Ratanlal Baid and Others vs State of Mizoram and Others

J.N. Sarma, J.—In all these Civil Rules levy of composite fee by the Govt, of Mizoram under notification dated 21.3.95 is under challenge, particularly on three grounds:

(i) It is ultravires to Section 88 of M.V. Act 1988 and the Rules framed thereunder.

(ii) That in fact it is a tax which can not be levied by a notification.

(iii) Even assuming it to be a fees, it is exhorbitant and there is no quid pro quo.

Before we go further let us have a look at Section 88(9) of the Motor Vehicles Act. 1988.

Section 88(9):

Notwithstanding anything contained in Sub-section (1) but subject to any rules that may be made by the Central Government under Sub-section (14), any State Transport Authority may, for the purpose of promoting tourism, grant permits in respect of tourist vehicles valid for the whole of India, or in such contiguous States not being less than three in number including the State in which the permit is issued as may be specified in such permit in accordance with the choice indicated in the application and the provisions of Sections 73, 74, 80, 81, 82, 83, 84, 85, 86 and 89 shall, as far as may be, apply in relation to such permits.

Section 88(9) as quoted above particularly employers State Transport Authority to grant permits in respect of various vehicles either valid for the whole of India or in such contiguous states and not less than three in number including the state in which the permit is issued. The power of State Transport Authority is subject to Sub-section 14 of Section 88. Sub-section 14 enable the Central Govt. to make Rules for carrying out the provisions of Section 88. Sub-section 14 of Section 88(a)(b) and (1) are quoted below:

(14)(a) The Central Govt. may make rules for carrying out the provisions of this section.

(b) In particular, and without prejudice to the generality of the forgoing power, such rules may provide for all or any of the following matters namely:

(i) the authorisation fee payable for the issue of a permit referred to in Sub-section (9) and (12)

The authorisation fee has been defined in explanation ''b'' of Section 88. That is quoted below:

(b) "authorisation fee" means the annual fee, not exceeding one thousand rupees, which may be charged by the appropriate authority of a State to enable a motor vehicle, covered by the permit referred to in Sub-sections (9) and (12) to be used in other States subject to the payment of taxes or fees, if any, levied by the States concerned.

Rule 83 of the Central Motor Vehicles Rules, 1989 provides as follows:

Authorisation fee-(1) An application for the grant of authorisation for a tourist permit shall be made in Form 46 and shall be accompanied by a fee of Rs. 500 per annum in the form of a bank draft.

(2) Every authorisation shall be granted in Form 47 subject to the payment of taxes or fees, if any, levied by the concerned states.

(3) The period of validity of an authorisation shall not exceed one year at a time and shall expire on the 31st day of March of the year.

Under Rule 83 of the Central Motor Vehicles Rules, 1989 authorisation will be granted after the payment of authorisation fee to the permit issuing State subject to the payment of taxation or fees levied by the States in respect of which authorisation is issued. So, authorisation fee payable to the permit issuing states is exclusive of taxes or fees that may be levied by the States in respect of which the tourist permit is issued. Under Rule 4(2) of the Motor Vehicles (All India Permit for Tourists Transport Operators) Rules, 1993, the authorisation certificate is issued in prescribed form as shown in the second schedule to the Rules and it reflects that in reverse side of the authorisation certificate, certificate of payment of composite fee is mentioned. The notification which is challenged in these Civil Rules is quoted below:

NOTIFICATION Dated Aizawl, the 21st Mar/99

No. B 11013/38/80-TRP : In pursuance of decision of the Government of India, Ministry of surface Transport (Transport Wingh), New Delhi as contained in their letter No. RT-11053/I/C/MV/Vol-II Dated 30th August, 1993, the Government of Mizoram hereby direct that in respect of Motor Vehicles specified in Column (1) of the schedule hereto and registered in any other States or Union Territories of India which are authorised to ply in the State of Mizoram under the Tourist permits granted under Sub-section (9) of Section 88 of the Motor Vehicles Act, 1988(Central Act 59 of 1988), Composite fee at the rates specified in corresponding entry in Column (2) of the said schedule shall be payable with effect from 1.4.95.

SCHEDULE

(1) (2) a) For Motor Cabs Rs. 300/- per quarter upto 6 seats per State(other than Home State) b) For Maxi Cabs upto 7-13 Rs. 3000/- per quarter per state(other than Home State). c) For Mini Buses of 14-35 seats Rs. 12000/-per quarter per state(other than home state) It is also further directed that the said composit fee shall be paid for each quarter by means of bank draft drawn in favour of the Secretary, State Transport Authority, Mizoram. The Composite fee shall be in lieu of all taxes payable in this State.

The state of the Petitioners are that earlier to this notification the composite fee for the State of Mizoram was only the minimum.

I have heard Mr. G.N. Sahewalla, learned Advocate for the Petitioners in all the cases and Mr. K.P Pathak Learned Advocate General for the State of Mizoram.

Let us take up the first contention as indicated above. Mr Sahewalla learned Advocate for the Petitioners with regard to the first contention submits that composite fee is not contemplated either in the Act or in the Rules framed thereunder and that plea finds place in paragraph 15 of the writ application i.e. C.R. No. 3108/95. This contention of Mr. Sahewalla is not correct in as much as in the authorisation certificate issued in the prescribed form on the reverse side of the authorisation certificate of composite fee is mentioned and Rule 83 as quoted above also provides for payment of taxes or fees if any levied by the concerned State. Form 47 also provides for certificate of payment of composite fees and taxes. Mr. Sahewalla also urged that this composite fee levied is unauthorised/arbitrary/Ultra vires and unconstitutional. He also argues that there is discrimination and in this respect he has stated in sub para (b) of paragraph 18 of the writ application i.e. C.R. 3108/95. That is quoted below:

It creates unreasonable classification amongst the permit holders from various North Eastern States including Mizoram. For example, while a permit holder from Mizoram operating his vehicles in the same three contiguous states including Assam is not required to pay such an amount, similarly situated permit holders from the other neighbouring States and operating their vehicles in the same tourist circuit including of course, the State of Assam, are being made to pay the purported composite tax of Rs. 48,000/- per annum.

It is also argued by him that the impugned notification is discriminatory in as much as no composite fee has been levied in respect of public carriers having National Carrier Permit in the State of Mizoram. Fees in Assam by amendment of this composite fee has been levied but that is also under challenge before this Court and this Court has stayed the realisation. Mr. Sahewalla also highlighted in this connection that if the composite fee is levied in such exhorbitant manner, the Petitioner shall not be able to carry out their business. Regarding discrimination I find that no case has been made out. There is a reasonable classification and Omnibuses can be put in a reasonable class. For all these I find that levy of composite fee by the State of Mizoram in lieu of other taxes is not ultra vires to Section 88(9) of the Motor Vehicles Act and the first contention of Mr. Sahewalla fails.

The next contention of Mr. Sahewalla is that it is a tax which cannot be levied by notification. This argument of Mr. Sahewalla has no force inasmuch as the bare perusal of the notification itself will show that it is not a tax but a fee. Learned Advocate for the Petitioner in this connection relies on the following decisions:

(i) Atiabari Tea Co., Ltd. Vs. The State of Assam and Others, That was a case with regard to the interpretation of Article 301. Article 301 imposes a limitation with regard to the exercise of legislative power the Union or by the State. The object of the freedom of trade enunciated this Article is to ensure that the economic unity of India may not be broken by putting unreasonable barriers. In looking at Article 301 we must bear in mind that under Article 301 no complain can prima facie be made under Article 301 can be made if, it is not a colourable exercise of power, if it is regulatory power aimed at the reasonable restriction of the free flow of trade, commerce and inter State trade between the States. There is a violation/freedom of guarantee by die Article 301 only where the legislative or executive act to restrict trade or intercourse directly and immediately as distinguished from creating some indirect regulatory arrangement which may be regarded as remidal.(See AIR 1983 AIR SC page 656 and AIR 1975 SC page 583). Regulatory or compensatory measures cannot be regarded as violative of the Article. Such measures as draft regulation licensing of vehicle charging for the maintenance of the road, market and health regulation prescribing control, economic and sufficient planning prescribing minimum wages cannot be challenged as interfering with the freedom guaranteed by Article 301 unless they are colourable measures to restrict the flow of trade/commerce and intercourse.

In the case cited by learned Advocate for the Petitioner the constitutional validity of the Section 13 of 1954 was challenged. The trade/commerce and intercourse must pave for the facilities provided by the State by way of construction/maintenance and repairing roads, bridges and other means of transportation necessary for such trade/commerce and intercourse. So long there is some kind of relation between the amount recovered and the cost incurred by the State the amount imposed cannot be challenged as exproprietory even there may be marginal excess over the cost. So, this contention of the learned Counsel that it is violative of Article 301 of the Constitution of India shall fall through.

The next case relied on by the Petitioner is The Government of Andhra Pradesh and Another Vs. Hindustan Machine Tools Ltd., That case relied on is to show distinction between tax and fees. In paragraph 19 the Supreme Court has pointed out as follows.

(a) Fees are a sort of return or consideration for services rendered, which makes it necessary that there would be an element of Quid pro quo in the imposition of a fee. There has to be a correlationship between the fee levied by an authority and the services rendered by it to the person who is required to pay the fee The Commissioner, Hindu Religious Endowments, Madras Vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt.,

(b) But the true legal position as stated by The Commissioner, Hindu Religious Endowments, Madras Vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt., is that" it is absolutely necessary that the levy of fees should on the face of the legislative provision, be correlated to the expenses incurred by Government in rendering the services.

We will consider this aspect of the matter when we come to the Govt. Affidavit. The next case relied on is The Secretary, Government of Madras, Home Department and Another Vs. Zenith Lamp and Electrical Ltd., In paragraph 30 the Supreme Court quoted its earlier judgment and laid down as follows:

From the above discussion, it is clear mat before any levy can be upheld as a fee, it must be shown that the levy has reasonable correlationship with the services rendered by the Government. In other words, the levy must be proved to be a quid pro quo for the services rendered. But in these matters it will be impossible to have an exact correlationship. The correlationship expected is one of a general character and not as of arithmetical exactitude.

The next case relied on is Krishi Upaj Mandi Samiti and Others Vs. Orient Paper and Industries Ltd., In this case the Supreme Court after considering its earlier judgment in Paragraph 15 has laid down that in each and every case the test of quid pro quo is not to be satisfied with such close or proximate relationship and in paragraph VI and VII of Paragraph 15 the Supreme Court laid down as follows:

(vi) That the element of quid pro quo may not be possible, or even necessary, to be established with arithmetical exactitude but even broadly and reasonable it must be established by the authorities who charge the fees that the amount is being spent for rendering services to those on whom falls the burden of the fee.

(vii) At least a good and substantial portion of the amount collected on account of fees, may be in the neighbourhood of two-thirds or three-fourths, must be shown with reasonable certainly as being spent for rendering services of the kind mentioned above.

In paragraph 18 the Supreme Court pointed out as follows:

The distinction between a tax and fee lies primarily in the fact that a tax is levied as a part of the common burden while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary duty of regulating any public interest. If the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees, there is and must always be a correlation between the fee collected and the services intended to be rendered. In determining whether the levy is a fee or tax, die true test must be whether its primary and essential purpose is to render specific services to a specified area or class. It benefited by it. The power of any legislature to levy a fee is conditioned by the fact that it must be by and large a quid pro quo for services rendered. Every correlationship between the levy and the services rendered is one of general character and not a mathematical exactitude. All that is necessary is mat there should be a reasonable relationship between die levy of fee and the services rendered. There is no postulate of a fee mat it must have a direct relation to the actual services rendered by the authority to each individual to obtain the benefit of the service. It is now increasingly realised that merely because die collections for the services rendered or for grant of a privilege or licence are taken to the Consolidated Fund of the State and not separately appropriated towards the expenditure for rendering the service, is not by itself decisive of the nature of the levy whether it is a fee or a tax. The court further held that presumably, the attention of the court in me Shirur Mutt case was not drawn to Article 266 of the Constitution. The Constitution nowhere contemplates it to be an essential element of a fee mat it should be credited to a separate fund and not to the Consolidated Fund. The element of quit pro quo in the strict sense is not always sine qua non for a fee.

Next case relied on is Anand Commercial Agencies Vs. The Commercial Tax Officer VI Circle, Hyderabad and Others, That is a case of Article 301 of the Constitution of India and there the Supreme Court pointed out as follows:

Freedom of trade, commerce and intercourse guaranteed by Article 301 means freedom to carry on business throughout the territory of India without any obstruction and hindrance. The question whether a fiscal barrier will amount to interference with the right to carry on trade, commerce and intercourse throughout me territory of India is not an easy question to answer. Every State has a right to impose tax on subjects which fall within its jurisdiction under list II of the Seventh schedule to the Constitution. A backward State may try to encourage development of industries within die State by grant of subsidy and also by low rate of tax on goods manufactured by local industries. But barring special circumstances, the view of the Supreme Court has consistently been that a State is not entitled to tax locally made goods at a lower rate while taxing similar goods manufactured in other states at a higher rate.

This case does not help the Petitioner. The stand of the Govt. in the affidavit-in-opposition is that only four vehicles paid the composite fee and other obtained the stay order and as such the composite fee could not be calculated and they have stated that the purpose of levying the composite fee is to develop tourism in the State by constructing and developing proper facilities for the tourist in the State of Mizoram including development of roads and tourist spots etc. and to develop other different facilities for the tourist So, there is some amount of quid pro quo in the fees levied.

In Kishan Lal Lakhmi Chand and Others Vs. State of Haryana and Others, where in the question of difference between tax and fee has been discussed and in paragraph S the Supreme Court pointed out as follows:

The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary purpose of regularisation in public interest. If die element of revenue for general purpose of the State predominates the levy becomes a tax. In regard to fee, there is, and must always be, correlation between the fee collected and the service intended to be rendered. In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area or class; it may be of no consequence that the state may ultimately and indirectly be benefited by it. The power of any legislature to levy a fee is conditioned by the fact that it must be "by and large" a quid pro quo for the services rendered. However, correlationship between the levy and die services rendered/expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a "reasonable relationship" between the levy of the fee and the services rendered. There is no general difference between a tax and a fee. Both are compulsory exactions of money by public authorities. Compulsion lies in the fact that payment is enforceable by law against a person in spite of his unwillingness or want of consent. A levy in the nature of a fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual service rendered by the authority to each individual nor that each should obtain the benefits of the service.

In this case in the last sentence of paragraph S the earlier judgment of the Supreme Court in 1981 SCC/which laid down the law and has been held as follows:

The ratio in K.K. Puri case that (SCC p.435. para 23(7) "At least a good and substantial portion of the amount collected on account of fees, may be in the neighbourhood of two-thirds or three-fourths, must be shown with reasonable certainty as being spent for rendering services of die kind mentioned above." was held to be an abiter" which is the main plank on which the contention of shri Shanti Bhusan rests.

In 1981 SCC 1863 Southern Pharmaceuticals and Chemicals. Trichur and Ors. v. State of Kerala and Ors. where it was held that the element of quid pro quo is not always a sine qua non of a fee. In Sri Krishna Das Vs. Town Area Committee, Chirgaon, wherein it was pointed out that it was necessary that fee only should have approximate correlationship between the fee collected and the service rendered.

That being the position, the point No. 2 and 3 as urged by Mr. Sahewalla has no force. Accordingly, there is a no merit in these writ applications and they are dismissed. Stay order passed earlier shall stand vacated.