P L D 1989 Lahore 367 (PLP)

This petition under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973, challenges the vices. of Rule 36‑A of the Punjab Agricultural Produce Markets (General) Rules, 1979 (hereinafter called the Rules), whereby a Market Committee has been empowered to levy a 'special cess' at the rate of Re.0.10 per quintal on the agricultural produce bought or sold by or through a dealer in the notified area except certain categories mentioned therein.

2. Learned counsel for the petitioner contended that under section 19 of the Punjab Agricultural Produce Markets Ordinance, 1978 (hereinafter called the Ordinance), only two types of levy are permissible viz. 'fee' and 'licence fee' and there is no provision in the Ordinance for the imposition of 'special cess' and, therefore, rule 36‑A is ultra vires of the Ordinance, inasmuch as, the Government in the exercise of its rule‑making power under section 35 cannot frame rules which are inconsistent with the Ordinance. The submission is that in the absence of any provision in the Ordinance for the imposition of 'special cess', the Government has no power to frame the impugned rule.

3. Rana Muhammad Arshad, learned Additional Advocate‑General submitted that the money received from the impugned 'special cess' is to be expended for a specific purpose, that is to say, for the construction of culverts and roads in the rural notified areas of the market committees concerned, and therefore, it is intra vires of section 21 (ii) of the Ordinance read with rule 35 ibid.

4. In .order to appreciate the contentions of learned counsel for the parties, a survey of the provisions of the Ordinance may be useful. The title of the Ordinance describes it as intended to provide for the better regulation of purchase and sale of agricultural produce and for that purpose to establish markets .and make rules for their proper administration in the manner laid down in the Ordinance.

5. The Ordinance contemplates the setting up of the market committees and the Government may exercise control over the produce and sale of agricultural produce in the Market Committees (Sections 3 & 4). The market committees are authorised to issue licences to dealers under the Ordinance and to renew such licences (section 5). Section 6 of the Ordinance deals with the requirement of licence by a dealer who within the notified market area sets up, establishes, uses or allows to be used any place for the purchase or sale of the agricultural produce. Section 7 provides for establishment of market committees. Section 8 deals with the constitution of the market committees. Under section 9, the function of the market committee is to establish a market within the notified areas allocated to that and to provide prescribed facilities for purchase, sale, storage, weighment, pressing and processing of agricultural produce and to enforce the provisions of the Ordinance and the rules and the bye‑laws. The market committees are also authorized to issue licences to the broker, weighman, measurer, surveyor, warehouseman, changer, palledar, boriota, tola, tokriwala and rehriwala. Section 10 prescribes the period of the office of members. Section 11 deals with the removal of members of the market committee. Section 12 relates to the election of Chairman and Vice‑Chairman of the market committee. Section 13 deals with the filling of vacancies. Section 14 provides that every market committee shall be a body corporate. Section 15 prescribes the appointment of a sub‑committee and the delegation of powers and duties conferred on it. Section 16 relates to the appointment and salaries of the servants: A of the market committees. Under section 17, every member or a servant of the market committee is deemed to be a public servant within the meaning of section 21 of the Pakistan Penal Code. Section 18 prescribes the procedure for making contracts by the market committee. Section 19 deals with the levy of fee which the market committee may impose. Section 20 relates to the funds of the market committee. Section 21 deals with the spending of the market committee's fund. Section 22 makes liable every person for the loss, waste or misapplication of any money or property belonging to the market committee. Section 23 prescribes that no trade allowance can be charged except those prescribed by rules or bye‑laws under the Ordinance. Section 24 enables the Government to direct that all or any of the disputes to which all the parties are dealers and arising in a notified market area and relating to such. matters connected with agricultural produce may be referred to the Board of Arbitrators. Section 25 bars the jurisdiction of suits in the absence of notice. Section 26 relates to the power of the market committee to borrow and raise money on the security of its property and fee levied by the market committee. Section 27 empowers the Government inter alia to annul proceedings of a market committee. Section 28 deals with the supersession of the market committee. Section 29 provides for acquisition of land for market committee. Section 30 prevents encroachment on the property of the market committee. Section 31 provides for setting up of a training institute for the members or staff and dealers and other market functionaries and for the promotion of research and agricultural marketing and allied subjects. Section 32 authorizes the Government to recover the dues from the market committee in the same manner as arrears of land revenue. Section 33 deals with the emergency powers of the Government and empowers it to assume to itself any of the powers of 'the market committee in the manner and subject to the conditions prescribed therein,. Section 34 provides the prescribed penalties which can be imposed for the offence committed under the Ordinance. Section 35 empowers the Government to make rules for any notified area or areas consistent with the Ordinance for carrying out its purposes. Section 36_ provides the making of bye‑laws. Section 37 deals with the prosecution under the Ordinance or the Rules or the bye‑laws. Section 38 validates continuation of certain functions of the authorities and the officers. Section 39 repeals the provisions of section 156 to 163 of the Punjab Local Government Act, 1975.

6. The contentions raised by learned counsel for the parties turn on the scope of sections 19, 20, 21 and 35 of the Ordinance and rule

36. Section 19 of the Ordinance empowers a market committee to levy fee not exceedings the maximum prescribed under the relevant rules on the agricultural produce bought or sold by or through a dealer in the notified market area. Section 20 enjoins that all monies received by the market committee shall be deposited into a fund which will be known as market committee fund. The purpose for which the fund may be expended is laid down in section 21 which inter alia envisages that it may be expended for maintenance and improvement of the markets including construction of storages, platforms, small pullis, culverts and roads. These sections, however, deal with the purposes on which the market committee fund may be expended, but not with the creation of funds. Section 35 empowers the Government either generally or specially to make rules for any notified market area or areas consistent with the Ordinance, for carrying out all or any of E the purposes thereof. None of the provisions in section 35 relates to making a rule for the levy of special cess. Rule 35 (2)(vi) merely empowers the Government to make rules for management of the market, maximum fee which may be levied by market committees in respect of agricultural produce bought or sold by licensees in the notified market areas, and the recovery and disposal of such fee. Clause (xix) ibid authorises the Government to make rules prescribing any matters in respect of which fee shall be payable under this Ordinance, and fixing the amount of such fee and the mode of payment and recovery thereof. It would thus appear that the Ordinance merely visualises the levy of fee and licence fee and there is no provision for imposition of 'special cess'.

7. Be that as it may, the mere nomenclature of the term 'special cess' used in the impugned rule 36‑A cannot be regarded as conclusive factor for determining its validity. It is not the language of the enactment which has to be taken into consideration, but the substance thereof which determines its validity. The question, therefore, to be considered is whether the impugned special cess is a tax, cess or fee in the facts and circumstances of the present case.

8. The distinction between a tax and a fee is well established. Tax is a compulsory exaction of money by public authorities for public purpose enforceable by law and is not a payment for services C rendered. While a fee is a payment for a special benefit or privilege or for services rendered. Refer (1) Mahboob Yar Khan v. M.C. Mian Channu PLD 1975 Lah. 748, (2) Lever Brothers v. Market Committee, Rahimyar Khan (PLD 1980 BJ 23), (3) Abdul Majid v. Province of East Pakistan (PLD 1960 Dacca 502),(4) Muhammad Ismail & Co. Ltd. v.: The Chief Cotton Inspector, Multan Division, Multan (PLD 19B6 SC 388).

9. The word "cess" means a tax and is generally used when the levy is for some special administrative expense. For example "health cess", "education cess" and "road cess" etc. It is usually collected D as an addition , to an existing tax. Refer M/s Sinde Brothers v. Deputy Commissioner, Raichur (AIR 1976 SC 1512) and Ahmedabad Manufacturing and Calico Printing Co. Ltd., Ahmedabad v. State of Gujerat (AIR 1967 SC 1916). A Division Bench of the Peshawar High Court, however, took the view that tax in the legal parlance is nothing more than money which an individual is compelled to pay for public purposes and, therefore, it is impossible to distinguish between tax and cess. See Haji Multan Zareen v. Government, of N.‑W.F.P. PLD 1980 Pesh. 137.

10. The distinction between 'a cess' and ' a licence fee' has been pointed out in Gwalior Sugar Co. Ltd`. V. State of hladhya Bharat (AIR 1954 MB 196), wherein it was held that a 'cess' is the tax levied for specific purposes often with a .prefixed word defining the object. A licence, however, includes a permission to trade subject to compliance with certain conditions.

11. In order to decide whether levy is a tax, cess or fee, the real test to be applied is whether the levy is made for the purposes of realising public revenues of the State and is intended to be spent for Government purposes or the levy is in connection with the services rendered by the authority. It was held in Muhammad Ismail & Co. Ltd., Lahore v. The Chief Cotton Inspector (PLD 1966 SC 388), that no hard and fast rule can be laid down to distinguish tax from fee. Each case is to be decided on the basis of its facts and circumstances.

12. In the present case, the market committee has been empowered to levy a special cess at the rate of Re. 0.10 per quintal on the agricultural produce bought or sold by or through a dealer in the notified market areas except in certain categories mentioned therein. Sub‑rule (8) of rule 36‑A specifically provides that the amount so collected shall be spent only for the construction of culverts and roads in the rural notified areas of the market committees concerned. Section 21(ii) provides that the market committee fund shall be E expended for the purposes of maintenance and improvement of the markets including construction of storages, platforms, small pullis, culverts and roads. Clearly, the imposition of special fee would appear to be a 'fee' within the meaning of section 19 of the Ordinance, rather than a 'cess' or a 'tax' because it has been imposed for the services rendered by the market committee on the construction of culverts and roads etc. This being so, the mere fact that it has been described :a 'special cess' and not 'fee' would not make it a 'cess'. . Be that as it may, section 19 prohibits the levy of fee on the agricultural produce bought or sold by the licensee beyond the maximum rate for the fees prescribed by the Government. Rule 36 has prescribed the maximum fee for various agricultural products. Malik Ghulam Fareed, Director Agriculture (Markets and Economics) has frankly conceded that the impugned imposition of 'cess' is in addition to the maximum fee prescribed by the Government under section 19 of the Ordinance read with various other rules.

14. In view of the above, the 'special cess' as contemplated under impugned rule 36‑A is in the nature of a 'fee', but being beyond the maximum fee prescribed by the Government under Section 19 of the Ordinance, it is ultra vires. The result is that the impugned rule 36‑A is declared as ultra vires of the Ordinance. The writ petition is accepted, but there shall be no order as to costs. A.A./P‑69/L Petition accepted.