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Judgment
S. Jagadeesan, J.—The Petitioner, Chennai Hotels Association, has filed this writ petition for the issue of a writ of mandamus, forbearing the
Respondents from collecting licence fee from the members of the Petitioner-association in excess of the licence fee paid for the year 1998-99 on
the basis of the rental value of the concerned premises.
The case of the Petitioner is that during the year 1998-99 the members of the Petitioner association were asked to pay the licence fee by the
first Respondent for the hotels, restaurants, tea shops and snack bars at different rates, ranging from Rs. 280/- to Rs. 6000/-. In fact the said
licence fee was prevailing from 1991-92 onwards. The licence fee has been periodically increased during various periods. No written
communication was given to any member of the Petitioner-association in respect of the increase in the licence fee. But however, they were orally
informed. During 1960, the minimum licence fee was Rs. 70/- and the maximum was Rs. 1000/-. This was increased twice the amount in 1975-76.
Thereafter in 1984-85 the minimum licence fee was Rs. 210/-; whereas the maximum was Rs. 3000/-. For the present year 1999-2000 the first
Respondent is demanding the licence fee ranging from Rs. 990/- to Rs. 3600/. On enquiry, the Petitioner was informed that the licence fee is being
levied on the basis of the rent or rental value of the premises. Dissatisfied with the enhancement of the licence fee, the Petitioner has filed this writ
petition.
In the affidavit filed in support of the writ petition, the Petitioner has contended that from 1960 the licence fee was not levied on the basis of the
rental income of the premises. The increase in the licence fee cannot be made without prior notice to the members of the Petitioner. The licence fee
cannot be on the basis of the rental value of the building. It should commensurate with the service rendered by thee Respondents. When all other
statutory authorities are collecting a nominal fee for the issue of licence, the Respondent herein ought not to have levied the licence fee on the basis
of the rental income of the premises. Further the authorities have no jurisdiction to revise the licence fee without any rhyme or reason and hence the
Respondents should be restrained from demanding the enhanced licence fee.
The first Respondent, on notice, has filed counter affidavit, wherein it is stated that Section 279 and 349(11) of the Madras City Municipal
Corporation Act, 1919 empowers the authorities to levy the licence fee. As per the schedule of rate fixed by the Council, the Corporation is
collecting the licence fee for the hotels and eating establishments. Even on the earlier occasions, the licence fee was levied only on the basis of the
rental value. The schedule rates had been published and the members of the Petitioner-association as well as the Petitioner knew about the
increase in the licence fee. From 1991-92, there is no enhancement of the licence fee and the present rate is only as fixed in the year 1991-92.
When the increase of the licence fee had been published, no one has raised any objection. The licence fee is being levied only on the basis of the
schedule in accordance with the resolution of the council. Only if there is an increase in the rental value, there will be an increase in the licence fee.
Otherwise there is no enhancement of the licence fee. When all along the licence fee has been levied only on the basis of the rental value, it is not
open to the Petitioner to challenge the same belatedly, having all along paid the licence fee on the basis of the rental value. There is no enhancement
of the licence fee after 1991-92, though the hotel owners had enhanced the price of the food articles many times, during the said period. More than
75% of the hoteliers have paid the licence fee and renewed their licence for 1999-2000. The fee levied for the issue of licence is only in
consumerate with the services rendered by the authorities, since they are required to inspect the hotel premises and eating establishments in order
to ensure that the conditions of licence are complied with. It is also their responsibility for inspecting and supervising the sale of foodstuffs to ensure
that all the conditions of licence pertaining to the preparation as well as the sales of such food are complied with. They are also required to ensure
the cleanliness, removal of garbage and maintenance of hygiene in these premises and as such the licence fee is not for the service rendered alone;
but also for large extent of regulatory steps for the purpose of monitoring the activity of the licensee and to ensure that they complied with the terms
and conditions of the licence.
Both the counsel reiterated what is stated in the affidavit and in the counter.
I carefully considered the contention of both the counsel. Section 279 of the Chennai City Municipal Corporation Act prohibits any person from
keeping any lodging-house, eating-house tea shop, coffee house, cafe, restaurant, refreshment room or any place without or otherwise than in
conformity with the terms of a licence granted by the Commissioner. Sub-section (11) of Section 349 empowers the Council to make by-laws to
provide for the regulation and licensing of hotels, lodging houses, boarding houses, choultries, rest-houses, restaurants, eating houses, cafes, etc to
which the public are admitted for repose or for the consumption of any food articles.
It is the contention of the Respondents that under this section the Council has passed a resolution imposing the licence fee with effect from
1991-92 based on the rental value of the said premises as follows:
Licence fee Rs. Remarks
280 .. Where the rent or rental value of the
hotel premises property is Rs. 25
and below.
500 .. Where the rent exceeds Rs. 25 but
does not exceed Rs. 50/-
600 .. Where the rent exceeds Rs. 50/- but
does not exceed Rs. 100/-
1100.. Where the rent exceeds Rs. 100/-
but does not exceed Rs. 200/-
2400.. Where the rent exceeds Rs. 200/-
but does not exceed Rs. 400/-
3600.. Where the rent exceeds Rs. 400/-
but does not exceed Rs. 750/-
4500.. Where the rent exceeds Rs. 750/-
but does not exceed Rs. 1500/-
6000.. Where the rent exceeds Rs. 1500/-.
It is also the contention of the counsel for the Respondents that there is no enhancement of the licence fee, as contended by the Petitioners for the
period 1999-2000.
A pemsal of the affidavit of the Petitioner reveals that he has stated in paragraph 4 of the affidavit that the minimum and maximum rates for the
licence fee at Rs. 280/- and Rs. 6000/- has been fixed in the 1998-99 but however, not on the basis of the rental value. Though the Petitioner has
stated in the same paragraph of the affidavit with regard to the licence fee levied for 1960, 1975-76 and 1984-85,''he has omitted to mention the
rates for the period 1991-92.
The only contention of the counsel for the Petitioner is that only for the period 1999-2000 the licence fee has been levied on the basis of the
rental value and for this purpose he relied upon the notice issued by the second Respondent to the Muneerddin who is having an eating
establishment at No. 72, Purasawalkam High Road, Chennai. However, the Petitioner has not chosen to file any reply to the counter affidavit filed
by the first Respondent. Even if the Petitioner''s case is accepted, in paragraph 4 he has clearly stated that for the year 1998-99 the licence fee was
ranging from Rs. 280/- to Rs. 6000/- depending upon the size of the premises. The Respondent has also stated the very same thing in the counter
affidavit and it is the Respondents'' case that this rate has been fixed from the year 1991-92. When the Petitioner has admitted that this is the rate
collected for licence fee even in the previous year and the members of the Petitioner-association had paid the same without raising any objection, I
am of the view that it is not open to the Petitioner to challenge the levy of licence fee, not at this stage by alleging that such fee is being levied as if
only from 1999-2000.
Further it is made clear from the counter affidavit that the levy of licence fee is only on the basis of the rental value and that is the basis from the
year 1991-92. The Petitioner did not produce any notice with regard to the enhancement of the licence fee at any earlier point of time to establish
that the levy was not on the basis of rental value and only for the first time the licence fee is being collected on the basis of the rental value. In the
typed set, the Petitioner has filed the levy of licence fee in respect of some of the members of the Petitioner-association, wherein the increase in the
licence fee has been claimed. The case of the Respondent is that wherever there is an increase in the rental value, correspondingly the licence fee is
also increased. Where there is no increase in the rental value, the licence fee is being collected at the original rate. Those from whom the increase in
the licence fee has been claimed, it is only due to the increase in the rental value and as such if those persons are aggrieved with regard to the
fixation of the rental value, it is open to them to challenge the same individually and the association cannot raise the voice, because the fixation of
the annual rental value of each building has to be considered individually and not collectively.
The learned Counsel for the Petitioner relied upon the judgment reported in India Sugars and Refineries Ltd. v. Municipal Council Hospet
1942 II MLJ 663 : 55 L.W. 783 and contended that the licence fee cannot be regarded as the form of taxation and as such it cannot be levied on
the basis of the rental value of the building. In that case, the court had considered the question of the refund of the professional tax. The company
paid the professional tax on the basis of the profit based on the statement of account. Ultimately the income tax authorities had permitted the
company to write off the entire profits towards depreciation of machinery. Hence the company filed the suit for recovery of the professional tax.
The suit was dismissed and the appeal thereon was also dismissed. Hence the principle laid down in the case may not be of any help for the
Petitioner herein.
In a recent judgment in Secunderabad Hyderabad Hotel Owners Association and Others Vs. Hyderabad Municipal Corporation, Hyderabad
and Another, the Supreme Court has held as follows:
It is, by now, well settled that a licence fee may be either regulatory or compensatory. When a fee is charged for rendering specific services a
certain element of quid pro quo must be there between the service rendered and the fee charged so that the licence fee is commensurate with the
cost of rendering the service although exact arithmetical equivalences is not expected. However, this is not expected. However, this is not the only
kind of fee which can be charged. Licence fee can also be regulatory when the activities for which a licence is given require to be regulated or
controlled. The fee which is charged for regulation for such activity would be validly classifiable as a fee and not a tax although no service is
rendered. An element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive.... In the present case,
however, the fees charged are not just for services rendered but they also have a large element of a regulatory fee levied for the purpose of
monitoring the activity of the licensees to ensure that they comply with the terms and conditions of the licence. Dealing with such regulatory fees,
this Court in Vam Organic Chemicals Ltd. and Another Vs. State of U.P. and Others, at page 726, observed that in the case of a regulatory fee no
quid pro quo was necessary but such fee should not be excessive. The same distinction between regulatory and compensatory fee had been made
in the case of P. Kannadasan etc, etc. Vs. State of Tamil Nadu and others [OVERRULED], in para 36 of SCC (Para 32 of AIR), as well as State
of Tripura and others Vs. Sudhir Ranjan Nath, .... In the first place it is not necessary that a fee should only be in the form of a lump sum fee. A fee
can also be graded as in the present case. The Corporation has chosen the quantum of rent paid as the criterion for the quantum of fee to be
charged. The rent under the relevant provisions of law in that connection, does have a nexus with the area in the occupation of the lodging house or
eating house. In the case of activities carried on by these lodging houses and eating houses, the area in their possession has a direct nexus with the
extent of business activities. The need for cleanliness and hygine the generation of garbage and the extent of regulation that may be required depend
upon the size of the premises which in turn control the extent of activity. Undoubtedly in a given case if the premises are old, the rent may be less
but that does not mean that classifying premises on the basis of the rent paid has no connection with the quantum of fee charged.
On the above principles, the apex court has upheld the levy of the licence fee on the basis of the quantum of rent. While doing so, however, the
learned Judges had observed that the increase in the licence fee has to be taken into consideration along with the interval with which the
enhancement of such licence fee is being made. As stated in the counter affidavit, it is the case of the Respondents that from 1991-92, the same
rates are being collected and there is no enhancement of the licence fee as alleged by the Petitioner for the ensuing year. It is also the admitted case
of the Petitioner that for the year 1989-90 the members of the Petitioner have paid the same licence fee. When there is no dispute with regard to
the minimum and maximum rates of licence being fixed, and the dispute is only in respect of an individual that too pertaining to the fixation of the
rental value, it is for that particular individual to challenge the fixation of the rental value alone and cannot challenge the basis of the licence fee as
stated by the Apex Court in Secunderabad Hyderabad Hotel Owners Association and Others Vs. Hyderabad Municipal Corporation, Hyderabad
and Another, .
Hence I am of the view that the Petitioners have not made out any case for the issue of a writ of mandamus, forbearing the Respondents from
levying the licence fee on the basis of the rental value. (sic) the writ petition is dismissed.