1990 (8) TMI 369 - HC - VAT and Sales Tax

Court quashes fee increase, orders refund, citing constitutional violations.

The court quashed the impugned order dated August 25, 1983, and directed the State to refund the enhanced tender form fee paid by the petitioners. The ... - Issues Involved:1. Arbitrary and unreasonable enhancement of tender form fee.2. Violation of Article 19(1)(g) of the Constitution of India.3. Violation of Article 14 of the Constitution of India.4. Levy of tax in the guise of a fee without the authority of law.5. Lack of rational basis for the revision of tender form fee.Detailed Analysis:1. Arbitrary and unreasonable enhancement of tender form fee:The petitioners, manufacturers of spun concrete pipes, challenged the drastic revision of tender form fees and registration fees by the State of Karnataka. The fee was increased from Rs. 100 to a range of Rs. 100 to Rs. 5,000 for fixed quantity and Rs. 1,000 to Rs. 15,000 for rate contract. The petitioners contended that this enhancement was arbitrary and unreasonable, as the tender form fee is intended to cover only the cost of the forms. The court observed that the revised fee was not cost-based or service-oriented and lacked any reciprocal service to the petitioners, indicating that the fee was essentially a tax.2. Violation of Article 19(1)(g) of the Constitution of India:The petitioners argued that the impugned order violated their right to practice any profession or to carry on any occupation, trade, or business under Article 19(1)(g) of the Constitution. They claimed that the exorbitant fee was oppressive and prohibitive, indirectly eliminating them from participating in the tender process. The court found that the unreasonable enhancement of the fee imposed an undue burden on the petitioners, thus infringing their fundamental rights under Article 19(1)(g).3. Violation of Article 14 of the Constitution of India:The petitioners also contended that the impugned order violated Article 14, which guarantees equality before the law. They argued that the high fee imposed an unreasonable restriction on those unable to pay, thereby discriminating against them. The court agreed, stating that the arbitrary and prohibitive fee shut the door to potential participants, thus violating the principle of equality enshrined in Article 14.4. Levy of tax in the guise of a fee without the authority of law:The petitioners argued that the State had no authority to levy a tax disguised as a fee without legislative backing, thus transgressing their fundamental rights. The court noted that the impugned order aimed at 'additional resource mobilisation' and lacked any indication of services rendered in return for the fee. The court held that the fee was essentially a tax and that the State had no power to impose such a tax without legislative enactment, violating Article 265 of the Constitution.5. Lack of rational basis for the revision of tender form fee:The petitioners contended that there was no rational basis for the revision of the tender form fee. The court found that the State failed to provide any material or justification for the drastic increase in the fee. The court observed that the fee was not correlated to the cost of the tender forms or any services rendered, thus lacking a rational basis.Conclusion:The court quashed the impugned order bearing No. CI 17 SPD 83 dated August 25, 1983, and directed the State to refund the enhanced tender form fee paid by the petitioners. The court held that the impugned order was arbitrary, unreasonable, and violative of Articles 14 and 19(1)(g) of the Constitution of India. The court also found that the fee was essentially a tax imposed without legislative authority, thus unsustainable. The writ petitions were allowed with no order as to costs.