Nezone Foods Private LTD. vs. The State Of Assam And 3 Ors.

Held

The Court held that the levy and collection of market cess by the Assam State Agricultural Marketing Board and the District Regulated Market Committees during the period from July 1, 2017, to June 12, 2020, was illegal and without authority of law. The Court found that the petitioners had not made any averments in their writ petitions to prove that they had not passed on the burden of the cess to their customers. Consequently, the Court held that the question of refunding the amount collected as cess to the petitioners did not arise due to the doctrine of unjust enrichment. However, the Court also considered the financial condition of the Respondent Board, noting its penurious state and reliance on grant-in-aid. Therefore, the Court was not inclined to pass any directions for restitution by the Respondent Board of the cess collected during the disputed period, as it would seriously hamper the Board's functioning. The Court's reasoning was based on the principle that courts should not exercise their power to unjustly enrich a person and that the doctrine of unjust enrichment is applicable even in the absence of a specific statutory provision, as it is based on equity. The Court directed that the State shall realize the amount to the extent the respondent had unjustly enriched itself and pay the same to a voluntary or charitable organization, but subsequently modified this by not directing recovery from the Respondent Board due to its financial situation.

Facts

The petitioners, M/s. Bhatter Traders and Anr., M/s. Jai Bajrangbali Food Products and Anr., M/s. Sitaram Rameswarlal and Anr., M/s. Mahabir Oil Traders Industries and Anr., Lahkar Udyog Private Ltd., M/s. Modi Enterprise and Anr., Nezone Foods Private Ltd., M/s. Askaran Amit Kumar Princha and Anr., M/s. Rathi Traders and Anr., and Indraprasth Roller Flour Mills, filed writ petitions challenging the levy and collection of market cess by the Assam State Agricultural Marketing Board and various District Regulated Market Committees. The period in dispute is from July 1, 2017, to June 12, 2020. The petitioners argued that the levy of market cess was illegal after the introduction of the Goods and Services Tax (GST) regime. The State and the Marketing Board contended that the cess was levied under the Assam Agricultural Produce Market Act, 1972, and that the petitioners had not passed on the burden of the cess to their customers.

Key Issues

1. Whether the levy and collection of market cess by the Assam State Agricultural Marketing Board and the District Regulated Market Committees during the period from July 1, 2017, to June 12, 2020, was illegal and without authority of law, particularly in light of the Goods and Services Tax (GST) regime, thereby violating Section 17 of the Assam Agricultural Produce Market Act, 1972, and Article 265 of the Constitution of India? Petitioner's Arguments: The petitioners argued that the levy of market cess was illegal and without jurisdiction after the implementation of GST, as it amounted to double taxation. They contended that the Assam Agricultural Produce Market Act, 1972, did not empower the respondents to levy such cess post-GST. They relied on various pronouncements of the Supreme Court and other High Courts regarding the illegality of levies that are in conflict with the GST regime. Revenue/State's Arguments: The respondents, including the State of Assam and the Assam State Agricultural Marketing Board, argued that the market cess was levied under the provisions of the Assam Agricultural Produce Market Act, 1972, and that the petitioners had not demonstrated that they had not passed on the burden of the cess to their customers. They invoked the doctrine of unjust enrichment, asserting that the petitioners would be unjustly enriched if the collected cess was refunded without proof that the burden was not passed on.