Holding

Rule 3 of the Tripura Transit Rules, except for sub‑rule (5) imposing export duty, is valid and intra‑vesre; the State may prohibit export and levy regulatory fees, and the rule is saved by Article 302 and does not contravene Articles 301 or 304(b).

Summary

The State of Tripura appealed against a Gauhati High Court decision that declared Rule 3 of its Transit Rules illegal. Rule 3 imposed licence and application fees, required licences for removal of timber and firewood, allowed the State to prohibit export of forest produce, and levied an export duty of up to 100% of market value. The Supreme Court held that the Indian Forest Act, 1927 (sections 41 and 76(d)) empowers the State to make such rules, including the power to prohibit export when needed for local needs, and to levy regulatory fees, but the power to levy export duty rests only with the Central Government under section 39, making sub‑rule (5) ultra‑vires. The Court also ruled that the rule is saved by Article 302 and does not violate Article 301 or require compliance with Article 304(b). Consequently, the appeal was allowed in part: Rule 3, except sub‑rule (5), was declared valid and the High Court judgment set aside to that extent.

Issues considered

The scope of power conferred on the State Government under Section 41 of the Indian Forest Act, 1927, especially whether it includes the power to prohibit export of timber and firewood (Rule 3(8)).
Whether the State may levy export duty on timber and firewood under Section 41/76(d) or whether such power is exclusively with the Central Government under Section 39.
The nature of the application and licence fees under Rule 3(3) and (4) – whether they are regulatory fees permissible under Section 41 or unconstitutional taxes.
Whether Rule 3 violates Article 301 of the Constitution and the proviso to Article 304(b).
Whether Rule 3 is protected by Article 302 as a rule made under a post‑constitutional parliamentary enactment.
The proper interpretation of the term "regulate" in Section 41 – does it encompass prohibition.

Legislation cited

Indian Forest Act, 1927s. 39, s. 41, s. 76
Union Territories (Laws) Act, 1950

Subjects

Indian Forest ActSection 41Section 39Section 76Export dutyRegulatory feeConstitutional lawArticle 301Article 302Article 304ProhibitionTransit RulesTripuraForest produceTrade restriction

Judgment

STATE OF TRIPURA AND ORS. A
v.

- SUDHIR RANJAN NATH

FEBRUARY 13; 1997

(B.P. JEEVAN REDDY AND SUJATA V. MANOHAR, JJ.) B

Indian Forest Act, 1927: Sections 41 and 76(d).

Tripura Transit Rules--Rule 3(8)-Timber and firewood-Quantity to

- be exported from State-To be detennined on basis of availability of forest C
produce after catering to needs and requirements of local people of
State-Validity of-Held: Rule 3(8) fell within the power of State Government
under S. 41 of the Act "to regulate transit of timber and other forest
produce''-Power to ''regulate" includes power to prohibit in the context of
sub-role (8)-Further, sub-role (8) was not only relatable to S. 41 but also to
S. 76(d) inasmuch as it was intended to carry out the object and purposes of D
the Act-Hence, R. 3(8) was valid and intra-vires the Acr-Tripura Transit
Rules, R. 3.

Sections 41. and 76(d)-Tripura Transit Rule-Rule 3-State Govern-
ment imposed restrictions regulating transit of timber and other fore st E
produce-Held : Rule 3 neither violative nor required to comply with proviso
to Art. 304(b )-It is saved by Art. 302-Rule was made by the State as delegate
of Parliament to carry out purposes of the Act-It was neither a law made by
the State Legislature nor a role made by the State Government in its capacity
as Government of Tripura-Hence, Rule 3 not required to comply with Art.
304(b). F

Sections 41 and 76--Tripura Transit Rules--Rule 3-Forest Act, insofar
as Tripura State was concerned, being post-Constitutional Parliamentary
enactment (as it had been extended to Tripura, which was then a Union
.Territory) by Union Territory (Laws) Act, 1950, Ss. 41 and 76 thereof were G
laws within the meaning of Art. 302-Ss. 41 and 76 thus being saved by Art.
302, any Rule made to carry out the purposes of the said provisions or to
elucidate the meaning and purpose of the said provisions must equally be
protected by Art. 302. .,

Section 39-Tripura Transit Rules--Rule 3-Held : The expression H
29
30 SUPREME COURT REPORTS (1997) 2 S.C.R.

A "restrictions" in Art. 302 was not qualified by word "reasonable''-But even
proceeding for the present purposes that the restrictions ought to be reasonable
since Art. 302 has a close parallel with Clauses .(2) to (6) of Art. 19, the power
to impose reasonable restrictions took the power to prohibit also in ap- '
propriate situations-Hence, considering that the restrictions imposed by R. 3
B amowtted to prohibition, it is unconstitutionaf-However, R. 3 could not have
been s4stained by sub-sections (3) and (4) of S.39--Constitution of India,
1950, Arts. 301 to 304.

Sections 39, 41and76-Tripura Transit Rules-Rule 3(5}-Empowered
State Government to levy duty for export of timber and firewood upto 100%
C of their market value-Held: Rule 3(5) ultra vires S.41 of Forest Act.

Sections 41 and 76(drTripura Transit Rules 3(3) a11d (4Horest
produce-Movement of-Licence levy of-Application fee and licence fee of
Rs. 1,000 and Rs. 2,000 respectively-Held: Such fee was regulatory fee and
not compensatory fee for which no quid pro quo need be established-Hence,
D Rules 3(3) and (4) valid-Constitution of India, 1950, Art. 301.

Sections 41and76(drTripura Transit Rules-Rule 3(2)--l'rovidedfor
licence for removal of timber or firewood from within the State to any place
outside the State and also for establishing a trading depot within the
E State-Held: Rule 3(2) was covered by Ss. 41and76(d}-Hence, Rules 3(3)
and (4) valid.

The Indian Forest Act, 1927 was enacted to consolidate the law
relating to forests, the transit of forest-produce and the duty leviable on
F timber and other forest-produce. The Act was extended to the then Union
Territory of Tripura by the Union Territories (Laws) Act, 1950. It con-
tinued to.be applicable to the State of Tripura. The State Government
framed the Tripura Transit Rules under Sections 41 and 42 of the Act.
Rule 3 of the Transit Rules provided for levy of an application fee and
licence fee of Rs. 1,000 and Rs. 2,000 respectively for movement of forest-
G produce. The Rule also provided that no person was permitted to establish
a trading depot within the State without a licence. Rule 3(5) of the Rules
levied export duty extending upto hundred percent of the market value of
timber/firewood.

H The High Court had declared that the levy of application and licence
STATEv. SUDHIR RANJAN NATH 31

-, fees amounted to levy of tax and was bad. This was on the ground that the A
. -State had not established the service rendered in lieu of the said fees. The
High Court had also held that Rule 3(5) of the Transit Rules, which levied
export duty on export of timber from the State, was beyond the rule-
making power conferred upon the State Government by Section 41 of the
Act. The High Court had also found fault with Rule 3(8). The High Court B
further held that Rule 3 violated Article 301 of the Constitution and since
the proviso to clause (b) of Article 304 has not been complied with, the
Rule was declared illegal and ultra vires the Constitution.

On behalf of the respondent it was contended that the power to
c
-- regulate conferred by Section 41 of the Act did not empower the State
Government to prohibit the export of forest- produce from within the State
to a place outside the State.as provided by Rule 3(8); and that the power
to ~late did not include the power to prohibit.

Allowing the appeal, this Court D

HELD : 1.1. _Rule 3 of the Transit Rules as framed by the State
Government is not only relatable to Section 41 of the Indian Forest Act,
1927 but also to clause (d) of Section 76 of the Act. Rule 3(8) empowers
the State Government to prohibit the export of timber and firewood if such 0
E
a course is necessary to cater to the needs of the local people or for meeting
the requirements of the people of the State. Thus power to "regulate"
includes power to prohibit in the context of sub-rule (8). Clause (d) of
Section 76 empowers the State Government to make rules generally to
carry out the provisions of the Act, wh~ch means the carrying out the object
and purposes of the Act. The object of the Act is to preserve and protect F
the forest wealth of the country of and to regulate the cutting, removal,
transport and possession of the forest-produce in the interest of the State
and their people. It is for achieving the above purpose that the Act provides
for declaration of reserve forest, formation of village forests and declara-
tion of protected forest. It is for achieving the very purpose that the Act G
, vests, in the Government, control over forest and lands not being the
property of the Government and controls even the collection and move-
ment of drift and stranded timber. It is not a taxing enactment designed
to preserve, protect and promote the forest wealth in the interests of the
nation. It must necessarily take within its fold catering to the needs of the H
32 SUPREME COURT REPORTS (1997) 2 S.C.R.

A people of the State and that is what sub-rule (8) provides. Therefore, Rule
3(8) is perfectly valid. (47-C-E]

Jiyajee Cotto11 Mills Ltd. &Anr. v.M.P. Electricity Board &A11r:, (1989) ...
Suppl. 2 SCC 52; K Ramanathan v. State of Tamil Nadu & Anr., (1985) 2
B SCC 116; State of Tamil Nadu v. Mis. Hind Stone & Ors., [1981) 2 SCC 205
and State of (J.P. v. Hi11dustan Aluminium Corporation, (1979) 3 SCC 229,
relied on"

State ofMysore v. H. Sanjeeviah, (1967) 2 SCR 361, held in applicable.

C G.K Krishnan v. State of T.N., (1975) 1 SCC 375 and Commonwealth
of Australia v. Bank of New South Wales, (1950) AC 235, cited.

1.2. The impugned Rule 3 of the Transit Rules is made by the State
as the delegate of the Parliament to carry out the purposes of the Act. It
is not a law made by the legislature of the State nor is it a rule made by
D the State Government in its capacity as the Government of Tripura. The
Indian Forest Act is a post-constitutional Parliamentary enactment in-
sofar as Tripura is concerned for the reason that it has been extended to
Tripura (which was then a Union Territory) by the Union Territories
(Laws) Act, 1950. Sections 41 and 76 are, therefore, laws within the
E meaning of Article 302 of the Constitution. If Sections 41 and 76 are saved
by Article 302, any rule. made to carry .out the purposes of the said
provisions or to elucidate the meaning and purport of the said provisions
must equally be protected by Article 302. The expression "restrictions" is
not qualified by the word "reasonable". Even proceeding for the present
F purposes that the restrictions ought to be reasonable, since Article 302 has
a close parallel with clauses (2). to (6) of Article 19, the power to impose
reasonable restrictions takes in the power to prohibit also in appropriate
situations. Hence, Rule 3 of the Tripura Transit Rules cannot be said to
be violative of Article 301 is it required to comply with the requirement of
G the proviso to clause (b) of Article 304 of the Constitution. However, Rule
3 could not also have been sustained by sub-sections (3) and (4) of Section
39 of the Act. Rule 3 of the Tripura Transit Rules, except sub-rule (5)
thereof, is declared to be perfectly valid and effective. (47-G-H, 48-A-E]

State of Mysore v. H. Sanjeeviah, (1967] 2 SCR 361; Mis. Krishan Lal
H Praveen Kumar v. State of Rajastha11, [1981] 4 SCC 550 and Narendra
STATE v. SUDHIR RANJAN NATH 33

Kumar v. Union of India, (1960] 2 SCR 361, relied on. A
Mithan Lal v. The State of Delhi & Anr., [1959] SCR 445 and New
Delhi Municipal Committee v. State of Punjab, [1997] 1 JT SC 40, referred
to.

2. There is nothing in Section 41, which empowers the State Govern· B
ment to leVy export duty. The power to levy duty is conferred only upon the
Central Government by Section 39 and that power is neither delegated to
the State Government nor is the State Government empowered to make rule
with respect to the said levy. Neither the powers conferred upon the State
Government by Section 41 nor the power conferred by Section 76 com- C
prehend the levy of export duty. The power to levy duty is conferred only
upon one named authority, viz., the Central Government. It must accord-
ingly be held that sub-rule (5) has been rightly declared bad. [42-E·F]

3. The High Court was not right in holding that the application fee
and. licence fee of Rs. 1,000 and Rs. 2,000 respectively amounted to tax on D
the gr!Jund that it has not been proved to be compensatory in nature. The
said fee imposed by sub- rule (3) and (4) of Rule 3 is a fee within the
meaning of Section 41 (2). It is regulatory fee and not compensatory fee for
which D<' quid pro quo need be established. [42-G-H]
E
Corporation of Calcutta v. Liberty Cinema, [1965] 2 SCR 477; Van
Organic Chemical Industries v. Collector of Central Excise, Bombay, (1997)
1 JT SC 641 and Bihar Distillery & Anr. v. Union of India, (1997) 2 JT SC
20, relied on.

Shannon v. Lower Mainland Dairy Products Board, (1938) AC 708, F
cited.

4. Rule 3(2) merely provides for a licence for removal of timber
or firewood from within the State to. any place outside the State and
also for setting up or establishing a trading depot within the State. This G
sub-rule is equally within the four corners of Section 41. Indeed Section
41(d) which empowers the State Government to make rules generally to.
carry out the provisions of this Act also serves as an authority for the
said sub-rule. [44-A-B]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 772 of H
34 SUPREME COURT REPORTS (1997) 2 S.C.R.

A 1997.
From the Judgement and Order 11.10.91 of the Gauhati High Court
(Assam, Nagaland, Meghalaya, Manipur, Tripura, Mizoram and Arunachal
Pradesh) in C.R. No. 184 of 1990.

B S.S'. Javali and Gopal Singh for the Appellants.

Har Dev Singh and Ms. Madhu Moolchandani for the Respondent.

The Judgment of the Court was delivered by

C B.P. JEEVAN REDDY, J. Leave granted. Heard the counsel for the
parties.

The Gauhati High Court has declared Rule 3 of the Transit Rules
framed by the Government of Tripura under Sections 41 and 42 of the
D Indian Forest Act, 1927 as illegal and ultravires the Constitution. The
correctness of the said decisions is challenged by the State of Tripura.

The Indian Forest Act, 1927 (the Act) was enacted to consolidate
the law relating to forests, the transit of forest-produce and the duty
leviable on timber and other forest-produce. The Act was extended to the
E then Union Territory of Tripura by the Union Territories (Laws) Act, 1950
(Act 30 of 1950). It continues to be applicable to the State of Tripura. The
Indian Forest Act is thus a post-constitutional enactment, so far as Tripura
is concerned, vide Mitlzan Lal v. The State of Delhi & Anr., (1959] SCR 445
and New Delhi Municipal Committee v. State of Punjab Etc. Etc., (1997) 1
p J.T. S.C. 40.

Chapter II of the Act deals with reserved forests while Chapter III
deals with village forests. Chapter IV deals with protected forests and while
Chapter V with State government Control over forests and lands not being
the property of the government. Chapter VI provides for levy of duty on
G timber and other forest-produce. Chapter VII provides for control on
timber and other forest-produce in transit. Chapter VIII deals with dri(l:
timber. Chapters IX, XI and XIII contain machinery provisions. A perusal
of the provisions of the Act shows that the Act is designed to protect and
increase the forest wealth and its proper utilisation for the purposes of the
H State and the people. For the purpose of the present case, it is not
STATE v. SUDHIR RANJAN NATII [B.P. JEEVAN REDDY, J.) 35

necessary to notice the provisions of the several chapters of the Act except A
Chapter VI, VII and XII. Section 39 in Chapter VI confers upon the
Central Government the power to levy duty on timber and other forest-
produce. Section 39 reads as follows :

"39. Power to impose duty on timber and other forest- produce-(1) B
The Central Government may levy and duty in such manner, at
such places and at such rates as it may declare by notification in
the Official Gazette on all timber or other forest-produce-

(a) which is produced in the territories to which this Act extends,
and in respect of which the Government has any right; C
(b) which is brought from any place outside the territories to which
this Act extends.

(2) In every case in which such duty is directed to be levied ad
valorem the Central Government may fix by like notification the D
value on which such duty shall be assessed.

(3) All duties on timber or other forest-produce which, at the time
when this Act comes into force in any territory, are levied therein
under the authority of the State Government, shall be deemed to E.
be and to have been duly levied under the provisions of this Act.

(4) Notwithstanding anything in this section, the State Government
may, until provision to the contrary is made by Parliament, con-
tinue to levy any duty which it was lawfully levying before the
commencem~nt of the Constitution, under this section as then in F
force;

Provided that nothing in this sub-section authorises the levy of
any duty which as between timber or other forest-produce of the
State and similar produce of the locality outside the state, dis- G
criminates in favour of the former, or which, in the case of timber
or other forest-produce of localities outside the State, dis-
criminates between timber or other forest-produce of one locality
and similar timber or other forest- produce of another locality."

Sub-section (1) thus confers the power to levy duty only upon the H
36 SUPREME COURT REPORTS (1997] 2 S.C.R.

A Central government and not upon the State Governments. Sub-section (3),
however, says that if any duty levied under the authority of the State
government on timber or other forest-produce is in force in any territory
on the date of coming into force of the said Act, the same sh~ll be deemed
to be and to have been levied under the said section. Sub-section (4) says
B that until a provision is made ·to the contrary by parliament, the State
government may 'continue to levy any. duty which it was lawfully levying
before the commencement of the Constitution, under this section as then
in force". These sub-section are referred to for the reason that an argument
is built upon them by the appellant-State, which we shall refer to at a later
stage.
c
Section 41 vests in the State government control of all rivers and their
banks as regards the floating of timber as well as the control of all timber
and other forest-produce in transit by land or water. It also empowers the
State government to make rules "to regulate the transit of all timber and
other forest-produce". Sub-section (2) elucidates several matters in respect
D of which rules can be framed. It would be appropriate to set out Section
41 in its entirety :

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
E timber, as well as the control of all timber and other forest-produce
in transit 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 generality of the
F foregoing power §UCh 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;
G (b) prohibit the import or export or moving of such timber or o,ther
.nroduce without a pass from an officer duly authorised to/ iSsue
the same, or otherwise than in accordance with the conditions of
such pass;

H ( c) provide for the issue, production and return of such passes and
·~.

STATE v. SUDHIR RANJAN NATII [B.P. JEEVAN REDDY, J.] 37

for the payment of fees therefor; A
(d) provide for the stoppage, reporting, examination and marking
of timber or other forest-produce in transit, in respect of which
there is reason to believe that any money is payable to the Govern-
ment 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 B
the purposes of this Act to affix a mark;

(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 payment of such money, or in order C
that such marks may be affixed to it, and the conditions under
which such timber or other produce shall be brought to, stored at
and removed from such depots;

(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,· D
and the throwing of grass, brushwood, branches or leaves into any
such river or any act which,)llay cause such river to be closed or
obstructed; ,.

(g) provide f~r the prevention or removal of any obstruction of the
channel or banks of any such river, and for recovering the cost of E
such prevention or removal from the person whose acts or
negligence necessitated the same;

(h) prohibit absolutely or subject to conditions, within specified
local limits, the establishment of sawpits, the converting, cutting,
burning, concealing or making of timber, the altering or effacing F
of a'ny marks on the same, or the possession or carrying or marking
hammers or other implements used for making timber;

(i) regulate the use of property marks for timber, and the registrac
tion of such marks; prescribe the time for which such registration G
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.

(3) The State Government may direct that any rule made under
this section shall not apply to any specified class of timber or other H
38 SUPREME COURT REPORTS [1997] 2 S.C.R.

A forest-produce or to any specified local area.~

Chapter XII confers an additional power upon the State government
to make rules. Sections 76, 77 and 78 occurring therein read as follows :

"76. Additional powers to make mies.- The State Government may
B make rules -

(a) to prescribe and limit the powers and duties of any Forest-of-
ficer under this Act;

(b) to regulate the rewards to be paid to officers and informers
c out of the proceeds of fines and confiscation under this Act;

(c) for the preservation, reproduction and disposal of trees and
timber belonging to Government, but grown on lands belonging to
or in the occupation of private persons; and
D ( d) generally, to carry out the provisions of this Act.

17. Penalties for breach of mies. - Any person contravening any
rule under this Act, for the contravention of which no special
penalty is provided, shall be punishable with imprisonment for a
E term which may extend to one month, or fine which may extend
to five hundred rupees, or both.

78. Rules when to have force of law. - All rules made by the State
Government under this Act shall be published in the Official
Gazette, and shall thereupon, so far as they are consistent with this
F Act, have effect as if enacted therein."

A reading of Section 41 and 76 discloses that besides vesting total
control over the forest-produce in the State government and empowering
it to regulate the transit of all timber or other forest-produce, the State
G government is also empowered to make rules "generally,· to carry out the
provisions of this Act". Thus, any rule made by the State government which
purports to give effect to any of its provisions would be within the four
corners of the Act.

In exercise of the powers conferred upon it by the Act, State govern-
H ment has framed the Transit Rules. Rule 3, with which alone we are
STATE v. SUDHIR RANJAN NATII [B.P. JEEVAN REDDY, J.) 39

concerned, reads thus; A
"3(1). Any person importing, exporting or moving into, from or
within, or who has imported, exported or moved into from or
within the State of Tripura any forest produce, shall p~esent it to
the Forest Officer in Charge of the place of origin or entry of the
forest produce, or to the Forest Officer in Charge of the area B
nearest to the place of origin or entry of the same through which
it is transported, for examination and check, and shall pay the
amount, if any, due thereon & obtain a transit pass in Form C of
the Appendix to these rules.

(2) No person shall remove or cause to be removed from the State
c
for the purpose of trade or otherwise any timber and firewood to
any other place outside the State and no trading depot shall be set
up or established in the State at any place without licence for such
purpose from the Divisional Forest Officer having the jurisdiction
over the area subject to approval of Conservator of Forests for the D
Circles.

(3) Every application for grant of licence under the aforesaid Rule
shall be made to the Divisional Forest Officer having the jurisdic-
. tion over the area in the Form appended to this Rules and on E
payment of non-refundable application fee amounting to Rs. 1,000.

(4) Every order granting or refusing a licence under these Rules
shall be in writing and in case of refusal, shall contain the reasons
therefor. The licence fee of Rs. 2,000 shall be paid and deposited
in Government Treasury/Sub-Treasury by challan and the F
receipted copy of the challan must accompany the licence.

(5) A licensee shall be required to pay the export duty for export
of timber and firewood from this State to other States which shall
not exceed 100% of the market value of such timber/firewood as
.· will be assessed by the Divisional Forest Officer. G

(6) The conditions of the licence, the route or routes through which
the timbers/firewoods are to be transported to a place outside the
State and the period of validity of the licence shall be such as may
be notified by the State Government in the Official Gazette. H
40 SUPREME COURT REPORTS [1997) 2 S.C.R.

A Provided that the conditions of the licence and the period of
its validity may vary for different categories of timber.

Provided further that such period of validity shall not exceed
6 (six) months.

B (7) Every licence granted under this Rules may be renewed. An
application for renewal of licence shall be made in form-E within
30 (thirty) days before the expiry of the licence. The Divisional
Forest Officer Having the jurisdiction over the area shall on receipt
of application for renewal of licence, make such inquiry as he may
c think fit and within a period of 60 (sixty) days from the date of
receipt of such application, either grant or refuse to grant renewal
of the licence;

Provided that no renewal of licence shall be granted unless the
Divisional Forest Officer is satisfied about the location, availability
D of the raw materials, financial capacity, past records in business
and relevant antecedent of such person. Whether the Divisional
Forest Officer refuses to grant such renewal of licence, he shall
record the reasons therefor and such reasons shall be communi-
cated to the persons in writing. For the purpose of inquiry under
this Rules, the Divisional Forest Officer may enter into or upon
E
any land, survey and demarcate the same, make a map thereof or
authorises any Officer to do so and also call for such documents
as he deems necessary for ascertaining the merit of the application.

Provided further that no application for renewal of licence shall
F be rejected unless the holder of such licence has been given an
opportunity of presenting his case and unless the Divisional Forest
Officer is satisfied that the application for such renewal has been
made after the period specified therefor of any statement made by
the person making such application for grant of renewal of the
licence was incorrect or materially false or such person has con-
G travened any of the terms and conditions of the licence or any
provision of the Indian Forest Act or the Rules made thereunder
or such person does not fulfil the terms and conditions of such
licence.

H (8) The quantity of timber and firewood which will be permissible
STATE v. SUDHIR RANJAN NATII (B.P. JEEVAN REDDY, J.] 41

for export by a export licensee shall be determined on the basis of A
availability of forest produce after catering to the needs of the local
people of the State and those of the Forest trade licence holder
for trading in forest produces within the State meeting the require-
ment of the people of the State."

(Sub-rules (2) to (8) were added by Notification dated May 7, B
l990.) .

Rule 3(1) obligates any person importing, exporting or transporting
any forest-produce into, from or within, the State of Tripura to present the
same to the appropriate officer for examination and check and also to pay C
the amount, if any, due thereon. He is also obligated to obtain a transit
pass in Form-C prescribed by the Rules for any of the above purposes.
Sub-rule (2) provides that no person shall remove or transport any timber
and firewood from within the State to any place out side the State except
under a licence granted by the appropriate Divisional Forest Officer. The
sub-rule also prohibits setting up of any depot in the State without such a D
licence. Sub-rule (3) says that an application for licence shall be submitted
in the prescribed form and shall be accompanied by a non-refundable
application fee of Rs. 1,000. Sub-rule (4) provides that a licence, if granted,
shall be issued on payment of licence fee of Rs. 2,000. (These amounts are
fixed irrespective of the value of the forest-produce involved.) Sub-rule (5) E
provides that on export of timber from the State of Tripura to other States,
an export fee not exceeding percent of the market value of the tim-
b~r/firewood concerned would be leviable. Sub-rule (6) empowers the
government to notify the route or routes along which the forest-produce
shall be transported to a place outside the State. Sub-rule (7) deals with F
renewal. of licences. Sub-rule (8) says that the quantity of timber and
firewood to be exported from the State shall be determined on the basis
of availability of forest-produce after catering to the needs of the local
people of the State and the requirements of the people of the State.

The High Court has declared that the levy of application fee of G
Rupees one thousand and of licence fee of Rupees two thousand amounts
to levy of tax and is bad This is on the ground that the State has not
established the service rendered in lieu of the said fees. The High Court
has also held that sub-rule (5), which levies export duty on export of timber
from the State is beyond the rule-making power conferred upon the State H
42 SUPREME COURT REPORTS [1997) 2 S.C.R.

A government by Section 41. It has also found fault with sub-rule (8). The
High Court has been of the further opinion that Rule 3 violates Article 301
of the Constitution and since the proviso to clause (b) of Article 304 has
not been complied with, the rule is liable to be declared unconstitutional.

B The correctness of the judgment is challenged in this appeal by Sri
S.S. Javali, learned counsel appearing for the State of Tripura. We have
also heard Sri Har Dev Singh, learned Counsel for the respondent who
supported the reasoning the conclusion of the High Court besides submit-
ting that the power to regulate conferred by Section 41 of the Act does not
empower the State government to prohibit the export of forest-produce
C from within the State to a place outside the State as provides by sub-rule
(8) of Rule 3. Counsel submitted that the power to regulate does not
include the power to prohibit.

We shall first deal with the validity of sub-rule (5) of Rule 3 which
D empowers the State Government to levy export duty extending upto
hundred percent of the market value of timber/firewood concerned. We
agree with the High Court that there is nothing in Section 41 which
empowers the State government to levy export duty. The power to levy duty
is conferred only upon the Central Government by Section 39 and that
power is neither delegated to the State government nor is the State govern·
E ment empowered to make rules with respect to the said levy. Neither the
powers conferred upon the State government by Section 41 nor the power
conferred by Section 76 comprehend the levy of export duty. The power
to levy duty is conferred only upon one named authority, viz., the Central
Government. It must accordingly be held that sub-rule (5) has been rightly
F declared bad.

We next take up the validity of the levy of application fee and licence
fee of Rupees one thousand and Rupees two thousand respectively. In our
opinion, the High Court was not right in holding that the said fee amounts
to tax on the ground that it has not been proved to be compensatory in
G nature. In our opinion, the fee imposed by sub-rules (3) and (4) is a fee
within the meaning of clause (c) of sub-section (2) of Section 41. It is
regulatory fee and not compensatory fee. The distinction between compen-
satory fee and regulatory fee is well established by several decisions of this
Court. Reference may be made to the decision of the Constitution Bench
<--
H in Corporation of Calcutta v. Liberty Cinema, (1965) 2 S.C.R. 477. It has
STATEv.SUDHIRRANJANNATil[B.P.JEEVANREDDY,J.] 43

been held in the said decision that the expression 'licence fee" does not A
necessarily mean a fee in lieu of services and that in the case of regulatory
fees, no quid pro quo need be established. The following observations may
usefully be quoted :

"This contention is not really open to the respondent for s.548 does
not use the word 'fee'; it uses the words 'licence fee' and those B
words do not necessarily mean a fee in return· for services. In fact
in our Constitution fee for licence and fee for services rendered are
contemplated as different kinds of levy. The former is not intended ·
to be a fee for services rendered. This is apparent from a con-
siqeration of Art. 110(2) and Art. 199(2) where both the expres- C
- sions are used indicating thereby that they are not the same. In
Shannon v. Lower Mainland Dairy Products Board, (1938) A.C.
708=AIR (1939) PC 36 it was .observed at pp. 721-722 (of Ac):
(at pp. 38-39 of AIR) :

'if licences are granted, it appears to be no objection that fees D
should be charged in order either to defray the costs of
administering the local regulation or to increase the general
funds or the Province or for both purposes .......... It cannot,
as their Lordships think, be an objection to a licence plus a
fee that it is directed both to the regulation of trade and to E
the provision of revenue.' ' ·

It would, therefore, appear that a provision for the imposition of
a licence fee does not necessarily lead to the conclusion that the
fee must be only for services rendered."
' F
This decision has been followed in several decisions, including the
recent decisions of this Court in Varn Organic Chemical Industries v.
Collector of Central Excise, Bombay, (1997) 1 J.T. S.C. 641 and Bihar
____,. Distillery & Anr. v. U11io11 of India, (1997) 2 J.T. S.C. 20. The'High Court
was, therefore, not right in proceeding on the .assumption that every fee G
must necessarily satisfy the test of quid pro quo and in declaring the fees
----,.....- levied by sub-rules (3) and (4) of Rule 3 as bad on. that basis. Since we
hold that the fees levied by the said sub-rules is regulatory in nature, the
said levy must be held to be valid and competent, being fully warranted by
Section 41. H
44 SUPREME COURT REPORTS (1997] 2 S.C.R ..

A So far as Sub-rule (2) is concerned, it merely provides for a licence
for removal of timber or firewood from within the State to any place
outside· the State and also for setting up or establishing a trading depot
with in the Sate. This sub-rule is equally within the four corners of Section
41. Indeed, clause ( d) of Section 76 which empowers the State government
B to make rules generally to carry out the provisions of this Act also serves
as an authority for the said sub-rule.

Objection is next taken to sub-rule (8). It is submitted that the power
to regulate conferred upon the State government by Section 41 does not
C take in the power to prohibit whereas sub-rule (8) empowers the State
government to prohibit the export of timber and firewood if such a course
is necessary to cater to the needs of the local people or for meeting the
requirements of the people of the State. This in turn raises the question,
what is the meaning and ambit of the expression "regulate" in Section 41(1)
D of the Act? (Section 41(1) empowers the State government "to regulate the
transit of all timber and other forest-produce".) The expression is not
defined either in the Act or in the rules made by the State of Tripura. We
must, therefore, go by its normal meaning having regard to the context in
which, and the purpose to achieve which, the expression is used. As held
by this Court in Jiyajee Cotton Mills Ltd. & Anr. v. Madhya Pradesh
E Electricity Board & Anr., (1989] Suppl. 2 S.C.C. 52 the expression "regulate"
'has different shades of meaning and must take its colour from the context
in which it is used having regard to the purpose and object of the relevant
provisions, and as has been repeatedly observed, the court while interpret-
ing the expression must necessarily keep in view the object to be achieved
F and the mischief sought to be remedied" (at page 79). Having regard to
the context and other relevant circumstances, it has been held in some
cases that the expression "regulation" does not include "prohibition"
whereas in certain other contexts, it has been understood as taking within

G
.
its fold "prohibition" as well. It has been held in K Ramanathan v. State of
Tamil Nadu & Anr., (1985] 2 S.C.C. 116 that :

' 1 "'The word 'regulation' cannot have any rigidor inflexible meaning
as to exclude 'prohibition'. The word 'regulate' is difficult to define
as having any precise meaning. It is a word of broad import, having
a board meaning, and is very comprehensive in scope .....It has
H
often been said that power to regulate does not necessarily include
STATE v. SUDHIR RANJAN NATII [B.P. JEEVAN REDDY, J.) 45

- the power to prohibit, and ordinarily the word 'regulate' is not A
synonymous with the word 'prohibit'. This is true in a general sense
and in the sense that mere regulation is not the same as absolute
.....
prohibition. At the same time, the power to regulate carries with
it full power over the thing subject to regulation and in absence of
restrictive words, the power must be regarded as plenary over the B
entire subject. It implies the power to rule, direct and control, and
involves the adoption of a rule or guiding principle to be followed,
or the making of a rule with respect to the subject ·to be ·regulated.
.The power to regulate implies the power to check and may imply
the power to prohibit under certain circumstances, as where the

- best or only efficacious regulation consists of suppression. It would C
therefore appear that the word 'regulation' cannot have any in-
flexible meaning as to exclude 'prohibition'. It has different shades
of meaning and must take its colour from the context in which it
is used having regard to the purpose and object of the legislation,
and the Court must necessarily keep in view the mischief which
.. the Legislation seeks to remedy."
D

To the same effect is the decision of this Court in State of Tamil
Nadu v. M/s. Hind Stone & Ors., [1981] 2 S.C.C. 205. Dealing with the
contention that Section 15 of the Mines and Minerals (Regulation and
Development) Act, 1957 authorises the making of rules regulating the grant E
of mining leases and that the power does not take in power to prohibit the
grant of leases, this Court held :

"We do not think that 'regulation' has that rigidity of meaning as
never to take in 'prohibition'. Much depends on the context in F
which the expression is used in the statute and the object sought
to be achieved by the contemplated regulation. It was observed by
Mathew, J. in G.K. Krishnan v. State of Tamil Nadu, (1975] 1 S.C.C.
375 : 'The word 'regulation' has no fixed connotation. Its meaning
differs according to the nature of the thing to which it is applied'.
In modern statutes concerned as they are with economic and social G
activities, 'regulation' must, of necessity, receive so wide an inter-
pretation that in certain situations, it must exclude competition to
the public sector from the private sector. More so in a welfare
State. It was pointed out by the Privy Council in Commonwealth
ofAustralia v. Bank of New South Wales, (1950) AC. 235 = (1949) H
46 SUPREME COURT REPORTS [1997] 2 S.C.R.

A 2 All. E.R. (PC) and we agree with what was stated therein - that
the problem whether an enactment was regulatory or something
more or whether a restriction was direct or only remote or only
incidental involved, not. so much legal as political, social or
economic consideration and that it could not be laid down that in

-
no circumstances could the exclusion of competition so as to create
B
a monopoly, either in a State or Commonwealth agency, b.e jus-
tified. Each case, it was said, must be judged on its own facts and
in its own setting of time and circumstances and it might be that
in regard to some economic activities and at some stage of social
development, prohibition with a view to State monopoly-was the
c only practical and reasonable manner of regulation. The statute .
with which we are concerned, the Mines and Minerals (Develop-
ment and Regulation) Act, is aimed, as we have already said more
than once, at the conservation and the prudent and discriminating
-
exploitation of minerals. Surely, in the case of a scare mineral, to
permit exploitation by the State or its agency and to prohibit
D
exploitation by private agencies is the most effective method of
conservation and prudent exploitation. If you want to conserve for
the future, you must prohibit in the present. We have no doubt
that the prohibiting of leases in certain cases is part of the regula-
tion contemplated by Section 15 of the Act."
E
We do not think that it is necessary to multiply the decisions except
to point out that in a different context, the power to regulate is held not
to include the power to prohibit (See State of Uttar Pradesh v. Hindustan
Aluminium Corporation, [1979] 3 S.C.C. 229 at 243.
F
Sri Har Dev Singh, learned counsel for the respondent, however,
brought to our notice a decision of the Constitution Bench of this Court in
State of Mysore v. H. Sanjeeviah, [1967) 2 S.C.R. 361. Section 37 of the ,
Mysore Forest Act is in pari-materia with Section 41(1) of the Indian Forest
Act, Similarly, clause (b) of sub-section (2) of Section 37 of the Mysore
G Act is inpari-materia with clause (b) of sub-section (2) of Section 41 of the
Indian Fore_i;t Act. By virtue of the rules made under the Mysore Forest
Act, the Government of Mysore totally prohibited the transport of forest-
produce between 10.00 P.M. and sunrise. It also placed certain restrictions
on the movement of the forest-produce between sunset and 10.00 P.M. as
H well. This Court held that the power to regulate conferred by Section 37(1)
STATE v. SUDHIR RANJAN NATH [B.P. JEEVAN REDDY, J.) · 47

read with Section 37{2)(bY does not empower the State government to A
prohibit the movement/transport of forest-produce altogether, observing
''prim a f acie a rule which totally prohibits the movement of forest-produce

-- during the period between sunset and sunrise is prohibitory or restrictive
of the right to transport forest-produce. A rule regulating transport in its
essence permits transport, subject to certain conditions devised to promote B
transport; such rule aims at making transport orderly so that it does not
harm or endanger other persons following a similar vocation or the public
and enables transport to function for the public good". The said decision
is, however, of no help to the respondent inasmuch as Rule 3 framed by
the State of Tripura is not only relatable to Section 41 but also to clause
( d) of Section 76. Clause ( d) of Section 76, which has been extracted C
hereinbefore, empowers the State government to make rules generally to
carry out the provisions of the Act, which means the carrying out the object
and purposes of the Act. The object of the Act is to preserve and protect
the ·forest wealth of the country and to regulate the cutting, remova~
transport and possession of the forest-produce in the interest of the States D
and their people. It is for achieving the above purpose that the Act provides
for declaration of reserve forests, formation of village forests and declara-
tion of protected forests. It is for achieving the very purpose that the Act
vests, in the government, control over forest and lands not being the
property of the government and controls even the collection and movement
of drift and stranded timber. It is not a trucing enactment but an enactment E
designed .to preserve, protect and promote the forest wealth in the interests
of the nation. It must necessarily take within its fold catering to the needs
of the people of the State and that is what sub-rule (8) provides. In our
opinion, therefore, sub-rule (8) of Rule 3 is perfectly'.yalid.
F
We shall now consider the attack based upon Article 301. In our
opinion, the reasons for which Rule 3 has been held to be in contravention
of Article 301 of the Constitution are unsustainable in law. The impugned
Rule 3 is made by the State as the delegate of the Parliament to carry out
the purposes of the Act. It is not a law by the legislature of the State of
Tripura nor is it a rule made by the Government of Tripura in its capacity G
as the Government of Tripura. This is the basic distinction between the
present case and the decision in ·H. Sanjeeviah where the enactment
concerned was a law made by the State legislature and had, therefore, to
comply with clause (b) of Article 304. We have also pointed out
hereinabove that the Indian Forest Act is a post-constitutional Parliamen- H
'
J
48 SUPREME COURT REPORTS [1997) 2 s.c.R'.

A tary enactment insofar as Tripura is concerned for the reason that it has
been extended to Tripura (which was then a Union Territory) by the Union
Territories (Laws) Act, 1950. Sections 41 and 76 are, therefore, laws within

B
the meaning of Article 302 of the Constitution which empowers the Parlia-
ment to impose such restrictions on !he freedom of trade, commerce and
intercourse between one State and another or within any part of the
--
territory of India, as may be required in the public interest. If Sections 41
and 76 are saved by Article 302, any rule made to carry out the purposes
of the said provisions or to elucidate the meaning and purport of the said
provisions must equally be protected by Article 302, as held by this Court
in M/s. KTishan Lal Praveen Kumar v. State of Rajasthan, [1981) 4 S.C.C.
c 550.

It is relevant to notice that Article 302 uses the expression "restric-
tions". In other words, it empowers the Parliament to impose such restric-
tions on the freedom of trade, commerce and intercourse between one
D State or another or within any part of the territory of India, as may be
required in the public interest. Though the expression " restrictions" in this
article is not qualified by the word "reasonable", we shall proceed on the
assumption, for the purposes of this case, that such restrictions ought to
be reasonable. Even so, it would be evident that the provision in Article
-
302 has a close parallel with clauses (2) to (6) Article 19. Under clauses
E (2) to (6fof Article 19, it has been held by this Court that the power to
impose reasonable restrictions takes in the power to prohibit also in
appropriate situations (see Narendra Kumar v. Union of India, [1960) 2
S.C.R. 361). It may also be mentioned that the prime example of the
exercise of power under Article 302 is the Essential Commodities Act,
F 1955, which not only empowers the making of the rules for the purpose of
regulating the production, supply and distribution of essential commodities
but also for prohibiting the production, supply and distribution of essential
commodities and trade and commerce therein. For the above reasons, we
are of the opinion that Rule 3 of the Tripura Transit Rules cannot be said
to be violative of Article 301 nor is it required to comply with the require-
G ment of the proviso to clause (b) of Article 304 of the Constitution.

The levy of duty is sought to be sustained by the learned counsel for ·
the State of Tripura with reference to sub-section (3) and/or sub-section
(4) of Section 39. It is submitted that the Princely State of Tripura has
H imposed the said duty and that the same is being continued after the
STATE v. SUDHIR RANJAN NATII [B.P. JEEVAN REDDY, J.) 49

commencement of the Constitution. Article 305 of the Constitution is also A
invoked in this behalf. We are unable to appreciate the submission. No
order or proceeding of the Princely State of Tripura has been produced
before the High Court or this Court levying the duty. We also do not know
at what rate and on what basis, if any, the duty was being levied. We are
also not sure whether the said plea can fall within the four corners of either B
sub-section (3) or sub-section (4). Sri Javali requested for grant of some-
time to enable the State to produce the proceedings. We are not inclined
to accede to this plea either. Having not produced the proceedings/orders
either before the High Court or before this Court all these years, the State
cannot reasonably ask for more time to produce the same when the matter
has come up for final hearing. C
For the above reasons, the appeals is allowed in part. Rule 3 of the
Tripura Transit Rules, except sub-rule (5) thereof, is declared to be
perfectly valid and effective. The judgment of the High Court is set aside
to the above extent.
D
No costs.

v.s.s. Appeal allowed.