Several petitions were filed before the Karnataka High Court challenging the Ground Rent, Licence Fee, Building Licence Fee, Scrutiny Fee, Security Deposit imposed by BBMP on various constructions and the same were quashed by the High Court on the ground of being ultra vires the Karnataka Municipal Corporations Act, 1976.
Date of judgment:
August 04, 2021
Justice M Nagaprasanna, J.
Petitioner: MR. SUNDERAM SHETTY
Respondents: STATE OF KARNATAKA
Whether the impugned cess and fees lack the sanction of legal authority? Whether the demand and imposition made by BBMP and State government ultra vires?
- Article 265 of the Constitution.
- Sections 103, 295, 310 and 423 of Karnataka Municipal Corporations Act, 1976.
- Provisions of the Workers’ Welfare Cess Act, 1996 that deal with labour cess.
- Bangalore Mahanagara Palike Building Bye-Laws, 2003.
- Several writ petitions were filed before the Karnataka High Court against BBMP and the State government challenging the imposts/fee imposed by the Bruhath Bengaluru Mahanagara Palike(BBMP) upon the residents and developers/builders of the city of Bengaluru.
- The court used three leading petitions W.P.No.36017/2018, W.P.No.4601/2020 and W.P.No.8849/2020, since all the petitions raise a common issue.
- Writ petition no. 36017/2018 was filed by M/s Vaswani Estates Developers Private Limited that agreed with the landowner to construct a commercial building and also obtained no-objection certificates from several authorities for the same.
- It was mentioned that the company along with other requisite documents approached the Town Planning Department of BBMP and was demanded Rs.1,86,86,000/ for endorsement and an additional amount of labour cess of Rs.17,16,200/- for grant of building licence and sanction of the plan and the same are challenged in this petition.
- The petitioner of W.P.No.4601/2020 is Mr Sunderam Shetty and others and the contention of this writ is almost the same as the previous writ as they were also demanded several crores on various heads for grant of such permission and licence and it challenged fees such as ground rent, licence fee, lake rejuvenation fee and scrutiny fee.
- In petition number .8849/2020, the petitioner has challenged the demand of Labour Cess imposed by the Government of Karnataka under the Building and Other Construction Workers’ Welfare Cess Act, 1996.
- The petitioners have contended that they are only liable to pay betterment fee, compound wall fee and no other fee that is imposed by the government.
- It is stated that the demand of labour cess by the government is without the authority of law, without application of mind and contrary to the Act and the Rules and the Byelaws.
- Ms Nayanatara, counsel representing the petitioner submitted before the court that BBMP doesn’t have the authority to levy the challenged fee, it is levied without any authority of law and is violative of Article 19(1)(g) of the Constitution of India.
- Another counsel challenged the labour cess and stated that it is against the procedure laid down in the Welfare Act and both BBMP and the government don’t have the power to demand the fee in the manner it is demanded.
- The counsel for the BBMP had submitted that the fees charged by BBMP are not in the form of taxes and the same is leviable by the BBMP in terms of powers conferred in it by the bye-laws.
- The counsel for the state government submitted that levying of fees is within the provisions of the Welfare Cess Act and the Rules made thereunder and since the Act is welfare legislation, imposition of payment of labour cess cannot be said illegal.
- The court before looking into the issues and contentions made by the parties considered the position of law in the matters of imposition of such imposts or a fee and noted that Article 265 of the constitution gives the power to state and central government to impose taxes in accordance with the law.
- The court looked into several judgments such as Commissioner, Hindu Religious Endowments v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, Corporation of Calcutta v. Liberty Cinema, Nagar Mahapalika v. Durga Das Bhattacharya, Delhi Race Club Vs. Union of India, Jindal Stainless Ltd. v. State of Haryana etc.
- Observing the cases, the court looked into the interpretation of tax and fee and the power of the government and other authorities to demand cess.
- The court remarked 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.
- The court first looked into the Karnataka Municipal Corporations Act, 1976 to consider the contention of BBMP that they are empowered to levy impugned fees under the Act and the bye-laws.
- Section 103 of the Act lays down provisions for imposition of the tax, Section 295 deals with the building of bylaws by a corporation on the approval of government under the Act, Section 310 deals with completion certificate and permission to occupy or use a particular building, section 423 deals with corporation’s power to make bylaws.
- The court noted that levy of fee can be done only in the matters allowed by the Act which is mentioned under sub-section 20(b) of Section 423 and those matters are the use of such burial, burning grounds and crematoria that are maintained by the Corporation.
- The court noted that the bylaws are made in terms with the power conferred by the act and the Bangalore Mahanagara Palike Building Bye-Laws, 2003 supersede the bylaws made in 1983 and therefore court decided to look into every levy/fee that is imposed by the Corporation separately.
- The court first dealt with the levying of ground rent which is mentioned under Bye-law Nos.3.8 to 3.13 and noticed that ground rent is imposed when materials are stocked on the roads managed by BBMP.
- The court said that in the instant case, petitioners had their own space to keep materials and the imposition of ground rent had no backing of the law and is done with no application of mind.
- While looking into the imposition of building license fees and license fees, the court stated that it lacks the sanction of law and the same can be said about scrutiny fees.
- Therefore, the court stated that the ground rent, licence fee and the scrutiny fee are all out of the scope of the powers under the Act.
- The court held that the authority has no power under the act to impose the impugned levies i.e., ground rent, licence fee, building licence fee, scrutiny fee and security deposit as they do not come under the ambit of quid pro quo which means ’fee’ that can be imposed for a service that is rendered.
- The court looked through the judicial interpretation of fees and concluded 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 and its imposition can only be quid pro quo.
- The court noted that the lake rejuvenation fee is not imposed under the Act but on the basis of a circular that was passed in 2017 and the Act does not authorise BBMP to charge any such fee.
- The court also held that the petitioners will be liable to pay labour cess as mandated under the Act but they will not have to pay it upfront before construction takes place.
- The court allowed all the writ petitions and held that the bye-laws under which Ground Rent, Licence Fee, Building Licence Fee, Scrutiny Fee, Security Deposit are all ultra-Vires the Act and are therefore furnished unenforceable.
There have been several instances where the government authorities charge unnecessary fees/cess on people in exchange for providing permissions and licenses and the same was brought before the Karnataka High Court in the instant case. The BBMP and Karnataka state government were levying unnecessary fees on the companies that wanted to carry out construction and needed the permission of the same from BBMP. The authorities were demanding excessively high charges to provide permission and the same was challenged before the HC. The court looked into various acts and byelaws of the government to understand the interpretation of fees and the power of authorities to levy such charges.
The court held that fees levied by BBMP were ultra vires the Act and the authorities had no power to impose such charges. It also mentioned that the fees can only be charged under the principle of quid pro quo which means that the fees can only be charged only in exchange for some service.
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