SREE MURUGAN FINANCING CORPORATION CHIT PROMOTERS AND FINANCIERS Vs. STATE OF TAMIL NADU REPTD BY THE SECRETARY TO GOVERNMENT COMMERCIAL TAXES, AND RELIGIOUS ENDOWMENTS DEPARTMENT FORT ST GEORGE

JUDGEMENT

(1.) Petitioners in these writ petitions conduct chit funds on securing registration under Section 3 of the Tamil Nadu Chit Funds Act, 1961 (T.N. Act 24 of 1961)(hereinafter referred to as the Act). They seek for a declaration that the amendments effected to Article 1 and insertion of Article 8-A to Appendix II of the Tamil Nadu Chit Funds Rules, 1964 (hereinafter referred to as the Rules) are unconstitutional and illegal. The amendments were made in exercise of the powers conferred under Section 63 of the Act. These amendments came into force with effect from 21.10.1981 consequent to its publication in the Fort St. George Gazette : of G.O.Ms. No. 1075, Commerical Taxes and Religious Endowments, dated 23.9.1981. The amendments are to the following effect.

(2.) Petitioners state that to start or conduct any chit, under Section 3, they will have to apply to the Registrar for registration of the by-laws of the chit, and as per Rule 4, such application for registration has to be made by the Foreman under Form II and it shall be accompanied by the fees set out in Appendix II. Section 53(a) provides that Government may from time to time prescribe the fee that shall be paid to the Registrar for the registration of the by-laws of the chit under Section 3. Rule 42 states that fees payable to the Registrar for matters specified in Section 53 shall be as set out in the Appendix II and shall be paid in cash. Article No. 1 in Appendix II as originally framed provided only Rs. 25 for the registration of the by-laws, and an amendment was made on 2.11.1979 revising the rates of registration as follows: <TAB> Chlt amount Fees levied Upto Rs. 5,000 50 Above Rs. 5,000 and upto Rs. 10,000 100 Above Rs. 10,000 and upto Rs. 20,000 150 Above Rs. 20,000 200</TAB>

(3.) For the first time, for balance sheets audited by a Chartered Accountant a fee is imposed under Article 8-A. The rate of fee is the same fee which is charged when audited by chit auditors, having no nexus to the extent of service rendered by the Department. As for the increase made under Article 8, it is not challenged in these petitions. As Section 53 does not authorise imposition of fees for balance-sheets filed under Section 16 of the Act, and Section 63 alone having been invoked in carrying out the amendments, it is ultra vires of the Act. No service is rendered by the Registrar on receiving the balance-sheets and preserving them. The essential element of quid pro quo in the imposition of these fees is absent. So far as the Foremen are concerned, the Registrars do not render any special service in furtherance of his business and the fee collected has no correlation to the expenses incurred in rendering service, if any. The only ground relied upon in the impugned G.O. is that, to bring about rationalisation in rates, the fee for registration has been revised, taking into account the number of subscribers or the instalments whichever is higher, instead of the slab system which was prevailing prior to 21.10.1981. If whatever done by the Registrar at the time of registration are looked into the basis now adopted is highly irrational and unreasonable, and the imposition is disproportionate and not at all commensurate to the nature of service claimed to be rendered. Merely because in the neighbouring State of Kerala, a higher levy is imposed, the respondents have chosen to rely upon it so as to augment the general revenues of the State, and hence it is not a fee but a tax, which is not authorised under the Act.