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TMI Blog1964 (12) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... ch rate as may from time to time be provided. In 1948 the Corporation had fixed the scale of fees on the basis of the annual valuation of the cinema-houses made by a method which does not appear on the record. The respondent had under these sections obtained a licence for its cinema house and had been paying a licence fee calculated on the aforesaid basis. The fee as calculated was ₹ 400 per year. By a resolution passed on March 14, 1958 the Corporation changed the basis of assessment of the licence fee with effect from April 1, 1958. Under the new method the fee was to be assessed at rates prescribed per show according to the sanctioned seating capacity of the cinema houses. The respondent's cinema house,had 551 seats and under the changed method it became liable to a fee of ₹ 5 per show. In the result it became liable to pay a fee of ₹ 6,000 per year. The respondent then moved the High Court at Calcutta under Art. 226 of the Constitution for a writ quashing the resolution. The application was first heard by Sinha J. who allowed it. This order was confirmed by an appellate Bench of the same Court consisting of Bose C. J. and C. K. Mitter J. on appeal by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, therefore, is, was the levy a fee in return for services? Another subsidiary question is, what is the nature of the services which makes a levy in respect of them, a fee ? It is not disputed that a levy made in return for services rendered would be a fee. It is, therefore, unnecessary to consider what a fee is or the tests by which it is to be determined. Nor is it necessary to discuss whether in order that a levy may be a fee the statute imposing it must intend primarily to confer the benefits of the services on those who pay it and benefits received from those services by the public at large, if any, must be secondary. A discussion of these aspects of fees, will be unprofitable and will only cloud the point really in issue. Now, on the first question, that is, whether the levy is in return for services, it is said that it is so because s. 548 uses the word "fee". But, surely, nothing turns on words used. The word "fee" cannot be said to have acquired a rigid technical meaning in the English language indicating only a levy in return for services. No authority for such a meaning of the word was cited. However that may be, it is conceded by the respondent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the word "fee" is not conclusive of the question that it must be in return for services, as we think it is not, then the question whether the fee contemplated in s. 548 is a fee in return for services, can only be decided by reference to the terms of the section and for this purpose we have to consider that section along with s. 443. We have earlier summarised the sections but now propose to set them out so far as material : S. 443. No person shall, without or otherwise than in conformity with the terms of a licence granted.... S. 548. (1) Every licence granted under this Act shall specify, ............................ (1) the tax or fee, if any, paid for the licence (2) Except when it isotherwise expressly provided, for every such licencea fee may be charged at such rate as may from time to time be fixed by the Corporation.................... The sections do not refer to the rendering of any service by the Corporation. Looking at them we do not find anything to lead to the conclusion that they make it incumbent on the Corporation to render any service in return for the fee imposed. Stopping here, therefore, there is no reason for saying that the levy is a fee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was something to be done to control the licensee's activities and to make him observe the conditions of the licence on pain of cancellation of the licence. This is clear from sub-s. (3) of S. 548 which states that "any licence granted under this Act may at any time be suspended or revoked if any of its restrictions or conditions is infringed or evaded by the grantee." This non-observance of the conditions of the licence would expose the licensee to penalty under S. 537 of the Act. The inspection was therefore necessary also for enforcing the conditions of the licence by penalising a breach of them by the licensee. We cannot imagine that an inspection by the Corporation for such purposes can at all be said to be rendering of service to the licensee. The nature of services to be rendered in return for a levy so as to make it a fee has been considered by this Court in several cases and in all of them it has been said that the services must confer some benefit on the person paying the fee. The earliest case on the subject appears to be The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt ([1954] S.C.R. 1005), where it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 323, "If with a view to provide a specific service, levy is imposed by law and expenses for maintaining the service are met out of the amounts collected there being a reasonable relation between the levy and the expenses incurred for rendering the service, the levy would be in the nature of a fee and not in the nature of a tax." It was further said, "A fee being a levy in consideration of rendering service of a particular type, correlation between the expenditure by the Government and the levy must undoubtedly exist." The act was the same as the earlier one in regard to the services to be rendered by the Government and the view expressed in the earlier judgment as to the nature of the services required by the statute to be performed was endorsed in this judgment. It was said at p. 312, that the Mathadipati "is by virtue of his office under an obligation to discharge the duties as a trustee and is answerable as such". It would follow that a service resulting in the control of the Mathadipati would confer special benefit on the institution which alone paid the levy. Both these cases discussed other tests besides the require- ment of the rendering of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that Part V dealt with "Public Health, Safety and Convenience" and s. 443 which was included in Chapter XXVI contained in this Part was headed "Inspection and Regulation of Premises, and of Factories, Trades and Places of Public Resort". A cinema house, it is not disputed, is included in the words "Places of public resort". It was, therefore, contended that a levy outside Part IV could not be a tax and hence must be a fee for services. This contention was sought to be supported by the argument that s. 443 occurred in a Part concerning public health, safety and convenience and therefore the intention was that the levy authorised by the section would be in return for work done for securing public health, safety and convenience and was hence a fee. We are wholly unable to accept this contention. Whether a particular levy is a fee or tax has to be decided only by reference to the terms of the section as we have earlier stated. Its position in the Act cannot determint; its nature; an imposition which is by its terms a tax and not a fee, which in our opinion the present imposition is, cannot become a fee by reason of its having been placed in a certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to anything except rendering of services. We are unable to accept this argument and it is enough to say in regard to it that it is not right that s. 443 does not impose a duty on the Corporation. We think it does so, though in what manner and when it will be exercised it is for the Corporation to decide. It is impossible to call it a power, as the respondent wants to do, for it is not given to the Corporation for its own benefit. The Corporation has been set up only to perform municipal duties and its powers are for enabling it to perform those duties. Furthermore there is no doubt that an estimate of the licence fee has to be included in the budget and therefore the word "tax" in S. 127(3) must be deemed to include the levy under s. 548. The words " subject to the provisions of Part IV" in S. 127(3)must be read with the addition of the words "where applicable".If that levy cannot be a fee because there is no provision forservice being rendered in respect of it, it would indisputably be a tax. As such again, its rate can be determined under s. 127(3) to provide for the discharge of at least the other undisputed duties of the Corporation. We woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, 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 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 which we now proceed to refer. First, there is Pandit Benarsi Das Bhanot v. The State of Madhya Pradesh ([1959] S. C. R. 427) . That case was concerned with a Sales Tax Act which by s. 6(1) provided that no tax would be payable on any sale of goods specified in a schedule to it. Item 33 of that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear to have been based do not support it. It has been contended that as the observations do not form part of the actual decision in the case, they need not be given 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 which Venkatarama Aiyar J. referred fully support his observations. The first case relied upon by him was Powell v. Appollo CandleCo. Ltd.( 1 O. A. C. 282). That case upheld the validity of a statute passedby the legislature of New South Wales which conferred power on the Governor of that Province to impose duty on certain articles in the circumstances prescribed. The Governor under this 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 that "the duties levied under the Order in Council are really levied by the authority of the Act" see p. 291. Here, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 carrying out its functions under the statute for which alone the taxing power was conferred on it, may afford sufficient guidance to make the power to fix the rate of tax valid. We proceed now to refer to these cases. The Western India Theatres Ltd. v. Municipal Corporation of the City of Poona([1959] Supp. 2 S. C. R. 71) 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 was contended that such a power amounted to abdication of legislative function as there was no guidance provided. This contention 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 sufficient guidance for the imposition of the tax. Again, no doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered in fixing the fair price of an essential commodity from time to time. In prescribing a schedule of maximum prices the Controller has to take into account the 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 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 at P. 640, "In deciding the nature and extent of the guidance which should be given to the delegate Legislature must inevitably take into account the special features of the object which it intends to achieve by a particular statute...... Having regard to the nature of the problem which the Legislature wanted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point out that, as in the cases under Essential Supplies (Temporary Powers) Act, 1946, so in the case of a big municipality like that of Calcutta, its needs would depend on various and changing circumstances. There are epidemics, influx of refugees, labour strikes, new amenities to be provided, for such as hospitals, schools and various other such things may be mentioned which make it necessary for a colossal Municipal Corporation like that of Calcutta to have a large amount of flexibility in its taxing powers. These considerations lead us to the view that s. 548 is valid legislation. There is sufficient guidance in the 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 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 on behalf of the Corporation. It is that even if it be assumed that no guidance for the taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten 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 the Municipal limits of the city. Under the provisions of the Calcutta Municipal Act 1923 which had been repealed and reenacted with modifications by the Act of 1951, the respondent was paying for his theatre ₹ 800 per annum as licence fee under provisions corresponding to ss. 443 and 548 (2) of the Act. While so, by a resolution of the Municipal Council dated March 14, 1958, the licence fee payable by theatres under s. 443 was raised with the result that instead of ₹ 800 which the respondent was paying previously he was required to pay a sum of ₹ 6,000 per year. As the Corporation insisted upon the amount 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee as distinguished from a tax. Regarded as a fee the levy was invalid as there was no quid pro quo. If, however, it be held that the provisions quoted authorised the levy of a tax, the provisions were unconstitutional because they involved an improper delegation of legislative power. They also held that the levy was not to any extent saved by Art. 277 of the Constitution. The Corporation desiring to prefer an appeal sought a certificate of fitness from the learned Judges and the same having been granted, the appeal is now before us. As one of the questions involved in the appeal related to the ,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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 conferment of power is on a municipal corporation, or, in any event, whether the rule as to excessive delegation needs substantial modification before the same is applied to a case where the donee of the power is a municipal corporation entrusted with local self government. We shall take up these questions in that order. 1.The Nature of a Fee as distinguished from a tax. Mr. Pathakdid not dispute that the Constitution had drawn a distinction between "fees" and "taxes", and that while "fees" could be charged as incidental to the exercise of legislative power on topics set up in the several entries in the three legislative lists in Schedule VII, 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 que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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. Sundararamier & Co. v. The State of Andhra Pradesh.( [1958] S.C.R. 1422,1479-80) Venkatarama Aiyar, J.speaking for the Court said :- "In List 1, Entries 1 to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be 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. Entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen entries 96 of List 1 or 66 of List 11 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 imposition of a tax. Merely by way of illustration of this type of fee we might refer to fees which are charged for licences which are required to be taken by dealers under the Sales Tax Act in the 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 and sometimes even this maximum is not prescribed. These licences are issued in order to ensure the orderly administration of tax legislation and the proper collection of the tax imposed thereby. The distinction between the tax imposed under Entry 54 of List 11 "taxes on the sale or purchase of goods" and +the fees charged for the licences issued to dealers as a condition of their being permitted 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 submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsent the payment being enforced by law, (2) that a tax is an imposition made for public purpose without 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' 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 governmental agency. "The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service though in many cases the costs are arbitrarily assessed". The learned Judge then went on to observe "the distinction 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 payment for a special benefit or privilege. Fee confers a special capacity although the special advantage as for example in the case of registration fees for documents or marriage li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undra, Thirtha Swamiar v. Commissioner for Hindu Religious and Charitable Endowments, Mysore(1)which was a sequel to the Shirur Mutt case,(1). After s. 76(1) was struck down by this Court in the Shirur Mutt case([1954] S.C.R. 1046) the Madras Legislature by Act 27 of 1954 effected certain amendments to that 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 institutions 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 rendered it somewhat like an income tax, and (3) that it was paid to the Government and became part of the Consolidated Fund of the State, the expenses incurred in administering the Act being paid out of the General Revenues. Section 76 as amended by Act 27 of 1954 was held to be intra vires and sustained as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been a decisive factor for determining the nature of the levy. This decision as well as the Orissa and the Bombay cases already cited 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. As contrasted with these three cases, Mr. Pathak submitted that when fees were levied for licences they were taxes. In support he referred to Cooverjee B. Bharucha v. The Excise Commissioner & the Commissioner, Ajmer and others.( [1954] S.C.R. 873) Under the legislation before the Court viz. The Excise Regulation Act 1950 licences were granted to regulate the trade in liquor. The fee to be charged for the grant of the licence was not prescribed by the 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 legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to 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 public purposes,whereas cess levied by way of fees is not intended to be, and doesnot become, a part of the consolidated fund. It is earmarked and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 rendering the service. Besides the requirement as to special service to the payer being required, the argument continued that on the authorities cited any fee would be tax 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 requirement, however, the learned counsel did not press seriously, seeing that even charges for services rendered, for instance, charges for extra water supply also went into the general municipal fund and figured in the consolidated annual budget prepared for the Corporation. Learned counsel is no doubt right in the submission that the impost described as a "fee" does not decisively determine that it is not a tax. He is also right in urging that the, fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 presently 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, 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, for the cost involved in (a) the machinery 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 Corporation of Rangoon v. The Cooratee Bara Bazar Co. Ltd.(1) the validity of a licence fee imposed for keeping a private market was questioned by a suit filed on the original side of the High Court. Section 178(3) of the City of the Ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that what was being regulated and controlled 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 for licences was conferred by a section occurring in a part headed Miscellaneous and Procedure. Phillips J. observed at p. 57 : "Beasley, I., has held that the fees are leviable as compensation to the corporation for the expenses incurred in the issue of licenses and the general regulation of the trades and other occupations which are licenced 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 Barn Bazar Co. Ltd. (A.I.R. 1927 Rangoon 183-5 Rangoon 212). With all respect, I think this is a very reasonable 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 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 corporation shall kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines by the High Court of Allahabad in Lala Rai Kishore v. District Board of Saharanpur(A.I.R. 1954 All. 675). 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 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 constitute 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. " 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." It is, therefore, not as if powers or duties are not cast on the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any of the matters in this List". If the learned counsels submission that the expression quid pro quo should be read in the sense of a special and particular benefit conferred upon particular licensees (benefit again in the sense suggested) is correct ,he licence fees levied under the rules made under s. 30 (2) (j) read with s. II would be invalid as a fee and it could not be sustained as a tax either, for the tax there levied could not be brought within the rubric of any of the Entries, 82 to 92. It, therefore, appears to us that the word quid pro quo should be read not in the narrow and restricted sense submitted by the learned counsel for the appellant but in a somewhat wider sense as including cases where the function of the licence is to impose control upon an activity the cost incurred for effectuating that control, and this on the basis that the industry or activity is placed under regulation and control not merely in public interest but in the interest and for the benefit of the licensees as a whole as well. Coming nearer to the present case we might take another instance. Take the case of a licensing of factories and trades which are the other matters dealt with in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... health and sanitation" and 24-"industries" read with Entry 66 of the State List. We have taken these two illustrative cases at random but an examination of the entire body of statute law in India would bear this out. We are not, therefore, disposed' to read the judgments of this Court in the Shirur Mutt case(1) and the cases following as laying down that where an activity is regulated by licences 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 charged for such a licence not a fee in the real sense but a tax, whose constitutional validity could be sustained only by reference to the taxation entries in Lists I and II. Mr. Pathak submitted that so far as the fee charged with reference to entertainments in theaters under s. 443 of the Act might be sustained with reference to Entry 62 of List 11, but that would hardly be an answer, because we are examining the entirety of the group of cases to which s. 548(2) of the Act would apply. It will now be convenient to consider the argument of learned Counsel based on Art. 110(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous that a tax which is collected as a licence fee such as in the Ajmere Excise case considered earlier, would not fall outside this definition of a money bill merely because the tax was imposed and collected as a licence fee. If therefore pure taxation measures would be money bills then, it is obvious that the fees for licences which are outside the definition would be those fees which are imposed to meet the cost of regulation and supervision of an activity which is controlled by the requirement of a licence and compliance with its terms. Thus a contribution under s. 76(1) of the Madras Religious Endowments Act as amended in 1954, would be a fee for services rendered because there is no question of licences being taken out in these cases and fees for regulating an activity such as the fees payable for licences under the Regulation of Industries Act, 1951 or for licences for trading in essential commodities under the Essential Commodities Act, 1955 would on the other hand fall tinder the bead "payment of fees for licences". Thus we consider that Art. 110(2) far from supporting Mr. Pathak, negatives the construction for which he contends. Any other construction of Art. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinguished from entries conferring taxing power, the last entry enables fees to be levied as ancillary to the legislative power conferred by the other entries in that list. Even assuming that learned Counsel is right in his submission regarding the manner in which the decisions of this Court in the Religious Endowment group of cases have to be understood, the appellant would be in no better position; in fact, its position would be worse, for if a fee within Entry 66 is confined to payments for particular and specific services rendered to the fee payer, the constitutional validity of s. 548(2) of the Act would be open to challenge on the ground that it authorises the Municipal Corporation to impose taxes which are not within the State's power to impose for its own purposes. This would be an additional reason for reading the word "fee" in Entry 66 in the sense which we have indicated earlier and which is in consonance with the uniform course of decisions already referred to rendered on the meaning of that word. (2)Is the fee permitted to be charged by s. 548 (2) a fee or a tax ? This brings us to a consideration of the provisions of the Act for the purpose of determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Elaborate procedure is laid down by the other sections of this Chapter ending with s. 207 for the manner in which the annual value of lands and buildings on which the specified percentages may be levied may be determined, with appeals provided to Civil Courts for the aggrieved tax-payer in the event of the annual value as determined by the Corporation being disputed. The next Chapter-Ch. XII comprising ss. 208 to 217 is headed 'Taxes on Carriages and Animals'. When the tax leviable under this chapter whose rate is prescribed by the Sch. VI of the Act, is paid, a licence is issued to the owner of the Carriage or Animal. Next, we get to Ch. XIII headed "Tax on professions, trades and callings" and comprises ss. 218 to 221. Section 218 directs that "every person who exercises or carries on in Calcutta any profession, trade or calling indicated in Sch. IV shall annually take out a licence before the 1 st July each year........ and pay for the same such fee as is mentioned in that behalf in the said Schedule. Schedule IV, it might be mentioned, contains the rules as to the quantum of the profession etc. tax to be charged by the ,Corporation. The persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs and deaths and disposal of the dead. The next chapter in this Part deals with acquisition, disposal and general improvement of land and buildings and the last oneCh. XXXIII with the special powers of the Corporation. The next part-Part VII contains provisions for enabling the Municipal Corporation to make bye-laws and rules. Part VIII which is the last Part has four chapters-Ch. XXXV deals with penalties to be imposed for ensuring compliance with the provisions of the Act and the bye-laws made by the Corporation, Ch. XXXVI is headed 'Procedure', and s. 548 is the first section in this Chapter, and the other sections deal with the incidental powers of the Corporation and with procedure. The next two chapters are headed "Supplemental provisions & Transitory provisions". Mr. De for the respondent urged that the scheme of the Muni- cipal Act proceeded on a clear demarcation between taxes and fees, and that all the taxes which the Corporation was empowered to impose were grouped together under various heads in Part IV of the Act headed "Taxation". Section 443 occurs in the Chapter relating to the inspection of places of entertainment and public resort and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 127(3) what is to be considered is the levy of the consolidated rate and the taxes and these are subject to the provisions of Part IV and the obligatory expenditure imposed by sub-s. (4) is to be met out of the consolidated rates and taxes which are to be determined subject to the provisions of Part IV. It was, therefore, submitted that the rates and taxes had to be determined subject to the provisions of Part IV and as the expenditure under sub-s. (4) was to be correlated to the receipt from the rates and taxes it was an indication that all rates & taxes were only under Part IV. We consider that this argument proceeds upon a misconstruction of these provisions. Sub-s. (4) of s. 127, of course, deals with obligatory expenditure but from this it does not follow that expenditure which the Corporation could lawfully incur for the optional amenities which it could provide for the citizens would not find a place in the budget. Sub-s. (4), it would be seen, opens with the words "shall among other things, make Under s. 126 the budget will cover all the expenditure which it is proposed to incur-both that which is obligatory upon the Corporation under s. 127(4) and those which it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be imposed for the grant of a licence was always not a tax. Learned Counsel is, no doubt, right in the submission that Part IV headed 'Taxes' uses the expression "fee" to designate taxes to be imposed upon particular articles or activities but the provisions of the Act and the way the relevant sections are framed make it clear that what is permitted to be charged by these provisions in Part IV is really in the nature of a tax. Besides, in the case of all these imposts, whether called a tax or a fee, except in the case of a fee on advertisements under s. 229 either the amount of the tax was prescribed or criteria laid down on the basis of which the rate of the levy was to be determined. In some cases, as the case of profession tax, tax on carts etc., the tax to be imposed is determined by the Act itself. In the case of others like the Consolidated rate the maximum percentages are fixed and what is left to be determined by the Municipal authorities are the fixation of the percentages within the maxima prescribed and the determination of the annual value of the premises for fixing which elaborate procedure is laid down which includes appeals to Courts where persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent criteria for determining excessive delegation has to be adopted and that having regard to the terms of Entry 5 of List II no conferment of a power in favour of a municipality which is germane to municipal administration or local self government can be held to be beyond the legislative power of the State., and (2) *,bat even if the above were not accepted, the Act itself laid down in sufficiently definite terms the prin- ciples upon which the rate of fee was to be determined and afforded' sufficient guidance for its determination, that the provision did not suffer from the vice of excessive delegation. We shall deal with them in that order. For the submission, under the first head, Mr. Pathak relied on two lines of reasoning, based respectively on the terms of Entry 5 of List 11 of Sch. VII and on certain American decisions which he said supported such a view. Entry 5 reads "Local government, that is to say, the constitution and powers of municipal corporations, improvement trusts, district boards, mining settlement authorities and other local authorities for the purpose of local self-government or village administration". On the terms of this entry emphas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erienced in sustaining the plea that every fee for a written permission or for licence permitted by s. 548 (2) of the Act could be related to particular entries as to taxation which alone are permitted to the States by the distribution of legislative power under the Seventh Schedule. For instance, it was pointed out during the course of the argument that the purposes for which a written permission was necessary and a licence was required to be taken embraced a wide variety of subjects and if s. 548 (2) were held to authorise the levy of a tax in respect of each of those activities for which a permission was needed or a licence was required to be taken, it would not be possible to relate such a tax to any of the taxation entries in List 11, that is, entries 45 to 63. Thus S. 297 of the Act provides that without the written permission of the Commissioner no private streets shall be constructed and under s. 548 (2) a fee may be charged for the granting of the written permission. It is not possible to relate the fee to be charged for this permission under any of the heads of taxation in List 11. Of course, if it were a fee under entry 66, it would fall under that entry read with entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot easy to see how it could confer a wider power, which it could not otherwise exercise, upon a municipality. Besides, it was not suggested that without a power being conferred by the legislature in the Municipal Act, by the mere constitution of a Municipality, the latter can lay claim to any inherent power either of local self-government or as incidental thereto of a power to levy taxes and fees. If the powers of a municipality are derived from legislation and if the legislature has not, under Art. 246 of the Constitution read with the entries in the Legislative List which are relevant, the authority to confer such a power it appears to us to be self-evident that the State Legislature can confer no higher powers on the municipality than it has itself. If Mr. Pathak is right it would mean that though a State cannot levy income tax or impose customs duties on imports and exports for the purpose of augmenting State Revenues, it can however confer power to levy these taxes on a municipality for the "purpose of local self government". The proposition has only to be stated to be rejected. Nothing, therefore, in our opinion depends upon the use of the " powers" in ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislative power in the sense in which we have under the Government of India Act and the Constitution. India was then under a unitary form of Government;) the legislatures were not confined to enumerated powers and the distribution of legislative power between the provinces and the centre was determined with a view to administrative convenience and not on foot of an allocation of areas of exclusive legislative competence. No legislation of a State Government which trenched on a central subject was unconstitutional (See proviso to s. 80A(3) introduced by the Government of India Act, 1919). No assistance therefore can be derived by reference to the powers exercised by local authorities and municipal corporations at a time when there was no distribution of legislative powers leading to unconstitutionality. It is precisely because the Government of India Act made a change in this respect that a provision was inserted in s. 143(2) of that Act by which taxes, duties, cesses or fees which immediately before the commencement of the Government of India Act, 1935 were being lawfully levied by any Provincial Government, municipality or other local authority or body for the purposes of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the State List or even within any of the three Lists. It is not necessary to examine the details of the instances referred to by learned Counsel. But assuming learned Counsel is right in the illustration it would not help him in the least. In the first place, so far as legislative practice is concerned, it cannot prevail over the limitations imposed by the distribution of legislative power in respect of post-Constitution legislation such as the Act before us. What the legislature cannot do directly by legislating and conferring power upon the State Government or the instruments which it creates, it cannot obviously confer upon a municipal corporation merely because it has authority to confer power upon a municipality in express terms. The power to impose taxes which it cannot impose for the augmentation of the revenues of the State it cannot manifestly confer upon a municipality or other organ of a local self-government. Besides, as pointed out by Lord Tomlin in dealing with a contention as to the meaning of 53.3 the word "fisheries" in "Sea coast and inland fisheries" in s. 91 of the British North America Act, 1867 in Attorney General for Canada v. Attorne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the Forward Markets Commission has been created and powers and ,duties vested in it. From these examples it would be clear that the authority to confer power upon the bodies created by legislation is inherent in the power to legislate on the topic. The express mention of an authority to confer power on Municipal Corporations, therefore, introduces no novel principle or rule of construction as regards the conferment of powers. The quantum of the power which a law could bestow upon an institution or body of its creation is determined, firstly, by the view of the legislature as to what are necessary for achieving the purposes for which the institution or body is created and, secondly, by the over-all limitations imposed by the Constitution by the distribution of legislative power. Nothing, therefore, turns on whether the authority to confer "power" is express or is a necessary incident of legislative power. If the very nature of a legislative power is such that the legislature cannot delegate essential legislative functions the fact that the authority to confer power is express & not implicit makes no difference to the application of the principle. In either event, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of other administrative agencies, the question next to be considered is whether the Act affords sufficient guidance to the municipal authority for the levying of the rate. The subject of the limits of the delegation of legislative power has been the subject of consideration in several decisions of this Court including the Delhi Laws Case ([1951] S.C.R. 747) mentioned above. It is, however, sufficient to refer to a few of them. As regards the principle itself we do not understand that there is any controversy. In Vasant Lal Maganbhai Sanjanwala v. The State of Bombay and Ors.( [1961] 1 S.C.R. 341) Subba Rao. J. though he dissented from the judgment of the majority of the Court on the facts, summarised the decisions of this Court on this topic, which Mr. Pathak did not dispute correctly states the law. He said at pp. 356-357 of the report :- "The law on the subject may be briefly stated thus: The Constitution confers a power and imposes a duty on the legislature to make laws. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct. Obviously it cannot abdicate its functions in favour of another. But in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fords no basis either for the contention that there has been an excessive delegation of legislative power as to amount to an abdication of its functions or that the discretion vested is uncanalised and unguided as to amount to a carte blanche to discriminates The matter may possibly be stated more simply by adopting the language of Bose, J. in Rajnarain Singh v. The Chairman, Patna Administration Committee, Patna and another(1) 'is it the delegation of essential legislative power", or unessential details the principle being that if the legislature lays down a policy, prescribes the standards and affords sufficient guidance to the rule making or subordinate legislative authority it is a proper delegation, but not if the legislature confers on the subordinate law making authority powers to determine its own policy without any guidance in that regard. In the one case it would be a canalised power and in the other uncanalised and would amount, in effect, to transferring its basic power to another body. If the validity of s. 548(2) of the Act be judged by this test the questions that arise are : (1) Whether the power to determine the rate of a tax is an essential legislative, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... States Supreme Court. In all those cases the amount of the rate had been prescribed by the legislature and the delegation to the external authority the Government or the President in the United Sates, was merely the determination of certain external facts for rendering the tax applicable to the commodity. Thus in Powell v. Apollo Candle Company, Limited(1) the rate of the custom duty was laid down by an enactment of the New South Wales Legislature. Section 133 of the Customs Act enacted: "Whenever any article possesses, in the opinion of the collector, properties in the whole or in part which can be used for a similar purpose as a dutiable article, the Governor is authorised to levy a duty upon such article at a rate to be fixed in proportion to the degree in which such unknown article approximates in its qualities or uses to such dutiable article". Candles were expressly named in the Act as subject to the rate of duty specified and on the application of the Collector the Governor, by an order in Council notified "stearine" as liable to a similar duty. It is in that context that the Privy Council stated in a passage which is extracted in the judgment of this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged by a civil suit filed in the Bombay High Court by the appellant company. Several points were urged in support of this contention. The first was that the Provincial Legislature under the Government of India Act, 1935 did not itself have the power to levy the said tax; (2) that the residuary category set forth in cl. 1 1 "any other tax" was unconstitutional, the point urged being that thereby "the legislature had completely abdicated its function and delegated essential legislative power to the municipality to determine the nature of the taxes to be imposed on the rate payers. Such omnibus delegation could not, on the authorities, be supported as constitutional". The grounds upon which this second argument was rejected was the main point on which Mr. Pathak relied in support of this case. These were: (1) that the taxes authorised to be imposed were taxes "for the purposes of the Act" i.e., taxes could be raised only for implementing the purposes for which the municipality was constituted and for no other purpose, (2) though strictly speaking the rule as to ejusdem generis could not be invoked, the kind and the nature of the tax which the municipality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x such rate on any other suitable basis as it thinks fit." By a notification issued under that section the Government of Bombay prescribed the rate of rent and this was much lower than the one previously fixed. By petitions under Art. 226 filed in the High Court of Bombay the appellants who were landholders challenged the constitutionality of this fixation on the ground that the legislature had delegated its essential legislative function without laying down policy or principles affording guidance to the delegates for implementing the legislation. This Court, by a majority, answered this question in the negative. The decision proceeded on the basis that the fixation of rent was an essential legislative function. It was, however, held that the legislature had enunciated the principles subject to which the delegates could exercise its subsidiary powers. Gajendragadkar J. as he then was, observed : "The extent to which delegation is permissible is also now well settled. The legislature cannot delegate its essential legislative function in any case. It must lay down the legislative policy and principle and must afford guidance for carrying out the legislative policy laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority 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 or unconstitutional. This leads us to the last of the points urged by Mr. Pathak that the Act itself affords sufficient guidance and fixes standards by which it could determine the rate at which a tax could be levied. It is not, and cannot be disputed that the guidance could be afforded not merely by the provision enabling the tax to be levied but by other provisions of the Act including the preamble. But the question is whether there are any such provisions in the Act which could serve to determine the standard upon which the rate of tax to be levied is to be determined. Mr. Pathak first referred us to the preamble where it is recited that the Act enacted was one relating to the municipal affairs of Calcutta. We are unable to see how this affords any assistance in this regard. He next referred us to s. 24 reading, to quote the material words "Subject to the provisions of this Act and the rules, bye- laws and regulations made thereunder the municipal government of Calcutta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority' is unguided and that he had an unfettered and arbitrary authority to exercise his discretion 'at his sweet will and pleasure' the existence of a provision for appeals might not impart validity to such legislation. The reason for this is that the appellate power would be subject to the same vice as the power of the original authority and the imposition of one's I sweet will and pleasure' over another of a lower authority, would not prevent discrimination or render the restriction reasonable". Principal reliance, however, was placed by learned counsel on ss. 115 and 117 of the Act as affording the requisite guidance. These read :- Section 115 : "There shall be one Municipal Fund held by the Corporation in trust for the purposes of this Act to which all moneys realised or realisable under this Act (other than fine levied by Magistrates) and all moneys otherwise received by the Corporation shall be credited". Section 117 : "(1) The moneys from time to time credited to the Municipal Fund shall be applied in payment of all sums, charges and cost necessary for carrying out the purposes of this Act, or of which the payment is duly directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied within the State or the Union, as the case may be. As Mr. Pathak himself realised, this would be plainly unsupportable. If this were so, merely because the area of Government was restricted to a municipality we do not consider how these provisions afford guidance to the subordinate law making authority viz., the Municipal Corporation to fix the rate of the levy. Pausing here, learned Counsel said that even if a maxima were prescribed still it left an amount of discretion to the Municipal Corporation or the Executive, as the case may be, and that even such a "guided" power could be attacked as ultra vires. This, however, do Is not follow. The unconstitutionality arises out of the discretion being %,holly uncanalised and unguided. The argument on the other side is not that no discretion could be left to the legislature to determine within permissible limits the precise rate that would secure the purposes which it seeks to achieve but rather that no guidance is at all afforded and a blank cheque given to the subordinate authority. Where a maxima is fixed and the limit of discretion is thus controlled the legislature has exercised its legislative power on that topic viz., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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