Vidarbha Chambers of Commerce and Industries, a Association of Traders and Industrialists, Duly Registered Under Societies Registration Act, 1860 Represented by Its President Niranjankumar Bhagwandas Agrawal and Secretary Kamlesh Vora Vs. the Commissioner, Municipal Corporation of Akola City and the State of Maharashtra, Urban Development Department Represented by the Secretary - Court Judgment

SooperKanoon Citationsooperkanoon.com/355604
SubjectOther Taxes
CourtMumbai High Court
Decided OnJul-03-2007
Case NumberWrit Petition No. 3795 of 2003
JudgeJ.P. Devadhar and ;B.P. Dharmadhikari, JJ.
Reported in2007(4)BomCR536; 2007(4)MhLj82
ActsBombay Provincial Municipal Corporation Act, 1949 - Sections 63(18), 124, 124(1)(2), 127, 142, 147, 148C, 466 and 466(1)(A); Societies Registration Act, 1860; Forest Act, 1927; U.P. Transit of Timber and Other Forest Produce Rules, 1978 - Rules 2, 5 and 26; Constitution of India - Articles 147 and 226; Karnataka Municipalities Act
AppellantVidarbha Chambers of Commerce and Industries, a Association of Traders and Industrialists, Duly Reg
RespondentThe Commissioner, Municipal Corporation of Akola City and the State of Maharashtra, Urban Developmen
Appellant AdvocateG.B. Lohiya, Adv.
Respondent AdvocateA.M. Ghare, Adv. for Respondent No. 1 and ;S.Y. Deopujari, AGP for Respondent No. 2
Excerpt:
- - he contends that thus, the requirement of section 147 of importing goods within municipal limits for immediate export is not satisfied. 1 that it is spending said amount on various works like construction, maintenance and improvement of streets, is not legally valid. the requirement of goods being brought into municipal limits for the purposes of immediate exportation was not satisfied. transit of timber and other forest produce rules, 1978, framed under forest act, 1927. the hon'ble apex court was considering challenge to transit fee and it has been observed that rule 5 which prescribes fee payable for different class of pass was clearly regulatory in nature and therefore it was not necessary for the state government to establish quid pro quo. however, it has been also observed that a good and substantial portion of the fee must, however, be shown to be expended for the purpose for which the fee is levied.b.p. dharmadhikari, j.1. by this writ petition filed under article 226 of constitution of india, the petitioner. association is challenging the increase in transit fee from rs. 20/-to rs.50/-by respondent no. 1. municipal corporation, on the ground that it is illegal, void and without jurisdiction. 2. during arguments, shri lohiya, learned counsel appearing for the petitioner also contended that in fact there could not be levy of any transit fee on goods/ transport vehicles which used national highway only for passing from one point to another point and therefore today he has moved an application seeking permission to amend prayer clause by which he is seeking quashing and setting aside of relevant provisions of standing orders framed by respondent no. 1 under the provisions of section 466(1)(a)(f) of bombay provincial municipal corporation act, 1949 (hereinafter referred to as the act). as the necessary facts are already on record in writ petition with necessary assertions, we have allowed the amendment. shri ghare, learned counsel for respondent no. 1 stated that as contents of petition are being changed, respondent no. 1 should be permitted to file appropriate reply. however, we do not find it necessary. amendment is accordingly allowed. necessary amendment be carried out during the course of the day. 3. the petitioner is a registered society under the societies registration act, 1860, and its locus to maintain such petition has not been disputed by respondent no. 1 or by respondent no. 2. state of maharashtra. the petitioners have stated that they have passed a resolution to challenge increase in transit fee by respondent no. 1. they have pointed out that akola municipal corporation has come into existence from 1.10.2001 and before that it was a. class municipal council. the recovery of octroi has started after conversion of municipal council into municipal corporation and octroi has been imposed by the corporation with effect from 1.12.2002. it is stated that imposition of octroi has been challenged in separate petition i.e. writ petition no. 4100 of 2002 which is already admitted for final hearing. the petitioners have contended that the octroi can be levied only if goods are imported for consumption, use or sale within municipal limits in view of provisions of section 147 of the act. they state that if the vehicle containing goods pass from one point to other point through corporation limits, statute permits corporation to recover supervision charges/ transit fee. it is contended that initially when octroi was being levied by municipal council, the rate of transit fee was rs. 2/-per vehicle and on 1.12.2002, when octroi was imposed by municipal corporation, it was rs. 20/-per vehicle. it is contended that only because vehicle passes through municipal limits, such an amount of rs. 20/-cannot be levied. it is further stated that on 28.3.2003, general body of akola municipal corporation passed resolution and increased transit fee from rs. 20/-to rs.50/-and said resolution along with increase has been assailed before us. it is stated that as it is fee, there has to be a proportionate relation between rate of fee and the service rendered or facility extended. as there is no quid pro quo, the petitioners prayed that said hike should be set aside. it is further contended that in view of provisions of section 147 read with section 466(1)(a)(f) of the act, the supervision or transit fee is leviable only if goods are imported within city limits and thereafter are sought to be exported out of it. it is stated that thus resting of goods in municipal limit is sine qua non when goods merely pass through municipal limits without taking any halt or when the bulk is not broken, there cannot be any recovery of transit fee. 4. in this background, we have heard shri lohiya, learned counsel for the petitioner -association, shri ghare, learned counsel for respondent no. 1 and shri deopujari, learned agp for respondent no. 2. 5. shri lohiya, learned counsel, after narrating the facts as stated above has invited attention of this court to the provisions of section 147 and section 466 of the act and other relevant provisions. it is not the case of municipal council that vehicles on which supervision fee is imposed, unloaded their goods at any place within their limits. he contends that thus, the requirement of section 147 of importing goods within municipal limits for immediate export is not satisfied. he further states that the supervision fee contemplated by section 147 is provided for in section 466(1)(a)(f) and in clause (f) also the same ingredients are required. he, therefore, contends that basically no supervision fee can be levied upon members of petitioner association who are not importing goods within corporation limits. in support of his contention, he has relied upon the judgment of the hon'ble apex court in the case of town municipal council v. urmilla kothari, reported at : [1977]2scr660 . 6. by inviting attention to additional written submissions filed on behalf of respondent no. 1, shri lohiya, learned counsel has attempted to show that the quantum of fee at rs. 50/-per vehicle being recovered is grossly disproportionate and excessive. he has pointed out from said additional submission that the total income of octroi department for the period from december 2002 to december 2003 is rs. 18,45,00,733/-while income from supervision fee or transit fee is rs. 3,99,53,166/-. he further points out that as against this, the entire expenditure of octroi department for the period of nine months from 1.12.2002 to 31.8.2003 is rs. 90,67,997/-. he contends that therefore monthly expenditure of entire octroi department is not more than rs. 10 lakhs, therefore, annual expenditure will be about rs. 1,20,00,000/-. he argues that as against this annual expenditure of entire octroi department, recovery from supervision fee is more than 250% thereof i.e. roughly about rs. 4 crores. he, therefore, contends that there is absolutely no justification or explanation for increasing the supervision fee from rs. 20/-per vehicle to rs. 50/-per vehicle. he has relied upon certain cases to point out that the fee in such circumstances must bare reasonable relationship and proportion to the expenditure incurred by respondent no. 1 for providing the service or facility. as practically same cases are cited even by respondent no. 1 in support of their arguments, we find it proper to refer to these cases at appropriate places. shri lohiya, learned counsel further states that the explanation of respondent no. 1 that it is spending said amount on various works like construction, maintenance and improvement of streets, is not legally valid. he contends that for said purpose the tax is already levied by state government and is being collected by competent authority. he, therefore, argues that either the supervision fee or transit fee must be held to be not payable by the petitioners or then the hike should be quashed and set aside. 7. shri ghare, learned counsel for respondent no. 1 has contended that section 147 of the act contains a deeming fiction and said deeming fiction is in relation to import. he contends that the entry point in fact at which vehicles of petitioner reports is the place of import and exit naka from which it leaves the municipal limits is the other relevant point for consideration. he points out that provision of section 147 is incorporated in statute book only to see that the transporters are not in a position to evade payment of octroi. he states that for said purposes, section itself permits imposition of supervision fee and that is also contemplated by section 466(1)(a)(f). he has also invited attention to section 127 which permits municipal corporation to impose octroi. according to him, in these circumstances, when power exists, the judgment of the hon'ble apex court in the case of town municipal council v. urmilla kothari, (supra) has no application. he points out the judgment of the hon'ble apex court in the case of municipal corporation, baroda v. babubhai, reported at : [1990]185itr255(sc) , to state that exactly identical issue has been considered therein by the hon'ble apex court and he further contends that provisions considered are the same i.e. section 147 and section 466 of the act. he, therefore, contends that controversy is concluded in view of said judgment which is directly on the point. he further invites attention to provisions of the bombay provincial municipal corporation act, 1949, to point out various obligations and duties cast upon the municipal corporation by said act. he contends that it is not necessary that supervision fee or transit fee recovered from the petitioner must be utilised for supporting the expenditure of providing the escort to the petitioners or for keeping supervision on their vehicle. he contends that such amount can also be spent on various other functions of municipal corporation which are entrusted to it and in para 6 of additional written submission those heads are pointed out. these heads pleaded are construction, maintenance and improvement of streets. he contends that in such circumstances, the argument of quid pro quo is totally misconceived. he has also relied upon certain cases to explain how the principle of quid pro quo has been evolved and is being considered. 8. shri deopujari, learned agp appearing for respondent no. 2 adopts the arguments of shri ghare. he contends that in view of the express provision made in section 147 and 466 of the act, respondent no. 1 is justified in charging supervision fee. he further points out that in petition itself, at one place, the petitioners have accepted that the supervision fee can be levied. he, therefore, states that there is no merit in the petition and petition needs to be dismissed. he further states that as resolution increasing the hike in transit fee has been validly passed, the state government has rightly approved the same. 9. as the right of respondent no. 1 to levy octroi is not in dispute, it is not necessary for us to go into the detailed provisions of bombay provincial municipal corporation act, 1949. the only two provisions for consideration before us are sections 147 and 466. section 147 reads as under:147. articles imported for immediate exportation until the contrary is proved any goods imported into the city shall be presumed to have been imported for the purposes of consumption, use or sale therein unless such goods are conveyed from the place of import to the place of export by such routes, within such time, under such supervision and on payment of such fees there for as shall be determined by the standing orders. bare perusal of section 147 shows that the deeming provision appearing is in relation to import for the purposes of consumption, use or sale within municipal limits and such presumption arises if goods are not immediately conveyed to the place of export. the time for such export is to be prescribed in standing orders to be framed by respondent no. 1 for said purpose and it also permits standing orders to provide for supervision on such export and also for payment of such fee for that supervision. section 466(1)(a)(f) reads as under:466. making of standing orders by commissioner. (1) the commissioner may make standing orders consistent with the provisions of this act and the rules and by-laws in respect of the following matters, namely, -(a)(f) determining the supervision under which, the routes by which and the time within which goods intended for immediate exportation shall be conveyed out of city and the fees payable by persons so conveying the goods;. clause (f) also therefore again shows that standing orders can be framed to determine the supervision under which and the routes by which and the time within which the export is to be effected and also it permits determination of fees payable by persons so conveying the goods. 10. the judgment of the hon'ble apex court in municipal corporation, baroda v. babubhai, (supra) shows that the hon'ble apex court has considered the challenge to standing order no. 3 framed by municipal corporation of baroda under section 466(1)(a)(f) read with section 147 of the bombay provincial municipal corporation act, 1949, i.e. the same act by which the affairs of present respondent no. 1 1 are regulated. in that judgment the hon'ble apex court has held that the provisions of statute permit municipal corporation to collect supervision charges from transporters for carrying the goods through corporation limits under supervision of staff of corporation without paying octroi. it is further observed that it is not a levy or an imposition of tax but is merely fee charged for privilege or services rendered to the payer and it satisfies the quid pro quo principle. 11. the other judgment on which the petitioners have placed reliance is in the case of town municipal council v. m/s. urmilla kothari, (supra) which considers the provisions of section 124 and rule 26 framed under karnataka municipalities act. the larger bench of the hon'ble apex court has construed the opening words of section 124 of that act. section 124(1)(2) and relevant portion of rule 26 which have been construed by the hon'ble apex court read as under:section 124 : non-liability for octroi and refund of octroi on goods in transit (1) any article or animal brought into the municipal limits for the purpose of immediate exportation may at the option of the importer not be subjected to levy of octroi if such article or animal be conveyed direct from the place of import to the place of export by such routes, within such time, and under such supervision as the municipal council may be resolution determine. for purposes of this sub-section the municipal council shall on payment of the prescribed fees issue promptly the necessary transport permits. (2) when any article in respect of which octroi has been paid is exported from the municipal limits, in the same condition in which it was brought into or received from beyond the municipal limits, the amount of octroi paid shall, subject to such rules as may be prescribed, be refunded. rule 26:in case the person bringing the goods wishes to transport the goods at once beyond the limits of the municipality he shall do so only after obtaining a transport permit in form iv, on payment of a fee of rupees two for each lorry and rupee one in other cases in the case of a city municipal council and rupee one for each lorry and fifty paise in other cases in the case of a town municipal council. the opening words of section 124 have been found to be important by the hon'ble apex court and the hon'ble apex court has noticed that they imply process of importing into and exporting from the municipal limits of goods or animals and presuppose an element of repose and rest of the goods within the municipal limits. the hon'ble apex court has also observed that in the facts of case before it, when iron ore is carried in the trucks of the respondent which merely pass through the areas which lie within the municipal limits and is not unloaded and reloaded at any place within the municipal area. the requirement of goods being brought into municipal limits for the purposes of immediate exportation was not satisfied. it is to be noted that the very same provision with which we are concerned has been construed by the hon'ble apex court in its 1989 judgment (supra) and we, therefore, find that the controversy insofar as challenge to the power of respondent no. 1 to levy supervision charges or transit fee is concerned, stands concluded against the petitioners and in favour of respondent no. 1 by the judgment in the case of municipal corporation, baroda v. babubhai (supra). 12. in state of u.p. v. sitapur packing wood suppliers reported at : [2002]3scr345 , the hon'ble apex court has considered provisions of rule 5 of u.p. transit of timber and other forest produce rules, 1978, framed under forest act, 1927. the hon'ble apex court was considering challenge to transit fee and it has been observed that rule 5 which prescribes fee payable for different class of pass was clearly regulatory in nature and therefore it was not necessary for the state government to establish quid pro quo. the hon'ble apex court has also noticed that the high court was in error in holding transit fee to be invalid in absence of quid pro quo. 13. b.s.e. brokers' forum v. securities and exchange board of india, reported at : air2001sc1010 , again holds that registration fee sought to be levied by security and exchange board of india on stockbrokers was regulatory in nature. while so holding, in para 30, the hon'ble apex court has approved its earlier judgment holding that in determining whether a levy is a fee or not emphasis must be on whether its primary or essential purpose is to render specific services to a specified area or class. it is also observed that a levy of fee does not cease to be a fee merely because there is an element of compulsion or coerciveness present in it and it is not necessary that such fee must have direct relation to actual service rendered by the authority to each individual who obtains the benefit of service. the element of quid pro quo in strict sense is not always a sine qua non for a fee in all cases. it has been held that the traditional concept of quid pro quo in a fee is undergoing transformation. further, it is also observed that the fee must have relation to the services rendered, or the advantages conferred. in para 33, the hon'ble apex court has held taking note of the human expectation of winning in a draw or a bid at the auction and becoming rich overnight mostly by the lower-middle class and the poor who invest their hard- earned money in such chit funds, levy to be a regulatory measure since the collection of such funds from such category of people will have to be monitored strictly. in para 35 of very same ruling, it has been also reiterated that such a levy should not be examined so minutely or be weighed in golden scales to discern any difference between the expenditure on administration of criminal and civil justice and it is not the requirement of law that such collection should exactly tally or correspond to the expenditure on administration of civil justice. in para 37 again, the same principles are reiterated by relying upon the judgment in secunderabad hyderabad hotel owners' association v. hyderabad municipal corporation, reported at : [1999]1scr143 , and it has been observed that licence fees may be either regulatory or compensatory. in para 39, the hon'ble apex court has considered the arguments of the petitioners that though the equivalent quid pro quo was not necessary, the amount of fees collected by said levy was excessive and in para 40 found that board could point out that its requirement was far more than receipts to render the levy invalid. 14. in a.p. paper mills ltd. v. government of a.p. reported at : air2000sc3290 , again the same view has been taken. 15. in krishi upaj mandi samiti v. orient paper & industries ltd. reported at : (1995)1scc655 , relied upon by shri lohiya, in para 21, the same principles have been laid down. however, it has been also observed that a good and substantial portion of the fee must, however, be shown to be expended for the purpose for which the fee is levied. it is also observed that though element of quid pro quo is not possible or even necessary to be established with arithmetical exactitude, the same must be established broadly and reasonably that the amount is being spent for rendering services to those on whom the burden of the fee falls. in para 20, it is observed by the hon'ble apex court that there should be reasonable relationship between the levy of the fee and the services rendered. he has also invited our attention to the constitutional bench judgment of the hon'ble apex court in the case of jindal stainless ltd. v. state of haryana reported at 2006(6) all mr (sc) 75. in para 40, the hon'ble apex court has held that the compensatory tax is levied on individual as a member of a class whereas a fee is levied on an individual as such. reimbursement or recompense have been held to be the closest equivalence to the cost incurred by the provider of the services/ facilities. in para 43, the hon'ble apex court has held that in the case of a fee., the basis is the special benefit to the payer (individual as such) based on the principle of equivalence. 16. thus, from all judgments which are cited by both sides before us, it follows that the quantum of fee has to have some correlation and proportion with the service/ benefit being provided. though the existence of quid pro quo need not be established with mathematical perfection, the reasonable relationship between the two is essential. from the facts which are disclosed above, it is apparent that entire expenditure of octroi department annually at the relevant time was not more than rs. 1,20,00,000/. the income earned by octroi department from octroi itself was rs. 18,45,00,733/-and from supervision fee or transit fee it was rs. 3,99,53,166/-. it is no doubt true that octroi is one of the important source of income for municipal corporation and revenue so generated is being utilised by municipal corporation for discharge of its other obligations. however, supervision fee or transit fee is not a tax and as has been contended by respondent no. 1, it is at the most a regulatory fee. from the scheme of section 147, it appears to be a regulatory fee. however, entire annual expenditure of octroi department is being met by the quantum of supervision fee recovered by respondent no. 1. the total income of octroi department from the supervision charges is rs. 3,99,53,166/-while the expenditure of entire octroi department is rs. 1,20,00,000/-. what is the expenditure of octroi department for making the arrangements for supervision is not disclosed anywhere by respondent no. 1. but as is apparent from both affidavits it is less than rs. 1,20,00,000/-. thus, the revenue fetched through transit fee or supervision charges is 333% of the annual expenditure of the octroi department. it is, therefore, apparent that the element of quid pro quo is totally lacking or in any case levy exceeds many fold in the facts of present case. the supervision charge before hike impugned before us was rs. 20/-per vehicle. it is clear that even by continuing with same rate of supervision charges, the entire annual expenditure of octroi department could have been fulfilled. we, therefore, do not see any reason or justification in hike of supervision charges or transit fee. the stand of municipal corporation that it utilises the amount generated for maintenance of roads,bridges etc. cannot be accepted as sufficient justification because such fee is not being recovered from other users of roads. moreover section 148c read with section 63(18) enable municipal corporation to levy street tax for said purpose on lands and buildings. its incident is not on goods or movement of goods within municipal limits. section 142 of the act enables municipal corporation to levy tax on vehicles used in city for conveyance of passengers or goods. thus levy of supervision fee cannot be justified for said purpose and that too from persons on whom these taxes cannot be imposed. such a levy cannot be construed as a tax in the disguise of fee/ charge. 17. in view of this finding, we hold the hike from rs. 20/ to rs. 50/-to be unwarranted and unjust. because of said hike, the charge or fee is losing its character as such and is becoming expropriator in nature and an undue burden upon the members of the petitioner association. accordingly, writ petition is partly allowed. the other prayer made for holding the standing order no. 5 and rule 2 to be ultra-vires is rejected. 18. at this stage, shri lohiya, learned counsel has invited our attention to order dated 19.4.2004, by which while refusing interim relief, this court observed that in case writ petition is allowed, respondent no. 1 would be required to refund the fees with nominal interest which will be decided at the time of final hearing of the petition. shri lohiya, accordingly requests that the direction to refund the entire amount collected by respondent no. 1, with interest should be issued. shri ghare, learned counsel for respondent no. 1 states that the entire amount received by municipal corporation has been spent by it for various development works including maintenance of roads and streets and members of the petitioners are also benefitted thereby. he, therefore, contends that this is not a case in which recovery should be permitted.19. we find that in view of the earlier order dated 19.4.2004, the petitioners are entitled to refund and accordingly we direct respondent no. 1 to refund the amount in terms of said order as early as possible and in any case within a period of four months from today. if the amount is not so paid within four months, an interest of 6% per annum would be required to be paid by respondent no. 1 to the petitioner association. the petitioners shall be free to recover the same in accordance with law. the eligible members of the petitioner association shall apply to respondent no. 1 for refund through the petitioner with proof of payment of transit fee/ supervision charges within a period of two months from today and after verification thereof, respondent no. 1 shall refund to such individual, the amount as is found due and payable to him. 20. shri ghare, learned counsel for respondent no. 1 at this stage states that the order passed today should be stayed for a period of four weeks to enable respondent no. 1 to approach the hon'ble apex court. the request is opposed by shri lohiya, learned counsel for the petitioners. however, considering the situation, we are inclined to suspend the today's judgment for a period of four weeks subject to the arrangement as ordered in our earlier order dated 19.4.2004. the said arrangement shall continue for a period of four weeks. this order of suspension shall cease to operate automatically after a period of four weeks.21. accordingly, rule is made absolute in above terms with no order as to costs.
Judgment:

B.P. Dharmadhikari, J.

1. By this writ petition filed under Article 226 of Constitution of India, the petitioner. Association is challenging the increase in transit fee from Rs. 20/-to Rs.50/-by Respondent No. 1. Municipal Corporation, on the ground that it is illegal, void and without jurisdiction.

2. During arguments, Shri Lohiya, learned Counsel appearing for the petitioner also contended that in fact there could not be levy of any transit fee on goods/ transport vehicles which used National Highway only for passing from one point to another point and therefore today he has moved an application seeking permission to amend prayer clause by which he is seeking quashing and setting aside of relevant provisions of Standing Orders framed by Respondent No. 1 under the provisions of Section 466(1)(A)(f) of Bombay Provincial Municipal Corporation Act, 1949 (hereinafter referred to as the Act). As the necessary facts are already on record in writ petition with necessary assertions, we have allowed the amendment. Shri Ghare, learned Counsel for respondent No. 1 stated that as contents of petition are being changed, Respondent No. 1 should be permitted to file appropriate reply. However, we do not find it necessary. Amendment is accordingly allowed. Necessary amendment be carried out during the course of the day.

3. The petitioner is a registered Society under the Societies Registration Act, 1860, and its locus to maintain such petition has not been disputed by Respondent No. 1 or by Respondent No. 2. State of Maharashtra. The petitioners have stated that they have passed a resolution to challenge increase in transit fee by Respondent No. 1. They have pointed out that Akola Municipal Corporation has come into existence from 1.10.2001 and before that it was A. class Municipal Council. The recovery of Octroi has started after conversion of Municipal Council into Municipal Corporation and octroi has been imposed by the Corporation with effect from 1.12.2002. It is stated that imposition of octroi has been challenged in separate petition i.e. Writ Petition No. 4100 of 2002 which is already admitted for final hearing. The petitioners have contended that the octroi can be levied only if goods are imported for consumption, use or sale within municipal limits in view of provisions of Section 147 of the Act. They state that if the vehicle containing goods pass from one point to other point through Corporation limits, statute permits corporation to recover supervision charges/ transit fee. It is contended that initially when octroi was being levied by Municipal Council, the rate of transit fee was Rs. 2/-per vehicle and on 1.12.2002, when octroi was imposed by Municipal Corporation, it was Rs. 20/-per vehicle. It is contended that only because vehicle passes through municipal limits, such an amount of Rs. 20/-cannot be levied. It is further stated that on 28.3.2003, General Body of Akola Municipal Corporation passed resolution and increased transit fee from Rs. 20/-to Rs.50/-and said resolution along with increase has been assailed before us. It is stated that as it is fee, there has to be a proportionate relation between rate of fee and the service rendered or facility extended. As there is no quid pro quo, the petitioners prayed that said hike should be set aside. It is further contended that in view of provisions of Section 147 read with Section 466(1)(A)(f) of the Act, the supervision or transit fee is leviable only if goods are imported within city limits and thereafter are sought to be exported out of it. It is stated that thus resting of goods in municipal limit is sine qua non when goods merely pass through municipal limits without taking any halt or when the bulk is not broken, there cannot be any recovery of transit fee.

4. In this background, we have heard Shri Lohiya, learned Counsel for the petitioner -association, Shri Ghare, learned Counsel for respondent No. 1 and Shri Deopujari, learned AGP for respondent No. 2.

5. Shri Lohiya, learned Counsel, after narrating the facts as stated above has invited attention of this Court to the provisions of Section 147 and Section 466 of the Act and other relevant provisions. It is not the case of Municipal Council that vehicles on which supervision fee is imposed, unloaded their goods at any place within their limits. He contends that thus, the requirement of Section 147 of importing goods within Municipal limits for immediate export is not satisfied. He further states that the supervision fee contemplated by Section 147 is provided for in Section 466(1)(A)(f) and in Clause (f) also the same ingredients are required. He, therefore, contends that basically no supervision fee can be levied upon members of petitioner association who are not importing goods within corporation limits. In support of his contention, he has relied upon the judgment of the Hon'ble Apex Court in the case of Town Municipal Council v. Urmilla Kothari, reported at : [1977]2SCR660 .

6. By inviting attention to additional written submissions filed on behalf of Respondent No. 1, Shri Lohiya, learned Counsel has attempted to show that the quantum of fee at Rs. 50/-per vehicle being recovered is grossly disproportionate and excessive. He has pointed out from said additional submission that the total income of octroi department for the period from December 2002 to December 2003 is Rs. 18,45,00,733/-while income from supervision fee or transit fee is Rs. 3,99,53,166/-. He further points out that as against this, the entire expenditure of octroi department for the period of nine months from 1.12.2002 to 31.8.2003 is Rs. 90,67,997/-. He contends that therefore monthly expenditure of entire octroi department is not more than Rs. 10 lakhs, therefore, annual expenditure will be about Rs. 1,20,00,000/-. He argues that as against this annual expenditure of entire octroi department, recovery from supervision fee is more than 250% thereof i.e. roughly about Rs. 4 crores. He, therefore, contends that there is absolutely no justification or explanation for increasing the supervision fee from Rs. 20/-per vehicle to Rs. 50/-per vehicle. He has relied upon certain cases to point out that the fee in such circumstances must bare reasonable relationship and proportion to the expenditure incurred by Respondent No. 1 for providing the service or facility. As practically same cases are cited even by Respondent No. 1 in support of their arguments, we find it proper to refer to these cases at appropriate places. Shri Lohiya, learned Counsel further states that the explanation of Respondent No. 1 that it is spending said amount on various works like construction, maintenance and improvement of streets, is not legally valid. He contends that for said purpose the tax is already levied by State Government and is being collected by competent authority. He, therefore, argues that either the supervision fee or transit fee must be held to be not payable by the petitioners or then the hike should be quashed and set aside.

7. Shri Ghare, learned Counsel for respondent No. 1 has contended that Section 147 of the Act contains a deeming fiction and said deeming fiction is in relation to import. He contends that the entry point in fact at which vehicles of petitioner reports is the place of import and exit Naka from which it leaves the municipal limits is the other relevant point for consideration. He points out that provision of Section 147 is incorporated in statute book only to see that the transporters are not in a position to evade payment of octroi. He states that for said purposes, section itself permits imposition of supervision fee and that is also contemplated by Section 466(1)(A)(f). He has also invited attention to Section 127 which permits Municipal Corporation to impose octroi. According to him, in these circumstances, when power exists, the judgment of the Hon'ble Apex Court in the case of Town Municipal Council v. Urmilla Kothari, (supra) has no application. He points out the judgment of the Hon'ble Apex Court in the case of Municipal Corporation, Baroda v. Babubhai, reported at : [1990]185ITR255(SC) , to state that exactly identical issue has been considered therein by the Hon'ble Apex Court and he further contends that provisions considered are the same i.e. Section 147 and Section 466 of the Act. He, therefore, contends that controversy is concluded in view of said judgment which is directly on the point. He further invites attention to provisions of the Bombay Provincial Municipal Corporation Act, 1949, to point out various obligations and duties cast upon the Municipal Corporation by said Act. He contends that it is not necessary that supervision fee or transit fee recovered from the petitioner must be utilised for supporting the expenditure of providing the escort to the petitioners or for keeping supervision on their vehicle. He contends that such amount can also be spent on various other functions of Municipal Corporation which are entrusted to it and in para 6 of additional written submission those heads are pointed out. These heads pleaded are construction, maintenance and improvement of streets. He contends that in such circumstances, the argument of quid pro quo is totally misconceived. He has also relied upon certain cases to explain how the principle of quid pro quo has been evolved and is being considered.

8. Shri Deopujari, learned AGP appearing for respondent No. 2 adopts the arguments of Shri Ghare. He contends that in view of the express provision made in Section 147 and 466 of the Act, Respondent No. 1 is justified in charging supervision fee. He further points out that in petition itself, at one place, the petitioners have accepted that the supervision fee can be levied. He, therefore, states that there is no merit in the petition and petition needs to be dismissed. He further states that as resolution increasing the hike in transit fee has been validly passed, the State Government has rightly approved the same.

9. As the right of Respondent No. 1 to levy octroi is not in dispute, it is not necessary for us to go into the detailed provisions of Bombay Provincial Municipal Corporation Act, 1949. The only two provisions for consideration before us are Sections 147 and 466. Section 147 reads as under:

147. Articles imported for immediate exportation Until the contrary is proved any goods imported into the City shall be presumed to have been imported for the purposes of consumption, use or sale therein unless such goods are conveyed from the place of import to the place of export by such routes, within such time, under such supervision and on payment of such fees there for as shall be determined by the standing orders. Bare perusal of Section 147 shows that the deeming provision appearing is in relation to import for the purposes of consumption, use or sale within municipal limits and such presumption arises if goods are not immediately conveyed to the place of export. The time for such export is to be prescribed in standing orders to be framed by Respondent No. 1 for said purpose and it also permits Standing Orders to provide for supervision on such export and also for payment of such fee for that supervision. Section 466(1)(A)(f) reads as under:

466. Making of standing orders by Commissioner.

(1) The Commissioner may make standing orders consistent with the provisions of this Act and the rules and by-laws in respect of the following matters, namely, -

(A)(f) determining the supervision under which, the routes by which and the time within which goods intended for immediate exportation shall be conveyed out of City and the fees payable by persons so conveying the goods;. Clause (f) also therefore again shows that standing orders can be framed to determine the supervision under which and the routes by which and the time within which the export is to be effected and also it permits determination of fees payable by persons so conveying the goods.

10. The judgment of the Hon'ble Apex Court in Municipal Corporation, Baroda v. Babubhai, (supra) shows that the Hon'ble Apex Court has considered the challenge to Standing Order No. 3 framed by Municipal Corporation of Baroda under Section 466(1)(A)(f) read with Section 147 of the Bombay Provincial Municipal Corporation Act, 1949, i.e. the same Act by which the affairs of present Respondent No. 1 1 are regulated. In that judgment the Hon'ble Apex Court has held that the provisions of statute permit Municipal Corporation to collect supervision charges from Transporters for carrying the goods through Corporation limits under supervision of staff of Corporation without paying octroi. It is further observed that it is not a levy or an imposition of tax but is merely fee charged for privilege or services rendered to the payer and it satisfies the quid pro quo principle.

11. The other judgment on which the petitioners have placed reliance is in the case of Town Municipal Council v. M/s. Urmilla Kothari, (supra) which considers the provisions of Section 124 and Rule 26 framed under Karnataka Municipalities Act. The Larger Bench of the Hon'ble Apex Court has construed the opening words of Section 124 of that Act. Section 124(1)(2) and relevant portion of Rule 26 which have been construed by the Hon'ble Apex Court read as under:

Section 124 : Non-liability for octroi and refund of octroi on goods in transit (1) Any article or animal brought into the municipal limits for the purpose of immediate exportation may at the option of the importer not be subjected to levy of octroi if such article or animal be conveyed direct from the place of import to the place of export by such routes, within such time, and under such supervision as the municipal council may be resolution determine. For purposes of this sub-section the municipal council shall on payment of the prescribed fees issue promptly the necessary transport permits.

(2) When any article in respect of which octroi has been paid is exported from the municipal limits, in the same condition in which it was brought into or received from beyond the municipal limits, the amount of octroi paid shall, subject to such rules as may be prescribed, be refunded. Rule 26:

In case the person bringing the goods wishes to transport the goods at once beyond the limits of the municipality he shall do so only after obtaining a transport permit in Form IV, on payment of a fee of rupees two for each lorry and rupee one in other cases in the case of a city municipal council and rupee one for each lorry and fifty paise in other cases in the case of a town municipal council. The opening words of Section 124 have been found to be important by the Hon'ble Apex Court and the Hon'ble Apex Court has noticed that they imply process of importing into and exporting from the municipal limits of goods or animals and presuppose an element of repose and rest of the goods within the municipal limits. The Hon'ble Apex Court has also observed that in the facts of case before it, when iron ore is carried in the trucks of the respondent which merely pass through the areas which lie within the municipal limits and is not unloaded and reloaded at any place within the municipal area. The requirement of goods being brought into municipal limits for the purposes of immediate exportation was not satisfied. It is to be noted that the very same provision with which we are concerned has been construed by the Hon'ble Apex Court in its 1989 judgment (supra) and we, therefore, find that the controversy insofar as challenge to the power of Respondent No. 1 to levy supervision charges or transit fee is concerned, stands concluded against the petitioners and in favour of Respondent No. 1 by the judgment in the case of Municipal Corporation, Baroda v. Babubhai (supra).

12. In State of U.P. v. Sitapur Packing Wood Suppliers reported at : [2002]3SCR345 , the Hon'ble Apex Court has considered provisions of Rule 5 of U.P. Transit of Timber and Other Forest Produce Rules, 1978, framed under Forest Act, 1927. The Hon'ble Apex Court was considering challenge to transit fee and it has been observed that Rule 5 which prescribes fee payable for different class of pass was clearly regulatory in nature and therefore it was not necessary for the State Government to establish quid pro quo. The Hon'ble Apex Court has also noticed that the High Court was in error in holding transit fee to be invalid in absence of quid pro quo.

13. B.S.E. Brokers' Forum v. Securities and Exchange Board of India, reported at : AIR2001SC1010 , again holds that registration fee sought to be levied by Security and Exchange Board of India on stockbrokers was regulatory in nature. While so holding, in para 30, the Hon'ble Apex Court has approved its earlier judgment holding that in determining whether a levy is a fee or not emphasis must be on whether its primary or essential purpose is to render specific services to a specified area or class. It is also observed that a levy of fee does not cease to be a fee merely because there is an element of compulsion or coerciveness present in it and it is not necessary that such fee must have direct relation to actual service rendered by the authority to each individual who obtains the benefit of service. The element of quid pro quo in strict sense is not always a sine qua non for a fee in all cases. It has been held that the traditional concept of quid pro quo in a fee is undergoing transformation. Further, it is also observed that the fee must have relation to the services rendered, or the advantages conferred. In para 33, the Hon'ble Apex Court has held taking note of the human expectation of winning in a draw or a bid at the auction and becoming rich overnight mostly by the lower-middle class and the poor who invest their hard- earned money in such chit funds, levy to be a regulatory measure since the collection of such funds from such category of people will have to be monitored strictly. In para 35 of very same ruling, it has been also reiterated that such a levy should not be examined so minutely or be weighed in golden scales to discern any difference between the expenditure on administration of criminal and civil justice and it is not the requirement of law that such collection should exactly tally or correspond to the expenditure on administration of civil justice. In para 37 again, the same principles are reiterated by relying upon the judgment in Secunderabad Hyderabad Hotel Owners' Association v. Hyderabad Municipal Corporation, reported at : [1999]1SCR143 , and it has been observed that licence fees may be either regulatory or compensatory. In para 39, the Hon'ble Apex Court has considered the arguments of the petitioners that though the equivalent quid pro quo was not necessary, the amount of fees collected by said levy was excessive and in para 40 found that Board could point out that its requirement was far more than receipts to render the levy invalid.

14. In A.P. Paper Mills Ltd. v. Government of A.P. reported at : AIR2000SC3290 , again the same view has been taken.

15. In Krishi Upaj Mandi Samiti v. Orient Paper & Industries Ltd. reported at : (1995)1SCC655 , relied upon by Shri Lohiya, in para 21, the same principles have been laid down. However, it has been also observed that a good and substantial portion of the fee must, however, be shown to be expended for the purpose for which the fee is levied. It is also observed that though element of quid pro quo is not possible or even necessary to be established with arithmetical exactitude, the same must be established broadly and reasonably that the amount is being spent for rendering services to those on whom the burden of the fee falls. In para 20, it is observed by the Hon'ble Apex Court that there should be reasonable relationship between the levy of the fee and the services rendered. He has also invited our attention to the Constitutional Bench judgment of the Hon'ble Apex Court in the case of Jindal Stainless Ltd. v. State of Haryana reported at 2006(6) ALL MR (SC) 75. In para 40, the Hon'ble Apex Court has held that the compensatory tax is levied on individual as a member of a class whereas a fee is levied on an individual as such. Reimbursement or recompense have been held to be the closest equivalence to the cost incurred by the provider of the services/ facilities. In para 43, the Hon'ble Apex Court has held that in the case of a fee., the basis is the special benefit to the payer (individual as such) based on the principle of equivalence.

16. Thus, from all judgments which are cited by both sides before us, it follows that the quantum of fee has to have some correlation and proportion with the service/ benefit being provided. Though the existence of quid pro quo need not be established with mathematical perfection, the reasonable relationship between the two is essential. From the facts which are disclosed above, it is apparent that entire expenditure of octroi department annually at the relevant time was not more than Rs. 1,20,00,000/. The income earned by octroi department from octroi itself was Rs. 18,45,00,733/-and from supervision fee or transit fee it was Rs. 3,99,53,166/-. It is no doubt true that octroi is one of the important source of income for municipal corporation and revenue so generated is being utilised by municipal corporation for discharge of its other obligations. However, supervision fee or transit fee is not a tax and as has been contended by Respondent No. 1, it is at the most a regulatory fee. From the scheme of Section 147, it appears to be a regulatory fee. However, entire annual expenditure of octroi department is being met by the quantum of supervision fee recovered by Respondent No. 1. The total income of octroi department from the supervision charges is Rs. 3,99,53,166/-while the expenditure of entire octroi department is Rs. 1,20,00,000/-. What is the expenditure of octroi department for making the arrangements for supervision is not disclosed anywhere by Respondent No. 1. But as is apparent from both affidavits it is less than Rs. 1,20,00,000/-. Thus, the revenue fetched through transit fee or supervision charges is 333% of the annual expenditure of the octroi department. It is, therefore, apparent that the element of quid pro quo is totally lacking or in any case levy exceeds many fold in the facts of present case. The supervision charge before hike impugned before us was Rs. 20/-per vehicle. It is clear that even by continuing with same rate of supervision charges, the entire annual expenditure of octroi department could have been fulfilled. We, therefore, do not see any reason or justification in hike of supervision charges or transit fee. The stand of Municipal Corporation that it utilises the amount generated for maintenance of Roads,Bridges etc. cannot be accepted as sufficient justification because such fee is not being recovered from other users of roads. Moreover Section 148C read with Section 63(18) enable Municipal Corporation to levy street tax for said purpose on lands and buildings. Its incident is not on goods or movement of goods within municipal limits. Section 142 of the Act enables Municipal Corporation to levy tax on vehicles used in city for conveyance of passengers or goods. Thus levy of supervision fee cannot be justified for said purpose and that too from persons on whom these taxes cannot be imposed. Such a levy cannot be construed as a tax in the disguise of fee/ charge.

17. In view of this finding, we hold the hike from Rs. 20/ to Rs. 50/-to be unwarranted and unjust. Because of said hike, the charge or fee is losing its character as such and is becoming expropriator in nature and an undue burden upon the members of the petitioner association. Accordingly, writ petition is partly allowed. The other prayer made for holding the Standing Order No. 5 and Rule 2 to be ultra-vires is rejected.

18. At this stage, Shri Lohiya, learned Counsel has invited our attention to order dated 19.4.2004, by which while refusing interim relief, this Court observed that in case writ petition is allowed, Respondent No. 1 would be required to refund the fees with nominal interest which will be decided at the time of final hearing of the petition. Shri Lohiya, accordingly requests that the direction to refund the entire amount collected by Respondent No. 1, with interest should be issued. Shri Ghare, learned Counsel for respondent No. 1 states that the entire amount received by Municipal Corporation has been spent by it for various development works including maintenance of roads and streets and members of the petitioners are also benefitted thereby. He, therefore, contends that this is not a case in which recovery should be permitted.

19. We find that in view of the earlier order dated 19.4.2004, the petitioners are entitled to refund and accordingly we direct Respondent No. 1 to refund the amount in terms of said order as early as possible and in any case within a period of four months from today. If the amount is not so paid within four months, an interest of 6% per annum would be required to be paid by Respondent No. 1 to the petitioner association. The petitioners shall be free to recover the same in accordance with law. The eligible members of the petitioner association shall apply to Respondent No. 1 for refund through the petitioner with proof of payment of transit fee/ supervision charges within a period of two months from today and after verification thereof, Respondent No. 1 shall refund to such individual, the amount as is found due and payable to him.

20. Shri Ghare, learned Counsel for respondent No. 1 at this stage states that the order passed today should be stayed for a period of four weeks to enable Respondent No. 1 to approach the Hon'ble Apex Court. The request is opposed by Shri Lohiya, learned Counsel for the petitioners. However, considering the situation, we are inclined to suspend the today's judgment for a period of four weeks subject to the arrangement as ordered in our earlier order dated 19.4.2004. The said arrangement shall continue for a period of four weeks. This order of suspension shall cease to operate automatically after a period of four weeks.

21. Accordingly, rule is made absolute in above terms with no order as to costs.