Jharkhand High Court Strikes Down 'Composition User Fee' on Mineral Transport Under 1851 Tolls Act - 2025-09-09

Beyond the Toll: High Court Reins in State’s Power to Tax Mineral Transit

In a landmark verdict from the High Court of Jharkhand , a division bench comprising Hon’ble The Chief Justice Tarlok Singh Chauhan and Hon’ble Mr. Justice Rajesh Shankar has struck down the state's “Composition User Fee” imposed on mineral-carrying vehicles. The decision effectively dismantles the state’s mechanism of collecting tolls through transport challans, ruling it inconsistent with both the colonial-era Indian Tolls Act, 1851, and the constitutional framework of fiscal authority.

The Backdrop: A Fee by Any Other Name

The dispute pitted major construction and mineral entities, led by Triveni Engicons Private Limited , against the State of Jharkhand. Since 2021, the state government had introduced and repeatedly amended the Jharkhand Highways Fee (Determination of Rates & Collection) Rules , imposing a “Composition User Fee” on mechanical vehicles carrying minerals weighing more than nine tonnes.

The mandate was stark: operators were barred from generating essential electronic transport challans on the JIMMS (Jharkhand Integrated Mines and Mineral Management System) portal unless this fee was paid—regardless of whether the vehicle actually traversed a government-constructed road or bridge.

The Arguments: Servitude vs. Sovereignty

Petitioners argued that the fee was essentially a tax disguised as a toll. They emphasized the "quid pro quo" principle: a toll is a compensatory payment for specific infrastructure usage. Under the Indian Tolls Act, 1851 , the state is only empowered to collect toll if it has first invested in the construction or repair of a specific road or bridge. By forcing payment before transit through a web portal, the state effectively shifted the charging event away from actual usage, converting a toll into an unauthorized tax on goods.

The State of Jharkhand, represented by the Advocate General, defended its position by citing the high volume of traffic in mining areas as a primary cause of road degradation. It argued that the state has plenary constitutional powers to manage infrastructure through Article 162 and that the fee was necessary to fund the continuous cycle of repair and maintenance necessitated by heavy industrial traffic.

The Judicial Scrutiny: "An Artificial Definition"

The court’s reasoning zeroed in on the legislative limits of the state's rulemaking power. Justice Rajesh Shankar, writing for the bench, underscored that the state’s broad definition of "mining area" and the automatic deduction of fees for transit violated the strict interpretation required for taxing statutes.

> "A toll can never qualify as a tax and if it has to be realised as a 'tax', then the competence of the State Legislature must be referable to a particular and specific taxing entry in List II of the Seventh Schedule."

The court noted that the state failed to identify specific infrastructure where the fee would apply, opting instead for a broad-brush levy. By linking the fee to the generation of a transit challan, the state was essentially taxing the mineral rather than the road usage .

Key Observations

The judgment provides a stern reminder of institutional limitations:

• On the Nature of Tolls: "The public benefit envisaged under Section 2 of the Tolls Act, 1851 is the making or repairing of any road or bridge at the expense of the State Government. For the advantage obtained by the public by the construction of the roads and bridges, the State Government is entitled to reimburse itself for providing the service."
• On Taxable Events: "By imposing toll in the nature of 'Composition User Fee', the State Government has not taken care of the fact as to whether the mineral carrying vehicle is actually using the toll road or not and thus the element of quid pro quo is missing."
• On Strict Interpretation: "If any ambiguity be found to exist, it must be resolved in favour of the citizen… taxing statutes must receive strict construction which are not to be extended by implication beyond the clear import of the language used."

The Verdict and Its Aftermath

The High Court declared the challenged rules "ultra vires" to the 1851 Act. While the court stopped short of ordering a cash refund, citing the business nature of the petitioners, it directed the state to adjust the illegally collected fees against the petitioners' existing or future liabilities.

This ruling serves as a vital check on delegated legislation. It affirms that while states have a mandate to maintain infrastructure for mining operations—a burden already offset by the District Mineral Foundation (DMF) Fund —they cannot invent new methods of taxation under the guise of an 1851 colonial statute without adherence to the fundamental principles of road access and compensatory service.