1960 PLP 570 (PTD)

(iii) Third Class hotel or restaurant or eating‑house or lodging‑house 200 (iv) Fourth Class hotel or restaurant or eating‑house or lodging‑house 100 (v) Fifth Class hotel or restaurant or eating‑house or lodging‑house 50 (2) The provision of subsection (1) shall not apply to hotels, restaurants, eating‑houses or lodging‑houses the monthly net income of which is Rs. 500 or below. Explanation.‑Net income shall be determined by Rules. (3) Every registration under subsection (1) shall remain valid for a year and shall be renewed every year within one month of the expiry of its validity. (4) The Provincial Government may make rules for classi fication of the hotels, restaurants, eating‑houses and lodging -houses, and for regulating the procedure for collection and payment of the registration fee and any other matter incidental to its levy. (5) If any owner or management of a hotel, restaurant, eating‑house or lodging‑house fails to apply within due time for registration of the hotel, restaurant eating‑house or lodging- house he shall be liable to pay one and one‑eighth the rates specified in subsection (1). Mr. Hamidul Huq Chowdhury, the learned Advocate for the petitioner in Writ Petition No. 46 of 1958, has challenged the validity of the above provisions of the Act. He has contended that the registration fees mentioned in the above section was really a tax, and hence the Provincial Government was not com petent to levy such a tax. In support of his contention, he has relied on the following decisions: (1) The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swarniar of Sri Shirur Mutt (AIR 1954 S C 2), (2) Maharaja Shri Umaid Mills, Ltd. v. State of Rajasthan and another (A I R 1954 Raj. 178).

4. On the other hand, the learned Advocate‑General has contended that under this section certain registration fees are charged from hotels according to their income, and that the Provincial Government was quite competent to legislate upon it. According to him, this legislation is covered by Entries Nos. 59 and 93 of the Provincial List of Schedule V of the Constitution.

5. The main question which has been canvassed before us is : Whether this levy is a tax or a fee? While considering the well‑recognised distinction between tax and fees, the Supreme Court of India in the Madras case on which Mr. Chowdhury has relied, observed (at page 295) as follows: "The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for special benefit or privilege. Fees confer for a special capacity, although the special advantage, as for example in the case of registration fees for documents or marriage licences, is secondary to the primary motive of regulation in the public interest, vide Findlay Shirras on `Science of Public Finance', Vol. I, page

202. Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit which the individual receives. As Seligman says, it is the special benefit accruing to the individual which is the reason for payment in the case of fees ; in the case of a tax, the particular advantage, if it exists at all, is an incidental result of State action, vide Seligman's `Essays on Taxation', page

408. If, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should, on the face of the legislative provision, be correlated to the expenses incurred by Govern ment in rendering the services. As indicated in Article 110 of the Constitution, ordinarily there are two classes of cases where Government imposes `fees' upon persons. In the first class of cases, Government simply grants a permission or privilege to a person to do something, which otherwise that person would not be competent to do, and extracts fees, either heavy or moderate, from that person in return for the privilege that is conferred. A most common illustration of this type of cases is furnished by the licence fees for motor vehicles. Here the costs incurred by the Government in maintaining an office or bureau for the granting of licences may be very small, and the amount of imposition that is levied is based really not upon the costs incurred by the Government, but upon the benefit that the individual receives. In such cases, according to all the writers on public finance, the tax element is predominant, vide Seligman's `Essays on Taxation', page 409, and if the money paid by .the licence‑holders goes for the upkeep of roads and other matters of general public utility, the licence fee cannot but be regarded as a tax. In the other class of cases, the Government does some positive work for the benefit of persons, and the money is taken as the return for the work done or services rendered. If the money thus paid is set apart and appropriated specifically for the performance of such work, and is not merged in the public revenues for the benefit of the general public, it could be counted as fees and not a tax." Now, the preamble of the East Pakistan Finance Act, 1957, is as follows: "An Act to raise funds for augmentation of the revenues of the Province and for continuance in force of certain taxes for the purpose of meeting expenditure on rehabilitation of refugees."

6. Chapter IV of the Rules framed under this Act deals with the fees for registration of hotels, restaurants, eating‑houses and lodging‑houses. The learned Advocate‑General has been candid enough to say that there is nothing in the Act or in the Rules to show that this fee was levied for some services to be rendered by the State to the hotels, restaurants, etc. The preamble clearly mentions that the purpose of the Act is to raise funds for the augmentation of the revenues of the Province. Further, the fee that has been levied under section 5 has been made to depend upon the capacity of the payee. Furthermore, the hotels which have income of less than Rs. 500 are excluded from the liability to pay any fee. In the words of the Supreme Court of India, these are "undoubtedly some of the characteristics of taxes, and imposition bears a close analogy to income‑tax". Lastly, the fact that no part of this fee is ear‑marked or specified for rendering service to the payee negatives the theory of `fee'. We, therefore, agree with Mr. Chowdhury that the fee levied under section 5 is a tax and not a fee, and V consequently it was beyond the power of the Provincial Legislature to enact that provision. We, therefore, pass the following orders:

7. We order that a writ of mandamus do issue directing the respondents to forthwith cancel or withdraw the notices, dated the 16th November 1957, 17th December 1957, and 28th February 1958, served by them on the petitioner.

8. We also order that a writ of mandamus do issue directing the respondents to forthwith cancel or withdraw the notices and order, dated 18th November 1957, 19th November 1957, 14th December 1957, and 14th December 1957, served by them on the petitioner.

9. The Rules are accordingly made absolute. The petitioners will be entitled to get the cost of their applications which we assess at five Gold Mohurs for each of the applications. BAQUER, J.‑I agree. Rules made absolute.