Panigrahi, C.J.
1. The petitioner, a firm of businessmen, prays for the issue of a Writ of Prohibition against the opposite party, the Municipality of Cuttack, forbidding it from collecting certain license fetes levied under Section 290, Orissa Municipal Act 23 of 1950. The petitioner's firm carries on business on a wholesale basis in grains', chillies, tamarind and other commodities. By a Notification No. 224, dated 28-1-1953, the Chairman of the Cuttack Municipality called upon the wholesale dealers doing business within its limits to take out licenses for doing business in articles mentioned in the schedules attached to the Notification.
The Notification prescribes different rates of fees for stocking or selling different varieties of commodities and a graded scale is prescribed for different quantities. The petitioner complains that the levy of the fees prescribed by the Municipality is out of all proportion to the services rendered by it, and is in fact a tax intended to augment the revenues of the Municipality.
The petitioner refused to take out a license as required by the Notification and a criminal case has been started against him in the Court of the Magistrate, III Class, Cuttack, under Sections 343 and 337, Orissa Municipal Act. The fees required to be paid by the petitioner under the Notification in respect of the different commodities he trades in, amount in the aggregate to Rs. 144/-. The petitioner has, therefore, prayed that the proceedings pending in the Court of the Magistrate be quashed as the demand is unreasonably excessive and illegal.
2. It has to be stated at the outset that the learned Advocate appearing for the Municipality conceded that there is no separate establishment maintained by the Municipality for the grant of licenses or for attending to the supervision of licensed premises. There is no separate account maintained of the amounts collected by way of license fees and the amounts spent for the purpose.
It was also conceded that in view of the recent pronouncement of the Supreme Court in --'Shirur Mutt's case, Commr. Hindu Religious Endowments, Madras v. Lakshmindra Thirthe Swamiar', AIR 1954 SC 282 (A), the levy of fees disproportionate to the services rendered by the Municipality may amount to a tax, and the correctness of that principle is no longer open to debate.
It was contended, however, that the petitioner cannot carry on business without applying for a license in respect of each of the commodities in which he is dealing. In view of the importance of the question raised, we have been called upon to examine the provisions of the Orissa Municipal Act, empowering the Municipal Council to levy taxes and fees so that the Municipal Council may make suitable amendments to the Notification.
3. Chapter 13, Orissa Municipal Act is entitled 'Municipal Taxation' and deals with imposition of taxes. Section 131 says that the Municipal Council may impose within the limits of the Municipality certain specified taxes or fees. Clause (1) of Sub-section (1) of Section 131 runs thus:
'(1) any other fee for services rendered by the Municipality under the Act for the health, safety, and convenience of residents.'
Chapter 19 of, the Act is entitled 'Industries and Factories (including Dangerous and Offensive Trades, Occupations or Processes)'. The impugned Section 290 of this Chapter lays down that the Municipal Council may notify that no place within the municipality shall be used without a license granted by the Executive Officer and except in accordance with the conditions specified in such license, for one or more of the purposes mentioned in that Section. Sub-section (7) of that Sections says that:
'The Municipal Council may, subject to a maximum to be fixed by the State Government, levy a fee in respect of any such license and the renewal thereof, and may impose such conditions and restrictions upon the grant of such license as it may think necessary.'
Chapter 23 deals with general provisions regarding licenses and permissions, and lays down that it shall be the duty of the Executive Officer to inspect places in respect of which a license or permission is required by or under the Act (See Section 337 (4)). Chapter 27 deals with penalties an Section 383 (1) (a) says that whoever contravenes any provision of any of the Sections specified in the first column of Schedule 4 shall be punished with a fine, which may extend to the amount mentioned in that behalf in Col. 4 of Schedule 4. Section 290 is one of the Sections mentioned in Schedule 4 and Col. 3 of that Schedule reads as follows:
'Using a place for any of the purposes specified in Section 290 (1) without a license or contrary to license.'
I have referred to these various sections of the Act in order to determine the source of the power of the Municipality to levy a fee for granting a license in respect of Dangerous and Offensive trades, and the penalty for failure to comply with the provisions of Section 290.
Having regard to these provisions, there can be no doubt that the Municipal Council is empowered to levy a. 'fee for services rendered by the Municipality for the health, safety and convenience of the residents' under Section 131 (1) (1). Nor can it be doubted that it is necessary that the Municipality should have the power to control dangerous and offensive trades in the interest of public health/and safety. Section 290, there fore, vests the power of control in the Municipality and says that no place within the Municipality can be used for carrying on a dangerous and offensive trade without the permission of the Municipality.
To say that such a provision is unconstitutional is an extravagant argument. The Legislature specifically vests the power on the Municipality to 'levy fees for services rendered' under Section 131 and Section 290 (7) defines the limits within which the power may be exercised.
The contention that the Notification is ultra vires the Constitution has, therefore, no legs to stand upon and has to be overruled.
4. The question, however, is whether the Court is empowered to question the extent and propriety of the exercise of this power by the, Municipality, and substitute its own ideas of what the fee should be in a particular case. I have no doubt that the Court has no such, power Nonetheless it is open to the Court to test the reasonableness of the levy having regard to the purpose of the enactment.
5. Courts are slow to hold that a power 'bona fide' exercised by a Municipal Council is void for unreasonableness, and it ought to be supported unless it is manifestly partial or unequal in its operation between different classes, or unjust or made in bad faith, or clearly involving an unjustifiable interference with the liberty of those subject to it. The ought to be benevolently interpreted and credit ought to be given to those who have to administer them, that they will be reasonably administered. See -- 'Kruse v. Johnson', 1898-2 QB 91 (B).
The restriction upon the power of the licensing authority to impose conditions on the grant of licenses is that the conditions must be (1) reasonable, (2) in respect of the use of the licensed premises, and (3) in the public interest. But if the condition imposed has no connection with the subject-matter of the license the Court will not hesitate to disregard it as 'ultra vires' See --'Theatre de Luxe, Ltd. (Halifax) v. Gledhill', 1915-2 KB 49 (C).
The principle, therefore, is that the Court should be satisfied that the ground for imposing different rates of fees for the issue of a license for a particular place has some connection with the subject-matter of the license, namely, the use of the premises by the licensee.
Section 290, therefore, very properly speaks of 'the purposes for which the place may not be used without a license'. It is the place that has to be licensed if a dangerous and offensive trade or occupation is carried on there, and a fee can be imposed by the Municipal Council for the service rendered by it. The fee collected is the quid pro quo for the expenses incurred by the Council.
6. The fees prescribed, therefore, should reasonably, cover the cost of the special services necessitated by the duties and responsibilities imposed on the Council in respect of the supervision and regulation of places for which a license is taken. They are intended to be a compensation to, the Municipality for the expenses incurred in the issue of licenses and the general regulation of trades which are licensed.
It is necessary in the interests of the health of the town that the Municipality should know where a particular trade is being carried on, so that it may control and check its working so as not to cause nuisance or danger, to the public generally or to the persons living in the locality.
It would follow, therefore, that the Councilhas no power to fix any arbitrary fee it chooses.There is some limit to this power; and the limit,is set by the, amount required for meeting the costof the special service's rendered by the Council.This, however, is not to say that the amount collected should be exactly the same as that requiredto cover the extra burden placed on the Councilby reason of the extra supervision and inspection.
As was held by the Judicial Committee in -- 'Pazundaung Bazaar Co. Ltd. v. Municipal Corporation of Rangoon', AIR 1931 PC 217 (D), the license fee
'might reasonably cover the cost of all special services necessitated by the duties and liabilities imposed upon the Corporation in respect of supervision and regulation of private markets.'
It would follow, therefore, that the power to charge license fees cannot be used for taxation. In other words, the total fees charged by the Council should not be much in excess of what the duties and responsibilities cast upon them and their staff in connection with the licenses cost them. It is open to the Council to enhance the fee from time to time if they find that the sums realized are not sufficient to defray the cost of services rendered. But it is clear that it has no power to fix any arbitrary fee.
The line of distinction which would make 'fee' a 'tax' is whether the fee prescribed is reasonable or unreasonable, and this must depend upon the circumstances of each case.
7. The Notification is open to a more serious, objection and that is that the amount of fee prescribed is graduated by the amount of business done. For instance, for licensing of match boxes up to 100 grosses or part thereof the fee is Rs. 6/- but if the quantity stored exceeds 100 grosses the fee would be Rs. 12/. This can hardly be said to be a licensing fee for carrying on business.
The Act empowers the Municipal Council to impose a tax on 'profession, art and calling' as may be prescribed in Section 131 (1) (g). It is open to the Council to impose a tax on particular professions or businesses in exercise of the power conferred by this Section.
It would appear, therefore, that the Council may exact both a license fee as a condition for granting the right to do business of a particular kind and also levy a tax on the business itself.
But a tax on profession, trade or calling, should not be confused with a fee levied for licenses issued for certain specified trades. A business may be licensed and yet not taxed, or it may be taxed and yet not licensed.
The Council in exercise of its Police power may control a business by issuing a license and may even refuse to issue a license if it consider that the carrying on of a particular trade in a particular area would be obnoxious to the public health. But it cannot so use the power to levy a license fee as to make it a source of revenue.
8. A reference to the Municipal Acts of Bengal and Madras leads me to the same conclusion. The Bengal Government issued a Circular in 1896, laying down certain general principles to be followed in fixing the scales of fees for controlling dangerous and offensive trades. The Circular is quoted at page 202 of the Collier's Municipal Manual for Bengal Bihar, Orissa and Assam and is as follows:
'A distinction should, in the first place, be drawn between dangerous trades and offensive trades, and those only should be included in thelatter category which cause, actual annoyance or discomfort to persons living in the neighbourhood and which can equally well be carried on outside municipal limits'. In respect of these, the Lieutenant Governor has no objection to fees being levied at such rates as will tend to discourage the establishment of such industries within municipalities.
In the case of trades which contain some elements of danger (such as danger from fire which attends on the establishment of depots for inflammable material but which it is not desirable to drive outside municipal limits, inasmuch as they can, with suitable precautions, be carried on within those limits, without causing annoyance or risk to the neighbors the fee levied should not be much in excess Of the cost of maintaining the supervision necessary to secure that such precautions are taken' -- (See Bengal Government Municipal Circular No. 67-M dated 10-6-1896 to Commissioners).
Another Circular No. 2057-M, dated 23-6-1898,quoted at the same page, is to the effect that:
'the fee leviable under Section 261 is only a fee in respect of a license to use a place for a certain specified purpose. No power is given to the Commissioners to levy a tax on the products of the manufacture carried on in a place so licensed.'
9. It was urged before us that the Council is entitled to charge a separate license fee in respect of each of the items mentioned in the different categories of dangerous trades mentioned in Section 290 (1), Clauses (a) to (x). It was, therefore, argued that a person may be required to take out a separate license for storing or selling each of the commodities such as grain, groundnut, turmeric, tamarind etc., mentioned in Clause (1). This 'Contention, however plausible, will not stand scrutiny.
After having given my anxious consideration to the point raised I am of opinion that Section 290 (1) contemplates only one license for 'anyone or moreof the following purposes'. If the subject-matter of the license is the place where the trade is carried on I fail to see any reason why a personshould be required to take out more than one license or pay more than one fee even if separate licenses were required.
I am aware that Section 337 (2) contemplates more than one license and fees may be charged 'on such units and at such rates as may be fixed by the Municipal Council'. This clause may lend support to the, conclusion that each of the units may have to be licensed but what are 'the units'? One interpretation may be that they are those classified under (a) to (x) in Section 290 (1) while another, and equally plausible interpretation is that each of the purposes mentioned in that section is a separate unit.
A clue to the correct interpretation is to be found in the expression 'and such rates' which follows the word 'units'. The section speaks of 'such rates' which means that the fee must have some bearing on the trouble and expense involved in undertaking supervision and inspection of the premises. 'Rates' implies proportion or estimated value. What does it matter to the Municipality if more than one commodity is stored in the same premises? It certainly does not involve additional labour or expense so far as the Municipality is concerned. I am, therefore, unable to see why separate fees should be charged even if separate licenses may be required, so that the Municipality may be kept apprised of the particular trade being carried on at a particular place.
If, for instance, a license is issued for burning bricks at a particular place. I fail to see why tiles cannot be manufactured at the same place without a further fee, though a separate license is required.
10. This question has come up on more than one occasion before the Madras High Court, but I have not been able to find any case which is on all fours with the one before us.
In 'Nyna Mahomed v. E. S. Llyod', 1911-1 Mad WN 71 (E), the point was specifically referred to the High Court by the Presidency Magistrate under Section 432, Criminal P. C. There is no discussion, in the very brief judgment of their Lordships, whether an aggregate of fees in respect of different licenses for the same place would not amount to a tax. All that was decided in that case was that if the Government sanctioned the levy of an aggregate fee, it was not ultra vires. It may be that under the law as it stood then this view may be supported, but it can hardly be justified under our present Constitution.
In 'Corporation of Madras v. Spencer and Co. Ltd.', AIR 1930 Mad 55 (F), Phillips J., relied on the principle laid down in -- 'Kruse y. Johnson', (B), and held that the Court would interfere if the levy of the fee is unreasonable. In that case the Corporation of Madras had fixed a license fee of Rs. 25/- for 'storing spirits'. This amount was suddenly raised to Rs. 200/- by the Council, changing the nature of the license to one for arrack and foreign liquors containing alcohol. Philips J., held that the fee was not raised because of the additional expenses of collection and regulation, but was merely, a counter-demonstration to the order of Government refusing to allow the Corporation to take the abkari revenue of the City. .
It appeared from the evidence that the expenses of supervising the places where foreign liquor was stored were practically nil. The site was inspected when the license was originally granted and no further action had been taken. Compared to the fee prescribed for stables, dairies and for storing skins and explosives, the fees for storing spirits was by far the highest although those other matters Involved much greater trouble and danger and offence to the public. In these circumstances, the Court held that the enhance fee was unreasonable.
In 'Samarapuri v. Corporation of Madras AIR 1931 Mad 488 (1) (G), Jackson J., refers to a Resolution of the Standing Committee of the Municipal Council and it appears that the Corporation decided that no separate license is necessary for each process in respect of the same article, As the learned Judge observed, what was probably meant was that no separate fee is necessary, though a separate license may be obligatory.
In 'Satyanarayana v. H. B. Yorke', AIR 1933 Mad 148 (H), the Manager of the Deccan Sugar Co., at Samalkot was prosecuted for failure to take out a license for (1) manufacture of arrack with machinery; (2) manufacture of Co-2 gas with machinery; and (3) manufacture of confectionery with machinery. The Coconada Taluk Board passed a Resolution to the effect that no place within its jurisdiction should be used for any of the three specified manufactures without a license and the fee for license in each case was fixed at Rs. 400/-. The license for manufacture of sugar was fixed at Rs. 500/-.
The question that arose was whether the accused was bound to pay an aggregate sum of Rs. 1700/- for the business be was doing at oneand the same place. It was found that all these manufactures were only parts of sugar manufacture for which the Company had taken out a license. Section 193, Madras Local Boards Act, 14 of 1920 corresponds to Section 290, Orissa Municipal Act of 1950 of Schedule 7 of the Madras Act specifies the purposes for which the premises may not be used without a license. Clause (a) of the Schedule says:
'In general, doing in the course of any industrial process anything which is likely to beoffensive or dangerous to human life, or health orproperty.' .
Bardswell J. held that the fee imposed by the panchayat was excessive and unreasonable and observed that the Panchayet
'will have acted within its powers in directing that licenses be taken for manufactures (1), (2) and (3) if those manufactures are found to be manufactures separately carried on.'
11. On a review of these authorities I am led to the conclusion that it is open to the Court to examine the reasonableness of the graded fees fixed by the Municipal Council in respect of different trades and I am satisfied that, in the present case, they are harsh and unreasonable and bear no relation to the services rendered by the Council. They accordingly amount to a tax which cannot be levied under Section 290, Orissa Municipal Act.
We would, therefore, direct the issue of a Writ of Prohibition forbidding the opposite party from imposing or collecting the same from the petitioner. We further direct that the proceedings against the petitioner, now pending in the Court of Shri N. K. Das, Magistrate, III Class, Cuttack, in Case No. 109C-3/113-T of 1954 be quashed.
12. The petition is allowed, but we make no order as to costs.
Mohapatra, J.
13 I agree.