Holding

The licence fee is a valid fee, as it is linked to the corporation’s general public‑health services, and therefore the High Court’s order quashing the fee is set aside.

Summary

The Calicut City Corporation levied a licence fee under Schedule IV of the municipal act for the use of land to soak coconut husks. The respondents, who were conducting the soaking without a licence, challenged the fee, arguing that no specific service was conferred and that the levy was either an invalid fee (lacking quid pro quo) or an unlawful tax beyond the corporation’s authority. The Kerala High Court quashed the fee, holding that a fee must be linked to a special benefit. On appeal, the Supreme Court held that modern jurisprudence no longer requires a strict quid pro quo; a fee need only have a general relationship to services rendered, and the corporation’s scavenging and cleanliness services constitute such a benefit. Consequently, the licence fee was upheld as a valid fee, the High Court’s decision was set aside, and the writ petitions were dismissed.

Issues considered

Whether the licence fee for soaking coconut husks is a fee requiring a quid pro quo relationship with a specific service.
Whether the corporation has the power to levy the fee as a tax under the Kerala Municipal Corporation Act.
Whether the corporation’s general public‑health services satisfy the service element of a fee.

Legislation cited

Constitution of Indias. Article 265
Kerala Municipal Corporation Act, 1964 (formerly Calicut City Municipal Act, 1901)s. Schedule IV, s. Section 299

Subjects

licence feefee vs taxquid pro quomunicipal corporation powerpublic health serviceenvironmental regulationKerala Municipal Corporation Acttaxation powerservice fee

Judgment

A 1008

CITY CORPORATION OF CALICUT
B v.

THACHAMBALATH SADALINAN & ORS.
--
February 26, 1985

c (D. A. DESAI AND AMARENDRA NATH SEN, JJ.)

Constitution of India 1950, Article 265

Tax andfee-Quldpro quo·-Whether an essential element for fee

Kera/a Municipal Corporation Act 1961 (Act 30 of 1961)

Section 299 & Schedule JV-Use of premises and land for soaking
Coconut husks-Levy of licence fee by Corporation-Whether valid.

The appellant-Corporation levied licence fee for use of premises and
land for soaking coconut husks under Schedule IV of the Calicut City '
E Municipal Act 1961, Subsequently restyled as the Kerala Municipal Cor-
poration Act l96l.

The respondents were carrying on the trade of soaking coconut husks,
and as the)' bad not taken out the requisitd' licence, the Commissioner of
the Corporation issued notices to show cause why they should not be
F prosecuted. The respondents challenged the validity and legality of the
notices in Writ Petitions to the High Court, contending that if the licence
fee is levied as a fee, no service is readered or special advantage or favour
is conferred by the Corporation for collecting such fee and that there is no
quid pro quo and that the relevant provision'! of the Act do not enable the
Corporation to levy such a fee. It was further contended that if the levy
is treated is a tax, it is beyond the taxing powers of the Corporation. The
Corporation contested the Writ Petitions justifying the fee as licence fee
and that it bad the power to levy a tax of the nature levied by it.
G
A Single Judge of the Hi1h Court allowed the Writ Petitions, and
quashed the impuqoed licence fee as not legal in the absence of conferment
of special benefits in respect of persons who so::;.k coconut husks. It was
further held that the power to levy the various taxes conferred on the
Corporation .under Chapter V of the 1961 Act did not comprehend the
impugned levy and consequently the ta• was not valid and legal. The writ
ti appeals of the Corporation were dismissed.
CllY CORPORATION v. T. SADASIVAN 1009

Allowing the Appeals, this Court

HELD : By numerous recent decisions of tbis Court it is well-settled
that the traditional concept in a fee of quid pro quo is under&oing a trans-
formation and that though the fee mu"t have relation to the services ren-
dered or the advantages conferred, such relation need not be direct, a mere
casual relation may be enough. It is not Ot!cessary to establish that those
who pay the fee must receive direct benefit of the services rendered for B
which the fee is being paid. If one who is liable to pay receives general
benefit from the authority levying the fee the element of service required for
collecting ft:e is satisfied. It is not necessary that the persons liable to pay
must receive some special benefit or advantage for payment of the feo.
(1012 E·F]
c
In the instant case, it is incontrovertible that the appellant-Corpo-
ration is rendering numerous services to the persons within its areas of
operation and that ~herefore the levy of the licence fee as fee is fully
justified. Soaking coconut husks emit foul odour and contaminates environ-
ment. The Corporation by rendering scavangiog services, carrying on
operations for cleanliness of the city, to make habitation tolerable is render-
ing general service of which amongst other& respondents are beneficiaries. a
The decisions of the Single Judge and of the Division Bench are set aside
and the Writ Petitions of the respondents are di•missod. [1012 G-H]

Municipal Corporation of Delhi & Ors. v. Mohd. Yasin & Anr. (1983)
3 SCC 229, Sreenivasa General Traders and Others v. State of Andhra Pradesh
and Others (1983) 4 SCC 353 & M/s. Amarnath Om Prakash and Others v.
I State of Punjab & Or.·. (1985! I SCC 345 referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 13 &
14of1971

From the Judgment & Order dated 2. 7. 68 of the Kerala High
Court at Emakulam in Writ Petition Nos. 107 & 108/68. F

A. S. Nabiar and P. Parmeswaran, for the Appellant.

N. Sudhakaran, P. K. Pallai, V. J. rrancis, N. M. Popli A. G.
Pudissary for the respondents.

The Judgment of the Court was delivered by. G

DESAI, J. The respoudents in these two appeals filed Original
Petitions Nos. 2892-3073 of 1965 challenging the validity of the
licence fee levied by the appellant 'The City Corporation of Calicut'
to be paid for use of the land or premises for soaking of coconut
husks. The appellant Corporation by its resolution dated January
25, 1963 levied licence fees in respect of vario11$ items set out in u
1010 SUPREME COURT REPORTS [1985] 2 s.c.R.
A
Schedule IV of the Calicut City Municipal Act, 1901 subsequently
restyled a1 Kerala Municipal Corporation Act, 1964 ('Corporation
Act' for short) including for use of premises and land for soaking
coconut husks. The respondents are admittedly carrying on the
trade of soaking coconut husks and they had not taken out a licence
B for carrying on the trade. The Commissioner of the appellant
Corporation issued a notice to each of the respondents calling upon
him to show cause why within three days of the receipt of the notice,
the respondents should not be prosecuted for using premises for
ioaking coconut husks without obtaining .a licence as required by
law. The respondents challenged the validity and legality of the
!Ifore-mentioned notices issued by the Corporation and served upon
c thorn in the afore-mentioned two writ petitions on diverse grounds,
inter-alia contending that if the licence fee is levied as a fee, no
service is rendered or special advantage or favour is conferred by
the Corporation on the respondents for collecting such fee and that
there is no quid pro quo and that the relevant provisions of the Act
do not enable the Corporation to levy such a fee. Alternatively, it
D
was contended that if it is levied as a tax, it is beyond the taxing
powers of the Corporation.

The Corporation filed its counter-affidavit and sought to
justify the fee. as a licence fee or in the alternative it was contended
I! that the Corporation had the power to levy a tax of the nature
levied by it.

Both the petitions came up before a learned Single Judge of
the High Court who held that the levy of the impugned licence fee ·
is not legal in the absence of conferment of special benefit on the
petitioners and other persons who soak coconut husks. The alter-
F
native submission that the Corporation had the power to levy it as
a tax was negatived observing that' the power to levy the various
taxes conferred on the Corporation under Chapter V of the 1964
Act does not comprehend the impugned levy and accordingly held
that as a tax it was not valid and legal. Accordingly both the writ
G petitions were allowed and the impugned notices were quashed. The
Corporation after unsucce,sful Writ Appeals Nos. 107-108 of 1967
filed these !!ppeals by special leave.

Mr. A. S. Nambiar, learned counsel who appeared for the
appellant-Corporation urged that the levy of licence fee as fee is
fully justified and the High Court was in error in rejecting it a~
CITY CORPN. v. T. SADASIVAN (Desai, J.) 1011

such on the ground that the rc•pondents do not enjoy any •peci&l A
service or benefit for paying the fees on the traditional view of law
more or less than prevailing that for a fee there must necessarily be
quid pro quo. He submitted that the trend revealed by recent deci-
sions of th is Court would show that traditional view about fee has
undergone a sea change and that the demarcating line between tax
and fee bas become so blurred as to become almost invisible. It
I
was alternatively submitted that even according to traditional view
the Corporation has placed enough evidence on record to show that
the respondents have been and are receiving special service or benefit
in return for the fees levied and paid. It is not necessary to exa-
mine the alternative submission save saying in passing that the
respondents do enjoy certam benefits from the functions discharged c
by the Corporation. The first limb of the contention must prevail
in view of the three recent decisions of this Court.

In Munrclpal Corporation of Delhi & Ors. v. Mohd Yasin&Anr.( 1)
after a review of the earlier decisions it was observed as under:

"What do we learn from these precedents? We learn D
that there is no generic difference between a tax and a fee,
though broadly a tax is a compulsory exaction as part of a
common burden, without promise of any special advantages
•
to classes of tax payers whereas a fee is a payment for ser-
vices rendered, benefit provided or privilege conferred.
Compulsion is not the hallmark of the distinction between
a tax and a fee. That the money collected does not go into
a separate fund but goes into the consolidated fund does
not also necessarily make a levy a tax. Though a fee must
have relation to the services renuered, or the advantages
conferred, such relation need not be direct, a mere casual
relation may be enough. Further, neither the incidence of F
the fee nor the service rendered need be uniform. That
others besides those paying the fees are also benefited does
not detract from the character of the fee. In fact, the
special benefit or advantage to the payers of the fees may
even be secondary as compared with the primary motive of
regulation in the public interest. Nor is the court to a•sume 0
the role of a cost accountant. It is neither necessary nor
expedient to weigh too meticulously the co11 of the services
rendered etc. against the amount of fees collected so as to
evenly balance the two. A broad co-relationship is all

(I) [1'13] 3 s. c. c. 229, H
1012 SUPREME COUR REPORS (1985] 2 s.c.R.
A
that is necessary quid pro quo in the strict sense is not the
one and only true index of a fee; nor is it necessarily
t
absent in a tax''.

This view was reaffirmed in Sreenivasa General Traders
B and Others v. State of Andhra Pradesh and Others(l) observing that
it is increasingly realised that the element of quid pro quo in the
strict sense is not always a sine qua non for a fee. However, co-
relationship between the levy and the services rendered or expected
is one of general character and not of mathematical exactitude. All
that is necessary is that there should be a reason.able co-relationship
c between the levy of the fee and the services rendered.

In a very recent decision in M/s Amarnath Om Prakash and
Others v. State of Punjab & Ors. ('l the Court reiterated the principle
laid down in Mohd. Yasin's case.

D It is thus well-settled by numerous recent decisions of this
Court that the traditional concept in a fee of quid pro quo is under·
going a transformation and that though the fee must have relation
to the services rendered, or the advantages conferred, mch relation
need not be direct, a mere casual relation may be enough. It is not
necessary to establish that)hose who pay the fee must receive direct
E benefit of the services rendered for which the fee is being paid. If
one who is liable to pay receives general benefit from the authority
levying the fee the element of service required for collecting fee is
satisfied. It is not necessary that the person liable to pay must
receive some special benefit or advantage for payment of the fee.

F
Applying the ratio of these decisions it is incontrovertible that
the appellant-Corporation is rendering numerous services to the
persons within its areas of operation and that therefore the levy of
the licence fee as fee is fully justified. Soaking coconut husks emit
foul odour and contaminates environment. The Corporation by
rendering scavanging services, carrying on operations for cleanliness
G
of city, to make habitation tolerable is rendering general service of
which amongst others appellants are beneficiaries. Levy as a fee is
thus justified.

(!) [1983] 4s.c.c. 353. '
\2) {1985] I S.C.C. 345.
tt
CITY CORPN. v. T. SADASIVAN (Desai, J,) 1013

In this view of the matter it is not necessary to consider the A
alternative submis1ion that the levy a& a tax is lc811.

Accordingly, both the appeals arc allowed and the decision of
the learned Single Judge as well ai the decision of the Division
Bench in writ appeals are iet aside and the writ petitions filed by
the petitioners are dismissed with no order as to casts.
8

N.V.K. Appeal allowed.

•

'

'\.,

•

t