Corporation of Calcutta & ANR Vs. Liberty Cinema [1964] INSC 293 (14 December 1964)
14/12/1964 SARKAR, A.K.
SARKAR, A.K.
SUBBARAO, K.
DAYAL, RAGHUBAR AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R.
CITATION: 1965 AIR 1107 1965 SCR (2) 477
CITATOR INFO:
R 1967 SC1040 (8) RF 1967 SC1895 (10,11,12) RF 1968 SC1232 (25,27,53,86,95,96) RF 1971 SC 344 (5,6) R 1971 SC1182 (9) RF 1971 SC2100 (8,18,19,21) RF 1973 SC1374 (6) R 1974 SC1660 (9,21,32) RF 1975 SC 846 (19) R 1975 SC1007 (12) D 1975 SC2193 (3,6,8,10) E 1979 SC 321 (13,15,18,26,40) RF 1979 SC1475 (20,22) E 1980 SC1008 (15) RF 1985 SC 218 (7) R 1990 SC 560 (13)
ACT:
Calcutta Municipal Act (33 of 1951), ss. 413 and 548--License fee on cinema houses-whether tax or fee for rendering service--Validity of levy and s. 548.
HEADNOTE:
Under a. 413 of the Calcutta Municipal Act, 1951, no person shall without a licence granted by the Corporation of Calcutta, keep open any cinema house for public amusement in Calcutta. Under s. 548(2), for every licence under the Act, a fee may be charged at such rate as may from time to time be fixed by the Corporation. In 1948, the appellant (Corporation) fixed fees on the basis of annual valuation of the cinema house. The respondent, who was the owner and licensee of a cinema theatre, had been paying a licence fee of Rs. 400 per year on that basis. In 1958, the appellant, by a Resolution, changed the basis of assessment of the fee.
Under the new method the fee was to be assessed at rates prescribed per show according to the sanctioned seating capacity of the cinema house; and the respondent had to pay a fee of Rs. 6,000 per year. The respondent, therefore moved the High Court for the issue of a writ quashing the resolution and the application was allowed.
In the appeal to the Supreme Court the appellant contended that (i) the levy was a tax and not a fee in return for services and (ii) s. 548(2) does not suffer from the vice of excessive delegation; while the respondent contended that (i) the levy was a fee in return for services to be rendered and not a tax, and as it was not commensurate with the costs incurred by the Corporation in providing the services, the levy was invalid; (ii) if s. 548 authorised the levy of a tax, as distinct from a fee in return for service rendered, it was invalid, as it amounted to an illegal delegation of legislative functions to the appellant to fix the amount of a tax without any guidance for the purpose and (iii) the levy was invalid as violating Art. 19(1) (f) and (g) of the Constitute.
HELD (per Sarkar, Raghubar Dayal and Mudholkar JJ) : (i) The was not a fee but a tax. [490 F] The Act does not intend to use the word "fee" as referring only to a levy in return for services, for, the levies authorised by some other sections of the Act are really "taxes", though called "fees". Besides, the words used are "fee for the licence" and these words do not necessarily mean a "fee in return for services" as is apparent from Arts. 110(2) and 199(2) of the Constitution, where both expressions are used indicating that they are not the same.
[483 G-H] The word "fee" in s. 548 must be read as referring to a tax as any other reading would make the section invalid, and in interpreting a statute, it ought to be made valid if possible. [484 B-C] The decisions of this Court establish that in order to make a levy a fee for services rendered, the levy must confer special benefit on the persons on whom it is imposed. The levy under s. 548 (2) is not a "fee in return for services" as the Act does not provide for any services of a special kind being rendered, resulting in benefits to the person on 478 whom it is imposed. S. 527(43) permits by laws to be framed for regulating the inspection, supervision and control, among others, of cinema houses; but it is not obligatory to make such by laws and therefore, there may be no services to render. Even the bylaw made provides only for inspection, and the work of inspection done by the appellant was only to see that the terms of the licence were observed by the licensee. It was not a service to him, and so, no question arises of correlating the amount of levy to the costs of any service. The levy therefore is not a fee and must be tax.
[485 B-C, F; 488 E; 490 E-F] The Commissioner, Hindu Religious Endowments, Madras v. Shri Lakshmindra Thirtha Swamiar of Sirur Mutt, [1954] S.C.R.
1005, H. H. Sudhindra Thirtha Swamiar v. Commissioner for Hindu Religious and Charitable Endowments, [1963] Supp. 2 S.C.R. 302 and The Hingir Rampur Coal Co. Ltd. v. The State of Orissa and Ors. [1961] 2 S.C.R. 537, referred to.
Whether a particular levy is a fee or a tax has to be decided only by reference to the terms of the section. Its position in the Act cannot determine its nature ; an imposition which is by its terms a tax and not a fee, cannot become a fee by reason of its having been placed in a certain part of the Statute. [489 B] It is not right to say that s. 443 does not impose any duty on the appellant and that therefore, the licence fee leviable under s. 548, should be fixed only with reference to rendering of services. The Corporation has been set up only to perform municipal duties and its powers are for enabling it to perform those duties. But, since there is no provision for service being rendered, the levy cannot be a fee and would indisputably be a tax. [490 B, C, D] (ii) The fixing of the rate of a tax is not of the essence of legislative power and the fixing of rates may be left to a non legislative body. When it is so left to another body the legislature must provide guidance for such fixation.
Since there is sufficient guidance in the Act as to how the rate of the levy under s. 548 is to be fixed, the section is valid. [492 D, F; 493 G-H; 497 B] The appellant is an autonomous body. It has to perform various statutory functions. It is given power to decide when and in what manner the functions are to be performed.
For all this it needs money and its needs will vary from time to time with the prevailing exigencies. Its power to collect tax is necessarily limited by the expenses required to discharge the functions. it has, therefore, where rates have not been specified in the statute, to fix such rates as may be necessary to meet its needs, and that would be sufficient guidance to make the exercise of its power to fix the rate, valid. [496 D-F] Case law reviewed.
(iii) The challenge to the levy on the ground that it amounts to expropriation is wholly unfounded.
No doubt the increase in the rate of fee was large but considering the available seating capacity of the respondent, it cannot be said to be unreasonably high. [482 E-F] The contention of the appellant that even if no guidance for taxation has been prescribed the section would still be valid, because, the Act may be said to have been passed under Entry 5 of List II of the Seventh Schedule to the Constitution and that Entry authorises the passing of a law concerning the powers of a municipal corporation and that such powers must necessarily include the power to levy a tax, was left open. [497 D-E, H] 479 per Subba Rao and Ayyangar, JJ (dissenting) (i) If on a proper construction of the Act one reached the conclusion that Part IV of the Act was not exhaustive of the range of levies permitted by the Act, and the fees permitted to be levied by s. 548(2) were also taxes, there would be nothing in s. 127(3) or (4) to militate against that construction.
But, an examination of the provisions of the Act makes three matters abundantly clear; (a) that the Act draws a sharp and clear distinction between taxes properly so called and fees;
(b) that 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 Chanter heading, is dealt with in any other; and (c) that taxes, by whatever designation they might be called, are all comprehended and dealt with by Part IV and by Part IV alone, and that what is permitted to be imposed by s. 548(2) is only a fee as distinguished from a tax. As admittedly there is no correlation between the fee charged and the service rendered, the impugned levy was not authorised and the High Court was right in granting relief to the respondent. [525 B-C; 526 D-G] 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. The word "services" in the context has to be understood in a wide sense, as including supervision and control over the activities for the excess of which the fee is charged. The judgments of this Court in the Shirur Mutt case, [1954] S.C.R. 1005, and the cases following it, do not lay down that where an activity is regulated by licenses, the imposition of charges for the inspection, supervision and control of the activity to ensure compliance with the regulation is not a benefit conferred on the licensee, so as to render the amount charged for such a licence not a fee in the real sense, but a tax, whose constitutional validity could be sustained by reference to the taxation entries in Lists I and II. [508 A; 515 F-G; 517 H; 518 A] Case law considered.
Also, Art. 110(2) of the Constitution far from supporting the appellant's contention, negatives it. If pure taxation measures, employing the machinery of licences and fees, would be money-bills, then the fees for licences which are outside the definition, would be those fees which are imposed to meet the cost of regulation and supervision of an activity which is controlled by the requirements of a licence and compliance with its terms. Besides, if the levy of such licence fees on various activities which form the subject of legislative control or regulation under the various non-taxation entries in the Lists were treated as tax, Entries 96 and 66 in the respective Lists would have to be read as taxation entries, because, such a levy is permitted only by those entries. This however would be contrary to the entire scheme on which the several entries in the Lists are made, namely, setting out the exclusive general legislative powers the enumeration of taxes which could be imposed and finally the power to, impose fees in respect of any of the matters in the List. [502 C; 519 B-C, E, G] (ii) Viewed as a tax the delegation in s. 548(2) is unconstitutional, as essential legislative functions are parted with to the municipality, a subordinate law making body, and therefore the provision is unconstitutional. [546 B] Essential legislative functions cannot be delegated but where the law lays down the principles and affords guidance to the subordinate lawmaking authority details may be left for being filled up by the executive or by other authorities vested with quasi-legislative power. The power 480 to fix a rate of tax is an essential legislative function and therefore, unless the subordinate law-making authority is afforded guidance by the policies being formulated, principles enunciated and standards laid down, the legislation will suffer from the vice of excessive delegation and would be void as arbitrary and unconstitutional. The _Provisions of the Act do not afford any guidance to the Municipal Corporation to fix the rate of levy. No doubt, the municipal government of Calcutta was vested in the Corporation under s. 24 of the Act, but the expression "government" does not gather within its fold all powers necessary for administration nor does it create an independent sovereign body entitled to legislate in any manner it likes for the purpose of carrying on civic government. The Corporation is still a subordinate body which is the creation of the legislature and can only function within the framework of the powers conferred upon it by the Act. No assistance is derived in this regard from the powers of supervision which the State Government has over the municipal affairs under a. 42 and 47. If no standards have been laid down by the Act for the Corporation to afford it a guidance for the fixation of a rate, the fact that supervisory power is conferred upon the executive would not obviate that objection, for the Government itself would have no guidance from the legislature as to the policy to be adopted in exercising the supervision. [541 E--G; 542 C-G;
545 A] It cannot be said that as a result of as. 115, 117 and 126 no taxes could be raised except such as were needed for the expenditure for which provision had been made in the budget and the rate of tax was, therefore, determined by the needs of the Corporation. If the amount of money which a municipality needs for discharging its functions, affords any guidance, then the need of a State or the Union ought to afford sufficient guidance to sustain the validity of any skeleton legislation. [545 A-C] The Orissa Ceramic Industries Ltd. v. Executive Officer, Jharsuguda Municipality A.l.R, 1963 Orissa 171 disapproved.
The quantum of power which a law could bestow upon an institution or body of its creation is determined, first, by the view of the legislature to what are necessary for achieving the purposes for which the institution or body is created and, secondly, by the overall limitations imposed by the Constitution by the distribution of legislative power.
Nothing therefore turns on the use of the word "powers" in Entry 5 of the List 11 which deals with the Constitution and powers of municipal corporations for the purpose of local self-government. The State Legislature cannot, therefore, authorise a municipal body which it creates, even though, it be for the purpose of local self-Govemment, to exercise a power higher than what it itself possesses. Any legislative practice prevailing before 1st April, 1937 when India was under a unitary form of government or prevailing before the Constitution, does not serve as a guide for interpreting the Legislative entries in the Constitution and any such legislative practise cannot prevail over the limitations imposed by the distribution of Legislative power in respect of post-Constitution legislation. [527 F-G;530 D, G; 532 F-G ; 533 E-F; 534 C] The analogy of American decisions also cannot afford any guidance for the application of a different rule as to what constitutes excessive delegation in the case of legislation creating municipal bodies. The rule to limits of delegation by the legislatures constituted in India, by the Constitution, has been the subject of elaborate consideration by this Court and the decisions have not laid down that a different rule applies when the delegation of legislative power is in favour of a municipal corporation. [535 C-D, E] Case law considered.
481
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 26 of 1961.
Appeal from the judgment and order dated July 26, 1961 of the Calcutta High Court in Appeal from original Order No. 67 of 1959.
G. S. Pathak, A. N. Sinha and P. K. Mukherjee for the appellants.
Niren De, Additional Solicitor-general N.C chatterjee S.Ghosh, J. B. Dadachanji and O. C. Mathur for the respondent.
D. N. Mukherjee, for the intervener No. 1. Naunit Lal, for the intervener No. 2.
The Judgment of SARKAR, RAGHUBAR DAYAL and MUDHOLKAR JJ. was delivered by SARKAR J. The dessenting Opinion of SUBBA RAO and AYYANGAR JJ. was delivered by AYYANGAR J.
Sarkar J. The appellant Corporation was constituted by the Calcutta Municipal Act, 1951, an Act passed by the Legislature of the State of West Bengal. The Act was intended to consolidate and amend the law relating to the Municipal affairs of Calcutta and it defined the duties, powers and functions of the Corporation in whose charge those affairs were placed. The respondent is a firm owning a cinema house. and carrying on business of public cinema shows.
Section 443 of the Act provides that no person shall without a licence granted by the Corporation keep open any cinemahouse for public amusement. It, however, does not say that any fee is to be paid for the licence. But sub-s. (2) of S. 548 says that for every licence under the Act, a fee may, unless otherwise provided, be charged at such rate as may from time to time be provided. In 1948 the Corporation had fixed the scale of fees on the basis of the annual valuation of the cinema-houses made by a method which does not appear on the record. The respondent had under these sections obtained a licence for its cinema house and had been paying a licence fee calculated on the aforesaid basis.
The fee as calculated was Rs. 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 482 fee of Rs. 5 per show. In the result it became liable to pay a fee of Rs. 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 the present appeal.
In this Court the levy was challenged on three grounds the first of which may be disposed of at once. That ground was that the levy amounted to expropriation and was, therefore, invalid as violating cls. (f) and (g) of sub-Art. (1) of Art. 19. Sinha J. rejected this contention as on the materials on the record it could not be said that the new rate was so high as to make it impossible for the respondent to carry on its business. The learned Judges of the appellate Bench do not appear to have taken a different view of the matter. It seems to us that a fee at the rate of Rs.
5 per show in a house with a seating capacity of 551 cannot in any sense be said to be unreasonably high. With that seating capacity the respondent would at a reasonable estimate be collecting about Rs. 1,000 per show and paying the sum of Rs. 5 per show. No doubt the increase in the rate of fee from Rs. 400 to Rs. 6,000 per year was large.
But at the same time the circumstances obtaining in our country had undergone an immense change between 1948 when the fee was earlier fixed and 1958. The challenge to the levy on the ground that it amounted to expropriation is wholly unfounded and was rightly rejected in the High Court.
Substantially the same argument was advanced from a different point of view. It was said that Art. 19(1), (f) and (g) were violated in any case as S. 548 gave an arbitrary power of taxation. This contention found favour with the learned Judges of the High Court but, with respect to them, we are unable to agree. In our view, for reasons to be later stated, no arbitrary power of taxation was conferred by s. 548.
The second challenge to the levy was put in this way. The levy authorised by ss. 443 and 548 was a fee in return for services to be rendered and not a tax and it had therefore to be commensurate with the costs incurred by the Corporation in providing those services. The present levy of Rs. 6,000 per year was far in excess of those costs and was for that reason invalid. The Corporation's answer to this contention is that the levy was a tax and not a fee taken in return for services and no question of its 483 being proportionate to any costs for services arose. The Corporation does not dispute that if the levy was a fee in the sense mentioned, it would be invalid. The only question on this part of the case, therefore, is, was the levy a fee in return for services? Another subsidiary question is, what is the nature of the services which makes a levy in respect of them, a fee ? It is not disputed that a levy made in return for services rendered would be a fee. It is, therefore, unnecessary to consider what a fee is or the tests by which it is to be determined. Nor is it necessary to discuss whether in order that a levy may be a fee the statute imposing it must intend primarily to confer the benefits of the services on those who pay it and benefits received from those services by the public at large, if any, must be secondary. A discussion of these aspects of fees, will be unprofitable and will only cloud the point really in issue.
Now, on the first question, that is, whether the levy is in return for services, it is said that it is so because s. 548 uses the word "fee". But, surely, nothing turns on words used. The word "fee" cannot be said to have acquired a rigid technical meaning in the English language indicating only a levy in return for services. No authority for such a meaning of the word was cited. However that may be, it is conceded by the respondent that the Act uses the word "fee" indiscriminately. It is admitted that some of the levies authorised are taxes though called fees. Thus, for example, as Mitter J. pointed out, the levies authorised by ss. 218, 222 and 229 are really taxes though called fees, for no services are required to be rendered in respect of them.
The Act, therefore, did not intend to use the word fee as referring only to a levy in return for services.
This contention is not really open to the respondent for s. 548 does not use the word "fee"; it uses the words "licence fee" and those words do not necessarily mean a fee in return for services. In fact in our Constitution fee for licence and fee for services rendered are contemplated as different kinds of levy. The former is not intended to be a fee for services rendered. This is apparent from a consideration of Art. 110(2) and Art. 199(2) where both the expressions are used indicating thereby that they are not the same. In Shannon v. Lower Mainland Dairy Products Board(1) it was observed at pp. 721-722, "if licences are granted, it appears to be no objection that fees should be charged in order either to defray the costs of administering the local regulation or to increase (1) [1938] A. C. 708 484 the general funds of the Province or for both purposes It cannot, as their Lordships think, be an objection to a licence plus a fee that it is directed both to the regulation of trade and to the provision of revenue." It would, therefore, appear that a provision for the imposition of a licence fee does not necessarily lead to the conclusion that the fee must be only for services rendered.
It may also be stated that a statute has to be read so as to make it valid and, if possible, an interpretation leading to a contrary position should be avoided; it has to be construed ut res magis valeat quam pareat : see Broom's Legal Maxims (10 ed.) p. 361, Craies on Statutes (6th ed.) p. 95 and Maxwell on Statutes (11th ed.) p. 221. Therefore again, the word "fee" in s. 548 should be read as meaning a tax, for as we shall show later, it made no provision for services to be rendered; any other reading would make the section invalid. A construction producing that result has to be avoided. We do not also think that by reading the word as referring to a tax we would be doing any violence to the language used.
If the word "fee" is not conclusive of the question that it must be in return for services, as we think it is not, then the question whether the fee contemplated in s. 548 is a fee in return for services, can only be decided by reference to the terms of the section and for this purpose we have to consider that section along with s. 443. We have earlier summarised the sections but now propose to set them out so far as material :
S. 443. No person shall, without or otherwise than in conformity with the terms of a licence granted....
S. 548. (1) Every licence granted under this Act shall specify, ............................
(1) the tax or fee, if any, paid for the licence (2) Except when it isotherwise expressly provided, for every such licencea fee may be charged at such rate as may from time to time be fixed by the Corporation....................
The sections do not refer to the rendering of any service by the Corporation. Looking at them we do not find anything to lead to the conclusion that they make it incumbent on the Corporation 485 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 levy of the fee are set out in the by-laws made under s.
527, item 43. Item 43 permits by-laws to be framed regulating the inspection, supervision and control, among others, of cinema houses. It does not however make it obligatory on the Corporation to make any by-law. If the by-laws are not made, there would, ex hypothesis be no services to render. No doubt s. 443 contemplates that the cinema shows shall be conducted in conformity with the terms of the licence but it again seems to us that it is optional for the Corporation to impose terms; it is not bound to do so. In any case, those terms need not be for rendering of services by the Corporation. They may, for example, provide that the shows will not be continued after a certain hour in the evening.
In fact, however, certain by-Laws, called Theatre By-laws, were framed by the Corporation. Those by-laws were not produced before us excepting one which states, "The Chairman may cause all such premises to be inspected at least twice yearly and if as the result of such inspection any defect or disorder be noticed in such premises in connection with and relating to any of the matters or things referred to in these by-laws, the Chairman may by written notice require the owner or lessee of such premises to make good such defects." It is quite clear that the words "the matters or things referred to in these by-laws" occurring in the by-law quoted, contemplate things to be done by the licensee and not by the Corporation. Those matters or things cannot be services which the Corporation is required to render. It would, therefore, appear that even the by-laws the terms of which might have been incorporated in the licence do not contemplate the rendering of any service by the Corporation to the licensee. It may be stated that the licence granted to the respondent does not appear in the records of this case.
It is however said that the by-law earlier quoted requires inspection of the cinema houses by the Corporation and that was the service that the Corporation had to render in return for the licence fee. We are unable to accept this contention. The inspection was not certainly a service to the licensee; it was necessary only to make sure that he carried out the conditions on which the licence had been granted to him. It was something to 486 be done to control the licensee's activities and to make him observe the conditions of the licence on pain of cancellation of the licence. This is clear from sub-s. (3) of S. 548 which states that "any licence granted under this Act may at any time be suspended or revoked if any of its restrictions or conditions is infringed or evaded by the grantee." This non-observance of the conditions of the licence would expose the licensee to penalty under S. 537 of the Act. The inspection was therefore necessary also for enforcing the conditions of the licence by penalising a breach of them by the licensee. We cannot imagine that an inspection by the Corporation for such purposes can at all be said to be rendering of service to the licensee.
The nature of services to be rendered in return for a levy so as to make it a fee has been considered by this Court in several cases and in all of them it has been said that the services must confer some benefit on the person paying the fee. The earliest case on the subject appears to be The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(1), where it was said at p. 1042, 'a fee is a payment for a special benefit or privilege.... Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit which the individual receives". It was again said at p. 1043, that in the case of fees for services "the Government does some positive work for the benefit of persons and the money is taken as the return for the work done or services rendered." This case was concerned with a statute which imposed a levy on religious institutions expressly said to be in return for services. The services mentioned in the statute consisted among others in the Government supervising the management of the institutions, auditing their accounts and seeing that their income was duly appropriated to the purposes for which they were founded. Though it did not expressly say so. this Court was presumably of the view that these were services to the institutions making the levy a fee, for it declared the levy invalid on the ground that it was not correlated to the costs of those services and therefore was a tax which was beyond the competence of the Madras Legislature which had enacted the statute. It would appear that the services here considered were not for controlling the institutions but for doing work which secured to them their funds and the proper application of them. The statute might have involved a check on the conduct of the (1) [1954] S.C.R. 1005.
487 Mathadipatis who managed the institutions but that control also was for the benefit of the institutions. It has to be remembered as was said in another case to which we shall presently refer, that the Mathadipatis were in the position of trustees of the institutions. It would follow that control of their wrongful activities must result in special benefits to the institutions for their funds would not then be frittered away.
After this judgment, the section imposing the levy was amended but the amended section was also challenged on similar grounds. The matter again came up to this Court in the case of H. H. Sudhundra Thirtha Swamiar v. Commissioner for Hindu Religious & Charitable Endowments, Mysore(").
This time the validity of the section was upheld. The reasons for this decision are not relevant to the present discussion. As to the nature of services however, this Court reiterated the view stated in the earlier case. It said at p. 323, "If with a view to provide a specific service, levy is imposed by law and expenses for maintaining the service are met out of the amounts collected there being a reasonable relation between the levy and the expenses incurred for rendering the service, the levy would be in the nature of a fee and not in the nature of a tax." It was further said, "A fee being a levy in consideration of rendering service of a particular type, correlation between the expenditure by the Government and the levy must undoubtedly exist." The act was the same as the earlier one in regard to the services to be rendered by the Government and the view expressed in the earlier judgment as to the nature of the services required by the statute to be performed was endorsed in this judgment. It was said at p.
312, that the Mathadipati "is by virtue of his office under an obligation to discharge the duties as a trustee and is answerable as such". It would follow that a service resulting in the control of the Mathadipati would confer special benefit on the institution which alone paid the levy.
Both these cases discussed other tests besides the requirement 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 of the costs of the services to the levy but with that also we are not concerned as it is not sought to uphold the present levy on the ground of such correlation. We have referred to these cases only for showing that to make a levy a fee the services rendered in respect of it (1) [1965] Supp. 2 S. C. R. 302 Supp./65-15 488 must benefit, or confer advantage on, the person who pays the levy.
The other case to which we wish to refer in this connection is The Hingir-Rampur Coal Co. Ltd. v. The State of Orissa and ors.(1). There the imposition by a certain statute of a levy on lessees of coal mines in a certain area and the creation of a fund with it, was called in question. It was held that the levy was a foe in return for services and was valid. It was there said at p. 549, "If the special service rendered is distinctly and primarily meant for the benefit of a specified class or area, the fact that in benefitting the specified class or area the State as a whole may ultimately and indirectly be benefitted would not detract from the character of the levy as a fee." It may be mentioned that the levy there went to meet expenditure necessary or expedient for providing amenities like communication, water supply and electricity for the better development of the mining area and to meet the welfare of the labour employed and other persons residing or working in the area of the mines. Here again there is no element ,of control but the services resulted in real benefit specially accruing to the persons on whom the levy was imposed. These decisions of this Court clearly establish that in order to make a levy a fee for services rendered the levy must confer special benefit on the persons on whom it is imposed. No case has been brought to our notice in which it has been held that a mere control exercised on the activities of the persons on whom the levy is imposed so as to make these activities more onerous, is ,service rendered to them making the levy a fee.
It was also contended that the levy under S. 548 must be a tee and not a tax, for all provisions as, to taxation are contained in Part IV of the Act, while this section occurred in Chapter XXXVI headed "Procedure" in Part VIII which was without a heading. It was pointed out that Part V dealt with "Public Health, Safety and Convenience" and s. 443 which was included in Chapter XXVI contained in this Part was headed "Inspection and Regulation of Premises, and of Factories, Trades and Places of Public Resort". A cinema house, it is not disputed, is included in the words "Places of public resort". It was, therefore, contended that a levy outside Part IV could not be a tax and hence must be a fee for services. This contention was sought to be supported by the argument that s. 443 occurred in a Part concerning public health, safety and convenience and therefore the (1) [1961] 2 S. C. R. 537 489 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 the levy would not as such owners be getting that benefit. We are not concerned with the benefit, if any, received by them as members of the public for that is not special benefit meant for them. We are clear in our mind that if looking at the terms of the provision authorising the levy, it appears that it is not for special services rendered to the person on whom the levy is imposed. it cannot be a fee wherever it may be placed in the statute. A consideration of where ss. 443 and 548 are placed in the Act is irrelevant for determining whether the levy imposed by them is a fee or a tax.
The last argument in this connection which we have to notice was based on ss. 126 and 127 of the Act. Section 126 deals with the preparation by the Chief Executive Officer of the Corporation called Commissioner, of the annual budget. The budget has to include an estimate of receipts from all sources. These receipts would obviously include taxes, fees, licence fees and rents. Under s. 127(3) the Corporation has to pass this budget and to determine, subject to Part IV of the Act, the levy of consolidated rates and taxes at such rates as are necessary to provide for the purposes mentioned in sub-s. (4). Sub-section (4) requires the Corporation to make adequate and suitable provision for such services as may be required for the fulfillment of the several duties imposed by the Act and for certain other things to which it is not necessary to refer.
The first point made was that these sections showed that the Act made a distinction between fees and taxes. It does not seem to us that anything turns on this as the only question now is whether the levy under s. 548 is a fee. The other point was that cls. (3) and (4) of s. 127 showed that the Corporation could fix the consolidated rates and taxes and that the determination of rates for these had to be in accordance with the needs for carrying out the Corporation's duties under the Act.
490 It was said that as the licence fee leviable under S. 548 did not relate to any duty of the Corporation under the Act, it being optional for the Corporation to impose terms for grant of licences for cinema houses, the rate for that fee was not to be fixed in reference to anything except rendering of services. We are unable to accept this argument and it is enough to say in regard to it that it is not right that s. 443 does not impose a duty on the Corporation. We think it does so, though in what manner and when it will be exercised it is for the Corporation to decide. It is impossible to call it a power, as the respondent wants to do, for it is not given to the Corporation for its own benefit. The Corporation has been set up only to perform municipal duties and its powers are for enabling it to perform those duties. Furthermore there is no doubt that an estimate of the licence fee has to be included in the budget and therefore the word "tax" in S.
127(3) must be deemed to include the levy under s. 548. The words " subject to the provisions of Part IV" in S.
127(3)must be read with the addition of the words "where applicable". If that levy cannot be a fee because there is no provision for service 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 benefits to the person on whom it is imposed. The work of inspection done by the Corporation which is only to see that the terms of the licence are observed by the licensee is not a service to him. No question here arises of correlating the amount of the levy to the costs of any service. The levy is a tax. It is not disputed, it may be stated, that if the levy is not a fee, it must be a tax.
It was then said that if S. 548 authorised the levy of a tax as distinct from a fee in return for services rendered, it was invalid as it amounted to an illegal delegation of legislative functions to the Corporation because it left it entirely to the latter to fix the amount of the tax and provided no guidance for that purpose. We wish to point out here that the contention now is that the section is invalid while the contention that we have just dealt with proceeded on the basis that the section was valid as it provided for the levy of a fee in return for services and as this necessarily implied a limit of the levy, namely, that it had to be commensurate to the amount of the costs of the services, no guidance for 491 fixing the amount of the fee to be levied was required to be provided. That argument only challenged the resolution on the ground that it fixed the amount of the fee at a figure much in excess of the costs for the services rendered.
Here again there is no dispute that a delegation of essential legislative power would be bad. It was so held by this Court first in re The Delhi Laws Act.(1) The principle there laid down has been summarised by Bose J. in Rajnarain Singh v. The Chairman, Patna Administration Committee, Patna(2), in these terms: "In our opinion, the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature. Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view about this in the former case, but this much is clear from the opinions set out above: it cannot include a change of policy." On the basis that s. 548 is a piece of delegated legislation, it has been contended on behalf of the Corporation that the rate of a tax is not an essential feature of legislation and the power to fix it was properly delegated to the Corporation as sufficient guidance for that purpose was given in the Act. It is not in controversy, and this indeed has been held by this Court, that if that is so, the section would be unexceptionable. The question first is whether the power to fix the rate of a tax can be delegated by the legislature to another authority; whether it is of the essence of taxing legislation. The contention of the Corporation that fixation of rates is not an essential part of legislation would seem to be supported by several judgments of this Court to some of which we now proceed to refer.
First, there is Pandit Benarsi Das Bhanot v. The State of Madhya Pradesh ( 3 ) . 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 it was a delegation of the (1) [1951] S. C. R. 747 (2) [1955] 1 S. C. R. 290,301.
(3) [1959] S. C. R. 427.
492 essential power of legislation to the State Government.
Venkatarama Aiyar J. delivering the judgment of the majority of the Court sitting in a Constitution Bench, rejected this contention and after having read what we have earlier set out from the judgment of Bose J. in Rajnarain Singh's case(1), observed at p. 435: "On these observations, the point for determination is whether the impugned notification relates to what may be said to be an essential feature of the law, and whether it involves any change of policy. Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like." The Act was a statute imposing taxes for revenue purposes. This case would appear to be express authority for the proposition that fixation of rates of taxes may be legitimately left by a statute to a non-legislative authority, for we see no distinction in principle between delegation of power to fix rates simpliciter; if power to fix rates in some cases can be delegated then equally the power to fix rates generally can be delegated. No doubt Pandit Banarsi Das's case(1) was not concerned with fixation of rates of taxes; it was a case where the question was on what subject mater, and therefore on what persons, the tax could be imposed. Between the two we are unable to distinguish in principle, as to which is of the essence of legislation; if the power to decide who is to pay the tax is not an essential part of legislation, neither would the power to decide the rate of tax be so. Therefore we think that apart from the express observation made, this case on principle supports the contention that fixing of the rate of a tax is not of the essence of legislative power.
In regard to the observations in Pandit Benarsi Das's case(1) earlier quoted, it has been said that the authorities on which they appear to have been based do not support it. It has been contended that as the observations do not form part of the actual decision in the case, they need not be given that weight which they would otherwise have been entitled to. In the High Court this contention appears to have been accepted. The acceptance of the contention would result in by-passing a judgment of this Court and that is something which cannot in any case be supported. We are furthermore of opinion that the authorities to (1) [1955] 1 S. C. R. 290.
(2) [1959] S. C. R. 427, 493 which Venkatarama Aiyar J. referred fully support his observations. The first case relied upon by him was Powell v. Appollo CandleCo. Ltd.(1). 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(2). There a power to an authority to determine who shall pay the tax was upheld. On the same principle a power to determine at what rate he will have to pay the tax has to be upheld. The last case was Hampton Jr. & Co. v. United States(3), in which the power conferred by a statute on the President to make an increase or decrease in the rate of customs duty was upheld. There it was said at p. 630, "It is conceded by counsel that Congress may use executive officers in the application and enforcement of a policy declared in law by Congress and authorise such officers in the application of the Congressional declaration to enforce it by regulation equivalent to law. But it is said that this never has been permitted to be done where Congress has exercised the power to levy taxes and fix customs duties.
The authorities make no such distinction. The same principle that permits Congress to exercise its rate making power in interstate commerce by declaring the rule which shall prevail in the legislative fixing of rates, and enables it to remit to a rate making body created in accordance with its provisions the fixing of such rates, justifies a similar provision for the fixing of customs duties on imported merchandise." This therefore is clear authority that the fixing of rates may be left to a non legislative body.
No doubt when the power to fix rates of taxes is left to another body, the legislature must provide guidance for such fixation. The question then is, was such guidance provided in the Act ? We first wish to observe that the validity of the guidance 1) 1 O. A. C. 282 (2) [1952] 3 S. T. C 367 (3) [1927] 72 L. ed. 624.
494 cannot be tested by a rigid uniform rule; that must depend on the object of the Act giving power to fix the rate. It is said that the delegation of power to fix rates of taxes authorised for meeting the needs of the delegate to be valid, must provide the maximum rate that can be fixed, or lay down rules indicating that maximum. We are unable to see how the specification of the maximum rate supplies any guidance as to how the amount of the tax which no doubt has to be below the maximum, is to be fixed. Provision for such maximum only sets out a limit of the rate to be imposed and a limit is only a limit and not a guidance.
It seems to us that there are various decisions of this Court which support the proposition that for a statutory provision for raising revenue for the purposes of the delegate, as the section now under consideration is, the needs of the taxing body for carrying out its functions under the statute for which alone the taxing power was conferred on it, may afford sufficient guidance to make the power to fix the rate of tax valid. We proceed now to refer to these cases.
The Western India Theatres Ltd. v. Municipal Corporation of the City of Poona(1) 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 has to be held to be good. It is true, as was pointed out by learned advocate for the respondent, that other ,,rounds were mentioned in support of the view taken in the Western India Theatres case(1) but that surely is irrelevant, for it cannot make the ground of the decision there which we have earlier set out devoid of all force.
Then there is Vasantlal Manganbhai Sanjanwala v. The State of Bombay (2) . The provision of the statute there attacked (1) [1959] Supp. 2 S. C. R. 71.
(2) [1961] 1 S. C. R. 341.
49 5 gave the Government power to fix a lower rate of maximum rent payable by the tenants. The validity of this provision was upheld on the ground that the material provisions of the Act including its preamble were intended to give relief to tenants by fixing the maximum rent payable by them. It was in the light of this policy of the Act that the validity of the impugned provision was really upheld.
The last case which we wish to notice in this connection is the Union of India v. Bhana Mal Gulzari Mal(1). Section 3 of the Essential Supplies (Temporary Powers) Act, 1946 came up for consideration there. That section gave power to the Government to make necessary orders for maintaining or increasing supplies of any essential commodities or for securing their equitable distribution and availability at fair prices. In Harishankar Bagla v. The State of Madhya Pradesh(1) the validity of the delegation of power contained in that section had been upheld as it laid down the policy as to how that power was to be exercised by the delegates, that is, the Government. In Bhana Mal Gulzari Mal's case(3) the validity of an order made under s. 3 reducing the price at which steel could be sold was challenged. This challenge was rejected on the ground that the order fixing the price carried out the legislative objective prescribed in s. 3. It was observed at p. 638, "It is not difficult to appreciate how and why the Legislature must have thought that it would be inexpedient either to define or describe in detail all the relevant factors which have to be considered in fixing the fair price of an essential commodity from time to time.
In prescribing a schedule of maximum prices the Controller has to take into account the position in respect of production of the commodities in question, the demand for the said commodities, the availability of the said commodities from foreign sources and the anticipated increase or decrease in the said supply or demand. Foreign prices for the said commodities may also be not irrelevant.
Having regard to the fact that the decision about the maximum prices in respect of iron and steel would depend on a rational evaluation from time to time of all these varied factors the Legislature may well have thought that this problem should be left to be tackled by the delegate with enough freedom, the policy of the Legislature having been clearly indicated by s. 3 in that behalf." Again it was said at P. 640, "In deciding the nature and extent of the guidance which should be given to the delegate Legislature must inevitably (1) [1960] 2 S. C. R. 627.
(2) [1955] 1 S C. R. 380.
496 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(1) quoted in the preceding paragraph will show that the validity of the guidance required to make delegation of power good cannot be judged by a stereotyped rule. With respect, we entirely be held to be agree with this view.
The guidance furnished must good if it leads to the achievement of the object of the statute which delegated the power. The validity of the power to fix rates of taxes delegated to the Corporation by s. 548 of the Act must be judged by the same standard. Now there is no dispute that all taxes, including the one under this section, can be collected and used by the Corporation only for discharging its functions under the Act. The Corporation, subject to certain controls with which we are not concerned, is an autonomous body. It has to perform various statutory functions. It is often given power to decide when and in what manner the functions are to be performed. For all this it needs money and its needs will vary from time to time with the prevailing exigencies. Its power to collect tax, however, is necessarily limited by the expenses required to discharge those functions. It has, therefore, where rates have not been specified in the statute, to fix such rates as may be necessary to meet its needs. That, we think, would be sufficient guidance to make the exercise of its power to fix the rates valid. The case is as if the statute had required the Corporation to perform duties A, B & C and given power to levy taxes to meet the costs to be incurred for the discharge of these duties and then said that, "provided, however, that the rates of the taxes shall be such is would bring into the Corporation's hands the amount necessary to defray the costs of discharging the duties." We should suppose, this would have been a valid guidance. We think the Act in the present case impliedly provides the same guidance see s. 127 (3) & (4). It would be impracticable to insist on a more rigid guidance. In the case of a self-governing body with taxing powers, a large amount of flexibility in the guidance to be provided for the exercise of that power must exist. It is hardly necessary to point out that, as in the cases under Essential Supplies (Temporary Powers) Act, 1946, so in the case of a big (1)[1960] 2 S. C. R. 627.
497 municipality like that of Calcutta, its needs would depend on various and changing circumstances. There are epidemics, influx of refugees, labour strikes, new amenities to be provided, for such as hospitals, schools and various other such things may be mentioned which make it necessary for a colossal Municipal Corporation like that of Calcutta to have a large amount of flexibility in its taxing powers. These considerations lead us to the view that s. 548 is valid legislation. There is sufficient guidance in the Act as to how the rate of the levy is to be fixed.
We may point out at the end that entry 62 in List II of the Seventh Schedule to the Constitution gives power to the State Legislatures to impose taxes on entertainment and amusement and therefore on cinema shows. It was hence not said if the question was relevant that the State Legislature delegated a power to the Corporation which it itself did not possess.
It remains now to notice an argument advanced by Mr. Pathak on behalf of the Corporation. It is that even if it be assumed that no guidance for the taxation 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 municipal corporation. Mr. Pathak contended that the powers of a corporation contemplated in this entry must necessarily include power to levy tax, for no municipal corporation could work without its own funds. He pointed out that this has been the case with the municipal corporations created before and after the Constitution. He, therefore, said that the present was not a case of delegation of taxing power which might be bad if no guidance to the exercise of that power had been furnished by the Act; it is a case where under the Constitution independent power to tax had been conferred on the Corporation. The conferment of such power did not require any guidance for its exercise to make it valid. He pointed out that delegation of power necessarily meant delegation of the power of the delegator. On such delegation the delegated power could only be exercised by the delegates for the use of the delegator. That was not the case of power conferred tinder entry 5. In such a case the power of taxation conferred was for the purpose of the corporation itself. The amount collected by taxation belonged to the corporation. This is what had happened here. As at present advised, we think that this contention of Mr. Pathak deserves consideration. It is unnecessary,, 498 however, for us to pronounce finally on it, for in either view the taxing power challenged must be held to be good.
In the result we would allow the appeal with costs throughout.
Ayyangar, J. Section 443 of the Calcutta Municipal Act, 1951 (West Bengal Act XXXIII of 1951) which will hereafter be referred to as the Act enacts :
"No person shall, without or otherwise than in conformity with the terms of a licence granted by the Commissioner in this behalf, keep open any theatre, circus, cinema house, dancing hall or other similar place of public resort, recreation or amusement :
Provided that this section shall not apply to private performances in any such place." and s. 548 (2) :
"Except when it is in this Act or in any rule or byelaw made thereunder otherwise expressly provided, for every such licence or written permission a fee may be charged at such rate as may from time to time be fixed by the Corporation and such fee shall be payable by the person to whom the licence or written permission is granted.
The respondent before us is the owner and licensee of a cinema theatre known as the Liberty Cinema situated in Calcutta within the Municipal limits of the city. Under the provisions of the Calcutta Municipal Act 1923 which had been repealed and reenacted with modifications by the Act of 1951, the respondent was paying for his theatre Rs. 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 Rs. 800 which the respondent was paying previously he was required to pay a sum of Rs. 6,000 per year. As the Corporation insisted upon the amount being paid and threatened to cancel the licence and take appropriate 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 consoli499 dated rate for the property, a fee of Rs. 250 as profession tax for carrying on the trade or calling of cinema exhibitor as well as other taxes and fees. He characterised the licence fee which was. demanded from him as not in reality a fee which alone the Municipal Corporation was entitled to charge. Stating that it was out of all proportion to the service rendered or the costs involved in ensuring the observance of the conditions of the licence, he contended that the fee demanded from him was really a tax which the Corporation was not entitled to levy under the provisions quoted and therefore sought the relief which he prayed for in the petition.
The learned Single Judge who heard the petition in the first instance held on an analysis of the provisions of the Calcutta Municipal Act that what the Municipality was entitled to levy under s. 548 (2) read with s. 443 was really "a licence fee" and not a tax and that viewed as a licence fee it did not pass the test of legality on account of there being no correlation between the amount charged on the theatre owners and the services rendered to them or the expenses incurred by the Municipality in regard to the issue of licences. Dealing with the alternative contention urged before him by the Corporation that s. 548 (2) of the Act authodsed' the Corporation to levy a tax, the learned Judge held that the section would be unconstitutional as suffering from the vice of excessive delegation in that it laid down no principle, indicated no policy and afforded no guidance for determining the basis or the rate on which the tax was to be levied and was therefore void. In consequence he allowed the petition saving however the right of the Corporation to recover the fee at the rate in force prior to March 14, 1958 on the ground that the levy at this rate was saved by Art. 277 of the Constitution. The Corporation preferred an appeal to a Division Bench and the learned Judges on practically the same line of reasoning as the learned Single Judge dismissed the appeal. Their conclusions were as follows : The imposition permitted to be made by s. 548 (2) read with s. 443 of the Act is charged was only a fee as distinguished from a tax. Regarded as a fee the levy was invalid as there was no quid pro quo. If, however, it be held that the provisions quoted authorised the levy of a tax, the provisions were unconstitutional because they involved an improper del
