TaxTMI 
TaxTMI 
1990 (8) TMI 369
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....e considered various measures for additional resource mobilisation. One of these being revision of the fees charged by the Department of Stores Purchase. The revenue of the Department of Stores Purchase consists of tender fees, registration fees and miscellaneous receipts. The present rates were revised in March, 1980. Government consider it necessary to revise these rates. ORDER Sanction is accorded for the revision of the rates charged by the Department of Stores Purchase as indicated below with immediate effect. (A) Tender form fee for Fixed quantity: 1.. Upto Rs. 50,000 Rs. 100 2. Rs. 50,000 to Rs. 1 lakh Rs. 200 3. For Rs. 1 lakh and above Rs. 400 4. For every additional Rs. I lakh Rs. 100 with overall ceiling limit of Rs. 5,000. (B) Tender form fee for rate contract: 1. For sale of tender forms for rate contract upto Rs. 1 lakh Rs. 1,000 2. Rs. 1 lakh to Rs. 10 lakhs Rs. 2,500 3. Rs. 10 lakhs to Rs. 25 lakhs Rs. 5,000 4. Rs. 25 lakhs to Rs. 50 lakhs Rs. 7,500 5. Rs. 50 lakhs to Rs. 1 crore Rs. 10,000 6. Rs. 1 crore and above Rs. 15,000 In the case of registered small-scale industrial units in Karnataka, there will be a concession of 50 per ....
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....by the proceedings of the Government of Karnataka. Thereafter, by proceedings of respondent I dated August 25, 1983, came about a drastic revision of tender form fee and registration fee. The price of tender forms was enhanced from Rs. 100 to a rate ranging between Rs. 100 to Rs. 5,000 for fixed quantity and Rs. 1,000 to Rs. 15,000 for rate contract. However, in the case of registered small-scale industrial units in Karnataka, a concession was given to the extent of 50 per cent of the prescribed fee. Since the tender form fee as commonly understood is intended to cover only the cost of the forms, the abnormal enhancement of the price caused much heartburn among the petitioners and, therefore, they have challenged the impugned order. 5.. The case of the petitioners is that the impugned order is not only arbitrary but also unreasonable and that the reason advanced for revision and enhancement of the tender form fee is impermissible in law, unconstitutional and violative of article 19(1)(g) of the Constitution of India for the reason that the price under the impugned order is oppressive and prohibitive. The second contention is that the impugned order infringes article 14 of the Co....
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....us receipts. The first revision took place in March, 1980, enhancing the tender form fee from Rs. 50 to Rs. 100. The second revision took place on August 25, 1983. It is also seen that the registration fee also underwent an increase besides application form fee. The registration fee for small-scale industrial units was increased to Rs. 500 and for others to Rs. 750 whereas the application form fee was increased from Rs. 5 to Rs. 20. Thus it is seen that there was an all-round revision and drastic increase in the fee payable to the Department of Stores Purchase under the impugned order. Annexure A is the notice dated August 13, 1987, served on the petitioners, the relevant portion of which is extracted below: "Sealed tenders in duplicate superscribed with enquiry number and closing date will be received by the Director, Stores Purchase Department up to 3 p.m. on September 15, 1987 for the supply of R.C.C. pipes and collars (non-pressure) on rate contract basis. Intending tenderers may on application to the Director, Stores Purchase Department, 17th Floor, Public Utility Building, M.G. Road, Bangalore-1, obtain the requisite tender forms on which tenders should be submitted. Ap....
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....f valid sales tax and income-tax clearance certificates, the applications would be rejected outright. By these conditions, it is abundantly clear that the first step contemplated in the process is the mandate to the intending tenderer to apply for the requisite tender forms by paying the price fixed on the same, failing which the application for supply of tender forms would be rejected outright. In the notice it is also made clear that any quotation submitted without purchasing the prescribed tender forms and without the accompanying of earnest money deposit of Rs. 1,500 is liable to be rejected. It is thus seen that the petitioners are subjected to compulsory exaction of money in so far as the payment of tender form fee is concerned. In these cases, we are not concerned with the tenders as such, but we are only concerned with the reasonableness of the price fixed for the tender forms and the right of the petitioners to participate in the tenders. 10.. The preamble to the impugned order clearly demonstrates that the payment of revised tender form fee and imposition of the same on the intending tenderers is for the collateral purpose of "additional resource mobilisation" in the w....
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....onstitution. Reliance in this connection may be placed on the observations of this Court in Radha Krishna Agarwal v. State of Bihar [1977] 3 SCC 457; AIR 1977 SC 1496. It appears to us, at the outset, that in the facts and circumstances of the case, the respondent-company, IOC is an organ of the State or an instrumentality of the State as contemplated under article 12 of the Constitution. The State acts in its executive power under article 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under article 14 can be checked. See M/s. Radha Krishna Agarwal v. State of Bihar [1977] 3 SCC 457; AIR 1977 SC 1496 (at page 466 of SCC; at pages 1499-1500 of AIR) but article 14 of the Constitution cannot and has not been construed as a charter for judicial review of State action after the contract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions...... In case any right conferred on the citizens which is sought to be interfered, such action is subject to a....
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....rbitrary price shuts the door to the aspirants who otherwise would have participated in the tender by paying a reasonable price for the tender forms. It is not only significant but also relevant to note that no tender could be offered without purchasing the forms at a rate so outrageous in its defiance of logic or of acceptable standards that no reasonable person who had applied his mind could have arrived at. It is against this background that I am prompted to observe that the cry of public interest is the summons to relief through juristic activism and that irrationality is a valid basis for judicial review of State action. 13.. Sovereign people rely heavily on courts today to breathe life into the words of the Constitution. Rule of law is the accepted foundation. However, realism tells that what matters is how the wheel turns and not a theory that makes a Government free or not free. How truly it is said that democracy has no theory but only a theorem and that principles of democratic Government may be described by a single proposition but there is no single means to achieve them. Between the State and the citizen there is no place for arbitrariness or authoritarian action wh....
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....in a large sense, any oppression under colour of right. In a strict sense, the taking of money by any officer under colour of his office either where none at all is due, or not so much is due or where it is not yet due." The compulsory exaction of an exorbitant fee on tender forms in my opinion, tends to fall within the ambit of extortion, as it is not only irrational but also confiscatory not being refundable. In recent years, a new doctrine has taken roots in the thinking of courts in administrative law called the "hard look doctrine". [See C.S. Diver's "Policy making Paradigms in Administrative Law" [1981] Harvard Law Review and also Verkuil's "Review of Informal rule making".] The said doctrine which has set a new trend of judicial activism has assumed the form of a more exacting review of the rational basis of discretionary decisions. It has been described as "a distinct move from an incremental approach to one of comprehensive, rational planning, to a synoptic rather than a piecemeal approach and the threshold requirement of rational reasonableness has given way to the 'hard look doctrine". This lethal sounding devise has been characterised as a reluctance of the cou....
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.... imposed under statutory power without the tax payer's consent and the payment is enforced by law-Vide 'Lower Mainland Diary v. Crystal Dairy Ltd.' [1933] AC 168. The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the tax payer and the public authority. (See Findlay Shirras on 'Science of Public Finance', Vol. 1, page 203). Another feature of taxation is that as it is a part of the common burden, the quantum of imposition upon the tax-payer depends generally upon his capacity to pay. Coming now to fees, a 'fee' is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service, though in many cases t....
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....ic difference between the tax and fees and as said by Seligman, the taxing power of a State may manifest itself in three different forms known respectively as special assessments, fees and taxes. (Ibid. page 406). Our Constitution has, for legislative purposes, made a distinction between a tax and a fee and while there are various entries in the legislative Lists with regard to various forms of taxes, there is an entry at the end of each one of the three Lists as regards fees which could be levied in respect of any of the matters that is included in it. The implication seems to be that fees have special reference to governmental action undertaken in respect to any of these matters." Applying the ratio of the decision in regard to the distinction between fee and tax, the logical conclusion is that in the instant cases the fee charged for the supply of tender forms is nothing but tax. 19.. In Kewal Krishan Puri v. State of Punjab [1980] 1 SCC 416 at 425, a Bench of five Judges of the Supreme Court, while adopting the view taken by the Supreme Court in AIR 1954 SC 282 (Commissioner, Hindu Religious Endowments v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt) which is ref....
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.... absence of uniformity is not a criterion on which alone it can be said that the levy is in the nature of a tax. As a fee is regarded as a sort of return or consideration for services rendered, it is necessary that the levy of a fee should be correlated to the expenses incurred in rendering the services. It is also generally necessary that the payments demanded for rendering services must be set apart or specifically appropriated for that purpose and that they should not be merged in the general revenue of the State to be spent for general public purposes. It may not, however, be possible to prove in every case that the fees collected always approximate to the expenses that are incurred in rendering the particular kind of services or in performing any particular work for the benefit of certain individuals." In the impugned order, the object of collecting the fee is stated as a measure for additional resource mobilisation. Applying the principle laid down in the above cases since the fee collected is not set apart or specifically appropriated for rendering services to the payers but is merged in the general revenue of the State, the inevitable conclusion is that what is collected....
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....s essentially a question of fact. Prima facie, the levy appears to be excessive even if the State can be said to be rendering some service to the licensees. The State ought to be in possession of the material from which the correlationship between the levy and the services rendered can be established at least in a general way. But the State has not chosen to place those materials before the court. Therefore, the levy under the impugned rule cannot be justified." It is to be pointed out that the State in these cases has not been able to substantiate or demonstrate what service is being rendered to the petitioners in lieu of the fee collected, by placing material in support. Applying the principle laid down in the above case, the finding is that the impugned levy is not justified. 22.. In Hingir-Rampur Coal Co. Ltd. v. State of Orissa AIR 1961 SC 459, the Supreme Court while answering the question whether the levy imposed amounted to a fee relatable to entry 23 read with entry 66 in List II of the Constitution said: "Before we deal with this question it is necessary to consider the difference between the concept of tax and that of a fee. The neat and terse definition of tax ....
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....ts would have to scrutinise the scheme of the levy very carefully and determine whether in fact there is a co-relation between the service and the levy, or whether the levy is either not co-related with service or is levied to such an excessive extent as to be a pretence of a fee and not a fee in reality. In other words, whether or not a particular cess levied by a statute amounts to a fee or tax would always be a question of fact to be determined in the circumstances of each case. The distinction between a tax and a fee is, however, important, and it is recognised by the Constitution. Several entries in the three Lists empower the appropriate Legislatures to levy taxes; but apart from the power to levy taxes thus conferred each List specifically refers to the power to levy fees in respect of any of the matters covered in the said List excluding of course the fees taken in any court. ....................... It is true that when the Legislature levies a fee for rendering specific services to a specified area or to a specified class of persons or trade or business, in the last analysis such services may indirectly form part of services to the public in general. If the special service....
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....e essential character of the impost is that some special service is intended or envisaged as a quid pro quo to the class of citizens which is intended to be benefited by the service and there is a broad and general correlation between the amount so raised and the expenses involved in providing the services, the impost would partake the character of a 'fee' notwithstanding the circumstance that the identity of the amount so raised is not always kept distinguished but is merged in the general revenues of the State and notwithstanding the fact that such special services, for which the amount is raised, are, as they very often do, incidentally or indirectly benefit the general public also. The test is the primary object of the levy and the essential purpose it is intended to achieve. The correlationship between the amount raised through the 'fee' and the expenses involved in providing the services need not be examined with a view to ascertaining any accurate, arithmetical equivalence or precision in the correlation; but it would be sufficient that there is a broad and general correlation. But a fee loses its character as such if it is intended to and does go to enrich the general reven....