VIJAYAWADA MUNICIPAL COUNCIL Vs. VIJAYAWADA HOTEL OWNERS ASSOCIATION

JUDGEMENT

(1.) Judgment of the Court delivered by Sambasiva Rao, J. ] 1. The Vijayawada Municipal Council, which was the respondent in S.A. Nos. 173 and 174 of 70, has brought these Letters Patent Appeals against the judgment of our learned brother Ramachandra Rao, J allowing the said second appeals and setting aside the decrees and judgments of the Courts below. The second Appeals arise out of O S Nos. 451/66 and 143/68 which were filed by the Vijayawada Hotel Owner's Association challenging the enhancement of licence fee by the appellant Municipal Council on meals and coffee hotels as illegal, arbitrary and capricious and for a permanent injunction restraining the Municipality and its staff from collecting the enhanced licence fee and for costs. O S No. 451/66 on the file of the Distnct Munsifi's Court, Vijayawada, was in respect of the enhancement in the licence tees made in the year 1966 and O.S. No. 143/66 was in respect of the enhancement effected in the year 1968 The enhancement was made on the basis of dividing hotels and restaurants into eight categories The plaintiff challenged not only the classification but also the enhancement on the ground tint it was not commensurate with the services rendered by the Municipality. The defence of the Municipality as stated in the written statement was that the classification was legal and proper, that it was incurring large Amount of expenses towards supervision and establishment charges and therefore it was wrong to say that the enhanced licence fee was not commensurate with the services rendered by the Municipality. The only point urged before and considered by the Trial Court was whether ihe enhancement was arbitrary and opposed to principles of natural justice. It found that the division of hotels and restaurants into eight categories was valid and proper. It further found that the Municipality was spending more towards issue and enforcement of licensing provisions than what it was getting by way of licence fee and consequently there was justification for enhancement of the fee. According to it, the services rendered to the bigger hotel were much more than those rendered to small hotels. In the result, it held that the enhancement was legal and valid and dismissed the suits.

(2.) In the appeals preferred by the plaintiff, the appellate Court called for findings on two additional points. They were : (1) What was tha amount which was being realised towards licence fee and what was the expenditure incurred by the Municipality in connection' with the services to be rendered by the Municipality towards the regulation of the conduct of the business for which licences are to be issued, and (2) Whether there was any deficit and if so, to what extent and what is the enhancement that can reasonably be proposed to meet the deficit The trial Court submitted findings on these two issues against the plaintiff. The appellate Court, after receipt of these findings, reached the conclusion (hat the Municipality did not keep any separate account of the income and expenditure relating to the levy of licence fees and that the services rendered by it were wholly disproportionate to the fee levied and therefore there was no justification for enhancement of the licence fee. In the lower appellate Court, however, the Municipality took up a new stand by filing an additional written statement contending that the impugned levy is not fees levied for any services rendered, but amounted to a tax. That Court, on a consideration of the case law, held that licence fee was not levied for rendering any services and for that reason no question of correlating the levy with the cost of any services would arise. It further held that the license fee was in fact a tax. In this view, it dismissed the appeals and the suits.

(3.) The plaintiff preferred the two second appeals against these decisions. Before Ramachandra Rao, J., who heard the second Appeals, it was argued by the learned counsel for the plaintiff appellant that the first appellate Court took a wrong view in thinking that the licence fee was a tax. It was further contended that even supposing it was a tax, the procedure prescribed by the Municipalities Act for levying and increasing the tax has not been followed and therefore the imposition was illegal. Learned counsel for the respondent before the learned single judge challenged the finding of the first appellate Court that no services were rendered by the Municipality and that the amount of the licence fee levied was not commensurate with the cost of the special services rendered by the Municipality to the hotels. It was his further submission that the licence fee is in fact a tax and the prescribed procedure was followed for levying it.