Holding

Standing Order No. 3 is valid; the supervision fee is a lawful, optional fee, and the Commissioner had authority to prescribe it under Section 466(1)(A)(f).

Issues considered

Whether the Commissioner could frame Standing Order No. 3 under Section 466(1)(A)(f) of the Bombay Provincial Corporations Act, 1949.
Whether the supervision fee constitutes a tax or a fee and whether a strict quid‑pro‑quo is required.
Whether the supervision fee is compulsory or optional for transporters.
Whether the State Legislature has authority under Entry 52 of the State List to impose such a fee.

Legislation cited

Bombay Provincial Corporations Act, 1949s. 147, s. 466(1)(A)(f)

Subjects

octroisupervision feestanding orderfee vs taxquid pro quooptional feemunicipal corporationtransportersSection 466Section 147

Judgment

A MUNICIPAL CORPORATION OF TI-IE CITY OF BARODA
v.
BABUBHAI HIMATLAL

AUGUST 16, 1989

B [G.L. OZA AND K.N. SAIKIA, JJ.]

The Bombay Provincial Corporations Act, 1949: Sections 147
and 466( l)(A)(f) and Standing Order No. 3-Payment of supervision
fee by transporter-Whether reasonable-Optional to transporter-
A voidance of claiming refund on octroi duty-Standing Order held
valid, legal and enforceable.
c I
~.
The respondent who was carrying on the business of transporting
goods challenged before the High Court the imposition of supervision
fee levied under Standing Order No. 3 on the goods in transit through
the limits of the Municipal Corporation of Baroda. Before the framing
D of Standing Order No. 3, a transporter was required to pay octroi at the
point of entry in the city and claim refund thereof at the point of exit
after satisfying the authority that the goods which had entered were
being taken out. Standing Order No. 3 framed under section
466(I)(A)(O read with section 147 of the Bombay Provincial Corpora-
tions Act 1949, provided that when a transporter entered into the cor-
E poration limits with goods which were only in transit, he could on
payment of supervision fee carry the goods through the corporation
limits under the supervision of the staff of the Corporation without
payment of octroi at the point of entry.

The High Court held Standing Order No. 3 as illegal and without
F the authority of law. The High Court observed that under section """"
466(I)(A)(t) the Commissioner had the authority to frame standing
orders only in respect of goods on which octroi was payable and as
octroi was not payable on the goods which were in transit, no standing
orders could be framed under the Section. The High Court further held
that quid pro quo was not satisfied as no service was rendered to the
G transporter. I·

Before this Court it was contended on behalf of the appellant that ~
the levy of supervision fee was optional; the procedure under Standing
Order No. 3 was introduced to avoid hardship to the transporter; it was
open to him to follow the normal procedure of paying the octroi and
H claiming refund; the requirement of quid pro quo was in substance
862
~

j MUNICIPAL CORPN. OF THE CITY OF BARODA v. BABUBHAI 863

-~
1
satisfied, and the fee was charged only to facilitate the transporter in
A
carrying the goods in transit.

Allowing the appeal, this Court,

HELD: (1) The procedure under Standing Order No. 3 is not
~\ compulsory and it is the option of the transporter to take advantage of B
this Standing Order if he so chooses otherwise follow normal procedure
of payment of octroi and claiming refund. [868H-869A]
ill
'('
,._. (2) Clause (f) of section 466(I)(A) contemplates that the Commis-
sioner may by standing order prescribed the procedure for the goods
which ale introduced iu the city limits, for immediate exportation aud
.. , _,f
.(
also the fees which could be charged. It is clear that this provision which c
" confers the authority on the Commissioner to frame standing orders
does not talk of goods on which octroi is payable. The Commissioner
therefore had the authority under section 466, and the Standing Orders
have been framed in accordance with the procedure prescribed under
~ that section. [867D-E; 8690] D

(3) It appears that while taking the view that the levy could not be
--·;.
justified under Entry 52 of the State List which authorises the State
" ~ Legislature to impose a tax on entry of goods into a local area, the High
Court was examining the fees prescribed as a tax, and it was on that
• basis that the High Court took the view that no such tax could be levied E
' on goods on which no octroi was payable. But, as it is not a tax, the
imposition could not be said to be bad on the ground that the State
Legislature had no authority to impose it. [869E-870A]

~- (4) In order to establish a quid pro quo concept it is not necessary
to establish exactly that the amount collected is spent ~n the services F
rendered. [872A]

Sourthern Pharmaceuticals & Chemicals Trichur & Ors. etc. v.
State of Kera/a & Ors. etc., [1982] l SCR 519 and Sreenivasa General
Traders & Ors. v. State of Andhra Pradesh & Ors., [1983] 3 SCR 843,
If referred to. G
~? '
f (5) So far as the charging of supervision fee is concerned, it
.. reasonably appears to be a charge for the services rendered. The High
Court was, therefore, not right in coming to the conclusion that this fee
was not justified because, according to the High Court, it was not
... established that the fee was in consideration of the services or privilege H
conferred on the transporter. [872F]
864 SUPREME COURT REPORTS [1989] 3 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1086
of 1971.

From the Judgment and Order dated 28.4. 71 of the Gujarat High
Court in S.C.A. No. 671of1970.

B R.F. Nariman, A.K. Verma and D.N. Misra for the Appellant.

V.J. Francis, (N.P.), Krishan Kumar, Vimal Dave & Co., M.N.
Shroff, (N.P.) and Girish Chandra for the Respondent.
•
The Judgment of.the Court was delivered by
c ' I
OZA, J. This appeal on certificate by the High Court of Gujarat ~-
is filed against the judgment of the Gujarat High Court dated 28th
April, 1971 holding Standing Order No. 3 framed under Section
466( l)(A)(f) read with Section 147 of The Bombay Provincial
Corporations Act, 1949 ('Act' for short) as illegal and without the
D authority of law.

This Act applies to the city of Baroda and the present appellant
the Municipal Corporation, Baroda is governed by this Act. It is not in
dispute that octroi on the import of goods is chargeable under the
scheme of the Act. Before this Standing Order which is the subject
E matter of challenge before the High Court and before us, was framed,
a transporter who brought the goods within the limits of the Municipal
Corporation in view of Section 147 of this Act was to pay the octroi
duty chargeable on the goods on the assumption that the goods have
been imported for sale, consumption or use in the limits of the city of
Baroda. Under the scheme as it was in force if the goods were not
F consumed or sold within the limits of the Municipal Corporation and
are taken out on the other end, and if the octroi post authority was
satisfied that the goods which had entered are being taken out then the
transporter had to get the tax which he had paid at the octroi post
refunded. According to the appellant corporation this procedure took
time at both the ends and for those transporters who were carrying
G goods which only were in transit in the city of Baroda still had to suffer
the inconvenience of paying the octroi duty when they entered the city
limits and then satisfy the authorities at the post from where they went
out of town and also had to pay first the tax and then claim a refund, in
order to avoid inconvenience and the burden on the transporter this
Standing Order was provided so that when a transporter enters the
H corporation limits with goods which are only in transit and not to be
MUNICIPAL CORPN. OF THE CITY OF BARODA v. BABUBHAI [OZA, J.l 865

). unloaded for sale or consumption within the corporation limits and if
the transporter so chooses on payment of supervision fees the trans-
A
porter can carry the goods through the corporation limits without pay-
ment of octroi under the supervision of the staff of the corporation and
for this purpose under this Standing Order fee of Rs.2 per heavy
vehicle was prescribed. It is alleged that originally the fee suggested
was Rs.S but on a representation made by the respondent association B
itself this was reduced to Rs.2 per vehicle.

By the impugned judgment, the High Court of Gujarat came to
the conclusion that under Section 466( l)(A)(f) of the Act no doubt the
Commissioner had the authority to frame standing orders but he can
only frame standing orders in respect of goods on which octroi was
payable under Section 466(1)( A.)(f) and as the goods admittedly for C
which this fee was prescribed were goods not to be imported for sale or
consumption the octroi was not payable thereon and therefore no
standing orders could be framed under Section 466(J)(A)(f) and there-
fore standing order providing for fees as discussed above was beyond
the authority of the Commissioner under this Act. o
The High Court also accepted the second contention of the
respondent that although the Corporation claim to charge the fee as a
fee for the convenience of the transporter but after examining the
scheme, the learned Judges of the High Court came to the conclusion
that there is no quid pro quo established nor it is established that the E
charge and the collection made on the basis of this charge had any
rationale ratio with the services rendered by the corporation.
Aggrieved by this decision of the High Court the Municipal Corpora-
tion has come up in appeal.

The main contention advancd on behalf of the appellant was that F
imposition of this fee by the Corporation could not be said to be an
imposition as it was optional, as when a transporter brings goods and
enters into the Corporation limits it was open to him either to choose
to take advantage of this Standing Order by paying supervision fees
and taking the goods straight under the supervision.of the Corporation
authorities without' the payment of octroi duty but if a transporter G
chooses not to take advantage of this Standing Order it was not com-
) pulsory and it was open to the transporter to pay the octroi in accor-
dance with the normal rule and follow the normal procedure by satisfy-
ing the checkpost authorities on the other end and claim refund and
get it after following the due procedure. It was therefore contended
that in fact this was an option given to the transporter so that if they so H
866 SUPREME COURT REPORTS [1989] 3 S.C.R.

choose they may follow this Standing Order and save themselves from
A
the hardship of paying the octroi and then claiming the refund and for
that purpose stopping at the entry checkpost and again at the exit
checkpost and also to satisfy the checkpost authorities that the goods
which had entered the corporation limits are being taken out in the
same state and it also involved handling of sum by the transporter so
B that it may be possible for him to pay the octroi on the entry checkpost
itself. It was therefore contended firstly that it being an option given to
the transporter, it could not be said to be an imposition or a tax and the
question of the authority of the Commissioner does not arise. That in
view of language of Section 466( l)(A)(f) it is clearly with the authority
of the Commissioner to frame Standing Orders, and the Standing
Orders had the approval of the Standing Committee and also of the
c State Government and therefore it could not be said that the Standing
Orders are not framed in accordance with Section 466.

It was also contended that the affidavit filed in the High Court by
the appellant clearly shows that how this fee is collected and spent for
D the purpose of giving a facility to the transporter for carrying the goods
in transit under the supervision of the corporation authorities so that
they have not to suffer the inconvenience and it was contended that in
substance therefore the requirement of quid pro quo is satisfied and in
fact the fee is charged only to facilitate the transporter in carrying the
goods in transit without payment of octroi and without undue deten-
E tion in the process of payment of octroi at the entry and claiming
refund at the exit. It is alleged that a notice was issued suggesting this
procedure as prescribed in Standing Orders, a representation was
made by the respondent association accepting the suggestion of the
Corporation but suggested that Rs.5 per vehicle suggested by the
Corporation would be too much and it should be reduced to Rs.2 and
F it was on this representation that in fact the Corporation, the present
appellant, chose to reduce the supervision charges to Rs.2 per vehicle.
It was therefore contended that. now this is not open to the respondent
association to say that this is not in accordance with law.

L~arned counsel for the respondent stated that although a rep-
G resent?.tion about the supervision fee was made by the association but
it coulJ not be said that there was any agreement entered into by the
associstion nor it could be said that the Association could enter into
such an agreement with the corporation. It was contended that the
High Court was right in reaching the conclusion that the Commissioner
had no authority under Section 466, and that in fact quid pro quo is not
H satisfied as no service is rendered to the transporter. Learned counsel
MUNICIPALCORPN. OFTIIECITYOFBARODA v. BABUBHAI [OZA,J.) 867

for the parties referred to the decision of this Court on the question of
A
fee and the principle of quid pro quo.

Section 466(1)(A)(f) reads:

"466( 1) The Commissioner may make standing orders
consistent with the provisions of this Act and the rules and B
by-laws in respect of the following matters namely:

(A) (a) xxx xxx xxx
xxx xxx xxx

(f) determining the supervision under which, the routes by
which and the time within which goods intended for c
immediate exportation shall be conveyed out of the City
and the fees payable by persons so conveying the goods;"

This contemplates the authority with the Commissioner to make
Standing orders consistent with this Act, rules or by-laws in respect of D
the Act. Clause (f) talks of supervision under which and the routes by
which and the time when goods introduced for immediate exportation
shall be conveyed out of the city and the fee is payable by the person
carrying the goods. It is therefore clear that this clause (f) con-
templates that Commissioner may by Standing Order prescribe the
procedure for the goods which are introduced in the city .limits, for E
immediate exportation and also the fees which could be charged. It is
therefore clear that this provision which confers the authority on the
Cc;mmissioner to frame Standing Orders do not talk of goods on which
octroi is payable. But Section 466 pertains to collection of octroi.
Sub-section (2) of this Section provides:
F
"(2) No order made by the Commissioner under cl'iuse
(A) of sub-section (1) shall be valid unless it is approved by
the Standing Committee and confirmed by the State Gov-
ernment, and no order made by the Commissioner under
clause (B) or paragraph (e) of clause (c) of sub-section(!)
shall be valid unless it is approved by the Standing G
Committee."

It is not in dispute that these Standing Orders have been approved by
the Standing Committee and confirmed by the State Government
which is clear from the Notification which reads as under:
"". H
868 SUPREME COURT REPORTS [1989] 3 S.C.R.
.4.
BARODA MUNICIPAL CORPORATION
A
"The Standing Orders made by the Municipal Com-
missioner, Baroda Municipal Corporation, Baroda under
Section 466( I)(A)(f) of the Bombay Provincial Municipal
·-corporation Act, 1949 vide his order No. 2441 dated ~
16.8.69 and approved by the Standing Committee under its
B
Resolution No. 882 dated 28th November, 1969 and con-

_, ...
firmed by Government under their Resolution P.H.D. No.
BMC 4470-160 P. Dated the 12th March, 1970.
j{

Section 147 of this Act reads: 'Ii

~'
c "Until the contrary is proved any goods imported into the \
City shall be presumed to have been imported for the
purpose of consumption, use or sale therein unless such
goods are conveyed from the place of import to the place of
export, by such routes, within such time, under such
supervision and on payment of such fees therefor as shall
D be determined by the standing orders."

It is clear from this Section that when any goods are brought ,_
within the corporation. limits a presumption arises that they have been
brought in for the purposes or sale or consumption and the burden lies
on the person who imports the goods to prove that they are not for sale
E or consumption and it is on the basis of language of Section 147 that
the normal procedure before this Standing Order was introduced, was
that the goods when enterd into the corporation limits, have to stop at
the checkpost and pay octroi duty on the goods as provided by the
rules. For getting out of the local limits, the transporter has to satisfy -~
the checkpost authorities that the goods on which he has paid octroi
F and imported are being exported out of the. city and it is only after
satisfying the authorities about the goods on which octroi is paid being
exported that the transporter can claim refund of the octroi duty
already paid. It is therefore clear that the language of Section 147 in
the scheme of the Octroi clearly indicates a presumption which is a
rebuttable presumption. Burden however lay on the transporter to I
G establish that the goods are not for consumption or sale. So far as this
scheme before the introduction of disputed Standing Order is con-
cerned, there is no controversy. The only controversy is the Standing
"
Order which has been introduced. It is also clear that so far as this
Standing Order No. 3 is concerned wherein the transporter is to pay a
supervision fees it is not compulsory as it is the option of the transpor-
H
MUNICIPALCORPN.OFTHECITYOFBARODAv.BABUBHAllOZA,J.] 869

;, ter to take advantage of this Standing Order if he so chooses otherwise
follow the normal procedure of payment 'of octroi and claiming refund
A
as is clear from the affidavit filed before the High Court by the appel-
]ant's officer i.e. Octroi Superintendent. Paragraph 14 of this affidavit
reads:

i "Thus the system of clearing the through traffic on charg-
ing normal supervision fees is really in the larger interest of
B

the importers. As I have pointed out hereinabove this is
not obligatory but purely voluntary and optional. Those
who do not want to avail of this facility need not avail it and
'
-lit-- allow the other procedure already indicated hereinaboe."
I
It is therefore clear that there is no compulsion on the transporter to c
/
f pay a supervision fee. It is only an option so that if the transporter
wishes to take advantage of this scheme and save time he can choose to
follow it.

It is thus clear that so far as the authority of the Commissioner D
under Section 466 of the Act is concerned and the manner in which the
Standing Orders are framed, it is clear that the Commissioner had the
authority and the Standing Orders have been framed in accordance
-{, ' with procedure prescribed under Section 466 and therefore on that
count the judgment of the High Court could not be sustained.
E
The High Court took the view that the State Legislature could
enact Section 466 only if it can be brought within the ambit of Entry 52
of this State list as, that is the only entry which authorises the State
Legislature to impose a tax on entry of goods into a local area and the
learned Judges felt that as under Section 466 and under the standing
t· order in question a supervision fee is charged on goods which are not
for sale or consumption in the local limits. This could not be justified
F

under Entry 52. The learned Judges therefore took the view that
Standing Orders which the Commissioner could frame under Section
466 could be in respect of goods on· which octroi is payable and not
pertaining to the goods on which the octroi is not payable. It appears
that while taking this view the High Court was examining this fees G
\ prescribed as a tax and it is on the basis of this that the High Court
took the view that no such tax could be levied on goods on which no

"" octroi is payable. So far as the question as to whether this fees could be
said to be a tax is concerned, there is no difficulty as even the learned
counsel appearing for the appellant do not contend that it can be said
to be a tax and as it is not a tax the imposition could not be said to be H
870 SUPREME COURT REPORTS [1989]3 S.C.R.

A
bad because the State Legislature had no authority to impose it. It was .._
contended by the learned counsel that in view of Section 147 quoted
above any import within the local limits would draw a presumption
that it is for consumption or sale and therefore octroi duty on the
goods becomes payable. By this Standing Order, the Corporation has
attempted to make it convenient to the transporter not to involve in
·~
B the payment of octroi duty at the entry and after satisfying the
authorities at the exit end claim the refund of the octroi paid, thereby
the Corporation intended to help the transporter in saving time and
also in payment of the octroi at one end and later on claiming a refund.
This in fact was the service rendered by the corporation to the benefit
of the transporter and this fees which was charged was just to meet the ~·
approximate expenses that the Corporation may have to incur to pro-
c vide this facility as has been clearly stated by the corporation officer in ~
his affidavit before the High Court and in fact even the corporation
accepted the suggestion of the petitioner association when the associa-
tion suggested to the appellant corporation to reduce this fees from
Rs.5 to Rs.2 which is clear from the Jetter written by the Association to
D the Corporation dated 3 lst March, 1970. As regards this aspect of the
matter, the learned Judges of the High Court came to the conclusion
that there was no quid pro quo established which could justify the levy
of this fees as fees for the services rendered in the interest of the
transporter. In Southern Pharmaceuticals & Chemicals Trichur & Ors.
,_.
etc. v. State of Kera/a & Ors. etc., [1982) 1 SCR 519 this Court after
E considering the various decision distinguished fees from tax in these
words;

"'Fees' are the amounts paid for a privilege, and are not an
obligation, but the payment is voluntary. Fees are distin-

F
guished from taxes in that the chief purpose of a tax is to
raise funds for the support of the Government or for a -1'
public purpose, while a fee may be charged for the
privilege or benefit conferred, or service rendered or to
meet the expenses connected therewith. Thus, fees are
nothing out payment for some special privilege granted or
service rendered."
G
As regards the principle of quid pro quo rule in the same judgment it I
was observed:
....
''That is because the Constitution did not contemplate it to
be an essential element of a fee that it should be credited to
H a separate fund and not to the consolidated fund. It is also
MUNICIPALCORPN. OFTIIECITYOFBARODA v. BABUBHAI [OZA,J.I 871
). increasingly realised that the element of quid pro quo
A
stricto senso is not always a sine qua non of a fee. It is
needless to stress that the element of quid pro quo is not
necessarily absent in every tax."

In the light of these observations if the affidavit filed on behalf of the
appellant Corporation explaining the amount expected to be collected B
and spent in the process of supervision is examined it could not be said
as was stated by the High Court that it did not satisfy the quid pro quo
principle. It is in this background that the question that this Standing
Order does not impose a compulsory levy but it only gives an option to
the transporter to take advantage of this provision makes it further

/
~. clear that it is not a levy or an imposition of tax but merely a fees
charged for the privilege or services rendered to the payer. In c
Sreenivasa General Traders & Ors. etc. v. State of Andhra Pradesh &
Ors. etc., [ 1983] 3 SCR 843 this Court considered series of decisions on
the question and observed:

"There is no generic difference between a tax and a fee. D
Both are compulsory exactions of money by public
authorities. Compulsion lies in the fact that p"ayment is
enforceable by law against a person inspite of his unwil-
lingness or want of consent. A levy in the nature of a fee
does not cease to be of that character merely because there
is an element of compulsion or coerciveness present in it, E
nor is it a postulate of a fee that it must have direct relation
to the actual service rendered by the authority to each indi-
vidual who obtains the benefit of the service. It is now
increasingly realized that merely because the collections for
the service rendered or grant of a privilege or licence are
taken to the consolidated fund of the State and not sepa- F
rately appropriated towards the expenditure for rendering
the service is not by itself decisive. Presumably the atten-
tion of the Court in the Shirur Mutt case was not drawn to
Art. 266 of the Constitution. The Constitution nowhere
contemplates it to be an essential element of fee that it
should be credited to a separate fund and not to the con- G
solidated fund. It is also. increasingly realized that the
element of quid pro quo in the strict sense is not always a
I sine qua non for a fee. It is needless to stress that the
element of quid pro quo is not necessarily absent in every
tax: Constitutional Law of India by H.M. Seervail Vol. 2,
2nd Edn. p. 1252, para 22.39." H
872 SUPREME COURT REPORTS [1989] 3 S.C.R.

A It is therefore clear that in order to establish a quid pro quo concept it
is not necessary to establish exactly that the amount collected is spent
on the services rendered as it was further observed in this decision:

"The traditional view that there must be actual quid pro
quo for a fee has under gone a sea change in the subsequent
B decisions. The distinction between a tax and a fee lies
primarily in the fact that a tax is levied as part of a common
a
-
burden, while fee is for payment of a specific benefit or
privilege although the special advantage is secondary to the
primary motive of regulation in public in public interest. If
the element of revenue for general purpose of the State
predominates, the levy becomes a tax. In regard to fees
c there is, and must always be, correlation between the fee
collected and the service intended to be rendered. In
determining whether a levy is a fee, the true test must be
whether its primary and essential purpose is to render
specific services to a specified area or class; it may be of no
D consequence that the State may ultimately and indirectly
be benefitted by it. The power of any legislature to levy a
fee is conditioned by the fact that it must be 'by and large' a
quid pro quo for the services rendered. However, correla-
tionship between the levy and the services rendered
expected is lone of the general character and not of
E mathematical exactitude. All that is necessary is that there
should be a "reasonable relationship" between the levy of
the fee and the services rendered."

It is therefore clear that so far as the charging of supervision fees is
concerned it reasonably appears to be a charge for the services -i
F rendered from the affidavit filed by the Officers of the Appellant
Corporation and therefore the High Court was not right in coming to
the conclusion that this fees was not justified as it is not established
that it reasonably satisfies that it is in consideration of the services or
privilege conferred on the transporter on goods in transit.

G In our opinion, therefore, the judgment of the High Court could
not be sustained. The appeal is therefore allowed. The judgment of the
High Court is set aside and it is held that the Standing Order No. 3
passed by the appellant Municipal Corporation is valid and enforce-
able. The appellant shall also be entitled to costs of this appeal. Costs
quantified at Rs.5,000.
H
R.S.S. Appeal allowed.