State Of Uttaranchal And Others v. Kumaon Stone Crusher ., Supreme Court Of India, Judgment, Law, casemine.com

Factual and Procedural Background

The Supreme Court of India was seized of multiple special leave petitions arising from the State of Uttar Pradesh and the State of Uttaranchal concerning the levy of a “transit fee” on forest produce under Rule 5 of the U.P. Transit of Timber and Other Forest Produce Rules, 1978. In an earlier decision—State of U.P. v. Sitapur Packing Wood Suppliers (2002) 4 SCC 566—this Court had upheld the constitutional validity of Rule 5 and categorised the levy as a regulatory fee that did not require proof of quid pro quo.

Subsequently, Rule 5 was amended three times: the Third Amendment set the fee at Rs 38 per cubic metre per lorry; the Fourth Amendment raised it to Rs 200 per cubic metre per lorry; and the Fifth Amendment converted it to 15 % ad valorem on the value of the forest produce. The Allahabad High Court upheld the Third Amendment but struck down the Fourth and Fifth Amendments. Appeals and connected matters reached the Supreme Court, which issued interim directions on 29-10-2013 for U.P. matters and on 12-11-2013 for Uttaranchal matters. Because a final hearing was unlikely in the near future, the Court entertained applications to modify those interim directions “keeping in mind public interest.”

Legal Issues Presented

Whether the interim directions governing the collection of transit fee should be modified pending final adjudication of the constitutional challenges to the Fourth and Fifth Amendments to Rule 5.

What interim rate of transit fee should be applied to different categories of forest produce defined under Section 2(4) of the Indian Forest Act, 1927.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of U.P. v. Sitapur Packing Wood Suppliers, (2002) 4 SCC 566	Held that transit fee under Rule 5 is regulatory in nature and does not require demonstration of quid pro quo.	Provided the doctrinal backdrop affirming the State’s power to levy a regulatory transit fee, thereby informing the Court’s willingness to allow continued recovery at revised rates during the pendency of the appeals.

Precedent

Rule or Principle Cited For

Application by the Court

State of U.P. v. Sitapur Packing Wood Suppliers, (2002) 4 SCC 566

Held that transit fee under Rule 5 is regulatory in nature and does not require demonstration of quid pro quo.

Provided the doctrinal backdrop affirming the State’s power to levy a regulatory transit fee, thereby informing the Court’s willingness to allow continued recovery at revised rates during the pendency of the appeals.

Court's Reasoning and Analysis

The Court first noted that Section 2(4) of the Forest Act, 1927, distinguishes between two broad classes of “forest produce”:

Sub-clause (a) items, which are deemed forest produce regardless of origin;

Sub-clause (b) items, which are forest produce only when “found in or brought from a forest.”

Recognising the public interest in both environmental regulation and uninterrupted commercial activity, the Court determined that a nuanced interim regime was warranted. Accordingly, it calibrated the applicable fee rates by matching each statutory category of forest produce with a specific amendment to Rule 5:

For produce within sub-clause (a) and for sub-clause (b) produce originating in Uttar Pradesh, the Fifth Amendment’s 15 % ad valorem rate would apply.

For sub-clause (b) produce merely transiting through Uttar Pradesh (i.e., originating outside the State), the Fourth Amendment’s rate of Rs 200 per cubic metre per lorry would apply.

The Court preserved prior protective measures: any recovery is subject to the final outcome of the petitions, and successful petitioners will receive refunds with 9 % annual interest. Accurate records of collections must be maintained. The modified directions take effect from 1-5-2016 and exclude exempted goods such as clinker and fly ash. Orders previously issued for Uttaranchal matters remain undisturbed.

Holding and Implications

Interim directions modified. The State of Uttar Pradesh may recover transit fee at the rates specified above from 1-5-2016, while the protective refund mechanism and prior directions for Uttaranchal continue.

Implications: The ruling allows the States to collect higher transit fees immediately, improving regulatory revenue and potentially influencing market behaviour, yet preserves the financial interests of private parties through a refund-with-interest safeguard. No final precedent on the constitutional validity of the Fourth and Fifth Amendments has been set; that issue remains to be decided at the final hearing, scheduled for September 2016.

State Of Uttaranchal And Others v. Kumaon Stone Crusher .

Order

1. In State of U.P. v. Sitapur Packing Wood Suppliers (2002) 4 SCC 566, validity of levy of transit fee under Rule 5 of the U.P. Transit of Timber and Other Forest Produce Rules, 1978 (for short “the Rules”) was in question. In the judgment under appeal therein, the High Court had held the said Rule 5 to be constitutionally valid but levy of transit fee was invalidated in the absence of quid pro quo. Allowing the appeals, this Court found the transit fee under Rule 5 to be clearly regulatory and held that it was not necessary for the State to establish quid pro quo.

2. In the present matters coming from the State of U.P., amendments to very same Rule 5 are in question. By the Third Amendment, the rate was revised to Rs 38 per cubic metre capacity per lorry. By the Fourth Amendment, the rate was further revised to Rs 200 per cubic metre capacity per lorry while the Fifth Amendment seeks to revise the rate to 15% ad valorem, on the value of the forest produce for transportation.

3. The High Court has held the Third Amendment to Rule 5 to be valid but invalidated the Fourth and Fifth Amendments.

4. In these matters, the following interim directions were passed by this Court on 29-10-2013 (2018) 14 SCC 630.

“1. The State shall be free to recover transit fee for forest produce removed from within the State of U.P. at the rate stipulated in the Third Amendment to the Rules mentioned in the earlier part of this order.

2. Any such recovery shall remain subject to the ultimate outcome of present petitions pending in this Court.

3. In the event of the writ petitioners/private parties succeeding in their cases, the amount deposited/recovered from them shall be refunded to them with interest @ 9% p.a. from the date the deposit was made till actual refund.

4. The State shall maintain accurate amount of recovery made and the nature and the quantum/quantity of the produce removed by the private parties concerned.

5. Even in the second batch of cases arising out of Writ Petition No. 975 of 2004 whereby the High Court has struck down the Fourth and Fifth Amendments to the Rules, the State shall be free to make recoveries in terms of the Third Amendment in regard to the forest produce removed from within the State of U.P. The operation of the orders passed by the High Court shall to that extent remain stayed.

6. This modification shall not apply to exempted goods or industrial by-products like clinker and fly ash.”

5. In matters from the State of Uttaranchal, namely, SLP (C) No. 19445 of 2004 (State Of Uttaranchal Petitioner(S) v. Kumaon Stone Crusher (S).) and other connected matters, the following directions were passed by this Court on 12-11-2013 (2018) 14 SCC 641:

“The operation of the impugned judgment(s) passed by the High Court shall remain stayed in these matters subject to the following conditions:

(I) Recoveries, if any, made from writ petitioners-respondents herein shall be subject to the ultimate outcome of these matters.

(II) In the event of the appeals, filed by the State against the impugned orders passed by the High Court, being dismissed, the amount recovered from the writ petitioners (respondents herein) towards transit fees shall be refunded to them with interest at the rate of 9% per annum from the date the recovery is made till the date of actual refund.

(III) The rate at which the recovery may be made by the State shall be those stipulated under the notifications issued on the subject as modified by any interim or final order passed by the High Court of Uttaranchal in any pending writ petition.

Pleadings, if not already completed, shall be completed within six weeks.

Post these matters for hearing in the month of February, 2014 along with the connected matters arising from the State of U.P. including SLP (C) BI, 11367 of 2007, etc.”

6. These matters were thereafter heard in part on 19-2-2015 “SLP (C) No. 11367 of 2007, 10627-28 of 2008 but could not be heard thereafter. On 10-2-2016 2016 SCC OnLine SC 1743, the matters were directed to be posted on 26-4-2016 for final hearing. However, considering the number of matters, there does not seem to be immediate prospect of final hearing in the matters.

7. We, therefore, heard the learned counsel for the State as well as for the private parties to consider, if interim directions passed earlier could suitably be modified keeping in mind public interest involved in the matters.

8. Rule 5 of the Rules seeks to impose transit fee on the forest produce. “Forest produce” as defined in Section 2(4) of the Forest Act, 1927 has two elements. The matters covered under sub-clause (a) of Section 2(4) are “forest produce” regardless whether found in, or brought from a forest or not, whereas under sub-clause (b) those enumerated therein “when found in or brought from a forest” are stated to be forest produce.

9. In the circumstances, we deem it appropriate to pass the following interim directions in modification of those passed earlier:

9.1. Insofar as “forest produce” as defined in sub-clause (a) of clause (4) of Section 2 is concerned, the State shall be free to recover transit fee within the State of U.P. at the rate stipulated in the Fifth Amendment to Rule 5 as aforesaid;

9.2. Insofar as forest produce originating from the State of U.P. and covered by sub-clause (b) of clause (4) of Section 2 is concerned, the State shall be free to recover transit fee at the rate stipulated in the Fifth Amendment to the aforesaid Rule 5.

9.3. Insofar as forest produce covered under sub-clause (b) of clause (4) of Section 2, which does not originate from the State of U.P. but is merely passing through the State, the State shall be free to recover transit fee in respect of such forest produce at the rate stipulated in the Fourth Amendment to the aforesaid Rule 5.

9.4. Any such recovery shall remain subject to the ultimate outcome of the present petitions pending in this Court.

9.5. In the event of the writ petitioners/private parties succeeding in their cases, the amount deposited/recovered from them shall be refunded to them with interest @ 9% per annum from the date of deposit till actual refund.

9.6. The State shall maintain accurate amount of recovery made and the nature/quantity of the produce removed by the private party is concerned.

9.7. These modified directions shall come into effect on and from 1-5-2016.

9.8. This modification shall not apply to exempted goods or industrial by-products like clinker and fly ash.

10. The directions issued on 12-11-2013 (2018) 14 SCC 641 in respect of matters from the State of Uttaranchal, remain unchanged. Let these matters be listed for final disposal in the third week of September 2016.

[Cited Order (2)], (Record of Proceedings)

State Of Uttaranchal And Others v. Kumaon Stone Crusher .

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

State Of Uttaranchal And Others v. Kumaon Stone Crusher .

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