Judgment

GROVER, J.:- This is an appeal from a judgment of the Punjab High Court (Circuit Bench, Delhi) involving the question of the validity of Rule 7 read with Rule 5 and its Schedule of the Delhi Factories Rules 1950 made under Section 112 of the Factories Act, 1948, hereinafter called the Act. The impugned Rules relate to the grant of a licence for a factory and renewal thereof, the fees being prescribed by the Schedule to Rule 5.

2. The Delhi Cloth and General Mills Co. Ltd., operates within the Delhi area a number of industrial establishments which are factories within the meaning of Section 2 (m) of the Act. The company has to pay a total sum of Rs. 12,775.00 as annual licence fee for all its factories in Delhi, the fees being calculated according to the horse power and the maximum number of workers to be employed on any day during the year as given in the Schedule. The Maximum fee that is payable is Rs. 2,000 for a factory. The factories can be run only after registration and under a licence granted under the Act and the Rules on payment of the prescribed fee. The licence is renewed every year under Rule 7 on payment of the same fee which is paid at the time of the granting of the licence. Every licence granted or renewed remains in force upto Dec. 31, of the year for which it is granted or renewed. In January 1963 the company filed a petition under Articles 226 and 227 of the Constitution in the High Court challenging the validity of the Rules under which the licence fee for renewal of the licence for each of its factories in Delhi was being levied and collected i.e., Rule 7 read with Rule 5 and its Schedule. This petition was dismissed by a Division Bench on February 11, 1965. The company then filed the present appeal by certificate.

3. The principal point which has been canvassed on behalf of the appellant company is that the payment made for renewal of the licence was and is only to endorse the licence as valid for the next year and the amount charged for the renewal thereof cannot and does not entail services which can reasonably be regarded to be commensurate with the amount so charged. In other words the element of quid-pro-quo which distinguishes a fee from a tax is absent and lacking. The Act, it is pointed out, contains specific provisions for rendering of benefit and service to the workmen by the owners of the factories. The Inspectors who are appointed under the Act to ensure that its provisions are complied with by the factory owners constitute a policy agency and it is not possible to say that the powers and duties of the Inspectors when exercised and carried out amount to services rendered for the benefit of the factory owners or the workmen.

4. Falshaw, C. J., who delivered the judgment of the Division Bench was of the view that the work carried out by the Inspectors under the Act of seeing that all its beneficent provisions for the health and welfare of the workers employed in the factories were fully implemented must definitely be regarded as services rendered in return for the fee levied for the annual renewal of the licence for the factory. It was further observed on an examination of the affidavit which had been placed before the Court that at least 60 per cent of the amount realised as licence fee was being utilised on running the department.

5. Mr. H. R. Gokhale for the appellant company has contended that the High Court failed to apply the principles which are settled by certain decisions of this Court for determining whether a fee for a licence or a renewal thereof in circumstances similar to the present case is in substance and effect a tax. He has relied largely on Corporation of Calcutta v. Liberty Cinema, (1965) 2 SCR 477. In that case the licence fee had been raised from Rupees 400 to Rupees 6,000 per year. It was observed in the majority judgment that the provision under which the licence had to be taken out for a cinema did not refer to the rendering of any service by the Corporation of Calc