Decided on July 02,1968



- (1.) These appeals have been preferred by the City Corporation of Calicut against the judgment of Gopalan Nambiyar, J. in Original Petition Nos. 2962 & 3037 of 1965. The petitioners challenged the validity of the levy by the Corporation, of licence fee for soaking cocount husks in soaking pits in their property. The Corporation would justify the impost under S.299 read with S.387 and Schedule 4V of the Calicut City Municipal Act, (Act 30 of 1961) renamed as the Kerala Municipal Corporations Act (Act 13 of 1964). The case of the petitioners is that as a fee the levy is not justified by the provisions of the statute and as a tax, it is beyond the power of taxation conferred on the Corporation The stand taken by the Corporation on the other hand is that the levy is a tax. Alternatively it is also contended by the Corporation that it is a "fee for license". The learned Single Judge has held in his judgment dated 8-2-1967 that as a fee the levy is unsustainable since no positive service is rendered by the Corporation in return for the fee levied. As a tax the learned Judges's view is that it is beyond the power of taxation conferred on the Corporation. Accordingly it has been held by the learned Judge that the levy of licence fee for soaking coconut husks is illegal.
(2.) The question for decision in these appeals is whether the levy of licence fee for soaking, cocount husks is sustainable under any of the provisions of the Calicut City Municipal Act (hereinafter to be referred to as "the Act".) The Corporation would trace its power to impose the impugned levy to S.299 and 387 of the Act. We are extracting those two sections: "299: .................................. (1) No place within the limits of the city shall be used for any of the purposes mentioned in Schedule IV without a licence obtained from the commissioner and except in accordance with the conditions specified therein." X X X X X 387: ..................................... (1) Every licence or permission granted under this Act or any rule or bye law made under it shall specify the period, if any, for which and the restrictions, limitations and conditions subject to which the same is granted, and shall be signed by the Commissioner. (2) (a) Save as otherwise expressly provided in, or may be prescribed under, this Act, for every such licence or permission, fees shall be paid in advance on such units and at sued rates as may be fixed by the council. X X XX X" The above sections speak of the imposition of license fee. The learned counsel for the Corporation classified fees referred to in the above sections under three heads and they are: (a) fee for licence, (b) fee for services rendered and (c) fee in the nature of a tax. We have carefully examined all these three heads in the light of relevant decisions of the Supreme Court and we are not satisfied that the impugned fee could be brought under any one of them. The law stands settled by a series of decisions of the Supreme Court beginning with AIR 1954 SC 282 , 388 and 400 (Shrirur Mutt case, Ratilal v. State of Bombay and Sri. Jagannath v. State of Orissa) and ending, as told at the Bar, in the recent decision in Nagar Miahapalika Varanasi v. Durga Das Bhattacharya & Others (Civil Appeal No. 558 of 1967), that without a special benefit accruing to the payer in return, the levy cannot be justified. The position has been placed beyond doubt by the Supreme Court in the following words in Ratilal v. State of Bombay ( AIR 1954 SC 388 ):- "Fees are payments primarily in the public interest, but for some special service rendered or some special work done for the benefit of those from whom the payments are demanded. Thus in fees there is always an element of 'quid pro quo' which is absent in a tax." Distinguishing licence fee from a tax the learned Judges would further observe:- "A tax is in the nature of a compulsory exaction of money by a public authority for public purpose, the payment of which is enforced by law. The other characteristic of a tax is, that the imposition is made for public purpose to meet the general expenses of the State without reference to any special advantage to be conferred upon the payers of the tax. Thus, although a tax may be levied upon particular classes of persons or particular kinds of property, it is imposed) not to confer any special benefit upon individual persons and the collections are all merged in the general revenue of the State to be applied for general public purposes. Tax is a common burden and the only return which the tax payer gets is participation in the common benefits of the State." Adverting to some of the characteristics of a fee the learned Judges would again observe:- "In order that the collections made by the Government can rank as fees there must be correlation between the levy imposed and the expenses incurred by the State for the purpose of rendering such services. Thus two elements are essential in order that a payment may be regarded as a fee. In the first place, it must be levied to consideration of certain services which the individuals accepted either willingly or unwillingly and in the second place, the amount collected must be earmarked to meet the expenses of rendering these services and must not go to the general revenue of the State to be spent for general public purpose."
(3.) In the above back ground we would approach the first head namely, a fee for licence. The fee coming under this head is the money paid for a licence or permission to run a particular trade or calling: ''A licence is merely a permission granted to a particular person to do a particular thing at a fixed place during a determinate period. The fee attached to such a permit is a specific sum of money to be collected from the licensee for the purpose of covering the expenses of the licence, its registration, inspection and supervision. Fees levied on licenses of premises ought not to be greater than a sum to cover the costs of the regulation." (Cunliffe, J. in LLR 5 Rangoon 212 quoted by their Lordships in the Liberty Cinema Case). In the Corporation of Calcutta v. Liberty Cinema ( AIR 1965 SC 1107 ) their Lordships held:-- "The license fees are in respect of what are called dangerous and offensive trades, that is to say, it is necessary in the interests of the city that the corporation shall know where such trades are being carried on and shall be in a position to see that they are carried on in a proper manner without causing unnecessary nuisance to other people or danger to the public generally." But it is to be remembered that in such cases the fee collected must have correlation to the expenses incurred in issuing the same. To quote the words of their Lordships in AIR 1954 SC 282: -- "If as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should; on the face of the legislative provision, be correlated to the expenses incurred by Government in rendering the services. As indicated in Art.110 of the Constitution, ordinarily there are two classes of cases where Government imposes 'fees' upon persons. In the first class of cases, Government simply grants a permission or privilege to a person to do something, which otherwise that person would not be competent to do and extracts fees either heavy or moderate from that person in return for the privilege that is conferred." If more than what is required to issue the licence is levied, the tax element will predominate since the excess collected will go to the general fund to be utilised for matters of general public utility and in such cases the levy would assume the character of a tax and not fee. In the cases before us we are not told that the fee collected from the petitioners for soaking husks is set apart for the purpose of meeting the expenses of the licence. Nor is there any data placed before us by which the expenses incurred could be gauged. It was argued before us that for a simple fee for licence granted for carrying on an activity, no quid pro quo is needed. In such cases the fee will in fact be a tax and thus we are taken to the third category namely fee in the nature of a tax. The Corporation, in our view, cannot impose a tax in the guise of a fee. In Hardwar Municipality v. Raghubir Singh ( AIR 1966 SC 1502 ), the question arose whether the toll on vehicles leaving the Municipality could be justified when the Municipal Act provided levy of tolls only on vehicles entering the Municipality. The learned Judges held:- "Toll as such can only be collected under the Municipalities Act from vehicles entering the Municipal limits. This, exhausts all the powers delegated by the Legislators to the Municipal Boards and that power cannot be extended either by considerations derived from the nature of tolls or from the residuary clause." Thus even if the licence fee is construed as a tax, the levy cannot be justified.;

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