Karnataka High Court
Bangalore Carmel Society And Ors. vs State Of Karnataka And Ors. on 2 April, 2007
Equivalent citations: 2007(5)KARLJ56
ORDER H.V.G. Ramesh, J.
1. In these petitions, petitioners have challenged the amendment of the Karnataka Societies Registration (Amendment) Rules, 2002 as per notification dated 30-3-2002 and have sought for issuance of a writ of certiorari challenging the same as constitutionally impermissible beyond the rule making power as provided under Section 30 of the Karnataka Societies Registration Act, 1960 as unenforceable against the petitioners and to direct the respective respondents-Registrar to refund the filing fees if already paid by such of the petitioners.
2. Petitioners are Societies registered under the Karnataka Societies Registration Act. Section 30 of the Act provides power to make Rules for the State Government by publishing the same in the Official Gazette by way of a notification to carry out the purposes of the Act. In exercise of such powers under Section 30, acting under various provisions of the Act, the State Government can frame Rules to fix such fees and fines for various services rendered or for any such regulatory activities such as for registration of societies, to prefer an appeal before the Appellate Tribunal, for filing of changes in the memorandum of association and also for filing of change of name, rules and regulations and also similarly for filing of the list and balance sheet and income and expenditure account under Section 13 and fines under Sections 13 and 18 and fee for enquiry under Section 25. In these two set of petitions, petitioners have assailed the amended Rule 9 which provides for imposing fine and also for levying and collecting fees and also with respect to filing of income and expenditure account under Section 13 wherein it is stated that for every Rs. 1 lakh of income and expenditure or part thereof, fine of Rs. 100/- is prescribed. Prior to amendment during 2002 as per the provision prevailing during 2000, the unamended rule read:
Filing of the list and balance sheet and income and expenditure account under Section 13:
(a) When the amount of balance sheet and income and expenditure does not exceed Rs. 10 lakhs, for every rupees one lakh or part thereof - Rs. 100.00;
(b) When the amount of balance sheet and income and expenditure exceeds Rs. 10 lakhs, for every rupees one lakh or part thereof - Rs. 1,000/- subject to a maximum of Rs. 5,000/-.
The present amendment of 2002 prescribes the fees for filing of the balance sheet, income and expenditure account on pro rata basis aggrieved by which the petitioners have challenged the vires of the Rule stating that they do not stand to reason and the order of the Single Judge of this Court in W.P. No. 10465 of 2004, dated 14-9-2004 and the order of the Division Bench in W.A. No. 4796 of 2004 and connected matters in a similar context are per incuriam as they have not made reference to the amended provisions of S1. No. 5 of Rule 9 since there is no reference as to the unamended provisions of the Rule in imposing fees for filing of income and expenditure account and thereafter, after amendment in 2002, according to the petitioner, fees has been fixed on pro rata basis of Rs. 100/- on every Rs. 1 lakh of income which is without any basis nor without any statutory authority and ultra vires of the Constitution without there being any rationale and without there being quid pro quo. Even if it is treated as a fees, arbitrarily the rule has been inserted to the disadvantage of many persons like the petitioners and similarly placed persons and without there being any reasonableness in such collection of fees when compared to the unamended provisions which only prescribed Rs. 100/- to a maximum of Rs. 2,500/- in cases of societies registered and run by women and for others, the maximum is Rs. 5,000/- for filing of such income and expenditure statement. According to the petitioners, the unamended Rule 9(5) provided fees of only Rs. 100/- upto Rs. 10 lakhs for any such filing and if it exceeds Rs. 10 lakhs, for every Rs. 1 lakh it is Rs. 1,000/- and subject to maximum of Rs. 5,000/- having regard to the nature of service rendered and also where no such service is rendered except mere filing and accepting the statements. As such, petitioners have challenged the very amended Rule 9(5) of the Rules.
3. It is the submission of the petitioners' Counsel that the judgment rendered by this Court by a Single Judge as well as the Division Bench is without reference to the ratio laid down by the Apex Court in the case of Commissioner of Central Excise, Lucknow, Uttar Pradesh v. Chhata Sugar Co. Limited. and in the case of Calcutta Municipal Corporation and Ors. v. Shrey Mercantile (Private) Limited and Ors. and accordingly submitted that under the Calcutta Municipal Corporation (Taxation) Regulations, 1989 Calcutta Municipal Corporation and Ors. v. Avenue Properties (Private) Limited and Anr. levy of fees on ad valorem basis to augment the revenue was held to be a tax and held to be ultra vires. Similarly, referring to Chhata Sugar Company's case, it is submitted that levy of administrative charges is a tax and not a fee. Referring to the decision in Jindal Stainless Limited and Anr. v. State of Haryana and Ors. it is submitted that compensatory tax is unlike tax and the burden is on the State to justify the same and accordingly argued that in the case on hand, without there being service rendered on quid pro quo basis, collection of fees on mere filing of the income and expenditure statement, as it is obligatory on the part of the petitioner, is without any justification. Accordingly, petitioners' Counsel tried to distinguish the judgment of this Court by a Single Judge as well as the Division Bench and submitted that the Rule is ultra vires the Act as well as the Constitution and such imposition does not attract the definition of 'fees'. Moreover, no such service is being rendered and it is arbitrary in imposing amount by way of tax. Accordingly, it is his argument that it is a clear case for striking down the amended provision which provides of payment of fees of Rs. 100/- on every Rs. 1 lakh income.
4. Per contra, Government Advocate submitted that this Court by a Single Judge as well as in Division Bench has elaborately dealt with the matter and having appreciated the legal position as to the think distinction between fees and tax, held that the judgment rendered by the Apex Court referred to by the Division Bench in the case of State of Himachal Pradesh and Ors. v. Shivalik Agro Poly Products and Ors. wherein it is observed that there is no generic difference between tax and fees and both are compulsory exaction of money by public authorities and submitted that the service is being rendered by way of inspecting the documents submitted and verify the statements filed and for that the fees is charged which cannot be held to be ultra vires the Act or the power of the Amendment provided under Section 13 of the Karnataka Societies Registration Act, 1960.
5. Taking me through the detail text of the judgment of the Division Bench, he submitted that there is no unreasonableness in the order rather, on elaborate discussion, the Division Bench has appreciated the factual position and arrived at a conclusion and accordingly submitted that these set of judgments are also referred by this Court in Single Bench as well as Division Bench and in similar context, this Court cannot take a different view and the Court is bound to follow the same.
6. In reply to the argument advanced by the Government Advocate, petitioners' Counsel submitted that one of the strange reason assigned by the Division Bench in its judgment is that since the very Rule has not been challenged during 2000, the petitioners are now precluded from challenging the amended provision and no cogent reasons are assigned. Moreover, the judgment of the Division Bench as well as of the Single Judge is distinguishable as they have not made reference to the amended Table of 2002, under Rule 9 of the Rules. Accordingly, it is submitted that the Act of the Government in imposing fees and collecting the same without there being any service rendered is ultra vires the Act as well as the Constitution.
7. In the light of the arguments advanced, let me consider whether the amended provision S1. No. 5 of Rule 9 of the Table is ultra vires the Act and the Constitution.
8. It is well-settled that the tax is a direct exaction of the amount by a public authority for public purpose enforceable under law and it is not necessarily for payment for service rendered. In case of fees, necessarily it should have an element of service on quid pro quo basis to impose such fees for the purpose which is related in the context.
9. On going through Rule 9 and the clauses framed therein and the Table, it is seen after the amendment of 2002, some amounts are prescribed in the form of fees/fines, etc. Among other things, for registration of the Memorandum of Association under Section 8, if the Society is registered within Bangalore, the fees is prescribed as Rs. 1,000/- and similarly as noted earlier, if the appeal is preferred as per Section 8(3) and Section 9, and as per Section 10, the fees prescribed is Rs. 500/- and it is so even for filing of change of name. The 5th such clause is the filing of income and expenditure account acting under Section 13 which makes the Rule obligatory on the part of the petitioners to invariably file the income and expenditure account and in turn, as per the Rule, the Society concerned has to pay the fees fixed at Rs. 100/- for every Rs. 1 lakh of the amount of income and expenditure or part thereof. Thereby it indicates on such earning of every Rs. 1 lakh, petitioners have to pay Rs. 100/-. Prior to the amendment it appears the Rule provided that when the amount of income and expenditure does not exceed Rs. 10 lakhs, for every Rs. 1 lakh or part thereof, they were to pay Rs. 100/- and according to the petitioners, after the amendment, for every such Rs. 1 lakh of income and expenditure account, without verifying the petitioners have to pay several thousands of rupees i.e., on every Rs. 1 lakh, Rs. 100/- is the fees to be paid without there being an upper limit. Further, according to the petitioners, the earlier rules existing prior to amendment provided only for the maximum of Rs. 2,000/- in case of societies run by women towards filing of balance sheet whereas in case of others, it was Rs. 5,000/-.
10. What is the duty/service involved in respect of filing of income and expenditure statement on the Department or its agencies? As is submitted by the Counsel for the petitioners, it is only a mode/means to collect money and to swindle money from the societies by the Government based on the income without actually there being any service rendered in this regard. The minimum fees prescribed was Rs. 100/- with a maximum of Rs. 2,000/- in case of societies run by women and minimum of Rs. 100/- and maximum of Rs. 5,000/- in case of other societies.
11. The Division Bench of this Court was of the view that a levy in the nature of fees does not cease to be of that character merely because there is an element of compulsion not it postulates fees. It was also of the view that it is also in accordance with law with an element of quid pro quo in the strict sense and is not always sine quo non with that of a fee. Of course, while dealing with the matter, the Division Bench was of the view that there is no allegation that there was any unauthorised expenditure by the Registrar of Societies to perform the duties and functions under the Karnataka Societies Registration Act. It has noted the grievance of the appellants therein with respect to item at S1. No. 5 of the Table appended to Rule 9 that as per Section 13 of the Act, it is only to receive such statements and to keep them in the file as part of the record and no other action is required to be taken with reference to the document in question. Further, it has also noted the argument of the appellants therein to the effect that what is sought to be levied as fees by the impugned amendment to Rule 9 is not related to tax and there is absolutely no nexus between the service rendered and the fee levied.
12. On perusal of the judgment of the Division Bench it is seen, the Division Bench has also taken note of the amended Rule 9 and has held that the argument of the petitioner is dislodged and cannot be held to be per incuriam. Might be some of the judgments rendered by the Apex Court in Chhata Sugar, Jindal Stainless and Calcutta Municipal Corporation's cases have been taken into consideration wherein in totality the ratio laid down is the State only should levy tax under the authority of the Statute and in case of fees, it is charged on quid pro quo basis on the services as being rendered. Of course of late while making distinction between fees and tax, the Apex Court has held that there is a thin line of distinction between fees and tax.
13. In the decision relied upon by the Government Advocate in P.M. Ashwathanarayana Setty and Ors. v. State of Karnataka and Ors. with reference to Karnataka Court Fees and Suits Valuation Act, 1958, the Apex Court has held that there is a broad and general correlation between the amount so raised and the expenditure involved in providing service, the impost would partake the character of a 'fee' notwithstanding the circumstance that the identity of the amount so raised is not always kept distinguished but is merged in the general revenues of the State. The correlationship between the amount raised through fees and the expenses involved in providing the service need not be examined with a view to ascertaining any accurate, arithmetical equivalence or precision in correlation. It would be sufficient that there is broad and general correlation. Further, it is also held therein the fee loses its character as such, if it is intended to and does go to enrich the general revenue of the State to be applied for general purpose of Government.
In Chhata Sugar's case cited supra, the Apex Court has held:
The respondent-Company was engaged in the manufacture and clearance of molasses falling under Tariff Item 1703.10. It collected administrative charges under Section 8(5) of the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 (for short, 'the UP Act') on behalf of the State Government form the buyers/allottees, on sale of molasses. The question was whether the said administrative charges were in the nature of a tax and therefore, excludible in the value of molasses in terms of Section 4(4)(d)(ii), Central Excise Act, 1944 (for short, 'the Act') or were in the nature of a fee and therefore includible. CEGAT held it to be a tax and not includible in the value of molasses. The revenue then filed the instant appeals under Section 35-L of the Central Excise Act.
14. The tax is being capable of being passed on to the consumer or buyer whereas a fee is a counter payment by the buyer who receives the benefit of the service for which he is charged and such fees are not capable of being passed as fees to the consumer or buyer. It is further held that whether the levy is a tax or fee is that while tax is a compulsory exaction, fees relates to the principle of quid pro quo. Referring to the case on hand therein, the Apex Court while dealing with the provisions of the Central Excise Act, 1944 and other related enactments, was of the view that there is no element of quid pro quo as far as administrative charges in the hands of sugar factory and held Section 8(4) of the UP Sheera Niyantran Adhiniyam under the UP Act. The requirement of other sugar factory to deposit administrative charges in molasses sold separate before actual delivery to the distillery which brings in the principles of compulsory exaction and held that administrative charge under the UP Act is a tax and not a fee.
15. In Calcutta Municipal Corporation's case, the Apex Court has held that the mutation fees provided under the Calcutta Municipal Corporation provides for an ad valorem fees in the form of a tax and is also arbitrary and discriminatory and disproportionate to the so-called service as such, it was held violative of Article 14 of the Constitution.
16. Thus, according to the petitioners, the view taken by the Division Bench of this Court as well as by the learned Single Judge of this Court is without reference to the judgment rendered by the Apex Court in the above two decisions and the nature of the fees that is being charged is in the form of exactitude and the amendment provides for collection of fees without there being service rendered.
17. The argument of the petitioner's Counsel is that, even in the case on hand also, on pro rata basis for filing of the income and expenditure statement for every Rs. 1 lakhs, Rs. 100/- is charged as fees without there being any upper limit being fixed and it is almost like levy of ad valorem basis and it is more in the nature of tax and disproportionate to the so-called service rendered.
18. Of course this Court in Division Bench, to avoid such controversy, to make out a case to bring within the purview of reasonableness, relied upon the decision in M/s. Shivalik Agro Ploy Products case, to stand by that there is no generic difference between tax and fee which are both compulsory exaction of money by public authorities. The correlation between levy of fees and service rendered should be one of general character and not of mathematical exactitude.... Levy will not fall only on the ground that the measure of its distribution on the person or incidence is disproportionate to the actual service rendered by it. The true test being the comprehensive levy of the value of the totality of the services set-off against the totality of the receipts.
19. Another line of argument advanced on behalf of the petitioners' Counsel is that there is no such labour involved in mere acceptance of the statement of income and expenditure rather, it is an obligation on the part of the petitioners to file such statement as per Section 13 of the Act and the inspection fee is specifically provided under Section 25 and that itself provides for such charges. Such being the case, question of charging once again for mere acceptance of the income and expenditure statement is without any basis and without partaking the character of service being rendered.
20. Might be in that context, the authorities would be in a better position to explain than the Legislators as to what is the service that would be rendered by them. Mere common sense argument would be that apart from inspecting the accounts or records of the Societies under Section 25 of the Act, specifically with reference to Section 13 wherein fee is being charged for filing of the statement of income and expenditure, it may also involve labour of verifying such a statement by the authority to satisfy itself whether there is irregularity in the statement of such societies or the amount utilised by the societies by way of expenditure or to seek clarification after verification in the form of a formal enquiry also in this regard specifically apart from the provisions provided under Sections 25 and 27-A for the purpose of providing even for Administrator on such appointment or for charging even for inspection for visiting the societies and to verify the records or to hold enquiry or incur the expenditure thereon.
21. Of course it is seen specifically it is stated in S1. No. 5 of Rule 9 as to what is the real service that is being rendered at the time of filing the income and expenditure statement but, there may also be a duty cast on the authorities to verify such statement. The rule then prevailing i.e., prior to amendment of 2002 was having upper limit and it was permissible for the authorities to collect the fees on every Rs. 1 lakh, a sum of Rs. 100/- and maximum of Rs. 1,000/- and minimum of Rs. 2,000/-in cases of societies formed by women and maximum of Rs. 5,000/- in case of societies formed by other persons. But, by amendment, that maximum limit has been removed thereby the societies which are earning more have to pay on pro rata basis and in this context, there appears to be excessive charge by way of fees depending on the income. A three Judges Bench of the Apex Court has held that correlation between the amount raised through fees and the expenditure involved in providing service need not be examined with a view to ascertain accurate arithmetical equivalence or precision but, it would be sufficient that there is a broad and general correlation. In that context, fees so levied cannot be exactly said that it is intended to enrich the general revenue of the State. Might be that such statement would run pages together where there is huge transaction involved reflecting in detail the income and expenditure which requires proper verification, application of mind and labour to find out any such irregularities and to maintain proper control over the audit and accounts, such exercise has to be done by the authorities and in this context, in the interest of the State as well as in the interest of the society concerned, if such proper verification is made on such statement of income and expenditure being submitted, and fees levied therein on pro rata basis, it cannot either be held arbitrary or unreasonable.
For the foregoing reasons, I do not find any merit in the argument of the petitioners' Counsel to differ from the earlier judgment rendered by this Court by the learned Single Judge as well as by the Division Bench. Accordingly, these two petitions are dismissed. No costs.