VERY IMPORTANT POINT
The system of "rounding off the price" of kerosene an essential commodity, so as to build up a fund available with the Director and Collectors in M.P. State is liable to be quashed being ultra vires Article 265 of the Constitution and has no sanctity of law u/s 3 of Essential Commodities Act, 1955 and para 2(d) of Kerosene (Restriction on Use and Fixation of Sale Price) Order, 1993.

Headnote:Constitution of India-Articles 136, 226 and 265-Essential Commodities Act, 1955-Sections 3 and 5-Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993-Para 2 clause (d)-Declared price in relation of kerosene, an essential commodity-On 20/21-3-2001 State Govt. of M.P. has framed rules-Fixation of price of kerosene has included an amount by way of "rounding off charges"-Challenged by two writ petitions as ultra vires the constitution-Dismissed by M.P. High Court-Appeals against by special leave-Whether levy and recovery of any amount over and above the price fixed by taking into consideration the relevant factors an amount by way of "rounding off charges" is without authority of law and amounts to taxation in disguise and is ultra vires the constitution and the Act and order? (Yes)-Appeals allowed-Directions given for auditing of fund and its proper utilisation-Case law referred.
       Held : Not only the levy in the guise of rounding off is unlawful and unauthorized but on the stand taken by the respondents themselves showing the manner in which the fund has been operated and utilized makes the position worst. The Rules framed on 20/21-3-2001, during the pendency of these petitions before this Court are shocking-to say the least. In the name of rounding off, the sale price by wholesaler and the sale price by retailer have been appointed so strategically as to generate a substantial fund. An amount of Rs. 9,97,817/- has been spent for purchasing computers, an amount of Rs. 98,15,689/- has been spent for procuring office assets and an amount of Rs. 29,97,358/- has been incurred by way of miscellaneous expenditure, the details whereof are not known. A huge fund stands accumulated to the credit of several collectors in several districts and the director and it is not shown for what purpose it is proposed to be utilized. March, 2001 executive instructions, styled as Rules, go to show that the amount from the sale of condemned vehicles and articles purchased out of the fund, the rental amount of godowns, shops, tankers drums etc. generated out of the fund and any other amount which is receivable under the Rules shall be utilized for augmenting the fund. Para 6 of March 2001 Rules indicates works of permanent nature being constructed, vehicles purchased and several other activities such as information and training and giving away the awards being drawn out of the fund. All this is to be done from the amount collected in the name of rounding off from the poorest of the citizens for whom kerosene is the cooking medium. It was understandable if the State Government had taken a policy decision to sell the kerosene at a uniform price at all the retail supply points within a district or region or entire State and for that purpose it would have so appointed the wholesale and the retail prices as to work out deficit somewhere and surplus elsewhere but the deficit and the surplus being fully set off against each other. Any fund devised for the purpose of collecting the surplus and utilizing the amount so collected for compensating the deficit, would have enabled uniformity of fair price being maintained throughout the district or region where it was sought to be so maintained. Then the State Government could not have been accused of having brought into being a levy for its own purpose. The beneficiary would have been the consumer by availing the kerosene at a uniform fair price. But that is not what has been done. The Director and the Collector and the executive wing of the State, what they have done is to develop a local administration, levy charges for developing a fund at their own level, administered by them for running a department or system of governance. Such collection and fund has no sanctity in law and is violative of Article 265 of Constitution. For the foregoing reasons, the appeals are allowed. The impugned judgment of the High Court is set aside. The system of rounding off the price so as to build up a fund available with the Director and the Collectors is directed to be quashed being ultra vires of Article 265 of Constitution and Section 3 of the Essential Commodities Act and Para 2(d) of Kerosene Restriction on Use and Fixation of Sale Price Order 1993. The appeals stand disposed of accordingly. (Paras 17 & 18)
       Held further : However, on the facts brought to the notice of this Court, the matter cannot be left at that alone. We have the figures of the collection and utilization of the fund upto 31.7.2001 brought to our notice. During the pendency of these appeals, further amount must have been collected and also spent. Some directions would be required to be made for utilizing the fund so available with the officers of the State Government. This Court would also like to know how and for what purpose the fund has been utilized and whether timely audits of the fund were carried out. For this purpose we request the Accountant General of Madhya Pradesh to carry out the audit of the fund as available with the Director and the Collectors of the Districts in the States of Madhya Pradesh and Chhattisgarh, the latter State having been carved out and formed during the pendency of these Special Leave Petitions. Apart from carrying out the usual audit, we request the Accountant General of Madhya Pradesh to compile the expenditure under different heads and sub-heads so as to clearly indicate for what purpose the fund has been utilized. We hope the audit will be completed in a period of 4 months from the date of communication of this order to the Accountant General of Madhya Pradesh. On receipt of the report of the Accountant General, the same shall be laid before the Court soliciting further directions. Till then, the amount collected in the said fund by the Director of Food and Civil Supplies and the Collectors of the Districts shall stand frozen. (Para 19)

JUDGMENT

R.C. Lahoti. J.-Challenge in the two writ petitions, to fixation of price of kerosene, a controlled commodity, wherein the Director of Food and Civil Supplies of the State of Madhya Pradesh and the Collectors of districts have included an amount by way of rounding off charges, has been turned down by the High Court of M.P. The aggrieved petitioners have filed these petitions for leave to appeal.

2. Leave granted.

3. Admittedly, kerosene is a controlled commodity to which the Essential Commodities Act 1955 (hereinafter the Act , for short) applies. Under sub-section (1) of Section 3, if the Central Government is of the opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodities or for securing their equitable distribution and availability at fair prices, it may by order provide for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein. Without prejudice to the generality of such power, under clause (c) of sub-section (2), the Central Government may by an order provide for controlling the price at which essential commodity may be bought or sold. Under Section 5, the Central Government may, by notified order, direct that the power to make orders or issue notifications under Section 3 shall, in relation to such matters and subject to such conditions, if any, as may be specified in the direction, be exercised also by such State Government or such officer or such authority subordinate to a State Government as may be specified in the direction. By Central Government Order No. 682(E) dated the 30th November, 1974, the Central Government, exercising the power conferred by Section 5, directed that the powers conferred on it by sub-section (1) of Section 3 of the Act to make orders to provide for the matters specified in clause (c) of sub-section (2) thereof shall, in relation to all essential commodities, other than food stuffs and fertilizers, be exercisable also by a State Government.

4. Under Section 3 of the Act the Central Government has made the Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993 (hereinafter referred to as the Kerosene Order , for short). Clauses (d) and (j) define declared price and public distribution system as under :-

"(d) "declared price" in relation to kerosene sold under the public distribution system means the maximum selling price declared by the Central Government, from time to time with reference to an area and shall include such other charges, rates, duties and taxes, prescribed :-

(i) by the State Government or District Collector in the case of an area in a State, or

(ii) by the Administrator of the Union Territory, in the case of an area in a Union Territory;

xxx xxx xxx xxx

(j) "public distribution system" means the system of distribution, marketing or selling of kerosene at declared price through a distribution system approved by the Central or State Government";

5. On 25.5.1998, the Director, Department of Food, Civil Supplies and Consumer Rights, Madhya Pradesh issued a letter to all the Collectors of districts in Madhya Pradesh which reads as under :-

"1. The rates of kerosene for Retailers in the rural areas have been fixed for Rs. 3.20 per litre. The calculation of savings from rounding off should be done in a manner that the amounts of savings from round off could be recovered from wholesalers. At first the Retailer s commission, and expenses of transport from Semi-wholesaler to Retailer should be deducted from the rates fixed for retailers and it will fix the rates for Semi-Wholesalers. After deducting the semi-wholesaler s commission and transport expenses from wholesaler to semi-wholesaler the rates for wholesaler will be fixed. The amount remaining after deducting the amount to be paid to the Oil Company by wholesaler, tax and transport expenses will be the round off amount. The amoun

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