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Rajasthan High Court, Full Bench
Wanchoo C.J., Bapna & Bhandari, JJ.
The Maharaja Kishangarh Mills Ltd. - Appellant
Versus
Municipal Board, Kishangarh - Respondents
Civil Writ petition No.140 of 1955
Decided On : November 22, 1957
The fees mentioned in Item 66 of List II and Item 47 of List III are fees strictly so called and not taxes. If the levy is to be justified under these two item, it has to be justified as a fee strictly so called and not as a tax for purposes of raising revenue generally. The fact that a levy, when realised, does not go to the general revenues of the State, makes no difference.
The distinction between fees and taxes which applies when fees and taxes are levied by the State equally applies when fees and taxes are levied by the Municipality. Just as the State, when it is levying a fee strictly so called cannot convert it into a tax and cannot pitch it so high as to argument general revenue, so, when the Municipality is levying a fee strictly so called as opposed to tax, it can only justify it as a fee and cannot justify it as a tax. (Para 10)
When any levy is being justified under Item 66 of List II or Item 47 of List III as a fee, it should be shown that it is for some service rendered by the State or by the Municipality to the particular person concerned and that its incident is such as to meet the expense of the service rendered. (Para 10)
It is true that Item 66 speaks of fees with respect to any of the matters in this List. But it docs not necessarily follow that it must be possible to levy fees with respect to each and everyone of the earlier 65 entries. When Item 66 speaks of fees in respect of any of the matters in this List, it really means levying of fees with respect to such of the items in the List as can be justified as a fee strictly so called. The fee, which it is possible to levy under Item 66 of List II must be a fee strictly so called for service rendered and the relation between fee and the service rendered to the individual must be clear and proximate and not remote. In the case of a fee for purposes of Local Government, it is obvious that the relation between the fee and the service rendered to any individual within the municipal limits is neither clear nor proximate. It is really so remote that what may euphemistically be called a fee for purposes of Local Government really becomes a tax for the general revenue of the municipality. Such a tax cannot be justified as a fee for purposes of Local Government under Item 66. There can be no fee under Item 66 which is for the purposes of Local Government because that would not be fee strictly so called but a tax which is not provided anywhere in List II, (para 15)
"Whether the Municipal Board, Kishangarh, could validly impose in exercise of the powers under sec. 128 (xiv) of the Uttar Pradesh Municipalities Act, licence fee or tax on factories situated within the boundary of Kishangarh Municipality to be collected on the basis of horse power of the factories."
2. The facts which have led to this reference may be briefly narrated. The applicant is a joint stock company having its registered office at Kishangarh and is carrying on business of production and sale of cotton yarn and cloth at that place. The State of Rajasthan by means of a notification No.F-2 (157) LSG/50, dated the 21st August, 1950, published in the Rajasthan Rajpatra, dated 25th November, 1950, sanctioned the imposition of a licence fee on flour mills and other factories at a certain rate based on horse power. This was done under sub-sec. (2) of sec. 135 of the Uttar Pradesh Municipalities Act, 1916 as that Act was in force with respect to Kishangarh Municipality at the time. In consequence of this notification, the Municipal Board of Kishangarh made a demand for a large sum of money from the applicant on account of licence fee for the period from December, 1950 to March, 1955. The applicant contested the legality of the demand. The Municipal Board, however, attached two cars belonging to the applicant in that connection. Further demand on account of licence fee from 1st of April, 1955 to 31st of March, 1956, was made later and steps were being taken by the Municipal Board to sell the attached cars. Consequently, the applicant filed the present writ application attacking the legality of the tax on various grounds. It is not necessary for purposes of the reference to refer to all the grounds raised on behalf of the applicant. It is enough to say that one of the contentions of the applicant was that the tax or licence fee was not levied by any authority of law and could not be levied under the law at all and, therefore, could not be recovered in view of the provisions of Article 265 of the Constitution.
3. The application has been opposed on behalf of the opposite parties and their case is that the levy is justified under sec. 128 (1) (xiv) of the Uttar Pradesh Municipalities Act and items 5 and 66 of List II and items 36 and 47 of List III of the seventh Schedule to the Constitution of India.
4. Sec. 128 of the Uttar Pradesh Municipalities Act provides for tax which may be imposed by the Municipalities and clause (xiv) is as follow:—
"Any other tax which the State Legislature has power to impose in the State under the Constitution."
5. We shall have therefore, to look into the Constitution to find justification for the levy which has been made in this case. For this purpose, we will have to go to List II and List III of the Seventh Schedule to the Constitution. Taxes are mentioned in items 45 to 63 of List II besides fees taken in all courts except the Supreme Court which appear in item 3. Now this levy is not being justified under any of the above items relating to taxes. Then we come to fees in item 66 of List II which is in these terms;—
"Fees in respect of any of the matters in this List, but not including fees taken in any court."
6. There are no taxes provided in List III, but fees are provided in item 47 of List III in these words:—
Fees in respect of any of the matters in this List, but not including fees taken in any court."
7. Thus, looking to List II and List III, the justification for this levy will have to be found either in item 66 of List II or item 47 of List III. If this levy cannot be justified under either of these two items, it will be hit by Art. 265 of the Constitution.
8. Now there is a well recognised distinction between a tax and a fee and this Court had occasion to consider this distinction in Maharaja Shri Umed Mills Ltd. vs. State of Rajasthan and another(1). We need not repeat all that was said in that case to draw out t
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