TMI Blog1958 (7) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) A consolidated rate of ₹ 971.08 np. per year. (b) A fee of ₹ 250,/- for a trade licence. (c) A licence-fee of ₹ 800/- per year under Section 443 of the Calcutta Municipal Act, 1951. (d) A water-tax amounting to ₹ 33/- per year. (e) Licence fee for sky signs, (unspecified). 2. At a meeting held on 14-3-1958 the Corporation of Calcutta passed a resolution, a copy whereof is Ex. 'A' to the petition. In that resolution it was stated that in accordance with the decision of the Standing Finance (Budget) Committee, dated 5-2-1958 to increase the existing charges in respect of cinema only, under Section 443 rend with Section 548(2) of the Calcutta Municipal Act, 1951, the procedure for levy and realisation of such fees was to be according to the terms of the resolution. No person was to keep open any cinema house without a licence granted by the Commissioner to the Corporation. The classification of cinema houses and the fees for the licence with effect from 1-4-1958 were to be as follows: (I) Classification of cinema houses Class A- having sanctioned seats over 1000. Class B- having sanctioned seats over 700 not exceeding 1000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... animals or birds are kept for sale or hire. The idea is to control the storing of dangerous articles which may imperil the safety of the rate-payer and also to prevent nuisance. Section 442 deals with eating houses and lays down that no eating house, teashop, hotel, boarding house etc. should be kept without a licence issued by the Commissioner. In the case of Section 437 it is laid down that the fee shall not exceed ₹ 500/-. In the case of Section 442, it has been laid down that the fee shall not exceed ₹ 20/-. I now come to Section 443 which runs as follows: 443. No person shall, without or otherwise than in conformity with the terms of a licence granted by the Commissioner in this behalf, keep open any theatre, circus, cinema house, dancing-hall or other similar places of public resort, recreation or amusement , provided that this Section shall not apply to private performances in any such place. 7. No fee is prescribed in Section 443. For that we have to travel to Section 548(2) of the Act. That Section is contained in Chapter XXXVI which is headed Procedure--licences and written permissions Chapter XXXVI is contained in Part VIII of the Act. It is in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (ii) That it gives arbitrary power to the executive and/or a non-legislative body to lay down any restriction it likes so far as the quantum of tax is concerned, and this amounts to an unreasonable restriction of the fundamental rights of the petitioner as granted by Article 19(1)(g). 9. I shall now proceed to consider these grounds. Reliance has been placed by learned Counsel for the petitioner upon my decision in Matter No. 81 of 1956 Sarat Chandra Ghatak v. Corporation of Calcutta, AIR1959Cal36 (Judgment dated 21-11-1957). In that case, a similar challenge was thrown in respect of Section 229 of the said Act, which relates to licence-fee for advertisements. The advertisements with which we were concerned in that case, were advertisements displayed on the screen in a cinema-house. Under Section 229, a licence-fee can be charged by the Corporation upon such exhibitions, at such rate and in such manner and subject to such exemptions as the Corporation may prescribe by rule with the approval of the State Government. There also, the question arose as to whether such an imposition was a fee or a tax. The learned Advocate-General appearing on behalf of the State frankly confes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itory provisions. The section is contained in Chap. XXVI which relates to procedure. 11. Under the Constitution, the Legislature can impose a tax or a fee and it has in the Act authorised the imposition of both taxes and fees. It is unfortunate, however, that the legal distinction between these two kinds of impositions have not been kept in view. That being so, we have got to find out, upon the facts of this case and the nature of the imposition, as to whether it is a fee or tax. The distinction between a tax and a fee is well established. Reference may be made to my decision in Netram Agarwalla v. Chairman, Raiganj Municipality 59 CWN 872 (B). In that case, I have analysed the law bearing on the distinction between a tax and a fee. The tests to be employed have been tabulated at pages 877/878 (there appears to be a misprint in respect of test No. 1, as the word not has been dropped between the words is and in'' in the fourth line). Some of the salient features which are relevant for our purpose in this case are reproduced below : (1) A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not in payment for servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contained in the Part relating to taxation. It is in Part V which deals with public health, safety and convenience. Even if this is inconclusive, we come to the heading of Chap. XXVI which merely speaks about inspection and regulation of premises, and of factories, trades and places of public resort. The scheme of the Chapter seems to be quite clear. The Chapter deals with buildings deemed to be unfit for human habitation, factories which might create a nuisance, places where things might be stored which are dangerous to life, health or property or which were likely to create a nuisance, eating houses and places of amusement like theatre, circus etc. The permission, that is granted under the Chapter and the licence that is taken out, is for facilitating inspection and regulation thereof and not for the purpose of raising general revenue. After all, we must make some distinction between a tax and a fee although the Act has failed to do so. Inevitably therefore, we must consider the particular position of the Section we are considering and its place in the Scheme of the Act. In the scheme of the Act, J. do not see how Section 443 read with Section 548(2) as applicable to the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently very large additional expenses have to be incurred in order to exercise better, fuller and more effective control over cinema-houses. It is pointed out that there is an ever-growing need for protection regarding the health, safety and convenience of the public and the new scale of fees is reasonably required to cover the necessary expenditure involved in the control and supervision of cinema-houses in Calcutta. Reading this superficially, one would almost think that the Corporation of Calcutta was at last awakening to the needs of the rate-payers and that the increased imposition was indeed to be spent for the benefit of the licence-holders only. A little consideration will serve to dispel this illusion. As I have stated above, in order to justify the quantum of fees levied in respect of any particular matter, what will have to be proved is that it has some correlation to the cost of the services rendered or to be rendered for that particular object. That the proposed increase is on a grand scale is not being disputed by anybody. We are faced in this case with an increase from ₹ 800/- to ₹ 18,000/-. What is suggested is that this increased amount is required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The question, however, is as to the method by which this increased amount is to be imposed and collected. The law providing for any such imposition and collection must be a law that will pass the tests of legality. Obviously, such impositions must be by way of taxation and not licence fees. Since the attempt has been made to levy an imposition in the nature of a licence fee, the legal limitations must at once apply, and however lofty the object, an illegal imposition must be struck down. 15. I, therefore, hold that the imposition that is sought to be made under Section 443 read with Section 548 (2) of the Act in the present case is not in the nature of a tax but is in the nature of a licence fee and that it has not passed the tests of legality, inasmuch as there is no correlation between the quantum that is sought to be impound and the services that are to be rendered. That is to say, there is no quid pro quo. It is also bad on the ground that the amount as is sought to be imposed is excessive. I must, however, mention here that the objection is merely to the increase in the fee and not to the existing fee. 16. Next, I have to examine the question as to whether the imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under the Constitution of India, at any stage. The whole scheme of the Constitution is based on the concept that the legislative function of the Union will be discharged by Parliament and that of the States by the respective State legislatures and no other body. The essentials of legislative function, viz., the determination of the legislative policy and its formulation as a rule of conduct are in Parliament or the State Legislature as the case may be, and nowhere else. If, however, owing to unusual circumstances and exigency the Legislature does not choose to lay down detailed rules or regulations, that work may be left to another body which is then deemed to have subordinate legislative power. This is described as subordinate legislation. The Legislature cannot, however, abdicate its legislative functions and, therefore, while entrusting power to an outside agency, it must see that such agency acts as a subordinate authority and does not become a parallel Legislature. The essential legislative function consists of the determination or choosing of the legislative policy and of formula enacting that policy into a binding rule of conduct. It is open to the Legislature to formu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition of an unreasonably excessive amount which may lead to the extinction of the petitioner's business. Secondly, it is stated that the conferring of an uncontrolled and arbitrary power to the executive authority or a non-legislative body, to impose any amount of tax, constitutes an unreasonable restriction upon the fundamental rights granted to the petitioner under Article 19(1)(g). The first question that has to be determined is as to whether in the case of the imposition of a tax it is permissible at all to apply the provisions of Article 19. The first case that may be cited is Chintaman Rao v. State of Madhya Pradesh, [1950]1SCR759 . This was not a case of taxation, but it laid down the principle as to what was, or amounted to, reasonable restriction within the meaning of Article 19(6). The Central Provinces and Berar Regulation of Manufacture of Bidis (Agricultural Purposes) Act, provided that the Deputy Commissioner may by Notification fix a period to be an agricultural season in respect of a specified village, and by the order prohibit the manufacture of bidis therein during the agricultural season. An order was issued by the Deputy Commissioner forbidding all perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The petitioner was a wholesale dealer in fresh vegetables and fruit at Jalalabad in the State of Uttar Pradesh, The Town Area Committee of Jalalabad framed a certain bye-law which virtually gave a monopoly in the sale of vegetable and fruit to a contractor. It was held that this was an unreasonable restriction on the fundamental rights of the petitioner under Article 19(1)(g), Das, J. (as he then was) said as follows : Learned Counsel for the respondent in reply takes a preliminary objection to this line of argument. He points out that as the levying of a tax without authority of law is specifically prohibited under Article 265 of the Constitution, Article 31(1)(i) must be construed as referring to deprivation of property otherwise than by levying of a tax and that levying of a tax in contravention of Article 265 does not amount to a breach of a fundamental right. He contended on the authority of the decision of this Court in Ramjilal v. Income-tax Officer Mohindar Garh, [1951]19ITR174(SC) that while an illegal imposition of tax may be challenged in a properly constituted suit, it cannot be questioned by an application under Article 32. This argument overlooks the difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l v. State of Madhya Pradesh [1954]1SCR1122 , it was held that Explanation (ii) to Section 2 (g) of the Central Provinces and Berar Sales Tax Act, 1947 as amended by Act XVI of 1949, being ultra vires, any imposition of sales tax was without authority of law, and that being so, a threat by the State by using the coercive machinery of the impugned Act to realise it amounted to an infringement of the appellant's fundamental right under Article 31 of the Constitution, and the appellant was entitled to relief under Article 225 of the Constitution. In the State of Bombay v. United Motors (India) Ltd., [1953]4SCR1069 (J) the question of sales tax and the validity of a law imposing sales tax was involved. It was held that the principle that the Court will not issue a prerogative writ when an adequate alternative remedy was available would not apply and where a party came to the Court with an allegation that his fundamental right has been infringed and sought relief under Article 226, relief should be granted. 22. It thus appears that the construction that might be put upon Ramjilal's case (H) (supra), namely, that in the rase of a tax, the fundamental rights guaranteed by Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under Article 19(1)(g). As I have pointed out above, this argument can only be sustained upon the footing that it is a tax and not a fee. If it is a fee, then there is an implied restriction. If it is a tax, then there is no implied restriction and consequently there is no limit. If it is a tax, the Corporation can, even though acting under the guise of levying a licence-fee, make the fee as high as it likes without any limit and without any indication in the Act as to the ceiling of any such imposition. I have already referred to the case of Chintaman Rao (F) (supra) where it was held that the order passed by Deputy Commissioner whereby everyone within a specified area was prohibited from being engaged in the manufacture of bidis, amounted to an unreasonable restriction. 24. The next case cited is The State of Rajasthan v. Nath Mal [1954]1SCR982 . In that case, the last portion of Clause 25 of the Rajasthan Foodgrains Control Order, 1949 was struck down. Ghulam Hasan, J. said as follows : The last portion of Clause 25 to the effect that 'such stocks shall also be liable to be requisitioned or disposed of under orders of the said authority at the rate fixed for purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in normally available commodities cannot but be held to be unreasonable. The phrase reasonable restriction'' connotes that the limitation imposed upon a person in the enjoyment of a right should not be arbitrary or of an excessive nature beyond what is required in the interest of the public. 27. In my opinion, it is now firmly established that an uncontrolled and arbitrary power without any restriction whatsoever cannot be granted to the executive or a non-legislative body, if it is possible by the exercise of such power to affect the rights guaranteed to a citizen to carry on trade cr business. Since even the levy of a tax can be made the subject-matter of violation of fundamental rights under Article 19, I do not see why the principle laid down in the cases cited above should not be taken to lay down that an unrestricted or arbitrary power which is so wide in terms as to make it possible for the executive or a non-legislative body to impose such a tax as would make it impossible or onerous for a citizen to carry on his trade or business, should not be struck down. In this case, viewed as a tax, the impugned provision enables the Corporation to levy any quantum of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power to authorise the imposition of a new tax. Mr. Gupta argues that in such a case the question of improper delegation does not come into the picture at all because the Government of India Act, 1919 was made by the British Parliament which was supreme and in such an Act of Parliament there is no question of improper delegation of power. He says that the British Parliament being supreme, was not restricted by any constitutional limitation as to the delegation of powers, and could therefore not only make a law vesting the State legislature with power to impose a tax, but also vesting it with the power to authorise some one else to impose it. Consequently, when the provincial legislature with the previous sanction of the Governor General, empowered the Corporation to levy a tax as laid down in Section 498(2) of the Calcutta Municipal Act, 1923 it was acting within the powers conferred by the provisions above mentioned in the Government of India Act, 1915 and the Government of India Act, 1919. By this argument he seeks to counter the point as to improper delegation of power by the State legislature to the Corporation. His second argument goes even further. This part of the argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Acts mentioned above, empowers the Provincial legislature with the previous sanction of the Governor General, to authorise the Corporation to levy a tax without limit or without the laying down of any policy, then it would affect only the Calcutta Municipal Act, 1923. In this case, however, we are dealing with the Calcutta Municipal Act, 1951 which came to be enacted after the promulgation of the Constitution, and which repealed the Calcutta Municipal Act, 1923. It is not disputed that the present taxation is sought to be levied under Section 548(2) of the Calcutta Municipal Act, 1951. When it came to the promulgation of the Calcutta Municipal Act, 1951 by the State Legislative, the Constitution had already come into being, and its provisions were paramount. Thus, the entire basis of the argument of Mr. Gupta falls to the ground. It may be that in the 1923 Act, no question of improper delegation could arise. But under the Calcutta Municipal Act, 1951 both the question of improper delegation, as well as violation of the fundamental rights, apply in full force. Being faced with this, Mr. Gupta has sought to escape through the provisions of Article 277. He says that whatever inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and the Province under the Government of India Act, 1935 this article has no application. Quite apart from this, there is another reason why Article 277 does not apply to the facts and circumstances of this case. As I have mentioned above. Article 277 speaks about a municipal tax which was being levied before the Constitution came into being. It is argued by Mr. Gupta that such a tax would continue to be valid after the Constitution, whatever be its infirmities. A tax, however, cannot remain in the air. It is imposed by a certain Statute, and it follows that if the particular Municipal tax remains alive after the Constitution then the provision of law which enables the imposition of the tax, must also remain alive. This is a position which Mr. Gupta had to concede. He had to admit that in order to save a tax levied under the 1923 Act, the provisions of that Act enabling the tax to be levied, must necessarily continue. Assuming for a moment that such was the position, all that happened was that the 1923 Act and the provisions therein relating to municipal taxation with which we are concerned, remained alive, whatever be their infirmities, under the Constitution, by virtue of Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be borne out to a certain extent by a Madras decision; J. N. Rao v. State of Madras AIR1954Mad643 . In that case, the State Government levied certain duties on medicinal preparations prior to the Constitution. After the Constitution came into being, a new duty was imposed by Notification dated 18-11-1952. In the meantime, the subject had become transferred to the Union List. The question was whether this new duty imposed by the State Government could be supported. Aiyar, J. after referring to Article 277 of the Constitution said as follows: This provision would enable the Government to continue to levy such duties on medicinal preparations as were being levied by them prior to the Constitution and that would save the levy of duty under Notification No. 473. But here we are concerned with a new duty imposed for the first time by the Notification dated 18-11-1952. As neither the legislature nor the Government of Madras had on that date any competence to impose a duty on medicinal preparations, imposition under Notification No. 941 is not within the saving of Article 277 and must, be held to be ultra vires. In this case the tax imposed under the 1951 Act may be of the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... municipality, board or authority. It is argued on behalf of the petitioner that, in any event, they cannot be called upon to pay any amount in excess of what it was paying immediately before the Constitution came into being. So far as the petitioner in this case is concerned, it was in the neighbourhood of ₹ 800/-. Mr. Gupta has argued that this provision only applies to license-fees like trade licenses and so forth, and cannot apply to taxes generally. I am inclined to agree with his point of view. But since I have held that the payment in dispute is in fact a license-fee, the matter becomes of importance. Since however, the petitioners in all these cases are not urging that payment should be limited to ₹ 250/-, I need not deal with this aspect any further. To summarise, I hold that the imposition under Section 548(2) of the Calcutta Municipal Act 1951 read with Section 443, as applied in the case of a cinema-house, is a license-fee and not a tax, and the amount demanded in excess of what was being paid before the impugned notice dated 25-3-1958 in this case and the impugned notices in the other cases, are excessive and unreasonable and for which no quid pro quo h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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