TMI Blog2012 (7) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... zance by a court not inferior to a Metropolitan Magistrate. To ensure compliance with these conditions, the 1985 Rules empower the District Officer or an Entertainment Tax Officer to conduct inspection of the race club at reasonable times. For the purpose of enforcement, wide powers are conferred on various authorities to enable them to supervise, regulate and monitor the activities relating to the race course with a view to secure proper enforcement of the provisions. Therefore, by applying the principles, it is clear that the said levy is a 'fee’ and not 'tax’. A licence fee imposed for regulatory purposes is not conditioned by the fact that there must be a quid pro quo for the services rendered, but that, such licence fee must be reasonable and not excessive. It would again not be possible to work out with arithmetical equivalence the amount of fee which could be said to be reasonable or otherwise. If there is a broad correlation between the expenditure which the State incurs and the fees charged, the fees could be sustained as reasonable. The object of the Act, as synthesized from its provisions, is to regulate, monitor, control and encourage the sport of horse-racing. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held save on a race course for which a licence for horse racing granted in accordance with the provisions of this Act, is in force. Section 4 which lays down the procedure for issuing the licences for horse racing reads as follows: 4. Licences for horse-racing- (1) The owner, lessee or occupier of any race course may apply to the Government for horse-racing on such race-course or for arranging for wagering or betting in such race- course on a horse, race run or some other race-course either within the Union territory of Delhi or Outside the Union territory of Delhi. (2) The Government may (if in its opinion public interest so requires) withhold such licence or grant it subject to such conditions and for such period as they may think fit. (3) In particular and without prejudice to the generality of the foregoing power, such conditions may provide for- (a) the payment of a licence fee; (b) the maintenance of such accounts and furnishing of such returns as are required by the United Provinces Entertainment and Betting Tax Act, 1937 as extended to the Union territory of Delhi; (c) the amount of stakes which may be allotted for different kinds of hor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce run on any other race course, within or outside the Union Territory of Delhi, shall be rupees five hundred (Rs.500/-) per race day on which race is held. Rule 12 of the 1985 Rules, material for our purpose, confers power of inspection and states as under: 12. Inspection- The District Officer or any other officer not below the rank of Entertainment Tax Inspector shall have access to the licensed race course at all reasonable times with a view to satisfy himself that the provisions of the Act and these Rules are being complied with and that the conditions of the licence are duly observed. 4. On 7th March 2001, in exercise of the powers conferred under Section 11 of the Act, the Lt. Governor of the National Capital Territory of Delhi enacted the Delhi Race Course Licensing (Amendment) Rules, 2001 (for short 2001 Rules ) and enhanced the aforesaid licence fee rates to ₹ 20,000/- and ₹ 5,000/- respectively. 5. On 31st January, 2002, Commissioner of Excise, Entertainment Luxury Tax (respondent no.3 in this appeal) issued a demand letter to Delhi Race Club, a body corporate, the appellant in this appeal, informing them that the licence fee deposited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel traced the evolution of law in this regard by referring to several decisions of this Court. The main thrust of his submissions was based on the decision of this Court in Corporation of Calcutta Anr. Vs. Liberty Cinema AIR (1965) SC 1107 , wherein it was held that the function of fixing the rate of tax is not an essential function and can be delegated, but such delegation has to be under some guidance. He invited our attention to the case of Devi Das Gopal Krishnan Ors. Vs. State of Punjab Ors. 1967 (3) SCR 557, wherein while explaining the ratio of the decision in Liberty Cinema (supra) and emphasising the necessity of some guidance while delegating the power to fix the rate of tax, it was observed that the doctrine of constitutional and statutory needs would not afford reasonable guidelines in the fixation of such rates of tax. Reliance was also placed on The Municipal Corporation of Delhi Vs. Birla Cotton, Spinning and Weaving Mills, Delhi Anr. AIR (1968) SC 1232 , wherein, the Constitution Bench of this Court, while observing that guidance and control must necessarily be present while delegating a legislative function, discussed various forms of such guidance dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them has to be examined for the purpose of determining the rendering of the services, which would make the levy a fee. 10. Per contra, Mr. T.S. Doabia, learned senior counsel appearing on behalf of respondent nos.2 and 3, submitted that the Act does not suffer from the vice of excessive delegation as the scheme of the Act provides enough guidelines to fix the rate of licence fee. To buttress his argument, he relied upon the Preamble and the text of Section 4 of the Act as also Rule 13(2) of the 1985 Rules. Drawing support from Liberty Cinema (supra) and Municipal Corporation of Delhi (supra) learned counsel contended that the nature and extent of guidance is to be ascertained from the broad features and objects sought to be achieved by a particular statute and not on the touchstone of a rigid uniform rule. According to the learned counsel, Section 4(3) of the Act, relating to the conditions of licence, itself provides the parameters to be kept in view while fixing the licence fee and are thus, sufficient guidelines in the matter of fixation of such licence fee. Rebutting the submissions of the appellant that the levy cannot be demanded as there was no quid pro quo involved, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted no policy and afforded no guidance for determining the basis or the rate on which the tax was to be levied and is, therefore, void. Corporation s appeal before the Division Bench being unsuccessful, the matter reached this Court. By majority, Corporation s appeal was allowed and impost was upheld as a tax. However, while upholding the validity of levy, speaking for the majority, Sarkar, J. observed that when the power to fix rates of tax is left to another body, the legislature must provide guidance for such fixation. Nevertheless, the validity of the guidance cannot be tested by a rigid uniform rule and must depend on the object of the Act which delegated the power to fix the rate. Thus, it was held that the power to fix the rate of tax can be delegated but some guidance has to be specified in the Act. 14. A similar question arose in Devi Das (supra) where the Constitution Bench, while endorsing the opinion rendered in Liberty Cinema (supra), held that there can be no general principle that the doctrine of constitutional and statutory needs would always afford reasonable guidelines in the fixation of rates of taxation. Each statute has to be examined to find out whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retion that undoubtedly rests with the legislature in determining the extent of delegation necessary in a particular case. On a review of a number of decisions on the point, including In re. Delhi Laws Act, 1912 AIR 1951 SC 332, Liberty Cinema (supra) and Devi Das (supra), Wanchoo C.J. (speaking for himself and Shelat, J.) observed that what guidance should be given and to what extent and whether guidance has been given in a particular case at all depends on a consideration of the provisions of the particular Act with which the Court has to deal with including its preamble. It was also observed that the nature of the body to which delegation is made is also a factor to be taken into consideration in determining whether there is sufficient guidance in the matter of delegation. However, what form the guidance should take is again a matter which cannot be stated in general terms. It will depend upon the circumstances of each statute under consideration; in some cases guidance in broad general terms may be enough; in other cases more detailed guidance may be necessary. In the same decision, Shah J. (speaking for himself and Vaidialingam J.) after analyzing the cases on the point of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, there should be a clear legislative policy, these judgments, which were vociferously relied upon before us, will have no bearing unless the levy involved is tax. 17. Therefore, the pivotal question to be determined is the nature of the impost in the present case. The characteristics of a fee, as distinct from tax, were explained by this Court, as early as in The Commissioner, Hindu Religious Endowments, Madras Vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt AIR 1954 SC 282 (commonly referred to as the 'Shirur Mutt s Case ). The ratio of this decision has been consistently followed as locus classicus in subsequent decisions dealing with the concept of 'fee and 'tax . A Constitution Bench of this Court in Hingir Rampur Coal Co. Ltd. Vs. State of Orissa 1961 (2) SCR 537 was faced with the challenge of deciding upon the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952, levying cess on the colliery of the petitioner therein. The Bench explained different features of a 'tax , a 'fee and 'cess in the following passage: The neat and terse definition of Tax which has been given by Latham, C.J., in Matthews v. Chico ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decision in Hingir Rampur Coal Co. Ltd (supra), explained the distinction between the terms 'tax and 'fee in the following words: (SCC HN) The term cess is commonly employed to connote a tax with a purpose or a tax allocated to a particular thing. However, it also means an assessment or levy. Depending on the context and purpose of levy, cess may not be a tax; it may be a fee or fee as well. It is not necessary that the services rendered from out of the fee collected should be directly in proportion with the amount of fee collected. It is equally not necessary that the services rendered by the fee collected should remain confined to the persons from whom the fee has been collected. Availability of indirect benefit and a general nexus between the persons bearing the burden of levy of fee and the services rendered out of the fee collected is enough to uphold the validity of the fee charged . (Emphasis supplied by us) 19. In the light of the tests laid down in Hingir Rampur (supra) and followed in Kesoram Industries (supra), it is manifest that the true test to determine the character of a levy, delineating 'tax from 'fee is the primary objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of this Court in Sreenivasa General Traders and Ors. Vs. State of Andhra Pradesh and Ors. (1983) 4 SCC 353, wherein a Bench of three learned Judges, analysed, in great detail, the principles culled out in Kewal Krishan Puri (supra). Opining that the observation made in the said decision, seeking to quantify the extent of correlation between the amount of fee collected and the cost of rendition of service, namely: 'At least a good and substantial portion of the amount collected on account of fees, may be in neighbourhood of two-thirds or three-fourths, must be shown with reasonable certainty as being spent for rendering services in the market to the payer of fee appeared to be an obiter, the Court echoed the following views insofar as the actual quid pro quo between the services rendered and payer of the fee was concerned: 31. The traditional view that there must be actual quid pro quo for a fee has undergone a sea change in the subsequent decisions. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to work out with mathematical precision the amount of fee required for the services to be rendered each year and to collect only just that amount which is sufficient for meeting the expenditure in that year. In some years, the income of a market committee by way of market fee and licence fee may exceed the expenditure and in another year when the development works are in progress for providing modern infrastructure facilities, the expenditure may be far in excess of the income. It is wrong to take only one particular year or a few years into consideration to decide whether the fee is commensurate with the services rendered. An overall picture has to be taken in dealing with the question whether there is quid pro quo i.e. there is correlation between the increase in the rate of fee from 50 paise to rupee one and the services rendered .. 21. It is pertinent to note that in Liberty Cinema (supra), the Court had identified the existence of two distinct kinds of fee and traced its presence to the Constitution itself. It was observed that in our Constitution, fee for licence and fee for services rendered are contemplated as different kinds of levy. The former is not intended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judges of this Court was called upon to examine the validity of the revision of licence fee under the Andhra Pradesh Factories Rules, 1950. The levy of licence fee was challenged inter-alia on the grounds that the fee imposed being in fact a tax, the State had no power to levy the same; the Rules or the Factories Act, 1948, did not provide any criteria or guidelines for fixation of licence fee and that the State had no power to impose or enhance the licence fee for any alleged services rendered or proposed to be rendered under other legislations other than the concerned Act, as the power is delegated under that particular Act only. On an analysis of the provisions of that Act and the Rules made thereunder, the Court came to the conclusion that the licence fee in this case was a regulatory fee and not a fee for any special services rendered; there was no mention of any special service to be rendered to the payer of the licence fee in the provisions and the purpose of the licence was to enable the authorities to supervise, regulate and monitor the activities relating to factories with a view to secure proper enforcement of the provisions. It was observed that the nature of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtise and training and also constant vigil on the activities of the race course. The expenses incurred in carrying out such regular inspections have to be considerable. Hence, in our opinion, the licence fee imposed in the present case is a regulatory fee and need not necessarily entail rendition of specific services in return but at the same time should not be excessive. In any case, the appellant has not challenged the amount of the levy as unreasonable and expropriatory or excessive. The argument on behalf of the appellant that inspection does not constitute a service rendered in lieu of the fee charged, based upon the observations in the Liberty Cinema case (supra) is equally fallacious. In Delhi Cloth General Mills Co. Ltd. Vs. The Chief Commissioner, Delhi (1969) 3 SCC 925 while holding that the levy involved in that case was a fee as opposed to tax, this Court held as follows: .In each case where the question arises whether the levy is in the nature of a fee the entire scheme of the statutory provisions, the duties and obligations imposed on the inspecting staff and the nature of work done by them will have to be examined for the purpose of determining the rendering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with the object and purpose for which the Act and the 2001 Rules have been enacted. 28. As noted above, challenge to the constitutionality of Section 11(2) of the Act was based on the premise that no guidance, check, control or safeguard is specified in the Act. This principle, as we have distinguished above, applies only to the cases of delegation of the function of fixation of rate of tax and not a fee. As we have held that the levy involved in the present case is a fee and not tax, the ratio of the above-mentioned cases, relied upon by the learned Senior Counsel, will have no application in determining the question before us. The scheme of the Act clearly spells out the object, policy and the intention with which it has been enacted and therefore, the Act does not warrant any interference as being an instance of excessive delegation. 29. Before we part with the judgment, it is pertinent to note that the challenge to the validity of Section 11(2) of the Act was raised after almost 15 years of its coming into force. The appellant, since the commencement of the Act, had been regularly paying the licence fee and the present challenge was made only when quantum of the licence ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
