Jharkhand High Court Strikes Down Levy Of “Composition User Fee” On Vehicles Carrying Minerals Weighing Over 9 Tonnes

Subsequent amendments included amendments introduced by the Jharkhand Highways Fee (Determination of Rates and Collection) Amendment Rules, 2022 (enhanced CUF) and the Jharkhand Highways Fee (Determination of Rates and Collection) Amendment Rules, 2025 (doubled CUF to Rs.1200).

For reference— CUF was a mandatory levy imposed by the State Government on vehicles carrying minerals above 9 tonnes, and was collected at the point of generating transit challans through the JIMMS portal. It was imposed irrespective of actual use of State roads by such vehicles, and the revenue so collected was used in the State exchequer for road construction and maintenance.

Responding to a slew of petitions challenging the levy, a Division Bench of Chief Justice Tarlok Singh Chauhan and Justice Rajesh Shankar observed that the impugned Rules and subsequent amendments tried to create an unjustified class within a class by providing that mechanical vehicles carrying more than 9 tonnes of minerals were liable to pay CUF and other vehicles carrying other goods of same weight were exempted. In this regard, the Division Bench held,

“We are of the view that the classification made by the respondent-State between mineral carrying vehicles and other vehicles has no nexus with the object sought to be achieved by it. Thus, the impugned Rules and the subsequent amendments thereof to the extent of imposing the “Composition User Fee” is also violative of Article 14 of the Constitution of India.”

BACKGROUND

Entry No. 59 of List-II under VIIth Schedule of the Constitution specifies the subject “Tolls” on which the State Government is empowered to legislate. Section 2 of the Tolls Act— “it shall be lawful for the Government to cause such rates of toll, as it thinks fit, to be levied upon any road or bridge which has been or shall hereafter be made or repaired at the expense of the Government.”

In light of these provisions, petitioners argued that CUF is in the nature of a compensatory tax, levied only for reimbursement of the amount spent by State on construction or maintenance of roads/bridges and the same cannot be levied as a source of State revenue on the pretext that construction and maintenance is a continuous process. It was further argued that the terms “shall hereafter be” in Section 2 does not empower State to indefinitely collect tax for road constructions. Additionally, petitioners contended that the State of Jharkhand is levying toll on mineral transportation and the charging event is not upon use of public roads and/or bridges. In several cases, mines were situated in remote areas with no public road and thus, levy of toll on mere generation of Transport Challan, was argued to be beyond the scope of Tolls Act. An arbitrary class within a class was also argued to be created by imposing CUF only on vehicles carrying minerals above 9 tonnes, which violated the equality clause in Article 14.

On the contrary, the State defended the levy of CUF, stating that it possessed the requisite constitutional competence. Additionally, it was submitted that mineral-laden trucks moving in mineral belts caused massive degradation of roads which warranted regular maintenance.

The Court thus had to determine whether levy of 'toll' in the name of “CUF on transportation of minerals through mechanical vehicles using State roads or commuting in mining areas, is beyond the scope of Section 2 of Tolls Act.

Court's Findings:

At the outset, the Court observed that CUF, as introduced by the 2021 Rules, was charged by the State by way of automatic deduction irrespective of whether connecting roads exist or not, or whether reconstruction or repair work is being undertaken or not. Thus, it observed,

“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 in imposition of the “Composition User Fee”

Explaining the difference between “toll” and “tax”, the Court noted,

“The imposition of tax is made for public purpose to meet the general expense of the State without any special benefit to be conferred on the payer of tax and it is a part of common burden. On the other hand, toll is a recompense for use of a road or a part thereof by a user because it receives a special benefit of transporting or travelling on such roads constructed and maintained out of the funds of Central or State Government.”

In light of this explanation, the Court stated,

“'Toll' is not a tax, rather it is a compensatory fee which is chargeable for service. There is an element of quid pro quo in any such charge. Though in view of section 8 of the Act, 1851, the collected tolls are part of the public revenue and may be absorbed in the general revenue of the State, nevertheless by very definition of 'toll', it cannot be otherwise used for augmenting the State's revenue.”

Further, the Court emphasised that the Constitution permits levy or collection of tax only by sanction of law, and as CUF was bereft of a statutory backing under Tolls Act, it held,

“Article 265 of the Constitution of India delineates that no tax shall be levied or collected except by authority of law. Thus, we are of the view that the impugned Rules and the subsequent amendments relating to imposition of “Composition User Fee” is ultra vires to the Act, 1851”

The Court further emphasised that as per the Tolls Act, the State Government has to identify the roads and bridges which have been constructed or maintained at its expense and thereafter erect toll gates for collection of toll. As the state roads upon which toll was to be levied were not identified, the Court held,

"In the present case, since there is an ambiguity regarding identification of the State roads/bridges on which the toll in the nature of “Composition User Fee” is to be levied, we are of the view that the same cannot be imposed upon the petitioners.”

Additionally, clarifying that the State can levy toll only on roads and bridges constructed or repaired, and not to indefinite future projects, the Court—interpreting “shall hereinafter be” under Section 2 of Tolls Act, held,

“The true and purposive interpretation of the words “shall hereafter be” mentioned in section 2 of the Act, 1851 would be that if any road or bridge is constructed or repaired after the enactment of the said Act, then on the said road or bridge also, the State Government will be empowered to levy toll tax. The State Government, however, is not empowered to levy Toll tax for any road or bridge to be constructed in future as the same is compensatory in nature and a quid pro quo element is involved in it.”

In light of the given analysis, the Court concluded that the scheme of levy of CUF, as articulated by the 2021 Rules and subsequent amendments, were beyond the scope of the provisions of section 2 of Tolls Act and as such the same was struck down.

Case Details:

Case Title: Triveni Engicons Private Limited v. The State of Jharkhand and others and batch

Case Number: W.P.(C)No.1532 of 2022 and batch

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