1. The petitioners in these writ petitions are running ginning and pressing factories within the territorial limits of the Municipal Council, Karanja, The Municipal Council, Karanja framed bye-laws in exercise of the powers conferred by Clause (a) of Section 3, Clause (c) of Section 322 obviously read with Sections 278 and 280 of the Maharashtra Municipalities Act for regulating the establishments as well as for issue and renewal of the licenses for cotton ginning and pressing factories within the limits of Municipal Council. As per these bye-laws, no person can establish or run a cotton ginning and pressing factory in which steam, electricity, water and other mechanical power is used or intended to be used without a licence. He is obliged to make an application in that behalf to the Municipal Council, while by bye-law No. 4 the rates of fees are prescribed for issuance as well as renewal of these licenses. This bye-law reads as under:
No licence shall be issued or renewed except on payment of the fees on the power of the engine or electric motor as enumerated below:-(i) Up to and including 10 horse power ... Rs. 10 per H.P.(ii) Above 10 horse power to 15 ... Rs. 15 per H.P.(iii) Above 15 horse power ... Rs. 20 per H.P.
2. It appears from the averment made in the petition that before framing these bye-laws a public notice was issued and the petitioners also raised certain objections. Finally these bye-laws were sanctioned by the Collector and came into force from the date of its publication in the Maharashtra Government Gazette itself. In pursuance of these bye-laws the petitioners received notices from the Municipal Council, Karanja for payment of necessary fees. According to the petitioner in Special Civil Application No. 358 of 1971 as per the rate prescribed in the bye-law they will have to pay about Rs. 18,000 annually as a fee for licence, whereas according to the petitioner in Special Civil Application No. 1365 of 1972 he will have to pay a sum of Rs. 1,500 annually towards this licence fee. Therefore, in these two petitions, the petitioners have challenged this bye-law No. 4 on the various grounds.
3. It is contended by the petitioners that under Section 278 read with Section 148 of the Maharashtra Municipalities Act, the Municipal Council can charge a reasonable fee for granting a licence in favour of the petitioner. What the Municipal Council is entitled to levy is a fee and not a tax. According to the petitioners, a fee is levied in consideration of certain services and the amount collected must be ear-marked to meet the expenses of rendering these services and must not go to the general revenue. In order that the impost may legitimately be claimed as a fee and not a tax, it must be shown that the burden imposed is not unduly high considering the expenses incurred by the Council for making the arrangement for the facility or services which occasions the impost. According to them, in the present case the levy of a fee has no nexus or correlation with the services rendered. In substance, it is the contention of the petitioners that under the guise of levying the fee the Council has levied a tax and such a power of taxation cannot be derived from Section 148 of the Maharashtra Municipalities Act. Obviously, therefore, according to the petitioners the said levy of fees is unreasonable. It is ultra vires of the power of the Council being beyond the scope of Section 148 as well as Section 278 of the Maharashtra Municipalities Act.
4. In support of this contention, it is contended by the petitioners in the petitions that they are not getting any special services from the Municipal Council at all. Apart from this, they are already paying the various other taxes to the Municipal Council, such as consolidated property tax, bale and boja tax, professional tax etc. It was also contended by them that a licence fee cannot be fixed on the basis of horse power because it has no nexus either with the purpose for which the fee is imposed or the services rendered to the premises of the petitioners. Therefore, in substance, it is the contention of the petitioners that the fee imposed by the Municipal Council, Karanja is wholly unauthorised it being ultra vires of its powers conferred upon the Municipal Council by Section 148 of the Municipalities Act.
5. When the matter was partly heard on earlier occasion time was granted to the Municipal Council to file a detailed affidavit to show the correlation between the imposition of the fee and the services rendered by the Municipal Council. Accordingly the administrator of the Municipal Council has filed an affidavit on August 10, 1977. It is contended by the Municipal Council in the said affidavit that the petitioners are using electric motor power and the water consumption is also necessary for running the industry. The chemical processes are also employed in some places. For showing the reasonableness of the levy demanded from the petitioners as a licence fee the Administrator of the Municipal Council has contended as under:.I have verified, the record attested by the Chief Officer, Municipal Council, Karanja, and prepared the statement of expenditure for the period starting from 1970-71 to 1976-77, which is enclosed herewith as statement No. 1. The statement has been prepared under 17 different heads. There are expenses incurred on development of road construction. This service of development of road constructions also includes the development of roads which have been used by the public and also the customers of the petitioner factory. Similarly, expenses on water-supply, construction of drains, street lighting and expenditure on staff which is shown in column Nos. 15, 16 and 17 are incurred by the Municipal Council.
In the return it is submitted that the running of the factory in the Municipal area necessarily involves the problems of sanitation, supervision, maintenance of public health and control thereof in the public interest. In view of this position the respondent Council has to regulate the trade in the public interest and supervisory and other staff is to be engaged, streets have to be maintained and approach roads are to be controlled and regulated on which the Municipal Council has to incur the expenses and in future also it will have to incur the expenses on these items. Hence I say that there is reasonableness of the levy with some services rendered by the Municipal Council in this direction.
6. The respondent-Municipal Council has filed before us a statement showing the income and expenditure of Karanja Municipal Council from the year 1970-71 to 1976-77 which is sub-divided in the various sub-heads, such as building construction, water supply of the town, construction of roads and drains, construction of temporary water-supply scheme, street lighting, miscellaneous town improvement etc. In paragraph 6 of the affidavit the Administrator stated that some services are being rendered to the petitioners though they are of general nature. According to him, some staff is required for issuance of no objection certificate. Similarly there are buildings owned by the factories which are regulated by the provisions of the Maharashtra Municipalities Act. He further stated that the Municipal Council also provides facilities for supervision, control and maintenance of public health etc. According to him in the larger interest of the public it is also necessary for the Municipal Council to see that the factories do not cause any nuisance to the public at large and in this view of the matter, he further contended that the imposition of a fee is reasonable. This is the whole material placed by the Municipal Council, Karanja before us in support of its contention.
7. Normally where a levy fixed under the bye-laws is lawfully imposed under Section 322 of the Act and is also duly published, there will be a presumption that if the levy is reasonable it has a correlation between the fee collected and the services intended to be rendered. Therefore, the person who challenges or says that it is a tax and not a fee has to substantiate his contention. In any case, obviously the burden was upon the petitioners to show that under the guise of levying the fee the Council has levied the tax. In the petition a specific averment is made that the Municipal Council is not rendering any service to the petitioners and, therefore, obviously the burden shifted upon the Municipal Council to show as to what type of services were being rendered by the Municipal Council.
8. The difference and distinction between a 'tax' and 'fee' is by now well settled. It is not necessary to make a detailed reference to the various decisions of the Supreme Court cited before us. From the latest decision of the Supreme Court in Govt. of A.P. v. Hindustan Machine Tools : AIR1975SC2037 , it is quite clear that 'fee' can be levied by any authority only for some service rendered by it to the person from whom the levy is exacted. Fee levied by any local authority can be justified only if there is some special service rendered to the reason from whom fee is collected and the sum total of the activities of the public body like the Municipal Council cannot be taken into account for this purpose. Expenses by the Municipality in discharging its obligatory functions are usually met by imposition of a variety of taxes and on that basis the levy of the fee could not be justified.
9. In this connection reference could usefully be made by the following observations of the Supreme Court in paras. 19, 20 and 21 of the said judgment (p. 2044):
But there is a broader ground on which the levy of Permission Fee must be struck down. Fees are a sort of return or consideration for services rendered, which makes it necessary that there should be an element of quid pro quo in the imposition of a fee. There has to be a correlationship between the fee levied by an authority and, the services rendered by it to the person who is required to pay the fee. The Commissioner, Hindu Religious Endowments, Madras v, Sri Lakshmindra Thirtha, Swamiar of Sri Shirur Mutt : 1SCR1005 State of Maharashtra v. Salvation Army : 3SCR475 . There is in this case, not a word showing such a correlationship. In the counter-affidavit which the appellants filed in the High Court in reply to the respondent's writ petition, nothing at all was stated as to the expenses incurred or likely to be incurred by the Gram Panchayat in rendering any actual or intended service to the respondent. There may be something in the grievance of the Gram Panchayat that the mighty respondent and others following the respondent's lead; have been persistently refusing to pay taxes which has made it impossible for the Gram Panchayat to render any services. But the true legal position as stated by Mukherjea J. in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, is that (p. 1042): '... it is absolutely necessary that the levy of fees should, on the face of the legislative provision, be co-related to the expenses incurred by Government in rendering the services.' In the total absence of any data showing such a correlationship, the levy of Permission Fee has to fail.
One cannot take into account the sum total of the activities of a public body like a Gram Panchayat to seek justification for the feds imposed, by it. The expenses incurred by a Gram Panchayat or a Municipality in discharging its obligatory functions are usually met by the imposition of a variety of taxes. For justifying the imposition of fees the public authority has to show what services are rendered or intended to his rendered individually to the particular person on whom the fee is imposed. The Gram Panchayat here has not even prepared an estimate of what the intended service would cost it.
Learned counsel for the appellants contended that the Gram Panchayat lays roads for providing access to new buildings, that it provides for drainage and lights and, that it scrutinises the plans submitted for intended constructions and, if necessary, it advises the applicants in order that the proposed construction may conform to the regulations. We are unable to accept that these services are rendered individually to the respondent. The laying of roads and drainage or the supply of street lights are a statutory function of public authorities and it is difficult to hold, in the absence of any material, that any of such services as have been mentioned to us have, in fact, been rendered to the respondent. The very circumstance that the Permission Fee is levied at a certain percentage of the capital value of the buildings shows that the Grain Panchayat itself never intended to correlate the fee with the services rendered or intended to be rendered by it. There is therefore no warrant for the levy of Permission Fee, not even on factory buildings, assuming for the sake of argument that the permission of Gram Panchayat is necessary for the construction of factory buildings.
10. A similar view is taken by the Supreme Court in Madurai Municipality v. R, Narayanan : 1SCR333 . From these decisions it is clear that to justify the levy qua 'fee' the authority must render some special services rendered to the category of persons from whom the amount is exacted and the total sum so collected must have a reasonable correlation to the cost of such services. Where these dual basic features are absent, then the authority cannot legally claim from the licensee the amount under the label 'fee'.
11. However, Shri Masodkar, learned counsel appearing for the Municipal Council has strongly relied upon the earlier decisions of the Supreme Court, reported in Corporation of Calcutta v. Liberty Cinema : 2SCR477 , as well as a decision of the Calcutta High Court in Abdul Majeed v. Calcutta Corporation : AIR1967Cal174 . So far as the earlier decision of the Supreme Court in Liberty Cinema's case is concerned, it has been wholly explained by the Supreme Court in Madurai Municipality's case (supra). So far as the decision of the Calcutta High Court in Abdul Majeed's case is concerned, it is obviously not relevant to the controversy involved in these writ petitions. Moreover, the observations made by the learned single Judge in the said decision obviously run counter to the law laid down by the Supreme Court in Govt. of A. P. v. Hindustan Machine Tools,
12. In the present case under Section 278 of the Maharashtra Municipalities Act, 1965 a prohibition is imposed for running a factory unless a licence is obtained from the Municipal Council. Section 278, therefore, deals with establishment and regulation of the factories. It also confers a power upon the Municipal Council to grant a licence in that behalf. Then by Section 148 a power is conferred upon the Municipal Council to charge a reasonable fee for granting a licence. The expression used namely, 'reasonable fee' is significant. If this expression is read in its context, then it is quite obvious that a reasonable fee can be charged by the Municipal Council which is a sort of return or consideration for the services rendered which makes it necessary that there should be an element of quid pro quo in the imposition of a fee. There has to be correlationship between the fee levied by the Municipal Council and the services rendered by it to the person who is required to pay the fee. It is no doubt true that in some cases it will not be possible to show with mathematical exactitude the precise correlation between the amount realised as fee from one particular person and the services rendered to him. In a given case it is also possible that the fee is realised from hundreds or thousands of persons and the corresponding service is also rendered to hundreds or thousand's. In that situation it may be impossible to show any strict correlation qua an individual except to indicate that the person who had paid the fee has derived a benefit in return. In such a case correlation between the fee levied and the service rendered may have to be determined having regard to the services rendered to the various persons and the benefit derived by an individual factory. But before us even such a case is not made out. To say the least, the affidavit filed in reply to the allegations made in the petition by the Administrator of the Municipal Council is beautifully vague. It does not make out any case to show as to what services are rendered to the petitioners from whom such a heavy fee is being recovered. As observed by the Supreme Court in Govt, of A. P. v. Hindustan Machine Tools while deciding such a question, one cannot take into account the sum total of the activities of a public body like the Municipal Council to seek justification for the fees imposed by it. The expenses incurred by the Municipal Council in discharge of its obligatory functions are usually met by imposition of variety of taxes and from the averments made in the petitions it is quite clear that the petitioners are paying those taxes independently. For justifying the imposition of a fee the Municipal Council was required to show as to what services are rendered or intended to be rendered individually to the petitioners on whom the fee is imposed. From the affidavit as well as the chart filed before us it is quite clear that the Municipal Council has not even prepared an estimate of what the intended services would cost to it. There is nothing in the affidavit filed by Administrator to indicate as to what expenses are incurred or are likely to be incurred for such services. Nothing is stated to show as to what actual services are being rendered or are intended to be rendered to the licensees. Laying down of the roads and drainages, water supply, street lights are the statutory functions of a Municipal Council and, therefore, it is difficult to hold in the absence of any material that, any specific services are being rendered by the Municipal Council to the petitioners, which will have some correlation to the fee which is being imposed and recovered. It is also not shown as to whether the account of the fee levied is being maintained separately or whether it forms part and parcel of the general revenue. In these circumstances, in our opinion, having regard to the material placed before us by the Municipal Council, it will have to be held that the fees levied by the Municipal Council has no correlation with the services rendered by it and, therefore, could not be termed to be a reasonable fee as contemplated by Section 148 of the Maharashtra Municipalities Act, 1965.
13. It was neither submitted nor argued that what is being recovered from the petitioners is not a fee but is a tax. It is not the case of the Municipal Council before us that this fee is imposed under any other provisions of the Municipalities Act. However, a contention was raised by Shri Masodkar that the petitioners had an alternate remedy under Sections 169, 308 and 318 of the Maharashtra Municipalities Act and, therefore, these writ petitions are not maintainable. From the bare reading of these provisions, it is quite clear that the remedy provided by the said provisions cannot be termed to be an alternate remedy when a bye-law of a Municipal Council is challenged on the ground that it is ultra vires of the powers of the Municipal Council. This Court had an occasion to consider the scope of Section 169 of the Maharashtra Municipalities Act in Muni. Council, Morshi v. Tulsiram  Mh. L.J. 735. Therefore, there is no substance in this contention,
14. In the result, therefore, the petitions are allowed and bye-law No. 4 of the Bye-laws dated January 11, 1971 framed under Sections 278 and 280 read with Section 322 of the Maharashtra Municipalities Act is struck down as being ultra vires of the powers conferred upon the Municipal Council by Section 148 read with Section 278 of the said Act. As a necessary consequence of this, the Municipal Council is restrained from recovering the amount of the said fees as incorporated in the notices and bills served on the petitioners. However, in the circumstances of the case, there will be no order as to costs.