Judgment

HEGDE, J.: - In this appeal by certificate the vires of Rule 111 of the Rules framed under Section 90 of the Bihar and Orissa Excise Act, 1915 is in issue. The appellant, Indian Mica and Micanite Industries contends that the said Rule is ultra vires the Constitution. The High Court of Patna rejected that contention.

2. In the High Court various contentions came up for consideration. The High Court has come to the conclusion that the levy made under the impugned rule is a fee. That finding was not challenged before us by any of the parties. Therefore all that we have to see is whether the fee levied is within the permissible limit. In other words whether there is sufficient quid pro quo for the levy in question.

3. The appellant is a consumer of denatured spirit. It purchases denatured spirit from the wholesalers or the manufacturers for the purpose of manufacturing micanite. The Bihar and Orissa Excise Act, 1915 (Bihar and Orissa Act 2 of 1915) came into force on January 19, 1916. In pursuance of the provisions of that Act the impugned Rule was framed by the Board of Revenue for levying licence fee. The fee for the licence to possess denatured spirit in 1919 was only Rs. 2/- per annum irrespective of the quantity in the possession of a person. This rate continued to be in force till 1937. At this stage it may be remembered that under sub-section (2) of Section 143 of the Government of India Act, 1935, the Provinces were authorised to continue to levy tax, duties, cesses or fees which were being lawfully levied prior to the commencement of that Act. Under the 1935 Act as under our present Constitution, the power to levy duties on alcoholic liquor fit for human consumption was allocated to the Provincial Legislature whereas the power to levy duty on alcoholic liquor not fit for human consumption was allocated to the Central Legislature. Denatured spirit though an alcoholic liquor is not fit for human consumption. The power to levy duty on the same was and is given to the Central Legislature. But the same being intoxicating liquor, the Provincial Legislature under the 1935 Act and at present the State Legislature has power to levy fee. The power of any legislature to levy fee is conditioned by the fact that it must be by and large a quid pro quo for the services rendered. If a levy purporting to be a fee is found to be an exaction without doing any service or if it is found that the levy is wholly disproportionate to the services rendered then the levy becomes invalid.

4. The distinction between fee and levy came up for the first time for consideration by this Court in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, 1954 SCR 1005. Therein this Court speaking through Mukherjea J. (as he then was) quoted with approval the definition of tax given by Latham, C. J. of the High Court of Australia in Matthews v. Chicoory Marketing Board, 60 CLR 263. In that case the learned Chief Justice observed:

" "A tax" is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered."

5. Dealing with the distinction between "tax" and "fee" Mukherjea J. Observed thus in the above-mentioned case

"It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the tax-payer s consent and the payment is conformed by law. The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax.. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the tax payer and the public authority. Another feature of taxation is that as it