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PUNJAB & HARYANA HIGH COURT
Bhandari and Bishan Narain JJ.
Gopi Parshad
Versus
State Of Punjab
Civil Writ No. 259 of 1955,
Decided On : AUGUST 9, 1956
LICENCE FEE - TOBACCO VEND FEES ACT - SECTION 3, 4 - WHETHER IMPOSITION OF LICENCE FEE CONSTITUTES TAX OR LICENCE FEE - VALIDITY OF RULE 4 OF RULES FRAMED UNDER THE ACT - REASONABLENESS OF LICENCE FEE - DISCRIMINATION - VIOLATION OF ARTICLES 14 AND 19 OF THE CONSTITUTION.
Fact of the Case:
Petitioner, a dealer in cigarettes and bidis, challenged the validity of Rule 4 of the rules framed under the Tobacco Vend Fees Act, 1954, which required him to take out a distributing agents license on payment of a license fee of Rs. 500/-. He contended that the imposition was a tax in the garb of a license fee, discriminatory, and an unreasonable restriction on trade and business.
Finding of the Court:
The court held that the imposition authorized by the Punjab Tobacco Vend Fees Act, 1964, constituted a license fee and not a tax. The court found that the Act was enacted with the object of regulating the sale of manufactured tobacco and not with the object of providing revenue for the State. The court also held that the license fee was not unreasonable or discriminatory and did not violate Articles 14 and 19 of the Constitution.
Issues: 1. Whether the imposition authorized by the Punjab Tobacco Vend Fees Act, 1964, constitutes a tax or a license fee? 2. Whether Rule 4 of the rules framed under the Act is valid? 3. Whether the license fee is reasonable? 4. Whether the license fee is discriminatory? 5. Whether the Act violates Articles 14 and 19 of the Constitution?
Ratio Decidendi: 1. A license fee is an imposition or exaction on the right to use or dispose of property, to pursue a business, occupation or calling or to exercise a privilege, while a tax is exacted with the object or providing revenue for the State and enabling it to carry on the duties of Government. 2. In order to determine whether licence legislation is a regulatory or a revenue measure, it is necessary to examine the operation, practical results and incidents and the substance and natural and legal effects of the language employed in the statute by which the charge has been imposed. 3. The amount of the license fee need not be confined to the mere expenses of issuing the license but may include any reasonably proper cost of supervision, inspection, examination and regulation of the business in respect of which the license is issued. 4. A classification is neither arbitrary nor unreasonable, for substantial differences in the size and importance of the establishment in which the business, is conducted may be made the basis of classification. 5. The Constitution does not confer unfettered discretion on any person to conduct a business so as to injure the public at large or any substantial group thereof.
Final Decision: The petition was dismissed with costs.
Bhandari, J.
1. This petition under Article 236 of the Constitution raises the question whether the imposition authorised by the Punjab Tobacco Vend Pees Act, 1964, constitutes a tax or a licence fee.
2. The petitioner, who is carrying on business as a dealer in cigarettes and bidis in Sonepat, has been required to take on a distributing agents licence on payment of a licence fee of Rs. 500/-under Rule 4 of the rules framed under the Tobacco Vend Fees Act, 1954. He declines to take out the licence in question and challenges the validity of the rule on various grounds, among others, being that the State Government is imposing a tax in the garb of a licence fee, that the licence fee is discriminatory and that it amounts to unreasonable restriction on trade and business.
3. A licence fee on the sale of tobacco was imposed for the first time by the Punjab Tobacco Vend Pees Act, 1934, which was enacted with the object of regulating the sale of manufactured tobacco in municipal and certain other areas. Section 3 imposed a statutory obligation on all vendors of tobacco to take out a dealers licence and Section 4 declared that every licence shall be granted on payment of such fees as may be prescribed by the State Government. The State Government prescribed an annual licence fee at the rate of Rs. 2/- in the year 1935 but increased it to Rs. 3/- in 1939, Rs. 5/- in 1941 and Rs. 20/- in 1950/ The Act of 1934 was repealed in the year 1952 but was re-enacted in substantially the same form in the year 1954. Rule 4 of the rules framed under the new Act authorises the issue of the following kinds of licences on the fees mentioned against each, namely-
(1) Manufacturers or distributing agents licence .............. Rs. 500/- per annum
(2) Licence for a dealer who Has more than one assistant or employee .............. Rs. 240/- per annum
(3) Licence for a dealer who has only one assistant or employee .............. "Rs. 60/- per annum
(4) Licence for a dealer or hawker who has no assistant or employee .............. Rs. 30/- per annum.
4. The Constitution confers ample power on a State Legislative to divide the various business vocations into classes for the purpose of levying taxes and fees and to levy varying amounts on different professions, trades, callings and employments. A licence is a privilege granted by the State to do something which without the grant would be illegal, and a licence fee is an imposition or exaction on the right to use or dispose of property, to pursue a business, occupation or calling or to exercise a privilege.
A licence fee is imposed primarily with the object of reimbursing the State for the services rendered by it, while a tax is exacted with the object or providing revenue for the State and enabling it to carry 011 the duties of Government -- Retilal Panachand v. State of Bombay, AIR 1954 SC 388 (A). A licence is a price paid for a privilege while a tax is an enforced contribution levied on persons, property or income for governmental needs Pittsburgh Rly. Co. v. City of Pittsburgh, 60 A 1077 at p. 1078 (B).
Charges may be levied either for purposes of regulation or for purposes of revenue or for both purposes. If the primary object of the charge is to regulate or restrain it is a licence fee; if on the other hand the primary object is to produce revenue it is a licence tax.
5. In order to determine whether licence legislation is a regulatory or a revenue measure, it is necessary to examine the operation, practical results and incidents and the substance and natural and legal effects of the language employed in the statute by which the charge has been imposed. Although the name by which the Legislature chooses to designate a particular charge is not conclusive, it is an important factor in determining whether the particular imposition is a tax or a. licence fee -- Flint v. Stone Tracy Co. (1911) 220 US 107 (C),; -- Camas Stage Co. v. Kozer, (1922) 25 Am LR 27 (D).
It is necessary also to ascertain the
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