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CASE NO.: Appeal (civil)  5631 of 2000

PETITIONER: Calcutta Municipal Corporation & Others

RESPONDENT: M/s Shrey Mercantile Pvt.Ltd.&Others

DATE OF JUDGMENT: 09/03/2005

BENCH: S.N. VARIAVA & Dr. AR. LAKSHMANAN & S.H. KAPADIA

JUDGMENT: J U D G M E N T

WITH

CIVIL APPEAL No.6121 OF 2000

State of West Bengal                            \005Appellant    

Versus

M/s Shrey Mercantile Pvt. Ltd. & Others \005Respondents

AND

CIVIL APPEAL No.412 OF 2001  

Calcutta Municipal Corporation & Others \005Appellants   

Versus

M/s Avenue Properties (P) Ltd. & Anr.   \005Respondents

KAPADIA, J.

       The short question which arises for determination in  these civil appeals by grant of special leave by Calcutta  Municipal Corporation  is \026 whether the imposition for the  process of change in the name of the owner in the assessment  books of the corporation is in the nature of  "a fee" or  "tax".

       For the sake of convenience, we refer to the facts of Civil  Appeal No.5631 of 2000.   

       Premises bearing No.9A, Jatindra Mohan Avenue,  Calcutta - 700 006 belonged to Tapas Ghosh, Meenakshi Sinha  and Gayatri Chandra.  By several deeds of conveyance, they  sold the said premises to M/s Shrey Mercantile (P) Ltd., M/s  Drishti Mercantile (P) Ltd. and M/s KIC Resources Ltd.  (hereinafter referred to as "the developers").  The building in  the premises was very old and was in a dilapidated  condition.  The developers decided to construct a new  building after demolishing the existing old structure.  The  developers submitted the building plan for sanction which  the corporation refused to accept without the names of the  developers being brought on record by way of mutation.  On  21.3.1997, the developers applied for mutation by deletion of

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the names of the previous owners and substitution of their  names for which the corporation demanded mutation fees of  Rs.3 lacs under Calcutta Corporation (Taxation) Regulations,  1989.  This demand was challenged by filing of writ petition in  the Calcutta High Court.  

       The Calcutta Municipal Corporation (Amendment) Act,  1988 was passed by the State Legislature, which was published  in the gazette on 9.1.1989 and which came into effect from  20.2.1989.  Section 7 of the Amendment Act (XXI of 1988)  provided as under: "Section 7.     Amendment of Section 183 \026 In sub- section 183 of the Principal Act \026  

(1)     after the words "Under this Section", the  words "and upon payment of such fees as  may be determined by regulation" shall be  inserted, and

(2)     the words "in such form and in such manner  as may be prescribed" shall be omitted."         In terms of the aforestated Amendment Act, the  corporation made Calcutta Corporation (Taxation) Regulations,  1989, in purported exercise of the powers conferred by section  602 read with section 183(5).  The said regulations inter alia  provided that fees for recording of transfer or devolution of title  of any land or building under section 183 shall be as per the  schedule reproduced hereunder: "SCHEDULE

       1)      In the case of transfer/agreement for sale or cost of  acquisition or in the case where there is certificate or in the case  of testamentary succession\027

Amount of fee in rupees (a) If the price/value of the property  declared does not exceed rupees  fifty  thousand.

0.5% of the price/value (b) Where such price/value exceeds  rupees fifty thousand but does  not exceed rupees one lakh.

1% of the price/value. (c) Where such price/value exceeds  rupees one lakh but does not  exceed rupees three lakh.

1.5% of the price/value. (d) Where such price/value exceeds  rupees three lakhs but does not  exceed rupees five lakhs.

2% of the price/value. (e) Where such price/value exceed  rupees five lakhs. 2.5% of the price/value.

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       (2)     In the case of transfer by a deed of lease/sub- lease/assignment or such other similar instrument, the amount  to be paid will be at the same rates as at (1) above, on the value  shown in the document for Stamp Duty:

       Provided that in calculating the amount of fee to be paid  under (1) or (2) above any fraction of a rupee amounting to fifty  paise or more shall be rounded off to the nearest rupee.

       (3)     In the case of intestate succession\027

Amount of fee (a) If the last decided annual  valuation does not exceed rupees  three thousand.

Rs.25 (b) If such valuation exceeds rupees  three thousand but does not  exceed rupees six thousand.

Rs.50 (c) If such valuation exceeds rupees  six thousand but does not exceed  rupees ten thousand.

Rs.100 (d) If such valuation exceeds rupees  ten thousand but does not exceed  rupees fifteen thousand.

Rs.200 (e) If such valuation exceeds rupees  fifteen thousand Rs.250

4 In case of thika tenant/hut owner  in a Bustee hut premises. Rs.20"

                In the writ petition, the developers pleaded that the said  regulations in the guise of imposing "a fee" had in fact imposed  a tax without sanction of law; that the impost was on ad  valorem basis and not in commensuration with the expenses  incurred by the corporation in rendering the alleged services;   that prior to the amendment of section 183 by Act XXI of 1988,  no fee was imposed for mutation; that after the amendment and  framing of the aforestated regulations, enormous amounts were  sought to be levied on ad valorem basis in the case of mutations  consequent upon inter-vivos transfers vis-a-vis mutations on  account of intestate successions where fees were charged at a  flat rate, particularly when the functions performed by the  corporation with regard to the mutations remained the same.   That, whether the property was valued below Rs.50,000/- or  whether it was valued above Rs.2 lacs, the function of the

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corporation with regard to mutation was the same.  It was  further averred that whatever may be the cause of mutation,  whether it is because of transfer or change of ownership due to  succession or otherwise, the function of the corporation in the  matter of mutation remained the same and even the expenses, if  any, incurred by the corporation in performing such functions  did not vary, whatever may be the value of the property or the  cause of mutation.  It was further averred in the writ petition  that under the provisions of the Act, the owner was primarily  responsible to the corporation to pay the consolidated rate and,  therefore, it was necessary for the corporation for the purposes  of recovery of consolidated rate to maintain records relating to  the ownership of the premises including the name and address  of the owner who was liable to pay the consolidated rate.   Further, the corporation was required to maintain municipal  assessment book under section 191 containing the particulars of  the premises, the names and addresses of the owners and the  annual value of the premises and, therefore, in order to keep  track of the persons liable to pay the tax, it was necessary to  record the change in the ownership to facilitate the recovery of  taxes and, therefore, the corporation was not providing any  special civic service to the citizens.  In the circumstances, there  was no justification for levy of so called "fees".  Further, the  said levy was on ad valorem basis which circumstance  indicated that in the garb of fees, the corporation purported to  levy and recover taxes which it was not authorized to do under  section 183(5) of the 1980 Act.  Moreover, the aforestated  Taxation Regulations were also challenged as arbitrary,  irrational, unjustified and discriminatory on the ground that the  corporation had no authority to charge different rates depending  on the cause of transfer and value of the property, particularly  when the act of mutation was the same, be it transfer or  devolution of right, title and interest by way of testamentary or  intestate succession.   

       By judgment and order dated 31.1.2000, the learned  Single Judge, held, that mutation was the process of change of  name of the owner in the books of the corporation; that the  impugned regulations had failed to satisfy the requirement of  quid pro quo; and that the corporation was not justified in using  its power to levy fees on mutation by charging large sums  which partake of the character of taxation.  According to the  learned Judge, a bare look at the schedule of the regulations  shows that in the garb of imposition of mutation fees, the  corporation has done nothing other than to impose a tax.   Accordingly, the writ application was allowed.   

       Aggrieved by the aforestated judgment of the learned  Single Judge, the matter was carried in appeal by the  corporation to the Division Bench.  According to the impugned  judgment of the Division Bench, the essential purpose of  section 183 was to mutate somebody’s name; that no other  service of any kind whatsoever was rendered to the rate-payers;  that under section 183(5). mutation fee was merely to be  prescribed by regulations and not to impose a tax in the garb of  fees; that no such delegation was ever made in favour of the  corporation;  that the rate of levy on ad valorem basis itself  indicated that the levy was in the nature of a tax; that the  different rates prescribed for mutation in the case of transfers  vis-a-vis intestate succession indicated that the levy was a tax  and not a fee; that the said provision was not for the benefit of  the owner of the premises but it was for statutory compliance,  failure to comply wherewith was to attract penal consequences;  that no benefit was conferred on the rate-payers and on the  contrary, the said provision was for the benefit of the

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corporation; that the nature of the services rendered to the rate- payers for mutation had no connection with the quantum of fees  sought to be levied; that the fee was neither regulatory nor  compensatory; and that the impugned regulations were  discriminatory inasmuch as the purchasers were subjected to a  higher fee than those who got the ownership of property by way  of intestate succession, wholly overlooking the fact that both  these groups for all practical purposes of taxation constituted  one class by themselves.  Accordingly, the impugned  regulations were held to be arbitrary and violative of articles 14  and 246 of the Constitution.           Mr. Tapash Ray, learned senior advocate appearing on  behalf of the appellant submitted that numerous services were  rendered by the corporation under the Act to the citizens, for  which it needed funds.  It was urged that the difference between  a fee and a tax based on quid pro quo which once existed is  now almost irrelevant as a test and, therefore, the High Court  had erred in holding that mutation fee was bad on account of  absence of quid pro quo.  He submitted that the law as it stands  today no longer requires nexus between the service rendered  and the fee charged.  He submitted that even otherwise for the  purposes of ascertaining the quid pro quo, it was incumbent  upon the High Court to consider various obligatory and  discretionary functions of the corporation as laid down in  sections 29 and 30 of the Act and the spending of mutation fees  so collected.  He submitted that the fees collected were applied  to meet obligatory and discretionary functions and, therefore,  the requirement of quid pro quo was satisfied.  He submitted  that with the collection of fees and taxes, the corporation was  able to meet a fraction of its expenses which were needed for  the owners and occupiers of a building and, therefore, the High  Court had erred in holding that the imposition was in the nature  of a tax and not a fee, for want of quid pro quo.  Learned  counsel further submitted that a tax and a fee are both  compulsory exaction of money by public authorities and a levy  in the nature of a fee does not cease to be of that character  merely because it does not have a direct relation to the actual  service rendered by the authority to each individual who obtains  the benefit of the service.  The element of quid pro quo,  according to the learned counsel, was not always a sine qua non  for a fee nor is the element of quid pro quo necessarily absent  in every tax.  According to the learned counsel, the purchasers  of land and building belong to a separate class from persons  who inherit property under a testamentary disposition or by way  of intestate succession; that these persons constitute different  classes/categories and, therefore, there was no violation of  article 14 of the Constitution in the matter of levy of mutation  fees at different rates from different categories of persons.  In  the circumstances, it was submitted that the levy of mutation  fees by the corporation was in the nature of "a fee" in terms of  section 183(5) and, therefore, the corporation was entitled to  prescribe mutation fees which it has done under the above  Regulations and, therefore, there was no violation of articles 14  and 246 of the Constitution.  

       Shri Pradip Kumar Ghosh, learned senior counsel  appearing on behalf of the original petitioners submitted that  although mathematical precision is not accepted in the matter of  correlation between the service rendered and the imposition, the  law as it stands today certainly requires an imposition in the  nature of fees to be based on rendition of service; that no charge  can be levied as a fee without any correlation between the  amount of levy and the cost of any service; that in the present  case, the corporation in the matter of taxation was duty bound

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to maintain assessment record containing names of the  occupiers, names of the owners, description of the property,  annual value etc. and as a matter of taxation, the corporation  had to maintain up to date record in order to facilitate  expeditious recovery of taxes from the existing  owners/occupiers.  According to the learned counsel, mutation  was the process for change in the name of the owner in the  assessment books of the corporation and, therefore, no service   of special kind was rendered to the rate-payers in the making of  mutation entry in the assessment books of the corporation; that  the corporation was not rendering any extra service to rate- payers in the matter of mutation  which was a part of taxing  process under the Act; that there was total absence of quid pro  quo; that the levy was discriminatory as the incidence thereof  was unequal on the persons falling within the same class; that  there was no rational reason for imposing higher rate on  purchasers vis-‘-vis persons who became owners by way of  intestate succession; that the levy based on ad valorem basis  itself indicated that the corporation was trying to recover taxes  in the garb of fees which it was not authorized to do and,  therefore, the levy was ultra vires articles 14 and 246 of the  Constitution.  In the circumstances, it was submitted that no  interference was called for in the impugned judgment of the  High Court.

       The Calcutta Municipal Corporation Act was enacted on  28.12.1981 to amend and consolidate the law relating to  municipal affairs of Calcutta.  Chapter IV deals with power and  functions of the municipal authorities and the officers of the  corporation. Section 29 deals with obligatory functions of the  corporation and it lays down that the corporation shall having  regard to the available resources provide civic services  including water supply, sewerage and drainage to the rate- payers.  One of the functions mentioned in section 29(z) is to  compile and maintain records relating to the administration and  functions of the corporation under the Act.  Section 30 deals  with discretionary functions of the corporation.  Section 32  deals with authentication of the orders of the corporation.  Part- III deals with Finance.  Chapter VIII which falls in part-III  refers to the setting up of the municipal fund in five accounts,  namely, water-supply account, road development and  maintenance account, general account etc.  Chapter XII deals  with taxation.  Under section 170, the corporation is  empowered to levy a consolidated rate on lands and buildings.   Under section 170(2), the levy, assessment and collection of  taxes mentioned in section 170(1) is required to be done in  accordance with the provisions of the Act and the rules made  thereunder.  Section 174 deals with determination of annual  valuation.  Section 178 deals with municipal assessment code.   Section 179 deals with periodical assessment of lands and  buildings situated in any ward of the corporation.  Section 180  deals with revision of assessment.  Section 181 deals with  submission of returns for purposes of assessment.  Under the  said section, the municipal commissioner is authorized to call  upon any person primarily liable for payment of consolidated  rate of land or building to give such particulars as may be  required to determine the annual value of such land or building.   Section 182 deals with the submissions of returns for purposes  of revision in the annual value of land and building.  Section  183 is the section which deals with notice of transfers.  Under  section 183(1), whenever the title of any person to any land or  building is transferred, such person, if primarily liable for the  payment of consolidated rate on such land or building, and the  transferee to whom the title is transferred shall within the  stipulated period give notice of such transfer to the municipal

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commissioner.  Under section 183(2) in the event of the death  of any person primarily liable, the transferee, on whom the title  devolves, is required within the stipulated period to give notice  of such devolution to the municipal commissioner.  Under  section 183(4), if the transferor fails to give notice, he is made  liable to penalty.  Further, he is also made liable for payment of  consolidated rate on such land or building till he gives such  notice to the municipal commissioner.  Under section 183(5), it  is further provided that the municipal commissioner shall on  receipt of such notice of transfer or devolution of title record  such transfer or devolution in the assessment book subject to  payment of such fees as may be determined by the regulations.   Section 185 deals with amendment of assessments.  Section 186  deals with objections against valuation of assessment.  Section  192 deals with amendment of municipal assessment book by  insertion therein of the name of any person whose name ought  to have been inserted or by striking out the name of any person  not liable for payment of consolidated rate.  Under section 602  of the Act, the corporation is empowered to make regulations  not inconsistent with the provisions of the Act for discharging  functions under the Act.

       In exercise of the power conferred under section 602 read  with section 183(5), the corporation with the approval of the  State Government framed the following regulations called  Calcutta Municipal Corporation (Taxation) Regulations, 1989,  which are reproduced hereinbelow:  "REGULATIONS

       1.      (a)     These regulations may be called "The  Calcutta Municipal Corporation (Taxation) Regulations, 1989".

               (b)     They shall come into force on the date of  their publication in the Official Gazette.  

       2.      In these regulations, unless the context otherwise  requires the "Act" means the Calcutta Municipal Corporation  Act, 1980 (West Ben, Act LIX of 1980) and the other terms and  expressions used herein and not defined shall have the same  meaning as in the Act.

       3.      Fees for recording of transfer or devolution of title  of any land or building under sub-section (5) of section 183 of  the Act shall be as per Schedule below:-

SCHEDULE

       1)      In the case of transfer/agreement for sale or cost of  acquisition or in the case where there is certificate or in the case  of testamentary succession\027

Amount of fee in rupees (a) If the price/value of the property  declared does not exceed rupees  fifty  thousand.

0.5% of the price/value (b) Where such price/value exceeds  rupees fifty thousand but does  not exceed rupees one lakh.

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1% of the price/value. (c) Where such price/value exceeds  rupees one lakh but does not  exceed rupees three lakh.

1.5% of the price/value. (d) Where such price/value exceeds  rupees three lakhs but does not  exceed rupees five lakhs.

2% of the price/value. (e) Where such price/value exceed  rupees five lakhs. 2.5% of the price/value.

       (2)     In the case of transfer by a deed of lease/sub- lease/assignment or such other similar instrument, the amount  to be paid will be at the same rates as at (1) above, on the value  shown in the document for Stamp Duty:

       Provided that in calculating the amount of fee to be paid  under (1) or (2) above any fraction of a rupee amounting to fifty  paise or more shall be rounded off to the nearest rupee.

       (3)     In the case of intestate succession\027

Amount of fee (a) If the last decided annual  valuation does not exceed rupees  three thousand.

Rs.25 (b) If such valuation exceeds rupees  three thousand but does not  exceed rupees six thousand.

Rs.50 (c) If such valuation exceeds rupees  six thousand but does not exceed  rupees ten thousand.

Rs.100 (d) If such valuation exceeds rupees  ten thousand but does not exceed  rupees fifteen thousand.

Rs.200 (e) If such valuation exceeds rupees  fifteen thousand Rs.250

4 In case of thika tenant/hut owner  in a Bustee hut premises.

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Rs.20"

       The central point in the entire controversy is \026 whether  the impugned imposition is in the nature of a "fee" or a "tax".

       According to "Words & Phrases", Permanent Edition,  Vol. 41 Page 230, a charge or fee, if levied for the purpose of  raising revenue under the taxing power is a "tax".  Similarly,  imposition of fees for the primary purpose of "regulation and  control" may be classified as fees as it is in the exercise of  "police power", but if revenue is the primary purpose and  regulation is merely incidental, then the imposition is a "tax".   A tax is an enforced contribution expected pursuant to a  legislative authority for purpose of raising revenue to be used  for public or governmental purposes and not as payment for a  special privilege or service rendered by a public officer, in  which case it is a "fee".  Generally speaking "taxes" are  burdens of a pecuniary nature imposed for defraying the cost of  governmental functions, whereas charges are "fees" where they  are imposed upon a person to defray the cost of particular  services rendered to his account.   

       In the case of State of West Bengal v. Kesoram  Industries Ltd. reported in [(2004) 10 SCC 201], the  Constitution Bench of this Court while differentiating between  the "power to regulate" and "power to tax" observed: "108.   It is of paramount significance to note the  difference between "power to regulate and  develop" and "power to tax".

109.    The primary purpose of taxation is to collect  revenue.  Power to tax may be exercised for the  purpose of regulating an industry, commerce or  any other activity; the purpose of levying such tax,  an impost to be more correct, is the exercise of  sovereign power for the purpose of effectuating  regulation though incidentally the levy may  contribute to the revenue.  Cooley in his work on  taxation (Vol.1, 4th Edn., 1924) deals with the  subject in paras 26 and 27:

       "There are some cases in which levies  are made and collected under the general  designation of taxes, or under some term  employed in revenue laws to indicate a  particular class of taxes, where the  imposition of the burden may fairly be  referred to some other authority than to that  branch of the sovereign power of the State  under which the public revenues are  apportioned and collected.  The reason is  that the imposition has not for its object the  raising of revenue but looks rather to the  regulation of relative rights, privileges and  duties as between individuals, to the  conservation of order in the political society,  to the encouragement of industry, and the  discouragement of pernicious employments.   Legislation for these purposes it would seem  proper to look upon as being made in the  exercise of that authority which is inherent  in every sovereignty, to make all such rules  and regulations as are needful to secure and  preserve the public order, and to protect

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each individual in the enjoyment of his own  rights and privileges by requiring the  observance of rules of order, fairness and  good neighborhood, by all around him.  This  manifestation of the sovereign authority is  usually spoken of as the police power.  The  power to tax must be distinguished from an  exercise of the police power." [State v.  Tucker \026 56 SC 516 : 35 SE 215].

The police power "is a very different one from the  taxing power, in its essential principles, though the  taxing power, when properly exercised, may  indirectly tend to reach the end sought by the other  in some cases".  (p.94)  "The distinction between a  demand of money under the police power and one  made under the power to tax is not so much one of  form as of substance." (p. 95).  The distinction  between a levy in exercise of police power to  regulate and the one which would be in the nature  of tax is illustrated by Cooley by reference to a  licence.  He says:

"So-called license taxes are of two kinds.   The one is a tax for the purpose of revenue.   The other, which is, strictly speaking, not a  tax at all but merely an exercise of the police  power, is a fee imposed for the purpose of  regulation." (p.97)

*       *       *                  "Suppose a charge is imposed partly for  revenue and partly for regulation.  Is it a tax or an  exercise of the police power?  Other considerations  than those which regard the production of revenue  are admissible in levying taxes, and regulation may  be kept in view when revenue is the main and  primary purpose.  The right of any sovereignty to  look beyond the immediate purpose to the general  effect neither is nor can be disputed.   The  Government has general authority to raise a  revenue and to choose the methods of doing so; it  has also general  authority over the regulation of  relative rights, privileges and duties, and there is  no rule of reason or policy in the Government  which can require the legislature, when making  laws with the one object  in view, to exclude  carefully from its attention the other.   Nevertheless, cases of this nature are to be  regarded as cases of taxation.  If revenue is the  primary purpose, the imposition is a tax.  Only  those cases where regulation is the primary  purpose can be specially referred to the police  power.  If the primary    purpose  of the legislative  body in imposing the charge is to regulate, the  charge is not a tax even if it produces revenue for  the public". (Cooley, ibid., pp.98-99)

110.    This Court in a seven-Judge Bench decision  in Synthetics and Chemicals Ltd. v. State of U.P.  [(1990) 1 SCC 109] agreed  that regulation is a  necessary concomitant of the police power of the   State.   However, it was an American doctrine and  in the opinion of the Court it was not perhaps

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applicable as such in India.  The Court endorsed  recognizing the power to regulate as a part of the  sovereign power of the State exercisable by the  competent legislature.  Brushing aside the need for  discussion on the question, whether under the  Constitution the States have police power or not,  the Court accepted the position that the State has  the power to regulate.  However in the garb of  exercising the power to regulate, any fee or levy  which has no connection with the cost or expenses  of administering the regulation, cannot  be  imposed; only such levy can be justified as can be  treated as part of regulatory measure. Thus, the  State’s power to regulate perhaps not as emanation  of police power but as an expression of the  sovereign power of the State has its limitations.  In  our opinion , these observations of the Court lend  support to the view  which we have formed that a  power to regulate, develop or control would not  include within its ken a power to levy tax or fee  except when it is only regulatory.  Power to tax or  levy for augmenting revenue shall continue to be  exercisable by the legislature in whom it vests i.e.  the State Legislature in spite of regulation or  control having been assumed by another legislature  i.e. the Union.  State legislation levying a tax in  such manner or of such magnitude as can be  demonstrated to be tampering or intermeddling  with the Centre’s regulation and control of an  industry can perhaps be the exception to the rule  just stated."          

       Therefore, the main difference between "a fee" and "a  tax" is on account of the source of power.  Although "police  power" is not mentioned in the Constitution, we may rely upon  it as a concept to bring out the difference between "a fee" and  "a tax".  The power to tax must be distinguished from an  exercise of the police power.  The "police power" is different  from the "taxing power" in its essential principles.  The power  to regulate, control and prohibit with the main object of giving  some special benefit to a specific class or group of persons is in  the exercise of police power and the charge levied on that class  to defray the costs of providing benefit to such a class is "a  fee".  Therefore, in the aforestated judgment in Kesoram’s case,  it has been held that where regulation is the primary purpose, its  power is referable to the "police power".  If the primary  purpose in imposing the charge is to regulate, the charge is not  a tax even if it produces revenue for the government.  But  where the government intends to raise revenue as the primary  object, the imposition is a tax.  In the case of Synthetics &  Chemicals Ltd. v. State of U.P. reported in [(1990) 1 SCC  109], it has been held that regulation is a necessary concomitant  of the police power of the State and that though the doctrine of  police power is an American doctrine, the power to regulate is a  part of the sovereign power of the State, exercisable by the  competent legislature.  However, as held in Kesoram’s case  (supra), in the garb of regulation, any fee or levy which has no  connection with the cost or expense of administering the  regulation cannot be imposed and only such levy can be  justified which can be treated as a part of regulatory measure.   To that extent, the State’s power to regulate as an expression of  the sovereign power has its limitations.  It is not plenary as in  the case of the power of taxation.  

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       These well settled principles have been reiterated by this  Court in the case of Commissioner of Central Excise v. Chhata  Sugar Co. Ltd. reported in [(2004) 3 SCC 466] in which it has  been held:-         "18. The  Constitution of India postulates  either a tax or a fee.  However, the use of the  expression "tax" or "fee" in a  statute is not  decisive; as on a proper construction thereof and  having regard to its scope and purport "fee" may  also be held to be a tax.

       19.     The  definition of "tax" in terms of  clause (28) of Article 366  of the Constitution is  wide in nature.  The said definition may be for the  purpose of the Constitution; but it must be borne in  mind that the legislative competence conferred  upon the State Legislature or Parliament to impose  "tax" or "fee" having been enumerated in different  entries in the three lists contained in the Seventh  Schedule of the Constitution of India, the same  meaning of the expression "tax" unless the context  otherwise requires should be assigned.

       20.     Having regard to the fact that  different legislative entries have been made  providing for imposition of "tax" and "fee"  separately, indisputably, the said expression do not  carry the same meaning.  Thus a distinction  between a tax and fee exists and the  same while  interpreting a statute has to be borne in mind.  

       21.     A distinction must furthermore be  borne in mind as regards the sovereign power of  the State as understood in India and the doctrine of  police power as prevailing in the United States of  America.  In some jurisdictions a distinction may  exist between a police power and a power to tax  but as in the Constitution of India, the word "tax"  is defined, it has to be interpreted accordingly.  

       22.     The expression "regulatory  fee" is  not defined.  Fee, therefore, may be held to be a  tax if no service is rendered.  While imposing a  regulatory fee, although the element of quid pro  quo, as understood in common parlance, may not  exist but it is trite that regulatory fee may be in  effect and substance a tax. [See: Corpn. of  Calcutta v. Liberty Cinema (AIR 1965 SC 1107)].  

       23.  In Municipal Corpn. Amritsar v.  Senior Supdt. of Post Offices [(2004) 3 SCC 92] it  was held: (SCC p. 9-97, para 8)                           "8.     The question, whether the  demand so made was by way of ‘service  charge or ‘tax’, need not detain us any  longer.  The demand so made was with  regard to the services rendered to the  respondents’ Department, like water supply,  street-lighting drainage and approach roads  to the land and buildings.  In the counter, the  respondents averred that they are paying for  the services rendered by the appellant  separately. It is also categorically averred  that no  other specific services are being

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provided to the respondents for  which the  tax in the shape of service charges can be  levied and realized from the respondents.   There is no provision in the Municipal  Corporation Act for levying services   charges.  The only provision  is by way of  tax.  Undisputedly, the appellant  Corporation is collecting the tax from  general public for water supply, street- lighting and approach roads, etc.  Thus, the  ‘tax’ was sought to be imposed in the garb  of  ’service charges’."

       24.     We may furthermore notice that a  seven-Judge Bench of this Court in Synthetics and  Chemicals Ltd. v. State of U.P. [(1990) 1 SCC  109] while  considering the question as to whether  the levy on industrial alcohol by the State is  justifiable, inter alia, held that when revenue  earned out of the impost is substantial, the same  would not be justifiable as fee.  

       25.     In Liberty Cinema this Court, while  interpreting Section 548 of the Calcutta Municipal  Act providing for grant of a licence, observed:  (AIR p. 1116, para 18)  

       "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  authorizing 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 statue.   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."

It was further observed: (AIR p.1116, paras 19-20)

       "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

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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 clauses (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 that it is not right that Section  443 does not impose a duty on the  Corporation.  We think it does so, though in  what manner and when it will be exercised it  is for the Corporation to decide.  It is  impossible to call it a power, as the  respondent wants to do, for it is not given to  the Corporation for its own benefit.  The  Corporation has been set up only to perform  municipal duties and its powers are for  enabling it to perform those duties.   Furthermore there is no doubt that an  estimate of the licence fee has to be included  in the budget and therefore the word ’tax’ in  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’\005.

       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 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."

26.     A regulatory statute may also contain taxing  provisions.

27.     The decisions of this Court point out  towards the need of existence of the element of  quid pro quo for imposition of fee; be it to the  person concerned or be it to a group to which he

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belongs; irrespective of the fact as to whether the  benefit of such service is received directly or  indirectly.

28.     The point at issue is required to be  considered keeping in view the aforementioned  legal position.

29.     By reason of the provisions of the U.P.  Sheera Niyantran Adhiniyam, 1964, the trade  carried out by the respondents is sought to be  regulated.

30.     Some service, therefore, was required to be  rendered by the State or the statutory authority to  the owners of the factory producing molasses or  the molasses industries generally if an impost by  way of "fee" was to be levied."

       Applying the above principles to the present case, we  find enumeration of obligatory and discretionary functions of  the corporation in sections 29 and 30 under which civic services  are rendered to the rate-payers for which taxes are leviable as  mentioned in section 170 of the Act.  As stated above, the entire  part-IV of the Act deals not only with the levy of taxes, they  also deal with assessments, valuation, collection and recovery  of taxes.  The entire machinery for filing of returns, objections  and inspection of records and properties comes under the part  which deals with taxation.  The maintenance of assessment  books, annual reports, valuation reports etc. all come under the  part which deals with taxation.  Section 183 which deals with  notice of transfer also comes under the same part.  It is true that  under section 183(5), fees are payable for mutation as may be  prescribed under the regulations, still as stated above, the  primary object of such a charge is to augment the revenue and  the levy of such a charge cannot be treated to be a part of the  regulatory measure.  Further, under the Regulations, the  corporation while prescribing fees has levied fees on ad  valorem basis which is one more circumstance to show that the  impugned levy is in the nature of tax and not in the nature of a  fee.  Further, the quantum of levy indicates that it is a tax and  not a fee.  The analysis of the various provisions of the Act and  the impugned regulations show that the impugned levy is in  exercise of power of taxation under the said Act to augment the  revenues primarily and not as a part of regulatory measure.  As  stated above, the purpose of mutation is to register the transfer  in the records of the corporation which in turn would help the  corporation to recover taxes from the existing tax payers.   Therefore, no special benefit results to the transferee who is  made statutorily liable to inform the corporation of the change,  if any, in the name of the person primarily liable to pay the tax.

       In the case of Nand Kishwar Bux Roy v. Gopal Bux Rai  & others reported in [AIR 1940 Privy Council 93], the Court,  while discussing the nature of mutation proceedings, observed: "Mutation proceedings are merely in the nature of  fiscal inquiries, instituted in the interest of the  State for the purpose of ascertaining which of the  several claimants for the occupation of the  property may be put into occupation of it with the  greater confidence that the revenue for it will be  paid."

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       Therefore, it is clear that mutation enquiry is instituted in  the interest of the corporation for tax purposes and not for the  benefit of the tax payer.

       Now coming to the question of challenge to the levy as  arbitrary and discriminatory and violative of Article 14, we find  that the functions of the corporation with regard to mutation  remains the same, whether the applicant is a transferee under a  conveyance or a lessee or a beneficiary under a will or an heir  in the case of intestate succession.  Once an application for  mutation is made, the same is examined by the department and  after hearing the objections, if any, the record is ordered to be  changed.  Ultimately, the exercise is for fiscal purpose.   Similarly, the property valuation may be below Rs.50,000/- or  above Rs.2 lacs, the function of the corporation in making the  mutation entry remains the same.  Similarly, whatever may be  the cause of mutation, whether it is case of transfer or  devolution, the activity of mutation remains constant in all the  cases.  The expenses incurred in all the cases also cannot vary,  whatever be the value of the property or the cause of mutation.   In the circumstances, there is no reason given for charging  different rates depending on the value of the property and the  cause of transfer.  By doing so, the incidence of the levy falls  differently on persons similarly situated resulting in violation of  article 14 of the Constitution.  Moreover, the quantum of fees is  disproportionate to the so called "services" which is one more  circumstance showing arbitrariness in the levy of such  imposition.  So far as article 14 is concerned, the Courts in  India have always examined whether the classification was  based on intelligible differentia and whether the differentia had  a reasonable nexus with the object of legislation [See: Om  Kumar v. Union of India reported in [(2001) 2 SCC 386].   

       Applying the said tests to the impugned levy, we find that  the levy is irrational, arbitrary, discriminatory and beyond  section 183(5) of the said 1980 Act.

       Before concluding, we may point out that the entire  argument advanced on behalf of the respondents herein was that  the imposition was in the nature of a tax and not a fee and that  the said imposition was arbitrary, discriminatory, irrational and  ultra vires article 14 of the Constitution.  There was no  challenge to the power of the State to levy mutation fees under  section 183(5) of the said 1980 Act (as amended).        In the case  of Narendra Kumar & Others v. Union of India & Others  reported in [AIR 1960 SC 430], one of the arguments advanced  on behalf of Union of India was that since the petitioner  Narendra Kumar had conceded the competency of the Central  Government to make a Control Order under section 3 of the  Essential Commodities Act, 1955, it was not open to him to  submit that the said section 3 was ultra vires articles 19(1)(f)  and 19(1)(g).  In the said case, the controversy was \026 whether  the Non-ferrous Metal Control Order issued by the Central  Government under section 3 of the Essential Commodities Act  fell within the saving provisions of articles 19(5) and 19(6) of  the Constitution.  Therefore, the Court was required to examine  whether the Control Order violated the fundamental rights of  the citizen and, if so, whether the law was saved by articles  19(5) and 19(6).  In the light of the said controversy, this Court  while rejecting the contention of Union of India examined the  question of validity of section 3 of Essential Commodities Act,  though it was not specifically challenged.  Therefore, the ratio  of the decision in Narendra Kumar’s case (supra) has no  application to the facts of the present case.

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       For the aforestated reasons, we find no infirmity in the  impugned judgment and accordingly, the civil appeals herein  stand dismissed, with no order as to costs.  However, our order  of dismissal of IA No.1 of 2004 in Civil Appeal No.6121 of  2000 passed on 23.2.2005 will not preclude the Intervener(s)  from claiming refund in accordance with law.