Even a rupee cannot be levied except in accordance with law: Karnataka High Court quashes imposition of ground rent, license fee etc by BBMP

In a significant decision, the Karnataka High Court quashed a circular issued by the Bruhat Bengaluru Mahanagara Palika (BBMP) levying ground rent, license fee, scrutiny fee, and lake rejuvenation fee on citizens [Sunderam Shetty v. State of Karnataka and others]..Justice M Nagaprasanna of the High Court stated in the judgment,“Even a rupee cannot be taken from a citizen as fee except in accordance with law. .It was also held that imposition of fee requires a quid pro quo."Therefore, there is no power under Act to impose the impugned levies i.e., ground rent, licence fee, building licence fee, scrutiny fee and security deposit. It is trite that fee can be imposed only if there is quid pro quo. Quid pro quo in legal parlance is that ’fee’ that can be imposed for a service that is rendered.".The Court, therefore, held that the by-laws under which such fees were imposed are ultra vires the Karnataka Municipal Corporations Act, 1976.It further ordered that the petitioners who had deposited certain amounts are entitled to refund of the amounts so deposited."All the Writ Petitions are allowed. The bye-laws under which Ground Rent, Licence Fee, Building Licence Fee, Scrutiny Fee, Security Deposit are all held ultravires the Act and are resultantly rendered unenforceable.".The Court was hearing a batch of petitions challenging a batch of petitions challenging ground rent, licence fee, building licence fee, scrutiny fee and security deposit imposed by BBMP..Counsel for the petitioners submitted that levy of different fees were in excess of the powers of BBMP and the characterization of the levy was without authority of law. It was neither a fee nor a tax, as there was no co relation between what was charged and the quid pro quo, it was added. Therefore, it was contended that the levy was violative of Article 19(1)(g) of the Constitution of India..Advocate V Sreenidhi, appearing for the BBMP, contended that the petitioners have filed these petitions under a mistaken notion that the demand made is a tax. According to him, it was a fee that is leviable by the BBMP in terms of powers conferred on it by the by-laws.He also placed reliance on various documents to justify each of the fees that was levied. .After considering the rival contentions, the Court said that levy of fees can be done only in accordance with law.."On an analysis of the afore-extracted judgments of the Apex Court, it would become unmistakably clear that certain services that are rendered to the benefit of the individual upon whom the fee is charged such a fee can be charged, failing which, it would take the character of tax...It is on the bedrock of the principles enunciated by the Apex Court, the impugned imposts/fee are required to be considered. Therefore, each of the impugned levy is considered separately," the judgment said..The Court then considered various provisions of Karnataka Municipal Corporations Act, 1976 and related by-laws that the BBMP claimed empowered it to levy fee for ground rent, licence, building licence, scrutiny and demand of security deposit. .It was held that there was no power under the Act to levy the various imposts under challenge. Additionally, the Court reiterated that a fee can be imposed only if there is a quid pro quo relationship..The Court also referred to a plethora of judicial precedents to interpret the term "fee". It specifically referred to the judgment laid down in Indus Towers Limited v. State of Gujarat and others, in which the Supreme Court had said that apart from Article 265 which prohibits levy or recovery of tax except by authority of law, Article 243-X specifically provides that the legislature of a state may, by law authorize a municipality to levy, collect and appropriate such taxes, duties, tolls and fees in accordance such procedure and subject to such limits as may be specified by law. .Therefore, the Court opined that the synthesis of the interpretation of a tax or a fee that can be levied by a Corporation upon its citizens as considered in Supreme Court judgments would lead to an unmistakable conclusion that a fee is a charge for special service rendered to individuals by a governmental agency."The amount of fee levied is supposed to be based on expenses incurred by Government in rendering service. Fee is uniform and no account is taken of payers’ capacity. Imposition of fee can only be as a quid pro quo," the Court opined. .That said, the Court made it clear that nothing would preclude or be an impediment for the legislature to bring out suitable legislation for imposition of the said demands. .With regard to the imposition of labour cess under the Welfare Cess Act, the Court upheld the same, but its demand for payment upfront in terms of the two Government Orders were quashed..With these observations, the Court disposed of the plea. .[Read the judgment]