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PETITIONER: THE HINGIR-RAMPUR COAL CO., LTD. AND OTHERS

       Vs.

RESPONDENT: THE STATE OF ORISSA AND OTHERS

DATE OF JUDGMENT: 21/11/1960

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SARKAR, A.K. SUBBARAO, K. WANCHOO, K.N. MUDHOLKAR, J.R.

CITATION:  1961 AIR  459            1961 SCR  (2) 537  CITATOR INFO :  R          1963 SC 703  (23)  F          1964 SC1284  (11,14)  D          1965 SC 177  (8)  R          1965 SC1107  (17,48,50)  APL        1970 SC1436  (14,15,16)  R          1971 SC1182  (7)  F          1975 SC 846  (14)  RF         1976 SC1654  (5,19,24,25)  AFR        1980 SC   1  (13)  R          1980 SC1008  (13,14)  RF         1980 SC1955  (41)  RF         1981 SC 711  (11)  RF         1981 SC 951  (11)  R          1983 SC 617  (6)  R          1983 SC 930  (7)  F          1983 SC1246  (30)  R          1984 SC 420  (15)  RF         1985 SC 218  (7,9)  D          1985 SC1211  (41)  RF         1986 SC 726  (11)  RF         1987 SC2034  (16)  RF         1989 SC 317  (34)  R          1989 SC2015  (10)  F          1990 SC  85  (26,30)  R          1990 SC1637  (47)  E          1991 SC1676  (5,6,9,13,15,18,27,42,48,50,52  RF         1992 SC1383  (14)  R          1992 SC2038  (3,7)

ACT: Mining Areas, Development of--Enactment by State Legislature authorising  constitution  of mining areas  and  development fund-Imposition  of cess-Constitutional  validity-Competency of  State Legislature-Orissa Mining Areas  Development  Fund Act,  1952  (Orissa  XXVII of 1952),  S.  4-Constitution  of India,  Art. 372, Seventh Schedule, List II, Entry  23,  66, List I, Entries 52, 54, 84--Adaptation of Laws Order,  1950, cls. 16, 21.

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HEADNOTE: The  petitioners challenged the constitutional  validity  of the Orissa Mining Areas Development Fund Act, 1952, which by s.  3  empowered the State Government to  constitute  mining areas  for  the  purpose  of  providing  them  with  certain amenities after hearing objections from the lessees, by s. 4 to  impose  and  collect  a cess not  exceeding  5%  of  the valuation  of  the minerals at the pit’s mouth and by  s.  5 created  a fund to which the cess was to be  credited.   The petitioners’ case, inter alia, was that the impugned Act and the rules made thereunder were ultra vires the powers of the State Legislature, the cess levied thereunder was not a  fee but  a duty of excise on coal within Entry 84 of List  I  of the  Seventh Schedule to the Constitution and  repugnant  to Coal  Mines  Labour  Welfare Fund Act, 1947  (Act  XXXII  of 1947),  and,  alternatively,  even supposing it  was  a  fee relatable  to  Entries 23 and 66 of List II, it was  hit  by Entry  54  of  List  I read  with  the  Mines  and  Minerals (Regulation and Development) Act 1948 (Act LIII of 1948), or by Entry 52 of List I read with the Industries  (Development and  Regulation) Act, 1951 (Act LXV of 1951).  It was  urged on behalf of the State, inter alia, that the cess was a  fee and  not  a duty of excise and the competence of  the  State Legislature to levy it was not affected by the Central Acts. Held  (per Gajendragadkar, Sarkar, Subba Rao and  Mudholkar, JJ.),  that the cess imposed by the Act was a fee  relatable to  Entries 23 and 66 of List II of the Seventh Schedule  to the  Constitution  and the Constitutional  validity  of  the impugned Act was beyond question. Although  there can be no generic difference between  a  tax and  a fee since both are compulsory exactions of  money  by public  authorities, there is this distinction between  them that  whereas  a  tax is imposed  for  public  purposes  and requires  no  consideration to support it, a fee  is  levied essentially  for  services  rendered and there  must  be  an element of quid pro quo between the person 538 who pays it and the public authority that imposes it.  While a  tax invariably goes into the consolidated fund, a fee  is earmarked  for the specified services in a fund created  for the  purpose.   Whether  a cess is one or  the  other  would naturally depend on the facts of each case.  If in the guise of a fee, the Legislature imposes a tax, it is for the Court on  a scrutiny of the scheme of the levy, to  determine  its real  character.   The  distinction  is  recognised  by  the Constitution   which   while  empowering   the   appropriate Legislatures  to levy taxes under the Entries in  the  three lists  refers to their power to levy fees in respect of  any such matters, except the fees taken in court, and tests have been  laid down by this Court for determining the  character of an impugned levy. Matthews  v.  Chicory Marketing Board, 60  C.L.R.  263,  The Commissioner,  Hindu  Religious Endowments,  Madras  v.  Sri Lakshmindra  Thirtha  Swamiar  of Sri  Shirur  Mutt,  [1954] S.C.R. 1005, Mahant Sri Jagannath Ramanuj Das & Any. v.  The State  of Orissa, [1954] S.C.R. 1046, and Ratilal  Panachand Gandhi v. The State of Bombay, [1954] S.C.R. 1055,  referred to. P.   P.  Kutti  Keva & Ors. v. The State of  Madras,  A.I.R. 1954  Mad.  621, Attorney-General for  British  Columbia  v. Esquimalt  and  Nanaimo  Railway  Co., (1950)  A.C.  87  and Parton  &  Any. v. Mils Board (Victoria), (1949)  80  C.L.R. 229, considered and held inapplicable. In determining whether a levy is a fee the true test must be whether  its  primary  and essential purpose  is  to  render

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specific services to a specified area or class, it being  of no consequence that the State may ultimately and  indirectly be benefited by it. So  judged, the scheme of the impugned Act leaves no  manner of  doubt that the levy authorised by it is a fee and not  a tax. The  amount  of the levy must depend on the  extent  of  the services   sought   to   be  rendered  and   if   they   are proportionate,  it would be unreasonable to say  that  since the  impost is high it must be a duty of excise.   The  rate specified by s. 4(2) of the Act, therefore, cannot by itself alter the character of the levy and constitute a trespass by the  State  Legislature  on the legislative  powers  of  the Parliament under Entry 84 of the List I. Nor  can  the method prescribed by the Legislature  for  re- covering the levy by itself alter its character.  The method is  a matter of convenience and, though relevant, has to  be tested in the light of other relevant circumstances.  It  is not  permissible  to  challenge  the  vires  of  a   statute relatable  to an Entry in List II solely on the ground  that the  method adopted for the recovery of the impost  can  and generally is adopted in levying a duty of excise. Ralla Ram v. The Province of East Punjab, [1948] F.C.R. 207, Byramjee Jeejeebhoy v. The Province of Bombay & Anr.  I.L.R. 539 1940 Bom. 58 and Governor-General in Council v. Province  of Madras, (1945)’L.R. 72 I.A. 91, considered. The  limitation  imposed by the latter part of Entry  23  of List II is a limitation on the legislative competence of the State’  Legislature  itself and the test whether  a  statute passed  by the State Legislature thereunder was ultra  vires would  be whether the requisite declaration under Entry  54, List I, has been made by Parliament by law covering the same field  or  not;  it is not necessary in order  to  make  the declaration  effective  that rules should also be  made  and enforced. Although  by operation of Art. 372 of the  Constitution  Act LIII of 1948 was an existing Act substantially covering  the same  field  as covered by the impugned Act,  there  was  no adaptation of S. 2 of that Act whereby a declaration implied by it could be said to have been adapted to a declaration by Parliament.   Clause  16 of the Adaptation  of  Laws  Order, 1950,  properly  construed, cannot be held to refer  to  the Dominion Legislature and equate it with the Parliament.   It can  be  resorted to only where the existing  law  expressly refers  to  some  authority that can  be  equated  with  the corresponding   new   authorities.    Since   the   Dominion Legislature was not so referred to, its competence under the Constitution  Act of 1935, repealed by the  Constitution  of India,  was clearly outside the clause.  Nor can Cl.  21  of the order be of any help to the petitioners. Consequently, in the absence of the requisite  Parliamentary declaration, the competence of the Orissa State  Legislature under  Entry  23 read with Entry 66 of the List II  was  not impaired and the impugned Act must be deemed to have repeal- ed the Central Act, so far as that State was concerned. This  case  incidentally  discloses that in  regard  to  the requisite  Parliamentary declaration prescribed by Entry  54 in  List I in its application to the  pre-constitution  Acts under  corresponding Entry 36 in List I of the  Constitution Act of 1935, there is a lacuna which has not been covered by any clauses of the Adaptation of Laws Order, 1950. Nor  was the impugned Act ultra vires the State  Legislature by  operation  of Entry 52 of List I read with S. 2  of  the Industries  (Development and Regulation) Act, 1951  (LXV  of

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1951).  That Act, in pith and substance, deals more directly with  the control of certain specified industries  including the coal industry, while the impugned Act is concerned  with the development of the mining-areas notified under it.   The field covered by the two Acts was not, therefore, the same. per  Wanchoo, J.-In order to determine whether a levy  is  a tax or a fee, what has to be considered is the pith and sub- stance of the levy.  Where the levy in pith and substance is not essentially different from a tax, it cannot be converted into  a fee by crediting it to a special fund and  attaching certain services to it. 540 The Commissioner, Hindu Religious Endowments, Madras, v. Sri Lakshmindra  Thirtha  Swamiar  of Sri  Shirur  Mutt,  [1954] S.C.R. 1005, Mahant Sri Jaannath Ramanuj Das v. The State of Orissa,  [1954] S.C.R. 1046 and Ratilal Panachand Gandhi  v. The State of Bombay, [1954] S.C.R. 1055, discussed. A  duty of excise in pith and substance is primarily a  duty levied  on  a  manufacturer or producer in  respect  of  the commodity  manufactured  or produced.  It is  different  and distinct from a sales tax and in law they do not overlap. Governor-General  in Council v. Province of Madras, 72  I.A. 91, referred to. What the impugned Act did was to provide for the levying  of the cess on the goods produced at a rate not exceeding  five per  centum of the value at the pit’s mouth.  The cess  was, therefore,  in pith and substance a duty of  excise  falling within Entry 84 of List I, which the State legislature could not levy. It  was not correct to say that the method employed  by  the impugned  Act  for realising the cess was a mere  method  of quantification  and did not affect its character  which  was that  of  a fee.  In the present case the very mode  of  the levy of the cess is nothing other than the levy of a duty of excise, and, therefore, the principle of quantification  for purposes  of  a fee could not be so extended as  to  convert what was in pith and substance a tax into a fee. Sri  Byramjee Jeejeebhoy v. The Province of  Bombay,  I.L.R. 1940 Bom. 58, Municipal Corporation, Ahmedabad v. Patel Gor- dhandas  Hargovandas, I.L.R. 1054 Bom. 41 and Ralla  Ram  v. The Province of East Punjab, [1948] F.C.R. 207, considered. K.   C. Gajapati Narayan Deo v. The State of Orissa,  [1954] S.C. R. 1, referred to. The cess levied under s. 4 of the Act could not be justified as a tax on mineral rights under Entry 50 of List II of  the Seventh  Schedule  and  the impugned Act  was  in  effect  a colourable piece of legislation.

JUDGMENT: ORIGINAL JURISDICTION: Petition No. 87 of 1959. Petition  under  Art. 32 of the Constitution  of  India  for enforcement of Fundamental Rights. M.   P. Amin, Dara P. Mehta, P. M. Amin; S. N. Andley, J. B. Dadachanji,   Rameshwar  Nath  and  P.  L.  Vohra  for   the petitioners. A.   V.  Viswanatha  Sastri, R. Ganapathy  Iyer,  P.  Kesava Pillai and T. M. Sen, for the respondents. H.   N.  Sanyal, Additional Solicitor-General of  India,  B. Sen and R. H. Dhebar, for the Intervener. 541 1960.  November, 21.  The, Judgment of P. B. Gajendragadkar, A.  K.  Sarkar, K. Subba Rao and J. R. Mudholkar,  JJ.,  was delivered  by  P. B. Gajendragadkar J., K. N.  Wanchoo,  J.,

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delivered a separate judgment. GAJENDRAGADKAR, J.-This is a petition filed under Art. 32 of the Constitution in which the validity of the Orissa  Mining Areas  Development  Fund Act,(-, 1952 (XXVII  of  1952),  is challenged.   The  first  petitioner  is  a  public  limited company which has its registered office at Bombay.  A  large majority of its shareholders are citizens of India; some  of them are themselves companies incorporated under the  Indian Companies Act.  Petitioners Nos. 2 to 7 are the Directors of Petitioner  No. 1, the second petitioner being the  Chairman of  its  Board  of Directors.   These  petitioners  are  all citizens  of  India.   At  all  material  times  the   first petitioner  carried on and still carries on the business  of producing and selling coal excavated from its collieries  at Rampur  in  the  State ’of Orissa.   Two  leases  have  been executed  in its favour; the first was executed  on  October 17,  1941, by the Governor of Orissa whereby all that  piece or parcel of land in the registration district of  Sambalpur admeasuring  about  3341.79  acres has been  demised  for  a period  of  30 years commencing from September 1,  1939,  in consideration  of the rent reserved thereby and  subject  to the covenants and conditions prescribed thereunder; and  the second  is  a surface lease executed in its  favour  by  Mr. Mohan Brijraj Singh Dee on April 19, 1951, in relation to  a land  admeasuring  approximately  211.94 acres  for  a  like period  of  30 years commencing from February  4,  1939,  in consideration  of  the  rent and subject to  the  terms  and conditions prescribed by it. Pursuant to s. 5 of the Orissa Estates Abolition Act,  1951, all the right, title and interest of the Zamindar of  Rampur in  the  lands  demised to the first  petitioner  under  the second  lease  vested in respondents, the State  of  Orissa. Since  then  the  first petitioner has duly  paid  the  rent reserved  by the said lease to the  appropriate  authorities appointed by respondent 1, 69 542 and  has  observed  and performed  all  the  conditions  and covenants  of  the said lease.  In exercise  of  its  rights under the said two leases the first petitioner entered  upon the  lands demised and has been carrying on the business  of excavating and producing coal at its collieries at Rampur. In  December, 1952, the Legislature of the State  of  Orissa passed  the impugned Act; and it received the assent of  the Governor  of Orissa on December 10, 1952.  It was,  however, not reserved for the consideration of the President of India nor  has it received his assent.  In pursuance of the  rule- making power conferred on it by the impugned Act  respondent 1 has purported to make rules called the Orissa Mining Areas Development  Act  Rules, 1955; these rules  have  been  duly notified in the State Gazette on January 25, 1955. Subsequently,  the  Administrator, respondent  2,  appointed under  the  impugned Act issued a notification on  June  24, 1958,  whereby  the first petitioner’s Rampur  colliery  has been  notified for the purpose of liability for the  payment of  cess under the impugned Act.  The area of this  colliery has  been determined at 3341.79 acres.  In its appeal  filed under  rule  3  before  the  Director  of  Mines  the  first petitioner  objected to the issue of the said  notification, inter  alia,  on the ground that the impugned  Act  and  the rules  framed  under  it were ultra vires  and  invalid;  no action   has,  however,  been  taken  on  the  said   appeal presumably because the authority concerned could not  enter- tain or deal with the objections about the vires of the  Act and the rules.

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Thereafter  on March 26, 1959, the Assistant  Administrative Officer,  respondent 3, called upon the first petitioner  to submit monthly returns for the assessment of the cess.   The first  petitioner  then  represented that it  had  filed  an appeal   setting   forth   its   objections   against    the notification,  and  added  that until the  said  appeal  was disposed  of no returns would be filed by it.  In  spite  of this  representation respondent 3, by his letter of  May  6, 1959, called upon the 543 first petitioner to submit monthly returns in the prescribed form  and  issued the warning that  failing  compliance  the first  petitioner  would  be prosecuted under s.  9  of  the impugned  Act.   A similiar demand was made  and  a  similar warning  issued by respondent 3 by his letter dated June  6, 1959.   It  is under these circumstances  that  the  present petition has been filed. The petitioners contend that the impugned Act and’ the rules made   thereunder  are  ultra  vires  the  powers   of   the Legislature of the State of Orissa, or in any event they are repugnant  to the provisions of an existing law.   According to  the petition the cess levied under the impugned  Act  is not  a fee but is in reality and in substance a levy in  the nature of a duty of excise on the coal produced at the first petitioner’s  Rampur  colliery, and as such  is  beyond  the legislative   competence   of   the   Orissa    Legislature. Alternatively  it is urged that even if the levy imposed  by the impugned Act is a fee relatable to Entries 23 and 66  in List  II of the Seventh Schedule, it would  nevertheless  be ultra  vires having regard to the provisions of Entry 54  in List I read with Central Act LIII of 1948.  The  petitioners further  allege that even if the said levy is held to  be  a fee it would be similarly ultra vires having regard to Entry 52  in List I read with Central Act LXV of 1951.   According to  the petitioners the impugned Act is really relatable  to Entry 24 in List III, and since it is repugnant with Central Act  XXXII of 1947 relatable to the same Entry and  covering the same field the impugned Act is invalid to the extent  of the  said repugnancy under Art. 254.  On  these  allegations the  petitioners  have applied for a writ of mandamus  or  a writ in the nature of the said writ or any other writ, order or direction prohibiting the respondents from enforcing  any of  the  provisions of the impugned Act  against  the  first petitioner;  a  similar  writ or order  is  claimed  against respondent  3 in respect of the letters addressed by him  to the 1st petitioner on March 3, 1959 and June 6, 1959. This  petition  is  resisted  by  respondent  1  on  several grounds.  It is urged on its behalf that the levy 544 imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II and its validity is not affected either by Entry  54  read with Act LIII of 1948 or by ’Entry  52  read with  Act LXV of 1951.  In the alternative it  is  contended that if the said levy is held to be a tax and not a fee,  it would be a tax relatable to Entry 50 in List II, and as such the  legislative  competence  of the  State  Legislature  to impose   the   same  cannot  be   successfully   challenged. Respondent  1 disputes the petitioner’s contention that  the impugned  Act is relatable to Entry 24 in List III; and  so, according to it, no question of repugnancy with the  Central Act XXXII of 1947 arises. After  this  appeal  was fully argued  before  us  Mr.  Amin suggested-and Mr. Sastri did not object-that we should  hear the  learned Attorney-General on the question as to  whether even  if  the  levy imposed by the impugned  Act  is  a  fee

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relatable  to  Entries 23 and 66 in List II of  the  Seventh Schedule, it would nevertheless be ultra vires having regard to  the provisions of Entry 54 in List I read  with  Central Act LIII of 1948.  Accordingly we directed that a notice  on this point should be served on the learned  Attorney-General and  the case should be set down for hearing on  that  point again.    For  the  learned  Attorney-General  the   learned Additional Solicitor-General appeared before us in  response to  this notice and we have had the benefit of  hearing  his arguments on the point in question. The first question which falls for consideration is  whether the  levy  imposed  by the impugned Act  amounts  to  a  fee relatable to Entry 23 read with Entry 66 in List II.  Before we  deal with this question it is necessary to consider  the difference  between  the concept of tax and that of  a  fee. The neat and terse definition of tax which has been given by Latham, C. J., in Matthews v. Chicory Marketing Board (1) is often  cited  as a classic on this subject.  "A  tax",  said Latham, C. J., "is a compulsory exaction of money by  public authority for public purposes enforceable by law, and is not payment  for  services  rendered".   In  bringing  out   the essential features of a tax this defini- (1) (1938) 60 C.L.R. 263, 276.                             545 tion also assists in distinguishing a tax from a fee.  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 business in any local area, and as a condition precedent for the said services or in  return for  them 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 a cess levied by way of fee 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.   There  is, however, an element of compulsion in the imposition of  both tax  and  fee.   When the Legislature decides  to  render  a specific service to any area or to any class of persons,  it is not open to the said area or to the said class of persons to  plead  that they do not want the service  and  therefore they  should  be  exempted from the  payment  of  the  cess. Though there is an element of quid pro quo between the  tax- payer  and  the public authority there is no option  to  the tax-payer in the matter of receiving the service  determined by  public authority.  In regard to fees there is, and  must always  be,  co-relation between the fee collected  and  the service  intended  to be rendered.  Cases  may  arise  where under the guise of levying a fee Legislature may attempt  to impose a tax; and in the case of such a colourable  exercise of  legislative  power courts would have to  scrutinise  the scheme  of the levy very carefully and determine whether  in fact  there  is a co-relation between the  service  and  the levy,  or  whether the levy is either  not  co-related  with service or is levied to such an 546

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excessive extent as to be a presence of a fee and not a  fee in  reality.   In other words, whether or not  a  particular cess  levied  by  a statute amounts to a fee  or  tax  would always  be  a  question  of fact to  be  determined  in  the circumstances  of each case.  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 the fees taken in any Court. The  question about the distinction between a tax and a  fee has  been  considered by this Court in  three  decisions  in 1954.   In  The Commissioner,  Hindu  Religious  Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (1)  the vires of the Madras Hindu Religious and  Charitable Endowments  Act, 1951 (Madras Act XIX of 195 1), came to  be examined.   Amongst  the sections challenged was  s.  76(1). Under this section every religious institution had to pay to the  Government annual contribution not exceeding 5% of  its income  for  the  services  rendered  to  it  by  the   said Government; and the argument was that the contribution  thus exacted  was  not a fee but a tax and as  such  outside  the competence  of the State Legislature.  In dealing with  this argument Mukherjee, J., as he then was, cited the definition of  tax given by Latham, C.J., in the case of Matthews  (2), and has elaborately considered the distinction between a tax and a fee.  The learned judge examined the scheme of the Act and  observed  that "the material fact which  negatives  the theory of fees in the present case is that the money  raised by  the  levy  of  the  contribution  is  not  earmarked  or specified for defraying the expense that the Government  has to incur in performing the services.  All the collections go to  the consolidated fund of the State and all the  expenses have  to be met not out of those collections but out of  the general  revenues by a proper method of appropriation as  is done in the (1) [1954] S.C.R. 1005. (2) (1938) 60 C.L.R. 263. 547 case  of other Government expenses".  The learned  judge  no doubt  added that the said circumstance was  not  conclusive and  pointed out that in fact there was  a total absence  of any  co-relation  between  the  expenses  incurred  by   the Government  and the amount raised by contribution.  That  is why s. 76(1) was struck down as ultra vires. The  same  point arose before this Court in respect  of  the Orissa  Hindu Religious Endowments Act, 1939, as amended  by amending Act 11 of 1952 in Mahant Sri Jagannath Ramanuj  Das v. The, State of Orissa (1).  Mukherjea, J., who again spoke for  the Court, upheld the validity of s. 49  which  imposed the  liability  to pay the specified contribution  on  every Mutt or temple having an annual income exceeding Rs. 250 for services  rendered by the State Government.  The  scheme  of the  impugned Act was examined and it was noticed  that  the collections  made  under it are not merged  in  the  general public  revenue and are not appropriated in the manner  laid down   for  appropriation  of  expenses  for  other   public purposes.    They   go  to  constitute  a  fund   which   is contemplated by s. 50 of the Act, and this fund to which the Provincial  Government contributes both by way of  loan  and grant  is  specifically  set  apart  for  the  rendering  of services involved in carrying out the provisions of the Act. The same view was taken by this Court in regard to s. 58  of

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the  Bombay Public Trust Act, 1950 (Act XXIX of 1950)  which imposed  a  similar contribution for a  similar  purpose  in Ratilal  Panachand  Gandhi v. The State of Bombay  (2).   It would  thus be seen that the tests which have to be  applied in determining the character of any impugned levy have  been laid down by this Court in these three decisions; and it  is in  the  light of these tests that we have to  consider  the merits  of  the rival contentions raised before  us  in  the present petition. On  behalf of the petitioners Mr. Amin has relied  on  three other  decisions which may be briefly considered.  In P.  P. Kutti Keya v. The State of Madras (3), the Madras High Court was called upon to consider, inter (1) [1954] S.C.R. 1046.         (2) [1954] S.C.R. 1055. (3) A.I.R. 1954 Mad. 621. 548 alia,  the validity of s. 11 of the Madras Commercial  Crops Markets  Act  20 of 1933 and Rules 28(1)  and  28(3)  framed thereunder.   Section  11(1) levied a fee on  the  sales  of commercial crops within the notified area and s. 12 provided that the amounts collected by the Market Committee shall  be constituted  into a Market Fund which would be utilised  for acquiring  a site for the market, constructing  a  building, maintaining  the  market  and meeting the  expenses  of  the Market  Committee.   The  argument  that  these   provisions amounted to services rendered to the notified area and  thus made  the levy a fee and not a tax was not accepted  by  the Court.  Venkatarama Aiyar, J., took the view that the  funds raised from the merchants for a construction of a market  in substance amounted to an exaction of a tax.  Whether or  not the  construction of a market amounted to a service  to  the notified  area  it  is  unnecessary  for  us  to   consider. Besides,  as we have already pointed out we have  now  three decisions  of  this Court which have  authoritatively  dealt with  this  matter,  and  it is in the  light  of  the  said decisions that the present question has to be considered. In  Attorney-General for British Columbia v.  Esquimalt  and Nanaimo Railway Co. (1), the Privy Council had to deal  with the  validity  of  forest protection impost  levied  by  the relevant  section of the Forest Act R. S. B. C.  1936.   The lands  in question were statutorily exempted from  taxation, and it was urged against the validity of the impost that the levy of the said impost was not a service charge but a  tax; and since it contravened the exemption from taxation granted to  the  land it was invalid.  This plea was upheld  by  the Privy   Council.   The  Privy  Council  did   consider   two circumstances  which were relevant; the first that the  levy was  on a defined class of interested individuals,  and  the second  that the fund raised did not fall into  the  general mass  of the proceeds of taxation but was applicable  for  a special  and  limited purpose.  It was conceded  that  these considerations  were relevant but the Privy Council  thought that the weight to be attached to them should not be exagge- (1)  (1950) A.C. 87. 540 rated.   In  appreciating the weight of  the  said  relevant circumstances  the Privy Council was impressed by  the  fact that  the lands in question formed an important part of  the national   wealth   of  the  Province   and   their   proper administration,  including in particular protection  against fire, is a matter of high public concern’ as well as one  of particular  interest  to individuals.  In other  words,  the effect  of the impugned provision was, that the expenses  of what  was the public service of the greatest importance  for the Province as a whole had been divided between the general

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body of tax. payers and those individuals who had a  special interest in having their property protected.  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 pub- lic service, and in essence is directly a part of it, diffe- rent  considerations  may  arise.   In such  a  case  it  is necessary to enquire what is the primary object of the  levy and  the essential purpose which it is intended to  achieve. Its  primary  object  and  the  essential  purpose  must  be distinguished  from  its ultimate or incidental  results  or consequences.   That  is the true test  in  determining  the character of the levy. In Parton. v. Milk Board (Victoria)(1), the validity of  the levy imposed on dairymen and owners of milk depots by s.  30 of the Milk Board Act of 1933 as amended by subsequent  Acts of 1936-1939 was (1)  (1949) 80 C.L.R. 229. 70 550 challenged,  and it was held by Dixon, J., that the levy  of the  said contribution amounted to the imposition of a  duty of  excise.   This decision was substantially based  on  the ground  that  the statutory board  "performs  no  particular service  for the dairyman or the owner of a milk  depot  for which  his  contribution  may  be considered  as  a  fee  or recompense"  that is to say the element of quid pro quo  was absent  qua the persons on whom the levy had  been  imposed. Therefore none of the decisions on which Mr. Amin has relied can assist his case. Let  us now examine the scheme of the impugned Act.  As  the preamble  shows  it has been passed because it  was  thought expedient  to  constitute mining areas and  a  Mining  Areas Development Fund in the State of Orissa.  It consists of  11 sections.    Section   3  of  the  Act  provides   for   the constitution  of  a mining area whenever it appears  to  the State  Government  that  it is necessary  and  expedient  to provide  amenities  like  communications,  water-supply  and electricity  for the better development of any area  in  the State of Orissa wherein any mine is situated, or to  provide for  the welfare of the residents or to workers in any  such areas within which persons employed in a mine or a group  of mines  reside  or  work.   Under  this  section  the   State Government  has  to define the limits of the  area.  and  is given  the power to include within such area any local  area contiguous  to  the same or to exclude from  such  area  any local area comprised therein; that is the effect of s. 3(1). Section 3(2) empowers the owner or a lessee of a mine or his duly  constituted  representative in the said area  to  file objections  in respect of any notification issued  under  s. 3(1)  within the period specified, and the State  Government is  required to take the said objection into  consideration. After  considering objections received the State  Government is authorised to issue a notification constituting a  mining

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area under s. 3(3).  Section 4 deals with the imposition and collection  of cess.  The rate of the levy authorised  shall not exceed 5 per centum of the valuation of the minerals  at the pit’s mouth.  Section 5 provides for the constitution of the Orissa Mining Areas Development 551 Fund.  This fund vests in the State Government and has to be administered by such officer or officers as may be appointed by  the  State  Government  in  that,  behalf  Section  5(2) requires that there shall be paid to the credit of the  said fund the proceeds of the cess recovered under s. 4 for  each mining area during the quarter after deducting expenses,  if any, for collection and recovery.  Section 5(3) contemplates that  to  the credit of the said fund shall  be  placed  all collections  of cess under s. 5(2) as well as  amounts  from State  Government  and  the  local  authorities  and  public subscriptions specifically given for any of the purposes  of the  fund.  Section 5(4) deals with the topic of the  appli- cation  of  the said fund.  The fund has to be  utilised  to meet  expenditure incurred in connection with such  measures which  in the opinion of the State Government are  necessary or  expedient for providing amenities  like  communications, water supply and electricity, for the better development  of the mining areas, and to meet the welfare of the labour  and other  persons  residing  or working in  the  mining  areas. Section  5(5)  lays  down  that  without  prejudice  to  the generality  of  the  foregoing provisions the  fund  may  be utilised to defray any of the purposes specified in cls. (a) to  (e).   Under s. 5(6) the State Government is  given  the power to decide whether any particular expenditure is or  is not debitable to the fund and their decision is made  final; and s. 5(7) imposes on the State Government an obligation to publish  annually in the gazette a report of the  activities financed from the fund together with an estimate of receipts and  expenditure  of the fund and a  statement  of  account. Section  6 prescribes the mode of constituting  an  advisory committee.  It has to consist of such number of members  and chosen in such manner as may be prescribed, provided however that  each committee shall include representatives of  mine- owners  and workmen employed in mining industry.  The  names of the members of the committee are required to be published in  the gazette.  Section 7 deals with the  appointment  and functions  of  the statutory authorities to  carry  out  the purpose  of  the  Act,  while s.  8  confers  on  the  State Government power to 552 make rules.  Section 9 prescribes penalties and provides for prosecutions;  and s. 10 gives protection to  the  specified authorities  or  officers  in respect of  anything  done  or intended  to be done by them in good faith in  pursuance  of the Act or any rules or order made thereunder.  Section  11, which  is the last section confers on the  State  Government the  power  to do anything which may appear to  them  to  be necessary  for  ’the  purpose of  removing  difficulties  in giving effect to the provisions of the Act. The  scheme of the Act thus clearly shows that it  has  been passed for the purpose of the development of mining areas in the  State.  The basis for the operation of the Act  is  the constitution of a mining area, and it is in regard to mining areas  thus constituted that the provisions of the Act  come into play.  It is not difficult to appreciate the  intention of  the State Legislature evidenced by this Act.  Orissa  is an underdeveloped State in the Union of India though it  has a  lot  of  mineral wealth of great  potential  value.   Un- fortunately its mineral wealth is located generally in areas

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sparsely populated with bad communications.  Inevitably  the exploitation  of  the  minerals is handicapped  by  lack  of communications,  and the difficulty experienced  in  keeping the  labour  force  sufficiently healthy  and  in  congenial surroundings.    The  mineral  development  of  the   State, therefore,  requires  that  provision  should  be  made  for improving the communications by constructing good roads  and by providing means of transport such as tramways; supply  of water  and  electricity would also help.  It would  also  be necessary  to  provide  for  amenities  of  sanitation   and education to the labour force in order to attract workmen to the  area.   Before the Act was passed it appears  that  the mine-owners tried to put up small-length roads and  tramways for  their own individual purpose, but that obviously  could not  be as effective as roads constructed by the  State  and tramway  service provided by it.  It- is on a  consideration of these factors that the State Legislature decided to  take an  active part in unsystematic development of  its  mineral areas which would help the mine-owners in moving their 553 minerals  quickly  through  the  shortest  route  and  would attract  labour  to assist the excavation of  the  minerals. Thus  there  can  be  no doubt  that  the  primary  and  the principal object of the Act is to develop’ the mineral areas in  the  State  and to assist more  efficient  and  extended exploitation of its mineral wealth. The constitution of the advisory committee as prescribed  by s. 4 emphasises the fact that the policy of the Act would be to  carry  out with the assistance of  the  mine-owners  and their  workmen.   Thus after a mining area  is  notified  an advisory committee is constituted in respect of it, and  the task  of carrying out the objects of the Act is left to  the care   of  the  said  advisory  committee  subject  to   the provisions of the Act.  Even before an area is notified  the mine-owners are allowed an opportunity to put forward  their objections.  These features of the Act are also relevant  in determining  the question as to whether the Act is  intended to render service to the specified area and to the class  of persons who are subjected to the levy of the cess. Section 5 shows that the cess levied does not become a  part of   the  consolidated  fund  and  is  not  subject  to   an appropriation in that behalf; it goes into the special  fund earmarked for carrying out the purpose of the Act, and  thus its existence establishes a correlation between the cess and the  purpose for which it is levied.  It was  probably  felt that some additions should be made to the special fund,  and so   s.  5(3)  contemplates  that  grants  from  the   State Government  and local authorities and  public  subscriptions may be collected for enriching the said fund.  Every year  a report  of  the activities financed by the fund  has  to  be published   together  with  an  estimate  of   receipt   and expenditure  and a statement of accounts.  It would thus  be clear  that the administration of the fund would be  subject to  public scrutiny and persons who are called upon  to  pay the  levy would have an opportunity to see whether the  cess collected  from  them  has been properly  utilised  for  the purposes  for  which it is intended to be used.  It  is  not alleged by the petitioners 554 that the levy imposed is unduly or unreasonably excessive so as   to  make  the  imposition  a  colourable  exercise   of legislative  power.  Indeed the fact that the accounts  have to  be published from year to year affords an indication  to the  contrary.   Thus the scheme of the Act shows  that  the cess is levied against the class of persons owning mines  in

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the  notified  area  and it is levied to  enable  the  State Government to render specific services to the said class  by developing  the notified mineral area.  There is an  element of  quid  pro  quo  in the scheme,  the  cess  collected  is constituted  into  a specific fund and it has not  become  a part of the consolidated fund, its application is  regulated by a statute and is confined to its purposes, and there is a definite  co-relation between the impost and the purpose  of the  Act  which is to render service to the  notified  area. These  features  of  the  Act  impress  upon  the  levy  the character of a fee as distinct from a tax. It is, however, urged that the cess levied by s. 4(2) is  in substance and reality a duty of excise.  As we have  already noticed  s. 4(2) provides that the rate of such  levy  shall not exceed 5 per centum of the valuation of the minerals  at the  pit’s  mouth;  in other words it is the  value  of  the minerals  produced  which is the basis for  calculating  the cess  payable  by  mine-owners, and that  precisely  is  the nature  in which duty of excise is levied under Entry 84  in List I. The said Entry empowers Parliament to impose  duties of excise, inter alia, on goods manufactured or produced  in India.  When minerals are produced from mines and a duty  of excise  is  intended  to  be imposed on  them  it  would  be normally  imposed at the pit’s mouth, and that is  precisely what the impugned Act purports to do.  It is also  contended that  the  rate  prescribed by s.  4(2)  indicates  that  it operates  not as a mere fee but as a duty of  excise.   This argument must be carefully examined before the character  of the  cess  is finally determined.  It is not  disputed  that under  Entry  23 in List II read with Entry 66 in  the  said List  the  State Legislature can levy a fee  in  respect  of mines and mineral development.  Entry 23 reads thus:  "Regu- lation of Mines and mineral development subject to                             555 the  provisions  of List I with respect  to  regulation  and development  under the control of the Union".  We will  deal with the condition imposed by the latter part of this  Entry later.   For  the  present  it  is  enough  to  state   that regulation  of mines and mineral development is  within  the competence of the State Legislature.  Entry 66 provides that fees  in respect of any of the matters in the said List  can be imposed by the State Legislature subject of course to the exception of fees taken in any Court.  The argument is  that though  the State Legislature is competent to levy a fee  in respect  of  mines and mineral development, if  the  statute passed  by  a State Legislature in substance and  in  effect imposes  a  duty  of excise it  is  travelling  outside  its jurisdiction and is trespassing on the legislative powers of Parliament. This  argument  is based on two considerations.   The  first relates  to the form in which the levy is imposed,  and  the second  relates to the extent of the levy  authorised.   The extent  of the levy authorised would always depend upon  the nature  of  the  services intended to be  rendered  and  the financial  obligations  incurred thereby.  If  the  services intended  to  be  rendered to  the  notified  mineral  areas require that a fairly large cess should be collected and co- relation can be definitely established between the  proposed services   and   the  impost  levied,  then  it   would   be unreasonable to suggest that because the rate of the levy is high  it is not a fee but a duty of excise.  In the  present case,  if the development of the mining areas involves  con- siderable  expenditure  which necessitates the levy  of  the prescribed  rate  it  only means  that  the  services  being rendered to the mining areas are very valuable and the rate-

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payer  in  substance  is  compensating  the  State  for  the services rendered by it to him.  It is significant that  the petitioners  do  not  seriously suggest  that  the  services intended to be rendered are a cloak and not genuine, or that the  taxes levied have no relation to the said services,  or that they are unreasonable and excessive.  Therefore, in our opinion, the extent of the rate allowed to be imposed by  s. 4(2) cannot by itself alter the character of the levy from a 556 fee  into  that  of a duty of excise.   If  the  co-relation between the levy and the services was not genuine or   real, or  if  the  levy was  disproportionately  higher  than  the requirements  of  the services intended to  be  rendered  it would have been another matter. Then  as  to the form in which the impost is levied,  it  is difficult  to  appreciate  how the method  adopted   by  the Legislature   in  recovering  the  impost  can   alter   its character.  The character of the levy must be determined  in the  light of the tests to which we have  already  referred. The  method  in which the fee is recovered is  a  matter  of convenience,  and by itself it cannot fix upon the levy  the character  of the duty of excise.  This question  has  often been  considered  in the past, and it has always  been  held that  though the method in which an impost is levied may  be relevant  in determining its character its significance  and effect cannot be exaggerated.  In Balla Ram v. The  Province of  East  Punjab (1) the Federal Court had to  consider  the character  of  the tax levied by s. 3 of  the  Punjab  Urban Immoveable  Property  ’tax  Act XVII  of  1940.   Section  3 provided  as  follows: "There shall be charged,  levied  and paid an annual to tax on buildings and lands situated in the rating areas shown in the schedule to this Act at such  rate not exceeding twenty per centum of the annual value of  such buildings  and  lands as the Provincial  Government  may  by notification  in official gazette direct in respect of  each such  rating area".  The argument urged before  the  Federal Court  was that the tax imposed by the said section  was  in reality  a  tax on income within the meaning of Item  54  in List  I of the Seventh Schedule to the Constitution  Act  of 1935,  and as such it was not covered by Item 42 in List  II of  the  said Schedule.  This argument was rejected  on  the ground  that  the  tax levied by the Act  was  in  pith  and substance  a tax on lands and buildings covered by Item  42. It would be noticed that the basis of the tax was the annual value of the building which is the basis used in the  Indian Income-tax Act for determining income from property; and so, the attack against the section was based on (1)  (1948) F.C.R. 207.                             557 the  ground that it had adopted the same basis  for  leaving the  impost  as  the  Income-tax  Act  and  the  said  basis determined  its character whatever may be the appearance  in which  the impost was purported to be levied.  In  repelling this  argument  Fazl  Ali,  J.  observed  that  the  crucial question  to  be  answered was whether  merely  because  the Income-tax Act has adopted the annual value as the  standard for  determining the income it must necessarily follow  that if the same standard is employed as a measure for any  other tax  that  tax becomes a tax on income.  The  learned  judge then proceeded to add that if the answer to this question is to  be  given in the affirmative then  certain  taxes  which cannot  possibly be described as income-tax must be held  to be so.  In other words, the effect of this decision is  that the  adoption  of the standard used in  Income-tax  Act  for getting  at the income by any other act for levying the  tax

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authorised  by it would not be enough to convert  the  said. tax into an income-tax.  During the course of this  judgment Fazl Ali, J. also noticed with approval a similar view taken by  the Bombay High Court in Sir Byramjee Jeejeebhoy v.  The Province of Bombay (1). This  decision  has  been expressly approved  by  the  Privy Council in Governor-General in Council v. Province of Madras (2).   Consistently with the decision of the  Federal  Court their Lordships expressed the opinion that "a duty of excise is primarily a duty levied on a manufacturer or producer  in respect of the commodity manufactured or produced.  It is  a tax on goods and not on sales or the proceeds of the sale of goods.  The two taxes, the one levied on the manufacturer in respect of his goods and the other on the vendor in  respect of  his sales may in one sense overlap, but in law there  is no overlapping; the taxes are separate and distinct imposts. If  in,  fact they overlap that may be  because  the  taxing authority  imposing a duty of excise finds it convenient  to impose that duty at the moment when the excisable article (1)  I.L.R. 1940 Bom. 58. (2)  (1945) L.R. 72 I.A. 91. 71 558 leaves  the  factory or workshop for the first time  on  the occasion  of  its  sale".  In that  case  the  question  was whether  the tax authorised by the Madras General Sales  Tax Act,  1939, was a tax on the sale of goods or was a duty  of excise, and the Privy Council held it was the former and not the  latter.  Therefore, in our opinion, the mere fact  that the levy imposed by the impugned Act has adopted the  method of  determining  the rate of the levy by  reference  to  the minerals produced by the mines would not by itself make  the levy  a  duty  of excise.  The method thus  adopted  may  be relevant in considering the character of the impost but  its effect  must be weighed along with and in the light  of  the other  relevant  circumstances.  In this  connection  it  is always  necessary  to bear in mind that  where  an  impugned statute  passed  by a State Legislature is relatable  to  an Entry  in  List II it is not permissible  to  challenge  its vires  only on the ground that the method adopted by it  for the  recovery of the impost can be and is generally  adopted in levying a duty of excise.  Thus considered the conclusion is  inevitable that the cess levied by the impugned  Act  is neither a tax nor a duty of excise but is a fee. The next question which arises is, even if the cess is a fee and as such may be relatable to Entries 23 and 66 in List II its  validity  is  still  open  to  challenge  because   the legislative competence of the State Legislature under  Entry 23  is subject to the provisions of List I with  respect  to regulation  and development under the control of the  Union; and  that takes us to Entry 54 in List I. This  Entry  reads thus:  "Regulation of mines and mineral development  to  the extent  to which such regulation and development  under  the control of the Union is declared by Parliament by law to  be expedient-in  the public interest".  The effect  of  reading the two Entries together is clear.  The jurisdiction of  the State   Legislature  under  Entry  23  is  subject  to   the limitation imposed by the latter part of the said Entry.  If Parliament  by  its  law has declared  that  regulation  and development of mines should in public interest be under  the control of the Union, to 559 the extent of such declaration the jurisdiction of the State Legislature  is excluded.  In other words, if a Central  Act has  been passed which contains a declaration by  Parliament

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as required by Entry 54, and if the said declaration  covers the  field  occupied by the impugned Act  the  impugned  Act would be ultra vires, not because of any repugnance  between the  two statutes but because the State Legislature  had  no jurisdiction to pass the law.  The limitation imposed by the latter  part of Entry 23 is a limitation on the  legislative competence of (,he State Legislature itself.  This  position is not in dispute. It  is  urged  by Mr. Amin that the  field  covered  by  the impugned  Act  has  already been covered by  the  Mines  and Minerals  (Regulation and Development) Act, 1948,  (LIII  of 1948)  and he contends that in view of the declaration  made by  s. 2 of this Act the impugned Act is ultra vires.   This Central  Act  was passed to provide for  the  regulation  of mines  and oil fields and for the development  of  minerals. It  may  be stated at this stage that by Act LXVII  of  1957 which  has been subsequently passed by Parliament, Act  LIII of  1948 has now been limited only to oil fields.   We  are, however,  concerned  with the operation of the said  Act  in 1952,  and at that time it applied to mines as well  as  oil fields.   Section 2 of the Act contains a declaration as  to the  expediency and control by the Central  Government.   It reads  thus: "It is hereby declared that it is expedient  in the public interest that the Central Government should  take under its control the regulation of mines and oil fields and the  development  of  minerals  to  the  extent  hereinafter provided".   It is common ground that at the  relevant  time this  Act  applied  to coal mines.  Section  4  of  the  Act provides  that  no mining lease shall be granted  after  the commencement  of this Act otherwise than in accordance  with the  rules  made  under this Act.  Section  5  empowers  the Central  Government  to  make  rules  by  notification   for regulating the grant of mining leases or for prohibiting the grant  of  such leases in respect of any mineral or  in  any area.  Sections 4 and 5 thus 560 purport to prescribe necessary conditions in accordance with which  mining leases have to be executed.  This part of  the Act  has no relevance to our present purpose.  Section 6  of the  Act, however, empowers the Central Government  to  make rules  by  notification  in the  official  gazette  for  the conservation and development of minerals.  Section 6(2) lays down several matters in respect of which rules can be framed by the Central Government.  This power is, however,  without prejudice  to  the  generality of powers  conferred  on  the Central Government by s. 6(1).  Amongst the matters  covered by s. 6(2) is the levy and collection of royalties, fees  or taxes  in respect of minerals mined, quarried, excavated  or collected.   It  is  true that no rules have  in  fact  been framed  by the Central Government in regard to the levy  and collection of any fees; but, in our opinion, that would  not make  any difference.  If it is held that this Act  contains the  declaration referred to in Entry 23 there would  be  no difficulty in holding that the declaration covers the  field of  conservation and development of minerals, and  the  said field  is  indistinguishable from the field covered  by  the impugned   Act.   What  Entry  23  provides  is   that   the legislative  competence of the State Legislature is  subject to  the provisions of List I with respect to regulation  and development under the control of the Union, and Entry 54  in List  I  requires a declaration by Parliament  by  law  that regulation  and  development of mines should  be  under  the control  of the Union in public interest.  Therefore,  if  a Central Act has been passed for the purpose of providing for the  conservation  and development of minerals,  and  if  it

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contains  the  requisite declaration, then it would  not  be competent to the State Legislature to pass an Act in respect of  the subject-matter covered by the said declaration.   In order  that  the declaration should be effective it  is  not necessary  that rules should be made or enforced;  all  that this  required  is a declaration by Parliament  that  it  is expedient in the public interest to take the regulation  and development  of  mines under the control of the  Union.   In such  a  case  the  test must  be  whether  the  legislative declaration covers the field 561 or not.  Judged by this test there can be no doubt that  the field covered by the impugned Act is covered by the  Central Act LIII of 1948. It  still remains to consider whether s. 2 of the  said  Act amounts in law to a declaration by Parliament as required by Art.  54.   When  the  said  Act  was  passed  in  1948  the legislative  powers  of  the  Central  and  the   Provincial Legislatures  were governed by the relevant Entries  in  the Seventh Schedule to the Constitution Act of 1935.  Entry  36 in List I corresponds to the present Entry 54 in List I.  It reads thus: "Regulation of Mines and Oil Fields and  mineral development  to  the  extent to which  such  regulation  and development  under Dominion control is declared by  Dominion law to be expedient in public interest".  It would be notic- ed   that  the  declaration  required  by  Entry  36  is   a declaration by Dominion law.  Reverting then to s. 2 of  the said  Act it is clear that the declaration contained in  the said section is put in the passive voice; but in the context there  would  be  no difficulty in  holding  that  the  said declaration  by  necessary  implication  has  been  made  by Dominion  law.  It is a declaration contained in  a  section passed  by  the Dominion Legislature’ and so it  is  obvious that it is a declaration by a Dominion law; but the question is:  Can  this  declaration by a Dominion  law  be  regarded constitutionally  as  declaration  by  Parliament  which  is required by Entry 54 in List I. It  has  been  urged before us  by  the  learned  Additional Solicitor-General  and  Mr. Amin that in dealing  with  this question we should bear in mind two general  considerations. The Central Act has been continued under Art. 372(1) of  the Constitution as an existing law, and the effect of the  said constitutional provision must be that the continuance of the existing  law would be as effective and to the  same  extent after  the  Constitution came into force as before.   It  is urged that after the said Act was passed and before the Con- stitution  came into force no Provincial  Legislature  could have  validly made a law in respect of the field covered  by the said Act, and it would be commonsense to assume that the effect of the continuance of the 562 said  law  under Art. 372(1) cannot be  any  different.   In other  words,  if  no  Provincial  Legislature  could   have trespassed  on the field covered by the said Act before  the Constitution,  the position would and must be the same  even after the Constitution came into force. It  is also contended that for the purpose of  bringing  the provision  of existing laws into accord with the  provisions of the Constitution the President was given power to make by order  appropriate  adaptations and  modifications  of  such laws,  and the object of making such  adaptations  obviously was  to  make  the continuance of the  existing  laws  fully effective.   It  is  in  the  light  of  these  two  general considerations,  so  the. argument runs, must the  point  in question   be  considered.  The  relevant  clause   in   the

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Adaptation  of Laws Order, 1950, on which reliance has  been placed  in  support  of  this argument  is  el.  16  in  the Supplementary Part of the said Order.  This clause  provides that  subject to the provisions of this Order any  reference by  whatever  form  of  words in any  existing  law  to  any authority  competent at the date of the passing of that  law to  exercise any powers or authorities, or to discharge  any functions, in any part of India shall, where a corresponding new   authority  has  been  constituted  by  or  under   the Constitution, have effect until duly repealed or amended  as if  it  were  a  reference  to  that  new  authority.    The petitioners  contend  that as a result of  this  clause  the declaration made by the Dominion Legislature in s. 2 of  the Central  Act must now be held to be the declaration made  by Parliament.   Is  this contention justified on  a  fair  and reasonable construction of the clause?  That is the crux  of the problem. In considering this question it would be relevant to  recall the  scheme  of  the Adaptation of  Laws  Order,  1950.   It consists  of Three Parts.  Part 1 deals with the  adaptation of  Central Laws and indicates the adaptation made  therein; Part  11  deals with the adaptation of Provincial  Laws  and follows  the same pattern; and Part III is  a  Supplementary Part   which   contains   provisions  in   the   nature   of supplementary   provisions.   A  perusal  of   the   clauses contained in Part                             563 I  would  show that though some adaptation was made  in  Act LIII  of  1948  it  was not thought  necessary  to  make  an adaptation in s. 2 of the said Act whereby  the  declaration implied in the said section has been expressly adapted  into a declaration by Parliament. Now,  the  effect  of el. 16 in substance is  to  equate  an authority  competent  at  the date of  the  passing  of  the existing  law to exercise any powers or authorities,  or  to discharge  any functions with a corresponding new  authority which  has  been constituted by or under  the  Constitution. Reference  to the authority in the con. text  would  suggest cases  like reference to the Governor-General eo nomine,  or Central Government which respectively would be equated  with the  President  or the Union Government.   Prima  facie  the reference  to  authority would not include  reference  to  a Legislature; in this connection it may be relevant to  point out  that Art. 372(1) refers to a competent  Legislature  as distinguished from other competent authorities.  That is the first  difficulty  in  holding that el.  16  refers  to  the Dominion  Legislature  and purports to equate  it  with  the Parliament. It  is clear that for the application of this clause  it  is necessary  that  a reference should have been  made  to  the authority  by  some words whatever may be  their  form.   In other  words  it  is  only where  the  existing  law  refers expressly to some authority that this clause can be invoked. It is difficult to construe the first part of this clause to include  authorities  to which no reference is made  by  any words in terms, but to which such reference may be  implied; and quite clearly the Dominion Legislature is not  expressly referred  to  in s. 2. In construing the present  clause  we think  it would be straining the language of the  clause  to hold  that  an authority to which no reference  is  made  by words  in  any  part of the existing  law  could  claim  the benefit of this clause. Besides,  there is no doubt that when the clause  refers  to any   authority   competent  to  exercise  any   powers   or authorities, or to discharge any functions, it refers to the

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powers,   authorities  or  functions  attributable  to   the existing law itself; that is to say, authorities 564 which  are  competent  to exercise powers  or  to  discharge functions under the existing laws are intended to be equated with  corresponding  new authorities.  It is  impossible  to hold that the Dominion Legislature is an authority which was competent to exercise any power or to discharge any function under  the  existing law.  Competence to exercise  power  to discharge   functions  to  which  the  clause  refers   must inevitably  be  related to the existing law and not  to  the Constitution  Act  of  1935  which  would  be  necessary  if Dominion  Legislature  was to be included  as  an  authority under  this clause.  The Constitution Act of 1935  had  been repealed  by the Constitution and it was not, and could  not obviously be, the object of the Adaptation of Laws Order  to make  any adaptation in regard to the said Act.   Therefore, the competence of the Dominion Legislature which flowed from the  relevant provisions of the Constitution Act of 1935  is wholly  outside this clause.  We have  carefully  considered the  arguments  urged before us by  the  learned  Additional Solicitor-General  and  Mr. Amin but we are unable  to  hold that  cl. 16 can be pressed into service for the purpose  of supporting  the  conclusion  that  the  declaration  by  the Dominion  Legislature  implied in s. 2 of Act LIII  of  1948 can,  by  virtue of cl. 16, be held to be a  declaration  by Parliament within the meaning of the relevant Entries in the Constitution.   If  that  be  the  true  position  then  the alternative  challenge to the vires of the Act based on  el. 16 of the Adaptation of Laws Order must fail. There  is  another possible argument which may  prima  facie lead to the same conclusion.  Let us assume that the  result of  reading  Art. 372 and cl. 16 of the Adaptation  of  Laws Order  is  that under s. 2 of Act LIII of 1948  there  is  a declaration  by Parliament as suggested by  the  petitioners and  the learned Additional Solicitor-General.   Would  that meet  the requirements of Entry 54 in List I of the  Seventh Schedule?   It is difficult to answer this question  in  the affirmative   because   the  relevant  provisions   of   the Constitution   are  prospective  and  the   declaration   by Parliament specified by Entry 54 must be declaration made by 565 Parliament subsequent to the date when the Constitution came into  force.   Unless a declaration is  made  by  Parliament after  the Constitution came into force it will not  satisfy the requirements of Entry 54, and that inevitably would mean that  the impugned Act is validly enacted under Entry 23  in List  II  of  the Seventh Schedule.  If  that  be  the  true position  then it would follow that even on  the  assumption that el. 16 of the Adaptation of Laws Order and Art. 372 can be  construed as suggested by the petitioners  the  impugned Act would be valid. Faced  with  this difficulty, both  the  learned  Additional Solicitor-General  and  Mr. Amin argued that cl. 21  of  the said Order may be of some assistance.  Clause 21 reads thus: "Any Court, Tribunal, or authority required or empowered  to enforce  any  law  in  force  in  the  territory  of   India immediately before the appointed day shall,  notwithstanding that this Order makes no provision or insufficient provision for the adaptation of the law for the purpose of bringing it into  accord  with  the  provisions  of  the   Constitution, construe the law with all such adaptations as are  necessary for  the said purpose".  Assuming that this clause is  valid we  do not see how it is relevant in the present case.   All that  this clause purports to do is to empower the Court  to

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construe  the law with such adaptations as may be  necessary for the purpose of bringing it in accord with the provisions of  the  Constitution.   There is no occasion  to  make  any adaptation  in construing Act LIII of 1948 for  bringing  it into accord with the provisions of the Constitution at  all. The said Act has been continued under Art. 372(1) and  there is  no  constitutional  defect  in  the  said  Act  for  the avoidance  of  which any adaptation is necessary.   In  fact what  the petitioners seek to do is to read in s. 2  of  the said Act the declaration by Parliament required by Entry  54 so  as to make the impugned Act ultra vires.  Quite  clearly cl.  21 cannot be pressed into service for such  a  purpose. Therefore, we reach this position that the field covered  by Act  LIII  of 1948 is substantially the same  as  the  field covered by the 72 566 impugned  Act but the declaration made by s. 2 of  the  said Act  does  not  constitutionally  amount  to  the  requisite declaration by Parliament, and so the limitation imposed  by Entry  54 does not come into operation in the present  case. Act LIII of 1948 continues in operation under Art. 372; with this  modification  that so far as the State  of  Orissa  is concerned  it is the impugned Act that governs and  not  the Central  Act.   Article  372(1) in  fact  provides  for  the continuance  of  the  existing  law  until  it  is  altered, repealed  or  amended by a competent  Legislature  or  other competent  authority.   In  the  absence  of  the  requisite parliamentary declaration the legislative competence of  the Orissa Legislature under Entry 23 read with Entry 66 is  not impaired, and so the said Legislature is competent either to repeal, alter or amend the existing law which is the Central Act  LIII  of 1948; in effect, after the  impugned  Act  was passed,  so far as Orissa is concerned the Central Act  must be deemed to be repealed.  This position is fully consistent with  the  provisions of Art. 372.  The result is  that  the material words used in cls. 16 and 21 being unambiguous  and explicit, it is difficult to give effect to the two  general considerations  on  which reliance has been  placed  by  the petitioners.   Incidentally the present case discloses  that in   regard  to  the  requisite  parliamentary   declaration prescribed  by Entry 54 in List I in its application to  the pre-Constitution Acts under corresponding Entry 36 in List I of the Constitution Act of 1935, there is a lacuna which has not  been covered by any clauses of the Adaptation  of  Laws Order;  that,  however,  is  a  matter  for  Parliament   to consider. There  is one more point which is yet to be considered.  Mr. Amin  contends  that Entry 23 in List II is subject  to  the provisions  in  List  I  with  respect  to  regulation   and development under the control of the Union, and according to him  Entry 52 in List I is one of such provisions.  In  this connection  he  relies on the said Entry  which  deals  with industries the control of which by the Union is declared  by Parliament  by law to be expedient in the  public  interest, and Industries (Development and Regulation) Act, 1951 (LXV 567 of  1951).   This  Act has been passed to  provide  for  the development  and  regulation of certain  industries  one  of which  undoubtedly  is coal mining industry.  Section  2  of this  Act  declares  that  it is  expedient  in  the  public interest  that the Union should take under its  control  the industries   specified   in  the   First   Schedule.    This declaration is a declaration made by Parliament, and if  the provisions of the Act read with the said declaration covered

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the  same field as is covered by the impugned Act, it  would undoubtedly  affect  the vires of the impugned Act;  but  in dealing  with this question it is important to bear in  mind the doctrine of pith and substance.  We have already noticed that  in  pith and substance the impugned Act  is  concerned with the development of the mining areas notified under  it. The Central Act, on the other hand, deals more directly with the  control  of  all industries  including  of  course  the industry  of coal.  Chapter II of this Act provides for  the constitution of the Central Advisory Council and Development Councils, chapter III deals with the regulation of scheduled industries, chapter IIIA provides for the direct  management or control of industrial undertakings by Central  Government in  certain  cases, and chapter IIIB is concerned  with  the topic  of  control of supply, distribution, price,  etc,  of certain articles.  The last chapter deals with miscellaneous incidental  matters.   The  functions  of  the   Development Councils  constituted under this Act prescribed by  s.  6(4) bring out the real purpose and object of the Act.  It is  to increase  the  efficiency or productivity in  the  scheduled industry  or  group of scheduled industries, to  improve  or develop   the  service  that  such  industry  or  group   of industries  renders or could render to the community, or  to enable  such industry or group of industries to render  such service   more  economically.   Section  9  authorises   the imposition of cess on scheduled industries in certain cases. Section  9(4) provides that the Central Government may  hand over  the  proceeds of the cess to the  Development  Council there  specified  and  that the  Development  Council  shall utilise  the said proceeds to achieve the objects  mentioned in cls. (a) to (d).  These 568 objects  include the promotion of scientific and  industrial research,  of  improvements in design and quality,  and  the provision for the training of technicians and labour in such industry or group of industries.  It would thus be seen that the  object  of  the  Act  is  to  regulate  the   scheduled industries with a view to improvement and development of the service that they may render to the society, and thus assist the solution of the larger problem of national economy.   It is  difficult  to  hold  that  the  field  covered  by   the declaration  made  by s. 2 of this Act,  considered  in  the light  of its several provisions, is the same as  the  field covered  by the impugned Act.  That being so, it  cannot  be said that as a result of Entry 52 read with Act LXV of  1951 the   vires  of  the  impugned  Act  can   be   successfully challenged. Our  conclusion,  therefore,  is that the  impugned  Act  is relatable  to  Entries 23 and 66 in List II of  the  Seventh Schedule,  and its validity is not impaired or  affected  by Entries  52 and 54 in List I read with Act LXV of  1951  and Act  LIII of 1948 respectively.  In view of this  conclusion it  is unnecessary to consider whether the impugned Act  can be  justified  under Entry 50 in List II, or whether  it  is relatable  to Entry 24 in List III and as such suffexs  from the vice of repugnancy with the Central Act XXXII of 1947. The  result  is  the petition fails and  is  dismissed  with costs. WANCHOO,  J.-I have read the judgment just delivered  by  my learned brother Gajendragadkar J. and regret that I have not been  able to persuade myself that the cess levied  in  this case  on all extracted minerals from any mine in any  mining area at a rate not exceeding five per centum of the value of the  minerals  at  the  pit’s  mouth  by  the  Orissa  State Legislature   under  s.  4  of  the  Orissa   Mining   Areas

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Development Fund Act, No. XXVII of 1952, (hereinafter called the  Act) is a fee properly so called and not a duty of  ex- cise.   The  facts  are all set out  in  the  judgment  just delivered and I need not repeat them. The  scheme of the Act, as appears from s. 3 thereof  is  to give power to the State Government, whenever it 569 thinks it necessary and expedient to provide amenities, like communications, water-supply and electricity for the  better development of any area in the State where-, in any mine  is situated  or  to  provide for the welfare  of  residents  or workers in any such area within. which persons employed in a mine or a group of mines reside or work, to constitute  such an area to be a mining area for the purposes of the Act,  to define  the limits of the area, to include within such  area any  local  area contiguous to the same and defined  in  the notification  and to exclude from such area any  local  area comprised  therein  and  defined  in  the  notification.   A notification  under s. 3 is made, after  hearing  objections from owners or lessees of mines.  After such an area is con- stituted  under  s. 3, a cess is imposed under s. 4  on  all extracted  minerals  from any mine in any such area  at  the rate  not  exceeding  five per centum of the  value  of  the minerals  at  the  pit’s mouth.  The cess  so  collected  is credited to a fund called the Orissa Mining Area Development Fund  created under s. 5 of the Act, besides  other  amounts with  which we are not concerned in this case.  The Fund  is to  be  applied to meet expenditure incurred  in  connection with  such  measures,  which in the  opinion  of  the  State Government,   are  necessary  or  expedient  for   providing amenities like communications, water-supply and electricity, for  the better development of mining areas and to meet  the welfare  of labour and other persons residing or working  in the  mining areas.  Then come other provisions  for  working out  the above provisions including s. 8, which gives  power to the State Government to frame rules to carry. into effect the  purposes of the Act.  The Rules were framed  under  the Act in January, 1955. The   constitutional   competence  of   the   Orissa   State Legislature  to levy the cess under the Act is  attacked  on two main grounds.  In the first place, it is urged that  the cess is in pith and substance a duty of excise under item 84 of List I of the Seventh Schedule and therefore the levy  of such  a  cess is beyond the competence of the  Orissa  State Legislature.  In the second place, it is urged that even  if the cess is a fee, in view 570 of  the two Acts of the Central Legislature and  Parliament, namely, The Mines and Minerals (Regulation and  Development) Act,  No. LIII of 1948 and The Industries  (Development  and Regulation) Act, No. LXV of 1951, the Orissa Legislature was not competent to pass the Act. The  petition  has been opposed on behalf of  the  State  of Orissa and the main contentions urged on its behalf are that the  cess  is  a fee properly so called and not  a  duty  of excise  and  therefore  the  Orissa  State  Legislature  was competent to levy it and the two Central Acts do not  affect that competence.  In the alternative it has been urged  that even  if  the  cess  is a  tax  the  State  Legislature  was competent to levy it under item 50 of List If of the Seventh Schedule. The first question therefore that falls for consideration is whether  the  cess  in  this’  ease  is  a  tax  or  a  fee. Difference  between  a  tax properly so  called  and  a  fee properly  so  called came up for consideration  before  this

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Court  in three cases in 1954 and was considered at  length. In  the  first  of them,  namely,  The  Commissioner,  Hindu Religious  Endowments,  Madras v.  Sri  Lakshmindra  Thirtha Swamiar of Sri Shirur Mutt it was pointed out that- "though  levying  of fees is only a particular form  of  the exercise of the taxing power of the State, our  Constitution has  placed fees under a separate category for  purposes  of legislation  and  at  the  end of  each  one  of  the  three legislative  lists, it has given a power to  the  particular legislature  to  legislate  on the  imposition  of  fees  in respect  to  every one of the items dealt with in  the  list itself". It was also pointed that- "the  essence of a tax is compulsion, that is to say, it  is imposed under statutory power without the taxpayer’s consent and   the   payment  is  enforced  by   law.    The   second characteristic of a tax is that it is an imposition made for public  purpose without reference to any special benefit  to be conferred on the payer of the tax.  This is expressed  by saying  that the levy of tax is for the purposes of  general revenue, which when (1)  [1954] S.C.R. 1005. 571 collected  forms 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, as it is said,  no element of quid pro quo between the tax-payer and the public authority.   Another feature of taxation is that as it is  a part  of the common burden, quantum of imposition  upon  the tax-payer depends generally upon his capacity to pay."  As to fees, it was pointed out that- "a  ’fee’ is generally defined to be a charge for a  special service rendered to individuals by some governmental agency. The  amount  of fee levied is supposed to be  based  on  the expenses  incurred  by  the  Government  in  rendering   the service,  though  in many cases the  costs  are  arbitrarily assessed.   Ordinarily, the fees are uniform and no  account is taken of the varying abilities of different recipients to pay." Finally, it was pointed out that- "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............... Public interest seems to be at  the basis  of all impositions, but in a fee it is  some  special benefit which the individual receives." The consequence of these principles was that- "if,  as we hold, a fee is regarded as a sort of  return  or consideration  for  services  rendered,  it  is   absolutely necessary  that the levy of fees should, on the face of  the legislative provision be co-related to the expenses incurred by  Government in rendering the  services...............  If the   money  thus  paid  is  set  apart   and   appropriated specifically  for  the performance of such work and  is  not merged in the public revenues for the benefit of the general public, it could be counted as fees and not a tax." Having laid down these principles, that case then considered the  vires  of  s.  76 of the  Madras  Hindu  Religious  and Charitable  Endowments  Act,  No. XIX of 1951,  and  it  was pointed  out  that  the material fact  which  negatived  the theory  of  fees in that case was that the money  raised  by levy of the contribution was not ear-marked or specified for defraying the expenses 572 that the Government had to incur in performing the services.

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All  the  collections went to the consolidated fund  of  the State  and all the expenses had to be met not out  of  those collections  but  out of the general revenues  by  a  proper method  of  appropriation as was done in the case  of  other government   expenses.    That  in  itself  might   not   be conclusive, but in, that case there was total absence of any co-relation between the expenses incurred by the  Government and the amount raised by contribution under the provision of s.  76  and in those circumstances the theory of  return  or counter-payment or quid pro quo could not have any  possible application  to that case.  Consequently,  the  contribution levied under s. 76 was held to be a tax and not a fee. In  the second case of Mahant Sri Jagannath Ramanuj  Das  v. The State of Orissa (1), a similar imposition by the  Orissa Legislature  came up for consideration.  After referring  to the earlier case, it was pointed out that- "two  elements are thus. essential in order that  a  payment may  be regarded as a fee.  In the first place, it  must  be levied  in  consideration  of  certain  services  which  the individuals  accepted either willingly or unwillingly.   But this  by itself is not enough to make the imposition a  fee, if the payments demanded for rendering of such services  are not set apart or specifically appropriated for that  purpose but  are  merged in the general revenue of the State  to  be spent for general public purposes." The  Orissa  imposition  was held to be a  fee  because  the collections  made  were  not merged in  the  general  public revenue  and  were  meant for the  purpose  of  meeting  the expenses  of the Commissioner and his office which  was  the machinery  set up for due administration of the  affairs  of the  religious institution.  They went to constitute a  fund which  was contemplated by s. 50 of the Orissa Act and  this fund  was  specifically  set apart  for  rendering  services involved in carrying out the provisions of the Act. The third case, namely, Ratilal Panachand Gandhi (1)  [1954] S.C.R. 1046. 573 v.   The  State of Bombay (1) came from Bombay.  Sec. 58  of the Bombay Act, No. XXIX of 1950, provided for an imposition in proportion to the gross annual income of the trust.  This imposition was levied for the purpose of due  administration of  the  trust  property  and  for  defraying  the  expenses incurred  in connection with the same.  After  referring  to the two earlier cases, the Court went on to say that- "taxis  a  common  burden  and the  only  return  which  the taxpayer gets is participation in the common benefits of the State.   Fees, on the other hand, are payments primarily  in the  public interest, but for some special service  rendered or some special work done for the benefit of those from whom the payments are demanded.  Thus in fees there is always  an element  of quid pro quo which is absent in  a  tax......... But in order that the collections made by the Government can rank  as  fees, there must be co-relation between  the  levy imposed  and  the  expenses incurred by the  State  for  the purpose of rendering such services." It was then pointed out that  the contributions, which were collected under  s.  58, were to be credited in the Public Trusts Administration Fund as  constituted  under s. 57.  This fund was to  be  applied exclusively   for  the  payment  of  charges  for   expenses incidental  to  the  regulation of  public  trusts  and  for carrying  into  effect  the  provisions  of  the  Act.   The imposition therefore was in that case held to be a fee. These  decisions clearly bring out the difference between  a tax  and  a fee and generally speaking there  is  always  an element  of  quid  pro quo in a fee and  the  amount  raised

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through  a fee is co-related to the expenses  necessary  for rendering the services which are the basis of quid pro  quo. Further,  the  amount  collected as a fee  does  not  go  to augment the general revenues of the State and many a time  a special  fund is created in which fees  are  credited-though this is not absolutely necessary.  But as I read these deci- sions, they cannot be held to lay down that ’What is in pith and substance a tax can become a fee merely (1)  [1954] S.C.R. 1055. 574 because a fund is created in which collections are  credited and  some services may be rendered to the persons from  whom collections are made.  If that were so, it will be  possible to  convert many taxes not otherwise leviable into  fees  by the  device  of creating a special fund and  attaching  some service to be rendered through that fund to the persons from whom  collections are made.  I am therefore of opinion  that one  must first look at the pith and substance of the  levy, and  if  in  its pith and substance it  is  not  essentially different  from a tax it cannot be converted into a  fee  by creating  a  special  fund  in  which  the  collections  are credited and attaching some services to be rendered  through that fund. Let  me  then look at the pith and substance  of  the  cess, which has been imposed in this case.  The cess consists of a levy  not  exceeding  five per centum of the  value  of  the minerals  at  the  pit’s mouth on  all  extracted  minerals. Prima facie such a levy is nothing more nor less than a duty of excise.  Item 84 of List I gives power to levy duties  of excise exclusively to the Union and is in these terms :- "Duties of excise on tobacco and other goods manufactured or produced in India except- (a)  alcoholic liquors for human consumption; (b)  opium,  Indian  hemp  and  other  narcotic  drugs   and narcotics,  but including medicinal and toilet  preparations containing  alcohol  or  any  substance  included  in   sub- paragraph (b) of this entry." This  item  gives power to Parliament to  impose  duties  of excise on all goods manufactured. or produced in India  with certain   exceptions   mentioned   therein.    Taking   this particular  case, coal is produced from the mine  and  would clearly  be covered by the words " other goods  produced  in India" and a duty of excise can be levied on it.  What  then exactly  is  meant by a duty of excise?  Reference  in  this connection  may  be made to Governor-General in  Council  v. Province  of  Madras  (1).  In that  case  the  point  arose whether the sales-tax imposed by the Madras Legislature  was a duty of excise.  The Privy Council pointed out that-- (1)  (1945) L.R. 72 I.A. 91. 575 "in  a Federal constitution in which there is a division  of legislative   powers   between   Central   and    Provincial legislatures,  it appears to be inevitable that  controversy should  arise  whether  one  or  other  legislature  is  not exceeding   its  own,  and  encroaching  on   the   other’s, constitutional legislative power, and in such a  controversy it is a principle, which their Lordships do not hesitate  to apply  in the present case, that it is not the name  of  the tax but its real nature, its ’pith and substance’ as it  has sometimes been said which must determine into what  category it falls." The Privy Council went on to consider what a duty of  excise was and said that- "it is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced.  It is

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a  tax  on  goods not on sales or the proceeds  of  sale  of goods.  Though sometimes a duty of excise may be imposed  on first sales, a duty of excise and a tax on the sale of goods were  separate  and  distinct  imposts and  in  law  do  not overlap." The  Privy Council approved of the decisions of the  Federal Court  in re The Central Provinces and Berar Sales of  Motor Spirit  and  Lubricants  Taxation  Act,  1938  (1)  and  The Province of Madras v. Messrs.  Boddu Paidanna and Sons  (2). It  seems  to have been urged that because in some  cases  a duty  of excise may be levied on the occasion of  the  first sale  and  a  sales  tax may also  be  levied  on  the  same occasion, there is really no difference between the two.  It is however clear that a duty of excise is primarily a tax on goods manufactured or produced; it is not a tax on the  sale of  goods,  though the taxing authority may as a  matter  of concession  to the producer not charge the  tax  immediately the goods are produced and may postpone it, to make it  easy for the producer to pay the tax, till the first sale is made by him; nevertheless the charge is still on the goods and is therefore a duty of excise.  On the other hand, a sales  tax can only be levied when a sale is made and there is  nothing to prevent its levy on the first sale.  The two concepts (1) (1939) F.C.R. 18.             (2) (1948) F.C.R. go. 576 are however different and, as the Privy Council pointed out, a  sales tax and a duty of excise are separate and  distinct imposts  and in law do not overlap.  The pith and  substance of a duty of excise is that it is primarily a duty levied on a  manufacturer  or  producer in respect  of  the  commodity manufactured or produced. Let me therefore see what the Orissa Legislature has done in the  present  case.   It has levied a cess  at  a  rate  not exceeding  five per centum on the value of minerals  at  the pit’s  mouth on all extracted minerals.  All  the  extracted minerals are nothing other than goods produced and the  cess is levied on the goods produced at a rate not exceeding five per  centum  of  the value at the  pit’s  mouth.   The  cess therefore in the present case cannot be anything other  than a  duty  of excise.  The pith and substance of the  cess  in this case falls fairly and squarely within entry 84 of  List I and is therefore a duty of excise, which cannot be  levied by  the Orissa State Legislature.  I may in this  connection refer  to the cesses levied by the Central  Legislature  and Parliament  by Act XXXII of 1947 and by the Act No.  LXV  of 1951.   Sec.  3 of Act XXXII of 1947 lays  down  that  there shall be levied and collected as a cess for the purposes  of that  Act a duty of excise on all coal and  coke  dispatched from  collieries at such rate not less than four  annas  and not  more than eight annas per ton as may from time to  time be  fixed by the Central Government by notification  in  the Official  Gazette.   This is obviously a tax  on  the  goods produced, the basis of the tax being so much per ton.  Again sec. 9 of Act LXV of 1951 lays down that there may be levied and collected as a cess for the purposes of that Act on  all goods  manufactured  or  produced  in  any  such   scheduled industry  as may be specified in this behalf by the  Central Government by notified order a duty of excise at a rate  not exceeding  two annas per centum of the value of  the  goods. This   again  is  clearly  a  tax  on  goods   produced   or manufactured  and is in the nature of a duty of excise,  the basis  of the tax being so much of the value of  the  goods. If these two taxes are duties of excise,                             577 I  fail to see any difference in pith and substance  between

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these two taxes and the cess levied under the Act. It is however urged that the method employed in the Act  for realising the cess is only a method of quantification of the fee and merely because of this quantification, the pith  and substance of the impost does not change from a fee to a duty of  excise.  Reference in this connection was made to  three cases of quantification.  In Sir Byramjee Jeejeebhoy v.  The Province  of Bombay (1), a question arose with respect to  a tax  imposed on urban immovable property, whether it  was  a tax on lands and buildings.  The challenge to the tax was on the ground that it was tax on income or capital value within items  54  and 55 of List I of the Seventh Schedule  of  the Government  of India Act and could not therefore be  imposed by  the Bombay Legislature.  It was held that the tax was  a tax on lands and buildings within the meaning of item 42  of List II of the same Schedule and that the basis of the  tax, which was the annual value, would not convert it into a  tax on  income or capital value.  The High Court considered  the pith  and  substance  of  the  said  Act  and  came  to  the conclusion   that  every  tax  on  annual  value   was   not necessarily a tax on income and it was held that the mode of assessment of a tax did not determine its character and  one has to look to the essential character of the tax to  decide whether  it was a tax on income or on lands  and  buildings. Looking to the pith and substance of the tax it was held  in that  case that it was a tax on lands and  buildings.   That decision was in the circumstances of that case right because the  intention of the legislature was not to tax the  income of any one; the essential character of the tax in that  case was  to tax the lands and buildings and the annual value  of the lands and buildings was only taken as a mode of  levying the tax.  In the present case, however, the very mode of the levy of the cess is nothing other than the levy of a duty of excise  and  therefore the principle of  quantification  for purposes of a fee cannot be extended to (1)  I.L.R. 1940 Bom. 58. 578 such an extent as to convert what is in pith and substance a tax into a fee on that basis. The  next  case  to which reference was  made  is  Municipal Corporation, Ahmedabad v. Patel Gordhandas Hargovandas  (1). In that case the Ahmedabad Bo. rough Municipality had levied a  rate on open lands and the basis of the levy was one  per centum of the capital value of the land.  It was urged  that this  amounted to a capital levy within entry 54 of List  I; but  the  court repelled that contention and held  that  the levy  was in pith and substance a tax on lands,  which  came within  entry 42 of List II of the Seventh Schedule  to  the Government  of India Act.  A distinction was made between  a tax  on  land which is levied on the basis  of  its  capital value and a tax which is on capital treating it as an  asset itself.   This decision also, if I may say so with  respect, is  correct,  for the basic idea was to tax lands  and  some method had to be found for doing so and the method  evolved, though  it might look like a capital levy, was in  pith  and substance not so. But the theory of quantification which  is the  basis of these two cases cannot be stretched so far  as to  turn levies which are in pith and substance  taxes  into fees,  by  the  process of attaching  certain  services  and creating a fund. The  third case is Ralla Ram v. The Province of East  Punjab (2).   That was a case of a tax on lands and  buildings  and annual value was the basis on which the tax was levied.  The Federal  Court  rightly  pointed  out  that  the  pith   and substance of the levy had to be seen and on that view it was

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not  income-tax  but a tax on lands and  buildings  and  the method  adopted was merely a method of quantification.   The Federal  Court  also  pointed out that "where  there  is  an apparent conflict between an Act of the Federal  Legislature and  an  Act of the Provincial Legislature, we must  try  to ascertain  the  pith and substance or the  true  nature  and character  of the conflicting provisions and that before  an Act  is declared ultra vires, there should be an attempt  to reconcile  the two conflicting jurisdictions, and,  only  if such a reconciliation should prove (1) I.L.R. 1954 Bom. 41. (2) (1948) F.C.R. 207. 579 impossible, the impugned Act should be declared invalid." It may  also be pointed out that in all these three cases,  one source  of  income of an individual or one item out  of  the total capital of an individual was the basis of  calculation while  income-tax or capital levy is generally on the  total income  or the total capital of a person.  That aspect  must have  gone  into the decision that the method  employed  was merely a mode for imposing a tax on lands and buildings.  In the  present case, however, I see no difference between  the method of imposing a duty of excise and the method  employed in the Act for imposing a cess-a matter which will be  clear from  the cesses imposed under the two Central Acts  already referred to (No.  XXXII of 1947 and No. LXV of 1951).  It is not  as  if  there  could be no method  of  imposing  a  fee properly  so  called in this case except the  one  employed. Two  methods readily suggest themselves.  A lump sum  annual fee  could  be levied on each mine even on  a  graded  scale depending on the size of the mine as evidenced by its  share capital.   Or a similar graded fee could be levied  on  each mine  depending on its size determined by the number of  men employed   therein.    Where   therefore   the   result   of quantification  is  to bring a  particular  impost  entirely within the ambit of a tax it would not be right to say  that such an impost is still a fee, because certain services have to  be  rendered  and  a fund  has  been  created  in  which collections  of  the  impost are  credited.   If  this  were permissible  many  taxes  not otherwise  leviable  would  be converted  into  fees  by the simple device  of  creating  a special  fund and attaching certain services to be  rendered from the amount in that fund.  That would in my opinion be a colourable   exercise  of  the  power  of  legislation,   as explained  in  K. C. Gajapati Narayan Deo v.  The  State  of Orissa (1).  Let me illustrate how taxes can be turned  into fees on the so-called basis of quantification with the  help of  the  device  of creating a fund  and  attaching  certain services to be rendered out of monies in the fund.  Take the case  of income-tax under item 82 of List I of  the  Seventh Schedule, which is exclusively reserved (1)  [1954] S.C.R. 1. 580 for the Union.  Suppose that some State Legislature wants to impose a tax on income other than agricultural income in the garb  of  fees.  All that it has to do is then to  create  a special  fund  out of the amounts collected  and  to  attach rendering  of certain services to the fund.  All that  would be necessary would be to define the services to be  rendered so widely that the amount required for the purpose would  be practically  limitless.   In  that case there  would  be  no difficulty  in levying any amount of tax on income, for  the amount collected would always be insufficient for the  large number  of services to be rendered.  What has to be done  is to  find  out a number of items in Lists II and III  of  the

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Seventh  Schedule in respect of which fees can be levied  by the State Legislature.  These fees can be levied on a  total basis  for a large number of services under various  entries of  Lists  II  and III.  A fund can  be  created,  say,  for rendering  services  of various kinds to  residents  of  one district.   In order to meet the expenses of tendering  such services,  suppose, the legislature imposes a tax  on  every one in the district at 10 per centum of the net total income (other than agricultural income); the amount so collected is put  in  a  separate fund and ear-marked  for  such  special services  to be rendered to the residents of that  district. Can  it  be said that such a levy is a fee  justified  under various  entries  of  Lists II and III, and  not  a  tax  on income,  on  the  ground  that this  is  merely  a  mode  of quantification?   As an instance, take, item 6 of  List  II, "Public health and sanitation, hospitals and  dispensaries"; item 9, "Relief of the disabled and unemployable"; item  II, Education;   item   12,  Libraries,  museums   and   similar institutions";  item  13, communications, that  is  to  say, roads,  bridges and other means of communications; item  17, "Water,  that  is  to say, water  supplies,  irrigation  and canals,  drainage and embankments, water storage  and  water power"; and item’, 25, "Gas and gas-works"; item 23 of  List III,  "Social security and social insurance, employment  and unemployment";   item  24,  "Welfare  of  labour   including conditions  of work, provident funds,  employers’  liability workmen’s compensation, invalidity and old age 581 pensions  and maternity benefits"; item 25, "Vocational  and technical  training of labour"; and item 38,  "Electricity". Assume that a fund is created for rendering, these  services to  the residents of a district.  The State  Legislature  is entitled to impose fees for rendering these services to  the residents of the district; the costs of these services would obviously be limitless and in order to meet these costs, the State  legislature levies a consolidated fee for  all  these purposes  at  10 per centum of the total net income  on  the residents  of  the  district  (excluding  his   agricultural income)  as a measure of quantification of the fee.  Can  it be  said in the circumstances that such a levy would not  be Income-tax,  simply because a fund is created to be used  in the  district where collections are made and these  services have  to  be  rendered out of the fund  so  created  to  the residents of that district and to no others?  The answer can only  be one, viz., that the nature of the impost is  to  be seen in its pith and substance; and if in pith and substance it  is  income-tax within item 82 of List I of  the  Seventh Schedule  it  will still remain income-tax in spite  of  the creation of a fund and the attaching of certain services  to the monies in that fund to be rendered in a particular area. Such an impost can never be justified as a consolidated  fee on the ground that it is merely a method of quantification. Compare what has been done in this case.  Sec. 3 of the  Act which  refers  to  the  services  to  be  rendered  mentions communications, that is,, roads, bridges and other means  of communication (barring those given in List I),  water-supply and  electricity,  for the better development of  the  area. These three items themselves would mean expenditure of  such large  amounts  that anything could be charged as a  fee  to meet  the costs, particularly in an undeveloped  State  like Orissa.   Further, the section goes on to mention  provision for  the welfare of residents or workers in any  such  area, which  would  include  such things as  social  security  and social  insurance,  provident-funds,  employer’s  liability, workmen’s compensation, invalidity and old age pensions  and

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maternity   benefits   and  may  be  even   employment   and unemployment.  Again large funds would 74 582 be  required  for these purposes.  Therefore,  the  services enumerated  in s. 3 being so large and requiring such  large sums,  any amount can be levied as a fee and in the name  of quantification any tax, even though it may be in List I, can be imposed; and that is exactly what has been done,  namely, what  is really a duty of excise has been imposed as  a  fee for these purposes which fall under items 13 and 17 of  List II and 23, 24 and 38 of List III.  There can be no doubt  in the  circumstances that the levy of a cess as a fee in  this case  is  a colourable piece of legislation.  I do  not  say that  the  Orissa State Legislature did  this  deliberately. The  motive of the legislature in such cases  is  irrelevant and it is the effect of the legislation that has to be seen. Looking  at  that,  the cess in this case  is  in  pith  and substance nothing other than a duty of excise under item  84 of   List  I  and  therefore  the  State   legislature   was incompetent to levy it as a fee. The next contention on behalf of the State of Orissa is that if  the  cess is not justified as a fee, it is a  tax  under item  50  of  List  II of the  Seventh  Schedule.   Item  50 provides  for  taxes  on  mineral  rights  subject  to   any limitations imposed by Parliament by law relating to mineral development.  This raises a question as to what are taxes on mineral rights.  Obviously, taxes on mineral rights must  be different  from  taxes on goods produced in  the  nature  of duties  of excise.  If taxes on mineral rights also  include taxes  on  minerals produced, there would be  no  difference between  taxes on mineral rights and duties of excise  under item  84  of List I. A comparison of Lists I and II  of  the Seventh Schedule shows that the same tax is not put in  both the  Lists.   Therefore,  taxes on mineral  rights  must  be different from duties of excise which are taxes on  minerals produced.  The difference can be understood if one sees that before minerals are extracted and become liable to duties of excise somebody has got to work the mines. The usual  method of working them is for the owner of the mine to grant mining leases to those who have got the capital to work the  mines. There should 583 therefore be no difficulty in holding that taxes on  mineral rights  are taxes on the right to extract minerals  and  not taxes  on  the  minerals actually extracted.   Thus  tax  on mineral  rights would be confined, for example, to taxes  on leases of mineral rights and on premium or royalty for that. Taxes on such premium and royalty would be taxes on  mineral rights while taxes on the minerals actually extracted  would be  duties of excise.  It is said that, there may  be  cases where the owner himself extracts minerals and does not  give any  right of extraction to somebody else and that  in  such cases  in the absence of mining leases or  sub-leases  there would  be no way of levying tax on mineral right,-,.  It  is enough  to say that these cases also, rare though they  are, present  no  difficulty.  Take the case of taxes  on  annual value of buildings.  Where there is a lease of the building, the annual value is determined by the lease-money; but there are  many cases where owners themselves live  in  buildings. In  such  cases also taxes on buildings are  levied  on  the annual  value worked out according to certain rules.   There would be no difficulty where an owner himself works the mine to value the mineral rights on the same principles on  which leases  of  mineral  rights are made and  then  to  tax  the

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royalty  which,  for example, the owner might  have  got  if instead of working the mine himself he had leased it out  to somebody  else.  There can be no doubt therefore that  taxes on mineral rights are taxes of this nature and not taxes  on minerals  actually produced.  Therefore the present case  is not  a  tax on mineral rights; it is a tax on  the  minerals actually  produced  and  can be no  different  in  pith  and substance  from  a tax on goods produced which  comes  under Item  84  of List I, as duty of excise.   The  present  levy therefore under s. 4 of the Act cannot be justified as a tax on mineral rights. In  the view I have taken, it is not necessary  to  consider the  other  point,  raised on  behalf  of  the  petitioners, namely, that even if it is a fee, in view of the two Central Acts  (mentioned  earlier) the, Orissa Legislature  was  not competent to pass the Act.  I would 584 therefore  allow the petition, and declare that  the  Orissa Mining  Areas  Development  Fund Act, 1952,  is  beyond  the constitutional competence of the Orissa Legislature to  pass it.  The whole Act must be struck down because there will be very  little left in the Act if s. 4 falls as it must.   The legislature would never have passed the Act without s. 4. By  COURT.  In accordance with the majority Judgment of  the Court, the Writ Petition is dismissed with costs.