Cantonment Board Cannot Levy Bar License Fee Based On Restaurant's Annual Revenue: Jammu & Kashmir High Court

The Jammu and Kashmir and Ladakh High Court has ruled that a Cantonment board cannot levy trade license fee from a restaurant operating within its jurisdiction based on the restaurant's annual revenue. A bench comprising Justice Moksha Khajuria Kazmi observed,

"Claim of the respondents (Cantonment Board) of fixing the licence fee proportionate to the revenue earned by the petitioner (Restaurant) and on the basis of the fee in terms of notification, SO275 of the excise department, cannot be taken into account because of the fact that firstly, the respondents have no access to the revenue earned by the petitioner and secondly the licence fee charged by the respondents is with respect to the sanitation, hygiene and a licence to run the business etc., in the Cantonment Area of the respondents.

It is not the income tax or any other tax which is proposed to be taken on the income earned by the petitioner but, it is a licence fee to be fixed, and the procedure to be followed for fixing licence fees is already specified as reasonable in section 277(4) of the Cantonment Act, 2006. The action of the respondents in fixing excessive licence fee has virtually made Section 277(4) of the Cantonment Act, 2006 as redundant."

Justice Kazmi made these observations while hearing a plea assailing the letter and minutes of the meeting issued by the Cantonment Board, demanding trade license fee of Rs. 5,00,000/- for their bar and restaurant and alleging violation of Section 277(I)(J) of the Cantonment Act, 2006.

The petitioner is engaged in the business of a bar and restaurant in the Cantonment area of Srinagar and had obtained a trade license for the year 2020-2021 under section 277 of the Cantonment Act, 2006. Initially, the annual fee was Rs. 10,000. However, in 2014, the Cantonment Board passed a resolution increasing the trade license fee and petitioner paid Rs. 2,44,500 for the year 2015-2016, and since then, he had been paying the fee at the increased rate with a 10% enhancement every year.

During this period the petitioner filed an application under the Right to Information Act, 2005, seeking information on the rates and found that other traders were still being charged a nominal annual fee of Rs. 550.

When the petitioner protested to this, the respondents justified their decision by referring to the fee charged by the Government of J&K, specifically a notification issued on August 31, 2020 (SO 275). In a communication dated July 12, 2021, the respondents agreed to renew the trade license but imposed a condition for the petitioner to deposit Rs. 5,00,000 for the period 2021-2022. It was this condition that was challenged.

Senior Counsel Pranav Kohli for the petitioner argued that the Cantonment Board lacks the authority to exceed the rates, and in any case the municipality charges a much lower annual license fee, as evidenced by a notification from the Srinagar Municipal Corporation. He contended that the trade fee is a license fee, not a tax, and no services are provided by the respondents to justify the fee and the excessive fee charged by the respondents is without legislative competence and violates Article 14 and 19(1)(g) of the Constitution.

Advocate Shahbaz Sikandar for the respondent board argued that the trade license fee is determined based on the revenue generated by traders, particularly for non-essential items. Since the petitioner had not raised any objections regarding the fixation of the license fee until 2021 and had consistently paid the fee as determined by the respondent board, the principle of estoppel should be applied against the petitioner, he contended.

Adjudicating upon the matter Justice Kazmi noted that Section 277(4) of the Cantonment Act, 2006, clearly states that the Board may charge for the grant of licences, such reasonable fees, as it may fix keeping in view the fees levied in this regard in a municipality in the State where such Cantonment is situated.

"The intent of the legislature is clearly reflected in Section 277(4), wherein, it is categorically mentioned that the Board has to charge and fix fees for the grant of licences only such reasonable fees levied at par with the fees fixed by the municipality in the state where such Cantonment is situated", the bench underscored.

It thus held that the license fee imposed on the petitioner's establishment by the respondents is unreasonable and contrary to Section 277(4) of the Cantonment Act, 2006.

"The discretionary powers must be exercised within its legal boundaries and must not become ultra vires of the statute. Discretionary power regarding policy-making, is not a licence to be used in an arbitrary and biased manner according to one‟s whims and fancies and personal interests," the bench emphasised.

Accordingly the court quashed the letter and the Minutes of Meeting which imposed an exorbitant trade license fee on the petitioner's bar. The respondents were directed to set a reasonable trade license fee in accordance with Section 277(4) of the Act, taking into consideration the license fees charged by Cantonment Boards in other States and Union Territories of the country.

Case Title: M/S Highlander Bar and Restaurant Vs Union of India

Citation: 2023 LiveLaw (JKL) 140

Counsel For Petitioner: Mr. Pranav Kohli, Sr. Advocate with Mr. Arun Dev Singh, Advocate.

Counsel For Respondent: Mr. T. M. Shamsi, Dy. SGI for R 1 to 6 Mr. Shahbaz Sikander, Advocate for R 7 & 8

Click Here To Read/Download Judgment