1

2026:CGHC:539-DB

AFR

HIGH COURT OF CHHATTISGARH AT BILASPUR

WPC No. 4676 of 2022

1 - Steel Authority of India Limited Bhilai Steel Plant, Through Its Power of

Attorney Holder And General Manager (Incharge Law) Bhlai Steel Plant, Ispat

Bhawan, Bhilai, District Durg, Chhattisgarh.

2 - The Chief General Manager (Mines And Rowghat) Steel Authority of India

Limited, Bhilai Steel Plant, Ispat Bhawan, Bhilai, District Durg Chhattisgarh.

... Petitioners

versus

1 - State of Chhattisgarh Through The Secretary , Department of Forest And

Climate Change, Mahanadi Bhawan, Atal Nagar, Nawa Raipur, District Raipur

Chhattisgarh.

2 - The Principal Chief Conservator of Forest Aranya Bhawan , North Block ,

Sector 19, Atal Nagar, Nawa Raipur, District Raipur Chhattisgarh.

3 - The Divisional Forest Officer Rajnandgaon Forest Division, Rajnandgaon,

Chhattisgarh.

4 - Union of India Through Its Secretary, Ministry of Environment Forest of

Climate Change, Paryavaran Bhawan, Jorbagh, New Delhi.

... Respondents

(Cause-title taken from Case Information System)

For Petitioners :Mr. Rajeev Shakdhar, Senior Advocate

appearing through Video Conferencing assisted

by Mr. Ankit Singhal, Advocate through Video

Conferencing, Mr. Pawan Shree Agrawal and

Mr. Ashish Mittal, Advocates

For Respondents No.1 to 3/

State

:Mr. Praveen Das, Deputy Advocate General

For Respondent No.4/UOI :Mr. Ramakant Mishra, Deputy Solicitor General

assisted by Ms. Annapurna Tiwari, Central

Government Counsel

Date of Hearing :16/12/2025

Date of Judgment : 06/01/2026

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Hon'ble Shri Ramesh Sinha, Chief Justice

Hon'ble Shri Naresh Kumar Chandravanshi , Judge

C.A.V Order

Per Ramesh Sinha , Chief Justice

1.Heard Mr. Rajeev Shakdhar, Senior Cousnel appearing through Video

Conferencing assisted by Mr. Ankit Singhal, learned counsel through

Video Conferencing, Mr. Pawan Shree Agrawal and Mr. Ashish Mittal,

learned counsel for the petitioners. Also heard Mr. Praveen Das, learned

Deputy Advocate General appearing for the State/respondents No.1 to 3

and Mr. Ramakant Mishra, learned Deputy Solicitor General with Ms.

Annapurna Tiwari, learned Central Government Counsel appearing for

the Union of India/respondent No.4.

2.The petitioners have filed the instant writ petition challenging the

constitutional validity, legality and propriety of Rules 3 and 5 of the

Chhattisgarh Transit (Forest Produce) Rules, 2001 (hereinafter referred

to as “the Rules of 2001”), on the ground that the same are ultra vires the

provisions of the Indian Forest Act, 1927 (for short, the Act of 1927) and

Article 246 read with Schedule VII of the Constitution of India. The

petitioners further assail Notification No. 06-02/2014/10-2 dated

30.06.2015, published in the Official Gazette on 10.07.2015, and

Notification No. F.No. 6-2/2014/10-2/Van dated 27.07.2022, published in

the Official Gazette on 04.08.2022, issued by the respondent–State, to

the extent they impose fees for issuance of transit passes for

transportation of iron ore at the rate of ₹15/- per ton and ₹57/- per ton,

respectively. The petitioners also challenge the legality, validity and

propriety of the letters dated 23.08.2022 and 02.09.2022 issued by

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respondent Nos. 1 and 2, respectively, whereby directions have been

issued for compliance with Notification No. F No. 6-2/2014/10-2/Van

dated 27.07.2022.

3.The petitioner has prayed for the following relief(s):

“10.1 That this Hon'ble Court may kindly be pleased to

declare that the Rule 3 and 5 of Chhattisgarh Transit

(Forest Produce) Rules, 2001 is ultra vires to the Indian

Forest Act 1927, the Mines and Minerals (Development

and Regulation) Act. 1957 as also Articles 14,19, 265

and 301 of the Constitution of India.

10.2 That this Hon'ble Court may kindly be pleased to

declare that the notifications dated 30.6.2015 and

27.7.2022 issued in exercise of power conferred under

Rule 5 of Chhattisgarh Transit (Forest Produce) Rules,

2001 is ultra vires to the principal Act i.e., Indian Forest

Act 1927, the Mines and Minerals (Development and

Regulation) Act. 1957 as also Articles 14,19, 265 and

301 of the Constitution of India.

10.3 That this Hon'ble Court may further be pleased

quash and set aside letters dated 23.8.2022 and

2.9.2022 issued by the Respondent No. 2 and 3

respectively;

10.4 Cost of the petition may also be granted to the

petitioner.

10.5 Any other relief or relief(s) which this Hon'ble

Court may deem fit and proper in view of the facts and

circumstances of the case, may also kindly be

granted.”

4.Brief facts necessary for adjudication of the present writ petition are that

petitioner No.1, Steel Authority of India Limited (‘SAIL’), is the successor

of Hindustan Steel Limited and is a public limited Company substantially

owned, controlled and supervised by the Central Government. The Bhilai

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Steel Plant (for short, ‘BSP’), situated in District Durg, is one of the units

of petitioner No.1 and is widely known as Bhilai Steel Plant. The

petitioners hold valid mining leases for extraction of iron ore over forest

land falling within the territorial jurisdiction of the Divisional Forest Offices

at Rajnandgaon and Balod. The respondents are “State” within the

meaning of Article 12 of the Constitution of India and are amenable to the

writ jurisdiction of this Court.

5.The State of Chhattisgarh, in exercise of powers conferred under

Sections 41, 42 and 76 of the Act of 1927, framed the Rules of 2001,

which came into force with effect from 25.08.2001, repealing the earlier

Rules of 1961. The said Rules constitute subordinate legislation deriving

their authority from the Act of 1927, which permits regulation and levy of

fees only in respect of forest produce in transit by land or water. The Act

of 1927, being a pre-Constitution enactment, was aligned with the

constitutional scheme of distribution of legislative and executive powers

under the Government of India Act, 1935, which scheme has been

substantially adopted under the Constitution of India, 1950, reserving

taxation on goods carried by rail and air exclusively within the domain of

the Union. The Act of 1927 was enacted to consolidate the law relating to

forests, the transit of forest produce and the duty leviable on timber and

other forest produce. Section 2(4) of the Act of 1927 includes minerals

within the definition of “forest produce” when found in or brought from a

forest. Section 41 of the Act of 1927 vests control in the State

Government over timber and other forest produce in transit by land or

water and authorises the State Government to frame rules regulating

such transit, including the issuance of transit passes and levy of fees

therefor. Chapter XII of the Act of 1927, particularly Sections 76 to 78,

further empowers the State Government to frame rules to carry out the

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provisions of the Act of 1927, subject to consistency with the parent

statute. Rule 3 of the Rules of 2001 mandates that no forest produce

shall be moved into, from or within the State of Chhattisgarh without a

valid transit pass, subject to specified exemptions. In exercise of powers

under Rule 5, the State Government initially issued a notification dated

14.06.2002 imposing transit fee, including on iron ore, at the rate of ₹7

per ton.

6.Subsequently, the respondents applied the said Rules to transportation

of iron ore by rail, and even sought to restrain such transportation, which

led to issuance of communications by Railway authorities. On

17.05.2013, a demand of ₹44,28,46,097/- was raised against the

petitioners towards transit fee for the period 2001–02 to 2012–13.

Aggrieved thereby, the petitioners filed W.P.(T) No. 68 of 2013 before

this Court, challenging the constitutional validity of Rule 3, the notification

dated 14.06.2002 and the consequential demand. Similar challenges

were also raised in other writ petitions. This Court, by interim orders

dated 05.07.2013 and 12.02.2014, granted protection to the petitioners

from coercive recovery of past dues, subject to payment of current transit

fee and furnishing of security. During pendency of the said proceedings,

the State issued Notification dated 30.06.2015, superseding the earlier

notification, enhancing the transit fee for iron ore to ₹15 per ton.

7.In the meanwhile, one of the connected matters, W.P.(C) No. 635 of

2013, was transferred to the Hon’ble Supreme Court and renumbered as

Transferred Petition (Civil) No. 14 of 2018, which remains pending. In

view thereof, this Court, by order dated 30.09.2019, disposed of the

pending writ petitions, including that of the present petitioners, making

the interim orders absolute and directing that the rights of the parties

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shall abide by the final outcome of the proceedings before the Hon’ble

Supreme Court.

8.In compliance with the said order, the petitioners continued to pay transit

fee at the rate of ₹15 per ton. Thereafter, the respondent-State, in

supersession of the notification dated 30.06.2015, issued the impugned

Notification No. F.No.6-2/2014/10-2/Van dated 27.07.2022, published on

04.08.2022, enhancing the transit fee for iron ore to ₹57 per ton.

Consequential letters dated 23.08.2022 and 02.09.2022 were issued by

the respondents directing compliance with the said notification.

9.Aggrieved by the enhancement of transit fee and inclusion of minerals

within the ambit of the impugned notifications, the petitioners have

approached this Court contending that the impugned Rules and

notifications, insofar as they seek to levy transit fee on transportation of

minerals including iron ore, are unconstitutional, ultra vires the Act of

1927, and violative of Articles 14, 19, 265 and 301 of the Constitution of

India, and therefore liable to be quashed.

10.Mr. Rajeev Shakdhar, learned Senior Counsel appearing through Video

Conferencing, assisted by Mr. Ankit Singhal, learned counsel through

Video Conferencing, Mr. Pawan Shree Agrawal and Mr. Ashish Mittal,

learned counsel appearing for the petitioners, would submit that the

action of the respondents in levying and recovering transit fee on

transportation of iron ore is arbitrary, illegal and contrary to the law

applicable to the facts and circumstances of the case. Learned Senior

Counsel would contend that the levy of transit fee in the present case is

ex facie illegal and unconstitutional, inasmuch as the iron ore extracted

from forest land is transported to non-forest land exclusively through

Railways. The scheme of the Act of 1927 and the Rules of 2001 does not

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permit levy of any fee in respect of transportation by rail, and therefore

the impugned levy is wholly without authority of law.

11.Mr. Shakdhar would further submit that the so-called transit fee is, in

substance, a tax, which cannot be imposed or recovered in the absence

of a valid legislative sanction. It is a settled principle of constitutional law

that no tax can be levied or collected except by authority of law. In the

present case, the respondents have attempted to levy and recover transit

fee in contravention of the parent statute and the Rules framed

thereunder, resulting in unjust enrichment of the State. He would submit

that the recovery of transit fee is also hit by the doctrine of unjust

enrichment, as no corresponding service is rendered by the State. The

inclusion of minerals in the impugned notifications dated 30.06.2015 and

27.07.2022 is arbitrary, unconstitutional and violative of Article 14 of the

Constitution of India. Minerals, by their very nature, origin and

composition, are not forest produce and cannot be artificially brought

within the definition of forest produce by executive notification issued

under Rule 5 of the Rules.

12.It is contended by Mr. Shakdhar that treating minerals as forest produce

results in clubbing together dissimilar and unrelated classes, which is

impermissible under Article 14 of the Constitution. Naming minerals as

“forest produce” in the impugned notifications is arbitrary and against the

constitutional mandate. The impugned notifications are also void under

Article 254 of the Constitution of India, as they are repugnant to Central

legislation occupying the same field. He would further argue that the

impugned levy cannot be sustained even with reference to Entry 50 of

List II of the VII Schedule. With the introduction of Entry 17-A in the

Concurrent List and the enactment of the Forest (Conservation) Act,

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1980 (for short, the Act of 1980) by Parliament, the entire field relating to

diversion of forest land for non-forest use, payments in respect thereof

and conservation measures stands occupied by Central legislation. By

virtue of Article 254(1) of the Constitution, the doctrine of occupied field

applies, rendering the impugned notifications repugnant and void.

13.It is also submitted by Mr. Shakdhar that iron ore is a major mineral

governed by the Mines and Minerals (Development and Regulation) Act,

1957 (for short, the MMRD Act), which is a complete and exhaustive

Code. The State Government is denuded of any competence to impose

any levy, in the garb of transit fee, on tonnage basis in respect of a

scheduled major mineral. The impugned notifications directly impinge

upon the field exclusively occupied by the MMDR Act and the Act of

1980. He would submit that under Section 31 of the Act of 1927, only the

Central Government is competent to impose any substantive levy by way

of duty on forest produce. Section 41 of the Act of 1927 does not

authorise the State Government to impose any substantive levy, much

less on tonnage basis at the rate of ₹57 per ton. The impugned levy, in its

pith and substance, is a tax on major minerals and is therefore beyond

the legislative competence of the State.

14.It is urged by Mr. Shakdhar that Section 41 of the Act of 1927 does not

permit any discriminatory levy and the impugned notifications constitute a

colourable exercise of power. In any event, Rule 5 of the Rules of 2001

authorises fixation of rates only in accordance with Rule 4 of the Rules of

2001, which deals with timber and fuel and not with major minerals. Rule

7 of the Rules of 2001 contemplates issuance of transit pass on “load”

basis, meaning thereby that any fee, if at all permissible, could only be

vehicle-based and not tonnage-based. He would submit that application

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of the impugned notifications would result in hostile discrimination

against mine holders operating in forest areas vis-à-vis those operating

in non-forest areas. The purpose of the Act of 1927 and the Rules of

2001 is merely regulatory, namely to prevent unauthorised movement of

forest produce, and not to impose a tax on its movement. The levy lacks

any element of quid pro quo and bears no correlation with the cost of

services, if any, rendered by the State for issuance of transit passes. It is

further contended that once forest land is diverted for non-forest use, it

loses its character as forest land and the Rules of 2001 cease to apply.

The impugned levy imposes unreasonable restrictions on trade and

commerce, violating Articles 19(1)(g), 19(1)(d) and 301 of the

Constitution of India. Under the guise of a fee, the respondents are, in

effect, levying a duty or tax on major minerals, which is impermissible in

law.

15.Mr. Shakdhar, learned Senior Counsel would also submit that Rule 3 and

Rule 5 of the Rules of 2001 suffer from the vice of excessive delegation

and sub-delegation. While Section 41 of the Act of 1927 permits framing

of rules, the State Government has further delegated to itself or its

officers the unguided power to fix rates of transit fee without any statutory

control or guidelines, rendering the Rules arbitrary and unconstitutional. It

is lastly submitted that the impugned letters dated 23.08.2022 and

02.09.2022 (Annexure P/11 collectively) are equally unsustainable, as

the impugned notification does not contemplate levy of any fee for

transportation by Rail. The respondents also failed to appreciate that the

issue of legislative competence of the State Government to levy transit

fee is still pending consideration before the Hon’ble Supreme Court.

Issuance of the impugned notification dated 27.07.2022 during pendency

of proceedings before the Apex Court is arbitrary, per se illegal and liable

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to be quashed.

16.Reliance has been placed upon the judgment rendered by the Allahabad

High Court in the matter of Hindalco Industries Limited v. State of

U.P. and others, {2018 SCC OnLine All 5810} to buttress his

submissions. Learned Senior Counsel further argued that being

aggrieved with the aforesaid judgment, the State of Uttar Pradesh has

preferred an Special Leave Petition (Civil) Diary No.18473/2020 before

the Hon’ble Apex Court, which was dismissed vide order dated

04.07.2023 and as such, the order passed by the Allahabad High Court

has attained finality.

17.On the other hand, Mr. Praveen Das, learned Deputy Advocate General,

appearing for the State/respondents No.1 to 3 would oppose the

submissions advanced by learned Senior Counsel appearing for the

petitioner and submit that the entire writ petition, which seeks to

challenge the vires of Rules 3 and 5 of the Rules of 2001, is wholly

misconceived and deserves to be dismissed at the threshold. He would

submit that the petitioner has fundamentally misread and misconstrued

the scope and object of the parent legislation, namely the Indian Forest

Act, 1927, under which ample power has been conferred upon the State

Government to regulate the transit of forest produce and to levy fees in

that regard. It is contended that the Act of 1927 was enacted to

consolidate the law relating to forests, transit of forest produce and the

duties leviable thereon, and Section 2(iv) thereof expressly includes

minerals within the definition of “forest produce”. Therefore, the

challenge raised by the petitioner on the premise that minerals cannot be

treated as forest produce is legally untenable. It is further submitted that

Chapter VII of the Act of 1927, particularly Section 41, vests the State

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Government with wide powers to make rules regulating the transit of

forest produce. Sub-section (2) of Section 41 specifically authorises the

State to provide for payment of fees for the issue of transit passes, and

sub-section (3) empowers the State to grant exemptions in appropriate

cases. Exercising these statutory powers, and read with the general rule-

making power under Section 76, the State Government has validly

framed the Rules of 2001. Rule 3 of the Rules of 2001 mandates

regulation of transit through passes, while Rule 5 of the Rules of 2001

authorises the State to fix the rate of fee from time to time. Hence, both

Rules 3 and 5 of the Rules of 2001 are squarely traceable to the parent

Act of 1927 and cannot be termed ultra vires.

18.Mr. Das submits that the petitioner’s argument based on Entries 89 of

List I and 56 of List II of Schedule VII is misplaced. Section 41 of the Act

of 1927 uses the expression “transit by land or water”, which is of wide

amplitude and necessarily includes transportation by road as well as by

rail. There is no statutory restriction excluding rail transport from the

scope of regulation under Section 41, and therefore the contention that

the State lacks competence to regulate transit of forest produce by rail is

wholly erroneous. It is submitted that the plea of repugnancy under

Article 254 of the Constitution of India, based on the MMRD Act, is

devoid of substance. The Act of 1927 is a pre-Constitutional legislation,

saved by Article 372 of the Constitution, and continues to operate unless

repealed or amended by a competent legislature. The Act of 1927 and

the MMDR Act operate in distinct and separate fields, the former

concerns forests and forest produce (including incidental regulation of

transit), whereas the latter governs mining and mineral development.

Since the two enactments do not occupy the same field, the question of

repugnancy does not arise.

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19.In support of his submissions, learned Deputy Advocate General places

strong reliance upon the authoritative pronouncement of the Hon’ble

Supreme Court in State of Uttarakhand v. Kumaon Stone Crusher

(2018) 14 SCC 537, wherein the vires of Section 41 of the Act of 1927

and pari materia transit rules framed by the State of Madhya Pradesh,

were upheld. The Hon’ble Supreme Court categorically held that the

State Government is fully empowered to levy transit fees under Rule 5 of

the Rules of 2001 and that such levy is well within the scope of Section

41 of the Act of 1927. It is submitted that the ratio laid down in the said

judgment squarely covers the issues raised in the present petition,

rendering the challenge to Rules 3 and 5 of the Rules of 2001 wholly

untenable.

20.Mr. Das further submits that the contention regarding absence of quid

pro quo is equally unsustainable, as the levy in question is a regulatory

fee imposed for effective control and monitoring of forest produce in

transit, and strict mathematical equivalence between the fee and

services rendered is not required in law. In view of the settled legal

position and the binding precedent of the Hon’ble Supreme Court, it is

submitted that the challenge raised by the petitioner is frivolous,

misconceived and an abuse of the process of law. Consequently, the writ

petition, being devoid of merit, deserves to be dismissed with costs.

21.Placing reliance on the rejoinder-affidavit on record, learned Senior

Advocate appearing for the petitioners would submit that the stand taken

by the respondents in their reply is wholly misconceived, legally

untenable and proceeds on a complete misreading of the statutory

framework as well as the constitutional scheme of distribution of

legislative powers. Mr. Shakdhar would contend that Rules 3 and 5 of

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Rules of 2001 do not apply to the transit of forest produce by Railways,

and therefore any demand of transit fee on iron ore transported through

railways is ex facie unconstitutional and violative of Articles 14, 19(1)(g),

265, 301 and 304 of the Constitution of India. He would urge that the

consequential Notifications dated 30.06.2015 and 27.07.2022, in so far

as they are sought to be applied to railway transportation, amount to a

colourable exercise of subordinate legislative power in a field exclusively

reserved for the Union. He would further submit that the respondents’

reliance on Section 41 read with Section 76 of the Act of 1927 and Article

372 of the Constitution is misplaced. Article 372 of the Constitution does

not sanctify the continued operation of pre-constitutional laws in

derogation of the constitutional distribution of legislative powers under

Articles 245 and 246 read with the VII Schedule. Any interpretation of the

Rules of 2001 so as to include Railway transport would render them

unconstitutional and ultra vires; hence, such an interpretation must be

avoided. He would emphasizes that Section 41 of the Act of 1927

consciously restricts the State’s regulatory power to transit “by land or

water”, and the deliberate omission of Railways signifies legislative intent

consistent with the demarcation under Entries 13 and 56 of List II and

Entries 22, 30 and 89 of List I. Consequently, the State lacks legislative

competence to regulate or levy any fee on forest produce transported by

Rail.

22.Placing reliance on Hindalco Industries Limited (supra), Mr. Shakdhar

would submit that the charging and computation mechanism under the

transit rules contemplates only land-based modes such as lorry, cart or

head load, and does not envisage railway transport. In the absence of a

workable computation and collection mechanism, no levy can be

sustained in law. It is further submitted that the respondents’ reliance on

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Kumaon Stone Crusher (supra) is misconceived, as the said judgment

dealt with regulation of forest produce transported by road within forest

areas and cannot be extended to railway transportation of minerals,

which falls outside the scope of Section 41 of the Act of 1927. Even

otherwise, the levy impugned herein bears no nexus with any regulatory

service rendered by the Forest Department and thus violates the doctrine

of quid pro quo, amounting in substance to an unauthorized tax barred

by Article 265 of the Constitution.

23.In essence, Mr. Shakdhar would submit that the Rules of 2001 and the

notifications dated 30.06.2015 and 27.07.2022 do not apply to, nor can

they be construed to cover, transit of forest produce by Railways, and

any such application would render them unconstitutional, ultra vires the

Act of 1927 and beyond the legislative competence of the State.

24.We have heard learned counsel for the parties, perused the pleadings

and materials available on record.

25.The principal questions that arise for consideration in the present writ

petition are:

(i) Whether Rules 3 and 5 of the Rules of 2001, insofar as

they are applied to transportation of iron ore by Railways,

are ultra vires the Act of 1927 and the Constitution of India;

(ii) Whether the impugned Notifications dated 30.06.2015

and 27.07.2022 levying transit fee on iron ore on a tonnage

basis are beyond the scope of Section 41 of the Act of

1927;

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(iii) Whether the impugned levy is, in pith and substance, a

tax lacking authority of law and violative of Articles 14, 19(1)

(g), 265 and 301 of the Constitution of India.

26.At this juncture, it would be apposite to advert to and reproduce the

relevant provisions of the Act of 1927, which have a direct bearing on the

controversy involved in the present writ petition.

27.Chapter II of the Indian Forest Act, 1927 deals with ‘reserved forests’

while Chapter III deals with ‘village forests’. Chapter IV deals with

‘protected forests’ and while Chapter V deals with ‘control over forests

and lands not being the property of the Government’. Chapter VI

provides for levy of ‘duty on timber and other forest- produce’. Chapter VI

provides for ‘control on timber and other forest-produce in transit’.

Chapter VIII deals with ‘collection of drift timber and stranded timber’.

Chapters IX, XI and XIII contain machinery provisions. A bare perusal of

the said provisions makes it clear the Act of 1927 is designed to protect

and increase the forest wealth and its proper utilization for the purposes

of the State and the people.

28.Section 2(4) of the Act reads as under:-

“2. Interpretation clause. - In this Act, unless there is

anything repugnant in the subject or context,-

xxx xxx xxx

(4) "forest-produce" includes-

(a) xxx xxx xxx

(b) the following when found in, or brought from a forest,

that is to say:

(ii) xxx xxx xxx

(iii) xxx xxx xxx

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(iv) peat, surface soil, rock, and minerals including

limestone, laterite, mineral oils, and all products of mines

or quarries);

v) xxx xxxx xxx”

29.Though Section 2(4) of the Act of 1927 includes minerals within the

definition of “forest produce” when found in or brought from a forest, such

inclusion cannot be read in isolation or dehors constitutional limitations.

The definition is contextual and must be harmonised with the object of

the Act, which is conservation and regulation of forests and forest

produce, not fiscal extraction from mining activity.

30.Once forest land is lawfully diverted for non-forest use under the Act of

1980, and mining is undertaken pursuant to valid leases governed by the

MMDR Act, the activity is regulated by a complete and exhaustive

Central legislation. Any further levy by the State, in the guise of a transit

fee, directly impinges upon a field already occupied by Parliament.

31.Section 41 of the Act of 1927 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 of which rules can be framed. When the

Section 41 itself defines the legislative competency of State only to the

extent of transit by road and water ways, any notification must confine to

transit of forest produce by road and water ways. It would be appropriate

to reproduce Section 41 of the Act of 1927, 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 timber, as well as the control of all

timber and other forest-produce in transit by land or water, is

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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

foregoing power 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;

(b) prohibit the import or export or moving of such

timber or other produce without a pass from an officer

duly authorized to issue 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 therefore;

(d) provide for the stoppage, reporting, examination and

marking of timber of 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;

(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 that such marks

may be affixed to it, and the condition under which such

timber or other produce shall be brought to, stored at

and removed from such depots;

(h) 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 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 same;

(h) prohibit absolutely or subject to conditions, within

specified local limits, the establishment of saw-pits, the

converting, cutting, burning, concealing or marking 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;

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(i) regulate the use of property marks for timber, and the

registration of such marks; prescribe the time for which

such registration 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 forest-produce or to any specified local area.”

32.Chapter XII of the Act of 1927 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 rules – the State

Government may make rules-

(a) to prescribe and limit the powers and duties of any

Forest Officer under this Act;

(b) to regulate the rewards to be paid to officers and

informers 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

land belonging to or in the occupation of private persons;

and

(d) generally, to carry out the provisions of this Act.

77. Penalties for breach of rules - 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 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, shall thereupon, so far as they are consistent

with this Act, have effect as if enacted therein.”

19

33.Section 41 of the Act of 1927 empowers the State Government to make

rules to regulate the transit of timber and other forest produce “by land or

water” and to provide for payment of fees for the issue of transit passes.

The power conferred is regulatory in nature and must be strictly

construed, being a delegated legislative power traceable to a statute

enacted in a pre-Constitutional framework. The expression “by land or

water” occurring in Section 41 cannot be expansively interpreted to

include railway transportation. Railways constitute a distinct mode of

transport constitutionally demarcated under the Union List. Any

interpretation which brings railway transportation within the sweep of

Section 41 would render the provision constitutionally vulnerable, as it

would trench upon a field reserved exclusively for the Union under

Articles 245 and 246 read with Schedule VII. It is a settled principle of

statutory interpretation that when two interpretations are possible, the

one which preserves the constitutionality of the provision must be

preferred. Therefore, Section 41 must be read as authorising regulation

of transit by conventional land-based modes such as carts, trucks or

head-loads, and by water routes, but not by rail.

34.The scheme of the Rules of 2001 reinforces this interpretation. The

computation mechanism contemplated therein proceeds on the basis of

“load”, vehicle movement and check-post regulation, all of which are

wholly incompatible with railway transportation. In the absence of a

workable statutory mechanism, no levy can be sustained.

35.A close reading of Sections 41 and 76 of the Act of 1927 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 Government is also empowered to make

20

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.

36.Further, Rule 3 of the Rules of 2001 provides that no forest produce shall

be moved into or from or within the State of Chhattisgarh without a transit

pass in form annexed to these rules from an officer of the Forest

Department or a person duly authorized by or under these rules to issue

such pass or otherwise than in accordance with the conditions of such

pass or any route or to any destination other than the route or destination

specified in such pass. The Rule 3 is reproduced as below:

“3. Regulation of transit of forest produce by means of

passes - No forest produce shall be moved into or outside the

state of within the state of Chhattisgarh except in the manner as

hereinafter provided without a transit pass in Form A, B, or C

annexed to these rules. The transit pass will be issued by a

forest officer or gram panchayat or a person duly authorised

under these rules to issue such pass;

Provided that no transit pass shall be required for the removal -

(a) of any forest produce which is being removed for

bonafide domestic consumption of 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;

(b) of such forest produce as may be exempted by the

State Government from the operation of these rules by

notification in the Official Gazette;

(c) of forest produce covered by money receipt/rated

passes/ forest produce passes/carting challan, issued by

competent authority in accordance with the Rules made

in this behalf for the time being in force.

(d) Of minor forest produce from forests to the local

21

market to the collection centre or for bonafide domestic

consumption.”

37.The Hon’ble High Court of Allahabad in Hindalco Industries Limited

(supra) while dealing with the similar issue, has observed as follows :-

“19. A bare reading of Rule 5 would reveal that it contemplates

of charging transit fee on the forest produce on the basis of Lorry

load, Cart load, Camel load; and head load. It does not provide

for levy of transit fee on the basis of quantity or weight etc, rather

on the basis of capacity of a lorry and cart etc., and at a fixed

rate per Camel load or per head load. It does not even

contemplate to charge transit fee on transportation of various

forest forest produce by any other mode such as Railways or

ARW and BPC system.

20. The aforesaid Rules are in the nature of a taxing statute and

as such have to be construed strictly in accordance with the

usage of language therein putting the tax payer in a

advantageous position if the situation so demands.

21. In State of Maharastra Vs. Mishri Lal Tarachand AIR 1964

SC 457 while interpreting the provisions of the Bombay Court

fees Act, the Court observed as under:-

“The Act is a taxing statute and its provisions therefore have

to be construed strictly, in favour of the subject-litigant.”

22. In Diwan Brothers Vs. Central Bank of India and others AIR

1976 SC 1503 it was again observed that it is well settled that in

case of fiscal statute the provisions must be strictly interpreted

giving every benefit of doubt to the subject.

23. The above observations made by the Supreme Court

manifestly reveal that the Courts have to interpret the provisions

of the fiscal statute strictly so as to give the benefit of doubt to

the litigant/assessee/tax payer.

24. It may be important to mention here that normally in a fiscal

statute the charging section and the computing provision are

different but in the case at hand Rule 5 of the Rules is both the

22

charging section as well as the provision for computing the

transit fee. The manner of computation as provided therein is not

applicable, as there is no transportation of forest produce by

either of the modes prescribed therein and as such transit fee

would not be leviable on the transport of coal through Railways

or AWR and BPC system.

25. In C.I.T Bangalore Vs. B.C. Srinivasa Setty (1981) 2 SCC

460 it has been observed that the charging section and the

computation provision of a fiscal statute constitute an integrated

code and when it is not possible to apply the computation

provision, it means that the statute do not intend to levy tax.

26. In Tata Sky Limited Vs. State of Madhya Pradesh and others

(2013) 4 SCC 656 it was again observed that it is well settled

that if the collection machinery directed under the Act is such

that it can not be applied to an event, it follows that the event is

beyond the charge created by the taxing statute.

27. In observing the aforesaid, the Apex Court not only relied

upon C.I.T Bangalore Vs. B.C. Srinivasa Setty (supra) but also

upon the CIT Vs. Official Liquidator (1985) 1 SCC 45 and

Punjab National Bank Vs. CIT (2008) 13 SCC 94.

28. In A.V. Fernandez Vs. State of Kerala AIR 1957 SC 657

while interpreting the fiscal statues the Apex Court observed as

under:-

“It is no doubt true that in construing fiscal statues and in

determining the liability of a subject to tax one must have

regard to the strict letter of the law 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

corners of the provisions of the taxing statute, no tax can be

imposed by inference or by analogy or by trying to probe

into the intentions of the legislature and by considering what

was the substance of the matter.”

29. In view of the above decisions it is clear that computation of

23

transit fee on the transport of forest produce/coal as per Rule 5

of the Rules has to be done on the basis of Lorry load, Cart

load, Camel load and head load and not otherwise. There is no

machinery for assessing the transit fee on the transportation of

forest produce/coal by Railway or ARW and BPC system.

Therefore, transportation of forest produce/coal by the said

modes is beyond the purview of transit fee.

30. Let us also examine the contention of the defendants that a

railway wagon would also be a lorry. Therefore, any

transportation of coal through railway wagon would be amenable

to payment of transit fee under Rule 5 of the Rules.

31. In CST Vs. Jaswant Singh Charan Singh AIR 1967 SC 1454

it was held that while interpreting items in fiscal statutes resort

should not be had to the scientific or technical meanings of the

terms used therein but to their popular meaning or the meaning

attached to them by persons dealing with those terms in a

commercial sense.

32. In CST Vs. G.S. Pai and Company AIR 1980 SC 611 it was

again laid down that while interpreting entries in taxing

legislation, it should be borne in mind that the words used in the

entries must be construed not in technical sense but as

understood in common parlance.

33. In Indian Cable Co. Ltd. Vs. CCE (1994) 6 SCC 610 it was

held that in construing the relevant item or entry in a fiscal

statute, the authority concerned must normally construed it in the

manner, it is understood in common parlance or in commercial

world or trade circles or in the manner, if it is one of everyday

use. In other words the item or entry must be given its popular

meaning rather than its technical or scientific. This was laid

down by following the approach of Lord Esher in Unwin Vs.

Hanson (1891) 2 QB 115.

34. The Supreme Court in Associated Cement Co. Ltd Vs. State

of M.P. and others (2004) 9 SCC 727 relying upon CST Vs.

Jaswant Singh Charan Singh (Supra), Minerals and Metals

Trading Corporation of India Ltd. Vs. Union of India (1972) 2

24

SCC 620, Royal Hatcheries (P) Ltd. Vs. State of Andhra Pradesh

1994 Supp. (1) SCC 429 and Dunlop India Ltd. Vs. Union of

India (1976) 2 SCC 241 reiterated the principle of interpretation

that the relevant item or entry in a fiscal statute is to be

considered as it is one of everyday use by giving a popular

meaning rather in scientific or technical sense.

35. A similar view was expressed in Pleasantime Products Vs.

CCE, (2010) 1 SCC 265 and it was held that the test of

“common parlance” ought to be applied in interpreting the

meaning of any word appearing in the taxing legislation.

36. In short all the above decisions point out that the meaning of

any word used in taxing statute or in any entry thereof has to be

as it is understood in “common parlance” in day-to-day life.

37. In this context, now we have to examine the meaning of the

word 'lorry' as used in Rule 5 of the Rules and if it includes

within its ambit the railway wagon.

38. The word 'lorry' in his historical form refers to horse-drawn

vehicles used for carrying goods as a trolley. It used to be a

wooden version of modern car carrying trailer. Later, lorry

developed into a sturdier form of a carriage meant for carrying

heavier motorcars. They were primarily used as a urban vehicle

on paved roads. Subsequently, motor-propelled lorry in the

shape of trucks came to be developed.

39. In Britain “lorry” nowadays means any large powered truck.

In other words lorry and truck are synonymous these days.

40. A “lorry” is ordinarily defined as a large truck designed to

carry heavy loads usually without any sides. It is basically a

truck designed to carry freight or goods or to perform special

services such as fire fighting.

41. The Cambridge English Dictionary gives the meaning of the

“lorry” as a large road vehicle that is used for transporting

goods.

42. Collins Cobuild Advanced Learner's English Dictionary 4th

Edition 2003 gives the meaning of the word 'Lorry' as a large

25

vehicle that is used to transport goods by road.

43. Oxford English-English-Hindi Dictionary first published in

2008 in its 26th impression February 2013 printed by Oxford

University Press also gives the meaning of the word 'Lorry' as a

large strong motor vehicle that is used by carrying goods by

road.

44. Chambers Encyclopedic English Dictionary first published by

Chambers in 1994 describes 'Lorry' as large heavily built road

vehicle for transporting heavy loads. Similarly, The Oxford

Thesaurus and Word Power Guide defines 'Lorry' as a large,

heavy motor-vehicle for transporting goods and troops. It is

primarily a heavy truck and is understood as such in common

parlance. It does not include a railway wagon, therefore, the use

of the word “lorry” in Rule 5 of the Rules would be confined in

reference to trucks and would not refer to the railway wagons.

45. Accordingly, the answer to the issue/question no. 1 as

formulated in the earlier part of the judgment is that the Rules do

not provide for charging transit fee on the transport of forest

produce/coal by rail or through AWR and BPC system and as

such is outside the purview of transit fee.

46. A reading of Rule 15 and 17 of the Rules make it clear that

the Conservator of Forest is the person authorized to establish

check posts and depots. According to Rule 17 each check post

or the depots is to be managed by an officer appointed by or

under the order of the Conservator of Forest or the Divisional

Forest Officer. Thus, the check posts or depots have been kept

under supervision, control or charge of an officer to be

appointed by the Conservator of Forest or the Divisional Forest

Officer of the Forest Department.

47. Rule 5 provides for payment of transit fee on the check posts

or depots. Thus, obviously transit fee, if at all, has to be

collected by the authorized officer of the Forest Department.

48. The Regional Officer, Sonebhadra vide letter dated 11th July

2003 addressed to the NCL on the basis of the letter of the

Chief Secretary, U.P. Government dated 14th June 1999 has

26

intimated the NCL that transit fee @ Rs. 5 per ton is realizable

on coal mind from its collaries and therefore the requisite

amount for the years 1999-2000 and 2000-2001 be paid by the

department.

49. The notice dated 12th May 2008 again of the Regional

Forest Officer addressed to the NCL directs it to provide with the

necessary amount failing which the Railway rakes would be

ceased under Section 52 of the Forest Act. Similar letters of the

year 2010 directing for realizing Rs. 38/- per tonne for the coal

mines have also been produced and relied upon.

50. Under the Rules we were unable to find any provision which

authorizes the NCL to deduct, collect or realize the transit fee

from the petitioner. The above letters are only demand letters

which do not authorizes the NCL to collect transit fee from the

purchasers of the coal. In the absence of any Rule or any

authorization by the Conservator of Forest or the Divisional

Forest Officer authorizing the General Manager, NCL to realize

the transit fee from the petitioner, we are of the opinion that the

NCL has no authority of law to make any deduction or to realize

transit fee from the petitioner not even on the basis of the letters

referred to above.

51. The above discussion leads us to answer the second

issue/question in favour of the petitioner and we hold that the

NCL has no authority to collect the transit fee as it has not been

authorized to do so by any competent officer of the forest

department.

52. The ancillary issue that the dispute, if any, regarding

payment of statutory dues is a subject matter of arbitration, we

are of the opinion that the submission in this regard is

completely mis-conceived and is not tenable in law.

53. In the present case there is no dispute regarding payment of

statutory charges between the parties to the contract rather the

petitioner is challenging the authority of the forest department in

levying and realizing transit fee through the NCL. Thus, the

issue is purely legal in nature and beyond reference to any

27

arbitration. If the Statute does not provide for charging of transit

fee on transportation of coal by AWR and BPC system or

Railways and there is no statutory liability upon the petitioner to

pay it, the same can not be realized by NCL under the contract

and would thus be not referable as a dispute for adjudication to

the arbitration.

54. In view of the aforesaid facts and circumstances, the

respondents are not competent to realize transit fee on the

transport of coal by rail or through AWR and BPC system.

55. The writ petitions accordingly stand allowed and a

mandamus is issued to the respondents not to realise any transit

fee from the petitioner on the transportation of coal through rail

mode or AWR and BPC system.”

38.Reverting to the facts of the present case, it is not in dispute that the

petitioners are engaged in lawful mining operations pursuant to valid

mining leases and statutory clearances, and that the iron ore extracted

from forest land is transported to non-forest destinations exclusively

through the railway network.

39.In the present case, the iron ore is being transported by way of Railways

and the field of ‘Railway’ falls within the Central Government. In List I of

the VII Schedule of the Constitution, ‘Railway’ finds place at Entry No. 22

of the Union List and Entry 89 of the said list provides for ‘Terminal taxes

on goods or passengers, carried by railway, sea or air taxes on railway

fares and freights’ meaning thereby that on the iron ore transported

through Railways, no transit fee can be imposed by the State

Government when transported through Railways.

40.List II, State List of the VII Schedule, Entry 50 provides for taxes on

mineral rights subject to any limitations imposed by Parliament by law

relating to mineral development. The present is a case where the mineral

28

is being treated as a forest produce and as such, levy of any transit fee

by the State Government on the mineral transported through Railways,

cannot be justified.

41.Though styled as a “transit fee”, the impugned levy is imposed on a

tonnage basis at a uniform rate of ₹57 per ton, without any correlation to

the cost of regulation or services rendered. The levy is not vehicle-based,

route-based or transaction-specific, but is directly linked to quantity of

mineral transported. Such a levy, in pith and substance, bears the

characteristics of a tax rather than a regulatory fee. It is trite law that

nomenclature is not determinative, and the Court must examine the true

nature of the impost. The absence of any discernible quid pro quo,

coupled with the scale and structure of the levy, leads to an irresistible

conclusion that the impost is fiscal in nature.

42.Article 265 of the Constitution mandates that no tax shall be levied or

collected except by authority of law. In the present case, neither Section

41 of the Act of 1927 nor the Rules of 2001 authorise imposition of a

substantive tax on minerals, much less on a tonnage basis. The

impugned Notifications, therefore, lack statutory foundation.

43.The impugned Notifications treat minerals on par with timber and other

forest produce without any rational classification or intelligible differentia.

Mining operations governed by Central legislation are clubbed with

traditional forest produce, leading to hostile discrimination against lease-

holders operating in forest areas. The levy also disproportionately

burdens entities transporting minerals by Rail, despite the absence of

any regulatory role played by the Forest Department in such

transportation. Such arbitrary and unequal treatment offends Article 14 of

the Constitution.

29

44.As has been authoritatively held by the Allahabad High Court in

Hindalco Industries Limited (supra), the transit rules framed under

Section 41 of the Indian Forest Act, 1927 are in the nature of a fiscal

statute and, therefore, must be strictly construed. The charging provision

and the computation mechanism form an integrated code, and where the

machinery for computation fails or is incapable of application to a

particular mode of transport, the levy itself must necessarily fail. The said

judgment, which has attained finality upon dismissal of the Special Leave

Petition preferred by the State of Uttar Pradesh, squarely applies to the

controversy at hand.

45.Applying the aforesaid principles, this Court finds that Rules 3 and 5 of

the Rules, 2001 do not envisage, either expressly or by necessary

implication, the levy of transit fee on transportation of forest produce or

minerals by railways. The computation mechanism prescribed under

Rule 5 is wholly inapplicable to railway transportation, and there exists no

statutory machinery under the Rules for assessment, levy or collection of

transit fee in respect thereof. Any attempt to extend the scope of the

Rules to railway transport would amount to rewriting the subordinate

legislation, which is impermissible in law.

46.This Court further finds substance in the contention of the petitioners that

the impugned Notifications dated 30.06.2015 and 27.07.2022, insofar as

they seek to levy transit fee on iron ore on a tonnage basis, travel beyond

the rule-making power conferred under Section 41 of the Act of 1927.

The said levy, in pith and substance, partakes the character of a tax on

minerals, for which the State Government lacks legislative competence.

The levy also fails to satisfy the essential attributes of a regulatory fee,

there being no discernible quid pro quo or nexus with any service

30

rendered by the Forest Department in relation to railway transportation.

47.The reliance placed by the respondents on Kumaon Stone Crusher

(supra) is misconceived. The said decision dealt with regulation and levy

in the context of road-based transportation of forest produce and cannot

be extended to validate a levy on railway transportation, which stands on

an entirely different constitutional and statutory footing. The said

judgment does not dilute the settled principle that in the absence of a

workable charging and computation mechanism, no fiscal levy can be

sustained.

48.This Court is also of the considered opinion that the impugned action of

the respondents suffers from the vice of lack of authority of law, rendering

it violative of Article 265 of the Constitution of India. The consequential

letters dated 23.08.2022 and 02.09.2022, being founded entirely upon

the impugned notification dated 27.07.2022, are equally unsustainable

and liable to be quashed.

49.In view of the foregoing discussion, and respectfully following the ratio

laid down in Hindalco Industries Limited (supra), this Court holds that:

(i) The Rules of 2001 do not provide for levy of transit fee on

transportation of forest produce or minerals by Railways;

(ii) The Notifications dated 30.06.2015 and 27.07.2022, insofar as

they seek to levy transit fee on iron ore transported by rail, are ultra

vires the Act of 1927 and beyond the legislative competence of the

State; and

(iii) The respondents/State have no authority to demand or realise

transit fee from the petitioners in respect of transportation of iron

ore by rail.

31

50.Consequently, the writ petition deserves to be and is hereby allowed.

The impugned Notifications dated 30.06.2015 and 27.07.2022, and the

consequential letters dated 23.08.2022 and 02.09.2022, are quashed

and set aside, insofar as they relate to levy and recovery of transit fee on

transportation of iron ore by Railways.

51.There shall be no order as to costs.

Sd/- Sd/-

(Naresh Kumar Chandravanshi) (Ramesh Sinha)

JUDGE CHIEF JUSTICE

Anu / Amit

32

Head Note

Section 41 of the Indian Forest Act, 1927 empowers the State to regulate transit

of forest produce “by land or water”. The expression cannot be expansively

interpreted to include railway transportation, which falls exclusively within the

Union List. Any such interpretation would render the provision constitutionally

infirm.