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PETITIONER: THE SECRETARY TO GOVERNMENT OFMADRAS & ANR.

       Vs.

RESPONDENT: P.R. SRIRAMULU & ANR.

DATE OF JUDGMENT22/11/1995

BENCH: FAIZAN UDDIN (J) BENCH: FAIZAN UDDIN (J) BHARUCHA S.P. (J) MAJMUDAR S.B. (J)

CITATION:  1996 AIR  767            1996 SCC  (1) 345  JT 1995 (8)   305        1995 SCALE  (6)589

ACT:

HEADNOTE:

JUDGMENT:                             WITH                WRIT PETITION NO. 1390 OF 1987                ------------------------------ Central Bank of India V. The Secretary to Government of Tamilnadu & Ors.                       J U D G M E N T      Court has  been directed  against  the  judgment  dated March 3,  1975 delivered by the High Court of Madras in Writ Petition  No.   749/1966  P.R.  Sriramulu  &  Anr.  Vs.  The Secretary to  the  Government  of  Madras.  Home  Department alongwith a group of other Writ Petitions and Civil Appeals, declaring Article (1) in Schedule (1) to the Tamilnadu Court Fees and  Suits Valuation Act, 1955 and Sub-rule (1) of Rule (1) of  Order II of the High Court Fees Rules, 1956 based on Article (1)  of Schedule  (1) of Madras Act No. XIV of 1955, to be  invalid in so-far-as they relate to the levy of Court Fees on ad-valorem scale. 2.   The facts  in brief leading to the aforesaid appeal are that certain  lands belonging to the respondents No. 1 and 2 herein situated  in Tondiarpet were acquired at the instance of Public  Works Department  in respect of which award No. 6 and 8 both of 1962 were made on 5.3.1962 and 10.3.1962. On a reference made under Section 18 of the Land Requisition Act, at the  instance of  respondents No. 1 and 2, IVth Assistant City Civil  Judge, Madras  enhanced  the  compensation.  The respondents being  dis-satisfied preferred  appeals  to  the High Court  for further enhancement of the compensation. The Court Fee  payable according  to Madras Court Fees and Suits Valuation Act,  1955 on such appeals was an ad-valorem Court Fee at the rate of 7 1/2 per cent of the total claim without any upper  limit for  such levy  irrespective of the amount. The respondents  No. 1  and 2 challenged the validity of the

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aforesaid  provisions  of  levy  of  Court  Fees  and  Suits Valuation Act  of 1955  with reference to levy of Court Fees ad-valorem working out at the rate of 7 1/2 per cent without upper  limit  by  contending  that  the  levy  is  not  only exorbitant   but    wholly   arbitrary,   unreasonable   and unjustified  bearing   no  relationship   to  the   cost  of administration of justice and that in fact it was not a levy of Court  Fee but  really a levy of tax though purporting to be a  levy of  fee. The  respondents took the stand that the Court Fees  must be related to the cost of administration of justice and  cannot be  used as  a means of taxation for the purpose of  raising the  revenue to  the Government  for its general administration.  Respondents further  took the stand that the  pattern of  levy of  Court Fees  prior to 1955 was only to  levy an  ad-valorem fee  up to  a certain limit and thereafter the fee was on a reduced scale and that the scale of fees in other States of the country are also on different basis and  not on the basis of ad-valorem fee without limit. The said  provisions therefore  were sought  to be  declared invalid. 3.   One Mr.  Kelu Eradi,  Joint Secretary to the Government of Tamilnadu had filed the counter afidavit on behalf of the State supporting  the levy  of  ad-valorem  Court  Fees  and opposing the  writ petitions However, at the arguments stage one Mr.  J. Shiva  Kumar, Deputy Secretary to the Government also  filed   a  supplementary   counter   affidavit   dated 11.10.1966 on  behalf of  the Government  but the High Court did not  take into  account the  said supplementary  counter affidavit  and   decided  writ  petitions.  Relying  on  the principles laid  down in Corporation of Madras Vs. Spencer & Co. the  High Court  allowed the group of writ petitions and appeal and  struck down  the  aforementioned  provisions  by taking the  view that  the levy of ad-valorem flat rate of 7 1/2 per  cent without any upper limit would be unreasonable, because where  the cost  of service  had to  be  distributed between several  persons, it  would  not  be  equitable  and reasonable if  the fees were so fixed that the whole cost or a grossly  disproportionate part  of it  was  imposed  on  a particular section  of  litigants.  The  said  judgment  was challenged before  this Court  in appeal. This Court allowed the appeal  and set aside the judgment of the High Court and remitted  the  matter  back  to  the  High  Court  with  the following observations :      "It seems  to us  that we  cannot dispose  of this      appeal   without   giving   opportunity   to   the      respondents to file and affidavit or affidavits in      reply to  the supplemental counter affidavit dated      October 11, 1966 because if we take the figures as      given and  explained by  the  Advocate-General  we      cannot say  that the  State is making a profit out      of the  administration of  civil justice.  Various      items both on the receipt side and the expenditure      side have  to be  carefully analyzed  to see  what      items or  portion of  items should  be credited or      debited to the administration of civil justice:      It is  true, as held by the High Court, that it is      for the  State to  establish that  what  has  been      levied is  court fee  properly so  called  and  if      there is  any enhancement  the State  must justify      the enhancement:      We are accordingly constrained to allow the appeal      and set  aside the  judgment passed  by  the  High      Court and remit the case to it:      We direct  that the  High  Court  should  give  an      opportunity to  the writ  petitioners to  file  an

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    affidavit or  affidavits in reply to the affidavit      dated October  11, 1966. The High Court shall then      decide whether  the impugned  fees are  the  court      fees or taxes on litigants or litigation." 4.   After  remand  by  this  Court  the  respondents  filed further  affidavits   traversing  the  supplemental  counter affidavit dated  October 11, 1966 filed by Mr. Shiv Kumar on behalf of  the Government.  After considering the affidavits filed on  behalf of  the parties  and the material on record the High  Court took  the view in the impugned judgment that there is  no idea of quid pro quo in the levy at the rate of 7 1/2  per cent  flat rate  without limit  as  there  is  no necessity to  raise the  Court fees  as compensation for the cost of  service rendered  and to meet any increased cost in the administration  of civil  justice and  that there was no principle of  rationalization justifying  demand at  a  flat rate. The  High Court  further  held  that  considering  the circumstances the  impost inherently  bears within  more the concept of  tax than  fee and the levy imposing, as it does, on  a   particular   section   of   litigants   is   grossly disproportionate  part   of  the  burden  and  the  same  is unreasonable and  arbitrary. The expenditure incurred by the Government as  shown in some of the items, in the opinion of the  High  Court  could  not  be  debited  to  the  cost  of administration of justice which the litigant can be required to compensate and that the expenditure in the administration of criminal  justice is  also not  debitable to  the cost of administration of  civil justice  in Courts.  The High Court further held  that the  record indicated  that for  the year 1955-56 the  State was  making a profit varying between 9 to 21 lakhs.  On the  basis of these conclusions the High Court struck down  Article 1  in Schedule 1 to the Tamilnadu Court Fees and Suits Valuation Act and sub-rule 1 of Rule 1 of the High Court  Rules, 1956  based on Article 1 of Schedule 1 to the Madras  Act No.  14 of 1955 as invalid against which the aforementioned appeal has been directed. 5.   The petitioner in writ petition No. 139/1987 is a Bank. The said  Bank had  filed a  civil suit  for recovery of Rs. 6,50,40,605.12 against  M/s. Mettur  Textile Industries Ltd. and Others on which it had to pay Court Fee amounting to Rs. 48,78,054.25 on  ad-valorem basis  at the  rate of 7 1/2 per cent under  Article 1  of Schedule  1 of the said Madras Act No. XIV  of  1955.  Certain  other  money  suits  were  also contemplated by  the Bank  and having  learnt that the Civil Appeal No. 736/1975 has been filed in this Court against the Madras judgment,  the Bank has also filed the aforesaid writ petition under  Article 32  of  the  Constitution  of  India challenging the  said levy of Court Fees on the flat rate of 7 1/2 percent ad-valorem, relying on the same grounds as are set out in the aforesaid appeal. 6.   Before we  embark upon  the points  in controversy  and respective contentions relating thereto we may briefly trace the history  with regard  to the  levy of Courts Fee in this country on  the litigating  parties. Before  the  advent  of British rule  in India  the administration  of  justice  was considered to be the basic function of the State as guardian of the  people without  the levy  of any charge on the party approaching the  Court for  redress of its grievance. As far as the  memory goes  during the  Moghul rule  and the period prior  to   that,  there   was  no   fee  payable   even  on administration of  civil justice  and the  administration of justice was totally free. It was only after the British rule that regulations  imposing  Court  Fees  were  brought  into existence. In  the beginning  the imposition  of the fee was nominal but  in the course of time it was enhanced gradually

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under the  impression that  it would prevent the institution of frivolous  and groundless  litigation and as an effective deterrent to  the abuse  of process  of  the  Court  without causing any  impeciment in  the institution  of just claims. However insignificant this view may be that the levy of fees would have  a tendency  to  put  a  restraint  on  frivolous litigation, that  view at  any rate had the merit of seeking to achieve  a  purpose  which  was  believed  to  have  some relevance to the administration of justice. Since about past two decades  the levy  of Court  Fees on higher scales would seem to  find its  justification, not in any purpose related to the  sound administration  of justice, but in the need of the State  Government for revenue as a means for recompense. It may  be seen  that the  Central Court  Fees Act  of  1870 fixed,  what   may  be   described  in  view  of  subsequent happenings, a moderate scale of Court Fees. But the fact may not be  lost sight  of that after the enactment of the Court Fees Act.  1870 the financial needs of the State Governments have multiplied  to a  much larger extent. Consequently most of the States have enacted their own Court Fees Acts or have amended the  original Acts  themself beyond  recognition and thereby have  increased the  scale of  fees to a level which has given rise to the feeling that it is no longer a fee but a heavy tax on the litigants. 7.   It  cannot  be  disouted  that  the  administration  of justice is  one of  the main  functions of  the State. It is also a  fact that  the functions  of the State in the modern times have become too extensive encompassing a large area of activity. Now  the State  has not only to maintain system of administration of  justice for  the maintenance  of law  and order, but  it has  also to  provide a  system to enable its citizens to convass their rights against wrongs done to them as well  as to  the  State  itself,  statutory  parties  and Government  Corporations,   they  deing   now  the   largest litigants by  reason of  the growing  tendency  of  all  the States to  project themselves  into various social, economic and industrial  spheres of  the society,  which during  pre- independence days, was a rare phenomena. It is for all these reasons  that  the  States  came  forward  to  levy  fee  by legislative amendments  in order  to cover  up the  expenses towards  the   pay,  allowances  and  pensions  of  Judicial Officers  and   establishment   staff,   their   residential accommodations.  Court  buildings  repairs  and  maintenance thereof as  well as  provision for  transport, libraries and stationery, besides  other expenses  under various heads and machinery engaged  and employed  for the  administration  of justice. 8.   In the  present appeal  and writ petition before us, it may be  noted that  the questions  that  arise  out  of  the arguments adoressed  to us  by the  learned counsel  for the parties, may be formulated as under:- 1) What  is the nature of the Fees taken in Court within the meaning of  Entry  3,  List  II,  in  7th  Schedule  of  the Constitution. Whether the fee so charged is a tax or a fee? 2) Whether it is a colourable exercise of legislative power, in as  much as  the State  in fact  is raising tax under the guise of levying a fee because the levy is excessive to such an extent  as to  be a pretence of a fee but it is not a fee in reality ? 3) Whether  the levy  of Court  Fees  on  ad-valorem  basis, without an  upper limit renders the impost a tax in as-much- as, having  regard to  the very  nature of  services,  which consist of  adjudication of  disputes, a stage is inevitably reached wherein  after and  above an  ad-valorem  levy,  the proportionate increase  in the  value of  the subject matter

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ceases to be a fee and becomes a tax ? 4) Whether  the impugned  impositions are fees - there being no correlation between the services and the levy and because State makes  a profit  out of  the administration  of  civil justice  as   it  does   not  spend   the  entire  money  an administration of  civil justice  but also in administration of criminal  justice and  a large  surplus is  left out even after meeting  the expenses of the administration of justice ? 9.   We may  state here  that the  aforementioned  questions raised before  us are  not new  but were raised and agitated earlier also and decided by this Court. In this connection a reference to  some of  the decisions may be made. In I.M.& M Industries Vs.  State of Bihar [AIR 1971 SC 1182] this Court expressed the  view that  before any levy can be upheld as a fee,  it   must  be  shown  that  the  levy  has  reasonable correlation with the services rendered by the Government. In other words  the levy  must be proved to have a quid pro quo for the  services rendered.  But in  such matters it will be impossible to have an exact correlationship and that the cor relationship expected to exist is one of a general character and not  of arithmetical  exactitude. It  has  been  further observed  that  the  correlationship  between  the  services rendered and  the levy  of fee  is essentially a question of fact. 10. A  Constitution Bench  of this  Court while enterpreting Entry 3, List II in Schedule 7 of the Constitution of India, in the  case of  Government of  Madras Vs. Zenith Lamos [AIR 1973 SC  724] took  the view  that the  fees taken in Courts cannot be  equated with  taxes and  in paragraph  31 of  the report held as under:      ‘"In this case we are concerned with the      administration of  civil  justice  in  a      State. The  fees must  have relation  to      the  administration  of  civil  justice.      While  levying   fees  the   appropriate      legislature is  competent to  take  into      account all  relevant factors, the value      of the  subject matter  of the  dispute,      the  various   steps  necessary  in  the      prosecution of  a suit  or  matter,  the      entire cost  of the upkeep of courts and      officers  administering  civil  justice,      the vexatious  nature of  a certain type      of   litigation   and   other   relevant      matters. It  is free to levy a small fee      in some  cases, a  large fee  in others,      subject of  course to  the provisions of      Art, 14.  But one  thing the Legislature      is not  competent to  do, and that is to      make   litigants   contribute   to   the      increase of  general public  revenue. In      other words,  it cannot  tax litigation,      and make  litigations pay,  say for road      building   or    education   or    other      beneficial  schemes  that  a  State  may      have.   There    must   be    a    broad      correlationship with  the fees collected      and the  cost of administration of civil      justice." Further in  the said  report this Court also agreed with the following observations made in [ILR (1968) (1) Madras 247 at pp. 340-341:      "When a levy is impugned as a colourable      exercise of legislative power, the State

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    being charged  with raising  a tax under      the guise  of levying a fee, courts have      to scrutinize  the scheme  of  the  levy      carefully,  and  determine  whether,  in      fact there  is correlation  between  the      services and  the levy,  or whether  the      levy is  excessive to  such an extent as      to be  a pretence of a fee and not a fee      in reality.  If, in  substance, the levy      is not  to raise  revenues also  for the      general purposes  of the  State the mere      absence of  uniformity or  the fact that      it has  no direct relation to the actual      services rendered  by the  authority  to      each individual  who obtains the benefit      of the  service, or  that  some  of  the      contributories do  not obtain  the  same      degree of  service as  others may,  will      not change  the essential  character  of      the levy." 11.  Again in  Om Prakash  Vs. Giri Raj Kishori [AIR 1986 SC 726] this  Court observed  in para  10 of the report that in determining a  levy as fee the true test must be whether its primary and  essential purpose  is the rendering of specific services to  a specified  area or  class,  it  being  of  no consequence that  the State may ultimately and indirectly be benefited by it. 12.  Apart from  the aforementioned  decisions the points in controversy and  questions raised  before us, as referred to above, are  squarely covered  by a decision of this Court in P.M. Ashwanatha  Narayana Setty Vs. State of Karnataka [1989 Supple. (1)  SCC 696.  While dealing  with  the  distinction between a  "fee" and  a "tax"  and after  reviewing all  the earlier pronouncements  of  this  Court  on  the  conceptual distinction between a fee and a tax, it has been observed in para 35 (page 712) of the report as under :      "What emerges  from these pronouncements      is that  if the  essential character  of      the impost  is that some special service      is intended  or envisaged  as a quid pro      quo to  the class  of citizens  which is      intended to  be benefited by the service      and  there   is  a   broad  and  general      correlation between the amount so raised      and the  expenses involved  in providing      the services,  the impost  would partake      the character of a "fee" notwithstanding      the circumstance  that the  identity  of      the amount  so raised is not always kept      distinguished  but   is  merged  in  the      general  revenues   of  the   State  and      notwithstanding  the   fact  that   such      special services,  for which  the amount      is raised,  are, as  they very often do,      incidentally or  indirectly benefit  the      general public  also. The  test  is  the      primary  object  of  the  levy  and  the      essential  purpose  it  is  intended  to      achieve. The correlationship between the      amount raised  through the ’fee’ and the      expenses  involved   in  providing   the      services need  not be  examined  with  a      view  to   ascertaining  any   accurate,      arithmetical equivalence or precision in      the  correlation;   but  it   would   be

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    sufficient that  there is  a  broad  and      general correlation." In para  66 of the said report while repelling the arguments with regard  to the  alleged arbitrariness and inequities in the imposition  of the  ad-valorem impost  without an  upper limit this  Court in  paragraph 67  (page 720) of the report observed as follows :      "The anomalies  that the  policy  behind      the impugned  provisions can  produce in      onceivable  cases   could,  indeed,   be      inquitable or  even quite startling. But      the  argument   in  the   last  analysis      becomes   indistinguishable   from   the      contention that  the correlation  of the      services to  the fee  would have  to  be      decided  on   the  basis   of  how   the      correlation operate  in each  individual      case.  It  would  be  an  insistence  on      testing the conceptual nature of the fee      on the  basis of  the degree of the quid      pro quo  in the  case of each individual      payer of  the fee.  That is  the peccant      part  of  the  argument.  Once  a  broad      correlation between  the totality of the      expenses on the services, conceived as a      whole, on  the one hand and the totality      of the  funds raised  by way of the fee,      on the  other, is  established, it would      be no part of the legitimate exercise in      the examination of the constitutionality      of the  concept of  the impost to embark      upon its  effect  in  individual  cases.      Such  a   grievance  would   be  one  of      disproportionate    nature     of    the      distribution of  the fees  amongst those      liable  to   contribute  and   not   one      touching the  conceptual nature  of  the      fee." It has  been further  observed in  para 72 (page 721) of the said report as under:      "What   emerges   from   the   foregoing      discussion is  that  when  a  broad  and      general correlation between the totality      of the  fee on  the  one  hand  and  the      totality of the expenses of the services      on the  other is  established, the  levy      will not fail in its essential character      of a  fee on  the ground  alone that the      measure  of   its  distribution  on  the      persons or incidence is disproportionate      to the  actual  services  obtainable  by      them. The  argument that where the levy,      in an  individual case,  far exceeds the      maximum value, in terms of money, of the      services that  could at all be possible,      then,   qua,   that   contributor,   the      correlation breaks  down is a subtle and      attractive  argument.   However,  on   a      proper comprehension of the true concept      of a  fee the argument seems to us to be      more subtle  than accurate.  The test of      the correlation is not in the context of      individual contributors.  The test is on      the comprehensive  level of the value of      the totality  of the  services, set  off

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    against the totality of the receipts. If      the  character  of  the  ’fee’  is  thus      established,   the   vagaries   in   its      distribution amongst  the class,  do not      detract from  the concept  of a ’fee’ as      such,   though    a   wholly   arbitrary      distribution of the burden might violate      other constitutional limitation." In this  connection it  will also  be appropriate  to have a look at  the observations  made in  para 79 (at page 723) of the said report which are as follows:      "The problem  is, indeed,  a complex one      not   free   from   its   own   peculiar      difficulties. Though  other  legislative      measures    dealing     with    economic      regulation are  not outside  Article 14,      it is  well recognised  that  the  State      enjoys   the   widest   latitude   where      measures  of   economic  regulation  are      concerned. These measures for fiscal and      economic    regulation     involve    an      evaluation of  diverse and  quite  often      conflicting   economic    criteria   and      adjustment  and   balancing  of  various      conflicting social  and economic  values      and interests.  It is  for the  State to      decide what  economic and  social policy      it    should     pursue     and     what      discriminations advance those social and      economic  policies.   In  view   of  the      inherent  complexity   of  these  fiscal      adjustments,  courts   give   a   larger      discretion to  the  legislature  in  the      matter of  its preferences  of  economic      and social  policies and  affectuate the      chosen  system   in  all   possible  and      neasonable ways.  If two or more methods      of adjustments  of an  economic  measure      are    available,     the    legislative      preference in  favour  of  one  of  them      cannot be  questioned on  the ground  of      lack of  legislative wisdom  or that the      method adopted  is not  the best or that      there were  better ways of adjusting the      competing  interests   and  claims.  The      legislasture  possesses   the   greatest      freedom in  such areas.  The analogy  of      principles of  the burden of tax may not      also be  inapposite in  dealing with the      validity  of  the  distribution  of  the      burden of a ’fee’ as well." 13.  Now adverting  to the  facts of the present case it may be stated  that the  High Court after comparing the scale of Court Fees  and noticing  the difference in the incidence of Court Fees  between 1922  Act  and  1955  Act  recorded  the findings that  the levy at 7 1/2 per cent under Article 1 of Schedule 1  of the  Madras Act of 1955 on an ad-valorem flat rate basis  without any  limit does  not  satisfy  the  pre- requisites of a valid levy of Court Fees as according to the High Court  it has  in itself more the element of tax rather than the  idea of  quid pro  quo. In other words there is no correlation between  the levy  of the  Court  Fees  and  the services rendered  to the  litigants  in  administration  of civil justice.  The High  Court also  took the view that the levy at  the aforesaid rate imposing on a particular section

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of litigants  is grossly disproportionate part of the burden and,  therefore,   deserves  to   be   struck   down   being unreasonable and  arbitrary. Further,  the High Court, after considering the  affidavit filed by Mr. Kelu Eradi on behalf of the  Government and  also the  statements appended to the supplemental counter  affidavit for  the years  1955 to 1965 found that  except for the year 1954-55 the State was making yearly profit  varying between  9 to 21 lacs. With regard to the year  1954-55 the High Court found that the total actual receipts for  1954-55 were  Rs. 122.12  lacs as  against the expenditure  of   Rs.  124.94  lacs  for  the  said  period. According to  the High  Court the  aforementioned figures of expenditure included Rs. 36.70 lacs relating to the criminal courts, Rs.  3.57 lacs  to Presidency Magistrate Courts, Rs. 6.26 lacs  to Law  Officers to  the Government and Rs. 58.31 lacs pertaining  to the Civil & Sessions Courts and took the view that  the expenditure  incurred by  the  Government  in payment to  their Law Officers cannot be debited to the cost of administration  of justice  which  the  litigant  can  be required to  compensate for.  The High  Court also  took the view that  the criminal  Courts do not render any service to the litigants  and the  expenditure in the administration of criminal  justice   is  not   debitable  to   the  cost   of administration  of   civil  justice   in  Courts.  On  these reasonings the  High Court  in support of its aforementioned conclusions took  the view  that if the aforementioned total sum of  Rs. 46.53  lacs and part of Rs. 58.31 lacs under the head "Civil  and Sessions Courts" are deducted the total net balance would be less than Rs. 78.41 lacs and the State thus had earned  a profit  of Rs. 43.71 lacs over the expenditure of about Rs. 78.41 lacs in the year 1954-55. 14.  Having   regard    to   the   decisions   and   various pronouncements cited  above it  is difficult  to accept  the reasoning and  the view  taken by  the  High  Court  in  the impugned judgment.  As  discussed  above  if  the  essential character of  the levy  is  that  some  special  service  is intended as  quid pro  quo to the class of citizens which is intended to  be benefited  by the  service and  a broad  and general correlation  between the amount so collected and the expenses incurred  in providing  the services  is  found  to exist, then  such levy  would partake  the  character  of  a "fee", irrespective  of the  fact that such special services for  which   the  amount   by  levy   of  fee  is  collected incidentally and indirectly benefit the general public also. In order  to establish  the correlation  between the  amount recovered by  way of  "fee" and  the  excenses  incurred  in providing the  services  they  should  not  be  examined  so minutely or  be whipped  in  golden  scale  to  discern  any difference between the two. It is not necessary to ascertain the same  with any  mathematical exactitude  for finding the correlation out  the test  would be satisfied if a broad and general correlation  is found to exist and once such a broad correlation between  the totality  of the  expenses  on  the services rendered  as a  whole, on  the  one  hand  and  the totality of  the amount  so raised by way of the fee, on the other is  established, it would be no part of the legitimate exercise in  the examination of the constitutionality of the concept of  the amongst  to embark  upon its  effect in  the individual cases.  If the  aforesaid relation  is  found  to exist in  the levy of the fee, the levy cannot be said to be wanting in  its essential  character of  a fee on the ground that the  measure of  its distribution  on  the  persons  or incidence is  disproportionate to  the actual  services made available to  them. In view of this position of law the view expressed by  the High  Court that  ad-valorem levy of Court

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Fee in  an individual case far exceeds the maximum value, in terms of  money, dua  that contributor and hence the concept of correlation  fails  and  renders  the  levy  invalid  and illegal cannot  be acceded  for the  simple reason  that the correlation  is   not   in   the   context   of   individual contributors,  the   test  being   its  ascertainment  on  a comprehensive  basis  keeping  in  view  the  value  of  the totality of  the service,  qua, the  totality  of  receipts. According to D.O. Marco, the author of the "First Principles of Public  Finance" page  33, "the  fee must be equal in the aggregate to the cost of production of the services. That is the aggregate  amount of  the fees  which the State collects from individual  customers must equal the aggregate expenses of production."  Thus the  test of  the correlation is to be reckoned at  the aggregate  level and  not at the individual level as is also the view taken in Asnwanatha Narayana Setty s case (supra). 15.  As pointed  out earlier with reference to the decisions of this  Court the  State enjoys  the widest  latitude where measure  of   economic  regulations   are  concerned.  These measures for  fiscal  and  economic  regulation  involve  an evaluation of  diverse and  quite often conflicting economic criteria, adjustment  and balancing  of various  conflicting special and  economic values  and interests.  It is  for the State to  decide what  economic and  social policy it should pursue. It  is settled  law that  in view  of  the  inherent complexity of  the fiscal  adjustments, the  Courts  give  a large discretion  to the  legislature in  the matter  of its preferences of  economic and  social policies and effectuate the chosen  system in  all possible  and reasonable ways. If two or more methods of adjustment of an economic measure are available, the  legislative preference  in favour  of one of them  cannot   be  questioned  on  the  ground  of  lack  of legislative wisdom  or that  the method  adopted is  not the best or  there are  better ways  of adjusting  the competing interests and  the claims  as the  legislature possesses the greatest freedom in such areas. It is also well settled that lack  of  perfection  in  a  legislative  measure  does  not necessarily  imply  its  constitutionality  as  no  economic measure has  so far  been discovered  which is free from all discriminatory impact  and that  in such  a complex  area in which no  fool proof device exists, the Court should be slow in imposing  strict and  rigorous standard  of  scrutiny  by reason of which all local fiscal schemes may be subjected to criticism under  the Equal  Protection clause. Having regard to these  settled principals  the impugned  Judgment of  the High Court could not be sustained. 16.  It may  be noticed  that the  observation of  the  High Court that  the State  Government had earned a profit of Rs. 43.71 lacs  out of  the total  receipts for the year 1954-55 and that  the State had made yearly profit varying between 9 to 21  lacs during  the period  from 1955 to 1965, cannot be accepted to  be correct  as the  said observations have been made  ignoring   the  facts   stated  in  the  supplementary affidavit filed  by Mr.  J. Shiva Kumar, Deputy Secretary to the Government and other material on record. It may be noted that factually  it is  neither possible  nor practicable  to give the exact break up of figures in regard to the expenses incurred under  different heads and other departments of the Government  in  relation  to  the  administration  of  civil justice, Shri Shiva Kumar in his supplementary affidavit has also stated  in para  6 that  it is  difficult  to  estimate accurately to  the last  rupee the expenditure incurred on a number of  items relating  to the  administration  of  civil justice. He  has, however,  given various  heads under which

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the  levy   of  fees  is  made  as  also  various  heads  of expenditure relating  to the  administration of  justice  of which details  were not  given by  Shri Kelu  Eradi  in  his affidavit which  alone has  been taken  into account  by the High Court  while recording  its conclusions  which resulted into the  error. Apart  from the  facts stated  above it may also be taken note of that there could not be any scientific method by  which  the  levy  of  fee  may  be  made  exactly corresponding  to  the  expenditure  in  a  particular  year relating  to  the  administration  of  civil  justice.  Some fluctuations are bound to occur in respect of the recoveries by levy  of fee  and the  expenditure on  administration  of civil justice. In any case it is also not the requirement of law that  the collection  raised  through  the  levy  should exactly tally  or  correspond  to  the  expenditure  in  the administration of  civil justice.  It has already been ruled by this Court that the co-relation between the amount raised through the  fee and  the expenses incurred in providing the services should  not be examined with exactitude with a view to ascertain  any accurate  and arithmetical equivalence but the  test   would  be  satisfied  if  a  broad  and  general correlation is  found to exist. That being so, even if it is accepted that  the recoveries during the period from 1955-65 were in  excess to  the tune  of about  Rs. 9 to 21 lacs per year, the  levy would  not fail on that account because once it is  established that the primary and essential purpose is the rendering  of specific services to a specified class, it becomes  immaterial   that  the  State  has  earned  certain benefits out of it indirectly. 17.  The High  Court also  took the  view that  the criminal courts do  not render  any service  to  the  litigants  and, therefore,  the   expenditure  made   in  administration  of criminal  justice   cannot  be   debited  to   the  cost  of administration  of   civil  justice   in  Courts.  While  so observing the  High Court  lost sight  of the  fact  that  a Munsif who deals with the civil administration of justice is also invested  with the  magisterial powers  and deals  with criminal matters  also. So  is the  case with the members of the higher  judicial service.  In such  circumstances it  is difficult to  find any  proper basis  or formula to separate the charges  of civil and criminal administration of justice when civil  and criminal  courts are  generally not distinct but both  functions are  discharged  by  the  same  Judicial Officer.  It   appears  to  be  not  only  difficult  rather impossible to ascertain as to how much public time was spent by a  Judicial Officer  while dealing  with criminal matters and how much time was spent while dealing with civil matters so as to come to a definite conclusion that any surplus much less sizeable  surplus is  left out  of the receipts derived from Court  Fees after  meeting the  actual  expenditure  in administration of  civil justice.  It is  for these  reasons that the  Deputy Secretary, Shiv Kumar in his affidavit also stated that  it is  difficult to  estimate accurately to the last rupee  the expenditure  incurred on  a number  of items mentioned by  him in  his affidavit. It is expressed by this Court also, "that it is difficult to estimate accurately the expenditure actually made by the Courts in administration of civil justice  but it does not men that there does not exist a broad  correlation between  the expenses  and  the  amount raised by way of levy." 18.  While considering  the reasonableness  of the  levy the High Court also took into account the vast difference in the rites of  fee between  the  years  1922  to  1955.  In  this connection it  may be  pointed out that having regard to the changing social  and economic  conditions of the country and

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the threats of frequent inflationary trends hovering around, the levy  of court  fees cannot  remain static and has to be amended according  to the  requirements of  the  times.  The increase in  the Court  Fees has  to be  appreciated  having regard to the increased need of the revenue by reason of the increased cost  of the administration of justice. That being so, it  would be  a futile  exercise to compare the rates of Court fee  under the Court Fee Act, 1922 with those of 1955. There is  bound to be a world of difference in the rates due to large span of time having elapsed between 1922 and 1955. 19.  The High  Court also took the view that the expenditure incurred by  the Government in payment to their Law Officers cannot be  debited to  the cost of administration of justice which the litigant can be required to compensate for. In our opinion this view of the High Court also can not be accepted for the  simple reason that these Law Officers are also part of the  machinery of  the administration  of justice.  Apart from what has been stated above in the aforegoing paragraphs it may  be noticed that the view expressed by the High Court cannot be  sustained in  view of  the subsequent judgment of this Court  in the  case of All India Judges association Vs. Union of  India [1992  (1) SCC  119] whereby  this Court had given  various   directions  to   the  Government  involving considerable amount  of funds  most of which will fall under the head  of administration of civil justice. The Government is, therefore,  bound to  raise funds  through the medium of fee. 20.  Learned counsel for the respondents, however, submitted that this  Court in  the case  of Asnwanatha  Narayana Setty (supra) ultimately  did not approve the scheme of ad-valorem levy of  Court Fees  without upper  limit and urged that the said decision  cannot be  taken as  an aid in support of the contention of the appellant that the ad-valorem of Court Fee without upper  limit is justified and legal. It is true that in the  last sentence  of para  88 in  the said  report this Court observed as under:      "though the  scheme cannot be upheld. at the same time. it cannot be struck down either." While laying  emphasis on the aforesaid observation. learned counsel for  the respondents  ignored the  view expressed in paras just  preceding the  said observation,  wherein it has been emphatically  stated that  it is  difficult to say that the ad-valorem principle which may not be an ideal basis for distribution  of   a  fee   can  be   said  to   incur   any unconstitutional  infirmity.   Formity.  From   the   entire discussion of  the said decision it is clear that this Court did not  strike down  the  ad-valorem  levy  of  Court  Fees without upper  limit and  at the  same  time  has  expressed displeasure with  regard to  the scheme  and it  is for this reason that  certain successions were in para 95 of the said report in  record to  the rationalization  of the Court Fees under the  "Rajasthan Act  and the  Karnataka Act" where the rate of  Court Fees  was 10 per cent ad-valorem which is not the case here before us. 21.   It  may be appropriate here to mention that ultimately the the  State of  Madras amended  its Court Fees rules with effect form  11.9.1968 whereby the uniform levy of 7 1/2 der cent ad-valorem  Court Fees  has been  given up and the slab system with  a tapering scale has been adopted. This fact is clear from  the affidavit  dated 1.11.1973  filed before the high Court  by one  S.P.Ambrose, Special  Secretary  to  the Government of Tamilnadu, Home Department. 22. Before  parting with  these matters, we me may point out that it  could not  be disouted  that the  administration of justice is  a service which the State is under an obligation

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to render  to its subject. There can be no two opinions that the amount  raised from  the suitors  by way  of way  of fee should not normally exceed the cost of the administration of justice because.  possibly there  could be  no justification with the  State to  enrich itself from high court fees of to secure  revenue   for  general   administration.  The  total receipts from  the Court fees should be such as by and large can cover  the cost  of  administration  of  justice.  There should also  be some  measure of uniformity in the scales of Court fees  through out the country as there appears to be a vast difference  in the  scales of  court  fees  in  various States of  the country.  The feasibility  of a fixed maximum chargeable fee also deserves serious consideration. 23.   In  the facts  and circumstances  discussed above  the impugned judgment of the High Court con not be sustained and has to be set aside. 24.   In  the result  the  appeal  succeeds  and  is  hereby allowed. The  impugned judgment  of the  High Court  is  set aside. The  writ petition  No.1390/1987  is  dismissed.  The parties are  left to bear their respective costs in both the matters.