IMPORTANT POINTS
1. The true test to determine the character of a levy, delineating tax from fee is the primary object of the levy and the essential purpose intended to be achieved.
2. A licence fee imposed for regulatory purposes is not conditioned by the fact that there must be a quid pro quo for the services rendered, but that, such licence fee must be reasonable and not excessive. If there is a broad correlation between the expenditure which the State incurs and the fees charged, the fees could be sustained as reasonable.

JUDGMENT

D.K. Jain, J.-This is an appeal from a judgment, dated 5th February, 2003, rendered by the High Court of Delhi at New Delhi in CWP No.2278/2002. By the impugned judgment, the High Court has upheld the validity of the Delhi Race Course Licensing (Amendment) Rules, 2001.

2. On 19th October, 1984, the Central Government in exercise of its powers under Section 2 of the Union Territories (Laws) Act, 1950, extended the Mysore Race Courses Licensing Act, 1952 (for short “the Act”) to the Union Territory of Delhi, as it existed then, with certain amendments. The Preamble to the said Act reads thus:

“Whereas it is expedient to make provision for the licensing regulation, control and management of horse-racing on race-course and all matters connected therewith in the Union Territory of Delhi”

Further, Section 3 of the Act reads as follows:

“3. Prohibition of horse-racing on unlicensed race-courses- No horse- race shall be held save on a race course for which a licence for horse racing granted in accordance with the provisions of this Act, is in force.”

Section 4 which lays down the procedure for issuing the licences for horse racing reads as follows:

“4. Licences for horse-racing-

(1) The owner, lessee or occupier of any race course may apply to the Government for horse-racing on such race-course or for arranging for wagering or betting in such race- course on a horse, race run or some other race-course either within the Union territory of Delhi or Outside the Union territory of Delhi.

(2) The Government may (if in its opinion public interest so requires) withhold such licence or grant it subject to such conditions and for such period as they may think fit.

(3) In particular and without prejudice to the generality of the foregoing power, such conditions may provide for-

(a) the payment of a licence fee;

(b) the maintenance of such accounts and furnishing of such returns as are required by the United Provinces Entertainment and Betting Tax Act, 1937 as extended to the Union territory of Delhi;

(c) the amount of stakes which may be allotted for different kinds of horses;

(d) the measures to be taken for the training of persons to become Jockeys;

(e) the measures to be taken to encourage Indian bred horses and Indian Jockeys;

(f) the inclusion or association of such persons as the Government may nominate as Stewards or members in the conduct and management of horse- racing;

(g) the utilisation of the amount collected by the licensee in the conduct and management of horse-racing;

(h) such other matters connected with horse-racing and the maintenance of the race-course for which in the opinion of Government it is necessary or expedient to make provision in the licence. …..”

Sections 5, 6 and 7 respectively enumerate penalties for taking part in horse races on unlicensed race-course and for contravention of conditions of licence. Section 9 envisages that cognizance of the offences under the Act can be taken by a court not inferior to that of a Metropolitan Magistrate. Section 11, the pivotal provision, which empowers the Government to make rules, reads as follows:

“11. Power to make rules-

(1) The Government may, by notification in the Delhi Gazette, make rules for the purpose of carrying into effect the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing powers; such rules may provide for all or any of the following matters, namely:-

(i) the form and manner in which applications for licences are to be made;

(ii) the fees payable for such licences;

(iii) the period for which licences are to be granted;

(iv) the renewal, modification and cancellation of licences.”

3. In furtherance of the power conferred under Section 11 of the Act, by a notification dated 1st March 1985, the Administration of the Union Territory of Delhi, notified the Delhi Race Course Licensing Rules, 1985 [for short “1985 Rules”]. Rules 4 and 5 of the 1985 Rules lay down the procedure for submission of