Full Judgment Text
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PETITIONER:
CITY CORPORATION OF CALICUT
Vs.
RESPONDENT:
THACHAMBALATH SADALINAN & ORS.
DATE OF JUDGMENT26/02/1985
BENCH:
DESAI, D.A.
BENCH:
DESAI, D.A.
SEN, AMARENDRA NATH (J)
CITATION:
1985 AIR 756 1985 SCR (2)1008
1985 SCC (2) 112 1985 SCALE (1)294
CITATOR INFO :
R 1989 SC 100 (26)
R 1989 SC 317 (34)
ACT:
Constitution of India 1950, Article 265
Tax and fee-Quid pro quo-Whether an essential element for
fee
Kerala Municipal Corporation Act 1961 (Act 30 of 1961)
Section 299 & Schedule IV-Use of premises and land for
soaking Coconut husks-Levy of licence fee by Corporation-
Whether valid.
HEADNOTE:
The appellant-Corporation levied licence fee for use
of premises and land for soaking coconut husks under
Schedule IV of the Calicut City Municipal Act 1961,
Subsequently restyled as the Kerala Municipal Corporation
Act 1961.
The respondents were carrying on the trade of soaking
coconut husks, and as they had not taken out the requisite
licence, the Commissioner of the Corporation issued notices
to show cause why they should not be prosecuted. The
respondents challenged the validity and legality of the
notices in Writ Petitions to the High Court, contending that
if the licence fee is levied as a fee, no service is
rendered or special advantage or favour is conferred by the
Corporation for collecting such fee and that there is DO
quid pro quo and that the relevant provisions of the Act do
not enable the Corporation to levy such a fee. It was
further contended that if the levy is treated is a tax, it
is beyond the taxing powers of the Corporation. The
Corporation contested the Writ Petitions justifying the fee
as licence fee and that it had the power to levy a tax of
the nature levied by it.
A Single Judge of the High Court allowed the Writ
Petitions, and quashed the impugned licence fee as not legal
in the absence of conferment of special benefits in respect
of persons who soak coconut husks. It was further held that
the power to levy the various taxes conferred on the
Corporation under Chapter V of the 1961 Act did not
comprehend the impugned levy and consequently the tax was
not valid and legal. The writ appeals of the Corporation
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were dismissed.
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Allowing the Appeals, this Court
^
HELD: By numerous recent decisions of this Court it is
well-settled that the traditional concept in a fee of quid
pro quo is undergoing a transformation and that though the
fee must have relation to the services rendered or the
advantages conferred, such relation need not be direct, a
mere casual relation may be enough. It is not necessary to
establish that those who pay the fee must receive direct
benefit of the services tendered for which the fee is being
paid. If one who is liable to pay receives general benefit
from the authority levying the fee the element of service
required for collecting fee is satisfied. It is not
necessary that the persons liable to pay must receive
some special benefit or advantage for payment of the fee.
[1012E-F]
In the instant case, it is incontrovertible that the
appellant-Corporation is rendering numerous services to the
persons within its areas of operation and that therefore the
levy of the licence fee as fee is fully justified. Soaking
coconut husks emit foul odour and contaminates environment.
The Corporation by rendering scavanging services, carrying
on operations for cleanliness of the city, to make
habitation tolerable is rendering general service of which
amongst others respondents are beneficiaries. a The
decisions of the Single Judge and of the Division Bench are
set aside and the Writ Petitions of the respondents are
dismissed. [1012 G-H]
Municipal Corporation of Delhi & Ors. v. Mohd. Yasin
JUDGMENT:
Others v. State of Andhra Pradesh and Others (1983) 4 SCC
353 & M/s Amarnath Om Prakash and Others v. State of Punjab
& Ors. (1985) I SCC 345 referred to.
&
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1 3 &
14 Of 1971
From the Judgment & Order dated 2. 7. 68 of the Kerala
High Court at Ernakulam in Writ Petition NOS. 107 & 108/68.
F
A. S. Nabiar and P. Parmeswaran, for the Appellant. N.
Sudhakaran. P. K. Pallai, V. J. Francis, N. M. Popli A. C.
Pudissary for the respondents.
The Judgment of the Court was delivered by.
DESAI, J. The respondents in these two appeals
filed Original Petitions Nos. 2892-3073 of 1965 challenging
the validity of the licence fee levied by the appellant ’The
City Corporation of Calicut’ to be paid for use of the land
or premises for soaking of coconut husks. The appellant
Corporation by its resolution dated January 25. 1963 levied
licence fees in respect of various items set out in
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Schedule IV of the Calicut City Municipal Act, 190l
subsequently restyled as Kerala Municipal Corporation Act,
1964 ( Corporation act’ for short) including for use of
premises and land for soaking coconut husks. The respondents
are admittedly carrying on the trade of soaking coconut
husks and they had not taken out a licence for carrying on
the trade. The Commissioner of the appellant Corporation
issued a notice to each of the respondents calling upon him
to show cause why within three days of the receipt of the
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notice, the respondents should not be prosecuted for using
premises for soaking coconut husks without obtaining a
licence as required by law. The respondents challenged the
validity and legality of the afore-mentioned notices issued
by the Corporation and served upon them in the afore-
mentioned two writ petitions on diverse grounds, inter-alia
contending that if the licence fee Is levied as a fee, no
service is rendered or special advantage or favour is
conferred by the Corporation on the respondents for
collecting such fee and that there is no quid pro quo and
that the relevant provisions of the Act do not enable the
Corporation to levy such a fee. Alternatively, it was
contended that if it is levied as a tax, it is beyond the
taxing powers of the Corporation.
The Corporation filed its counter-affidavit and sought
to justify the fee as a licence fee or in the alternative it
was contended that the Corporation had the power to levy a
tax of the nature levied by it.
Both the petitions came up before a learned Single
Judge of the high Court who held that the levy of the
impugned licence fee is not legal in the absence of
conferment of special benefit on the petitioners and other
persons who soak coconut husks. The alternative submission
that the Corporation had the power to levy it as a tax was
negatived observing that the power to levy the various taxes
conferred on the Corporation under Chapter V of the 1964 Act
does not comprehend the impugned levy and accordingly held
that as a tax it was not valid and legal. Accordingly both
the writ petitions were allowed and the impugned notices
were quashed. The Corporation after unsuccessful Writ
Appeals Nos. 107-108 of l967 filed these Appeals by special
leave.
Mr. A. S. Nambiar, learned counsel who appeared for
the appellant-Corporation urged that the levy of licence fee
as fee is fully justified and the High Court was In error in
rejecting it as
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such on the ground that the respondents do not enjoy any
special A service or benefit for paying the fees on the
traditional view of law more or less than prevailing that
for a fee there must necessarily be quid pro quo. He
submitted that the trend revealed by recent decisions of
this Court would show that traditional view about fee has
undergone a sea change and that the demarcating line between
tax and fee has become so blurred as to become almost
invisible. It w-s alternatively submitted that even
according to traditional view the Corporation has placed
enough evidence on record to show that the respondents have
been and are receiving special service or benefit in return
for the fees levied and paid It is not necessary to examine
the alternative submission save saying in passing that the
respondents do enjoy certain benefits from the functions
discharged by the Corporation. The first limb of the
contention must prevail in view. of the three resent
decisions of this Court.
in Municipal Corporation of Delhi & Ors. v. Mohd Yasin
& Anr.1) after a review of the earlier decisions it was
observed as under:
"What do we learn from these precedents? We
learn that there is no generic difference between a tax
and a fee, though broadly a tax is a compulsory
exaction as part of a common burden, without promise of
any special advantages to classes of tax payers whereas
a fee is a payment for services rendered, benefit
provided or privilege conferred. Compulsion is not the
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hallmark of the distinction between a tax and a fee.
That the money collected does not go into a separate
fund but goes into the consolidated fund does not also
necessarily make a levy a tax. Though a fee must have
relation to the services rendered, or the advantages
conferred, such relation need not be direct, a mere
casual relation may be enough. Further, neither the
incidence Or the fee nor the service rendered need be
uniform. that others besides those paying the fees are
also benefited does not detract from the character of
the fee. In fact, the special benefit or advantage to
the payers of the fees may even be secondary as
compared with the primary motive of regulation in the
public interest. Nor is the court to assume the role of
a cost accountant. It is neither necessary nor
expedient to weigh too meticulously the coat of the
services rendered etc. against the amount of fees
collected so as to evenly balance the two. A broad co-
relationship is all
(1) [1983] 3 S. C. 229.
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that is necessary quid pro quo in the strict
sense is not the one and only true index of a fee; nor
is it necessarily absent in a tax This view was
reaffirmed in Sreenivasa General Traders and Others v.
State of Andhra Pradesh and Others(l) observing that it
is increasingly realized that the element of quid pro
quo in the strict sense is not always a sine qua non
for a fee. However, co-relationship between the levy
and the services rendered or expected is one of general
character and not of mathematical exactitude. All that
is necessary is that there should be a reasonable co-
relationship between the levy of the fee and the
services rendered.
In a very recent decision in M/s Amarnath Om Prakash
and Others v. State of Punjab & Ors. (2) the Court
reiterated the principle laid down in Mohd. Yasin’s case. It
is thus well-settled by numerous recent decisions of this
Court that the traditional concept in a fee of quid pro quo
is under going a transformation and that though the fee must
have relation to the services rendered, or the advantages
conferred, such relation need not be direct, a mere casual
relation may be enough. It is not necessary to establish
that those who pay the fee must receive direct benefit of
the services rendered for which the fee is being paid. If
one who is liable to pay receives general benefit from the
authority levying the fee the element of service required
for collecting fee is satisfied It is not necessary that the
person liable to pay must receive some special benefit or
advantage for payment of the fee.
Applying the ratio of these decisions it is
incontrovertible that the appellant-corporation is rendering
numerous services to the persons within its areas of
operation and that therefore the levy of the licence fee as
fee is fully justified Soaking coconut husks emit foul odour
and contaminates environment. The Corporation by rendering
scavenging services, carrying on operations for cleanliness
of city, to make habitation tolerable is rendering general
service of which amongst others appellants are
beneficiaries. Levy as a fee is thus justified.
(1) [1983] 4 S.C.C. 353.
(2) [1985] I S.C.C. 345.
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In this view of the matter it is not necessary to
consider the A alternative submission that the levy as a tax
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is legal.
Accordingly, both the appeals are allowed and the
decision of the learned Single Judge as well as the decision
of the Division Bench in writ appeals are set aside and the
writ petitions filed by the petitioners are dismissed with
no order as to costs.
N. V. K. Appeal allowed.
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