JUDGMENT
Hari Nath Tilhari, J.
1. These petitions involve a common question of law as to the interpretation of provisions of the Karnataka Municipal Corporation Act, 1976 and similar reliefs have been claimed by petitioners in all these writ petitions. As such, these petitions are being hereby disposed of by a common judgment.
2. I have heard Sri Dinesh Kulkarni holding brief for Sri F. V. Patil, learned counsel for the petitioners and Sri H. N. Shashidhar on behalf of the respondent-Hubli-Dharwad Municipal Corporation, Hubli. The petitioners in these petitions have sought the following reliefs :–
(a) Declare that the enhancement of DOT licence fee and Hotel licence fee by the Corporation on the basis of annual rateable value of the building is wholly illegal, arbitrary and the same is confiscatory in nature and violative of Article 14 of the Constitution of India and accordingly it is liable to be struck down;
(b) Issue a writ of certiorari quashing the impugned resolution vide Annexure-A passed by the respondent under subject No. 303, dated 28-6-1997 and also the impugned notification vide Annexure-B issued by the respondent in No. HDC/HDH/97/ 1459, dated 28-8-1997;
(c) Issue any other writ, order or direction as this Hon’ble Court may deem fit to grant in the circumstances of the case including costs, in the interest of justice and
equity;
3. The petitioners’ contention is that they are the persons carrying on the hotel business and are running the hotels after having obtained the hotel licence which licence was renewed every year as well. The petitioners’ case is that prior to 1997, licence fee in respect of DOT licence was Rs. 100.00 and the highest amount that was to be collected was Rs. 5,000.00. Similarly in respect of hotel licence, minimum was Rs. 300.00 and maximum licence fee was Rs. 1,000.00. The petitioners’ case is that without following any procedure for enhacement of fee, the respondent by passing a resolution has enhanced the DOT licence minimum fee from Rs. 100.00 to Rs. 200.00 and the maximum fee from Rs. 5,000.00 to Rs. 10,000.00. Similarly, it has also been provided that the licence fee has to be collected on the basis of annual rateable value of the building. The learned counsel for the petitioners Sri Kulkarni very strenuously contended that this enhancement of the fee is illegal and not in consonance with the provisions of the Karnataka Municipal Corporation Act. Sri Kulkarni submitted that the procedure prescribed under the provisions of Sections 103 and 104 contained in Chapter X would apply with equal force in the matter of fixation or imposition of licence fee. The learned counsel submitted that even in the matter of enhancement of licence fee if there is a revision to take place as to the rate of licence fee, the procedure prescribed under Sections 103 and 104 i.e., in Chapter X of the Act namely the Karnataka Municipal Corporation Act, 1976 read with Section 148 of the Act will apply. The learned counsel contended that the licence fee even if it is a fee, but in view of the definition given to the tax in Section 2, Sub-section (41), it is included within the framework of expression “tax” in the Act and therefore when the expression “tax” includes in itself fee imposed under the Act or imposable or enhanceable under the Act, the procedure prescribed by the provisions for fixation or for imposition or for revision and enhancement of tax will apply with equal force to the matters of imposition or for revision and enhancement of the fee. The learned counsel contended that this procedure has not been followed at all. The petitioners had no information or hotel licence holders were not given any notice. The learned counsel contended that when
power is given to do a certain thing and mode is prescribed, that power can be exercised in that manner alone and not otherwise.
4. The contentions of the petitioners’ counsel have hotly been contested by the learned counsel for the Corporation and especially by Sri Shashidhar. Sri Shashidhar contended that it is a fee and the Corporation renders service in the sense that the Inspector goes to do the spot inspection and other things, so it may be taken to be fee and it not being the tax, the procedure prescribed for imposition or fixation of rate or revision and enhancement of rate of the licence fee can be fixed by the Municipal Corporation by its own decision, and so the provisions of Chapter X of the Municipal Corporation Act will not apply. In support of his contention, the learned counsel made a reference to the decision of the Supreme Court in the case of The Corporation of Calcutta v. Liberty Cinema . He also made a reference to the decision of Their Lordships of the Supreme Court in the case of Secunderabad- Hyderabad Hotel Owners Association v. Hyderabad Municipal Corporation, Hyderabad reported in AIR 1999 SC 65. He further made reference to the decision of this Court decided by Hon’ble Brother Tirath S. Thakur, J., in the case of A. S. Loni v. Town Municipal Council, Jamakhandi and Ors. reported in ILR 2000 Karnataka 2593.
5. I have applied my mind to the contentions raised by the learned counsels for the parties.
6. There can be no doubt that with the passage of time when the life becomes costlier, expensive more funds i.e., money may be required to maintain the institutions and to carry out the Corporation’s duties under the Act. There may be need to enhance the licence fee and the rates and the Corporation has been given right, no doubt, to enhance it or to revise it. In the matter of tax also, there is a specific provision that the Corporation has been conferred power to enhance and to revise the tax imposed every five years whenever enhancement of rate is evidenced to be necessary. As regards the licence and licence fee, Chapter XVII and Chapter XXI of the Karnataka Municipal Corporation Act are relevant. Section 343 of the Act prohibits keeping of lodging houses, eating houses, coffee houses, restaurants, refreshment rooms or any place
where public are admitted for the consumption of any food or drink or any place where food is sold or prepared for sale, except in conformity with the terms of a licence granted by the Commissioner in that behalf. The persons who want to run such lodging houses etc., are required to carry on the business under and in conformity with the terms of licence granted by the Commissioner and the definition of “lodging houses” as per the explanation to Section 343 includes a hotel, boarding house, choultry or rest-house. Section 443 makes a general provision with reference to licences, registrations and permissions and Section 443(1) provides that the licence will specify the period for which and the restrictions, limitations and conditions subject to which the same is granted and it shall be signed by the Commissioner. Sub-section (2) of Section 443 provides that save as otherwise expressly provided in or may be prescribed under this Act for every such licence or permission fees shall be paid in advance by such units and at such rates as may be fixed by the Corporation. Proviso to Sub-section (2) very clearly provides that the fee so charged shall not exceed the highest fee chargeable in respect of any one of the said purposes as referred to in Schedule X. Therefore, power is given no doubt to the Corporation to fix the rates. There may be ordinarily a distinction between the tax and the fee. The cases which I will later refer will indicate that there may be two types of fee, one may be fee levied for services rendered while other may be in respect of which no service is required to be rendered and therefore in the case of later type of fee, there is no question of quid pro quo such as licence fee or the like. In the case of The Corporation of Calcutta v. Liberty Cinema , Their Lordships have considered this question in Paragraphs 7, 8 and 19. In Paragraph No. 7, Their Lordships have observed in the context of Section 548 of the Calcutta Municipal Act, 1951 and have laid down as under :–
“(7) Now, on the first question, that is, whether the levy is in return for services, it is said that it is so because Section 548 uses the word ‘fee’. But, surely, nothing turns on words used. The word ‘fee’ cannot be said to have acquired a rigid technical meaning in the English language indicating only a levy in return for services. No authority for
such a meaning of the word was cited. However that may be, it is conceded by the respondent that the Act uses the word ‘fee’ indiscriminately. It is admitted that some of the levies authorised are taxes though called fees. Thus, for example, as Mitter, J. pointed out, the levies authorised by Sections 218, 222 and 229 are really taxes though called fees, for no services are required to be rendered in respect of them. The Act, therefore, did not intend to use the word fee as referring only to a levy in return for services.”
In Paragraph No. 8, Their Lordships further observed as under :–
“(8) This contention is not really open to the respondent for Section 548 does not use the word ‘fee’; it uses the words ‘licence fee’ and those words do not necessarily mean a fee in return for services.”
In Paragraph No. 19, Their Lordships further observed as under :–
“(19) The last argument in this connection which we have to notice was based on Sections 126 and 127 of the Act Section 126 deals with the preparation by the Chief Executive Officer of the Corporation called Commissioner, of the annual budget. The budget has to include an estimate of receipts from all sources. These receipts would obviously include taxes, fees, licence fees and rents. Under Section 127(3) the Corporation has to pass this budget and to determine, subject to Part IV of the Act, the levy of consolidated rates and taxes at such rates as are necessary to provide for the purposes mentioned in subsection (4). Sub-section (4) requires the Corporation to make adequate and suitable provision for such services as may be required for the fulfilment of the several duties imposed by the Act and for certain other things to which it is not necessary to refer. The first point made was that these sections showed that the Act made a distinction between fees and taxes. It does not seem to us that anything turns on this as the only question now is whether the levy under Section 548 is a fee. The other point was that Clauses (3) and (4) of Section 127 showed that the Corporation could fix the consolidated rates and taxes and that the determination of rates for these had to be in accordance with the needs for carrying out the Corporation’s duties under the Act. It was said that as the licence fee leviable under Section 548 did not relate to any duty of the Corporation under the Act, it being optional for the Corporation to impose terms
for grant of licences for cinema houses, the rate for that fee was not to be fixed in reference to anything except rendering of services. We are unable to accept this argument and it is enough to say in regard to it that it is not right that Section 443 does not impose a duty on the Corporation. We think it does so, though in what manner and when it will be exercised it is for the Corporation to decide. It is impossible to call it a power, as the respondent wants to do, for it is not given to the Corporation for its own benefit. The Corporation has been set up only to perform municipal duties and its powers are for enabling it to perform those duties. Furthermore there is no doubt that an estimate of the licence fee has to be included in the budget and therefore the word ‘tax’ in Section 127(3) must be deemed to include the levy under Section 548. The words ‘subject to the provisions of Part IV’ in Section 127(3) must be read with the addition of the words “where applicable”. If that levy cannot be a fee because there is no provision for service being rendered in respect of it, it would indisputably be a tax. As such again, its rate can be determined under Section 127(3) to provide for the discharge of at least the other undisputed duties of the Corporation. We would, therefore, reject this last argument also.”
7. A perusal of this decision per se reveals that an item described as fee may not amount to be fee in the technical sense namely fee for services rendered. It may be said to be a tax or may be said to be a fee without services being rendered. This decision of the Hon’ble Supreme Court has been followed and referred to in another case namely Secunderabad-Hyderabad Hotel Owners Association v. Hyderabad Municipal Corporation, Hyderabad . Their Lordships in paragraph No. 9 observe as under :–
“9. It is, by now, well settled that a licence fee may be either regulatory or compensatory. When a fee is charged for rendering specific services a certain element of quid pro quo must be there between the service rendered and the fee charged so that the licence fee is commensurate with the cost of rendering the service although exact arithmetical equivalence is not expected. However, this is not the only kind of fee which can be charged. Licence fees can also be regulatory when the activities for which a licence is given require to be regulated or
controlled. The fee which is charged for regulation for such activity would be validly classifiable as a fee and not a tax although no service is rendered. An element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive.”
Dealing with the licence fee in paragraph No. 12, Their Lordships further observed as under :–
“(12) In the present case, however, the fees charged are not just for services rendered but they also have a large element of a regulatory fee levied for the purpose of monitoring the activity of the licensees to ensure that they comply with the terms and conditions of the licence. Dealing with such regulatory fees, this Court in Vam Organic Chemicals Ltd. v. State of U.P., , observed that in the case of a regulatory fee no quid pro quo was necessary but such fee should not be excessive. The same distinction between regulatory and compensatory fees has been made in the case of P. Kannadasan v. State of T. N. , as well as State of Tripura v. Sudhir Ranjan Nath, .”
8. In the present case, for determining the present question as raised in the case, the technical distinction between tax and fee may not be material and relevant in view of the definition of the expression “tax” as given in the Act vide Section 2, Sub-section (41). Section 2(41) reads as under :–
“2. Definitions.– In this Act, unless the context otherwise, requires,–
(41) ‘Tax’ includes toll, rate, cess, fee or other impost leviable under this Act.”
9. The question which arises is, as to how and in what manner the fee is to be levied and rates are to be fixed by the Corporation? For the purpose of the present case, as fee is included within the framework of ‘tax’ in the definition clause, the definition given in the Act will be conclusive for the purpose of the present question. Section 148 of the Act reads as under :–
“Section 148, Corporation fund.-
(1) The Corporation shall revise any tax imposed by it once every five years and whenever enhancement of the rate is evidenced necessary, shall levy the enhanced
rates after observing the procedure prescribed for the imposition of taxes.
(2) Notwithstanding anything contained in Sub-section (1), the Government may, at any time, direct the Corporation to revise any tax imposed by it and the Corporation shall so revise after observing the procedure prescribed for the imposition of taxes.”
10. Prima facie no doubt as contended that under this section, the power has been given to the Corporation to revise the tax every five years and it has been contended that really there is no provision for revision of fee. If the definition clause would not have been there, the contention of the petitioner’s counsel could have or would have got some substance that the Corporation has no power to revise or enhance the rate of fee. The definition being given in Section 2(41) of the Act defining the tax as including in itself the ‘fee’, it can no doubt well be said that the Corporation has been given power to revise the fee once every five years and if enhancement of rates is evidenced to be necessary, then it can enhance the fee as well. But what procedure is to be followed is clearly indicated in the matter of tax that it will be the same procedure as is prescribed
for imposition of tax. Even revision can be done at the instance and directions of the Government. But that revision can be done only in the process prescribed for imposition of tax. If the right or power to revise the rates of fee are to be held and taken by the Corporation to be there under this section because tax includes fee, then it cannot be said that it should be applied partially, instead the procedure as is provided under that provision will be applicable and in my opinion, as the tax includes the fee also in its definition and wherever it is used in the Act. Section 148 will also apply to the cases where the rates have to be revised either periodically every five years or under the directions of the Government, and in view of this provision, the provisions of Sections 103 and 104 onwards will apply to the matter of imposition or revision of licence fee. A detailed procedure in this regard is prescribed under Sections 104 to Section 106. These sections are being quoted herewith.
“Section 104. Procedure preliminary to imposing a tax.
A corporation, before imposing a tax, shall observe the following preliminary procedure :–
(a) it shall, by resolution passed at a total general meeting, select for the purpose one or other of the taxes specified in Section 103 and in such resolution specify so far as may be applicable-
(i) the classes of persons or property or of both which the corporation proposes to make liable and any exemptions which it proposes to make;
(ii) the amount or rate at which the corporation proposes to assess each such class;
(b) when such resolution has been passed, the corporation shall publish in the Official Gazette and in such other manner as may be prescribed, a notice of such resolution in the prescribed form;
(c) any inhabitant of the city objecting to the imposition of the said tax or to the amount or rate proposed or to the classes of persons or property to be made liable thereto or to any exemptions proposed, may, within one month from the publication in the Official Gazette of the said notice, send his objection in writing to the corporation; the corporation shall take all such objections into consideration, or shall authorise the standing committee for taxation and finance to consider the same and report thereon and unless it decides to abandon the proposed tax, shall submit such objections with its opinion thereon and any modifications proposed in accordance therewith, together with a copy of the notice aforesaid to Government.
Section 105. Power to sanction, modify and impose conditions.-
Government may either refuse to sanction the resolution submitted under Section 104 or may return it to the corporation for further consideration, or if no objection which is in its opinion sufficient, was made to the proposed tax within one month from the publication of the said notice, may sanction the said resolution either.-
(a) without modification, or
(b) subject,–
(i) to such modifications not involving an increase of the amount to be imposed, or
(ii) to such conditions as to the application within the corporation to any purpose or purposes of this Act, specified in such conditions, of the whole or any part of the proceeds of such tax as it deems fit.
Section 106. Publication of sanctioned resolutions with notice.-
(1) All resolutions sanctioned under Section 105 with all modifications subject to which the sanction is given shall be published by the corporation in the Official Gazette and in the offices of the corporation in city together with a notice reciting the sanction and the date and number thereof, and the tax as prescribed by the resolution so published shall, from a date which shall be specified in such notice and which shall not be less than one month from the publication of such notice, be imposed accordingly, and the proceeds thereof shall be applied by the corporation in accordance with all conditions, if any, subject to which the sanction is given under Section 105 :
Provided that-
(a) a tax leviable by the year,–
(i) shall not come into force except on one of the following dates, namely, the first day of April, the first day of July, the first day of October, the first day of January in the official year in which such notice is published, and
(ii) if it comes into force on any day other than the first day of April shall be leviable by the quarter till the first day of April then next ensuing;
(b) on or before the day on which a notice is issued under this section, the corporation shall publish further details as may be required, as regards the dates on which the tax or the instalments, if any, thereof, shall be payable;
(C) if the levy of tax, or of a special portion of a tax, has been sanctioned for a fixed period only, the levy shall cease at the conclusion of that period, except in regard to the unpaid arrears which may have become due during the period.
(2) The publication of a notice under this section shall be conclusive evidence that the tax has been imposed in accordance with the provisions of this Act and the rules or bye-laws made thereunder.”
11. It is not the case of the Corporation that they have followed this procedure in the matter of revision and enhancement of licence rates. As well settled and laid down in very many cases beginning from the decision of Nazir Ahmed v. King Emperor reported in AIR 1936 Privy Council 253 and followed by the Supreme Court in the case of State of Uttar Pradesh v. Singhara Singh , when the
power is given to do a certain thing and the manner is prescribed by the Act conferring that power, then that power can be exercised in that manner alone and not otherwise. As there is no dispute on the question of fact that procedure prescribed under Chapter X has not been followed, the enhancement of the licence fee under Annexures A and B can be said to be illegal, null and void. Annexures A & B, as such, have to be declared illegal, null and inoperative and the respondent is directed not to enforce these resolutions unless and until enhancement is made which no doubt the Corporation has got power to make by revising as mentioned earlier licence fee etc., but it is done in accordance with the procedure and the law prescribed.
12. It is kept open to the Corporation to revise the rates if it is evidenced necessary by the circumstances and to take steps by following the procedure specified under the Act in the light of Chapter X, Chapter XVII and Chapter XXI as well as Section 148.
All the writ petitions, as such, are allowed.
Parties to bear their own respective costs.
Interim order, if any, shall stand vacated.