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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 ..... 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 Corporation. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 that the Act uses the word fee indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices, 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 return for services. But it was said that the services to be provided for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions 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 was said at p. 1042, 'a fee is a payment for a special benefit or privilege.... Public interest seems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 services for determining whether a levy is a fee, but with these we are not concerned in the present case. These cases also discussed the correlation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 certain part of the statute. The reference to the heading of Part V can at most indicate that the provisions in it were for conferring benefit on the public at large. The cinema house owners paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 would, therefore, reject this last argument also. The conclusion to which we then arrive is that the levy under S. 548 is not a fee as the Act does not provide for any services of special kind being rendered resulting in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 of this power the Government duly substituted by a notification for item 33 the following: Goods sold by the State Government . The amendment of the schedule by the notification was challenged on the round that s. 6(2) was invalid as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention 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, therefore, a power conferred on the Governor by the Legislature to levy a tax was upheld. It would follow that a power conferred to fix rates of taxes has equally to be upheld. The next case was Syed Mohamed v. State of Madras([1952] 3 S. T. C 367). There a power t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 doubt, this was not a case dealing with rates of taxes, but if a power on the Corporation to impose any tax it liked subject to the guidance mentioned was valid, that would include in it the power to fix the rates of the tax, subject of course to the same guidance. Such a power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailability 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 attack it may have come to the conclusion that it would be inexpedient to limit the discretion of the delegate in fixing the maximum prices by reference to any basic price. The portions in the judgment in Bhana Mal Gulzari Mal's case()[1960] 2 S. C. R. 627) quoted in the prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has been prescribed, the provision for taxation in the Act would be valid. He said that the Act may be said to have been passed under entry 5 of List 11 in the Seventh Schedule to our Constitution. That entry authorises the passing of a law concerning the constitution and powers of a municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... berty 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 writs of certiorai, mandamus etc. to quash the said resolution and to prevent the Corporation from enforcing the said demand. It was stated in the petition that the respondent had been paying besides the consolidated rate for the property, a fee of ₹ 250 as profession tax for carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld 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 fee-payer. His submissions in support of the validity of the impugned levy were : (1) An analysis of the several provisions of the Act showed that the Act employed the word fee and particularly in the context of a fee for licences granted for carrying on an activity, in the sense of a tax., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 question necessarily arose as to what were the ingredients or characteristics of a fee as distinguished from a tax . Mr. Pathak submitted that fees as envisaged by the Constitution was the exaction of compensation permitted by a statute to be imposed for a special service rendered to the payer. In other words, unless by or un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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. Entry 41 mentions Trade and commerce with foreign countries; import and export across customs frontiers . If these expressions are to be interpreted as including duties to be levied in respect of that trade and commerce, then Entry 83 which is Duties of customs including export duties would be wholly redundant. Entries 43 and 44 relate to incorporation, regulation and winding up of corporations. Entry 85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 submissions of Mr. Pathak as regards the nature of a fee under the Constitution we shall reserve for consideration later. Recognising this well marked distinction which the Constitution makes as between a fee and a tax, the submission of Mr. Pathak was that fees in entry 66 of List II were fees for services specially rendered to the payer, and for this construction he relied on two separate lines of reasoning (1) that this had been the sense in which this Court had understood the content of the word fee ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 licences is secondary to the primary motive of regulation in the public interest. Public interest seems to be the basis of all impositions, but in a fee it is some special benefit which the individual receives . In holding that the contribution imposed by s. 76(1) was really a tax and not a fee regard was also had to some other factors, viz., (1) the percentage of contribution leviable was graded according to the income derived by the institution, and(2)the entire collections went into the Consolidated Fund of the State and the expenses for the upkeep of the Board which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds 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 fee. The changes that were effected by the Madras Legislature were : (1) the graded system was abolished and the maximum percentage of the contribution being fixed by the statute, (2) the contributions payable were collected by the Commissioner and not by the State, (3) that a separate Fund was created into which these collections were credited and moneys for meeting the expenditure for the administration of the Act were drawn from this Fund. One other point to be mentioned is that the services rendered to the institution, as set out in s. 76 and the other relevant provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 legislative power for enacting this legislation was to be traced to the Entries in the Seventh Schedule, List 11, of the Government of India Act, 1935, for making laws regarding intoxicating liquors, i.e. the production, manufacture, possession, transport, purchase and sale of intoxicating liquors, and under the powers conferred for raising duties of excise on alcoholic liquors for human consumption; and the pith and substance of the regulation was that it raised excise revenue by imposing duties on liquors . Dealing with the contention that as it was described in the Excise Act as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 andset apart for the purpose of services for which it is lvied......In regard to fees there is, and must always be, co-ordinaton between the fee collected and the service intended to be rendered..... The distinction between a tax and a fee is, however, important and it is recognised by the Constitution. Several Entries in the Three Lists empower the appropriate Legislatures to levy taxes, but apart from the power to levy taxes thus conferred each List specifically refers to the power to levy fees in respect of any of the matters covered in the said List excluding of course fees taken in any Court . Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 the fee is imposed for the grant of a licence, is equally not determinative of its true nature. It is common knowledge that in the United Kingdom duties of excise are often collected as licence fees and an illustration of a similar practice in India is seen in the Ajmere Excise Licence case.( [1954] S.C.R. 873) As observed by Gwyer, C.J., in Re : Central Provinces and Berar Act 14 of 1938 ([1939] F.C.R. 18) The licence fees payable by persons who produced or sold excisable articles also became known (in U.K.) as duties of excise . In the context of the problem before us, however, the question is whether in order to constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 Rangoon Municipal Act ran : For every such licence or permission a fee may be charged at such rate as shall from time to time be fixed by the Corporation . Under this provision fees amounting to substantial sums were charged for licences granted for these private markets. This fee was challenged as unreasonable and ultra vires. Cunliffe, J. who tried the suit observed at pp. 219 and 220 :- A licence is merely a permission granted to a particular person to do a particular thing at a. fixed place during a determinate period. The fee attached to such a permit is a specific sum of money to be collected from the licensee for the purpose of covering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 know where such trades are being carried on and shall be in a position to see that they are carried on in a proper manner without causing unnecessary nuisance to other people or danger to the public generally. Reilly, J., the other learned Judge, added at p. 59 It is suggested that the fixing of fees for those licenses may be used by the council as method of taxation. Surely, if that was intended, that power would have been provided for in the part of the Act which deals with taxation. What could be the reason for bringing it in as a' mere matter of procedure at the end of the Act ? .... If we accept the proposition that the power of charging li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the activities of public bodies. Nevertheless the supervision, inspection and regulation is from a long term point of view considered to be and is in the interest of the industry or the activity itself. To say that to enable a fee strictly so called to be levied, an immediate advantage measurable in terms of money should be conferred on the payer, is to take too narrow a view of the concept of a fee. We do not consider that the decisions of this Court in the Endowment cases lay down such a proposition or compel us to adopt this construction. On the other hand the Orissa Endowments Act and the Bombay Public Trusts Act cases, as also the Orissa Minin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 the fasciculus of sections of the Act in which s. 443 is to be found. Section 436 runs, to quote the material words no person shall, without the previous written permission of the Commissioner establish in any premises or materially alter, enlarge or extend any factory, workshop or workplace in which it is intended to employ some electricity, water or other mechanical power [436(1)] and s. 437(1) reads : No person shall use or Permit or suffer to be used any premises for any of the following purposes without or otherwise or in conformity with the term, of the licence granted by the Commissioner in this behalf, viz. (a) any of the purposes specified in Schedule 18,(b) any purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) as supporting the narrow construction of the word fee as used in the entries in the legislative lists. Article 110(2) deals with the definition, of Money Bills for the purposes of that Chapter. Clause (1) defines in positive terms what shall be deemed to be a money bill and cl. (2) negatively defines what shall not be deemed to be a money bill. That provision reads 110. (2) A Bill shall not be deemed to be a Money Bill by reason only that it provides for the imposition of fines or other pecuniary penalties, or for the demand or payment of fees for licences or fees for services rendered, or by reason that it provides for the imposition, abolition, remission,, alteration or regulation of any tax by any local authority or body for local p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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. 110(2) would hardly fit in with the scheme of the Article itself or even with the lists in Sch. VII. Thus if every fee for a licence were outside the definition of a money bill, legislation for the levy of excise duties which are very often collected by adopting the machinery of licences and fees therefor, would not be money bills, and seeing that excise duties are a taxation entry in Lists I II such a position cannot be reconciled. Besides, as already pointed out, Entry 66 itself would have to be read as a taxation entry in order to sustain the levy of licence fees on various activities which might form the subject of legislative control or regulation under the various non-taxation entries in the lists. Such a construction would be contrary to the entire scheme on which the several entries in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 determining whether the impost permitted to be charged by S. 548(2) of the Act is a fee understood in the sense in which we have explained earlier as used in Entry 66 of List 11 or is it a tax. For this purpose it is necessary to examine the scheme of the Act. The Act contains 615 sections and these are divided into 3 8 chapters each with a heading indicating the subject dealt with in it. These several chapters are themselves grouped under 8 Parts. Part 1 in which Ch. 1 alone occurs is preliminary and does not require mention. Part 11 which comprises Chapters 11 to VI deal with the constitution and government of the Municipal Corporation. The several chapters of this Part enumerate and specify the powers and functions of the several municipal authorities and the manner in which the business of the Corporation has to be transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, 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 to be taxed under this head are divided into 10 classes depending upon the amount of business carried on and in the case of companies, their paid-up capital and in the case of individuals, of their annual income and in respect of each class the fee to be levied is specified. Chapter XIV headed Scavenging Tax comprises ss. 222 and 223. This tax is to be levied on per- sons who exercise a calling. specified in Part 1 of Sch. VII and is dependent on either the average number of animals kept by the persons for the exercise of such calling, or in the case of the owner or occupier of a market, the average quantity of offensive matter and rubbish removed daily. A licence is to be taken by the person liable to pay the tax and the rates to be charged are to be those specified in Part 11 of Sch. VII. Next, we have a tax on carts under Ch. XV. The ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 s. 548(2) in one headed Procedure and that the framers of the Act, therefore, could not, by these provisions, intend that the fee to be levied would be a tax. In other words, the argument was that all taxing power and the heads of taxation were to be exclusively found in Part IV of the Act. This argument deserves serious consideration, but before we proceed to do so, we might notice and dispose of an additional submission which was made to reinforce this argument based on the terms of s. 127(3) read with s. 127(4) of the Act. Section 127 occurs in Ch. VIII dealing with Budget estimates. Section 126 requires the Commissioner to prepare and submit to the Standing Finance Committee on or before December 15 each year, the annual estimates of expenditure, receipts and balances and the statements of proposed taxes . Section 127 is concerned with requiring the Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 could lawfully incur. On the receipt side would be included also fees and all receipts from every other source. No doubt, s. 127(3) would appear to suggest that so far as consolidated rates and taxes are concerned, it would be subject to the provisions of Part IV but that by its very nature can only apply to the rates and taxes listed in Part IV. If on a proper construc- tion of the Act one reached the conclusion that Part IV was not exhaustive of the range of levies permitted by the Act and that the fees permitted to be levied by s. 548(2) were also taxes, there would be nothing in s. 127(3), either by itself or read with s. 127(4), to militate against that construction. We do not, therefore, consider that these provisions advance the case of the respondent if on a construction of the Act one reached a different conclusion. We are thus left with the assistance afforded to us by the scheme unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 are aggrieved by action of the municipal authorities. One exception to this method of prescribing the tax or its permitted limits is, as already pointed out, s. 229. It is called a licence fee on advertisements but, in the context, gives no room for controversy as to whether it is a tax or a fee. We are satisfied that an examination of the provisions to which we have referred makes three matters abundantly clear : (1) that it draws a sharp and clear distinction between taxes properly so called and fees, (2) the division into Parts and chapters is logical and clear cut and no matter which properly falls under a subject set out under a Part or chapter heading is dealt with in any other. Mr. Pathak was not able to point to any instance in which a subject which fell under one Part or even chapter was included in and dealt with in another, and (3) that taxes, by whatever designation they might be called, ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment, 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 emphasis was laid on the words powers of municipal corporations and for the purpose of local self-government for which the municipal corporations and other bodies specified were to be constituted. Relying on the words underlined he urged: (1) that the Constitution empowered the devolution on municipal corporations of all powers which were needed for the purpose of local self- government. If, therefore, a power of taxation was conferred upon a municipal corporation, that devolution of power was sanctioned by the Constitution and so was outside the rule against excessive delegation of Legislative power. The argument was even pitched higher and it was said that the expression powers occurring in the entry enabled the State Legislature to confer upon municipal corporations not merely all the powers which the State Legislature itself could exercise under the several legislative entries in Lists II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 5, entry 6-public health and sanitation-as well as entry 13- Communications, that is to say, roads, bridges etc. Very many more illustrations of this sort to some of which we have adverted earlier, were pointed out during the course of the argument and learned Counsel suggested that some of them might fall under the head of lands and buildings . But the regulation of an activity for carrying on a business in certain premises and which are dealt with in Chapter XXVI of the Act-- Inspection and Regulation of Premises, and of Factories cannot be equated with the subject-matter of a tax on land and buildings which are specifically dealt with by s. 165 which reads : A graduated consolidated rate on the annual valuation determined under this Chapter may be imposed by the Corporation upon all lands and buildings in Calcutta for the purpose of this Act.. Similarly, restrictions are imposed in the interest of public health and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entry 5, as that expression can refer only to (a) such powers as are actually conferred by the enactment in question and (b) powers which the Legislature can by law confer on the executive Government of the State or on any other instrumentality of its creation. The answer on behalf of the respondent to this submission was based upon two grounds: (1) That s. 548(2) is really an exercise of legislative power under entry 66 of List 11 and that under the power so conferred what the Corporation has a right to impose is not to impose a tax but to charge a fee correlated to the expenses involved in the administration of that law; (2) What the legislature can confer by a provision of the type found in S. 548 (2) is merely a power to levy a fee and not a tax as otherwise, the tax itself which is permitted to be levied would be beyond the competence of the State Legislature. We consider this submission well- founded. A stream can rise no higher than its source, and this is so self-evident as not to need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediately 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 province, municipality, district or other local area etc. may notwithstanding that those taxes, duties, cesses or fees mentioned in Federal Legislative List continue to be levied and to be applied to the same purposes until provision is made to the contrary by the Federal Legislature . In other words, the framers of the Government of India Act proceeded on the basis that the powers of the Provincial Legislatures as regards taxation were not the same and that it was, therefore, necessary for making a provision for continued realisation of those taxes subject to any central law on the topic and we have a provision exactly on the same lines with practically the same phraseology in Art. 277 of the Constitution. If the submission of the learned Counsel for the appellant is right, there would have been no need in Art. 277, for a reference to taxation by Municipal and other local bodies because or, the argument the State Legislature could validly confer upon a municipal corporation all powers wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Attorney General for British Columbia and ors([1930] A.C. 111, 121): He (the appellant) supports his contention by referring to fishery legislation prior to 1867 affecting territories now part of the Dominion, pointing out that in this legislation there are to be found numerous provisions relating to the curing and marketing of fish, and he urges that the British North America Act, 1867, must be construed in the light of the earlier legislation, and that the word 'fisheries' must be given such a meaning as is wide enough to include at any rate the operations affected by the impugned sections. Their Lordships are of opinion that the appellant's contention in this respect is not well-founded. The fact that in earlier fishery legislation raising no question of legislative competence matters are dealt with not strictly within any ordinary definition of fishery affords no ground for putting an unnatural construction upon the words Sea coast and inland fisheries . Lastly, it may be pointed out that the territo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is express not implicit makes no difference to the application of the principle. In either event, as the law conferring power even when expressly authorised is a law, the rule against excessive delegation, applies to it as much to cases where the authority to confer power is implicit. The next head of argument on this point was based on invoking the principles stated to have been laid down by certain American decisions to which we were referred. The principal authority on which reliance was placed was the formulation of the law by Fuller C.J. in Soutenburgh v. Hennick(1) Speaking for the majority of the Court he said:- It is a cardinal principle of our system of government, that local affairs shall be managed by local authorities, and general affairs by the central authority; and hence while the rule is also fundamental that the power to make laws cannot be delegated, the creation of municipalities exercising local self government has never been held to trench upon that rule. Such legislation is not regarded as a transfer of general legislative power, but rather as the grant of the authority to prescribe local regulations, according to immemorial practice, subject of course to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a rule of conduct. Obviously it cannot abdicate its functions in favour of another. But in view of the multifarious activities of a welfare State, it cannot presumably work out all the details to suit the varying aspects of a complex situation. It must necessarily delegate the working out of details to the executive or any other agency. But there is a danger inherent in such a process of delegation. An overburdened legislature or one controlled by a powerful executive may unduly overstep the limits of delegation. It may not lay down any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the executive; it may confer an arbitrary power on the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation. This self effacement of legislative power in favour of another agency either in whole or in part is beyond the permissible limits of delegation. It is for a court to hold on a fair, generous and liberal construction of an impugned statute whether the legislature exceeded such limits. But the said liberal construction should not be carried by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are : (1) Whether the power to determine the rate of a tax is an essential legislative, function or is it merely a minor and incidental matter, (2). Assuming it is an essential legislative function, whether the Act has indicated with reasonable certainty the principles upon which that power has to be exercised or laid down the standards for the fixation of the rate. Now, on the first point as to whether it is an essential legislative function or not, the submission of Mr. Pathak was that it was not, and for this purpose he relied principally on three decisions of this Court.The first one Banarsi Das v. The State of Madhya Pradesh([1955] 1 S.C.R. 290) was concerned with the constitutional validity of a provision in the C.P. Berar Sales Tax Act, 1947 which conferred upon Government power to withdraw certain exemptions from the tax as levied by the Act. It was urged before the Court that the conferment of this power to withdraw the exemption on the Executive was unconstitutional as suffering from the vice of excessive delegation. This argument was repelled by this Court for more than one reason. The passage relied on in this connection is at p. 435 :- The point for determinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which is extracted in the judgment of this Court (1) 10 A.C. 282, But the duties levied under the Order in Council are really levied by the authority of the Act under which the order is issued . The two other decisions do not lay down a wider principle. For this reason Mr. De submitted that the judgment of this Court should be understood in the context in which it occurs and with reference to the authorities cited in support and if so read the rates referred to are in relation to those to be charged in respect of different classes of goods , as in Powell's case. We see considerable force in this argument and as we shall show by a reference to later decisions of this Court, this passage has not been understood in the sense in which Mr. Pathak desires us to understand viz., that a legislation which leaves the rate of taxation entirely to the executive does not suffer from the vice of excessive delegation. If Mr. Pathak is right, in order to impose an income tax, it would be sufficient for the legislature to pass a single section empowering the executive to levy the tax at such rates as they might consider appropriate on the different classes of persons whom they consider p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to impose were indicated by the specified items 1 to 10, (3) the taxing power of the municipality was made subject to the approval of the Governor-in-Council which, at the date when the Act was passed, viz. 1901, meant the Governor-inlegislative Council, and (4) finally it was observed the impugned section did lay down a principle and fix a standard which the municipalities had to follow in imposing the tax and, in the circumstances, the legislature was held not to have abdicated its powers. No doubt, this decision does support learned counsel to some extent but a question in the form in which it arises now was not before the Court. The only point was whether there was sufficient formulation of policy for determining the nature of the tax which a municipality might impose. The answer was in the affirmative, based principally on two grounds: (1) that by sub-s. (2) of s. 59 as well on general principles of law the power of the municipality to levy taxes was confined to those on which Provincial Legislature could legislate. In fact, from the arguments as reported it would appear that one of the points urged by learned counsel for the appellant was that under head II of s. 5 9 (1) muni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidiary power in that behalf. The enunciation of the principle in this manner does not help Mr. Pathak. His contention, however, was that in s. 6(2) extracted earlier, no policy had been laid down but that this Court had upheld the constitutional validity of that delegation. A close I examination of the decision, however, does not support this submission. The basic reasoning on which that decision rests is that for the fixation of a reasonable rent under s. 12 by the Mamlatdar the necessary factors had all been specified and on a construction of the Act the learned Judges of the majority reached a conclusion that the exercise of powers under s. 6(2) had to be effected on the same basis and with reference to the same factors which were specified in s. 12(3) of the Act. It is precisely on this question of the construction of the Act and the correlation between the power to fix the rent conferred upon the State Government by s. 6(2) and the power of fixation of fair rent, conferred on the Mamlatdar by s. 12 that there was the difference of opinion between the learned Judges. It would, therefore, be seen that far from Vasantlal's case being an authority for the position that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to ss. 42 to 47 which deal with the supervision of the State Government over the affairs and activities of the Corporation. As regards s. 24, we are unable to see how this helps learned counsel in the present argument. No doubt, the municipal government of Calcutta is vested in the Corporation but the question is what powers are vested in that government. If by describing the powers of administration of the city of Calcutta vested in the Corporation, as a government every power necessary to effectuate governmental functions was involved there would have been no necessity at all for the other provisions of the Act. It is not, therefore, as if the expression 'government' gathers within its fold all powers necessary for administration or creates an independent sovereign body entitled to legislate in any manner it likes provided the same is necessary for the purpose of carrying on civic government. It is obvious that is not the sense in which the word 'government' is employed in s. 24. The Corporation is still a subordinate body which is the creature of the legislature and can only function within the framework of the powers conferred upon it by the Municipal Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )Such moneys shall likewise be applied in payment of all sums payable out of the Municipal Fund under any other enactment for the time being in force. Reference was also made in this connection to s. 126 under which annual budget estimates have to be prepared for the Corporation in which a statement of the proposals as to taxation which would be necessary or expedient to impose in the said year and the expenditure to be incurred would all have to be set out. It was, therefore, submitted : (1) that there was a municipal fund into which all collections were deposited, (2) the amount of the collection was determined by the expenditure which it was either obligatory or permissive for the Corporation to incur. Thus no taxes could be raised except such as were needed for the expendi- ture for which provision had been made in the budget and the rate of tax was, therefore, determined by the needs of the Corporation. In support of the submission that this was sufficient guidance learned Counsel referred us to the decision of the High Court of Orissa in The Orissa Ceramic Industries Ltd. v. Executive Officer, Jharsuguda Municipality(A.I.R. 1963 Orissa 171) where reference is made to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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