Vyapar Mandal, Mauaima Town v. State of U. P — 1990 DIGILAW 1135 (ALL)

JUDGMENT A.P. Misra, J. - The present writ petition is directed for a writ of certiorari to quash the draft proposal (Annexure I to the petition) and further directing the respondent Nos. I to 3 not to realise the taxes on the basis of draft proposal. 2. We have heard learned counsel for the parties, the challenge to the said imposition of tax of Tahbazari has been made by the petitioner on a number of grounds. The main ground has been that the State Government has not yet issued any gazette notification regarding the said imposition and in its absence such imposition is illegal. 3. The impugned resolution has been passed by the Town Area Mauaima constituted under the U. P. Town Areas Act, 1914 (hereinafter referred to as the Act). Under Section 14 of the Act a Town area committee is empowered to impose a tax upon the rent received by the proprietor or under proprietor, taxes upon the trades, fees for licencing hackney carriages and other fees including Tahbazari, which is subject matter of question in the present case. In this petition, we are concerned with the imposition of Tahbazari leviable under Section 14(2)(b) of the Act. Section 14 (2)(b) is reproduced below: "14(2)(b) Tahbazari leviable for the use of public land or public roads." In the present case, Tahbazari was levied by the Town Area Mauaima by means of notification dated 9th March, 1990 under which the taxes which were payable previously were enhanced, according to the petitioner, unreasonably and without any authority of law. 4. The main contention on behalf of the petitioner is that the imposition of the said Tahbazari could only be made by complying with the procedure as laid down under Sections 15-A and 15-B of the Act. It is not in dispute that if that section is made applicable then such a tax would be effective only if there is approval by the State Government. Under Section 15A of the Act the town area committee by means of resolution, subject to the rules made in this behalf by the State Government. specify the tax being one of the taxes described in Section 14, which it desires to impose, and further, the amount or rate leviable from any person or class of persons liable or to be made liable for the tax. specify the tax being one of the taxes described in Section 14, which it desires to impose, and further, the amount or rate leviable from any person or class of persons liable or to be made liable for the tax. The committee prepares draft rules, which it desires the State Government to make in respect of the matters referred to in Section 39. After they are published in the manner prescribed, the inhabitants of the town may file objections and the committee thereafter after taking into consideration the objections filed may finally settle the proposal. This draft rule is submitted to the prescribed authority and if there is non, the District Magistrate. Thereafter, under Section 15B the said authority may either reject the proposal or sanction them with or without modification and that draft rule is forwarded to the State Government. The State Government then frames rules in terms of the same and forwards it back to the District Magistrate and the committee then through a resolution directs the imposition of tax with effect from the date to be specified. According to the petitioner, admittedly this procedure having not been followed, the imposition of Tahbazari under Section 14 of the Act by the respondent Town Area is not sustainable in the eye of law. 5. On behalf of the respondent, it was contended that in view of the Notification Nos. 972/XI-871-E and 9741XI-574-E published in the United Provinces of Agra and Oudh Gazette date April 7, 1928 on exercise of the powers conferred by Section 38(1) of the Act, Sections 208(2)F(d), 298(2) H(h) to (1), 251, 299(1), 301(2) and 301(5) of the U.P. Municipalities Act, II of 1916 have been extended to all the town areas in U.P. in the modified forms set forth in the aforesaid notification. Reliance has been placed on Section 301(2) as modified by the notification, which is reproduced below: "A copy of the bye law, made by the panchayat shall be posted in conspicuous place within the town area, and no bye law shall take effect until it has been confirmed by the District Magistrate". The only difference is the word "panchayat" referred therein stands substituted by Act II of 1934. The only difference is the word "panchayat" referred therein stands substituted by Act II of 1934. The argument on behalf of the respondent in view of this is that the procedure as prescribed under the amended U.P. Town Areas Act, which has been made applicable to the town areas has been followed in this case and in view of this the challenge by the petitioner to the said imposition of tax, if approved by the District Magistrate, is not sustainable. 6. It is significant that Sections 15A and 15B have been introduced by means of Section 4 of U.P. Act XXIII of 1950. The question which comes up for consideration is whether after the introduction of the aforesaid provision Section 301(2) still holds good for the purpose of imposition of impugned Tahbazari as tax or fee or not. Learned counsel for the respondents relied on Section 38(2) of the Act, which reads : "where any enactment is so extended, any provision of this Act inconsistent with such extension or declared in the aforesaid notification to be inoperative shall cease to have effect so long as the extension is in force." It was urged, since that notification and the extension is in force even now, therefore, there being inconsistency between the procedure as mentioned under Sections 15-A and 15B of the Act and the procedure under Section 301(2) as aforesaid the earlier procedure under Section 15-1 and 15B will not hold good. 7. Having given our considered opinion we are of the view that this contention on behalf of the respondent is not sustainable. The language used in Section 38(2) of the Act is "where any enactment is so extended, any provision of this Act inconsistent with such extension.... to be inoperative". This will be applicable to all the enactments existing on the date when the notification came into play. However, it would not be available to the subsequent amendments made in the said enactment. Therefore, the contention, to the extent of inconsistency in the procedure of Sections 15-A and 15-B with Section 301(2) of the U.P. Municipalities Act being not applicable is not sustainable. As we have said above that such an interpretation is not possible on the language of Section 38(2) itself. Therefore, the contention, to the extent of inconsistency in the procedure of Sections 15-A and 15-B with Section 301(2) of the U.P. Municipalities Act being not applicable is not sustainable. As we have said above that such an interpretation is not possible on the language of Section 38(2) itself. Admittedly, Sections 15-A and 15B of the Act being introduced by means of an amendment brought in 1950, while the said notification was issued in the year 1928, the subsequent modification in the enactment would not be held to be inconsistent and inoperative in view of Section 38(2) of the Act. 8. The next argument raised on behalf of the respondent was that the procedure as prescribed under Sections 15A and 15B only speaks about taxes and, therefore, under Section 14, what is not a tax, which, according to the respondent even Tahbazari is not a tax, the procedure prescribed under Section 15B of the Act would not be applicable, but the procedure as laid down under Section 301(2), as aforesaid would be applicable. 9. On the other hand, learned counsel for the petitioner urged that the Tahbazari is, in fact, a tax and therefore, the procedure prescribed under Sections 15-A and 15-B should be followed. On behalf of the petitioner reliance has been placed on the case of Udyog Vyapar Mandal v. Shyam Sunder, 1990 All CJ 671 in which it was held (at p. 936 of All. L. J.) : "The term `taxes in the context in which it appears, has been used in a comprehensive sense so as to include all imports enumerated in Section 14 tahbazari being one of the taxes listed in Section 14 would thus clearly be covered by Section 15-A. A combined reading of Sections 14 and 15-A therefore leads irresistibly to the conclusion that the procedure laid down under Section 15A of the Town areas Act would be equally applicable to the imposition of Tahbazari". Reliance was also placed in the case of Sri Krishna Das v. Town Area committee, Chirgaon, (1990) 2 UPLBEC 813 (SC) in which it was held : "A fee is paid for performing a function. A fee is not ordinarily considered to be a tax: If the fee is merely to compensate an authority for services performed or as compensation for the services rendered, it can hardly be called a tax. A fee is not ordinarily considered to be a tax: If the fee is merely to compensate an authority for services performed or as compensation for the services rendered, it can hardly be called a tax. However, if the object of the fee is to provide general revenue of the authority rather than to compensate it, and the amount of the fee has no relation to the value of the services, the fee will amount to tax". However, we want to make it clear that so far in this case nothing has been pleaded, nor there is anything on record to come to the conclusion whether the impugned fees was placed in the general revenue or not. Therefore, it is not possible for us to come to any conclusive finding in this regard. 10. Next, reliance was placed in the case of Rahmat Ali v. The Town Area Committee Bahadurganj, District Ghazipur, 1984 UPLBEC 1110. While dealing with Sections 14, 15, 15A and 15-B of the Act the following observation was made : "If there is a challenge to the validity of the tax, the Town area committee is under an obligation to prove that the necessary steps were taken for framing the rules and the procedure laid down in the Act was complied with, where it was not followed and the date of imposition of tax was not published in the manner prescribed, the imposition of tax cannot be upheld". The proposition in this case can never be doubted, nor any stand contrary has been taken on behalf of the respondents. 11. Reliance was also placed in the case of Oriental Glass Works v. Municipal Board, Firozabad, 1980 UPLBEC 369 : (1980) All LJ NOC 21 in which it was held : "A fee is generally defined to be a charge for special service rendered to individuals by the Government or some other agency like a local authority or statutory corporation. The amount of fee is supposed to be based on the expenses incurred by the State in rendering the service..... The amount of fee is supposed to be based on the expenses incurred by the State in rendering the service..... Two elements of essentials in order that the payment may be regarded as fee, i.e. firstly, it must be levied in consideration of certain services which the individual accept either willingly and in the second place, the amount collected must be earmarked to meet the expenses of rendering the services and must not go to general revenue of the State to be spent for general public purposes." As we have said above, in the present case there is neither any pleading, nor there is anything on the record to come to the conclusion whether the services rendered was earmarked or whether it went in the general revenue or not. The proposition laid down in the aforesaid decision is merely a distinction between tax and fee on which there is a catena of decisions even by the Supreme Court and this Court. In this regard main reliance was placed on behalf of the respondent in the case of Ali Hasan v. Zila Parishad, Etawah, 1988 UPLBEC 258 . This is again a case where a detailed summarisation has been made of various authorities regarding distinction between tax and fee. This was a case under U. P. Kshettra Samitis and Zila Parishads Adhiniyam where levy of Tahbazari as ground rent of stall in a market was in question and it was held that such a levy was not illegal and a distinction has been made between tax and fee. 12. However, we are not satisfied with the aforesaid citations as the question involved in the present case is not fully covered by any of the decision relied upon by the learned counsel for the parties except Udyog Vyapar Mandal v. Shyam Sunder, 1990 All LJ 935 (supra). 13. 12. However, we are not satisfied with the aforesaid citations as the question involved in the present case is not fully covered by any of the decision relied upon by the learned counsel for the parties except Udyog Vyapar Mandal v. Shyam Sunder, 1990 All LJ 935 (supra). 13. On behalf of the respondent, it was urged that a finding has been recorded that the Tahbazari is a tax, but no reasons have been recorded for holding the same and, therefore reliance was placed on behalf of the respondent on the basis of decision in Ali Hasan v. Zila Parishad (supra), Tahbazari would be a fee and it would not be covered by the meaning of the word "tax" and thus the imposition of Tahbazari would be valid as it does not require the procedure as laid down under Section 15A of the Act. 14. However, looking to Chapter III of the Act we find that in Section 14 of the Act and the heading uses the words "imposition of town tax". Before it, Chapter III is headed with words "taxation and Town fund". We find, Sections 14 to 21 deal with various forms of taxation. Thereafter, there is a heading again "Town fund" starting from Section 22 to Section 25. Thus, this chapter has been splatted into two parts. one dealing taxation and the other dealing town fund. We further find that the imposition of tax in this case has been prescribed under various sub-headings, but significantly Section 14 (2) provides for taxes and fee and, in fact, Section 14(2), (a), (c) and (d) all start as fees except 14(2)(b) which deals with Tahbazari leviable for the use of public land or public roads. The question arises whether the procedure of Section I5-A of the Act would be confined only to Section 14(1) or it will be applicable to both Section 14(1) and 14(2), which includes fees also. It is significant that in Section 14(2), the legislature used the words "the committee may also impose the following taxes and fee". The words `Taxes and Fee' are very significant. Of this, interpretation may be given in two ways, either the legislature intended to specify that there are distinction between tax and fee. If that be so. It is significant that in Section 14(2), the legislature used the words "the committee may also impose the following taxes and fee". The words `Taxes and Fee' are very significant. Of this, interpretation may be given in two ways, either the legislature intended to specify that there are distinction between tax and fee. If that be so. then except (b) of sub section (2) of Section 14 which describes that the tahbazari leviable for the use of public land or public roads, the other sub-clauses of sub-section (2) of Section 14 deal with fee and thus it could be said that tahbazari would be tax. The other possible interpretation is that the words "tax" and "fee" could be interpolated and by way of clarification this has been used as to include both of them. Looking to the concept this Chapter III stating with Section 14 and followed by amendment to Sections 15A and 15 B, procedure for altering taxes Section 15 D, abolition or modification of tax and its assessments etc. by the State Government, Section 16, exemption from tax, Section 17, publication of assessment list in respect of tax, Section 18, appeals from assessment or levy of tax, Section 19, payment of tax, Section 20, dealing with writ of demand and Section 21 recovery of arrears of tax, all deal with taxation. Thereafter, town fund starts with Section 22 to Section 25. Thus, we feel it is not possible to give interpretation that if the entire sections from 14 to 21 are in respect of tax, but the legislature intended to exclude Tahbazari for the purpose of procedural law to be excluded from this chapter to be imposed by means of Section 301 (2) as modified by the aforesaid notification in the year 1928. We are deliberately not going into the question whether Tahbazari in strict sense is a fee or tax as has been stated by the parties, but we come to the conclusion, even if it could be said to be fee then not only sub-clause (b) of Section 14(2), but all sub-clauses (a), (c) and (d) of Section 14 (2) would all be cases to be covered with taxes and a procedure for the purpose of taxation would be as laid down under Sections 15A and 15B. Therefore, the meaning of the word "Tax" for the purpose of Chapter III in Section 14 would be to include Tahbazari also and therefore it is incumbent on the respondent town area to follow the procedure as prescribed under the aforesaid two sections. Coming to the said conclusion, we fell and accordingly quash the imposition of tax by the town area Mauaima as in the present case it is not in dispute even by the respondents that the procedure as prescribed under Sections I5A and 15 B having not been followed in this case, the imposition of tahbazari by the Town Area is illegal and not sustainable in the eye of law. 15. We accordingly quash the imposition of tax by the respondent in pursuance to the proposed draft mentioned in Annexure 1. However, we make it clear that this is without prejudice to the right of respondent town area to levy the said tax by following the procedure as laid down in Sections 15A and 15B of the Act. We further make it clear that if any tax has been imposed and realised by the Town area in pursuance to the said notification issued by the respondent Town Area it is open to the petitioner to apply for refund of the same to the said authority and the respondent will refund the same-in accordance with law. 16. With the aforesaid observations, this petition is allowed. Costs easy.