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TMI Blog1971 (4) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this Court. There is no doubt that the State has failed to place the necessary material before the Court to justify the levy. But the fact remains that because of the negligence of those in-charge of the defence of the State, the State may suffer considerable, financial loss, if we hold that the impugned Rule is void. Hence we are constrained to give the State a further chance to prove its case. In the result we allow the appeal, sat aside the order of the High Court and remit the case to the High Court for disposal according to law in the light of this decision. A further opportunity be given to the State to place material before that court to show that the value of the services rendered by the State has reasonable correlationship with the fee charged - Civil Appeal No. 770 of 1967 - - - Dated:- 2-4-1971 - HEGDE, K.S., SIKRI, S.M. (CJ), MITTER, G.K., GROVER, A.N. AND REDDY, P. JAGANMOHAN, JJ. Sarjoo Pravad, K. K. Sinha and B. B. Sinha, for the appellant S. C. Agarwala, R. K. Garg, V.J. Francis, Narayana Netter and S. P. Singh, for the respondent Hegde J. JUDGEMENT In this appeal by certificate. the vires of Rule III of the Rules framed under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the levy becomes invalid. The distinction between fee and levy' came up for the first time for consideration by this Court in The Commissioner, Hindu Religious Endowments' Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt([1954] S.C.R. 1005). Therein this Court speaking through Mukherjea, J. (as he then was) quoted with approval the definition of 'tax' given by Latham C. J. of the High Court of Australia in Matthews v. Chicory, Marketing Board 60 C.L.R. 263. In that case the learned Chief Justice observed : A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered. Dealing with the distinction between tax and fee Mukherjea J. observed thus in the abovementioned case. It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the tax-payer's consent and the payment is enforced by law. The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss is one or the other would naturally depend on the facts of each case. If in the guise of a fee, the Legislature imposes a tax, it is for the Court on a scrutiny of the scheme of the levy, to determine its Teal character. The distinction is recognised by the Constitution which while empowering the appropriate Legislatures to levy taxes under the Entries in the three lists refers to their power to levy fees in respect of any such matters, except the fees taken in court, and tests have been laid down by this Court for determining the ,character of an impugned levy. In determining whether a levy is a fee the true test must be whether its primary and essential purpose is to render specific services to a specified area or class, it being of no consequence that the State may ultimately and indirectly be benefited by it. In H. H. Sudhundra Thirtha Swamiar v. Commissioner for ,Hindu Religious and Charitable Endowments, Mysore, ([1963] Supp. 2 S.C.R. 302) this Court was called upon to consider whether the levy impugned in that case could be justified as a fee. It upheld the levy which was an annual contribution levied under the amended Section 76(1) of the Madras Religious Endowments Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion that a large number of provisions of the Act, particularly in the Chapters dealing with safety involve a good deal of technical knowledge and in the course of their discharge of duties and obligations the Inspectors are expected to give proper advice and guidance so that there may be due compliance with the provisions of the Act. On certain occasions the factory owners are bound to receive a good deal of benefit by being saved from the consequences. of the working of dangerous machines or employment of such processes as involve danger to human life by being warned at the proper time as to the defective nature of the machinery or of the taking of precautions which are enjoined under the Act. Similarly if a building or a machinery or plant is in such a condition that it is dangerous to human life or safety the Inspector by serving a timely notice on the manager saves the factory owner from all the consequences of proper repairs not being done in time to the building or machinery. In that case the High Court found that 60% of the amount of licence fees which were being realised was actually spent on services rendered to the factory owners. That finding was accepted by this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State can sell the right to practice the profession of law in courts or to practice the profession of medicine or any of the other numerous professions, at exorbitant prices or may even put up those rights for auction to be given to the highest bidder. Nothing so bad can be within the contemplation of our laws. We are inclined to think that the learned Judges of the High Court have misunderstood the observations of Seligman quoted in the Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt ([1954] S.C.R. 1005) to the effect that it is a special benefit accuring to the individual which is the reason for the payment of fee. Let us now consider whether in the present case the State is proved to have been rendering any service to the appellant in lieu of the fee levied and further whether if it does render any service whether there is reasonable correlationship between the services rendered and the fee levied. In other words whether the fee levied can be considered as a quid pro quo for the services rendered. The averments of the respondents in their counter-affidavit that are relevant on this aspect of the case are those found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard' rules, the actual cost of supervision of the manufacturing process by the Excise Department is required to be home by the manufacturer. There cannot be a double levy in that regard. In the opinion of the High Court the subsequent transfer of denatured spirit and possession of the same in the hands of various persons such as whole-sale dealer, retail dealer or other manufacturers also requires close and effective supervision because of the risk of the denatured spirit being converted into potable liquor and thus evading heavy duy. Assuming this conclusion to be correct, by doing so, the State is rendering no service to the consumer. It is merely protecting its own rights. Further in this case, the State which was in a position to place material before the Court to show what services had been rendered by it to the appellant and other similar licensees, the costs or at any rate the probable costs that can be said to have been incurred for rendering those services and the amount realised as fees has failed to do so. On the side of the appellant, it is alleged that the State is collecting huge amount as fees and that it is rendering little or no service in return. The correlati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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