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PETITIONER: SECRETARY, GOVERNMENT OF MADRAS, HOMEDEPARTMENT AND ANOTHER

       Vs.

RESPONDENT: ZENITH LAMP & ELECTRICAL LTD.

DATE OF JUDGMENT10/11/1972

BENCH: SIKRI, S.M. (CJ) BENCH: SIKRI, S.M. (CJ) RAY, A.N. PALEKAR, D.G. BEG, M. HAMEEDULLAH DWIVEDI, S.N.

CITATION:  1973 AIR  724            1973 SCR  (2) 973  1973 SCC  (1) 162  CITATOR INFO :  RF         1975 SC 706  (40)  RF         1975 SC 846  (17)  REI        1980 SC   1  (13)  R          1980 SC1008  (18)  RF         1981 SC1863  (29)  R          1989 SC 100  (16,21,32)  RF         1992 SC 165  (50)  RF         1992 SC1256  (13)

ACT: Madras  Court Fees and Suits Valuation Act 14  of  1955-High Court Fees Rules 1956, Rule 1-Enhancement of Court-fee on ad valorem,  basis-Validity of-Court fees whether fees or  tax, factors  to  be taken into  consideration  for  determining- Phrase "Fees taken in Court" in List 1 Entry 77 and List  11 Entry  3  of  Seventh Schedule  to  Constitution  of  India, meaning of.

HEADNOTE: The  respondent petitioners intended to file a suit  in  the Madras  High  Court  on  the original  side  valued  at  Rs. 2,06,552, against the Revenue.  The petitioner filed a  writ petition  in  the High Court on the  question  of  court-fee payable in the intended suit praying that the High Court may be pleased to issue a writ of mandamus or other direction or order declaring Rule 1 of the High Court Fee Rules 1956  and the  provisions  of  the Madras High Court  Fees  and  Suits Valuation  Act  14  of 1955 to be invalid  and  ultra  vires insofar  as they related to the levy of fees on  ad  valorem scale.  It was urged that the increase made in 1955 and 1956 in the court fees payable was unjustifiable in the light  of the  expenditure actually incurred in the administration  of civil justice.  In its counteraffidavit the State urged that the rates of fee prescribed under the Court Fees Act of 1955 were not excessive and that the levy did not amount to a tax on litigation.  A supplemental affidavit was filed on behalf of the State on October 11, 1966 in which various statements were   given   to   show  that  the   expenditure   on   the administration of justice was higher than the receipts.  The

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petitioner  objected  that there were  several  inadmissible items  which  had been taken into account.  The  High  Court struck  down the levy found in Art. 1 of Schedule 1  of  the Madras  Court  Fees  and Suits Valuation  Act  1955  in  its application  to the High Court.  With  certificate,.  appeal was filed in this Court.  The Court had to consider  whether the  "fees taken ’in court" in Entry 3 List 11 Schedule  VII of  the Constitution are taxes or fees or whether  they  are sui generis. Allowing the appeal, Held  : (i) The history of court fees in England as well  as in India, shows that fees taken in court were not levied  as taxes and the costs of administration was always one of  the factors that was present. (ii) It  seems  plain that "fees taken in,  court"  are  not taxes, for, if it were so, the word ’taxes’ would have  been used  or  some other indication given.  This  conclusion  is strengthened  by two considerations.  First, taxes that  can be levied by the Union are mentioned in List I from Entry 82 in  List II taxes that can be imposed start from  Entry  45. Secondly the very use of the words ’not including fees taken in any court’ in Entry 96 List I and Entry 66 List 11  shows that they would otherwise have fallen within these  Entries. It  follows that "fees taken in court" cannot be equated  to ’Taxes’.   There  is no essential  difference  between  fees taken  in  Court  and  other  fees.   It  is  difficult   to appreciate why the word ’fees’ bears a different meaning  in Entries 77 List I and Entry 96 List 1 or Entry 3 List 11 and Entry 66 List II. [982 A-C] 974 (iii)     But  even  if  the meaning is the  same,  what  is ’fees’  in a particular ,case depends on the  subject-matter in relation to which the fees are imposed.  The present case related  to the administration of civil justice in a  State. The  fees must have relation to the administration of  civil justice.  While levying fees the appropriate legislature  is competent  to  take into account all relevant  factors,  the value  of  the subject matter of the ,dispute,  the  various steps necessary in the prosecution of a suit or matter,  the entire   cost of  the  upkeep  of  courts   and   officers administering civil justice, the vexatious nature of certain types of litigation and other relevant matters.  It is  free to  levy a small fee in some cases, a large fee  in  others, subject  of  course to the provisions of Art. 14.   But  one thing the legislature is not competent to do, and that is to make litigants contribute to the increase of general  public revenue.  In other words, it cannot tax litigation and  make litigations  pay,  say for road building  or  education  ,or other beneficial schemes that a State may have.  There  must be a correlationship between the fees collected and the cost of administration of civil justice. [982 F-H] (iv) The phrase ’fees taken in court’ cannot be  interpreted to  mean  that it described fees which were  actually  being taken before the Constitution ,came into force.  If that was the  meaning, no fees could be levied in the  Supreme  Court because  the Supreme Court did not exist before the  Consti- tution came into force and no fees were being taken therein. This would render part of the Entry of List I nugatory. [983 A-B] (v)  The  contention  that  fees taken in  court  are  taxes because  by virtue of Art. 266 all fees, being  revenues  of the  State will be credited to the Consolidated Fund,  could not be accepted.  This Court has held that the fact that  an item of revenue is credited to the Consolidated Fund is  not conclusive  to show that it is an item of tax.  As Art.  266

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requires that all revenues received by the State have to  go to  the  Consolidated Fund, not much stress can be  laid  on this point.  Fees and taxes are both revenue for the  State. [983 C; 984 H] (vi) The  High Court rightly held in the present  case  that the  fees taken in Courts are not a category  by  themselves and must contain the essential elements of the fees as  laid down  by  this  Court.  The High Court  was  also  right  in holding that it is for the State to establish that what  has been levied is court-fees properly so-called and if there is any  enhancement  the State must justify  the  enhancement., [988 D; 989 D] (vii)     The   State  had  claimed  in  its   supplementary affidavit  that the State was not making any profit  out  of the  administration of civil justice.  Since this  had  been questioned  by the respondents the case must be remanded  to the  High Court for determination of the question.   Various items  both  on the receipts side and the  expenditure  side must  be carefully analysed to see what items or portion  of items should be credited or debited to the administration of civil justice. [989 C,-D] Case law considered.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 993 of 1967. Appeal  by  certificate from the judgment  and  order  dated March 31, 1967 of the Madras High Court in Writ Petition No. 1743 of 1964. 97 5 S.   Govind Swaminandan, Advocate-General of Tamil Nadu, S.   Moha n, N.  S. Sivan, K. Rajendra Choudhry and K. R.  Choudhry,  for the appellant. R.   Thiagarajan, for respondent No. 1. K.   R. Choudhry, for respondent No. 2. A.   R. Somnatha Iyer and S. Lakshminarasu, for  interveners Nos. 1-3. V.   M. Tarkunde and B. D. Sharma, for interveners Nos. 1-3. S.   N. Choudhry, for intervener No. 5. Syed Mahamud, and A. G. Pudisssery, for intervener No. 5. K.   K.  Sinha, S. K. Sinha and B. P. Sinha, for  intervener No. 7. V.   S. Raman and Vineet Kumar, for intervener No. 8. S.   V.   Gupte,  A;  V.  Diwan,  P.  C.  Bhartari,  J.   B. Dadachanji, O. C.  Mathur and Ravinder Narain, for intervener No. 9. A. Subba Rao, for intervener No. 10. The Judgment of the Court was delivered by SIKRI, C. J.-This appeal, by certificate granted by the High Court, is directed against tin judgment dated March 31, 1967 of the High Court of Madras, in Zenith Lamps and Electricals Ltd.  v. The Registrar, High Court, Madras() given  in  Writ Petition  No.  1743 of 1964 (and Writ Petition No.  3891  of 1965).    Messrs  Zenith  Lamps  and   Electrical   Limited, respondent  before  us and hereinafter referred  to  as  the petitioner,  intended  to  file a suit in  the  Madras  High Court, on the original side, claiming a relief valued at Rs. 2,06,552,  against the Revenue.  The petitioner  filed  Writ Petition  No.  1743  of 1964 on the  question  of  court-fee payable  on the intended suit, praying that the  High  Court may  be  pleased  to  issue a  writ  of  mandamus  or  other direction  order  declaring Rule I of the  High  Court  Fees Rules, 1956, and the provisions of the Madras Court Fees and

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Suits  Valuation Act (Madras Act XIV of 1955) to be  invalid and  ultra vires insofar as they relate to the levy of  fees on  ad valorous scale.  It was contended that Rule 1 of  the High  Court  Fees  Rules, 1956, was  void  and  ultra  vires because  the Madras Court Fees and Suits Valuation Act  (XIV of 1955) which had been applied in these Rules was void  and ultra vires.  Various reasons were given in the petition for alleging  that  the impugned Rule was void.  It  was  stated inter  alia that there was no justification at all  for  the increase  of  court-fees in 1955 and 1956 on  the  basis  of civil (1)  I.L.R. [1968] 1 Mad. 247 9 7 6 litigants being made to pay fees covering the expenditure on civil litigation.  It was alleged that ’whenever an increase is contemplated, it is for the authority to justify by facts and figures such increase by showing that actual expenditure at the time exceeds the fee income.  The petitioner  alleged that judged by this test, the increases of 1955 were without any  legal or actual jurisdiction." It was  further  alleged that  the State was proceeding on the basis that the  court- fees  had to compensate the Government both for the cost  of civil   as  well  as  criminal  administration,  which   was unwarranted.  In ground D it was alleged:               "From  the figures of 1963-64  available  from               the  budget for 1964-65, it is seen  that  the               fees levied exceeds the cost of administration               of civil justice.  The figures have further to               be   scrutinised  and  amended  so  that   in-               admissible items such as fees of  Government’s               Law  Officers are eliminated as it is not  the               duty of litigant public generally to bear  the               expense of the, State’s Law Officers." In  ground  E  it was alleged that it  was  ultra  viresand inequitable  to levy an ad valorem fee without lit from  the petitioner in a single proceeding. Various other reasons were given but it is not necessary  to set them out. The State filed an affidavit in reply maintaining that  Rule 1  of the High Court Fees Rules, 1956, and the Madras  Court Fees and Suits Valuation Act, 1955 (Madras Act XIV of  1955) were legal and valid.  It was stated that the rates of  fees prescribed  under  the  Court  Fees Act  of  1955  were  not excessive  and  that  the levy did not amount to  a  tax  on litigants.   The  State  gave  figures  to  show  that   the expenditure  on  the administration of  justice  was  higher during  the year 1954-55 than the fees realised.  The  State rebutted   the   contention  that  the  cost   of   criminal administration  and the fees paid to Government law  Officer should not be taken into account in justifying court fees. This affidavit was filed on March 6, 1965.  It appears  that a supplemental counter-affidavit on behalf of respondents  2 and  3  was filed on October 11, 1966.   In  this  affidavit various  statements were given to show that the  expenditure on  the  administration  of  justice  was  higher  than  the receipts. The   Petitioner  took  objection  to  the  filing  of   the supplemental counter-affidavit at that stage because it  was filed  after  the arguments had started.  It  was  contended that  the  figures  given  in  the  counter-affidavit  would require drastic scrutiny.  It was also 97 7 alleged that various inadmissible items had been taken  into account;  for example, the expenditure on law  officers  had been taken into consideration.

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The  High Court struck down the levy found in Article  I  of Schedule 1 of the Madras High Court Fees and Suits Valuation Act, 1955, in its application to the High Court.  As it  was not  contended  before the High Court ’that  the  result  of striking down article 1 of schedule 1 in its application  to the  High  Court would necessitate the  declaration  of  the invalidity  of the entire Court Fees Act, it refrained  from examining the position. The  State having obtained certificate of fitness filed  the appeal  which  is now before us.  We may  mention  that  the petitioner was not interested in pursuing the appeal and  it prayed that if the appeal is decided against it no order may be  made  against it for costs in the circumstances  of  the case. We  issued notice to the Advocates-Goneral and a  number  of States have appeared before us. The  first  question  that  arises  out  of  the   arguments addressed  to us is : What is the nature of "fees  taken  in court" in entry 3 List II Schedule VIII of the  Constitution ?  Are  they taxes or fees or are they sui generis ?  It  is necessary  that  there should  not  correlationship  between ’fees  taken in Court’ and the cost of administration  of civil justice?  Dr. Syed Mohammed has on behalf of the State of  Kerala  urged  that  fees  taken  in  Court  are   taxes simpliciter.  The Advocate-General of Madras had urged  that they  are sui generis, and that they are more in the  nature of  taxes  than in nature of fees.  Mr. Tarkunde  has  urged that it would be wrong to regard them as ’fees’ of the  same nature  as fees in Entry 65 List II.  The answer depends  on the  correct interpretation of various entries in the  three Legislative Lists and several articles of the  Constitution. In the background must be kept the history of fees taken  in Courts in the past both in England and India. Let  us first look at the background.  According  to  Holds- worth(1)  the Judges, from the first, were paid salaries  by the Crown which in the course of years were increased.  "But from the earliest times, the salaries of the Judges had  not formed  their  only source of income.  Though they  did  not hold their offices as their freeholds, though they could  be dismissed   by   the  Crown,  they   nevertheless   drew   a considerable  part  of their income from fees".   "When  the income of the Judges from fees was taken away in 1826  their salaries were raised from pound 2400 a year to pound 5500." (1)  History  of  English Law-W.S.  Holdsworth-seventh  Edn. vol., 1, page 252-254. 978 As  far as the officials of the courts were  concerned  "the earliest information which we get about the officials of the courts  of  common  law shows that  they  were  paid  almost entirely by fees.  In fact it would be true to say that  the official  staff of all the central courts (except  the  Lord Chancellor  and  the  judges)  was  almost  entirely   self- supporting."   "But  probably  the  largest  part   of   the remuneration  of the official staff of the courts came  from fees in connection with the very numerous acts that must  be done to set and keep in motion the complicated machinery  of the  courts,,  from the issue of the original  writ  to  the execution of final judgment." (Holdsworth-P. 256) In  the-  Dictionary of English Law by          Earl  Jowitt (Vol.  1  P.   791) it is stated;               "Fees, perquisites allowed to officers in  the               administration of justice as a recompense for               their  labour and trouble, ascertained  either               by  Acts  of Parliament, by rule or  order  of               court,  or by ancient usage, in  modern  times

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             frequently commuted for a salary, e.g. by  the               Justice Clarks Act, 1877."               "Although,  however, the officers of  a  court               may be paid by salary instead of the fees, the               obligation  of  suitors to  pay  fees  usually               remains,  these fees being paid into the  fund               out of which the salaries of the officers  are               defrayed.   In  the  Supreme  Court  they  are               collected   by  means  of  stamps  under   the               Judicature  Act,  1875, s. 26,  and  order  of               1884,  and the Supreme Court Fees Order,               1930 (as amended)."               "The  mode  of  collecting fees  in  a  public               office  is under the Public Office  Fees  Act,               1879  (repealing  and  replacing,  the  Public               Office Fees Act, 1866), by stamps or money, as               the Treasury may direct." At  present  "the Lord Chancellor has also power,  with  the consent  of at least three judges of the Supreme  Court  and the concurrence of the Treasury, to fix fees to be, taken in the  High  Court  and the Court of Appeal or  in  any  court created  by the commission.  Under the powers  referred  to, the  Rules of the Supreme Court, 1883 and the Supreme  Court Fees Order, 1.930, were made(1)." The  English  history  shows that a  very  close  connection existed  between  fees and cost of administration  of  civil justice.  In the beginning, they were directly  appropriated by  the court officials.  The existing law shows  that  fees are not taxes.  It is not usual to delegate taxing powers to judges. (1)  vide Halsbury’s Laws of England, Vol. 9 p. 422-423. 97 9 In India according to the Fifth Report on East India Affairs Vol. 1 (1812), chapter, "The civil courts of Justice’,, "the chouthay  or fourth part of the value of property  recovered in  a  court of judicature, seems to be considered  in  most parts of the Indian Peninsula as the compensation or fee due to the ruling power for the administration of justice." This was  abolished on the accession of the British power to  the Government of Bengal, and in lieu of it, the introduction of a  small  percentage on the institution of a suit  has  been noticed. The first legislative measure which has been brought to  our notice  is the Bengal Regulation XXXVIII of 1795.   In  the preamble, it is stated that the establishing of fees on  the institution  and trial of suits, and on petitions  presented to  the courts was considered the best method of  putting  a stop  to  the  abuse of bringing  groundless  and  litigious suits.  There are various sections of the- Regulation  which allow fees to be appropriated by the Judges. In action II (4) it was laid down:               "The Munsiffs are to appropriate the fees they               may  collect under this section, to their  own               use,  as a compensation for their trouble  and               an indemnification for the expense which  they               may  incur in the execution of the  duties  of               their office". Similarly under section 111(6), the "Register" was  entitled to  appropriate  the  fees, collected  under  this  section. Similarly   subsection  (7)  of  section  III  enabled   the Commissioners  to  appropriate  the fees.   But  fees  under section  IV to be paid on the trial of suits, tried  in  the first  instance by the Judges of the Zillah and City  Courts or  by their Registers were to be carried to the account  of Government.   Similarly various other fees were  carried  to

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the account of Government. In the preamble to Bengal Regulation VI of 1797, the  object is  stated to be to discourage litigations,  complaints  and the  filing  of superfluous exhibits and  the  summoning  of unnecessary  witnesses  on the trial of suits  and  also  to provide  for  deficiency which would be  occasioned  in  the public revenue by abolition of the police tax as well as  to add   eventually   public   resources,   without   burdening individuals.  The same object of discouraging litigation  is stated in clause 1 of the Bombay Regulation VIII of 1802. In  the Statement of Objects and Reasons for the Court  Fees Bill,  1869,  it is stated that "the  experience  gained  of their  (stamp  fees) working during the two years  in  which they have been in force, seems to be conclusive as to "their repressive effect on the general litigation of the country". "It  is,  therefore,  thought expedient to  make  a  general reduction in the rates now chargeable on 11-L499Sup.C.I./73 98 0 the  institution  of  Civil  suits, and  to  revert  to  the principle  of  maximum fee which obtained under  the  former law." Later it is stated : "As  some  measure of compensation for the loss  of  revenue which is expected to result from the general reduction of is proposed  to  discontinue the refund of any portion  of  the amount levied on the first institution of suits, and also to raise  the heretofore chargeable on probates and letters  of administry  granted under the Indian Succession Act, and  on certificates  issued  under  Act XXVII of 1860,  to  the  ad valorem rates leviable under the English law in like cases". The  Bill was designed to contain in one enactment the  were of the existing law relative to fees leviable in all  Courts of  Justice,  whereas previously fees were,  leviable  under various acts. This  brief resume of the history shows that the court  fees was   levied  sometimes  with  the  object  of   restricting litigations; so times with the object of increasing revenue. But  there is material to show that when the latter was  the objective  when the cost of administration of civil  justice was more than the fees levied and collected. The  constitutional  question with which  we  are  concerned could not arise before the enactment of the Government of In Act,  1935, because even if fees taken in courts were  taxes litigation,  there  was  no  bar to the  levy  of  taxes  on litigation. Various judges have spoken about the nature of court fees In the judgment under appeal(1), reference has been made  their observations  but  those Judges were not faced with  the  co titutional  problem  with  which  we  are  concerned.   Some described fees as one form of taxation, some regarded it  as taxes for s vices rendered by the court or work done by  the court or as price payable to Government for the trial of the suit. This  background does not supply a sure touchstone  for  the determination  of  the question posed in  the  beginning  of judgment, but it does show that fees taken in court were not levied  as taxes and the cost of administration  was  always one  of factors that was present.  In its origin in  England fees  were meant for officers and judges.  In  India  indeed section  3  of  the Court Fees’  Act,  1870  mentions  "fees payable  for  the time being to the  clerks  and  officers". Section 15 of the Indian High Court Act, 1861, also spoke of fees  to  be allowed to sheriffs....... and all  clerks  and officers  of Court".  We will therefore have  interpret  the

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relevant Entries and various Articles of the Constitu- 981 tion  in order to ascertain the true nature of  Court  fees. The relevant Entries of the Constitution are :               "List I Entry 77 : Constitution, organisation,               jurisdiction  and power of the  Supreme  Court               (including  contempt of such Court),  and  the               fees   taken  therein;  persons  entitled   to               practise before the Supreme Court".               "List  I Entry 96 : Fees in respect of any  of               the  matters in this List, but  not  including               fees taken in any Court".               "List II Entry 2 : Administration of  justice;               constitution. and organisation of all  courts,               except  the Supreme Court and the High  Court,               officers  and  servants  of  the  High  Court;               procedure  in  rent and revenue  courts;  fees               taken in all courts except the Supreme Court."               "List II Entry 66 : Fees in respect of any  of               the  matters in this List, but  not  including               fees taken in any court.               "List   III  Entry  13  :   Civil   procedure,               including, all matters included in the Code of               Civil  Procedure at the commencement  of  this               Constitution, limitation and arbitration.               "List III Entry 47 : Fees in respect of any of               the  matters in this List,  but  not-including               fees taken in any court". It  will  be noticed that the ’fees taken  therein  i.e.  in Supreme  Court’ in List I Entry 77 have been  excluded  from List  I Entry 96. Similarly the ’fees taken in  all  courts’ included in List 11 Entry 3 have been excluded from List  11 Entry  66.  In List III Entry 47 ’fees taken in  any  court’ have  been  excluded.   What is  the  significance  of  this exclusion  ?  Does the Constitution regard  ’fees  taken  in court’  as being different from ’fees leviable under List  I Entry 96, List II Entry 66 and in List III Entry 47’? It seems to us that the, separate mention of ’fees taken  in court’  in  the  Entries  referred to  above  has  no  other significance  than  that they logically come  under  Entries dealing  with  administration of justice  and  courts.   The draftsman has followed the scheme designed in the Court Fees Act, 1870 of dealing with fees taken in court at one  place. If  it  was the intention to distinguish them from  fees  in List  11 Entry 66, surely some indication would I have  been given by the language employed.  If these words had not been separately mentioned in List 1 Entry 77 and List 11 Entry 3, the  court  fees would still have been levied under  List  I Entry 96 and List H Entry 66. 982 it seems plain that ’fees taken in court’ are not taxes, for if it were so, the word ’taxes’ would have been used or some other indication given.  It seems to us that this conclusion is  strengthened by two considerations.  First,  taxes  that cart  be  levied by the Union are mentioned in List  I  from Entry  82; in List II taxes that can be imposed  start  from Entry  45.   Secondly,  the  very  use  of  the  words  ’not including  fees taken in any court’ in Entry 96 List 1,  and Entry  66  List  11’ shows that they  would  otherwise  have fallen within these Entries.  It follows that ’fees taken in Court’  cannot  be equated to ’Taxes’.  If this  is  so,  is their  any essential difference between fees taken in  Court and  other fees.?  We are unable to appreciate why the  word ’fees’  bears a different meaning in Entries 77 List  1  and Entry 96 List 1 or Entry 3 List 11 and Entry 66 List 11.  AR

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these relevant cases oil the nature of ’fees’ were  reviewed in  The  Indian Mica and Micanite Indus tries  Ltd.  v.  The State  of Bihar and others(1) by Hegde, J. and the  observed :-               "From  the above discussion, it is clear  that               before  any  levy can be upheld as a  fee,  it               must  be  shown that the levy  has  reasonable               correlations with the services rendered by the               Government.  In, other words. the levy must be               proved  to be a quid pro quo for the  services               rendered.  But in these matters it will be im-               possible  to  have an  exact  correlationship.               The  correlationship  expected  is  one  of  a               general  character and not as of  arithmetical               exactitude". But  even  if the meaning is the same, what is ’fees’  in  a particular case depends on the subject-matter in relation to which  fee are imposed.  In this case we are concerned  with the  administration lion of civil justice in a  State.   The fees  must  have  relation to the  administration  of  civil justice.  While levying fees the appropriate legislature  is competent  to  take into account all relevant  factors,  the value  of  the subject matter of the  dispute,  the  various steps necessary in the prosecution of a suit or matter,  the entiry   cost   of  the  upkeep  of  courts   and   officers administering  civil  justice  the  vexatious  nature  of  a certain  type of litigation and other relevant matters.   It is  free to levy a small fee in some cases, a large  fee  in others, subject of course to the provisions of Art. 14.  But one  thing the Legislature is not competent to do, and  that is  to make litigants contribute to the increase of  general public revenue In other words, it cannot tax litigation, and make  litigations pay say for road building or education  or other beneficial schemes that a State may have.  There  must be  a broad correlationship wit the fees collected  and  the cost of administration of civil justice. (1)  A.T.R. 1971 S.C. 1182 at p. 1186. 983 We  may now dispose of other arguments addressed to us.   We are  not able to interpret the phrase ’fees taken in  court’ to  mean  that it described fees which were  actually  being taken before the Constitution came into force.  If this  was the  meaning, no fees could be levied in the  Supreme  Court because   the  Supreme  Court  did  not  exist  before   the Constitution  came into force and no fees were  being  taken therein.   This  would render part of the Entry  of  List  I nugatory. It was urged that various Articles in the Constitution  show that  fees  taken  in Courts are taxes.   For  instance,  by virtue of Article 266 all fees, being revenues of the State, will have to be credited to the Consolidated Fund.  But this Court  has held that the, fact that one item of  revenue  is credited to the Consolidated Fund is not conclusive to  show that  the  item  is  a  Tax.   In  The  Commissioner,  Hindu Religious  Endowments,  Madras  v  Sri  Lakshmindra  Thirtha Swamiar of Sri Shirur Mutt(1), it was held               "A  tax is a compulsory exaction of  money  by               public    authority   for   public    purposes               enforceable  by  law and is  not  payment  for               services rendered.               It  is not possible to formulate a  definition               of  fees that can apply to all cases as  there               are  various  kinds of fees.  But  a  fee  may               generally be defined as a charge for a special               service   rendered  to  individuals  by   some

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             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  such  expenses               are arbitrarily assessed.               The  distinction between a tax and a fee  lies               primarily in the fact that a tax is levied  as               part  of  a common burden, while a  fee  is  a               payment for special benefit or privilege". Our attention was invited to Art. 199(2) which provides that a bill shall not be deemed to be a Money Bill by reason only that  it provides for........ the demand or payment of  fees for  licence-,  or  fees  for  services  rendered.   It  was suggested that as Court fees were not for services  rendered they  would have to be levied by means of a Money Bill.   It seems  to  us that this argument proceeds on  an  assumption that  fees  taken in court are not  for  services  rendered. Reference  to  Art 277 and Art. 366(28) does not  throw  any light on the problem before us. In  The Commissioner, Hindu Religious Endowments, Madras  v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(1), refe- rence  was  made by Mukheriea, J. to Essays in  Taxation  by Selig- 9 84 man.   We may here, refer to some other passages which  have reference to court fees.               "The  distinction  between  fees  and   taxes,               although sometimes ascribed to Rau, is  really               much  older.   Adam Smith  already  speaks  of               certain  expenses "which are laid out for  the               benefit   of  the  whole  society".   "It   is               reasonable,  therefore", he adds,  "that  they               should be defrayed by the general contribution               of  the  whole  society, all  the  different               members contributing as nearly as possible  in               proportion  to  their  respective  abilities".               These,  as he afterward explains,  are  taxes.               On  the  other  hand,, he  speaks  of  certain               outlays, as for justice, for "persons who give               occasion to this expense," and, who are,  most               immediately  benefited by this  expense."  The                             expenditure,  therefore, he thinks, "m ay  very               properly   be  defrayed  by   the   particular               contributions  of these persons", that is,  by               fees of court.  And he extends this  principle               to tolls of roads and various other expenses."               "This  point  of  view  helps  us  out  of   a               difficulty as to the line of cleavage  between               fees and taxes.  Thus, if a charge is made for               the cost of judicial process, the payment is a               fee,  because  of the special benefit  to  the               litigant.’  If no charge is made, the cost  of               the  process  must  be  defrayed  by   general               taxation;  and the litigant pays his share  in               general  taxes.  If the charge is so  arranged               as  to bring in a considerable net revenue  to               the government, the payment by the litigant is               a tax not a general tax on all taxpayers,  but               a  special tax on litigants, like the  tax  on               law   suits   in   some   of   our    Southern               Commonwealths.   The  character of  fees  dis-               appears only secondarily because the principle               of  cost  is  deviated  from,  but   primarily               because the special benefit to the litigant is

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             converted  in  the first case  into  a  common               benefit   shared   with  the   rest   of   the               comniunity,  and  in the second  case  into  a               special  burden.   The failure  to  grasp  the               basis  of this distinction, which  is  equally               true   of  other  fees,  has   confused   many               writers." A great deal of stress was laid by Mukherjea, J. at p.  1044 on  the fact that the collections in that case went  to  the Consolidated  Fund.  He, however, said that in itself  might not  be  conclusive.   But as Art.  266  requires  that  all revenues   received  by  the  State  have  to  go   to   the Consolidated  Fund,  not  much stress can be  laid  on  this point. Reliance was placed on two cases decided by the Privy  Coun- cil.  In Attorney-General for British Columbia v.  Esquimalt and 985 Nanaimo  Railway  Company  & Ors.(1), a  case  from  Canada, question (7) was put thus :               "Is  the Esquimalt and Nanaimo Railway  liable               to  tax  (so-called)  for  forest   protection               imposed  by s. 123 of the ’Forest Act’  (later               corrected   to  sec.  121)  of   (the   Forest               Act...... in connection with its timber  lands               in  the  island  railway  belt  acquired  from               Canada in 1887 ?  In particular does the  said               tax  (so called) derogate from the  provisions               of section 22 of the Act of 1883" ?               The Privy Council observed:               "The question is a short on,--.  The exemption               conferred by section 22 is given in the, words                             "the  lands shall not be liable to  ta xation".                             There is no context to give the word " taxation"               any special meaning and the question comes  to               this : "Is the impost charged by s. 124 of the               Forest Act ’taxation’ within the ordinary sig-               nificance of that word ?" After  examining  the  provisions of Pt.   XI  of  the  Act, consisting  of  ss.  95 to 127, which  dealt  with  what  is described as "Forest Protection, the Privy Council observed:               "The   levy   has   what   are,   undoubtedly,               characteristics  of  taxation, in that  it  is               imposed  compulsorily  by  the  State  and  is               recoverable at the suit of the Crown." This  case is distinguishable because the Privy Council  did not  have  to deal-with fees and taxes but  interpreted  the word  ’taxation’  in  section  22  of  the  Act  to  mean  a compulsory ’Levy by the State.  Whether it was fees or taxes did  not  matter.  The only question was whether  it  was  a compulsory levy. In  Bachappasubran  v. Shidappa Vankatrao ( 2 )  before  the Privy  Council for the first time objection was raised  that the suit, out of which the appeal arose, was not triable  by the First Class Subordinate Judge.  It was argued that  this was the result of provisions contained in the Court Fees Act 1870  and  the Suits Valuaation Act,, which,  it  was  said, imposed notional value on the property as distinct from  its real  value and that this notional value was less  than  Rs. 5000/-.   It  was  in this context that  the  Privy  Council observed:               "Their  Lordships  are of  opinion  that  they               would   not  be  justified  in  assisting   an

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             objection  of this type, but more  than  that,               they hold that even the technicality on  which               the defendant relies cannot prevail.               The  Court-Fees  Act was passed not to  arm  a               litigant with a weapon of technicality against               his oppo-               (1) [1950] A.C. 87,120,121.               (2) I.L.R. 43 Bom. 507.               986               nent, but to secure revenue for the benefit of               the,   State.   This  is  evident   from   the               character  of the Act, and is brought  gut  by               section  12, which makes the decision  of  the               First  Court as to value final as between  the               parties  and  enables  a Court  of  appeal  to               correct  any error as to this, only where  the               First  Court decided to the detriment  of  the               revenue.               The  defendant in this suit seeks  to  utilise               the  provisions of the, Act, not to  safeguard               the interest of the State, but to obstruct the               plaintiff; he does not contend that the  Court               wrongly  decided  to  the  detriment  of   the               revenue,  but  that  it dealt  with  the  case               without jurisdiction". We are unable to appreciate how this case assists the appel- lant.   Fees and taxes are both revenue for the  benefit  of the State.  At any rate the Privy Council was not  concerned with  the  interpretation of legislative  Entries,  where  a sharp distinction is drawn between fees and taxes. Two High Courts have upheld the levy of increased court fees and  the learned Advocate-General strongly relied  on  them. In Khacharu Singh v. S.D.O. Khurja(1), a petition under Art. 226 was presented with a fee of Rs. 5/-, while by virtue  of the Court fees (Uttar Pradesh Amendment) Act, 1959, the  fee leviable  was  Rs. 50/-.  The latter fee was  held  to  fall within  Entry  3 List 11.  Mootham C. J. held  that  because court  fees were not appropriated for any  specific  purpose but formed part of the general revenues of the State,  these were  neither tax nor fees as defined in  The  Commissioner, Hindu  Religious  Endowments,  Madras  v.  Sri   Lakshmindra Thirtha  Swamiar  of  Sri Shirur MUtt(2  )  and  Mahant  Sri Jagannath  Ramanuj  Das  v.  The  State  of  Orissa(3).   He observed               "It   is  not  an  exaction  imposed   without               reference to any special benefit conferred  on               the  payers, for it is imposed only  on  those               persons who wish to file documents, the filing               of  the document or the obtaining of the  copy               being   of  direct  benefit  to   the   person               concerned.  It would appear therefore (not  to               be a tax as so defined." He  went  on to observe, and here, with respect, he  made  a mistake : "Nor clearly is it a fee as so defined if only for the, reason that the moneys realized have not been set apart but  have  merged  in  the public  revenue  of  the  State". Mukherjea,   J.  in.  The  Commissioner,   Hindu   Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur  Mutt(2) had said that this fact was  not  conclusive and in view of Art. 266 of the (3)  [1954] S.C.R. 1046. (2) [1954] S.C.R. 1005. 987 in Constitution,  it  could not be conclusive.   Mootham,  C.J.

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Khacharu Singh v. S.D.O. Khurja(1) observed :               "It  clearly follows, I think, from the,  fact               that  the  fees or other money  taken  by  the               Supreme  Court  or  a High  Court  are  to  be               credited  to the Consolidated Fund  that  such               fees  cannot  be fees of the  kind  which  the               Supreme Court had under consideration; for  an               essential characteristic of such a fee is that               it  shall be set apart and not merged  in  the               general revenue of the State.  It  accordingly               appears  that  there exists another  class  of               imposition,   also   called  a  fee   in   the               Constitution  which differs from the  type  of               fee   which  the  Supreme  Court   had   under               consideration  and that the definition of  fee               to  he  found  in  the  three  Supreme   Court               decisions of 1964 is not exhaustive". With  respect,.  the  fees  taken in  courts  and  the  fees mentioned in Entry 66 List I are of the same kind.  They may differ from each other only because they relate to different subject matters and the subject matter may dictate what kind of  fees  can  be  levied  conveniently,  but  the   overall limitation is that fees cannot be levied for the increase of general  revenue.   For instance if a State were  to  double fees with the object of providing money for road building or building  schools, the enactment would be held to  be  void. Dayal J. correctly observed in Khacharu Singh v.  S.D.O. Khurja(1)               "The  expression "the fees taken  therein"  in               item  No. 77 of List 1 and "fees taken in  all               courts except the Supreme Court" in item No. 3               of List 11 need not be interpreted to refer to               such fees which must be credited to a separate               fund  and not to the general fund of India  or               the  State.   It follows  therefore  that  the               Constitution  did not contemplate it to be  an               essential element of a fee-that it be credited               to   a   separate   fund  and   not   to   the               Consolidated, Fund." But the High Court in Khacharu Singh v. S.D.O. Khurja(1) did not  meet the argument of the learned counsel that  "as  the State Government was already making a very large profit  out of  court fees, the entire amending Act of  1959  increasing those  fees is ultra vires".  It seems to us  that  whenever the  State  Legislature  generally increases  fees  it  must establish  that  it is necessary to increase court  fees  in order  to meet the cost of administration of civil  justice. As  soon  as the broad correlationship between the  cost  of administration  of civil justice and the levy of court  fees ceases,  the  imposition  becomes  a  tax  and  beyond   the competence of the State Legislature. (1)  I.L.R. [1960] 1 All. 429, 445. 988 The Bombay High Court in The Central Province Sindicate (PR) Ltd. v. The Commissioner of Income-tax, Nagpur(1) also  fall into  the same error.  V. S. Desai, J. held that one of  the essential  elements laid down by the Supreme Court  was  the requisite of a fee, namely, that it must be appropriated  to a  separate  fund  earmarked to meet  the  expenses  of  the services  has never been true of the court fees at any  time and  is  also not true of the court fees  levied  after  the constitution  The learned Advocate General, in our  opinion, is  right in saying that the levy of court fees for  general revenues has been authorised by the relevant Entries in  the Legislature." What impressed the High Court was that  "there

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was however no monetary measure of the fees charged for  the services rendered and the levy of the fees could also not be said to be in proportion to the services rendered". We agree with the Madras High Court in the present case that the  fees taken in Courts are not a category  by  themselves and must contain ’the essential elements of the fees as laid down  by  this  Court.  We also  agree  with  the  following observation(2)               "If  the  element of revenue for  the  general               purposes  of the State predominates, then  the               taxing  element takes hold of the levy and  it               ceases  to  have any relation to the  cost  of               administration   of  the  laws  to  which   it               relates;  it becomes a tax.  Its validity  has               then  to be determined with reference  to  its               character  as  a  tax and it has  to  be  seen               whether  the  Legislature  has  the  power  to               impose  the  particular tax.  When a  levy  is               impugned   as   a   colorable   exercise    of               legislative  power,  the State  being  charged               with raising a tax under the guise of  levying               a fee, Courts have to scrutinize the scheme of               the levy carefully, and determine whether,  in               fact,   there  is  correlation   between   the               services and the levy, or whether the levy  is               excessive  to  such  an  extent  as  to  be  a               presence  of a fee and not a fee in  realilty.               If,  in  substance, the levy is not  to  raise               revenues also for the general purposes of the               State,  the mere absence of uniformity or  the               fact  that  it has no direct relation  to  the               actual  services rendered by the authority  to               each individual who obtains the benefit of the               service, or that some of the contributories do               not  obtain  the  same degree  of  service  as               others  may,  will not  change  the  essential               character of the levy. The  next  question  that arises  is  whether  the  impugned impositions   are   fees.   The   learned   Advocate-General contended (2)  I.L.R. [1968] 1 Mad. 247 at p. 340-341. 989 that  the State of Madras does not make a profit out of  the administration of civil justice.  On the contrary it  spends money on the administration of civil justice out of  general revenues. He  relied  on the supplemental counter affidavit  filed  on October 11, 1966. objection was taken on behalf of the  res- pondent  in the connected civil appeals that  this  counter- affidavit should not be taken into consideration because  it was  filed  in  the  course of arguments  and  they  had  no opportunity to meet the affidavit. It seems to us that we cannot dispose of this appeal without giving  opportunity to the respondents to file an  affidavit or affidavits in reply to the supplemental counter affidavit dated  October 11, 1966 be-cause if we take the  figures  as given  and explained by the Advocate-General we  cannot  say that the State is making a profit out of the  administration of civil _justice.  Various items both on the receipts  side and  the expenditure side have to be carefully  analysed  to see  what  items or portion of items should be  credited  or debited to the administration of civil justice. It  is true, as held by the High Court, that it is  for  the State  to establish that what has been levied is  court-fees properly socalled and if there is any enhancement the  State

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must justify the enhancement. We  are accordingly constrained to allow the appeal and  set aside  the judgment passed by the High Court and remand  the case  to it.  We direct that the High Court should  give  an opportunity to the writ petitioners to file an affidavit  or affidavits in reply to the affidavit dated October 11, 1966. The  High Court shall then decide whether the impugned  fees are court fees or taxes on litigants or litigation. G.C.                         Appeal allowed. 9 9 0