JUDGMENT
J.B. Koshy, J.
1. Petitioners in these cases challenge Sections 14(1), 14(1A) and 14(5) of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as The Act’) as unconstitutional and invalid. All the petitioners herein are dealers registered under the Kerala General Sales Tax Act and under the Central Sales Tax Act (in short ‘Central Act’). Section 13 of the Act requires compulsory registration of every dealer whose total turnover exceeds a particular limit. At present, Rs. 1 lakh is the limit prescribed under the Act. Section 14(1) prescribes the fees for registration. Section 14(1) after the amendment of the Act by Act 17 of 1988 with effect from 1.4.1988 with enhancement of rates pending till Act 23 of 1996 is as follows:
“14. Procedure for registration : (1) An application for registration shall be made to such authority, in such manner and within such period as may be prescribed and shall be accompanied by a fee as specified below:-
(a) Where the total turnover is less than three
lakh rupees.
One hundred rupees
(b) Where the total turnover is three lakh rupees
and above but is less than ten lakh rupees.
Two hundred and fifty rupees.
(c) Where the total turnover is ten lakhs rupees
and above but less than fifty lakh rupees.
Seven hundred and fifty rupees for each lakh or
part thereof above ten lakh rupees.
(d) Where the total turnover is fifty lakhs
rupees and above, fifty rupees plus
One thousand seven fifty rupees for each lakh or
part thereof above fifty lakhs rupees so however that the total registration
fee payable shall not exceed twenty thousand rupees.”
The rates were further enhanced with effect from 1.4.2000. Before the amendment by Act 17 of 1988 the registration fee was as follows:
The registration fee was originally ten rupees. Afterwards it was amended as under:
from 1.4.1963 to 31.3.1984 (Act 15of 1963) Rs. 10/-
from l.4.1984 to30.6.1987(Act 3 of l983) Rs. 50/-
from l.7.1987to31.3.1998 (Act 18of 1987) Rs. 100/-
from 1.4.1988to31.3.1992:
Total turnover: less than Rs.3 lakhs Rs. 50/-
between Rs. 3 lakhs and Rs. 10 lakhs Rs. 100/- above Rs. 10 lakhs (Act 17 of 1988) Rs. 250/- from 1.4.1992 : Total Turnover: less than Rs.3 lakhs Rs. 100/- between Rs.3 lakhs and Rs. 10 lakhs Rs. 250/- above Rs. 10 lakhs Rs. 750/- Every casual trader and dealer residing outside the State but carrying on business in the State irrespective of the quantum of his total turnover Rs. 1,000/-"
2. The contention of the petitioners is that charging of registration fee at such an exorbitant rate is unwarranted and illegal and that the said levy is opposed to all constitutional requirements and conditions for levy of fees for registration. State cannot impose such huge amounts in the guise of fee. In any event, the exorbitant increase in the registration fee is arbitrary and illegal and violative of Article 14 of the Constitution of India. Section 14(1A) as inserted by Act 8 of 1992 reads as follows:
“14……..
(1A) Notwithstanding anything contained in Sub-section ( 1) every dealer registered under Sub-section (3) of Section 7 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956) shall in addition to the fee specified in Sub-section (1) pay a fee of rupees one hundred.”
The contention of the petitioners is that since already registration fee was charged under the Central Act, imposition of fee by the State for registration under the Central Sales Tax Act is illegal and ultra vires the powers of the State. Section 14(5) reads as follows: –
“14………
(5) A certificate issued under Sub-section (2) shall be valid for a year and shall be renewed from year to year on payment of the fee specified in Sub-section (1) and continues to be valid on such renewal.”
It is the Contention of the petitioners that authorities have got power to cancel registration given to any dealer and detailed procedures are made under the Act and Rules. Otherwise the registration is automatic. Hence payment of registration fees at the same rate for renewal every year is clearly illegal. Further it is submitted that levy of registration fee at differential rates on slab rate is arbitrary, illegal and unconstitutional. It is also stated that Sub-section (5) does not require the procedure required to be followed under Sub-section (2) for the purpose of registration to be granted to a dealer for the first time. It is also submitted that there is no necessity for further levy as certificates and registration number are received by the assessees on registration and in any event, fees charged at every year for renewal of registration are exorbitant and are liable to be set aside.
3. We shall consider the nature of registration fees charged before going into the merits of the case. It is true that there is no generic difference between tax and fee, though broadly tax is a compulsory exaction as part of a common burden, without promise of any special advantage to classes of tax payers whereas fee is a payment for services rendered, benefit provided or privilege conferred. Eventhough services rendered need not be uniform, tax is levied for public purpose and not for payment of services rendered. But with regard to the fees, there is an element of quid pro quo between the persons paying fee and the authority imposing it. In Commissioner, Hindu Religious Endowments, Madras v. Sri. Lakshmindra Thirtha Swamiar (AIR 1954 SC 282) the Apex Court considered the contradistinction between ‘tax’ and ‘fee’. The definition of ‘tax’ given by Latham, C.J. as “a compulsory exaction of money by public authority for public purposes enforceable by law and not payment for services rendered” was accepted by the Apex Court as stating the essential characteristics of a tax. Turning to fees, it was said “a fee is generally defined to be a charge for a special service rendered to individuals by some governmental agency”, but it was confessed, “as there may be various kinds of fee, it is not possible to formulate a definition that would be applicable to all cases”. As regards the distinction between a tax and a fee, it was noticed that compulsion could not be made the sole or even a material criterion for distinguishing a tax from fee. In Hingir-Rampur Coal Co. Ltd. v. State of Orissa (AIR 1961 SC 459) the Apex Court held that there was an element of quid pro quo between the person paying the fee and the authority imposing it. The Apex Court further held that:
“If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area; and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business, the cess is distinguishable from a tax and is described as a fee.”
After considering various decisions in Municipal Corporation of Delhi and Ors. v. Mohd. Yasin ((1983) 3 SCC 229) the Apex Court held as follows:
“What do we learn from these precedents? We learn that there is no generic difference between a tax and a fee, though broadly a tax is a compulsory exaction as part of a common burden without promise of any special advantages to classes of tax payers whereas a fee is a payment for services rendered, benefit provided or privilege conferred. Compulsion is not the hallmark of the distinction between a tax and a fee. That the money collected does not go into a separate fund but goes into the consolidated fund does not also necessarily make a levy a tax. Though a fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct, a mere casual relation may be enough. Further, neither the incidence of the fee nor the service rendered need be uniform. That others besides those paying the fees are also benefitted does not detract from the character of the fee. In fact the special benefit or advantage to the payers of the fees may even be secondary as compared with the primary motive of regulation in the public interest. Nor is the court to assume the role of a cost accountant. It is neither necessary nor expedient to weigh too meticulously the cost of the services rendered etc. against the amount of fees collected so as to evenly balance the two. A broad co-relationship is all that is necessary. Quid pro quo in the strict sense is not the one and only true index of a fee; nor is it necessarily absent in a tax.”
4. In this case there is no dispute between the parties that what is levied in the form of licence fee is a fee and not a tax. The Government Pleader submitted that what is collected is a fee. In the counter affidavit also Government justifies the imposition of licence fees as a fee and not as tax. Therefore, we need not go at length whether the levy is tax or fee.
5. The second question to be considered is whether there is legislative competence in imposing levy of this fees. The preamble of the Act itself would show that the Act itself was made to amend the law relating to levy of general tax on the sale or purchase of goods in the State of Kerala. The preamble reads as follows:
“Preamble:- Whereas it is expedient to consolidate and amend the law relating to the levy of a general tax on the sale or purchase of goods in the State of Kerala.”
Item 54 in List II of Schedule 7 reads as follows;
“54. Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I.”
Therefore, KGST Act was enacted within the powers of the State as can be seen from Article246(3) of the Constitution of India. Item 66 of List II of Schedule 7 also provides as follows:
“66. Fees in respect of any of the matters in this List, but not including fees taken in any court.”
Since the Act itself was passed with legislative competence, fees also can be charged under the Act under item 66 of List II as it is one of the matters covered in the List. In the above circumstances, there is legislative competence for the State to impose fees and Sections 14(1) and 14(5) are enacted with legislative competence.
6. Now we have to consider whether there is legislative competence to enact Section 14(1A) imposing levy of additional fees on the registered dealers under the Central Sales Tax Act. As far as interstate sales are concerned, the matter is covered by List I of Schedule 7. Item 92A of List I of Schedule 7 reads as follows :
“92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce.”
Therefore, with respect to dealers of inter-State sales, only the Central Government has got power to impose fees. Item 96 shows that Union Government can impose fees in respect of matters mentioned in List I. Therefore, State Government cannot charge fees from registered dealers under the Central Sales Tax Act as there is no legislative competence for in view of Article246(1) of the Constitution. Parliament has exclusive jurisdiction for charging tax or fees in respect of interstate sales. Therefore, we declare that Section 14(1A) of the Kerala General Sales tax Act is unconstitutional and beyond the powers of the State Legislature. This is further supported by the fact that with regard to the inter-State sales and purchases, Parliament has already enacted the Central Sales Tax Act, 1956. Section 7of the Central Act deals with registration of dealers. Section 7(1) reads as follows:
“7. Registration of dealers:- (1) Every dealer liable to pay tax under this Act, shall within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particulars as may be prescribed.”
Section 13(1)(a) and (b) of the Central Act make it clear that only the Central Government can, by notification, make Rules regarding the manner in which the application should be made under the Act and prescribe the fees payable for registration. It is not a matter for the State Government to impose registration fees from dealers under the Central Sales Tax Act. The Central Government, in exercise of the powers conferred by Section 13(1) has made Rules. The Central Sales Tax (Registration and Turnover) Rules, 1957 deals with granting of registration, cancellation of registration, fees for registration, etc, Rule 4(3) of the Central Sales Tax (Registration and Turnover) Rules, 1957 reads as follows:
“4(1)………..
(3) A fee of rupees twenty five shall be payable in respect of every application for registration under Sub-rule (1) or Sub-rule (2), and such fee may be paid in the form of court fee stamps affixed to such application.”
Therefore, the registration fee for a registered dealer under the Central Sales Tax Act is only Rs.25/- (unlike maximum fee of Rs. 20,000/- payable under the State Act every year) and no repeated fees need by paid on every year for registration as per the Rules. In view of the specific provisions under the Central Act and Rules, provisions made in the State Act prescribing additional fees for registration to the registered dealers under the Central Sales Tax Act is clearly illegal. Therefore, we have no hesitation to declare that Section 14(1A) of the Act is unconstitutional.
7. We have seen that for enacting Sections 14(1) and 14(5) the State Government has got legislative competence. Under Section 14(1) registration fee is prescribed and under Section 14(5) apart from the initial registration, registration has to be renewed every year and every time same fee equal to the initial registration fee has to be paid. According to the State, amount collected as registration fee is in the nature of fees and not tax. The major contention of attack is that for charging fees there should be quid pro quo and in the absence of any quid pro quo the fees cannot be charged. It is further contended that the charges are exorbitant and it is being raised unreasonably from time to time without any rational basis in an arbitrary manner. Thirdly it is contended that requirement of paying same registration fee as in the case of initial registration, at the time of renewal is arbitrary. Neither in the Central Sales Tax Act nor in the Sales Tax Act prevailing in neighbouring States, there is no requirement of paying registration fee at the time of renewal of registration every year and, therefore, there is no basis for charging registration fee at the time of renewal, especially when registration is automatic.
8. In the counter affidavit it is contended that registration fee is levied for services rendered to the assessees. In the counter affidavit it is stated as follows:
“Registration confers on the dealers certain rights and privileges. Even in the case of dealers who deal in goods which are completely exempted from tax, like salt, or who have only export sales, certain services have to be rendered by the Department, like supplying forms, completion of assessments, better facilities provided in the offices, especially in the new offices constructed or under construction at different parts of the State etc. for which expenses have to be incurred by the State. The administration expenses are also going up…..”
Learned Government Pleader also points out that in P.R.S. Hospital v. State of Kerala (2003 (1) KLT 633) it was held that increase in the registration fee was correct. It was also held in that case that the court cannot look as a cost accountant to see whether entire fees collected are used in providing service. So long as there is services, the expenses for services need not be tallied with the amount collected. But in those cases only increase in the rate of registration fee was challenged on the contention that it was arbitrary and unreasonable and that registration fee depending upon the turnover is also arbitrary and irrational. The learned Single Judge correctly found that registration fee can be co-related with the turnover. In P.R.S. Hospital’s case the learned Single Judge held as follows:
“…… In the first place, the parties are entitled to departmentally issued declarations in Form No. 26 for transport of goods, returns and other forms are also printed and supplied by the department including treasury challans for payment of tax, all of which are not charged on cost basis. Above all, there is a heavy burden on the Government to maintain various infrastructure facilities such as Check Posts, vehicles etc. for administration of the statute which has to be recouped by collection of fees. There are large number of dealers served by the Department who are not liable to pay any tax either being second or subsequent sellers of First Schedule items or dealers in exempted goods or exporters. The fee collected in proportion to turnover is therefore amply justified. Considering the inflation and cost increase in the course of last several years. I do not think the current levy of maximum registration fee at Rs. 20,000/- is exorbitant or arbitrary, since there is quid pro quo, I do not think this Court can go into the question whether there is service rendered in proportion to the fees charged. This is outside the scope of judicial scrutiny. So far as there is service rendered and the amount of fees charged for registration or renewal thereof is not exorbitant or unreasonable, the section authorising such levy has to be upheld and I do so……”
The above observation shows that the Learned Judge proceeded on the basis that there is admittedly quid pro quo but only the enhancement of rates are questioned. But here in this case, the contention is that charging of registration fee itself is illegal and unconstitutional. The petitioners initially registered when registration fee was a meagre amount eventhough no service was rendered in return. When the amount was minimal they did not incur further expenses by challenging the same. When renewal fee was increased exorbitantly they challenged the vires of the provisions itself.
9. Now we will consider the nature of the services said to have rendered by the State for levying registration fees. It is contended that check posts are established to assist the assessees. Establishment of check posts is for checking whether tax is evaded. It is part of the sales tax collection machinery. It cannot be stated that by establishing check post service is done to the assessees. It is further submitted that declaration forms and various other forms, records etc. are supplied by the Department. The declaration forms etc. are supplied on payment of a price. The assessees are doing a service to the Department by collecting tax from the customers and merely because return forms are given to submit return, it cannot be stated that a service is rendered as quid pro quo for paying registration fee. Thirdly, it is submitted that administrative expenses are incurred and it is on the increase every year. Sales Tax Act itself is enacted for charging tax on sales and purchases of goods. For establishing machineries for collection of sales tax, administrative expenses are incurred. Incurring of administrative expenses, paying salary to the Sales Tax Officials, maintaining of vehicles of the Department, establishing various offices etc. cannot be stated to be a service done to the assessees in return of charging registration fees. It was again contended that there are large number of exempted assessees and that some turnovers like second sale etc. are exempted to the assessees. By verifying the claims for exemption the Department is giving service to the assessees. When exemptions are claimed, checking by the Department whether assessees are entitled to exemption as claimed by them or whether the alleged exempted turnover is liable for assessment etc. are part” of revenue collection process or assessment process. Assessment is part of tax collection. Therefore, verification of claims for exemption to find out whether due tax is evaded etc. cannot be stated to be a service done to the assessees as quid pro quo for the registration fees collected. Along with the registration fees, depending upon the turnover assessee has to pay security. That also vary with the increase in turnover. Increased security is demanded depending upon the returned turnover of previous year. In view of Section 14(2A) and Rules and orders framed thereunder, the security can be demanded depending upon the turnover at any time, but for levying registration fees no separate services are rendered. It is true that as held by the Supreme Court in Sreenivasa General Trades v. State of Andhra Pradesh (AIR 1988 SC 1246) the traditional view that there must be actual quid pro quo for a person from whom fee is collected has undergone a sea of change in the subsequent decisions and exact arithmetical co-relation is not necessary and court need not look as a cost accountant, whether fees levied and the cost of services rendered are equal. It is also held that it is not necessary that a particular person paying the fees alone is benefited. In The City Corporation of Calicut v. Thachambalath Sadasivan and Ors. (AIR 1985 SC 756) it was held that it is not necessary to establish that those who pay the fees must receive the benefit directly. It is enough if one who is liable to pay fees receives general benefit from the authority levying the fees as the element of service. In that case when fee was charged for use of land or premises for soaking of coconut husks, it was found that the Corporation by rendering scavenging services, carrying on operations for cleanliness of the city and making habitation tolerable, despite pollutions created by soaking coconut husk. Persons paying the fees also getting general services among other users of the premises. In Kishan Lal Lakshmi Chand and Ors. v. State of Haryana and Ors. (JT 1993 (4) SC 426) the Apex Court held as follows:”
“… The broad co-relationship between the imposition of fee and the nature of the service rendered to the entire textiles industry satisfied the test of quid pro quo, though no specific service was rendered to the payer of the fee……”
But in all other cases sited before us including Kewal Krishan Puri v. State of Punjab ((1980) 1 SCC 416) etc. it was only held that even though an arithmetical co-relationship is not necessary, by and large, there should be quid pro quo.
10. In Agricultural Market Committee, Raj am and Anr. v. Rajam Jute & Oil Millers Association, Rajam ((2003) 4 SCC 187) the Supreme Court observed as follows:
“… 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 (sic or) expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a ‘reasonable relationship’ between the levy of the fee and the services rendered.”
There should be, by and large, a quid pro quo a reasonable relationship between the levy of fee and services rendered. In Sirsilk Ltd. and Ors. v. The Textiles Committee and Ors. (AIR 1989 SC 317) quoting from Sreeniwasa General Traders’ case (supra), the Apex Court observed as follows:
“…. 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 or expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a “reasonable relationship” between the levy of the fee and the services rendered. If authority is needed for this proposition, it is to be found in the several decisions of this Court drawing a distinction between a ‘tax’ and a Tee’. See The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt ((1954) SCR 1005 : AIR 1954 SC 282), H.H. Sudhundra Thirtha Swamiar v. Commissioner for Hindu Religious and Charitable Endowments, Mysore (1963 Suppl. (2) SCR 302 : AIR 1963 SC 966), The Hingir-Rampur Coal Co. Ltd. v. State of Orissa ((1961) 2 SCR 537 : AIR 1961 SC 459), H.H. Shri Swamiji of Shri Admar Mutt v. Commissioner, Hindu Religious and Charitable Endowments Department ((1980) 1 SCR 368 : AIR 1980 SC 1), South Pharmaceuticlas and Chemicals, Trichur v. State of Kerala ((l982) 1 SCR 519: AIR 1981 SC 1863) and Municipal Corporation of Delhi v. Mohd. Yasin ((1983) 2 SCR 999: AIR 1983 SC 617)……”
(Underlining by us)
After considering the entire decisions on the subject in Krishi Upaj Mandi Samiti and Ors. v. Orient Paper & Industries Ltd. ((1995) 1 SCC 655) the Supreme Court held as follows:
“21. Thus what emerges from the conspectus of the aforesaid decisions is as follows:
(1) Though levying of fee is only a particular form of the exercise of the taxing power of the State, our Constitution has placed fee under a separate category for purposes of legislation. At the end of each one of the three Legislative Lists, it has given power to the particular Legislature to legislate on the imposition of fee in respect of every one of the items dealt with in the list itself, except fees taken in court.
(2) The tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered. There is no quid pro quo between the taxpayer and the public authority. It is a part of the common burden and the quantum of imposition upon the taxpayer depends generally upon his capacity to pay.
(3) Fee is a charge for a special service rendered to individuals or a class by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service though in some cases the costs are arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay. These are various kinds of fees and it is not possible to formulate a definition that would be applicable to all cases.
(4) The element of compulsion or coerciveness is present in all kinds of impositions though in different degrees and it is not totally absent in fees. Hence it cannot be the sole or even a material criterion for distinguishing a tax from fee……
(5) The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of the common burden while a fee is a payment for a special benefit or privilege. Fees confer a special capacity although the special advantage is secondary to the primary motive of regulation in the public interest. Public interest seems to be at the basis of all impositions but in a fee it is some special benefit which is conferred and accruing which is the reason for imposition of the levy. In the case of a tax, the particular advantage if it exists at all, is an incidental result of State action. A fee is a sort of return or consideration for services rendered and hence it is primarily necessary that the levy of fee should on the face of the legislative provision be co-related to the expenses incurred by Government in rendering the services……..
(6) There is really no generic difference between tax and fee and the taxing power of the State may manifest itself in three different forms, viz., special assessments, fees and taxes……
(7) It is not a postulate of a fee that it must have relation to the actual service rendered.
However, the rendering of service has to be established/The service, further, cannot
be remote. The test of quid pro quo is not to be satisfied with close or proximate
relationship in all kinds of fees. A good arid substantial portion of the fee must,
however, be not necessary to confer the whole of the benefit on the payers of the fee
but some special benefit must be conferred on them which has a direct and reasonable
co-relation to the fee. While conferring some special benefits on the payers of the fees,
it is permissible to render service in the general interest of all concerned. The element
of quid pro quo is not possible or even necessary to be established with arithmetical
exactitude. But it must be established broadly and reasonably that the amount is being
spent for rendering services to those on whom the burden of the fee falls. There is
no postulate of a fee that it must have a direct relation to the actual services rendered
by the authorities to each individual to obtain the benefit of the service. The element
of quid pro quo in the strict sense is not always a sine qua non for a fee. The element
of quid pro quo is not necessarily absent in every tax. It is enough if there is a broad,
reasonable and general co-relationship between the levy and the resultant benefit to
the class of people on which the fee is levied though no single payer of the fee receives
direct or personal benefit from those services. It is immaterial that the general public
may also be benefited from some of the services if the primary service intended is for
the payers of the fees …..”
(Underlining by us)
11. We have already seen that actually no services are rendered by the Government in return for charging registration fees. The services said to have been rendered as quid pro quo for the fees levied are only incurring of expenses for assessment and collection of sales tax and purchase tax which is part of assessment expenses. No separate benefit is conferred on the assessees which has a direct and reasonable co-relation to the fee. In paragraph 5 of the counter affidavit filed by the State in O.P. No. 11071 of 1993 it is stated that in 1987 Government introduced turnover tax. But it was objected to by the public. Therefore, turnover tax was withdrawn except for petroleum products and foreign liquor. In order to make good the revenue loss, registration fee was enhanced. These averments will show that the fees were imposed not for rendering services or conferring privileges to the assessees. We cannot equate registration fee to the licence fee charged by local authorities or fee charged by Marketing/Trading Authorities etc. as by collection of the above fee some services are rendered which have at least a nexus to the collection of fee. Hence we find that there is no nexus between the registration fee charged and services rendered.
12. We note that all the petitioners herein are registered dealers. At the time of registration they did not question the charging of fee. When a person applies for registration the State may have to incur expenses for verification depending upon the turnover. Therefore, initial registration fees charged have some relation with the expenses incurred for verification. When registration number is given, it will enable the department for easy verification of assessment of tax and identification of assessee. Registration number will also enable the assessee and general public in maintaining accounts and identification. Since expenses are incurred for verification of the initial registration and petitioners are already registered dealers, we are not interfering with Section 14(1) of the Act. It was submitted by the petitioners that registration fee is being increased exorbitantly. When licence fee under the Kerala Money Lenders Act was enhanced from Rs. 2,000/- to Rs. 5,000/-, a Division Bench of this Court in Kerala Small Financiers Association v. State of Kerala (1998 (2) KLT 813 = 1998 KLJ (Tax Cases) 746) set aside the same as unreasonable. Here it is submitted that the maximum registration fee of Rs. 10/- 1963, Rs.250/-in 1983 and Rs. 7,500/- in 1992 was increased to Rs. 10,000/- in 1993 and to Rs. 20,000/-in 1996. But we note that the petitioners are already registered dealers and amount of registration fee depending upon the turnover cannot said to be exorbitant, if it is one time affair. There is no ground for setting aside Section 14(1) charging initial registration fee especially when Section 13 of the Act is not challenged. Once a dealer is registered, depending upon the turnover security also can be increased.
13. Renewal of registration is automatic and the same registration number will continue. Registration can be cancelled by following the procedure prescribed under the Act and Rules either on that year itself or in any subsequent years. Section 14(5) requires for year wise registration. But fixation of same fee for renewal of registration as of initial fee is clearly illegal and arbitrary as we have already seen that there is no quid pro quo. Absolutely no services are rendered either for assessee or public for charging renewal fees as renewal is automatic unless it is cancelled after following the procedure prescribed. Under the Central Act and Rules apart from the initial registration fee of Rs 25/- no renewal fee is charged. It is also submitted by the petitioners that in the neighbouring States also no exorbitant fees are charged as fee for renewal of registration. Therefore, Section 14(5) of the KGST Act in so far as it requires registered assessees to pay renewal fee payable from year to year at the same rate of initial registration fee payable under Sub-section (1) is clearly unreasonable. Such fees charged without any quid pro quo and nothing in return is clearly unconstitutional. There is nothing wrong in the provisions incorporated for renewing licence as yearwise registration can be given. State also will be free to charge nominal fees for covering up expenses, if any, incurred for renewal of registration.
14. The learned Government Pleader submitted that renewal fees are collected from all the dealers from 1988 onwards and consequent to the dictum that collection of renewal fee at the same rate as that of initial registration fee. State will have to refund the amount collected and it will be a huge liability to the State. Therefore, according to the Government Pleader, if the court declares that provision for collection of fees every year as invalid, it should be made prospective in operation. It is settled law that High Court has no power to say that judgment has only prospective operation after declaring certain provisions as unconstitutional. (See Somaiya Organics (India) Ltd. v. Slate of Uttar Pradesh (AIR 2001 SC 1723) and State of Himachal Pradesh v. Nurour Private Bus Operators Union and Ors. (AIR 1999 SC 388)). Hence prospective operation can be done only by the Apex Court. But the court can mould the relief. Only some assessees have approached this Court. Others were paying the amount without protest. Some petitioners approached the court when the rate was increased substantially in 1993 and before that date they were paying renewal fee also as the rates were substantially increased in 1992. Some petitioners approached this Court in the year 2003 only and before that they were paying the fees voluntarily. Therefore, as far as refund of the fees paid is concerned, it will be applicable only to the petitioners who approached the court questioning correctness of levy that too in respect of fees collected for the period after they approached the court.
15. In the result we hold that: (i) Section 14(1) of the K.G.S.T. Act is legal and valid; (2) Section 14(1A) is unconstitutional and its enactmentis beyond the legislative competence; (3) Section 14(5) is invalid in so far as it compels payment of registration fee at the rate prescribed under Section 14(1) on every year at the time of renewal as such fees are charged without any quid pro quo, without any services rendered or benefits or privileges conferred to the assessees.
All the Original Petitions are disposed of accordingly.
