Judgments
Judgments
  1. Home
  2. /
  3. High Court Of Judicature at Allahabad
  4. /
  5. 1961
  6. /
  7. January

Durga Das Bhattacharya And Ors. vs Municipal Board

High Court Of Judicature at Allahabad|23 November, 1961

JUDGMENT / ORDER

JUDGMENT Desai, C.J.
1. I regret that I have to differ from my brothers Jagdish Sahai and Bishambhar Dayal and to say that the appeal deserves to be dismissed.
2. The Municipal Board framed Rickshaw bye-laws in exercise of the power conferred upon it under Sections 298 (II)-List I-I-I (c) and (d) and 294. It is not in dispute that it could in exercise of the power frame the bye-laws imposing the obligation of taking out licences on the proprietors and drivers of rickshaws and fixing the fees payable for the licenses. What is contended is that Clause (12) of the bye-laws fixing a fee of Rs. 30/-for a licence granted to a proprietor, and Clause (14) fixing a fee of Rs. 5/- for a licence granted to a driver, of a rickshaw are invalid, because the total amount realised from the licence fees far exceeds the expenses incurred in the regulation of the plying on hire of rickshaws. It was contended in the plaint that the Board could charge a licence fee just to cover the probable, expenses of regulating the trade of plying rickshaws on hire and could not make the licence fee another source of income to augment its general fund, that it maintains no extra staff to regulate, the trade of plying rickshaws on hire, that it could at the most charge only a nominal fee for the licences and that consequently the licence fees are unreasonable and beyond the statutory powers of the Board.
3. The bye-laws were made in March, 1941', the licence fees originally fixed were Rs. 25/- and Re. 1/-, but they were enhanced to Rs. 30/- in March 1948, and to Rs. 5/,- in February 1951, respectively. The suit challenging the bye-laws was instituted in 1956. The appellants did not plead that Clauses (12) and (14) were invalid, either in 1941 when the bye-laws were enacted, or in 1948 and 1951 when the clauses were amended and the licence fees enhanced. Though they pleaded that the clause of action accrued when the bye-laws were enacted and when Clauses (12) and (14) were amended, they did not specifically plead that the aggregate amount of the tees realised from the licensees in 1941 or even in 1948 and 1951 exceeded the expenses of regulating the trade so much as to be unreasonable and to amount to imposition of a tax.
A reading of the plaint suggests that they filed the suit on the basis that at the time of the institution of the suit the income from the licence fees far exceeded the expenses of regulating the trade. If that is their case, a question would arise whether a bye-law, charging a licence fee which is reasonable and within the statutory powers and, therefore, valid, becomes invalid because at a later date the income becomes unreasonably high in comparison to the expenditure. That question has not been discussed by the trial Court and by my learned brothers. If a bye-law valid on the date of its being made remains valid in spite of change of circumstances, i.e., a Board is not obliged by law to go on continuously amending its bye-laws as relevant circumstances change, I do not see how the bye-laws in question, not alleged to be invalid on the dates when they were enacted or amended, can be declared as invalid because the relevant circumstances have changed since then.
4. We are concerned with two licence fees, one realised from proprietors to whom licences are granted and the other realised from drivers to whom licences are granted. If the total income far exceeds the expenditure in regulation of the trade, it may still be that the total income from proprietors or the total income from drivers does not far exceed the total expenditure on the regulation of the trade and in that event it cannot be said to be beyond the statutory powers of the Board. It would be illogical to strike down both the clauses of the bye-laws because the total of the income is found to be unreasonable. Each clause should be considered on its own merits and can be knocked down only if the income, derived under it is unreasonable, if Clause (12) is knocked down with the result that the Board will get no income from proprietors there will remain only the income under Clause (14), and, if it does not exceed the expenditure regulating the trade, the latter cannot be knocked down at all.
5. While there is no generic distinction between a tax and a fee, whether for a licence or for services rendered, our Constitution has made a distinction for legislative purposes by providing separately for legislative powers over taxes and fees, vide Schedule VII, List I, serials 82 etc., and 96 and 97, List II, serials 46, 49 etc., and 66 and List III, serial 47. Article 110 differentiates not only between a tax and a fee but also between a fee for a licence and a fee for services rendered. If a fee for a licence is distinct from a fee for services rendered it can be only on the ground that the former is not for services rendered, i.e., a fee for a licence is not meant to be the price of services rendered. Though in a fee for a licence some service may be rendered to the licensee, it is only incidental and, entirely optional and the fee is not meant to cover the price of the service rendered.
The Municipalities Act also maintains the distinction between a tax and a fee by providing separately for the two, and also the distinction between a licence fee and a fee for services rendered through Sections 293, 293-A, 298 (2) List I-J-Miscellaneous--(d), (e) and (g) providing for 'fees for the use or occupation of municipal property, the use of any place to which the public is allowed access, house scavenging, holding of fairs and exhibitions and inspection and copies of municipal records. When it is authorised to charge a fee for services rendered it cannot charge more than the estimated Price of the services rendered. Obviously the excess over the estimated price of the services rendered, if appreciable, cannot be said to be for services rendered. It is not practicable to make the fee exactly equal to the price of the services rendered but it should be intended to be roughly equal to the estimated price. No such correspondence is required for a fee for a licence. It is nothing but the price of a licence and the fixation of the price is at the discretion of the Board, which grants the licence.
Just as the owner of an article is not bound by any rule when fixing the price for its sale, go also the Board is not bound by any rule in fixing the price of a licence. In all the provisions in the Municipalities Act relating to licence lees, the fixation of the fee is left wholly at the discretion of the Board. In none of them has any standard or rule been laid down and no restriction of any kind is expressly imposed on the amount of the fee. The only restriction implied by law is that imposed on all bye-laws, viz., that it must be reasonable.
A bye-law of a Municipal Board can be declared invalid on the ground that it is unreasonable and a clause in a bye-law fixing a licence fee can be knocked down as invalid only on this ground. If the amount of the licence fee is not unreasonably high it is not against any law, and a Court has no jurisdiction to judge its propriety. So long as the fee is a fee for a licence, charging it is within the scope of the Board's authority, regardless of the amount and regardless of services rendered. While in the case of a fee for services rendered there may have to be quid pro quo, no quid pro quo other than the granting of a licence is required in a fee for a licence. It is declared to be a fee for the grant of a licence and the granting of licence is itself the required quid pro quo. No services are required by any provision, of the Municipalities Act to be rendered by the Board to the licensees and in the absence of any obligation to render services it is futile to consider the value of services, if any, rendered. Incurring expenditure on the staff engaged for the regulation of the trade including collection of licence fees and Prosecuting those infringing the bye-laws is in no sense rendering services to licensees.
Even otherwise not more than an element of quid pro quo is required and there is such an element when any service (which is not too trifling to be considered) is rendered to the licensee So long as the licensee gets something appreciable in addition to the licence the bye-law fixing the fee cannot be struck down as invalid except on the ground of unreasonableness. It is wholly unjustifiable to insist on the same amount of quid pro quo in a fee for a licence as in a fee for services rendered. The Municipalities Act contains provisions laying down that the imposition of certain taxes must be wholly with the object of defraying certain expenses and that all moneys derived from them must be expended solely on those objects, for instance Section 130.
In tile absence of a similar provision in respect of fees for licences granted to owners and drivers of rickshaws it cannot be said that the Board must use the money derived from the licence fees solely for defraying the expenses connected with licensing of rickshaw proprietors and drivers and that the estimated income from the licences should be the same as the estimated expenditure on the licensing.
6. A Municipal Board's taxing powers are limited; it can impose only those taxes which are enumerated in Section 128 and no more. There is no element of quid pro quo in a tax and the moneys realised on account of a tax go to the general fund and are not earmarked for defraying any particular expenditure. The general fund has to be used for the benefit of the public and in this sense there is a return to the public but there is no return to the particular payers and the return is not in the form of a special service to them. A license fee does not differ in essence from a tax ; merely because the amount of a license fee goes to general fund and far exceeds the expenditure on the services rendered to the licensees and on the licensing system, it cannot be said that the licence fee is a tax.
A Municipal Board has certainly no power to impose, a tax other than a tax permitted under the Act but a licence fee imposed by it professedly in exercise of its statutory powers cannot be knocked down as a tax, unless it is established beyond doubt that it is a tax. It may be that it cannot impose a tax in the guise of a licence fee, but a very heavy onus rests upon one who assails a licence fee as a tax, Even if a licence fee differs from a tax in the amount of the imposition the amount of a licence fee must be so great in relation to the benefit accruing to the licencee from the licence, that the Court can reasonably say that it is not a licence fee but a tax.
7. The nature of a licence fee has been described by Roberts, J., in Great Atlantic and Pacific Tea Co. v. Grosjean, (1936) 301 U. S. 412 : 81 Law Ed 1193 (1201), in the following words:-
"Whatever a state may forbid or regulate it may permit upon condition that a fee be paid in return for the privilege, and such a fee may be exacted to discourage the prosecution of a business or to adjust competitive or economic inequalities. Taxation may be made the implement of the exercise of the state's police power".
Again, Stone, J., said in Carmichael v. Southern Coal and Coke Co., (1936) 301 U. S. 495 : 81 Law Ed 1245 (1252).
''Taxes, which are but the means of distributing the burden of the cost of government, are commonly levied on property or its use, but they may likewise be laid on the exercise of personal rights and privileges.'' Strong, C. J., said in Fortier v Lambe, (1896) 25 S.C.R. (Canada) 422, that a licence required to be taken out by a statute for a business is merely an incident to the collection of the tax and does not alter its character.
"A licence tax required for the sale of goods is in effect tax upon the goods themselves''; see Welton v. State of Missouri, (1874) 23 Law Ed 347. An excise duty fee for licence of a transport voided fixed at a certain percentage of the gross revenue received from the licensed service was held to be a tax in Browns Transport proprietary Ltd. v. Kroop, (1959.) 100 C. L. R. 117. In the Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar, 1954 SCR 1005 : (AIR 1934 SC 282), Mukherjea, J,,' speaking for the Supreme Court observed that, "levying of fees is only a particular, form of the exercise of the taxing power of the State.'' and that one of the characteristics, of a tax is that "it is an imposition made for public Purpose without reference to any special benefit to be conferred on the payer of the tax" (p. 1040 (of SCR): (p. 295 of AIR)), and that the fact the amount realised from an imposition is not ear-marked for defraying particular expenses and goes to the consolidated fund of the State might not be a conclusive test of its being a tax (p. 1044 (of SCR) : (p. 296 of AIR)).
In that ease the Supreme Court held a levy of a contribution in respect of services rendered by the Government from every religious, institution from its income at a certain percentage of it to be a tax and not a fee. The facts that distinguish that case from the instant case are that it was not levied expressly as a licence fee or in pursuance of a statutory power to realise a licence fee, that it was not in return for a licence and expressly professed to be in return for services rendered, and that the amount of it varied with the income of the payer instead of with the quantum of the services rendered. The Government itself claimed that the imposition was a fee for services rendered and not a fee for a licence. As regards fees, Mukherjea, J., recognised the distinction between the two fees and observed at p. 1042 (of SCR) ; (at p. 296 of AIR) with regard to licence fees:-
"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."
He took the example of a licence fee for a motor and said at p. 1043 (of SCR) : (at p. 296 of AIR).-
"Here the costs incurred by the Government in maintaining an office for the granting of licences may be very small and the amount of imposition that is levied is based really not upon the costs incurred by the Government but upon benefit that the individual receives."
In the present case though the tax element is predominant and the licence fee may be regarded as a tax, it is a tax Permitted by the statute, though in the name of a licence fee. He emphasised on the same, page that, "there is really no generic difference between the tax and fees."
Nothing material in the present case can be found in Asa Ram v. The District Board, Muzaffarnagar, 1959 Supp (1) SCR 715 : (AIR 1959 SC 480). In that case the Supreme Court dealt with a District Board's right to frame bye-laws for a town area. The District Boards ACT does not contain a provision for the granting of licences as the Municipalities Act does. Section 106 of the District Boards Act is very similar to section 294 of the Municipalities Act, but it was held to be not an authority in itself for the issue of licences.
On the other hand, a provision of Town Areas Act empowers a town area to regulate an offensive trade, and the Supreme Court observed that, regulation includes the power of issuing a licence. The Supreme Court was not called upon to, and did not, decide on what grounds a provision imposing a licence fee, can be struck down as ultra vires or unconstitutional. The impositions that were considered by the Supreme Court in Ratilal Panachand v. State of Bombay, AIR 1954 SC 388, and Sri Jagannath Ramanuj Das v. States of Orissa, AIR 1954 SC 400 were not licence fee but contributions from religious endowments authorities. In the former case Mukherjea, J., emphasised that there is no generic difference between a tax and a fee. His observation at p. 395 that, "Fees, on the other hand, are payment primarily in the public interest, but for some special service rendered or some special work done for the benefit of these from whom the payments are demanded."
and that "in fees there is always an element of quid pro quo'' was made with reference to fees for services rendered and not to licence fees. The same must be said about his further observation that, "there must be correlation between the levy imposed and the expenses incurred by the State for the purpose of rendering such services", which makes an express mention, of services rendered.
The question of ear-marking the receipts to meet the expense of rendering the services is connected with the question of services rendered only when services have to be rendered that the receipts must be ear-marked for, or should be spent on, rendering them. The Supreme Court did not consider at all fees for licences. The contributions were not for licences at all. In the latter case also Mahajan, C. J., distinguished between a tax and a fee for services rendered. It was in respect of fees for services rendered and not licence fee that he observed that there must be an element of pro quid quo in fees and that there must be ear-marking of the receipts for rendering the services. In that case also the contributions were not for licences.
The Hingir-Rampur Coal Co., Ltd. v. State of Orissa, AIR 1961 SC 459 was again a case of a cess and not a licence fee, Gajendragadkar, J. had in mind a fee for services rendered when he compared a foe with a tax at p. 464; he also did not deal with licence fees and did not lay down any criterion for distinguishing between a licence fee and tax. It was a fee for services rendered that was held to be a tax if it brought in a much larger amount than was spent for rendering the services. The interpretation that I place upon the provisions of the Municipalities Act is thus not against the decisions of the Supreme Court.
There is nothing in India Sugars and Refineries Ltd. v. Municipal Council, Hospet, AIR 1943 Mad 191 which supports the appellants. It was a licence fee that was dealt with by the learned Judges; even though it was raised suddenly from Rs. 100/- to Rs. 1050/-, they refused to strike it down as ultra vires. They relied upon the facts that it was not proved that the rise was arbitrary and with a view to damage any particular individual. Their observation that "a licence fee for carrying on a particular trade or industry should not be regarded as a form, of taxation" at p. 192 is one to be considered by the Court when it has to see whether the rule or bye-law fixing a licence fee is reasonable or not. If the licence fee does not bear a relation to the cost of issuing the licence, supervising the trade, and of any special measures rendered necessary by its character, it may be held to be unreasonable.
The learned Judges realised and where a supervising agency is necessary for a number of industries, it is difficult to say how the cost is to be apportioned and that a Court cannot interfere with the way in which it is apportioned so long as it is done On a reasonable basis. No materials were placed before them by the challengers to justify a conclusion that the raising of the licence fees was arbitrary and that the Municipal Board did not fix them in an endeavour to distribute as equitably as possible the special cost of the supervision of the various factories according to their sizes, and so they refused to declare the licence fee as a tax. Even if there was an, error of judgment committed by the Board in estimating the amount of the extra expense involved in the supervision of the trade, they held that the matter was within the competence of the Board. I do not think that the decision of the learned Judges helps the appellants at all.
The only recent case in which the Supreme Court dealt directly with a licence fee is Chandrakant Krishnarao Pradhan v. Jasjit Singh, Petes Nos. 80, 80-A, 81 and 116 to 213 of 1060, decided on 11-8-1961 : (AIR 1962 SC 204), Under Section 202 of the Sea Customs Act no person can act as an agent for clearance of goods from a vessel unless he holds a licence and the Chief Customs Authority is empowered to make rule providing for the form of a licence and other matters connected with licensing. The authority made a rule fixing a fee of Rs. 50/- for a fresh licence as well as renewal of a licence. The Supreme Court held that the fee for a fresh licence was not exorbitant because the authority had to incur expenditure over scrutinsing applications, examining candidates, etc., but that foe renewal of a licence, which did not involve any expenditure, was improper". The Supreme Court noticed that previously the fee for renewal of a licence was only 50 Naya Paisa and that renewal consisted simply of an endorsement on the licence that it was renewed for a further period. It was for this reason that the Supreme Court observed that the renewal fee of Rs. 50/- did not entail services which could be reasonably said to measure against the charge.
I do not think this decision helps the appellants at all. Just as the fee of Rs. 50/- was held to Be a valid licence fee, so also the fees of Rs. 30/-, and Rs. 5/-, can be held to be valid licence fees for owners and drivers of rickshaws. The licence fees that we are considering are fees for fresh licence and not for renewal. Further, the Municipal Board traversed in its written statement the allegations made by the appellants in their plaint; the authority had failed to do so in the above case.
8. Heavy onus lay upon the appellants to prove that the imposition of a licence fee is taxation or that Clauses 12 and 14 of the Bye-Laws are unreasonable, but they have produced no evidence to discharge it. There is no evidence that the Municipal Board intended to augment its general fund. It is immaterial that the licence fees are credited in the general, fund and not ear-marked the law which authorises them does not require them to be ear-marked or to be kept separate from the general fund. How they are to be credited is a matter of accounting depending upon the rules. There is no provision for earmarking of any licence fee and no licence fee is earmarked in the municipal accounts.
Since there are no services to be rendered, there arises no question of earmarking the licence fee for any particular purpose. Even if it is intended to compensate the Board for the expenses incurred in regulating the trade and in the licencing system, it has to be credited in the general fund. If the crediting of the fees in the general fund or the absence of their being ear-marked means that they are not licence fees, no licence fee, however small, would be held to be valid. There is no evidence of the value of the benefits accruing to the proprietors and drivers of rickshaws from their being licenced to own and drive them and in the absence of any date, I cannot say that charging a rickshaw proprietor Rs. 30/-for a licence granted to him, or a rickshaw driver Rs. 5/- for a licence granted to him, is imposing a tax upon him. The prices fixed by the Board for the grant of licences are certainly not so high that I should say that on the pretext of charging licence fees the Board has imposed a tax with the object of augmenting its general fund.
There is nothing to show that it is unreasonable to demand Rs. 30/- from a proprietor, or Rs. 5/- from a driver of a rickshaw. There is no evidence that a proprietor and a driver of a rickshaw do not earn so much as to be able to bear the burden of the licence fees. If a rickshaw proprietor makes a net profit of Rs. 300/- in a year, charging him Rs. 30/- for the licence fee can hardly be said to be an unreasonable exaction. If a rickshaw driver earns Rs. 500/- in a year, charging him Rs. 5/- for a licence can hardly be said to be unreasonable.
9. The trial Court found that the total income from the two licence fees in 1954-55 was Rs. 1,25,000/- and the total expenditure on the services rendered to rickshaw proprietors and drivers, Rs. 1,19,000/- and upheld the validity of the licence fees. It took into account the moneys spent by the Board on repairs of streets and Lanes, paying kuchcha lanes and lighting of lanes and bye-lanes, maintenance of parking grounds for rickshaws and entertainment of a staff. A Municipal Board is under a duty to maintain and repair all public roads and lanes and to light all streets, but it is impossible for any Board to maintain in perfect condition all public roads and lanes and to light every street and lame. No Municipal Board has sufficient funds to enable it to discharge its duty completely.
Therefore, when the respondent Board claimed that certain expenditure on repairs and paying of certain roads and lanes and on the lighting of certain streets should be treated as services rendered to rickshaw proprietors and drivers, the claim cannot be brushed aside lightly. When a Municipal Board cannot repair and light all roads, streets and lanes, it must select the roads, streets and lanes to be repaired and lighted and leave the others un-repaired and unlighted. The selection is solely at its discretion. Therefore, it is in a position to claim that if it had not charged the licence fee it would not have repaired and paved or lighted certain roads, streets and lanes and it is impossible for any one to rebut it. The expenditure on these services rendered would not be found to be so trivial as not to be an element of quid pro quo.
The Municipal Board attached to its written statement a statement of expenditure under these heads but did not produce any evidence to prove the statement. It would have been very inconvenient to produce all its registers and account books in the Court and, therefore, as a special cage the trial Court permitted it to file the statement and directed it to allow its registers and account books to be inspected by the appellants. The appellants did not object to the procedure adopted by the trial Court and did not challenge the correctness of the statement filed by the Municipal Board. The onus lay upon them to prove that the licence fees were unreasonable or amounted to a tax and, having acquiesced in the procedure adopted by the trial Court, they should not be permitted to plead in appeal that the statement was no evidence.
10. For the above reasons, I am of opinion that the appellants did fail to prove their case and their suit was rightly dismissed.
Jagdish Sahai, J.
11. This first appeal has come before us on a reference made by our brothers Gurtu and Srivastava, JJ. to a Full Bench. The appellants who were plaintiffs in the trial court are some of the rickshaw owners and drivers operating in the city of Banaras, while the defendant-respondent is the Municipal Board and now the Corporation of Banaras. The relief claimed in the suit giving rise to this appeal was for the issue of a permanent injunction restraining the Municipal Board, Banaras (hereinafter referred to as the respondent) not to charge any licence fee from either the rickshaw owners or the rickshaw drivers and not to obstruct them in plying cycle-rickshaws for hire without paying the licence fee chargeable under the bye-laws framed by the respondent. The learned Civil Judge, Banaras who tried the suit dismissed it with costs on 20-3-1958. Against that decree the present first appeal has been filed. The ground on which the learned Civil Judge dismissed the suit was that the bye-laws framed by the respondent were not invalid.
12. We have heard Mr. Ambika Prasad for the plaintiff-appellants and Mr. Jagdish Swarup for the defendant-respondent.
13. The bye-laws purport to have been framed under Section 298-H (c) and (d) of the U. P. Municipalities Act (hereinafter referred to as the Act).
14. Clause (1) of the bye-laws defines a rickshaw and reads as follows :
"In these bye-laws the term rickshaw means two wheeled carriage or tricycle of a special type propelled by human labour for carrying passengers."
15. Clause (2) of the bye-laws requires that the proprietor or his duly authorised agent shall take out a licence for every rickshaw kept for plying on hire or for private use within the limits of the municipality.
16. Clause (10) provides in effect that no person other than the one who holds a licence for driving rickshaws shall be allowed to do so.
17. Clause (12) as amended by the notifications NOS. 4022/XXIII-445, dated 2nd February 1950 and 5834/XXII1-745 dated 6-9-1951, is to the effect that a fee of Rs. 30/- per annum shall be payable by every proprietor and of Rs. 5/- by every driver of a rickshaw operating within the limits of Banaras Municipality, as licence fee.
18. The sole question that requires determination in this case is whether the Municipal Board was competent to impose a charge of Rs. 30/- for the issue of every proprietor's licence and of Rs. 5/- for the issue of every driver's licence and whether the impugned bye-laws are valid.
19. It has been contended by Mr. Ambika Prasad that the charges mentioned above were neither fee's nor in the nature of fees and inasmuch as the sums realised by the respondent were not used for the purposes of the rickshaw proprietors or the rickshaw drivers but were utilised towards the general expenditure of the Board, the bye-laws were invalid.
20. The submission of Mr. Jagdish Swarup who represents the respondent before us is that the charges made for the issue of licences to the rickshaw owners or rickshaw drivers are fees or in the nature of fees but with no element of quid pro quo between the licencees and the Corporation. In the alternative toe has submitted that at any rate so far as the present fee is concerned there is in fact a correlation between the service and the levy.
21. The learned Civil Judge recorded a finding that the total expenditure incurred by the Board in regulating the trade of rickshaw plying and providing facilities and amenities in that connection was about Rs. 1,19,000/- per year against an annual income of Rs. 1,25,000/- derived from the licence fees. On this finding he dismissed the suit.
22. The case that the impugned imposition is a fee but with no element of quid pro quo was not set up in the trial court. The simple question that was raised there was that the expenditure incurred by the Board in rendering services to the licences was commensurate with the amount of fee received and was consequently justified. However, since the question as to whether or not the Impugned imposition is a fee without an element of quid pro quo is a question of law we have heard Mr. Jagdish Swarup on it.
23. The first question to consider would be whether the charges levied for the issue of licences are in the nature of fees or they are taxes or other impositions. If these charges can be upheld as tax, the question as to what amount the Board spends in regulating the trade of rickshaw plying and providing facilities and amenities for the same would be quite Immaterial. It is only if the charges are held to be fee that it would be necessary to go into the question as to whether it is a fee which has no element of quid pro quo in it and whether the respondent renders to the plaintiff-appellants or other licence-holders any service and if so to what extent.
24. In a generic sense fee is also a tax and the levy of fee is a particular form of the exercise of the taxing power of the State. The Act was passed in the year 1916, i.e. before the Government of India Act, 1935, or the present Constitution had come into force. Strictly speaking, therefore, the provisions of the Constitution would not be directly relevant for deciding the present case. It may, however, be stated that the definition of taxation given in Article 366 (28) is wide enough to include a fee but both in the Government of India Act, 1935, and the present Constitution a dear distinction between tax and fee was maintained. In fact such a distinction existed even before the 1935 Act was passed.
25. In order to show that there can be a fee for licences quite distinct from fee for services rendered, Mr. Jagdish Swarup referred us to the provisions of Articles 110 and 199 of the Constitution wherein it has been provided that a bill will not be deemed to be a money, bill by reason only that it provides for the imposition of fines or for the demand of payment of fees for licences or fees for services rendered, whereas the bill dealing with the imposition or regulation of a tax will always be a money bill. His contention was that even though the provisions of the Constitution may not govern the present case these two Articles are illustrative, of the fact that there can be a fee for licence other than a fee for services rendered.
26. Section 298 of the Act reads as follows:
"298. (1) A board by special resolution may, and where required by the State Government shall, make bye-laws applicable to the whole or any part of the municipality, consistent with this Act and with any rules, for the purpose of promoting or maintaining the health, safety and convenience of the inhabitants of the municipality and for the furtherance of municipal administration under this Act.
(2) In particular, and without prejudice to the generality of the power conferred by Sub-section (1), the board of a municipality, wherever situated, may, in the exercise of the said power, make any bye-law described in list I below and the board of a municipality wholly or in part situated in a hilly tract may further make, in the exercise of the said Power, any bye-law described in list II below."
Clauses H (c) and (d) Of List I of Section 298 of the Act read as follows:
(c) Imposing the obligation of taking out licences on the proprietors or drivers of vehicles (other than motor vehicles), boats or animals kept or plying for hire, or on persons hiring themselves out for the purpose of carrying loads within the limits of the municipality, and fixing the fees payable for such licences and the conditions on which they are to be granted and may be revoked;
(d) Limiting the rates which may be demanded for the hire of a carriage cart, boat or other conveyance, or of animals hired to carry loads, or for the services of persons hired to carry loads, and the loads to be carried by such conveyances, animals or persons when hired within the municipality for a period not exceeding twenty-four hours or for a service which would ordinarily be performed within twenty-four hours.
In Matthews v. Chicory Marketing Board, 60 CLR 263 (276), the definition of what tax as different from fee means, was given by Latham C. J. of the High Court of Australia in the following words :
"A tax is a compulsory exaction of money by public authority for public purposes enforceable by law, and is not a payment for service rendered''.
This definition was approved of by our Supreme Court in the case of AIR 1954 SC 282 (295). In this case the Supreme Court held that ordinarily a tax had the following two characteristics :
(1) A tax "is imposed under the statutory power without the tax-payers' consent and the payment is enforced by law". In other words the essence of taxation is compulsion. Their Lordships relied in this connection on the case of Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy Ltd., 1933 AC 168.
(2) A tax "is an imposition made for public purpose without reference to any special benefit to be conferred by saying that the levying of the tax is for the purposes of general revenues, which when collected forms part of the public revenues of the State" and that there is no element of quid pro quo between the tax-payer and the pubic authority.
27. While dealing with the characteristics of fees, their Lordships observed as follows:
"Coming now to fees, a 'fee' is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessed. Ordinary the fees are uniform and no account is taken of the varying abilities of different recipients to pay'' ................................................................................
"the, distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege. Fees confer a special capacity, although the special advantage, as for example in the case of registration fees for documents or marriage licences, is secondary to the primary motive of regulation in the public interest".
27a. Their Lordships again expressed themselves to the same effect in AIR 1954 SC 388; AIR 1954 SC 400 and AIR 1961 SC 459.
28. It is true that Arts. 110 and 199 of the Constitution contemplate two kinds of fee, i.e. one for licences and the other for services rendered. The former is that class of cases where 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 fee either moderate or heavy from that person in return for the privilege that is conferred. The most common example of a case like this is the licence fee for motor vehicles. The cost in such a case in maintaining an office or bureau for granting of licence may be very small and the amount of imposition that is levied is based really not upon the cost incurred by the Government but upon the benefit that the individual receives. It was observed by their Lordships of the Supreme Court in AIR 1954 SC 282 (supra) :
"In such cases according to all writers on public finance, the tax element is predominant, vide Seligman's Essays on Taxation page 409, and if the money paid by licence holders goes for the upkeep of the roads and other matters of general public utility, the licence fee cannot but be regarded as a tax".
"In the other class of cases, the Government does some positive work for the benefit of persons and the money is taken as the return for the work done or services rendered. If the money thus paid is set apart and appropriated specifically for the performance of such work and is not merged in the public revenue for the benefit of the general public, it could be counted as fees and not a tax."
29. There is good authority for the proposition that it is the pith and substance of an imposition winch matters and not its nomenclature. See District Board, Farrukhabad v. Prag Dutt AIR 1948, All 382 (FB), Governor-General-in-Council v. Madras Province, AIR 1945 PC 98 and In Re :, C. P. and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, AIR 1939 FC 1. Therefore the essential quality of an imposition has got to be examined in each case. If the impugned imposition is a fee as distinct from a tax it can only be for services rendered and there must be an clement of quid pro quo between the taxing authority and the licensee. If it partakes of the nature of a tax though described by the name of fee the question requiring determination would be whether such a tax can be imposed by the respondent under the provisions of the Act. The impugned licence fee hag been imposed under Section 296, List I. Clauses (c) and (d) of Heading H off the Act. The enacting clauses of Section 298 do not confer on a Municipal Board the power to impose a licence fee, but that can be done under Clause (c) of para II of list I read with Section 294 of the Act.
30. Under Section 294 of the Act a fee can be charged for any licence, sanction or permission. The said provision reads as follows ;
"The board may charge a fee to be fixed by bye-law for any licence, sanction or permission which it is entitled or required to grant by or under this Act."
There is thus no difficulty in coming to the conclusion that the Board can impose a, licence fee-under Clause (c) of Section 298 (2) H read with Section 294 of the Act.
31. Section 298 of the Act is similar to Section 174 of the District Boards Act and Section 294 of the Act is in the same terms as Section 106 of the U.P. District Boards Act. While interpreting Section 106 of the U.P. District Boards Act in the case of AIR 1959 SC 480, their Lordships observed as follows:
"It is true that Section 106 provides that the board may charge a fee to be fixed by bye-law for any licence, sanction or permission which it as entitled or required to grant by or under the Act; but that section merely provides for levying of fee where a licence is necessary under other provisions of the Act and is not in itself an authority for issue of licences. Therefore, when the Board framed a bye-law relating to issue of licences it did so under its power of regulation."
In the present case the Board has framed bye-laws under Section 298 (2) H (c) and (d) of the Act. Clause (c) confers on a Municipal Board the power to fix a licence fee recoverable both from the owners as also the drivers of rickshaws. These provisions read along with Section 294 of the Act confer on the Board the power to impose a licence fee on every owner and driver of a rickshaw. It still remains to consider whether the licence fee contemplated by these provisions is a fee for services rendered or the respondent can with the help of these provisions make an exaction in the nature of a tax.
32. Section 298 (2) H is headed as "Public Safety and Convenience", which is suggestive of a regulatory power in the interest of public safety and convenience. Section 298 (1) provides that a bye-law can be framed for purposes of 'public safety and convenience', of the inhabitants of a municipality as, also for the furtherance of the municipal administration. Ch. VIII under which Section 294 falls is headed as "Other Powers and Penalties", Section 298 falls under Ch. IX which is headed as "Rules, Regulations and Bye-laws'', The wordy 'other powers' at the top of Ch. VIII show that the powers mentioned therein are different from the powers conferred in the preceding chapters of the Act including Ch. V which deals with taxation. To put it differently those words indicate that the power, of taxation is a separate and distinct power from the power of imposing & fee Sections 237 to 295 fall under Ch. VIII.
33. Sections 237 to 240 deal with the Power of the board to regulate slaughter houses and trade of selling meat Sections 241 to 244 deal with the powers of the board to regulate the sale of articles of food etc. Sections 245 to 248 deal with the regulation of offensive trades including immoral traffic in women as also begging Sections 349 to 266 deal with public safety and confer on the board powers in that connection. Sections 267 to 286 deal with sanitation and prevention of diseases. Sections 287 to 290 deal with Inspection, entry, search etc. and Sections 291 to 294 deal with rent and charges including fee. Section 295 which is the last section in this chapter deeds with the penalty for obstructing persons employed by the board.
The scheme of Ch. VIII shows that the provisions contained therein are meant for the purpose of regulation of certain trades, maintenance of public safety and convenience of the inhabitants of the municipality. The fees mentioned in Section 294, therefore, are to be imposed for the purpose of rendering services i.e. regulation of trades etc. The Supreme Court in the case, of AIR 1959 SC 480 (supra) had taken a similar view with regard to the fee contemplated by Section 106 of the U. P. District Boards Act which is in the same words as Section 294 of the Act. The legislature to my mind did not intend by means of Sections 294 or 298 of the Act to give a municipal board the power to make a charge which may not be for services rendered.
34. In this connection it may be noticed that the respondent like every other municipal board in the State exercises delegated powers. The power to tax belongs to the legislature. The U.P. Legislature has delegated the power in respect of municipal administration to the municipal boards and in each case it has got to be carefully investigated as to what extent is the power of taxation delegated to the board. It is well known that a delegatee can neither change nor exceed the delegated powers. There is good authority for the proposition that the power of municipal corporations to impose taxes, licence fee or other impositions is not an absolute power. (See Rex ex rel Morris v. Stimmel, 1923-4 DLR 955).
In that case relying upon Dillon on Municipal Corporations, 5th edition, para. 1377, it was observed :
"It is a principle universally declared and admitted that municipal corporations can levy no taxes, general or special, upon the inhabitants or their property unless the power be plainly and unmistakably conferred.
It has, indeed, often been said that it must be specifically granted in terms; but all Courts agree that the authority must be given in express words or by necessary or unmistakable implication, and that it cannot he collected by doubtful inferences from other powers, or powers relating to other subjects, nor can it be deduced from any consideration or convenience or advantage."
It is clear that a statute conferring powers upon a municipal corporation to impose taxes must be strictly construed. If the authority of the municipality to levy and collect a tax is doubtful the doubt must always be resolved against the tax.
35. There is another way of looking at the matter. All municipal boards are creatures of statute. They can only function within the limitations prescribed by the statute and have no other powers than those specifically conferred upon them. See Smt. Hira Devi v. District Board Shahjahanpur, AIR 1952 SC 302.
36. Under Section 128 of the Act the legislature has mentioned different classes of taxes which a municipality can impose. The provisions of Ch. V are exhaustive of the taxing powers of a Municipal Board. If the intention was to provide for the imposition of a tax in the name of a licence fee under Sections 294 and 298 of the Act those provisions would have found place in Ch. V of the Act and would have been a part of Section 128 of the Act. It would be noticed that under the provisions of Section 137 of the Act the State Government has the power to remedy or abolish a tax. That provision reads as follows :
"137 (1) Whenever it appears, on complaint made or otherwise to the State Government that the levy of any tax is contrary to the public interest or that any tax is, unfair in its incidence, the State Government may, after considering the explanation of the Board of the municipality concerned, by order require such board to take measures within, a lime to be specified in the order, for the removal of any defect which it considers to exist in the tax or in the method of assessing or collecting the tax.
(2) Upon the failure or inability of the board to comply, to the satisfaction of the State Government, with an order, made under Sub-section (1) the State Government may by notification Suspend the levy of the tax, or of any portion thereof, until the defect is removed, or may abolish or reduce the tax."
It would appear from this provision that power has been given to the State Government to abolish a tax or to issue suitable directions to the municipality imposing the tax if in the Opinion of the State Government the incidence of taxation is unfair. No such power has been given to the State Government in connection with a fee imposed under Section 294 or by means of a bye-law framed under Section 298 (2) of the Act, obviously because a fee contemplated by Section 294 or 298(2) of the Act was to be a fee for services rendered and there could therefore be no question of its being unfair in its incidence.
37. A study of the various provisions contained in Ch, V unmistakably reveals that those provisions exhaustively deal with all matters relating to taxes. Those provisions have not been made applicable to the case of a fee for the simple reason that the considerations which are relevant in a tax are completely absent in the case of a fee. For these reasons it appears to me that the fee contemplated by Sections 294 and 298 of the Act is a fee simpliciter in which an element or quid pro quo is necessarily involved. It is not a pretence of a fee for a tax nor is it a fee for licence as contradistinguished from a fee for services rendered.
38. That a fee imposed by a bye-law framed under Section 298 H (c) of the Act is a fee as such and not a tax was held by this Court (Sulaiman, C. J. and King, J.) also in the case of Brij Mohan Lal v. Emperor, AIR 1934 All 497. The argument advanced in that case was that the bye-law for the Infringement of which Brij Mohan Lal had been convicted was ultra vires of the Municipal Board because in substance it imposed a tax though called a licence fee which the Board could not impose without the sanction of the Local Government and without following the prescribed procedure for the imposition of a tax. The learned Judges while repelling this plea observed as follows :
"Undoubtedly the license fee has not been imposed and sanctioned in the manner provided for a tax. We find, however, that the Act itself provides for the imposition of a licence fee of this description. Under Section 298 (3) H (c) the Municipal Board is authorised to make bye-laws imposing the obligation of taking out licenses on the proprietors or drivers of vehicles kept for plying for hire within the limits of the Municipality, and fixing the fees payable for such licenses, and the conditions on which they are to be granted and may be revoked. Section 294 of the Act also expressly lays down that the Board may charge a fee to be fixed by bye-law for any license which it is entitled to or empowered to grant under this Act. It is perfectly clear therefore that the U. P. Municipalities Act itself contemplates the making of a bye-law imposing the obligation of taking out vehicles plying for hire and authorises the charging of a fee, to be fixed by bye-law, for such licenses, as the Act itself recognises license fees as something distinct from taxes and as something which may be imposed and fixed by bye-law, we are unable to accept the learned advocate's contention that the license fee is practically identical with a tax and therefore could not be imposed except in the manner prescribed for the imposition of a tax."
39. Sri Jagdish Swarup has strenuously contended that the present fee is one for licences and not for services rendered. He has, however, not been able to support his contention by anything in the Act. In Attorney. General for Quebec V. Williams (1944) 4 DLR 488 (Can) a question arose as to whether a licence, fee imposed solely to assure revenue for the State could be anything other than a tax and Guerin, J. laid down as follows :
"In the light of these texts, I must come to the conclusion that tax is a general word which includes any contribution imposed by a competent authority to assure the services of the State. License would be a permission to do any act whatsoever. Although demanded with a view to regulation, it could nevertheless incidentally comprise an amount of money capable of assuring the services of the State.
From this it may be realised that if a license seems to be imposed solely to assure revenue for the State, such permit is no longer a license but a tax, whatever may be the word used in the text of the Act."
The point is made clear by the following observations by G. Findlay Shirras in his book 'Science of Public Finance' on page 203 :
"When for example, is a license fee a fee and not a tax? Where the licensee gets a special benefit for the privilege it is a fee, but where the licence charge is so high as to bring in a net revenue to the public authority it is concealed tax. Licence fees concealed are ordinarily far more than the mere cost of service, and the positive service rendered is very often absent .... When fees, shade in this manner into taxation it is difficult to distinguish fees from taxation."
I have already dealt with various provisions occurring in the Act to show that the license fee contemplated by Sections 298 and 294 of the Act is a fee and not a tax in the garb of a fee which a license fee would be if it is not for service 'rendered and with an element of quid pro quo in it. Reliance has been placed by Sri Jagdish Swarup on certain passages occurring in "The Economics of Public Finance" by Taylor, but I and nothing in that book to justify the conclusion that an imposition describe as a license fee but not imposed for the services rendered can still be anything but a tax. On the contrary Taylor clearly speaks of a fee as a charge imposed in connection with a special service. The following passage under the head "Administrative Revenues" occurring at page 213 in his book clearly militates against the submission of Sri Jagdish Swarup :
"H.C. Adams has given a useful description of 'a fee as a charge imposed on the occasion of a special service' the service arising incidentally in connection with some comprehensive governmental function"". (The underline (here in ' ' marks--Ed.) is mine).
Again at Page 216 Taylor observes as follows:
"A much greater danger in extension of the fee system is in its tendency to justify payments to government in terms of specific benefit to the payer. The obverse of this tendency is to justify payments to government only where a specific benefit is conferred. Such an emphasis obviously runs counter to the ideal of contribution to government on the basis of ability to pay. And it encourages departure from the concept of Government as a promoter of the general welfare and movement towards government as a dispenser of benefits to particular individuals and groups at a price.'' But as already said nothing depends on the name of the imposition. If the object is to levy an impost for the general benefit as distinct from the benefit to a particular class the imposition would be a tax and not a fee.
40. It was then contended that there is no provision in the Act for the income from licences being put separately and that under the provisions of Section 114 of the Act all sums received by or on behalf of the board are placed to the credit of the board in the municipal fund. It is submitted that this would show that the income from fees not being required, to be Separately kept was considered to be not different from the income from a tax and consequently the impugned fees are in the nature of a tax. The short answer to this submission is that merely because the entire revenue of the municipality is kept in one fund, that would not indicate, at any rate, conclusively, that the various sources from which the income has been derived are of the same nature.
Section 174 of the Act provides for fees for every notice issued under Section 168, every distress made under Section 171, and the costs of maintaining any livestock seized under the said section but it cannot be said that the same is a tax and not a fee and the amount of the charge could be put so high as to be totally disproportionate to the costs incurred in renting the services mentioned therein. Section 291 provides for the recovery of rent from a person occupying municipal land. Section 293 provides for fees for use of municipal property otherwise than under a lease while Section 293-A provides for power to impose fees for use of any place to which public is allowed access and where the board may provide sanitary and other facilities to the public. Obviously these charges are in the nature of rent though some of them are described as fee.
But it cannot be said that only because, income from these sources also goes to the consolidated fund the nature, of the charge is changed and instead of rent, it becomes a tax. The mere fact that all the income of the board goes to the consolidated fund is not inconsistent with specific items being, earmarked for special expenditure.
Besides as was pointed out by their Lordships of the Judicial Committee in Attorney General of British Columbia v. Esquimalt and Nanaimo Ry. Co., 1950 AC 87 that relevant as the consideration is whether the fund raised did not fall into the general mass of the proceeds of taxation its importance should not be exaggerated. Having carefully considered the submissions of Sri Jagdish Swarup I find myself unable to hold that the fees imposed by the impugned bye-laws-need not be for services rendered;
41. In that view of the matter it is now necessary to consider whether the income received by the board from the collection of the impugned fee is totally disproportionate to the services rendered.
42. It is true that at the time when the licence fee is being fixed it cannot be known as to how many persons would apply for the licences and what amount should be fixed in order to meet the expected cost in connection with the regulation of the trade. Even though the licence fee cannot be fixed with any exactitude it should not be so unreasonable that the income derived from the licences, should be wholly disproportionate to the services rendered to the licensees or the trade for the regulation oil which the licences are issued. In the present case the learned Civil Judge has recorded a finding that a sum of Rs. 1,19,000/- is spent by the Board for providing facilities and amenities to persons employed in the rickshaw plying either as owners or drivers of the rickshaws. This sum of Rs. 1,19,000/- is made up of the following items :
Rs. 68,000/- spent over the paving of bye-lanes; in these the only conveyance that can operate is a rickshaw.
Rs. 20,000/- spent as expenses for lighting of streets and lanes.
Rs. 47,741/7 spent in making provision for parking grounds.
Rs. 8,000/- spent on payment of salary to the staff maintained for issuing, licences and inspecting rickshaws.
In this connection two submissions, have been made by the learned, counsel for the appellants The first one is that the items mentioned above were not proved by any evidence on the record.
What had happened was that along with the written statement an annexure was filed in which the respondent mentioned the various items or expenditure in connection with the regulation of the trade of rickshaw plying. The plaintiffs were given an opportunity to inspect the records of the respondent and satisfy themselves about the correctness of the items of expenditure nO objection was made by the plaintiffs with regard to the correctness, of the amounts Shown by the respondent.
Even though that is so, it cannot be denied that these items have not been proved according to law. It was open to the respondent to have filed duly certified copies of the register or registers or extracts from them in which these amounts were entered or of any other relevant document in the possession of the Board and that evidence could have been, admissible under Section 330 of the Act but the respondent did not do so. It must, therefore, be held that these amounts have not been properly proved.
I might have considered the question of remanding the case for proper proof as has been urged by the learned counsel for the respondent, but it does not appear necessary to do so because I am of the opinion that the amount of Rs. 68,000/- spent over the paving of the bye-lanes and of Rs. 20,000/- spent in lighting of streets and lanes cannot be considered to have been spent in rendering services to the licences. Under the provisions of Section 7 (a) of the Act it is one of the duties of a municipal board to light public streets and places and under Clause (h) of the same section to construct and maintain public streets, culverts etc. Thus the expenditure under these two items has been incurred by the board in the discharge of their statutory duty. It was held in the case of ILR (1943) Mad 521 : AIR 1943 Mad 191 that a licence fee cannot be imposed to provide for the costs of ordinary municipal services to which the licence, industry is entitled to by virtue of its position as a tax-payer in the municipality, I respectfully argue with that decision.
43. In AIR 1961 SC 459 it was held that when the legislature levies a fee for rendering specific services to a specified area or class of persons or trade or business in the last analysis such services may indirectly form part of services to the public in general. If the special service rendered is distinctly and primarily, meant for the benefit of a specified class or area the State as a whole may ultimately and indirectly be benefited would not detract from the character of the levy as a fee. Where, however, the specific service is indistinguishable from public service and in essence is directly a part of it, different consideration may arise. In the present case the Board in spending money over paving of lanes and streets and in lighting them is only rendering service to the general public and performing a statutory duty and no special service to the licensees. If these two items are excluded from consideration the total of the remaining two items would not justify the realisation of as big a sum as Rs. 1,25,000/-. For these reasons I am of the opinion that the impugned fee is ultra vires the respondent
44. Sri Jagdish Swamp has also orally prayed that the respondent may be permitted to amend the written statement and include some other unspecified items of expenditure. In my judgment at this stage the written statement should not be allowed to be amended specially when Sri Jagdish Swarup could not tell us what those items are.
45. I would, therefore, allow the appeal, set aside the judgment of the trial Court and decree the plaintiffs' suit with costs throughout. I, would, however, like to make it clear that I am not holding that the imposition of any licence foe on the rickshaw owners or the rickshaw drivers is ultra vires the Board. I am only holding that they are not entitled to recover a sum of Rs. 30/- from each of the rickshaw owners and that of Rs. 5/- from each of the rickshaw drivers. It would be open to the Board to reduce the fee to a reasonable figure and correlate it to the service.
Bishambhar Dayal, J.
46. I agree with my brother Jagdish Sahai.
BY THE COURT
47. In accordance with the majority judgment of the Court the appeal is allowed with costs throughout.
Disclaimer: Above Judgment displayed here are taken straight from the court; Vakilsearch has no ownership interest in, reservation over, or other connection to them.
Title

Durga Das Bhattacharya And Ors. vs Municipal Board

Court

High Court Of Judicature at Allahabad

JudgmentDate
23 November, 1961
Judges
  • M Desai
  • J Sahai
  • B Dayal