Vijai Kumar v. Zila Parishad, District Deoria — 1986 DIGILAW 405 (ALL)

JUDGMENT H.N. Seth, Actg. C.J. - Vide notification dated 23rd February, 1974 (Annexure- to the writ petition) Zila Parishad, Deoria framed certain bye-laws for regulating the running of brickkilns within the district. According to these bye-laws no person is entitled to run a brickkiln except in accordance with the conditions of a licence obtained by him from the Zila Parishad. The bye-laws further lay down that the licence for the purpose can be obtained on payment of licence fee of Rs. 150/- and that the same can be renewed on payment of annual fee of Rs. 125/-. 2. The petitioners, 46 in number, are the owners of brickkilns located at various places in the district of Deoria. They have, in this petition, questioned the validity of the bye-laws (Annexure-1 to the writ petition) inter alia on the following grounds :- (i) Zila Parishad, Deoria is not competent to frame any bye-law for regulating running of brickkilns in the district. (ii) The Zila Parishad did not follow the procedure prescribed for framing of Bye-laws by the U.P. Kshetra Samitis and Zila Parishads Adhiniyam, 1961 (hereinafter referred to as the Adhiniyam). (iii) (a) The provisions in the bye-laws obliging the licence to pay a sum of Rs. 150/- for obtaining a new licence and thereafter to have the same renewed on payment of an annual fee of Rs. 125/- stands vitiated inasmuch as the Zila Parishad neither renders any service to the brickkilns owners nor does it provide any facility to them (b) in the circumstances, imposition of the licence fee, in substance, amounts to levy of tax. The Zila Parishad is neither competent to levy such tax nor did it follow the procedure prescribed by the Adhiniyam for levying the same. The petitioners, therefore, prayed for an appropriate writ under Article 226 of the Constitution for quashing the said bye-laws and for directing the respondents not to enforce the same against them. 3. Zila Parishad, Deoria has contested the prayer made in the writ petition. In the counter-affidavit filed on its behalf, it has been asserted that the petitioners, while running the brickkiln were carrying on an offensive trade and the Zila Parishad is under S. 239(1) of the Act, competent to frame the bye-laws in respect thereof. 3. Zila Parishad, Deoria has contested the prayer made in the writ petition. In the counter-affidavit filed on its behalf, it has been asserted that the petitioners, while running the brickkiln were carrying on an offensive trade and the Zila Parishad is under S. 239(1) of the Act, competent to frame the bye-laws in respect thereof. The Parishad also claimed that the due procedure in framing of said bye-laws has been followed and that it had been rendering service and providing facilities to the brickkilns owners. According to the Parishad, most of the brickkilns are situated by the side of roads constructed and maintained by the Zila Parishad and that the brickkilns owners are using the same for transporting their products. In this connection Sri Raghav Singh Tax Collector of the Zila Parishad, Deoria his in para 13 of the counter- affidavit, claimed that the Zila Parishad is rendering following further services to the petitioners which can be taken into account in determining the propriety of the licence fee : i) There are 20 dispensaries in the rural areas in which workers employed in brickkiln get free medical facilities. ii) Families of labourers who come from out of city also get education in the school situate in rural area. iii) Smoke emitted by brickkilns and chimneys cause disease to groves as well as to human beings, Zila Parishad maintains a large number of staff such as vaccinators, health inspectors etc. for preventing disease caused by such smoke. iv) Zila Parishad provides medicines for preventing diseases in groves caused by smoke of chimneys. Sri Raghav Singh further claimed that during the years 1976-77 and 1977-78, sums of Rs. 21,820/- and Rs. 25,870/- respectively for each of the two years had been collected as licence fee from brickkiln owners and the expenditure incurred by the Zila Parishad in regulating the trade of brickkilns in these years amounted to Rs. 26,174-33 p. and Rs. 29,109/-. 4. When the petition came up for hearing, learned counsel for the petitioners did not press the grounds with regard to competence of the Zila Parishad to frame bye-laws under S. 239 of the Adhiniyam. He also did not press the objection with regard to the procedure adopted by the Zila Parishad in framing the impugned bye-laws. He confined his challenge to the bye-laws on the third ground viz. He also did not press the objection with regard to the procedure adopted by the Zila Parishad in framing the impugned bye-laws. He confined his challenge to the bye-laws on the third ground viz. that the Zila Parishad is not competent to realise any amount as licence fee from the petitioners unless it renders some special service to them and the amount of fee so realised from them has some reasonable nexus with the amount spent by it in rendering such service. He urged that any amount realised from the petitioners as licence fee unconnected with rendering of services amounted to imposition of tax which the Zila Parishad was not competent to do. He vehemently urged that the services which the Zila Parishad claims to be rendering to the licencees are illusory and that they cannot be considered to be special services to the class of persons from whom the licence fee is being realised. In fact these services partake the nature of general services which the Zila Parishad is otherwise bound to render to all the inhabitants residing in the district. Thus, main thrust of the submission made by the learned counsel is directed towards questioning the legality of the provision of bye-laws relating to prescription of licence fee on the ground that inasmuch as the said licence fee has no nexus with the services rendered by the Zila Parishad. It in fact amounts to levying of tax which, in the instant case, has been levied by the Zila Parishad without authority. 5. Section 143 of the Adhiniyam lays down that a Zila Parishad or Kshettra Samiti may charge a fee to be fixed by the bye-law for any licence, sanction or permission which it is entitled or required to grant by or under the Adhiniyam. Accordingly, it cannot be doubted that the legislature has empowered the Zila Parishad to frame bye-laws prescribing the amount of fee which a person is to pay for obtaining a licence for running brickkiln as also for getting such licence renewed. Section 119 of the Adhiniyam empowers the Zila Parishad to levy circumstance and property tax as also any other tax which the state legislature is empowered to levy under the Constitution, provided it has been authorised to do so by the State. Section 119 of the Adhiniyam empowers the Zila Parishad to levy circumstance and property tax as also any other tax which the state legislature is empowered to levy under the Constitution, provided it has been authorised to do so by the State. Entry No. 60 of list II of seventh schedule of the Constitution empowers the State to tax freight, trade and calling. Accordingly the Zila Parishad is entitled to tax a trade if it has been permitted by the State to do so after following the procedure for the purpose prescribed in the Adhiniyam. The real controversy raised in this connection concerns the question as to whether the licence fee imposed by the Zila Parishad in the instant case is a levy in the nature of fee contemplated by S. 143 of the Adhiniyam or it is in fact a tax under the nomenclature of fees, invalidly imposed by the Parishad. 6. The question with regard to distinction between tax and fee has been elaborately dealt with by the Supreme Court in the case of the Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, AIR 1954 SC 282 . In this case the court, after examining the matter in detail and also in the light of the provisions contained under Article 110 of the Constitution, came to the conclusion that there is no generic difference between a tax and fee. It is really the taxing power of the State that manifests itself in three different forms known respectively as special assessment, fee and tax. Our Constitution has, for legislative purposes, made a distinction between a tax and a fee. The Court also pointed out that as indicated by Article 110 of the Constitution ordinarily there are two classes of cases where the Government imposes fees upon persons. In the first class of cases the Government simply grants a permission or a privilege to person to do something which that person would otherwise not be competent to do and extracts fee either heavy or moderate from that person in return for the privilege that is conferred. In other class of cases the Government does some positive work for the benefit of persons and the money is taken as return for the work done or the services rendered. In other class of cases the Government does some positive work for the benefit of persons and the money is taken as return for the work done or the services rendered. The Court also pointed out that in cases falling in the second category i.e. where the fees are being charged for services rendered, it is absolutely necessary that the levy of fee should on the face of legislative provision, be correlated to the expenses incurred by the Government in rendering of service. The fee so realised should be set apart and specifically for the performance of such work and should not be merged in the public revenue for the benefit of general public. So far as the fees falling the first category are concerned, the Court made the following observations : "A most common illustration of this type of cases is furnished by the licence fees for motor vehicles. Here the costs incurred by the Government in maintaining an office or bureau for the granting of licences may be very small and the amount of imposition that is levied is based really not upon the costs incurred by the Government but upon the benefit that the individual receives. In such cases, according to all the writers on public finance, the tax element is predominant, vide Seligman's Essays on Taxation, page 409, and if the money paid by licence holders goes for the upkeep of roads and other matters of general public utility, the licence fee cannot but be regarded as a tax." Clear implication of aforementioned observation is that even in cases where the State levies a charge, by whatever, name called, for granting of licenses and permitting a person to do what he otherwise would not be entitled to do, it would partake the nature of fees only if it is correlated to the expenses incurred by the State in granting such licence. If the charge is correlated neither to the expenditure incurred in this regard nor to the benefit which an individual derives, the levy should ordinarily be treated to be a tax. The Court further indicated that in order to qualify as fee, the money obtained by the levy had to be set apart and appropriated specifically for the performance of such work and should not be merged-in the public revenues for the benefit of general public. 7. The Court further indicated that in order to qualify as fee, the money obtained by the levy had to be set apart and appropriated specifically for the performance of such work and should not be merged-in the public revenues for the benefit of general public. 7. In the case of Nagar Mahapalika, Varanasi v. Durga Das Bhattacharya, AIR 1968 SC 1119 the Supreme Court was required to examine the validity of annual licence fees of Rs. 15/- and Rs. 5/- levied on rickshaw owners and rickshaw drivers respectively by the Municipal Board, Varanasi. The Court fully endorsed the view in this regard expressed by it in the case of the Commissioner, Hindu Religious Endowments, Madras ( AIR 1954 SC 282 ) (supra). It examined the scheme of the U. P. Municipalities Act and observed that Chapter V thereof enabled the Municipal Board to levy taxes falling in various categories specified in S. 128 thereof, which included right to impose tax on vehicles other than motor vehicles being plied on hire and also prescribed the procedure to be followed by the Board for making such imposition. Chapter VII of the Act dealt with the powers of the Board with regard to buildings, public drains and streets etc. Chapter VIII deals with other powers of the Board in respect of markets, slaughter-houses, sale of food, public safety, sanitation and prevention of disease, inspection, entry, search, rent and charges etc. Section 294 which occurs in the said Chapter runs thus : "294. The board may charge a fee to be fixed by bye-law for any licence, sanction or permission which it is entitled or require to grant by or under this Act." 8. Section 298 thereafter prescribes the procedure for framing of bye-laws and enumerates the matter in respect of which the bye-law can be framed by the Board. 9. The case of the Municipal Board was that the impugned licence fee was not a fee in the sense that the Board had to give quid pro quo to the persons from whom it was being charged. According to it, the licence fee was in the nature of tax which the Board was entitled to levy. It was, therefore, not necessary for the board to show that there existed a correlation between the amount or licence fee and the services rendered by it. According to it, the licence fee was in the nature of tax which the Board was entitled to levy. It was, therefore, not necessary for the board to show that there existed a correlation between the amount or licence fee and the services rendered by it. According to it, the levy of such a fee was fully competent under S. 294 of the Act which contemplated not only levy of fee in the sense of a fee for which quid pro quo is provided but also in the sense of fees in which the element of tax predominated. The Supreme Court, after examining the scheme of the Act, repelled the submission made on behalf of the Board and held that there was logical and clear cut division of the Act into several chapters and taxes by whatever designation they may be called are all comprehended and dealt with in Chapter V and by that Chapter alone. What was permitted to be imposed by S. 294 which occurred in Chapter VIII was only a fee in the restricted sense as distinguished from a tax. The Act contemplated only two categories of imposts i.e. taxes enumerated in Chapter V and fees mentioned in Ss. 293, 293A and 294 of Chapter VIII. The scheme of the Act did not contemplate that there was to be third category of impost of licence fee in the nature of tax for which the procedure contemplated by Chapter IX was applicable. The Court ruled that the scheme of Chapter VIII of the Act showed that the provisions contemplated therein were meant for the purpose of regulation of certain trades and professions and for maintenance, of public safety and convenience of the inhabitants of the Municipality. The fees mentioned in S. 294 were meant to be imposed for the purpose of regulation of trade and professions and for rendering services. It was not contemplated by the Act that licence fees imposed by S. 294 should be merged in the public revenues of the Municipality and should go for the upkeep of the roads and other matters of general public utility. It was in the circumstances, not permissible for the Municipal Board to impose a tax under the guise of a licence fee without following the mandatory procedure for imposition of the taxes prescribed by Ss. 131 to 135 of the Act. 10. It was in the circumstances, not permissible for the Municipal Board to impose a tax under the guise of a licence fee without following the mandatory procedure for imposition of the taxes prescribed by Ss. 131 to 135 of the Act. 10. It is significant to note that like the U. P. Municipalities Act, the Kshettra Samiti and Zila Parishad Adhiniyam also confers the power on the Parishad to impose taxes and prescribes the machinery for levying the same (Chapter VII). Like S. 294 of the U. P. Municipalities Act, S. 143 of the Adhiniyam enables the Parishad to charge fees to be fixed by bye-law for any licence, sanction, permit which it is entitled or required to grant by or under the Act. Again like the provisions contained in U. P. Municipalities Act, S. 239 of the Adhiniyam empowers the Zila Parishad to frame bye-laws for the purposes of promoting or maintaining health, safety and convenience of the inhabitants and for furtherance of the Administration of the Act in the Khand and the district. Sub- section (2)-E specifically enables the Parishad to frame bye-laws for regulating offensive trades. It will thus be seen that in regard to imposition of tax and levy of fees, the provisions contained in Kshettra Samitis and Zila Parishad Adhiniyam are in pari materia with the corresponding provisions contained in the U. P. Municipalities Act, 1916. Accordingly applying the ratio of the Supreme Court decision in the case of Nagar Mahapalika, Varanasi AIR 1968 SC 1119 (supra), it has to be held that under the Kshettra Samiti Adhiniyam also the Zila Parishad has been empowered to frame bye-laws and to levy only such licence fee under S. 143 of the Adhiniyam which is correlated either with the extent of services rendered by the Parishad to the licensee or to the expenses incurred by it in granting of the licences. In absence of such a correlation, it will have to be taken that such levy amounts to imposition of tax which can be imposed only by following the procedure laid down in chapter VII of the Adhiniyam. 11. In absence of such a correlation, it will have to be taken that such levy amounts to imposition of tax which can be imposed only by following the procedure laid down in chapter VII of the Adhiniyam. 11. Learned counsel appearing for the Parishad, however, contended that the view expressed by the Supreme Court in the cases of the Commissioner, Hindu Religious Endowments, Madras ( AIR 1954 SC 282 ) (supra) and Nagar Mahapalika, Varanasi ( AIR 1968 SC 1119 ) (supra) held the field till the year 1980 when the philosophy of fee underwent a remarkable change including a change in the traditional trend of quid pre quo. He urged that so far as the keeping of the amount in a separate account for showing that it was being spent on services to the community on whom the fee had been levied is concerned it has, in paragraph `25' of the judgment in the case of Southern Pharmaceutical and Chemicals v. State of Kerala AIR 1981 SC 1863 , been observed by the Supreme Court thus :- "It is now increasingly realised that merely because the collections for the services rendered or grant of privilege or licence, are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure for rendering the service is not by itself decisive. That is because the Constitution did not contemplate it to be an essential element of a fee that it should be credited to a separate fund and not to the consolidated, fund. It is also increasingly realised that element of quid pro quo stricto senso is not always a sine qua non of a fee. It is needless to stress that element of quid pro quo is not necessarily absent in every tax". He also referred us to the decision of the Supreme Court in the case of Municipal Corporation of Delhi v. Mohd. Yasin AIR 1983 SC 617 wherein the Supreme Court, after pointing out that there was no generic difference between a tax and a fee held that neither the element of compulsion nor the fact that the money collected does not go into a separate fund but goes into consolidated fund necessarily indicates that the impost is a tax as distinguished from fee. It however, recognised that generally speaking, "to be a fee" the impost must have relation to services rendered or advantages conferred, and observed that for this purposes it was not necessary that such relationship must be direct. In its opinion even a casual relationship between, the impost and the services would, in this regard, be sufficient. It also pointed out that in such cases even if the primary object of the impost was regulatory in nature, but then if the impost had a nexus with the special benefit or advantage to the payer, it would not derogate from its being treated as fee; and that for this purpose it was neither necessary nor expedient to weigh too meticulously the cost of services rendered so as to evenly (sic) the two. A broad correlationship was all that was required and that quid pro quo in the strict sense was not the only and only true index of fees. The court further elucidated its opinion in regard to the concept of fee and tax in the case of City Corporation of Calicut v. T. Sadasivan, AIR 1985 SC 756 wherein following submissions were made before it in the alternative :- 1. The trend of authorities reveal that the traditional view about fee has undergone a sea-change and that the demarcating line between tax and fee has become so blurred as to have almost become invisible. 2. Even according to traditional view the Corporation had, in that case, placed enough material on record to show that the respondents had been and were receiving services or benefit in return for the fees levied and paid by them. The court observed that in the context it was not necessary for it to examine the alternative submission save saying in passing that the payers of the fees did enjoy certain benefits from the functions discharged by the Corporation and opined that in view of three recent decisions of the court in the case of Municipal Corporation of Delhi v. Mohd. Yasin AIR 1983 SC 617 ; Sreenivasa General Traders v. State of Andhra Pradesh, AIR 1983 SC 1246 and M/s. Amar Nath Om Prakash v. State of Punjab, AIR 1985 SC 218 the first submission mentioned above have to prevail. Yasin AIR 1983 SC 617 ; Sreenivasa General Traders v. State of Andhra Pradesh, AIR 1983 SC 1246 and M/s. Amar Nath Om Prakash v. State of Punjab, AIR 1985 SC 218 the first submission mentioned above have to prevail. It expressed its conclusions thus :- "It is thus well-settled by numerous recent decisions of this Court that the traditional concept in a fee, of quid pro quo, is undergoing a transformation and that though the fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct, a mere casual relation may be enough. It is not necessary to establish that those who pay the fee must receive direct benefit of the services rendered for which the fee is being paid. If one who is liable to pay receives general benefit from the authority levying the fee the element of service required for collecting fee is satisfied. It is not necessary that the person liable to pay must receive some special benefit or advantage for payment of the fee.". The Court then went on to consider the question as to whether City Corporation of Calicut was justified in charging the licence fee for the use of premises and land for soaking coconut husk. It applied the dictum formulated by it thus :- "It is incontrovertible that the Corporation is rendering numerous services to the persons within its area of operation and that, therefore, the levy of licence fee as fee is fully justified. Soaking coconut husk emit foul odour and contaminates environment. The Corporation by rendering scavanging services, carrying on operations for cleanliness of city, to make habitation tolerable is rendering general services of which amongst others appellants are beneficiaries. Levy as a fee is thus justified.". A careful scrutiny of the observations made by the Supreme Court in the aforementioned cases goes to indicate that the rigid test laid down by it in earlier cases for determining whether a impost qualifies as a fee or tax, is not fully apt and its validity has, to some extent, been eroded. The principal criteria for the purposes, as enunciated in earlier cases, namely, that in order to qualify as a fee. the impost must have relation to services rendered or advantages conferred, however, still hold good. The principal criteria for the purposes, as enunciated in earlier cases, namely, that in order to qualify as a fee. the impost must have relation to services rendered or advantages conferred, however, still hold good. It has, however, been clarified that such connection need not be direct and a mere casual relationship may in this regard be sufficient. For this purpose it is not necessary to establish that those who pay the fee must receive direct benefits and the test would stand satisfied even in cases where the payer of the fees receives some general benefit. An example of what can be regarded as general and casual connection between payment of fees and services rendered so as to qualify the impost as a fee, is to be found in the case of City Corporation of Calicut ( AIR 1985 SC 756 ) (supra). In that case the City Corporation of Calicut made provisions making it obligatory for persons using land or premises for soaking of coconut husk to take out licences and to pay licence fee for the use thereof. Such persons questioned the validity of the levy contending inter alia that the levy could not be justified as a fee as neither any service was being rendered by the Corporation nor any special advantage or favour was being conferred by the Corporation in favour of persons from whom the fee was being collected. There was thus no quid pro quo and the relevant provisions of the Act do not enable the Corporation to levy such fee. The Supreme Court repelled the plea by observing that the Corporation was in fact rendering numerous services to persons within its area of operation and, therefore, the licence fee as fee was fully justified. It pointed out that soaking coconut husk emitted foul odour and contaminated environment. The Corporation, by rendering scavanging services, carrying on operation for cleanliness of city, to make habitation tolerable, was rendering general service of which amongst others the persons carrying on the trade were the beneficiaries and that the levy was accordingly justified. It pointed out that soaking coconut husk emitted foul odour and contaminated environment. The Corporation, by rendering scavanging services, carrying on operation for cleanliness of city, to make habitation tolerable, was rendering general service of which amongst others the persons carrying on the trade were the beneficiaries and that the levy was accordingly justified. The aforementioned observations go to indicate that in the opinion of the Supreme Court, for justifying a levy as a fee, it is necessary that there had to be a nexus between the imposed and the services rendered and that such nexus would also be there in cases where the activity for which persons are required to pay fee necessitates rendering of a particular services by the authority which it had otherwise been rendering, and the payer had been receiving the benefit thereof in the company of others. It would in this regard be sufficient if it is shown that there is some reasonable connection between the impost and the necessity of rendering of services as a consequences of the activity for the carrying on of which the fee is being charged. 12. Coming now to the case before us we find that it cannot be doubted that running of brick-kilns in an area is an offensive trade. The smoke emitted by the brick-kilns and their chimneys pollutes the atmosphere and cause diseases which have to be combated by giving medical treatment. The dispensaries established by the Zila Parishad have along, with other matters, also to tackle such diseases and the benefit thereof goes to the inhabitants of the area including the brickkiln owners and their employee. In the counter-affidavit it has been asserted that Zila Parishad maintains a large number of staff of vaccinators, health inspectors etc. for preventing diseases caused by such smoke. It has also been asserted that most of the brick-kilns are situated on the roads constructed and maintained by Zila Parishad which are being used by brick-kilns owners for transporting the bricks manufactured by them. It cannot be doubted that the use of the Zila Parishad road by brick-kiln owners for purposes of transporting bricks manufactured by them causes an additional burden on those roads. It cannot be doubted that the use of the Zila Parishad road by brick-kiln owners for purposes of transporting bricks manufactured by them causes an additional burden on those roads. In the circumstances if the amount collected from the brick-kiln owners is also utilised towards maintenance and upkeep of the road over which the commodity manufactured by the brick-kiln owner passes, it cannot be said that the amount so collected has no nexus with the services rendered by the Zila Parishad in this regard. 13. In the result we feel satisfied that there is a nexus between the impugned fees levied by the Zila Parishad and the services rendered by the Zila Parishad and the impost is justified as fees. This conclusion, arrived at by us, is in consonance with the view expressed by a Division Bench of this Court in the case of Shyam Bihari Mathur v. Zila Parishad. Mainpuri 1984 All LJ 660 wherein it was observed thus :- "Thus where the licence fee was levied by the Zila Parishad on the petitioner, who was running a cattle fair and market within its local limits and the Zila Parishad also constructed one Kilometer long metalled road to connect the village where the petitioner was running his cattle fair and market, besides the facilities in the shape of dispensaries for providing medical facilities to the animals which were brought for sale in the fairs and markets and the Zila Parishad had also undertaken the drinking water project, the levy of licence fee could not be said to be unjustified. The facts that the dispensaries and the road were in existence from before the imposition of the fee in question would not affect the validity of the fee, for the Zila Parishad has to incur expenditure over the maintenance of the same." 14. In the result having regard to the amount of licence fee imposed by the Zila Parishad and the nature of services which are being rendered by it, we do not feel satisfied that the impost has no nexus with the services rendered and that it does not qualify as fee. The petitioners have thus failed to establish that the imposition of licence fee by the Zila Parishad on the brick-kiln owners suffers from any infirmity. 15. The petition, therefore, fails and is dismissed. Parties are directed to bear their own costs.