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State Of Kerala And Others v. K.P Govindan, Tapioca Exporter And Others

Supreme Court Of India

Nov 7, 1974

Judgment

Subsequent
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Factual and Procedural Background

The Government of Kerala, acting under a scheme dated April 15, 1966 (published in the Kerala Gazette on May 3, 1966), began levying an “administrative surcharge” on the export of tapioca and its products. The surcharge rates were revised from time to time. Respondents—dealers engaged in the export of tapioca—filed several writ petitions in the Kerala High Court challenging the levy and seeking refund of the amounts already collected.

The High Court allowed the writ petitions. Pursuant to certificates of fitness granted by that court, the State filed multiple civil appeals (Nos. 729-57 of 1972, 514-515 of 1973) before the Supreme Court. All appeals involved identical facts and questions of law and were heard together.

Legal Issues Presented

Whether the “administrative surcharge” imposed by the State of Kerala on the export of tapioca was a valid levy authorized by Section 3 of the Essential Commodities Act, 1955, and the Kerala Tapioca Manufacture and Export (Control) Order, 1966.
Whether the surcharge could be sustained as a legitimate licence fee imposed in the exercise of the State’s police powers to regulate the export of an essential commodity.

Arguments of the Parties

Appellant (State of Kerala)

Contended that the surcharge was in substance a licence fee charged for permits issued under Clause 5 of the Kerala Tapioca Manufacture and Export (Control) Order, 1966.
Argued that Section 3(1) and 3(2)(ii) of the Essential Commodities Act, 1955, when read with the Central Government’s notification of June 9, 1966 and the delegation under Section 5, empowered the State to impose such a fee.
Criticised the High Court’s finding that the impost was a “fee” lacking any quid pro quo for services rendered.

Respondents (Tapioca Export Dealers)

Maintained that the levy was ultra vires because neither Section 3 of the Act nor the Tapioca Export Control Order expressly authorised the imposition of an export surcharge.
Emphasised that the April 15, 1966 scheme was not an order made under Section 3 and therefore could not legally support the impost.
Asserted that the surcharge was, in effect, an export tax—something the State had no constitutional competence to impose.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Court assumed, arguendo, that the State might have the power under Section 3(2)(ii) of the Essential Commodities Act to levy a legitimate licence fee to regulate the tapioca trade. Nevertheless, the impugned levy failed for the following reasons:

Lack of statutory basis: The April 15, 1966 scheme that introduced the surcharge was “not an order under any of the provisions of Section 3 of the Act.” It merely prescribed a surcharge on export and did not correlate to the grant of licences or permits.
Control Order silent on fees: The Kerala Tapioca Manufacture and Export (Control) Order, 1966 contained no provision authorising the imposition of any fee for the grant of export permits.
Nature of the levy: In substance, the surcharge operated as an impost on export rather than a regulatory fee, and the State lacked constitutional power to impose such an export duty.
State’s own pleadings: The petitions of appeal acknowledged that the scheme originated under Rule 125 of the Defence of India Rules, 1962, not under the Essential Commodities Act, further undermining the asserted statutory foundation.

Given these deficiencies, the Court concluded that the surcharge “was bad” and that collections made under it were “without the authority of law.” While recognising the State’s ability to impose lawful taxes or fees in the future, the Court held that any such impost would have to conform to constitutional and statutory limits.

Holding and Implications

APPEALS DISMISSED. The Supreme Court affirmed the Kerala High Court’s orders quashing the surcharge and ordered the State to bear costs (one hearing fee).

Immediate consequence: The administrative surcharge on tapioca exports stands invalidated, and amounts collected under it remain refundable to the respondents. Broader implication: The decision underscores that any fiscal impost relating to essential commodities must have a clear statutory footing; regulatory fees must be authorised expressly and structured as such, not imposed in guise of an export tax. No new precedent was expressly set, but the ruling reinforces the limits on State power to levy charges without legislative sanction.

Show all summary ...

N.L Untwalia, J.— All these civil appeals filed on grant of certificates of fitness by the High Court of Kerala have been heard together and are being disposed of by a common judgment as their facts and the points involved in them are identical. The respondents filed various writ petitions questioning the validity of the orders of the State Government of Kerala levying administrative surcharge on the export of tapioca. Respondents are dealers in tapioca and do the business of exporting it also outside the State of Kerala. In their writ petitions, they also claimed refund of the amounts realised by the State Government on the basis of the impugned orders. Writ petitions were allowed by a bench of the Kerala High Court and Civil Appeals Nos. 729-57 of 1972 are directed against the orders in the writ petitions. Two of the civil appeals, namely, Civil Appeals Nos. 514 and 515 of 1973 arise out of the appellate order of the Kerala High Court dismissing the appeals from the orders allowing the writ petitions.

2. In exercise of the powers conferred by sub-section (1) and sub-section (2) of Section 3 of the Essential Commodities Act, 1955 (Central Act 10 of 1955), hereinafter referred to as “the Act”, read with the order of the Government of India dated June 9, 1966 and with the prior concurrence of the Central Government, the Government of Kerala made the Kerala Tapioca Manufacture and Export (Control) Order, 1966. Under clause 5 of the said order no person could export tapioca except under and in accordance with a permit issued by the Commissioner or any officer authorised by him in this behalf. Clause 6 of the order provides for the filing of applications for the grant of permits for tapioca in Form III and the permit for the export of tapioca shall be in Form IV. Even before the promulgation of the Kerala Tapioca Manufacture and Export (Control) Order, administrative surcharge was levied under a scheme formulated by the State Government, on April 15, 1966 published in the Kerala Gazette dated May 3, 1966. The rates of administrative charge levied on tapioca in the scheme dated April 15, 1966 was varied from time to time and a copy of the order dated October 20, 1967 specifying the revised rates was Ext. P-1 in one of the writ petitions. A copy of the order dated April 15, 1966 was given to us by the learned Solicitor-General appearing for the appellant State. The respondents' plea that the levy of administrative charges was ultra vires the State Government and unwarranted by law has been accepted by the Kerala High Court. Learned Solicitor-General appearing for the appellant State submitted that the orders levying administrative charge on the export of tapioca was in effect and substance a licence fee charged in the exercise of the police powers of the State for permitting the respondents by grant of permits to export tapioca. Such a levy, counsel submitted, can very well be supported with reference to the provisions of sub-section (1) or sub-section (2) of the Act, whereby the State as a result of the authorisation under Section 5 of the Act is empowered to regulate the transport or export of tapioca, and essential foodstuff's.

3. Learned Solicitor General strenuously attacked the findings of the Kerala High Court, that the administrative charge imposed on the export of tapioca was a fee and since it had no co-relation with the service rendered by the State, the impost was bad.

4. In the instant case it is not necessary for us to decide whether the view aforesaid of the Kerala High Court or the submission made on behalf of the appellant in that regard is correct or not. The Tapioca Export Control Order was made by the State Government on being authorised by the Central Government in its notification dated June 9, 1966. A copy of the said notification was placed before us at the time of hearing of these appeals. It purported to authorise the State Government to make orders under Section 3 of the Act to provide for some of the matters mentioned in the various clauses of sub-section (2). Learned counsel for the respondents submitted that it was not a general authorisation to make an order under sub-section (1). It is not necessary for us to go into this question either.

5. We shall assume in favour of the appellant that while regulating or prohibiting the production, supply and distribution of tapioca and trade and commerce therein it has got the police power to charge licence fee for the purpose of regulating the tapioca trade or to charge fees for grant of issue of licences/permits or other documents in accordance with clause (ii) of sub-section (2) of Section 3 of the Act. Still we find that the impugned levies have rightly been held to be bad as they were not levies of licence fees for regulating the trade or for grant of permits. The order dated April 15, 1966 formulating the scheme was not an order under any of the provisions of Section 3 of the Act. It did not impose any licence fee or fee for grant of permit. It merely provided for levying of administrative surcharge for the export of tapioca and its products at the specified rates which varied from time to time. In substance and in effect it was an impost on export which indisputably the State had no power to do. The orders levying the administrative charge which followed the Tapioca Export Control Order did not refer to the exercise of any power under the said Order. It was completely independent of it. The Tapioca Export Control Order did not provide for imposition of any licence fee for the grant of permit for export of tapioca. Argument put forward on behalf of the appellant that the order dated April 15, 1966 was in substance and in effect an order under Section 3 of the Act runs counter to its case in the petitions of appeal wherein it has been stated

“that the deterioration in food position in the State of Kerala started from 1963 onwards and to avert the further worsening of the food position, the Government under Rule 125 of the Defence of India Rules, 1962 issued the Tapioca Control Order, 1964, whereby Government imposed certain restrictions in the export of tapioca and its products from the State and permitted the export of limited quantity through selected dealers. The State, in accordance with this order framed a scheme known as Scheme for the export of tapioca and its products”, on April 15, 1966 whereby the Government clarified the manner and mode of selection of the dealer, the details regarding the submission of applications of the intending exporters, the issue of permits and the payments of administrative surcharge.”

6. The stand taken in the petitions of appeal was not pursued at the time of the hearing. It is, therefore, clear that the administrative surcharge levied by the State Government on the export of tapioca, as it was, was bad. The realisations thereunder were without the authority of law. It will, however, be open to the State Government to impose tax or fee, as they may be advised to do in accordance with law and if permissible under it, for permitting the respondents to export tapioca outside the State of Kerala. The debatable question as to the nature of impost, its constitutional validity and legal justifiability will have to be gone into then.

7. On the facts as they stand in these appeals, we uphold the orders of the Kerala High Court for the reasons given by us. The appeals fail and are dismissed with costs. One hearing fee.