MUNICIPAL COUNCIL MADURAI Vs. R NARAYANAN

JUDGEMENT

(1.) The die-hard 'tax' -'fee' dilemma survives, as these appeals, by special leave, attest, long after this court has dispelled the fiscallegal confusion on the point in a series of rulings. The cases before us were provoked by a sudden escalation of licence 'fee' imposed on all hoteliers by the common appellant the Madurai Municipal Council (now it is a Corporation, but that makes no difference) (Council for short). The scale of fees which perhaps, merely defrayed the cost of issuing the licence, was moderate to begin with and paid periodically by the respondents who run hotels within the municipal limits: but their present grievance is that the resolution of December 28, 1965, whereby a sharp spurt in the rates of fee was brought about, has been tainted with 'unconstitutionality'.

(2.) The authority to justify the levy qua fee, must render some special services to the category from whom the amount is exacted and the total sum so collected must have a reasonable correlation to the cost of such services. Where these dual basic features are absent, you cannot legally claim from the licensee under the label 'fee'.

(3.) This court has, as late as the Salvation Army case. (1975) 1 SCC 509 = (AIR 1975 SC 846 = 1975 Tax LR 1455) set out the tests beyond doubt. When the respondents. (writ petitioners) challenged the fee raise, the plea in defence first was that the impost was a fee strictly so-called, that it was requitted by adequate benefits and that the larger lay-out on the inspecting staff and allied items, both necessitated and validated the new increase, However, on later and better reflection, may be the inspirational source for which was stated to be this Court's pronouncement in the Liberty Cinema case (1965) 2 SCR 477 = (AIR 1965 SC 1107), the Council rightly abandoned the fee-cum-quid pro quo formula and anchored itself on the right to exact the higher rate as a tax on land and building under Entry 49 of List II, in the Seventh Schedule read with Section 321 (2) of the Madras District Municipalities Act, 1920 (for short, the Act). This volteface, as it were, was not objected to by the opposite party and the writ petitions and writ appeal were disposed of on that footing. The learned Single Judge upheld the levy but the appellate Bench upset it. The appellant Council has journeyed to this Court to repair the blow on its revenue since there are 1,200 and odd hotel-keepers similarly situated in the Madurai Municipal limits, although only four have figured as respondents here.The financial dimension of the decision is, indeed, considerable.