the guarantee which they offered they began to charge tolls in respect of the markets, which were later known as ports or burhs. Later the right to take toll began to be conferred by the Kings on others by way of franchise. Some of the bodies to which the franchises were granted included ad hoc bodies like turnpike trusts or municipal corporations. As the right to take tolls was really a right to take money from the subject a right which could be misused care was taken to see that the right should be granted by the Kings without the special assent of the House of Commons only for a matter which was for the common profit of the people, e.g., the construction or repair of a bridge or the walls of a town. Later such franchises for the realisation of tolls began to be granted by Acts of Parliament also.

29. The meaning attributed to the word 'toll' in the Shorter Oxford English Dictionary is this :

'1. Orig., A general term for (a) a definite payment exacted by a king, ruler, or lord, or by the State or the local authority, by virtue of sovereignty or lordship, or in return for protection (Obs. exc. Hist.); more especially, (b) for permission to pass somewhere, do some act, or perform some function; or (c) as a share of the money passing, or profit accruing, in a transaction; a tax, tribute, impost, custom duty. A charge for the right of passage along a road (at a turnpike or toll-gate; now abolished in Great Britain), along a river or channel, over a bridge or ferry. A charge for the right of landing or shipping goods at a port; formerly also, a customs duty. A charge made for transport of goods, esp. by railway or canal.'

30. In Webster New International Dictionary 'toll' has been described as a tax or dues paid for some liberty or privilege particularly for the privilege of passing over a highway, as a road or bridge, for that of keeping a booth, vending goods, etc., in a fair, market or other limited space as a manor, for importing or exporting goods, and compensation taken for services rendered.

31. Black's Law Dictionary defines the term as under :

'Toll, a sum of money for the use of something generally applied to the consideration which is paid for the use of a road, highway, bridge, or the like of a public nature. Sands v. Manistee River Imp Co. 123 U.S. 288 S.C.t 113, 31 L.Ed 149 ; Rogge v. United States C.C.A. Alaska 128 F. 2d 800, 802. The price of the privilege of travel over that particular highway and it is quid pro quo and rests on principle that he who receives the toll does or has done something as an equivalent to him who pays it. State ex rel. Washington Toll Bridge Authority v. Yelle 195 Wash 636, 82 P. 2d 120, 125. Charge for long distance telephone calls.

Tolls. In a general sense, any manner of customs, subsidy, prestation, imposition, or sum of money demanded for exporting or importing of any goods or merchandise to be taken of the buyer. See also Toll.'

32. Some of the English cases dealing with the subject of tolls may now be noticed :

The earliest case relating to a toll is the case of Vinkensterna v. Ebden (1698) 91 ER 1154. The mayor and burgesses of the Town of Newcastle used from time to time or repair the port of the town and in consideration thereof they used to have a toll of five pence per chaldron for all coals exported. The defendant in the above case refused to pay the toll in respect of some coal on the plea that it had not been averred that the port had actually been repaired. Holt Chief Justice held, that 'there is not any necessity to aver here, that the port was in repair, for the consideration is that they have been time whereof, etc., obliged to repair and not the actual repairing of it.'

33. In Lord Pelham v. Pickersgil (1787) 1 TR 660, a bridge was situated within the manor of the plaintiff. The defendant denied the right and pleaded that the toll claimed being a toll thorough, could not be upheld because it was without consideration. Ashhurst, J., observed :

'It is properly admitted that toll thorough cannot be supported without showing a consideration but toll traverse may; and the reason is, that the very circumstance of passing over the soil of private person, where the public had no right before to pass imports a consideration.'

34. In Rickards v. Bennett (1823) 107 ER 83 the lord of the manor claimed right to a toll upon all goods brought and delivered or brought elsewhere and brought into and delivered, in a town within the manor. Pointing out the distinction between the 'toll thorough' and 'toll traverse', Best, J, observed :

'Toll thorough is in the highway, but toll traverse is for passing over another's ground. In latter case, the use of the soil is a sufficient consideration for the toll, and it is not necessary to state any other in support of a claim to it. But in the former, it is in a highway; that is, why the proprietor had a right of passage before the grant of toll; and, therefore, the claimant must show that something is done by him beneficial to the person against whom he makes the claim.'

35. In (1829) 1 Mood and M. 416, the right to realize the tolls had been granted by a charter of King John. The right was sought to be supported on the ground that the corporation repaired all the roads and streets in Cambridge. Lord Tenterden, C.J., in summing up to the jury observed that there were two sorts of toll recognised by law--toll traverse and toll thorough--and that if there was a burden of repairing public highways toll could be taken in consideration of those repairs. That, he said, would be toll thorough. Toll-traverse arose, according to the learned Judge when the owner of the soil dedicated it to the use of the public but at the time of the dedication reserved to himself toll from those who passed over it.

36. In Hundgerford Market Co. v. City Steamboat Co. (1860) 122 ER 736, the question that arose was whether the company was bound to charge toll at a uniform rate from every person liable to pay the toll. The question was answered in the negative. Cockburn, C.J., observed :

'The power to take the tolls is conferred on the company in consideration of service to be rendered, and accommodation to be afforded, to the public. If the service be rendered and the accommodation afforded, the obligation of the company is fulfilled. If it omits to exact the toll which is the consideration for the service, the shareholders would seem to be the only persons who can have a right to complain.'

37. In the case of (1872) 7 CP 555, Brecon Markets Co. v. Neath and Brecon Rail Co., Willes, J., pointed out the difference between 'toll traverse' and 'toll thorough' as under :

'Toll thorough may be taken upon land not belonging to the grantee and consequently no consideration can be implied for such grant. It is ordinarily taken upon a highway, and is granted to some one who undertakes some public work for the benefit of those who used the highway............ A toll traverse is said to differ from a toll thorough in this, that no consideration for it need be averred. This does not, however, mean that there need be no consideration for it; it merely expresses that, as there can be no toll traverse except of going over the land of the grantee, the consideration of using the land is implied from the character of the toll, and need not be further averred than by stating that it is a toll traverse. The consideration is the giving up the land of the grantee.'

38. In this regard, it would be worthwhile to make a reference to the decision of the Supreme Court in the case of AIR 1963 SC 906 (Burmah-Shell Oil Storage and Distributing Co. of India Ltd., Belgaum v. Belgaum Borough Municipality, Belgaum). While dealing with the term 'octroi', certain observations have been made by the Supreme Court of India. These observations throw light on the nature of tax which is imposed by the State and other authorities. The relevant observations are being noticed as under :

'The particular tax was `octroi' and there was no description of the tax, The word `octroi' comes from the word `octroyer' which means `to grant' and it its original use meant `an import' or `a toll' or `a town duty' on goods brought into a town. At first octrois were collected at ports but being highly productive, towns began to collect them by creating octroi limits. They came to be known as 'town duties'. These were collected not only on 'imports' but also on 'exports' see Beuhler : Public Finance (3rd Edn.) p. 426. Grice in his National and Local Finance, p. 303 says that they were known as 'ingate tolls' because they were collected at toll gates or barriers. Normally, they were levied on goods meant for consumption but in Seligman's Encyclopaedia of Social Sciences Volume IX, page 570, 'octrois' are described without any reference to consumption or use. This is how the editors describe octrois :

'As compared with the facilities of the National Government the possibilities of raising revenue by local bodies are quite limited. All forms of indirect taxation are practically closed to local authorities. They are unable to levy customs duties, although they may collect the so-called octrois; that is, duties levied on goods entering town'.'

It was further observed :

'Octrois and terminal taxes were different taxes though they resembled in one respect, namely, that they were leviable in respect of goods brought into a local area. While terminal taxes were leviable on goods 'imported or exported' from the municipal limits denoting thereby that they were connected with the traffic of goods, octrois, according to the legislative practice then obtaining were, leviable in respect of goods brought into a municipal area for consumption or use or sale. It is not necessary to cite the Municipal Acts prior to 1935 but a reference to them will amply prove that such was the tax which was contemplated as octroi.'

39. From the aforementioned decisions, it can be said that there are many kinds of the tolls and all categories must be taken to be comprehended by the entry relating to tolls. In the Government of India Act of 1935 or the Constitution of India, there were as indicated above, two divisions 'toll thorough' and 'toll traverse'. There are sub-divisions also. These are in the nature of 'toll stallage'. The first was a levy prescribed by towns for animals or men that went over through highways of a town or over ferries, bridges, etc., belonging to it. Toll traverse was charged for passing over a private person's ground. Toll stallage was a charge for occupation of land by pitching stalls in fairs and markets. A toll was thus a tribute or custom paid for a privilege, generally for passage over or for using a bridge, road, ferry, railway and sometimes for occupation of market, port, anchorage, etc. The justification for tolls was that the person charged enjoyed a privilege and the amount went towards the construction, improvement or upkeep of these things. Toll were a common feature of medieval Europe and England and toll roads and turnpike roads were so common that it was impossible to go any distance without having to pay some charge. Tolls went out of fashion and were abandoned because they were very unpopular and the charges for maintenance of roads, bridges, ferries, etc., were directly levied as taxes. They lingered for some time as octrois which were picturesquely described an 'ingate' toll being collected at the gates of a town or toll barriers. Even octrois have disappeared in Europe and England but they have continued to persist in India.

40. Thus, tolls are of many kinds and can be levied for various purposes. Besides tolls relating to passage over land the other recognised tolls are market toll, fair toll, stallage toll, canal toll, etc. It is tolls relating to passage which are usually classified in two kinds--toll thorough and toll traverse. A toll thorough has no connection with the ownership of the land and is usually granted to someone who undertakes to do something for the benefit of the person who uses the passage, i.e., makes the road or a bridge or keeps it in repairs. A toll traverse is on the other hand connected with the ownership of the soil and is allowed to be charged for the use of the land by the person liable for the toll. This classification is not applicable to tolls of other kinds which have no connection with passage.

41. The contention that some sort of consideration is necessary to support the levy of tolls is not always correct. The right to levy a toll is based either on a grant or has been acquired by prescription. If the right had been exercised from time immemorial its legal origin as well as consideration may be presumed. Similarly, if the right has been granted by statute the consideration may be mentioned in the statute itself and can even be presumed even if it is not so mentioned because the Legislature would not have granted the right unless there was some consideration to justify the grant.

42. Usually the consideration is some amenity, service, benefit or advantage which the person entitled to the toll undertakes to provide for the public in general or the persons liable to pay the toll. Sometimes the consideration may be traced to ownership of jus dominii. Permission by the owner of the land for the use of his land for any purpose may therefore be sufficient consideration if the person charging the toll is the owner. The toll in the present case has not been levied in respect of any particular road or service. It is being levied in consideration of all the conveniences, advantages and amenities which the petitioners are enjoying on account of having their business within the State limits. The petitioners could not therefore escape liability for the toll on the ground that its wagons do not use the roads provided by the respondent-State and pass over a siding with whose constructions or maintenance, the respondent-State have no concern. The toll in the present case is authorised by statute. Consideration was certainly necessary for it but that consideration is in the first place to be presumed because the Legislature would not have granted the authority to levy the toll unless there was consideration. In any case, the consideration is to be found in the general amenities and advantages which the State provides.

43. In the present case, the toll is being collected under a pre-Constitution Act. At that point of time, the National Highways Act was not there. This toll is in the nature of toll traverse. On the basis of the principle indicated above and on the basis of the statement of law contained in Holdsworth's History of English Law that when tolls are levied under the Act of Legislature, then there has to be no corresponding element of quid pro quo even if it be presumed that in this regard, some element of quid pro quo has to be there, even then that element is present in this case. The petitioners are using not only the national highways but also are using the State highways. Their factories are not located on the national highways but are located in the interior of the State, and therefore, they have necessarily to use the State highways. The dry fruit is collected from the interior of the State. This is brought on the State highways and ultimately the national highways are also used. Therefore, to say that the State is levying the tax without giving any corresponding service to the petitioners is incorrect. This is being levied in consideration of all the conveniences, advantages and amenities which the petitioners enjoy on account of having their business premises within the State of Jammu and Kashmir. This aspect of the matter has been considered with elaboration by the Full Bench in Girdharilal Anand Saraf's case AIR 1969 J&K; 113. What was said in paragraph 10 is being reproduced below :

'The word 'toll' has been described in the Webster's New International Dictionary as 'a tax or dues paid for some liberty or privilege particularly for the privilege of passing over a highway, as a road or bridge, for that of keeping a booth, vending goods, etc., in a fair, market or other limited space as a manor, for importing or exporting goods'. In Byrine's Law Dictionary, 1923 edition, 'toll' is a payment for passing over or using a bridge, road, ferry, railway, market, port, anchorage, etc. In Wharton's Law Lexicon (fourteenth edition), among other things, the word 'toll' is described as 'a tribute or custom paid for passage'. Under the English Law, broadly there are two kinds of tolls recognised, which are known as 'toll traverse' and 'toll thorough'. According to Byrne's Law Dictionary, 'toll traverse' was a sum payable for passing over the private soil of another, or over a private road, bridge, ferry or the like, and 'toll thorough' was a sum payable for passing over the public highway: to support a claim for such a toll (which is a franchise) a consideration must be shown, i.e., repairs to the highway by the owner of the franchise. According to Wharton's Law Lexicon, toll traverse is taken for every beast driven across a man's land. In Halsbury's Law of England, third edition, Vol. 19 (Simonds Edition), 'a toll traverse is a toll taken in respect of the original ownership of the land crossed by the public (though now perhaps severed therefrom), the land having been at the date of the grant the private property of the grantee, and having been then dedicated by him to the public in consideration of the toll to be taken'. 'A toll thorough is independent of any ownership of the soil by the original grantee, the consideration necessary to support it being usually the liability to repair the particular highway or bridge.'

44. The Full Bench noted distinction described two classes of tolls and referred to the view expressed by Lord Parker of Waddington in Hammerton v. Earl of Dysart (1916) 1 AC 57. He remarked :

'Toll are generally classified as tolls-traverse and toll thorough. If, apart from the franchise, no one would have had a right to do that for which the toll is charged the toll is a toll traverse. If, apart from the franchise, any one would have had the right to do that for which the toll is charged, the toll is a toll thorough. In the former case the consideration moving to the public may be found in the right conferred on the public by the franchise. For example, if before the creation of the franchise, the road for the use of which toll is charged was a private road, the consideration may be the dedication of the road to the public..........'

Therefore, we are of the opinion that :

(i) the toll tax of the nature which is being levied by the State under the Act is a toll for which there has to be no corresponding element of quid pro quo ;

(ii) the petitioners are not merely using the national highway but they are making use of State highways and other roads which are being maintained out of State funds ;

(iii) the State authorities are providing other facilities, therefore, element of quid pro quo is there. Therefore, the argument that the toll tax cannot be levied is found to be without merit and is rejected;

(iv) that the aforementioned questions have been considered in depth by the Full Bench in Girdharilal Anand Saraf's case AIR 1969 J & K 113 and the nature of levy has been held to be a tax;

(v) that we have not been able to persuade ourselves to take a different view in this regard.

45. The other argument that the additional toll tax creates a special category for dry fruits like almonds, walnuts and walnut kernels, be also examined.

46. It be seen that in the matter of levy of tax the concept of reasonableness is normally not there. The petitioners were supposed to show that the tax is excessive. Beyond making a bare assertion, nothing has been placed on the record. Even otherwise, the service facilities which the State is generally providing require large amount to be spent. The salary component of the employees who are concerned with the maintenance of the State highways has gone up by geometrical progression. Therefore, to say that the additional toll tax at Re. 0.60 per kg. is unreasonable cannot be sustained. The argument that a special category has been carved out for this purpose, is an argument which cannot be accepted. This is because if the Schedule appended to the original Act is seen, it would become apparent that for various items, different rates have been prescribed. If at the time of inception, this could be visualised then merely because dry fruits and its derivatives have been subjected to higher rate of toll tax cannot be made a ground to contend that the levy is excessive.

47. The argument based on the basis of the provisions contained in the National Highways Act, 1956 (hereinafter referred to as 'the Central Act'), be now examined.

48. Under the aforementioned Act, some of the highways included in the Schedule appended to the Central Act have been declared as national highways. This is so indicated in Section 2(1) of the Central Act. In the exercise of powers conferred under Section 2(2) of the Central Act, the Central Government can declare certain other highways as national highways. The Central Government has again the power to omit any highways from the scope of the term 'national highways'. See Section 2(3). These highways are to vest in the Union of India, The provision in this regard exists in Section 4. The responsibility for development and maintenance of national highways rests with the Central Government. The Central Government can by notification in the official gazette levy fees at such rates as may be prescribed by the Rules. Section 7 makes a provision in this regard. Notwithstanding the above provision, the Central Government can enter into agreement with the State Governments and municipalities for the development, maintenance and management of these national highways. See Section 8(8) of the Central Act. There is a provision in Section 9 for framing Rules. All Rules and notifications issued are to be laid before both the Houses of Parliament after these are issued.

49. The highway connecting Jullundhur, Madhopur, Jammu, Banihal, Srinagar, Baramula and Uri is a national highway. It figures at Sl. No. 1-A of the Schedule. So far as other highways in the State are concerned, these are not included in the Schedule appended to the aforementioned Act. As the petitioners have based their arguments on the provisions contained in Sections 4, 7, 8 and 10 of the Act, these provisions are being noticed as under :

'Section 4: National highways to vest in the Union.--All national highways shall vest in the Union, and for the purposes of this Act 'highways' include--

(i) all lands appurtenant thereto, whether demarcated or not;

(ii) all bridges, culverts, tunnels, causeways, carriage ways and other structures constructed on or across such highways ; and

(iii) all fences, trees, posts and boundary, furlong and mile stones of such highways or any land appurtenant to such highways.

Section 7 : Fees for services of benefits rendered on national highways.--(1) The Central Government may, by notification in the official Gazette, levy fees at such rates as may be laid down by rules made in this behalf for services or benefits rendered in relation to the use of ferries (permanent bridges the cost of construction of each of which is more than rupees twenty-five lakhs and which are opened to traffic on or after the 1st day of April, 1976), temporary bridges and tunnels on national highways (and the use of sections of highways). (Provided that if the Central Government is of opinion that it is necessary in the public interest so to do, it may, by like notification specify and bridge in relation to the use of which fees shall not be leviable under this Sub-Section.)

(2) Such fees when so levied shall be collected in accordance with the rules made under this Act.

(3) Any fees leviable immediately before the commencement of this Act for services or benefits rendered in relation to the use of ferries, temporary bridges and tunnels on any highway specified in the Schedule shall continue to be leviable under this Act unless and until it is altered in exercise of the power conferred by Sub-section (1).

Section 8 : Agreements with State Governments or municipalities.--Notwithstanding anything contained in this Act, the Central Government may enter into an agreement with the Government of any State or with any authority entrusted with the control of management of any municipal area in relation to the development or maintenance of the whole or any part of a national highway situated within the State or, as the case may be, in relation to the development or maintenance of any such part of a highway situated within a municipal area as is referred to in Sub-section (1) of Section 2 and any such agreement may provide for the sharing of expenditure by the respective parties thereto.

8-A: Power of Central Government to enter into agreements for development and maintenance of National highways.--(1) Notwithstanding anything contained in this Act, the Central Government may enter into an agreement with any person in relation to the development and maintenance of the whole or any part of a national highway.

(2) Notwithstanding anything contained in Section 7 the person referred to in Sub-section (1) is entitled to collect and retain fees at such rate, for services or benefits rendered by him as the Central Government may, by notification in the official Gazette, specify having regard to the expenditure involved in building, maintenance, management and operation of the whole or part of such national highway, interest on the capital invested, reasonable return, the volume of traffic and the period of such agreement.

(3) A person referred to in Sub-section (1) shall have powers to regulate and control the traffic in accordance with the provisions contained in chapter VIII of the Motor Vehicles Act, 1988 on the national highway forming subject-matter of such agreement for proper management thereof.

Section 10 : Laying of notifications, rules, etc., before Parliament.--All notifications or agreements issued or entered into under this Act shall be laid before both Houses of Parliament as soon as may be after they are issued or entered into.

50. On the basis of the aforementioned provisions, the following arguments have been raised :

(i) that as the barrier located at Lakhanpur is located on the national highway and as this highway vests in the Union of India, therefore, the State Government has no power to levy any tax.

(ii) that even if it be presumed that there is some arrangement between the State Government and the Union of India for collection of taxes then that arrangement has to be in the shape of a notification. If it is not so, then it cannot be taken note of.

51. The stand of the respondent-State is that vesting of the highway in the Union of India is only for a limited purpose, i.e., for development, maintenance and therefore, the land underneath the highway continues to vest in the State Government as it has proprietary rights in the land and as the petitioners are making use of this land, therefore, the State Government can levy the toll in question. The vesting it is thus, urged is, only for a limited purpose. In addition to above, it is urged that the laying of a notification before the Parliament is not a mandatory requirement of law.

52. The question naturally crops up what is the scope and ambit of vesting as the subject is dealt within the National Highways Act and whether the laying down of rules and notifications before the Parliament is a mandatory requirement of law. This question arose and was considered by a Full Bench of the Punjab and Haryana High Court in the case reported as Megha Singh and Co. v. State of Punjab [1977] 40 STC 370; AIR 1977 P&H; 297. The Full Bench observed that 'this infirmity will not invalidate the rules. Reliance was placed on a Supreme Court decision in Jan Mohammad Noor Mohammad Bagan v. State of Gujarat AIR 1966 SC 385, wherein the Supreme Court did not pronounce the rules to be ineffective simply because there was failure to place the rules before the Houses of the State Legislature. In this connection reference may also be made to Krishnan v. Secretary, Regional Transport Authority AIR 1956 Andhra 129 and Madhava Rao v. State of Andhra Pradesh (1967) 2 An W.R. 366 wherein similar view was expressed by the Andhra Pradesh High Court. The Full Bench of the Punjab and Haryana High Court also quoted the decision reported as Regina v. Immigration Appeals Tribunal (1972) 1 WLR 1390. Mr. Justice O. Chinnappa Reddy (later Judge, Supreme Court of India), who delivered the judgment of the Full Bench observed as under :

'Recently in Regina v. Immigration Appeals Tribunal, the question arose whether certain immigration rules had been laid before Parliament as required by the Immigration Appeal Act. The Lord Chief Justice of England and two of his companion Judges went into the matter and, on the evidence, held that there was compliance with the requirement regarding laying. The question was not brushed aside on the ground that non-laying was of no consequence. In a case which came before the Court of Error of Barbados, Collymore, C.J., was reported by Megarry to have said :

'Where the Legislature delegates its law-making power to a subordinate authority and reserves the right to review the regulations made by such subordinate body, and if necessary to disallow them, and attaches conditions to secure that it shall have the opportunity to exercise its power of review as the supreme legislative authority, such conditions are mandatory.''

It was further observed :

'Academic lawyers like Sir C.K. Allen, Barnard Schwartz, R.R. Megarry (now Justice Megarry) and Prof. Kersell have all been greatly agitated about the problem of 'non-laying' and very rightly too. One of the major problems of any liberal democracy, particularly a modern welfare State is that of controlling excessive executive action. The desire to attain the objective of securing 'social, economic and political justice' necessarily results in intense activity in the legislative and the executive fields. Unable to deal with matters of detail, the Legislature is too often content to lay down the guidelines and leave the details to be worked out by expert executives. It may perhaps be said that in recent years subordinate legislation has grown in geometrical progression to legislation as such. With the growth of subordinate legislation has grown the possibility of abuse in the making of such subordinate legislation, not because of any evil design on the part of the executive but because of the well-known tendency on the part of the executive to get on with the job without any possible interference. In fact a well intentioned executive armed with power may turn out to be the most arbitrary of men. There is thus a danger of the expert executives becoming masters of the people they are employed to serve. There is an even greater danger of in-differently made delegated legislation wrecking parent legislation as effectively as by design. We are quite familiar with such delegated legislation. So it is necessary for the Legislature to control the executive and 'laying before the Legislature' is one of the devices by which such control is exercised. But then is it for the courts to declare delegated legislation as invalid on the ground of 'non-laying when the Legislature itself attached or prescribed no consequence to the non-laying'? '

53. It was accordingly concluded that the non-laying of rules before the Legislature is not a material defect and this shall not take away the efficacy of the rules in question. Therefore, the argument raised by the learned counsel for the petitioners in this regard is found to be without merit and is rejected.

54. With regard to the other question vis-a-vis the power of the State Government to levy the toll tax and recover it from the vehicles using national highway, the question was elaborately considered in Girdharilal Anand Saraf's case AIR 1969 J&K; 113. As a matter of fact, the aforementioned decision of the Full Bench of this Court is a complete answer to almost all the arguments which have been raised in this behalf. What the Full Bench observed can be summarised as under :

(i) Entry No. 23 of the Union List in VII Schedule of the Constitution of India enables the Parliament to make laws with regard to the national highways ;

(ii) So far as levy of toll is concerned, this is not a Central subject and is an exclusively State subject falling in item No. 59 of the State List. This is a power which is to be exercised by the State Legislature exclusively.

(iii) That the provisions of Jammu and Kashmir (Levy of Toll) Act (8 of 1995) Samvat are Constitutional.

(iv) That vesting under the national highways in the Union of India does not take away the ownership of the State Government.

(v) That levy of toll under the Tolls Act is in the nature of a tax and not a fee and therefore, there has to be no relationship between the services rendered and the collection of the levy. The toll in question is being charged for the use of the State Highways, and therefore, merely because some part of the road falls on the national highways would be of no consequence.

(vi) that the levy of toll tax does not in any way interfere with the inter-State trade and commerce.

55. As to what is meant by the term vest is again a matter which has been deliberated upon by the Full Bench. The reasoning given by the Full Bench in Girdharilal Anand Saraf's case AIR 1969 J&K; 113 that the State Government is not divested of ownership is an opinion to which no exception can be taken. The term vest was considered by the Supreme Court in the case reported as AIR 1957 SC 344 (Fruit & Vegetable Merchants Union v. Delhi Improvement Trust). What was said in paragraph 16 is being reproduced below :

'In the case of Coverdale v. Charlton (1878) 4 QBD 104(C), the Court of Appeal on a consideration of the provisions of the Public Health Act, 1875 (38 & 39 Vict, c. 55) with particular reference to s. 149 has made the following observations at P. 116 :

What then is the meaning of the word 'Vest' in this section The Legislature might have used the expression 'transferred' or 'conveyed', but they have used the word 'vest'. The meaning I should like to put upon it is, that the street vests in the local board qua street: not that any soil or any right to the soil or surface vests, but that it vests qua street.'

56. This precise question was also considered by the Full Bench in Girdharilal Anand Saraf's case AIR 1969 J&K; 113. The implications of the word 'vest' were taken note of. The Full Bench has elaborately discussed the concept and what was said by it is being quoted again :

'The word 'vest' has been the subject-matter of a long series of decisions in England and in India also. In Wharton's Law Lexicon it is defined as '(1) either to place in possession : to make possessor of; or, to give an absolute interest in property when a named period or event occurs ; (2) (of a right or interest). Its coming into the possession of any one; enuring to the benefit of any one.' Similarly in Byrne dictionary it is stated among other things to mean 'where an Act of Parliament enacts that a street shall vest in an urban sanitary authority, this means that the surface of the land, and so much of the soil as is necessary for its use as a street, shall be transferred to the authority'.'

The English case Coverdale v. Charlton (1878) 4 QBD 104 is considered to be the leading case on the subject and therein Bramwell, L.J., observed:

'I am disposed to hold that this 'street' vests without any property in the freehold of the soil. The word 'vest' may have two meanings. It may mean that a man acquires the property 'usque ad coelum' and to the centre of the earth but I do not think that to be its meaning here. One construction of the word 'vest' here is that it gives the property in the soil, the freehold, the surface and all above and below it, but that would be such a monstrous thing to say to be necessary for the proper control of the streets by the local board, that I cannot suppose it to mean such a thing. Suppose the soil of the freehold passes, and consequently it carries the right to the land to an indefinite extent upwards, and to the centre of the earth below the surface; I cannot make up my mind to say that is the meaning of the word 'vest' in Section 149......... What then is the meaning of the word Vest' in this section The Legislature might have used the expression 'transferred' or 'conveyed' but they have used the word 'vest'. The meaning I should like to put upon it is that the street vests in the local board qua street; not that any soil or any right to the soil or surface vests, but that it vests qua street.........The meaning I put upon the word 'vest' is, the space and the street itself, so far as it is ordinarily used in the way that streets are used shall vest in the local board....That would show that 'street' comprehends what we may call the surface, that is to say, not a surface bit of no reasonable thickness, but a surface of such a thickness as the local board may require for the purposes of doing to the street that which is necessary to it as a street and also of doing those things which commonly are done, in or under the streets ; and to that extent they had a property in it.'

57. The Full Bench also took note of various other authorities in which same view was expressed. These are Rolls v. Vestry of St. George (1880) 14 Ch D 785 (796), Mayor of Tunbridge Wells v. Baird (1896) AC 434. After considering all these authorities, the learned Judges held that :

'When a street is vested in a municipal council, such vesting does not transfer to the municipal authority the rights of the owner in the site or soil over which the street exists. It does not own the soil from the centre of the earth usque ad coelum, but it has the exclusive right to manage and control the surface of the soil and so much of the soil below and of the space above the surface as is necessary to enable it to adequately maintain the street as a street. It has also certain property in the soil of the street which would enable it as owner to bring a possessory action against trespassers.'

58. The Full Bench further relied upon the judgment of the Supreme Court in the case reported as Municipal Board, Manglaur v. Mahadeoji Maharaj AIR 1965 SC 1147, in which it was held that a public pathway vests in the municipality by virtue of Section 116(g), U.P. Municipalities Act but the municipality does not own the soil. It has the exclusive right to manage and control the surface of soil and 'so much of the soil below and of the space above the surface as is necessary to enable it to adequately maintain the street as a street'.

59. After taking note of the above decision, it was observed that the national highways vest in the Union of India only for a limited purpose. So far as the ownership of the road is concerned, it continues with the State of Jammu and Kashmir. So far a Union of India is concerned, it was observed that it has control over the highway so far its proper maintenance and up-keep demands. The aforementioned view expressed by the Full Bench which is based on Supreme Court decisions, is a view which sums up aptly the legal as well as the factual position. There is absolutely no room for taking any other view. We respectfully agree with the same.

60. The questions which have not been raised before the Full Bench in Girdharilal Anand Saraf's case AIR 1969 J&K; 113 and which have now been raised are vis-a-vis the exemption which is being claimed. This exemption is being claimed on the basis of the notifications already noticed above. If the transaction in question falls within the definition of the term 'manufacture', then the petitioners would be entitled to some benefit; if it is not, then they would not be entitled to any benefit. This aspect of the matter is now being dealt with.

61. The question as to whether the process which is being undertaken by the petitioners falls within the term 'manufacture' may now be examined.

62. The details of the process undertaken by the petitioners have been noticed above. This basically consists of washing, cleaning and drying. Some of these processes are mechanical, some are manual. Same process is resorted to when kernels are taken out of shells. The question arises as to whether this process would be covered by the term 'manufacture'.

63. The word 'manufacture' is derived from the Latin word 'manu', which means by hand and 'facture' from 'facere' means to make. In Cassel's Compact English Dictionary, 'manufacture' means as 'to make or work up for use, produce for fashion by labour or machinery specially on a large scale'. According to Shorter Oxford Dictionary, 'manufacture' means the action or process of making by hand, the making of articles or materials (now on a large scale), by physical labour or mechanical power.

64. In Union of India v. Delhi Cloth and General Mills Co. Ltd. AIR 1963 SC 791, the Supreme Court of India held that the word 'manufacture', generally meant the bringing into existence of a new substance and does not mean merely to produce some changes in a substance, however, minor in consequence the change may be. Reference was made to a passage from an American judgment quoted in the Permanent Edition of Words and Phrases, Volume 26 which is quoted against :

'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation, a new and different article must emerge having a distinctive name, character or use.'

65. In Eastern Drug Company Limited v. State of West Bengal (1973) 77 CWN 382, it was held that to constitute manufacture there must be transformation or change of the raw material into a different marketable article. In Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430, it was observed by the Supreme Court that the dictionary meaning of 'manufacture' is 'transform' or fashion raw materials into a changed form for use.

66. In Anheuser Busch Brewing Association v. United States 52 L Ed 336, the U.S. Supreme Court held that :

'Manufacture implies a change, but every change is not manufacture........ there must be transformation ; a new and different article must emerge, 'having a distinctive name, character or use'.'

It was added :

'At some point, processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage, we cannot say that it has been 'manufactured'.'

67. In East Texas Motor Freight Lines v. Frozen Food Express 100 L Ed 917, the U.S. Supreme Court held that dressed and frozen chicken was not a commercially distinct article from the original chicken. It was pointed out :

'Killing, dressing and freezing a chicken is certainly a change in the commodity. But it is no more drastic a change than the change which takes place in milk from pasteurizing homogenizing, adding vitamin concentrates, standardising and bottling.'

It was further observed :

'.....there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cotton seed in the field and cotton seed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cotton seed, as well as the dressed chicken, have gone through a processing stage. But neither has been 'manufactured' in the normal sense of the word.'

68. In Nilgiri Ceylon Tea Supplying Co. v. State of Bombay [1959] 10 STC 500 (Bom), the question was whether blending of different brands of tea purchased in bulk from the market by a dealer according to a formula evolved without the application of mechanical or chemical process can be treated as 'manufacture'. It was held that although some skill was involved in the preparation of tea mixtures but that could not be regarded as processing. The commodity remained the same. There was no alteration in the nature and character of the goods in the preparation of tea mixtures as contemplated by the said Act. Blending and packing of tea was again held to be not a process covered by the term 'manufacture' by the Karnataka High Court in the case reported as Lipton India Limited v. State of Karnataka [1994] 95 STC 225.

69. Plain cashew nuts were purchased in tins. They were sold in plastic bags after frying and applying spices to make them tasty. This process was held to be not covered by the term 'manufacture' in Commissioner of Sales Tax v. Bombay Traders [1976] 38 STC 286 (Bom).

70. Polishing and sizing of stones such as cuddapah, shahabad and marble would not be covered by the term 'manufacture'. See Poonam Stone Processing Industries v. Deputy Commissioner of Commercial Taxes (Admn.), Gulbarga Division, Gulbarga [1994] 94 STC 183 (Kar).

71. Iron scrap was purchased. It was converted into various shapes and sizes by cutting and twisting. It was observed that as no new commodity came into existence, therefore, the process would not be covered by the term 'manufacture'. See K.P. Enterprises v. Divisional Deputy Commissioner of Sales Tax, Raipur [1996] 102 STC 483 (MP).

72. In Assistant Commercial Taxes Officer, Ward A, Chittorgarh v. Sitaram Badrilal [1986] 61 STC 258 (Raj), the polished stones were held to be not the outcome of process of 'manufacture'.

73. The process of drying of tendu leaves and packing them in bundles was held not to involve any manufacturing process. This was the decision given in Commissioner of Sales Tax, M.P. v. Jugal-kishore Badriprasad [1979] 43 STC 501 (MP). Again the process of stirring cream to quicken and the process of conversion into butter does not bring into existence any different commercial commodity than the original one. There is no essential difference between cream and butter. Since no manufacturing process is at all involved in the conversion of cream into butter, it follows that there is no consumption of 'cream' in the process of converting it into 'butter'. State of Tamil Nadu v. Bharat Dairy Farm [1991] 81 STC 332 (Mad.).

74. In Commissioner of Sales Tax, U.P., Lucknow v. Harbilas Rai and Sons [1968] 21 STC 17 (SC), bristles were boiled with soap and other chemicals. These were sorted out in bundles according to their size and colour. These were despatched to foreign countries for sale. It was held that the final product in this case did not come into existence through the process of 'manufacture'. It was observed that the word 'manufacture' has various shades of meaning but if the goods to which some labour is applied remain essentially the same commercial article, then it cannot be said that the final product is the result of manufacture. See also Commissioner, Sales Tax, U.P. v. Ch. Mithoo Lal Roshan Lal [1963] 14 STC 781 (All.). Again goat hair and goat hair strings were purchased. These were sorted out, cleaned and knitted into patties for export. The process was held to be not covered by the term 'manufacture'--Prabhat Patti Suppliers v. Commercial Taxes Officer, Jodhpur [1992] 84 STC 302 (Raj).

75. The assessee, an authorised contractor was engaged in the purchase of firewood. He removed trees from the forest, brought the same to his business premises and chopped and sold the same as firewood. It was observed that this process does not involved any activity to be covered by the term 'manufacture'. See Pyare Lal Khushwant Rai v. State of Punjab [1974] 34 STC 341 (P&H;). Again where a log either by manual labour or mechanical process is converted into a plank or a rafter, a new substance does not come into existence and this process is not covered by the term 'manufacture'. Such was the view expressed in Sidhu Ram Atam Parkash v. State of Haryana [1974] 34 STC 344 (P&H;). Standing timber trees were felled. They were cut and converted into ballis. This process was held to be not covered by the term 'manufacture' in Mohanlal Vishram v. Commissioner of Sales Tax, Madhya Pradesh, Indore [1969] 24 STC 101 (MP). Small pieces of wooden planks were converted into pencil slats. It was observed that pencil slats were nothing but timber cut into small pieces of plank and this process would not be covered by the term 'manufacture'--Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. B. Thampan [1995] 96 STC 631 (Ker).

76. Til oil was purchased. It was sold after mixing scent to it. It was observed that this does not involve any process of 'manufacture'--Commissioner, Sales Tax, Uttar Pradesh v. Bechu Ram Kishorilal [1976] 38 STC 236 (All.).

77. In Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers [1980] 46 STC 63 (SC), processing of pineapple fruit into pineapple slices for being sold in sealed containers was held to be not covered by the term 'manufacture'. Again the processing of lobsters for the purpose of sale was held to be not covered by the term 'manufacture' as no new commodity emerged. Prawns which were subjected to the process of cleaning, cutting, sizing and packaging for export remain prawns and cannot be regarded as a new commercial commodity.--State of Tamil Nadu v. Ceyvere Southern Inc. [1983] 52 STC 328 (Mad.) and State of Tamil Nadu v. Tata Oil Mills Co. Ltd. [1983] 52 STC 328 (Mad.).

78. Iron scrap was purchased. This was cut to suit the requirement by various customers. It was held that this will not change the basic character of iron scrap. It only involved processing by twisting, fabricating or giving it a particular shape required by customers. Such type of processing would not change the identity of the material and would not amount to manufacturing.--K.P. Enterprises v. Divisional Deputy Commissioner of Sales Tax, Raipur [1996] 102 STC 483 (MP).

79. A dealer was engaged in the business of purchasing waste mixture of polyester and cotton fibre from textile mills. This was sold after removing dust and other impurities therefrom. This was also subjected to processes such as cleaning, segregating, carding, drafting and winding. On the question whether goods having a new distinct identity could be said to have been manufactured, it was held that as a result of the process employed the fibre still retained the character of fibre and it was not turned into yarn. The fibre was sold as a mixture of polyester and cotton fibre, the proportion of polyester and cotton remaining the same. Though the dealer, by employing the processes in question was able to sell the cleaned mixture of polyester and cotton fibre of different colours separately and at a higher price, it could not be said that the dealer was selling different goods having a distinct identity and distinct use. The processes in question did not amount to or result in manufacture of a new commercial commodity. This view was expressed in State of Gujarat v. Polythreads [1991] 82 STC 282 (Guj). The same view was expressed in regard to the coir products. These were subjected to sheaving, smoking and stencilling. This process was held to be outside the scope of the word 'manufacture'.--See K.G. Vijayan v. State of Kerala [1990] 79 STC 243 (Ker).

80. Thus on a conspectus of all the aforesaid decisions, it can be said that the following ingredients are necessary to constitute 'manufacture' :

(a) there must be change in substance ;

(b) a different article must emerge having a distinctive character and use from the raw material by the use of physical labour or by mechanical process ;

(c) the articles produced either by physical labour or by mechanical process will be on large scale and will pass as a commercial commodity from hand to hand.

In view of the above position of law it is held that the petitioners' claim for seeking exemption in pursuance of notifications, SRO No. 121 and SRO No. 224 would not be available to them.

81. The last argument with regard to the validity of SRO No. 342 by which the sales tax is sought to be recovered at Re. 0.60 per kg. be now examined.

82. This is a notification issued under Section 5 of the Jammu and Kashmir General Sales Tax Act of 1962. The tax is payable on a turnover which is to be determined by weight. Re. 0.60 is the rate per kg. This notification is for a limited duration. The argument raised is that this is a colourable exercise of power. The sales tax law does not contemplate determination of turnover by taking weight into consideration.

83. It be seen that the Jammu and Kashmir General Sales Tax Act of 1962 was brought on the statute book with a view to legitimate the levy of general tax on the sale and purchase of goods in the State and for other connected matters. The tax is, therefore, basically on sale and purchase. As to how the turnover is to be determined, is indicated in Section 2(n). The definition is inclusive. This section, for facility of reference is being reproduced below :

' 'Turnover' includes the aggregate of the amounts of sale and purchase and parts of sale and purchase made by any dealer whether as principal agent or in any other capacity.'

84. The explanation to this section makes it clear that the turnover can be determined subject to the conditions and restrictions as may be prescribed. One of the modes which is prescribed in the statute is to levy tax on the amount for which goods are sold. The notification which is being assailed in this case prescribes and enables the State to collect the tax by determining the turnover by taking weight into consideration. Whatever is the weight sold so far as the items included in SRO No. 342 are concerned, the tax is to be levied accordingly. The incidence of the tax is the sale. It is only the method as to how the turnover is to be assessed and calculated which is differently prescribed. There is no set principle that a turnover is to be determined only in a particular manner. In this particular event, the turnover is being assessed on the basis of sales made and the weight is being taken into consideration. The incident of taxation is on the sale. Therefore, the argument put across by the learned counsel for the petitioners in this regard cannot be accepted.

85. In view of the above discussion, we are of the opinion :

(i) that there is no generic difference between a tax and fee. Compulsion is not the hall-mark of distinction between the two. Again the money collected need not go into a separate fund. If it goes into a consolidated fund, the nature of collection is altered ;

(ii) that in this case, what is being collected, is a tax and not a fee. This is being collected in the exercise of sovereign power vested in the State. This levy was being charged before the Constitution came into force ;

(iii) that even if the toll in question is treated as a fee, even then there has to be no corresponding rendering of service. This is because the toll in question is in the nature of toll traverse and not toll thorough. In the case of 'toll traverse', mere use of the soil is sufficient consideration for the levy of the toll ;

(iv) that the petitioners are using not only the national highways but they are using State highways also. Therefore, even if the concept of quid pro quo is made applicable, even then the petitioners cannot succeed. This is because as indicated above, in addition to the national highway, they are using State highway and also the roads which are not part of national highway ;

(v) that the vesting of National highway in the Central Government is only with a view to see that these are properly maintained. The ownership of soil remains with the State. On this reasoning also, the State Government can impose tax in question ;

(vi) that the above conclusions were the subject-matter of decision in the case of Girdharilal Anand Saraf v. State of Jammu and Kashmir AIR 1969 J&K; 113. All these have been answered in favour of the State. The reasoning given by the Full Bench is a reasoning to which no exception can be taken. We respectfully concur with the view so expressed.

86. Some of the arguments which were not there before the earlier Full Bench in Girdharilal Anand Saraf's case AIR 1969 J&K; 113 are also answered against the petitioners. These are :

(i) that the requirement of laying a notification before the Parliament is not mandatory ;

(ii) that the activity which is carried on by the petitioners in the matter of making the dry fruit marketable does not fall within the concept of term 'manufacture'. What was said by the Supreme Court of India and by other High Courts has already been noticed above. The activity in question being not covered by the term 'manufacture', therefore, the petitioners cannot seek exemption ;

(iii) that the incidence of taxation remains the same. Merely because the turnover has been determined by taking the weight into consideration would not take the tax out of the purview of the Jammu and Kashmir General Sales Tax Act of 1962 ;

(iv) that the levy of additional toll tax is, therefore, valid. As to what should be the rate of tax is to be primarily determined by forums other than this Court. Taking into consideration, the geometrical increase in State expenditure in all avenues, it cannot be said that the additional toll tax is in any way violative of any constitutional provision.

87. In view of the above discussion, the questions posed are answered against the petitioners and in favour of the State. The registry is now directed to list all the writ petitions before the division Bench so that these are disposed of by taking into consideration the facts of each individual case.

This judgment is being pronounced in terms of Rule 138 of the Jammu and Kashmir High Court Rules of 1999.

Order of Division Bench :

The issue involved in this petition and other connected petitions has been answered in favour of the State. It has been held that the levy of toll tax is in accordance with law. In view of the detailed reasons given by the Full Bench in Writ Petition No. 660 of 1982 and other connected writ petitions enumerated in the title, these petitions are found to be without merit and are dismissed.

The interim directions shall stand vacated automatically.