Holding

Notification SRO 348 is beyond the purview of Section 3 of the Levy of Tolls Act, 1995 and therefore ultra vires; the levy of the additional toll tax is invalid.

Summary

The Supreme Court examined the validity of Notification SRO 348 dated 20 August 1982, which imposed an additional toll of Rs 0.06 per kilogram on dry fruits such as almonds, walnuts and kernels exported from Jammu & Kashmir. The petitioners argued that the levy was a fee requiring quid‑pro‑quo and that the State had no authority to impose it under the Levy of Tolls Act, 1995, and that they were entitled to exemption because their processing activities amounted to ‘manufacture’. The Court held that the Act only empowers the State to levy tolls on the use of roads and bridges by vehicles, not on goods, and that the notification was therefore beyond the scope of Section 3 of the Act. Consequently, the notification was ultra vires, the High Court’s decision upholding it was set aside, and the judgment was given prospective effect with no refund of amounts already collected. The appeal was allowed.

Issues considered

Whether Notification SRO 348 levying an additional toll on dry fruits is within the powers conferred by Section 3 of the Levy of Tolls Act, 1995.
Whether the levy of a toll on goods constitutes a fee requiring quid‑pro‑quo or a tax within the meaning of the Act.
Whether the processing of dry fruits falls within the definition of ‘manufacture’ for the purpose of exemption under a separate notification.
Whether the State can levy such a toll without having incurred expenditure on the highways used.
Whether the notification violates constitutional provisions (Articles 19(1)(g), 14, 286).

Legislation cited

National Highways Act, 1956

Subjects

toll taxLevy of Tolls Actultra viresstatutory interpretationfee vs taxmanufacture exemptionconstitutional challengeJammu & Kashmirdry fruitsprospective effect

Judgment

HANS RAJ AND SONS A
v.
STATE OF JAMMU AND KASHMIR AND ORS.

JULY 17, 2002

B
[D.P. MOHAPATRA AND DORAISWAMY RAJU, JJ.]

Levy of Tolls Act, 1995: Sections 3 and 4:

Notification No. SRO 348-Levy of additional toll tax on dry fruits- C
Validity of-Held, Notification is beyond the purview of Section 3 of the Act
since State Government is not vested with power to levy additional toll tax-
However, this ruling will have prospective effect.

Respondent-State issued Notification whereby additional toll tax was
levied on certain dry fruits. Appellant-Petitioners and others filed Writ D
Petitions challenging the validity and legality of the Notification and
alternatively sought for grant of exemption of additional levy of toll tax
on the ground that State Government, by another notification had granted
exemption from levying of additional tax to those who were engaged in
the process of manufacturing of dry fruits. According to the appellants, E
in their factory dry fruits were being subjected to various tests and
processes, manual as well as mechanical, to ensure best quality supply to
foreign markets and therefore claimed exemption from levy of toll tax
under the said notification. High Court dismissed the Writ Petitions. Hence
this appeal.
F
It was contended for the appellants that toll t~x as levied was in the
nature of fee. Hence there has to be an element of quid pro quo. Since the
State Government was not spending any amount for construction and
maintenance of high ways, the levy of toll tax was not justified.

On behalf of respondent-State, it was contended that the toll tax G
levied was not fee but like a tax to which principle of quid pro quo applied;
and that the activities undertaken by the appellants were not covered b1
the term 'manufacture', therefore, they were not entitled to exemption
from levying of toll tax under the relevant notification.

199 H
200 SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A Allowing the appeal, the Court

HELD : 1.1. Tolls are of different types and may be levied in different
situations; it ordinarily means the amount which the Government, or a
local authority or a person duly authorised by the Government may collect
for passage of carriages and vehicles over a road or bridge. This meaning \
B is by no means exhaustive. Where provision for levy and collection of tolls
is made under the legislative enactment or a subordinate legislation then
the levy is to be governed strictly according to the provisions of the statute
or rules or any other instrument, as the case may be. [209-A, BJ

Shorter Oxford English Dictionary on Historical Principles revised and
C · edited C. T. Onions. Thiri Edition, Volume II, page 2206; Wharton's Law
Lexicon, 14th Edition, pages 999-1000; Black's Law Dictionary, Seventh
Edition and Halsbury 's Laws of England, 4th Edition, page 96, referred to.

1.2. Levy of Tolls Act was enacted with a view to consolidate in one
D Act the provisions of levy of tolls upon public roads and bridges in Jammu
and Kashmir State. In the Schedule to the Act are enumerated vehicles of
different types and the rates at which the toll is to be charged in respect
of the same. From the contents of the Schedule it is clear that the Statute
contemplates levy of toll for crossing upon different road and bridges in
the State and the State is vested with the power to prescribe by Notification
E the toll rate of the levy and the manner of collections of the same.
[209-F; 210~0, E]

1.3. The scheme of the Statute does not envisage levy of toll on goods
or on any transaction of sale thereof. It is clearly a levy upon user of public
roads and bridges in the State. The scheme fits in with the concept of tolls,
F be it toll transverse of toll through, to be levied in lieu of the advantage
or privilege provided by the State Government for user of roads and
bridge lying within the State. For the purpose of the levy the agency which
has construed the roads or bridges in question or the source of finance
for implementation of the project are not relevant. (210-E, F)
G 1.4. On a primafacie reading of Notification No. 348 in the context
of the provision in Section 3(1), it is manifest that the Notification is not .
in conformity with the power vested in the State Government under the
Section. The intention is to levy toll on dry fruits including almonds,
walnuts and walnut kernels exported out of the State through certain exit
H points by roads or roadways. The power to impose such a levy does not
HANS RAJ ANDSONSv. STATE [D.P. MOHAPATRA, J.] 201
flow from the power vested in Section 3 of the Act in purported exercise A
of which the Notification has been issued. 1210-G, H; 211-AJ
.:.
2. Notification No. SRO 348 in which the additional toll tax was
levied was clearly beyond the purview of Section 3 of the Act. Further,
the finding of the High Court that in the context of facts and circumstances
of the case, processing of the dry fruits like almonds, walnuts and walnut B
kernels did not come within the expression 'manufacture' cannot be said
to be erroneous. The judgment of the High Court upholding the levy of
additional toll tax in the case is also unsustainable. This judgment will have
only prospective operation and any amount collected as toll/additional toll
tax under the impugned notification need not be refunded. 1212-E, F) C
A. V. Fernandez v. The State of Kera/a, )1957) SCR 837, followed.

Commissioner of Wealth Tax Gujarat-III, Ahmedabad v. Ellis Bridge
Gymkhana, [1998) I SCC 384; Diwan Bros. v. Central Bank of India, Bombay
and Ors., [1976) 3 SCC 800 and Bank of Chettinad v. Income Tax D
Commissioner, AIR (1940) P.C. 183, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4123-24/
2002.

From the Judgment and Order dated 23.8.99 of the High Court of
Jammu and Kashmir, Jammu/Srinagar in W.P. No. 660/82 and connected. E
CIVIL APPEAL NOS.4125-4145-of 2002 © SLP (C) Nos . 15830,
15831-32, 15823-24 15989-15990.16169-16170, 16172-16173, 16713-16714,

.'
16455-16456, 16859-16860, 16852,16879-16880 S 18787/99 respectively .

Dushyant Dave, Sunil Dogra, Manu Nair for Suresh A. Shroff & Co. F
Ms. Pratibha M. Singh, Manik Dogra and Maninder Singh for the Appellants.

Sandeep Narain, Shri Narain, Ms. Anjali for S. Narain & Co.

The Judgment of the Court was delivered by
G
D.P. MOHAPATRA, J. Leave is granted in all the Special Leave
Petitions.

The controversy raised in these cases relates only to the legality and
validity of the levy of additional toll tax under Notification SRO 348 dated
20.8.82 on dry fruits like almonds, walnuts and walnut kernels. In view of the H
202 SUPREME COURT REPORTS (2002) SUPP. I S.C.R.

A common questions involved in the cases they were heard together with a
consent of learned counsel for the parties, and they are being disposed of by
this judgment.

For the sake of convenience we will refer to relevant facts with reference
to writ petition no. 660 of 1982 filed by Mis Mehta Foods Pvt. Ltd Against
B the State of Jammu and Kashmir represented by the Chief Secretary and the
Secretary in Ministry of Finance of the Government of Jammu and Kashmir
which is the subject matter of Civil Appeal arising out of SLP (C) No. 16852
of 1999. In the petition filed under Article 226 of the Constitution of India
read with Section 103 of the Constitution of Jammu and Kashmir before the
C High Court of Jammu and Kashmir the writ petitioner sought the following
reliefs:

"It is, therefore, prayed that the Notification SRO 348 dated 20.08.1982
and Notification SRO 349 dated 20.08.1982 may be quashed by a
writ of certiorari as the impugned Notification is ultra vires the statute
and that it also violates the fundamental right of the petitioner under
D
Article 19 (1 )(g) and 14 of the Constitution oflndia and is otherwise
ultra vires of Article 286 (i) of Constitution of India ..

The Hon'ble Court may grant such other relief as the circumstances
of the case may warrant."

E The respondents contested the case. That case and the other connected matters
were decided by a Full Bench of the High court by the Judgment rendered
on 23rd August, 1999.

ln the writ petition the petitioner questioned the validity and legality
of the levy of additional toll tax@ Rs. 0.60 paise per kilogram on dry fruits
F including almonds, walnuts and walnut kernels, to be exported out of the
State of Jammu & Kashmir through the barriers located at Lakhanpur, Jammu
Railway Station, Manwal and other toll posts, as may be modified by the
State Government from time to time. Alternatively the writ petitioner contended
that even if the levy of toll tax is held to be valid, then the additional toll tax
G is not payable by him since the State Government by a notification had
granted exemption from payment of toll tax to those who were engaged in
the process of manufacture of dry fruits. The petitioner submitted that it was
engaged in the business of sale and export of dry fruits including almonds,
walnuts and walnut kernel not only to places located outside the State of
Jammu & Kashmir but also to foreign countries. The dry fruits referred to
H above were collected from the grower and before exporting them, they were
HANS RAJ AND SONS v. STATE [D.P. MOHAPATRA, J.] 203

subjected to various processes. After purchasing walnuts and bitter apricots A
in shell from different pans of the State, the raw material were transported
to the petitioner's factories. In the factories the walnut and bitter apricot were
subjected to various tests and processes which were both manual as well as
mechanical. This was done with a view to ensure best quality materials are
supp lied to foreign markets.
B
Setting out the details of the processed undertaken by it the petitioner
stated that the walnuts and bitter apricots in shell were first graded by a
grading machine with a view to ensure size segregation; after completing the
process of-grading, the dry fruits in shell were sorted out manually, this was
done so that the split walnuts, damaged nuts and spoiled nuts as also the oily C
1
nuts were separated. After completing the process of sorting, the walnuts
were subjected to bleaching. They were treated with a chemical solution.
This is meant to give them a luster and attractive appearance. It was the
contention of the petitioner that it is this process of bleaching which completely
transforms the original look of the nuts and renders the outer shell softer than
the original one. After bleaching, the walnuts are put in another machine for D
drying. This is done with a view to attain retention of 3% of moisture content
After drying, the nuts are sorted manually with a vit:w to eliminate unwanted
nuts. The walnuts are inspected again with a view to ensure quality control.

As regards walnut kernels and bitter apricots the process and treatment E
is the same which is applicable to walnuts. After the process of grading, the
walnuts and bitter apricots are soaked over-night in water. They are then
shelled by the semi- skilled labourers for removing, the kernels with special
emphasis on the object of obtaining maximum percentage of halves. After
removing the kernels, they are dried by mechanical process. Later on, they
are sorted out according to colour and size. This is achieved by use of motor F
driven conveyor belts. The halves thus removed are subjected to the process
of gravity separation. By this process, the broken pieces are removed from
the half pieces. Crumbs and dust is also removed. The pieces of crumbs
which are left out go to the grading machine and are subjected to further
grading. These different sizes are then cleaned. After all these processes are G
over, the net product is packed and exported outside the State. It is this
process which according to the petitioner amounts to 'manufacture'. The
petitioner contended that even if it be assumed that the tolls had been validly
levied, then the petitioner is entitled to exemption under the notifications
issued by the State Government, appended with the writ petitions. It was the
further case of the petitioner that toll tax levied is in the nature of a fee, H
204 SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A therefore, there has to be an element of quid pro quo i.e. there has to be a
corresponding service to be provided by the State Government. As the
petitioner used national highways for transporting its goods and the State
Government is not spending any amount from the State funds for construction
or maintenance of such highways the levy of toll tax by the State Government
is not sustainable.
B
Refuting the allegation made by the petitioner the State and its Officers
who were arrayed as parties in the writ petition submitted, inter alia, that the
tolls levied in the case are not fee to which the principle of quid pro quo
applies. The levy in the case is like a tax which is imposed by an Act of the
C Legislature, the concept of quid pro quo is alien to such a levy The respondent
placed reliance on the Full Bench decision of the Jammu & Kashmir High
Court in the case of Girdhari Lal Anand Sarafv. Jammu and Kahsmir and
Ors., AIR (1969) J & K 113. The further case of the respondents was that
the petitioner is not entitled to any exemption as the activities allegedly
undertaken by it is not covered by the term 'manufacture'.
D
In support of their respective cases the parties raised various questions
which were considered in detail by the High Court in the impugned judgment
covering about 50 pages. The High Court has traced the development of the
levy of tolls under the Levy of Tolls Act, 1995 (samvat 1938 A.D) (for short
'the Act'). The High Court has taken note of Section 3 of the Act in which
E it is inter alia provided that the Government may from time to time prescribe,
annul or alter rates of tolls to be levied upon any road, ferry or bridge (in the
State) and may place the collection of such tolls under such management as
may appear to it proper, and all persons employed in the management and
collection of such tolls shall be liable to the same responsibilities as would
F belong to them if employed in the collection of the ( Excise) revenue under
the Jammu and Kashmir (Excise) Act, 1958.

The arguments raise in support of the challenge against the levy of
additional toll tax were summed up by the High Court as follows:

G (i) that levy of tolls visuaJi3e an element of quid pro quo. This
would involve examination of the distinction between tax and
fee,

(ii) that no toll tax can be levied as the petitioners are using national
highways which highways are being maintained by the Central
H Government,
HANS RAJ AND SONS v STATE [D.P. MOHAPATRA, J.] 205

(iii) that under the National Highways Act of 1956, the responsibility A
of maintaining the highways is on the State Government. If any
levy is to be made by the State Government then there has to be
a specific agreement bet\veen the Central Government and the
State Government and this agree1nent has necessarily to be
approved by the parliament. In the present case, it is submitted B
that no such agreement exists between the Central Government
and the State Government and none has been placed before the
Parliament , therefore, the State Government cannot levy any
toll tax;
(iv) that additional toll tax on dry fruits cannot be levied. By issuing
notification a separate category is said to have been carved out C
for dry fruits and kernels. By creating this category, the petitioners
have been discriminated.
(v) That in any case, the walnuts are subjected to a manufacturing
process. Therefore, walnuts themselves and other dry fruits
including its kernels are except from the payment of toll tax. D
(vi) That the method of detennining taxable turnover by weight, so
far as sales tax is concerned, is not known to laws;

After discussing at length the merits of the contentions raised before it in the
principles laid down in the several decisions of English Courts and the Supreme E
Court and different High Courts in this country, the High Court held that the
toll in the present case has not been levied in respect of any particular road
or service, it is being levied in consideration of all the conveniences,
advantages and amenities which the petitioner is enjoying on account of
having its business within the State. The consideration for the toll is to be
found in the general amenities and advantages which the State provides. The F
High Court further held that this toll is in the nature of toll tax levied under
the Act and for such levy the element of quid pro quo is to be presumed and
that element is present in the case in hand.

(i) that there is no generic difference between a tax and fee.
Compulsion is not a hallmark- of distinction between the two. G
Again the money collected need not go in to a separate fund. If
it goes in to a consolidated fund, the nature of collection is
altered,
(ii) that in this case, what is being collected, is a tax and not a fee.
This is being collected in the exercise of sovereign power vested H
206 SUPREME COURT REPORTS [2002) SUPP. I S.C.R.

A in the State. This levy was being charged before the Constitution
came in to force,
(iii) that even ifthe toll in question is treated as a fee, even then there
has to be no corresponding rendering of service. This is because
the toll in question is in the nature of toll traverse and not toll
B thorough. In the case of toll traverse, here use of the soil is
sufficient consideration for the levy of the toll;
(iv) that the petitioners are using not only the national highways but
they are using State Highways also. Therefore. Even ifthe concept
of quid pro quo is made applicable, even then the petitioners
c cannot succeed. This is because as indicated above in addition to
the national highway, they are using State Highway and also the
roads which are not part of 'national highway'.
(v) That the vesting of National Highway in the Central Government
is only with a view to see that these are properly maintained. The
ownership ofsoil remains with the State. On this reasoning also,
D
the State Government can impose tax in question;
(vi) That the above conclusions were the subject matter of decision
in the case of Girdhari Lal Anand Saraf v. State of J&K, AIR
(1969) J&K 113. All these have been answered in favour of the
State. The reasoning given by the Full Bench is a reasoning to
E
which no exception can be taken. We respectfully concur with
the view so expressed.

Some of the arguments which were not there before the earlier Full
Bench in Girdhari Lal Anand Sarafs case (supra) are also answered
F against the petitioner. These are:

(i) that the requirement of laying a notification before the Parliament
is not mandatory
(ii) that the activity which is carried on by the petitioners in the
matter of making the dry fruit marketably does not fall within
G the concept of term 'manufacture'. What was said by the Supreme
Courts of India and by other High Courts has already been noticed
above. The activity in question being not covered by the term .
'manufacture'. Therefore, the petitioners cannot seek exemption,

(iii) that the incidence of taxation remains the same. Merely because
H the turnover has been determined by taking the weight into
HANS RAJ AND SONSv. STATE [D.P. MOHAPATRA,J.) 207

consideration would not take the tax out of the purview of the A
Jammu & Kashmir General Sales Tax Act of 1962,
(iv) that the levy of additional toll tax is therefore valid. As to what
should be the rate of tax is to be primarily determined by forums
other than this court. Taking into consideration , the geometrical
increase in state expenditure in all avenues it cannot be said that B
the additional toll tax is in any way violative of any constitutional
provision."

In conclusion the High Court (Full Bench) passed the following order:

"In view of the above discussion the questions posed are answered C
against the petitioners and in favour of the State. The registry is now
directed to list all writ petitions before the Division Bench so that
• these are disposed of by taking into consideration the facts of each
I individual case.

Thereafter in compliance with the above direction, the case was disposed of D
by the Division Bench by the order, which reads as follows:

"The issue involved in this petition and other connected petitions has
been answered in favour of the state. It has been held that the levy
of toll tax is in accordance with law. In view of the detailed reasons
given by the Full Bench in writ petition 660/82 and other connected E
writ petitions enumerated in the title, these petitions are found to be
without merit and are dismissed.

The interim directions shall stand vacated automatically."

Before considering the case on merits, the meaning of the expressions F
'toll', 'toll thorough' and 'toll traverse' may be noted:

The expression 'toll' normally means a definite payment exacted by
the state or the local authority, by virtue of sovereignty or lordship, or in
return for protection, more especially, for permission to pass somewhere, do
some act, or perform some function. Another meaning attributed to the term G
is a charge for the landing or shipping goods at a port, a charge made for
transport of goods, esp. by railway or canal.

The expression 'toll thorough' means where a town prescribes to have
toll for every beast that goes through their town. The term 'toll traverse',
means where one claims to have an amount for every beast that is driven H
208 SUPREME COURT REPORTS [2002] SUPP. I S.C.R.

A over his ground. (See The Shorter Oxford English Dictionary on Historical
Principles, revised and edited by C.T Onions, Third Edition, Volume II, page
2206.

In Wharton's Law Lexicon 14th Edition, pages 999-1000, the terms
'toll' 'toll-thorough' and 'toll traverse', are defined as under:
B
"By s.3 toll includes any rate or other payment payably under the
special Act for any passenger, animal, carriage, goods merchandise,
articles, matters or things conveyed on the railway. See RAILWAY,
and Hunt v. Great Northern Railway Co., (1851) IOC.B.900.

C Toll-thorough means, when a town prescribes to have toll for such a
number of beasts, or for every beast that goes through the town, or
over a bridge or ferry belonging to it.

Toll-traverse means, toll taken for every beast driven across a man's
land. He may prescribe and distrain for it via regia.
D
In Black's Law Dictionary, Seventh Edition, the term 'toll' has been
described as ''I. A sum of money paid for the use of something esp., the
consideration paid to use a public road, highway, or bridge, 2. A charge for
a long-distance telephone call.''

E In Halsbury's Laws of England, 4th Edition, page 96 para 138 dealing
with 'tolls at common law' it is stated that the common law recognizes two
classes of tolls payable under a grant to presumed grant from the Crown in
respect of the passage of a highway or bridge, namely tolls traverse and tolls
thorough. A toll traverse is a toll taken in respect of the original ownership
of the land crossed by the public (even if now perhaps severed from it), the
F land having been at the date of the grant the grantee's private property, and
having been then dedicated by him to the public in consideration of the toll
to be taken. It is further stated therein that a toll thorough is independent of
any ownership of the soil by the original grantee, the consideration necessary
to support it being usually the liability to repair the particular highway or
G bridge. ,t
Dealing with "tolls under statute' at page 97 para 139 it is stated that .
highway and bridge tolls may be payable under statute. In the case of an
independent statutory undertaking engaged in the maintenance of a bridge,
the power to revise the amount of the tolls may be in the undertakers'
H discretion, or the tolls may only be subject to a requirement that they are to ·
HANS RAJ AND SONSv. STATE [D.P. MOHAPATRA, J.] 209
be reasonable in amount. A
It is clear from the above that though tolls are of different types and
may be levied in different situations, it ordinarily means the amount which
the government, or a local authority or a person duly authorised by the
government may collect for passage of carriages and vehicles over a road or
bridge. This meaning is by no means exhaustive. There provision for levy B
and collection of tolls is made under the legislative enactment or a subordinate
legislation then the levy is to be governed strictly according to the provisions
of the statute or rules or any other instrument, as the case may be.

As noted earlier, in the writ petitions the petitioners questioned the C
validity of levy of additional toll tax by the State Government under the
Notification SRO 348 Dated 20th August, 1982. Relevant portion of the said
Notification is extracted hereunder:

"In exercise of the powers conferred by Sub Section (I) of Section
3 of the Levy of Tolls Act Samvat 1995 (VIIl of 1995) (1938 A.O.) D
and in supersession of notification SRO 341 dated 19-08-1982 the
Government hereby direct that additional toll tax shall be levied at
Rs. 0.06 per kg. On dry fruit including almonds, walnuts and walnut
kernels thereof exported out of state through lakhanpur, Jammu Rly.
Station Manual and other toll posts as may be notified by the Govt.
from time to time in addition to the toll payable in terms of SRO 115 E
dated 31-03-1982."

The Levy of Tolls Act, 1995 (1938 A.O.) was enacted with a view to
consolidated in one Act the provisions of levy of tolls upon public roads and
bridges in Jammu and Kashmir State, Section 3 under which the Notification F
has been issued reads as follows:

"Rate of tolls to be levied:(l) The Government may from time to
time prescribe, annul or alter rates of tolls to be levied upon any road,
ferry or bridge [in the State] and may place the collection of such
tolls under such management as may appear to it proper, and all G
persons employed in the management and collection of such tolls
shall be liable to the same responsibilities as would belong to them
if employed in the collection of [Excise] Revenue under the Jam mu
and Kashmir [Excise] Act, 1958.

(a) The rates prescribed to be levied at the commencement of this H
210 SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A Act, shall be rates mentioned in the first Schedule hereto annexed.
The rates shall continue to be levied till they are annulled or altered
in accordance with the provisions of this section.

(b) the power to annul or alter the rates vested in the Government
under the foregoing provisions of this section may be exercised from
B time to time after publication in the Government Gazette. The
amendment and alteration shall have the same force and effect as if
they had been contained in the first Schedule.

(c) the persons under whose management the tolls are levied at the
commencement of this Act shall levy the tolls prescribed and shall be
c held to have been appointed for collection of tolls under the provisions
of this Act.

(d) The Government may, from time to time, notify the commodities
in respect of which tolls may be levied on ad valorem basis, subject
to a maximum of 15% of the value of purchase."
D
In the Schedule to the Act are enumerated vehicles of different types
and the rates at which the toll is to be charged in respect of the same. The
Schedule bears the heading "Through Traffic up and down crossing the Domell
Toll Stations per trip each way". From the contents of the Schedule it is clear
that the statute contemplates levy of toll for crossing upon different roads
E and bridges in the State and the state is vested with the power to prescribe
by Notification the toll rate of the levy and the manner of collection of the
same. The scheme of the Statute does not envisage levy of toll on goods or
on any transaction of sale thereof. It is clearly a levy upon user of public
roads and bridges in the State. The scheme fits in with the concept of tolls,
F be it toll traverse or toll thorough, to be levied in lieu of the advantage or
privilege provided by the State Government for user of roads and bridges
lying within the State. For the purpose of the levy the agency which has
constructed the roads or bridges in question or the source of finance for
implementation of the project are not relevant. On a prima facie reading of
the Notification no. 348 in the context of the provision in Section 3(1), it is
G manifest that the Notification is not in conformity with the power vested in
the State Government under the Section. On a plain reading of the Notification
it is clear that the intention is to levy toll on dry fruits including almonds,
walnuts and walnut kernels exported out of the State through certain exit
points by road or railways. The power to impose such a levy does not flow
H the power vested in Section 3 of the Act in purported exercise of which the
HANS RAJ AND SONS v. STATE [D.P. MOHAPATRA, J.] 211

Notification has been issued. A
A Constitution Bench of this Court. in the case of A. V. Fernandez v.
The State of Kera/a, [1957] SCR 837 observed:

"It is no doubt true that in construing fiscal statutes and in determining the
liability ofa subject to tax one must have regard to the strict letter of the law B
and not merely to the spirit of the statute or the substance of the law. If the
Revenue satisfies the Court that the case falls strictly within the provisions
of the law, the subject can be taxed. If, on the other hand, the case is not
covered within the four comer of the provisions of the taxing statute, no tax
can be imposed by inference or by analogy or by trying to probe into the C
intentions of the legislature and by considering what was the substance of the
matter. We must of necessity, therefore, have regard to the actual provisions
of the Act and the rules made thereunder before we can come to the conclusion
that the appellant was liable to assessment as contended by the Sales Tax
Authorities."
D
In that case this Court noted with approval, the following observations of
Lord Russel of Killowen in Inland Revenue Commissioners v. Duke of
Westminister, (1936) A.C.I. 24'

"I confess that l view with disfavour the doctrine that in taxation
cases the subject is to be taxed if in accordance with a Court's view E
of what it considers the substance of the transaction, the Court thinks
that the case falls within the contemplation or spirit of the statute.
The subject is not taxable by inference or by analogy, but only by the
plain words of a statute applicable to the facts and circumstances of
his case."
F
The observations of Lord Russel in the aforementioned case were also referred
by the Privy Council in the Bank ofChettinad v. Income Tax Commissioner,
AIR (!940) P.C. 183. The Privy Council did not accept the suggestion that
in revenue cases "the substance of the matter" may be regarded as distinguished
from the strict legal position. G
A similar view was taken in Commissioner of Wealth Tax, Gujarat-JI/,
Ahmedabad v. Ellis Bridge Gymkhana, [1998] 1 SCC 384, in which it was
• observed: "the rule of construction of a charging section is that before taxing
any person, it must be shown that he falls within the ambit of the charging

• section by clear words used in the section. No one can be taxed by implication. H

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212 SUPREME COURT REPORTS [2002] SUPP. I S.C.R.

A A charging section has to be construed strictly. If a person has not been
brought within the ambit of the charging section by clear words, he cannot
be taxed at all."

Again in the Case of Dilvan Bros. v. Central Bank of India, Bombay
and Ors., [ 1976] 3 SCC 800, three Judge of bench of this Court, construing
B the principles of interpretation of fiscal statutes, quoted with approval, the
observations in A. V. Fernandez v. State of Kera/a (supra), and in State of
Maharashtra v. Mishri Lal Tarachand Lodha, [1964] 5 SCR 230, in which
it was observed:

"The Act is a taxing statute and its provisions therefore have to be
c construed strictly, in favour of the subject-litigant".

Following the ratio in the afore-mentioned decisions it was observed:

"These observations manifestly show that the courts have to interpret
the provisions of a fiscal statue strictly so as to give benefit of doubt
D to the litigant. The principles deducible from the decisions referred to
above are well established and admit of no doubt."

From the discussions in the foregoing paragraphs, the position that
emerges is that the Notification No. SRO 348 in which the additional toll tax
was levied was clearly beyond the purview of Section 3 of the Act. Further,
E the finding of the High Court that in the context of facts and circumstances
of the case, processing of the dry fruits like almonds, walnuts and walnut
kernels did not come within the expression 'manufacture' cannot be said to
be erroneous. The judgment of the High Court upholding the levy of additional
toll tax in the case is also unsustainable.
F
According, the appeals are allowed. The judgment of the High Court
under challenge is set aside. It is made clear that this judgment will have only
prospective operation and any amount collected as toll/ additional toll tax
under the impugned notification need not be refunded. Parties to bear their
respective costs.
G
S.K.S. Appeals allowed.