SECUNDERABAD HYDERABAD HOTEL OWNERS ASSOCIATION AND ORS. versus HYDERABAD MUNICIPAL CORPORATION, HYDERABAD

Citation: [1999] 1 S.C.R. 143 · Decided: 20-01-1999 · Supreme Court of India · Bench: SUJATA V. MANOHAR · Disposal: Dismissed

Cited by 2 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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SECUNDERABAD HYDERABAD HOTEL OWNERS 
ASSOCIATION AND ORS. 
v. 
HYDERABAD MUNICIPAL CORPORATION, HYDERABAD 
ANDANR. 
JANUARY 20, 1999 
[MRS. SUJATA V. MANOHAR AND A.P. MISRA, JJ.] 
Municipalities : 
Hyderabad Municipal Corporation Act, 1955: Sections 169, 174, 197, 
198, 230, 52l(l)(e) and 622. 
A 
B 
c 
Licence fee-Trade licence-For miming a lodging house, hote~ res-
taurant, coffee house, tea stall, eating house, soft drink stall, ca[ eteria, tiffin 
room etc.-lncrease of-By orders dated 6.4.1981and25.7.1992 issued under D 
Ss. 521(1)(e) a11d 622:-Taxorfee--Municipal Co1poration required to inspect 
the premises in question to ensure that co11ditions of licence were complied 
with and supervising sale of foodstuff and to ensure cleanliness, garbage 
removal and maintenance of hygiene in these premises-Licence fee was 
credited to the common fund of the Corporation but the fees were eannarked E 
for the purposes for which they were collected under R. 6 of Budget Estimates 
Rules-lfeld, Under such circumstances, levy is a fee and not a tax-Intention 
is to levy the fee for regulatory and compensatory purposes-Contention that 
levy is a tax in the guise of fee, rejected-Further, contention that non-com-
p li an c e with Ss. 197 and 198 rendered the levy invalid, also 
"' 
rejected-Co1poration's power to impose conse1vancy tax under S. 230 does 
F 
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not affect nature of the said fee-No quid pro quo is necessary for levying 
such fee if the fee is charged for regulatilig such activity but it cannot be 
excessiv~n facts, fee is not excessive. 
Fee or tax-Determination of-Depends on the nature of licence G 
granted--Regulatory fee-Creation of a separate fund-Not necessary--Ear-
marking the amount for its purposes is sufficient-Hyderabad Municipal 
Corporation Estimate Rules, 1968, R. 6. 
Lice11ce fee-For rnnning a lodging or eating houses etc.-Rate 
of-Fixing of-On basis of rent of premises concemed-Validity of-Held, H 
143 
144 
SUPREME COURT REPORTS 
[1999) 1 S.C.R. 
A Rent does not have a nexus with se1vice rendered by Municipal Corpora-
tion-Hence classification of premises on basis of rent has connection with 
quantum off ee charge~Also doubling off ees after nine years, not exces-
sive-Constitution of India 1950, Art, 14. 
The respondent-Corporation increased the licence fee for a trade 
B licence for running a lodging house, hotel, restaurant, coffee house, tea 
stall, eating house, soft drink stall, tiffin room etc. levied under Section 
622 of the Hyderabad Municipal Corporation Act, 1955 by orders dated 
6.4.1981and25.7.1992 issued under Sections 521(1)(e) and 622 of the Act. 
The petitioners had filec'. the present writ petition before this Court 
C challenging the aforesaid increase in the licence fee. 
On behalf of the petitioners it was contended that there was no quid 
pro quo between the licence fee charged by the respondent and the services 
rendered to the traders in question; that the amount collected by way of 
licence fee was credited to the common fund of the Municipal Corporation 
D under Section 169 of the Act to be utilised for different purposes under 
Section 174; and, therefore, without following the procedure laid down in 
Sections 197 and 198 the increase in the licence fee was invalid; that even 
if the levy was a fee the quantum of ree levied was excessive and that a 
licence fee based on the rent payable in respect of the premises concerned 
E was unreasonable as the rent had no nexus with the services rendered by 
the Corporation. 
Dismissing the petition, this Court 
HELD : 1.1. The question, which requires consideration, is whether 
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the increased licence fee under the orders of 1981 and 1992 is in the nature 
of a tax or a fee. In order to answer this question it is necessary to look at 
the nature of the licence which is granted. The hotel licence which is issued 
to each of the traders is subject to the conditions set forth in the bye-laws 
of the Municipal Corporation relating to the regulation of eating houses 
G 
or hotels mentioned in Section 521 of the Hyderabad Municipal Corpora-
tion Act, 1955. These conditions are reproduced in the licence. These 
conditions also require the respondent- Corporation to inspect the 
premises in question in order to ensure that the conditions are complied 
with. It also has the responsibility for inspecting and supervising the sale 
of foodstuff to ensure that all the conditions of licence pertaining to the 
H preparation and sale of such

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