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(1965) 2 SCR 477 : AIR 1965 SC 1107

In the Supreme Court of India

(BEFORE A.K. SARKAR, K. SUBBA RAO, RAGHUBAR DAYAL, N. RAJAGOPALA AYYANGAR AND J.R.
MUDHOLKAR, JJ.)

CORPORATION OF CALCUTTA AND ANOTHER … Appellant;

Versus
LIBERTY CINEMA … Respondent.
(1) AJOY KUMAR MUKHERJEE (2) STATE OF ASSAM … Interveners.
Civil Appeal No. 266 of 1964* , decided on December 14, 1964
Advocates who appeared in this case :
G.S. Pathak, Senior Advocate (A.N. Sinha and P.K. Mukherjee, Advocates, with
him), for the Appellants;
Niren De, Additional Solicitor-General of India and N.C. Chatterjee, Senior Advocate
(S. Ghosh, Advocate and J.B. Dadachanji and Onkar Chand Mathur, Advocates of J.B.
Dadachanji & Co., with them), for the Respondent;
D.N. Mukherjee, Advocate, for Intervener 1;
Naunit Lal, Advocate, for Intervener 2.
The Judgment of the Court was delivered by
A.K. 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.
2. Section 443 of the Act provides that no person shall without a licence granted by
the Corporation keep open any cinema-house for public amusement. It, however, does
not say that any fee is to be paid for the licence. But sub-section (2) of Section 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 so calculated was Rs 400 per year.
3. 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 Rs 5 per show. In the
result it became liable to pay a fee of Rs 6000 per year.
4. The respondent then moved the High Court at Calcutta under Article 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 G.K. Mitter, J. on appeal by the Corporation. Hence
the present appeal.
5. 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 clauses (f) and (g) of sub-Article (1) of Article 19.
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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 1000 per show and paying the sum of Rs 5 per show. No doubt the
increase in the rate of fee from Rs 4000 to Rs 6000 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
levey 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 Article 19(1), (f) and (g) were violated
in any case as Section 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 Section 548.
6. The second challenge to the levy was put in this way: The levy authorised by
Sections 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 6000 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 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.
7. Now, on the first question, that is, whether the levy is in return for services, it is
said that it is so because Section 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 Sections 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.
8. This contention is not really open to the respondent for Section 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
Article 110(2) and Article 199(2) where both the expressions are used indicating
thereby that they are not the same. In Shannon v. Lower Mainland Dairy Products
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Board1 it was observed at pp. 721-22, “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 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.
9. 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 Edn) p.
361, Craies on Statute (6th Edn) p. 95 and Maxwell on Statutes (11th Edn) p. 221.
Therefore again, the word ‘fee’ in Section 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.
10. 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
Section 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
Section 443. We have earlier summarised the sections, but now propose to set them
out so far as material:
5. 443—No person shall, without or otherwise than in conformity with the terms
of a licence granted … keep open any … cinema house …
5. 548.—(1) Every licence …. granted under this Act …. shall specify,
(e) the tax or fee, if any, paid for the licence.…
(2) Except when it is … otherwise expressly provided, for every such licence …. a
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.
11. 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 Section 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 hypothesi, be no services to render.
No doubt Section 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.
12. 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
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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.
13. It is however said that the by-law earlier quoted requires inspection of the
cinema houses by the Corporation and that 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 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-section (3) of Section 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 Section 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.
14. 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 Commissioner, Hindu Religious Endowments,
Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt2 , where it was said at p.
1042, “a fee is a payment for a special benfit 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 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.
15. 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, Mysore3 . This time the validity of the section was
upheld. The reasons for this decision are not relevant to the present discussion. As to
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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.
16. 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 must benefit, or confer advantage on, the person who pays the levy.
17. The other case to which we wish to refer in this connection is Hingir-Rampur
Coal Co. Ltd. v. State of Orissa4 . 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 fee 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 benefiting the
specified class or area the State as a whole may ultimately and indirectly be benefited
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.
18. It was also contended that the levy under Section 548 must be a fee 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 Section 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 Section 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
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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 determine 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
Sections 443 and 548 are placed in the Act is irrelevant for determining whether the
levy imposed by them is a fee or a tax.
19. The last argument in this connection which we have to notice was based on
Sections 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 Section 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-section (4). Sub-section (4) requires the Corporation
to make adequate and suitable provision for such services as may be required for the
fulfilment 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 Section 548
is a fee. The other point was that clause (3) and (4) of Section 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. It was said that as the licence fee leviable under
Section 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 Section 443 does not impose a duty on the Corporation. We
think it does so, thought 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 Section 127(3) must be
deemed to include the levy under Section 548. The words “subject to the provisions of
Part IV” in Section 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 Section 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.
20. The conclusion to which we then arrive is that the levy under Section 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
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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.
21. It was then said that if Section 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 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.
22. 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 In re The Delhi Laws Act5 . The
principle there laid down has been summarised by Bose J. in Rajnarain Singh v.
Chairman, Patna Administration Committee, Patna6 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”.
23. On the basis that Section 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.
24. First, there is Pandit Benarsi Das Bhanot v. State of Madhya Pradesh7 . That case
was concerned with a Sales Tax Act which by Section 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 ground that Section 6(2) was invalid as it was a
delegation of the 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 case6 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
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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 of taxes to be charged on different classes of
goods and 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 Benarsi Das case7 was not concerned with fixation of rates of taxes; it was a
case where the question was on what subject-matter, 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.
25. In regard to the observations in Pandit Benarsi Das case7 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 which Venkatarama Aiyar J.
referred fully support his observations. The first case relied upon by him was Powell v.
Apollo Candle Co. Ltd.8 . That case upheld the validity of a statute passed by 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 Madras9 . 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 States10 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 inter-state 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.
26. 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 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
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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.
27. 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
delegates, 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.
28. Western India Theatres Ltd. v. Municipal Corporation of the City of Poona11 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 grounds were mentioned in
support of the view taken in the Western India Theatres case11 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.
29. Then there is Vasantlal Maganbhal Sanjanwala v. State of Bombay12 . The
provision of the statute there attacked 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.
30. The last case which we wish to notice in this connection is the Union of India v.
Bhana Mal Gulzari Mal13 . 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. State of Madhya Pradesh14 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 delegate, that is, the Government. In Bhana Mal
Gulzari Mal case13 the validity of an order made under Section 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 object prescribed in Section 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
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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 Section 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”.
31. The portion in the judgment in Bhana Mal Gulzari Mal13 case 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 stereo-typed rule. With respect, we
entirely agree with this view. The guidance furnished must be held to be 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 Section 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 it
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 as 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 Section 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 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 Section 548 is valid legislation. There is
sufficient guidance in the Act as to how the rate of the levy is to be fixed.
32. We may at the end point out 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.
33. 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
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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 II 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 delegatee for the
use of the delegator. That was not the case of power conferred under 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, however, for us to pronounce finally on it,
for in either view the taxing power challenged must be held to be good.
34. In the result we would allow the appeal with costs throughout.
N. RAJAGOPALA AYYANGAR, J.— We regret our inability to agree:
36. Section 443 of the Calcutta Municipal Act, 1951 (West Bengal Act 33 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 Section 548(2):
“Except when it is in this Act or in any rule or bye law 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.”
37. 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 re-
enacted 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 Sections
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 Section 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 6000 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 Article 226 of the Constitution praying for appropriate
writs of certiorari, 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 Rs
250 as profession tax for carrying on the trade or calling of cinema exhibitor as well as
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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.
38. 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 Section 548(2) read with Section 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 Section 548(2) of the Act authorised 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 principal,
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
Article 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 Section 548(2) read with Section 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 delegation of legislative power. They also held that the levy was
not to any extent saved by Article 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.
39. 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.
40. 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 Section 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, (2) The fee permitted to be charged for licences by Section 548(2)
of the Act was not a fee but a tax as it was not a quid pro quo for services which the
Corporation was required by or under the Act to render or did render to the licensee,
(3) A fee charged for a licence other than a fee for services rendered is in reality a tax
and no quid pro quo is necessary to sustain its validity beyond the grant of the licence
and a permission to carry on the activity which the licence authorises, (4) If what was
permitted to be charged by Section 548(2) were a tax, the provision is not
unconstitutional for the reason that the rate of the fee was not specified in the Act.
The non-specification in the Act of the rate of the licence fee to be charged is not open
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to the objection of excessive delegation of legislative power for two reasons: (1) For
considering whether there has been an excessive delegation, regard must be had not
merely to the section conferring the power but to the other provisions of the Act as
well which might throw light upon the topic and from which sufficient enunciation of
principle or guidance could be gathered. In the present case there was sufficient
guidance available and proper standards laid down in the other provisions of the Act as
to uphold the validity of the delegation., (2) When a delegation of legislative power
including legislative power to impose a tax is conferred upon a Municipal Corporation,
no question of excessive delegation arises as the Constitution itself permits and
authorises such devolution of legislative power.
41. In view of these submissions it is necessary to consider and ascertain
principally 4 matters: (1) the precise nature of a fee, as distinguished from a tax., (2)
Whether on an examination of the several provisions of the Act the charge authorised
to be levied by Section 548(2) read with Section 443 of the Act, is a fee in that sense
or is it a tax., (3) If what is permitted to be levied by Section 548(2) is not a fee but a
tax whether the various provisions of the Act read independently or together enunciate
the principles, prescribe the standards, and affords sufficient guidance to the
Municipality to fix the rate so as to render the conferment of the power free from the
vice of excessive delegation; and (4) lastly, whether the rule as to excessive
delegation of legislative power is inapplicable in those cases where the devolution 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.
42. We shall take up these questions in that order.
1. The Nature of a Fee as distinguished from a tax.—Mr Pathak did 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 out in the several entries in the three legislative lists in Schedule VII, the
power of 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 under an enactment it was obligatory on
an authority, be it a municipal authority or any other to render some special service
to the payer of the fee as distinguished from the benefit conferred on every member
of the general public by the performance of statutory duties, and the levy is
permitted to be made for meeting the cost of such service, the charge imposed
would not be a “fee”. In all other cases, where no special service is directed to be or
is rendered to a particular individual out of the ordinary, the fee imposed for the
licence or permission granted for the carrying on of any activity is really in the
nature of a tax in regard to which no question of quid pro quo arises.
43. It is common ground that the Constitution recognises a clear distinction
between a tax and a fee. The several entries in the Lists in the Seventh Schedule
which enumerate the legislative powers and distribute them between Parliament and
the State Legislatures point to this distinction. The scheme underlying the Lists may
shortly be summarised thus. Each of the Union and the State Lists which are Lists I
and II start by enumerating first the entries conferring general legislative powers as
distinct from taxation powers. In other words, the taxation entries, that is entries
conferring taxing power, are separately enumerated after entries conferring general
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legislative power. Thus Items 1 to 81 of List I deal with the exclusive general
legislative powers of Parliament while 82 to 92 enumerate the taxes which Parliament
may impose. Item 96 empowers Parliament to legislate in respect of “fees in respect of
any of the matters in this List, but not including fees taken in any Court”. This would
clearly demonstrate that while “fees” may be levied in respect of or as incidental to
legislation on the topics set out in the other entries in the list, the power to levy a tax
is not to be taken as conferred by entries conferring general legislative power. Thus
though a fee may be levied as incidental to legislation be it general as in respect of
Entries 1 to 81 or the entries conferring taxing powers— Entries 82 to 92, or in respect
of the miscellaneous matters enumerated by such an entry like 94, no taxes may be
imposed by virtue of the general legislative power under Entries 1 to 81. This matter
has been the subject of consideration by this Court though from a slightly different
angle in M.P.V. Sundararamier & Co. v. State of Andhara Pradesh15 . Venkatarama
Aiyar, J. speaking for the Court said:
“In List I, 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 provides separately for
Corporation tax. Turning to List II, Entries 1 to 44 form one group mentioning the
subjects on which the States could legislate. Entries 45 to 63 in that List form
another group, and they deal with taxes. Entry 18, for example, is “Land” and Entry
45 is “Land revenue”. Entry 23 is “Regulation of mines” and Entry 50 is “Taxes of
mineral rights”. The above analysis—and it is not exhaustive of the entries in the
Lists—leads to the inference that taxation is not intended to be comprised in the
main subject in which it might on an extended construction be regarded as
included, but is treated as a distinct matter for purposes of legislative competence.
And this distinction is also manifest in the language of Article 248, clauses (1) and
(2), and of Entry 97 in List 1 of the Constitution.”
44. The same pattern of classification and conferment of general legislative as
distinguished from taxing power is adopted in the State List, List II. Entries 1 to 44 of
this List deal with general legislative power while Items 45 to 63 deal with specific
taxes which might be imposed exclusively by the State Legislatures. The last entry in
this List is in the same terms as Entry 96 of List I and reads “fees taken in respect of
any of the matters in this List but not including fees taken in any Court”. So far as the
Concurrent List is concerned, it contains no entry conferring the taxation power but by
its last entry, Entry 47, it enables the Legislatures to impose “fees in respect of any of
the matters in that List but not including fees taken in any Court” and this is in terms
identical with Entries 96 of List I and 66 of List II. It is, therefore, quite obvious that
the Constitution proceeds on a basis of clear line of demarcation between the power to
tax and the power to levy a fee.
45. Before proceeding further, one other matter arising out of this scheme might
also be noticed. When Entries 96 of List I or 66 of List II speak of “any of the matters
in this List” they necessarily include also the entries relating to taxation. In other
words, a fee may be levied even under an enactment relating to the imposition of a
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tax. Merely by way of illustration of this type of fee we might refer to fees which are
charged for licences which are required to be taken by dealers under the Sales Tax Act
in the various States. The exact amount of the licence fees to be charged 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 II “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.
46. Recording 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”. (2) That this construction was
required or reinforced by Article 110(2) [and the corresponding Article 199(2)].
47. We shall first consider the decisions of this Court, which it is stated have thus
interpreted the term “fee” as used in the Constitution. The first case referred to in this
connection was Commissioner, Hindu Religious Endowments, Madras v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt2 where this Court had to consider the
constitutional validity of certain provisions of the Madras Hindu Religious and
Charitable Endowments Act, 1951 in its application to Mutts. Among the provisions
considered in that context was Section 76 of that enactment, which directed every
religious institution to “pay to the Government annually” such contribution not
exceeding 5 per cent of its income as might be prescribed. The validity of this
provision was challenged on the ground that what was authorised to be levied was not
a fee but a tax, and that as a tax it could not be brought within any of the particular
taxes enumerated in List II which the State Legislature was empowered to impose.
This Court agreed with this contention, and based its conclusion on the following
circumstances. It recognised that a clear distinction existed between taxes and fees
under the Constitution. As to what was meant by a tax, Mukherjee, J., who delivered
the judgment of the Court adopted the definition of the term by Latham, C.J., in
Matthews v. Chicory Marketing Board16 “a tax is a compulsory exaction of money by a
public authority for public purposes enforceable by law and is not payment for services
rendered”. The learned Judge enumerated the characteristic of a tax from other forms
of compulsory payments, and these were summarised thus: (1) that taxes were
imposed by a statutory power without the tax-payer's consent the payment being
enforced by law, (2) that a tax is an imposition made for public purpose without
reference to any special benefit to be conferred on the payer of the tax, (3) that a tax
was levied for the purposes of general revenue which when collected formed part of
the public revenues of the State. “As the object of a tax is not to confer any special
benefit upon any particular individual there is no element of quid pro quo between the
tax-payer and the public authority”. On the other hand, a fee was generally stated to
be defined to 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
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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 Section 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 a statutory corporation created for the
administration of religious endowments in the State was also directed to be met out of
the monies in the Consolidated Fund. Reliance was also placed on similar observations
of this Court, in other cases of fees charged on religious endowment under other
enactments which were heard along with the Shirur Mutt case2 already referred to,
though in them the validity of the levy was upheld. The validity of a contribution levied
under the Orissa Hindu Religious Endowments Act was considered by this Court in
Mahant Sri Jagannath Ramanuj Das v. State of Orissa17 and of a similar levy under the
Bombay Public Trust Act (Ratilal Panachand Gandhi v. State of Bombay18 In these two
cases, the validity of the contribution levied under their respective charging provisions
was, as stated already, upheld. The ground on which Section 76(1) of the Madras Act
which was struck down in the Shirur Mutt case was distinguished was that under the
other two enactments, a special fund was created to which the collections were to be
credited and that the expenses of the administration of the Act were directed to be
met out of this fund. Though the concept of a fee as a quid pro quo for particular
services rendered to the fee payer as explained in the Shirur Mutt Case are also
repeated in these two decisions, it is worth noticing that the services to be rendered to
the Religious Endowment or public trust by the Orissa and the Bombay Acts were
exactly similar to the service — which was by way of supervision, regulation and
control over the way in which the management by the trustees was conducted under
the Madras Act. This consideration is highlighted when one examines the decision of
this Court in the Udipi Mutt case — H.H. Sudlundra Thirtha Swamiar v. Commissioner
for Hindu Religious and Charitable Endowments, Mysore3 — which was a sequel to the
Shirur Mutt case2 . After Section 76(1) was struck down by this Court in the Shirur
Mutt case2 the Madras Legislature by Act 27 of 1954 effected certain amendments to
that section with a view to rendering it constitutional. Section 76 had been held to be
ultra vires of the legislature on the ground that what it imposed was not a fee which
was the only thing permitted by Entry 66 but in reality a tax. This decision was based
upon several grounds 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
Section 76 and the other relevant provisions of the Act remained exactly the same.
This Court held the contribution to be a fee principally for the reason that the moneys
that were being paid into a separate Fund were collected not by the Government and
were being paid to a different Fund. If one proceeded on the footing that unless the
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service rendered was a specific service in the sense of a benefit conferred specially
upon the payer, the charge levied would be a tax, the contribution levied under
Section 76 even after the amendment would have been held to be a tax. No doubt, the
fact that a separate Fund is segregated from the Consolidated Fund of the State and
the moneys are received not by the Government's such but by a public authority
might show that it is not a tax, still these ore not decisive, for as was held by the Privy
Council in Attorney-General for British Columbia v. E. & N. Railway Co.19 which has
been approved by this Court in The Hingir Rampur Coal Co. Ltd. v. State of Orissa4 to
which we shall refer later the payments were credited to a Fund known as the
Authorised Protection Fund to which advances were made from Consolidated revenues.
Lord Greene after saying that the levy had the characteristics of taxation, observed:
“It is suggested, however, that there are two circumstances which are sufficient
to turn the levy into what is called a ‘service charge’. They are first, that the levy is
on a defined class of interested individuals and, secondly, that the fund raised does
not fall into the general mass of the proceeds of taxation but is applicable for a
special and limited purpose. Neither of these considerations appears to Their
Lordships to have the weight which it is desired to attach to them.”
The segregation of the Fund, therefore, could not have been a decisive factor for
determining the nature of the levy. This decision as well as the Orissa and the Bombay
cases already cited are, therefore, authority for the position that the word ‘services’ in
this context may have to be understood in a wide sense as including supervision and
control over the activity for the exercise of which the fee is charged.
48. As contrasted with these three cases, Mr Pathak submitted that when fees were
levied for licences they were taxes. In support he referred to Cooverjee B. Bharucha v.
Excise Commissioner and the Commissioner, Ajmer20 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 II, 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 a licence fee the same was invalid as excessive was repelled in these terms:
“The next contention that the charge of fee by public auction is excessive and is not in
the nature of a fee but a tax ignores the fact that the licence fee described as a licence
fee is more in the nature of a tax that a licence fee. One of the purposes of the
Regulation is to raise revenue.… The grants is given a licence on payment of the
auction price. The Regulation specifically authorises this”. We do not see how this
decision helps the appellant. The description of the levy as a fee does not of course
determine whether it is a fee or a tax. That taxes may be imposed for effectuating
other purposes than raising revenue for protecting some activity which is not subject
to tax or to inhibit one which is so subject or to regulate some activity cannot also be
dispute. That fees for licences may be by way of taxes does not, however, mean that
every fee for a licence is or must be a tax.
49. Reference was next made to The Hingir-Rampur Coal Co. Ltd. v. State of Orissa4
which considered the validity of a cess imposed on owners, among others, of coal-
mines by the Orissa Mining Areas Development Fund Act, 1952. The amount of cess
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was to be determined by the Government but it was not to exceed 5 per cent of the
value of the minerals extracted at the pits-mouth which was to be paid into a fund out
of which was to be derived the monies for providing the amenities to the mining areas.
It was contended for the petitioner coal company who moved this Court under Article
32 of the Constitution that this cess was really a duty of excise on coal within Entry 84
of List I of the Seventh Schedule. On the other hand, it was contended by the State
who opposed the petition that the cess was a fee and not a duty of excise. This Court
upheld the validity of the cess on the ground that it was really a fee, and in so holding
observed “it is true that between a tax and a fee there is no generic difference. Both
are compulsory exactions of money by public authorities; but whereas a tax is
imposed for public purposes and is not, and need not, be supported by any
consideration of service rendered in return, a fee is levied essentially for services
rendered and as such there is an element of quid pro quo between the person who
pays the fee and the public authority which imposes it. If specific services are
rendered to a specific area or to a 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 does not become, a part of the
consolidated fund. It is earmarked and set apart for the purpose of services for which
it is levied….In regard to fees there is, and must always be, correlation 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”. Reference was then made to the decisions in the
Shirur Mutt case2 the Orissa17 and the Bombay18 cases to which we have already
adverted. Mr Pathak placed considerable reliance on the reference in the Hingir
Rampur Coal Co.4 to the decision of the Privy Council in Attorney-General for British
Columbia v. Esquimalt and Nanaimo Railway Co.19 and to the explanation of the
rationale of those decisions of this Court: “It would thus appear that this decision
proceeded on the basis that what was claimed to be a special service to the lands in
question was in reality an item in public service itself and so the element of quid pro
quo was absent. It is true that when the Legislature levies a fee for rendering specific
services to a specified area or to a specified class of persons or trade or business, in
the last analysis such services may indirectly form part of services to the public in
general. If the special service rendered is distinctly and primarily meant for the benefit
of a specified class or area the fact that in benefiting the specified class or area the
State as a whole may ultimately and indirectly be benefited would not detract from the
character of the levy as a fee. Where, however, the specific service is indistinguishable
from public service and in essence is directly a part of it different considerations may
arise”.
50. These decisions according to the learned counsel established (1) that a fee for a
licence was prime facie a tax and was a mode of raising revenue, (2) the fact that
under the licence the trade, business or other activity of the licensee is controlled and
regulated where such control and regulation is imposed in the interest of the general
public is not sufficient to negative the licence fee being a tax; (3) it was only in those
cases where an impost was made either as an ad hoc cess or a fee for the grant of a
licence as a charge for services rendered to the fee-payer that the impost could be
characterised technically as a fee which for being valid would have to stand the test of
correlation with the costs entailed on the public body for rendering the service.
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Besides the requirement as to special service to the payer being required, the
argument continued, that on the authorities cited any fee would be tax if there was no
segregation of its proceeds for the general revenues and a requirement of the 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.
51. 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 Case20 . As observed by Gwyer,
C.J., in Re: Central Provinces and Berar Act 14 of 1938:1021 “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 constitute a fee in the strict sense it is not sufficient that it is
imposed in order to raise funds for ensuring due compliance with the activity which it
is the object of the licence, to place under supervision, inspection and control. In this
connection reference may be made to para 7 of the affidavit by the Corporation in
answer to the Writ Petition filed by the respondent. There the appellant Corporation
stated “the new scale of fees as fixed by the Corporation is reasonable for effective
inspection, supervision and control of cinema houses in Calcutta at present numbering
75 in accordance with the provisions in the relative bye-law framed under the Calcutta
Municipal Act having regard to the public health, safety and convenience….I say that
in order to effectively discharge the statutory duties imposed on the Corporation in
regard to the inspection, regulation, supervision and control of cinema houses in
Calcutta it is necessary to provide for a more suitable machinery and establishment
involving employment of a much larger staff and consequently very large additional
expenses in order to exercise a better, fuller and more effective control and
supervision of the cinema houses, having regard to the additional burden imposed by
the cinema business at present times and the ever growing needs of precautions
regarding the health, safety and convenience of the public, the new scale of fees is
reasonable to cover necessary expenses involved in the said control and supervision of
the cinema houses as herein-before stated”. Mr Pathak urged that the point that he
was raising was one of law and therefore the appellant was not confined to supporting
the levy as a fee in the strict sense. He is right there, but we are drawing attention to
this defence only for the reason that this plea was taken because of the accepted
position as to the concept of a fee on the authorities to which we shall refer presently
and the elements of service” needed the rendering of which would constitute a quid
pro quo for the fee imposed. These authorities have taken the view that where a
licence is granted, the fee to be charged for such a licence might bear a reasonable
relation to the cost of providing the inspection, supervision and control imposed on the
licensee both in his own interest as well as in the interest of the general public. In
other words a fee in the strict sense— 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 Municipal
Corporation of Rangoon v. Sooratee Bara Bazar Co. Ltd.22 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
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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 challanged as unreasonable and ultra vires. Cunliffe, J. who tried 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 the expenses of the licence, its registration, inspection and supervision.
Fees levied on licences of premises ought not to be greater than a sum to cover the
costs of the regulation”.
A similar view was taken by the Division Bench on appeal. They said at p. 228:—
“Was it the intention to give the Corporation power to impose on the owners of
private markets a charge for a licence which might extend to any amount for which
the sanction of the Local Government could be obtained? Or was the intention
merely to give power to charge a fee which would save the Corporation from being
out of pocket by reason of the duties and liabilities imposed on it by the Act of the
supervision and regulation of private markets?”
As the amount charged bore no relationship to the expenses involved in the
inspection, supervision and control which the Corporation might exercise over the
licenced premises, the fee was held to be ultra vires. This decision was followed in
Corporation of Madras v. Spencer & Co.23 The licence fee for storing spirits levied under
the Madras City Municipal Act was raised from Rs 25 to 200 by a resolution of the
Corporation after observing the necessary formalities. This was challenged as
excessive because of want of correlation between the cost of inspection, supervision
and control of holders of the licence and the total amount recovered as fees. The
pattern of the Madras City Municipal Act was the same as the Act before us. The
contention urged before the Court was the same as that now urged viz. that what was
permitted to be levied by Section 365(2) of the Madras Act [corresponding to our
Section 548(2)] was a tax—particularly seeing that what was being regulated and
controlled was a noxious or dangerous trade or activity. The Court repelled it by
pointing out that taxes were dealt with in Part 3 while the power to levy fees for
licences was conferred by a section occurring in a part headed Miscellaneous and
Procedure. Phillips J. observed at p. 57:
“Beasley, J., has held that the fees are leviable as compensation to the
corporation for the expenses incurred in the issue of licences and the general
regulation of the trades and other occupations which are licenced and there must be
some relation between these expenses and the amount of fees leviable. This was
the view which was adopted by the Rangoon High Court in Municipal Corporation
Rangoon v. Cooratee Bara 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 licence 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 licences 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? …
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If we accept the proposition that the power of charging licence-fees cannot be used
for taxation, then we must say that as a whole the fees charged by the corporation
must not be very much in excess of what the duties cast upon them and their staff
in connexion with the licences cost them. There is the cost of issuing the licences;
there is the cost of inspecting the premises to see whether they are suitable for the
purpose proposed; and there is the subsequent cost of inspecting the promises to
see that they are being used properly and that the conditions and restrictions
imposed by the Commissioner are observed”.
These decisions were followed in Municipal Council of Kumbakonam v. Ralli Bros24
where a fee for a Municipal licence granted for storing groundnut was increased and its
validity was questioned. Section 321(2) of the Madras District Municipalities Act was in
terms identical with Section 548(2) of the Act. Dealing with the nature of the fee
permitted to be charged under that provision Curgenven, J. said:
“The wording undoubtedly suggested that the fee should be commensurate with
the extra cost entailed by granting the licence and exercising such supervision as is
necessary to see that its terms are complied with. It may be that in order to
promote the health, etc., of the public, with which this part of the Act specially
deals, higher fees should be chargeable in the case of dangerous or offensive
occupations.”
The High Court of Orissa25 followed these decisions and adopted the same construction
of the fee permitted to be levied by Section 321 of the Madras District Municipalities
Act, whose provisions were also applicable to parts of the State of Orissa, besides
decisions on the same lines by the High Court of Allahabad in Lala Raj Kishore v.
District Board of Saharanpur26 .
52. We have therefore, to consider whether there is anything in the decisions of this
Court referred to earlier and relied on by the learned counsel which militate against
holding that the cost involved in the inspection, supervision and control of an industry,
trade or activity is not a quid pro quo to the payer so as to constitute a fee levied for
that purpose as always a tax. Reference may here be made to the terms of Section
431 of the Act with which Chapter XXVI, in which Section 443 occurs, opens.
“Inspection and Regulation of Premises 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.”
53. 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 Section 548(2) would be a quid pro
quo.
54. 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 Mining Area Development Fund
case support a broader view of what constitutes service to the fee-payer.
55. We are also satisfied that the narrow construction suggested would not accord
with the scheme of the entries in the lists in Schedule VII to the Constitution. To
illustrate the point, we would refer to a legislation like the Industries Development and
Regulation Act, 1951 (Central Act 65 of 1951). It is an Act to provide for the
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Development and Regulation of certain industries. Under the provisions of Section 11

of that enactment no new industrial undertaking could be established by any person or
authority other than the Central Government after the commencement of the Act
“except under and in accordance with the licence issued in that behalf by the Central
Government”. The inspection, supervision and control to be exercised over the
licensees is provided for in detail by various sections of the enactment. Under Section
30(2)(j) the Central Government is empowered under the rules made under the Act to
determine the fees to be levied in respect of licences and permissions issued under the
Act. Now let us see the constitutional power to empower the fee to be charged. Entry
52 of List I reads “industries, the control of which by the Union is declared by law to
be expedient in the public interest”, and Section 2 of the enactment contains this
declaration. Coming now to the entries relating to taxation it will be found that none of
these Entries, 82 to 92, would cover the fees charged for licences issued under the
enactment. It is obvious, therefore, that the legislative power for charging fees is to be
derived from Entry 96 of List I, “fees in respect of any of the matters in this List”. If
the learned counsel's submission that the expression quid pro quo should be read in
the sense of a special and particular benefit conferred upon particular licensees
(benefit again in the sense suggested) is correct the licence fees levied under the rules
made under Section 30(2)(j) read with Section 11 would be invalid as a fee and it
could not be sustained as a tax either, for the tax there levied could not be brought
within the rubric of any of the Entries, 82 to 92. It, therefore, appears to us that the
word quid pro quo should be read not in the narrow and restricted sense submitted by
the learned counsel for the appellant but in a somewhat 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.
56. 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 Section 443 is to be found. Section 436 runs,
to quote the material words “no person shall, without the previous written permission
of the Commissioner established 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”. Section 436(1) and Section 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 terms of the licence granted
by the Commissioner in this behalf viz. (a) any of the purposes specified in Schedule
18(b) any purpose which is in the opinion of the Corporation dangerous to life, health
or property or ……”. Schedule 18 contains a list of the purposes for which premises
may not be used without a licence and contains a long list of goods or articles which
could not be packed, stored etc. in such premises. Under Section 548(2) a fee might
be charged both for a written permission as well as for the grant of a licence. It must
be assumed that if the learned counsel is right in his submission as to what
constitutes a fee, the fee charged for a written permission under Section 436 and for
licence under Section 437 which we have extracted above would in reality be taxes
though called fees. Now, let us see whether there is any taxation entry in List II which
could support the validity of the impost. The only entry under which it could possible
be brought in if at all would be Entry 60, “taxes on professions, trades, callings and
employment”. It is hardly possible to sustain this interpretation because there is also
Chapter 13 of Part IV headed “taxes on professions, trades, callings and the exact
figure of the taxes which might be imposed are laid down in Schedule 4. It cannot of
course be said to be, “a tax on land and buildings” because it is not on the land or
building that the tax is levied but on the activity pursued therein, and besides “taxes
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on lands and buildings” are specifically dealt with under Chapter II of Part IV where
the permissible “consolidated rates” are laid down. The licence fee for the written
permission and licence fee under Sections 436-437 can only be supported as referable
to legislation under Entries 5—“constitution and powers of the municipal corporations”
and 6—“public health and sanitation” and 24—“industries” read with Entry 66 of the
State List. We have taken these two illustrative cases at random but an examination of
the entire body of statute law in India would bear this out. We are not, therefore,
disposed to read the judgments of this Court in the Shirur Mutt case2 and the cases
following as laying down that where an activity is regulated by licences 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 only by reference to the taxation
entries in Lists I and II. Mr Pathak submitted that so far as the fee charged with
reference to entertainments in theatres under Section 443 of the Act might be
sustained with reference to Entry 62 of list II, but that would hardly be an answer,
because we are examining the entirety of the group of cases to which Section 548(2)
of the Act would apply.
57. It will now be convenient to consider the argument of learned Counsel based on
Article 110(2) as supporting the narrow construction of the word “fee” as used in the
entries in 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 clause (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 purposes”.
Learned Counsel pointed out that here a distinction was drawn between a payment of
fees for licences and fees for services rendered, and so a payment for fees for licences
was treated differently from fees for services rendered. The argument based upon it
was that Entry 66 of List II and the similar Entries in Lists I and III were confined to
fees for services rendered and that “a payment of fees for licences” were really not
fees within those Entries. Referring to the present case he urged that as no special
services for the benefit of the theatre owners had either been required to be rendered
by the Act or the bye-laws made thereunder or had actually been rendered, it could
not fall under the category of “fees for services rendered”. The Constitution, therefore,
it was urged contemplated imposts by way of fees for licences which were not for
services rendered and it was this category of impost that was permitted to be charged
by Section 548(2) of the Act. We are unable to agree in this construction of Article 110
(2).
58. In the first place, all municipal taxation is outside the definition of a money bill,
so that in regard to municipalities and the imposts made for purposes of local
administration, no distinction is drawn between taxes and fees. The “fees” therefore
which are specifically excluded from the definition are fees imposed by the State
Government or its administrative agencies other than by instruments of Local Self
Government. The exclusion from the definition is as regards two categories: (1) fees
for licences, and (2) fees for services rendered. It is obvious that a tax which is
collected as a licence fee such as in the Ajmere Excise case considered earlier, would
not fall outside this definition of a money bill merely because the tax was imposed and
collected as a licence fee. If therefore pure taxation measure would be money bills
then, it is obvious that the fees for licences which are outside the definition would be
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those fees which are imposed to meet the cost of regulation and supervision of an
activity which is controlled by the requirement of a licence and compliance with its
terms. Thus a contribution under Section 76(1) of the Madras Religious Endowments
Act as amended in 1954, would be a fee for services rendered because there is no
question of licences being taken out in these cases and fees for regulating an activity
such as the fees 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 under the head “payment of fees for licences”. Thus
we consider that Article 110(2) far from supporting Mr Pathak, negatives the
construction for which he contends.
59. Any other construction of Article 110(2) would hardly fit in with the scheme of
the article itself or even with the lists in Schedule VIII. 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
therefore, would not be money bills, and seeing that “excise duties” are a taxation
entry in Lists I and 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
the lists are arranged and differentiated. As additional illustrations of the anomaly that
would result if Mr Pathak's construction of Entry 66 of List II were accepted we would
refer to other sections of the Act which enable the issue of licences and the charging of
fees therefore. We have already referred to Section 436 and Section 437 of the Act.
Under Section 449 the Commissioner is empowered to licence vendors in municipal
markets, under Section 451—he has power to licence private markets, slaughter
houses and stock-yards, and under Section 460—to licence butchers and those who
sell meat. We are not making an exhaustive list but are merely pointing out that in
order to sustain these levies as fees, because they do not fall under any of the heads
of taxation permitted to the State, the word ‘fee’ has to be read as including fees
charged for supervision, control and regulation of an activity which the legislature
desires to control. On this part of the case we are clearly of the opinion that the
legislative power as regards “fees” under Entry 66 as well as the corresponding entries
in the other Lists is really in the nature of an incidental power to effectuate the main
head of legislation empowered to be enacted by the other entries in the List. Item 66
is not an entry in relation to taxes which, on the scheme of the Constitution as we
have analysed earlier, are grouped together serially in Lists I and II. This construction
is confirmed by the fact that in the Concurrent List which contains only entries in
relation to legislative power as distinguished from entries conferring taxing power, the
last entry enables fees to be levied as ancillary to the legislative power conferred by
the other entries in that list.
60. Even assuming that learned Counsel is right in his submission regarding the
manner in which the decisions of this Court in the Religious Endowment group of cases
have to be understood, the appellant would be in no better position; in fact, its
position would be worse, for if a fee within Entry 66 is confined to payments for
particular and specific services rendered to the fee payer, the constitutional validity of
Section 548(2) of the Act would be open to challenge on the ground that it authorises
the Municipal Corporation to impose taxes which are not within the State's power to
impose for its own purposes. This would be an additional reason for 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 Section 548(2) a fee or a tax?
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61. 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 Section 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 II 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 38 chapters each with a
heading indicating the subject dealt with in it. The several chapters are themselves
grouped under 8 Parts. Part I in which Chapter I alone occurs is preliminary and does
not require mention. Part II which comprises Chapters II 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
transacted. This Part also is not relevant to the matter on hand and may be passed
over. Part III deals with Finance and is made up of Chapters VII, VIII, IX and X. It is
sufficient to refer to the headings of the several chapters which are Chapter VII—The
Municipal Fund, Chapter VIII—Budget Estimates, Chapter IX—Loans and Chapter X—
Accounts. We shall have to refer to some of the provisions of these chapters in dealing
with certain arguments of Mr Pathak relying on them for the purpose of showing that
the legislature had laid down the principles and afforded sufficient guidance for
determining the rate at which a fee should be levied on the basis that such a fee was a
tax. To these however, we shall revert later.
62. Part IV is headed “Taxation” and Chapters XI to XVII are in this Part and each
of these chapters deal with separate heads of taxes which the Corporation is
authorised to levy and collect.
63. Section 165 of the Act with which Chapter XI opens empowers the Corporation
to impose “a consolidated rate” on lands and buildings situated within the municipal
area. The section prescribes the maximum percentages of the annual value at which
the tax may be levied and grades them into several categories dependent on the total
annual valuation. Section 166 prescribes the manner in which the particular
percentage to be charged is to be determined by the Corporation. The percentages,
subject to the maxima laid down in Section 165, have to be fixed annually having
regard to the requirements of the Corporation with reference to the obligations
imposed upon it by the Act. Elaborate procedure is laid down by the other sections of
this Chapter ending with Section 207 for the manner in which the annual value of
lands and buildings on which the specified percentages may be levied may be
determined, with appeals provided to civil courts for the aggrieved tax-payer in the
event of the annual value as determined by the Corporation being disputed. The next
Chapter—Chapter XII comprising Sections 208 to 217 is headed “Taxes on Carriages
and Animals”. When the tax leviable under this chapter whose rate is prescribed by
the Schedule VI of the Act, is paid, a licence is issued to the owner of the Carriage or
Animal. Next, we get to Chapter XIII headed “Tax on professions, trades and callings”
and comprises Sections 218 to 221. Section 218 directs that “every person who
exercises or carries on in Calcutta any profession, trade or calling indicated in
Schedule IV shall annually take out a licence before the 1st July each year … and pay
for the same such fees 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 “Scavening Tax” comprises Sections 222 and 223. This tax is to be levied on
persons who exercise a calling specified in Part I of Schedule VII and is dependent on
either the average number of animals kept by the persons for the exercise of such
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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 II of
Schedule VII. Next, we have a tax on carts under Chapter XV. The tax is to be
imposed for the registration and the numbering of carts and by charging of a fee for
such registration. Section 225 prescribes the fee that might be charged for the several
varieties of vehicles which are classified under that section. Section 229 which is the
first section in Chapter XVI provides for the imposition of a licence fee for
advertisements. It is the only provision for taxation as regards which a rate is not
specified or the maxima laid down by the Act. Chapter XVII which is the last chapter
in this Part is concerned with making provision for the recovery of the consolidated
rate and the other taxes and for certain supplementary provisions in relation to taxes
permitted to be levied under this Part.
64. The next Part—Part V is headed the Public Health. Safety and Convenience and
Chapters XVIII to XXXI are included in this Part. Chapter XVIII relates to water
supply, XIX to drains, privies and other receptacles for filth, Chapter XX to licenced
plumbers, XXI to Streets and Public places, XXII to buildings, XXIII to Bustees, XXIV
to demolition, alteration and stopping of unlawful work XXV to lighting and
scavenging, and regulation of public bathing and washing, XXVI to inspection and
regulation of premises, and of factories, trades and places of public resort and this is
the chapter in which Section 443 finds a place. Chapter XXVII deals with markets and
slaughter places, Chapter XXVIII with Food and Drugs, Chapter XXIX with milk-
supply, Chapter XXX with restraint of infection and Chapter XXXI with registration of
births and deaths and disposal of the dead. The next chapter in this Part deals with
acquisition, disposal and General improvement of land and buildings and the last
one—Chapter XXXIII with the special powers of the Corporation. The next part—Part
VII contains provisions for enabling the Municipal Corporation to make bye-laws and
rules. Part VIII which is the last part has four chapters—Chapter XXXV deals with”
penalties to be imposed for ensuring compliance with the provisions of the Act and the
bye-laws made by the Corporation, Chapter XXXVI is headed ‘Procedure’, and Section
548 is the first section in this Chapter, and the other sections deal with the incidental
powers of the Corporation and with procedure. The next two chapters are headed
“Supplemental provisions and” Transitory provisions”.
65. Mr De for the respondent urged that the scheme of the Municipal Act 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 Section 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 Section 127(3) read with
Section 127(4) of the Act. Section 127 occurs in Chapter 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 to frame budget
estimates of the year Sub-section (3) on which he relied reads:
“(3) The Budget Estimate by the Standing Finance Committee shall be laid
before the Corporation on the 15th February or as soon as possible thereafter and
the Corporation shall consider the same. It may refer the estimates back to the
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Standing Finance Committee for further consideration and resubmission within a

specified time and shall—
(a) * * *
(b) determine, subject to the provisions of Part IV the levy of the consolidated
rate and taxes for the said year at such rates as are necessary to provide for the
purposes mentioned in sub-section (4):
* * *
and sub-section (4) reads:
“(4) In the Budget Estimates the Corporation shall, among other things—
(a) make adequate and suitable provisions for such services as may be required
for the fulfilment of the several duties imposed by this Act,
(aa) make adequate provisions for depreciation of machinery belonging to the
Corporation, as far as may be possible,
(b) provide for the payment as they fall due of all instalments of the principal
and interest for which the Corporation may be liable in respect of loans contracted
by it,
(c) allow for a cash balance at the end of the year of not less than twelve lakhs of
rupees, and
(d) allot sums of money to each Borough Committee to enable it to exercise and
discharge its powers, duties and functions.”
The argument was that in the budget estimates in Section 127(3) what is to be
considered is the levy of the consolidated rate and the taxes and these are subject to
the provisions of Part IV and the obligatory expenditure imposed by sub-section (4) is
to be met out of the consolidated rates and taxes which are to be determined subject
to the provisions of Part IV. It was, therefore, submitted that the rates and taxes had
to be determined subject to the provisions of Part IV and as the expenditure under sub
-section (4) was to be correlated to the receipt from the rates and taxes it was an
indication that all rates and taxes were only under Part IV. We consider that this
argument proceeds upon a mis-construction of these provisions. Sub-section (4) of
Section 127, of course, deals with obligatory expenditure but from this it does not
follow that expenditure which the Corporation could lawfully incur for the optional
amenities which it could provide for the citizens would not find a place in the budget.
Sub-section (4), it would be seen, opens with the words “shall, among other things,
make ….”. Under Section 126 the budget will cover all the expenditure which it is
proposed to incur—both that which is obligatory upon the Corporation under Section
127(4) and those which it could lawfully incur. On the receipt side would be included
as also fees and all receipts from every other source. No doubt, Section 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 construction 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 Section 548(2) were also taxes, there
would be nothing in Section 127(3), either by itself or read with Section 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.
66. We are thus left with the assistance afforded to us the scheme underlying the
provisions of the Act for determining whether the levy permitted by Section 548(2) is
of the nature of a tax. The submission of Mr Pathak was that Part IV, no doubt, dealt
with rates and taxes but merely on that account one cannot draw the conclusion that
taxes are not dealt with or permitted to be imposed by other provisions of the Act. No
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doubt, if a power to make a levy occurred in a part outside Part IV and it clearly and
unequivocally pointed to the imposition being a tax its effectiveness could not be
denied merely because the provision did not appear in Part IV. But on the scheme of
the Act we have at least to start with a presumption that Part IV is exhaustive of the
taxes which are permitted to be levied by the Corporation. In this connection Mr
Pathak laid some stress on the fact that the nomenclature employed to designate
taxes in Part IV was not uniform and that a tax was sometimes called a consolidated
rate (vide Section 165) and, though called a tax in the case of taxes on carriages and
animals under Sections 208 and 216, a licence was granted on the payment of a tax, it
was called a fee under Section 218 in the case of tax on professions, trades and
callings, and, similarly, in the case of scavenging tax under Section 222, was
designated as a fee and a licence fee on advertisements by Section 229. In the face of
this difference in the terminology employed learned Counsel stressed that the framers
of the Act did not proceed on the differentiation that every fee permitted to be
imposed for the grant of a licence was always not a tax. Learned Counsel is, no doubt,
right in the submission that Part IV headed ‘Taxes’ uses the expression “fee” to
designate taxes to be imposed upon particular articles or activities but the provisions
of the Act and the way the relevant sections are framed make it clear that what is
permitted to be charged by these provisions in Part IV is really in the nature of a tax.
Besides, in the case of all these imposts, whether called a tax or a fee, except in the
case of a fee on advertisements under Section 229 either the amount of the tax was
prescribed or criteria laid down on the basis of which the rate of the levy was to be
determined. In some cases, as the case of profession tax, tax on carts etc., the tax to
be imposed is determined by the Act itself. In the case of others like the Consolidated
rate the maximum percentages are fixed 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, Section 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, are all comprehended and dealt with by Part IV and
by Part IV alone and that what is permitted to be imposed by Section 548(2) is only a
fee as distinguished from a tax. If one has reference to the entries in the legislative
list in Schedule VII, what is permitted to be imposed under Section 548(2) is a fee “in
respect of the matters in the list” viz. Entry 5, Entry 6—Public Health and Sanitation.
16—Prevention of cattle trespass, 24—Industries, 28—Markets and Fairs. 33 —Sports,
entertainments and amusements. In this view as admittedly there is no correlation
between the fee charged and the service rendered in the sense discussed earlier, we
must hold that the impugned levy was not authorised and that the learned Judges of
the High Court were right in granting relief to the respondent.
3. Assuming Section 548 permits the levy of a tax, is the provision constitutional?
67. In this view no other question would arise. In view, however, of the elaborate
arguments addressed to us Mr Pathak on the other parts of the case and particularly
since the learned Judges of the High Court have devoted considerable parts of their
judgment to dealing with them we propose to examine the submissions of learned
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Counsel under that head also. On the footing that what was permitted to be levied by
Section 548(2) was a tax the submission of learned Counsel was, as already stated,
two-fold: (1) that in the case of devolution of legislative or quasi-legislative power to a
Municipal Corporation a different criteria for determining excessive delegation has to
be adopted and that having regard to the terms of Entry 5 of List II no conferment of a
power in favour of a municipality which is germane to municipal administration or local
self government can be held to be beyond the legislative power of the State., and (2)
that even if the above were not accepted, the Act itself laid down in sufficiently
definite terms the principles upon which the rate of fee was to be determined and
afforded sufficient guidance for its determination, that the provision did not suffer
from the vice of excessive delegation.
68. We shall deal with them in that order. For the submission under the first head,
Mr Pathak relied on two lines of reasoning based respectively on the terms of Entry 5
of List II of Schedule VII and on certain American decisions which he said supported
such a view.
Entry 5 reads:
“Local government, 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 and III, but even powers outside those Lists provided they were necessary for
the purposes of local self-government. It was suggested that having regard to the
great object of decentralisation of power which was achieved by setting up institutions
for the purpose of local self-government the Constitution had vested in the State
Legislatures complete and plenary powers necessary for effectuating the setting up of
such bodies and endowing them with the capacity to achieve their object. If Entry 5
was construed in this manner the conferment of power to tax by Section 548(2) of the
Act could not be challenged as unconstitutional.
69. To exaimne this argument closely it would be convenient to split it up into two
parts: (1) whether by reason of a provision for legislation as regards the “power” of
municipal corporations the rule as to unconstitutionality arising from excessive
delegation of legislative power becomes inapplicable, and (2) whether the powers
which were permitted to be conferred on municipal corporations extend beyond those
open to the State Legislatures themselves to exercise under the relevant entries in the
Seventh Schedule.
70. We shall take up the second question first. Learned counsel was driven to put
forward an argument vin this form that powers to be conferred upon municipal
corporations need not necessarily be confined to the legislative power of the State
Legislatures under other entries, because of the difficulty he experienced in sustaining
the plea that every fee for a written permission or for licence permitted by Section 548
(2) of the Act could be related to particular entries as to taxation which alone are
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permitted to the States by the distribution of legislative power under the Seventh
Schedule. For instance, it was pointed out during the course of the argument that the
purposes for which a written permission was necessary and a licence was required to
be taken embraced a wide variety of subjects and if Section 548(2) were held to
authorise the levy of a tax in respect of each of those activities for which a permission
was needed or a licence was required to be taken, it would not be possible to relate
such a tax to any of the taxation entries in List II, that is, Entries 45 to 63. Thus
Section 297 of the Act provides that without the written permission of the
Commissioner no private streets shall be constructed and under Section 548(2) a fee
may be charged 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 II.
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 Section 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…”
71. Similarly, restrictions are imposed in the interest of public health and sanitation
on the carrying on of certain trades which are specified in Schedule XVIII. The licence
fee levied to secure permission to carry on such an activity could not, on the scheme
of the Act, be called a tax on professions, trades, callings and employments referred to
in Entry 60 of List II. It was by reason of these difficulties that learned Counsel was
forced to make the submission relying on the words “powers” and “for the purpose of
self-government” in Entry 5. We consider that this submission is entirely without
force. In the first place, it could not be disputed, though learned Counsel did so
somewhat hesitantly at one stage, that the legislature cannot confer larger powers
upon a body which it creates than what it itself possesses. We should have considered
that this was too elementary for any elaborate exposition but for submission of counsel
in this case. The position is really incontrovertible. In the Western India Theatres Ltd.
v. Municipal Corporation of the City of Poona27 the learned Chief Justice speaking for
the Court said:
“In the first place, the power of the municipality cannot exceed the power of the
provincial legislature itself and the municipality cannot impose any tax, e.g. income
tax which the provincial legislature could not itself imposed”
If the State Legislature cannot confer a power upon the State Government it is not
easy to see how it could confer a wider power, which it could not otherwise exercise,
upon a municipality. Besides, it was not suggested that without a power being
conferred by the legislature in the Municipal Act, by the mere constitution of a
Municipality, the latter can lay claim to any inherent power either of local self-
government or as incidental thereto of a power to levy taxes and fees. If the powers of
a municipality are derived from legislation and if the legislature has not, under Article
246 of the Constitution read with the entries in the Legislative List which are relevant,
the authority to confer such a power it appears to us to be self-evident that the State
Legislature can confer no higher powers on the municipality than it has itself. If Mr
Pathak is right it would mean that though a State cannot levy income tax or impose
customs duties on imports and exports for the purpose of augmenting State Revenues,
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it can however confer power to levy these taxes 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.
72. The answer on behalf of the respondent to this submission was based upon two
grounds: (1) That Section 548(2) is really an exercise of legislative power under Entry
66 of List II 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 Section 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
elaboration, it would follow that the State legislature cannot authorise a municipal
body which it creates even though it be for the purpose of local self-government a
power higher than what it itself possesses. In this connection one cannot forget that
the government of the entire territory forming the State is vested in the State and
what the legislature cannot do for the purpose of the government of that area cannot
obviously be done by conferring powers upon a municipal authority, whose jurisdiction
extends to define limits in that territory.
73. It was next urged that the terms of Entry 5 were sufficient to clothe the State
Legislature with authority to endow municipal corporations at least with such powers
as they possessed on the date the Constitution came into force. We do not see any
legal basis for this argument. It would be noticed that Entry 5 in List II reproduces in
terms Entry 13 of List II of the Provincial Legislative List in Schedule VII to the
Government of India Act, 1935. If the argument had any validity it would follow that
one should go back not merely to the state of circumstances and the law as to
distribution of legislative power which prevailed under the Government of India Act
but to a period anterior thereto, namely before the 1st of April, 1937 when the
Government of India Act, 1935 itself came into force. At that time there was no
distribution of legislative power in the sense in which we have under the Government
of India Act and the Constitution. India was then under a unitary form of Government
the legislatures were not confined to enumerated powers and the distribution of
legislative power between the provinces and the centre was determined with a view to
administrative inconvenience and not on foot of an allocation of areas of exclusive
legislative competence. No legislation of a State Government which trenched on a
central subject was unconstitutional [See proviso to Section 80-A(3) introduced by the
Government of India Act, 1919]. No assistance therefore can be derived by reference
to the powers exercised by local authorities and municipal corporations at a time when
there was no distribution of legislative powers leading to unconstitutionality.
74. It is precisely because the Government of India Act made a change in this
respect that a provision was inserted in Section 143(2) of that Act by which taxes,
duties, cesses or fees which immediately 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
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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 Article 277 of the Constitution. If the submission of the learned
Counsel for the appellant is right, there would have been no need in Article 277, for a
reference to taxation by Municipal and other local bodies because on the argument the
State Legislature could validly confer upon a municipal corporation all powers which it
had enjoyed before including the power to impose taxes, notwithstanding that that
power is not in the State Legislative List.
75. As “power” could be conferred on a Municipal Corporation only by law, we
consider that the nature or quantum of power that could be vested by a law of the
State Legislature, cannot transcend the limitations prescribed by the Constitution on
the State legislature. In the context therefore of the law being one in relation to
municipal corporations, the State legislature can confer on the corporation created only
those powers which are within its legislative power and relevant to the topic.
76. Pausing here, it would be convenient to refer to the submission of Mr Naunit Lal
appearing for the Intervener who addressed us in further support of the appellant's
case. His argument was that Entry 5 was to be understood in the light of the
legislative practice which prevailed prior to the Constitution and he placed before us
the report of the Local Finance Enquiry Committee published in 1951 in which the
history of taxation powers exercised by municipal and other authorities from early
times has been traced. He also referred us to the provisions in several pre-and-post-
constitution enactments in which provision had been made enabling the municipal or
other local authorities to levy and collect taxes some of which, he stated, did not fall
within the State List or even within any of the three Lists. It is not necessary to
examine the details of the instances referred to by Learned Counsel. But assuming
learned Counsel is right in the illustration, it would not help him in the least. In the
first place, so far as legislative practice is concerned, it cannot prevail over the
limitations imposed by the distribution of legislative power in respect of post-
Constitution legislation such as the Act before us. What the legislature cannot be
directly by legislating and conferring power upon the State Government or the
instruments which it creates, it cannot obviously confer upon a municipal corporation
merely because it has authority to confer power upon a municipality in express terms.
The power to impose taxes which it cannot impose for the augmentation of the
revenues of the State it cannot manifestly confer upon a municipality or other organ of
a local self-government. Besides, as pointed out by Lord Tomlin in dealing with a
contention as to the meaning of the word “fisheries” in Sea coast and inland fisheries
in Section 91 of the British North America Act, 1867 in Attorney-General for Canada v.
Attorney-General for British Columbia28 :
“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 territory of India now embraces what were
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formerly the territory of ruling princes in which there were no limitations on the
powers which might be vested in Municipal bodies. It is not, therefore, possible to
refer to an uniform legislative practice prevailing before the Constitution to serve as a
guide for interpreting the legislative entries in the Constitution. That is so far as
reliance was placed on legislative practice.
77. We do not, therefore, consider that anything material turns on the use of the
word “powers” in Entry 5. Authority to confer power on institutions or bodies created
by legislation, to enable them to fulfil their purposes and achieve their objects is
implicit in every entry of conferring legislative power. Thus, for instance under Entry
47 of List 1 reading “Insurance” Parliament has created the Life Insurance Corporation
under the Life Insurance Corporation Act and has clothed it with sufficient powers to
enable it to function and carry out the purposes for which it was created. Similarly, by
legislation under the head ‘Banking’ the Reserve Bank Act has been enacted and the
Reserve Bank created with sufficient powers conferred upon it necessary to regulate
the functioning of the Banking system in the country. By legislation under the entry
‘Future markets’ (Entry 48 List I) the Forward Markets Commission has been created
and powers and duties vested in it. From these examples it would be clear that the
authority to confer power upon the bodies created by legislation is inherent in the
power to legislate on the topic. The express mention of an authority to confer power on
Municipal Corporations, therefore, introduces no novel principle or rule of construction
as regards the conferment of powers. The quantum of the power which a law could
bestow upon an institution or body of its creation is determined, firstly, by the view of
the legislature as to what are necessary for achieving the purposes for which the
institution or body is created and, secondly, by the over-all limitations imposed by the
Constitution by the distribution of legislative power. Nothing, therefore, turns on
whether the authority to confer “power” is express or is a necessary incident of
legislative power. If the very nature of a legislative power is such that the legislature
cannot delegate essential legislative functions the fact that the authority to confer
power is express not implicit makes no difference to the application of the principle. In
either event, as the law conferring power even when expressely authorised is a law,
the rule against excessive delegation, applies to it as much to cases where the
authority to confer power is implicit.
78. 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. Hennick29 . 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 the interposition
of the superior in cases of necessity”.
There are similar passages in judgments in other cases to which also our attention was
drawn. But we do not, however, see the appositeness of the American rule to the
interpretation of the Indian Constitution, particularly in the context of the criteria there
indicated. Besides the rule as to limits of delegation by the legislatures constituted in
India by the Constitution has been the subject of elaborate consideration by this Court
in the Delhi Laws Act case5 , and in the later decisions in Vasantlal Maghanbhai
Sanjanwala v. State of Bombay30 ; Jyoti Pershad v. Administrator for the Union
Territory of Delhi31 to mention a few and these decisions bind this Court. These
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decisions have not laid down that a different rule applies where the delegation of
legislative power is in favour of a municipal corporation. We, therefore, consider that
the analogy of the American decisions affords no guidance for the application of a
different rule as to what constitutes excessive delegation in the case of legislation
creating municipal bodies.
79. If then the same tests have to be applied to determine the limits of permissible
delegation of quasi legislative power whether the same be in favour of Municipal
bodies or in favour of other administrative agencies, the question next to be
considered is whether the Act affords sufficient guidance to the municipal authority for
the levying of the rate. The subject of the limits of the delegation of legislative power
has been the subject of consideration in several decisions of this Court including the
Delhi Laws case5 mentioned above. It is, however, sufficient to refer to a few of them.
As regards the principle itself we do not understand that there is any controversy. In
Vasant Lal Maganbhai Sanjanwala v. State of Bombay30 (supra) Subba Rao, J., though
he dissented from the judgment of the majority of the Court on the facts, summarised
the decisions of this Court on this topic, which Mr Pathak did not dispute correctly
states the law. He said at pp. 356-357 of the report:
“The law on the subject may be briefly stated thus: The Constitution confers a
power and imposes a duty on the legislature to make laws. The essential legislative
function is the determination of the legislative policy and its formulation as a rule of
conduct. Obviously it cannot abdicate its functions in favour of another. But in view
of the multifarious activities of a walfare 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
excutive; 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 courts to the extent of always trying to discover a
dormant or latent legislative policy to sustain an arbitrary power conferred on
executive authorities. It is the duty of this Court to strike down without any
hesitation any arbitrary power conferred on the executive by the legislature.”
The same principle was expressed in slightly, different language in Jyoti Pershad v.
Administrator for the Union Territory of Delhi31 at p. 145:
“In the context of modern conditions and the variety and complexity of the
situations which present themselves for solutions, it is not possible for the
Legislature to envisage in detail every possibility and make provision for them. The
Legislature therefore is forced to leave the authorities created by it an ample
discretion limited, however, by the guidance afforded by the Act. This is the ratio of
delegated legislation, and is a process which has come to stay, and which one may
be permitted to observe is not without its advantages. So long therefore as the
Legislature indicates, in the operative provisions of the statute with certainty, the
policy and purposes of the enactment, the mere fact that the legislation is skeletal,
or the fact that a discretion is left to those entrusted with administering the law,
affords no basis either for the contention that there has been an excessive
delegation of legislative power as to amount to an abdication of its functions, or
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that the discretion vested in uncanalised and unguided as to amount to a Carte

blanche to discriminate.”
80. The matter may possibly be stated more simply by adopting the language of
Bose, J. in Rajnarain Singh v. Chairman, Patna Administration Committee, Patna6 “is it
the delegation of essential legislative power”, or unessential details the principle being
that if the legislature lays down a policy, prescribes the standards and affords
sufficient guidance to the rule making or subordinate legislative authority it is a proper
delegation, but not if the legislature confers on the subordinate law making authority
powers to determine its own policy without any guidance in that regard. In the one
case it would be a canalised power and in the other uncanalised and would amount, in
effect, to transferring its basic power to another body.
81. If the validity of Section 548(2) of the Act be judged by this test, the questions
that arise 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. State of Madhya Pradesh7 was concerned with the constitutional validity of a
provision in the C.P. & Berar Sales Tax Act, 947 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 of the Report and reads:
“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. 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.”
As to the meaning of the words “such as…. the rates at which it is to be charged in
respect of different classes of goods” there was controversy before us. Mr Pathak
submitted that this was an explicit decision holding that the determination of a rate at
which a tax might be levied was not an essential legislative function. On the other
hand, Mr De urged that the emphasis in the passage was really on “different classes of
goods” — and not on the determination of a rate simpliciter and in support pointed out
that the three decisions from which the principles underlying the passage noted above
was extracted did not support such a wide proposition. The three decisions relied on
for the proposition were — one of the Privy Council, one of this Court and one of the
United States Supreme Court. In all those cases the amount of the rate had been
prescribed by the legislature and the delegation to the external authority — the
Government or the President in the United States, was merely the determination of
certain external facts for rendering the tax applicable to the commodity. This in Powell
v. Apollo Candle Company, Limited8 the rate of the custom duty was laid down by an
enactment of the New South Wales Legislature. Section 133 of the Customs Act
enacted:
“Whenever any article possesses, in the opinion of the collector, properties in the
whole or in part which can be used for a similar purpose as a dutiable article, the
Governor is authorised to levy a duty upon such article at a rate to be fixed in
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proportion to the degree in which such unknown article approximates in its qualities
or uses to such dutiable article”.
Candles were expressly named in the Act as subject to the rate of duty specified and
on the application of the Collector the Governor, by an order in Council notified
“stearine” as liable to a similar duty. It is in that context that the Privy Council stated
in a passage which is extracted in the judgment of this Court:
“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 who they consider proper and with
reference to such income as they might choose to tax. This illustration — of what his
argument would lead to — was put to Mr Pathak but his only answer was that that was
not the case before us.
82. The second case that Mr Pathak referred to was the Western India Theatres Ltd.
v. Municipal Corporation of the City of Poona11 . Section 59 of the Bombay District
Municipalities Act, 1901 empowered municipalities to impose for the purpose of the
Act certain taxes. By the first ten entries in sub-section (1) particular taxes were
specified and this was followed by a general head reading “any other tax”. The second
sub-section of Section 59 read:
“Nothing in this section shall authorise the imposition of any tax which the State
Legislature has no power to impose in the State under the Constitution”.
The Municipal Corporation of Poona imposed a tax after following the procedure
prescribed by the Municipal Act on theatres within the city of Rs 2 per day as a licence
fee. This tax was imposed from October 1, 1920 and there was enhancement of this
tax in 1941 and 1948. It was the constitutional validity of this levy which came from
pre-Constitution times that was challenged by a civil suit filed in the Bombay High
Court by the appellant-company. Several points were urged in support of this
contention. The first was that the Provincial Legislature under the Government of India
Act, 1935 did not itself have the power to levy the said tax; (2) that the residuary
category set forth in clause 11 “any other tax” was unconstitutional, the point urged
being that thereby “the legislature had completely abdicated its function and
delegated essential legislative power to the municipality to determine the nature of
the taxes to be imposed on the rate payers. Such omnibus delegation could not, on
the authorities, be supported as constitutional”. The grounds upon which this second
argument was rejected was the main point on which Mr Pathak relied in support of this
case. These were (1) that the taxes authorised to be imposed were taxes “for the
purposes of the Act” i.e. taxes could be raised only for implementing the purposes for
which the municipality was constituted and for no other purpose, (2) Though strictly
speaking the rule as to ejusdem generis could not be invoked, the kind and the nature
of the tax which the municipality was authorised to impose were indicated by the
specified Items 1 to 10, (3) that 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
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viz. 1901, meant the Governor-in-legislative 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.
83. 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-section (2) of Section 59 as well as 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 11 of Section 59(1) the municipality might levy an
income tax. It was this extreme contention that was answered and rejected by the
learned Judges. This was, in a sense, negative as it marely prevented the municipality
from levying particular kinds of taxes. Coming to the positive aspect, the learned
Judges held that the other specified items of taxes coupled with the purposes for
which tax was to be levied, indicated the nature of the tax that was to be levied. We
are unable to agree that this case decides that the fixation of a rate of tax is not an
essential legislative function but a mere matter of detail which could be delegated to a
subordinate law making body.
84. The last of the decisions relied on in this connection was in Vasantlal v. State of
Bombay12 . It was not a case regarding the determination of a rate at which tax could
be levied but of the rent which a tenant might be required to pay under the Bombay
Tenancy and Agricultural land Act, 1948. Section 6(2) of that Act enacted:
“The Provincial Legislature may, by notification in the Official Gazette, fix a lower
rate of maximum rent payable by the tenants of lands situate in any particular area
or may fix such rate on any other suitable basis as it thinks fit”.
By a notification issued under that section the Government of Bombay prescribed the
rate of rent and this was much lower than the one previously fixed. By petitions under
Article 226 filed in the High Court of Bombay the appellants who were landholders
challenged the constitutionality of this fixation on the ground that the legislature had
delegated its essential legislative function without laying down policy or principles
affording guidance to the delegates for implementing the legislation. This Court, by a
majority, answered this question in the negative. The decision proceeded on the basis
that the fixation of rent was an essential legislative function. It was, however, held
that the legislature had enunciated the principles subject to which the delegates could
exercise its subsidiary powers. Gajendragadkar, J. as he then was, observed:
“The extent to which delegation is permissible is also now well settled. The
legislature cannot delegate its essential legislative function in any case. It must lay
down the legislative policy and principle and must afford guidance for carrying out
the legislative policy laid down before it delegates its subsidiary power in that
behalf”.
The enunciation of the principle in this manner does not help Mr Pathak. His
contention, however, was that in Section 6(2) extracted earlier, no policy had been
laid down but that this Court had upheld the constitutional validity of that delegation.
A close examination of the decision, however, does not support this submission. The
basic reasoning on which that decision rests is that for fixation of a reasonable rent
under Section 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 Section 6(2) had to be effected on the same basis and
with reference to the same factors which were specified in Section 12(3) of the Act. It
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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 Section 62(2) and
the power of fixation of fair rent conferred on the Mamlatdar by Section 12 that there
was the difference of opinion between the learned Judges. It would, therefore, be seen
that far from Vasantlal case being an authority for the position that the fixation of a
rate of rent is not an essential legislative function but a mere matter of detail which
could be left wholly to the executive or subordinate law making authority, the decision
clearly lays down that it is an essential legislative function and it could not be
delegated without sufficient guidance.
85. There were a few other decisions which were referred to by the learned counsel
on the question of excessive delegation but the principles laid down there are general
ones and related to the particular point about the fixation of rates. We do not,
therefore, consider it necessary to refer to or to deal with them. The final result of this
analysis of the decisions as laying down the law so far as the Constitution is
concerned, may be thus summarised: (1) Essential legislative functions cannot be
delegated but where the law lays down the principles and affords guidance to the
subordinate law making authority details may be left for being filled up by the
executive or by other authorities vested with quasi-legislative power, (2) The power 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 or unconstitutional.
86. This leads us to the last of the points urged by Mr Pathak that the Act itself
affords sufficient guidance and fixes standards by which it could determine the rate at
which a tax could be levied. It is not, and cannot be disputed that the guidance could
be afforded not merely by the provision enabling the tax to be levied but by other
provisions of the Act including the preamble. But the question is whether there are
any such provisions in the Act which could serve to determine the standard upon
which the rate of tax to be levied is to be determined. Mr Pathak first referred us to the
preamble where it is recited that the Act enacted was one relating to the municipal
affairs of Calcutta. We are unable to see how this affords any assistance in this regard.
He next referred us to Section 24 reading, to quote the material words:
“Subject to the provisions of this Act and the rules, bye-laws and regulations
made thereunder the municipal government of Calcutta shall vest in the
Corporation”.
and to Sections 42 to 47 which deal with the supervision of the State Government over
the affairs and activities of the Corporation. As regards Section 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 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
that is not the sense in which the word “government” is employed in Section 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
Act. Nor are we able to appreciate how any assistance is derived in this regard from
the powers of supervision which the State Government has over municipal affairs
under Sections 32 to 47. The supervision is only by the Executive Government and the
question relating to the vice of excessive delegation is as much applicable to powers
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exercisable by the Executive Government as to the Corporation. 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. As was pointed
out by this Court in Jyoti Pershad v. Administrator for the Union Territory of Delhi31
though in a slightly different context speaking of an appeal provided against orders of
an authority where it was complained that an arbitrary power had been vested in the
original authority:
“If learned counsel is right in his submission that the power of the ‘competent
authority’ is unguided and that he had an unfettered and arbitrary, authority to
exercise his discretion ‘at his sweet-will and pleasure’ the existence of a provision
for appeals might not impart validity to such legislation. The reason for this is that
the appellate power would be subject to the same vice as the power of the original
authority and the imposition of one ‘sweet-will and pleasure’ over another of a lower
authority, would not prevent discrimination or render the restriction reasonable”.
87. Principal reliance, however, was placed by learned counsel on Sections 115 and
117 of the Act as affording the requisite guidance. These read:
Section 115: there be one Municipal Fund held by the Corporation in trust for the
purposes of this Act to which all moneys realised or realisable under this Act (other
than fine levied by Magistrates) and all moneys otherwise received by the
Corporation shall be credited.
Section 117(1) The moneys from time to time credited to the Municipal Fund
shall be applied in payment of all sums, charges and costs necessary for carrying
out the purposes of this Act, or of which the payment is duly directed or sanctioned
by or under any of the provisions of this Act.
(2) 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.”
88. Reference was also made in this connection to Section 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 expenditure 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
Orissa Ceramic Industries Ltd. v. Executive Officer, Jharsuguda Municipality32 where
reference is made to these very provisions as affording sufficient guidance to enable a
power to fix the rate being delegated to a municipal authority. We do not consider that
Sections 115 and 117 afford any guidance for the fixation of a rate. If the amount of
money which a municipality needs for discharging its functions, affords any guidance
it would appear to follow that the needs of a State for the expenditure which it has to
incur for its manifold activities and again of the Union for the activities which it might
undertake ought to afford sufficient guidance to sustain the validity of a skeleton
legislation of the type we have indicated earlier. Thus, if learned Counsel is right in his
submission as regards Sections 115 and 117 read with Section 126 as affording
sufficient guidance a legislation by a State Legislature or Parliament enacting that the
Government might raise such taxes as it considers necessary and at such rates as it
might consider proper for meeting the expenditure of Government could be
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constitutional and there would be no need for a parliamentary scrutiny and legislation
as regards the rates of the several taxes to be levied within the State or the Union, as
the case may be. As Mr Pathak himself realised, this would be plainly unsupportable. If
this were so, merely because the area of Government was restricted to a municipality
we do not consider how these provisions afford guidance to the subordinate law
making authority viz. the Municipal Corporation to fix the rate of the levy. Pausing
here, learned Counsel said that even if a maxima were prescribed still it left an
amount of discretion to the Municipal Corporation or the Executive, as the case may
be, and that even such a “guided” power could be attacked as ultra vires. This,
however, does not follow. The unconstitutionality arises out of the discretion being
wholly uncanalised and unguided. The argument on the other side is not that no
discretion could be left to the legislature to determine within permissible limits the
precise rate that would secure the purpose which it seeks to achieve but rather that no
guidance is at all afforded and a blank cheque given to the subordinate authority.
Where a maxima is fixed and the limit of discretion is thus controlled the legislature
has exercised its legislative power on that topic viz. the particular tax. In the other
case, where it merely authorises the subordinate law making authority to levy the tax
without indicating the essential legislative features of such a tax it is not really
legislation on the taxation entry but is merely authorising the subordinate legislature
to enact a law on that topic. If these provisions, referred to earlier, do not afford any
guidance to the Municipal Corporation to fix the rate of the levy it was not suggested
that there were any others in the Act which performed that function. Sections 443 and
548(2), it is admitted, do not afford any help for this purpose. It has, therefore, to be
held that, viewed as a tax, the delegation is unconstitutional as the essential
legislative functions are parted with to the subordinate law making body and the
provision is, therefore, unconstitutional.
89. The result is, the appeal fails and is dismissed with costs.
90. In accordance with the majority judgment, the appeal is allowed with costs
throughout.
———
*Appeal from the Judgment and Order dated 26th July, 1961 of the Calcutta High Court in Appeal from Original
Order No. 67 of 1959

1 (1938) AC 708
2 (1954) SCR 1005
3 (1963) Supp 2 SCR 302
4 (1961) 2 SCR 537
5 (1951) SCR 747
6
(1955) SCR 290, 301
7 (1959) SCR 427
8 AC 282
9 3 STC 367
10 72 Led 624
11 (1959) Supp 2 SCR 71
12 (1961) 1 SCR 341

13 (1960) 2 SCR 627

14 (1955) 1 SCR 380
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15
(1958) SCR p 1422 at pp 1947-80
16 60 CIR 263
17
(1954) SCR 1046
18 (1954) SCR 1055
19 (1950) AC 87
20 (1954) SCR 873
21 (1939) FCR 18

22 5 Rangoon 212
23 AIR 1930 Mad 55
24 1931 Mad 496

25 vide Anem Pedda Sivaparvatamma v. Executive Officer, Berhampur Municipalityand, AIR 1957 Orissa 285
26 AIR 1954 All 675
27 (1959) 2 Supp SCR 71 at p. 75

28 1930 AC 111 at p. 121

29 129 US 142 : 32 LE 637
30 (1961) 1 SCR 341

31 (1962) 2 SCR 125

32 AIR 1963 Orissa 171

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