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2013 (6) TMI 36 - HC - VAT and Sales TaxExcise licenses for selling Indian Made Foreign Liquor in sealed bottles - whether Nagar Nigam have any power to impose a license on the petitioners when they have already obtained a license from the Excise Department under the U.P. Excise Act and direction to pay ₹ 12,000/- per annum as licence fee? - Held that - Nagar Nigam is a body that has to perform certain obligatory duties. These duties are provided under Section 114 of the Nagar Nigam Adhiniyam. A cursory look at the section will make it abundantly clear that these duties are directly related to public welfare, health, peace and well being. Further, in order to carry out these duties there is a huge financial burden that the Nagar Nigam has to meet, this financial burden is reduced by collecting taxes and fees in lieu of these services. As Rule 5(8) enshrines that in urban areas, no new shop shall be opened without notice to the Nagar Mahapalika, Town area or notified area, as the case may be. Sending of notice is not a mere formality. Requiring of notice denotes that if any objection is made by the Nagar Nigam it will be decided by the collector. Thus the objections raised by the Nagar Nigam cannot be ignored or taken lightly. Since for regulatory fee there is no need for any quid pro quo, though the fee cannot be excessive. The assertion of the petitioners that charging of ₹ 12,000/- per annum is highly excessive. The bye-laws have provided ₹ 6,000/- as licence fee for country-made liquor and ₹ 12,000/- for foreign liquor. Thus the fee of ₹ 6,000/- for country-made liquor and ₹ 12,000/per annum is not excessive as it works out to only about ₹ 500/- and ₹ 1,000/- per month, which is a meagre amount. Writ dismissed.
Issues Involved:
1. Validity of Nagar Nigam's power to impose a license fee on excise license holders. 2. Conflict between U.P. Excise Act and Nagar Nigam bye-laws. 3. Procedural defects in the formulation of bye-laws. 4. Distinction between 'fee' and 'tax' and the legality of the imposed license fee. Detailed Analysis: 1. Validity of Nagar Nigam's power to impose a license fee on excise license holders: The petitioners argued that the Nagar Nigam lacks the authority to impose a license fee on them as they already hold licenses under the U.P. Excise Act. They contended that the U.P. Excise Act, enacted by the State Government under Entries 8 and 51 of List II, Schedule VII of the Constitution, fully regulates the excise business, leaving no room for additional regulation by the Nagar Nigam. The petitioners also argued that the Nagar Nigam's bye-laws would lead to dual control and potential conflicts, rendering the excise licenses ineffective if denied by the Nagar Nigam. 2. Conflict between U.P. Excise Act and Nagar Nigam bye-laws: The petitioners asserted that the bye-laws framed by the Nagar Nigam under Section 541 (20) and Section 438 of the U.P. Nagar Nigam Adhiniyam are invalid as they attempt to regulate a trade (liquor) that is already strictly controlled by the State through the Excise Commissioner. They cited precedents such as Hari Shanker vs. Deputy Excise and Taxation Commissioner and Khodey Distillery Ltd. vs. State of Karnataka to emphasize that excise trade is not a commercial trade and is a privilege of the State. 3. Procedural defects in the formulation of bye-laws: The petitioners argued that the bye-laws were not published in the Government Gazette as required under Section 543 of the U.P. Nagar Nigam Adhiniyam, thus suffering from procedural defects. They also pointed out the lack of a State Government notification for imposing the license fee, which was introduced through a Government order dated 27.10.1994 without following the due process. 4. Distinction between 'fee' and 'tax' and the legality of the imposed license fee: The petitioners contended that the license fee imposed by the Nagar Nigam is essentially a tax, as it does not provide any specific services in return, violating the principle of quid pro quo. They argued that a fee should be compensatory and regulatory, not a source of revenue. The respondents countered that the fee is regulatory and compensatory, citing various Supreme Court judgments, including M/s Kishan Lal Lakhmi Chand vs. State of Haryana, which clarified that the element of quid pro quo is not necessary for regulatory fees. Judgment: The court dismissed the writ petitions, upholding the validity of the Nagar Nigam's bye-laws. It ruled that: - The Nagar Nigam has the power to impose a license fee under Section 541 (20), (36), and (41) of the U.P. Nagar Nigam Adhiniyam, as long as the bye-laws are not inconsistent with the Act. - The fee imposed is regulatory, not compensatory, and does not require a quid pro quo. The court referred to several Supreme Court judgments that support the imposition of regulatory fees without strict quid pro quo. - The procedural requirements for the formulation of the bye-laws were met, as the bye-laws were notified in the U.P. Gazette and public notice was given through newspapers. - The fee of Rs. 12,000/- per annum for foreign liquor and Rs. 6,000/- per annum for country-made liquor was deemed not excessive, considering the financial burden on the Nagar Nigam to perform its obligatory duties. The court concluded that the imposition of the license fee by the Nagar Nigam was lawful and dismissed the petitions with costs.
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