Decided on July 15,1968



- (1.) A common question arises for decision in these cases and we propose to dispose of them by a common judgment. The question is whether the imposition of what is called a fee by the Council of the Ernakulam Municipality in purported exercise of the powers of the Council under S.284 and 363(3) of the Kerala Municipalities Act, 1960, is sustainable at law.
(2.) It is not urged before us that the fee impose is as a quid pro quo for services rendered; so the fees cannot be sustained as a licence fee. Nor is it urged that this is a tax imposed as a tax by following the provisions contained in S.96 to 128 of the Kerala Municipalities Act, 1960. However it is urged that the levy is sustainable even if it amounts to a tax because of the distinction between a fee for licences and a licence fee. What is contended is, a fee for licence need not be confined to the actual cost of the issue of the licence under which alone a particular activity can be carried on and the necessary expenses involved in supervising whether the activity is carried on in accordance with the terms and conditions of the licence issued, but can provide general funds to augment the general revenue of the Municipality. In other words, it is urged that by acting under S.284 and 363(3) of the Act, a tax can in fact be imposed though this is called a licence fee, and that without complying with the provisions contained in S.96 to 128 of the Act. Support is sought to be gained for this contention from the observations of the Supreme Court in The Corporation of Calcutta and another v. Liberty Cinema reported in 1965 SC 1107. This question has recently been considered in two sets of cases by a Full Bench of this Court. The earlier batch of Writ Appeals, 107 and 108 of 1967 was disposed of on the 2nd July this year, and the later decision in Writ Appeal No. 148 of 1967, on the 12th July. The later decision largely depended on the pronouncement in the earlier batch of cases.
(3.) The Full Bench relied on a passage from the judgment of the Supreme Court in Civil Appeal 558 of 1967. We shall read that passage: It was, however, contended for the appellant that under S.294 of the Act the Municipal Board has authority to impose a licence fee by enacting a bye law for that purpose under S.298 of the Act. It was said that S.294 of the Act contemplates the charge of a fee not only in the restricted sense of a fee for which a quid pro quo is provided but also in the sense of a fee in which the taxation element is predominant. It was hence argued that the procedural machinery for the imposition of tax contemplated under S.131 to 135 of the Act need not be followed in such a case. We are unable to accept this argument as correct. According to the scheme of the Act there is a sharp and clear distinction between taxes properly so called and fees. There is a logical and clear cut division of the Act into several chapters, and taxes, by whatever designation they may be called are all comprehended and dealt with in Chap.5 and by that Chapter alone. And what is permitted to be imposed by S.294 which occurs in Chap.8 is only a fee in the restricted sense as distinguished from a tax. To put it differently, the Act contemplates only two categories of impost, i. e., taxes enumerated in Chap.5 and fees mentioned in as 293, 293A and 294 of Chap.8. It is not contemplated in the scheme of the Act that there should be a third category of impost of licence fee which is in the nature of a tax for which the procedure contemplated by Chap.9 is applicable. In our opinion, the scheme of Chap.8 of the Act shows that the provisions are for maintenance of public safety and convenience of the inhabitants of the municipality. The fees mentioned in S.294 are meant to be imposed for the purpose of regulation of trade and professions and for rendering service;. It is not contemplated by the Act that license fees imposed by S.294 should be merged in the public revenues of the municipality and should go for the upkeep of the roads and other matters of general public utility. It is therefore not permissible for the Municipal Board to impose a tax on the respondents under the guise of a license fee without following the mandatory procedure for imposition of the taxes prescribed by S.131 to 135 of the Act; otherwise there will be a circumvention of the provisions of S.131 to 135 of the Act. It is manifest that S.294 of the Act must be interpreted in such a manner as to prevent the circumvention of the safeguards of the provisions of S.131 to 135 of the Act.;

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