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PETITIONER: CORPORATION OF CALCUTTA AND ANOTHER

       Vs.

RESPONDENT: LIBERTY CINEMA

DATE OF JUDGMENT: 14/12/1964

BENCH: SARKAR, A.K. BENCH: SARKAR, A.K. SUBBARAO, K. DAYAL, RAGHUBAR AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R.

CITATION:  1965 AIR 1107            1965 SCR  (2) 477  CITATOR INFO :  R          1967 SC1040  (8)  RF         1967 SC1895  (10,11,12)  RF         1968 SC1232  (25,27,53,86,95,96)  RF         1971 SC 344  (5,6)  R          1971 SC1182  (9)  RF         1971 SC2100  (8,18,19,21)  RF         1973 SC1374  (6)  R          1974 SC1660  (9,21,32)  RF         1975 SC 846  (19)  R          1975 SC1007  (12)  D          1975 SC2193  (3,6,8,10)  E          1979 SC 321  (13,15,18,26,40)  RF         1979 SC1475  (20,22)  E          1980 SC1008  (15)  RF         1985 SC 218  (7)  R          1990 SC 560  (13)

ACT: Calcutta   Municipal   Act  (33  of  1951),  ss.   413   and 548--License  fee  on cinema houses-whether tax or  fee  for rendering service--Validity of levy and s. 548.

HEADNOTE: Under a. 413 of the Calcutta Municipal Act, 1951, no  person shall  without  a  licence granted  by  the  Corporation  of Calcutta, keep open any cinema house for public amusement in Calcutta.  Under s. 548(2), for every licence under the Act, a  fee may be charged at such rate as may from time to  time be  fixed  by  the  Corporation.   In  1948,  the  appellant (Corporation) fixed fees on the basis of annual valuation of the  cinema  house.  The respondent, who was the  owner  and licensee of a cinema theatre, had been paying a licence  fee of Rs. 400 per year on that basis.  In 1958, the  appellant, by a Resolution, changed the basis of assessment of the fee. Under  the  new method the fee was to be assessed  at  rates prescribed  per  show according to  the  sanctioned  seating capacity of the cinema house; and the respondent had to  pay a  fee  of Rs. 6,000 per year.   The  respondent,  therefore

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moved  the High Court for the issue of a writ  quashing  the resolution and the application was allowed. In  the appeal to the Supreme Court the appellant  contended that  (i)  the levy was a tax and not a fee  in  return  for services and (ii) s. 548(2) does not suffer from the vice of excessive  delegation; while the respondent  contended  that (i) the levy was a fee in return for services to be rendered and not a tax, and as it was not commensurate with the costs incurred  by the Corporation in providing the services,  the levy  was invalid; (ii) if s. 548 authorised the levy  of  a tax, as distinct from a fee in return for service  rendered, it  was invalid, as it amounted to an illegal delegation  of legislative functions to the appellant to fix the amount  of a  tax  without any guidance for the purpose and  (iii)  the levy was invalid as violating Art. 19(1) (f) and (g) of  the Constitute. HELD (per Sarkar, Raghubar Dayal and Mudholkar JJ) : (i) The was not a fee but a tax. [490 F] The  Act does not intend to use the word "fee" as  referring only  to  a  levy in return for services,  for,  the  levies authorised  by  some other sections of the  Act  are  really "taxes", though called "fees".  Besides, the words used  are "fee  for  the licence" and these words do  not  necessarily mean  a  "fee in return for services" as  is  apparent  from Arts.  110(2)  and 199(2) of the  Constitution,  where  both expressions are used indicating that they are not the  same. [483 G-H] The word "fee" in s. 548 must be read as referring to a  tax as any other reading would make the section invalid, and  in interpreting  a  statute,  it  ought to  be  made  valid  if possible. [484 B-C] The decisions of this Court establish that in order to  make a  levy  a fee for services rendered, the levy  must  confer special  benefit on the persons on whom it is imposed.   The levy under s. 548 (2) is not a "fee in return for  services" as  the Act does not provide for any services of  a  special kind being rendered, resulting in benefits to the person on 478 whom it is imposed.  S. 527(43) permits by laws to be framed for  regulating  the inspection,  supervision  and  control, among others, of cinema houses; but it is not obligatory  to make such by laws and therefore, there may be no services to render.  Even the by law made provides only for  inspection, and the work of inspection done by the appellant was only to see  that  the  terms of the licence were  observed  by  the licensee.  It was not a service to him, and so, no  question arises of correlating the amount of levy to the costs of any service.   The levy therefore is not a fee and must be  tax. [485 B-C, F; 488 E; 490 E-F] The Commissioner, Hindu Religious Endowments, Madras v. Shri Lakshmindra  Thirtha  Swamiar of Sirur Mutt,  [1954]  S.C.R. 1005,  H. H. Sudhindra Thirtha Swamiar v.  Commissioner  for Hindu  Religious and Charitable Endowments, [1963]  Supp.  2 S.C.R. 302 and The Hingir Rampur Coal Co. Ltd. v. The  State of Orissa and Ors. [1961] 2 S.C.R. 537, referred to. Whether  a  particular  levy is a fee or a  tax  has  to  be decided only by reference to the terms of the section.   Its position in the Act cannot determine its nature   ;       an imposition which is by its terms a tax and not a fee, cannot become a  fee  by  reason  of its having been  placed  in  a certain part of the Statute.  [489 B] It is not right     to  say that s. 443 does not impose  any duty  on the appellant and that therefore, the  licence  fee leviable  under s. 548, should be fixed only with  reference to  rendering of services.  The Corporation has been set  up

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only  to  perform municipal duties and its  powers  are  for enabling it to perform those duties.  But, since there is no provision  for service being rendered, the levy cannot be  a fee and would indisputably be a tax. [490 B, C, D] (ii) The  fixing of the rate of a tax is not of the  essence of legislative power and the fixing of rates may be left  to a non legislative body.  When it is so left to another  body the  legislature  must provide guidance for  such  fixation. Since there is sufficient guidance in the Act as to how  the rate of the levy under s. 548 is to be fixed, the section is valid. [492 D, F; 493 G-H; 497 B] The  appellant  is an autonomous body.  It  has  to  perform various  statutory functions.  It is given power  to  decide when  and in what manner the functions are to be  performed. For  all  this it needs money and its needs will  vary  from time  to time with the prevailing exigencies.  Its power  to collect tax is necessarily limited by the expenses  required to  discharge the functions. it has, therefore, where  rates have not been specified in the statute, to fix such rates as may  be  necessary  to meet its needs,  and  that  would  be sufficient guidance to make the exercise of its power to fix the rate, valid. [496 D-F] Case law reviewed. (iii)     The  challenge to the levy on the ground  that  it amounts to expropriation is wholly unfounded. No  doubt  the  increase in the rate of fee  was  large  but considering   the   available  seating   capacity   of   the respondent, it cannot be said to be unreasonably high.  [482 E-F] The contention of the appellant that even if no guidance for taxation  has  been prescribed the section  would  still  be valid,  because,  the Act may be said to  have  been  passed under  Entry  5 of List II of the Seventh  Schedule  to  the Constitution and that Entry authorises the passing of a  law concerning  the powers of a municipal corporation  and  that such  powers  must necessarily include the power to  levy  a tax, was left open. [497 D-E, H] 479 per  Subba  Rao and Ayyangar, JJ (dissenting) (i)  If  on  a proper  construction of the Act one reached  the  conclusion that  Part IV of the Act was not exhaustive of the range  of levies  permitted by the Act, and the fees permitted  to  be levied by s. 548(2) were also taxes, there would be  nothing in  s. 127(3) or (4) to militate against that  construction. But, an examination of the provisions of the Act makes three matters abundantly clear; (a) that the Act draws a sharp and clear distinction between taxes properly so called and fees; (b) that the division into Parts and Chapters is logical and clear cut and no matter which properly falls under a subject set  out under a Part or Chanter heading, is dealt  with  in any other; and (c) that taxes, by whatever designation  they might be called, are all comprehended and dealt with by Part IV  and by Part IV alone, and that what is permitted  to  be imposed  by s. 548(2) is only a fee as distinguished from  a tax.  As admittedly there is no correlation between the  fee charged and the service rendered, the impugned levy was  not authorised  and the High Court was right in granting  relief to the respondent. [525 B-C; 526 D-G] To say that to enable a fee strictly so called to be levied, an  immediate advantage measurable in terms of money  should be  conferred on the payer is to take too narrow a  view  of the  concept of a fee.  The word "services" in  the  context has  to  be  understood  in  a  wide  sense,  as   including supervision  and control over the activities for the  excess of  which the fee is charged.  The judgements of this  Court

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in  the Shirur Mutt case, [1954] S.C.R. 1005, and the  cases following  it,  do not lay down that where  an  activity  is regulated  by  licenses, the imposition of charges  for  the inspection,  supervision  and  control of  the  activity  to ensure  compliance  with  the regulation is  not  a  benefit conferred  on  the  licensee, so as  to  render  the  amount charged for such a licence not a fee in the real sense,  but a  tax, whose constitutional validity could be sustained  by reference to the taxation entries in Lists I and II. [508 A; 515 F-G; 517 H; 518 A] Case law considered. Also,  Art. 110(2) of the Constitution far  from  supporting the appellant’s contention, negatives it.  If pure  taxation measures,  employing  the machinery of  licences  and  fees, would  be money-bills, then the fees for licences which  are outside  the  definition,  would be  those  fees  which  are imposed to meet the cost of regulation and supervision of an activity  which  is  controlled by  the  requirements  of  a licence and compliance with its terms.  Besides, if the levy of  such licence fees on various activities which  form  the subject  of  legislative  control or  regulation  under  the various  non-taxation entries in the Lists were  treated  as tax, Entries 96 and 66 in the respective Lists would have to be  read  as  taxation  entries, because,  such  a  levy  is permitted only by those entries.  This however would be con- trary  to the entire scheme on which the several entries  in the  Lists  are  made, namely,  setting  out  the  exclusive general  legislative powers the enumeration of  taxes  which could  be imposed and finally the power to, impose  fees  in respect of any of the matters in the List. [502 C; 519  B-C, E, G] (ii) Viewed  as  a  tax  the  delegation  in  s.  548(2)  is unconstitutional,  as  essential legislative  functions  are parted  with to the municipality, a subordinate  law  making body, and therefore the provision is unconstitutional.  [546 B] Essential  legislative  functions cannot  be  delegated  but where the law lays down the principles and affords  guidance to  the subordinate lawmaking authority details may be  left for being filled up by the executive or by other authorities vested with quasi-legislative power.  The power 480 to  fix a rate of tax is an essential  legislative  function and  therefore, unless the subordinate law-making  authority is  afforded  guidance  by the  policies  being  formulated, principles   enunciated   and  standards  laid   down,   the legislation   will  suffer  from  the  vice   of   excessive delegation   and   would   be   void   as   arbitrary    and unconstitutional.  The _Provisions of the Act do not  afford any guidance to the Municipal Corporation to fix the rate of levy.   No doubt, the municipal government of  Calcutta  was vested  in the Corporation under s. 24 of the Act,  but  the expression "government" does not gather within its fold  all powers  necessary for administration nor does it  create  an independent  sovereign  body entitled to  legislate  in  any manner  it  likes  for  the purpose  of  carrying  on  civic government.   The  Corporation is still a  subordinate  body which  is  the  creation of the  legislature  and  can  only function  within the framework of the powers conferred  upon it by the Act.  No assistance is derived in this regard from the  powers  of supervision which the State  Government  has over  the  municipal  affairs  under a. 42  and  47.  If  no standards have been laid down by the Act for the Corporation to afford it a guidance for the fixation of a rate, the fact that supervisory power is conferred upon the executive would

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not obviate that objection, for the Government itself  would have no guidance from the legislature as to the policy to be adopted  in exercising the supervision. [541 E--G; 542  C-G; 545 A] It  cannot be said that as a result of as. 115, 117 and  126 no taxes could be raised except such as were needed for  the expenditure for which provision had been made in the  budget and the rate of tax was, therefore, determined by the  needs of  the  Corporation.   If  the  amount  of  money  which  a municipality  needs for discharging its  functions,  affords any guidance, then the need of a State or the Union ought to afford  sufficient guidance to sustain the validity  of  any skeleton legislation. [545 A-C] The  Orissa  Ceramic Industries Ltd. v.  Executive  Officer, Jharsuguda Municipality A.l.R, 1963 Orissa 171 disapproved. The  quantum  of  power which a law  could  bestow  upon  an institution or body of its creation is determined, first, by the  view  of  the legislature to  what  are  necessary  for achieving the purposes for which the institution or body  is created and, secondly, by the overall limitations imposed by the  Constitution by the distribution of legislative  power. Nothing  therefore turns on the use of the word "powers"  in Entry 5 of the List 11 which deals with the Constitution and powers  of municipal corporations for the purpose  of  local self-government.   The State Legislature cannot,  therefore, authorise a municipal body which it creates, even though, it be  for the purpose of local self-Govemment, to  exercise  a power higher than what it itself possesses.  Any legislative practice  prevailing before 1st April, 1937 when  India  was under a unitary form of government or prevailing before  the Constitution, does not serve as a guide for interpreting the Legislative  entries  in  the  Constitution  and  any   such legislative  practise  cannot prevail over  the  limitations imposed by the distribution of Legislative power in  respect of post-Constitution legislation. [527 F-G;530 D, G; 532 F-G ; 533 E-F; 534 C] The  analogy  of American decisions also cannot  afford  any guidance for the application of a different rule as to  what constitutes excessive delegation in the case of  legislation creating municipal bodies.  The rule to limits of delegation by  the  legislatures constituted in India, by  the  Consti- tution,  has been the subject of elaborate consideration  by this  Court  and  the decisions have not laid  down  that  a different  rule applies when the delegation  of  legislative power is in favour of a municipal corporation. [535 C-D, E] Case law considered. 481

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 26 of 1961. Appeal  from the judgment and order dated July 26,  1961  of the Calcutta High Court in Appeal from original Order No. 67 of 1959. G.   S.  Pathak,  A. N.  Sinha and P. K. Mukherjee  for  the appellants. Niren   De,  Additional  Solicitor-general  N.C   chatterjee S.Ghosh,  J.  B.   Dadachanji  and  O.  C.  Mathur  for  the respondent. D. N. Mukherjee, for the intervener No. 1.  Naunit Lal,  for the intervener No. 2. The Judgment of SARKAR, RAGHUBAR DAYAL and MUDHOLKAR JJ. was delivered  by SARKAR J. The dessenting Opinion of SUBBA  RAO and AYYANGAR JJ. was delivered by AYYANGAR J.

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 Sarkar J. The appellant Corporation was constituted by the Calcutta   Municipal  Act,  1951,  an  Act  passed  by   the Legislature  of  the  State of West  Bengal.   The  Act  was intended  to consolidate and amend the law relating  to  the Municipal  affairs  of Calcutta and it defined  the  duties, powers  and  functions of the Corporation  in  whose  charge those affairs were placed.  The respondent is a firm  owning a  cinema house. and carrying on business of  public  cinema shows. Section 443 of the Act provides that no person shall without a   licence  granted  by  the  Corporation  keep  open   any cinemahouse for public amusement.  It, however, does not say that any fee is to be paid for the licence.  But sub-s.  (2) of  S. 548 says that for every licence under the Act, a  fee may,  unless otherwise provided, be charged at such rate  as may from time to time be provided.  In 1948 the  Corporation had  fixed  the  scale of fees on the basis  of  the  annual valuation  of the cinema-houses made by a method which  does not  appear on the record.  The respondent had  under  these sections  obtained  a licence for its cinema house  and  had been paying a licence fee calculated on the aforesaid basis. The fee as calculated was Rs. 400 per year. By  a  resolution passed on March 14, 1958  the  Corporation changed   the  basis of assessment of the licence  fee  with effect from April 1,     1958.  Under the new method the fee was to be assessed at rates   prescribed per show  according to  the  sanctioned seating capacity of the  cinema  houses. The  respondent’s cinema house,had 551 seats and  under  the changed method it became liable to a 482 fee  of Rs. 5 per show.  In the result it became  liable  to pay a fee of Rs. 6,000 per year. The  respondent then moved the High Court at Calcutta  under Art.  226  of  the  Constitution for  a  writ  quashing  the resolution.  The application was first heard by Sinha J. who allowed it.  This order was confirmed by an appellate  Bench of the same Court consisting of Bose C. J. and C. K.  Mitter J. on appeal by the Corporation.  Hence the present appeal. In  this Court the levy was challenged on three grounds  the first of which may be disposed of at once.  That ground  was that the levy amounted to expropriation and was,  therefore, invalid  as  violating cls. (f) and (g) of sub-Art.  (1)  of Art.  19.   Sinha  J. rejected this  contention  as  on  the materials  on the record it could not be said that  the  new rate was so high as to make it impossible for the respondent to  carry  on  its  business.  The  learned  Judges  of  the appellate Bench do not appear to have taken a different view of the matter.  It seems to us that a fee at the rate of Rs. 5 per show in a house with a seating capacity of 551  cannot in  any  sense be said to be unreasonably high.   With  that seating  capacity  the  respondent  would  at  a  reasonable estimate  be collecting about Rs. 1,000 per show and  paying the  sum  of Rs. 5 per show.  No doubt the increase  in  the rate  of fee from Rs. 400 to Rs. 6,000 per year  was  large. But  at  the same time the circumstances  obtaining  in  our country  had undergone an immense change between  1948  when the  fee was earlier fixed and 1958.  The challenge  to  the levy  on  the ground that it amounted  to  expropriation  is wholly unfounded and was rightly rejected in the High Court. Substantially   the  same  argument  was  advanced  from   a different  point of view.  It was said that Art. 19(1),  (f) and  (g)  were  violated  in any case  as  S.  548  gave  an arbitrary  power of taxation.  This contention found  favour with the learned Judges of the High Court but, with  respect to  them, we are unable to agree.  In our view, for  reasons

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to  be  later  stated, no arbitrary power  of  taxation  was conferred by s. 548. The  second challenge to the levy was put in this way.   The levy  authorised by ss. 443 and 548 was a fee in return  for services  to be rendered and not a tax and it had  therefore to   be  commensurate  with  the  costs  incurred   by   the Corporation  in providing those services.  The present  levy of  Rs. 6,000 per year was far in excess of those costs  and was  for that reason invalid.  The Corporation’s  answer  to this  contention  is that the levy was a tax and not  a  fee taken in return for services and no question of its 483 being  proportionate to any costs for services  arose.   The Corporation  does not dispute that if the levy was a fee  in the sense mentioned, it would be invalid.  The only question on this part of the case, therefore, is, was the levy a  fee in  return  for services?  Another subsidiary  question  is, what  is  the nature of the services which makes a  levy  in respect of them, a fee ? It is not disputed that a levy made in  return  for services rendered would be a  fee.   It  is, therefore,  unnecessary  to consider what a fee  is  or  the tests by which it is to be determined.  Nor is it  necessary to  discuss  whether in order that a levy may be a  fee  the statute  imposing  it must intend primarily  to  confer  the benefits  of the services on those who pay it  and  benefits received from those services by the public at large, if any, must  be secondary.  A discussion of these aspects of  fees, will be unprofitable and will only cloud the point really in issue. Now, on the first question, that is, whether the levy is  in return for services, it is said that it is so because s. 548 uses  the word "fee".  But, surely, nothing turns  on  words used.   The  word "fee" cannot be said to  have  acquired  a rigid  technical meaning in the English language  indicating only a levy in return for services.  No authority for such a meaning  of the word was cited.  However that may be, it  is conceded by the respondent that the Act uses the word  "fee" indiscriminately.   It is admitted that some of  the  levies authorised are taxes though called fees.  Thus, for example, as Mitter J. pointed out, the levies authorised by ss.  218, 222  and  229 are really taxes though called  fees,  for  no services  are  required to be rendered in respect  of  them. The  Act, therefore, did not intend to use the word  fee  as referring only to a levy in return for services. This contention is not really open to the respondent for  s. 548 does not use the word "fee"; it uses the words  "licence fee" and those words do not necessarily mean a fee in return for  services.  In fact in our Constitution fee for  licence and fee for services rendered are contemplated as  different kinds  of levy.  The former is not intended to be a fee  for services rendered.  This is apparent from a consideration of Art.  110(2) and Art. 199(2) where both the expressions  are used  indicating  thereby that they are not  the  same.   In Shannon  v.  Lower Mainland Dairy Products Board(1)  it  was observed  at  pp.  721-722, "if  licences  are  granted,  it appears  to be no objection that fees should be  charged  in order either to defray the costs of administering the  local regulation or to increase (1)  [1938] A. C. 708 484 the  general funds of the Province or for both  purposes  It cannot,  as  their  Lordships think, be an  objection  to  a licence  plus  a  fee  that  it  is  directed  both  to  the regulation  of  trade and to the provision of  revenue."  It would, therefore, appear that a provision for the imposition

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of a licence fee does not necessarily lead to the conclusion that the fee must be only for services rendered. It may also be stated that a statute has to be read so as to make it valid and, if possible, an interpretation leading to a  contrary  position  should  be  avoided;  it  has  to  be construed  ut  res magis valeat quam pareat  :  see  Broom’s Legal  Maxims (10 ed.) p. 361, Craies on Statutes (6th  ed.) p. 95 and Maxwell on Statutes (11th ed.) p. 221.   Therefore again, the word "fee" in s. 548 should be read as meaning  a tax,  for as we shall show later, it made no  provision  for services  to be rendered; any other reading would  make  the section  invalid.  A construction producing that result  has to  be  avoided.  We do not also think that by  reading  the word as referring to a tax we would be doing any violence to the language used. If the word "fee" is not conclusive of the question that  it must be in return for services, as we think it is not,  then the question whether the fee contemplated in s. 548 is a fee in return for services, can only be decided by reference  to the  terms  of the section and for this purpose we  have  to consider  that section along with s. 443.  We  have  earlier summarised  the sections but now propose to set them out  so far as material :               S.    443.    No  person  shall,  without   or               otherwise than in conformity with the terms of               a licence granted....               S. 548. (1) Every licence granted under this               Act   shall               specify, ............................               (1)  the  tax  or fee, if any,  paid  for  the               licence               (2) Except when it isotherwise  expressly               provided, for every such licencea fee  may               be  charged at such rate as may from  time  to               time  be         fixed         by          the               Corporation.................... The sections do not refer to the rendering of any service by the Corporation.  Looking at them we do not find anything to lead  to the conclusion that they make it incumbent  on  the Corporation 485 to  render  any  service  in return  for  the  fee  imposed. Stopping here, therefore, there is no reason for saying that the levy is a fee in return for services. But  it  was said that the services to be provided  for  the levy  of  the fee are set out in the by-laws made  under  s. 527,  item  43.   Item  43  permits  by-laws  to  be  framed regulating  the inspection, supervision and  control,  among others,  of  cinema  houses.  It does not  however  make  it obligatory  on the Corporation to make any by-law.   If  the by-laws  are  not  made, there would, ex  hypothesis  be  no services  to render.  No doubt s. 443 contemplates that  the cinema shows shall be conducted in conformity with the terms of the licence but it again seems to us that it is  optional for  the Corporation to impose terms; it is not bound to  do so.   In any case, those terms need not be for rendering  of services by the Corporation.  They may, for example, provide that the shows will not be continued after a certain hour in the evening. In  fact, however, certain by-Laws, called Theatre  By-laws, were  framed  by the Corporation.  Those  by-laws  were  not produced before us excepting one which states, "The Chairman may  cause all such premises to be inspected at least  twice yearly and if as the result of such inspection any defect or disorder be noticed in such premises in connection with  and

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relating  to  any of the matters or things  referred  to  in these  by-laws, the Chairman may by written  notice  require the  owner  or  lessee of such premises to  make  good  such defects."  It is quite clear that the words "the matters  or things referred to in these by-laws" occurring in the by-law quoted,  contemplate things to be done by the  licensee  and not  by the Corporation.  Those matters or things cannot  be services  which the Corporation is required to  render.   It would, therefore, appear that even the by-laws the terms  of which  might  have been incorporated in the licence  do  not contemplate the rendering of any service by the  Corporation to the licensee.  It may be stated that the licence  granted to  the  respondent does not appear in the records  of  this case. It  is however said that the by-law earlier quoted  requires inspection of the cinema houses by the Corporation and  that was the service that the Corporation had to render in return for  the  licence  fee.   We  are  unable  to  accept   this contention.   The inspection was not certainly a service  to the  licensee;  it was necessary only to make sure  that  he carried  out  the conditions on which the licence  had  been granted to him.  It was something to 486 be done to control the licensee’s activities and to make him observe   the   conditions  of  the  licence  on   pain   of cancellation of the licence.  This is clear from sub-s.  (3) of S. 548 which states that "any licence granted under  this Act  may at any time be suspended or revoked if any  of  its restrictions  or  conditions is infringed or evaded  by  the grantee."  This  non-observance  of the  conditions  of  the licence would expose the licensee to penalty under S. 537 of the  Act.  The inspection was therefore necessary  also  for enforcing  the  conditions of the licence  by  penalising  a breach  of them by the licensee.  We cannot imagine that  an inspection  by the Corporation for such purposes can at  all be said to be rendering of service to the licensee. The  nature of services to be rendered in return for a  levy so as to make it a fee has been considered by this Court  in several  cases and in all of them it has been said that  the services  must confer some benefit on the person paying  the fee.   The  earliest case on the subject appears to  be  The Commissioner,  Hindu  Religious Endowments,  Madras  v.  Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(1), where  it was  said  at  p. 1042, ’a fee is a payment  for  a  special benefit or privilege.... Public interest seems to be at  the basis  of all impositions, but in a fee it is  some  special benefit  which the individual receives".  It was again  said at  p.  1043,  that in the case of fees  for  services  "the Government  does  some  positive work  for  the  benefit  of persons  and the money is taken as the return for  the  work done  or services rendered." This case was concerned with  a statute  which  imposed  a levy  on  religious  institutions expressly  said to be in return for services.  The  services mentioned  in  the  statute consisted among  others  in  the Government  supervising the management of the  institutions, auditing  their  accounts and seeing that their  income  was duly  appropriated  to  the purposes  for  which  they  were founded.  Though it did not expressly say so. this Court was presumably  of  the  view that these were  services  to  the institutions making the levy a fee, for it declared the levy invalid  on  the ground that it was not  correlated  to  the costs  of those services and therefore was a tax  which  was beyond  the competence of the Madras Legislature  which  had enacted the statute.  It would appear that the services here considered were not for controlling the institutions but for

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doing work which secured to them their funds and the  proper application  of  them.  The statute might  have  involved  a check on the conduct of the (1)  [1954] S.C.R. 1005. 487 Mathadipatis  who managed the institutions but that  control also was for the benefit of the institutions.  It has to  be remembered  as  was said in another case to which  we  shall presently refer, that the Mathadipatis were in the  position of  trustees  of  the institutions.  It  would  follow  that control of their wrongful activities must result in  special benefits to the institutions for their funds would not  then be frittered away. After  this  judgment,  the section imposing  the  levy  was amended  but  the  amended section was  also  challenged  on similar grounds.  The matter again came up to this Court  in the case of H. H. Sudhundra Thirtha Swamiar v.  Commissioner for  Hindu  Religious &  Charitable  Endowments,  Mysore("). This  time  the  validity of the section  was  upheld.   The reasons  for this decision are not relevant to  the  present discussion.   As  to the nature of  services  however,  this Court  reiterated the view stated in the earlier  case.   It said  at  p.  323, "If with a view  to  provide  a  specific service, levy is imposed by law and expenses for maintaining the service are met out of the amounts collected there being a  reasonable  relation between the levy  and  the  expenses incurred for rendering the service, the levy would be in the nature  of  a fee and not in the nature of a  tax."  It  was further  said,  "A  fee being a  levy  in  consideration  of rendering service of a particular type, correlation  between the  expenditure  by  the  Government  and  the  levy   must undoubtedly exist." The act was the same as the earlier  one in  regard to the services to be rendered by the  Government and  the  view expressed in the earlier judgment as  to  the nature  of  the  services  required by  the  statute  to  be performed was endorsed in this judgment.  It was said at  p. 312, that the Mathadipati "is by virtue of his office  under an  obligation to discharge the duties as a trustee  and  is answerable  as  such".   It  would  follow  that  a  service resulting  in  the control of the Mathadipati  would  confer special  benefit  on the institution which  alone  paid  the levy. Both these cases discussed other tests besides the  require- ment of the rendering of services for determining whether  a levy  is a fee, but with these we are not concerned  in  the present case.  These cases also discussed the correlation of the costs of the services to the levy but with that also  we are not concerned as it is not sought to uphold the  present levy on the ground of such correlation.  We have referred to these  cases only for showing that to make a levy a fee  the services rendered in respect of it (1) [1965] Supp. 2 S. C. R. 302 Supp./65-15 488 must  benefit, or confer advantage on, the person  who  pays the levy. The other case to which we wish to refer in this  connection is  The Hingir-Rampur Coal Co. Ltd. v. The State  of  Orissa and ors.(1). There the imposition by a certain statute of  a levy  on  lessees of coal mines in a certain  area  and  the creation of a fund with it, was called in question.  It  was held that the levy was a foe in return for services and  was valid.  It was there said at p. 549, "If the special service rendered  is distinctly and primarily meant for the  benefit of  a specified class or area, the fact that in  benefitting

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the  specified  class  or  area the State  as  a  whole  may ultimately  and indirectly be benefitted would  not  detract from  the  character  of  the levy as  a  fee."  It  may  be mentioned  that  the  levy there went  to  meet  expenditure necessary   or  expedient  for  providing   amenities   like communication,  water supply and electricity for the  better development  of the mining area and to meet the  welfare  of the labour employed and other persons residing or working in the  area of the mines.  Here again there is no element  ,of control but the services resulted in real benefit  specially accruing to the persons on whom the levy was imposed.  These decisions  of this Court clearly establish that in order  to make a levy a fee for services rendered the levy must confer special  benefit on the persons on whom it is  imposed.   No case  has  been brought to our notice in which it  has  been held that a mere control exercised on the activities of  the persons  on  whom the levy is imposed so as  to  make  these activities more onerous, is ,service rendered to them making the levy a fee. It  was also contended that the levy under S. 548 must be  a tee  and not a tax, for all provisions as, to  taxation  are contained in Part IV of the Act, while this section occurred in  Chapter XXXVI headed "Procedure" in Part VIII which  was without  a  heading.  It was pointed out that Part  V  dealt with  "Public  Health, Safety and Convenience"  and  s.  443 which  was included in Chapter XXVI contained in  this  Part was  headed "Inspection and Regulation of Premises,  and  of Factories,  Trades and Places of Public Resort".   A  cinema house, it is not disputed, is included in the words  "Places of public resort".  It was, therefore, contended that a levy outside  Part IV could not be a tax and hence must be a  fee for services.  This contention was sought to be supported by the  argument  that  s. 443 occurred in  a  Part  concerning public health, safety and convenience and therefore the (1)  [1961] 2 S. C. R. 537 489 intention was that the levy authorised by the section  would be  in  return  for work done for  securing  public  health, safety  and convenience and was hence a fee.  We are  wholly unable to accept this contention.  Whether a particular levy is  a fee or tax has to be decided only by reference to  the terms  of  the  section  as we  have  earlier  stated.   Its position  in  the  Act  cannot  determint;  its  nature;  an imposition which is by its terms a tax and not a fee,  which in  our opinion the present imposition is, cannot  become  a fee by reason of its having been placed in a certain part of the statute.  The reference to the heading of Part V can  at most indicate that the provisions in it were for  conferring benefit  on  the public at large.  The cinema  house  owners paying  the  levy would not as such owners be  getting  that benefit.   We  are not concerned with the benefit,  if  any, received  by them as members of the public for that  is  not special  benefit meant for them.  We are clear in  our  mind that  if looking at the terms of the  provision  authorising the  levy,  it appears that it is not for  special  services rendered  to  the  person on whom the levy  is  imposed.  it cannot be a fee wherever it may be placed in the statute.  A consideration of where ss. 443 and 548 are placed in the Act is  irrelevant for determining whether the levy  imposed  by them is a fee or a tax. The last argument in this connection which we have to notice was based on ss. 126 and 127 of the Act.  Section 126  deals with  the preparation by the Chief Executive Officer of  the Corporation called Commissioner, of the annual budget.   The budget  has  to  include an estimate of  receipts  from  all

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sources.   These  receipts would  obviously  include  taxes, fees,   licence  fees  and  rents.   Under  s.  127(3)   the Corporation  has  to  pass this  budget  and  to  determine, subject  to  Part IV of the Act, the  levy  of  consolidated rates  and taxes at such rates as are necessary  to  provide for  the purposes mentioned in sub-s. (4).  Sub-section  (4) requires  the  Corporation  to make  adequate  and  suitable provision  for  such  services as may be  required  for  the fulfilment of the several duties imposed by the Act and  for certain other things to which it is not necessary to  refer. The first point made was that these sections showed that the Act made a distinction between fees and taxes.  It does  not seem to us that anything turns on this as the only  question now  is whether the levy under s. 548 is a fee.   The  other point  was that cls. (3) and (4) of s. 127 showed  that  the Corporation  could fix the consolidated rates and taxes  and that  the  determination  of rates for these had  to  be  in accordance with the needs for carrying out the Corporation’s duties under the Act. 490 It  was said that as the licence fee leviable under  S.  548 did not relate to any duty of the Corporation under the Act, it  being optional for the Corporation to impose  terms  for grant  of licences for cinema houses, the rate for that  fee was  not  to  be  fixed  in  reference  to  anything  except rendering  of  services.   We  are  unable  to  accept  this argument and it is enough to say in regard to it that it  is not  right  that  s.  443 does not  impose  a  duty  on  the Corporation.  We think it does so, though in what manner and when  it  will  be exercised it is for  the  Corporation  to decide.   It  is  impossible  to call it  a  power,  as  the respondent  wants  to  do,  for  it  is  not  given  to  the Corporation  for its own benefit.  The Corporation has  been set  up only to perform municipal duties and its powers  are for enabling it to perform those duties.  Furthermore  there is  no doubt that an estimate of the licence fee has  to  be included  in the budget and therefore the word "tax"  in  S. 127(3) must be deemed to include the levy under s. 548.  The words  "  subject  to  the provisions  of  Part  IV"  in  S. 127(3)must  be  read with the addition of the  words  "where applicable".If that levy   cannot be a fee because  there is no provision forservice being rendered in respect of it, it would indisputably be a tax.  As such again, its rate can be  determined under s. 127(3) to provide for the  discharge of at least the other undisputed duties of the  Corporation. We would, therefore, reject this last argument also. The  conclusion  to which we then arrive is  that  the  levy under  S. 548 is not a fee as the Act does not  provide  for any  services  of special kind being rendered  resulting  in benefits  to the person on whom it is imposed.  The work  of inspection done by the Corporation which is only to see that the terms of the licence are observed by the licensee is not a  service to him.  No question here arises  of  correlating the  amount  of the levy to the costs of any  service.   The levy  is a tax.  It is not disputed, it may be stated,  that if the levy is not a fee, it must be a tax. It was then said that if S. 548 authorised the levy of a tax as  distinct from a fee in return for services rendered,  it was  invalid  as  it amounted to an  illegal  delegation  of legislative functions to the Corporation because it left  it entirely  to  the latter to fix the amount of  the  tax  and provided no guidance for that purpose.  We wish to point out here that the contention now is that the section is  invalid while the contention that we have just dealt with  proceeded on  the basis that the section was valid as it provided  for

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the  levy  of  a  fee in return for  services  and  as  this necessarily implied a limit of the levy, namely, that it had to  be  commensurate  to  the amount of  the  costs  of  the services, no guidance for 491 fixing the amount of the fee to be levied was required to be provided.   That argument only challenged the resolution  on the  ground that it fixed the amount of the fee at a  figure much in excess of the costs for the services rendered. Here  again  there  is  no  dispute  that  a  delegation  of essential legislative power would be bad.  It was so held by this  Court  first  in  In re The  Delhi  Laws  Act.(1)  The principle there laid down has been summarised by Bose J.  in Rajnarain  Singh  v.  The  Chairman,  Patna   Administration Committee,  Patna(2), in these terms: "In our  opinion,  the majority  view  was  that  an  executive  authority  can  be authorised to modify either existing or future laws but  not in  any  essential  feature.  Exactly  what  constitutes  an essential feature cannot be enunciated in general terms, and there  was some divergence of view about this in the  former case,  but  this  much is clear from the  opinions  set  out above: it cannot include a change of policy." On   the  basis  that  s.  548  is  a  piece  of   delegated legislation,  it  has  been  contended  on  behalf  of   the Corporation  that  the  rate of a tax is  not  an  essential feature of legislation and the power to fix it was  properly delegated to the Corporation as sufficient guidance for that purpose was given in the Act.  It is not in controversy, and this indeed has been held by this Court, that if that is so, the section would be unexceptionable.  The question first is whether the power to fix the rate of a tax can be  delegated by  the legislature to another authority; whether it  is  of the  essence of taxing legislation.  The contention  of  the Corporation that fixation of rates is not an essential  part of  legislation  would  seem  to  be  supported  by  several judgments  of this Court to some of which we now proceed  to refer. First,  there is Pandit Benarsi Das Bhanot v. The  State  of Madhya Pradesh ( 3 ) . That case was concerned with a  Sales Tax  Act  which  by s. 6(1) provided that no  tax  would  be payable on any sale of goods specified in a schedule to  it. Item  33  of that Schedule read, "goods sold to  or  by  the State  Government".  Section 6(2) of the Act authorised  the State  Government to amend the schedule by  a  notification. In exercise of this power the Government duly substituted by a notification for item 33 the following: "Goods sold by the State  Government".   The amendment of the schedule  by  the notification  was challenged on the round that s.  6(2)  was invalid as it was a delegation of the (1)  [1951] S. C. R. 747 (2) [1955] 1 S. C. R. 290,301. (3)  [1959] S. C. R. 427. 492 essential  power  of legislation to  the  State  Government. Venkatarama Aiyar J. delivering the judgment of the majority of the Court sitting in a Constitution Bench, rejected  this contention  and after having read what we have  earlier  set out  from  the  judgment of Bose  J.  in  Rajnarain  Singh’s case(1),  observed  at p. 435: "On these  observations,  the point for determination is whether the impugned notification relates  to what may be said to be an essential  feature  of the law, and whether it involves any change of policy.  Now, the  authorities are clear that it is  not  unconstitutional for  the  legislature  to  leave  it  to  the  executive  to determine details relating to the working of taxation  laws,

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such  as the selection of persons on whom the tax is  to  be laid,  the rates at which it is to be charged in respect  of different  classes  of goods, and the like." The Act  was  a statute  imposing  taxes for revenue  purposes.   This  case would  appear  to be express authority for  the  proposition that fixation of rates of taxes may be legitimately left  by a  statute  to a non-legislative authority, for  we  see  no distinction in principle between delegation of power to  fix rates  simpliciter; if power to fix rates in some cases  can be  delegated then equally the power to fix rates  generally can be delegated.  No doubt Pandit Banarsi Das’s case(1) was not concerned with fixation of rates of taxes; it was a case where the question was on what subject mater, and  therefore on what persons, the tax could be imposed.  Between the  two we are unable to distinguish in principle, as to which is of the essence of legislation; if the power to decide who is to pay the tax is not an essential part of legislation, neither would the power to decide the rate of tax be so.   Therefore we think that apart from the express observation made,  this case on principle supports the contention that fixing of the rate of a tax is not of the essence of legislative power. In  regard  to  the observations  in  Pandit  Benarsi  Das’s case(1)   earlier  quoted,  it  has  been  said   that   the authorities  on which they appear to have been based do  not support it.  It has been contended that as the  observations do  not form part of the actual decision in the  case,  they need  not  be given that weight which they  would  otherwise have  been entitled to.  In the High Court  this  contention appears  to  have  been accepted.   The  acceptance  of  the contention  would  result in by-passing a judgment  of  this Court and that is something which cannot in any case be sup- ported.  We are furthermore of opinion that the  authorities to (1) [1955] 1 S. C. R. 290. (2) [1959] S. C. R. 427, 493 which  Venkatarama  Aiyar  J.  referred  fully  support  his observations.  The first case relied upon by him was  Powell v. Appollo CandleCo.   Ltd.(1).  That  case  upheld   the validity of a statute passedby  the  legislature  of   New South  Wales which conferred power on the Governor  of  that Province   to  impose  duty  on  certain  articles  in   the circumstances  prescribed.   The Governor under  this  power imposed  the  tax  and this was  challenged.   The  Judicial Committee rejected the contention that the tax had not been, imposed  by the Legislature which alone could do it  in  the view that "the duties levied under the Order in Council  are really  levied  by  the authority of the Act"  see  p.  291. Here,  therefore, a power conferred on the Governor  by  the Legislature to levy a tax was upheld.  It would follow  that a  power conferred to fix rates of taxes has equally  to  be upheld.   The  next  case  was  Syed  Mohamed  v.  State  of Madras(2).   There a power to an authority to determine  who shall pay the tax was upheld.  On the same principle a power to determine at what rate he will have to pay the tax has to be  upheld.  The last case was Hampton Jr. & Co.  v.  United States(3), in which the power conferred by a statute on  the President  to  make an increase or decrease in the  rate  of customs  duty was upheld.  There it was said at p. 630,  "It is  conceded  by  counsel that Congress  may  use  executive officers  in  the application and enforcement  of  a  policy declared  in law by Congress and authorise such officers  in the application of the Congressional declaration to  enforce it  by  regulation equivalent to law.  But it is  said  that this never has been permitted to be done where Congress  has

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exercised  the power to levy taxes and fix  customs  duties. The   authorities  make  no  such  distinction.   The   same principle that permits Congress to exercise its rate  making power  in inter state commerce by declaring the  rule  which shall  prevail  in  the legislative  fixing  of  rates,  and enables  it  to  remit  to a rate  making  body  created  in accordance  with  its provisions the fixing of  such  rates, justifies  a  similar provision for the  fixing  of  customs duties  on  imported merchandise." This therefore  is  clear authority  that  the fixing of rates may be left to  a  non- legislative body. No  doubt  when the power to fix rates of taxes is  left  to another body, the legislature must provide guidance for such fixation.  The question then is, was such guidance  provided in  the Act ? We first wish to observe that the validity  of the guidance 1) 1 O. A. C. 282 (2) [1952] 3 S.  T. C 367 (3)  [1927] 72 L. ed. 624. 494 cannot  be tested by a rigid uniform rule; that must  depend on  the object of the Act giving power to fix the rate.   It is  said that the delegation of power to fix rates of  taxes authorised  for  meeting  the needs of the  delegate  to  be valid,  must provide the maximum rate that can be fixed,  or lay  down rules indicating that maximum.  We are  unable  to see  how the specification of the maximum rate supplies  any guidance as to how the amount of the tax which no doubt  has to be below the maximum, is to be fixed.  Provision for such maximum only sets out a limit of the rate to be imposed  and a limit is only a limit and not a guidance. It  seems  to us that there are various  decisions  of  this Court  which  support the proposition that for  a  statutory provision  for  raising  revenue for  the  purposes  of  the delegate,  as  the section now under consideration  is,  the needs  of  the taxing body for carrying  out  its  functions under  the  statute  for which alone the  taxing  power  was conferred on it, may afford sufficient guidance to make  the power to fix the rate of tax valid.  We proceed now to refer to these cases. The Western India Theatres Ltd. v. Municipal Corporation  of the  City  of Poona(1) was concerned with  a  statute  under which  the respondent Corporation had been set up and  which gave that Corporation power to levy "any other tax".  It was contended  that  such  a power  amounted  to  abdication  of legislative  function  as there was  no  guidance  provided. This  contention was rejected.  One of the grounds for  this view  was  that the statute authorised the  municipality  to impose , taxes therein mentioned for the purposes of the Act and   that  this  furnished  sufficient  guidance  for   the imposition of the tax.  Again, no doubt, this was not a case dealing  with  rates  of  taxes,  but  if  a  power  on  the Corporation  to  impose  any tax it  liked  subject  to  the guidance  mentioned was valid, that would include in it  the power to fix the rates of the tax, subject of course to  the same guidance.  Such a power has to be held to be good.   It is  true,  as was pointed out by learned  advocate  for  the respondent, that other ,,rounds were mentioned in support of the  view  taken in the Western India Theatres  case(1)  but that surely is irrelevant, for it cannot make the ground  of the  decision there which we have earlier set out devoid  of all force. Then  there is Vasantlal Manganbhai Sanjanwala v. The  State of Bombay (2) . The provision of the statute there attacked (1) [1959] Supp. 2 S. C. R. 71.

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(2) [1961] 1 S. C. R. 341. 49 5 gave  the  Government power to fix a lower rate  of  maximum rent payable by the tenants.  The validity of this provision was upheld on the ground that the material provisions of the Act  including its preamble were intended to give relief  to tenants by fixing the maximum rent payable by them.  It  was in the light of this policy of the Act that the validity  of the impugned provision was really upheld. The last case which we wish to notice in this connection  is the  Union of India v. Bhana Mal Gulzari Mal(1).  Section  3 of the Essential Supplies (Temporary Powers) Act, 1946  came up for consideration there.  That section gave power to  the Government  to  make  necessary orders  for  maintaining  or increasing  supplies  of any essential  commodities  or  for securing  their equitable distribution and  availability  at fair  prices.  In Harishankar Bagla v. The State  of  Madhya Pradesh(1) the validity of the delegation of power contained in  that section had been upheld as it laid down the  policy as  to how that power was to be exercised by the  delegates, that is, the Government.  In Bhana Mal Gulzari Mal’s case(3) the validity of an order made under s. 3 reducing the  price at which steel could be sold was challenged.  This challenge was  rejected on the ground that the order fixing the  price carried out the legislative objective prescribed in s. 3. It was  observed at p. 638, "It is not difficult to  appreciate how and why the Legislature must have thought that it  would be  inexpedient either to define or describe in  detail  all the  relevant factors which have to be considered in  fixing the fair price of an essential commodity from time to  time. In  prescribing a schedule of maximum prices the  Controller has  to  take  into  account  the  position  in  respect  of production  of the commodities in question, the  demand  for the   said  commodities,  the  availability  of   the   said commodities   from  foreign  sources  and  the   anticipated increase or decrease in the said supply or demand.   Foreign prices for the said commodities may also be not  irrelevant. Having  regard  to  the fact that  the  decision  about  the maximum prices in respect of iron and steel would depend  on a rational evaluation from time to time of all these  varied factors  the  Legislature may well have  thought  that  this problem  should be left to be tackled by the  delegate  with enough  freedom, the policy of the Legislature  having  been clearly indicated by s. 3 in that behalf." Again it was said at  P.  640,  "In  deciding the nature  and  extent  of  the guidance  which should be given to the delegate  Legislature must inevitably (1) [1960] 2 S. C. R. 627. (2) [1955] 1 S C. R. 380. 496 take  into account the special features of the object  which it  intends to achieve by a particular statute......  Having regard  to the nature of the problem which  the  Legislature wanted to attack it may have come to the conclusion that  it would be inexpedient to limit the discretion of the delegate in  fixing  the  maximum prices by reference  to  any  basic price." The  portions  in the judgment in Bhana  Mal  Gulzari  Mal’s case(1) quoted in the preceding paragraph will show that the validity  of  the guidance required to  make  delegation  of power  good  cannot be judged by a stereotyped  rule.   With respect,  we  entirely be held to be agree with  this  view. The  guidance  furnished  must  good  if  it  leads  to  the achievement of the object of the statute which delegated the power.   The  validity of the power to fix  rates  of  taxes

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delegated  to the Corporation by s. 548 of the Act  must  be judged  by the same standard.  Now there is no dispute  that all  taxes,  including the one under this  section,  can  be collected  and used by the Corporation only for  discharging its  functions under the Act.  The Corporation,  subject  to certain  controls  with which we are not  concerned,  is  an autonomous  body.   It  has  to  perform  various  statutory functions.   It is often given power to decide when  and  in what manner the functions are to be performed.  For all this it  needs  money and its needs will vary from time  to  time with  the prevailing exigencies.  Its power to collect  tax, however, is necessarily limited by the expenses required  to discharge  those functions.  It has, therefore, where  rates have not been specified in the statute, to fix such rates as may  be necessary to meet its needs.  That, we think,  would be sufficient guidance to make the exercise of its power  to fix  the  rates valid.  The case is as if  the  statute  had required  the  Corporation to perform duties A, B  &  C  and given  power to levy taxes to meet the costs to be  incurred for  the  discharge  of these duties  and  then  said  that, "provided,  however,  that the rates of the taxes  shall  be such is would bring into the Corporation’s hands the  amount necessary to defray the costs of discharging the duties." We should  suppose, this would have been a valid guidance.   We think  the  Act in the present case impliedly  provides  the same   guidance  see  s.  127  (3)  &  (4).   It  would   be impracticable  to insist on a more rigid guidance.   In  the case  of a self-governing body with taxing powers,  a  large amount of flexibility in the guidance to be provided for the exercise  of that power must exist.  It is hardly  necessary to point out that, as in the cases under Essential  Supplies (Temporary Powers) Act, 1946, so in the case of a big (1)[1960] 2 S. C. R. 627. 497 municipality  like that of Calcutta, its needs would  depend on various and changing circumstances.  There are epidemics, influx  of  refugees, labour strikes, new  amenities  to  be provided,  for such as hospitals, schools and various  other such  things may be mentioned which make it necessary for  a colossal Municipal Corporation like that of Calcutta to have a  large amount of flexibility in its taxing powers.   These considerations  lead  us to the view that s.  548  is  valid legislation.  There is sufficient guidance in the Act as  to how the rate of the levy is to be fixed. We may point out at the end that entry 62 in List II of  the Seventh  Schedule  to the Constitution gives  power  to  the State  Legislatures  to impose taxes  on  entertainment  and amusement  and therefore on cinema shows.  It was hence  not said if the question was relevant that the State Legislature delegated a power to the Corporation which it itself did not possess. It remains now to notice an argument advanced by Mr.  Pathak on  behalf  of the Corporation.  It is that even  if  it  be assumed   that  no  guidance  for  the  taxation  has   been prescribed,  the provision for taxation in the Act would  be valid.  He said that the Act may be said to have been passed under  entry  5 of List 11 in the Seventh  Schedule  to  our Constitution.   That entry authorises the passing of  a  law concerning  the  constitution  and  powers  of  a  municipal corporation.   Mr.  Pathak contended that the  powers  of  a corporation contemplated in this entry must necessarily  in- clude power to levy tax, for no municipal corporation  could work  without its own funds.  He pointed out that  this  has been the case with the municipal corporations created before and  after the Constitution.  He, therefore, said  that  the

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present  was not a case of delegation of taxing power  which might  be bad if no guidance to the exercise of  that  power had been furnished by the Act; it is a case where under  the Constitution independent power to tax had been conferred  on the  Corporation.   The  conferment of such  power  did  not require any guidance for its exercise to make it valid.   He pointed  out  that  delegation of  power  necessarily  meant delegation   of  the  power  of  the  delegator.   On   such delegation  the delegated power could only be  exercised  by the  delegates for the use of the delegator.  That  was  not the  case of power conferred tinder entry 5. In such a  case the  power of taxation conferred was for the purpose of  the corporation  itself.   The  amount  collected  by   taxation belonged  to  the corporation.  This is  what  had  happened here.  As at present advised, we think that this  contention of Mr. Pathak deserves consideration.  It is unnecessary,, 498 however,  for us to pronounce finally on it, for  in  either view the taxing power challenged must be held to be good. In the result we would allow the appeal with costs  through- out. Ayyangar, J. Section 443 of the Calcutta Municipal Act, 1951 (West  Bengal  Act XXXIII of 1951) which will  hereafter  be referred to as the Act enacts :               "No person shall, without or otherwise than in               conformity with the terms of a licence granted               by the Commissioner in this behalf, keep  open               any  theatre,  circus, cinema  house,  dancing               hall or other similar place of public  resort,               recreation or amusement :               Provided that this section shall not apply  to               private performances in any such place."               and s. 548 (2) :               "Except when it is in this Act or in any  rule               or byelaw made thereunder otherwise  expressly               provided,  for every such licence  or  written               permission  a fee may be charged at such  rate               as  may  from  time to time be  fixed  by  the               Corporation  and such fee shall be payable  by               the  person  to whom the  licence  or  written               permission is granted. The  respondent  before us is the owner and  licensee  of  a cinema  theatre  known  as the Liberty  Cinema  situated  in Calcutta within the Municipal limits of the city.  Under the provisions of the Calcutta Municipal Act 1923 which had been repealed  and  reenacted with modifications by  the  Act  of 1951, the respondent was paying for his theatre Rs. 800  per annum  as licence fee under provisions corresponding to  ss. 443  and 548 (2) of the Act.  While so, by a  resolution  of the Municipal Council dated March 14, 1958, the licence  fee payable by theatres under s. 443 was raised with the  result that  instead  of Rs. 800 which the  respondent  was  paying previously  he  was required to pay a sum of Rs.  6,000  per year.   As  the Corporation insisted upon the  amount  being paid  and threatened to cancel the licence and  take  appro- priate  penal  action in the event of the demand  not  being met,  the respondent filed a petition before the High  Court under  Art. 226 of the Constitution praying for  appropriate writs  of  certiorai,  mandamus  etc.  to  quash  the   said resolution and to prevent the Corporation from enforcing the said  demand.   It  was  stated in  the  petition  that  the respondent had been paying besides the consoli-  499 dated rate for the property, a fee of Rs. 250 as  profession tax for carrying on the trade or calling of cinema exhibitor

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as  well  as  other taxes and fees.   He  characterised  the licence fee which was. demanded from him as not in reality a fee  which alone the Municipal Corporation was  entitled  to charge.   Stating that it was out of all proportion  to  the service  rendered  or  the costs involved  in  ensuring  the observance  of the conditions of the licence,  he  contended that  the fee demanded from him was really a tax  which  the Corporation  was not entitled to levy under  the  provisions quoted  and therefore sought the relief which he prayed  for in the petition. The learned Single Judge who heard the petition in the first instance  held  on  an analysis of  the  provisions  of  the Calcutta  Municipal  Act  that  what  the  Municipality  was entitled  to  levy  under s. 548 (2) read with  s.  443  was really  "a licence fee" and not a tax and that viewed  as  a licence fee it did not pass the test of legality on  account of there being no correlation between the amount charged  on the theatre owners and the services rendered to them or  the expenses incurred by the Municipality in regard to the issue of licences.  Dealing with the alternative contention  urged before  him  by the Corporation that s. 548 (2) of  the  Act authodsed’ the Corporation to levy a tax, the learned  Judge held that the section would be unconstitutional as suffering from  the vice of excessive delegation in that it laid  down no  principle, indicated no policy and afforded no  guidance for  determining the basis or the rate on which the tax  was to  be  levied and was therefore void.   In  consequence  he allowed  the  petition  saving  however  the  right  of  the Corporation to recover the fee at the rate in force prior to March 14, 1958 on the ground that the levy at this rate  was saved  by  Art. 277 of the  Constitution.   The  Corporation preferred  an  appeal to a Division Bench  and  the  learned Judges  on  practically the same line of  reasoning  as  the learned   Single   Judge  dismissed   the   appeal.    Their conclusions were as follows : The imposition permitted to be made  by s. 548 (2) read with s. 443 of the Act  is  charged was  only a fee as distinguished from a tax.  Regarded as  a fee the levy was invalid as there was no quid pro quo.   If, however,  it be held that the provisions  quoted  authorised the  levy  of a tax, the  provisions  were  unconstitutional because they involved an improper delegation of  legislative power.   They also held that the levy was not to any  extent saved  by  Art. 277 of the  Constitution.   The  Corporation desiring to prefer an appeal sought a certificate of fitness from  the learned Judges and the same having  been  granted, the appeal is now before us. 500 As  one of the questions involved in the appeal  related  to the  ,constitutional validity of the provisions of  a  State enactment, notice of this appeal was served on the State. Mr. Pathak learned Counsel for the appellant Corporation did not  contest  the finding and decision of both  the  learned Single  Judge as well as the learned Judges in appeal,  that if  what s. 548 (2) of the Act authorised was only a fee  in the technical sense, viz., a payment for service rendered as distinguished  from a tax, the impugned levy was invalid  in as  much as there was admittedly no correlation between  the amount  of  the  levy and the cost of the  service,  if  any rendered  to the fee-payer.  His submissions in  support  of the validity of the impugned levy were : (1) An analysis  of the  several  provisions  of the Act  showed  that  the  Act employed the word "fee" and particularly in the context of a fee for licences granted for carrying on an activity, in the sense  of  a tax., (2) the fee permitted to be  charged  for licences by s. 548 (2) of the Act was not a fee but a tax as

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it was not a quid pro quo for services which the Corporation was required by or under the Act to render or did render  to the licensee., (3) A fee charged for a licence other than  a fee  for services rendered is in reality a tax and  no  quid pro  quo  is necessary to sustain its  validity  beyond  the grant  of  the  licence and a permission  to  carry  on  the activity  which  the licence authorises., (4)  If  what  was permitted  to  be  charged by S. 548 (2)  were  a  tax,  the provision  is not unconstitutional for the reason  that  the rate  of  the fee was not specified in the  Act.   The  non- specification  in the Act of the rate of the licence fee  to be  charged  is  not  open to  the  objection  of  excessive delegation  of legislative power for two reasons :  (1)  For considering whether there has been an excessive  delegation, regard must be had not merely to the section conferring  the power  but to the other provisions of the Act as well  which might  throw light upon the topic and from which  sufficient enunciation of principle  or guidance could be gathered.  In the  present case there  was sufficient  guidance  available and  proper standards laid down in the other  provisions  of the  Act as to uphold the validity of the  delegation.,  (2) When a delegation of legislative power including legislative power  to  impose  a  tax  is  conferred  upon  a  Municipal Corporation,  no question of excessive delegation arises  as the   Constitution  itself  permits  and   authorizes   such devolution ,of legislative power. In view of these submissions it is necessary to consider and ascertain principally 4 matters : (1) the precise nature  of a fee,  501 as distinguished from a tax., (2) Whether on an  examination of  the several provisions of the Act the charge  authorised to be levied by s. 548 (2) read with s. 443 of the Act, is a fee in that or is it a tax., (3) If what is permitted to  be levied  by  s.  548(2) is not a fee out a  tax  whether  the various provisions of the Act read independently or together enunciate  the  principles,  prescribe  the  standards,  and affords  sufficient guidance to the Municipality to fix  the rate  so as to render the conferment of the power  free  the from  the  vice  of excessive delegation;  and  (4)  lastly, whether  the rule as to excessive delegation of  legislative power is inapplicable in those cases where the devolution or conferment  of power is on a municipal corporation,  or,  in any event, whether the rule as to excessive delegation needs substantial  modification  before the same is applied  to  a case where the donee of the power is a municipal corporation entrusted with local self government. Weshall take up these questions in that order. 1.The Nature of a Fee as distinguished from a tax.  Mr. Pathakdid not dispute that the Constitution had drawn  a distinction  between  "fees"  and "taxes",  and  that  while "fees"  could  be charged as incidental to the  exercise  of legislative power on topics set up in the several entries in the  three  legislative  lists in Schedule  VII,  the  power taxation  by  the  Union or by the  State  was  confined  to particular species or types of taxes distinctively specified as  such in lists I or II respectively.  In the  context  of such a distinction the question necessarily arose as to what were  the  ingredients  or characteristics  of  a  "fee"  as distinguished  from  a  "tax".  Mr.  Pathak  submitted  that "fees" as envisaged by the Constitution was the exaction  of compensation  permitted  by a statute to be  imposed  for  a special  service  rendered to the payer.   In  other  words, unless  by  or under an enactment it was  obligatory  on  an authority,  be  it  a municipal authority or  any  other  to

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render  some  special  service to the payer of  the  fee  as distinguished from the benefit conferred on every member  of the  general public by the performance of statutory  duties, and the levy is permitted to be made for meeting the cost of such  service, the charge imposed would not be a "fee".   In all other cases, where no special service is directed to  be or  is  rendered  to  a particular  individual  out  of  the ordinary,  the  fee imposed for the  licence  or  permission granted for the carrying on of any activity is really in the nature  of a tax in regard to which no question of quid  pro quo arises. 502 It is common ground that the Constitution recognises a clear distinction between a tax and a fee.  The several entries in the  Lists  in  the Seventh  Schedule  which  enumerate  the legislative  powers and distribute them  between  Parliament and  the State Legislatures point to this distinction.   The scheme underlying the Lists may shortly be summarised  thus. Each of the Union and the State Lists which are Lists I  and II start by enumerating first the Entries conferring general legislative  powers  as distinct from taxation  powers.   In other   words,  the  taxation  entries,  that   is   entries conferring  taxing  power, are separately  enumerated  after entries conferring general legislative power.  Thus items  1 to 81 of List I deal with the exclusive general  legislative powers  of  Parliament while 82 to 92  enumerate  the  taxes which Parliament may impose.  Item 96 empowers Parliament to legislate  in  respect  of "fees in respect of  any  of  the matters  in this List, but not including fees taken  in  any Court." This would clearly demonstrate that while "fees" may be  levied in respect of or as incidental to legislation  on the  topics  set out in the other entries in the  list,  the power  to  levy  a tax is not to be taken  as  conferred  by entries conferring general legislative power.  Thus though a fee may be levied as incidental to legislation be it general as  in respect of entries 1 to 81 or the entries  conferring taxing  powers  entries  82  to 92, or  in  respect  of  the miscellaneous  matters enumerated by such an entry like  94, no taxes may be imposed by virtue of the general legislative power  under  entries  1 to 81.  This matter  has  been  the subject  of  consideration  by  this  Court  though  from  a slightly  different angle in M.P.V. Sundararamier &  Co.  v. The   State   of  Andhra  Pradesh.(1)   Venkatarama   Aiyar, J.speaking for the Court said :-               "In  List  1,  Entries 1  to  81  mention  the               several  matters  over  which  Parliament  has               authority  to  legislate.  Entries  82  to  92               enumerate the taxes which could be imposed  by               a law of Parliament.  An examination of  these               two  groups  of Entries shows that  while  the               main  subject  of legislation figures  in  the               first  group,  a tax in  relation  thereto  is               separately  mentioned  in the  second.   Thus,               Entry 22 in List I is "Railways", and Entry 89               is  "Terminal  taxes on goods  or  passengers,               carried  by  railway,  sea or  air;  taxes  on               railway  fares and freights".  If Entry 22  is               to  be  construed  as involving  taxes  to  be               imposed,  then Entry 89 would be  superfluous.               Entry  41  mentions "Trade and  commerce  with               foreign coun-               (1)   [1958] S.C.R. 1422,1479-80.                503               tries;   import  and  export  across   customs               frontiers".   If these expressions are  to  be

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             interpreted  as including duties to be  levied               in  respect of that trade and  commerce,  then               Entry 83 which is "Duties of customs including               export  duties"  would  be  wholly  redundant.               Entries  43  and 44 relate  to  incorporation,               regulation  and  winding up  of  corporations.               Entry  85 provides separately for  Corporation               tax.  Turning to List II, Entries 1 to 44 form               one group mentioning the subjects on which the               States  could legislate.  Entries 45 to 63  in               that  List form another group, and  they  deal               with taxes.  Entry 18, for example, is  "Land"               and  Entry 45 is "Land revenue".  Entry 23  is               "Regulation  of mines" and Entry 50 is  "Taxes               of mineral rights".  The above analysis and it               is not exhaustive of the Entries in the  Lists               leads  to the inference that taxation  is  not               intended  to be comprised in the main  subject               in which it might on an extended  construction               be  regarded as included, but is treated as  a               distinct  matter for purposes  of  legislative               competence.   And  this  distinction  is  also               manifest in the language of Art. 248, Cls. (1)               and  (2),  and of Entry 97 in List  I  of  the               Constitution." The same pattern of classification and conferment of general legislative as distinguished from taxing power is adopted in the State List, List II.  Entries 1 to 44 of this List  deal with  general  legislative power while items 45 to  63  deal with  specific taxes which might be imposed  exclusively  by the  State Legislatures.  The last entry in this List is  in the  same terms as Entry 96 of List 1 and reads "fees  taken in  respect  of  any of the matters in  this  List  but  not including  fees  taken in any Court".  So far  as  the  Con- current  List is concerned, it contains no entry  conferring the  taxation  power  but by its last entry,  Entry  47,  it enables  the Legislatures to impose "fees in respect of  any of the matters in that List but not including fees taken  in any Court" and this is in terms identical with Entries 96 of List  1 and 66 of List 11.  It is, therefore, quite  obvious that  the Constitution proceeds on a basis of clear line  of demarcation between the power to tax and the power to levy a fee. Before  proceeding further, one other matter arising out  of this scheme might also be noticed.  When entries 96 of  List 1  or  66 of List 11 speak of "any of the  matters  in  this List" they necessarily include also the entries relating  to taxation.  In other words, a fee may be levied even under an enactment relating to the imposi- 3Sup./65-16 504 tion  of a tax.  Merely by way of illustration of this  type of fee we might refer to fees which are charged for licences which  are required to be taken by dealers under  the  Sales Tax  Act  in the various States.  The exact  amount  of  the licence  fees  to  be  charged is most  often  left  to  the executive   determination,  the  maximum   being   sometimes prescribed by the relevant sales tax enactment and sometimes even  this  maximum is not prescribed.  These  licences  are issued in order to ensure the orderly administration of  tax legislation  and  the proper collection of the  tax  imposed thereby. The distinction between the tax imposed under Entry 54  of List 11 "taxes on the sale or purchase of goods"  and +the  fees charged for the licences issued to dealers  as  a condition  of their being permitted to carry on business  of

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buying and selling goods is too obvious to need explanation. The significance of illustration of this kind and its impact upon the submissions of Mr. Pathak as regards the nature  of a   fee  under  the  Constitution  we  shall   reserve   for consideration later. Recognising   this   well  marked  distinction   which   the Constitution  makes  as  between  a  fee  and  a  tax,   the submission of Mr. Pathak was that "fees" in entry 66 of List II  were fees for services specially rendered to the  payer, and for this construction he relied on two separate lines of reasoning  (1)  that this had been the sense in  which  this Court  had  understood the content of the word  "fee";  that this construction was required or reinforced by Art. 110 (2) [and the corresponding Article 199 (2)]. We  shall first consider the decisions of this Court,  which it  is stated have  thus interpreted the term "fee" as  used in  the  Constitution.  The first case referred to  in  this connection was The Commissioner, Hindu Religious Endowments, Madras  v.  Sri  Lakshmindra Thirth Swamiar  of  Sri  Shirur Mutt(1) where this Court had to consider the  constitutional validity of certain provisions of the Madras Hindu Religious and  Charitable Endowments Act, 1951 in its  application  to Mutts.  Among the provisions considered in that context  was a.  76  of that enactment, which  directed  every  religious institution  to  "pay  to  the  Government  annually"   such contribution  not  exceeding 5% of its income  as  might  be prescribed.   The validity of this provision was  challenged on the ground that what was authorised to be levied was  not a  fee but a tax, and that as a tax it could not be  brought within  any  of the particular taxes enumerated in  List  11 which  the State Legislature was empowered to impose.   This Court agreed with this contention. and based its  conclusion on the following circums- (1)  [1954] S.C.R. 1005.  505 tances.   It  recognised that a  clear  distinction  existed between  taxes and fees under the Constitution.  As to  what was  meant  by  a  tax, Mukherjea,  J.,  who  delivered  the judgment of the Court adopted the definition of the term  by Latham, C.J., in Mathews v. Chicory Marketing Board(1) :  "a tax is a compulsory exaction of money by a public  authority for  public purposes enforceable by law and is  not  payment for  services rendered".  The learned Judge  enumerated  the characteristic  of  a  tax from other  forms  of  compulsory payments,  and these were summarised thus :- (1) that  taxes were  imposed by a statutory power without  the  tax-payer’s consent the payment being enforced by law, (2) that a tax is an  imposition made for public purpose without reference  to any special benefit to be conferred on the payer of the  tax (3)  that  a  tax was levied for  the  purposes  of  general revenue  which  when  collected formed part  of  the  public revenues  of the State.  "As the object of a tax is  not  to confer  any special benefit upon any  particular  individual there  is no element of quid’ pro quo between the  tax-payer and  the  public authority".  On the other hand, a  fee  was generally  stated to be defined to be a charge  for  special service rendered to individuals by some governmental agency. "The  amount  of fee levied is supposed to be based  on  the expenses incurred by the Government in rendering the service though  in many cases the costs are  arbitrarily  assessed". The  learned Judge then went on to observe "the  distinction between  a tax and a fee lies primarily in the fact  that  a tax is levied as a part of a common burden while a fee is  a payment  for a special benefit or privilege.  Fee confers  a special  capacity  although  the special  advantage  as  for

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example  in the case of registration fees for  documents  or marriage  licences  is secondary to the  primary  motive  of regulation in the public interest.  Public interest seems to be  the  basis of all impositions, but in a fee it  is  some special benefit which the individual receives".  In  holding that  the contribution imposed by s. 76(1) was really a  tax and  not  a fee regard was also had to some  other  factors, viz., (1) the percentage of contribution leviable was graded according   to  the  income  derived  by  the   institution, and(2)the entire collections went into the Consolidated Fund of the    State and the expenses for the upkeep of the Board which was a   statutory   corporation   created   for    the administration of religious endowments in the State was also directed  to  be met out of the monies in  the  Consolidated Fund.   Reliance was also placed on similar observations  of this Court, in other cases of (1)61) C.L.R. 263. 506 fees charged on religious endowments under other  enactments which were heard along with the Shirur Mutt case,(1) already referred  to,  though in them the validity of the  levy  was upheld.   The  validity of a contribution levied  under  the Orissa Hindu Religious Endowments Act was considered by this Court  in Mahant Sri Jagannath Ramanuj Das and Anr.  v.  The State of Orissa and Anr.(1) and of a similar levy under  the Bombay Public Trust Act (Ratial Panchand Gandhi v. The State of Bombay and Ors.(2)). In these two cases, the validity  of the  contribution  levied under  their  respective  charging provisions  was, as stated already, upheld.  The  ground  on which s. 76(1)of the Madras Act which was struck down in the Shirur Mutt case was distinguished was, that under the other two  enactments,  a special fund was created  to  which  the collections were to be credited and that the expenses of the administration  of  the Act were directed to be met  out  of this  fund.  Though the concept of a fee as a quid  pro  quo for  particular  services  rendered  to  the  fee  payer  as explained in the Shirur Mutt case are also repeated in these two  decisions, it is worth noticing that the service to  be rendered  to the Religious Endowment or public trust by  the Orissa  and  the  Bombay Acts were exactly  similar  to  the service  which  was by way of  supervision,  regulation  and control over the way in which the management by the trustees was  conducted under the Madras Act.  This consideration  is highlighted when one examines the decision of this Court  in the  Udipi  Mutt case H. H. Sudhundra,  Thirtha  Swamiar  v. Commissioner for Hindu Religious and Charitable  Endowments, Mysore(1)which  was  a sequel to the Shirur  Mutt  case,(1). After  s. 76(1) was struck down by this Court in the  Shirur Mutt  case(2)  the  Madras Legislature by  Act  27  of  1954 effected  certain amendments to that section with a view  to rendering it constitutional.  Section 76 had been held to be ultra  vires  of the legisture on the ground  that  what  it imposed was not a fee which was the only thing permitted  by Entry  66  but in reality of tax.  This decision  was  based upon several grounds of which the principal were : (1)  that no special service had been rendered to the Mutts and  other religious institutions so as to justify its being a fee  for services rendered,, (2) that it was graded according to  the capacity  of the payer based upon the annual income  derived by the institution which rendered it somewhat like an income tax,  and (3) that it was paid to the Government and  became part  of  the Consolidated Fund of the State,  the  expenses incurred in administering the Act being paid  (1) [1954] S.C.R. 1005. (2) [1954] S.C.R. 1046.

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(3)[1963] 2 Supp.  S.C.R. 302.  507 out  of the General Revenues.  Section 76 as amended by  Act 27  of  1954 was held to be intra vires and sustained  as  a fee.    The  changes  that  were  effected  by  the   Madras Legislature  were : (1) the graded system was abolished  and the  maximum percentage of the contribution being  fixed  by the statute, (2) the contributions payable were collected by the  Commissioner and not by the State, (3) that a  separate Fund was created into which these collections were  credited and   moneys   for   meeting   the   expenditure   for   the administration  of the Act were drawn from this  Fund.   One other point to be mentioned is that the services rendered to the institution, as set out in s. 76 and the other  relevant provisions of the Act remained exactly the same.  This Court held the contribution to be a fee principally for the reason that  the moneys that were being paid into a  separate  Fund were collected not by the Government and were being paid  to a  different  Fund.  If one proceeded on  the  footing  that unless  the service rendered was a specific service  in  the sense  of a benefit conferred specially upon the payer,  the charge levied would be a tax, the contribution levied  under s. 76 even after the amendment would have been held to be  a tax.  No doubt, the fact that a separate Fund is  segregated from  the Consolidated fund of the State and the moneys  are received  not  by  the Government as such but  by  a  public authority  might show that it is not a tax, still these  are not  decisive,  for  as was held by  the  Privy  Council  in Attorney-General  for  British Columbia v. E. &  N.  Railway Co.(1)  which has been approved by this Court in The  Hingir Rampur  Coal  Co. Ltd. and Ors. v. The State of  Orissa  and ors.  (2)  to which we shall refer later the  payments  were credited  to a Fund known as the Authorised Protection  Fund to  which  advances were made  from  Consolidated  revenues. Lord   Greene   after   saying  that  the   levy   had   the characteristics of taxation, observed :               "It is suggested, however, that there are  two               circumstances which are sufficient to turn the               levy  into what is called a ’service  charge’.               They are, first, that the levy is on a defined               class of interested individuals and, secondly,               that  the fund raised does not fall  into  the               general  mass of the proceeds of taxation  but               is  applicable  for  a  special  and   limited               purpose.   Neither  of  these   considerations               appears to their Lordships to have the  weight               which it is desired to attach to them." The segregation of the Fund, therefore, could not have  been a  decisive factor for determining the nature of  the  levy. This (1) [1950] A.C. 87. (2) [1961] 2 S.C.R. 537. 508 decision as well as the Orissa and the Bombay cases  already cited  are, therefore, authority for the position  that  the word ’services’ in this context may have to be understood in a  wide sense as including supervision and control over  the activity for the exercise of which the fee is charged. As  contrasted with these three cases, Mr. Pathak  submitted that when fees were levied for licences they were taxes.  In support  he referred to Cooverjee B. Bharucha v. The  Excise Commissioner & the Commissioner, Ajmer and others.(1)  Under the legislation before the Court viz.  The Excise Regulation Act  1950  licences were granted to regulate  the  trade  in liquor.  The fee to be charged for the grant of the  licence

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was  not prescribed by the Act or the rules but the  licence was sold in public auction, the highest bidder being granted the  licence  the amount of the licence fee thus  being  the amount  of  the highest bid.  This Court held that  the  fee collected from the highest bidders to whom the licences were granted  was really in the nature of a tax though  described as  a licence fee.  It was held that the  legislative  power for  enacting  this  legislation was to  be  traced  to  the Entries in the Seventh Schedule, List 11, of the  Government of India Act, 1935, "for making laws regarding  intoxicating liquors,  i.e.  the  production,  manufacture,   possession, transport,  purchase and sale of intoxicating  liquors,  and under  the powers conferred for raising duties of excise  on alcoholic  liquors for human consumption; and the  pith  and substance  of  the  regulation was  that  it  raised  excise revenue  by imposing duties on liquors".  Dealing  with  the contention  that as it was described in the Excise Act as  a licence  fee the same was invalid as excessive was  repelled in these terms : "The next contention that the charge of fee by public auction is excessive and is not in the nature of a fee  but  a  tax  ignores the  fact  that  the  licence  fee described  as a licence fee is more in the nature of  a  tax than a licence fee.  One of the purpose of the Regulation is to  raise  revenue .... The grantee is given  a  licence  on payment  of the auction price.  The Regulation  specifically authorizes this".  We do not see how this decision helps the appellant.  The description of the levy as a fee does not of course  determine whether it is a fee or a tax.  That  taxes may be imposed for effectuating other purposes than  raising revenue for protecting some activity which is not subject to tax  or  to inhibit one which is so subject or  to  regulate some  activity  cannot  also be  disputed.   That  fees  for licences may be by way of taxes does not, however, mean that every fee for a licence is or must be a tax. (1)  [1954] S.C.R. 873.  509 Reference  was next made to The Hingir-Rampur Coal Co.  Ltd. and  others v. The State of Orissa and ors.(1) which  consi- dered  the  validity  of a cess  imposed  on  owners,  among others, of coal-mines by the Orissa Mining Areas Development Fund Act, 1952.  The amount of cess was to be determined  by the  Government but it was not to exceed 5% of the value  of the  minerals  extracted at the pits-mouth which was  to  be paid  into a fund out of which was to be derived the  monies for  providing  the amenities to the mining areas.   It  was contended  for  the petitioner coal company who  moved  this Court  under Art. 32 of the Constitution that this cess  was really a duty of excise on coal within Entry 84 of List I of the  Seventh Schedule.  On the other hand, it was  contended by  the State who opposed the petition that the cess  was  a fee  and  not  a  duty of excise.   This  Court  upheld  the validity of the cess on the ground that it was really a fee, and  in so holding observed "it is true that between  a  tax and  a  fee  there  is  no  generic  difference.   Both  are compulsory  exactions  of money by public  authorities;  but whereas a tax is imposed for public purposes and is not, and need  not,  be  supported by any  consideration  of  service rendered in return, a fee is levied essentially for services rendered  and  as such there is an element of quid  pro  quo between the person who pays the fee and the public authority which  imposes it.  If specific services are rendered  to  a specific  area or to specific class of persons or  trade  or persons  in any local area and as a condition precedent  for such  service  cess is levied against the said area  or  the said  class  of  persons or trade or business  the  cess  is

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distinguishable  from a tax and is described as a fee.   Tax recovered  by  public  authority invariably  goes  into  the consolidated  fund  which  ultimately is  utilised  for  all public purposes,whereas  cess levied by way of  fees  is not intended to be, and doesnot  become,  a  part  of  the consolidated fund.  It is earmarked andset  apart  for  the purpose of services for which it is lvied......In  regard to  fees there is, and must always be, co-ordinaton  between the   fee   collected  and  the  service  intended   to   be rendered.....  The distinction between a tax and a  fee  is, however, important and it is recognised by the Constitution. Several Entries in the Three Lists empower the appropriate Legislatures to levy taxes, but apart from the power to levy taxes  thus conferred each List specifically refers  to  the power to levy "fees in respect of any of the matters covered in  the  said  List excluding of course fees  taken  in  any Court".  Reference was then (1)[1961] 2 S.C.R. 537. 510 made  to  the  decisions  in the  Shirur  Mutt  case(1)  the Orissa(1)  and the Bombay(2) cases to which we have  already adverted.   Mr. Pathak placed considerable reliance  on  the reference  in the Hingir-Rampur Coal Co.(4) to the  decision of  the  Privy  Council  in  Attorney-General  for   British Columbia v. Esquimalt and Nanaimo Railway Co.(3) and to  the explanation  of  the rationale of those  decisions  of  this Court :-  "It would thus appear that this decision proceeded on  the basis that what was claimed to be a special  service to  the lands in question was in reality an item  in  public service  itself  and  so the element of  quid  pro  quo  was absent.   It is true that when the Legislature levies a  fee for rendering specific services to a specified area or to  a specified class of persons or trade or business, in the last analysis such services may indirectly form part of  services to  the public in general.  If the special service  rendered is  distinctly  and  primarily meant for the  benefit  of  a specific  class  or  area the fact that  in  benefiting  the specified class or area the State as a whole may  ultimately and  indirectly  be  benefited would not  detract  from  the character  of  the  levy  as a  fee.   Where,  however,  the specific  service is indistinguishable from  public  service and   in  essence  is  directly  a  part  of  it   different considerations may arise". These decisions according to the learned counsel established (1) that a fee for a licence was prima facie a tax and was a mode of raising revenue, (2) the fact that under the licence the  trade,  business or other activity of the  licensee  is controlled  and regulated where such control and  regulation is  imposed  in the interest of the general  public  is  not sufficient  to negative the licence fee being a tax; (3)  it was  only in those cases where an impost was made either  as an  ad  hoc cess or a fee for the grant of a  licence  as  a charge  for  services  rendered to the  fee-payer  that  the impost could be characterised technically as a fee which for being valid would have to stand the test of correlation with the  costs  entailed on the public body  for  rendering  the service.   Besides the requirement as to special service  to the payer being required, the argument continued that on the authorities  cited  any  fee would be tax if  there  was  no segregation  of its proceeds for the general revenues and  a requirement  of the law that the collections should be  used only  for the purpose of rendering the service.   This  last requirement,  however,  the learned counsel  did  not  press seriously,  seeing that even charges for services  rendered, for instance, charges for

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(1)  [1954] S.C.R. 1005. (2) [1954]  S.C.R. 10. (3) [1954] S.C.R. 1055. (4) [1961] 2  S.C.R. 537. (5)  [1950] A.C. 87.  511 extra water supply also went into the general municipal fund and  figured in the consolidated annual budget prepared  for the Corporation. Learned counsel is no doubt right in the submission that the impost  described as a "fee" does not  decisively  determine that it is not a tax.  He is also right in urging that  the, fact that the fee is imposed for the grant of a licence,  is equally not determinative of its true nature.  It is  common knowledge  that in the United Kingdom duties of  excise  are often  collected  as licence fees and an illustration  of  a similar  practice  in  India is seen in  the  Ajmere  Excise Licence case.(1) As observed by Gwyer, C.J., in Re : Central Provinces  and  Berar Act 14 of 1938 (2) "The  licence  fees payable  by persons who produced or sold excisable  articles also  became known (in U.K.) as duties of excise".   In  the context  of the problem before us, however, the question  is whether in order to constitute a fee in the strict sense  it is not sufficient that it is imposed in order to raise funds for  ensuring due compliance with the activity which  it  is the  object  of  the licence, to  place  under  supervision, inspection and control.  In this connection reference may be made  to paragraph 7 of the affidavit by the Corporation  in answer to the Writ Petition filed by the respondent.   There the  appellant Corporation stated "the new scale of fees  as fixed  by  the  Corporation  is  reasonable  for   effective inspection,  supervision  and control of  cinema  houses  in Calcutta  at  present numbering 75 in  accordance  with  the provisions in the relative bye-law framed under the Calcutta Municipal Act having regard to the public health, safety and convenience......  I  say  that  in  order  to   effectively discharge the statutory duties imposed on the Corporation in regard  to  the  inspection,  regulation.  supervision   and control of cinema houses in Calcutta it is necessary to pro- vide  for  a  more  suitable  machinery  and   establishment involving employment of a much larger staff and consequently very  large  additional  expenses in  order  to  exercise  a better, fuller and more effective control and supervision of the  cinema houses, having regard to the  additional  burden imposed by the cinema business at present times and the ever growing  needs of precautions regarding the  health,  safety and  convenience  of  the public the new scale  of  fees  is reasonable to cover necessary expenses involved in the  said control and supervision of the cinema houses as hereinbefore stated".   Mr.  Pathak  urged that the  point  that  be  was raising  was one of law and therefore the appellant was  not confined to sup- (1) [1954] S.C.R. 873. (2) [1939] F.C.R. 18. 512 porting the levy as a fee in the strict sense.  He is  right there, but we are drawing attention to this defence only for the reason that this plea was taken because of the  accepted position  as to the concept of a fee on the  authorities  to which we shall refer presently and the elements of "service" needed  the rendering of which would constitute a  quid  pro quo  for the fee imposed.  These authorities have taken  the view that where a licence is granted, the fee to be  charged for  such a licence might bear a reasonable relation to  the cost  of providing the inspection, supervision  and  control

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imposed on the licensee both in his own interest as well  as in the interest of the general public.  In other words a fee in  the  strict sense-as distinguished from a tax  could  be charged, for the cost involved in (a) the machinery employed for  granting the licence, (b) the  supervision,  regulation and  control  to which the licensee renders  himself  liable under  the licence, and subject to which he is  granted  the licence.   Thus in The Municipal Corporation of  Rangoon  v. The  Cooratee  Bara  Bazar Co. Ltd.(1)  the  validity  of  a licence  fee  imposed  for  keeping  a  private  market  was questioned by a suit filed on the original side of the  High Court.  Section 178(3) of the City of the Rangoon  Municipal Act ran : "For every such licence or permission a fee may be charged at such rate as shall from time to time be fixed  by the  Corporation".  Under this provision fees  amounting  to substantial sums were charged for licences granted for these private  markets.  This fee was challenged  as  unreasonable and  ultra vires.  Cunliffe, J. who tried the suit  observed at pp. 219 and 220 :-               "A licence is merely a permission granted to a               particular person to do a particular thing  at               a.  fixed place during a  determinate  period.               The  fee  attached  to  such  a  permit  is  a               specific sum of money to be collected from the               licensee  for  the  purpose  of  covering  the               expenses  of  the licence,  its  registration,               inspection  and supervision.  Fees  levied  on               licenses  of premises ought not to be  greater               than   a  sum  to  cover  the  costs  of   the               regulation."               A Similar view was taken by the Division Bench               on appeal.  They said at p. 228 :-               "Was it the intention to give the  Corporation               power  to  impose  on the  owners  of  private               markets  a  charge for a licence  which  might               extend to any amount for which               (1)   [1927] I.L.R. 5 Rangoon 212.                513               the sanction of the Local Government could  be               obtained?  Or was the intention merely to give               power  to  charge a fee which would  save  the               Corporation from being out of pocket by reason               of the duties and liabilities imposed on it by               the  Act of the supervision and regulation  of               private markets ? As  the amount charged bore no relationship to the  expenses involved  in the inspection, supervision and  control  which the  Corporation might exercise over the licensed  premises, the  fee  was  held to be ultra vires.   This  decision  was followed in Corporation of Madras v. Spencer & Co. (1).  The licence fee for storing spirits levied under the Madras City Municipal Act was raised from Rs. 25 to 200 by a  resolution of   the   Corporation   after   observing   the   necessary formalities.   This was challenged as excessive  because  of want   of  correlation  between  the  cost  of   inspection, supervision  and control of holders of the licence  and  the total  amount recovered as fees.  The pattern of the  Madras City  Municipal Act was the same as the Act before us.   The contention,urged  before the Court was the same as that  now urged viz. that what was permitted to be levied by s. 365(2) of the Madras Act [corresponding to our s. 548(2)] was a tax particularly  seeing  that  what  was  being  regulated  and controlled  was  a noxious or dangerous trade  or  activity. The Court repelled it by pointing out that taxes were  dealt with in Part 3 while the power to levy fees for licences was

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conferred   by  a  section  occurring  in  a   part   headed Miscellaneous and Procedure.  Phillips J. observed at p.  57 :               "Beasley,  I.,  has  held that  the  fees  are               leviable  as compensation to  the  corporation               for  the  expenses incurred in  the  issue  of               licenses  and  the general regulation  of  the               trades   and  other  occupations   which   are               licenced  and  there  must  be  some  relation               between these expenses and the amount of  fees               leviable.  This was the view which was adopted               by   the  Rangoon  High  Court  in   Municipal               Corporation Rangoon v. Cooratee Barn Bazar Co.               Ltd. (A.I.R. 1927 Rangoon 183-5 Rangoon  212).               With  all  respect,  I think this  is  a  very               reasonable view to take and, although possibly               the above is not the sole consideration  which               may be taken into account in fixing the amount               of fee, it is the main               (1) A.I.R. 1939 Mad. 55.               514               consideration.    The  license  fees  are   in               respect  of  what  are  called  dangerous  and               offensive  trades,  that  is  to  say,  it  is               necessary  in the interests of the  city  that               the  corporation shall know where such  trades               are  being  carried  on  and  shall  be  in  a               position to see that they are carried on in  a               proper  manner  without  causing   unnecessary               nuisance  to  other people or  danger  to  the               public generally."               Reilly, J., the other learned Judge, added  at               p. 59               "It  is suggested that the fixing of fees  for               those  licenses may be used by the council  as               method  of  taxation.   Surely,  if  that  was               intended, that power would have been  provided               for  in the part of the Act which  deals  with               taxation.   What  could  be  the  reason   for               bringing it in as a’ mere matter of  procedure               at the end of the Act ? .... If we accept  the               proposition that the power of charging license               fees cannot be used for taxation, then we must               say  that as a whole the fees charged  by  the               corporation must not be very much in excess of               what the duties cast upon them and their staff               in  connexion  with the  licenses  cost  them.               There  is  the cost of issuing  the  licenses;               there  is the cost of inspecting the  premises               to  see  whether  they are  suitable  for  the               purpose proposed; and there is the  subsequent               cost  of inspecting the premises to  see  that               they  are  being used properly  and  that  the               conditions  and  restrictions imposed  by  the               Commissioner are observed." These decisions were followed in Municipal Council of Kumba- konam v. Ralli Bros.(1) where a fee for a Municipal  licence granted for storing groundnut was increased and its validity was  questioned.   Section 321 (2) of  the  Madras  District Municipalities Act was in terms identical with s. 548(2)  of the Act.  Dealing with the nature of the fee permitted to be charged under that provision Curgenvan, J. said :-               "The  wording undoubtedly suggested  that  the               fee should be commensurate with the extra cost               entailed   by   granting   the   licence   and

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             exercising such supervision as is necessary to               see that its terms are complied with.  It  may               be that in order to promote the health,  etc.,               of the public, with which this part of the act               specially               (1)   A.I.R. 1931 Mad. 497.                515               deals, higher fees should be chargeable in the               case of dangerous or offensive occupations." The  High  Court of Orissa(1) followed these  decisions  and adopted  the  same construction of the fee permitted  to  be levied by s. 321 of the Madras District Municipalities  Act, whose provisions were also applicable to parts of the  State of  Orissa, besides decisions on the same lines by the  High Court of Allahabad in Lala Rai Kishore v. District Board  of Saharanpur(2). We have, therefore, to consider whether there is anything in the  decisions of this Court referred to earlier and  relied on  by the learned counsel which militates  against  holding that  the cost involved in the inspection,  supervision  and control of an industry, trade or activity is not a quid  pro quo  to the payer so as to constitute a fee levied for  that purpose as always a tax.  Reference may here be made to  the terms of s. 431 of the Act with which Chapter XXVI, in which s. 443 occus, opens.               " inspection and Regulation of Premises.               431. Subject  to the provisions of this  Act,               land  and  buildings  shall  respectively   be               inspected,   cleansed,   secured,    repaired,               drained  or otherwise regulated in  accordance               with the rules contained in Schedule XVII." It is, therefore, not as if powers or duties are not cast on the  Corporation  to be discharged for which the fee  to  be charged under s. 548 (2) would be a quid pro quo. The placing of an activity, industrial or commercial,  under regulation  and control is no doubt done in  furtherance  of public interest, but so are most of the activities of public bodies.    Nevertheless  the  supervision,  inspection   and regulation  is from a long term point of view considered  to be  and is in the interest of the industry or  the  activity itself.   To say that to enable a fee strictly so called  to be  levied,  an immediate advantage measurable in  terms  of money  should  be  conferred on the payer, is  to  take  too narrow  a view of the concept of a fee.  We do not  consider that the decisions of this Court in the Endowment cases  lay down  such  a  proposition  or  compel  us  to  adopt   this construction.   On the other hand the Orissa Endowments  Act and  the Bombay Public Trusts Act cases, as also the  Orissa Mining Area Development Fund case support a broader view  of what constitutes service to the fee-payer. (1)  Sivaparvatamma   v.  Executive  Officer,  A.I.R.   1957 Orissa, 285. (2)  A.I.R. 1954 All. 675. 516 We are also satisfied that the narrow construction suggested would not accord with the scheme of the entries in the lists in  Schedule  VII to the Constitution.   To  illustrate  the point,  we would refer to a legislation like the  Industries Development  and  Regulation Act, 1951 (Central  Act  65  of 1951).   It  is an Act to provide for  the  Development  and Regulation  of certain industries.  Under the provisions  of s. 11 of that enactment no new industrial undertaking  could be  established  by any person or authority other  than  the Central Government after the commencement of the Act "except under  and  in accordance with the licence  issued  in  that

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behalf   by  the  Central  Government".    The   inspection, supervision and control to be exercised over the licenses is provided for in detail by various sections of the enactment. Under  s.  30 (2) (j) the Central  Government  is  empowered under the rules made under the Act to determine the fees  to be  levied  in respect of licences  and  permissions  issued under the Act.  Now, let us see the constitutional power  to empower  the  fee to be charged.  Entry 52 of List  I  reads "industries,  the control of which by the Union is  declared by law to be expedient in the public interest", and s. 2  of the enactment contains this declaration.  Coming now to  the entries  relating to taxation it will be found that none  of these  entries, 82 to 92, would cover the fees  charged  for licences  issued  under  the  enactment.   It  is   obvious. therefore,  that the legislative power for charging fees  is to  be derived from Entry 96 of List 1, "fees in respect  of any  of the matters in this List".  If the learned  counsels submission  that the expression quid pro quo should be  read in  the sense of a special and particular benefit  conferred upon  particular  licensees  (benefit  again  in  the  sense suggested)  is  correct ,he licence fees  levied  under  the rules  made  under s. 30 (2) (j) read with s.  II  would  be invalid  as  a fee and it could not be sustained  as  a  tax either, for the tax there levied could not be brought within the rubric of any of the Entries, 82 to 92.  It,  therefore, appears to us that the word quid pro quo should be read  not in the narrow and restricted sense submitted by the  learned counsel  for the appellant but in a somewhat wider sense  as including  cases  where the function of the  licence  is  to impose  control  upon  an activity  the  cost  incurred  for effectuating  that control, and this on the basis  that  the industry or activity is placed under regulation and  control not  merely in public interest but in the interest  and  for the benefit of the licensees as a whole as well. Coming  nearer  to the present case we  might  take  another instance.   Take  the case of a licensing of  factories  and trades  which  are  the  other matters  dealt  with  in  the fasciculus of sections  517 of  the  Act in which s. 443 is to be  found.   Section  436 runs, to quote the material words "no person shall,  without the   previous  written  permission  of   the   Commissioner establish  in any premises or materially alter,  enlarge  or extend  any  factory, workshop or workplace in which  it  is intended   to  employ  some  electricity,  water  or   other mechanical  power [436(1)] and s. 437(1) reads : "No  person shall  use or Permit or suffer to be used any  premises  for any  of  the following purposes without or otherwise  or  in conformity  with  the term, of the licence  granted  by  the Commissioner  in this behalf, viz. (a) any of  the  purposes specified in Schedule 18,(b)  any  purpose which is  in  the opinion  of the Corporation danger(us to health or  property or......... Schedule 18 contains a list of the purposes  for which  premises  may  not  be used  without  a  licence  and contains a long list of goods or articles which could not be packed, stored etc. in such premises.  Under s. 548(2) a fee might  be charged both for a written permission as  well  is for the grant of a licence.  It must be assumed that if  the learned  counsel  is  right in his  submission  as  to  what constitutes a fee, the fee charged for a written  permission under  s.  436 and for licence under s. 437  which  we  have extracted  above  would in reality be  taxes  though  called fees.   Now, lot us see whether there is any taxation  entry in  List 11 which could support the validity of the  impost. The  only Entry under which it could possibly be brought  in

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if it all would be Entry 60, "taxes on professions, callings and  employments".   It is hardly possible lo  sustain  this interpretation  because  there  is also Ch. 13  of  Part  IV headed "taxes on professions, trades, callings and the exact figure of the taxes which. might be imposed are laid down in Schedule 4. It cannot of course be said to be a tax on  land buildings  because it is not on the ’land or  building  that the  tax is levied but on the activity Pursued therein,  and besides  "taxes on lands and buildings" are specially  dealt with  under  Ch.  11  of  Part  IV  where  the   permissible "consolidated rates" are laid down.  The licence fee for the written permission and licence fee under ss. 436-37 can only be  supported as referable to legislation under Entries  5-- constitution  and powers of the municipal corporations"  and 6public health and sanitation" and 24-"industries" read with Entry  66  of  the  State List.  We  have  taken  these  two illustrative  cases  at  random but an  examination  of  the entire body of statute law in India would bear this out.  We are not, therefore, disposed’ to read the judgments of  this Court in the Shirur Mutt case(1) and the cases following  as laying down that where an activity is regulated by  licences the imposition of charges for the inspection, (1)  [1954] S.C.R. 1005. 518 supervision and control of the activity to ensure compliance with  the  regulation  is not a  benefit  conferred  on  the licensee  so  as  to render the amount charged  for  such  a licence  not  a  fee  in the real sense  but  a  tax,  whose constitutional validity could be sustained only by reference to  the  taxation  entries in Lists I and  II.   Mr.  Pathak submitted  that so far as the fee charged with reference  to entertainments in theaters under s. 443 of the Act might  be sustained  with reference to Entry 62 of List 11,  but  that would  hardly  be an answer, because we  are  examining  the entirety of the group of cases to which s. 548(2) of the Act would apply. It  will  now  be convenient to  consider  the  argument  of learned  Counsel  based  on Art. 110(2)  as  supporting  the narrow construction of the word "fee" as used in the entries in  the  legislative lists.  Article 110(2) deals  with  the definition, of Money Bills for the purposes of that Chapter. Clause (1) defines in positive terms what shall be deemed to be  a money bill and cl. (2) negatively defines  what  shall not be deemed to be a money bill.  That provision reads               "110.  (2) A Bill shall not be deemed to be  a               Money Bill by reason only that it provides for               the  imposition  of fines or  other  pecuniary               penalties,  or  for the demand or  payment  of               fees   for  licences  or  fees  for   services               rendered,  or by reason that it  provides  for               the    imposition,   abolition,    remission,,               alteration  or  regulation of any tax  by  any               local authority or body for local purposes." Learned  Counsel  pointed out that here  a  distinction  was drawn  between a payment of fees for licences and  fees  for services  rendered, and so a payment for fees  for  licences was  treated  differently from fees for  services  rendered. The argument based upon it was that Entry 66 of List 11  and the  similar Entries in Lists I & III were confined to  fees for  services  rendered  and that "a  payment  of  fees  for licences"  were really not fees within those  Entries.   Re- ferring  to  the present case he urged that  as  no  special services  for the benefit of the theatre owners  had  either been required to be rendered by the Act or the bye-laws made thereunder or had actually been rendered, it could not  fall

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under  the  category of "fees for services  rendered".   The Constitution,  therefore, it was urged contemplated  imposts by  way  of fees for licences which were  not  for  services rendered  and it was this category of impost that  was  per- mitted to be charged by s. 548(2) of the Act.  We ire unable to agree in this construction of Art. 1 10(2). In  the first place, all municipal taxation is  outside  the definition   of  a  money  bill,  so  that  in   regard   to municipalities  and the imposts made for purposes  of  local administration, no distinction is drawn  519 between  taxes  and fees.  The "fees"  therefore  which  are specifically  excluded from the definition are fees  imposed by the State Government or its administrative agencies other than by instruments of Local Self-Government.  The exclusion from the definition is as regards two categories : (1)  fees for  licences,  and (2) fees for services rendered.   It  is obvious that a tax which is collected as a licence fee  such as  in the Ajmere Excise case considered earlier, would  not fall outside this definition of a money bill merely  because the  tax  was imposed and collected as a  licence  fee.   If therefore pure taxation measures would be money bills  then, it  is obvious that the fees for licences which are  outside the definition would be those fees which are imposed to meet the cost of regulation and supervision of an activity  which is controlled by the requirement of a licence and compliance with  its terms.  Thus a contribution under s. 76(1) of  the Madras Religious Endowments Act as amended in 1954, would be a fee for services rendered because there is no question  of licences  being  taken  out  in these  cases  and  fees  for regulating an activity such as the fees payable for licences under the Regulation of Industries Act, 1951 or for licences for  trading  in essential commodities under  the  Essential Commodities  Act, 1955 would on the other hand  fall  tinder the  bead "payment of fees for licences".  Thus we  consider that  Art. 110(2) far from supporting Mr. Pathak,  negatives the construction for which he contends. Any  other construction of Art. 110(2) would hardly  fit  in with the scheme of the Article itself or even with the lists in Sch.  VII.  Thus if every fee for a licence were  outside the definition of a money bill, legislation for the levy  of excise duties which are very often collected by adopting the machinery of licences and fees therefor, would not be  money bills, and seeing that "excise duties" are a taxation  entry in  Lists  I  & II such a  position  cannot  be  reconciled. Besides, as already pointed out, Entry 66 itself would  have to be read as a taxation entry in order to sustain the  levy of  licence fees on various activities which might form  the subject  of  legislative  control or  regulation  under  the various   non-taxation  entries  in  the  lists.    Such   a construction would be contrary to the entire scheme on which the   several  entries  in  the  lists  are   arranged   and differentiated.  As additional illustrations of the  anomaly that  would result if Mr. Pathak’s construction of entry  66 of List 11 were accepted we would refer to other sections of the Act which enable the issue of licences and the  charging of fees therefor.  We have already referred to s. 436 and s. 437  of  the  Act.  Under Section 449  the  Commissioner  is empowered to license vendors in Sup./65 17 520 municipal  markets,  under S. 451 he has  power  to  license private markets, slaughter houses and stock-yards, and under s. 460-to license butchers and those who sell meat.  We  are not  making an exhaustive list but are merely  pointing  out

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that in order to sustain these levies as fees, because  they do not fall under any of the heads of taxation permitted  to the  State, the word ’fee’ has to be read as including  fees charged  for  supervision,  control  and  regulation  of  an activity which the legislature desires to control.  On  this part  of  the case we are clearly of the  opinion  that  the legislative  power as regards "fees" under Entry 66 as  well as the corresponding entries in the other Lists is really in the  nature  of an incidental power to effectuate  the  main head  of  legislation empowered to be enacted by  the  other entries in the List.  Item 66 is not an entry in relation to taxes  which, on the scheme of the Constitution as  we  have analysed earlier, are grouped together serially in Lists I & II.  This construction is confirmed by the fact that in  the Concurrent  List which contains only entries in relation  to legislative  power as distinguished from entries  conferring taxing  power, the last entry enables fees to be  levied  as ancillary  to the legislative power conferred by  the  other entries in that list. Even   assuming  that  learned  Counsel  is  right  in   his submission  regarding the manner in which the  decisions  of this Court in the Religious Endowment group of cases have to be understood, the appellant would be in no better position; in  fact, its position would be worse, for if a  fee  within Entry 66 is confined to payments for particular and specific services  rendered  to  the fee  payer,  the  constitutional validity of s. 548(2) of the Act would be open to  challenge on  the ground that it authorises the Municipal  Corporation to  impose taxes which are not within the State’s  power  to impose  for its own purposes.  This would be  an  additional reason  for reading the word "fee" in Entry 66 in the  sense which  we have indicated earlier and which is in  consonance with  the  uniform course of decisions already  referred  to rendered on the meaning of that word. (2)Is the fee permitted to be charged by s. 548 (2) a fee or a tax ? This  brings us to a consideration of the provisions of  the Act  for  the  purpose of  determining  whether  the  impost permitted  to  be charged by S. 548(2) of the Act is  a  fee understood  in the sense in which we have explained  earlier as  used  in Entry 66 of List 11 or is it a tax.   For  this purpose  it is necessary to examine the scheme of  the  Act. The Act contains 615 sections and these are 521 divided into 3 8 chapters each with a heading indicating the subject  dealt  with  in it.   These  several  chapters  are themselves  grouped under 8 Parts.  Part 1 in which  Ch.   1 alone  occurs is preliminary and does not  require  mention. Part  11  which comprises Chapters 11 to VI  deal  with  the constitution  and government of the  Municipal  Corporation. The several chapters of this Part enumerate and specify  the powers  and functions of the several  municipal  authorities and the manner in which the business of the Corporation  has to  be  transacted.  This Part also is not relevant  to  the matter on hand and may be passed over.  Part III deals  with Finance  and is made up of Chapters VII, VIII, IX and X.  It is  sufficient  to  refer to the  headings  of  the  several chapters which are Ch.  VII. The Municipal Fund, Ch.   VIII- Budget  Estimates,  Ch.  IX Loans and Ch.  X  Accounts.   We shall  have  to  refer to some of the  provisions  of  these chapters  in  dealing with certain arguments of  Mr.  Pathak relying  on  them  for  the  purpose  of  showing  that  the legislature  had  laid  down  the  principles  and  afforded sufficient guidance for determining the rate at which a  fee should  be levied, on the basis that such a fee was  a  tax.

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To these, however, we shall revert later. Part IV is headed ’Taxation’ and Chapters XI to XVII are  in this  Part  and each of these chapters  deal  with  separate heads  of taxes which the Corporation is authorised to  levy and collect. Section 165 of the Act with which Ch.  XI opens empowers the Corporation  to  impose "a consolidated rate" on  lands  and buildings  situated within the municipal area.  The  section prescribes  the maximum percentages of the annual  value  at which  the  tax may be levied and grades them  into  several categories dependent on the total annual valuation.  Section 166 prescribes the manner in which the particular percentage to  be charged is to be determined by the Corporation.   The percentages, subject to the maxima laid down in s. 165, have to  be fixed annually having regard to the  requirements  of the  Corporation with reference to the  obligations  imposed upon it by the Act.  Elaborate procedure is laid down by the other  sections of this Chapter ending with s. 207  for  the manner  in which the annual value of lands and buildings  on which  the  specified  percentages  may  be  levied  may  be determined,  with appeals provided to Civil Courts  for  the aggrieved  tax-payer  in the event of the  annual  value  as determined  by  the Corporation being  disputed.   The  next Chapter-Ch.  XII comprising ss. 208 to 217 is headed  ’Taxes on Carriages and Animals’.  When the tax leviable under this chapter whose rate is prescribed by the Sch.  VI of the Act, is paid, a licence is issued to the owner of the Carriage or 522 Animal.    Next,  we  get  to  Ch.   XIII  headed  "Tax   on professions,  trades and callings" and comprises ss. 218  to 221.   Section 218 directs that "every person who  exercises or  carries on in Calcutta any profession, trade or  calling indicated  in  Sch.  IV shall annually take  out  a  licence before the 1 st July each year........ and pay for the  same such  fee  as  is  mentioned in  that  behalf  in  the  said Schedule.  Schedule IV, it might be mentioned, contains  the rules  as  to the quantum of the profession etc. tax  to  be charged by the ,Corporation.  The persons to be taxed  under this  head  are divided into 10 classes depending  upon  the amount of business carried on and in the case of  companies, their  paid-up  capital and in the case of  individuals,  of their annual income and in respect of each class the fee  to be levied is specified.  Chapter XIV headed "Scavenging Tax" comprises ss. 222 and 223.  This tax is to be levied on per- sons  who  exercise a calling. specified in Part 1  of  Sch. VII and is dependent on either the average number of animals kept by the persons for the exercise of such calling, or  in the  case of the owner or occupier of a market, the  average quantity  of offensive matter and rubbish removed daily.   A licence  is to be taken by the person liable to pay the  tax and  the  rates to be charged are to be those  specified  in Part  11 of Sch.  VII.  Next, we have a tax on  carts  under Ch.  XV.  The tax is to be imposed for the registration  and the  numbering  of carts and by charging of a fee  for  such registration.  Section 225 prescribes the fee that might  be charged  for  the several varieties of  vehicles  which  are classified  under  that section.  Section 229 which  is  the first  section in Ch.  XVI provides for the imposition of  a licence  fee for advertisements.  It is the  only  provision for taxation as regards which a rate is not specified or the maxima laid down by the Act.  Chapter XVII which is the last chapter in this Part is concerned with making provision  for the  recovery of the consolidated rate and the  other  taxes and  for  certain supplementary provisions  in  relation  to taxes permitted to be levied under this Part.

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The next Part-Part V is headed the Public Health, Safety and Convenience and Chapters XVIII to XXXI are included in  this Part.  Chapter XVIII relates to water supply, XIX to drains, privies  and  other  receptacles for filth,  Chapter  XX  to licensed plumbers, XXI to Streets and Public places, XXII to buildings, XXIII to Bustees, XXIV to demolition,  alteration and   stopping  of  unlawful  work,  XXV  to  lighting   and scavenging,  and regulation of public bathing  and  washing, XXVI  to  inspection  and regulation  of  premises,  and  of factories,  trades and places of public resort and  this  is the chapter in which s. 443 finds a place.  Chapter XXVII  523 deals  with markets and slaughter places, Ch.   XXVIII  with Food  and Drugs, Ch.  XXIX with milk-supply, Ch.   XXX  with restraint  of infection and Ch.  XXXI with  registration  of births  and  deaths  and disposal of  the  dead.   The  next chapter  in this Part deals with acquisition,  disposal  and general  improvement  of  land and buildings  and  the  last oneCh.   XXXIII with the special powers of the  Corporation. The next part-Part VII contains provisions for enabling  the Municipal Corporation to make bye-laws and rules.  Part VIII which  is  the last Part has four chapters-Ch.   XXXV  deals with  penalties to be imposed for ensuring  compliance  with the  provisions  of  the Act and the bye-laws  made  by  the Corporation, Ch.  XXXVI is headed ’Procedure’, and s. 548 is the  first section in this Chapter, and the  other  sections deal with the incidental powers of the Corporation and  with procedure.   The next two chapters are headed  "Supplemental provisions & Transitory provisions". Mr. De for the respondent urged that the scheme of the Muni- cipal Act proceeded on a clear demarcation between taxes and fees,  and  that  all the taxes which  the  Corporation  was empowered  to  impose were grouped  together  under  various heads in Part IV of the Act headed "Taxation".  Section  443 occurs  in the Chapter relating to the inspection of  places of  entertainment  and public resort and s.  548(2)  in  one headed  "Procedure"  and  that  the  framers  of  the   Act, therefore,  could not, by these provisions, intend that  the fee  to  be  levied would be a tax.   In  other  words,  the argument was that all taxing power and the heads of taxation were  to be exclusively found in Part IV of the  Act.   This argument  deserves  serious  consideration,  but  before  we proceed  to  do  so,  we might  notice  and  dispose  of  an additional  submission  which  was made  to  reinforce  this argument based on the terms of s. 127(3) read with s. 127(4) of  the Act.  Section 127 occurs in Ch.  VIII  dealing  with Budget estimates.  Section 126 requires the Commissioner  to prepare  and submit to the Standing Finance Committee on  or before  December  15  each year, "the  annual  estimates  of expenditure,  receipts  and balances and the  statements  of proposed  taxes".  Section 127 is concerned  with  requiring the Corporation to frame budget estimates of the year.  Sub- s. (3) on which he relied reads               "(3).   The Budget Estimates prepared  by  the               Standing  Finance  Committee  shall  be   laid               before the Corporation on the 15th February or               as   soon  as  possible  thereafter  and   the               Corporation  shall consider the same.  It  may               refer  the  estimates  back  to  the  Standing               Finance  Committee for  further  consideration               and  resubmission within a specified time  and               shall-               524               (a) .............................               (b)determine, subject to the provisions  of

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             Part IV the levy of the consolidated rate  and               taxes  for the said year at such rates as  are               necessary   to   provide  for   the   purposes               mentioned            in            sub-section               (4) ......................               and sub-s. (4) reads :               "(4).  In the Budget Estimates the Corporation               shall among other things               (a)make  adequate and  suitable  provisions               for  such services as may be required for  the               fulfilment  of the several duties  imposed  by               this Act,               (aa) make adequate provisions for depreciation               of machinery belonging to the Corporation,  as               far as may be possible,               (b)provide for the payment as they fall due               of  all  instalments  of  the  principal   and               interest  for  which the  Corporation  may  be               liable in respect of loans contracted by it,               (c)allow  for a cash balance at the end  of               the  year  of not less than  twelve  lakhs  of               rupees, and               (d)allot  sums  of money  to  each  Borough               Committee   to  enable  it  to  exercise   and               discharge its powers, duties and functions." The  argument was that in the budget estimates in s.  127(3) what  is  to be considered is the levy of  the  consolidated rate  and the taxes and these are subject to the  provisions of Part IV and the obligatory expenditure imposed by  sub-s. (4)  is  to be met out of the consolidated rates  and  taxes which are to be determined subject to the provisions of Part IV.   It was, therefore, submitted that the rates and  taxes had  to be determined subject to the provisions of  Part  IV and as the expenditure under sub-s. (4) was to be correlated to the receipt from the rates and taxes it was an indication that all rates & taxes were only under Part IV.  We consider that this argument proceeds upon a misconstruction of  these provisions.   Sub-s.  (4) of s. 127, of course,  deals  with obligatory expenditure but from this it does not follow that expenditure  which the Corporation could lawfully incur  for the  optional  amenities  which it  could  provide  for  the citizens would not find a place in the budget.  Sub-s.  (4), it  would be seen, opens with the words "shall  among  other things, make    Under s. 126 the budget  525 will  cover  all  the expenditure which it  is  proposed  to incur-both  that  which is obligatory upon  the  Corporation under s. 127(4) and those which it could lawfully incur.  On the  receipt  side  would  be included  also  fees  and  all receipts from every other source.  No doubt, s. 127(3) would appear  to  suggest that so far as  consolidated  rates  and taxes  are concerned, it would be subject to the  provisions of Part IV but that by its very nature can only apply to the rates and taxes listed in Part IV.  If on a proper construc- tion of the Act one reached the conclusion that Part IV  was not  exhaustive of the range of levies permitted by the  Act and  that the fees permitted to be levied by s. 548(2)  were also  taxes, there would be nothing in s. 127(3), either  by itself  or  read with s. 127(4), to  militate  against  that construction.   We  do not, therefore, consider  that  these provisions  advance  the  case of the  respondent  if  on  a construction of the Act one reached a different conclusion. We  are thus left with the assistance afforded to us by  the scheme underlying the provisions of the Act for  determining whether the levy permitted by s. 548(2) is of the nature  of

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a  tax.  The submission of Mr. Pathak was that Part  IV,  no doubt, dealt with rates and taxes but merely on that account one cannot draw the conclusion that taxes are not dealt with or  permitted to be imposed by other provisions of the  Act. No  doubt,  if  a power to make a levy occurred  in  a  part outside Part IV and it clearly and unequivocally pointed  to the  imposition being a tax its effectiveness could  not  be denied  merely because the provision did not appear in  Part IV.  But on the scheme of the Act we have at least to  start with  a presumption that Part IV is exhaustive of the  taxes which  are  permitted to be levied by the  Corporation.   In this connection Mr. Pathak laid some stress on the fact that the nomenclature employed to designate taxes in Part IV  was not   uniform  and  that  a  tax  was  sometimes  called   a consolidated rate (vide s. 165) and, though called a tax  in the case of taxes on carriages and animals under ss. 208 and 216,  a licence was granted on the payment of a tax, it  was called a fee under s. 218 in the case of tax on professions, trades  and  callings,  and,  similarly,  in  the  case   of scavenging  tax under s. 222, was designated as a fee and  a licence  fee  on advertisements by s. 229.  In the  face  of this difference in the terminology employed learned  Counsel stressed that the framers of the Act did not proceed on  the differentiation  that every fee permitted to be imposed  for the  grant  of  a licence was always  not  a  tax.   Learned Counsel  is, no doubt, right in the submission that Part  IV headed ’Taxes’ uses the expression "fee" to designate  taxes to be imposed upon particular articles or activities but the provisions of the Act and the way the relevant sections  are framed make 526 it  clear  that  what is permitted to be  charged  by  these provisions  in  Part IV is really in the nature  of  a  tax. Besides, in the case of all these imposts, whether called  a tax or a fee, except in the case of a fee on  advertisements under s. 229 either the amount of the tax was prescribed  or criteria  laid  down on the basis of which the rate  of  the levy  was to be determined.  In some cases, as the  case  of profession tax, tax on carts etc., the tax to be imposed  is determined  by the Act itself.  In the case of  others  like the Consolidated rate the maximum percentages are fixed  and what  is left to be determined by the Municipal  authorities are  the  fixation  of the  percentages  within  the  maxima prescribed and the determination of the annual value of  the premises  for fixing which elaborate procedure is laid  down which includes appeals to Courts where persons are aggrieved by  action of the municipal authorities.  One  exception  to this  method of prescribing the tax or its permitted  limits is, as already pointed out, s. 229.  It is called a  licence fee on advertisements but, in the context, gives no room for controversy  as  to whether it is a tax or a  fee.   We  are satisfied that an examination of the provisions to which  we have  referred  makes three matters abundantly clear  :  (1) that  it draws a sharp and clear distinction  between  taxes properly so called and fees, (2) the division into Parts and chapters  is  logical  and clear cut  and  no  matter  which properly  falls  under  a subject set out under  a  Part  or chapter heading is dealt with in any other.  Mr. Pathak  was not  able to point to any instance in which a subject  which fell  under  one Part or even chapter was  included  in  and dealt  with  in  another, and (3) that  taxes,  by  whatever designation  they might be called, are all comprehended  and dealt with by Part IV and by Part IV alone and that what  is permitted  to  be  imposed by S. 548(2) is  only  a  fee  as distinguished  from  a  tax.  If one has  reference  to  the

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entries  in  the  legislative list in  Sch.   VII,  what  is permitted  to  be  imposed under s. 548 (2)  is  a  fee  "in respect of the matters in the list" viz., Entry 5, Entry  6- Public  Health  and  Sanitation,  16-Prevention  of   cattle trespass,  24-Industries,  28-Markets and  Fairs,  33Sports, entertainments  and amusements.  In this view as  admittedly there  is  no correlation between the fee  charged  and  the service  rendered  in the sense discussed earlier,  we  must hold that the impugned levy was not authorised and that  the learned  Judges  of the High Court were  right  in  granting relief to the respondent. (3)Assuming  s.  548  permits the levy of a  far,  is  the provision Constitutional ? In  this  view  no other question  would  arise.   In  view, however,  of the elaborate arguments addressed to us by  Mr. Pathak on the  527 other  parts of the case and particularly since the  learned Judges of the High Court have devoted considerable parts  of their  judgment to dealing with them we propose  to  examine the submissions of learned Counsel under that head also.  On the  footing  that  what was permitted to be  levied  by  s. 548(2)  was a tax the submission of learned Counsel was,  as already  stated,  two-fold  :  (1)  that  in  the  case   of devolution  of legislative or quasi legislative power  to  a Municipal  Corporation a different criteria for  determining excessive  delegation  has  to be adopted  and  that  having regard to the terms of Entry 5 of List II no conferment of a power  in  favour  of a municipality  which  is  germane  to municipal  administration  or local self government  can  be held  to be beyond the legislative power of the State.,  and (2)  *,bat  even  if the above were not  accepted,  the  Act itself  laid down in sufficiently definite terms  the  prin- ciples  upon which the rate of fee was to be determined  and afforded’  sufficient guidance for its  determination,  that the  provision  did not suffer from the  vice  of  excessive delegation. We shall deal with them in that order.  For the  submission, under  the  first head, Mr. Pathak relied on  two  lines  of reasoning,  based  respectively on the terms of Entry  5  of List 11 of Sch.  VII and on certain American decisions which he said supported such a view.               Entry 5 reads               "Local   government,  that  is  to  say,   the               constitution    and   powers   of    municipal               corporations,  improvement  trusts,   district               boards,  mining  settlement  authorities   and               other  local  authorities for the  purpose  of               local      self-government     or      village               administration". On  the terms of this entry emphasis was laid on  the  words "powers  of municipal corporations" and "for the purpose  of local self-government" for which the municipal  corporations and other bodies specified were to be constituted.   Relying on the words underlined he urged: (1) that the  Constitution empowered  the devolution on municipal corporations  of  all powers  which  were needed for the purpose  of  local  self- government.    If,  therefore,  a  power  of  taxation   was conferred  upon a municipal corporation, that devolution  of power was sanctioned by the Constitution and so was  outside the rule against excessive delegation of Legislative  power. The  argument was even pitched higher and it was  said  that the  expression "powers" occurring in the entry enabled  the State Legislature to confer upon municipal corporations  not merely

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528 all  the  powers which the State  Legislature  itself  could exercise  under the several legislative entries in Lists  II and  111, but even powers outside those Lists provided  they were  necessary for the purposes of  local  self-government. It  was suggested that having regard to the great object  of decentralisation  of power which was achieved by setting  up institutions  for the purpose of local  self-government  the Constitution  had vested in the State Legislatures  complete and plenary powers necessary for effectuating the setting up of  such  bodies  and endowing them  with  the  capacity  to achieve  their  object.  If entry 5 was  construed  in  this manner  the conferment of power to tax by s. 548 (2) of  the Act could not be challenged as unconstitutional. To  examine this argument closely it would be convenient  to split  it  up into two parts : (1) whether by  reason  of  a provision   for  legislation  as  regards  the  "power"   of municipal  corporation,$ the rule as to  unconstitutionality arising  from  excessive  delegation  of  legislative  power becomes inapplicable, and (2) whether the powers which  were permitted  to be conferred on municipal corporations  extend beyond  those open to the State Legislatures  themselves  to exercise under the relevant entries in the Seventh Schedule. We shall take up the second question first.  Learned Counsel was  driven  to put forward an argument in  this  form  that powers to be conferred upon municipal corporations need  not necessarily  be  confined to the legislative powers  of  the State  Legislatures  under  other entries,  because  of  the difficulty he experienced in sustaining the plea that  every fee for a written permission or for licence permitted by  s. 548 (2) of the Act could be related to particular entries as to  taxation which alone are permitted to the States by  the distribution   of  legislative  power  under   the   Seventh Schedule.   For  instance,  it was pointed  out  during  the course of the argument that the purposes for which a written permission  was necessary and a licence was required  to  be taken embraced a wide variety of subjects and if s. 548  (2) were held to authorise the levy of a tax in respect of  each of  those activities for which a permission was needed or  a licence  was required to be taken, it would not be  possible to relate such a tax to any of the taxation entries in  List 11,  that  is,  entries 45 to 63.  Thus S. 297  of  the  Act provides   that  without  the  written  permission  of   the Commissioner  no  private streets shall be  constructed  and under  s. 548 (2) a fee may be charged for the  granting  of the  written permission.  It is not possible to  relate  the fee to be charged for this permission under any of the heads of  taxation in List 11.  Of course, if it were a fee  under entry 66, it would fall under that entry read with entry  529 5, entry 6-public health and sanitation-as well as entry 13- Communications,  that is to say, roads, bridges  etc.   Very many  more  illustrations of this sort to some of  which  we have adverted earlier, were pointed out during the course of the argument and learned Counsel suggested that some of them might fall under the head of "lands and buildings".  But the regulation  of  an activity for carrying on  a  business  in certain premises and which are dealt with in Chapter XXVI of the  Act--"Inspection  and Regulation of  Premises,  and  of Factories"  cannot be equated with the subject-matter  of  a tax on land and buildings which are specifically dealt  with by s. 165 which reads :               "A  graduated consolidated rate on the  annual               valuation determined under this Chapter may be               imposed by the Corporation upon all lands  and

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             buildings in Calcutta for the purpose of  this               Act.......... Similarly,  restrictions  are  imposed in  the  interest  of public  health and sanitation on the carrying on of  certain trades  which are specified in Schedule XVIII.  The  licence fee levied to secure permission to carry on such an activity could  not,  on the scheme of the Act, be called  a  tax  on professions, trades, callings and employments referred to in entry 60 of List 11.  It was by reason of these difficulties that  learned  Counsel was forced to  make  this  submission relying on the words "powers" and "for the purpose of  self- government" in entry 5. We consider that this submission  is entirely without force.  In the first place, it could not be disputed, though learned counsel did so somewhat  hesitantly at  one  stage, that the legislature  cannot  confer  larger powers  upon  a body which it creates than  what  it  itself possesses.   We  should have considered that  this  was  too elementary  for any elaborate exposition but for  submission of   counsel   in  this  case.   The  position   is   really incontrovertible. In  the Western India Theatres  Ltd.  v. Municipal Corporationof the City of Poona(1) the learned Chief Justice speaking for the court said :               "In   the  first  place,  the  power  of   the               municipality  cannot exceed the power  of  the               provincial   legislature   itself   and    the               municipality  cannot  impose  any  tax,   e.g.               income  tax which the  provincial  legislature               could not itself impose." If  the  State Legislature cannot confer a  power  upon  the State Government it is not easy to see how it could confer a wider power, (1)  [1959] Supp. 2 S.C.R. 71, 75. 530 which it could not otherwise exercise, upon a  municipality. Besides,  it  was not suggested that without a  power  being conferred  by the legislature in the Municipal Act,  by  the mere  constitution  of a Municipality, the  latter  can  lay claim to any inherent power either of local  self-government or as incidental thereto of a power to levy taxes and  fees. If the powers of a municipality are derived from legislation and  if  the  legislature has not, under  Art.  246  of  the Constitution  read with the entries in the Legislative  List which are relevant, the authority to confer such a power  it appears to us to be self-evident that the State  Legislature can confer no higher powers on the municipality than it  has itself.  If Mr. Pathak is right it would mean that though  a State  cannot  levy income tax or impose customs  duties  on imports  and  exports for the purpose  of  augmenting  State Revenues, it can however confer power to levy these taxes on a  municipality for the "purpose of local self  government". The  proposition  has  only to be  stated  to  be  rejected. Nothing,  therefore, in our opinion depends upon the use  of the " powers" in entry 5, as that expression can refer  only to  (a)  such  powers  as  are  actually  conferred  by  the enactment  in question and (b) powers which the  Legislature can  by law confer on the executive Government of the  State or on any other instrumentality of its creation. The  answer on behalf of the respondent to  this  submission was based upon two grounds: (1) That s. 548(2) is really  an exercise of legislative power under entry 66 of List 11  and that under the power so conferred what the Corporation has a right  to impose is not to impose a tax but to charge a  fee correlated to the expenses involved in the administration of that law; (2) What the legislature can confer by a provision of the type found in S. 548 (2) is merely a power to levy  a

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fee  and  not a tax as otherwise, the tax  itself  which  is permitted to be levied would be beyond the competence of the State  Legislature.   We  consider  this  submission   well- founded.   A stream can rise no higher than its source,  and this is so self-evident as not to need elaboration, it would follow  that the State legislature cannot authorise a  muni- cipal  body  which  it creates even though  it  be  for  the purpose of local self-government a power higher than what it itself possesses.  In this connection one cannot forget that the government of the entire territory forming the State  is vested  in the State and what the legislature cannot do  for the purpose of the government of that area cannot  obviously be  done  by conferring powers upon a  municipal  authority, whose  jurisdiction  extends  to  defined  limits  in   that territory.  531 It was next urged that the terms of entry 5 were  sufficient to  the State Legislature with authority to endow  municipal corporations at least with such powers as they possessed  on the  late the Constitution came into force.  We do  not  see any legal basis for this argument.  It would be noticed that entry  5 in List 11 reproduces in terms entry 13 of List  11 of  the Provincial legislative List in Schedule VII  to  the Government  of  India Act, 1935.  If the  argument  had  any validity it would follow that one should go back not  merely to the state of circumstances and the law as to distribution of legislative power which prevailed under the Government of India  Act but to a period anterior thereto,  namely  before the  1st  of April, 1937 when the Government of  India  Act, 1935  itself  came into force.  At that time  there  was  no distribution  of legislative power in the sense in which  we have under the Government of India Act and the Constitution. India  was  then under a unitary form  of  Government;)  the legislatures were not confined to enumerated powers and  the distribution of legislative power between the provinces  and the  centre  was determined with a  view  to  administrative convenience  and  not on foot of an allocation of  areas  of exclusive legislative competence.  No legislation of a State Government   which  trenched  on  a  central   subject   was unconstitutional (See proviso to s. 80A(3) introduced by the Government of India Act, 1919).  No assistance therefore can be  derived  by reference to the powers exercised  by  local authorities and municipal corporations at a time when  there was  no  distribution  of  legislative  powers  leading   to unconstitutionality. It  is precisely because the Government of India Act made  a change  in this respect that a provision was inserted in  s. 143(2)  of that Act by which taxes, duties, cesses  or  fees which immediately before the commencement of the  Government of  India  Act,  1935  were being  lawfully  levied  by  any Provincial Government, municipality or other local authority or  body  for the purposes of  the  province,  municipality, district  or other local area etc. may notwithstanding  that those  taxes,  duties, cesses or fees mentioned  in  Federal Legislative List continue to be levied and to be applied  to the same purposes until provision is made to the contrary by the  Federal Legislature".  In other words, the  framers  of the Government of India Act proceeded on the basis that  the powers  of the Provincial Legislatures as  regards  taxation were not the same and that it was, therefore, necessary  for making a provision for continued realisation of those  taxes subject  to  any  central law on the topic  and  we  have  a provision  exactly  on the same lines with  practically  the same phraseology in Art. 277 of the Consti- 532

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tution.   If the submission of the learned Counsel  for  the appellant  is right, there would have been no need  in  Art. 277,  for  a reference to taxation by  Municipal  and  other local bodies because or, the argument the State  Legislature could validly confer upon a municipal corporation all powers which  it had enjoyed before, including the power to  impose taxes,  nothwithstanding  that  power is not  in  the  State Legislative List. As  "Power"  could be conferred on a  Municipal  Corporation only by law, we consider that the nature or quantum of power that  could  be vested by a law of  the  State  Legislature, cannot   transcend   the  limitations  prescribed   by   the Constitution  on  the  State legislature.   In  the  context therefore  of  the law being one in  relation  to  municipal corporations,  the  State  legislature  can  confer  on  the corporation  created only those powers which are within  its legislative power and relevant to the topic. Pausing here, it would be convenient to refer to the submis- sion  of  Mr. Naunit Lal appearing for  the  Intervenor  who addressed  us  in further support of the  appellant’s  case. His  argument was that entry 5 was to be understood  in  the light  of the legislative practice which prevailed prior  to the  Constitution and he placed before us the report of  the Local  Finance Enquiry Committee published in 1951 in  which the  history of taxation powers exercised by  municipal  and other authorities from early times has been traced.  He also referred  us  to  the provisions in several  pre  and  post- Constitution  enactments  in which provision had  been  made enabling  the municipal or other local authorities  to  levy and  collect  taxes some of which, he stated, did  not  fall within the State List or even within any of the three Lists. It is not necessary to examine the details of the  instances referred  to  by  learned  Counsel.   But  assuming  learned Counsel  is right in the illustration it would not help  him in  the  least.  In the first place, so far  as  legislative practice   is   concerned,  it  cannot  prevail   over   the limitations imposed by the distribution of legislative power in respect of post-Constitution legislation such as the  Act before  us.   What  the legislature cannot  do  directly  by legislating  and conferring power upon the State  Government or  the  instruments which it creates, it  cannot  obviously confer  upon a municipal corporation merely because  it  has authority  to  confer power upon a municipality  in  express terms.  The power to impose taxes which it cannot impose for the  augmentation  of the revenues of the  State  it  cannot manifestly  confer upon a municipality or other organ  of  a local  self-government.   Besides, as pointed  out  by  Lord Tomlin in dealing with a contention as to the meaning of  53.3 the word "fisheries" in "Sea coast and inland fisheries"  in s.  91  of the British North America Act, 1867  in  Attorney General for Canada v. Attorney General for British  Columbia and ors(1): "He (the appellant) supports his contention by referring  to fishery legislation prior to 1867 affecting territories  now part of the Dominion, pointing out that in this  legislation there  are to be found numerous provisions relating  to  the curing and marketing of fish, and he urges that the  British North  America Act, 1867, must be construed in the light  of the earlier legislation, and that the word ’fisheries’  must be given such a meaning as is wide enough to include at  any rate the operations affected by the impugned sections. Their   Lordships  are  of  opinion  that  the   appellant’s contention  in this respect is not well-founded.   The  fact that  in earlier fishery legislation raising no question  of

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legislative  competence matters are dealt with not  strictly within  any  ordinary  definition of  "fishery"  affords  no ground for putting an unnatural construction upon the  words "Sea coast and inland fisheries". Lastly,  it may be pointed out that the territory  of  India now  embraces  what were formerly the  territory  of  ruling princes  in  which there were no limitations on  the  powers which  might  be  vested in Municipal bodies.   It  is  not, therefore,  possible  to  refer to  an  uniform  legislative practice  prevailing before the Constitution to serve  as  a guide  for  interpreting  the  legislative  entries  in  the Constitution.   That  is so far as reliance  was  placed  on legislative practice. We do not, therefore, consider that anything material  turns on  the  use of the word "powers" in entry 5.  Authority  to confer   power   on  institutions  or  bodies   created   by legislation,  to enable them to fulfill their  purposes  and achieve their objects is implicit in every entry  conferring legislative  power.   Thus, for instance under entry  47  of List  I reading "Insurance" Parliament has created the  Life Insurance  Corporation under the Life Insurance  Corporation Act  and has clothed it with sufficient powers to enable  it to  function  and carry out the purposes for  which  it  was created.  Similarly, by legislation under the head ’Banking’ the Reserve Bank Act has been enacted and the Reserve,  Bank created  with sufficient powers conferred upon it  necessary to regulate (1)[1930] A.C. 111, 121. 534 the  functioning of the Banking system in the  country.   By legislation under the entry "Future markets" (entry 48  List 1)  the  Forward  Markets Commission has  been  created  and powers  and  ,duties vested in it.  From these  examples  it would  be clear that the authority to confer power upon  the bodies  created by legislation is inherent in the  power  to legislate on the topic.  The express mention of an authority to  confer  power  on  Municipal  Corporations,   therefore, introduces  no  novel principle or rule of  construction  as regards the conferment of powers.  The quantum of the  power which a law could bestow upon an institution or body of  its creation  is  determined,  firstly,  by  the  view  of   the legislature  as  to  what are necessary  for  achieving  the purposes  for which the institution or body is created  and, secondly,  by  the  over-all  limitations  imposed  by   the Constitution  by  the  distribution  of  legislative  power. Nothing, therefore, turns on whether the authority to confer "power" is express or is a necessary incident of legislative power.   If the very nature of a legislative power  is  such that  the legislature cannot delegate essential  legislative functions  the  fact that the authority to confer  power  is express   &  not  implicit  makes  no  difference   to   the application  of the principle.  In either event, as the  law conferring  power even when expressly authorised is  a  law, the rule against excessive delegation, applies to it as much to cases where the authority to confer power is implicit. The  next  head  of  argument on this  point  was  based  on invoking  the  principles stated to have been laid  down  by certain  American decisions to which we were referred.   The principal  authority  on which reliance was placed  was  the formulation of the  law  by  Fuller C.J. in  Soutenburgh  v. Hennick(1) Speaking for  the majority of the Court he said:- "It  is  a cardinal principle of our system  of  government, that  local affairs shall be managed by  local  authorities, and  general  affairs by the central  authority;  and  hence while  the rule is also fundamental that the power  to  make

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laws  cannot  be delegated, the creation  of  municipalities exercising  local  self government has never  been  held  to trench upon that rule.  Such legislation is not regarded  as a  transfer of general legislative power, but rather as  the grant  of  the  authority to  prescribe  local  regulations, according  to immemorial practice, subject of course to  the interposition of the superior in cases of necessity". (1)  129 U.S. 142=32 L.Ed. 637.  535 there  are similar passages in judgments in other  cases  to which also our attention was drawn.  But we do not, however, see   the   appositeness  of  the  American  rule   to   the interpretation  of the Indian Constitution, particularly  in the  context of the criteria there indicated.   Besides  the rule  as  to  limits  of  delegation  by  the   legislatures constituted  in  India  by the  Constitution  has  been  the subject  of  elaborate consideration by this  Court  in  the Delhi  Laws  Act  cam,(1)  and in  the  later  decisions  in Yasantlal  Maganbhai Sanjanwala v. The State of  Bombay  and others (2); Jyoti Pershad v. The Administrator For the Union Territory  of Delhi($) to mention a few and these  decisions bind this Court.  These decisions have not laid down that  a different  rule applies where the delegation of  legislative power is in favour of municipal corporation.  We, therefore, consider that the analogy of the American decisions  affords no  guidance for the application of a different rule  as  to what  constitutes  excessive  delegation  in  the  case   of legislation creating municipal bodies. If  then the same tests have to be applied to determine  the limits of permissible delegation of quasi legislative  power whether  the  same be in favour of Municipal  bodies  or  in favour  of other administrative agencies, the question  next to  be  considered  is whether the  Act  affords  sufficient guidance  to the municipal authority for the levying of  the rate.   The  subject  of the limits  of  the  delegation  of legislative  power has been the subject of consideration  in several  decisions  of this Court including the  Delhi  Laws Case(1)  mentioned  above.  It is,  however,  sufficient  to refer to a few of them.  As regards the principle itself  we do not understand that there is any controversy.  In  Vasant Lal Maganbhai Sanjanwala v. The State of Bombay and  Ors.(2) Subba Rao.  J. though he dissented from the judgment of  the majority of the Court on the facts, summarised the decisions of  this  Court  on this topic, which  Mr.  Pathak  did  not dispute correctly states the law.  He said at pp. 356-357 of the report :- "The  law  on the subject may be briefly  stated  thus:  The Constitution  confers  a  power and imposes a  duty  on  the legislature   to  make  laws.   The  essential   legislative function is the determination of the legislative policy  and its  formulation as a rule of conduct.  Obviously it  cannot abdicate its functions in favour of another.  But in view of the  multifarious activities of a welfare State,  it  cannot presumably work out all the (1) [1951] S.C.R. 747. (2) [1961] 1 S.C.R. 341. (3) [1962] 2 S.C.R. 125.  sup 65 - 18 536 details to suit the varying aspects of a complex  situation. It  must necessarily delegate the working out of details  to the  executive or any other agency.  But there is  a  danger inherent  in such a process of delegation.  An  overburdened legislature  or one controlled by a powerful  executive  may unduly  overstep the limits of delegation.  It may  not  lay

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down  any policy at all; it may declare its policy in  vague and general terms; it may not set down any standard for  the guidance of the executive; it may confer an arbitrary  power on the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation.   This self effacement of legislative power  in favour  of  another  agency either in whole or  in  part  is beyond  the permissible limits of delegation.  It is  for  a court  to hold on a fair, generous and liberal  construction of an impugned statute whether the legislature exceeded such limits.   But  the said liberal construction should  not  be carried  by  the courts to the extent of  always  trying  to discover  a dormant or latent legislative policy to  sustain an  arbitrary power conferred on executive authorities.   It is  the  duty  of  this Court to  strike  down  without  any hesitation any arbitrary power conferred on the executive by the legislature". The  same  principle  was expressed  in  slightly  different language in jyoti Pershad v. The Administrator for the Union Territory of Delhi(’,) at p. 145 :- "In  the  context of modern conditions and the  variety  and complexity  of the situations which present  themselves  for solutions,  it  is  not  possible  for  the  Legislature  to envisage in detail every possibility and make provision  for them.   The  Legislature therefore is forced  to  leave  the authorities  created  by  it an  ample  discretion  limited, however,  by the guidance afforded by the Act.  This is  the ratio  of delegated legislation, and is a process which  has come  to stay, and which one may be permitted to observe  is not  without  its  advantages.  So  long  therefore  as  the Legislature  indicates, in the operative provisions  of  the statute  with  certainty,  the policy  and  purpose  of  the enactment, the mere fact (1)  [1962] 2 S.C.R. 125.  537 that  the legislation is skeletal, or the fact that  a  dis- cretion  is left to those entrusted with  administering  the law,  affords no basis either for the contention that  there has been an excessive delegation of legislative power as  to amount  to  an  abdication  of its  functions  or  that  the discretion  vested is uncanalised and unguided as to  amount to a carte blanche to discriminates The  matter may possibly be stated more simply  by  adopting the language of Bose, J. in Rajnarain Singh v. The Chairman, Patna Administration Committee, Patna and another(1) ’is  it the   delegation   of  essential  legislative   power",   or unessential   details  the  principle  being  that  if   the legislature lays down a policy, prescribes the standards and affords   sufficient   guidance  to  the  rule   making   or subordinate legislative authority it is a proper delegation, but  not if the legislature confers on the  subordinate  law making authority powers to determine its own policy  without any guidance in that regard.  In the one case it would be  a canalised  power  and  in the other  uncanalised  and  would amount,  in  effect,  to transferring  its  basic  power  to another body. If  the validity of s. 548(2) of the Act be judged  by  this test the questions that arise are : (1) Whether the power to determine  the  rate of a tax is an  essential  legislative, function or is it merely a minor and incidental matter, (2). Assuming  it is an essential legislative  function,  whether the   Act  has  indicated  with  reasonable  certainty   the principles upon which that power has to be exercised or laid down  the standards for the fixation of the rate.   Now,  on the first point as to whether it is an essential legislative

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function  or not, the submission of Mr. Pathak was  that  it was not, and for this purpose he relied principally on three decisions  of  this Court.The first one Banarsi Das  v.  The State   of   Madhya  Pradesh(1)  was  concerned   with   the constitutional  validity of a provision in the C.P. &  Berar Sales Tax Act, 1947 which conferred upon Government power to withdraw  certain exemptions from the tax as levied  by  the Act.   It was urged before the Court that the conferment  of this  power to withdraw the exemption on the  Executive  was unconstitutional  as  suffering from the vice  of  excessive delegation.   This argument was repelled by this  Court  for more  than  one  reason.   The passage  relied  on  in  this connection is at p. 435 :- "The  point  for  determination  is  whether  the   impugned notification relates to what may be said to be (1) [1955] 1 S.C.R. 290. (2) [1959] S.C.R. 427. 538 an essential feature of the law, and whether it involves any change of policy.  The authorities are clear that it is  not unconstitutional  for  the legislature to leave  it  to  the executive  to determine details relating to the  working  of taxation laws, such as the selection of persons on whom  the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like". As  to the meaning of the words "such as .... the  rates  at which it is to be charged in respect of different classes of goods"   there  was  controversy  before  us.   Mr.   Pathak submitted  that this was an explicit decision  holding  that the  determination of a rate at which a tax might be  levied was  not  an essential legislative function.  On  the  other hand,  Mr.  De urged that the emphasis in  the  passage  was really  on  "different  classes of goods" -and  not  on  the determination  of a rate simpliciter and in support  pointed out  that  the  three decisions  from  which  the  principle underlying  the passage quoted above was extracted  did  not support such a wide proposition.  The three decisions relied on for the proposition were one of the Privy Council, one of this  Court and one of the United States Supreme Court.   In all  those cases the amount of the rate had been  prescribed by  the  legislature  and the  delegation  to  the  external authority  the  Government or the President  in  the  United Sates,  was  merely the determination  of  certain  external facts  for  rendering the tax applicable to  the  commodity. Thus in Powell v. Apollo Candle Company, Limited(1) the rate of the custom duty was laid down by an enactment of the  New South  Wales  Legislature.  Section 133 of the  Customs  Act enacted: "Whenever  any  article  possesses, in the  opinion  of  the collector,  properties in the whole or in part which can  be used  for  a  similar purpose as  a  dutiable  article,  the Governor is authorised to levy a duty upon such article at a rate  to be fixed in proportion to the degree in which  such unknown  article  approximates in its qualities or  uses  to such dutiable article". Candles  were expressly named in the Act as subject  to  the rate  of  duty  specified  and on  the  application  of  the Collector  the  Governor, by an order  in  Council  notified "stearine"  as  liable  to a similar duty.  It  is  in  that context that the Privy Council stated in a passage which  is extracted in the judgment of this Court (1)  10 A.C. 282,  539 "But the duties levied under the Order in Council are really levied by the authority of the Act under which the order  is

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issued". The  two other decisions do not lay down a wider  principle. For  this reason Mr. De submitted that the judgment of  this Court should be understood in the context in which it occurs and  with reference to the authorities cited in support  and if  so read the rates referred to are in relation  to  those "to be charged in respect of different classes of goods", as in  Powell’s  case.   We  see  considerable  force  in  this argument  and  as  we shall show by  a  reference  to  later decisions   of  this  Court,  this  passage  has  not   been understood  in the sense in which Mr. Pathak desires  us  to understand viz., that a legislation which leaves the rate of taxation entirely to the executive does not suffer from  the vice  of excessive delegation.  If Mr. Pathak is  right,  in order  to impose an income tax, it would be  sufficient  for the  legislature  to pass a single  section  empowering  the executive  to  levy  the tax at such  rates  as  they  might consider  appropriate  on the different classes  of  persons whom they consider proper and with reference to such  income as they might choose to tax.  This illustration of what  his argument  would lead to was put to Mr. Pathak but  his  only answer was that was not the case before us. The second case that Mr. Pathak referred to was the  Western India Theatres Ltd. v. Municipal Corporation of the City  of Poona.(1)  Section 59 of the Bombay District  Municipalities Act 1901 empowered municipalities to impose for the  purpose of the Act certain taxes.  By the first ten entries in  sub- s. (1) particular taxes were specified and this was followed by a general head reading "any other tax".  The second  sub- section of s. 59 read : "Nothing  in this section shall authorise the imposition  of any  tax which the State Legislature has no power to  impose in the State under the Constitution." The  Municipal  Corporation of Poona imposed  a  tax,  after following  the procedure prescribed by the Municipal Act  on theatres within the city, of Rs. 2 per day as a licence fee. This  tax  was imposed from October 1, 1920  and  there  was enhancement  of  this  tax in 1941 and  1948.   It  was  the constitutional  validity of this levy which came  from  pre- Constitution times that was challenged by a civil suit filed in the Bombay High Court by the appellant company.   Several points were urged in support of this conten- (1) [1959] 2 Supp.  S.C.R. 71. supp/65-19 540 tion.   The first was that the Provincial Legislature  under the  Government of India Act, 1935 did not itself  have  the power to levy the said tax; (2) that the residuary  category set  forth in cl. 1 1 "any other tax" was  unconstitutional, the  point  urged being that thereby  "the  legislature  had completely  abdicated its function and  delegated  essential legislative  power  to  the municipality  to  determine  the nature of the taxes to be imposed on the rate payers.   Such omnibus  delegation  could  not,  on  the  authorities,   be supported  as constitutional".  The grounds upon which  this second argument was rejected was the main point on which Mr. Pathak relied in support of this case.  These were: (1) that the  taxes  authorised  to be imposed were  taxes  "for  the purposes  of the Act" i.e., taxes could be raised  only  for implementing  the  purposes for which the  municipality  was constituted  and for no other purpose, (2)  though  strictly speaking  the  rule  as  to ejusdem  generis  could  not  be invoked,  the  kind  and the nature of  the  tax  which  the municipality was authorised to impose were indicated by  the specified  items  1  to  10, (3) the  taxing  power  of  the

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municipality  was  made  subject  to  the  approval  of  the Governor-in-Council  which,  at the date when  the  Act  was passed, viz. 1901, meant the Governor-inlegislative Council, and (4) finally it was observed the impugned section did lay down a principle and fix a standard which the municipalities had to follow in imposing the tax and, in the circumstances, the legislature was held not to have abdicated its powers. No doubt, this decision does support learned counsel to some extent but a question in the form in which it arises now was not before the Court.  The only point was whether there  was sufficient formulation of policy for determining the  nature of  the tax which a municipality might impose.   The  answer was  in the affirmative, based principally on  two  grounds: (1)  that  by  sub-s.  (2)  of s.  59  as  well  on  general principles  of  law the power of the  municipality  to  levy taxes was confined to those on which Provincial  Legislature could legislate.  In fact, from the arguments as reported it would appear that one of the points urged by learned counsel for  the  appellant  was that under head II of s.  5  9  (1) municipality might levy an income tax.  It was this  extreme contention  that  was answered and rejected by  the  learned Judges.   This  was,  in  a sense,  negative  as  it  merely prevented the municipality from levying particular kinds  of taxes.   Coming to the positive aspect, the  learned  Judges held  that the other specified items of taxes  coupled  with the  purposes for which tax was to be levied, indicated  the nature of the tax that was to be levied.  We  541 are unable to agree that this case decides that the fixation of  a rate of tax is not an essential  legislative  function but  a mere matter of detail which could be delegated  to  a subordinate law making body. The  last of the decisions relied on in this connection  was in  Vasantlal v. The State of Bombay(1).  It was not a  case regarding the determination of a rate at which tax could  be levied  out of the rent which a tenant might be required  to pay  under  the Bombay Tenancy and  Agricultural  Land  Act, 1948.  Section 6(2) of that Act enacted : "The  Provincial  Legislature may, by  notification  in  the official  Gazette, fix a lower rate of maximum rent  payable by  the tenants of lands situate in any particular  area  or may  fix such rate on any other suitable basis as it  thinks fit." By  a notification issued under that section the  Government of  Bombay  prescribed the rate of rent and  this  was  much lower  than  the one previously fixed.  By  petitions  under Art.  226 filed in the High Court of Bombay  the  appellants who  were  landholders challenged the  constitutionality  of this  fixation  on  the  ground  that  the  legislature  had delegated its essential legislative function without  laying down   policy  or  principles  affording  guidance  to   the delegates for implementing the legislation.  This Court,  by a  majority,  answered this question in the  negative.   The decision  proceeded on the basis that the fixation  of  rent was  an  essential legislative function.  It  was,  however, held  that  the legislature had  enunciated  the  principles subject to which the delegates could exercise its subsidiary powers.  Gajendragadkar J. as he then was, observed : "The  extent to which delegation is permissible is also  now well settled.  The legislature cannot delegate its essential legislative  function  in any case.  It must  lay  down  the legislative  policy and principle and must  afford  guidance for carrying out the legislative policy laid down before  it delegates its subsidiary power in that behalf." The  enunciation  of the principle in this manner  does  not

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help  Mr. Pathak.  His contention, however, was that  in  s. 6(2)  extracted  earlier, no policy had been laid  down  but that  this Court had upheld the constitutional  validity  of that  delegation.   A close I examination of  the  decision, however,  does  not  support  this  submission.   The  basic reasoning on which that decision rests is that (1)[1961] 1 S.C.R. 341. 542 for  the  fixation of a reasonable rent under s. 12  by  the Mamlatdar  the necessary factors had all been specified  and on  a  construction  of the Act the learned  Judges  of  the majority  reached a conclusion that the exercise  of  powers under s. 6(2) had to be effected on the same basis and  with reference  to  the same factors which were specified  in  s. 12(3)  of the Act.  It is precisely on this question of  the construction  of  the Act and the  correlation  between  the power to fix the rent conferred upon the State Government by s. 6(2) and the power of fixation of fair rent, conferred on the  Mamlatdar  by s. 12 that there was  the  difference  of opinion between the learned Judges.  It would, therefore, be seen  that far from Vasantlal’s case being an authority  for the  position that the fixation of a rate of rent is not  an essential  legislative function but a mere matter of  detail which  could be left wholly to the executive or  subordinate law making authority the decision clearly lays down that  it is  an essential legislative function and it could.  not  be delegated without sufficient guidance. There  were a few other decisions which were referred to  by the learned counsel on the question of excessive  delegation but  the  principles laid down there are  general  ones  and related to the particular point about the fixation of rates. We  do not, therefore, consider it necessary to refer to  or to deal with them.  The final result of this analysis of the decisions as laying down the law so far as the  Constitution is  concerned,  may  be  thus  summarised  :  (1)  Essential legislative functions cannot be delegated but where the  law lays  down the principles and affords guidance to  the  sub- ordinate law making authority details may be left for  being filled  up by the executive or by other  authorities  vested with quasi legislative power, (2) The power to fix a rate of tax  is  an  essential legislative  function  and  therefore unless  the  subordinate  lawmaking  authority  is  afforded guidance  by  the  policies  being  formulated,   principles enunciated  and  standards laid down  the  legislation  will suffer  from the vice of excessive delegation and  would  be void as arbitrary or unconstitutional. This leads us to the last of the points urged by Mr.  Pathak that  the Act itself affords sufficient guidance  and  fixes standards  by which it could determine the rate at  which  a tax could be levied.  It is not, and cannot be disputed that the  guidance could be afforded not merely by the  provision enabling the tax to be levied but by other provisions of the Act  including  the preamble.  But the question  is  whether there  are any such provisions in the Act which could  serve to  determine the standard upon which the rate of tax to  be levied is to be determined.  Mr. Pathak first  543 referred us to the preamble where it is recited that the Act enacted  was  one  relating  to  the  municipal  affairs  of Calcutta.   We  are  unable  to see  how  this  affords  any assistance  in  this regard.  He next referred us to  s.  24 reading, to quote the material words "Subject  to the provisions of this Act and the rules,  bye- laws   and   regulations  made  thereunder   the   municipal government of Calcutta shall vest in the Corporation."

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and  to ss. 42 to 47 which deal with the supervision of  the State  Government  over the affairs and  activities  of  the Corporation.   As  regards s. 24, we are unable to  see  how this  helps  learned counsel in the  present  argument.   No doubt, the municipal government of Calcutta is vested in the Corporation  but the question is what powers are  vested  in that   government.    If  by  describing   the   powers   of administration  of  the  city  of  Calcutta  vested  in  the Corporation,  as  "a government" every  power  necessary  to effectuate  governmental functions was involved there  would have  been no necessity at all for the other  provisions  of the  Act.   It  is  not, therefore,  as  if  the  expression ’government’  gathers within its fold all  powers  necessary for administration or creates an independent sovereign  body entitled  to legislate in any manner it likes  provided  the same  is  necessary  for the purpose of  carrying  on  civic government.   It is obvious that is not the sense  in  which the word ’government’ is employed in s. 24.  The Corporation is  still  a subordinate body which is the creature  of  the legislature  and can only function within the  framework  of the powers conferred upon it by the Municipal Act.  Nor  are we able to appreciate bow any assistance is derived in  this regard  from  the  powers of  supervision  which  the  State Government  has over municipal affairs under ss. 42  to  47. The supervision is only by the Executive Government and  the question relating to the vice of excessive delegation is  as much  applicable  to  powers exercisable  by  the  Executive Government as to the Corporation.  If no standards have been laid  down  by the Act for the Corporation to  afford  it  a guidance   for  the  fixation  of  a  rate  the  fact   that supervisory power is conferred upon the executive would  not obviate that objection for the Government itself would  have no  guidance  from the legislature as to the  policy  to  be adopted  in exercising the supervision.  As was pointed  out by this Court in Jyoti Pershad v. The Administrator for  the Union  Territory of Delhi(1) though in a slightly  different context speaking of an appeal Provided against orders of  an authority  where it was complained that an  arbitrary  power had been vested in the original authority : (1)  [1962] 2 S.C.R. 125. 5 4 4 "If  learned  counsel is right in his  submission  that  the power  of the ’competent authority’ is unguided and that  he had  an unfettered and arbitrary authority to  exercise  his discretion ’at his sweet will and pleasure’ the existence of a  provision for appeals might not impart validity  to  such legislation.   The  reason for this is  that  the  appellate power would be subject to the same vice as the power of  the original authority and the imposition of one’s I sweet  will and  pleasure’ over another of a lower authority, would  not prevent    discrimination   or   render   the    restriction reasonable". Principal  reliance, however, was placed by learned  counsel on  ss.  115 and 117 of the Act as affording  the  requisite guidance.  These read :- Section 115 : "There shall be one Municipal Fund held by the Corporation  in trust for the purposes of this Act to  which all moneys realised or realisable under this Act (other than fine  levied  by  Magistrates)  and  all  moneys   otherwise received by the Corporation shall be credited". Section 117 : "(1) The moneys from time to time credited  to the Municipal Fund shall be applied in payment of all  sums, charges and cost necessary for carrying out the purposes  of this  Act,  or  of which the payment  is  duly  directed  or sanctioned by or under any of the provisions of this Act.

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(2)Such  moneys shall likewise be applied in payment of  all sums  payable  out  of the Municipal Fund  under  any  other enactment for the time being in force." Reference  was also made in this connection to s. 126  under which  annual budget estimates have to be prepared  for  the Corporation  in  which a statement of the  proposals  as  to taxation which would be necessary or expedient to impose  in the  said year and the expenditure to be incurred would  all have to be set out.  It was, therefore, submitted : (1) that there  was a municipal fund into which all collections  were deposited, & (2) the amount of the collection was determined by  the  expenditure  which  it  was  either  obligatory  or permissive  for  the Corporation to incur.   Thus  no  taxes could be raised except such as were needed for the  expendi- ture for which provision had been made in the budget and the rate  of tax was, therefore, determined by the needs of  the Corporation.   In  support of the submission that  this  was sufficient  545 guidance learned Counsel referred us to the decision of  the High  Court of Orissa in The Orissa Ceramic Industries  Ltd. v.  Executive  Officer,  Jharsuguda  Municipality(1)   where reference  is  made to these very  provisions  as  affording sufficient guidance to enable a power to fix the rate  being delegated to a municipal authority.  We do not consider that ss.  115 and 117 afford any guidance for the fixation  of  a rate.  If the amount of money which a municipality needs for discharging  its  functions, affords any guidance  it  would appear to follow that the needs of a State for the  expendi- ture  which it has to incur for its manifold activities  and again  of  the  Union  for the  activities  which  it  might undertake ought to afford sufficient guidance to sustain the validity  of  a  skeleton legislation of the  type  we  have indicated earlier.  Thus, if learned Counsel is right in his submission  as regards ss. 115 and 117 read with s.  126  as affording  sufficient  guidance  a legislation  by  a  State Legislature or Parliament enacting that the State Government might raise such taxes as it considers necessary and at such rates   as  it  might  consider  proper  for   meeting   the expenditure of Government could be constitutional and  there would   be  no  need  for  a  parliamentary   scrutiny   and legislation as regards the rates of the several taxes to  be levied  within the State or the Union, as the case  may  be. As  Mr.  Pathak  himself realised,  this  would  be  plainly unsupportable.  If this were so, merely because the area  of Government  was  restricted  to a  municipality  we  do  not consider  how  these  provisions  afford  guidance  to   the subordinate   law  making  authority  viz.,  the   Municipal Corporation  to  fix the rate of the  levy.   Pausing  here, learned  Counsel said that even if a maxima were  prescribed still  it  left  an amount of discretion  to  the  Municipal Corporation  or the Executive, as the case may be, and  that even such a "guided" power could be attacked as ultra vires. This,  however, do Is not follow.   The  unconstitutionality arises  out of the discretion being %,holly uncanalised  and unguided.   The  argument on the other side is not  that  no discretion  could  be left to the legislature  to  determine within permissible limits the precise rate that would secure the  purposes which it seeks to achieve but rather  that  no guidance is at all afforded and a blank cheque given to  the subordinate  authority.   Where a maxima is  fixed  and  the limit  of discretion is thus controlled the legislature  has exercised  its  legislative power on that  topic  viz.,  the particular  tax.   In  the  other  case,  where  it   merely authorises the subordinate law making authority to levy  the

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tax without indicating the essential legislative features of such a tax it is not really legislation on the taxation (1)  A.I.R. 1963 Orissa 171. 546 entry but is merely authorising the subordinate  legislature to enact a law on that topic.  If these provisions, referred to  earlier,  do not afford any guidance  to  the  Municipal Corporation to fix the rate of the levy it was not suggested that  there were any others in the Act which performed  that function.   Sections 443 and 548(2), it is admitted, do  not afford any help for this purpose.  It has, therefore, to  be held  that  viewed as a tax, the delegation  is  unconstitu- tional  as  the essential legislative functions  are  parted with  to the subordinate law making body and  the  provision is, therefore, unconstitutional. The result is, the appeal fails and is dismissed with costs.                            ORDER In  accordance  with the majority judgment,  the  appeal  is allowed with costs throughout. L3Sup/65-2,500-13-12-65-GIPF. 547