(1) Because of a similar point for consideration, these two petitions have been heard together. The question relates to the propriety of the Kadayanallur Panchayat and the Vasudevanallur Panchayat, which are the respondents, enhancing the licence fee for the private weekly market of each of the petitioners. The petitioners say that the enhancement is totally disproportionate to the value of service rendered by the Panchayats and is therefore, illegal. The petitioner in W. P. 633 of 1962 is the owner of a private weekly market at Nainaragaran village. He would say that the weekly market was functioning from prior to 1802, he purchased the weekly market in 1957 and was conducting the market under licences issued by the District Board every year. For 1959-60, the fee levied was a sum of Rs. 497-42. The quantum of the fee levied would appear to have been disputed, which eventually led to G. O. Ms. 1935, Local Administration, dated November 13, 1959. Based on the order of the State Government, the special Officer, District Board, Tirunelveli, fixed the licence fee for 1959-60 at 3.6% of the gross income of the preceding year. This basis was continued, but for 1960-61, the fee was assessed at 3.2% of the gross income. The assessment at that rate of fee amounted to Rs. 442-42. On 2-10-1961, the Kadayanallur Panchayat Union came into being. The Union, on 29-11-1961, demanded from the petitioner Rs. 342-42, being the balance of licence fee for the year 1960-61, after deducting a sum of Rs. 100 already paid. The balance was paid by the petitioner on 4-12-1961. On 28-3-1962, the Union, by a resolution of that date, enhanced the rate of licence fee from 3.2% to 12% with effect from 1-4-1961. Worked at this rate, the licence fee would stand enhanced from Rs. 531-20 to Rs. 1,992. In the other petition, the Vasudevanallur Panchayat Union Council, by a resolution, dated 17-3-1962, raised the licence fee for 1961-62 from Rs. 568-38 to Rs. 2,528-40, the difference representing enhancement of the rate of licence fee from 3.2 percent to 15 per cent of the gross income of the turnover of the business in the private market. It is these levies as enhanced, the petitioners seek to quash as being illegal.
(2) In both the petitions, the Panchayat Unions have filed counter affidavits justifying the enhancement. so far as the Vasudevanallur Panchayat Union is concerned, the justification is this. Under S. 100 (4) of Madras Act XXXV of 1958, a fee not exceeding 15% of the gross income in the preceding year may be charged by the Panchayat union council for a licence issued under S. 100(2) of that Act. In this case, the licence fee had been fixed at 15% of the gross income and the petitioner can have therefore no grievance. The option is with the local authority and an imposition of the fee by such authority within the percentage allowed cannot be contended to be in excess of its powers. The licence fee is authorised by law and is well within the jurisdiction of the Panchayat union. To the same effect is the justification of the Kadayanallur Panchayat Union.
(3) Neither of the Panchayat unions has justified the enhancement on the basis that the enhancement is related to increased expenses in rendering special service to the petitioners. But, on the other hand, the attempt of the unions is to show that one-fifth or one-seventh as the case may be of the salaries and allowance of the supervisory staff who inspect the market every week on the shandi day has been the basis for the increase in the licence fee. The counter affidavit filed for the unions contain a statement of the total expenses incurred towards salaries and allowances of staff like the Commissioner, the Health inspector, two peons, Chairman's peon and the travelling allowance of the Health Inspector Commissioner and Chairman and certain other expenses. But the Panchayat unions have not attempted in their counter affidavits to correlate the enhancement to the actual or approximate value of the services rendered by the supervising staff. The proportion of one-fifth or one-seventh is not shown to represent the proportionate cost of the actual service rendered to either of the markets, but seems to be arbitrary. In fact, the attempt on the part of the unions is not to justify the enhancement on any quid pro quo basis, namely that to render so much special service so much expenditure is incurred and, therefore, the enhancement in the licence fee is called for.
(4) The Supreme Court in the Commr. of Hindu Religious Endowments, Madras v. L. T. Swamiar of Sirur Mutt, , pointed out the difference between a tax and a fee. A tax, as defined by Latham, C. J. in Mathews v. Chicory Marketing Board, 60 CLR 263 is compulsory exaction of money by public authority for public purposes enforceable by law and is not a payment for services rendered. A fee, as pointed out by supreme Court, is generally defined to be a charge for a social service rendered to individuals by some governmental agency. It is a sort of return or consideration for services rendered and, therefore, it is necessary that the levy of fees should on the face of the legislative provision be correlated to the expenses incurred by Government in rendering the services. No doubt both tax and fee are compulsory exactions. But the difference between the two lies in the fact that a tax is not correlated to particular service rendered but is intended to met the expenses of the Government and a fee is meant to compensate the government for expenses incurred in rendering services of a special nature to the persons from whom the fee is collected. a tax is for purposes of and goes into general revenue, unlike a fee. Unless, therefore, the fee levied is correlated to or in proportionate, more or less, to the costs of the special service rendered, its validity cannot be supported. This proposition is now well-established by numerous decisions of the Supreme Court as well as of this Court.
(5) But, for the respondents, my attention has been invited to Municipal Council, Tiruvarur v. Md. Abu Baker Rowther, 1943-2 Mad LJ 496: (AIR 1944 Mad 85) and Ramanatha Aiyar v. Corporation of Madras, 1948-2 Mad LJ 144: (AIR 1949 Mad 136) and it is contended that, so long as the increase in the licence-fee is within the maximum rate prescribed by statute, it is not open to attack. S. 100(4) of Madras Act, XXXV of 1958, provides:
"When a licence granted under sub-sec. (2) does not permit the levy of any fee, it shall be granted free of charges; but when such permission is given, a fee not exceeding 15 per cent of the gross income of the owner from the market in the preceding year shall be charged by the Panchayat of Panchayat union council, as the case may be for such licence."
The two decisions were rendered on analogous provisions in the earlier enactments. In 1943-2 Mad LJ 496: (AIR 1944 Mad 85), Leach, C. J. and Lakshmana Rao, J. took the view:
"The section (S. 262-A of the Madras District Municipalities Act) expressly states that a licence-fee not exceeding 15 per cent of the gross income which the owner of the market has received from it in the preceding year shall be charged. The authority is not compelled to charge the maximum of 15 per cent. It may base it s licence-fee on a smaller percentage. The option is with the authority".
The same view is reiterated in 1948-2 Mad LJ 144: (AIR 1949 Mad 136), which is with reference to S. 321(3) of the Madras City Municipal Act. With respect, I am unable to regard these two decisions as laying down good law any longer. Neither of the decisions take note of the distinction between a tax and a fee. If I may say so with respect, they overlooked that, though the statutory provision allowed that local body to levy fee subject to a maximum specified, the levy or increase in the fee should also be justified on the quid pro quo basis, that is to say, that the quantum of fee or increase of fee is correlated to and is proportionate to the cost or increased cost of the special service rendered to the person from whom the licence-fee is exacted. In addition to the test of maximum rate prescribed by the statutory provision, the fee or the increase in fee, in order to be valid, should also answer the test of the correlation and quid pro quo basis.
(6) In these two cases, there is not the slightest doubt that the increase in the licence-fee demanded does not satisfy the correlation and quid pro quo made on the petitioners should be quashed.
(7) The petitions are allowed, but, with no costs.
(8) Petition allowed.