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TMI Blog1961 (3) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... as prescribed a fee to be paid on applications by the assessee under Section 66 of the Indian Income Tax Act. Article 1(f) of the Second Schedule of the New Act has provided for fees to be paid on petitions or applications under Section 45 of the Specific Relief Act, under Articles 226 and 227 of the Constitution and for other petitions and applications not otherwise provided for in the Act. In all these applications, contentions are raised as to the constitutional validity of the provisions of Article 16 of the First Schedule in the new Act, and also as to the applicability of the new Act to the present applications. In view of the importance of the questions raised, and, in view of the fact that these questions are likely to arise in a large number of other applications also, we have set these applications for hearing only on those contentions. As we are not concerned with the merits of all these cases at the present stage, it is not necessary to state the fact out of which the applications arise. It may, however, be mentioned that the assessment proceedings out of which these applications arise had commenced a long time before the new Act was enacted and came into force. (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate the case and the assessee is content with this refusal, he is entitled to withdraw his application, in which case the fee of one hundred rupees paid by him is refunded to him. Under Section 66 sub-section (2), if the assessee or the Commissioner, as the case may be, is not satisfied with the Tribunal's refusal to state the case to the High Court, he is entitled to make an application to the High Court requesting the High Court to direct the Tribunal to draw up the case and refer it to the High Court, and, if on such application, the High Court is not satisfied of the correctness of the decision of the Appellate Tribunal in refusing to state the case it may require the Appellate Tribunal to state the case and to refer it to the High Court. Section 66, sub-section (3) provides for cases where the Tribunal rejects applications made to it under Section 66(1) on the ground that they are time-barred. In such cases, the assessee or the Commissioner, as the case may be, is entitled to apply to the High Court and if the High Court is not satisfied with the correctness of the Appellate Tribunal's decision as to limitation, it may require the Appellate Tribunal to treat the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. By a subsequent amendment, the portion of the article in the third column was amended, and the said amended article now reads as follows: 1. 2 3 16. Application or petition made by any One half of ad valorem fee leviable assessee to the High Court under on the amount in dispute (namely, Section 66 of the Indian Income Tax the difference between the amount Act, 1922. Of tax actually assessed and the amount of tax admitted by the assessee as payable by him), subject to minimum fee of fifty rupees. The provision corresponding to Article 1(d) in the Second Schedule of the old Act is now to be found in the Article 1(f) of the Second Schedule in the New Act. The said provision is the new Act reads as follows: * * * * * * * 1. Application or Petition (f) When presented to the High Court- (I) under the section 45 of the Fifty rupees. Specific Relief Act, 1877 or for directions, orders or writs under Article 226 of the Constitution for any purpose other than the enforcement of the fundamental rights conferred by Part III thereof; (ii) for directions, orders or writs Twenty rupees. under Article 226 for the enforce- ment of any of the fundamental rights conferred by Part III of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-fee is entry No. 3 I List II in the Seventh Schedule in the Constitution. The only other entry relating to fees in the State list is entry No. 66, but it does not include fees taken in any court. The levy cannot be justified under any other entry of this list. There is no entry even in List III, under which the levy can fall and entry No. 47 in the III list also does not include fees taken in any Court. Now, entry No. 3 in List II only empowers the levying of a fee. In other words, the levy imposed under this entry must have the necessary characteristics of a fee and cannot be a tax. If the present imposition has not got the characteristics of a fee, but has, on the other hand, all the characteristics of a tax, it would be a tax and not a fee, and cannot therefore be justified under entry No. 3 in List II. It is contented that the Constitution has made a clear distinction between a tax and a fee and when the Constitution permits the levying of fees, it cannot be said that it has permitted the levy of a tax. If the present levy therefore, is a tax, it can fall only under entry 96 in list I in Schedule VII or under Article 248(1) of the Constitution. But in either of these cases, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quantum of imposition upon the tax payer depends generally upon his capacity to pay . As to fees, their Lordships observed: A fee is generally defined to be a charge for a 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. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay. These are undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases. Having thus mentioned the essential characteristics of a tax and a fee, their Lordships observed the distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of the common burden, while a fee is payment for a special benefit or privilege. Fees confer a 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 regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly, and in the second place the amount collected must be earmarked to meet the expenses of rendering these services and must not go to the general revenue of the State to be spent for general public purposes. In Sir Jagannath Ramanuj Das v. State of Orissa [1954]1SCR1046 , their Lordships observed: There is no generic difference between a tax and a fee and both are different forms in which the taxing power of a State manifests itself. Our Constitution however, has made a distinction between a tax and a fee for legislative purposes and while there are various entries in the three lists with regard to various forms of taxation, there is an entry at the end of each one of the sexists as regards fees which could be levied in respect of every one of the matter that are included therein. A tax is undoubtedly in the nature of compulsory exaction of money by a public authority for public purposes the payment of which is enforced by law. But the sentinel thing in a tax is that the imposition is made for public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a compulsory exaction of money, because section 5 of the Court-fees Act makes it obligatory on any suitor to pay the court-fee prescribed, by providing that unless such a fee has been paid, no document shall be filed, exhibited or recorded in any court of justice. It is collected as a general source of revenue to meet the general expenses of the State without reference to any special advantage to be conferred upon the payers of the tax. There is no element of quid pro quo in the levy and the imposition appears to have been levied in view of the capacity of the payers to bear the burden and pay the same. According to Mr. Kolah the impugned levy is a tax and not a fee, and therefore, beyond the competence of the State Legislature. (7) Now, as we have pointed out earlier, the applications under section 66(2) of the Income Tax Act arise when the Appellate Tribunal has refused to state the case to the High Court the only question which the High Court is called upon to decide on such an application is whether any question of law does or does not arise on the order of the Appellate Tribunal under section 33(4) of the Income Tax Act. Applications under section 66(3) are only limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and cannot therefore be said to have an element of 'quid pro quo' in it. The levy of court-fee is not co-related with the expenses incurred in rendering the services for which it is purported to be charged. The Court-fee collected under the Court-fees Act is not earmarked to meet the expenses for rendering the service, but goes to the general revenue of the State to be spent for general public purposes. Mr. Kolah argued that the levy of the Court-fee as fees for the administration of justice cannot be justified unless the fees charged are adjusted and utilised so as to meet the administration of civil justice only. The class of litigants on whom this levy is imposed is the class of civil litigants. If the fee is imposed for rendering a service to this class of litigants the fee levied has to be correlated with the expenses incurred in the administration of civil justice. If the civil litigants are also required to bear the burden of the administration of criminal justice in the State, the imposition on them will be in the nature of a tax and not a fee. According to Mr. Kolah the fees collected from the civil litigants are far in excess of the costs incurred by the State i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in validity and beyond the competence of the State Legislature. (9) The learned Advocate General has argued that the court-fees do not belong to the class of fees with which the Supreme Court was dealing in the cases which have been referred to by Mr. Kolah. The court-fees are and have always been treated on a different footing from all other fees. The element of quid pro quo has never been present in the court-fees ever since the court-fees have been imposed. The imposition of ad valorem court-fees on money claims is not on the basis of the services rendered in adjudicating the said claims. For instance, a suit on Negotiable instrument like a promissory note of a considerable value, in which a considerable amount of court-fee is required to be paid, will not require as much time and effort in disposing it of as may be required in a suit of a much smaller claim where complicated questions of law arise. The court-fee leviable in Probate proceedings will also show that the levying of the court-fees is not dependent upon the service rendered to the litigant. That the court-fee was imposed as a general source of revenue has always been the feature of the Court-fee all along. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rously in legislative enactments, and many a time what is called a fee is really a tax meant for raising revenues. So far as fees are concerned, they have to be divided into two parts. There are some fees which are really taxes though they are called fees. In their case, all the incidents of a tax apply, and the limitations to which fees are subject do not apply. As an example of this kind, mention may be made of Court-fees under the Court-fees Act. In a recent case from the Allahabad High Court, report in Khacheru Singh v. S. D. O. Khurja AIR1960All462 , in which the levy of court-fee on a writ application to the High Court was challenged as being a tax and not a fee on the ground that the levy did not satisfy the two essential conditions laid down by the Supreme Court decisions as the requisites of a fee. their Lordships of the Allahabad High Court observed 'the definition of fee to be found in the Supreme Court cases is not intended to be exhaustive. The provisions of Article 146(3) and Article 229(3) show that there exists another class of imposition also called a fee in the Constitution, which differs from the type of fee which the Supreme Court had under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... List the fees taken in any court were excluded from the exercise of that power. In the legislative list of the State, the Entry No. 1 empowered the State Legislature to legislate with reference to administration of justice, constitution and organisation of all Courts except the Federal Court and the gees taken therein. Entry No 54 in this list which provided for fees in respect of any of the matters mentioned in the list, excluded again the fees taken in any Court. Entry No. 36 in the Concurrent Legislative List which gave power to levy fees, similarly excluded the power to levy fees. It will thus be seen that the Legislative lists under the Government of India Act, 1935, made a distinction between the court-fees and the other fees. Sections 216 and 228 of the Government of India Act 1935, will also indicate that the feature of the fees that they must be earmarked as a separate fund to meet the expenses of the services which were to be rendered to the payers of such fees was not to hold good of the fees levied in Courts. Under S. 216 the fees and the other moneys taken by the Federal Court were to form part of the revenues of the Dominion, and under Section 228 the fees or other mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the Supreme Court held as being essential of the fees with which they were dealing. The learned Advocate General, in our opinion, is right saying that the levy of court-fee for raising the general revenue has been authorised by the relevant entries in the Legislative lists under the Constitution and the challenge therefore, to the validity of such fees on the ground that they are not earmarked as a separate fund for the purposes of meeting the expenses of the services rendered, cannot be sustained. The first contention, therefore, which Mr. Kolah has urged with reference to the constitutional validity of the court-fees fails. (11) The next attack is on the basis of Article 14 of the Constitution. This attack is founded on two grounds. Firstly, it is stated that inasmuch as Article 16 of the First Schedule of the Court Fees Act imposes a court-fee only on the application which the assessee wants to make but does not require such court-fee to be paid by the Commissioner on similar applications, the article discriminates between the Commissioner and the assessee and gives an unfair advantage to the Commissioner. It is urged that so far as applications under Section 66(2) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue, in which the entire nation, including the tax payers , are interested. In our opinion, therefore, the classification of the Commissioner as belonging to a distinctly different class from the assessee is perfectly reasonable and justifiable. (13) It is however argued that it is not enough that the classification is founded on a rational basis but what is further required is that the classification must have a rational relation to the object sought to be achieved by the Act. It is urged that the object of the Court-fee Act is to raise revenue for the State. The Commissioner who is exempted from the payment of the court-fee is not the representative of the State but of the Union and the court-fee which he has to pay is not from the funds of the State but from the funds of the Union. No justification therefore exists why exemption should be granted to him to the detriment of the State revenue. It is pointed out in this connection that it is not as if the policy of the legislature is always to exempt the State Government or the Union Government from the payment of court-fees. When suits are required to be filed by the Government court-fee is always required to be paid. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to apply to the Chief Revenue Authority to draw up the statement of case and refer points to law arising on the decision of the Chief Revenue Authority to the High Court. That was a provision which was similar to Section 66(1) of the Act of 1922. If the Chief Revenue Authority, however, refused to make a reference, there was no provision similar to Section 66(2) of the Act of 1922 enabling the assessee or the Commissioner to apply to the High Court, requiring it to direct the Chief Revenue authority to make a reference. It was, however, held under the Act of 1918 by the Privy Council that, even though there was no provision in the Income Tax Act an application could still be made to the High Court by the aggrieved party under Section 45 of the Specific Relief Act, and the High Court was competent to exercise that power and direct the Chief Revenue Authority to refer the case to the High Court. This was on the ground that the High Court in making such an order was only compelling the Chief Revenue Authority to do its statutory duty, and was not exercising its original jurisdiction in a matter concerning the revenue so as to be excluded by Section 6(2) of the Government of India A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g his applications under the latter provisions and thus save the burden of court-fees imposed upon him under Article 16 of the First Schedule. In our opinion, therefore, the second ground of objection against the Constitutional validity of the court-fee levied under Article 126 of the First Schedule of the New Act under Article 14 of the Constitution cannot be sustained. (16) Before proceeding to the next contention which relates to the retrospective operation of the new Act, we will dispose of one further argument which was advanced before us relating to the in validity of the impugned levy. That argument proceeds on the basis that the levy of court-fee contemplated by the wording of the impugned article as it stood on the date when the present applications were filed would in certain cases be totally destructive of the rights sought to be enforced or of the advantage sought to b e obtained and would thus be unjustifiable and in violation of the fundamental rights of the petitioners. We do not feel it necessary to discuss this contention in any great detail because the interpretation which we give to the wording of the article as it stood on the date when the present petitions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66(3). The question before us however is not whether court-fees as levied under the Court-fees Act are proper the question is whether the levy is within the legislative competence of the State Legislature. If it is we cannot strike it down as in validity because in our view such heavy court-fees should not have been imposed. We do not however propose to discuss the contention raised in any great detail because it was not raised in the petition or in the affidavit filed in support thereof and the state therefore had no notice of it and had no opportunity to put in a reply to it. If Mr. Rajgopal was serious about the contention he should have raised it at the proper stage and in a proper manner, we have not been very technical in dealing with the present application. We have allowed the petitioners to amend the petitioners or to put in further affidavits in clarification of the contentions raised during the course of the hearing. Mr. Rajgopal has sought to such permission at the proper stage but has remained content with raising the point only when he rose to supplement the main arguments which were raised by Mr. Kolah. We do not think we will be justified in entertaining this belate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and saves no vested rights. Although the question raised is already decided by a Division Bench of this Court, in view of the importance of the matter, we have heard the arguments which the petitioners and the State wanted to advance in order to consider whether, in view of the fresh arguments advanced, it was necessary to refer the matter to a larger Bench. (20) Now, Mr. Kolah has agreed that the retrospective operation of the new Act has to be gathered from the provisions of Section 49 of the new Act. He has also agreed with the view taken by us in the earlier case that the first part of the first proviso to Section 49 which saves the previous operation of the repealed Court-fees Act would by itself save the vested rights brought into existence by the said previous operation. In the earlier case however, we took the view that although the first part of the first proviso, which saved the previous operation of the repealed Act would by itself, is nothing else was said have preserved the vested rights coming into existence by the previous operation of the repealed Act, there was something further said in the second proviso, which had the effect of curtailing the said vested right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount thereof, the question shall when the difference arises in the High Court, be referred to the taxing officer, whose decision thereon shall be final, subject to revision in the manner provided in the section. sub-section (2) of Section 4 makes a similar provision with regard to such differences when they arise in the Court of Small Causes at Bombay, Section 5 appears in Chapter III, which deals with computation of fees, and applies to all Courts in the State including the High Court but excluding the Court of Small Causes at Bombay. Sub-section (2) of Section 5 provides that when any difference arises between the officer whose duty it is to see that any fee is paid under this Act and any suitor or his pleader, as to the necessity of paying a fee or the amount thereof, the question shall when the question arises in the High Court he referred to the taxing officer whose decision thereon shall be final, subject to revision as provided in the section. In the old Court-fees Act namely the Court-fees Act of 1870 Chapter II related to the fees in the High Court and in the Court of Small Causes at the presidency towns and provisions corresponding to Section 3 and 4 of the new Act wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 4 of the new Act or under Section 5 of the old Act. We are not inclined to accept this submission of Mr. Kolah. According to us the existence of Section 4(1) in the Court-fees Act is referable to the position which once obtained that the Court-fees Act did not apply to the Original Side of the High Court. The fees leviable in matters coming before the High Court on the Original Side were regulated by the table of fees prepared by the High Court. It was only after 1954 that the Court-fees Act became applicable to the Original Side also. It still did not, however apply to matters which had been commenced before the Act was made applicable to the Original Side. The Court-fees Act was not applicable to the Court of Small Causes at Bombay also. Provision had been made, however, in Chapter II of the old Act for fees to be collected under the Court-fees Act A provision similar to Section 4(1) in the new Act which existed under Section 5 in the old Court-fees Act was made for the purpose of deciding differences and disputes relating to the proper fee to be paid in matters arising on the Original Side of the High Court. The present existence of Section 4(1) in the new Court-fees Act can h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters by provision for the operation of the previous law in part and in negative terms as also for the operation of the new law in the other part and in positive terms, the said provision may well be taken to be self-contained and indicative of the intention to exclude operation of Section 7 of the Bombay General Clauses Act. In gathering the effect of the repeal we had therefore to look to the provisions of Section 49 and the two provisos to the said Section. So far the learned Advocate General agrees with the view that we have taken. In construing the provisions however our view was that the approach had to be on the principles governing interpretation namely that vested rights were intended to be saved and the line of inquiry therefore had to be whether what w as contained in the new provision took away the vested rights. Construing the first proviso to Section 49 in the light of these principles we took the view that since it saved the previous operation of the repealed law the vested rights which come into existence as a consequence of the said previous operation must necessarily be saved. In our opinion the Old Court-fees Act operated on the list the moment it was commence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indeed, a comparison of the wording of S. 58 of Act 31 of 1950 with the wording of S. 6 of the General Clauses Act would show that if the legislature intended either that pending proceedings were to be continued under the previous law or that anything in the nature of vested right of finality of determination or some right akin thereto was to arise in respect of such pending proceedings, the negative portion of Section 58 (3) would not have stopped short with saving only the 'previous operation' of the repealed law. It would have borrowed from out of some portions of the remaining sub-section (c) (d) and (e) of S. 6, General Clauses Act and provided in express terms for the continuance of the previous law in respect of pending proceedings. In our opinion, the observations to which the learned Advocate General has referred must be read in the context of the facts of the case. On the facts of that case, it was not a case of vested rights at all because their Lordships had held that there could not be vested rights for obtaining a decision, with the attributes of finality, and they had also further held that no finality had also been obtained at the time when the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new Act is retrospective only with reference to the rates to be charged. But is not retrospective with regard to the computation of the claim. (24) The next question then is whether on the view that we have taken of the retrospective effect of the new Act, article 16 of the First Schedule of the Court-fees Act is applicable to the petitions before us. In order to decide that question, what we have to consider is whether that article provides only an enhanced rate of court-fee or also affects the right relating to computation. If the new provision does not affect in any way, the right of computation, but only prescribes a rate, it will certainly be applicable to the present petitions. If, on the other hand, the new provision has the effect of obliging the assessee to have the claim computed in a manner different from that in which he was entitled to have it computed under the old Act and make the rate dependent on the said computation the question will have to be further considered whether the article 16 in the new Act can apply to the present application either wholly or at any rate to the extent, of the rate prescribed thereunder. (25) Mr. Kolah for the petitioner has u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no vested right at all as to computation and the new Act provides for the computation for the first time, the new Act being applicable at the time when the computation is required to be made the provisions of the new Act must apply. (26) In our opinion, the new provision does affect the vested right relating to computation under the old Court-fees Act. The right to pay a fixed court-fee without reference to any computation of the claim on an arbitrary basis was right vested in the litigant under the old Court-fees Act. The provision of Article 16 which requires the claim to be computed on a certain arbitrary basis prescribes a new rule for computation under the new Act. It changes the classification of the item and shifts it from the schedule of fixed fees to the schedule of ad valorem fees. It is not a mere matter of enhancing the existing rate of fees but it involves a change in the basis of the imposition. The change in the law introduced by the new Act relates to computation of the claim because the fee payable is made dependent on the computation. Such a change which introduces a new method of computation where none existed before is as much a change relating to computation ..... 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