ALLEPPY MUNICIPAL COUNCIL Vs. S VEERIAH REDIAR

JUDGEMENT

(1.) S. A. Nos. 252 to 263 are by the Alleppey Municipal council and S. A. Nos. 1189 to 1192 by the Kottayam Municipal Council. The respondents in both series are textile merchants in the respective municipalities. The questions in all these appeals are whether the municipal councils can taboo storing of textile fabrics without a licence of the Commissioner under the kerala Municipalities Act, 1960 (Act XIV of 1961) hereafter 'the Act' and whether the licence fee levied therefor under Schedule III to the Act is a lawful fee or tax. The Munsiff, who disposed of the Alleppy suits by a common judgment, held "that piece goods are combustible material contemplated in schedule III to the Kerala Municipalities Act;" that the fee levied "is not really licence fee but only tax since there is no correlation between the fees levied and the services rendered and that the levy is therefore not legally recoverable," but dismissed the suit for want to service of a notice under S. 392 of the Act. On appeal, the District Judge, alleppey, held that the bar of S. 392 of the Act does not apply to the suits, 'that textile goods stored for trade purposes cannot be brought under combustible materials mentioned in Schedule III and that the Municipality has no right to levy licence fee for the textile goods stored for trade purposes, that the fee levied is not really licence fee, but only a tax and that the municipality has no jurisdiction to levy such a tax' and allowed the suits with costs in both Courts. The Munsiff who disposed of the Kottayam suits held that the bar of S. 392 of the Act does not apply to the suits, that 'no service whatever is rendered to the plaintiffs ' and therefore 'the levy of fees on the textile shops is ultravires the powers conferred on the Municipality' and allowed the suits. The appeals preferred by the Municipal Council were dismissed with costs by the District Judge. Kottayam, who added: "schedule 3 details various items of articles and materials for which licences are necessary either for storing, manufacturing, selling, packing, cleansing etc. Applying the ordinary dictionary meaning of the term combustible material, materials like bamboos, campher, charcoal, cloths, coal, cotton, wool, silk, sulphur, firewood, straw, paper etc. , are all materials capable of being consumed by fire and can be said to be coming under the term combustible material. But it is significant to note that under schedule. 3 alt these materials have been specifically stated and licence is necessary for the purpose of either storing, selling, manufacturing, dyeing or packing these materials. Gunpowder is one of the items specified is Schedule. 3 and for storing, packing, etc. of gunpowder a licence is necessary. Clothes include silk and woolen goods also. Under Schedule. 3 of the Act a licence is necessary only for dyeing of cloths. Though cloth has been specifically mentioned as one of the items for dyeing for which a licence is necessary. Schedule. 3 does not enjoin that any licence is necessary for storing or selling of any variety of cloths. Similarly silk and wool are two of the items specified in Schedule. 3. Under this Schedule, for packing, pressing, cleansing, preparing or manufacturing silk, a licence is necessary and also for storing, packing, pressing, cleansing, preparing, manufacturing, dyeing or drying wool, a licence has to be taken. This shows that a licence is necessary only for storing raw wool and that no licence is necessary for storing raw silk. There is no prohibition for storing for sale piece goods without a licence. So it is seen that many materials which can be brought under the ordinary dictionary meaning of the word 'combustible material' have been separately specified in the schedule. As already stated above, cloths, silk, wool are separately shown and specified in this Schedule. All these circumstances clearly indicate that the legislature never intended piece goods including silk and woolen goods to be brought under the beading combustible materials and that this term has been used in a scientific sense. Otherwise there was no necessity for separately mentioning these various materials as all these materials could have been brought under the heading combustible material. So also if it was the intention of the legislature to levy licence fee in respect of the storing or for storing for sate any variety of cloths including silk and woolen goods, the legislature would have mentioned this under the heading cloths. Under the heading cloths, a licence is necessary only for the dyeing of cloths and not for storing or for storing for sale Piece goods including silk and woolen goods do not come under the beading 'combustible material' specified in Schedule III of the Kerala municipalities Act, 1960. " The Municipal Councils have come up in second appeal.

(2.) THE first question argued is whether the instant impost is a tax or a licence fee, and if a licence fee whether it is lawful. THE distinction between a tax and a fee has been well settled by precedents of the Supreme Court. A fee required a quid pro quo in the form of some service adequate to the levy: a tax is a revenue collected by the Government or a local authority for its own purposes. It follows that if a particular impost is made without any offer of service in return therefor it can only be a tax, and not a licence fee. Neither S. 284 of the Act which prescribes a licence for conduct of certain activities within the municipality, nor S. 363 which allows impost of a fee on such licences required the municipality to offer any service in return for the levy. On the contrary, S. 135 of the Act provides: "all moneys received by the municipal Council shall constitute a fund which shall be called the municipal fund and shall be applied and disposed of subject to the provisions of this Act or other laws. " This Section makes it obligatory on the part of the municipal Council not to keep the licence fees collected as a separate fund for any particular purpose to be carried out by the municipality. THE mandate of the legislature in the Act is clear that all the licence fees collected under various provisions in the Municipalities Act are to be put in a hotch-pot and merged with taxes collected to constitute a general fund called 'the municipal fund', which has to be applied and disposed of for the general proposes of the municipality. THE legislative intent in providing for licences and licence fees under S. 284 and 363 of the Act is clear that the collections from licensees are not to be utilised for rendering any special services to them, individually or as a class, but must be merged in the Municipal fund along with taxes, cessess, rates etc. collected from other citizens of the municipality. It is regrettable that this salient provision which indicates the real nature of the licence fees levied and collected by municipalities escaped attention of many a learned judge who adjudged legality of licence fees levied by the municipalities. In the Corporation of Calcutta v. Liberty Cinema AIR. 1965 S C. 1107 a Constitution bench of the Supreme Court had to consider the legality of a similar levy of licence fee on cinema houses under the Calcutta Municipal Act, 1951. Sarkar J. , speaking for the majority of the Bench, observed: "now, on the first question, that is. whether the levy is in return for services, it is said that it is so because S. 548 uses on 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 This contention is not really open to the respondent for s 548 does cot use the word "fee"; it uses the words "licence fee' and those words do not necessarily mean a fee in return for services. In fact in our Constitution fees for licence and fee for services rendered are contemplated as different kinds of levy. THE former is not intended to be a fee for services rendered. This is apparent from a consideration of Art. 110 (2) and art. 199 (2) where both the expressions are used indicating thereby that they are not the same. In Shannon v. Lower Main Land Dairy Products Board, 1933 AC. 708 it was observed at pp. 721-752: if licences are granted, it appears to be no objection that fees should be charged in order either to defray the costs of administering the local regulation or to increase the general funds of the province or for both purposes. It cannot, as their Lordships think, be an objection to a licence plus a fee that it is directed both to the regulation of trade and to the provision of revenue'. It would, therefore, appear that a provision for the imposition of a licence fee does not necessarily lead to the conclusion that the fee must be only for services rendered. If the word 'fee' is not conclusive of the question that it must be in return for services, as we think it is not, then the question whether the fee contemplated in S. 548 is a fee in return for services, can only be decided by reference to the terms of the section and for this purpose we have to consider that section along with S. 443 A cinema house, it is not disputed, is included in the words 'places of public resort. It was, therefore, contended that a levy outside Part IV could not be a tax and hence must be a fee for services. This contention was sought to be supported by the argument that S. 443 occurred in a Part concerning public health, safety and convenience and therefore the intention was that the levy authorised by the section would be in return for work done for securing public health, safety and convenience and was hence a fee. We are wholly unable to accept this contention Whether a particular levy is a fee or tax has to be decided only by reference to the terms of the section as we have earlier stated. Its position in the Act cannot determine its nature; an imposition which is by its terms a tax and not a fee, which in our opinion the present imposition is, cannot become a fee by reason of its having been placed in a certain part of the statute. THE reference to the heading of Part V can at most indicate that the provision in it were for conferring benefit on the public at large. THE cinema house owners paying the levy would not as such owners be getting that benefit. We are not concerned with the benefit, if any received by them as members of the public for that is not special benefit meant for them. We are clear in our mind that if looking at the terms of the provision authorising the levy, it appears that it is not for special services rendered to the person on whom the levy is imposed, it cannot be a fee wherever it may be placed in statute-a consideration of where S. 443 and 548 are placed in the act is irrelevant for determining whether the levy imposed by them is a fee or a tax. " (underline added) THE licence fee imposed by the municipal council on cinema houses was held in that decision by the Supreme Court to be a tax. Counsel for respondents-assessees read the decision of a division Bench of the Supreme Court in Nagar Mahapalika, Varanasiv. Durga Das bhattacharya AIR. 1968 S. C. 1119, with a stress on the following observations therein which have been cited by two Full Benches of this Court in City corporation of Calicut v. Sadasivan 1968 KLT. 589 F. B. and Arya Vaidya Pharmacy v. THE Health officer, Ernakulam 1968 KLT. 739 F. B. : "in our opinion, the scheme of Chapter VIII of the act (U. P. Municipalities Act, 1916) show that the provisions contained therein are meant for the purpose of regulation of certain trades and professions and for maintenance of public safety and convenience of the inhabitants of the municipality. THE fees mentioned in S. 294 are meant to be imposed for the purpose of regulation of trade and professions and for rendering services. It is not contemplated by the Act that licence fees imposed by S. 294 should be merged in the public revenues of the municipality and should go for the upkeep of the roads and other matters of general public utility. It is therefore not permissible for the Municipal Board to impose a tax on the respondents under the guise of a license fee without following the mandatory procedure for imposition of the taxes prescribed by S. 131 to 135; " (underline is mine ). It is obvious in the above passage, particularly in the penultimate sentence thereof (which is underlined by me) that the U. P. Municipalities Act 1916 contains no provision parallel to S. 135 of the Kerala municipalities Act 1960 which is an express mandate that the licence fees imposed by any Section of the Act should be merged in the public revenues of the Municipality and should go for matters of general public utility. THE decision in Nagar Mahapatika, Varanasi v. Durga Das Bhattacharya AIR. 1964 S. C. 1119 is therefore clearly distinguishable on this essential difference in the provisions of the statutes concerned. THE dicta in the Liberty Cinema Case air. 1965 SC 1107 are that the imposition of a licence fee need not necessarily lead to the inference that the fee must be only for services rendered and that a fee which is not one in return for services under terms of the Section that imposes it is in reality a tax. Where the statute goes further and commands the fee to be merged in the general revenues of the local authority and not to be earmarked for a particular service, the case is stronger for the licence fee to be reckoned not as a fee but as a tax only. It is pertinent to note that in the later decision in Nagar Mahapalika Varanasi v. Durga Das Bhattacharya AIR. 1968 s. C. 1119 be dictum in the Liberty Cinema Case AIR. 1965 S. C. 1107 was not noticed.

(3.) IT is under S. 284 and 363 (3) of the Act that the appellants claim authority to impose a licence fee for storing textile fabrics within the municipalities. S. 284 empowers the municipal councils to notify that no places within the municipality shall be used for any of the purposes specified in Schedule III without a licence of the Commissioner, and S. 363 (3)empowers the municipal council to fix and levy a fee for such licences. Schedule III enumerates more than 120 materials, and in regard to each of them a particular activity or certain particular activities as requiring licences under S. 284 of the Act. The imposition of licence fee for storing textiles is traced by the appellants to the entry in the Schedule. Combustible material storing" The assessees challenge it. IT appears that on the question whether textile fabrics are combustible material different views have been expressed in the Madras High Court and this Court: Vide Rariappa Patiala. In re 1942. 11 MLJ. 555 and Ahmad Batcha v. Municipal Council, Vanivambadi 1956-1 mlj. 5 N. R. C. on the one hand and the judgments in O. P. No. 176 of 1964 and C. R. P. No. 69 of 1968 in this Court. I think it unnecessary to try to resolve the controversy here, particularly in view of the observations made by Mr. Kader, District Judge, Kottayam (quoted above) with which I am in substantial agreement. Among the various materials and purposes enumerated as compulsorily licensable in Schedule III are "ammunition Storing, pressing, cleansing, preparing or manufacturing by any process whatsoever. Camphor Storing, packing, pressing, cleansing, preparing or manufacturing by any process whatever or boiling. Explosive Storing. Fireworks Storing, packing, pressing, cleansing, preparing or manufacturing by any process whatever. Gas Storing, packing, pressing, cleansing, preparing or manufacturing by any process whatever' gunpowder Storing, packing, pressing, preparing or manufacturing by any process whatever. Matches Storing, packing, pressing, cleansing, preparing or manufacturing by any process whatever. Spirits Storing, packing, pressing, cleansing, preparing or manufacturing by any process whatever. Sulphur Storing, packing, pressing, cleansing, preparing or manufacturing by any process whatever. Tarpentine Storing, packing, pressing, cleansing, preparing or manufacturing by any process whatever" Thus, besides the general entry "combustible material Storing" particular entries are made in the Schedule in regard to ammunition, explosive, fireworks, gas, gunpowder, matches, spirits, sulphur, turpentine etc. all of which are obviously combustible materials and in regard to each such particular entry certain particular activities are enumerated in detail as objects of levy of licence fees and they include 'storing'. As the 'storing' of particular materials which are undoubtedly combustibles is separately provided for, the legislative intent is obvious to remove them from the general provision as to the 'storing' of "combustible material" in the Schedule. The maxim 'generalibus specialia derogant' also comes into play. Various other materials like coconut fibre, coir yarn, cotton, cowduag cakes, firewood, gun, cotton, jute and thatching materials, which are not less combustible than textile fabrics, are also separately enumerated in the Schedule and in regard to them also 'storing' is particularly made compulsorily licensable. Cloths and Silk (which in common parlance includes 'cloth woven of silk') are also separately shown in the Schedule, but in regard to them 'storing' is not made licensable. The relative entries in the schedule read "cloths Dyeing, Silk Packing, pressing, cleansing, preparing or manufacturing by any process whatever. " IT then follows that storing of cloths and/or silk is not a'purpose' for which licence can be insisted by the municipal councils under the Act. In regard to 'wool', storing is made licensable by a particular entry in the Schedule; but the word 'wool' means only a kind of hair of certain animals, but not woolen fabrics which alone will come under the category of textiles. In the view that I take of the meaning of the word "combustible material" in the Schedule HI to the Act, the municipalities have no power to impose a licence fee in regard to the storing of textile fabrics. The levy of licence fees on storing of textiles by the assessees has to be and is hereby held beyond the powers of the municipalities, under the Kerala Municipalities act, 1960.