High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 28.01.2009C O R A M :THE HONOURABLE MR. JUSTICE K. CHANDRUW.P.Nos.4876 of 1999 and 2869 of 1998Chennai Regional Petroleum Dealers'Association, rep.by its SecretaryMr.P.Chander, No.30, PoonamalleeHigh Road, Chennai -600 003... Petitioners in W.P.No.4876/1999All India LPG Distributos'Federation (SR),rep. by its General Secretary,Mr. K. Gurumurthy356/B, West Avenue, M.K.B. Nagar, Chennai – 600 039... Petitioners in W.P.No.2869/1998-vs-1.The Corporation of Chennai, rep.by its Commissioner,Rippon Buildings, Park Town,Chennai-600 003.2.The State of Tamil Nadu rep.byits Secretary to Government,Municipal Administration Department,Fort St.George, Chennai-600 009. .. Respondents in both W.Ps.PRAYER : W.P. No.4876/1999 has been filed under Article 226 of theConstitution of India praying for the issuance of a writ ofcertiorari calling for the records relating to the proceedings of thefirst respondent in the resolution dated 24.3.1960 passed by theChennai Municipal Corporation (i.e.) the first respondent hereinenhancing the schedule of fees chargeable under section 365(ii) ofthe Madras City Municipal Corporation Act enhancing the licence feecharged for the petrol bunk from Rs.300/- to Rs.6000/- and forservice stations from Rs.540/- to Rs.9000/- as a flat rate https://hcservices.ecourts.gov.in/hcservices/ irrespective of the horse power used in so far as the members of thepetitioner Association are concerned and to quash the same. W.P. No.2869 of 1998 has been filed under Article 226 of theConstitution of India, praying to issue a writ of Certiorari, to callfor the records relating to the proceedings of the first respondentculminating in the issue of the impugned order No.F.2/1859/97 dated5.12.1997 issued by the first respondent herein, Corporation ofMadras, which is purported to be under Section 365(2) of the MadrasCity Municipal Corporation Act, 1919 and to quash the same.For petitioner : Mr. D.R. SivakumarFor respondents: Mr. V. Bharathidasan (R1) Mr.A.Arumugam, Spl.G.P. (R2)O R D E R The petitioner in W.P. No.4876 of 1999 is a registeredAssociation of petroleum dealers at Chennai. Though it is claimedthat it has 284 members, the names and address of 143 of its membersis furnished in the typed set filed along with writ petition andfound at page Nos.29 to 35. It is claimed that the present writpetition has been filed on behalf of those members in arepresentative capacity. In the present writ petition, the challengeis to the resolution passed by the first respondent-Corporation ofChennai dated 24.3.1916 passed under Section 365 (2) of the MadrasCity Municipal Corporation Act, 1999 (For short "MCMC Act").2. The petitioner had not stated as to why they have waitedfor challenging the said resolution after a period of 39 years. Onlyit is stated in the affidavit that they are forced to come to theCourt only because the Officials of the first respondent-Corporationstarted demanding the enhanced rate at the time of renewal of theirlicence only in the yea 1999 and so far they have not claimed theenhanced rate and there was no occasion to challenge the same. 3. It is an admitted case that under Section 365(ii) of theMCMC Act, the first respondent-Corporation Council passed aresolution, enhancing the scale of fees payable. Under the head, LD(dangerous trades), dealing in petroleum and petroleum products havebeen brought under the licencing system. In the present case, theimpugned resolution dealt with automobile fuel supply and servicestations under two heads and gave the revised licensing fee, whichare as follows:- https://hcservices.ecourts.gov.in/hcservices/

1. Each Automobile fuel 9000.00Per annum, each supply and service station station where fuel is supplied and vehicles are serviced.2. Each Automobile Fuel6000.00 -do-Supply Station wherefuel alone is supplied4. When writ petition was admitted on 15.4.1999, this Courtpassed the following interim order:-"In similar matter, this Court in W.M.P.No.4249/1998 in W.P. No.2869/98 dated 6.8.98granted interim order on certain conditions.Following the said order, there will be aninterim stay on condition that the members of thepetitioner-Association shall pay the existinglicence fee and furnish bank guarantees for thedifference between existing licence fee and theenhanced licence fee within four weeks from todayfailing which the interim stay shall standautomatically vacated. Even for the yearcommencing from 1.4.99 the abovesaid conditionhas to be complied with failing which the interimstay shall stand automatically vacated."5. The petitioner-Association filed an application formodifying the said conditions on the ground that the conditionimposed by this Court was onerous and therefore, it must be relaxed.However, the said modification petition was dismissed by this Courton 31.3.2000. It is not clear as to whether the petitioners havepaid the enhanced rate in spite of their being no interim order intheir favour. A perusal of the modification petition shows that theyhave been paying only Rs.300/- in respect of automobile fuel supplyoutlets and in respect fuel supply-cum-service stations at Rs.540/-.6. On notice from this Court, the first respondent-Corporation has filed a counter affidavit dated nil (..August, 1999)as well as an additional counter affidavit dated 15.4.1999. It isstated in the counter affidavit that in spite of the council'sresolution, since the local body was not collecting the enhanced fee,there was audit objection from both local fund audit as well asA.G.'s office. Even the plea of discrimination in respect of othertrades may not be correct. Further it is also stated that nearly 22petrol bunks in the city are paying the enhanced rate. The power ofCorporation to enhance the fee cannot be challenged only on the https://hcservices.ecourts.gov.in/hcservices/ ground that it may affect the business of the members of thepetitioner-Association. 7. Mr. D.R. Shivakumar, learned counsel for the petitioner-Association submitted that the action of the Corporation in revisingthe fee from Rs.300/- to Rs.6000/- (20 times) is arbitrary andviolative of Article 14 of the Constitution. Earlier, theCorporation was charging on the basis of the horse power of themotors used. But, presently they have fixed a flat rate on allbunks. He also submitted that the other trades are not charged asmuch as the petroleum outlets. He further submitted that the membersof the petitioner-Association were only intermediaries and gettingcommission for the sale of petroleum products. The petroleumCompanies have not substantially increased the commission to themand if they pay the enhanced fee, they will be in a disadvantageousposition in the trade.8. Learned counsel placed reliance upon the judgment of theSupreme Court reported in the case of BHAGWAN DASS SOOD V. STATE OFH.P. AND OTHERS ((1997) 1 Supreme Court Cases 227). He placedreliance upon the paragraphs 35 and 36, which are as follows:-" 35. By a series of decisions of this Court,reference to which have already been made, theprinciples for upholding constitutional validityof imposition of levy of market fee in a notifiedmarket area have been laid down. The AgriculturalProduce Marketing Acts have been enacted byvarious State legislatures. The beneficiallegislation is aimed to prevent exploitation ofgrowers of agricultural produce in the hands ofdealers, traders and middlemen. There iscommonness, by and large, in such legislations.The Marketing Act and the Rules framed thereunderusually contain provisions for establishingorganised market and market yards, provisions toensure sale and purchase of agricultural produceat a fair price to be notified, to ensure correctweighment of such produce brought and sold in themarket yards, to ensure storage of agriculturalproduce by giving reasonable advances against theproduce stored in the godowns of the marketcommittee so that distress sale at a lower priceat the time of harvesting is prevented for thebenefit of farmers and agriculturists, to provideroads and pathways for transport of agriculturalproduce to organised market yards, to disseminateinformation to the farmers about improvedtechniques in cultivation, to ensure supply of https://hcservices.ecourts.gov.in/hcservices/ good quality seeds, manures, agriculturalimplements etc. for intensive cultivation, toprovide place of rest for farmers bringing theirproduce in the organised market yards afterensuring sanitary conditions in and around suchorganised market yards etc. etc. In order toensure generation of funds in the hands of marketcommittee and Boards constituted under theMarketing Act, so that organised markets andmarket yards are established with necessaryinfrastructures involving substantial cost, theMarketing Act invariably contains provisions forimposition of levy of market fee at a specifiedrate on the traders and dealers in specifiedagricultural produce operating within thespecified market area and in principal and sub-market yards established by the market committee.The dealers and traders are required to takelicence for their trading activities in such areain respect of specified agricultural produce sothat their trading activities are monitored andcontrolled and they may not escape the liabilityof imposition of market levy.36. Levy of market fee being essentially afee and not a tax, such imposition of levy ofmarket fee necessarily inheres in it the essenceof quid pro quo between the fees levied andservices returned to the payer of such fees. Whatshould be the extent of service rendered to thepayers of levy of market fees so as to keep suchlevy of fees within the bounds of acceptedprinciple of fee involving existence of reasonablequid pro quo has been a vexed question agitatedbefore various High Courts including this Courtfrom time to time. Some of the decisions of thisCourt on this question have been indicated. Thelegal position regarding constitutional validityof levy of market fee may be summarised asfollows:(i) Existence of quid pro quo is essentialfor retaining the character of ‘fee’ in the matterof levy of market fees.(ii) Such quid pro quo is not to be reckonedwith any mathematical precision with reference toquantum of fees realised by imposition of levy andthe percentage of such fees spent for establishingmarket yards, construction of variousinfrastructures etc. and providing variousamenities as envisaged under the Marketing Act and https://hcservices.ecourts.gov.in/hcservices/ the Rules framed thereunder for effectiveimplementation of aims and objectives under theAct.(iii) The service to be rendered to thepayers of market fee must be real and notillusory.(iv) Such service must have an objectivebasis and have a direct link and not be remote inits effect.(v) It is not necessary that imposition oflevy is to be effected only on establishment ofprincipal and sub-market yards by completing theinfrastructures required for such establishment ofmarket and sub-market yards. Such constructionbeing time-consuming and expenditure-oriented, itwill be sufficient to justify valid imposition oflevy if it is demonstrable that after notifyingmarket area, effective steps not in contemplationbut in reality have been taken to identify marketand sub-market yards and schemes for establishmentof such market or sub-market yards have in factbeen put to action and the market fees levied andrealised are being ploughed back for theadvancement of the purpose for which market feeshave been levied and realised.(vi) In deciding the question of rendering ofa real and not illusory service in discharging theobligation emanating from quid pro quo, to levy ofmarket fee, no strait-jacket formulae can beevolved. Fact-situation in the matter ofestablishment of principal and sub-market yardsand the practical feasibility of construction ofinfrastructures, roads, pathways etc. forestablishment of such market yards within a time-frame and in the light of financial constraints isbound to vary depending on various factorsincluding imponderables. It is, therefore,essentially necessary to take a pragmatic approachto the problems associated with establishingmarket and sub-market yards with necessaryinfrastructures etc. and accompanying facilitiesand amenities to be made available to traders andproducers coming to such yards, in order to decidewhether concrete steps have been translated intoaction with reasonable sincerity in implementingthe schemes envisaged under the Marketing Act andthe Rules framed thereunder. https://hcservices.ecourts.gov.in/hcservices/

9. It is not clear as to why the judgment rendered on thequestion of levy of market fee collected by the Regulated MarketingCommittees set up under a state legislation is cited at the Bar. Thefee charged by a local body such as the first respondent though maynot be a tax, but it is a regulatory-cum-compensatory fee. 10. Thereafter, the learned counsel placed reliance uponanother judgment of the Supreme Court relating to licensing feecharged by the Hyderabad Muncipal Corporation. In that case, theSupreme Court upheld the charge of licensing fee based upon monthlyrents collected in lodging houses and hotels. The learned counselplaced reliance upon paragraph 16 of the judgment of the SupremeCourt in Secunderabad Hyderabad Hotel Owners' Assn. v. HyderabadMunicipal Corpn., (1999) 2 SCC 274). The said paragraph reads asfollows:- "16. In the first place, it is not necessarythat a fee should only be in the form of a lumpsum fee. A fee can also be graded as in thepresent case. The Corporation has chosen thequantum of rent paid as the criterion for thequantum of fee to be charged. The rent under therelevant provisions of law in that connection,does have a nexus with the area in the occupationof the lodging house or eating house. In the caseof activities carried on by these lodging housesand eating houses, the area in their possessionhas a direct nexus with the extent of businessactivities. The need for cleanliness and hygiene,the generation of garbage and the extent ofregulation that may be required depend upon thesize of the premises which in turn controls theextent of activity. Undoubtedly, in a given case,if the premises are old, the rent may be less butthat does not mean that classifying premises onthe basis of the rent paid has no connection withthe quantum of fee charged."However, the learned counsel failed to note that in the very samejudgment, the Supreme Court has held that it was not possible toformulate a definition that it would be applicable to all cases. TheSupreme Court also held that the regulatory fee were levied not onlyfor the services rendered but also for the purpose of monitoring thelicencees so as to ensure they comply with the terms and conditionsof the licence. Therefore, it is necessary to refer paragraphs 10and 12 from the very same judgment and it reads as follows:-"10. In the case of Commr., H.R.E. v. SriLakshmindra Thirtha Swamiar of Sri Shirur Mutt1 https://hcservices.ecourts.gov.in/hcservices/ one of the earliest cases dealing with thequestion whether the levy is a fee or a tax, thisCourt held that the Constitution and, inparticular, the legislative entries in ScheduleVII of the Constitution make a clear distinctionbetween a tax and a fee. This Court reproduced thedefinition of what “tax” means, given by Latham,C.J. of the High Court of Australia in Matthews v.Chicory Marketing Board2 (CLR at p. 276) (seeat p.1040). “A tax” according to the learnedChief Justice, “is a compulsory exaction of moneyby public authority for public purposesenforceable by law and is not payment for servicesrendered”. A fee, on the other hand, is generallydefined to be a charge for a special servicerendered to individuals by some governmentalagency. The amount of fee levied is supposed to bebased on the expenses incurred by the Governmentin rendering the service, though in many cases,the costs are arbitrarily assessed. Ordinarily,the fees are uniform and no account is taken ofthe varying abilities of different recipients topay. These are undoubtedly some of the generalcharacteristics, as far may be, of various kindsof fees. It is not possible to formulate adefinition that would be applicable to all cases.The Court then observed: (at p. 1042) “The distinction between a tax and a fee liesprimarily in the fact that a tax is levied as apart of the common burden, while a fee is apayment for a special benefit or privilege. Feesconfer a special capacity, although the specialadvantage, as for example, in the case ofregistration fees for documents or marriagelicences, is secondary to the primary motive ofregulation in the public interest.” There is really no generic difference between atax and a fee and as said by Seligman, the taxingpower of a State may manifest itself in threedifferent forms known respectively as specialassessments, fees and taxes. Our Constitution has,for legislative purposes, made a distinctionbetween a tax and a fee.12. In the present case, however, the feescharged are not just for services rendered butthey also have a large element of a regulatory feelevied for the purpose of monitoring the activity https://hcservices.ecourts.gov.in/hcservices/ of the licensees to ensure that they comply withthe terms and conditions of the licence. Dealingwith such regulatory fees, this Court in VamOrganic Chemicals Ltd. v. State of U.P.8 (SCC atp. 726) observed that in the case of aregulatory fee, no quid pro quo was necessary butsuch fee should not be excessive. The samedistinction between regulatory and compensatoryfees has been made in the case of P. Kannadasan v.State of T.N.9 (SCC in para 36) as well as Stateof Tripura v. Sudhir Ranjan Nath10 (SCC at p. 673)."Further, in the very same judgment in paragraph 7, the licensing feecharged by the Hyderabad Municipal Corporation in respect of lodginghouses and hotels were extracted. It is found that between theperiod 1981 to 1992, there was an increase in the fee ranging from 12to 30 times. That was not interfered with by the Supreme Court.11. Therefore, it is not necessary to go into the questionwhether the first respondent-Corporation was utilising the entirecollection made from the licensing fee only in respect of thepetroleum outlets as it is solely outside the scope of the presentlitigation. The further contention that it was discriminatory tocharge other trades on different rates cannot be accepted. Thepresent schedule of fee had classified the different trades basedupon the structure, road obstruction, offensive and dangerous trades.Even in respect of the fuel outlets, there has been a distinction inthe licensing fee based upon whether the outlet has a service stationattached to it or not. 12. It is shocking to note that the petitioners have notpaid the licensing fee as fixed by the Municipal Corporation and werepaying on their own rates depending upon the horse power of the motorused in their outlet. This must have been in collusion with theOfficials of the Corporation. But, for the audit objection made byLF audit department and AG's office this non recovery would not havecome to notice. The arguments that their commission rates have notgone up over the sale of petroleum products cannot be accepted sinceno material was placed before this Court. Further, it is more than48 years have lapsed since the date of the impugned councilresolution and still the petitioners are contending over the allegedexcess levy. For yet another reason, the petitioners are notentitled for any relief from this Court since they have failed tocomply with the interim order passed by this Court.13. In the light of the above, no case is made out tointerfere with the licensing fee charged by the first respondent-Corporation. Hence the writ petition stands dismissed. https://hcservices.ecourts.gov.in/hcservices/

14. In W.P. No.2869 of 1998, the challenge is to theenhanced licence fee made by the first respondent-Corporation inrespect of consumer gas storing and selling. The fee, which wasfixed at Rs.450/- was increased to Rs.2,000/- from the year 1998-99.Since similar contentions were raised in this writ petition also andcommon arguments were addressed, this writ petition will also standsdismissed. No costs.Sd/Asst.Registrar/true copy/Sub Asst.Registrarjs/ssa.To1.The Commissioner, Corporation of Chennai, Rippon Buildings, Park Town,Chennai-600 003.2. The Secretary to Government,Municipal Administration Department, Fort St.George, Chennai-600 009.1 CC to the Government Pleader, SR NO.4366 W.P.Nos.4876 of 199 & 2869 of 1998mbs(co)pmk/3.2.2009.