TMI Blog1971 (9) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... e validity of the levy is sought to be sustained by the State as revenue received incidentally in the exercise of police power or in the alternative as licence fee or as fee for services rendered. There are several decisions of the Supreme Court and this Court bearing on similar levies. The validity of certain annual contributions made by religious institutions to the Government under the Madras hindu Religious and Charitable Endowments Act, 1951, came up for consideration before the Supreme Court in Commissioner, FIRE. v. LT. Swamiar AIR 1964 S. C. 282. Relying on Lutz on Public Finance, Find lay Shirras on Science of Public finance and Seligman's Essays on Taxation, the distinguishing features of taxes and fees were laid down there. Special assessments, fees and taxes were only different forms of mainfestation of the State's taxing power. Compulsion was common to all of them. While tax was levied as a part of the common burden, fee was for payment of special benefits or privileges. Fee was a kind of return or consideration for services rendered. While taxes collected merged in public revenue and went to the benefit of the general public, fees were set apart and appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in Sri. Jagannath v. State of orissa (AIR 1954 S. C. 400). The collections there did not megre in the general revenue and were not allowed to be appropriated in the manner laid down for expenses of public purposes. By s. 50 of the Act a separate fund was contemplated and that was set apart for rendering services. The Supreme Court held that s. 49 of the Act was valid and that the levy was justified. Under s. 58 of the Bombay Trusts Act, 1950, contributions had to be made by public and religious trusts and they were to go to a separate fund called Public Trusts Administration Fund. That fund was created for the better administration of the trusts. It was to meet the expenses of the administration that the levy was made. It was held by the Supreme Court in Ratilal v. The State of Bombay (AIR 1954 SC. 388) that it was fee and that s. 58 of the Act which provided for the levy was valid. Under the Orissa Mining Areas Development Fund Act, 1952, a cess was levied on lessees for the development of certain mining areas. As the levy was for meeting expenses connected with the rendering of services, its validity was upheld by the Supreme Court in Hingir-Rampur Coal Co. v. State of Oris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay consequently be said that if the primary purpose of a statute or ordinance exacting an imposition of some kind is to raise revenue, it represents an exercise of the taxing power, while if the primary purpose of such an enactment is the regulation of some particular occupation, calling or activity, it is as exercise of the police power even if it incidentally produces revenue . The Madras District Municipalities Act provided for levy of fees for constructing halting places and cart stands. Acting under that provision the Cannanore Municipal Council levied fee at the rate of 50 Ps. per bus per day for use of a bus stand. Later on the Municipality raised the fee to re. 1/- per bus. As regards the increased levy it was contended by the bus operators affected by it that the income from it was considerably higher than the expenses incurred for the service and that there was no reasonable correlation between the levy and expenses incurred. It had come out that the collections on account of the increased levy amounted to ₹ 2,500/- per month while the monthly expenses incurred by the Municipality for the maintenance of the bus stand and incidental matters were about ₹ 381 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category of levy called licence fee without any return or quid pro quo. The validity of certain levies called licence fees had to be considered by this Court again incorporation of Calicut v. Sadasivan (1968 KLT. 589), Commissioner, Municipal Council v. S. M. Prabhu (1968 KLT. 628), Travancore Tea Estates Co-, Ltd. v. Executive Officer (1968 KLT. 776), Arya Vaidya Pharmacy Ltd. v. Health Officer, Ernakulam (1968 KLT. 789), Sankaran Nair v. Vaniamkulam Panchayat (1971 KLT. 264) and Kannan Devan Hills v. Munnar panchayat, (1971 KLT. 348), all Full Bench decisions. In all those decisions the levies were held invalid. This Court observed that there was no intermediate category of levy as licence fee which did not fall within the category of either tax or fee. In the exercise of police power of the State incidentally the State may receive, revenue. A good example of that is licence fee collected for sale of liquor under the Abkari Act. IN Coover Jee v. Excise Commissioner, Ajmer (AIR 1954 SC. 220) the Supreme Court held that for mitigation or suppression of evil the police power of the State could be used for regulating business and that one of the purposes of regulation could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are to go to the entire community. Fee is consideration for a special benefit or privilege. In the case of fee there is direct relationship between the payment made and the service rendered as on a contractual basis as though between individuals. While taxes are levied for the very existence of Government, fees are levied only for the purpose of rendering services. The fees levied should not be disproportionate to the services rendered. It is not necessary that the services are rendered to the particular individuals from whom the fees are collected. It is sufficient if the services are rendered to the class of persons en whom the levy is made. The name given to a levy may be misleading. What is called a tax may really be a fee or vice versa. Similarly what is called a licence fee may really be a fee for services rendered. One has to go to the pith and substance of the matter to find out its real character. It may be necessary to enquire as to what is the primary object of the levy and the essential purpose it is intended to achieve to find out its character. In many of the reported cases the levy named as licence fees on scrutiny was found to be merely fees and as fees they wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nct category specifically recognised by Seligman in his Essays on Taxation and accepted in Commissioner H. R. E. v. L. T. Swamiar (AIR 1954 SC. 282.) It is possible to think of routine assessment on warehouses and prohibition of use of bonded warehouses except under licences followed by special assessment on bonded warehouses demanded and paid as licence fees. It is true that while there are specific entries in the Legislative Lists in the Seventh Schedule of the Constitution with regard to various forms of taxes and there is also an entry at the end of each List providing for levy of fees there is no levy called licence fee contemplated by any of those entries. But to conclude from it that all levies should be either taxes or fees is not warranted because of the express provisions in Art. 110 and 199 of the Constitution which deal with Money Bills of the Union and States. The relevant portions of Art. 110 can now be read: 110. (1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely: (a) the imposition, abolition, remission, alteration or regulation of any ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 20. 52 lakhs and that it was not even 1 per cent of the additional expenditure which the Government had to incur in this regard. The expenses mentioned there as having been incurred must have been for regulating production and manufacture of all essential commodities covered by the Act and not for issue of licences to tapioca exporters because the expenses for issue of licences to exporters of tapioca could not be so heavy. There is no material furnished to show what exactly was the service that the Government Lendered to exporters of tapioca and what exactly was the amount that the Government had to spend on that account. It is specifically stated in the Government Order dated 15th April, 1966, that the amount collected by the levy should be made and credited to government. It is to the general revenue or the Consolidated Fund of the State that it goes. The levy cannot be sustained as fee. Viewed from another angle also the impugned levy is invalid. Trade and commerce within any part of India or between States shall be free under Art. 301 of the Constitution. But both Parliament and Legislatures of states can by law in the public interest impose under Art. 302 and 304 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee for services rendered and taxes; and that this difference is brought out by Art. 110 and 199 of the Constitution. IN support of this, my learned brother has relied on the decision of the Supreme Court in The Commissioner, H. R. E. Madras v. L t. Swamiar (AIR 1954 SC. 282). The relevant passage from this decision appears extracted in Para. 2 of the judgment, which states that a licence fee is a fee in return for a privilege conferred on the person who pays it, who has no right otherwise for it. This may itself indicate that there is an element of quid pro quo or return for the licence fee. The Full Bench decisions of this Court (about half-a-dozen of them) and the decision of the Single Judge mentioned in para. 12 of the judgment have all stated that there was no intermediate category of levy as licence fee which did not fall within either the category of tax or of fee. I am not bold enough to say that the passage extracted from the decision of the Supreme Court in L. T. Swamiar's case has an effect different from these decisions: In my opinion, the passage extracted itself indicates that there are only two classes of levy, one, a tax with no quid pro quo or considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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