IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 37578 of 2001(W)
1. PLANT MANAGER, INDIN OIL CORPORATION LTD
... Petitioner
Vs
1. THE SECRETARY, THENHIPALAM GRAM
... Respondent
For Petitioner :.
For Respondent :SRI.GEORGE THOMAS (MEVADA)(SR.)
The Hon'ble MR. Justice P.N.RAVINDRAN
Dated :22/06/2010
O R D E R
"C.R"
P.N.RAVINDRAN, J.
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O.P.No.37578 of 2001
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Dated 22nd June, 2010
JUDGMENT
The Plant Manager of the LPG Bottling Plant
established by the Indian Oil Corporation within the local limits of
Thenhipalam Grama Panchayat, in Malappuram District is the
petitioner in this original petition.
2. The Indian Oil Corporation established the bottling
plant within the local limits of Thenhipalam Grama Panchayat in
the year 1992-93. After the plant was established, they applied
for a licence under the provisions of the Kerala Panchayats
(Licensing of Dangerous and Offensive Trades and Factories)
Rules, 1963. Such a licence was granted and it was renewed up
to 31.3.1995. In the meanwhile, the Kerala Panchayat Raj Act,
1994 was enacted and brought into force. The Government
thereupon issued the Kerala Panchayat Raj (Issue of Licence to
Dangerous and Offensive Trades and Factories) Rules, 1996. The
Indian Oil Corporation did not however apply for renewal of the
licence issued under the erstwhile rules. The Secretary,
O.P.No.37578/2001 2
Thenhipalam Grama Panchayat thereupon issued Ext.P5 demand
notice dated 18.9.2001 to the petitioner demanding payment of
the sum of Rs.2,28,789/- being the licence fee and penalty
payable for the period from 1996-1997 to 2001-2002. Reference
was made to sections 231 and 231B of the Kerala Panchayat Raj
Act, 1994. Another notice dated 17.9.2001 was also issued
calling upon the petitioner to show cause why he should not be
prosecuted for running the plant without a licence. The
petitioner responded to the said notices by sending Ext.P7 letter
dated 27.9.2001 raising various contentions including the
contention that section 231 referred to in Ext.P5 notice has no
application and that section 231B is not in the statute. The
Panchayat thereupon issued Ext.P8 proceedings dated 29.9.2001
withdrawing Ext.P5 notice and the notice dated 17.9.2001 on the
ground that reference was made to wrong provisions of law. The
Panchayat thereafter issued Ext.P9 notice dated 5.10.2001
calling upon the petitioner to show cause why proceedings should
not be taken against the establishment for running the bottling
plant without a licence. The petitioner in turn sent Ext.P10 letter
dated 20.10.2001 contending that licence fee can be levied only
for machinery having a total capacity of 432 HP and that fire
O.P.No.37578/2001 3
pumps and diesel generating sets are not machinery used in the
manufacturing process.
3. The Panchayat considered the said contention and
thereafter issued Ext.P11 notice dated 30.10.2001 demanding
payment of the sum of Rs.1,69,875/- being the arrears of licence
fee payable for the period from 1996-97 to 2001-2002. Ext.P11
notice was issued on the basis that the capacity of the machinery
installed in the bottling plant is 1865 HP, that the licence fee
payable under rule 7 of the Kerala Panchayat Raj (Issue of
Licence to Dangerous and Offensive Trades and Factories) Rules,
1996 based on the average daily turnover is Rs.4,000/- in terms
of Schedule II of the said rules, that the licence fee payable in
respect of the machinery used in the bottling plant, calculated in
accordance with Schedule III thereof is Rs.18650/- and that the
additional fee payable under rule 19 of the aforesaid rules for
belated payment of licence fee and application for licence is 25%
of the licence fee of Rs.22650/-, namely Rs.5,662.50. Ext.P11
discloses that the Panchayat had on that basis demanded from
the petitioner the sum of Rs.28,312.50 per year during the
period from 1996-97 to 2001-2002. The petitioner thereupon
remitted the sum of Rs.15,560/- which according to the
O.P.No.37578/2001 4
petitioner was the actual amount of fee and additional fee
payable for the said period and submitted Ext.P12 application
dated 7.11.2001 for renewal of the licence for the period from
1996-97 to 2001-2002. The Panchayat received the said
payment and after giving credit to it issued Ext.P14 notice dated
26.11.2001 demanding payment of the balance amount of
Rs.1,54,315/- so that Ext.Ext.P12 application can be considered.
The petitioner was also cautioned that unless the licence is
renewed after payment of arrears, the Panchayat will be
constrained to initiate appropriate proceedings against the
petitioner. Exts.P9, P11 and P14 are under challenge in this
original petition. The petitioner has also prayed for a direction to
the respondent to issue license to the petitioner after accepting
payment of Rs.15,560/- towards license fee.
4. The petitioner contends that as no fresh decision
had been taken after the Panchayat Raj Act, 1994 was enacted
and brought into force to renew the license, the licence should
have been renewed on the terms initially fixed, namely, licence
fee at the rate of Rs.2,070/- per year. It is also contended that
the installed capacity of the machinery used in the bottling plant
is only 432 HP and not 1865 HP as stated by the Panchayat and
O.P.No.37578/2001 5
that licence fee is payable only for machinery having an installed
capacity of 432 HP. As a matter of fact, in Ext.P12 application
itself the daily turnover is mentioned as Rs.30,00,000/-. If that
be so, the licence fee based on the daily turnover itself for the
period from 1996-97 to 2001-2002 (six years) would work out to
Rs.24,000/-. However, the petitioner had remitted only the sum
of Rs.15,560/- which according to the petitioner was the licence
fee and additional licence fee payable for the period from 1996-
97 to 2001-2002.
5. Though the respondent Panchayat has been
served, till date the Panchayat has not filed a counter affidavit.
The Kerala Panchayat Raj (Issue of Licence to Dangerous and
Offensive Trades and Factories) Rules, 1996 came into force on
18.1.1996. Rule 7 thereof enables the respondent Panchayat to
levy licence fee based on the daily turnover at the rate stipulated
in schedule II thereof. In the instant case, the licence fee
demanded from the petitioner is Rs.4,000/=, which is based on
the fact that the turnover per day is in excess of Rs.1,00,000/-.
The petitioner has not pleaded or proved with reference to any
cogent material that the average daily turnover is below
Rs.1,00,000/-. As a matter of fact in Ext.P12 application dated
O.P.No.37578/2001 6
7.11.2001 it is admitted that the daily turnover is
Rs.30,00,000/-. If that be so, it can be safely presumed that the
daily turnover during the period from 1996-97 to 2001-2002 was
in excess of Rs.1,00,000/-. The demand under rule 7 is
therefore perfectly legal. Rule 18 of the Kerala Panchayat Raj
(Issue of Licence to Dangerous and Offensive Trades and
Factories) Rules, 1996 stipulates that the fee that may be
charged for granting licence or for the renewal of licence for one
year under section 232 of the Kerala Panchayat Raj Act for the
place where any machinery or manufacturing plant operated by
electricity is used shall not exceed the maximum specified in
Schedule III appended to the said rules. Rule 19 thereof
stipulates that the maximum fee specified in Schedule III to the
said rules shall be applicable only for the application submitted in
due time and that in the case of belated applications an
additional fee of 25 per cent of the fee for licence payable under
the schedule may be charged. Rules 18 and 19 are extracted for
easy reference:
“18. Maximum fee for the place where
machinery or manufacturing plant operated by
electricity is used.- The fee that may be charged
for granting licence or for the renewal of licence for
one year under Section 232 for the place where any
machinery or manufacturing plant operated by
electricity, is used shall not exceed the maximumO.P.No.37578/2001 7
specified in Schedule III appended to these rules:
Provided that where any such licence is
granted or renewed for a period that is less than one
year, the total fee that may be charged for the same
place for any year in respect of the same machinery
or manufacturing plant shall not exceed the fee that
may be charged for granting or renewing licence for
one year:
Provided further that the fee that may be
charged under this rule shall not exceed the fee
charged for the installation of any machinery or
manufacturing plant having the same horse power
operated by means other than that of electricity.
(emphasis supplied)
19. Additional Fee.- The maximum fee
specified in Schedule III appended to these rules
shall be applicable only for the application submitted
in due time. In the case of belated applications an
additional fee of 25 per cent of the fee for licence
payable under the schedule may be charged.”
6. The petitioner does not dispute the fact that the
total installed capacity of the machinery installed in the bottling
plant is 1865 HP. The contention of the petitioner is that for the
purpose of computation of the licence fee, the fire pumps and
diesel generating sets cannot be taken into account as they are
not used in the manufacturing process. In other words, the
contention is that licence fee can be levied only for machinery
having an installed capacity of 432 HP which alone is used in the
manufacturing process and that the fire pumps, 3 in number
(732 HP) and diesel generating sets, 3 in number (701 HP)
O.P.No.37578/2001 8
cannot be reckoned for the purpose of computation of licence
fee. In my opinion, there is no merit in the said contention. The
fire pumps are the integral part of the establishment of the
petitioner. Without fire pumps, the petitioner cannot run the
bottling plant. It also needs diesel generating sets to supply
power when the supply of power by the Electricity Board is
disrupted. Without such safety and back up measures, the
petitioner cannot run the bottling plant. Rule 18 does not
stipulate that fee can be charged only for the machinery actually
used in the manufacturing process. Rule 18 empowers the local
authority to charge licence fee under section 232 of the
Panchayat Raj Act for the place where any machinery or
manufacturing plant operated by electricity is used. It does not
stipulate that the electricity used should be supplied by the
Kerala State Electricity Board and cannot be self generated
power. Rule 18 or Schedule III of the aforesaid rules also does
not draw a distinction between the machinery actually used in
the manufacturing process and machinery which is required to be
installed for the purpose of ensuring safety and also for
uninterrupted supply of power. The petitioner does not dispute
the fact that the total installed capacity of the machinery is 1865
O.P.No.37578/2001 9
HP. If that be so, the levy of licence fee at the rate of
Rs.18,650/- per annum is perfectly in order. The petitioner had
not admittedly renewed the licence after 31.3.1995. Therefore,
the Panchayat is in my opinion justified in levying additional fee
at the rate of 25% of the licence fee payable. In the instant
case, the total licence fee payable is Rs.18650/- + Rs.4000/- =
22650/- per year. 25% of that amount namely Rs.5,662/- is
demanded as late fee. It is thus evident that the demand made
by the Panchayat in Ext.P11 is perfectly in order and in
accordance with the provisions contained in the rules. The
contention of the petitioner that they are liable to pay only
Rs.15,560/- towards licence fee and penalty for the period from
1996-1997 to 2001-2002 cannot therefore be sustained.
7. I also find no merit in the contention of the
petitioner that in view of section 284(2)(a) of the Kerala
Panchayat Raj Act, 1994 the petitioner is not bound to pay the
enhanced licence fee stipulated in the 1996 rules. The
stipulations in clause (a) of sub-section (2) of section 284 of the
Kerala Panchayat Raj Act, 1994 do not in my opinion enable the
petitioner to contend for the said position. All that the said
provision stipulates is that any fee imposed under the erstwhile
O.P.No.37578/2001 10
Kerala Panchayat Raj Act, 1960 immediately before the
appointed day, namely the date on which the Kerala Panchayat
Raj Act, 1994 came into force will continue to be in force until it
is modified by any rule made under the Kerala Panchayat Raj
Act, 1994. The 1996 rules is a rule made under the Kerala
Panchayat Raj Act, 1994. Thus, with the framing and issuance of
the aforesaid rules, the stipulation in section 284 2(a), ceased to
be effective. The petitioner is therefore bound to pay licence fee
at the rates stipulated in the 1996 rules.
8. The petitioner has a further contention that in view
of the provisions contained in section 243 of the Kerala
Panchayat Raj Act, 1994, the local authority cannot recover the
arrears of licence fee after the expiry of a period of three years
from the date on which the fee was payable. In my opinion,
section 243 has no application to the instant case. The
Panchayat has not taken steps to recover the amount payable
under 1996 rules. All that the Panchayat has done in the instant
case is to impose a condition that if the petitioner wants a
renewal of the licence, it should pay the arrears of licence fee as
stipulated under rules 7 and 18 together with the additional fee
payable under rule 19 of the 1996 rules. The Indian Oil
O.P.No.37578/2001 11
Corporation, which is an instrumentality of the Government of
India cannot in my opinion be heard to contend that it was
entitled to run the bottling plant without obtaining a licence from
the local authority. As an instrumentality of the State, the Indian
Oil Corporation had an obligation to pay the licence fee from time
to time and also to apply for renewal of the licence in time. It
ought to have set an example to other industrialists and
establishments instead of evading payment of licence fee. The
Indian Oil Corporation would not have condoned such lapses on
the part of its dealers if they had failed to comply with the
statutory stipulations. In such circumstances, I am of the opinion
that as an instrumentality or agency of the State, the Indian Oil
Corporation cannot put forward a technical plea that the claim of
the Panchayat is barred by limitation. If such contentions are
accepted, it will lead to a situation where Government run
establishments can decline payment of licence fee or even refuse
to take out a licence thereby violating the law and depriving the
local authorities of their right to levy licence fee and collect it.
I accordingly hold that no grounds have been made
out for the grant of the reliefs payed for in the original petition.
The original petition fails and is accordingly dismissed. It is
O.P.No.37578/2001 12
clarified that the respondent Panchayat need renew the licence
only if the petitioner pays the entire amount of licence fee
payable as per the rules right from the period 1996-1997 till date
within one month from the date of receipt of a certified copy of
this judgment. If the petitioner does not comply with the said
direction, the Panchayat will be free to take appropriate steps
including steps to prevent the continued functioning of the
bottling plant.
P.N.RAVINDRAN
Judge
TKS