Ntpc Limited & Another v. State Of U.P And Others, Allahabad High Court, Judgment, Law, casemine.com

Precedent	Rule or Principle Cited For	Application by the Court
State of U.P. & others vs. Sitapur Packing Wood Suppliers and others (2002) 4 SCC 566	Upheld State's competence to levy transit fees as regulatory fees under Entry 17A List III; no quid pro quo required for regulatory fees.	Confirmed validity of Rules of 1978 and State's power to regulate transit of forest produce including minerals found in or brought from forests.
State of Tripura vs. Sudhir Ranjan Nath (1997) 3 SCC 665	Regulatory nature of transit fees; no requirement of quid pro quo for fees imposed for regulation.	Supported the regulatory character of transit fees upheld in Sitapur Packing Wood Suppliers.
Corporation of Calcutta vs. Liberty Cinema AIR 1965 SC 1107	Licence fees as regulatory fees need not have quid pro quo.	Supported the principle that regulatory fees do not require direct service correlation.
Secunderabad Hyderabad Hotel Owners' Association vs. Hyderabad Municipal Corporation (1999) 2 SCC 274	Regulatory fees are valid without proving quid pro quo.	Reinforced the principle of regulatory fees upheld in the present case.
P. Kannadasan vs. State of T.N (1996) 5 SCC 670	Regulatory fees need not be compensatory.	Supported the differentiation between regulatory fees and compensatory fees/taxes.
Kumar Stone Works and others vs. State of UP and others 2005 (3) AWC 2177	Interpretation of 'forest produce' and applicability of transit fees on minerals found in or brought from forests.	Held that minerals excavated from non-forest land are not forest produce; transit fee applicable only when minerals are found in or brought from forest.
Suresh Lohiya v. State of Maharashtra (1996) 10 SCC 397	Commercially distinct manufactured products cease to be forest produce.	Applied to distinguish processed products like bamboo mats and kattha from forest produce.
State of M.P. vs. S.P. Sales Agencies and others (2004) 4 SCC 448	Processed catechu and kattha are forest produce.	Overruled earlier contrary judgments; confirmed that such processed products remain forest produce.
Government of West Bengal vs. Kesoram Industries Ltd (2004) 10 SCC 201	Scope of State and Union powers regarding regulation and taxation of minerals.	Held that reasonable tax or fee levied by State does not infringe Union's exclusive power unless it trenches on regulation.
Jindal Stainless Ltd. and anr vs. State of Haryana and others (2006) 7 SCC 241	Distinction between tax, fee, and compensatory tax; regulatory fees need broad correlation with services.	Applied to assess the nature of transit fee and its constitutional validity under Articles 14 and 301.
Calcutta Municipal Corporation vs. Shrey Mercantile (P) Ltd. (2005) 4 SCC 245	Fee for revenue raising under guise of regulation is a tax; distinction between police power and revenue raising.	Held that fee must have nexus with cost of regulation; otherwise, it is an invalid tax.
T.N. Godavarman Thirumulpad vs. Union of India (1997) 11 SCC 605	Definition of 'forest' and 'forest land' for purposes of Forest Conservation Act, 1980.	Adopted broad dictionary meaning covering all statutory forests and forest-like areas irrespective of ownership.
GVK Industries Ltd & Anr. vs. Income Tax Officer & Anr. (2011) 4 SCC 36	Doctrine of territorial nexus and extra-territorial operation of laws.	Confirmed that laws with real territorial nexus are valid even if they have extra-territorial effect.
State of Mysore v. H. Sanjeeviah AIR 1967 SC 1189	Power of State to regulate transit of forest produce and reasonable restrictions under Article 304(b).	Upheld regulatory laws as valid restrictions, distinguished between regulation and restriction.
Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla (1992) 3 SCC 285	Limits on delegated legislative power in fiscal matters.	Held that delegated authority must act within specific legislative parameters in imposing fees or taxes.
District Council of the Jowai Autonomous District Jowai and others vs. Dwet Singh Rymbai etc. (1986) 4 SCC 38	Royalty on timber as tax and legislative competence.	Held that royalty imposed by Autonomous District Council was a tax beyond their competence.
State of Orissa vs. M.A. Tulloch AIR 1964 SC 1284	Legislative competence and field occupation regarding minerals and forest produce.	Discussed limits of State and Union powers; distinguished overlapping fields.
State of Karnataka & others vs. Balaji Computers & others (2007) 2 SCC 743	Principle of statutory interpretation and inclusive definitions.	Supported purposive interpretation of forest produce definition.
State of AP vs. A.B. Malhotra (1976) 1 SCC 834	Principle of statutory construction in overlapping legislation.	Applied principles to reconcile laws without repugnancy.
State of Rajasthan vs. Vatan Medical & General Store (2001) 4 SCC 642	Doctrine of repugnancy and harmonization of laws.	Emphasized effort to avoid repugnancy between laws operating in different fields.
Krishi Utpadan Mandi Samiti vs. Pilibhit Pantnagar Beej Ltd (2004) 1 SCC 391	Overlapping legislation and precedence of special law.	Held that overlapping laws should be reconciled, special law prevails.
Belsund Sugar Co. Ltd. vs. State of Bihar (1999) 9 SCC 620	Processed agricultural produce and forest produce classification.	Held processed leaves were agricultural produce; applied to forest produce distinctions.
Hingir Rampur Coal Co. Ltd v. State of Orissa AIR 1961 SC 459	Distinction between tax and fee based on principle of ability to pay and equivalence.	Outlined constitutional principles distinguishing tax and fee.
Kewal Krishna Puri v. State of Punjab AIR 1980 SC 1008	Regulatory fee must be proportional to special benefit.	Supported principle of equivalence for fees.
State of UP v. Malti Kaul (1996) 10 SCC 425	Validity of regulatory fees.	Confirmed regulatory fees need not be exact but broadly proportional.
Indian Mica and Micanite Industries vs. State of Bihar AIR 1971 SC 1182	Requirement of earmarking fees for service rendered.	Held fees should be appropriated for the service for which imposed.
State of Rajasthan v. Sajjanlal Panjawat (1974) 1 SCC 500	Fee justified as raising expenses of service, not for profit.	Upheld fees aimed at cost recovery for services.
Gasket Radiators Pvt. Ltd. vs. Employees of State Insurance Corporation (1985) 2 SCC 68	Requirement of nexus between service and fee.	Invalidated fee lacking direct nexus with service rendered.
B.S.E. Brokers' Forum vs. Securities and Exchange Board of India (2001) 3 SCC 482	Regulatory fees for public interest regulation.	Held fees for regulation of stock exchanges valid as public interest regulatory fees.
Ambica Quarry Works vs. State of Gujarat (1987) 1 SCC 213	Environmental concerns and forest conservation.	Recognized deforestation as social menace; supported Forest Conservation Act, 1980.
Electronics Corporation of India Ltd. vs. CIT (1989) Supp (2) SCC 642	Scope of Parliament's power and extra-territorial legislation.	Discussed limits on Parliament's legislative competence.
Atiabari Tea Co. Ltd vs. State of Assam AIR 1961 SC 232	Freedom of trade and commerce under Article 301.	Established doctrine of direct and immediate effect of trade restrictions.
Automobile Transport (Rajasthan) Ltd. vs. State of Rajasthan AIR 1962 SC 1406	Compensatory tax doctrine.	Held regulatory fees with compensatory character valid under Article 301.

Pankaj Mithal, J.;-

1. In these writ petitions with NTPC Ltd. & Anr. Vs. State of U.P. & Ors., (Writ (Tax) No.327 of 2008) as leading writ petition of the first batch; and the others filed after June 4th, 2011 with M/s Ajay Trading (Coal) Company & Ors. Vs. State of U.P. & Ors., (Writ (Tax) No.963 of 2011) of the second batch, the petitioners incorporated as public limited companies/private limited companies, registered partnership/proprietorship firms, manufacturers and traders of goods made out of forest produce, the miners and the transports of forest produce, have challenged the applicability of the Indian Forest Act, 1927, on mines and minerals including coal and other forest produce; as also the validity of the U.P. Transport of Timber and Other Forest Produce Rules, 1978 (in short the Rules of 1978) made under Section 41 (1) (c) of the Indian Forest Act, 1927; as amended by the 4th Amendment to the Rules in 1978 notified on 13.12.2010, increasing levy of transit fee from Rs.38 per metric tonne, to Rs.75; Rs.100 and Rs.200 per cubic meter of capacity per lorry load of different quality of timber and other forest produce; and the 5th Amendment to the Rules of 1978, notified on 4.6.2011 enhancing transit fee and changing the basis of levy from cubic feat to advalorum between 5% to 15%, on variety of forest produce including timber, firewood, and other forest produce coming from mines e.g., coal, limestone, sand, bajari and other minerals, as unconstitutional, beyond legislative competence of State Government so far as mines and minerals, and, as violative of Art.14, 19 (1) (g), and 301 of the Constitution of India, as well as ultra vires the provisions of Section 41, 42, 51 and 76, of the Indian Forest Act, 1927.

2. The State Government issued a Notification dated 14.8.1997 under clause (c) of proviso to Rule 3 of the Rules of 1978 in supersession to the Notification dated 25.10.1991 to exempt all timbers and barks of the species given in Column-I including 20 trees, not situated in any forest from the operation of the Rules within the area of all the districts mentioned in Column-II (42 Districts excluding certain Tehsils of District Rampur, Shahjahanpur, Allahabad, Sidharthnagar, Padrauna and Varanasi). By a notification dated 29.3.2010 the State Government has exempted the forest produce such as peat, surface soil, rock and minerals (including limestone, laterite, mineral oils and all products of mines or quarries), as mentioned in sub-clause (iv) of clause (b) of sub-section (4) of Section 2, of the Forest Act, 1927, excavated from non-forest land and moved thereby, from the operation of clause (c) of proviso to Rule 3 of the Rules of 1978 made under Sections 41, 42, 51 and 76 of the Indian Forest Act, 1927.

3. During the pendency of these writ petitions, the Conservator of Forest, Agra Circle, Agra, issued an order to the Regional Director, Social Forestry Division, Agra on 28.7.2011, directing him not to recover transit fee on any finished product of limestone such as quicklime, burnt lime etc. from out of limestone defined under Section 2 (4) (b) (iv) of the Indian Forest Act, 1927.

THE EARLIER CHALLENGE

4. The Rules of 1978 framed in exercise of powers under Sections 41, 42, 51, and 76 of the Indian Forest Act, 1927 were challenged in the High Court by traders and transporters of timber in Writ Petition No. 901 of 1984 and other connected writ petitions, which were allowed on 16.5.1986. The Rules were invalidated as imposing fees without rendering any service, as quid pro quo. The State of U.P filed Civil Appeal, which was allowed by the Supreme Court; in State of U.P. & others vs. Sitapur Packing Wood Suppliers and others (2002) 4 SCC 566. The Supreme Court upheld the judgment of the High Court in so far as the question of constitutional competence of the State Government to impose transit fees. The powers of the State Government, it was held, under Entry 17-A of List III of the Seventh Schedule of the Constitution of India, would include power to regulate transit of forest produce. The Supreme Court also upheld the findings of the High Court that the power to regulate the transit of timber under the Act and the Rules is not confined to the transit of timber of forest produce by the owner thereof; it would also extend to those traders, who arrange to transport it for any reason and will be included within the general power of control over transit under Section 41 (2) of the Act.

5. In Sitapur Packing Wood Suppliers (supra), the Supreme Court, following State of Tripura vs. Sudhir Ranjan Nath (1997) 3 SCC 665, in which the application fees for transit of timber was upheld, and the judgments in Corporation of Calcutta vs. Liberty Cinema AIR 1965 SC 1107; Secunderabad Hyderabad Hotel Onwers' Association vs. Hyderabad Municipal Corporation (1999) 2 SCC 274 and P. Kannadasan vs. State of T.N. (1996) 5 SCC 670, held that transit fee under Rule 5 is clearly regulatory and, thus it was not necessary for the State to establish quid pro quo. The Supreme Court held in paragraphs 8 to 11 as follows:-

"8. The distinction between tax and fee is well settled and need not be restated herein. It is clear from the afore-noticed provisions of the Act and the Rules that the transitory fee is regulatory in nature. The question of quid pro quo is necessary when a fee is compensatory. It is well established that for every fee quid pro quo is not necessary. The transit fee being regulatory, it is not necessary to establish the factum of rendering of service. Thus, there is no question of a levy of transit fee being invalidated on the ground that quid pro quo has not been established.

9.In State of Tripura & Ors. v. Sudhir Ranjan Nath [(1997) 3 SCC 665] almost similar question came up for consideration in relation to State of Tripura. It was held that Sections 41 and 76 of the Act vest total control over the forest produce in the State Government and empower it to regulate the transit of all timber or other forest produce for which purpose the State Government is also empowered to make the Rules. The decision of the High Court invalidating the levy of application fee in the said case on the ground that the State had not established that the services were rendered in lieu of the said fee, was reversed by this Court holding that the fee was regulatory and not compensatory. Reference may be made to the decision in the case of Corporation of Calcutta & Anr. v. Liberty Cinema [(1965) 2 SCR 477] wherein it was held that the expression licence fee does not necessarily mean a fee in lieu of services and in case of regulatory fee no quid pro quo need be established. Following Liberty Cinema's case similar views have been expressed in Secundrabad Hyderabad Hotel Owners' Association & Ors. v. Hyderabad Municipal Corporation, Hyderabad & Anr. [(1999) 2 SCC 274] and P.Kannadasan & Ors. v. State of T.N. & Ors. [(1996) 5 SCC 670].

10.The transit fee under Rule 5 is clearly regulatory and, thus, it was not necessary for the State to establish quid pro quo. The High Court was in error in holding that transit fee is invalid in absence of quid pro quo. As a consequence the penalty would also be valid. The penalty was held to be invalid by the High Court in view of its conclusion about the invalidity of the transit fee. The penalty, however, cannot be beyond what is permissible in the Act. That aspect, however, is not under challenge in these appeals as the State Government after the impugned judgment of the High Court realizing its mistake amended the Rule so as to bring the provision of penalty in accord with the provisions of the Act.

11. For the aforesaid reasons, we allow these appeals and hold that the levy of the transit fee is valid and the judgment of the High Court is accordingly set aside. The parties are, however, left to bear their own costs."

6. In the year 2004 by Notification dated 14.6.2004 (after more than 25 years of the enforcement of the Rules of 1978), the transit fee was increased from Rs. 5/- to Rs. 38/-, per tonne of weight and came to be challenged again both on the ground of legislative competence of the State Government to make Rules to levy transit fee on stone chips, stone grit, stone balast, sand, morrum, coal, limestone, dolomite etc., and also on the ground that the mines and minerals are not 'forest produce' as defined under sub-section (4) of Section 2 of the Indian Forest Act, 1927 as these are not found in or brought from a forest. In Kumar Stone Works and others vs. State of UP and others 2005 (3) AWC 2177 this Court held that the phrase 'that is to say' occurring in clause (b) is exhaustive and indicates the intention of the Parliament to limit the restriction to those goods alone as are specifically mentioned therein. The only items mentioned in various sub-clauses of clause (b) of sub-section (4) of Section 2 would be forest produce when found in or brought from forest. It was further held in paragraph-24 of the judgment that there is no reference to any reserved forest area. Any of the items mentioned in clause (a) of the aforesaid provision would constitute a forest produce whether found in or brought from a reserved forest area or not. Clause (b), however, refers to a forest produce if found in or brought from a forest. The mineral excavated from the mines/areas, which are not situate in a reserved forest area, is of no consequence. The Court then observed that in Suresh Lohiya v. State of Maharashtra & anr (1996) 10 SCC 397, the Supreme Court, while considering the definition clause of sub-section (4) of Section 2 of the Act, held that the legislature having defined 'forest produce', it is not permissible for us to read in the definition something which is not there. In this case the Supreme Court was dealing with the issue whether the bamboo mats can be treated to be bamboo and thus a forest produce. The Supreme Court held:

"7. The legislature having defined "forest-produce", it is not permissible to us to read in the definition something which is not there. We are conscious of the fact that forest wealth is required to be preserved; but, it is not open to us to legislate, as what a court can do in a matter like at hand is to iron out creases; it cannot weave a new texture. If there be any lacuna in the definition it is really for the legislature to take care of the same"

7. In Kumar Stone Works and ors (supra) the High Court thereafter relying upon Commissioner of Sales Tax, U.P. v. Lal Kunwa Stone Crusher (P) Ltd. (2000) 3 SCC 525, and State Of Maharashtra v. Mahalaxmi Stores, (2003) 1 SCC 70 held that stone chips and gittis and stone ballast continue to be stone and they are not commercially different goods and further that the conversion of stone and boulder into gitti, bajari would remain stone and would come under sub-clause (d) of sub-section (4) of Section 2 as the products of mines and quarries. The Court then interpreted the words 'brought from' which have not been defined in the Act with the help of dictionaries and found that the word 'brought' is a verb and past tense and past participle of word 'bring'. The stone chip, stone gittis, stone ballast, sand, morrum, limestone, dolomite etc. included in clause (b) of sub section (4) of Section 2 of the Forest Act whether found in or brought from forest were held to be included in the definition of forest produce.

8. M/s Subhash Stone Works, Sonebhadra approached this Court in Writ Petition No. 24911 of 2004 for restraining the respondents from realising transit fees from lifting and transporting stone chips, stone grits and balast from the mine sites to different destination. The Division Bench dismissed the writ petition but left it open to the petitioners to move an application before the authority concerned to prove that the goods, which were being transported by the petitioners, did not pass through forest land to make it not liable for payment of transit fee in that regard. The representation was rejected in the light of the judgment in Kumar Stone Works (supra). A Division Bench of this Court, after noticing the judgments in M/s Yashwant Stone Works vs. State of UP and others AIR 1988 All. 121 (UP); Gandhi Smarak Nidhi Vyasthapak and others vs. State of UP and others 1988 ALJ 149; Smt. Pyari Devi vs. State of UP and others 2004 (96) RD 27 and Kumar Stone Works and others (supra), held that the question, whether the goods taken out by the mining operation are being carried through the land of forest reserved or not, hinges upon the point as to whether any land, which has not been declared under Section 20 of the Indian Forest Act as forest reserved, should be legally treated as forest reserved or not. The transit fee is permissible under the Rules with regard to transportation of such goods; forest produce can definitely be realised but the transit fee for passing through the land of non-reserved forest can definitely not be realised by the respondent forest department. The Court directed that the transit fee for using the non-reserved forest land for the carriage of forest produce through, which the vehicles of the petitioners pass shall not be realised from it.

9. In M/s Nagarjuna Construction Limited vs. State of UP and others (Writ Petition No. 4187 of 2008) and other connected petitions, a question was raised by the company, which had been given contracts for construction of roads that they purchase minor minerals from certain lessees of minor minerals and in the course of their business they transport the miner minerals from their dumping yards to the construction site passing through the NH-25 and NH-26. It was not disputed that NH-25 and NH-26 were declared as reserved and protected forest and that portions of NH-57 in the connected Writ Petition No. 53207 of 2007 was also declared as protected forest.

10. The Division Bench, after noticing the definition of forest produce under Section 2 (4) of the Indian Forest Act, 1927 and the judgment in Kumar Stone Works(supra), found it difficult to agree with the reasoning given in Kumar Stone Works on the ground (i) the Division Bench in Kumar Stone Works has based by its interpretation on the definition of the words 'forest produce' on its dictionary meaning of the word 'brought' without referring to other provisions of the Act. The expression 'brought from' in the definition required reconsideration; (ii) the words 'brought from' have been used in the definition along with the preceding expression 'found in' and that the true meaning of the words 'brought from' can be appreciated with it in the context of 'found in' which refers to location of those items having their origin in the forest and being still within the forest; (iii) even if an item was not originally forest produce such as mangoes, from a tree in a private land of a farmer merely because it is transported and during the course of such transportation it passes road or a highway through a forest, which will not become forest produce. The interpretation, which creates a fiction is to be adopted only when there are words, which compel such interpretation and (iv) the expression 'forest produce' occurs in various Sections of Indian Forest Act, 1927 such as Sections 3, 4, 5, 11, 12, 14, 15 and 26 of Chapter II, which relates to reserved forest; Sections 28 (2) of Chapter III, which relates to village forest, Section 29, 30, 32, 33 of Chapter IV, which relates to protected forest, Section 38 in Chapter-V, which relates to claimants forest, Section 39 in Chapter VI, which relates to duty and other Sections. In none of these provisions the expression has been used to cover a produce as forest produce only because it passes through a forest. In all the Sections the context indicates that the produce being referred to as forest produce is that which has its origin in the forest and not merely items mentioned in sub-clauses (i) to (iv) of sub-section (4) of Section 2 (b) which though were produced in non-forest areas and were not forest produce originally but pass through a forest. The minerals excavated from mines, which do not fall in a forest area would not be forest produce and would not become so merely because a portion of the route through which they pass in transit is through a forest. The presumption would have drastic consequence namely under Section 69 of the Act a presumption has been drawn that all forest produce shall be deemed to belong to the State Government until the contrary is proved.

11. The Division Bench in M/s Nagarjuna Construction Ltd (supra) has referred the following two questions by the referring order dated 4.3.2008 to a larger bench:-

"(I) Whether the words 'brought from' used in Section 2 (4) (b) of the Indian Forest Act would cover such items mentioned in clauses (i) to (iv) of Section 2 (4) (b) which though did not have origin in the forest but they are transported through a forest?

(ii)Whether the interpretation of the words 'brought from' given by Division Bench in Kumar Stone case (supra) is correct?"

12. The reference, however, is still pending before the larger bench and thus in these petitions we do not propose to deal with the question and have confined ourselves to the main challenge, namely the legislative competence of the State to frame the Rules of 1978, and the Rules being violative of Articles 14, 19 (1) (g), 301 and the invalidation in absence of quid pro quo.

13. By a Notification No. 760/14-2-2010-217 (L)/2009 issued by the State Government on 29.3.2010 the State Government has exempted certain minerals, excavated from non-forest land and moved thereby. The notification provides for exemption in terms as follows:-

Notification

No.760/14-2-2010-217(L)/2009

Lucknow, Dated 29 March, 2010

In exercise of the powers under clause (c) of the proviso to rule 3 of the Uttar Pradesh Transit of Timber and other Forest Produce Rules, 1978 framed under sections 41, 42, 51 and section 76 of the Indian Forest Act, 1927 (Act no.16 of 1927) the Governor is pleased to exempt the forest produce peat, surface soil, rock and minerals (including limestone, laterite, mineral oils and all products of mines or quarries) as mentioned in sub-clause (iv) of clause (b) of sub-section (4) of section 2 of the said Act, excavated from non-forest land and moved thereby, from the operation of said rules.

By order,

(Chanchal Kumar Tewary)

Principal Secretary"

14. The judgment in Kumar Stone Works (supra) is under challenge in Supreme Court. A Special Leave to Appeal, directed against a judgment of the High Court following the judgment in Kumar Stone Works, being SLP (C) 11261/2005 (M/s Tuganiya Gramodyog Vikas Sansthan and others vs. State of UP and others) in which by an order dated 7.4.2008 the Supreme Court has directed the status quo to be maintained as on that day is also pending. The Special Leave to Appeal (Civil)...../2005 (CC 8893/2005) M/s Bhagyashree Trading Company vs. State of UP and others, and many other petitions have been tagged with SLP (C) No. 11261/2005.

15. In Kanhaiya Singh and another vs. State of UP and others in Special Leave to Appeal (C) No. 11367 of 2007 from the judgment of the High Court dated 5.4.2007 in Writ Petition No.16408 of 2007, Hon'ble Supreme Court was pleased to pass an order on 23.7.2008:-

"O R D E R

I.A. Nos. 2 & 3 of 2008 in SLP (C) No.11367 of 2007 and I.A. No. 4/2008 in C.A. No. 279/2008

Having heard learned counsel for the respective parties and having considered the order passed by us on 16th April, 2008 in SLP (C) Nos. 9093-9094 of 2008, we modify the interim order passed on 23rd July, 2007 and direct that there will be stay of realisation of any demand by way of transit fee in the meantime.

IA Nos. 2 and 3 of 2008 are allowed. I.A. No. 4/08 in C.A. No. 2787/2008 is also allowed.

In view of the submissions made on behalf of the petitioners in SLP(C) No. 11367/2007, let all these matters stand adjourned for final disposal till the week commencing 10th August, 2008."

16. By Notification No. 2108/XIV-3-95-74 dated September 27, 1978 the State Government had notified the transit fee on following rates:- (i) per lorry load of timber or other forest produce.....Rs. 5 per tonne of capacity; (ii) per cart load of timber or other forest produce ....Rs. 2.50; (iii) per camel load of timber or other forest produce ...Rs. 1.25; (iv) per pony load of timber or other forest produce...Rs.0.50; and (v) per head load or timber or other forest produce...Rs.0.25.

17. By Notification No. 1047/XIV-2-2004-343 (L)-2001 dated June 14, 2004 (Third Amendment to the Rules), the rates were increased as follows:- (i) per lorry load of timber or other forest produce.....Rs. 38.00 per tonne of capacity; (ii) per cart load of timber or other forest produce ....Rs. 19.00; (iii) per camel load of timber or other forest produce ...Rs. 1.25; (iv) per pony load of timber or other forest produce...Rs.4.00; and (v) per head load or timber or other forest produce...Rs.2.00.

18. The interim orders granted in Kanhaiya Singh's case as above, have been granted in almost the entire first batch of writ petitions let by Writ (Tax) No. 327 of 2008, NTPC Ltd & another vs. State of UP and others challenging the Fourth Amendment to the Rules of 1978.

THE FOURTH & FIFTH AMENDMENT TO THE RULES OF 1978

19. By a Notification No. 3460/XIV-2-2010-343 (L)/2001 dated 20.10.2010, the U.P. Transit of Timber and Other Forest Produce (Fourth Amendment) Rules, 2010, (in short, the 4th Amendment) were notified providing for transit fees on timber of various quality of trees on different rates per cubic meter of capacity. Vide corrigendum of Notification No. 4191/XIV-2-2010-343(L)/2001 dated 13.12.2010, the words 'other than' were removed from Rule 5 (i) (a) and 5 (ii) (a). By Notification No. 312/XIV-2-2011-343 (L)-2001 dated June 04, 2011 the U.P. Transit of Timber and Other Forest Produce (Fifth Amendment) Rules, 2011, (in short the 5th Amendment) were notified providing for transit fee at advalorem basis per truck load on different rates between 5% to 15%, and including in the notification for the first time the forest produce coming from mines i.e. coal, lime, stone, sand, Bajri and other minerals. The notifications dated 13.10.2010 and 4.6.2011 challenged in these writ petitions, in tabular form, as they were published, which also gives comparison of the change brought about from the 4th Amendment to the 5th Amendment, is quoted as follows:-

"Uttar Pradesh Shasan

Van Anubhag-2

In pursuance of provisions of clause (3) of Article 348 of the Constitution, the Governor is pleased to order the publication of the following English translation of notification no.312/XIV-2-2011-343(L)/2001, dated June 04, 2011:

Notification

No.312/XIV-2-2011-343 (L)/2001

Lucknow, Dated June 04, 2011

In exercise of the powers under Sections 41, 42, 51 and 76 of the Indian Forest Act, 1927 (Act no.16 of 1927), read with section 21 of the General Clauses Act, 1897 (Act no.X of 1897), the Governor is pleased to make the following rules with a view to amending the Uttar Pradesh Transit of Timber and other Forest Produce Rules, 1978.

The Uttar Pradesh Transit of Timber and Other Forest Produce

(Fifth Amendment) Rules, 2011

Short title and commencement

1. (1) These rules may be called the Uttar Pradesh Transit of Timber and other Forest Produce (Fifth Amendment) Rules, 2011

(2) They shall come into force with effect from the date of their publication in the Gazette.

Amendment of rule-5

2. In the Uttar Pradesh Transit of Timber and other Forest Produce Rules, 1978 for the existing rule 5 set out in column-1 below the rules as set out in column-2 shall be substituted, namely:-

Column-1

Existing Rules

Column-2

Rules as hereby substituted

5. Fees payable for different classes of passes:- At the check chowki or depot established under rule 15 and specified under proviso (ii) to clause (b), sub-rule (1) of rule 4, the forest produce along with the two copies of the pass (duplicate and triplicate) shall be produced for examination under sub-rule (4) of rule 6 and for payment of transit fee on the forest produce calculated at the following rates; corresponding receipt shall be granted in the Form given in Schedule C.

(i) (a) per lorry load of timber other than of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders.

Rs.200.00 per cubic Meter of capacity

(i) (a) per lorry load of timber of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders.

Advalorem at the rate of 5% or minimum Rs.2000/-.

(b) per lorry load of timber other than of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders or other forest produce

Rs.75.00 per cubic Meter of capacity

(b) per lorry load of timber other than of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders or other forest produce except as mentioned in (i) (c).

Advalorem at the rate of 15% or minimum Rs.750/-.

(ii) (a) per cart load of timber other than of Khair, Sal and Sagaum (Teak), Shisham, Sandal Wood and Red Sanders.

Rs.100.00 per cubic Meter of capacity

(ii) (a) per cart load of timber of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders.

Advalorem at the rate of 5% or minimum Rs.400/-.

(b) per cart load of timber other than of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders or other forest produce.

Rs.40.00 per cubic Meter capacity

(b) per cart load of timber other than of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders or other forest produce except as mentioned in (ii) (c).

Advalorem at the rate of 5% or minimum Rs.200/-

Advalorem at the rate of 15% or minimum Rs.200/-

(iii) per camel load of timber or other forest produce

Rs.9.00

(iii) per camel load of timber or other forest produce

Rs.9.00

(iv) per pony load of timber or other forest produce

Rs.4.00

(iv) per pony load of timber or other forest produce

Rs.4.00

(v) per head load of timber or other forest produce

Rs.2.00

(v) per head load of timber or other forest produce

Rs.2.00

Note:- In respect of resin and resin products, the provisions of the Uttar Pradesh Resin and other Forest Produce (Regulation of Trade) Act, 1976 and the rules framed thereunder, shall apply.

By order

((Chanchal Kumar Tewary)

Principal Secretary"

THE SUBMISSIONS

20. Shri V.K. Upadhyay appearing in Writ Petition No. 327 of 2008 (NTPC Limited and another vs. State of UP and others) and in Writ Petition No. 91 of 2010 (LANCO Anpara Power Ltd vs. State of UP & others), which have been amended challenging the 5th Amendment to the Rules, notified on June 4th, 2011, has challenged the imposition of Rules of 1978 and charge of transit fees as demanded vide letter dated 8.10.2007 on the transportation of soil (Mitti) and coal. It is submitted that N.T.P.C. Limited is a Government of India undertaking engaged in generation of electricity in its various units, one of them being Singrauli Super Thermal Power Station(SSTPS) at Shakti Nagar, District Sonebhadra in U.P, which is a Coal Based Thermal Power Station. In the process of generation of power by burning coal the power plants of NTPC Ltd. & SSTPS generate ash. The Central and State Pollution Control Boards have made pollution control laws for proper disposal of ash by constructing, 'ash dykes', properly surrounded and enclosed of 'ash dyke lagoons' to which the dry ash mixed with pumped water. The construction of the ash dyke lagoon involves huge quantity of soil (Mitti). If the bunds of ash dyke lagoon are not raised within time SSTPS has to slow down generation of electricity. Apart from the work of raising bands of 'ash dyke lagoon' as a method of disposal of ash, ash is also utilised for filling low lying areas within the premises of SSTPC. After levelling these areas with ash (pond ash), the said area is covered and compacted by soil. The third method of disposal of ash is making it available to various parties engaged in the manufacture of cement. The disposal of the ash in the ash dyke method remains the primary and most effective method of disposal of ash.

21. In NTPC Ltd & another vs. State of UP & others the petitioner no.1 has awarded contracts to M/s Rungta Projects Limited (petitioner no.2) on 6.6.2007 for the raising of the bunds of the Ash Dyke Location-II situated in southern parts of village Marrak and Jogichaura, Tehsil Duddhi, District Sonebhadra in five areas of about 500 acres. The soil is excavated from the Rihand reservoir from those acres of land at 880 feet level falling in the Village Kohroul for which no objection certificate has been issued by the Executive Engineer, Rihand Dam and the mining permit has been given by the District Mining Officer, Sonebhadra. The Divisional Forest Officer, Renukoot Forest Division has given no objection certificate on 8.1.2008 for excavation of soil. The mining permits have been issued. The soil is excavated from non-forest areas and is transported by the route, which does not fall within the forest area or pass through the forest area. The Divisional Forest Officer, Renukoot has written a letter on 8.10.2007 to Forest Range Officer, Anpara Range, for charging transit fee on transportation of soil, which at that time was at the rate of Rs. 38.00 per tonne capacity.

22. Shri V.K. Upadhyay has relied upon a judgment of Uttrakhand High Court in M/s Gupta Builders vs. State of Uttrakhand decided on 26.6.2007 that the term 'forest' used in the Act of 1927 is limited to the forests, which are intended to be controlled and regulated under the Act of 1927. Until there is declaration of a land as forest of specified category the minerals, which are products of mines and quarries cannot be termed as forest produce. He submits in the alternative that the soil (Mitti) which, is ordinary earth, is a mineral contemplated under the Mines and Minerals (Development and Regulation) Act, 1957 (in short the MMDR Act). Section 15 of the MMDR Act empowers the State Government to frame Rules for regulation of miner minerals under which the State Government has made regulations known as 'U.P. Miner Minerals (Concessions) Rules, 1963. These Rules provide for royalty and dead rent in the first and second schedule respectively. The provisions of the Indian Forest Act, 1927 and the Rules of 1978 as well as the 5th Amendment to the Rules in the year 2011 are thus void to the extent they purport to relate to scheduled minerals under the MMDR Act. Shri V.K. Upadhyay submits that the Indian Forest Act is a pre-Constitution enactment and was enacted for the purposes of consolidating the law relating to forest and transit of forest produce and duty leviable on timber and other forest produce. After the commencement of the Constitution, all pre-constitution Acts continue to apply by virtue of Article 372 subject to conditions stated therein. He submits that after the enactment of MMDR Act, the provisions of the Indian Forest Act, 1927 to the extent, that they relate to the scheduled minerals, have been impliedly repealed. The MMDR Act, being a special Act dealing exclusively with the regulations and development of minerals, will supplant, substitute and supersede the Indian Forest Act, 1927 on the principles that the later enactment on the same topic would impliedly repeal the former.

23. Shri V.K. Upadhyay further submits that in the garb of levying transit fees for regulation of forest produce the State in fact is imposing levy on scheduled mineral, which is exclusively subject matter of MMDR Act. It is a colourable exercise of powers. He submits that Entry 54 of List-I of the Seventh Schedule read with Section 2 of the MMDR Act, the Union legislature alone has jurisdiction to regulate matters with regard to mines and minerals. The power to regulate miner minerals has been conceded to the State Government only to the extent contemplated under Section 15 of the MMDR Act. The State legislature is denuded of the power to regulate or in any manner deal with the minerals so as to exceed the field of regulation covered exclusively and subscribe by Section 15 of the MMDR Act. He has relied upon Government of West Bengal and another vs. Kesoram Industries Limited and another, JT 2004 (1) SC 375 (para 148), in which, while considering the power of the State to levy tax or fee on minerals in view of provision of Entry 54 of List-I of the Seventh Schedule, it was held that a tax or fee levied by State with the object of augmenting its finances and in reasonable limits does not ipso facto trench upon regulation, development or control of the subject. It is different if the tax or fee sought to be levied, by State can itself be called regulatory, the primary purpose whereof is to regulate or control and augmentation of revenue or rendering service is only secondary or incidental. It is submitted that as it has been held in Sitapur Packing Wood Suppliers (supra) that the transit fee is regulatory in nature in view of Kesoram Industries Limited, the transit fee under the Rules of 1978 on transportation of minerals being a regulatory fee and not a fee for service rendered is within the exclusive legislative domain of the Union. The levy and collection of forest transit fee on soil (Mitti) being transported from the approved site to the ash dyke is absolutely without jurisdiction and illegal.

24. In Lanco Anpara Power Ltd. Vs. State of U.P. & Ors., Writ (Tax) No.91 of 2011, the petitioner, a public limited company carrying on business of generation, sale and distribution of electricity, was selected through international competitive bidding process by the Government of U.P. to build, own, operate and maintain 2x600 MW Thermal Power Project known as Anpara ''C' as a Dispatchable Power Plant. The construction started in the year 2008 was completed in January, 2011 and was ready for trial run. For the purposes of supply of coal various collieries of NCL entered into MOU on 22.12.2010, at present for release of 50,000 metric tonne of coal, which is ultimately to be adjusted from the firm quantity that may be allocated by the competent authority. The petitioner has already submitted commitment guarantee in the from of bank guarantee on 16.5.2009 for a sum of Rs.48,51,12,000/-. For the purposes of trial run the petitioner purchased through ''e' auction coal for an amount of Rs.1 crores 80 lacs and odd on 4.12.2010, and Rs.2 crores 30 lacs and odd on 21.12.2010. The trucks bearing coal purchased by the petitioner was supplied from Kakri Colliery, Sonbhadra to the power station through PWD road on 4.1.2011. The trucks were stopped by the officials of the U.P. Forest Department for payment of transit fee. The petitioner paid transit fees under protest. A protest letter was written on 5.1.2011 addressed to the Divisional Forest Officer, Renukoot Forest Division, Renukoot, Sonbhadra.

25. Shri V.K. Upadhyay has summarized his grounds of challenge as follows:-

"1. The provisions of the Mines and Minerals (Development and Regulation) Act, 1957 (1957 Act) Act as amended up to date and the Rules made there-under establish that the field inasmuch as it relates to regulation and development of mines and minerals is ''fully occupied' by later Parliamentary legislation namely 1957 Act and the Indian Forest Act, 1927 (1927 Act) can not operate in the so occupied field of regulation and development of mines and minerals. This is further supported by various legislations relating to coal and coal mining. Reliance has been placed on Indu Bhushan Bose Vs. Rama S. Devi, AIR 1970 SC 228; Quarry Owners Association Vs. State of Bihar, (2000) 8 SCC 655; State of Tamil Nadu Vs. M/s Hind Stone, AIR 1981 SC 711; State of West Bengal Vs. Kesoram Industries, (2004) 10 SCC 201 and State of Orissa Vs. M.A. Tulloch, AIR 1964 SC 1284.

2. Under Section 23-C of 1957 Act, the State of Uttar Pradesh has itself framed comprehensive Rules titled "U.P. Minerals (Prevention of Illegal Mining, Transportation and Storage) Rules, 2002" whereunder the dispatches of minerals and ores are mandatorily to be accompanied by transit passes issued under the said Rules and strictly in accordance with the terms and conditions thereof. The aforesaid Rules are still in force and the transportation of coal is carried on in accordance with the terms of the Rules.

3. The provisions of the pre Constitution Indian Forest Act, 1927 specifically, Section 2 (4) (b) (iv) are deemed to have been repealed in so far as they purport to relate to minerals in view of the special later Parliamentary enactment namely, MMDR Act, 1957, inasmuch as it fully occupies the filed of transit/ transportation of minerals.

4. The MMDR Act is a later (and special) Parliamentary enactment enacted on 1.6.1958 whereas the Indian Forest Act, is an earlier (and general) pre-Constitution enactment enacted on 21.9.1927. The MMDR Act is also a special enactment dealing exclusively with the regulation and development of mines and minerals whereas the Indian Forest Act is a general enactment dealing, inter-alia, generally with forests and forest produce in the Dominion of India. Therefore, both on the principle of GENERALIA SPECIALIBUS NON-DEROGANT and on the principle that later enactment on the same topic would impliedly repeal the earlier, the charging provisions of the Indian Forest Act of 1927 and/ or Rules must necessarily be held to be supplanted, substituted and superseded by MMDR Act of 1957 insofar as they relate to minerals. Hence the definition clause of the 1927 Act, namely, Section 2 (4) (b) (iv), has to be read down so as to exclude minerals therefrom. Reliance has been placed on South India Corporation (P) Ltd. Vs. Secretary, Board of Revenue, AIR 1964 SC 207; Dhamji Valji Shah Vs. LIC, AIR 1966 SC 135; Belsund Sugar Co Ltd. Vs. State of Bihar, AIR 1999 SC 3125; Jasbir Singh Vs. Vipin Kr, AIR 2001 SC 2734; and Tata Motors Ltd. Vs. Pharmaceuticals Products of India, (2008) 7 SCC 619.

5. A bare look at the impugned Rules would show that the impugned levy is, in pith and substance a levy on minerals and in fact the impugned levy is on quantity, tonnage basis and now on ad valorem basis under 5th Amendment.

6. The notification dated 4.6.2011 is ultra-vires the powers of State Government under Section 41 (2) (c) of the Indian Forest Act, 1927 as the State Government has only been authorized to charge fee for issuance of transit passes. It does not authorize to use it as a substantive taxing provision as has been done by the State Government albeit unauthorisedly.

7. Impugned levy is a colorable exercise of power. The State cannot do indirectly what it is prohibited to do directly.

8. The impugned Rules and Notification dated 4.6.2011 are in contravention of Article 301 of the Constitution of India as it impedes the free flow of minerals.

9. Presidential assent has admittedly not been obtained for framing the Rules purportedly under section 41 of 1927 act and issuance of the impugned Notification. Therefore, the Rules are hit by the provisions of Articles 304 of the Constitution of India and are invalid on this ground alone.

10. The impugned 5th Amendment is violative of Article 14 of the Constitution as the same suffer from uncanalised and arbitrary power on the various authorities for taking different prices of coal for the purpose of collecting/ realizing transit fee and the fee is exorbitant, excessive and extortionary particularly keeping in view the nature of the levy being regulatory only for issuing transit passes. Reliance has been placed on Calcutta Municipal Corporation Vs. Shrey Mercantile (P) Ltd., (2005) 4 SCC 245; Vam Organic Chemicals Ltd. & Anr. Vs. State of U.P. & Ors., (1997) 2 SCC 715; and A.P. Paper Mills Ltd. Vs. Govt. of AP, (2000) 8 SCC 167.

11. The levy and collection of transit fee on coal originating from the collieries of NCL and being transported through the PWD road to the Thermal Power Generating Unit of the petitioner at Anpara is wholly illegal, arbitrary and without jurisdiction."

26. Shri V.K. Upadhyay further submits that the petitioners have not been given sufficient opportunity to file rejoinder affidavit as the counter affidavit was received a few days before the hearing began. The Court should thus accept the averments made in the petition to be correct vide State of Assam Vs. Union of India, (2010) 10 SCC 408. He submits that the notification dated 17th September, 1969 declaring some areas of tehsil Duddhi Distt. Mirzapur, now in District Sonbhadra as reserve forest under Section 20 of the Forest Act, 1927 does not relate to any area in the coal area or on the coal route culminating to power plant of petitioner at Anpara. Coal originating from U.P. based Khudia, Kakri or Bina coal mines of NCL is transported first on the private coliery road and then takes the Shaktinagar-Varanasi National Highway for coming straight to Anpara. Duddhi falls much after Anpara on the National Highway. Similarly, if coal were to originate from M.P. based collieries of NCL the only route is to enter U.P. at Singrauli and taking the Shaktinagar-Varanasi National Highway come to the first town at Anpara. The trucks transporting coal from collieries of NCL to the power plant of the petitioner at Anpara, do not and cannot pass through the areas of Duddhi Tehsil. The other notification relied upon and issued under Section 39 (1) (3) read with Section 80A of the Indian Forest Act, 1927 declaring the sides of the roads mentioned in the notification at some places would show that no area of any road in Distt. Sonbhadra or any portion of the Varanasi-Shakti Nagar National Highway has been declared as protected forest under the notification.

27. Shri V.K. Upadhyay submits that since the legal issues raised in these writ petitions are pending consideration of Larger Bench in the High Court in Nagarjun Construction Ltd (Supra) and in Supreme Court in Kanhaiya Singh & Anr. Vs. State of U.P. in Special Leave Petition, against the Kumar Stone's case and further since the matter of levy of fee, cess or tax of minerals or mineral bearing areas, by the State Legislature, all the states of Orissa, Bihar, Chhatisgarh, Madhya Pradesh, U.P. and A.P. have been referred by a three Judge Bench of the Supreme Court in Civil Appeal No.4056-4064 of 1999 formulating 11 questions, based on the law laid down by 5 judges' Constitution Bench in Keso Ram Industries Ltd. (Supra), which has interpreted earlier decision of the Constitution Bench of 7 Hon'ble Judges in Indian Cement's case (1990) 1 SCC 12, the High Court should wait until the verdict is given on the issues by the Supreme Court.

28. Shri S.P. Gupta, Senior Advocate assisted by Shri Aloke Kumar appearing in Writ Petition No. 963 of 2011 (Ajai Trading (Coal) Company vs. State of UP and others), challenging the 5th Amendment, submits that the coal has been included specifically for the first time in the Notification dated 4.6.2011. The levy of transit fee payable under the 4th Amendment at the rate of Rs. 5936/- per Truck has been arbitrarily and exorbitantly increased by the 5th Amendment to Rs. 60, 000/- per Truck. Shri Gupta submits that by 42nd Amendment, to the Constitution w.e.f. 03.1.1977 Entry-23 in List-II was deleted with a corresponding Entry 17-A 'Forests', was inserted in List-III. The State Government is competent to make Rules to regulate the forest produce. This power to regulate, however, would not include power to regulate the mines and minerals, the field of which is exclusively covered under Entry 54 of List-I 'regulation on mines & minerals development to the extent to which such regulation and development under the control of union is declared by law to be expedient in the, public interest, and on which the Central Government has enacted M.M.D.R. Act, also regulating the transportation and movement of coal under the Rules of 2002.

29. Fine tuning the arguments Shri S.P. Gupta submits that by the 5th Amendment to the Rules of 1978, made in exercise of powers under Section 41 of the Indian Forest Act, 1927, which provides in sub-section (2) (c) the powers to make Rules for the issue, production and return of such passes and for the payment of fees therefor the State Government cannot impose tax on transport of forest produce. The levy of increased and exorbitant transit fee by the 5th Amendment, on advalorem basis is irrational, highly excessive and confiscatory being violative of Article 14, 19 (1) (g) and 301 of the Constitution. He submits that Section 41 of the Indian Forest Act, 1927, does not empower the State to levy any tax. It is not a provision for generating revenue. It may only authorise the levy of fee for transit a forest produce. The transit passes may be issued to check illicit movement of forest produce, but not to levy any tax on the movement of forest produce.

30. Shri S.P. Gupta has relied upon Jindal Stainless Limited and anr. vs. State of Haryana and others 2006 NTN (30) 78, in which the Supreme Court, while considering the constitutional validity of the Haryana Local Area Development Tax Act, 2000 challenged on the ground of being violative of Article 301, and not saved by Article 304; and that, the Act in fact seeks to levy sales tax on inter-State sales, which is outside the competence of the State Legislature, after considering the Atiabari Tea Co. Ltd vs. State of Assam and others AIR 1961 SC 232, Automobile Transport (Rajasthan) Limited vs. State of Rajasthan AIR 1962 SC 1406, and Bhagatram Rajeev Kumar v. C.S.T. M.P. 1995 Supp (1) SCC 673, held in paragraphs 42 to 48 as follows:-

42. Tax is levied as a part of common burden. The basis of a tax is the ability or the capacity of the taxpayer to pay. The principle behind the levy of a tax is the principle of ability or capacity. In the case of a tax, there is no identification of a specific benefit and even if such identification is there, it is not capable of direct measurement. In the case of a tax, a particular advantage, if it exists at all, is incidental to the States' action. It is assessed on certain elements of business, such as, manufacture, purchase, sale, consumption, use, capital etc. but its payment is not a condition precedent. It is not a term or condition of a licence. A fee is generally a term of a licence. A tax is a payment where the special benefit, if any, is converted into common burden.

43. On the other hand, a fee is based on the "principle of equivalence". This principle is the converse of the "principle of ability" to pay. In the case of a fee or compensatory tax, the "principle of equivalence" applies. The basis of a fee or a compensatory tax is the same. The main basis of a fee or a compensatory tax is the quantifiable and measurable benefit. In the case of a tax, even if there is any benefit, the same is incidental to the government action and even if such benefit results from the government action, the same is not measurable. Under the principle of equivalence, as applicable to a fee or a compensatory tax, there is an indication of a quantifiable data, namely, a benefit which is measurable.

44.A tax can be progressive. However, a fee or a compensatory tax has to be broadly proportional and not progressive. In the principle of equivalence, which is the foundation of a compensatory tax as well as a fee, the value of the quantifiable benefit is represented by the costs incurred in procuring the facility/services which costs in turn become the basis of reimbursement/recompense for the provider of the services/facilities. Compensatory tax is based on the principle of "pay for the value".

45. It is a sub-class of "a fee". From the point of view of the Government, a compensatory tax is a charge for offering trading facilities. It adds to the value of trade and commerce which does not happen in the case of a tax as such. A tax may be progressive or proportional to income, property, expenditure or any other test of ability or capacity (principle of ability). Taxes may be progressive rather than proportional. Compensatory taxes, like fees, are always proportional to benefits. They are based on the principle of equivalence. However, a compensatory tax is levied on an individual as a member of a class, whereas a fee is levied on an individual as such. If one keeps in mind the "principle of ability" vis-`-vis the "principle of equivalence", then the difference between a tax on one hand and a fee or a compensatory tax on the other hand can be easily spelt out. Ability or capacity to pay is measurable by property or rental value. Local rates are often charged according to ability to pay. Reimbursement or recompense are the closest equivalence to the cost incurred by the provider of the services/facilities. The theory of compensatory tax is that it rests upon the principle that if the government by some positive action confers upon individual(s), a particular measurable advantage, it is only fair to the community at large that the beneficiary shall pay for it. The basic difference between a tax on one hand and a fee/compensatory tax on the other hand is that the former is based on the concept of burden whereas compensatory tax/fee is based on the concept of recompense/reimbursement. For a tax to be compensatory, there must be some link between the quantum of tax and the facility/services. Every benefit is measured in terms of cost which has to be reimbursed by compensatory tax or in the form of compensatory tax. In other words, compensatory tax is a recompense/reimbursement.

46. In the context of Article 301, therefore, compensatory tax is a compulsory contribution levied broadly in proportion to the special benefits derived to defray the costs of regulation or to meet the outlay incurred for some special advantage to trade, commerce and intercourse. It may incidentally bring in net-revenue to the government but that circumstance is not an essential ingredient of compensatory tax.

47. Since compensatory tax is a judicially evolved concept, understanding of the concept, as discussed above, indicates its parameters.

48. To sum up, the basis of every levy is the controlling factor. In the case of "a tax", the levy is a part of common burden based on the principle of ability or capacity to pay. In the case of "a fee", the basis is the special benefit to the payer (individual as such) based on the principle of equivalence. When the tax is imposed as a part of regulation or as a part of regulatory measure, its basis shifts from the concept of "burden" to the concept of measurable/quantifiable benefit and then it becomes "a compensatory tax" and its payment is then not for revenue but as reimbursement/ recompense to the service/facility provider. It is then a tax on recompense. Compensatory tax is by nature hybrid but it is more closer to fees than to tax as both fees and compensatory taxes are based on the principle of equivalence and on the basis of reimbursement/recompense. If the impugned law chooses an activity like trade and commerce as the criterion of its operation and if the effect of the operation of the enactment is to impede trade and commerce then Article 301 is violated."

31. Shri S.P. Gupta submits that by imposing transit fee on advolarem basis, which is in the nature of a tax, the State of U.P has violated Article 301. The Rules of 1978 are not saved by Article 304 (b). He further submits that Rules of 2002 made under the MMDR Act have superseded the Rules of 1978 in respect of coal.

32. Shri S.P. Gupta submits that almost the entire coal is brought by the petitioners from non-forest area, and thus the transit fee cannot be levied on it, even if it passes through the forest area. He relies upon exemption vide Notification dated 29.3.2010. Shri Gupta has also argued that any place outside UP for the purpose of levy of transit fee will be treated as non-forest area.

33. Shri Bharat Ji Agarwal, Senior Advocate appearing in Writ Petition No. 1015 of 2011 (Jindal Pipes Limited vs. State of UP & ors); Writ Petition No.1647 of 2010, 1649 of 2010 relating to coal, Writ Petition No.925 of 2010 relating to coal, and limestone; Writ Petition No.1017 of 2011 and 1161 of 2011 relating to timber imported from outside the country and in Writ Petition No. 1105 of 2011 relating to timber within the country; submits that in case of Jindal Pipes Limited, the coal is a raw material for the captive power plant. It is imported from Dilwara, Rajasthan through National Highway maintained by C.P.W.D. The coal is not transported using any forest road and does not pass through any forest. After the check posts were abolished on 28.7.2008, and collection centres were also abolished in June, 2011, the transit fee is being collected on monthly basis calculated on the total import of coal at Ghaziabad.

34. Shri Bharat Ji Agarwal submits that the coal is not a forest produce and that even if it is treated as forest produce, since the petitioners are bringing coal from Rajasthan, the transit fee is by way of unreasonable restriction on the import of coal and is consequently violative of Article 301 of Constitution. He submits that even assuming that the transit fee is regulatory fee, it has to be commensurate with the expenditure incurred by the State for the purposes of regulation and not for any other purpose. The Forest Department does not incur any expenditure on the movement of coal.

35. Shri Bharat Ji Agarwal has relied upon State of UP v. Vam Organics (2004) 1 SCC 225, in which the levy was struck down on the ground that the State has not given the details of the actual expenditure on regulating industrial alcohol for the purposes that it may not be renatured for the purpose of consumption as potable alcohol. Shri Bharat Ji Agarwal has also relied upon the judgments in Indian Glycols vs. State of UP 2004 UPTC 474, Ram Surat Tiwari vs. State of UP 1991 ALJ 644, Synthetics and Chemicals Ltd vs. State of UP AIR 1990 SC 1927, Indian Mica and Micanite Industries Ltd v. State of Bihar, AIR 1971 SC 1182, in submitting that the burden of proof that the services are being rendered by the Forest Department lies on the respondents.

36. Shri Rahul Agarwal, appearing in Writ Petition No. 925 of 2011 (Star Paper Mills Ltd. vs. State of UP and others), submits that the petitioner is manufacturing paper and uses timber as the basic raw material. Additionally, in the chemical process used for manufacturing paper, the petitioner requires coal and lime/lime stone. The petitioner has also a captive power plant at Saharanpur consisting of two units of 6.2 MW and 5 MW capacity running on coal. The petitioner has been granted a long term linkage with Eastern Coal Fields Ltd. for supply of coal to one of these power generating units by the Government of India. For the other unit, the petitioner has linkage with the Central Coal Fields Ltd. The supply of coal from Central Coal Fields Ltd. is yet to commence. The petitioner purchases coal through E-auction for use in its power generating unit.

37. It is submitted that the Star Paper Mill Ltd annually requires about 50,000 M.T of coal worth about Rs. 20 crores. The entire supply is obtained through e-auction of coal through railway rakes. Each rake carries about 3600 M.T of coal. The entire coal mined usually originates and starts its movement from the State of Jharkhand, West Bengal, Madhya Pradesh, Orissa where it is mined and is destined directly to Saharanpur. The shortfall is made up by spot purchases from coal markets in Madhya Pradesh and in emergencies the coal is purchased from the coal market at Chandauli in U.P which is about 10% of its annual requirement of the coal consigned to the petitioner through trucks. The Star Paper Mills also uses lime/lime stone in its factory at Saharanpur to treat the waste product emerging from the first manufacturing process and recover raw material such as caustic soda from the waste. The treatment of lime stone is carried out in the lime kiln in its factory. The lime is obtained from the city of Jodhpur in the state of Rajasthan by trucks. The annual requirement of this raw material is about Rs. 1 crore. In none of these transactions of coal or lime stone the goods are carried through any forest in U.P. The railway rakes do not come from or through any forest in UP. The coal obtained from the State of Madhya Pradesh through the road route also does not come through forest.

38. Shri Rahul Agarwal submits that the forest produce under Section 2 (4) is such forest produce, which only naturally occurs or which is either found in or brought from a forest. The coal and lime stone are not forest produce as they are neither found in or brought from any forest. The increase of transit fee from Rs. 5.00 per tonne of capacity of lorry in the year 1978 to Rs. 38.00 and thereafter on cubic fit basis and finally by the 5the Amendment to the Rules by notification dated 4.6.2011 advalorem has increased the cost of raw material by 15%. He submits that the judgment in Kumar Stone Works (supra), in which it was held without any positive material brought on record that the coal is being transported within the State of UP passes through the forest in Sonebhadra, is subject matter of Special Leave to Appeal (C) No. 11261 of 2005 (converted into Civil Appeal No. 2797 of 2008) filed by Star Paper Mill (the petitioner). The Supreme Court has by an interim order dated 7.4.2008 directed status quo as on that day to be maintained. Shri Rahul Agarwal submits that where the movement of raw material does not originate in any forest or any place which is in the forest or its movement is minimal in any forest area in which practically no forest road is used, the respondents have no right to demand the petitioner to take out transit pass and to pay transit fee. He submits that the imposition of transit fee is a restrictive on the business of the petitioner as well as violates Article 301 of the Constitution of India which gives freedom of trade, commerce and intercourse throughout the territory of India. The increase of fees at advalorem basis has made it confiscatory in nature. The fee is no longer regulatory and since no material has been produced to justify its levy on the basis of quid pro quo, in view of the law declared by the Supreme Court in Jindal Stainless Ltd vs. State of Haryana (2006) 7 SCC 241, the levy is illegal and unjustified. He has relied upon a chart annexed with the supplementary affidavit from which he demonstrates that while under the 3rd Amendment in the year 2004 the annual liability of the petitioner of transit fee increased from Rs. 90.25 lacs (@ Rs. 38/- per metric tonne) to Rs. 178.13 lacs (@ Rs. 75/- per cubic meter). The increase by 5th Amendment @ 5% cost of timber of debarked Eucalyptus/Poplar (Fire wood) and Waste of ply wood (Chips/Peels) and Bamboo and @ 15% on coal, and lime stone, is of Rs. 842.69 lacs.

39. In the end Shri Rahul Agarwal submits that after abolition of collection centres, the expenditure incurred on the salary of staff has been eliminated. He submits that the expenditure given in the counter affidavit is of the entire plan and non-plan expenditure of the Forest Department, which is sought to be justified from the levy of transit fee. There are no pleading in the counter affidavit with regard to the cost of regulation. The entire cost of maintenance of Forest Department cannot be justified on the transit fee.

40. Shri Rahul Agarwal has also raised an issue regarding the levy of transit fee on vineer and plywood which is manufactured from wood.

41. It is submitted by Shri Rahul Agarwal, that the levy of transit fee based on the protection of environment and reference to kyoto-protocol, has no justification at all. The State Government has not produced any such material or study of deforestation or exploitation of natural resources found in forest to justify the levy on the ground of regulation for protection of environment. He submits that the forest and eco-system are different concepts. Where the State Government tries to justify the levy of transit fee on the timber produced outside the country and for protection of environment internationally, the Rules of 1978 will not stand the test of the extra territorial operation of the laws. He relies upon a constitution bench decision in GVK Industries Ltd & another vs. Income Tax Officer & others (2011) 4 SCC 36 in which the Supreme Court laid down the principles of extra territorial operation of laws under Article 245 of the Constitution of India.

42. Shri Navin Sinha, Senior Advocate, assisted by Shri Vipin Sinha appears for the petitioners in Writ Petition Nos. 941, 942 and 943 of 2011 filed by the Indian Wood Product Co. Ltd. engaged in the business of manufacture and sale of Katechu and Kutch from Khairwood extract, Gambiar and Cashew Husk. All the three writ petitions were filed on 11.7.2011. In Writ Petition No. 941 of 2011 the reliefs have been sought against the Conservator of Forest, Bareilly and the Divisional Forest Officer, Bareilly; in Writ Petition No. 942 of 2011 the reliefs have been sought against the Divisional Forest Officer, Mughalsarai Range, Varanasi and in Writ Petition No. 943 of 2011 the reliefs have been sought against the Conservator of Forest, Agra, Meerut, Kanpur and Bareilly. Shri Navin Sinha assisted by Shri Vipin Sinha also appears in Writ Petition No. 1230 of 2011 (M/s Vibhu Essential Oils vs. State of UP and others) challenging the levy of transit fee on Sandal wood oil imported from outside the country. The petitioner imports the Sandal wood oil either directly or through other traders, who import the same from abroad. No part of the Sandal Wood Oil, it is alleged, is extracted from any forest produce in any forest in the State of UP. The Sandal wood oil is distinct from the red Sandal wood oil which is an extract of forest produce within the State of UP. In the Writ Petitions filed on behalf of the Indian Wood Product Co. Ltd adopting the arguments of Shri V.K. Upadhyay, Shri Bharat Ji Agarwal and Shri S.P. Gupta, Shri Navin Sinha submits that Catechu is the finished product manufactured through a chemical process in its factory situated outside the forest area. It is distinct from Catechu which is prepared in forest as cottage industry. It is a mill product and cannot be deemed to be a forest produce. So far as Cutch is concerned, it is a bye-produce of the petitioner industry which is basically used in the market for industrial purposes such as dyeing and tanning.

43. It is submitted that the petitioner company manufactures Catechu by processing Khair wood, Gambier and Cashew husk. Cutch is a bye-product of the petitioner's industry. He has relied upon elaborate process of manufacturing of Catechu with Cutch as bye-product in the manufacturing notes prepared by the Vice President (Finance) and Secretary of the petitioner-company. He has also relied upon the certificate dated 31.3.1996 issued by Shri K.S. Ayyar, Officer-in-Charge, Chemistry of Forest Product Branch, Forest Research Institute and College, Dehradun as well as reply given by the Additional Chief Conservator of Forest Research and Plantation dated 7.4.1986, in which he has written that Catechu is a constituent of the heart wood and is found in stem branches and roots. It does not trickle down from trees and can be extracted only by processing. The process is given in paragraphs 10 to 15 as follows:-

"10. That from what has been stated above it is absolutely plain and clear that Catechu & Cutch does not trickle down from the trees and it is a product of Khair wood obtained by processing as such is outside of the preview of Forest Act, 1927.

11.That Kattha is produced after processing Khair wood which takes a period of about 40-45 days. Firstly upper layer of the Khair wood is removed at the Kattha producing factories. Then inner hard wood is cut into small chips and boiled in water along with Gambier & Cashew husk. Thus another liquor is prepared which is made thick by evaporation process. It is put into aluminum containers which are put into chillers. By this process thick liquor is formed into crystals and this crystalized and freezed liquor is sacked. Thereafter the substance so recovered is mashed to make it uniform and given shape of about 1.5 millimeter thick plates. These plates are pressed by Hydraulic press to remove further water contents. Thereafter these plates are cut into 2" 2" cakes. These cakes are dried in dehumidified for about 15 days. Again these cakes are put in room through which normal air is passed for about 5 days.

12.That the mill Kattha so obtained by the above process is eatable and marketable item and not a forest produce within the meaning of Section 2 (4) of the Indian Forest Act. Thus for its transit no pass is required. The petitioners sells its mills Kattha to whole salers and retailers all over India and if at each stage a transit pass is required from the forest authorities then it will cause immense difficulty and in fact bring the business of the petitioners unworkable and to a halt.

13.That there is vast difference between cottage industry Kattha and mill Kattha. The cottage industry Kattha is made generally by the boiling of Khair wood in Bhattis peaces of Khairwood in the forest. Whereas mill Kattha is manufactured by a very complex mechanical process in a factory situated in town and not forest. Their contents are also very different the cottage industry Kattha contains mostly tannin, whereas the mill Kattha contains more of catechu, mill kattha can be used directly in betels while the cottage industry kattha cannot be so used.

14.That the sale and distribution of Khair wood is completely controlled by the U.P. Forest Corporation, which allots it to its registered units including the petitioners. U.P. Forest Corporation issues gate pass when Khair woods are lifted from its depots. A fee of 50 paise is charged for every quintal of forest produce of movement of transit pass has to be obtained at U.P. Check Post.

15. That whenever the petitioners transports their products either within the State of U.P or outside the State of UP the respondents insists the petitioners to pay transit fee and only then they are permitted to transport their products, therefore, the same is impugned in the present writ petition."

44. It is submitted by Shri Navin Sinha, that in the ordinary course of business the petitioner-company dispatches for sale on an average of 160 metric tonnes of Kattha and 70 metric tonnes of Cutch. Prior to 4.6.2011 the liability of transit fee aggregated to Rs. 24, 610/- per month which is increased to Rs. 24.90 lacs at 5% of the value of approximately Rs. 498 lacs. The increase in transit fee is 100 times. This increase is difficult to be absorbed by the industry. In the highly competitive business the petitioner will not survive with such a huge increase in the transit fee which is also violative of Articles 14, 19 (1) (g) and 301 of the Constitution.

45. In Writ Petition No. 1230 of 2011 (M/s Vibhu Essential Oils vs. State of UP and others) it is submitted that the sandal wood oil imported by the petitioner from outside the State of UP and also from outside the country does not fall within the definition of sub-section (4) of Section 2 of the Indian Forest Act, 1927 and further such processed form of forest produce cannot be subjected to transit rule under Section 41 of the Act. Shri Sinha submits that in terms of the notification issued on 20.10.2010 (4th Amendment) the transit fee payable by the petitioner was @ Rs. 200/- per cubic meter replacing the transit fee payable earlier @ Rs. 38/- per tonne capacity. The 5th Amendment has enhanced the transit fee at advalorem basis and consequently increased the liability in case of while sandal wood oil by 100 times. In para-21 of the writ petition it is stated that the consequent impact of the enhancement is that in ordinary course, a truck load of white sandal wood oil may be carrying about 0.320 cubic meter of the value in the realm of Rs. 91, 44, 800/- on which under the 4th Amendment the liability would be about Rs. 128/- per cubic meter. Now on advelorum basis at 5% of the value, the transit fee would amount to approximate Rs. 45, 000/- on the same quantity. In one of the Invoice No. 002, Book No. 01 despatching Sandal Wood Oil Rectified (High Santanol) dated 7.4.2011 by Ultra Aromatics, Plot No. 237, Village Budhpur, Delhi valued at Rs. 91, 44, 800/-, the transit fee at 5% advalorem is shown at Rs. 5 lacs as against Rs. 128/-for 0.320 cubic meter paid earlier.

46. Shri Navin Sinha has relied upon object clause of Indian Forest Act, which does not admit any such regulatory fee within its ambit. He has challenged the 5th Amendment on the ground that by increase of fees exorbitantly the regulatory fee has virtually become a compensatory tax for which no justification has been given of the services provided by the Forest Department. The burden of justification is entirely on the respondents. The high increase has made it excessive, exorbitant and confiscatory. Shri Sinha submits that though in Sitapur Packing Wood (supra) the Supreme Court held that transit fee to be regulatory, even if quid pro quo is not required the fee should co-relate to the expenses. He has relied upon judgment in Ram Surat Tiwari v. State of UP and others 1991 All. L.J. 644. In this judgment the licence fee on FL-16 licence under Rule 680 of the U.P. Excise Rules on whole sale vend of ordinary denatured spirit at 15% advalorem, subsequently amended to 25% and thereafter to 40% was under challenge. Relying upon Synthetics and Chemical Ltd. v. State of U.P. AIR 1990 SC 1927 and Indian Mica and Nicanite Industries Ltd v. State of Bihar, AIR 1971 SC 1182 Hon'ble Mr. Justice B.P. Jeevan Reddy speaking for the High Court observed at page 646 and 647 that generally licensing system is adopted and the licence fee is charged for collection of revenue, for regulation and for raising of revenue, for granting any benefit or privilege to a person to exploit the properties of the Government. The fee may also be charged for rendering service and for regulating any trade or business. When the object of the licensing is to collect revenue and regulation is only incidential devised as a means to collect revenue, licence fee in such case is a tax and not 'fee'. If the object of the licence is both regulation and collection of revenue, there is substantial element of regulatory measure involved and in such cases fee is charged for meeting the cost of regulation as well as for earning revenue. Licence fee for parting with the privilege and conferring it on the licensee is not a 'fee' but a price for the right or the privilege transferred by the State to the license. When licence fee is charged for service rendered, it is a 'fee' in true sense of term. In such cases, although the principles of quid pro quo with arithmetical exactitude are not necessary to be established, broad co-relationship between the amount charged and the service rendered is required to be maintained. Where the State wants to regulate any trade or business by means of license and to charge licence fee in connection therewith; but in such cases principles of quid pro quo do not apply as by regulating the trade or business the State Government is not rendering any service but enforcing the regulation by placing restriction on their rights to trade or business for the good of the society. By exercising the control on the activities of the licensees, the State makes the activities subject to reasonable restrictions, which is not a service rendered to them. By granting a licence the State does not confer any privilege or benefit on any one and that it does is to regulate a trade, business or profession in public interest. After citing Indian Mica and Nicanite Industries Ltd v. State of Bihar, AIR 1971 SC 1182 and Corporation of Calcutta v. Liberty Cinema AIR 1965 SC 1107 this Court held: when the State makes the law for regulation of any trade or business by means of licensing, it is open to it to charge licence fee to defray the cost of administering the regulation. In these cases although the principles of quid pro quo do not apply; but the fee so charged should have broad co-relationship with the cost of administering the regulation. What is essential is that fee should not be excessive or exorbitant. The Court thereafter relied upon Synthetics and Chemical Ltd. v. State of UP AIR 1990 SC 1927 where the fee imposed by the State which was found to have no connection with the cost of administering the regulation was not held to be part of regulatory measures.

47. Shri Navin Sinha has also relied upon Calcutta Municipal Corporation and others vs. Shrey Mercantile (P) Ltd and others (2005) 4 SCC 245 in which the Supreme Court set aside the fee demanded by Calcutta Municipal Corporation at Rs. 3 lacs under the Calcutta Municipal Corporation (Taxation) Regulations, 1989 from the developers purchasing the building for construction, as a charge for mutation. The Supreme Court held that a charge or fee, if levied for the purposes of raising revenue under the taxing power is a tax. The imposition of fees for the primary purpose of "regulation and control" may be classified as fees as it is in the exercise of "police power", but if revenue is the primary purpose and regulation is merely incidental, then the imposition is a "tax". Although "police power" is not mentioned in the Constitution,, it may be relied upon as a concept to bring out the difference between "a fee" and "a tax". The power to regulate, control and prohibit are the powers of the category of police power and the charge levied on that class to defray the costs of providing benefit to such a class is "a fee". Where the object, however, is to raise revenue under the garb of regulation, any fee or levy which has no connection with the cost or expense of administering the regulation cannot be imposed and only such levy can be justified which can be treated as a part of regulatory measure. In such event the State's power to regulate is not plenary as in the case of power of taxation. The Supreme Court relied upon State of West Bengal v. Kesoram Industries Ltd (2004) 10 SCC 201 and CCE v. Chhata Sugar Co. Ltd. (2004) 3 SCC 466.

48. In order to support the argument that Katechu is not a forest produce as it is manufactured form of Khair wood of, Shri Navin Sinha has relied upon judgment in Suresh Lohiya v. State of Maharashtra and another (1996) 10 SCC 397. In this case the Supreme Court held that bamboo mats are commercially different than bamboo which is a forest produce. In common parlance this is a distinct product and same cannot be included within the expression 'forest produce' as defined in Section 2 (4) of the Act despite it being inclusive in nature. The reasoning given by the Supreme Court in paras 6 and 7 is quoted as below:-

"6. We have given our considered thought to the rival contentions. It appears to us that the High Court erred in taking the abovesaid view by referring to the definition of 'timber' inasmuch as we agree with Shri Bhatia that the second part of the definition does not take within its fold fashioned bamboo as that part is relatable to wood, and not tree. We have said so because the definition of tree includes even canes, and a cane cannot be taken as a wood, even if a tree could be. But then, the High Court has also referred to sub-clause (i) (supra) which speaks of produce of tree as well. As to this, submission of the appellant's counsel has been that when sub-clause (i) is read as a whole the same would clearly indicate that such produce of tree alone is contemplated which is a natural growth or product like flowers and fruits. This submission has force when the definition of forest-produce is read in its entirety which would show that the definition either includes nature's gifts like charcoal, mahua flowers or minerals. Wild animals of which sub-clause (iii) speaks of is also a God's gift and not man-made. Wherever the legislature wanted to include article produced with the aid of human labour, it has said so specifically as would appear from sub-clause (iv), as it speaks, apart from minerals etc. of "all products of mines or quarries".

7. The legislature having defined "forest-produce", it is not permissible to us to read in the definition something which is not there. We are conscious of the fact that forest wealth is required to be preserved; but, it is not open to us to legislate, as what a court can do in a matter like at hand is to iron out creases; it cannot weave a new texture. If there be any lacuna in the definition it is really for the legislature to take care of the same."

49. Shri Navin Sinha has submitted at the end of his argument, that there are no specific denial in the counter affidavit both with regard to the Katechu being the processed form and thus is not a forest produce as well as the financial impact of the levy on the petitioners' industry, which will completely wipe out the profits both in case of Katechu and Sandal Wood Oil. He has relied upon paragraphs 13 of the judgment in Bharat Singh and others v. State of Haryana and others (1988) 4 SCC 534, in which the Supreme Court held that when no reply is given in the counter affidavit, the Court may presume the facts given in the writ petition to be correct.

50. Shri Manish Goyal, appearing in Writ Petition Nos. 831 of 2008; 292 of 2008; 293 of 2008 and 2042 of 2008 relating to import of Coal, submits that the petitioners are not bringing Coal produced in any forest area or from, within or through a forest area. He submits that the forests in the Indian Forest Act, 1927 are of the categories of a reserved forest, a protected forest, private forest or village forest. The definition of forest is based on geographical or administrative basis. The Coal imported from any of the areas, which does not fall within the meaning of forest under the Indian Forest Act cannot be subjected to levy of transit fee. There are no notifications regarding the areas declaring them to be forest from which the Coal is brought. The passing of the Coal from any of the area namely the Sonebhadra forest area is not sufficient for imposition of the transit fee.

51. Shri Manish Goyal has relied upon judgment in State Of Mysore v. H. Sanjeeviah. AIR 1967 SC 1189, where the night rule under the Mysore Forest Act (Act No. 11 of 1900) regulating transit of timber, firewood, charcoal and bamboos held to be violative by the Mysore High Court was upheld by the Supreme Court on the ground that the power, which the State Government may exercise under the proviso to Rule 2 to regulate the transport of forest produce including the power to prohibit or restrict transport. The power to restrict movement of forest produce between sunset and sunrise was found to be prohibitory and restrictive of the right to transport forest produce. Relying upon Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (supra) it was held that the restrictions obstruct the freedom, where regulations promote it. Police regulations, though they may superficially appear to restrict the freedom of movement, in fact provide the necessary conditions for the free movement. Regulations such as provision for lighting, speed good conditions of vehicles, timings, rule of the road and similar others, really facilitate the freedom of movement rather than retard it. The licensing system with compensatory fees would not be restrictions but regulatory provisions: for without it, the necessary lines of communications, such as roads, waterways and air-ways cannot effectively be maintained. The regulations providing for necessary services to enable the free movement of traffic, whether charged or not, cannot also be described as restrictions impeding the freedom. The power to regulate the transit of forest produce is not a power to restrict it. If the provisos are in truth restrictive of the right to transport the forest produce, however, good the grounds apparently may be for restricting the transport of forest produce, they cannot on that account transform the power conferred by the provisos into a power which is merely regulatory. The Supreme Court thereafter observed that Article 304 is an exception to Article 301. It saves certain laws from the operation of Article 301 if the law is passed by the legislature of a State. The provisos to Rule 2 are not made by the legislature of the State. They are made by the executive Government in exercise of delegated authority. The rules have the force of law, even if they do not become part of the Act. The reasonable restrictions under Article 304 (b) exempts from the operation of Article 301 on the freedom of trade, commerce and intercourse with or within the State as may may be required in the public interest.

52. Shri Manish Goyal submits that the regulations in the present case by imposing transit fee as exorbitant are not saved by the proviso to Article 304 (b). The transit fee violates Article 301. He also submits that the coal is not a forest produce and that in view of the special Rules of 2002 regulating the movement of coal made under the MMDR Act, the Rules of 1998 made under Section 41 (2) (c) stands superseded.

53. Shri Aloke Kumar appears in several writ petitions. In Writ Petition Nos. 1733 of 2007, 347 of 2009, and 1634 of 2010 he represents the petitioners, who are dealing in transport of Clinker; in Writ Petition No. 1710 of 2007, 1731 of 2010, 1732 of 2007 and 1800 of 2007, the private limited companies as petitioners are dealing in transport of Clinker and Flyash; in Writ Petition Nos. 89 of 2010 and 886 of 2011 the petitioners are dealing in transport of Calcium Hydroxide, Calcium Oxide, Quick Lime and Hydrated Lime; in Writ Petition Nos. 395 of 2009, 503 of 2011 and 529 of 2011 the petitioners are dealing in transport of Hard Coke; in Writ Petition Nos. 528 of 2011 and 698 of 2011 the petitioners are dealing in transport of Coal & Hard Coke; in Writ Petition No. 1398 of 2010 the petitioner-company is dealing in transport of Coal, Gypsum, Minerals etc; in Writ Petition Nos. 1127 of 2009, 1579 of 2010, 476 of 2010 and 284 of 2010 the petitioners are dealing in transport of Iron-ore; in Writ Petition No. 495 of 2010 the petitioners are dealing in transport of Iron-ore and Coal; in Writ Petition No. 779 of 2010 the petitioners are dealing in transport of Marble Stone; in Writ Petition No. 1628 of 2010 the petitioners are dealing in transport of Quartz, Bauxite, Feldspar etc.; in Writ Petition No. 276 of 2010 the petitioners are dealing in transport of rejected Coke & Ash Burn Coke; in Writ Petition No. 55 of 2009 the petitioner is dealing in transport of Soil (Mitti); in Writ Petition Nos. 1020 of 2008, 1021 of 2008; 1717 of 2010 and 668 of 2011 the petitioners are dealing in transport of Sponge Iron; in Writ Petition Nos. 498 of 2009; 827 of 2010; 1424 of 2010; 225 of 2011 and 670 of 2011 the petitioners are dealing in transport of Sand; in Writ Petition Nos. 1108 and 1109 of 2011 the petitioners are dealing in Tendu Leaf and in Writ Petition No. 1078 of 2011 the petitioner is dealing with transport of Coal/Limestone.

54. Shri Alok Kumar has provided the down-loaded extract from Wikipedia (the free encyclopedia) giving the contents, properties, method of preparation, uses of Calcium oxide (widely known as quicklime or burnt lime, which is a chemical compound). Calcium oxide is usually made by the thermal decomposition of materials such as limestone, that contain calcium carbonate in a lime kiln by heating the material to above 825 oC, a process which is called calcination or lime-burning, which liberates a molecule of carbon dioxide leaving quicklime. In case of Calcium Hydroxide traditionally called slaked lime is an inorganic compound which is a colourless crystal or white powder and is obtained when calcium oxide is mixed, or slaked with water. It is also called hydrated lime, builders lime, slack lime, cal, or pickling lime. Shri Aloke Kumar has also provided the method of preparing Portland cement, which is the most common type of cement use around the world. It is a fine powder produced by grinding Portland cement clinker (more than 90%), a limited amount of calcium sulfate (which controls the set time) and up to 5% constituents as allowed by various standards. He has also given the process of making Sponge Iron in which a mixer of iron ore, coal and dolomite is subjected to process of feeding with primary air and secondary air by coal. The resultant Sponge Iron and Char are consumed to obtain Spong Iron.

55. In Writ Petition No. 1710 of 2007 M/s Jai Laxmi Cement Co. (P) Ltd.-the petitioner uses Clinker and Flay Ash as raw material for manufacturer of cement. The Clinker imported by the petitioner is manufactured by Prism Cement Limited in their plant and same is the finished product of the concerned. The Clinker is manufactured by burning lime stone and coal in Rotary Kiln on a specific temperature. In Writ Petition No. 89 of 2010 M/s Kanoria Chemicals & Industries Ltd is engaged in the manufacture and sale of chemicals for which they need Calcium Hydroxide, Calcium Oxide, Quick Lime and Hydrated Lime. Most of these is purchased from traders/manufacturers situated in Jodhpur in the State of Rajasthan and are transported after paying royalty.

56. Shri Aloke Kumar submits that the commodities transported by the petitioners are not found in the forests in the State of UP. They are not forest produce as they are not found in or brought from and transported through the forest areas in the State of UP. He has relied upon Suresh Lohiya vs. State of Maharashtra (1996) 10 SCC 397 in which a commercially new and distinct article such as bamboo mat was not held to be forest produce.

57. Shri Aloke Kumar submits that the Flyash is given free of cost by NTPC to the Cement Industry as industrial waste. It has no commercial value and is not a forest produce.

58. It is submitted by Shri Aloke Kumar, that Hard Coke is manufactured out of crust coal heated in chambers. After the impunities are removed and the oxygen is released, the residue is subjected to sprinkling by water in a controlled manner producing Hard Coke. He submits that Hard Coke, rejected Coke, Ash Burn Coke are industrial waste, and are bye-products of Hard Coke. These are not forest produce and are district than the Coal. These commodities are commercially different commodities, which cannot be treated as Coal in commercial parlance and cannot be thus subjected to transit fee.

59. Shri N.C. Gupta appearing in Writ Petition No. 2124 of 2008 submits that the petitioners import coal from outside the State of UP on Form-38 of U.P. Value Added Tax Act, 2008. The coal imported from outside the State is not a forest produce. He has also adopted the argument of Shri V.K. Upadhyay in submitting that the coal is a mineral on which the State Government is not competent to make Rules under the Forest Act. He submits that under the Coal Mines (Conservation and Development) Act, 1974 the entire coal bearing areas have been nationalised. The Forst Act has no application to such areas. The coal is thus not a forest produce.

60. Shri Punit Kumar Upadhyay appearing in Writ Petition Nos. 228 of 2010, 229 of 2010, 1167 of 2010, 616 of 2011 and 796 of 2011 has also made submissions to the effect that the coal is not a forest produce and that after the nationalisation of entire coal bearing areas nothing remains to be regulated by the State Government in the name of transit fee for enforcement of environmental laws. He submits that the State Government does not have territorial jurisdiction to impose transit fee.

61. Shri Nitin Kesarwani appearing in Writ Petition No. 1497 of 2010 has relied upon the certificates issued by the Forest Officers of Van Pramandal certifying that collieries are not situate in forest areas.

62. Shri Tarun Agrawal, appearing in Writ Petition Nos. 605 of 2011 and 787 of 2011 as well as Writ Petition Nos. 1102 of 2011 and 1771 of 2011 challenging the 5th Amendment to the Rules of 1978 on the imposition of transit fee on Marble brought from Makrana in the State of Rajasthan to be transported both in the State of UP and on its onward transit to the various places in the State of Uttrakhand, has adopted all the arguments that transit fee is essentially a tax. He also submits that the fee is arbitrary, discriminatory and unreasonable and is thus violative of Article 14 of the Constitution of India. He submits that the object of the transit fee as set out in the counter affidavit is to regulate the movement of various produce. The defence of the State Government, that the transit fee has been levied to protect environment, does not justify the advalorem imposition, of fees. He submits that the environmental concerns of the State Government are not based on any scientific analysis of empirical data. The decision taken to increase transit fee is not informed by the reasoning as there is no scientific data collected to analyse it. Shri Tarun Agrawal submits that the principles of sustainable development, and inter-generational equity cannot justify the increase of transit fee. The increase of transit fee on advalorem basis will not result in optimum use of consequential sustainable development. The increase in transit fees cannot minimise the use of forest produce. Its optimization may help in sustaining a balance. The increase is thus wholly unreasonable with no object to achieve to justify it.

63. Shri Siddhartha Srivastava, appearing in Writ Petition Nos. 714 of 2011 and 1087 of 2011 filed by the petitioners dealing in transport of Marble, Kota Stone, Granite from Rajasthan, submits that Section 41 (2) (c) does not provide for levy of transit fee on forest produce. He submits that there is no legislation for imposing transit fee. The word 'fees' under the provision of Section 41 (2) (c) of the Act has to be read 'noscitur a sociis' i.e. fees for issue, production and return of transit pass alone and not beyond tht purpose. Section 41 (2) (c) of the Forest Act 1927, may not be read down and interpreted as delegation of power to the State Government to legislate, the provision for transit fees. Such an excessive delegation is not permissible in law. He has relied upon Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla and others (1992) 3 SCC 285, in which it was held that the imposition of development fees by framing regulations was wholly unauthorised, illegal and void. In a fiscal matter it is not proper to hold that in the absence of any express provision a delegated authority can impose tax or fee. Whenever there is a compulsory exaction of any money, there should be specific legislative provision for the same, and there is no room for intendment. The delegated authority must act strictly within the parameters of the authority delegated to it under the Act. It will not be proper to bring the theory of implied intent or the concept of incidental and ancillary power in the matter of exercise of fiscal powers.

64. Shri Siddharth Srivastava has relied upon District Council of the Jowai Autonomous District Jowai and others vs. Dwet Singh Rymbai etc. (1986) 4 SCC 38 in which royalty on timber brought from private forest imposed by Executive Committee of Jowai Autonomous District Council was held to be in the nature of tax, which the District Council was not competent to impose.

65. Shri Siddharth Srivastava has also relied upon Kishan Prakash Sharma and others v. Union of India and others (2001) 5 SCC 212 in which the principles of delegation of legislative power and limitations were reinstated considering the various schemes framed under the General Insurance Business (Nationalisation) Act, 1972. The Supreme Court held that the legislature possesses wide powers subject to certain limitations such as the legislature cannot delegate essential legislative function, which consists in the determination or choosing of the legislative policy and of formally enacting that policy into a binding rule of conduct.

66. Shri V.K. Singh, Senior Advocate assisted by Shri S. Shekhar appears for petitioners in Writ Petition Nos. 1719 of 2010 and 1063 of 2011. The petitioners in both these writ petitions are engaged in transporting tendu leaves under the U.P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1972 (in short the Tendu Patta Adhiniyam of 1972). The U.P. Tendu Patta (Vyapar Viniyaman) Niyamawali, 1972 provides for the rules to carry out the purpose of the Act.

67. Shri V.K. Singh submits that the State legislature has passed the Tendu Patta Adhiniyam, 1972, as an independent, complete and Special Act to provide in the interest of public for creation of the State monopoly of purchase and distribution of tendu leaves. The inclusion of 'forest' in Entry-17A in List-III entitles the State Government to enact laws for regulating activities connected with forest.

68. Shri V.K. Singh submits that the tendu leaves are grown in a special area in Uttar Pradesh bordering Madhya Pradesh, Chhatisgarh, and Bihar. Tendu shrubs are naturally grown, and are of the average height of 3 ft. In the third week of May and first week of June for a period of 20 days only, the tendu leaves grown in these shrubs, used for manufacture of 'biri', are traditionally collected by the tribals of the area. In order to protect the tribals from exploitation and to take over the entire purchase and distribution of tendu leaves, the Tendu Patta Adhiniyam of 1972 provides in Section 4 for appointment of agents in respect of different units or in respect of more than one unit on terms and conditions of, and the procedure respecting such appointment as may be prescribed. The entire trade of collection, storage and transportation is monopolised by the State Government. No person under section 5 (1) (a) can sell tendu leaves to any person, other than the State Government, or the officers of the State Government authorised by it in that behalf or an agent. Sub-section (1) (b) prohibits any person other than the Government, officer or agents to purchase tendu leaves from any person other than such Government officer or agent, or collect tendu leaves grown on any land of which he is not owner or tenure-holder. Sub-section (1) (c) prohibits any person other than the Government, officers or agents to transport tendu leaves except in the cases namely; (i) where he being a grower of tendu leaves transports them from any place within the unit wherein such leaves have grown to any other place in that unit; or (ii) where he transports them on behalf of such Government, officers or agents; or (iii) where he has purchased the leaves from such Government, officers or agents either for the manufacture of bidis within Uttar Pradesh or for sale of such leaves outside Uttar Pradesh, and he transports them outside the unit in accordance with the terms and conditions of a permit issued in that behalf. Sub-section (2) provides for various permits, detailed in the Rules. A tax @ Rs. 3/- per standard bag of tendu leaves is prescribed under sub-section (3). section 5a, was inserted by U.P. Act 14 of 1979 to authorise a person to whom the State Government has sold or with whom it has agreed to sell tendu leaves to collect the same on its behalf directly from the grower of tendu leaves, on payment of price thereof to such growers. The permit under sub-section (2) shall specify the estimated quantity sold, the name of the growers of tendu leaves, the amount required to be paid to such growers and such other particulars. Sub-section (3) provides that if a person authorised under sub-section (1) shall be deemed to be an agent for all or any of the purposes of this Act as may be prescribed, but shall not be entitled to payment of any amount by way of commission or otherwise for collection of tendu leaves. The price is fixed under Section 7 by the State Government and Section 8 provides that the State Government shall purchase all tendu leaves offered for sale. Each grower is registered under Section 9. The disposal of tendu leaves is provided in Section 10. The Tendu Patta Niyamawali of 1972 provides under Rule 4 the transport permit and permit for sale and purchase of tendu leaves. Rule 4 (1) is quoted as below:-

"4. Transport permit and permit for sale and purchase of tendu leaves- (1) Transport permit shall be of the following six types and shall be issued by officers and/or person mentioned against each of them:

Type of transport permit

Authority to issue permit

(i)

For transport from collection

depot to storage godown:

(a)

Main permit, form T.P.I (Main)

Divisional Forest Officer or an officer authorised by him in writing

(b)

Subsidiary permit Form T.P.I (Subsidiary) up to the extent of quantity mentioned in the main

Divisional Forest Officer or any Officer and/or person authorised by the Divisional Forest Officer in writing

(ii)

For Transport from one Storage godown to another or to distribution centre, Form T.P.2

Divisional Forest Officer or any Officer and/or person authorised by the Divisional Forest Officer in writing up to a specified quantity and period

(iii)

For transport from distribution centre to Sattadars or Mazdoors, Form T.P.3

Divisional Forest Officer or any person authorised by the Divisional Forest Officer in writing specifying the maximum quantity to be transported in each consignment.

(iv)

For transport outside the State or transport to any area in the State to which the Act does not apply from any area in the State to which the Act applies Form T.P.4.

Divisional Forest Officer or any officer not below the rank of Assistant Conservator of Forests authorised by Divisional Forest Officer in writing.

(v)

For transport inside the State from an area outside the State, or for transport to any area in the State to which the Act applies from any area in the State to which the Act does not apply Form T.P.5.

Divisional Forest Officer or any officer not below the rank of Assistant Conservator of Forests authorised by the Divisional Forest Officer in writing.

(vi)

For transport to any place outside the State or outside the area to which the Act applies from another place outside the State or outside the area to which the Act applies through the State or the area to which the Act applies, Form T.P.6:

Divisional Forest Officer or any officer not below the rank of Assistant Conservator of Forests authorised by the Divisional Forest Officer in writing.

Provided that the Divisional Forest Officer if he has reason to believe that the officer or person authorised by him to issue permit is not suitable, shall forthwith cancel authorization.

69. Shri V.K. Singh submits that the Tendu Patta Adhiniyam, 1972 and U.P. Tendu Patta (Vyapar Viniyaman) Niyamawali, 1972 are independent and complete code for the purposes of one forest produce namely 'tendu leave'. The authorities of the forest department are obliged in law to issue transport permits for transportation of tendu leaves under Section 4 of the Act read with Rule 4 of the Niyamawali. The petitioners are only liable to pay fee, if required under the provisions of the Act and the Niyamawali. The expression 'other forest produce' under the Rules of 1978 does not include tendu leave as provision of transit of tendu leaves has been made by a complete Act and the Rules. The realisation of the transit fee under the Rules of 1978 is also barred under the principles of doctrine of occupied field.

70. It is further submitted by Shri V.K. Singh that since 1980 the U.P. Forest Corporation has complete monopoly on the trade of tendu leaves. The tendu leaves are collected in the gaddies (bundles) on the phar. The price is fixed by the Committee appointed by the State Government under the Tendu Patta Adhiniyam. The leaves are then dried for a few days under the sun light. One standard bag contains 1000 gaddies (bundles) of 50 leaves each. They are thereafter stitched and transported to godowns, from where they are taken out for commercial sale. The entire movement of tendu leaves is covered by the transit passes under Rule 4 namely T.P.-1 to T.P.-6. A tax under Section 5 (3) is paid on transport of tendu leaves. The entire trade operates under strict control of the State Government and thus no object is sought to be achieved in obtaining transit pass under the Rules of 1978 which virtually amounts to duplication of passes for payment of transit fee over and above the transit fee paid under the Tendu Patta Adhiniyam. He submits that in Mohanlal Hargundas v. State of UP 1986 (1) ALJ (All) 585 this Court declared Section 5 (3) imposing tax as beyond the legislative competence of the State Government and consequently ultra vires. The Supreme Court allowed the Special Appeal and upheld the tax.

71. Shri V.K. Singh submits relying upon J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. State of Uttar Pradesh and others AIR 1961 SC 1170; Patna Improvement Trust v. Shrimati Lakshmi Devi and others AIR 1963 SC 1077 (para 12); Jogendra Lal Saha v. The State of Bihar and others AIR 1991 SC 1148; State of Orissa and others vs. Commissioner of Land Records & Settlement, Cuttack and others (1998) 7 SCC 162; Saf Yeast Company Private Limited v. State of U.P and another (2009) 24 VST 152 (All) that the general law yields to special law on the principles 'generalia specialibus non derogant'.

72. It is submitted relying upon G. Ganapathraj Surana and others vs. State of Tamil Nadu and others 1993 Supp (2) SCC 565 that endeavour should be made by the court to reconcile the overlapping of legislation under different Entries in the Lists in Seventh Schedule by applying the principles of liberal construction. He further submits relying upon Shri Jilubhai Nijbhai Khachar & ors v. State of Gujarat and ors JT 1994 (4) S.C. 473 that the pre-dominant character of the Act determines the validity.

73. Shri V.K. Singh has stressed upon harmonious construction of the statute, and has in the alternative argued that the Court should read down the provisions of the Rules of 1998 to hold that such Rules are not applicable to the trade and transportation of tendu leaves. He has relied upon All Saints High School, Hyderabad and others v. Government of Andhra Pradesh and others (1980) 2 SCC 478 and M. Rathinaswami and others v. State of Tamil Nadu and others (2009) 5 SCC 625 in which it was held by Supreme Court in para-29 that sometimes to uphold the constitutional validity the statutory provision has to be read down.

74. In the end Shri V.K. Singh submits that the levy of transit fee under the Rules of 1978 will amount to levy of fee twice as the fee has already been paid under the Tendu Patta Niyamawali of 1972. He has filed two receipts namely T.P.6 under Tendu Patta Niyamawali 1972 showing the payment of Rs. 1683/- on 16.8.2011 as well as receipt of Rs. 2850/- issued for transit pass under the Transit Rules of 1978, for same tendu leaves.

75. Shri Rajeev Misra appearing for the traders in Writ Petition No. 933 of 2011 submits that the U.P. Tobacco Products Pvt. Ltd.-the petitioners are engaged in the manufacture and sale of country made charrot commonly called as 'Biris'. He relies upon averments made in paragraphs-32 & 33 of the writ petition in which the petitioner has stated that the transit fee initially @ Rs. 5/- per tonne in 1978 was increased to Rs. 38/- per tonne of forest produce in 2004. By 4th Amendment notified on 20.10.2010 the rates have been increased from Rs. 38/- per tonne to Rs. 75/- per cubic meter of capacity of the lorry. By the 5th Amendment the transit fee has been prescribed at the advalorem rate of 5% or minimum of Rs. 750/- per lorry load. By this amendment one truck of tendu leaves with capacity of 10 tonnes will attract transit fee to the tune of Rs. 30,000/- as the current value of 1 kg of tendu leave is about Rs. 60/-, and 10 tonnes will mean 10,000 kg. The increase is highly excessive and does not serve any object. It will seriously affect the trade, providing employment to thousands of poor persons engaged in wrapping and sale of biris. The transit fee has been held to be regulatory in nature. By quantum jump in the fee it has lost its character as regulatory fee and has become compensatory fee for which the levy has to be justified on the principles of quid pro quo. In the present case the petitioners are not provided any service or facility. Unlike licence fee a compensatory fee must be justified on rendering of services.

76. Shri Rajeev Misra further submits that the classification of the 5th Amendment by providing transit fee on various rates on various forest produce does not serve any purpose. If the object is to regulate the movement and to ensure that the movement is not unauthorised as well as to protect the environment, the imposition of fees on different forest produce at different rates is discriminatory, and is violative of Article 14 of the Constitution of India. He submits that such a high fee amounts to restriction on trade which is neither reasonable nor in public interest and refers to Mohd. Yasin v. John Mohammad 1986 (3) SCC 20.

77. Shri Udit Chandra, appearing in Writ Petition No. 5 of 2010, 1344 of 2010, 741 of 2011, 848 of 2011, 961 of 2011, 1045 of 2011, 1047 of 2011, 1239 of 2011, 2287 of 2011, and many other writ petitions of similar nature, represents the traders and transporters of timber, marble, granite, masalas and ayurvedic products. He submits that Rule 3 of the Rules of 1978 cannot be read with Rule 5 and the same is totally independent with no co-relation with each other. He submits as stated in his submission as follows:-

"It is most respectfully submitted that Rule 3 read with Schedule "A" is totally independent that of Rule 5 and the same has no co-relation with each other. To bring out the true intention of the 1978 Rules as to when fee is to be charged, the same has to be read in the following manner that is firstly Rule 4 (1) (b) (i) & (ii) with Schedule "B", secondly Rule 6 (4) and then thirdly Rule 5. Rule 3 and Schedule 'A' nowhere contemplates or has a column prescribing charging of fee.

An application has to be moved under Rule 4 (1) (b) (i) by any person for desiring to obtain transit pass for transit of forest produce. The said application has to move in pursuant to the prescribed application form as under Schedule "B" for the removal of forest produce. Under Schedule "B" at serial No. 4 which asks the person applying under Rule 4 (1) (b) (i) for the detail of the land has to be read with Rule 1 (2), which says that the extent of the Act is for whole of State of Uttar Pradesh. Thus, the land has to be situated in the State of Uttar Pradesh only."

78. Shri Udit Chandra submits that after the application under Schedule "B" by any person to which a booklet is issued to him under Rule 6 (2), a transit pass is to be issued in duplicate and triplicate to any other person/third party who approaches him for transit of such forest produce under Rule 6 (4). When any other person/third person reaches to Depot/Chowki as established under Rule 15 he has to pay the transit fee prescribed under Rule 5 only on those transit passes which have been issued by the person under Rule 6 (4). On payment of such fee a receipt is issued as prescribed under Schedule 'C' and therefore, the transit fee which is to be paid or in other words Rule 5 will only apply in those cases in which the transit is made on the transit pass issued under Rule 6 (4) and not in any other cases. The express mention of one thing implies the exclusion of the other. Once Rule 5 contemplates the charging of transit fee only with reference to passes issued under Rule 6 (4), then the fee cannot be charged in any other case. He submits that Rule 3 under the Rules of 1978, has independent entity and is to be read with Schedule 'A'. It has no co-relation with Rule 5 which prescribes the payment of fees. Rule 3 in Schedule-A- does not contemplate charging of transit fees. Therefore, the transit pass has to be issued free of cost under Rule-3.

79. Shri Udit Chandra further submits that in Jindal Stainless (supra) the concept of regulatory fee and compensatory tax has been explained. The test of principle of equivalence shifts the burden on the authority imposing the levy not only to justify the same but also to show quid pro quo of the services rendered. He also relies upon Calcutta Municipal Corporation v. Shrey Mercantile (supra) where the registration fee imposed on advalorem rate was held by the Supreme Court as tax under the garb of fee. He refers to the transit fee prescribed at Rs. 1/- per form under the Tamil Nadu Timber Transit Rules, 1968; Rs. 5 to Rs. 25/- under the Karnataka Forest Rules, 1969; no prescription of fee on transportation of forest produce under the Kerala Forest Produce Transit Rules, 1975 except on movement of fuel, charcoal etc. at Rs. 1/-; no charge of fees under the Orissa Timber and other Forest Produce Transit Rules, 1980; Rs. 1/- per form under the Rajasthan Forest (Produce Transit) Rules, 1975; Rs. 7/- per tonne in the State of Maharashtra, and Rs. 50/- at maximum in the State of Uttrakhand. He submits that since no mining activity can be done on any forest land specially in the case of marbles and other stones and that Section 2 of the Forest Conservation Act 1980 prohibits such activity, except with the prior approval of the Central Government which has been explained in Rural Litigation and Entitlement Kendra v. State of U.P. AIR 1988 SC 2187, no transit fee of any manner can be charged from the petitioner. The Government of U.P has also issued Government Order dated 29.3.2010 where as exception has been provided under Rule 3 (c) of 1978 Rules to various miner minerals excavated from non-forest land. The subsequent amendments are in colourable exercise of powers. He submits that the amount realised so far should be refunded with interest at 18% per annum to the petitioners.

80. Shri Susheel Gupta, appearing for the petitioners in Writ Petition Nos. 1104 of 2010; 1624 of 2010; 1625 of 2010; 1626 of 2010 and 1103 of 2011, submits that during the pendency of the writ petitions by notification dated 29.3.2010 certain forest produce such as peat, surface soil, rock and minerals (including limestone, laterite, mineral oils and all products of mines or quarries) mentioned in Section 2 (4) clause-b (iv) of the Indian Forest Act, excavated from non-forest land and moved thereby, have been exempted from operation of the Rules. He submits that the word 'quarry' has not been included in the 5th Amendment, 2011, which is specifically mentioned in Section 2 (4) Clause-b (iv) of the Forest Act, 1927, as forest produce of mines or quarries. The 'mines' and 'quarry', have different meaning. In Webster's new world dictionary of American language by David B. Gural Nik (Editor-in-Chief) at page 904 and 1162, these words are defined as follows:-

"Quarry: A place where building stone, marble or slate is excavated as by cutting or blasting -Vt. - ried, ry.ing 1. to excavate from a quarry 2. to make a quarry in (land).

Mine:- 1. a) a large excavation made in the earth, from which to extract mettalic ores, coal, precious stones, salt or certain other minerals: distinguished from QUARRY.

81. Shri Susheel Gupta submits that in D.K. Trivedi & sons vs. State of Gujarat AIR 1986 SC 1323 at page 1351, the Supreme Court observed:-

"To quarry is defined as Extract Stone from quarry, quarrying mineral is, therefore, a mining operation inasmuch as it consists of an operation undertaken for the purpose of winning particular classes of minerals."

82. Shri Susheel Gupta submits that quarries are for mining operations situated in the allotted/leased area after making royalty and dead rent to the Government under MMRD Act. The transportation of the quarried minerals are not taken by the petitioners through non-forest land. The petitioners are purchasing marble from different sale depots established in the industrial area of different districts in the State of Rajasthan. Only National Highway road is used during transportation.

THE REPLY/DEFENCE BY STATE

83. In the counter affidavit of Shri Anwar Ahmad, Forest Range Officer, Renukoot Forest Division, Renukoot, District Sonebhadra, it is stated that the fee payable for different classes of transit fee clearly depicts that the rate fixed for the payment of transit fee was based on weight per tonne. The predominant category for transit fee was timber and all other forest produce were categorized in the category of 'other forest produce'. In the year 2004, the analysis of the transit fee was taken into consideration with respect to the enhancement in the price of timber and in the year 2010 due to enhancement in the prices of timber, it was decided to change the transit fee. In paragraphs 8 and 9 (a) it is stated as follows:-

"8. That in the year 2004, the analysis of the transit fee was taken into consideration with respect to the enhancement in the price of timber and other forest produce. The analysis presents a picture that the royalty rate of timber has been enhanced on an average by 5 to 10 times. So, on an average, it was decided by the Government to enhance the transit fee by 7.5 times of the prevalent transit fee. Here the consideration was again only on weight by which the timber and other forest produce were transported from one place to another. This Hon'ble Court may also take notice of high rate of inflation.

9.That in the year 2010, due to enhancement in the prices of timber and other forest produce, it was decided to change the transit fee.

(a) At the time of consideration, the following facts were brought to the notice of the Government:

a) Forest produce such as timber is being transported in stacks measured in cubic meter (cu.m). Hence, a practical approach in realizing transit fee would be cu.m instead of weight.

b) On the price of timber between 2005-06 and 2006-07, the royalty rate was increased on an average by 30% and between 2006-07 to 2007-08 it increased by about 11%.

c) Categories of forest produce: it is universally that timber of higher grade like teak fetch higher market price and profit. It is being generally used by affluent sections of the society with higher paying capacity. Hence, the agency involved in transportation should pay more as a transit fee in comparison to timber of low grade. It was, therefore, based on empirical data.

In the light of the above, categories were formed as below:

i) Valuable timber: Khair, Sal and Sagaun (Teak), Shisham, Sandal wood and Red Sanders.

ii) Less valuable timber: other than Khair, Sal and Sagaun (Teak), Shisham, Sandal wood and Red Sanders."

84. It is then stated in paragraphs 10, 11 and 12 as follows:-

"10. That the transit fee determined in different years, i.e. 1978, 2004 and 2010, it was felt that hike in prices of forest produce is reflected in the transit fee at a span of uneven intervals, reflecting that the pace of increase of price of forest produce is not corresponding with the rates of transit fee, which remains static for a longer time. There was always a gap between increase of price of the forest produce and change in transit fee. At times, the time lag was 26 years and at other times it was 6 years.

11.That in order to rationalize the fee structure with co-relation to the change in the price of timber, the only way left was resorting to adoption of advalorem process. The fluctuations in market price would be automatically absorbed in advalorem and consequently the smooth inflow of transit fee will take place to the Government without any further procedure to be followed, which takes reasonable time to process.

12.That in order to rationalize the transit fees, a committee was formed and the committee discussed different parameters for the determination of transit fee in relation to forest produce. In drew the conclusion that forest produce should be further categorized in order to differentiate the rate of advalorem rate of fee. The categories are as follows:-

a) Timber Khair, Sal and Sagaun (Teak), Shisham, Sandal wood and Red Sanders.

b) Timber other than Khair, Sal and Sagaun (Teak), Shisham, Sandal wood and Red Sanders or other forest produce except as mentioned in

c)Other forest produce coming from mines, e.g., coal, lime, stone, sand, bajri and other minerals.

85. The reason for differential advalorem rates for different kinds of forest produce are summerised in paras-13 to 16 of the counter affidavit as follows:-

"13. That the reasons for differential advalorem rates for different kinds of forest produce can be justified as below:-

(a) The evolution of transit fee presents a scenario that the transit fee determination was never considered on the valuation of forest produce. It was linked to volume/weight. An end user using high value item of forest produce, i.e., coal/marble were paying the same fee as low value items such as, Eucalyptus, Poplar, Fuel wood etc. Hence, a distinction should be made between high value and low value items of forest produce.

(b) In addition to this, the timber is a renewable resource that can be grown also but high value forest produce such as coal, marble etc. are non-renewable resources which are to be used very cautiously and conservatively so that they remain available for posterity. The coal also generates pollution and release carbon dioxide (a global warming gas) wherever used. Hence, the forest produce which are precious and essential for survival for mankind, should be charged at higher rates to discourage the wanton and indiscriminate use of precious resources. It is a well settled principle that natural resources which are non-renewable and which cause pollution should be sparingly used and discouraged by imposition of higher transit fees.

One of the most significant challenges in addressing climate change and global warming is reducing greenhouse gas emissions resulting from the use of coal. Coal is inherently higher polluting and more carbon intensive than other energy alternatives. Climate change and global warming if it is permitted to happen by carbon dioxide emissions will impose a heavy burden on future generations in all states, and in all countries.

The Kyoto Protocol is an amendment to the United Nations Framework Convention on Climate Change (UNFCCC), an international treaty intended to bring countries together to reduce global warming and to cope with the effects of temperature increases that are unavoidable after 150 years of industrialization. The provisions of the Kyoto Protocol are legally binding on the ratifying nations. India is also a signatory to the Kyoto Protocol that went into effect on February 16, 2005. The three major impacts are those on increase in frequency of extreme events (drought/rainfall), rising sea level and effects on agriculture (which is even more important for an agricultural state like Uttar Pradesh). With learning threat of global warming, the immediate concern should be its energy strategy based on coal and how to reduce carbon dioxide emissions generated by burning coal. Directly and indirectly, the Government is trying to pursue green house gas friendly policies by promoting aforestation, promoting renewable energy, energy conservation, policies on abatement of air pollution. This advalorem fee is also a step in this direction. Murthy, Panda and Parikh (2000) examined the impact of carbon dioxide on agriculture and concluded that impact on agriculture will be significant - with a +2degree temperature change and a +7 degree precipitation will lead to fall in net earning from agricultural land by 9%. For an agricultural state like UP, these global warming changes will spell much greater disaster.

14.It is to mention here that under the Court Fees Act, 1870 (Schedule) advalorem fees are leviable on different types of suits. Also, a registration fee under Stamp & Registration Act is an advalorem fees.

15.That the above fee is a regulatory fee. Hence strict enforcement machinery is required. In the Forest Department, field officers have been posted along with flying squads who are engaged in checking illegal transit of forest produce. The cost of establishment, recurring costs of fuel on vehicles plying for this purpose and other miscellaneous expenditure are also increasing every year by 10-20%. These incurring expenditures have to be realized through the transit fee.

16.That the answering respondents received amount of transit fee and the expenditure which has been spent for the enforcement is as follows:-

वन उपज अभिवहन से प्राप्त राजस्व तथा इससे प्राप्त करने हेतु प्रवर्तन पर किया गया व्यय

वर्ष

वन उपज के अभिवहन से प्राप्त राजस्व (रू. लाख में)

वन विभाग में प्रवर्तन पर व्यय (रू. लाख में)

अधिष्ठान

अन्य

अनुसांगिक व्यय

योग

2004.05

3867.00

10997.33

15.37

201.23

11213.93

2009.10

9086.17

27684.38

15.61

238.73

27938.72

2010.11

11288.2

31786.85

31.09

387.22

32205.16

2011.12

;Upto July 2011)

3848.33

11338.75

2.94

41.89

11383.58

86. In reply to the challenge to legislative competence of the State to levy transit fees, it is stated in the counter affidavit that Forest Act, 1972, is now referable to Entry 17A and 47 of List-III of Seventh Schedule of the Constitution. The U.P. Minor Mineral (Concessions) Rules, 1963 provide that any mineral can be transported in U.P on form MM-11 as provides that if the mineral is forest produce as defined under Section 2 (4) (b) of the Indian Forest Act, 1927, the transit fee is leviable irrespective of the fact, whether the same is being transported on Form MM-11. The minor mineral/major mineral (product of mines or quarries) is a forest produce. The words 'brought from' used in definition under Section 2 (4) (b) also connotes the meaning if transported through forest would amount to a forest produce as held in Kumar Stone's case. The word 'forest' has not been defined in Forest Act. The Supreme Court, in T.N. Godavarman Thirumulpad's case, has given an expansive meaning to the word 'forest'.

87. It is further stated in the counter affidavit, that scope and jurisdiction of MMRD Act 1957, and Indian Forest Act, 1927 is entirely different. Both the Acts have no relation with each other nor their provisions overlap in any way upon the other. The MMRD Act provides for regulation of mines and minerals, grant of mining lease, fixation of royalty etc. whereas the Forest Act deals with preservation, development and conservation of forest. It is stated in paragraph-22 of the counter affidavit, that any minor mineral, which is transported from outside the State of UP, as soon as it comes in the territory of State of UP, the Rules of 1978 will apply and the transporters have to obtain transit passes. So far as payment of royalty and other dues to the concerned State is concerned, the petitioners are not the lease holders. Where a person transports minor minerals in the territory of Uttar Pradesh, the transit fee will have to be paid by him under the Rules of 1978. The transit fee is transitory fees and is regulatory in nature. The question of quid pro quo is necessary only if the fee is compensatory in nature. It is thus not necessary to establish the factum of rendering of service.

THE NOTIFICATIONS

88. The notification dated 10th February, 1969 published in the U.P. Gazette, issued under Section 39 (3) read with Section 80A of the India Forest Act, 1927 declares both the sides of the 20 roads in Distt Meerut; 8 in Muzaffar Nagar; 18 in Saharanpur; 7 in Dehradun; 16 in Gorakhpur; 7 in Etah; 16 in Aligarh; 6 in Buland Shahar; 16 in Varanasi and Lalitpur Section; 7 in Jalaun; 12 in Hamirpur Mahoba section; 25 in Mathura; 19 in Agra; 8 in Farrukhabad; 11 in Etawah; 12 in Mainpuri; 16 in Moradabad; 5 in Bareilly; 6 in Pilibhit; 7 in Badaun; 22 in Bijnor; 25 in Rampur on both metallic and unmetallic roads; 2 in Unnao; 5 in Lucknow; 6 in Banda; 10 in Fatehpur; 14 in Kanpur; 5 in Faizabad; 2 in Sultanpur; 3 in Barabanki; 5 in Pratapgarh; 11 in Allahabad; 18 in Jaunpur; 1 in Banaras; 9 in Ghazipur; also including Mirzapur-Robertsganj road, Mirzapur-Ahrora Road; SGGT Road Mirzapur; Rewa Road, Mirzapur, Chopan Road in Distt. Mirzapur; 14 in Distt. Bahraich; 9 in Hardoi and 10 in Kheri, also declaring 55 classes of trees standing in protected forest by the notification to be reserved, covers the entire sides of the roads upto the year 1969. All these sides of the roads are thus notified reserved forest vis-a-vis 55 classes of trees. The notification followed the proposals dated 28th March, 1966 notifying the area. In respect of Distt. Mirzapur alone the notified area measured 9938.85 hects. under Section 20 of the Indian Forest Act, 1927, in various blocks in Pargana Duddhi Tehsil Duddhi. The State of U.P. has also filed index of documents annexing therewith the notifications declaring establishment of Kaimur Wild Life Santuary dated 10.8.1982, in Forest Range Halia (15992.8 hects.); Forest Range Ghorawal (area 19375.2 hects.); Gurma (14705 hects.) total area 5 sq. kms. bounded by the rivers and hills, given in the notification under Section 18 of the Wild Life (Protection) Act, 1972; a coloured map of Wild Life Sanctuary and map of the Kaimur Black Buck Sanctuary as document Nos.2 and 3. The Divisional Forest Officer, Kaimur Wild Life Division, Mirzapur has submitted a report that Kaimur Wild Life Sanctuary was declared vide notification dated 10th August, 1982 including Varanasi-Shakti Nagar; the Obra Forest Range and Markundi Forest Range included in Kaimur Wild Life Sanctuary. The current Obra Forest Range including Markundi Forest Division was notified in 1970. The working scheme of Obra Forest Division of the year 1980-81 to 1989-90 (Survey of India) indicate Markundi Forest Division; the Kaimur Wild Life Sanctuary includes Varanasi Shakti Nagar Road Km.73 to 76.2 (3.2 kms.) through the Markundi Forest Division of the Kaimur Wild Life Sanctuary. Since the Wild Life Sanctuary is spread out in the entire length on the sides of the road, the road passes through the sanctuary from north to south.

89. Paper Nos.5 and 6 are the notifications under Section 4 of the Indian Forest Act, 1927 and the regarding Markundi Forest Block dated 1.5.1970; notification under Section 20 of the Indian Forest Act dated 17.9.1969; paper no.7 and 9 are the transfers of land for coal excavation of the Forest Department to NCL on 30.7.1990 and 4.1.1991 and letter dated 18.10.2010 by Van Mandal Adhikari, Van Mandal Singrauli, M.P. Shows the use of the transferred land for coal excavation. Paper no.12 is a Government Order dated 20.12.2007 in reference to DO letter dated 19.12.2007 of the Government of U.P. regarding identification of forest like areas in all the districts of the state in reference to I.A. no.-979 filed in Hon'ble Supreme Court. The letter reads as follows:-

"To

Principal Secretary,

Government of U.P.,

Forest Section-2

Lucknow

Sub.: Identification of forest like areas in all the districts of the state in reference to I.A. no.-979 filed in Hon'ble Supreme Court.

Ref.: D.O. letter no.3697/14-2-2007 dated 19.12.2007 of the Government of U.P.

Sir,

In compliance of the above message the meeting of state level expert committee was held on 19.12.2007. The committee has recommended to fix the following parameters for the "identification of forest like areas"-

Minimum number of trees per hectare will be as follows:-

Geographical region

Minimum area (Ha)

Minimum number of trees (per Ha)

Vindhya & Bundelkhand region

100

Terai and Plain region

Trees mean naturally grown perennial trees.

Shrubs and root stock will not be included in the counting of trees.

The minimum area of land will be based on plot number wise. But in the case of private land, where several owners' names are recorded as on any plot as sub-plot (minjumla) numbers, then the area of each such sub-plot (minjumla) number will be considered as the basis for the criteria.

The plantations done on private land or public land will not be identified as forest like areas.

Minutes of meeting of the committee's recommendations is enclosed.

Kindly see the recommendations of state level expert committee and do the needful action for the identification of forest like areas in reference to the orders passed by Hon'ble Supreme Court on 07.12.2007.

Enclosure-As above.

Sincerely yours

-sd/-

(B.K. Patnaik)

Principal Chief Conservator of

Forests,

Uttar Pradesh,

Lucknow"

The First Supplementary Counter Affidavit and the Documents filed by the State of U.P.:

90. In the first supplementary counter affidavit of Shri Anwar Ahmad, Forest Range Officer, Renukoot, Forest Division, Renukoot, Distt. Sonbhadra in Writ Petition No.963 of 2011 (M/s Ajay Trading (Coal) Col. & Ors. Vs. State of U.P. & Ors.), it is stated that the Rules of 1978 have been framed under Sections 41, 42, 51 and 76 of the Indian Forest Act and in supersession of Government Notification dated September 30th, 1915, and all other orders and notifications on the subject to regulate the transit of timber and other forest produce. The prefatory note to the Rules of 1978 reads as follows:-

"In exercise of the power under Section 41, 42, 51 and 76 of the Indian Forest Act (Act No.16 of 1927), and in suppression of Government Notification No.672/XIV-42, dated September 30, 1915, and all other orders and notification on the subject, the Governor is pleased to make the following rules to regulate the transit of timber and other forest produce."

91. According to sub-section 41 (1) of the Indian Forest Act, 1927 the State Government may make rules to regulate the transit of timber and other forest produce. Section 76 (d) empowers the State Government to make rules to carry out the purposes of the Act. It is stated that the coal mines of National Coalfields Ltd. (NCL) are situate both in the States of U.P. and M.P. The NCL has been given these lands by the State Government on lease. One of such order dated 4th January, 1991 issued by the Government of U.P. granting lease of 1305 hects. of forest land to NCL Ltd. in Duddhi Chuna and Kharia Coal Project in Distt. Mirzapur (Sonbhadra) for 40 years is annexed as Annexure No.SCA-1. Para 6 of the Government Order provides that said land, even after the construction will continue to be the protected/ reserved forest and the lease will not change its current legal character. In para 5 it is stated that the NCL will make compensatory plantation of trees in Distt. Kanpur, Pratapgarh and Sultanpur on 1565.59 hects. of non-forest land under the Social Forestry Programme. The land was transferred after seeking approval of the Government of India vide letter dated 30.7.1990 by the Advisory Committee constituted by the Central Government under Section 3 of the Forest Conservation Act, 1980 with the conditions that legal status of the land will remain unchanged, with conditions of compensatory afforestation over non-forest land; rehabilitation of oustees families; assurance that no destruction of the forest area shall be made by the labour and staff; no explosives will be allowed to be used in the forest areas.

92. It is submitted in the supplementary counter affidavit filed by the State that even the mines of NCL situated in the State of U.P. are on the leased land of Government of U.P. vide letter dated 18.10.2010 issued by the Divisional Forest Officer, Renukoot Forest, in respect of 2095.91 acres of land in Jhigur-Dih; 447 hects. in Gorvi 'V' and 73.127 hects. in Gorvi Extension for lease to NCL. In para 11 of the affidavit it is stated that road from Varanasi to Shakti Nagar passes through a wild life sanctuary, which is a reserved forest and thus coal in question is forest produce and the petitioner is bound to pay transit fee in accordance with law.

93. The State Government has also filed a short counter affidavit of Shri S.P. Singh, Forest Range Officer, Anpara, Renukoot Forest Division, Sonebhadra in NTPC Limited and others (Writ Petition No. 327 (Tax) of 2008) and a counter affidavit of Shri Anwar Ahmad, Forest Range Officer, Renukoot Forest Division, Renukoot, District Sonebhadra in M/s Ajay Trading (Coal) Co. and others vs. State of UP and others (Writ Petition No. 963 (Tax) of 2011).

94. In the short counter affidavit, it is stated by the State Government that plot nos. 71, 72, 73, 74, 75, 262/1 and 262/2 measuring area 6 acres in village Kohraul, Duddhi, Sonebhadra on which mining permit has been granted by the District Magistrate, Sonebhadra on 01.2.2008 for a period of three months, is not a forest land, but the road, from which the petitioner is transporting the ordinary earth to his dykes lagoon, is a National Highway No. 76-E, Varanasi-Shaktinagar marg, which falls on forest land. The Ministry of Environment and Forest, Government of India issued a letter on 28.6.1990 for transfer of the forest land on which the National Highway was constructed by PWD on certain terms and conditions. The first condition of this letter is that the legal status of the forest land will remain unchanged. The other conditions include plantation of trees to be undertaken on both sides of road; and compensatory afforestation to be raised on 47.28 hec. of non-forest land identified by the State Government. The State of UP has, in compliance with Government of India's order dated 28.6.1990, directed the PWD for widening of the National Highway No. 76-E and for this purpose an area measuring 42.587 hectares of non-forest land was transferred on the same condition.

95. Shri Ravi Kant, Sr. Advocate appearing for the State of U.P. along with Shri Alok Kumar Singh, Standing Counsel submits that wide and sweeping arguments have been advanced by learned counsels appearing for the parties, unnecessarily expanding the scope of challenge to the Rules of 1998 as amended by the 5th Amendment by Notification dated 4.6.2011. The constitutional validity of the Rules have been upheld by the Supreme Court in Sitapur Packing Wood Suppliers (supra) in the year 2002 wherein it was held that powers of the State Government under Entry 17A of List III of the Seventh Schedule of the Constitution of India would include the power to regulate transit of forest produce and to levy transit fees. The Rules are not confined only to the transit of timber. They also extend to those traders, who arranged to transport it for any reason and will be included within the general power of control over transit under Section 41 (2) of the Forest Act, 1927. The Supreme Court followed State of Tripura vs. Sudhir Ranjan Nath (Supra); Corporation of Calcutta vs. Liberty Cinema (Supra); Sicunderabad Hyderabad Hotel Owners' Association vs. Hyderabad Municipal Corporation (Supra) and P. Kannadasan vs. State of T.N. (Supra) and held that the transit fee under Rule 5 is clearly regulatory and thus it was not necessary for the State to establish quid pro quo.

96. Shri Ravi Kant submits that the Forest Act was enacted prior to the enforcement of the Government of India Act, 1935. Keeping in view the environmental concerns, the entry 'Forests' was omitted from Entry 19 List-II, and inserted as Entry 17A in List-III of the Seventh Schedule. The Forest Conservation Act, 1980 was enacted to provide for conservation of forests and for matters connected therewith or ancillary or incidental thereto. In order to check deforestation, which causes ecological imbalance and leads to environmental deterioration taking place on a large scale in the country raising widespread concerns, the Forest Conservation Act, 1980 restricted de-reservation of forest or use of forest land for non-forest purpose by any State Government or other authority except with the prior approval of the Central Government.

97. Shri Ravi Kant submits that in Ambica Quarry Works Vs. State of Gujarat, (1987) 1 SCC 213 it was observed that deforestation causes ecological imbalances as a result thereof have become social menace and thus the Forest Conservation Act, 1980 was brought into force as supplement to the Forest Act, 1927. In T.N. Godavarman Thirumal Pad Vs. Union of India, (1997) 2 SCC 267, the Supreme Court held that the word 'forest' must be understood according to its dictionary meaning. The description covers all statutorily recognised forests whether designated as reserved, protected or otherwise for the purposes of Section 2 (1) of the Forest Conservation Act, 1980. The Rules of 1978 were made in exercise of powers under Section 41, 42, 51 and 76 of the Indian Forest Act to regulate the transit of timber and other forest produce. The object of the Rules of 1978 for taking out transit pass and payment of transit fees as regulatory fees to cover the expenses of the regulation, is to check the illicit movement of forest produce. The transit fee is a regulatory fees. India is also signatory to Kyoto Protocol and is committed to reduce emission of greenhouse gases by providing for measures including the check on deforestation.

98. Shri Ravi Kant submits that in case illegal movement of forest produce and poaching continues, the resultant degradation of the environment will harm everyone.

99. Shri Ravi Kant submits that charging of fees on transit of forest produce is not to regulate the forest produce but to regulate its movement. It is not a regulation on excavation and manufacture of forest produce. He submits that in pith and substance the regulation of movement of forest produce by the Rules of 1978 made by the State Government in exercise of the delegated power of the Central Government would clearly fall within Entry 17A; Forests in List-III of the Seventh Schedule. The various entries in the three schedules are by way of fields of legislation. The Rules of 1998, do not seek to regulate mines and minerals; if there is any entrenchment, it is only incidental or ancillary and that Court should try to reconcile such entrenchment.

100. Shri Ravi Kant submits that fees by way of regulation of transit does not violate the freedom of trade, commerce and intercourse under Art.301 of the Constitution of India and thus there is no question of treating it as restriction under Art.304 (b). Tracing the history of the cases decided by the Supreme Court in the context of Art.301, beginning from Atiabari (Supra) and Khaiberbari T. Company, he submits that the regulatory fees is not by way of restriction. The petitioners have not placed any such quantifiable data to show that trade will be affected. They have not discharged initial burden to shift the onus of proof of restriction of trade on the State Government. A fee by its nature is not voluntary; it is fiscal in nature, compulsory and like a tax. It is almost on the pedestal of tax. The expenses to be born out of such fees must bear nexus to the proportion on which it is charged. Shri Ravi Kant submits that in order to protect the environment, the principles of sustainable development and inter-generality equality must be kept in mind. Art.48A under directive principles of State policy mandates the States to protect and improve the environment and to safeguard the forest and wild life of the country. Art.51 (g) impose fundamental duties on every citizen of India to protect and improve the natural environment including forests, lakes, rivers and wild life and to save living creatures. The needs of time require a holistic view to be taken. The Court must take into account the definition of forest provided by the Supreme Court in T.N. Godaverman's case. The definition is not restricted to the kinds of forest such as reserve forest, village forest, protected forest etc. In any case he submits that both sides of railway tracks and roads in the State of U.P. have been included as protected forests by notifications issued under Section 80A of the Act.

101. Shri Ravi Kant submits that the Court has to give a very expansive meaning to the forest produce. The intention of the law maker has to be found by giving the purposive meaning to the words 'forest produce'. The legal process theory invites a dynamic statutory interpretation to the laws enacted in public welfare. The meaning of the words keep changing from time to time. The environmental concerns shown by the statutes and the treaties signed by the Central Government require the Court to give wider meaning to the words 'forest' and 'forest produce'. He relies upon MCD Vs. Mohd. Yaseen, (1983) 3 SCC 229; the meaning of the words 'that is to say' in Royal Hatcheries Pvt. Ltd. Vs. State of A.P., (1994) 1 SCC 429; State of Karnataka & others vs. Balaji Computers & others, (2007) 2 SCC 743; and in State of A.P. vs. A.B. Malhotra, (1976) 1 SCC 834. He submits that even manufactured form and processed form of forest produce is included within the definition of the words 'forest produce. For 'kathha' and 'catechu', he relied upon the Supreme Court judgment in State of M.P. Vs. S.P. Sales Agencies & Ors., (2004) 4 SCC 448 in which the Supreme Court after considering the process of manufacture of 'kattha' and 'catcheu' held in para 80 as follows:-

"8. In view of the foregoing discussion and definitions extracted above from various dictionaries, catechu means any of the various dry, earthy, or resinous astringent substances extracted from wood, leaves or fruits of various tropical Asiatic plants, viz., acacia and other trees and shrubs. Khair tree is one of the types of acacia tree and log of wood of the said tree is basic raw material for the manufacture of kattha and cutch. After employing series of activities to the log of khairwood, various substances, namely, cutch and kattha etc., are extracted which are known as one of the types of catechu. This being the position, we hold that cutch and kattha come within the sweep of expression 'catechu' which has been enumerated in the definition of forest produce, as such kattha and cutch are forest produce within the meaning of Section 2(4) of the Act and the High Court was not justified in holding otherwise."

102. Shri Ravi Kant submits that in Belsund Sugar Co. Ltd. vs. State of Bihar and others, (1999) 9 SCC 620, even the plucked leaves, processed by roasting and blending, outside Bihar were held to be 'Agricultural Produce', for the purposes of levy of market fee as defined in Section 2 (1) (a) of Bihar Agricultural Produce Markets Act. He also relies upon State of U.P. Vs. Ram Chandra Kailash Kumar, (1980) SCC Supp. 29 in support of his submissions. So far extra territorial jurisdiction of laws is concerned, Shri Ravi Kant submits that Article 245 (2) provides that no law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial operation. He relies upon TISCO Vs. State of Bihar, AIR 1958 SC 452 and submits that where there is some nexus, the law would be valid. The transit fee is being charged on the cases, which are in the State of U.P. The physical presence of the goods in the State of U.P. on their movement, would not invalidate the law on the ground that the journey of the goods starts from outside the country or from any other State. All these goods are destined to be brought into and used in the State of U.P.

103. Replying to the arguments that the increase of regulatory fees on advalorem basis, has virtually become a compensatory tax, in as much as the quid pro quo is lacking, Shri Ravi Kant submits that the difference between tax and fee is waning. It is not necessary to render service to specify individual group or association. The services rendered to the society is sufficient. The co-relation between fee and service has to be broad and not exact. It is not necessary that the amount collected may be deposited in a separate account. It could like tax be brought into consolidated fund of the State. The expenditure incurred has also to be seen. The court will not minutely examine the details. He relies upon the judgments in the matters of court fees and submits that even ad valorem court fees can be charges. In State of Himachal Pradesh Vs. Shivalik Agro Poly Products & Ors., (2004) 8 SCC 556 the fee charged on graduated scale was upheld. He submits that existence of the liability is no ground for challenge. In Secundrabad Hyderabad Hotel Owners' Association & others vs. Hyderabad Municipal Corporation Hyderabad and another (1999) 2 SCC 274 the hike of fees by 30 times was also upheld.

104. So far as argument that Clinker, Fly-ash, Calcium Hydroxide, Calcium Oxide, Quick Lime, Hydraded Lime, Hard Coke, Gypsum, Rejected Coke, Ash-burn, and Sponge Iron are not forest produce, Shri Ravi Kant submits that no data or literature has been furnished. The contention is rather cavalier. He submits that the argument that the fee is arbitrary and violative of Art.14 has no legs to stand as fee has not been challenged on the ground of breach of Art.14, Art.301 and Art.19 (1) (g). While considering the challenge to Art.14 the Court has to proceed under a presumption that the Act is constitutional. The burden is clearly on the petitioner to establish it.

THE FOREST

105. The preamble of the Indian Forest Act, 1927 declares that the Act seeks to consolidate the law relating to forests, the transit of forest produce, and the duty leviable on timber and other forest produce. The Act consolidated the then prevailing laws on forest. It essentially provides for establishing three classes of forests namely Reserved Forest (Chapter II), Village Forest (Chapter III) and Protected Forest(Chapter-IV) and provides for procedure for constituting these categories with a detailed process of settlement of rights; the control over forests and lands not being the property of Government (Chapter-V); the duty on timber and other forest produce (Chapter VI); the timber and other forest produce in transit (Chapter VII); the regulation of the rights of owners in drift and stranded timber (Chapter VIII) and the power to reserve specific trees pieces in protected forest are some of the essential provisions of the Act. The Rule making powers are provided in Rule 38M for control over forests of claimants; in Rule 41 and 41A, for control of timber, and other forest produce in transit conferred on State and Central Governments and in Rules 51, 76, 77, and 78.

106. The Indian Forest Act, 1927 does not define 'forest' or 'forest land'. The lack of definition has wide implications. In T.N. Godavarman Thirumulpad vs. Union of India and others (1997) 11 SCC 605 the Supreme Court in its order dated 12.12.1996 stated:

"The word 'forest' must be understood according to its dictionary meaning. This description covers all statutory recognized forest, whether designated as reserve, protected or otherwise for the purpose of Section 2 (1) of the Forest Conservation Act. The term 'forest land' occurring in Section 2 will not include forest as understood in the dictionary sense but also any area recorded as forest in the Government records irrespective of its ownership."

107. The dictionary meaning of forest suggests that forest is a large tract covered with trees and undergrowth, sometimes mixed with pasture (Oxford Dictionary, 7th Edition). The forest is also defined as 'a tract of land covered with trees and one usually of considerable extent' (Black's Law Dictionary). With these definitions it can be clearly said that the forests as defined by the Supreme Court are those which include all statutorily recognised forests, and forests as understood commonly in the dictionary sense, whereas forest land includes not only forest as understood commonly in the dictionary sense, but also any area recorded as forest irrespective of ownership. Even in the absence of any precise definition of forest under the Indian Forest Act, 1927, the principles or criteria of defining forest are to be based on sound ecological and scientific bases. The term 'forest' also needs to be clearly distinguished from the 'forest land'. In order to understand forest, the criteria or principles to designate forest lands needs to be developed not only on scientific basis, but should also necessarily reflect sociological concerns. Under the directions of the Supreme Court to identify the forest like areas, many State Governments including the State of Uttar Pradesh have held State level expert committee meetings. In the Government Order dated 20.12.2007 issued by Government of Uttar Pradesh the expert committee has fixed parameters for identification of forest like areas to include a minimum number of 50 trees per hectare in a minimum area of 2 hectares in Terai and Plain region and a minimum number of 100 trees per hectare in minimum area of 30 hectare in Vindhya and Bundelkhand region. The expert committee recommended that the trees mean naturally grown perennial trees; (shrubs and roots stock will not be included in the counting of trees); and that the minimum area of land will be based on plot number-wise. In case of private land, the subject plot number will be included in the plots and that plantations done on private land or public land will not be identified as forest like area.

108. The forest in the aforesaid context has to be understood as the large tract covered with trees and undergrowth usually of considerable extent, on the principles of sound ecological and scientific basis reflecting sociological concerns. The Forest Conservation Act, 1980 has changed the concept of the forest previously understood in a sense of naturally grown and plantation of trees, to a comprehensive definition which not only include trees and undergrowth, pasture or any green area called as forest like area keeping in view the object of preservation and conservation, notwithstanding the ownership of the land of the area covered by forest.

109. The old concept of understanding of forest before the enforcement of the Forest Conservation Act, 1980 namely that the forest includes only reserved forest, protected forest and village forest, is no longer valid. The forest within the meaning of the Indian Forest Act, 1927, and Forest Conservation Act, 1980 is not limited to these categories. In order to conserve forest, keeping in view the ecological and sociological concerns, even those eco-system, which do not have growth of trees can be treated as forests. The forest like areas have been included within the concept of forest, to include eco-systems including wet lands, marshes, rocky lands, crop lands, grazing lands, or even deserts for maintaining ecological balance. In Ambica Quarries Works (supra) the Supreme Court held that the Forest Conservation Act, 1980 was in recognition of the awareness that the ecological imbalances as a result of deforestation have become social menaces and that further deforestation and ecological imbalance should be prevented.

THE 'FOREST PRODUCE'

110. The 'Forest produce', is defined under Section 2 (4) of the Indian Forest Act, 1927. It is an inclusive definition and is thus not confined only to the forest produce, which is to be read and found in the definition. In the definition, the 'forest produce' is divided into broad categories, namely (a) the following, whether found in, or brought from, a forest or not, that is to say:- timber, charcoal, caoutchouc, catechu, wood-oil, resin, natural varnish, bark lac, mahua flowers, mahua seeds, (kuth) and myrabolams; and (b) the following, when found in, or brought from a forest, that is to say:- (i) trees and leaves, flowers and fruits, and all other parts or produce not hereinbefore mentioned, of trees; (ii) plants not being trees (including grass, creepers, reeds and moss), and all parts or produce of such plants, (iii) wild animals and skins, tusks, horns, bones, silk, cocoons, honey and wax, and all other parts or produce of animals, and (iv) peat, surface soil, rock, and minerals (including lime-stone, laterite, mineral oils, and all products of mines or quarries).

111. The ambit of the definition of forest produce and regulation of its transit has raised several issues before the Court. In order to understand the scope of the definition, we must appreciate that the definition is not exhaustive, but inclusive. The test appears to be that any article or thing, which is ordinarily found in or brought from a forest, shall be treated as forest produce. Besides the produce of forests, which have the natural growth, the legislature has also included products out of a forest produce, whether organic or inorganic, live or dead, in case of plants and animals, and also which come into existence with the aid of human skill. The definition also includes minerals, and all products of mines or quarries, when found in or brought from forest. The words 'whether' in part (a) and 'when' in part (b) of the definition are significant, category (a) may be brought from a forest, but in category (b), the articles must be brought from a forest.

112. In Fatehsang Gimba Vasava v. State of Gujarat AIR 1987 Guj. 9 the aboriginal hill tribe of Kotwalais and Vansfodias filed a writ petition alleging that they were being harassed by the officers of the Forest Department depriving their privileges to collect forest produce including bamboo with which they make toplas, supdas, palas, for their hutment and livelihood. The Gujarat High Court keeping in view the sociological concerns and the protections of the rights of the hilly people observed:-

"A careful look at the various clauses of the definition of forest-produce makes it clear that it takes within its fold all that is produced by nature but does not include man-made products such as toplas, palas, supdas, etc., made from bamboo chips. True it is that if bamboo as a whole is forest-produce, every part thereof including chips would fall within that definition but once the chips cease to be a 'produce' of nature and get merged into a 'product' brought about by human labour and if the product so made is commercially new and distinct, known to the business community as a totally different commodity having a distinct character, such an article or product ceases to be a forest-produce, i.e., furniture made from timber or paper produced from bamboo-pulp. Therefore, bamboo being a tree would certainly fall within Clause (b) of the definition of 'forest-produce', but toplas, supdas and palas made out of bamboo chips would not fall within the definition of forest-produce."

113. In Suresh Lohiya v. State of Maharashtra (1996) 10 SCC 397 the Supreme Court relied upon the test that where an article or thing which is totally different from forest produce having a distinct character, known to the business community as totally different is brought into existence by human labour, such an article and product would cease to be a forest produce. The Supreme Court held that bamboo mat is a new and distinct product and though made from bamboo it will not be treated as forest produce within the meaning of Forest Act for confiscation in violation of the forest laws.

114. In State of M.P. vs. S.P. Sales Agencies and others (2004) 4 SCC 448 the Supreme Court held, following the H.P. Marketing Board v. Shankar Trading Co. (P) Ltd. (1997) 2 SCC 496 where the question had arisen as to whether kattha is a forest produce within the meaning of the Himachal Pradesh Agricultural Produce Markets Act, 1969, that catechu means any of the various dry, earthy, or resinous astringent substances extracted from wood, leaves or fruits of various tropical Asiatic plants viz. Acacia and other trees and shrubs. Khair tree is one of the types of acacia tree and log of wood of the said tree is basic raw material for the manufacture of kattha and cutch. After employing a series of activities to the log of khair wood, various substances, namely, cutch and kattha etc. are extracted which are known as one of the types of catechu. Both cutch and kattha come within the sweep of the expression "catechu" which has been enumerated in the definition of forest produce and as such kattha and cutch are forest produce within the meaning of Section 2 (4) of the Act. The Supreme Court consequently set aside the judgment of the Madhya Pradesh High Court. This decision impliedly overrules judgment of this Court in M/s Indian Wood Product Company Ltd. vs. State of UP 1999 AIHC 3860 and the judgment in Rathi Khandsari Udayog vs. State of UP (1985) 2 SCC 485.

115. Some of the articles, which have been held by the High Courts as forest produce, are as follows:-

(1) 'Sawed timber' is a forest produce (AIR 2002 AP 58);

(2) The 'fire wood' is forest produce (1992 Orissa LR (440) 403 (DB));

(3) 'Wood oil', though produced by a manufacturing process, is a forest produce (1993 CRLJ 1100 (DB) (Kerela));

(4) 'Fish' found in a pond or water tunnel situated in the area of forest is a forest produce (AIR 1981 All. 205);

(5) 'Rubber sheets' are forest produce (AIR 1994 SC 2218);

The High Courts, however, have held that the processed cashew which is fit for human consumption is not a forest produce (1986 (1) Cal. H.L. 133); Rosa oil is not a forest produce (1991 (1) ALT 383); and the dung droppings from cattle grazing area is not a forest produce (AIR 1987 MP 163(DB))'

116. Since the definition of forest produce is inclusive and not an exhaustive. Only those articles, which are defined in category (a), whether found in, or brought from a forest or not, and in category (b) when found in or brought from a forest, are included within the definition of the words 'forest produce'. Where a forest produce defined in section 2 (4) (a) and (b), is changed into commercially new article, which is totally different from forest produce having a distinct character, known to the business community, with the aid of human skill, it ceases to be forest produce. The interpretation clause under Section 2 of the Indian Forest Act, 1927 also defines 'timber' and 'tree' in sub-section (6) and (7). The timber includes in sub-section (6) trees when they have fallen or have been felled, and all wood whether cut up or fashioned or hollowed out for any purpose or not; and the word 'tree' under sub-section (7) includes palms, bamboos, skumps, brush-wood and canes. The timber is included under sub-section (4) (a) whereas tree is included in sub-section (4) (b). This means the timber whether found in, or brought from, a forest or not, is a forest produce, whereas a tree only when found in, or brought from a forest, only be included in the definition of forest produce. To put it more precisely the forest produce being an inclusive definition and sub-categorised in sub-section (4) (a) and sub-section (4) (b), in its natural form and also in the processed form until it is changed into commercially new and distinct article has to be treated as forest produce for the purpose of the Indian Forest Act, 1927, read with Forest Conservation Act, 1980.

117. We respectfully agree with the interpretation given to the words 'brought from' in Kumar Stone's case and hold that when the items included in sub-section (4) (b), are found in, or brought from a forest, they will be treated as forest produce for the purposes of charging transit fee. The question as to what is the meaning of words 'brought from' and would cover such items mentioned in sub-section (4) (b) though they do not have their origin in forest but they are transported through a forest and whether the interpretation of the words 'brought from' in Kumar Stone's case is correct, has been referred to a larger bench in M/s Nagarjuna Construction Limited.

THE 'CLIMATE CHANGE'

118. Mr. Shimon Shetreet, Greenblatt Professor of Public and International Law, Hebrew University of Jerusalem in his article 'Access and Benefit Sharing of Natural Resources: Adopting a Kyoto Protocol Model on Air Quality for Global and Regional Water Management' published in the Seminar Volume of International Seminar on Global Environment & Disaster Management: Law & Society held at New Delhi on 22-24, July 2011, has described the Kyoto Protocol:-

"V. The Kyoto Protocol

The Kyoto Protocol to the United Nations Framework Convention on Climate Change (the "Kyoto Protocol") is the international protocol aimed at reducing greenhouse gas emissions through a series of credits and sanctions. The object of the Kyoto Protocol is to delay global warming and to clean the environment through domestic policies and measures. It is a legally binding amendment to the United Nations' (the "UN") international treaty on global warming, the UN Framework Convention on Climate Change (the "UNFCCC"), and covers emissions of the six main greenhouse gases, namely carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6). Pursuant to the protocol, signatories to Annex I (industrialized countries) commit to either reducing greenhouse gas emissions, or else to participate in emissions credits trading if they maintain or increase emissions. The UNFCCC was reconfirmed as the "appropriate forum for negotiating future action on climate change" in the Gleneagles Plan of Action, which followed the July 2005 G8 conference.

Industrialized countries as a whole are required to reduce certain types of greenhouse emissions by 5.2 percent for the 2008 to 2012 commitment period whereas non-industrialized countries are not legally bound to any reductions. This division between industrialized and non-industrialized countries was made as it was felt that as non-industrialized countries generally produce lower levels of emissions than industrialized countries they should not be bound to the same reductions.

Pursuant to the Kyoto Protocol each country has its own target levels, based on a percentage of base year emissions, resulting in some countries not having to reduce levels at all, while others have to reduce emissions by a tremendous amount. Generally the base year is 1990. Countries must show "demonstrable progress" prior to the 2012 deadline.

Parties may offset their emissions by increasing the amount of greenhouse gases removed from the atmosphere by so-called carbon "sinks" in the land use, land-use change and forestry sector. However, only certain activities in this sector are eligible. These are afforestation, reforestation and deforestation (defined as eligible by the Kyoto Protocol) and forest management, cropland management, grazing land management and revegetation (added to the list of eligible activities by the Marrakesh Accords). Greenhouse gases removed from the atmosphere through eligible sink activities generate credits known as removal units (RMUs). Any greenhouse gas emissions from eligible activities, in turn, must be offset by greater emission cuts or removals elsewhere.

Article 6 of the Kyoto Protocol Provides flexibility for signatories, allowing them to meet targets while not reducing domestic emissions to the extent that they are required by the protocol. Article 6 provides that:

For the purpose of meeting its commitments under Article 3, any Party included in Annex I may transfer to, or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy, provided that:

(a) Any such project has the approval of the Parties involved;

(b) Any such project provides a reduction in emissions by sources, or an enhancement of removals by sinks, that is additional to any that would otherwise occur;

(c) It does not acquire any emission reduction units if it is not in compliance with its obligations under Articles 5 and 7; and

(d) The acquisition of emission reduction units shall be supplemental to domestic actions for the purposes of meeting commitments under Article 3.

Joint Implementation ("JI") allows developed countries, on a project basis, to receive credits through the investment in greenhouse emission reduction projects in other Annex I countries, whereas the Clean Development Mechanism ("CDM") permits the earning of credits through the investment in greenhouse emission reduction projects in developing countries. In JI and CDM, the investing country gains credits whereas the host country loses credits. JI and CDM were developed in order to make it simpler for developed countries to meet their emission reduction goals and to encourage investment in emissions reduction CDM projects tend to be large-scale hydroelectric, gas capture and fuel switch projects, whereas JI projects are more often than not more diverse in type, with a slight preference for energy efficiency projects.43 International Emissions Trading ("IET") allows developed countries to buy or sell portions of their emissions commitments amongst themselves.

The Kyoto Protocol was opened for signature on 16 March 1998 following ratification by consensus by the Conference of the Parties (COP3) in Kyoto, Japan in December 1997. Due to a provision in the agreement providing that the Kyoto Protocol shall become legally binding only upon the ratification of at least 55 countries composing at least 55 percent of the world's emissions addressed by the Protocol as of the year 1990, the Kyoto Protocol did not come into effect until 16 February 2004, following Russia's 18 November 2004 ratification.

As of August 2005, 153 countries have ratified the Kyoto Protocol. Israel was the fifteenth signatory, signing in March 2004. The United States withdrew from the Kyoto Protocol in 2001. President Bush's partly explained his country's decision to withdraw from the Kyoto Protocol by claiming that emission reduction changes would be too costly for the United States introduce, that they would cause harm to the US economy, and that the Kyoto Protocol is flawed. Australia, also a non-signatory, asserts that without the United States the Kyoto Protocol will not be effective, and that there is no "clear pathway for action by developing countries."

As of 2010, 172 countries have ratified the KP. Developed countries (Annex I Parties) have a heavier burden than developing countries (non-Annex I Parties) under the principle of 'common but differentiated responsibilities' (article 10 KP). Because of their high industrial activity, the former are mostly responsible for the GHG emissions and consequently their high levels in the atmosphere. The major feature of the KP is that it sets binding targets for the Annex I Parties for reducing GHG emissions. Overall emissions must be reduced by at least 5% below the 1990 levels within the commitment period from 2008 to 2012 (article 3 (1) KP). This measure applies for six different GHG (mainly carbon dioxide). The KP introduces new market-based mechanisms to help them meet these new commitments.

Despite its skeptics, the Kyoto Protocol has the potential to introduce sustainability to the environment by committing industrialized countries to clean up their own backyards, and also by providing them the motivation to reduce emissions in other countries. The main challenge is to expand the implementation of the Kyoto Protocol. Further conventions on the climate change that took place in Bali, in Copenhagen (2009) and in Cancun, Mexico recently (December 2010), were able to achieve further progress in getting the major economic powers like the United States and China to commit themselves to a process of negotiations that will produce a certain perspective formula to air pollution reduction."

SUSTAINABLE DEVELOPMENT

"The concept of 'sustainable development' provides for a regulation which connects, economic development with the conservation of the environment. Its implementation obliges the governments of the states to think in different terms with respect to the economy. They have to balance between the exploitation of natural resources and nature protection, industrial development and quality of air and water, use and development of land and conservation of their green cover, energy consumption and the risks of climate change etc.

The concept of sustainable development emerged as the result of environmental churning by the world community of unthoughtful human activity callous to the environmental considerations. It seemed that the international economic community had a phobia that economic considerations shall always succumb to the environmental considerations, if the concept is enforced.. But the subsequent developments in the evolution of the environmental law prove that the phobia was unfounded. The Rio Declaration is of key importance in international law relating to the environment and other international instruments having environmental implications. The Rio Declaration is impartial, providing against the misuse of environmentalism in respect of trade. Principle 12 accords the concern of free trade advocates, that environmental restrictions should not constitute disguised or arbitrary interference with the free trade. Similarly, in its chapter 2, Agenda 21 calls for a supportive international climate for achieving environment and development goals by promoting sustainable development through trade liberalization and making trade and environment mutually supportive.

It is not untenable that the principle behind the concept of sustainable development is of a fundamentally norm-creating character which is capable of forming the basis of a general rule of law. Sustainable development does not mean that economic development should come to a standstill. A myopic vision may consider sustainable development as a hurdle to the growth, but that is not correct. The principle of sustainable development reconciles the two disciplines and functions as a bridge between them and potentially prevents them from running in opposite directions, that is, extreme mercantilism reading to a 'tragedy of commons' and extreme environmentalism leading to a 'stagnating of growth'. If the environment attenuates below the point and becomes irreparable, economic development too will come to an end. For a long lasting growth of the economy, environment protection is a precondition. Hence, sustainable development just ensures that development is sensitized to the environmental imperatives so that economic progress goes on forever. Hence, it has all the more a strong case for becoming a prominent principle of international law on which shall rest economic prosperity and environmental quality."

(Excrepts taken from 'The WTO and International Environmental Law', page 50-52 by Anupam Goyal)

THE LEGISLATIVE COMPETENCE

119. The Entry 54 in List-I-Concurrent List of the Seventh Schedule of the Constitution of India, and Entry-17A in List-III-Concurrent List of the Constitution of India provide for fields of the legislation. These Entries are quoted as follows:-

"LIST-I (UNION LIST)

Entry 54- Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest."

LIST-III-CONCURRENT LIST

Entry 17-A: Forests, (To the extent that there is no declaration by Parliament under Entry 54 of List-I in public interest, the power of regulation of mines and mineral development belongs to the State legislature under Entry 23 of List II. But as soon as such declaration is made by Parliament, the power of State Legislature to that extent is withdrawn. This declaration has been made under Section 2 of the MMRD Act).

120. In Quarry Owners' Association vs. State of Bihar AIR 2000 SC 2870 it was held that the word 'regulation' may have different meaning in different context, but considering the economic and social activities including development and excavation of mines ecological and environmental factors, the fixation of the rates of royalties would also be included within its meaning. In State of West Bengal vs. Keso Ram Industries Ltd (supra) it was held that section 2 of the mmrd act, contain an indication that inspite of an inbuilt inclination on the parts of the courts to be liberal in assigning a wide meaning to the scope of the said provisions, the boundaries of limitation are there and the expanse of these provisions cannot be stretched as to strike at the State legislations which are adequately accommodated within the field of an Entry in List II.

121. The power of regulation and control is separate and distinct from the power of taxation for the purposes of legislation. The heads of taxation are clearly enumerated in Entries 82 to 92-C in List-I and Entries 45 to 63 in List-II. The Concurrent List does not provide for any head of taxation. Entry 96 in List-I, Entry 66 in List-II and Entry 47 in List-III deals with fees. The residuary power of legislation in the field of taxation is spelled out of Article 248 (2) and Entry 97 in List-I can be applied only to such subjects which are not included in Entries 45 to 63 of List-II.

122. Taxes on mineral rights on subject in Entry 50 of List II can also not be levied by the Union, though as stated in Entry 50, the union may impose limitation on the powers of the State and such limitations imposed by Parliament by law relating to mineral development to that extent shall subscribe the States' power to legislate. In State of West Bengal vs. Keso Ram Industries Ltd (supra) relying upon Automobile Transport (Rajasthan) Ltd vs. State of Rajasthan AIR 1962 1406 it was held that so long as a tax or fee on mineral rights remains in pith and substance, a tax for augmenting the revenue resources of the State or a fee for rendering services by the State and it does not impinch upon regulations of mines and mineral development and the control of industry by the Central Government. It is not unconstitutional. It is for the Parliament to state by law the limitations and sweep thereof which it may choose to impose on field available to the State for taxation by reference to Entry 50 in List II. The Courts would not venture into the enquiry in individual case to find out whether such tax would hamper mineral development, if Parliament has chosen to observe silence by not legislating or has failed to say something explicit. A reasonable tax or fee, it was held levied by State legislation, cannot be construed as trenching upon the unions power and freedom to regulate and control mines and minerals.

123. In this case it has been argued that the Parliament having expressed the intention in public interest, in section 2 of the mmrd act, to regulate mines and minerals the State does not have power to regulate mines and minerals and its products by imposing transit fee as forest produce under Entry 17-A of List III, which virtually amounts to in view of arbitrary increase of fees on advalorem basis a tax on mines and mineral, and which is exclusively covered under Entry 54 of List-I.

124. It is submitted at the bar that since the question as to whether the State legislature can levy tax on mines and mineral has been referred in Mineral Area Development Authority etc. vs. M/s Steel Authority of India and others, Civil Appeal No. 4056/4064 of 1999, on March 30, 2011, by three Hon'ble Judges of Supreme Court framing eleven questions, questioning the correctness of State of West Bengal vs. Kesoram Industries Ltd to a larger bench of nine Judges, the Court may defer the hearing and await the decision of the Supreme Court in the reference.

125. In our opinion the answer to be given by a larger bench of Supreme Court on the eleven questions framed in Mineral Area Development Authority etc. vs. M/s Steel Authority of India, will not in any way affect the decision of this case. The Supreme Court has essentially referred the question as to whether the royalty determined under Section 9/15 (3) of the MMRD Act, 1957 is in the nature of tax and whether the State legislature while levying a tax on land under Entry 49 in List II of the 7th Schedule adopt a measure of tax based on the value of the produce of land. In such case, would the constitutional position be any different in so far as the tax on land is imposed on mining land on account of Entry 50 in List II and its inter-relation with Entry 54 List I. The Supreme Court has also referred the question to the meaning of the expression taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development under Entry 50 of List II and the true nature of royalty/dead rent payable on minerals produced/mined/extracted from mines.

126. The Supreme Court has also referred the questions as to whether the majority decision in Kesoram Industries Ltd has departed from the law laid down in Seven-Judges' bench decision in India Cement Ltd and ors vs. State of Tamilnadu and others (1990) 1 SCC 12. The remaining six questions are closely related to the questions referred to as above.

127. In the present case, we are concerned with transit fee on transportation of forest produce in the State of UP. If the transit fee in the present case is regulatory in nature, the State Government has a right in exercise of powers under Sections 41, 42, 51 and 76 of the Indian Forest Act, 1927 (a Central Act), under Entry 17-A of List III, to make rules to levy fee on the regulation of transit of forest produce. The minerals defined as forest produce under Section 2 (4) (b) (iv) when found in or brought from a forest are forest produce, the regulation of transport of which would also definitely fall in the field of legislation under Entry 17A of List III on which a fee can be levied under Entry 47 of List III. The reference of the broader questions as to whether royalty under MMRD Act, 1957 is a tax and whether legislature can levy such a tax on the mines and minerals, is entirely different issue, which may not detain us in deciding these matters.

128. We are further of the opinion that the regulation of transport of the mines and minerals, which are also forest produce as defined under Section 4 (2) (b) (iv), is provided in Section 41 (2) (c) of the Forest Act, 1927 on which the State Government can make rules. The petitioners have not challenged the powers of the State Government under Sections 41, 42, 51 and 76 to make rules regulating the transit of forest produce under sub-section (1) of section 41. The control of all rivers and their banks as regards the floating of timber as well as of control of all timber and other forest produce in transit on land or water is vested in the State Government with powers to make rules to regulate the transit of all timber and other forest produce. So long as this power given by the Central Act is vested in the State Government, and that the State Government has also the power under Rule 41 (2) (c) to provide for the issue, production and return of such passes and for the payment of fees thereof, the rules for regulating transit of all timber and other forest produce by passes and imposition of fees by the State Government cannot be held to be ultra vires of the Indian Forest Act, 1927, or beyond the powers of the State Government under Entry 17-A of List III of Constitution of India. The Rules as held by the Supreme Court in Sitapur Packing Wood Suppliers (supra), do not suffer from any constitutional infirmity.

EXTRA-TERRITORIAL OPERATION OF LAWS

129. Part XI of the Constitution of India in Chapter-1-Legislative Relations, provides for distribution of legislative powers. Art.245 provides for the extent of laws made by Parliament and by legislatures of States subject to the provisions of the Constitution. The Parliament makes laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of State. Clause 2 of Art.245 provides that no law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial operation. Rules of 1978 have been made in exercise of powers under Section 41 (1) (c) of the Forest Act. The Rules provide for taking out passes and payment of transit fee for movement of forest produce within the State of U.P. The forest produce may have been imported in the country and brought from other States or may be brought within the State of U.P. from outside the State, or if the goods are moving from within the State of U.P., to outside State of U.P., transit fee is payable on the movement of such forest produce within the State of U.P.

130. In Shrikant Bhalchandra Karulkar Vs. State of Gujarat, (1994) 5 SCC 459 the Supreme Court held that no doubt in view of the provisions of Art.245 and 246 of the Constitution of India the State legislature has no legislative competence to make laws having extra territorial operation, but so long as law made by State legislature is applicable to the persons residing within its territory and to all things and acts within its territory, it cannot be considered extra-territorial. The doctrine of 'territorial nexus' as evolved by the Supreme Court is well established. If there is a territorial nexus between the persons/ property subject matter of the act in the State seeking to comply with the provisions oft he Act, then statute cannot be considered as having extra-territorial operation. It was stated in para 7 of the opinion that the sufficiency of the territorial connection involves consideration of two elements. The connection must be real and not illusory, and the law sought to be imposed under the Act must be relevant to that connection. Same view was taken in the State of Bihar & Ors. Vs. Shankar Wire Products Industries & Ors., (1995) Supp 4 SCC 646. The Bihar Weight and Measures (Enforcement) Act, 1959 insisted on verifying and stamping the said weights on demand of fees. These weights were manufactured in Bihar but were meant for sale and delivery in other States. The Supreme Court held that the verification and stamping is on the weights manufactured in the State; it is irrelevant, where the weights are sold, in the State or outside the State. The provisions of stamping have been enacted to protect the interests of the buyers and consumers. It is not unlikely that part of weights may travel to the internal market in the State or after their sale and delivery in other States. In the interests of consumers and keeping in view the object of the legislation, the weights should be verified and stamped at the very inception at the place, where they are manufactured. The provisions of the State Legislature in verifying and stamping the weights cannot, therefore, be said to be beyond its territorial legislative competence.

131. In GVK Industries Limited & Anr. Vs. Income Tax Officer & Anr., (2011) 4 SCC 36 the Supreme Court was not directly concerned with the issue, however, at the instance of the Attorney General, it considered the question to re-examine the rigidity of the view expressed in Electronics Corporation of India Ltd. Vs. CIT (CIL), 1989 Supp (2) SCC 642, in which it was held that the Parliament's power to legislate, incorporate only competence to enact laws with respect to aspects or causes, that occur, arise or exist, or may be expected to do so, solely within India. The Supreme Court considering the arguments of the Attorney General that the Parliament has inherent power to legislate for any territory including territories beyond India and that no Court in India may question or invalidate such laws on the ground that they have extra-territorial laws, which in other words views that Parliament may enact legislation even to extra-territorial expects or cause that have no impact, effect in or consequence for India, on considering the scope of Art.245, the principles of constitutional interpretation, analysis of constitutional topological space and the cases decided by the Privy Council, Australian High Court and the International Law on the concept of sovereignty, and also taking into account the scientific and technological development, which have the magnitude of cross-border travel and transactions including the aspects of crime having global criminal and terror networks, held that the Parliament is constitutionally restricted from enacting legislation with respect to extra-territorial aspects or causes that do not have, nor expected to have any direct or indirect, tangible or intangible impact or the effect or consequence for the territory of India, or any part of India or the interests of the welfare of the well being of or security of inhabitants of India and Indians. The Supreme Court held in para 125 and 126 as follows:-

"125. It is important for us to state and hold here that the powers of legislation of the Parliament with regard to all aspects or causes that are within the purview of its competence, including with respect to extra-territorial aspects or causes as delineated above, and as specified by the Constitution, or implied by its essential role in the constitutional scheme, ought not to be subjected to some a-priori quantitative tests, such as "sufficiency" or "significance" or in any other manner requiring a pre-determined degree of strength. All that would be required would be that the connection to India be real or expected to be real, and not illusory or fanciful.

126. Whether a particular law enacted by Parliament does show such a real connection, or expected real connection, between the extra-territorial aspect or cause and something in India or related to India and Indians, in terms of impact, effect or consequence, would be a mixed matter of facts and of law. Obviously, where the Parliament itself posits a degree of such relationship, beyond the constitutional requirement that it be real and not fanciful, then the courts would have to enforce such a requirement in the operation of the law as a matter of that law itself, and not of the Constitution."

132. The Supreme Court also held that Parliament does not have power to legislate for any territory other than territory of India or part of it and such laws would be ultra vires. It follows, therefore, that the Parliament is empowered to make laws with respect to aspects or cause that occur, arise or exist or may be expected to do so within the territory of India and also with respect to extra-territorial expects or cause that have an impact on or nexus with India.

133. The Rules of 1978 made by the State Legislature in exercise of powers under Section 47 (1) (c) of the Forest Act, 1927, with the object of preventing deforestation, over exploitation of the natural wealth for maintaining ecological balance, address environmental concerns, which have direct impact, on the lives of the people including people living in India, has an impact or nexus with India. The operations of the Rules of 1978, therefore, on the forest product including timber, mines and minerals, even if they are brought from or excavated from outside State of UP. or even outside territories of India, for obtaining passes or payment of transit fees within the State of U.P. cannot be invalidated on the ground that the rules have extra territorial operation.

FREEDOM OF TRADE, COMMERCE, AND INTERCOURSE

134. Art.301 of the Constitution of India declares that subject to other provisions of this Part (i.e. Part XIII) the trade, commerce and intercourse throughout territory of India shall be free. The freedom is from all the laws, which restricts or affect activities of trade and commerce amongst the States. Art.301 refers to freedom from laws, which go beyond regulations, which burden, restrict or prevent the trade between one State and another and also within the State. It imposes limitations on the powers of the State and is thus binding on the Union and State legislature. The Parliament may by law impose such restrictions under Art.302 on freedom of trade, commerce or intercourse between one State and another as may be required in public interest. Such law, however, notwithstanding anything contained in Art.302, can authorise the Parliament or the State to give any preference to one State over other or discriminate between one State and another, by virtue of prohibition contained in Art.303 on any entry relating to trade and commerce in any of the lists in view of the Seventh Schedule, except in case where under Clause (2) the discrimination is necessary for the purposes of dealing with situation arising from scarcity of goods in any part of territory of India. Art.304 (b), notwithstanding anything in Art.301 or Art.303 empowers the legislature of a State to impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest, provided that the bill or amendment for such restriction in public interest is introduced or moved in the Legislature of a State, with the previous consent of the President.

135. As noticed above, the Rules of 1978 have been made by the State Government authorised to make such Rules under the Indian Forest Act, 1927, which is a central law saved by the Constitution. It was, therefore, not necessary for the Rules to be made by the State Government with the previous sanction of the President. The State is also not required to justify the restrictions as reasonable and required in public interest, to save it under Article 304 (b).

136. The issuance of transit pass on payment of transit fee, for movement of goods brought from outside State of U.P, in the State of U.P. or moving from within the State of U.P. to outside the State of U.P. may impede freedom and movement and be violative of Art.301 of the Constitution of India, only if it is established by the petitioner that the levy of transit fee is regulatory measure, which promotes facilities with or without compensation. If the imposition of transit fee on every movement of forest produce is found to be a compensatory tax, which is not for use for trading facilities and is confiscatory in nature, it is liable to be declared as unreasonable restriction upon freedom of trade and intercourse guaranteed by Art.301.

137. In Jindal stainless Ltd. (2) & Anr. Vs. State of Haryana & Ors., (2006) 7 SCC 241 the Supreme Court held that taxing laws are not excluded from the operation of Art.301, which means that the tax laws can and do amount to restrictions on freedom guaranteed under Part XIII of the Constitution. In Atiabari Tea Company (Supra) the Supreme Court propounded the doctrine of direct and immediate effect. In Automobile Transport (Supra) an exception was judicially crafted and the concept of compensatory tax was propounded. The tax which otherwise interfere with the unfettered freedom under Art.301 will be protected from the vice of unconstitutionality, if they are compensatory. To determine whether the tax is compensatory is to be inquired whether the trade is having certain facilities, for the better conduct of business and is not paying a penalty which is much more than what is required for providing the facilities. This working test is valid even today.

138. In was next stated in Jindal Stainless Ltd. (2) (Supra) that the test of same connection laid down in Bhagat Ram's case, 1995 Supp (1) SCC 673, saying that even if there is some link between the tax and the facilities extended to the trade directly or indirectly, is not contrary to the 'working test', propounded in Automobile Transport's case, but it obliterates very basis of compensatory tax. Both these tests namely the 'working test', and 'some connection test', cannot stand together and therefore is 'some connection test', as propounded in Bhagat Ram's case is not applicable to the concept of compensatory tax. Accordingly the opinion expressed in Bhagat Ram's case and State of Bihar Vs. Bihar Chamber of Commerce, (196) 9 SCC 136 were overruled.

139. The Supreme Court held in para 45 and 46 in Jindal Stainless Ltd (2) (supra) that whenever a law is impugned as violative of Art.301 of the Constitution, the Court has to see whether the impugned enactment facially or patently indicates quantifiable data on the basis of which compensatory tax is sought to be levied. The Act must facially indicate the benefit, which is quantifiable or measurable. It must indicate proportionality, to the quantifiable benefit. The burden is upon the State as service/ facility provider to show by placing the material that the payment of compensatory tax is a reimbursement/ recompense for the quantifiable/ measurable benefit provided or to be provided to the payer(s). As soon as it is shown that Act invades freedom of trade, it is necessary to enquire whether the State has proved that the restrictions imposed by it by way of taxation are reasonable and in public interest within the meaning of Article 304 (b) of Constitution of India.

140. In the present case the State has put forth an argument that in order to protect the environment, and on the principles of sustainable development and intergenerational equality, keeping in view the commitments made by the India in international agreements and as signatory to Kyoto Protocol, it is necessary to regulate the movement of forest produce. It is stated that in order to protect the illegal felling of trees, deforestation, illegal mining and poaching, it is obligatory for the State to regulate the movement of forest produce and that the restrictions of taking out of passes and payment of transit fee is reasonable and is in public interest. The transit fee, therefore, does not violate Art.301 of the Constitution.

141. As discussed above, we find justification in the stand taken by the State Government that the requirement of taking out the passes, and the transit fee, held to be regulatory in Sitapur Packing Wood Suppliers and others (Supra), when it was imposed at the rate of Rs.5 per tonne and thereafter amended in the year 2004 at Rs.38 per tonne, was reasonable, and was in realm of regulation. It was, as held by Supreme Court, not necessary for the regulation of transit, to justify the fees on quid pro quo. The increase of the transit fees by the 4th Amendment on cubic feet basis and thereafter by impugned 5th Amendment on ad valorem basis on movement of forest produce on the ground that the value of the forest produce has increased, has made it unconstitutional on both the counts namely that the cost of forest produce has no co-relation with the objects sought to be achieved by regulation of transit, and secondly the State has not justified the increase on any empirical data based on scientific evaluation of the cost of regulation. The fee has thus changed its character from regulatory fee, and in the absence of any defence on quid pro quo, to a compensatory tax, which has the effect of augmenting the revenue of the State.

142. In our opinion, considering the arguments raised and the material placed before us, even if the Rules of 1978 are valid, the notifications dated 13.12.2010, dated 4th June, 2011 under challenge, increasing the transit fees firstly on dubic feet basis and thereafter item wise on advalorem basis linked to the price by making distinction between the forest produce, and the minor minerals, which are also forest produce, and without providing justification for such increase, converted the regulatory fees into compensatory tax. The State has completely failed to justify, such arbitrary increase, both on the principle of reasonableness and in public interest.

143. We further find that so far as trade, and transport of coal and tendu patta is concerned, the trade is monopolised by State legislation and its transport is completely regulated by the transport permits issued under the U.P. Tendu Patta Viniyaman Adhiniyam, 1972 and the Rules framed therein. The entire trade of Tendu Patta is monopolised by the State of U.P.

144. On the facts placed before us, the imposition of transit fees at 15% advalorem on coal, used by the thermal power projects, the captive power generation plants and the industries using coal in its various forms and derivatives as raw material, the State Government has made an attempt to tax the transport of coal, which is ultra vires the powers of the State Government under Rule 41 (2) (c) of the Forest Act, 1927, permitting only issuance of passes and fees for issuance of such passes, as well as violative of Art.301 of the Constitution of India. Even if the Rules have been made by the State Government under a Central Act, since the Central Act traces its legislative competence, from Entry 17A in List III of the Seventh Schedule of the Constitution of India, and which only give power of regulation of transport, the imposition of transit fee having assumed the nature of compensatory tax, in the absence of any material placed by the State Government to use the collections for facilitating the trade, the levy cannot be sustained both on the grounds of its imposition under the Rule making power, as well as its conversion on account of its advalorem nature into compensatory tax and thus violative of the Article 301 of the Constitution of India.

FEE OR TAX

145. The power to levy a tax is not identical with that of the power to levy a fee. Tax, in our constitutional scheme is distributed between the Union and the State legislatures by various Entries in List I and II. The residuary power to levy a tax belongs to Entry 97 of List I to the Parliament. The power to levy fee is given at the end of each of the three Lists. The legislature has power to levy a tax which is co-extensive with the power to legislate with respect to substantive matters. Either of the legislature may while making a law within its competence levy a fee.

146. A tax is an imposition made for public purpose by way of common burden, for common benefit without reference to any services rendered by the State or any specific benefit to be conferred upon the tax payer and may be progressive, vide Hingir Rampur Coal Co. Ltd v. State of Orissa AIR 1961 SC 459. A fee on the other hand, is a payment levied by the State in respect of services performed by it either for licensing under police powers of the State; or for the benefits of the individual. A regulatory fee is paid for some special benefits, enjoyed by the payer and the payment is usually proportional to the special benefit vide Kewal Krishna Puri v. State of Punjab AIR 1980 SC 1008; State of UP v. Malti Kaul (1996) 10 SCC 425.

147. Some of the basic principles relating to validity of the fee laid down by the Supreme Court may be summerised as follows:- (a) the benefit enjoyed by the payer of the fee is usually proportional to the special benefit; and (b) the money raised by a fee is set apart and appropriated specially for the performance of the service for which it has been imposed and (c) it is not merged with the general revenues of the State vide Indian Mica and Micanite Industries vs. State of Bihar 1971 (2) SCC 236; Secretary, Government of Madhya Pradesh vs. Zenith Lamp and Electrical (1973) 1 SCC 162 and Southern Pharmaceuticals and Chemicals v. State of Kerala (1981) 4 SCC 391. If the special service rendered is distinctly and primarily meant for the benefit of a specified class or area, the fact, that in such benefits the State as a whole may ultimately and indirectly be benefited, would not detract the levy as a fee vide Kisanlal Lakshmi Chand v. State of Haryana (1993) Supp (4) SCC 461 and I.T.C. vs. State of Karnataka (1985) Supp SCC 476.

148. The amount of levy of fee is based upon the expenses incurred by the State in rendering the services, the amount may not be arithmetically commensurate with the expenses vide D.C.M. v. Chief Commissioner (1970) 2 SCC 172.

149. A fee may be justified where the object of the levy is to raise the expenses of a service and not to make any profit out of it, vide State of Rajasthan v. Sajjanlal Panjawat (1974) 1 SCC 500.

150. Where there is no direct or clear nexus between some special service and the levy, it could not be said to be a fee, vide Gasket Radiators Private Limited vs. Employees of State Insurance Corporation (1985) 2 SCC 68.

151. Where the petitioners concerned raise objections regarding the existing scales of rates and conditions being unreasonable, excessive or lacking in 'quid pro quo', they can file a representation to Government, which should consider the same and in appropriate cases give hearing before taking any decision regarding modification or cancellation. The Court can direct the Government in public interest to consider the representation.

152. The absence of uniformity in its incidence; the compulsion in the collection; some of the contributories not obtaining to same degree of service as others may; the State may as a whole ultimately and indirectly benefited out of the imposition; absence of a provision for the constitution of a separate fund and the benefit, to be derived is not simultaneous, but is deferred; or the fee is reserved for future services, will not invalidate the fees vide Krishi Upaj Mandi Samiti vs. Orient Paper & Industries Limited (1995) 1 SCC 655.

153. On the above principles of law, on the validity of levy of fee laid down by Supreme Court, we find that the distinction between a tax and a fee primarily lies in the fact that a tax is levied as a part of the common burden based on the principle of capacity and ability to pay and may be progressive, the fee is a payment of a special benefit or privilege. The fee is levied in a special capacity although the special advantage is secondary to the primary motive of regulation in public interest, which is the basis of all imposition. There is some special benefit, a sort of return or consideration for services rendered and hence it is primarily necessary that the levy of fee should on the face of the legislative provision be co-related to the expenses incurred by the Government. The cost incurred by the Government for granting permission or privilege may be very small. The amount of imposition levied is not necessarily based upon the costs incurred by the Government but upon the benefit that the individual receives. In such cases of fee the tax element is predominant. In other cases the Government does some positive work for the benefits of the persons and the money is taken as a return for the work done or services rendered.

154. In B.S.E. Brokers' Forum vs. Securities and Exchange Board of India (2001) 3 SCC 482 the Supreme Court held that once the Court comes to the conclusion that the fee in question is primarily a regulatory fee, i.e. for the regulation of the business of the stock exchanges, then the argument that the service rendered by the Securities and Exchange Board of India should be confined to the contributories alone, cannot be accepted. The Court has to investigate whether primarily the object of Regulations for which the fee is being collected, is in public interest. Once the levy is in public interest and is connected with the larger trade in which the contributories are involved, then the question of confining the services only to the contributories does not arise. The Securities and Exchange Board of India is an autonomous body to control the activities of the securities market in which thousands of members of public invest their money. The Central Government, in order to protect their interest felt a need for a vigilant supervision of the activities of the market and for that purpose if the statute intends that the necessary funds should be met by collection of fees from the securities market itself, then the said levy cannot be questioned on the ground that the money is required for the capital expenditure of the Board, should be met by the Government of India.

155. In Jindal Stainless Ltd (2) v. State of Haryana (2006) 7 SCC 241 the Supreme Court has clarified the difference between the compensatory tax and fees. While a challenge to the law being violative of Article 301 of Constitution of India, it was held that a tax may be progressive or proportional to income, property, expenditure or any other test of ability or capacity; compensatory taxes like fees, always have to be proportional to benefits and not progressive. These compensatory taxes like betterment charges, fees, regulatory charges or by way of recompense/reimbursement of the cost or expenses incurred or incurable for providing services/facilities are based on the principle of equivalence, unlike taxes whose basis is the concept of "burden" based on the principle of ability to pay. The main basis of a fee or a compensatory tax is the quantifiable and measurable benefit. Under the principle of equivalence, as applicable to a fee or compensatory tax, there is an indication of a quantifiable data, namely, a benefit, which is measurable.

156. The Supreme Court held that the basis of every levy is the controlling factor. In the case of "a tax", the levy is a part of common burden based on the principle of ability or capacity to pay. In the case of "a fee", the basis is the special benefit to the payer (individual as such) based on the principle of equivalence. When the tax is imposed as a part of regulation or as a part of regulatory measures, its basis shifts from the concept of "burden" to the concept of measurable/quantifiable benefit and then it becomes "a compensatory tax", and its payment is then not for revenue but as reimbursement/recompense to the service/facility provider. It is then a tax on recompense. Compensatory tax is by nature hybrid but it is closer to fees than to tax as both fees and compensatory taxes are based on the principle of equivalence and on the basis of reimbursement/recompense.

157. It was further held in Jindal Stainless Limited (2) vs. State of Haryana that if the law enacted is to enforce discipline or conduct under which the trade has to perform, or if the payment is for regulation of conditions or incidence of trade or manufacture then the levy is regulatory.

158. The legislative competence of the State to make the Rules of 1978 was upheld by the Supreme Court in State of U.P. and others vs. Sitapur Packing Wood Suppliers and others (supra). The Supreme Court held that the powers of the State Government under Entry 17A of List III of the Seventh Schedule of the Constitution of India would include the powers to regulate transit of forest produce. We do not find any substance in the submission, that the legislative competence was upheld only in respect of and with reference to timber as forest produce and not other forest produce. We also do not find any substance in the submission of learned counsels appearing for the parties, that the mines and minerals including coal are not forest produce, unless such mines and mineral including coal are found in the forest, which include only reserved forest, protected forest, village forest or a land, which is recorded as forest in the revenue records. As discussed by us in this judgment, the old concept of understanding of forest before the enforcement of Forest Conservation Act, 1980, has undergone change. The forest is not defined either in the Indian Forest Act, 1927 or in the Forest Conservation Act, 1980, and is not limited to only those categories of forests, which are either notified as forest, or are recorded as forest in the government records. In order to conserve forest keeping in view of the environmental, ecological and sociological concerns even those areas, which are forest like areas, are included within the meaning of word 'forest'. In T.N. Godavarman Thirumulkpad vs. Union of India (supra) the Supreme Court has given a very wide meaning of the word 'forest'. The word 'forest' must be understood according to its dictionary meaning, and this description covers all statutory recognised forest whether designated as reserved, protected or otherwise for the purpose of Section 2 (1) of the Forest Conservation Act, 1980. The term 'forest land' occurring in Section 2, includes forest as understood in the dictionary sense, but also any area recorded as forest in the Government records irrespective of its ownership. It also includes the land covered by forest like areas.

159. The State Government has placed on record the notifications, declaring both the sides of the road in almost all the major districts of the State of UP, qua the 55 classes of trees in such notified areas as protected forests. The entire land, in Kaimur Wild Life Sanctuary, Forest Range Halia, Forest Range Ghorawal, Gurma bounded by the rivers and hills notified under the notification under Section 18 of the Wild Life (Protection) Act, 1972, the Kaimur Black Buck Sanctuary, Varanasi Shakti Nagar, the Obra Forest Range and the Markundi Forest Division included in the Kaimur Wild Life Sanctuary, the current Obra Forest Range including Markundi Forest Division and the Varanasi Shakti Nagar road, have all been notified and are included within the meaning of forest under the Indian Forest Act, 1927 read with the Forest Conservation Act, 1980. The State Government has also identified in pursuance to the orders passed by the Supreme Court in T.N. Godavarman Thirumulkpad vs. Union of India (supra) the forest like areas in all the districts of the State in reference to I.A. No. 979 filed in the Supreme Court vide d.o. letter dated 19.12.2007 of the Government of UP and which include all the areas in Vindhya and Bundelkhand region having 100 trees per hec. in a minimum area of 3 hec. and in Terai and Plain region area having minimum number of 50 trees per hec. in a minimum area of 2 hec. as forest like areas.

160. With this change in the legal concept and meaning of the word 'forest' and 'forest land', almost the entire forest and forest land notified as reserved, protected and village forest, the entire land recorded as forest in the Government records, the sides of all the major roads in the notified district in the State of UP and all the Forest Ranges notified under the Wild (Protection) Act, 1972 are included within the meaning of 'forest', and 'forest land', and will also include all such areas having minimum of three hectare with 100 trees per hectare in Vindhya and Bundelkhand region, and a minimum area of two hectare in Tarai and Plain region having 50 trees per hectare with an exception that shrubs and root stock will not be included in the counting of trees; the minimum area of land will be based on plot number wise and plantations done on private land or public land are not identified as forest like areas.

161. We thus do not find any substance in the contentions raised by learned counsels appearing for the parties, that the definition of 'forest' and 'forest land' must be confined only to the notified forest, and that areas, which may be forest like areas or the areas included in special eco-zones and eco-systems, are not included within the meaning of 'forest', and should not be treated as forest. The 'forest' and 'forest land', are not to be treated with reference to any notification but as a wholesome concept to protect environment. The argument, that the entire coal mined from the coal bearing areas, which are not notified as forest, is also not sustainable. With the new meaning and understanding of the word 'forest' and 'forest land', the argument, that the mines and mineral including coal, which is not excavated from the forest land, and moved thereby will not be included within the definition of forest produce to attract the Rules of 1978, is liable to be rejected.

162. The coal mines of the National Coalfields Limited (NCL) are situated both in the State of U.P. and M.P. The State Government has produced orders issued by the Government of UP granting lease of various land to NCL in Duddhi, Chunar and Kharia Coal Projects in District Mirzapur, and the letter of the State Government dated 18.10.2010, issued by the Divisional Forest Officer, Renukoot Forest in respect of areas of land in Jhigurdih-Gorvi extension on lease to NCL with the condition that even after the constructions, the land will continue to be protected/reserved forest and lease will not change its current legal character. These leases given by the State Government on forest land clearly demonstrate that the coal bearing mines in the State of U.P. and in the bordering States, have been allocated on the forest land as well and thus it is not correct to say that the coal mines of National Coalfields Limited are not situated and may be excluded from the definition of the words 'forest' and 'forest land'.

163. The argument, that the MMDR Act is a special primary enactment, whereas Indian Forest Act is a general pre-constitutional enactment and thus MMDR Act will impliedly repeal the Indian Forest Act, and the charging provisions of the Indian Forest Act and Rules must necessarily be held to be supplanted, substituted and superseded by the MMDR Act in so far as they relate to minerals, overlooks the fact, that both the Acts operate in different fields and are referable to the different entries in the lists in Seventh Schedule. The MMDR Act has been enacted by the Parliament with reference to Entry 54 of List I, whereas the Indian Forest Act, 1927 traces its origin and is referable to Entry 17-A of List III of the Seventh Schedule. There is no overlapping in the object and purpose of enacting the two legislations nor can it be said that the provisions of MMDR Act so far as they relate to regulation and development of mines fully occupy the field. The Forest Act, 1927 read with Forest Conservation Act, 1980 have been enacted as legislations relating to forest to check deforestation, which causes ecological imbalance and leads to environmental deterioration. The object of both the Acts read together is not only to consolidate laws relating to forest, preservation, maintenance and management of forest but also to maintain environmental stability, through preservation, conserving natural flora and fauna, biological diversity, genetic resources, check soil erosion, water conservation and management, checking extension of sand dunes, increasing productivity of forest to meet essential national needs, while protecting human rights of tribals and forest settlers, earning livelihood from forests. Both these Acts operate in entirely different fields. The Indian Forest Act, 1927 is also a Central Act, and thus there is no repugnancy between the two legislations. There can be no question of repugnancy unless the law made by the Parliament occupies the same field. If they deal with separate and distinct matters, through of a cognate and allied character and their purposes are different, the repugnancy does not arise. The law in this regard has been clarified by the Supreme Court in Deep Chand vs. State of UP AIR 1959 SC 648; Barai T. v. Henry An Hone AIR 1983 SC 150; Hoechst Pharmaceuticals Ltd. v. State of Bihar AIR 1983 SC 1019, and Sita Ram & Brothers v. State of Rajasthan 1995 1 SCC 257 (para-4).

164. As held by the Supreme Court, repeatedly when an argument of repugnancy is raised under Article 254, every effort should be made to reconcile the two enactments and to construe them so as to avoid their being repugnant to each other and care should be taken to see whether the two really operate in different fields without encroachment. The Supreme Court has clarified in State of Rajasthan vs. Vatan Medical & General Store (2001) 4 SCC 642 relying on State of AP v. McDowell & Co. (1996) 3 SCC 709 that the doctrine of covered/occupied field can be applied only to the Entries of List III and further that there can be no question of repugnancy unless the two Acts are wholly incompatible with each other or the two standing together would lead to absurd result. It was held in Krishi Utpadan Mandi Samiti vs. Pilibhit Pantnagar Beej Ltd (2004) 1 SCC 391 that even if there is some overlapping, the same should be ignored.

165. For the aforesaid reasons, we do not find any force in the argument, that the MMDR Act and the Rules made thereunder namely the U.P. Minerals (Prevention of Illegal Mining, Transportation and Storage) Rules, 2002 under which transit passes are issued in respect of despatches of minerals and ores including coal occupy the entire field of regulation and development of mines and minerals. The reliance upon the decision in State of Orissa vs. M.A. Tulloch (supra) and State of West Bengal vs. Kesoram Industries (supra) is entirely misplaced.

166. The powers of the State Government to regulate transit of forest produce under the Rules of 1978 of the Indian Forest Act, 1927 with reference to Entry 17A of List III of the Seventh Schedule has been specifically upheld in Sitapur Packing Wood Suppliers, with reference to timber. The Rules of 1978 were applicable to the mines and minerals as forest produce right from the inception, and thus the argument that the constitutional validity was upheld only with reference to timber as forest produce, is not valid. In Kumar Stone Works (supra) this Court considering the applicability of the Rules of 1978 to stone chips, stone gittis, stone ballast, sand, morrum, limestone, dolomite etc. which are all minerals excavated from the mines, did not go into the question of constitutional validity of the Rules vis-a-vis mines and minerals as the constitutional competence was already upheld by the Supreme Court in Sitapur Packing Wood Suppliers. The judgment in Kumar Stone Works has been challenged in Supreme Court in Civil Appeals, which are still pending. We have not been persuaded to take a different view than which has been taken in Kumar Stone Works.

167. So far as the question of interpretation of the words 'brought from' used in Section 2 (4) (b) of the Indian Forest Act to cover such items mentioned in clause (i) to (iv) of Section (2) (4) (b), which though did not have origin in the forest, but they are transported through a forest and the interpretation of the words 'brought from' given by the Division Bench in Kumar Stone Works case, the reference in M/s Nagarjuna Construction Ltd (supra) on 4.3.2008 to a larger bench is still pending. We do not find any good ground to take a different view, on these questions also from that which has been taken in M/s Kumar Stone Works (supra). We thus observe that the answer to the questions referred in M/s Nagarjuna Construction Ltd (supra) will guide the interpretation of the words 'brought from' used in Section (2) (4) (b) of the Indian Forest Act.

168. We have considered the reasoning given and M/s Gupta Builders vs. State of Uttrakhand decided by the Uttrakhand High Court on 26.6.2007, that the term 'forest' used in the Forest Act, 1927 is limited to the forests, which are intended to be controlled and regulated under the Act of 1927 and until there is a declaration of land as a forest of specified category of minerals, which are products of mines and quarries cannot be presumed as forest produce. On the discussion of the meaning of the words 'forest', 'forest land' and 'forest produce' given by us in this judgment, we find it difficult to agree with such limited meaning given to these words and with respect to the Uttrakhand High Courts, we are unable to subscribe the same view.

169. The word 'forest produce' came up for consideration in Suresh Lohiya v. State of Maharashtra & anr (1996) 10 SCC 397 and State of M.P. vs. S.P. Sales Agencies and others (2004) 4 SCC 448. In our opinion the argument advanced by Shri Navin Sinha, that Cutch and Kattha as types of Catechu having undergone to the process of manufacture are not Khair wood to be treated as forest produce and further the argument advanced by Shri Aloke Kumar, that Clinker and Flyash, Calcium Hydroxide, Calcium Oxide, Quick Lime, Hydrated Lime, Hard Coke, Gypsum, rejected Coke and Ash Burn Coke, Soil (Mitti) and Sponge Iron are not forest produce, is fully covered by these two decisions. As held in Suresh Lohiya unless a commercially new and distinct article is not produced out of the processing including manufacture out of the forest produce, the same cannot be excluded from the definition of forest produce. We are thus not persuaded to hold that Kattha and Cutch, which come within the sweep of expression Katechu as held in State of M.P. vs. S.P. Sales Agencies (supra), would be covered within the definition of forest produce.

170. In Belsund Sugar Co Ltd. Vs. State of Bihar (1999) 9 SCC 620, the plucked tea leaves even after undergoing processing of rostering and blending were held to be forest produce. We thus hold that except for Sponge Iron, which is manufactured by a process in which the iron ore undergone a change after mixing with coal and dolomite by the process of feeding with primary air and secondary air by coal resulting into Sponge Iron, which is a commercially different product and is in common parlance a distinct product than iron ore, the remaining are minerals and are included within the expression of forest produce as defined in Section 2 (4) of the Act, despite it being inclusive in nature.

171. We may add here that except for the test of common parlance in which a commercially different article, than the forest produce is produced out of processing or manufacture, if the goods so produced retain the essential character and are known in commercial parlance as forest produce, have to be treated as forest produce for the purposes of levy of transit fee.

172. The U.P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1972 was enacted by the State of UP with an object

"An Act to provice, in the public interest, for the creation of State monopoly in the purchase and distribution of tendu leaves and for matters connected therewith"

. Section 5 of the Act places restriction on sale, purchase and transport of tendu leaves. sub section (1) (a) provides that no person shall sell tendu leaves to any person other than the State Government or an officer of the State Government authorised by it in that behalf or an agent in respect of the unit in which the leaves have grown; Sub-section (1) (b) provides that no person other than such Government officer or agent shall purchase tendu leaves from any person other than such Government, officer or agent, or collect tendu leaves grown on any land of which he is not owner or tenure-holder. Sub section (1) (c) provides that no person other than such Government, officer or agent shall transport tendu leaves except in the following cases, namely:- (i) where he being a grower of tendu leaves transports chem from any place within the unit wherein such leaves have grown to any other place in that unit; or (ii) where he transports them on behalf of such Government, officer or agent; or (iii) where he purchases the leaves from such Government, officer or agent either for the manufacture of bidis within Uttar Pradesh or for sale of the leaves outside Uttar Pradesh. Sub-section (2) of Section 5 provides for permission to sell and transport within the State of UP or to take such leaves outside the State of up. sub-section (1) of section 5a provides for authorisation to collect the tendu leaves on behalf of the State Government directly from the grower of tendu leaves, on the payment of price thereof to such growers. Sub-section (2) provides that permit referred to in sub-section (1) shall specify the estimated quantity sold, the name of the grower of tendu leaves, the amount required to be paid to such grower and such other particulars. Sub-section (3) provides that a person authorised under sub-section (1) shall be deemed to be an agent for all or any of the purposes of this Act as may be prescribed, but shall not be entitled to payment of any amount by way of commission or otherwise for the collection of tendu leaves. The price of the tendu leave is fixed by the State Government under Section 7. Section 8 provides that the State Government shall purchase all tendu leaves offered for sale. Sections 9 and 10 provide for registration of growers and disposal of the leaves.

173. The U.P. Tendu Patta (Vyapar Viniyaman) Niyamawali, 1972 provides for appointment of agents. Rule 4 provides for transport permit and permit for sale and purchase of tendu leaves. The transport permit in Forms TP-1, T.P-2, and TP-3 is provided for transport from collection depot to storage godown; from one storage godown to another or to distribution centre and from distribution centre to Sattadars or Mazdoors. The transport permit on Form TP-4 provides for transport outside the State or transport to any area in the State to which the Act does not apply; for transport inside the State from an area outside the State, or for transport to any area in the State in Form TP-5; and for transport to any place outside the State or outside the area to which the Act applies from another place outside the State or outside the area to which the Act applies through the State or the area to which the Act applies in Form TP-6.

174. The aforesaid provisions of the Act and the Rules clearly demonstrate that the State of UP has created monopoly in the purchase and distribution of tendu leaves and the movement of tendu leaves within the State from outside or within the State to outside the State of UP is entirely regulated. It is admitted that the tendu leaves are forest produce but that since the entire ownership and movement of tendu leave is strictly regulated by the State Government and that no transportation of tendu leave is permitted except under transport permits issued under Rule 4. There is no object of requiring the Government, officers or agents appointed by the State Government to obtain transit passes and to pay transit fee under the Rules of 1978 is to regulate the transit of forest produce for the purposes of checking deforestation and poaching. As it is stated in the counter affidavit, the requirement of obtaining passes and payment of transit fee under the Rules of 1978 is by way of duplication, for achieving the same purpose. In Belsund Sugar Co. Ltd. vs. State of Bihar and others (1999) 9 SCC 620 it was held that where the entire trade of sugarcane was regulated, there was no object to be achieved by invoking the provisions of the Bihar Agricultural Produce Markets Act, 1960 on sugarcane and molasses. In paragraph-104 of this judgment it was held that where sale and purchase of sugarcane and mollases was regulated by the detailed statutory scheme of control of sale and purchase the general provisions of the Market Act, therefore, will give way to the special provisions. The State Government was fully conscious of this legal position, in providing in the note at the bottom of the notification dated 4.6.2011, notify the 5th Amendment to the Rules of 1978, as follows:- "In respect of resin and resin products,- the provisions of the U.P. Resin and other Forest Produce (Regulation and Trade) Act, 1976, and the Rules framed thereunder will apply.

175. Following the same reasons we hold that so far as the movement of tendu patta within the State of UP either in respect of the tendu leaves collected in UP, or for tendu leaves collected outside U.P. and brought within the State of UP, shall not attract the provisions of the Rules of 1978.

176. In State of UP & others vs. Sitapur Packing Wood Suppliers (supra) the Supreme Court, while setting aside the judgment of the High Court and upholding the levy of transit fee on timber, relied upon the judgment in State of Tripura vs. Sudhir Ranjan Nath in which the validity of the application fees charged on one time basis for year for transit of timber was upheld. The Supreme Court relied upon judgments in Corporation of Calcutta vs. Liberty Cinema (supra); Secunderabad Hyderabad Hotel Onwers' Association vs. Hyderabad Municipal Corporation (supra) and P. Kannadasan vs. State of T.N. (supra). In paragraph-10 of the judgment following the aforesaid cases the Supreme Court held that the transit fee under Rule 5 is clearly regulatory and thus it was not necessary for the State to establish quid pro quo. In the year 2004 by notification dated 14.6.2004 the transit fee was increased from Rs. 5/- per tonne to Rs. 38/- per tonne. The validity of transit fee of Rs. 38/- per tonne was upheld in Kumar Stone Works (supra) as no material was brought on record to show that the fee was so excessive that it would violate the Articles 14, 19 (1) (g) and 301 of the Constitution of India. The Civil Appeals against the judgment are still pending.

177. By the impugned Notifications dated 20.10.2010 (4th Amendment to the Rules) challenged in the first batch of writ petitions, and the Notification dated 4.6.2011 (5th Amendment to the Rules) the transit fee provided to be levied on cubic meter of capacity by the 4th Amendment, is sought to be levied on advelorum basis at the rate of 5% on timber broadly categorised in two categories, with minimum of Rs. 2000/- on the timber of Khair, Sal and Sagaun (Teak), Shisham, Sandal Wood and Red Sanders; and with a minimum of Rs. 750/- on every category of timber and at advalorem at the rate of 15% or minimum of Rs. 750/- per lorry load of other forest produce coming from mines, i.e. coal, lime, stone, sand, bajari and other minerals. This increased fee has changed the character of the transit fees from regulatory fee to compensatory tax. We find substance in the argument raised by all the counsels relying upon Jindal Stainless Limited and anr. vs. State of Haryana and others (supra) that the fee is generally a term of a licence based on the principle of equivalence, which is converse of the principle of ability to pay. A fee has to be broadly proportional and not progressive. In the principle of equivalence, which is the foundation of a compensatory tax as well as a fee, the value of the quantifiable benefit is represented by the costs incurred in procuring the facility/service, which costs in turn become the basis of re-measurement/recompense for the provider of the service/facility.

178. In State of UP and others vs. Sitapur Packing Wood Suppliers (supra) it was held by the Supreme Court that the transit fee under the Rules of 1978 is regulatory in nature, and that the question of quid pro quo is necessary when a fee is compensatory. For every fee quid pro quo is not necessary. The Supreme Court had observed that the transit fee being regulatory, it is not necessary to establish the factum of rendering of service. With the increase of fees by the 4th Amendment to the Rules by Notification dated 13.12.2010, the imposition was changed from per tonne basis to per cubic basis, and thereafter by the 5th Amendment to the Rules by Notification dated 4.6.2011, the imposition has been changed on advalorem basis. The classification of the trees in respect of timber and forest produce coming from mines, and further the imposition of fees on such classification on advalorem basis at 5% in respect of timber subject to minimum of Rs. 2000/- for the timber of higher quality of wood and Rs. 750/- of the timber of other trees advalorem at the rate of 5% and other forest produce coming from mines at advalorem basis at the rate of 15% or minimum of Rs. 750/- has completely changed the character of the fees.

179. The object and purpose of the Rules of 1978 is to regulate the transit of timber for which the purpose as disclosed in the counter affidavit is to check illegal felling, mining poaching, and also protecting environment by indiscriminate mining of non-renewable sources of energy keeping in view the commitments made by India to the Kyoto Protocol that went into effect on February 16, 2005. The categorisation and the increase of fees on advalorem basis has been justified on the ground that the hike in prices of forest produce at a span of un-even interval reflecting that the basis of increase of the price of forest produce was not corresponding with the rate of transit fee and to rationalise the fee structure with co-relation to the change of prices of timber was the only way left to reject the adoption of advalorem price. With this change of the basis of levy of transit fee, even if the object and purpose of levy remains the same, the character of the fees has changed from a simple regulatory fee to a fee, which is progressive and dependents upon the cost of forest produce with the purpose of raising revenue.

180. In Calcutta Municipal Corporation Vs. Shrey Mercantile (P) Ltd. (supra) the Supreme Court had set aside the fee demanded by the Calcutta Municipal Corporation at Rs. 3 lacs under the Calcutta Municipal Corporation (Taxation) Regulations 1989 from the developers purchasing the buildings for construction as a charge for mutation. The Supreme Court held that a charge or fee if levied for the purpose of raising revenue under the taxing power is a tax. The imposition of fees for primary purpose of regulation and control may be classified as fees as it is in exercise of police power but if the revenue is the primary purpose and regulation is merely incidental thus the imposition is a tax.

181. In the present case the respondents have given in para-16 of the counter affidavit of Shri Anwar Ahmad, Forest Range Officer, Renukoot, District Sonebhadra, the details of the collections of transit fee in the years 2004-05, 2009-10, 2010-11 and 2011-12 upto July 2011. The 4th Amendment and the 5th Amendment to the Rules of 1978, came into force by notifications dated 20.10.2010 and 4.6.2011 respectively. The imposition on cubic meter basis and thereafter advalorem basis was stayed by the Supreme Court and this Court, and thus the collections upto July, 2011, were limited to 3848.33 lacs. On advalorem basis, on the cost of forest produce, between 5% to 15%, including coal imported in the State and transported in millions of tonnes, will increase the collections by not less than ten times. The collections in 2010-11, before the 4th and 5th Amendments to the Rules of 1978 was 11288.2 lacs, whereas the expenditure of the establishment and other administrative expenses on the enforcement for the entire year 2010-11 on the collection of transit fees by the department was 32205.16 lacs. It is likely to increase, as admitted by only 10-20% every year. The revenue to be generated by the transit fee, would thus be at least 10 times more than the cost in collection of fees. By any conservative estimate the increase of fees on advalorem basis, would be far above the entire expenses born by the department for enforcement on collection of the fees, and thus the large amount of the collection of transit fees will go into the coffers of the State to raise its revenues. Even if entire collections are spent on maintenance of staff, vehicles, fuel and other administrative expenses of forest department, it looses its character as regulatory fees, to regulate transit of forest produce, with no benefit or service directly or indirectly to facilitate the trade or transit of forest produce. There is no averment, nor it is argued by learned counsel appearing for the State that any facility or services are to be provided or are contemplated for the trade.

182. We further find that absolutely no object is sought to be achieved by increasing the transit fee on advalorem basis. The State Government has not placed on record the reports of the Expert Committees, which may have gone into the mechanics of receipt and expenditure of the transit fees to charge on advalorem basis. The regulation of renewable and non-renewal energy resources, the extent of the deforestation and poaching and the exploitation of the mineral resources have not been studied, worked out and placed on record with any empirical scientific data to justify the increase of transit fee. The increase on advalorum basis at 15% is far and beyond the rates of Central Sale Tax or Commercial Tax imposed on these articles in the inter-state trade or the intra-state trade of the forest produce. Whereas the Central Sales Tax on coal, as declared goods, is at 4%, the transit fee is sought to be imposed at 15%. The increase of the essential raw materials for generation of power and manufacture of goods for creating infrastructure will increase the cost of development of the State, which is struggling with poverty.

183. We further find that though a reference is made in the counter affidavit to the Kyoto Protocol, and sustainable development and that the State Government has obligations to the general public to protect the environment, nothing has been brought on record to demonstrate the obligations of the Government of U.P., and the role assigned to it, by the Ministry of Environment and Forest in the matter of observations, precautions and the steps to be taken for protecting the environment by reducing carbon emissions. No relevant date has been placed before us to demonstrate the purpose and the object sought to be achieved and the manner in which the increase of transit fee on advalorum basis will check the environmental degradation.

184. Coal is an important raw material for generation of electricity and manufacture of materials used in infrastructure for development of the State. The Union Government through its agencies including Coal India Limited is keeping strict control over the exploitation of coal bearing areas, and a constant vigil on the over exploitation of non-renewal sources of energy for maintaining inter-generational equity. If the State Government has been assigned any role and has been given the goals to minimise the exploitation of minerals, it should have placed the material before us in support of the argument of raising the transit fee as a dis-incentive to such over- exploitation. The averments in the counter affidavit are by way of an essay on protection of environment. The State appears to have raised only its concerns, with which no one can have any doubts without placing the actual date and the object which the State Government seeks to achieve by raising the transit fee on advalorem basis, on some forest produce, as high as 15%, which will adversely affect the trade, already overburdened with increasing cost of fuel on transportation.

185. Keeping in view the concept of sustainable development, we find substance in arguments addressed by the learned counsels appearing for the petitioners, that the development of the State has to be kept in mind while increasing the fees to reduce the exploitation of natural resources including forest produce. The State Government was required to carry out an exercise on the empirical data to study the scientific basis with ecological and social concerns, the maintenance of balance between development and exploitation of natural resources.

186. While we agree with Shri Ravi Kant appearing for the State that the petitioners have not placed any such facts, which may amount to a shut down situation for the trade and industry on account of the heavy burden of transit fees, we may like to point out that the burden, even if a shut down situation may not arise to justify the increase of transit fee, which has virtually assumed the character of compensatory tax was on the State Government. We do not find any such material placed by the State before us, which may justify the increase to such a level which retards the development of the State. The Indian Forest Act, 1927, or the Rules of 1978, with its amendments do not even facially indicate the quantifiable date on which the increase was worked out. It does not indicate even superficially the benefit by the State as service/facility provider to indicate proportionality to the quantifiable benefit. The exhorbitant increase in transit fees has robbed from it the regulatory character, and has converted it into confiscatory, and prohibitory fees, imposing unreasonable restriction on freedom trade as well as inter-state trade.

CONCLUSIONS

187. Our conclusions, on the questions raised before us are as follows:-

(i) The words 'forest' and 'forest land' are not defined in the Indian Forest Act, 1927 and the Forest Conservation Act, 1980. These words must be understood according to its dictionary meaning. The description will cover all statutory recognised forest whether notified as reserved, protected or village forest or not, for the purposes of Section 2 (1) of the Forest Conservation Act. The principles and criteria of defining forest has to be based on sound ecological and scientific basis. The 'forest land' would also include the forest like areas, whether notified or not, for which the Government has taken decision in Government Order dated 20.12.2007 quoted in paragraph 89 of the judgment.

(ii) The definition of 'forest produce' is inclusive and not exhaustive. Only those articles and goods, which are defined in section 2 (4), (a) & (b) of the Indian Forest Act, 1927 are included within the meaning of the words 'forest produce'. Where a forest produce so defined, changes its essential character either by processing or by manufacturing process into a commercially new article, which is totally different from the forest produce, having a distinct character, known to the business community, with the aid of human skill, it ceases to be forest produce.

(iii) The expression catechu comes within the sweep of cutch and kattha and is included within the meaning of word as forest produce. Sawed timber, fire wood, wood oil, fish, rubber sheets, bamboo mats, furniture, paper and like articles having a distinct character, known to the business community as totally different articles and goods, would cease to be forest produce; for example sponge iron made by manufacturing process from iron ore is not a forest produce. All the minerals from mines and quarries, such as clinker and fly ash, calcium hydroxide, calcium oxide, quick lime, hydrated lime, hard coke, gypsum, rejected coke, ash burn coke and soil (mitti) are forest produce.

(iv) The State has monopolised the entire trade of tendu patta by enacting UP Tendu Patta (Vypyar Viniyaman) Adhiniyam, 1972. The collection, packing, storage and transportation of tendu leaves in the State of U.P. is strictly regulated by U.P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1962 and the Rules framed thereunder in which Rule 4 regulates the entire transport of tendu leaves under the prescribed forms. No object is thus sought to be achieved in regulating the transportation of the same forest produce under the Rules of 1978 made by State under Section 41 (1) (c) of the India Forest Act, 1972. The transportation of Tendu Patta within the State of U.P. either brought from outside the State of U.P., within the State of UP, or to be taken out from the State of U.P. is thus not covered and regulated by the provisions of the Rules of 1978.

(v) The State Government has legislative competence under Section 41, 42, 51 and 76 to make rules regulating the transit of forest produce, by providing for transit passes and transit fees under Section 41 (2) (c) of the Indian Forest Act, 1927. The Rules of 1978 are intra vires the Indian Forest Act, 1972, read with Forest Conservation Act, 1980. There is no repugnancy between the Mines and Minerals Regulation and Development Act, 1957, enacted with reference to Entry 54 of List 1 in Seventh Schedule of the Constitution of India, and the Indian Forest Act, 1927 and the Rules framed therein with reference to Entry 17A of the List 3 of Seventh Schedule of the Constitution of India. The Rules of 1978, are not violative of Art.245 (2) of the Constitution of India, even if they have extra-territorial operations. The Rules of 1978 have been made by the State Government under the Act of Parliament and have close nexus with the residents of the State of U.P. as citizens of India for protection of environment from deforestation, poaching, maintaining ecological balance and to restrict over-exploitation of mineral resources of the State.

(vi) The imposition of transit fee under Rule 5 of the Rules of 1978 is transitory and regulatory in nature. The transit fee is payable on movement of the forest produce within the State of U.P., with the object of protecting environment from deforestation and overexploitation of natural resources including mines and minerals when found in or brought from forest and which not only include notified, protected reserved and village forest but also the forest lands, and forest like areas, whether notified by the State Government or not.

(vii) The levy of transit fee at the rate of Rs.38 per metric tonne per truck, etc. by notification dated 14.6.2004, was declared to be valid in Kumar Stones Works' case (Supra). The levy on such rates is subject to the decision of the Supreme Court in the matters in which judgment in Kumar Stone Works' case has been challenged.

(viii) The increase of transit fee under the Rules of 1978 as notified by the 4th Amendment of the Rules notified on 20.12.2010, on cubic meter of capacity and thereafter by the 5th Amendment to the Rules notified on 4.6.2011 increasing it on ad valorem on the price of forest produce at 5% on the timber of specified trees with minimum of Rs.2000/-; at 15% on the timber of specified trees on ad valorem basis subject to minimum of Rs.750/-, and on all other forest produce coming from mines including coal, lime stone, sand, Bajari and other minerals on the price at the rate of 15% with minimum of Rs.750/- as well, as on cart loads on the same basis subject to minimum of Rs.400/- for timber of specified trees; Rs.200/-, for timber of specified trees and Rs.200/- for forest produce coming from mines as notified in Schedule 'C', has changed the character of regulatory fees, to compensatory tax. The State Government has not justified the increase of transit fees as regulatory fees on quid pro quo. The increase of transit fee on ad valorem basis has thus rendered the fees as compensatory tax, for which the State Government has no powers to levy under the Indian Forest Act, 1927.

(ix) The basis of the increase of fees by the 4th Amendment and the 5th Amendment to the Rules of 1978 has not been justified and established, in co-relation with the alleged objects sought to be achieved, namely to maintain ecological balance, as no empirical data with scientific and sociological concerns has been produced before the Court.

(x) The exorbitant increase of the transit fees by 4th and 5th Amendment to the Rules of 1978, without rendering any services to facilitate the trade, even if the Rules have been framed by the State Government under the Indian Forest Act, 1927, which is Central Act, restrict freedom of trade, commerce and intercourse, and is thus violative of Art.301 of the Constitution of India and which is not saved by Art.304 (b) of the Constitution of India. The increase in transit fee thus cannot be treated to be reasonable restriction on the freedom of trade, commerce and intercourse with or within the State in public interest.

(xi) The State Government while trying to justify the increase of transit fee on cubic feet basis and thereafter on ad valorem basis purportedly to collect the transit fee to meet expenses for enforcement of regulation of movement by issuing transit passes, has not considered and kept in mind the principles of sustainable development, while raising environmental concern. The increase in the transit fee on advelorum basis on timber, coal and other minerals, necessary for raising infrastructure, generating power and manufacture of essential goods will have a direct impact and will impede the development of the State. No scientific study in this regard has been conducted by the State Government, nor any reports placed before the Court to justify the increase of fees, taking into consideration the right to development, which is a fundamental right of the citizens of the State under Art.21 of the Constitution of India.

(xii) The State Government has failed to justify the increase of transit fees on advelorum basis by linking it only with the increased cost of enforcement for collections. The collections will be far and above the cost of enforcement, raising revenue for the State. The imposition will increase the cost of generation of power, and the manufacture of essential goods necessary for creating infrastructure affecting the development of the State.

188. All the writ petitions are consequently allowed. The Notifications dated 20.10.2010, by which the 'U.P. Transport of Timber and Other Forest Produce Rules, 1978', was amended by the 4th Amendment; and the Notification dated 4.6.2011, by which the 'U.P. Transport of Timber and Other Forest Produce Rules, 1978' was amended by the 5th Amendment, are quashed. It will be open to the respondents to impose and collect the transit fees on such forest produce prevailing on such rates as it was being charged prior to the 4th Amendment to the Rules notified on 20.10.2010, i.e. at the rate of Rs. 38/- per tonne of capacity per lorry load of timber or other forest produce; Rs. 19/- per tonne of capacity per cart load of timber or other forest produce; Rs. 1.25 per camel load of timber and other forest produce; Rs. 4/- per per pony load of timber or other forest produce and Rs. 2/- per head load of timber or other forest produce. We also declare that the imposition of transit fee on 'Sponge Iron' which is not a forest produce after undergoing the process of manufacture, converting it into a commercially different commodity than forest produce, and 'Tendu Patta', the trade and transportation of which is monopolised by the State Government, is not valid in law, and restrain respondents from requiring transit passes and transit fees on it. The costs are made easy.

Ntpc Limited & Another v. State Of U.P And Others

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments

State Government's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Ntpc Limited & Another v. State Of U.P And Others

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