1. This second appeal arises out of a suit brought by 26 plaintiffs, who are the appellants in this Court, for a declaration that the levy of a license fee on lodging and boarding houses by the Municipal Borough of Rajkot was illegal. The appellants did not ask for a permanent injunction in the plaint. This defect was noticed by them in the lower appellate Court, and they made an application in that Court for amendment of the plaint by adding a prayer for a permanent injunction. The amendment was granted by the learned appellate Judge, and no question is raised about that amendment in this Court. The trial Court held that the levy was legal and dismissed the suit on. January 13, 1958. The appellants preferred an appeal to the District Court. The learned District Judge, by his judgment, dated December 26, 1958, dismissed the appeal.
2. The plaintiffs-appellants, who are owners of lodging and boarding houses, carry on business in the limits of Rajkot Borough Municipality They formed themselves into an association, and, the present suit was filed by them as representing all the owners of lodging and boarding houses who carry on their business within the municipal area of Rajkot. It appears that, in 1914, the then Municipality of Rajkot had introduced a license fee of Rs. 6 per annum to be collected from lodging and boarding houses. That fee was raised in 1926 to Rs. 20. After Rajkot Borough Municipality was constituted by a notification of the Government of Saurashtra, which notification brought into existence the municipality with effect from July 1, 1949, the General Board of the Municipality decided on November 19, 1951, to publish by-laws, which had been drafted by its Rules Committee on March 29, 1951, and invited objections. The Municipality purported to frame the by-laws under Section 61, Sub-section (1), Clause (b), Sub-clause (ii) of the Bombay Municipal Boroughs Act (hereafter called the Boroughs Act). A public notice, exh. 10, dated November 22, 1951, was published in the local newspapers. This was done under Section 61, Sub-section (2), of the Boroughs Act. The by-laws which the municipality intended to frame concerned a number of trades and businesses. In the present appeal, I am concerned only with the by-laws relating to lodging and boarding houses. These by* laws proposed to levy a license fee on such houses. For this purpose, lodging and boarding houses were divided into two classes-for houses, which contained twenty or less beds, the license fee proposed was Rs. 75 per annum, and, for houses, which had over 20 beds, a license fee of Rs, 100 was proposed. On December 20, 1951, the appellants' association filed objections. Those objections were over-ruled, and, on February 26, 1952, the General Board approved the by-laws as proposed by its Rules Committee. These by-laws required the sanction of the Government under Sub-section (2) of Section 61 of the Boroughs Act. Therefore, the municipality sent the by-laws for sanction, on April 29,1952, to the Government of Saurashtra through the Collector of Madhya Saurashtra. Government, by their letter exh. 59, dated September 6, 1952, informed the municipality that its proposal regarding the license fee aforesaid and one more license fee was likely to be challenged on legal grounds. Therefore, Government suggested that the municipality should adopt a uniform system of fees in respect of these two matters, and should forward the same for sanction of the Government. It appears that, in the meantime, the municipality was superseded, and an Administrator was appointed. The letter of Government was considered by the Administrator, who enjoyed all the powers of the General Board. The Administrator, on October 5, 1952, took the communication of the Government into consideration and resolved to fix a uniform fee of Rs. 75 for all classes of lodging and boarding houses. It is an admitted fact that, after this new resolution was passed, amending the quantum of license fee, the procedure prescribed by Section 61(2) was not followed by the Administrator. Instead, the Administrator forwarded that resolution, by his endorsement, dated October 8, 1952, to the Government and requested them to sanction the amended by-laws. Accordingly, on October 15, 1952, Government sanctioned the by-laws as amended by the resolution of the Administrator. On October 24, 1952, the Administrator decided to put the by-laws into force with effect from January 1, 1953, and passed a resolution to give a notice thereof to the public. Accordingly, a public notice was published on November 16, 1952, in the issue of 'Jai Hind'. The appellants' association, thereupon, filed objections on December 13, 1952. It appears from the record that the President of the Association was called for interviews by the Administrator on December 22, 1952, and December 31, 1952. As a result of these interviews, the Administrator decided to shift the date from which the by-laws were to come into force from January 1, 1953, to April 1, 1953, and sanction to this change was accorded to him by Government on Feb-iraary 13, 1953. On February 20, 1953, a public notice was given by the municipality, intimating to the public that the by-laws would be brought into force with effect from April 1, 1953. The appellants gave two notices to the munici-pality challenging the levy before filing the present suit. The first notice was dated May 14, 1954, and the second notice was dated May 20, 1954. Thereafter, they instituted the suit from which this second appeal arises. The appellants challenged the levy of the license fee on several grounds. All these grounds were negatived by the two lower Courts.
3. In this Court, Mr. Rajani Patel, learned Counsel for appellants, has made only two submissions. The first submission is that the levy of the license fee was bad, because, after the by-laws were altered on October 5, 1952, they were not published as required by Section 61(2) of the Boroughs Act. The second submission is that the license fee was, in reality, a tax, and that the municipality had no power to levy a tax without undergoing the procedure prescribed by Chapter VII of the Boroughs Act. Both these contentions were raised by appellants in the two lower Courts, and both of them were negatived.
4. Now, the first submission of Mr. Rajani Patel has got to be examined in relation to the admitted fact that, though a notice of the proposed by-laws was given to the public as required by Sub-section (2) of Section 61, no such notice was given to the public of the change which was proposed to be effected as a result of the communication of the Government, dated September 6, 1952. The contention of Mr. Rajani Patel is that the by-law is ineffective, unless and until the procedure prescribed by Sub-section (2) of Section 61 has been gone through. He submits that when Government returned the by-laws without sanctioning the same and proposed a change in the by-laws, the new by-laws, incorporating the change, were fresh proposals of the municipality, and, unless and until an opportunity was given to the members of the public to raise objections in respect of this change in the by-laws, the procedure prescribed in Sub-section (2) of Section 61 cannot be said to have been undergone, and a disobedience of the provisions contained in that Sub-section will have the consequence of nullifying the by-laws. He also argued that Sub-section (2) not merely gave an opportunity to the members of the public to raise objections, but east a duty upon the municipality to take these objections into consideration. He further drew my attention to Sub-section (3) of Section 61, which casts a further duty upon the municipality of sending a copy of every objection or suggestion received from the members of the public to Government, Therefore, he contended that, inasmuch as the changed by-laws had not been published, the public lost opportunity of raising objections to the proposed change, and the Government had been deprived of considering such objections, as might have been raised. Mr. Patel compared the provisions contained in Section 61 with the provisions contained in Section 76 of the Act. Section 76 deals with the power of the Government to sanction rules relating to taxes. That section confers a power upon Government not only to sanction rules as proposed by the municipality, but confers a power upon the Government to modify the rules and then sanction them. He contended that, in respect of the by-laws, no such power had been given to Government, and Government had no alternative but to sanction bylaws as proposed or to reject the same. It was, therefore, contended that when Government did* not sanction the first proposal and asked the municipality to make a fresh proposal and the municipality made a new proposal, in fact, it was making a fresh proposal on the subject, and, unless and until the whole procedure prescribed by Sub-section (2) of Section 61, was gone through, the by-law could not have the effect of law. Now, the answer which Mr. Thakore gave to this line of reasoning was that, in substance, the by-laws which are sanctioned by Government were the same by-laws which the municipality had originally proposed, and the change which had been made by the new proposal was not at all prejudicial to any members of the public. It was contended that, whereas, in the original proposal, a higher license fee was proposed for houses containing more than 20 beds, by the fresh proposal, the license fee proposed was a lower one. This argument has appealed to the learned District Judge. I do not think I can subscribe to this view. In my opinion, in considering whether a by-law has been legally passed or not, this consideration is entirely irrelevant. The question for consideration is whether the by-law which was sanctioned was the same which had been proposed by the municipality, or whether the by-law which was being sanctioned was a new one. If the by-law was a new one, and the facts of the case do not leave any doubt that it was a fresh proposal, then, the whole procedure prescribed in Sub-section (2) of Section 61 must be gone through. The Administrator treated it as such, and he did pass a fresh resolution on the subject. Moreover, the reasoning accepted by the learned appellate Judge does not appeal to me even on facts. It may be that the owners of lodging and boarding houses who had more than 20 beds may not have been adversely affected, but, the members of the public certainly lost an opportunity of making a representation to the municipality and to the Government on the proposed change. For example, in the present case, the hotel keepers or some other trades people had a right to make representation on the proposed change. They might have as well made a representation to the municipality and the Government that, as the license fee was being reduced in the case of the aforesaid owners, a corresponding reduction should also be made in their cases. It may he that the owners of the houses which had less than 20 beds might have also made a representation that, just as some concession was shown to the owners of the houses containing more than 20 beds, a similar concession should also have been shown to them. In any case, the public lost an opportunity of making a representation to Government about the validity or otherwise of the objection on account of which a proposal was made by them that a uniform rate of license fee should be introduced in the case. Therefore, the argument which has been accepted by the learned District Judge does not appeal to me.
5. However, Mr. Thakore, learned Counsel for the municipality, raised a fresh point on this subject, which does not appear to have been raised at any stage in this litigation. He contended that though the municipality purported to levy a license fee by framing a by-law, actually what the municipality was required to do in this matter was not to pass a by-law, but it was required to act under Section 90 of the Boroughs Act. He stated that the municipality derived power to levy a license fee not by virtue of any of the by-laws, but that, that power was conferred upon the municipality by Section 90 of the Boroughs Act. Therefore, his contention was that, though the municipality purported to frame by-laws in which it incorporated the levy of a license fee, in effect, the municipality was acting in respect of levy of license fee, not under Section 61, but under Section 90 of the Act, and for this purpose, Mr. Thakore drew my attention to Clause (20) of the by-laws in which it was distinctly stated that the license fee was being levied by the municipality under Section 90 read with Section 58 of the Boroughs Act. Therefore, it is necessary to examine the provisions of Section 90 of the Boroughs Act. The relevant portion of that section states that
When any licence is granted under this Act...the authority granting or giving such licence or permission may charge a fee for the same.
Mr. Thakore contended that, for levying this fee, no sanction of Government was necessary at all, and, therefore, when the municipality framed a by-law for levying a license fee, in fact, no sanction was necessary under Sub-section (2) of Section 61 of the Boroughs Act. The reply of Mr. Rajani Patel was that Section 90 only confers a power upon the municipality to levy a fee, but it does not confer any power upon that body to prescribe the quantum of the fee. He contended that that power was conferred upon the municipality by Section 58, and, unless and until the provisions of that section were complied with, the municipality could not levy the license fee. The argument of Mr. Rajani Patel appears to be sound. In my opinion, the language of Section 90 does not justify the submission that, under that section, the authority granting a licence, may charge a fee. If that construction were to be placed upon Section 90, then, it is quite clear that the provision would mean that the quantum of fee was fixable not only by the municipality but also by any other authority on whom the power of granting licences may be conferred. The Legislature could hardly be presumed to confer such a wide power on a subordinate authority. In my judgment, Section 90 only confers a power of levying a fee; but, it does not deal with the question as to how the quantum of fee is to be prescribed. That subject is dealt with by Section 58, and that is why, in Clause 20 of the by-law already referred to, a reference has been made to Section 58 of the Boroughs Act. Section 58 provides that the municipality shall make rules, not inconsistent with the Act, on the various subjects mentioned in the various clauses of that section. The clause which is relevant is Clause (j). That clause confers power upon a municipality to prescribe, by rules, the fees to be charged for licences or permissions granted under Section 90 of the Boroughs Act. Therefore, in order that a license fee may be validly levied, the municipality has to act under Section 58 of the Boroughs Act. A further discussion at the bar showed that this position in law is more favourable to the respondent-municipality than to the appellants. This is so, because of the provisions contained in the proviso (a) to Section 58. That proviso states that no rule made under Section 58 shall have any effect unless and until it has been approved by Government. In the present case, having regard to the fact that the Government has ultimately given sanction to the levy of the licence fee on October 15, 1952, it is quite clear that Government has accorded sanction to this levy. Before according sanction under the proviso (a) to Section 58, it is not necessary that the municipality should undergo the procedure prescribed by Sub-section (2) of Section 61 of the Act. At least, my attention was not drawn to any provision in the Boroughs Act, which required that any rules which may be framed by the municipality under Section 58 required to undergo the procedure prescribed by Section 61(2). Mr. Rajani Patel made a reference to Section 73 of the Act, and contended that if the levy was being made by virtue of a rule purporting to be framed under Section 58, then, the procedure prescribed by Sections 75 and 76 had to be undergone. In my opinion, the submission of Mr. Patel has no force. The procedure prescribed in Sections 75 and 76 has to be undergone only if the rule relates to one of the taxes mentioned in Section 73 of the Act, and it is nobody's contention that the present levy fell within the purview of that section. As already stated by me, this levy falls within the purview of Section 90. On this, one further point was urged by Mr. Patel, and it was that the Government had not given sanction to the levy under Section 58, proviso (a), but, it had granted sanction only under Section 61, Sub-section (2). He contended that, unless and until the Government sanctioned the levy, under the proviso (a) aforesaid, that levy was ineffective. I do not think I can uphold this contention. It is true that, whilst granting sanction to the by-laws as a whole, the Government has made reference only to Sub-section (2) of Section 61, and has not made any reference to proviso (a) to Section 58. But, in my opinion, that is just a matter of form and not a matter of substance. The question for consideration is whether the levy of the license fee, the quantum of which the municipality was entitled to prescribe under Section 58 of the Act, is or is not sanctioned by the Government. Having regard to the facts of the case, there is no doubt whatsoever that the Government has accorded such a sanction and, therefore, though, for different reasons, I agree with the finding of both the lower Courts that the first submission made on behalf of appellants has no force.
6. The second submission of Mr. Rajani Patel was that the levy was in fact, not a fee, but, a tax. He contended that what Section 90 of the Act authorised the municipality to levy was a fee and not a tax. He contended that if the municipality intended to levy any tax, then, the whole procedure prescribed by Section 73 should have been gone through, and, as, having regard to the facts of the case, no such procedure was gone through, consequently, the levy was bad. Mr. Rajani Patel relied upon the ruling reported in Mahant Sri Jagannath Ramanuj Das v. The State of Orissa : 1SCR1046 . He submitted that this case clearly brought out the distinction between a tax and a fee, and, if the tests which are laid down in this ruling, are applied to the facts of the present case, then, the levy would be found to be a tax and not a fee. Before I consider the tests which were laid down by their Lordships of the Supreme Court, I propose to dispose off a fundamental objection which was raised by Mr. Thakore to the application of the principles laid down by this Supreme Court ruling. He contended that the distinction made by the Supreme Court between a tax and a fee was made only for legislative purposes, and that that distinction could not be validly applied in construing a statute in which the legislative competence was not in issue. He contended that the Supreme Court made the distinction only to determine whether the impost, with which it had to deal with in that case, was within the legislative competence of the Provincial Legislature. In order to emphasise this point, Mr. Thakore relied upon the ruling reported in Ratilal Panachand Gandhi v. The State of Bombay S.C.R. 1055 : 56 Bom. L.R 1184, in which the same point was raised and decided. It appears that, in all, the Supreme Court delivered three judgments in three different appeals within a short space of time, and, the ruling on which Mr. Thakore relies is the latest pronouncement of the Supreme Court on the subject. This is what their Lordships observed in that ruling (p. 1273) :
We may start by saying that although there is no generic difference between a tax and a fee and in fact they are only different forms in which the taxing power of a State manifests itself, our Constitution has, in fact, made a distinction between a tax and a fee for legislative purposes.
Therefore, Mr. Thakore emphasised that the distinction was made by the Supreme Court only for the purpose of deciding whether the fee levied thereunder was or was not within the legislative competence of the Provincial Legislature, and that the Supreme Court did not recognize or establish any inherent distinction between a tax and a fee. However, this argument runs counter to a judgment of a division bench of this Court reported in Ramsevak Raghunath v. City ofNagpur Corporation  Bom. 593. Mr. Justice Mudholkar, in delivering the judgment of the division bench, referred to all the three Supreme Court decisions referred to above, and relied upon the same. In that case, the question for consideration was whether the fee, which the Nagpur Corporation intended to levy from the petitioners and which fee was being levied by the Nagpur Municipality under a previous legislation, was or was not saved by the Nagpur Corporation Act, 1948. The question turned upon whether the levy was in fact a tax or a fee. In considering that question, the division bench applied the tests laid down in the Supreme Court rulings aforesaid. It is important to notice that this case arose in connection with municipal taxation. In view of this division bench ruling, I need not refer to a number of other rulings which were cited or intended to be cited by Mr. Patel in support of his proposition that this distinction is applicable not only for deciding the legislative competence of a Legislature, but also with reference to municipal taxation laws.
7. Mr. Thakore also relied upon the fact that the word 'tax' itself was defined in the Boroughs Act, in Section 3(20), The definition is:
'Tax' shall mean any toll, rate, cess, fee or other impost leviable under this Act and shall include a water rate.
Therefore, the contention was that the Boroughs Act did not make any distinction between a tax and a fee, and, therefore, the tests laid down by the Supreme Court were not applicable to the facts of the present case. It is true that, if the Legislature itself has used the two words 'tax' and 'fee' in the same sense, then, the matter will be governed by the statute itself. But, the question for consideration is whether, from the definition aforesaid, it necessarily follows that the Legislature has not made a distinction between a tax and a fee. From the definition, it appears that the word 'tax' is the genus of which 'fee' is a species. Does it follow from this that whatever is species is also the genus? If we turn to the provision contained in Section 73 of the Boroughs Act, we find that the Legislature has used all these terms, tax, toll, rate, etc., in that section, A bare reading of that section would show that though the term, tax has been defined by the Legislature to mean all the aforesaid forms of imposts, the Legislature has not made those other imposts convertible with the term tax. Moreover, though the fact must be borne in mind that the Legislature has defined the term tax as including fee, whether the term fee is the same thing as a tax will depend upon the context in which the term has been used in Section 90 of the Boroughs Act, Therefore, the crucial point that has got to be decided in the present case is: Has the Legislature used the term 'fee' in the sense of the terra 'tax' in Section 90 of the Boroughs Act? In my opinion, the answer must be in the negative. If the Legislature intended that the power conferred under Section 90 was the same as the power to levy a tax, then, it is hardly probable that the Legislature would have made a separate provision for this purpose in Section 90, and should not have included that matter in Section 73. If we read the provisions of Section 90 in conjunction with the provisions of Section 73, it is quite clear that the Legislature did not mean the same thing by the use of the term 'tax' and the term 'fee'. What the Legislature intended to confer upon the municipality was to levy a fee and not to impose a tax. Therefore, in my opinion, though a definition has been given of the word 'tax;' in the Boroughs Act, the term 'fee' has been used in the context of Section 90 in contradistinction to the general word tax contained in Section 73, and the distinction which has been made by the Supreme Court between the two terms is relevant for the purpose of deciding the present case.
8. That takes me to the distinction which was made by the Supreme Court in the cases, which I have referred to above. It appears that the Supreme Court dealt with the same matter in three decisions and all these three decisions are reported in 1954 Supreme Court Reports. Out of these three decisions, only two were cited before me and I propose to deal with only these two rulings. I cannot do better than to quote a passage from one of the judgments of their Lordships of the Supreme Court which pointedly and forcefully brings out the distinction between a tax and a fee. This is what their Lordships have stated at p. 1053 in the case reported in Mahant Sri Jagannath Ramanuj Das v. The State of Orissa:.A tax is undoubtedly in the nature of a compulsory exaction of money by a public authority for public purposes, the payment of which is enforced by law. But the essential thing in a tax is that the imposition is made for public purposes to meet the general expenses of the State without reference to any special benefit to be conferred upon the payers of the tax. The taxes collected are all merged in the general revenue of the State to be applied for general public purposes. Thus, tax is a common burden and the only return which the taxpayer gets is the participation in the common benefits of the State. Fees, on the other hand, 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 payments are demanded. Thus in fees there is always an element of quid pro quo which is absent in a tax.. Two elements are thus essential in order that a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly. But this by itself is not enough to make the imposition a fee, if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general publicpurposes.
After laying down these tests, their Lordships proceeded to apply the same to the facts of that case and came to the conclusion that the levy was a fee and not a tax. Mr. Thakore, however, insisted that the observations made by their Lordships in the case reported in Batilal Panachand Gandhi v. The State of Bombay at pages 1073 and 1075 should also be read before deciding as to what are the tests which their Lordships intended to apply. He insisted on this, because, in his submission, this, being a later case, decided after the first two cases were decided, their Lordships, according to him, explained the scope and the content of the tests which were laid down in the earlier two rulings. However, in my opinion, there is no vital difference between the tests laid down in the earlier rulings and those laid down in the ruling on which Mr. Thakore relies. But in deference to his insistence, I propose to quote an extract from the decision on which he relied so that nothing important may be left out on the subject. After explaining the true nature of a tax at page 1074, their Lordships proceeded to explain the nature of a fee in the following words:.Fees, on the other hand, 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. It may not be possible to prove in every case that the fees that are collected by the Government approximate to the expenses that are incurred by it in rendering any particular kind of services or in performing any particular work for the benefit of certain individuals. But in order that the collections made by the Government can rank as fees, there must be co-relation between the levy imposed and the expenses incurred by the State for the purpose of rendering such services. This can be proved by showing that on the face of the legislative provision itself, the collections are not merged in the general revenue but are set apart and appropriated for rendering these 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 in consideration of certain services which the individuals accepted either willingly or unwillingly and in the second place, the amount collected must be ear-marked 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 purposes.
Therefore, a perusal of these two decisions of the Supreme Court shows that there are two essential features of a fee. The first is that the fees are payments for some special service rendered or special work done for the benefit of those from whom payments are demanded. In other words, as their Lordships have explained, there is always an element of quid pro quo in a fee, which is absent in a tax. Mr. Rajani Patel emphasised the words quid pro quo in the expression 'an element of quid pro quo' used in the judgments of their Lordships, but Mr. Thakore emphasised the word 'element' in the same expression. I agree with Mr. Thakore that the effect of the Supreme Court ruling is that it is; not necessary that, in every case, there should be a complete co-relationship existing; between the levy and the services rendered. Their Lordships have observed at p. 1074 that.It may not be possible to prove in every case that the fees that are collected by the Government approximate to the expenses that are incurred by it in rendering any particular kind of services or in performing any particular work for the benefit of certain individuals.
But, at the same time, it is clear that there must be some reasonable co-relationship existing between the levy and the expenses incurred for the purposes of rendering the services. From the aforesaid rulings, it is quite clear that the second feature of the levy is that the amount must he collected to meet the expenses of services rendered and must not be intended for the general revenues of the State. In the first case, their Lordships have emphasised that (p. 1054) :.if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general public purposes,
then, it is not a fee. In the second case, the language which is used by them is still stronger. They have stated that the amount collected must be ear-marked 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 purposes. There fore, the second test which their Lordships have laid down is that the amount levied must not be amalgamated with the general revenue, but, it must be set apart for the purpose for which the services were being rendered.
9. This being a second appeal, I am not entitled to enter into questions of facts. Therefore, before I consider the question as to whether the levy is either a fee or a tax, it is necessary for me to examine the judgment of the learned appellate Judge with a view to consider as to what are the facts which he has found and which are relevant for deciding this case. It is not disputed before me that the question as to whether a particular levy is or is not a fee or a tax is a question of law and has got to be decided by this Court. That is a matter which has got to be inferred from the facts found in the case. But, at the same time, it is also quite clear that the question as to whether there is or is not a co-relationship existing between the amount of the levy and the expenses incurred in connection with the services is a question of fact. The contention of Mr. Thakore is that this question has been decided by the learned appellate Judge and I am bound to accept his finding on this subject. On the other hand, Mr. Patel contended that all the evidence appearing on the subject has not been considered by the learned appellate Judge, and, on one or two points, the learned appellate Judge has introduced matters on which there is no proper evidence in the case. I may mention that it was not disputed before me that the municipality was rendering some special service to the appellants for which it was entitled to levy a fee. The by-laws relating to the subject were read before me and have been referred to by the learned appellate Judge, and these by-laws do not leave any doubt that, in the interests of the general public health, certain responsibilities have been cast upon the owners of the lodging and boarding houses, and that the municipal staff and its officers have to see that these responsibilities are duly discharged by these owners. In connection with this, some special services undoubtedly have to be rendered by the municipal staff and its officers. There is no dispute on this subject. But the real question that has got to be considered is whether the municipality has levied the fee after taking into consideration the expenses which it had to incur in connection with the services, or whether it has blindly adopted the figure without any knowledge on the subject. The learned appellate Judge has remarked that the total amount which the municipality would recover would be a sum of Rs. 2,100 per annum and, on the face of it, it appeared to him that this was intended to augment the general revenues of the municipality, having regard to the fact that, prior to the present imposition, the municipality was recovering only Rs. 900 from the appellants. After making this observation, the learned District Judge proceeded to examine the evidence of the Chief Officer. He observed that it was common knowledge that the salaries of the members of the staff had increased on account of the high cost of living, and the municipality had to incur additional expenditure since 1926. Mr. Patel's contention was that there was no evidence on this subject. However, Mr. Thakore drew my attention to the annual report of the municipality for the year 1951-52 and showed that the expenses on account of the salaries of the Health Officer, the Sanitary Inspectors and the Sanitary Mukadams had increased from Rs. 35,183-6-0 in 1950-51 to Rs. 46,084-11-0 in 1951-52. But, however, having regard to the fact that the original fee was Rs. 20 per annum, and it has been increased to Rs. 75 in 1951-52, the figures for comparison should be for the years 1926 and 1951-52, and not the figures for the years 1950-51 and 1951-52. In addition to this, Mr. Patel appears to be right in stating that there are no materials on the record to show as to what was the state of affairs prevailing in 1926. It is open for one to argue that the year 1926 was a pre-slump period and that, in that year, the world was still suffering from the aftermath of the first World War. The second reason which the learned appellate Judge has given is that, formerly, the owners of the lodging and boarding houses were required to pay a sum of Rs. 36 per annum for removal of sullage water from their houses. Mr. Rajani Patel contends that there was no evidence on the subject. He stated that though there was an averment in the plaint that Rs. 36 was being recovered per annum, there is nothing on the record to show that this charge was levied only from the owners of the lodging and boarding houses and not from other persons who had special kundis for collection of sullage water. He referred me to a circular (p. 875) in which the rates were fixed by the municipality for removal of the sullage water. According to that circular, the maximum which was claimable by the municipality was Rs. 20 for rendering this special service. But, Mr. Patel contended that this was not a special service which was being rendered to the lodging and boarding houses only, but it was being rendered to all the house-owners, and the fee was being collected not only from the owners of the lodging and boarding houses, but from all people having such kundis. There is nothing on the record to show as to why and under what power the municipality was recovering an extra sum of Rs. 16 from the present appellants. Mr. Thakore very fairly conceded before me that, in so far as the municipality was recovering Rs. 20 from the appellants, it could not be said to be a special service ; but, he contended that, in any case, Rs. 16 which were being collected by the municipality represented a sum for rendering the special services which the municipality was giving to the present appellants. However, there is nothing on the record of the case to justify this submission. Having regard to the fact that the learned appellate Judge has made use of a material which is not borne out by the evidence on the record, in my opinion, Mr. Patel was right in inviting this Court to review the evidence over again. The main reason which induces me to do this is not only this, but also the fact that, though the Supreme Court ruling was cited before the learned appellate Judge he does not seem to have, whilst discussing the evidence as a whole, applied his mind to the crucial test which was to be applied to the facts of the present case, and that test was, as I have already mentioned, whether the municipality had levied a tax for general revenue purposes or whether it had levied it for the purpose of meeting the expenses which it had to incur in connection with the special services to be rendered to the appellants. The test which their Lordships have laid down is to see that prima facie there is a relationship existing between the expenses of the services and the amount of the levy. This crucial position does not appear to have been present in the mind of the learned appellate Judge at the time when he was discussing this subject in para. 9 of his judgment which contains his reasons for reaching the conclusion in favour of the respondent-municipality. For these two reasons, I decided to go through the relevant evidence on the subject. Both the sides are agreed that the con-elusion is to be reached on an appreciation of the evidence given by the Chief Officer. I have been taken through the whole of the evidence of the Chief Officer, and the broad points which emerge from his evidence, which are relevant to this aspect of the case, are that the municipality, at the time when it resolved to levy the fee, did not take into account the question as to how much expenses are being incurred by the municipality for the appellants. When the appellants raised objections, then, also, the question of the expenses which the municipality was incurring in, connection with the services rendered to the appellants was also not considered. The Chief Officer also admitted that the income derived from the fees was not being kept separate, but was being amalgamated with the general revenues. At an earlier stage of the case, when the Chief Officer was asked to give separately the expenditure incurred in connection with the services rendered by the municipality to the appellants, he filed exh. 79 in which he stated that it was not possible for the municipality to do this. Mr. Patel also contended that the licence fee had been fixed mainly after taking into consideration the licence fees that were charged by the other municipalities, and, for this purpose, he relied upon the statement of the Chief Officer. But, however, it is not quite clear whether the evidence of the Chief Officer means that, in fixing the quantum of the figure, the municipality was mainly influenced by the licence fees which the other municipalities were collecting. Therefore, I propose to leave this factor out of consideration. But, reading the evidence of the Chief Officer, it appears to be crystal clear that, at the time when the fees were increased, the municipality had at no stage calculated the amount of expenditure which it was incurring in connection with the special services which it was rendering to the appellants. This was not done at the time when the resolution was passed, nor at the time when the objections were considered. Not only this, but the municipality did not earmark or keep the income from the fees separately. Their Lordships in the judgments referred to above have emphasised this fact. Therefore, in my opinion, reading the evidence of the Chief Officer as a whole, there cannot be any doubt that, at the time when the fee was increased, the municipality did not take into consideration the amount of expenses that it was incurring in regard to the special services rendered to the appellants. But, Mr. Thakore contended, that the mere fact that the municipality had not done this was not in itself a circumstance for branding the levy as a fee and not as a tax. He contended that if, as a matter of fact, the municipality was recovering only such amount as was co-related to the expenses which it was incurring then, the levy cannot be scotched. I agree with this proposition. In fact, this aspect of the case has been taken into consideration by their Lordships of the Supreme Court whilst laying down the tests. They have pointed out that, in some cases, it may not be possible for the Government to fix the exact amount of expenses which it was incurring. As I read the Supreme Court rulings, it does not lay down that there should be an exact co-relationship between expenses and the amount of the levy. It may be that, in some cases, even after making best efforts, the levying authority may not be in a position to find out the exact figure of the expenses that it was incurring. In such cases, the expenses may be fixed even arbitrarily. But, there is a clear distinction between arbitrary assessment, and blind assessment. If no attempt is made by the levying authority to assess the expenses and the fee is fixed, then, it is reasonable to draw an inference therefrom that the assessment was a blind one and not even an arbitrary one. When such is the case, then, the burden lies upon the levying authority to establish that the actual amount which it was collecting bore a reasonable co-relationship between the expenses incurred and the services rendered. Now, if the matter is looked from this stand-point, in my opinion, there is absolutely no evidence adduced by the municipality to show that there was any such relationship existing between expenses incurred and the services rendered. From the account-books, it is not possible for me to state as to what expenses the municipality was incurring in rendering services to the appellants. The Chief Officer also admitted that the collections of all the fees were being put together, and, thus were being used for the general administration of the municipality. In my opinion, when such is the case, then, the burden lies upon the municipality to prove as aforesaid and, as already stated by me, the municipality has not led any evidence whatsoever to do this. The by-laws have definitely fixed the duties which are to be performed by the municipal staff and the officers in connection with the houses owned by the appellants. In my opinion, it was not altogether impossible for the municipality to lead some evidence to prove approximately the expenses which it was incurring in connection with the special services which it was rendering to the appellants. Under the circumstances, after giving my best consideration to all that was stated by Mr. Thakore in favour of the municipality, I have come to the conclusion that there was no reasonable relationship between the amount of the fee collected and the expenses which the municipality was incurring. In coming to this conclusion, I have borne in mind the argument of Mr. Thakore that the Supreme Court rulings did not lay down that there should be an exact quid pro quo between the levy and the expenses incurred on the services, and it is enough if an element of quid pro quo was present. Thus, in my opinion, the second test which has been laid down by the Supreme Court has not been satisfied and, consequently, the appeal must be allowed on that ground.
10. Therefore, I allow the appeal. I set aside the decrees of both the lower Courts.
11. There are three reliefs which are claimed by the appellants. The first relief is very wide and having regard to my decision aforesaid, it cannot be granted in the form in which it is asked for. The decision which this Court has arrived at is that the levy of the licence fee at the rate of Rs. 75 per annum is illegal. A declaration will be given only to this effect that the levy of the licence fee at the rate ofRs. 75 under the by-laws is illegal on the ground that it is not in reality a fee, but is in the nature of a tax. This declaration will not touch the levying of the licence fees under other by-laws. In order that there may be no misunderstanding on the subject, I may mention that the other by-laws except the by-law relating to the levy of the licence-fee in respect of the boarding and lodging houses are not being held by me to be invalid.
12. A permanent injunction should issue in favour of the appellants restraining respondent municipality from levying the licence fee at the rate of Rs. 75 per annum.
13. As success is divided in this Court, I order that each party should bear its own costs all throughout.