Public authorities cannot arbitrarily increase license fees without clear statutory authorization and a demonstrated rational nexus to the specific services rendered. Such fees must correlate to service costs; otherwise, they constitute an unreasonable and unsustainable exercise of power.

ORDER :

M.DHANDAPANI, J.

This petition has been filed challenging the impugned order dated 24.09.2019 passed by the 1^st respondent and consequential Demand Notice dated 22.06.2020 issued by the 2^nd respondent, and seeks to quash the same.

2.The learned counsel appearing for the petitioner would submit that, the petitioner is a company registered under the Companies Act and is engaged in the business of manufacturing fasteners, auto components, power train components and various critical high-precision engineering components for the automotive and other sectors. The Tamil Nadu District Municipalities Act (“the Act”) mandates the local bodies to provide certain services and collect taxes from residents as well as licence fees from companies operating within their jurisdiction. The petitioner company has been paying the requisite license since its inception and has not defaulted in payment at any point of time.

3.The further case of the petitioner is that, for the purpose of renewal of its licence, the petitioner company approached the 2^nd and 3^rd respondents for renewal. On 27.02.2020, when the officials of the petitioner visited the office of the 3^rd respondent to remit the license fee of Rs.2,14,930/- at the existing rate, namely Rs.1050/- for the first 100 HP and Rs.10/- for every HP in excess of 100 HP, they were informed that the licence fee had been revised. Thereafter, the 2^nd respondent issued a demand notice to the petitioner’s plant directing the petitioner to remit a licence fee of Rs.12,89,280/-. The said amount was calculated at the revised rate of Rs.6000/- for the first 100 HP. Thus, the rate of Rs.10/- per HP was increased to Rs.60/- per HP, and the base fee of Rs.1,050/- was increased to Rs.6,000/-.

4.According to the petitioner, the revision is arbitrary and unreasonable, as no rationale or basis has been provided for such a steep increase in the licence fee. The petitioner contends that it has been regularly paying the licence fee and that the abnormal enhancement bears no nexus to the services rendered by the respondents or to any legitimate objective sought to be achieved. The increase appears to have been effected solely with a view to augmenting the revenue of the 3^rd respondent. The petitioner further submits that a similar issue was considered by this Court in W.P No.5452 of 2011 by order dated 20.12.2022, wherein the demand raised by the respondent was set aside. Relying on the said decision, the learned counsel prays for allowing the present writ petition.

5.Per contra, the learned Government Counsel appearing for the respondents would submit that, the licence fee had originally been fixed prior to the year 2020. Subsequently, by way of a resolution, the license fee was revised with a view to augmenting the revenue of the Municipality, which has since been merged with the Corporation, Hosur. It was further submitted that, under Section 249 of Tamil Nadu District Municipalities Act, the Municipality is vested with the power to levy and revise license fees. Accordingly, license fee was increased in exercise of the powers conferred under the Act, and therefore, the revision cannot be termed arbitrary or illegal. On these grounds, the learned Government Counsel prayed for dismissal of the present writ petition.

6.Heard the learned counsel on either side and perused the material available on record.

7.The facts of the present case are not in dispute. Admittedly, the petitioner company is registered under