KISHAN LAL LAKHMI CHAND Vs. STATE OF HARYANA

JUDGEMENT

(1.) Special leave granted.

(2.) The vires of the Haryana Rural Development Act 6 of 1986 for short 'the Act' was assailed but repelled by the full bench of the Punjab and Haryana High court reported in Subhash Chander Kamlesh Kumar v. State of Punjab against which these appeals were laid by leave. Initially the Haryana Rural Development Act 12 of 1983 was made of which ultimately this court in Om Prakash Agarwal v. Giri Raj Kishori held that Section 3 was unconstitutional on the ground of legislative incompetence as the levy of cess under Section 3 was in the nature of tax and not fee, quid pro quo being absent. Purporting to have removed the defects as pointed out therein, the Act came to be made and the full bench put its seal of approval on its validity.

(3.) Shri Shanti Bhushan, the learned senior counsel for the appellants in his usual vehemence contended that the agricultural produce is a declared goods under Article 286 (2 of the Constitution. This court declared in Kewal Krishan Puri v. State of Punjab that constitutionally it is impermissible to levy market fee in excess of 2 per cent. The State Legislature is incompetent to levy sales tax in excess of 4 per cent on sale of goods. The State Legislature of Haryana, therefore, found the Act a camouflage and colourable device to circumvent the constitutional mandates, effected cosmetic changes in the Act and imposed I per cent fee as development fund to bypass the mandate of the Constitution and the law declared by this court. The impost at I per cent is no less than a tax. It is a colourable exercise of the power by the State Legislature and the Act cannot be brought under any of the Entries 45 to 63 of List II of the Seventh Schedule to the Constitution. Imposition and collection of the fee by operation of Section 5 of the Act, is not expended in any particular market or market area but to general development in rural area. The principle of quid pro quo in the region of at least 2/3 or 3/4 as envisaged in Kewal Krishan Puri case is totally absent. The traders as a class and appellants, in particular, are not deriving any benefit therefrom. Resultantly there is total lack of correlation between the fund collected and the service intended to be rendered to the dealers. The impost part takes the character of the tax falling within the teeth of the ratio laid in Om Prakash agrrawal case. The Act, therefore, is ultra vires. Shri Harish Salve, the learned senior counsel for the State resisted the contentions.