Holding

The transit fee under Rule 5 is a regulatory fee and is valid; no quid pro quo is required.

Summary

The State of Uttar Pradesh challenged the validity of the transit fee imposed under Rule 5 of the Uttar Pradesh Transit of Timber and Other Forest Produce Rules, 1978, arguing that the fee was invalid because it was not supported by a quid pro quo. The Allahabad High Court upheld the constitutional validity of the rule but struck down the fee on the ground that no service was rendered in exchange for the fee. On appeal, the Supreme Court examined the nature of the fee, noting that Sections 41, 42, 51 and 76 of the Indian Forest Act, 1927 empower the State to regulate transit of forest produce and to levy fees. The Court held that the transit fee is a regulatory fee, not a compensatory one, and therefore the requirement of quid pro quo does not apply. Consequently, the levy of the transit fee was declared valid and the High Court's decision was set aside. The appeals were allowed and each party was ordered to bear its own costs.

Issues considered

The constitutional validity of the transit fee levied under Rule 5 of the Uttar Pradesh Transit of Timber and Other Forest Produce Rules, 1978.
Whether a fee imposed for regulatory purposes must be supported by a quid pro quo (service rendered).
Whether the State has authority under the Indian Forest Act, 1927 to impose such a fee.

Legislation cited

Indian Forest Act, 1927s. 41, s. 42, s. 51, s. 76

Subjects

transit feeregulatory feequid pro quoIndian Forest Actforest produceconstitutional validityUttar Pradesh

Judgment

STATE OF U.P. AND ORS. A
v.
MIS. SITAPUR PACKING WOOD SUPPLIERS ETC.

APRIL 23, 2002

[Y.K. SABHARWAL AND K.G. BALAKRISHNAN, JJ.] B

U.P. Transit of Timber and Other Forest Produce Rules, 1978-Rule 5-
• "' Transit fee on forest produce-Levy of-Validity- in the instant case, High
Court holding transit fee invalid in absence of quid pro quo-On appeal held,
transit fee being regulatory and not compensatory, it is not necessary to
c
establish factum of rendering of service-Thus cannot be invalidated on the
ground that quid pro quo has not been established-Indian Forest Act, 1927.

Writ Petitions were filed before the High Court challenging the validity
of levy of transit fee on the forest produce under Rule 5 of U.P. Transit of D
Timber and Other Forest Produce Rules, 1978. High Court held the Rule to
be constitutionally valid but invalidated the levy of transit fee in absence of
,.. ).. quid pro quo. Hence the present appeals.
~

Allowing the appeals, the Court
E
_HELD : It is clear from the provisions of the Indian Forest Act, 1927
and U.P. Transit of Timber and Other Forest Produce Rules, 1978 that the
transitory fee is regtllatory 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
~
F
~ 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 and was not necessary for the State to establish quid pro
quo. [350-F; 351-C]

State of Tripura and Ors. v. Sudhir Ranjah Nath, [1997[ 3 SCC 665; G
Corporation of <;alcutta and Anr. v. Liberty Cinema, [1965] 2 SCR 477;
Secunde.-abad Hyderabad Hotel Owners' Association and Ors. v. Hyderabad
~)..
Municipal Corporation, Hyderabad and Anr., [1999] 2 SCC 274 and P.
Kannadasan and Ors. v. State o[T.N and Ors., [1996[ 5 SCC 670, referred to.

345 H
346 SUPREME COURT REPORTS [2002] 3 S.C.R.

A CIVIL APPELLATE JURISDICTION ; Civil Appeal Nos. 3974-
4051 of 1986.

From the Judgment and Order dated 16.5.1986 of the Allahabad High
Court in W.P. Nos. 901/84, 6168/83, 1411, 1585, 1602, 2027, 2369, 2398,
2419, 2492, 2538, 2647, 2655, 2665, 3369, 3776, 4169, 4357, 4459, 4535,
13 4627, 4628, 4629, 4633, 4820, 4941, 4942, 4974, 5006, 5007, 5021, 5151,
5307,5309, 5345, 5381, 5382, 5384, 5437, 5459, 5527, 5601, 5720, 5773,
5833, 5921, 6068/84, 133, 341, 356, 637, 785, 850, 1190, 1257, 1709, 1860,
1920, 1991, 2144, 2267, 2681, 3924, 3927, 4013, 4192, 5721, 6659/85, 49,
142, 159, 205, 370, 371, 372, 374, 1013, and 2208 of 1986.
c WITH

C.A. Nos. 2891, 2876, 2877-2886, 2887, 2888, 2889, 2890, 2874 of
2002, 36/45/95, 5376/98 and 2699 of 1999.

Dinesh Dwivedi, R.C. Verma, (NP), Ajay K. Agrawal, lrshad Ahmad
D (NP), G.G. Upadhyay for R.D. Upadhyay, Manoj Swarup, Ms. Lalita Kohli,
A.P. Mohanty (NP), Shakil Ahmed Syed (NP), Anis Ahmed Khan (NP) for
the appearing parties. ....
The Judgment of the Court was delivered by
E Y.K. SABHARWAL, J. Delay condoned.

Special leave granted.

The only question that is required to be determined in these appeals
is about the validity of the levy of transit fee under Rule 5 of U.P. Transit
F of Timber and Other Forest Produce Rules, 1978 (for short 'the Rules'). The
High Court has held the Ruleto be constitutionally valid but levy of transit
fee has been invalidated in absence of quid pro quo. The Rule has not been
struck down as in the view of the High Court it is open to the State Government
to support the levy of transit fee by rendering service as quid pro quo. This
G aspect alone is under challenge in these appeals filed by the State Government
aggrieved by the conclusion of the High Court that the levy of transit fee is
invalid.

The Rules have been framed in exercise of the powers under Sections
.. Al, 42, 51 and 76 of the Indian Forest Act, 1927. Rule 3 provides for regulation
H of transit of forest produce by means of passes. It places restrictions on
,.,I ,
STATE v. S!TAPUR PACKING WOOD SUPPLIERS [Y.K. SABHARWAL, !.] 347

movement of forest produce without transit pass into or from or within the A
State of U.P. The imposition of fee is provided in Rule 5. Rule 14 provides
for affixing of transit marks to timber. Rules 3, 5 and 14 read as under:

"3. Regulation of transit of forest produce by means of passes.-No
forest produce shall be moved into or from or within the State of
Uttar Pradesh except as hereinafter provided, without a transit pass in B
the form in Sch. A to these rules, from an officer of the Forest
Department or a person duly authorized by or under these rules to
I
• issue such pass or otherwise than in accordance with the conditions
of such pass or by any route or to any destination other than the route
or destination specified in such pass :
c
Provided that no transit pass shall be required for the removal -

(a) of any forest produce which is being removed for bona fide
consumption by any person in exercise of a privilege granted in
this behalf by the State Government or of a right recognized
under the Act, within the limits of a village in which it is produced; D

- )..
(b) of forest produce by contractors' agency from the forests managed
by the Forest Department, in which case the movement shall be
regulated by the relevant conditions of sale and terms of the
corresponding agreement deed executed by the buyer;
E
(c) of such forest produce as may be exempted by the State
Govem1Gent from the operation of these rules by notification in
the official Gazette.

5. Fees payable for different classes ofpasses.-At the check Chowki
or depot established under rule 15 and specified under proviso (ii) to F
Clause (b), sub-rule {I) 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 G
C-
(i) per lorry of timber or other Rs.5.00 per tonne
forest produce of capacity
(ii) per cart load of timber or
other forest produce 2.50 H
348 SUPREME COURT REPORTS [2002] :; S.C.R.
.if' ...-# '
A (iii) per camel load of timber or
other forest produce ... 1.25
(iv) per pony load of timber or other
forest produce 0.50

(v) per head of timber or the forest produce 0.25
B
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.

14. Property and transit marks to be affixed to timber.-Except
c when it is the property of Government, all timber brought at the
specified check Chowki or depot shall be examined and imprinted
with a Government hammer mark (the facsimile of which shall be
imprinted on the connected pass) the design of such a hammer mark
shall, from time to time, be prescribed by the Conservator of forest
D or the Divisional Forest Officer. In addition, if the Conservator of
Forests or the Divisional Forest Officer so directs, a distinguishable
private property mark of the owner of such timber of the description
which has been registered in the office of the Conservator of Forests
of the Circle, or the Divisional Forest Officer, shall also be affixed."

E Section 41 of the Act empowers the State Government to make rules
to regulate the transit of timber and other forest produce. The said Section 41
reads as under:

"41. Power to make rules to regulate transit of forest-produce.-
(1) The control of all rivers and their banks as regards the floating of
F timber, as well as the control of all timber and other forest-produce
in trar15it by land or water, is vested in the State Government, and it
may make rules to regulate the transit of all timber and other forest-
produce.

(2) In particular and without prejudice to the gent:rality of the foregoing
G powers such rules may-

( a) prescribe the routes by which alone timber or other forest-produce
may be imported, exported or moved into, from or within the
State;
H (b) prohibit the import or export or moving of such timber or other
STATE v. SITAPUR PACKING WOOD SUPPLIERS [Y.K. SABHARWAL.J.] 349
~ "I"' produce without a pass from an officer duly authorized to issue A
the same or otherwise than in accordance with the conditions of
such pass;
(c) provide for the issue, production and return of such passes and
for the payment of fees therefor;

(d) provide for the stoppage, reporting, examination and marking of B
timber or other forest-produce in transit, in respect of which there
is reason to believe that any money is payable to the Government
. ...
on account of the price thereof, or on account of any duty, fee,
royalty or charge due thereon, or, to which it is desirable for the
purposes of this Act to affix a mark; c
(e) provide for the establishment and regulation of depots to which
such timber or other produce shall be taken by those in-charge of
it for examination, or for the pay11_1ent of such money, or in order
that such marks may be affixed to it; and the conditions under
which such timber or other produce shall be brought to, stored at D

-
and removed from such depots;
J (t) prohibit the closing up or obstructing of the channel or banks of
any river used for the transit of timber or other forest-produce,
and the throwing of grass, brushwood, branches or leaves into
any such river or any act which may cause such river to be closed E
or obstructed;
(g) provide for the prevention or removal of any obstruction of the
channel or banks of any such river, and for recovering the cost
of such prevention or removal from the person whose acts or
-{ negligence necessitated the same; F
-~

(h) prohibit absolutely or subject to conditions, within specified local
limits, the establishment of saw-pits, the converting, cutting,
burning, concealing or making of timber, the altering or effacing
of any marks on the same, or the possession or carrying of marking
hammers or other implements used for marking timber; G
(i) regulate the use of property marks for timber, and the registration
of such marks; prescribe the time for which such registration
- Jc shall hold good; limit the number of such marks that may be
registered by any one person, and provide for the levy of fees for
such registration. H
350 SUPREME COURT REPORTS [2002] 3 S.C.R.

A (3) The State Government may direct that any rule made under this
section shall not apply to any specified class of timber or other forest-
produce or to any specified local area."

While dealing with the question of the constitutional competence of
the State Government to impose transit fee the High Court, in the judgment
B under appeal, held that 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 the regulatory measure could include the power to regulate
market fee. The High Court concluded that the power to regulate the transit
of timber under the Act and the Rules and for that purpose to levy fee,
C the·refore, is not confined to the transit of timber or forest produce by the
owner thereof; it would also extend to those traders who arrange to transport
it for any reason. The transit fee was held to fall within the general power
of control over transit under Section 41 (2) of the Act.

Having found that the constitutional competence in providing fee as set
D out in Rule 5 is not lacking, the High Court accepted the challenge to the
validity of levy on the ground that the fee is not supported by the principle
of quid pro quo; It held that no service is provided in lieu of the fee to any
person much less to the person from whom the transit fee is charged. In the
view of the High Court, reasonable relationship between the levy of the fee
and the services rendered had not been established.
E
The distinction between tax and fee is well settled and need not be
restated herein. It is clear from the aforenoticed 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
F every fee quid pro quo is not necessary. The transit fee being regulatory, it )-
is not necessJry 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.

In State of Tripura and Ors. v. Sudhir Ranjan Nath, [1997) 3 SCC 665
G almost similar question came up for consideration in relation to State of
Tripura. It was held that Sections 41 and 7 6 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
H that the State had not established that the services were rendered in lieu of
STATE v. SITAPUR PACKING WOOD SUPPLIERS [YK SABHARWAL, J.] 35 J
the said fee, was reversed by this Court holding that the fee was regulatory A
and not compensatory. Reference may be made to the decision in the case of
Corporation of Calcutta and 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 B
expressed in Secundrabad Hyderabad Hotel Owners' Association and Ors. v.
Hyderabad Municipal Corporation, Hyderabad and Anr., [1999) 2 SCC 274

. and P. Kannadasan and Ors. v. State ofT.N. and Ors., [1996) 5 SCC 670 .

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 C
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 D
its mistake amended the Rule so as to bring the provision of penalty in
;.
accord with the provisions of the Act.

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. E
N.J. Appeals allowed.

-