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Issues Involved:
1. Nature of Court Fees: Tax or Fee? 2. Colorable Exercise of Legislative Power 3. Ad-Valorem Levy Without Upper Limit 4. Correlation Between Services Rendered and Levy Summary: Nature of Court Fees: Tax or Fee? The primary issue was whether the court fees charged u/s Entry 3, List II, in the 7th Schedule of the Constitution were taxes or fees. The Court reiterated that fees must have a broad correlation with the services rendered by the government, as established in prior judgments such as I.M.& M Industries Vs. State of Bihar and Government of Madras Vs. Zenith Lamps. The Court emphasized that the essential character of the levy is to provide special services to a specific class of citizens, and a broad correlation between the amount collected and the expenses incurred suffices to classify it as a fee. Colorable Exercise of Legislative Power The respondents argued that the levy was a colorable exercise of legislative power, essentially a tax disguised as a fee. The Court, however, found that the levy was intended to cover the costs associated with the administration of civil justice and not for general revenue purposes. The Court noted that the State has the widest latitude in economic regulations and fiscal adjustments, and the legislative preference in such matters cannot be easily questioned. Ad-Valorem Levy Without Upper Limit The High Court had struck down the ad-valorem levy of 7.5% without an upper limit, deeming it unreasonable and arbitrary. However, the Supreme Court found that the broad correlation between the total fees collected and the total expenses incurred in the administration of civil justice was sufficient to uphold the levy. The Court observed that the test of correlation should be on a comprehensive level, not on the basis of individual contributors. Correlation Between Services Rendered and Levy The High Court had found that the State was making a profit from the court fees, and certain expenditures should not be debited to the cost of administration of justice. The Supreme Court disagreed, stating that it is difficult to provide an exact breakdown of expenses related to civil justice and that a broad correlation is sufficient. The Court also noted that the administration of both civil and criminal justice often involves the same judicial officers, making it impractical to separate the costs. Conclusion The Supreme Court allowed the appeal, set aside the High Court's judgment, and dismissed the writ petition. The Court emphasized that the levy of court fees should broadly cover the cost of administering justice and should not be used to generate general revenue. The State's legislative adjustments in economic measures were upheld, and the need for uniformity in court fees across the country was highlighted.
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