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Lala Jagdish Prasad ... v. Administrator Munici...
Judgment Summary — Dwivedi, J.
Factual and Procedural Background
These petitions, arising from similar facts and legal questions, were heard together and disposed of by a common judgment. The petitioners are owners of lands and buildings within the municipal limits of Saharanpur. The Saharanpur Municipal Board (the Board) required them to pay water-tax assessed at the rate of 10% on the annual valuation of lands and buildings. The Board imposed the water-tax with effect from 1 January 1957 and made assessments for different periods on the basis of quinquennial assessment lists of buildings and lands (for periods ending 31 March 1957 and beginning 1 April 1957 respectively). No separate water-tax assessment list was prepared; the Board relied on the land-and-building assessment lists and maintained that Sections 142 and 143 of the U.P. Municipalities Act do not require a separate water-tax assessment list. The petitioners challenged the legality and constitutionality of the municipal demand on multiple grounds. The petitions were ultimately dismissed and each petitioner was ordered to pay Rs. 201 to the Municipal Board, Saharanpur as costs. The order concluded with the concise disposition: "Petition dismissed."
Legal Issues Presented
- Whether Sections 141–146, 142 and 143 of the U.P. Municipalities Act required the Board to prepare and publish a separate assessment list specifically for water-tax, distinct from the assessment list for land-and-building tax.
- Whether the petitioners had locus standi to challenge the water-tax on the ground that some persons who did not use Board-supplied water were nonetheless assessed.
- Whether the Board's imposition of water-tax contravened Clause (b) of Section 129 of the Act by not being imposed solely to defray expenses connected with municipal water-works (i.e., whether the levy was in substance a revenue-raising measure rather than being earmarked for water-works).
- Whether Clause (x) of Section 128(1) of the Act (authorising water-tax) was beyond the legislative competence of the U.P. Legislature after the commencement of the Constitution (i.e., whether it was ultra vires having regard to the entries in the Seventh Schedule).
- Whether the water-tax authorised by Section 128(1)(x) is to be characterised as a "tax" or as a "fee" for the purposes of Entries 5, 17 and 66 of List II of the Seventh Schedule to the Constitution.
- Whether the provision in Section 129 delegating authority to the State Government by rule to fix the radius (beyond which water-tax would not be imposed) amounted to an improper delegation of essential legislative power to the executive.
Arguments of the Parties
Petitioners' Arguments
- The Board was required to prepare and publish a separate water-tax assessment list under Sections 141–143 (and related provisions), and failure to do so rendered the assessments invalid.
- The water-tax included persons who did not use water supplied by the Board's water-works; therefore imposition and assessment of the water-tax was invalid.
- The water-tax was not imposed solely for defraying expenses of municipal water-works (as required by Clause (b) of Section 129) but was being used to increase municipal revenues.
- Clause (x) of Section 128(1) (authorising water-tax) was beyond the competence of the U.P. Legislature after the Constitution commenced (Entries in List II do not support it).
- The power given by Section 129 to the State Government (by rule) to fix the radius was an impermissible delegation of essential legislative power to the executive.
Respondent (Board / Counter‑Affidavit) Position
- The assessments for the relevant periods were made on the quinquennial assessment lists of buildings and lands; no separate water-tax list was required by Sections 142 and 143.
- The Board published proposals and rules regarding water-tax in September 1955 and invited objections; only a small number of objections were filed and some were late; objections were considered and rejected (Administrator's order dated 23 February 1956).
- The Board provided factual and financial material: Government sanctioned a loan of Rs. 39,50,000 for the water-works repayable in thirty instalments with 4½% compound interest; the Board had borrowed Rs. 29,50,000 so far; estimated annual instalment for full loan would be Rs. 2,34,347; actual and estimated water-works expenditure and receipts for specified periods were provided in the counter-affidavit to show that receipts were to be applied to water-works expenses.
- The Board denied that the water-tax was imposed to enhance revenue and contended that receipts were earmarked for water-works as required by Clause (b) of Section 129.
- The U.P. Municipalities Act was enacted in 1916 when the provincial legislature had plenary powers and the provision authorising water-tax has been continued in force by successive constitutional provisions (Sections of Government of India Acts, Indian Independence Act and Article 372), making its validity on the ground of want of legislative power not maintainable.
- The State Government's rule-making power to fix the radius was invoked and rules (Rule 8) had proposed a radius (600 ft.); the statutory process for framing proposals, publishing them, inviting objections and sanctioning rules under Sections 131–135 had been followed, which provided procedural safeguards and a check on the rule-making power.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sheo Shanker v. State of Madhya Pradesh, A.I.R. 1951 Nag. 58 80 | Authority recognising continuity or validity of pre-constitutional provincial enactments continued under transitional provisions. | Used to support the proposition that the U.P. Municipalities Act (enacted 1916) remained in force and its constitutionality could not be attacked on the ground of want of legislative competence after the Constitution commenced. |
| Sagar Mal v. The State, A.I.R. 1951 All. 816 817 | Authority on continuity or validity of pre-constitutional enactments (as cited alongside others). | Relied upon together with other authorities to show that the municipal enactment survived constitutional changes and is not open to challenge on legislative competence grounds. |
| Binoy Bhusan v. State of Bihar, A.I.R. 1954 Pat. 346 | Authority on continuation/validity of pre-Constitution provincial legislation. | Referenced to support the continuity and validity of the U.P. Municipalities Act provisions. |
| Kanpur Oil Mills v. Judge, Sales Tax, A.I.R. 1955 All. 99 104 | Authority cited in the context of continuity or competence of provincial legislation. | Cited in the group of authorities the court relied on to hold that the Municipalities Act provision was not open to challenge on the ground of want of legislative power. |
| State v. Yash Pal, A.I.R. 1957 Punj. 91 92 | Authority cited in support of continuity/validity of legislation. | Included among decisions indicating the impugned enactment had been validly continued. |
| R.L. Aurora Ram Ditta Mai v. State of Uttar Pradesh, A.I.R. 1958 All. 126 131 | Authority cited regarding validity/continuity of pre-constitutional provincial enactments. | Relied upon with other cases to demonstrate that the 1916 Act remained a valid source of power. |
| The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar, 1954 A.I.R. S.C. 282 | Supreme Court discussion distinguishing taxes from fees and identifying when a levy is a tax (absence of quid pro quo / not earmarked). | Adopted as part of the test to distinguish tax from fee; used to evaluate whether water-tax is in substance a fee or a tax. |
| Mahant Sri Jagannath Ramanuj Das v. The State of Orissa (Ibid. p. 1046) | Supreme Court authority on distinguishing fee from tax (application of the quid pro quo and earmarking test). | Relied on for the two-element test (service rendered/quid pro quo and earmarking of proceeds) that the court applied to characterize the water-tax. |
| Rati Lal Pana Chand Gandhi v. State of Bombay (Ibid. p. 1055) | Supreme Court authority elaborating the fee-vs-tax distinction and the requirement of co-relation between levy and expenses for rendering services. | Used to reinforce the test for characterising a levy as a fee and to support the conclusion that the water-tax fell within that test. |
| Archibald G. Hodge v. The Queen, 9 A.C. 117 | Authority on delegation and rule-making; cited in the context of permissible delegation of detailed matters and rule-making by executive bodies. | Invoked to support the proposition that detailed or variable matters (like radius/distance) can properly be left to subordinate rule-making and are ancillary rather than essential legislative functions. |
| In re. The Delhi Laws Act 191211 | Authority on the scope and permissibility of delegation in relation to local matters (as cited). | Relied on to show that certain delegations to subordinate authorities are permissible when related to local administration and variable conditions. |
| Charles Russell v. Queer, 7 A.C. 829 | Authority referenced in connection with legislatively sanctioned negative checks and procedures for subordinate rule-making. | Noted as supporting the court's view that the rule-making power subject to public scrutiny/objections is a relevant consideration when assessing delegation. |
| W.H. Stontenburgh v. W.J. Hernick (as cited in secondary authority) | Secondary authority (quoted) supporting the principle that powers of local legislation may be granted to municipal corporations; historical practice justifying delegation to local bodies. | Quoted to show the longstanding recognition of delegating local regulatory powers to municipal bodies and as an exception to the non-delegation rule. |
| State v. Ram Kishan, 1951 A.L.J. 64 (Full Bench) | Full Bench recognition of exceptions to the rule against delegation—specifically permitting limited local legislative powers to municipal/local authorities. | Relied upon to support the proposition that conferring rule-making powers on local bodies is an accepted exception to the non-delegation doctrine. |
| Suryapal Singh v. The State of U.P., 1951 A.L.J. 365 (Full Bench) | Full Bench authority recognising delegation of limited local legislative powers as permissible and necessary for local self-government. | Used to reinforce that delegation to local authorities for local purposes is an established exception to the non-delegation rule and applicable here. |
Court's Reasoning and Analysis
The court analysed each of the petitioners' contentions in turn and applied statutory construction, evidentiary burden principles and constitutional law principles as follows:
-
Assessment list requirement:
The court held that Section 141 (requiring preparation of an assessment list "When a tax on buildings or lands or both is imposed") was directed to land-and-building tax (what the judge described as "land and building tax") and not water-tax. Section 146(b) makes an entry in an assessment list conclusive proof of the annual value "for the purpose of assessing any other municipal tax." Given that water-tax in Clause (x) of Section 128(1) is also assessed on annual valuation, the land-and-building assessment list suffices and there is no requirement to prepare a separate water-tax assessment list. The court concluded Sections 142 and 143 do not require the Board to prepare a separate assessment list for water-tax. The court noted that arithmetic errors in calculation could be corrected on appeal under Section 160, but there can be no basic challenge to the assessed amount where the annual value is fixed in the existing assessment list.
-
Locus and challenge based on non-users:
The petitioners sought to challenge the levy on the ground that some assessed persons did not use Board-supplied water. The court observed that the petitioners' affidavits did not show that they themselves belonged to the class of non-users. They had neither pleaded nor proved that fact and thus lacked locus standi to raise that ground. The court therefore declined to permit this objection for two stated reasons: lack of locus and failure to take the ground in the petitions.
-
Compliance with Section 129(b) (earmarking for water-works):
The petitioners alleged the water-tax was imposed to augment municipal revenue rather than solely to defray water-works expenses, in contravention of Section 129(b). The court reviewed procedural compliance under Sections 131–134: the Board published proposals and rules in 1955, invited objections, considered them and obtained sanction; the Administrator rejected the objections. The court then addressed the evidentiary onus: it would be presumed that the Board acted within statutory power and the onus lay heavily on the petitioners to show otherwise. The counter-affidavit gave specific financial details (loan sanctioned by Government, sums borrowed, estimated instalment, limited extent of water-mains and supply in the municipality, actual receipts and establishment/collection figures) and showed the receipts were to be applied to water-works-related expenses. On the basis of those figures and the statutory requirement in Clause (b) of Section 129 that receipts be expended solely on water-works, the court concluded the petitioners had not discharged the onus of proving the Board had imposed the tax for revenue enhancement. That contention therefore failed.
-
Legislative competence and characterisation as tax or fee:
The court considered whether Clause (x) of Section 128(1) was within the legislative competence of the U.P. Legislature after the Constitution commenced. First it observed the U.P. Municipalities Act dated from 1916 and had been validly enacted at a time when the provincial legislature had plenary powers; its provisions were continued in force by later constitutional instruments and Article 372, so its constitutionality could not be attacked on the ground of lack of legislative power. The court then addressed the more specific question whether the water-tax could be supported under Entries 5 (local government), 17 (water supplies) and 66 (fees) of List II of the Seventh Schedule. The key question was whether the water levy in Clause (x) was truly a "tax" (which would not fall within entry 66) or a "fee" (which could fall within entry 66).
The court adopted the Supreme Court's two-element test (as expounded in the cited Supreme Court decisions): (i) the levy must be in consideration of services rendered (quid pro quo), and (ii) the amounts collected must be earmarked/appropriated to meet the expenses of rendering those services and not merged into general revenue. Applying that test to Clause (b) of Section 129, which expressly requires that water-tax be imposed solely to defray water-works expenses and that receipts be expended solely on those objects, the court found both elements present. The legislative scheme thus earmarked the receipts and established a co-relation between levy and water-works expenses. The court therefore concluded the levy, despite its nomenclature "water-tax," in its true nature and character bore the hallmarks of a fee and could be supported by Entries 5, 17 and 66 of List II. Accordingly Clause (x) of Section 128(1) was not ultra vires the U.P. Legislature post-Constitution.
-
Delegation (radius fixed by rule) and non-delegation doctrine:
The petitioners argued that Section 129's provision that the radius be fixed by rule delegated an essential legislative function to the executive. The court rejected this for multiple reasons. It held that the Legislature had not abdicated its core legislative function: it set out the policy, incidence of the tax, and the broad standard (co-relation with water-works expenses). The power to determine the radius was characterised as ancillary or subordinate to the primary legislative function and appropriate because the radius logically depends on practical, varying local facts (location and number of stand-pipes/pumps, municipal finances, exigencies). The court further observed that the State Government's rule-making power is bounded by procedural safeguards: the Board must frame proposals and publish them; inhabitants may object under Section 132; the appropriate authority must sanction proposals and the State Government makes rules under Section 296; after rules are made, the Board may impose the tax by special resolution. In the instant case Rule 8 proposed a 600 ft. radius, and the petitioners had the opportunity to object but did not do so. The court also relied on authorities recognising an exception to the non-delegation rule for local self-government and local matters (Full Bench decisions and authoritative sources). For these reasons, the court found the radius rule-making did not amount to an impermissible delegation of essential legislative power.
Holding and Implications
Holding: The petitions were dismissed. The court found no merit in any of the petitioners' contentions — specifically (i) there was no statutory requirement to prepare a separate water-tax assessment list, (ii) the petitioners lacked locus to raise the non-user objection and had not pleaded it, (iii) the petitioners failed to discharge the onus of proving the water-tax was imposed to augment general municipal revenue in contravention of Section 129(b), (iv) Clause (x) of Section 128(1) is within the legislative competence of the U.P. Legislature and (v) the rule-making power to fix the radius did not amount to an unconstitutional delegation of essential legislative power.
Direct consequences and implications for the parties: Each petition was dismissed and each petitioner was directed to pay Rs. 201 to the Municipal Board, Saharanpur as costs. The judgment upholds the validity of the Board's water-tax imposition (as applied in Saharanpur in January 1957) and affirms the statutory procedures and safeguards for framing and sanctioning the tax and associated rules.
No broader new precedent beyond the court's application of existing authorities and the statutory framework was expressly stated by the court in the opinion; the decision applies established tests (particularly the tax-versus-fee test) and recognised exceptions to the non-delegation doctrine to the facts of these petitions.
Petition dismissed.
Dwivedi, J.:— These petitions, which proceed on similar facts and questions of law, are being disposed of by a common judgment.
2. The petitioners are owners of lands and buildings situate within the municipal limits of Saharanpur. They are required by Saharanpur Municipal Board (hereinafter called the Board) to pay various sums due from them as water-tax on their lands and buildings, and they seek to challenge the legality of the municipal demand on a number of grounds. The demand is made at the rate of 10% on the annual valuation of lands and buildings.
3. The Board imposed water-tax on lands and buildings with effect from January 1, 1957. It appears from paragraph 17 of the counter-affidavit of Sri Anand Prakash Mittal that the assessments for the period between January 1 and March 31, 1957 were made on the basis of the quinquennial assessment list of buildings and lands ending on March 31, 1957, while the assessments for the financial year 1957-1958 were made on the basis of the assessment list of buildings and lands for the quinquennial period beginning from April 1, 1957. It is further said in the counter-affidavit that the two assessment lists were validly prepared in accordance with the material provisions of law. No water-tax assessment list was prepared, but Secs. 142 and 143 of the U.P Municipalities Act (hereinbelow called the Act) do not require the Board to do so.
4. Cl. (f) of sub-Sec. (1) of Sec. 128 of the Act empowers the Board to impose a tax on the annual valuation of buildings or lands. Cl. (x) thereof provides for the imposition of water-tax on the annual valuation of buildings or lands. Land and building tax (this nomenclature is coined by me) as well as water-tax are thus both levied on the annual valuation of buildings or lands. Sec. 140 defines the annual valuation of lands and buildings. Sec. 141(1) reads:—
“When a tax on buildings or lands or both is imposed, the board shall cause an assessment list of all buildings or lands or both in the municipality to be prepared, containing—
(a) the name of the street or mohalla in which the property is situated;
(b) the designation of the property, either by name or by number sufficient for identification;
(c) the names of the owner and occupier if known;
(d) the annual letting value or other particulars determining the annual value; and
(e) the amount of the tax assessed thereon.”
5. Sec. 142 requires the Board to publish notice of the place where the assessment list or copy thereof, when prepared, may be inspected, and confers a right on owners and occupiers of lands and buildings and their agents to inspect the list and to make extracts therefrom without charge. Sec. 143(1) requires the Board to give notice of a date, not less than one month after the publication of the assessment list, when it will proceed to consider the valuation and the assessments entered therein. The Board is further enjoined, in all cases in which any property is for the first time assessed, to give notice of the valuation and assessment to the owner or occupier of the property. Sub-Sec. (2) of Sec. 143 needs to be materially quoted:—
“All objections to valuations and assessments shall be made to the board, ….. by application in writing stating the grounds on which the valuation and assessment are disputed …..”.
6. The Board, will, after giving the objectors an opportunity of being heard, investigate and dispose of the objections. After objections have been disposed of and necessary amendments have been incorporated in it, the assessment list shall, as provided by Sec. 144, be authenticated by the signature of the President or the authority designated in the section.
7. Cl. (b) of Sec. 146, which is important, needs now to be set out:—
“An entry in an assessment list shall be conclusive proof,….
(b) for the purpose of assessing any other municipal tax, of the annual value of any building or land during the said period.”
8. The expression in sub-Sec. (1) of Sec. 141 “a tax on buildings or lands” refers, to put it in my own words, to the land and building tax and not to the water-tax, and consequently the assessment list, required to be prepared under that section, of all buildings and lands is the assessment list for the purpose of assessing tax on lands and buildings under Cl. (i) of Sub-Sec. (1) of Sec. 128. Sec. 141 does not, in my opinion, require the Board to prepare an assessment list in regard to water-tax. Having regard to the circumstance that water-tax is also assessed on annual valuation of lands and buildings, Cl. (b) of Sec. 146 of sub-Sec. (2) of Sec. 143 would also support my view. Since the assessment list of buildings and lands, prepared for assessing tax on buildings and lands, is conclusive proof, for the purpose of assessing water-tax, of the annual value of any building or land entered therein, the entry regarding the annual value of any building or land in the list cannot be disputed under sub-Sec. (2) of Sec. 143, and there is no sense in requiring the Board to prepare and publish an assessment list in regard to water-tax. The annual value of any building or land being definite and the rate of water-tax, which is 10% on the annual value of buildings or lands in this, case, being certain, it is a mere matter of arithmetic to calculate the amount of water-tax that would be payable by the owner or occupier of a particular building or land. Accordingly, apart from mere slips in calculation (which may be set right on appeal under Sec. 160), there can be no basic challenge to the amount assessed as water-tax. These considerations lead me to the conclusion that Secs. 142 and 143 do not require the Board to prepare an assessment list in regard to water-tax. The first contention of the petitioners, therefore, fails.
9. It is then contended that since persons, who were not using water supplied by the Board's water-works, were also assessed to water-tax, the imposition and assessment of water-tax by the Board on the petitioners is invalid. It is admitted that the petitioners' affidavits do not show that they were some of the persons who were not using during the material time water supplied by the Board's water-works. They have accordingly no locus standi to challenge the imposition and assessment of water-tax on the ground that some other persons, who did not take water from the water-works, were required to pay water-tax. They have also not taken this ground in their petitions. For these two reasons I am not inclined to permit the petitioners to raise this objection.
10. It is next contended that since the water-tax has been imposed in contravention of the provisions of Cl. (b) of Sec. 129 of the Act, the assessments of water-tax on the petitioners are illegal. It is complained that the water-tax has not been imposed solely with the object of defraying the expenses connected with the construction, maintenance, extension or improvement of municipal water-works. The contention of the petitioners is liable to fail for two reasons. Sec. 131 provides that when a Board desires to impose a tax, it shall by special resolution, frame proposals and rules in regard to it and publish them in the prescribed manner for public information. Sec. 132 gives a right to any inhabitant of the municipality to submit, within a fortnight from the publication of the proposals and the rules, to the Board an objection in writing to all or any of the proposals and rules. The Board is required to consider the objections and pass orders thereon by special resolution. It appears from paragraph 3 of the counter-affidavit of Sri Anand Prakash Mittal that the Board published proposals and the rules regarding water-tax in September 1955. The inhabitants of the municipality were invited to raise objections to the proposals and rules within 15 days of the publication. Paragraph 4 of the counter-affidavit stated that only six persons raised objections, three of them being filed beyond time. Paragraph 6 of the counter-affidavit stated that the objections mainly questioned the right of the Board to levy water-tax on the ground that the waterworks scheme of the municipality was financed by Government in the Second Five Year Plan. The objections were rejected by the Administrator of the Board by his order dated 23rd February 1956. It does not clearly appear from the affidavits of the petitioners' that they had objected to the imposition of water-tax on the ground that it was imposed not solely with the object of defraying expenses connected with the construction, maintenance, etc. of municipal water-works but for increasing the municipal revenues. The issue is essentially one of fact, and I would not permit the petitioners to raise the objection for the first time in the writ proceedings.
11. Secondly, it would be presumed that the Board has not transgressed its statutory powers and has imposed water-tax in conformity with the provisions of Sec. 129(b) solely with the object of defraying expenses connected with the construction, maintenance, etc. of municipal water-works, and the onus of showing the contrary rests heavily on the petitioners. The counter-affidavit of Sri Anand Prakash Mittal denies that the water-tax has been imposed by the Board not for the purposes specified in Cl. (b) of Sec. 129 but for the purpose of enhancing its revenue. The counter-affidavit gives facts and figures to refute the petitioners' assertion. It appears that the Government sanctioned a loan of Rs. 39,50,000 to the Board for its waterworks scheme repayable in thirty equal instalments with 4½% compound interest. The Board has so far borrowed Rs. 29,50,000, and the amount of annual instalment on a loan of Rs. 39,50,000 repayable in thirty years with 4½% compound interest would be Rs. 2,34,347. Water mains have been laid in only three fourth portion of the city, and even there 40% of water-posts are yet to be erected. In hardly 10% of the houses water mains have been requisitioned and laid. Even though the water-works scheme has not gone in its full swing; the expenditure for the financial year 1957-1958 on water pumping, water connection and water supply would, according to estimate, amount to Rs. 32,000. Paragraph 21 of the counter-affidavit gives the actual receipts of water tax and the establishment charges excluding collection changes for the period between January 1 and March 31, 1957 and between April, 1 and September 30, 1957. In the first period the first amount was Rs. 210 and the second amount was Rs. 8608; in the second period the corresponding figures were Rs. 3619 and Rs. 10639. Paragraph 22 of the counter-affidavit states that in view of the said actual figures the estimated receipts of water-tax, upon which the petitioners have relied, have been drastically reduced in the proposed revised budget for the financial year 1957-1958. After carefully reading the affidavits-of the petitioners and the counter-affidavit I am not satisfied that the petitioners have discharged the onus of proving that the Board has imposed water-tax not for the purposes specified in Cl. (b) of Sec. 129 but for the purpose of enhancing its revenue. This contention of the petitioners, therefore, also fails.
12. It is then urged on behalf of the petitioners that the provisions of Cl. (x) of Sec. 128(1) are beyond the legislative competence of the U.P Legislature. It is pointed out that Entry 49 in List II of the Seventh Schedule to the Constitution cannot be read to include, water-tax, and that there is no other entry in List II, which would enable the State Legislature to enact a law regarding levy of water-tax. One may agree that the subject of water-tax is not included in Entry 49, which deals with the topic of “Taxes on lands and buildings.” This entry perhaps deals with a tax which may popularly be described as the land tax. But that does not conclude the matter. The U.P Municipalities Act, of which Cl. (x) of Sec, 128(1) is a part, was enacted in June, 1916 and was published in the Gazette under Sec. 81 of the Government of India Act, 1915 on June 24, 1916. The U.P Legislature was then not a legislature of enumerated powers, and could, under Sec. 79(1) of the con stating instrument, make laws for the peace and good Government of the province, and the entire Municipalities Act was then legitimately enacted by the U.P Legislature in exercise of its powers under that provision. The impugned-enactment was continued in force by Sec. 292 of the Government of India Act, 1935, and Sec. 18(3) of the Indian Independence Act, 1947, and is even now in force by virtue of the provisions of Art. 372 of the Constitution, and its constitutionality on the ground of want of power in the appropriate legislature to enact it is not open to challenge. See Sheo Shanker v. State of Madhya Pradesh A.I.R 1951 Nag. 58 80.; Sagar Mal v. The State A.I.R 1951 All, 816 817; Binoy Bhusan v. State of Bihar A.I.R 1954 Pat. 346.; Kanpur Oil Mills v. Judge, Sales Tax A.I.R 1955 All. 99 104; State v. Yash Pal A.I.R 1957 Punj. 91 92. and R.L Aurora Ram Ditta Mai v. State of Uttar Pradesh A.I.R 1958 All. 126 131 and..
13. It is then contended that the conjoint effect of sub-Sec. (3) of Sec. 128, which provides that nothing in sub-Sec. (1) thereof shall authorise the imposition of any tax which the State legislature has no power to impose in the State under the Constitution, and Art. 277 of the Constitution is to render invalid the imposition in January 1957 of water-tax in Saharanpur municipality, because on that date the U.P State Legislature had no legislative power to impose the impugned levy in the State under the Constitution. I am quite clear that this contention also has no force. The State Legislature, as I would presently show, has power to impose the levy in question in the State. Entry 5 of List II in the Seventh Schedule to the Constitution empowers the State Legislature to legislate with respect to local government. The entry is very comprehensive, and I think a law with respect to the maintenance of a water-works by a municipality may be enacted under this entry by the State Legislature. Similarly entry 17 of List II in the Seventh Schedule empowers the State Legislature to legislate with respect to “water, that is to say, water supplies, irrigation and canals, drainage and embankment, water storage and water power subject to the provisions of entry 56 of List I.” We are not concerned in this case with entry 56 of List I. It is clear from entry 17 that the State Legislature can legislate with respect to the subject-matter of water, which could include a provision for municipal water works for supplying water to the inhabitants of the municipality. Entry 66 of List II in the Seventh Schedule deals with the topic of “Fees in respect of any of the matters in this List, but not including fees taken in any court.” From a conjoint reading of entries 5, 17 and 66 it would be clear beyond doubt that the U.P Legislature was competent or the relevant date to enact a law with respect to fees in relation to water-supply by a municipality to its inhabitants. The pertinent question, therefore, is whether the water tax authorised by Sec. 128(1)(x) is a fee within the meaning of that word in entry 66. If it appears that the subject-matter of Cl. (x) of Sec. 128(1) not fee but a tax, entry 66 will not protect the imposition of water-tax ??? the Board in January 1957. If, on ??? other hand, it appears that the subset-matter of Cl. (x) of Sec. 128(1) is fee, then I have no doubt that the imposition of water-tax by the Board in January 1957 would be valid. It is, therefore, now necessary to determine whether the imposition in question is a tax or fee. One thing should be said at the outset. The imposition is no doubt described by Cl. (x) of Sec. 128(1) as water-tax, but the nomenclature of an imposition alone is not decisive, one has to ascertain the true nature and character of the imposition. If in its true nature and character the imposition is a fee, then despite its nomenclature it cannot be held to be a tax.
14. The distinction between tax and fee has recently been pointed out by their Lordships of the Supreme Court in The Commissioner, Hindu Religious Endownments, Madras v. Sri Lakshmindra Thirtha Swamiar 1954 A.I.R S.C 282., Mahant Sri Jagannath Ramanuj Das v. The State of Orissa Ibid p. 1046. and Rati Lal Pana Chand Gandhi v. State of Bombay Ibid p. 1055. In the first cases, the levy was held to be a tax and not a fee, while, in the other case, it was held to be a fee and not a tax. While pointing out that there was no generic difference between a tax and a fee and that both were different forms in which the taxing power of a State manifested itself, Mukerji, J. pointed out that a tax was imposed for public purposes to meet the general expenses of the State without reference to any special benefit to be conferred upon the payers of the tax, while a fee was a payment for some special service rendered or some special work done for the benefit of those from whom payments are demanded. Mukerji, J. observed at page 1053:—
“Two elements are thus essential in order that a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly. But this by itself is not enough to make the imposition a fee, if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general public purposes.”
15. Having formulated the test his Lordship, at page 1054, went on to observe:—
“Judged by this test, the contribution that is levied by Sec. 49 of the Orissa Act will have to be regarded as a fee and not a tax. The payment is demanded only for the purpose of meeting the expenses of the Commissioner and his office which is the machinery set up for due administration of the affairs of the religious institution. The collections made are not merged in the general public revenue and are not appropriated in the manner laid down for appropriation of expenses for other public purposes. They go to constitute the fund which is contemplated by Sec. 50 of the Act and this fund, to which also the Provincial Government contributes both by way of loan and grant, is specifically set apart for the rendering of services involved in carrying out the provisions of the Act…. The fact that the amount of levy is graded according to the capacity of the payers though it gives it the appearance of an income tax, is not by any means a decisive test.”
16. Mukerji, J., who delivered the judgment of the Supreme Court in the third case also, reiterated the test already formulated by him in the second case. It was said by him that in fees there was always an element of quid pro quo which was absent in a tax and that there must be co-relation between the levy imposed and the expenses incurred by the State for the purpose of rendering services. At page 1075 of the Report his Lordship observed.
“But in order that the collections made by the Government can rank as fees, there must be co-relation between the levy imposed and the expenses incurred by the State for the purpose of rendering such services. This can be proved by showing that on the face of the legislative provision itself, the collections are not merged in the general revenue but are set apart and appropriated or rendering these services.
Thus two elements are essential in order that a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly and in the second place, the amount collected must be ear-marked to meet the expenses of rendering these services and must not go to the general revenue of the State to be spent for general public purposes.”
17. At page 1076 it was further observed by him:—
“…..According to the concept of a modern State, it is not necessary that services should be rendered only at the request of particular people, it is enough that payments are demanded for rendering services which the State considers beneficial in the public interests and which the people have to accept whether they are willing or not.” In the light of the test formulated by him, Mukerji, J. held that Sec. 58 of the Bombay Trust Act, which imposed a levy of contribution upon public trust was intra vires the State Legislature, as it fell within entry 47 of list 3 in Schedule VII of the Constitution.
18. In the first case, however, Mukerji, J., while accepting the test set out above, held that Sec. 76(1) of the Madras Hindu Religious and Charitable Endownments Act, 1951, which made a levy of contribution upon every religious institution in the State for the services rendered by the Government and their Officers, was ultra vires the Madras Legislature, because, in his view, there was total absence of any co-relation between the expenses incurred by the Government and the amount raised he contribution under Sec. 76.
19. The instant case is, in my view, covered not by the first decision but by the subsequent two decisions of their Lordships of the Supreme Court. The Water-tax is imposed upon the owners of lands and buildings within the Municipality for the water works service rendered by the Municipal Board. The tax is also co-related on the face of the legislative provision itself to the expenses incurred by the Municipality for purposes of rendering water-works service. Cl. (b) of Sec. 129 expressly directs that the water tax would be imposed solely with the object of defraying the expenses connected with construction, maintenance, extension or improvement of Municipal water-works, and that all monies derived therefrom would be expended solely on the aforesaid objects. The receipts of water tax are thus ear-marked by the legislative provision for expenses in connection with the Municipal water-works service. By enjoining upon the Municipalities in plain language that the receipts should be expended solely on the water-works service, the Legislature has clearly manifested its intention that the receipts would not go to augment the general revenues of the Municipal Board but would be allocated by it towards efficient maintenance of a waterworks for the supply of water to the inhabitants of the Municipality. The Legislature has not itself fixed the rate of water-tax, but has left it to be determined by Municipalities and the State Government. This fact indicates that the Legislature intended that Municipalities and the State Government should be free to vary and adjust from time to time the rate of water tax to the expenses required for maintaining an efficient waterworks. This fact is, therefore; an evidence of the legislative intention that the rate of water tax should, in fact, also bear co-relation with the expenses required for maintaining the water-works service. The idea of quid pro quo is, therefore, there.
20. In the first Supreme Court case at page 1041 Mukerji, J. made the remarks:—
“The house tax has to be paid only by those who own houses, the land tax by those who possess lands, Municipal taxes or rates will fall on those who have properties within a Municipality. Persons, who do not have houses, lands or properties within Municipalities, would not have to pay those taxes, but nevertheless these impositions come within the category of taxes and nobody can say that it is a choice of these people to own lands or houses or specified kinds of properties, so that there is no compulsion on them to pay taxes at all.”
21. These remarks were made by Mukerji, J. while discussing whether the element of compulsion or coercive ness was an exclusive characteristic of taxes or was also common to fees. These remarks should, I think, be read in the light of their context, and they do not appear to me to support the contention that the levy of water-tax under Cl. (x) of sub-Sec. (1) of Sec. 128 read with Cl. (b) of Sec. 129 of the U.P Municipalities Act is a tax and not a fee within the meaning of that expression in entry 66 of list II in Sch. VII of the Constitution.
22. I am, therefore, of opinion that Cl. (x) of sub-Sec. (1) of Sec. 128 of the Act is not ultra vires the U.P Legislature even after the commencement of the Constitution. The provision in question is covered by items 5 and 17 read with item 66 of list II in Schedule VII of the Constitution.
23. The last argument of the petitioners assailed the constitutionality of a portion of Sec. 129, the pertinent part of which reads thus:—
“The imposition of a tax under Cl. (x) of sub-Sec. (1) of Sec. 128 shall be subject to the following restrictions, namely,
(a) that the tax shall not be imposed …. where the unit of assessment is a plot of land or a building as hereinafter, defined, on any such plot or building of which no part of it is within; a radius, to be, fixed by rule in this behalf for each Municipality, from the nearest stand-pipe or other water-work “whereat the water is made available to the public by the Board.”
24. The contention was that the Legislature has abdicated to the State Government the essential legislative function of fixing by rule the radius, and this amounts to impermissible delegation of legislative power to the executive. I am unable to agree to this contention for more than one reason. Firstly, I am of the view that the Legislature has not delegated to the State Government any essential legislative function. It has provided that a Municipality may levy a water-tax for maintaining water-works. It has also indicated the incidence of the tax. It has also defined in broad terms the standard of the water-tax, in that it is co-related with the expenses required for maintaining the water-works service. The power of the State Government to determine the radius cannot, therefore, be characterised as an essential legislative function in relation to the levy of water tax; it is, in my view, ancillary or subordinate to the main power of imposing water-tax. Cl. (iii) of sub-Sec. (1) of Sec. 228 obligates every Municipal Board, in which a water-tax is imposed, to supply, in all the chief streets in which mains have been laid, water to stand-pipes or pumps situated at such intervals as may be prescribed. The word ‘prescribed’ is defined in Sec. 2(17)(i) of the Municipalities Act to mean prescribed by or under the Act or rules made thereunder. The State Government is, therefore, required to make rules fixing the distance at which stand-pipes or pumps would be fixed by the Municipal Board, which has imposed a water tax. The radius would accordingly be determined by the State Government having regard to the location of the stand-pipes or pumps. The distance of the radius would naturally vary according to the number of the stand-pipes or pumps within a Municipality, and the number of stand-pipes or pumps would vary according to the dynamic financial resources of a. Municipality and the exigencies of the moment. The Legislature, while enacting Cl. (x) of sub-Sec. (1) of Sec. 128 and Cl. (a) of Sec. 129, would not have foreseen and congealed the different and elastic financial resources of Municipalities which existed at the time of the enactment of the Act, and which may be created thereafter. Naturally, therefore, the Legislature contended itself with laying down the policy and principles in broad and flexible terms, for an attempt to provide for the varying details in reference to water-tax might have become oppressive or might have absolutely failed. See Archibald G. Hodge v. The Queen 9 A.C 117. and In re. The Delhi Laws Act 191211.
25. It is also significant that the State Government's power to fix by rule the radius is not to be exercised in an insulated chamber but is made subject to the scrutiny of those who are required to pay water-tax. Sec. 131(1) and (2) provides that when a Board desires to impose a water-tax, it shall, by special resolution frame proposals specifying the nature and the rate of the tax, the persons upon whom and the property upon which the tax would be imposed and any other matter referred to in Sec. 153, which the State Government requires by rule to be specified. Cl. (f) of Sec. 153 provides that rules shall be made with respect to any other matter relating to taxes in respect of which the Act makes no provision or insufficient provision, and provision is, in the opinion, of the State Government necessary. Sub-Sec. (3) of Sec. 131 requires the Board to publish the proposals and rules framed under Sec. 131(1) and (2). Sec. 132(1) gives a right to an inhabitant of the Board to raise objections to all or any of the proposals and rules framed under Sec. 131(1) and (2), and requires the Board to hear and consider the objections. When the Board, after considering the objections, has finally settled its proposals, it shall submit them, along with the objections, to the appropriate authority which, in certain cases, would be the State Government and in other cases may be some other authority. Sec. 134(1) provides that, when the proposals have been sanctioned by the appropriate authority, the State Government, after taking into consideration the draft rules submitted by the Board, shall make under Sec. 296 such rules in respect of the tax as for the time being it considers necessary. When the rules have been made, the order of sanction and a copy of the rules are sent to the Board, and thereafter the Board may, by special resolution, direct the imposition of the tax with effect from a date specified in the resolution. The resolution is then published in the official Gazette, as required by Sec. 135.
26. In the instant case, it appears from the counter-affidavit of Anand Prakash Mittal, Water Works Engineer, Municipal Board, Saharanpur, that the Saharanpur, Municipal Board had framed proposals and rules in regard to water-works as required by Sec. 131, and then it published those proposals and rules for public information, as required by Sub-Sec. (3) of Sec. 131. Rule 8 of the rules proposed fixing the radius as 600 ft. The petitioners had an opportunity under Sec. 132 of objecting to the radius proposed to be fixed by the Board. It does not appear from the facts on the record that the petitioners or any other inhabitant of the Board raised any objection to the limit of radius. It would thus appear that the determination of the limit of radius is on the fact of the legislative provision subject to an important safeguard, namely, the negative right of the prospective tax payers of objecting to the proposed limit of radius fixed by the Board and to get it changed according to their wishes. No doubt, the chance of revision of the proposed radius limit will vary according to the magnitude of popular pressure and opposition to it. But what may be significant here is that the rule-making power in regard to the limit of radius is not unfettered and uncontrolled, but is made subject to the negative check of the persons who would be directly affected by it. This special feature vide Charles Russell v. Queer 7 A.C 829. may, I think, be legitimately taken into consideration when deciding whether the impugned legislation amounts to delegated legislation.
27. The rule that essential legislative function cannot be delegated by the Legislature to any person appears to be subject to several exceptions. One of those exceptions is with reference to the delegation of powers to local self Governments. As to this it has been held that the giving he the Legislature of law-making powers with reference to local matters to subordinate local bodies being a time-hallowed Anglo-Saxon practise, and the right of local self Government being so fundamental to democratic Government, a Constitution should, in the absence of any express prohibition to the contrary, be construed as permitting it. (See W.H Stontenburgh v. W.J Hernick,13 Footnote to paragraph 1076 in Vol. 3 of the Constitutional Law of the United States by Willoughby, II Edition, 1929, cites the following quotation from State v. Noyes, 30 N.H 279:—
“It seems to be generally conceded that powers of local legislation may be granted to cities, towns, and other Municipal Corporations and it would require strong reasons to satisfy us that it could have been the design of the framers of our Constitution to take from the Legislature the power which has been exercised in Europe by Governments of all classes from the earliest history, and the exercise of which has probably done more to promote civilisation than all the other causes combined; which has been constantly exercised in every part of our country from its earliest settlement, and which has raised up among us many of the most valuable institutions.”
28. In State v. Ram Kishan 1951 A.L.J 64. a Full Bench of our Court gave recognition to certain exceptions to the rule of non-delegation of essential legislative powers. At page 79 Wali Ullah, J. who gave the leading judgment, observed:—
“A limited power of legislation conferred on Municipalities and other local bodies which enjoy a certain measure of local self-Government has also been recognised as an exception to the general rule. Indeed such a delegation of power is not regarded as a transfer of “general legislative power” but rather as the grant of the authority to prescribe local regulations. This is sanctified by immemorial practice both in England and in America.”
29. In Suryapal Singh v. The State of U.P 1951 A.L.J 365. another Full Bench case, the Court gave recognition to this well-known exception to the rule of non-delegation of legislative powers. At page 394 the Court observed:
“These considerations lead us to the further conclusion that if the power of delegation possessed by a Legislature is of a more limited character than we have stated earlier, there are nevertheless certain classes of legislation which Legislature must have power to entrust to another authority. Such classes will include:—
…………..
(3) Power may be conferred on a local or other territorial authority to make rules and regulations for local self-Government or for other local purposes. This power is well established and the necessity for it is obvious.”
30. In view of these authorities, it must be held that the impugned provision in Sec. 129 regarding the fixation of the radius by rule does not amount to delegation of legislative power.
31. Since all the contentions of the petitioners have been repelled, there is no force in these petitions and they are accordingly dismissed. The petitioners in each case shall, pay to the Municipal Board, Saharanpur, Rs. 201 as costs.
Petition dismissed.
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