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TMI Blog1999 (1) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... same, is or is proposed to be carried on. By an order of the Special Officer, Municipal Corporation of Hyderabad, dated 15.4.1972 a list of trades, operations etc. covered by Section 521(1)(e)(ii) was notified. The trades so covered include eating houses, hotels, restaurants, Cafes, bars, tea stalls, canteens, coffee houses, tiffin rooms, cafeteria or any place where food is prepared and supplied or sold for the purpose of gain. Lodging houses were also covered. Under Section 622 of the Hyderabad Municipal Corporations Act, 1955 whenever it is provided under the Act that a licence or a written permission may be given for any purpose, such licence or written permission shall specify the period for which and the restrictions and conditions subject to which, the same is granted. Under Section 622 (2) for every such licence or written permission a fee may be charged at such rate as shall from time to time be fixed by the Commissioner, with the sanction of the Corporation. Under the said order of 15.4.1972 the licence fees for the said trades were specified/revised. Where the monthly rent of an eating house etc. was up to ₹ 50/- the rate of licence fee was ₹ 50/-. The li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is under challenge before the High Court. Thereafter by an order dated 12.10.1991 the respondent- Corporation again increased the licence fees of eating houses and lodging houses. The increase was four times the licence fee fixed in 1987. However, on 25.7.1992 the respondents have reduced this increase on the basis of a compromise arrived at between the Corporation and several groups of affected traders. The increased licence fee under the order of 25.7.1992 is twice the licence fee charged under the order of 1987. The petitioners were not parties to the compromise. They have filed Writ Petition No. 238 of 1992 in this Court under Article 32 challenging the increased licence fee under the orders of 1992. Since common questions of law arise in all these proceedings they have been heard together. A chart showing the increase of licence fee for lodgings and eating houses from time to time is set out below:- Description of the trade operation to be licensed Annual licence fee prevailing prior to 1981 Annual licence fee increased in 1981 Annual licence fee increased in 1987 Annual licencee fee re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orations Act, 1955 which deals with municipal taxation. Under Section 197, (which is the first section falling under Chapter III) for the purposes of this Act the Corporation shall impose the taxes which are specified in that section. Under sub-section(2) of Section 197 the Corporation may impose any tax other than those specified under sub-section(1) subject to the previous sanction of the Government. Under Section 198 before the Corporation passes any resolution imposing a tax for the first time or at a new rate it shall direct the Commissioner to publish a notice in the Andhra Pradesh Gazette and in the local newspaper of its intention to do so and fix a reasonable period not being less than one month for submission of objections. The Corporation may, after considering the objections, determine by resolution to levy the tax. The Corporation is also required to publish a notice specifying the date from which and the rate at which such tax or increased tax is to be levied. The petitioners contend that this procedure has not been followed while increasing the licence fee which is in the nature of a tax and not a fee and hence the levy is not valid. The first question, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure cleanliness, removal of garbage and maintenance of hygiene in these premises. Undoubtedly, the Corporation has the general duty to provide scavenging and sanitation services including removal of garbage and maintaining hygienic conditions in the city for the benefit of all persons living in the city. Nevertheless, hotels and eating houses by reason of the nature of their occupation, do impose an additional burden on the municipal corporation in discharging its duties of lifting of garbage, maintenance of hygiene and sanitation since a large number of persons use the premises either for lodging or for eating; the food is prepared in large quantity unlike individual households and the resulting garbage is also much more than what would otherwise be in the case of individual households. In fact, under Section 230 of the said Act the respondent-Corporation has the power to fix special rates of conservancy tax in respect of a hotel, club or other large premises. This, however, does not turn a licence fee into a tax. It is, by now, well settled that a licence fee may be either regulatory or compensatory. When a fee is charged for rendering specific services a certain element of q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, is secondary to the primary motive of regulation in the public interest . There is really no generic difference between tax and fee and as said by Seligman, the taxing power of a State may manifest itself in three different forms known respectively a special assessments, fees and taxes. Our Constitution has, for legislative purposes, made a distinction between a tax and a fee. In the case of Corporation of Calcutta and Another v. Liberty Cinema ([1965] 2 SCR 477 at page 483), this Court after referring to the constitutional provisions making a distinction between a fee and a tax, also went on to say that in our Constitution fees for licence and fees for services rendered are contemplated as different kinds of levy. The former is not intended to be a fee for services rendered. This is apparent from a consideration of Article 110(2) and Article 199(2) where both the expressions are used indicating thereby that they are not the same. In other words, a distinction was made between fees for services rendered and fees which are regulatory. In Indian Mica Micanite Industries Ltd. v. State of Bihar Ors. (1971 Supp. SCR 319 at page 324), Om Parkash Agarwal etc. v. Giri Raj Kisho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct or under any rule, bye-law or standing order in force thereunder, (f) ............. (g) ............., and (h) all interest and profits arising from any investment of, or from any transaction in connection with any money belonging to the Corporation shall be credited to a fund which shall be called 'the Municipal Fund' and which shall be held by the Corporation in trust for the purposes of this Act, subject to the provisions herein contained. (2)........... Section 174 describes the purpose for which the municipal fund is to be applied. It is, therefore, submitted that since all the fees form a part of the common municipal fund, and this fund is to be deployed for various purposes of the municipal corporation, there is no provision by which the fee collected is used for regulatory purposes. This Court, however, in the case of Sirsilk Ltd. Anr. v. Textiles Committee Ors. ([1988] Supp.(2) SCR 880 at pages 910, 912) has pointed out that a separate fund is not essential in the case of regulatory fees. In the present case the Budget Estimate Rules are relied upon by the respondents in order to show that the fees are being utilised for regulatory services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises which in turn control the extent of activity. Undoubtedly in a given case if the premises are old, the rent may be less but that does not mean that classifying premises on the basis of the rent paid has no connection with the quantum of fee charged. It is also contended that the fees charged are excessive. The respondents in their counter affidavit filed in the writ petition have given general figures to show that the total income from trade licence fees on the basis of the 1987 rates was ₹ 1,08,25,588/- as per the revised estimates. With the increase in the licence fees in 1992 the income would be doubled to ₹ 2,16,51,176/-. This would not be sufficient for the sanitary and public health services including lifting of garbage, cleaning of roads, sanitation, medical centres, salaries of the staff employed and so on. The public health budget for the relevant period of the Corporation is to the tune of nearly ₹ 13,95,40,000/-. Of course, these figures do not indicate separately the extent of fees collected from eating and lodging houses or the amount expended for regulating the activities of eating and lodging houses and rendering them services. In respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crease after 1972. The High Court has rightly considered that looking to the increase in the cost of the various activities carried on by the Hyderabad Municipal Corporation, doubling of licence fees after nine years can not be considered as an excessive increase. In respect of the increase from the 1987 level of licence fees to the 1992 level of licence fees, the initial increase could have been viewed as excessive. But after the representations were made to the respondent-Corporation by the various traders affected by the increase in the licence fees, the municipal corporation reduced the increase and kept it at twice the licence fees charged in 1987. The respondents in this connection had meetings and detailed negotiations with the various trade organisations connected with the conducting of eating houses and lodging houses. The respondents have annexed the minutes of the proceedings before the Commissioner, Municipal Corporation of Hyderabad, dated 25.7.1992. The meeting of 25.7.1992 dealt with enhancement of licence fee of certain trades and operations. These cover the present trades and occupations. The proceedings record that the traders viewed the increase from the existing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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