CORPORATION OF CALCUTA AND ANOTHER v. LIBERTY CINEMA

Citation: [1965] 2 S.C.R. 477; 1964 INSC 286

Court: Supreme Court of India

Bench: A.K. SARKAR , K. SUBBA RAO, RAGHUBAR DAYAL, N. RAJAGOPALA AYYANGAR, J.R. MUDHOLKAR

Judgment date: 1964-12-14

Case summary

1964 INSC 286. Supreme Court of India judgment dated 1964-12-14. CORPORATION OF CALCUTA AND ANOTHER v. LIBERTY CINEMA. Read the judgment and case details on...

Judgment text

A CORPORATION OF CALCUTIA AND ANOTHER v. LIBERTY CINEMA December 14, 1964 477 B [A. K. SARKAR, K. SuBBA RAo, RAGHU. BAR DAYAL, N. RAJA- GOPALA AYYANGAR AND J. R. MUDHOLKAR, JJ. ] Calcutta Municipal A. ct (33 of 1951), ,. 413 and 548-Licen. re fee on cinema houses-whether tax or fee for rendering service-Validity of levy and s. 548. Under a. 413 of the Calcutta Municipal Act, 1951, no person shall c without a licence granted by the Corporation of Calcutta, keep open any cinema house for public amusement in Calcutta. Under s. 548(2), far every licence under the Act, a fee may be charged at such rate as may from time to time be fixed by the Corporation. In 1948, the appellant (Corporation) fixed fees on the basis of annual valuation of the cinema house. The respondent, who was the owner and licencee of a cinema theatre, had been paying a licence fee of Rs. 400 per year on that basil!. In 1958, the appellant, by a Resolution, changed the basis of assessment D of the fee.

Under the new method the fee was to be assessed at ratee prescribed per show according to the sanctioned seating capacity of the cinema house; and the respondent had to pay a fee of Rs. 6,000 per year. The respondent, therefore, moved the HiJ! h Court for the issue of a writ quashing the resolution and the application was allowed. In the appeal to the Supreme Court the appellant contended that : (i) the levy was a tax and not a fee in return for services and (ii) •· E 548 ( 2) does not suffer from the vice of excessive delegation; while the respondent contended that ( i) the levy was a fee in return for services to be rendered and not a tax, and as it was not commensurate with the costs incurred by the Corporation in providing the services, the levy was invalid; (ii) if s.

548 authorised the levy of a tax, as distinct from a fee in return for service rendered, it was invalid, as it amounted to an illegal delegation of legislative functions to the appellant to fix the amount of a tax "without any guidance for the purpose and (iii) the levy was invalid F as violating Art. 19(1) (f) and (g) of the Constitute. HELD (per Sarkar, Raghubar Dayal and Mudholkar JJ) : (i) The levy was not a fee but a tax. (490 Fl 1k Act does not intend to use the word "fee" as referring only to a levy in return for services, for, the levies authorised by some other sec- tions of the Act are really "taxes", though called "fees". Besides, the words used are "fee for the licence" and these words do not necessarily G mean a "fee in return for services" as is apparent from Arts. 110(2) and 199(2) of the Constitution, where both expressions are used indicat- ing that they are not the same. [483 G-H] The word "fee" in s.

548 must be read as referring to a tax as any other reading would make the section invalid, and in interpreting a statute, it ought to be made valid if possible. [484 B-C] The decisions of this Court establish that in order to make H a levy a fee for services rendered, the levy must confer special benefit on the persons on whom it is imposed. The levy under s. 548(2) ill not a "fee in return for services" as the Act does not provide for any services of a special kind being rendered, resulting in benefits to the person on 478 SUPREME COURT Jll! PORTS (1965] 2 S. C. R. whom it is imposed. S. 527(43) permits by-laws to be framed for regulat- A ing the inspection, supervision and control, amolli others, of cinema houses; but it is not obligatory to make such by-laws and therefore, there may be no services to render.

Even the by-law made provides only for inspection, and the work of inspection done by the appellant was only to see that the terms of the licence were observed by the licensee. It waa not a service to him, and so, no question arises of correlating the amount of levy to the coots of any service. The levy therefore is not a fee and must be tax. (485 B. C, F; 488 E; 490 P,. F] B The Commissioner, Hindu Religious Endowments, Madras Y. Shrl Lakshmindra Thirtha Swamiar of Sirur Mutt, (1954) S. C. R. 1005, H. H. Sudhindra Thirtha SwarnJar v. Commissioner for Hindu Religious and Charitable Endowments, (1963] Supp. 2 S. C. R. 302 and The Hinglr Rampur Coal Co. Ltd. v. The State of Orissa and Ors. (1961] 2 S. C. R. 537, referred to. Whether a particular levy is a fee or a tax has to be decided only by C reference to the terms of . the section.

Its pooition in the Act cannot determine its nature ; an imposition which is by its terms a tax and not & fee, cannot become a fee by reason of its having been placed in a certain part of the Statute. (489 BJ It is not right to say that s. 443 does not impose any duty on the appellant and that therefore, the licence fee leviable under s. 548, should be fixed only with reference to rendering of services. The Corporation D has been set up only to perform municipal duties and its powers are for enabling it to perform those duties. But, since there is no provision for aeivice being rendered, the levy cannot be a fee and would indisputably be a tax. (490 B, C, DI (ii) The fixing of the rate of a tax is not of the essence of legislative fOWer and the fixing of rates may be leftto a non-legislative body. When it is so left to another body the legislature must provide guidance for such y ftxation. Since there is sufficient guidance in the Act as to how tho rate of the le\-y under s.

548 is to be fixed, the 1ection is valid. (492 D, F; · 493 G-H; 497 B] . The appellant is an autonomous body. It has to perform vario111 atatutory functions. It is given power to decide when and in what manner the functions are to be performed. For all this it needs money and it& needs will vary from time to time with the prevailing exigencies. Its power to collect tax is necessarily limited by the expenses required to F discharge the functions. It has, therefore, where rates have not been apecified in the statute, to fix such rates as may be neceosarv to meet it& needs, and that would be sufficient guidance to make tho exercise of it& power to fix the rate, valid. , (496 D-F] Case law reviewed. (iii), The challenge to the levy on the ground that it amounts to ex- propriation is wholly unfounded. • G No doubt the increase in the rate of fee was large but considering the available seating capacity of the respondent, it cannot be said to be unreasonably high.

(482 E-F] The contention of the appellant that even if no guidance for taxa- tion has been prescribed the section would still be valid, because, the Act may be said to have been passed under Entry 5 of List II of the Seventh Schedule to the Constitution and that, that Entry authorises the passing H of a law concerning the powers of a municipal corporation and that such powers must necessarily include the power to levy a tax, was left open. (497 D-E, H] A • c D CALCUTTA CORP. v. LIBERTY CINEMA (Sarkar, J. ) 479 Per Sobba Rao and Ayyangar, JI. (dissenting) (i) If on a proper construction of the Act one reached the conclusion that Part IV of the Act w.. not exhaustive of the range of levies permitted by the Act, and the fees permitted to be levied by s. 548(2) were also taxes, there would be nothing in a. 127(3) or (4) to militate against that construction. But, an examination of the provisions of the Act lnakes three matters abun- dantly .

clear; (a) that the Act draws a sharp and clear distinction between taxes properly so called and fees; (b) that the division into Parts and Chapters is logical and clear-¢Ut and no matter which properly falls under a subject set out under a Part or Chapter heading, is dealt ~th in any other; and ( c) that taxes, by whatever designation they might be called, arc all comprehended and dealt with by Part IV and by Part IV alone, and that what ia permitted to be imposed by s. 548(2) is only a fee as distinguished from a tax. As admittedly there is no correlation between the fee charged and the service rendered, the impugned levy was not authoriaed and the High Coun was right in granting relief to the respondent. (525 B-C; 526 D-G] To say that to enable a fee strictly so called to be levied, an imme- diate advantage measurable in terms of money should be conferred on the payer is to take too narrow a view of the concept of a fee.

The word "services" in the context has to be understood in a wide sense, as includ- ing supervision and control over the activities for the excess of which the fee is charged. The judgements of this Court in the Shlrur Mutt case, (1954] S. C. R. 1005, and the cases following it, do not lay down that where an activity is regulated by licenses, the imposition of charges for the inspection, supervision and control of the activity to ensure compliance with the regulation is not a benefit conferred on the licensee, so as to render the amount char11ed for such a licence not a fee in the real sense, but a tax, whose constitutional validity could be sustained by reference to the taxation entries in Lists I and II. [508 A; 515 F-G; 517 H; 518 Al ea.. law considered. Also, Art. 110(2) of the Constitution far from supporting the appel- lant's contention, negatives it.

If pure taxation measures, employing the machinery of licences and fees, would be money-bills, then the fees for licences which are outside the definition, would be those fees which are imposed to meet tho cost of regulation and supervision of an activity which :r ii controlled by the requirements of a licence and compliance with its terms. Besides, if the levy of such licence-fees on various activities which form the subject of legislative control or regulation under the various non-taxation entries in the Lists were treated as tax, Entries 96 and 66 in the respective Lists would have to be read as taxation entries, because, such a levy is permitted only by those entries. This however would be con- trary to the entire scheme on which the several entries in the Lists are made, namely, setting out the exclusive general legislative powers the G enumeration of taxes which could be imposed and finally the power to impose fees in respect of any of the matters in the List.

(502 C; 519 B-C, E, G] (ii) Viewed as a tax the delegation in s. 548(2) is unconstitutional, u essential legislative functions are parted with to the municipality, a subordinate law-making body, and therefore the provision is unconstitu- tional. (546 Bl H Essential legislative functions cannot be delegated but where the law lays down the principles and affords guidance to the subordinate law- making authority details may be left for being filled up by the executive or by other authorities vested with quasi-legislative power. The power 480 SUPREME COURT REPORTS (1965) 2 S. C. R. to fix a rate of tax is an essential legislative function and therefore, unless the subordinate law-making authority is afforded guidance by the policies being formulated, principles enunciated and standards laid down, the legislation will suffer from the vice of excessive delegation and would be void as arbitrary and unconstitutional.

The provisions of the Act do not afford any guidance to the Municipal Corporation to fix the rate of levy. No doubt, the municipal government of Calcutta was vested in the Cor· poration under s. 24 of the Act, but the expression "government" does not gather within its fold all powers necessary for administration nor does it create an independent sovereign body entitled to legislate in any manner it likes for the. purpose of carrying on civic government. The Corporation is still a subordinate body which is the creation of the legislature and can only function within the framework of the powers conferred upon it by the Act. No assistance is derived in this regard from the powers of super- vision which. the State Government has over the municipal affairs under ss. 42 and 47 . If no standards have been laid down by the Act for the Corporation to afford it a guidance for the fixation of a rate, the fact that supervi.

sory power is conferred upon the executive would not obviate that objection, for the Government itself would have no guidance from the legislature as to the policy to be adopted in exercising the supervision. [541 E-G; 542 C-G; 545 A] It cannot be said that as a result of ss. 115, 117 and. 126 no taxes could be raised ei be c:Ommen- surate to the amount of the costs of the services, no guidance. Jar CALCUTTA CORP. v. LIBERTY CINEMA (Sarkar, I. ) 491 A furing the amount of the fee to be levied was required to be pro- vided. That argument only challenged the resolution on the ground that it fixed the amount of the fee at a figure much in excess of the costs for the services rendered. Here again there is no dispute that a delegation of essential • legislative power would be bad. It was so held by this Court first in Jn re The Delhi Laws Act. ( 1 ) The principle there laid down has been summarised by Bose J. in Rajnarain Singh v.

The Chair- man, Patna Administration Committee, Patna( 2 ), in these terms: "In our opinion, the majority view was that an executive authority can be authorised to modify either existing or future laws but not c in any essential feature. Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view about this in the former case, but this much i1s clear from the opinions set out above: it cannot include a change of policy. " b On the basis that s. 548 is a piece of delegated legislation, it has been contended on behalf of the Corporation that the rate of a tax is not an essential feature of legislation and the power to fix it was properly delegated to the Corporation as sufficient guidance for that purpose was given in the Act. It is not in controversy, and this indeed has been held by this Court, that if :I that is so, the section would be unexceptionable.

The question first is whether the power to fix the rate of a tax can be delegated by the legislature to another authority; whether it is of the essence of taxing legislation. The contention of the Corporation that fixation of rates is not an essential part of legislation would seem to be supported by several judgments of this Court to some of F which we now proceed to refer. First, there is Pandit Benarsi Das Bhanot v. The State of Madhya Pradesh( 8 ). That case was concerned with a Sales Tax Act which by s. 6 (l) provided that no tax would be payable on any sale of goods specified in a schedule to it. Item 33 of that G Schedule read, "goods sold to or by the State Government". :Section 6(2) of the Act authorised the State Government to amend the schedule by a notification. In exercise of this power the Government duly substituted by a notification for item 33 the following: "Goods sold by the State Government".

The amendment of the schedule by the notification was challenged on II the ground that s. 6(2) was invalid as it was a delegation of the (I) [195l)S. C. R. 747 (2) [195511 S. C. R. 290, 301, (3) [! 959j S. C. R. 427. SUPllBMB COUllT 11. BPOllTS (1965) 2 S. C. R... essential power of legislation to the State Government. Venkata- A 1ama Aiyar J. delivering the judgment of the majority of the Court sitting in a Constitution Bench, rejected this contention and after having read what we have earlier set out from the judgment of Bose J. in Rajnarain Singh's case( 1 ), observed at p. 435: "On these1observations, the point for determination is whether the impugned notification relates to what may be said a to be an essential feature of the law, and whether it involves any change of policy.

Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to tbe executive to detennilie details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates C' at which it is to be · charged in respect of different classes of goods, and the like. '' The Act was a statute imposing taxes for revenue purposes. This case would appear to be express autho- rity for the proposition that fixation of rates of taxes may be legi- timately left by a statute to a non-legislative authority, for we see no distinction in principle between delegation of power to fix . D nites simpliciter; if power to fix rates in some cases can be delegat- ed then equally the power to fix rates generally can be delegated. No doubt Pandit Banarsi Das's case(') was not concerned with fixation of rates of taxes; it was a case where the question was on '. what subject mater, and therefore on what persons, the tax could be imposed.

Between the two we are unable to distinguish in r. principle, as to which is of the essence of legislation; if the power to decide who is to pay the tax is not an essential part of legislation, neither would the power to decide the rate of tax be so. Therefore, • we think that apart from the express observation made, this case on principle supports the contention that fixing of the rate of a tax is not of the essence of legislative power. ~ In regard to the observations in Pandit Benarsi Das's case('] earlier quoted, it has been said that the authorities on which they appear to have been based do not support it. It has been con- tended that as the observations do not form part of the actual G decision in the case, they need not be giveri that weight which they would otherwise have been entitled to. In the High Court this contention appears to have been accepted.

The acceptance of the contention would result in by-passing a judgment of this Court and that, is something which cannot in any case be sup- ported. We are furthermore of opinion that the authorities to H (I) [19SSJ I S. C. R. 290. (2) [19S9j S. C. R. 427. CALCUTTA CORP. v. LIBERTY CINEMA (Sarkar, I. ) 493 A which Venkatarama Aiyar J. referred fully support his observa- tions. The first case relied upon by him was Powell v. Appollo Candle Co. Ltd. ('). That case upheld the validity of a statute passed by the legislature of New South Wales which conferred power on the Governor of that Province to impose duty on certain anides in the circumstances prescribed. The Governor under B thJs power imposed the tax and this was challenged. The Judicial Committee rejected the contention that the tax had not been imposed by the Legislature which alone could do it in the view ! hat '"lhe duties levied under the Order in Council are really levied by the authority of the Act" seep. 291.

Here, therefore, a C power conferred on the Governor by the Legislature to levy a tax was upheld. It would follow that a power conferred to fix rates of taxes has equally to be upheld. The next case was Syed Mohamed v. State of Madras("). There a power to an authority to determine who shall pay the tax was upheld. On the same principle a power to determine at what rate he will have to pay D the tax has to be upheld. The last case was Hampton Jr. ii Co. v. United States('), in which the power conferred by a statute on the President to make an increase or decrease in the rate of customs duty was upheld. There it was said at p. 630, "It is conceded by counsel that Congress may μse executive officers in the application and enforcement of a policy declared E in law by Congress and authorise such officers in the application of the Congressional declaration to enforce it by regulation equivalent to law.

But it is said that this never has been permit- ted to be done where Congress has exercised the power to levy taxes and fix customs duties. The authorities make no such distinction. The same principle that permits Congress to exercise F its rate making power in inter-state commerce by decfaring the rnle which shall prevail in the legislative fixing of rates, and enables it to remit to a rate-making bopy created in accordance with its provisions the fixing of such rates, justifies a similar provision for the fixing of customs duties on imported merchan- G disc. " This therefore is clear authority that the fixing of rates may be left to a non-legislative body. No doubt when the power to fix rates of taxes is left to another body, the legislature must provide guidance for such fixation. The question then is, was such guidance provided in H the Act? We first wish to observe that the validity of the guidance I) I 0. A. C. 282 (2) [1952] 3 S. T. C 367 (3 1 [1927] 72 L. ed. 624. - 49( SUPIU!

MB COURT lU! PORTS [1965) 2 S. C. ll. cannot be tested by a rigid uniform rule; that must depend A on the object of the Act giving power to fix the rate. It is said that the delegation of power to fix rates of taxes authorised for meeting the needs of the delegate to be valid, must provide the maximum rate that can be fixed, or lay down rules indicating that maximum. We are unable to see how the specification of the maximum rate supplies any guidance as to how the amount of the tax which no doubt has to be below the maximum, is to be fixed. Provision for such maximum only sets out a limit of the rate to be imposed and a limit is only a limit and not a guidance.

It seems to us that there are various decisions of this Court which support the proposition that for a statutory provision for raising revenue for the purposes of the delegate, as the section now under consideration is, the needs of the taxing body for ca1rying out its functions under the statute for which alone the taxing power was conferred on it, may afford sufficient guidance c to make the power to fix the rate of tax valid. We proceed now D to refer to these cases. The Western India Theatres Ltd. v. Municipal Corporation of the City of Poona(') was concerned with a statute under which the respondent Corporation had been set up and which gave that Corporation power to levy "any other tax". It waa contended that such a power amounted to abdication of Jegisla- • tive function as there was no guidance provided. This conten- tion was rejected. One of the grounds for this view was that the statute authorised the municipality to impose .

'taxes therein mentioned for the purposes of the Act and that this furnished su! llcient guidance for the imposition of the tax. Again, no ir doubt, this was not a case dealing with rates of taxes, but if a power on the Corporation to impose any tax it liked subject to th~ guidance mentioned was valid, that would include in it the power to fix the rates of the tax, subject of course to the same guidance. Such a power has to be held to be good. It is true, as was pointed out by learned advocate for the respondent, that G other 3rounds were mentioned in support of the view taken in the Western India Theatres case(') but that surely is irrelevant, for it cannot make the ground of the decision there which we have earlier set out devoid of all force. Then there is Vasantlal Manganbhai Sanjanwala v. The State of Bombay( 2 ). The provision of the statute there. attacked 8 (I) (1959) Supp. 2 S. C. R. 71. (2) [1961] IS. C. R. 341. CALCUTTA CORP. 11. LIBERTY CINEMA (Sarkar, /.

) 495 4 gave the Government power to fix a lower rate of maximum rent payable by the tenants. The validity of this provision was up- held on the ground that the material provisions of the Act includ- ing its preamble were intended to give relief to tenants by fixing tht· maximum rent payable by them. It was in the light of this policy of the Act that the validity of the impugned provision was B really upheld. The last case which we wish to notice in this connection ia the Union of India v. Bhana Mal Gulzari Mal('). Section 3 of the Essential Supplies (Temporary Powers) Act, 1946 came up c for consideration there. That section gave power to the Govern- ment to make necessary orders for maintaining or increasing supplies of any essential commodities or for securing their equit- able distribution and availability at fair prices. In Harishankar Bag/a v.

The State of Madhya Pradesh( 2 ) the validity of the dele- gation of power contained in that section had been upheld as it D laid down the policy as to how that power was to be exercised by the delegates, that is, the Government. In Bhana Mal Gulzari Mal's case(') the validity of an order made under s. 3 reducing the price at which steel could be sold was challenged. This challenge was rejected on the ground that the order fixing the price carried out the legislative objective prescribed in s. 3. It JI: was observed at p. 638, "It is not difficult to appreciate how and why the Legislature must have thought that it would be inexpe- dient either to define or describe in detail all the relevant tactors which have to be considered in fixing the fair price of an essential commodity from time to time. In prescribing a schedule of maximum prices the Contr<!

ller has to take into account the If position in respect of production of the commodities in question, the demand for the said Commodities, the availability of the said commodities from foreign sources and the anticipated increase or decrease in the said supply or demand. Foreign prices for the said commodities may also be not irrelevant. Having regard to Q the fact that the decision about the maximum prices in respect of iron and steel would depend on a rational evaluation from time to time of all these varied factors the Legislature may well have thought that this problem should be left to be tackled by the delegate with enough freedom, the policy of the Legislature having been clearly indicated by s. 3 in that behalf. " Again it was said H at p. 640, "In deciding the nature and extent of the guidance which should be given to the delegate Legislature mu&t inevitably. (I) [19601 2 s: c. R. 627. (2) [19SS] I SC. R. 380. 496 SUPREME COURT REPORTS 1~65] 2 S. C. R.

take into account the special features of the object which it in- A. tends to achieve by a particular statute. . . . . . Having regard to the nature of the problem which the Legislature wanted to attack: it may have come to the conclusion that it would be inexpedient to limit the discretion of the delegate in fixing the maximum prices by reference to any basic price. " B The portions in the judgment in Bhana Mal Gulzari Mal's case (1) quoted in the preceding paragraph will show that the validity of the guidance required to make de~egation of power ~ood cannot be judged by a stereotyped rule. With respect, we entrrely agree with this view. The guidance furnished must be held to be good if it leads to the achievement of the object of the statute c which delegated the power. The validity of the power to fix rates of taxes delegated to the Corporation by s. 548 of the Act must be judged by the same standard.

Now there is no dispute that all taxes, including the one under this section, can be collected and used by the Corporation only for discharging its functions under the Act. The Corporation, subject to certain controls D wuh which we are not concerned, is an autonomous body. It has to perform various statutory functions. It is often given power to decide when and in what manner the functions are to be performed. For all this it needs money and its needs will vary from time to time with the prevailing exigencies. Its power to collect tax, however, is necessarily limited by the expenses requir- E ed to discharge those functions. It has, therefore, where rates have not been specified in the statute, to fix such rates as m:iy be necessary to meet its needs. That, we think, would be sufficient guidance to make the exercise of its power to fix the rates valid.

The case is as if the statute had required the Corporation to F perform duties A, B & C and given power to levy taxes to meet the costs to be incurred for the discharge of . these duties and then said that, "provided, however, that the rates of the taxes shall be such as would bring into the Corporation's hands the amount necessary to defray the costs of discharging the duties. " We shauld suppose, this would have been a valid guidance. We think G the Act in the present case impliedly provides the same guidance see s. 127 ( 3) & ( 4). It would be impracticable to insist on a more rigid guidance. In the case of a self-governing body with taxing powers, a large amount of flexibility in the guidance to be provided for the exercise of that power must exist. It is hardly neco::ssary to point out that, as in the cases under Essential Sup- H plies (Temporary Powers) Act, 1946, so in the case of a big {I) [19601 2 S. C. R. 6'};1, • CALCUTTA CORP. v. LIBBllTY CINEMA ($or/car, J.

) 497 A municipality like that of Calcutta, its needs would depend on various and changing circumstances. There are epidemics, in- llux of refugees, labour strikes, new amenities to be provided, ~or such as hospitals, schools and various other such things may be mentioned which make it necessary for a colossal Municipal Cor- poration like that of Calcutta to have a large amount of flexibility B in its taxing powers. These considerations lead us to the view that s. 548 is valid legislation. There is sufficient guidance in ! he Act as to how the rate of the levy is to be fixed. We may point out at the end that entry 62 in List II of the Seventh Schedule to the Constitution gives power to the State C Legislatures tO impose taxes on entertainment and amusement and therefore on cinema shows. It was hence not said-if the question was relevant-that the State Legislature delegated a power to the Corporation which it itself did not possess. It remains now to notice an argument advanced by Mr.

Pathak D on behalf of the Corporation. It is that even if it be assumed that no guidance for-the taxation has been prescribed, the provi- sir n foi taxation in the Act would be valid. He said that the Act may be said to have been passed under entry 5 of List II in the Seventh Schedule to our Constitution. That entry authorises the passing of a law concerning the constitution and powers < E. a municipal corporation. Mr. Pathak c<intended that the powe1 of a corporation contemplated in this entry must necessarily iL elude power to levy tax, for no municipal corporation could work without its own funds. He pointed out that this has been the case with the municipal corporations created before and after the F Constitution.

He, therefore, said that the present was not a case of delegation of taxing power which might be bad if no guidance to the exercise of that p(Jwer had been furnished by the Act; it is a case where under the Constitution independent power to tax had been conferred on the Corporation. · The conferment of such power did not require any guidance for its exercise to. make it G valid. He pointed out that delegation of power necessarily meant delegation of the power of the delegator. On such delegation the delegated power could only be exercised by the delegates for the use of the delegator. That was not the case of power con- ferred under entry 5. ·In such a case the power of taxation con- ferred was for the purpose of the corporation itself. The amount H collected by taxation belonged to the corporation. This is what had happened here. As at present . advised, we think that this £Ontention of Mr. Pathak deserves consideration. It is unnecessary, <198 SUPREME COURT REPORTS [1965] 2 S. C. R.

however, for us to . pronounce finally on it, for in either A view the talling power ci\allenged must be held to be good. In the result we would allow the appeal with costs through- ·out. Ayyangar, J. Section 443 of the Calcutta Municipal Act, 1951 (West Bengal Act XXXIII of 1951) which will hereafter be • referred to as the Act enacts : "No person shall, without or otherwise than in con- formity with the terms of a licence granted by the Commissioner in this behalf, keep open any theatre, circus, cinema-house, dancing hall or other similar place of public resort, recreation or amusement : Provided that this section shall not apply to private performances in any such place. " and s.

548(2) : "Except when it is in this Act or in any rule or byo- law made thereunder otherwise expressly provided, for every such licence or written permission a fee may be charged at such rate as may from time to time be fixed by the Corporation and such fee shall be payable by the person to whom the licence or written permission is granted. The respondent before us is the owner and licensee of a cinema theatre known as the Liberty Cinema situated in Calcutta within c D the Municipal limits of the city· Under the provisions of the Calcutta Municipal Act 1923 which had been repealed and re- enacted with modifications by the Act of 1951, the respondent F was paying for his theatre Rs. 800 per annum as licence fee under provisions corresponding toss. 443 and 548(2) of the Act. While so, by a resolution of the Municipal Council dated Marc. It 14, 1958, the licence fee payable by theatres under s. 443 was raised with the result that instead of Rs.

800 which the respon- dent was paying previously he was required to pay a sum of G Rs. 6,000 per year. As the Corporation insisted upon the amoilQt being paid and threatened to cancel the licence and take appro- priate penal action in the event of the demand not being met, the respondent filed a petition before the High Court under Art. 226 of the Constitution praying for appropriate writs of certiorai, mandamus etc. to quash the said resolution and to prevent the C'. or- H poration from enforcing the said demand. It was stated in the petition that the respondent had been paying besides the con8oli- ' I ' '. r. ALCUTTA CORP. v. LmERTY CINEMA (Ayyangar, 1. ) 49& A dated rate for the property, a fee of Rs. 250 as profession tax for carrying on the trade or calling of cinema exhibitor as well as other taxes and fees. He characterised the licence fee which was demanded from him as not in rciality a fee which alone the Muni- cipal Corporation was entitled to charge.

Stating that it was out of all proportion to the. service rendered or the costs involved B in ensuring the observance of the conditions of the licence, he contended that the fee demanded from him was really a tax which the Corporation was not entitled to levy under the provisions quoted and therefore sought the relief , which he prayed for in the petition. c The learned Single Judge who heard the petition in the first instance held on an analysis of the provisions of the Calcutta Municipal Act that what the Municipality was entitled to levy under s. 548(2) read withs. 443 was really "a licence fee" and not a tax and that viewed as a licence fee it did not pass the test of legality on account of there being no correlation between the. D amount charged on the theatre owners and the services rendered to them or the expenses incurred by the Municipality in regard to the issue of licences. Dealing with the alernative contention urged before him by the Corporation thats.

548(2) of the Act authorised the Corporation to levy a tax, the learned Judge held that the section would be unconstitutional as suffering from the vice of :I excessive delegation in that it laid down no principle, indicated no policy and afforded no guidance for determining the basis or the rate on which the tax was to be levied and was therefore void. In consequence he, allowed the petition saving however the right of the Corporation to recover the fee. at the rate in force prior to I' March 14, 1958 on the ground that the levy at this rate was saved by Art. 277 of the Constitution. The Corporation preferred an appeal to a Division Bench and the learned Judges on practically the same line of reasoning as the learned Single Judge dismissed the appeal. Their conclusions were as follows : The imposition permitted to be made bys. 548(2) read with s. 443 of the Act is G charged was only a fee as distinguished from a tax.

Regarded as a fee the levy was invalid as there was no quid pro quo. If, how- ever, it be held tliat the provisions cruoted authorised the levy of a tax, the provisions were unconstitutional because they involved an improper delegation of legislative power. They also held that th~ levy was not to any extent saved by Art. 277 of the Constitution. H The Corporation desiring to prefer an appeal sought a certificat& of fitness from the learned Judges and the same having been. granted, the appeal is now· before us. ' 500 SUPREME COUR. T REPORTS [1965] 2 S. CR.. As one of the questions involved in the appeal related to the A constitutional validity of the provisions of a State enactment, notice of this appeal was served on the State. Mr. Pathak learned Counsel for the appellant Corporation did not contest the finding and decision of both the learned Single Judge as well as the learned Judges in appeal, that if what B s.

548(2) of the Act authorised was only a fee in the technical sense, viz. , a payment for service rendered as distinguished from a tax, the impugned levy was invalid in as much as there was admittedly no correlation between the amount of the levy and the cost of the service, if any rendered to the fee-payer. His sub- missions in support of the validity of the impugned levy were : ( 1) . C An analysis of the several provisions of the Act showed that the Act employed the word "fee" and particularly in ihe context of a fee for licences granted for carrying on an activity, in the sense of a tax. , (2) the fee permitted to be charged for licences by s. 548 (2) of the Act was not a fee but a tax as it was not a quid D pro quo for services which the Corporation was required by or under the Act to render or did render to the licensee.

, ( 3) A fee <:barged for a licence other than a fee for services rendered is in reality a tax and no quid pro quo is necessary to sustain its validity beyond the grant of the licence and a permission to carry on the activity which the licence authorises. , ( 4) If what was permitted E to be charged bys. 548(2) were a tax, the provision is not un- constitutional for the reason that the rate of the fee was not speci- fied in the Act. The non-specification · in the Act of the rate of the . licence fee to be charged is not open to the objection of excessive delegation of legislative power for two reasons : ( 1 ) For considering whether there· has been an excessive delegation, regard must be had not merely to the section conferring the power F but to the other provisions of the Act as well which might throw light upon the topic and from which sufficient enunciation of principle or guidance could be gathered.

In the present case there was sufficient guidance available and proper standards laid down in the other provisions of the Act as to uphold the validity G of the delegation. , (2) When a delegation of legislative power including legislative power to impose a tax is conferred upon a Municipal Corporation, no question of excessive delegation arises as the Constitution itself permits and authorises such devolution of legislative power. In view of these submissions it is necessary to consider and. ascertain principally 4 matters : ( 1) the precise nature of a fee, H CALCUTTA COllP. v. LmEllTY CINEMA (Ayyangar, /. ) 501 A as distinguished from a tax. , (2) Whether on an examination of the several provisions of the Act the charge authorised to be levied by s. 548(2) read with s. 443 of the Act, is a fee in that aeDSe or is it a tax. , ( 3) If what is permitted to be levied by · s.

548 ( 2) is not a fee out a tax whether the various provisions of the Act read idependently or together enunciate the principles, B prescribe the standards, and affords sufficient guidance to the Municipality to fix the rate so as to render the conferment of the power free the from the vice of excessive delegation; and ( 4) . lastly, whether the . rule as to excessive delegation of legislative power is inapplicable in those cases where the devolution or con- e ferment of pbwer is on a municipal corporation, or, in any event, whether the rule as to excessive delegation needs substantial modi- · fication before the same is applied to a case where the donee of the power is a municipal corporation entrusted with local SFlf government. D We shall take up these questions in that order. I. The Nature of a Fee as distinguished from a taJC. Mr.

Pathak did not dispute that the Constitution had drawn a distinc- tion between "fees" and "taxes", and that while "fees" could be E charged as incidental to the exercise of legislative power on topics set up in the several entries in the three legislative lists in Schedule VIl, the power taxation by the Union or by the State was confined to particular species or types of taxes distinctively specified as such in lists I or II respectively. In the context of such a distinction the question necessarily arose as to what were the ingredients or F characteristics of a "fee" as distinguished from a "tax". Mr. Pathak submitted that "fees" as envisaged by the Constitution was the exaction of compensation permitted by a statute to be imposed for a special service rendered to the payer.

In other · words, unless by or under an enactment it was obligatory on an authority, be it a municipal authority or any other to render some G special service to the payer of the fee as distinguished from the benefit conferred on every member of the general public by the performance of statutory duties, and the levy is permitted to be made for meeting the cost of such service, the charge imposed would not be a "fee". In all other cases, where no special service is directed to be or is rendered to a particular individual out of H the ordinary, the fee imposed for the licence or permission granted for the carrying on of any activity il; really in the nature of a tax in regard to which no question of quid pro quo arises. 502 SUPJU! MB 'COU. T UPOl. TI (1965] 2 ~. c. a It is common ground that the Constitution recognises a clear A distinction between a tax and a fee.

The several entries in tho Lists in the Seventh Schedule which enumerate the legislative powers and distribute them between Parliament and lhe . Stl! ID Legislatures point to this distinction. The scheme underlying the Lists may shortly be summarised thus.. Each of the Union and the State Lists which are Lists I and II start by enumerating fint • the Entries conferring general legislative powers as distinct from taxation powers. In other words, the taxation entries, that ii entries conferring taxing power, are separately enumerated after entries conferring general legislative power .. Thus items 1 to 81 of List I deal with the exclusive general legislative powers of C Parliament while 82 to 92 enumerate the taxes which Parliament may impose. Item 96 empowers Parliament to legis- late in respect of "fees in respect of any of the matters in this List, but not including fees taken in any Court.

" This would clearly demonstrate that while "fees" may be levied in respect of or as incidental to legislation on the topics set out in the other entries D in the list, the power to levy a tax is not to be taken as conferred by entries conferring general legislative power. Thus though a fee may be levied as incidental to legislation be it general as in · respect of entries 1 to 81 or the entries conferring taxing powers --entries 82 to 92, or in respect of the miScellaneous matters enumerated by such an entry like 94, no taxes may be imposed • by virtue of the general legislative power under entries 1 to 81. This matter has been the subject of consideration by this Court though from a slightly different angle in M. P. V. Sundararami~ & Co. v. The State of Andhra PradeJh. ( 1 ) Venkatarama Aiyar, I. speaking for the Court said :- "In List I, Entries 1 to 81 mention the aeveral matters over which Parliament has authority to legislate. Entries 82 .

to 92 enumerate the taxes which could bo imposed by a law of Parliament. An examination of these two groups of Entries shows that while the main subject . of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. Thus, Entry 22 in List I is "Railways", and Entry 89 is "Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights". If Entry 22 is to be construed as involving taxes to be imposed, then Entry 89 would be superfluous. Entry 41 mentions "Trade and commerce with foreign coall- (1) [1958] S. C. R. 1422, 1479-80. .. R • A B c D CALCUTTA CORP. v. LIBERTY CINEMA (Ayyangar, /. ) 503 tries; import and export across customs frontiers". U these expressions are to be interpreted as including duties to be levied in respect of that trade and com- merce, then Entry 83 which is "Duties of customs including export duties" would be wholly redundant.

Entries 43 and 44 relate to incorporation, regulation and winding up of corporations. Entry 85 provides separately for Corporation tax. Turning to Li~t 11, Entries 1 to 44 form one group mentioning the sullj~ts on which the States could legislate. Entries 45 to 63 in that List form another group, and they deal with taxes. Entry 18, for example, is "Land" and Entry 45 is "Land revenue". Entry 23 is "Regulation of mines" and Entry 50 is "Taxes of mineral rights". The above analysis- and it is not exhaustive of the Entries in the Lists- leads to the inference that taxation is not intended to be comprised in the main subject in which it might on an extended construction be regarded as included, but is treated as a distinct matter for purposes of legisiative competence. And this illstinction is also manifest in the language of Art. 248, Cls. (1) and (2), and of Entry 97 in List I of the Constitution.

" The same pattern of classification and conferment of general E ·legislative as illstinguished from taxing power is adopted in the State List, List II. Entries 1 to 44 of this List deal with general legislative power while items 45 to 63 deal with specific taxes which might be imposed exclusively by the State Legislatures. The last entry in this List is in the same terms as Entry 96 of F List I and reads "fees taken in respect of any of the matters in this List but not including fees taken in any Court". So far as the Con- current List is concerned, it contains no entry conferring the taxation power but by its last entry, Entry 47, it enahle~ the Legislatures to impose "fees in respect of any of the matters in that List but not including fees taken in any Court" and this is G in terms identical with Entries 96 of List I 'ind 66 of List II. It is, therefore, quite obvious that the Constitution proceeds on a basis of clear line of demarcation between the power to ta'!

: and the power to levy a fee. Before proceeding further, one other matter arising out of this ~cheme might also be noticed. When entries 96 of List I or 66 ff of List II speak of "any of the matters in this List" they necessarily include also the entries relating to taxation. In other words, a fee may be levied even under an enactment relating to the imposi- L3Sup. /6S-l6 104 SUPREME COUllT REPORTS . (1965) 2 S. C. L tion of a tax. Merely by way of illustration of this type of fco · A. we might refer to fees which are charged for licences which are required to be taken by dealers under the Sales Tax Act in tho various States. The exact amount of the licence fees to be charged is most often left to the executive determination, the maximum being sometimes prescribed by the relevant sales tax enactment B and sometimes even this maximum is not prescribed.

Theso licences are issued in order to ensure the orderly administration of tax legislation and the proper collection of the tax imposed there- by. The distinction between the tax imposed under Entry 54 of List II "taxes on the sale or purchase of goods" and the fees charged for the licences issued to dealers as a condition of their being per- C milted to carry on business of buying and selling goods is too • obvious to need explanation. The significance of illustration of this kind and its impact upon the submissions of Mr. Pathak as regards the nature of a fee under the Constitution we shall reservo for consideration later. Recognising this well marked distinction which the Constitution D makes as between a fee and a tax, the submission of Mr. Pathak was that "fees" in entry 66 of List II were fees for services specially rendered to the payer, and for this construction· he relied on two separate lines of reasoning (1) that this had been the sP.

nse in which this Court had understood the content of the word "fee"; ( 2) that this construction was required or reinforced by Art. g 110(2) [and the corresponding Article 199(2)]. We shall first consider the decisions of this Court, which it is stated have thus interpreted the term "fee" as used in the Consti- tution. The first case referred to in this connection was The Commissioner, Hindu Religious Endowments, Madras v. Sri F Lakshmindra Thlrth Swamiar of Sri Shirur Mutt(') where this Court had to consider the constitutional validity of certain pro- visions of the Madras Hindu Religious and Charitable Endow- ments Act, 1951 in its application to Mutts. Among the provi- sions considered in that context was s. 76 of that enactment, which directed every religious institution to "pay to the Government G annually" such contribution not exceeding 5% of its income as might be prescribed.

The validity of this provision was challenged on the ground that what was authorised to be levied was not a fee but a tax, and that as a tax it could not be brought within any of the particular taxes enumerated in List II which the State Legis- lature was empowered to impose. This Court agreed with this H contention, and based its conclusion on the following circumt- (1) 119'4) S. C;Jl. 1005. CALCUTTA CORP. v. LIBERTY CINEMA (Ayyangar, /. ) 505 A tances. It recognised that a clear distinction existed between taxes and fees under the Constitution. As to what was meant by a tax, Mukherjea, J. , who delivered the judgment of the Court adopted the definition of the term by Latham, C. J . , in Mathews v. Chicory Marketing Board(') : "a tax is a compulsory exaction of money by a public authority for public -purposea B enforceable by law and is not payment for services rendered".

The learned Judge enumerated the characteristic of a tax from other forms o( compulsory payments, and these were summarised thus :- (I) that taxes were imposed by a statutory power with-. out the tax-payer's consent the payment being enforced hy law, (2) that a tax is an imposition made for public purpose without C reference to any special benefit to be conferred on the payer of the tax ( 3) that a tax was levied for the purposes of general revenue which when collected formed part of the public revenues of the State. "As the object of a tax is not to confer any special benefit upon any particular individual there is no element of quid D pro quo between the tax-payer and the public authority''. On the other hand, a fee was generally stated to be defined to be a charge for special service rendered to individuals by some gov- ernmental agency.

"The amount of fee levied is supposed to be based on the expenses incurred by the Government in render- ing the service though in many cases the costs are arbitrarily E assessed". The learned Judge then went on to observe ''the dis- tinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden while a fee is a pay- ment for a special benefit or privilege. Fee confers a special capacity although the special advantage as for example in tho case of registration fees for documents or marriage licences is F secondary to the primary motive /of regulation in the public interest. Public interest seems to be the basis of all impositions, but in a fee it is some special benefit which the individual receives". In holding that the contribution imposed bys. 76(1) was really a tax and not a fee regard was also had to some other factors, viz.

, ( 1) ihe percentage of contribution leviable was G graded according to the income derived by the institution, and (2) the entire collections went into the Consolidated Fund of the State and the expenses for the upkeep of the Board which was a statutory corporation created for the · administration of religious endowments in the State was ·also directed to be met H out of the monies in the Consolidated Fund. Reliance was also placed on similar observations of this Court, in other cases of (l) 60 C. LR. 263. 506 SUPREME COURT REPORTS (1965] 2 S. C. R. fees charged on religious endowments under other enactments A which were heard along with the Shirur Mutt case, ( 1 ) already referred to, though in them the validity of the levy was upheld. The validity of a contribution levied under the. Orissa Hindu Religious Endowments Act was considered by this Court in Mahant Sri Jagannath Ramanu; Das and Anr. v. The State of Orissa and Anr.

( 1 ) and ·of a similar levy under the Bombay B Public Trust Act (Ratial Panchand Gandhi v. The State of Bombay and Ors. (')). In these two cases, the validity of the contribution levied under their respective charging provisions was. as stated already, upheld. The ground on which s. 76(1) of the Madras Act which was S\I'UCk down in the Shirur Mutt C case was distinguished was, that under the other two enactments, a special fund was created to which the collections were to be credited and that the expenses of the administration of the Act were directed to be met out of this fund.

Though the concept of a fee as a quid pro quo for particular services rendered to the fee payer as explained in the Shirur Mutt case are also repeated D in these two decisions, it is worth noticing that the service to be rendered to the Religious Endowment or public trust by the Orissa and the Bombay Acts were exactly similar to the service-- which was by way of supervision, regulation and control over the way in which the management by the trustees was conducted under the Madras Act. This consideration is highlighted when E one examines the decision of this Court in the Udipi Mutt cas~ H. H. Sudhundra, Thirtha Swamiar v. Commissioner /pr Hindu Religious and Charitable Endowments, Mysore(')-which was a sequel to the Shirur Mutt case,('). Afters. 76(1) was struck down by this Court in the Shirur Mutt case( 1 ) the Madras Legis- lature by Act 27 of 1954 effected certain amendments to that F section with a view to rendering it ·constitutional.

Section 76 had been held to be ultra vires of the legisture on the ground that what it imposed was not a fee which was the only thing permitted by Entry 66 but in reality of tax. This decision was based upon several grounds of which the principal were : ( 1) that no special service had been rendered to the Mutts and other religious insti- G tutions so as to justify its being a fee for services rendered, (2) that it was graded according to the capacity of the payer based upon the annual income derived by the institution which ren- dered it somewhat like an income tax, and (3) that it was paid to the Government and _became part of the Consolidated Fund of the H . State, the expenses incurred in administering the Act being paid (I) [1954] S. C. R. l(l()S, (2) [1954) S. C. R. 1046. (3) [1963) 2 Supp. S. C. R. 302. CALCUTTA CORP. v. LIBERTY CINEMA (Ayyangar, I. ) 507 A out of the General Revenues. Section 76 as amended by Act 27 of 1954 was held to be intra vires and sustained as a fee.

The changes that were effected by the Madras Legislature were : ( 1) the graded system was abolished and the maximum percentage of the contribution being fixed by the statute, (2) the contributions payable were collected by the Commissioner and not by the State, B ( 3 ) that a separate Fund was created into which these collections were credited and moneys for meeting the expenditure for the administration of the Act were drawn from this Fund. One other point to be mentioned is that the services rendered to the institution, as set out in s. 76 and the other relevant provisions of the Act remained exactly the same. This Court held the contribution to C be a fee principally for the reason that the moneys that were being paid into a separate Fund were collected not by the Governm•! nt and were being paid to a different Fund.

If one proceeded on the footing that unless the service rendered was a specific service in the sense of a benefit conferred specially upon the payer, the 0 charge levied would be a tax, the contribution levied under s. 76 even after the amendment would have been held to be a tax. No doubt, the fact that a separate Fund is segregated from the Con- solidated fund of the State and the moneys are received not. by the Government as such but by a public authority might show that it is not a tax, still these are not decisive, for as was held by the 11: Privy Council in Attornt1y-Gt1neral for British Columbia v. E. cl N. Railway Co. (') which has been approved by this Court in Tht1 Hingir Rampur Coal Co. Ltd. and Ors. v. The State of Orissa and ors. (') to which we shall refer later the payments were credited to a Fund known as the Authorised Protection Fund to which advances were made from Consolidated revenues.

Lord Greene F after saying that the levy had the characteristics of taxation,' observed: "It is suggested, however, that there are two cir- cumstances which are sufficient to turn the levy into what is called a 'service charge'. They are, first, that the G levy is on a defined class of interested individuals and, secondly, that the fund raised does not fall into the general mass of the proceeds of taxation but is applicable for a special and limited purpose. Neither of these considerations appears to their Lordships to have the weight which it is desired to attach to them. " H The segregation of the Fund, theref9re, could not have been a decisive factor for determining the nature of the levy. This [ (I) [19SO] A. C. 87. (2) [1961] 2 S. C. R. 537. 508 SUPllBMB COURT REPORTS [1965) 2 S. c. R.. decision as well as the Orissa and the Bombay cases already cited A are, therefore, authority for.

the position ·that the word 'services' in this context may have to be understood in a wide sense as including supervision and control over the activity for the exercise of which the fee is charged. AB contrasted with these three cases, Mr. Pathak submitted that B when fees were Jevied for licences they were taxes. In support he referred. to Cooverjee B. Bharucha v. The Excise Commissioner & the Commissioner, Ajmer and others. ( 1 ) Under the legislation before the Court viz. The Excise Regulation Act 1950 licences were granted to regulate the trade in liquor. The fee to bo charged for the grant of the licence was not prescribed by the c Act or the rules but the licence was sold in public auction, the highest bidder being granted the licence the amount of the licence · fee thus being the amount of the highest bid. This Court held that the fee collected from the highest bidders to whom the licences were granted was really in the nature of a tax though described as a licence fee.

It was held that the legislative power for enacting D this legislation was to be traced to the Entries in the Seventh Schedule, List II, of the Government of India Act, 1935, "for 111ak. ing laws regarding intoxicating liquors, i. e. the production, manufacture, possession, transport, purchase and sale of intoxi: eating liquors, and under the powers conferred for raising duties E of excise on alcoholic liquors for human consumption; and the pith and· substance of the regulation was that it raised excise revenue by imposing duties on liquors". Dealing with the con- tention that as it was described in the Excise Act as a licence fee the same was invalid as excessive was repelled in these terms : "The next contention that the charge of fee by· public auction F is excessive and is not in the nature of a fee but a tax ignores the fact that the licence fee described as a licence fee is more in the nature of a tax than a licence fee.

One of the purpos~s of the Regulation is to raise revenue .... The grantee is given a licence on payment of the auction price. The Regulation specifically authorises this". We do not see how this decision helps the appel- G lant. The description of the levy as a fee does not of course determine whether it is a fee or a tax. That taxes may be imposed for effectuating other purposes than raising revenue-for protecting somt activity which is not subject to tax or to inhibit one which is so subject or to regulate some activity cannot also be disputed. That fees for licences may be by way of taxes does not, however, H mean Iha t every fee for a licence is or must be a tax. (l) (19,4] S. C. ll. 873. CALCUTTA CORP. "· LmEllTY CINEMA (Ayyangar, /. ) 509 I. Reference was next made to The Hingir-Rampur Coal Co. Ltd. and others v. The State of Orissa and ors. (').

which consi- dered the validity of a cess imposed on owners, among others, of coal-mines by the Orissa Mining Areas Development Fund Act, 1952. The amount of cess was to be determined by the Govern- ment but it was not to exceed S % of the value of the minerals • extracted at the pits-mouth which was to be paid into a fund out of which was to be derived the monies for providing the amenitiea to the mining areas. It was contended for the petitioner coal company who moved this Court under Art. 32 of the Constitu- tion that this cess was really a duty of excise on coal within C Entry 84 of List I of the Seventh Schedule. · On the other hand, it was cohtended by the State who opposed the petition that the cess was a fee and not a duty of excise. This Court upheld the validity of the cess on the ground that it was really a fee, and in so. holding observed "it is true that between a tax and a fee there is no generic difference.

Both are compulsory exactions of D money by public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essen- tially for services rendered and as such there is an element of quid pr<' quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to It a specific area or to specific class of persons or trade or persons in any local area and as a condition precedent for such service cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public authority invariably goes into the consolidated fund which ultimately is utilised for all r public purposes, whereas cess levied by way of fees is not intended to be, and does not become, a part of the consolidated fund.

It is earmarked and set apart for the purpose of services for which it is levied. . . . . . In regard to fees there is, and must always be, co-ordination between the fee collected and the service intended to G be rendered. . . . . The distinction between a tax and a fee is, however, important and it is recognised by the Constitution. Several Entries in the Three Lists empower the appropriate Legislatures to levy taxes, but apart from the power to levy taxes thus conferred each List specifically refers to the power to levy H "fees in respect of any of the matters covered in the said List excluding of course fees taken in any Court". Reference was then ---------- 11) (1961) 2 S. C. R. 537. 510 SUPREME COURT REPORTS . [1965] 2 S. C. R. made to the decisions in the Shirur Mutt ccue( 1 ) the Orissa(') Ji. and· the Bombay(") cases to which we have already adverted. Mr. Pathak: placed considerable reliance on the reference in the Hingir-Rampur Coal Co.

(') to the decision of the Privy Council in Attorney-General for British Columbia v. Esquimalt and Nana· imo Railway Co. (') and to the explanation of the rationale of those decisions of this Court :-"It would thus appear that this a decision proceeded on the basis that what was claimed to be a special service to the lands in question was in reality an item in public service itself and so the element of quid pro quo was absent It is true that when the Legislature levies a fee for rendering specific services to a specified area or to a specified class of C persons or trade or business, in the last analysis such services may indirectly form part of services to the public in general. If the special service rendered is distinctly and primarily meant for the benefit of a specific class or area the fact that in benefiting the specified class or area the State as a whole may ultimately and indirectly be benefited would not detract from the character of D the levy as a fee.

Where, however, the specific service is indistin- guishable from public service and in essence is directly a part of it different considerations may arise". These decisions according to the learned counsel established ( I ) that a fee for a licence was prima facie a tax and was a mode 1t of raising revenue, (2) the fact that under the licence the trade, business or other activity of the licensee is controlled and regu· lated where such control and regulation is imposed in the interest of the general public is not sufficient to negative the licence fee being a tax; ( 3) it was only in those cases where an impost was made either as an ad hoc cess or a fee for the grant of a licence F as a charge for services rendered to the fee-payer that the impost -could be characterised technically as a fee which for being valid would have to stand the test of correlation with the costs entailed on the public body for rend~ring the service.

Besides the require- ment as to special service to the payer being required, the argu· ment continued that on the authorities cited any fee would be tax G if there was no segregation of its proceeds for the general revenues and a requirement of the law that the collections should be used only for the purpose of rendering the service. This last require- ment, however, the learned counsel did not press seriously, seeing that even charges for services rendered, for instance, charges for H (1) (1954) S. C. R. 1005. (2) (1954) S. C. R. 10. (3) [19S4J s. c. R. toss. (4) [t96tJ 2 s. c. R. 537. (S) [ 1950) A. C. 87. CALCUTTA CORP. v. LIBERTY CINEMA (Ayyangar, J. ) 511 A extra water supply also went into the general municipal fund and figured in the consolidated annual budget prepared for the Cor- poration. Learned counsel is no doubt right in the submission that the impost described as a "fee" does not decisively determine that it B is not a tax.

He is also right in urging that the fact that the fee is imposed for the grant of a licence, is equally not determinative of its true nature. It is common knowledge that in the United Kingdom duties of excise are often collected as licence fees and an illustration of a similar practice in India is seen in the Ajmere Excise Licence case. (1) As observed by Gwyer, C. J. , in Re : C Central Provinces and Berar Act 14 of 1938 (2) "The licenee fees payable by persons who· produced or sold excisable articles also became known (in U. K. ) as duties of excise". In the con- text of the problem before us, however, the question is whether in order to constitute a fee in the strict sense it is not sufficient that D it is imposed in order to raise funds for ·ensuring due compliance with· the activity which it is the object of the licence, to place under supervision, inspection and control.

In this connection reference may be made to paragraph 7 of the affidavit by the Cor- poration in answer to the Writ Petition filed by the respondent. There the appellant Corporation stated "the new scale of fees as E fixed by the Corporation is reasonable for effective inspection, supervision and control of cinema houses in Calcutta at present numbering 75 in accordance with the provisions in the relative bye-law framed under the Calcutta Municipal Act having regard to the public health, safety and convenience ......

I say that in order to effectively discharge the statutory duties imposed on the F Corporation in regard to the inspection, regulation, supervision · and control of cinema houses in Calcutta it is necessary to pro- vide for a more suitable machinery and establishment involving employment of a much larger staff and consequently very large additional expenses in order to exercise a better, fuller and more G effective control and supervision of the cinema houses, having regard to the additional burden imposed by the cinema business at present times and the evergrowing needs of precautions regard- ing the health, safety and convenience of the public the new scale of fees is reasonable to cover necessary expenses involved in the said control and supervision of the cinema houses as hereinbefore H stated". Mr. Pathak urged that the ooint that he was rai~ing was one of law and therefore the appellant was not confined to sup- (I) [19S4J S. C. R. 873. (2) [1939! F. C. R. 18.

512 SUPREME COURT REPORTS (1965] 2 S. C. R. porting the levy as a fee in the strict sense. He is right there, It. but we are drawing attention to this defence only for the reason that this plea was taken because of the accepted position as to the concept of a fee on the authorities to which we shall refer pre- sently and the elements of "service" needed the rendering of which would constitute a quid pro quo for the fee imposed. These authorities have taken the view that where a licence is granted, B the fee to be charged for such a licence might bear a reasonable relation to the cost of providing the inspection, supervision and control imposed on the licensee both in his own interest as well as in the interest of the general public.

In other words a fee in the strict sense--as distinguished 'from a tax could be charged, C for the cost involved in (a) the iμachinery employed for granting the licence, (b) the supervision, regulation and control to which the licensee renders himself liable under the licence, and subject to which he is granted the licence. Thus in The Municipal Cor- poration of Rangoon v. The Cooratee Bara Bazar Co. Ltd. ( 1 ) the validity of a licence fee imposed for keeping a private market D was questioned hy a suit filed on the original side of the High Court. Section 178(3) of the City of the Rangoon Municipal Act ran : "For every such licence· or permission a fee may be charged at such rate as shall from time to time be fixed by the Corporation". Under this provision fees amounting to substan- tial sums were charged for licences granted for these private E markets. This fee was challenged as unreasonable and ultra vires. Cunliffe, J. who tried the suit observed at pp.

219 and 220:- "A licence is merely a permission granted to a particular person to do a particular thing at a fixed r place during a determinate period. The fee attached to such a permit is a specific sum of money to be collected from the licensee for the purpose of covering the expenses of the licence, its registration, inspection and supervision. Fees levied on licenses of premises ought not to be greater than a sum to cover the cost~ G of the regulation. " A. similar view was taken by the Division Bench on appeal. They said at p. 228 :- "Was it the intention to give the Corporation power to impose on the owners of private markets a charge for a licence which might extend to any amount for which (I) [1927] Ll. R. 5 Rangoon 212 H ' • CALCUTTA CORP. v. LmEllTY CINEMA (Ayyangar, 1. ) 513 the sanction of the Local Government could be obtained?

Or was the intention merely to give power to charge a fee which would save the Corporation from being out of pocket by reason of the duties and liabili- ties imposed on it by the Act of the supervision and regulation of private markets ? As the amount charged bore no relationship to the expenses in- Yolved in the inspection, supervision and control whioh1 the Corporation might exercise over the licensed premises, the fee was held to be ultra vires. This decision was followed in Cor- poration of Madras v. Spencer & Co. ( 1 ). The licence fee for C storing spirits levied under the Madras City Municipal Act was raised from Rs. 25 to 200 by a resolution of the Corporation after observing the necessary formalities. This was challenged as excessive becausi: of want of correlation between the cost of inspection, supervision and control of holders of the licence and D the total amount recovered as fees. The pattern of the Madras City Municipal Act was the same as the Act before us.

The contention . urged before the Court was the same as th at now urged viz. that what was permitted to be levied by s. 365(2) of the Madras Act [corresponding to our s. 548(2)) was a tax- particularly seeing that what was being regulated and . controlled E was a noxious or dangerous trade or activity. The Court repelled it by pointing out that taxes were dealt with in Part 3 while the power to levy fees fot licences was conferred by a section occur- ring in a part headed Miscellaneous and Procedure. Phillips J. observed at p. 57 : F H "Beasley, J. , has held that the fees are leviable as compensation to the corporation for the expenses in- curred in the issue of licenses and the general regulation of the trades and other occupations which are Iicen<ed and there must be some relation between these expenses and the amount of fees leviable. This was the view which was adopted by the Rangoon High Court in Municipal Corporation Rangoon v. Cooratee Bara Bazar Co. Ltd. (A. LR.

1927 Rangoon 183-5 Rangoon 212) . With all respect, I think this is a very reason- able view to take and, although possibly the above is not the sole consideration which may be taken into account in fixing the amount of fee, it is the main (J) A. I. R. 1939 Mad. 5'. 514 SUPREME COURT REPORTS [1965] :rs. c. R. consideration. The license fees are in respect of what are called dangerous and offensive trades, that is to say, it is necessary in the interests of the city that the corpora- tion shall know where such trades are being carried on and shall be in a position to see that they are carried on in a proper manner without causing unnecessary nuisance to other people or danger to the public generally. " Reilly, J. , the other learned Judge, added at p. 59 : · "It is suggested that the fixing of fees for those licenses may be used by the council as method of taxation. Surely, if that was intended, that power would have been provided for in the part of the Act which deals with taxation.

What could be the reason for bringing it in as a mere matter of procedure at the end of the Act ? . . . . If we accept the proposition that the power of charging license-fees cannot be used for taxation, then we must say that as a whole the fees charged by the corporation must not be very much in excess of what the duties cast upon them and their staff in connexion with the licenses cost them. There is the cost of issuing the licenses; there is the cost of inspect- ing the premises to ·see whether they are suitable for the purpose proposed; and there is the subsequent cost of inspecting the premises to see that they· are being used properly and that the conditions and restrictions imposed by the Commissioner are observed. " A. • B c D These decisions wero followed in Municipal Council of Kumba- F konam v. Ralli Bros. ( 1 ) where a fee for a Municipal licence granted for storing ground-nut was increased and its validity was questioned.

Section 321(2) of the Madras District Municipali- ties Act was in terms identical withs. 54! t(2) of the Act. Deal- ing with the nature of the fee permitted to be charged under that provision Curgenvan, J. said :- G "The wording undoubtedly suggested that the fee should be commensurate with the extra cost entailed by granting the licence and exercising such supervision as is necessary to see that its terms are complied with. It may be that in order to promote the health, etc. , of H the public, with which this part of the act specially ------- (I) A. I. R. 1931 Mad. 497. CALCUTTA CORP. v. LIBERTY CINEMA (Ayyangar, /. ) 515 A deals, higher fees should be chargeable in the case of dangerous or offensive occupations. " The High Court of Orissa( 1 ) followed these decisions and adopted the same construction of the fee permitted to be levied by s.

321 of the Madras District Municipalities Act, whose provisions were 11 also applicable to parts of the State of Orissa, besides decisions on the same lines by the High Court of Allahabad in Lala Raj Kishore v. District Board of Saharanpur('). We have, therefore, to consider whether there is anything in the decisions of this Court referred to earlier and relied on by the learned counsel which militates against holding that the cost C involved in the inspection, supervision and control of an industry, trade or activity is not a quid pro quo to the payer so as to consti- tute a fee levied for that purpose as always a tax. Reference may here be made to the terms of s. 431 of the Act with which Chapter XXVI, in which s. 443 occus, opens. n "Inspection and Regulation of Premises. 431. Subject to the provisions of this Act, land and buildings shall respectively be inspected, cleansed, secured, repaired, drained or otherwise regulated in accordance with the rules contained in Schedule XVII.

" E It is, therefore, not as if powers or duties are not cast on tbs Corporation to be discharged for which the fee to be charged under s. 548(2) would be a quid pro quo. The placing of an activity, industrial or commercial, under regulation and control is no doubt done in furtherance of public interest, but so are most of the activities of public bodies. Never- F theless the supervision, inspection and regulation is from a Ion~ term point of view considered to be and is in the interest of the industry or the activity itself. To say that to enable a fee strictly so called to be levied, an immediate advantage measurable in terms of money should be conferred on the payer, is to take too G narrow a view of the concept of a fee. We do not consider that the decisions of this Court in the Endowment cases lay down such a proposition or compel us to adopt this construction.

On the other hand the Orissa Endowments Act and the Bombay Public Trusts Act cases, as also the Orissa Mining Area Development Fund case support a broader view of what constitutes service to H the fee-payer. (I) Sivaparvatamma v. Executive Officer, A. I. R. 1957 Orissa, 28. S. (2) A. J. R. 1954 All. 67S. il8 SUPllBMB COUllT llBPO! lTS '[1965] 2 S. C. Jl. We are also satisfied that the narrow construction suggeated A would not accord with the scheme of the entries in the lists in Schedule VII to the Constitution. To illustrate the point, we would refer to a legislation like the Industries Development and Regulation Act, 1951 (Central Act 65 of 1951). It is an Act to provide for the Development and Regulation of certain industries. B Under-the provisions of s.

11 of that enactment no new indus- trial undertaking could be established by any person or authority other than the Central Government after the commencement of tho Act "except under and in accordance with the licence issued in that behalf by the Central Government". The inspection, supervision and- control to be exercised over the licenses is provided for in C detail by various sections of the enactment. Under s. 30(2)(j) the Central Government is empowered under the rules made under the Act to determine the fees to be levied in respect of licence1 and permissions issued under the Act. Now, let us see the con- stitutional power to empower the fee to be charged. Entry 52 of List I reads "industries, the control of which by the Union ill D declared by law to be expedient in the public interest", and s. 2 of the enactment contains this declaration.

Coming now to tho entries relating to taxation it will be found that none of these entries, 82 to 92, would cover the fees charged for licences issued under the enactment. It is obvious, therefore, that the legislativo power for charging fees is to be derived from Entry 96 of List I, • "fees in respect of any of the matters in this List". If the learned counsel's submission that the expression quid pro quo should bc read in the sense of a special and particular benefit conferred upon particular licensees (benefit agai

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