1954 Supreme(Raj) 96

Rajasthan High Court
Wanchoo C.J. & Modi, J.
The Maharaja Shri Umaid Mills Ltd. - Appellant
Versus
The State Of Rajasthan - Respondents
D.B. Civil Writ Petition No. 25 of 1953
Decided On : April 09, 1954

Headnote:(a) Constitution of India, Art. 265—Taxes and fees—Distinction—Taxes meant for raising revenue, and fees to meet expenses for service rendered -Distinction not always kept in mind.(b) Indian Factories Act. sec. 6—Rajasthan Factories Rules, 1951—Fees for obtaining licence —Such fees are fees and not taxes -Classification according to horse power and number of employees reasonable—Fees not a tax on profession.(c) Constitution of India, Art. 276 (1) and (2)—Fees payable under Rajasthan Factories Rules not tax on profession.(d) Constitution of India, Art. 19 (1) (g) —Indian Factories Act, sec. 6 and Rajasthan Factories Rules—Fees for obtaining licence etc. reasonable restriction.

       Authorities on public finance recognize the distinction between a tax and a fee. Generally speaking a tax is an impost levied by the State for purposes of raising revenue. The person, who has to pay the tax, has no option but to do so provided the tax is validly imposed. He cannot object to it on the ground that the State does not render him any particular service in lieu of the tax. A fee on the other hand, is not generally meant to augment general revenues. It is levied for some service rendered by the State to the particular person concerned, and the levy generally takes place when the particular person asks for permission to do something for which regulations exist. As levy is not meant to augment the general revenue of the State, it is fixed generally at such a level as to meet the expenses of the services rendered by the State in connection with the matters for which the fee is levied. This distinction, however, is not always kept in mind rigorously in legislative enactments, and many a time what is called a fee is really a tax meant for raising revenues. Further, constitutionally speaking a fee is also a tax for the purpose of Art. 265 of the Constitution for no fee can be levied without the authority of law. So far, therefore, as a tax is concerned, there is no difficulty, for it is meant for raising revenue, and must be governed by the authority of law as provided in Art. 265. So far as fees are concerned. they have to be divided into two parts. There are some fees which are really taxes though they are called fees. In their case, all the incidents of a tax apply, and the limitations to which fees are subject do not apply. As an example of this kind, may be mentioned court fees under the Court Fees Act. Though it may be said that court fees are charged from parties who came to court, it is still true that the Court Fees Act generally speaking is a measure for raising revenue for the State. Then there are fees strictly so called, which are not meant for raising revenue, but for meeting the expenses of the department of the Government created for regulating professions, trades, calling and employments from which license fees are levied. This distinction is recognised between taxes and fees even where legislative power is in Parliament, though, some fees may be nothing more or less than taxes. The fees prescribed by sec. 6 of the Indian Factories Act are in the nature of fees strictly so called, and not a mere tax for purposes of raising revenue. (Paras 4, 5, 11 & 12)

       Sec. 6 of the Indian Factories Act provides that the Provincial Government may make rules for the regulation of factories, and also requires their registration and licensing and prescribes fees payable for such registration and licensing and for the renewal of licenses. The State of Rajasthan has made rules in exercise of the powers conferred under this section read with sec. 112 of the Factories Act. In these rules, called the Rajasthan Factories Rules, 1951, necessary provisions have been made for the regulation on factories in Rajasthan, and a sliding schedule has been provided fixing fees for various factories based on horse power and the maximum number of persons employed during the year. These fees range from a minimum of Rs. 10/- to a maximum of Rs. 2,000/- Obviously there is a reasonable basis for classification of factories according to horse power, and the maximum number of persons employed during the year. Therefore, whether the levy is a tax or a fee strictly so called, there is authority of law behind it, and the condition required by Art. 265 is satisfied. (Para 7)

       This levy cannot be called a tax on professions, trades, callings and employments, for the intention was not to levy any tax on the trade carried on by the applicant, which is manufacturing of cloth and yarn. It is a tax on all factories, whatever may be their trade, for purposes of license and registration with a view to regulating the factories. (Para 8)

       Under clause (6) of Art. 19, the State has the right to make any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by Art. 19 (1) (g). The Indian Factories Act, and the rules framed thereunder, particularly the rule as to registration and thing out of licenses, impost a reasonable restriction on the right of carrying on the trade of manufacturing, as it is necessary, in the interest of the general public, that factories, where large number of people work, should properly supervised, and should have proper conditions of work as prescribed in the rules. (Para 10)

       Leaving out of account the extraordinary circumstances, which were prevalent in the financial year 1952-53 both on the side of income and of expenditure, it does seem that the income derived from the fees is more or less of the order of the amount which will have to be spent on the inspectorate of factories. Taking a comprehensive view, therefore, and keeping in mind future years, it cannot be said with any degree of force that the income from the fees is not reasonably commensurate with the expenditure on the inspectorates, of factories and the fees have been pitched high in order to augment general revenues. Barring, therefore, the exceptional circumstances prevailing in the financial year 1952-53, the charges in the schedule to be found in rule 5 of the Rajasthan Factories Rules 1951 are reasonable as fees, and are not meant for purposes of augmenting general revenues. (Para 14)