The Supreme Court held last week that a state government could impose a fee on transport of goods even without giving any service in return. A fee could be imposed as a regulatory measure, the court held while allowing the appeal of the Uttar Pradesh government against the ruling of the Allahabad High Court in a case involving Sitapur Packing Wood Suppliers and other timber companies.
The state government imposed a transit fee for transporting timber and other forest produce, according to rules made under the Indian Forest Act. The rules provided for regulation of transit of forest produce by means of passes. Without such passes, movement of such goods from or within the state was prohibited. Timber traders challenged the rule in the high court. It quashed the rule on the ground that the government did not provide any service as a quid pro quo for the fee.
By definition, a fee should be justified by a service. Unlike tax, for which no quid quo pro was necessary, a fee could be charged only if a service was rendered, according to the high court.
However, on the appeal of the state government, a Supreme Court Bench comprising Justice Y K Sabharwal and Justice K G Balakrishnan said it was not necessary to provide a service in every case where a fee was charged. In this case, the levy was meant to regulate transit of goods. Therefore, there was no question of a levy of transit fee being invalidated on the ground of not providing for a quid pro quo.
Recently, the court decided another case raising a similar issue in the State of Tripura vs Sudhir Ranjan Nath. The Supreme Court held in that case that Sections 41 and 76 of the Forest Act vested total control over the forest produce in the state government and empowered it to regulate the transit of all timber and forest produce.
The high court in that case had invalidated the levy of "application fee" on the ground that the government was not giving any service in return for the fee. On appeal by the state government, the Supreme Court reversed the high court ruling and held that the fee was regulatory and not compensatory. In the case of a regulatory fee, the provision of service need not be established, the apex court clarified.
The present judgment went a step further and held that penalty also could be imposed for not paying the fee. The high court had held that since the fee was illegal, the penalty also would be invalid. The apex court reversed the high court view on this point as well.
