IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN TUESDAY, THE 22ND JUNE 2010 / 1ST ASHADHA 1932 OP.No. 37578 of 2001(W) ----------------------- PETITIONER(S): --------------- PLANT MANAGER, INDIAN OIL CORPORATION LIMITED, INDANE BOTTLING PLANT, P.O.CHELARI, THENHIPALAM, MALAPPURAM DISTRICT. BY ADV. SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SMT.PRIYA MAHESH SMT.PRIYA MANJOORAN RESPONDENT(S): --------------- THE SECRETARY, THENHIPALAM GRAMA PANCHAYATH, THENHIPALAM, MALAPPURAM DISTRICT. ADV. SRI.GEORGE THOMAS (MEVADA), SENIOR ADVOCATE SRI.RATHISH VIJAYENDRAN THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 22/06/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ORDER ON C.M.P.NO.61495/2001 IN O.P.NO.37578 OF 2001 DISMISSED 22.6.2010 SD/- P.N.RAVINDRAN, JUDGE. APPENDIX PETITIONER'S EXHIBITS: EXT.P1: TRUE COPY OF THE APPLICATION FOR LICENCE DATED 26.10.1993. EXT.P2: TRUE COPY OF LETTER DATED 13.10.1993 FROM THE RESPONDENT TO THE PETITIONER. EXT.P3: TRUE COPY OF LETTER DATED 15.2.1994 FROM THE RESPONDENT TO THE PETITIONER. EXT.P4: TRUE COPY OF LICENCE DATED 20.4.94 FOR THE PERIOD FROM 1.4.1994 TO 31.3.1995. EXT.P5: TRUE COPY OF DEMAND NOTICE ISSUED BY THE THENHIPALAM GRAMA PANCHAYAT DATED 18.9.2001. EXT.P6: TRUE COPY OF REPLY LETTER DATED 20.9.2001 FROM THE PETITIONER TO THE RESPONDENT. EXT.P7: TRUE COPY OF LETTER DATED 27.9.2001 FROM THE PETITIONER TO THE RESPONDENT. EXT.P8: TRUE COPY OF THE NOTICE DATED 29.9.2001 FROM THE RESPONDENT TO THE PETITIONER. EXT.P9: TRUE COPY OF THE NOTICE DATED 5.10.2001 FROM THE RESPONDENT TO THE PETITIONER. EXT.P10: TRUE COPY OF OBJECTION DATED 20-10-2001 FROM THE PETITIONER TO THE RESPONDENT. EXT.P11: TRUE COPY OF THE REPLY LETTER DATED 30-10-2001 FROM THE RESPONDENT TO THE PETITIONER. EXT.P12: TRUE COPY OF THE APPLICATION FORM DATED 7.11.2001 FROM THE PETITIONER TO THE RESPONDENT. EXT.P13: TRUE COPY OF THE COVERING LETTER DATED 7.11.2001 FROM THE PETITIONER TO THE RESPONDENT. EXT.P14: TRUE COPY OF THE ORDER DATED 26.11.2001 FROM THE RESPONDENT TO THE PETITIONER. // TRUE COPY // TKS “C.R” P.N.RAVINDRAN, J. ---------------------------- O.P.No.37578 of 2001 ---------------------------- Dated 22nd June, 2010 JUDGMENT The Plant Manager of the LPG Bottling Plant established by the Indian Oil Corporation within the local limits of Thenhipalam Grama Panchayat, in Malappuram District is the petitioner in this original petition. 2. The Indian Oil Corporation established the bottling plant within the local limits of Thenhipalam Grama Panchayat in the year 1992-93. After the plant was established, they applied for a licence under the provisions of the Kerala Panchayats (Licensing of Dangerous and Offensive Trades and Factories) Rules, 1963. Such a licence was granted and it was renewed up to 31.3.1995. In the meanwhile, the Kerala Panchayat Raj Act, 1994 was enacted and brought into force. The Government thereupon issued the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996. The Indian Oil Corporation did not however apply for renewal of the licence issued under the erstwhile rules. The Secretary, O.P.No.37578/2001 2 Thenhipalam Grama Panchayat thereupon issued Ext.P5 demand notice dated 18.9.2001 to the petitioner demanding payment of the sum of Rs.2,28,789/- being the licence fee and penalty payable for the period from 1996-1997 to 2001-2002. Reference was made to sections 231 and 231B of the Kerala Panchayat Raj Act, 1994. Another notice dated 17.9.2001 was also issued calling upon the petitioner to show cause why he should not be prosecuted for running the plant without a licence. The petitioner responded to the said notices by sending Ext.P7 letter dated 27.9.2001 raising various contentions including the contention that section 231 referred to in Ext.P5 notice has no application and that section 231B is not in the statute. The Panchayat thereupon issued Ext.P8 proceedings dated 29.9.2001 withdrawing Ext.P5 notice and the notice dated 17.9.2001 on the ground that reference was made to wrong provisions of law. The Panchayat thereafter issued Ext.P9 notice dated 5.10.2001 calling upon the petitioner to show cause why proceedings should not be taken against the establishment for running the bottling plant without a licence. The petitioner in turn sent Ext.P10 letter dated 20.10.2001 contending that licence fee can be levied only for machinery having a total capacity of 432 HP and that fire O.P.No.37578/2001 3 pumps and diesel generating sets are not machinery used in the manufacturing process. 3. The Panchayat considered the said contention and thereafter issued Ext.P11 notice dated 30.10.2001 demanding payment of the sum of Rs.1,69,875/- being the arrears of licence fee payable for the period from 1996-97 to 2001-2002. Ext.P11 notice was issued on the basis that the capacity of the machinery installed in the bottling plant is 1865 HP, that the licence fee payable under rule 7 of the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 based on the average daily turnover is Rs.4,000/- in terms of Schedule II of the said rules, that the licence fee payable in respect of the machinery used in the bottling plant, calculated in accordance with Schedule III thereof is Rs.18650/- and that the additional fee payable under rule 19 of the aforesaid rules for belated payment of licence fee and application for licence is 25% of the licence fee of Rs.22650/-, namely Rs.5,662.50. Ext.P11 discloses that the Panchayat had on that basis demanded from the petitioner the sum of Rs.28,312.50 per year during the period from 1996-97 to 2001-2002. The petitioner thereupon remitted the sum of Rs.15,560/- which according to the O.P.No.37578/2001 4 petitioner was the actual amount of fee and additional fee payable for the said period and submitted Ext.P12 application dated 7.11.2001 for renewal of the licence for the period from 1996-97 to 2001-2002. The Panchayat received the said payment and after giving credit to it issued Ext.P14 notice dated 26.11.2001 demanding payment of the balance amount of Rs.1,54,315/- so that Ext.Ext.P12 application can be considered. The petitioner was also cautioned that unless the licence is renewed after payment of arrears, the Panchayat will be constrained to initiate appropriate proceedings against the petitioner. Exts.P9, P11 and P14 are under challenge in this original petition. The petitioner has also prayed for a direction to the respondent to issue license to the petitioner after accepting payment of Rs.15,560/- towards license fee. 4. The petitioner contends that as no fresh decision had been taken after the Panchayat Raj Act, 1994 was enacted and brought into force to renew the license, the licence should have been renewed on the terms initially fixed, namely, licence fee at the rate of Rs.2,070/- per year. It is also contended that the installed capacity of the machinery used in the bottling plant is only 432 HP and not 1865 HP as stated by the Panchayat and O.P.No.37578/2001 5 that licence fee is payable only for machinery having an installed capacity of 432 HP. As a matter of fact, in Ext.P12 application itself the daily turnover is mentioned as Rs.30,00,000/-. If that be so, the licence fee based on the daily turnover itself for the period from 1996-97 to 2001-2002 (six years) would work out to Rs.24,000/-. However, the petitioner had remitted only the sum of Rs.15,560/- which according to the petitioner was the licence fee and additional licence fee payable for the period from 1996- 97 to 2001-2002. 5. Though the respondent Panchayat has been served, till date the Panchayat has not filed a counter affidavit. The Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 came into force on 18.1.1996. Rule 7 thereof enables the respondent Panchayat to levy licence fee based on the daily turnover at the rate stipulated in schedule II thereof. In the instant case, the licence fee demanded from the petitioner is Rs.4,000/=, which is based on the fact that the turnover per day is in excess of Rs.1,00,000/-. The petitioner has not pleaded or proved with reference to any cogent material that the average daily turnover is below Rs.1,00,000/-. As a matter of fact in Ext.P12 application dated O.P.No.37578/2001 6 7.11.2001 it is admitted that the daily turnover is Rs.30,00,000/-. If that be so, it can be safely presumed that the daily turnover during the period from 1996-97 to 2001-2002 was in excess of Rs.1,00,000/-. The demand under rule 7 is therefore perfectly legal. Rule 18 of the Kerala Panchayat Raj (Issue of Licence to Dangerous and Offensive Trades and Factories) Rules, 1996 stipulates that the fee that may be charged for granting licence or for the renewal of licence for one year under section 232 of the Kerala Panchayat Raj Act for the place where any machinery or manufacturing plant operated by electricity is used shall not exceed the maximum specified in Schedule III appended to the said rules. Rule 19 thereof stipulates that the maximum fee specified in Schedule III to the said rules shall be applicable only for the application submitted in due time and that in the case of belated applications an additional fee of 25 per cent of the fee for licence payable under the schedule may be charged. Rules 18 and 19 are extracted for easy reference: “18. Maximum fee for the place where machinery or manufacturing plant operated by electricity is used.- The fee that may be charged for granting licence or for the renewal of licence for one year under Section 232 for the place where any machinery or manufacturing plant operated by electricity, is used shall not exceed the maximum O.P.No.37578/2001 7 specified in Schedule III appended to these rules: Provided that where any such licence is granted or renewed for a period that is less than one year, the total fee that may be charged for the same place for any year in respect of the same machinery or manufacturing plant shall not exceed the fee that may be charged for granting or renewing licence for one year: Provided further that the fee that may be charged under this rule shall not exceed the fee charged for the installation of any machinery or manufacturing plant having the same horse power operated by means other than that of electricity. (emphasis supplied) 19. Additional Fee.- The maximum fee specified in Schedule III appended to these rules shall be applicable only for the application submitted in due time. In the case of belated applications an additional fee of 25 per cent of the fee for licence payable under the schedule may be charged.” 6. The petitioner does not dispute the fact that the total installed capacity of the machinery installed in the bottling plant is 1865 HP. The contention of the petitioner is that for the purpose of computation of the licence fee, the fire pumps and diesel generating sets cannot be taken into account as they are not used in the manufacturing process. In other words, the contention is that licence fee can be levied only for machinery having an installed capacity of 432 HP which alone is used in the manufacturing process and that the fire pumps, 3 in number (732 HP) and diesel generating sets, 3 in number (701 HP) O.P.No.37578/2001 8 cannot be reckoned for the purpose of computation of licence fee. In my opinion, there is no merit in the said contention. The fire pumps are the integral part of the establishment of the petitioner. Without fire pumps, the petitioner cannot run the bottling plant. It also needs diesel generating sets to supply power when the supply of power by the Electricity Board is disrupted. Without such safety and back up measures, the petitioner cannot run the bottling plant. Rule 18 does not stipulate that fee can be charged only for the machinery actually used in the manufacturing process. Rule 18 empowers the local authority to charge licence fee under section 232 of the Panchayat Raj Act for the place where any machinery or manufacturing plant operated by electricity is used. It does not stipulate that the electricity used should be supplied by the Kerala State Electricity Board and cannot be self generated power. Rule 18 or Schedule III of the aforesaid rules also does not draw a distinction between the machinery actually used in the manufacturing process and machinery which is required to be installed for the purpose of ensuring safety and also for uninterrupted supply of power. The petitioner does not dispute the fact that the total installed capacity of the machinery is 1865 O.P.No.37578/2001 9 HP. If that be so, the levy of licence fee at the rate of Rs.18,650/- per annum is perfectly in order. The petitioner had not admittedly renewed the licence after 31.3.1995. Therefore, the Panchayat is in my opinion justified in levying additional fee at the rate of 25% of the licence fee payable. In the instant case, the total licence fee payable is Rs.18650/- + Rs.4000/- = 22650/- per year. 25% of that amount namely Rs.5,662/- is demanded as late fee. It is thus evident that the demand made by the Panchayat in Ext.P11 is perfectly in order and in accordance with the provisions contained in the rules. The contention of the petitioner that they are liable to pay only Rs.15,560/- towards licence fee and penalty for the period from 1996-1997 to 2001-2002 cannot therefore be sustained. 7. I also find no merit in the contention of the petitioner that in view of section 284(2)(a) of the Kerala Panchayat Raj Act, 1994 the petitioner is not bound to pay the enhanced licence fee stipulated in the 1996 rules. The stipulations in clause (a) of sub-section (2) of section 284 of the Kerala Panchayat Raj Act, 1994 do not in my opinion enable the petitioner to contend for the said position. All that the said provision stipulates is that any fee imposed under the erstwhile O.P.No.37578/2001 10 Kerala Panchayat Raj Act, 1960 immediately before the appointed day, namely the date on which the Kerala Panchayat Raj Act, 1994 came into force will continue to be in force until it is modified by any rule made under the Kerala Panchayat Raj Act, 1994. The 1996 rules is a rule made under the Kerala Panchayat Raj Act, 1994. Thus, with the framing and issuance of the aforesaid rules, the stipulation in section 284 2(a), ceased to be effective. The petitioner is therefore bound to pay licence fee at the rates stipulated in the 1996 rules. 8. The petitioner has a further contention that in view of the provisions contained in section 243 of the Kerala Panchayat Raj Act, 1994, the local authority cannot recover the arrears of licence fee after the expiry of a period of three years from the date on which the fee was payable. In my opinion, section 243 has no application to the instant case. The Panchayat has not taken steps to recover the amount payable under 1996 rules. All that the Panchayat has done in the instant case is to impose a condition that if the petitioner wants a renewal of the licence, it should pay the arrears of licence fee as stipulated under rules 7 and 18 together with the additional fee payable under rule 19 of the 1996 rules. The Indian Oil O.P.No.37578/2001 11 Corporation, which is an instrumentality of the Government of India cannot in my opinion be heard to contend that it was entitled to run the bottling plant without obtaining a licence from the local authority. As an instrumentality of the State, the Indian Oil Corporation had an obligation to pay the licence fee from time to time and also to apply for renewal of the licence in time. It ought to have set an example to other industrialists and establishments instead of evading payment of licence fee. The Indian Oil Corporation would not have condoned such lapses on the part of its dealers if they had failed to comply with the statutory stipulations. In such circumstances, I am of the opinion that as an instrumentality or agency of the State, the Indian Oil Corporation cannot put forward a technical plea that the claim of the Panchayat is barred by limitation. If such contentions are accepted, it will lead to a situation where Government run establishments can decline payment of licence fee or even refuse to take out a licence thereby violating the law and depriving the local authorities of their right to levy licence fee and collect it. I accordingly hold that no grounds have been made out for the grant of the reliefs payed for in the original petition. The original petition fails and is accordingly dismissed. It is O.P.No.37578/2001 12 clarified that the respondent Panchayat need renew the licence only if the petitioner pays the entire amount of licence fee payable as per the rules right from the period 1996-1997 till date within one month from the date of receipt of a certified copy of this judgment. If the petitioner does not comply with the said direction, the Panchayat will be free to take appropriate steps including steps to prevent the continued functioning of the bottling plant. P.N.RAVINDRAN Judge TKS