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Mohta Ispat Limited, Ratlam Vs. the Chief Municipal Officer, Ratlam and ors. - Court Judgment

LegalCrystal Citation
SubjectMunicipal Tax;Civil
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. Nos. 55, 190 and 741 of 1979 and 71 of 1980
Judge
Reported inAIR1981MP62; 1981MPLJ175
ActsMadhya Pradesh Municipalities Act, 1961 - Sections 130, 283 and 349
AppellantMohta Ispat Limited, Ratlam
RespondentThe Chief Municipal Officer, Ratlam and ors.
Appellant AdvocateA.K. Chitale and ;A.G. Dhande, Advs.
Respondent AdvocateA.M. Mathur, Adv. General and ;R.K. Verma, Adv.
DispositionPetition allowed
Cases ReferredMunicipal Council Madurai v. R. Nara
Excerpt:
.....the explanation appended. the contention is that fee for a licence to carry on an offensive or a dangerous trade is in the nature of a tax. 12. the regulation of dangerous and offensive trades does necessarily involve a good deal of technical knowledge and in the course of their discharge of duties, the supervisory staff of the council are expected to give proper advice and guidance so that there may be due compliance with the provisions of the act. the inspection and supervision is not only necessary for the general public good but also for the factory owners. a licence fee charged for regulating dangerous and offensive trades, in its very conception, is a fee for services rendered......as a sortof return or consideration for servicesrendered, it is absolutely necessary thatthe levy of fees should on the face of thelegislative provision, be correlated to theexpenses incurred by government in rendering the services.' 6. the same points of distinction are reiterated in hingir rampur coal co. ltd. v. state of orissa. air 1961 sc 459 delhi cloth and general mills co. ltd, v. chief commr. delhi air 1971 sc 344 indian mica and micanite industries ltd. v. state of bihar, air 1971 sc 1182; nagar mahapalika, varanasi v. durga da's bliattacharya, air 1968 sc 1119 and municipal council, madurai v. r. nara-yanan, atr 1975 sc 2193. 7. when a question arises whether a particular levy is in the nature of a fee or a tax, the entire scheme of the statutory provisions, the duties.....
Judgment:

M.L. Malik, J.

1. This order shall also govern the disposal of Miscellaneous Petition No. 190 of 1979 (M/s. Modella Steels and Alloys Limited and Anr. v. The Chief Municipal Officer, Ratlam Nagai Palika, Ratlam and two others), Miscellaneous Petition No. 741 of 1979 (M/s. Jayant Vitamins Limited, Ratlam v. The Chief Municipal Officer, Ratlam Nagar Palika, Ratlam and two others) and Miscellaneous Petition No. 71 of 1980 (M/s Sajjan Chemicals Private Limited, Ratlam v. The Chief Municipal Officer, Ratlam Nagar Palika, Ratlam and two others).

2. The petitioners, a company with limited liability duly incorporated under the provisions of the Companies Act, 1956, have their factory for casting steel ingots in the Industrial Area of Ratlam town. The Industrial Area was developed by the State Government and was located some kilometers away, outside the municipal limits. The petitioners installed their industry in the Industrial Area long before the nrea was brought within the municipal limits by notification dated 23rd June, 1977. After the Industrial Area fell within the municipal limits, the Chief Municipal Officer issued a notice to the petitioners to comply with the municipal by-l;tws and obtain a licence thereunder, on remitting licence fee at the rate of Rs 5/- per Horse Power. In the by-laws initially framed in 1958, the licence fee tor industry engaged in casting of metals wis Rs. 40/- in item I of Schedule I til! 1-4-1970 and was thereafter enhanced to Rs 100/-.

The licence fee for industry engaged in business comprised in Item 13 (7) that is 'Yantrik Karkhane', employing electrical or mechanical energy i. e. oil engine, steam engine, and hydraulic energy, was Rupees 10/- till March, 1974. By an amendment introduced by notification dated 5th April, 1974, the licence fee has been enhanced from Rs. 10/-to an ad valorem payment calculatedat the rate of Rupees 5/- per Horse Power, over the capacity of 2 Horse Power for which the licence fee remained Rs. 10/-. Calculated at this rate, the licence fee payable by the petitioners worked out to Rs. 31.345/- per year. The petitioners submitted reply to the notice issued by the Chief Municipal Officer raising vairous objections and refused to obtain licence, whereupon they were served with a show cause notice proposing penal action.

They then filed the present writ petition under Article 226 of the Constitution praying appropriate writs of cer-tiorari, mandamus etc. to quash the said demand of licence fee and to prevent the municipal authorities from enforcing the said demand. The petitioners contend that the levy was in the nature of a tax, not provided for under Chapter VII dealing with imposition of taxes. The procedure for imposing tax, as prescribed by Section 129 of the M. P. Municipalities Act, 1961, was never followed. That if it was a levy as a 'fee', it must be shown that there was sufficient quid pro quo that is, reasonable correlationship between services rendered and the fee levied (though not with arithmetical exactitude). That the enhancement of licence fee could not be justified on the ground of increase in the expenditure for providing the services.

3. Various other grounds were raised in the petition, such as, the extension of the municipal limits so as to include industrial area, was done mala fide; that the by-laws framed under the Madhya Bharat Municipalities Act, under which the levy was being imposed, could not automatically continue under the M. P. Municipalities Act, which now governed the area; that even if the by-laws were deemed saved, they would not fasten on industries which were outside the municipal limits and who had no opportunity to raise objections when the proposals for the impost were, initially made, and that the original notification of imposition of tax could not be made applicable to the newly included area. The learned counsel for the petitioners was fair enough to concede at the time of arguments that he would not press these grounds since the petitioners were willing to obtain lieencs on paying fee as might be determined on the basis of the Schedule in force prior to 1st March, 1974. The counsel said that the real grievance was with the amendment introduced by notification dated 5-4-1974 (Annexure 'A') whereunder the demand was being made ad valorem nt the rate of Rs. 5/- per Horse Power.

4. The stand taken in the Return filed on bebalf of the municipality is that Section 283 of the M. P. Municipalities Act gives the Council powers for the purposes of regulation of certain offensive or dangerous trades, those from which offensive or unwholesome smell arises or whieh involve risk of fire or which by reason of use or situation become a nuisance to the neighbourhood or is likely to be dangerous to life, health or property [See Section 283 (1) (n) and (q) and the Explanation appended. The nuisance includes any contamination of the atmosphere by soot and any mechanical noise.] Such a trade needs a licence and the Council is authorised under Section 349 of the Act to charge such fee as might be prescribed by the by-laws. The contention is that fee for a licence to carry on an offensive or a dangerous trade is in the nature of a tax. It is not a fee for services rendered or to be rendered. That the Council has power to enhance the tax by exercising powers under Section 130 of the Act. For such enhancement, procedure of Section 129 is not required to be followed.

5. It is an admitted position that the impugned licence fee does not fall within any of the clauses of Section 127 (1) of the M. P. Municipalities Act. It is not a tax on person carrying on any trade or calling or tax payable by the occupier of houses or buildings according to his circumstances and property within the municipal limits [Clauses iv and vi of Section 127 (I)]. The impost is governed by Sections 283, 349 and 358 of the M. P. Municipalities Act, is the stand taken by the respondents in no uncertain terms. The question to answer then is simple. Is the impost in the nature of a tax or is it a fee in the real sense? Dealing with the distinction between 'tax' and 'fee', their Lordships of the Supreme Court observed thus in The Commissioner Hindu Religious Endowments, Madras v. Sri I.akshmindra Thirtha Swamiar, ATR 1954 SC 282:

'It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the tax-payer's consent and the payment is enforced by law. The second characteristic of 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. This is expressed by saying that the levy of tax is for the purposes of general revenue, which whencollected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particualr individual, there is, as it is said, no element of quid pro quo between the tax payer and the public, authority. Another feature of taxation is thai as it is a part of the common burden, the quantum of imposition upon the tax payer depends generally upon his capacity to pay.

x x x x x 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. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay. These are un-doubtrdly some of the general charneteris-ties, hut as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases.

x x x x x If, as we hold, a fee is regarded as a sortof return or consideration for servicesrendered, it is absolutely necessary thatthe levy of fees should on the face of thelegislative provision, be correlated to theexpenses incurred by Government in rendering the services.'

6. The same points of distinction are reiterated in Hingir Rampur Coal Co. Ltd. v. State of Orissa. AIR 1961 SC 459 Delhi Cloth and General Mills Co. Ltd, v. Chief Commr. Delhi AIR 1971 SC 344 Indian Mica and Micanite Industries Ltd. v. State of Bihar, AIR 1971 SC 1182; Nagar Mahapalika, Varanasi v. Durga Da's Bliattacharya, AIR 1968 SC 1119 and Municipal Council, Madurai v. R. Nara-yanan, ATR 1975 SC 2193.

7. When a question arises whether a particular levy is in the nature of a fee Or a tax, the entire scheme of the statutory provisions, the duties and obligations imposed on the Council, the expenses the Council incurs in discharging those duties and obligations and whether the duties and obligations enure to the benefit of the general public or to the benefit of a class as such, will have to be examined. And once the Court conies to the conclusion that the levy is a fee. it would be for the authority to justify that they render some special services to the category from whom the fee is exacted and that there exists some reasonable correlation between the total sum collected and the cost of services.

8. Under the scheme of our Act (M. P. Municipalities Act, 1961), imposition ot taxation falls in Chapter VII. Section 127 deals with the types of taxes which may be imposed Section 128 deals with restrictions on the imposition of property tax. Section 129 deals with procedure to be followed before the imposition is notified. Section 130 deals with abolition and variation in tas and the procedure to be followed in respect of such abolition or variation.

9. Regulation of trades falls in Chapter IX and the levy of fees for licences and permissions falls in Chapter XIV. Similar is the scheme in Madras District Municipalities Act (Act 5 of 1920) with which their Lordships of the Supreme Court had an occasion to deal in The Municipal Council, Madurai v. R. Nara-yanan, AIR 1975 SC 2193. The Madurai Municipal Council by its resolution passed on 28th December, 1965, enhanced the licence fee on the hoteliers carrying on business within the municipal limits, very disproportionate to the services rendered and claimed to justify the imposition as a tax on land and building or on a calling. The enhancement was struck down by their Lordships and this is what their Lordships held :

'Section 78, empowering property tax levy, falls in Part III (Taxation and Finance), while Section 321, relating to licence fees, is located in Part VI. The scheme thus separates issue of licences and levy of licence fees from taxes on porperty and other items. Prima facie, in the absence of other compelling factors,--to lug in a taxing provision into Part VI may, therefore lead to obscurity and confusion.

The Madras Act speaks with more precision and relegates licences aud licence fees to a Part different from Taxation and Finance. The procedure for each is also delineated separately. For these reasons it cannot be said that 'fee' in Section 321 (2) is a tax.

The plea that Section 321 (2) lends itself to being regarded as a tax, indifferently described as fee, breaks down for two reasons. When the Legislature has carefully provided in Section 78 (3) for previous invitation and consideration of objections to enhancement of tax levies, resort to the device of tax disguised as fee, under Section 321 (2), may not requireany such procedural fairness and discipline and thus will frustrate the procedural protection written into the law in regard to fiscal measures. Secondly Schedule V, with which Section 321 is directly linked, sets out a host of petty and lucrative ventures all of which, theoretically, cannot be carried on except on land or buildings.

Held that the resolution of Madurai Municipal Council dated 28-12-1965, whereby a sharp spurt in the rates of licence fee payable by the hotel keepers was brought about, was invalid. It was not a fee ex concessis; it was not a tax ex facie.'

10. Their Lordships distinguished the earlier authority of the Supreme Court reported in Corporation of Calciitta v. Liberty Cinema AIR 1965 SC 1107. They observed that there was some wobbling in the Calcutta Act since power to tax was oddly placed in Chapter primarily concerned with licences and permissions. The Madras Act on the other hand spoke with more precision and relegated licences and licence fees to a part different from taxation. The procedure for each was also delineated separately. Their Lordships in Madurai Municipal case were of a definite view that it was impossible to uphold the levy miscalled 'fee' on the basis that it was a 'tax', as was done in the Liberty Cinema case.

11. As said above, the scheme of our Act is very similar to the Madras Act and the authority of the Supreme Court in Municipal Council Madurai v. R. Nara-yanan, AIR 1975 SC 2193 must fully govern our reasoning to hold that the levy is a 'fee' in the real sense.

12. The regulation of dangerous and offensive trades does necessarily involve a good deal of technical knowledge and in the course of their discharge of duties, the Supervisory Staff of the Council are expected to give proper advice and guidance so that there may be due compliance with the provisions of the Act. On certain occasions, the factory owners are bound to receive some benefit by timely advice of the Municipal Inspectors and may be saved of the consequences of the working of dangerous machines or employment or such processes as involve danger to human life. A timely warning may set things right. The inspection and supervision is not only necessary for the general public good but also for the factory owners. A licence fee charged for regulating dangerous and offensive trades, in its very conception, is a fee for services rendered. The fee must, therefore, be justified on quid pro quo basis.

13. The Municipal Council, Ratlam has not justified the enhancement of the licence fee on quid pro quo basis. The enhancement in the licence fee done by notification dated 5-4-1974 (Annexure 'A' in M. P. No. 190 of 1979) must, therefore, be struck down. We order accordingly.

Respondent No. 1 shall pay petitioners' costs. Counsel's fee Rs. 200/-.


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