Gauhati High Court
Assam Medicine Dealers Association & ... vs Guwahati Municipal Corporation & 2 Ors on 27 November, 2017
Author: Suman Shyam
Bench: Suman Shyam
IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM
AND ARUNACHAL PRADESH)
WP(C) 1960/2016
1. Assam Medicine Dealers Association, An Association
registered under the provisions of the Societies
Registration Act, 1860 and having its principal place of
business at Bishop Plaza, Col. J. Ali Road, Panbazar,
Guwahati-781001, in the District of Kamrup (Metro),
Assam. Represented by its Secretary Jitu Mani Barman,
a resident of Bani Nagar, Rehabari, Guwahati-781008, in
the District of Kamrup (Metro), Assam.
2. Md. Abed Ullah, son of Late Safi Ullah, resident of Col. J.
Ali Road, Lakhtokia, Guwahati-781001, in the District of
Kamrup (metro), Assam and carrying on the business in
the name and style of a firm namely 'Bishop Drug
Distributors', having its principal place of business at Col.
J. Ali Road, Lakhtokia, Guwahati-781001.
...........Petitioners
-Versus -
1. Guwahati Municipal Corporation, A corporation
established under the provisions of the Gauhati Municipal
Corporation Act of 1971 and has its office at Panbazar,
Guwahati-781001, in the District of Kamrup (Metro),
Assam.
2. The Commissioner, Guwahati Municipal Corporation,
Panbazar, Guwahati-781001 in the District of Kamrup
(Metro), Assam.
3. State of Assam, represented by the Commissioner and
Secretary to the Government of Assam, Guwahati
Development Department, Dispur, Guwahati-781006.
..........R espondents
WP(C) 1960/16 & 5160/2017- CAV Page 1 of 24
For the Petitioners : Mr. D. Baruah, Advocate.
For the Respondents : Mr. D. Saikia, Sr. AAG, Assam,
Mr. S.Bora , SC, GMC.
WP(C) 5160/2017
1. Kamrup Chambers of Commerce, an association situated in Kamrup Chamber Road, Fanzy Bazar, Guwahati-
781001 (Assam.
2. Ashok Kumar Killa, son of Late B.P. Killa, resident of Satya Narayan Road, Guwahati-781001, in the District of Kamrup (metro), Assam and carrying on the business in the name and style of a firm namely 'Shri Gopal Bhandar', having its principal place of business at Satya Narayan Road, Guwahati-781001.
...........Petitioners
-Versus -
4. Guwahati Municipal Corporation, A corporation established under the provisions of the Gauhati Municipal Corporation Act of 1971 and has its office at Paltanbazar, Guwahati-781001, in the District of Kamrup (Metro), Assam.
5. The Commissioner, Guwahati Municipal Corporation, Panbazar, Guwahati-781001 in the District of Kamrup (Metro), Assam.
6. State of Assam, represented by the Commissioner and Secretary to the Government of Assam, Guwahati Development Department, Dispur, Guwahati-781006.
..........R espondents
For the Petitioners : Mr.B. Deka, Adv.
For the Respondents : Mr. D. Saikia, Sr. AAG, Assam,
WP(C) 1960/16 & 5160/2017- CAV Page 2 of 24
BEFORE
THE HON'BLE MR. JUSTICE SUMAN SHYAM
Date of hearing : 29/08/2017, 07/09/2017,
26/10/2017
Date of Judgement : 27/11/2017
JUDGEMENT AND ORDER (CAV)
Heard Mr. D. Baruah, learned counsel appearing for the petitioners in WP(C) 1960/2016 as well as Mr. B. Deka, learned counsel appearing for the petitioners in WP(C) 5160/2017. I have also heard Mr. D. Saikia, learned Senior Additional Advocate General, Assam, assisted by Mr. S. Bora, appearing for the State.
2. In both these writ petitions, the notification dated 27/04/2015, by means of which the Fourth Schedule of the Gauhati Municipal Corporation Act, 1971 (hereinafter referred to as the Act of 1971) , was amended thereby enhancing the fee payable for obtaining trade license as well as notifying the different classes of traders and there liability to pay trade license fee, has been put to challenge. Since both these writ petitions are founded on identical facts, raising common questions of law, I propose to dispose of these writ petitions by this common order.
3. The writ Petitioner No.1 in WP(C) 1960/2016 is a conglomeration of various medicine dealers which is a society registered under the provisions of Societies Registration Act, 1860. The petitioner No. 2 is one of the members of the Kamrup (Metro) District Unit of the Assam Medicine Dealers Association and claims to be affected by the impugned notification.
4. The writ Petitioner No.1 in WP(C) 5160/2017 is also a conglomeration of various traders operating in the district of Kamrup and is an association having WP(C) 1960/16 & 5160/2017- CAV Page 3 of 24 registration under the Societies Registration Act, 1860. The Petitioner No. 2 is one of the members of Kamrup (Metro) District wing of the petitioner No1 Association who claims to be affected by the impugned notification.
5. As per the provision of Section 180 of the Act of 1971, every person who carries on with business within the city of Guwahati either by himself or by an agent or a representative in all the professions, trades or callings, as indicated in the Fourth Schedule of the Act, is required to annually take out a license before the 1st day of April in each year and pay such fee as is mentioned in that behalf in the said schedule. Since the members of the writ petitioner associations in both these cases are carrying on activities included in the Fourth Schedule of the Act of 1971 they are required to obtain trade license from the Gauhati Municipal Corporation (GMC) authorities under section 180(1) by paying license fee.
6. Section 180(5) of the Act of 1971 authorises the GMC to increase the rates specified in the Schedule by issuing notification in the Official Gazette. In exercise of the power conferred under section 180(5) of the Act of 1971 , the GMC had issued the impugned notification dated 27/04/2015 modifying the Fourth Schedule inter-alia enhancing the trade license fee for the Class-I category traders from Rs. 7500/- to Rs. 8650/-. Aggrieved by the notification dated 27/04/2015, the petitioners, who fall under the class-I category, are before this Court contending that the fee levied under section 180(5) of the Act of 1971 is a tax and not a fee and, therefore, the amount sought to be realised from the Class-I category being far in excess of the constitutional limit imposed by Article 276(2), is illegal and is liable to be declared so. It is also the case of the writ petitioners that as per Section 180(4) of the Act of 1971, the class of persons and their liability to take out a license is required to be determined by framing rules. Since the rules under section 180(4) are yet to be framed, hence, no amount under section 180(1) can either be levied or realised by the corporation from the traders. WP(C) 1960/16 & 5160/2017- CAV Page 4 of 24
7. Leading the arguments on behalf of the writ petitioners, Mr.D. Baruah, submits that issuance of a trade license does not envisage any "quid-pro-quo" and therefore, the levy imposed by the impugned notification dated 27/04/2015 is not a fee but a tax for all practical purposes. The learned counsel submits that the power to levy tax on profession, trades, callings and employment is relatable to Entry 60 of List-II of the Constitution of India and the same would be subject to the limitation prescribed under Article 276(2) which provides that taxes on profession, trades, callings and employment raised by the State Legislature for the benefit of the State or a Municipality or a District Board or Local Board or other local authority shall not exceed Rs. 2500/- per annum. The amount of Rs 8650/- being far in excess of the limit impose under Art. 276(2) the same was unconstitutional.
8. Mr. Baruah further submits that the provisions contained in Part-IV of the Act of 1971 contains Chapter XI to XXI, which specifically deals with various forms of taxation whereas the provisions contained in Chapter XXII to XXVII deals with the power of the Corporation to regulate and exercise police powers conferred upon it. Since, section 180 finds place in Chapter XVII included in Part-VII of the Act of 1971, the levy imposed under the said provision, according to Mr.Baruah, must necessarily be treated as a tax rather than a fee. To buttress his aforesaid argument, Mr. Baruah has also referred to Section 144(f) of the Act of 1971 to contend that having regard to the scheme of the Act, it is evident that the levy imposed under Section 180 (1) is nothing but a tax on profession, trade and callings and as such, the amount levied by the impugned notification dated 27/04/2015 is clearly hit by Article 276(2) of the Constitution.
9. Mr. Baruah has placed heavy reliance on the decision of the Supreme Court in the case of Karnataka Bank Ltd. Vs. State of Andhra Pradesh and others reported in (2008) 2 SCC 254 to contend that the power of the State Legislature to make a law to WP(C) 1960/16 & 5160/2017- CAV Page 5 of 24 levy and collect professional tax is made subject to the restrictions provided under Article 276(2) of the Constitution. The learned counsel submits that tax is levied as a common burden which does not involved a "quid-pro-quo" whereas a fee is for payment of a specific benefit, privilege or service. Therefore, submits Mr. Baruah, in order to qualify as a fee, the impugned levy must have the characteristics of a service charge which is absent in the present case. The learned counsel has further argued that a levy need not be treated as a tax if it is in exercise of police powers and is regulatory in nature but in the present case, it is the pleaded stand of the Corporation that the enhancement of the license fee has been triggered by the necessity of the Corporation to augment its revenue collection for the purpose of paying the salary and wages, cost of fuel and machinery etc. utilised by the Corporation for running the day to day affairs.
10. Mr. Baruah has also argued that even assuming that the levy was not a tax but a fee, even in that case the impugned notification dated 27/04/2015 is hit by Section 180(4) of the Act of 1971, inasmuch as, the Corporation was not competent to issue a notification under Section 180(5) of the Act of 1971 without framing rules prescribing the classes of traders and their liability. Under the circumstances, submits Mr. Baruah, the impugned notification is liable to be struck down as being in contravention of the provisions of Section 180(4) of the Act of 1971 as well as the constitutional rights guaranteed to the members of the petitioner association. In support of his aforesaid arguments, Mr. Baruah has relied upon to the following decisions :-
I) (1977) 2 SCC 578 (Shri Rangaswami, the Textile Commissioner and others Vs. The Sagar Textile Mills (P) Ltd.
II) (1999) 2 SCC 274 (Secunderabad Hyderabad Hotel Owners' Association and others Vs. Hyderabad Municipal Corporation, Hyderabad and another).
III) (2004) 6 SCC 254 (Kusum Ingots & Alloys Ltd. Vs. Union of India and another).WP(C) 1960/16 & 5160/2017- CAV Page 6 of 24
IV) (2005) 4 SCC 245 (Calcutta Municipal Corporation and others Vs. Shrey Mercantile (P) Ltd. and others).
V) (2008) 2 SCC 254 (Karnataka Bank Ltd. Vs. State of Andhra Pradesh and others).
VI) (2011) 5 SCC 360 (Consumer Online Foundation and others Vs. Union of India and others).
VII) (2015) 13 SCC 748 (State of Tamil Nadu and another Vs. TVL. South Indian Sugar Mills Association and others).
11. Mr. B. Deka, learned counsel appearing for the writ petitioners in W.P.(c) 5160 / 2017 has adopted the arguments advanced by Mr. D. Baruah in support of his case.
12. Mr. D. Saikia, learned Senior Additional Advocate General, Assam, on the other hand, contends that the impugned levy is based on amendments carried out to the Fourth Schedule of the Act of 1971, which forms a part of the Act. According to Mr Saikia, in the absence of a challenge made to the amended Fourth Schedule, both the writ petitions are not maintainable in the facts and circumstances of the case and are liable to be dismissed on such count alone.
13. Referring to the various provisions of the Act of 1971, Mr. Saikia submits that the levy against the trade license fee is not a tax but a fee realised by the Corporation from the specific classes of traders in lieu of services rendered to them such as cleaning of garbage, maintenance of drains and sewerage etc. The learned Additional AG submits that different categories of traders engage themselves in different kinds of business activities and as per section 180(1) of the Act of 1971, the GMC authorities issue trade license to regulate such activities. Mr. Saikia submits that the waste/ garbage generated by a particular class of trader is also specific to the nature of their business / trade and that is the reason why the traders have been classified into WP(C) 1960/16 & 5160/2017- CAV Page 7 of 24 different classes by fixing their liabilities since these operators would require need based service to be provided by the GMC.
14. By referring to the decision of the Supreme Court rendered in the case of Secunderabad Hyderabad Hotel Owners' Association and others Vs. Hyderabad Municipal Corporation, Hyderabad and another reported in (1999) 2 SCC 274, Mr. Saikia submits that law is well settled that a license fee can either be regulatory or compensatory in nature and a license fee would be regulatory when the purpose for which the license is issued is to regulate and control such activity. In the present case, submits Mr. Saikia, the basic purpose of issuing a trade license is to regulate the business activities within the city of Guwahati so as to ensure that the citizens are not adversely affected by health hazard and nuisance by improper carrying of trade etc and that is the reason why a trade license is necessary so as to ensure that the manner in which the business is being carried out is in accordance with Rules and the safety guidelines. As such, submits Mr. Saikia, even if it is assumed that there is no element of quid-pro-quo in the form of services rendered to the traders, yet, merely due to the regulatory nature of the trade license, the fee realised for the purpose, cannot be termed as a tax.
15. Responding to the plea taken by the petitioners on the ground of non- conformity with Section 180(4) of the Act of 1971, Mr. Saikia submits that the notification issued under Section 180(5) of the Act lays down in clear terms the classes of traders and their liabilities and hence, the matters covered under rules to be framed under section 180(4) of the Act of 1971 is adequately complemented by the Fourth Schedule thereby making Act workable. As such, submits Mr. Saikia, mere non-framing of the Rules would not invalidate the notification dated 27/04/2015. In support of his aforementioned argument, Mr. Saikia has relied upon a decision of the Supreme Court WP(C) 1960/16 & 5160/2017- CAV Page 8 of 24 rendered in the case of Jantia Hill Truck Owners Association Vs. Sahilang Area Coal Dealer and Truck Owners Association and Ors. reported in (2009) 8 SCC 492.
16. I have considered the rival submissions advanced at the bar and have also gone through the materials placed on record. After hearing the learned counsel for the parties, it is evident that the notification dated 27/04/2015 has been challenged basically on two grounds. Firstly, that the same is in conflict with Article 276(2) of the Constitution of India and secondly that in the absence of any rules framed under Section 180(4) of the Act of 1971, the GMC would not have the authority to realise license fee from any of the traders.
17. In order to answer the first question it will be necessary to determine as to whether the impugned levy is a tax or a fee and whether the fee levied in respect of the Class-I traders offends Article 276(2) of the Constitution. For the said purpose, a reference to some of the relevant provisions of the Act of 1971 would be necessary.
18. Section 3(78) of the Act of 1971 defines "Tax" according to which, tax includes any toll, rate, cess or even other impost liveable under the Act of 1971.
19. Section 110 of the Act defines Municipal Fund. According section 110 all monies realised or realisable by the Corporation under the Act and all monies otherwise received by the Corporation shall be credited to fund which shall be called "Municipal Fund" which shall be held by the Corporation in trust for the purpose of the Act.
20. Section 180 (1) of the Act provides that any person or his representative who desires to carry out any of the activities mentioned therein must obtain a trade license by paying fee. Section 180 is reproduced herein below for ready reference :-
"180. Licence to be taken out annually.- (1) Every person who exercises or carries in the city, either by himself or by an agent or representative, any of the professions, trades or callings indicated in the Fourth Schedule, shall annually take out a license before the first day of April in each year or within one month WP(C) 1960/16 & 5160/2017- CAV Page 9 of 24 of his taking up the profession, trade or calling, as the case may be, and pay for the same, such fee as is mentioned in that behalf in the schedule.
Provided also that the grant of such a license shall not be deemed to affect the liability of the licensee to take out a license under any other section of this Act:
Provided also that the Commissioner may, --
(a) remit or refund any portion of the fee so payable in respect of the exercise or carrying on of any profession, trade or calling if he is satisfied that the profession, trade or calling has not been exercised or carried on for more than six consecutive months; or
(b) exempt a person, who in the opinion of the Commissioner is unable to pay the fee due for a license, from liability to take out such license, or declare that he shall be entitled to take out a license under a lower class than that under which he is chargeable according to the said schedule;
(c) in any other case exempt any person from liability to take out a license or declare that any person shall be entitled to take out a license under a lower class than before.
(2) The Commissioner may at any time grant a license for any previous year for which no license has been taken out, on payment of the fee which would have been payable therefore in the first instance:
Provided that the production of such a licence shall not afford a valid defence if the licencee is prosecuted for failing to take a licence within the time required by this Act.
(3) Power of Commissioner to call for list of persons. - The Commissioner may, by written notice, require the owner or occupier of any building or place of business to forward to him within seven days a list, signed by such owner or occupier of the names of all persons exercising or carrying on any professions, trades or calling therein, and of their respective professions, trades, and callings.WP(C) 1960/16 & 5160/2017- CAV Page 10 of 24
(4) Liability and class how to be determined. - The liability of any person to take out a licence and the class under which he shall be deemed bound to take out a licence, shall be determined in accordance with the rules that may be made in this behalf by the Corporation.
(5) The Corporation may, by notification in the Official Gazette, from time to time, increase the rates specified in the Schedule."
21. Section 144 of the Act of 1971, included in Chapter XI deals with "Taxation". Section 144 is quoted herein below for ready reference :-
"144. Taxes to be imposed under this Act. - (1) For the purposes of this Act, the Corporation shall impose following taxes, namely: --
(a) property taxes;
(b) a tax on draught animals, vessels and vehicles other than those mechanically propelled;
(c) a tax on theatres, theatrical performance and other shows for public amusement;
(d) a tax on advertisement other than advertisements published in the newspapers;
(e) a duty on the transfer of property;
(f) a tax on profession, trades and calling.
(2) In addition to the taxes mentioned in sub-section (1), the Corporation may, for the purposes of this Act, levy any or all of the following taxes, namely: --
(a) a betterment tax on properties whose value may have increased as a result of town planning scheme undertaken in the city;
(b) a tax on dogs kept within the city;
(c) a toll on vehicles and animals entering the city but not liable to taxation under clause (b) of sub-section (1);WP(C) 1960/16 & 5160/2017- CAV Page 11 of 24
(d) market dues on persons exposing goods for sale in any market or in any space belonging to or under the control of Government or of the Corporation;
(e) a drainage tax where a system of drainage has been introduced;
(f) a tax on pilgrims resorting periodically to a shrine within the limits of the Corporation;
(g) a tax on passengers and goods carried by road or inland waterways;
(h) a tool on new bridges constructed by the Corporation;
(i) octroi; and
(j) any other tax with the period approval of the State Government."
22. The Act of 1971 noticeably does not define a License. However, the term license has been specifically used in section 180(1).
23. According to Black's Law Dictionary [Eight Edition] a License is a permission to commit some act that would otherwise be unlawful and is usually revocable. In a decision of the Supreme Court rendered in the case of Puran Singh Sahni vs Sundari Bhagwandas Kripalani [(1991) 2 SCC 180 ] it has been observed that a license is a power or authority to do some act which, without such authority, could not lawfully be done.
24. The language used in sub section 1 of section 180 is comprehensive and goes to show that without a license issued by the GMC under section 180(1) it would be unlawful to carry on with any of the professions, trades or callings indicated in the Fourth Schedule of the Act within the city of Guwahati. A trade license issued under section 180(1) of the Act of 1971 is, therefore, noting but an evidence of such a permission having been accorded by the GMC which can be revoked in the event of violation of the terms and conditions mentioned therein.
WP(C) 1960/16 & 5160/2017- CAV Page 12 of 24
25. Chapter XII to XVII of the Act of 1971 deal with various provisions under which the GMC would have the power to impose tax. Section 180 is included in Chapter XVII under the heading "Tax On Professions, Trades and Callings".
26. List II included in the Seventh Schedule to the Constitution of India enlists the subjects on which the State would have the power to legislate and Entry- 60 of the said list deals with " Taxes on professions, trades and callings". Entry 66 of the List II deals with "Fees in respect of any of the matters in this list, but not including fee taken in any court", which is the same as Entry 47 of List III.
27. While dealing with the characteristic of Tax, a Constitution Bench of the Hon'ble Supreme Court had observed in the case of Ratilal Panachand Gandhi vs State of Bombay , AIR 1954 SC 388 that 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 and that the imposition is made for public purposes to meet the general expenses of the State without reference to any special advantage to be conferred upon the payer of the tax. It was further observed that fees are payments primarily in public interest but for some special service rendered or some special work done for the benefit of those for whom the payments are demanded. In fees there is always an element of quid pro quo which is absent in tax. Thus, it was held that the two elements essential in order that a payment be regarded as fee are that it must be levied in consideration of some service which the individuals accepted either willingly or un-willingly and that the amount collected must be earmarked 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 purpose.
28. Similarly, in the case of Pratibha Processors vs Union of India (1996) 11 SCC 101 the Supreme Court has observed that tax is the amount payable as a result of the WP(C) 1960/16 & 5160/2017- CAV Page 13 of 24 charging provision and that it is a compulsory exaction of money by a public authority for public purpose, the payment of which is enforced by law.
29. In the case of Kewal Krishan Puri vs State of Punjab reported in (1980) 1 SCC 416, the Supreme Court had the occasion to notice the distinction between tax and fee wherein it was observed that quid pro quo for the service rendered to the payer is a must to levy of fees. However, the service does not mean a personal or domestic service but it means service in relation to the transaction, property or the institution in respect of which he is made to pay the fee. In a subsequent decision in the case of Sreenivasa General Traders And Others vs State of Andhra Pradesh And Others reported in (1983) 4 SCC 353, the Supreme Court had, however, held that Kewal Kishan Puri (supra) does not lay down any legal principle of general applicability. While clarifying the position, the Supreme Court had held that element of quid pro quo in the strict sense in always not a sine qua non for a fee and that element of quid pro quo is not always absent in every tax.
30. In case of Dhenkanal Municipal Council and Another vs A.Raja Rao and Others reported in 1993 Supp(3) SCC 543, a question of similar nature arose wherein levy of fee was challenged by filing a writ petition before the Orissa High Court taking the plea that no amenities were provided by the Municipal Council in the market called "Darbar- Hat" falling within the Municipal area although fee was been collected from the traders for attending the market. In that case, section 295(2) of the Orissa Municipal Act,1950 permitting collection of fee from traders in the market was put to challenge. By filing an additional affidavit the Executive Officer of the Municipal Council had stated that the budget estimate for the year 1974-75 included specific amounts to be spent for construction of compound wall around the Hat, to level the ground and for construction of Hat Road. It was also mentioned that electrification of the Hat roads, maintenance of a well and construction of tin sheds for the vendors were some WP(C) 1960/16 & 5160/2017- CAV Page 14 of 24 of the amenities provided by the Municipal Council at huge cost. Rejecting the contention of the Council the High Court had restrained the Municipal Council from collecting fee from the traders. Reversing the said decision of the Orissa High Court, the Supreme Court had made the following observations in Paragraphs 6 and 7.
"6. It is not necessary for us to go into the question as to whether the levy under Section 295(2) of the Act is a "fee" or "tax". Assuming the levy to be fee we are of the view that the High Court fell into patent error in reaching the finding that no services were being rendered for the benefit of the traders in the market area of "Darbar Hat". We are at a loss to understand how the laying of roads, levelling of ground, constructing boundary wall and providing electricity etc. are not the services rendered for the benefit of the traders.
7. This Court in Municipal Corporation of Delhi and Ors. v. Mohd. Yasin etc. [MANU/SC/0018/1983] referred to the earlier judgments of this Court in Commissioner of H.R. & C.E. Madras v. Shri Lakshmindra Thritha Swamiyar 1954 1 SCR 1005; H.H. Sudhundra v. Commissioner for Hindu Religious and Charitable Endowments, 1963 Supp. 2 SCR 302; Hingir-Rampur Coal Co. Ltd. and Ors. v. The State of Orissa and Ors. (1961) 2 SCR 537 ; H.H. Swamiji v. Commissioner Hindu Religious & Charitable Endowments Dept. and Ors. 1980 1 SCR 268; Southern Pharmaceutical and Chemicals, Trichur and Ors. etc. v. State of Kerala and Ors. (1982) 1 SCR 519 and held 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 taxpayers whereas a fee is a payment for services rendered, benefit provided or privilege conferred. Compulsion is not the hall-mark 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 causal relation may be enough. Further, neither the incidence of the fee nor WP(C) 1960/16 & 5160/2017- CAV Page 15 of 24 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 cost of the services rendered etc. against the amount of fees collected so as to evenly balance the two. A broad co- relationship is all 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."
31. Again, in the case of B.S.E Brookers' Forum, Bombay And Others vs Securities and Exchange Board in India and Others reported in (2001) 3 SCC 482, the Supreme Court had discussed the ratio laid down in a number of earlier decisions covering the issue and held that in so far as the regulatory fee is concerned, the service to be rendered is not a condition precedent and the same does not lose the character of a fee provided the fee so charged is not excessive. In this decision also it was held that there was no generic difference between a tax and a fee and both are compulsory exaction of money by public authorities. The observations made in paragraph 30 would be relevant for the purpose of this case and are extracted here-in below:-
"30 . This Court in the case of Sreenivasa General Traders & Ors. v. State of Andhra Pradesh & Ors. [1983 (4) SCC 353] has taken the view that the distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest. This Court said that in determining whether a levy is a fee or not emphasis must be on whether its primary and essential purpose is to render specific services to a specified area or class. In that process if it is found that the State ultimately stood to benefit indirectly from such levy, the same is of no consequence. It also held that there is no generic difference between a tax and a fee and both are compulsory exactions of money by public WP(C) 1960/16 & 5160/2017- CAV Page 16 of 24 authorities. This was on the basis of the fact that the compulsion lies in the fact that the payment is enforceable by law against a person in spite of his unwillingness or want of consent. It also held that a levy does not cease to be a fee merely because there is an element of compulsion or coerciveness present in it nor is it a postulate of a fee that it must have direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service. It also held that the element of quid pro quo in the strict sense is not always a sine qua non for a fee, and all that is necessary is that there should be a reasonable relationship between the levy of fee and the services rendered. That judgment also held that the earlier judgment of this Court in Kewal Krishan Puri & Anr. v. State of Punjab & Ors. [(1980) 1 SCC 416] is only an obiter."
32. While referring to the distinctive characteristics of a tax and a fee the Supreme Court had made the following observations in the case of State of U.P. vs Vam Organic Chemical Ltd. reported in (2004) 1 SCC 225 "30. The locus classicus on the distinction between a 'fee' and a 'tax' is the decision of this Court in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [Air 1954 SC 282). In that case the subject matter of challenge was, inter-alia, Section 76 of the Madras Hindu Religious and Charitable Endowments Act, 1951 under which religious institutions were required to make a contribution at 5 per cent of their income towards the services rendered by the Government and its officers. According to the State this annual contribution was a fee for overseeing the working of the religious institutions. According to the religious institutions, the levy was a tax which the State was incompetent to impose.
31. The distinctive characteristics of a tax and fee were laid down. As far as a fee is concerned it was held that:
"(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 WP(C) 1960/16 & 5160/2017- CAV Page 17 of 24 undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases".
(Emphasis supplied)
32. However, the Court made it clear that the service need not necessarily be one which is voluntarily taken by the person responsible for paying the fee. There may be an element of compulsion or coerciveness present "if in the larger interest of the public, a State considers it desirable that some special service should be done for certain people, the people must accept these services, whether willing or not".
33. In the case of Calcutta Municipal Corporation And Others vs Shery Mercantile (P) Ltd. And Others reported in (2005) 4 SCC 245 the Supreme Court had held that the main difference between "a fee" and "a tax" is on account of the source of power. It was held that the power to tax must be distinguished from police power although "police power" is not specifically mentioned in the constitution. In that decision, the Supreme Court had held that the power to regulate, control and prohibit with the main object of giving some special benefit to a special class or group of persons is in the exercise of police power and the charge levied on that class to defray the cost of providing benefit to such a class is " a fee". But where the Government intends to raise revenue as the primary object, the imposition is a tax.
34. In the case of Union of India And Others vs State of Uttar Pradesh and Others reported in (2007) 11 SCC 324, a question as to whether the water charges and sewerage charges levied by Jal Sansthan on the Railways was a tax or a fee.While answering the question, the Supreme Court had held that it is not the nomenclature of the levy but its nature that would be decisive. The observations made in para 10 are extracted here-in-below for ready reference :-
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"10. From a perusal of Article 285 it is clear that no property of the Union of India shall be subject to tax imposed by the State, save as Parliament may otherwise provide. The question is whether the charges for supply of water and maintenance of sewerage is in the nature of a tax or a fee for the services rendered by the Jal Sansthan. There is a distinction between a tax and a fee, and hence one has to see the nature of the levy whether it is in the nature of tax or whether it is in the nature of fee for the services rendered by any instrumentality of the State like the Jal Sansthan. There is no two opinion in the matter that so far as supply of water and maintenance of sewerage is concerned, the Jal Sansthan is to maintain it and it is they who bear all the expenses for the maintenance of sewerage and supply of water. It has to create its own funds and therefore, levy under the Act is a must. In order to supply water and maintain sewerage system, the Jal Sansthan has to incur the expenditure for the same. It is in fact a service which is being rendered by the Jal Sansthan to the Railways, and the Railways cannot take this service from the Jal Sansthan without paying the charges for the same. Though the expression tax has been used in the Act of 1975 but in fact it is in the nature of a fee for the services rendered by the Jal Sansthan. What is contemplated under Article 285 is taxation on the property of the Union. In our opinion the Jal Sansthan is not charging any tax on the property of the Union; what is being charged is a fee for services rendered to the Union through the Railways. Therefore, it is a plain and simple charge for service rendered by the Jal Sansthan for which the Jal Sansthan has to maintain staff for regular supply of water as well as for sewerage system of the effluent discharge by the railway over their platform or from their staff quarters. It is in the nature of a fee for service rendered and not any tax on the property of the Railways."
35. In State of Tamil Nadu And Another vs TVL. South Indian Sugar Mills Association And Others, ( 2015) 13 SCC 748, the Supreme Court had quoted with approval the observation made in the earlier decisions in the case of B.S.E Brooker's (supra ) and Vam Organics Chemicals Ltd. wherein it s was held that quid pro quo in a strict sense was not necessary for a fee and in determining whether a levy was a WP(C) 1960/16 & 5160/2017- CAV Page 19 of 24 fee or not emphasis must be on whether its primary and essential purpose is to render specific services to a specified area or class.
36. The legal principles that can be culled out from the ratio laid down by the Supreme Court in above noted decisions is that quid pro quo in a strict sense is not a sina qua non for a fee and all that is necessary is that there should be a reasonable correlation between the levy of fee and the service rendered. It is also not necessary that the service to be rendered must be confined to the contributories alone and further that when it is a case of regulatory fee, service to be rendered is not a condition precedent at all. Moreover, when the main object of the charge levied is to give some special benefits to a specified group or class of persons in the exercise of police power the same would be a fee and not a tax.
37. Coming to the facts of the case in hand, I find that by filing an additional affidavit, the respondents have made specific averments to the effect that the fee realised by the Corporation against trade license is utilised for creating fund required for construction, maintenance of roads, for providing drainage and sewerage, for providing street lights and for cleaning garbage and waste materials for the purpose of implementing the provisions of the Act of 1971 and in this manner, various compensatory services are provided to the traders in the form of civic amenities. It has further been stated that the GMC issues trade licenses as a regulatory measure to control and organize the trade and business and to restrain mushroom and clandestine growth of such business activities within the city. In support of the aforesaid statements, Mr. Saikia has also produced a copy of the Office Memorandum dated 07/03/2013 issued under Memo No. GCS/ARPS/112/12/38 by the Commissioner, GMC, laying down the guidelines and the procedure to be followed while issuing a trade license. A bare perusal of the said notification clearly indicates a regulatory purpose behind issuance of trade license. The writs petitioners have failed to substantiate that WP(C) 1960/16 & 5160/2017- CAV Page 20 of 24 the activities mention in the OM dated 07/03/2013 were untrue or irrelevant in the facts and circumstances of these cases.
38. The attention of this court has also been invited to a copy of the trade license (Annexure-D to WP(C) 1960/2016),a perusal of which goes to show that the license was liable to be cancelled in the event of violation of any of the terms and conditions of the GMC Act and the Rules framed thereunder. Since, the trade license specifically refers to the terms and conditions mandating compliance of the Rules and Regulations framed by the Corporation, there can be no room to doubt that one of the important purpose of issuing the trade license is to regulate the growth and conduct of the trade and business activities with the city. Therefore, the charged levied, in the opinion of this court,has to be held as regulatory in nature.
39. It is not in dispute that the GMC authorities do provide certain basic amenities for the resident of the city of Guwahati which includes the general traders. There is a cost involved in providing the amenities such as garbage disposal, maintenance of drainage systems, street lighting etc which are enjoyed by the city based traders as well. The corporation has to collect revenue to defray the cost of such amenities and the fund collected form a part of the common "Municipal Fund" under the Act. That apart, a broad correlation between the fee collected and the service rendered by the GMC is also established on the face of the record. In the case of Dhenkanal Municipal Council and Another (supra) the Supreme Court had held that facilities of such nature provided by the Municipal Council would amount to service. Therefore, merely because the respondents have stated that the fund collected from the trade license fee is used to augment the revenue of the Corporation, the levy cannot be branded as a tax. Applying the ratio laid down by the Supreme Court in the above noted decisions, it is evident that the levy in question would pass the test of rule of quid pro quo so as to qualify as a fee.
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40. The power to collect fee against trade license is traceable to the field reserved for the State Legislature under Entry 66 of the List II of the Seventh Schedule. It is not in dispute that the GMC is separately collecting professional tax which is not connected with the fee charged for issuance of trade license. The fee is being realised as per the provisions of the Fourth Schedule of the Act. In the case of B.S.E Brooker's Forum (supra) the Supreme Court has held that so long as the impugned power is traceable to the statute concerned, mere omission or error in reciting the correct provision of law does not denude the power of the authority from taking statutory action so long as its action is legitimately traceable to a statutory power governing such action. In such cases the court would always rely upon section 114. III (e) of the Evidence Act to draw a statutory presumption that the official acts are regularly performed and if satisfied that the action in question is traceable to a statutory power, the courts would uphold such action. Therefore, mere wrong mention of a nomenclature in the relevant provision of the statute would not have any invalidating effect on the levy.
41. In the case of Karnataka Bank Ltd. Vs. State of Andhra Pradesh and others reported in (2008) 2 SCC 254 the Supreme Court had the occasion to interpret clause 2 of Article 276 of the Constitution and the amount indicated therein on the touch stone of legislative power under Entry 60 of the List II of the Seventh Schedule to impose taxes on persons or trade etc. That was the case where all the appellants were aggrieved by the notices issued by the respondent authorities demanding Profession Tax @ Rs. 2500/- from each of the branches operated by the appellants in different places in the State of Andhra Pradesh. The said action of the State was challenged on the ground that it violate sub-clause 2 of Article 276 of the Constitution which imposes a ceiling of Rs. 2500/- that can be realised from each person per annum contending that the separate branches ought to have been treated as one person. The writ petitions filed by the appellants challenging the constitutional validity of the provisions WP(C) 1960/16 & 5160/2017- CAV Page 22 of 24 of the Act, viz. Andhra Pradesh Tax on Profession, Trade, Callings and Employment Act, 1971, were dismissed by the High Court as a result of which the matter went up to the Supreme Court. It was in such context that the Supreme Court had observed that the power of the State Legislature to make law imposing taxes on profession, trade, callings and employment is traceable to Entry 60 of List -II of the Seventh Schedule but such power is made subject to restrictions provided for under Article 276(2) of the Constitution.
42. In the decision in Karnataka Bank Ltd.(supra) there was no dispute about the fact that the levy made under the impugned Act was a tax and the legislation imposing the levy was also traceable to Entry 60 of List II of the Seventh Schedule. In the present case, however, the basic dispute pertains to the question as to whether the levy is a tax or a fee and for the reasons mentioned here-in-above it has been held that the impugned levy is a fee. Therefore, the ratio of Karnataka Bank Ltd.(supra) would not have any application in the facts of the present case.
43. It is no doubt true that Chapter XVII of the Act of 1971 begins with the heading " Taxes on Profession, Trades and Callings" but from a deeper analysis of the nature and character of the levy it is apparent that the same is not a tax but a fee. From the definition of "tax" as contained in section 3 (78) of the Act read with that of "Municipal Fund" as appearing in section 110 it is clear that the word tax has been used in a wider connotation so as to include in its fold all levies such as toll, cess, rate, fee and other imposts leviable under the Act which goes to the common Municipal Fund. Therefore, regardless of the nomenclature used in the Act, the fee collected against trade license, in pith and substance, must be held to be a charge under Entry- 66 of the List II rather than one related to Entry-60 of the said list. Going by the scheme of the Act of 1971, a pedantic interpretation of the heading in Chapter XVII so WP(C) 1960/16 & 5160/2017- CAV Page 23 of 24 as to confine the impost there under to a tax, in my opinion, would be wholly un- warranted.
44. Coming to the next plea raised by the petitioners of non-framing of rules, it is no doubt true that Section 180(4) envisages Rules to be framed by the Corporation determining the class of traders and their liabilities. The respondents have admitted that there are no Rules framed under Section 180(4) till date. However, the stand of the respondents is that the Fourth Schedule had been amended by issuing notification in the official gazette in exercise of powers conferred under Section 180(5) of the Act of 1971. Since Section 180(1) refers to the schedule, hence, it is apparent that the Fourth Schedule is a part of the Act of 1971. By issuing the impugned notification dated 27/04/2015, the respondents have amended the Fourth Schedule.
45. Taking note of the pleaded case of the writ petitioner, this Court had made a query as to whether the petitioners are challenging the statute so far as it relates to the Fourth Schedule of the Act of 1971. In response to the said query, the writ petitioner in WP(C) 1960/2016 have filed an affidavit dated 16/09/2017 categorically stating that the petitioners are not challenging the statute or the Fourth Schedule. If that be so, there would be no necessity for this Court to examine the validity of the amendments carried out to the Fourth Schedule in the present case. It will be sufficient to note here-in that the respondents have amended the Fourth Schedule by issuing the impugned notification dated 27/04/2015 which has the authority and sanction of the General Council of the Corporation. It would be further significant to note herein that the petitioners have challenged the categorisation of the classes of traders through the impugned notification, yet, it appears from the records that the Drug Distributors were included in the Class-I category by the previous amendment of the Schedule, which was notified in the official gazette in the year 2009. But there is no challenge to the said gazette notification in the present batch of writ petition. WP(C) 1960/16 & 5160/2017- CAV Page 24 of 24
46. In the case of Jantia Hill Truck Owners Association Vs. Shailang Area Coal Dealer and Truck Owner Association and Ors reported in (2009) 8 SCC 492, the Supreme Court has made the following observation :-
"24. The Memorandum was issued in the name of the Governor. It is not in dispute that it was authenticated in terms of Clause (2) of Article 166 of the Constitution. The power was exercised by the State under the provisions of the Act. The said order was to remain in force till Rules are framed in the prescribed manner.
The provisions of the Act mandate that the unladen weight and laden weight must be determined. Indisputably, weighing devices had to be provided for the said purpose. It is true that for the said purpose Rules may have to be framed. It is, however, a well settled principle of law that even in a case where the statute provides for certain things to be done, subject to Rules, any action taken without framing the Rules would not render any action invalid. If a statute is workable even without framing of the Rules, the same has to be given effect to. The law itself except in certain situations does not envisage vacuum."
47. From the law laid down by the Supreme Court as noticed above, I am of the view that the impugned notification cannot be invalidated merely on the ground of non-framing of Rules under Section 180(4) of the Act of 1971, since the Corporation has notified its decision to classify the traders and determine their liability by issuing gazette notification in exercise of powers under Section 180(5). There is nothing in the Act to indicate that the power under Section 180(5) is dependent on Section 180(4).Rather, from the language employed in the said provision, it appears that those are independent provisions operating in mutually exclusive fields. Whether the Corporation could have amended the Fourth Schedule by issuing the impugned notification under Section 180(5) of the Act in the present fashion is a matter which need not be gone into in the present proceedings in the absence of specific challenge made in that regard. Once it is found that the impugned levy is based on power conferred by the statute, there is no room for the court to declare the same as illegal. WP(C) 1960/16 & 5160/2017- CAV Page 25 of 24
48. For the reasons stated hereinabove, I am of the view that these writ petitions and devoid of any merit and the same are accordingly dismissed. However, considering the fact that there is a stay order dated 21/03/2016 operating in WP(C) 1960/2016, the trade license fee payable for the period from 21/03/2016 till today by the members of the petitioner No.1 Association in WP(C) 1960/2016, shall be accepted by the authorities without levying any penalty if the same is tendered within a period of two weeks from today.
Writ petitions are accordingly disposed of.
There would be no order as to costs.
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