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TMI Blog2006 (2) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... companies who are desirous of exhibiting their advertisements under the heading of registration charges. 2. Short facts leading to the present petition are as follows: 2.1 In city of Ahmedabad on places of strategic importance, advertisements are being exhibited by various companies of their produces or services. Sites at which these advertisements are exhibited can be broadly classified into two categories. First category is the sites situated in properties belonging to Municipal Corporation of city of Ahmedabad and in the second category, are those sites on which advertisements are being exhibited on private properties. The present litigation concerns issues involving exhibition of advertisements on sites held by private individual property owners. The Municipal Corporation of Ahmedabad has been collecting licence fees from the owners or agencies where such advertisements are exhibited by private properties. This practice of collecting licence fees is going on since many years now. 2.2 The issues arising in this group of petitions are mainly pertaining to two aspects. One question is regarding collection of registration charges from the agencies who are dealing in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , such sites would carry licence fees at the rate of 16% of the amount offered by the tenderer for the tender sites. For those sites, which are of private owners and which are situated at a distance of more than 80 metres from the road junction, licence fees will be charged at the rate of 8% of the amount offered for tender site. In other words, instead of earlier policy of charging licence fees at a flat rate for the entire city of Ahmedabad, by the above mentioned resolution, the Corporation decided to rationalise the rates of licence fees to be paid by different private owners depending upon the rate offered by tenderer for the sites in the nearby vicinity. It is the case of the petitioners that this decision of the Corporation is wholly illegal and unlawful. The grounds on which such decision is sought to be assailed by the petitioners will be gone into at a later stage. Suffice it to say at this stage that the petitioners complaint that on account of new methodology adopted by the Corporation for fixing licence fees, rate at which the licence fee that is now required to be paid has under gone quantum increase which is not justified. It is the case of the petitioners that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mula depending on the rate offered by the tenderer for the site belonging to the Ahmedabad Municipal Corporation in the near vicinity, private property owners or their agents had to bear burden of the licence fees to be paid to the Corporation. The formula adopted was that for the properties which are within the distance of 80 meters of road junction, for exhibiting advertisements of hoardings on such properties, licence fees at the rate of 16% of the rate offered by the tenderer to the Corporation would have to be paid. On the other hand, for the properties which are situated beyond the distance of 80 meters from the road junction, rate at which licence fee was required to be paid was fixed at 8% of the tender rate. 5.2 It is the contention of the petitioners that new methodology adopted by the Corporation for collection of licence fees is wholly illegal and unlawful. It is suggested that on account of new methodology adopted by the Corporation, in some prime areas of the city such as Ashram Road and C.G.Road, licence fee rates have gone upward revision by many times compared to existing rates. It is contended that the new rate at which the Corporation wishes to collect licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n decided to provide for different rates for collection of licence fees for different areas of City of Ahmedabad depending on the commercial potential of different sites. It is denied that the the licence fee being charged is excessive. It is stated in affidavit-in-reply dated 15th July, 2005 filed by Shri Pritambhai Naranbhai Raut on behalf of Ahmedabad Municipal Corporation that the charge levied on hoardings form part of the income resources of the Corporation to meet its ever increasing expenses and to meet the infrastructure needs of the public. It is further contended that levy of licence fee is regulatory mechanism adopted keeping in view the public welfare. It is further contended that the Corporation has power to collect licence fee and at what rate should it be levied is a policy decision. In the further affidavit-in-reply dated 27th July, 2005 filed by Shri Pritambhai Naranbhai Raut, it is contended that the levy of licence fee by Ahmedabad Municipal Corporation is for the purpose of generating funds to be utilised within the City limits for creation, maintenance and betterment of basic amenities and facilities for commuting public. It is contended that the legislature b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners with the tender amount offered by the tenderer to the Corporation can hardly be the correct yardstick for determining licence fees. 8. Reliance was placed on the decision in the case of Calcutta Municipal Corporation and Others v. Shrey Mercantile (P) Ltd. And Others reported in (2005) 4 SCC 245 wherein Hon'ble Supreme Court upheld the decision of the High Court striking down the demand for payment of mutation charges on the ad valorem basis upon the valuation of the properties. 9. Reliance was also placed on the decision of the Hon'ble Supreme Court in the case of Vam Organic Chemical Ltd. And Another v. State of U.P. And others reported in (1997) 2 SCC 715, wherein Hon'ble Supreme Court made following observations: The High Court has taken the view that in the case of regulatory fees, like the licence fees, existence of quid pro quo is not necessary although the fee imposed must not be, in the circumstances of the case, excessive. The High Court further held that keeping in view the quantum and nature of the work involved in supervising the process of denaturation and the consequent expenses incurred by the State, the fee of 7 paise per litre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin 80 meters of road junction to be treated differently from those situated beyond the said distance is a reasonable classification. 11. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Sona Chandi Oal Committee and others v. State of Maharashtra reported in (2005) 2 SCC 345, wherein Hon'ble Supreme Court was pleased to uphold the revision of licence fees to be charged from money-lenders. 12. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of B.S.E. Brokers' Forum, Bombay and others v. Securities and Exchange Board of India reported in (2001) 3 SCC 482, wherein Hon'ble Supreme Court was pleased to uphold the licence fees to be levied on the basis of annual turnover of the brokers negating the contention that since licence fee is related to annual turnover, the same is in nature of tax. 13. From the above discussion, it can be seen that the central controversy in the present group of petitions is with respect to the rate revision in the licence fee sought to be implemented by the Ahmedabad Municipal Corporation against the petitioners and property owners of the City of Ahmedabad. 14. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not justified. It is contended that the Corporation is not empowered to collect tax under the B.P.M.C. Act and that the collection of licence fee in the garb of tax cannot be justified. It is therefore, contended that if the petitioners succeed in establishing before this Court that the Corporation is collecting tax from the petitioners and not fee, the levy needs to be quashed. 17.1 In the alternative it was suggested that licence fee to be charged from the petitioners cannot be excessive. Even if there is no requirement of quid pro quo, with mathematical exactitude, there must be reasonable co-relation between the fee charged and the expenditure incurred. 17.2 As noted, in support of this contention, strong reliance was placed on the decision of Hon'ble Supreme Court in the case of Calcutta Municipal Corporation and Others v. Shrey Mercantile Pvt. Limited (supra). Reliance was placed on the observations made by Hon'ble Supreme Court in paragraph No. 14 which reads as under: 14. According to Words and Phrases, Permanent Edn. Vol.41, p.320, a charge or fee, if levied for the purpose of raising revenue under the taxing power is a tax . Similarly, imposition of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power has its limitations. It is no plenary as in the case of the power of taxation. Reliance was also placed on the observations made in paragraph 18, wherein it was stated that it is true that under Section 183(5), fees are payable for mutation as may be prescribed under the regulations, still as stated above, the primarily object of such charge is to augment the revenue and the levy of such charge cannot be treated to be part of the regulatory measure. Further, under the regulations, the Corporation while prescribing the fees has levied fees on ad valorem basis which is one more circumstance to show that the impugned levy is in the nature of tax and not in the nature of fees. Further the quantum of levy indicates that it is a tax and not a fee. Above observations made by the Hon'ble Supreme Court were in the background of a case where municipal authorities had decided to charge ad valorem fees in carrying out mutation entries in records after transaction is completed. It was observed that once application is made, the same is examined by the department and after hearing the objections if any, the record is ordered to be changed. It was therefore, observed that whatev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r advantage of the services rendered for which the fee was being paid and if one who is liable to pay, receive general benefit from the authority levying the fee, the element of service required for collecting the fee is satisfied. The contention that the fee should be uniform was negated in the following manner: 28. Contention raised by Shri G.L.Sanghi, Senior Counsel for the appellants that the fees have to be uniform has no merit in view of the judgment of this Court in Secunderabad Hyderabad Hotel Owners' Assn. v. Hyderabad Municipal Corporation and State of Maharashtra v. Salvation Army, Western India Territory. It has been held in these judgments that fees are ordinarily uniform but the absence of uniformity is not the sole criterion on which it can be said that the levy is in the nature of tax. 18.2 In the case of B.S.E. Brokers' Forum, Bombay and others v. Securities and Exchange Board of India reported in (2001) 3 SCC 482, Hon'ble Supreme Court was considering the legality of levy of registration fee from Stock Brokers by the Stock Exchange. The registration fees ranged from ₹ 1 lac for category (C) brokers to ₹ 5 lac for category (A) bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to levy the fee for its capital expenditure should also meet with the same fate. This Court in Salvation Army's case has specifically held The expenditure in constructing buildings for locating the head office and regional offices and the increase in the allowances or other amenities to the staff have also to be included in the costs of the services . That being the position in law, this argument should also fail. Even the argument that the amount required for the capital expenditure of the Board should be met by the Government of India and not out of the regulatory fee charged by the Board, has no force. The Board is an autonomous body created by an Act of Parliament to control the activities of the securities market in which thousand of members of gullible public will be investing huge sums of money. Therefore, there is every need for a vigilant supervision of the activities of the market and for that purpose if the Statute intends that the necessary funds should be met by collection of fees from the securities market itself then the said levy cannot be questioned on the ground that the monies required for the capital expenditure of the Board should be met by the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iform levy unrelated to the quality, character or income/yield of the land. Any such levy has been held to be arbitrary and discriminatory. No one can say that a tax under a particular entry must be levied only in a particular manner, which may have been adopted hitherto. The legislature is free to adopt such method of levy as it chooses and so long as the character of levy remains the same, i.e., within the four corners of the particulars entry, no objection can be taken to the method adopted. 46. Similar is the view taken by this Court in the case of The Tyford Tea Co. Ltd. v. The State of Kerala. 47. Therefore, it would be futile to contend that the impugned fee merely because it is levied on the basis of the turnover of the brokers would either amount to a turnover tax or a tax on income. While we accept the levy based on annual turnover of the brokers as valid, we have to notice that the Expert Committee appointed by the Board has in its report held that there should be certain changes brought about in the definition of 'annual turnover' as also in the quantum of the levy pertaining to certain specific transactions which are treated as part of the turnover. It h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the activities under the Bihar Act, we are of the view that the fee mentioned in the impugned notification is reasonable and proper. 32. Similarly, in the case of State of U.P. v. Sitapur Packing Wood Suppliers this Court held that the question of quid pro quo is necessary when a fee is compensatory, for every fee quid pro quo is not necessary. In the case of regulatory fee it is not necessary to establish the factum of rendering of service. Therefore, there is no question of regulatory fee being invalidated on the ground that quid pro quo has not been established. 18.4 In the case of State of Gujarat and others v. Akil Gujarat Pravasi V.S. Mahamandal and others reported in (2004) 5 SSC 155, the Hon'ble Supreme Court made following observations: 12. A fee is generally defined to be a charge for a special service rendered to individuals by some governmental agency. But the traditional view that there must be actual quid pro quo has undergone a sea change with the passage of time. Correlationship between the levy and the services rendered / expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice is rendered. An element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive. Xxxx 10 to 14 xxxxx 15. It is, however, contended by the petitioners that if this is a fee, the quantum of fee levied is excessive. It is also unreasonable because the manner in which the fee is levied bears no nexus to the purpose for which the fee is levied. The petitioners contend that a licence fee based on the rent payable in respect of the premises in which the activities of an eating house or a lodging house are carried on is not a proper basis for charging a fee because the rent charged for the premises has no nexus with the services rendered by the Corporation. 16. In the first place, it is not necessary that a fee should only be in the form of a lump sum fee. A fee can also be graded as in the present case. The Corporation has chosen the quantum of rent paid as the criterion for the quantum of fee to be charged. The rent under the relevant provisions of law in that connection, does have a nexus with the area in the occupation of the lodging house or eating house. In the case of activities carried on by these lodging house and eating hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended 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 George Walkem Shannon v. Lower Mainland Dairy Products Board, 1938 AC 708 : (AIR 1939 PC 36), it was observed (at pp. 721-722 of AC : at pp. 38-39 of AIR) : 'if licences are granted, it appears to be no objection that fees should be charged in order either to defray the costs of administering the local regulation or to increase the general funds of the Province or for both purposes... It cannot, as their Lordships think, be an objection to a licence plus a fee that it is directed both to the regulation of trade and to the provision of revenue.' It would, therefore, appear that a provision for the imposition of a licence fee does not necessarily lead to the conclusion that the fee must be only for services rendered. 15. This decision has been followed in several decisions, including the recent decision of this Court in Van Organic Chemicals Ltd. v. State of U. P. (1997 (2) SCC 715) and Bihar Distillery v. Union of India (1997 AIR SCW 1240 : AIR 1997 SC 1208). The H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulatory fee, no quid pro quo was necessary but such fee should not be excessive. The same distinction between regulatory and compensatory fees has been made in the case of P. Kannadasan v. State of T. N. (1996) 5 SCC 670 : (1996 AIR SCW 3189 : AIR 1996 SC 2560) as well as State of Tripura v. Sudhir Ranjan Nath ((1997) 3 SCC 665 : ( 1997 AIR SCW 1178 : AIR 1997 SC 1168). 32. From the conspectus of the views taken in the decided cases noted above it is clear that the impugned licence fee is regulatory in character. Therefore, stricto senso the element of quid pro quo does not apply in the case. The question to be considered is if there is a reasonable correlation between the levy of the licence fee and the purpose for which the provisions of the Act and the Rules have been enacted/framed. As noted earlier, the High Court has answered the question in the affirmative. We have carefully examined the provisions of the Act and the Rules and also the pleadings of the parties. We find that the High Court has given cogent and valid reasons for the findings recorded by it and the said findings do not suffer from any serious illegality. It is our considered view that the licence fee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce many years now. In that view of the matter, it is not possible to conclude that what is sought to be levied by the Corporation is tax in the garb of licence fee. 21.1 Section 244 of the B.P.M.C. Act provides for regulations as to sky-signs. Section 244 reads as follows: 244. Regulations as to sky-sings. (1) No person shall, without the written permission of the Commissioner, erect, fix or retain any sky-sign of the kind prescribed by rules whether existing on the appointed day or not. Such written permission [may be granted or renewed for a period not exceeding two years] from the date of each such permission or renewal, subject to the conditions that such permission shall be deemed to be void if:- (a) any addition is made to the sky-sign except for the purpose of making is secure under the direction of the City Engineer; (b) any change is made in the sky-sign, or any part thereof; (C) the sky-sign or nay part thereof fall either through accident, decay or any other cause; (d) any addition or alteration is made to, or in, the building, or structure upon or over which the sky-sign is erected, fixed or retained, involving the disturbance of the sky-sign or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctment of this section upon any land, building, wall, hoarding or structure in contravention of the provisions of sub-section (1) the owner or person in occupation of such land, building wall, hoarding or structure shall be deemed to be the person who has erected, exhibited, fixed or retained such advertisement in contravention of the provisions of this section, unless he proves that such contravention was committed by a person not in his employment or under his control or was committed without his connivance. (3) If any advertisement be erected, exhibited, fixed or retained contrary to the provisions of this section or after the expiry of the permission granted under sub-section (1) the Commissioner may, by notice in writing, require the owner or occupier of the land building, wall, hoarding or structure upon which the advertisement has been erected, exhibited, fixed or retained, to take down or remove the advertisement. (4) (a) The word structure in this section shall include an omnibus and any vehicle or moveable board used primarily as an advertisement or an advertising medium; and (b) the expression illuminated advertisement in this section shall not include an il ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e: Provided that, when an application has been made for the renewal of a licences or permission by the date specified therein, the applicant shall be entitled to act as if it has been renewed, pending the receipt of orders. (5) Every person to whom any such licence or written permission has been granted shall, at all reasonable times, while such written permission or licence remains in force, if so required by the Commissioner, produce such licence or written permission. (6) Every application for a licence or written permission shall be addressed to the Commissioner. (7) The acceptance by or on behalf of the Commissioner of the fee for a licence or permission shall not in itself entitle the person paying the fee to the licence or permission. 22. From the combined reading of statutory provisions noted hereinabove, it would appear that skysigns and advertisements within the limits of Municipal Corporation have to be regulated in certain manner. The Corporation has to ensure that the sky-signs is sufficiently secure. The Corporation has to ensure that the regulations contained in Section 244 pertaining to sky-signs are adhered to. Under Section 245 the Corporation enjoy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of funds out of the fees collected from the petitioners is being diverted for purposes other than for regulating of the activities, licence fee cannot be justified. It was contended that no direct or even indirect benefit is being received by the petitioners individually or as a class. It was further the case of the petitioners that formula adopted by the Corporation for collection of licence fee is discriminatory. It was suggested that the commercial value or the potential of advertisement sites cannot be the basis for charging licence fee. The licence fee ought to be determined uniformly and cannot vary according to capacity of the site to absorb such fee. 26. It was additionally contended that fee charged is excessive. Firstly, because the amount collected is far in excess of amount required by the Corporation for providing regulatory machinery. Secondly in other cities such as Rajkot, Surat and Vadodara in the State of Gujarat or even in cities outside State of Gujarat, such as Culcutta and Hyderabad such collection rates are much lower than those proposed by the Municipal Corporation of Ahmedabad. It was in this regard, contended that the petitioners as agents do not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent cites, to find out whether the rates prevailing in Ahmedabad are comparatively speaking really excessive. For want of material, it is not possible for me to undertake this exercise in the present case. 29. It is not in doubt that the Corporation spends certain amount towards providing regulatory machinery to regulate activities in question. It is also not in dispute that the amount of licence fee which is recovered from the petitioners and other similarly situated persons concerned, forms part of collection of the Corporation, portion of which is utilised for the said regulatory machinery. It is equally not in dispute that substantial portion of the earning is utilised for the purposes other than for specific regulatory controls. In fact the Corporation in the affidavit-in-reply has stated that part of the fund so collected is being utilized for providing better amenities, and facilities for the commuting public. It is contended that only when such facilities are provided that the petitioners are able to erect sites for exhibiting advertisements. 30. As noted above, strict fulfillment of quit pro quo is not necessary. A portion of funds collected by way of fee is utilis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shopping or for visiting different offices, banks or restaurants. It is only then that the private owners would be in a position to extract maximum possible revenue out of renting their sites for the purpose of exhibiting advertisements. Existence of good roads which are well maintained and well looked after cannot be separated from the potential of the property owners to earn maximum revenue from the proposed sites for advertisements. One does not need much thinking to appreciate that on roads such as Ashram Road and C.G.Road, all advertisers would be paying highest rentals prevailing in the city. Whereas in remote suburban areas where such development has not yet reached, the prevailing rates for advertisements would be substantially lower. Why should Ashram Road and C.G.Road receive such preferential attention by the Corporation is the question this Court cannot go into. Fact remains that these roads house some of the prime properties in the city and it is only on account of such commercial development, that existing property owners can claim highest rent by permitting companies to exhibit their advertisements. Therefore, money spent by the Corporation for building these roads, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er do not suggest that the apprehension of the petitioners is well founded. 32. One more aspect of the matter which cannot be lost sight of is that the rates of licence fee had remained stagnant since 1997. Nearly nine years have passed since then. Commercial activities in and around Ahmedabad have gone up. The city has been expanding, Population is increasing. Money has also devaluated. Business have gone up and earnings have increased. Property prices have shot up over past few years. The rates which were prevailing in the year 1997 cannot be hold good in the year 2006. Therefore, rate revision was imminent. What should have been the revised rate is the only question. This Court would not interfere with exercise of discretionary power of the Corporation when the powers are exercised in a reasonable manner. Unless it is pointed out that rates so revised are highly excessive, this Court would not interfere with the policy decision of the authority. This Court has no power to dissect the decision of the Corporation which is primarily in the nature of policy matter. Corporation enjoys certain discretion in this regard, I do not see any reason to interfere with the rate revision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation. 34. One aspect of the matter still remains outstanding. At the fag end of the arguments, it was contended on behalf of the petitioners that in certain areas of the city there are certain properties which are far away from any tender site. To compare such properties with tender sites situated at far away places would be unreasonable. For want of material on record in this regard, I refrain from making any conclusive observations. It would however appear that if the petitioners are correct in their factual averments, I see a valid point being made out. If the private property is situated far away from the tender site, with which it is compared for the charging of licence fees, the same would not stand the test of reasonableness. With these observations, I permit the petitioners to approach the Corporation in such individual cases to redress their grievances and to take corrective measure. The Commissioner shall examine such cases and take steps as may be found necessary bearing in mind the observations made hereinabove. 35. The learned advocate for the petitioners Shri Mehta submitted that Corporation itself has passed resolution No. 345 dated 29.06.2000 in which it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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