THE MUNICIPAL COUNCIL, MADURAI versus R. NARAYANAN ETC.

Citation: [1976] 1 S.C.R. 333 · Decided: 18-08-1975 · Supreme Court of India · Bench: A.N. RAY · Disposal: Dismissed

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

Judgment (excerpt)

A 
B 
• 
_j 
• 
c 
i.,. .. 
D 
E 
....,, 
F 
I 
G 
H 
THE MUNICIPAL COUNCIL, MADURAI 
v. 
R. NARAYANAN ETC. 
August 18, 1975 
[A. N. RAY, C.J., K. K. MATHEW, V. R. KRISHNA IYER 
ANDS. M. FAZAL, ALI, JJ.l 
333 
Madras District Municipalities Act, 1920, s. 321(2)-Licence fee on hoteliers-
lf can be treated a'> tax. 
' 
The appellant increased the licence fee imposed on hoteliers respondents 
under s. 321(2), Madras District Municipalities Act, 1920, and they challenged 
the increase.· The appellant justified the increase on the basis that the fee under 
the section is a tax and falls u1i.der "tax on land and building" in Entry 49·~ List 
II. VII Schedule of the Constitution. 
The High Court held in favour of the 
respondents: 
Dismissin~ the appeal to this Court, 
HELD : ( 1) The appellant would be competent to impose a prop~rty tax a.t 
any oarticular rate it chooses, the user of the land and building as a restaurant 
or hotel furnishing sufficient nexu~ for the legislature to impose a tax. 
[339H, 340A] 
Ajoy Kumar v. Local Board [1965] 3 S.C.R. 47, referred to. 
(2) But the fee imposed under s. 321(2) in this case is not a tax. 
[336G] 
(a) Section 321(2) authorises the collection of a fee in contradiction to 
tax. 
[335B] 
(b) Section 321 is in a part of the Act different from the part dealing 
with taxation. 
Wh~.Je the nomenclature of the levy or the location of 
a section in the Act is not conclusive. they are relevant factors. for 
deciding whether the. fee impos-ed is a tax or not. 
[335-CD] 
Liberty Cinerna Case [1965] 2 S.C.R. 477, referred to. 
(c) Section 78(1A) author'ses the levy of property tax. 
Section. 78(3) 
contains the mandatory procedural prescriptions for imposing taxes. 
When the legislature __ has carefully provided in the sub-section for 
previous invitation and consideration of objiections to enhancement 
of tax levies, resort to s. 321(2) to impose a tax as a fee would frus .. 
trate the processual protection written into the la-w in regard to fiscal 
measures. 
[338 BCE] 
(d) Schedule V with which s. 321 is directly linked sets out a number 
of petty occupations all of which, theoretically cannot be carried on 
except on land or in buildings. 
If the licence-fee ~n s. 321 (2) is 
read as land tax the fee in relation to every item of activity set out 
in the Schedule would be tax on the basis of the trivial activity 
furnishing the legal nexus between the tax and the land. 
But, it 
would. be straining the lanE?,uage to justify the imposition of a tax 
on the land, on the basis of such a flimsy or casual connection. 
[340C-E] 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1656 to 1659 
of 1973. 
Appeal by special leave from the judgment and Order dated the· 
29th September, 1972 of the Madras High Court in Writ Appeals Nos. 
191, 23, 24 & 190 of 1968 respectively. 
S. Chllllaswamy and K. Hingorani, for the appellant. 
8-L839SupCl/75 
334 
SUPREME COURT REPORTS 
[1976) l S.C.R. 
A. K. Sen, A. V. Ranganf and A. Subashini, for the respondents. 
The Judgment of the Court was delivered by 
KRISHNA IYER, J.-The die-hard 'tax'-'fec' dilenima survives, as 
these appeals, by special leave, attest, long after this Court has dis-
pelled the fiscal-legal confusion on the point in a series of rulings. 
The cases before us were provoked by a sudden escalation of licence 
'fee' imposed on all hoteliers by the common appeilant, the Madurai 
Municipal Council (now it is a Corporation, but that makes no differ-
ence) (Council, for short). The scale of fees which, perhaps, merdy 
defrayed the cost of issuing the licence, was moderate to begin with 
\afid paid periodically by the respondents wlho run hotels within the 
. municipal limits; but their present grievance is that the resolution of 
December 28, 1965, whereby a sharp spurt in the rates of. fee was 
brought about, bas been tainted with 'unconstitutionality'. 
The authority, to justify the levy qua fee, must render some special 
services to the category from whom the amount is exacted and the 
total sum so collected must have a reasonable correlation to the cost 
of such services. 
Where these dual basic features· are absent, 
you 
cannot legally claim from the licensee under the label 'fee'. 
This Court has, as late as the Salvation Army Case( 1) set out the 
tests. beyond doubt. 
When the respondents (writ-petitioners) chal-
lenged the fee raise, the plea in defence first was that the impost was 
a fee strictly so called, that it was requited by 

Excerpt shown. Read the full judgment & AI analysis in Lexace.