PETITIONER:
MUNICIPAL CORPORATION OF THE CITY OF BARODA
Vs.
RESPONDENT:
BABUBHAI HIMATLAL
DATE OF JUDGMENT16/08/1989
BENCH:
OZA, G.L. (J)
BENCH:
OZA, G.L. (J)
SAIKIA, K.N. (J)
CITATION:
1989 AIR 2091 1989 SCR (3) 862
1989 SCC (4) 103 JT 1989 (3) 437
1989 SCALE (2)305
ACT:
The Bombay provincial Corporations Act, 1949: Sections
147 and 466(1)(A)(f) and Standing Order No. 3--Payment of
supervision fee by transporter--Whether reasonable--Optional
to transporter-Avoidance of claiming refund on octroi
duty--Standing Order held valid, legal and enforceable.
HEADNOTE:
The respondent who was carrying on the business of
transporting goods challenged before the High Court the
imposition of supervision fee levied under Standing Order
No. 3 on the goods in transit through the limits of the
Municipal Corporation of Baroda. Before the framing of
Standing Order No. 3, a transporter was required to pay
octroi at the point of entry in the city and claim refund
thereof at the point of exit after satisfying the authority
that the goods which had entered were being taken out.
Standing Order No. 3 framed under section 466(1)(A)(f) read
with section 147 of the Bombay provincial Corporations Act
1949, provided that when a transporter entered into the
corporation limits with goods which were only in transit, he
could on payment of supervision fee carry the goods through
the corporation limits under the supervision of the staff of
the Corporation without payment of octroi at the point of
entry.
The High Court held Standing Order No. 3 as illegal and
without the authority of law. The High Court observed that
under section 466(1)(A)(f) the Commissioner had the authori-
ty to frame standing orders only in respect of goods on
which octroi was payable and as octroi was not payable on
the goods which were in transit, no standing orders could be
framed under the Section- The High Court further held that
quid pro quo was not satisfied as no service was rendered to
the transporter.
Before this Court it was contended on behalf of the
appellant that the levy of supervision fee was optional; the
procedure under Standing Order No. 3 was introduced to avoid
hardship to the transporter; it was open to him to follow
the normal procedure of paying the octroi and claiming
refund; the requirement of quid pro quo was in substance
563
satisfied, and the fee was charged only to facilitate the
transporter in carrying the goods in transit.
Allowing the appeal, this Court,
HELD: (1) The procedure under Standing Order No. 3 is
not compulsory and it is the option of the transporter to
take advantage of this Standing Order if he so chooses
otherwise follow normal procedure of payment of octroi and
claiming refund. [868H-869A]
(2) Clause (f) of section 466(1)(A) contemplates that
the Commissioner may by standing order prescribed the proce-
dure for the goods which are introduced in the city limits.
for immediate exportation and also the fees which could be
charged. It is clear that this provision which confers the
authority on the Commissioner to frame standing orders does
not talk of goods on which octroi is payable. The Commis-
sioner therefore had the authority under section 466, and
the Standing Orders have been framed in accordance with the
procedure prescribed under that section. [867D-E; 869D]
(3) It appears that while taking the view that the levy
could not be justified under Entry 52 of the State List
which authorises the State Legislature to impose a tax on
entry of goods into a local area, the High Court was examin-
ing the fees prescribed as a tax, and it was on that basis
that the High Court took the view that no such tax could be
levied on goods on which no octroi was payable. But, as it
is not a tax, the imposition could not be said to be bad on
the ground that the State Legislature had no authority to
impose it. [869E-870A]
(4) In order to establish a quid pro quo concept it is
not necessary to establish exactly that the amount collected
is spent on the services rendered. [872A]
Sourthen Pharmaceuticals & Chemicals Trichur & Ors. etc.
v. State of Kerala & Ors. etc., [1982] 1 SCR 519 and Sreeni-
vasa General Traders & Ors. v. State of Andhra Pradesh &
Ors., [1983] 3 SCR 843, referred to.
(5) So far as the charging of supervision fee is con-
cerned, it reasonably appears to be a charge for the serv-
ices rendered. The High Court was, therefore, not right in
coming to the conclusion that this fee was not justified
because, according to the High Court, it was not established
that the fee was in consideration of the services or privi-
lege conferred on the transporter. [872F]
864
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1086 of
1971.
From the Judgment and Order dated 28.4.71 of the Gujarat
High Court in S.C.A. No. 671 of 1970.
R.F. Nariman, A.K. Verma and D.N. Misra for the Appellant.
V.J. Francis, (N.P.), Krishan Kumar, Vimal Dave & Co.,
M.N. Shroff, (N.P.) and Girish Chandra for the Respondent.
The Judgment of,the Court was delivered by
OZA, J. This appeal on certificate by the High Court of
Gujarat is filed against the judgment of the Gujarat High
Court dated 28th April, 1971 holding Standing Order No. 3
framed under Section 466(1)(A)(f) read with Section 147 of
The Bombay Provincial Corporations Act, 1949 (‘Act’ for
short) as illegal and without the authority of law.
This Act applies to the city of Baroda and the present
appellant the Municipal Corporation, Baroda is governed by
this Act. It is not in dispute that octroi on the import of
goods is chargeable under the scheme of the Act. Before this
Standing Order which is the subject matter of challenge
before the High Court and before us, was framed, a trans-
porter who brought the goods within the limits of the Munic-
ipal Corporation in view of Section 147 of this Act was to
pay the octroi duty chargeable on the goods on the assump-
tion that the goods have been imported for sale, consumption
or use in the limits of the city of Baroda. Under the scheme
as it was in force if the goods were not consumed or sold
within the limits of the Municipal Corporation and are taken
out on the other end, and if the octroi post authority was
satisfied that the goods which had entered are being taken
out then the transporter had to get the tax which he had
paid at the octroi post refunded. According to the appellant
corporation this procedure took time at both the ends and
for those transporters who were carrying goods which only
were in transit in the city of Baroda still had to suffer
the inconvenience of paying the octroi duty when they en-
tered the city limits and then satisfy the authorities at
the post from where they went out of town and also had to
pay first the tax and then claim a refund, in order to avoid
inconvenience and the burden on the transporter this Stand-
ing Order was provided so that when a transporter enters the
corporation limits with goods which are only in transit and
not to be
865
unloaded for sale or consumption within the corporation
limits and if the transporter so chooses on payment of
supervision fees the transporter can carry the goods through
the corporation limits without payment of octroi under the
supervision of the staff of the corporation and for this
purpose under this Standing Order fee of Rs.2 per heavy
vehicle was prescribed. It is alleged that originally the
fee suggested was Rs.5 but on a representation made by the
respondent association itself this was reduced to Rs.2 per
vehicle.
By the impugned judgment, the High Court of Gujarat came
to the conclusion that under Section 466(1)(A)(f) of the Act
no doubt the Commissioner had the authority to frame stand-
ing orders but he can only frame standing orders in respect
of goods on which octroi was payable under Section
466(1)(A)(f) and as the goods admittedly for which this fee
was prescribed were goods not to be imported for sale or
consumption the octroi was not payable thereon and therefore
no standing orders could be framed under Section
466(1)(A)(f) and therefore standing order providing for fees
as discussed above was beyond the authority of the Commis-
sioner under this Act.
The High Court also accepted the second contention of
the respondent that although the Corporation claim to charge
the fee as a fee for the convenience of the transporter but
after examining the scheme, the learned Judges of the High
Court came to the conclusion that there is no quid pro quo
established nor it is established that the charge and the
collection made on the basis of this charge had any ration-
ale ratio with the services rendered by the corporation.
Aggrieved by this decision of the High Court the Municipal
Corporation has come up in appeal.
The main contention advanced on behalf of the appellant
was that imposition of this fee by the Corporation could not
be said to be an imposition as it was optional, as when a
transporter brings goods and enters into the Corporation
limits it was open to him either to choose to take advantage
of this Standing Order by paying supervision fees and taking
the goods straight under the supervision of the Corporation
authorities without’ the payment of octroi duty but if a
transporter chooses not to take advantage of this Standing
Order it was not compulsory and it was open to the trans-
porter to pay the octroi in accordance with the normal rule
and follow the normal procedure by satisfying the checkpost
authorities on the other end and claim refund and get it
after following the due procedure. It was therefore contend-
ed that in fact this was an option given to the transporter
so that if they so
866
choose they may follow this Standing Order and save them-
selves from the hardship of paying the octroi and then
claiming the refund and for that purpose stopping at the
entry checkpost and again at the exit checkpost and also to
satisfy the checkpost authorities that the goods which had
entered the corporation limits are being taken out in the
same state and it also involved handling of sum by the
transporter so that it may be possible for him to pay the
octroi on the entry checkpost itself. It was therefore
contended firstly that it being an option given to the
transporter, it could not be said to be an imposition or a
tax and the question of the authority of the Commissioner
does not arise. That in view of language of Section
466(1)(A)(f) it is clearly with the authority of the Commis-
sioner to frame Standing Orders, and the Standing Orders had
the approval of the Standing Committee and also of the State
Government and therefore it could not be said that the
Standing Orders are not framed in accordance with Section
466.
It was also contended that the affidavit filed in the
High Court by the appellant clearly shows that how this fee
is collected and spent for the purpose of giving a facility
to the transporter for carrying the goods in transit under
the supervision of the corporation authorities so that they
have not to suffer the inconvenience and it was contended
that in substance therefore the requirement of quid pro quo
is satisfied and in fact the fee is charged only to facili-
tate the transporter in carrying the goods in transit with-
out payment of octroi and without undue detention in the
process of payment of octroi at the entry and claiming
refund at the exit. It is alleged that a notice was issued
suggesting this procedure as prescribed in Standing Orders,
a representation was made by the respondent association
accepting the suggestion of the Corporation but suggested
that Rs.5 per vehicle suggested by the Corporation would be
too much and it should be reduced to Rs.2 and it was on this
representation that in fact the Corporation, the present
appellant, chose to reduce the supervision charges to Rs.2
per vehicle. It was therefore contended that now this is not
open to the respondent association to say that this is not
in accordance with law.
Learned counsel for the respondent stated that although
a representation about the supervision fee was made by the
association but it could not be said that there was any
agreement entered into by the association nor it could be
said that the Association could enter into such an agreement
with the corporation. It was contended that the High Court
was right in reaching the conclusion that the Commissioner
had no authority under Section 466, and that in fact quid
pro quo is not satisfied as no service is rendered to the
transporter. Learned counsel
867
for the parties referred to the decision of this Court on
the question of fee and the principle of quidpro quo.
Section 466(1)(A)(f) reads:
“466(1) The Commissioner may make standing
orders consistent with the provisions of this
Act and the rules and by-laws in respect of
the following matters namely:
(A) (a) xxx xxx xxx xxx xxx xxx
(f) determining the supervision under which,
the routes by which and the time within which
goods intended for immediate exportation shall
be conveyed out of the City and the fees
payable by persons so conveying the goods;”
This contemplates the authority with the Commissioner to
make Standing orders consistent with this Act, rules or by-
laws in respect of the Act. Clause (f) talks of supervision
under which and the routes by which and the time when goods
introduced for immediate exportation shall be conveyed out
of the city and the fee is payable by the person carrying
the goods. It is therefore clear that this clause (f) con-
templates that Commissioner may by Standing Order prescribe
the procedure for the goods which are introduced in the city
limits, for immediate exportation and also the fees which
could be charged. It is therefore clear that this provision
which confers the authority on the Commissioner to frame
Standing Orders do not talk of goods on which octroi is
payable. But Section 466 pertains t9 collection of octroi.
Sub-section (2) of this Section provides:
“(2) No order made by the Commissioner under
clause (A) of sub-section (1) shall be valid
unless it is approved by the Standing Commit-
tee and confirmed by the State Government, and
no order made by the Commissioner under clause
(B) or paragraph (e) of clause (c) of sub-
section (1) shall be valid unless it is ap-
proved by the Standing Committee.”
It is not in dispute that these .Standing Orders have been
approved by the Standing Committee and confirmed by the
State Government which is clear from the Notification which
reads as under:
868
BARODA MUNICIPAL CORPORATION
“The Standing Orders made by the
Municipal Commissioner, Baroda Municipal
Corporation, Baroda under Section 466(1)(A)(f)
of the Bombay Provincial Municipal Corporation
Act, 1949 vide his order No. 2441 dated
16.8.69 and approved by the Standing Committee
under its Resolution No. 882 dated 28th Novem-
ber, 1969 and confirmed by Government under
their Resolution P.H.D. No. BMC 4470-160 P.
Dated the I2th March, 1970.
Section 147 of this Act reads:
“Until the contrary is proved any goods im-
ported into the City shall be presumed to have
been imported for the purpose of consumption,
use or sale therein unless such goods are
conveyed from the place of import to the place
of export, by such routes, within such time,
under such supervision and on payment of such
fees therefore as shall be determined by the
standing orders.”
It is clear from this Section that when any goods are
brought within the corporation limits a presumption arises
that they have been brought in for the purposes or sale or
consumption and the burden lies on the person who imports
the goods to prove that they are not for sale or consumption
and it is on the basis of language of Section 147 that the
normal procedure before this Standing Order was introduced,
was that the goods when entered into the corporation limits,
have to stop at the checkpost and pay octroi duty on the
goods as provided by the rules. For getting out of the local
limits, the transporter has to satisfy the checkpost author-
ities that the goods on which he has paid octroi and import-
ed are being exported out of the city and it is only after
satisfying the authorities about the goods on which octroi
is paid being exported that the transporter can claim refund
of the octroi duty already paid. It is therefore clear that
the language of Section 147 in the scheme of the Octroi
clearly indicates a presumption which is a rebuttable pre-
sumption. Burden however lay on the transporter to establish
that the goods are not for consumption or sale. So far as
this scheme before the introduction of disputed Standing
Order is concerned, there is no controversy. The only con-
troversy is the Standing Order which has been introduced. It
is also clear that so far as this Standing Order No. 3 is
concerned wherein the transporter is to pay a supervision
fees it is not compulsory as it is the option of the trans-
por-
869
ter to take advantage of this Standing Order if he so
chooses otherwise follow the normal procedure of payment of
octroi and claiming refund as is clear from the affidavit
filed before the High Court by the appellant’s officer i.e.
Octroi Superintendent. Paragraph 14 of this affidavit reads:
“Thus the system of clearing the through
traffic on charging normal supervision fees is
really in the larger interest of the import-
ers. As I have pointed out hereinabove this is
not obligatory but purely voluntary and op-
tional. Those who do not want to avail of this
facility need not avail it and allow the other
procedure already indicated hereinabove.”
It is therefore clear that there is no compulsion on the
transporter to pay a supervision fee. It is only an option
so that if the transporter wishes to take advantage of this
scheme and save time he can choose to follow it.
It is thus clear that so far as the authority of the
Commissioner under Section 466 of the Act is concerned and
the manner in which the Standing Orders are framed, it is
clear that the Commissioner had the authority and the Stand-
ing Orders have been framed in accordance with procedure
prescribed under Section 466 and therefore on that count the
judgment of the High Court could not be sustained.
The High Court took the view that the State Legislature
could enact Section 466 only if it can be brought within the
ambit of Entry 52 of this State list as, that is the only
entry which authorises the State Legislature to impose a tax
on entry of goods into a local area and the learned Judges
felt that as under Section 466 and under the standing order
in question a supervision fee is charged on goods which are
not for sale or consumption in the local limits. This could
not be justified under Entry 52. The learned Judges there-
fore took the view that Standing Orders which the Commis-
sioner could frame under Section 466 could be in respect of
goods on which octroi is payable and not pertaining to the
goods on which the octroi is not payable. It appears that
while taking this view the High Court was examining this
fees prescribed as a tax and it is on the basis of this that
the High Court took the view that no such tax could be
levied on goods on which no octroi is payable. So far as the
question as to whether this fees could be said to be a tax
is concerned, there is no difficulty as even the learned
counsel appearing for the appellant do not contend that it
can be said to be a tax and as it is not a tax the imposi-
tion could not be said to be
870
bad because the State Legislature had no authority to impose
it. It was contended by the learned counsel that in view of
Section 147 quoted above any import within the local limits
would draw a presumption that it is for consumption or sale
and therefore octroi duty on the goods becomes payable. By
this Standing Order, the Corporation has attempted to make
it convenient to the transporter not to involve in the
payment of octroi duty at the entry and after satisfying the
authorities at the exit end claim the refund of the octroi
paid, thereby the Corporation intended to help the trans-
porter in saving time and also in payment of the octroi at
one end and later on claiming a refund. This in fact was the
service rendered by the corporation to the benefit of the
transporter and this fees which was charged was just to meet
the approximate expenses that the Corporation may have to
incur to provide this facility as has been clearly stated by
the corporation officer in his affidavit before the High
Court and in fact even the corporation accepted the sugges-
tion of the petitioner association when the association
suggested to the appellant corporation to reduce this fees
from Rs.5 to Rs.2 which is clear from the letter written by
the Association to the Corporation dated 31st March, 1970.
As regards this aspect of the matter, the learned Judges of
the High Court came to the conclusion that there was no quid
pro quo established which could justify the levy of this
fees as fees for the services rendered in the interest of
the transporter. In Southern Pharmaceuticals & Chemicals
Trichur & Ors. etc. v. State of Kerala & Ors. etc., [1982] 1
SCR 519 this Court after considering the various decision
distinguished fees from tax in these words.
“‘Fees’ are the amounts paid for a privilege,
and are not an obligation, but the payment is
voluntary. Fees are distinguished from taxes
in that the chief purpose of a tax is to raise
funds,for the support of the Government or for
a public purpose, while a fee may be charged
for the privilege or benefit conferred, or
service rendered or to meet the expenses
connected therewith. Thus, fees are nothing
out payment for some special privilege granted
or service rendered.”
As regards the principle of quid pro quo rule
in the same judgment it was observed:
“That is because the Constitution did not
contemplate it to be an essential element of a
fee that it should be credited to a separate
fund and not to the consolidated fund. It is
also
871
increasingly realised that the element of quid
pro quo stricto senso is not always a sine qua
non of a fee. It is needless to stress that
the element of quid pro quo is not necessarily
absent in every tax.”
In the light of these observations if the affidavit filed on
behalf of the appellant Corporation explaining the amount
expected to be collected and spent in the process of super-
vision is examined it could not be said as was stated by the
High Court that it did not satisfy the quid pro quo princi-
ple. It is in this background that the question that this
Standing Order does not impose a compulsory levy but it only
gives an option to the transporter to take advantage of this
provision makes it further clear that it is not a levy or an
imposition of tax but merely a fees charged for the privi-
lege or services rendered to the payer. In Sreenivasa Gener-
al Traders & Ors. etc. v. State of Andhra Pradesh & Ors.
etc., [1983] 3 SCR 843 this Court considered series of
decisions on the question and observed:
“There is no generic difference between a tax
and a fee. Both are compulsory exactions of
money by public authorities. Compulsion lies
in the fact that payment is enforceable by law
against a person inspite of his unwillingness
or want of consent. A levy in the nature of a
fee does not cease to be of that character
merely because there is an element of compul-
sion or coerciveness present in it, nor is it
a postulate of a fee that it must have direct
relation to the actual service rendered by the
authority to each individual who obtains the
benefit of the service. It is now increasingly
realized that merely because the collections
for the service rendered or grant of a privi-
lege or licence are taken to the consolidated
fund of the State and not separately appropri-
ated towards the expenditure for rendering the
service is not by itself decisive. Presumably
the attention of the Court in the Shirur Mutt
case was not drawn to Art. 266 of the Consti-
tution. The Constitution nowhere contemplates
it to be an essential element of fee that it
should be credited to a separate fund and not
to the consolidated fund. It is also increas-
ingly realized that the element of quid pro
quo in the strict sense is not always a sine
qua non for a fee. It is needless to stress
that the element of quid pro quo is not neces-
sarily absent in every tax: Constitutional Law
of India by H.M. Seervail Vol. 2, 2nd Edn. p.
1252, para 22.39.”
872
It is therefore clear that in order to establish a quid pro
quo concept it is not necessary to establish exactly that
the amount collected is spent on the services rendered as it
was further observed in this decision:
“The traditional view that there must be
actual quid pro quo for a fee has under gone a
sea change in the subsequent decisions. The
distinction between a tax and a fee lies
primarily in the fact that a tax is levied as
part of a common burden, while a fee is for
payment of a specific benefit or privilege
although the special advantage is secondary to
the primary motive of regulation in public in
public interest. If the element of revenue for
general purpose of the State predominates, the
levy becomes a tax. In regard to fees there
is, and must always be, correlation between
the fee collected and the service intended to
be rendered. In determining whether a levy is
a fee, the true test must be whether its
primary and essential purpose is to render
specific services to a specified area or
class; it may be of no consequence that the
State may ultimately and indirectly be bene-
fitted by it. The power of any legislature to
levy a fee is conditioned by the fact that it
must be ‘by and large’ a quid pro quo for the
services rendered. However, co-relationship
between the levy and the services rendered
expected is lone of the general character and
not of mathematical exactitude. All that is
necessary is that there should be a “reasona-
ble relationship” between the levy of the fee
and the services rendered.”
It is therefore clear that so far as the charging of super-
vision fees is concerned it reasonably appears to be a
charge for the services rendered from the affidavit filed by
the Officers of the Appellant Corporation and therefore the
High Court was not right in coming to the conclusion that
this fees was not justified as it is not established that it
reasonably satisfies that it is in consideration of the
services or privilege conferred on the transporter on goods
in transit.
In our opinion, therefore, the judgment of the High
Court could not be sustained. The appeal is therefore al-
lowed. The judgment of the High Court is set aside and it is
held that the Standing Order No. 3 passed by the appellant
Municipal Corporation is valid and enforceable. The appel-
lant shall also be entitled to costs of this appeal. Costs
quantified at Rs.5,000.
R.S.S. Appeal allowed.
873